<PAGE>
As filed with the Securities and Exchange Commission on May 16, 2000
Registration No. 333-34332
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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:
Schwab Trusts, Schwab Ten Trust, 2000 Series B
B.NAME OF DEPOSITORS:
Charles Schwab & Co., Inc.
ING Funds Distributor,
Inc.
C.COMPLETE ADDRESS OF DEPOSITORS' PRINCIPAL EXECUTIVE OFFICES:
Charles Schwab & Co., Inc.
101 Montgomery Street ING Funds Distributor,
Inc.
San Francisco, California 94104
1475 Dunwoody Drive
West Chester,
Pennsylvania 19380
<TABLE>
<CAPTION>
D.NAME AND COMPLETE ADDRESS OF AGENT FOR SERVICE:
<S> <C> <C>
COPY OF COMMENTS TO:
KAREN ALUISE, ESQ. PETER J. DEMARCO MICHAEL R. ROSELLA, Esq.
Charles Schwab & Co., Inc. ING Funds Distributor, Inc. Battle Fowler LLP
101 Montgomery Street 230 Park Avenue 75 East 55th Street
San Francisco, California 94104 New York, New York 10169 New York, New York 10022
(212) 856-6858
</TABLE>
E.TITLE AND AMOUNT OF SECURITIES BEING REGISTERED:
An indefinite number of Units of Schwab Trusts, Schwab Ten Trust, 2000
Series B is being registered under the Securities Act of 1933 pursuant to
Section 24(f) of the Investment Company Act of 1940, as amended, and Rule
24f-2 thereunder.
F. PROPOSED MAXIMUM AGGREGATE OFFERING PRICE TO THE PUBLIC OF THE SECURITIES
BEING REGISTERED:
Indefinite
G.AMOUNT OF FILING FEE:
No filing fee required.
H.APPROPRIATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after the effective date of the Registration Statement.
[X] Check if it is proposed that this filing will become effective
immediately upon filing on May 16, 2000 pursuant to Rule 487.
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<PAGE>
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CharlesSchwab
- -------------------------------------------------------------------------------
SCHWAB TRUSTS
SCHWAB TEN TRUST, 2000 SERIES B
The Trust is a unit investment trust designated Schwab Ten Trust, 2000 Series
B. The Sponsors are Charles Schwab & Co., Inc. and ING Funds Distributor, Inc.
The Trust consists of a fixed portfolio of the Dow Jones Industrial Average's
ten highest dividend yielding stocks. The Trust will terminate approximately
one year after the Initial Date of Deposit. The minimum purchase is 100 Units
for individual purchasers, and 25 Units for purchases by custodial accounts or
Individual Retirement Accounts, self-employed retirement plans (formerly Keogh
Plans), pension funds and other tax-deferred retirement plans.
This Prospectus consists of two parts. Part A contains the Summary of
Essential Information including descriptive material relating to the Trust and
the Statement of Financial Condition of the Trust. Part B contains general
information about the Trust. Part A may not be distributed unless accompanied
by Part B. Please read and retain both parts of this Prospectus for future
reference.
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- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation
to the contrary is a criminal offense.
PROSPECTUS PART A DATED MAY 16, 2000
<PAGE>
INVESTMENT OBJECTIVE. The Trust seeks to maximize total return through a
combination of capital appreciation and current dividend income. There is no
guarantee that the investment objective of the Trust will be achieved.
STRATEGY OF PORTFOLIO SELECTION. The Trust seeks to achieve its investment
objective by attempting to outperform the Dow Jones Industrial Average (DJIA).
The Trust will attempt to outperform the DJIA by creating a portfolio that
follows the investment strategy of investing in the ten common stocks in the
DJIA which have the highest dividend yield.
DESCRIPTION OF PORTFOLIO. The Portfolio contains 10 issues of common stock of
domestic companies. 100% of the issues are represented by the Sponsors'
contracts to purchase. All of the stocks are listed on the New York Stock
Exchange. Based upon the principal business of each issuer and current market
values, the following industries are represented in the Portfolio: Auto
Manufacturing, 10.02%; Banking and Finance, 10.02%; Chemicals, 10.00%; Consumer
Products, 10.00%; Machinery, 9.99%; Diversified Manufacturing Operations,
10.02%; Paper, 9.99%; Photography, 9.99%; and Telephone, 19.97%.
RISK CONSIDERATIONS. Unitholders can lose money by investing in this Trust. The
value of the units and the Securities can each decline in value. An investment
in units of the Trust should be made with an understanding of the following
risks:
. For common stocks, the risk that the financial condition of the issuers
of the Securities may become impaired or that the general condition of
the stock market may worsen (both of which may contribute directly to a
decrease in the value of the Securities and thus in the value of the
units).
. Since the Portfolio of the Trust is fixed and "not managed," in general
the Sponsors can only sell securities under certain extraordinary
circumstances, at the Trust's termination or in order to meet
redemptions. As a result, the price at which each security is sold may
not be the highest price it attained during the life of the Trust.
. When cash or a letter of credit is deposited with instructions to
purchase securities in order to create additional units, an increase in
the price of a particular security between the time of deposit and the
time that securities are purchased will cause the units to be comprised
of less of that security and more of the remaining securities. In
addition, brokerage fees incurred in purchasing the Securities will be an
expense of the Trust.
. A decline in the value of the Securities during the initial offering
period may require additional Securities to be sold in order to reimburse
the Sponsors for organization costs. This would result in a decline in
the value of the units.
. There is no assurance that any dividends will be declared or paid in the
future on the Securities.
PUBLIC OFFERING PRICE. The Public Offering Price per 100 units of the Trust is
calculated by:
. dividing the aggregate value of the underlying securities held in the
Trust by the number of units outstanding; and
. multiplying the result by 100.
In addition, during the initial offering period, an amount sufficient to
reimburse the Sponsor for the payment of all or a portion of the estimated
organization costs of the Trust will be added to the Public Offering Price per
A-2
<PAGE>
100 units. The price of a single unit, or any multiple thereof, is calculated
by dividing the Public Offering Price per 100 units by 100 and multiplying by
the number of units. The Public Offering Price per Unit will vary on a daily
basis in accordance with fluctuations in the aggregate value of the underlying
Securities and each investor's purchase price will be computed as of the date
the units are purchased.
DEFERRED SALES CHARGE. The deferred sales charge will be deducted as follows:
. For every Unitholder, ten monthly charges of $0.80 per 100 units ($8.00
total) will be deducted from the Principal Account in ten monthly
installments commencing on August 14, 2000 and on the first business day
of each month thereafter through May 1, 2001. In addition:
. For Unitholders bearing the deferred sales charge of $12.50 per 100
units, two semi-annual charges of $2.25 per 100 units ($4.50 total)
will be deducted from the Income Account on June 30, 2000 and
December 31, 2000; or
. For Unitholders bearing the deferred sales charge of $10.00 per 100
units, two semi-annual charges of $1.00 per 100 units ($2.00 total)
will be deducted from the Income Account on June 30, 2000 and
December 31, 2000.
See "Public Offering--Discounts" in Part B for a description of reduced
deferred sales charges for certain investors. The deferred method of payment
keeps more of the Unitholder's money invested over a longer period of time.
ESTIMATED NET ANNUAL DISTRIBUTIONS. The estimated net annual distributions to
unitholders per 100 units (based on the most recent quarterly or semi-annual
ordinary dividend declared with respect to the Securities and based on the
payment of the maximum deferred sales charge, which includes a deduction of
$4.50 per 100 units from the Income Account) was $25.20. This estimate will
vary with changes in the Trust's fees and expenses, actual dividends received,
and with the sale of Securities. In addition, because the issuers of common
stock are not obligated to pay dividends, there is no assurance that the
estimated net annual dividend distributions will be realized in the future.
DISTRIBUTIONS. The Trust will distribute dividends received, less expenses,
semi-annually. The first dividend distribution will be made on June 30, 2000 to
all Unitholders of record on June 15, 2000 and thereafter distributions will be
made on the last business day of every December and June. The final
distribution will be made within a reasonable period of time after the Trust
terminates.
MARKET FOR UNITS. Unitholders may sell their units to the Sponsors or the
Trustee at any time, without fee or penalty. The Sponsors intend to repurchase
units from Unitholders throughout the life of the Trust at prices based upon
the market value of the underlying Securities. However, the Sponsors are not
obligated to maintain a market and may stop doing so without prior notice for
any business reason. If a market is not maintained a Unitholder will be able to
redeem his units with the Trustee at the same price. The existence of a liquid
trading market for these Securities may depend on whether dealers will make a
market in these Securities. There can be no assurance of the making or the
maintenance of a market for any of the Securities contained in the portfolio of
the Trust or of the liquidity of the Securities in any markets made. The price
at which the Securities may be sold to meet redemptions and the value of the
Units will be adversely affected if trading markets for the Securities are
limited or absent.
A-3
<PAGE>
TERMINATION. The Trust will terminate in approximately one year. At that time
investors may choose one of the following three options with respect to their
terminating distribution:
. receive the distribution in-kind;
. receive cash upon the liquidation of their pro rata share of the
Securities; or
. reinvest in a subsequent series of the Schwab Ten Trust (if one if
offered) at a reduced deferred sales charge.
Because the Sponsor can start selling the Securities on June 19, 2001,
Unitholders who purchase Units after June 16, 2000 will have no assurance of
realizing long-term capital gains (see "Tax Status" in Part B). Unitholders
should consult their own tax advisers in this regard.
ROLLOVER OPTION. Unitholders may elect to roll over their terminating
distributions into the next available New Trust at a reduced deferred sales
charge. Rollover Unitholders must make this election on or prior to the
Rollover Notification Date. Upon making this election, a Unitholder's Units
will be redeemed and the proceeds will be reinvested in units of the next
available New Trust. See "Trust Administration--Trust Termination" in Part B
for details to make this election.
REINVESTMENT PLAN. Unitholders may elect to automatically reinvest their
distributions, if any (other than the final distribution in connection with the
termination of the Trust) into additional units of the Trust, without a sales
charge. See "Reinvestment Plan" in Part B for details on how to enroll in the
Reinvestment Plan.
UNDERWRITING. Charles Schwab & Co., Inc., 101 Montgomery Street, San Francisco,
California 94104, will act as Underwriter for all of the Units of the Schwab
Ten Trust, 2000 Series B. Units of the Trust shall be distributed exclusively
by the Underwriter to its customers.
A-4
<PAGE>
FEE TABLE
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This Fee Table is intended to help you to understand the costs and expenses
that you will bear directly or indirectly. See "Public Offering" and "Trust
Expenses and Charges." Although each Series has a term of only one year, and
is a unit investment trust rather than a mutual fund, this information is
presented to permit a comparison of fees, assuming the principal amount and
distributions are rolled over each year into a new Series subject only to the
deferred sales charge and trust expenses.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Maximum Deferred Sales Charge Reduced Deferred Sales Charge+
----------------------------- ------------------------------
Unitholder Transaction As a % of Amounts As a % of Amounts
Expenses Initial per Initial per
(fees paid directly from Offering Price 100 Units Offering Price 100 Units
your investment) -------------- --------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Deferred Sale Charge
per Year.............. 1.25%* $12.50 1.00%** $10.00
----- ------ ----- ------
Maximum Sales Charge
Imposed Per Year
Reinvested Dividends.. 0% $ 0 0% $ 0
===== ====== ===== ======
Estimated Organization
Costs................. .102% $ 1.02 .102% $ 1.02
===== ====== ===== ======
<CAPTION>
Estimated Annual Fund
Operating Expenses Amounts Amount
(expenses that are As of % of per As of % of per
deducted from Trust Net Assets 100 Units Net Assets 100 Units
assets) ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Trustee's Fee.......... .086% $ .86 .086% $ .86
Other Operating
Expenses.............. .043% .43 .043% .43
Portfolio Supervision,
Bookkeeping and
Administrative Fees.. .025% .25 .025% .25
----- ------ ----- ------
Total................. .129% $ 1.29 .129% $ 1.29
===== ====== ===== ======
</TABLE>
Examples
<TABLE>
<CAPTION>
Cumulative Expenses Paid for Period:
Maximum Deferred Sales Charge Example: ------------------------------------
1 year 3 years
---------- -----------
<S> <C> <C>
An investor would pay the following
expenses on a $10,000 investment assuming
the Trust operating expense ratio of
.129% and a 5% annual return on the
investment throughout the periods........ $148 $409
<CAPTION>
Cumulative Expenses Paid for Period:
Reduced Deferred Sales Charge Example: ------------------------------------
1 year 3 years
------ -------
<S> <C> <C>
An investor would pay the following
expenses on a $10,000 investment assuming
the Trust operating expense ratio of
.129% and a 5% annual return on the
investment throughout the periods........ $123 $342
</TABLE>
The Examples assume reinvestment of all dividends and distributions and
utilize a 5% annual rate of return. For purposes of the Examples, the deferred
sales charge imposed on reinvestment of dividends is not reflected until the
year following payment of the dividend; the cumulative expenses would be
higher if sales charges on reinvested dividends were reflected in the year of
reinvestment. The Examples should not be considered a representation of past
or future expenses or annual rate of return; the actual expenses and annual
rate of return may be more or less than those assumed for purposes of the
Examples.
- --------
*The actual fee is a total of $12.50 per 100 Units, irrespective of purchase
or redemption price, deducted in installments over the life of the Trust,
commencing August 14, 2000. If the Unit price exceeds $10 per Unit, the
deferred sales charge will be less than 1.25%; if the Unit price is less than
$10 per Unit, the deferred sales charge will exceed 1.25%.
**The actual fee is a total of $10.00 per 100 Units, irrespective of purchase
or redemption price, deducted in installments over the life of the Trust,
commencing August 14, 2000. If the Unit price exceeds $10 per Unit, the
deferred sales charge will be less than 1.00%; if the Unit price is less than
$10 per Unit, the deferred sales charge will exceed 1.00%.
+See "Public Offering--Discounts" in Part B for a description of which
investors will be eligible for this reduced deferred sales charge, as well as
the circumstances under which a further reduction to $8.00 per 100 Units (.80%
of the Initial Offering Price) may be applicable.
A-5
<PAGE>
SUMMARY OF ESSENTIAL INFORMATION AS OF MAY 15, 2000:*
<TABLE>
<S> <C>
INITIAL DATE OF DEPOSIT: May 16, 2000
AGGREGATE VALUE OF
SECURITIES................... $ 150,122
NUMBER OF UNITS............... 15,012
FRACTIONAL UNDIVIDED INTEREST
IN TRUST SECURITIES.......... 1/15,012
PUBLIC OFFERING PRICE PER 100 UNITS
Net Assets of the Trust...... $ 149,969
Divided By 15,012 Units (times 100).. $ 998.98
Plus Estimated Organization Costs**.. $ 1.02
Public Offering Price per 100 Units***+.. $ 1,000.00
SPONSORS' REPURCHASE PRICE AND
REDEMPTION PRICE PER 100
UNITS++...................... $ 987.50
EVALUATION TIME: 4:00 p.m. New York Time
(or earlier close of the New York Stock
Exchange).
MINIMUM INCOME OR PRINCIPAL DISTRIBUTION:
$1.00 per 100 Units.
LIQUIDATION PERIOD: A 40 day period
beginning on the first business day
following the Termination Date.
MINIMUM VALUE OF TRUST: The Trust may be
terminated if the value of the Trust is
less than 40% of the aggregate value of
the Securities at the completion of the
Deposit Period.
TERMINATION DATE: June 18, 2001 or the
disposition of the last Security in the
Trust.
MANDATORY TERMINATION DATE: The last day
of the Liquidation Period.
</TABLE>
<TABLE>
<S> <C>
TRUSTEE: The Chase Manhattan Bank.
TRUSTEE'S FEE: $.86 per 100 Units
outstanding
OTHER FEES AND EXPENSES: $.18 per 100 Units
outstanding.
SPONSORS: Charles Schwab & Co., Inc. and ING
Funds Distributor, Inc.
AGENT FOR SPONSORS: ING Funds Distributor,
Inc.
PORTFOLIO SUPERVISOR: ING Mutual Funds
Management Co. LLC
PORTFOLIO SUPERVISORY, BOOKKEEPING AND
ADMINISTRATIVE FEE: Maximum of $.25 per 100
Units outstanding (see "Trust Expenses and
Charges" in Part B).
RECORD DATES: June 15 and December 15.
DISTRIBUTION DATES: June 30 and December 31.
ROLLOVER NOTIFICATION DATE****: June 7, 2001
or another date as determined by the
Sponsors.
MONTHLY DEFERRED SALES CHARGE PAYMENT DATES:
August 14, 2000 and the
first business day of each month thereafter
through May 1, 2001
SEMI-ANNUAL DEFERRED SALES CHARGE PAYMENT
DATES: June 30, 2000, and December 31,
2000.
</TABLE>
<TABLE>
<S> <C>
CUSIP NUMBERS: Cash: 808523567 Schwab Fee-Based Schwab
Reinvestment: Accounts: Account/Strategic
808523575 Cash: 808523542 Ten Investors:
Reinvestment: Cash: 808523526
808523559 Reinvestment:
</TABLE> 808523534
- --------
*The business day prior to the Initial Date of Deposit. The Initial Date of
Deposit is the date on which the Trust Agreement was signed and the deposit of
Securities with the Trustee made.
**This amount per 100 Units will be invested in Securities during, and sold
at the end of, the initial offering period, to reimburse the Sponsors for the
payment of all or a portion of the estimated costs incurred in organizing the
Trust. See "Risk Considerations" for a discussion of the impact of a decrease
in value of the Securities purchased with the Public Offering Price proceeds
intended to be used to reimburse the Sponsors.
A-6
<PAGE>
***A maximum Deferred Sales Charge of $12.50 per 100 Units (1.25% of the
Initial Public Offering Price) will be paid through deductions subsequent to
the Initial Date of Deposit as described under "Deferred Sales Charge." On a
repurchase or redemption of Units before the last Deferred Sales Charge Payment
Date, any remaining Deferred Sales Charge payments will be deducted from the
proceeds. Units purchased pursuant to the Reinvestment Plan are subject to that
portion of the Deferred Sales Charge remaining at the time of reinvestment.
****The date by which a Rollover Unitholder must elect to reinvest its
terminating distribution in an available series of the Schwab Ten Trust, if
offered (see "Trust Administration--Trust Termination").
+On the Initial Date of Deposit there will be no cash in the Income or
Principal Accounts. Anyone purchasing Units after such date will have included
in the Public Offering Price a pro rata share of any cash in such Accounts.
++This figure reflects deduction of the maximum Deferred Sales Charge of
$12.50 per 100 Units; the actual amount deducted upon redemption of Units will
depend upon the Deferred Sales Charge applicable to the redeeming Unitholder.
Any redemptions of 25,000 Units or more may, upon request by a redeeming
Unitholder, be made in kind. The Trustee will forward the distributed
securities, less any deferred sales charge remaining, to the Unitholder's
broker-dealer account at The Depository Trust Company in book-entry form. As of
the close of the initial offering period, the Sponsors' Repurchase Price and
Redemption Price per 100 Units for the Trust will be reduced to reflect the
payment of the organization costs to the Sponsors.
A-7
<PAGE>
SCHWAB TEN TRUST,
2000 SERIES B
STATEMENT OF FINANCIAL CONDITION AS OF MAY 15, 2000
ASSETS
<TABLE>
<S> <C>
Investment in Securities -- Sponsors' Contracts to Purchase
Underlying Securities Backed by Letter of Credit (cost $150,122)
(Note 1)........................................................... $150,122
--------
Total................................................................. $150,122
========
LIABILITIES AND INTEREST OF UNITHOLDERS
Reimbursement to Sponsors for Organization Costs (Note 2)............. $ 153
--------
Interest of Unitholders -- Units of Fractional
Undivided Interest Outstanding (2000 Series B: 15,012 Units)........ 150,122
Less: Reimbursement to Sponsors for Organization Costs (Note 2)..... (153)
--------
149,969
--------
Total................................................................. $150,122
========
Net Asset Value per Unit (3).......................................... $ 9.99
========
</TABLE>
- ---------------------
Notes to Statement of Financial Condition:
The preparation of financial statements in accordance with generally
accepted accounting principles requires Trust management to make estimates and
assumptions that affect the reported amounts and disclosures. Actual results
could differ from those estimates.
(1) Schwab Ten Trust, 2000 Series B (the "Trust") is a unit investment trust
created under the laws of the State of New York and registered under the
Investment Company Act of 1940. The objective of the Trust, jointly sponsored
by Charles Schwab & Co., Inc. and ING Funds Distributor, Inc. (the "Sponsors")
is to maximize total return through capital appreciation and current dividend
income. An irrevocable letter of credit issued by SunTrust Bank in an amount of
$200,000 has been deposited with the Trustee for the benefit of the Trust to
cover the purchases of Securities. Aggregate cost to the Trust of the
Securities listed in the Portfolio of Investments is determined by the Trustee
on the basis set forth under "Public Offering -- Offering Price" as of 4:00
p.m. on May 15, 2000. The Trust will terminate on June 18, 2001 or can be
terminated earlier under certain circumstances as further described in the
Prospectus.
(2) A portion of the Public Offering Price consists of securities in an
amount sufficient to reimburse the Sponsor for the per Unit portion of all or a
part of the costs of establishing the Trust. These costs have been estimated at
$1.02 per 100 Units for the Trust. A payment will be made as of the close of
the initial public offering period to an account maintained by the Trustee from
which the obligation of the investors to the Sponsors will be satisfied. To the
extent that actual organization costs are less than the estimated amount, only
the actual organization costs included in the Public Offering Price will be
reimbursed to the Sponsors and deducted from the assets of the Trust.
(3) The maximum Deferred Sales Charge of $12.50 per 100 Units (1.25% of the
Initial Public Offering Price) will be paid by monthly and semi-annual charges
subsequent to the Initial Date of Deposit. If Units are redeemed prior to the
last Deferred Sales Charge Payment Date, the remaining amount of the deferred
sales charge applicable to such Units will be payable at the time of
redemption. Based on projected total assets of $20,000,000, the estimated
maximum total deferred sales charge would be $250,000. To the extent that
Unitholders pay a reduced deferred sales charge or the Trust is larger or
smaller, the estimate may vary.
A-8
<PAGE>
SCHWAB TEN TRUST,
2000 SERIES B
PORTFOLIO OF INVESTMENTS
AS OF MAY 15, 2000
<TABLE>
<CAPTION>
Market
Value of
Stocks as a
Number Percentage Current Market Cost of
Portfolio of Ticker of the Dividend Value Per Securities to
No. Shares Name of Issuer(1) Symbol Trust(2) Yield (3) Share the Trust(4)
- --------- ------ ----------------- ------ ----------- --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Common Stocks:
1. 387 AT&T Corp. T 9.99% 2.27% $ 38.7500 $ 14,996
2. 369 Caterpillar Inc. CAT 9.99 3.20 40.6250 14,990
3. 287 E.I. du Pont de Nemours and Company DD 10.00 2.68 52.3125 15,014
4. 262 Eastman Kodak Company EK 9.99 3.07 57.2500 15,000
5. 174 General Motors Corporation GM 10.02 2.31 86.4375 15,040
6. 371 International Paper Company IP 9.99 2.47 40.4375 15,002
7. 114 J.P. Morgan & Company JPM 10.02 3.03 132.0000 15,048
8. 175 Minnesota Mining & Manufacturing Co. MMM 10.02 2.70 85.9375 15,039
9. 552 Philip Morris Companies, Inc. MO 10.00 7.06 27.1875 15,008
10. 324 SBC Communications Inc. SBC 9.98 2.18 46.2500 14,985
------ --------
Total Investment in Securities 100.00% $150,122
====== ========
</TABLE>
FOOTNOTES TO PORTFOLIO OF INVESTMENTS
(1) Contracts to purchase the Securities were entered into on May 15, 2000. All
such contracts are expected to be settled on or about the First Settlement
Date of the Trust which is expected to be May 19, 2000.
(2) Based on the cost of the Securities to the Trust.
(3) Current Dividend Yield for each security was calculated by annualizing the
last quarterly or semi-annual ordinary dividend declared on the security
and dividing the result by its market value as of the close of trading on
May 15, 2000.
(4) Evaluation of Securities by the Trustee was made on the basis of closing
sales prices at the Evaluation Time on May 15, 2000. The Sponsors' Purchase
Price was $150,274. The Sponsors' Loss on the Initial Date of Deposit is
$152.
The accompanying notes form an integral part of the Financial Statements.
A-9
<PAGE>
REPORT OF INDEPENDENT AUDITORS
THE UNITHOLDERS, SPONSORS AND TRUSTEE
SCHWAB TEN TRUST, 2000 SERIES B
We have audited the accompanying Statement of Financial Condition of Schwab
Ten Trust, 2000 Series B, including the Portfolio of Investments, as of May 15,
2000. This financial statement is the responsibility of the Trust's management.
Our responsibility is to express an opinion on this financial statement based
on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statement
is free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statement. Our
procedures included confirmation with The Chase Manhattan Bank, Trustee, of an
irrevocable letter of credit deposited for the purchase of securities, as shown
in the financial statement as of May 15, 2000. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statement referred to above presents fairly,
in all material respects, the financial position of Schwab Ten Trust, 2000
Series B, at May 15, 2000, in conformity with accounting principles generally
accepted in the United States.
ERNST & YOUNG LLP
New York, New York
May 16, 2000
A-10
<PAGE>
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CharlesSchwab
- ------------------------------------------------------------------------------
SCHWAB TRUSTS
SCHWAB TEN TRUST, 2000 SERIES B
PROSPECTUS PART B
PART B OF THIS PROSPECTUS MAY NOT BE
DISTRIBUTED UNLESS ACCOMPANIED BY
PART A
THE TRUST
ORGANIZATION. Schwab Ten Trust consists of a "unit investment trust"
designated as set forth in Part A. The Trust was created under the laws of the
State of New York pursuant to a Trust Indenture and Agreement (the "Trust
Agreement"), dated the Initial Date of Deposit, among Charles Schwab & Co.,
Inc. and ING Funds Distributor, Inc., as Sponsors, and The Chase Manhattan
Bank, as Trustee.
On the Initial Date of Deposit, the Sponsors deposited with the Trustee
common stock, including funds and delivery statements relating to contracts for
the purchase of certain such securities (collectively, the "Securities") with
an aggregate value as set forth in Part A and cash or an irrevocable letter of
credit issued by a major commercial bank in the amount required for such
purchases. Thereafter the Trustee, in exchange for the Securities so deposited,
has registered on the registration books of the Trust evidence of the Sponsors'
ownership of all Units of the Trust. The Sponsors have a limited right to
substitute other securities in the Trust portfolio in the event of a failed
contract. See "The Trust--Substitution of Securities." The Sponsors may also,
in certain circumstances, direct the Trustee to dispose of certain Securities
if the Sponsors believe that, because of market or credit conditions, or for
certain other reasons, retention of the Security would be detrimental to
Unitholders. See "Trust Administration--Portfolio Supervision."
As of the Initial Date of Deposit, a "Unit" represents an undivided
fractional interest in the Securities and cash of the Trust as is set forth in
the "Summary of Essential Information." As additional Units are issued by the
Trust as a result of the deposit of Additional Securities, as described below,
the aggregate value of the Securities in the Trust will be increased and the
fractional undivided interest in the Trust represented by each Unit will be
decreased. To the extent that any Units are redeemed by the Trustee, the
fractional undivided interest or pro rata share in such Trust represented by
each unredeemed Unit will increase, although the actual interest in such Trust
represented by such fraction will remain unchanged. Units will remain
outstanding until redeemed upon tender to the Trustee by Unitholders, which may
include the Sponsors, or until the termination of the Trust Agreement.
DEPOSIT OF ADDITIONAL SECURITIES. With the deposit of the Securities in the
Trust on the Initial Date of Deposit, the Sponsors established a proportionate
relationship among the initial aggregate value of specified Securities in the
Trust. During the 90 days subsequent to the Initial Date of Deposit (the
"Deposit Period"), the Sponsors may deposit additional Securities in the Trust
that are substantially similar to the Securities already deposited in the Trust
("Additional Securities"), contracts to purchase Additional Securities or cash
(or a bank letter of credit in lieu of cash) with instructions to purchase
Additional Securities, in order to create additional Units, maintaining to the
extent practicable the original proportionate relationship of the
B-1
<PAGE>
number of shares of each Security in the Trust portfolio on the Initial Date of
Deposit. These additional Units, which will result in an increase in the number
of Units outstanding, will each represent, to the extent practicable, an
undivided interest in the same number and type of securities of identical
issuers as are represented by Units issued on the Initial Date of Deposit. It
may not be possible to maintain the exact original proportionate relationship
among the Securities deposited on the Initial Date of Deposit because of, among
other reasons, purchase requirements, changes in prices, or unavailability of
Securities. The composition of the Trust portfolio may change slightly based on
certain adjustments made to reflect the disposition of Securities and/or the
receipt of a stock dividend, a stock split or other distribution with respect
to such Securities, including Securities received in exchange for shares or the
reinvestment of the proceeds distributed to Unitholders. Deposits of Additional
Securities in the Trust subsequent to the Deposit Period must replicate exactly
the existing proportionate relationship among the number of shares of
Securities in the Trust portfolio. Substitute Securities may be acquired under
specified conditions when Securities originally deposited in the Trust are
unavailable (see "The Trust--Substitution of Securities" below).
OBJECTIVE. The objective of the Trust is to maximize total return through
capital appreciation and current dividend income. The Trust seeks to achieve
its objective by attempting to outperform the Dow Jones Industrial Average
("DJIA") by creating a portfolio that follows the investment strategy of
investing in the ten (10) common stocks which, out of the thirty (30) common
stocks comprising the DJIA, have the highest dividend yield (the "Strategic
Ten"), determined as of two business days prior to the Initial Date of Deposit.
The Strategic Ten strategy is commonly referred to as the "dogs of the Dow."
The Trust's portfolio will be comprised of these ten (10) stocks. The Trust's
assets will be allocated in approximately equal amounts among the Strategic
Ten. For the actual percentage of each stock in the portfolio, see "Portfolio"
in Part A. (Also see "The Trust--The Securities" herein.)
The name "Dow Jones Industrial Average" is the property of Dow Jones &
Company, Inc., which is not affiliated with the Sponsors and has not
participated in any way in the creation of the Trust or the selection of the
stocks included in the Trust and has not reviewed or approved any information
included in this prospectus. Dow Jones & Company, Inc. has not granted to the
Trust or the Sponsors a license to use the Dow Jones Industrial Average.
As used herein, the term "highest dividend yield" means the yield for each
Security calculated by annualizing the last quarterly or semi-annual ordinary
dividend declared on that Security and dividing the result by the market value
of that Security as of two business days prior to the Initial Date of Deposit.
This rate is historical, and there is no assurance that any dividends will be
declared or paid in the future on the Securities in the Trust. As used herein,
the term "Securities" means the common stocks initially deposited in the Trust
and described in "Portfolio" in Part A and any additional common stocks
acquired and held by the Trust pursuant to the provisions of the Indenture.
Investing in stocks comprising the DJIA with the highest dividend yields may
be effective in achieving the Trust's investment objective because regular
dividends are common for established companies and dividends have accounted for
a substantial portion of the total return on thirty common stocks comprising
the DJIA. There can be no assurance that the dividend rates will be maintained.
Reduction or elimination of a dividend could adversely affect the stock price
as well. Purchasing a portfolio of these stocks as opposed to one or two stocks
can achieve a more diversified holding. There is only one investment decision
instead of ten. An investment in the Trust can be cost-efficient, avoiding the
odd-lot costs of buying small quantities of securities directly. An investment
in a number of companies with high dividends relative to their stock prices is
designed to increase the Trust's potential for higher returns. The Trust's
return will consist of a combination of capital
B-2
<PAGE>
appreciation and current dividend income. The Trust will terminate in
approximately one year, at which time investors may choose to either receive
the distributions in kind, in cash or reinvest in a subsequent series of the
Schwab Ten Trust (if available) at a reduced deferred sales charge. Further,
the Securities may appreciate or depreciate in value, dependent upon the full
range of economic and market influences affecting corporate profitability, the
financial condition of issuers and the prices of equity securities in general
and the Securities in particular.
Investors should note that the Trust's selection criteria were applied to
the Securities two business days prior to the Initial Date of Deposit. Since
the Sponsors may deposit additional Securities in connection with the sale of
additional Units, the yields on these Securities may change subsequent to the
Initial Date of Deposit. Therefore, there is no guarantee that the objective of
the Trust will be achieved.
THE SECURITIES. Each of the Securities has been taken from the Dow Jones
Industrial Average ("DJIA"). The DJIA comprises 30 common stocks chosen by the
editors of The Wall Street Journal as representative of the broad market and of
American industry. The companies are major factors in their industries and
their stocks are widely held by individuals and institutional investors.
Changes in the components of the DJIA are made entirely by the editors of The
Wall Street Journal without consultation with the companies, the stock exchange
or any official agency. For the sake of continuity, changes are made rarely.
Most substitutions have been the result of mergers, but from time to time,
changes may be made to achieve a better representation. The components of the
DJIA may be changed at any time for any reason. Any changes in the components
of the DJIA after the date of this Prospectus will not cause a change in the
identity of the common stocks included in the Trust's portfolio, including any
Additional Securities deposited in the Trust. The Trust is not considered to be
"concentrated" in a particular category or industry.
The first DJIA, consisting of 12 stocks, was published in The Wall Street
Journal in 1896. The list grew to 20 stocks in 1916 and to 30 stocks on October
1, 1928. For two periods of 17 consecutive years each, there were no changes to
the list: March 1939-July 1956 and June 1959-August 1976. The DJIA last changed
on November 1, 1999.
<TABLE>
<CAPTION>
Stocks Currently Comprising the DJIA
------------------------------------
<S> <C>
AT&T Corporation Intel Corporation
Allied Signal International Business Machines Corporation
Aluminum Company of
America International Paper Company
American Express Company Johnson & Johnson
Boeing Company J.P. Morgan & Company, Inc.
Caterpillar Inc. McDonald's Corporation
Citigroup Inc. Merck & Company, Inc.
Coca-Cola Company Microsoft Corporation
E.I. du Pont de Nemours
and Company Minnesota Mining & Manufacturing Company
Eastman Kodak Company Phillip Morris Companies, Inc.
Exxon Mobil Corporation Proctor & Gamble Company
General Electric Company SBC Communications Inc.
General Motors Corpora-
tion United Technologies Corporation
Hewlett-Packard Company Wal-Mart Stores, Inc.
Home Depot Inc. Walt Disney Company
</TABLE>
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<PAGE>
The yield for each Security was calculated by annualizing the last quarterly
or semi-annual ordinary dividend distributed and dividing the result by the
market value of the Security as of two business days prior to the Initial Date
of Deposit. This formula (an objective determination) served as the basis for
the Sponsors' selection of the Strategic Ten. The companies represented in the
Trust are some of the most well-known and highly capitalized companies in
America. The Securities were selected irrespective of any research
recommendation by the Sponsors. Investing in the stocks of the DJIA may be
effective as well as conservative because regular dividends are common for
established companies and dividends have accounted for a substantial portion of
the total return on stocks of the group of stocks comprising the DJIA.
The following sets forth the total return for previous series of Schwab Ten
Trusts offered and terminated. These total returns reflect the maximum sales
charges (1.25%) and actual expenses, but do not include commissions or taxes.
<TABLE>
<CAPTION>
Date Date Total
Name of Trust Offered Terminated Return
- ------------- -------- ---------- ------
<S> <C> <C> <C>
1997 Series A........................................ 11-04-97 12-10-98 7.16%
1998 Series A........................................ 03-03-98 04-13-99 7.22%
1998 Series B........................................ 07-07-98 08-17-99 23.03%
1998 Series C........................................ 12-10-98 01-18-00 10.18%
</TABLE>
Although the Schwab Ten Trust was not available until 1997, during the last
25 years, the strategy of investing in approximately equal values of the ten
highest yielding stocks each year generally would have yielded a higher total
return than an investment in all 30 stocks which make up the DJIA. The
following table shows the hypothetical performance of investing approximately
equal amounts in the Strategic Ten at the beginning of each year and rolling
over the proceeds. The total returns do not reflect sales charges, brokerage
and transaction costs, commissions or taxes and, therefore, will be different
from actual investment results. In addition, the time period presented for the
DJIA and Strategic Ten reflect a calendar year and may differ from actual Trust
Offerings. These results represent past performance of the Strategic Ten and
should not be considered indicative of future results of the Trust. The Trust's
annual total return may not exceed the DJIA in any one year; however,
historically, long term cumulative total returns from these strategies have
outperformed the cumulative returns of the DJIA. The Strategic Ten
underperformed the DJIA in certain years. Also, investors in the Trust may not
realize as high a total return as on a direct investment in the Strategic Ten
since the Trust has sales charges and expenses and may not be fully invested at
all times. Unit prices fluctuate with the value of the underlying stocks, and
there is no assurance that dividends on these stocks will be paid or that the
Units will appreciate in value.
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<PAGE>
The following table compares the actual performance of the DJIA and
approximately equal values of the Strategic Ten Strategy in each of the past 25
years, as of December 31 in each of these years:
COMPARISON OF TOTAL RETURNS(/1/)
<TABLE>
<CAPTION>
Strategic Ten
Dow Jones Net of Sales
Industrial Charges and
Year Ended Average (DJIA) Strategic Ten(/2/) Expenses(/3/)
---------- -------------- ------------------ -------------
<S> <C> <C> <C>
1975 44.4% 55.9% 54.42%
1976 22.7 34.8 33.57
1977 -12.7 0.9 -0.33
1978 2.7 -0.1 -1.33
1979 10.5 12.4 11.17
1980 21.5 27.2 25.97
1981 -3.4 5.0 3.77
1982 25.8 23.6 22.37
1983 25.7 38.7 37.47
1984 1.1 7.6 6.37
1985 32.8 29.5 28.27
1986 26.9 32.1 30.87
1987 6.0 6.1 4.87
1988 16.0 22.9 21.67
1989 31.7 26.5 25.27
1990 -0.4 -7.6 -8.83
1991 23.9 39.3 38.07
1992 7.4 7.9 6.67
1993 16.8 27.3 26.07
1994 4.9 4.1 2.87
1995 36.4 36.7 35.47
1996 28.9 27.9 26.67
1997 24.7 21.6 20.37
1998 17.9 10.8 9.57
1999 27.0 3.6 2.37
</TABLE>
- ---------------------
(1) Total Return represents the sum of Appreciation and Actual Dividend Yield.
(i) Appreciation for the Strategic Ten and the DJIA is calculated by
subtracting the opening market value of these Strategic Ten or DJIA stocks,
respectively, as of the first trading day on the New York Stock Exchange in
a given year from the market value of those stocks as of the last trading
day in that year, and dividing the result by the market value of the stocks
as of the first trading day in that year. (ii) Actual Dividend Yield for
the Strategic Ten is calculated by adding the total dividends received on
the stocks in the year and dividing the result by the market value of the
stocks as of the first trading day in that year. Actual Dividend Yield for
the DJIA is calculated by taking the total dividends credited to the DJIA
and dividing the result by the opening value of the DJIA as of the first
trading day in that year. Total return does not take into consideration any
sales charges, commissions, expenses or taxes.
(2) The Strategic Ten in any given year were selected by ranking the dividend
yields for each of the stocks in the DJIA as of the beginning of that year,
based upon an annualization of the last quarterly or semi-annual regular
dividend distribution (which would have been declared in the preceding
year) divided by that stock's market value on the first trading day on the
New York Stock Exchange in that year.
These results represent past performance and should not be considered
indicative of future results of the Trust. Unit prices may fluctuate with
the value of the underlying stocks, and there is no assurance that
dividends on these stocks will be paid or that the Units will appreciate in
value.
(3) Total return is net of sales charges (1.25% for the first year and 1.00%
thereafter) and estimated annual expenses of .231%.
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<PAGE>
The contracts to purchase Securities deposited initially in the Trust are
expected to settle in three business days, in the ordinary manner for such
Securities. Settlement of the contracts for Securities is thus expected to take
place prior to the settlement of purchase of Units on the Initial Date of
Deposit.
SUBSTITUTION OF SECURITIES. In the event of a failure to deliver any
Security that has been purchased for the Trust under a contract ("Failed
Securities"), the Sponsors are authorized under the Trust Agreement to direct
the Trustee to acquire other securities ("Substitute Securities") to make up
the original corpus of the Trust.
The Substitute Securities must be purchased within 20 days after the
delivery of the notice of the failed contract. Where the Sponsors purchase
Substitute Securities in order to replace Failed Securities, the purchase price
may not exceed the purchase price of the Failed Securities and the Substitute
Securities must be substantially similar to the Securities originally
contracted for and not delivered. Such selection may include or be limited to
Securities previously included in the portfolio of the Trust. No assurance can
be given that the Trust will retain its present size and composition for any
length of time.
Whenever a Substitute Security has been acquired for the Trust, the Trustee
shall, within five days thereafter, notify all Unitholders of the acquisition
of the Substitute Security and the Trustee shall, on the next Distribution Date
which is more than 30 days thereafter, make a pro rata distribution of the
amount, if any, by which the cost to the Trust of the Failed Security exceeded
the cost of the Substitute Security.
In the event no substitution is made, the proceeds of the sale of Securities
will be distributed to Unitholders as set forth under "Rights of Unitholders--
Distributions." In addition, if the right of substitution shall not be utilized
to acquire Substitute Securities in the event of a failed contract, the
Sponsors will cause to be refunded the sales charge attributable to such Failed
Securities to all Unitholders, and distribute the principal and dividends, if
any, attributable to such Failed Securities on the next Distribution Date.
RISK CONSIDERATIONS
FIXED PORTFOLIO. The value of the Units will fluctuate depending on all of
the factors that have an impact on the economy and the equity markets. These
factors similarly impact the ability of an issuer to distribute dividends.
Unlike a managed investment company in which there may be frequent changes in
the portfolio of securities based upon economic, financial and market analyses,
securities of a unit investment trust, such as the Trust, are not subject to
such frequent changes based upon continuous analysis. All the Securities in the
Trust are liquidated or distributed during the Liquidation Period. Since the
Trust will not sell Securities in response to ordinary market fluctuation, but
only at the Trust's termination or upon the occurrence of certain events (see
"Trust Administration--Portfolio Supervision") the amount realized upon the
sale of the Securities may not be the highest price attained by an individual
Security during the life of the Trust.
Some of the Securities in the Trust may also be owned by other clients of
the Sponsors and their affiliates. However, because these clients may have
differing investment objectives, the Sponsors may sell certain Securities from
those accounts in instances where a sale by the Trust would be impermissible,
such as to maximize return by taking advantage of market fluctuations.
Investors should consult with their own financial advisers prior to investing
in the Trust to determine its suitability. (See "Trust Administration--
Portfolio Supervision" below.)
ADDITIONAL SECURITIES. Investors should be aware that in connection with the
creation of additional Units subsequent to the Initial Date of Deposit, the
Sponsors will deposit Additional Securities, contracts to purchase Additional
Securities or cash (or letter of credit in lieu of cash) with instructions to
B-6
<PAGE>
purchase Additional Securities, in each instance maintaining the original
proportionate relationship, subject to adjustment under certain circumstances,
of the numbers of shares of each Security in the Trust. To the extent the price
of a Security increases or decreases between the time cash is deposited with
instructions to purchase the Security and the time the cash is used to purchase
the Security, Units may represent less or more of that Security and more or
less of the other Securities in the Trust. In addition, brokerage fees (if any)
incurred in purchasing Securities with cash deposited with instructions to
purchase the Securities will be an expense of the Trust.
Price fluctuations between the time of deposit and the time the Securities
are purchased, and payment of brokerage fees, will affect the value of every
Unitholder's Units and the Income per Unit received by the Trust. In
particular, Unitholders who purchase Units during the initial offering period
would experience a dilution of their investment as a result of any brokerage
fees paid by the Trust during subsequent deposits of Additional Securities
purchased with cash deposited. In order to minimize these effects, the Trust
will try to purchase Securities as near as possible to the Evaluation Time or
at prices as close as possible to the prices used to evaluate Trust Units at
the Evaluation Time.
In addition, subsequent deposits to create additional Units will not be
fully covered by the deposit of a bank letter of credit. In the event that the
Sponsors do not deliver cash in consideration for the additional Units
delivered, the Trust may be unable to satisfy its contracts to purchase the
Additional Securities without the Trustee selling underlying Securities.
Therefore, to the extent that the subsequent deposits are not covered by a bank
letter of credit, the failure of the Sponsors to deliver cash to the Trust, or
any delays in the Trust receiving such cash, would have significant adverse
consequences for the Trust.
COMMON STOCK. Since the Trust contains common stocks of domestic issuers, an
investment in Units of the Trust should be made with an understanding of the
risks inherent in any investment in common stocks including the risk that the
financial condition of the issuers of the Securities may become impaired or
that the general condition of the stock market may worsen.
Additional risks include those associated with the right to receive payments
from the issuer which is generally inferior to the rights of creditors of, or
holders of debt obligations or preferred stock issued by the issuer. Holders of
common stocks have a right to receive dividends only when, if, and in the
amounts declared by the issuer's board of directors and to participate in
amounts available for distribution by the issuer only after all other claims on
the issuer have been paid or provided for. By contrast, holders of preferred
stocks usually have the right to receive dividends at a fixed rate when and as
declared by the issuer's board of directors, normally on a cumulative basis.
Dividends on cumulative preferred stock must be paid before any dividends are
paid on common stock and any cumulative preferred stock dividend which has been
omitted is added to future dividends payable to the holders of such cumulative
preferred stock. Preferred stocks are also usually entitled to rights on
liquidation which are senior to those of common stocks. For these reasons,
preferred stocks generally entail less risk than common stocks.
Moreover, common stocks do not represent an obligation of the issuer and
therefore do not offer any assurance of income or provide the degree of
protection of debt securities. The issuance of debt securities or even
preferred stock by an issuer will create prior claims for payment of principal,
interest and dividends which could adversely affect the ability and inclination
of the issuer to declare or pay dividends on its common stock or the economic
interest of holders of common stock with respect to assets of the issuer upon
liquidation or bankruptcy. Further, unlike debt securities which typically have
a stated principal amount payable at maturity (which value will be subject to
market fluctuations prior thereto), common stocks have neither fixed principal
amount nor a maturity and have values which are subject to market fluctuations
for as long as the common
B-7
<PAGE>
stocks remain outstanding. Common stocks are especially susceptible to general
stock market movements and to volatile increases and decreases in value as
market confidence in and perceptions of the issuers change. These perceptions
are based on unpredictable factors including expectations regarding government,
economic, monetary and fiscal policies, inflation and interest rates, economic
expansion or contraction, and global or regional political, economic or banking
crises. The value of the common stocks in the Trust thus may be expected to
fluctuate over the life of the Trust to values higher or lower than those
prevailing on the Initial Date of Deposit.
LEGISLATION. At any time after the Initial Date of Deposit, legislation may
be enacted affecting the Securities in the Trust or the issuers of the
Securities. Changing approaches to regulation, particularly with respect to the
environment, or with respect to the petroleum or tobacco industries, may have a
negative impact on certain companies represented in the Trust. There can be no
assurance that future legislation, regulation or deregulation will not have a
material adverse effect on the Trust or will not impair the ability of the
issuers of the Securities to achieve their business goals.
LEGAL PROCEEDINGS AND LITIGATION. At any time after the Initial Date of
Deposit, legal proceedings may be initiated on various grounds, or legislation
may be enacted, with respect to the Securities in the Trust or to matters
involving the business of the issuer of the Securities. There can be no
assurance that future legal proceedings or legislation will not have a material
adverse impact on the Trust or will not impair the ability of the issuers of
the Securities to achieve their business and investment goals.
ORGANIZATION COSTS. The Securities purchased with the portion of the Public
Offering Price intended to be used to reimburse the Sponsors for the Trust's
organization costs will be purchased in the same proportionate relationship as
all the Securities contained in the Trust. Securities will be sold to reimburse
the Sponsors for the Trust's organization costs at the completion of the
initial offering period, which is expected to be 90 days from the Initial Date
of Deposit (a significantly shorter time period than the life of the Trust).
During the initial offering period, there may be a decrease in the value of the
Trust Securities. To the extent the proceeds from the sale of these Securities
are insufficient to repay the Sponsors for the Trust organization costs, the
Trustee will sell additional Securities to allow the Trust to fully reimburse
the Sponsors. In that event, the net asset value per Unit will be reduced by
the amount of additional Securities sold. Although the dollar amount of the
reimbursement due to the Sponsors will remain fixed and will never exceed $1.02
per 100 Units, this will also result in a greater effective cost per Unit to
Unitholders for the reimbursement to the Sponsor. When Securities are sold to
reimburse the Sponsor for organization costs, the Trustee will sell such
Securities to an extent which will maintain the same proportionate relationship
among the Securities contained in the Trust as existed prior to such sale.
GENERALLY. There is no assurance that any dividends will be declared or paid
in the future on the Securities. Investors should be aware that there is no
assurance that the Trust's objective will be achieved.
PUBLIC OFFERING
OFFERING PRICE. In calculating the Public Offering Price, the aggregate
value of the Securities is determined in good faith by the Trustee on each
"Business Day" as defined in the Indenture in the following manner: because the
Securities are listed on a national securities exchange, this evaluation is
based on the closing sale prices on that exchange as of the Evaluation Time
(unless the Trustee deems these prices inappropriate as a basis for valuation).
If the Trustee deems these prices inappropriate as a basis for evaluation,
B-8
<PAGE>
then the Trustee may utilize, at the Trust's expense, an independent evaluation
service or services to ascertain the values of the Securities. The independent
evaluation service shall use any of the following methods, or a combination
thereof, which it deems appropriate: (a) on the basis of current bid prices for
comparable securities, (b) by appraising the value of the Securities on the bid
side of the market or by such other appraisal deemed appropriate by the Trustee
or (c) by any combination of the above, each as of the Evaluation Time.
The sales charge consists of a Deferred Sales Charge of $12.50 per 100 Units
(1.25% of the Initial Public Offering Price). The Deferred Sales Charge will be
paid through ten monthly deductions from the Principal Account of the Trust of
$.80 on each of the Monthly Deferred Sales Charge Payment Dates as set forth in
the Summary of Essential Information in Part A (the "Monthly Charge") and two
semi-annual deductions from distributions from the Income Account of $2.25 each
on June 30, 2000 and on December 31, 2000 (the "Semi-Annual Charge"). If the
amount of the distribution from the Income Account is insufficient to pay the
Semi-Annual Charge, any unpaid amount shall be further deferred and deducted
from proceeds due to Unitholders upon termination. If the amount available in
the Principal Account of the Trust is insufficient to pay the Monthly Charge,
the Trustee shall sell Securities selected by the Sponsors sufficient to pay
such amounts. If the Public Offering Price paid by an investor exceeds $10.00
per Unit, the Deferred Sales Charge will be less than 1.25%; if the Public
Offering Price paid by an investor is less than $10.00 per Unit, the Deferred
Sales Charge will exceed 1.25%. To the extent the entire Deferred Sales Charge
has not been so deducted at the time of repurchase or redemption of the Units,
any unpaid amount will be deducted from the proceeds or in calculating an in
kind distribution. However, any remaining Deferred Sales Charge will be
refunded by the Sponsors when Units of any Schwab Ten Trust held at the time of
the death (including the death of a single joint tenant with rights of
survivorship) or disability (as defined in the Internal Revenue Code of 1986)
of a Holder are repurchased or redeemed. The Sponsors may require receipt of
satisfactory proof of the death or disability before releasing the portion of
the proceeds representing the amount waived. Units purchased pursuant to the
Reinvestment Plan are subject only to any remaining Deferred Sales Charge
deductions (see "Reinvestment Plan").
DISCOUNTS. Employees (and their immediate families) of Charles Schwab & Co.,
Inc., and ING Funds Distributor, Inc. (and their affiliates) and of the special
counsel to the Sponsors may, pursuant to employee benefit arrangements,
purchase Units of the Trust at a price equal to the aggregate value of the
underlying securities in the Trust during the initial offering period, divided
by the number of Units outstanding plus a reduced Deferred Sales Charge of
$10.00 per 100 Units (1.00% of the Initial Public Offering Price). Such
arrangements result in less selling effort and selling expenses than sales to
employee groups of other companies. Resales or transfers of Units purchased
under the employee benefit arrangements may only be made through the Sponsors'
secondary market, so long as it is being maintained, and not through other
broker-dealers. Units may be purchased in the primary or secondary market at
the Public Offering Price plus a reduced Deferred Sales Charge of $10.00 per
100 Units by investors who purchase Units through registered investment
advisers, certified financial planners and registered broker-dealers who have
agreements with Charles Schwab & Co., Inc. ("Schwab Financial Advisor"), or by
investors in either (i) any unit investment trust with an investment strategy
based upon the Strategic Ten that have purchased their investment within a two
year period prior to the date of this Prospectus who can purchase Units of the
Trust in an amount not greater in value than the amount of said investment made
during this two year period or (ii) a terminating series of the Schwab Ten
Trust who can purchase Units of the Trust in an amount not greater than twice
the value of their investment in the terminating Schwab Ten Trust ("Strategic
Ten Investors"). Such Strategic Ten Investors who purchase Units of the Trust
through a Schwab Financial Advisor may purchase Units in the primary or
secondary market at the Public Offering Price plus a Deferred Sales Charge of
$8.00 per 100 Units (.80% of the Initial Public Offering Price), if available
in the secondary market. The reduced Deferred Sales Charge of $10.00 per 100
B-9
<PAGE>
Units will be paid through Monthly Charges of $.80 and the two Semi-Annual
Charges of $1.00 each. The reduced Deferred Sales Charge of $8.00 per 100 Units
will only be subject to the monthly charge described above.
DISTRIBUTION OF UNITS. During the initial offering period and thereafter to
the extent additional Units continue to be offered by means of this Prospectus,
Units will be distributed by the Sponsors at the Public Offering Price. The
initial offering period is thirty days after each deposit of Securities in the
Trust and the Sponsors may extend the initial offering period for successive
thirty-day periods. The Sponsors intend to qualify the Units for sale in
substantially all States.
SPONSORS' PROFITS. The Sponsors will receive a combined gross underwriting
commission equal to up to $12.50 per 100 Units or 1.25% of the Initial Public
Offering Price per 100 Units (equivalent to 1.266% of the net amount invested
in the Securities). Additionally, the Sponsors may realize a profit on the
deposit of the Securities in the Trust representing the difference between the
cost of the Securities to the Sponsors and the cost of the Securities to the
Trust. (See "Portfolio of Investments.") All or a portion of the Securities
initially deposited in the Trust may have been acquired through the Sponsors.
During the initial offering period and thereafter to the extent additional
Units continue to be offered by means of this Prospectus, the Sponsors may also
realize profits or sustain losses as a result of fluctuations after the Initial
Date of Deposit in the aggregate value of the Securities and hence in the
Public Offering Price received by the Sponsors for the Units. Cash, if any,
made available to the Sponsors prior to settlement date for the purchase of
Units may be used in the Sponsors' business subject to the limitations of 17
CFR 240.15c3-3 under the Securities Exchange Act of 1934 and may be of benefit
to the Sponsors.
Both upon acquisition of Securities and termination of the Trust, the
Trustee may utilize the services of the Sponsors for the purchase or sale of
all or a portion of the Securities in the Trust. The Sponsors may receive
brokerage commissions from the Trust in connection with such purchases and
sales in accordance with applicable law.
In maintaining a market for the Units (see "Sponsors Repurchase") the
Sponsors will realize profits or sustain losses in the amount of any difference
between the price at which they buy Units and the price at which they resell
such Units.
RIGHTS OF UNITHOLDERS
BOOK-ENTRY UNITS. Ownership of Units of the Trust will not be evidenced by
certificates. All evidence of ownership of the Units will be recorded in book-
entry form at The Depository Trust Company ("DTC") through an investor's
brokerage account. Units held through DTC will be deposited by the Sponsors
with DTC in the Sponsors' DTC account and registered in the nominee name CEDE &
COMPANY. Individual purchases of beneficial ownership interest in the Trust
will be made in book-entry form through DTC. Ownership and transfer of Units
will be evidenced and accomplished directly and indirectly only by book-entries
made by DTC and its participants. DTC will record ownership and transfer of the
Units among DTC participants and forward all notices and credit all payments
received in respect of the Units held by the DTC participants. Beneficial
owners of Units will receive written confirmation of their purchase and sale
from Charles Schwab & Co., Inc. Transfers, and the requirements therefor, will
be governed by the applicable procedures of DTC and the Unitholder's agreement
with the DTC participant in whose name the Unitholder's Units are registered on
the transfer records of DTC.
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DISTRIBUTIONS. Dividends received by the Trust are credited by the Trustee
to an Income Account for the Trust. Other receipts, including the proceeds of
Securities disposed of, are credited to a Principal Account for the Trust.
Distributions to each Unitholder from the Income Account are computed as of
the close of business on each Record Date for the following Distribution Date
and consist of an amount substantially equal to such Unitholder's pro rata
share of the income credited to the Income Account, less expenses.
Distributions from the Principal Account of the Trust (other than amounts
representing failed contracts, as previously discussed) will be computed as of
each Record Date, and will be made to the Unitholders of the Trust on or
shortly after the Distribution Date. Proceeds representing principal received
from the disposition of any of the Securities between a Record Date and a
Distribution Date which are not used for redemptions of Units will be held in
the Principal Account and not distributed until the next Distribution Date.
Persons who purchase Units between a Record Date and a Distribution Date will
receive their first distribution on the second Distribution Date after such
purchase.
As of each Record Date, the Trustee will deduct from the Income Account of
the Trust, and, to the extent funds are not sufficient therein, from the
Principal Account of the Trust, amounts necessary to pay the expenses of the
Trust (as determined on the basis set forth under "Trust Expenses and
Charges"). The Trustee also may withdraw from said accounts such amounts, if
any, as it deems necessary to establish a reserve for any applicable taxes or
other governmental charges that may be payable out of the Trust. Amounts so
withdrawn shall not be considered a part of such Trust's assets until such time
as the Trustee shall return all or any part of such amounts to the appropriate
accounts. In addition, the Trustee may withdraw from the Income and Principal
Accounts such amounts as may be necessary to cover redemptions of Units.
Distributions of amounts necessary to pay the Deferred Sales Charge will be
made from the Principal Account to the extent of the Monthly Charge of $.80 per
100 Units for all Unitholders and from distributions made from the Income
Account to the extent of the Semi-Annual Charge of either $2.25 or $1.00 per
100 Units for those Unitholders paying Deferred Sales Charges of $12.50 and
$10.00, respectively, per 100 Units, to an account maintained by the Trustee
for purposes of satisfying investors' sales charge obligations.
The dividend distribution per 100 Units, if any, cannot be anticipated and
may be paid as Securities are redeemed, exchanged or sold, or as expenses of
the Trust fluctuate. No distribution need be made from the Income Account or
the Principal Account unless the balance therein is an amount sufficient to
distribute $1.00 per 100 Units.
RECORDS. The Trustee shall furnish Unitholders in connection with each
distribution a statement of the amount being distributed from the Income and
Principal Account, respectively, expressed in each case as a dollar amount per
100 Units. Within a reasonable time after the end of each calendar year, the
Trustee will furnish to each person who at any time during the calendar year
was a Unitholder of record a statement showing (a) as to the Income Account:
dividends, interest and other cash amounts received, amounts paid for purchases
of Substitute Securities and redemptions of Units, if any, deductions for the
Deferred Sales Charge, applicable taxes and fees and expenses of the Trust, and
the balance remaining after such distributions and deductions, expressed both
as a total dollar amount and as a dollar amount representing the pro rata share
of each 100 Units outstanding on the last business day of such calendar year;
(b) as to the Principal Account: the Securities disposed of and the net
proceeds received therefrom, deductions for payment of disposition of any
Securities and the net proceeds received therefrom, deductions for the Deferred
Sales Charge, payments of applicable taxes and fees and expenses of the Trust,
amounts paid for purchases of Substitute Securities and
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redemptions of Units, if any, and the balance remaining after such
distributions and deductions, expressed both as a total dollar amount and as a
dollar amount representing the pro rata share of each 100 Units outstanding on
the last business day of such calendar year; (c) a list of the Securities held,
a list of Securities purchased, sold or otherwise disposed of during the
calendar year and the number of Units outstanding on the last business day of
such calendar year; (d) the Redemption Price per 100 Units based upon the last
computation thereof made during such calendar year; and (e) amounts actually
distributed to Unitholders during such calendar year from the Income and
Principal Accounts, separately stated, of the Trust, expressed both as total
dollar amounts and as dollar amounts representing the pro rata share of each
100 Units outstanding on the last business day of such calendar year.
The Trustee shall keep available for inspection by Unitholders at all
reasonable times during usual business hours books of record and account of its
transactions as Trustee, including records of the names and addresses of
Unitholders, Units held, a current list of Securities in the portfolio and a
copy of the Trust Agreement.
LIQUIDITY
SPONSORS REPURCHASE. Unitholders who wish to dispose of their Units should
inquire of the Sponsors as to current market prices prior to making a tender
for redemption. The aggregate value of the Securities will be determined by the
Trustee on a daily basis and computed on the basis set forth under "Trustee
Redemption." The Sponsors do not guarantee the enforceability, marketability or
price of any Securities in the Portfolio or of the Units. The Sponsors may
discontinue the repurchase of redemption requests if the supply of Units
exceeds demand, or for other business reasons. The date of repurchase is deemed
to be the date on which redemption requests are received in proper form by
Charles Schwab & Co., Inc., except for redemption requests received after 4
P.M., New York Time when Units will be deemed to have been repurchased on the
next business day. In the event a market is not maintained for the Units, a
Unitholder may be able to dispose of Units only by tendering them to the
Trustee for redemption.
Units purchased by the Sponsors in the secondary market may be reoffered for
sale by the Sponsors at a price based on the aggregate value of the Securities
in the Trust subject to the remaining Deferred Sales Charge plus a pro rata
portion of amounts, if any, in the Income and Principal Accounts. Any Units
that are purchased by the Sponsors in the secondary market also may be redeemed
by the Sponsors if they determine such redemption to be in their best interest.
The Sponsors may, under certain circumstances, as a service to Unitholders,
elect to purchase any Units tendered to the Trustee for redemption (see
"Trustee Redemption"). Factors which the Sponsors will consider in making a
determination will include the number of Units of all Trusts which they have in
inventory, their estimate of the salability and the time required to sell such
Units and general market conditions. For example, if in order to meet
redemptions of Units the Trustee must dispose of Securities, and if such
disposition cannot be made by the redemption date (three calendar days after
tender), the Sponsors may elect to purchase such Units. Such purchase shall be
made by payment to the Unitholder's brokerage account not later than the close
of business on the redemption date of an amount equal to the Redemption Price
on the date of tender less any unpaid Deferred Sales Charge.
TRUSTEE REDEMPTION. At any time prior to the Evaluation Time on the business
day preceding the commencement of the Liquidation Period (approximately one
year from the Date of Deposit), or on the date of any earlier termination of
the Trust, Units may also be tendered to the Trustee for redemption upon
payment of any relevant tax by contacting Charles Schwab & Co., Inc. In certain
instances, additional documents may
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be required, such as a trust instrument, certificate of corporate authority,
certificate of death or appointment as executor, administrator or guardian. At
the present time there are no specific taxes related to the redemption of
Units. No redemption fee will be charged by the Sponsors or the Trustee. Units
redeemed by the Trustee will be canceled.
Within three business days following a tender for redemption, the Unitholder
will be entitled to receive an amount for each Unit tendered equal to the
Redemption Price per Unit computed as of the Evaluation Time set forth under
"Summary of Essential Information" in Part A on the date of tender less any
unpaid Deferred Sales Charge applicable to the redeeming Unitholder. The "date
of tender" is deemed to be the date on which Units are received by the Trustee,
except that with respect to Units received after the close of trading on the
New York Stock Exchange (4:00 p.m. Eastern Time), the date of tender is the
next day on which such Exchange is open for trading, and such Units will be
deemed to have been tendered to the Trustee on such day for redemption at the
Redemption Price computed on that day.
The Redemption Price per Unit is the pro rata share of the Unit in the Trust
determined by the Trustee on the basis of (i) the cash on hand in the Trust or
moneys in the process of being collected (during the initial offering period a
portion of the cash on hand includes an amount sufficient to pay the per Unit
portion of all or a part of the costs incurred in organizing and offering the
Trust, see "Trust Expenses and Charges"), (ii) the value of the Securities in
the Trust as determined by the Trustee, less (a) amounts representing taxes or
other governmental charges payable out of the Trust, (b) the accrued expenses
of the Trust and (c) cash allocated for the distribution to Unitholders of
record as of a Record Date prior to the evaluation being made. As of the close
of the initial offering period the Redemption Price per 100 Units will be
reduced to reflect the payment of the organization costs to the Sponsors.
Therefore, the amount of the Redemption Price per 100 Units received by a
Unitholder will include the portion representing organization costs only when
such Units are tendered for redemption prior to the close of the initial
offering period. Because the Securities are listed on a national securities
exchange, the Trustee may determine the value of the Securities in the Trust
based on the closing sale prices on that exchange. Unless the Trustee deems
these prices inappropriate as a basis for evaluation or if there is no such
closing purchase price, then the Trustee may utilize, at the Trust's expense,
an independent evaluation service or services to ascertain the values of the
Securities. The independent evaluation service shall use any of the following
methods, or a combination thereof, which it deems appropriate: (a) on the basis
of current bid prices for comparable securities, (b) by appraising the value of
the Securities on the bid side of the market or (c) by any combination of the
above.
In connection with each redemption the Sponsors will direct the Trustee to
redeem Units in accordance with the procedures set forth in either (a) or (b)
below.
(a) A Unitholder will receive his redemption proceeds in cash. Amounts
paid on redemption allocable to the Unitholder's interest in the Income
Account shall be withdrawn from the Income Account, or, if the balance
therein is insufficient, from the Principal Account. All other amounts paid
on redemption shall be withdrawn from the Principal Account. The Trustee is
empowered to sell Securities in order to make funds available for
redemptions. Such sales, if required, could result in a sale of Securities
by the Trustee at a loss. To the extent Securities are sold, the size and
diversity of the Trust will be reduced. The Securities to be sold will be
selected by the Trustee in order to maintain, to the extent practicable,
the proportionate relationship among the number of shares of each stock.
Provision is made in the Indenture under which the Sponsors may, but need
not, specify minimum amounts in which blocks of Securities are to be sold
in order to obtain the best price for the Trust. While these minimum
amounts may vary from time to time in accordance with market conditions,
the Sponsors believe that the minimum amounts which would be specified
would be approximately 100 shares for readily marketable Securities.
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Any Unitholder tendering 25,000 Units or more of the Trust for redemption
may request by written notice submitted at the time of tender from the Trustee
in lieu of a cash redemption a distribution of shares of Securities and cash in
an amount and value equal to the Redemption Price Per Unit as determined as of
the evaluation next following tender. To the extent possible, in kind
distributions ("In Kind Distributions") shall be made by the Trustee through
the distribution of each of the Securities in book-entry form to the
Unitholder's broker-dealer account at The Depository Trust Company. An In Kind
Distribution will be reduced by customary transfer and registration charges.
The tendering Unitholder will receive his pro rata number of whole shares of
each of the Securities comprising the Trust portfolio and cash from the Income
and Principal Accounts equal to the balance of the Redemption Price to which
the tendering Unitholder is entitled. A Unitholder who elects to receive In
Kind Distributions may incur brokerage or other transaction costs in converting
the Securities so distributed into cash subsequent to their receipt of the
Securities from the Trust. If funds in the Principal Account are insufficient
to cover the required cash distribution to the tendering Unitholder, the
Trustee may sell Securities in the manner described above.
The Trustee is irrevocably authorized in its discretion, if the Sponsors do
not elect to purchase a Unit tendered for redemption or if the Sponsors tender
a Unit for redemption, in lieu of redeeming such Unit, to sell such Unit in the
over-the-counter market for the account of the tendering Unitholder at prices
which will return to the Unitholder an amount in cash, net after deducting
brokerage commissions, transfer taxes and other charges, equal to or in excess
of the Redemption Price for such Unit. The Trustee will pay the net proceeds of
any such sale to the Unitholder on the day he would otherwise be entitled to
receive payment of the Redemption Price.
(b) The Trustee will redeem Units in kind by an in kind distribution to
The Chase Manhattan Bank as the Distribution Agent. A Unitholder will be
able to receive in kind an amount per Unit equal to the Redemption Price
per Unit as determined as of the day of tender. In Kind Distributions to
Unitholders will take the form of whole shares of Securities. Cash will be
distributed by the Distribution Agent in lieu of fractional shares. The
whole shares, fractional shares and cash distributed to the Distribution
Agent will aggregate an amount equal to the Redemption Price per Unit.
Distributions in kind on redemption of Units shall be held by the
Distribution Agent, whom each Unitholder shall be deemed to have designated as
his agent upon purchase of a Unit, for the account, and for disposition in
accordance with the instructions of, the tendering Unitholder as follows:
(i) The Distribution Agent shall sell the In Kind Distribution as of the
close of business on the date of tender or as soon thereafter as possible
and remit to the Unitholder not later than three business days thereafter
the net proceeds of sale, after deducting brokerage commissions and
transfer taxes, if any, on the sale unless the tendering Unitholder
requests a distribution of the Securities as set forth in paragraph (ii)
below. The Distribution Agent may sell the Securities through the Sponsors,
and the Sponsors may charge brokerage commissions on those sales.
(ii) If the tendering Unitholder requests distribution in kind and
tenders in excess of 25,000 Units, the Distribution Agent shall sell any
portion of the In Kind Distribution represented by fractional interests in
shares in accordance with the foregoing and distribute the net cash
proceeds plus any other distributable cash to the tendering Unitholder
together with book-entry credit to the account of the Unitholder's bank or
broker-dealer at DTC representing whole shares of each of the Securities
comprising the In Kind Distribution.
The 25,000 Unit threshold will not apply to redemptions in kind at the
termination of the Trust.
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<PAGE>
The portion of the Redemption Price which represents the Unitholder's
interest in the Income Account shall be withdrawn from the Income Account to
the extent available. The balance paid on any redemption, including dividends
receivable on stocks trading ex-dividend, if any, shall be drawn from the
Principal Account to the extent that funds are available for such purpose. To
the extent Securities are distributed in kind to the Distribution Agent, the
size of the Trust will be reduced. Sales by the Distribution Agent may be
required at a time when Securities would not otherwise be sold and might result
in lower prices than might otherwise be realized. The Redemption Price received
by a tendering Unitholder may be more or less than the purchase price
originally paid by such Unitholder, depending on the value of the Securities in
the Portfolio at the time of redemption.
The Trustee reserves the right to suspend the right of redemption and to
postpone the date of payment of the Redemption Price per Unit for any period
during which the New York Stock Exchange is closed, other than customary
weekend and holiday closings, or trading on that Exchange is restricted or
during which (as determined by the Securities and Exchange Commission) an
emergency exists as a result of which disposal or evaluation of the Securities
is not reasonably practicable, or for such other periods as the Securities and
Exchange Commission may by order permit. The Trustee and the Sponsors are not
liable to any person or in any way for any loss or damage which may result from
any such suspension or postponement.
A Unitholder who wishes to dispose of his Units should inquire of his broker
in order to determine if there is a current secondary market price in excess of
the Redemption Price.
TRUST ADMINISTRATION
PORTFOLIO SUPERVISION. The Trust is a unit investment trust and is not a
managed fund. Traditional methods of investment management for a managed fund
typically involve frequent changes in a portfolio of securities on the basis of
economic, financial and market analyses. The Portfolio of the Trust, however,
will not be managed and therefore the adverse financial condition of an issuer
will not necessarily require the sale of its Securities from the portfolio.
Although the portfolio of the Trust is regularly reviewed, because of the
formula employed in selecting the Strategic Ten, it is unlikely that the Trust
will sell any of the Securities other than to satisfy redemptions of Units, or
to cease buying Additional Securities in connection with the issuance of
additional Units. However, the Trust Agreement provides that the Sponsors may
direct the disposition of Securities upon the occurrence of certain events
including: (1) default in payment of amounts due on any of the Securities; (2)
institution of certain legal proceedings; (3) default under certain documents
materially and adversely affecting future declaration or payment of amounts due
or expected; (4) determination of the Sponsors that the tax treatment of the
Trust as a grantor trust would otherwise be jeopardized; (5) decline in price
as a direct result of serious adverse credit factors affecting the issuer of a
Security which, in the opinion of the Sponsors, would make the retention of the
Security detrimental to the Trust or the Unitholders; or (6) that there has
been a public tender offer made for a Security or a merger or acquisition is
announced affecting a Security, and that in the opinion of the Sponsors the
sale or tender of the Security is in the best interest of the Unitholders.
Furthermore, the Trust will likely continue to hold a Security and purchase
additional shares notwithstanding its ceasing to be included among the
Strategic Ten or even its deletion from the DJIA.
In addition, the Trust Agreement provides as follows:
(a) If a default in the payment of amounts due on any Security occurs
pursuant to provision (1) above and if the Sponsors fail to give immediate
instructions to sell or hold that Security, the Trustee, within 30 days of
that failure by the Sponsors, shall sell the Security.
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<PAGE>
(b) It is the responsibility of the Sponsors to instruct the Trustee to
reject any offer made by an issuer of any of the Securities to issue new
securities in exchange and substitution for any Security pursuant to a
recapitalization or reorganization. If any exchange or substitution is
effected notwithstanding such rejection, any securities or other property
received shall be promptly sold unless the Sponsors direct that it be
retained.
(c) Any property received by the Trustee after the Initial Date of
Deposit as a distribution on any of the Securities in a form other than
cash or additional shares of the Securities shall be promptly sold unless
the Sponsors direct that it be retained by the Trustee. The proceeds of any
disposition shall be credited to the Income or Principal Account of the
Trust.
(d) The Sponsors are authorized to increase the size and number of Units
of the Trust by the deposit of Additional Securities, contracts to purchase
Additional Securities or cash or a letter of credit with instructions to
purchase Additional Securities in exchange for the corresponding number of
additional Units from time to time subsequent to the Initial Date of
Deposit, provided that the original proportionate relationship among the
number of shares of each Security established on the Initial Date of
Deposit is maintained to the extent practicable. The Sponsors may specify
the minimum numbers in which Additional Securities will be deposited or
purchased. If a deposit is not sufficient to acquire minimum amounts of
each Security, Additional Securities may be acquired in the order of the
Security most under-represented immediately before the deposit when
compared to the original proportionate relationship. If Securities of an
issue originally deposited are unavailable at the time of the subsequent
deposit, the Sponsors may (i) deposit cash or a letter of credit with
instructions to purchase the Security when it becomes available, or (ii)
deposit (or instruct the Trustee to purchase) either Securities of one or
more other issues originally deposited or a Substitute Security.
In determining whether to dispose of or hold Securities, new securities or
property, the Sponsors may be advised by the Portfolio Supervisor.
TRUST AGREEMENT AND AMENDMENT. The Trust Agreement may be amended by the
Trustee and the Sponsors without the consent of any of the Unitholders: (1) to
cure any ambiguity or to correct or supplement any provision which may be
defective or inconsistent; (2) to change any provision thereof as may be
required by the Securities and Exchange Commission or any successor
governmental agency; or (3) to make such other provisions in regard to matters
arising thereunder as shall not adversely affect the interests of the
Unitholders.
The Trust Agreement may also be amended in any respect, or performance of
any of the provisions thereof may be waived, with the consent of investors
holding 66 2/3% of the Units then outstanding for the purpose of modifying the
rights of Unitholders; provided that no such amendment or waiver shall reduce
any Unitholder's interest in the Trust without his consent or reduce the
percentage of Units required to consent to any such amendment or waiver without
the consent of the holders of all Units. The Trust Agreement may not be
amended, without the consent of the holders of all Units in the Trust then
outstanding, to increase the number of Units issuable or to permit the
acquisition of any Securities in addition to or in substitution for those
initially deposited in such Trust, except in accordance with the provisions of
the Trust Agreement. The Trustee shall promptly notify Unitholders, in writing,
of the substance of any such amendment.
TRUST TERMINATION. The Trust Agreement provides that the Trust shall
terminate as of the Evaluation Time on the business day preceding the
commencement of the Liquidation Period or upon the earlier maturity, redemption
or other disposition, as the case may be, of the last of the Securities held in
such
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Trust and in no event is it to continue beyond the Mandatory Termination Date.
If the value of the Trust shall be less than the minimum amount set forth under
"Summary of Essential Information" in Part A, the Trustee may, in its
discretion, and shall, when so directed by the Sponsors, terminate the Trust.
The Trust may also be terminated at any time with the consent of investors
holding 100% of the Units then outstanding. When directed by the Sponsors, the
Trustee shall utilize the services of the Sponsors for the sale of all or a
portion of the Securities in the Trust, and in so doing, the Sponsors will
determine the manner, timing and execution of the sales of the underlying
Securities. Any brokerage commissions received by the Sponsors from the Trust
in connection with such sales will be in accordance with applicable law. In the
event of termination, written notice thereof will be sent by the Trustee to all
Unitholders who are holding their Units in a Schwab brokerage account at that
time. Such notice will provide Unitholders with the following three options by
which to receive their pro rata share of the net asset value of the Trust and
requires their election of one of the three options by notifying the Trustee by
returning a properly completed election request (to be supplied to such
Unitholders at least 30 days prior to the commencement of the Liquidation
Period) (see "Summary of Essential Information" in Part A for the date of the
commencement of the Liquidation Period):
1. A Unitholder whose interest in the Trust would entitle him to receive
at least one share of each underlying Security will have his Units redeemed
on or about the commencement of the Liquidation Period by distribution of
the Unitholder's pro rata share of the net asset value of the Trust on such
date distributed in kind to the extent represented by whole shares of
underlying Securities and the balance in cash within three business days
following the commencement of the Liquidation Period. Unitholders
subsequently selling such distributed Securities will incur brokerage costs
when disposing of such Securities. Unitholders should consult their own tax
adviser in this regard;
2. To receive in cash such Unitholder's pro rata share of the net asset
value of the Trust derived from the sale by the Sponsors as the agents of
the Trustee of the underlying Securities during the Liquidation Period. The
Unitholder's pro rata share of its net assets of the Trust will be
distributed to such Unitholder within three days of the settlement of the
trade of the last Security to be sold; and/or
3. To invest such Unitholder's pro rata share of the net assets of the
Trust derived from the sale by the Sponsors as agents of the Trustee of the
underlying Securities in units of a subsequent series of the Schwab Ten
Trust (the "New Series") provided one is offered. It is expected that a
special redemption and liquidation will be made of all Units of this Trust
held by Unitholders (the "Rollover Unitholder") who affirmatively notify
the Trustee of their election to participate in this option on or prior to
the Rollover Notification Date set forth in the "Summary of Essential
Information" for the Trust in Part A. In the event that the Sponsors
determine that such a redemption and subsequent investment in a New Series
by a Rollover Unitholder may be effected under applicable law in a manner
that will not result in the recognition of either gain or loss for U.S.
federal income tax purposes with respect to any Securities that are
included in the portfolio of the New Series ("Duplicated Securities"),
Unitholders will be notified at least 30 days prior to the commencement of
the Liquidation Period of the procedures and process necessary to
facilitate such tax treatment. The Units of a New Series will be purchased
by the Unitholder within three business days of the settlement of the trade
for the last of the Unitholder's Securities to be sold. Such purchaser will
be entitled to a reduced deferred sales charge upon the purchase of units
of the New Series. It is expected that the terms of the New Series will be
substantially the same as the terms of the Trust described in this
Prospectus, and that similar options with respect to the termination of
such New Series will be available. The availability of this option does not
constitute a solicitation of an offer to purchase Units of a New Series or
any other security. A Unitholder's election to participate in this option
will be treated as an indication of interest only. At any time prior to the
purchase by the Unitholder of units of a New Series such Unitholder may
change his investment strategy and receive, in cash, the
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proceeds of the sale of the Securities. An election of this option will not
prevent the Unitholder from recognizing taxable gain or loss (except in the
case of a loss, if and to the extent the New Series is treated as
substantially identical to the Trust) as a result of the liquidation, even
though no cash will be distributed to pay any taxes. Unitholders should
consult their own tax adviser in this regard.
Unitholders who do not make any election will be deemed to have elected to
receive the termination distribution in cash (option number 2). In addition,
Unitholders who have transferred their Units from a Schwab brokerage account
will not be eligible for the rollover (option number 3) and will be deemed to
have elected to receive the termination distribution in cash (option number 2),
unless they affirmatively notify the Trustee by the Rollover Notification Date
that they elect to receive an in-kind distribution (option number 1).
The Sponsors have agreed that to the extent they effect the sales of
underlying securities for the Trustee in the case of the second and third
options such sales will be free of brokerage commissions. The Sponsors, on
behalf of the Trustee, will sell, unless prevented by unusual and unforeseen
circumstances, such as, among other reasons, a suspension in trading of a
Security, the close of a stock exchange, outbreak of hostilities and collapse
of the economy, all of the Securities by the last business day of the
Liquidation Period. The Redemption Price Per Unit upon the settlement of the
last sale of Securities during the Liquidation Period will be distributed to
Unitholders in redemption of such Unitholders' interest in the Trust.
Depending on the amount of proceeds to be invested in Units of the New
Series and the amount of other orders for Units in the New Series, the Sponsors
may purchase a large amount of securities for the New Series in a short period
of time. The Sponsors' buying of securities may tend to raise the market prices
of these securities. The actual market impact of the Sponsors' purchases,
however, is currently unpredictable because the actual amount of securities to
be purchased and the supply and price of those securities is unknown. A similar
problem may occur in connection with the sale of Securities during the
Liquidation Period; depending on the number of sales required, the prices of
and demand for Securities, such sales may tend to depress the market prices and
thus reduce the proceeds of such sales. The Sponsors believe that the sale of
underlying Securities during the Liquidation Period, as described above, is in
the best interest of a Unitholder and may mitigate the negative market price
consequences stemming from the trading of large amounts of Securities. The
Securities may be sold in fewer than seven days if, in the Sponsors' judgment,
such sales are in the best interest of Unitholders. The Sponsors, in
implementing such sales of securities on behalf of the Trustee, will seek to
maximize the sales proceeds and will act in the best interests of the
Unitholders. There can be no assurance, however, that any adverse price
consequences of heavy trading will be mitigated.
Section 17(a) of the Investment Company Act of 1940 generally prohibits
principal transactions between registered investment companies and their
affiliates. Pursuant to an exemptive order issued by the Securities and
Exchange Commission, each terminating Schwab Ten Trust can sell Duplicated
Securities directly to a New Series. The exemption will enable the Trust to
eliminate commission costs on these transactions. The price for those
securities transferred will be the closing sale price on the sale date on the
national securities exchange where the securities are principally traded, as
certified and confirmed by the Trustee.
The Sponsors may for any reason, in their sole discretion, decide not to
sponsor any subsequent series of the Trust, without penalty or incurring
liability to any Unitholder. If the Sponsors so decide, the Sponsors will
notify the Trustee of that decision, and the Trustee will notify the
Unitholders before the commencement of the Liquidation Period. All Unitholders
will then elect either option 1 or option 2.
By electing to reinvest in the New Series, the Unitholder indicates his
interest in having his terminating distribution from the Trust invested only in
the New Series created following termination of the Trust; the
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<PAGE>
Sponsors expect, however, that a similar reinvestment program will be offered
with respect to all subsequent series of the Trust, thus giving Unitholders a
yearly opportunity to elect to "rollover" their terminating distributions into
a New Series. The availability of the reinvestment privilege does not
constitute a solicitation of offers to purchase units of a New Series or any
other security. A Unitholder's election to participate in the reinvestment
program will be treated as an indication of interest only. The Sponsors intend
to coordinate the date of deposit of a future series so that the terminating
trust will terminate contemporaneously with the creation of a New Series. The
Sponsors reserve the right to modify, suspend or terminate the reinvestment
privilege at any time.
THE SPONSORS. Charles Schwab & Co., Inc. ("Schwab") was established in 1971
and is one of America's largest discount brokers. The firm provides low-cost
securities brokerage and related financial services to over 3.3 million active
customer accounts and has over 200 branch offices. Schwab also offers
convenient access to financial information services and provides products and
services that help investors make investment decisions. Schwab is a wholly
owned subsidiary of The Charles Schwab Corporation. Charles R. Schwab is the
founder, Chairman, Chief Executive Officer and a director of The Charles Schwab
Corporation and, as of March 18, 1999, the beneficial owner of approximately
18.6% of the outstanding shares of that corporation. Mr. Schwab may be deemed
to be a controlling person of Schwab.
ING Funds Distributor, Inc., an Iowa corporation, is a wholly owned indirect
subsidiary of ING Groep N.V. ING Groep N.V., among the leading global financial
services organizations, is engaged in asset management, banking and insurance
activities in 60 countries worldwide with over 90,000 employees. The Sponsor is
a member of the National Association of Securities Dealers, Inc.
The information included herein is only for the purpose of informing
investors as to the financial responsibility of the Sponsors and their ability
to carry out their contractual obligations. The Sponsors will be under no
liability to Unitholders for taking any action, or refraining from taking any
action, in good faith pursuant to the Trust Agreement, or for errors in
judgment except in cases of their own willful misfeasance, bad faith, gross
negligence or reckless disregard of their obligations and duties.
The Sponsors may each resign at any time by delivering to the Trustee an
instrument of resignation executed by the individual Sponsor. If at any time
either of the Sponsors shall resign or fail to perform any of its duties under
the Trust Agreement or becomes incapable of acting or becomes bankrupt or its
affairs are taken over by public authorities, then the Trustee may either (a)
appoint a successor Sponsor; (b) terminate the Trust Agreement and liquidate
the Trust; or (c) continue to act as Trustee without terminating the Trust
Agreement. Any successor Sponsor appointed by the Trustee shall be satisfactory
to the Trustee and, at the time of appointment, shall have a net worth of at
least $1,000,000.
THE TRUSTEE. The Trustee is The Chase Manhattan Bank with its principal
executive office located at 270 Park Avenue, New York, New York 10017 (800)
428-8890 and its unit investment trust office at 4 New York Plaza, New York,
New York 10004. The Trustee is subject to supervision by the Superintendent of
Banks of the State of New York, the Federal Deposit Insurance Corporation and
the Board of Governors of the Federal Reserve System.
The Trustee shall not be liable or responsible in any way for taking any
action, or for refraining from taking any action, in good faith pursuant to the
Trust Agreement, or for errors in judgment; or for any disposition of any
moneys, Securities or Units in accordance with the Trust Agreement, except in
cases of its own willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations and duties;
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provided, however, that the Trustee shall not in any event be liable or
responsible for any evaluation made by any independent evaluation service
employed by it. In addition, the Trustee shall not be liable for any taxes or
other governmental charges imposed upon or in respect of the Securities or the
Trust which it may be required to pay under current or future law of the United
States or any other taxing authority having jurisdiction. The Trustee shall not
be liable for depreciation or loss incurred by reason of the sale by the
Trustee of any of the Securities pursuant to the Trust Agreement.
For further information relating to the responsibilities of the Trustee
under the Trust Agreement, reference is made to the material set forth under
"Rights of Unitholders."
The Trustee may resign by executing an instrument in writing and filing the
same with the Sponsors, and mailing a copy of a notice of resignation to all
Unitholders. In such an event the Sponsors are obligated to appoint a successor
Trustee as soon as possible. In addition, if the Trustee becomes incapable of
acting or becomes bankrupt or its affairs are taken over by public authorities,
the Sponsors may remove the Trustee and appoint a successor as provided in the
Trust Agreement. Notice of such removal and appointment shall be mailed to each
Unitholder by the Sponsors. If upon resignation of the Trustee no successor has
been appointed and has accepted the appointment within thirty days after
notification, the retiring Trustee may apply to a court of competent
jurisdiction for the appointment of a successor. The resignation or removal of
the Trustee becomes effective only when the successor Trustee accepts its
appointment as such or when a court of competent jurisdiction appoints a
successor Trustee. Upon execution of a written acceptance of such appointment
by such successor Trustee, all the rights, powers, duties and obligations of
the original Trustee shall vest in the successor.
Any corporation into which the Trustee may be merged or with which it may be
consolidated, or any corporation resulting from any merger or consolidation to
which the Trustee shall be a party, shall be the successor Trustee. The Trustee
must always be a banking corporation organized under the laws of the United
States or any State and have at all times an aggregate capital, surplus and
undivided profits of not less than $2,500,000.
EVALUATION OF THE TRUST. The value of the Securities in the Trust portfolio
is determined in good faith by the Trustee on the basis set forth under "Public
Offering-Offering Price." The Sponsors and the Unitholders may rely on any
evaluation furnished by the Trustee and shall have no responsibility for the
accuracy thereof. Determinations by the Trustee under the Trust Agreement shall
be made in good faith upon the basis of the best information available to it,
provided, however, that the Trustee shall be under no liability to the Sponsors
or Unitholders for errors in judgment, except in cases of its own willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations and duties. The Trustee, the Sponsors and the Unitholders may rely
on any evaluation furnished to the Trustee by an independent evaluation service
and shall have no responsibility for the accuracy thereof.
TRUST EXPENSES AND CHARGES
Investors will reimburse the Sponsors on a per 100 Units basis, for all or a
portion of the estimated costs incurred in organizing the Trust (collectively,
the "organization costs"), including the cost of the initial preparation and
execution of the Trust Agreement, registration of the Trust and the Units under
the Investment Company Act of 1940 and the Securities Act of 1933 and State
registration fees, the initial fees and expenses
B-20
<PAGE>
of the Trustee, legal expenses and other actual out-of-pocket expenses. The
estimated organization costs will be paid to the Sponsors from the assets of
the Trust as of the close of the initial offering period (which may be between
30 and 90 days). To the extent that actual organization costs are less than the
estimated amount, only the actual organization costs will be deducted from the
assets of the Trust. To the extent that actual organization costs are greater
than the estimated amount, only the estimated organization costs included in
the Public Offering Price will be reimbursed to the Sponsors. All advertising
and selling expenses, as well as any organizational costs not paid by the
Trust, will be borne by the Sponsors at no cost to the Trust.
ING Mutual Funds Management Co. LLC, an affiliate of ING Funds Distributor,
Inc., and Charles Schwab & Co., Inc. will receive for portfolio supervisory,
bookkeeping and administrative services to the Trust an annual fee in the
amount set forth under "Summary of Essential Information" in Part A. This fee
may exceed the actual cost of providing portfolio supervisory, bookkeeping and
administrative services for the Trust, but at no time will the total amount
received for portfolio supervisory, bookkeeping and administrative services
rendered to all series of the Schwab Trusts in any calendar year exceed the
aggregate cost to the Portfolio Supervisor and Charles Schwab & Co., Inc. of
supplying such services in such year. (See "Portfolio Supervision.")
The Trustee will receive, for its ordinary recurring services to the Trust,
an annual fee in the amount set forth under "Summary of Essential Information"
in Part A. For a discussion of the services performed by the Trustee pursuant
to its obligations under the Trust Agreement, see "Trust Administration" and
"Rights of Unitholders."
The Trustee's fees applicable to a Trust are payable as of each Record Date
from the Income Account of the Trust to the extent funds are available and then
from the Principal Account. Both the annual fee for portfolio supervisory,
bookkeeping and administrative services, and Trustee's fees may be increased
without approval of the Unitholders by amounts not exceeding proportionate
increases in consumer prices for services as measured by the United States
Department of Labor's Consumer Price Index entitled "All Services Less Rent."
The following additional charges are or may be incurred by the Trust: all
expenses (including counsel fees) of the Trustee incurred and advances made in
connection with its activities under the Trust Agreement, including the
expenses and costs of any action undertaken by the Trustee to protect the Trust
and the rights and interests of the Unitholders; fees of the Trustee for any
extraordinary services performed under the Trust Agreement; indemnification of
the Trustee for any loss or liability accruing to it without gross negligence,
bad faith or willful misconduct on its part, arising out of or in connection
with its acceptance or administration of the Trust; indemnification of the
Sponsors for any losses, liabilities and expenses incurred in acting as
sponsors of the Trust without gross negligence, bad faith or willful misconduct
on its part; and all taxes and other governmental charges imposed upon the
Securities or any part of the Trust (no such taxes or charges are being levied,
made or, to the knowledge of the Sponsors, contemplated). The above expenses,
including the Trustee's fees, when paid by or owing to the Trustee are secured
by a first lien on the Trust to which such expenses are charged. In addition,
the Trustee is empowered to sell the Securities in order to make funds
available to pay all expenses.
Unless the Sponsors otherwise direct, the accounts of the Trust shall be
audited not less than annually by independent auditors selected by the
Sponsors. To the extent lawful, the expenses of the audit shall be an expense
of the Trust. Unitholders covered by the audit during the year may receive a
copy of the audited financial statements upon request.
B-21
<PAGE>
REINVESTMENT PLAN
Income and principal distributions on Units (other than the final
distribution in connection with the termination of the Trust) may be reinvested
by participating in the Trust's reinvestment plan. Under the plan, the Units
acquired for participants will be either Units already held in inventory by the
Sponsors or new Units created by the Sponsors' deposit of Additional Securities
as described in "The Trust-Organization" in this Part B. Units acquired by
reinvestment will not be subject to a sales charge. In order to enable a
Unitholder to participate in the reinvestment plan with respect to a particular
distribution on their Units, written notification must be received by the
Trustee within 10 days prior to the Record Date for such distribution. Each
subsequent distribution of income or principal on the participant's Units will
be automatically applied by the Trustee to purchase additional Units of the
Trust. The Sponsors reserve the right to demand, modify or terminate the
reinvestment plan at any time without prior notice.
TAX STATUS
The following is a general discussion of certain of the Federal income tax
consequences of the purchase, ownership and disposition of the Units by U.S.
citizens and residents and corporations organized in the United States. The
summary is limited to investors who hold the Units as "capital assets"
(generally, property held for investment) within the meaning of the Internal
Revenue Code and does not address the tax consequences of Units held by
dealers, financial institutions or insurance companies.
In rendering the opinion set forth below, Battle Fowler LLP has examined the
Agreement, the final form of Prospectus dated the date hereof and the documents
referred to therein, among others, and has relied on the validity of said
documents and the accuracy and completeness of the facts set forth therein. In
the opinion of Battle Fowler LLP, special counsel for the Sponsors, under
existing law:
1. The Trust will be classified as a grantor trust for Federal income
tax purposes and not as a partnership or association taxable as a
corporation. Classification of the Trust as a grantor trust will cause the
Trust not to be subject to Federal income tax, and will cause the
Unitholders of the Trust to be treated for Federal income tax purposes as
the owners of a pro rata portion of the assets of the Trust. All income
received by the Trust will be treated as income of the Unitholders in the
manner set forth below.
2. The Trust is not subject to the New York Franchise Tax on Business
Corporations or the New York City General Corporation Tax. For a Unitholder
who is a New York resident, however, a pro rata portion of all or part of
the income of the Trust will be treated as income of the Unitholder under
the income tax laws of the State and City of New York. Similar treatment
may apply in other states.
3. During the 90-day period subsequent to the initial issuance date, the
Sponsors reserve the right to deposit Additional Securities that are
substantially similar to those establishing the Trust. This retained right
falls within the guidelines promulgated by the IRS and should not affect
the taxable status of the Trust.
A taxable event will generally occur with respect to each Unitholder when
the Trust disposes of a Security (whether by sale, exchange or redemption) or
upon the sale, exchange or redemption of Units by the Unitholder. The price a
Unitholder pays for its Units, including sales charges, is allocated among its
pro rata portion of each Security held by the Trust (in proportion to the fair
market values thereof on the date the Unitholder purchases its Units) in order
to determine its initial cost for its pro rata portion of each Security held by
the Trust.
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<PAGE>
A Unitholder will be considered to have received all of the dividends paid
on its pro rata portion of each Security when such dividends are received or
amounts are converted by the Trust, even if the Holder does not actually
receive such distributions but rather reinvests its dividend distributions
pursuant to the Reinvestment Plan. For Federal income tax purposes, a
Unitholder's pro rata portion of dividends paid with respect to a Security held
by a Trust is taxable as ordinary income to the extent of the issuing
corporation's current and accumulated earnings and profits. A Unitholder's pro
rata portion of dividends paid on a Security that exceed current and
accumulated earnings and profits will first reduce a Unitholder's tax basis in
the Security, and to the extent that such dividends exceed a Unitholder's tax
basis in the Security will generally be treated as capital gain.
A Unitholder's portion of gain, if any, upon the sale, exchange or
redemption of Units or the disposition of Securities held by the Trust will
generally be considered a capital gain and will be long-term if the Unitholder
has held its Units (and the Trust has held the Securities) for more than one
year. Capital gains are generally taxed at the same rates applicable to
ordinary income, but non-corporate Unitholders who realize long-term capital
gains may be subject to a reduced tax rate of 20%, rather than the "regular"
maximum tax rate of 39.6%. Tax rates may increase prior to the time when
Unitholders may realize gains from the sale, exchange or redemption of the
Units or Securities.
A Unitholder's portion of loss, if any, upon the sale or redemption of Units
or the disposition of Securities held by the Trust will generally be considered
a capital loss and will be long-term if the Unitholder has held its Units (and
the Trust has held the Securities) for more than one year. Capital losses are
deductible to the extent of capital gains; in addition, up to $3,000 of capital
losses ($1,500 in the case of married individuals filing separately) recognized
by non-corporate Unitholders may be deducted against ordinary income.
An individual Unitholder that itemizes its deductions may also deduct its
pro rata share of the fees and expenses of the Trust, but only to the extent
that such amounts, together with the Unitholder's other miscellaneous
deductions, exceed 2% of its adjusted gross income. The deduction of fees and
expenses is subject to limitations for individuals with incomes in excess of
certain thresholds.
A corporation that owns Units will generally be entitled to a 70% dividends
received deduction with respect to its pro rata portion of dividends received
by the Trust from a domestic corporation or from a qualifying foreign
corporation in the same manner as if such corporate unitholder directly owned
the Securities paying such dividends. That deduction is available to
corporations (other than "S" corporations and certain other corporations that
are not eligible for such deduction) and is not available for purposes of
special taxes such as the accumulated earnings tax and the personal holding
company tax. However, a corporation owning Units should be aware that there are
additional limitations on the eligibility of dividends for the 70% dividends
received deduction. These limitations include a requirement that stock (and
therefore Units) must generally be held at least 46 days during the 90-day
period beginning on the date that is 45 days before the date on which the stock
becomes "ex-dividend." Moreover, the allowable percentage of the deduction will
be reduced if a corporate Unitholder owns stock (or Units) the financing of
which is directly attributable to indebtedness incurred by such corporation.
The dividends-received deduction is currently 70%. Congress from time to time
considers proposals to reduce this percentage.
After the end of each calendar year, the Trustee will furnish to each
Unitholder an annual statement containing information relating to the dividends
received by the Trust on the Securities, the gross proceeds received by the
Trust from the disposition of any Security, and the fees and expenses paid by
the Trust. The Trustee will also furnish annual information returns to each
Unitholder and to the Internal Revenue Service.
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<PAGE>
As discussed in the section "Termination", each Unitholder may have three
options in receiving its termination distributions, which are (i) to receive
its pro rata share of the underlying Securities in kind, (ii) to receive cash
upon liquidation of its pro rata share of the underlying Securities, or (iii)
to invest the amount of cash it would receive upon the liquidation of its pro
rata share of the underlying Securities in units of a future series of the
Trust (if one is offered). A Unitholder that chooses option (i), should be
treated as merely exchanging its undivided pro rata ownership of Securities
held by the Trust for sole ownership of a proportionate share of Securities,
and therefore the transaction should be tax free to the extent the Securities
are received. Alternatively, the transaction may be treated as an exchange that
would qualify for nonrecognition treatment to the extent the Unitholder is
exchanging his undivided interest in all of the Trust's Securities for his
proportionate number of shares of the underlying Securities. In either
instance, the transaction should result in a non-taxable event for the
Unitholder to the extent Securities are received. However, there is no specific
authority addressing the income tax consequences of an in-kind distribution
from a grantor trust.
Entities that generally qualify for an exemption from Federal income tax,
such as many pension trusts, are nevertheless taxed under Section 511 of the
Code on unrelated business taxable income. Unrelated business taxable income is
income from a trade or business regularly carried on by the tax-exempt entity
that is unrelated to the entity's exempt purpose. Unrelated business taxable
income generally does not include dividend or interest income or gain from the
sale of investment property, unless such income is derived from property that
is debt-financed or is dealer property. A tax-exempt entity's dividend income
from the Trust and gain from the sale of Units in the Trust or the Trust's sale
of Securities is not expected to constitute unrelated business taxable income
to such tax-exempt entity unless the acquisition of the Unit itself is debt-
financed or constitutes dealer property in the hands of the tax-exempt entity.
Prospective investors are urged to consult their own tax advisers concerning
the Federal, state, local and any other tax consequences of the purchase,
ownership and disposition of Units prior to investing in the Trust.
RETIREMENT PLANS. Units of the Trust may be well suited for purchase by
Individual Retirement Accounts ("IRAs"), Keogh plans, pension funds and other
qualified retirement plans. Generally, capital gains and income received in
each of the foregoing plans are exempt from Federal taxation. Except with
respect to certain IRAs known as Roth IRAs, distributions from such plans are
generally treated as ordinary income but may be eligible for tax-deferred
rollover treatment and, in very limited cases, special 10 year averaging.
Holders of Units in IRAs, Keogh plans and other tax-deferred retirement plans
should consult their plan custodian as to the appropriate disposition of
distributions. Investors considering participation in any such plan should
review specific tax laws related thereto and should consult their attorneys or
tax advisers with respect to the establishment and maintenance of any such
plan. Such plans are offered by brokerage firms, including Charles Schwab &
Co., Inc., and other financial institutions. Fees and charges with respect to
such plans may vary.
Before investing in the Trust, the trustee or investment manager of an
employee benefit plan (e.g., a pension or profit sharing retirement plan)
should consider among other things (a) whether the investment is prudent under
the Employee Retirement Income Security Act of 1974, as amended ("ERISA" ),
taking into account the needs of the plan and all of the facts and
circumstances of the investment in the Trust; (b) whether the investment
satisfies the diversification requirement of Section 404(a)(1)(C) of ERISA; and
(c) whether the assets of the Trust are deemed "plan assets" under ERISA and
the Department of Labor regulations regarding the definition of "plan assets."
B-24
<PAGE>
OTHER MATTERS
LEGAL OPINIONS. The legality of the Units offered hereby and certain matters
relating to federal tax law have been passed upon by Battle Fowler LLP, 75 East
55th Street, New York, New York 10022 as counsel for the Sponsors. Carter,
Ledyard & Milburn, Two Wall Street, New York, New York 10005 have acted as
counsel for the Trustee.
PORTFOLIO SUPERVISOR. ING Mutual Funds Management Co. LLC, a Delware limited
liability company, is a wholly-owned indirect subsidiary of ING Group and is an
affiliate of the ING Funds Distributor, Inc.
INDEPENDENT AUDITORS. The Statement of Financial Condition, including the
Portfolio of Investments, is included herein in reliance upon the report of
Ernst & Young LLP, independent auditors, and upon the authority of said firm as
experts in accounting and auditing.
PERFORMANCE INFORMATION. Total returns, average annualized returns or
cumulative returns for various periods of the Strategic Ten, the related index
and this Trust may be included from time to time in advertisements, sales
literature and reports to current or prospective investors. Total return shows
changes in Unit price during the period plus any dividends and capital gains
received, divided by the public offering price as of the date of calculation.
Average annualized returns show the average return for stated periods of longer
than a year. From time to time, the Trust may compare the cost of purchasing
Trust shares to the cost of purchasing the individual securities which
constitute the Strategic Ten. In addition, the Trust may compare its deferred
sales charge to the sales charges assessed on unitholders by other unit
investment trusts. Sales material may also include an illustration of the
cumulative results of like annual investments in the Strategic Ten during an
accumulation period and like annual withdrawals during a distribution period.
Figures for actual portfolios will reflect all applicable expenses and, unless
otherwise stated, the maximum deferred sales charge. No provision is made for
any income taxes payable. Similar figures may be given for this Trust applying
the Strategic Ten investment strategy to other indexes. Returns may also be
shown on a combined basis. Trust performance may be compared to performance on
a total return basis of the Dow Jones Industrial Average, the S&P 500 Composite
Price Stock Index, or the average performance of mutual funds investing in a
diversified portfolio of U.S. stocks generally or growth stocks, or performance
data from Lipper Analytical Services, Inc. and Morningstar Publications, Inc.
or from publications such as Money, The New York Times, U.S. News and World
Report, Business Week, Forbes or Fortune. As with other performance data,
performance comparisons should not be considered representative of a Trust's
relative performance for any future period.
B-25
<PAGE>
No person is authorized to give any information or to make any
representations with respect to this Trust not contained in Parts A and B of
this Prospectus. The Trust is registered as a unit investment trust under the
Investment Company Act of 1940. Such registration does not imply that the Trust
or any of its Units have been guaranteed, sponsored, recommended or approved by
the United States or any state or any agency or officer thereof.
---------------
Table of Contents
<TABLE>
<CAPTION>
Title Page
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<S> <C>
PART A
Fee Table................................................................. A-5
Summary of Essential Information.......................................... A-6
Statement of Financial Condition.......................................... A-8
Portfolio of Investments.................................................. A-9
Report of Independent Auditors............................................ A-10
PART B
The Trust................................................................. B-1
Risk Considerations....................................................... B-6
Public Offering........................................................... B-8
Rights of Unitholders..................................................... B-10
Liquidity................................................................. B-12
Trust Administration...................................................... B-15
Trust Expenses and Charges................................................ B-20
Reinvestment Plan......................................................... B-22
Tax Status................................................................ B-22
Other Matters............................................................. B-25
</TABLE>
This Prospectus does not contain all of the information set forth in the
registration statement, filed with the SEC, Washington, D.C., under the
Securities Act of 1933 (file no. 333-34332), and the Investment Act of 1940
(file no. 811-8293), and to which reference is made. Information may be
reviewed and copied at the Commission's Public Reference Room, and information
on the Public Reference Room may be obtained by calling the SEC at 1-202-942-
8090. Copies may be obtained from the SEC by:
. visiting the SEC Internet address: http://www.sec.gov
. electronic request (after paying a duplicating fee) at the following E-
mail address: [email protected]
. writing: Public Reference Section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549-6009
TF 7754
---------------------
Schwab Ten Trust/TM/
---------------------
SCHWAB TEN TRUST,
2000 SERIES B
(A UNIT INVESTMENT TRUST)
PROSPECTUS
DATED: MAY 16, 2000
SPONSORS:
CHARLES SCHWAB & CO., INC.
101 Montgomery Street
San Francisco, California 94104
800-435-4000
ING FUNDS DISTRIBUTOR, INC.
230 Park Avenue
New York, New York 10169
(212) 309-8650
TRUSTEE:
THE CHASE MANHATTAN BANK
4 New York Plaza
New York, New York 10004
---------------
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.
<PAGE>
PART II--ADDITIONAL INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM A--BONDING ARRANGEMENTS
The employees of ING Funds Distributor, Inc. are covered under Brokers'
Blanket Policy, Standard Form 14, in the amount of $2,000,000.
ITEM B--CONTENTS OF REGISTRATION STATEMENT
This Registration Statement on Form S-6 comprises the following papers and
documents:
The facing sheet on Form S-6.
The Cross-Reference Sheet (incorporated by reference to the Cross-
Reference Sheet to Amendment No. 2 to the Registration Statement of
Schwab Trusts, Schwab Ten Trust, 1997 Series A).
The Prospectus consisting of pages.
Undertakings.
Signatures.
Written consents of the following persons:
Battle Fowler LLP (included in Exhibit 3.1)
Ernst & Young LLP
The following exhibits:
<TABLE>
<C> <S>
*99.1.1 -- Reference Trust Agreement including certain amendments to the
Trust Indenture and Agreement referred to under Exhibit
99.1.1.1 below.
*99.1.1.1 -- Form of Trust Indenture and Agreement.
99.1.3.5 -- Restated Articles of Incorporation of Charles Schwab & Co.,
Inc. (filed as Exhibit 1.3.5 to Amendment No. 2 to Form S-6
Registration Statement No. 333-31133 of Schwab Trusts, Schwab
Ten Trust, 1997 Series A on November 4, 1997 and incorporated
herein by reference).
99.1.3.6 -- Certificate of Amendment of Articles of Incorporation of
Charles Schwab & Co., Inc. (filed as Exhibit 1.3.6 to Amendment
No. 2 to Form S-6 Registration Statement No. 333-31133 of
Schwab Trusts, Schwab Ten Trust, 1997 Series A on November 4,
1997 and incorporated herein by reference).
99.1.3.7 -- Amended and Restated Bylaws of Charles Schwab & Co., Inc.
(filed as Exhibit 1.3.7 to Amendment No. 2 to Form S-6
Registration Statement No. 333-31133 of Schwab Trusts, Schwab
Ten Trust, 1997 Series A on November 4, 1997 and incorporated
herein by reference).
99.1.3.8 -- Articles of Incorporation and Articles of Amendment of ING
Funds Distributor, Inc. (filed as Exhibit 99.1.3.5 to Amendment
No. 2 to the Form S-6 Registration Statement No. 333-31048 of
The Pinnacle Trust, Internet Trust Series I on March 28, 2000
and incorporated herein by reference).
</TABLE>
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* Filed herewith.
II-1
<PAGE>
<TABLE>
<C> <S>
99.1.3.9. -- By-Laws of ING Funds Distributor, Inc. (filed as Exhibit
99.1.3.6 to Amendment No. 2 to the Form S-6 Registration
Statement No. 333-31048 of The Pinnacle Trust, Internet
Trust Series I on March 2, 2000 and incorporated herein by
reference).
*99.3.1 -- Opinion of Battle Fowler LLP as to the legality of the
securities being registered, including their consent to the
filing thereof and to the use of their name under the
headings "Tax Status" and "Legal Opinions" in the
Prospectus, and to the filing of their opinion regarding
tax status of the Trust.
99.6.0 -- Powers of Attorney of ING Funds Distributor, Inc., the
Depositor, by its officers and a majority of its Directors
(filed as Exhibit 99.6.0 to Form S-6 Registration Statement
No. 333-31048 of The Pinnacle Trust, Internet Trust Series
I on February 24, 2000 and incorporated herein by
reference).
99.6.1 -- Powers of Attorney of Charles Schwab & Co., Inc., the
Depositor, by its officers and a majority of its Directors
(filed as Exhibit 6.1 to Form S-6 Registration Statement
No. 333-31133 of Schwab Trusts, Schwab Strategic Ten Trust,
1997 Series A on July 11, 1997 and incorporated herein by
reference).
</TABLE>
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*Filed herewith.
II-2
<PAGE>
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
SIGNATURES
The Registrant hereby identifies Schwab Trusts, Schwab Ten Trust, 1998
Series B for the purposes of the representations required by Rule 487 and
represents the following:
1) That the 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 date was determined by the commission or the staff;
and
3) That is has complied with Rule 460 under the Securities Act of 1933.
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Schwab Trusts, Schwab Ten Trust, 2000 Series B, has duly caused this Amendment
to the Registration Statement to be signed on its behalf by the undersigned,
hereunto duly authorized, in the City of New York and State of New York on the
16th day of May, 2000.
SCHWAB TRUSTS, SCHWAB
TEN TRUST, 2000 SERIES B
(Registrant)
CHARLES SCHWAB & CO., INC.
(Depositor)
/s/ Jim White
By __________________________________
Jim White
(Authorized Signator)
II-3
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following persons,
who constitute the principal officers and a majority of the directors of
Charles Schwab & Co., Inc., the Depositor, in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
DAVID POTTRUCK Chief Executive Officer and Director
STEVEN SCHEID Chief Financial Officer and Director
CHARLES R. SCHWAB Director May 16, 2000
</TABLE>
/s/ Jim White
By ______________________________
Jim White**
Attorney-In-Fact
- --------
** Executed copies of Powers of Attorney were filed as Exhibit 6.1 to
Registration Statement No. 333-31133 on July 11, 1997.
II-4
<PAGE>
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
SIGNATURES
The Registrant hereby identifies Schwab Trusts, Schwab Ten Trust, 1998
Series B for the purposes of the representations required by Rule 487 and
represents the following:
1) That the 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 date was 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,
Schwab Trusts, Schwab Ten Trust, 2000 Series B, has duly caused this Amendment
to the Registration Statement to be signed on its behalf by the undersigned,
hereunto duly authorized, in the City of New York and State of New York on the
16th day of May, 2000.
SCHWAB TRUSTS, SCHWAB
TEN TRUST, 2000 SERIES B
(Registrant)
ING FUNDS DISTRIBUTOR, INC.
(Depositor)
/s/ Peter J. DeMarco
By __________________________________
Peter J. DeMarco
(Senior Vice President)
II-5
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following persons,
who constitute the principal officers and a majority of the directors of ING
Funds Distributor, Inc., the Depositor, in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
John J. Pileggi Chief Executive and Director
Mitchell J. Mellen President and Director
Donald E. Brostrom Chief Financial Officer, Treasurer and
Director
Eric M. Rubin Director May 16, 2000
</TABLE>
By /s/ Peter J. DeMarco
--------------------------
Peter J. DeMarco
as Senior Vice President
and Attorney-In-Fact
- --------
* An executed copy of the Power of Attorney was filed as Exhibit 99.6.0 to Form
S-6 Registration Statement No. 333-31048 on February 24, 2000.
II-6
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference made to our firm under the caption "Independent
Auditors" in Part B of the Prospectus and to the use of our report dated May
16, 2000, in this Registration Statement (Form S-6 No. 333-34332) of Schwab
Trusts, Schwab Ten Trust, 2000 Series B.
Ernst & Young LLP
New York, New York
May 16, 2000
II-7
<PAGE>
Exhibit 1.1
SCHWAB TRUSTS,
SCHWAB TEN TRUST, 2000 SERIES B
REFERENCE TRUST AGREEMENT
This Reference Trust Agreement (the "Agreement") dated May 16, 2000
among Charles Schwab & Co., Inc., ING Funds Distributor, Inc., as Depositors,
ING Mutual Funds Management Co. LLC, as Portfolio Supervisor and The Chase
Manhattan Bank, as Trustee, sets forth certain provisions in full and
incorporates other provisions by reference to the document entitled "Schwab
Trusts, Schwab Ten Trust, 2000 Series B, and Subsequent Series, Trust Indenture
and Agreement" dated May 16, 2000 and as amended in part by this Agreement
(collectively, such documents hereinafter called the "Indenture and Agreement").
This Agreement and the Indenture, as incorporated by reference herein, will
constitute a single instrument.
WITNESSETH THAT:
WHEREAS, this Agreement is a Reference Trust Agreement as defined in
Section 1.1 of the Indenture, and shall be amended and modified from time to
time by an Addendum as defined in Section 1.1 (1) of the Indenture, such
Addendum setting forth any Additional Securities as defined in Section 1.1 (2)
of the Indenture;
WHEREAS, the Depositors wish to deposit Securities, and any Additional
Securities as listed on any Addendums hereto, into the Trust and issue Units,
and Additional Units as the case maybe, in respect thereof pursuant to Section
2.5 of the Indenture; and
NOW THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, the Depositors, the Portfolio Supervisor and the
Trustee as follows:
Part I
STANDARD TERMS AND CONDITIONS OF TRUST
Section 1. Subject to the provisions of Part II hereof, all the
provisions contained in the Indenture 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 except that the following sections of the Indenture hereby are
amended as follows:
<PAGE>
Section 2. This Reference Trust Agreement may be amended and modified
by Addendums, attached hereto, evidencing the purchase of Additional Securities
which have been deposited to effect an increase over the number of Units
initially specified in Part II of this Reference Trust Agreement ("Additional
Closings"). The Depositors, Portfolio Supervisor and Trustee hereby agree that
their respective representations, agreements and certifications contained in the
Closing Memorandum dated May 16, 2000, relating to the initial deposit of
Securities continue as if such representations, agreements and certifications
were made on the date of such Additional Closings and with respect to the
deposits made therewith, except as such representations, agreements and
certifications relate to their respective By-Laws and as to which they each
represent that there has been no amendment affecting their respective abilities
to perform their respective obligations under the Indenture.
Part II
SPECIAL TERMS AND CONDITIONS OF TRUST
Section 1. The following special terms and conditions are hereby
agreed to:
(a) The Securities (including Contract Securities) listed in the
Prospectus relating to this series of Schwab Ten Trust (the "Prospectus") have
been deposited in the Trust under this Agreement (see "Portfolio" in Part A of
the Prospectus which for purposes of this Indenture and Agreement is the
Schedule of Securities or Schedule A).
(b) The number of Units delivered by the Trustee in exchange for the
Securities referred to in Section 2.3 is 15,012.
(c) For the purposes of the definition of Unit in item (24) of Section
1.1, the fractional undivided interest in and ownership of the Trust initially
is 1/15,012 as of the date hereof.
(d) The term Record Date shall mean the fifteenth day of June and
December commencing on June 15, 2000.
(e) The term Distribution Date shall mean the last business day of
June and December commencing on June 30, 2000.
(f) The First Settlement Date shall mean May 19, 2000.
(g) For purposes of Section 6.1(g), the liquidation amount is hereby
specified to be 40% of the aggregate value of the Securities at the completion
of the initial public offering period.
-2-
<PAGE>
(h) For purposes of Section 6.4, the Trustee shall be paid per annum
an amount computed according to the following schedule, determined on the basis
of the number of Units outstanding as of the Record Date preceding the Record
Date on which the compensation is to be paid, provided, however, that with
respect to the period prior to the first Record Date, the Trustee's compensation
shall be computed at $.86 per 100 Units:
rate per 100 units number of Units outstanding
$0.86 5,000,000 or less
$0.80 5,000,001 - 10,000,000
$0.74 10,000,001 - 20,000,000
$0.62 20,000,001 or more
(i) For purposes of Section 7.4, the maximum annual portfolio
supervisory fee is hereby specified to be $.25 per 100 Units outstanding.
(j) The Termination Date shall be June 18, 2001 or the earlier
disposition of the last Security in the Trust.
(k) The fiscal year for the Trust shall end on December 31 of each
year.
(l) For purposes of Section 3.16, the Trust will have a Deferred Sales
Charge as specified in and as permitted by the Prospectus.
IN WITNESS WHEREOF, the parties hereto have caused this Reference
Trust Agreement to be duly executed on the date first above written.
[Signatures on separate pages]
-3-
<PAGE>
CHARLES SCHWAB & CO, INC.
Depositor
By: /s/ James C. White
--------------------------------
Authorized Signator
STATE OF CALIFORNIA )
: ss:
COUNTY OF SAN FRANCISCO )
On this 10th day of May, 2000, before me personally appeared James C.
White, to me known, who being by me duly sworn, said that he is an Authorized
Signator of Charles Schwab & Co., Inc. the Depositor, one of the corporations
described in and which executed the foregoing instrument, and that he signed his
name thereto by authority of the Board of Directors of said corporation.
/s/ Andrew F. Albright
---------------------------------------
Notary Public
ANDREW F. ALBRIGHT
COMM. # 1252845
NOTARY PUBLIC CALIFORNIA
SAN FRANCISCO COUNTY
My Comm. Expires Feb. 7, 2004
<PAGE>
ING FUNDS DISTRIBUTOR, INC.
Depositor
By: /s/ Peter DeMarco
-----------------------------
Authorized Signator
STATE OF NEW YORK )
: ss:
COUNTY OF NEW YORK )
On this 10th day of May, 2000, before me personally appeared Peter J.
DeMarco, to me known, who being by me duly sworn, said that he is an Authorized
Signator of ING Funds Distributor, Inc., one of the corporations described in
and which executed the foregoing instrument, and that he signed his name thereto
by authority of the Board of Directors of said corporation.
/s/ Michael Rosella
--------------------------------------
Notary Public
MICHAEL R. ROSELLA
NOTARY PUBLIC, State of New York
No. 31-5016879
Qualified in New York County
Commission Expires 9/26/2001
<PAGE>
THE CHASE MANHATTAN BANK
Trustee
By: /s/ Rosalia Raviele
-------------------------------
Vice President
STATE OF NEW YORK )
:ss.:
COUNTY OF NEW YORK )
On this 15th day of May, 2000, before me personally appeared Rosalia
Raviele, to me known, who being by me duly sworn, said that he/she is an
Authorized Signator of The Chase Manhattan Bank, one of the corporations
described in and which executed the foregoing instrument; that he/she knows the
seal of said corporation; that the seal affixed to said instrument is such
corporate seal; that it was so affixed by authority of the Board of Directors of
said corporation and that he/she signed his/her name thereto by like authority.
/s/ Ann Lo Brutto
-----------------------------------
Notary Public
Notary Public, State of New York
No. 24-01LO4780467
Qualified in Kings County
Commission Expires March 30,2001
<PAGE>
ING MUTUAL FUNDS MANAGEMENT CO. LLC
Portfolio Supervisor
By: /s/ Peter DeMarco
-------------------------
Authorized Signator
STATE OF NEW YORK )
: ss:
COUNTY OF NEW YORK )
On this 10th day of May, 2000, before me personally appeared Peter J.
DeMarco, to me known, who being by me duly sworn, said that he is an Authorized
Signator of the Portfolio Supervisor, one of the entities described in and which
executed the foregoing instrument, and that he signed his name thereto by
authority of the sole member of said limited liability company.
/s/ Michael Rosella
--------------------------------------
Notary Public
MICHAEL R. ROSELLA
NOTARY PUBLIC, State of New York
No. 31-5016879
Qualified in New York County
Commission Expires 9/26/2001
<PAGE>
Exhibit 1.1.1
SCHWAB TRUSTS
SCHWAB TEN TRUST, 2000 SERIES B
for all series formed on or subsequent to the effective
date specified below
__________
TRUST INDENTURE AND AGREEMENT
Among
CHARLES SCHWAB & CO., INC.
and
ING FUNDS DISTRIBUTOR, INC.
As Depositors
and
THE CHASE MANHATTAN BANK
As Trustee
and
ING MUTUAL FUNDS MANAGEMENT CO. LLC
As Portfolio Supervisor
__________
Dated: May 16, 2000
<PAGE>
SCHWAB TRUSTS
SCHWAB TEN TRUST, 2000 SERIES B
and Subsequent Series
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
INTRODUCTION ..................................................................................... i
ARTICLE 1 DEFINITIONS; CERTIFICATES ............................................................. 2
Section 1.1. Definitions ...................................................................... 2
ARTICLE 2 DEPOSIT OF SECURITIES; DECLARATION OF TRUST;
FORM AND ISSUANCE OF CERTIFICATES .................................................... 5
Section 2.1. Deposit of Securities ............................................................ 5
Section 2.2. Declaration of Trust ............................................................. 5
Section 2.3. Issue of Units ................................................................... 5
Section 2.4. Certain Contracts Satisfactory ................................................... 6
Section 2.5. Deposit of Additional Securities ................................................. 6
ARTICLE 3 ADMINISTRATION OF TRUST ............................................................... 9
Section 3.1. Initial Cost ..................................................................... 9
Section 3.2. Income Account ................................................................... 10
Section 3.3. Principal Account ................................................................ 10
Section 3.4. Reserve Account .................................................................. 11
Section 3.5. Payments and Distributions ....................................................... 11
Section 3.6. Distribution Statements .......................................................... 13
Section 3.7. Substitute Securities ............................................................ 15
Section 3.8. Sale of Securities ............................................................... 16
Section 3.9. Counsel .......................................................................... 16
Section 3.10 Notice and Sale by Trustee ....................................................... 17
Section 3.11. Reorganization and Similar Events ................................................ 17
Section 3.12. Notice of Actions ................................................................ 17
Section 3.13. Notice of Change in Principal Account ............................................ 17
Section 3.14. Extraordinary Distributions ...................................................... 18
Section 3.15. Grantor Trust Status ............................................................. 18
Section 3.16. Deferred Sales Charge ............................................................ 18
ARTICLE 4 EVALUATION OF SECURITIES .............................................................. 19
Section 4.1. Evaluation of Securities ......................................................... 19
Section 4.2. Tax Reports ...................................................................... 19
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Section 4.3. Liability of Trustee with respect to Evaluations ................................. 20
ARTICLE 5 TRUST EVALUATION, REDEMPTION, PURCHASE, TRANSFER,
INTERCHANGE OR REPLACEMENT OF CERTIFICATES............................................ 20
Section 5.1. Trust Evaluation ................................................................. 20
Section 5.2. Redemptions by Trustee; Purchases by Depositors .................................. 21
Section 5.3. Depositor Redemptions ............................................................ 24
Section 5.4. Units to be Held Only Through the Depository Trust
Company or a Successor Clearing Agency .......................................... 25
ARTICLE 6 TRUSTEE; REMOVAL OF DEPOSITORS ........................................................ 25
Section 6.1. General Definition of Trustee's Liabilities, Rights
and Duties; Removal of Depositors ............................................... 25
Section 6.2. Books, Records and Reports ....................................................... 28
Section 6.3. Indenture and List of Securities on File ......................................... 29
Section 6.4. Compensation and Indemnification ................................................. 29
Section 6.5. Removal and Resignation of the Trustee; Successor ................................ 30
Section 6.6. Qualifications of Trustee ........................................................ 31
ARTICLE 7 DEPOSITORS ............................................................................ 32
Section 7.1. Succession ....................................................................... 32
Section 7.2. Resignation of a Depositor ....................................................... 32
Section 7.3. Liability of Depositors and Indemnification ...................................... 32
Section 7.4. Compensation ..................................................................... 33
Section 7.5. Joint Position of Depositors; Power of Attorney .................................. 34
Section 7.6. Resignation and Removal of Portfolio Supervisor;
Successor ....................................................................... 34
Section 7.7. Liability of Portfolio Supervisor and
Indemnification ................................................................. 35
ARTICLE 8 RIGHTS OF UNITHOLDERS ................................................................. 36
Section 8.1. Beneficiaries of Trust ........................................................... 36
Section 8.2. Rights, Terms and Conditions ..................................................... 37
ARTICLE 9 ADDITIONAL COVENANTS; MISCELLANEOUS PROVISIONS ........................................ 37
Section 9.1. Amendments ....................................................................... 37
Section 9.2. Termination ...................................................................... 38
Section 9.3. Construction ..................................................................... 41
Section 9.4. Registration of Units ............................................................ 41
Section 9.5. Written Notice ................................................................... 41
Section 9.6. Severability ..................................................................... 41
Section 9.7. Dissolution of Depositors Not to Terminate ....................................... 42
</TABLE>
-ii-
<PAGE>
SCHWAB TRUSTS
SCHWAB TEN TRUST, 2000 SERIES B
AND
SUBSEQUENT SERIES
TRUST INDENTURE AND AGREEMENT
DATED MAY 16, 2000
This Trust Indenture and Agreement ("Indenture") dated May 16, 2000,
among Charles Schwab & Co., Inc. and ING Funds Distributor, Inc., as Depositors,
The Chase Manhattan Bank, as Trustee and ING Mutual Funds Management Co. LLC, as
Portfolio Supervisor.
WITNESSETH THAT
In consideration of the premises and of the mutual agreements herein
contained, the Depositors, the Trustee and the Portfolio Supervisor agree as
follows:
INTRODUCTION
The Depositors concurrently with the execution and delivery hereof are
establishing Schwab Trusts, Schwab Ten Trust, 2000 Series B (and subsequent
Series), wherein certain securities consisting of common stock and contracts and
funds for the purchase of such securities (collectively, the "Securities") will
be deposited by the Depositors, to be held by the Trustee in trust for the use
and benefit of the registered holders of certificates of ownership (the
"Unitholders") to be issued as hereinafter provided. The parties hereto are
entering into this Indenture for the purpose of establishing certain of the
terms, covenants and conditions of Schwab Trusts, Schwab Ten Trust, 2000 Series
B and of each additional series of Schwab Trusts which may be established from
time to time hereafter. For Schwab Trusts, Schwab Ten Trust, 2000 Series B and
each subsequent series of Schwab Trusts (sometimes referred to herein as the
"Trust") (as to which this Indenture is to be applicable) the parties hereto
shall execute a separate Reference Trust Agreement incorporating by reference
this Indenture 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 (1) the Securities deposited in trust and the number
of Units delivered by the Trustee in exchange for the Securities pursuant to
Section 2.3; (2) the initial fractional undivided interest represented by each
Unit; (3) the first and subsequent Record Dates; (4) the first and subsequent
Distribution Dates; (5) the First Settlement Date; (6) the liquidation amount
for purposes of Section 6.1(g); (7) the Trustee's fee; (8) the Depositors' fee,
if any; (9) the portfolio supervisory fee pursuant to Section 7.4; (10) the
Termination Date; and (11) any other change or addition contemplated or
permitted by this Indenture.
<PAGE>
ARTICLE 1
DEFINITIONS; CERTIFICATES
Section 1.1 Definitions: Whenever used in this Indenture the
-----------
following words and phrases, unless the context clearly indicates otherwise,
shall have the following meanings:
(1) "Addendum to the Reference Trust Agreement" shall mean the
addendum which evidences the Additional Securities deposited into the Trust and
the number of Additional Units created.
(2) "Additional Securities" shall mean such Securities as are listed
in Supplementary Schedules to Addendums to the Reference Trust Agreement or a
Deposit Certificate and which have been deposited to effect an increase over the
number of Units initially specified in the Reference Trust Agreement.
(3) "Additional Units" shall mean such Units as are issued in respect
of Additional Securities.
(4) "Business Day" shall mean any day other than a Saturday, 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) "Contract Securities" shall mean Securities which are to be
acquired by the Trust pursuant to contracts entered into by the Depositors,
including (i) Securities listed in Schedule A to the Reference Trust Agreement
and (ii) Securities which the Depositors have contracted to purchase for the
Trust pursuant to Sections 2.5 and 3.7.
(6) "Depositors" shall mean Charles Schwab & Co., Inc. ("Schwab") or
its successors in interest and ING Funds Distributor, Inc. ("ING") or its
successors in interest, or any successor depositor or depositors appointed as
herein provided.
(7) "Distribution Agency Agreement" shall mean the Distribution
Agency Agreement among the Depositors, Trustee and the Distribution Agent dated
as of May 16, 2000.
(8) "Distribution Agent" shall mean the Distribution Agent appointed
in the Distribution Agency Agreement, or its successor as appointed pursuant to
the Distribution Agency Agreement.
(9) "Distribution Date" shall have the meaning assigned to it in Part
II of the Reference Trust Agreement.
-2-
<PAGE>
(10) "DTC" shall mean Depository Trust Company, or its successors.
(11) "Failed Security" shall have the meaning assigned to it in
Section 3.7 hereof.
(12) "First Settlement Date" shall mean the date specified in Part II
of the Reference Trust Agreement.
(13) "Indenture" shall mean this Trust Indenture and Agreement as
originally executed or, if amended as herein provided, as so amended.
(14) "Original Issue" shall mean an issue of Securities deposited
pursuant to Section 2.1 or any Substitute Securities purchased to replace any
Original Issue which have become Failed Securities.
(15) "Original Proportionate Relationship" shall mean the
proportionate relationship among the number of shares of each Security
established on the deposit made pursuant to Section 2.1. The Original
Proportionate Relationship shall be adjusted, if appropriate, to reflect (1) the
deposit of Substitute Securities and (2) the occurrence of any stock dividend,
stock splits, redemptions, or similar events.
(16) "Portfolio Supervisor" shall mean ING Mutual Funds Management Co.
LLC, or its successor or any successor Portfolio Supervisor appointed as herein
provided.
(17) "Prospectus" shall mean the prospectus included in the
registration statement, as amended, on Form S-6 under the Securities Act of
1933, as amended, relating to the Trust on file with the Securities and Exchange
Commission at the time such registration statement, as amended, becomes
effective, except that if the prospectus filed pursuant to Rule 497(b) under the
Securities Act of 1933, as amended, differs from the prospectus on file at the
time such registration statement, as amended, becomes effective, the term
Prospectus shall refer to the Rule 497(b) prospectus from and after the time it
is mailed or otherwise delivered to the Securities and Exchange Commission for
filing.
(18) "Record Date" shall have the meaning assigned to it in Part II of
the Reference Trust Agreement.
(19) "Redemption Form" shall mean the form provided by the Trustee at
the request of holders of Units for the purposes of redeeming such Units, as
such form may be reasonably acceptable to the Depositors and the Trustee from
time to time.
(20) "Reference Trust Agreement" shall mean the indenture for the
particular series of Schwab Trusts into which the terms of this Indenture are
incorporated.
-3-
<PAGE>
(21) "Securities" shall mean such common stock, preferred stock, ADRs
and contracts and funds for the purchase of such securities as are (i) deposited
in irrevocable trust and listed in the Schedule to the Reference Trust Agreement
and (ii) received in exchange or substitution for any Securities pursuant to
Section 3.7 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.
(22) "Substitute Security" shall mean a Security purchased by the
Trustee pursuant to Section 3.7 hereof.
(23) "Termination Date" shall have the meaning assigned to it in Part
II of the Reference Trust Agreement.
(24) "Trust" shall mean the Trust created by this Indenture, 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, liquidation thereof, such
amounts as may be on deposit in the Reserve Accounts hereinafter established and
all other property and rights to which Unitholders may be entitled under the
provisions of this Indenture.
(25) "Trustee" shall mean The Chase Manhattan Bank, or its successor
or any successor Trustee appointed as herein provided.
(26) "Unit" shall mean the fractional undivided interest in and
ownership of the Trust initially specified in Part II of the Reference Trust
Agreement, the denominator of which shall be decreased by the number of any such
Units redeemed as provided in Section 5.2 and increased by any Additional Units
which are specified in a Supplementary Schedule to an Addendum to the Reference
Trust Agreement or a Deposit Certificate as defined in Section 2.5.
(27) "Unitholder" shall mean the registered holder of units of
beneficial interest as recorded in book-entry form at DTC, such holder's legal
representatives and heirs and the successors of any corporation, partnership or
legal entity which is a registered holder of any Unit, and as such shall be
deemed a beneficiary of the trust created by the Indenture to the extent of such
holder's pro rata share thereof.
(28) 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.
(29) Words importing singular number shall include the plural number
in each case and vice versa, and words importing person shall include
corporations and associations, as well as natural persons.
-4-
<PAGE>
ARTICLE 2
DEPOSIT OF SECURITIES; DECLARATION OF TRUST;
FORM AND ISSUANCE OF CERTIFICATES
Section 2.1 Deposit of Securities: The Depositors, concurrently with
---------------------
the execution and delivery of a Reference Trust Agreement, have deposited with
the Trustee in trust the Securities and contracts for the purchase of Contract
Securities listed in Schedule A to the Reference Trust Agreement in bearer form
or registered in the name of the Trustee, or its nominee, or duly endorsed in
blank or accompanied by all necessary instruments of assignment and transfer in
proper form to be held, managed and applied by the Trustee as herein provided.
In the event that the purchase of Securities represented by contracts shall not
be consummated in accordance with said contracts, the Trustee shall credit to
the Principal Account pursuant to Section 3.3 hereof the cash or cash
equivalents (including such portion of any letter of credit applicable to such
contracts) deposited by the Depositors, for the purpose of such purchase. Such
moneys, unless invested in Substitute Securities in accordance with Section 3.7
hereof, shall be distributed to Unitholders pursuant to Section 3.5 hereof on
the Distribution Date following the failure of consummation of such purchase.
The Depositors shall deliver the Securities listed on said Schedule A 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 3.7 applies, within such shorter
period as is specified in Section 3.7.
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.
When and as directed by the Depositors, the Trustee or Distribution
Agent shall accept securities and cash to be deposited in a New Series in
exchange for Units of the New Series from persons other than Unitholders
participating in a rollover option. Notwithstanding the fact that any
Unitholder may acquire Units of the Trust by purchase or by in-kind
contribution, the Depositors will not deposit Securities received by the
Depositors on termination, or through a redemption of Units, of a series of the
Trust to a subsequent series of the Trust.
Section 2.2 Declaration of Trust: The Trustee declares that it holds
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and will hold the Trust as Trustee in trust upon the terms herein set forth for
the use and benefit of all present and future Unitholders.
Section 2.3 Issue of Units: By executing the Reference Trust
--------------
Agreement, the Trustee will thereby acknowledge receipt of the deposit relating
to the Trust to which such Reference Trust Agreement relates, referred to in
Section 2.1, and simultaneously with the receipt of said deposit, pursuant to
the Depositors' written direction, will register on the registration books of
the Trust the ownership by the Depositors of such Units or, if requested by the
Depositors, the ownership by DTC of all of such Units and will cause such Units
to be credited at DTC to the account of the Depositors or, pursuant to the
Depositors' direction and as hereafter
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provided, the account of the issuer of the letter of credit referred to in
Section 2.01. The Depositors shall not sell, pledge, hypothecate or otherwise
transfer such Units, prior to the effectiveness of the registration statement
covering the Units filed with the Securities and Exchange Commission under the
Securities Act of 1933, except that the Depositors may place the Units as
security for any letter of credit provided in connection with the deposit of
contracts described in Section 2.1.
The number of Units may be increased through a split of the Units or
decreased through a reverse split thereof, as directed by the Depositors, on any
day on which the Depositors are the only Unitholders, which revised number of
Units shall be recorded by the Trustee on its books.
Section 2.4 Certain Contracts Satisfactory: The Depositors approve
------------------------------
as satisfactory in form and substance the contracts to be assumed by the Trustee
with regard to any Securities listed in Schedule A to the Reference Trust
Agreement and authorizes the Trustee on behalf of the Trust to 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 Securities
covered thereby into the Trust.
Section 2.5 Deposit of Additional Securities.
--------------------------------
(a) Subject to the requirements set forth below in this Section, the
Depositor may, on any Business Day (the "Trade Date"), subscribe for Additional
Units as follows:
(1) Prior to the Evaluation Time defined in Section 5.1 on the
Trade Date, the Depositor shall provide notice (the "Subscription
Notice") to the Trustee, by telecopy or by written communication,
of the Depositor's intention to subscribe for Additional Units.
The Subscription Notice shall identify the Additional Securities
to be acquired (unless such Additional Securities are a precise
replication of the then existing portfolio) and shall either (i)
specify the quantity of Additional Securities to be deposited by
the Depositor on the settlement date for such subscription or
(ii) instruct the Trustee to purchase Additional Securities with
an aggregate cost as specified in the Subscription Notice.
(2) Promptly following the Evaluation Time on such Business Day,
the Depositor shall verify with the Trustee, by telecopy, the
number of Additional Units to be created.
(3) Not later than the time on the settlement date for such
subscription when the Trustee is to deliver the Additional Units
created thereby (which time shall not be later than the time by
which the Trustee is required to settle any contracts for the
purchase of Additional Securities entered into by the Trustee
pursuant to the instruction of the Depositor referred to in
subparagraph (1) above), the
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Depositor shall deposit with the Trustee (i) any Additional
Securities specified in the Subscription Notice (or contracts to
purchase such Additional Securities together with cash or a
letter of credit in the amount necessary to settle such
contracts) or (ii) cash or a letter of credit in the amount equal
to the aggregate cost of the Additional Securities to be
purchased by the Trustee, as specified in the Subscription
Notice, together with, in each case, Cash as defined below.
"Cash" means, as to the Principal Account, cash or other property
(other than Securities) on hand in the Principal Account or
receivable and to be credited to the Principal Account as of the
Evaluation Time on the Business Day preceding the Trade Date
(other than amounts to be distributed solely to persons other
than persons receiving the distribution from the Principal
Account as holders of Additional Units created by the deposit),
and, as to the Income Account, cash or other property (other than
Securities) received by the Trust as of the Evaluation Time on
the Business Day preceding the Trade Date or receivable by the
Trust in respect of dividends or other distributions declared but
not received as of the Evaluation Time on the Business Day
preceding the Trade Date, reduced by the amount of any cash or
other property received or receivable on any Security allocable
(in accordance with the Trustee's calculation of the monthly
distribution from the Income Account pursuant to Section 3.5) to
a distribution made or to be made in respect of a Record Date
occurring prior to the Trade Date. Each deposit made pursuant to
this Section 2.5 during the 90 days following the initial date of
deposit shall replicate, to the extent practicable, as specified
in subparagraph (b), the Original Proportionate Relationship,
adjusted, if appropriate, to reflect (1) the deposit of
Substitute Securities pursuant to Section 3.7, (2) the sale of
securities pursuant to Section 3.8, 3.10 or 5.2 and (3) the
occurrence of any stock dividends, stock splits, redemptions,
acquisition of shares through dividend reinvestment plans or
similar events. Each deposit made pursuant to this Section 2.5
after the 90 days following the initial date of deposit made
pursuant to Section 2.1 hereof (except for deposits made to
replace Failed Securities if such deposits occur within 20 days
from the date of a failure occurring within such initial 90 day
period) shall maintain exactly the proportionate relationship
existing among the Securities as of the expiration of such 90 day
period. Each such deposit shall exactly replicate Cash.
(4) On the settlement date for a subscription, the Trustee
shall, in exchange for the Securities and cash or letter of
credit described above, issue and deliver to or on the order of
the Depositor the number of Units verified by the Depositor with
the Trustee. No Unit to be issued pursuant to this paragraph
shall be issued or delivered unless and until Securities, cash or
a letter of credit is received in exchange therefor and no person
shall have any claim to any Unit not so issued and delivered or
any interest in the Trust in respect thereof.
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(5) Each deposit of Additional Securities, shall be listed in a
Supplementary Schedule to an Addendum to the Reference Trust
Agreement or a certificate (a "Deposit Certificate") stating the
date of such deposit and the number of Additional Units being
issued therefor. The Trustee shall acknowledge in such Addendum
or in such Deposit Certificate the receipt of the deposit and the
number of Additional Units issued in respect thereof. The
Additional Securities shall be held, administered and applied by
the Trustee in the same manner as herein provided for the
Securities.
(6) The acceptance of Additional Units by the Depositor in
accordance with the provisions of paragraph (a) of this Section
shall be deemed a certification by the Depositor that the deposit
or purchase of Additional Securities associated therewith
complies with the conditions of this Section 2.5.
(7) Notwithstanding the preceding, in the event that the
Depositors' Subscription Notice shall instruct the Trustee to
purchase Additional Securities in an amount which, when added to
the purchase amount of all other unsettled contracts entered into
by the Trustee, exceeds 25% of the value of the Securities then
held (taking into account the value of contracts to purchase
Securities only to the extent that there has been deposited with
the Trustee cash or an irrevocable letter of credit in an amount
sufficient to settle their purchase), the Depositors shall
deposit with the Trustee concurrently with the Subscription
Notice cash or a letter of credit in an amount such that, when
added to 25% of the value of the Securities then held (determined
as above) the aggregate value shall be not less than the purchase
amount of the securities to be purchased pursuant to such
Subscription Notice.
(b) Additional Securities deposited during the 90 days following the
initial deposit made pursuant to Section 2.1 hereof shall maintain as closely as
practicable the Original Proportionate Relationship, except as provided in this
Section 2.5. Additional Securities may be deposited or purchased in round lots;
if the amount of the deposit is insufficient to acquire round lots of each
Security to be acquired, the Additional Securities shall be deposited or
purchased in the order of the Security in the Trust most under represented
immediately before the deposit with respect to the Original Proportionate
Relationship. Instructions to purchase Additional Securities under this Section
shall be in writing and shall direct the Trustee to purchase, or enter into
contracts to purchase, Additional Securities; such instructions shall also
specify the name, CUSIP number, if any, aggregate amount of each such Additional
Security and price or range of price. If, at the time of a subsequent deposit
under this Section, Securities of an Original Issue are unavailable, cannot be
purchased at reasonable prices or their purchase is prohibited or restricted by
applicable law, regulation or policies, in lieu of the portion of the deposit
that would otherwise be represented by those Securities, the Depositors may (A)
deposit (or instruct the Trustee to purchase) Securities of another Original
Issue or replacement securities, or (B) deposit cash or a
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letter of credit with instructions to acquire the Securities of such Original
Issue when they become available.
(c) The Trustee shall have no responsibility for the selection of
Securities deposited hereunder or for maintaining the composition of the Trust
portfolio or for any loss or depreciation resulting from any purchase of
Additional Securities pursuant to the Depositors' direction or from the
Depositors' failure to settle any subscription for Units. The Trustee shall be
indemnified against any loss or liability arising from purchases contracted for
pursuant to this Section in accordance with Section 6.4.
ARTICLE 3
ADMINISTRATION OF TRUST
Section 3.1 Initial Cost: Subject to reimbursement as hereinafter
------------
provided, the cost of organizing the Trust and sale of the Trust Units shall be
borne by the Depositors, provided, however, that the liability on the part of
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the Depositors 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 2.1. Upon notification from the Depositors that
the primary offering period is concluded, the Trustee 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 Depositors the Depositors'
reimbursable expenses of organizing the Trust and sale of the Trust Units in an
amount certified to the Trustee by the Depositors but not in excess of the
estimated per-Unit amount set forth in the Prospectus multiplied by the number
of Units outstanding as of the conclusion of the primary offering period. If
the cash balance of the Principal Account is insufficient to make such
withdrawal, the Trustee shall, as directed by the Depositors, sell Securities
identified by the Depositors, or distribute to the Depositors Securities having
a value, as determined under Section 4.1 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. Any assets deposited with the Trustee in
respect of the expenses reimbursable under this section shall be held and
administered as assets of the Trust for all purposes hereunder. The Depositors
shall deliver to the Trustee any cash identified in the Statement of Net Assets
of the Trust included in the Prospectus not later than the First Settlement Date
and the Depositors' obligation to make such delivery shall be secured by the
letter of credit deposited pursuant to sections 2.1 and 2.5. Any cash which the
Depositors have identified as to be used for reimbursement of expenses pursuant
to this Section shall be held by the Trustee, without interest, and reserved for
such purpose and, accordingly, prior to the conclusion of the primary offering
period, shall not be subject to distribution or, unless the Depositors otherwise
direct, used for payment of redemptions in excess of the per-Unit amount payable
pursuant to the next sentence. If a Unitholder redeems Units prior to the
conclusion of the primary offering period, the Trustee shall pay to the
Unitholder, in addition to the Redemption Price of the tendered Units, an amount
equal to the estimated per-Unit cost of organizing the Trust
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and the sale Trust Units set forth in the Prospectus multiplied by the number of
Units tendered for redemption; to the extent the cash on hand in the Trust is
insufficient for such payment, the Trustee shall have the power to sell
Securities in accordance with Section 5.2. As used herein, the Depositors'
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.
Section 3.2 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."
Section 3.3 Principal Account: (a) The Securities and all cash,
-----------------
other than amounts credited to the Income Account, received by the Trustee in
respect of the Securities shall be credited to a separate account to be known as
the "Principal Account".
(b) Moneys and/or irrevocable letters of credit required to purchase
Contract Securities or deposited to secure such purchases are hereby declared to
be held specially by the Trustee for such purchases and shall not be deemed to
be part of the Principal Account until (i) the Depositors fail to timely
purchase Contract Securities and have not given the Failed Contract Notice (as
defined in Section 3.7) at which time the moneys and/or letters of credit
attributable to the Contract Securities not purchased by the Depositors shall be
credited to the Principal Account; or (ii) the Depositors have given the Trustee
the Failed Contract Notice at which time the moneys and/or letters of credit
attributable to failed contracts referred to in such Notice shall be credited to
the Principal Account; provided, however, that if the Depositors also notify the
Trustee in the Failed Contract Notice that they have purchased or entered into a
contract to purchase Substitute Securities (as defined in Section 3.7), the
Trustee shall not credit such moneys and/or letters of credit to the Principal
Account unless the Substitute Securities shall also have failed or are not
delivered by the Depositors within two business days after the settlement date
of such Substitute Securities, in which event the Trustee shall forthwith credit
such moneys and/or letters of credit to the Principal Account. To the extent of
moneys, and/or moneys drawn under a letter of credit, deposited by the
Depositors and then held by the Trustee, the Trustee shall credit to the
Principal Account, and to the extent such moneys are insufficient the Depositors
shall deposit in the Principal Account, the difference, if any, between the
purchase price of the failed Contract Securities and the purchase price of the
Substitute Securities, together with any sales charge and accrued dividends
applicable to such difference and distribute such moneys to Unitholders pursuant
to Section 3.5. Cash held or receivable from the Depositors pursuant to Section
2.5 in respect of contracts for purchase of Additional Securities entered into
by the Trustee shall be credited to the Principal Account upon the Trustee's
entering into such contracts.
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Section 3.4 Reserve Account: From time to time the Trustee shall
---------------
withdraw from the cash on deposit in the Income Account or 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 or by 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 Unitholders any of the amounts in the
Reserve Account; provided, however, that if it 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 appropriate account from which withdrawn or, if the Trust
has been terminated or is in the process of termination, the Trustee shall
distribute to each Unitholder such holder's interest in the Reserve Account in
accordance with Section 9.2.
Section 3.5 Payments and Distributions: Distributions to each
--------------------------
Unitholder from the Income Account are computed as of the close of business on
each Record Date for the following Distribution Date. Distributions from the
Principal Account of the Trust (other than amounts representing failed
contracts, as discussed in Section 3.3.(b)) will be computed as of each Record
Date, and will be made to the Unitholders of the Trust on or shortly after the
next Distribution Date. Proceeds representing principal received from the
disposition of any of the Securities between a Record Date and a Distribution
Date which are not used for redemptions of Units will be held in the Principal
Account and not distributed until the second succeeding Distribution Date or
such later time as hereinafter provided. If a Unitholder is participating in a
Reinvestment Plan, distributions to such Unitholder shall be applied by the
Trustee to purchase Units from the Depositors at the applicable reinvestment
price on the Distribution Date. Persons who purchase Units between a Record Date
and a Distribution Date will receive their first distribution on the second
Distribution Date after such purchase.
As of each Record Date the Trustee 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 6.4 or otherwise pursuant to the provisions hereof;
(b) deduct from the Income Account of the Trust, and, to the extent
funds are not sufficient therein, from the Principal Account of the Trust,
amounts necessary to pay any unpaid expenses of the Trust, including
registration charges, Blue Sky fees, printing costs, attorneys' fees, auditing
costs and other miscellaneous out-of-pocket expenses, as certified by the
Depositors, incurred in keeping the registration of the Units and the Trust on a
current basis pursuant to Section 9.4, provided, however, that no portion of
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such amount shall be deducted or paid unless the payment thereof from the Trust
is at that time lawful;
(c) deduct from the Income Account, or, to the extent funds are not
available in such Account, from the Principal Account, and pay an amount equal
to the unpaid fees and expenses, if any, of counsel pursuant to Section 3.9 as
certified to it by the Depositors; and
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(d) 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 Portfolio Supervisor and Schwab are then entitled to receive pursuant to
Section 7.4 and hold such amount without interest until such time as it is
payable to the Portfolio Supervisor and Schwab as set forth below.
On or before the first Distribution Date after the conclusion of each
calendar year, the Trustee shall, upon certification in satisfactory form to the
Trustee, upon which the Trustee may rely, distribute to the Portfolio Supervisor
and Schwab from the amount so held pursuant to the immediately preceding
paragraph the amounts that the Portfolio Supervisor and Schwab are at the time
entitled to receive pursuant to Section 7.4 on account of services theretofore
performed and expenses theretofore incurred.
The Trustee also may withdraw from said accounts such amounts, if any,
as it deems necessary to establish a reserve for any applicable taxes or other
governmental charges that may be payable out of the Trust. Amounts so withdrawn
shall not be considered a part of such Trust's assets until such time as the
Trustee shall return all or any part of such amounts to the appropriate
accounts. In addition, the Trustee may withdraw from the Income and Principal
Accounts such amounts as may be necessary to cover redemptions of Units by the
Trustee.
The Principal Account shall be reimbursed for any amount 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 therein, when sufficient funds are not
available in the Income Account after giving effect to the payment from the
Income Account of all amounts otherwise required to be deducted therefor at that
time 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 Unitholder of record at
the close of business on the preceding Record Date, at the post office address
appearing on the registration books of the Trustee (or, if a Clearing Agency as
defined in Section 5.4 is the registered Unitholder, the Trustee shall make
distributions to such Clearing Agency in accordance with its applicable
procedures), such holder's pro rata share of the balance in the Income Account
calculated as set forth in the next paragraph, plus such holder's pro rata share
of the distributable cash balance of the Principal Account, as of the preceding
Record Date; provided, however, the Depositors are authorized to direct that
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funds credited to the Principal Account in the event of the failure of
consummation of a contract to purchase Securities pursuant to Section 2.1
hereof, funds representing the proceeds of the sale of Securities pursuant to
Section 3.8 or 3.10 hereof, and funds representing the proceeds of the sale of
Securities under Section 5.2, 6.4 or this Section 3.5 in excess of the aggregate
of (i) the amounts needed for the purposes of said Sections and (ii) such amount
as the Depositors have informed the Trustee is to be used to purchase securities
pursuant to Section 3.7 hereof, shall not be distributed until the following
Distribution Date or at such earlier date as shall be determined by the Trustee.
The Trustee shall not be required to make a
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distribution from the Principal or Income Account unless the cash balance on
deposit therein available for distribution shall be sufficient to distribute at
least $1.00 per Unit in the case of Units initially offered at approximately
$1,000, or a proportionately lower amount in the case of Units initially offered
at less than $1,000 (e.g., .001 per Unit in the case of Units initially offered
at approximately $1.00).
The Trustee shall compute the amount of the Distribution from the
Income Account (i) by subtracting from the cash balance of the Income Account
computed as of the close of business on such Record Date (a) any unpaid fees and
expenses then deductible pursuant to the foregoing provisions of Section 3.5 and
(b) the Trustee's estimate of other expenses chargeable to the Income Account
pursuant to the Indenture which have accrued as of such Record Date, or are
otherwise properly attributable to the period to which such Income Distribution
relates and (ii) by dividing the result of such calculation by the number of
Units outstanding on the applicable Record Date.
The amounts to be so distributed to each Unitholder 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,
computed as set forth above, as shall be represented by a notation of the Units
owned by such Unitholder 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.
For the purpose 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 Unitholder of record. Nothing herein shall be construed to prevent
the payment of amounts from the Income Account and the Principal Account to
individual Unitholders 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 3.6 hereof.
The Trustee shall withhold from a Unitholder's income distribution any
portion of the Deferred Sales Charge deductible therefrom pursuant to Section
3.16.
Section 3.6 Distribution Statements: With each distribution from the
-----------------------
Income or Principal Accounts the Trustee shall set forth, either in the
instrument by means of which payment of such distribution is made or in any
accompanying statement the amount being distributed from each such account
expressed as a dollar amount per Unit.
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Within a reasonable period of time after the last business day of each
calendar year, the Trustee shall furnish to each person who at any time during
such calendar year was a Unitholder a statement setting forth, with respect to
such calendar year:
(A) as to the Income Account:
(1) the amount of dividends received on the Securities,
(2) the amounts paid from the Income Account for redemptions
pursuant to Section 5.2,
(3) the deductions for applicable taxes and fees and expenses of
the Trustee and counsel pursuant to Section 3.9, accrued organization
expenses, Deferred Sales Charge, the annual audit fees referred to in
Section 6.2, and the annual fees for portfolio supervisory services
pursuant to Section 7.4,
(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 year;
(B) as to the Principal Account:
(1) The number of shares of each issue of Securities sold or
liquidated, and the aggregate net proceeds received with respect to each
issue, excluding any portion thereof credited to the Income Account,
(2) the amounts paid from the Principal Account for redemption
pursuant to Section 5.2,
(3) the deductions for payment of applicable taxes and fees and
expenses of the Trustee and counsel pursuant to Section 3.9, organizational
expenses, the annual audit fees referred to in Section 6.2, and the annual
fee for portfolio supervisory services pursuant to Section 7.4, and
(4) 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 year; and
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(C) the following information:
(1) a list of Securities held in the Trust as of the last Business
Day of such calendar year,
(2) the number of Units outstanding on the last Business Day of
such calendar year,
(3) the Unit Value based on the last trust evaluation pursuant to
Section 5.1 made during such calendar year, and
(4) the amounts actually distributed to Unitholders 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 and the status of
such distributions for Federal income tax purposes.
Section 3.7 Substitute Securities: In the event that any Contract
---------------------
Security or Security to be purchased pursuant to a contract entered into by the
Trustee in accordance with Section 2.5 is not delivered due to any occurrence,
act or event beyond the control of the Depositors and of the Trustee (such a
Contract Security being herein called a "Failed Security"), the Depositors may
instruct the Trustee to purchase Substitute Securities which have been selected
by the Depositors having a cost not in excess of the cost of the Failed
Securities. To be eligible for inclusion in the Trust, the Substitute
Securities which the Depositors select must: (a) be of the same type as that
replaced (e.g., both will be common stock or preferred stock); (b) in the
----
Depositors' judgment, be substantially similar to the Failed Security, as the
case may be, as respects the investment characteristics which led the Depositors
to select the Failed Security for inclusion in the Trust; and (c) be purchased
prior to, simultaneously with, or no more than twenty days after delivery of
written notice to the Trustee or Depositors, as appropriate, of the failed
contract (the "Failed Contract Notice").
Any Substitute 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
Substitute 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 Substitute Security is acquired by the Trust pursuant to the
provisions of this Section 3.7, the Trustee shall, within five days thereafter,
mail to all Unitholders notices of such acquisition, including an identification
of the Failed Security and the Substitute Security acquired. The purchase price
of a Substitute Security shall be paid out of the funds in the Principal Account
attributable to the Failed 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
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pursuant to any such instructions from the Depositors and in the absence of such
instructions the Trustee shall have no duty to purchase any Substitute
Securities under this Indenture. The Depositors shall not be liable for any
failure to instruct the Trustee to purchase any Substitute Security or for
errors of judgment in selecting any Substitute Security.
Section 3.8 Sale of Securities: In order to maintain the sound
------------------
investment character of the Trust, the Depositors may direct the Trustee to sell
or liquidate Securities at such price and time and in such manner as shall be
determined by the Depositors, provided that the Depositors have determined with
the advice of the Portfolio Supervisor, if appropriate, that any one or more of
the following conditions exist:
(1) default in payment of amounts due on any of the Securities;
(2) institution of legal proceedings in law or equity seeking to
restrain or enjoin the payment of amounts due or declaration or payment of
regular dividends;
(3) default under certain documents materially and adversely affecting
future declaration or payment of amounts due or expected;
(4) determination of the Depositors that the tax treatment of the Trust
as a grantor trust would otherwise be jeopardized;
(5) decline in price that is a direct result of serious adverse credit
factors affecting the issuer of a Security which, in the opinion of the
Depositors, would make the retention of the security detrimental to the Trust or
the Unitholders; or
(6) that there has been a public tender offer made for a Security or a
merger or acquisition is announced affecting a Security, and that in the opinion
of the Depositors the sale or tender of the Security is in the best interest of
the Unitholders.
Upon receipt of such direction from the Depositors, upon which the
Trustee shall rely, the Trustee shall proceed to sell the specified Security 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 Depositors 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 3.8.
Section 3.9 Counsel: The Depositors may employ from time to time as
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it may deem necessary a firm of attorneys for any legal services that may be
required in connection with the disposition of Securities pursuant to Section
3.8. The fees and expenses of such counsel shall be paid by the Trustee from
the Interest and Principal Accounts as provided for in Section 3.5(c) hereof.
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Section 3.10 Notice and Sale by Trustee: If at any time there has
--------------------------
been a failure by the issuer to pay a dividend that is due and payable, the
Trustee shall notify the Depositors thereof. If within thirty days after such
notification the Trustee has not received any instruction from the Depositors to
sell or to hold or to take any other action in connection with such Securities,
the Trustee shall sell such Securities 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 Depositors. The Trustee shall promptly notify the
Depositors of such action in writing and shall set forth therein the Securities
sold and the proceeds received therefrom.
Section 3.11 Reorganization and Similar Events: 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 Securities, cash and/or property received in exchange
shall be deposited hereunder and shall be promptly sold, if securities or
property, by the Trustee pursuant to the Depositors' direction, unless the
Depositors advise the Trustee to retain such securities or property. The
Depositors may rely on the Portfolio Supervisor in so advising the Trustee. The
cash received in such exchange and cash proceeds of any such sales shall be
distributed to Unitholders on the next Distribution Date in the manner set forth
in Section 3.5 regarding distributions from the Principal Account. This section
shall apply, but its application shall not be limited, to public tender offers,
mergers, acquisitions, reorganizations and recapitalizations. Unless the
Depositors direct that notice be otherwise provided, the Trustee shall include
notice of any Security so acquired in the annual statement provided to
Unitholders pursuant to Section 3.6. Neither the Depositors nor the Trustee
shall be liable to any person for action or failure to take action pursuant to
the terms of this Section 3.11.
Section 3.12 Notice of Actions: 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 Depositors and shall thereupon take such action or refrain from
taking any action as the Depositors shall in writing direct; provided, however,
-------- --------
that if the Depositors shall not within five business days of the giving of such
notice to the Depositors 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 Depositors nor the Trustee shall be liable to any
person for any action or failure to take action with respect to this section.
Section 3.13 Notice of Change in Principal Account: The Trustee shall
-------------------------------------
give prompt written notice to the Depositors of all amounts credited to or
withdrawn from the Principal Account pursuant to any provisions of this Article
III, and the balance of such account after giving effect to such credit or
withdrawal.
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Section 3.14 Extraordinary Distributions: 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 in the Reference Trust Agreement or
of a Substitute Security, which shall be retained by the Trust, shall be dealt
with in the manner described in Section 3.11 and shall be retained or disposed
by the Trustee according to those provisions, provided, however, that no
property shall be retained which the Trustee determines shall adversely affect
its duties hereunder. The proceeds of any disposition shall be credited to the
Income or Principal Account of the Trust, as the Depositors may direct.
Section 3.15 Grantor Trust Status: The Trust is intended to be
--------------------
treated as a fixed investment (i.e., grantor) trust for income tax purposes, and
its powers shall be limited in accordance with the restrictions imposed on such
trusts by Treas. Reg. Section 301.7701-4.
Section 3.16 Deferred Sales Charge: If the Reference Trust Agreement
---------------------
and Prospectus for a Trust specify a Deferred Sales Charge, the Trustee shall,
on the dates specified in and as permitted by the prospectus, withdraw from the
Income Account, the Principal Account and/or distributions to be made therefrom,
as such accounts or distributions are designated in the Prospectus as the source
of the payments of the Deferred Sales Charge, an amount per Unit specified in
the Prospectus and credit such amount to a special, non-Trust account maintained
by the Trustee out of which the Deferred Sales Charge will be distributed to the
Depositors. If the balances in the Income and Principal Accounts are
insufficient to make any withdrawal designated to be made therefrom, the Trustee
shall, as directed by the Depositors, 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 Depositors'
account or credit Securities in kind to such special Depositors' account
provided, however, that the Trustee shall not be required to advance an
aggregate amount in excess of $15,000 pursuant to this Section. Such directions
shall identify the Securities, if any, to be sold or distributed in kind and
shall contain, if the Trustee is directed by the Depositors to sell a Security,
instructions as to execution of such sales. If a Unitholder redeems Units prior
to full payment of the Deferred Sales Charge, the Trustee shall, if so provided
in the Reference Trust Agreement and Prospectus, on the Redemption Date,
withhold from the Redemption Price payment to such Unitholder an amount equal to
the unpaid portion of the Deferred Sales Charge and distribute such amount to
such special Depositors' account or, if the Depositors shall purchase such Unit
pursuant to the terms of Section 5.02 hereof, the Depositors shall pay the
Redemption Price for such Unit less the unpaid portion of the Deferred Sales
Charge. If the Prospectus provides for a waiver or refund of any portion of the
Deferred Sales Charge under specified circumstances (such as, for example, in
connection with a redemption or sale of Units following the death or disability
of the Unitholder), the Trustee shall deduct and pay to the Depositors the full
amount of the Deferred Sales Charge chargeable upon the redemption in the
absence of such waiver or refund and the Depositors shall pay to the affected
Unitholder the amount of such waiver or refund; the Trustee shall have no
responsibility to the affected Unitholder with respect to the amount to be so
refunded. The Depositors may at any time instruct the Trustee to distribute to
the Depositors cash or Securities previously credited to the
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special Depositors' account. The Depositors represent that the price paid by any
Unitholder for Units acquired through reinvestment of Trust distributions will
be reduced by the aggregate amount of unpaid Deferred Sales Charge at the time
of the purchase such that the subsequent collection by the Depositors of the
Deferred Sales Charge in respect of the Units so acquired will be permissible
under applicable NASD rules.
ARTICLE 4
EVALUATION OF SECURITIES
Section 4.1 Evaluation of Securities: The Trustee shall determine
------------------------
separately and promptly furnish to the Depositors 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 5.1. The value of each issue of Securities shall
be determined in good faith by the Trustee in accordance with the following
procedures: If the Securities are listed on one or more national securities
exchanges, such valuation shall be based on the closing sale 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 sale price on such exchange, such valuation
shall be based on the closing sale 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 sale price, then the Trustee may utilize, at the Trust's
expense, an independent evaluation service or services approved by the
Depositors to ascertain the values of the Securities. The independent evaluation
service shall use any of the following methods, or a combination thereof, which
it deems appropriate: (a) on the basis of current bid prices of such Securities
as obtained from investment dealers or brokers (including the Depositors) who
customarily deal in securities comparable to those held by the Trust, or (b) if
bid prices are not available for any of such Securities, on the basis of bid
prices for comparable securities, or (c) 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 (d) by any combination of the above. As used herein, the
closing sale price is deemed to mean the most recent closing sale price on the
relevant securities exchange prior to the Evaluation Time. The Trustee shall be
permitted to rely on these evaluations when determining the Unit Value. The
Trustee shall have no responsibility or liability for the valuations supplied to
it by the independent evaluation service. 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 pursuant to Section 2.1. Such
evaluation shall be made on the same basis as set forth above and shall be
included in the Schedules attached to the Reference Trust Agreement.
Section 4.2 Tax Reports: For the purpose of permitting Unitholders
-----------
to satisfy any reporting requirements of applicable Federal or state tax law,
the Trustee shall transmit to any Unitholder upon written request any
determinations made by the Trustee pursuant to Section 4.1.
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Section 4.3 Liability of Trustee with respect to Evaluations: The
------------------------------------------------
Depositors and the Unitholders 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, and shall have no liability for errors in, the information
reasonably available to it. The Trustee shall be under no liability to the
Depositors or the Unitholders for errors in information obtained from any
pricing service or similar source of information used to obtain closing sale
prices which is selected by the Trustee with reasonable care. With respect to
any evaluation made hereunder, the Trustee shall not be liable for errors in
judgment or any action taken in good faith, 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 gross
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties hereunder.
ARTICLE 5
TRUST EVALUATION, REDEMPTION, PURCHASE, TRANSFER,
INTERCHANGE OR REPLACEMENT OF CERTIFICATES
Section 5.1 Trust Evaluation: The Trustee shall make an evaluation
----------------
of the Trust as of the close of trading on the New York Stock Exchange
(sometimes referred to herein as the "Evaluation Time") (1) on the last Business
Day of each of the months of June and December, (2) 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 (3) on any other day desired by the Trustee or requested
by the Depositors. Such evaluations shall take into account and itemize
separately (a)(1) the cash on hand in the Trust (other than moneys on deposit in
the Reserve Account, funds deposited on the date thereof by the Depositors for
the purchase of Securities and not theretofore credited to the Principal Account
pursuant to Section 3.3 and funds in the Principal Account with respect to which
contracts for the purchase of the Substitute Securities have been entered into
pursuant to Section 3.7 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 4.1 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 Depositors , the Portfolio Supervisor and their successors, if any, (b)(3)
cash held for distribution to Unitholders of record as of a date on or prior to
the evaluation then being made and (b)(4) unpaid organizational and offering
costs in the estimated amount per Unit set forth in the Prospectus. The value
of the pro rata share of each
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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), (b)(2),
(b)(3) and (b)(4) shall be referred to herein as the "Unit Cash Value".
The Trustee shall promptly advise the Depositors of each determination
of Unit Value made by it as above provided, and, in addition, upon each
valuation by the Trustee under Section 4.1 other than those involved in such
calculations of Unit Value, the Trustee shall promptly furnish to the
Depositors, for purposes of assisting them in maintaining a market in the Units,
with such information regarding the Principal, Income and Reserve Accounts as
the Depositors may reasonably request.
Section 5.2 Redemptions by Trustee; Purchases by Depositors: In
-----------------------------------------------
connection with each redemption of Units, the Depositors shall direct the
Trustee to redeem Units in accordance with the procedures set forth in either
(a) or (b) of this Section 5.2.
(a) Trustee. Any Unit tendered for redemption by a Unitholder or his
duly authorized attorney to the Trustee at its unit investment trust office by
the registered holder thereof pursuant to the Redemption Form, shall be redeemed
by the Trustee on the third Business Day following the day on which tender for
redemption is made (such third Business Day being herein called the "Redemption
Date"). Subject to payment by such Unitholder of any tax or other governmental
charges which may be imposed thereon, such redemption is to be made by payment
on the Redemption Date of cash equivalent to the Unit Value determined by the
Trustee as of the Evaluation Time on the date of tender, multiplied by the
number of Units being tendered for redemption (herein called the "Redemption
Price"). Units received for redemption by the Trustee on any day after the
Evaluation Time will be held by the Trustee until the next day on which the New
York Stock Exchange is open for trading and will be deemed to have been tendered
on such day for redemption at the Redemption Price computed on that day.
The Trustee may in its discretion, and shall when so directed by the
Depositors in writing, suspend the right of redemption or postpone the date of
payment of the Redemption Price for more than three Business 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
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(3) for such other periods as the Securities and Exchange Commission
may by order permit,
and 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 of tender of a Unit
for redemption by a Unitholder other than the Depositors, the Trustee shall
notify the Depositors of such tender. The Depositors shall have the right to
purchase such Unit by notifying the Trustee of their election to make such
purchase as soon as practicable thereafter, but in no event subsequent to the
close of business on the Business Day on which such Unit was tendered for
redemption. Such purchase shall be made by payment for such Unit by the
Depositors to the Unitholder not later than the close of business on the
Redemption Date of an amount equal to the Redemption Price which would otherwise
be payable by the Trustee to such Unitholder.
Any Unit so purchased by the Depositors may, at the option of the
Depositors, 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 5.2.
If the Depositors do not elect to purchase any Unit tendered to the
Trustee for redemption, or if a Unit is being tendered by the Depositors for
redemption, that portion of the Redemption Price which represents dividends
shall be withdrawn from the Income Account to the extent funds are available.
The balance paid on any redemption, including accrued dividends, 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 sell such Securities from among those designated on the current list for
such purpose by the Depositors as provided below and in the manner, in its
discretion, as it shall deem advisable or necessary in order to fund the
Principal Account for purposes of such redemption. Sales of Securities by the
Trustee shall be made in such manner as the Trustee shall determine, subject to
any minimum amount limitations on sale which shall have been specified by the
Depositors and agreed to by the Trustee. In the event that funds are withdrawn
from the Principal Account or Securities are sold for payment of any portion of
the Redemption Price representing accrued dividends, the Principal Account shall
be reimbursed when sufficient funds are next available in the Income Account for
such funds so applied.
The Depositors shall maintain with the Trustee a current list of
Securities designated to be sold for the purpose of redemption of Units tendered
for redemption and not purchased by the Depositors, and for payment of expenses
hereunder, provided that if the Depositors 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 representing principal shall be credited to the Principal Account
and the proceeds of such sales representing accrued interest shall be credited
to the Income Account.
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Neither the Trustee nor the Depositors shall be liable or responsible
in any way for depreciation or loss incurred by reason of any sale of Securities
made pursuant to this Section 5.2.
Units redeemed pursuant to this Section 5.2 shall be canceled by the
Trustee and the Units tendered by Redemption Forms shall be terminated by such
redemptions.
If the related Prospectus for the Trust so provides, a Unitholder who
tenders for redemption Units in an aggregate amount of at least the amount
specified in the Prospectus may request, at the time of tender, to receive an
"In Kind Distribution" in lieu of cash. Such In Kind Distribution shall consist
of (i) such Unitholder's pro rata portion of each of the Securities, to the
extent of whole shares, and (ii) cash equal to such Unitholder's pro rata
portion of the Income and Principal Accounts follows: (x) a pro rata portion of
the net proceeds of sale of the Securities representing any fractional shares
included in such Unitholder's pro rata share of the Securities and (y) such
other cash as may properly be included in such Unitholder's pro rata share of
the sum of the cash balances of the Income and Principal Accounts in an amount
equal to the Redemption Price on the date of tender less amounts specified in
clauses (i) and (ii)(x) of this sentence. The Trustee shall distribute the
Unitholder's Securities to the account of the Unitholder's bank or broker dealer
at the DTC. An In Kind Distribution shall be reduced by customary transfer and
registration charges incurred by the Trustee.
(b) Distribution Agent. On any Business Day on which any Unit or
Units are tendered for redemption (the "Redemption Day") by a Unitholder or his
duly authorized attorney to the Trustee at its unit investment trust office in
the City of New York not later than the Evaluation Time, such Units shall be
redeemed by the Trustee on that Redemption Day. Units in uncertificated form
shall be tendered by means of an appropriate request for redemption in form
approved by the Trustee. Unitholders must sign exactly as their name appears on
the register with the signature guaranteed by a participant in a signature
guarantee program acceptable to the Trustee, 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 Unitholder 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 Unitholder
on the Redemption Day of (i) the Unitholder's pro rata portion as of the
Redemption Day of the Securities in the Trust as designated by the Depositor and
(ii) the Unitholder's pro rata portion of the cash in the Trust as of the
Redemption Day (herein called the "Redemption Distribution"). The Distribution
Agent will dispose of such assets in accordance with the provisions of the
Distribution Agent Agreement. Fractional interests in shares distributed to the
Distribution Agent, which are not included in the Redemption Distribution, shall
be held in trust by the Distribution Agent, which is hereby designated a
subcustodian of the Trustee with respect to such fractional interests, and shall
be subject to such disposition as the Depositor shall direct. Units received
for redemption by the Trustee on any date after the Evaluation Time will be held
by the Trustee until the next Business Day on which the New York Stock Exchange
is open for trading and will be deemed to have been tendered on such day for
redemption at the
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Redemption Price computed on that day. Units tendered for redemption by the
Depositors on any Business Day shall be deemed to have been tendered before the
Evaluation Time on such Business Day provided that the Depositors advise the
Trustee before the later of the Trustee's close of business and 5:00 pm New York
City time. By such advice, the Depositors will be deemed to certify that all
Units so tendered were either (a) tendered to the Depositors or to a retail
dealer between the Evaluation Time on the preceding Business Day and the
Evaluation Time on such Business Day or (b) acquired previously by the
Depositors but which the Depositors determined to redeem prior to the Evaluation
Time on such Business Day.
The portion of the Redemption Distribution which represents the
Unitholder's interest in the Income Account shall be withdrawn from the Income
Account to the extent available. The balance paid on any redemption, including
dividends receivable on stocks trading ex dividend, if any, shall be 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 Unitholder 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
uncollectible 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.
Unitholders requesting or required to receive a cash distribution
shall receive such distribution in accordance with the applicable provisions of
the Distribution Agency Agreement.
Notwithstanding the foregoing provisions of this Section 5.2, the
Trustee is hereby irrevocably authorized in its discretion, in the event that
the Depositors do not elect to purchase any Unit tendered to the Trustee for
redemption (other than Units as to which a valid request for In Kind Redemption
has been made), or in the event that a Unit is being tendered by the Depositors
for redemption, in lieu of redeeming Units tendered for redemption, to sell such
Units in the over-the-counter market or by private sale for the account of
tendering Unitholders at prices which will return to the Unitholders amounts in
cash, net after deducting brokerage commissions, transfer taxes and other
charges, equal to or in excess of the Redemption Prices which such Unitholders
would otherwise be entitled to receive on redemption pursuant to this Section
5.2. The Trustee shall pay to the Unitholders the net proceeds of any such sale
on the day they would otherwise be entitled to receive payment of the Redemption
Price hereunder.
Section 5.3 Depositor Redemptions: Units tendered for redemption by
---------------------
the Depositors on any Business Day shall be deemed to have been tendered before
the Evaluation Time on such Business Day provided that the tendering Depositor
advises the Trustee in writing (which may be electronic transmission) of such
tender before the later of 5:00 p.m. New York
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<PAGE>
City time and the Trustee's close of business on such Business day. By such
advice, the Depositor will be deemed to certify that all Units so tendered were
either(a) tendered to the Depositors or to a retail dealer between the
Evaluation Time on the preceding Business Day and the Evaluation Time on such
Business Day or (b) acquired previously but which the Depositor determined to
redeem prior to the Evaluation Time on such Business Day. On or before payment
of the Redemption Price, the Depositor shall assign or deliver to the Trustee
such documents which the Trustee shall reasonably require to effect the
redemption of those Units.
Section 5.4 Units to be Held Only Through the Depository Trust
--------------------------------------------------
Company or a Successor Clearing Agency: No Unit may be registered in the name
- --------------------------------------
of any person other than DTC or its nominee (or such other clearing agency
registered as such pursuant to Section 17A of the Exchange Act of 1934
designated as successor to DTC by the Depositors, or the Trustee or the nominee
thereof) (DTC and any such successor clearing agency are herein referred to as
the "Clearing Agency") unless the Clearing Agency advises the Trustee that it is
no longer willing or able properly to discharge its responsibilities with
respect to the Units and the Trustee is unable to locate a qualified successor
clearing agency, in which case the Trustee shall notify the Clearing Agency and
instruct it to provide the Trustee with the name and address of all persons who
are the beneficial owners of Units as registered on the books of the Clearing
Agency (the "Owners"). So long as a Clearing Agency is the registered holder of
the Units, it shall be the registered holder of the Units for all purposes under
this Indenture and the Owners shall hold their interest in the Units pursuant to
such Clearing Agency's applicable procedures. The Trustee shall be entitled to
deal with any Clearing Agency for all purposes of this Indenture (including the
payment of distributions on the Units and giving of instructions or directions
by or to the Owners) as the sole Unitholder of the Units and shall have no
obligations to the Owners. The rights of the Owners shall be exercised only
through the Clearing Agency and shall be limited to those established by law,
the applicable procedures of the Clearing Agency and the agreements between the
Owners and the Clearing Agency and its participants. None of the Depositors nor
the Trustee shall have any liability in respect of any transfers of Units
effected by any Clearing Agency. All provisions of this Indenture relating to
the ownership and transfer of Units shall be construed to effectuate the
provisions of this Section.
ARTICLE 6
TRUSTEE; REMOVAL OF DEPOSITORS
Section 6.1 General Definition of Trustee's Liabilities, Rights and
-------------------------------------------------------
Duties; Removal of Depositors: In addition to and notwithstanding the other
- -----------------------------
duties, rights, privileges and liabilities of the Trustee otherwise set forth
herein, the liabilities of the Trustee are further defined as follows:
(a) All moneys deposited with or received by the Trustee hereunder
shall be held by the Trustee without interest in trust as part of the Trust or
the Reserve Account until required
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to be disbursed in accordance with the provisions of this Indenture and such
moneys will be segregated by separate recordation on the trust ledgers 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
moneys 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, endorsement, assignment, resolution,
draft or other document, whether or not of the same kind, prima facie properly
executed, or for the purchase, retention or disposition of moneys, Securities or
Units pursuant to this Indenture or the Depositors' direction, or in respect of
any evaluation which the Trustee is required to make or is required or permitted
to have made by others under this Indenture or otherwise except by reason of its
gross negligence, lack of good faith or willful misconduct, provided that the
Trustee shall not in any event be liable or responsible for any evaluation made
by any independent evaluation service employed by it pursuant to Section 4.1.
The Trustee 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, and any construction of any such provisions hereof by the Trustee in
good faith shall be binding upon the parties hereto. The Trustee shall in no
event be deemed to have assumed or incurred any liability, duty or obligation to
any Unitholder or the Depositors, other than as expressly provided for herein.
(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 Depositors, or for the form, character, genuineness,
sufficiency, value or validity of any letter of credit held hereunder or any
Securities or for or in respect of the validity or sufficiency of the Units or
of the due execution thereof by the Depositors, and the Trustee shall in no
event assume or incur any liability, duty or obligation to any Unitholder or the
Depositors other than as expressly provided for herein. The Trustee shall not
be responsible for or in respect of the validity of any signature by or on
behalf of the Depositors.
(d) The Trustee shall not be under any 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, it shall be furnished with reasonable
security and indemnity against such expense or liability as it may require, and
any pecuniary cost of the Trustee from such actions shall be deductible from and
a charge against the Income and Principal Accounts. 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 interests
of the Unitholders 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 Unitholders.
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(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 care; provided,
--------
however, that if the Trustee chooses to employ DTC 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 DTC 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, which may be counsel to the Depositors
acceptable to the Trustee. The fees and expenses charged by such agents,
attorneys, accountants or auditors shall constitute an expense of the Trustee
reimbursable from the Income and Principal Accounts as set forth in Section 3.5
hereof.
(f) Other than as provided in Article 7 hereunder, if at any time
there is only one Depositor acting hereunder and said Depositor shall resign or
fail to undertake or perform or become incapable of undertaking or performing
any of the duties which by the terms of this Indenture are required by it to be
undertaken or performed and no express provision is made for action to be taken
by the Trustee in such event, or said Depositor shall be adjudged bankrupt or
insolvent, or a receiver of such Depositor or of its property shall be
appointed, or any public officer shall take charge or control of such Depositor
or of its property or affairs for the purpose of rehabilitation, conservation or
liquidation, then in any such case, the Trustee may, in its sole discretion, do
any one or more of the following: (1) appoint a successor Depositor who shall
act hereunder in all respects in place of the Depositor, who shall be
compensated semi-annually, at rates deemed by the Trustee to be reasonable under
the circumstances, by deduction from the Income Account or from the Principal
Account, 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; (2) terminate this Indenture
and the Trust created hereby and liquidate the Trust, all in the manner provided
in Section 9.2.; or (3) continue to act as Trustee hereunder without terminating
this Indenture, acting in its own absolute discretion without appointing any
successor Depositor and assuming such of the duties and responsibilities of the
Depositor hereunder as the Trustee determines, in its absolute discretion, are
necessary or desirable for the administration and preservation of the Trust, and
receiving additional compensation at rates determined as provided in clause (1).
If the Trustee continues so to act, it is authorized to employ one or more
agents to perform portfolio supervisory services and such other of the services
of the Depositors hereunder as the Trustee determines, in its sole discretion,
to be necessary or desirable. The fees and expenses of such agent or agents
shall be charged to the Trust in accordance with Section 6.4. All provisions of
this Indenture relating to the liability and indemnification of the Trustee,
including, without limitation, subparagraph (e) of this Section, shall apply to
any responsibility assumed or action taken by the Trustee pursuant to this
subparagraph.
(g) If the value of the Trust as shown by any evaluation by the
Trustee pursuant to Section 5.1 hereof shall be less than the liquidation amount
specified in Part II of the Reference
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Trust Agreement, the Trustee may in its discretion, and shall, when so directed
by the Depositors, terminate this Indenture and the Trust created hereby and
liquidate the Trust, all in the manner provided in Section 9.2.
(h) 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 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 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 Unitholders.
(i) The Trustee, except by reason of its gross negligence, lack of
good faith, reckless disregard of its obligations hereunder or willful
misconduct, shall not be liable for any action taken or suffered to be taken by
it in good faith and believed by it to be authorized or within the discretion or
rights or powers conferred upon it by this Indenture.
(j) Notwithstanding anything in this Indenture to the contrary, the
Trustee is authorized and empowered to enter into any safekeeping arrangement or
arrangements it deems necessary or appropriate for holding the Securities then
owned by the Trust and the Trustee is authorized and empowered in its sole right
to amend, supplement or terminate any safekeeping arrangement or arrangements
made under this provision. In addition, the Trustee is authorized and
empowered, at the request and written discretion of the Depositors, 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 Depositors.
(k) The Trustee in its individual or any other capacity may become
owner or pledgee or, or be an underwriter or dealer in respect of, stock, bonds
or other obligations issued by the same issuer (or an affiliate of such issuer)
or any obligor of any Securities at any time held as part of the Trust and may
deal in any manner with the same or with the issuer (or an affiliate of the
issuer) with the same rights and powers as if it were not the Trustee hereunder.
(l) The Trust may include a letter or letters of credit for the
purchase of Contract Securities or Additional Securities issued by the Trustee
in its individual capacity for the account of the Depositors, and the Trustee
may otherwise deal with the Depositors with the same rights and powers as if it
were not the Trustee hereunder.
Section 6.2 Books, Records and Reports: The Trustee shall keep
--------------------------
proper books of record and account of all the transactions under this Indenture
at its unit investment trust office including a record of the name and address
of, and the Units issued by the Trust and held by,
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every Unitholder, and such books and records shall be open to inspection by any
Unitholder at all reasonable times during the usual business hours, and such
books and records shall be made available to the Depositors upon the written
request of the Depositors including, but not limited to, a record of the name
and address of every Unitholder.
Unless the Depositors otherwise direct, the Trustee shall cause
audited statements as to the assets and income of the Trust to be prepared on an
annual basis by independent public accountants selected by the Depositors. Such
audited statement will be made available to Unitholders upon request. The
Trustee shall maintain and provide, upon the request of a Unitholder or the
Depositors, the Unitholders or the Unitholder's designated representative with
the cost basis of the Securities represented by the Unitholder's Units.
To the extent permitted under the Investment Company Act of 1940 as
evidenced by an opinion of counsel to the Depositors, reasonably acceptable to
the Trustee, the Trustee shall pay, or reimburse to the Depositors or others,
the costs of the preparation of documents and information with respect to the
Trust required by law or regulation in connection with the maintenance of a
secondary market in units of the Trust. Such costs may include but are not
limited to accounting and legal fees, blue sky registration and filing fees,
printing expenses and other reasonable expenses related to documents required
under Federal and state securities laws.
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.
Section 6.3 Indenture and List of Securities on File: The Trustee
----------------------------------------
shall keep a certified copy or duplicate original of this Indenture on file at
its unit investment trust office available for inspection at all reasonable
times during the usual business hours by any Unitholder and the Trustee shall
keep and so make available for inspection a current list of the Securities.
Section 6.4 Compensation and Indemnification: For services performed
--------------------------------
under this Indenture the Trustee shall be paid at the rate per annum set forth
in Part II of the Reference Trust Agreement which shall be computed on the basis
set forth in such Reference Trust Agreement. The Trustee may from time to time
adjust its compensation as set forth above provided that the 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 shall cease to be published, then as
measured by the available index most nearly comparable to such index. The
consent or concurrence of any Unitholder hereunder shall not be required for any
such adjustment or increase, however, the consent of the Depositors shall be
required. Such compensation shall be charged by the Trustee against the Income
and Principal Accounts at the time provided in Section 3.5 provided, however,
that such compensation shall be deemed to provide only for the usual normal and
recurring functions undertaken as Trustee pursuant to this Indenture.
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The Trustee shall charge the Income and Principal Accounts at such
times as shall be convenient in its administration of the Trust any and all
expenses, including, but not limited to, the fees of counsel which may be
retained by the Trustee in connection with its activities hereunder, and
disbursements incurred hereunder and any extraordinary services performed by the
Trustee hereunder. The Trustee shall be indemnified and held harmless against
any loss or liability accruing to it without gross negligence, bad faith or
willful misconduct on its part, arising out of or in connection with 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. If the cash balances in the Income and Principal Accounts shall be
insufficient to provide for amounts payable pursuant to this Section 6.4, the
Trustee shall have the power to sell (1) Securities from the current list of
Securities designated to be sold pursuant to Section 5.2 hereof, or (2) 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 6.4. 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 6.4. Any moneys
payable to the Trustee pursuant to this section shall be secured by a lien on
the Trust prior to the interests of the Unitholders.
Section 6.5 Removal and Resignation of the Trustee; Successor: The
-------------------------------------------------
following provisions shall provide for the removal and resignation of the
Trustee and the appointment of any successor Trustee:
(a) any resignation or removal of the Trustee and appointment of a
successor pursuant to this section shall not become effective until acceptance
of appointment by the successor Trustee as provided in subsection (b) hereof;
(b) the Trustee or any trustee hereafter appointed may resign and be
discharged of the trust created by this Indenture by executing an instrument in
writing resigning as such Trustee, filing the same with the Depositors and
mailing a copy of a notice of resignation to all Unitholders then on record not
less than sixty days before the date specified in such instrument when, subject
to Section 6.5(d), such resignation is to take effect. Upon receiving such
notice of resignation, the Depositors shall use their best efforts to promptly
appoint a successor 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. The Depositors may remove the Trustee at any
time with or without cause 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. Notice of such removal and
appointment of a successor shall be mailed by the successor Trustee, promptly
after its acceptance of such appointment, to each Unitholder then of record;
(c) any successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Depositors and the retiring Trustee an instrument
accepting such appointment hereunder, and such successor Trustee without any
further act, deed or conveyance shall become
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<PAGE>
vested with all the rights, powers, duties and obligations of its predecessor
hereunder with like effect as if originally named Trustee herein and shall be
bound by all the terms and conditions of this Indenture provided, however, that
no successor trustee shall be under any liability hereunder for occurrences or
omissions prior to the execution of such instrument. Upon the request of such
successor Trustee, the Depositors and 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 moneys 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
upon all Securities and moneys at the time held by it hereunder to secure any
amounts then due the retiring Trustee hereunder;
(d) in case at any time the Trustee shall resign and no successor
Trustee shall have been appointed and have accepted appointment within thirty
days after notice of resignation has been received by the Depositors, 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; and
(e) any corporation into which any Trustee hereunder may be merged or
with which it may consolidate, 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.
Section 6.6 Qualifications of Trustee: The Trustee, or any successor
-------------------------
thereof, 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 $2,500,000.
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ARTICLE 7
DEPOSITORS AND PORTFOLIO SUPERVISOR
Section 7.1 Succession: The covenants, provisions and agreements
----------
herein contained shall in every case be binding upon any successor to the
business of the Depositors. In the event of the death, resignation or
withdrawal of any partner of a Depositor or of any successor Depositor which may
be a partnership, the deceased, resigning or withdrawing partner 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 a Depositor to a successor
corporation or partnership as permitted by the next following sentence, such
Depositors and, if such Depositor is a partnership, its partners, shall be
relieved of all further liability under this Indenture. The Depositors may
transfer all or substantially all of their assets to a corporation or
partnership which carries on the business of that Depositor, if at the time of
such transfer such successor duly assumes all the obligations of said Depositor
under this Indenture and if at such time such successor maintains a net worth of
at least $1,000,000 (determined in accordance with generally accepted accounting
principles).
Section 7.2 Resignation of a Depositor: If at any time any Depositor
--------------------------
desires to resign its position as Depositor hereunder, it may resign by
delivering to the Trustee an instrument of resignation executed by such
Depositor. Such resignation shall become effective upon the expiration of
thirty days from the date on which such instrument is delivered to the Trustee.
Upon effective resignation hereunder, 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 resignation and any successor
Depositor appointed by the Trustee pursuant to Section 6.1(f) shall thereupon
perform all duties and be entitled to all rights under this Indenture. The
successor Depositor shall not be under any liability hereunder for occurrences
or omissions prior to the execution of such instrument.
Section 7.3 Liability of Depositors and Indemnification: (a) No
-------------------------------------------
Depositor shall be under any liability to any other Depositor, the Trust or the
Unitholders for any action or for refraining from the taking of any action in
good faith pursuant to this Indenture, or for errors in judgment or for
depreciation or loss incurred by reason of the purchase or sale of any
Securities, provided, however, that this provision shall not protect the
Depositors against any liability to which they would otherwise be subject by
reason of willful misfeasance, bad faith or gross negligence in the performance
of their duties or by reason of their reckless disregard of their obligations
and duties hereunder. The Depositors 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 by the Trustee, the Trustee's counsel or any
other person for any matters arising hereunder. The Depositors shall in no
event be deemed to have assumed or incurred any liability, duty, or obligation
to any Unitholder or the Trustee other than as expressly provided for herein.
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(b) The Trust shall pay and hold the Depositors harmless from and
against any loss, liability or expense incurred in acting as Depositors of the
Trust other than by reason of willful misfeasance, bad faith or gross negligence
in the performance of their duties or by reason of their reckless disregard of
their obligations and duties hereunder, including the costs and expenses of the
defense against any claim or liability in the premises. The Depositors shall
not be under any obligation to appear in, prosecute or defend any legal action
which in their opinion may involve them in any expense or liability, provided,
however, that the Depositors may in their discretion undertake any such action
which they may deem necessary or desirable in respect of this Indenture and the
rights and duties of the parties hereto and the interests of the Unitholders
hereunder and, in such event, the legal expenses and costs of any such action
and any liability resulting therefrom shall be expenses, costs and liabilities
of the Trust and shall be paid directly by the Trustee out of the Income and
Principal Accounts as provided by Section 3.5.
(c) None of the provisions of this Indenture shall be deemed to
protect or purport to protect the Depositors against any liability to the Trust
or to the Unitholders to which the Depositors would otherwise be subject by
reason of willful misfeasance, bad faith or gross negligence in the performance
of their duties, or by reason of the Depositors' reckless disregard of their
obligations and duties under this Indenture.
(d) Notwithstanding the discharge of a Depositor of the Trust, such
Depositor shall continue to be fully liable in accordance with the provisions
hereof in respect of action taken or refrained from under this Indenture by the
Depositors before the date of such discharge or by the undischarged Depositors
before or after the date of such discharge, as fully and to the same extent as
if no discharge has occurred.
Section 7.4 Compensation: The Portfolio Supervisor and Schwab shall
------------
receive at the times set forth in Section 3.5 as compensation for performing
portfolio supervisory services, such amount and for such periods as specified in
Part II of the Reference Trust Agreement. The computation of such compensation
shall be made on the basis of the largest number of units outstanding at any
time during the period for which such compensation is being computed. At no
time, however, will the total amount received by the Portfolio Supervisor and
Schwab for services rendered to all series of Schwab Trusts in any calendar year
exceed the aggregate cost to them of supplying such services in such year. Such
rate may be increased by the Trustee from time to time, without the consent or
approval of any Unitholder, Schwab or the Portfolio Supervisor, 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.
In the event that any amount of the compensation paid to the Portfolio
Supervisor and Schwab pursuant to Section 3.5 is found to be an improper charge
against the Trust, the Portfolio Supervisor and Schwab shall reimburse the Trust
in such amount. An improper charge shall be established if a final judgment or
order for reimbursement of the Trust shall be rendered
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against the Portfolio Supervisor and Schwab and such judgment or order shall not
be effectively stayed or a final settlement is established in which the
Portfolio Supervisor and Schwab agree to reimburse the Trust for amounts paid to
the Portfolio Supervisor and Schwab pursuant to this Section 7.4.
Section 7.5 Joint Position of Depositors; Power of Attorney: (a) The
-----------------------------------------------
Depositors shall be jointly and severally liable for the obligations imposed
upon and undertaken by the Depositors hereunder. At all times prior to the
termination of the Trust and while more than one Depositor shall be acting
hereunder, there shall be maintained on file with the Trustee a power of
attorney (which, initially, constitutes part of the Closing Memorandum delivered
by the Trustee and the Depositor in connection with the deposit made pursuant to
Section 2.1) executed in favor of one Depositor by the other Depositor
constituting and appointing the non-executing Depositor the trust and lawful
agent and attorney-in-fact of the executing Depositor to execute and deliver for
and on behalf of the executing Depositor 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 or
to take any other action in respect hereof. Such power of attorney shall
continue in effect as to the executing Depositor until written notice of
revocation thereof has been given by such executing Depositor to the Trustee and
the non-executing Depositor. 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 any other action in respect hereof on behalf
of the executing Depositor as to which such power of attorney is in effect.
(b) In the event that the power of attorney referred to in paragraph
(a) 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 paragraph, the Depositors shall be
deemed to have been unable to reach agreement with respect to an action to be
taken jointly by them hereunder 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 Depositor shall act
hereunder without the necessity of any other or further action on the part of
the Depositors or of the Trustee.
Section 7.6 Resignation and Removal of Portfolio Supervisor;
------------------------------------------------
Successor: (a) The Portfolio Supervisor may resign and be discharged hereunder,
- ---------
by executing an instrument in writing resigning as Portfolio Supervisor and
filing the same with the Depositors and the Trustee, not less than 60 days
before the date specified in such instrument when, subject to paragraph (e),
such resignation is to take effect. Upon receiving such notice of resignation,
the Depositors and the Trustee shall use their best efforts to appoint a
successor portfolio supervisor having qualifications and at a rate of
compensation satisfactory to the Depositors and the Trustee. Such appointment
shall be made by written instrument executed by the Depositors and the Trustee,
in duplicate, one copy of which shall be delivered to the resigning Portfolio
Supervisor and one copy
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to the successor portfolio supervisor. The Depositors or the Trustee may remove
the Portfolio Supervisor at any time upon 30 days' written notice and appoint a
successor portfolio supervisor having qualifications and at a rate of
compensation satisfactory to the Depositors and the Trustee, provided, however,
that so long as ING Funds Distributor, Inc. is acting as Depositor, the Trustee
shall have no power to remove the Portfolio Supervisor. Such appointment shall
be made by written instrument executed by the Depositors and the Trustee, in
duplicate, one copy of which shall be delivered to the Portfolio Supervisor so
removed and one copy to the successor portfolio supervisor. Notice of such
resignation or removal and appointment of a successor portfolio supervisor shall
be mailed by the Trustee to each Unitholder then of record.
(b) Any successor portfolio supervisor appointed hereunder shall
execute, acknowledge and deliver to the Depositors and the Trustee an instrument
accepting such appointment hereunder, and such successor portfolio supervisor
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 Portfolio Supervisor herein and shall be
bound by all the terms and conditions of this Indenture.
(c) In case at any time the Portfolio Supervisor shall resign and no
successor portfolio supervisor shall have been appointed and have accepted
appointment within 30 days after notice of resignation has been received by the
Depositors and the Trustee, the Portfolio Supervisor may forthwith apply to a
court of competent jurisdiction for the appointment of a successor portfolio
supervisor. Such court may thereupon after such notice, if any, as it may deem
proper and prescribe, appoint a successor portfolio supervisor.
(d) Any corporation into which the Portfolio Supervisor hereunder may
be merged or with which it may be consolidated, or any corporation resulting
from any merger or consolidation to which the Portfolio Supervisor hereunder
shall be a party, shall be the successor portfolio supervisor 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 the Portfolio
Supervisor 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.
(e) Any resignation or removal of the Portfolio Supervisor and
appointment of a successor portfolio supervisor pursuant to this Section shall
become effective upon acceptance of appointment by the successor portfolio
supervisor as provided in subsection (b) hereof.
Section 7.7 Liability of Portfolio Supervisor and Indemnification:
-----------------------------------------------------
(a) The Portfolio Supervisor shall be under no liability to the Depositors, the
Trust or the Unitholders for any action or for refraining from the taking of any
action in good faith pursuant to this Indenture, or for errors in judgment or
for depreciation or loss incurred by reason of the purchase or sale of any
Securities, provided, however, that this provision shall not protect the
Portfolio Supervisor against any liability to which it would otherwise be
subject by reason of willful misfeasance, bad
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faith or gross negligence in the performance of its duties or by reason of its
reckless disregard of its obligations and duties hereunder. The Portfolio
Supervisor 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 it by the
Trustee, the Trustee's counsel or any other person for any matters arising
hereunder. The Portfolio Supervisor shall in no event be deemed to have assumed
or incurred any liability, duty, or obligation to any Unitholder or the Trustee
other than as expressly provided for herein.
(b) The Trust shall pay and hold the Portfolio Supervisor harmless
from and against any loss, liability or expense incurred in acting as Portfolio
Supervisor of the Trust other than 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, including the costs
and expenses of the defense against any claim or liability in the premises. The
Portfolio Supervisor shall not be under any obligation to appear in, prosecute
or defend any legal action which in its opinion may involve it in any expense or
liability, provided, however, that the Portfolio Supervisor 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 Unitholders hereunder and, in such event, the legal
expenses and costs of any such action and any liability resulting therefrom
shall be expenses, costs and liabilities of the Trust and shall be paid directly
by the Trustee out of the Income and Principal Accounts as provided by Section
3.5.
(c) None of the provisions of this Indenture shall be deemed to
protect or purport to protect the Portfolio Supervisor against any liability to
the Trust or to the Unitholders to which the Portfolio Supervisor would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties, or by reason of the Portfolio
Supervisor's reckless disregard of its obligations and duties under this
Indenture.
(d) Notwithstanding the discharge of the Portfolio Supervisor of the
Trust, the Portfolio Supervisor shall continue to be fully liable in accordance
with the provisions hereof in respect of action taken or refrained from under
this Indenture by the Portfolio Supervisor before the date of such discharge or
by the undischarged Portfolio Supervisor before or after the date of such
discharge, as fully and to the same extent as if no discharge has occurred.
ARTICLE 8
RIGHTS OF UNITHOLDERS
Section 8.1 Beneficiaries of Trust: By the purchase and acceptance
----------------------
or other lawful delivery and acceptance of any Unit the Unitholder shall be
deemed to be a beneficiary of the Trust created by this Indenture and vested
with all right, title and interest in the Trust to the extent of the Unit or
Units, subject to the terms and conditions of this Indenture.
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Section 8.2 Rights, Terms and Conditions: In addition to the other
----------------------------
rights and powers set forth in the other provisions and conditions of this
Indenture the Unitholders shall have the following rights and powers and shall
be subject to the following terms and conditions:
(a) A Unitholder may at any time prior to the Evaluation Time on the
date the Trust is terminated tender his or her Unit or Units to the Trustee for
redemption in accordance with Section 5.2.
(b) The death or incapacity of any Unitholder shall not operate to
terminate this Indenture or the Trust, nor entitle his or her legal
representatives or heirs to claim an accounting or to take any action or
proceeding in any court of competent jurisdiction 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 Unitholder expressly waives any right
he or she 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
moneys from time to time received, held and applied by the Trustee hereunder.
(c) No Unitholder 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 Unitholders from time to time as partners; nor shall any
Unitholder ever be under any liability to any third persons by reason of any
action taken by the parties to this Indenture for any other cause whatsoever.
ARTICLE 9
ADDITIONAL COVENANTS; MISCELLANEOUS PROVISIONS
Section 9.1 Amendments: This Indenture may be amended from time to
----------
time by the parties hereto or their respective successors, without the consent
of any of the Unitholders (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; (b) to change any provision required by
Securities and Exchange Commission or any successor governmental agency to be
changed; or (c) to make such other provision in regard to matters or questions
arising hereunder as shall not adversely affect the interests of the Unitholders
(as determined by the Depositors); provided, however, that the parties hereto
may not amend this Indenture so as to (1) increase the number of Units above the
number set forth 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 (2) except in the manner permitted by the Indenture as in effect on the date
of the first deposit of Securities under a particular Indenture, permit the
deposit or acquisition hereunder of securities either in addition to or in
replacement of any of the Securities.
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<PAGE>
This Indenture may also be amended from time to time by the Depositors
and the Trustee (or the performance of any of the provisions or this Indenture
may be waived) with the expressed written consent of Unitholders evidencing 66-
2/3% 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
Unitholders; provided, however, that no such amendment or waiver shall (i)
reduce the interest in the Trust represented by such Units without the consent
of the Unitholder, (ii) reduce the aforesaid percentage of Units, the holders of
which are required to consent to any such amendment, without the consent of the
holders of all Units then outstanding, (iii) affect the duties, obligations and
responsibilities of the Trustee without its consent or (iv) affect the Trust's
status as a grantor trust as set forth in Section 3.15.
Unless the Depositors otherwise direct, notice of any such amendment
shall be included in the annual statement provided pursuant to Section 3.07.
Section 9.2 Termination: Unless previously terminated pursuant to
-----------
the provisions hereof, this Indenture and the Trust created hereby shall
terminate as of the Evaluation Time on the Termination Date or upon the date of
the earlier maturity, redemption, sale or other disposition as the case may be
of the last Security held hereunder; provided that in no event shall the Trust
continue beyond the "Mandatory Termination Date" specified in the Prospectus for
the Trust.
Written notice of any termination shall be given by the Trustee to
each Unitholder at his or her address appearing on the registration books of the
Trustee.
In the event of any termination of the Trust prior to the Termination
Date, the Trustee shall proceed to liquidate the Securities then held and make
the payments and distributions provided for hereinafter in this Section 9.2
except that in such event, the distribution to each Unitholder shall be made in
cash and shall be such Unitholder's pro rata interest in the balance of the
Principal and Income Account after the deductions herein provided.
In the event that the Trust terminates on the Termination Date, the
Trustee shall, not less than 30 days prior to the Termination Date, send a
written notice to each Unitholder. Such notice shall allow each Unitholder of
record, to elect to redeem his Units at the net asset value on the Termination
Date and to receive, in partial payment of the Redemption Price per Unit, an in-
kind distribution of such Unitholder's pro rata share of the Securities, to the
extent of whole shares. The Trustee will honor duly executed requests for such
in-kind distribution received by the close of business on the Termination Date.
Redemption of the Units of Unitholders electing such in-kind distribution shall
be made on the third business day following the Termination Date and shall
consist of (1) such Unitholder's pro rata share of Securities (valued as of the
Termination Date) to the extent of whole shares and (2) cash equal to the
balance of such Unitholder's Redemption Price. Unitholders who do not
effectively request an in-kind distribution shall receive their distribution
upon termination in cash. The Trustee shall distribute the Unitholder's
Securities to the account of the Unitholder's bank or broker-dealer at
Depositary
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<PAGE>
Trust Company. An in-kind distribution shall be reduced by customary transfer
and registration charges incurred by the Trustee.
The balance of the Securities shall be sold over a period described in
the Prospectus of the Trust. The Depositors shall direct the Trustee to sell
the Securities in such manner as the Depositors determine will produce the best
price for the Trust. If so directed, the Trustee shall use the services of the
Depositors to effect such sales.
In the event that the Depositors direct the Trustee that certain
Securities will be sold to a new series of the Trust (a "New Series"), the
Depositors will certify to the Trustee, within five days of each sale from a
Trust to a New Series, (1) that the transaction is consistent with the policy of
both the Trust and the New Series, as recited in their respective registration
statements and reports filed under the Investment Company Act of 1940, (2) the
date of such transaction and (3) the closing sales price on the national
securities exchange for the sale date of the securities subject to such sale.
The Trustee will then countersign the certificate, unless the Trustee disagrees
with the closing sales price listed on the certificate, whereupon the Trustee
will promptly inform the Depositors orally of any such disagreement and return
the certificate within five days to the Depositors with corrections duly noted.
Upon the Depositors' receipt of a corrected certificate, if the Depositors
verify the corrected price by reference to an independently published list of
closing sales prices for the date of the transactions, the Depositors will
ensure that the price of Units of the New Series, and distributions to holders
of the Trust with regard to redemption of their Units or termination of the
Trust, accurately reflect the correct price. To the extent that the Depositors
disagree with the Trustee's corrected price, the Depositors and the Trustee will
jointly determine the correct sales price by reference to a mutually agreeable,
independently published list of closing sales prices for the date of the
transaction. The Depositors and Trustee will periodically review the procedures
for sales and make such changes as they deem necessary, consistent with Rule
17a-7(e)(2). The Depositors will maintain records of the procedures and of each
transaction will be maintained as provided in Rule 17a-7(f). The Trustee shall
bear no responsibility for any sale made pursuant to the Depositors' instruction
as provided in this paragraph.
Within a reasonable period of time after such termination and
liquidation of Securities, the Trustee shall:
(a) deduct from the Income Account or, to the extent that funds are
not available in such account, from the Principal Account and pay to itself
individually an amount equal to the sum of
(1) its accrued compensation for its ordinary recurring services,
(2) any compensation due it for its extraordinary services, and
(3) any other costs, expenses, advances or indemnities as provided
herein.
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<PAGE>
(b) 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 of counsel pursuant to Section 3.9;
(c) deduct from the Income Account or the Principal Account any
amounts which may be required to be deposited in the Reserve Account 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;
(d) make a final distribution from the Trust of such Unitholder's pro
rata share of the cash balances of the Income and Principal Accounts and, on the
conditions set forth in Section 3.4 hereof, the balance of the Reserve Account,
if any;
(e) together with such distribution to each Unitholder as provided
for in (d), furnish to each such Unitholder a final distribution statement as of
the date of the computation of the amount distributable to Unitholders, setting
forth the data and information in substantially the form and manner provided for
in Section 3.6 hereof; and
(f) distribute to each Unitholder receiving the distribution provided
in paragraph (d) 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 amounts to be so distributed to each Unitholder shall be that pro
rata share of the balance of the total Income and Principal Accounts as shall be
represented by the Units held of record by such Unitholder.
The Trustee shall be under no liability with respect to moneys 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.
Upon the Depositors' request, the Trustee will include in the written
notice to be sent to Unitholders referred to in the fourth paragraph of this
section a form of election whereby Unitholders may express interest in investing
their terminating distribution in units of another series of the Schwab Trusts
(the "New Series"). The Trustee will inform the Depositors of all Unitholders
who, within the time period specified in such notice, express such interest.
The Depositors will provide to such Unitholders applicable sales material with
respect to the New Series and a form, acceptable to the Trustee, whereby a
Unitholder may appoint the Distribution Agent the Unitholder's agent to apply
the Unitholder's distribution for the acquisition of a unit or units of the New
Series (a "Rollover"). Such form will specify, among other things, the time by
which it must be returned to the Trustee in order to be effective and the manner
in which such purchase shall be made. Redemption of the Units of the
Unitholders electing such Rollover shall be made by distribution to the
Distribution Agent on behalf of redeeming Unitholder on a date on or prior to
the Termination Date selected by the Depositors and specified in the notice (the
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<PAGE>
"Rollover Date") and shall consist of (1) such Unitholder's pro rata share of
Securities (valued as of the Rollover Date) and (2) cash equal to the balance of
the Unitholder's Redemption Price. The Distribution Agent will dispose of such
assets in accordance with the provisions of the Distribution Agency Agreement.
In the event that the Depositors determine that an in-kind deposit into the New
Series pursuant to Section 1.02 of the Distribution Agency Agreement will not be
permitted, the Units owned by the Unitholders electing investment in a New
Series will be redeemed pursuant to Section 5.2(a) and the above-described
notice will include a form, acceptable to the Trustee, whereby a Unitholder may
appoint the Trustee the Unitholder's agent to apply the Unitholder's cash
distribution for the purchase of a unit or units of the New Series. This
paragraph shall not obligate the Depositors to create any New Series or to
provide any such investment election.
Section 9.3 Construction: This Indenture is executed and delivered
------------
in the State of New York, and all local laws or rules of construction of such
State shall govern the rights of the parties hereto and the Unitholders and the
interpretation of the provisions hereof.
Section 9.4 Registration of Units: The Depositors agree and
---------------------
undertake to register the Units with the Securities and Exchange Commission or
other applicable governmental agency pursuant to applicable Federal or state
statutes, if such registration shall be required, and to do all things that may
be necessary or required to comply with this provision during the term of the
Trust created hereunder, and the Trustee shall incur no liability or be under
any obligation or expense in connection therewith.
Section 9.5 Written Notice: Any notice, demand, direction or
--------------
instruction to be given to the Depositors hereunder shall be in writing and
shall be duly given if mailed or delivered to the agent for the Depositors
designated pursuant to Section 7.5 as follows: if to Charles Schwab & Co.,
Inc., 101 Montgomery Street, San Francisco, California 94104; if to ING Funds
Distributor, Inc., 1475 Dunwoody Drive, West Chester, Pennsylvania 19380 or at
such other address as shall be specified by the Depositors to the Trustee in
writing. Any notice to be given to the Portfolio Supervisor shall be in writing
and shall be given if mailed or delivered to the Portfolio Supervisor at 1475
Dunwoody Drive, West Chester, Pennsylvania 19380 or at such other address as
shall be specified to the Trustee and Schwab by the Portfolio Supervisor in
writing. Any notice, demand, direction or instruction to be given to the Trustee
shall be in writing and shall be duly given if mailed or delivered to the
Trustee at 4 New York Plaza, New York, New York 10004, or such other address as
shall be specified to the Depositors by the Trustee in writing. Any notice to
be given to the Unitholders shall be duly given if mailed or delivered to each
Unitholder at the address of such holder appearing on the registration books of
the Trustee.
Section 9.6 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 or 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
-41-
<PAGE>
of this Indenture and shall in no way affect the validity or enforceability of
the other provisions of this Indenture or of the Units or the rights of the
holders thereof.
Section 9.7 Dissolution of Depositors Not to Terminate: The
------------------------------------------
dissolution of one or all of the Depositors from or for any cause whatsoever
shall not operate to terminate this Indenture or the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed as of the date first above written.
[Signatures and acknowledgments on separate pages.]
-42-
<PAGE>
THE CHASE MANHATTAN BANK
Trustee
By: /s/ ROSALIA RAVIELE
-------------------
Vice President
STATE OF NEW YORK )
:ss.:
COUNTY OF NEW YORK )
On this 15th day of May, 2000, before me personally appeared Rosalia
Raviele, to me known, who being by me duly sworn, said that he/she is an
Authorized Signator of The Chase Manhattan Bank, one of the corporations
described in and which executed the foregoing instrument; that he/she knows the
seal of said corporation; that the seal affixed to said instrument is such
corporate seal; that it was so affixed by authority of the Board of Directors of
said corporation and that he/she signed his/her name thereto by like authority.
/s/ Ann LoBrutto
------------------------------
Notary Public
Notary Public, State of New York
No. 24-01LO4780467
Qualified in Kings County
Commission Expires March 30, 2001
<PAGE>
ING FUNDS DISTRIBUTOR, INC.
Depositor
By: /s/ Peter DeMarco
----------------------------------
Authorized Signator
STATE OF NEW YORK )
: ss:
COUNTY OF NEW YORK )
On this 10th day of May, 2000, before me personally appeared Peter J.
DeMarco, to me known, who being by me duly sworn, said that he is an Authorized
Signator of ING Funds Distributor, Inc., one of the corporations described in
and which executed the foregoing instrument, and that he signed his name thereto
by authority of the Board of Directors of said corporation.
/s/ Michael Rosella
--------------------------------------
Notary Public
MICHAEL R. ROSELLA
NOTARY PUBLIC, State of New York
No. 31-5016879
Qualified in New York County
Commission Expires 9/26/2001
<PAGE>
CHARLES SCHWAB & CO, INC.
Depositor
By: /s/ James C. White
------------------------------
Authorized Signator
STATE OF CALIFORNIA )
: ss:
COUNTY OF SAN FRANCISCO )
On this 10th day of May, 2000, before me personally appeared James C.
White, to me known, who being by me duly sworn, said that he is an Authorized
Signator of Charles Schwab & Co., Inc. the Depositor, one of the corporations
described in and which executed the foregoing instrument, and that he signed his
name thereto by authority of the Board of Directors of said corporation.
/s/ Andrew F. Albright
-------------------------------------
Notary Public
ANDREW F. ALBRIGHT
COMM. # 1252845
NOTARY PUBLIC CALIFORNIA
SAN FRANCISCO COUNTY
My Comm. Expires Feb. 7, 2004
<PAGE>
ING MUTUAL FUNDS MANAGEMENT CO. LLC
Portfolio Supervisor
By: /s/ Peter DeMarco
--------------------------
Authorized Signator
STATE OF NEW YORK )
: ss:
COUNTY OF NEW YORK )
On this 10th day of May, 2000, before me personally appeared Peter J.
DeMarco, to me known, who being by me duly sworn, said that he is an Authorized
Signator of the Portfolio Supervisor, one of the entities described in and which
executed the foregoing instrument, and that he signed his name thereto by
authority of the sole member of said limited liability company.
/s/ Michael Rosella
--------------------------------------
Notary Public
MICHAEL R. ROSELLA
NOTARY PUBLIC, State of New York
No. 31-5016879
Qualified in New York County
Commission Expires 9/26/2001
<PAGE>
Exhibit 3.1
[Letterhead of Battle Fowler LLP]
May 16, 2000
Charles Schwab & Co., Inc.
101 Montgomery Street
San Francisco, California 94104
ING Funds Distributor, Inc.
1475 Dunwoody Drive
West Chester, Pennsylvania 19380
ING Mutual Funds Management Co. LLC
1475 Dunwoody Drive
West Chester, Pennsylvania 19380
Re: Schwab Trusts, Schwab Ten Trust, 2000 Series B
----------------------------------------------
Dear Sirs:
We have acted as special counsel for Charles Schwab & Co., Inc. and ING
Funds Distributor, Inc., as Depositors, Sponsors and Principal Underwriters
(collectively, the "Depositors") and ING Mutual Funds Management Co. LLC, as
Portfolio Supervisor (the "Portfolio Supervisor") of Schwab Trusts, Schwab Ten
Trust, 2000 Series B (the "Trust") in connection with the issuance by the Trust
of units of fractional undivided interest (the "Units") in the Trust. Pursuant
to the Trust Agreements referred to below, the Depositors have transferred to
the Trust certain securities and contracts to purchase certain securities
together with an irrevocable
<PAGE>
Charles Schwab & Co., Inc.
ING Funds Distributor, Inc.
ING Mutual Funds Management Co. LLC
May 16, 2000
letter of credit to be held by the Trustee upon the terms and conditions set
forth in the Trust Agreements. (All securities to be acquired by the Trust are
collectively referred to as the "Securities").
In connection with our representation, we have examined copies of the
following documents relating to the creation of the Trust and the issuance and
sale of the Units: (a) the Trust Indenture and Agreement and related Reference
Trust Agreement, each of even date herewith, relating to the Trust (collectively
the "Trust Agreements") among the Depositors, the Portfolio Supervisor, and The
Bank of New York, as Trustee; (b) the Notification of Registration on Form N-8A
and the Registration Statement on Form N-8B-2, as amended, relating to the
Trust, as filed with the Securities and Exchange Commission (the "Commission")
pursuant to the Investment Company Act of 1940 (the "1940 Act"); (c) the
Registration Statement on Form S-6 (Registration No. 333-34332) filed with the
Commission pursuant to the Securities Act of 1933 (the "1933 Act"), and all
Amendments thereto (said Registration Statement, as amended by said Amendment(s)
being herein called the "Registration Statement"); (d) the proposed form of
final Prospectus (the "Prospectus") relating to the Units, which is expected to
be filed with the Commission this day; (e) resolutions of the Board of Directors
of ING Funds Distributor, Inc. and of the Board of Directors of Charles Schwab &
Co., Inc. authorizing the execution and delivery by the Depositors of the Trust
Agreements and the consummation of the transactions contemplated thereby; (f)
the Articles of Incorporation, Articles of Amendment and Bylaws of ING Funds
Distributor, Inc.; (g) the Restated Articles of Incorporation, the Certificate
of Amendment of Articles of Incorporation and the Amended and Restated Bylaws of
Charles Schwab & Co., Inc.; (h) resolutions of the sole member of ING Mutual
Funds Management Co. LLC authorizing the execution and delivery by the Portfolio
Supervisor of the Trust Agreements and the consummation of the transactions
contemplated thereby; (i) the Certificate of Formation, the Certificate of
Correction and Limited Liability Company Agreement of ING Mutual Funds
Management Co. LLC; (j) a certificate of an authorized officer of ING Mutual
Funds Management Co. LLC with respect to certain factual matters contained
therein; and (k) a certificate of an authorized officer of ING Funds
Distributor, Inc. with respect to certain factual matters contained therein.
We have examined the Order of Exemption from certain provisions of
Sections 11(a) and 11(c) of the 1940 Act, filed on behalf of Reich & Tang
Distributors L.P.(the predecessor to Reich & Tang Distributors, Inc.); Equity
Securities Trust (Series 1, Signature Series and Subsequent Series), Mortgage
Securities Trust (CMO Series 1 and Subsequent Series), Municipal Securities
Trust, Series 1 (and Subsequent Series) (including Insured Municipal Securities
Trust, Series 1 (and Subsequent Series and 5th Discount Series and Subsequent
Series)); New York Municipal Trust (Series 1 and Subsequent Series); and A
Corporate Trust (Series 1 and Subsequent Series) granted on October 9, 1996. In
addition, we have examined the Order of Exemption from certain
<PAGE>
Charles Schwab & Co., Inc.
ING Funds Distributor, Inc.
ING Mutual Funds Management Co. LLC
May 16, 2000
provisions of Sections 2(a)(32), 2(a)(35), 22(d) and 26(a)(2) of the 1940 Act
and Rule 22C-1 thereunder, filed on behalf of Reich & Tang Distributors L.P.;
Equity Securities Trust; Mortgage Securities Trust; Municipal Securities Trust
(including Insured Municipal Securities Trust); New York Municipal Trust; A
Corporate Trust; Schwab Trusts; and all presently outstanding and subsequently
issued series of these trusts and all subsequently issued series of unit
investment trusts sponsored by Reich & Tang Distributors L.P. granted on October
29, 1997. Further, we have examined a no-action letter from the Commission
permitting ING Funds Distributor, Inc. to rely upon the Orders of Exemption
described above.
We have not reviewed the financial statements, compilation of the
Securities held by the Trust, or other financial or statistical data contained
in the Registration Statement and the Prospectus, as to which you have been
furnished with the reports of the accountants appearing in the Registration
Statement and the Prospectus.
In addition, we have assumed the genuineness of all agreements,
instruments and documents submitted to us as originals and the conformity to
originals of all copies thereof submitted to us. We have also assumed the
genuineness of all signatures and the legal capacity of all persons executing
agreements, instruments and documents examined or relied upon by us.
Statements in this opinion as to the validity, binding effect and
enforceability of agreements, instruments and documents are subject: (i) to
limitations as to enforceability imposed by bankruptcy, reorganization,
moratorium, insolvency and other laws of general application relating to or
affecting the enforceability of creditors' rights, and (ii) to limitations under
equitable principles governing the availability of equitable remedies.
We are not admitted to the practice of law in any jurisdiction but the
State of New York and we do not hold ourselves out as experts in or express any
opinion as to the laws of other states or jurisdictions except as to matters of
Federal, Iowa and Delaware corporate law.
Based exclusively on the foregoing, we are of the opinion that under
existing law:
(1) The Trust Agreements have been duly authorized and entered into by
an authorized officer of each of the Depositors and the Portfolio Supervisor
and is a valid and binding obligation of the Depositors and the Portfolio
Supervisor in accordance with their respective terms.
(2) The registration of the Units on the registration books of the Trust
by the Trustee has been duly authorized by the Depositors in accordance with the
provisions of the Trust Agreements and issued for the consideration contemplated
therein, will constitute fractional undivided interests
<PAGE>
Charles Schwab & Co., Inc.
ING Funds Distributor, Inc.
ING Mutual Funds Management Co. LLC
May 16, 2000
in the Trust, will be entitled to the benefits of the Trust Agreements, and will
conform in all material respects to the description thereof contained in the
Prospectus. Upon payment of the consideration for the Units as provided in the
Trust Agreements and the Registration Statement, the Units will be fully paid
and non-assessable by the Trust.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name in the Registration Statement
and in the Prospectus under the headings "Tax Status" and "Legal Opinions". We
authorize you to deliver copies of this opinion to the Trustee and the Trustee
may rely on this opinion as fully and to the same extent as if it had been
addressed to it.
This opinion is intended solely for the benefit of the addressees and the
Trustee in connection with the issuance of the Units of the Trust and may not be
relied upon in any other manner or by any other person without our express
written consent.
Very truly yours,
/s/ Battle Fowler LLP
Battle Fowler LLP
