<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-6
For Registration Under the Securities Act of 1933 of Securities of
Unit Investment Trusts Registered on Form N-8B-2
A. Exact name of Trust:
THE PAINEWEBBER EQUITY TRUST,
REIT SERIES 1
B. Name of Depositor:
PAINEWEBBER INCORPORATED
C. Complete address of Depositor's principal executive office:
PAINEWEBBER INCORPORATED
1285 Avenue of the Americas
New York, New York 10019
D. Name and complete address of agents for service:
PAINEWEBBER INCORPORATED
Attention: Mr. Robert E. Holley
1200 Harbor Boulevard
Weehawken, New Jersey 07087
Copy to:
CARTER, LEDYARD & MILBURN
Attention: Kathleen H. Moriarty, Esq.
2 Wall Street
New York, New York 10005
E. Total and amount of securities being registered:
An indefinite number of Units pursuant to Rule 24f-2
under the Investment Company Act of 1940.
F. Proposed maximum offering price to the public
of the securities being registered:
Indefinite
G. Amount of filing fee, computed at one-thirty-third of 1
percent of the proposed maximum aggregate offering price
to the public:
None Required Pursuant to Rule 24f-2
H. Approximate date of proposed sale to public:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF
THE REGISTRATION STATEMENT
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>
THE PAINEWEBBER EQUITY TRUST
REIT SERIES 1
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 1
as to Prospectus on Form S-6)
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
I. Organization and General Information
1. (a) Name of Trust ) Front Cover
(b) Title of securities issued )
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 ) The Trust
Trust Agreement ) 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 )The Trust
Trust's Securities and Rights of ) Rights of Unitholders
Holders
- ---------
* Not applicable, answer negative or not required.
<PAGE>
(a) Type of Securities ) The Trust
(Registered or Bearer) )
(b) Type of Securities ) The Trust
(Cumulative or Distributive) )
(c) Rights of Holders as to ) Rights of Unitholders
Withdrawal or Redemption ) Redemption
) Public Offering of
) Units-Secondary
) Market for Units
) Exchange Option
(d) Rights of Holders as to ) Public Offering of
conversion, transfer, etc. ) Units-Administration
) of the Trust
(e) Rights of Trust issues periodic ) *
payment plan certificates )
(f) Voting rights as to Securities, ) Rights of Unitholders
under the Indenture ) Amendment of the Trust
) Termination of the
) Trust
(g) Notice to Holders as to )
change in )
(1) Assets of Trust ) Amendment of the Indenture
(2) Terms and Conditions ) Supervision of Trust
of Trust's Securities ) Investments
(3) Provisions of Trust ) Amendment of the Indenture
(4) Identity of Depositor ) Administration of the Trust
and Trustee )
(h) Consent of Security Holders )
required to change )
(1) Composition of assets ) Amendment of the Indenture
of Trust
(2) Terms and conditions ) Amendment of the Indenture
of Trust's Securities )
(3) Provisions of Indenture )
(4) Identity of Depositor and ) Amendment of the Indenture
Trustee )
11. Type of securities comprising ) The Trust Rights of Unit-
security holder's interest ) holders Administration of
) the Trust-Portfolio
) Supervision-Reinvestment
- ----------
* Not applicable, answer negative or not required.
<PAGE>
12. Information concerning periodic ) *
payment certificates )
13. (a) Load, fees, expenses, etc. ) Public Offering Price of
) Units, Administration of
) the Trust, Expenses of the
) Trust
(b) Certain information regarding ) *
periodic payment certificates )
(c) Certain percentages ) Public offering of Units
(d) Certain other fees, etc. )
payable by holders ) Rights of Unitholders
(e) Certain profits receivable by ) Public Offering of Units-
depositor, principal under- ) Public Offering Price;
writers, trustee or ) -Sponsor's Profit-Secondary
affiliated persons ) Market for Units
(f) Ratio of annual charges to ) *
income )
14. Issuance of trust's securities ) The Trust
) Public Offering of Units
15. Receipt and handling of payments ) Public Offering of Units
from purchasers )
16. Acquisition and disposition of ) The Trust, Administration
Underlying Securities ) of the Trust, Amendment of
) the Indenture, Termination
) of the Trust
17. Withdrawal or redemption ) Public Offering of Units
) Administration of the Trust
18. (a) Receipt and disposition of ) Distributions, The Trust,
income ) Distributions, Administra-
) tion of the Trust
(b) Reinvestment of distributions ) *
(c) Reserves or special fund ) Distributions, Redemption,
) Expenses of the Trust,
) Termination of the Trust,
) Amendment of the Indenture
- ----------
* Not applicable, answer negative or not required.
<PAGE>
(d) Schedule of distribution ) *
19. Records, accounts and report ) Distributions, Adminstra-
) tion of the Trust
20. Certain miscellaneous provisions ) Trustee, Sponsor Termina-
of trust agreement ) tion of the Trust, Amend-
) ment of the Indenture
21. Loans to security holders ) *
22. Limitations on liability ) Sponsor, Trustee, Redemp-
) tion
23. Bonding arrangements ) Included in Form N-8B-2
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 ) Public Offering Price of
) Units, 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 ) *
30. Persons controlling Depositor ) Sponsor
31. Payments by Depositor for certain ) *
other services trust )
32. Payments by Depositor for ) *
certain other services )
rendered to trust )
33. Remuneration of employees of ) *
Depositor for certain services )
rendered to trust )
- ----------
* Not applicable, answer negative or not required.
<PAGE>
34. Remuneration of other persons ) *
for certain services rendered )
to trust )
IV. Distribution and Redemption of Securities
35. Distribution of trust's ) Public Offering of Units
securities by states )
36. Suspension of sales of trust's ) *
securities )
37. Revocation of authority to ) *
distribute )
38. (a) Method of distribution ) Public Offering of Units
(b) Underwriting agreements ) The Trust, Administration
(c) Selling agreements ) of The Trust
39. (a) Organization of principal ) Sponsor
Underwriter )
(b) N.A.S.D. membership of ) Sponsor
principal underwriter )
40. Certain fees received by ) Public Offering of Units,
principal underwriter ) Expenses of the Trust
41. (a) Business of principal ) Sponsor
underwriter )
(b) Branch officers of principal )
underwriter )
(c) Salesman of principal ) *
underwriter )
42. Ownership of trust's securities ) *
by certain persons )
43. Certain brokerage commissions ) *
received by principal underwriter )
44. (a) Method of valuation ) Public Offering of Units
) Valuation
(b) Schedule as to offering price ) *
(c) Variation in offering ) Public Offering of Units
Price to certain persons ) Administration of the Trust
- ----------
* Not applicable, answer negative or not required.
<PAGE>
45. Suspension of redemption rights ) *
46. (a) Redemption valuation ) Public Offering of Units
) -Public Offering Price
) -Secondary Market for Units
) Valuation; Redemption
(b) Schedule as to redemption ) *
price )
V. Information concerning the Trustee or Custodian
47. Maintenance of position in ) Redemption, Public Offering
underlying securities ) of Units-Public Offering
) Price
48. Organization and regulation of ) Trustee
Trustee )
49. Fees and expenses of Trustee ) Expenses of the Trust
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
- ----------
* Not applicable, answer negative or not required.
<PAGE>
VII. Policy of Registrant
52. (a) Method of selecting and ) The Trust, Administration
eliminating securities from ) of the Trust
the Trust )
(b) Elimination of securities ) *
from the Trust )
(c) Policy of Trust regarding ) The Trust, Administration
substitution and elimination ) of the Trust
of securities )
(d) Description of any funda- ) The Trust, Administration
mental policy of the Trust ) of the Trust-Portfolio
) Supervision
53. (a) Taxable status of the Trust ) Federal Income Taxes
(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 Financial
(Instruction 1(c) to Form S-6) ) Condition
- ----------
* Not applicable, answer negative or not required.
<PAGE>
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL
PRIOR TO THE REGISTRATION STATEMENT OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH JURISDICTION.
Preliminary, Subject to Completion Dated October 20, 1997
PAINEWEBBER EQUITY TRUST
REIT Series 1
- -----------------------------------------------------------------------------
The investment objective of this Trust is to provide primarily for high
current income with a secondary objective of possible long term capital
appreciation through an investment in a portfolio of publicly traded domestic
real estate investment trusts ("REITs"). The value of the Units will
fluctuate with the value of the portfolio of underlying securities.
The minimum purchase is $ . Only whole Units may be purchased.
- -----------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
- -----------------------------------------------------------------------------
SPONSOR:
PAINEWEBBER INCORPORATED
Read and retain this prospectus for future reference.
PROSPECTUS DATED , 1997
<PAGE>
ESSENTIAL INFORMATION REGARDING THE TRUST
AS OF (1)
<TABLE>
<CAPTION>
Sponsor: PaineWebber Incorporated
Co-Trustees: Investors Bank & Trust Company
The First National Bank of Chicago
Initial Date of Deposit: , 1997
<S> <C>
Aggregate Value of Securities in Trust: ................. $
Number of Units: ........................................
Fractional Undivided Interest in the Trust Represented
by Each Unit: .......................................... 1/ th
Calculation of Public Offering Price Per Unit(2)
Aggregate Value of Underlying Securities in Trust ...... $
Divided by Units ....................................... $
Plus Sales Charge of 3.75% of Public Offering Price
(3.90% of net amount invested per Unit) ............... $.375
Public Offering Price per Unit ......................... $
Redemption Value: ........................................... $
Evaluation Time:............................................. 4:00 P.M. New York time.
Income Account Distribution Dates(3): ....................... and monthly thereafter and on
the Mandatory Termination Date.
Capital Account Distribution Dates(3):....................... and annually thereafter and on
the Mandatory Termination Date. No
distributions of less than $.05 per
Unit need be made from the Capital
Account on any Distribution Date.
Record Dates:................................................ and monthly thereafter.
Mandatory Termination Date:..................................
Discretionary Liquidation Amount:............................ 50% of the value of Securities upon
completion of the deposit of
Securities.
Estimated Annual Organizational Expenses of the Trust(4): .. $. per Unit.
Estimated Other Expenses of the Trust........................ $. per Unit.
---------------
Total Estimated Annual Expenses of the Trust(5): ........... $. per Unit.
</TABLE>
- --------------
(1) The date prior to the Initial Date of Deposit.
(2) The Public Offering Price will be based upon the value of the Securities
next computed following receipt of the purchase order plus the
applicable sales charges. Following the Initial Date of Deposit, costs
incurred in connection with the acquisition of additional Securities
will be at the expense of the Trust. (See "Essential Information
Regarding the Trust--Additional Deposits," "Risk Factors and Special
Considerations" and "Valuation").
(3) See "Distributions".
(4) This Trust (and therefore the investors) will bear all or a portion of
its organizational costs--including costs of preparing the initial
registration statement, the trust indenture and other closing documents,
registering Units with the SEC and the states and the initial audit of
the Portfolio--as is common for mutual funds. Historically, the sponsors
of unit investment trusts have paid all the costs of establishing those
trusts.
(5) See "Expenses of the Trust". Estimated dividends from the Securities,
based upon last dividends actually paid are expected by the
Sponsor to be sufficient to pay estimated expenses of the Trust. If such
dividends paid are insufficient to pay expenses, the Trustee is
authorized to sell Securities in an amount sufficient to pay such
expenses. (See "Administration of the Trust" and "Expenses of the
Trust".)
2
<PAGE>
ESSENTIAL INFORMATION REGARDING THE TRUST (CONTINUED)
THE TRUST. The primary objective of the PaineWebber Equity Trust, REIT
Series 1 (the "Trust") is to provide a high level of current dividend income
and secondarily to provide for capital appreciation through an investment in
a fixed portfolio consisting of publicly traded domestic real estate
investment trusts, herein referred to as the "Securities," which have, in the
Sponsor's opinion, on the Initial Date of Deposit, an above-average potential
for such current dividend income.
The Trust will seek to achieve its objective of providing a high level of
current dividend income through an investment in a portfolio of Securities
that PaineWebber believes are likely to continue to make dividend payments
over the life of the Trust. The Securities included in the Trust portfolio
were selected by the Sponsor primarily for their current dividend yields as
well as their potential for continuance of such dividend yields. The criteria
used by the Sponsor in making such selections include in-depth analysis of
historical financial data, operating cash flow, performance and management
expertise. Achievement of the Trust's objectives is dependent upon a number
of factors including the financial condition of the issuers of the
Securities, as well as any appreciation of the Securities and the state of
the real estate market. Further, investors in the Trust may not realize as
high a total return as theoretical performance of the Securities held in the
Trust due to a variety of factors, including without limitation, sales
charges and expenses of the Trust, brokerage costs, unequal weightings of
Securities and any delays experienced in purchasing Securities with cash
deposits.
The Trust portfolio contains common stocks issued by different
domestic real estate investment trusts ("REITs"). A REIT is a creation of the
federal income tax law and, therefore, its structure and operation must
conform to certain requirements of the Internal Revenue Code. In general, a
REIT must hold at least 75% of its total assets in real estate assets and
distribute at least 95% of its taxable income (without regard to any net
capital gains) on an annual basis. There are two principal types of REITs:
those which hold 75% of their invested assets in the ownership of real estate
and benefit from the underlying net rental income generated from the
properties ("Equity REITs") and those which hold 75% of their invested assets
in mortgages which are secured by real estate assets and benefit
predominantly from the difference between the interest income on the mortgage
loans and the interest expense on the capital used to finance the loans
("Mortgage REITs"). A third type combines the investment strategies of the
Equity REITs and the Mortgage REITs ("Hybrid REITs"). The Trust is invested
entirely in Equity REITs which comprise 100% of the Trust portfolio.
SUMMARY OF RISK FACTORS. Investment in the Trust should be made with an
understanding that the value of the underlying Securities, and therefore the
value of the Units, will fluctuate, depending on the full range of economic
and market influences which may affect the market value of the Securities,
including the profitability and financial condition of issuers, conditions in
the real estate industry, market conditions and values of common stocks
generally, and other factors. The Trust is not appropriate for investors
requiring conservation of capital.
The Sponsor's buying and selling of the Securities, especially during the
initial offering of Units of the Trust or to satisfy redemptions of Units may
impact upon the value of the underlying Securities and the Units. The
publication of the list of the Securities selected for the Trust may also
cause increased buying activity in certain of the REITs comprising the Trust
portfolio. After such announcement, investment advisory and brokerage clients
of the Sponsor and its affiliates may purchase individual Securities
appearing on the list during the course of the initial offering period. Such
buying activity in the stock of these REITs prior to the purchase of the
Securities by the Trust may cause the Trust to purchase the REITs at a higher
price than those buyers who effect purchases prior to the purchases by the
Trust and
3
<PAGE>
may also increase the amount of the profit realized by the Sponsor on the
purchase of the Securities from their issuers. In addition, the issuances of
the additional Securities by the REITs in the transactions underwritten by
the Sponsor may, in certain circumstances, have an adverse impact on the
value of the Securities and the Units.
Since the Trust will consist entirely of shares issued by REITs, domestic
corporations or business trusts which invest primarily in income producing
real estate or real estate related loans or mortgages, an investment in the
Trust will be subject to risks similar to those associated with the direct
ownership of real estate (in addition to securities markets risks) because of
their of concentration in the securities of companies in the real estate
industry. These risks include declines in the value of real estate,
illiquidity of real property investments, changes in general and local
economic conditions, dependency on management skill, heavy cash flow
dependency, possible lack of availability of mortgage funds, overbuilding,
extended vacancies of properties, increased competition, increases in
property taxes and operating expenses, changes in zoning laws, losses due to
costs resulting from the clean-up of environmental problems, liability to
third parties for damages resulting from environmental problems, casualty or
condemnation losses, economic or regulatory impediments to raising rents,
changes in neighborhood values and the appeal of properties to tenants and
changes in interest rates.
In addition to the risks stated above, Equity REITs may be more likely to
be affected by changes in the value of the underlying property owned by the
trusts, while Mortgage REITs may be more likely to be affected by the quality
of any credit extended. Further, Equity and Mortgage REITs are dependent upon
the management skills of the issuers and generally may not be diversified.
Equity and Mortgage REITs are also subject to heavy cash flow dependency,
defaults by borrowers and self-liquidation. In addition, Equity and Mortgage
REITs could possibly fail to qualify for tax free pass-through of income
under the Internal Revenue Code of 1986, as amended (the "Code"), or to
maintain their exemptions from registration under the Investment Company Act
of 1940 (the "1940 Act"). The above factors may also adversely affect a
borrower's or a lessee's ability to meet its obligations to the REIT. In the
event of a default by a borrower or lessee, the REIT may experience delays in
enforcing its rights as a mortgagee or lessor and may incur substantial costs
associated with protecting its investments. (See "Risk Factors and Special
Considerations--Real Estate Investment Trusts".)
There are also certain investment risks inherent in any unit trust
portfolios which hold equity securities. The Securities held by the Portfolio
may appreciate or depreciate in value or pay dividends depending on the full
range of economic and market influences affecting corporate profitability,
the financial condition of the issuers, the prices of equity securities, the
condition of the stock markets in general and the prices of the stocks in
particular. In addition, rights of common stock holders are generally
inferior to those of holders of debt obligations or preferred stock. (See
"Risk Factors and Special Considerations" for a discussion of these risks.)
The Trust Portfolio is diversified among various industry groups in an
attempt to limit the risks inherent in owning a portfolio of stock which does
not provide a broad base of industry groupings as shown below in the table
included under the caption "The Composition of the Portfolio". There is no
assurance, however, that such diversification will eliminate an investor's
risk of earnings or market price volatility or trading liquidity.
There can also be no assurance that the Trust portfolio will remain
constant during the life of the Trust. For example, the Trustee may be
required to sell Securities to pay for the expenses of the Trust (see
"Expenses of the Trust" and "Administration of the Trust--Accounts"). Also,
certain events might occur which could lead to the elimination of one or more
Securities from the Portfolio (see "Administration of the Trust--Portfolio
Supervision"), thereby reducing the diversity of the Trust's investments.
Further,
4
<PAGE>
under certain circumstances, if a tender offer is made for any of the
Securities in the Trust, or in the event of a merger or reorganization, the
Trust will either tender the Securities or sell them as more fully described
under the captions "The Trust" and "Administration of the Trust--Portfolio
Supervision," herein.
THE COMPOSITION OF THE PORTFOLIO.
PaineWebber's research professionals have selected certain Securities in
the industries listed below which they believe will benefit from one or more
of the trends listed above. In PaineWebber's search for REITs which have
potential for high current dividend income, there was no particular bias
toward large capitalization or small capitalization issues. The Securities in
the Portfolio derive revenues primarily from the revenues from primary
industry listed below and in the "Schedule of Investments."
APPROXIMATE PERCENT OF AGGREGATE
PRIMARY INDUSTRY SOURCE MARKET VALUE OF THE TRUST
----------------------- -------------------------
ADDITIONAL DEPOSITS. The initial purchase of Securities will not
necessarily represent equal dollar amounts of each of the Securities;
however, with the initial deposit of Securities, the Sponsor established a
proportionate relationship among the number of shares of each REIT deposited
in the Portfolio. During the 90-day period following the Initial Date of
Deposit the Sponsor may, from time to time, create additional Units by
causing the deposit of additional Securities into the Trust, maintaining, as
closely as practicable, the original percentage relationships between the
number of shares of Securities deposited on the Initial Date of Deposit,
subject to certain adjustments. Costs incurred in acquiring such additional
Securities will be borne by the Trust. Unitholders will experience a dilution
of their investment as a result of such brokerage fees and other expenses
paid by the Trust during additional deposits of Securities purchased by the
Trustee with cash or cash equivalents pursuant to instructions to purchase
such Securities. (See "The Trust" and "Risk Factors and Special
Considerations".) Any deposits of Securities after the 90-day period must
replicate exactly the proportionate relationship among the number of shares
comprising the Portfolio at the end of the initial 90-day period, subject to
certain events discussed under Administration of the Trust--Trust
Supervision. The Sponsor may cease creating Units (temporarily or
permanently) at any time. (See Administration of the Trust--Trust
Supervision.)
TERMINATION. Unless advised to the contrary by the Sponsor, the Trustee
will begin to sell the Securities held in the Trust twenty days prior to the
Mandatory Termination Date. Moneys held upon such
5
<PAGE>
sale or maturity of Securities will be held in non-interest bearing accounts
created by the Indenture until distributed and will be of benefit to the
Trustee. The Trust will terminate approximately years after the Initial
Date of Deposit regardless of market conditions at the time. (See
"Termination of the Trust" and "Federal Income Taxes".)
PORTFOLIO ACQUISITION. On the Initial Date of Deposit all of the
Securities deposited in the Trust were acquired by the Sponsor in open market
purchases on the American and New York Stock Exchanges. Subsequent to the
Initial Date of Deposit, it is expected that all of the Securities in the
Trust will be purchased from the Sponsor in transactions in which the Sponsor
will act as sole underwriter to the issuers of the Securities, except for
which will be purchased from the Sponsor in a private placement. These
transactions will be effected to the Sponsor at prices below the current
market value of the Securities due to various factors, including size of the
purchase, expectation of holding period and cost of issuance. All of the
Securities will be deposited in the Trust based upon their market value as of
the Initial Dates of Deposit. [As a result of the Sponsor's ability to
purchase these Securities below market value, the Sponsor will offer Units of
the Trust with no sales charge during the initial offering period. By virtue
of buying stock at below market prices, the Sponsor will realize a profit on
the deposit of the Securities to the Trust in an amount of up to 5% of the
market value of these Securities.] Notwithstanding the preceding, the Sponsor
may create additional Units by depositing Securities acquired on the
applicable national stock exchanges.
PUBLIC OFFERING PRICE. The Public Offering Price per Unit is computed by
dividing the Trust Fund Evaluation by the number of Units outstanding and
then adding a sales charge of 3.75% of the Public Offering Price (3.90% of
the net amount invested). The sales charge is reduced on a graduated scale
for volume purchasers and is reduced for certain other purchasers. Units are
offered at the Public Offering Price computed as of the Evaluation Time for
all sales subsequent to the previous evaluation. The Public Offering Price on
the Initial Date of Deposit, and on subsequent dates, will vary from the
Public Offering Price set forth on page 2. (See "Public Offering of
Units--Public Offering Price".) Any difference between the aggregate prices
the Sponsor paid to acquire the Securities and the aggregate prices at which
Securities were initially deposited in the Trust is noted on page 30,
footnote 3 to the Schedule of Investments. The Sponsor's profit or loss on
the deposit of Securities largely depends on whether the Securities' prices
rise in response to the Sponsor's purchases of possibly large volumes of the
Securities for initial and subsequent deposits in the Trust. The effect of
the Sponsor's purchases of Securities on the prices of the Securities is
unpredictable. See "Portfolio Acquisition" above concerning additional profit
to the Sponsor on subsequent deposits.
There is no "par value" for Units.
DISTRIBUTIONS. The Stocks in the Trust were chosen primarily for their
income potential. The Trustee will make distributions of dividends and
capital, if any, on the Distribution Dates. (See "Distributions" and
"Administration of the Trust".) Unitholders may elect to have their
distributions automatically reinvested into additional Units of the Trust at
no sales charge (see "Reinvestment Plan"). Whether a distribution is
reinvested or received in cash, the distribution will be taxable to the
Unitholder. Unitholders who reinvest their distributions will receive
additional Units and will therefore own a greater percentage of the Trust
than Unitholders who receive cash distributions (see "Reinvestment Plan").
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. The sale of Securities 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.
6
<PAGE>
MARKET FOR UNITS. The Sponsor, though not obligated to do so, presently
intends to maintain a secondary market for Units. The public offering price
in the secondary market will be based upon the value of the Securities next
determined after receipt of a purchase order, plus the applicable sales
charge. (See "Public Offering of Units--Public Offering Price" and
"Valuation".) If a secondary market is not maintained, a Unitholder may
dispose of his Units only through redemption. With respect to redemption
requests in excess of $100,000, the Sponsor may determine in its sole
discretion to direct the Trustee to redeem units "in kind" by distributing
Securities to the redeeming Unitholder. (See "Redemption".)
THE TRUST
The Trust is one of a series of similar but separate unit investment
trusts created under New York law by the Sponsor pursuant to a Trust
<F1>
Indenture and Agreement * (the "Indenture") dated as of the Initial Date of
Deposit, between PaineWebber Incorporated, as Sponsor and Investors Bank &
Trust Company and The First National Bank of Chicago, N.A., as Co-Trustees
(the "Trustee"). The primary objective of the Trust is high current income
with a secondary objective of possible long term capital appreciation through
an investment in a portfolio of publicly traded domestic real estate
investment trusts ("REITs").
The Trust portfolio is diversified among REITs that the Sponsor believes
offer an opportunity for high current income and potential capital
appreciation over the term. The Sponsor believes that these potentially
higher yielding Securities may reflect the risks associated with the real
estate market generally but that the broad diversification among different
issuers should minimize the exposure to any single issuer. However, investors
should carefully review the Portfolio and the objectives of the Trust and
consider their ability to assume the risks involved before investing in the
Trust. (See "Risk Factors and Special Considerations" below).
REITs are a creation of the tax law. A REIT essentially operates as a
corporation or business trust with the advantage of exemption from corporate
income taxes provided the REIT satisfies the requirements of Sections 856
through 860 of the Internal Revenue Code. The major tests for tax-qualified
status are that the REIT (i) be managed by one or more trustees or directors,
(ii) issue shares of transferable interest to its owners, (iii) have at least
100 shareholders, (iv) have no more than 50% of the shares held by five or
fewer individuals, (v) invest substantially all of its capital in real estate
related assets and derive substantially all of its gross income from real
estate related assets and (vi) distribute at least 95% of its taxable income
to its shareholders each year.
The Securities deposited in the Trust on the Initial Date of Deposit
consist entirely of interests in REITs. There are two principal types of
REITs: Equity REITs which typically hold 75% of their invested assets in the
ownership of real estate and benefit from the underlying net rental income
generated from the properties, and Mortgage REITs, which typically hold 75%
of their invested assets in mortgages which are secured by real estate assets
and benefit predominantly from the difference between the interest income on
the mortgage loans and the interest expense on the capital used to finance
the loans. A third type, Hybrid REITs, combines the investment strategies of
the Equity REITs and the Mortgage REITs.
The Trust is invested entirely in Equity REITs.
In addition to being classified according to investment type, REITs may be
categorized further in terms of their specialization by property type (e.g.,
retail, multifamily, healthcare, office, etc.,) or geographic focus
(nationwide, regional or metropolitan area). Additional stratification is
then possible
- --------------
* Reference is hereby made to said Trust Indenture and Agreement and any
statements contained herein are qualified in their entirety by the provisions
of said Trust Indenture and Agreement.
7
<PAGE>
within certain product types (e.g., factory outlets, community centers, and
regional malls are all categories within the retail sector). Lastly, REITs
have a specified length of time before liquidating their underlying assets.
On the Initial Date of Deposit, the Sponsor deposited with the Trustee
confirmations of contracts for the purchase of Securities together with an
irrevocable letter or letters of credit of a commercial bank or banks in an
amount at least equal to the purchase price. The value of the Securities was
determined on the basis described under "Valuation". In exchange for the
deposit of the contracts to purchase Securities, the Trustee delivered to the
Sponsor a receipt for Units representing the entire ownership of the Trust.
With the deposit on the Initial Date of Deposit, the Sponsor established a
proportionate relationship between the Securities in the Trust (determined by
reference to the number of shares of each issue of Securities). The Sponsor
may, from time to time, cause the deposit of additional Securities in the
Trust when additional Units are to be offered to the public or pursuant to
the Reinvestment Plan. During the 90-day period following the Initial Date of
Deposit additional deposits of Securities or cash in connection with the
issuance and sale of additional Units will maintain, to the extent
practicable, the original proportionate relationship among the number of
shares of each Security. The original proportionate relationship is subject
to adjustment to reflect the occurrence of a stock split or a similar event
which affects the capital structure of the issuer of a Security but which
does not affect the Trust's percentage ownership of the common stock equity
of such issuer at the time of such event, to reflect a sale or maturity of
Security or to reflect a merger or reorganization. It may not be possible to
maintain the exact original proportionate relationship among the Securities
deposited on the Initial Date of Deposit because of, among other reasons,
purchase requirements, changes in prices, brokerage commissions or
unavailability of Securities. Replacement Securities may be acquired under
specified conditions when Securities originally deposited are unavailable
(see "Administration of the Trust--Portfolio Supervision"). Units may be
continuously offered to the public by means of this Prospectus (see "Public
Offering of Units--Public Offering Price") resulting in a potential increase
in the number of Units outstanding. Deposits of Additional Securities
subsequent to the 90-day period following the Initial Date of Deposit must
replicate exactly the proportionate relationship among the number of shares
of each of the Securities comprising the Portfolio at the end of the initial
90-day period. Stock dividends issued in lieu of cash dividends, if any,
received by the Trust will be sold by the Trustee and the proceeds therefrom
shall be added to the Income Account. (See "Administration of the Trust" and
"Reinvestment Plan").
On the Initial Date of Deposit each Unit represented the fractional
undivided interest in the Securities and net income of the Trust set forth
under "Essential Information Regarding the Trust". However, if additional
Units are issued by the Trust (through the deposit of additional Securities
for purposes of the sale of additional Units or pursuant to the Reinvestment
Plan), the aggregate value of Securities in the Trust will be increased and
the fractional undivided interest represented by each Unit in the balance
will be decreased. If any Units are redeemed, the aggregate value of
Securities in the Trust will be reduced, and the fractional undivided
interest represented by each remaining Unit in the balance will be increased.
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".)
RISK FACTORS AND SPECIAL CONSIDERATIONS
General. 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. 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
8
<PAGE>
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. The Trust is not appropriate for investors requiring conservation of
capital.
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 securities or even preferred stock by
an issuer will create prior claims for payment of principal, interest and
dividends which could adversely affect the ability and inclination of the
issuer to declare or pay dividends on its common stock or the rights of
holders of common stock with respect to assets of the issuer upon liquidation
or bankruptcy. 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 may
be expected to fluctuate over the life of the Trust.
Any distributions of income to Unitholders will generally depend upon the
declaration of dividends by the issuers of Securities and the declaration of
dividends depends upon several factors, including the financial condition of
the issuers and general economic conditions. In addition, there are other
investment risks common to all equity issues. The Securities may appreciate
or depreciate in value depending upon a variety of factors, including the
full range of economic and market influences affecting corporate
profitability, the financial condition of issuers, changes in national or
worldwide economic conditions, and the prices of equity securities in general
and the Securities in particular. Distributions of income, generally made by
declaration of dividends, is also dependent upon several factors, including
those discussed above in the preceding sentence as well as those discussed
below under "Real Estate Investment Trusts".
The Sponsor's buying and selling of the Securities, especially during the
initial offering of Units of the Trust or to satisfy redemptions of Units may
impact upon the value of the underlying Securities and the Units. The
publication of the list of the Securities selected for the Trust may also
cause increased buying activity in certain of the Securities comprising the
Trust portfolio. After such announcement, investment advisory and brokerage
clients of the Sponsor and its affiliates may purchase individual Securities
appearing on the list during the course of the initial offering period. Such
buying activity in the stock of these companies prior to the purchase of the
Securities by the Trust may cause the Trust to purchase stocks at a higher
price than those buyers who effect purchases prior to purchases by the Trust
and may also increase the amount of the profit realized by the Sponsor on the
purchase of the Securities from their issuers. In addition, the issuances of
the additional Securities by the REITs in the transactions underwritten by
the Sponsor may, in certain circumstances, have an adverse impact on the
value of the Securities and the Units.
The Trust may purchase Securities that are not registered ("Restricted
Securities") under the Securities Act of 1933 (the "Securities Act"), but can
be offered and sold to "qualified institutional buyers" as that term is
defined in the Securities Act. See "Real Estate Investment Trusts--Liquidity"
below for the risks inherent in the purchase of Restricted Securities.
Investors should note that the creation of additional Units subsequent to
the Initial Date of Deposit may have an effect upon the value of previously
existing Units. To create additional Units the Sponsor
9
<PAGE>
may deposit cash (or cash equivalents, e.g., a bank letter of credit in lieu
of cash) with instructions to purchase Securities in amounts sufficient to
maintain, to the extent practicable, the percentage relationship among the
Securities based on the price of the Securities at the Evaluation Time on the
date the cash is deposited. To the extent the price of a Security increases
or decreases between the time cash is deposited with instructions to purchase
the Security and the time the cash is used to purchase the Security, Units
will represent less or more of that Security and more or less of the other
Securities in the Trust. Unitholders will be at risk because of price
fluctuations during this period since if the price of shares of a Security
increases, Unitholders will have an interest in fewer shares of that
Security, and if the price of a Security decreases, Unitholders will have an
interest in more shares of that Security, than if the Security had been
purchased on the date cash was deposited with instructions to purchase the
Security. In order to minimize these effects, the Trust will attempt to
purchase Securities as closely as possible to the Evaluation Time or at
prices as closely as possible to the prices used to evaluate the Trust at the
Evaluation Time. Thus price fluctuations during this period will affect the
value of every Unitholder's Units and the income per Unit received by the
Trust. In addition, costs incurred in connection with the acquisition of
Securities will be at the expense of the Trust and will affect the value of
every Unitholder's Units.
In the event a contract to purchase a Security to be deposited on the
Initial Date of Deposit or any other date fails, cash held or available under
a letter or letters of credit, attributable to such failed contract may be
reinvested in another stock or stocks having characteristics sufficiently
similar to the Securities originally deposited (in which case the original
proportionate relationship shall be adjusted) or, if not so reinvested,
distributed to Unitholders of record on the last day of the month in which
the failure occurred. The distribution will be made twenty 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.
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 FULLY IN AN ATTEMPT TO TAKE ADVANTAGE
OF VARIOUS MARKET CONDITIONS TO IMPROVE THE TRUST'S NET ASSET VALUE, BUT MAY
DISPOSE OF SECURITIES ONLY UNDER LIMITED CIRCUMSTANCES. (SEE THE DISCUSSION
BELOW RELATING TO DISPOSITION OF STOCKS WHICH MAY BE THE SUBJECT OF A TENDER
OFFER, MERGER OR REORGANIZATION AND ALSO THE DISCUSSION UNDER THE CAPTION
"ADMINISTRATION OF THE TRUST--PORTFOLIO SUPERVISION".)
Certain of the Stocks may be attractive acquisition candidates pursuant to
mergers, acquisitions and tender offers. In general, tender offers involve a
bid by an issuer or other acquiror to acquire a stock pursuant to the terms
of its offer. Payment generally takes the form of cash, securities (typically
bonds or notes), or cash and securities. Pursuant to federal law a tender
offer must remain open for at least 20 days and withdrawal rights apply
during the entire offering period. Frequently offers are conditioned upon a
specified number of shares being tendered and upon the obtaining of
financing. There may be other conditions to the tender offer as well.
Additionally, an offeror may only be willing to accept a specified number of
shares. In the event a greater number of shares is tendered, the offeror must
take up and pay for a pro rata portion of the shares deposited by each
depositor during the period the offer remains open. In the event of a tender
offer for a Security in the Portfolio, the Sponsor may, but is not required
to, direct the Trustee to sell or tender such Security (see "Administration
of the Trust--Portfolio Supervision" herein).
REAL ESTATE INVESTMENT TRUSTS
General. REITs are financial vehicles that have as their objective the
pooling of capital from a number of investors in order to participate
directly in real estate ownership or financing. REITs are
10
<PAGE>
usually managed by separate advisory companies for a fee which is ordinarily
based on a percentage of the assets of the REIT in addition to reimbursement
of operating expenses. Since the Trust will consist entirely of shares issued
by REITs, an investment in the Trust will be subject to varying degrees of
risk generally incident to the ownership of real property (in addition to
securities market risks) and will involve more risk than a portfolio of
common stocks that is not concentrated in a particular industry or group of
<F1>
industries. * The underlying value of the Trust's Securities and the Trust's
ability to make distributions to its Unitholders may be adversely affected by
adverse changes in national economic conditions, adverse changes in local
market conditions due to changes in general or local economic conditions and
neighborhood characteristics, increased competition from other properties,
obsolescence of property, changes in the availability, cost and terms of
mortgage funds, the impact of present or future environmental legislation and
compliance with environmental laws, the ongoing need for capital
improvements, particularly in older properties, changes in real estate tax
rates and other operating expenses, regulatory and economic impediments to
raising rents, adverse changes in governmental rules and fiscal policies,
dependency on management skills, civil unrest, acts of God, including
earthquakes and other natural disasters (which may result in uninsured
losses), acts of war, adverse changes in zoning laws, and other factors which
are beyond the control of the issuers of the REITs in the Trust.
REITs have been compared to bond equivalents (paying to the REIT holder
their pro rata share of the REIT's annual taxable income). In general, the
value of bond equivalents changes as the general levels of interest rates
fluctuate. When interest rates decline, the value of a bond equivalent
portfolio invested at higher yields can be expected to rise. Conversely, when
interest rates rise, the value of a bond equivalent portfolio invested at
lower yields can be expected to decline. Consequently, the value of the REITs
may at times be particularly sensitive to devaluation in the event of rising
interest rates. Equity REITs are less likely to be affected by interest rate
fluctuations than Mortgage REITs and the nature of the underlying assets of
an Equity REIT, i.e., investments in real property, may be considered more
tangible than that of a Mortgage REIT. Equity REITs are more likely to be
adversely affected by changes in the value of the underlying property it owns
than Mortgage REITs.
REITs may concentrate investments in specific geographic areas or in
specific property types, i.e., hotels, shopping malls, residential complexes,
and office buildings; the impact of economic conditions on REITs can also be
expected to vary with geographic location and property type. Variations in
rental income and space availability and vacancy rates in terms of supply and
demand are additional factors affecting real estate generally and REITs in
particular. In addition, investors should be aware that REITs may not be
diversified and are subject to the risks of financing projects. REITs are
also subject to defaults by borrowers, self-liquidation, the market's
perception of the REIT industry generally, and the possibility of failing to
qualify for tax-free pass-through of income under the Internal Revenue Code,
and to maintain exemption from the Investment Company Act of 1940. A default
by a borrower or lessee may cause the REIT to experience delays in enforcing
its rights as mortgagee or lessor and to incur significant costs related to
protecting its investments.
Uninsured Losses. The issuer of REITs generally maintains comprehensive
insurance on presently owned and subsequently acquired real property assets,
including liability, fire and extended coverage. However, there are certain
types of losses, generally of a catastrophic nature, such as earthquakes and
floods, that may be uninsurable or not economically insurable, as to which
the REITs properties are at risk in their particular locales. The management
of REIT issuers use their discretion in determining amounts,
- --------------
* A Trust is considered to be "concentrated" in a particular industry when
the securities in that industry grouping constitute 25% or more of the
total asset value of such Trust's portfolio.
11
<PAGE>
coverage limits and deductibility provisions of insurance, with a view to
requiring appropriate insurance on their investments at a reasonable cost and
on suitable terms. This may result in insurance coverage that in the event of
a substantial loss would not be sufficient to pay the full current market
value or current replacement cost of the lost investment. Inflation, changes
in building codes and ordinances, environmental considerations, and other
factors also might make it infeasible to use insurance proceeds to replace a
facility after it has been damaged or destroyed. Under such circumstances,
the insurance received by REITs might not be adequate to restore its economic
position with respect to such property.
Environmental Liability. Under various federal, state, and local
environmental laws, ordinances and regulations, a current or previous owner
or operator of real property may be liable for the costs of removal or
remediation of hazardous or toxic substances on, under or in such property.
Such laws often impose liability whether or not the owner or operator caused
or knew of the presence of such hazardous or toxic substances and whether or
not the storage of such substances was in violation of a tenant's lease. In
addition, the presence of hazardous or toxic substances, or the failure to
remediate such property properly, may adversely affect the owner's ability to
borrow using such real property as collateral. No assurance can be given that
one or more of the REITs in the Trust may not be presently liable or
potentially liable for any such costs in connection with real estate assets
they presently own or subsequently acquire while such REITs are held in the
Trust.
Americans with Disabilities Act. Under the Americans with Disabilities Act
of 1990 (the "ADA"), all public accommodations are required to meet certain
federal requirements related to physical access and use by disabled persons.
In the event that any of the REITs in the Trust invest in or hold mortgages
in real estate properties subject to the ADA, a determination that any such
properties are not in compliance with the ADA could result in imposition of
fines or an award of damages to private litigants. If any of the REITs in the
Trust were required to make modifications to comply with the ADA, the REIT's
ability to make expected distributions to the Trust could be adversely
affected, thus adversely affecting the ability of the Trust to make
distributions to Certificateholders.
Property Taxes. Real estate generally is subject to real property taxes.
The real property taxes on the properties underlying the REITs in the Trust
may increase or decrease as property tax rates change and as the properties
are assessed or reassessed by taxing authorities.
Liquidity. Although the Securities in the Trust, except for Restricted
Securities held by the Trust, if any, themselves are listed on a national
securities exchange or NASDAQ National Market System and are liquid, real
estate investments, the primary holdings of each of the Securities in the
Trust are relatively illiquid. Therefore, the ability of the issuers of the
Securities in the Trust to vary their portfolios in response to changes in
economic and other conditions will be limited and, hence, may adversely
affect the value of the Units. There can be no assurance that any issuer of a
Security will be able to dispose of its underlying real estate assets when
they find disposition advantageous or necessary or that the sale price of any
disposition will recoup or exceed the amount of their investment.
The Trust may purchase securities that are not registered ("Restricted
Securities") under the Securities Act, but can be offered and sold to
"qualified institutional buyers" under Rule 144A under the Securities Act.
Since it is not possible to predict with assurance exactly how this market
for Restricted Securities sold and offered under Rule 144A will develop, the
Sponsor will carefully monitor the Trust's investments in these securities,
focusing on such factors, among others, as valuation, liquidity and
availability of information. This investment could have the effect of
increasing the level of illiquidity in the Trust to the extent that qualified
institutional buyers become for a time uninterested in purchasing these
Restricted Securities.
12
<PAGE>
FEDERAL INCOME TAXES
In the opinion of Carter, Ledyard & Milburn, counsel for the Sponsor,
under existing law:
1. The Trust is not an association taxable as a corporation for federal
income tax purposes. Under the Internal Revenue Code of 1986, as amended
(the "Code"), each Unitholder will be treated as the owner of a pro rata
portion of the Trust, and income of the Trust will be treated as income of
the Unitholder.
2. Each Unitholder will have a taxable event when the Trust disposes of
a Security (whether by sale, exchange, redemption, or payment at maturity)
or when the Unitholder sells its Units or redeems its Units for cash. The
total tax cost of each Unit to a Unitholder is allocated among each of the
Securities in accordance with the proportion of the Trust comprised by each
Security to determine the per Unit tax cost for each Security.
3. The Trust is not an association taxable as a corporation for New York
State income tax purposes. Under New York State law, each Unitholder will be
treated as the owner of a pro rata portion of the Trust and the income of
the Trust will be treated as income of the Unitholders.
The following general discussion of the federal income tax treatment of an
investment in Units of the Trust is based on the Code and Treasury
Regulations promulgated thereunder as in effect on the date of this
Prospectus. The federal income tax treatment applicable to a Unitholder may
depend upon the Unitholder's particular tax circumstances. The tax-treatment
of non-U.S. investors is not addressed. Future legislative, judicial or
administrative changes could modify the statements below and could affect the
tax consequences to Unitholders. Accordingly, each Unitholder is advised to
consult its own tax advisor concerning the effect of an investment in Units.
General. Each Unitholder must report on its federal income tax return a
pro rata share of distributions received by the Trust and a pro rata share of
the expenses of the Trust.
Long-term capital gains of individuals are generally taxed at a maximum
federal rate of 28%. Under the recently enacted Taxpayer Relief Act of 1997,
Unitholders who are individuals and have held their Units for more than 18
months may be entitled to a more favorable federal tax rate (generally, 20%,
but 10% for individuals otherwise in the 15% bracket) for gains from the sale
of these Units. Prior to the issuance of relevant regulations, it is not
certain whether or how this more favorable federal tax rate will be available
with respect to capital gain dividends paid by the Trust. Unitholders should
consult their own tax advisers in this regard.
Unitholders will be taxed in the manner described above regardless of
whether distributions from the Trust are actually received by the Unitholder
or are reinvested pursuant to the Reinvestment Plan.
The Trust will own shares in REITs, entities that have elected and
qualified for the special tax treatment applicable to "real estate investment
companies." A number of complex requirements must be satisfied in order for
REIT status to be maintained. If the REIT distributes 95% or more of its real
estate investment trust taxable income, subject to certain adjustments, to
its shareholders, it will not be subject to Federal income tax on the amounts
so distributed. Moreover, if the REIT distributes at least 85% of its
ordinary income and 95% of its capital gain net income it will not be subject
to the 4% excise tax on certain undistributed income of REITs. Distributions
by the REIT from its earnings and profits to its shareholders will be taxable
as ordinary income to such shareholders. They will not be eligible for the
dividends-received deduction for corporations. Distributions of the REIT's
net capital gain, which are designated as capital gain dividends by the REIT,
will be taxable to its shareholders as long-term capital gain, regardless of
the length of time the shareholders have held their investment in the REIT.
13
<PAGE>
To the extent distributions with respect to a Security were to exceed the
issuing corporation's current and accumulated earnings and profits, they
would not constitute dividends. Rather, they would be treated as a tax free
return of capital and would reduce a Unitholder's tax cost for such Security.
This reduction in basis would increase any gain, or reduce any loss, realized
by the Unitholder on any subsequent sale or other disposition of Units. After
the tax cost has been reduced to zero, any additional distributions in excess
of current and accumulated earnings and profits would be taxable as gain from
the sale of Security.
A Unitholder who is an individual, estate or trust may be disallowed
certain itemized deductions described in Code Section 67, including
compensation paid to the Trustee and administrative expenses of the Trust, to
the extent these itemized deductions, in the aggregate, do not exceed two
percent of the Unitholder's adjusted gross income. Thus, a Unitholder's
taxable income from an investment in Units may exceed amounts distributed to
the extent amounts are used by the Trust to pay expenses.
Gain or Loss on Sale. Each Unitholder will be considered the owner of a
pro rata portion of each Security in the Trust. A Unitholder should determine
his tax cost for each Security represented by his Units by allocating the
total cost for his Units, including the sales charge, among each Security in
the Trust represented by his Units (in proportion to the fair market values
thereof on the date the Unitholder purchases his Units). If a Unitholder
sells or otherwise disposes of a Unit, the Unitholder generally will
recognize gain or loss in an amount equal to the difference between the
amount realized on the disposition allocable to the Securities and the
Unitholder's adjusted tax bases in the Securities. Such gain or loss will be
capital gain or loss if the Unit and underlying Securities were held as
capital assets. Each Unitholder generally will also recognize taxable gain or
loss when all or part of its pro rata portion of a Security is sold or
otherwise disposed of for an amount greater or less than its per Unit tax
cost therefor.
Withholding For Citizen or Resident Investors. In the case of any
noncorporate Unitholder that is a citizen or resident of the United States, a
31 percent "backup" withholding tax will apply to certain distributions of
the Trust unless the Unitholder properly completes and files under penalties
of perjury, IRS Form W-9 (or its equivalent).
The foregoing discussion of taxation is a general summary and relates only
to certain aspects of the federal income tax consequences of an investment in
the Trust for Unitholders that hold their Units as capital assets.
Unitholders may also be subject to state and local taxation. Each Unitholder
should consult its own tax advisor regarding the Federal, state and local tax
consequences to it of ownership of Units.
Investment in the Trust may be suited for purchase by funds and accounts
of individual investors that are exempt from federal income taxes such as
Individual Retirement Accounts, tax-qualified retirement plans including
Keogh Plans, and other tax-deferred retirement plans. Unitholders desiring to
purchase Units for tax-deferred plans and IRA's should consult their
PaineWebber Investment Executive for details on establishing such accounts.
Units may also be purchased by persons who already have self-directed
accounts established under tax-deferred retirement plans.
PUBLIC OFFERING OF UNITS
Public Offering Price. The public offering price per Unit is based on the
aggregate market value of the Securities, next determined after the receipt
of a purchase order, divided by the number of Units outstanding plus the
sales charge set forth below. The public offering price per Unit is computed
by dividing the Trust Fund Evaluation, next determined after receipt of a
purchase order by the number of Units outstanding plus the sales charge. (See
"Valuation".) The Public Offering Price on the Initial Date of Deposit or on
any subsequent date will vary from the Public Offering Price calculated on
the business day prior to the Initial Date of Deposit (as set forth on page 2
hereof) due to fluctuations in the value of the Stocks among other factors.
14
<PAGE>
Sales Charge and Volume Discount. The Public Offering Price of Units of
the Trust includes a sales charge which varies based upon the number of Units
purchased by a single purchaser. (See the sales charge schedule set forth
below.) During the initial public offering period, the sales charge will be
based on the number of Trust Units purchased on the same or any preceding day
by a single purchaser. Such purchaser or his dealer must notify the Sponsor
at the time of purchase of any previous purchase of Trust Units in order to
aggregate all such purchases and must supply the Sponsor with sufficient
information to permit confirmation of such purchaser's eligibility;
acceptance of such purchase order is subject to confirmation. Purchases of
Units of other trusts may not be aggregated with purchases of Trust Units to
qualify for this procedure. This procedure may be amended or terminated at
any time without notice. In the event of such termination, the procedure will
revert to that stated under the sales charge schedule referred to below.
Sales charges during the initial public offering period and for secondary
market sales are set forth below. A discount in the sales charge is available
to volume purchasers of Units due to economies of scale in sales effort and
sales related expenses relating to volume purchases. The sales charge
applicable to volume purchasers of Units is reduced on a graduated scale for
sales to any person of at least $50,000 or 5,000 Units, applied on whichever
basis is more favorable to the purchaser.
INITIAL PUBLIC OFFERING PERIOD AND SECONDARY MARKET THEREAFTER
PERCENT OF
PUBLIC PERCENT OF
OFFERING NET AMOUNT
AGGREGATE DOLLAR VALUE OF UNITS* PRICE INVESTED
- -------------------------------- ----- --------
Less than $50,000................ 3.75% 3.90%
$50,000 to 99,999................ 3.50 3.63
$100,000 to 199,999.............. 3.25 3.36
$200,000 to 399,999.............. 2.75 2.83
$400,000 to 499,999.............. 2.50 2.56
$500,000 to 999,999.............. 2.00 2.04
$1,000,000 or more .............. 1.75 1.78
- --------------
* The sales charge applicable to volume purchasers according to the table
above will be applied either on a dollar or Unit basis, depending upon which
basis provides a more favorable purchase price to the purchaser.
The volume discount sales charge shown above will apply to all purchases
of Units on any one day by the same person in the amounts stated herein, and
for this purpose purchases of Units of this Trust will be aggregated with
concurrent purchases of any other trust which may be offered by the Sponsor.
Units held in the name of the purchaser's spouse or in the name of a
purchaser's child under the age of 21 are deemed for the purposes hereof to
be registered in the name of the purchaser. The reduced sales charges are
also applicable to a trustee or other fiduciary purchasing Units for a single
trust estate or single fiduciary account.
No sales charge will be imposed on Units of the Trust acquired by
Unitholders in connection with participation in the Reinvestment Plan (see
"Reinvestment Plan").
Employee Discount. Due to the realization of economies of scale in sales
effort and sales related expenses with respect to the purchase of Units by
employees of the Sponsor and its affiliates, the Sponsor intends to permit
employees of the Sponsor and its affiliates and certain of their relatives to
purchase units of the Trust at a reduced sales charge of $1.00 per 100 Units.
15
<PAGE>
Exchange Option. Unitholders may elect to exchange any or all of their
Units of this series for units of one or more of any series of PaineWebber
Municipal Bond Fund (the "PaineWebber Series"); The Municipal Bond Trust (the
"National Series"); The Municipal Bond Trust, Multi-State Program (the
"Multi-State Series"); The Municipal Bond Trust, California Series (the
"California Series"); The Corporate Bond Trust (the "Corporate Series");
PaineWebber Pathfinder's Trust (the "Pathfinder's Trust"); the PaineWebber
Federal Government Trust (the "Government Series"); The Municipal Bond Trust,
Insured Series (the "Insured Series"); or the PaineWebber Equity Trust (the
"Equity Series") (collectively referred to as the "Exchange Trusts"), at a
Public Offering Price for the Units of the Exchange Trusts to be acquired
based on a reduced sales charge of $15 per Unit, per 100 Units in the case of
a trust whose Units cost approximately $10 or per 1,000 units in the case of
a trust whose Units cost approximately one dollar. Unitholders of this Trust
are not eligible for the Exchange Option into an Equity Trust, Growth Stock
Series designated as a rollover series for the 30 day period prior to
termination of the Trust. The purpose of such reduced sales charge is to
permit the Sponsor to pass on to the Unitholder who wishes to exchange Units
the cost savings resulting from such exchange of Units. The cost savings
result from reductions in time and expense related to advice, financial
planning and operational expenses required for the Exchange Option. Each
Exchange Trust has different investment objectives, therefore a Unitholder
should read the prospectus for the applicable Exchange Trust carefully prior
to exercising this option. Exchange Trusts having as their objective the
receipt of tax-exempt interest income would not be suitable for tax-deferred
investment plans such as Individual Retirement Accounts. A Unitholder who
purchased Units of a series and paid a per Unit, per 100 Unit or per 1,000
Unit sales charge that was less than the per Unit, per 100 Unit or per 1,000
Unit sales charge of the series of the Exchange Trusts for which such
Unitholder desires to exchange into, will be allowed to exercise the Exchange
Option at the Unit Offering Price plus the reduced sales charge, provided the
Unitholder has held the Units for at least five months. Any such Unitholder
who has not held the Units to be exchanged for the five-month period will be
required to exchange them at the Unit Offering Price plus a sales charge
based on the greater of the reduced sales charge, or an amount which,
together with the initial sales charge paid in connection with the
acquisition of the Units being exchanged, equals the sales charge of the
series of the Exchange Trust for which such Unitholder desires to exchange
into, determined as of the date of the exchange.
The Sponsor will permit exchanges at the reduced sales charge provided
there is either a primary market for Units or a secondary market maintained
by the Sponsor in both the Units of this series and units of the applicable
Exchange Trust and there are units of the applicable Exchange Trust available
for sale. While the Sponsor has indicated that it intends to maintain a
market for the Units of the respective Trusts, there is no obligation on its
part to maintain such a market. Therefore, there is no assurance that a
market for Units will in fact exist on any given date at which a Unitholder
wishes to sell his Units of this series and thus there is no assurance that
the Exchange Option will be available to a Unitholder. Exchanges will be
effected in whole Units only. Any excess proceeds from Unitholders' Units
being surrendered will be returned. Unitholders will be permitted to advance
new money in order to complete an exchange to round up to the next highest
number of Units. An exchange of Units pursuant to the Exchange Option
generally will constitute a "taxable event" under the Code, i.e., a
Unitholder will recognize a tax gain or loss at the time of exchange.
Unitholders are urged to consult their own tax advisors as to the tax
consequences to them of exchanging Units in particular cases.
The Sponsor reserves the right to modify, suspend or terminate this
Exchange Option at any time with notice to Unitholders. In the event the
Exchange Option is not available to a Unitholder at the time he wishes to
exercise it, the Unitholder will be immediately notified and no action will
be taken with respect to his Units without further instruction from the
Unitholder.
16
<PAGE>
To exercise the Exchange Option, a Unitholder should notify the Sponsor of
his desire to exercise the Exchange Option and to use the proceeds from the
sale of his Units to the Sponsor of this series to purchase Units of one or
more of the Exchange Trusts from the Sponsor. If Units of the applicable
outstanding series of the Exchange Trust are at that time available for sale,
and if such Units may lawfully be sold in the state in which the Unitholder
is resident, the Unitholder may select the series or group of series for
which he desires his investment to be exchanged. The Unitholder will be
provided with a current prospectus or prospectuses relating to each series in
which he indicates interest.
The exchange transaction will operate in a manner essentially identical to
any secondary market transaction, i.e., Units will be repurchased at a price
based on the market value of the Securities in the portfolio of the Trust
next determined after receipt by the Sponsor of an exchange request and
properly endorsed documents. Units of the Exchange Trust will be sold to the
Unitholder at a price based upon the next determined market value of the
Securities in the Exchange Trust plus the reduced sales charge. Exchange
transactions will be effected only in whole units; thus, any proceeds not
used to acquire whole units will be paid to the selling Unitholder.
For example, assume that a Unitholder, who has three thousand units of a
trust with a current price of $1.30 per unit, desires to sell his units and
seeks to exchange the proceeds for units of a series of an Exchange Trust
with a current price of $890 per Unit based on the bid prices of the
underlying securities. In this example, which does not contemplate any
rounding up to the next highest number of Units, the proceeds from the
Unitholder's Units would aggregate $3,900. Since only whole units of an
Exchange Trust may be purchased under the Exchange Option, the Unitholder
would be able to acquire four Units in the Exchange Trust for a total cost of
$3,620 ($3,560 for the Units and $60 for the sales charge). If all 3,000
Units were tendered, the remaining $280 would be returned to the Unitholder.
Conversion Option. Owners of units of any registered unit investment trust
sponsored by others which was initially offered at a maximum applicable sales
charge of at least 3.0% (a "Conversion Trust") may elect to apply the cash
proceeds of the sale or redemption of those units directly to acquire
available units of any Exchange Trust at a reduced sales charge of $15 per
Unit, per 100 Units in the case of Exchange Trusts having a Unit price of
approximately $10, or per 1,000 Units in the case of Exchange Trusts having a
Unit price of approximately $1, subject to the terms and conditions
applicable to the Exchange Option (except that no secondary market is
required for Conversion Trust units). To exercise this option, the owner
should notify his retail broker. He will be given a prospectus for each
series in which he indicates interest and for which units are available. The
dealer must sell or redeem the units of the Conversion Trust. Any dealer
other than PaineWebber must certify that the purchase of the units of the
Exchange Trust is being made pursuant to and is eligible for the Conversion
Option. The dealer will be entitled to two thirds of the applicable reduced
sales charge. The Sponsor reserves the right to modify, suspend or terminate
the Conversion Option at any time with notice, including the right to
increase the reduced sales charge applicable to this option (but not in
excess of $5 more per Unit, per 100 Units or per 1,000 Units, as applicable
than the corresponding fee then being charged for the Exchange Option). For a
description of the tax consequences of a conversion reference is made to the
Exchange Option section herein.
Distribution of Units. The minimum purchase in the initial public offering
is $ . Only whole Units may be purchased.
The Sponsor is the sole underwriter of the Units. Sales may, however, be
made to dealers who are members of the National Association of Securities
Dealers, Inc. ("NASD") at prices which include a concession of $.30 per Unit
at the highest sales charge, subject to change from time to time. The
difference
17
<PAGE>
between the sales charge and the dealer concession will be retained by the
Sponsor. In the event that the dealer concession is 90% or more of the sales
charge per Unit, dealers taking advantage of such concession may be deemed to
be underwriters under the Securities Act of 1933.
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 in all
states of the United States, the District of Columbia and the Commonwealth of
Puerto Rico.
SPONSOR'S PROFITS
On the Initial Date of Deposit, the Sponsor realized a profit or loss on
deposit of the Securities into the Trust in the amount set forth in the notes
to the Schedule of Investments, which equals the difference between the cost
of the Securities to the Trust (which is based on the aggregate value of the
Securities on the Initial Date of Deposit) and the purchase price of such
Securities to the Sponsor. In the event that subsequent deposits are effected
by the Sponsor with the deposit of Securities (as opposed to cash or a letter
of credit) with respect to the sale of additional Units to the public, the
Sponsor similarly may realize a profit or loss. The Sponsor will also realize
a profit in an amount of up to 5% of the market value of the Securities by
virtue of buying such Securities in underwritten transactions at prices below
their market value (see "The Composition of the Trust--Portfolio
Acquisition"). The Sponsor also may realize profits or sustain losses as a
result of fluctuations after the Initial Date of Deposit in the aggregate
value of the Securities and hence of the Public Offering Price received by
the Sponsor for Units. Cash, if any, made available by buyers of Units to the
Sponsor prior to the settlement dates for purchase of Units may be used in
the Sponsor's business and may be of benefit to the Sponsor. [The Sponsor has
adopted an internal policy whereby an allocation of sales credit to a
financial consultant may be reversed if Units are sold within 30 days of the
effective date of the Trust.]
Secondary Market for Units. While not obligated to do so, the Sponsor
intends to maintain a secondary market for the Units and continuously offer
to purchase Units at the Trust Fund Evaluation per Unit next computed after
receipt by the Sponsor of an order from a Unitholder. The Sponsor may cease
to maintain such a market at any time, and from time to time, without notice.
In the event that a secondary market for the Units is not maintained by the
Sponsor, a Unitholder desiring to dispose of Units may tender such Units to
the Trustee for redemption at the price calculated in the manner set forth
under "Redemption". Redemption requests in excess of $100,000 may be redeemed
"in kind" as described under "Redemption." The Sponsor does not in any way
guarantee the enforceability, marketability, value or price of any of the
stocks in the Trust, nor that of the Units.
Investors should note the Trust Fund Evaluation per Unit at the time of
sale or tender for redemption may be less than the price at which the Unit
was purchased.
The Sponsor may redeem any Units it has purchased in the secondary market
if it determines for any reason that it is undesirable to continue to hold
these Units in its inventory. Factors which the Sponsor may consider in
making this determination will include the number of units of all series of
all trusts which it holds in its inventory, the saleability of the Units and
its estimate of the time required to sell the Units and general market
conditions.
A Unitholder who wishes to dispose of his Units should inquire of his bank
or broker as to current market prices in order to determine if
over-the-counter prices exist in excess of the redemption price and the
repurchase price (see "Redemption").
Sponsor's Profits. In addition to the applicable sales charge, the Sponsor
realizes a profit (or sustains a loss) in the amount of any difference
between the cost of the Securities to the Sponsor and the
18
<PAGE>
price at which it deposits the Securities in the Trust in exchange for Units,
which is the value of the Securities, determined by the Trustee as described
under "Valuation". The cost of Securities to the Sponsor includes the amount
paid by the Sponsor for brokerage commissions. These amounts are 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 Securities upon their
delivery may be used in the Sponsor's business subject to the limitations of
Rule 15c3-3 under the Securities and Exchange Act of 1934 and may be of
benefit to the Sponsor.
In selling any Units in the initial public offering after the Initial Date
of Deposit, the Sponsor may realize profits or sustain losses resulting from
fluctuations in the net asset value of outstanding Units during the period.
In maintaining a secondary market for the Units, the Sponsor may realize
profits or sustain losses in the amount of any differences between the price
at which it buys Units and the price at which it resells or redeems such
Units.
REDEMPTION
Units may be tendered to Investors Bank & Trust Company for redemption at
its office in person, or by mail at Hancock Towers, 200 Clarendon Street,
Boston, MA 02116 upon payment of any transfer or similar tax which must be
paid to effect the redemption. At the present time there are no such taxes.
No redemption fee will be charged by the Sponsor or Trustee. If the Units are
represented by a certificate it must be properly endorsed accompanied by a
letter requesting redemption. If held in uncertificated form, a written
instrument of redemption must be signed by the Unitholder. Unitholders must
sign exactly as their names appear on the records of the Trustee with
signatures guaranteed by an eligible guarantor institution or in such other
manner as may be acceptable to the Trustee. In certain instances the Trustee
may require additional documents such as, but not limited to, trust
instruments, certificates of death, appointments as executor or
administrator, or certificates of corporate authority. Unitholders should
contact the Trustee to determine whether additional documents are necessary.
Units tendered to the Trustee for redemption will be cancelled, if not
repurchased by the Sponsor.
Units will be redeemed at the Redemption Value per Unit next determined
after receipt of the redemption request in good order by the Trustee. The
Redemption Value per Unit is determined by dividing the Trust Fund Evaluation
by the number of Units outstanding. (See "Valuation".)
A redemption request is deemed received on the business day (see
"Valuation" for a definition of business day) when such request is received
prior to 4:00 p.m. If it is received after 4:00 p.m., it is deemed received
on the next business day. During the period in which the Sponsor maintains a
secondary market for Units, the Sponsor may repurchase any Unit presented for
tender to the Trustee for redemption no later than the close of business on
the second business day following such presentation and Unitholders will
receive the Redemption Value next determined after receipt by the Trustee of
the redemption request. Proceeds of a redemption will be paid to the
Unitholder no later than the seventh calendar day following the date of
tender (or if the seventh calendar day is not a business day on the first
business day prior thereto).
With respect to cash redemptions, amounts representing income received
shall be withdrawn from the Income Account, and, to the extent such balance
is insufficient and for remaining amounts, from the Capital Account. The
Trustee is empowered, to the extent necessary, to sell Securities to meet
redemptions. The Trustee will sell Securities in such manner as is directed
by the Sponsor. In the event no such direction is given, Securities will be
sold pro rata, to the extent possible, and if not possible
19
<PAGE>
Securities having the greatest amount of capital appreciation will be sold
first. (See "Administration of the Trust".) However, with respect to
redemption requests in excess of $100,000, the Sponsor may determine in its
discretion to direct the Trustee to redeem Units "in kind" by distributing
Securities to the redeeming Unitholder. When Securities are so distributed, a
proportionate amount of each Security will be distributed, rounded to avoid
the distribution of fractional shares and using cash or checks where rounding
is not possible. The Sponsor may direct the Trustee to redeem Units "in kind"
even if it is then maintaining a secondary market in Units of the Trust.
Securities will be valued for this purpose as set forth under "Valuation". A
Unitholder receiving a redemption "in kind" may incur brokerage or other
transaction costs in converting the Stocks distributed into cash. The
availability of redemption "in kind" is subject to compliance with all
applicable laws and regulations, including the Securities Act of 1933, as
amended.
To the extent that Securities are redeemed in kind or sold, the size and
diversity of the Trust will be reduced. Sales will usually be required at a
time when Securities would not otherwise be sold and may result in lower
prices than might otherwise be realized. The price received upon redemption
may be more or less than the amount paid by the Unitholder depending on the
value of the Securities in the portfolio at the time of redemption. In
addition, because of the minimum amounts in which Securities 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 Unitholders on the
Distribution Dates.
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 of
the Redemption Value, for more than seven calendar days following the day of
tender for any period during which the New York Stock Exchange, Inc. is
closed other than for weekend and holiday closings; or for any period during
which the Securities and Exchange Commission determined that trading on the
New York Stock Exchange, Inc. is restricted or for any period during which an
emergency exists as a result of which disposal or evaluation of the
Securities is not reasonably practicable; or 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 or 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.
VALUATION
The Trustee will calculate the Trust's value (the "Trust Fund Evaluation")
per Unit at the Evaluation Time set forth under "Summary of Essential
Information Regarding the Trust" (1) on each business day as long as the
Sponsor is maintaining a bid in the secondary market, (2) on the business day
on which any Unit is tendered for redemption, (3) on any other day desired by
the Sponsor or the Trustee and (4) upon termination, by adding (a) the
aggregate value of the Securities and other assets determined by the Trustee
as set forth below, (b) cash on hand in the Trust, including dividends
receivable on Securities trading ex-dividend and income accrued held but not
yet distributed (other than any cash held in any reserve account established
under the Indenture or cash held for the purchase of Contract Securities) and
(c) accounts receivable for Securities sold and any other assets of the Trust
not included in (a) and (b) above, and deducting therefrom the sum of (v)
taxes or other governmental charges against the Trust not previously
deducted, (w) accrued fees and expenses of the Trustee and the Sponsor
(including legal and auditing expenses) and other Trust expenses (x) cash
allocated for distributions to Unitholders and (y) accounts payable for Units
tendered for redemption and any other liabilities of the Trust Fund not
included in (v), (w), (x) and (y) above. The per Unit Trust Fund Evaluation
is calculated by dividing the
20
<PAGE>
result of such computation by the number of Units outstanding as of the date
thereof. Business days do not include Saturdays, Sundays, New Year's Day,
President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day and other days that the New York Stock
Exchange is closed.
The value of Securities shall be determined by the Trustee in good faith
in the following manner: (1) if the domestic Securities are listed on one or
more national securities exchanges or on the National Market System
maintained by the National Association of Securities Dealers Automated
Quotations System, such evaluation shall be based on the closing sale price
on that day (unless the Trustee 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 in the case of the domestic Securities if such
Securities are listed thereon), (2) if there is no such appropriate closing
sales price on such exchange or system, at the mean between the closing bid
and asked prices on such exchange or system (unless the Trustee deems such
price inappropriate as a basis for evaluation), (3) if the Securities are not
so listed or, if so listed and the principal market therefor is other than on
such exchange or there are no such appropriate closing bid and asked prices
available, such evaluation shall be made by the Trustee in good faith based
on the closing sale price in the over-the-counter market (unless the Trustee
deems such price inappropriate as a basis for evaluation) or (4) if there is
no such appropriate closing price, then (a) on the basis of current bid
prices, (b) if bid prices are not available, on the basis of current bid
prices for comparable securities, (c) by the Trustee's appraising the value
of the Security in good faith on the bid side of the market or (d) by any
combination thereof. The tender of a Security pursuant to a tender offer will
not affect the method of valuing such Security.
COMPARISON OF PUBLIC OFFERING PRICE AND REDEMPTION VALUE
The Securities are valued in the manner described above under "Valuation"
on the same basis for the initial offering period as for the offering of the
Units in the secondary market and for purposes of redemptions. On the
business day prior to the Date of Deposit, the Public Offering Price per Unit
(which figure includes the sales charge) exceeded the Redemption Value. (See
"Essential Information"). For this reason 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.
EXPENSES OF THE TRUST
The cost of the preparation and printing of the Indenture and this
Prospectus, the initial fees of the Trustee and the Trustee's counsel, and
expenses incurred in establishing the Trust, including legal and auditing
fees (the "Organizational Expenses"), will be paid by the Trust, as is common
for mutual funds. Historically, the Sponsors of Unit Trusts have paid all
organizational expenses. The Sponsor will receive no fee from the Trust for
its services in establishing the Trust.
The Sponsor will receive a fee, which is earned for portfolio supervisory
services, and which is based upon the largest number of Units outstanding
during the calendar year. The Sponsor's fee, which is not to exceed $.0035
per Unit per calendar year, may exceed the actual costs of providing
portfolio supervisory services for the Trust, but at no time will the total
amount it receives for portfolio supervisory services rendered to all series
of the PaineWebber Equity Trust in any calendar year exceed the aggregate
cost to it of supplying such services in such year.
For its services as Trustee and Evaluator, the Trustee will be paid in
monthly installments, annually $. per Unit, based on the largest number of
Units outstanding during the previous month. In addition,
21
<PAGE>
the regular and recurring expenses of the Trust are estimated to be $.
which include, but are not limited to Organizational Expenses of $. per
Unit, and certain mailing, printing, and audit expenses. Expenses in excess
of this estimate will be borne by the Trust. The Trustee could also benefit
to the extent that it may hold funds in non-interest bearing accounts created
by the Indenture.
The Sponsor's fee and Trustee's fee 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 or, if the Price Index is
no longer published, a similar index as determined by the Trustee and
Sponsor.
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 (see "Administration of
the Trust--Accounts"): (1) fees for the Trustee for extraordinary services;
(2) expenses of the Trustee (including legal and auditing expenses) and of
counsel; (3) various governmental charges; (4) expenses and costs of any
action taken by the Trustee to protect the Trust and the rights and interests
of the Unitholders; (5) indemnification of the Trustee for any loss,
liabilities or expenses incurred by it in the administration of the Trust
without gross negligence, bad faith or wilful misconduct on its part; (6)
brokerage commissions and other expenses incurred in connection with the
purchase and sale of Securities; and (7) expenses incurred upon termination
of the Trust. In addition, to the extent then permitted by the Securities and
Exchange Commission, the Trust may incur expenses of maintaining registration
or qualification of the Trust or the Units under Federal or state securities
laws so long as the Sponsor is maintaining a secondary market (including, but
not limited to, legal, auditing and printing expenses).
The accounts of the Trust shall be audited not less than annually by
independent public accountants selected by the Sponsor. The expenses of the
audit shall be an expense of the Trust. So long as the Sponsor maintains a
secondary market, the Sponsor will bear any annual audit expense which
exceeds $.0050 per Unit. Unitholders covered by the audit during the year may
receive a copy of the audited financial statements upon request.
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
Securities are expected to be sufficient to pay the entire amount of
estimated expenses of the Trust. To the extent that dividends paid with
respect to the Securities are not sufficient to meet the expenses of the
Trust, the Trustee is authorized to sell Securities to meet the expenses of
the Trust. Securities will be selected in the same manner as is set forth
under "Redemption".
RIGHTS OF UNITHOLDERS
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 an eligible guarantor institution or in such
other manner as may be acceptable to the Trustee, is delivered by the
Unitholder to the Sponsor. Issued Certificates are transferable by
presentation and surrender to the Trustee at its office in Boston,
Massachusetts properly endorsed or accompanied by a written instrument or
instruments of transfer. Uncertificated Units are transferable by
presentation to the Trustee at its office in Boston 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 $2.00 per certificate reissued or transferred, and shall be
required to pay any governmental charge that may be imposed in connection
22
<PAGE>
with each such transfer or interchange. For new certificates 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.
DISTRIBUTIONS
The Trustee will distribute net dividends from the Income Account on the
monthly Distribution Dates to Unitholders of record on the preceding Record
Date. Distributions from the Capital Account will be made on annual
Distribution Dates to Unitholders of record on the preceding Record Date.
Distributions of less than $.05 per Unit need not be made from the Capital
Account on any Distribution Date. See "Essential Information". Whenever
required for regulatory or tax purposes, the Trustee will make special
distributions of any dividends or capital on special Distribution Dates to
Unitholders of record on special Record Dates declared by the Trustee.
If and to the extent that the Sponsor, on behalf of the Trust, receives a
favorable response to a no-action letter request which it intends to submit
to the Division of Investment Management of the Securities and Exchange
Commission (the "SEC") with respect to reinvesting cash proceeds received by
the Trust, the Trustee may reinvest such cash proceeds in additional
Securities held in the Trust Fund at such time. Such reinvestment shall be
made so that each deposit of additional Securities shall be made so as to
match as closely as practicable the percentage relationships of shares of
Securities, and such reinvestment shall be made in accordance with the
parameters set forth in the no-action letter response. If the Sponsor and the
Trustee determine that it shall be necessary to amend the Indenture to comply
with the parameters set forth in the no-action letter response, such
documents may be amended without the consent of Unitholders. There can be no
assurance that the Sponsor will receive a favorable no-action letter
response.
Unitholders may elect to have their Income Account and Capital Account
distributions automatically reinvested into additional Units of the Trust at
no sales charge. (See "Reinvestment Plan").
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 expenses of the Trust.
(See "Termination of the Trust".)
REINVESTMENT PLAN
Income Account and Capital Account distributions on Units may be
reinvested by participating in the Trust's Reinvestment Plan (the
"Reinvestment Plan"). To participate in the Reinvestment Plan, a Unitholder
must contact his broker, dealer or financial institution to determine whether
he may participate in the Reinvestment Plan. Under the Reinvestment Plan, the
Units acquired for current Unitholders will be either Units already held in
inventory by the Sponsor or new Units created by the Sponsor's deposit of
additional Securities, contracts to purchase additional Securities or cash
(or a bank letter of credit in lieu of cash) with instructions to purchase
additional Securities. Deposits or purchases of additional Securities will be
made so as to maintain the percentage relationships. Purchases made pursuant
to the Reinvestment Plan will be made without any sales charge at the net
asset value for Units of the Trust. Under the Reinvestment Plan, the Trust
will pay the distributions to the Trustee which in turn will purchase for
those participating Unitholders whole Units of the Trust at the price
determined as of the close of business on the Distribution Date and will add
such Units to the Unitholder's account. The Unitholder's account statement
will reflect the reinvestment. The Trustee will not issue fractional Units,
23
<PAGE>
thus any cash remaining after purchasing the maximum number of whole Units
will be distributed to the Unitholder. Unitholders wishing to terminate their
participation in the Reinvestment Plan must notify their broker, dealer or
financial institution of such decision. The Sponsor reserves the right to
amend, modify or terminate the Reinvestment Plan at any time without prior
notice.
ADMINISTRATION OF THE TRUST
Accounts. All dividends and income received on Securities, proceeds from
the sale of Securities or other moneys received by the Trustee on behalf of
the Trust may be held in trust in non-interest bearing accounts until
required to be disbursed.
The Trustee will credit on its books to an Income Account dividends, if
any, and income, on Securities in the Trust. All other receipts (i.e., return
of principal and gains) are credited on its books to a Capital Account. A
record will be kept of qualifying dividends within the Income 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".
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 and Charges.") 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.")
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 distribution from the Trust, Unitholders
will be furnished with a statement setting forth the amount being distributed
from each account.
The Trustee keeps records and accounts of the Trust at its office in
Boston, including records of the names and addresses of Unitholders, a
current list of underlying Securities 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,
commencing with calendar year 1997, the Trustee will furnish each person who
was a Unitholder at any time during the calendar year an annual report
containing the following information, expressed in reasonable detail both as
a dollar amount and as a dollar amount per Unit: (1) a summary of
transactions for such year in the Income and Capital Accounts and any
Reserves; (2) any Securities sold during the year and the Securities held at
the end of such year; (3) the Trust Fund Evaluation per Unit, based upon a
computation thereof on the 31st day of December of such year (or the last
business day prior thereto); and (4) amounts distributed to Unitholders
during such 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. The Indenture provides that the Sponsor
may (but need not) direct the Trustee to dispose of a Security (or tender a
stock for cash in the case of paragraph (6) below):
(1) upon the failure of the issuer to declare or pay anticipated
dividends or interest;
(2) upon the institution of a materially adverse action or proceeding at
law or in equity seeking to restrain or enjoin the declaration or payment of
dividends or interest on any such Securities or the existence of any other
materially adverse legal question or impediment affecting such Securities or
the declaration or payment of dividends or interest on the same;
24
<PAGE>
(3) upon the breach of covenant or warranty in any trust indenture or
other document relating to the issuer which might materially and adversely
affect either immediately or contingently the declaration or payment of
dividends on such Securities;
(4) upon the default in the payment of principal or par or stated value
of, premium, if any, or income on any other outstanding securities of the
issuer or the guarantor of such Securities which might materially and
adversely, either immediately or contingently, affect the declaration or
payment of dividends on the Securities;
(5) upon the decline in price or the occurrence of any materially
adverse credit factors, that in the opinion of the Sponsor, make the
retention of such Securities not in the best interest of the Unitholder;
(6) upon a public tender offer being made for a Stock, or a merger or
acquisition being announced affecting a Stock that in the opinion of the
Sponsor make the sale or tender of the Stock in the best interests of the
Unitholders;
(7) upon a decrease in the Sponsor's internal rating of the Security;
(8) if the sale of such Securities is desirable to maintain the
qualification of the Trust Fund as a "regulated investment company"; or
(9) upon the happening of events which, in the opinion of the Sponsor,
negatively affect the economic fundamentals of the issuer of the Security or
the industry of which it is a part.
The Trustee may dispose of Securities where necessary to pay Trust
expenses or to satisfy redemption requests as directed by the Sponsor and in
a manner necessary to maximize the objectives of the Trust, or if not so
directed in its own discretion, and Stocks having the greatest appreciation
shall be sold first.
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 or to correct or
supplement any provision thereof which may be defective or inconsistent or to
make such other provisions as will not adversely affect the interest of the
Unitholders.
The Indenture may also be amended by the Trustee and the Sponsor without
the consent of any of the Unitholders to implement a program to reinvest cash
proceeds received by the Trust in connection with corporate actions and in
other situations, when and if the Sponsor receives a favorable response to
the no-action letter request which it intends to submit to the Division of
Investment Management at the SEC discussed above (see "Distributions"). There
can be no assurance that a favorable no-action letter response will be
received.
The Indenture may be amended in any respect by the Sponsor and the Trustee
with the consent of the holders of 51% of the Units then outstanding;
provided that no such amendment shall (1) reduce the interest in the Trust
represented by a Unit or (2) 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 on the Mandatory
Termination Date. If the value of the Trust as shown by any evaluation is
less than fifty per cent (50%) of the market value of the
25
<PAGE>
Securities upon completion of the deposit of Securities, the Trustee may in
its discretion, and will when so directed by the Sponsor, terminate such
Trust. The Trust may also be terminated at any time by the written consent of
51% of the Unitholders or by the Trustee upon the resignation or removal of
the Sponsor if the Trustee determines termination to be in the best interest
of the Unitholders. In no event will the Trust continue beyond the Mandatory
Termination Date.
Unless advised to the contrary by the Sponsor, approximately 20 days prior
to the termination of the Trust the Trustee will begin to sell the Securities
held in the Trust 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. Moneys held
upon the sale of Securities 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 Securities in the Trust in the period prior to
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.
SPONSOR
The Sponsor, PaineWebber Incorporated, is a corporation organized under
the laws of the State of Delaware. The Sponsor is a member firm of the New
York Stock Exchange, Inc. as well as other major securities and commodities
exchanges and is a member of the National Association of Securities Dealers,
Inc. The Sponsor is engaged in a security and commodity brokerage business as
well as underwriting and distributing new issues. The Sponsor also acts as a
dealer in unlisted securities and municipal bonds and in addition to
participating as a member of various selling groups or as an agent of other
investment companies, executes orders on behalf of investment companies for
the purchase and sale of securities of such companies and sells securities to
such companies in its capacity as a broker or dealer in securities.
The Indenture provides that the Sponsor will not be liable to the Trustee,
the Trust 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 willful misfeasance, bad faith, gross negligence or
willful disregard of its duties. The Sponsor will not be liable or
responsible in any way for depreciation or loss incurred by reason of the
sale of any Securities in the Trust.
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 or partnership 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.
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 either appoint a successor Sponsor or
Sponsors to serve at rates of compensation determined as provided in the
Indenture or terminate the Indenture and liquidate the Trust.
TRUSTEE
The Co-Trustees are The First National Bank of Chicago, a national banking
association with its corporate trust office at One First National Plaza,
Suite 0126, Chicago, Illinois 60670-0126 (which is subject to supervision by
the Comptroller of the Currency, the Federal Deposit Insurance Corporation
26
<PAGE>
and the Board of Governors of the Federal Reserve System) and Investors Bank
& Trust Company, a Massachusetts trust company with its principal office at
Hancock Towers, 200 Clarendon Street, Boston, Massachusetts 02116, toll-free
number 800-356-2754 (which is subject to supervision by the Massachusetts
Commissioner of Banks, the Federal Deposit Insurance Corporation and the
Board of Governors of the Federal Reserve System).
The Indenture provides that the Trustee will not be liable for any action
taken in good faith in reliance on properly executed documents or the
disposition of moneys, Securities or Certificates or in respect of any
valuation which it is required to make, except by reason of its own gross
negligence, bad faith or willful misconduct, nor will the Trustee be liable
or responsible in any way for depreciation or loss incurred by reason of the
sale by the Trustee of any Securities in the Trust. In the event of the
failure of the Sponsor to act, the Trustee may act and will not be liable for
any such action taken by it in good faith. The Trustee will not be personally
liable for any taxes or other governmental charges imposed upon or in respect
of the Securities or upon the interest thereon or upon it as Trustee or upon
or in respect of the Trust which the Trustee may be required to pay under any
present or future law of the United States of America or of any other taxing
authority having jurisdiction. In addition, the Indenture contains other
customary provisions limiting the liability of the Trustee. The Trustee will
be indemnified and held harmless against any loss or liability accruing to it
without gross negligence, bad faith or willful misconduct on its part,
arising out of or in connection with its acceptance or administration of the
Trust, including the costs and expenses (including counsel fees) of defending
itself against any claim of liability.
INDEPENDENT AUDITORS
The Statement of Financial Condition and Schedule of Investments audited
by Ernst & Young LLP, independent auditors, have been included in reliance on
their report given on their authority as experts in accounting and auditing.
LEGAL OPINIONS
The legality of the Units offered hereby has been passed upon by Carter,
Ledyard & Milburn, 2 Wall Street, New York, New York, as counsel for the
Sponsor.
27
<PAGE>
REPORT OF INDEPENDENT AUDITORS
THE UNITHOLDERS, SPONSOR AND CO-TRUSTEES
THE PAINEWEBBER EQUITY TRUST, REIT SERIES 1
We have audited the accompanying Statement of Financial Condition of The
PaineWebber Equity Trust, REIT Series 1, including the Schedule of
Investments, as of . This financial statement is the responsibility
of the Co-Trustees. Our responsibility is to express an opinion on this
financial statement 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 financial statement is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement. Our
procedures included confirmation with Investors Bank & Trust Company, a
Co-Trustee, of an irrevocable letter of credit deposited for the purchase of
securities, as shown in the financial statement as of . An audit
also includes assessing the accounting principles used and significant
estimates made by the Co-Trustees, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statement referred to above presents fairly,
in all material respects, the financial position of The PaineWebber Equity
Trust, REIT Series 1 at , in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
New York, New York
28
<PAGE>
THE PAINEWEBBER EQUITY TRUST,
REIT SERIES 1
STATEMENT OF FINANCIAL CONDITION
AS OF INITIAL DATE OF DEPOSIT,
TRUST PROPERTY
--------------
Sponsor's Contracts to Purchase underlying Securities
backed by irrevocable letter of credit (a)....................... $
Organizational Expenses (b)........................................
-----------
Total.......................................................... $
===========
INTEREST OF UNITHOLDERS
-----------------------
Accrued Liability (b).............................................. $
-----------
Units outstanding:
Cost to investors (c).............................................
Less: Gross underwriting commissions (d)..........................
-----------
Total liabilities and net assets............................... $
===========
- --------------
(a) The aggregate cost to the Trust of the securities listed under
"Schedule of Investments" is determined by the Co-Trustees on the basis set
forth above under "Public Offering of Units--Public Offering Price." See also
the column headed Cost of Securities to Trust under "Schedule of
Investments." Pursuant to contracts to purchase securities, an irrevocable
letter of credit drawn on Kredietbank N.V., New York Branch in the amount of
$ has been deposited with the Co-Trustees, Investors Bank & Trust
Company and The First National Bank of Chicago, for the purchase of $
aggregate value of Securities in the initial deposit and for the purchase of
Securities in subsequent deposits.
(b) Organizational Expenses incurred by the Trust have been deferred and
will be amortized over the 5 year life of the Trust. Organizational Expenses
have been estimated on projected total assets of $ million. To the extent
the Trust is larger or smaller, the estimate may vary.
(c) The aggregate public offering price is computed on the basis set forth
under "Public Offering of Units--Public Offering Price."
(d) Sales charge of 3.75% of the Public Offering Price per Unit is
computed on the basis set forth under "Public Offering of Units--Sales Charge
and Volume Discount."
29
<PAGE>
THE PAINEWEBBER EQUITY TRUST
REIT SERIES 1
SCHEDULE OF INVESTMENTS
AS OF INITIAL DATE OF DEPOSIT,
COMMON STOCKS (1)
PRIMARY INDUSTRY SOURCE AND NUMBER OF COST OF SECURITIES
NAME OF ISSUER SHARES TO TRUST(2)
-------------- ------ -----------
- --------------
(1) ALL SECURITIES ARE REPRESENTED ENTIRELY BY CONTRACTS TO PURCHASE
SECURITIES.
(2) VALUATION OF THE SECURITIES BY THE CO-TRUSTEES WAS MADE AS DESCRIBED
IN "VALUATION" AS OF THE CLOSE OF BUSINESS ON THE BUSINESS DAY PRIOR
TO THE DATE OF DEPOSIT.
(3) THE PROFIT (LOSS) TO THE SPONSOR ON THE DATE OF DEPOSIT IS $ .
* INCOME PRODUCING SECURITY.
30
<PAGE>
PaineWebber Equity Trust
REIT Series 1
CO-TRUSTEES:
INVESTORS BANK & TRUST COMPANY
Hancock Towers
200 Clarendon Street
Boston, Mass. 02116
(800) 356-2754
THE FIRST NATIONAL BANK OF CHICAGO
One First National Plaza,
Suite 0126
Chicago, Illinois 60670-0126
SPONSOR:
PAINEWEBBER INCORPORATED
1200 Harbor Boulevard,
Weehawken, N.J. 07087
(201) 902-3000
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
Essential Information Regarding the Trust ................................ 2
The Trust ............................................................... 7
Risk Factors and Special Considerations ................................. 8
Federal Income Taxes .................................................... 13
Public Offering of Units ................................................ 14
Public Offering Price ................................................. 14
Sales Charge and Volume Discount ...................................... 15
Employee Discount ..................................................... 15
Exchange Option ....................................................... 16
Conversion Option ..................................................... 17
Distribution of Units ................................................. 17
Sponsor's Profits ...................................................... 18
Secondary Market for Units ............................................ 18
Sponsor's Profits ..................................................... 18
Redemption .............................................................. 19
Valuation ............................................................... 20
Comparison of Public Offering Price and Redemption Value ................ 21
Expenses of the Trust ................................................... 21
Rights of Unitholders ................................................... 22
Distributions ........................................................... 23
Reinvestment Plan ....................................................... 23
Administration of the Trust ............................................. 24
Accounts .............................................................. 24
Reports and Records ................................................... 24
Portfolio Supervision ................................................. 24
Amendment of the Indenture .............................................. 25
Termination of the Trust ................................................ 25
Sponsor ................................................................. 26
Trustee ................................................................. 26
Independent Auditors .................................................... 27
Legal Opinions .......................................................... 27
Report of Independent Auditors .......................................... 28
Statement of Financial Condition ........................................ 29
Schedule of Investments ................................................. 30
- -------------------------------------------------------------------------------
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION
NOT CONTAINED IN THIS PROSPECTUS; AND ANY INFORMATION OR REPRESENTATION NOT
CONTAINED HEREIN MUST NOT BE RELIED ON AS HAVING BEEN AUTHORIZED BY THE
TRUST, THE TRUSTEE OR THE SPONSOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY SECURITIES IN ANY STATE TO
ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE SUCH OFFER IN SUCH STATE.
- -------------------------------------------------------------------------------
THIS PROSPECTUS CONTAINS INFORMATION CONCERNING THE TRUST AND THE SPONSOR,
BUT DOES NOT CONTAIN ALL THE INFORMATION SET FORTH IN THE TRUST'S
REGISTRATION STATEMENTS, AMENDMENTS AND EXHIBITS RELATING THERETO, WHICH HAVE
BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WASHINGTON, D.C.
UNDER THE SECURITIES ACT OF 1933 AND THE INVESTMENT COMPANY ACT OF 1940, AND
TO WHICH REFERENCE IS HEREBY MADE.
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
and State of New York, on the 20th day of October, 1997.
THE PAINEWEBBER EQUITY TRUST,
REIT, SERIES 1
(Registrant)
By: PaineWebber Incorporated
(Depositor)
Robert E. Holley
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on behalf of PaineWebber Incorporated
the Depositor by the following persons who constitute a majority of the
Executive Committee of its Board of Directors in the following capacities and
in the City of New York, and State of New York, on this 20th day of October,
1997.
PAINEWEBBER INCORPORATED
Name Office
Donald B. Marron Chairman, Chief Executive
By Officer, Director & Member of
the Executive Committee
Robert E. Holley
Attorney-in-Fact*
Regina Dolan Senior Vice President, Chief
By Financial Officer & Director
Robert E. Holley
Attorney-in-fact*
Joseph J. Grano, Jr. President, Retail Sales & Marketing,
By Director & Member of the Executive Committee
Robert E. Holley
Attorney-in-fact*
----------
* Executed copies of the powers of attorney have been filed with the
Securities and Exchange Commission in connection with the Registration
Statement No. 33-19786.
