<PAGE>
As filed with the Securities and Exchange Commission on May 19, 1998
Registration No. 333-51391
Securities And Exchange Commission
Washington, D.C. 20549-1004
Amendment No. 1
to
Form S-6
Registration Statement
For Registration under the Securities Act of 1933 of Securities of
Unit Investment Trusts Registered on Form N-8B-2.
A. Exact name of Trust: HBI Equity Trust, Series 5
B. Name of Depositor: Howe Barnes Investments, Inc.
C. Complete address of Depositor's principal executive offices:
Howe Barnes Investments, Inc.
135 South LaSalle Street, Suite 1500
Chicago, Illinois 60603
D. Name and complete address of agents for service:
Copy to:
Howe Barnes Investments, Inc. Chapman and Cutler
Attention: Michael E. Sammon Attention: Matthew C. Boba
135 South LaSalle Street, Suite 1500 111 West Monroe Street
Chicago, Illinois 60603 Chicago, Illinois 60603
E. Title of securities being registered: Units of fractional undivided
interests
F. Approximate date of proposed public offering:
as soon as practicable after the Effective Date of the Registration
Statement
[X] Check box if it is proposed that this filing will become effective
on May 19, 1998 pursuant to Rule 487
The registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a)
may determine.
<PAGE>
HBI Equity Trust, Series 5
Cross Reference Sheet
Pursuant to Rule 404(c) of Regulation C
under the Securities Act of 1933
(Form N-8B-2 Items Required by Instruction as to Prospectus in Form S-6)
<TABLE>
<CAPTION>
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
<S> <C>
I. Organization and General Information
1. (a) Name of trust ) Front Cover
(b) Title of securities issued) Front Cover
2. Name and address of Depositor ) Back Cover
3. Name and address of Trustee ) Back Cover
4. Name and address of principal ) Back Cover
underwriter )
5. Organization of trust ) The Trust
6. Execution and termination of ) Essential Information Regarding the Trust;
Trust Indenture and Agreement ) Administration of the Trust; Amendment of
) Indenture; The Trust; Termination of the
) Trust
7. Changes of Name ) *
8. Fiscal year ) *
9. Litigation ) *
II. General Description of the Trust and Securities of the Trust
10. General information regarding )
trust's securities and rights )
of holders )
(a) Type of Securities )
(Registered or Bearer) ) The Trust; Rights of Unitholders
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
<S> <C>
(b) Type of Securities (Cumula- )
tive or Distributive) ) *
(c) Rights of Holders as to with- ) The Trust; Redemption of Units; Public
drawal or redemption ) Offering of Units -- Maintenance of
) Secondary Market
(d) Rights of Holders as to ) The Trust; Public Offering of Units --
conversion, transfer, etc. ) Maintenance of Secondary market;
) Redemption of Units
(e) Rights if Trust issues periodic)
payment plan certificates. ) *
(f) Voting rights as to Securities ) Rights of Unitholders
under the Indenture )
(g) Notice to Holders as to )
change in: )
(1) Assets of Trust ) Administration of the Trust -- Portfolio
) Supervision; Amendment of the Indenture
(2) Terms and Conditions of ) Administration of the Trust -- Portfolio
the Trust's Securities ) Supervision; Amendment of the Indenture
(3) Provisions of Trust ) Amendment of the Indenture
(4) Identity of Depositor and )
Trustee ) Sponsor; Trustee
(h) Consent of Security Holders )
required to change: )
(1) Composition of assets of ) Administration of the Trust -- Portfolio
Trust ) Supervision; Amendment of the Indenture
(2) Terms and conditions of ) Administration of the Trust
Trust's Securities )
(3) Provisions of Indenture ) Amendment of the Indenture
(4) Identity of Depositor and )
Trustee ) Sponsor; Trustee
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
<S> <C>
(i) Other feature or right ) *
11. Type of securities comprising ) The Trust; Rights of Unitholders;
security holder's interest ) Administration of the Trust -- Portfolio
) Supervision
12. Information concerning periodic )
payment certificates ) *
13. (a) Load, fees, expenses, etc. ) Public Offering of Units; Expenses of the
) Trust
(b) Certain information regard- ) *
ing periodic payment )
certificates )
(c) Certain percentages ) Public Offering of Units; Expenses of the
) Trust
(d) Certain other fees, etc. ) Public Offering of Units -- Public Offering
payable by holders ) Price
(e) Load, fees, expenses, and )
charges not covered in 13(a) ) Rights of Unitholders
(f) Certain profits receivable by )
depositor, principal under- )
writers, trustee or affiliated) Public Offering of Units -- Profits to the
persons ) Sponsor
(g) Ratio of annual charges to )
income ) *
14. Issuance of trust's securities ) The Trust; Rights of Unitholders
15. Receipt and handling of payments ) Public Offering of Units -- Profits to the
from purchasers ) Sponsor; Administration of the Trust
16. Acquisition and disposition of ) The Trust; Administration of the Trust --
Underlying Securities ) Portfolio Supervision; Termination of the
) Trust
17. Withdrawal or redemption ) Public Offering of Units -- Maintenance of a
</TABLE>
-iii-
<PAGE>
<TABLE>
<CAPTION>
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
<S> <C>
) Secondary Market; Redemption of Units
18. (a) Receipt and disposition ) Distributions to Unitholders; Administration
of income ) of the Trust
(b) Reinvestment of distribu- ) *
tions )
(c) Reserves or special funds ) Distributions to Unitholders; Administration
) of the Trust -- Accounts; Administration of
) the Trust -- Reinvestment
(d) Schedule of distributions ) Essential Information Regarding the Trust
19. Records, accounts and reports ) Distributions to Unitholders; Administration
) of the Trust -- Reports and Records
20. Certain miscellaneous provisions ) Sponsor; Termination of the Trust;
of Trust Agreement ) Amendment of the Indenture
21. Loans to security holders ) *
22. Limitations on liability ) Sponsor; Trustee
23. Bonding arrangements ) *
24. Other material provisions of ) *
trust agreement )
III. Organization Personnel and Affiliated Persons of Depositor
25. Organization of Depositor ) Sponsor
26. Fees received by Depositor ) Administration of the Trust -- Portfolio
) Supervision; Expenses of the Trust
27. Business of Depositor ) Sponsor
28. Certain information as to ) Sponsor
officials and affiliated )
persons of Depositor )
29. Voting securities of Depositor ) Sponsor
</TABLE>
-iv-
<PAGE>
<TABLE>
<CAPTION>
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
<S> <C>
30. Persons controlling Depositor ) Sponsor
31. Payments by Depositor to officers) *
for certain other services )
rendered to trust )
32. Payments by Depositor to ) *
directors for certain other )
services rendered to trust )
33. Remuneration of employees of ) *
Depositor for certain services )
rendered to trust )
IV. Distribution and Redemption of Securities
35. Distribution of trust's ) Public Offering of Units -- Distribution
securities by states ) of Units
36. Suspension of sales of trust's ) *
securities )
37. Revocation of authority to ) *
distribute )
38. (a) Method of distribution ) Public Offering of Units -- Distribution of
) Units; Public Offering of Units --
) Maintenance of a Secondary Market
(b) Underwriting agreements ) *
(c) Selling agreements ) Public Offering of Units -- Distribution of
) Units
39. (a) Organization of principal ) Sponsor
underwriter )
(b) N.A.S.D. membership by ) Sponsor
principal underwriter )
40. Certain fees received by ) Administration of the Trust -- Portfolio
principal underwriter ) Supervision; Expenses of the Trust
41. (a) Business of principal ) Sponsor
</TABLE>
-v-
<PAGE>
<TABLE>
<CAPTION>
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
<S> <C>
underwriter )
(b) Branch offices of principal ) *
underwriter )
(c) Salesmen of principal ) *
underwriter )
42. Ownership of trust's securities ) Sponsor
by certain persons )
43. Certain brokerage commissions ) Public Offering of Units -- Profits to
received by principal ) Sponsor
underwriter )
44. (a) Method of valuation ) The Trust; Public Offering of Units --
) Maintenance of a Secondary Market;
) Valuation of Units; Redemption of Units
(b) Schedule as to offering price) Essential Information Regarding the Trust;
) Public Offering of Units -- Public Offering
) Price; Valuation of Units; Schedule of
) Investments
(c) Variation in offering price ) Public Offering of Units -- Public Offering
to certain persons ) Price
45. Suspension of redemption rights ) *
46. (a) Redemption valuation ) Valuation of Units; Redemption of Units
(b) Schedule as to redemption ) *
price )
V. Information Concerning the Trustee or Custodian
47. Maintenance of position in ) Redemption of Units
underlying securities )
48. Organization and regulation of ) Trustee
Trustee )
</TABLE>
- ------------------
* Not applicable, answer negative or not required.
-vi-
<PAGE>
<TABLE>
<CAPTION>
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
<S> <C>
49. Fees and expenses of Trustee ) Essential Information Regarding the Trust;
) Expenses of the Trust; Trustee;
) Administration of the Trust -- Accounts;
) Distributions to Unitholders
50. Trustee's lien ) Expenses of the Trust
VI. Information Concerning Insurance of Holders of Securities
51. (a) Name and address of )
Insurance Company ) *
(b) Type of policies ) *
(c) Type of risks insured and )
excluded ) *
(d) Coverage of policies ) *
(e) Beneficiaries of policies ) *
(f) Terms and manner of )
cancellation ) *
(g) Method of determining )
premiums ) *
(h) Amount of aggregate )
premiums paid ) *
(i) Who receives any part of )
premiums ) *
(j) Other material provisions of )
the Trust relating to ) *
insurance )
VII. Policy of Registrant
52. (a) Method of selecting and ) The Trust; Administration of the Trust --
eliminating securities from ) Portfolio Supervision; Termination of the
the Trust ) Trust
</TABLE>
-vii-
<PAGE>
<TABLE>
<CAPTION>
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
<S> <C>
(b) Elimination of securities from ) Administration of the Trust -- Portfolio
the Trust ) Supervision
(c) Policy of Trust regarding ) The Trust; Administration of the Trust --
substitution and elimination ) Portfolio Supervision
(d) Description of any fundamental ) The Trust; Administration of the Trust --
policy of the Trust ) Portfolio Supervision; Termination of the
) Trust
53. (a) Taxable status of the Trust ) Tax Considerations
)
(b) Qualification of the Trust as a) *
regulated investment company )
VIII. Financial and Statistical Information
54. Information regarding the Trust's ) *
past ten fiscal years )
55. Certain information regarding ) *
periodic payment plan certificates )
56. Certain information regarding ) *
periodic payment plan certificates )
57. Certain information regarding ) *
periodic payment plan certificates )
58. Certain information regarding ) *
periodic payment plan certificates )
59. Financial statements ) Statement of Net Assets
(Instruction 1(c) to Form S-6) )
</TABLE>
- ------------------
* Not applicable, answer negative or not required.
-viii-
<PAGE>
HBI
EQUITY TRUST, SERIES 5
A UNIT INVESTMENT TRUST
A PORTFOLIO OF MIDWEST BANK AND THRIFT STOCKS
- -------------------------------------------------------------------------------
The investment objective of this Trust is to provide for capital appreciation
through an investment in common stocks primarily consisting of certain banking
institutions and thrift institutions incorporated or headquartered in the
midwestern United States and having, in the Sponsor's opinion, on the Initial
Date of Deposit, the potential to outperform broad-based stock indices and
bank and thrift stocks generally over the life of the Trust. The value of the
Units will fluctuate with the value of the portfolio of underlying securities.
The minimum purchase in the initial public offering is 100 Units or
approximately $1,500. Only whole Units may be purchased. Units will be
available for purchase only during the initial public offering period.
- -------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
LOGO
HOWE BARNES INVESTMENTS, INC.
Read and retain this Prospectus for future reference. Prospectus dated May 19,
1998
<PAGE>
ESSENTIAL INFORMATION REGARDING THE TRUST
As of May 18, 1998(1)
Sponsor: Howe Barnes Investments, Inc.
Trustee: The Bank of New York
Initial Date of Deposit...................................... May 19, 1998
<TABLE>
<S> <C>
Aggregate Value of Stocks in Trust (2).............................. $8,684,973
Number of Units..................................................... 600,000
Fractional Undivided Interest in the Trust Represented by Each Unit. 1/600,000
Calculation of Public Offering Price per Unit (3)
Aggregate Value of Stocks in Trust (2)............................. $8,684,973
Divided by 600,000 Units........................................... $14.475
Plus Sales Charge of 3.500% of Public Offering Price (3.627% of net
amount invested).................................................. $.525
Public Offering Price per Unit..................................... $15.000
Redemption Price per Unit (3)....................................... $14.192
Excess of Public Offering Price per Unit over Redemption Price per
Unit............................................................... $.808
</TABLE>
Evaluation Time......................................... 3:00 p.m. Chicago time
Income and Capital Account Distribution Dates...... June 15, 1998 and quarterly
thereafter
Record Dates............................. June 1, 1998 and quarterly thereafter
Mandatory Termination Date............................ May 15, 2001
Discretionary Liquidation Amount...... 40% of the aggregate market value of the
Stocks
Trustee's Annual Fee................................................... $11,000
Estimated Annual Sponsor's Supervisory Fee...................... $.043 per Unit
Estimated Annual Miscellaneous Expenses......................... $.010 per Unit
- -------
(1) The date prior to the Initial Date of Deposit.
(2) Represents value of the Stocks in the portfolio based on the closing
prices at the offer side of the market on May 18, 1998, rather than the
closing prices at the bid side of the market. After the initial offering,
Net Asset Value of the Trust is calculated based on the closing prices at
the bid side of the market of the Stocks. See "Valuation of Units." The
aggregate value of the Stocks based on the closing bid prices on May 18,
1998 is $8,515,324.
(3) The initial Public Offering Price per Unit on the Initial Date of Deposit
is based on the pro rata share of the aggregate value of the Stocks in the
Trust, valued at the offer side of the market, plus the applicable sales
charge. Thereafter, the Public Offering Price during the initial public
offering period will be based upon the Net Asset Value of the Trust next
computed (based, during the initial public offering period only, on
valuation at the offer side of the market) as described in "Valuation of
Units" plus the applicable sales charge. The Redemption Price per Unit
will be calculated based on the Net Asset Value next computed (based on
valuation at the bid side of the market) based on the pro rata share of
the aggregate value of the Stocks in the Trust as described in "Redemption
of Units."
2
<PAGE>
HBI EQUITY TRUST, SERIES 5
HBI Equity Trust. The objective of the HBI Equity Trust, Series 5 (the
"Trust") is to provide for capital appreciation through an investment in
common stocks primarily consisting of banking institutions and thrift
institutions incorporated or headquartered in the midwestern United States
(the "Stocks"). Stocks have been selected which, in the Sponsor's opinion, on
the Initial Date of Deposit have the potential to outperform broad-based stock
indices and bank and thrift stocks generally over the life of the Trust. The
Trust is not a "managed" investment portfolio, but rather will consist of the
same portfolio of Stocks for the life of the Trust, subject to adjustment or
elimination in certain limited circumstances. Except for temporary investment
of any proceeds received in such limited circumstances, the Trust's portfolio
will consist primarily of common stocks. See "Administration of the Trust."
The Trust will seek to achieve its objective of capital appreciation through
an investment in a portfolio primarily consisting of Stocks representing
banking institutions and thrift institutions incorporated or headquartered in
the midwestern United States. The Sponsor believes that changes in state
banking laws to permit wider interstate banking and the continuing
consolidation of the banking and thrift industries have created attractive
investment opportunities among numerous midwestern banking institution and
thrift institution stocks. The Sponsor believes these stocks have the
potential to achieve above-average capital appreciation over the next three
years primarily due to strong or improving fundamental characteristics of the
issuer companies, including among other factors, strength and depth of
management, strategic banking locations in stable or growing market areas,
high asset quality, and potential earnings growth.
In selecting the Stocks for the Trust, the Sponsor has considered, among
other financial criteria of the issuer (or its banking or thrift subsidiary),
regulatory capital levels, net interest margin, return on average assets,
return on average equity, the adequacy of the loan loss reserve, the level of
non-performing and non-accrual loans, and loan charge-off history. The Sponsor
did not base its selection of Stocks for the Trust on the payment of dividends
by the various issuers; however, many selected Stocks do currently pay
dividends.
Bank stocks (as represented by the NASDAQ Bank Index) have outperformed the
general market (as represented by the S&P 500 Index) over the last five years.
Over the period of January 3, 1992 through December 31, 1997, the NASDAQ Bank
Index grew from 356.54 to 2083.22, while the S&P 500 Index grew from 419.34 to
970.43. During the years 1992, 1993, 1994, 1995, 1996 and 1997, the price
appreciation of the NASDAQ Bank Index was 52%, 29%, 1%, 45%, 26% and 63%,
respectively, while the price of appreciation of the S&P 500 Index in the same
periods was 5%, 7%, -2%, 34%, 20% and 31%. These figures represent the price
appreciation of the stocks included in each index and do not include dividends
paid on such stocks. The historical performance of the indices is shown for
illustrative purposes only and is not meant to forecast, imply or guarantee
the future performance of any particular investment or the Trust, which will
vary. The NASDAQ Bank Index is a broad-based, capitalization-weighted index of
domestic and foreign common stocks of banks and thrifts that are traded on the
Nasdaq National Market System and SmallCap Market. The overall composition of
the Trust will not be the same as that of the indices. Unitholders are subject
to fees, sales charges and taxes that are not reflected in these figures.
3
<PAGE>
Termination. Unless advised to the contrary by the Sponsor, the Trustee will
begin to sell the Stocks held in the Trust 30 days prior to the Mandatory
Termination Date. Moneys held upon such sale of Stocks, to the extent not
reinvested in Treasury Obligations, and funds received from Treasury
Obligations upon maturity will be held in non-interest bearing accounts until
distributed and will be of benefit to the Trustee. See "Expenses of the
Trust." During the life of the Trust, Stocks will not be sold to take
advantage of market fluctuations. The Trust will terminate on the Mandatory
Termination Date regardless of market conditions at that time. See
"Termination of the Trust" and "Tax Considerations."
Public Offering Price. The initial Public Offering Price per Unit on the
Initial Date of Deposit is determined by dividing the aggregate value of the
Stocks, based on the closing prices at the offer side of the market on the
date prior to the Initial Date of Deposit, by the number of Units being sold,
plus the applicable sales charge. Thereafter, during the initial public
offering period, the Public Offering Price per Unit is computed by dividing
the Net Asset Value of the Trust (based, during the initial public offering
period only, on valuation of the Securities at the offer side of the market),
as determined by the Trustee as described under "Valuation of Units," by the
number of Units outstanding, then adding the applicable sales charge. During
the initial public offering period, the sales charge will be 3.500% of the
Public Offering Price (3.627% of the net amount invested); provided, however,
that a reduced sales charge will apply to employees and affiliates of the
Sponsor and certain of their relatives and transactions involving $500,000 or
more. See "Public Offering of Units--Public Offering Price."
Distributions. The Trustee will make pro rata distributions to Unitholders
from both the Income Account and the Capital Account on each Distribution Date
to the extent funds are available for distribution in the respective accounts.
See "Distributions to Unitholders." Upon termination of the Trust, the Trustee
will distribute to each Unitholder of record on such date his pro rata share
of the Trust's assets, less expenses. Holders may request to receive such
distribution "in kind." See "Redemption of Units" and "Termination of the
Trust." See "Tax Considerations" for a discussion of the tax consequences to
an investor of an "in kind" redemption. The sale of Stocks in the Trust in the
period prior to termination and upon termination may result in a lower amount
than might otherwise be realized if such sale were not required at such time
due to impending or actual termination of the Trust. For this reason, among
others, the amount realized by a Unitholder upon termination may be less than
the amount paid by such Unitholder.
Secondary Market. Although the Sponsor is not obligated to maintain a
secondary market for the Units, the Sponsor presently intends to do so. The
maintenance of a secondary market may be discontinued at any time. If a
secondary market is not maintained, a Unitholder may dispose of his Units
through redemption.
Risk Factors. An investment in the Trust should be made with an
understanding of the risks associated therewith, including, among others, the
possible deterioration of either the financial condition of the issuer or the
general condition of the stock market, volatile interest rates, economic
recession and risk factors affecting banks and thrifts. See "The Trust--Risk
Factors."
4
<PAGE>
REPORT OF INDEPENDENT AUDITORS
THE UNITHOLDERS, SPONSOR AND TRUSTEE
HBI EQUITY TRUST, SERIES 5
We have audited the accompanying statement of net assets, including the
schedule of investments, of HBI Equity Trust, Series 5, as of the opening of
business on May 19, 1998. This statement of net assets is the responsibility
of the Trust's Sponsor. Our responsibility is to express an opinion on this
statement of net assets based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statement of net assets is free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the statement of net
assets. Our procedures included confirmation of the letter of credit held by
the Trustee and deposited in the Trust on May 19, 1998. An audit also includes
assessing the accounting principles used and significant estimates made by the
Sponsor, as well as evaluating the overall presentation of the statement of
net assets. We believe that our audit of the statement of net assets provides
a reasonable basis for our opinion.
In our opinion, the statement of net assets referred to above presents
fairly, in all material respects, the financial position of HBI Equity Trust,
Series 5 at the opening of business on May 19, 1998 in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
May 19, 1998
HBI EQUITY TRUST, SERIES 5
STATEMENT OF NET ASSETS
At the opening of business on May 19, 1998, the Initial Date of Deposit.
NET ASSETS
<TABLE>
<S> <C>
Investments (1)(2)............................................. $8,684,973
==========
Units outstanding.............................................. 600,000
==========
ANALYSIS OF NET ASSETS
Cost to investors (3).......................................... $8,999,972
Less sales charge (3).......................................... 314,999
----------
Net proceeds to the Trust, equal to net assets................. $8,684,973
==========
</TABLE>
- -------------------
(1) Aggregate cost to the Trust of the Stocks listed in the schedule of
investments is based on the closing prices at the offer side of the market
of the Stocks on May 18, 1998, the business day prior to the Initial Date
of Deposit, as determined by the Trustee in its capacity as Evaluator.
(2) Investments consist of $8,684,973 aggregate value of Stocks represented by
Sponsor's contracts to purchase the Stocks for which an irrevocable letter
of credit from Harris Trust and Savings Bank totaling $10,000,000 has been
deposited with the Trustee.
(3) The aggregate cost to investors includes a sales charge computed at the
rate of 3.500% of the initial Public Offering Price (equivalent to 3.627%
of the net amount invested) and assumes no reduction in sales charges for
purchases by employees and affiliates of the Sponsor and certain of their
relatives or for quantity purchases.
5
<PAGE>
HBI EQUITY TRUST, SERIES 5
SCHEDULE OF INVESTMENTS
At the opening of business on May 19, 1998, the Initial Date of Deposit.
<TABLE>
<CAPTION>
COST OF
STOCKS TO
TICKER NUMBER TRUST
SYMBOL NAME OF ISSUERS (LOCATION) OF SHARES (1)(2)
------ ---------------------------------------------- --------- ----------
<C> <S> <C> <C>
ANBC ANB Corporation, Muncie, IN................... 12,965 $ 377,606
ABCL Alliance Bancorp, Hinsdale, IL................ 13,308 377,615
ASBC Associated Banc-Corp, Green Bay, WI........... 7,279 377,598
BANF BancFirst Corporation, Oklahoma City, OK...... 7,908 377,607
BRBK Brenton Banks, Inc., Des Moines, IA........... 17,164 377,608
BNK CNB Bancshares, Inc., Evansville, IN.......... 7,939 377,599
CBCF Citizens Banking Corporation, Flint, MI....... 10,563 377,627
CFBX Community First Bankshares, Inc., Fargo, ND... 15,492 377,618
CORS Corus Bankshares, Inc., Chicago, IL........... 8,582 377,608
FMBK F&M Bancorporation, Inc., Kaukauna, WI........ 9,099 377,608
FRME First Merchants Corporation, Muncie, IN....... 8,807 377,600
HFFC HF Financial Corp., Sioux Falls, SD........... 10,417 377,616
Heritage Financial Services, Inc., Tinley
HERS Park, IL...................................... 10,275 377,606
HOMF Home Federal Bancorp, Seymour, IN............. 11,530 377,608
MAFB MAF Bancorp. Inc., Clarendon Hills, IL........ 9,792 377,604
OSKY Mahaska Investment Company, Oskaloosa, IA..... 16,690 377,611
MBHI Midwest Banc Holdings, Inc., Melrose Park, IL. 18,880 377,600
NCBM National City Bancorporation, Minneapolis, MN. 10,712 377,598
OSBC Old Second Bancorp, Inc., Aurora, IL.......... 5,743 377,602
SBIT Summit Bancshares, Inc., Fort Worth, TX....... 16,690 377,611
VBNJ Vista Bancorp, Inc., Phillipsburg, NJ......... 15,652 377,604
West Bancorporation, Inc., West Des Moines,
WTBA IA............................................ 19,616 377,608
WCBI Westco Bancorp, Inc., Westchester, IL......... 12,483 377,611
----------
TOTAL INVESTMENTS.................................. $8,684,973
==========
</TABLE>
- -------------------
(1) Represents the aggregate value of the Stocks based on the closing prices
on May 18, 1998, the business day prior to the Initial Date of Deposit, at
the offer side of the market. The aggregate value of the Stocks based on
the closing prices at the bid side of the market on May 18, 1998 was
$8,515,324.
(2) The aggregate cost of the Stocks to the Sponsor, including brokerage
commissions, was $8,559,990 and the profit to the Sponsor at the opening
of Business on the Initial Date of Deposit was $124,983. See "Public
Offering of Units--Profits to the Sponsor."
6
<PAGE>
THE TRUST
General. The Trust is one of a series of similar but separate unit
investment trusts created under New York law by the Sponsor pursuant to a
Trust Agreement dated as of the Initial Date of Deposit (the "Indenture"),
between Howe Barnes Investments, Inc. (the "Sponsor") and The Bank of New York
(the "Trustee"). Reference is made to the Indenture and any statements
contained herein are qualified in their entirety by the provisions of the
Indenture.
The portfolio of the Trust primarily consists of common stock of certain
issuers selected by the Sponsor, including, in the case of securities not
delivered on the Initial Date of Deposit, confirmations of contracts to
purchase such securities, and any additional stocks acquired and held in the
Trust pursuant to the Indenture (collectively, the "Stocks"). Portfolios of
additional series may include shares of preferred stock or other equity
securities convertible into common stock.
On the Initial Date of Deposit, the Sponsor deposited the Stocks with the
Trustee together with cash or an irrevocable letter or letters of credit of a
commercial bank or banks in an amount at least equal to the aggregate purchase
price of any of the Stocks represented by confirmation of contracts to
purchase such securities. The value of the Stocks on the Initial Date of
Deposit was determined on the basis of the closing prices at the offer side of
the market on the business day prior to the Initial Date of Deposit. In
exchange for the deposit of the Stocks, including any contracts to purchase
Stocks, the Trustee delivered to the Sponsor a receipt for Units representing
the entire ownership of the Trust.
On the Initial Date of Deposit, each Unit represented that fractional
undivided interest in each of the Stocks as set forth under "Essential
Information Regarding the Trust." If any Units are redeemed, the aggregate
value of Stocks in the Trust will be reduced, and the fractional undivided
interest represented by each remaining Unit will be increased proportionately.
Units will remain outstanding until redeemed upon tender to the Trustee by any
Unitholder (which may include the Sponsor) or until the termination of the
Trust. See "Termination of the Trust."
In the event a contract to purchase a Stock which is deposited on the
Initial Date of Deposit fails, funds attributable to such failed contract may
be reinvested in such other substantially similar stock or stocks, if any,
which have been identified as substitute stocks by the Sponsor as of the
Initial Date of Deposit or, if not so reinvested within 40 days after the
Initial Date of Deposit (the "Purchase Period"), distributed to Unitholders of
record on the last day of the month during which the end of the Purchase
Period occurred. The distribution will be made within 20 days following such
record date and, in the event of such a distribution, the Sponsor will refund
to each Unitholder the portion of the sales charge attributable to such failed
contract.
Additional Units of the Trust may be issued at any time by depositing in the
Trust additional Stocks or contracts to purchase securities together with
irrevocable letters of credit or cash. As additional Units are issued by the
Trust as a result of the deposit of additional Stocks by the Sponsor, the
aggregate value of the Stocks in the Trust will be increased and the
fractional undivided interest in the Trust represented by each Unit will be
decreased. The Sponsor may continue to make additional deposits of Stocks into
the Trust following the Initial Date of Deposit, provided that such additional
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deposits will be in amounts which will maintain, as nearly as practicable, the
original proportionate relationship and not the actual proportionate
relationship on the subsequent date of deposit, since the actual proportionate
relationship may be different than the original proportionate relationship.
Any such difference may be due to the sale, redemption or liquidation of any
of the Stocks deposited in the Trust on the Initial, or any subsequent, Date
of Deposit.
Each Unit initially offered represents an undivided interest in the Trust.
To the extent any Units are redeemed by the Trustee or additional Units are
issued as a result of additional Stocks being deposited by the Sponsor, the
fractional undivided interest in the Trust represented by each unredeemed Unit
will increase or decrease accordingly, although the actual interest in the
Trust represented by such fraction will remain unchanged. Investors should
note that the Stocks were selected for inclusion in the Trust as of the
Initial Date of Deposit. The Trust may continue to purchase or hold Stocks
originally selected through this process even though the evaluation of the
attractiveness of the Stocks may have changed and, if the evaluation were
performed again at that time, the Stocks would not be selected for the Trust.
Because the Trust is organized as a unit investment trust, rather than as a
management investment company, the Trustee and the Sponsor do not have
authority to manage the Trust's assets in an attempt to take advantage of
various market conditions to improve the Trust's Net Asset Value, but rather
may dispose of Stocks only under limited circumstances. The original
proportionate relationship among the Stocks is only subject to adjustment (i)
to reflect the occurrence of a stock split, stock dividend or a similar event
which affects the capital structure of the issuer of a Stock but which does
not affect the Trust's percentage ownership of the common stock equity of such
issuer at the time of such event, (ii) to reflect a sale of a Stock, (iii) to
reflect the acquisition (and subsequent disposition upon maturity) of Treasury
Obligations or (iv) to reflect a merger or reorganization by an issuer of a
Stock. See "Administration of the Trust--Portfolio Supervision" and
"Administration of the Trust--Reinvestment."
The Stocks are common stocks which have been selected by the Sponsor as
having, as of the Initial Date of Deposit, an above-average capital
appreciation potential over the life of the Trust. Stocks contained in the
Trust will not be sold to take advantage of market fluctuations nor will they
be sold solely because the Sponsor no longer considers them to have
appreciation potential. Proceeds from the sale of Stocks, if any (unless such
proceeds are reinvested in Treasury Obligations if and to the extent there is
no legal impediment thereto), and any dividends and distributions received
will be held by the Trustee in non-interest bearing accounts until used to pay
expenses or distributed to Unitholders on the next following Distribution
Date. See "Administration of the Trust--Reinvestment." To the extent that
funds are held in such non-interest bearing accounts, such funds will benefit
the Trustee.
Risk Factors. An investment in Units of the Trust should be made with an
understanding of the risks inherent in an investment in common stocks in
general, including the risk that the financial condition of the issuers of the
Stocks or the general condition of the stock market may worsen and the value
of the Stocks and therefore the value of the Units may decline. Common stocks
are especially susceptible to general stock market movements and to volatile
increases and decreases of value as market confidence in and perceptions of
the issuers change. These perceptions are based on
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unpredictable factors including expectations regarding domestic and foreign
government, economic, monetary and fiscal policies, inflation and interest
rates, economic expansion or contraction, and global or regional political,
economic or banking crises. The general risks are associated with the rights
to receive payments from the issuer which are generally inferior to creditors
of, or holders of debt obligations or preferred stocks issued by, the issuer.
Holders of common stocks have a right to receive dividends only when and if,
and in the amounts, declared by the issuer's board of directors and to
participate in amounts available for distribution by the issuer only after all
other claims against the issuer have been paid or provided for. By contrast,
holders of preferred stocks have the right to receive dividends at a fixed
rate when and as declared by the issuer's board of directors, normally on a
cumulative basis, but do not participate in other amounts available for
distribution by the issuing corporation. Dividends on cumulative preferred
stock must be paid before any dividends are paid on common stock. Preferred
stocks are also entitled to rights on liquidation which are senior to those of
common stocks. For these reasons, preferred stocks generally entail less risk
than common stocks.
Common stocks do not represent an obligation of the issuer. Therefore they
do not offer any assurance of income or provide the degree of protection of
debt securities. The issuance of debt securities or preferred stock by an
issuer will create prior claims for payment of principal, interest and
dividends, which could adversely affect the ability and inclination of the
issuer to declare or pay dividends on its common stock or the rights of
holders of common stock with respect to assets of the issuer upon liquidation
or bankruptcy. Unlike debt securities, which typically have a stated principal
amount payable at maturity, common stocks do not have a fixed principal amount
or a maturity. Additionally, the value of the Stocks in the Trust is subject
to market fluctuations for as long as the Stocks remain outstanding, and
therefore over the life of the Trust the Stocks in the Trust may be expected
to fluctuate to values higher or lower than those prevailing on the Initial
Date of Deposit.
The Trust is concentrated in Stocks issued by companies in the banking and
thrift industries. In view of this, an investment in Units of the Trust should
be made with an understanding of the problems and risks inherent in the
banking and thrift industries in general. Banking institutions and thrift
institutions are especially subject to the adverse effects of economic
recession, volatile interest rates, portfolio concentrations in geographic
markets and in commercial and residential real estate loans, and competition
from new entrants in their fields of business. Economic conditions in the real
estate markets can have a significant effect upon banking institutions and
thrift institutions because they generally have a substantial percentage of
their assets invested in loans secured by real estate. Banking institutions
and thrift institutions are subject to extensive federal regulation and, when
such institutions are state-chartered, to state regulation as well. Regulatory
actions, such as increases in the minimum capital requirements applicable to
commercial banks and thrifts and increases in deposit insurance premiums
required to be paid by commercial banks and thrifts to the FDIC, can
negatively impact earnings and the ability of an institution to pay dividends.
Furthermore, neither federal insurance of deposits nor governmental
regulation, however, ensures the solvency or profitability of banking
institutions or thrift institutions, or insures against any risk of investment
in the securities issued by such institutions.
Financial institutions and their holding companies are extensively regulated
under federal and state laws. As a result, the business, financial condition
and prospects of banks and thrifts can be
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materially affected not only by management decisions and general economic
conditions, but also by applicable statutes and regulations and other
regulatory pronouncements and policies promulgated by regulatory agencies with
jurisdiction over the banks and thrifts, such as the Board of Governors of the
Federal Reserve System ("FRB"), the Office of the Comptroller of the Currency
("OCC"), the Office of Thrift Supervision (the "OTS"), the Federal Deposit
Insurance Corporation ("FDIC") and the state banking regulators. The effect of
such statutes, regulations and other pronouncements and policies can be
significant, cannot be predicted with a high degree of certainty and can
change over time. Furthermore, such statutes, regulations and other
pronouncements and policies are intended to protect depositors and the FDIC's
deposit insurance funds, not to protect stockholders. Bank and thrift holding
companies as well as their subsidiary banks and thrifts are subject to
enforcement actions by their regulators for regulatory violations. In addition
to compliance with statutory and regulatory limitations and requirements
concerning financial and operating matters, regulated financial institutions
must file periodic and other reports and information with their regulators and
are subject to examination by each of their regulators.
The statutory requirements applicable to and regulatory supervision of bank
and thrift holding companies and their subsidiary banks and thrifts have
increased significantly and have undergone substantial change in recent years.
To a great extent, these changes are embodied in the Financial Institutions
Reform, Recovery and Enforcement Act ("FIRREA"), enacted in August 1989, the
Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"),
enacted in December 1991, and the regulations promulgated under FIRREA and
FDICIA. The impact of regulations promulgated pursuant to FDICIA on the
business and financial condition and prospects of banks and thrifts cannot be
predicted with certainty. Banks and thrifts currently face significant
competition from other financial institutions such as mutual funds, securities
and brokerage companies, credit unions, mortgage banking corporations and
insurance companies, and increased competition may result from broadening
national interstate banking powers and liberalization of certain restrictions
on the activities of nonbank subsidiaries of banks and thrifts. Many of these
competitors are much larger in total assets and capitalization, have greater
access to capital markets and offer a broader array of financial services than
the issuers of the Stocks. There can be no assurance that such issuers will be
able to compete effectively in their markets, and the results of operations
could be adversely affected if circumstances affecting the nature or level of
competition change.
Federal legislation became effective in 1995 which serves to lessen or
remove certain legal barriers to interstate banking and branching by financial
institutions. The legislation has resulted in an increase in the nationwide
consolidation activity occurring among financial institutions by facilitating
interstate bank operations and acquisitions. The effects of changes in
interstate banking have increased competition within the banking industry,
however, these changes are ongoing and may have an adverse impact on certain
issuers. In addition, the Federal Reserve Board has approved applications by
bank holding companies to engage, through nonbank subsidiaries, in certain
securities-related activities, provided that the subsidiaries would not be
"principally engaged" in such activities for purposes of Section 20 of the
Glass-Steagall Act. In certain situations, holding companies may be able to
use such subsidiaries to underwrite and deal in corporate debt and equity
securities. The Federal Reserve Board has recently liberalized the standards
used in determining whether a subsidiary is
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principally engaged in such activities. From time to time bills have been
introduced in Congress that would remove many of the Glass-Steagall Act
restraints, although no comprehensive bill has been enacted to date. This and
any future liberalization of Glass-Steagall could result in increased
competition which could have an adverse impact on certain issuers. The Sponsor
makes no prediction as to what, if any, additional bank and thrift regulatory
reform might be adopted or what ultimate effect such reform might have on the
Trust's portfolio.
Like other investment companies, financial and business organizations and
individuals around the world, the Trust could be adversely affected if the
computer systems used by the Sponsor, Trustee or other service providers to
the Trust do not properly process and calculate date-related information and
data from and after January 1, 2000. This is commonly known as the "Year 2000
Problem." The Sponsor and Trustee are taking steps that they believe are
reasonably designed to address the Year 2000 Problem with respect to computer
systems that they use and to obtain reasonable assurances that comparable
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 impact corporations, which may include
issuers of Stocks contained in the Trust, to varying degrees based upon
various factors, including, but not limited to, their industry sector and
degree of technological sophistication. The Sponsor is unable to predict what
impact, if any, the Year 2000 Problem will have on issuers of the Stocks
contained in the Trust.
Until distributed, proceeds received upon the sale of Stocks may be
reinvested in interest-bearing Treasury Obligations maturing prior to the next
Distribution Date or, if earlier, December 31 of the year of purchase to the
extent legally permissible. See "Administration of the Trust--Reinvestment."
The value of the Securities and, therefore, the value of Units, may be
expected to fluctuate.
The Sponsor has acquired or will acquire the Stocks and thereby benefits
from transaction fees. The Sponsor in its general securities business acts as
agent or principal in connection with the purchase and sale of equity
securities, including the Stocks in the Trust, and may act as a market maker
in certain or all of the Stocks. The Sponsor also from time to time may issue
reports on and make recommendations relating to equity securities, which may
include the Stocks. See "Public Offering of Units--Profits to the Sponsor."
TAX CONSIDERATIONS
The following is a general discussion of certain of the federal income tax
consequences of the purchase, ownership and disposition of the Units. The
summary is limited to investors who hold the Units as "capital assets"
(generally, property held for investment) within the meaning of Section 1221
of the Internal Revenue Code of 1986, as amended (the "Code"). Unitholders
should consult their tax advisers in determining the federal, state, local and
any other tax consequences of the purchase, ownership and disposition of Units
in the Trust. For purposes of the following discussion and opinions, it is
assumed that each Stock is equity for federal income tax purposes.
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In the opinion of Chapman and Cutler, special counsel for the Sponsor, under
existing law:
1. The Trust is not an association taxable as a corporation for federal
income tax purposes; each Unitholder will be treated as the owner of a pro
rata portion of each of the assets of the Trust under the Code; and the
income of the Trust will be treated as income of the Unitholders thereof
under the Code. Each Unitholder will be considered to have received his pro
rata share of income derived from each Stock when such income is considered
to be received by the Trust.
2. Each Unitholder will be considered to have received all of the
dividends paid on his pro rata portion of each Stock when such dividends
are received by the Trust. Unitholders will be taxed in this manner
regardless of whether distributions from the Trust are actually received by
the Unitholder.
3. Each Unitholder will have a taxable event when the Trust disposes of a
Stock (whether by sale, taxable exchange, liquidation, redemption or
otherwise) or upon the sale of redemption of Units by such Unitholder
(except to the extent an "in kind" distribution of Stocks is received by
such Unitholder as described below). The price a Unitholder pays for his
Units, generally including sales charges, is allocated among his pro rata
portion of each of the Stocks held by the Trust (in proportion to the fair
market values thereof on the valuation date closest to the date the
Unitholder purchases his Units) in order to determine his initial tax basis
for his pro rata portion of each of the Stocks held by the Trust.
Unitholders should consult their own tax advisers with regard to
calculation of basis. For federal income tax purposes, a Unitholder's pro
rata portion of dividends, as defined by Section 316 of the Code, paid by a
corporation with respect to a Stock held by the Trust is taxable as
ordinary income to the extent of such corporation's current and accumulated
"earnings and profits." A Unitholder's pro rata portion of dividends paid
on such Stock which exceeds such current and accumulated earnings and
profits will first reduce a Unitholder's tax basis in such Stock, and, to
the extent that such dividends also exceed a Unitholder's tax basis in such
Stock, shall generally be treated as capital gain. In general, the holding
period for such capital gain will be determined by the period of time a
Unitholder has held his Units.
4. A Unitholder's portion of gain, if any, upon the sale or redemption of
Units or the disposition of any of the Stocks held by the Trust will
generally be considered a capital gain (except in the case of a dealer or a
financial institution). A Unitholder's portion of loss, if any, upon the
sale or redemption of Units or the disposition of any of the Stocks held by
the Trust will generally be considered a capital loss (except in the case
of a dealer or a financial institution). Unitholders should consult their
tax advisers regarding the recognition of such capital gains and losses for
federal income tax purposes.
Dividends Received Deduction. A corporation that owns Units will generally
be entitled to a 70% dividends received deduction with respect to such
Unitholder's pro rata portion of dividends received by the Trust (to the
extent such dividends are taxable as ordinary income, as discussed above, and
are attributable to domestic corporations) in the same manner as if such
corporation directly owned the Stocks paying such dividends (other than
corporate Unitholders, such as "S" corporations which are not eligible for the
deduction because of their special characteristics and other than for purposes
of special taxes such as the accumulated earnings tax and the personal holding
corporation tax). However, a
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corporation owning Units should be aware that Sections 246 and 246A of the
Code impose additional limitations on the eligibility of dividends for the 70%
dividends received deduction. These limitations include a requirement that
stock (and therefore Units) must generally be held at least 46 days (as
determined under Section 246(c) of the Code). Final Regulations have been
issued which address special rules that must be considered in determining
whether the 46-day holding period requirement is met. Moreover, the allowable
percentage of the deduction will be reduced from 70% if a corporate Unitholder
owns certain stock (or Units) the financing of which is directly attributable
to indebtedness incurred by such corporation. It should be noted that various
legislative proposals that would affect the dividends received deduction have
been introduced. Unitholders should consult their tax advisers with respect to
the limitations on and possible modifications to the dividends received
deduction.
Limitations on Deductibility of Trust Expenses by Unitholders. Each
Unitholder's pro rata share of each expense paid by the Trust is deductible by
the Unitholder to the same extent as though the expense had been paid directly
by such Unitholder. It should be noted that as a result of the Tax Reform Act
of 1986, certain miscellaneous itemized deductions, such as investment
expenses, tax return preparation fees and employee business expenses will be
deductible by an individual only to the extent they exceed 2% of such
individual's adjusted gross income. Unitholders may be required to treat some
or all of the expenses of the Trust as miscellaneous itemized deductions
subject to this limitation.
Recognition of Taxable Gain or Loss Upon Disposition of Stocks or
Disposition of Units. As discussed above, a Unitholder may recognize taxable
gain (or loss) when any of the Stocks are disposed of by the Trust or if the
Unitholder disposes of a Unit. The Taxpayer Relief Act of 1997 (the "1997
Act") provides that for taxpayers other than corporations, net capital gain
(which is defined as net long-term capital gain over net short-term capital
loss for the taxable year) is subject to a maximum marginal stated tax rate of
either 28% or 20%, depending upon the holding periods of the capital assets.
Capital gain or loss is long-term if the holding period for the asset is more
than one year, and is short-term if the holding period for the asset is one
year or less. The date on which a Unit is acquired (i.e., the "trade date") is
excluded for purposes for determining the holding period of the Unit.
Generally, capital gains realized from assets held for more than one year but
not more than 18 months are taxed at a maximum marginal stated tax rate of 28%
and capital gains realized from assets (with certain exclusions) held for more
than 18 months are taxed at a maximum marginal stated tax rate of 20% (10% in
the case of certain taxpayers in the lowest tax bracket). Further, capital
gains realized from assets held for one year or less are taxed at the same
rates as ordinary income. Legislation is currently pending that provides the
appropriate methodology that should be applied in netting the realized capital
gains and losses. Such legislation is proposed to be effective retroactively
for tax years ending after May 6, 1997. It should be noted that legislative
proposals are introduced form time to time that affect tax rates and could
affect relative differences at which ordinary income and capital gains are
taxed.
In addition, please note that capital gains may be recharacterized as
ordinary income in the case of certain financial transactions that are
considered "conversion transactions" effective for transactions entered into
after April 30, 1993. Unitholders and prospective investors should consult
with their tax advisers regarding the potential effect of this provision on
their investment in Units.
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If the Unitholder disposes of a Unit, he is deemed thereby to have disposed
of his entire pro rata interest in all assets of the Trust involved including
his pro rata portion of all the Stocks represented by the Unit.
The 1997 Act includes provisions that treat certain transactions designed to
reduce or eliminate risk of loss and opportunities for gain (e.g., short
sales, offsetting notional principal contracts, futures or forward contracts,
or similar transactions) as constructive sales for purposes of recognition of
gain (but not loss) and for purposes of determining the holding period.
Unitholders should consult their own tax advisers with regard to any such
constructive sale rules.
"In Kind" Distributions. A Unitholder may request an "in kind" distribution
upon the termination of the Trust. In addition, with respect to redemption
requests during the term of the Trust of $100,000 or more, a Unitholder may be
required to take an "in kind" distribution if the Sponsor, in its sole
discretion, directs the Trustee to redeem Units "in kind". Treasury
Obligations held by the Trust will not be distributed to a Unitholder as part
of an "in kind" distribution. As previously discussed, prior to the redemption
of Units or the termination of the Trust, a Unitholder is considered to own a
pro rata portion of each of the Trust assets for federal income tax purposes.
The receipt of an "in kind" distribution will result in a Unitholder receiving
an undivided interest in whole shares of Stock plus, possibly, cash.
The potential tax consequences that may occur under an "in-kind"
distribution will depend on whether or not a Unitholder receives cash in
addition to Stock. A "Stock" for this purposes is a particular class of stock
issued by a particular corporation. A Unitholder will not recognize gain or
loss if a Unitholder only receives Stock in exchange for his or her pro rata
portion in the Stock held by the Trust. However, if a Unitholder also receives
cash in exchange for a fractional share of a Stock held by the Trust, such
Unitholder will generally recognize gain or loss based upon the difference
between the amount of cash received by the Unitholder and his tax basis in
such fractional share of a Stock held by the Trust.
Because the Trust will own several Stocks, a Unitholder who receives an "in
kind" distribution will have to analyze the tax consequences with respect to
each Stock owned by the Trust. The amount of taxable gain (or loss) recognized
upon such exchange will generally equal the sum of the gain (or loss)
recognized under the rules described above by such Unitholder with respect to
each Stock owned by the Trust. Unitholders who request or receive "in kind"
distributions are advised to consult their tax advisers in this regard.
Computation of the Unitholder's Tax Basis. Initially, a Unitholder's tax
basis in his Units will generally equal the price paid by such Unitholder for
his Units. The cost of the Units is allocated among the Stocks held in the
Trust in accordance with the proportion of the fair market values of such
Stocks on the valuation date nearest to the date the Units are purchased in
order to determine such Unitholder's tax basis for his pro rata portion of
each Stock.
A Unitholder's tax basis in his Units and his pro rata portion of a Stock
held by the Trust will be reduced to the extent dividends paid with respect to
such Stock are received by the Trust which are not taxable as ordinary income
as described above.
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General. Each Unitholder will be requested to provide the Unitholder's
taxpayer identification number to the Trustee and to certify that the
Unitholder has not been notified that payments to the Unitholder are subject
to back-up withholding. If the proper taxpayer identification number and
appropriate certification are not provided when requested, distributions by
the Trust to such Unitholder (including amounts received upon the redemption
of Units) will be subject to back-up withholding. Distributions by the Trust
will generally be subject to United States income taxation and withholding in
the case of Units held by non-resident alien individuals, foreign corporations
or other non-United States persons. Such persons should consult their tax
advisers.
Each Unitholder will be notified annually of the amounts of dividend income
includable in the Unitholder's gross income and the amount of Trust expenses
which may be claimed as itemized deductions.
The foregoing discussion relates only to the tax treatment of U.S.
Unitholders ("U.S. Unitholders") with regard to federal income tax.
Unitholders may be subject to state taxation and should consult their own tax
advisors in this regard. As used herein, the term "U.S. Unitholder" means an
owner of a Unit in the Trust that (a) is (i) for United States federal income
tax purposes a citizen or resident of the United States, (ii) a corporation,
partnership or other entity created or organized in or under the laws of the
United States or of any political subdivision thereof, or (iii) an estate or
trust the income of which is subject to United States federal income taxation
regardless of its source or (b) does not qualify as a U.S. Unitholder in
paragraph (a) but whose income from a Unit is effectively connected with such
Unitholder's conduct of a United States trade or business. The term also
includes certain former citizens of the United States whose income and gain on
the Units will be taxable.
PUBLIC OFFERING OF UNITS
Public Offering Price. The initial Public Offering Price per Unit on the
Initial Date of Deposit is based on the pro rata share of the aggregate value
of the Stocks in the Trust based on the closing prices at the offer side of
the market on the business day prior to the Initial Date of Deposit, plus the
sales charge of 3.500% (3.627% of the net amount invested). Thereafter, during
the initial public offering period, the Public Offering Price per Unit is the
Net Asset Value per Unit, which is based on the aggregate market value of the
Stocks valued at the closing prices at the offer side of the market, plus the
3.500% sales charge. See "Valuation of Units." During the secondary market the
Public Offering Price per Unit is the Net Asset Value per Unit, which is based
on the aggregate market value of the Stocks valued at the closing prices at
the bid side of the market, plus the 3.500% sales charge.
The Sponsor intends to permit a reduced sales charge with respect to Units
purchased by its employees and affiliates of the Sponsor and certain of their
relatives who may purchase Units of the Trust (individually or for their
retirement programs) at a reduced sales charge of 0.515% (0.518% of the net
amount invested). In addition, the Sponsor will permit a reduced sales charge
of 2.500% of the Public Offering Price (2.591% of the net amount invested)
with respect to Units purchased by any person in the amount of $500,000 or
more.
Distribution of Units. The minimum purchase is 100 Units, or approximately
$1,500. Only whole Units may be purchased.
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The Sponsor will be the sole underwriter of 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 3.000% of the
Public Offering Price 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.
The Sponsor reserves the right to reject, in whole or in part, any order for
the purchase of Units. The Sponsor intends to qualify the Units for sale in
the State of Illinois as well as in selected other states. Units will be sold
only to individuals and other investors resident in such states and to
institutional and other investors in other states to the extent there are
available exemptions from applicable state securities registration
requirements.
The Net Asset Value per Unit at the time of sale or transfer or upon
redemption may be less than the price at which the Unit was purchased.
Profits to the Sponsor. In addition to the applicable sales charges, the
Sponsor realizes a profit (or sustains a loss) in the amount of any difference
between the cost of the Stocks to the Sponsor and the price at which it
deposits the Stocks in the Trust in exchange for Units. For purposes of any
deposit, the Stocks will be valued at the closing prices at the offer side of
the market on the business day prior to the related date of deposit. The
spread between the cost of the Stocks to the Sponsor and the price at which
the Stocks were deposited in the Trust on the Initial Date of Deposit is set
forth in footnote (2) to the "Schedule of Investments." The cost of Stocks to
the Sponsor includes the amount paid by the Sponsor, if any, for brokerage
commissions. These amounts are not an expense of the Trust.
Cash, if any, received from Unitholders prior to the settlement date for the
purchase of Units or prior to the payment for Stocks upon their delivery may
be used in the Sponsor's business subject to the limitations of Rule 15c3-3
under the Securities Exchange Act of 1934, as amended, and may be of benefit
to the Sponsor.
In selling Units in the initial or secondary public offering, the Sponsor
may realize profits or sustain losses to the extent there are any fluctuations
in the Public Offering Price of the Units after a date of deposit before
completion of the sale of the Units in the initial public offering.
Maintenance of a Secondary Market. Although the Sponsor is not obligated to
maintain a secondary market for the Units, the Sponsor currently intends to do
so. The secondary market may be discontinued at any time. If a secondary
market is not maintained, a Unitholder may dispose of his Units through
redemption. With respect to redemption requests of $100,000 or more, the
Sponsor may, in its sole discretion, direct the Trustee to redeem Units "in
kind" by distributing stocks to the redeeming Unitholder. See "Redemption of
Units." The Public Offering Price per Unit in the secondary market will be the
Net Asset Value per Unit, which will be based on the aggregate market value of
the Stocks valued at the closing prices at the bid side of the market, plus
the 3.500% sales charge. See "Valuation of Units."
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REDEMPTION OF UNITS
Units held in uncertificated form may be redeemed by delivering a written
request for redemption to the Trustee at its office. Units held in
certificated form may be tendered to the Trustee at its office (currently
located at the address indicated on the back cover), must be properly endorsed
or accompanied by a written instrument of transfer in form satisfactory to the
Trustee, and must be executed by the Unitholder or his authorized attorney. In
either case the Unitholder must pay any transfer or similar tax which must be
paid to effect redemption and, Unitholders of uncertificated Units must sign
such written request and Unitholders of certificated Units must sign such
certificate transfer instrument, exactly as their name appears on the records
of the Trustee and on any certificate representing the Units to be redeemed.
Such signature(s) must be guaranteed by a participant in the Securities
Transfer Agents Medallion Program ("STAMP") or such other signature guarantee
program in addition to, or in substitution for, STAMP, as may be accepted by
the Trustee. A Unitholder may tender his Units for redemption at any time
after the settlement date or purchase. The Unitholder upon redemption will
receive the Net Asset Value per Unit determined as of the close of business on
the day of tender. There is no sales charge incurred when a Unitholder tenders
his Units to the Trustee for redemption unless the redemption is an amount
less than 7,500 Units in which case a fee of $150 will be charged. The amount
received by a Unitholder upon redemption may be more or less than the amount
paid by the Unitholder depending on the value of the Stocks in the portfolio
at the time of redemption. The redemption price per Unit on the Initial Date
of Deposit will be less than the initial Public Offering Price per Unit both
because the sales charge in included in the offering price and because the
redemption price is based on valuations of the Stocks at the bid side of the
market rather than the closing prices at the offer side of the market. See
"Essential Information Regarding the Trust." Prior to redeeming such Units
from the Trust, the Trustee shall offer such Units for sale to the Sponsor at
the Net Asset Value per Unit. Subject to payment of applicable tax or
governmental charges, if any, the Net Asset Value of Units tendered for
redemption will be paid to the redeeming Unitholder no later than the seventh
calendar day following the day of tender. See "Valuation of Units."
With respect to cash redemptions, amounts representing income received shall
be withdrawn from the Income Account, and, to the extent the Income Account is
insufficient and for remaining amounts, from the Capital Account. The Trustee
is empowered, to the extent necessary, to sell Stocks to meet redemptions.
Treasury Obligations, if any, held by the Trust must be held to maturity and
cannot be disposed of by the Trustee. The Trustee will sell Stocks in such
manner as is directed by the Sponsor. With respect to redemption requests of
$100,000 or more, the Sponsor may, in its sole discretion, direct the Trustee
to redeem Units "in kind" by distributing Stocks to the redeeming Unitholder.
When Stocks are so distributed, the Unitholder will receive that number of
whole shares of each Stock representing the aggregate of his interest in each
of the Stocks, plus cash in lieu of fractional shares. Stocks will be valued
for this purpose as set forth under "Valuation of Units." A Unitholder
receiving a redemption "in kind" may incur brokerage or other transaction
costs in converting the Stocks distributed into cash. For information on the
tax effects of receiving a redemption "in kind", see "Tax Considerations."
To the extent that shares of Stocks are distributed pursuant to redemption
"in kind" or sold, the size of the Trust will, and the diversity of the Trust
may, be reduced. Sales may be required at a time when Stocks would not
otherwise be sold and may result in lower proceeds than might otherwise be
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realized. In addition, because of the minimum amounts in which Stocks are
required to be sold, the proceeds of sale may exceed the amount required at
the time to redeem Units; these excess proceeds will be distributed to the
remaining Unitholders on the next Distribution Date.
The Trustee may, in its discretion, and will, when so directed by the
Sponsor, suspend the right of redemption, or postpone the date of payment for
Units tendered for redemption to a date more than seven calendar days
following the day of tender, (i) for any period during which the New York
Stock Exchange is closed other than for weekend and holiday closings; (ii) for
any period during which the Securities and Exchange Commission determines that
trading on the New York Stock Exchange is restricted; (iii) for any period
during which an emergency exists as a result of which disposal or evaluation
of the Stocks is not reasonably practicable; or (iv) for such other period as
the Securities and Exchange Commission may by order permit for the protection
of Unitholders. The Trustee is not liable to any person in any way for any
loss or damages which may result from any such suspension or postponement, or
any failure to suspend or postpone, when done in the Trustee's discretion.
On the business day prior to the Initial Date of Deposit, the initial Public
Offering Price per Unit (which figure includes the sales charge) exceeds the
Net Asset Value per Unit. See "Essential Information Regarding the Trust." The
initial Public Offering Price per Unit is determined by dividing the aggregate
value of the Stocks based on the closing prices at the offer side of the
market on the business day prior to the Initial Date of Deposit, by the number
of Units being sold, plus the applicable sales charge. The prices of the
Stocks will generally vary. For these reasons and others, including the fact
that the Public Offering Price includes the sales charge, the amount realized
by a Unitholder upon redemption of Units may be less than the price paid by
the Unitholder for such Units.
VALUATION OF UNITS
The Trustee will calculate the Trust's value (the "Net Asset Value") at the
Evaluation Time set forth under "Essential Information Regarding the Trust"
(i) on each Trust Business Day (as hereinafter defined) until completion of
the initial public offering, (ii) on the Trust Business Day on which any Unit
is tendered for redemption, (iii) on any other day desired by the Sponsor or
the Trustee and (iv) upon termination, by adding:
(a) The aggregate value of Stocks in the Trust (including the value of
Stocks subject to purchase contracts, if any, deposited with the Trustee on
the Deposit Date), as determined by the Trustee in its capacity as
Evaluator of the Trust; and
(b) The sum of (i) cash on hand in the Trust other than cash deposited to
purchase Stocks or cash credited to any reserve account established under
the Indenture and (ii) dividends receivable on Stocks trading ex-dividend.
The Trustee will deduct from the resulting figure: amounts representing any
applicable taxes or governmental charges payable by the Trust for the purpose
of making an addition to any reserve account established under the Indenture;
amounts representing estimated accrued fees and expenses of the Trust,
including amounts representing unpaid fees of the Trustee and the Sponsor; and
cash or Stocks held to redeem tendered Units and for distribution to
Unitholders of record as of a Trust Business Day prior to the evaluation being
made on the days or dates set forth above.
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For the purpose of the redemption of Units, the Net Asset Value per Unit is
computed by the Trustee by dividing the result of the above computation by the
total number of Units outstanding on the date of such evaluation. A Trust
Business Day is a day on which the New York Stock Exchange is open, other than
federal or New York state bank holidays.
For the purpose of the redemption of Units and the secondary market public
offering price, the value of Stocks shall be determined in good faith by the
Trustee acting in its capacity as Evaluator of the Trust in the following
manner: (i) if the Stocks are listed on one or more national securities
exchanges such evaluation shall be based on the closing sale price on that day
(unless the Sponsor deems such price inappropriate as a basis for evaluation)
on the exchange which is the principal market thereof (deemed to be the New
York Stock Exchange if the Stocks are listed thereon), (ii) if the Stocks are
listed but there is no such appropriate closing sales price on such exchange,
and for Stocks that are not so listed but are quoted on the Nasdaq National
Market, at the closing bid prices on such exchange or system (unless the
Sponsor deems such price inappropriate as a basis for evaluation), (iii) if
the Stocks are not listed or quoted or, if so listed or quoted and the
principal market therefor is other than on such exchange or system or there
are no such appropriate closing bid prices available, such evaluation shall be
made by the Sponsor in good faith based on the closing sales price in the
over-the-counter market (unless the Sponsor deems such price inappropriate as
a basis for evaluation) or (iv) if there is no such appropriate closing price,
then (a) on the basis of current bid prices obtained from dealers or brokers
(which may include the Sponsor), (b) if bid prices are not available, on the
basis of current bid prices for comparable securities, (c) by the Sponsor's
appraising the value of the Stocks in good faith on the bid side of the market
or (d) by any combination thereof. The tender of a Stock pursuant to a tender
offer will not affect the method of valuing such Stock.
The Treasury Obligations, if any, are valued on the basis of bid prices. The
aggregate bid prices of the Treasury Obligations are the prices obtained from
dealers or brokers (which may include the Sponsor) who customarily deal in
Treasury Obligations; or, if there is no market for the Treasury Obligations,
and bid prices are not available, on the basis of current bid prices for
comparable securities; or by appraisal; or by any combination of the above.
EXPENSES OF THE TRUST
The Sponsor will receive a fee, which is earned for portfolio supervisory
services, based upon the largest number of Units outstanding during the
calendar year. The portfolio supervisory services include providing certain
bookkeeping and other administrative services to the Trust, monitoring the
market prices of portfolio securities to confirm Net Asset Value calculations
of the Evaluator and handling Unitholder inquiries and services. The Sponsor's
fee is that amount set forth under "Essential Information Regarding the
Trust." Such fee may exceed the actual costs of providing portfolio
supervisory services for this particular series of the Trust, but at no time
will the total amount the Sponsor receives for such services rendered to all
series of the Trust in any calendar year exceed the aggregate cost to it of
supplying such services in such year. Thus, the Sponsor will not profit from
fees received from the Trust for portfolio supervisory services.
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For its services as Trustee and Evaluator, the Trustee will be paid that
amount set forth under "Essential Information Regarding the Trust." The
Trustee will also benefit to the extent that it holds funds in non-interest
bearing accounts. In addition, the regular and recurring annual expenses of
the Trust, including without limitation certain mailing, printing, and other
miscellaneous expenses, are currently estimated to be that amount set forth
under "Essential Information Regarding the Trust." Actual miscellaneous
expenses payable by the Trust may be more or less than this estimate.
If Units are redeemed, per Unit annual expenses of the Trust will increase.
The Trustee's fee and the Sponsor's supervisory fee are payable monthly, from
the Income Account, to the extent funds are available, and then from the
Capital Account. Either of such fees may be increased without approval of the
Unitholders by an amount not exceeding a proportionate increase in the
category entitled "All Services Less Rent" in the Consumer Price Index
published by the United States Department of Labor.
The cost of the preparation and printing of the Indenture and this
Prospectus, the initial fees and expenses of the Trustee, advertising expenses
and expenses incurred in establishing the Trust, including legal and auditing
fees, are paid by the Sponsor and not by the Trust.
In addition to the above, the following charges are or may be incurred by
the Trust and paid from the Income Account, or, to the extent funds are not
available in such Account, from the Capital Account: (i) fees for the Trustee
for extraordinary services; (ii) reimbursable expenses of the Trustee
(including legal and auditing expenses, but not including any fees and
expenses charged by any agent for custody and safekeeping of Securities);
(iii) various governmental charges; (iv) expenses and costs of any action
taken by the Trustee to protect the Trust and the rights and interests of the
Unitholders; (v) indemnification of the Trustee for any loss, liabilities or
expenses (including reasonable attorneys' fees) incurred by it in the
administration of the Trust without gross negligence, bad faith or willful
misconduct on its part; (vi) indemnification of the Sponsor for any loss,
liability or expenses (including reasonable attorneys' fees) incurred in
acting in such capacity other than by reason of its own gross negligence, bad
faith or willful misconduct; (vii) brokerage commissions in connection with
the sale of Stocks; and (viii) expenses incurred upon termination of the
Trust. See "Administration of the Trust--Accounts."
The fees and expenses set forth above are payable out of the Trust and when
unpaid will be secured by a lien on the Trust. To the extent that dividends
paid with respect to the Stocks are not sufficient to meet the expenses of the
Trust, the Trustee is authorized to sell Stocks to meet the expenses of the
Trust.
RIGHTS OF UNITHOLDERS
Each Unit represents a pro rata fractional undivided interest in each of the
Stocks and other assets held in the Trust.
Ownership of Units is evidenced by recordation on the books of the Trustee.
In order to avoid additional operating costs and for investor convenience,
certificates will not be issued unless a request,
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in writing with signature guaranteed by a participant in the Securities
Transfer Agents Medallion Program ("STAMP") or such other signature guarantee
program in addition to, or in substitution for, STAMP, as may be accepted by
the Trustee, is delivered by the Unitholder to the Sponsor. Issued
certificates are transferable by presentation and surrender to the Trustee at
its office (currently located at the address on the back cover) properly
endorsed or accompanied by a written instrument or instruments of transfer.
Uncertificated Units are transferable by presentation to the Trustee of a
written instrument of transfer.
Certificates may be issued in denominations of one Unit or any integral
multiple thereof as deemed appropriate by the Trustee. A Unitholder may be
required to pay a reasonable fee (currently $25.00 per certificate) for each
certificate issued, reissued or transferred, and shall be required to pay any
governmental charge that may be imposed in connection with each such transfer
or interchange. For new certificates to be issued to replace destroyed,
mutilated, stolen or lost certificates, the Unitholder must furnish indemnity
satisfactory to the Trustee and must pay such expenses as the Trustee may
incur. Mutilated certificates must be surrendered to the Trustee for
replacement.
Unitholders will have no voting rights, except in the unlikely event of
resignation or removal of the Sponsor as provided under "Termination of the
Trust" and in the event of an amendment to the Indenture as provided under
"Amendment of the Indenture." As the holder of the Stocks, the Trustee will
have the right to vote all of the voting stocks in the Trust and will vote
such stocks in accordance with the instructions of the Sponsor. The rights the
Unitholders have in distributions from the Income and Capital Accounts are set
forth below under "Distributions to Unitholders."
DISTRIBUTIONS TO UNITHOLDERS
The Trustee will make distributions from the Income Account, if any, on the
quarterly Distribution Date to Unitholders of record on the preceding Record
Date. Distributions from the Capital Account will be made on each quarterly
Distribution Date to Unitholders of record on the preceding Record Date. See
"Essential Information Regarding the Trust." Whenever required for regulatory
or tax purposes, the Trustee will make special distributions on special
distribution dates to Unitholders of record on special record dates when and
as declared by the Trustee.
Upon termination of the Trust, each Unitholder of record on such date will
receive his pro rata share of the amounts realized upon disposition of the
Securities plus any other assets of the Trust, less liabilities of the Trust.
See "Termination of the Trust."
ADMINISTRATION OF THE TRUST
Accounts. All dividends received on Stocks, proceeds from the sale of Stocks
or other moneys received by the Trustee on behalf of the Trust will be held in
trust in non-interest bearing accounts except that proceeds of sale may be
reinvested in Treasury Obligations until required to be disbursed. See
"Administration of the Trust--Reinvestment."
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The Trustee will credit on its books to an Income Account dividends and
interest, if any, on Securities in the Trust. All other receipts (i.e., return
of principal and capital gains) are credited on its books to a Capital
Account. The pro rata share of the Income Account and the pro rata share of
the Capital Account represented by each Unit will be computed by the Trustee
as set forth under "Valuation of Units."
The Trustee will deduct from the Income Account and, to the extent funds are
not sufficient therein, from the Capital Account, amounts necessary to pay
expenses incurred by the Trust. See "Expenses of the Trust." In addition, the
Trustee may withdraw from the Income Account and the Capital Account such
amounts as may be necessary to cover redemption of Units by the Trustee. See
"Redemption of Units."
The Trustee may establish reserves (the "Reserve Account") within the Trust
for state and local taxes, if any, and any other governmental charges payable
out of the Trust.
Reports and Records. With any distributions from the Trust, the Trustee will
furnish each Unitholder a statement setting forth the amount being distributed
from each account. In addition, the Trustee shall notify the Unitholders
within five days of substitute stocks, if any, which are acquired for the
portfolio. See "The Trust."
The Trustee keeps records and accounts of the Trust at its office (currently
located at the address on the back cover), including records of the names and
addresses of Unitholders, a current list of underlying Stocks in the portfolio
and a copy of the Indenture. Records pertaining to a Unitholder or to the
Trust (but not to other Unitholders) are available to the Unitholder for
inspection at reasonable times during business hours.
Within a reasonable period of time after the end of each calendar year, the
Trustee will furnish each person who was a Unitholder at any time during the
calendar year a report containing the following information, expressed in
reasonable detail both as a dollar amount and as a dollar amount per Unit: (i)
a summary of transactions for the Trust in the Income and Capital Accounts and
any Reserve Account; (ii) Securities sold or purchased, if any; (iii) the Net
Asset Value per Unit, based upon the last computation thereof made during the
year; and (iv) amounts distributed to Unitholders during the year.
Portfolio Supervision. The portfolio of the Trust is not "managed" by the
Sponsor or the Trustee; their activities described herein are governed solely
by the provisions of the Indenture. Traditional methods of investment
management for a managed fund typically involve frequent changes in a
portfolio of securities on the basis of economic, financial and market
analyses. The Trust, however, will not be managed. The Indenture provides that
the Sponsor may (but need not) direct the Trustee to dispose of a Stock in
certain events such as the issuer having defaulted on the payment on any of
its outstanding obligations or the price of a Stock has declined to such an
extent or other such credit factors exist so that in the opinion of the
Sponsor, the retention of such Stocks would be detrimental to the Trust.
Pursuant to the Indenture and with limited exceptions, the Trustee may sell
any securities or other properties acquired in exchange for Stocks such as
those acquired in connection with a merger
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or other transaction. If offered such new or exchanged securities or property,
the Trustee shall reject the offer. However, in the event such securities or
property are nonetheless acquired by the Trust, they may be accepted for
deposit in the Trust and either sold by the Trustee or held in the Trust
pursuant to the direction of the Sponsor. Therefore, except as stated under
"The Trust" for failed securities, as provided under "Administration of the
Trust--Reinvestment" and as provided in this paragraph, the acquisition by the
Trust of any securities other than the Stocks is prohibited. Proceeds from the
sale of Stocks (or any securities or other property received by the Trust in
exchange for Stocks), unless held for reinvestment as herein provided, are
credited to the Capital Account for distribution to Unitholders, to meet
redemptions or to pay charges and expenses of the Trust.
Stock may also be sold in the manner described under "The Trust." The
Trustee may dispose of Stocks where necessary to pay Trust expenses or to
satisfy redemption requests as directed by the Sponsor and the proceeds of
such sale may not be reinvested except as provided below.
Reinvestment. Cash received upon the sale of Stocks (except for proceeds
used to meet redemption requests) may, if and to the extent there is no legal
impediment, be reinvested in Treasury Obligations which mature on or prior to
the next scheduled Distribution Date. The Sponsor anticipates that, where
permitted, such proceeds will be reinvested in Treasury Obligations unless
factors exist such that such reinvestment would not be in the best interests
of Unitholders or would be impractical. Such factors may include, among
others, (i) short reinvestment periods which would make reinvestment in
Treasury Obligations undesirable or infeasible and (ii) amounts not
sufficiently large so as to make a reinvestment economical or feasible. Any
moneys held and not reinvested will be held in a non-interest bearing account
until distribution on the next Distribution Date to Unitholders of record.
AMENDMENT OF THE INDENTURE
The Indenture may be amended by the Trustee and the Sponsor without the
consent of any of the Unitholders to cure any ambiguity, to correct or
supplement any provision thereof which may be defective or inconsistent, or to
make such other provisions as will not materially adversely affect the
interest of the Unitholders or as required by the Securities and Exchange
Commission, so long as the Trustee provides the Unitholders with notice as
required by the Indenture.
The Indenture may be amended in any respect by the Sponsor and the Trustee
with the consent of the holders of 66 2/3% of the Units then outstanding;
provided that no such amendment shall (i) permit the acquisition of any stocks
other than those specified in Schedule A of the Indenture or (ii) reduce the
percentage of Unitholders required to consent to any such amendment, without
the consent of all Unitholders.
The Trustee will promptly notify Unitholders of the substance of any
amendment affecting Unitholders' rights or their interest in the Trust.
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TERMINATION OF THE TRUST
The Indenture provides that the Trust will terminate upon the following
circumstances: (i) occurrence of the Mandatory Termination Date (as defined in
"Essential Information Regarding the Trust"); or (ii) written consent to
termination by 66 2/3% of the Units then outstanding. In addition, the Trust
may terminate if the value of the Trust as shown by any evaluation is less
than 40% of the market value, based on closing bid prices, of the Stocks at
the time they were deposited in the Trust. In no event will the Trust continue
beyond the Mandatory Termination Date.
Unless advised to the contrary by the Sponsor, approximately 30 days prior
to the termination of the Trust, the Trustee will begin to sell the Stocks
held in the Trust other than those Stocks to be distributed "in kind" as
discussed below. Upon termination of the Trust, the Trustee will sell any
Stocks then remaining in the Trust (other than those distributed "in kind")
and will then, after deduction of any fees and expenses of the Trust and
payment into the Reserve Account of any amount required for taxes or other
governmental charges that may be payable by the Trust, distribute to each
Unitholder, after due notice of such termination, such Unitholder's pro rata
share in the Income and Capital Accounts. Cash held upon the sale of Stocks
may be held in non-interest bearing accounts created by the Indenture until
distributed and will be of benefit to the Trustee. The sale of Stocks in the
Trust in the period prior to the termination and upon termination may result
in a lower amount than might otherwise be realized if such sale were not
required at such time due to impending or actual termination of the Trust. For
this reason, among others, the amount realized by a Unitholder upon
termination may be less than the amount paid by such Unitholder.
Notwithstanding the foregoing, the Sponsor reserves the right to direct the
Trustee to make an "in kind" distribution of the Stocks to all Unitholders
upon termination in lieu of a cash distribution.
Prior to termination of the Trust, and in no event less than 75 days prior
to the Mandatory Termination Date, the Trustee shall furnish to Unitholders
written notice of the date of termination and election forms pursuant to which
Unitholders will be permitted to receive an "in kind" distribution upon
termination in lieu of cash in the event the Sponsor does not elect to direct
the Trustee to distribute all Stocks "in kind" as described above. Any
Unitholders who make appropriate elections no less than 30 days prior to the
date of termination shall be entitled to receive distribution "in kind" of all
of their Units. Upon the distribution following termination of the Trust, such
Unitholders will receive that number of whole shares of each Stock
representing the aggregate of their respective interests in each of the
Stocks, plus cash representing their pro rata shares of other Trust assets and
cash in lieu of fractional shares, if any. No partial "in kind" distributions
will be made. See "Tax Considerations" for information concerning the tax
consequences to a Unitholder of a distribution "in kind."
SPONSOR
The Sponsor, Howe Barnes Investments, Inc., is an investment services firm
which since 1915 has served a wide range of institutional and individual
investors, corporations and fiduciaries, as well as other securities dealers.
The Sponsor, a Delaware corporation, is registered as a broker/dealer and
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through its subsidiary, Marshall Capital Management, Inc., is registered as an
investment adviser with the Securities and Exchange Commission. The Sponsor is
also a member of the National Association of Securities Dealers, the New York
Stock Exchange and the Chicago Stock Exchange. Services offered by the Sponsor
include investment research and trade execution services for listed and over-
the-counter equity and fixed-income securities and options; execution and
clearing services for small brokers and dealers; investment banking services
for corporations; and underwriting services for the equity and fixed income
markets, including municipal and corporate bonds. Among other specialities,
the Sponsor is recognized for its concentrated focus on research and
securities analysis with respect to midwestern regional and subregional
banking institutions and thrift institutions. The Sponsor may, but need not,
make a principal market as dealer in one or more of the Stocks in the Trust.
In addition, the Sponsor may act as an investment advisor for one or more of
the banking or thrift institutions with Stocks in the Trust.
The Indenture provides that the Sponsor will not be liable to the Trust, the
Trustee or to the Unitholders for taking any action or for refraining from
taking any action made in good faith or for errors in judgment, but will be
liable only for its own gross negligence, bad faith or willful malfeasance in
the performance of its duties or by reason of its reckless disregard of its
obligation and duties. The Sponsor will not be liable or responsible in any
way for depreciation or loss incurred by reason of the sale of any Stocks in
the Trust.
The Indenture further provides that the Sponsor shall be indemnified by the
Trust and held harmless from and against any loss, liability or expense
incurred in acting as Sponsor of the Trust other than by reason of its own
gross negligence, bad faith or willful malfeasance in the performance of its
obligations or by reason of its own reckless disregard of its obligations and
duties.
The Indenture is binding upon any successor to the business of the Sponsor.
The Sponsor may transfer all or substantially all of its assets to a
corporation which carries on the business of the Sponsor and duly assumes all
the obligations of the Sponsor under the Indenture. In such event the Sponsor
shall be relieved of all further liability under the Indenture.
The Indenture provides that the Sponsor may resign its position as Sponsor
by delivering to the Trustee an instrument of resignation. This resignation
will only be effective if prior to or concurrent with the delivery of the
instrument the Trustee has either (i) appointed a successor Sponsor or (ii)
agrees to act as Sponsor thereby succeeding to all the rights and duties of
the resigning Sponsor. The Trustee must notify the Unitholders of any such
resignation or appointment of a successor Sponsor.
If the Sponsor fails to undertake any of its duties under the Indenture,
becomes incapable of acting, becomes bankrupt, or has its affairs taken over
by public authorities, the Trustee may appoint a successor Sponsor or Sponsors
to serve at rates of compensation determined as provided in the Indenture.
TRUSTEE
The Trustee is The Bank of New York, a trust company organized under the
laws of New York. The Bank of New York has its unit investment trust division
offices at 101 Barclay Street, New York,
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New York 10286, telephone (800) 856-8487. The Bank of New York is subject to
supervision and examination by the Superintendent of Banks of the State of New
York and the Board of Governors of the Federal Reserve System, and its
deposits are insured by the Federal Deposit Insurance Corporation to the
extent permitted by law.
The Indenture provides that the Trustee shall be indemnified by the Trust
and held harmless from and against any loss, liability or expense incurred
without gross negligence, bad faith or willful malfeasance in the performance
of its duties or by reason of its reckless disregard of the duties of the
Trustee arising out of or in connection with the administration of this Trust.
The Trustee may resign and be discharged of its duties with respect to the
Trust pursuant to the Indenture by delivering an instrument of resignation to
the Sponsor and mailing such instrument to the Unitholders then of record not
less than 60 days before the resignation date. The Trustee shall not, however,
resign until either (i) the Trust has been completely liquidated and the
proceeds distributed to the Unitholders, or (ii) a successor Trustee, having
the qualifications prescribed in the governing securities laws, has been
designated and has accepted the duties as Trustee.
The Sponsor may remove the Trustee, upon the occurrence of certain events as
set forth in the Indenture. In addition, the Unitholders may remove the
Trustee upon the vote or written consent of 66 2/3% of the Units then of
record. Upon the resignation or removal of the Trustee as set forth above and
in the Indenture, the Sponsor shall use its best efforts promptly to appoint a
successor Trustee. The Indenture is binding upon any successor to the business
of the Trustee. The Trustee may transfer all or substantially all of its
assets to a corporation which carries on the business of the Trustee and duly
assumes all the obligations of the Trustee under the Indenture. In such event
the Trustee shall be relieved of all further liability under the Indenture.
LEGAL OPINIONS
The legality of the Units offered hereby has been passed upon by Chapman and
Cutler, Chicago, Illinois, as counsel for the Sponsor.
INDEPENDENT AUDITORS
The statement of net assets, including the schedule of investments, as of
the opening of business on the Initial Date of Deposit appearing in this
prospectus and in the registration statement has been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon appearing
elsewhere herein and in the registration statement, and is included in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
26
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ESSENTIAL INFORMATION REGARDING THE TRUST................................... 2
HBI EQUITY TRUST, SERIES 5.................................................. 3
REPORT OF INDEPENDENT AUDITORS.............................................. 5
STATEMENT OF NET ASSETS..................................................... 5
SCHEDULE OF INVESTMENTS..................................................... 6
THE TRUST................................................................... 7
TAX CONSIDERATIONS.......................................................... 11
PUBLIC OFFERING OF UNITS.................................................... 15
REDEMPTION OF UNITS......................................................... 17
VALUATION OF UNITS.......................................................... 18
EXPENSES OF THE TRUST....................................................... 19
RIGHTS OF UNITHOLDERS....................................................... 20
DISTRIBUTIONS TO UNITHOLDERS................................................ 21
ADMINISTRATION OF THE TRUST................................................. 21
AMENDMENT OF THE INDENTURE.................................................. 23
TERMINATION OF THE TRUST.................................................... 24
SPONSOR..................................................................... 24
TRUSTEE..................................................................... 25
LEGAL OPINIONS.............................................................. 26
INDEPENDENT AUDITORS........................................................ 26
</TABLE>
--------------------
This Prospectus does not contain all of the information set forth in the
registration statements and exhibits relating thereto, filed with the
Securities and Exchange Commission, Washington, D.C. under the Securities Act
of 1933, as amended, and the Investment Company Act of 1940, as amended, and
to which reference is made.
--------------------
No person is authorized to give any information or to make any
representations not contained in this Prospectus and any information or
representation not contained herein must not be relied upon as having been
authorized by the Trust, the Trustee, or the Sponsor. The Trust is registered
as a unit investment trust under the Investment Company Act of 1940. Such
registration does not imply that the Trust or the Units have been guaranteed,
sponsored, recommended or approved by the United States or any state or any
agency or officer thereof.
--------------------
This Prospectus does not constitute an offer to sell securities to, or a
solicitation of an offer to buy securities from, any person in any state to
whom it is not lawful to make such offer or solicitation in such state.
HBI
EQUITY TRUST, SERIES 5
A UNIT INVESTMENT TRUST
A PORTFOLIO OF MIDWEST BANK AND THRIFT STOCKS
SPONSOR:
HOWE BARNES INVESTMENTS, INC.
135 SOUTH LASALLE STREET
CHICAGO, ILLINOIS 60603
TRUSTEE:
THE BANK OF NEW YORK
101 BARCLAY STREET
NEW YORK, NEW YORK 10286
<PAGE>
Part II
Undertaking to File Reports
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
Contents of Registration Statement
This Registration Statement comprises the following papers and documents:
The facing sheet
The Prospectus
The undertaking to file reports
The signatures
The following exhibits:
Exhibit 1.1 - Form of Trust Agreement.
Exhibit 1.1.1 - Form of Standard Terms and Conditions of Trust. Reference is
made to Exhibit 1.1.2 to Amendment No. 1 to the Registration
Statement on Form S-6 for HBI Equity Trust, Series 1 (File No.
33-72314) as filed on March 16, 1994.
Exhibit 2.1 - Form of Certificate of Beneficial Interest. Reference is made
to pages 3 and 4 of Exhibit 1.1.1.
Exhibit 3.1 - Opinion and consent of Chapman and Cutler as to the legality of
securities being registered.
Exhibit 3.2 - Opinion and consent of Chapman and Cutler as to federal income
tax status of securities being registered.
Exhibit 6.1 - Consent of Ernst & Young LLP, Independent Auditors.
Exhibit 6.2 - Power of Attorney. Reference is made to Exhibit 6.2 to
Amendment No. 1 to the Registration Statement for the HBI
Equity Trust, Series 4 (File No. 333-34673) as filed on August
29, 1997.
Exhibit 27 - Financial Data Schedule.
S-1
<PAGE>
Signatures
The Registrant hereby identifies HBI Equity Trust, Series 1 for purposes of
the representations required by Rule 487 and represents the following: (1) that
the portfolio securities deposited in the series as to the securities of which
this Registration Statement is being filed do not differ materially in type or
quality from those deposited in such previous series; (2) that, except to the
extent necessary to identify the specific portfolio securities deposited in, and
to provide essential financial information for, the series with respect to the
securities of which this Registration Statement is being filed, this
Registration Statement does not contain disclosures that differ in any material
respect from those contained in the registration statements for such previous
series as to which the effective date was determined by the Commission or the
staff; and (3) that it has complied with Rule 460 under the Securities Act of
1933.
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant, HBI Equity Trust, Series 5, has duly caused this registration
statement to be signed on its behalf by the undersigned thereunto duly
authorized, in the City of Chicago and State of Illinois, on the 18th day of
May, 1998.
HBI Equity Trust, Series 5
By Howe Barnes Investments, Inc.,
Depositor
By /s/ Michael E. Sammon
------------------------------
Michael E. Sammon
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed on May 18th, 1998 by the following
persons in the capacities indicated.
Signature Title
GEORGE H. SHELTON Director and President
- ----------------------- (Principal Executive Officer)
George H. Shelton
PHILIP C. ALLEN Director
- -----------------------
Philip C. Allen
THEODORE M. PERKOWSKI Director
- -----------------------
Theodore M. Perkowski
RICHARD W. TERRELL Director
- -----------------------
Richard W. Terrell
S-2
<PAGE>
Signature Title
MICHAEL E. SAMMON Director
- -----------------------
Michael E. Sammon
MICHAEL R. OCHOA Director
- -----------------------
Michael R. Ochoa
DANIEL E. COUGHLIN Director
- -----------------------
Daniel E. Coughlin
MARK PAUL SHELSON Director and Treasurer
- ----------------------- (Principal Financial and
Mark Paul Shelson Accounting Officer)
MARIO G. BERNARDI Director
- -----------------------
Mario G. Bernardi
CHARLES V. DOHERTY Director
- -----------------------
Charles V. Doherty
BETTEANN KESLINKE Director
- -----------------------
Betteann Keslinke
/s/ Michael E. Sammon
-------------------------------------
Michael E. Sammon
(Attorney-in-fact*)
_______________
* An executed copy of the power of attorney incorporated herein by reference.
S-3
<PAGE>
Schedule A
Securities Initially Deposited
HBI Equity Trust, Series 5
(Note: Incorporated herein and made a part hereof is the "Schedule of
Investments" as set forth in the Prospectus.)
<PAGE>
Exhibit 1.1
HBI Equity Trust, Series 5
Trust Agreement
This Trust Agreement dated as of May 19, 1998 between Howe Barnes
Investments, Inc., as Depositor, and The Bank of New York, as Trustee, sets
forth certain provisions in full and incorporates other provisions by reference
to the document entitled "HBI Equity Trust, Series 1 and Subsequent Series,
Standard Terms and Conditions of Trust, Effective March 16, 1994" (herein called
the "Standard Terms and Conditions of Trust"), and such provisions as are set
forth in full and such provisions as are incorporated by reference constitute a
single instrument.
Witnesseth That:
In consideration of the premises and of the mutual agreements herein
contained, the Depositor and the Trustee agree as follows:
Part I
Standard Terms and Conditions of Trust
Subject to the provisions of Part II hereof, all the provisions contained
in the Standard Terms and Conditions of Trust are herein incorporated by
reference in their entirety and shall be deemed to be a part of this instrument
and to the same extent as though said provisions had been set forth in this
instrument.
Part II
Special Terms and Conditions of Trust
The following special terms and conditions are hereby agreed to:
(a) The equity securities listed in the Schedule hereto have been
deposited in trust under this Trust Agreement.
(b) For the purposes of the definition of the term "Unit" in Article
I, it is hereby specified that the fractional undivided interest in and
ownership of the Trust is the amount set forth in the section captioned
"Essential Information Regarding the Trust" in the final Prospectus of the
Trust (the "Prospectus") contained in Amendment No. 1 to the Trust's
Registration Statement (Registration No. 333-51391) as filed with the
Securities and Exchange Commission on May 19, 1998. The fractional
undivided interest may decrease by the number of Units redeemed pursuant to
Section 5.02.
<PAGE>
(c) For purposes of the definition of the terms "Trust" or "Trust
Fund" in Article I, it is hereby specified that such terms shall include
the HBI Equity Trust, Series 5.
(d) The term "Trustee" shall mean The Bank of New York or its
successors or any successor Trustee appointed as provided in the Standard
Terms and Conditions of Trust. Notwithstanding anything to the contrary in
the Standard Terms and Conditions of Trust, any notice, demand, direction
or instruction to be given to the Trustee shall be in writing and shall be
duly given if mailed, first class with the proper postage prepaid, or
delivered to the Trustee at 101 Barclay Street, New York, New York 10286,
or such other address as shall be specified to the other parties hereto by
the Trustee in writing.
(e) The term "Record Date" shall mean the "Record Dates" set forth
under "Essential Information Regarding the Trust" in the Prospectus.
(f) The terms "Income Distribution Date" and "Capital Distribution
Date" shall mean the "Income Account Distribution Dates" and "Capital
Account Distribution Dates" set forth under "Essential Information
Regarding the Trust" in the Prospectus.
(g) The term "Date of Deposit" shall be replaced with the term
"Initial Date of Deposit". The term "Initial Date of Deposit" shall mean
May 19, 1998.
(h) The number of Units of the Trust referred to in Section 2.03 is
set forth under "Essential Information Regarding the Trust" in the
Prospectus.
(i) For the purposes of Section 3.11, the Depositor shall receive for
portfolio surveillance services that annual fee described under "Essential
Information Regarding the Trust" in the Prospectus.
(j) For the purposes of Section 8.05, the Trustee shall receive for
services as trustee that annual fee described under "Essential Information
Regarding the Trust" in the Prospectus.
(k) For the purposes of Section 4.03, the Trustee will act as the
Evaluator and will not receive a separate fee for providing services as
evaluator.
(l) For the purposes of Section 8.01(g), the liquidation amount is
hereby specified as the amount set forth under "Essential Information
Regarding the Trust - Discretionary Liquidation Amount" in the Prospectus.
(m) For the purposes of Section 3.10, the identity of the Substitute
Securities for each Contract Security held in the Trust is as follows: None
-2-
<PAGE>
(n) The Mandatory Termination Date shall be that date set forth in
the section captioned "Essential Information Regarding the Trust" in the
Prospectus.
(o) Section 2.01 is hereby amended by adding the following subsection
(e) immediately after Section 2.01(d):
(e) From time to time following the Initial Date of Deposit, the
Depositor is hereby authorized, in its discretion, to assign, convey
to and deposit with the Trustee additional Securities, duly endorsed
in blank or accompanied by all necessary instruments of assignment and
transfer in proper form (or Contract Securities relating to such
Securities), to be held, managed and applied by the Trustee as herein
provided. Such deposit of additional Securities shall be made, in each
case, pursuant to a Supplemental Indenture accompanied by a legal
opinion issued by legal counsel satisfactory to the Depositor. The
Depositor, in each case, shall ensure that each deposit of additional
Securities pursuant to this Section (i) shall be equal to the original
percentage relationship among the number of shares of each Security as
is specified in the Trust Agreement for such Trust and (ii) shall not
violate any applicable laws, rules or regulations, including, but not
limited to, the Investment Company Act of 1940. The Depositor shall
deliver the additional Securities which were not delivered
concurrently with the deposit of additional Securities and which were
represented by Contract Securities within 10 calendar days after such
deposit of additional Securities (the "Additional Securities Delivery
Period"). If a contract to buy such Securities between the Depositor
and seller is terminated by the seller thereof for any reason beyond
the control of the Depositor or if for any other reason the Securities
are not delivered to the Trust by the end of the Additional Securities
Delivery Period for such deposit, the Trustee shall immediately draw
on the Letter of Credit, if any, in its entirety, apply the moneys in
accordance with Section 2.01(b), and the Depositor shall forthwith
take the remedial action specified in Section 3.10. If the Depositor
does not take the action specified in Section 3.10 within 10 calendar
days of the end of the Additional Securities Delivery Period, the
Trustee shall forthwith take the action specified in Section 3.10.
(p) Section 2.03(a) is hereby amended by adding the following at the
end of such section:
The Trustee hereby agrees that on the date of any Supplemental Trust
Agreement, it shall acknowledge that the additional Securities
identified therein have been deposited with it by recording on its
books the ownership, by the Depositor or such other person or persons
as may be indicated by the Depositor, of the aggregate number of Units
to be issued in respect of such additional Securities so deposited,
and shall, if so requested, execute documentation substantially in the
form above recited representing the ownership of an aggregate number
of those Units.
-3-
<PAGE>
(q) Section 10.05 is hereby replaced in its entirety by the
following:
Section 10.05. New York Law to Govern. This Agreement is executed and
delivered in the State of New York, and all laws or rules of
construction of such state, except for provisions with respect to
choice of law, shall govern the rights of the parties hereto and the
Unitholders and the interpretation of the provisions hereof.
(r) Notwithstanding anything to the contrary in the Standard Terms
and Conditions of Trust, for purposes of the evaluation procedure described
in Section 4.01, during the initial offering period of the Trust the
evaluation of the Securities shall be made in the manner described in such
Section on the basis of the last available ask or offer side prices of the
Securities, except in those cases in which the Securities are listed on a
national securities exchange and the closing sale prices are utilized.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to
be duly executed.
Howe Barnes Investments, Inc.,
Depositor
By /s/ Michael E. Sammon
------------------------------------
Senior Vice President
The Bank of New York
By /s/ Jeffrey Bieselin
---------------------------------------
Vice President
-5-
<PAGE>
Exhibit 3.1
Chapman and Cutler
111 West Monroe Street
Chicago, Illinois 60603
May 19, 1998
Howe Barnes Investments, Inc.
135 South LaSalle Street, Suite 1500
Chicago, Illinois 60603
Re: HBI Equity Trust, Series 5
--------------------------
Ladies/Gentlemen:
We have served as special counsel for Howe Barnes Investments, Inc., as
Sponsor and Depositor (the "Depositor") of HBI Equity Trust, Series 5 (the
"Fund"), in connection with the preparation, execution and delivery of a Trust
Agreement dated May 19, 1998 and a Standard Terms and Condition of Trust dated
March 16, 1994 (collectively, the Indenture) each of which are between Howe
Barnes Investments, Inc., as Depositor, and The Bank of New York, as Trustee,
pursuant to which the Depositor has delivered to and deposited the securities
listed in Schedule A to the Trust Agreement with the Trustee and pursuant to
which the Trustee has issued in the name of the Depositor documents representing
units of fractional undivided interest in and ownership of the Fund created
under said Trust Agreement.
In connection therewith we have examined such pertinent records and
documents and matters of law as we have deemed necessary in order to enable us
to express the opinions hereinafter set forth.
Based upon the foregoing, we are of the opinion that:
1. The execution and delivery of the Indenture and the execution and
issuance of certificates evidencing the units of the Fund have been duly
authorized; and
2. The certificates evidencing the units of the Fund when duly
executed and delivered by the Depositor and the Trustee in accordance with
the aforementioned Indenture, will constitute valid and binding obligations
of the Fund and the Depositor in accordance with the terms thereof.
<PAGE>
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement (File No. 333-51391) relating to the units referred to
above and to the use of our name and to the reference to our firm in said
Registration Statement and in the related Prospectus.
Respectfully submitted,
Chapman And Cutler
MJK/md
-2-
<PAGE>
Exhibit 3.2
Chapman and Cutler
111 West Monroe Street
Chicago, Illinois 60603
May 19, 1998
The Bank of New York
101 Barclay Street
New York, New York 10286
Howe Barnes Investments, Inc.
135 South LaSalle Street
Chicago, Illinois 60603
Re: HBI Equity Trust, Series 5
--------------------------
Ladies/Gentlemen:
We have acted as special counsel for Howe Barnes Investments, Inc.,
Depositor of HBI Equity Trust, Series 5 (the "Trust"), in connection with the
issuance of units of fractional undivided interest in the Trust, under a Trust
Agreement dated May 19, 1998 and a Standard Terms and Conditions of Trust dated
March 16, 1994 (collectively, the "Indenture") each of which are between Howe
Barnes Investments, Inc., as Depositor, and The Bank of New York, as Trustee.
In this connection, we have examined the Registration Statement, the form
of Prospectus proposed to be filed with the Securities and Exchange Commission,
the Indenture and such other instruments and documents as we have deemed
pertinent.
The assets of the Trust will consist of a portfolio of equity securities
(the "Stock") as set forth in the Prospectus. For purposes of this opinion, it
is assumed that each Stock is equity for federal income tax purposes.
Based upon the foregoing and upon an investigation of such matters of law
as we consider to be applicable, we are of the opinion that, under existing
United States Federal income tax law:
(i) The Trust is not an association taxable as a corporation for
federal income tax purposes but will be governed by the provisions of
subchapter J (relating to trusts) of Chapter 1, Internal Revenue Code of
1986 (the "Code").
(ii) A Unitholder will be considered as owning a pro rata portion of
each of the assets of the Trust in the proportion that the number of Units
held by him bears to
<PAGE>
the total number of Units outstanding; under subpart E, subchapter J of
Chapter 1 of the Code, income of the Trust will be treated as income of
each Unitholder in the proportion described; and an item of Trust income
will have the same character in the hands of a Unitholder as it would have
in the hands of the Trustee. Each Unitholder will be considered to have
received his pro rata share of income derived from each Trust asset when
such income is considered to be received by the Trust. A Unitholder's pro
rata portion of distributions of cash or property by a corporation with
respect to a Stock ("dividends" as defined by Section 316 of the Code) is
taxable as ordinary income to the extent of such corporation's current and
accumulated "earnings and profits." A Unitholder's pro rata portion of
dividends which exceed such current and accumulated earnings and profits
will first reduce the Unitholder's tax basis in such Stock and to the
extent that such dividends exceed a Unitholder's tax basis in such Stock,
shall be treated as gain from the sale or exchange of property.
(iii) The price a Unitholder pays for his Units, generally including
sales charges, is allocated among his pro rata portion of each Stock held
by the Trust (in proportion to the fair market values thereof on the
valuation date closest to the date the Unitholder purchases his Units) in
order to determine his tax basis for his pro rata portion of each Stock
held by the Trust.
(iv) Gain or loss will be recognized to a Unitholder (subject to
various non-recognition provisions under the Code) upon redemption or sale
of his Units, except to the extent an in kind distribution of stock is
received by such Unitholder from the Trust as discussed below. Such gain or
loss is measured by comparing the proceeds of such redemption or sale with
the adjusted basis of his Units. Before adjustment, such basis would
normally be cost if the Unitholder had acquired his Units by purchase. Such
basis will be reduced, but not below zero, by the Unitholder's pro rata
portion of dividends with respect to each Stock which is not taxable as
ordinary income.
(v) If the Trustee disposes of a Trust asset (whether by sale,
exchange, liquidation, redemption, payment on maturity or otherwise) gain
or loss will be recognized to the Unitholder (subject to various non-
recognition provisions under the Code) and the amount thereof will be
measured by comparing the Unitholder's aliquot share of the total proceeds
from the transaction with his basis for his fractional interest in the
asset disposed of. Such basis is ascertained by apportioning the tax basis
for his Units (as of the date on which his Units were acquired) among each
of the Trust assets (as of the date on which his Units were acquired)
ratably according to their values as of the valuation date nearest the date
on which he purchased such Units. A Unitholder's basis in his Units and of
his fractional interest in each Trust asset must be reduced, but not below
zero, by the Unitholder's pro rata portion of dividends with respect to
each stock which is not taxable as ordinary income.
(vi) Under the Indenture, under certain circumstances, a Unitholder
tendering Units for redemption may receive an in kind distribution of Stock
upon the redemption of Units or upon the termination of the Trust. As
previously discussed, prior to the redemption of Units on the termination
of the Trust, a Unitholder is
-2-
<PAGE>
considered as owning a pro rata portion of each of the Trust's assets. The
receipt of an in kind distribution will result in a Unitholder receiving an
undivided interest in whole shares of stock and possibly cash. The
potential federal income tax consequences which may occur under an in kind
distribution with respect to each Stock owned by the Trust will depend upon
whether or not a Unitholder receives cash in addition to Stock. A "Stock"
for this purpose is a particular class of stock issued by a particular
corporation. A Unitholder will not recognize gain or loss if a Unitholder
only receives Securities in exchange for his or her pro rata portion of the
Securities held by the Trust. However, if a Unitholder also receives cash
in exchange for a fractional share of a Stock held by the Trust, such
Unitholder will generally recognize gain or loss based upon the difference
between the amount of cash received by the Unitholder and his tax basis in
such fractional share of a Stock held by the Trust. The total amount of
taxable gains (or losses) recognized will generally equal the sum of the
gain (or loss) recognized under the rules described above by the Unitholder
with respect to each Stock owned by the Trust.
A domestic corporation owning Units in the Trust may be eligible for the
70% dividends received deduction pursuant to Section 243(a) of the Code with
respect to such Unitholders pro rata portion of dividends received by the Trust
(to the extent such dividends are taxable as ordinary income, as discussed
above, and are attributable to domestic corporations).
Section 67 of the Code provides that certain miscellaneous itemized
deductions, such as investment expenses, tax return preparation fees and
employee business expenses will be deductible by an individual only to the
extent they exceed 2% of such individual's adjusted gross income. Unitholders
may be required to treat some or all of the expenses of the Trust as
miscellaneous itemized deductions subject to this limitation.
A Unitholder will recognize taxable gain (or loss) when all or part of the
pro rata interest in a Stock is either sold by the Trust or redeemed or when a
Unitholder disposes of his Units in a taxable transaction, in each case for an
amount greater (or less) than his tax basis therefor, subject to various non-
recognition provisions of the Code.
Any gain or loss recognized on a sale or exchange will, under current law,
generally be capital gain or loss.
The scope of this opinion is expressly limited to the matters set forth
herein, and, except as expressly set forth above, we express no opinion with
respect to any other taxes, including foreign, state or local taxes or
collateral tax consequences with respect to the purchase, ownership and
disposition of Units.
-3-
<PAGE>
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement (File No. 333-51391) relating to the Units referred to
about and to the use of our name and to the reference to our firm in said
Registration Statement and in the related Prospectus.
Very truly yours,
Chapman and Cutler
MJK/md
-4-
<PAGE>
Exhibit 6.1
Consent of Independent Auditors
We consent to the reference to our firm as experts under the caption
"Independent Auditors" and to the use of our report dated May 19, 1998 in
Amendment No. 1 to the Registration Statement on Form S-6 (File No. 333-51391)
and related Prospectus of HBI Equity Trust, Series 5.
Ernst & Young LLP
Chicago, Illinois
May 19, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> MAY-19-1998
<PERIOD-START> MAY-19-1998
<PERIOD-END> MAY-19-1998
<INVESTMENTS-AT-COST> 8,684,973
<INVESTMENTS-AT-VALUE> 8,684,973
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 8,684,973
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 8,684,973
<SHARES-COMMON-STOCK> 600,000
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 8,684,973
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
