<PAGE>
As filed with the Securities and Exchange Commission on September 24, 1996
Registration No. 333-11315
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
Amendment No. 1
to
Form S-6
REGISTRATION STATEMENT
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: HBI EQUITY TRUST, SERIES 2
B. Name of Depositor: HOWE BARNES INVESTMENTS, INC.
C. Complete address of Depositor's principal executive offices:
Howe Barnes Investments, Inc.
135 South LaSalle Street, Suite 1500
Chicago, Illinois 60603
D. Name and complete address of agents for service:
Copy to:
HOWE BARNES INVESTMENTS, INC. CHAPMAN AND CUTLER
Attention: Michael E. Sammon Attention: Mark J. Kneedy
135 South LaSalle Street, Suite 1500 111 West Monroe Street
Chicago, Illinois 60603 Chicago, Illinois 60603
E. Title and amount of securities being registered: Indefinite number of Units
of fractional undivided interests pursuant to Rule 24f-2 promulgated under
the Investment Company Act of 1940, as amended
F. Proposed maximum aggregate offering price to the public of the securities
being registered: Indefinite
G. Amount of filing fee: $500.00 (previously paid)
H. Approximate date of proposed public offering:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THE REGISTRATION STATEMENT
[X] Check box if it is proposed that this filing will become effective on
September 24, 1996 at 2:00 p.m. pursuant to Rule 487
The registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a)
may determine.
<PAGE>
HBI EQUITY TRUST, SERIES 2
Cross Reference Sheet
Pursuant to Rule 404(c) of Regulation C
under the Securities Act of 1933
(Form N-8B-2 Items Required by Instruction as to Prospectus in Form S-6)
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
<TABLE>
<CAPTION>
I. Organization and General Information
<S> <C>
1. (a) Name of trust ) Front Cover
(b) Title of securities issued ) Front Cover
2. Name and address of Depositor ) Back Cover
3. Name and address of Trustee ) Back Cover
4. Name and address of principal ) Back Cover
underwriter
5. Organization of trust ) The Trust
6. Execution and termination of ) Essential Information Regarding the Trust;
Trust Indenture and Agreement ) Administration of the Trust; Amendment of
) Indenture; The Trust; Termination of the
) Trust
7. Changes of Name ) *
8. Fiscal year ) *
9. Litigation ) *
II. General Description of the Trust and Securities of the Trust
10. General information regarding )
trust's securities and rights )
of holders )
(a) Type of Securities (Registered )
or Bearer) ) The Trust; Rights of Unitholders
</TABLE>
<PAGE>
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
<TABLE>
<S> <C>
(b) Type of Securities (Cumula- )
tive or Distributive) ) *
(c) Rights of Holders as to with- ) The Trust; Redemption of Units; Public
drawal or redemption ) Offering of Units - Maintenance of
) Secondary Market
(d) Rights of Holders as to ) The Trust; Public Offering of Units -
conversion, transfer, etc. ) Maintenance of Secondary market;
) Redemption of Units
(e) Rights if Trust issues periodic )
payment plan certificates. ) *
(f) Voting rights as to Securities ) Rights of Unitholders
under the Indenture )
(g) Notice to Holders as to )
change in: )
(1) Assets of Trust ) Administration of the Trust - Portfolio
) Supervision; Amendment of the Indenture
(2) Terms and Conditions of ) Administration of the Trust - Portfolio
the Trust's Securities ) Supervision; Amendment of the Indenture
(3) Provisions of Trust ) Amendment of the Indenture
(4) Identity of Depositor and )
Trustee ) Sponsor; Trustee
(h) Consent of Security Holders )
required to change: )
(1) Composition of assets of ) Administration of the Trust - Portfolio
Trust ) Supervision; Amendment of the Indenture
(2) Terms and conditions of ) Administration of the Trust
Trust's Securities )
(3) Provisions of Indenture ) Amendment of the Indenture
(4) Identity of Depositor and )
Trustee ) Sponsor; Trustee
</TABLE>
-ii-
<PAGE>
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
<TABLE>
<S> <C>
(i) Other feature or right ) *
11. Type of securities comprising ) The Trust; Rights of Unitholders;
security holder's interest ) Administration of the Trust - Portfolio
) Supervision
12. Information concerning periodic )
payment certificates ) *
13. (a) Load, fees, expenses, etc. ) Public Offering of Units; Expenses of the
) Trust
(b) Certain information regard- ) *
ing periodic payment )
certificates )
(c) Certain percentages ) Public Offering of Units; Expenses of the
) Trust
(d) Certain other fees, etc. ) Public Offering of Units - Public Offering
payable by holders ) Price
(e) Load, fees, expenses, and )
charges not covered in 13(a) ) Rights of Unitholders
(f) Certain profits receivable by )
depositor, principal under- )
writers, trustee or affiliated ) Public Offering of Units - Profits to the
persons ) Sponsor
(g) Ratio of annual charges to )
income ) *
14. Issuance of trust's securities ) The Trust; Rights of Unitholders
15. Receipt and handling of payments ) Public Offering of Units - Profits to the
from purchasers ) Sponsor; Administration of the Trust
16. Acquisition and disposition of ) The Trust; Administration of the Trust -
Underlying Securities ) Portfolio Supervision; Termination of the
) Trust
17. Withdrawal or redemption ) Public Offering of Units - Maintenance of a
</TABLE>
-iii-
<PAGE>
<TABLE>
<CAPTION>
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
<S> <C> <C>
) Secondary Market; Redemption of Units
18. (a) Receipt and disposition ) Distributions to Unitholders; Administration
of income ) of the Trust
(b) Reinvestment of distribu- ) *
tions )
(c) Reserves or special funds ) Distributions to Unitholders; Administration
) of the Trust - Accounts; Administration of
) the Trust - Reinvestment
(d) Schedule of distributions ) Essential Information Regarding the Trust
19. Records, accounts and reports ) Distributions to Unitholders; Administration
) of the Trust - Reports and Records
20. Certain miscellaneous provisions ) Sponsor; Termination of the Trust;
of Trust Agreement ) Amendment of the Indenture
21. Loans to security holders ) *
22. Limitations on liability ) Sponsor; Trustee
23. Bonding arrangements ) *
24. Other material provisions of ) *
trust agreement )
III. Organization Personnel and Affiliated Persons of Depositor
25. Organization of Depositor ) Sponsor
26. Fees received by Depositor ) Administration of the Trust - Portfolio
) Supervision; Expenses of the Trust
27. Business of Depositor ) Sponsor
28. Certain information as to ) Sponsor
officials and affiliated )
persons of Depositor )
29. Voting securities of Depositor ) Sponsor
</TABLE>
-iv-
<PAGE>
<TABLE>
<CAPTION>
FORM N-8B-2 FORM S-6
ITEM NUMBER HEADING IN PROSPECTUS
<S> <C> <C>
30. Persons controlling Depositor ) Sponsor
31. Payments by Depositor to officers ) *
for certain other services )
rendered to trust )
32. Payments by Depositor to ) *
directors for certain other )
services rendered to trust )
33. Remuneration of employees of ) *
Depositor for certain services )
rendered to trust )
IV. Distribution and Redemption of Securities
35. Distribution of trust's ) Public Offering of Units -- Distribution
securities by states ) of Units
36. Suspension of sales of trust's ) *
securities )
37. Revocation of authority to ) *
distribute )
38. (a) Method of distribution ) Public Offering of Units -- Distribution of
) Units; Public Offering of Units --
) Maintenance of a Secondary Market
(b) Underwriting agreements ) *
(c) Selling agreements ) Public Offering of Units -- Distribution of
) Units
39. (a) Organization of principal ) Sponsor
underwriter )
(b) N.A.S.D. membership by ) Sponsor
principal underwriter )
40. Certain fees received by ) Administration of the Trust -- Portfolio
principal underwriter ) Supervision; Expenses of the Trust
41. (a) Business of principal ) Sponsor
</TABLE>
-v-
<PAGE>
<TABLE>
<CAPTION>
FORM N-8B-2 FORM S-6
ITEM NUMBER HEADING IN PROSPECTUS
<S> <C> <C>
underwriter )
(b) Branch offices of principal ) *
underwriter
(c) Salesmen of principal ) *
underwriter )
42. Ownership of trust's securities ) Sponsor
by certain persons )
43. Certain brokerage commissions ) Public Offering of Units -- Profits to
received by principal ) Sponsor
underwriter )
44. (a) Method of valuation ) The Trust; Public Offering of Units --
) Maintenance of a Secondary Market;
) Valuation of Units; Redemption of Units
(b) Schedule as to offering price ) Essential Information Regarding the Trust;
) Public Offering of Units -- Public Offering
) Price; Valuation of Units; Schedule of
) Investments
(c) Variation in offering price ) Public Offering of Units -- Public Offering
to certain persons ) Price
45. Suspension of redemption rights ) *
46. (a) Redemption valuation ) Valuation of Units; Redemption of Units
(b) Schedule as to redemption ) *
price )
V. Information Concerning the Trustee or Custodian
47. Maintenance of position in ) Redemption of Units
underlying securities )
48. Organization and regulation of ) Trustee
Trustee )
</TABLE>
- ---------------------------------------------------
* Not applicable, answer negative or not required.
-vi-
<PAGE>
<TABLE>
<CAPTION>
FORM N-8B-2 FORM S-6
ITEM NUMBER HEADING IN PROSPECTUS
<S> <C> <C>
49. Fees and expenses of Trustee ) Essential Information Regarding the Trust;
) Expenses of the Trust; Trustee;
) Administration of the Trust -- Accounts;
) Distributions to Unitholders
50. Trustee's lien ) Expenses of the Trust
VI. Information Concerning Insurance of Holders of Securities
51. (a) Name and address of )
Insurance Company ) *
(b) Type of policies ) *
(c) Type of risks insured and )
excluded ) *
(d) Coverage of policies ) *
(e) Beneficiaries of policies ) *
(f) Terms and manner of )
cancellation ) *
(g) Method of determining )
premiums ) *
(h) Amount of aggregate )
premiums paid ) *
(i) Who receives any part of )
premiums ) *
(j) Other material provisions )
of the Trust relating to ) *
insurance )
VII. Policy of Registrant
52. (a) Method of selecting and ) The Trust; Administration of the Trust --
eliminating securities ) Portfolio Supervision; Termination of the
from the Trust ) Trust
</TABLE>
-vii-
<PAGE>
<TABLE>
<CAPTION>
FORM N-8B-2 FORM S-6
ITEM NUMBER HEADING IN PROSPECTUS
<S> <C> <C>
(b) Elimination of securities from ) Administration of the Trust -- Portfolio
the Trust ) Supervision
(c) Policy of Trust regarding ) The Trust; Administration of the Trust --
substitution and elimination ) Portfolio Supervision
(d) Description of any fundamental ) The Trust; Administration of the Trust --
policy of the Trust ) Portfolio Supervision; Termination of the
) Trust
53. (a) Taxable status of the Trust ) Tax Considerations
)
(b) Qualification of the Trust as a ) *
regulated investment company )
VIII. Financial and Statistical Information
54. Information regarding the Trust's ) *
past ten fiscal years )
55. Certain information regarding ) *
periodic payment plan certificates )
56. Certain information regarding ) *
periodic payment plan certificates )
57. Certain information regarding ) *
periodic payment plan certificates )
58. Certain information regarding ) *
periodic payment plan certificates )
59. Financial statements ) Statement of Net Assets
(Instruction 1(c) to Form S-6) )
</TABLE>
- --------------------------------------------------
* Not applicable, answer negative or not required.
-viii-
<PAGE>
HBI
EQUITY TRUST, SERIES 2
A UNIT INVESTMENT TRUST
A PORTFOLIO OF MIDWEST BANK AND THRIFT STOCKS
- --------------------------------------------------------------------------------
The investment objective of this Trust is to provide for capital appreciation
through an investment in common stocks of certain banking institutions and
thrift institutions incorporated or headquartered in the midwestern United
States and having, in the Sponsor's opinion, on the Initial Date of Deposit,
the potential to outperform broad-based stock indices and bank and thrift
stocks generally over the three-year life of the Trust. The value of the Units
will fluctuate with the value of the portfolio of underlying securities.
The minimum purchase in the initial public offering is 100 Units or
approximately $1,500. Only whole Units may be purchased. Units will be
available for purchase only during the initial public offering period.
- --------------------------------------------------------------------------------
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.
LOGO
HOWE BARNES INVESTMENTS, INC.
Read and retain this Prospectus for future reference. Prospectus dated
September 24, 1996
<PAGE>
ESSENTIAL INFORMATION REGARDING THE TRUST
As of September 23, 1996(1)
Sponsor: Howe Barnes Investments, Inc.
Trustee: Investors Fiduciary Trust Company
Initial Date of Deposit................................ September 24, 1996
<TABLE>
<S> <C>
Aggregate Value of Stocks in Trust (2).............................. $3,283,611
Number of Units..................................................... 230,427
Fractional Undivided Interest in the Trust Represented by Each Unit. 1/230,427
Calculation of Public Offering Price per Unit (3)
Aggregate Value of Stocks in Trust (2)............................. $3,283,611
Divided by 230,427 Units........................................... $14.25
Plus Sales Charge of 5.000% of Public Offering Price (5.263% of net
amount invested).................................................. $.75
Public Offering Price per Unit..................................... $15.00
Redemption Price per Unit (3)....................................... $14.04
Excess of Public Offering Price per Unit over Redemption Price per
Unit............................................................... $.96
</TABLE>
Evaluation Time......................................... 3:00 p.m. Chicago time
Income and Capital Account Distribution Dates... January 15, 1997 and quarterly
thereafter
Record Dates.......................... January 1, 1997 and quarterly thereafter
Mandatory Termination Date.................................. September 30, 1999
Discretionary Liquidation Amount....... 40% of the aggregate market value we
Stocks deposited in the Trust
Trustee's Annual Fee.............................................. $11,000
Estimated Annual Sponsor's Supervisory Fee................. $.043 per Unit
Estimated Annual Miscellaneous Expenses.................... $.010 per Unit
- --------
(1) The date prior to the Initial Date of Deposit.
(2) Represents value of the Stocks in the portfolio based on the closing
prices at the midpoint between the bid and offer side of the market on
September 23, 1996, rather than the closing prices at the bid side of the
market. After the initial offering, Net Asset Value of the Trust is
calculated based on the closing prices at the bid side of the market of
the Stocks. See "Valuation of Units." The aggregate value of the Stocks
based on the closing bid prices on September 23, 1996 is $3,236,244.
(3) The initial Public Offering Price per Unit on the Initial Date of Deposit
is based on the pro rata share of the aggregate value of the Stocks in the
Trust, valued at the midpoint between the bid and offer side of the
market, plus the applicable sales charge. Thereafter, the Public Offering
Price during the initial public offering period will be based upon the Net
Asset Value of the Trust next computed (based, during the initial public
offering period only, on valuation at the midpoint between the bid and
offer side of the market) as described in "Valuation of Units" plus the
applicable sales charge. The Redemption Price per Unit will be calculated
based on the Net Asset Value next computed (based on valuation at the bid
side of the market) based on the pro rata share of the aggregate value of
the Stocks in the Trust as described in "Redemption of Units."
2
<PAGE>
HBI EQUITY TRUST, SERIES 2
HBI Equity Trust. The objective of the HBI Equity Trust, Series 2 (the
"Trust") is to provide for capital appreciation through an investment in
common stocks of banking institutions and thrift institutions incorporated or
headquartered in the midwestern United States (the "Stocks"). Stocks have been
selected which, in the Sponsor's opinion, on the Initial Date of Deposit have
the potential to outperform broad-based stock indices and bank and thrift
stocks generally over the three-year life of the Trust. The Trust is not a
"managed" investment portfolio, but rather will consist of the same portfolio
of Stocks for the life of the Trust, subject to adjustment or elimination in
certain limited circumstances. Except for temporary investment of any proceeds
received in such limited circumstances, the Trust's portfolio will consist
primarily of common stocks. See "Administration of the Trust."
The Trust will seek to achieve its objective of capital appreciation through
an investment in a portfolio of Stocks representing banking institutions and
thrift institutions incorporated or headquartered in the midwestern United
States. The Sponsor believes that changes in state banking laws to permit
wider interstate banking and the continuing consolidation of the banking and
thrift industries have created attractive investment opportunities among
numerous midwestern banking institution and thrift institution stocks. The
Sponsor believes these stocks have the potential to achieve above-average
capital appreciation over the next three years primarily due to strong or
improving fundamental characteristics of the issuer companies, including among
other factors, strength and depth of management, strategic banking locations
in stable or growing market areas, high asset quality, and potential earnings
growth.
In selecting the Stocks for the Trust, the Sponsor has considered, among
other financial criteria of the issuer (or its banking or thrift subsidiary),
regulatory capital levels, net interest margin, return on average assets,
return on average equity, the adequacy of the loan loss reserve, the level of
non-performing and non-accrual loans, and loan charge-off history. The Sponsor
did not base its selection of Stocks for the Trust on the payment of dividends
by the various issuers; however, many selected Stocks do currently pay
dividends.
Termination. Unless advised to the contrary by the Sponsor, the Trustee will
begin to sell the Stocks held in the Trust 30 days prior to the Mandatory
Termination Date. Moneys held upon such sale of Stocks, to the extent not
reinvested in Treasury Obligations, and funds received from Treasury
Obligations upon maturity will be held in non-interest bearing accounts until
distributed and will be of benefit to the Trustee. See "Expenses of the
Trust." During the life of the Trust, Securities will not be sold to take
advantage of market fluctuations. The Trust will terminate on the Mandatory
Termination Date regardless of market conditions at that time. See
"Termination of the Trust" and "Tax Considerations."
Public Offering Price. The initial Public Offering Price per Unit on the
Initial Date of Deposit is determined by dividing the aggregate value of the
Stocks, based on the closing prices at the midpoint between the bid and offer
side of the market on the date prior to the Initial Date of Deposit, by the
number of Units being sold, plus the applicable sales charge. Thereafter,
during the initial public offering period, the Public Offering Price per Unit
is computed by dividing the Net Asset Value of the Trust (based, during the
initial public offering period only, on valuation of the Securities at the
offer side of the market), as determined by the Trustee as described under
"Valuation of Units," by the number of Units outstanding, then adding the
applicable sales charge. During the initial public offering period, the sales
charge will be 5.000% of the Public Offering Price (5.263% of the net amount
invested); provided, however, that a reduced sales charge will apply to
employees and affiliates of the Sponsor and certain of their relatives. See
"Public Offering of Units--Public Offering Price."
3
<PAGE>
Distributions. The Trustee will make pro rata distributions to Unitholders
from both the Income Account and the Capital Account on each Distribution Date
to the extent funds are available for distribution in the respective accounts.
See "Distributions to Unitholders." Upon termination of the Trust, the Trustee
will distribute to each Unitholder of record on such date his pro rata share
of the Trust's assets, less expenses. Holders may request to receive such
distribution "in kind." See "Redemption of Units" and "Termination of the
Trust." See "Tax Considerations" for a discussion of the tax consequences to
an investor of an "in kind" redemption. The sale of Stocks in the Trust in the
period prior to termination and upon termination may result in a lower amount
than might otherwise be realized if such sale were not required at such time
due to impending or actual termination of the Trust. For this reason, among
others, the amount realized by a Unitholder upon termination may be less than
the amount paid by such Unitholder.
Secondary Market. The Sponsor is not obligated, and currently does not
intend, to maintain a secondary market for the Units. Accordingly, a
Unitholder may currently only purchase Units in the initial public offering
and only dispose of his Units through redemption.
Risk Factors. An investment in the Trust should be made with an
understanding of the risks associated therewith, including, among others, the
possible deterioration of either the financial condition of the issuer or the
general condition of the stock market, volatile interest rates, economic
recession and potential increased regulation on banks and thrifts. See "The
Trust--Risk Factors."
4
<PAGE>
REPORT OF INDEPENDENT AUDITORS
THE UNITHOLDERS, SPONSOR AND TRUSTEE
HBI EQUITY TRUST, SERIES 2
We have audited the accompanying statement of net assets, including the
schedule of investments, of HBI Equity Trust, Series 2, as of the opening of
business on September 24, 1996. This statement of net assets is the
responsibility of the Trust's Sponsor. Our responsibility is to express an
opinion on this statement of net assets based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statement of net assets is free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the statement of net
assets. Our procedures included confirmation of the letter of credit held by
the Trustee and deposited in the Trust on September 24, 1996. An audit also
includes assessing the accounting principles used and significant estimates
made by the Sponsor, as well as evaluating the overall presentation of the
statement of net assets. We believe that our audit of the statement of net
assets provides a reasonable basis for our opinion.
In our opinion, the statement of net assets referred to above presents
fairly, in all material respects, the financial position of HBI Equity Trust,
Series 2 at the opening of business on September 24, 1996 in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
September 24, 1996
HBI EQUITY TRUST, SERIES 2
STATEMENT OF NET ASSETS
At the opening of business on September 24, 1996, the Initial Date of
Deposit.
NET ASSETS
<TABLE>
<S> <C>
Investments (1)(2)............................................. $3,283,611
==========
Units outstanding.............................................. 230,427
==========
ANALYSIS OF NET ASSETS
Cost to investors (3).......................................... $3,456,433
Less sales charge (3).......................................... 172,822
----------
Net proceeds to the Trust, equal to net assets................. $3,283,611
==========
</TABLE>
- ---------------------
(1) Aggregate cost to the Trust of the Stocks listed in the schedule of
investments is based on the closing prices at the midpoint between the bid
and offer side of the market of the Stocks on September 23, 1996, the
business day prior to the Initial Date of Deposit, as determined by the
Trustee in its capacity as Evaluator.
(2) Investments consist of $3,283,611 aggregate value of Stocks represented by
the Sponsor's contracts to purchase the Stocks for which an irrevocable
letter of credit from Harris Trust and Savings Bank totaling $3,500,000
has been deposited with the Trustee.
(3) The aggregate cost to investors includes a sales charge computed at the
rate of 5.000% of the initial Public Offering Price (equivalent to 5.263%
of the net amount invested) and assumes no reduction in sales charges for
purchases by employees and affiliates of the Sponsor and certain of their
relatives.
5
<PAGE>
HBI EQUITY TRUST, SERIES 2
SCHEDULE OF INVESTMENTS
At the opening of business on September 24, 1996, the Initial Date of
Deposit.
<TABLE>
<CAPTION>
COST OF
STOCKS TO
TICKER NUMBER TRUST
SYMBOL NAME OF ISSUERS (LOCATION) OF SHARES (1)(2)
------ ---------------------------------------------- --------- ----------
<C> <S> <C> <C>
SRCE 1st Source Corporation (South Bend, IN)....... 10,310 $ 234,553
AMBK Ambanc Corp. (Vincennes, IN).................. 7,387 234,537
BANF BancFirst Corporation (Oklahoma City, OK)..... 9,525 234,553
BEVB Beverly Bancorporation, Inc. (Chicago, IL).... 14,833 234,547
CBCO CB Bancorp, Inc. (Michigan City, IN).......... 11,511 234,537
CORS Corus Bankshares, Inc. (Chicago, IL).......... 7,245 234,557
First Financial Corporation (Stevens Point,
FFHC WI)........................................... 9,902 234,554
Heritage Financial Services, Inc. (Tinley
HERS Park, IL)..................................... 10,909 234,543
HOMF Home Federal Bancorp (Seymour, IN)............ 8,053 234,544
IRWN Irwin Financial Corporation (Columbus, IN).... 5,486 234,527
MAFB MAF Bancorp, Inc. (Clarendon Hills, IL)....... 8,935 234,544
OSKY Mahaska Investment Company (Oskaloosa, IA).... 12,184 234,542
MPFC Mountain Parks Financial Corp. (Denver, CO)... 8,158 234,542
Pinnacle Financial Services, Inc. (St. Joseph,
PNFI MI)........................................... 9,875 234,531
----------
TOTAL INVESTMENTS.................................. $3,283,611
==========
</TABLE>
- ---------------------
(1) Represents the aggregate value of the Stocks based on the closing prices
on September 23, 1996, the business day prior to the Initial Date of
Deposit, at the midpoint between the bid and offer side of the market. The
aggregate value of the Stocks based on the closing prices at the bid side
of the market on September 23, 1996 was $3,236,244.
(2) The aggregate cost of the Stocks to the Sponsor, including brokerage
commissions, was $3,255,878 and the profit to the Sponsor at the opening
of Business on the Initial Date of Deposit was $27,733. See "Public
Offering of Units--Profits to the Sponsor."
6
<PAGE>
THE TRUST
General. The Trust is one of a series of similar but separate unit
investment trusts created under Missouri law by the Sponsor pursuant to a
Trust Agreement dated as of the Initial Date of Deposit (the "Indenture"),
between Howe Barnes Investments, Inc. (the "Sponsor") and Investors Fiduciary
Trust Company (the "Trustee"). Reference is made to the Indenture and any
statements contained herein are qualified in their entirety by the provisions
of the Indenture.
The portfolio of the Trust consists of common stock of certain issuers
selected by the Sponsor, including, in the case of securities not delivered on
the Initial Date of Deposit, confirmations of contracts to purchase such
securities, and any additional stocks acquired and held in the Trust pursuant
to the Indenture (collectively, the "Stocks" or the "Securities"). Portfolios
of additional series may include shares of preferred stock or other equity
securities convertible into common stock.
On the Initial Date of Deposit, the Sponsor deposited the Stocks with the
Trustee together with cash or an irrevocable letter or letters of credit of a
commercial bank or banks in an amount at least equal to the aggregate purchase
price of any of the Stocks represented by confirmation of contracts to
purchase such securities. The value of the Stocks on the Initial Date of
Deposit was determined on the basis of the closing prices at the midpoint
between the bid and offer side of the market on the business day prior to the
Initial Date of Deposit. In exchange for the deposit of the Stocks, including
any contracts to purchase Stocks, the Trustee delivered to the Sponsor a
receipt for Units representing the entire ownership of the Trust.
On the Initial Date of Deposit, each Unit represented that fractional
undivided interest in each of the Stocks as set forth under "Essential
Information Regarding the Trust." If any Units are redeemed, the aggregate
value of Stocks in the Trust will be reduced, and the fractional undivided
interest represented by each remaining Unit will be increased proportionately.
Units will remain outstanding until redeemed upon tender to the Trustee by any
Unitholder (which may include the Sponsor) or until the termination of the
Trust. See "Termination of the Trust."
In the event a contract to purchase a Stock which is deposited on the
Initial Date of Deposit fails, funds attributable to such failed contract may
be reinvested in such other substantially similar stock or stocks, if any,
which have been identified as substitute stocks by the Sponsor as of the
Initial Date of Deposit or, if not so reinvested within 40 days after the
Initial Date of Deposit (the "Purchase Period"), distributed to Unitholders of
record on the last day of the month during which the end of the Purchase
Period occurred. The distribution will be made within 20 days following such
record date and, in the event of such a distribution, the Sponsor will refund
to each Unitholder the portion of the sales charge attributable to such failed
contract.
Additional Units of the Trust may be issued at any time by depositing in the
Trust additional Stocks or contracts to purchase securities together with
irrevocable letters of credit or cash. As additional Units are issued by the
Trust as a result of the deposit of additional Stocks by the Sponsor, the
aggregate value of the Stocks in the Trust will be increased and the
fractional undivided interest in the Trust represented by each Unit will be
decreased. The Sponsor may continue to make additional deposits of Stocks into
the Trust following the Initial Date of Deposit, provided that such additional
deposits will be in amounts which will maintain, as nearly as practicable, the
original proportionate relationship and not the actual proportionate
relationship on the subsequent date of deposit, since the actual proportionate
relationship may be different than the original proportionate relationship.
Any such difference may be due to the sale, redemption or liquidation of any
of the Stocks deposited in the Trust on the Initial, or any subsequent, Date
of Deposit.
Each Unit initially offered represents an undivided interest in the Trust.
To the extent any Units are redeemed by the Trustee or additional Units are
issued as a result of additional Stocks
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being deposited by the Sponsor, the fractional undivided interest in the Trust
represented by each unredeemed Unit will increase or decrease accordingly,
although the actual interest in the Trust represented by such fraction will
remain unchanged. Investors should note that the Stocks were selected for
inclusion in the Trust as of the Initial Date of Deposit. The Trust must
continue to purchase or hold Stocks originally selected through this process
even though the evaluation of the attractiveness of the Stocks may have
changed and, if the evaluation were performed again at that time, some or all
of the Stocks may not be selected for the Trust.
Because the Trust is organized as a unit investment trust, rather than as a
management investment company, the Trustee and the Sponsor do not have
authority to manage the Trust's assets in an attempt to take advantage of
various market conditions to improve the Trust's Net Asset Value, but rather
may dispose of Stocks only under limited circumstances. The original
proportionate relationship among the Stocks is only subject to adjustment (i)
to reflect the occurrence of a stock split, stock dividend or a similar event
which affects the capital structure of the issuer of a Stock but which does
not affect the Trust's percentage ownership of the common stock equity of such
issuer at the time of such event, (ii) to reflect a sale of a Stock, (iii) to
reflect the acquisition (and subsequent disposition upon maturity) of Treasury
Obligations or (iv) to reflect a merger or reorganization by an issuer of a
Stock. See "Administration of the Trust--Portfolio Supervision" and
"Administration of the Trust--Reinvestment."
The Stocks are common stocks which have been selected by the Sponsor as
having, as of the Initial Date of Deposit, an above-average capital
appreciation potential over the life of the Trust. Stocks contained in the
Trust will not be sold to take advantage of market fluctuations nor will they
be sold solely because the Sponsor no longer considers them to have
appreciation potential. Proceeds from the sale of Stocks, if any (unless such
proceeds are reinvested in Treasury Obligations if and to the extent there is
no legal impediment thereto), and any dividends and distributions received
will be held by the Trustee in non-interest bearing accounts until used to pay
expenses or distributed to Unitholders on the next following Distribution
Date. See "Administration of the Trust--Reinvestment." To the extent that
funds are held in such non-interest bearing accounts, such funds will benefit
the Trustee.
Risk Factors. An investment in Units of the Trust should be made with an
understanding of the risks inherent in an investment in common stocks in
general, including the risk that the financial condition of the issuers of the
Stocks or the general condition of the stock market may worsen and the value
of the Stocks and therefore the value of the Units may decline. Common stocks
are especially susceptible to general stock market movements and to volatile
increases and decreases of value as market confidence in and perceptions of
the issuers change. These perceptions are based on unpredictable factors
including expectations regarding domestic and foreign government, economic,
monetary and fiscal policies, inflation and interest rates, economic expansion
or contraction, and global or regional political, economic or banking crises.
The general risks are 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 against
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,
but do not participate in other amounts available for distribution by the
issuing corporation. Dividends on cumulative preferred stock must be paid
before any dividends are paid on common 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.
Common stocks do not represent an obligation of the issuer. Therefore they
do not offer any assurance of income or provide the degree of protection of
debt securities. The issuance of debt
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securities or 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. Unlike debt securities, which
typically have a stated principal amount payable at maturity, common stocks do
not have a fixed principal amount or a maturity. Additionally, the value of
the Stocks in the Trust is subject to market fluctuations for as long as the
Stocks remain outstanding, and therefore over the life of the Trust the Stocks
in the Trust may be expected to fluctuate to values higher or lower than those
prevailing on the Initial Date of Deposit.
The Trust is concentrated in Stocks issued by companies in the banking and
thrift industries. In view of this, an investment in Units of the Trust should
be made with an understanding of the problems and risks inherent in the
banking and thrift industries in general. Banking institutions and thrift
institutions are especially subject to the adverse effects of economic
recession, volatile interest rates, portfolio concentrations in geographic
markets and in commercial and residential real estate loans, and competition
from new entrants in their fields of business. Economic conditions in the real
estate markets, which have been weak in the recent past, can have a
significant effect upon banking institutions and thrift institutions because
they generally have a substantial percentage of their assets invested in loans
secured by real estate, as has recently been the case for a number of banks
and thrifts with respect to commercial real estate in the northeastern and
southwestern regions of the United States. Banking institutions and thrift
institutions are subject to extensive federal regulation and, when such
institutions are state-chartered, to state regulation as well. Regulatory
actions, such as increases in the minimum capital requirements applicable to
commercial banks and thrifts and increases in deposit insurance premiums
required to be paid by commercial banks and thrifts to the FDIC, can
negatively impact earnings and the ability of an institution to pay dividends.
Furthermore, neither federal insurance of deposits nor governmental
regulation, however, ensures the solvency or profitability of banking
institutions or thrift institutions, or insures against any risk of investment
in the securities issued by such institutions.
Financial institutions and their holding companies are extensively regulated
under federal and state laws. As a result, the business, financial condition
and prospects of banks and thrifts can be materially affected not only by
management decisions and general economic conditions, but also by applicable
statutes and regulations and other regulatory pronouncements and policies
promulgated by regulatory agencies with jurisdiction over the banks and
thrifts, such as the Board of Governors of the Federal Reserve System ("FRB"),
the Office of the Comptroller of the Currency ("OCC"), the Office of Thrift
Supervision (the "OTS"), the Federal Deposit Insurance Corporation ("FDIC")
and the state banking regulators. The effect of such statutes, regulations and
other pronouncements and policies can be significant, cannot be predicted with
a high degree of certainty and can change over time. Furthermore, such
statutes, regulations and other pronouncements and policies are intended to
protect depositors and the FDIC's deposit insurance funds, not to protect
stockholders. Bank and thrift holding companies as well as their subsidiary
banks and thrifts are subject to enforcement actions by their regulators for
regulatory violations. In addition to compliance with statutory and regulatory
limitations and requirements concerning financial and operating matters,
regulated financial institutions must file periodic and other reports and
information with their regulators and are subject to examination by each of
their regulators.
The statutory requirements applicable to and regulatory supervision of bank
and thrift holding companies and their subsidiary banks and thrifts have
increased significantly and have undergone substantial change in recent years.
To a great extent, these changes are embodied in the Financial Institutions
Reform, Recovery and Enforcement Act ("FIRREA"), enacted in August 1989, the
Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"),
enacted
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in December 1991, and the regulations promulgated under FIRREA and FDICIA.
Many of the regulations promulgated pursuant to FDICIA have only recently been
finalized and their impact on the business and financial condition and
prospects of banks and thrifts cannot be predicted with certainty. Currently,
various initiatives have been proposed that could result in wide-ranging
restructuring of the bank regulatory system in the United States. These
include (i) the merger or other combination of the financial institution
regulators, including the FRB, the OCC, the OTS and the FDIC, (ii) the
combination of the OCC and FDIC, with the FRB remaining independent, and (iii)
the creation of a new federal banking agency to provide comprehensive
supervision of financial institutions. Banks and thrifts currently face
significant competition from other financial institutions such as mutual
funds, credit unions, mortgage banking corporations and insurance companies,
and increased competition may result from broadening national interstate
banking powers. The Sponsor makes no prediction as to what, if any, additional
bank and thrift regulatory reform might be adopted or what ultimate effect
such reform might have on the Trust's portfolio.
Until distributed, proceeds received upon the sale of Stocks may be
reinvested in interest-bearing Treasury Obligations maturing prior to the next
Distribution Date or, if earlier, December 31 of the year of purchase to the
extent legally permissible. See "Administration of the Trust--Reinvestment."
The value of the Securities and, therefore, the value of Units, may be
expected to fluctuate.
The Sponsor has acquired or will acquire the Stocks and thereby benefits
from transaction fees. The Sponsor in its general securities business acts as
agent or principal in connection with the purchase and sale of equity
securities, including the Stocks in the Trust, and may act as a market maker
in certain or all of the Stocks. The Sponsor also from time to time may issue
reports on and make recommendations relating to equity securities, which may
include the Stocks. See "Public Offering of Units--Profits to the Sponsor."
TAX CONSIDERATIONS
The following is a general discussion of certain of the federal income tax
consequences of the purchase, ownership and disposition of the Units. The
summary is limited to investors who hold the Units as "capital assets"
(generally, property held for investment) within the meaning of Section 1221
of the Internal Revenue Code of 1986 (the "Code"). Unitholders should consult
their tax advisers in determining the federal, state, local and any other tax
consequences of the purchase, ownership and disposition of Units in the Trust.
In the opinion of Chapman and Cutler, special counsel for the sponsor, under
existing law:
1. The Trust is not an association taxable as a corporation for federal
income tax purposes; each Unitholder will be treated as the owner of a pro
rata portion of each of the assets of the Trust under the Code; and the
income of the Trust will be treated as income of the Unitholders thereof
under the Code. Each Unitholder will be considered to have received his pro
rata share of income derived from the Trust asset when such income is
considered to be received by the Trust.
2. Each Unitholder will have a taxable event when the Trust disposes of a
Security (whether by sale, exchange, liquidation, redemption, or otherwise)
or upon the sale or redemption of Units by such Unitholder (except to the
extent an in kind distribution of stock is received by such Unitholder as
described below). The price a Unitholder pays for his Units is allocated
among his pro rata portion of each Security held by the Trust (in
proportion to the fair market values thereof on the valuation date nearest
the date the Unitholder purchases his Units) in order to determine his
initial tax basis for his pro rata portion of each Security held by the
Trust. For federal income tax purposes, a Unitholder's pro rata portion of
dividends as defined by Section 316 of the Code paid by a corporation with
respect to a
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Security held by the Trust are taxable as ordinary income to the extent of
such corporation's current and accumulated "earnings and profits." A
Unitholder's pro rata portion of dividends paid on such Security which
exceeds such current and accumulated earnings and profits will first reduce
a Unitholder's tax basis in such Security and, to the extent that such
dividends exceed a Unitholder's tax basis in such Security, shall generally
be treated as capital gain, In general, any such capital gain will be
short-term unless a Unitholder has held his Units for more than one year.
3. A Unitholder's portion of gain, if any, upon the sale or redemption of
Units or the disposition of any of the Securities held by the Trust will
generally be considered a capital gain except in the case of a dealer or a
financial institution and, in general, will be long-term if the Unitholder
has held his Units for more than one year (the date on which the Units are
acquired (i.e., the "trade date") is excluded for purposes of determining
whether the Units have been held for more than one year). A Unitholder's
portion of loss, if any, upon the sale or redemption of Units or the
disposition of Securities held by the Trust will generally be considered a
capital loss (except in the case of a dealer or a financial institution)
and, in general, will be long-term if the Unitholder has held his Units for
more than one year. Unitholders should consult their tax advisers regarding
the recognition of such capital gains and losses for federal income tax
purposes.
Dividends Received Deduction. A corporation that owns Units generally will
be entitled to a 70% dividends received deduction with respect to such
Unitholder's pro rata portion of dividends received by the Trust (to the
extent such dividends are taxable as ordinary income, as discussed above, and
are attributable to domestic corporations) in the same manner as if such
corporation directly owned the Securities paying such dividends (other than
corporate Unitholders such as "S" corporations, which are not eligible for the
deduction because of their special characteristics and other than for purposes
of special taxes such as the accumulated earnings tax and the personal holding
corporation tax). However, a corporation owning Units should be aware that
Sections 246 and 246A of the Code impose additional limitations on the
eligibility of dividends for the 70% dividends received deduction. These
limitations include a requirement that stock (and therefore Units) must
generally be held at least 46 days (as determined under Section 246(c) of the
Code). Final regulations have been recently issued which address special rules
that must be considered in determining whether the 46 day holding requirement
is met. Moreover, the allowable percentage of the deduction will be reduced
from 70% if a corporate Unitholder owns certain stock (or Units) the financing
of which is directly attributable to indebtedness incurred by such
corporation. It should be noted that various legislative proposals that would
affect the dividends received deduction have been introduced. Unitholders
should consult their tax advisers with respect to the limitations on and
possible modifications to the dividends received deduction.
Limitations on Deductibility of Trust Expenses by Unitholders. Each
Unitholder's pro rata share of each expense paid by the Trust is deductible by
the Unitholder to the same extent as though the expense had been paid directly
by him. It should be noted that as a result of the Tax Reform Act of 1986,
certain miscellaneous itemized deductions, such as investment expenses, tax
return preparation fees and employee business expenses will be deductible by
an individual only to the extent they exceed 2% of such individual's adjusted
gross income. Unitholders may be required to treat some or all of the expenses
of the Trust as miscellaneous itemized deductions subject to this limitation.
Disposition of Securities or Disposition of Units. As discussed above, a
Unitholder may recognize taxable gain (or loss) when a Security is disposed of
by the Trust or if the Unitholder disposes of a Unit.
Recognition of Taxable Gain or Loss Upon Disposition of Securities by the
Trust or Disposition of Units. As discussed above, a Unitholder may recognize
taxable gain (or loss) when a Security is disposed of by the Trust or if the
Unitholder disposes of a Unit. For taxpayers other than
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corporations, net capital gains are subject to a maximum marginal stated tax
rate of 28%. However, it should be noted that legislative proposals are
introduced from time to time that affect tax rates and could affect relative
differences at which ordinary income and capital gains are taxed.
The Revenue Reconciliation Act of 1993 (the "Act") raised tax rates on
ordinary income while capital gains remain subject to a 28% maximum stated
rate for taxpayers other than corporations. Because some or all capital gains
are taxed at a comparatively lower rate under the Act, the Act includes a
provision that would recharacterize capital gains as ordinary income in the
case of certain financial transactions that are "conversion transactions"
effective for transactions entered into after April 30, 1993. Unitholders and
prospective investors should consult with their tax advisers regarding the
potential effect of this provision on their investment in Units.
If a Unitholder disposes of a Unit he is deemed thereby to have disposed of
his entire pro rata interest in all assets of the Trust including this pro
rata portion of all Securities represented by a Unit.
"In Kind" Distributions. A Unitholder may request an In Kind Distribution
upon the termination of the Trust. In addition, with respect to redemption
requests during the term of the Trust of $100,000 or more, a Unitholder may be
required to take an In Kind Distribution if the Sponsor, in its sole
discretion, directs the Trustee to redeem Units "in kind". As previously
discussed, prior to redemption of Units or prior to the termination of the
Trust, a Unitholder is considered as owning a pro rata portion of each of the
Trust assets for federal income tax purposes. The receipt of an In Kind
Distribution will result in a Unitholder receiving an undivided interest in
whole shares of stock plus, possibly, cash.
The potential tax consequences that may occur under an In Kind Distribution
with respect to each Security held by the Trust will depend on whether or not
a Unitholder receives cash in addition to Securities. A "Security" for this
purpose is a particular class of stock issued by a particular corporation. A
Unitholder will not recognize gain or loss if a Unitholder only receives
Securities in exchange for his or her pro rata portion in the Securities held
by the Trust. However, if a Unitholder also receives cash in exchange for a
fractional share of a Security held by the Trust, such Unitholder will
generally recognize gain or loss based upon the difference between the amount
of cash received by the Unitholder and his tax basis in such fractional share
of a Security held by the Trust.
Because the Trust will own many Securities, a Unitholder who requests an In
Kind Distribution will have to analyze the tax consequences with respect to
each Security owned by the Trust. The amount of taxable gain (or loss)
recognized upon such exchange will generally equal the sum of the gain (or
loss) recognized under the rules described above by such Unitholder with
respect to each Security owned by the Trust. Untitholders who request an In
Kind Distribution are advised to consult their tax advisers in this regard.
Computation of the Unitholder's Tax Basis. Initially, a Unitholder's tax
basis in his Units will generally equal the price paid by such Unitholder for
his Units. The cost of the Units is allocated among the Securities held in the
Trust in accordance with the proportion of the fair market values of such
Securities on the valuation date nearest the date the Units are purchased in
order to determine such Unitholder's tax basis for his pro rata portion of
each Security.
A Unitholder's tax basis in his Units and his pro rata portion of a Security
held by the Trust will be reduced to the extent dividends paid with respect to
such Security are received by the Trust which are not taxable as ordinary
income as described above.
General. Each Unitholder will be requested to provide the Unitholder's
taxpayer identification number to the Trustee and to certify that the
Unitholder has not been notified by the Internal Revenue Service that payments
to the Unitholder are subject to back-up withholding. If the proper
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taxpayer identification number and appropriate certification are not provided
when requested, distributions by the Trust to such Unitholder (including
amounts received upon the redemption of Units) will be subject to back-up
withholding. Distributions by the Trust (other than those that are not treated
as United States source income, if any) will generally be subject to United
States income taxation and withholding in the case of Units held by non-
resident alien individuals, foreign corporations or other non-United States
persons. Such persons should consult their tax advisers.
At the termination of the Trust, the Trustee will furnish to each Unitholder
of the Trust a statement containing information relating to the dividends
received by the Trust on the Securities, the gross proceeds received by the
Trust from the disposition of any Security (resulting from redemption or the
sale of any Security), and the fees and expenses paid by the Trust. The
Trustee will also furnish annual information returns to Unitholders and to the
Internal Revenue Service.
Under existing law, the Trust is not an association taxable as a corporation
for Missouri income tax purposes and the Unitholders of the Trust will be
treated as owners of a pro rata portion of the Trust and the income of such
portion of the Trust will be treated as income of the Unitholders for Missouri
state income tax purposes.
The foregoing discussion relates only to the tax treatment of U.S.
Unitholders ("U.S. Unitholders") with regard to federal and certain aspects of
Missouri income taxes. Unitholders may be subject to taxation in Missouri or
in other jurisdictions and should consult their own tax advisers in this
regard. As used herein, the term "U.S. Unitholder" means an owner of a Unit of
the Trust that (a) is (i) for United States federal income tax purposes a
citizen or resident of the United States, (ii) a corporation, partnership or
other entity created or organized in or under the laws of the United States or
of any political subdivision thereof, or (iii) an estate or trust the income
of which is subject to United States federal income taxation regardless of its
source or (b) does not qualify as a U.S. Unitholder in paragraph (a) but whose
income from a Unit is effectively connected with such Unitholder's conduct of
a United States trade or business. The term also includes certain former
citizens of the United States whose income and gain on the Units will be
taxable.
PUBLIC OFFERING OF UNITS
Public Offering Price. The initial Public Offering Price per Unit on the
Initial Date of Deposit is based on the pro rata share of the aggregate value
of the Stocks in the Trust based on the closing prices at the midpoint between
the bid and offer side of the market on the business day prior to the Initial
Date of Deposit, plus the sales charge of 5.000% (5.263% of the net amount
invested). Thereafter, during the initial public offering period, the Public
Offering Price per Unit is the Net Asset Value per Unit, which is based on the
aggregate market value of the Securities valued at the closing prices at the
midpoint between the bid and offer side of the market, plus the 5.000% sales
charge. See "Valuation of Units."
The Sponsor intends to permit a reduced sales charge with respect to Units
purchased by its employees and affiliates of the Sponsor and certain of their
relatives who may purchase Units of the Trust (individually or for their
retirement programs) at a reduced sales charge of 1.554% (1.579% of the net
amount invested.)
Distribution of Units. The minimum purchase in the initial public offering
is 100 Units, or approximately $1,500. Only whole Units may be purchased.
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The Sponsor reserves the right to reject, in whole or in part, any order for
the purchase of Units. The Sponsor intends to qualify the Units for sale in
the State of Illinois as well as in selected other states. Units will be sold
only to individuals and other investors resident in such states and to
institutional and other investors in other states to the extent there are
available exemptions from applicable state securities registration
requirements.
The Net Asset Value per Unit at the time of sale or transfer or upon
redemption may be less than the price at which the Unit was purchased.
Profits to the Sponsor. In addition to the applicable sales charges, the
Sponsor realizes a profit (or sustains a loss) in the amount of any difference
between the cost of the Stocks to the Sponsor and the price at which it
deposits the Stocks in the Trust in exchange for Units. For purposes of any
deposit, the Stocks will be valued at the closing prices at the midpoint
between the bid and offer side of the market on the business day prior to the
related date of deposit. The spread between the cost of the Stocks to the
Sponsor and the price at which the Stocks were deposited in the Trust on the
Initial Date of Deposit is set forth in footnote (2) to the "Schedule of
Investments." The cost of Stocks to the Sponsor includes the amount paid by
the Sponsor, if any, for brokerage commissions. These amounts are not an
expense of the Trust.
Cash, if any, received from Unitholders prior to the settlement date for the
purchase of Units or prior to the payment for Stocks upon their delivery may
be used in the Sponsor's business subject to the limitations of Rule 15c3-3
under the Securities Exchange Act of 1934, as amended, and may be of benefit
to the Sponsor.
In selling Units in the initial public offering, the Sponsor may realize
profits or sustain losses to the extent there are any fluctuations in the
Public Offering Price of the Units after a date of deposit before completion
of the sale of the Units in the initial public offering.
Maintenance of a Secondary Market. The Sponsor is not obligated, and
currently does not intend, to maintain a secondary market for the Units;
though the Sponsor may, however, decide to do so during the life of the Trust.
Accordingly, a Unitholder may currently only purchase Units in the initial
public offering and only dispose of his Units through redemption. With respect
to redemption requests of $100,000 or more, the Sponsor may, in its sole
discretion, direct the Trustee to redeem Units "in kind" by distributing
stocks to the redeeming Unitholder. See "Redemption of Units." If the Sponsor
decides to maintain a secondary market for the Units, the Public Offering
Price per Unit in the secondary market will be the Net Asset Value per Unit,
which will be based on the aggregate market value at the Securities valued at
the closing prices at the bid side of the market, plus the 5.000% sales
charge. See "Valuation of Units."
REDEMPTION OF UNITS
Units held in uncertificated form may be redeemed by delivering a written
request for redemption to the Trustee at its office. Units held in
certificated form may be tendered to the Trustee at its office (currently
located at the address indicated on the back cover), must be properly endorsed
or accompanied by a written instrument of transfer in form satisfactory to the
Trustee, and must be executed by the Unitholder or his authorized attorney. In
either case the Unitholder must pay any transfer or similar tax which must be
paid to effect redemption and, Unitholders of uncertificated Units must sign
such written request and Unitholders of certificated Units must sign such
certificate transfer instrument, exactly as their name appears on the records
of the Trustee and on any certificate representing the Units to be redeemed.
Such signature(s)
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must be guaranteed by a participant in the Securities Transfer Agents Medallion
Program ("STAMP") or such other signature guarantee program in addition to, or
in substitution for, STAMP, as may be accepted by the Trustee. A Unitholder may
tender his Units for redemption at any time after the settlement date or
purchase. The Unitholder upon redemption will receive the Net Asset Value per
Unit determined as of the close of business on the day of tender. There is no
sales charge incurred when a Unitholder tenders his Units to the Trustee for
redemption unless the redemption is an amount less than 7,500 Units in which
case a fee of $150 will be charged. The amount received by a Unitholder upon
redemption may be more or less than the amount paid by the Unitholder depending
on the value of the Stocks in the portfolio at the time of redemption. The
redemption price per Unit on the Initial Date of Deposit will be less than the
initial Public Offering Price per Unit both because the sales charge in
included in the offering price and because the redemption price is based on
valuations of the Stocks at the bid side of the market rather than the closing
prices at the midpoint between the bid and offer side of the market. See
"Essential Information Regarding the Trust." Prior to redeeming such Units from
the Trust, the Trustee shall offer such Units for sale to the Sponsor at the
Net Asset Value per Unit. Subject to payment of applicable tax or governmental
charges, if any, the Net Asset Value of Units tendered for redemption will be
paid to the redeeming Unitholder on the seventh calendar day following the day
of tender. If such day of payment is not a Trust Business Day (as hereinafter
defined), payment will be made on the next following Trust Business Day. See
"Valuation of Units."
With respect to cash redemptions, amounts representing income received shall
be withdrawn from the Income Account, and, to the extent the Income Account is
insufficient and for remaining amounts, from the Capital Account. The Trustee
is empowered, to the extent necessary, to sell Stocks to meet redemptions.
Treasury Obligations, if any, held by the Trust must be held to maturity and
cannot be disposed of by the Trustee. The Trustee will sell Stocks in such
manner as is directed by the Sponsor. With respect to redemption requests of
$100,000 or more, the Sponsor may, in its sole discretion, direct the Trustee
to redeem Units "in kind" by distributing Stocks to the redeeming Unitholder.
When Stocks are so distributed, the Unitholder will receive that number of
whole shares of each Stock representing the aggregate of his interest in each
of the Stocks, plus cash in lieu of fractional shares. Securities will be
valued for this purpose as set forth under "Valuation of Units." A Unitholder
receiving a redemption "in kind" may incur brokerage or other transaction costs
in converting the Stocks distributed into cash. For information on the tax
effects of receiving a redemption "in kind", see "Tax Considerations."
To the extent that shares of Stocks are distributed pursuant to redemption
"in kind" or sold, the size of the Trust will, and the diversity of the Trust
may, be reduced. Sales may be required at a time when Stocks would not
otherwise be sold and may result in lower proceeds than might otherwise be
realized. In addition, because of the minimum amounts in which Stocks are
required to be sold, the proceeds of sale may exceed the amount required at the
time to redeem Units; these excess proceeds will be distributed to the
remaining Unitholders on the next Distribution Date.
The Trustee may, in its discretion, and will, when so directed by the
Sponsor, suspend the right of redemption, or postpone the date of payment for
Units tendered for redemption to a date more than seven calendar days following
the day of tender, (i) for any period during which the New York Stock Exchange
is closed other than for weekend and holiday closings; (ii) for any period
during which the Securities and Exchange Commission determines that trading on
the New York Stock Exchange is restricted; (iii) for any period during which an
emergency exists as a result of which disposal or evaluation of the Stocks is
not reasonably practicable; or (iv) for such other period as the Securities and
Exchange Commission may by order permit for the protection of Unitholders. The
Trustee is not liable to any person in any way for any loss or damages which
may result from any such suspension or postponement, or any failure to suspend
or postpone, when done in the Trustee's discretion.
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On the business day prior to the Initial Date of Deposit, the initial Public
Offering Price per Unit (which figure includes the sales charge) exceeds the
Net Asset Value per Unit. See "Essential Information Regarding the Trust." The
initial Public Offering Price per Unit is determined by dividing the aggregate
value of the Stocks based on the closing prices at the midpoint between the bid
and offer side of the market on the business day prior to the Initial Date of
Deposit, by the number of Units being sold, plus the applicable sales charge.
The prices of the Stocks will generally vary. For these reasons and others,
including the fact that the Public Offering Price includes the sales charge,
the amount realized by a Unitholder upon redemption of Units may be less than
the price paid by the Unitholder for such Units.
VALUATION OF UNITS
The Trustee will calculate the Trust's value (the "Net Asset Value") at the
Evaluation Time set forth under "Essential Information Regarding the Trust" (i)
on each Trust Business Day (as hereinafter defined) until completion of the
initial public offering, (ii) on the Trust Business Day on which any Unit is
tendered for redemption, (iii) on any other day desired by the Sponsor or the
Trustee and (iv) upon termination, by adding:
(a) The aggregate value of Securities in the Trust (including the value
of Stocks subject to purchase contracts, if any, deposited with the Trustee
on the Deposit Date), as determined by the Trustee in its capacity as
Evaluator of the Trust; and
(b) The sum of (i) cash on hand in the Trust other than cash credited to
any reserve account established under the Indenture and (ii) dividends
receivable on Stocks trading ex-dividend.
The Trustee will deduct from the resulting figure: amounts representing any
applicable taxes or governmental charges payable by the Trust for the purpose
of making an addition to any reserve account established under the Indenture;
amounts representing estimated accrued fees and expenses of the Trust,
including amounts representing unpaid fees of the Trustee and the Sponsor; and
cash or Securities held to redeem tendered Units and for distribution to
Unitholders of record as of a Trust Business Day prior to the evaluation being
made on the days or dates set forth above.
For the purpose of the redemption of Units, the Net Asset Value per Unit is
computed by the Trustee by dividing the result of the above computation by the
total number of Units outstanding on the date of such evaluation. A Trust
Business Day is a day on which the New York Stock Exchange is open, other than
federal or Missouri state bank holidays.
For the purpose of the redemption of Units, the value of Stocks shall be
determined in good faith by the Trustee acting in its capacity as Evaluator of
the Trust in the following manner: (i) if the Stocks are listed on one or more
national securities exchanges such evaluation shall be based on the closing
sale price on that day (unless the Sponsor deems such price inappropriate as a
basis for evaluation) on the exchange which is the principal market thereof
(deemed to be the New York Stock Exchange if the Stocks are listed thereon),
(ii) if the Stocks are listed but there is no such appropriate closing sales
price on such exchange, and for Stocks that are not so listed but are quoted on
the Nasdaq National Market, at the closing bid prices on such exchange or
system (unless the Sponsor deems such price inappropriate as a basis for
evaluation), (iii) if the Stocks are not listed or quoted or, if so listed or
quoted and the principal market therefor is other than on such exchange or
system or there are no such appropriate closing bid prices available, such
evaluation shall be made by the Sponsor in good faith based on the closing
sales price in the over-the-counter market (unless the Sponsor deems such price
inappropriate as a basis for evaluation) or (iv) if there is no such
appropriate closing price, then (a) on the basis of current bid prices obtained
from dealers or brokers (which may include the Sponsor), (b) if bid prices are
not available, on the basis of current bid prices for comparable securities,
(c) by the Sponsor's
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appraising the value of the Stocks in good faith on the bid side of the market
or (d) by any combination thereof. The tender of a Stock pursuant to a tender
offer will not affect the method of valuing such Stock.
The Treasury Obligations, if any, are valued on the basis of bid prices. The
aggregate bid prices of the Treasury Obligations are the prices obtained from
dealers or brokers (which may include the Sponsor) who customarily deal in
Treasury Obligations; or, if there is no market for the Treasury Obligations,
and bid prices are not available, on the basis of current bid prices for
comparable securities; or by appraisal; or by any combination of the above.
EXPENSES OF THE TRUST
The Sponsor will receive a fee, which is earned for portfolio supervisory
services, based upon the largest number of Units outstanding during the
calendar year. The portfolio supervisory services include providing certain
bookkeeping and other administrative services to the Trust, monitoring the
market prices of portfolio securities to confirm Net Asset Value calculations
of the Evaluator and handling Unitholder inquiries and services. The Sponsor's
fee is that amount set forth under "Essential Information Regarding the
Trust." Such fee may exceed the actual costs of providing portfolio
supervisory services for this particular series of the Trust, but at no time
will the total amount the Sponsor receives for such services rendered to all
series of the Trust in any calendar year exceed the aggregate cost to it of
supplying such services in such year. Thus, the Sponsor will not profit from
fees received from the Trust for portfolio supervisory services.
For its services as Trustee and Evaluator, the Trustee will be paid that
amount set forth under "Essential Information Regarding the Trust." The
Trustee will also benefit to the extent that it holds funds in non-interest
bearing accounts. In addition, the regular and recurring annual expenses of
the Trust, including without limitation certain mailing, printing, and other
miscellaneous expenses, are currently estimated to be that amount set forth
under "Essential Information Regarding the Trust." Actual miscellaneous
expenses payable by the Trust may be more or less than this estimate.
If Units are redeemed, per Unit annual expenses of the Trust will increase.
The Trustee's fee and the Sponsor's supervisory fee are payable monthly, from
the Income Account, to the extent funds are available, and then from the
Capital Account. Either of such fees may be increased without approval of the
Unitholders by an amount not exceeding a proportionate increase in the
category entitled "All Services Less Rent" in the Consumer Price Index
published by the United States Department of Labor.
The cost of the preparation and printing of the Indenture and this
Prospectus, the initial fees and expenses of the Trustee, advertising expenses
and expenses incurred in establishing the Trust, including legal and audit
expenses, are paid by the Sponsor and not the Trust.
In addition to the above, the following charges are or may be incurred by
the Trust and paid from the Income Account or, to the extent funds are not
available in such Account, from the Capital Account: (i) fees for the Trustee
for extraordinary services; (ii) reimbursable expenses of the Trustee
(including legal and auditing expenses, but not including any fees and
expenses charged by any agent for custody and safekeeping of Securities);
(iii) various governmental charges; (iv) expenses and costs of any action
taken by the Trustee to protect the Trust and the rights and interests of the
Unitholders; (v) indemnification of the Trustee for any loss, liabilities or
expenses (including reasonable attorneys' fees) incurred by it in the
administration of the Trust without gross negligence, bad faith or willful
misconduct on its part; (vi) indemnification of the Sponsor for any loss,
liability or expenses (including reasonable attorneys' fees) incurred in
acting in such
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capacity other than by reason of its own gross negligence, bad faith or willful
misconduct; (vii) brokerage commissions in connection with the sale of Stocks;
and (viii) expenses incurred upon termination of the Trust. See "Administration
of the Trust--Accounts."
The fees and expenses set forth above are payable out of the Trust and when
unpaid will be secured by a lien on the Trust. Based upon the last dividends
paid prior to the Initial Date of Deposit, dividends on the Stocks are expected
to be sufficient to pay the estimated expenses of the Trust. To the extent that
dividends paid with respect to the Stocks are not sufficient to meet the
expenses of the Trust, the Trustee is authorized to sell Stocks to meet the
expenses of the Trust.
RIGHTS OF UNITHOLDERS
Each Unit represents a pro rata fractional undivided interest in each of the
Stocks and other assets held in the Trust.
Ownership of Units is evidenced by recordation on the books of the Trustee.
In order to avoid additional operating costs and for investor convenience,
certificates will not be issued unless a request, in writing with signature
guaranteed by a participant in the Securities Transfer Agents Medallion Program
("STAMP") or such other signature guarantee program in addition to, or in
substitution for, STAMP, as may be accepted by the Trustee, is delivered by the
Unitholder to the Sponsor. Issued certificates are transferable by presentation
and surrender to the Trustee at its office (currently located at the address on
the back cover) properly endorsed or accompanied by a written instrument or
instruments of transfer. Uncertificated Units are transferable by presentation
to the Trustee of a written instrument of transfer.
Certificates may be issued in denominations of one Unit or any integral
multiple thereof as deemed appropriate by the Trustee. A Unitholder may be
required to pay a reasonable fee (currently $25.00 per certificate) for each
certificate issued, reissued or transferred, and shall be required to pay any
governmental charge that may be imposed in connection with each such transfer
or interchange. For new certificates to be issued to replace destroyed,
mutilated, stolen or lost certificates, the Unitholder must furnish indemnity
satisfactory to the Trustee and must pay such expenses as the Trustee may
incur. Mutilated certificates must be surrendered to the Trustee for
replacement.
Unitholders will have no voting rights, except in the unlikely event of
resignation or removal of the Sponsor as provided under "Termination of the
Trust" and in the event of an amendment to the Indenture as provided under
"Amendment of the Indenture." As the holder of the Stocks, the Trustee will
have the right to vote all of the voting stocks in the Trust and will vote such
stocks in accordance with the instructions of the Sponsor. The rights the
Unitholders have in distributions from the Income and Capital Accounts are set
forth below under "Distributions to Unitholders."
DISTRIBUTIONS TO UNITHOLDERS
The Trustee will make distributions from the Income Account, if any, on the
quarterly Distribution Date to Unitholders of record on the preceding Record
Date. Distributions from the Capital Account will be made on each quarterly
Distribution Date to Unitholders of record on the preceding Record Date. See
"Essential Information Regarding the Trust." Whenever required for regulatory
or tax purposes, the Trustee will make special distributions on special
distribution dates to Unitholders of record on special record dates when and as
declared by the Trustee.
Upon termination of the Trust, each Unitholder of record on such date will
receive his pro rata share of the amounts realized upon disposition of the
Securities plus any other assets of the Trust, less liabilities of the Trust.
See "Termination of the Trust."
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ADMINISTRATION OF THE TRUST
Accounts. All dividends received on Stocks, proceeds from the sale of Stocks
or other moneys received by the Trustee on behalf of the Trust will be held in
trust in non-interest bearing accounts except that proceeds of sale may be
reinvested in Treasury Obligations until required to be disbursed. See
"Administration of the Trust--Reinvestment."
The Trustee will credit on its books to an Income Account dividends and
interest, if any, on Securities in the Trust. All other receipts (i.e., return
of principal and capital gains) are credited on its books to a Capital Account.
The pro rata share of the Income Account and the pro rata share of the Capital
Account represented by each Unit will be computed by the Trustee as set forth
under "Valuation of Units."
The Trustee will deduct from the Income Account and, to the extent funds are
not sufficient therein, from the Capital Account, amounts necessary to pay
expenses incurred by the Trust. See "Expenses of the Trust." In addition, the
Trustee may withdraw from the Income Account and the Capital Account such
amounts as may be necessary to cover redemption of Units by the Trustee. See
"Redemption of Units."
The Trustee may establish reserves (the "Reserve Account") within the Trust
for state and local taxes, if any, and any other governmental charges payable
out of the Trust.
Reports and Records. With any distributions from the Trust, the Trustee will
furnish each Unitholder a statement setting forth the amount being distributed
from each account. In addition, the Trustee shall notify the Unitholders within
five days of substitute stocks, if any, which are acquired for the portfolio.
See "The Trust."
The Trustee keeps records and accounts of the Trust at its office (currently
located at the address on the back cover), including records of the names and
addresses of Unitholders, a current list of underlying Stocks in the portfolio
and a copy of the Indenture. Records pertaining to a Unitholder or to the Trust
(but not to other Unitholders) are available to the Unitholder for inspection
at reasonable times during business hours.
Within a reasonable period of time after the end of each calendar year, the
Trustee will furnish each person who was a Unitholder at any time during the
calendar year a report containing the following information, expressed in
reasonable detail both as a dollar amount and as a dollar amount per Unit: (i)
a summary of transactions for the Trust in the Income and Capital Accounts and
any Reserve Account; (ii) Securities sold or purchased, if any; (iii) the Net
Asset Value per Unit, based upon the last computation thereof made during the
year; and (iv) amounts distributed to Unitholders during the year.
Portfolio Supervision. The portfolio of the Trust is not "managed" by the
Sponsor or the Trustee; their activities described herein are governed solely
by the provisions of the Indenture. Traditional methods of investment
management for a managed fund typically involve frequent changes in a portfolio
of securities on the basis of economic, financial and market analyses. The
Trust, however, will not be managed. The Indenture provides that the Sponsor
may (but need not) direct the Trustee to dispose of a Stock in certain events
such as the issuer having defaulted on the payment on any of its outstanding
obligations or the price of a Stock has declined to such an extent or other
such credit factors exist so that in the opinion of the Sponsor, the retention
of such Stocks would be detrimental to the Trust. Pursuant to the Indenture,
the Sponsor is not authorized to direct the reinvestment of the proceeds of the
sale of Stocks in replacement securities except in the event the sale is the
direct result of serious adverse credit factors affecting the issuer of the
Stock which, in the opinion of the Sponsor, would make the retention of such
Stock detrimental to the Trust. Pursuant to the Indenture and with limited
exceptions, the Trustee may sell any securities or other properties acquired in
exchange for Stocks such as those
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acquired in connection with a merger or other transaction. If offered such new
or exchanged securities or property, the Trustee shall reject the offer.
However, in the event such securities or property are nonetheless acquired by
the Trust, they may be accepted for deposit in the Trust and either sold by the
Trustee or held in the Trust pursuant to the direction of the Sponsor.
Therefore, except as stated under "The Trust" for failed securities and as
provided in this paragraph, the acquisition by the Trust of any securities
other than the Stocks is prohibited. Proceeds from the sale of Stocks (or any
securities or other property received by the Trust in exchange for Stocks),
unless held for reinvestment as herein provided, are credited to the Capital
Account for distribution to Unitholders, to meet redemptions or to pay charges
and expenses of the Trust.
Stock may also be sold in the manner described under "The Trust." The Trustee
may dispose of Stocks where necessary to pay Trust expenses or to satisfy
redemption requests as directed by the Sponsor and the proceeds of such sale
may not be reinvested.
Reinvestment. Cash received upon the sale of Stocks (except for proceeds used
to meet redemption requests) may, if and to the extent there is no legal
impediment, be reinvested in Treasury Obligations which mature on or prior to
the next scheduled Distribution Date. The Sponsor anticipates that, where
permitted, such proceeds will be reinvested in Treasury Obligations unless
factors exist such that such reinvestment would not be in the best interests of
Unitholders or would be impractical. Such factors may include, among others,
(i) short reinvestment periods which would make reinvestment in Treasury
Obligations undesirable or infeasible and (ii) amounts not sufficiently large
so as to make a reinvestment economical or feasible. Any moneys held and not
reinvested will be held in a non-interest bearing account until distribution on
the next Distribution Date to Unitholders of record.
AMENDMENT OF THE INDENTURE
The Indenture may be amended by the Trustee and the Sponsor without the
consent of any of the Unitholders to cure any ambiguity, to correct or
supplement any provision thereof which may be defective or inconsistent, or to
make such other provisions as will not materially adversely affect the interest
of the Unitholders or as required by the Securities and Exchange Commission, so
long as the Trustee provides the Unitholders with notice as required by the
Indenture.
The Indenture may be amended in any respect by the Sponsor and the Trustee
with the consent of the holders of 66 2/3% of the Units then outstanding;
provided that no such amendment shall (i) permit the acquisition of any stocks
other than those specified in Schedule A of the Indenture or (ii) reduce the
percentage of Unitholders required to consent to any such amendment, without
the consent of all Unitholders.
The Trustee will promptly notify Unitholders of the substance of any
amendment affecting Unitholders' rights or their interest in the Trust.
TERMINATION OF THE TRUST
The Indenture provides that the Trust will terminate upon the following
circumstances: (i) occurrence of the Mandatory Termination Date (as defined in
"Essential Information Regarding the Trust"); or (ii) written consent to
termination by 66 2/3% of the Units then outstanding. In addition, the Trust
may terminate if the value of the Trust as shown by any evaluation is less than
40% of the market value, based on closing bid prices, of the Stocks at the time
they were deposited in the Trust. In no event will the Trust continue beyond
the Mandatory Termination Date.
Unless advised to the contrary by the Sponsor, approximately 30 days prior to
the termination of the Trust, the Trustee will begin to sell the Stocks held in
the Trust other than those Stocks to
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be distributed "in kind" as discussed below. Upon termination of the Trust,
the Trustee will sell any Stocks then remaining in the Trust (other than those
distributed "in kind") and will then, after deduction of any fees and expenses
of the Trust and payment into the Reserve Account of any amount required for
taxes or other governmental charges that may be payable by the Trust,
distribute to each Unitholder, after due notice of such termination, such
Unitholder's pro rata share in the Income and Capital Accounts. Cash held upon
the sale of Stocks may be held in non-interest bearing accounts created by the
Indenture until distributed and will be of benefit to the Trustee. The sale of
Stocks in the Trust in the period prior to the termination and upon
termination may result in a lower amount than might otherwise be realized if
such sale were not required at such time due to impending or actual
termination of the Trust. For this reason, among others, the amount realized
by a Unitholder upon termination may be less than the amount paid by such
Unitholder. Notwithstanding the foregoing, the Sponsor reserves the right to
direct the Trustee to make an "in kind" distribution of the Stocks to all
Unitholders upon termination in lieu of a cash distribution.
Prior to termination of the Trust, and in no event less than 75 days prior
to the Mandatory Termination Date, the Trustee shall furnish to Unitholders
written notice of the date of termination and election forms pursuant to which
Unitholders will be permitted to receive an "in kind" distribution upon
termination in lieu of cash in the event the Sponsor does not elect to direct
the Trustee to distribute all Stocks "in kind" as described above. Any
Unitholders who make appropriate elections no less than 30 days prior to the
date of termination shall be entitled to receive distribution "in kind" of all
of their Units. Upon the distribution following termination of the Trust, such
Unitholders will receive that number of whole shares of each Stock
representing the aggregate of their respective interests in each of the
Stocks, plus cash representing their pro rata shares of other Trust assets and
cash in lieu of fractional shares, if any. No partial "in kind" distributions
will be made. See "Tax Considerations" for information concerning the tax
consequences to a Unitholder of a distribution "in kind."
SPONSOR
The Sponsor, Howe Barnes Investments, Inc., is an investment services firm
which since 1915 has served a wide range of institutional and individual
investors, corporations and fiduciaries, as well as other securities dealers.
The Sponsor, a Delaware corporation, is registered as a broker/dealer and
through its subsidiary, Marshall Capital Management, Inc., is registered as an
investment adviser with the Securities and Exchange Commission. The Sponsor is
also a member of the National Association of Securities Dealers, the New York
Stock Exchange and the Chicago Stock Exchange. Services offered by the Sponsor
include investment research and trade execution services for listed and over-
the-counter equity and fixed income securities and options; execution and
clearing services for small brokers and dealers; investment banking services
for corporations; and underwriting services for the equity and fixed income
markets, including municipal and corporate bonds. Among other specialities,
the Sponsor is recognized for its concentrated focus on research and
securities analysis with respect to midwestern regional and subregional
banking institutions and thrift institutions. The Sponsor may, but need not,
make a principal market as dealer in one or more of the Stocks in the Trust.
In addition, the Sponsor may act as an investment advisor for one or more of
the banking or thrift institutions with Stocks in the Trust.
The Indenture provides that the Sponsor will not be liable to the Trust, the
Trustee or to the Unitholders for taking any action or for refraining from
taking any action made in good faith or for errors in judgment, but will be
liable only for its own gross negligence, bad faith or willful malfeasance in
the performance of its duties or by reason of its reckless disregard of its
obligation and duties. The Sponsor will not be liable or responsible in any
way for depreciation or loss incurred by reason of the sale of any Stocks in
the Trust.
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The Indenture further provides that the Sponsor shall be indemnified by the
Trust and held harmless from and against any loss, liability or expense
incurred in acting as Sponsor of the Trust other than by reason of its own
gross negligence, bad faith or willful malfeasance in the performance of its
obligations or by reason of its own reckless disregard of its obligations and
duties.
The Indenture is binding upon any successor to the business of the Sponsor.
The Sponsor may transfer all or substantially all of its assets to a
corporation which carries on the business of the Sponsor and duly assumes all
the obligations of the Sponsor under the Indenture. In such event the Sponsor
shall be relieved of all further liability under the Indenture.
The Indenture provides that the Sponsor may resign its position as Sponsor by
delivering to the Trustee an instrument of resignation. This resignation will
only be effective if prior to or concurrent with the delivery of the instrument
the Trustee has either (i) appointed a successor Sponsor or (ii) agrees to act
as Sponsor thereby succeeding to all the rights and duties of the resigning
Sponsor. The Trustee must notify the Unitholders of any such resignation or
appointment of a successor Sponsor.
If the Sponsor fails to undertake any of its duties under the Indenture,
becomes incapable of acting, becomes bankrupt, or has its affairs taken over by
public authorities, the Trustee may appoint a successor Sponsor or Sponsors to
serve at rates of compensation determined as provided in the Indenture.
TRUSTEE
The Trustee, Investors Fiduciary Trust Company, is a limited purpose trust
company specializing in investment related services, organized and existing
under the laws of Missouri, having its trust office at 127 West 10th Street,
Kansas City, Missouri 64105. The Trustee is subject to supervision and
examination by the Division of Finance of the State of Missouri and the Federal
Deposit Insurance Corporation.
The Indenture provides that the Trustee shall be indemnified by the Trust
and held harmless from and against any loss, liability or expense incurred
without gross negligence, bad faith or willful malfeasance in the performance
of its duties or by reason of its reckless disregard of the duties of the
Trustee arising out of or in connection with the administration of this Trust.
The Trustee may resign and be discharged of its duties with respect to the
Trust pursuant to the Indenture by delivering an instrument of resignation to
the Sponsor and mailing such instrument to the Unitholders then of record not
less than 60 days before the resignation date. The Trustee shall not, however,
resign until either (i) the Trust has been completely liquidated and the
proceeds distributed to the Unitholders, or (ii) a successor Trustee, having
the qualifications prescribed in the governing securities laws, has been
designated and has accepted the duties as Trustee.
The Sponsor may remove the Trustee, upon the occurrence of certain events as
set forth in the Indenture. In addition, the Unitholders may remove the Trustee
upon the vote or written consent of 66 2/3% of the Units then of record. Upon
the resignation or removal of the Trustee as set forth above and in the
Indenture, the Sponsor shall use its best efforts promptly to appoint a
successor Trustee. The Indenture is binding upon any successor to the business
of the Trustee. The Trustee may transfer all or substantially all of its assets
to a corporation which carries on the business of the Trustee and duly assumes
all the obligations of the Trustee under the Indenture. In such event the
Trustee shall be relieved of all further liability under the Indenture.
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HBI
EQUITY TRUST, SERIES 2
A UNIT INVESTMENT TRUST
A PORTFOLIO OF MIDWEST BANK AND THRIFT STOCKS
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
ESSENTIAL INFORMATION REGARDING THE TRUST................................ 2
HBI EQUITY TRUST, SERIES 2............................................... 3
REPORT OF INDEPENDENT AUDITORS........................................... 5
STATEMENT OF NET ASSETS.................................................. 5
SCHEDULE OF INVESTMENTS.................................................. 6
THE TRUST................................................................ 7
TAX CONSIDERATIONS....................................................... 10
PUBLIC OFFERING OF UNITS................................................. 13
REDEMPTION OF UNITS...................................................... 14
VALUATION OF UNITS....................................................... 16
EXPENSES OF THE TRUST.................................................... 17
RIGHTS OF UNITHOLDERS.................................................... 18
DISTRIBUTIONS TO UNITHOLDERS............................................. 18
ADMINISTRATION OF THE TRUST.............................................. 19
AMENDMENT OF THE INDENTURE............................................... 20
TERMINATION OF THE TRUST................................................. 20
SPONSOR.................................................................. 21
TRUSTEE.................................................................. 22
LEGAL OPINIONS........................................................... 23
INDEPENDENT AUDITORS..................................................... 23
</TABLE>
- --------------------------------------------------------------------------------
SPONSOR: TRUSTEE:
HOWE BARNES INVESTMENTS, INC. INVESTORS FIDUCIARY TRUST COMPANY
135 SOUTH LASALLE STREET 127 WEST 10TH STREET
CHICAGO, ILLINOIS 60603 KANSAS CITY, MISSOURI 64105
---------------
This Prospectus does not contain all of the information set forth in the
registration statements and exhibits relating thereto, filed with the
Securities and Exchange Commission, Washington, D.C. under the Securities Act
of 1933, as amended, and the Investment Company Act of 1940, as amended, and to
which reference is made.
No person is authorized to give any information or to make any
representations not contained in this Prospectus and any information or
representation not contained herein must not be relied upon as having been
authorized by the Trust, the Trustee, or the Sponsor. The Trust is registered
as a unit investment trust under the Investment Company Act of 1940. Such
registration does not imply that the Trust or the Units have been guaranteed,
sponsored, recommended or approved by the United States or any state or any
agency or officer thereof.
This Prospectus does not constitute an offer to sell securities to, or a
solicitation of an offer to buy securities from, any person in any state to
whom it is not lawful to make such offer or solicitation in such state.
<PAGE>
PART II
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet
The Prospectus
The undertaking to file reports
The signatures
The following exhibits:
Exhibit 1.1 - Form of Trust Agreement.
Exhibit 1.1.1 - Form of Standard Terms and Conditions of Trust. Reference
is made to Exhibit 1.1.2 to Amendment No. 1 to the
Registration Statement on Form S-6 for HBI Equity Trust,
Series 1 (File No. 33-72314) as filed on March 16, 1994.
Exhibit 2.1 - Form of Certificate of Beneficial Interest. Reference is
made to pages 3 and 4 of Exhibit 1.1.1.
Exhibit 3.1 - Opinion and consent of Chapman and Cutler as to the
legality of securities being registered.
Exhibit 3.2 - Opinion and consent of Chapman and Cutler as to federal and
Missouri income tax status of securities being registered.
Exhibit 6.1 - Consent of Ernst & Young LLP, Independent Auditors.
Exhibit 6.2 - Power of Attorney. Reference is made to Exhibit 6.2 to the
Registration Statement for the HBI Equity Trust, Series 2
(File No. 333-11315) as filed on September 3, 1996.
Exhibit 27 - Financial Data Schedule.
S-1
<PAGE>
SIGNATURES
The Registrant hereby identifies HBI Equity Trust, Series 1 for purposes of
the representations required by Rule 487 and represents the following: (1) that
the portfolio securities deposited in the series as to the securities of which
this Registration Statement is being filed do not differ materially in type or
quality from those deposited in such previous series; (2) that, except to the
extent necessary to identify the specific portfolio securities deposited in, and
to provide essential financial information for, the series with respect to the
securities of which this Registration Statement is being filed, this
Registration Statement does not contain disclosures that differ in any material
respect from those contained in the registration statements for such previous
series as to which the effective date was determined by the Commission or the
staff; and (3) that it has complied with Rule 460 under the Securities Act of
1933.
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant, HBI Equity Trust, Series 2, has duly caused this registration
statement to be signed on its behalf by the undersigned thereunto duly
authorized, in the City of Chicago and State of Illinois, on the 24th day of
September, 1996.
HBI Equity Trust, Series 2
By Howe Barnes Investments, Inc.,
Depositor
By
-----------------------------------------
George H. Shelton
President
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed on September 24, 1996 by the
following persons in the capacities indicated.
Signature Title
ALEX S. RUDOLPH Director and Chairman
- -----------------------
Alex S. Rudolph
GEORGE H. SHELTON Director and President
- -----------------------
George H. Shelton (Principal Executive Officer)
PHILIP C. ALLEN Director
- -----------------------
Philip C. Allen
THEODORE M. PERKOWSKI Director
- -----------------------
Theodore M. Perkowski
S-2
<PAGE>
Signature Title
BRADLEY W. YOUNG Director
- -----------------------
Bradley W. Young
MICHAEL E. SAMMON Director
- -----------------------
Michael E. Sammon
MICHAEL R. OCHOA Director
- -----------------------
Michael R. Ochoa
MARK PAUL SHELSON Director and Treasurer
- -----------------------
Mark Paul Shelson (Principal Financial and
Accounting Officer)
RICHARD S. GRIFFIN Director
- -----------------------
Richard S. Griffin
MARIO G. BERNARDI Director
- -----------------------
Mario G. Bernardi
CHARLES V. DOHERTY Director
- -----------------------
Charles V. Doherty
RICHARD P. JAMES Director
- -----------------------
Richard P. James
---------------------------------------
Michael E. Sammon
(Attorney-in-fact*)
_______________
* An executed copy of the power of attorney incorporated herein by reference.
S-3
<PAGE>
Exhibit 1.1
HBI EQUITY TRUST, SERIES 2
TRUST AGREEMENT
This Trust Agreement dated as of September 24, 1996 between Howe Barnes
Investments, Inc., as Depositor, and Investors Fiduciary Trust Company, as
Trustee, sets forth certain provisions in full and incorporates other provisions
by reference to the document entitled "HBI Equity Trust, Series 1 and Subsequent
Series, Standard Terms and Conditions of Trust, Effective March 16, 1994"
(herein called the "Standard Terms and Conditions of Trust"), and such
provisions as are set forth in full and such provisions as are incorporated by
reference constitute a single instrument.
WITNESSETH THAT:
In consideration of the premises and of the mutual agreements herein
contained, the Depositor and the Trustee agree as follows:
PART I
STANDARD TERMS AND CONDITIONS OF TRUST
Subject to the provisions of Part II hereof, all the provisions contained
in the Standard Terms and Conditions of Trust are herein incorporated by
reference in their entirety and shall be deemed to be a part of this instrument
and to the same extent as though said provisions had been set forth in this
instrument.
PART II
SPECIAL TERMS AND CONDITIONS OF TRUST
The following special terms and conditions are hereby agreed to:
(a) The equity securities listed in the Schedule hereto have been
deposited in trust under this Trust Agreement.
(b) For the purposes of the definition of the term "Unit" in Article
I, it is hereby specified that the fractional undivided interest in and
ownership of the Trust is the amount set forth in the section captioned
"Essential Information Regarding the Trust" in the final Prospectus of the
Trust (the "Prospectus") contained in Amendment No. 1 to the Trust's
Registration Statement (Registration No. 333-11315) as filed with the
Securities and Exchange Commission on September 24, 1996. The fractional
undivided interest may decrease by the number of Units redeemed pursuant to
Section 5.02.
<PAGE>
(c) For purposes of the definition of the terms "Trust" or "Trust
Fund" in Article I, it is hereby specified that such terms shall include
the HBI Equity Trust, Series 2.
(d) The term "Record Date" shall mean the "Record Dates" set forth
under "Essential Information Regarding the Trust" in the Prospectus.
(e) The terms "Income Distribution Date" and "Capital Distribution
Date" shall mean the "Income Account Distribution Dates" and "Capital
Account Distribution Dates" set forth under "Essential Information
Regarding the Trust" in the Prospectus.
(f) The term "Date of Deposit" shall be replaced with the term
"Initial Date of Deposit". The term "Initial Date of Deposit" shall mean
September 24, 1996.
(g) The number of Units of the Trust referred to in Section 2.03 is
set forth under "Essential Information Regarding the Trust" in the
Prospectus.
(h) For the purposes of Section 3.11, the Depositor shall receive for
portfolio surveillance services that annual fee described under "Essential
Information Regarding the Trust" in the Prospectus.
(i) For the purposes of Section 8.05, the Trustee shall receive for
services as trustee that annual fee described under "Essential Information
Regarding the Trust" in the Prospectus.
(j) For the purposes of Section 4.03, the Trustee will act as the
Evaluator and will not receive a separate fee for providing services as
evaluator.
(k) For the purposes of Section 8.01(g), the liquidation amount is
hereby specified as the amount set forth under "Essential Information
Regarding the Trust - Discretionary Liquidation Amount" in the Prospectus.
(l) For the purposes of Section 3.10, the identity of the Substitute
Securities for each Contract Security held in the Trust is as follows: None
(m) The Mandatory Termination Date shall be that date set forth in the
section captioned "Essential Information Regarding the Trust" in the
Prospectus.
(n) Section 10.02 shall be replaced in its entirety with the
following:
"Section 10.02. Initial Costs. The expenses incurred in establishing a
Trust, including the cost of the initial preparation and typesetting
of the registration statement, prospectuses (including preliminary
prospectuses), the indenture, and other documents relating to a Trust,
printing of Certificates, Securities and Exchange Commission and state
blue sky registration fees, the costs of the initial
-2-
<PAGE>
valuation of the portfolio and audit of a Trust, the initial fees and
expenses of the Trustee, and legal and other non-material out-of-
pocket expenses related thereto, but not including the expenses
incurred in the printing of preliminary prospectuses and final
prospectuses, expenses incurred in the preparation and printing of
brochures and other advertising materials and any other selling
expenses shall be borne by the Trust. To the extent the funds in the
Income and Capital Accounts of the Trust shall be insufficient to pay
the expenses borne by the Trust specified in this Section 10.02, the
Trustee shall advance out of its own funds and cause to be deposited
and credited to the Income Account such amount as may be required to
permit payment of such expenses. The Trustee shall be reimbursed for
such advance on each Record Date from funds on hand in the Income
Account or, to the extent funds are not available in such Account,
from the Capital Account, in the amount deemed to have accrued as of
such Record Date as provided in the following sentence (less prior
payments on account of such advances, if any), and the provisions of
Section 8.05 with respect to the reimbursement of disbursements for
Trust expenses, including, without limitation, the lien in favor of
the Trustee therefor, shall apply to the payment of expenses made
pursuant to this Section. For purposes of the preceding sentence, the
expenses borne by the Trust pursuant to this Section shall be deemed
to have been paid upon the date of the Trust Agreement and to accrue
at a daily rate over such time period as specified for their
amortization by the Depositor; provided, however, that nothing herein
shall be deemed to prevent, and the Trustee shall be entitled to full
reimbursement for, any advances made pursuant to this Section no later
than the termination of the Trust."
(o) Section 8.01(i) of the Standard Terms and Conditions of Trust
shall be amended by deleting the words "Notwithstanding any provisions of
this Agreement to the contrary" and replacing them with the following:
"Except as provided in Sections 10.02 and 3.04"
(p) Section 10.03 is hereby amended by deleting the first word of such
Section and replacing it with the following: "Except as provided in
Sections 10.02 and 3.04, the"
(q) Section 2.01 is hereby amended by adding the following subsection
(e) immediately after Section 2.01(d):
(e) From time to time following the Initial Date of Deposit, the
Depositor is hereby authorized, in its discretion, to assign, convey
to and deposit with the Trustee additional Securities, duly endorsed
in blank or accompanied by all necessary instruments of assignment and
transfer in proper form (or Contract Securities relating to such
Securities), to be held, managed and applied by the Trustee as herein
provided. Such deposit of additional Securities shall be made, in each
case, pursuant to a Supplemental Indenture accompanied by a legal
opinion issued by legal counsel satisfactory to the
-3-
<PAGE>
Depositor. The Depositor, in each case, shall ensure that each deposit
of additional Securities pursuant to this Section (i) shall be equal
to the original percentage relationship among the number of shares of
each Security as is specified in the Trust Agreement for such Trust
and (ii) shall not violate any applicable laws, rules or regulations,
including, but not limited to, the Investment Company Act of 1940. The
Depositor shall deliver the additional Securities which were not
delivered concurrently with the deposit of additional Securities and
which were represented by Contract Securities within 10 calendar days
after such deposit of additional Securities (the "Additional
Securities Delivery Period"). If a contract to buy such Securities
between the Depositor and seller is terminated by the seller thereof
for any reason beyond the control of the Depositor or if for any other
reason the Securities are not delivered to the Trust by the end of the
Additional Securities Delivery Period for such deposit, the Trustee
shall immediately draw on the Letter of Credit, if any, in its
entirety, apply the moneys in accordance with Section 2.01(b), and the
Depositor shall forthwith take the remedial action specified in
Section 3.10. If the Depositor does not take the action specified in
Section 3.10 within 10 calendar days of the end of the Additional
Securities Delivery Period, the Trustee shall forthwith take the
action specified in Section 3.10.
(r) Section 2.03(a) is hereby amended by adding the following at the
end of such section:
The Trustee hereby agrees that on the date of any Supplemental Trust
Agreement, it shall acknowledge that the additional Securities
identified therein have been deposited with it by recording on its
books the ownership, by the Depositor or such other person or persons
as may be indicated by the Depositor, of the aggregate number of Units
to be issued in respect of such additional Securities so deposited,
and shall, if so requested, execute documentation substantially in the
form above recited representing the ownership of an aggregate number
of those Units.
-4-
<PAGE>
In Witness Whereof, the parties hereto have caused this Trust Agreement to
be duly executed.
Howe Barnes Investments, Inc.,
Depositor
By
-------------------------------
Senior Vice President
Investors Fiduciary Trust Company
By
-------------------------------
Operations Officer
-5-
<PAGE>
SCHEDULE A
Securities Initially Deposited
HBI Equity Trust, Series 2
(Note: Incorporated herein and made a part hereof is the "Schedule of
Investments" as set forth in the Prospectus.)
-6-
<PAGE>
Exhibit 3.1
September 24, 1996
Howe Barnes Investments, Inc.
135 South LaSalle Street, Suite 1500
Chicago, Illinois 60603
Re: HBI Equity Trust, Series 2
--------------------------
Ladies/Gentlemen:
We have served as special counsel for Howe Barnes Investments, Inc., as
Sponsor and Depositor (the "Depositor") of HBI Equity Trust, Series 2 (the
"Fund"), in connection with the preparation, execution and delivery of a Trust
Agreement dated September 24, 1996 and a Standard Terms and Condition of Trust
dated March 16, 1994 (collectively, the Indenture) each of which are between
Howe Barnes Investments, Inc., as Depositor, and Investors Fiduciary Trust
Company, as Trustee, pursuant to which the Depositor has delivered to and
deposited the securities listed in Schedule A to the Trust Agreement with the
Trustee and pursuant to which the Trustee has issued in the name of the
Depositor documents representing units of fractional undivided interest in and
ownership of the Fund created under said Trust Agreement.
In connection therewith we have examined such pertinent records and
documents and matters of law as we have deemed necessary in order to enable us
to express the opinions hereinafter set forth.
Based upon the foregoing, we are of the opinion that:
1. The execution and delivery of the Indenture and the execution and
issuance of certificates evidencing the units of the Fund have been duly
authorized; and
2. The certificates evidencing the units of the Fund when duly
executed and delivered by the Depositor and the Trustee in accordance with
the aforementioned Indenture, will constitute valid and binding obligations
of the Fund and the Depositor in accordance with the terms thereof.
<PAGE>
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement (File No. 333-11315) relating to the units referred to
above and to the use of our name and to the reference to our firm in said
Registration Statement and in the related Prospectus.
Respectfully submitted,
Chapman And Cutler
MJK/cjw
-2-
<PAGE>
Exhibit 3.2
September 24, 1996
Investors Fiduciary Trust Company
127 West 10th Street
Kansas City, Missouri 64105
Howe Barnes Investments, Inc.
135 South LaSalle Street
Chicago, Illinois 60603
Re: HBI Equity Trust, Series 2
--------------------------
Ladies/Gentlemen:
We have acted as special counsel for Howe Barnes Investments, Inc.,
Depositor of HBI Equity Trust, Series 2 (the "Trust"), in connection with the
issuance of units of fractional undivided interest in the Trust, under a Trust
Agreement dated September 24, 1996 and a Standard Terms and Conditions of Trust
dated March 16, 1994 (collectively, the "Indenture") each of which are between
Howe Barnes Investments, Inc., as Depositor, and Investors Fiduciary Trust
Company, as Trustee.
In this connection, we have examined the Registration Statement, the form
of Prospectus proposed to be filed with the Securities and Exchange Commission,
the Indenture and such other instruments and documents as we have deemed
pertinent.
The assets of the Trust will consist of a portfolio of equity securities
(the "Securities") as set forth in the Prospectus.
Based upon the foregoing and upon an investigation of such matters of law
as we consider to be applicable, we are of the opinion that, under existing
United States Federal income tax law:
(i) The Trust is not an association taxable as a corporation but will
be governed by the provisions of subchapter J (relating to Trusts) of
Chapter 1, Internal Revenue Code of 1986 (the "Code")
(ii) A Unitholder will be considered as owning a pro rata portion of
each of the assets of the Trust in the proportion that the number of Units
held by him bears to the total number of Units outstanding under subpart E,
subchapter J of Chapter 1 of the Code, income of the Trust will be treated
as income of each Unitholder in the
<PAGE>
proportion described and an item of Trust income will have the same
character in the hands of a Unitholder as it would have in the hands of the
Trustee. Each Unitholder will be considered to have received his pro rata
share of income derived from each Trust asset when such income is
considered to be received by the Trust. A Unitholder's pro rata portion of
distributions of cash or property by a corporation with respect to a
Security ("dividends" as defined by Section 316 of the Code) are taxable as
ordinary income to the extent of such corporation's current and accumulated
"earnings and profits." A Unitholder's pro rata portion of dividends which
exceed such current and accumulated earnings and profits will first reduce
the Unitholder's tax basis in such Security and to the extent that such
dividends exceed a Unitholder's tax basis in such Security, shall be
treated as gain from the sale or exchange of property.
(iii) The price a Unitholder pays for his Units is allocated among his
pro rata portion of each Security held by the Trust (in proportion to the
fair market values thereof on the valuation date closest to the date the
Unitholder purchases his Units) in order to determine his tax basis for his
pro rata portion of each Security held by the Trust.
(iv) Gain or loss will be recognized to a Unitholder (subject to
various non-recognition provisions under the Code) upon redemption or sale
of his Units, except to the extent an in kind distribution of stock is
received by such Unitholder from the Trust as discussed below. Such gain or
loss is measured by comparing the proceeds of such redemption or sale with
the adjusted basis of his Units. Before adjustment, such basis would
normally be cost if the Unitholder had acquired his Units by purchase. Such
basis will be reduced, but not below zero, by the Unitholder's pro rata
portion of dividends with respect to each Security which are not taxable as
ordinary income.
(v) If the Trustee disposes of a Trust asset (whether by sale,
exchange, liquidation, redemption or otherwise) gain or loss will be
recognized to the Unitholder (subject to various non-recognition provisions
under the Code) and the amount thereof will be measured by comparing the
Unitholder's aliquot share of the total proceeds from the transaction with
his basis for his fractional interest in the asset disposed of. Such basis
is ascertained by apportioning the tax basis for his Units (as of the date
on which his Units were acquired) among each of the Trust assets of such
Trust (as of the date on which his Units were acquired) ratably according
to their values as of the valuation date nearest the date on which he
purchased such Units. A Unitholder's basis in his Units and of his
fractional interest in each Trust asset must be reduced, but not below
zero, by the Unitholder's pro rata portion of dividends with respect to the
Security which is not taxable as ordinary income.
(vi) Under the Indenture, under certain circumstances, a Unitholder
tendering Units for redemption may receive an in kind distribution of
Securities upon the redemption of Units or upon the termination of the
Trust. As
-2-
<PAGE>
previously discussed, prior to the termination of the Trust, a Unitholder
is considered as owning a pro rata portion of each of the Trust's assets.
The receipt of an in kind distribution will result in a Unitholder
receiving an undivided interest in whole shares of stock and possibly cash.
The potential federal income tax consequences which may occur under an in
kind distribution with respect to each Security owned by the Trust will
depend upon whether or not a Unitholder receives cash in addition to
Securities. A "Security" for this purpose is a particular class of stock
issued by a particular corporation. A Unitholder will not recognize gain or
loss if a Unitholder only receives Securities in exchange for his or her
pro rata portion in the Securities held by the Trust. However, if a
Unitholder also receives cash in exchange for a fractional share of a
Security held by the Trust, such Unitholder will generally recognize gain
or loss based upon the difference between the amount of cash received by
the Unitholder and his tax basis in such fractional share of a Security
held by the Trust. The total amount of taxable gains (or losses) recognized
will generally equal the sum of the gain (or loss) recognized under the
rules described above by the Unitholder with respect to each Security owned
by the Trust.
Dividends received by the Trust which are attributable to a corporation
owning Units in the Trust and which are taxable as ordinary income may be
eligible for the 70% dividends received deduction pursuant to Section 243(a) of
the Code, subject to the limitations imposed by Sections 246 and 246A of the
Code. It should be noted that various legislative proposals that would affect
the dividends received deduction have been introduced.
Section 67 of the Code provides that certain itemized deductions, such as
investment expenses, tax return preparation fees and employee business expenses
will be deductible by individuals only to the extent they exceed 2% of such
individual's adjusted gross income. Unitholders may be required to treat some or
all of the expenses of the Trust as miscellaneous itemized deductions subject to
this limitation.
A Unitholder will recognize taxable gain (or loss) when all or part of the
pro rata interest in a Security is either sold by the Trust or redeemed or when
a Unitholder disposes of his Units in a taxable transaction, in each case for an
amount greater (or less) than his tax basis therefor, subject to various non-
recognition provisions of the Code.
Any gain or loss recognized on a sale or exchange will, under current law,
generally be capital gain or loss.
The scope of this opinion is expressly limited to the matters set forth
herein, and, except as expressly set forth above, we express no opinion with
respect to any other taxes, including foreign, state or local taxes or
collateral tax consequences with respect to the purchase, ownership and
disposition of Units.
-3-
<PAGE>
We have also examined the laws of the State of Missouri to determine their
applicability to the Trust. It is our opinion that under Missouri law, as
presently enacted and construed:
(i) The Trust is not an association taxable as a corporation for
Missouri income tax purposes.
(ii) The Unitholders of the Trust will be treated as the owners of a
pro rata portion of the Trust and the income of the Trust will therefore be
treated as income of the Unitholders for Missouri state income tax
purposes.
(iii) The Trust will not be subject to the Kansas City, Missouri
Earnings and Profits Tax and each Unitholder's share of income of the Trust
will not generally be subject to the Kansas City, Missouri Earnings and
Profits Tax or the City of St. Louis Earnings Tax (except that no opinion
is expressed in the case of certain Unitholders, including corporations,
otherwise subject to the St. Louis City Earnings Tax).
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement (File No. 333-11315) relating to the Units referred to
about and to the use of our name and to the reference to our firm in said
Registration Statement and in the related Prospectus.
Very truly yours,
Chapman And Cutler
MJK/cjw
-4-
<PAGE>
Exhibit 6.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm as experts under the caption
"Independent Auditors" and to the use of our report dated September 24, 1996 in
Amendment No. 1 to the Registration Statement on Form S-6 (File No. 333-11315)
and related Prospectus of HBI Equity Trust, Series 2.
Ernst & Young LLP
Chicago, Illinois
September 24, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> Other
<FISCAL-YEAR-END> SEP-24-1996
<PERIOD-START> SEP-24-1996
<PERIOD-END> SEP-24-1996
<INVESTMENTS-AT-COST> 3,283,611
<INVESTMENTS-AT-VALUE> 3,283,611
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,283,611
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,283,611
<SHARES-COMMON-STOCK> 230,427
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 3,283,611
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
