As filed with the Securities and Exchange Commission on April 20, 2000
Registration No. 333-
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM S-6
-------------------
For Registration Under the Securities Act
of 1933 of Securities of Unit Investment
Trusts Registered on Form N-8B-2
-------------------
A. EXACT NAME OF TRUST:
EST Symphony Trust, Series 26, EquiT's II
B. NAME OF DEPOSITOR:
ING Funds Distributor, Inc.
C. COMPLETE ADDRESS OF DEPOSITORS' PRINCIPAL EXECUTIVE OFFICES:
ING Funds Distributor, Inc.
1475 Dunwoody Drive
West Chester, Pennsylvania 19380
D. NAME AND COMPLETE ADDRESS OF AGENT FOR SERVICE:
COPY OF COMMENTS TO:
PETER J. DEMARCO MICHAEL R. ROSELLA, Esq.
Senior Vice President Battle Fowler LLP
ING Funds Distributor, Inc 75 East 55th Street
230 Park Avenue New York, New York 10022
New York, New York 10169 (212) 856-6858
E. TITLE AND AMOUNT OF SECURITIES BEING REGISTERED:
An indefinite number of Units of EST Symphony Trust, Series 26, EquiT's II
are being registered under the Securities Act of 1933 pursuant to Section
24(f) of the Investment Company Act of 1940, as amended, and Rule 24f-2
thereunder.
F. PROPOSED MAXIMUM AGGREGATE OFFERING PRICE TO THE PUBLIC OF THE SECURITIES
BEING REGISTERED:
Indefinite.
G. AMOUNT OF FILING FEE:
No filing fee required.
H. APPROPRIATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after the effective date of the Registration
Statement.
==============================================================================
The registrant hereby amends the registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the registration
statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
==============================================================================
937586.1
<PAGE>
The information inthis prospectus in not complete and may be changed. We may
not sell these securities until the registration statementfiled with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not sliciting an offer to buy securities in
any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED APRIL 20, 2000
EST SYMPHONY TRUST
SERIES 26
- --------------------------------------------------------------------------------
THE ING SECURITYNET PORTFOLIO
- --------------------------------------------------------------------------------
EquiT's II
A unit investment trust
The investment objectives of the EST Symphony Trust, Series 26, EquiT's II are
to seek to achieve safety of capital through investment in stripped United
States Treasury issued notes or bonds paying no current interest and to
attempt to provide for capital appreciation through investment in shares of
the ING Internet Fund, an open-end management investment company.
The Sponsor is ING Funds Distributor, Inc.
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 and Part B must be distributed together.
Read and retain this Prospectus for future reference.
================================================================================
================================================================================
The Securities and Exchange Commission has not approved or disapproved
these securities or passed upon the adequacy of this prospectus.
Any representation to the contrary is a criminal offense.
PROSPECTUS DATED _______, 2000
937586.1
<PAGE>
INVESTMENT SUMMARY
INVESTMENT OBJECTIVES. The EST Symphony Trust, Series 26, EquiT's II (the
"Trust") seeks to achieve safety of capital through investment in stripped
United States Treasury issued notes or bonds paying no current interest
("Treasury Obligations") and to attempt to provide for capital appreciation
through investment in class A shares of the ING Internet Fund (the "Fund"), an
open-end management investment company. There is no guarantee that the
investment objectives of the Trust will be achieved.
STRATEGY OF PORTFOLIO SELECTION. The Trust seeks to achieve safety of capital
through investment in Treasury Obligations maturing approximately 12 years from
the initial date of deposit. The Fund is a non-diversified, separate investment
fund, commonly known as a mutual fund, that seeks to provide investors with
long-term capital appreciation. As used herein, the term "Securities" means the
Treasury Obligations and class A shares of the Fund ("Fund Shares") initially
deposited in the Trust and contracts and funds for the purchase of such
securities, and any additional securities acquired and held by the Trust
pursuant to the provisions of the Trust Agreement.
DESCRIPTION OF THE TRUST. The Trust contains a sufficient amount of Treasury
Obligations to insure that an initial investor will receive, at the maturity of
the Trust, $10.00 per Unit. The Initial Public Offering Price will be
approximately $10.00 per Unit. The Treasury Obligations and the Fund Shares
represent ___% and ___%, respectively, of the total of the aggregate offering
side evaluation of Treasury Obligations in the Trust and the aggregate value of
Fund Shares on the initial date of deposit. Under normal market conditions, the
Fund will invest at least 65% of its total assets in equity securities of U.S.
and non-U.S. internet technology companies. For these purposes, the Fund defines
internet technology companies as those companies with internet/virtual
businesses or internet related consulting businesses, or that derive at least
50% of their revenues from business operations in internet related hardware,
software or infrastructure industries. The Trust is "concentrated" in Fund
Shares, so investors should be aware that the potential for capital appreciation
is directly related to the investment performance of the Fund itself. A Trust is
considered to be "concentrated" in a particular category or industry when the
securities in that category or that industry constitute 25% or more of the total
assets of the portfolio.
PRINCIPAL RISK CONSIDERATIONS. Unitholders can lose money by investing in the
Trust. The value of the Units and the Securities in the Trust can each decline
in value. An investment in Units of the Trust should be made with an
understanding of the following risks:
o Since the Fund is concentrated in stocks which derive a substantial
portion of their income from the internet industry, investors should be
familiar with the risks associated with these industries which may
include the volatile price of internet, computer and technology stocks,
greater government regulations and products that may become obsolete.
o Unitholders will pay both Trust expenses and a share of the Fund's
expenses.
o The value of the Treasury Obligations will fluctuate inversely with
changes in interest rates and are subject to substantially greater price
fluctuations during periods of changing interest rates than securities
of comparable quality which make periodic interest payments.
o An investment in common stocks includes 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 Fund Shares and
thus in the value of the Units).
o Since the portfolio of the Trust is fixed and "not managed," in general,
the Sponsor can sell Securities only 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.
937586.1
<PAGE>
o When cash or a letter of credit is deposited with instructions to
purchase securities in order to create additional Units, an increase in
the price of a particular security between the time of deposit and the
time that securities are purchased will cause the Units to be comprised
of less of that security and more of the remaining securities. In
addition, brokerage fees incurred in purchasing the Securities will be
an expense of the Trust.
o Investors should also consider the greater risk of the Fund's
concentration in a particular industry and the effect on their
investment versus a more diversified portfolio. Investors should compare
returns available in less concentrated portfolios before making an
investment decision.
o A decline in value of the Securities during the initial offering period
may require additional Securities to be sold in order to reimburse the
Sponsor for organization costs. This would result in a decline in value
of the Units.
PUBLIC OFFERING PRICE. The Initial Public Offering Price per 100 units of the
Trust is calculated by:
o dividing the aggregate value of the underlying securities and cash held
in the Trust (representing the estimated organizational costs) by the
number of units outstanding;
o adding an initial sales charge of 1.00% (1.010% of the net amount
invested); and
o multiplying the result by 100.
In addition, during the initial offering period, the Public Offering Price per
100 units will include an amount sufficient to reimburse the Sponsors for the
payment of all or a portion of the estimated organizational costs of the Trust.
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. Orders involving at least 10,000 Units will be entitled to a volume
discount from the Public Offering Price.
DISTRIBUTIONS. Distributions of net income (other than amortized discount) and
long-term capital gains distributions received in respect to any of the
Securities by the Trust will be made by the Trust annually. The first dividend
distribution will be made on January 15, 2001 to all Unitholders of record on
January 1, 2001 and thereafter distributions will be made on the fifteenth day
of every January. 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 Sponsor or the Trustee
at any time, without fee or penalty. The Sponsor intends to repurchase Units
from Unitholders throughout the life of the Trust at prices based upon the
market value of the underlying Securities. However, the Sponsor is not obligated
to maintain a market and may stop doing so without prior notice for any business
reason. If a market is not maintained, a Unitholder will be able to redeem his
Units with the Trustee at the same price. The existence of a liquid trading
market for the Securities in the Trust may depend on whether dealers will make a
market in these Securities. There can be no assurance of the making or the
maintenance of a market for any of the Securities contained in the portfolio of
the Trust or of the liquidity of the Securities in any markets made. The price
at which the Securities may be sold to meet redemptions and the value of the
Units will be adversely affected if trading markets for the Securities are
limited or absent.
TERMINATION. The Trust will terminate in approximately twelve years. During the
Liquidation Period, Securities will be sold in connection with the termination
of the Trust. All Securities will be sold or distributed by the Mandatory
Termination Date. The Sponsor does not anticipate that the Liquidation Period
will be longer than seven days, and it could be as short as one day, depending
on the liquidity of the Securities being sold. Unitholders may elect one of the
following three options in receiving their terminating distributions:
937586.1
A-2
<PAGE>
o receive their distribution in-kind, if they own at least 2,500 Units;
o receive cash upon the liquidation of their pro rata share of the
Securities; or
o reinvest in a subsequent series of the EST Symphony Series (if one is
offered), at a reduced sales charge.
ROLLOVER OPTION. Unitholders may elect to rollover their terminating
distributions into the next available series of the EST Symphony Trust, at a
reduced sales charge. Rollover Unitholders must make this election on or prior
to the Rollover Notification Date. When Unitholders make this election, their
Units will be redeemed and the proceeds will be reinvested in units of the next
available series of the EST Symphony Trust. An election to rollover terminating
distributions will generally be a taxable event. See "Administration of the
Trust--Trust Termination" in Part B for details to make this election.
REINVESTMENT PLAN. Unitholders may elect to automatically reinvest any
distributions they may receive (except the final distribution made at
termination) 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. The names and addresses of the Underwriters of the Units of the
Trust are as follows:
Name Address
---- -------
ING Funds Distributor, Inc. . . . 1475 Dunwoody Drive, West Chester, PA 19380
937586.1
A-3
<PAGE>
FEE TABLE
- --------------------------------------------------------------------------------
This Fee Table is intended to help you understand the costs and expenses you
will bear directly or indirectly. See "Public Sale of Units" and "Trust Expenses
and Charges" in Part B. Although the Trust 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 contributions are rolled over each year
into a new series subject only to a sales charge and trust expenses.
- --------------------------------------------------------------------------------
Unitholder Transaction Expenses
(Fees paid directly from your investment)
As a %
Of Initial Amount
Offering Per 100
Price Units
----- -----
Maximum Initial Sales Charge Imposed on Purchase..... 1.00%* $ 10.00
Maximum Deferred Sales Charge........................ 3.90%** $ 39.00
------- --------
Total ....................................... 4.90% $ 49.00
======= ========
Maximum Sales Charge Imposed Per Year on Reinvested
Dividends.......................................... 0% $ 0
Reimbursement to Sponsor for Estimated
Organizational Expenses............................ % $
Estimated Annual Fund Operating Expenses
(Expenses that are deducted from Trust assets)
As a % Amount
Of Initial Per 100
Net Assets Units
---------- -----
Trustee's Fee.................... % $
Other Operating Expenses......... % $
Portfolio Supervision,
Bookkeeping and
Administrative Fees.......... .045% $ .450
Underlying Fund Expenses***...... ____% $ ____
Total............................ ======== ======
Example
This Example is intended to help you compare the cost of investing in the Trust
with the cost of investing in other unit trusts. You would pay the following
expenses on a $10,000 investment in the Trust assuming estimated operating
expense ratio of % for the Trust and a 5% return on the investment throughout
the period. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
1 year 3 years 5 years
------ ------- -------
$ $ $
The Example assumes reinvestment of all dividends and distributions and
utilizes a 5% annual rate of return as mandated by Securities and Exchange
Commission regulations applicable to mutual funds. The Example should not be
considered a representation of past or future expenses or an annual rate of
return.
_______________________________
* The Initial Sales Charge would exceed 1.00% if the Public Offering Price
exceeds $10.00 per 100 Units.
** The actual fee is $7.80 per month per 100 Units on each Deferred Sales
Charge Payment Date. If the Unit price exceeds $10.00 per Unit, the
deferred sales charge will be less than 3.90%, if the Unit price is less
than $10.00 per Unit, the deferred sales charge will exceed 3.90%.
*** Although not an actual Trust operating expense, the Trust, and therefore
unitholders, will indirectly bear similar operating expenses of the ING
Internet Fund in the estimated amount set forth in the table. The expenses
are estimated based on the actual expenses charged in the Fund's most recent
fiscal year but are subject to change in the future. An investor in the
Trust will therefore indirectly pay higher expenses than if the underlying
Fund Shares were held directly.
937586.1
A-4
<PAGE>
EST SYMPHONY TRUST, SERIES 26, EquiT's II
SUMMARY OF ESSENTIAL INFORMATION
As of ________, 2000, the business day prior to the Initial Date of Deposit
<TABLE>
<S> <C>
Initial Date of Deposit of Securities in the Evaluation Time: 4:00 p.m. New York Time
Trust: __________, 2000 Minimum Value of Trust: The Trust may be
Aggregate Value of Securities: ............. $ terminated if the value of the Trust is less than 40% of the aggregate
Number of Units: ........................... value of the Securities at the completion of the initial offering period.
Fractional Undivided Interest in Cusip Numbers: Cash:
Trust: .................................. 1/ Reinvestment:
Public Offering Price per 100 Units: Trustee: The Bank of New York
Net Assets of the Trust.................. $ Trustee's Fee per 100 Units***: $
Divided By Units (times 100)............. Other Fees and Expenses per 100 Units: $
Plus Estimated Organization Costs*.......$ Sponsor: ING Funds Distributor, Inc.
Plus Initial Sales Charge of 1.00% of Public Portfolio Supervisor: ING Mutual Funds
Offering Price(Degree)................... $ Management Co. LLC
Public Offering Price per 100 Units+..... $ Portfolio Supervisory, Bookkeeping
Sponsor's Repurchase Price And And Administrative Fee per 100 Units:
Redemption Price per 100 Units++: ....... $ Maximum of $.45 (see "Trust Expenses and
Minimum Income or Principal Charges" in Part B).
Distribution per 100 Units: ............. $1.00 Evaluator: Kenny S&P Evaluation Services
Liquidation Period: A 40 day period Evaluator's Fee for Each Evaluation of Treasury Obligations:
beginning on the first business day Expected Settlement Date of Securities in the
following the Termination Date. Trust****: _______, 2000
Termination Date: , 2012 or Record Dates: First of January, annually
the disposition of the last security in the Distribution Dates: First of January, annually
Trust. Deferred Sales Charge Payment Dates: The first business day of each month
Mandatory Termination Date: The last commencing _______1, 2000 through _______ 1, 2001
day of the liquidation period.
Rollover Notification Date**: , 2012
or another date as determined by the Sponsors.
</TABLE>
- ----------------------
* This amount per 100 Units will be invested in Securities during, and sold at
the end of, the initial offering period, to reimburse the Sponsor 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 Sponsor.
** The date by which a Rollover Unitholder must elect to reinvest its
terminating distribution in an available series of the EST Symphony Trust,
if offered.
*** Any rule 12b-1 fees paid by the Fund's distributor to the Trustee for
performing servicing functions with respect to the Fund Shares will be used
to reduce directly the expenses and fees otherwise payable by the Trust to
the Trustee.
****The business day on which contracts to purchase securities in the Trust are
expected to settle.
+ On the Initial Date of Deposit, the only cash in the Income or Principal
Accounts will represent the estimated organization costs. Anyone purchasing
Units after such date will pay a Public Offering Price which includes a pro
rata share of any cash in such Accounts.
++ As of the close of the initial offering period, the Sponsor's Repurchase
Price and Redemption Price for the Trust will be reduced to reflect its
estimated organization cost.
o The sales charge consists of an initial sales charge and a deferred
sales charge. On the Initial Date of Deposit the initial sales charge is
1.00% of the Public Offering Price. The initial sales charge is paid
directly from the amount invested. The deferred sales charge of
approximately $39.00 (approximately 3.90% of the Initial Public Offering
Price) is paid through a reduction of the net asset value of the Trust by
$7.80 per 100 Units on each of the five Deferred Sales Charge Payment Dates.
Upon a repurchase, redemption or exchange of units before the final Deferred
Sales Charge Payment Date, any remaining deferred sales charge payments will
be deducted from the proceeds.
937586.1
A-5
<PAGE>
EST SYMPHONY TRUST
SERIES 26
EquiT's II
STATEMENT OF FINANCIAL CONDITION, AS OF _________, 2000
ASSETS
Investment in Securities--Sponsor's Contracts to Purchase
Underlying Securities Backed by Letter of Credit (cost
$________) (Note 1)...................................................
$
Total....................................................................
$
LIABILITIES AND INTEREST OF UNITHOLDERS
Reimbursement to the Sponsor for Organization Costs (Note 2)............. $
Interest of Unitholders--Units of Fractional Undivided Interest
Outstanding ( Units)....................................... $
Less: Reimbursement to Sponsor for Organization Costs (Note 2). ........ ______
Total....................................................................
$
Net Asset Value per Unit.................................................
$
- ----------------------
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 can
differ from those estimates.
(1) The EST Symphony Trust, Series 26, EquiT's II (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 sponsored
by ING Funds Distributor, Inc., the Sponsor, is to achieve safety of capital and
capital appreciation. An irrevocable letter of credit issued by The Bank of New
York in an amount of $______ has been deposited with the Trustee for the benefit
of the Trust to cover the purchases of such Securities. Aggregate cost to the
Trust of the Securities listed in the portfolios is determined by the Trustee on
the basis set forth under "Public Sale of Units--Public Offering Price" as of
4:00 p.m. on _______, 2000. The Trust will terminate on ___________, 2012 or
earlier under certain circumstances as further described in the Prospectus.
(2) A portion of the Public Offering Price consists of cash in an amount
sufficient to reimburse the Sponsor for all or a portion of the costs of
establishing the Trust. These costs have been estimated at $____ 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 Sponsor will be satisfied. To the extent that
actual organization costs are greater than the estimated amount, only the
estimated organization costs included in the Public Offering Price will be
reimbursed to the Sponsor and deducted from the assets of the Trust.
A-6
<PAGE>
EST SYMPHONY TRUST
SERIES 26
EquiT's II
PORTFOLIO
AS OF __________, 2000
<TABLE>
<CAPTION>
Name of Issuer and Cost of Securities
------------------ ------------------
Portfolio No. Title of Securities(1) Percentage Of the Trust to the Trust (2)
------------- ---------------------- ------------------------ ----------------
<S> <C> <C> <C>
1 $_____ Zero Coupon U.S. % $
Treasury Bonds Maturing
_____, 2012
2 _____ Class A Shares of the
ING Internet Fund ($_____
per Fund Share) _______ ________
100.00% $
======= ========
</TABLE>
FOOTNOTES TO PORTFOLIO
(1) The Treasury Obligations have been purchased at a discount from the
maturity value because there is no stated interest income thereon (such
securities are often referred to as zero coupon securities). Over the life
of the Treasury Obligation such discount accrues and upon maturity thereof
the holder receives 100% of the Treasury Obligations maturity amount. The
Fund Shares have been valued at their net asset value as of the Evaluation
Time on the day prior to the Date of Deposit. All Securities are
represented by contracts to purchase such Securities. Forward contracts to
purchase the Securities were entered into from _______, 2000 to _______,
2000. All such contracts are expected to be settled on or about the First
Settlement Date of the Trust which is expected to be _______, 2000.
(2) Offering prices of Treasury Obligations are determined by the Evaluator on
the basis stated under "Public Offering--Offering Price" herein. The
offering side evaluation is greater than the current bid side evaluation of
the Treasury Obligations, which is the basis on which Redemption Price per
Unit is determined (see "Liquidity--Trustee Redemption" herein). The
aggregate value of the Treasury Obligations based on the bid side
evaluation of the Treasury Obligations on the day prior to the Date of
Deposit was $_________ (which is $________ lower than the aggregate cost of
the Treasury Obligations to the Trust based on the offering side
evaluation). The profit (loss) to Sponsor on deposit totals $_____.
937586.1
A-7
<PAGE>
THE UNITHOLDERS, SPONSOR AND TRUSTEE
EST SYMPHONY TRUST
SERIES 26
EquiT's II
We have audited the accompanying Statement of Financial Condition of the
EST Symphony Trust, Series 26, EquiT's II, including the Portfolio, as of
__________, 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 statements. Our
procedures included confirmation with The Bank of New York, Trustee, of an
irrevocable letter of credit deposited for the purchase of securities, as shown
in the financial statement as of ____________, 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 the EST Symphony Trust,
Series 26, EquiT's II, at __________, 2000, in conformity with accounting
principles generally accepted in the United States.
ERNST & YOUNG LLP
New York, New York
___________, 2000
937586.1
A-8
<PAGE>
EST SYMPHONY TRUST
SERIES 26
EquiT's II
PROSPECTUS--PART B
PART B OF THIS PROSPECTUS MAY NOT BE
DISTRIBUTED UNLESS ACCOMPANIED BY
PART A
THE TRUST
ORGANIZATION. The Trust was created under New York State law pursuant to
an Indenture and Trust Agreement, and related Reference Trust Agreement
(collectively, the "Trust Agreement ") among ING Funds Distributor, Inc., as
Sponsor, ING Mutual Funds Management Co. LLC, as Portfolio Supervisor, The Bank
of New York, as Trustee and Kenny S&P Evaluation Services, as Evaluator.
On the Initial Date of Deposit, (i) the Sponsor deposited with the Trustee
stripped United States Treasury issued notes or bonds paying no current return
(the "Treasury Obligations") and Class A Shares of the ING Internet Fund, a
non-diversified, open-end management investment company (the "Fund Shares")
including funds and delivery statements relating to contracts for the purchase
of certain such securities (collectively, the "Securities") and cash or an
irrevocable letter of credit issued by a major commercial bank in the amount
required for such purchases, and (ii) the Trustee, in exchange for the
Securities, registered on the registration books of the Trust the Sponsor's
ownership of all Units of the Trust. As used herein, the term "Securities" means
the Treasury Obligations and Fund Shares initially deposited in the Trust and
described in "Portfolio" in Part A and any additional securities acquired and
held by the Trust pursuant to the provisions of the Indenture.
As of the Initial Date of Deposit, a "Unit" represents a fractional
undivided interest or pro rata share 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 Sponsor, or until the termination of the Trust Agreement.
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.
DEPOSIT OF ADDITIONAL SECURITIES. During the 90-day period following the
Initial Date of Deposit (the "Deposit Period"), the Sponsor may deposit (i)
additional Securities in the Trust that are substantially similar to the
Securities already deposited in the Trust ("Additional Securities"), (ii)
contracts to purchase Additional Securities or (iii) cash with instructions to
purchase Additional Securities, in order to create additional Units, maintaining
to the extent practicable the original proportionate relationship between the
maturity amounts of Treasury Obligations and the number of Fund Shares in the
Trust's 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.
B-1
<PAGE>
It may not be possible to maintain the exact original proportionate
relationship between the Securities deposited on the Initial Date of Deposit
because of, among other reasons, purchase requirements, changes in prices, or
unavailability of Securities. Deposits of Additional Securities in the Trust
subsequent to the Deposit Period must replicate exactly the existing
proportionate relationship between the Treasury Obligations and the Fund Shares
in the Trust's portfolio at the end of the Deposit Period. The number and
identity of Securities in the Trust will be adjusted to reflect the disposition
of Securities and/or the receipt of a distribution with respect to shares or the
reinvestment of the proceeds distributed to Unitholders. The portfolio of the
Trust may change slightly based on such disposition and reinvestment. Securities
received in exchange for Securities will be similarly treated. Substitute
Treasury Obligations may be acquired under specified conditions when Treasury
Obligations originally deposited in the Trust are unavailable (see "The
Trust--Substitution of Securities").
INVESTMENT OBJECTIVES. The Trust seeks to achieve safety of capital and to
attempt to provide capital appreciation. In addition, it is the Trust's
objective to achieve growth in income with the growth in capital. The Trust
seeks to achieve these objectives by investing primarily in a portfolio of
Treasury Obligations and Fund Shares. The Fund's objective is long-term capital
appreciation which the Fund attempts to achieve by investing primarily in equity
securities of U.S. and non-U.S. internet technology companies. The allocation
between the Treasury Obligations and the Fund Shares would seek to assure that
an investor purchasing units in the Trust at inception would at least receive
back the original unit purchase price at the termination of the Trust from the
maturity value of the Treasury Obligations. There is no guarantee that the
investment objectives of the Trust will be achieved.
PORTFOLIO SELECTION. In selecting Treasury Obligations for the Trust, the
Sponsor normally will consider the following factors, among others: (i) the
prices and yields of such securities and (ii) the maturities of such securities.
In selecting the Fund Shares for deposit in the Trust, the following factors,
among others, were considered by the Sponsor: (i) the historical performance of
the Fund and (ii) the nature of the underlying Fund portfolio.
THE SECURITIES. The Trust consists of such of the Securities listed under
"Portfolio," herein as may continue to be held from time to time in the Trust,
newly deposited Securities meeting requirements for creation of additional
Units, undistributed cash receipts from the Fund and proceeds realized from the
disposition of Securities.
STRIPPED U.S. TREASURY OBLIGATIONS
The Treasury Obligations in the portfolio consist of United States
Treasury Obligations which have been stripped by the United States Treasury of
their unmatured interest coupons or such stripped coupons or receipts or
certificates evidencing such obligations or coupons. The obligor with respect to
the Treasury Obligations is the United States Government. Such Treasury
Obligations may include certificates that represent rights to receive the
payments that comprise a U.S. Government bond.
Stripped U.S. Treasury bonds evidence the right to receive a fixed payment
at a future date from the U.S. Government, and are backed by the full faith and
credit of the U.S. Government. The Treasury Obligations can be purchased at a
deep discount because the buyer receives only the right to receive one fixed
payment at a specific date in the future and does not receive any periodic
interest payments. The effect of owning deep discount obligations which do not
make current interest payments is that a fixed yield is earned not only on the
original investment but also, in effect, on all discount earned during the life
of the discount obligations. This implicit reinvestment of earnings at the same
rate eliminates the risk of being unable to reinvest the income on such
obligations at a rate as high as the implicit yield on the discount obligation,
but at the same time eliminates the holder's ability to reinvest at higher rates
in the future. For this reason, the Treasury Obligations are subject to
substantially greater price fluctuations during periods of changing market
interest rates than are securities of comparable quality which pay interest on a
current basis. Investors should be aware that income in respect of the accrual
of original issue discount on the Treasury Obligations, although not distributed
on a current basis, will be includable by a Unitholder as income and will be
subject to income tax on a current basis at ordinary income tax rates (see "Tax
Status").
937586.1
B-2
<PAGE>
ING Internet Fund
The following disclosure concerning the Fund and its affiliates has been
derived from the prospectus, semi-annual report and statement of additional
information of the ING Internet Fund. While the Sponsor has not independently
verified its information, it has no reason to believe that such information is
not correct in all material respects. No representation is made herein as to the
accuracy or adequacy of such information.
The Portfolio contains class A shares of the ING Internet Fund (the
"Fund"). On October 31, 1999, the net assets of the Class A shares of the Fund
were $35,798,000 and the total net assets for all classes of shares of the Fund
were $57,017,000.
The Fund is a separate investment fund or portfolio, commonly known as a
mutual fund. The Fund is a portfolio of the ING Funds Trust, a Delaware business
trust organized under the laws of the State of Delaware as an open-end
management investment company on July 30, 1998. The ING Funds Trust's Board of
Trustees oversees the overall management of the Fund and elects the officers of
the Fund.
Investment Objective and Policies of the Fund
The Fund is managed by ING Mutual Funds Management Co. LLC (the "Manager")
and sub-advised by ING Investment Management Advisors B.V. (the "Sub-Adviser").
The Fund has a distinct investment objective and policies. There can be no
assurance that the Fund will achieve its investment objective.
The Fund is a non-diversified fund that seeks to provide investors with
long-term capital appreciation. Under normal market conditions, the Fund will
invest at least 65% of its total assets in equity securities of U.S. and
non-U.S. internet technology companies. For these purposes, the Fund defines
internet technology companies as those companies with internet/virtual business
or internet related consulting businesses, or that derive at least 50% of their
revenue from business operations in internet related hardware, software or
infrastructure industries.
The Sub-Adviser believes that the internet is in the early stages of a
period of promising growth. The internet has enabled companies to tap into new
markets, use new distribution channels and do business with end users of their
products all over the world without having to go through wholesalers and
distributors. The Sub-Adviser believes that investment in companies related to
the internet should offer substantial opportunities for long-term capital
appreciation. Of course, swings in investor psychology or significant trading by
large institutional investors can result in significant price fluctuations and
stock price declines.
The Fund's investment policy is not limited to any minimum capitalization
requirement and the Fund may hold securities without regard to the
capitalization of the issuer. Generally, the Sub-Adviser's overall stock
selection for the Fund will be based on an assessment of a company's fundamental
prospects. The Sub-Adviser anticipates however that a portion of the Fund's
holdings will be invested in newly issued securities being sold in the primary
or secondary market.
While the Fund will invest primarily in investments that are consistent
with its name, the Fund may invest any remaining assets in fixed income
securities, money market securities, certificates of deposit, bankers'
acceptances and commercial paper or in equity securities that the Fund's
Sub-Adviser believes are appropriate in light of the Fund's investment
objective. For purposes of this Prospectus, equity securities include common
stock, preferred stock, warrants or rights to subscribe to common stock and, in
general, any security that is convertible into or exchangeable for common stock.
The Fund will only purchase fixed income securities that are rated
investment grade, i.e., rated at least BBB by Standard & Poor's Rating Group
("S&P") or Baa by Moody's Investor Services ("Moody's"), or have an equivalent
rating from another Nationally Recognized Statistical Ratings Organization
("NRSRO"), or if unrated, are determined to be of comparable quality by the
Sub-Adviser. Money market securities, certificates of deposits,
937586.1
B-3
<PAGE>
banker's acceptance and commercial paper purchased by the Fund must be rated in
one of the two top rating categories by an NRSRO or, if not rated, determined to
be of comparable quality by the Fund's Sub-Adviser.
The Fund may use various investment strategies and techniques when the
Sub-Adviser determines that such use is appropriate in an effort to meet the
Fund's investment objective including: purchasing and writing "covered" put and
call equity options; purchasing and selling stock index, interest rate, and
other futures contracts; purchasing options on stock index futures contracts and
futures contracts based upon other financial instruments; entering into foreign
currency transactions and options and forward contracts on foreign currencies;
entering into repurchase agreements or reverse repurchase agreements; investing
up to 15% of net assets in illiquid securities; and lending portfolio securities
to brokers, dealers, banks, or other recognized institutional borrowers of
securities.
In order to meet liquidity needs or for temporary defensive purposes, the
Fund may invest up to 100% of its assets in fixed income securities, money
market securities, certificates of deposit, bankers' acceptances, commercial
paper or in equity securities which in the Sub-Adviser's opinion are more
conservative than the type of securities that the Fund typically invests in. To
the extent the Fund is engaged in temporary defensive investments, it will not
be pursuing its investment objective.
The SEC currently requires the Fund to invest at least 65% of its total
assets in investments that are consistent with its name (e.g., the ING Internet
Fund must invest at least 65% of its total assets in equity securities of
internet technology companies). To the extent the SEC changes the percentage of
the Fund's assets that must be invested in investments that are consistent with
its name, the Fund reserves the right to change, without shareholder approval,
the percentage required to be invested by the Fund from 65% of total assets to
the percentage required by the SEC or to change the name of the Fund.
As a matter of fundamental policy, notwithstanding any limitation
otherwise, the Fund has the ability to seek to achieve its investment objective
by investing all of its investable assets in an investment company having
substantially the same investment objective and policies as the Fund.
It is the intention of the Fund, unless otherwise indicated, that with
respect to its policies that are the result of the application of law, the Fund
will use to its maximum advantage the flexibility that may exist as a result of
rules or interpretations of the SEC of such laws currently in existence or
amended or promulgated in the future.
937586.1
B-4
<PAGE>
General Information Regarding the Fund
Shown below for the period ended October 31, 1999 are per share income and
capital changes for a share of capital stock outstanding for each class of the
Fund. The Trust's portfolio includes Class A shares only.
<TABLE>
<CAPTION>
Class A Class B Class C Class X
For a share of beneficial interest outstanding throughout the Shares(1) Shares(1) Shares(1) Shares(1)
period:
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value per share, beginning of period $ 10.00 $ 10.00 $ 10.00 $ 10.00
From investment operations:
Net investment loss (0.03) (0.03) (0.03) (0.04)
Net realized and unrealized gain(2) 2.70 2.66 2.66 2.67
------- ------- ------- -------
Total from investment operations 2.67 2.63 2.63 2.63
------- ------- ------- -------
Distributions paid from investment income - - - -
-------- -------- -------- -------
Net asset value per share, end of period $12.67 $12.63 $12.63 $12.63
NET ASSETS, END OF PERIOD (in thousands) $35,798 $14,869 $5,290 $1,060
Total investment return at net asset value(3,4) 26.70% 26.30% 26.30% 26.30%
Ratios to average net assets:(5)
Net expenses 1.54% 2.17% 2.18% 2.17%
Gross expenses 3.35% 3.75% 3.79% 3.65%
Net investment loss -1.15% -1.88% -1.88% -1.85%
Portfolio turnover rate(4) 22.08% 22.08% 22.08% 22.08%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
1. Class A, B, C and X shares commenced operations on July 1, 1999.
2. Includes gains and losses on foreign currency transactions.
3. Total return assumes reinvestment of all dividend and capital gain
distributions, if any, and does not reflect the deduction of the applicable
sales charges with respect to Class A shares or the applicable contingent
deferred sales charges with respect to Class B, C, and X shares. Total
return for Class X shares does not include the 2.00% bonus shares paid by
the Distributor. If the effect of bonus shares was included, total return
for Class X shares would have been 28.83%. Total returns would be lower if
part of the Fund's expenses were not waived or reimbursed.
4. Not annualized.
5. Annualized.
Management of the Fund
As manager of the Fund, the Manager has overall responsibility, subject to
the supervision of the Board of Trustees, for engaging sub-advisers and for
monitoring and evaluating the management of the assets of the Fund by the
Sub-Adviser. The Manager also provides certain administrative services necessary
for the Fund's operations. The Manager was formed on September 8, 1998, as a
Delaware limited liability company and is a wholly-owned indirect subsidiary of
ING Group. The Manager is registered with the SEC as an investment adviser.
Under the Management Agreement, the Manager has overall responsibility,
subject to the supervision of the Board of Trustees, for engaging sub-advisers
and for monitoring and evaluating the management of the assets of the Fund by
its Sub-Adviser. The Manager is also responsible for monitoring and evaluating
the Sub-Adviser on a periodic basis, and will consider its performance record
with respect to the investment objective and policies of the Fund. The Manager
also provides certain administrative services necessary for the Fund's
operations including: (i) coordination of the services performed by the Fund's
custodian, independent auditors and legal counsel; (ii) regulatory compliance,
including the compilation of information for documents such as reports to, and
filings with, the SEC; (iii) preparation of proxy statements and shareholder
reports for the Fund; (iv) general supervision relative to the compilation of
data required for the preparation of periodic reports distributed to the Fund's
officers and Board of Trustees; and (v) furnishing office space and certain
facilities required for conducting the business of the Fund.
937586.1
B-5
<PAGE>
Pursuant to the Management Agreement, the Manager is authorized to
exercise full investment discretion and make all determinations with respect to
the investment of the Fund's assets and the purchase and sale of portfolio
securities for the Fund in the event that at any time no Sub-Adviser is engaged
to manage the assets of the Fund. The Management Agreement may be terminated
without penalty by the vote of the Board of Trustees or the shareholders of the
Fund, or by the Manager, upon 60 days' written notice by any party to the
Agreement and will terminate automatically if assigned as that term is described
in the 1940 Act.
Pursuant to a Management Agreement, the ING Funds Trust currently pays the
Manager for its services a monthly fee at a annual rate based on the average
daily net assets of the Fund at an annual rate equal to 1.25%. The Sub-Adviser
is an indirect subsidiary of ING Group and is an affiliate of the other
sub-advisers of the ING Family of Funds and the Manager and ING Funds
Distributor, Inc. ("Distributor"). The Manager and the Sub-Adviser are also both
affiliates of the Sponsor.
For its services, the Sub-Adviser receives a fee from the Manager based on
the Fund's average daily net assets. The Sub-Adviser has full investment
discretion and makes all determinations with respect to the investment of the
Fund's assets and the purchase and sale of portfolio securities consistent with
the investment objective, policies, and restrictions for the Fund.
Other Service Providers
The Distributor distributes the Fund's shares and may be compensated for
certain of its distribution-related expenses. ING Fund Services Co. LLC ("ING
Fund Services") has entered into a Fund Services Agreement with the Fund
pursuant to which ING Fund Services will perform or engage third parties to
perform transfer agency, fund accounting, account servicing, and other services.
ING Fund Services has hired DST Systems, Inc. to act as the Fund's transfer
agent and First Data Investor Services Group to act as the Fund's fund
accounting agent.
Class "A" Shares
An investor who purchases Class A shares normally pays a maximum sales
charge of 5.75% at the time of purchase; however, the sales charge for Fund
Shares purchased by the Trust has been waived. As a result, Class A shares are
not subject to any charges when they are redeemed (except for sales at net asset
value in excess of $1 million which may be subject to a contingent deferred
sales charge at the time of redemption). The initial sales charge may be reduced
or waived for certain purchases. Class A shares are also subject to an annual
Rule 12b-1 fee of up to 0.50% of average daily net assets attributable to Class
A shares. This fee is lower than the other classes having Rule 12b-1 fees and
therefore Class A shares may have lower expenses and may pay higher dividends.
Distribution Expenses
Pursuant to a Plan of Distribution adopted by the Fund under Rule 12b-1
under the 1940 Act, the Fund pays the Distributor an annual fee of up to 0.50%
of average daily net assets attributable to its Class A shares.
The distribution fee for all classes may be used by the Distributor for
the purpose of financing any activity which is primarily intended to result in
the sale of shares of the Fund. For example, such distribution fee may be used
by the Distributor: (i) to compensate broker-dealers, including the Distributor
and its registered representatives, for their sale of Fund shares, including the
implementation of various incentive programs with respect to broker-dealers,
banks, and other financial institutions; (ii) to pay an affiliated party of the
Distributor for interest and other borrowing costs incurred by the Distributor;
and (iii) to pay other advertising and promotional expenses in connection with
the distribution of Fund shares. These advertising and promotional expenses
include, by way of example but not by way of limitation, costs of prospectuses
for other than current shareholders; preparation and distribution of sales
literature; advertising of any type; expenses of branch offices provided jointly
by the Distributor and affiliated companies; and compensation paid to and
expenses incurred by officers, employees or representatives of the Distributor
or of other broker-dealers, banks, or other financial institutions, including
travel, entertainment, and telephone expenses. If the Distribution Plan is
terminated by the Fund, the Board of
937586.1
B-6
<PAGE>
Trustees may allow the Fund to pay the 12b-1 fees to the Distributor for
distributing shares before the Plan was terminated.
Shareholder Servicing Plan
The Fund has adopted a Shareholder Servicing Plan pursuant to which it may
pay a service fee up to an annual rate of 0.25% of the Fund's average daily net
assets to various banks, trust companies, broker-dealers or other financial
organizations including the Manager and its affiliates (collectively, "Service
Organizations"). Under the Shareholder Servicing Plan, fees may be used to
compensate Service Organizations who provide administrative and support services
to their customers who may from time to time beneficially own shares of
beneficial interest in the Fund, which may include, but is not limited to, (i)
answering routine customer inquiries regarding the Fund; (ii) assisting
customers in changing dividend options, account designations and addresses, and
in enrolling into any of several investment plans offered by the Fund; (iii)
assisting in processing purchase and redemption transactions, including
arranging wire transfers, transmitting and receiving funds, and verifying
customer signatures; and (iv) providing such other similar services directly to
their customers to the extent permitted under applicable statutes, rules and
regulations.
Risks of Investing in the Fund
General. The price per share of the Fund will fluctuate with changes in
value of the investments held by the Fund. For example, the value of the Fund's
share will generally fluctuate inversely with the movements in interest rates.
Shareholders of the Fund should expect the value of their shares to fluctuate
with changes in the value of the securities owned by the Fund. There is, of
course, no assurance that the Fund will achieve its investment objective or be
successful in preventing or minimizing the risk of loss that is inherent in
investing in particular types of investment products. In order to attempt to
minimize that risk, the Sub-Adviser monitors developments in the economy, the
securities markets, and with each particular issuer.
Equity Securities. Investments in equity securities in general are
subject to market risks that may cause their prices to fluctuate over time. The
value of convertible equity securities is also affected by prevailing interest
rates, the credit quality of the issuer and any call provisions. Fluctuations in
the value of equity securities in which the Fund invests will cause the net
asset value of the Fund to fluctuate.
Investments in mid- and small-capitalization companies involve greater
risk than is customarily associated with larger, more established companies due
to the greater business risks of small size, limited markets and financial
resources, narrow product lines and the frequent lack of depth of management.
The securities of smaller companies are often traded over-the-counter and may
not be traded in volumes typical on a national securities exchange.
Consequently, the securities of smaller companies may have limited market
stability and may be subject to more abrupt or erratic market movements than
securities of larger, more established growth companies or the market averages
in general.
Internet Specific Risks. Internet and internet-related companies are
generally subject to the rate of change in technology, which is higher than
other industries. In addition, many products and service of companies engaged in
the internet and internet-related activities are also subject to relatively high
risks of rapid obsolescence caused by progressive scientific and technological
advances.
Foreign Securities. Investing in the securities of issuers in any
foreign country including American Depositary Receipts and European Depositary
Receipts involves special risks and considerations not typically associated with
investing in U.S. companies. These include differences in accounting, auditing
and financial reporting standards; generally higher commission rates on foreign
portfolio transactions; the possibility of nationalization, expropriation or
confiscatory taxation; adverse changes in investment or exchange control
regulations (which may include suspension of the ability to transfer currency
from a country); and political instability which could affect U.S. investments
in foreign countries. Additionally, foreign securities and dividends and
interest payable on those securities may be subject to foreign taxes, including
taxes withheld from payments on those securities. Foreign securities often trade
with less frequency and volume than domestic securities and,
937586.1
B-7
<PAGE>
therefore, may exhibit greater price volatility. Additional costs associated
with an investment in foreign securities may include higher custodial fees than
apply to domestic custodial arrangements and transaction costs of foreign
currency conversions. Changes in foreign exchange rates also will affect the
value of securities denominated or quoted in currencies other than the U.S.
dollar. The Fund's investments may be affected either unfavorably or favorably
by fluctuations in the relative rates of exchange between the currencies of
different nations, by exchange control regulations and by indigenous economic
and political developments.
Fixed Income Securities. The market value of the Fund's fixed income
investments will change in response to interest rate changes and other factors.
During periods of falling interest rates, the values of outstanding fixed income
securities generally rise. Conversely, during periods of rising interest rates,
the values of such securities generally decline. Securities with longer
maturities are subject to greater fluctuations in value than securities with
shorter maturities. Changes by an NRSRO in the rating of any fixed income
security and in the ability of an issuer to make payments of interest and
principal also affect the value of these investments. Changes in the value of
the Fund's securities will not affect cash income derived from these securities
but will affect the Fund's net asset value.
Securities held by the Fund that are guaranteed by the U.S. Government,
its agencies or instrumentalities guarantee only the payment of principal and
interest on the guaranteed securities, and do not guarantee the securities'
yield or value or the yield or value of the Fund's shares.
Risks of Options and Futures Contracts. One risk involved in the
purchase and sale of futures and options is that the Fund may not be able to
effect closing transactions at a time when it wishes to do so. Positions in
futures contracts and options on futures contracts may be closed out only on an
exchange or board of trade that provides an active market for them, and there
can be no assurance that a liquid market will exist for the contract or the
option at any particular time. To mitigate this risk, the Fund will ordinarily
purchase and write options only if a secondary market for the options exists on
a national securities exchange or in the over-the-counter market. Another risk
is that during the option period, if the Fund has written a covered call option,
it will have given up the opportunity to profit from a price increase in the
underlying securities above the exercise price in return for the premium on the
option (although the premium can be used to offset any losses or add to the
Fund's income) but, as long as its obligation as a writer continues, the Fund
will have retained the risk of loss should the price of the underlying security
decline. Investors should note that because of the volatility of the market
value of the underlying security, the loss from investing in futures
transactions is potentially unlimited. In addition, the Fund has no control over
the time when it may be required to fulfill its obligation as a writer of the
option. Once the Fund has received an exercise notice, it cannot effect a
closing transaction in order to terminate its obligation under the option and
must deliver the underlying securities at the exercise price.
The Fund's successful use of stock index futures contracts, options on
such contracts and options on indices depends upon the ability of the
Sub-Adviser to predict the direction of the market and is subject various
additional risks. The correlation between movements in the price of the futures
contract and the price of the securities being hedged is imperfect and the risk
from imperfect correlation increases in the case of stock index futures as the
composition of the Fund's portfolios diverge from the composition of the
relevant index. Such imperfect correlation may prevent the Fund from achieving
the intended hedge or may expose the Fund to risk of loss. In addition, if the
Fund purchases futures to hedge against market advances before they can invest
in common stock in an advantageous manner and the market declines, the Fund
might create a loss on the futures contract. Particularly in the case of options
on stock index futures and on stock indices, the Fund's ability to establish and
maintain positions will depend on market liquidity. The successful utilization
of options and futures transactions requires skills different from those needed
in the selection of the Fund's portfolio securities. The Fund believes that the
Sub-Adviser possesses the skills necessary for the successful utilization of
such transactions.
The Fund is permitted to engage in bona fide hedging transactions (as
defined in the rules and regulations of the Commodity Futures Trading
Commission) without any quantitative limitations. Futures and related option
transactions which are not for bona fide hedging purposes may be used provided
the total amount of the initial margin and any option premiums attributable to
such positions does not exceed 5% of the Fund's liquidating value after taking
into account unrealized profits and unrealized losses, and excluding any
in-the-money option premiums paid. The Fund will not market, and is not
marketing, itself as a commodity pool or otherwise as a vehicle for
937586.1
B-8
<PAGE>
trading in futures and related options. The Fund will segregate liquid assets
such as cash, U.S. Government securities or other liquid high grade debt
obligations to cover the futures and options.
Risk of Techniques Involving Leverage. Utilization of leveraging
involves special risks and may involve speculative investment techniques. The
Fund may borrow for other than temporary or emergency purposes, lend its
securities, enter reverse repurchase agreements, and purchase securities on a
when issued or forward commitment basis. In addition, the Fund may engage in
dollar roll transactions. Each of these transactions involve the use of
"leverage" when cash made available to the Fund through the investment technique
is used to make additional portfolio investments. The Fund uses these investment
techniques only when the Sub-Adviser believes that the leveraging and the
returns available to the Fund from investing the cash will provide shareholders
a potentially higher return.
Leverage exists when the Fund achieves the right to a return on a
capital base that exceeds the investment the Fund has invested. Leverage creates
the risk of magnified capital losses which occur when losses affect an asset
base, enlarged by borrowings or the creation of liabilities, that exceeds the
equity base of the Fund. Leverage may involve the creation of a liability that
requires the Fund to pay interest (for instance, reverse repurchase agreements)
or the creation of a liability that does not entail any interest costs (for
instance, forward commitment transactions).
The risks of leverage include a higher volatility of the net asset
value of the Fund's shares and the relatively greater effect on the net asset
value of the shares caused by favorable or adverse market movements or changes
in the cost of cash obtained by leveraging and the yield obtained from investing
the cash. So long as the Fund is able to realize a net return on its investment
portfolio that is higher than interest expense incurred, if any, leverage will
result in higher current net investment income being realized by the Fund than
if the Fund were not leveraged. On the other hand, interest rates change from
time to time as does their relationship to each other depending upon such
factors as supply and demand, monetary and tax policies and investor
expectations. Changes in such factors could cause the relationship between the
cost of leveraging and the yield to change so that rates involved in the
leveraging arrangement may substantially increase relative to the yield on the
obligations in which the proceeds of the leveraging have been invested. To the
extent that the interest expense involved in leveraging approaches the net
return on the Fund's investment portfolio, the benefit of leveraging will be
reduced, and, if the interest expense on borrowings were to exceed the net
return to shareholders, the Fund's use of leverage would result in a lower rate
of return that if the Fund were not leveraged. Similarly, the effect of leverage
in a declining market could be a greater decrease in net asset value per share
than if the Fund were not leveraged. In an extreme case, if the Fund's current
investment income were not sufficient to meet the interest expense of
leveraging, it could be necessary for the Fund to liquidate certain of its
investments at an inappropriate time. The use of leverage may be considered
speculative.
Non-diversified Investment Companies. The Fund is classified as a
non-diversified investment companies under the 1940 Act, which means that the
Fund is not limited by the 1940 Act in the proportion of its assets that it may
invest in the obligations of a single issuer. The investment of a large
percentage of the Fund's assets in the securities of a small number of issuers
may cause its share price to fluctuate more than that of a diversified
investment company.
Concentration. The Fund "concentrates" (for purposes of the 1940 Act)
its assets in securities related to a particular sector or industry, which means
that at least 25% of its assets will be invested in these assets at all times.
As a result, the Fund may be subject to greater market fluctuation than a fund
which has securities representing a broader range of investment alternatives.
European Economic and Monetary Union. Several European countries are
participating in the European Economic and Monetary Union, which will establish
a common European currency for participating countries. This currency will
commonly be known as the "Euro." Each such participating country replaced its
existing currency with the Euro on January 1, 1999. Other European countries may
participate after that date. This conversion presents unique uncertainties,
including whether the payment and operational systems of banks and other
financial institutions will be ready by the scheduled launch date; the legal
treatment of certain outstanding financial contracts after January 1, 1999 that
refer to existing currencies rather than the Euro; the establishment of exchange
rates for existing currencies and the Euro; and the creation of suitable
clearing and settlement payment systems for the new
937586.1
B-9
<PAGE>
currency. These or other factors, including political and economical risks,
could cause market disruptions before or after the interaction of the Euro, and
could adversely affect the value of securities held by the Fund.
The Fund has been informed that the Manager, and the Fund's other
service providers, as applicable, are taking steps to minimize the risk
associated with the conversion. In addition, where appropriate, certain service
providers are obtaining assurances from their vendors in the same manner.
Since the ultimate consequences of the conversion are unknown to the
Fund at this time, no assurance can be made that such consequences will not have
a material adverse impact on the Fund. The Fund and the Manager will continue to
monitor developments relating to the conversion.
SUBSTITUTION OF SECURITIES. In the event of a failure to deliver any
Treasury Obligation that has been purchased for the Trust under a contract
("Failed Securities"), the Sponsor is authorized under the Trust Agreement to
direct the Trustee to acquire other Treasury Obligations ("Substitute
Securities") to make up the original corpus of the Trust.
The Substitute Securities must be purchased within 20 days after delivery
of the notice of the failed contract. Where the Sponsor purchases Substitute
Securities in order to replace Failed Securities, the purchase price may not
exceed the purchase price of the Failed Securities and the Substitute Securities
must be substantially similar to the Securities originally contracted for and
not delivered.
Whenever a Substitute Security has been acquired for the Trust, the
Trustee shall, within five days thereafter, notify all Unitholders of the Trust
of the acquisition of the Substitute Security and the Trustee shall, on the next
Distribution Date which is more than 30 days thereafter, make a pro rata
distribution of the amount, if any, by which the cost to the Trust of the Failed
Security exceeded the cost of the Substitute Security.
In the event no substitution is made, the proceeds of the sale of
Securities will be distributed to Unitholders as set forth under "Rights of
Unitholders--Distributions." In addition, if the right of substitution shall not
be utilized to acquire Substitute Securities in the event of a failed contract,
the Sponsor will cause to be refunded the sales charge attributable to such
Failed Securities to all Unitholders, and distribute the principal and
dividends, if any, attributable to such Failed Securities on the next
Distribution Date.
RISK CONSIDERATIONS
FUND SHARES AND TREASURY OBLIGATIONS. The Sponsor has taken steps to
ensure than an investment in Fund Shares is equitable to all parties and
particularly that the interests of the Unitholders are protected. Accordingly,
any sales charges which would otherwise be applicable will be waived on Fund
Shares sold to the Trust, since the Sponsor is receiving the sales charge on all
Units sold. In addition, the Trust Agreement requires the Trustee to vote all
Fund Shares held in the Trust in the same manner and ratio on all proposals as
the vote of owners of Fund Shares not held by the Trust.
The Fund Shares may appreciate or depreciate in value (or pay dividends)
depending on the full range or economic and market influences affecting the
securities in which the Fund is invested and the success of the Fund's
management in anticipating or taking advantage of such opportunities as may
occur. In addition, in the event of the inability of the Fund's Adviser to act
and/or claims or actions against the Fund by regulatory agencies or other
persons or entities, the value of the Fund Shares may decline thereby causing a
decline in the value of Units. Termination of the Fund prior to the Termination
Date of the Trust may result in the termination of the Trust sooner than
anticipated. Prior to a purchase of Units, investors should determine that the
aforementioned risks are consistent with their investment objectives.
The net asset value of the Fund's Shares, like the value of the Treasury
Obligations, will fluctuate over the life of the Trust and may be more or less
than the price paid therefor by the Trust. An investment in Units of the Trust
should be made with an understanding of the risks inherent in ownership of
internet companies since the portfolio of the Fund is invested in equity
securities of U.S. and non-U.S. internet technology companies (see "Internet
937586.1
B-10
<PAGE>
Companies" below). However, the Sponsor believes that, upon termination of the
Trust on the mandatory termination date, even if the Fund Shares are worthless,
the Treasury Obligations will provide sufficient cash at maturity to equal
$10.00 per Unit. Part of such cash will, however, represent an amount of taxable
original issue discount of the Treasury Obligations which was previously accrued
and included in the income of the Unitholders.
A Unitholder purchasing a Unit on the date of this prospectus or
thereafter may receive total distributions, including distributions made upon
termination of the Trust that are less than the amount paid for such Unit.
Sales of Securities in the Portfolio under certain permitted circumstances
may result in an accelerated termination of the Trust. It is also possible that,
in the absence of a secondary market for the Units or otherwise, redemptions of
Units may occur in sufficient numbers to reduce the portfolio to a size
resulting in such termination. In addition, the Trust may be terminated if the
net aggregate value of the Trust is less than 40% of the aggregate value of the
Securities calculated immediately after the most recent deposit of Securities in
the Trust. Early termination of the Trust may have important consequences to the
Unitholders; e.g., to the extent that Units were purchased with a view to an
investment of longer duration, the overall investment program of the investor
may require readjustment; or the overall return on investment may be less than
anticipated, and may result in a loss to a Unitholder.
In the event of the early termination of the Trust, the Trustee will cause
the Fund Shares to be sold and the proceeds thereof distributed to the
Unitholders in proportion to their respective interests therein, unless a
Unitholder elects to receive Fund Shares "in kind." (See "Trust
Administration--Trust Termination.") Proceeds from the sale of the Treasury
Obligations will be paid in cash.
INTERNET COMPANIES. Companies in the Fund are subject to the problems and
risks inherent in the technology sectors in general. In addition, the market in
which internet companies compete is characterized by rapidly changing
technology, rapid product and service obsolescence, cyclical market patterns,
intense competition, evolving industry standards and frequent new product
introductions. The success of the issuers of the Securities depends in
substantial part on the timely and successful introduction of new products. An
unexpected change in one or more of the technologies affecting an issuer's
products or in the market for products based on a particular technology could
have a material adverse affect on an issuer's operating results. Furthermore,
there can be no assurance that the issuers of the Securities will be able to
respond in a timely manner to compete in the rapidly developing marketplace.
Based on the trading history of internet stocks, factors such as the
announcement of new products, the development of new technologies or the general
condition of the industry have caused and are likely to cause the market price
of these stocks to fluctuate substantially. In addition internet stocks have
experienced extreme price and volume fluctuations that often have been unrelated
to the operating performance of such companies. This market volatility may
adversely affect the market price of the Securities and therefore the ability of
a Unitholder to redeem Units at a price equal to or greater than the original
price paid for such Units.
Many internet companies rely on a combination of patents, copyrights,
trademarks and trade secret laws to establish and protect their proprietary
rights in their products and technologies. There can be no assurance that the
steps taken by the issuers of the Securities to protect their proprietary rights
will be adequate to prevent misappropriation of their technology or that
competitors will not independently develop technologies that are substantially
equivalent or superior to such issuers' technology. In addition, due to the
increasing public use of the internet, it is possible that other laws and
regulations may be adopted to address issues such as privacy, pricing,
characteristics, and quality of internet products and services. The adoption of
any such laws could have a material adverse impact on the Securities in the
Fund. The above factors could adversely affect the value of the Trust's Units.
The Fund's investments in securities of technology related companies
present certain risks that may not exist to the same degree in other types of
investments. Technology stocks, in general, tend to be relatively volatile as
compared to other types of investments. Any such volatility will be reflected in
the value of the Trust's Units. The technology and science areas may be subject
to greater governmental regulation than many other areas and changes
937586.1
B-11
<PAGE>
in governmental policies and the need for regulatory approvals may have a
material adverse effect on these areas. Additionally, companies in these areas
may be subject to risks of developing technologies, competitive pressures and
other factors and are dependent upon consumer and business acceptance as new
technologies evolve. Competitive pressures may have a significant effect on the
financial condition of companies in the technology sector. For example, if
technology continues to advance at an accelerated rate, and the number of
companies and product offerings continues to expand, these companies could
become increasingly sensitive to short product cycles and aggressive pricing.
Further, companies in the technology industry spend heavily on research and
development and are subject to the risk that their products or services may not
prove commercially successful or may become obsolete quickly.
Certain companies whose securities are included in the Fund are engaged in
providing local, long-distance and wireless services, in the manufacture of
telecommunications products and in a wide range of other activities including
directory publishing, information systems and the operation of voice, data and
video telecommunications networks.
Payment on common stocks of companies in the telecommunications industry,
including local, long-distance and cellular service, the manufacture of
telecommunications equipment, and other ancillary services, is generally
dependent upon the amount and growth of customer demand, the level of rates
permitted to be charged by regulatory authorities and the effects of inflation
on the cost of providing services and the rate of technological innovation. To
meet increasing competition, companies may have to commit substantial capital,
particularly in the formulation of new products and services using new
technology. Telecommunications companies are undergoing significant change due
to varying and evolving levels of governmental regulation or deregulation and
other factors. As a result, competitive pressures are intense and the securities
of such companies may be subject to significant price volatility.
The domestic companies in the Fund may consist of former government owned
telecommunications systems that have been privatized in states. The Sponsor
cannot predict whether such privatization will continue in the future or what,
if any, effect this will have on the Trust.
FIXED PORTFOLIO. Unlike a "managed" investment company in which there may
be frequent changes in the portfolio of securities based upon economic,
financial and market analyses, the adverse financial condition of the Securities
will not result in the elimination of its securities from the portfolio of the
Trust. 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, 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. See "Administration of the Trust--Trust
Supervision." Some of the Securities in the Trust may also be owned by other
clients of the Sponsor and their affiliates. However, because these clients may
have differing investment objectives, the Sponsor may sell certain Securities
from those accounts in instances where a sale by the Trust would be
impermissible, such as to maximize return by taking advantage of market
fluctuations. Although the Trust is regularly reviewed and evaluated and the
Sponsor may instruct the Trustee to sell Securities under certain limited
circumstances, Securities will not be sold by the Trust to take advantage of
market fluctuations or changes in anticipated rates of appreciation.
ADDITIONAL SECURITIES. Investors should be aware that in connection with
the creation of additional Units subsequent to the Initial Date of Deposit, the
Sponsor may deposit (i) Additional Securities, (ii) contracts to purchase
Additional Securities or (iii) cash with instructions to purchase Additional
Securities, in each instance maintaining the original proportionate
relationship, subject to adjustment under certain circumstances, of the numbers
of shares of each Security in the Trust. 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. 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.
937586.1
B-12
<PAGE>
In particular, Unitholders who purchase Units during the initial offering
period will experience a dilution of their investment as a result of any
brokerage fees paid by the Trust during subsequent deposits of Additional
Securities purchased with cash deposited. In order to minimize these effects,
the Trust will try to purchase Securities as near as possible to the Evaluation
Time or at prices as close as possible to the prices used to evaluate Trust
Units at the Evaluation Time. In addition, subsequent deposits to create such
additional Units will not be covered by the deposit of a bank letter of credit.
In the event that the Sponsor does not deliver cash in consideration for the
additional Units delivered, the Trust may be unable to satisfy their contracts
to purchase the Additional Securities. The failure of the Sponsor to deliver
cash to the Trust, or any delays in the Trust receiving such cash, may have
significant adverse consequences for the Trust.
TERMINATION. The Trust may be terminated at any time and all outstanding
Units liquidated if the net asset value of the Trust falls below 40% of the
aggregate net asset value of that Trust at the completion of the initial public
offering period. Investors should note that if the net asset value of the Trust
should fall below the applicable minimum value, the Sponsor may then terminate
the Trust, at its sole discretion, prior to the Termination Date specified in
the Summary of Essential Information.
LEGAL PROCEEDINGS AND LEGISLATION. 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, 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.
ORGANIZATION COSTS. The Securities purchased with the portion of the
Public Offering Price intended to be used to reimburse the Sponsor for the
Trust's organization costs will be purchased in the same proportionate
relationship as all the Securities contained in the Trust. Securities will be
sold to reimburse the Sponsor for the Trust's organization costs at the
completion of the initial offering period, which is expected to be 90 days from
the Initial Date of Deposit (a significantly shorter time period than the life
of the Trust). During the initial offering period, there may be a decrease in
the value of the Trust Securities. To the extent the proceeds from the sale of
these Securities are insufficient to repay the Sponsor for the Trust
organization costs, the Trustee will sell additional Securities to allow the
Trust to fully reimburse the Sponsor. In that event, the net asset value per
Unit will be reduced by the amount of additional Securities sold. Although the
dollar amount of the reimbursement due to the Sponsor will remain fixed and will
never exceed the amount set forth under "Plus Estimated Organization Costs" in
the Summary of Essential Information, this will also result in a greater
effective cost per Unit to Unitholders for the reimbursement to the Sponsor.
When Securities are sold to reimburse the Sponsor for organization costs, the
Trustee will sell such Securities to an extent which will maintain the same
proportionate relationship among the Securities contained in the Trust as
existed prior to such sale.
PUBLIC SALE OF UNITS
PUBLIC OFFERING PRICE. The Public Offering Price of the Units for the
Trust is computed by adding the applicable initial sales charge to the aggregate
value of the Securities (as determined by the Trustee) and any cash held to
purchase Securities, divided by the number of Units of the Trust outstanding.
The total sales charge consists of an initial sales charge and a deferred sales
charge equal in the aggregate, to a maximum charge of 4.90% of the Public
Offering Price (5.152% of the net amount invested in Securities). The initial
sales charge is computed by deducting the deferred sales charge ($39.00 per 100
Units) from the aggregate maximum sales charge of 4.90%. The initial sales
charge on the Initial Date of Deposit is 1.00% of the Public Offering Price.
Subsequent to the Initial Date of Deposit, the amount of the initial sales
charge will vary with changes in the aggregate value of the Securities in the
Trust. The initial sales charge is deducted from the purchase price $7.80 per
100 Units and is accrued in five monthly installments commencing on _______ 1,
2000 and will be charged to the Principal Account on the first day of each month
thereafter through _______, 1 2000. If a Deferred Sales Charge Payment Date is
not a business day, the payment will be charged to the Trust on the next
business day. To the extent the entire deferred sales charge of $39.00 per 100
Units has not been so deducted at the time of repurchase or redemption of units
prior to ______ 1, 2001, any unpaid amount will be deducted from the proceeds or
in calculating an in kind distribution.
937586.1
B-13
<PAGE>
Valuation of Securities by the Trustee is made at the close of business on
the NYSE on each business day. Securities quoted on a national exchange or
NASDAQ are valued at the closing sale price. Securities not so quoted are valued
in the manner described in the Indenture.
PUBLIC DISTRIBUTION OF UNITS. Units will be distributed to the public at
the Public Offering Price through the Sponsor and may also be distributed
through dealers. The Sponsor intends to qualify the Units for sale in certain
states.
VOLUME AND OTHER DISCOUNTS. Units are available at a volume discount from
the Public Offering Price based upon the number of Units purchased. This volume
discount will result in the following reduction of the sales charge applicable
to such purchases:
Approximate
Reduced
Sales
Charge
------
Number of Units
10,000 but less than 25,000............................ 4.7%
25,000 but less than 50,000............................ 4.5%
50,000 but less than 75,000............................ 4.3%
75,000 but less than 100,000........................... 4.1%
For transactions of at least 100,000 Units or more, the Sponsor may
negotiate the applicable sales charge and such charge will be disclosed to any
such purchaser.
These discounts will apply to all purchases of Units by the same
purchaser. Units purchased by the same purchasers in separate transactions will
be aggregated for purposes of determining if such purchaser is entitled to a
discount. Such purchaser must own at least the required number of Units at the
time such determination is made. Units held in the name of the spouse of the
purchaser or in the name of a child of the purchaser under 21 years of age are
deemed for the purposes hereof to be registered in the name of the purchaser.
The discount is also applicable to a trustee or other fiduciary purchasing
securities for a single trust estate or single fiduciary account.
Unitholders of prior series of the Equity Securities Trust (the "Prior
Series") may "rollover" into the Trust by exchanging units of the Prior Series
for Units of the Trust at their relative net asset values , subject only to the
applicable deferred sales charge of 3.90% of the Public Offering Price. (See
"Administration of the Trust--Trust Termination".) The rollover option described
herein will also be available to investors in the Prior Series who elect to
exchange units of a Prior Series for Units of the Trust. An exchange of units of
a Prior Series for Units of the Trust will generally be a taxable event.
Employees (and their immediate families) of ING Funds Distributor, Inc.
(and their affiliates) and of the special counsel to the Sponsor, may, pursuant
to employee benefit arrangements, purchase Units of the Trust without a sales
charge at a price equal to the aggregate value of the underlying securities in
the Trust, divided by the number of Units outstanding. Such arrangements result
in less selling effort and selling expenses than sales to employee groups of
other companies. Resales or transfers of Units purchased under the employee
benefit arrangements may only be made through the Sponsor's secondary market, so
long as it is being maintained.
Investors in any open-end management investment company or unit investment
trust that have purchased their investment within a five-year period prior to
the date of this Prospectus can purchase Units of the Trust in an amount not
greater in value than the amount of said investment made during this five-year
period subject only to the applicable deferred sales charge of 3.90% of the
Public Offering Price.
Units may be purchased in the primary or secondary market (including
purchases by Rollover Unitholders) at the Public Offering Price (for purchases
which do not qualify for a volume discount) less the concession the Sponsor
typically allows to brokers and dealers for purchases (see "Public
Offering--Distribution of Units") by (1) investors who purchase Units through
registered investment advisers, certified financial planners and registered
937586.1
B-14
<PAGE>
broker-dealers who in each case either charge periodic fees for financial
planning, investment advisory or asset management service, or provide such
services in connection with the establishment of an investment account for which
a comprehensive "wrap fee" charge is imposed, (2) bank trust departments
investing funds over which they exercise exclusive discretionary investment
authority and that are held in a fiduciary, agency, custodial or similar
capacity, (3) any person who, for at least 90 days, has been an officer,
director or bona fide employee of any firm offering Units for sale to investors
or their immediate family members (as described above) and (4) officers and
directors of bank holding companies that make Units available directly or
through subsidiaries or bank affiliates. Notwithstanding anything to the
contrary in this Prospectus, such investors, bank trust departments, firm
employees and bank holding company officers and directors who purchase Units
through this program will not receive the volume discount.
DISTRIBUTION OF UNITS. During the initial offering period and thereafter
to the extent additional Units continue to be offered by means of this
Prospectus, Units will be distributed by the Sponsor and dealers at the Public
Offering Price. The initial offering period is thirty days after each deposit of
Securities in the Trust and the Sponsor may extend the initial offering period
for successive thirty day periods. Certain banks and thrifts will make Units of
the Trust available to their customers on an agency basis. A portion of the
sales charge paid by their customers is retained by or remitted to the banks.
Under the Glass-Steagall Act, banks are prohibited from underwriting Units;
however, the Glass-Steagall Act does permit certain agency transactions and the
banking regulators have indicated that these particular agency transactions are
permitted under such Act. On November 16, 1999, President Clinton signed the
Gramm-Leach-Bliley Act, repealing certain provisions of the Glass-Steagall Act
which have restricted affiliation between banks and securities firms and
amending the Bank Holding Company Act thereby removing restrictions on banks and
insurance companies. The new legislation grants banks new authority to conduct
certain authorized activity through financial subsidiaries. In addition, state
securities laws on this issue may differ from the interpretations of federal law
expressed herein and banks and financial institutions may be required to
register as dealers pursuant to state law.
The Sponsor intends to qualify the Units for sale in substantially all
States through dealers who are members of the National Association of Securities
Dealers, Inc. Units may be sold to dealers at prices which represent a
concession of up to 2.50% per Unit, subject to the Sponsor's right to change the
dealers' concession from time to time. Such Units may then be distributed to the
public by the dealers at the Public Offering Price then in effect. The Sponsor
reserves the right to reject, in whole or in part, any order for the purchase of
Units.
Broker-dealers of the Trust, banks and/or others are eligible to
participate in a program in which such firms receive from the Sponsor a nominal
award for each of their registered representatives who have sold a minimum
number of units of unit investment trusts created by the Sponsor during a
specified time period. In addition, at various times the Sponsor may implement
other programs under which the sales forces of brokers, dealers, banks and/or
others may be eligible to win other nominal awards for certain sales efforts or
under which the Sponsor will allow to any such brokers, dealers, banks and/or
others that sponsor sales contests or recognition programs conforming to
criteria established by the Sponsor, or participate in sales programs sponsored
by the Sponsor, an amount not exceeding the total applicable sales charges on
the sales generated by such person at the public offering price during such
programs. Also, the Sponsor in its discretion may from time to time pursuant to
objective criteria established by the Sponsor pay fees to qualifying brokers,
dealers banks and/or others for certain services or activities which are
primarily intended to result in sales of Units of the Trust. Such payments are
made by the Sponsor out of its own assets and not out of the assets of the
Trust. These programs will not change the price Unitholders pay for their Units
or the amount that the Trust will receive from the Units sold.
SPONSOR'S PROFITS. The Sponsor will receive a combined gross underwriting
commission equal to up to the initial sales charge of 1.00% of the Public
Offering Price and the Deferred Sales Charge of $39.00 per 100 Units.
Additionally, the Sponsor may realize a profit on the deposit of the Securities
in the Trust representing the difference between the cost of the Securities to
the Sponsor and the cost of the Securities to the Trust (see "Portfolio" in Part
A). The Sponsor may realize profits or sustain losses with respect to Securities
deposited in the Trust which were acquired from underwriting syndicates of which
they were a member. All or a portion of the Securities deposited in the Trust
may have been acquired through the Sponsor.
937586.1
B-15
<PAGE>
During the initial offering period and thereafter to the extent additional
Units continue to be offered by means of this Prospectus, the Underwriter may
also realize profits or sustain losses as a result of fluctuations after the
Initial Date of Deposit in the aggregate value of the Securities and hence in
the Public Offering Price received by the Sponsor for the Units. Cash, if any,
made available to the Sponsor prior to settlement date for the purchase of Units
may be used in the Sponsor's business subject to the limitations of 17 CFR
240.15c3-3 under the Securities Exchange Act of 1934 and may be of benefit to
the Sponsor.
Both upon acquisition of Securities and termination of the Trust, the
Trustee may utilize the services of the Sponsor for the purchase or sale of all
or a portion of the Securities in the Trust. The Sponsor may only 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 "Liquidity-Sponsor Repurchase")
the Sponsor will realize profits or sustain losses in the amount of any
difference between the price at which it buys Units and the price at which it
resells such Units.
RIGHTS OF UNITHOLDERS
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 Sponsor with
DTC in the Sponsor's DTC account and registered in the nominee name CEDE & CO.
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 purchases and sale from the
broker-dealer or bank from whom their purchase was made. Transfer, and the
requirements therefore, will be governed by the applicable procedures of DTC and
the Unitholder's agreement with the DTC participant in whose name the
Unitholder's Units are registered on the transfer records of DTC.
DISTRIBUTIONS. Dividends, if any, received by the Trust are credited by
the Trustee to an Income Account for the Trust. Other receipts, including the
proceeds of Securities disposed of, are credited to a Principal Account for the
Trust.
Distributions to each Unitholder from the Income Account are computed as
of the close of business on each Record Date for the following payment date and
consist of an amount substantially equal to such Unitholder's pro rata share of
the income credited to the Income Account, less expenses. Distributions from the
Principal Accounts of the Trust (other than amounts representing failed
contracts, as previously discussed) will be computed as of each Record Date, and
will be made to the Unitholders of the Trust on or shortly after the
Distribution Date. Proceeds representing principal received from the disposition
of any of the Securities between a Record Date and a Distribution Date which are
not used for redemptions of Units will be held in the Principal Account and not
distributed until the next Distribution Date. Persons who purchase Units between
a Record Date and a Distribution Date will receive their first distribution on
the Distribution Date following the next Record Date.
As of each Record Date, the Trustee will deduct from the Income Account of
the Trust, and, to the extent funds are not sufficient therein, from the
Principal Account of the Trust, amounts necessary to pay the expenses of the
Trust (as determined on the basis set forth under "Trust Expenses and Charges").
The Trustee also may withdraw from said accounts such amounts, if any, as it
deems necessary to establish a reserve for any applicable taxes or other
governmental charges that may be payable out of the Trust. Amounts so withdrawn
shall not be considered a part of such Trust's assets until such time as the
Trustee shall return all or any part of such amounts to the appropriate
accounts. In addition, the Trustee may withdraw from the Income and Principal
Accounts such amounts as may be necessary to cover redemptions of Units by the
Trustee.
937586.1
B-16
<PAGE>
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 keeps records of the transactions of the Trust at its
corporate trust office including names, addresses and holdings of all
Unitholders of record, a current list of the Securities and a copy of the
Indenture. Such records are available to Unitholders for inspection at
reasonable times during business hours.
REPORTS TO HOLDERS. The Trustee will furnish Unitholders with each
distribution a statement of the amount of income and the amount of other
receipts, if any, which are being distributed, expressed in each case as a
dollar amount per 100 Units. Within a reasonable time after the end of each
calendar year, the Trustee will furnish to each person who at any time during
the calendar year was a Unitholder of record, a statement showing:
(i) as to the Income Account: dividends, interest and other cash
amounts received, amounts paid for purchases of Substitute Securities and
redemptions of Units, if any, deductions for applicable taxes and fees and
expenses of the Trust, and the balance remaining after such distributions
and deductions, expressed both as a total dollar amount and as a dollar
amount representing the pro rata share of each 100 Units outstanding on the
last business day of such calendar year;
(ii) as to the Principal Account: the dates of disposition of any
Securities and the net proceeds received therefrom, deductions for payments
of applicable taxes and fees and expenses of the Trust, amounts paid for
purchases of Substitute Securities and redemptions of Units, if any, and
the balance remaining after such distributions and deductions, expressed
both as a total dollar amount and as a dollar amount representing the pro
rata share of each 100 Units outstanding on the last business day of such
calendar year;
(iii) 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;
(iv) the Redemption Price per 100 Units based upon the last
computation thereof made during such calendar year; and
(v) 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.
Unitholders will be furnished with evaluations of Securities upon request
to the Trustee in order to comply with Federal and state tax reporting
requirements.
LIQUIDITY
SPONSOR REPURCHASE. Unitholders who wish to dispose of their Units should
inquire of the Sponsor as to current market prices prior to making a tender for
redemption. The aggregate value of the Securities will be determined by the
Trustee on a daily basis and computed on the basis set forth under "Trustee
Redemption." The Sponsor does not guarantee the enforceability, marketability or
price of any Securities in the Portfolio or of the Units. The Sponsor may
discontinue the repurchase of Units if the supply of Units exceeds demand, or
for other business reasons. The date of repurchase is deemed to be the date on
which redemption requests are received in proper form, by ING Funds Distributor,
Inc., 1475 Dunwoody Drive, West Chester, Pennsylvania 19380. Redemption requests
received after 4 P.M., New York Time, will be deemed to have been repurchased on
the next business day. In the event a market is not maintained for the Units, a
Unitholder may be able to dispose of Units only by tendering them to the Trustee
for redemption.
Units purchased by the Sponsor in the secondary market may be reoffered
for sale by the Sponsor at a price based on (i) the aggregate value of the
Securities in a Trust plus (ii) 4.90% sales charge (or 5.152% of the net
937586.1
B-17
<PAGE>
amount invested) for the Trust plus (iii) a pro rata portion of amounts, if any,
in the Income and Principal Accounts. Any Units that are purchased by the
Sponsor in the secondary market also may be redeemed by the Sponsor if it
determines such redemption to be in its best interest.
The Sponsor may, under certain circumstances, as a service to Unitholders,
elect to purchase any Units tendered to the Trustee for redemption (see
"Liquidity--Trustee Redemption"). Factors that the Sponsor will consider in
making a determination will include the number of Units of the Trust which they
have in inventory, their estimate of the stability and the time required to sell
such Units and general market conditions. For example, if in order to meet
redemptions of Units the Trustee must dispose of Securities, and if such
disposition cannot be made by the redemption date (three calendar days after
tender), the Sponsor may elect to purchase such Units. Such purchase shall be
made by payment to the Unitholder not later than the close of business on the
redemption date of an amount equal to the Redemption Price on the date of
tender.
TRUSTEE REDEMPTION. At any time prior to the Evaluation Time on the
business day preceding the commencement of the Liquidation Period (approximately
fifteen months from the Date of Deposit), Units may also be tendered to the
Trustee for redemption upon payment of any relevant tax by contacting the
Sponsor holding such Units in street name. In certain instances, additional
documents may be required, such as trust instrument, certificate of corporate
authority, certificate of death or appointment as executor, administrator or
guardian. At the present time there are no specific taxes related to the
redemption of Units. No redemption fee will be charged by the Sponsor or the
Trustee. Units redeemed by the Trustee will be canceled.
Within three business days following a tender for redemption, the
Unitholder will be entitled to receive an amount for each Unit tendered equal to
the Redemption Price per Unit computed as of the Evaluation Time set forth under
"Summary of Essential Information" in Part A on the date of tender. The "date of
tender" is deemed to be the date on which Units are received by the Trustee. For
Units received after the close of trading on the NASDAQ or NYSE (4:00 p.m.
Eastern Time), the date of tender is the next day on which such Exchange is open
for trading, and such Units will be deemed to have been tendered to the Trustee
on such day for redemption at the Redemption Price computed on that day.
A Unitholder will receive his redemption proceeds in cash and amounts paid
on redemption shall be withdrawn from the Income Accounts, or, if the balance
therein is insufficient, from the Principal Accounts. 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, can 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
between the Treasury Obligations and Fund Shares. Treasury Obligations will not
be sold, however, to the extent that the aggregate maturity value per Unit of
the Treasury Obligations remaining after such sale would be less than the
aggregate maturity value per Unit of the Treasury Obligations as of the initial
date of deposit.
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
particular Trust or moneys in the process of being collected, (ii) the value of
the Securities in the Trust as determined by the Trustee, less (a) amounts
representing taxes or other governmental charges payable out of the Trust, (b)
the accrued expenses of the Trust and (c) cash allocated for the distribution to
Unitholders of record as of the business day prior to the evaluation being made.
As of the close of the initial public offering period, the Redemption Price per
100 Units will be reduced to reflect the payment of the per 100 Unit
organization costs to the Sponsor. The Evaluator may determine the value of the
Securities in the Trust in the following manner: the net asset value of the Fund
Shares and the bid side evaluation of the Treasury Obligations. The evaluation
shall generally be based on the closing purchase price in the over-the-counter
market (unless the Evaluator deems these prices inappropriate as a basis for
evaluation) or if there is no such closing purchase price, then the Evaluator
may ascertain the values of the Treasury Obligations using any of the following
methods, or a combination thereof, which it deems appropriate: (a) on the basis
of the current bid prices for the Treasury Obligations as obtained from
investment dealers or brokers who customarily deal in securities comparable to
those held in the Trust, (b) if bid prices are not available for the Treasury
Obligations, on the basis of current bid prices
937586.1
B-18
<PAGE>
for comparable securities, (c) by appraising the value of the Treasury
Obligations on the bid side of the market or (d) by any combination of the
above.
Any Unitholder tendering 2,500 Units or more of the Trust for redemption
may request, by written notice submitted at the time of tender from the Trustee
in lieu of a cash redemption, a distribution of shares of Securities and cash in
an amount and value equal to the Redemption Price Per Unit as determined as of
the evaluation next following tender. To the extent possible, in kind
distributions ("In Kind Distributions") shall be made by the Trustee through the
distribution of each of the Securities in book-entry form to the account of the
Unitholder's broker-dealer at DTC. An In Kind Distribution will be reduced by
customary transfer and registration charges. The tendering Unitholder will
receive his pro rata number of Fund Shares and cash from the Principal Accounts
equal to the extent represented by the Treasury Obligations and the balance of
the Redemption Price to which the tendering Unitholder is entitled. If funds in
the Principal Account are insufficient to cover the required cash distribution
to the tendering Unitholder, the Trustee may sell Securities in the manner
described above.
The Trustee is irrevocably authorized in its discretion, if the Sponsor
does not elect to purchase a Unit tendered for redemption or if the Sponsor
tenders a Unit for redemption, in lieu of redeeming such Unit, to sell such Unit
in the over-the-counter market for the account of the tendering Unitholder at
prices which will return to the Unitholder an amount in cash, net after
deducting brokerage commissions, transfer taxes and other charges, equal to or
in excess of the Redemption Price for such Unit. The Trustee will pay the net
proceeds of any such sale to the Unitholder on the day he would otherwise be
entitled to receive payment of the Redemption Price.
The Trustee reserves the right to suspend the right of redemption and to
postpone the date of payment of the Redemption Price per Unit for any period
during which the NASDAQ or NYSE is closed, other than customary weekend and
holiday closings, or when 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 Sponsor are not liable to any person or
in any way for any loss or damage which may result from any such suspension or
postponement.
ADMINISTRATION OF THE TRUST
TRUST 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 is regularly reviewed, because of the formula employed in
selecting the Securities, it is unlikely the Trust will sell any of the
Securities other than to satisfy redemptions of Units, or to cease buying
Additional Securities in connection with the issuance of additional Units.
However, the Trust Agreement provides that the Sponsor may direct the
disposition of Securities upon the occurrence of certain events including: (i)
default in payment of amounts due on any of the Securities; (ii) institution of
certain legal proceedings; (iii) default under certain documents materially and
adversely affecting future declaration or payment of amounts due or expected;
(iv) determination of the Sponsor that the tax treatment of the Trust as a
grantor trust would otherwise be jeopardized; or (v) decline in price as a
direct result of serious adverse credit factors affecting the issuer of a
Security which, in the opinion of the Sponsor, will make the retention of the
Security detrimental to the Trust or the Unitholders.
In addition, the Trust Agreement provides as follows:
1. If a default in the payment of amounts due on any Security occurs
pursuant to provision (i) above and if the Sponsor fails to give immediate
instructions to sell or hold that Security, the Trustee, within 30 days of
that failure by the Sponsor, shall sell the Security.
937586.1
B-19
<PAGE>
2. It is the responsibility of the Sponsor to instruct the Trustee to
reject any offer made by an issuer of any of the Securities to issue new
securities in exchange and substitution for any Security pursuant to a
recapitalization or reorganization, if any exchange or substitution is
effected notwithstanding such rejection, any securities or other property
received shall be promptly sold unless the Sponsor directs that it be
retained.
3. 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, which shall be retained, shall
be promptly sold unless the Sponsor directs that it be retained by the
Trustee. The proceeds of any disposition shall be credited to the Income or
Principal Accounts of the Trust.
4. The Sponsor is authorized to increase the size and number of Units
of the Trust by the deposit of Additional Securities, contracts to purchase
Additional Securities or cash or a letter of credit with instructions to
purchase Additional Securities in exchange for the corresponding number of
additional Units from time to time subsequent to the Initial Date of
Deposit, provided that the original proportionate relationship among the
number of shares of each Security in a Trust established on the Initial
Date of Deposit is maintained to the extent practicable. The Sponsor may
specify the minimum numbers in which Additional Securities will be
deposited or purchased. If a deposit is not sufficient to acquire minimum
amounts of each Security, Additional Securities may be acquired in the
order of the Security most under-represented immediately before the deposit
when compared to the original proportionate relationship. If Securities of
an issue originally deposited are unavailable at the time of the subsequent
deposit, the Sponsor may (i) deposit cash or a letter of credit with
instructions to purchase the Security when it becomes available, or (ii)
deposit (or instruct the Trustee to purchase) either Securities of one or
more other issues originally deposited or a Substitute Security.
In determining whether to dispose of or hold Securities, new securities or
property, the Sponsor may be advised by the Portfolio Supervisor.
TRUST AGREEMENT AND AMENDMENT. The Trust Agreement may be amended by the
Trustee and the Sponsor without the consent of any of the Unitholders to: (i)
cure any ambiguity or to correct or supplement any provision which may be
defective or inconsistent; (ii) change any provision thereof as may be required
by the Securities and Exchange Commission or any successor governmental agency;
or (iii) 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 maturity, redemption or other
disposition, as the case may be, of the last of the Securities held in such
Trust but in no event is it to continue beyond the Mandatory Termination Date.
If the value of the Trust shall be less than the minimum amount set forth under
"Summary of Essential Information" in Part A, the Trustee may, in its
discretion, and shall, when so directed by the Sponsor, terminate such Trust.
The Trust may also be terminated at any time with the consent of the investors
holding 100% of the Units then outstanding. The Trustee may utilize the services
of the Sponsor for the sale of all or a portion of the Securities in the Trust,
and in so doing, the Sponsor will determine the manner, timing and execution of
the sales of the underlying Securities. In the event of termination, written
notice thereof will be sent by the Trustee to all Unitholders. Such notice will
provide Unitholders with the following three options by which to receive their
pro rata share of the net asset value of the Trust and requires their election
of one of the three options by notifying the Trustee by returning a properly
completed election request:
937586.1
B-20
<PAGE>
1. a Unitholder who owns at least 2,500 units and whose interest in
the Trust will entitle it to receive at least one share of each underlying
Security will have its Units redeemed on or about the commencement of the
Liquidation Period. This will be accomplished 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 Fund Shares and the
balance in cash to the extent represented by Treasury Obligations within
three business days next following the commencement of the Liquidation
Period. Unitholders subsequently selling such distributed Securities will
incur brokerage costs when disposing of such Fund Shares. An election of
this option will not prevent Unitholders from recognizing taxable gain or
loss as a result of liquidation of the Treasury Obligations. 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 Sponsor as agent of the Trustee of the
underlying Securities in units of a subsequent series of the EST Symphony
Trust (the "New Series") provided one is offered. It is expected that a
special redemption and liquidation will be made of all Units of the Trust
held by a Unitholder (a "Rollover Unitholder") who affirmatively notifies
the Trustee on or prior to the Rollover Notification Date set forth in the
"Summary of Essential Information" for the Trust in Part A. The Units of a
New Series will be purchased by the Unitholder within three business days
of the settlement of the trade for the last Security to be sold. Such
purchaser will be entitled to a reduced sales charge upon the purchase of
units of the New Series. It is expected that the terms of the New Series
will be substantially the same as the terms of the Trust described in this
Prospectus, and that similar options with respect to the termination of
such New Series will be available. The availability of this option does not
constitute a solicitation of an offer to purchase Units of a New Series or
any other security. A Unitholder's election to participate in this option
will be treated as an indication of interest only. At any time prior to the
purchase by the Unitholder of units of a New Series such Unitholder may
change his investment strategy and receive, in cash, the proceeds of the
sale of the Securities. An election of this option will not prevent the
Unitholder from recognizing taxable gain or loss (except in the case of a
loss, if and to the extent that Securities contained in the New Series are
treated as substantially identical to Securities held by 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 advisers in this
regard.
Unitholders who do not make any election will be deemed to have elected to
receive the termination distribution in cash (option number 2).
The Sponsor has agreed that, to the extent they effect the sales of
underlying Securities for the Trustee, in the case of the second and third
options during the Liquidation Period such sales will be free of brokerage
commissions. The Sponsor, on behalf of the Trustee, will sell the Securities by
the last business day of the Liquidation Period 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. The Redemption Price Per 100 Units upon the settlement
of the last sale of Securities during the Liquidation Period will be distributed
to Unitholders in redemption of such Unitholders' interest in the Trust.
Depending on the amount of proceeds to be invested in Units of the New
Series and the amount of other orders for Units in the New Series, the Sponsor
may purchase a large amount of securities for the New Series in a short period
of time. The Sponsor's buying of securities may tend to raise the market prices
of these securities. The actual market impact of the Sponsor's purchases,
however, is currently unpredictable because the actual amount of securities to
be purchased and the supply and price of those securities is unknown. A similar
problem may occur in connection with the sale of Securities during the
Liquidation Period; depending on the number of sales required, the prices of and
demand for Securities, such sales may tend to depress the market prices and thus
reduce the proceeds of such sales. The Sponsor believes that the sale of
underlying Securities over the Liquidation Period described above is in the best
interest of a Unitholder and may mitigate the negative market price consequences
stemming
937586.1
B-21
<PAGE>
from the trading of large amounts of Securities. The Securities may be sold in
fewer than seven days if, in the Sponsor's judgment, such sales are in the best
interest of Unitholders. The Sponsor, in implementing such sales of securities
on behalf of the Trustee, will seek to maximize the sales proceeds and will act
in the best interests of the Unitholders. There can be no assurance, however,
that any adverse price consequences of heavy trading will be mitigated.
The Sponsor may for any reason, in its sole discretion, decide not to
sponsor any subsequent series of the Trust, without penalty or incurring
liability to any Unitholder. If the Sponsor so decides, the Sponsor will notify
the Trustee of that decision, and the Trustee will notify the Unitholders. All
Unitholders will then elect either option 1, if eligible, or option 2.
By electing to rollover into the New Series, the Unitholder indicates his
interest in having his terminating distribution from the Trust invested only in
the New Series created following termination of the Trust; the Sponsor expects,
however, that a similar rollover program will be offered with respect to all
subsequent series of the Trust, thus giving Unitholders an opportunity to elect
to rollover their terminating distributions into a New Series. The availability
of the rollover privilege does not constitute a solicitation of offers to
purchase units of a New Series or any other security. A Unitholder's election to
participate in the rollover program will be treated as an indication of interest
only. The Sponsor intends to coordinate the date of deposit of a future series
so that the terminating trusts will terminate contemporaneously with the
creation of a New Series. The Sponsor reserves the right to modify, suspend or
terminate the rollover privilege at any time.
In the event the Sponsor determines that a redemption in kind and
subsequent investment in a New Series by a Unitholder may be accomplished in a
manner that will not result in the recognition of gain or loss for Federal
income tax purposes with respect to any Securities included in the portfolio of
the New Series, Unitholders will be notified at least 30 days prior to the
Rollover Notification Date of the procedures and process necessary to facilitate
such tax treatment.
THE SPONSOR. ING Funds Distributor, Inc., an Iowa corporation, is a wholly
owned indirect subsidiary of ING Group. ING Group, among the leading global
financial services organizations, is engaged in asset management, banking and
insurance activities in 60 countries worldwide with over 82,000 employees. The
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 Sponsor and its ability to
carry out its contractual obligations. The Sponsor will be under no liability to
Unitholders for taking any action, or refraining from taking any action, in good
faith pursuant to the Trust Agreement, or for errors in judgment except in cases
of its own willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations and duties.
The Sponsor may resign at any time by delivering to the Trustee an
instrument of resignation executed by the Sponsor. If at any time the Sponsor
shall resign or fail to perform any of its duties under the Trust Agreement or
become incapable of acting or become bankrupt or their affairs are taken over by
public authorities, then the Trustee may either (i) appoint a successor sponsor;
(ii) terminate the Trust Agreement and liquidate the Trust; or (iii) 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 Bank of New York, a trust company
organized under the laws of New York, having its offices at 101 Barclay Street,
New York, New York 10286. The Trustee is subject to supervision and examination
by the Superintendent of Banks of the State of New York and the Board of
Governors of the Federal Reserve System, and its deposits are insured by the
Federal Deposit Insurance Corporation to the extent permitted by law.
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
937586.1
B-22
<PAGE>
moneys, Securities or Units in accordance with the Trust Agreement, except in
cases of its own willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations and duties; provided, however, that the Trustee
shall not in any event be liable or responsible for any evaluation made by any
independent evaluation service employed by it. In addition, the Trustee shall
not be liable for any taxes or other governmental charges imposed upon or in
respect of the Securities or the Trusts 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. The Trustee has not participated in the selection of the
Trust's Securities.
For further information relating to the responsibilities of the Trustee
under the Trust Agreement, reference is made to the material set forth under
"Rights of Unitholders."
The Trustee may resign by executing an instrument in writing and filing
the same with the Sponsor, and mailing a copy of a notice of resignation to all
Unitholders. In such an event the Sponsor is obligated to appoint a successor
Trustee as soon as possible. In addition, if the Trustee becomes incapable of
acting or becomes bankrupt or its affairs are taken over by public authorities,
the Sponsor may remove the Trustee and appoint a successor as provided in the
Trust Agreement. Notice of such removal and appointment shall be mailed to each
Unitholder by the Sponsor. If upon resignation of the Trustee no successor has
been appointed and has accepted the appointment within thirty days after
notification, the retiring Trustee may apply to a court of competent
jurisdiction for the appointment of a successor. The resignation or removal of
the Trustee becomes effective only when the successor Trustee accepts its
appointment as such or when a court of competent jurisdiction appoints a
successor Trustee. Upon execution of a written acceptance of such appointment by
such successor Trustee, all the rights, powers, duties and obligations of the
original Trustee shall vest in the successor.
Any corporation into which the Trustee may be merged or with which it may
be consolidated, or any corporation resulting from any merger or consolidation
to which the Trustee shall be a party, shall be the successor Trustee. The
Trustee must always be a banking corporation organized under the laws of the
United States or any State and have at all times an aggregate capital, surplus
and undivided profits of not less than $2,500,000.
The Evaluator. The Evaluator is Kenny S&P Evaluation Services, a division
of J.J. Kenny & Co., Inc., with its main offices located at 65 Broadway, New
York, New York 10006]. The Evaluator is a wholly-owned subsidiary of The McGraw
Hill Companies. The Evaluator is a registered investment advisor and also
provides financial information services.
The value of the Securities in the Trust portfolio is determined in good
faith by the Evaluator on the basis set forth under "Public Offering --Offering
Price." The Sponsor, the Trustee and the Unitholders may rely on any evaluation
furnished by the Evaluator and shall have no responsibility for the accuracy
thereof. Determinations by the Evaluator under the Trust Agreement shall be made
in good faith upon the basis of the best information available to it, provided,
however, that the Evaluator shall be under no liability to the Sponsor, the
Trustee 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 Evaluator may resign or may be removed by the Sponsor and Trustee, and
the Sponsor and the Trustee are to use their best efforts to appoint a
satisfactory successor. Such resignation or removal shall become effective upon
the acceptance of appointment by the successor Evaluator. If upon resignation of
the Evaluator no successor has accepted appointment within the thirty days after
notice of resignation, the Evaluator may apply to a court of competent
jurisdiction for the appointment of a successor.
TRUST EXPENSES AND CHARGES
Investors will reimburse the Sponsor on a per 100 Units basis, for all or
a portion of the estimated costs incurred in organizing and offering the Trust
(collectively, the "organization costs"), including the cost of the initial
preparation and execution of the Trust Agreement, registration of the Trust and
the Units under the Investment Company Act of 1940 and the Securities Act of
1933 and state registration fees, the initial fees and expenses of the
937586.1
B-23
<PAGE>
Trustee, legal expenses and other actual out-of-pocket costs. The estimated
organization costs will be paid from the assets of the Trust as of the close of
the initial public offering period (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 Sponsor. All advertising and selling expenses, as well as
any organizational costs not paid by the Trust, will be borne by the Sponsor at
no cost to the Trust.
ING Mutual Funds Management Co. LLC, an affiliate of ING Funds
Distributor, Inc., will receive, for portfolio supervisory services to the
Trust, an annual fee in the amount set forth under "Summary of Essential
Information" in Part A. This fee may exceed the actual cost of providing
portfolio supervisory services for the Trust, but at no time will the total
amount received for portfolio supervisory services rendered to all series of the
EST Symphony Trust in any calendar year exceed the aggregate cost to ING Mutual
Funds Management Co. LLC of supplying such services in such year. (See
"Administration of the Trust--Trust 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
"Administration of the Trust" and "Rights of Unitholders."
For each evaluation of the Treasury Obligations in the Trust, the
Evaluator shall receive a fee as set forth in the "Summary of Essential
Information" in Part A.
The Trustee's fees and the Evaluator's fees applicable to the Trust are
payable as of each Record Date from the Income Accounts of the Trust to the
extent funds are available and then from the Principal Accounts. Both the
Portfolio Supervisor's and the 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: (i)
all expenses (including counsel fees) of the Trustee incurred and advances made
in connection with its activities under the Trust Agreements, including the
expenses and costs of any action undertaken by the Trustee to protect the Trust
and the rights and interests of the Unitholders; (ii) 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; (iii)
indemnification of the Sponsor for any losses, liabilities and expenses incurred
in acting as sponsor of the Trust without gross negligence, bad faith or willful
misconduct on its part; and (iv) all taxes and other governmental charges
imposed upon the Securities or any part of the Trust (no such taxes or charges
are being levied, made or, to the knowledge of the Sponsor, contemplated). The
above expenses, including the Trustee's fees, when paid by or owing to the
Trustee are secured by a first lien on the Trust to which such expenses are
charged. In addition, the Trustee is empowered to sell the Securities in order
to make funds available to pay all expenses.
Unless the Sponsor otherwise directs, the accounts of the Trust shall be
audited not less than annually by independent public accountants selected by the
Sponsor. 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.
937586.1
B-24
<PAGE>
REINVESTMENT PLAN
Income and principal distributions of Units (other than the final
distribution in connection with the termination of the Trusts) may be reinvested
by participating in the Trust's Reinvestment Plan. Under the plan, the Units
acquired for participants will be either Units already held in inventory by the
Sponsor or new Units created by the Sponsor's deposit of Additional Securities
as described in "The Trust--Deposit of Additional Securities" in this Part B.
Units acquired by reinvestment will not be subject to a sales charge.
Unitholders who participate in the Reinvestment Plan will nevertheless be
subject to tax on their distributions in the manner described under "Tax
Status." Investors should inform their broker when purchasing their Units if
they wish to participate in the Reinvestment Plan. Thereafter, Unitholders
should contact their broker if they wish to modify or terminate their election
to participate in the Reinvestment Plan. In order to enable a Unitholder to
participate in the Reinvestment Plan, with respect to a particular distribution
on their Units, such notice must be made at least three business days prior to
the Record 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 Sponsor reserves the
right to demand, modify or terminate the Reinvestment Plan at any time without
prior notice. The Reinvestment Plan for the Trust may not be available in all
states.
EXCHANGE PRIVILEGE AND CONVERSION OFFER
Unitholders will be able to elect to exchange any or all of their Units of
this Trust for Units of one or more of any available series of EST Symphony
Trust, Equity Securities Trust, Insured Municipal Securities Trust, Municipal
Securities Trust, New York Municipal Trust or Mortgage Securities Trust (the
"Exchange Trusts") subject only to the remaining deferred sales charge as set
forth in the prospectus of the Exchange Trust (the "Exchange Privilege"). Unit
owners of any registered unit investment trust for which there is no active
secondary market in the units of such trust (a "Redemption Trust") will be able
to elect to redeem such units and apply the proceeds of the redemption to the
purchase of available Units of one or more series of an Exchange Trust (the
"Conversion Trusts") at the Public Offering Price for units of the Conversion
Trust subject only to the remaining deferred sales charge as set forth in the
prospectus of the Conversion Trust (the "Conversion Offer"). Under the Exchange
Privilege, the Sponsor's repurchase price during the initial offering period of
the Units being surrendered will be based on the market value of the Securities
in the Trust portfolio or on the aggregate offer price of the Bonds in the other
Trust Portfolios; and, after the initial offering period has been completed,
will be based on the aggregate bid price of the securities in the particular
Trust portfolio. Under the Conversion Offer, units of the Redemption Trust must
be tendered to the trustee of such trust for redemption at the redemption price
determined as set forth in the relevant Redemption Trust's prospectus. Units in
an Exchange or Conversion Trust will be sold to the Unitholder at a price based
on the aggregate offer price of the securities in the Exchange or Conversion
Trust Portfolio (or for units of EST Symphony Series or Equity Securities Trust,
based on the market value of the underlying securities in the trust portfolio)
during the initial public offering period of the Exchange or Conversion Trust;
and after the initial public offering period has been completed, based on the
aggregate bid price of the securities in the Exchange or Conversion Trust
Portfolio if its initial offering has been completed plus accrued interest (or
for units of EST Symphony Series or Equity Securities Trust, based on the market
value of the underlying securities in the trust portfolio) and a reduced sales
charge.
Except for Unitholders who wish to exercise the Exchange Privilege or
Conversion Offer within the first five months of their purchase of Units of the
Exchange or Redemption Trust, any purchaser who purchases Units under the
Exchange Privilege or Conversion Offer will pay a lower sales charge than that
which would be paid for the Units by a new investor. For Unitholders who wish to
exercise the Exchange Privilege or Conversion Offer within the first five months
of their purchase of Units of the Exchange or Redemption Trust, the sales charge
applicable to the purchase of units of an Exchange or Conversion Trust shall be
the greater of (i) the reduced sales charge or (ii) an amount which when coupled
with the sales charge paid by the Unitholder upon his original purchase of Units
of the Exchange or Redemption Trust would equal the sales charge applicable in
the direct purchase of units of an Exchange or Conversion Trust.
In order to exercise the Exchange Privilege the Sponsor must be
maintaining a secondary market in the units of the available Exchange Trust. The
Conversion Offer is limited only to unit owners of any Redemption Trust.
937586.1
B-25
<PAGE>
Exercise of the Exchange Privilege and the Conversion Offer by Unitholders is
subject to the following additional conditions: (i) at the time of the
Unitholder's election to participate in the Exchange Privilege or the Conversion
Offer, there must be units of the Exchange or Conversion Trust available for
sale, either under the initial primary distribution or in the Sponsor's
secondary market, (ii) exchanges will be effected in whole units only, (iii)
Units of the Mortgage Securities Trust may only be acquired in blocks of 1,000
Units and (iv) Units of the EST Symphony Trust or Equity Securities Trust may
only be acquired in blocks of 100 Units. Unitholders will not be permitted to
advance any funds in excess of their redemption in order to complete the
exchange. Any excess proceeds received from a Unitholder for exchange, or from
units being redeemed for conversion, will be remitted to such Unitholder.
The Sponsor reserves the right to suspend, modify or terminate the
Exchange Privilege and/or the Conversion Offer. The Sponsor will provide
Unitholders of the Trust with 60 days' prior written notice of any termination
or material amendment to the Exchange Privilege or the Conversion Offer,
provided that no notice need be given if (i) the only material effect of an
amendment is to reduce or eliminate the sales charge payable at the time of the
exchange, to add one or more series of the Trust eligible for the Exchange
Privilege or the Conversion Offer, to add any new unit investment trust
sponsored by ING Funds Distributor, Inc. or a sponsor controlled by or under
common control with ING Funds Distributor, Inc., or to delete a series which has
been terminated from eligibility for the Exchange Privilege or the Conversion
Offer, (ii) there is a suspension of the redemption of units of an Exchange or
Conversion Trust under Section 22(e) of the Investment Company Act of 1940, or
(iii) an Exchange Trust temporarily delays or ceases the sale of its units
because it is unable to invest amounts effectively in accordance with its
investment objectives, policies and restrictions. During the 60-day notice
period prior to the termination or material amendment of the Exchange Privilege
described above, the Sponsor will continue to maintain a secondary market in the
units of all Exchange Trusts that could be acquired by the affected Unitholders.
Unitholders may, during this 60-day period, exercise the Exchange Privilege in
accordance with its terms then in effect.
To exercise the Exchange Privilege, a Unitholder should notify the Sponsor
of his desire to exercise his Exchange Privilege. To exercise the Conversion
Offer, a unit owner of a Redemption Trust should notify his retail broker of his
desire to redeem his Redemption Trust Units and use the proceeds from the
redemption to purchase Units of one or more of the Conversion Trusts. If Units
of a designated, outstanding series of an Exchange or Conversion Trust are at
the time available for sale and such Units may lawfully be sold in the state in
which the Unitholder is a resident, the Unitholder will be provided with a
current prospectus or prospectuses relating to each Exchange or Conversion Trust
in which he indicates an interest. He may then select the Trust or Trusts into
which he desires to invest the proceeds from his sale of Units. The exchange
transaction will operate in a manner essentially identical to a secondary market
transaction except that units may be purchased at a reduced sales charge. The
conversion transaction will be handled entirely through the unit owner's retail
broker. The retail broker must tender the units to the trustee of the Redemption
Trust for redemption and then apply the proceeds to the redemption toward the
purchase of units of a Conversion Trust at a price based on the aggregate offer
or bid side evaluation per Unit of the Conversion Trust, depending on which
price is applicable, plus accrued interest and the applicable sales charge. The
certificates must be surrendered to the broker at the time the redemption order
is placed and the broker must specify to the Sponsor that the purchase of
Conversion Trust Units is being made pursuant to the Conversion Offer. The unit
owner" broker will be entitled to retain a portion of the sales charge.
TAX CONSEQUENCES OF THE EXCHANGE PRIVILEGE AND THE CONVERSION OFFER. A
surrender of Units pursuant to the Exchange Privilege or the Conversion Offer
will constitute a "taxable event" to the Unitholder under the Internal Revenue
Code. The Unitholder will realize a tax gain or loss that will be of a long- or
short-term capital or ordinary income nature depending on the length of time the
units have been held and other factors. (See "Tax Status".) A Unitholder's tax
basis in the Units acquired pursuant to the Exchange Privilege or Conversion
Offer will be equal to the purchase price of such Units. Investors should
consult their own tax advisors as to the tax consequences to them of exchanging
or redeeming units and participating in the Exchange Privilege or Conversion
Offer.
937586.1
B-26
<PAGE>
TAX STATUS
This is a general discussion of certain of the Federal income tax
consequences of the purchase, ownership and disposition of the Units. 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. Unitholders should consult their tax advisers in determining the
Federal, state, local and any other tax consequences of the purchase, ownership
and disposition of Units.
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 Sponsor, 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 Sponsor reserves the right to deposit Additional Securities that are
substantially similar to those deposited in initially 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.
For Federal income tax purposes, a Unitholder's pro rata portion of
dividends paid with respect to a Security held by the Trust is taxable as
ordinary income to the extent of such corporation's current or 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 a capital gain.
In the case of stripped bonds, such as the Treasury Obligations held by
the Trust, the Trust is treated as having acquired bonds having original issue
discount equal to the difference between the excess of the amount due at the
maturity of the bonds over the purchase price of the bonds. The original issue
discount must be accrued between the date the Trust purchased the bonds and the
date the bonds mature. Income from the accrual of original issue discount on the
bonds will be includable in income by a Unitholder in the year of accrual even
if there is no corresponding cash payment. The tax basis of a Unitholder with
respect to their interest in a Treasury Obligation is increased by the amount of
original issue discount included in the Unitholder's gross income.
The Trust will also own shares in the Fund, an entity that has elected and
qualified to be treated as a regulated investment company. Such qualification
relieves the Fund of liability from Federal income taxes to the extent its
earnings are distributed in accordance with the applicable provisions of the
Internal Revenue Code. Distributions by the Fund of its investment company
taxable income will be taxable to its shareholders as ordinary income.
Distributions by the Fund of its net capital gain, which are designated as
capital gains dividends by the Fund, will be
937586.1
B-27
<PAGE>
taxable to its shareholders as long-term capital gain, regardless of the length
of time the shareholders has held their investment in the Fund.
A Unitholder may acquire its Units, or the Trust may acquire Treasury
Obligations at a price that represents a market discount for the Treasury
Obligations. A Unitholder has an interest in a market discount Treasury
Obligation if the Unitholder's tax cost for his pro rata interest in the
Treasury Obligation is less than the amount to be paid at the maturity of the
Treasury Obligation (or the issue price plus original issue discount accrued up
to the acquisition date, in the case of an original issue discount Treasury
Obligation). Treasury Obligations purchased at a market discount tend to
increase in market value as they approach maturity, when the principal amount is
payable, thus increasing the potential for taxable gain (or reducing the
potential for loss) on their redemption, maturity or sale. Gain on the
disposition of a Treasury Obligation purchased at a market discount generally
will be treated as ordinary income, rather than capital gain, to the extent of
the accrued market discount. If a Unitholder has an interest in a market
discount Treasury Obligation and has incurred debt to acquire Units, the
deductibility of a portion of the interest incurred on such debt may be
deferred.
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 (except accrued original issue discount
or accrued market discount) 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 realized by corporations are generally taxed at the same rates applicable
to ordinary income, but non-corporate taxpayers 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 for married individuals filing separately) recognized
by non-corporate Unitholders may be deducted against ordinary income.
A 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.
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.
A corporation (other than an S corporation and certain ineligible
corporations) that owns Units will generally be entitled to a 70% dividends
received deduction with respect to its pro rata portion of dividends taxable as
ordinary income received by the Trust from a domestic corporation or from a
qualifying foreign corporation in the same manner as if such corporation
directly owned the Securities paying such dividends. 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.
As discussed in the section "Administration of the Trust--Trust
Termination," each Unitholder may have three options in receiving its
termination distributions, namely (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 will receive upon the liquidation of its pro rata share of the underlying
Securities in units of a
937586.1
B-28
<PAGE>
future series of the Trust (if one is offered) at a reduced sales charge. 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 Securities are received.
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.
OTHER MATTERS
LEGAL OPINIONS. The legality of the Units offered hereby and certain
matters relating to Federal tax law have been passed upon by Battle Fowler LLP,
75 East 55th Street, New York, New York 10022 as counsel for the Sponsor. Emmet,
Marvin & Martin, LLP, 120 Broadway, New York, New York 10271 have acted as
counsel for the Trustee.
INDEPENDENT AUDITORS. The Statement of Financial Condition, including the
Portfolio, 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.
PORTFOLIO SUPERVISOR. ING Mutual Funds Management Co. LLC, a Delaware
limited liability company, is a wholly-owned indirect
subsidiary of ING Group and is an affiliate of the Sponsor.
PERFORMANCE INFORMATION. Total returns, average annualized returns or
cumulative returns for various periods of the strategy, the related index and
the 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, divided by
the original public offering price. Average annualized returns show the average
return for stated periods of longer than a year. Sales material may also include
an illustration of the cumulative results of like annual investments in a
strategy 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 sales charge. No provision is
made for any income taxes payable. Similar figures may be given for the Trust
applying the investment strategies 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 NASDAQ, NYSE or similar exchanges, as well as the DJIA, S&P
500 Index or other similar indices. In addition, total return comparisons may be
made to performance data from Bloomberg Financial Markets LP, Lipper Analytical
Services, Inc., Morningstar Publications, Inc., Standard & Poor's CompuStat and
Center for Research in Security Prices (CRSP) at the University of Chicago or
from publications such as The Wall Street Journal, 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 the Trust's relative performance for any future period.
Pending the approval of the National Association of Securities Dealers
Regulation, the Sponsor may also include, in advertisements, sales literature
and reports to current or prospective investors, the performance of hypothetical
portfolios to which the Sponsor has applied the same investment objectives and
selection strategies, as
937586.1
B-29
<PAGE>
well as back-tested data of the historical performance of such strategies, as
described in "The Trust--The Securities" and which the Sponsor intends to apply
to the selection of securities for the Trust. This performance information is
intended to illustrate the Trust's strategies and should not be interpreted as
indicative of the future performance of the Trust.
937586.1
B-30
<PAGE>
<TABLE>
<S> <C>
No person is authorized to give any
information or to make any representations not LOGO
contained in this Prospectus and you should not
rely on any other information. The Trust is EST SYMPHONY TRUST
registered as a unit investment trust under the Series 26
Investment Company Act of 1940. Such EquiT's II
registration does not imply that the Trust or
any of its Units have been guaranteed, (A Unit Investment Trust)
sponsored, recommended or approved by the United
States or any state or any agency or officer PROSPECTUS
thereof.
DATED: ________, 2000
Table of Contents
SPONSOR:
Title Page
----- ---- ING FUNDS DISTRIBUTOR, INC.
PART A 230 Park Avenue
Investment Summary.................... A-1 New York, New York 10169
Fee Table............................. A-4 (212) 309-8650
Summary of Essential Information...... A-5
Statement of Financial Condition...... A-6
Portfolio............................. A-7
Report of Independent Auditors........ A-8 TRUSTEE:
PART B
The Trust............................. B-1 THE BANK OF NEW YORK
Risk Considerations................... B-10 101 Barclay Street
Public Sale of Units.................. New York, New York 10286
B-13
Rights of Unitholders................. B-16
Liquidity............................. B-17
Administration of the Trust........... B-20
Trust Expenses and Charges............ B-24
Reinvestment Plan..................... B-25
Exchange Privilege and Conversion
Offer.............................. B-25
Tax Status............................ B-27
Other Matters......................... B-29
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-_____), and the Investment Company Act of
1940 (file no. 811-2868), and to which reference This Prospectus does not constitute an offer to
is made. Information may be reviewed and copied sell, or a solicitation of an offer to buy,
at the Commission's Public Reference Room, and securities in any state to any person to whom it
information on the Public Reference Room may be is not lawful to make such offer in such state.
obtained by calling the SEC at 1-202-942-8090.
Copies may be obtained from the SEC by:
</TABLE>
o visiting the SEC Internet address:
http://www.sec.gov
------------------
o electronic request (after paying a
duplicating fee) at the following
E-mail address: [email protected]
o writing: Public Reference Section of
the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549-0102
937586.1
<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 Sheets to the Registration Statements of Equities
Securities Trust, Series 12, 1997 Triple Strategy Trust II). The
Prospectus consisting of pages.
Undertakings.
Signatures.
Written consents of the following persons:
Battle Fowler LLP (included in Exhibit 3.1) Ernst & Young LLP Kenny
S&P Evaluation Services (included in Exhibit 5.1)
The following exhibits:
*99.1.1 -- Reference Trust Agreement including certain amendments to
the Trust Indenture and Agreement referred to under Exhibit
99.1.1.1 below.
*99.1.1.1 -- Form of Trust Indenture and Agreement.
99.1.3.5 -- Articles of Incorporation and Articles of Amendment of
ING Funds Distributor, Inc. (filed as Exhibit 99.1.3. -
to Amendment No. 2 to Form S-6 Registration Statement No.
333-31048 of The Pinnacle Family of Trusts, Internet
Trust Series I on March 28, 2000 and incorporated herein
by reference).
99.1.3.6 -- Bylaws of ING Funds Distributor, Inc. - Amendment No. 2
to Form S-6 Registration Statement No. 333-31048 of The
Pinnacle Family of Trusts, Internet Trust Series I on
March 28, 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.
*99.5.1 -- Consent of the Evaluator.
99.6.0 -- Power 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 No.
333-31048 of The Pinnacle Family of Trusts, Internet Trust
Series I on February 24, 2000 and incorporated hereby by
reference).
- --------------
* To be filed by Amendment.
937586.1
II-1
<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
Pursuant to the requirements of the Securities Act of 1933, the Registrant, the
EST Symphony Trust, Series 26, EquiT's II 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 20th day
of April, 2000.
EST SYMPHONY TRUST, SERIES 26, EquiT's II
(Registrant)
ING FUNDS DISTRIBUTOR, INC.
(Depositor)
By/S/PETER J. DEMARCO
----------------------------------------
Peter J. DeMarco
Senior Vice President
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.
Name Title Date
- ----------------- --------------------- -----------------
John J. Pileggi Chief Executive Officer and Director
Mitchell J. Mellen President and Director
Donald E. Brostrom Chief Financial Officer, Treasurer and
Director
Eric M. Rubin Director April 20, 2000
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.
937586.1
II-2
<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 , 2000, in this Registration Statement (Form S-6 No. 333-_____) of the EST
Symphony Trust, Series 26, EquiT's II.
ERNST & YOUNG LLP
New York, New York
, 2000
- -----------------
937586.1
II-3
