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File No. 333-55697
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 3
TO
FORM S-6
For Registration Under the Securities Act of 1933 of Securities
of Unit Investment Trusts Registered on Form N-8B-2
A. Exact name of Trust:
THE PAINEWEBBER EQUITY TRUST,
ABCs TRUST SERIES 1
B. Name of Depositor:
PAINEWEBBER INCORPORATED
C. Complete address of Depositor's principal executive
office:
PAINEWEBBER INCORPORATED
1285 Avenue of the Americas
New York, New York 10019
D. Name and complete address of agents for service:
PAINEWEBBER INCORPORATED
Attention: Mr. Robert E. Holley
1200 Harbor Boulevard
Weehawken, New Jersey 07087
Copy to:
CARTER, LEDYARD & MILBURN
Attention: Kathleen H. Moriarty, Esq.
2 Wall Street
New York, New York 10005
E. Total and amount of securities being registered:
An indefinite number of Units pursuant to Rule
24f-2 of the Investment Company Act of 1940.
F. Proposed maximum offering price to the public
of the securities being registered:
Indefinite
G. Amount of filing fee, computed at one-thirty-
fourth of 1 percent of the proposed maximum
aggregate offering price to the public:
None required pursuant to Rule 24f-2.
H. Approximate date of proposed sale to public:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF
THE REGISTRATION STATEMENT
[ ] Check box if it is proposed that this filing will
become effective on July _, 1998 at 3:00 p.m.
pursuant to Rule 487.
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THE PAINEWEBBER EQUITY TRUST,
ABCs TRUST SERIES 1
Cross Reference Sheet
Pursuant to Rule 404(c) of Regulation C
under the Securities Act of 1933
(Form N-8B-2 Items required by Instruction 1
as to Prospectus on Form S-6)
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
- ----------- ---------------------
I. Organization and General Information
1. (a) Name of Trust ) Front Cover
(b) Title of securities issued )
2. Name and address of Depositor ) Back Cover
3. Name and address of Trustee ) Back Cover
4. Name and address of principal ) Back Cover
Underwriter )
5. Organization of Trust ) The Trust
6. Execution and termination of ) The Trust
Trust Agreement ) Termination of the
) Trust
7. Changes of name ) *
8. Fiscal Year ) *
9. Litigation ) *
II. General Description of the Trust
and Securities of the Trust
---------------------------
10. General Information regarding Trust's ) The Trust
Securities and Rights of Holders ) Rights of Unitholders
- ---------------
* Not applicable, answer negative or not required.
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(a) Type of Securities ) The Trust
(Registered or Bearer) )
(b) Type of Securities ) The Trust
(Cumulative or Distributive) )
(c) Rights of Holders as to ) Rights of Unitholders
Withdrawal or Redemption ) Redemption
) Public Offering of
) Units, Secondary
) Market for Units
) Exchange Option
(d) Rights of Holders as to ) Public Offering of
conversion, transfer, etc. ) Units-Administration
) of the Trust
(e) Rights of Trust issues periodic ) *
payment plan certificates )
(f) Voting rights as to Securities, ) Rights of Unitholders
under the Indenture ) Amendment of the Trust
) Termination of the
) Trust
(g) Notice to Holders as to )
change in )
(1) Assets of Trust )
(2) Terms and Conditions )
of Trust's Securities )
(3) Provisions of Trust ) Amendment of the Indenture
(4) Identity of Depositor ) Administration of the Trust-
and Trustee ) Portfolio Supervision
(h) Consent of Security Holders )
required to change )
(1) Composition of assets ) Amendment of the Indenture
of Trust
(2) Terms and conditions ) Amendment of the Indenture
of Trust's Securities )
(3) Provisions of Indenture )
(4) Identity of Depositor and ) Amendment of the Indenture
Trustee )
11. Type of securities comprising ) The Trust Rights of Unit-
security holder's interest ) holders Administration of
) the Trust-Portfolio
) Supervision
- ---------------
* Not applicable, answer negative or not required.
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12. Information concerning periodic ) *
payment certificates )
13. (a) Load, fees, expenses, etc. ) Public Offering Price of
) Units, Administration of
) the Trust, Expenses of the
) Trust
(b) Certain information regarding ) *
periodic payment certificates )
(c) Certain percentages ) Public offering of Units
(d) Certain other fees, etc. )
payable by holders ) Rights of Unitholders
(e) Certain profits receivable by ) Public Offering of Units-
depositor, principal under- ) Public Offering Price;
writers, trustee or affiliated ) -Sponsor's Profit-Secondary
persons ) Market for Units
(f) Ratio of annual charges to ) *
income )
14. Issuance of trust's securities ) The Trust
) Public Offering of Units
15. Receipt and handling of payments ) Public offering of Units
from purchasers )
16. Acquisition and disposition of ) The Trust, Administration
Underlying Securities ) of the Trust, Amendment of
) the Indenture, Termination
) of the Trust
17. Withdrawal or redemption ) Public Offering of Units
) Administration of the Trust
18. (a) Receipt and disposition of ) Distributions, The Trust,
income ) Distributions, Administra-
) tion of the Trust
(b) Reinvestment of distributions ) *
(c) Reserves or special fund ) Distributions, Redemption,
) Expenses of the Trust,
) Termination of the Trust,
) Amendment of the Indenture
- ---------------
* Not applicable, answer negative or not required.
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(d) Schedule of distribution ) *
19. Records, accounts and report ) Distributions, Administra-
) tion of the Trust
20. Certain miscellaneous provisions ) Trustee, Sponsor, Termina-
of trust agreement ) tion of the Trust, Amend-
) ment of the Indenture
21. Loans to security holders ) *
22. Limitations on liability ) Sponsor, Trustee, Redemp-
) tion
23. Bonding arrangements ) Included in Form N-8B-2
24. Other material provisions of ) *
trust agreement )
III. Organization Personnel and
Affiliated Persons of Depositor
-------------------------------
25. Organization of Depositor ) Sponsor
26. Fees received by Depositor ) Public Offering of
) Units-Public Offering
) Price, Expenses of the
) Trust
27. Business of Depositor ) Sponsor
28. Certain information as to ) Sponsor
officials and affiliated )
persons of Depositor )
29. Voting securities of Depositor ) *
30. Persons controlling Depositor ) Sponsor
31. Payments by Depositor for certain ) *
other services trust )
32. Payments by Depositor for certain ) *
certain other services )
rendered to trust )
33. Remuneration of employees of ) *
Depositor for certain services )
rendered to trust )
- ---------------
* Not applicable, answer negative or not required.
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34. Remuneration of other persons ) *
for certain services rendered )
to trust )
IV. Distribution and Redemption of Securities
---------------------------------------------
35. Distribution of trust's ) Public Offering of Units
securities by states )
36. Suspension of sales of trust's ) *
securities )
37. Revocation of authority to ) *
distribute )
38. (a) Method of distribution ) Public Offering of Units
(b) Underwriting agreements ) The Trust, Administration
(c) Selling agreements ) of The Trust
39. (a) Organization of principal ) Sponsor
Underwriter )
(b) N.A.S.D. membership of ) Sponsor
principal underwriter )
40. Certain fees received by ) Public Offering of Units,
principal underwriter ) Expenses of the Trust
41. (a) Business of principal ) Sponsor
underwriter )
(b) Branch officers of principal )
underwriter )
(c) Salesman of principal ) *
underwriter )
42. Ownership of trust's securities ) *
by certain persons )
43. Certain brokerage commissions ) *
received by principal underwriter )
44. (a) Method of valuation ) Public Offering of Units
) Valuation
(b) Schedule as to offering price ) *
(c) Variation in offering ) Public Offering of Units
Price to certain persons ) Administration of the Trust
- ---------------
* Not applicable, answer negative or not required.
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45. Suspension of redemption rights ) *
46. (a) Redemption valuation ) Public Offering of Units
) -Public Offering Price
) -Secondary Market for Units
) Valuation, Redemption
(b) Schedule as to redemption ) *
price )
V. Information concerning the Trustee or Custodian
--------------------------------------------------
47. Maintenance of position in ) Redemption, Public Offering
underlying securities ) of Units-Public Offering
) Price
48. Organization and regulation of ) Trustee
Trustee )
49. Fees and expenses of Trustee ) Expenses of the Trust
50. Trustee's lien ) Expenses of the Trust
VI. Information concerning Insurance of Holders of Securities
-------------------------------------------------------------
51. (a) Name and address of Insurance ) *
Company )
(b) Type of policies ) *
(c) Type of risks insured and ) *
excluded )
(d) Coverage of policies ) *
(e) Beneficiaries of policies ) *
(f) Terms and manner of ) *
cancellation )
(g) Method of determining premiums ) *
(h) Amount of aggregate premiums ) *
paid )
(i) Who receives any part of ) *
premiums )
(j) Other material provisions of ) *
the Trust relating to insurance )
- ---------------
* Not applicable, answer negative or not required.
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VII. Policy of Registrant
-------------------------
52. (a) Method of selecting and ) The Trust, Administration
eliminating securities from ) of the Trust
the Trust )
(b) Elimination of securities ) *
from the Trust )
(c) Policy of Trust regarding ) The Trust, Administration
substitution and elimination ) of the Trust
of securities )
(d) Description of any funda- ) The Trust, Administration
mental policy of the Trust ) of the Trust-Portfolio
) Supervision
53. (a) Taxable status of the Trust ) Federal Income Taxes
(b) Qualification of the Trust as )
a regulated investment company )
VIII. Financial and Statistical Information
-------------------------------------------
54. Information regarding the Trust's ) *
past ten fiscal years )
55. Certain information regarding ) *
periodic payment plan certificates )
56. Certain information regarding ) *
periodic payment plan certificates )
57. Certain information regarding ) *
periodic payment plan certificates )
58. Certain information regarding ) *
periodic payment plan certificates )
59. Financial statements ) Statement of Net Assets
(Instruction 1(c) to Form S-6) )
- ---------------
* Not applicable, answer negative or not required.
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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.
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PAINEWEBBER EQUITY TRUST
ABCs Trust Series 1
- -----------------------------------------------------------------------------
The investment objective of this Trust is to provide for capital
appreciation through an investment in equity securities selected from
PaineWebber's ANALYSTS' BEST CALLS ("ABCs") list. The value of the Units will
fluctuate with the value of the portfolio of underlying securities and there
is no assurance that dividends will be paid or that the securities, and
therefore the Units, will appreciate in value.
The minimum purchase is $250. Only whole Units may be purchased.
- -----------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
- -----------------------------------------------------------------------------
SPONSOR:
PAINEWEBBER INCORPORATED
Read and retain this prospectus for future reference.
PROSPECTUS DATED JULY 29, 1998
<PAGE>
ESSENTIAL INFORMATION REGARDING THE TRUST
AS OF JULY 28, 1998(1)
<TABLE>
<CAPTION>
<S> <C> <C>
Sponsor: PaineWebber Incorporated
Trustee: Investors Bank & Trust Company
Initial Date of Deposit: July 29, 1998
Aggregate Value of Securities in Trust: ............................ $990,009
Number of Units(2): ................................................ 100,000
Fractional Undivided Interest in the Trust Represented by Each 1/100,000th
Unit: ..............................................................
Calculation of Public Offering Price Per Unit2, (3)
Public Offering Price per Unit .................................... $10.00
Less Reimbursement to Sponsor for Initial Organizational Costs(6) . $0.009
Less Initial Sales Charge(4)* of 1% of Public Offering Price
(1.00% of net amount invested per 100 Units) ..................... $0.10
Net Asset Value per Unit .......................................... $9.891
Net Asset Value for 100,000 Units ................................. $989,109
Divided by 100,000 Units(2) ....................................... $9.891
Redemption Value:** .................................................... $9.70
Evaluation Time:........................................................ 4:00 P.M. New York time.
Income Account Distribution Dates(5): .................................. September 25, 1998 and quarterly
thereafter and on the Mandatory
Termination Date.
Capital Account Distribution Dates(5):.................................. December 25, 1998 and on the
Mandatory Termination Date. No
distributions of less than $.05
per Unit need be made from the
Capital Account on any
Distribution Date.
Record Dates:........................................................... September 10, 1998 and quarterly
thereafter.
Mandatory Termination Date:............................................. January 28, 2000
Discretionary Liquidation Amount:....................................... 40% of the value of Securities
upon completion of the deposit of
Securities.
Estimated Organizational Expenses Paid by Unitholders(6): ............. $.009 per Unit.
Estimated Expenses of the Trust(7)...................................... $.026 per Unit.
</TABLE>
- ------------
(1) The date prior to the Initial Date of Deposit.
(2) As of the close of business on the Initial Date of Deposit, the number
of Units may be adjusted so that the Public Offering Price Per Unit will
equal approximately $10.00, based on the 4:00 p.m. Eastern time
valuation of the Securities in the Portfolio on such date. Thereafter,
to the extent of any such adjustment in the number of Units, the
fractional undivided interest per Unit will increase or decrease
accordingly, from the amounts indicated above.
(3) The Public Offering Price will be based upon the value of the Stocks
next computed following receipt of the purchase order plus the
applicable sales charges and will vary on any date subsequent to July
29, 1998 from the Public Offering Price per Unit shown above. Following
the Initial Date of Deposit, costs incurred in connection with the
acquisition of additional Stocks will be at the expense of the Trust.
Any investor purchasing Units after the Initial Date of Deposit will
also pay a pro-rata share of any accumulated dividends in the Income
Account. (See "Essential Information Regarding the Trust--Additional
Deposits," "Risk Factors and Special Considerations" and "Valuation").
(4) The Initial Sales Charge is 1% per 100 Units. In addition, ten (10)
monthly Deferred Sales Charges of $2.00 per 100 Units (totalling $20.00
per 100 Units) will be deducted from the Trust's net asset value during
the third (3rd) through twelfth (12th) months of the Trust's nineteen
(19) month life. The Initial Sales Charge is reduced on purchases of
Units worth $50,000 or more. See "Public Offering of Units--Sales Charge
and Volume Discount."
(5) See "Distributions".
continued on page 3
2
<PAGE>
(6) Investors purchasing Units during the initial offering period will
reimburse the Sponsor for all or a portion of the costs incurred by the
Sponsor in connection with organizing the Trust and offering the Units for
sale described more fully in "Public Offering Price" (collectively, the
"Initial Organizational Costs"). These costs have been estimated at $0.009
per Unit based upon the expected number of Units to be created during the
initial offering period. Certain Securities purchased with the proceeds of
the Public Offering Price will be sold by the Trustee at the completion of
the initial public offering period to reimburse the Sponsor for Initial
Organizational Costs actually incurred. If the actual Initial
Organizational Costs are less than the estimated amount, only the actual
Initial Organizational Costs will be deducted from the assets of the
Trust. If, however, the amount of the actual Initial Organizational Costs
are greater than the estimated amount, only the estimated amount of the
Initial Organizational Costs will be deducted from the assets of the
Trust.
(7) See "Expenses of the Trust". Estimated dividends from the Stocks, based
upon last dividends actually paid, are expected by the Sponsor to be
sufficient to pay estimated expenses of the Trust. If such dividends and
income paid are insufficient to pay expenses, the Trustee is authorized
to sell Securities in an amount sufficient to pay such expenses. (See
"Administration of the Trust" and "Expenses of the Trust".)
* The sales charge will not be assessed on these Securities sold to
reimburse the Sponsor for the Initial Organizational Costs.
** This figure reflects deduction of the Initial Sales Charge of 1.00% and
the Maximum Deferred Sales Charges of $0.20 per Unit. As of the close of
the initial offering period, the Redemption Value will be reduced to
reflect the payment of Initial Organizational Costs (see "Summary of Risk
Factors" and "Comparison of Public Offering Price and Redemption Value").
ESSENTIAL INFORMATION REGARDING THE TRUST (CONTINUED)
THE TRUST. The objective of the PaineWebber Equity Trust, ABCs Trust
Series 1 (the "Trust") is to provide for capital appreciation through an
investment in equity securities selected from PaineWebber's Analysts' Best
Calls list as discussed briefly below (referred to herein as the "Stocks" or
the "Securities"). THERE CAN BE NO ASSURANCE THAT THE OBJECTIVE OF THE TRUST
WILL BE ACHIEVED.
The PaineWebber Research Department has been long recognized as one of the
leaders on Wall Street; only PaineWebber has been named among the top 10
investment firms in "Institutional Investor's All America Research Team" in
each of its 26 annual surveys. Analysts' Best Calls ("ABCs") is a compilation
of PaineWebber's research analysts' top stock selections. All stocks on the
ABCs list must be rated either "buy" or "attractive", with an investment
horizon of twelve (12) months.
PaineWebber selected the Stocks in the Trust Portfolio from the securities
on the ABCs list as of the day prior to the Initial Date of Deposit, subject
to certain capitalization and liquidity screens (see "The Composition of the
Portfolio").
SUMMARY OF RISK FACTORS. There are certain investment risks inherent in
unit trust portfolios which hold equity securities. The Stocks may appreciate
or depreciate in value or pay dividends depending on the full range of
economic and market influences affecting corporate profitability, the
financial condition of the issuers, the prices of equity securities, the
condition of the stock markets in general and the prices of the stocks in
particular. In addition, rights of common stock holders are generally
inferior to those of holders of debt obligations or preferred stock. See
"Risk Factors and Special Considerations" for a discussion of these risks.
There can also be no assurance that the Trust portfolio will remain
constant during the life of the Trust (see "Risk Factors and Special
Considerations"). For example, the Trustee will sell Securities to reimburse
the Sponsor for the Initial Organizational Costs and may be required to sell
Securities to pay for the expenses of the Trust (see "Expenses of the Trust"
and "Administration of the Trust--Accounts"). Also, certain events might occur
which could lead to the elimination of one or more Stocks from the Portfolio
(see "Administration of the Trust--Portfolio Supervision"), thereby reducing
the diversity of the Trust's investments. Further, under certain circumstances,
if a tender offer is made for any of the Stocks in the Trust, or in the event
of a merger or reorganization, the Trust will either tender the Stocks or sell
them as more fully described under the captions "The Trust" and "Administration
of the Trust--Portfolio Supervision," herein. Also, to the extent a significant
number of Unitholders choose to exercise their exchange option in respect of
the July 30, 1999 Special Redemption Date, or thereafter, the Trust will
experience a correspondingly significant redemption at such time, thereby
reducing the size of the Trust (see "Exchange Option").
3
<PAGE>
THE COMPOSITION OF THE TRUST PORTFOLIO
PaineWebber observes that the challenge for many investors today is to
build a portfolio that offers the potential for solid performance from the
thousands of issues currently trading in the market. PaineWebber has
historically maintained a commitment to providing its clients with superior,
performance-oriented equity research.
Analysts' Best Calls ("ABCs") is a compilation of PaineWebber's research
analysts' top stock selections. More than 50 of PaineWebber's senior analysts
covering over 50 different industries each select a stock from their
respective sectors based on their assessment of the likelihood that the stock
will outperform the market over the next 12 months. It is the stock the
analyst believes has the highest appreciation potential in its universe
coupled with the highest level of conviction, and must be rated either "buy"
or "attractive" by PaineWebber. ABCs are drawn from the entire range of
industries and companies covered by the Research Department. Historically,
the ABCs list has comprised approximately 40 to 50 stocks. The Stocks in the
Trust were chosen from the entire universe of the stocks on the ABCs list.
Investors should note that because the Stocks held by the Trust were subject
to several selection screens described below, the Trust may not hold the
entire ABCs list.
The Stocks included in the Trust were chosen in the following manner:
first, all Stocks had to be ABCs as of the day prior to the Initial Date of
Deposit. Second, each Stock had to have a minimum market capitalization of $1
billion. Third, only Stocks chosen by PaineWebber research analysts who rated
at least 20% of their followed stocks either "buy" or "attractive", were
permitted to be included in the Trust. All Stocks meeting these three
criteria were included as Stocks in the Trust's Portfolio shown under the
heading "Schedule of Investments".
All the Stocks in the Trust Portfolio are common stocks issued by
companies that may receive income and derive revenues from multiple industry
sources but whose primary industry is listed in the "Schedule of
Investments."
THE PAINEWEBBER EQUITY RESEARCH DEPARTMENT
The PaineWebber Equity Research Department (the "Research Department")
seeks to identify today's best investment opportunities based on established
and emerging economic, market, industry and company trends. Using a
fundamental approach, PaineWebber's research professionals visit with the
company managements and evaluate their strategies in terms of the probable
impact on corporate earnings. At PaineWebber, the process involves a constant
and dynamic dialogue among strategists, economists and analysts; using
leading-edge technology, they look at information from the top down and the
bottom up, challenging each others' assumptions and continuously sharpening
their focus on both major issues and supporting details.
The Research Department has been long recognized as one of the leaders on
Wall Street. Only PaineWebber has been named among the top 10 investment
firms in Institutional Investor's "All America Research Team" in each of its
26 annual surveys. Additionally, The Wall Street Journal reported that
PaineWebber's Performance Portfolio, which is submitted by the Research
Department to Zacks Investment Research, performed the best amongst the
submitted recommended lists of 15 major firms for the five year period ended
March 31, 1998. For the one-year performance period ended March 31, 1998,
PaineWebber's Performance Portfolio was ranked number 8 out of 15 firms.
PaineWebber was rated the best full-service brokerage firm in the category of
stock selection by Kiplinger's Personal Finance Magazine, Money and Smart
Money in each of their respective 1997 annual surveys, based on each
publication's analysis of the one-year, three-year and five-year results of
certain full service brokerage firms. Each of these rankings is based, at
least in part, on data compiled by The Wall Street Journal and
4
<PAGE>
Zacks Investment Research. There is no assurance that PaineWebber will be
successful in stock selection during the term of this Trust or will continue
to be highly ranked among investment firms for stock selection. The stocks on
the ABCs list have not been, are not, and may not be during the term of this
Trust, the same stocks as those contained in the Performance Portfolio.
<TABLE>
<CAPTION>
APPROXIMATE PERCENT OF AGGREGATE
PRIMARY INDUSTRY SOURCE MARKET VALUE OF THE TRUST
- ------------------------------- --------------------------------
<S> <C>
Auto/Truck Parts & Equipment .. 5.85%
Beverages ...................... 2.93%
Building-Maintenance & Services 2.94%
Cable TV ....................... 2.96%
Cosmetics & Toiletries ......... 2.95%
Electric ....................... 2.92%
Electronics/Semi-Conductor .... 5.87%
Instruments-Controls ........... 2.95%
Insurance ...................... 5.91%
Internet Software .............. 3.00%
Medical ........................ 8.83%
Multimedia ..................... 2.93%
National Commercial Banks ..... 2.90%
Oil/Gas ........................ 11.74%
Paper Products ................. 2.99%
Publishing-Newspapers .......... 2.92%
Railroad Transportation ........ 2.93%
REITS-Hotel/Restaurant ......... 2.94%
REITS-Mortgage ................. 2.91%
Retail-Apparel/Shoe............. 5.89%
Retail-Food..................... 2.96%
Retail-Office Supplies ......... 2.93%
Steel Producers ................ 2.94%
Telecommunications ............. 5.91%
</TABLE>
ADDITIONAL DEPOSITS. After the first deposit on the Initial Date of
Deposit the Sponsor may, from time to time, cause the deposit of additional
Securities ("Additional Securities") in the Trust where additional Units are
to be offered to the public. (See "The Trust"). The Trust, when acquiring
such Additional Securities, may purchase Stocks notwithstanding that, at the
time of such purchase, such Stocks are no longer included in the most current
ABCs list. Costs incurred in acquiring such Additional Securities will be
borne by the Trust. Unitholders will experience a dilution of their
investment as a result of such brokerage fees and other expenses paid by the
Trust during additional deposits of Securities purchased by the Trustee with
cash or cash equivalents pursuant to instructions to purchase such
Securities. (See "The Trust" and "Risk Factors and Special Considerations".)
PUBLIC OFFERING PRICE. Units will be charged a combination of an Initial
Sales Charge on the date of purchase of 1.00% of the Public Offering Price,
plus Deferred Sales Charges which will aggregate $20.00 per 100 Units over
the third (3rd) through twelfth (12th) months of the nineteen (19) month life
of the Trust. For example, on a $1,000 investment, $990.00 is invested in the
Trust and a $10.00
5
<PAGE>
Initial Sales Charge is collected. In addition, a Deferred Sales charge of
$2.00 per 100 Units will be deducted from the Trust's net asset value on the
tenth (10th) day of each month from months three (3) through twelve (12) of the
Trust's life for a total of $20.00. This deferred method of payment keeps more
of the investor's money invested over a longer period of time than would be the
case if a single sales charge of the same amount were collected on the initial
date of purchase. The Initial Sales Charge is reduced on a graduated scale for
volume purchasers and is reduced for certain other purchasers. Units are
offered at the Public Offering Price computed as of the Evaluation Time for all
sales subsequent to the previous evaluation. The Public Offering Price on any
date subsequent to the Initial Date of Deposit, will vary from the Public
Offering Price set forth on page 2. Units redeemed or repurchased prior to the
accrual of the final Deferred Sales Charge installment will have any amount of
any remaining installments deducted from the redemption or repurchase proceeds
or deducted in calculating an in-kind redemption. (See "Public Offering of
Units".) In addition, during the initial public offering period, the Public
Offering Price per 100 Units will include an amount sufficient to reimburse the
Sponsor for the payment of all or a portion of the Initial Organizational Costs
described more fully in "Public Offering Price".
DISTRIBUTIONS. The Stocks in the Trust were chosen for their capital
appreciation potential, not for their income potential. The Trustee will make
distributions on the Distribution Dates. (See "Distributions", "Exchange
Option" and "Administration of the Trust".) Unitholders may elect to have
their Income and Capital Account distributions automatically reinvested into
additional Units of the Trust at no Initial Sales Charge (see "Reinvestment
Plan"). (Such Units, like all Units, will be subject to Deferred Sales
Charges.) Upon termination of the Trust, the Trustee will distribute to each
Unitholder of record on such date his pro rata share of the Trust's assets,
less expenses. The sale of Securities in the Trust in the period prior to
termination and upon termination may result in a lower amount than might
otherwise be realized if such sale were not required at such time due to
impending or actual termination of the Trust. For this reason, among others,
the amount realized by a Unitholder upon termination may be less than the
amount paid by such Unitholder.
TERMINATION. Unitholders may receive their termination proceeds in cash
(or, at the Sponsor's election, in kind for distributions in excess of
$500,000) after the Trust terminates (see "Termination of the Trust"). Unless
advised to the contrary by the Sponsor, the Trustee will begin to sell the
Securities held in the Trust approximately twenty days prior to the Mandatory
Termination Date. Moneys held upon such sale or maturity of Securities will
be held in non-interest bearing accounts created by the Indenture until
distributed and will be of benefit to the Trustee. The Trust will terminate
approximately nineteen (19) months after the Initial Date of Deposit
regardless of market conditions at the time. (See "Termination of the Trust"
and "Federal Income Taxes".)
EXCHANGE OPTION. So long as the Sponsor continues to offer new ABCs Trust,
Unitholders may exercise their exchange option in lieu of selling or
redeeming their Units on or after the July 30, 1999 Special Redemption Date, at
a reduced sales charge described under "Exchange Option". The Sponsor reserves
the right not to offer new ABCs Trusts and there is no guarantee that a new
Trust will be available on or after the July 30, 1999 Special Redemption Date.
MARKET FOR UNITS. The Sponsor, though not obligated to do so, presently
intends to maintain a secondary market for Units. The public offering price
in the secondary market will be based upon the value of the Securities next
determined after receipt of a purchase order, plus the applicable sales
charge. (See "Public Offering of Units--Public Offering Price" and
"Valuation".) If a secondary market is not maintained, a Unitholder may
dispose of his Units only through redemption. With respect to redemption
requests in excess of $500,000, the Sponsor may determine in its sole
discretion to direct the Trustee to redeem units "in kind" by distributing
Securities to the redeeming Unitholder. (See "Redemption".)
6
<PAGE>
THE TRUST
The Trust is the first of a series of similar but separate unit investment
trusts created under New York law by the Sponsor pursuant to a Trust
Indenture and Agreement * (the "Indenture") dated as of the Initial Date of
Deposit, between PaineWebber Incorporated, as Sponsor and Investors Bank &
Trust Company, as Trustee (the "Trustee"). The objective of the Trust is
capital appreciation through an investment in equity securities selected from
PaineWebber's Analysts' Best Calls ("ABCs") list. Of course, there can be no
assurance that the objective of the Trust will be achieved.
On the Initial Date of Deposit, the Sponsor deposited with the Trustee
confirmations of contracts for the purchase of Stocks together with an
irrevocable letter or letters of credit of a commercial bank or banks in an
amount at least equal to the purchase price. The value of the Securities was
determined on the basis described under "Valuation". In exchange for the
deposit of the contracts to purchase Securities, the Trustee delivered to the
Sponsor a receipt for Units representing the entire ownership of the Trust.
With the deposit on the Initial Date of Deposit, the Sponsor established a
proportionate relationship between the Securities in the Trust (determined by
reference to the number of shares of each issue of Stock). The Sponsor may,
from time to time, cause the deposit of Additional Securities in the Trust
when additional Units are to be offered to the public or pursuant to the
Reinvestment Plan. During the 90-day period following the Initial Date of
Deposit, deposits of Additional Securities or cash in connection with the
issuance and sale of additional Units will maintain, to the extent
practicable, the original proportionate relationship among the number of
shares of each Security. The original proportionate relationship is subject
to adjustment to reflect the occurrence of a stock split or a similar event
which affects the capital structure of the issuer of a Security but which
does not affect the Trust's percentage ownership of the common stock equity
of such issuer at the time of such event, to reflect a merger or
reorganization, to reflect the acquisition of Securities or to reflect a sale
or other disposition of a Security. It may not be possible to maintain the
exact original proportionate relationship among the Securities deposited on
the Initial Date of Deposit because of, among other reasons, purchase
requirements, changes in prices, brokerage commissions or unavailability of
Securities (see "Administration of the Trust--Portfolio Supervision"). Units
may be continuously offered to the public by means of this Prospectus (see
"Public Offering of Units--Public Offering Price") resulting in a potential
increase in the number of Units outstanding. Deposits of Additional
Securities subsequent to the 90-day period following the Initial Date of
Deposit must replicate exactly the proportionate relationship among the
number of shares of each of the Securities comprising the Portfolio
immediately prior to such deposit of Additional Securities. Stock dividends
issued in lieu of cash dividends, if any, received by the Trust will be sold
by the Trustee and the proceeds therefrom shall be added to the Income
Account. (See "Administration of the Trust" and "Reinvestment Plan").
On the Initial Date of Deposit each Unit represented the fractional
undivided interest in the Securities and net income of the Trust set forth
under "Essential Information Regarding the Trust". However, if additional
Units are issued by the Trust (through the deposit of Additional Securities
for purposes of the sale of additional Units or pursuant to the Reinvestment
Plan), the aggregate value of Securities in the Trust will be increased and
the fractional undivided interest represented by each Unit in the balance
will be decreased. If any Units are redeemed, the aggregate value of
Securities in the Trust will be reduced, and the fractional undivided
interest represented by each remaining Unit in the balance will be increased.
Units will remain outstanding until redeemed upon tender to the Trustee by
any Unitholder (which may include the Sponsor) or until the termination of
the Trust. (See "Termination of the Trust".)
- ------------
*Reference is hereby made to said Trust Indenture and Agreement and any
statements contained herein are qualified in their entirety by the provisions
of said Trust Indenture and Agreement.
7
<PAGE>
Investors should be aware that the Trust, unlike a mutual fund, is not a
"managed" fund and as a result the adverse financial condition of a company
will not result in its elimination from the portfolio except under
extraordinary circumstances (see "Trust Administration--Portfolio
Administration"). In addition, Securities will not be sold by the Trust to
take advantage of market fluctuations or changes in anticipated rates of
appreciation.
Investors should note that PaineWebber, in its general securities
business, acts as agent or principal in connection with the purchases and
sales of equity securities, including the Securities in the Trust, and may
act as a market maker in certain of the Securities. PaineWebber also from
time to time issues reports and may make recommendations relating to equity
securities, including the Securities in the Trust, and has provided, and may
continue to provide, investment banking services to the issuers of the
Securities.
Investors should note in particular that the Securities were selected by
the Sponsor as of the Initial Date of Deposit. The Trust may continue to
purchase Additional Securities when additional Units are offered to the
public or pursuant to the Reinvestment Plan, or may continue to hold
Securities originally selected through this process. This may be the case
even though the Securities may no longer be included in the current ABCs list
or the evaluation of the attractiveness of such Securities may have changed
and, if the evaluation were performed again at that time, the Securities
would not be selected for the Trust. In addition, the Sponsor may continue to
sell Trust Units even if PaineWebber changes a recommendation relating to one
or more Securities in the Trust.
RISK FACTORS AND SPECIAL CONSIDERATIONS
An investment in Units of the Trust should be made with an understanding
of the risks inherent in an investment in common stocks in general. The
general risks are associated with the rights to receive payments from the
issuer which are generally inferior to creditors of, or holders of debt
obligations or preferred stocks issued by, the issuer. Holders of common
stocks have a right to receive dividends only when and if, and in the
amounts, declared by the issuer's board of directors and to participate in
amounts available for distribution by the issuer only after all other claims
against the issuer have been paid or provided for. By contrast, holders of
preferred stocks have the right to receive dividends at a fixed rate when and
as declared by the issuer's board of directors, normally on a cumulative
basis, but do not participate in other amounts available for distribution by
the issuing corporation. Dividends on cumulative preferred stock must be paid
before any dividends are paid on common stock. Preferred stocks are also
entitled to rights on liquidation which are senior to those of common stocks.
For these reasons, preferred stocks generally entail less risk than common
stocks.
The Trust is not appropriate for investors who require high current income
or seek conservation of capital.
Common stocks do not represent an obligation of the issuer. Therefore,
they do not offer any assurance of income or provide the degree of protection
of debt securities. The issuance of debt securities or even preferred stock
by an issuer will create prior claims for payment of principal, interest and
dividends which could adversely affect the ability and inclination of the
issuer to declare or pay dividends on its common stock or the rights of
holders of common stock with respect to assets of the issuer upon liquidation
or bankruptcy. Unlike debt securities which typically have a stated principal
amount payable at maturity, common stocks do not have a fixed principal
amount or a maturity. Additionally, the value of the Stocks in the Trust may
be expected to fluctuate over the life of the Trust.
Certain of the Stocks in the Trust may be ADRs which are subject to
additional risks. (See "Schedule of Investments".) ADRs evidence American
Depositary Shares ("ADS"), which, in turn, represent
8
<PAGE>
common stock of foreign issuers deposited with a custodian in a depositary.
(For purposes of this Prospectus, the term "ADR" generally includes "ADS".)
ADRs involve certain investment risks that are different from those found in
stocks issued by domestic issuers. These investment risks include potential
political and economic developments, potential establishment of exchange
controls, new or higher levels of taxation, or other governmental actions which
might adversely affect the payment or receipt of payment of dividends on the
common stock of foreign issuers underlying such ADRs. ADRs may also be subject
to current foreign taxes, which could reduce the yield on such securities.
Also, certain foreign issuers are not subject to reporting requirements under
U.S. securities laws and therefore may make less information publicly available
than that provided by domestic issuers. Further, foreign issuers are not
necessarily subject to uniform financial reporting, auditing and accounting
standards and practices which are applicable to publicly traded domestic
issuers.
In addition, the securities underlying the ADRs held in the Trust are
generally denominated, and pay dividends, in foreign currency. An investment in
securities denominated and principally traded in foreign currencies involves
investment risk substantially different than an investment in securities that
are denominated and principally traded in U.S. dollars. This is due to currency
exchange rate risk, because the U.S. dollar value of the shares underlying the
ADRs and of their dividends will vary with the fluctuations in the U.S. dollar
foreign exchange rates for the relevant currency in which the shares underlying
the ADRs are denominated. The Trust, however, will compute its income in United
States dollars, and to the extent any of the Stocks in the Trust pay income or
dividends in foreign currency, the Trust's computation of income will be made
on the date of its receipt by the Trust at the foreign exchange rate then in
effect. PaineWebber observes that, in the recent past, most foreign currencies
have fluctuated widely in value against the U.S. dollar for many reasons,
including the soundness of the world economy, supply and demand of the relevant
currency, and the strength of the relevant regional economy as compared to the
economies of the United States and other countries. Exchange rate fluctuations
are also dependent, in part, on a number of economic factors including economic
conditions within the relevant country, interest rate differentials between
currencies, the balance of imports and exports of goods and services, and the
transfer of income and capital from one country to another. These economic
factors in turn are influenced by a particular country's monetary and fiscal
policies, perceived political stability (particularly with respect to transfer
of capital) and investor psychology, especially that of institutional
investors, who make assessments of the future relative strength or weakness of
a particular currency. As a general rule, the currency of a country with a low
rate of inflation and a favorable balance of trade should increase in value
relative to the currency of a country with a high rate of inflation and
deficits in the balance of trade.
Any distributions of income to Unitholders will generally depend upon the
declaration of dividends by the issuers of Securities and the declaration of
dividends depends upon several factors, including the
financial condition of the issuers and general economic conditions. In
addition, there are investment risks common to all equity issues. The Stocks
may appreciate or depreciate in value depending upon a variety of factors,
including the full range of economic and market influences affecting
corporate profitability, the financial condition of issuers, changes in
national or worldwide economic conditions, and the prices of equity
securities in general and the Stocks in particular. Distributions of income,
generally made by declaration of dividends, is also dependent upon several
factors, including those discussed above in the preceding sentence.
The Sponsor's buying and selling of the Securities, especially during the
initial offering of Units of the Trust or to satisfy redemptions of Units or
to reimburse the Sponsor for the Initial Organizational Costs, may impact
upon the value of the underlying Securities and the Units. For example, the
Sponsor's
9
<PAGE>
acquisition of certain of the Securities in open market purchases may have the
unintended result of increasing the closing market price for such Securities at
the close of business on the date(s) of such purchases. The publication of the
list of the Securities selected for the Trust may also cause increased buying
activity in certain of the Securities comprising the Trust portfolio. After
such announcement, investment advisory and brokerage clients of the Sponsor and
its affiliates may purchase individual Securities appearing on the list during
the course of the initial offering period. Such buying activity in the stock of
these companies prior to the purchase of the Securities by the Trust may cause
the Trust to purchase stocks at a higher price than those buyers who effect
purchases prior to purchases by the Trust and may also increase the amount of
the profit realized by the Sponsor on the purchase of the Securities from their
issuers.
Investors should note that the creation of additional Units subsequent to
the Initial Date of Deposit may have an effect upon the value of previously
existing Units. To create additional Units the Sponsor may deposit cash (or
cash equivalents, e.g., a bank letter of credit in lieu of cash) with
instructions to purchase Additional Securities in amounts and in percentage
relationships described above under "The Trust." To the extent the price of a
Security increases or decreases between the time cash is deposited with
instructions to purchase the Additional Security and the time the cash is
used to purchase the Additional Security, Units will represent less or more
of that Security and more or less of the other Securities in the Trust.
Unitholders will be at risk because of price fluctuations during this period
since if the price of shares of a Security increases, Unitholders will have
an interest in fewer shares of that Security, and if the price of a Security
decreases, Unitholders will have an interest in more shares of that Security,
than if the Security had been purchased on the date cash was deposited with
instructions to purchase the Security. In order to minimize these effects,
the Trust will attempt to purchase Additional Securities as closely as
possible to the Evaluation Time or at prices as closely as possible to the
prices used to evaluate the Trust at the Evaluation Time. Thus price
fluctuations during this period will affect the value of every Unitholder's
Units and the income per Unit received by the Trust. In addition, costs
incurred in connection with the acquisition of Additional Securities will be
at the expense of the Trust and will affect the value of every Unitholder's
Units.
Investors should note that the Trust has adopted an internal policy which
prohibits the ownership of any issue of Securities by all series of the ABCs
Trust combined beyond 9.9% of the then-current outstanding common stock of
such issue. The Sponsor is authorized to immediately discontinue the offering
of any additional Units of any ABCs Trust Series, including those to be
created for Reinvestment Plan purposes, until such time as all ABCs Trust
series, in the aggregate, hold less than 9.9% of the then-current outstanding
common stock of such issuer.
In the event a contract to purchase a Stock to be deposited on the Initial
Date of Deposit or any other date fails, cash held or available under a
letter or letters of credit, attributable to such failed contract may
be reinvested in another stock or stocks having characteristics sufficiently
similar to the Stocks originally deposited (in which case the original
proportionate relationship shall be adjusted) or, if not so reinvested,
distributed to Unitholders of record on the last day of the month in which
the failure occurred. The distribution will be made twenty days following
such record date and, in the event of such a distribution, the Sponsor will
refund to each Unitholder the portion of the sales charge attributable to
such failed contract.
To the extent that a significant number of Unitholders exercise their
exchange option on or after the July 30, 1999 Special Redemption Date, the Trust
will experience a correspondingly significant redemption at such time thereby
reducing the size of the Trust. Such redemptions may increase the expense
ratios for Unitholders who hold their Units until the Mandatory Termination
Date. See "Exchange Option".
10
<PAGE>
BECAUSE THE TRUST IS ORGANIZED AS A UNIT INVESTMENT TRUST, RATHER THAN AS
A MANAGEMENT INVESTMENT COMPANY, THE TRUSTEE AND THE SPONSOR DO NOT HAVE
AUTHORITY TO MANAGE THE TRUST'S ASSETS FULLY IN AN ATTEMPT TO TAKE ADVANTAGE
OF VARIOUS MARKET CONDITIONS TO IMPROVE THE TRUST'S NET ASSET VALUE, BUT MAY
DISPOSE OF SECURITIES ONLY UNDER CERTAIN LIMITED CIRCUMSTANCES. (SEE THE
DISCUSSION BELOW RELATING TO DISPOSITION OF STOCKS WHICH MAY BE THE SUBJECT
OF A TENDER OFFER, MERGER OR REORGANIZATION AND ALSO THE DISCUSSION UNDER THE
CAPTION "ADMINISTRATION OF THE TRUST--PORTFOLIO SUPERVISION".)
A number of the Securities in the Trust may also be owned by other clients
of the Sponsor. However, because these clients may have investment objectives
which differ from that of the Trust, the Sponsor may sell certain Securities
from such clients' accounts in instances where a sale of such Securities by
the Trust would be impermissible, such as to maximize return by taking
advantage of attractive market fluctuations in such Securities. As a result,
the amount realized upon the sale of the Securities from the Trust may not be
the highest price attained for an individual Security during the life of the
Trust.
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 or 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 Securities 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 Securities contained in the Trust.
The Sponsor may have acted as underwriter, manager, or co-manager of a
public offering of the Securities deposited into the Trust on the Initial
Date of Deposit, or as an adviser to one or more of the issuers of the
Securities, during the last three (3) years. The Sponsor or affiliates of the
Sponsor may serve as specialists in the Securities on one or more stock
exchanges and may have a long or short position in any of these Securities or
in options on any of them, and may be on the opposite sides of public orders
executed on the floor of an exchange where the Securities are listed. The
Sponsor may trade for its own account as an odd-lot dealer, market maker,
block positioner and/or arbitrageur in any of the Securities or options on
them. The Sponsor, its affiliates, directors, elected officers and employee
benefits programs may have either a long or short position in any of the
Securities or in options on them.
The Sponsor does not know of any pending litigation as of the Initial Date
of Deposit that might reasonably be expected to have a material adverse
effect on the Portfolio, although pending litigation may
have a material adverse effect on the value of Securities in the Portfolio.
In addition, at any time after the Initial Date of Deposit, litigation may be
initiated on a variety of grounds, or legislation may be enacted, affecting
the Securities in the Portfolio or the issuers of such Securities. Changing
approaches to regulation may have a negative impact on certain companies
represented in the Portfolio. There can be no assurance that future
litigation, legislation, regulation or deregulation will not have a material
adverse effect on the Portfolio or will not impair the ability of issuers of
the Securities to achieve their business goals.
The Trust is not appropriate for investors who require high current income
or seek conservation of capital.
11
<PAGE>
FEDERAL INCOME TAXES
In the opinion of Carter, Ledyard & Milburn, counsel for the Sponsor,
under existing law:
1. The Trust is not an association taxable as a corporation for federal
income tax purposes. Under the Internal Revenue Code of 1986, as amended
(the "Code"), each Unitholder will be treated as the owner of a pro rata
portion of the Trust, and income of the Trust will be treated as income of
the Unitholder. Each Unitholder will be considered to have received all of
the dividends paid on such Unitholder's pro rata portion of each Security
when such dividends are received by the Trust, whether or not such
dividends are used to pay a portion of Trust expenses or whether they are
automatically reinvested in additional Trust Units (see "Reinvestment
Plan").
2. Each Unitholder will have a taxable event when the Trust disposes of a
Security (whether by sale, exchange, or other disposition) or when the
Unitholder sells its Units or redeems its Units for cash. The total tax
cost of each Unit to a Unitholder is allocated among each of the
Securities in accordance with the proportion of the Trust comprised by
each Security to determine the per Unit tax cost for each Security.
3. The Trust is not an association taxable as a corporation for New York
State income tax purposes. Under New York State law, each Unitholder will
be treated as the owner of a pro rata portion of the Trust and the income
of the Trust will be treated as income of the Unitholders.
The following general discussion of the federal income tax treatment of an
investment in Units of the Trust is based on the Code and United States
Treasury Regulations (established under the Code) as in effect on the date of
this Prospectus. The federal income tax treatment applicable to a Unitholder
may depend upon the Unitholder's particular tax circumstances. The
tax-treatment applicable to non-U.S. investors is not addressed in this
Prospectus. Future legislative, judicial or administrative changes could
modify the statements below and could affect the tax consequences to
Unitholders. Accordingly, each Unitholder is advised to consult his or her
own tax advisor concerning the effect of an investment in Units.
General. Each Unitholder must report on its federal income tax return a
pro rata share of the entire income of the Trust, derived from dividends on
Stocks, interest on Short-Term Treasury Obligations (if any), gains or losses
upon dispositions of Securities by the Trust and a pro rata share of the
expenses of the Trust.
Distributions with respect to Stock, to the extent they do not exceed
current or accumulated earnings and profits of the distributing corporation,
will be treated as dividends to the Unitholders and will be subject to income
tax at ordinary rates. Corporate Unitholders may be entitled to the
dividends-received deduction discussed below.
To the extent distributions with respect to a Stock were to exceed the
issuing corporation's current and accumulated earnings and profits, they
would not constitute dividends. Rather, they would be treated as a tax free
return of capital and would reduce a Unitholder's tax cost for such Stock.
This reduction in basis would increase any gain, or reduce any loss, realized
by the Unitholder on any subsequent sale or other disposition of such stock
or of Units. After the tax cost has been reduced to zero, any additional
distributions in excess of current and accumulated earnings and profits would
be taxable as gain from the sale of Stock.
A Unitholder who is an individual, estate or trust may be disallowed
certain itemized deductions described in Code Section 67, including
compensation paid to the Trustee and administrative expenses of the Trust, to
the extent these itemized deductions, in the aggregate, do not exceed two
percent of the Unitholder's adjusted gross income. Thus, a Unitholder's
taxable income from an investment in Units may further exceed amounts
distributed to the extent amounts are used by the Trust to pay expenses.
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<PAGE>
Capital gains realized by noncorporate taxpayers are generally taxable at
a maximum rate of 20% if the taxpayer has a holding period of more than 12
months.
Any Unitholder exercising the Exchange Option on or after the July 30,
1999 Special Redemption Date will recognize capital gain or loss with respect to
the Securities but will not be entitled to a deduction for certain capital
losses realized on the Securities sold and, because of the exchange
procedures, will not receive a cash distribution with which to pay such taxes
(see "Exchange Option").
Corporate Dividends-Received Deduction. Corporate holders of Units may be
eligible for the dividends-received deduction with respect to distributions
treated as dividends, subject to the limitations provided in Sections 246 and
246A of the Code. The dividends-received deduction generally equals 70
percent of the amount of the dividend. As a result, the maximum effective tax
rate on dividends received generally will be reduced from 35 percent to 10.5
percent. A portion of the dividends-received deduction may, however, be
subject to the alternative minimum tax. Individuals, partnerships, trusts, S
corporations and certain other entities are not eligible for the
dividends-received deduction.
PUBLIC OFFERING OF UNITS
Public Offering Price. The public offering price per Unit is based on the
aggregate market value of the Securities, next determined after the receipt of
a purchase order, divided by the number of Units outstanding plus the sales
charge set forth below. The public offering price per Unit is computed by
dividing the Trust Fund Evaluation, next determined after receipt of a purchase
order, by the number of Units outstanding plus the sales charge. (See
"Valuation".) The Public Offering Price on any date subsequent to the Initial
Date of Deposit will vary from the Public Offering Price calculated on the
business day prior to the Initial Date of Deposit (as set forth on page 2
hereof) due to fluctuations in the value of the Stocks among other factors. In
addition, during the initial public offering period, a portion of the Public
Offering Price also consists of an amount sufficient to reimburse the Sponsor
for the payment of all or a portion of the Initial Organizational Costs in the
amount shown as a per Unit amount in "Essential Information Regarding the
Trust". The Initial Organizational Costs include the cost of preparing the
registration statement, trust documents and closing documents for the Trust,
registering with the Securities and Exchange Commission (the "SEC") and the 50
States, the initial fees of the Trustee's and Sponsor's counsel, and the
initial audit of the Trust's portfolio. The sales charge will not be assessed
on those Securities held in the Trust and sold by the Trustee at the end of the
public offering period to reimburse the Sponsor for the Initial Organizational
Costs. See "Administration of the Trust--Accounts" for a description of the
method by which the Trustee will sell such Securities.
Sales Charge and Volume Discount. Units will be charged a Total Sales
Charge of 3.00% per 100 Units which is a combination of the Initial and
Deferred Sales Charges. The Initial Sales Charge will be $10.00 per 100 Units
(1.00% of the Public Offering Price). Commencing in the third (3rd) month and
continuing through the twelfth (12th) month of the Trust's life, the Deferred
Sales Charge per 100 Units will be $20.00, approximately 2.00% of the Public
Offering Price. Because the Deferred Sales Charge per 100 Units is $20.00
regardless of the price paid for Units, the Total Sales Charge expressed as a
percentage of the Public Offering Price will vary with the price you pay to
purchase Units. So, for example, if an investor bought 100 Units for $1,000
(including the Initial Sales Charge of $10.00 and held the Units until the
Trust terminates, such investor would pay a Total Sales Charge of $30.00 or
3.00% of the acquisition price for such Units. If, however, an investor bought
100 Units for $900 (including the Initial Sales Charge of $9.00), such investor
would pay a Total Sales Charge of $29.00 or 3.2% of the acquisition price for
such Units. Conversely, if an investor bought 100 Units for $1,100 (including
the Initial Sales Charge of $11.00), such investor would pay a total of $31.00
or 2.8% of the acquisition price for such Units.
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<PAGE>
The Deferred Sales Charge is a charge of $20.00 per 100 Units and is
accrued in ten (10) monthly installments during the first twelve (12) months
of the life of the Trust ($20.00 annual total) commencing in the third (3rd)
month of the Trust. UNITS REDEEMED OR REPURCHASED PRIOR TO THE ACCRUAL OF THE
FINAL DEFERRED SALES CHARGES INSTALLMENT WILL HAVE THE AMOUNT OF ANY
INSTALLMENTS REMAINING DEDUCTED FROM THE REDEMPTION OR REPURCHASE PROCEEDS OR
DEDUCTED IN CALCULATING AN IN-KIND REDEMPTION, ALTHOUGH THIS DEDUCTION WILL
BE WAIVED IN THE EVENT OF DEATH OR DISABILITY (AS DEFINED IN THE INTERNAL
REVENUE CODE) OF AN INVESTOR.
It is anticipated that the Securities will not be sold to pay the Deferred
Sales Charges until after the date of the final installment. Investors will
be at risk for market price fluctuations in the Securities from the several
installment accrual dates to the date of actual sales of Securities to
satisfy this liability.
A discount in the Initial Sales Charge is available to volume purchasers
of Units due to economies of scale in sales effort and sales related expenses
relating to volume purchases. The Initial Sales Charge applicable to volume
purchasers of Units is reduced on a graduated scale as set forth below for
sales made on a single day to any person of at least $50,000 or 5,000 Units,
applied on whichever basis is more favorable to the purchaser.
<TABLE>
<CAPTION>
INITIAL SALES CHARGE TOTAL SALES CHARGE
------------------------------- -------------------------------
MAXIMUM DOLLAR
AMOUNT OF
DEFERRED SALES
AGGREGATE DOLLAR AS % OF PUBLIC AS % OF NET AS % OF PUBLIC AS % OF NET CHARGE PER
VALUE OF UNITS* OFFERING PRICE AMOUNT INVESTED OFFERING PRICE AMOUNT INVESTED 100 UNITS
- -------------------- -------------- --------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Up to $49,999 ....... 1.00% 1.01% 3.00% 3.09% $20.00
$50,000 to $99,999 . 0.75 0.76 2.75 2.83 $20.00
$100,000 to $249,999 0.50 0.50 2.50 2.56 $20.00
$250,000 to
$499,999............ 0.25 0.25 2.25 2.30 $20.00
$500,000 or more ... 0.00 0.00 2.00 2.04 $20.00
</TABLE>
- ------------
* The Initial Sales Charge applicable to volume purchasers according to
the table above will be applied either on a dollar or Unit basis,
depending upon which basis provides a more favorable purchase price to
the purchaser.
The volume discount on the Initial Sales Charge shown above will apply to
all purchases of Units on any one day by the same person in the amounts
stated herein, and for this purpose purchases of Units of this Trust will NOT
be aggregated with concurrent purchases of any other trust which may be
offered by the Sponsor. Units held in the name of the purchaser's spouse or
in the name of a purchaser's child under
the age of 21 are deemed for the purposes hereof to be registered in the name
of the purchaser. The reduced Initial Sales Charges are also applicable to a
trustee or other fiduciary purchasing Units for a single trust estate or
single fiduciary account.
No Initial Sales Charge will be imposed on Units of the Trust acquired by
Unitholders in connection with participation in the Reinvestment Plan (see
"Reinvestment Plan").
Employee Discount. Due to the realization of economies of scale in sales
effort and sales related expenses with respect to the purchase of Units by
employees of the Sponsor and its affiliates, the Sponsor intends to permit
employees of the Sponsor and its affiliates and certain of their relatives to
purchase Units of the Trust with no Initial Sales Charge imposed, subject
only to the Deferred Sales Charges remaining on the Units received.
Distribution of Units. The minimum purchase in the initial public offering
is $250. Only whole Units may be purchased.
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The Sponsor is the sole underwriter of the Units. Sales may, however, be
made to dealers who are members of the National Association of Securities
Dealers, Inc. ("NASD") at prices which include a concession of $.30 per Unit
at the highest sales charge, subject to change from time to time. The
difference between the sales charge and the dealer concession will be
retained by the Sponsor. In the event that the dealer concession is 90% or
more of the sales charge per Unit, dealers taking advantage of such
concession may be deemed to be underwriters under the Securities Act of 1933.
The Sponsor reserves the right to reject, in whole or in part, any order
for the purchase of Units. The Sponsor intends to qualify the Units in all
states of the United States, the District of Columbia and the Commonwealth of
Puerto Rico.
Secondary Market for Units. While not obligated to do so, the Sponsor
intends to maintain a secondary market for the Units and continuously offer
to purchase Units at the Trust Fund Evaluation per Unit next computed after
receipt by the Sponsor of an order from a Unitholder. The Sponsor may cease
to maintain such a market at any time, and from time to time, without notice.
In the event that a secondary market for the Units is not maintained by the
Sponsor, a Unitholder desiring to dispose of Units may tender such Units to
the Trustee for redemption at the price calculated in the manner set forth
under "Redemption". Redemption requests in excess of $500,000 may be redeemed
"in kind" as described under "Redemption." The Sponsor does not in any way
guarantee the enforceability, marketability, value or price of any of the
stocks in the Trust, nor that of the Units.
Investors should note the Trust Fund Evaluation per Unit at the time of
sale or tender for redemption may be less than the price at which the Unit
was purchased.
The Sponsor may redeem any Units it has purchased in the secondary market
if it determines for any reason that it is undesirable to continue to hold
these Units in its inventory. Factors which the Sponsor may consider in
making this determination will include the number of units of all series of
all trusts which it holds in its inventory, the saleability of the Units and
its estimate of the time required to sell the Units and general market
conditions.
A Unitholder who wishes to dispose of his Units should inquire of his bank
or broker as to current market prices in order to determine if
over-the-counter prices exist in excess of the redemption price and the
repurchase price (see "Redemption").
Sponsor's Profits. In addition to the applicable sales charge, the Sponsor
realizes a profit (or sustains a loss) in the amount of any difference
between the cost of the Stocks to the Sponsor and the price
at which it deposits the Stocks in the Trust in exchange for Units, which is
the value of the Stocks, determined by the Trustee as described under
"Valuation". The cost of Stock to the Sponsor includes the amount paid by the
Sponsor for brokerage commissions. These amounts are an expense of the Trust.
Cash, if any, received from Unitholders prior to the settlement date for
the purchase of Units or prior to the payment for Securities upon their
delivery may be used in the Sponsor's business subject to the limitations of
Rule 15c3-3 under the Securities Exchange Act of 1934 and may be of benefit
to the Sponsor.
In selling any Units in the initial public offering after the Initial Date
of Deposit, the Sponsor may realize profits or sustain losses resulting from
fluctuations in the net asset value of outstanding Units during the period.
In maintaining a secondary market for the Units, the Sponsor may realize
profits or sustain losses in the amount of any differences between the price
at which it buys Units and the price at which it resells or redeems such
Units.
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REDEMPTION
Units may be tendered to Investors Bank & Trust Company for redemption at
its office in person, or by mail at Hancock Towers, 200 Clarendon Street,
Boston, MA 02116 upon payment of any transfer or similar tax which must be
paid to effect the redemption. At the present time, there are no such taxes.
No redemption fee will be charged by the Sponsor or Trustee. A written
instrument of redemption must be signed by the Unitholder. Unitholders must
sign exactly as their names appear on the records of the Trustee with
signatures guaranteed by an eligible guarantor institution or in such other
manner as may be acceptable to the Trustee. In certain instances the Trustee
may require additional documents such as, but not limited to, trust
instruments, certificates of death, appointments as executor or
administrator, or certificates of corporate authority. Unitholders should
contact the Trustee to determine whether additional documents are necessary.
Units tendered to the Trustee for redemption will be cancelled, if not
repurchased by the Sponsor.
Units will be redeemed at the Redemption Value per Unit next determined
after receipt of the redemption request in good order by the Trustee. The
Redemption Value per Unit is determined by dividing the Trust Fund Evaluation
by the number of Units outstanding. (See "Valuation".) Unitholders who redeem
prior to the accrual of the final Deferred Sales Charges installment will
have the amount of any installments remaining deducted from their redemption
proceeds or deducted in calculating an in-kind redemption, although this
deduction will be waived in the event of death or disability (as defined in
the Internal Revenue Code) of an investor.
A redemption request is deemed received on the business day (see
"Valuation" for a definition of business day) when such request is received
prior to 4:00 p.m. If it is received after 4:00 p.m., it is deemed received
on the next business day. During the period in which the Sponsor maintains a
secondary market for Units, the Sponsor may repurchase any Unit presented for
tender to the Trustee for redemption no later than the close of business on
the second business day following such presentation and Unitholders will
receive the Redemption Value next determined after receipt by the Trustee of
the redemption request. Proceeds of a redemption will be paid to the
Unitholder no later than the seventh calendar day following the date of
tender (or if the seventh calendar day is not a business day on the first
business day prior thereto).
With respect to cash redemptions, amounts representing income received
shall be withdrawn from the Income Account, and, to the extent such balance
is insufficient and for remaining amounts, from the Capital Account. The
Trustee is empowered, to the extent necessary, to sell Securities to meet
redemptions. The Trustee will sell Securities in such manner as is directed
by the Sponsor. In the event no such direction is given, Stocks will be sold
pro rata, to the extent possible, and if not possible, the Trustee may
designate Securities to be sold. (See "Administration of the Trust".)
However, with respect to redemption requests in excess of $500,000, the
Sponsor may determine in its sole discretion to direct the Trustee to redeem
Units "in kind" by distributing Stocks to the redeeming Unitholder. When
Stocks are so distributed, a proportionate amount of each Stock will be
distributed, rounded to avoid the distribution of fractional shares and using
cash or checks where rounding is not possible. The Sponsor may direct the
Trustee to redeem Units "in kind" even if it is then maintaining a secondary
market in Units of the Trust. Securities will be valued for this purpose as
set forth under "Valuation". A Unitholder receiving a redemption "in kind"
may incur brokerage or other transaction costs in converting the Stocks
distributed into cash. The availability of redemption "in kind" is subject to
compliance with all applicable laws and regulations, including the Securities
Act of 1933, as amended.
To the extent that Securities are redeemed in kind or sold, the size and
diversity of the Trust will be reduced. Sales will usually be required at a
time when Securities would not otherwise be sold and may
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result in lower prices than might otherwise be realized. The price received
upon redemption may be more or less than the amount paid by the Unitholder
depending on the value of the Securities in the portfolio at the time of
redemption. In addition, because of the minimum amounts in which Securities are
required to be sold, the proceeds of sale may exceed the amount required at the
time to redeem Units; these excess proceeds will be distributed to Unitholders
on the Distribution Dates.
To the extent that a significant number of Unitholders exercise the
Exchange Option on or after the July 30, 1999 Special Redemption Date, the Trust
will experience a correspondingly significant redemption at such time,
thereby reducing the size of the Trust. Such redemption may
increase the expense ratios for Unitholders who hold their Units until the
Mandatory Termination Date. See "Exchange Option".
The Trustee may, in its discretion, and will, when so directed by the
Sponsor, suspend the right of redemption, or postpone the date of payment of
the Redemption Value, for more than seven calendar days following the day of
tender for any period during which the New York Stock Exchange, Inc. is
closed other than for weekend and holiday closings; or for any period during
which the SEC determined that trading on the New York Stock Exchange, Inc. is
restricted or for any period during which an emergency exists as a result of
which disposal or evaluation of the Securities is not reasonably practicable;
or for such other period as the SEC may by order permit for the protection of
Unitholders. The Trustee is not liable to any person or in any way for any
loss or damages which may result from any such suspension or postponement, or
any failure to suspend or postpone when done in the Trustee's discretion.
VALUATION
The Trustee will calculate the Trust's value (the "Trust Fund Evaluation")
per Unit at the Evaluation Time set forth under "Summary of Essential
Information Regarding the Trust" (1) on each business day as long as the
Sponsor is maintaining a bid in the secondary market, (2) on the business day
on which any Unit is tendered for redemption, (3) on any other day desired by
the Sponsor or the Trustee and (4) upon termination, by adding (a) the
aggregate value of the Securities and other assets determined by the Trustee as
set forth below, (b) cash on hand in the Trust, including dividends receivable
on Stock trading ex-dividend and income accrued held but not yet distributed
(other than any cash held in any reserve account established under the
Indenture or cash held for the purchase of Contract Securities) and (c)
accounts receivable for Securities sold and any other assets of the Trust not
included in (a) and (b) above, and deducting therefrom the sum of (v) taxes or
other governmental charges against the Trust not previously deducted, (w)
accrued fees and expenses of the Trustee and the Sponsor (including legal and
auditing expenses), other Trust expenses and any accrued Deferred Sales Charge
installment not yet paid to the Sponsor (x) cash allocated for distributions to
Unitholders and amounts owed to the Sponsor in reimbursement of Initial
Organizational Costs and (y) accounts payable for Units tendered for redemption
and any other liabilities of the Trust Fund not included in (v), (w), (x) and
(y) above. The per Unit Trust Fund Evaluation is calculated by dividing the
result of such computation by the number of Units outstanding as of the date
thereof. Business days do not include Saturdays, Sundays, New Year's Day,
Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day and other days
that the New York Stock Exchange is closed.
The value of Stocks shall be determined by the Trustee in good faith in
the following manner: (1) if the domestic Stocks are listed on one or more
national securities exchanges or on the National Market System maintained by
the National Association of Securities Dealers Automated Quotations System,
such evaluation shall be based on the last reported sale price on that day
(unless the Trustee deems such
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price inappropriate as a basis for evaluation) on the exchange which is the
principal market thereof (deemed to be the New York Stock Exchange in the case
of the domestic Stocks if such Stocks are listed thereon), (2) if there is no
such appropriate sales price on such exchange or system, at the mean between
the closing bid and asked prices on such exchange or system (unless the Trustee
deems such price inappropriate as a basis for evaluation), (3) if the Stocks
are not so listed or, if so listed and the principal market therefor is other
than on such exchange or there are no such appropriate closing bid and asked
prices available, such evaluation shall be made by the Trustee in good faith
based on the closing sale price in the over-the-counter market (unless the
Trustee deems such price inappropriate as a basis for evaluation) or (4) if
there is no such appropriate closing price, then (a) on the basis of current
bid prices, (b) if bid prices are not available, on the basis of current bid
prices for comparable securities, (c) by the Trustee's appraising the value of
the Stock 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.
COMPARISON OF PUBLIC OFFERING PRICE AND REDEMPTION VALUE
The Stocks are valued on the same basis for the initial and secondary
markets and for purposes of redemptions. On the business day prior to the
Initial Date of Deposit, the Public Offering Price per Unit (which figure
includes the Initial Sales Charge) exceeded the Redemption Value. (See
"Essential Information"). The prices of Stocks are expected to vary. For this
reason and others, including the fact that the Public Offering Price includes
the sales charge, the amount realized by a Unitholder upon redemption of
Units may be less than the price paid by the Unitholder for such Units. Also,
as of the close of the initial public offering period, the Redemption Value
per Unit will be reduced to reflect the sale of Securities made to reimburse
the Sponsor for the Initial Organizational Costs.
EXPENSES OF THE TRUST
The Sponsor will receive a fee, which is earned for portfolio supervisory
services, and which is based upon the largest number of Units outstanding
during the calendar year. The Sponsor's fee, which is not to exceed $.0035
per Unit per calendar year, may exceed the actual costs of providing
portfolio supervisory services for the Trust, but at no time will the total
amount it receives for portfolio supervisory services rendered to all series
of the PaineWebber Equity Trust in any calendar year exceed the aggregate
cost to it of supplying such services in such year.
For its services as Trustee and Evaluator, the Trustee will be paid in
monthly installments, annually $.0170 per Unit, based on the largest number
of Units outstanding during the previous month. In addition,
the regular and recurring expenses of the Trust are estimated to be $.0055
per Unit, which include, but are not limited to certain mailing, printing,
and audit expenses. Expenses in excess of this estimate will be borne by the
Trust. The Trustee could also benefit to the extent that it may hold funds in
non-interest bearing accounts created by the Indenture.
The Sponsor's fee and Trustee's fee may be increased without approval of
the Unitholders by an amount not exceeding a proportionate increase in the
category entitled "All Services Less Rent" in the Consumer Price Index
published by the United States Department of Labor or, if the Price Index is
no longer published, a similar index as determined by the Trustee and
Sponsor.
In addition to the above, the following charges are or may be incurred by
the Trust and paid from the Income Account, or, to the extent funds are not
available in such Account, from the Capital Account (see "Administration of the
Trust--Accounts"): (1) fees for the Trustee for extraordinary services; (2)
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expenses of the Trustee (including legal and auditing expenses) and of counsel;
(3) various governmental charges; (4) expenses and costs of any action taken by
the Trustee to protect the Trust and the rights and interests of the
Unitholders; (5) indemnification of the Trustee for any loss, liabilities or
expenses incurred by it in the administration of the Trust without gross
negligence, bad faith or wilful misconduct on its part; (6) brokerage
commissions and other expenses incurred in connection with the purchase and
sale of Securities; and (7) expenses incurred upon termination of the Trust. In
addition, to the extent then permitted by the SEC, the Trust may incur expenses
of maintaining registration or qualification of the Trust or the Units under
Federal or state securities laws so long as the Sponsor is maintaining a
secondary market (including, but not limited to, legal, auditing and printing
expenses).
The accounts of the Trust shall be audited not less than annually by
independent public accountants selected by the Sponsor. The expenses of the
audit shall be an expense of the Trust. So long as the Sponsor maintains a
secondary market, the Sponsor will bear any annual audit expense which
exceeds $.005 per Unit. Unitholders covered by the audit during the year may
receive a copy of the audited financial statements upon request.
The fees and expenses set forth above are payable out of the Trust and
when unpaid will be secured by a lien on the Trust. Based upon the last
dividend paid prior to the Initial Date of Deposit, dividends on the Stocks
are expected to be sufficient to pay the entire amount of estimated expenses
of the Trust. To the extent that dividends paid with respect to the Stocks
are not sufficient to meet the expenses of the Trust, the Trustee is
authorized to sell Securities to meet the expenses of the Trust. Securities
will be selected in the same manner as is set forth under "Redemption".
RIGHTS OF UNITHOLDERS
Ownership of Units is evidenced by recordation on the books of the
Trustee. In order to avoid additional operating costs and for investor
convenience, certificates will not be issued.
DISTRIBUTIONS
The Trustee will distribute net dividends and interest, if any, from the
Income Account on the quarterly Distribution Dates to Unitholders of record
on the preceding Record Date. Distributions from the Capital Account will be
made on the Capital Account Distribution Date to Unitholders of record on the
preceding Record Date. Distributions of less than $.05 per Unit need not be
made from the Capital Account on any Distribution Date. See "Essential
Information". Whenever required for regulatory or tax purposes, the Trustee
will make special distributions of any dividends or capital on special
Distribution Dates to Unitholders of record on special Record Dates declared
by the Trustee.
If and to the extent that the Sponsor, on behalf of the Trust, receives a
favorable response to a no-action letter request which it intends to submit
to the Division of Investment Management of the SEC with respect to
reinvesting cash proceeds received by the Trust, the Trustee may reinvest
such cash proceeds in additional Securities held in the Trust Fund at such
time. Such reinvestment shall be made so that each deposit of additional
Securities shall be made so as to match as closely as practicable the
percentage relationships of shares of Stocks and such reinvestment shall be
made in accordance with the parameters set forth in the no-action letter
response. If the Sponsor and the Trustee determine that it shall be necessary
to amend the Indenture to comply with the parameters set forth in the
no-action letter response, such documents may be amended without the consent
of Unitholders. There can be no assurance that the Sponsor will receive a
favorable no-action letter response.
Unitholders may elect to have their Income Account and Capital Account
distributions automatically reinvested into additional Units of the Trust at
no Initial Sales Charge. (See "Reinvestment Plan").
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Upon termination of the Trust, each Unitholder of record on such date will
receive his pro rata share of the amounts realized upon disposition of the
Securities plus any other assets of the Trust, less expenses of the Trust.
(See "Termination of the Trust".)
REINVESTMENT PLAN
Income Account and Capital Account distributions on Units may be
reinvested by participating in the Trust's Reinvestment Plan (the
"Reinvestment Plan"). To participate in the Reinvestment Plan, a Unitholder
must contact his broker, dealer or financial institution to determine whether
he may participate in the Reinvestment Plan. Under the Reinvestment Plan, the
Units acquired for current Unitholders will be either Units already held in
inventory by the Sponsor or new Units created by the Sponsor's deposit of
Additional Securities, contracts to purchase Additional Securities or cash
(or a bank letter of credit in lieu of cash) with instructions to purchase
Additional Securities. Deposits or purchases of Additional Securities will be
made so as to maintain the percentage relationships of shares of Stocks,
except as discussed under "The Trust". Purchases made pursuant to the
Reinvestment Plan will be made without any Initial Sales Charge at the net
asset value for Units of the Trust; of course, such Units will be subject to
the Deferred Sales Charges remaining on Units received. Under the
Reinvestment Plan, the Trust will pay the distributions to the Trustee which
in turn will purchase for those participating Unitholders whole Units of the
Trust at the price determined as of the close of business on the Distribution
Date and will add such Units to the Unitholder's account. The Unitholder's
account statement will reflect the reinvestment. The Trustee will not issue
fractional Units, thus any cash remaining after purchasing the maximum number
of whole Units will be distributed to the Unitholder. Unitholders wishing to
terminate their participation in the Reinvestment Plan must notify their
broker, dealer or financial institution of such decision. The Sponsor
reserves the right to amend, modify or terminate the Reinvestment Plan at any
time without prior notice.
EXCHANGE OPTION
So long as the Sponsor continues to offer new ABCs Trusts, Unitholders, in
lieu of selling or redeeming their Units, may elect, by contacting the Sponsor
no later than 12 noon on the Exchange Notification Date described below, to
exchange their Units in the Trust for units of the next ABCs Trust on or after
the July 30, 1999 Special Redemption Date at no Initial Sales Charge. Units
acquired by means of the Exchange Option will, of course, be subject to the
Deferred Sales Charges aggregating $20.00 per 100 Units. No election to
exchange may be made prior to 40 days before the date set forth in the notice
sent by the Distribution Agent (defined below) (the "Exchange Notification
Date") and any exchange election will be revocable at any time prior to 12 noon
on the Exchange Notification Date. It is expected that the terms of the new
Trust will be substantially the same as those of this Trust. The Sponsor
reserves the right not to offer new ABCs Trusts and there is no guarantee that
a new Trust will be available on or after the July 30, 1999 Special Redemption
Date or January 28, 2000 (the Mandatory Termination Date of the Trust).
An exchange of a Unitholder's Units will be accomplished by the in-kind
redemption of such Units, followed by the sale of the underlying Securities
by the Trustee acting as the distribution agent (the "Distribution Agent") on
behalf of participating Unitholders and the reinvestment of the sale proceeds
(net of brokerage fees, governmental charges and other sale expenses) in
units of the next ABCs Trust at their then-current net asset value.
Exchanges will be effected in whole Units only. Any excess proceeds from
Unitholders' Units being surrendered will be returned. Unitholders will be
permitted to advance new money in order to complete an exchange to round up
to the next highest number of Units.
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The Sponsor intends to direct the sale of the distributed Securities by
the Distribution Agent, as quickly as practicable, subject to the concerns
that the concentrated sale of large volumes of securities may affect market
prices in a manner adverse to the interest of investors. Accordingly, the
Sponsor may, in its sole discretion, undertake to cause a more gradual sale
of the distributed Securities to help mitigate any negative market price
consequences caused by this large volume of securities trades. In order to
minimize potential losses caused by market movement during this period,
program trades may be utilized in connection with the sales of the
distributed Securities, which might increase brokerage commissions payable by
investors. There can be no assurance, however, that any trading procedures
will be successful or might not result in less advantageous prices. Sales of
Securities pursuant to program trades will be made at such Securities'
closing prices on the exchange or system where they are principally traded.
An exchange of Units pursuant to the Exchange Option generally will
constitute a "taxable event" under the Code, i.e., a Unitholder will
recognize a tax gain or loss at the time of exchange with respect to each of
the Securities. While Unitholders exercising the Exchange Option will be
required to report taxable capital gains from the exchange, they will not be
allowed to a deduction for certain capital losses realized on the exchange.
Because of the exchange procedures, such Unitholders will not receive a cash
distribution with which to pay taxes owed. Unitholders are urged to consult
their own tax advisors as to the tax consequences to them of exchanging Units
in particular cases.
The Sponsor reserves the right to modify, suspend or terminate this
Exchange Option at any time with notice to Unitholders. In the event the
Exchange Option is not available to a Unitholder at the time he wishes to
exercise it, the Unitholder will be immediately notified and no action will
be taken with respect to his Units without further instruction from the
Unitholder.
To exercise the Exchange Option, a Unitholder should notify the Sponsor by
no later than 12 noon on the Exchange Notification Date that such Unitholder
wishes to exercise the Exchange Option and to use the proceeds from the sale
of underlying Securities in respect of his in-kind redemption of Units of
this Trust to purchase Units of the next ABCs Trust from the Sponsor. If
Units of the next ABCs Trust are at that time available for sale, and if such
Units may lawfully be sold in the state in which the Unitholder is resident,
the Unitholder will be provided with a current prospectus or prospectuses
relating to such next ABCs Trust series.
Unitholders who do not exercise the Exchange Option, or otherwise sell or
redeem their Units, will continue to hold their Units until the termination
of the Trust; however, depending upon the extent of participation in the
Exchange Option, the aggregate size of the Trust may be sharply reduced,
resulting in a significant increase in per Unit expenses.
The Division of Investment Management of the SEC is of the view that the
Exchange Option constitutes an "exchange offer", for the purposes of Section
11(c) of the Investment Company Act of 1940, and would therefore be
prohibited absent an exemptive order. The Sponsor has received exemptive
orders under Section 11(c) which the Sponsor believes permit the offering of
this Exchange Option, but no assurance can be given that the SEC will concur
with the Sponsor's position and additional regulatory approvals may be
required.
ADMINISTRATION OF THE TRUST
Accounts. All dividends and interest received on Securities, proceeds from
the sale of Securities or other moneys received by the Trustee on behalf of
the Trust may be held in trust in non-interest bearing accounts until
required to be disbursed.
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The Trustee will credit on its books to an Income Account dividends, if
any, and interest income, on Securities in the Trust. All other receipts
(i.e., return of principal and gains) are credited on its books to a Capital
Account. A record will be kept of qualifying dividends within the Income
Account. The pro rata share of the Income Account and the pro rata share of
the Capital Account represented by each Unit will be computed by the Trustee
as set forth under "Valuation".
The Trustee will deduct from the Income Account and, to the extent funds
are not sufficient therein, from the Capital Account, amounts necessary to
pay expenses incurred by the Trust. (See "Expenses and Charges.") In
addition, the Trustee may withdraw from the Income Account and the Capital
Account such amounts as may be necessary to cover redemption of Units by the
Trustee. (See "Redemption.") In addition, distributions of amounts necessary
to pay (1) the Initial Organizational Costs and (2) the Deferred Sales
Charges will be made from the Capital Account to special accounts maintained
by the Trustee for purposes of (1) reimbursing the Sponsor and (2) satisfying
Unitholders' Deferred Sales Charges obligations, respectively. To the extent
that funds are not available in the Capital Account to meet certain charges
or expenses, the Trustee may sell Securities. Upon notification from the
Sponsor that the initial offering period is terminated, the Trustee, at the
direction of the Sponsor, will cause the sale of Securities in an amount
equal to the Initial Organizational Costs as certified to it by the Sponsor.
Although the Sponsor may collect the Deferred Sales Charges monthly,
currently the Sponsor does not anticipate sales of Securities to pay such
sales charges until after the July 30, 1999 Special Redemption Date.
The Trustee may establish reserves (the "Reserve Account") within the
Trust for state and local taxes, if any, and any other governmental charges
payable out of the Trust.
Reports and Records. With any distribution from the Trust, Unitholders
will be furnished with a statement setting forth the amount being distributed
from each account.
The Trustee keeps records and accounts of the Trust at its office in
Boston, including records of the names and addresses of Unitholders, a
current list of underlying Securities in the portfolio and a copy of the
Indenture. Records pertaining to a Unitholder or to the Trust (but not to
other Unitholders) are available to the Unitholder for inspection at
reasonable times during business hours.
Within a reasonable period of time after the end of such calendar year
1998 and by February 28, 1999, the Trustee will furnish each person who was a
Unitholder at any time during such periods an annual report containing the
following information, expressed in reasonable detail both as a dollar amount
and as a dollar amount per Unit: (1) a summary of transactions for such year
in the Income and Capital Accounts and any Reserves; (2) any Securities sold
during such periods and the Securities held at the end
of such periods; (3) the Trust Fund Evaluation per Unit, based upon a
computation thereof on the last business day of such period); and (4) amounts
distributed to Unitholders during such periods.
Portfolio Supervision. The portfolio of the Trust is not "managed" by the
Sponsor or the Trustee; their activities described herein are governed solely
by the provisions of the Indenture. The Indenture provides that the Sponsor
may (but need not) direct the Trustee to dispose of a Security under the
following circumstances:
(1) upon the failure of the issuer to declare or pay anticipated
dividends or interest;
(2) upon the institution of a materially adverse action or proceeding at
law or in equity seeking to restrain or enjoin the declaration or payment
of dividends or interest on any such Securities or the existence of any
other materially adverse legal question or impediment affecting such
Securities or the declaration or payment of dividends or interest on the
same;
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(3) upon the breach of covenant or warranty in any trust indenture or
other document relating to the issuer which might materially and adversely
affect either immediately or contingently the declaration or payment of
dividends on such Securities;
(4) upon the default in the payment of principal or par or stated value
of, premium, if any, or income on any other outstanding securities of the
issuer or the guarantor of such Securities which might materially and
adversely, either immediately or contingently, affect the declaration or
payment of dividends on the Securities;
(5) upon the decline in price or the occurrence of any materially adverse
credit factors, that in the opinion of the Sponsor, make the retention of
such Securities not in the best interest of the Unitholder;
(6) upon a decrease in the Sponsor's internal rating of the Security; or
(7) upon the happening of events which, in the opinion of the Sponsor,
negatively affect the economic fundamentals of the issuer of the Security
or the industry of which it is a part.
Securities may also be tendered or sold in the event of a tender offer,
merger or acquisition in the manner described under "The Trust."
AMENDMENT OF THE INDENTURE
The Indenture may be amended by the Trustee and the Sponsor without the
consent of any of the Unitholders to cure any ambiguity or to correct or
supplement any provision thereof which may be defective or inconsistent or to
alter any provision as may be required by the SEC to make such other provisions
as will not adversely affect the interest of the Unitholders.
The Indenture may also be amended by the Trustee and the Sponsor without
the consent of any of the Unitholders to implement a program to reinvest cash
proceeds received by the Trust in connection with corporate actions and in
other situations, when and if the Sponsor receives a favorable response to
the no-action letter request which it intends to submit to the Division of
Investment Management at the SEC discussed above (see "Distributions"). There
can be no assurance that a favorable no-action letter response will be
received.
The Indenture may be amended in any respect by the Sponsor and the Trustee
with the consent of the holders of 51% of the Units then outstanding;
provided that no such amendment shall (1) reduce the interest in the Trust
represented by a Unit or (2) reduce the percentage of Unitholders required to
consent to any such amendment, without the consent of all Unitholders.
The Trustee will promptly notify Unitholders of the substance of any
amendment affecting Unitholders' rights or their interest in the Trust.
TERMINATION OF THE TRUST
The Indenture provides that the Trust will terminate on the Mandatory
Termination Date. If the value of the Trust as shown by any evaluation is
less than forty per cent (40%) of the market value of the Stocks upon
completion of the deposit of Stocks, the Trustee may in its discretion, and
will when so directed by the Sponsor, terminate such Trust. The Trust may
also be terminated at any time by the written consent of 51% of the
Unitholders or by the Trustee upon the resignation or removal of the Sponsor
if the Trustee determines termination to be in the best interest of the
Unitholders. In no event will the Trust continue beyond the Mandatory
Termination Date.
23
<PAGE>
Unless advised to the contrary by the Sponsor, approximately 20 days prior
to the termination of the Trust the Trustee will begin to sell the Securities
held in the Trust and will then, after deduction of any fees and expenses of
the Trust and payment into the Reserve Account of any amount required for
taxes or other governmental charges that may be payable by the Trust,
distribute to each Unitholder, after due notice of such termination, such
Unitholder's pro rata share in the Income and Capital Accounts. Moneys held
upon the sale of Securities may be held in non-interest bearing accounts
created by the Indenture until distributed and will be of benefit to the
Trustee. The sale of Securities in the Trust in the period prior to
termination may result in a lower amount than might otherwise be realized if
such sale were not required at such time due to impending or actual
termination of the Trust. For this reason, among others, the amount realized
by a Unitholder upon termination may be less than the amount paid by such
Unitholder.
SPONSOR
The Sponsor, PaineWebber Incorporated, is a corporation organized under
the laws of the State of Delaware. The Sponsor is a member firm of the New
York Stock Exchange, Inc. as well as other major securities and commodities
exchanges and is a member of the National Association of Securities Dealers,
Inc. The Sponsor is engaged in a security and commodity brokerage business as
well as underwriting and distributing new issues. The Sponsor also acts as a
dealer in unlisted securities and municipal bonds and in addition to
participating as a member of various selling groups or as an agent of other
investment companies, executes orders on behalf of investment companies for
the purchase and sale of securities of such companies and sells securities to
such companies in its capacity as a broker or dealer in securities.
The Indenture provides that the Sponsor will not be liable to the Trustee,
the Trust or to the Unitholders for taking any action or for refraining from
taking any action made in good faith or for errors in judgment, but will be
liable only for its own willful misfeasance, bad faith, gross negligence or
willful disregard of its duties. The Sponsor will not be liable or
responsible in any way for depreciation or loss incurred by reason of the
sale of any Securities in the Trust.
The Indenture is binding upon any successor to the business of the
Sponsor. The Sponsor may transfer all or substantially all of its assets to a
corporation or partnership which carries on the business of the Sponsor and
duly assumes all the obligations of the Sponsor under the Indenture. In such
event the Sponsor shall be relieved of all further liability under the
Indenture.
If the Sponsor fails to undertake any of its duties under the Indenture,
becomes incapable of acting, becomes bankrupt, or has its affairs taken over
by public authorities, the Trustee may either appoint a successor Sponsor or
Sponsors to serve at rates of compensation determined as provided in the
Indenture or terminate the Indenture and liquidate the Trust.
TRUSTEE
The Trustee is Investors Bank & Trust Company, a Massachusetts trust
company with its principal office at Hancock Towers, 200 Clarendon Street,
Boston, Massachusetts 02116, toll-free number 800-356-2754, which is subject
to supervision by the Massachusetts Commissioner of Banks, the Federal
Deposit Insurance Corporation and the Board of Governors of the Federal
Reserve System.
The Indenture provides that the Trustee will not be liable for any action
taken in good faith in reliance on properly executed documents or the
disposition of moneys, Securities or Certificates or in respect of any
valuation which it is required to make, except by reason of its own gross
negligence, bad faith or willful misconduct, nor will the Trustee be liable
or responsible in any way for depreciation or loss incurred by reason of the
sale by the Trustee of any Securities in the Trust. In the event of the
failure of
24
<PAGE>
the Sponsor to act, the Trustee may act and will not be liable for any such
action taken by it in good faith. The Trustee will not be personally liable for
any taxes or other governmental charges imposed upon or in respect of the
Securities or upon the interest thereon or upon it as Trustee or upon or in
respect of the Trust which the Trustee may be required to pay under any present
or future law of the United States of America or of any other taxing authority
having jurisdiction. In addition, the Indenture contains other customary
provisions limiting the liability of the Trustee. The Trustee will be
indemnified and held harmless against any loss or liability accruing to it
without gross negligence, bad faith or willful misconduct on its part, arising
out of or in connection with its acceptance or administration of the Trust,
including the costs and expenses (including counsel fees) of defending itself
against any claim of liability.
INDEPENDENT AUDITORS
The Statement of Net Assets and Schedule of Investments audited by Ernst &
Young LLP, independent auditors, have been included in reliance on their
report given on their authority as experts in accounting and auditing.
LEGAL OPINIONS
The legality of the Units offered hereby has been passed upon by Carter,
Ledyard & Milburn, 2 Wall Street, New York, New York, as counsel for the
Sponsor.
25
<PAGE>
REPORT OF INDEPENDENT AUDITORS
THE UNITHOLDERS, SPONSOR AND TRUSTEE
THE PAINEWEBBER EQUITY TRUST, ABCs TRUST SERIES 1
We have audited the accompanying Statement of Net Assets of The
PaineWebber Equity Trust, ABCs Trust Series 1, including the Schedule of
Investments, as of July 29, 1998. This financial statement is the
responsibility of the Trustee. Our responsibility is to express an opinion on
this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statement is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement. Our
procedures included confirmation with Investors Bank & Trust Company,
Trustee, of an irrevocable letter of credit deposited for the purchase of
securities, as shown in the financial statement as of July 29, 1998. An audit
also includes assessing the accounting principles used and significant
estimates made by the Trustee, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statement referred to above presents fairly,
in all material respects, the financial position of The PaineWebber Equity
Trust, ABCs Trust Series 1 at July 29, 1998, in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
New York, New York
July 29, 1998
26
<PAGE>
THE PAINEWEBBER EQUITY TRUST,
ABCS TRUST SERIES 1
STATEMENT OF NET ASSETS
AS OF INITIAL DATE OF DEPOSIT, JULY 29, 1998
<TABLE>
<CAPTION>
NET ASSETS
- ------------------------------------------------------------------------------------
<S> <C>
Sponsor's Contracts to Purchase underlying Securities backed by
irrevocable letter of credit (a)...................................... $ 990,009
Reimbursement to Sponsor for Initial Organizational Costs (b).......... $ (900)
------------
Total.............................................................. $ 989,109
============
Units outstanding (c):................................................. 100,000
ANALYSIS OF NET ASSETS
- ------------------------------------------------------------------------------------
Cost to investors (d)................................................. $1,000,000
Less: Gross underwriting commissions (e).............................. (9,991)
Reimbursement to Sponsor for Initial Organizational Costs........ (900)
------------
Net Assets......................................................... $ 989,109
============
</TABLE>
- ------------
(a) The aggregate cost to the Trust of the securities listed under
"Schedule of Investments" is determined by the Trustee on the basis set forth
above under "Public Offering of Units--Public Offering Price." See also the
column headed Cost of Securities to Trust under "Schedule of Investments."
Pursuant to contracts to purchase securities, an irrevocable letter of credit
drawn on Bank of America NT & SA, in the amount of $300,000,000 has been
deposited with the Trustee, Investors Bank & Trust Company for the purchase
of $990,009 aggregate value of Securities in the initial deposit and for the
purchase of Securities in subsequent deposits.
(b) Investors purchasing Units during the initial offering period will
reimburse the Sponsor for all or a portion of the costs incurred by the
Sponsor in connection with organizing the Trust and offering the Units for
sale as described more fully in "Public Offering Price" (collectively, the
"Initial Organizational Costs"). These costs have been estimated at $0.009
per Unit based upon the expected number of Units to be created during the
initial offering period. Certain Securities purchased with the proceeds of
the Public Offering Price will be sold by the Trustee at the completion of
the initial public offering period to reimburse the Sponsor for Initial
Organizational Costs actually incurred. If the actual Initial Organizational
Costs are less than the estimated amount, only the actual Initial
Organizational Costs will be deducted from the assets of the Trust. If,
however, the amount of the actual Initial Organizational Costs are greater
than the estimated amount, only the estimated amount of the Initial
Organizational Costs will be deducted from the assets of the Trust.
(c) Because the value of Securities at the Valuation Time on the Initial
Date of Deposit may differ from the amounts shown in this Statement of Net
Assets, the number of Units offered on the Initial Date of Deposit will be
adjusted from the initial number of Units shown to maintain the $10 per Unit
offering price only for that day. The Public Offering Price on any subsequent
day will vary.
(d) The aggregate public offering price is computed on the basis set forth
under "Public Offering of Units--Public Offering Price."
(e) Assumes the maximum Initial Sales Charge of 1.00% of the Public
Offering Price. Additionally, Deferred Sales Charges of $2.00 per 100 Units,
payable in ten equal monthly installments on the tenth (10th) day of each
month from the third (3rd) through twelfth (12th) months of the Trust for an
aggregate amount of $20.00 per 100 Units, will be deducted. Distributions
will be made to an account maintained by the Trustee from which the Deferred
Sales Charges obligation of the Unitholders to the Sponsor will be met. If
Units are sold, redeemed or exchanged prior to June 10, 1999, the remaining
portion of the distribution applicable to such redeemed Units will be
transferred to the account on such sale, exchange or redemption date. The
sales charges are computed on the basis set forth under "Public Offering of
Units--Sales Charge and Volume Discount." Based on the projected total assets
of $200,000,000, the estimated maximum Deferred Sales Charge would be
$4,000,000.
27
<PAGE>
THE PAINEWEBBER EQUITY TRUST,
ABCS TRUST SERIES 1
SCHEDULE OF INVESTMENTS
AS OF INITIAL DATE OF DEPOSIT, JULY 29, 1998
COMMON STOCKS (1)
<TABLE>
<CAPTION>
PRIMARY INDUSTRY SOURCE AND NUMBER OF COST OF SECURITIES
NAME OF ISSUER SHARES TO TRUST(2)(3)
- ---------------------------------------------- ----------- ------------------
<S> <C> <C>
Auto/Truck Parts & Equipment (5.85%)
Lear Corporation* ............................ 580 $29,299.00
LucasVarity plc+ ............................. 790 28,637.50
Beverages (2.93%)
PepsiCo, Inc. ................................ 730 28,971.88
Building-Maintenance & Services (2.94%)
Ecolab Inc. .................................. 920 29,095.00
Cable TV (2.96%)
Comcast Corporation .......................... 680 29,282.50
Cosmetics & Toiletries (2.95%)
Avon Products, Inc. .......................... 340 29,218.75
Electric (2.92%)
Consolidated Edison, Inc. .................... 670 28,935.63
Electronics/Semi-Conductor (5.87%)
Rockwell International Corporation ........... 720 29,070.00
Texas Instruments Incorporated ............... 490 29,001.88
Instruments-Controls (2.95%)
Parker-Hannifin Corporation .................. 870 29,199.38
Insurance (5.91%)
Hartford Life, Inc. .......................... 380 29,141.25
EXEL Limited ................................. 520 29,347.50
Internet Software (3.00%)
America Online, Inc.* ........................ 260 29,672.50
Medical (8.83%)
Medtronic, Inc. .............................. 460 28,893.75
Warner-Lambert Company ....................... 370 29,322.50
Wellpoint Health Networks Inc.* .............. 410 29,161.25
Multimedia (2.93%)
Time Warner Inc. ............................. 320 29,020.00
National Commercial Banks (2.90%)
NationsBank Corporation ...................... 360 28,755.00
Oil/Gas (11.74%)
Consolidated Natural Gas Company ............. 570 29,141.25
Ocean Energy, Inc.* .......................... 2,060 29,097.50
Sun Company, Inc. ............................ 820 29,007.50
Unocal Corporation ........................... 880 29,150.00
Paper Products (2.99%)
Fort James Corporation ....................... 830 29,620.63
28
<PAGE>
THE PAINEWEBBER EQUITY TRUST,
ABCS TRUST SERIES 1
SCHEDULE OF INVESTMENTS
AS OF INITIAL DATE OF DEPOSIT, JULY 29, 1998 (CONTINUED)
COMMON STOCKS (1)
PRIMARY INDUSTRY SOURCE AND NUMBER OF COST OF SECURITIES
NAME OF ISSUER SHARES TO TRUST(2)(3)
- ---------------------------------------------- ----------- ------------------
Publishing-Newspapers (2.92%)
The Times Mirror Company ..................... 470 $ 28,875.63
Railroad Transportation (2.93%)
Wisconsin Central Transportation Corporation* 1,330 29,010.63
REITS-Hotel/Restaurant (2.94%)
Patriot American Hospitality, Inc. ........... 1,500 29,062.50
REITS-Mortgage (2.91%)
Indymac Mortgage Holdings, Inc. .............. 1,250 28,828.13
Retail-Apparel/Shoe (5.89%)
Nordstrom, Inc. .............................. 900 29,137.50
The Men's Wearhouse, Inc.* ................... 940 29,140.00
Retail-Food (2.96)
The Kroger Co.* .............................. 610 29,280.00
Retail-Office Supplies (2.93%)
Staples, Inc.* ............................... 900 29,025.00
Steel Producers (2.94%)
Pohang Iron & Steel Company Ltd.+ ............ 2,360 29,057.50
Telecommunications (5.91%)
Nextel Communications, Inc.* ................. 1,160 29,290.00
WorldCom, Inc.* .............................. 560 29,259.96
------------------
TOTAL INVESTMENTS ........................... $990,009.00
==================
</TABLE>
- ------------
(1) All Securities are represented entirely by contracts to purchase
Securities.
(2) Valuation of the Securities by the Trustee was made as described in
"Valuation" as of the close of business on the business day prior to
the Initial Date of Deposit.
(3) The loss to the Sponsor on the Initial Date of Deposit is $1,018.
* Non-income producing security.
+ These shares are U.S. dollar denominated and pay dividends in U.S.
dollars but are subject to investment risks generally facing common
stocks of foreign issuers. (See "Risk Factors and Special
Considerations.")
29
<PAGE>
PAINEWEBBER EQUITY TRUST
ABCs Trust Series 1
TRUSTEE:
INVESTORS BANK & TRUST COMPANY
Hancock Towers
200 Clarendon Street
Boston, Mass. 02116
(800) 356-2754
SPONSOR:
PAINEWEBBER INCORPORATED
1200 Harbor Boulevard,
Weehawken, N.J. 07087
(201) 902-3000
- -----------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Essential Information Regarding the
Trust .................................... 2
The Trust ............................... 7
Risk Factors and Special Considerations . 8
Federal Income Taxes .................... 12
Public Offering of Units ................ 13
Public Offering Price ................. 13
Sales Charge and Volume Discount ...... 13
Employee Discount ..................... 14
Distribution of Units ................. 14
Secondary Market for Units ............ 15
Sponsor's Profits ..................... 15
Redemption .............................. 16
Valuation ............................... 17
Comparison of Public Offering Price and
Redemption Value ....................... 18
Expenses of the Trust ................... 18
Rights of Unitholders ................... 19
Distributions ........................... 19
Reinvestment Plan ....................... 20
Exchange Option ......................... 20
Administration of the Trust ............. 21
Accounts .............................. 21
Reports and Records ................... 22
Portfolio Supervision ................. 22
Amendment of the Indenture .............. 23
Termination of the Trust ................ 23
Sponsor ................................. 24
Trustee ................................. 24
Independent Auditors .................... 25
Legal Opinions .......................... 25
Report of Independent Auditors .......... 26
Statement of Net Assets ................. 27
Schedule of Investments ................. 28
</TABLE>
- -----------------------------------------------------------------------------
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION
NOT CONTAINED IN THIS PROSPECTUS; AND ANY INFORMATION OR REPRESENTATION NOT
CONTAINED HEREIN MUST NOT BE RELIED ON AS HAVING BEEN AUTHORIZED BY THE
TRUST, THE TRUSTEE OR THE SPONSOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY SECURITIES IN ANY STATE TO
ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE SUCH OFFER IN SUCH STATE.
- -----------------------------------------------------------------------------
THIS PROSPECTUS CONTAINS INFORMATION CONCERNING THE TRUST AND THE SPONSOR,
BUT DOES NOT CONTAIN ALL THE INFORMATION SET FORTH IN THE TRUST'S
REGISTRATION STATEMENTS, AMENDMENTS AND EXHIBITS RELATING THERETO, WHICH HAVE
BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WASHINGTON, D.C.
UNDER THE SECURITIES ACT OF 1933 AND THE INVESTMENT COMPANY ACT OF 1940, AND
TO WHICH REFERENCE IS HEREBY MADE.
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This registration statement comprises the following documents:
The facing sheet.
The Prospectus.
The Undertaking to file reports.
The signatures.
Written consents of the following persons:
Ernst & Young LLP
(included in Exhibit 99.C2)
Carter, Ledyard & Milburn
(included in Exhibits 99.2 and 99.C1)
The following exhibits:
1. Ex.-27 - Financial Data Schedule
2. Ex.-99.A1 - Form of Standard Terms and
Conditions of Trust dated as of July 1, 1998
between PaineWebber Incorporated, Depositor and
Investors Bank & Trust Company, as Trustee.
3. Ex.-99.A2 - Copy of Trust Indenture and
Agreement between PaineWebber Incorporated,
Depositor, and Investors Bank & Trust Company,
as Trustee, incorporating by reference the
Standard Terms and Conditions of Trust dated
as of July 1, 1998 (included herewith as
Exhibit 99.A1.)
4. Ex.-99.A5 - Form of Certificate of Ownership
(included in Standard Terms and Conditions of
Trust).
5. Ex.-99.A6 - Certificate of Incorporation of
PaineWebber Incorporated, as amended
(incorporated by reference to Exhibit 8 in
File No. 2-88344).
6. Ex.-99.A6 - By-Laws of PaineWebber
Incorporated, as amended (incorporated by
reference to Exhibit A(6)(a) in File No.
811-3722).
7. Ex.-99.2 - Opinion of Counsel as to legality
of securities being registered.
8. Ex.-99.C1 - Opinion of Counsel as to income
tax status of securities being registered.
9. Ex.-99.C2 - Consent of Ernst & Young LLP,
Independent Auditors.
<PAGE>
FINANCIAL STATEMENTS
--------------------
1. Statement of Net Assets as shown in the current Prospectus for
this series.
2. Financial Statements of the Depositor.
PaineWebber Incorporated-Financial Statements incorporated by reference to Form
10-K and Form 10-Q(File No. 1-7367), respectively.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this Amendment to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of New York, and State of New York, on the 29th day of July, 1998.
THE PAINEWEBBER EQUITY TRUST,
ABCs TRUST SERIES 1
(Registrant)
By: PaineWebber Incorporated
(Depositor)
/s/ Robert E. Holley
--------------------------------
Robert E. Holley
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed on behalf of
PaineWebber Incorporated the Depositor by the following persons who constitute
a majority of the Executive Committee of its Board of Directors in the
following capacities and in the City of New York, and State of New York, on
this 29th of July, 1998.
PAINEWEBBER INCORPORATED
Name Office
---- ------
Donald B. Marron Chairman, Chief Executive
Officer, Director & Member of
the Executive Committee*
Regina A. Dolan Executive Vice President, Chief
Financial Officer & Director of PaineWebber
Incorporated*
Joseph J. Grano, Jr. President, Retail Sales & Marketing,
Director & Member of the Executive
Committee*
Steve P. Baum Executive Vice President, Director of
PaineWebber Incorporated*
Robert H. Silver Executive Vice President Director of
Paine Webber Incorporated*
Mark B. Sutton Executive Vice President, Director of
PaineWebber Incorporated*
Margo N. Alexander Executive Vice President, Director of
PaineWebber Incorporated*
Terry L. Atkinson Managing Director, Director of PaineWebber
Incorporated*
Brian M. Barefoot Executive Vice President, Director of
PaineWebber Incorporated*
Michael Culp Managing Director, Director of PaineWebber
Incorporated*
Edward M. Kerschner Managing Director, Director of PaineWebber
Incorporated*
James P. MacGilvray Executive Vice President, Director of
PaineWebber Incorporated*
By
/s/ Robert E. Holley
--------------------
Robert E. Holley
Attorney-in-fact*
* Executed copies of the powers of attorney have been filed with the
Securities and Exchange Commission in connection with Post Effective
Amendment No.19 to the Registration Statement File No. 2-61279.
<PAGE>
EXHIBIT INDEX
1. Ex.-27 - Financial Data Schedule
2. Ex.-99.A1 - Form of Standard Terms and Conditions of Trust dated as of
July 1, 1998 between PaineWebber Incorporated, Depositor and Investors
Bank & Trust Company, as Trustee.
3. Ex.-99.A2 - Copy of Trust Indenture and Agreement between PaineWebber
Incorporated, Depositor, and Investors Bank & Trust Company, as
Trustee, incorporating by reference Standard Terms and Conditions of
Trust dated as of July 1, 1998 (included herewith as Exhibit 99.A1.)
4. Ex.-99.A5 - Form of Certificate of Ownership (included in Standard
Terms and Conditions of Trust).
5. Ex.-99.A6 - Certificate of Incorporation of PaineWebber Incorporated,
as amended (incorporated by reference to Exhibit 8 in File No.
2-88344).
6. Ex.-99.A6 - By-Laws of PaineWebber Incorporated, as amended
(incorporated by reference to Exhibit A(6)(a) in File No. 811-3722).
7. Ex.-99.2 - Opinion of Counsel as to legality of securities being
registered.
8. Ex.-99.C1 - Opinion of Counsel as to income tax status of securities
being registered.
9. Ex.-99.C2 - Consent of Ernst & Young LLP, Independent Auditors.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 0
<SECURITIES> 990,009
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 990,009
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 990,009
<CURRENT-LIABILITIES> 900
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 990,009
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE>
Exhibit 99.A1
THE PAINEWEBBER EQUITY TRUST
ABCs TRUST SERIES 1
AND
SUBSEQUENT SERIES OF PAINEWEBBER EQUITY TRUST
STANDARD TERMS AND CONDITIONS OF TRUST
for all series formed on or subsequent to the
effective date specified below
Dated as of July 1, 1998
BETWEEN
PAINEWEBBER INCORPORATED,
as SPONSOR,
and
INVESTORS BANK & TRUST COMPANY,
as TRUSTEE
EFFECTIVE DATE: JULY 29, 1998
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
<S> <C>
INTRODUCTION.............................................................................................5
ARTICLE I
Section 1.01 Definitions......................................................................3
ABBREVIATIONS............................................................................................5
Section 1.02 Interpretation..................................................................12
ARTICLE II
Declaration of Trust;
Original Issuance of Units.....................................................................14
Section 2.01. Declaration of Trust............................................................14
Section 2.02. Initial Deposit of Securities; Supplemental Deposits............................14
Section 2.03. Issuance of Units; Issuance of Certificates.....................................18
Section 2.04. Certain Contracts Satisfactory..................................................18
Section 2.05. Voting Rights...................................................................18
ARTICLE III
Administration of Trust........................................................................19
Section 3.01. Certain Moneys to Be Credited to Income Account.................................19
Section 3.02. Certain Moneys to be Credited to Capital Account................................19
Section 3.03. Establishment of Reserve Account................................................19
Section 3.04. Certain Deductions and Distributions............................................19
Section 3.05. Statements and Reports..........................................................21
Section 3.06. Sale of Securities and of Certain Rights........................................23
Section 3.07. Tender Offers, Reorganizations and Similar Events; Stock Dividends..............24
Section 3.08. Counsel.........................................................................25
Section 3.09. Notice and Sale by Trustee......................................................25
Section 3.10. Action by Trustee Regarding Securities and Voting...............................26
<PAGE>
Section 3.11. Trustee Not to Adjust Accounts..................................................26
Section 3.12. Notice of Change in Capital Account.............................................26
Section 3.13. Election to Qualify as Regulated Investment Company;
Diversification Tests; Continued Qualification..................................26
Section 3.16. Special Provisions for Grantor Trusts...........................................29
ARTICLE IV
Valuation of Securities
Section 4.01. Valuation of Securities.........................................................31
Section 4.02. Liability of the Trustee........................................................32
ARTICLE V
Trust Fund Evaluation and Redemption of Units
Section 5.01. Trust Fund Evaluation...........................................................33
Section 5.02. Redemption of Units.............................................................34
ARTICLE VI
Transfer, Interchange or Replacement of Units
Section 6.01. Transfer and Interchange of Units...............................................38
Section 6.02. Replacement of Certificates.....................................................39
Section 6.03. Form of Certificate.............................................................39
ARTICLE VII
Sponsor
Section 7.01. Liability of Sponsor and Indemnification........................................40
Section 7.02. Compensation of Sponsor.........................................................41
Section 7.03. Liability.......................................................................41
Section 7.04. Discharge of Sponsor............................................................42
Section 7.05. Certain Matters Regarding Succession............................................42
Section 7.06. Resignation of Sponsor..........................................................43
Section 7.07. Notice to Unitholders...........................................................43
ARTICLE VIII
Trustee
Section 8.01. General Matters Relating to Trustee.............................................44
Section 8.02. Books and Records...............................................................46
Section 8.03. Reports to Securities and Exchange Commission and Others........................46
<PAGE>
Section 8.04. Indenture and List of Securities on File........................................47
Section 8.05. Compensation of Trustee.........................................................47
Section 8.06. Resignation, Discharge or Removal of Trustee; Successor.........................48
Section 8.07. Qualification of Trustee........................................................49
RTICLE IX
Termination
Section 9.01. Procedure Upon Termination......................................................50
Section 9.02. Notice to Holders of Units Evidenced by Certificates............................51
Section 9.03. Moneys to Be Held in Trust Without Interest.....................................51
Section 9.04. Dissolution of Sponsor Not to Terminate.........................................51
RTICLE X
Miscellaneous Provisions
Section 10.01. Amendment and Waiver............................................................52
Section 10.02. Initial Organizational and Offering Costs.......................................52
Section 10.03. Registration (Current) of Units and Trust Fund..................................53
Section 10.04. Certain Matters Relating to Unitholders.........................................54
Section 10.05. New York Law to Govern..........................................................54
Section 10.06. Notices.........................................................................54
Section 10.07. Severability....................................................................54
Section 10.08. Separate and Distinct Series....................................................55
Section 10.09. Counterparts....................................................................55
</TABLE>
<PAGE>
THE PAINEWEBBER EQUITY TRUST
ABCs TRUST SERIES 1
AND
SUBSEQUENT SERIES OF THE PAINEWEBBER EQUITY TRUST
STANDARD TERMS AND CONDITIONS OF TRUST
Dated as of July 1, 1998 and
Effective as of July 29, 1998
These Standard Terms and Conditions of Trust effective as of July 29,
1998 are executed between PaineWebber Incorporated, as Sponsor, and Investors
Bank & Trust Company, as Trustee.
WITNESSETH THAT:
In consideration of the premises and of the mutual agreements herein
contained, the Sponsor and the Trustee agree as follows:
INTRODUCTION
These Standard Terms and Conditions of Trust effective as of the day
and year first above written (the "Standard Terms") shall be applicable to The
PaineWebber Equity Trust, ABCs Trust Series 1 (a Unit Investment Trust) and to
all subsequent Series of The PaineWebber Equity Trust formed on or subsequent
to the date hereof for which their applicability and their incorporation by
reference is specified in the applicable Trust Indenture relating to such
series. For each Series of The PaineWebber Equity Trust to which these Standard
Terms are to be applicable, the Sponsor and the Trustee shall execute a Trust
Indenture (or supplement or amendment to such Trust Indenture) incorporating by
reference these Standard Terms and designating any exclusion from or exception
to such incorporation by reference for the purposes of that series or variation
of the terms hereof for the purposes of that series and specifying for that
series (i) the Securities deposited in trust at that time and the number of
Units delivered by the Trustee in exchange for the Securities pursuant to
Section 2.02, (ii) the initial fractional undivided interest represented by
each Unit, (iii) the Record Dates, (iv) the Capital Account Distribution Dates
and the Income Account Distribution Dates, (v) the Mandatory Termination Date,
and the date on which the Trustee shall begin to sell Securities pursuant to
Section 9.01, (vi) the Discretionary Liquidation Amount, (vii) the Sponsor's
fee, (viii) the Trustee's fees, (ix) the determination to be organized as a
"grantor trust", or, to qualify the Trust as a regulated investment company
under the Internal Revenue Code of 1986, as amended, as applicable, (x) the
taxable year for such series, (xi) whether a Reinvestment Plan will be made
available to Unitholders of such series, (xii) whether Units of such series may
be held in certificated form, (xiii) the first year in which an annual report
will be provided to Unitholders pursuant to Section 3.05, (xiv) the balance in
the Capital Account below which no distribution need be made from the Capital
Account, (xv) the determination to deposit additional Securities into such
series and to issue a corresponding amount of additional Units, (xvi) the
"In-Kind" Distribution Amount, (xvii)
<PAGE>
whether such series will be subject to a Deferred Sales Charge, (xvii) the
Exchange Notification Date, if applicable, (xviii) the Special Liquidation
Period, if applicable, (xix) the Distribution Agent, if applicable, (xx)
whether such series is designated as an Exchange Series pursuant to Section
5.03, (xxi) the Sponsor's Estimated Initial Costs Account, and (xxii) any other
terms specific to such series of The PaineWebber Equity Trust.
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<PAGE>
ARTICLE I
Section 1.01 Definitions
Whenever used in the Indenture, the following capitalized words and
phrases, unless the context otherwise requires, shall have the following
meanings:
Additional Units
Units created after the Initial Date of Deposit pursuant to a
Supplemental Trust Indenture in accordance with the provisions of Section
2.03(c).
Business Day
Any day that the New York Stock Exchange is open for business or in
the case of a Trust series holding primarily Foreign Securities as set forth in
the Trust Indenture for such Trust series.
Capital Account
The account created pursuant to Section 3.02.
Capital Account Distribution Date
Shall have the meaning set forth in the Trust Indenture.
Capital Account Distributions
Shall have the meaning ascribed to it in Section 3.04(c).
Cash Component
The amount described and computed in accordance with the provisions of
Section 2.02(c)(6).
Certificate
In the case of a Trust for which Units are not required to be held in
uncertificated form, any one of the Certificates manually executed by the
Trustee, in each case in substantially the following form with the blanks
appropriately filled in.
[Face of Certificate]
3
<PAGE>
CERTIFICATE OF BENEFICIAL INTEREST
Units
-Evidencing-
A Fractional Undivided Interest
-in-
THE PAINEWEBBER EQUITY TRUST,
[Name of Series]
THIS CERTIFIES that is the registered owner of
Units of fractional undivided interest in the above-named Trust created
pursuant to the Indenture between PAINEWEBBER INCORPORATED, as Sponsor, and
INVESTORS BANK & TRUST COMPANY, as Trustee. This Certificate is issued under
and is subject to the terms, provisions and conditions of the Indenture to
which the Holder of this Certificate by virtue of the acceptance hereof assents
and is bound, a summary of which Indenture is contained in the Prospectus
relating to the Trust. This Certificate is transferable and interchangeable by
the registered owner in person or by his duly authorized attorney at the
Trustee's office upon surrender of this Certificate properly endorsed or
accompanied by a written instrument of transfer and any other documents that
the Trustee may require for transfer, in form satisfactory to the Trustee and
payment of the fees and expenses provided in the Indenture.
IN WITNESS WHEREOF, PaineWebber Incorporated has caused this
Certificate to be executed in facsimile by one of its Senior Vice Presidents as
an Authorized Signatory and Investors Bank & Trust Company, as Trustee, has
caused this Certificate to be executed in its corporate name by an authorized
officer.
Date:
INVESTORS BANK & TRUST COMPANY, PAINEWEBBER INCORPORATED,
Trustee Sponsor
By By
- ---------------------------------- ------------------------------------
Authorized Officer Authorized Signatory
Date:
[Reverse of Certificate]
4
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face
of this instrument, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as tenants
in common
UNIF GIFT MIN ACT - ......Custodian......
(Cust) (Minor)
under Uniform Gifts to Minors Act..........
(State)
Additional abbreviations may also be used though not included in the above
list.
A form of transfer, including signature guaranty requirement, acceptable to the
Trustee and such other language as agreed upon by the Sponsor and the Trustee
from time to time shall be printed on the reverse of the Certificate.
Certificateholder
Any Unitholder who is the registered holder of any Certificate as
recorded on the books of the Trustee, his legal representative and heirs, and
the successors of any corporation, partnership or other legal entity which is a
registered holder of any Certificate.
Code
The Internal Revenue Code of 1986, as amended.
Commission
The Securities and Exchange Commission.
Contract Securities
Securities which are to be acquired by the Trust Fund pursuant to
contract.
5
<PAGE>
Deferred Sales Charge
Shall have the meaning specified in Section 3.18.
Deferred Sales Obligation
Shall have the meaning specified in Section 3.18 (a).
Depositor
The Sponsor of any series of The PaineWebber Equity Trust.
Discretionary Liquidation Amount
The amount specified as such in the Trust Indenture.
Distribution Agent
Shall mean the Trustee, acting as agent on behalf of the Exchange
Unitholders as provided in Section 5.03, unless the Trust Indenture for a
particular Trust appoints and specifies another distribution agent for such
Trust.
Distribution Date
The date(s) specified as such in the Trust Indenture which may, if so
specified therein, be different for Income Account Distributions ("Income
Account Distribution Dates") and Capital Account Distributions ("Capital
Account Distribution Dates").
Diversification Requirements
Shall have the meaning specified in Section 3.13(b).
Diversification Test Date
Shall have the meaning specified in Section 3.13(b).
Dividend Equivalent Payment
The amount specified in Section 2.02(a).
Exchange Distribution
6
<PAGE>
Shall have the meaning specified in Section 5.03(b).
Exchange Series
Any Trust designated as such in the Trust Indenture and Prospectus
relating to such Trust, the Units of which may be acquired by Unitholders of
another trust in an exchange and rollover of such units pursuant to Section
5.03.
Exchange Notification Date
The date or dates specified as such in the Trust Indenture for a
particular Trust, as set forth in Section 5.03(b).
Exchange Unitholder
Shall have the meaning specified in Section 5.03(b).
Failed Security
Any Contract Security which is the subject of a "fail to receive" or a
"fail to deliver" notice submitted in writing by the Sponsor to the Trustee in
accordance with Section 3.15.
Foreign Security
Any security which is principally listed or traded on a non-U.S.
securities exchange.
Identified Securities
Shall have the meaning specified in Section 3.18.
Income
Any interest payment, accrual of income on Securities issued at an
original issue discount or cash dividend distribution by an issuer of a
Security, whether or not such payment or distribution is taxable to the
recipient thereof, and any other amounts directed to be credited to the Income
Account hereby.
Income Account
The account created pursuant to Section 3.01.
Income Account Distribution Dates
7
<PAGE>
Shall have the meaning set forth in the Trust Indenture.
Income Account Distributions
Shall have the meaning assigned to it in Section 3.04(c).
Indenture
These Standard Terms and Conditions of Trust together with the Trust
Indenture and all amendments and Supplemental Trust Indentures hereto and
thereto.
Initial Costs
Shall have the meaning specified in Section 10.02(a).
Initial Date of Deposit
The first date on which a deposit of Securities into the Trust is made
pursuant to Section 2.02(a) and as specified by Schedule A to the Trust
Indenture.
"In-Kind" Distribution
Shall have the meaning assigned to such term in Section 5.02.
"In-Kind" Distribution Amount
Shall have the meaning specified in Section 5.02.
Mandatory Termination Date
The date specified as such in the Trust Indenture.
New Series
Shall have the meaning specified in Section 5.02(a).
Percentage Ratios
Shall mean the percentage ratios between the number of shares of each
issue of Securities deposited in a particular Trust Fund on the Initial Date of
Deposit thereof and as determined by reference to Schedule A of the Trust
Indenture for such Trust Fund.
8
<PAGE>
Prospectus
The prospectus relating to a particular Trust in the form first used
to confirm sales of Units.
Record Date
The record date for a Capital Account Distribution and/or an Income
Account Distribution, as the case may be, specified as such in the Trust
Indenture. Such record dates may be specified as Capital Account Record Dates
or Income Account Record Dates as the case may be.
Redemption Date
Shall have the meaning assigned to it in Section 5.02.
Redemption Value
Shall have the meaning assigned to it in Section 5.02.
Regulated Investment Company
A trust which, pursuant to Section (ix) of the Introduction, elects to
qualify as a "regulated investment company" under Subchapter M of the Code, or
any successor provision thereto.
Reinvestment Security
Shall have the meaning assigned to such term in Section 3.15(c).
Replacement Security
Shall have the meaning assigned to it in Section 3.15(a).
Reserve Account
The account created pursuant to Section 3.03.
Restricted Securities
Securities which were acquired in private placements and which at the
time cannot, in the opinion of counsel designated by the Sponsor and
satisfactory to the Trustee, be sold publicly by the
9
<PAGE>
Trustee without either (1) registration under the Securities Act, or (2) an
exemption thereunder, or (3) similar provisions of law subsequently enacted.
Securities
The securities, including Contract Securities and Foreign Securities
(a) which are listed or referred to as Securities in Schedule A to the Trust
Indenture or any Supplemental Trust Indenture, (b) which have been received by
the Trust in exchange or substitution pursuant to Section 3.07 hereof or (c)
which are acquired pursuant to Sections 3.02 or 3.15 hereof, including
Replacement Securities and Reinvestment Securities, as may from time to time
continue to be held as a part of the Trust.
Short-term Treasury Obligations
Shall have the meaning assigned to such term in Section 3.02.
Securities Act
The Securities Act of 1933, as amended.
Securities Exchange Act
The Securities Exchange Act of 1934, as amended.
Special Liquidation Period
The date or dates specified as such in the Trust Indenture for a
particular Trust, as set forth in Section 5.03(c).
Special Redemption Date
The next Business Day following the Exchange Notification Date.
Sponsor
PaineWebber Incorporated, or its successors or any successor Sponsor
(or successor Sponsors if there be more than one) appointed as herein provided.
Standard Terms
10
<PAGE>
These Standard Terms and Conditions of Trust dated as of July 1, 1998
and effective as of July 29, 1998, between PaineWebber Incorporated, as
Sponsor, and Investors Bank & Trust Company, as Trustee and all amendments and
supplements hereto.
Supplemental Deposit
Any deposit of additional Securities and/or cash for the purchase of
such additional Securities, plus the applicable Cash Component, if any, made to
the Trust in respect of Additional Units created pursuant to Section 2.02(c).
Supplemental Trust Indenture
Shall mean a written direction from the Sponsor to the Trustee
instructing the Trustee to create Additional Units pursuant to and in
accordance with Section 2.02(c) hereof.
Tender Date
Shall have the meaning specified in Section 5.02.
Treasury Obligations
Shall mean direct obligations of the United States Government.
Trust or Trust Fund
Shall mean the trust created by the Trust Indenture which shall
consist of the Securities and all undistributed income or other amounts
received or receivable thereon and any undistributed cash held in the Capital
and Income Accounts or otherwise realized from the sale or liquidation of the
Securities, exclusive of any amounts which may be on deposit in the Reserve
Account.
Trust Fund Evaluation
Shall have the meaning assigned to it in Section 5.01.
Trust Indenture
The Trust Indenture for the particular series of The PaineWebber
Equity Trust into which these Standard Terms and Conditions of Trust are
incorporated and all amendments and supplements thereto.
Trustee
11
<PAGE>
Investors Bank & Trust Company, or any other entity identified as the
Trustee in the Trust Indenture, including one or more co-trustees, or any
successor Trustee appointed as herein provided.
Unit
Each Unit of fractional undivided interest in and ownership of the
Trust Fund, which shall be initially equal to the fraction specified in the
Trust Indenture, the denominator of which fraction shall be decreased by the
number of any Units redeemed as provided in Section 5.02 and shall be increased
by the number of any Units issued pursuant to a Supplemental Trust Indenture
pursuant to and in accordance with Section 2.02(c) hereof. Whenever reference
is made herein to the "interest" of a Unitholder in the Trust Fund or in the
Income or Capital Accounts, it shall mean such fractional undivided interest
represented by the number of Units held of record by such Unitholder.
Unitholder
The registered holder of any Unit, whether or not evidenced by a
Certificate, as recorded on the registration books of the Trustee, and such
holder's legal representative and heirs, and the successors of any corporation,
partnership or other legal entity which is a registered holder of any Unit.
Unit Value
The value of the fractional undivided interest and ownership of the
Trust Fund represented by each Unit as determined by a Trust Fund Evaluation.
Valuation Time
4:00 p.m. New York time or any other time of day when trading on the
New York Stock Exchange may close, unless another meaning is assigned to such
term in the Trust Indenture.
Section 1.02 Interpretation. Unless otherwise indicated in the
Indenture:
(a) Reference to and the definition of any document
(including these Standard Terms, shall be deemed a reference to such
document as it may be amended or modified from time to time;
(b) All references to an "Article", "Section," "Schedule" or
"Exhibit" are to an Article or Section hereof or to a Schedule or an
Exhibit attached hereto;
(c) Defined terms in the singular shall include the plural
and vice versa, and the masculine, feminine or neuter gender shall
include all genders;
12
<PAGE>
(d) The words "hereof," "herein" and "hereunder" and words of
similar import when used in the Indenture shall refer to the Indenture
as a whole and not to any particular provision of the Indenture; the
headings in the Indenture are for the purpose of reference only and do
not limit or affect its meaning; and
(e) References in the Indenture to "dollar amount(s) per
Unit" shall mean, as appropriate, dollar amount(s) per Unit, per 100
Units per 1,000 Units or per such number of Units as having a value of
approximately $1,000 on the Initial Date of Deposit, or otherwise as
the Sponsor may direct and as specified in the relevant Prospectus.
13
<PAGE>
ARTICLE II
Declaration of Trust;
Original Issuance of Units
Section 2.01. Declaration of Trust. The Trustee hereby declares it
holds and will hold the Trust Fund as Trustee in trust upon the trusts herein
set forth for the use and benefit of all present and future Unitholders.
Section 2.02. Initial Deposit of Securities; Supplemental Deposits.
(a) The Sponsor concurrently with the execution and delivery hereof, hereby
grants and conveys all of its right, title and interest in and to and hereby
conveys to and deposits with the Trustee in an irrevocable Trust, the
Securities (together with accrued and unpaid income thereon), including
Contract Securities, listed in Schedule A to the Trust Indenture, duly endorsed
in blank or accompanied by all necessary instruments of assignment and transfer
in proper form, to be held, managed and applied by the Trustee as herein
provided for the benefit of each Unitholder to the extent of such Unitholder's
interest in the Trust Fund. The Sponsor hereby also delivers to the Trustee a
certified check or checks, cash or cash equivalents or an irrevocable letter or
letters of credit issued by a commercial bank or banks in an amount necessary
to consummate the purchase of any Contract Securities.
(b) The Sponsor shall deliver or cause to be delivered the Securities
represented by Contract Securities (1) in the case of a trust which has
designated "grantor trust" status, within ninety (90) days of the Initial Date
of Deposit and (2) in the case of a trust which has elected to qualify as a
Regulated Investment Company, within a reasonable time frame as determined in
the sole discretion of the Sponsor. In the event that any Contract Security
shall be declared a Failed Security by the Sponsor, the Trustee shall credit to
the Capital Account referred to in Section 3.02 the funds, or, if applicable,
the funds drawn on an irrevocable letter of credit, deposited by the Sponsor
for the purpose of such purchase. Such funds, unless invested in Replacement
Securities, shall be distributed pursuant to Section 3.04 to Unitholders of
record as of the Record Date next following the failure of consummation of such
purchase. The Sponsor shall cause to be refunded to each Unitholder his pro
rata portion of the sales charge levied on the sale of Units to such Unitholder
attributable to such Failed Security for which no Replacement Security is
acquired.
(c) From time to time, following the Initial Date of Deposit, the
Sponsor is hereby authorized, in its discretion, to cause the Trustee to issue
Additional Units by means of Supplemental Deposits in the manner set forth in
subparagraphs (1) through (9) below.
(1) Such Additional Units will be created upon the deposit with the
Trustee of:
14
<PAGE>
(x) additional Securities in respect of such Additional Units
and/or contracts for the purchase of such additional
Securities; and/or
(y) cash in an amount to purchase such additional Securities
based upon the price of such additional Securities at the
Valuation Time on the date of such Supplemental Deposit; and
(z) if appropriate, the applicable Cash Component relating to
such Additional Units, as computed in accordance with
subparagraph (6) below.
(2) To accomplish the issuance of Additional Units by means of a
deposit of additional Securities, the Trustee is authorized to provide to the
Sponsor a current list of the Trust's portfolio of Securities then held and the
Sponsor, in reliance upon such list, is authorized to assign, convey to and
deposit with the Trustee (x) additional Securities, duly endorsed in blank or
accompanied by all necessary instruments of assignment, and/or (y) contracts
for the purchase of such additional Securities, and the Sponsor shall transfer
and deliver, or cause the transfer and delivery of, such necessary instruments
of assignment and/or contracts for the purchase of such additional Securities
to the Trustee along with a certified check or checks, cash, cash equivalents
or an irrevocable letter or letters of credit issued by a commercial bank in an
amount necessary to consummate the purchase of any such additional Securities
represented by contracts for the purchase of additional Securities.
(3) To accomplish the issuance of Additional Units by means of
depositing sufficient cash amounts with the Trustee to enable the Trustee to
purchase, or cause the purchase of, additional Securities in accordance with
instructions from the Sponsor and to deposit such additional Securities, the
Sponsor is hereby authorized to, and shall, instruct the Trustee to create a
specified number of Additional Units whereupon the Trustee shall purchase, or
cause the purchase of, such additional Securities in accordance with the
Sponsor's instructions, and shall deposit such additional Securities in the
Trust Fund. Brokerage commissions with respect to the Trustee's purchase of
additional Securities, if any, shall be an expense borne by the Trust.
(4) In the event that any Contract Security included in any
Supplemental Deposit be declared a Failed Security by the Sponsor, the Trustee
shall credit to the Capital Account referred to in Section 3.02 the funds, or,
if applicable, the funds drawn on an irrevocable letter of credit, deposited by
the Sponsor for the purpose of such purchase. Such funds, unless invested in
Replacement Securities in accordance with Section 3.15, shall be distributed
pursuant to Section 3.04 to Unitholders of record as of the Record Date next
following the failure of consummation of such purchase. The Sponsor shall cause
to be refunded to each Unitholder his pro rata portion of the sales charge
levied on the sale of Units to such Unitholder attributable to such Failed
Security for which no Replacement Security is acquired.
15
<PAGE>
(5) In connection with any Supplemental Deposit, the Sponsor shall pay
to the Trustee for deposit into the Income Account and/or Capital Account an
amount equal to the Cash Component per Unit, if any, multiplied by the number
of Additional Units created pursuant to this Section 2.02(c).
(6) For purposes of this subsection 2.02(c), Cash Component means the
(x) amount of cash or other property (other than Securities) on hand and/or
cash receivable by the Trust Fund, (y) reduced by payables and accrued expenses
not chargeable to the Additional Units and amounts allocated for redemption or
for distribution to holders, divided by the number of Units outstanding, all
computed as of the Evaluation Time on the Business Day preceding the date of
the Supplemental Deposit in accordance with the provisions of Section 5.01.
(7) Supplemental Deposits shall be made, in each case, pursuant to a
Supplemental Trust Indenture. The Sponsor shall ensure that each Supplemental
Deposit made pursuant to this section 2.02 shall include, in the manner
provided in subparagraphs (8) and (9) below, the Securities (including Contract
Securities) and the Cash Component, if any, held in the Trust.
(8) For purposes of this Section 2.02(c),
(x) during the ninety (90) day period following the Initial
Date of Deposit, Supplemental Deposits shall include the appropriate
Cash Component and Securities in their Percentage Ratios. Such
Percentage Ratios are subject to adjustment during such 90-day period
to reflect occurrence of (i) a stock split or a similar event which
affects the capital structure of the issuer of a Security but which
does not affect the Trust's percentage ownership of the common stock
equity of such issuer at the time of such event, (ii) Securities
received as a result of a stock dividend, merger or reorganization and
which are retained by the Trust, (iii) acquisition of Replacement
Securities and any other acquisition of a new issue of Securities
permitted hereby, or (iv) the sale or other disposition of any issue
of Securities from the Trust Fund.
(y) During the period subsequent to the 90-day period
following the Initial Date of Deposit,
(i) in the case of a Trust which has designated "grantor
Trust" status, each Supplemental Deposit shall replicate
exactly both Securities (including Contract Securities) in
the manner set forth in (z) below and the Cash Component; and
(ii) in the case of a Trust which has elected to qualify as a
Regulated Investment Company, each Supplemental Deposit shall
replicate to the extent practicable, the Securities
(including Contract Securities) in the manner set forth in
(z) below, and shall replicate exactly the Cash Component.
16
<PAGE>
(z) Any additional Securities included in a Supplemental Deposit
subsequent to the 90-day period following the Initial Date of Deposit
shall be identical to Securities held in the Trust immediately prior
to such Supplemental Deposit and in amounts such that (1) the number
of shares of additional Securities of a particular issue included in a
Supplemental Deposit divided by (2) the aggregate of the number of
shares of all additional Securities included in the Supplemental
Deposit results in a fraction which is the same as the fraction
resulting from division of (3) the aggregate number of shares of the
Securities of the same issue held in the Trust immediately prior to
such Supplemental Deposit divided by (4) the aggregate number of
shares of all Securities held in the Trust immediately prior to such
Supplemental Deposit. The phrase "replicate to the extent practicable"
when used to describe additional Securities included in a Supplemental
Deposit, means that any such additional Securities need meet the
proportionality requirements set forth above only to the extent
practicable. Without limiting the generality of the phrase "to the
extent practicable", if the Sponsor specifies a minimum number of
shares of a Security with respect to a Trust to be included in a
Supplemental Deposit and such minimum requirement cannot be met or if
a Security identical to a Security held in the Trust, in the opinion
of the Sponsor, is not readily obtainable, substitution, in accordance
with subparagraph (9) below, of other substantially similar Securities
(including Securities of an issue originally deposited) in order to
meet the foregoing proportionality requirements shall be considered as
a meeting of such requirements "to the extent practicable".
(9) If at the time of a Supplemental Deposit, Securities in the
opinion of the Sponsor, are unavailable, cannot be purchased at reasonable
prices or their purchase is prohibited or restricted by applicable law,
regulation or policies, the Sponsor may:
(x) deposit cash or a letter of credit in an amount equal to the
valuation of the issue of Securities whose acquisition is not feasible
with instructions to the Trustee to acquire such Securities of such
issue when they become available; or
(y) deposit, or instruct the Trustee to purchase, or cause to
purchase, in lieu thereof, another issue of Securities or Replacement
Securities, in the manner set forth in Section 3.15.
(d) The Securities deposited or to be held hereunder are comprised of
(1) the Securities set forth in Schedule A of the Trust Indenture, (2)
additional Securities deposited, or acquired with cash deposited, pursuant to
Section 2.02(c), (3) any Short-term Treasury Obligations which may be deposited
as temporary reinvestment for sale proceeds pursuant to Section 3.15, and (4)
Replacement Securities and Reinvestment Securities acquired pursuant to Section
3.15, if applicable.
(e) The Trustee is hereby irrevocably authorized to effect
registration or transfer of the Securities in fully registered form to the name
of the Trustee or to the name of its nominee or the nominee of its agent. The
Securities may, in the discretion of the Trustee, be interchanged from time to
time into either bearer or registered form without any notification thereof to
the Sponsor or the
17
<PAGE>
Unitholders and may be registered in the name of the Trustee or the name of any
nominee designated by it or any nominees of its agent.
Section 2.03. Issuance of Units; Issuance of Certificates. (a) The
Trustee acknowledges that the Securities and Contract Securities listed in
Schedule A to the Trust Indenture have been deposited with the Trustee by the
Sponsor on the date of the Trust Indenture and on the same date the Trustee has
recorded on its books the ownership by the Sponsor of the aggregate number of
Units specified in the Trust Indenture.
(b) The number of Units may be increased through a split of the Units
or decreased through a reverse split thereof, as directed in writing by the
Sponsor at any time when the Sponsor is the only beneficial holder of Units,
which revised number of Units shall be recorded by the Trustee on its books.
The Trustee shall be entitled to rely on the Sponsor's direction as
certification that no person other than the Sponsor has a beneficial interest
in the Units and the Trustee shall have no liability to any person for action
taken pursuant to such direction.
(c) The Trustee hereby agrees that on the date of any creation of
Additional Units, it shall acknowledge that the additional Securities, and/or
cash in respect thereof, have been deposited with it by recording on its books
the ownership by the Sponsor of the number of Additional Units issued in
respect of such additional Securities and/or cash.
(d) Units shall be held in uncertificated form unless the Trust
Indenture provides otherwise and the Prospectus so indicates. Under the terms
and conditions of the Trust Indenture, Unitholders may elect to have their
Units held in certificated form by making a written request to the Trustee. The
Trustee shall, upon receiving such written request, issue a new Certificate or
Certificates in quantities and denominations as requested by the Unitholder
(not exceeding the aggregate number of Units held by such Unitholder on the
Trustee's records) and deemed appropriate by the Trustee, subject to a fee of
$2.00 per Certificate, and at such time make an appropriate notation in the
registration books of the Trustee.
Section 2.04. Certain Contracts Satisfactory. The Sponsor hereby
approves as satisfactory in form and substance the contracts to be entered into
or assumed by the Trustee with regard to any Securities listed on Schedule A to
the Trust Indenture and any Supplemental Trust Indenture and hereby authorizes
the Trustee on behalf of the Trust Fund to enter into or assume such contracts,
to give any investment representations required for the purchase of Restricted
Securities thereunder, and otherwise to carry out the terms and provisions
thereof in order to complete the purchase of the Securities covered thereby.
Section 2.05. Voting Rights. Voting rights with respect to the
Securities held by the Trust shall be exercised by the Trustee as directed by
the Sponsor in accordance with Section 3.10.
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ARTICLE III
Administration of Trust
Section 3.01. Certain Moneys to Be Credited to Income Account. The
Trustee shall collect the Income on the Securities as it becomes payable and
credit all income to a separate non-interest bearing account to be known as the
"Income Account", on the date on which the Trust Fund receives such Income
(including all moneys realized by the Trustee from the sale of options,
warrants or other similar rights received in respect of the Securities pursuant
to Section 3.06(b) and including any proceeds of stock dividends sold pursuant
to Section 3.07).
Section 3.02. Certain Moneys to be Credited to Capital Account. All
moneys other than amounts credited to the Income Account received by the
Trustee in respect of the Securities under the Indenture shall be credited to a
separate non-interest bearing account to be known as the "Capital Account".
Anything in this Section 3.02 to the contrary notwithstanding, moneys which are
required to cover the purchase of Contract Securities shall be held specially
by the Trustee for such purchase and shall not be deemed to be part of the
Capital Account until the Sponsor shall have notified the Trustee that such
contracts are Failed Securities whereupon, unless invested in Replacement
Securities in accordance with Section 3.15, such moneys shall be credited to
the Capital Account and shall be held specially for distribution in the manner
provided in Section 2.02(b).
Section 3.03. Establishment of Reserve Account. From time to time the
Trustee may withdraw from the Income Account or Capital Account such amounts as
it, in its sole discretion, shall deem requisite to establish a reserve for any
applicable taxes or other governmental charges that may be payable out of the
Trust Fund. Such amounts so withdrawn shall be credited to a separate
non-interest bearing account which shall be known as the "Reserve Account". The
Trustee shall not be required to distribute to the Unitholders any of the
amounts in the Reserve Account; provided, however, that if it, in its sole
discretion, determines that such amounts are no longer necessary for payment of
any applicable taxes or other governmental charges, then it shall promptly
deposit such amounts in the account from which such amounts were withdrawn or
if the Trust Fund has been terminated or shall be in the process of
termination, the Trustee shall distribute to each Unitholder such holder's
interest in the Reserve Account in accordance with Section 9.01.
Section 3.04. Certain Deductions and Distributions. (a) Each month the
Trustee shall satisfy itself as to the adequacy of the Reserve Account, making
any further credits thereto as may appear appropriate in accordance with
Section 3.03 and shall then:
(1) deduct from the Income Account or, to the extent such
funds are not available in such Account, from the Capital Account, and
pay to itself individually (x) the amounts that it is at the time
entitled to receive pursuant to Sections 8.01 and 8.05 on account of
its services theretofore performed and expenses, losses and
liabilities theretofore incurred, if any and (y) the amounts, if any,
that it is at the time entitled to receive under the terms of Section
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3.17 and Section 3.18 in reimbursement of amounts advanced by it
pursuant to such Sections;
(2) deduct from the Income Account or, to the extent funds
are not available in such Account, from the Capital Account, and pay
to the Sponsor or successor Sponsor the amount that it is entitled to
receive pursuant to Sections 7.02 and 8.01(f); and
(3) to the extent that the Trustee has been advised that
costs incurred in keeping the registration of Units and the Trust on a
current basis are permitted to be deducted at that time by the
Securities and Exchange Commission, deduct from the Income Account, or
to the extent funds are not available in such Account, from the
Capital Account, an amount equal to the unpaid fees and expenses
incurred in keeping the registration statement current as provided in
Section 10.03.
(b) Any amounts that the Trustee has paid pursuant to (3) above in
excess of the amount to which the Sponsor is entitled pursuant to Section 7.02,
shall be returned to the Trust by the Sponsor and distributed on the next
Distribution Date to Unitholders of record on the preceding Record Date.
(c) On each Income Account Distribution Date with respect to
distributions to be made to Unitholders from the Income Account ("Income
Account Distributions"), and on each Capital Account Distribution Date with
respect to distribution to be made to Unitholders from the Capital Account
("Capital Account Distributions") or within a reasonable period of time
thereafter, the Trustee shall distribute by mail to each Unitholder of record
at the close of business on the preceding Record Date at his address appearing
on such Record Date on the registration books of the Trustee or by such other
means as may be mutually agreed upon by the Trustee and the Unitholder, such
Unitholder's pro rata share of the balance of the Income and/or Capital
Accounts, as the case may be, computed as of such Record Date in the manner set
forth below, provided, however, that the Trustee, if so directed with respect
to Income Account Distributions and the Capital Account Distributions in a
writing signed by the Sponsor on behalf of Unitholders electing the
reinvestment plan offered in the Prospectus (the "Reinvestment Plan") and
received by the Trustee at least ten (10) days prior to the Record Date for the
first distribution to which such notice is to apply, use such distributions to
purchase Units from the Sponsor, which may be Units held by the Sponsor or
Additional Units created pursuant to the provisions of Section 2.02(c), for the
accounts of such Unitholders under the terms and conditions set forth in the
Prospectus. Only whole Units shall be purchased pursuant to this Section.
(d) The Trustee shall on or before the third Business Day prior to
each Record Date for an Income Account Distribution and/or Capital Account
Distribution, as the case may be, compute (based on information available on
such date) the amount of the distribution per Unit for each such Income Account
Distribution and/or Capital Account Distribution (1) by deducting, as
applicable, from the cash on hand in the Capital and Income Accounts as of such
Record Date the total of (x) cash required for the redemption of unredeemed
tendered Units, (y) the sum of the amounts to be
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deducted from such Accounts on or before such Distribution Date pursuant to the
foregoing provisions of this Section 3.04 and (z) the Trustee's estimate of
other expenses properly chargeable to the Income Account and/or Capital Account
pursuant to the Indenture which have accrued, as of such Record Date, or are
otherwise properly attributable to the period to which such Income Account
Distribution or Capital Account Distribution relates and (2) dividing the
amount so obtained by the number of Units outstanding on such Record Date.
(e) No distribution need be made from the Capital Account if the
balance therein is less than an amount set forth in the Trust Indenture.
(f) The amount to be so distributed to each Unitholder shall be that
pro rata share of the cash balance of the Income Account or Capital Account, as
the case may be, computed as set forth herein, as shall be represented by the
number of Units held of record by such Unitholder. In making the computation of
such holder's pro rata share of the balance of the Income Account and Capital
Account, fractions of less than one cent shall be omitted.
(g) In the event a Unitholder of a particular series of any Trust Fund
is also a Unitholder of one or more other series of a trust for which the
Trustee is the trustee and for which the Sponsor is the sole depositor, and
such Unitholder has not elected to participate in the Reinvestment Plan, then
the Trustee shall consolidate in one check the distribution required to be made
to such Unitholder hereunder with all other distributions required to be made
on such Distribution Date to such Unitholder pursuant to the indenture
governing such other series; provided that an appropriate statement of
distribution be furnished therewith as required by the applicable Trust
Indenture.
Section 3.05. Statements and Reports. (a) With each distribution from
the Income or Capital Accounts the Trustee shall set forth, either in the
instrument by means of which payment of such distribution is made or in a
separate statement to each Unitholder, the amount being distributed from each
such Account expressed as a dollar amount per Unit, and the number of such
Units in the Unitholder's account maintained by the Trustee.
(b) Within sixty (60) days following the last day of each calendar
year commencing with the calendar year stated in the applicable Trust Indenture
and corresponding Prospectus, or within sixty (60) days of termination of the
Trust, if earlier, the Trustee shall furnish to each person who was a
Unitholder at any time during such calendar year, a statement setting forth,
with respect to such calendar year:
(1) as to the Income Account:
(x) the amount of Income received in respect of the
Securities or on the sale pursuant to Section 3.06 of any
rights to purchase securities;
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(y) the deductions for fees and expenses of the Trustee and
the Sponsor pursuant to Section 3.04, if any, and deductions,
if any, for payments to the Reserve Account;
(z) the amounts reserved for purchases of Contract
Securities;
(xx) the balance remaining after such distributions,
deductions and reservations, expressed both as a total dollar
amount and as a dollar amount per Unit outstanding on the
last day of such calendar year; and
(yy) the amounts paid for redemptions pursuant to Section
5.02.
(2) as to the Capital Account:
(x) the net proceeds received (excluding any portion thereof
credited to the Income Account) from the sale or liquidation
of any of the Securities or the sale pursuant to Section 3.06
of any rights to purchase securities;
(y) the deductions for payment of fees and expenses of the
Trustee and the Sponsor pursuant to Section 3.04, if any, and
deductions, if any, for payments to the Reserve Account;
(z) the amounts reserved for purchases of Contract
Securities;
(zz) the balance remaining after such distributions,
deductions and reservations expressed both as a total dollar
amount and as a dollar amount per Unit outstanding on the
last day of such calendar year; and
(yy) the amounts paid for redemptions pursuant to Section
5.02.
(3) the following information:
(x) a list of the Securities disposed of or acquired during
such calendar year, and a list of the Securities as of the
last day of such calendar year showing which Securities
constitute Restricted Securities;
(y) the number of Units outstanding on the last day of such
calendar year;
(z) the Unit Value based on the last Trust Fund Evaluation
made during such calendar year; and
(xx) the amounts actually distributed to Unitholders during
such calendar year from the Income and Capital Accounts,
separately stated, expressed both as total dollar
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amounts and as dollar amounts per Unit outstanding on the
Record Dates for such distributions.
(c) If so provided in the Trust Indenture, in lieu of an annual
statement, the Trustee shall, within a reasonable time following the
termination of the Trust, provide to each person who was a Unitholder during
the term of the Trust a statement containing the information specified above
covering the period of the Trust term. Notwithstanding the foregoing, when
directed by the Sponsor, no annual statement need be furnished with respect to
a calendar year ending (1) within six months of the Initial Date of Deposit
during which the Trust has not made any distributions pursuant to Section 3.04
or (z) not more than two months prior to the designated termination date of the
Trust, and the information for such calendar year may, instead, be included in
the next annual statement or statement following termination otherwise required
pursuant to this Section 3.05.
Section 3.06. Sale of Securities and of Certain Rights. (a) The
Sponsor by written notice may direct the Trustee to sell or, under the
circumstances described in subparagraph (7), tender for cash, Securities at
such price and time and in such manner as shall be deemed appropriate by the
Sponsor if the Sponsor shall have determined that any one or more of the
following conditions exist:
(1) that there has been a failure to declare or pay
anticipated dividends or interest;
(2) that any materially adverse action or proceeding has been
instituted at law or in equity seeking to restrain or enjoin the
declaration or payment of dividends or interest on any such Securities
or that there exists any other materially adverse legal question or
impediment affecting such Securities or the declaration or payment of
dividends or interest on the same;
(3) that there has occurred any breach of covenant or
warranty in any trust indenture or other document relating to the
issuer or obligor or guarantor which might materially and adversely
affect either immediately or contingently the declaration or payment
of dividends or interest on such Securities;
(4) that there has been a default in the payment of the
principal or par or stated value of premium, if any, or income on any
other outstanding securities of the issuer or the guarantor of such
securities which might materially and adversely, either immediately or
contingently, affect the declaration or payment of dividends or
interest on the Securities;
(5) that a decline in price has occurred or such materially
adverse market or credit factors have occurred, that in the opinion of
the Sponsor the retention of such Securities would not be in the best
interests of the Unitholders;
(6) that the sale of such Securities is desirable in order to
maintain the qualification of the Trust Fund as a "Regulated
Investment Company" in the case of a trust which has elected to
qualify as such;
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(7) that a public tender offer has been made for a Security,
or a merger or acquisition has been announced affecting a Security,
that in the opinion of the Sponsor, the sale or tender of such
Security is in the best interest of the Unitholders;
(8) that there has been a decrease in the Sponsor's internal
rating of the Security; or
(9) that there has been a happening of events which, in the
opinion of the Sponsor, negatively affects the economic fundamentals
of the issuer of the Security or the industry of which it is a part.
(b) Upon receipt of such direction from the Sponsor with respect to
any Securities, or with respect to any options, warrants or other rights to
purchase securities distributed to the Trust in respect of Securities, the
Trustee shall proceed to sell the specified Securities or any such rights. The
Trustee shall not be liable or responsible in any way for depreciation or loss
incurred by reason of any sale made pursuant to any such direction or by reason
of the failure of the Sponsor to give any such direction, and in the absence of
such direction the Trustee shall have no duty to sell any Securities under this
Section 3.06 except to the extent otherwise required by Section 3.09. The
Sponsor shall not be liable for errors of judgment in directing or failing to
direct the Trustee pursuant to this Section 3.06. This provision, however,
shall not protect the Trustee or Sponsor against any liability for which they
would otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of their obligations and duties hereunder.
(c) As requested by the Trustee, the Sponsor shall instruct the
Trustee, upon which instruction the Trustee is authorized to rely, as to the
manner in which any sale of Restricted Securities is to be made and in
connection with any such sale shall furnish the Trustee with any documents
necessary for the transfer of such Restricted Securities or for compliance with
transfer restrictions, if any, on such Restricted Securities. In the event the
sale of any Restricted Securities held by the Trust is to be registered under
the Securities Act, the Sponsor shall prepare, and, if required, submit to the
Trustee for review and signature, any documentation required for such
registration.
Section 3.07. Tender Offers, Reorganizations and Similar Events; Stock
Dividends.
(a) In the event the Trustee is notified of any vote to be taken or
proposed to be taken by holders of the Securities held by the Trust Fund in
connection with any proposed merger, reorganization, spin-off, split-off or
split-up by the issuer of Securities held in the Trust Fund, the Trustee shall:
(1) in the case of a Trust Fund which has elected to qualify
as a Regulated Investment Company, take such action with respect
thereto as the Sponsor shall direct; or
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(2) in the case of a Trust Fund which is organized as a
"grantor trust" for purposes of Federal income taxation, use its best
efforts to vote the Securities as closely as practicable in the same
manner and in the same general proportion as the Securities held by
owners other than the Trust Fund are voted.
(b) In the event that an offer shall be made by any person to exchange
stock or securities for any Securities (including but not limited to a tender
offer), the Trustee shall:
(1) in the case of a Trust Fund which has elected to qualify
as a Regulated Investment Company, take such action with respect
thereto as the Sponsor shall direct; or
(2) in the case of a Trust Fund which is organized as a
"grantor trust" for purposes of Federal income taxation, reject such
offer.
(c) If stock or other securities are received by the Trustee, with or
without cash, as a result of any merger, reorganization, tender offer,
spin-off, split-off, or split-up by the issuer of Securities held in the Trust
Fund or in exchange for Securities (including any stock or securities received
notwithstanding the Trustee's rejection of an offer or received without an
initial offer), the Trustee, at the direction of the Sponsor, may retain or
sell such stock or securities in the Trust Fund. Any stock or securities so
retained shall be subject to the terms and conditions of the Indenture to the
same extent as the Securities originally deposited hereunder. The Trustee shall
give notice to the Unitholders of the retention of stock or securities acquired
in exchange for Securities within five Business Days after such acquisition.
(d) Additional shares of Securities received as a distribution on
Securities (other than shares received in a non-taxable distribution which
shall be retained by the Trust Fund) shall be sold and the proceeds credited to
the Income Account.
Section 3.08. Counsel. The Sponsor may employ from time to time
counsel to act on behalf of the Trust Fund and perform any legal services in
connection with the Securities, including advice as to whether any Securities
constitute Restricted Securities and any legal matters relating to the possible
disposition or acquisition of any Securities pursuant to any provision hereof.
The fees and expenses of such counsel shall be paid by the Trustee as provided
in Section 3.04(a)(1) hereof.
Section 3.09. Notice and Sale by Trustee. If at any time the issuer of
any Security fails to pay an anticipated dividend or interest payment, the
Trustee shall notify the Sponsor thereof. If within thirty (30) calendar days
after such notification the Sponsor has not given any instruction in writing to
sell or to hold or has not taken any action in connection with such Securities,
the Trustee shall sell such Securities forthwith, and neither the Trustee nor
the Sponsor shall be liable or responsible in any way for depreciation or loss
incurred by reason of such sale.
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Section 3.10. Action by Trustee Regarding Securities and Voting.
Except as otherwise provided for in Section 3.07, in the event that the Trustee
shall have been notified at any time of any action to be taken or proposed to
be taken by the holders of the Securities, the Trustee shall promptly notify
the Sponsor and shall thereupon take such action or refrain from taking any
action as the Sponsor shall in writing direct; provided, however, that if the
Sponsor shall not within five (5) Business Days of the giving of such notice to
the Sponsor direct the Trustee to take or refrain from taking any action, the
Trustee shall take such action, or refrain from taking any action, as it, in
its sole discretion, shall deem advisable. Neither the Sponsor nor the Trustee
shall be liable to any person for any action or failure to take action with
respect to this Section 3.10.
Section 3.11. Trustee Not to Adjust Accounts. Nothing in the
Indenture, or otherwise, shall be construed to require the Trustee to make any
adjustments between the Income Account and the Capital Account by reason of any
premium or discount in respect of any of the Securities.
Section 3.12. Notice of Change in Capital Account. The Trustee shall
give prompt written notice to the Sponsor of all amounts credited to or
withdrawn from the Capital Account pursuant to any of the provisions of this
Article III and the balance in such Account after giving effect to the credit
or withdrawal.
Section 3.13. Election to Qualify as Regulated Investment Company;
Diversification Tests; Continued Qualification. (a) If the applicable Trust
Indenture for a Trust indicates that such Trust intends to elect to be treated
and to qualify as a Regulated Investment Company, the Trustee is directed to
make such elections, including any appropriate election to be taxed as a
corporation, as shall be necessary to effect such qualification.
(b) In the case of a Trust which has elected to qualify as a Regulated
Investment Company, the Trustee shall determine, or cause to be determined,
whether or not the Trust is in compliance with the investment diversification
requirements of Subchapter M of the Code, and the rules and regulations
promulgated thereunder ("Diversification Requirements"). On each calendar date
necessary to ensure qualification with the Diversification Requirements
("Diversification Test Date"), the Trustee shall send, or cause to be sent, a
written report to the Sponsor stating whether or not the Trust meets all
current Diversification Requirements on such Diversification Test Date. In the
event the written report indicates that the Trust does not meet all such
Diversification Requirements, as of such Diversification Test Date, the Sponsor
shall instruct the Trustee to sell all or any portion of an issue of Securities
or to take any other action necessary to cause the Trust to comply with the
Diversification Requirements.
(c) In order to ensure the continued qualification as a Regulated
Investment Company of a Trust which has elected to so qualify, the Trustee
shall cause a review of such Trust to be performed at least annually to
determine whether such Trust is meeting the gross income requirements and other
requirements set forth in Subchapter M of the Code. The Sponsor shall direct
the Trustee to sell
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Securities pursuant to Section 3.06 in an amount deemed necessary by the
Sponsor, or to take any other necessary action, to maintain the status of the
Trust as a Regulated Investment Company.
(d) In performing the duties set forth in this Section 3.13, the
Trustee may seek the advice of the independent certified public accountants
designated by the Sponsor pursuant to Section 8.01 hereof and may rely upon the
advice of such accountants.
Section 3.14. Investment Restrictions. (a) The Sponsor hereby agrees
that it will not deposit Securities in any series of the Trust, if such deposit
would cause the Trust (including any prior series of the Trust) to be the
holder of 5% or more of the outstanding voting securities of any one issuer of
Securities of, or otherwise cause the Trust to be deemed an "affiliate" of, a
public utility company, as defined in the Public Utility Holding Company Act of
1935 (the "1935 Act") or in any way cause the Trust to be in violation of the
1935 Act.
(b) The Sponsor hereby agrees that it will not deposit Securities in
any series of the Trust, if such deposit would cause the Trust (including any
prior series of the Trust), or the Sponsor itself, to be deemed to have
acquired a beneficial ownership in excess of 9.9% of any class of any Security
registered under Section 12 of the Securities Exchange Act, or otherwise cause
the Trust or the Sponsor to be subject to the reporting requirements of Section
16(a) of the Securities Exchange Act, or any of the rules and regulations
promulgated thereunder.
Section 3.15. Replacement Securities; Reinvestment of Cash Proceeds.
(a) If any contract in respect of a Contract Security (other than a contract to
purchase a Replacement Security), shall have failed due to any occurrence, act
or event beyond the control of the Sponsor or the Trustee, the Sponsor shall
declare such Contract Security a Failed Security and shall notify the Trustee
of its inability to deliver the Failed Security (such notice being herein
called the "Failed Contract Notice"). Within twenty (20) days of delivery of
the Failed Contract Notice (the "Purchase Period"), the Sponsor shall, if
possible, purchase, or enter into a contract to purchase, a security to be held
as a Security hereunder (the "Replacement Security") as part of the Trust Fund
in replacement of the Failed Security, subject to the satisfaction of all of
the following conditions:
(1) Each Replacement Security shall be an equity security and
shall, in the opinion of the Sponsor, be of the same general quality
as the Security originally deposited;
(2) The purchase price of each Replacement Security shall not
exceed the amount of funds reserved for the purchase of the Failed
Security;
(3) The Sponsor shall furnish a notice to the Trustee (which
may be part of the Failed Contract Notice) in respect of the
Replacement Security purchased or to be purchased that shall (i)
identify the Replacement Securities, (ii) state that the contract to
purchase, if any, entered into by the Sponsor is satisfactory in form
and substance and (iii) state that the foregoing conditions of clauses
(1) and (2) have been satisfied with respect to the Replacement
Securities.
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(4) If the applicable Trust Indenture for a Trust indicates
that it is organized as a "grantor trust" for purposes of the Code,
(i) no deposit of Replacement Securities shall be made unless the
Failed Security shall have been declared to have failed within ninety
(90) days following the Initial Date of Deposit, and (ii) Supplemental
Deposits which are made to replace Failed Securities may be
Replacement Securities only if such Supplemental Deposits occur within
twenty (20) days of the declaration of a Failed Security.
(5) Whenever a Replacement Security is acquired by the
Sponsor pursuant to the provisions of this subparagraph (a), the
Trustee shall, within five (5) days thereafter, mail to all
Unitholders a notice of such acquisition, including an identification
of the Failed Security and the Replacement Security acquired. The
purchase price of a Replacement Security shall be paid out of the
funds in the Capital Account attributable to the Failed Security which
it replaces.
(b) If the applicable Trust Indenture for a Trust indicates that such
Trust intends to elect to be treated and to qualify as a Regulated Investment
Company, the Sponsor may in writing from time to time direct the Trustee to
purchase securities to be held as Securities hereunder with funds held in the
Capital Account, provided, however, that the Sponsor shall provide such
direction not later than three Business Days prior to the Record Date for the
subsequent Distribution Date on which such funds would be distributed. Each
such purchase shall be subject to the following conditions and such other
conditions as may be specified in the Trust Indenture applicable to such Trust.
To be eligible for purchase, the securities must:
(1) have the same general characteristics as the Securities
described in the Prospectus;
(2) not constitute Restricted Securities or be purchased on a
when, as and if issued basis;
(3) have characteristics necessary for the Trust to comply with
requirements for the maintenance of Regulated Investment
Company status, including the Diversification Requirements;
and
(4) have a purchase price which does not exceed the balance in
the Capital Account at the time of the purchase resulting
from the proceeds of any sale of Securities pursuant to
Section 3.06, 3.07 or 3.09 or from the proceeds of any sale
of Securities pursuant to Section 5.02 to the extent such
proceeds are not necessary for redemption, provided, however,
that proceeds of Securities sold for redemption may be
reinvested only in an amount each year not to exceed 10% of
the aggregate value of the assets of the Trust at the
beginning of such year.
(c) If (1) the applicable Trust Indenture for a Trust indicates that
such Trust intends to elect to be treated and to qualify as a Regulated
Investment Company, and (2) to the extent that the Sponsor, on behalf of the
Trust, receives a favorable response to its no-action letter request submitted
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to the Commission with respect to reinvesting cash proceeds received by the
Trust, the Trustee shall, upon receipt of instructions from the Sponsor,
reinvest such cash proceeds in additional Securities held in the Trust Fund at
such time ("Reinvestment Securities"), subject to the following conditions: (x)
such reinvestment shall be made so that each deposit of additional Securities
shall be made so as to match as closely as practicable the Percentage Ratios,
and (y) such reinvestment shall be made in accordance with the parameters set
forth in the no-action letter response. If the Sponsor and the Trustee
determine that it shall be necessary to amend the Indenture to comply with the
parameters set forth in the no-action letter response, such documents may be so
amended without the consent of Unitholders.
(d) The Trustee shall have no duty or responsibility with respect to
selecting Securities and their selection by the Sponsor shall be deemed to be
the Sponsor's certification that such Securities comply with the provisions of
this Section 3.15. The Trustee shall not be liable or responsible for
depreciation or loss incurred by reason of any purchase made pursuant to any
instruction from the Sponsor and in the absence of such instruction the Trustee
shall have no duty to purchase any Securities. The Sponsor shall not be liable
for any failure to instruct the Trustee to purchase any security or for errors
of judgment in selecting any security.
(e) If Securities in a Trust are to be sold pursuant to Sections 3.06,
3.07 or 3.09, the proceeds of such sale, or moneys received as a distribution
of capital as the result of any corporate or other business action of the
issuer of a Security in the Trust, may be reinvested, upon the instruction of
the Sponsor, (1) in additional Securities held at such time in the Trust Fund
on a pro rata basis in the manner set forth in, and to the extent permitted by,
this Section 3.15, or (2) if not so permitted by this Section 3.15, if (x) at
the time there is no legal or regulatory impediment and (y) in the opinion of
the Sponsor it is in the best interests of the Unitholders to do so, in U.S.
Treasury Obligations which mature on or prior to the next scheduled
Distribution Date (the "Short- term Treasury Obligations"). Any Short-term
Treasury Obligations purchased pursuant to this Section 3.15 shall be deposited
into the applicable Trust and shall be subject to the terms of such Trust
Indenture to the same extent as any Security deposited into such Trust on the
Initial Date of Deposit and the terms "Trust", "Trust Fund" and "Securities"
shall thereafter be defined as including such Short-term Treasury Obligations
provided, however, that, with respect to any Trust other than a Trust which has
qualified, or is anticipated to qualify, as a Regulated Investment Company, the
Trustee shall not have the power to sell, transfer or otherwise dispose of any
such Short-term Treasury Obligation prior to the maturity thereof. Brokerage
commissions with respect to the purchase of Short-term Treasury Obligations, if
any, shall be an expense borne by the Trust. The Trustee shall have no
liability for loss or damage resulting from any reinvestment made pursuant to
the Sponsor's direction and in the absence of such direction shall not reinvest
monies credited to the Capital Account.
Section 3.16. Special Provisions for Grantor Trusts. If the applicable
Trust Indenture for a Trust indicates that it is organized as a "grantor trust"
for purposes of the Code, nothing in these Standard Terms or the applicable
Trust Indenture, or otherwise, shall be construed to give the Trustee the power
to vary the investment of the Unitholders within the meaning of U.S. Treasury
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Regulation Section 301.7701-4(c) or any similar or successor provisions of U.S.
Treasury Regulations, nor shall the Sponsor give the Trustee any direction that
would vary the investment of the Unitholders.
Section 3.17. Certain Advances. If specified in a Trust Indenture, the
Trustee shall advance out of its own funds and cause to be deposited in and
credited to the Income Account, any amount necessary to permit payment of the
Income Distribution required to be made by the Trustee on each Income
Distribution Date; provided however that the Trustee shall be entitled to be
reimbursed without interest out of the Trust Fund for any and all amounts so
advanced by it pursuant to this Section 3.17 on the first date following the
date of such advance or which such amounts may be reimbursed to the Trustee
without reducing the amount in the Income Account to an amount less than that
required to make the Income Distribution specified in Section 3.04.
Section 3.18. Deferred Sales Charge. (a) If the Prospectus and the
Trust Indenture for a Trust specify a Deferred Sales Charge, such Deferred
Sales Charge shall accrue on the books of the Trust at such times as shall be
specified in the Prospectus and shall be paid to the Sponsor either on or after
the date of such accrual as shall be determined by the Sponsor, by withdrawing
from the Income Account or the Capital Account, as the Prospectus may specify,
an amount per Unit specified in the Prospectus and the Trust Indenture (the
"Deferred Sales Obligation") and crediting such Deferred Sales Obligation to a
special, non-Trust account maintained for the benefit of the Sponsor by the
Trustee; provided, that if the balances in the Income Account or the Capital
Account are insufficient to make any such withdrawal, the Trustee shall, as
directed by the Sponsor, to the extent of any such insufficiency, either (x)
advance funds and be entitled to reimbursement of such advance upon the deposit
of additional monies in the Income Account or the Capital Account or (y) sell
for the account of the Sponsor, Securities selected by the Sponsor, and
distribute sale proceeds to the Sponsor to the extent of the Initial Costs,
provided that any amount of sale proceeds in excess of such amount shall be
deposited in the Capital Account.
(b) If the Prospectus and the Trust Indenture provide for the payment
of a contingent deferred sales charge or the unpaid balance of any Deferred
Sales Charge upon a Unitholder's redemption of Units, the Trustee shall, on the
Redemption Date, withhold from the Redemption Price payable to such Unitholder
an amount equal to the contingent deferred sales charge or the unpaid portion
of the Deferred Sales Charge, as the case may be, and distribute such amount to
such special Sponsor's account.
(c) The Sponsor may at any time instruct the Trustee in writing to
distribute to the Sponsor cash or Securities previously credited to the special
Sponsor's account.
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ARTICLE IV
Valuation of Securities
Section 4.01. Valuation of Securities. (a) The Trustee shall determine
separately and promptly furnish to the Sponsor upon request, the value of each
issue of Securities as of the Valuation Time on the days on which the Trust
Fund Evaluation is required pursuant to Section 5.01. The Securities which are
equity securities or securities convertible into equity securities shall be
valued as follows: (1) if the Securities are listed on one or more national
exchanges, or are traded on the Nasdaq National Market System or foreign
securities exchanges, the valuation shall be determined on the basis of the
last reported sale price on such exchange or system on that day on the exchange
or system which is the principal market therefor (deemed to be the New York
Stock Exchange if the Securities are listed thereon) (unless the Trustee deems
such price inappropriate as a basis for valuation); (2) if there is no sale
price on such exchange or system, at the mean between the closing bid and asked
prices on such exchange or system (unless the Trustee deems such price
inappropriate as a basis for valuation); (3) if the Securities are not so
listed or traded, or if so listed or traded and the principal market therefor
is other than on such exchange or system, the valuation shall be based on the
closing sale price on the over-the-counter market (unless the Trustee deems
such price inappropriate as a basis for valuation); or (4) if no such closing
sale prices are available (a) on the basis of current bid prices for the
Securities, (b) if bid prices are not available for any Securities, on the
basis of current bid prices for comparable securities, (c) by the Trustee's
appraisal of the value of the Securities in good faith, on the bid side of the
market or (d) by any combination of the above.
(b) With respect to any Security not listed on a national exchange or
traded on the Nasdaq National Market System, the Sponsor and the Trustee shall,
from time to time, designate one or more evaluation services or other sources
of information on which the Trustee shall be authorized to rely in evaluating
such Security, and the Trustee shall have no liability for any errors contained
in the information so received. The cost thereof shall be an expense
reimbursable to the Trustee from the Income and Capital Accounts pursuant to
Section 8.05.
(c) Except as may be provided in the Trust Indenture, all Securities
which are not equity Securities or Securities convertible into equity
Securities shall be valued as follows: during the initial offering period, on
the basis of offering prices; thereafter, for purposes of determining the Trust
Fund Evaluations required by Section 5.01, on the basis of bid prices. The
aggregate offering and bid prices of the Securities are the prices obtained
from investment dealers or brokers (which may include the Sponsor) who
customarily deal in such Securities; or if there is no market for the
Securities and bid or offering prices are not available, on the basis of
current bid or offering prices for comparable securities; or by appraisal; or
by any combination of the above.
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(d) In the event that the Trust holds Restricted Securities, such
Restricted Securities will be valued by an evaluation service pursuant to
paragraph (b) above. In making valuations, opinions of counsel may be relied
upon as to whether or not any Securities are Restricted Securities.
(e) For each valuation, the Trustee shall also determine and furnish
to the Sponsor the aggregate of (1) the value of all Securities on the basis of
such valuation and (2) the amount of cash on hand in the Trust Fund computed in
accordance with Section 5.01.
Section 4.02. Liability of the Trustee. The Sponsor and the
Unitholders may rely on any valuation furnished by the Trustee and shall have
no responsibility for the accuracy thereof. The determinations made by the
Trustee hereunder shall be made in good faith upon the basis of information
reasonably available to it. The Trustee shall be under no liability to the
Sponsor or the Unitholders for errors in judgment; provided, however, that this
provision shall not protect the Trustee against any liability to which it would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties hereunder.
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ARTICLE V
Trust Fund Evaluation
and
Redemption of Units
Section 5.01. Trust Fund Evaluation. (a) As of the Valuation Time (1)
on each June 30 and December 31 (or the last Business Day prior thereto), (2)
on each Business Day so long as the Sponsor is maintaining a secondary market
in Units, (3) on any Business Day as of the Valuation Time next following the
tender of any Unit for redemption, (4) on any other Business Day desired by the
Sponsor or Trustee, the Trustee shall:
(x) Add
(i) cash on hand in the Trust Fund, including dividends
receivable on Securities trading ex-dividend and accrued but
unpaid interest on the Securities on the date of such
computation, other than cash declared held especially for the
purchase of Contract Securities or cash held in the Reserve
Account;
(ii) the aggregate value of each issue of the Securities in
the Trust Fund, including Contract Securities; and
(iii) accounts receivable for Securities sold; and
(iv) any other assets of the Trust Fund; and
(y) Deduct
(i) amounts representing any applicable taxes or governmental
charges payable out of the Trust Fund and for which no
deductions shall have previously been made for the purpose of
addition to the Reserve Account;
(ii) amounts representing estimated accrued fees and expenses
of the Trust Fund including but not limited to unpaid fees
and expenses of the Trustee (including legal and auditing
expenses) and the Sponsor pursuant to Section 3.04 and
advances made pursuant to Sections 3.17 and 3.18;
(iii) cash allocated as of a date prior to the evaluation
then being made for distribution and in accordance with the
provisions of
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Section 10.02, the amounts allocated to the Sponsor for
reimbursement of Initial Costs; and
(iv) any accrued Deferred Sales Charge installments not yet
paid to the Sponsor; and
(v) accounts payable for Units tendered for redemption and
any other liabilities of the Trust Fund not included in (i),
(ii), (iii) and (iv) above.
(z) The resulting amount is herein called a "Trust Fund Evaluation".
(b) For each day on which the Trustee shall make a Trust Fund
Evaluation it shall also determine the "Unit Value" for such day. Such "Unit
Value" shall be determined by dividing such Trust Fund Evaluation by the number
of Units outstanding on such day, treating Units as no longer outstanding which
have been tendered for redemption and for which a liability has been
established pursuant to (a)(y) (v) above.
Section 5.02. Redemption of Units. (a) Any Unit tendered by a
Unitholder (for purposes of this Section 5.02, a written instrument evidencing
such transfer, delivered to the Trustee and in form satisfactory to the
Trustee, shall constitute tender with respect to Units owned by Unitholders and
not represented by a Certificate) or his duly authorized attorney for
redemption to the Trustee at its unit investment trust office shall be redeemed
and canceled by the Trustee. Units tendered in good order and received by the
Trustee prior to the Valuation Time on any Business Day shall be deemed
tendered on such Business Day (the "Tender Date") and the Tender Date for Units
tendered in good order and received by the Trustee after the Valuation Time on
any Business Day shall be the next following Business Day. Such Units shall be
redeemed on or prior to the seventh calendar day following the Tender Date
provided that if such seventh calendar day is not a Business Day, then such
Unit shall be redeemed on the first Business Day prior thereto (such seventh
calendar day or first Business Day prior thereto being herein called the
"Redemption Date"). Subject to payment by such Unitholder of any tax or other
governmental charges which may be imposed thereon, such redemption is to be
made by payment on the Redemption Date of cash or check equal to the Unit Value
next determined after the receipt of a redemption request in good order (based
on the Trust Fund Evaluation made in accordance with Section 5.01) multiplied
by the number of Units being redeemed (herein called the "Redemption Value").
The portion of the Redemption Value which represents income shall be withdrawn
from the Income Account to the extent available. The balance paid on any
redemption including accrued or declared but unpaid Income, if any, shall be
withdrawn from the Capital Account to the extent that funds are available for
such purpose. If such available balance shall be insufficient, the Trustee
shall sell such Securities in accordance with subparagraph (b) below.
(b) Whenever Securities are to be sold to meet redemptions
under this Section 5.02 or to pay Trust Fund expenses as provided
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in Section 8.05, or to pay Initial Costs as provided in Section 10.02, the
Sponsor shall instruct the Trustee with respect to the Securities to be sold,
so as to maintain, as closely as practicable, the proportionate relationship
between the number of shares of each Security in the Trust as it exists on the
date such Securities are sold, or if the Sponsor fails to so instruct the
Trustee, then the Trustee shall sell Securities so as to maintain, as closely
as practicable, the proportionate relationship between the number of shares of
each Security in the Trust as it exists on the date such Securities are sold,
or if not practicable, the Trustee may sell Securities in the manner in which
the Trustee, in its sole discretion, deems advisable.
(1) The net proceeds of any sales of Securities representing
accrued income shall be credited to the Income Account and the proceeds of such
sales representing principal or gains shall be credited to the Capital Account
and shall be disbursed from such accounts the extent necessary to pay the
Redemption Value, or Trust Fund expenses or Initial Costs, as the case may be.
(2) In the case of a Trust holding Restricted Securities, the
Sponsor shall instruct the Trustee to sell Securities in such a manner as shall
not result in Restricted Securities constituting more than 50% in value of the
Securities remaining in the Trust Fund upon the completion of such sale, or
result in the Trust Fund ceasing to be qualified as a Regulated Investment
Company under the Code, if applicable, provided, however, that the Sponsor
shall use its best efforts to ensure that such sale shall not result in
Restricted Securities constituting more than 40% in value of the Securities
remaining in the Trust Fund upon completion of such sale, it being understood
that sales of unrestricted Securities may be made if the Sponsor's best efforts
are unsuccessful with regard to the timely sale of Restricted Securities at
prices it deems reasonable if as a result of such sales, more than 50% in value
of the Trust Fund does not consist of Restricted Securities.
(c) In the event a Unitholder shall tender for redemption Units with a
Redemption Value in excess of the dollar amount specified in the Trust
Indenture as the "In-Kind Distribution Amount", the Trustee shall notify the
Sponsor. If so provided in the applicable Trust Indenture, either the
Unitholder may request, or the Sponsor may direct, that the Unitholder receive,
in lieu of cash, such Unitholder's pro rata share of each Security then held by
the Trust Fund (exclusive of any Restricted Security the restrictions on which
prevent transfer to the redeeming Unitholder), to the extent of whole shares,
and cash from the Capital Account equal to the value of the fractional shares
(and shares of any non-transferable Restricted Security, as discussed above),
and the Cash Component to which such tendering Unitholder is entitled, such
distribution being herein referred to as an "In- Kind Distribution". An In-Kind
Distribution will be made by the Trustee only by distribution of Securities to
the account of the Unitholder's bank or broker-dealer at The Depository Trust
Company and upon receipt of proper delivery instructions from the Unitholder.
The Trustee shall have no liability for any loss or depreciation resulting from
following such instructions or from experiencing a delay in receipt of such
instructions. If funds in the Capital Account are insufficient for the required
cash distribution to the tendering Unitholder, the Trustee shall sell
Securities as provided above.
(d) The Trustee may in its discretion, and shall when so directed by
the Sponsor in writing, suspend the right of redemption or postpone the date of
payment of the Redemption Price for more
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than seven calendar days following a Tender Date (1) for any period during
which the New York Stock Exchange, Inc. is closed other than customary weekend
and holiday closings; (2) for any period during which (as determined by the
Commission by rule, regulation or order) (x) trading on the New York Stock
Exchange, Inc. is restricted or (y) an emergency exists as a result of
whichdisposal by the Trust Fund of the Securities is not reasonably practicable
or it is not reasonably practicable to fairly determine in accordance herewith
the value of the Securities for the purposes of any Trust Fund Evaluation; or
(3) for such other periods as the Commission may by order permit.
(e) Not later than the close of business on the Tender Date of a Unit
tendered for redemption by a Unitholder other than the Sponsor, the Trustee
shall notify the Sponsor of such tender. The Sponsor shall have the right to
purchase such Unit by notifying the Trustee of its election to make such
purchase as soon as practicable thereafter but in no event subsequent to the
close of business on the second Business Day after the Tender Date. Such
purchase shall be made by payment for such Unit by the Sponsor to the
Unitholder not later than the close of business on the Redemption Date of an
amount not less than the Redemption Value which would otherwise be payable by
the Trustee to such Unitholder. So long as the Sponsor is maintaining a bid in
the secondary market for the Units, the Sponsor will so repurchase any Unit
tendered to the Trustee for redemption.
(f) Neither the Sponsor nor the Trustee shall be liable or responsible
in any way for depreciation or loss incurred by reason of any sale of
Securities made pursuant to this Section 5.02.
(g) Notwithstanding the foregoing provisions of this Section 5.02, in
the event that the Sponsor does not elect to purchase any Unit tendered to the
Trustee for redemption, or in the event that a Unit is being tendered by the
Sponsor for redemption, the Trustee is hereby irrevocably authorized in its
discretion, but shall have no obligation, in lieu of redeeming Units tendered
for redemption, to sell such Units in the over-the-counter market for the
account of tendering Unitholders at prices which will return to the Unitholders
proceeds in an amount, net after deducting brokerage commissions, transfer
taxes and other charges, equal to or in excess of the Redemption Value which
such Unitholders would otherwise be entitled to receive on redemption pursuant
to this Section 5.02. The Trustee shall pay to the Unitholders the net proceeds
of any such sale on or before the Redemption Date.
(h) Securities transactions of the Trust Fund will be placed by the
Trustee with brokers or dealers in accordance with instructions received from
the Sponsor, which may include the Sponsor and its affiliates, or, if no such
instructions are given, with brokers or dealers chosen by the Trustee in its
sole discretion.
(i) In the event that funds are withdrawn from the Capital Account or
Securities are sold for payment of any portion of the Redemption Value
representing accrued or declared but unpaid Income, the Capital Account shall
be reimbursed when sufficient funds are next available in the Income Account
for such funds so applied.
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Section 5.03. Exchange and Rollover of Units into a New Series. (a) If
the Sponsor shall offer a subsequent series of the ABCs Trust or of any other
Equity Trust which has been designated in the relevant Trust Indenture and
Prospectus as an "Exchange Series" (the "New Series"), the Trustee shall, at
the Sponsor's sole cost and expense, send a written notice containing a form of
election to Unitholders informing such Unitholders, if their redemption
distribution would be in an amount sufficient to purchase at least one Unit of
the New Series, that they may elect to have their Units(s) redeemed on the
Special Redemption Date and receive an In-Kind Distribution in respect thereof,
that the Securities included in such In-Kind Distribution would be sold, and
the cash proceeds received from the sale of such Securities would be applied by
the Distribution Agent to purchase Units of a New Series, all as hereinafter
provided. The Trustee shall honor properly completed election forms returned to
the Trustee, accompanied by any Certificate evidencing Units tendered for
redemption or a properly completed redemption request with respect to
uncertificated Units, by 12 noon on the Exchange Notification Date.
(b) All Units so tendered by a Unitholder (an "Exchange Unitholder")
shall be redeemed and canceled on the Special Redemption Date. Subject to
payment by such Exchange Unitholder of any tax or other governmental charges
which may be imposed thereon, such redemption is to be an In- Kind Distribution
made pursuant to Section 5.02 by distribution of cash and/or Securities to the
Distribution Agent on the Special Redemption Date of the net asset value
(determined on the basis of the Trust Fund Evaluation as of the Special
Redemption Date in accordance with Section 4.01) multiplied by the number of
Units being redeemed (herein called the "Exchange Distribution"). Any
Securities that are made part of the Exchange Distribution shall be valued for
purposes of the redemption distribution as of the Special Redemption Date.
(c) All Securities included in an Exchange Unitholder's Exchange
Distribution shall be sold by the Distribution Agent during the Special
Liquidation Period specified in the relevant Trust Indenture and the Prospectus
pursuant to the Sponsor's direction, and the Distribution Agent shall employ
the Sponsor or the Sponsor's designee as broker in connection with such sales.
For such brokerage services, the Sponsor or the Sponsor's designee shall be
entitled to compensation at its customary rates, provided however, that its
compensation shall not exceed the amount authorized by applicable securities
laws and regulations. Any brokerage costs or charges incurred in the sale of
such Securities will be borne by the Exchange Unitholders. The Sponsor shall
direct that sales be made in accordance with the guidelines set forth in the
Prospectus under the heading "Exchange Option." Should the Sponsor fail to
provide direction, the Distribution Agent shall sell the Securities on a pro
rata basis. The Distribution Agent shall have no responsibility for any loss or
depreciation incurred by reason of any sale made pursuant to this Section.
(d) Upon each trade date for sales of Securities included in the
Exchange Unitholder's Exchange Distribution, the Distribution Agent shall, as
agent for such Exchange Unitholder, deliver the proceeds to the Sponsor in
exchange for Units of a New Series (if any), for the account of such Exchange
Unitholder at the Sponsor's public offering price for such Units on such day,
and at such sales charge as shall be described in the prospectus for such New
Series. Any cash balance
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remaining after such purchase shall be distributed within a reasonable time to
the Exchange Unitholder by check mailed to the address of such Unitholder on
the registration books of the Trustee. Units of a New Series will be
uncertificated unless and until the Exchange Unitholder requests a certificate
and Trust Indenture for such New Series provides for the issuance of Units in
certificated form. Any cash held by the Distribution Agent shall be held in a
non-interest bearing account which will be of benefit to the Distribution Agent
in accordance with normal banking procedures. Neither the Trustee nor the
Distribution Agent shall have any responsibility or liability for loss or
depreciation resulting from any reinvestment made in accordance with this
paragraph, orfor any failure to make such reinvestment in the event the Sponsor
does not make Units available for purchase.
(e) Notwithstanding the foregoing, the Sponsor may, in its discretion
at any time, decide not to offer New Series in the future, and if so, this
Section 5.03 concerning the Exchange of Units shall be inoperative.
(f) The Distribution Agent shall receive no fees for performing its
duties hereunder. The Distribution Agent shall, however, be entitled to receive
indemnification and reimbursement from the Trust for any and all expenses and
disbursements to the same extent as the Trustee is permitted reimbursement
hereunder.
(g) Anything in this Section 5.03 to the contrary notwithstanding, the
Distribution Agent may, instead of selling Securities, sell or otherwise
distribute Securities to the New Series in accordance with, and subject to, the
provisions of, and conditions set forth in, any exemption order received by the
Sponsor from the Commission relating to the Exchange Option.
ARTICLE VI
Transfer, Interchange or Replacement of Units
Section 6.01. Transfer and Interchange of Units. (a) A Unit
may be transferred by the registered holder thereof by presentation of transfer
instructions, and surrender of the Certificate evidencing such Unit, if any, at
the unit investment trust office of the Trustee, properly endorsed in a manner
satisfactory to the Trustee or accompanied by such documents as the Trustee
deems necessary to evidence the authority of the person making such transfer
and executed by the registered Unitholder or his authorized attorney. Such
transfer shall thereupon be made on the records of the Trustee and, if
appropriate, a new registered Certificate or Certificates for the same number
of Units of the same Trust Fund shall be issued in exchange and substitution
therefor. The Certificates issued pursuant to the Indenture are interchangeable
for one or more other Certificates in an equal aggregate number of Units and
all Certificates issued shall be issued in denominations of one Unit or any
multiple thereof as may be requested by the Unitholder and deemed appropriate
by the Trustee. The Trustee may deem and treat the person in whose name any
Unit shall be registered upon the books of the Trustee as the owner of such
Unit for all purposes hereunder, and the Trustee shall not be
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affected by any notice to the contrary, nor be liable to any person or in any
way for so deeming and treating the person in whose name any Unit shall be so
registered. The transfer books maintained by the Trustee for the purposes of
this Section 6.01 shall be closed in connection with the termination of the
Trust Fund pursuant to Article IX hereof.
(b) A sum sufficient to cover any tax or other governmental charge
that may be imposed in connection with any such transfer or interchange shall
be paid to the Trustee. A Certificateholder may be required to pay $2.00 (or
such other amount as may be specified by the Trustee and approved by the
Sponsor) for each new Certificate issued on any such transfer or interchange.
(c) All Certificates canceled pursuant to the Indenture, other than
those endorsed for transfer, may be destroyed by the Trustee.
Section 6.02. Replacement of Certificates. In case any Certificate
shall become mutilated or be destroyed, stolen or lost, the Trustee shall
execute and deliver a new Certificate in exchange and substitution therefor
upon the Certificateholder's furnishing the Trustee with proper identification
and satisfactory indemnity, complying with such other reasonable regulations
and conditions as the Trustee may prescribe and paying such expenses as the
Trustee may incur, provided however, that if the Trust Fund has terminated or
is in the process of termination, the Trustee, in lieu of issuing such new
Certificate, may, upon the terms and conditions set forth herein, make the
distributions set forth in Section 9.01 hereof. Any mutilated Certificate shall
be duly surrendered and canceled before any replacement Certificate shall be
issued in exchange and substituted therefor. Upon issuance of any duplicate
Certificate pursuant to this Section 6.02, the Certificate claimed to have been
lost, stolen or destroyed shall become null and void and of no effect, and any
bona fide purchaser thereof shall have only such rights as are afforded under
Article 8 of the Uniform Commercial Code to a holder presenting a Certificate
for transfer in the case of any overissue.
Section 6.03. Form of Certificate. Each Certificate shall be in fully
registered form, shall be numbered serially for identification, shall be
executed in facsimile by the Sponsor and manually by an authorized signatory of
the Trustee, shall be dated the date of execution and delivery by the Trustee
and shall represent a fractional undivided interest in the Trust Fund, the
numerator of which fraction shall be the number of Units set forth on the face
of such Certificate and the denominator of which shall be the total number of
Units of undivided interest outstanding at any such time.
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ARTICLE VII
Sponsor
Section 7.01. Liability of Sponsor and Indemnification.
(a) The Sponsor shall be under no liability to the Trust or the
Unitholders for any action taken or for refraining from the taking of any
action in good faith pursuant to the Indenture, or for errors in judgment or
for depreciation or loss incurred by reason of the purchase or sale of any
Securities, provided, however, that this provision shall not protect the
Sponsor against any liability to which it would otherwise be subject by reason
of willful misfeasance, bad faith or gross negligence in the performance of its
duties or by reason of its reckless disregard of its obligations and duties
hereunder. The Sponsor may rely in good faith on any paper, order, notice,
list, affidavit, receipt, evaluation, opinion, endorsement, assignment, draft
or any other document of any kind prima facie properly executed and submitted
to it by the Trustee, the Trustee's counsel or any other person for any matters
arising hereunder (including the determination as to whether any Security is a
Restricted Security). The Sponsor shall in no event be deemed to have assumed
or incurred any liability, duty or obligation to any Unitholder or the Trustee
other than as expressly provided for herein.
(b) The Sponsor may employ agents and shall not be answerable for the
default or misconduct of any such agents if selected with reasonable care. The
fees of any such agents shall be an expense of the Trust Fund reimbursable to
the Sponsor as provided in Section 7.02.
(c) The Trust Fund shall pay and hold the Sponsor harmless from and
against any loss, liability or expense incurred in acting as Sponsor of the
Trust other than by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties hereunder, including the costs and
expenses of the defense against any claim or liability in the premises. The
Sponsor shall not be under any obligation to appear in, prosecute or defend any
legal action which in its opinion may involve it in any expense or liability,
provided, however, that the Sponsor may in its discretion undertake any such
action which it may deem necessary or desirable in respect of the Indenture and
the rights and duties of the parties hereto and the interests of the
Unitholders hereunder and, in such event, the legal expenses and costs of any
such action and any liability resulting therefrom shall be expenses, costs and
liabilities of the Trust Fund and shall be paid directly by the Trustee out of
the Income and Capital Accounts as provided by Section 3.04.
(d) None of the provisions of the Indenture shall be deemed to protect
or purport to protect the Sponsor against any liability to the Trust Fund or to
the Unitholders to which the Sponsor would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance of its
duties, or by reason of the Sponsor's reckless disregard of its obligations and
duties under the Indenture.
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Section 7.02. Compensation of Sponsor. The Sponsor may make additions
and deletions to the list referred to in Section 5.02 and shall conduct regular
quarterly reviews to determine whether or not to recommend the disposition of
Securities pursuant to the procedures under the Indenture. In addition, the
Sponsor shall perform such other reviews and procedures as it may deem
necessary for the Sponsor to give the consents and directions required by the
Indenture. As compensation for providing supervisory services, the Sponsor
shall receive, at the times specified in Section 3.04, against a statement or
statements therefor submitted to the Trustee, an aggregate annual fee in the
amount set forth in the Trust Indenture, but in no event shall such
compensation when combined with all compensation received from other Trust
Funds exceed the Sponsor's cost for performing such services. Such fee may be
increased by the Sponsor from time to time, without the consent or approval of
any Unitholder or the Trustee, by amounts not exceeding in total the
proportionate increase, during the period from the date of such Trust Indenture
to the date of any such increase, in consumer prices as published either under
the classification "All Services Less Rent" in the Consumer Price Index
published by the United States Department of Labor or, if such index is no
longer published, a similar index as determined by the Trustee and the Sponsor.
The Sponsor shall also receive, at the times set forth in Section
3.04, reimbursement for any and all expenses and disbursements incurred
hereunder, including legal and auditing expenses, in connection with such
action as the Sponsor in its discretion may deem necessary at any and all times
to undertake in order to protect the Trust Fund and the rights and interests of
the Unitholders pursuant to the terms of the Indenture.
Section 7.03. Liability. The Sponsor, or the Sponsors jointly and
severally if there be more than one, shall be liable in accordance herewith for
the obligations imposed upon and undertaken by any Sponsor hereunder, provided
that, without in any way affecting or diminishing such liability, each Sponsor
shall indemnify the other Sponsors and hold the other Sponsors harmless from
and against any and all costs, expenses and liabilities (including attorneys'
fees) which such other Sponsors may suffer or incur as a result of or by reason
of any act or failure to act hereunder on the part of the indemnifying Sponsor.
At all times prior to the termination of the Trust Fund, in the event there be
more than one Sponsor and while such Sponsors shall continue to act jointly
hereunder, there shall be maintained on file with the Trustee a power of
attorney executed in favor of one Sponsor by the other Sponsors constituting
and appointing the non-executing Sponsor the true and lawful agent and
attorney-in-fact of the executing Sponsors to execute and deliver for and on
behalf of the executing Sponsors any and all notices, opinions, certificates,
lists, demands, directions, instruments or other documents provided or
permitted to be executed or delivered by any Sponsor hereunder or to take any
other action in respect hereof. Such power of attorney shall continue in effect
as to each executing Sponsor until written notice of revocation thereof has
been given by such executing Sponsor to the Trustee. Prior to receipt of such
notice of revocation the Trustee shall be entitled to rely conclusively upon
such power of attorney as authorizing the non-executing Sponsor to give any
notice, opinion, certificate, list, demand, direction, instrument or any other
document provided for or permitted hereunder or to take any other action in
respect hereof on behalf of the executing Sponsors as to which such power of
attorney is in effect.
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Section 7.04. Discharge of Sponsor.
(a) If there be more than one Sponsor, in the event that any Sponsor
shall fail to undertake or perform any of the duties which by the terms of the
Indenture are required to be undertaken or performed by it and such failure
shall continue for 30 calendar days after notice to all Sponsors from the
Trustee, or if any Sponsor shall become incapable of acting or shall be
adjudged a bankrupt or insolvent, or a receiver of the property of any Sponsor
shall be appointed or any public officer shall take charge or control of any
Sponsor or its property or affairs for the purpose of rehabilitation,
conservation or liquidation, then such Sponsor shall forthwith be and be deemed
to be discharged forever as a Sponsor hereunder and thereupon the other Sponsor
shall act hereunder without the necessity of any other or further action on
their part or on the part of the Trustee.
(b) In the event that the power of attorney referred to in Section
7.03 above shall be revoked by written notice given by an executing Sponsor and
it shall not be replaced within one Business Day by another power of attorney
conforming with the requirements of Section 7.03, the Sponsors shall be deemed
to have been unable to reach agreement with respect to action to be taken
jointly by them hereunder and there upon the non-executing Sponsor shall
execute within one Business Day an instrument discharging the executing Sponsor
and thereupon such Sponsor shall be and shall be deemed to be discharged
forever as Sponsor hereunder and thereupon the other Sponsors shall act
hereunder without the necessity of any other or further action on their part or
on the part of the Trustee.
(c) Notwithstanding the discharge of a Sponsor in accordance with this
Section 7.04, such Sponsor shall continue to be fully liable in accordance with
the provisions hereof in respect of action taken or refrained from under the
Indenture by such Sponsors before the date of such discharge, or by the
remaining Sponsor before or after the time of such discharge as fully and to
the same extent as if no discharge had occurred.
Section 7.05. Certain Matters Regarding Succession. The covenants,
provisions and agreements herein contained shall in every case be binding upon
any successor to the business of any Sponsor. In the event of the death,
resignation or withdrawal of any partner of any successor Sponsor which may be
a partnership, a partner so dying, resigning or withdrawing shall be relieved
of all further liability hereunder if at the time of such death, resignation or
withdrawal such Sponsor maintains a net worth (determined in accordance with
generally accepted accounting principles) of at least $2,000,000. In the event
of any assignment by any Sponsor to a successor corporation or partnership as
permitted by the next following sentence, such Sponsor and, if such Sponsor is
a partnership, its partners, shall be relieved of all further liability under
the Indenture. Any Sponsor may transfer all or substantially all of its assets
to a corporation or partnership which carries on the business of such Sponsor,
if at the time of such transfer such successor duly assumes all the obligations
of such Sponsor under the Indenture.
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Section 7.06. Resignation of Sponsor. (a) If there be more than one
Sponsor and if at any time any Sponsor desires to resign its position as a
Sponsor hereunder and if at such time one of the other Sponsors maintains a net
worth (determined in accordance with generally accepted accounting principles)
of at least $2,000,000 and the other Sponsor or Sponsors are agreeable to such
resignation, the Sponsor desiring to resign may resign by delivering to the
Trustee an instrument executed by such resigning Sponsor and consented to by
the remaining Sponsors, and upon such delivery, the resigning Sponsor shall be
discharged and shall no longer be liable in any manner hereunder except as to
acts or omissions occurring prior to such delivery and the remaining Sponsors
shall thereupon perform all duties and be entitled to all rights under the
Indenture; provided, however, that concurrently with or subsequent to such
resignation, the remaining Sponsors and the Trustee may appoint a new Sponsor
to act with the remaining Sponsors and to assume the duties of the resigning
Sponsor by an instrument executed by the remaining Sponsors, the Trustee and
the new Sponsor. Such new Sponsor shall not be under any liability hereunder
for acts or omissions prior to the execution of such instrument.
(b) If at any time there is only one Sponsor acting hereunder and such
Sponsor desires to resign its position as Sponsor hereunder, it may resign by
delivering to the Trustee an instrument of resignation executed by such
Sponsor. Such resignation shall not be or become effective or valid for any
purpose whatsoever unless prior to or concurrently with the delivery thereof
(i) the Trustee shall have appointed a successor Sponsor or Sponsors to assume,
with such compensation from the Trust Fund as the Trustee may deem reasonable
under the circumstances, the duties and obligations of the resigning Sponsor
hereunder by an instrument of appointment and assumption executed by the
Trustee and the successor Sponsor or Sponsors or (ii) in accordance with
Section 8.01(f) hereof, the Trustee shall have determined to terminate the
Indenture and the Trust Fund created thereby and liquidate the Trust Fund. Any
such successor Sponsor shall be satisfactory to the Trustee and, at the time of
appointment, shall have a net worth of at least $2,000,000 (determined in
accordance with generally accepted accounting principles). Upon effective
resignation hereunder, the resigning Sponsor shall be discharged and shall no
longer be liable in any manner hereunder except as to acts or omissions prior
to such delivery and the successor Sponsor or Sponsors shall thereupon perform
all duties and be entitled to all rights as a Sponsor under the Indenture. The
successor Sponsor or Sponsors shall not be under any liability hereunder for
occurrences or omissions prior to the execution of such instrument.
Section 7.07. Notice to Unitholders. Notice of the discharge or
resignation of any Sponsor and of any appointment of a successor Sponsor or
Sponsors under Section 7.06 shall be mailed by the Trustee to each Unitholder
of record.
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ARTICLE VIII
Trustee
Section 8.01. General Matters Relating to Trustee. The Trustee shall
be named in the Trust Indenture.
(a) All moneys deposited with or received by the Trustee hereunder
shall be held by it without interest in trust as part of the Trust Fund until
required to be disbursed in accordance with the provisions of the Indenture and
such moneys will be segregated by separate recordation on the trust ledger of
the Trustee so long as such practice preserves a valid preference under
applicable law, or if such preference is not so preserved the Trustee shall
handle such moneys in such other manner as shall constitute the segregation and
holding thereof in trust within the meaning of the Investment Company Act of
1940.
(b) The Trustee shall be under no liability for any action taken in
good faith on any appraisal, paper, order, list, demand, request, consent,
affidavit, notice, opinion, direction, endorsement, assignment, resolution,
draft or other document whether or not of the same kind, prima facie properly
executed, or for the disposition of moneys or Securities pursuant to the
Indenture or in respect of any valuation which it is required to make or is
required or permitted to have made by others under the Indenture or otherwise;
provided, however, that this provision shall not protect the Trustee against
any liability to which it would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of its reckless disregard of its obligations and duties hereunder,
and the Trustee may construe any of the provisions of the Indenture insofar as
the same may appear to be ambiguous or inconsistent with any other provisions
hereof, and any construction of any such provisions hereof by the Trustee in
good faith shall be binding upon the parties hereto and the Unitholders.
(c) The Trustee shall not be responsible for or in respect of the
recitals herein, the validity or sufficiency of the Indenture or for the due
execution hereof by the Sponsor or for the form, character, genuineness,
sufficiency, value or validity of any Securities (except that the Trustee shall
be responsible for the exercise of due care in determining the genuineness of
Contract Securities delivered to it) or for or in respect of the validity or
sufficiency of the Certificate (except for the due execution thereof by the
Trustee), or for the due execution thereof by the Sponsor, and the Trustee
shall in no event assume or incur any liability, duty or obligation to any
Unitholder or to the Sponsor, other than as expressly provided for herein. The
Trustee shall not be responsible for or in respect of the validity of any
signature by or on behalf of the Sponsor.
(d) The Trustee shall not be under any obligation to appear in,
prosecute or defend any action, which in its opinion may involve it in any
expense or liability unless it shall be furnished with such reasonable security
and indemnity against such expense or liability as it may require, and any
pecuniary cost of the Trustee from such actions shall be deductible from and a
charge against the
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Income and Capital Accounts. The Trustee shall in its discretion undertake such
action as it may deem necessary at any and all times to protect the Trust Fund
and the rights and interests of the Unitholders pursuant to the terms of the
Indenture, provided, however, that the expenses and costs of such actions,
undertakings or proceedings shall be reimbursable to the Trustee from the
Income and Capital Accounts.
(e) The Trustee may employ agents, attorneys, accountants and auditors
and shall not be answerable for the default or misconduct of any such agents,
attorneys, accountants or auditors if such agents, attorneys, accountants or
auditors shall have been selected with reasonable care. Unless otherwise
directed by the Sponsor, the accounts of the Trust Fund shall be examined not
less frequently than annually by independent certified public accountants
designated from time to time by the Sponsor, and the report of such accountants
shall be furnished by the Trustee to Unitholders upon request. So long as the
Sponsor is maintaining a secondary market for Units, the Sponsor shall bear any
audit expense which exceeds $.50 per Unit, unless the Trustee has been advised
that all of such expenses are permitted by the Commission to be deducted from
the Trust Fund. The Trustee shall not be liable in respect of any action taken
or suffered under the Indenture in good faith, in accordance with an opinion of
counsel, including any action taken in reliance upon an opinion of counsel as
to whether any Securities are Restricted Securities. The fees and expenses
charged by such agents, attorneys, accountants or auditors shall constitute an
expense of the Trustee reimbursable from the Income and Capital Accounts as set
forth in Section 3.04 hereof.
(f) If at any time there is only one Sponsor acting hereunder and such
Sponsor shall fail to undertake or perform any of the duties which by the terms
of the Indenture are required by it to be undertaken or performed, or such
Sponsor shall become incapable of acting, or if a court having jurisdiction in
the premises shall enter a decree or order for relief in respect of such
Sponsor in an involuntary case, or such Sponsor shall commence a voluntary
case, under any applicable bankruptcy, insolvency, or other similar law now or
hereafter in effect, or any receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) for such Sponsor or for any substantial part
of its property shall be appointed or such Sponsor shall make any general
assignment for the benefit of creditors or shall generally fail to pay its
debts as they become due, then in any such case, the Trustee may do any one or
more of the following: (1) appoint a successor Sponsor or Sponsors which shall
act hereunder in all respects in place of such Sponsor and which may be
compensated, at rates deemed by the Trustee to be reasonable under the
circumstances, by deduction from the Income Account or, to the extent funds are
not available in such account, from the Capital Account but no such deduction
shall be made exceeding such reasonable amount as the Commission may prescribe
in accordance with Section 26(a)(2)(C) of the Investment Company Act of 1940;
(2) act hereunder in its own absolute discretion without appointing any
successor Sponsor and receive additional compensation at rates determined as
provided in clause (1); or (3) terminate the Indenture and the Trust created
hereby and liquidate the Trust Fund in the manner provided in Section 9.01.
(g) If the value of the Trust Fund as shown by any Trust Fund
Evaluation shall be less than the Discretionary Liquidation Amount specified in
the Trust Indenture, the Trustee may in its
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discretion, and shall if so directed by the Sponsor, terminate the Indenture
and the Trust created hereby and liquidate the Trust Fund all in the manner
provided by Section 9.01.
(h) In no event shall the Trustee be personally liable for any taxes
or other governmental charges imposed upon or in respect of the Securities or
upon the interest thereon. The Trustee shall be reimbursed and indemnified out
of the Income and Capital Accounts for all such taxes and charges, for any tax
or charge imposed against the Trustee as trustee of the Trust Fund and for any
expenses, including counsel fees, interest, penalties and additions to tax,
which the Trustee may sustain or incur with respect to such taxes or charges.
(i) Notwithstanding any provision of the Indenture to the contrary,
except as set forth in Section 3.04(c), 7.02 and 8.01(f), no payment to the
Sponsor or to any principal underwriter (as defined in the Investment Company
Act of 1940) for the Trust Fund or to any affiliated person (as so defined) or
agent of the Sponsor or such underwriter shall be allowed by the Trustee as an
expense except for payment of such reasonable amounts as the Commission may
prescribe as compensation for performing bookkeeping and other administrative
services of a character normally performed by the Trustee.
(j) The Trustee in its individual or any other capacity may become an
owner or pledgee of, or be an underwriter or dealer in respect of, securities
of the same issue as, or other securities issued by the issuer (or an affiliate
of such issuer) of, any Securities at any time held as part of the Trust Fund
and may deal in any manner with the same or with the issuer (or an affiliate of
the issuer) with the rights and powers as if it were not the Trustee hereunder.
(k) The Trust may include (1) a letter or letters of credit for the
purchase of Securities or Contract Securities issued by the Trustee in its
individual capacity for the account of the Sponsor and/or (2) Securities issued
by the Trustee in its individual capacity and the Trustee may otherwise deal
with the Sponsor with the same rights and powers as if it were not the Trustee
hereunder.
Section 8.02. Books and Records. The Trustee shall keep proper books
of record and account of all the transactions under the Indenture at its office
including, as agent of the Sponsor, a record of the name and address of, and
the Units (indicating whether they are evidenced by Certificates or in
uncertificated form) issued by the Trust Fund and held or beneficially owned by
every Unitholder, and such books and records shall be open to inspection by any
Unitholder at reasonable times during business hours of the Trustee, except as
they may pertain to another holder's account.
Section 8.03. Reports to Securities and Exchange Commission and
Others. The Trustee shall make such annual or other reports, make such
elections and file such tax returns as the Sponsor directs or as may from time
to time be required under any applicable state or Federal statute or rule or
regulation thereunder, and in particular, if the Trust Fund has elected to be
taxed as a Regulated
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Investment Company, for the continuing qualification of the Trust Fund as a
Regulated Investment Company under the Code. In the case of a Regulated
Investment Company, the Trust's taxable year shall be set forth in the Trust
Indenture. Nothing contained herein shall obligate the Trustee to maintain the
registration of the Units or Trust on a current basis.
Section 8.04. Indenture and List of Securities on File. The Trustee
shall keep a certified copy or duplicate original of the Indenture on file at
its office available for inspection by any Unitholder at reasonable times
during its usual business hours, and the Trustee shall keep and so make
available for inspection a current list of the Securities.
Section 8.05. Compensation of Trustee. (a) The Trustee shall receive
at the times set forth in Section 3.04 as compensation for performing the
usual, ordinary, normal and recurring services under the Indenture during the
preceding month an amount equal to the amount per month specified in the Trust
Indenture per Unit outstanding at any time during such month. The computation
of such compensation shall be made on the basis of the largest number of Units
outstanding at any time during such month; such rate may be increased by the
Trustee from time to time, without the consent or approval of any Unitholder or
the Sponsor by amounts not exceeding the total of the proportionate increase,
during the period from the date of such Trust Indenture to the date of any such
increase, in consumer prices as published either under the classification "All
Services Less Rent" in the Consumer Price Index published by the United States
Department of Labor or, if such Index is no longer published, a similar index
as determined by the Trustee and the Sponsor.
(b) The Trustee shall also receive, at the times set forth in Section
3.04, reimbursement for any and all expenses and disbursements incurred
hereunder, including any expenses incurred as Distribution Agent and including
legal, evaluating and auditing expenses and additional compensation for any
extraordinary services performed hereunder, which extraordinary services shall
include but not be limited to all costs and expenses incurred by the Trustee in
making any annual or other reports or filing tax returns pursuant to Section
8.03; provided, however, that the amount of any such charge which has not been
finally determined as of any Distribution Date may be estimated and any
necessary adjustments shall be made on the succeeding Distribution Date.
(c) The Trustee shall be indemnified from the Trust Fund and held
harmless against any loss, liability or expense incurred without gross
negligence, bad faith or willful misconduct on the part of such Trustee arising
out of or in connection with the acceptance or administration of this Trust, or
acting as Distribution Agent hereunder including the costs and expenses of
defending itself against any claim or liability in the premises.
(d) The Trustee's normal and extraordinary compensation and
reimbursement of the above-mentioned expenses and losses shall be charged by
the Trustee against the Income and Capital Accounts in accordance with Section
3.04. If the balances in the Income and Capital Accounts shall be insufficient
to provide for amounts payable pursuant to this Section 8.05, or if the Trustee
determines that amounts previously advanced by it pursuant to the terms hereof
are uncollectible or
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not otherwise recoverable under Section 3.04, the Trustee shall have the power
to sell Securities in the manner provided in Section 5.02 hereof. The Trustee
shall not be liable or responsible in any way for depreciation or loss incurred
by reason of any sale of Securities made pursuant to this Section 8.05. Any
moneys payable to the Trustee shall be secured by a prior lien on the Trust
Fund.
Section 8.06. Resignation, Discharge or Removal of Trustee; Successor.
(a) The Trustee may resign and be discharged of the Trust created by the
Indenture by executing an instrument in writing resigning as such Trustee,
filing the same with the Sponsor, not less than sixty calendar days before the
date specified in such instrument when, subject to Section 8.06(c), such
resignation is to take effect. Upon receiving such notice of resignation, the
Sponsor shall use its best efforts promptly to appoint a successor Trustee
(which may, in the case of a removed co-Trustee, be one or more of the
remaining co-Trustees) in the manner and meeting the qualifications hereinafter
provided, by written instrument or instruments delivered to such resigning
Trustee and the successor Trustee. Notice of such appointment of a successor
Trustee shall be mailed promptly after acceptance of such appointment by the
successor Trustee to each Unitholder then of record. In case at any time the
Trustee shall not meet the requirements set forth in Section 8.07 hereof, or
shall become incapable of acting, or if a court having jurisdiction in the
premises shall enter a decree or order for relief in respect of the Trustee in
an involuntary case, or the Trustee shall commence a voluntary case, under any
applicable bankruptcy, insolvency, or other similar law now or hereafter in
effect, or any receiver, liquidator, assignee, custodian, trustee, sequestrator
(or similar official) for the Trustee or for any substantial part of its
property shall be appointed or the Trustee shall make any general assignment
for the benefit of creditors or shall generally fail to pay its debts as they
become due, or if for any other reason the Sponsor shall determine in good
faith that the replacement of the Trustee is in the best interests of the
Unitholders, the Sponsor may remove the Trustee and appoint a successor Trustee
(which may, in the case of a removed co-Trustee, be one or more of the
remaining co-Trustees) by written instrument or instruments delivered to the
Trustee so removed and the successor Trustee provided that a notice of such
removal and appointment of a successor Trustee shall be mailed by the successor
Trustee promptly after acceptance of such appointment to each Unitholder then
of record. The Unitholders of 51% of the Units may remove the Trustee at any
time by written instrument or instruments delivered to the Trustee and Sponsor;
the Sponsor shall thereupon use its best efforts to appoint a successor Trustee
(which may, in the case of a removed co-Trustee, be one or more of the
remaining co-Trustees) in the manner hereinabove provided. If there shall be
two or more co-Trustees hereunder, and any co-Trustee shall resign or be
removed in accordance with this Section 8.06(a), the Sponsor may remove any or
all of the remaining co- Trustees and appoint a successor Trustee or two or
more successor co-Trustees in the manner hereinabove provided.
(b) In case at any time the Trustee shall resign and no successor
Trustee shall have been appointed within thirty (30) calendar days after notice
of resignation has been received by the Sponsor, the retiring Trustee may
forthwith apply to a court of competent jurisdiction for the appointment of a
successor Trustee. Such court may thereupon, after such notice, if any, as it
may deem proper and prescribe, appoint a successor Trustee.
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(c) Any successor Trustee appointed hereunder shall execute and
acknowledge to the Sponsor and the retiring Trustee an instrument accepting
such appointment hereunder and such successor Trustee without any further act,
deed or conveyance shall become vested with all the rights, powers, duties and
obligations of its predecessor hereunder with like effect as if it were
originally named a Trustee herein and shall be bound by all the terms and
conditions of the Indenture. Upon the request of such successor Trustee, the
retiring Trustee shall, upon payment of all amounts due the retiring Trustee,
execute and deliver an instrument acknowledged by it transferring to such
successor Trustee all the rights and powers of the retiring Trustee; and the
retiring Trustee shall transfer, deliver and pay over to the successor Trustee
all Securities and moneys at the time held by it hereunder, if any, together
with all necessary instruments of transfer and assignment of other documents
properly executed as necessary to effect such transfer and such other records
or copies thereof maintained by the retiring Trustee in the administration
hereof as may be requested by the successor Trustee and shall there upon be
discharged from all duties and responsibilities under the Indenture. Any
resignation or removal of a Trustee and appointment of a successor Trustee
pursuant to this Section 8.06 shall become effective upon such acceptance of
appointment by the successor Trustee.
(d) Any corporation into which a Trustee hereunder may be merged or
with which it may be consolidated, or any corporation resulting from any merger
or consolidation to which such Trustee hereunder shall be a party, shall be the
successor Trustee under the Indenture without the execution or filing of any
paper, instrument or further act to be done on the part of the parties hereto,
anything herein, or in any agreement relating to such merger or consolidation,
by which any such Trustee may seek to retain certain powers, rights and
privileges theretofore obtaining for any period of time following such merger
or consolidation, to the contrary notwithstanding.
(e) In any circumstance in which the Sponsor may appoint a successor
Trustee pursuant to Section 8.06(a), the Sponsor may alternatively, at its
option, in the manner provided in Section 8.06(a) for the appointment of a
successor Trustee, appoint two or more successor co-Trustees. Upon execution
and acknowledgment by each successor co-Trustee of an instrument accepting such
appointment in the manner set forth in Section 8.06(c), without any further
act, deed or conveyance, such successor co-Trustee shall become vested with all
the rights, powers, duties and obligations of the predecessor Trustee hereunder
with like effect as if originally named a Trustee herein and shall be bound by
all the terms and conditions of the Indenture. The word "Trustee" as used in
the Indenture shall be deemed to include any and all co-Trustees appointed
pursuant hereto. Notwithstanding any provision hereof (including without
limitation Section 8.01(e)), the obligations of the co-Trustees hereunder shall
be joint and several and the co-Trustees shall be jointly liable for the acts
of one another in connection with the performance of their duties hereunder.
Section 8.07. Qualification of Trustee. The Trustee and any successor
Trustee shall be a banking association or corporation organized and doing
business under the laws of the United States, or any state thereof, having at
all times an aggregate capital, surplus, and undivided profits of not less than
$5,000,000.00.
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ARTICLE IX
Termination
Section 9.01. Procedure Upon Termination. (a) The Indenture and the
Trust created hereby shall terminate upon the Mandatory Termination Date set
forth in the Trust Indenture or upon the maturity, sale or other disposition as
the case may be of the last Security held hereunder unless sooner terminated as
hereinbefore specified and may be terminated at any time by written instrument
executed by the Sponsor and consented to (as provided in Section 10.01) by
Unitholders owning 51% of the Units then outstanding under the Indenture, or if
the value of the Trust Fund is less than the Discretionary Liquidation Amount
specified in the Trust Indenture.
(b) On the date set forth in the Trust Indenture prior to the
Mandatory Termination Date, the Trustee shall begin to sell the Securities held
in the Trust pursuant to instructions from the Sponsor which may direct that
Securities having the greatest amount of capital appreciation will be sold
first and in a manner to effectuate orderly sales and minimal market impact. In
the event that the Sponsor does not so direct, Securities will be sold on a pro
rata basis.
(c) Written notice of any termination shall be given by the Trustee to
each Unitholder specifying the time or times at which the Certificateholders
may surrender their Certificates for cancellation and the date determined by
the Trustee upon which the transfer books of the Trustee, maintained pursuant
to Section 6.01, shall be closed. Within a reasonable period of time after such
termination the Trustee shall, subject to any applicable provisions of law,
sell all of the Securities not already sold then held, if any, and shall:
(1) deduct from the Income Account or, to the extent that
funds are not available in such account, from the Capital Account, and
pay to itself individually an amount equal to the sum of (x) its
accrued compensation for its ordinary services, (y) any compensation
due to it for its extraordinary services and (z) any other expenses,
disbursements and unreimbursed advances as provided herein;
(2) deduct from the Income Account or, to the extent that
funds are not available in such account, from the Capital Account, an
amount equal to the unpaid fees and expenses of the Sponsor, if any,
including registration charges, expenses of registering the Trust or
Trust Units under various state laws as required, printing costs,
attorneys' fees, auditing costs and other miscellaneous out-of-pocket
expenses, as certified by the Sponsor, incurred in keeping the
registration of the Units and the Trust on a current basis pursuant to
Section 10.03, provided, however, that no portion of such amount shall
be deducted or paid unless the payment thereof from the Trust is at
that time lawful;
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(3) deduct from the Income Account or, to the extent that
funds are not available from such account, from the Capital Account
any amounts which it, in its sole discretion, shall deem requisite to
be deposited in the Reserve Account to provide for any applicable
taxes or other governmental charges that may be payable out of the
Trust Fund;
(4) distribute to each holder of Units in uncertificated
form, and to each holder of Units evidenced by Certificates upon
surrender for cancellation of his Certificate or Certificates, if
applicable, such holder's interest in the balances of the Income and
Capital Accounts, and, on the conditions set forth in Section 3.03
hereof, the Reserve Account; and
(5) together with such distribution to each Unitholder as
provided for in paragraph (iv), furnish to each such Unitholder a
final statement as of the date of the computation of the amount
distributable to Unitholders.
Section 9.02. Notice to Holders of Units Evidenced by Certificates. In
the event that all of the Certificateholders shall not surrender their
Certificates for cancellation within six months after the time specified in the
above-mentioned written notice, the Trustee shall give a second written notice
to the remaining Certificateholders to surrender their Certificates for
cancellation and receive the liquidating distribution with respect thereto. If
within one year after the second notice all the Certificates shall not have
been surrendered for cancellation, the Trustee may take appropriate steps, or
may appoint an agent to take appropriate steps, to contact the remaining
Certificateholders concerning surrender of their Certificates and the cost
thereof shall be paid out of the moneys and other assets which remain in trust
hereunder.
Section 9.03. Moneys to Be Held in Trust Without Interest. The Trustee
shall be under no liability with respect to moneys in the Income, Capital and
Reserve Accounts upon termination, except to hold the same in trust without
interest. If permitted by applicable Federal securities laws and regulations,
de minimis balances remaining after the distribution provided in Section
9.01(d) representing the excess of funds retained for estimated expenses
payable after the termination over the expenses actually paid may be applied to
any overdraft in other trust funds sponsored by the Sponsor arising from a
similar cause.
Section 9.04. Dissolution of Sponsor Not to Terminate. The dissolution
of the Sponsor, or any Sponsors, if there are more than one, shall not operate
to terminate the Indenture insofar as the duties and obligations of the Trustee
are concerned.
51
<PAGE>
ARTICLE X
Miscellaneous Provisions
Section 10.01. Amendment and Waiver. (a) The Indenture may be amended
from time to time by the Sponsor and the Trustee without the consent of any of
the Unitholders (1) to cure any ambiguity or to correct or supplement any
provision contained herein which may be defective or inconsistent with any
other provision contained herein; (2) to change any provision hereof as may be
required by the Commission or any successor governmental agency exercising
similar authority; (3) to change any provision hereof as may be set forth in
the Commission's response to the no-action letter request pursuant to Section
3.15(c) the Commission's exemption order pursuant to Section 5.03 (g), (4) to
add or change any provision as may be necessary or advisable for the continuing
qualification of the Trust Fund as a grantor trust or as a Regulated Investment
Company under the Code where applicable; or (5) to make such other provisions
in regard to matters or questions arising hereunder as shall not materially
adversely affect the interests of the Unitholders.
(b) The Indenture may also be amended from time to time by the Sponsor
and the Trustee (or the performance of any of the provisions of the Indenture
may be waived) with the consent of Unitholders owning 51% of the Units at the
time outstanding under the Indenture for the purpose of adding any provisions
to or changing in any manner or eliminating any of the provisions of the
Indenture or of modifying in any manner the rights of the Unitholders;
provided, however, that no such amendment or waiver shall (1) reduce a
Unitholder's interest in the Trust Fund without the consent of such Unitholder
or (2) reduce the aforesaid percentage of Units, the holders of which are
required to consent to any such amendment, without the consent of all the
Unitholders then outstanding.
(c) The Trustee shall furnish written notification of the substance of
any material amendment promptly after the execution thereof to each Unitholder
then of record. Notice of other amendments shall be included in the annual
report described in Section 3.05.
(d) It shall not be necessary for the consent of Unitholders under
this Section 10.01 or under Section 9.01 to approve the particular form of any
proposed amendment, but it shall be sufficient if such consent shall approve
the substance thereof. The manner of obtaining such consents and of evidencing
the authorization of the execution thereof by Unitholders shall be subject to
such reasonable regulations as the Trustee may prescribe.
Section 10.02. Initial Organizational and Offering Costs. (a) Subject
to reimbursement as hereinafter provided, the initial costs incurred in
connection with the organization and establishment of the Trust and the sale of
Units (the "Initial Costs") shall be paid by the Sponsor, provided, however,
that the liability on the part of the Sponsor under this Section shall not
include any fees or other expenses incurred in connection with the
administration of the Trust subsequent to the Initial Date of Deposit. The
Trustee shall pay to the Sponsor the Sponsor's reimbursable Initial Costs in
52
<PAGE>
the manner set forth in subsections 10.02(d), and 10.02(e) below; such
reimbursement of Initial Costs shall be for the account of the Unitholders of
record at the conclusion of the initial offering period and shall not be
reflected in the computation of Unit Value prior thereto.
(b) The Initial Costs paid by the Sponsor which are reimbursable to
the Sponsor in accordance with this Section include, but are not limited to (1)
the costs of the initial preparation, typesetting and execution of the
registration statement, prospectuses (including preliminary prospectuses), the
Indenture and other legal documents relating to the establishment of the Trust,
and the costs of submitting such documents in electronic format to the
Commission, (2) Commission and state Blue Sky registration fees for the initial
registration of Trust Units, (3) the cost of the initial audit of the Trust,
(4) the legal costs incurred by the Sponsor and the Trustee related to any and
all of the foregoing, and (5) other out-of-pocket expenses related to any and
all of the foregoing provided, however, that if so stated in the Prospectus for
a Trust Fund, such Initial Costs shall not exceed the amount, if any, of the
estimated costs per Unit set forth in the Prospectus.
(c) Costs and expenses incurred in the marketing and selling of Trust
Units, shall be paid for by the Sponsor but shall not be reimbursable to the
Sponsor. Such costs and expenses include but are not limited to (1) those
incurred in the printing of prospectuses (including preliminary prospectuses),
(2) those incurred in the preparation and printing of brochures and other
advertising or marketing materials, including any legal costs incurred in the
review thereof, and (3) any other selling or promotional costs or expenses.
(d) Promptly after the conclusion of the initial public offering
period, upon written certification to the Trustee, the Sponsor shall receive
reimbursement for any of the Initial Costs set forth in subsection (b), in the
manner set forth in subsection 10.02(e) below.
(e) Upon receipt of written certification from the Sponsor as set
forth in subsection 10.02(d) and receipt of directions to sell those Securities
selected by the Sponsor, the Trustee shall sell those Securities having a
value, as determined under Section 4.01 as of the date of such sale sufficient
for reimbursement of Initial Costs and shall distribute the proceeds of the
sale to or upon the order of the Sponsor, but only to the extent of the Initial
Costs as set forth in the Sponsor's certification delivered in accordance with
paragraph (d) above.
Section 10.03. Registration (Current) of Units and Trust Fund. If the
Sponsor shall maintain a market in the Units, the Sponsor shall, if required by
applicable law, keep the registration of the Units and the Trust Fund on a
current basis with the Commission and under the applicable securities laws of
such states as the Sponsor may select. Registration charges, Blue Sky fees,
printing costs, attorney's fees, and other miscellaneous out-of-pocket expenses
incurred pursuant to this Section 10.03 and related to all Units shall be borne
by the Trust only to the extent and in the manner provided for by Section
3.04(d). To the extent that such expenses cannot be borne by the Trust, they
shall be borne by the Sponsor. The Sponsor shall be under no obligation to
maintain a market in the Units and, if it shall maintain such a market, it may
cease to do so immediately at any time and from
53
<PAGE>
time to time and without notice. The Sponsor shall do all things that may be
necessary or required to comply with this provision and the Trustee shall not
incur any liability or be under any obligation in connection therewith.
Section 10.04. Certain Matters Relating to Unitholders. (a) The death
or incapacity of any Unitholder shall not operate to terminate the Indenture or
the Trust Fund, nor entitle his legal representatives or heirs to claim an
accounting or to take any action or proceeding in any court for a partition or
winding up of the Trust Fund, nor otherwise affect the rights, obligations and
liabilities of the parties hereto or any of them. Each Unitholder expressly
waives any right he may have under any rule of law, or the provisions of any
statute, or otherwise, to require the Trustee at any time to account, in any
manner other than as expressly provided in the Indenture, in respect of the
Securities or moneys from time to time received, held and applied by the
Trustee hereunder.
(b) No Unitholder shall have any right to vote except as provided in
Sections 9.01 and 10.01 or in any manner otherwise to control the operation and
management of the Trust Fund, or the obligations of the parties hereto, nor
shall anything herein set forth or contained in the terms of the Certificate be
construed so as to constitute the Unitholders from time to time as partners or
members of an association; nor shall any Unitholder ever be under any liability
to any third person by reason of any action taken by the parties to the
Indenture, or for any other cause whatsoever.
Section 10.05. New York Law to Govern. The Indenture is delivered in
the State of New York, and all laws or rules of construction of such State
shall govern the rights of the parties hereto and the Unitholders and the
interpretation of the provisions hereof. The Indenture shall be deemed
effective when it is executed by the Sponsor and the Trustee.
Section 10.06. Notices. Any notice, demand, direction or instruction
to be given to the Sponsor hereunder shall be in writing and shall be duly
given if mailed or delivered to the Sponsor, to the attention of Mr. Robert E.
Holley, Unit Trust Department, PaineWebber Incorporated, 1200 Harbor Boulevard,
Weehawken, New Jersey 07087, or at such other address as shall be specified by
the Sponsor to the other parties hereto in writing. Any notice, demand,
direction or instruction to be given to the Trustee shall be in writing and
shall be duly given if mailed or delivered to the Trustee at its address
specified in the Trust Indenture, or such other address as shall be specified
to the other parties hereto by the Trustee in writing. Any notice to be given
to a Unitholder shall be duly given if mailed or delivered to each Unitholder
at the address of such holder appearing on the registration books of the
Trustee.
Section 10.07. Severability. If any one or more of the covenants,
agreements, provisions or terms of the Indenture shall be for any reason
whatsoever held invalid, then such covenants, agreements, provisions or terms
shall be deemed severable from the remaining covenants, agreements, provisions
or terms of the Indenture and shall in no way affect the validity or
enforceability of the other provisions of the Indenture or of the Certificates
or the rights of the holders thereof or of Unitholders.
54
<PAGE>
Section 10.08. Separate and Distinct Series. Each Series of The
PaineWebber Equity Trust to which these Standard Terms shall be applicable
shall, for all financial and administrative purposes, be considered separate
and distinct from every other Series, and the assets of one Series shall not be
commingled with the assets of another Series nor shall the expenses of any one
Series be charged against any other Series.
Section 10.09. Counterparts. These Standard Terms may be executed in
counterparts, and by each party on separate counterparts, each of which as so
executed and delivered shall be deemed an original, but all of which together
shall constitute one and the same instrument, and it shall not be necessary in
making proof of these Standard Terms as to any party hereto to produce or
account for more than one such counterpart executed and delivered by such
party.
55
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused these Standard
Terms and Conditions of Trust dated as of July 1, 1998 to be duly executed.
PAINEWEBBER INCORPORATED
Sponsor
By:
--------------------------------
Name: Robert E. Holley
Title: Vice President
SEAL
ATTEST:
- -----------------------------------
Assistant Secretary
INVESTORS BANK & TRUST COMPANY
By:
--------------------------------
Name:
Title:
SEAL
ATTEST:
- -----------------------------------
Title:
Effective Date: _________, 1998
56
<PAGE>
STATE OF NEW YORK )
: SS.:
COUNTY OF NEW YORK )
On this _____ day of ________, 1998 before me personally appeared
Robert E. Holley, to me known, who being by me duly sworn, said that he is a
Senior Vice President of PaineWebber Incorporated, one of the corporations
described in and which executed the foregoing instrument; that he knows the
seal of said corporation; that the seal affixed to said instrument is such
corporate seal; that it was so affixed by authority of the Board of Directors
of said corporation, and that he signed his name thereto by like authority.
By ___________________________________
Notary Public
57
<PAGE>
COMMONWEALTH OF MASSACHUSETTS )
: SS.:
COUNTY OF SUFFOLK )
On this ___ day of _____, 1998, before me personally appeared
_____________ and _________________ to me known, who being by me duly sworn,
said that each is a ____________ of Investors Bank & Trust Company one of the
corporations described in and which executed the foregoing instrument; that
each knows the seal of said corporation; that the seal affixed to said
instrument is such corporate seal; that it was so affixed by authority of the
Board of Directors of said corporation and that each signed his/her name
thereto by like authority.
_________________________________
Notary Public
[NOTARY]
[SEAL]
My Commission Expires: ______________
58
<PAGE>
Exhibit 99.A2
THE PAINEWEBBER EQUITY TRUST,
ABCs TRUST SERIES 1
TRUST INDENTURE AND AGREEMENT
Dated as of July 29, 1998
Incorporating
Standard Terms and Conditions of Trust
Dated as of July 1, 1998,
Between
PAINEWEBBER INCORPORATED,
as Depositor
and
INVESTORS BANK & TRUST COMPANY,
as Trustee
<PAGE>
THIS TRUST INDENTURE AND AGREEMENT dated as of July 29, 1998 between
PaineWebber Incorporated, as Depositor, and Investors Bank & Trust Company, as
Trustee, which sets forth certain of its provisions in full and incorporates
other of its provisions by reference to a document entitled "Standard Terms and
Conditions of Trust" dated as of July 1, 1998, among the parties hereto
(hereinafter called the "Standard Terms"), such provisions as are set forth in
full and such provisions as are incorporated by reference constituting a single
instrument.
W I T N E S S E T H T H A T :
WHEREAS, the parties hereto have heretofore or concurrently herewith
entered into the Standard Terms in order to facilitate creation of a series of
securities issued under a unit investment trust pursuant to the provisions of
the Investment Company Act of 1940, as amended and the laws of the State of New
York, each of which series will be composed of redeemable securities
representing undivided interests in a trust fund composed of publicly traded
common or preferred stocks issued by domestic companies, and, in certain cases,
interest-bearing United States Treasury Obligations ("Treasury Obligations");
and
WHEREAS, the parties now desire to create the First ABCs Trust of the
aforesaid series;
NOW THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, the Depositor and the Trustee agrees as follows:
Section 1. Incorporation of Standard Terms and Conditions of Trust.
Subject to the provisions of Section 2 of this Trust Indenture and Agreement
set forth below, all of the provisions of the Standard Terms incorporated by
reference in their entirety and shall be deemed to be a part of this instrument
as fully to all intents and purposes as though said provisions had been set
forth in full in this instrument. Unless otherwise stated, section references
shall refer to sections in the Standard Terms.
Section 2. Specific Terms of this Series. The following terms are
hereby agreed to for this series of The PaineWebber Equity Trust, which series
shall be known and designated as "The PaineWebber Equity Trust, ABCs Trust
Series 1".
A. (1) The aggregate number of Units outstanding on the date hereof
for this Series is 100,000.
(2) The initial fractional undivided interest represented by each
Unit of this series shall be 1/100,000th of the Trust Fund. A receipt
evidencing the ownership of this total number of Units outstanding on the date
hereof is being delivered by the Trustee to the Depositor.
(3) The Securities deposited into the Trust on the Initial Date of
Deposit are set forth on Schedule A hereto.
<PAGE>
B. The term "Record Date" shall mean September 10, 1998 and quarterly
thereafter; provided, however, that with respect to a distribution required by
Section 2.02(b), the Record Date shall be the last business day of the month
during which the contract to purchase the Security fails.
"Record Date" shall also include such date or dates determined by the
Sponsor and the Trustee as necessary or desirable and in the best interest of
the Unitholders for federal or state tax purposes, or for other purposes
(hereinafter a "Special Record Date") which date may replace a regularly
scheduled Record Date if such regularly scheduled Record Date is within 30 days
of a Special Record Date.
C. The term "Distribution Date" shall mean the 15th day following each
Record Date, commencing September 25, 1998, and quarterly thereafter with
respect to Income Account Distributions (the "Income Account Distribution
Dates") and shall mean December 25, 1998 with respect to Capital Account
Distributions (the "Capital Account Distribution Dates"), except that the
Trustee may declare a Record Date of December 31 in any year for a Distribution
Date of January 25 of the following year, if required for compliance with the
rules and regulations governing regulated investment companies. With respect to
a distribution required by Section 2.02(b), the Distribution Date shall be the
fifteenth (15) day after the Record Date with respect thereto.
In the event a Special Record Date is declared, "Distribution Date"
shall also include such date as is determined by the Sponsor and the Trustee to
be the Distribution Date in respect of such Special Record Date.
D. The Discretionary Liquidation Amount shall be forty per centum
(40%) of the aggregate market value of the Securities initially deposited on
the date hereof and subsequently deposited pursuant to any Supplemental
Indenture pursuant to Section 2.02.
E. The Mandatory Termination Date shall be January 28, 2000. Unless
advised to the contrary by the Sponsor, the date on which the Trustee shall
begin to sell equity Securities in accordance with Section 9.01 shall be
January 8, 2000.
F. The Trustee's annual compensation as referred to in Section 8.05
shall be $.0170 per Unit computed monthly based on the largest number of Units
outstanding during the preceding month.
G. The Sponsor's annual compensation pursuant to Section 7.02 shall be
computed as $.0035 per Unit, based on the largest number of Units outstanding
in a calendar year.
H. The balance in the Capital Account below which no distribution need
be made, as referred to in Section 3.04, is $.05 per Unit outstanding.
<PAGE>
I. The Trust hereby elects to qualify as a "grantor trust" under the
Internal Revenue Code of 1986, as amended. The taxable year for this Trust
shall end on December 31, .
J. The Trust hereby elects to make available a Reinvestment Plan to
Unitholders.
K. Units of this Trust shall not be held in certificated form.
L. An annual report for this Trust shall be provided to Unitholders
for calendar year 1998 and for the period ending July 29, 1999.
M. For purposes of this Trust, the In-Kind Distribution Amount shall
be $500,000, and the Sponsor shall direct whether an In-Kind Distribution shall
be made.
N. The Units of this Trust, shall be subject to a Deferred Sales
Charge in an amount, and to be paid in the manner as set forth in the
Prospectus.
O. The Exchange Notification Dates shall be July 29, 1999 and January
27, 2000.
P. The Special Redemption Date shall be July 30, 1999 and January 28,
2000.
Q. The Special Liquidation Period shall be July 30, 1999 and January
28, 2000.
R. For purposes of this Trust, the Trustee shall act as Distribution
Agent.
S. The Sponsor's Initial Costs are estimated to be $.009 per Unit.
T. The Trust may receive Supplemental Deposits and issue Additional
Units in accordance with Section 202(c).
U. The Trustee's address for notices under Section 10.06 is:
Hencock Towers
200 Clarendon Street
Boston, MA 02116
<PAGE>
IN WITNESS WHEREOF, PaineWebber Incorporated has caused this Trust
Indenture and Agreement to be executed by one of its Senior Vice Presidents and
its corporate seal to be hereto affixed and attested by one of its Assistant
Secretaries, and Investors Bank & Trust Company has caused this Trust Indenture
to be executed by one of its Authorized Signatories and its corporate seals to
be hereto affixed and attested by one of its Authorized Signatories, all as of
the date first above written.
PAINEWEBBER INCORPORATED
as Depositor and Sponsor
SEAL By
----------------------------
Senior Vice President
Attest:
- ---------------------------
Secretary
<PAGE>
STATE OF NEW YORK )
:ss.:
COUNTY OF NEW YORK )
On this 29th day of July, 1998 before me personally appeared Robert E.
Holley, to me known, who being by me duly sworn, said that he is a Senior Vice
President of PaineWebber Incorporated, one of the corporations described in and
which executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by authority of the Board of Directors of said
corporation, and that he signed his name thereto by like authority.
-----------------------
Notary Public
<PAGE>
SCHEDULE A TO TRUST INDENTURE
THE PAINEWEBBER EQUITY TRUST,
ABCS TRUST SERIES 1
SCHEDULE OF INVESTMENTS
AS OF INITIAL DATE OF DEPOSIT, JULY 29, 1998
COMMON STOCKS (1)
<TABLE>
<CAPTION>
PRIMARY INDUSTRY SOURCE AND NUMBER OF COST OF SECURITIES
NAME OF ISSUER SHARES TO TRUST(2)(3)
- ---------------------------------------------- ----------- ------------------
<S> <C> <C>
Auto/Truck Parts & Equipment (5.85%)
Lear Corporation* ............................ 580 $29,299.00
LucasVarity plc+ ............................. 790 28,637.50
Beverages (2.93%)
PepsiCo, Inc. ................................ 730 28,971.88
Building-Maintenance & Services (2.94%)
Ecolab Inc. .................................. 920 29,095.00
Cable TV (2.96%)
Comcast Corporation .......................... 680 29,282.50
Cosmetics & Toiletries (2.95%)
Avon Products, Inc. .......................... 340 29,218.75
Electric (2.92%)
Consolidated Edison, Inc. .................... 670 28,935.63
Electronics/Semi-Conductor (5.87%)
Rockwell International Corporation ........... 720 29,070.00
Texas Instruments Incorporated ............... 490 29,001.88
Instruments-Controls (2.95%)
Parker-Hannifin Corporation .................. 870 29,199.38
Insurance (5.91%)
Hartford Life, Inc. .......................... 380 29,141.25
EXEL Limited ................................. 520 29,347.50
Internet Software (3.00%)
America Online, Inc.* ........................ 260 29,672.50
Medical (8.83%)
Medtronic, Inc. .............................. 460 28,893.75
Warner-Lambert Company ....................... 370 29,322.50
Wellpoint Health Networks Inc.* .............. 410 29,161.25
Multimedia (2.93%)
Time Warner Inc. ............................. 320 29,020.00
National Commercial Banks (2.90%)
NationsBank Corporation ...................... 360 28,755.00
Oil/Gas (11.74%)
Consolidated Natural Gas Company ............. 570 29,141.25
Ocean Energy, Inc.* .......................... 2,060 29,097.50
Sun Company, Inc. ............................ 820 29,007.50
Unocal Corporation ........................... 880 29,150.00
Paper Products (2.99%)
Fort James Corporation ....................... 830 29,620.63
<PAGE>
THE PAINEWEBBER EQUITY TRUST,
ABCS TRUST SERIES 1
SCHEDULE OF INVESTMENTS
AS OF INITIAL DATE OF DEPOSIT, JULY 29, 1998 (CONTINUED)
COMMON STOCKS (1)
PRIMARY INDUSTRY SOURCE AND NUMBER OF COST OF SECURITIES
NAME OF ISSUER SHARES TO TRUST(2)(3)
- ---------------------------------------------- ----------- ------------------
Publishing-Newspapers (2.92%)
The Times Mirror Company ..................... 470 $ 28,875.63
Railroad Transportation (2.93%)
Wisconsin Central Transportation Corporation* 1,330 29,010.63
REITS-Hotel/Restaurant (2.94%)
Patriot American Hospitality, Inc. ........... 1,500 29,062.50
REITS-Mortgage (2.91%)
Indymac Mortgage Holdings, Inc. .............. 1,250 28,828.13
Retail-Apparel/Shoe (5.89%)
Nordstrom, Inc. .............................. 900 29,137.50
The Men's Wearhouse, Inc.* ................... 940 29,140.00
Retail-Food (2.96)
The Kroger Co.* .............................. 610 29,280.00
Retail-Office Supplies (2.93%)
Staples, Inc.* ............................... 900 29,025.00
Steel Producers (2.94%)
Pohang Iron & Steel Company Ltd.+ ............ 2,360 29,057.50
Telecommunications (5.91%)
Nextel Communications, Inc.* ................. 1,160 29,290.00
WorldCom, Inc.* .............................. 560 29,259.96
------------------
TOTAL INVESTMENTS ........................... $990,009.00
==================
</TABLE>
- ------------
(1) All Securities are represented entirely by contracts to purchase
Securities.
(2) Valuation of the Securities by the Trustee was made as described in
"Valuation" as of the close of business on the business day prior to
the Initial Date of Deposit.
(3) The loss to the Sponsor on the Initial Date of Deposit is $1,018.
* Non-income producing security.
+ These shares are U.S. dollar denominated and pay dividends in U.S.
dollars but are subject to investment risks generally facing common
stocks of foreign issuers. (See "Risk Factors and Special
Considerations.")
<PAGE>
Exhibit 99.2
PaineWebber Inc.
1200 Harbor Boulevard
Weehawken, New Jersey 07087 July 29, 1998
Investors Bank & Trust Company
Hancock Towers
200 Clarendon Street
Boston, Massachusetts 02116
Re: PaineWebber Equity Trust,
ABCs Trust Series 1
-------------------
Ladies and Gentlemen:
We have served as counsel for PaineWebber Incorporated as sponsor and
depositor (the "Sponsor") of PaineWebber Equity Trust, ABCs Trust Series 1
(hereinafter referred to as the "Trust") in connection with the issuance by the
Trust of an initial 100,000 units of fractional undivided interest in the Trust
(hereinafter referred to as the "Units").
In this regard, we have examined executed originals or copies of the
following:
(a) The Restated Certificate of Incorporation, as amended,
and the By-Laws of the Sponsor, as amended, certified by the Secretary
of the Sponsor on the date hereof;
<PAGE>
(b) Resolutions of the Board of Directors of the Sponsor
adopted on December 3, 1971 relating to the Trust and the sale of the
Units, certified by the Secretary of the Sponsor on the date hereof;
(c) Resolutions of the Executive Committee of the Sponsor
adopted on September 24, 1984, certified by the Secretary of the
Sponsor on the date hereof;
(d) Powers of Attorney as set forth in the certificate of the
Secretary of the Sponsor dated the date hereof;
(e) The Registration Statement on Form S-6 (File
No. 333-55697) filed with the Securities and Exchange Commission (the
"Commission") in accordance with the Securities Act of 1933, as
amended, and the rules and regulations of the Commission promulgated
thereunder (collectively, the "1933 Act") and amendments thereto
including Amendment No. 3 ("Amendment No. 3") proposed to be filed on
July 29, 1998 (the "Registration Statement");
(f) The Notification of Registration of the Trust filed with
the Commission under the Investment Company Act of 1940, as amended
(collectively, the "1940 Act") on Form N-8A, as amended, (the "1940
Act Notification");
(g) The registration of the Trust filed with the Commission
under the 1940 Act on Form N-8B-2 (File No. 811-3722), as amended (the
"1940 Act Registration);
(h) The prospectus included in Amendment No. 3 (the
"Prospectus");
(i) The Standard Terms and Conditions of the Trust dated as
of July 1, 1998, between the Sponsor and Investors Bank & Trust
Company, (the "Trustee") (the "Standard Terms");
(j) The Trust Indenture dated as of July 29, 1998 between the
Sponsor and the Trustee (the "Trust Indenture" and, collectively with
the Standard Terms, the "Indenture and Agreement");
(k) The Closing Memorandum dated July 29, 1998, between the
Sponsor and the Trustee (the "Closing Memorandum");
(l) Officers Certificates required by the Closing Memorandum;
<PAGE>
(m) The form of certificate of ownership for units (the
"Certificate") to be issued under the Indenture and Agreement; and
(n) Such other pertinent records and documents as we have
deemed necessary.
With your permission, in such examination, we have assumed the
following: (a) the authenticity of original documents and the genuineness of
all signatures; (b) the conformity to the originals of all documents submitted
to us as copies; (c) the truth, accuracy, and completeness of the information,
representations, and warranties contained in the records, documents,
instruments and certificates we have reviewed; (d) except as specifically
covered in the opinions set forth below, the due authorization, execution, and
delivery on behalf of the respective parties thereto of documents referred to
herein and the legal, valid, and binding effect thereof on such parties; and
(e) the absence of any evidence extrinsic to the provisions of the written
agreement(s) between the parties that the parties intended a meaning contrary
to that expressed by those provisions. However, we have not examined the
securities deposited pursuant to the Indenture and Agreement (the "Securities")
nor the contracts for the Securities.
We express no opinion as to matters of law in jurisdictions other than
the laws of the State of New York (except "Blue Sky" laws) and the federal laws
of the United States, except to the extent necessary to render the opinion as
to the Sponsor and the Indenture and Agreement in paragraphs (i) and (iii)
below with respect to Delaware law. As you know we are not licensed to practice
law in the State of Delaware, and our opinion in paragraph (i) and (iii) as to
Delaware law is based solely on review of the official statutes of the State of
Delaware.
Based upon such examination, and having regard for legal
considerations which we deem relevant, we are of the opinion that:
(i) The Sponsor is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Delaware with full corporate
power to conduct its business as described in the Prospectus;
(ii) The Sponsor is duly qualified as a foreign corporation and is in
good standing as such within the State of New York;
(iii) The Indenture and Agreement has been duly authorized, executed
and delivered by the Sponsor and, assuming the due authorization, execution and
delivery by the Trustee, is a valid and binding agreement of the Sponsor,
enforceable against the Sponsor in accordance with its terms;
(iv) The Trust has been duly formed and is validly existing as an
investment trust under the laws of the State of New York and has been duly
registered under the Investment Company Act of 1940;
<PAGE>
(v) The terms and provisions of the Units conform in all material
respects to the description thereof contained in the Prospectus;
(vi) The consummation of the transactions contemplated under the
Indenture and Agreement and the fulfillment of the terms thereof will not be in
violation of the Sponsor's Restated Certificate of Incorporation, as amended,
or By-Laws, as amended and will not conflict with any applicable laws or
regulations applicable to the Sponsor in effect on the date hereof;
(vii) The Certificates to be issued by the Trust, when duly executed
by the Sponsor and the Trustee in accordance with the Indenture and Agreement,
upon delivery against payment therefor as described in the Registration
Statement and Prospectus will constitute fractional undivided interests in the
Trust enforceable against the Trust in accordance with their terms, will be
entitled to the benefits of the Indenture and Agreement and will be fully paid
and non-assessable; and
(viii) While the Registration Statement has not yet become effective
we have no reason to believe that such Registration Statement will not become
effective within 30 days after the date hereof.
In addition, we have participated in conferences with representatives
of the Sponsor, the Trustee, the Trust's accountants and others concerning the
Registration Statement and the Prospectus and have considered the matters
required to be stated therein and the statements contained therein, although we
have not independently verified the accuracy, completeness or fairness of such
statements. Based upon and subject to the foregoing, nothing has come to our
attention to cause us to believe that the Registration Statement, as of the
date hereof, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, or that the Prospectus, as of the date hereof, contained an
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading (it being understood that we have not been requested to and do not
make any comment in this paragraph with respect to the financial statements,
schedules and other financial and statistical information contained in the
Registration Statement or the Prospectus).
Our opinion that any document is valid, binding, or enforceable in
accordance with its terms is qualified as to:
(a) limitations imposed by bankruptcy, insolvency, reorganization,
arrangement, fraudulent conveyance, moratorium, or other laws relating to or
affecting the enforcement of creditors' rights generally;
<PAGE>
(b) rights to indemnification and contribution which may be limited by
applicable law or equitable principles; and
(c) general principles of equity, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name wherever it appears in the
Registration Statement and the Prospectus.
Very truly yours,
CARTER, LEDYARD & MILBURN
KHM:def
<PAGE>
Exhibit 99.C1
PaineWebber Incorporated
1200 Harbor Boulevard July 29, 1998
Weehawken, New Jersey 07087
Investors Bank & Trust Company
Hancock Towers
200 Clarendon Street
Boston, Massachusetts 02116
Ladies & Gentlemen:
As counsel for PaineWebber Incorporated (the "Depositor"), we have
examined an executed copy of the Trust Indenture and Agreement dated as of July
29, 1998 (the "Indenture") and Standard Terms and Conditions of Trust, dated as
of July 1, 1998 (the "Agreement"), both between the Depositor, and Investors
Bank & Trust Company, as Trustee. The Indenture established a trust called The
PaineWebber Equity Trust, ABCs Trust Series 1 (the "Trust") into which the
Depositor deposited certain stocks (the "Securities"), and moneys to be held by
the Trustee upon the terms and conditions set forth in the Indenture and
Agreement. Under the Indenture, units were issued on the Initial Date of
Deposit representing 100,000 units of fractional undivided interest in the
Trust (the "Units").
Based upon the foregoing and upon an examination of such other
documents and an investigation of such other pertinent records and documents
and matters of law as we have deemed necessary, we are of the opinion that,
under existing statutes and decisions:
<PAGE>
1. The Trust is not an association taxable as a corporation for
Federal income tax purposes. Under the Internal Revenue Code of 1986, as
amended (the "Code"), each Unitholder will be treated as the owner of a pro
rata portion of the Trust, and income of the Trust will be treated as income of
the Unitholder.
2. Each Unitholder will have a taxable event when the Trust disposes
of a Security (whether by sale, exchange or payment at maturity) or when the
Unitholder redeems or sells its Unit or redeems its Unit for cash. For purposes
of determining gain or loss, the total tax cost of each Unit to a Unitholder is
allocated among each of the Securities, in accordance with the proportion of
the Trust comprised by each Security, to determine the Unitholder's per Unit
tax cost for each Security.
3. The Trust is not an association taxable as a corporation for New
York State income tax purposes. Under New York State Law, each Unitholder will
be treated as the owner of a pro rata portion of the Trust, and the income of
the Trust will be treated as income of the Unitholders.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement (File No. 333-55697) 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.
Very truly yours,
CARTER, LEDYARD & MILBURN
KHM:def
<PAGE>
Exhibit 99.C2
CONSENT OF INDEPENDENT AUDITORS
We consent to the use in this Amendment to the Registration Statement of our
report dated July 29, 1998 relating to the Statement of Net Assets of The
PaineWebber Equity Trust, ABCs Trust Series 1, including the Schedule of
Investments, included herein, and to the reference made to us under the caption
"Independent Auditors" in the Prospectus.
ERNST & YOUNG LLP
July 29, 1998
New York, New York
