<PAGE>
As filed with the Securities and Exchange Commission on May 17, 2000
Registration No. 333-35204
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
PRE-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-6
----------------
For Registration Under the Securities Act
of 1933 of Securities of Unit Investment
Trusts Registered on Form N-8B-2
----------------
A. EXACT NAME OF TRUST:
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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and it is not soliciting an offer to buy +
+securities in any state where the offer or sale is not permitted. +
+ +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MAY 17, 2000
[LOGO OF EST]
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 JUNE , 2000
<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:
. 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.
. Unitholders will pay both Trust expenses and a share of the Fund's
expenses.
. 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.
. 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).
A-2
<PAGE>
. 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.
. 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.
. 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.
. 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:
. 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;
. adding an initial sales charge of 1.00% (1.010% of the net amount
invested); and
. 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.
A-3
<PAGE>
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 four options in receiving their terminating distributions:
. receive their distribution in-kind for Fund Shares and cash for the
Treasury Obligations, if they own at least 2,500 Units;
. receive in-kind Fund Shares at net asset value for their pro rata share
of the Securities;
. receive cash upon the liquidation of their pro rata share of the
Securities; or
. 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 (if one
is offered), 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:
<TABLE>
<CAPTION>
Name Address
---- -------
<S> <C>
ING Funds Distributor, Inc. ... 230 Park Avenue, New York, New York 10169
</TABLE>
A-4
<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.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
As a % Of Amount
Unitholder Transaction Expenses Initial Per
Fees paid directly from your investment Offering Price 100 Units
- --------------------------------------- -------------- ---------
<S> <C> <C> <C> <C>
Maximum Initial Sales Charge Imposed on
Purchase................................. 1.00%* $10.00
Maximum Deferred Sales Charge............. 4.75%** $47.50
---- ------
Total..................................... 5.75% $57.50
==== ======
Maximum Sales Charge Imposed Per Year on
Reinvested Dividends..................... 0% $ 0
Reimbursement to Sponsor for Estimated
Organizational Expenses.................. % $
<CAPTION>
Estimated Annual Fund Operating Expenses As a % Of Amount
Expenses that are deducted from Trust Initial Per
assets Net Assets 100 Units
- ---------------------------------------- -------------- ---------
<S> <C> <C> <C> <C>
Trustee's Fee............................. % $
Other Operating Expenses.................. % $
Portfolio Supervision, Bookkeeping and
Administrative Fees.................... .045% $.450
Underlying Fund Expenses***............... % $
---- ------
Total..................................... % $
==== ======
</TABLE>
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:
<TABLE>
<CAPTION>
1 year 3 years 5 years
------ ------- -------
<S> <C> <C> <C>
$ $ $
</TABLE>
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 $9.50 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 4.75%, if the Unit price is less
than $10.00 per Unit, the deferred sales charge will exceed 4.75%.
*** 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.
A-5
<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 Trust: , 2000
Aggregate Value of Securities:....... $
Number of Units:
Fractional Undivided Interest in
Trust:.............................. 1/
Public Offering Price per 100 Units:
Net Assets of the Trust............. $
Divided By Units (times 100)........
Plus Estimated Organization Costs*.. $
Plus Initial Sales Charge of 1.00%
of Public Offering Price(degrees).. $
Public Offering Price per 100
Units+............................. $
Sponsor's Repurchase Price And
Redemption Price per 100 Units++:... $
Minimum Income or Principal
Distribution per 100 Units:......... $1.00
</TABLE>
Liquidation Period: A 40 day period beginning on the first business day
following the Termination Date.
Termination Date: , 2012 or the disposition of the last security in the
Trust.
Mandatory Termination Date: The last day of the liquidation period.
Rollover Notification Date**: , 2012 or another date as determined by the
Sponsors.
Evaluation Time: 4:00 p.m. New York Time
Minimum Value of Trust: The Trust may be terminated if the value of the Trust
is less than 40% of the aggregate value of the Securities at the completion of
the initial offering period.
Cusip Numbers: Cash:
Reinvestment:
Trustee: The Bank of New York
Trustee's Fee per 100 Units: $
Other Fees and Expenses per 100 Units: $
Sponsor: ING Funds Distributor, Inc.
Portfolio Supervisor: ING Mutual Funds Management Co. LLC
Portfolio Supervisory, Bookkeeping And Administrative Fee per 100 Units:
Maximum of $.45 (see "Trust Expenses and Charges" in Part B).
Evaluator: Kenny S&P Evaluation Services
Evaluator's Fee for Each Evaluation of Treasury Obligations:
Expected Settlement Date of Securities in the Trust***: , 2000
Record Dates: First of January, annually
Distribution Dates: Fifteenth of January, annually
Deferred Sales Charge Payment Dates: The first business day of each month
commencing 1, 2000 through 1, 2001
- --------
* 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.
*** 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.
(degrees) 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 $47.50
(approximately 4.75% of the Initial Public Offering Price) is paid through a
reduction of the net asset value of the Trust by $9.50 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.
A-6
<PAGE>
EST SYMPHONY TRUST
SERIES 26
EquiT's II
STATEMENT OF FINANCIAL CONDITION, AS OF , 2000
ASSETS
<TABLE>
<S> <C>
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.................................................. $
=====
</TABLE>
- --------
Notes to Statement of Financial Condition:
The preparation of financial statements in accordance with generally accepted
accounting principles requires Trust management to make estimates and
assumptions that affect the reported amounts and disclosures. Actual results
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-7
<PAGE>
EST SYMPHONY TRUST
SERIES 26
EquiT's II
PORTFOLIO
AS OF , 2000
<TABLE>
<CAPTION>
Portfolio Name of Issuer and Percentage Of Cost of Securities
No. Title of Securities(1) the Trust to the Trust (2)
--------- --------------------------- ------------- ------------------
<C> <S> <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 $ .
A-8
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
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
A-9
<PAGE>
The ING SecurityNet Portfolio
The ING SecurityNet Portfolio--
Now even conservative investors can participate in the Internet's growth
potential.
Investing in the Power of the Internet.
EST Symphony Trust Series 26 EquiT's II is a new opportunity for individuals
who want to invest in one of the most dynamic innovations of this century,
while enjoying the kind of peace of mind that comes from owning U.S. Treasury
securities.* ING SecurityNet Portfolio is a unit investment trust that seeks
long-term capital appreciation by investing in a professionally managed mutual
fund consisting of U.S. and non-U.S. Internet technology companies. The Trust
adds a second component--a portfolio of U.S. Government zero-coupon
securities--which safeguards unitholders' principal investment. So, no matter
how the stock market performs over the life of the Trust, those who stay the
course will get back their principal investment.
The Fund Behind the Trust
The primary force behind the Trust is the ING Internet Fund. It's an actively
managed investment portfolio for individuals looking to participate in the
Internet's growth potential. To that end, the Fund's management team focuses on
specific themes that will drive the Internet in the future, such as Internet
infrastructure, Internet technology, E-commerce, Internet security, Content and
Access and Hosting. As an investor in the Trust, you'll enjoy all the benefits
of owning a professionally managed investment portfolio.
"By identifying tomorrow's success stories today, the overall portfolio
may help investors access above-average reward potential."
--Guy Uding
--Portfolio Management Team Leader
A Closer Look at the Trust's Design
An Investment Discipline for Growth . . .
Backed by a proprietary investment strategy, the Fund's managers carefully
analyze each stock before determining if it is right for the portfolio. This
results in a three-step process.
1. Select Investment Themes--By studying the industry and marketplace trends,
the team identifies broad investment themes that it believes will shape the
future of the Internet.
2. Conduct Extensive Company Research--Fundamental company research helps to
distinguish those firms, within the broad range of investment themes, that
have the potential for long-term profitability and staying power.
3. Apply an Industry-Specific Screening Process--The managers believe that
traditional investment standards are outdated when it comes to the uncharted
territory of the Internet. That's why they have developed a sophisticated
screening process to further analyze the potential of prospective holdings.
- --------
* Treasury zero-coupon securities are deeply discounted debt obligations that
pay no periodic cash interest. Because zero-coupon investments provide a one-
time lump-sum cash payment, their interim price movement before maturity tends
to be more volatile than those of interest bearing bonds.
(i)
<PAGE>
. . . Plus, a Portfolio of U.S. Treasury Securities for Safety
In addition to owning shares of a professionally managed mutual fund, the Trust
invests approximately half of its assets in a portfolio of U.S. Treasury
securities, specifically zero-coupon bonds. The key point about these
securities is that, upon maturity, the Trust will receive the full par value of
the securities. We consider this the "security net" component because it is
designed to secure the return of principal, as of the date of deposit, to
investors who hold their units until the Trust terminates.
ING SecurityNet Portfolio
ING SecurityNet Portfolio is an opportunity for conservative investors to seek
long-term capital appreciation by investing in the ING Internet Fund, a
concentrated Internet mutual fund managed by seasoned investment professionals.
If held to maturity, the Trust also offers safety of principal from its
investment in zero-coupon securities.
Risk Considerations:
An investment in Units of the Trust should be made with an understanding of the
risks associated with an investment in common stocks, which include the risks
that the financial condition of the issuer may become impaired or that the
general condition of the stock market may worsen, and the value of the equity
securities in the Fund's portfolio (and therefore the value of the Units) may
decline. Since the Fund, and therefore the Trust, is concentrated in Internet
and Internet-related companies, investors should recognize the risks associated
with the Internet, which may include government regulation and obsolete
products. The Fund carries more risk than funds invested across many industries
and may be subject to significant price fluctuations and stock price declines,
and may not be suitable for all investors. The Fund may also invest in foreign
securities. There is no assurance that the Fund will fulfill its investment
objectives. In addition, the amount realized upon the sale of a security at
termination might not be the highest price attained by an individual security
during the life of the Trust. These and other risks are more fully described in
the prospectus.
The Value of the ING SecurityNet Portfolio
Return of Principal--The Trust's portfolio of U.S. Government zero-coupon
securities safeguards your principal investment. So, no matter how the stock
market performs over the life of the Trust, as long as you hold your units
until termination, you are guaranteed to get back your principal investment as
of the day of deposit.
Investment Management Expertise--The underlying mutual fund is actively managed
by a team of three investment professionals at ING Investment Management in The
Hague, The Netherlands. The team is led by Guy Uding, whose investment
experience is supplemented by his background in computer science and software.
Daily Pricing & Liquidity--You have the flexibility to redeem your units at the
net asset value, less any deferred sales charges, any day the stock market is
open. Keep in mind that the daily price will fluctuate with the underlying
securities, and may be worth more or less than you originally paid.
Low Minimum Investment--The Trust is able to offer this portfolio comprised
primarily of Internet companies and Treasury zero-coupon securities for an
initial investment that's as low as $1,000.
(ii)
<PAGE>
Compounded Returns--You have the option to take advantage of the power of
compounding by having distributions, if any, automatically reinvested into the
Trust at no additional cost.
Annual Reporting--The Trustee will issue annual reports which will include all
necessary tax information relating to the Fund shares and zero-coupon
securities. Although no cash income is paid on the U.S. Treasury zero-coupon
securities, the original issue discount will be subject to income tax on an
annual basis.
Four Options at Termination--The Trust will terminate in approximately 12
years. When the Trust terminates, you have four options, which may be subject
to tax liability. You may:
1. Receive your distribution in cash,
2. Reinvest your proceeds into a new trust (if available) at a reduced sales
charge, or
3. Receive cash for the zero-coupon portion of the units and in-kind ING
Internet Fund shares at NAV for the mutual fund portion of the units. As
with any mutual fund investment, fund shares are subject to ongoing fees and
expenses (minimums apply).
4. Receive in-kind ING Internet Fund shares at NAV for both the zero-coupon
bond portion of the units and the mutual fund portion of the units.
(iii)
<PAGE>
[LOGO OF EST]
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
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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.
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
the 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.
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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").
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 April 30, 2000, the net assets for the Class A shares of the Fund were
$88,783,180 and the total net assets for all classes of shares of the Fund were
$176,402,785.
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
B-3
<PAGE>
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, 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.
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<PAGE>
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.
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
Shares(/1/) Shares(/1/) Shares(/1/) Shares(/1/)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
For a share of beneficial
interest outstanding
throughout the period:
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
B-5
<PAGE>
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.
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,
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<PAGE>
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
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
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<PAGE>
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, 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.
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<PAGE>
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 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,
B-9
<PAGE>
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
B-10
<PAGE>
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 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.
B-11
<PAGE>
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
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.
B-12
<PAGE>
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 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.
B-13
<PAGE>
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.
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.
B-14
<PAGE>
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 5.75% of the Public
Offering Price (6.101% of the net amount invested in Securities). The initial
sales charge is computed by deducting the deferred sales charge ($47.50 per 100
Units) from the aggregate maximum sales charge of 5.75%. 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 $9.50 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, 2001. 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 $47.50 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.
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.
B-15
<PAGE>
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:
<TABLE>
<CAPTION>
Approximate
Reduced
Sales
Number of Units Charge
--------------- -----------
<S> <C>
10,000 but less than 25,000................................... 5.25%
25,000 but less than 50,000................................... 4.75%
50,000 but less than 75,000................................... 3.75%
75,000 but less than 100,000.................................. 3.25%
</TABLE>
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 4.75% 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 4.75% 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 broker-dealers
who in each case either charge periodic fees for financial planning, investment
B-16
<PAGE>
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 5.00% 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.
B-17
<PAGE>
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 $47.50 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.
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
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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.
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;
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(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., 230 Park Avenue, New York, New York 10169. 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) 5.75% sales charge (or 6.101% of the net 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.
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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 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.
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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 by 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.
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
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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
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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 four 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 four options
by notifying the Trustee by returning a properly completed election request:
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 (or option 2) 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 Fund Shares such Unitholder's pro rata share of the net
asset value of the Trust on such date distributed within three business
days next following the commencement of the Liquidation Period. The Fund
Shares distributed will be at net asset value and will not be subject to a
sales charge;
3. 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
4. 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 3).
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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 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, option 2 or option 3.
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 Groep N.V. ING Groep N.V., among the leading
global financial services organizations, is engaged in asset management,
banking and insurance activities in 60 countries worldwide with over 90,000
employees. The Sponsor is a member of the National Association of Securities
Dealers, Inc.
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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
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
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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 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
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<PAGE>
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.
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
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<PAGE>
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
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<PAGE>
Trust. 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
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<PAGE>
"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.
TAX STATUS
This is a general discussion of certain Federal income tax consequences of
the purchase, ownership and disposition of the Units by U.S. citizens and
residents and corporations organized in the United States. The summary is
limited to investors who hold the Units as "capital assets" (generally,
property held for investment) within the meaning of the Internal Revenue Code
and does not address the tax consequences of Units held by dealers, financial
institutions or insurance companies. 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
B-31
<PAGE>
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.
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.
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 tax 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 taxable to its shareholders as
long-term capital gain, regardless of the length of time the shareholders have
held their investment in the Fund.
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
B-32
<PAGE>
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 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.
B-33
<PAGE>
OTHER MATTERS
LEGAL OPINIONS. The legality of the Units offered hereby and certain matters
relating to Federal tax law have been passed upon by Battle Fowler LLP, 75 East
55th Street, New York, New York 10022 as counsel for the 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 Groep N.V. 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 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.
B-34
<PAGE>
No person is authorized to give any information or to make any
representations not contained in this Prospectus and you should not rely on
any other information. The Trust is registered as a unit investment trust
under the Investment Company Act of 1940. Such registration does not imply
that the Trust or any of its Units have been guaranteed, sponsored,
recommended or approved by the United States or any state or any agency or
officer thereof.
---------------
This Prospectus does not constitute an offer to sell, or a solicitation of
an offer to buy, securities in any state to any person to whom it is not
lawful to make such offer in such state.
Table of Contents
<TABLE>
<CAPTION>
Title Page
- ----- ----
<S> <C>
PART A
Investment Summary......................................................... A-2
Fee Table.................................................................. A-5
Summary of Essential Information........................................... A-6
Statement of Financial Condition........................................... A-7
Portfolio.................................................................. A-8
Report of Independent Auditors............................................. A-9
PART B
The Trust.................................................................. B-1
Risk Considerations........................................................ B-11
Public Sale of Units....................................................... B-15
Rights of Unitholders...................................................... B-18
Liquidity.................................................................. B-20
Administration of the Trust................................................ B-22
Trust Expenses and Charges................................................. B-27
Reinvestment Plan.......................................................... B-28
Exchange Privilege and Conversion Offer.................................... B-29
Tax Status................................................................. B-31
Other Matters.............................................................. B-34
</TABLE>
[LOGO OF EST]
EST SYMPHONY TRUST
SERIES 26
EquiT's II
(A UNIT INVESTMENT TRUST)
PROSPECTUS
DATED: JUNE , 2000
SPONSOR:
ING FUNDS DISTRIBUTOR, INC.
230 Park Avenue
New York, New York 10169
(212) 309-8650
TRUSTEE:
THE BANK OF NEW YORK
101 Barclay Street
New York, New York 10286
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. 333-35204), and the Investment Company Act of
1940 (file no. 811-2868), and to which reference is made. Information may be
reviewed and copied at the Commission's Public Reference Room, and information
on the Public Reference Room may be obtained by calling the SEC at 1-202-942-
8090. Copies may be obtained from the SEC by:
. visiting the SEC Internet address: http://www.sec.gov
. electronic request (after paying a duplicating fee) at the following E-
mail address: [email protected]
. writing: Public Reference Section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549-0102
<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:
<TABLE>
<C> <C> <S>
*99.1.1 -- Reference Trust Agreement including certain amendments to the
Trust Indenture and Agreement referred to under Exhibit 99.1.1.1
below.
*99.1.1.1 -- Form of Trust Indenture and Agreement.
99.1.3.5 -- 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).
</TABLE>
- --------
* To be filed by Amendment.
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
17th day of May, 2000.
EST SYMPHONY TRUST, SERIES 26, EquiT's II
(Registrant)
ING FUNDS DISTRIBUTOR, INC.
(Depositor)
/s/ Peter J. DeMarco
By ____________________________________
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.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
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 May 17, 2000
</TABLE>
/s/ Peter J. DeMarco
By __________________________________
Peter J. DeMarco
as Senior Vice President
and Attorney-In-Fact*
- --------
* An executed copy of the Power of Attorney was filed as Exhibit 99.6.0 to Form
S-6 Registration Statement No. 333-31048 on February 24, 2000.
II-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. 333-35204) of the EST
Symphony Trust, Series 26, EquiT's II.
Ernst & Young LLP
New York, New York
, 2000
II-3
