File No. 333-38255
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST EFFECTIVE AMENDMENT NO. 1
TO
FORM S-6
For Registration Under the Securities Act of 1933 of Securities of
Unit Investment Trusts Registered on Form N-8B-2.
A. Exact name of Trust:
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 Blvd.
Weehawken, New Jersey 07087
(x) Check if it is proposed that this filing should become effective
(immediately upon filing or on August 27, 1999) pursuant to paragraph
(b) of Rule 485.
E. Total and amount of securities being registered:
An indefinite number of units of Beneficial Interest 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 pursuant to Rule 24f-2
G. Amount of filing fee, computed at one-thirty-fourth of 1 percent of the
proposed maximum aggregate offering price to the public:
In accordance with Rule 24f-2, a fee in the amount of $94,833.42 was
paid on March 29, 1999 in connection with the filing of the Rule 24f-2
Notice for the Trust's most recent fiscal year.
H. Approximate date of proposed sale to public:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THE
REGISTRATION STATEMENT.
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 ) Back Cover
Depositor
3. Name and address of ) Back Cover
Trustee
4. Name and address of ) Back Cover
Principal
Underwriter )
5. Organization of Trust ) The Trust
6. Execution and ) The Trust
termination of
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 ) The Trust;
regarding
Trust's Securities and ) Rights of Unit
Rights
of Holders ) holders
(a) Type of Securities ) The Trust
(Registered or Bearer) )
(b) Type of Securities ) The Trust
(Registered or Bearer) )
* Not applicable, answer
negative or not required.
(c) Rights of Holders as to ) Rights of Unit
Withdrawal or ) holders
Redemption
) Redemption;
) Public Offering of Units-
) Secondary Market for Units
(d) Rights of Holders as to ) Secondary Market for
conversion, transfer, etc. ) Units Exchange Option
(e) Rights of Trust issues )
periodic payment plan ) *
certificates )
(f) Voting rights as to ) Rights of Unit
Securi-
ties, under the Indenture ) holders
(g) Notice to Holders as to )
change in )
(1)Assets of Trust ) Amendment of the
Indenture
(2)Terms and Conditions ) Administration of the
Trust-Portfolio Supervision
of Trust's Securities ) Investments
(3)Provisions of Trust ) Amendment of the
Indenture
(4)Identity of Depositor and ) Administration of the Trust
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 ) Amendment of the
Indenture
(4)Identity of Depositor ) Administration of the Trust
and Trustee )
11. Type of Securities ) The Trust
Comprising Units
12. Type of securities ) *
comprising
periodic payment )
certificates
13. (a)Load, fees, expenses, etc. ) Public Offering of
) Units; Expenses of the
) Trust
* Not applicable, answer
negative or not required.
(b)Certain information ) *
regarding periodic payment ) *
certificates )
(c)Certain percentages ) *
(d)Certain other fees, etc. ) Expenses of the Trust
payable by holders ) Rights of Unitholders
(e)Certain profits receivable ) Public Offering of
by depositor, principal ) Units
underwriters, trustee or ) Public Offering of Units
affiliated persons ) Market for Units
(f)Ratio of annual charges to ) *
income )
14. Issuance of Trust's ) The Trust
securities
) Public Offering of Units
15. Receipt and handling of ) *
payments from )
purchasers
16. Acquisition and ) The Trust; Administration
disposition of
underlying securities ) of the Trust; Termination
) of Trust
17. Withdrawal or ) Redemption
redemption
) Public offering of Units
) -Secondary Market for
) -Exchange Option
) -Conversion Option
18. (a)Receipt and disposition of ) Distributions of
income ) Unitholders
(b)Reinvestment of ) *
distributions
(c)Reserves or special fund ) Distributions to
) Unitholders; Expenses of
Trust
(d)Schedule of distribution ) *
19. Records, accounts and ) Distributions
report
) Administration
) of the Trust
20. Certain miscellaneous ) Administration of the Trust
pro-
visions of Trust )
agreement
21. Loans to security ) *
holders
22. Limitations on liability ) Sponsor, Trustee
23. Bonding arrangements ) Included in Form N-8B-2
24. Other material ) *
provisions of
trust agreement )
* Not applicable, answer
negative or not required.
III. Organization
Personnel and Affiliated
Persons of Depositor
25. Organization of ) Sponsor
Depositor
26. Fees received by ) Public Offering of
Depositor
) 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 ) Sponsor
Depositor
31. Payments by Depositor ) *
for
certain other services )
rendered to Trust )
32. Payments by Depositor ) *
for
certain other services )
rendered to Trust )
33. Remuneration of ) *
employees of
Depositor for certain )
services
rendered to Trust )
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 )
(c)Selling agreements ) Sponsor
* Not applicable, answer
negative or not required.
39. (a)Organization of principal ) Sponsor
underwriter )
(b)N.A.S.D. membership of ) Sponsor
principal underwriter )
40. Certain fees received by ) Public Offering Price of
principal underwriter ) Units
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 Price of
) Units
(b)Schedule as to offering ) *
price )
(c)Variation in Offering ) Public Offering Price of
price to certain persons ) Units
45. Suspension of ) *
redemption rights
46. (a)Redemption valuation ) Public Offering of Units
) -Secondary Market for Units
) -Valuation
(b)Schedule as to redemption )
price )
V. Information concerning the Trustee or Custodian
47. Maintenance of position ) Public Offering of Units
in
underlying securities ) Redemption
) Trustee
) Evaluation of the Trust
48. Organization and )
regulation of
Trustee ) Trustee
49. Fees and expenses of ) Expenses of the Trust
Trustee
50. Trustee's lien ) Expenses of the Trust
* Not applicable, answer
negative or not required.
VI. Information
concerning Insurance of
Holders of Securities
51. (a)Name and address of ) *
Insurance Company )
(b)Type of policies ) *
(c)Type of risks insured and ) *
excluded )
(d)Coverage of policies ) *
(e)Beneficiaries of policies ) *
(f)Terms and manner of ) *
cancellation )
(g)Method of determining ) *
premiums )
(h)Amount of aggregate ) *
premiums paid )
(i)Who receives any part of ) *
premiums )
(j)Other material provisions ) *
of the Trust relating to )
insurance )
VII. Policy of Registrant
52. (a)Method of selecting and ) The Trust;
eliminating securities ) Administration of the Trust
from the Trust )
(b)Elimination of securities ) *
from the Trust )
(c)Policy of Trust regarding ) Portfolio Supervision
) Administration of Trust
substitution and
elimination of securities )
(d)Description of any funda- ) Administration of
mental policy of the Trust ) Trust
) Portfolio Supervision
53. (a)Taxable status of the ) Tax status of the Trust
Trust )
(b)Qualification of the Trust ) Tax status of the Trust
as a mutual investment )
company )
* Not applicable, answer
negative or not required.
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 )
certi-
ficates )
59. Financial statements ) Statement of Financial
(Instruction 1(c) to ) Condition
Form S-6)
* Not applicable, answer
negative or not required.
PAINEWEBBER EQUITY TRUST
REIT SERIES 1
(A Unit Investment Trust)
18,300,731 Units
Portfolio of Common Stocks of Real Estate
Investment Trusts ("REITs")
Designed for Total Return
Annual Capital Distributions
This Prospectus consists of two parts: Part A and
Part B. Parts A and B should both be attached for
this Prospectus to be complete.
The Securities and Exchange Commission has not
approved or disapproved these Securities or
passed upon the adequacy of this Prospectus. Any
representation to the contrary is a criminal
offense.
SPONSOR:
PAINEWEBBER INCORPORATED
PROSPECTUS PART A DATED AUGUST 27, 1999
No person is authorized to give any information
or make any representations about this Trust not
contained in this Prospectus, and you should not
rely on any other information. Read and keep both
parts of this prospectus for future reference.
Table of Contents
Part A Page
Brief Description of the Trust's
Investment Portfolio......................A - 3
Is this Trust Appropriate for You?........A - 3
Summary of Risks..........................A - 3
Essential Information Regarding the Trust.A - 6
Report of Independent Auditors............A - 7
Statement of Financial Condition..........A - 8
Statement of Operations...................A - 9
Statement of Changes in Net Assets........A - 10
Notes to Financial Statements.............A - 11
Schedule of Investments...................A - 12
Part B
The Composition of the Trust's
Portfolio................ B - 1
About the Trust...........................B - 1
Risk Factors and Special Considerations...B - 2
Federal Income Taxes......................B - 6
Public Offering of Units..................B - 7
Public Offering Price..................B - 7
Sales Charge and Volume Discount.......B - 7
Employee Discount......................B - 8
Exchange Option........................B - 8
Conversion Option......................B - 10
Distribution of Units..................B - 10
Secondary Market for Units.............B - 10
Sponsor's Profits......................B - 11
Redemption................................B - 11
Valuation.................................B - 12
Comparison of Public Offering Price and
Redemption Value.................. B - 13
Expenses of the Trust.....................B - 13
Rights of Unitholders.....................B - 13
Distributions.............................B - 14
Reinvestment Plan.........................B - 14
Administration of the Trust...............B - 15
Accounts........................... B - 15
Reports and Records....................B - 15
Portfolio Supervision..................B - 15
Amendment of the Indenture................B - 16
Termination of the Trust..................B - 16
Sponsor...................................B - 16
Trustee...................................B - 17
Independent Auditors......................B - 17
Legal Opinions.......................... B - 17
PAINEWBBER EQUITY TRUST, REIT SERIES 1 - PART A
Brief Description of the Trust's Investment
Portfolio
1. The Trust's Objective.
The Trust seeks total return through a
combination of current income and potential
capital appreciation through an investment
primarily in a portfolio of common stocks issued
by a variety of real estate investment trusts,
commonly known as "REITs".
The Trust plans to hold until its termination the
portfolio of REIT stocks which PaineWebber
selected on May 27, 1998, the first day of the
Trust.
As of the first day of the Trust, PaineWebber
selected the stocks in the Trust's portfolio by
choosing the REIT stocks it believed had the
potential for achieving total return during the
three-year life of the Trust because on that day
the stocks were all rated either "Buy" or
"Attractive" by PaineWebber's Real Estate and
Lodging Research Group, referred to as the
"PaineWebber Research Group".
The Trust is a unit investment trust which means
that, unlike a mutual fund, the Trust's Portfolio
is not managed and stocks are not sold because of
market changes.
2. How were Stocks chosen for the Trust?
The PaineWebber Research Group is one of the
largest real estate research teams and provides
in-depth coverage on more than 50 REITs and the
industries in which they operate.
In selecting each REIT for the Trust, the
PaineWebber Research Group considered several
factors it considered important, including its
current yield, prospects for growth, property
supply and demand trends and relative valuation,
as more fully described in Part B of this
Prospectus.
Also, each REIT stock chosen for the Trust
Portfolio had to be rated either "Buy" or
"Attractive" by PaineWebber's Research Group on
the first day of the Trust.
3. Brief Description of the Trust's Portfolio.
On May 1, 1999, the aggregate market value of the
Trust Portfolio was $250,250,650.
REITs manage a portfolio of real estate
properties. REITs often focus on acquiring and
managing particular types of real estate, such as
shopping centers, and/or operating in particular
geographic regions, such as the West Coast.
Is this Trust Appropriate for You?
Yes, if you are seeking total return over
the life of the Trust by investing in REIT common
stocks issued by companies which PaineWebber
selected for their growth and/or income
potential.
No, if you want a speculative investment
that changes to take advantage of market
movements, if you are unable or unwilling to
assume the risks involved generally with equity
investments, if you need current income, or if
you want a more widely diversified portfolio of
common stocks.
Summary of Risks
You can lose money by investing in the
Trust. This can happen for various reasons. A
further discussion of the risks summarized below
can be found in Part B of this Prospectus.
1. Risks of Investing in the Trust
Certain risks are involved with an
investment in a unit trust which holds common
stocks, including REITs. For example:
The Trust, unlike a mutual fund, is not "managed"
and stocks will not be sold by the Trust to take
advantage of market fluctuations.
The Trust Portfolio may not remain constant
during the life of the Trust. The Trustee may be
required to sell stocks to pay Trust expenses, to
tender stocks under certain circumstances or to
sell stocks in the event certain negative events
occur.
The sale of stocks from 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 you receive upon termination may be less
than the amount you paid.
If many investors sell their Units, the Trust
will have to sell stocks. This could reduce the
diversification of your investment and increase
your share of Trust expenses.
The price of your Units depends upon the full
range of economic and market influences including
the prices of equity securities, the condition of
the real estate and stock markets and other
economic influences that affect the global or
United States economy.
Assuming no changes occur in the prices of the
stocks held by the Trust, the price you paid for
your Units will generally be less than the price
you paid because your purchase price included a
sales charge.
The stocks in the Trust's Portfolio will
generally trade on a domestic stock exchange or
in the over-the-counter market. PaineWebber
cannot assure you that a liquid trading market
will exist. The value of the Trust's Portfolio,
and of your investment, may be reduced if trading
in one or more stocks is limited or absent.
2. Risks of Investing in Stocks
Investing always involves risk. The risks
described below are the most significant risks
associated with investing in the stocks held by
the Trust.
Holders of common stocks such as those held by
the Trust have rights that are generally inferior
to the holders of debt obligations or preferred
stocks.
Common stocks are not obligations of the issuer.
Therefore, they do not provide any assurance of
income or provide the degree of protection of
debt securities.
The stocks held by the Trust can be expected to
fluctuate in value depending on a wide variety of
factors, such as economic and market influences
affecting corporate profitability, financial
condition of issuers, changes in worldwide or
national economic conditions, the prices of
equity securities in general and the Trust's
stocks in particular.
3. Single Industry or "Concentration" Risk
The Trust is considered "concentrated" in the
securities of a single industry because all of
its assets are invested in REITs.
Portfolios concentrated in stocks of a single
industry may present more risks to an investor
than a portfolio holding investments ranging
across a variety of industries.
4. Real Estate Investment Risks
The Trust may be particularly sensitive to
negative impact resulting from adverse market or
other conditions affecting REITs and real estate
in general.
The value of REITs may be particularly sensitive
to devaluation in the event of rising interest
costs, and by adverse changes in national, state
or local economic climate and real estate
conditions.
The REITs in the Trust may also be adversely
affected by changes in real property taxes on the
properties held by the REITs, as well as
catastrophic losses that are not covered by
insurance. See Part B of this Prospectus for a
more detailed discussion of risks connected with
investments in real estate.
Year 2000 Problem Risk
Many computer systems were designed in such a way
that they may be unable to distinguish between
the year 2000 and the year 1900 and therefore may
not properly process and calculate date-related
information and data (commonly known as the "Year
2000 Problem").
As with all investment and financial companies,
the Year 2000 Problem may have an adverse impact
upon the Trust. The Sponsor and the Trustee are
taking reasonable steps to address the year 2000
Problem with respect to the computer systems they
use and to obtain reasonable assurances that
similar steps are being taken by the Trust's
other service providers. At this time, however,
there can be no assurance that these steps will
be sufficient to avoid any adverse impact to the
Trust.
The year 2000 Problem is expected to have an
impact on all corporations, including those whose
stocks are contained in the Trust's Portfolio.
The Sponsor cannot predict what impact, if any,
the year 2000 Problem will have on the stocks in
the Trust.
<TABLE>
ESSENTIAL INFORMATION REGARDING THE TRUST
<CAPTION>
As of May 1, 1999
Sponsor: PaineWebber Incorporated
Trustee: The Chase Manhattan Bank
Initial Date of Deposit: May 27, 1998
<S> <C>
Aggregate Market Value of Securities in Trust: $250,250,650
Number of Units: 18,300,731
Fractional Undivided Interest in the Trust Represented by
Each Unit: 1/18,300,731st
Calculation of Public Offering Price Per Unit*
Aggregate Value of Net Assets in Trust $251,764,859
Divided by 18,300,731 Units $13.7571
Plus Sales Charge of 3.50% of Public Offering Price $.4990
Public Offering Price per Unit $14.2561
Redemption Value per Unit: $13.7571
Excess of Public Offering Price over Redemption Value per Unit: $.4990
Sponsor's Repurchase Price Per Unit: $13.7571
Excess of Public Offering over Sponsor's Repurchase Price per Unit: $.4990
Evaluation Time: 4 P.M. New York Time
Income Account Distribution Dates* *: Monthly, on the 25th of the month
and on the Mandatory Termination
Date.
Capital Account Distribution Dates* *: Annually, on December 25th and
on the Mandatory Termination
Date. No distributions of less than
$.075 per Unit need be made
from the Capital Account on
any Distribution Date.
Record Dates: Monthly, on the 10th of the month.
Mandatory Termination Date: June 30, 2001
Discretionary Liquidation Amount: 50% of the value of the Securities
upon completion of the deposit of
the Securities.
Estimated Annual Expenses of the Trust* * * $.0172 per Unit
* The Public Offering Price per Unit will
be based on the value of the Securities
established by the Trustee and
will vary on any date subsequent to the
Initial Date of Deposit from the Public Offering
Price per Unit shown
above. (See "Valuation").
* * See "Distributions"
* * * See "Expenses of 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".)
</TABLE>
<TABLE>
REPORT OF INDEPENDENT AUDITORS
<C> <S>
THE UNITHOLDERS, SPONSOR AND TRUSTEE
THE PAINEWEBBER EQUITY TRUST, REIT SERIES 1:
We have audited the accompanying statement of
financial condition, including the schedule of
investments, of The PaineWebber Equity Trust, REIT
Series 1 as of May 1, 1999 and the related
statements of operations and changes in net assets
for the period from May 27, 1998 (initial date of
deposit) to May 1, 1999. These financial
statements are the responsibility of the Trustee.
Our responsibility is to express an opinion on
these financial statements 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 statements are free of material
misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and
disclosures in the financial statements. Our
procedures included confirmation of the securities
owned as of May 1, 1999, as shown in the statement
of financial condition and schedule of
investments, by correspondence with the Trustee.
An audit also includes assessing the accounting
principles used and significant estimates made by
the Trustee, 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 statements referred
to above present fairly, in all material respects,
the financial position of The PaineWebber Equity
Trust, REIT Series 1 at May 1, 1999 and the
results of its operations and changes in its net
assets for the period from May 27, 1998 to May 1,
1999, in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
New York, New York
August 12, 1999
</TABLE>
<TABLE>
THE PAINEWEBBER EQUITY TRUST,
REIT SERIES 1
STATEMENT OF FINANCIAL CONDITION
May 1, 1999
<CAPTION>
ASSETS
<S> <C> <C>
Common Stock - at market value (Cost $273,917,686)
(note 1 to schedule of investments) $250,250,650
Dividends receivable 116,740
Accounts Receivable - Securities Sold 672,241
Cash 1,460,858
Total Assets $252,500,489
LIABILITIES AND NET ASSETS
Redemptions payable $683,675
Accrued expenses payable 51,955
Total Liabilities $735,630
Net assets (18,300,731 units of fractional undivided interest outstanding):
Cost of 18,300,731 units (note B) $283,852,524
Less sales charge (note C) (9,934,838)
Net amount applicable to investors 273,917,686
Net unrealized market depreciation (note D) (23,667,036)
Net amount applicable to unitholders 250,250,650
Undistributed investment income-net 1,524,154
Overdistributed proceeds from securities sold (9,945)
Net assets 251,764,859
Total liabilities and net assets $252,500,489
Net asset value per Unit $13.7571
See accompanying notes to financial statements.
</TABLE>
<TABLE>
THE PAINEWEBBER EQUITY TRUST,
REIT SERIES 1
STATEMENT OF OPERATIONS
<CAPTION>
For the Period
from May 27,
1998 (initial date
of deposit) to
May 1,
1999
<S> <C>
Operations:
Dividend Income $20,673,810
Total investment income 20,673,810
Less expenses:
Trustee's fees, expenses and evaluator's expense 372,266
Total expenses 372,266
Investment Income-net 20,301,544
Realized and unrealized loss on investments-net:
Net realized loss on securities transactions (13,984,908)
Net change in unrealized market depreciation (23,667,036)
Net realized and unrealized loss on investments (37,651,944)
Net decrease in net assets resulting from operations ($17,350,400)
See accompanying notes to financial statements.
</TABLE>
<TABLE>
THE PAINEWEBBER EQUITY TRUST,
REIT SERIES 1
STATEMENT OF CHANGES IN NET ASSETS
<CAPTION>
For the Period
from May 27,
1998 (initial date
of deposit) to
May 1,
1999
<S> <C>
Operations:
Investment income-net $20,301,544
Net realized loss on securities transactions (13,984,908)
Net change in unrealized market depreciation (23,667,036)
Net decrease in net assets resulting from operations (17,350,400)
Less: Distributions to Unitholders (Note E)
Investment Income 18,225,624
Total Distributions 18,225,624
Less: Units Redeemed By Unitholders (Note F)
Value of units redeemed at date of redemption 112,292,810
Undistributed income at date of redemption 551,764
Total Redemptions 112,844,574
Decrease in net assets (148,420,598)
Net Assets:
Beginning of Period ---
Supplemental Deposits 4,185,457
End of Period $251,764,859
See accompanying notes to financial statements.
</TABLE>
<TABLE>
NOTES TO FINANCIAL STATEMENTS
May 1, 1999
(A) The financial statements of the Trust are
prepared on the accrual basis of accounting.
Security transactions are accounted for on the
date the securities are purchased or sold.
(B) Cost to investors represents the initial
public offering price as of the initial date of
deposit, and the value of units through
supplemental deposits computed on the basis set
forth under "Public Offering Price of Units".
(C) Sales charge in the Initial Public Offering
period was 3.50% (3.63% of the net amount
invested). See "Public Offering of Units - Sales
Charge and Volume Discount", for information
relating to the secondary market.
(D) At May 1, 1999, the gross unrealized market
appreciation was $566,049 and the gross
unrealized market depreciation was ($24,233,085).
The net unrealized market depreciation was
($23,667,036).
(E) Regular distributions of net income and
principal receipts not used for redemption of
units are made monthly. Special distributions may
be made as the Sponsor and Trustee deem necessary
to comply with income tax regulations.
(F) The following units were redeemed with
proceeds of securities sold as follows:
<CAPTION>
For the Period
from May 27,
1998 (initial date
of deposit) to
May 1,
1999
<S> <C>
Total number of units redeemed ... 8,378,679
Redemption amount $112,844,574
The following units were sold through supplemental deposits:
Number of units sold 26,669,410
Value of amount, net of sales charge $400,035,457
</TABLE>
<TABLE>
THE PAINEWEBBER EQUITY TRUST,
REIT SERIES 1
SCHEDULE OF INVESTMENTS
As of May 1, 1999
<CAPTION>
COMMON STOCKS (100%)
Name of Issuer Number of Shares Market Value(1)
<C> <C> <C>
Alexandria Real Estate Equities, Inc. (9.24%) 820,282 $23,121,699
Camden Property Trust (2.88%) 266,574 7,197,498
Chateau Communities, Inc. (1.57%) 134,909 3,920,793
Colonial Properties Trust (1.87%) 171,269 4,688,489
Cornerstone Realty Income Trust, Inc. (7.06%) 1,776,772 17,656,672
EastGroup Properties, Inc. (2.12%) 294,215 5,314,258
FelCor Lodging Trust, Inc. (2.80%) 292,857 7,010,264
Gables Residential Trust (2.18%) 229,586 5,467,017
Home Properties of New York, Inc. (7.62%) 737,094 19,072,307
Kimco Realty Corporation (8.31%) 529,547 20,784,720
Liberty Property Trust (3.22%) 333,821 8,053,432
The Macerich Company (13.06%) 1,278,640 32,685,235
Mack-Cali Realty Corporation (8.29%) 670,735 20,750,864
Post Properties, Inc. (4.04%) 255,012 10,104,850
PS Business Parks, Inc. (6.55%) 701,704 16,402,331
Realty Income Corporation (.94%) 100,893 2,358,374
Shurgard Storage Centers, Inc. (2.01%) 186,632 5,027,400
Simon Property Group, Inc. (12.71%) 1,108,300 31,794,356
Storage USA, Inc. (1.85%) 144,297 4,635,541
Sun Communities, Inc. (1.68%) 120,130 4,204,550
TOTAL INVESTMENTS $250,250,650
(1) Valuation of Securities was made by the
Trustee as described in "Valuation".
</TABLE>
PAINEWEBBER EQUITY TRUST
REIT SERIES 1
PROSPECTUS PART B
PART B OF THIS PROSPECTUS MAY NOT BE DISTRIBUTED
UNLESS ACCOMPANIED BY PART A.
Part B contains a description of the important
features of the PaineWebber Equity Trust REIT
Series 1 and also includes a more detailed
discussion of the investment risks that a
Unitholder might face while holding Trust Units.
THE COMPOSITION OF THE PORTFOLIO
The Trust holds a portfolio of publicly traded
REITs. A REIT is an entity that combines the
capital of many investors to acquire and manage a
portfolio of real estate properties. REITs often
focus on acquiring and managing particular types
of real estate (e.g., apartments, shopping
centers) and/or operating in particular
geographic regions (e.g., Southeast, West Coast).
REIT portfolios are generally managed by
experienced real estate professionals, many of
whom have significant equity interests in their
REITs.
The Trust portfolio contains common stocks
issued by twenty (20) equity REITs selected by
PaineWebber's Research Group on May 27, 1998, the
first day of the Trust. On that day, all of the
participating equity REITs were covered by
PaineWebber's Research Group, and their common
stocks were then rated "Buy" or "Attractive". All
of the issuers of the Securities have securities
that are listed on a national securities exchange
or are traded in the over-the-counter market.
Jonathan Litt, the director of the Research
Group, has been rated among the top real estate
analysts by Institutional Investor, for the past
3 years. PaineWebber's Research Group is one of
the largest real estate research teams and
provides in-depth coverage on more than 60 REITs
and the industries in which they operate. In
selecting each REIT for the Trust, PaineWebber's
Research Group considered, among others, the
following factors: (i) its current yield,
prospects for growth, property supply and demand
trends and relative valuation (ii) its capital
structure and payout ratios, (iii) its liquidity
and total market capitalization, (iv) its
business, property and geographic focus and (v)
the quality, experience and depth of its
management.
ABOUT 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
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 objective of the Trust is
capital appreciation through an investment in
equity stocks having, in Sponsor's opinion on the
Initial Date of Deposit, potential for capital
appreciation.
On the Initial Date of Deposit, the Sponsor
deposited with the Trustee confirmations of
contracts for the purchase of Stocks 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 Stocks 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 Stock). 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, maintaining, as closely as
practicable, the original percentage relationship
between the Securities deposited on the Initial
Date of Deposit and replicating any cash or cash
equivalents held by the Trust (net of expenses).
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 Stock
but which does not affect the Trust's percentage
ownership of the common stock equity of such
issuer at the time of such event, to reflect a
sale or maturity of Security or to reflect a
merger or reorganization. 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 distributed on the
next Income Account Distribution Date.
*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.
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), 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
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 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 Stock in the Trust
may be expected to fluctuate over the life of the
Trust.
Investors should note that PaineWebber, in its
general securities business, acts as agent or
principal in connection with the purchases and
sales of equity securities, including the
Securities in the Trust, and may act as a market
maker in certain of the Securities. PaineWebber
also from time to time issues reports and may
make recommendations relating to equity
securities, including the Securities in the
Trust, and has provided, and may in the future
provide, investment banking services to the
issuers of the Securities. Investors should note
in particular that the Securities were selected
by the Sponsor as of the Initial Date of Deposit.
The Trust may continue to purchase Additional
Securities or hold Securities originally selected
through this process even though the evaluation
of the attractiveness of such Securities may have
changed and, if the evaluation were performed
again at that time, the Securities would not be
selected for the Trust. In addition, the Sponsor
may continue to sell Trust Units even if
PaineWebber changes a recommendation relating to
one or more Securities in 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, are also
dependent upon several factors, including those
discussed above in the preceding sentence as well
as those discussed below under "Real Estate
Investment Trusts".
Whether or not the Securities are listed on a
national securities exchange, the principal
trading market for the Securities may be in the
over-the-counter market. As a result, the
existence of a liquid trading market for the
Securities may depend on whether dealers will
make a market in the Securities. There can be no
assurance that a market will be made for any of
the Securities, that any market for the
Securities will be maintained or of the liquidity
of the Securities in any markets made. In
addition, the Trust may be restricted under the
Investment Company Act of 1940 from selling
Securities to the Sponsor. The price at which the
Securities may be sold to meet redemptions, and
the value of the Trust, will be adversely
affected if trading markets for the Securities
are limited or absent.
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 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
close as possible to the Evaluation Time or at
prices as close 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 not listed on any
national securities exchange (due to
differentials between bid and offer prices for
the 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 Stock 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 Stocks 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 under the caption
"Administration of the Trust--Portfolio
Supervision".)
A number of the Securities in the Trust may also
be owned by other clients of the Sponsor.
However, because these clients may have
investment objectives which differ from that of
the Trust, the Sponsor may sell certain
Securities from such clients' accounts in
instances where a sale of such Securities by the
Trust would be impermissible, such as to maximize
return by taking advantage of attractive market
fluctuations in such Securities. As a result, the
amount realized upon the sale of the Securities
from the Trust may not be the highest price
attained for an individual Security during the
life of the Trust.
PaineWebber has acted as sole underwriter to
certain of the issuers of Securities in the
acquisition of the Securities at prices below
market value for deposit into the Trust on the
Initial Date of Deposit. The Sponsor also
acquired Securities on the Initial Date of
Deposit, and may acquire Additional Securities on
subsequent dates for deposit into the Trust, in
open market transactions, and may benefit if the
price paid for such Securities is less than the
price at which the Securities are deposited by
the Sponsor into the Trust. The Sponsor may have
acted as underwriter, manager, or co-manager of a
public offering of the Securities deposited into
the Trust on the Initial Date of Deposit, or as
an adviser to one or more of the issuers of the
Securities, during the last three (3) years. The
Sponsor or affiliates of the Sponsor may serve as
specialists in the Securities on one or more
stock exchanges and may have a long or short
position in any of these Securities or in options
on any of them, and may be on the opposite sides
of public orders executed on the floor of an
exchange where the Securities are listed. The
Sponsor may trade for its own account as an odd-
lot dealer, market maker, block positioner and/or
arbitrageur in any of the Securities or options
on them. The Sponsor, its affiliates, directors,
elected officers and employee benefits programs
may have either a long or short position in any
of the Securities or in options on them.
REAL ESTATE INVESTMENT TRUSTS. The Trust is
considered "concentrated"* in REIT issuers. A
portfolio concentrated in a single industry may
present more risk than a portfolio of more
broadly diversified investments. The Trust, and
therefore Unitholders, may be particularly
susceptible to a negative impact resulting from
adverse market conditions or other factors
affecting REITs because any negative impact on
the REIT or real estate industry will not be
diversified among issuers within other unrelated
industries. In addition, due to the relative lack
of diversity in the portfolio in terms of the
number of issuers, a Unitholder may incur
additional risk compared to an investment in a
more diversified portfolio. Accordingly, an
investment in the Trust should be made with an
understanding of the risks inherent in an
investment in REITs specifically and in real
estate generally (in addition to securities
market risks).
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
generally fully integrated operating companies
that have interests in income-producing real
estate. REITs are differentiated by the types of
real estate properties held and the actual
geographic location of properties and fall into
two major categories: equity REITs emphasize
direct property investment, holding their
invested assets primarily in the ownership of
real estate or other equity interests, while
mortgage REITs concentrate on real estate
financing, holding their assets primarily in
mortgages secured by real estate. REITs obtain
capital funds for investment in underlying real
estate assets by selling debt or equity
securities on the public or institutional capital
markets or by bank borrowings. The value of REITs
may be particularly sensitive to devaluation in
the event of rising interest rates. The returns
on common equities of the REITs in which the
Trust invests will be significantly affected by
changes in costs of capital and, particularly in
the case of highly "leveraged" REITs (i.e., those
with large amounts of borrowings outstanding) by
changes in the level of interest rates. The
objective of an equity REIT is to purchase
income-producing real estate properties in order
to generate high levels of cash flow from rental
income and a gradual asset appreciation, and such
REITs typically invest in properties such as
office, retail, industrial, hotel and apartment
buildings and health care facilities. The
objectives of a mortgage REIT is to invest
primarily in mortgages secured by real estate in
order to generate cash flow from payments on the
mortgage loans.
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, state or local
economic climate and real estate conditions (such
as oversupply of or reduced demand for space and
changes in market rental rates), perceptions of
prospective tenants of the safety, convenience,
and attractiveness of the properties, the ability
of the owner to provide adequate management,
maintenance and insurance, the ability to collect
on a timely basis all rents from tenants, tenant
defaults, the cost of complying with the
Americans with Disabilities Act, 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.
Legislation has been proposed, and additional
legislation may be proposed or adopted in the
future, which could adversely impact REITs, and
the Sponsor is unable to predict whether current
or future proposals will be enacted or what
impact such proposals will have on the
Securities.
REITs are a creation of the tax law. REITs
essentially operate 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 Code. The major tests for tax
qualified status are that the REIT (i) be managed
by one or more trustees or directors, (ii) issue
share 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. If any REIT in the
Trust's portfolio should fail to qualify for such
tax status, the related shareholders (including
the Trust) could be adversely affected by the
resulting tax consequences.
*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.
In addition, because real estate generally is
subject to real property taxes, the REITs in the
Trust may be adversely affected by changes in the
real property taxes on the properties underlying
the REITs in the Trust as property tax rates
change or as such properties are assessed or
reassessed by taxing authorities. Furthermore,
because real estate is relatively illiquid, the
ability of REITs to vary their portfolios in
response to changes in economic and other
conditions may be limited and may adversely
affect the value of the Units. There can be no
assurance that any REIT will be able to dispose
of its underlying real estate assets when
advantageous or necessary.
Certain REITs in the Trust may be structured as
UPREITs. This form of REIT owns an interest in a
partnership that owns real estate, which can
result in a potential conflict of interest
between shareholders who may want to sell an
asset and partnership interest holders who would
be subject to tax liability if the REIT sells the
property. In some cases, REITs have entered into
"no sell" agreements, which are designed to avoid
a taxable event to the holders of partnership
units by preventing the REIT from selling the
property. This kind of arrangement could mean
that the REIT would refuse a lucrative offer for
an asset or be forced to hold on to a poor asset.
Since "no sell" agreements are often undisclosed,
the Sponsor is unable to state whether any of the
REITs in the Portfolio have entered into this
kind of arrangement.
REITs may concentrate investments in specific
geographic areas or in specific property types,
e.g., 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.
REITs generally maintain 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, 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 a
REIT might not be adequate to restore its
economic position with respect to such property.
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.
LIQUIDITY. Although the Securities in the Trust
themselves are listed on a national securities
exchange or are traded in the over-the-counter
market 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.
To the extent that the total assets held by the
Trust grow significantly on or after the Initial
Date of Deposit due to deposits of Additional
Securities in connection with the creation of
additional Units, it is possible that the Trust
may hold a sizeable percentage of the total
outstanding publicly traded common stock of one
or more issuers of the Securities. In such cases,
sales of such Securities from the Trust Portfolio
to meet large redemption requests may have a
greater adverse impact on the sale prices
received by the Trust than would have been the
case if the Trust had not held such a large
position in such Securities.
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 certain of
the federal income tax consequences of an
investment in Units of the Trust, 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
summary is limited to investors who hold the
Units as "capital assets" (generally, property
held for investment) within the meaning of
Section 1221 of the Code. 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. For purposes of the
following discussion and the opinion above, it is
assumed that each Security is considered a share
in a real estate investment trust for federal
income tax purposes.
General. Each Unitholder must report on its
federal income tax return a pro rata share of
income received by the Trust and a pro rata share
of the expenses of the Trust.
Distributions by a REIT to the Trust that are
made out of a REIT's earnings and profits will be
taxable as ordinary income to investors except to
the extent that such REIT designates any
distribution as a capital gain dividend. The
portion of any REIT distribution that is
designated as a capital gain dividend will be
taxable to an investor as long-term capital gain,
regardless of the time the investor has held his
Units. The Internal Revenue Service has issued a
notice (with interim guidance) of forthcoming
temporary regulations to permit a REIT to
designate its dividends, subject to certain
limitations, as 20%, 25% or 28% gain
distributions, which individual investors would
be entitled to treat as long-term capital gains
subject to tax at the maximum rates of 20%, 25%
or 28%, respectively.
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.
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. In addition, the Code limits the
benefit of itemized deductions in the case of
individual taxpayers with adjusted gross income
in excess of a specified amount.
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. The
deduction of capital losses is subject to
limitations.
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 foreign, 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. Foreign investors should consult their tax
advisers with respect to United States tax
consequences 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 Stocks, 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 due to
fluctuations in the value of the Stocks among
other factors.
Sales Charge and Volume Discount. Sales charges
during the 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.
Sales Charges after the Initial Date of Deposit
Through June 30, 1999
Percent of Percent of
Aggregate Dollar Public Offering Net Amount
Value of Units Price Invested
Less than $50,000....3.50% 3.63%
$50,000 to $99,999...3.25 3.36
$100,000 to $199,999.2.75 2.83
$200,000 to $399,999.2.50 2.56
$400,000 to $499,999.2.00 2.04
$500,000 to $999,999.1.75 1.78
$1,000,000 or more...1.50 1.52
Sales Charges from July 1, 1999
Through June 30, 2000
Percent of Percent of
Aggregate Dollar Public Offering Net Amount
Value of Units Price Invested
Less than $50,000....2.50% 2.56%
$50,000 to $99,999...2.25 2.30
$100,000 to $199,999.2.00 2.04
$200,000 to $399,999.1.75 1.78
$400,000 to $499,999.1.50 1.52
$500,000 to $999,999.1.25 1.27
$1,000,000 or more 1.00 1.01
Sales Charges from July 1, 2000 and Thereafter
Percent of Percent of
Aggregate Dollar Public Offering Net Amount
Value of Units Price Invested
Less than $50,000....1.50% 1.52%
$50,000 to $99,999...1.25 1.27
$100,000 to $199,999.1.00 1.01
$200,000 or more.....0.75 0.76
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 does not intend to impose
a sales charge on such employee sales.
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 Series (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 Municipal
Bond Trust, Insured Series (the "Insured
Series"); The Corporate Bond Trust, (the
"Corporate Series"); The PaineWebber Pathfinders
Trust, (the "Pathfinders Series"), The
PaineWebber Federal Government Trust, (the
"Government Series") or the PaineWebber Equity
Trust, (the "Equity Series") (collectively
referred to as the "Exchange Trusts"). Exchanges
made for Units of any Exchange Trust which has an
"up-front" salesload will be made 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. Unitholders may elect to
exchange any or all of their Units for Units of
The PaineWebber Equity Trust, Growth Stock Series
22, or any other PaineWebber Exchange Trust
subject to a deferred sales charge (the "Deferred
Sales Charge Units"). The Exchange Option will
permit the exchange of Units for any Deferred
Sales Charge Units at their then-current net
asset value, with no Initial Sales Charge
imposed. Units acquired through the Exchange
Option will continue to be subject to the
deferred sales charge installments remaining on
the Deferred Sales Charge Units so acquired.
Unitholders interested in exercising the Exchange
Option should read the current prospectus or
prospectuses relating to the Deferred Sales
Charge Units to ascertain what, if any, deferred
sales charge installments remain on such Units.
Unitholders of this Trust are not eligible for
the Exchange Option into any Exchange Trust
designated as a rollover series for the 30 day
period prior to termination of such 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 expense 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 "up-front" sales charge that was
less than the per Unit "up-front" sales charge of
the series of 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 "up-front"
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 "up-front" sales charge based on the
greater of the reduced "up-front" sales charge,
or an amount which, together with the initial
"up-front" sales charge paid in connection with
the acquisition of the Units being exchanged,
equals the "up-front" 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 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.
An exchange of units pursuant to the Exchange
Option will normally constitute a "taxable event"
under the Code, i.e., a Unitholder will recognize
a tax gain or loss. Unitholders are advised to
consult their own tax advisors as to the tax
consequences of exchanging units in their
particular case.
The Sponsor reserves the right to modify,
suspend or terminate this plan at any time
without further 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.
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 of this
series to purchase units of one or more of the
Exchange Trusts. If units of the applicable
outstanding series of the Exchange Trust are at
that time available for sale, 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 aggregate bid
price per Unit of the securities in the portfolio
of the Trust. Units of the Exchange Trust,
however, will be sold to the Unitholder at a
reduced sales charge as discussed above. 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 units of a trust with a current price of
$1,030 per unit based on the bid prices of the
underlying securities, 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 rounding up to the next
highest number of units, the proceeds from the
Unitholder's units will aggregate $3,090. Since
only whole units of an Exchange Trust may be
purchased under the Exchange Option, the
Unitholder would be able to acquire three units
in the Exchange Trust for a total cost of $2,715
($2,670 for the units and $45 for the sales
charge). The remaining $375 would be returned to
the Unitholder in cash.
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 having an "up-front" salesload 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). Owners of
Conversion Units will be permitted to use the
cash proceeds received from the sale or
redemption of those Units to acquire Deferred
Sales Charge Units at their then-current net
asset value, with no Initial Sales Charge
imposed. Deferred Sales Charge Units acquired
through the Conversion Option will continue to be
subject to the deferred sales charge installments
remaining on those Units so acquired.
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 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 without further
notice, including the right to increase the
reduced sales charge applicable to this option
(but not in excess of $5 more per Unit, 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 is
100 Units, or 20 Units in the case of a purchase
for an IRA or other qualified retirement plan.
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 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.
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 $500,000 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 Stocks to the Sponsor and
the price at which it deposits the Stocks in the
Trust in exchange for Units, which is the value
of the Stocks, determined by the Trustee as
described under "Valuation". The cost of Stock 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 The Chase Manhattan
Bank for redemption in person at its office at 4
New York Plaza, Ground Floor--Unit Trust Window,
New York, New York or by mail at Customer Service
Retail Department, Bowling Green Station, P.O.
Box 5185, New York, NY 10274-5185, upon payment
of any stock 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 participating in
an approved Medallion Guarantee program, 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, the Trustee may designate Securities to be
sold. (See "Administration of the Trust".)
However, with respect to redemption requests in
excess of $500,000, the Sponsor, in its sole
discretion, may determine to direct the Trustee
to redeem Units "in kind" by distributing
Securities to such redeeming Unitholder. When
Securities are so distributed, a proportionate
amount of each Security will be distributed, to
the extent of whole shares, and cash will be
distributed from the Capital Account equal to the
value of the fractional shares to which such
redeeming Unitholder is entitled. 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".
Securities will be delivered to the account of
the Unitholder's bank or broker at The Depository
Trust Company. A Unitholder receiving a
redemption "in kind" may incur brokerage or other
transaction costs in converting the Securities
distributed into cash. The availability of
redemption "in kind" is subject to compliance
with all applicable laws and regulations,
including the Securities Act.
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, 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 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, Martin Luther King, Jr. 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 Inc. 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
traded on the Nasdaq National Market System, such
evaluation shall be based on the last reported
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
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
On the business day prior to the Initial Date of
Deposit, the Public Offering Price per Unit
(which figure includes the sales charge) exceeded
the Redemption Value (see "Essential
Information"). The prices of the Securities are
expected to vary. 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"), were paid by the
Sponsor. The Sponsor received no fee from the
Trust for its services in establishing the Trust.
The Sponsor has agreed to waive all compensation
for portfolio supervisory services.
For its services as Trustee and Evaluator, the
Trustee will be paid in monthly installments,
annually $.0158 per Unit, based on the largest
number of Units outstanding during the previous
month. In addition, the regular and recurring
expenses of the Trust are estimated to be $.0014
per Unit which include, but are not limited to
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 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 each 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 trusts 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).
Unless otherwise directed by the Sponsor, 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 $.0075 per Unit. Unitholders covered by
the audit during the year may receive a copy of
the audited financials 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 dividend paid prior to the Initial Date of
Deposit, dividends on the Stocks 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 Stocks
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
participating in an approved Medallion Guarantee
program, 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 New York, New York
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 New
York, New York 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 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 annual income per Unit, after deducting
estimated annual Trust expenses per Unit, will
depend primarily upon the amount of dividends
declared and paid by the issuers of the
Securities and changes in the expenses of the
Trust and, to a lesser degree, upon the level of
purchases of Additional Securities and sales of
Securities. There is no assurance that dividends
on the Securities will continue at their current
levels or be declared or paid.
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. Each Unit receives an equal share of
monthly distributions of dividend income net of
estimated expenses. Because dividends on the
Securities are not received at a constant rate
throughout the year, any distribution may be more
or less than the amount then credited to the
Income Account. Subject to the Reinvestment Plan,
the Income Account distribution for each investor
shall consist of an amount, computed monthly by
the Trustee, substantially equal to one-twelfth
of the investor's pro rata share of the estimated
annual income to the Income Account after
deducting estimated expenses. There is no
assurance that actual distributions will be made
since all dividends received may be used to pay
expenses. Distributions of less than $.075 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 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
distributions from the Income and Capital
Accounts 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
Distributions to the Income and Capital Accounts
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, 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 interest 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 interest
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 New York, 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 1998, 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;
(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
Security, or a merger or acquisition being
announced affecting a Security that in the
opinion of the Sponsor make the sale or tender of
the security in the best interests of the
Unitholders; or
(7) 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.
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 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 Stocks upon completion of the
deposit of Stocks, 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 Trustee is The Chase Manhattan Bank, a New
York Bank with its principal executive office
located at 270 Park Avenue, New York, New York
10081 and its unit investment trust office at 4
New York Plaza, New York, New York 10004. The
Trustee is subject to supervision by the
Superintendent of Banks of the State of New York,
the Federal Deposit Insurance Corporation and the
Board of Governors of the Federal Reserve System.
In connection with the storage and handling of
certain Securities deposited in the Trust, the
Trustee may use the services of The Depository
Trust Company. These services may include
safekeeping of the Securities and coupon-
clipping, computer book-entry transfer and
institutional delivery services. The Depository
Trust Company is a limited purpose trust company
organized under the Banking Law of the State of
New York, a member of the Federal Reserve System
and a clearing agency registered under the
Exchange Act.
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 financial statements, including the Schedule
of Investments, of the Trust in this prospectus
have been audited by Ernst & Young LLP,
independent auditors, and have been included in
reliance upon 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.
CONTENTS OF REGISTRATION STATEMENT
This registration statement comprises the following
documents:
The facing sheet.
The Prospectus.
The signatures.
The following exhibits:
EX-99.C1 Opinion of Counsel as to legality of securities
being registered
EX-99.C2 Consent of Independent Auditors
FINANCIAL STATEMENTS
1. Statement of Condition of the Trust as shown in
the current Prospectus for this series.
2. Financial Statements of the Depositor.
PaineWebber Incorporated - Financial Statements
incorporated by reference to Form 10-k and
Form 10-Q (File No. 1-7367) respectively.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant, The PaineWebber Equity Trust, REIT Series 1 certifies
that it meets all of the requirements for effectiveness of this
Registration Statement pursuant to Rule 485(b) under the Securities
Act of 1933 and has duly caused this registration statement to be
signed on its behalf by the undersigned thereunto duly authorized,
and its seal to be hereunto affixed and attested, all in the City of
New York, and the State of New York on the 27th day of August, 1999.
PAINEWEBBER EQUITY TRUST,
REIT SERIES 1
(Registrant)
By: PaineWebber Incorporated
(Depositor)
/s/ ROBERT E. HOLLEY
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 in the
following capacities and in the City of New York, and State of New
York, on this 27th day of August, 1999.
PAINEWEBBER INCORPORATED
Name Office
Donald B. Marron Chairman, Chief Executive Officer
and Director of PaineWebber Incorporated*
Regina A. Dolan Executive Vice President,
Chief Financial Officer and
Director of PaineWebber Incorporated*
Joseph J. Grano, Jr. President and
Director of PaineWebber Incorporated*
Steve P. Baum Executive Vice President and
Director of PaineWebber Incorporated*
Robert H. Silver Executive Vice President and
Director of PaineWebber Incorporated*
Mark B. Sutton Executive Vice President and
Director of PaineWebber Incorporated*
Margo N. Alexander Executive Vice President and
Director of PaineWebber Incorporated*
Terry L. Atkinson Managing Director and
Director of PaineWebber Incorporated*
Brian M. Barefoot Executive Vice President and
Director of PaineWebber Incorporated*
Michael Culp Managing Director and
Director of PaineWebber Incorporated*
Edward M. Kerschner Managing Director and
Director of PaineWebber Incorporated*
James P. MacGilvray Executive Vice President and
Director of PaineWebber Incorporated*
By:/s/ ROBERT E. HOLLEY
Attorney-in-fact*
* Executed copies of the powers of attorney have been previously
filed with the Securities and Exchange Commission with the Post
Effective Amendment to the Registration Statement File No. 2-61279.
August 27, 1999
PaineWebber Incorporated
1200 Harbor Blvd.
Weehawken, New Jersey 07087
Ladies and Gentlemen:
We have served as counsel for PaineWebber Incorporated as
sponsor and depositor (the "Depositor") of PaineWebber
Equity Trust, REIT Series 1 (hereinafter referred to as
the "Trust"). It is proposed that Post-Effective Amendment No. 1
to the Trust's registration statement ("Post-Effective Amendment
No. 1") will be filed with the Securities and Exchange Commission
and dated as of the date hereof in connection with the continued
issuance by the Trust of an indefinite number of units of fractional
undivided interest in the Trust (hereinafter referred to as the
"Units") pursuant to Rule 24f-2 promulgated under the provisions of
the Investment Company Act of 1940, as amended. In this regard, we
have examined executed originals or copies of the following:
(a) The Restated Certificate of Incorporation, as amended, and the
By-Laws of the Depositor, as amended;
(b) Resolutions of the Board of Directors of the Depositor adopted on
December 3, 1971 relating to the Trust and the sale of the Units;
(c) Resolutions of the Executive Committee of the Depositor adopted
on September 24, 1984;
(d) Powers of Attorney referred to in the Amendment;
(e) Post-Effective Amendment No. 1 to the Registration Statement on
Form S-6 (File No. 333-38255) to be filed with the Securities and
Exchange Commission (the "Commission") in accordance with
the Securities Act of 1933, as amended, and the rules and
regulations of the Commission promulgated thereunder
(collectively, the "1933 Act") proposed to be filed on or about the
date hereof (the "Amendment");
(f) The Notification of Registration of the Trust filed with the
Commission under the Investment Company Act of 1940, as
amended (collectively, the "1940 Act") on Form N-8A, as
amended;
(g) The registration of the Trust filed with the Commission under the
1940 Act on Form N-8B-2 (File No. 811-3722), as amended;
(h) The prospectus included in the Amendment (the "Prospectus");
(i) The Standard Terms and Conditions of the Trust dated as of
May 1, 1998, as amended, among the Depositor, and Chase Manhattan
Bank (the "Trustee"), (the "Standard Terms");
(j) The Trust Indenture dated as of the Initial Date of Deposit, among
the Depositor, the Trustee and the Evaluator (the "Trust
Indenture" and, collectively with the Standard Terms, the
"Indenture and Agreement");
(k) The form of certificate of ownership for units (the "Certificate") to
be issued under the Indenture and Agreement; and
(l) Such other pertinent records and documents as we have deemed
necessary.
With your permission, in such examination, we have assumed
the following: (a) the authenticity of original documents and the
genuineness of all signatures; (b) the conformity to the originals of
all documents submitted to us as copies; (c) the truth, accuracy,
and completeness of the information, representations, and warranties
contained in the records, documents, instruments and certificates we
have reviewed; (d) except as specifically covered in the opinions set
forth below, the due authorization, execution, and delivery on behalf
of the respective parties thereto of documents referred to herein and
the legal, valid, and binding effect thereof on such parties; and (e)
the absence of any evidence extrinsic to the provisions of the written
agreement(s) between the parties that the parties intended a
meaning contrary to that expressed by those provisions. However,
we have not examined the securities deposited pursuant to the
Indenture and Agreement (the "Securities") nor the contracts for the
Securities.
We express no opinion as to matters of law in jurisdictions other
than the State of New York (except "Blue Sky" laws) and the federal laws
of the United States, except to the extent necessary to render the
opinion as to the Depositor in paragraph (i) below with respect to
Delaware law. As you know we are not licensed to practice law in the
State of Delaware, and our opinion in paragraph (i) and (iii) as to
Delaware law is based solely on review of the official statutes of the
State of Delaware.
Based upon such examination, and having regard for legal
considerations which we deem relevant, we are of the opinion that:
(i) The Depositor is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Delaware with full
corporate power to conduct its business as described in the
Prospectus;
(ii) The Depositor is duly qualified as a foreign corporation and is in
good standing as such within the State of New York;
(iii)The terms and provisions of the Units conform in all material
respects to the description thereof contained in the Prospectus;
(iv) The consummation of the transactions contemplated under the
Indenture and Agreement and the fulfillment of the terms thereof
will not be in violation of the Depositor's Restated Certificate of
Incorporation, as amended, or By-Laws, as amended and will not
conflict with any applicable laws or regulations applicable to the
Depositor in effect on the date hereof; and
(v) The Certificates to be issued by the Trust, when duly executed by
the Depositor and the Trustee in accordance with the Indenture
and Agreement, upon delivery against payment therefor as
described in the Prospectus will constitute fractional undivided
interests in the Trust enforceable against the Trust in accordance
with their terms, will be entitled to the benefits of the Indenture
and Agreement and will be fully paid and non-assessable.
Our opinion that any document is valid, binding, or enforceable in
accordance with its terms is qualified as to:
(a) limitations imposed by bankruptcy, insolvency, reorganization,
arrangement, fraudulent conveyance, moratorium, or other laws
relating to or affecting the enforcement of creditors' rights
generally;
(b) rights to indemnification and contribution which may be limited by
applicable law or equitable principles; and
(c) general principles of equity, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
We hereby represent that the Amendment contains no disclosure
which would render it ineligible to become effective immediately
upon filing pursuant to paragraph (b) of Rule 485 of the
Commission.
We hereby consent to the filing of this opinion as an exhibit to
the Amendment and to the use of our name wherever it appears in
the Amendment and the Prospectus.
Very truly yours,
/s/ CARTER, LEDYARD & MILBURN
INDEPENDENT AUDITORS' CONSENT
We consent to the reference to our firm under the caption
"Independent Auditors" and to the use of our report dated
August 12, 1999, in the Registration Statement and related
Prospectus of the PaineWebber Equity Trust, REIT Series 1
/s/ ERNST & YOUNG LLP
New York, New York
August 26, 1999
