<PAGE>
As filed with the Securities and Exchange Commission on December 22, 1995
Registration No. 33-50096
==========================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________
POST-EFFECTIVE AMENDMENT NO. 3
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
___________________
A. Exact Name of Trust:
NATIONAL EQUITY TRUST,
Utility Series 2
B. Name of depositor:
PRUDENTIAL SECURITIES INCORPORATED
C. Complete address of depositor's principal executive office:
One Seaport Plaza
199 Water Street
New York, New York 10292
D. Name and complete address of agent for service:
Copy to:
LEE B. SPENCER, JR. ESQ. KENNETH W. ORCE, ESQ.
PRUDENTIAL SECURITIES INCORPORATED CAHILL GORDON & REINDEL
One Seaport Plaza 80 Pine Street
199 Water Street New York, New York 10005
New York, New York 10292
It is proposed that this filing will become effective (check appropriate box.)
___
/ / immediately upon filing on (date) pursuant to paragraph (b);
___
/X / on December 31, 1995 pursuant to paragraph (b);
___
/__/ 60 days after filing pursuant to paragraph (a);
___
/__/ on (date) pursuant to paragraph (a) of rule 485.
<PAGE>
CUSIP: 635870116R
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National Equity Trust
Utility Series 2
(LOGO)
- --------------------------------------------------------------------------------
The objectives of the Trust are growth in both income and capital achieved by
investment in a portfolio of equity securities issued by electric and electric
and gas utility companies selected by the Sponsor. The Sponsor has selected the
securities in the portfolio based on its belief, as of the Date of Deposit, that
each such security has potential for greater total return that the stock market
as a whole, as measured by such indexes as the S&P 400, S&P 500 and Dow Jones
Industrial Average, over the five year life of the Trust. The value of the Units
of the Trust will fluctuate with the value of the portfolio of underlying
Securities. The Trust will dispose of a security when Prudential Securities'
research department's rating on a Security falls below a specified minimum
level. (See ``Sponsor--Responsibility.'')
Unit Holders may elect, prior to the Termination Date (five years after the
creation of the Trust), among the following options: (1) receiving their pro
rata shares of the underlying Securities in kind, plus cash and (2) receiving
cash only, following the liquidation of their pro rata shares of the underlying
Securities.
The minimum purchase is $1,000 except that the minimum purchase in connection
with an Individual Retirement Account (IRA) or other tax-deferred retirement
plan is $250.
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Sponsor:
Prudential Securities (LOGO)
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
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Please read and retain Prospectus dated
this Prospectus for future reference December 31, 1995
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(THIS PAGE INTENTIONALLY LEFT BLANK)
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This Prospectus does not contain all of the information with respect to the
investment company set forth in its registration statement and exhibits relating
thereto which have been filed with the Securities and Exchange Commission,
Washington, D.C. under the Securities Act of 1933 and the Investment Company Act
of 1940, and to which reference is hereby made.
- --------------------------------------------------------------------------------
THE NATIONAL EQUITY TRUST, Utility Series 2 (the ``Trust'') is composed of
equity securities (the ``Securities'' or ``Security'', as the context requires).
Subsequent to the Date of Deposit, the Sponsor may, but is not obligated to,
deposit additional Securities, maintaining the proportionate relationship of the
number of shares of each Security in the portfolio of the Trust immediately
prior to such deposit thereby creating additional Units which Units the Sponsor
intends to offer by means of this Prospectus. (See Part B--``The Trust'')
THE OBJECTIVES of the Trust are growth in both income and capital achieved
by investment in a portfolio of equity securities issued by electric and
electric and gas utility companies selected by the Sponsor. The Sponsor has
selected the Securities in the portfolio based on its belief, as of the Date of
Deposit, that each such stock has potential for greater total return than the
stock market as a whole, as measured by such indexes as the S&P 400, S&P 500 and
Dow Jones Industrial Average, over the five-year life of the Trust (See
``Summary of Essential Information'' for the Termination Date of the Trust).
There can be no assurance that such objectives can be realized. The factors
affecting the value of the Securities are those factors that have an impact upon
the value of equity securities generally and particularly those factors that
affect the economic and financial condition of each issuer of a Security. The
dividend paying ability of a company and the potential for the increase of such
dividends were among the factors considered by the Sponsor in determining to
include a Security issued by that company in the Portfolio of the Trust.
The Sponsor selected the Securities for inclusion in the Trust as follows:
As of the Date of Deposit, the Sponsor's utility industry analysts selected
those issues that they considered undervalued and capable of outperforming each
of the S&P 400, S&P 500 and the Dow Jones Industrial Average after considering
the fundamental sales and earnings outlook for each of these companies over the
next five years; the price/earnings multiple at which each company was presently
selling relative to the broad market averages; prospects for a favorable change
in that price/earnings multiple; the relative liquidity of each issue as
measured by its capitalization and the number of freely floating shares; the
degree of risk and the impact of regulatory action on the issuers; the degree of
risk associated with an investment in each of the issues included in the
portfolio and the yield on the securities of an issuer relative to the broad
market averages and to long term debt yields.
DISTRIBUTIONS of dividends received (net of expenses) and distributions of
capital, if any, by the Trust will be made on or shortly after the Monthly
Distribution Date to Unit Holders of record on the Record Date immediately
preceding such Monthly Distribution Date unless the Sponsor determines that such
distribution is likely to result in adverse federal income tax consequences to
the Trust. (See Part B--``Rights of Unit Holders--Distributions'') Unit Holders
may elect to reinvest distributions pursuant to the reinvestment Program. The
dividends are taxable to Unit Holders whether paid in cash or in Units pursuant
to the reinvestment Program (see Part B--``Rights of Unit Holders--Reinvestment
Program'').
PUBLIC OFFERING PRICE of the Units of the Trust is equal to the aggregate
value of the underlying Securities in the Trust's portfolio divided by the
number of Units outstanding in the Trust, plus a sales charge as set forth in
the table herein. A proportionate share of amounts, if any, in the Income
Account and dividends on securities trading ex-dividend is also added to the
Public Offering Price. (See Part B--``Public Offering of Units--Public Offering
Price--Volume Discount.'')
THE SPONSOR, although not obligated to do so, presently intends to maintain
a secondary market for the Units in the Trust as more fully described under Part
B--``Public Offering of Units--Secondary Market.'' If such a market is not
maintained, a Unit Holder will be able to dispose of his Units only by tendering
his Units to the Trustee for redemption. (See Part B--``Rights of Unit
Holders--Redemption--Computation of Redemption Price per Unit.'')
On October 21, 1993, Prudential Securities Incorporated entered into an
omnibus settlement with the Securities and Exchange Commission (``SEC''), state
securities regulators (with the exception of the Texas Securities Commissioner
who joined the settlement on January 18, 1994) and the National Association of
Securities Dealers, Inc. (``NASD'') to resolve allegations that from 1980
through 1990 Prudential Securities Incorporated sold certain limited partnership
interests in violation of securities laws to persons for whom such securities
were not suitable and misrepresented the safety, potential
A-i
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returns and liquidity of these investments. Without admitting or denying the
allegations asserted against it, Prudential Securities Incorporated consented to
the entry of an SEC Administrative Order which stated that the conduct of
Prudential Securities Incorporated violated the federal securities laws,
directed Prudential Securities Incorporated to cease and desist from violating
the federal securities laws, pay civil penalties, and adopt certain remedial
measures to address the violations.
Pursuant to the terms of the SEC settlement, Prudential Securities
Incorporated agreed to the imposition of a $10,000,000 civil penalty,
established a settlement fund in the amount of $330,000,000 and procedures to
resolve legitimate claims for compensatory damages by purchasers of the
partnership interests. Prudential Securities Incorporated has agreed to provide
additional funds, if necessary, for the purpose of the settlement fund. The
settlement with the state securities regulators included an agreement to pay a
penalty of $500,000 per jurisdiction. Prudential Securities Incorporated
consented to a censure and to the payment of a $5,000,000 fine in settling the
NASD action.
In October 1994, a criminal complaint was filed with the United States
Magistrate for the Southern District of New York alleging that Prudential
Securities Incorporated committed fraud in connection with the sale of certain
limited partnership interests in violation of federal securities laws. An
agreement was simultaneously filed to defer prosecution of these charges for a
period of three years from the signing of the agreement, provided that
Prudential Securities Incorporated complies with the terms of the agreement. If,
upon completion of the three year period, Prudential Securities Incorporated has
complied with the terms of the agreement, no prosecution will be instituted by
the United States for the offenses charged in the complaint. If on the other
hand, during the course of the three year period, Prudential Securities
Incorporated violates the terms of the agreement, the U.S. Attorney can then
elect to pursue these charges. Under the terms of the agreement, Prudential
Securities Incorporated agreed, among other things, to pay an additional
$330,000,000 into the fund established by the SEC to pay restitution to
investors who purchased certain Prudential Securities Incorporated limited
partnership interests.
TERMINATION OPTIONS--1. A Unit Holder who so elects by notifying the Trustee
prior to the Notification Date of the Trust, (see ``Summary of Essential
Information'') and whose interest in the Trust entitles him to receive at least
one share of each underlying Security, will have his Units redeemed in kind on
such Notification Date by distribution of the Unit Holder's pro rata share of
the net asset value of the Trust on such date distributed in kind to the extent
represented by whole shares of underlying Securities and the balance in cash
within 7 calendar days following the Notification Date. Unit Holders
subsequently selling such distributed Securities will incur brokerage costs when
disposing of such Securities.
2. A Unit Holder may also elect to receive in cash such Unit Holder's
pro rata share of the net asset value of the Trust derived from the sale by
the Sponsor as agent of the Trustee of the underlying Securities over a
period not to exceed 20 business days immediately following the Notification
Date. Amounts received over such 20 business day period representing the
proceeds of the underlying Securities sold will be held by the Trustee in
accounts which are non-interest bearing to Unit Holders and which are
available for use by the Trustee pursuant to normal banking procedures. The
Unit Holder's Redemption Price per Unit on the settlement date of the last
trade of a Security in the Trust will be distributed to such Unit Holder
within 7 days of the settlement of the trade of the last Security to be
sold.
The Sponsor has agreed to effect the sales of underlying Securities for the
Trustee in the case of the second option over a period not to exceed 20 business
days immediately following the Notification Date free of brokerage commissions.
The Sponsor, on behalf of the Trustee, will sell, unless prevented by unusual
and unforeseen circumstances, such as, among other reasons, a suspension in
trading of a Security, the close of a stock exchange, outbreak of hostilities
and collapse of the economy, on each business day during the 20 business day
period at least a number of shares of each Security which then remains in the
portfolio equal to the number of such shares in the portfolio at the beginning
of such day multiplied by a fraction the numerator of which is one and the
denominator of which is the number of days remaining in the 20 business day
sales period. The Redemption Price per Unit upon the settlement of the last sale
of Securities during the 20 business day period will be distributed in
redemption of the Unit Holder's interest in the Trust.
The sale of Securities during the 20 business day period following the
Notification Date; depending on the number of sales required, the prices of and
demand for Securities, 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 a 20 business day period as described above is in the best
interest of Unit Holders and may mitigate the negative market price consequences
stemming from the trading of large amounts of Securities. The Sponsor, in
implementing such sales of Securities on behalf
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of the Trustee, will seek to maximize the sales proceeds and will act in the
best interests of the Unit Holders. There can be no assurance, however, that any
adverse price consequences of heavy trading will be mitigated.
Unit Holders who do not make any election will be deemed to have elected to
receive the Redemption Price per Unit in cash (option number 2).
SPECIAL CONSIDERATIONS. Since the Trust consists primarily of common stocks,
an investment in Units of the Trust should be made with an understanding of the
risks inherent in any investment in common stocks. These include risks
associated with the rights to receive payments from the issuer which are
generally inferior to creditors of, or holders of debt obligations or preferred
stocks issued by, the issuer. Holders of common stocks have a right to receive
dividends only when and if, and in the amounts, declared by the issuer's board
of directors and to participate in amounts available for distribution by the
issuer only after all other claims on the issuer have been paid or provided for.
By contrast, holders of preferred stocks have the right to receive dividends at
a fixed rate when and as declared by the issuer's board of directors, normally
on a cumulative basis. Dividends on cumulative preferred stock must be paid
before any dividends are paid on common stock and any cumulative preferred stock
dividend which has been omitted is added to future dividends payable to the
holders of such cumulative preferred stock. Preferred stocks are also entitled
to rights on liquidation which are senior to those of common stocks. For these
reasons, preferred stocks generally entail less risk than common stocks.
Moreover, common stocks do not represent an obligation of the issuer and
therefore do not offer any assurance of income or provide the degree of
protection of capital debt securities. The issuance of debt securities or even
preferred stock by an issuer will create prior claims for payment of principal,
interest and dividends which could adversely affect the ability and inclination
of the issuer to declare or pay dividends on its common stock or the rights of
holders of common stock with respect to assets of the issuer upon liquidation or
bankruptcy. Further, unlike debt securities which typically have a stated
principal amount payable at maturity (which value will be subject to market
fluctuations prior thereto), common stocks have neither a fixed principal amount
nor a maturity and have values which are subject to market fluctuations for as
long as the common stocks remain outstanding. The value of the common stocks in
the Trust thus may be expected to fluctuate over the life of the Trust to values
higher or lower than those prevailing on the Date of Deposit.
The value of the Units will fluctuate depending on all the factors that have
an impact on the economy and the equity markets. These factors similarly impact
on the ability of an issuer to pay dividends. The Trust is not a ``managed''
registered investment company and Securities will not be sold by the Trustee as
a result of ordinary market fluctuations. Potential investors should be aware
that the Sponsor's analysts may change their recommendations relating to the
Securities during the life of the Trust and therefore should consult their own
financial advisers with regard to a purchase of Units. On the Date of Deposit
each Security in the Trust was rated ``buy'' by the Research Department of
Prudential Securities Incorporated. The Trustee will dispose of a security and
distribute the proceeds of such disposition to Unit Holders upon the downgrading
of the rating on a Security below a specified minimum level. See
``Sponsor--Responsibility'' for a description of the Prudential Securities'
rating system, the minimum disposition level and the circumstances under which
substitute Securities may be purchased. The Sponsor may direct the disposition
by the Trustee of Securities only when the occurrence of certain events,
including such downgrading, and under certain circumstances may direct the
purchase of substitute Securities. (See ``Sponsor--Responsibility.'')
Special Risk Considerations of the Electric and Electric and Gas Utility
Industry
The Trust is concentrated in common stocks of electric utilities and
combination electric and gas utility companies, which comprise as of December 8,
1994, 100% of the Portfolio. In view of this, an investment in the Trust should
be made with an understanding of the problems inherent in that industry. These
problems include difficulty in obtaining an adequate return on invested capital,
difficulty in financing large construction programs, restrictions on operations
and increased capital and operating costs attributable to environmental
considerations (including recently enacted Federal legislation to overhaul the
Clean Air Act and reduce emissions that are believed to cause acid rain),
difficulty of raising capital in adequate amounts on reasonable terms in
volatile securities markets, increased costs of certain types of fuel, the
occasionally reduced availability and high cost of natural gas for resale, the
effects of energy conservation, competitive inroads being made by non-utility
generators of electric power, and problems associated with the regulation and
operation of nuclear power plants. There are substantial differences between the
regulatory policies and practices of various jurisdictions, and any given
regulatory agency may make major shifts in policy from time to time. There is no
assurance that regulatory authorities will in the future grant rate increases or
that any such increases will be adequate to permit the payment of dividends on
common stocks. There is no assurance that regulatory authorities will not order
rate reductions in the future or disallowances from rate base due to regulators'
determination of utility excess capacity.
A-iii
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<PAGE>
Furthermore, future regulatory legislation may make it even more difficult for
these utilities to obtain adequate rate increases. Certain of the issuers of the
securities in the Portfolio own or operate nuclear generating facilities.
Governmental authorities may from time to time review existing, and impose
additional, requirements governing the licensing, construction, operation and
decommissioning of nuclear power plants. Certain of the issuers of the
securities in the Portfolio have made investments in non-utility businesses for
the purpose of diversification, which could increase the volatility of their
total corporate earnings and could result in unexpected losses or asset
writedowns on these non-utility operations. Changes in accounting rules and
regulations may cause significant variation in asset values and lead to
writeoffs and writedowns. Finally, the electric utilities industry, which
includes companies engaged in the production, transmission or distribution of
electric energy, has experienced significant changes in recent years.
Each of the problems referred to above could adversely affect the ability
and the inclination of public utilities to declare or to pay dividends and the
ability of holders of common stock to realize any value from the assets of the
issuer upon liquidation or bankruptcy. All of the electric and combination
utilities which are issuers of the common stocks in the Portfolio have been
experiencing one or more of these problems in varying degrees. The price
movements of utility common stocks are highly correlated with changes in the
yields on long-term fixed income securities and utility stocks are also
vulnerable to a general stock market decline. There can be no guarantee that the
direction of interest-rate movements over the coming years will not adversely
impact the values of the common stock issued by these companies.
Portfolio Summary
The Portfolio contains issues of Securities 100%* of which are listed on the
New York Stock Exchange.
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* Percentages computed on the basis of the aggregate net asset value of the
Securities in the Trust on December 12, 1995.
A-iv
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<PAGE>
SUMMARY OF ESSENTIAL INFORMATION
NATIONAL EQUITY TRUST,
UTILITY SERIES 2
As Of December 12, 1995
<TABLE>
<S> <C>
AGGREGATE VALUE OF SECURITIES.............................................................. $40,460,460.18
NUMBER OF UNITS............................................................................ 4,116,258.00
FRACTIONAL UNDIVIDED INTEREST IN THE TRUST REPRESENTED BY EACH UNIT........................ 1/4,116,258th
PUBLIC OFFERING PRICE
Aggregate net asset value of Securities in the Trust.................................. $40,624,794.00
Divided by 4,116,258 Units............................................................ $ 9.87
Plus sales charge of 4% of Public Offering Price (4.167% of net amount invested in
Securities)(2)...................................................................... $ .41
--------------
Public Offering Price per Unit(3)..................................................... $ 10.28
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SPONSOR'S REPURCHASE PRICE PER UNIT(3)..................................................... $ 9.87
--------------
--------------
REDEMPTION PRICE PER UNIT(3)............................................................... $ 9.87
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RECORD DATES: The first day of each month.
MONTHLY DISTRIBUTION DATES: The fifteenth day of each month.
ESTIMATED ANNUAL INCOME PER 100 UNITS(4)................................................... $ 59.14
Less estimated annual expenses per 100 Units.......................................... $ 1.10
--------------
ESTIMATED NET ANNUAL INCOME PER 100 UNITS.................................................. $ 58.04
--------------
--------------
MONTHLY INCOME DISTRIBUTIONS(4):
$4.92 per 100 Units
MINIMUM PRINCIPAL DISTRIBUTION: No distribution need be made from the Principal Account if the balance
therein is less than $1 per 100 Units
ESTIMATED TRUSTEE'S FEES AND EXPENSES: $1.10 per 100 Units
EVALUATION TIME: 4:00 P.M. New York Time
NOTIFICATION DATE: August 13, 1997
TERMINATION DATE: September 18, 1997
MINIMUM VALUE OF TRUST: The Indenture may be terminated if the value of the Trust is less than 40% of the
value as of the deposit of Securities calculated after the last deposit of Securities.
DATE OF DEPOSIT: September 17, 1992(1)
</TABLE>
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(1) The Date of Deposit. The Date of Deposit is the date on which the Trust
Indenture and Agreement was signed and the initial deposit of Securities with
the Trustee was made.
(2) The sales charge will be reduced for volume purchases. See ``Public
Offering Price--Volume discount''.
(3) This price is computed as of the Date of Deposit and may vary from such
price on the date of this Prospectus or any subsequent date.
(4) Based on the latest quarterly declaration.
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<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
THE UNIT HOLDERS, SPONSOR AND TRUSTEE
NATIONAL EQUITY TRUST
UTILITY SERIES 2
We have audited the statement of financial condition and schedule of
portfolio securities of the National Equity Trust Utility Series 2 as of
August 31, 1995, and the related statements of operations and changes in net
assets for the years ended August 31, 1995 and 1994 and for the period from
September 17, 1992 (date of deposit) to August 31, 1993. These financial
statements are the responsibility of the Trustee (see Footnote (a)(1)). Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are 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 of the securities owned as of
August 31, 1995 as shown in the statement of financial condition and
schedule of portfolio securities by correspondence with The Chase Manhattan
Bank N.A., (formerly the United States Trust Company of New York), the
Trustee. An audit also includes assessing the accounting principles used
and the significant estimates made by the Trustee, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the National Equity
Trust Utility Series 2 as of August 31, 1995, and the results of its
operations and the changes in its net assets for the years ended August 31,
1995 and 1994 and for the period from September 17, 1992 (date of deposit)
to August 31, 1993 in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
December 11, 1995
New York, New York
</AUDIT-REPORT>
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STATEMENT OF FINANCIAL CONDITION
NATIONAL EQUITY TRUST
UTILITY SERIES 2
August 31, 1995
TRUST PROPERTY
<TABLE>
<S> <C>
Investments in securities at market value (cost
$42,478,427) (Note (a) and Schedule of Portfolio
Securities Notes (1) and (2)) $39,521,334
Accrued dividend receivable 225,532
Cash 4,028
Total 39,750,894
LIABILITY AND NET ASSETS
Less Liability:
Payable to Unit Holders 1,655
Net Assets:
Balance applicable to 4,471,984 Units of fractional
undivided interest outstanding (Note (c)):
Capital, less net unrealized market
depreciation of $2,957,093 $39,521,334
Undistributed principal and net investment income
(Note (b)) 227,905
Net assets $39,749,239
Net asset value per Unit ($39,749,239 divided by 4,471,984 Units) $ 8.8885
</TABLE>
See notes to financial statements
A-2
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STATEMENTS OF OPERATIONS
NATIONAL EQUITY TRUST
UTILITY SERIES 2
<TABLE>
<CAPTION>
For the period from
For the years ended September 17, 1992
August 31, (date of deposit) to
1995 1994 August 31, 1993
<S> <C> <C> <C>
Investment income - dividends $3,000,947 $ 3,891,906 $3,574,236
Less Expenses:
Trust fees and expenses 59,011 59,409 57,197
Total expenses 59,011 59,409 57,197
Investment income - net 2,941,936 3,832,497 3,517,039
Net gain (loss) on investments:
Realized loss on securities
sold or redeemed (1,298,923) (362,169) -
Net unrealized market appre-
ciation (depreciation) 3,756,201 (16,963,128) 10,249,833
Net gain (loss) on
investments 2,457,278 (17,325,297) 10,249,833
Net increase (decrease) in net
assets resulting from
operations $5,399,214 $(13,492,800) $13,766,872
</TABLE>
See notes to financial statements
A-3
<PAGE>
STATEMENTS OF CHANGE IN NET ASSETS
NATIONAL EQUITY TRUST
UTILITY SERIES 2
<TABLE>
<CAPTION>
For the period from
For the years ended September 17, 1992
August 31, (date of deposit) to
1995 1994 August 31, 1993
<S> <C> <C> <C>
Operations:
Investment income - net $ 2,941,936 $ 3,832,497 $3,517,039
Realized loss on securities
sold or redeemed (1,298,923) (362,169) -
Net unrealized market appreciation
(depreciation) 3,756,201 (16,963,128) 10,249,833
Net increase (decrease) in
net assets resulting
from operations 5,399,214 (13,492,800) 13,766,872
Less Distributions to Unit Holders:
Principal (1,547,307) - -
Investment income - net (2,922,010) (3,839,248) (3,222,219)
Total distributions (4,469,317) (3,839,248) (3,222,219)
Capital Share Transactions:
Creation of 7,317,792 additional
Units - - 72,962,023
Redemption of 1,117,996 Units,
1,702,403 Units and 50,818
Units, respectively (9,931,016) (17,089,762) (498,431)
Investment income on redemptions (31,044) (47,556) (1,402)
Net capital share
transactions (9,962,060) (17,137,318) 72,462,190
Net (decrease) increase in net assets (9,032,163) (34,469,366) 83,006,843
Net assets:
Beginning of period (Note (c)) 48,781,402 83,250,768 243,925
End of period (including undis-
tributed principal and net
investment income of $227,905,
$1,786,652, and undistributed
net investment income of
$293,418, respectively $39,749,239 $48,781,402 $83,250,768
</TABLE>
See notes to financial statements
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NOTES TO FINANCIAL STATEMENTS
NATIONAL EQUITY TRUST
UTILITY SERIES 2
August 31, 1995
(a) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Trust is registered under the Investment Company Act of 1940 as a
Unit Investment Trust. The following is a summary of the significant
accounting policies of the Trust:
(1) Basis of Presentation
The Trustee has custody of and responsibility for all accounting
and financial books, records, financial statements and related
data of the Trust and is responsible for establishing and
maintaining a system of internal controls directly related to, and
designed to provide reasonable assurance as to the integrity and
reliability of, financial reporting of the Trust. The Trustee is
also responsible for all estimates and accruals reflected in the
Trust's financial statements. The Trustee determines the price
for each underlying Security included in the Trust's Schedule of
Portfolio Securities on the basis set forth in Part B of this
Prospectus, "Public Offering of Units - Public Offering Price".
Under the Securities Act of 1933 ("the Act"), as amended, the
Sponsor is deemed to be an issuer of the Trust Units. As such,
the Sponsor has the responsibility of an issuer under the Act with
respect to financial statements of each Trust included in the
Registration Statement under the Act and amendments thereto.
(2) Investments
Investments are stated at market value, as determined by the
Trustee, based on the closing sales price on the New York Stock
Exchange, as set forth in Part B of this Prospectus, "Public
Offering of Units - Public Offering Price." Cost of investments
are determined on the average cost method.
(3) Income Taxes
No provision for Federal income taxes has been made in the
accompanying financial statements because the Trust has elected
and qualifies, and intends to continue to qualify, for the tax
treatment applicable to "regulated investment companies" under the
Internal Revenue Code. Under existing law, if the Trust so
qualifies, it will not be subject to federal income tax on net
income and capital gains that are distributed to Unit Holders.
(4) Expenses
The Trust pays an annual Trustee's fee, estimated expenses, and may
incur additional charges as explained under "Expenses and Charges"
in Part B of this Prospectus.
(b) DISTRIBUTIONS
Dividends and principal, if any, received by the Trust are distributed
to the Unit Holders monthly, after deducting applicable expenses (See
"Rights of Unit Holders - Distributions").
A-5
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NATIONAL EQUITY TRUST
UTILITY SERIES 2
August 31, 1995
(c) COST TO INVESTORS
The cost to investors represents the aggregate initial public offering
price as of the respective dates of deposit.
A reconciliation of the cost of Units to investors to the net amount
applicable to investors as of August 31, 1995 follows:
<TABLE>
<S> <C>
Original cost to investors $76,134,186
Less: Gross underwriting commissions (sales charge) (2,928,238)
Net cost to investors 73,205,948
Cost of securities sold or redeemed (30,727,521)
Net unrealized market depreciation (2,957,093)
Net amount applicable to investors $39,521,334
</TABLE>
(d) OTHER INFORMATION
Selected data for a Unit of the Trust during each period:
<TABLE>
<CAPTION>
For the period from
For the years ended September 17, 1992
August 31, (date of deposit) to
1995 1994 August 31, 1993
<S> <C> <C> <C>
Principal distributions
during period $ .2768 $ - $ -
Net investment income
distributions during
period $ .5772 $ .6049 $ .4885
Net assets at end of
period $8.8885 $8.7266 $11.4161
Trust Units outstanding
at end of period 4,471,984 5,589,980 7,292,383
</TABLE>
A-6
<PAGE>
SCHEDULE OF PORTFOLIO SECURITIES
NATIONAL EQUITY TRUST
UTILITY SERIES 2
August 31, 1995
<TABLE>
<CAPTION>
Port-
folio Current Annual Number of Dividend per Market Value Market
No. Issuer of Securities Shares Share <F1> Per Share(s)<F2> Value<F2><F3>
<C> <S> <C> <C> <C> <C>
1. Boston Edison Company 69,600 $1.82 $25.625 $ 1,783,500
2. Detroit Edison Company 52,200 2.06 30.625 1,598,625
3. Dominion Resources Inc. 52,200 2.58 36.125 1,885,725
4. Entergy Corporation 52,200 1.80 24.000 1,252,800
5. Florida Progress Corporation 52,200 1.76 38.875 2,029,275
6. FPL Group, Inc. 52,200 2.02 30.375 1,585,575
7. General Public Utilities Corporation 69,600 1.88 28.625 1,992,300
8. Kansas City Power & Light Company 69,600 1.56 22.375 1,557,300
9. LG & E Energy Corp 52,200 2.15 38.750 2,022,750
10. Long Island Lighting Company 69,600 1.78 17.000 1,183,200
11. New England Electric System 52,200 2.36 35.000 1,827,000
12. New York State Electric & Gas
Corporation 52,200 1.40 24.125 1,259,325
13. Northeast Utilities<F4> 69,600 1.76 22.875 1,592,100
14. Pacific Gas & Electric Company<F4> 52,200 1.96 28.750 1,500,750
15. PP&L Resources Inc.<F6> 69,600 1.67 21.875 1,522,500
16. San Diego Gas & Electric Company 69,600 1.00 16.625 1,157,100
17. SCANA Corp. 69,600 1.56 21.750 1,513,800
18. SCECORP 69,600 1.44 23.250 1,618,200
19. The Southern Company<F4> 104,400 1.22 21.125 2,205,450
20. TECO Energy, Inc. 69,600 1.06 21.625 1,505,100
21. Texas Utilities Company 34,800 3.08 34.750 1,209,300
22. Union Electric Company 52,200 2.44 35.625 1,859,625
23. Western Resources 52,200 2.02 30.250 1,579,050
24. Cinergy Corp.<F5> 89,014 1.72 25.625 2,280,984
$39,521,334
</TABLE>
A-7
<PAGE>
NOTES TO SCHEDULE OF PORTFOLIO SECURITIES
NATIONAL EQUITY TRUST
UTILITY SERIES 2
August 31, 1995
The Trust will terminate on September 18, 1997. The Trust may be
terminated sooner on the basis set forth under "Amendment and
Termination of the Indenture - Termination."
<F1> Based on the latest quarterly or semiannual declaration, unless
otherwise noted.
<F2> The market value of the Securities as of August 31, 1995, last day
of trading during the period, was determined by the Trustee as
described in "Public Offering of Units - Public Offering Price".
<F3> At August 31, 1995, the net unrealized market depreciation of all
Securities was comprised of the following:
Gross unrealized market appreciation $ 1,586,280
Gross unrealized market depreciation (4,543,373)
Net unrealized market depreciation $(2,957,093)
The aggregate cost of the Securities to the Trust for Federal
income tax purposes approximates the amounts shown in the
accompanying statement of condition.
<F4> Prudential Securities Incorporated and/or its affiliates have
managed or co-managed a public offering of Securities and have
performed investment banking or other services for this Company.
<F5> On October 24, 1994, PSI Resources merged with Cincinnati Gas and
Electric Co. to create Cinergy Corp. Each share of PSI Resources
was exchanged for 1.023 shares of Cinergy.
<F6> Effective April 27, 1995, Pennsylvania Power and Light Co. became a
subsidiary of PP&L Resources, Inc., a holding company. Each of
the Utility's common shares was deemed to represent one common
share of the holding company.
A-8
<PAGE>
PROSPECTUS--Part B:
- --------------------------------------------------------------------------------
Note that Part B of this Prospectus may not be distributed unless accompanied by
Part A.
- --------------------------------------------------------------------------------
NATIONAL EQUITY TRUST
THE TRUST
National Equity Trust, Utility Series (the ``Trust'') is one of a series of
similar but separate unit investment trusts created by the Sponsor. The Trust
was created under the laws of the State of New York pursuant to a Trust
Indenture and Agreement and a related Reference Trust Agreement dated the Date
of Deposit (collectively, the ``Indenture''),* between Prudential Securities
Incorporated (the ``Sponsor'') and The Chase Manhattan Bank (National
Association) (the ``Trustee''). On the Date of Deposit, equity securities and/or
contracts and funds (represented by irrevocable letter(s) of credit issued by
major commercial bank(s)) for the purchase of such equity securities
(collectively, the ``Securities'' or, singularly, the ``Security'', as the
context requires) were deposited into the Trust and valued at prices which
reflect the value of the Securities as of the close of the market as of the Date
of Deposit. The Trustee then immediately delivered to the Sponsor certificates
of beneficial interest (the ``Certificates'') representing the units (the
``Units'') comprising the entire ownership of the Trust as of the Date of
Deposit which Units the Sponsor, through this Prospectus, is offering for sale
to the public. Each such Unit represented on the initial Date of Deposit an
identical number and type of shares in identical issuers.
The objectives of the Trust are growth in both income and capital achieved
by investment in a portfolio of equity securities issued by electric and
electric and gas utility companies selected by the Sponsor. The sponsor has
selected the Securities in the portfolio based on its belief, as of the Date of
Deposit, that each such stock has potential for greater total return than the
stock market as a whole, as measured by such indexes as the S&P 400, S&P 500 and
Dow Jones Industrial Average, over the five year life of the Trust (see
``Summary of Essential Information'' for the termination date of the Trust).
There can be no assurance that such objective can be realized. The factors
affecting the value of the Securities are those factors that have an impact upon
the value of equity securities generally and particularly those factors that
affect the economic and financial condition of each issuer of a Security. The
dividend income was one of the factors considered by the Sponsor when selecting
Securities for inclusion in the Trust.
Subsequent to the initial deposit of Securities on the Date of Deposit, the
Sponsor may, but is not obligated to, deposit from time to time additional
Securities (including contracts together with an irrevocable letter of credit
for the purchase thereof) in the Trust, to receive in exchange therefor
certificates representing additional Units, and to offer such Units to the
public by means of this Prospectus. Each additional Unit so issued prior to any
permitted change in the shares held in the Trust, (see below) will represent the
same number and type of shares in identical issuers as were so represented on
the initial date of deposit (although the rating on a Security may have been
reduced below the rating by the Sponsor's research department on the Date of
Deposit). Each additional Unit issued after a permitted change in the shares
held in the Trust will represent the same number and type of shares in identical
issuers as were represented by a Unit immediately prior to the issuance of the
additional Unit. Each Unit owned by each Unit Holder will represent the same
proportionate interest in the portfolio of the Trust. The number and identity of
shares in the Trust will be adjusted to reflect the disposition of Securities
and/or the receipt of a stock dividend, a stock split or other distribution with
respect to shares or the reinvestment of the proceeds of certain dispositions of
Securities. Other distributions will either be reinvested in substitute
Securities or sold by the Trustee and the proceeds distributed to Unit Holders.
The portfolio of the Trust may change slightly based on such disposition and
reinvestment. See ``Sponsor--Responsibility.'' Securities received in exchange
for shares will be similarly treated. As additional Units are issued by the
Trust as a result of the deposit of additional Securities by the Sponsor, 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.
Notwithstanding the availability of the above-mentioned irrevocable
letter(s) of credit, it is expected that the Sponsor will pay for the Securities
as the contracts for their purchase become due. To the extent Units are sold
prior to the settlement of such contracts, the Sponsor will receive the purchase
price of such Units prior to the time at which it pays for Securities pursuant
to such contracts and have the use of such funds during this period.
- ------------
* Reference is hereby made to said Indenture and any statements contained herein
are qualified in their entirety by the provisions of said Indenture.
B-1
<PAGE>
<PAGE>
Units will be sold to investors at the Public Offering Price next computed
after receipt of the investor's order to purchase Unit, if Units are available
to fill orders on the day that that price is set. If Units are not available or
are insufficient to fill the order, the investor's order will be rejected by the
Sponsor. The number of Units available may be insufficient to meet demand
because of the Sponsor's inability to or decision not to purchase and deposit
underlying Securities in amounts sufficient to maintain the proportionate
numbers of shares of each Security as required to create additional Units. The
Sponsor may, if unable to accept orders on any given day, offer to execute the
order as soon as sufficient Units can be created. An investor who agrees to this
will be deemed to place a new order for that number of Units each day until that
order is accepted. The investor's order will then be executed, when Units are
available, at the Public Offering price next calculated after such continuing
order is accepted. The investor will, of course, be able to revoke his purchase
offer at any time prior to acceptance by the Sponsor.
The Sponsor will execute orders to purchase in the order it determines that
they are received, i.e., orders received first will be filled first, except that
indications of interest prior to the effectiveness of the registration of the
offering of Trust Units which become orders upon effectiveness will be accepted
according to the order in which the indications of interest were received.
The holders of Units (the ``Unit Holders'' or ``Unit Holder'', as the
context requires) will have the right to have their Units redeemed at a price
based on the net asset value (the ``Redemption Price'') if they cannot be sold
in the over-the-counter market which the Sponsor, although not obligated to do
so, proposes to maintain. The Sponsor, Prudential Securities Incorporated, is a
wholly-owned, indirect subsidiary of The Prudential Insurance Company of
America. The Trust has a mandatory termination date set forth under Part
A--``Summary of Essential Information,'' but may be terminated prior thereto
upon the occurrence of certain events (see ``Amendment and Termination of the
Indenture--Termination''), including a reduction in the value of the Trust below
the value set forth under Part A--``Summary of Essential Information''.
On the Date of Deposit, a Unit represented the fractional undivided interest
in the Securities set forth under Part A--``Summary of Essential Information''
in the ratio of 1 Unit for each approximately $10.00 of net asset value of
Securities initially deposited in such Trust. If any Units are redeemed by the
Trustee, the number of Securities in the Trust will be reduced by an amount
allocable to redeemed Units and the fractional undivided interest in such Trust
represented by each unredeemed Unit will be increased. Units will remain
outstanding until redeemed upon tender to the Trustee by any Unit Holder (which
may include the Sponsor) or until the termination of the Trust pursuant to the
Indenture.
Portfolio Summary
Since the Trust consists primarily of common stocks, an investment in Units
of the Trust should be made with an understanding of the risks inherent in any
investment in common stocks. These include risks associated with the rights to
receive payments from the issuer which are generally inferior to creditors of,
or holders of debt obligations or preferred stocks issued by, the issuer.
Holders of common stocks have a right to receive dividends only when and if, and
in the amounts, declared by the issuers board of directors and to participate in
amounts available for distribution by the issuer only after all other claims on
the issuer have been paid or provided for. By contrast, holders of preferred
stocks have the right to receive dividends at a fixed rate when and as declared
by the issuer's board of directors, normally on a cumulative basis. Dividends on
cumulative preferred stock must be paid before any dividends are paid on common
stock and any cumulative preferred stock dividend which has been omitted is
added to future dividends payable to the holders of such cumulative preferred
stock. Preferred stocks are also entitled to rights on liquidation which are
senior to those of common stocks. For these reasons, preferred stocks generally
entail less risk than common stocks.
Moreover, common stocks do not represent an obligation of the issuer and
therefore do not offer any assurance of income or provide the degree of
protection of capital debt securities. The issuance of debt securities or even
preferred stock by an issuer will create prior claims for payment of principal,
interest and dividends which could adversely affect the ability and inclination
of the issuer to declare or pay dividends on its common stock or the rights of
holders of common stock with respect to assets of the issuer upon liquidation or
bankruptcy. Further, unlike debt securities which typically have a stated
principal amount payable at maturity (which value will be subject to market
fluctuations prior thereto), common stocks have neither a fixed principal amount
nor a maturity and have values which are subject to market fluctuations for as
long as the common stocks remain outstanding. The value of the common stocks in
the Trust thus may be expected to fluctuate over the life of the Trust to values
higher or lower than those prevailing on the Date of Deposit.
The value of the Units will fluctuate depending on all the factors that have
an impact on the economy and the equity markets. These factors similarly impact
on the ability of an issuer to distribute dividends. The Trust is not a
``managed''
B-2
<PAGE>
<PAGE>
registered investment company and Securities will not be sold by the Trustee as
a result of ordinary market fluctuations. The Sponsor may direct the disposition
by the Trustee of Securities only upon the occurrence of certain events. (See
``Sponsor-Responsibility''.)
The Trust consists of the Securities (or contracts to purchase such
Securities together with an irrevocable letter or letters of credit for the
purchase of such contracts) listed under Part A--``Schedule of Portfolio
Securities'' and the Securities deposited upon the creation of additional Units
as set forth above and substitute Securities acquired by the Trust as long as
such Securities may continue to be held from time to time in the Trust together
with uninvested cash realized from the disposition of Securities. BECAUSE
CERTAIN OF THE SECURITIES FROM TIME TO TIME MAY BE SOLD UNDER CERTAIN
CIRCUMSTANCES AND SUBSTITUTE SECURITIES ACQUIRED BY THE TRUST, ALL AS DESCRIBED
HEREIN, NO ASSURANCE CAN BE GIVEN THAT THE TRUST WILL RETAIN FOR ANY LENGTH OF
TIME ITS PRESENT SIZE AND COMPOSITION. THE TRUSTEE HAS NOT PARTICIPATED AND WILL
NOT PARTICIPATE IN THE SELECTION OF SECURITIES FOR THE TRUST, AND NEITHER THE
SPONSOR NOR THE TRUSTEE WILL BE LIABLE IN ANY WAY FOR ANY DEFAULT, FAILURE OR
DEFECT IN ANY SECURITIES. There is no assurance that any dividends will be
declared or paid in the future on the Securities.
All of the Securities are publicly traded either on a stock exchange or in
the over-the-counter market.
FEDERAL TAXATION
The following discussion offers only a brief outline of the federal income
tax consequences of investing in the Trust. Investors should consult their own
tax advisors for more detailed information and for information regarding the
impact of state, local or foreign taxes upon such an investment.
The Trust has elected and intends to continue to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the ``Code''). Generally, to qualify as a regulated investment company
for a taxable year the Trust must derive at least 90% of its income from certain
specified sources, including interest, dividends, gains from the disposition of
securities, and other income derived with respect to its business of investing
in securities. In addition, the Trust must derive less than 30% of its gross
income from the disposition of securities held for less than three months, must
meet certain diversification criteria regarding Trust investment, and must
distribute annually at least 90% of its investment company taxable income. For
any year in which the Trust qualifies for taxation as a regulated investment
company, (a) the Trust is not taxed on income distributed to its shareholders in
the form of dividends or capital gains distributions and (b) if the Trust is the
record holder of stock on the record date for a dividend payable with respect to
that stock, the dividend must be included in the gross income of the Trust as
determined for federal income tax purposes on the later of (1) the date the
stock became ex-dividend with respect to such dividend or (2) the date the Trust
acquired the stock. If, in any taxable year, the Trust were to fail to qualify
as a regulated investment company under the Code, the Trust would be taxed for
that year in the same manner as an ordinary corporation and distributions to its
shareholders would not be deductible by the Trust in computing its taxable
income. In addition, in the event of a failure to qualify as a regulated
investment company for a taxable year, that year's Trust distributions, to the
extent derived from current or accumulated earnings and profits, would be
taxable to the recipient shareholders as ordinary income dividends, even if
those distributions might otherwise have been considered distributions of
capital gains.
If the Trust fails to distribute in 1995 and each calendar year thereafter,
at least (i) 98% of its ordinary income for such calendar year and (ii) 98% of
its capital gain net income (both long-term and short-term) for the 12 months
ended October 31 of such calendar year (or December 31, if the Trust qualifies
to so elect and does so), the Trust will be subject to a 4% excise tax on
undistributed income if income tax on such income is not imposed on the Trust.
In addition, the Trust will be subject to such excise tax on any portion (not
taxed to the Trust) of the respective 2% balances which are not distributed
during the succeeding calendar year.
If the Trust fails to qualify as a regulated investment company for any
year, it must pay out its earnings and profits accumulated in that year (less
the interest charge mentioned below, if applicable) and may be required to pay
an interest charge to the Treasury on 50% of such earnings and profits before it
can again qualify as a regulated investment company.
Generally, distributions paid by the Trust are treated as received in the
taxable year of distribution; however, any amounts designated for distribution
by the Trust with respect to October, November or December of any calendar year
as
B-3
<PAGE>
<PAGE>
payable to Unit Holders of record on a specified date in such a month and
actually paid during January of the following year, will be treated as received
on December 31 of the preceding year. The Trust Agreement requires current
distribution to Unit Holders of the entire net income and net capital gain, if
any, of the Trust and cash proceeds of redemptions, mergers, liquidations of
issuers or sales representing recovery of cost (to the extent that the proceeds
of sales or other dispositions are not reinvested or used to redeem Units) of
underlying Securities in the Trust. (See ``Sponsor--Responsibility.'') In kind
receipts of the Trust in mergers and liquidations may be sold and the proceeds
of sale distributed, reinvested, retained or distributed as the Sponsor may
determine to be in the best interests of the Unit Holders consistent with the
Trust's meeting requirements for qualification as a regulated investment
company.
Distributions to Unit Holders other than capital gains distributions will be
taxable as ordinary income to the extent paid from interest, dividends and any
net short-term capital gains includible in the Trust's gross income for the
taxable year with respect to which the distribution is made, less the sum of the
Trust's allocable deductible expenses. To the extent that distributions to a
Unit Holder with respect to any year are not taxable as ordinary income or as
capital gains distributions, the amount of such distributions will be treated as
a return of capital and will reduce the Unit Holder's basis in his Units and, to
the extent that they exceed his basis, will be generally taxed as a capital
gain.
It is anticipated that part of the distributions of the Trust will be
taxable as ordinary income to Unit Holders and that substantially all of the
distributions which are taxable as ordinary income to Unit Holders will, under
present law, constitute dividends for purposes of the 70% dividends-received
deduction allowed to certain corporations with respect to dividends received,
as discussed below. This deduction is allowed to corporations (other than
corporations, such as ``S'' corporations, which are not eligible for such
deduction because of their special characteristics). Dividends received by
corporations are not deductible for purposes of special taxes such as the
accumulated earnings tax and the personal holding company tax.
Under existing law, only that amount of the Trust's distributions (exclusive
of capital gains distributions) that are designated as dividends by the Trust
and which do not exceed the aggregate amount of dividends received by the Trust
will qualify for the 70% dividends-received deduction for corporations.
Dividends received by the Trust will be considered dividends for this purpose
only if such dividends would qualify for the 70% dividends-received deduction if
such deduction were available to regulated investment companies.
Individual investors should note that the Code places a floor of 2% of
adjusted gross income on miscellaneous itemized deductions, including investment
expenses. The Code directs the Secretary of the Treasury to prescribe
regulations prohibiting indirect deduction through a pass-through entity (such
as the Trust) of amounts not allowable as a deduction under this rule if paid or
incurred directly by an individual.
Temporary Regulations applicable to ``nonpublicly offered regulated
investment companies'' have been issued. Under these temporary regulations, in
general, (i) specified expenses of the regulated investment company or, at the
election of the regulated investment company, 40% of its expenses, exclusive of
expenses which are specifically excluded from miscellaneous itemized deductions
if incurred by an individual, are allocated among its shareholders who are
``affected investors'' (i.e., individuals, estates, trusts and pass-through
entities having such shareholders) and (ii) such investors are treated as having
received or accrued dividends in an aggregate amount equal to the investor's
share of such expenses and to have incurred investment expenses in the same
aggregate amount. These computations are made on a calendar year basis and the
allocation of such expenses among affected investors may be done by the
regulated investment company on any reasonable basis (which basis, if utilizing
distributions to affected investors, may exclude some of such distributions).
The Code provides, however, that the 2% floor rule will not apply to
indirect deductions through a publicly offered regulated investment company. The
term ``publicly offered regulated investment company'' is defined as meaning a
regulated investment company the shares of which are ``continuously offered'' or
regularly traded on an established securities market or ``held by or for no
fewer than 500 persons at all times during the taxable year.'' The Sponsor is
unable to state whether or not the Trust will qualify in the future for
treatment as a ``publicly offered regulated investment company.''
Gain or loss will be realized by each Unit Holder to the extent that the
proceeds of redemption (or distributions received upon liquidation of his Units)
exceed or are less than the Unit Holder's tax cost basis of his Units which are
redeemed or in respect of which the liquidating distributions are made.
Distributions in kind are taken into account for this purpose at their fair
market value when distributed.
B-4
<PAGE>
<PAGE>
Distributions of net capital gains (designated as such by the Trust) will be
taxable to Unit Holders as long-term capital gains regardless of the length of
time the Units have been held by a Unit Holder. A redemption of Units will be a
taxable event for a Unit Holder and, depending on the circumstances, may give
rise to gain or loss. Under the Code, net capital gains (i.e., the excess of net
long term capital gain over net short term capital loss) of individuals, estates
and trusts are subject to a maximum nominal tax rate of 28%. Such net capital
gains may, however, result in a disallowance of itemized deductions and/or
affect a personal exemption phase-out.
The Code disallows the dividends-received deduction in full for corporations
with respect to stock including Trust Units (which are considered as stock for
this purpose) held for 45 days or less (90 days or less in the case of certain
preference stock), exclusive of days on which the holder's risk of loss is
diminished. Sections 246 and 246A of the Code also contain limitations on the
eligibility of dividends for the 70% dividends-received deduction (in addition
to the limitation discussed above). These limitations may be applicable to
dividends received by a Unit Holder depending on the Unit Holder's individual
circumstances. Accordingly, Unit Holders which are corporations should consult
their own tax advisors in this regard.
Information with respect to the Federal income tax status of each year's
distributions will be supplied to Unit Holders.
The Trust is required to withhold U.S. federal income tax at the rate of 31%
of all taxable distributions payable to holders of Trust Units who fail to
provide the Trust with their correct taxpayer identification numbers or to make
required certifications, or who have been notified by the Internal Revenue
Service that they are subject to backup withholding. Backup withholding is not
an additional tax. Any amounts withheld may be credited against U.S. federal
income tax liability of a holder of a Trust Unit.
Federal withholding taxes at a 30% rate or a lesser rate established by
treaty will generally apply to distributions to Unit Holders (except to those
distributions designated by the Trust as capital gains dividends) that are
nonresident aliens or foreign partnerships, trusts or corporations unless the
distributions constitute income effectively connected with the conduct of a
trade or business within the United States by the Unit Holder.
Investors are advised to consult their own tax advisors with respect to the
application to their own circumstances of the above-described general taxation
rules and with respect to the state, local or foreign tax consequences to them
of an investment in Trust Units.
Units of the Trust may be suited for purchase by Individual Retirement
Accounts and pension plans, profit sharing and other qualified retirement plans.
Investors considering participation in any such plan should review specific tax
laws and pending legislation related thereto and should consult their attorneys
or tax advisors with respect to the establishment and maintenance of any such
plan.
PUBLIC OFFERING OF UNITS
Public Offering Price
The Public Offering Price of Units during the initial public offering period
and thereafter is computed by determining the value (as set forth below) of the
Securities in the Trust dividing such sum by the number of Units outstanding and
adding to such sum a sales charge of 4% of the Public Offering Price (4.167% of
the net amount invested) or such other sales charge as set forth in the table
under Volume Discount, which table will reflect a reduced sales load based on
the volume of purchases of Units. A proportionate share of the amount in the
Income and Principal Accounts (other than money required to redeem Units) and of
dividends on securities trading ex dividend is also added to the Public Offering
Price. See ``Rights of Unit Holders--Distributions.''
The Public Offering Price on the date of this Prospectus or any subsequent
date may vary from the Public Offering Price set forth on the Part A--``Summary
of Essential Information'' in accordance with fluctuations in the value of the
underlying Securities in the Trust.
The aggregate value of the Securities is determined in good faith by the
Trustee on each ``Business Day'' as defined in the Indenture in the following
manner: if the Securities are listed on a national securities exchange or on the
NASDAQ National Market System, this evaluation is generally based on the closing
sale prices on that exchange as of the Evaluation Time (unless the Trustee deems
these prices inappropriate as a basis for valuation) or, if there is no closing
B-5
<PAGE>
<PAGE>
sale price at that time on that exchange, at the mean between the closing bid
and asked prices. If the Securities are not so listed or, if so listed and the
principal market therefor is other than on the exchange, the evaluation shall
generally be based on the current bid price on the over-the-counter market
(unless the Trustee deems these prices inappropriate as a basis for evaluation).
If current bid or closing prices are unavailable, the evaluation is generally
determined (a) on the basis of current bid prices for comparable securities, (b)
by appraising the value of the Securities on the bid side of the market or by
such other appraisal deemed appropriate by the Trustee or (c) by any combination
of the above, each as of the Evaluation Time.
Public Distribution
The Sponsor intends to qualify Units for sale in states selected by the
Sponsor, to be sold by the Sponsor and through dealers who are members of the
National Association of Securities Dealers, Inc.
Such dealers shall be entitled to receive a selling concession or agency
commission as follows:
<TABLE>
<CAPTION>
Purchases Selling Concession
<S> <C>
$ 1,000-$ 99,999............. 2.8%
$100,000-$249,999............. 2.6%
$250,000-$499,999............. 2.3%
$500,000-$749,999............. 2.0%
$750,000-$999,999............. 1.7%
$1,000,000 and over........... 1.5%
</TABLE>
Dealers may receive an additional concession based upon volume purchases in
the sole discretion of the Sponsor.
In addition, sales of Units may be made pursuant to distribution
arrangements with certain banks which are acting as agents for their customers.
These banks are making Units of the Trust available to their customers on an
agency basis. A portion of the sales charge paid by these customers is retained
by or remitted to the banks in amounts comparable to the aforementioned dealers'
concessions. The Glass-Steagall Act prohibits banks from underwriting certain
securities, including Units of the Trust; however, this Act does permit certain
agency transactions, and banking regulators have not indicated that these
particular agency transactions are impermissible under this Act. In Texas, any
bank making Units available must be registered as a broker-dealer in that State.
The Sponsor reserves the right to reject, in whole or in part, any order for
the purchase of Units. Upon the termination of the initial public offering
period, unsold Units or Units acquired by the Sponsor in the secondary market
referred to below may be offered to the public by this Prospectus at the then
current Public Offering Price.
Secondary Market
While not obligated to do so, it is the Sponsor's present intention to
maintain a secondary market for Units of the Trust and to continuously offer to
repurchase Units from Unit Holders at the Sponsor's Repurchase Price which
price, subject to change at any time, will be computed by adding (a) the
aggregate value as of the Evaluation Time of Securities in the Trust, (b)
amounts in the Trust including dividends receivable on stocks trading
ex-dividend and (c) all other assets in the Trust; deducting therefrom the sum
of (x) taxes or other governmental charges against the Trust not previously
deducted, (y) accrued fees and expenses of the Trustee (including legal and
auditing expenses) and counsel and certain other expenses and (z) amounts for
distribution to Unit Holders of record as of a date prior to the evaluation; and
dividing the result of such computation by the number of Units outstanding as of
the date thereof. The Sponsor, of course, does not in any way guarantee the
enforceability, marketability or price of any Securities in the Portfolio or of
the Units. There is no sales charge incurred when a Unit Holder sells Units back
to the Sponsor. Any Units repurchased by the Sponsor may be reoffered to the
public by the Sponsor at the then current Public Offering Price. The Sponsor
will become the owner of Units repurchased as of the trade date. Any profit or
loss resulting from the resale of such Units will belong to the Sponsor.
If the supply of Units exceeds demand (or for any other business reason),
the Sponsor may, at any time, occasionally, from time to time, or permanently,
discontinue the repurchase of Units. In such event Unit Holders wishing to
dispose of their Units may redeem their Units through the Trustee. In no event
will the price offered by the Sponsor for the repurchase of Units be less than
the current Redemption Price for those Units. (See ``Rights of Unit
Holders--Redemption''.) The Sponsor may, of course, redeem any Units that it has
purchased in the secondary market to the
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extent that it determines that it is undesirable to continue to hold such Units
in its inventory. Factors which the Sponsor will consider in making such a
determination will include the number of units of all series of unit trusts
which it has in its inventory, the saleability of such units and its estimate of
the time required to sell such units and general market conditions.
Profit of Sponsor
The Sponsor may have realized a book profit (or a loss) 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 of such Trust. (For the
amount of such difference, see Part A--``Summary of Essential Information''.)
The Sponsor may also realize profits or sustain losses in respect of Securities
which were acquired from the Sponsor or from underwriting syndicates of which it
was a member. An underwriter or underwriting syndicate purchases common stock
from the issuer on a negotiated or competitive bid basis as principal with the
motive of marketing such common stock to investors at a profit. In addition, the
Sponsor may realize profits (or sustain losses) due to daily fluctuations in the
value of the Securities in the Trust and thus in the Public Offering Price of
Units received by the Sponsor. Cash, if any, received by the Sponsor from the
Unit Holders prior to the settlement date for purchases of Securities may be
used in the Sponsor's business to the extent permitted by applicable regulations
and may be of benefit to the Sponsor.
The Sponsor may also realize profits (or sustain losses) while maintaining a
secondary market in the Units, in the amount of any difference between the
prices at which the Sponsor buys Units and the prices at which the Sponsor
resells such Units or the prices at which the Sponsor redeems such Units.
Volume Discount
Although under no obligation to do so, the Sponsor intends to permit volume
purchases of Units to purchase Units at a reduced sales charge. The Sponsor may
at any time change the amount by which the sales charge is reduced, or
discontinue the discount altogether.
The sales charge per Unit will be reduced pursuant to the following
graduated scale for sales to any period of at least $100,000:
<TABLE>
<CAPTION>
Percent of Percent of
Public Offering Net Amount
Purchases Price Invested
-------------------- --------------- ----------
<S> <C> <C>
$ 1,000-$ 99,000 4.0 % 4.167%
$100,000-$249,999 3.5 % 3.627%
$250,000-$499,999 3.25% 3.359%
$500,000-$749,999 3.0 % 3.093%
$750,000-$999,999 2.5 % 2.564%
$1,000,000 and over 2.0 % 2.041%
</TABLE>
The reduced sales charges as shown on the chart above will apply to all
purchases of Units in any fourteen-day period by the same person in the amounts
stated herein, and for this purpose, purchases of Units of the Trust will be
aggregated with concurrent purchases of Units of any other trust that may be
offered by the Sponsor. Each beneficial holder shall be deemed a separate
purchaser for purposes of the volume discount.
Units held in the name of the purchaser's spouse, in the name of a
purchaser's child under the age of 21 or in the name of an entity controlled by
the purchaser are deemed for the purposes hereof to be acquired by the
purchaser. The reduced sales charges are also applicable to a trustee or other
fiduciary purchasing Units for a single fiduciary account.
Employee Discount
The Sponsor intends to permit employees of Prudential Securities
Incorporated and its subsidiaries and affiliates to purchase Units of the Trust
at a price equal to the net asset value of the Securities in the Trust divided
by the number of Units outstanding plus a reduced sales charge of $5.00 per 100
Units, subject to a limit of 5% of the Units of the Trust at the discretion of
the Sponsor.
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EXCHANGE OPTION
Unit Holders may elect to exchange any or all of their Units of this series
of the National Equity Trust for units of one or more of any other series in the
Prudential Securities Incorporated family of unit investment trusts or certain
additional trusts that may from time to time be made available for such exchange
by the Sponsor (collectively referred to as the ``Exchange Trusts''). Such units
may be acquired at prices based on reduced sales charges per unit.
The purpose of such reduced sales charges is to permit the Sponsor to pass
on to the Unit Holder who wishes to exchange Units the cost of savings resulting
from such exchange of Units. The cost savings result from reductions in time and
expense related to advice, financial planning and operational expense required
for the Exchange Option.
Exchange Trusts have different investment objectives; a Unit Holder should
read the prospectus for the applicable Exchange Trust carefully to determine the
investment objective prior to the exercise of this option.
This option will be available provided the Sponsor maintains a secondary
market in both the Units of this series and units of the applicable Exchange
Trust and provided that units of the applicable Exchange Trust are available for
sale and are lawfully qualified for sale in the jurisdiction in which the Unit
Holder resides. While it is the Sponsor's intention to maintain a secondary
market for the units of all such trusts, there is no obligation on its part to
do so. Therefore, there is no assurance that a market for units will in fact
exist on any given date in which a Unit Holder wishes to sell or exchange his
units; thus there is no assurance that the Exchange Option will be available to
any Unit Holder. The Sponsor reserves the right to modify, suspend or terminate
this option at any time without further notice to Unit Holders. In the event the
Exchange Option is not available to a Unit Holder at the time he wishes to
exercise it, the Unit Holder will be immediately notified and no action will be
taken with respect to his units without further instruction from the Unit
Holder.
Exchanges will be effected in whole units only. If the proceeds from the
Units being surrendered are less than the cost of a whole number of units being
acquired, the exchanging Unit Holder will be permitted to add cash in an amount
to round up to the next highest number of whole units.
When units held for less than five months are exchanged for units with a
higher regular sales charge, the sales charge will be the greater of (a) the
reduced sales charge or (b) the difference between the sales charge paid in
acquiring the units being exchanged and the regular sales charge for the
quantity of units being acquired, determined as of the date of the exchange.
To exercise the Exchange Option, a Unit Holder should notify the Sponsor of
his desire to use the proceeds from the sale of his Units to purchase units of
one or more of the Exchange Trusts. If units of the applicable outstanding
series of the Exchange Trust are at that time available for sale, the Unit
Holder may select the series or group of series for which he desires his Units
to be exchanged. The Unit Holder will be provided with a current prospectus or
prospectuses relating to each series in which he indicates interest.
The exchange transaction will operate in a manner essentially identical to
any secondary market transaction, i.e., Units will be repurchased at a price
equal to the Repurchase Price per Unit of the Securities in the Portfolio. Units
of the Exchange Trust will be sold to the Unit Holder at a price equal to the
public offering price per unit plus accrued interest and the applicable sales
charge of $25 per Unit. Excess proceeds not used to acquire whole units will be
paid to the exchanging Unit Holder.
Owners of units of any registered unit investment trust other than National
Equity Trust which was initially offered at a minimum applicable sales charge of
3.0% of the public offering price exclusive of any applicable sales charge
discounts may elect to apply the cash proceeds of sale or redemption of those
units directly to acquire available units of any Exchange Trust at the reduced
sales charge of $25 per Unit, subject to the terms and conditions applicable to
the Exchange Option. To exercise this option, the owner should notify his retail
broker. He will be given a prospectus of each series in which he indicates
interest of which units are available. The Sponsor reserves the right to modify,
suspend or terminate the option at any time without further notice, including
the right to increase the reduced sales charge applicable to this option (but
not in excess of $5 more per unit than the corresponding fee then charged for a
unit of an Exchange Trust which is being exchanged).
For example, assume that a Unit Holder, who has three units of a Trust with
a 4.00% sales charge and a current price of $1,100 per unit, sells his units and
exchanges the proceeds for units of a series of an Exchange Trust with a current
price of $950 per unit and an ordinary sales charge of 4.00%. The proceeds from
the Unit Holder's units will aggregate $3,300.
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Since only whole units of an Exchange Trust may be purchased under the Exchange
Option, the Holder would be able to acquire four units in the Exchange Trust for
a total cost of $3,900 ($3,800 for units and $100 for the $25 per unit sales
charge) by adding an extra $600 in cash. Were the Unit Holder to acquire the
same number of units at the same time in the regular secondary market maintained
by the Sponsor, the price would be $3,958.35 [$3,800 for the units and $158.35
for the 4.00% sales charge (4.167% of the net amount invested)].
An exchange of Units pursuant to the Exchange Option for units of an
Exchange Trust will normally constitute a ``taxable event'' under the Code,
i.e., a Unit Holder will recognize gain or loss at the time of exchange.
However, upon an exchange of Units of this series of the National Equity Trust
for units of any other similar series of the Exchange Trusts the Internal
Revenue Service may seek to disallow any loss incurred upon such exchange if the
units exchanged are substantially identical and the exchange of units occurs
within a thirty day period. Unit Holders are urged to consult their own tax
advisors as to the tax consequences to them of exchanging Units of particular
cases.
If a Unit Holder utilizes the Exchange Option with respect to an Exchange
Trust which is a regulated investment company for U.S. federal income tax
purposes before the 91st day after the exchanged Units were acquired, the sales
charge incurred in acquiring the Units transferred in the exchange (up to the
amount of the reduction in the sales charge with respect to the securities
received in the exchange) is not taken into account in determining the amount of
gain or loss on the exchange. The sales charge amount so disregarded will
increase the gain or reduce the loss on the exchange, but will be treated as
incurred in acquiring the securities received in the exchange. Unit Holders are
advised to consult their own tax advisors as to the tax consequences of
exchanging Units in their particular cases.
TERMINATION OPTIONS
1. A Unit Holder who so elects by notifying the Trustee prior to the
Notification Date by returning a properly completed election request (to be
supplied to Unit Holders at least 20 days prior to such date) (see Part
A--``Summary of Essential Information'') and whose interest in the Trust
entitles him to receive at least one share of each underlying Security will
have his Units redeemed in kind on such Notification Date by distribution of
the Unit Holder's pro rata share of the net asset value of the Trust on such
date distributed in kind to the extent represented by whole shares of
underlying Securities and the balance in cash within 7 calendar days next
following the Notification Date. Unit Holders subsequently selling such
distributed Securities will incur brokerage costs when disposing of such
Securities.
2. A Unit Holder may also elect, by the Termination Date, by so
specifying in a completed election request to receive in cash such Unit
Holder's pro rata share of the net asset value of the Trust derived from the
sale by the Sponsor as the agent of the Trustee of the underlying Securities
over a period not to exceed 20 business days immediately following the
Notification Date. Amounts received by the Trustee over such 20 business day
period representing the proceeds of the underlying Securities sold will be
held by the Trustee in accounts which are non-interest bearing to Unit
Holders and which are available for use by the Trustee pursuant to normal
banking procedures. The Unit Holder's Redemption Price per Unit on the
settlement date of the last trade of a Security in the Trust will be
distributed to such Unit Holder within 7 days of the settlement of the trade
of the last Security to be sold.
The Sponsor has agreed to effect the sales of underlying securities for the
Trustee in the case of the second option over a period not to exceed 20 business
days immediately following the Notification Date free of brokerage commissions.
The Sponsor, on behalf of the Trustee, will sell, unless prevented by unusual
and unforeseen circumstances, such as, among other reasons, a suspension in
trading of a Security, the close of a stock exchange, outbreak of hostilities
and collapse of the economy, on each business day during the 20 business day
period at least a number of shares of each Security which then remains in the
portfolio (based on the number of shares of each issue in the portfolio)
multiplied by a fraction the numerator of which is one and the denominator of
which is the number of days remaining in the 20 business day sales period. The
Redemption Price Per Unit upon the settlement of the last sale of Securities
during the 20 business day period will be distributed to Unit Holders in
redemption of such Unit Holders' interest in the Trust.
The sale of Securities during the 20 business day period immediately
following the Notification Date; depending on the number of sales required, the
prices of and demand for Securities, 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 a 20 business day period as described above is in the
best interest of a Unit Holder 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 20 days if, in
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the Sponsor's judgement, such sales are in the best interest of Unit Holders.
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 Unit Holders. There can be no assurance, however, that any adverse price
consequences of heavy trading will be mitigated.
Unit Holders who do not make any election will be deemed to have elected to
receive the Redemption Price per Unit in cash (option number 2).
EXPENSES AND CHARGES
Initial Expenses
All expenses and charges incurred prior to or in the establishment of a
Trust including the cost of the initial preparation, printing and execution of
the Indenture, initial legal and auditing expenses, the cost of the preparation
and printing of this Prospectus and all other advertising and selling expenses,
have been paid by the Sponsor or the Underwriters, if any.
Fees
For its service as Trustee under the Indenture, the Trustee receives an
annual fee in the amount set forth under Part A--``Summary of Essential
Information.'' The Trustee's fee accrues monthly and is payable quarterly on or
before each Distribution Date from the Income Account, to the extent funds are
available, and thereafter from the Principal Account. Such fee may be increased
without approval of the Unit Holders in proportion to increases under the
classification ``All Services Less Rent'' in the Consumer Price Index published
by the United States Department of Labor but such fee will not be increased in
excess of increases in the Trustee's costs. The Trustee also receives benefits
to the extent that it holds funds on deposit in various non-interest bearing
accounts created under the Indenture.
Other Charges
The following additional charges are or may be incurred by the Trust as more
fully described in the Indenture (a) fees of the Trustee for extraordinary
services, (b) expenses of the Trustee (including legal and auditing expenses)
and of counsel designated by the Sponsor, (c) various governmental charges, (d)
expenses and costs of any action taken by the Trustee to protect the Trust and
the rights and interest of the Unit Holders, (e) indemnification of the Trustee
for any losses, liabilities or expenses incurred by it in the administration of
the Trust without gross negligence, bad faith, willful misfeasance or willful
misconduct on its part or reckless disregard of its obligations and duties, (f)
indemnification of the Sponsor for any losses, liabilities and expenses incurred
in acting as Sponsor or Depositor under the Indenture without gross negligence,
bad faith, willful misfeasance or willful misconduct or reckless disregard of
its obligations and duties, (g) expenditures incurred in contacting Unit Holders
upon termination of the Trust and (h) to the extent then lawful, expenses
(including legal, auditing and printing expenses) of maintaining registration or
qualification of the Units and/or the Trust under Federal or state securities
laws so long as the Sponsor is maintaining a market for the Units.
The fees and expenses set forth herein for the Trust are payable out of the
Trust and when so paid by or owing to the Trustee are secured by a lien on the
property of the Trust. If the balance in the Income and Principal Accounts are
insufficient to provide for amounts payable by the Trust, the Trustee has the
power to sell Securities to pay such amounts. The Trustee will first sell a
share of the highest priced stock, then sell a share of the next highest priced
stock and so on until such amounts are paid. To the extent Securities are sold,
the size of such Trust will be reduced and the proportions of the various
Securities in the Trust may change. Such sales might be required at a time when
Securities would not otherwise be sold and might result in lower prices than
might otherwise be realized. Moreover, due to the minimum proceeds of sale a
Security the proceeds of such sales may exceed the amount necessary for the
payment of such fees and expenses.
RIGHTS OF UNIT HOLDERS
Certificates
Ownership of Units is evidenced by registered certificates executed by the
Trustee and the Sponsor. Certificates are transferable by presentation and
surrender to the Trustee properly endorsed or accompanied by a written
instrument or instruments of transfer.
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Certificates may be issued in denominations of one Unit or any multiple
thereof. A Unit Holder will be required to pay $2.00, if such charge is imposed,
per certificate reissued or transferred, and will be required to pay any
governmental charge that may be imposed in connection with each such transfer or
interchange. For new certificates issued to replace destroyed, stolen or lost
certificates, the Unit Holder must furnish indemnity satisfactory to the Trustee
and must pay such expenses as the Trustee may incur. Mutilated Certificates
should be surrendered to the Trustee for replacement.
Distributions
Cash amounts received by the Trust will be distributed on each Monthly
Distribution Date on a pro rata basis to Unit Holders of record as of the
preceding Record Date. All distributions will be net of applicable expenses and
funds required for the redemption of Units, and, if applicable, reimbursements
to the Trustee for interest payments advanced to Unit Holders on previous
Monthly Distribution Dates. (See ``Summary of Essential Information,''
``Expenses and Charges'' and ``Rights of Unit Holders--Redemption.'') Because
the expenses of the Trust may exceed the dividend income received by the Trust
there can be no assurance that there will be any amounts available for
distribution to Unit Holders. See ``Expenses and Charges--Other Charges''.
The Trustee will credit to the Income Account all cash dividends received by
and payable to the Trust. Other cash receipts will be credited to the Principal
Account. The pro rata share of the Income Account and the pro rata share of cash
in the Principal Account represented by each Unit will be computed by the
Trustee as of the Record Date. (See ``Summary of Essential Information'' in Part
A.) Proceeds received from the disposition of any of the Securities subsequent
to a Record Date and prior to the next succeeding Monthly Distribution Date will
be held in the Principal Account and will not be distributed until the following
Monthly Distribution Date. The distribution to Unit Holders as of each Record
Date will be made on the following Monthly Distribution Date or shortly
thereafter (approximately 15 days after the Record Date) and shall consist of an
amount substantially equal to one-twelfth of such holders' pro rata share of the
estimated annual income to the Income Account (net of estimated expense) for the
twelve-month period beginning on such Record Date (the ``Income Distribution'')
and their pro rata share of the cash balance in the Principal Account, computed
as of the close of business on the preceding Record Date, including the proceeds
of Securities disposed of, to the extent not reinvested in substitute
Securities, unless the Sponsor determines that such distribution is likely to
result in adverse federal income tax consequences to the Trust. Persons who
purchase Units between a Record Date and a Distribution Date will receive their
first distribution on the second Distribution Date following their purchase of
Units. No distribution need be made from the Principal Account if the balance
therein is less than an amount sufficient to distribute $1.00 per 100 Units.
Funds which are available for future distributions, payments of expenses and
redemptions are in accounts which are non-interest bearing to Unit Holders and
are available for use by The Chase Manhattan Bank (National Association),
pursuant to normal banking procedures.
Normally, dividends on Securities in the Portfolio of a Trust are not paid
on a monthly basis. Because dividends are not necessarily received by a Trust at
a constant rate throughout the year, any Income Distribution may be more or less
than the amount credited to the Income Account as of the Record Date. In order
to eliminate fluctuations in Income Distributions resulting from such variances,
the Trustee is required by the Trust Agreement to advance such amounts as may be
necessary to provide Income Distributions of approximately equal amounts. The
Trustee will be reimbursed, without interest, for any such advances from funds
available from the Income Account on the next ensuing Record Date or Record
Dates, as the case may be. If all or a portion of the Securities for which
advances have been made subsequently fail to pay dividends as anticipated, the
Trustee may recoup advances made by it in anticipation of receipt of dividend
payments on the Securities by reducing the amount distributed per Unit in one or
more Income Distributions. If units are redeemed subsequent to such advances by
the Trustee, but prior to receipt by the Trustee of actual notice of such
failure to pay dividends, the amount of which was so advanced by the Trustee,
each remaining Unit Holder will be subject to a greater pro rata reduction in
his Income Distribution than would have occurred absent such redemptions.
As of each Record Date the Trustee will deduct from the Income Account and,
to the extent funds are not sufficient therein, from the Principal Account,
amounts necessary to pay the expenses of the Trust. (See ``Expenses and
Charges.'') The Trustee may also withdraw from said accounts such amounts, if
any, as it deems necessary to establish a reserve for any governmental charges
payable out of the Trust. Amounts so withdrawn shall not be considered a part of
a Trust's assets for purposes of determining the amount of distributions until
such time as the Trustee shall return all or any part of such amounts to the
appropriate account. In addition, the Trustee may withdraw from the Income
Account and the Principal Account such amounts as may be necessary to cover
redemption of Units by the Trustee. (See ``Rights of Unit
Holders--Redemption.'') The Trustee has no cash for income distribution to Unit
Holders until it receives dividend
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payments on the Securities in the Trust. The Trustee is authorized to provide
its own funds, at times, in order to advance income distributions. The Trustee
will recover these advancements when such dividend income is received.
Reinvestment Program
Monthly distributions in respect of the Units will automatically be mailed
to each Unit Holder of record as set forth under ``Distributions'' unless a Unit
Holder elects to participate in the Trust's reinvestment program (the
``Program'') by filing with the Trustee the written notice of election
accompanying this Prospectus, or by notice, to the Unit Holder's account
executive or sales representative, that he wishes to have such distributions
automatically invested in additional Units of the Trust. The dividends are
taxable to Unit Holders whether paid in cash or in Units pursuant to the
Program. Unit Holders may elect to reinvest distributions from either the Income
Account or the Principal Account or both accounts. The Unit Holder's completed
notice of election to participate in the Program must be received by the Trustee
at least ten days prior to the Record Date applicable to any distribution in
order for the Program to be in effect as to such distribution. Such
distributions will be used by the Trustee at the direction of the Sponsor to
purchase Units held in the Sponsor's inventory or to purchase Units created by
the Sponsor in accordance with the procedure set forth under ``The Trust''. The
purchase price payable by the Trustee for each of such Units will be equal to
the Sponsor's Repurchase Price per Unit on the Distribution Date or as soon
thereafter as possible. The Sponsor will not be entitled to any commission or
sales charge in connection with such sales of Units to the Trustee. The Units so
purchased by the Trustee will be issued or credited to the accounts of Unit
Holders participating in the Program. In the event the Sponsor has insufficient
Units in inventory to satisfy reinvestment demand and is unable to create
additional Units the monthly distribution will be distributed in cash to Unit
Holders.
No Certificates will be issued for whole Units acquired through the Program
unless the Unit Holder so requests. Fractional Units will be credited to a Unit
Holder's account and no certificates will be issued for such fractional Units.
To redeem Units acquired pursuant to the Program Unit Holders must so instruct
the Trustee as set forth in the following sentence. Unit Holders may redeem
Units acquired pursuant to the Program at any time by tendering certificates for
whole Units as set forth under ``Redemption--Tender of Units'' and, for whole
Units for which no certificate was issued and fractional Units, by delivery of a
request for redemption.
Reports and Records
The Trustee shall furnish Unit Holders in connection with each distribution
a statement of the amount of dividends and the amount of other receipts, if any,
which are being distributed, expressed in each case as a dollar amount per Unit.
Within a reasonable time after the end of each calendar year, the Trustee will
furnish to each person who at any time during the calendar year was a Unit
Holder of record, a statement (1) as to the Income Account: dividends and other
cash amounts received, deductions for payment of applicable taxes and for fees
and expenses of the Trust, redemptions of Units, purchase of substitute
Securities, 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 Unit outstanding on the last business day of such
calendar year; (2) as to the Principal Account: the dates of disposition and
identity of any Securities and the net proceeds received therefrom, deductions
for payments of applicable taxes and for fees and expenses of a Trust,
redemptions of Units and the purchase of substitute Securities, 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
Unit outstanding on the last business day of such calendar year; (3) a list of
the Securities held, a list of Securities purchased, sold or otherwise disposed
of during the year and the number of Units outstanding on the last business day
of such calendar year; (4) the Redemption Price per Unit based upon the last
computation thereof made during such calendar year; and (5) amounts actually
distributed during such calendar year from the Income Account and from the
Principal Account, separately stated, expressed both as total dollar amounts and
as dollar amounts representing the pro rata share of each Unit outstanding on
the last business day of such calendar year. The accounts of the Trust shall be
audited not less frequently than annually by independent certified public
accountants designated by the Sponsor, and the report of such accountants will
be furnished by the Trustee to Unit Holders upon request.
The Trustees shall keep available for inspection of Unit Holders at all
reasonable times during usual business hours, books of record and account of its
transactions as trustee, including records of the names and addresses of Unit
Holders, a current list of Securities in the portfolio and a copy of the
Indenture.
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Redemption
Tender of Units
Units may be redeemed at the office of the Trustee at its unit investment
trust office at 770 Broadway, New York, New York 10003, upon payment of any
relevant tax. At the present time there are not 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 cancelled.
Certificates for Units to be redeemed must be properly endorsed or
accompanied by a written instrument of transfer, although redemptions without
the necessity of certificate presentation will be effected for record Unit
Holders for whom Certificates have not been issued. Unit Holders must sign
exactly as their name appears on the face of the Certificate with the signature
guaranteed by a guarantor institution participating in the Securities Transfer
Agents Medallion Program or in such other guaranteed program acceptable to the
Trustee. In certain instances the Trustee may require additional documents such
as, but not limited to, trust instruments, certificates of death, appointments
as executor or administrator or certificates of corporate authority.
With respect to uncertificated Units, Unit Holders must have their signature
guaranteed by a guarantor institution participating in the Securities Transfer
Agents Medallion Program or in such other guarantee program acceptable to the
Trustee. In certain instances the Trustee may require additional documents such
as, but not limited to, trust instruments, certificates of death, appointments
as executor or administrator or certificates of corporate authority.
Within seven calendar days following such tender, or if the seventh calendar
day is not a business day, on the first business day prior thereto, the Unit
Holder will be entitled to receive in kind an amount for each Unit tendered
equal to the Redemption Price per Unit computed as of the Evaluation Time set
forth in the ``Summary of Essential Information'' in Part A on the date of
tender. (See ``Redemption--Computation of Redemption Price per Unit.'') The
``date of tender'' is deemed to be the date on which Units are received by the
Trustee, except that as regards Units received after the Evaluation Time, the
date of tender is the next day on which the New York Stock Exchange is open for
trading, and such Units will be deemed to have been tendered to the Trustee on
such day for redemption at the Redemption Price computed on that day.
The Trustee will redeem Units in kind. a Unit Holder will be able (except
during a period described below), not later than the seventh calendar day
following such tender (or if the seventh calendar day is not a business day on
the first business day prior thereto), to receive in kind an amount per Unit
equal to the Redemption Price per Unit as determined as of the day of tender. In
kind distributions (the ``In Kind distribution'') include whole shares of
Securities and cash as required. Fractional interests in shares will be
distributed in cash unless the Sponsor directs the distribution of a fractional
interest in shares in kind if such a distribution is deemed advisable to avoid
adverse federal income tax consequences to the Trust. The cash, the whole shares
and the fractional interest in shares will have an aggregate value equal to the
Redemption Price per Unit.
Distributions in kind on redemption of Units will be held by The Chase
Manhattan Bank (National Association), as the Distribution Agent, which each
Unit Holder shall be deemed to have designated as his agent upon purchase of a
Unit, for the account, and for disposition in accordance with the instructions
of, the tendering Unit Holder as follows:
(a) If the tendering Unit Holder requests cash payment, the Distribution
Agent shall sell the In Kind Distribution as of the close of business on the
date of tender or as soon thereafter as possible and remit to the Unit
Holder not later than seven calendar days thereafter the net proceeds of
sale, after deducting brokerage commissions and transfer taxes, if any, on
the sale. The Distribution Agent may sell the Securities through the
Sponsor, and the Sponsor may charge brokerage commissions on those sales.
Since these proceeds will be net of brokerage commissions, Unit Holders who
wish to receive cash for their Units should always offer them for sale to
the Sponsor in the secondary market before seeking redemption by the
Trustee. The Trustee may offer Units tendered to it for redemption to the
Sponsor on behalf of any Unit Holder, to obtain this more favorable price
for the Unit Holder.
(b) If the tendering Unit Holder requests distribution in kind, the
Trustee shall sell any portion of the In Kind Distribution represented by
fractional interests in shares in accordance with the foregoing and
distribute the net cash proceeds plus any other distributable cash to the
tendering Unit Holder together with certificates representing whole shares
of each of the Securities comprising the In Kind Distribution or, if so
directed by the Sponsor, distribute the fractional interests in shares in
kind to a redeeming Unit Holder. (In a case in which the Unit Holder
requests a distribution in kind the Trustee may, in lieu of distributing
Securities in kind to the Unit Holder, offer the Sponsor the
B-13
<PAGE>
<PAGE>
opportunity to acquire the tendered Units in exchange for the number of
shares of each Security and cash which the Unit Holder is otherwise entitled
to receive from the Trust. The federal income tax consequences for a Unit
Holder tendering all of his Units would be identical in either case. A Unit
Holder tendering only part of his Units might not receive capital gain or
loss treatment on a redemption but would on a sale to the Sponsor.)
Any amounts paid on redemption representing income received will be
withdrawn from the Income Account to the extent funds are available. In
addition, in implementing the redemption procedures described above, the Trustee
and the Distribution Agent shall make any adjustments necessary to reflect
differences between the redemption Price of the Units and the value of the In
Kind Distribution in whole shares as of the date of tender. To the extent that
Units are redeemed, the size of the Trust will be reduced.
The Trustee reserves the right to suspend the right of redemption and to
postpone the date of payment of the Redemption Price per Unit for any period
during which the New York Stock Exchange is closed, other than weekend and
holiday closings, or trading on that Exchange is restricted or during which (as
determined by the Securities and Exchange Commission by rule or regulation) an
emergency exists as a result of which disposal or evaluation of the underlying
Securities is not reasonably practicable, or for such other periods as the
Securities and Exchange Commission has by order permitted. The Trustee is not
liable to any person or in any way for any loss or damage that may result from
any such suspension or postponement.
Computation of Redemption Price per Unit
The Redemption Price per Unit of the Trust is determined by the Trustee as
of the Evaluation Time on the date any such determination is made. The
Redemption Price per Unit is each Unit's pro rata share, determined by the
Trustee, of: (1) the aggregate value of the Securities in the Trust, (2) cash on
hand in the Trust including dividends receivable on stocks trading ex-dividend
as of the date of computation and (3) any other assets of the Trust, less (a)
amounts representing taxes or governmental charges payable out of a Trust, (b)
the accrued expenses of the Trust, and (c) cash held for distribution to Unit
Holders of record as of a date prior to the evaluation.
The aggregate value of the Securities is determined in good faith by the
Trustee in the following manner: if the Securities are listed on a national
securities exchange or on the NASDAQ National Market System, this evaluation is
generally based on the closing sale prices as of the Evaluation Time on that
exchange (unless the Trustee deems these prices inappropriate as a basis for
valuation) or, if there is no closing sale price on that exchange, at the mean
between the closing bid and asked prices. If the Securities are not so listed
or, if so listed and the principal market therefor is other than on an exchange,
the evaluation shall generally be based on the current bid price on the
over-the-counter market (unless the Trustee deems these prices inappropriate as
a basis for evaluation). If current bid or closing prices are unavailable, the
evaluation is generally determined (a) on the basis of current bid prices for
comparable securities, (b) by appraising the value of the Securities on the bid
side of the market or by such other appraisal deemed appropriate by the Trustee
or (c) by any combination of the above, each as of the Evaluation Time.
Purchase by the Sponsor of Units Tendered for Redemption
The Indenture requires that the Trustee notify the Sponsor of any tender of
Units for redemption. So long as the Sponsor is maintaining a secondary market
for Units, the Sponsor, prior to the close of business on the day of tender, may
purchase any Units tendered to the Trustee for redemption by making payment
therefor to the Unit Holder in an amount no less than that which would have been
paid by the Trustee had the Units been redeemed by the Trustee. (See ``Public
Offering of Units--Secondary Market.'') Units held by the Sponsor may be
tendered to the Trustee for redemption as any other Units.
The offering price of any Units resold by the Sponsor will be the Public
Offering Price determined in the manner provided in this Prospectus. (See
``Public Offering of Units--Public Offering Price.'') Any profit resulting from
the resale of such Units will belong to the Sponsor which likewise will bear any
loss resulting from a lower offering or redemption price subsequent to its
acquisition of such Units. (See ``Public Offering of Units--Profit of
Sponsor.'')
SPONSOR
Prudential Securities Incorporated is a Delaware corporation and is engaged
in the underwriting, securities and commodities brokerage business and is a
member of the New York Stock Exchange, Inc., other major securities exchanges
and commodity exchanges and the National Association of Securities Dealers, Inc.
Prudential Securities
B-14
<PAGE>
<PAGE>
Incorporated, a wholly-owned subsidiary of Prudential Securities Group Inc. and
an indirect wholly-owned subsidiary of The Prudential Insurance Company of
America, is engaged in the investment advisory business. Prudential Securities
Incorporated has acted as principal underwriter and managing underwriter of
other investment companies. In addition to participating as a member of various
selling groups or as an agent of other investment companies, Prudential
Securities Incorporated executes orders on behalf of investment companies for
the purchase and sale of securities of such companies and sells securities to
such companies in its capacity as a broker or dealer in securities.
Prudential Securities Incorporated is distributor for Prudential Government
Securities Trust (Intermediate Term Series), The Target Portfolio Trust and for
Class B shares of The BlackRock Government Income Trust, Global Utility Fund,
Inc., Nicholas-Applegate Fund, Inc. (Nicholas-Applegate Growth Equity Fund),
Prudential Adjustable Rate Securities Fund, Inc., Prudential Allocation Fund,
Prudential California Municipal Fund (California Income and California Series),
Prudential Europe Growth Funds, Prudential Equity Fund, Prudential Equity Income
Fund, Prudential Global Fund, Prudential Global Genesis Fund, Prudential Global
Natural Resources Fund, Prudential GNMA Fund, Prudential Government Income Fund,
Prudential Growth Opportunity Fund, Prudential High Yield Fund, Prudential
Income Vertiblet Plus Fund, Inc., Prudential Intermediate Global Income Fund,
Inc., Prudential Multi-Sector Fund, Inc., Prudential Municipal Bond Fund,
Prudential Municipal Series Fund except Connecticut Money Market Series,
Massachusetts Money Market Series, New York Money Market Series and New Jersey
Money Market Series, Prudential National Municipals Fund, Prudential Pacific
Growth Fund, Inc., Prudential Short-Term Global Income Fund, Prudential
Strategist Fund, Prudential Structured Maturity Fund, Prudential U.S. Government
Fund and Prudential Utility Fund.
Limitations on Liability
The Sponsor is liable for the performance of its obligations arising from
its responsibilities under the Indenture, but will be under no liability to Unit
Holders for taking any action or refraining from any action in good faith or for
errors in judgment or liable or responsible in any way for depreciation or loss
incurred by reason of the sale of any Securities, except in case of its own
willful misfeasance, bad faith, gross negligence or reckless disregard for its
obligations and duties. (See ``Sponsor--Responsibility.'')
Responsibility
Although the Sponsor and Trustee do not presently intend to dispose of
Securities, nevertheless, the Indenture permits the Sponsor to direct the
Trustee to dispose of any Security upon the happening of certain events,
including, without limitation, default under certain documents or other
occurrences, legal actions which might adversely affect future declaration and
payment of dividends, institution of certain legal proceedings, a decline in
market price to such an extent, or such other adverse market or credit factor,
as in the opinion of the Sponsor would make retention of a Security detrimental
to the Trust and to the interests of the Unit Holders. Reinvestment of the
proceeds of any such disposition will be permitted only if such disposition is
due to unusual circumstances; i.e., that the creditworthiness or economic
viability of the issuer of the portfolio Security in question is seriously in
doubt. The Sponsor may also direct the Trustee to dispose of a Security if such
disposition is desirable to maintain the qualification of the Trust as a
``regulated investment company'' under the Internal Revenue Code. The Trustee
will dispose of a Security if the Prudential Securities' Research Department
reduces its rating on such Security as described below. On the Date of Deposit
each Security deposited into the portfolio was rated ``buy'' by the Prudential
Securities' Research Department. Stocks that are considered deeply undervalued
and thus likely to significantly outperform the market and stocks that are
considered moderately undervalued and likely to outperform the market but not by
as wide a margin are rated ``buy''. Stocks that are considered fairly valued and
are expected to perform about in line with the market are rated ``hold''. Stocks
that are considered moderately overvalued and expected to underperform the
market and stocks that are considered substantially overvalued and expected to
significantly underperform the market are rated ``sell''. In the event that the
Prudential Securities' Research Department reduces a rating to ``sell'', such
Security will be disposed of by the Trustee and the proceeds of such disposition
distributed to Unit Holders and not reinvested in substitute Securities.
The Sponsor and/or an affiliate thereof intend to continuously monitor
developments affecting the Securities in the Trust in order to determine whether
the Trustee should be directed to dispose of any such Securities.
It is the responsibility of the Sponsor to instruct the Trustee to reject
any offer made by an issuer of any of the Securities to issue new securities in
exchange and substitution for any Security pursuant to a recapitalization or
reorganization, except that the Sponsor may instruct the Trustee to accept such
an offer or to take any other action with respect thereto as the Sponsor may
deem proper if the Issuer failed to declare or pay or the Sponsor anticipates
such issuer will fail to pay or declare anticipated dividends with respect
thereto.
B-15
<PAGE>
<PAGE>
The Sponsor, at its option, is authorized by the Trust Agreement to direct
the Trustee to reinvest in substitute Securities the proceeds of sale of any of
the Securities only if such sale was due to unusual circumstances, i.e., that
the creditworthiness or economic viability of the issuer of the portfolio
Security in question is seriously in doubt or if desirable to maintain the
qualification of the Trust as a ``regulated investment company'' under the
Internal Revenue Code. In purchasing substitute Securities, the Sponsor will
endeavor to select Securities which are equity securities that possess
characteristics that are consistent with the objectives of the Trust as set
forth above, including a rating by the Prudential Securities' Research
Department. Such selection may include or be limited to Securities previously
included in the portfolio of the Trust. In the event no reinvestment is made the
proceeds of the sale of Securities will be distributed to Unit Holders as set
forth under ``Rights of Unit Holders--Distributions.''
If the Sponsor fails to perform its duties under the Trust Agreement or
becomes incapable of acting or becomes bankrupt or its affairs are taken over by
public authorities, the Sponsor is automatically discharged under the Trust
Agreement and the Trustee may appoint a successor Sponsor or terminate the Trust
Agreement and liquidate the Trust.
Any obligations so received in exchange or substitution will be held by the
Trustee subject to the terms and conditions of the Indenture to the same extent
as Securities originally deposited thereunder. Within five days after the
deposit of obligations in exchange or substitution for any of the underlying
Securities, the Trustee is required to give notice thereof to each Unit Holder,
identifying the Securities eliminated and the Securities substituted therefor.
Except as otherwise set forth in the Prospectus, the acquisition by the Trust of
any securities other than the Securities initially deposited is prohibited.
Resignation
If at any time the Sponsor shall resign under the Indenture or shall fail to
perform or be incapable of performing its duties thereunder or shall become
bankrupt or if its affairs are taken over by public authorities, the Indenture
directs the Trustee to either (1) appoint a successor Sponsor or Sponsors at
rates of compensation deemed reasonable by the Trustee not exceeding amounts
prescribed by the Securities and Exchange Commission, or (2) terminate the
Trust. The Trustee will promptly notify Unit Holders of any such action.
TRUSTEE
The Trustee is The Chase Manhattan Bank (National Association), a national
banking association with its principal executive office located at 1 Chase
Manhattan Plaza, New York, New York 10081 and its unit investment trust office
at 770 Broadway, New York, New York 10003. The Trustee is subject to supervision
by the Comptroller of the Currency, the Federal Deposit Insurance Corporation
and the Board of Governors of the Federal Reserve System. In connection with the
storage and handling of certain Securities deposited in the Trust, the Trustee
may use the services of The Depository Trust Company. These services may include
safekeeping of the Securities and coupon-clipping, computer book-entry transfer
and institutional delivery services. The Depository Trust Company is a limited
purpose trust company organized under the Banking Law of the State of New York,
a member of the Federal Reserve System and a clearing agency registered under
the Securities Exchange Act of 1934.
Limitations on Liability
The Trustee shall not be liable or responsible in any way for depreciation
or loss incurred by reason of the disposition of any monies, Securities or in
respect of any evaluation or for any action taken in good faith reliance on
prima facie properly executed documents except in cases of willful misfeasance,
bad faith, gross negligence or reckless disregard for its obligations and
duties. In addition, the Indenture provides that the Trustee shall not be
personally liable for any taxes or other governmental charges imposed upon or in
respect of the Trust which the Trust may be required to pay under current or
future laws of the United States or any other authority having jurisdiction.
Responsibility
For information relating to the responsibilities of the Trustee under the
Indenture, reference is made to the material set forth under ``Rights of Unit
Holders'' and ``Sponsor--Resignation.''
B-16
<PAGE>
<PAGE>
Resignation
By executing an instrument in writing and filing the same with the Sponsor,
the Trustee and any successor may resign. In such an event the Sponsor is
obligated to appoint a successor trustee as soon as possible. If the Trustee
becomes incapable of acting or becomes bankrupt or its affairs are taken over by
public authorities, the Sponsor may remove the Trustee and appoint a successor
as provided in the Indenture. The Sponsor may also remove the Trustee for any
other reason that the Sponsor determines to be in the best interest of the Unit
Holders. Such resignation or removal shall become effective upon the acceptance
of appointment by the successor trustee. If upon resignation of a trustee no
successor has been appointed or, if appointed, has not accepted the appointment
within thirty days after notification, the retiring trustee may apply to a court
of competent jurisdiction for the appointment of a successor. The resignation or
removal of a trustee becomes effective only when the successor trustee accepts
its appointment as such or when a court of competent jurisdiction appoints a
successor trustee.
AMENDMENT AND TERMINATION OF THE INDENTURE
Amendment
The Sponsor and the Trustee have the power to amend the Indenture without
the consent of any of the Unit Holders when such an amendment is (1) to cure any
ambiguity or to correct or supplement any provision of the Indenture which may
be defective or inconsistent with any other provision contained therein, (2) to
make such other provisions as shall not adversely affect the interests of the
Unit Holders (3) to change any provision as may be required by the Securities
and Exchange Commission or other regulatory agency or any successor authorities
or (4) to add or change any provision thereof as may be necessary or advisable
for the continuing qualification of the Trust as a regulated investment company
under the Internal Revenue Code; provided, that the Indenture may also be
amended by the Sponsor and the Trustee (or the performance of any of the
provisions of the Indenture may be waived) with the consent of Unit Holders
owning 51% of the Units of a Trust at the time outstanding for the purposes of
adding any provisions to or changing in any manner or eliminating any of the
provisions of the Indenture or of modifying in any manner the rights of Unit
Holders. In no event shall the Indenture be amended to permit the deposit or
acquisition of securities or other property except in the manner permitted by
the Trust Indenture or to provide the Trustee with the power to engage in
business or investments activities not specifically authorized in the Indenture
as originally adopted. In the event of any amendment requiring the consent of
Unit Holders, the Trustee is obligated to notify promptly all Unit Holders of
the substance of such amendment.
Termination
A trust may be terminated at any time by the consent of the holders of 51%
of the Units or by the Trustee upon the direction of the Sponsor when the value
of the Trust is less than 40% of the aggregate value of the Securities deposited
therein on the Date of Deposit and thereafter. However, in no event may a Trust
continue beyond the Termination Date set forth under ``Summary of Essential
Information in Part A.'' In the event of termination, written notice thereof
will be sent by the Trustee to all Unit Holders within a reasonable period after
termination, the Trustee will sell any Securities remaining in a Trust (except
that in the event of a termination on the Termination Date the procedures set
forth under Termination Options shall be followed), and, after paying all
expenses and charges incurred by a Trust, will distribute to each Unit Holder
his pro rata share of the balances remaining in the Income and Principal
Accounts. The sale of Securities in a Trust upon termination may result in a
lower amount than might otherwise be realized if such sale were not required at
such time. The amount realized by a Unit Holder upon termination may be less
than the cost of the Units held by such Unit Holder.
LEGAL OPINIONS
Certain legal matters in connection with the Units offered hereby have been
passed upon by Messrs. Cahill Gordon & Reindel, a partnership including a
professional corporation, 80 Pine Street, New York, New York 10005, as special
counsel for the Sponsor.
B-17
<PAGE>
<PAGE>
AUDITORS
The financial statements included in this Prospectus have been audited by
Deloitte & Touche LLP certified public accountants, as stated in their report
appearing herein, and are included in reliance upon such report given upon the
authority of that firm as experts in accounting and auditing.
B-18
<PAGE>
<PAGE>
I elect reinvestment in National Equity Trust, Utility
Series 2
Please reinvest (choose one)
/ / Principal and Dividends
/ / Principal
/ / Dividends
Social Security or Tax ID #
Full Registration (Name(s))
Full Address
Signature(s)
All notices received 10 days before the record date will
be coded for reinvestment on the subsequent payment
date.
PLEASE FORWARD COMPLETED FORM TO:
The Chase Manhattan Bank (National Association)
Attention: Reinvestment Department--A
770 Broadway, 7th Floor
New York, N.Y. 10003
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
No person is authorized to give any information or to make any
representations with respect to this investment company not contained herein;
and any information or representations not contained herein must not be relied
upon as having been authorized. This Prospectus does not constitute an offer to
sell, or a solicitation of an offer to buy, securities in any state to any
person to whom it is not lawful to make such offer in such state.
- --------------------------------------------------------------------------------
NATIONAL EQUITY TRUST,
Utility Series 2
Table of Contents
<TABLE>
<CAPTION>
Page
--------
<S> <C>
Summary of Essential Information........................... A-v
Accountants' Report........................................ A-1
Statement of Financial Condition........................... A-2
Schedule of Portfolio Securities........................... A-
The Trust.................................................. B-1
Portfolio Summary....................................... B-2
Federal Taxation........................................... B-3
Public Offering of Units................................... B-5
Public Offering Price................................... B-5
Public Distribution..................................... B-6
Secondary Market........................................ B-6
Profit of Sponsor....................................... B-7
Volume Discount......................................... B-7
Employee Discount....................................... B-7
Exchange Option............................................ B-8
Termination Options........................................ B-9
Expenses and Charges....................................... B-10
Initial Expenses........................................ B-10
Fees.................................................... B-10
Other Charges........................................... B-10
Rights of Unit Holders..................................... B-10
Certificates............................................ B-10
Distributions........................................... B-11
Reinvestment Program.................................... B-12
Reports and Records..................................... B-12
Redemption.............................................. B-13
Sponsor.................................................... B-14
Limitations on Liability................................ B-15
Responsibility.......................................... B-15
Resignation............................................. B-16
Trustee.................................................... B-16
Limitations on Liability................................ B-16
Responsibility.......................................... B-16
Resignation............................................. B-17
Amendment and Termination of the Indenture................. B-17
Amendment............................................... B-17
Termination............................................. B-17
Legal Opinions............................................. B-17
Auditors................................................... B-18
</TABLE>
- ---------------------------------------------------------------
NATIONAL EQUITY TRUST
Utility Series 2
(LOGO)
- ---------------------------------------------------------------
Sponsor
Prudential Securities Incorporated
One Seaport Plaza
199 Water Street
New York, New York 10292
Trustee
The Chase Manhattan Bank
(National Association)
1 Chase Manhattan Plaza
New York, NY 10081
- --------------------------------------------------------------------------------
<PAGE>
This Post-Effective Amendment to the Registration
Statement on Form S-6 comprises the following papers and
documents:
The facing sheet on Form S-6.
The Prospectus.
Signatures.
Consent of independent public accountants and consent
of evaluator; all other consents were previously
filed.
The following Exhibits:
****EX-3.(i) - Restated Certificate of Incorporation
of Prudential Securities Incorporated
dated March 29, 1993.
****EX-3.(ii) - Revised By-Laws of Prudential
Securities Incorporated as amended
through March 5, 1993.
+EX-4 - Trust Indenture and Agreement dated
January 17, 1990.
*EX-23 - Consent of Kenny S&P Evaluation Services, a
division of Kenny Information Systems,
Inc. (as evaluator).
***EX-24 - Powers of Attorney executed by a majority
of the Board of Directors of Prudential
Securities Incorporated.
*Ex-27 - Financial Data Schedule.
Ex-99 - Information as to Officers and Directors of
Prudential Securities Incorporated is
incorporated by reference to Schedules A
and D of Form BD filed by Prudential
Securities Incorporated pursuant to Rules
l5b1-1 and l5b3-1 under the Securities
Exchange Act of 1934 (1934 Act File No.
8-16267).
**EX-99.a - Affiliations of Sponsor with other
investment companies.
**EX-99.b - Broker's Blanket Policies, Standard Form
No. 39 in the aggregate amount of
$62,500,000.
++EX-99.c - Investment Advisory Agreement.
II-1
<PAGE>
_________________________
* Filed herewith.
** Incorporated by reference to exhibit of same designation
filed with the Securities and Exchange Commission as an
exhibit to the Registration Statement under the Securities
Act of 1933 of Prudential Unit Trusts, Insured Tax-Exempt
Series 1, Registration No. 2-89263.
*** Incorporated by reference to exhibit of same designation
filed with the Securities and Exchange Commission as an
exhibit to the Registration Statement under the Securities
Act of 1933 of National Municipal Trust Series,
Series 172, Registration No. 33-54681.
**** Incorporated by reference to exhibit of same designation
filed with the Securities and Exchange Commission as an
exhibit to the Registration Statement under the Securities
Act of 1933 of Government Securities Equity Trust, Series
5, Registration No. 33-57992.
+ Incorporated by reference to exhibit of same designation
filed with the Securities and Exchange Commission as an
exhibit to the Registration Statement under the Securities
Act of 1933 of National Equity Trust, Utility Series 1,
Registration No. 33-32670.
++ Incorporated by reference to exhibit of same designation
filed with the Securities and Exchange Commission as an
exhibit to the Registration Statement under the Securities
Act of 1933 of National Municipal Trust, Insured
Series 43, Registration No. 33-29314.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, the registrant, National Equity Trust, Utility Series 2
certifies that it meets all of the requirements for
effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly
caused this Registration Statement or amendment thereto to be
signed on its behalf by the undersigned thereunto duly
authorized, in the City of New York, and State of New York on
the 21th day of December, 1995.
NATIONAL EQUITY TRUST,
Utility Series 2
(Registrant)
By PRUDENTIAL SECURITIES INCORPORATED
(Depositor)
By the following persons,* who
constitute a majority of the
Board of Directors of Prudential
Securities Incorporated
Alan D. Hogan
George A. Murray
Leland B. Paton
Vincent T. Pica
Richard A. Redeker
Hardwick Simmons
Lee B. Spencer, Jr.
By /s/ Kenneth Swankie
(Kenneth Swankie,
Senior Vice President,
Manager--Unit Investment
Trust Department, as
authorized signatory for
Prudential Securities
Incorporated and Attorney-
in-Fact for the persons
listed above)
_____________________
* Pursuant to Powers of Attorney previously filed.
II-3
<PAGE>
CONSENT OF COUNSEL
The consent of counsel to the use of its name in the
Prospectus included in this Registration Statement is contained
in its opinion filed as Exhibit 5 to the Registration
Statement.
II-4
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of our report dated December 11, 1995, accompanying
the financial statements of the National Equity Trust Utility Series 2
included herein and to the reference to our Firm as experts under the
heading "Auditors" in the prospectus which is a part of this registration
statement.
DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
December 21, 1995
New York, New York
II-5
<PAGE>
<PAGE>
Exhibit 23
Letterhead of Kenny S&P Evaluation Services
(a division of Kenny Information Systems, Inc.)
December 22, 1995
Prudential Securities Incorporated
1 New York Plaza
New York, NY 10292
Re: National Equity Trust
Post-Effective Amendment No. 3
Utility Series 2
(Registration No. 33-50096)
Gentlemen:
We have examined the post-effective Amendment to the
Registration Statement File No. 33-50096 for the above-
captioned trust. We hereby acknowledge that Kenny S&P
Evaluation Services, a division of Kenny Information Systems,
Inc. is currently acting as the evaluator for the trust. We
hereby consent to the use in the Amendment of the reference to
Kenny S&P Evaluation Services, a division of Kenny Information
Systems, Inc. as evaluator.
In addition, we hereby confirm that the ratings
indicated in the above-referenced Amendment to the Registration
Statement for the respective bonds comprising the trust
portfolio are the ratings currently indicated in our KENNYBASE
database.
You are hereby authorized to file a copy of this
letter with the Securities and Exchange Commission.
Sincerely,
Frank A. Ciccotto
Frank A. Ciccotto
Vice President
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND> THE SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS FOR NATIONAL EQUITY TRUST
UTILITY SERIES 2 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS
</LEGEND>
<RESTATED>
<CIK> 0000890136
<NAME> NATIONAL EQUITY TRUST
UTILITY SERIES 2
<SERIES>
<NAME> NATIONAL EQUITY TRUST
UTILITY SERIES 2
<NUMBER> 1
<MULTIPLIER> 1
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> Aug-31-1995
<PERIOD-START> Sep-1-1994
<PERIOD-END> Aug-31-1995
<INVESTMENTS-AT-COST> 42,478,427
<INVESTMENTS-AT-VALUE> 39,521,334
<RECEIVABLES> 225,532
<ASSETS-OTHER> 4,028
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 39,750,894
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,655
<TOTAL-LIABILITIES> 1,655
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 42,478,339
<SHARES-COMMON-STOCK> 4,471,984
<SHARES-COMMON-PRIOR> 5,589,980
<ACCUMULATED-NII-CURRENT> 227,993
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
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</TABLE>
