<PAGE>
File No: 333-79861
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-6
For Registration Under the Securities Act of 1933 of
Securities of Unit Investment Trusts Registered on Form N-8B-2
A. Exact name of Trust:
THE PAINEWEBBER EQUITY TRUST,
ABCs TRUST, SERIES 3
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, N.J. 07087
copy to:
CARTER LEDYARD & MILBURN
Attention: Kathleen H. Moriarty, Esq.
2 Wall Street,
New York, NY 10005
E. Title and amount of securities being registered:
An indefinite number of Units pursuant to Rule 24f-2
under the Investment Company Act of 1940.
F. Proposed maximum aggregate 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
The registrant hereby amends this Registration
Statement on such date or dates as may be necessary
to delay its effective date until the registrant
shall file a further amendment which specifically
states that this Registration Statement shall
thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until
the Registration Statement shall become effective on
such date as the Commission, acting pursuant to said
Section 8(a), may determine.
<PAGE>
THE PAINEWEBBER EQUITY TRUST,
ABCs TRUST, SERIES 3
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 ) Nature of Trust
6. Execution and termination of ) Nature of 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 ) Summary of Portfolio
Trust's Securities and Rights ) Rights of Certificate-
of Holders ) holders
- ----------
*Not applicable, answer negative or not required.
<PAGE>
(a) Type of Securities ) Creation of Trust
(Registered or Bearer) )
(b) Type of Securities ) Creation of Trust
(Cumulative or Distributive) )
(c) Rights of Holders as to ) Rights of Certificate-
Withdrawal or Redemption ) holders
) Redemption of Units by
) Trustee
) The Municipal Bond Trust
) Reinvestment Program
(d) Rights of Holders as to ) Secondary Market for
conversion, transfer, etc. ) Units, Exchange Option
(e) Rights of Trust issues ) *
periodic payment plan )
certificates )
(f) Voting rights as to Secu- ) Rights of Certificate-
rities, under the Indenture ) holders
(g) Notice to Holders as to )
change in )
(1) Assets of Trust ) Amendment of the Indenture
(2) Terms and Conditions ) Supervision of Trust
of Trust's Securities ) Investments
(3) Provisions of Trust ) Amendment of the Indenture
(4) Identity of Depositor ) Administration of the
and Trustee ) Trust
(h) Consent of Security Holders )
required to change )
(1) Composition of assets ) Amendment of the Indenture
of Trust
(2) Terms and conditions ) Amendment of the Indenture
of Trust's Securities )
(3) Provisions of Indenture ) Amendment of the Indenture
(4) Identity of Depositor ) Administration of the
and Trustee ) Trust
11. Type of securities comprising ) *
periodic payment certificates )
- ----------
*Not applicable, answer negative or not required.
<PAGE>
12. (a) Load, fees, expenses, etc. ) Public Offering Price of
) Units Expenses of the
) Trust
(b) Certain information regard- ) *
ing periodic payment )
certificates )
(c) Certain percentages ) *
(d) Certain other fees, etc. ) Expenses of the Trust
payable by holders )
(e) Certain profits receivable ) Public Offering Price of
by depositor, principal ) Units
underwriters, trustee or ) Public Offering of Units
affiliated persons )
(f) Ratio of annual charges ) *
to income )
13. Issuance of trust's securities ) Nature of the Trust
) Public Offering of Units
14. Receipt and handling of ) *
payments from purchasers )
15. Acquisition and disposition of ) Acquisition of Securities
underlying securities ) for the Trust Supervision
) of Trust Investments
16. Withdrawal or redemption ) Redemption of Units by
) Trustee
17. (a) Receipt and disposition of ) Distributions to Certifi-
income ) cateholders
(b) Reinvestment of )
distributions ) *
(c) Reserves or special fund ) Distributions to Certifi-
) cateholders
(d) Schedule of distribution ) *
18. Records, accounts and report ) Statements to Certificate-
) holders Administration of
) the Trust
- ----------
*Not applicable, answer negative or not required.
<PAGE>
19. Certain miscellaneous ) Administration of the
provisions of trust agreement ) Trust
20. Loans to security holders ) *
21. Limitations on liability ) Limitation of Liabilities
22. Bonding arrangements ) Included in Form N-8B-2
23. Other material provisions of ) *
trust agreement )
III. Organization Personnel and
Affiliated Persons of Depositor
24. Organization of Depositor ) Sponsor
25. Fees received by Depositor ) Public Offering Price of
) Units Expenses of the
) Trust
26. Business of Depositor ) Sponsor
27. Certain information as to ) Sponsor
officials and affiliated )
persons of Depositor )
28. Voting securities of Depositor ) *
29. Persons controlling Depositor ) Sponsor
30. Payments by Depositor for ) *
certain other services trust )
31. Payments by Depositor for ) *
certain other services )
rendered to trust )
32. Remuneration of employees of ) *
Depositor for certain services )
rendered to trust )
33. Remuneration of other persons ) *
for certain services rendered )
to trust )
- ----------
*Not applicable, answer negative or not required.
<PAGE>
IV. Distribution and Redemption of Securities
34. Distribution of trust's ) Public Offering of Units
securities by states )
35. Suspension of sales of trust's ) *
securities )
36. Revocation of authority to ) *
distribute )
37. (a) Method of distribution ) Public Offering of Units
(b) Underwriting agreements )
(c) Selling agreements )
38. (a) Organization of principal ) Sponsor
underwriter )
(b) N.A.S.D. membership of ) Sponsor
principal underwriter )
39. Certain fees received by ) Public Offering Price of
principal underwriter ) Units
40. (a) Business of principal ) Sponsor
underwriter )
(b) Branch officers of )
principal underwriter )
(c) Salesman of principal ) *
underwriter )
41. Ownership of trust's securities ) *
by certain persons )
42. Certain brokerage commissions ) *
received by principal )
underwriter )
43. (a) Method of valuation ) Public Offering Price
) Units
(b) Schedule as to offering ) *
price )
(c) Variation in offering ) Public Offering
price to certain persons ) Units
44. Suspension of redemption rights ) *
- ----------
*Not applicable, answer negative or not required.
<PAGE>
45. (a) Redemption valuation ) Redemption of Units by
) Trustee
(b) Schedule as to redemption ) *
price )
V. Information concerning the Trustee or Custodian
46. Maintenance of position in ) Secondary Market for Units
underlying securities ) Redemption of Units by
) Trustee
) Evaluation of the Trust
47. Organization and regulation of ) Administration of the
Trustee ) Trust Trustee
48. Fees and expenses of Trustee ) Expenses of the Trust
49. Trustee's lien ) Expenses of the Trust
VI. Information concerninq Insurance of Holders of Securities
50. (a) Name and address of ) *
Insurance Company )
(b) Type of policies ) *
(c) Type of risks insured and ) *
excluded )
(d) Coverage of policies ) *
(e) Beneficiaries of policies ) *
(f) Terms and manner of ) *
cancellation )
(g) Method of determining ) *
premiums )
(h) Amount of aggregate ) *
premiums paid )
(i) Who receives any part of ) *
premiums )
(j) Other material provisions ) *
of the Trust relating to )
insurance )
- ----------
*Not applicable, answer negative or not required.
<PAGE>
VII. Policy of Registrant
51. (a) Method of selecting and ) Acquisition of Securities
eliminating securities ) for the Trust
from the Trust )
(b) Elimination of securities ) *
from the Trust )
(c) Policy of Trust regarding ) Supervision of Trust
substitution and elimina- ) Investment
tion of securities )
(d) Description of any funda- ) Acquisition of Securities
mental policy of the Trust ) for the Trust
) Supervision of Trust
) Investments
52. (a) Taxable status of the Trust ) Tax status of the Trust
(b) Qualification of the Trust ) Tax status of the Trust
as a mutual investment )
company )
VIII. Financial and Statistical Information
53. Information regarding the ) *
Trust's past ten fiscal years )
54. Certain information regarding ) *
periodic payment plan certifi- )
cates )
55. Certain information regarding ) *
periodic payment plan certifi- )
cates )
56. Certain information regarding ) *
periodic payment plan certifi- )
cates )
57. Certain information regarding ) *
periodic payment plan certifi- )
cates )
58. Financial statements ) Statement of Financial
(Instruction 1(c) to Form S-6) ) Condition
- ----------
*Not applicable, answer negative or not required.
<PAGE>
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d)
of the Securities Exchange Act of 1934, the undersigned
registrant hereby undertakes to file with the Securities and
Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by
any rule or regulation of the Commission heretofore or
hereafter duly adopted pursuant to authority conferred in that
section.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL
PRIOR TO THE REGISTRATION STATEMENT OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH JURISDICTION.
Preliminary, Subject to Completion, Dated June 11, 1999
PAINEWEBBER EQUITY TRUST
ABCs Trust Series 3
(A Unit Investment Trust)
- --------------------------------------------------------------------------------
o Portfolio of Common Stocks Chosen from PaineWebber's Analysts' Best
Calls ("ABCs") List
o Designed for Total Return
o Annual Capital Distributions
- --------------------------------------------------------------------------------
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
SPONSOR:
PAINEWEBBER INCORPORATED
THIS PROSPECTUS CONSISTS OF TWO PARTS: PART A AND PART B.
PROSPECTUS PART A DATED , 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ABCS TRUST SERIES 3 PROSPECTUS PART A PAGE
----
<S> <C>
Brief Description of the Trust ................................... A-3
Summary of Risks ................................................. A-4
Fees and Expenses ................................................ A-6
Brief Description of the Trust's Investment Portfolio ............ A-7
Availability of Exchange Option .................................. A-7
Is This Trust Appropriate for You? ............................... A-7
Performance of Prior Series ...................................... A-8
Essential Information Regarding the Trust ........................ A-9
Report of Independent Auditors ................................... A-11
Statement of Net Assets .......................................... A-12
Schedule of Investments .......................................... A-13
ABCS TRUST SERIES 3 PROSPECTUS PART B
The Composition of the Portfolio ................................. B-1
The PaineWebber Equity Research Department ....................... B-1
The Trust ........................................................ B-4
Risk Factors and Special Considerations .......................... B-5
Federal Income Taxes ............................................. B-9
Public Offering of Units ......................................... B-11
Public Offering Price ........................................... B-11
Sales Charge and Volume Discount ................................ B-11
Employee Discount ............................................... B-12
Distribution of Units ........................................... B-12
Secondary Market for Units ...................................... B-12
Sponsor's Profits ............................................... B-13
Redemption ....................................................... B-13
Valuation ........................................................ B-15
Comparison of Public Offering Price and Redemption Value ......... B-16
Expenses of the Trust ............................................ B-16
Rights of Unitholders ............................................ B-17
Distributions .................................................... B-17
Reinvestment Plan ................................................ B-18
Exchange Option .................................................. B-18
Administration of the Trust ...................................... B-20
Accounts ........................................................ B-20
Reports and Records ............................................. B-20
Portfolio Supervision ........................................... B-21
Amendment of the Indenture ....................................... B-21
Termination of the Trust ......................................... B-22
Sponsor .......................................................... B-22
Trustee .......................................................... B-23
Independent Auditors ............................................. B-23
Legal Opinions ................................................... B-23
</TABLE>
A-2
<PAGE>
PAINEWEBBER EQUITY TRUST, ABCS TRUST SERIES 3 - PROSPECTUS PART A
BRIEF DESCRIPTION OF THE TRUST
1. THE TRUST'S OBJECTIVES.
o The Trust seeks total return by investing in a fixed portfolio of domestic
and foreign stocks chosen from the PaineWebber Equity Research
Department's "Analysts' Best Calls" lists, also called the "ABCs List."
o The Trust plans to hold until its termination a diversified portfolio of
stocks which PaineWebber selected on August 24, 1999, the first day of the
Trust.
o As of the first day of the Trust, PaineWebber believes that the Trust's
portfolio of stocks have the potential for achieving total return during
the life of the Trust because such stocks have been chosen from the ABC's
List in the manner described below.
o The Trust is a unit investment trust which means that, unlike a mutual
fund, the Trust's Portfolio is not managed and stocks are not sold because
of market changes.
2. THE PAINEWEBBER EQUITY RESEARCH DEPARTMENT.
o The PaineWebber Equity Research Department seeks to identify the best
investment opportunities by focusing on established and emerging trends in
economics, the stock market and individual industries and companies.
o The Equity Research Department analyzes opportunities in the stocks of
individual companies by closely examining the fundamentals of the company
and its industry. For example, the Research Department's analysts meet
with company management, review management's strategies, evaluate the
company's earnings potential, and examine the information gathered in the
context of sophisticated economic and financial models.
o Based on the information obtained from its research, the Equity Research
Department assigns one of four investment ratings to each stock that it
covers: "Buy", "Attractive", "Neutral" or "Unattractive".
3. HOW ARE STOCKS CHOSEN FOR THE ABCS LIST?
o The ABCs List is a list of the PaineWebber Equity Research Department's
top stock selections. The ABCs List typically contains approximately 40 to
50 stocks.
o To compile the list, most of the more than 50 analysts from the Equity
Research Department who cover over 50 different industries each choose
a stock from their respective industry that the analyst believes is
most likely to outperform the stock market as a whole during the
following 12 months.
o The stocks chosen for the ABCs List must also be rated either "Buy" or
"Attractive" by PaineWebber's Equity Research Department. A "Buy"
rating is assigned to the stocks PaineWebber believes will achieve a
total return of at least 20% during that 12-month time period,
assuming a flat market, and an "Attractive" rating is assigned to those
stocks PaineWebber believes will achieve a total return of 10-20%
within the same time period. Of course, there is no assurance that the
stocks assigned such ratings will, in fact, achieve such projected
total returns, nor that the stocks will continue to be assigned such
ratings during the 12-month time period following the first day of the
Trust.
A-3
<PAGE>
4. HOW DOES PAINEWEBBER CHOOSE THE STOCKS FOR THE TRUST FROM THE ABCS LIST?
The Trust contains [ ] stocks chosen from the most current ABCs List. Not
all of the stocks included in the most current ABCs List are included in the
Trust. To be included in the Trust's portfolio, each stock had to meet each
of the following three (3) tests on August 23, 1999:
o First, the stock must appear on the most current ABCs List;
o Second, the stock must be issued by a company that has a market value of
at least $3 billion; and
o Third, the stock must be recommended by a PaineWebber Equity Research
Department analyst who rated at least 20% of the securities that the
analyst follows as either "Buy" or "Attractive".
SUMMARY OF RISKS
YOU CAN LOSE MONEY BY INVESTING IN THE TRUST. This can happen for various
reasons. A further discussion of the risks summarized below can be found in
Part B of this Prospectus.
1. RISKS OF INVESTING IN THE TRUST
Certain risks are involved with an investment in a unit trust which holds
common stocks. For example:
THE TRUST IS NOT "MANAGED"
o The Trust, unlike a mutual fund, is not "managed" and stocks will not be
sold by the Trust to take advantage of market fluctuations.
o The Trust holds a fixed portfolio of stocks chosen from the most current
ABCs List on the first day of the Trust. Since the Trust is fixed, and not
managed like a mutual fund, the Trust will not buy and sell Portfolio
Stocks to match the most current ABCs List. Therefore, when new ABCs
Lists are published by the Sponsor on a periodic basis, they may contain
stocks different from those included in the most current ABCs List and
from those held by the Trust.
o The Trust may, in the future, continue to buy more of the stocks held by
the Trust when additional Units are offered to the public or for the
Reinvestment Plan, even though those stocks may no longer be on the then
current ABCs List at the time such purchases are made by the Trust.
THE TRUST MAY SELL PORTFOLIO STOCKS
o The Trust Portfolio may not remain constant during the life of the Trust.
The Trustee may be required to sell stocks to pay Trust expenses, to
tender stocks under certain circumstances or to sell stocks in the event
certain negative events occur.
o The sale of stocks from the Trust in the period prior to termination and
upon termination may result in a lower amount than might otherwise be
realized if such sale were not required at such time due to impending or
actual termination of the Trust. For this reason, among others, the amount
you receive upon termination may be less than the amount you paid.
o If many investors sell their Units, the Trust will have to sell stocks.
This could reduce the diversification of your investment and increase your
share of Trust expenses.
A-4
<PAGE>
THE PRICE AND VALUE OF UNITS WILL FLUCTUATE DURING THE TRUST'S TERM.
o The price of your Units depends upon the full range of economic and market
influences including the prices of equity securities, the condition of the
stock markets and other economic influences that affect the global or
United States economy.
o Assuming no changes occur in the prices of the stocks held by the Trust,
the price you paid for your Units will generally be less than the price
you paid because your purchase price included a sales charge.
o The stocks in the Trust's Portfolio will generally trade on a domestic
stock exchange or in the over-the-counter market. PaineWebber cannot
assure you that a liquid trading market will exist. The value of the
Trust's Portfolio, and of your investment, may be reduced if trading in
one or more stocks is limited or absent.
o Additional stocks may be purchased by the Trust when additional Units are
offered to the public or for the Reinvestment Plan. Costs, such as
brokerage fees, incurred in purchasing such additional stocks will be
borne by the Trust. Your Units will be worth less as a result of the
Trust's payment of these brokerage fees and other expenses.
2. RISKS OF INVESTING IN STOCKS
INVESTING ALWAYS INVOLVES RISKS. The risks described below are the most
significant risks associated with investing in the stocks held by the Trust.
o Holders of common stocks such as those held by the Trust have rights that
are generally inferior to the holders of debt obligations or preferred
stocks.
o Common stocks are not obligations of the issuer of the stocks. Therefore,
they do not provide any guaranteed income or provide the degree of
protection of debt securities.
o The stocks held by the Trust can be expected to fluctuate in value
depending on a wide variety of factors, such as economic and market
influences affecting corporate profitability, financial condition of
issuers, changes in worldwide or national economic conditions, the prices
of equity securities in general and the Trust's stocks in particular.
3. YEAR 2000 PROBLEM RISKS
o Many computer systems were designed in such a way that they may be unable
to distinguish between the year 2000 and the year 1900 and therefore may
not properly process and calculate date-related information and data
(commonly known as the "Year 2000 Problem").
o As with all investment and financial companies, the Year 2000 Problem may
have an adverse impact upon the Trust. The Sponsor and the Trustee are
taking reasonable steps to address the year 2000 Problem with respect to
the computer systems they use and to obtain reasonable assurances that
similar steps are being taken by the Trust's other service providers. At
this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact on the Trust.
A-5
<PAGE>
o The year 2000 Problem is expected to have an impact on all corporations,
including those whose stocks are contained in the Trust's Portfolio. The
Sponsor cannot predict what impact, if any, the year 2000 Problem will
have on the stocks in the Trust.
FEES AND EXPENSES
This table shows the fees and expenses a Unitholder may pay, either
directly or indirectly, when investing in Units of the Trust.
ESTIMATED ANNUAL OPERATING EXPENSES OF THE TRUST
<TABLE>
<CAPTION>
AMOUNT PER
$1,000 INVESTED
(AS OF THE
AMOUNT FIRST DAY OF
PER UNIT THE TRUST)
------------- ----------------
<S> <C> <C>
Trustee's Fee $ $
Portfolio, Bookkeeping and Administrative Expenses $ $
Other Operating Expenses $ $
--------- ---------
Total $ $
========= =========
ESTIMATED INITIAL ORGANIZATION COSTS OF THE TRUST(1) $ $
--------- ---------
SALES CHARGES(2)
Maximum Initial Sales Charge $ 1.00% $ 10.00
Maximum Deferred Sales Charges(3) $ 2.00% $ 20.00
--------- ---------
Total Maximum Sales Charges $ 3.00% $ 30.00
========= =========
</TABLE>
- ----------
(1) Applicable only to purchasers of Units during the initial offering period
(approximately 6 weeks).
(2) Unitholders pay a combination of Initial and Deferred Sales Charges. The
Initial Sales Charge is reduced for purchasers of Units worth $50,000 or
more. Also, certain classes of investors are entitled to reduced sales
charges. For futher details, see "Public Offering of Units -- Sales
Charge and Volume Discount" and "-- Employee Discount" in Part B of this
Prospectus.
(3) The Deferred Sales Charge of $2.00 per 100 Units will be deducted from
the Trust's net asset value from the 3rd through 12th months of the 13
month life of the Trust, aggregating $20.00 per 100 Units during such
period. See "Public Offering Price -- Sales Charge and Volume Discount"
and "Administration of the Trust" in Part B of this Prospectus for
further details.
EXAMPLE
This example may help you compare the cost of investing in the Trust to
the cost of investing in other funds.
The example below assumes that you invest $10,000 in the Trust for the
periods indicated and then either redeem or do not redeem your Units at the end
of those periods. The example also assumes a 5% return on your investment each
year and that the Trust's annual operating expenses stay the same.
A-6
<PAGE>
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------ --------- ------------ ------------
<S> <C> <C> <C>
$ $ $ $
</TABLE>
While the Trust has a term of approximately 13 months, you may be able to
invest in future ABCs Trusts with reduced sales charges. These future sales
charges are included in the amounts provided above.
See "Expenses of the Trust" in Part B of this Prospectus for additional
information regarding expenses.
BRIEF DESCRIPTION OF THE TRUST'S INVESTMENT PORTFOLIO.
o The common stocks in the Trust's Portfolio have been issued by companies
who receive income and derive revenues from multiple industry sources, but
whose primary industry is listed in the "Schedule of Investments" in this
Prospectus Part A.
<TABLE>
<CAPTION>
APPROXIMATE PERCENT OF AGGREGATE
PRIMARY INDUSTRY SOURCE MARKET VALUE OF THE TRUST
<S> <C>
%
</TABLE>
AVAILABILITY OF EXCHANGE OPTION
o When this Trust Portfolio is about to terminate, you may elect the
Exchange Option and acquire units of another ABCs Trust Series if one is
available. Unitholders are encouraged to consult with their own tax
advisors as to the consequences to them of electing the Exchange Option.
o Unitholders electing the Exchange Option may exchange their Units of this
Trust for units of a future ABCs Trust Series, at no Initial Sales Charge.
Units acquired through the Exchange Option will, of course, be subject to
the Deferred Sales Charges aggregating $20.00 per 100 Units.
o If you notify the Sponsor by , your units will be redeemed and certain
distributed securities plus the proceeds from the sale of the remaining
securities will be reinvested in units of a new ABCs Trust Series. If you
decide not to elect the Exchange Option, you will receive a cash
distribution after the Portfolio terminates. For a discussion of the tax
effects of electing the Exchange Option see "Exchange Option" in this
Prospectus Part B.
IS THIS TRUST APPROPRIATE FOR YOU?
Yes, if you are seeking total return over the life of the Trust by
investing in common stocks issued by companies which PaineWebber selected for
their growth and/or income potential. You will benefit from a professionally
selected portfolio whose risk is reduced by investing in stocks of several
different issuers.
No, if you want a speculative investment that changes to take advantage of
market movements, if you are unable or unwilling to assume the risks involved
generally with equity investments or if you need current income.
A-7
<PAGE>
PERFORMANCE OF PRIOR SERIES
The following table shows the actual pre-tax returns to investors who
bought and held Units of the ABCs Trust Series 1 during the period shown below.
These returns assume that investors received all payment of dividends (but did
not reinvest such dividends) and paid the maximum sales fees on their Units.
The table also shows the performance of the S&P 500 Index during the same time
period, and also assumes payment (but no reinvestment) of dividends. Of course,
past performance is no guarantee of future performance, and the securities held
in ABCs Trust Series 1 may not be the same securities held in any other ABCs
Trust Series.
<TABLE>
<CAPTION>
ABCS TRUST SERIES 1 S&P 500 INDEX
PERFORMANCE PERIOD TOTAL RETURN TOTAL RETURN
- ------------------------ --------------------- --------------
<S> <C> <C>
7/29/98 through 6/1/99 18.64% 16.29%
</TABLE>
A-8
<PAGE>
ESSENTIAL INFORMATION REGARDING THE TRUST
AS OF AUGUST 23, 1999(1)
<TABLE>
<S> <C>
SPONSOR: PaineWebb Incorporated
TRUSTEE: Investors Bank & Trust Company
INITIAL DATE OF DEPOSIT: August 24, 1999
TOTAL VALUE OF SECURITIES HELD BY THE TRUST: ............................. $
TOTAL NUMBER OF UNITS(2): ................................................ 100,000
FRACTIONAL UNDIVIDED INTEREST IN THE TRUST REPRESENTED BY EACH UNIT: ..... 1/100,000th
CALCULATION OF PUBLIC OFFERING PRICE PER UNIT(2), (3)
Public Offering Price per Unit .......................................... $10.00
Less Reimbursement to Sponsor for Initial Organizational Costs(6) ....... $
Less Initial Sales Charge(4)* of 1% of Offering Price
(1.00% of net amount invested per 100 Units) ........................... $0.10
Net Asset Value per Unit ................................................ $
Net Asset Value for 100,000 Units ....................................... $
Divided by 100,000 Units(2) ............................................. $
REDEMPTION VALUE**: ......................................................... $
EVALUATION TIME: ............................................................ 4:00 P.M. New York time.
INCOME ACCOUNT DISTRIBUTION DATES(5): ....................................... , 1999 and
quarterly thereafter and
the Mandatory
Termination Date.
CAPITAL ACCOUNT DISTRIBUTION DATES(5): ...................................... December 31, 1999 and 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: ............................................................... , 1999 and quarterly
thereafter.
MANDATORY TERMINATION DATE: .................................................
DISCRETIONARY LIQUIDATION AMOUNT: ........................................... 40% of the value of Securities
upon completion of the
deposit of the Securities.
ESTIMATED INITIAL ORGANIZATIONAL COSTS OF THE TRUST(6): ..................... $ per Unit.
Continued on page A-9
</TABLE>
A-9
<PAGE>
<TABLE>
<S> <C>
ESSENTIAL INFORMATION REGARDING THE TRUST (CONTINUED)
ESTIMATED ANNUAL OPERATING EXPENSES OF THE TRUST(7) ..................... $ per Unit.
Trustees Fee ........................................................... $
Portfolio Supervision, Bookkeeping and Administrative Expenses ......... $
Other Operating Expenses ............................................... $
</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
Stocks in the Portfolio on such date. Subsequently, 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 any purchase orders received plus the applicable sales
charges and will vary on any date after August 24, 1999 from the Public
Offering Price per Unit shown above. Following the Initial Date of Deposit,
costs incurred in purchasing additional securities will be at the expense of
the Trust. Any investor purchasing Units after the Initial Date of Deposit
will also pay a proportionate share of any accumulated dividends in the
Income Account. (See "Essential Information Regarding the Trust--Additional
Deposits," "Risk Factors and Special Considerations" and "Valuation" in Part
B of this Prospectus).
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 thirteen (13) 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" in
Part B of this Prospectus.
5 See "Distributions" in Part B of this Prospectus.
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" in Part B of this Prospectus
(collectively, the "Initial Organizational Costs"). These costs have been
estimated at $ 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" in Part B of this Prospectus. Estimated dividends
from the securities purchased, based upon last dividends actually paid, are
expected by the Sponsor to be sufficient to pay estimated annual 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" in Part B of this Prospectus.)
* The sales charge will not be assessed on 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
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" in Part B of this
Prospectus).
A-10
<PAGE>
REPORT OF INDEPENDENT AUDITORS
THE UNITHOLDERS, SPONSOR AND TRUSTEE
THE PAINEWEBBER EQUITY TRUST, ABCs TRUST SERIES 3
We have audited the accompanying Statement of Net Assets of The
PaineWebber Equity Trust, ABCs Trust Series 3, including the Schedule
of Investments, as of August 24, 1999. 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 August 24, 1999. 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 3 at August 24, 1999, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
New York, New York
August 24, 1999
A-11
<PAGE>
THE PAINEWEBBER EQUITY TRUST,
ABCS TRUST SERIES 3
STATEMENT OF NET ASSETS
AS OF INITIAL DATE OF DEPOSIT, AUGUST 24, 1999
<TABLE>
<S> <C>
NET ASSETS
-----------
Sponsor's Contracts to Purchase underlying Securities backed by
irrevocable letter of credit (a) ................................. $
Reimbursement to Sponsor for Initial Organizational Costs (b) .....
---------
Total ......................................................... $
=========
Units outstanding (c) ............................................. 100,000
ANALYSIS OF NET ASSETS
----------------------
Cost to investors (d) ............................................ $1,000,000
Less: Gross underwriting commissions (e) .........................
Reimbursement to Sponsor for Initial Organizational Costs
----------
Net Assets .................................................... $
==========
</TABLE>
- ----------
(a) The aggregate cost to the Trust of the securities listed under
"Schedule of Investments" in this Prospectus Part A is determined by the
Trustee on the basis set forth under "Public Offering of Units--Public Offering
Price" in Part B of this Prospectus. See also the column headed "Cost of
Securities to Trust" under "Schedule of Investments" in this Prospectus Part A.
Pursuant to contracts to purchase securities, an irrevocable letter of credit
drawn on The Chase Manhattan Bank, in the amount of $2,000,000 has been
deposited with the Trustee, Investors Bank & Trust Company for the purchase of
$ 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" in Part B of this Prospectus
(collectively, the "Initial Organizational Costs"). These costs have been
estimated at $ per Unit based upon the expected number of Units to be
created during the initial offering period. Certain Stocks 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 Stocks 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" in Part B of this
Prospectus.
(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 , 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" in Part B of this Prospectus. Based on the projected total
assets of $ , the estimated maximum Deferred Sales Charge would be
$ .
A-12
<PAGE>
THE PAINEWEBBER EQUITY TRUST
ABCS TRUST SERIES 3
SCHEDULE OF INVESTMENTS
AS OF INITIAL DATE OF DEPOSIT, AUGUST 24, 1999
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>
$
TOTAL INVESTMENTS $
===============
</TABLE>
- ----------
(1) All Stocks are represented entirely by contracts to purchase such Stocks.
(2) Valuation of the Securities by the Trustee was made as described in
"Valuation" in Part B of this Prospectus as of the close of business on the
business day prior to the Initial Date of Deposit.
(3) The [gain] [loss] to the Sponsor on the Initial Date of Deposit is $ .
* Non-income producing security.
A-13
<PAGE>
PAINEWEBBER EQUITY TRUST
ABCS TRUST SERIES 3
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES NOR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
SPONSOR:
PAINEWEBBER INCORPORATED
Prospectus Part B may not be distributed unless accompanied by
Prospectus Part A.
This Prospectus Part B contains a description of the important features of
the PaineWebber Equity Trust, ABCs Trust Series 3 and also includes a more
detailed discussion of the investment risks that a Unitholder might face while
holding Trust Units.
THIS PROSPECTUS CONSISTS OF TWO PARTS: PART A AND PART B.
PROSPECTUS PART B DATED , 1999.
<PAGE>
PAINEWEBBER EQUITY TRUST
ABCS TRUST SERIES 3
PROSPECTUS PART B
- --------------------------------------------------------------------------------
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. Most of the more than 50 PaineWebber senior
analysts who cover 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. The ABC is the stock the
analyst believes has the highest total return potential in its universe and on
which the analyst has 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 PaineWebber Equity Research Department
(the "Equity Research Department"). Historically, the ABCs list has comprised
approximately 40 to 50 stocks. The stocks included in the Trust (the "Stocks")
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, the issuer of each Stock had to have a minimum market
capitalization of $3 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" in Part A of this Prospectus.
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"
in Part A of this Prospectus.
THE PAINEWEBBER EQUITY RESEARCH DEPARTMENT
The Equity Research Department seeks to identify today's best investment
opportunities based on established and emerging economic, market, industry and
company trends. PaineWebber's investment strategy is based on a thematic
approach to investing, which seeks to identify market-impacting trends before
they emerge. Equities' share of household assets is now a record 42% and is
expected to go higher. (The previous peak of 39% was reached in 1968.) The
Equity Research Department expects the factors behind this trend--low interest
rates, subdued inflation, education & retirement needs and an inadequate Social
Security System--to remain in place for the foreseeable future, ensuring that
households continue to invest a significant portion of their financial assets
in equities. This continued flow of funds could represent $25 trillion of
incremental market value over the next 15 years, versus the current approximate
value of the markets of $13 trillion.
Using a fundamental approach, PaineWebber's research professionals visit
with the company management teams and evaluate their strategies in terms of the
probable impact on corporate earnings.
B-1
<PAGE>
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. After visiting their companies, building detailed financial
models, evaluating near-and-longer term prospects for each company and its
competitors, establishing valuation frameworks for each stock, and factoring-in
the work of PaineWebber's strategists and economists, the analyst assigns an
investment rating to the stock.
PaineWebber analysts assign one of four investment ratings to each stock
under research coverage: "Buy", "Attractive", "Neutral" or "Unattractive". Each
rating assumes a 12-month time horizon and is based on a stock's total return
potential (stock price appreciation plus dividend) relative to the market. A
"Buy" rating is assigned to those stocks PaineWebber believes will achieve total
return of at least 20% in a flat market. A stock rated "Attractive" is one which
PaineWebber believes will offer total return of 10-20% in the coming 12-month
period. The "Neutral" rating is assigned to those stocks which are selling
within 10% of the PaineWebber analysts' estimated price targets one year out and
whose stock prices are not expected to change materially in price during the
next 12 months. The "Unattractive" rating is assigned to those stocks which
PaineWebber believes has at least ten percentage points more downside risk than
the current dividend yield, assuming a flat market environment.
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 27
annual surveys. Institutional Investor bases this ranking on the opinions of
directors of research, chief investment officers, portfolio managers and
analysts of major money management institutions. Additionally, The Wall Street
Journal reported that PaineWebber's "Performance Portfolio," which is submitted
by the Research Department to Zacks Investment Research, ranked first among the
submitted lists of 15 major firms for the five-year period ended March 31,
1999, achieving a return of 278.7%. For the one-year performance period ended
March 31, 1999, PaineWebber's Performance Portfolio was ranked number 5 out of
15 firms, achieving a return of 17.9%. The Wall Street Journal arrives at this
ranking by comparing the estimated performance of stocks on the recommended
lists submitted by 15 major brokerage firms. The performance figures are
computed using a variety of data, including stock price changes, dividends and
hypothetical trading commissions of 1%. Each brokerage firm constructs its
recommended list using the criteria it deems important; PaineWebber's
Performance Portfolio consists of a select list of stocks rated "Buy" or
"Attractive" by PaineWebber's investment research analysts. 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 may not be, during the term of
this Trust, the same stocks as those contained in the Performance Portfolio.
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" in this Prospectus Part B). 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" in this Prospectus Part B.)
B-2
<PAGE>
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 thirteen (13) month life of
the Trust. For example, on a $1,000 investment, $990.00 is invested in the
Trust and a $10.00 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 A- of this Prospectus. 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 this Prospectus Part B). 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" in this Prospectus Part B.
Distributions. The Stocks in the Trust were chosen for their total return
potential, not for their income potential. The Trustee will make distributions
on the Distribution Dates. (See "Distributions", "Exchange Option" and
"Administration of the Trust" in this Prospectus Part B.) 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") in this Prospectus Part B. (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" in this
Prospectus Part B). 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 thirteen (13) months after the Initial Date of
Deposit regardless of market conditions at the time. (See "Termination of the
Trust" and "Federal Income Taxes" in this Prospectus Part B.)
Exchange Option. So long as the Sponsor continues to offer new series of
the ABCs Trust, Unitholders may exercise their exchange option in lieu of
selling or redeeming their Units on or after the Special
Redemption Date, at a reduced sales charge described under "Exchange Option" in
this Prospectus Part B. 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 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
B-3
<PAGE>
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" in this Prospectus Part B.) 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" in this
Prospectus Part B.)
THE TRUST
The Trust is one of a series of similar but separate unit investment
trusts created under New York law by the Sponsor pursuant to a Trust Indenture
and Agreement* (the "Indenture") dated as of the Initial Date of Deposit,
between PaineWebber Incorporated, as Sponsor and Investors Bank & Trust
Company, as Trustee (the "Trustee"). The objective of the Trust is total return
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 this Prospectus Part B.
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" in this Prospectus Part B). Units may be
continuously offered to the public by means of this Prospectus (see "Public
Offering of Units--Public Offering Price" in this Prospectus Part B) 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" in this Prospectus
Part B).
- ----------
*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.
B-4
<PAGE>
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" in Part A of this Prospectus.
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" in this Prospectus Part B.)
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 CERTAIN
LIMITED CIRCUMSTANCES (SEE "TRUST ADMINISTRATION--PORTFOLIO ADMINISTRATION" IN
THIS PROSPECTUS PART B). 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.
B-5
<PAGE>
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" in Part A of this Prospectus.)
ADRs evidence American Depositary Shares ("ADS"), which, in turn, represent
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
B-6
<PAGE>
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, or to pay the
accrued Deferred Sales Charge to the Sponsor may impact upon the value of the
underlying Securities and the Units. For example, the Sponsor's 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
B-7
<PAGE>
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 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" in this Prospectus Part B.
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" in this Prospectus
Part B.)
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.
Many computer systems were designed in such a way that they may be unable
to distinguish between the year 2000 and the year 1900 and therefore may not
properly process and calculate date-related information and data (commonly
known as the "Year 2000 Problem"). As with all investment and financial
companies, the Year 2000 Problem may have an adverse impact upon the handling
of securities trades, pricing and account services and other activities
conducted by or for the Trust. 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.
B-8
<PAGE>
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.
Certain of the Stocks may be attractive acquisition candidates pursuant to
mergers, acquisitions and tender offers. In general, tender offers involve a
bid by an issuer or other acquiror to acquire a stock based on the terms of its
offer. Payment generally takes the form of cash, securities (typically bonds or
notes), or cash and securities. The Indenture contains provisions requiring the
Trustee to follow certain procedures regarding mergers, acquisitions, tender
offers and other corporate actions. Under certain circumstances, the Trustee,
at the direction of the Sponsor, may hold or sell any stock or securities
received in connection with such corporate actions (see "Administration of the
Trust--Portfolio Supervision" in this Prospectus Part B).
The Trust is not appropriate for investors who require high current income
or seek conservation of capital.
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"
in this Prospectus Part B).
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.
B-9
<PAGE>
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 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.
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.
Unitholders will be taxed in the manner discussed above regardless of
whether distributions from the Trust are actually received by the Unitholder in
cash or are reinvested pursuant to the "Reinvestment Plan" described later in
this Prospectus Part B. Unitholders exercising the Exchange Option will also
experience tax consequences as described in the "Exchange Option" described
later in this Prospectus Part B.
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.
B-10
<PAGE>
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" in this Prospectus Part B.) 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 A- 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" in Part A of this Prospectus. 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" in this Prospectus Part B 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 thirteen (13) month
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.
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.
The Deferred Sales Charge will be accrued on the books of the Trust and
will be paid to the Sponsor, upon the Sponsor's request. The Trustee is
directed to sell Securities to make this payment. 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.
B-11
<PAGE>
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>
MAXIMUM DOLLAR
INITIAL SALES CHARGE TOTAL SALES CHARGE 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" in this Prospectus Part B).
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.
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 $ 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
B-12
<PAGE>
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" in this Prospectus Part B. 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 that 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" in this Prospectus Part B).
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" in this Prospectus
Part B. 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.
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.
B-13
<PAGE>
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" in this Prospectus Part
B.) 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" in this Prospectus Part B 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" in this Prospectus Part B.)
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" in this Prospectus Part B. A Unitholder receiving a redemption "in
kind" may incur brokerage or other transaction costs in converting the Stocks
distributed into cash. The availability of redemption "in kind" is subject to
compliance with all applicable laws and regulations, including the Securities
Act of 1933, as amended.
To the extent that Securities are redeemed in kind or sold, the size and
diversity of the Trust will be reduced. Sales will usually be required at a
time when Securities would not otherwise be sold and may result in lower prices
than might otherwise be realized. The price received upon redemption may be
more or less than the amount paid by the Unitholder depending on the value of
the Securities in the portfolio at the time of redemption. In addition, because
of the minimum amounts in which Securities are required to be sold, the
proceeds of sale may exceed the amount required at the time to redeem Units;
these excess proceeds will be distributed to Unitholders on the Distribution
Dates.
To the extent that a significant number of Unitholders exercise the
Exchange Option on or after the 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" in this Prospectus Part B.
B-14
<PAGE>
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 "Essential Information
Regarding the Trust" in Part A of this Prospectus (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 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-15
<PAGE>
(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" in Part A of this Prospectus). 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 $ per
Unit per calendar year, may exceed the actual costs of providing portfolio
supervisory services for the Trust, but at no time will the total amount it
receives for portfolio supervisory services rendered to all series of the
PaineWebber Equity Trust in any calendar year exceed the aggregate cost to it
of supplying such services in such year.
For its services as Trustee and Evaluator, the Trustee will be paid in
monthly installments, annually $ per Unit, based on the largest number of
Units outstanding during the previous month. In addition, the regular and
recurring expenses of the Trust are estimated to be $ per Unit, which
include, but are not limited to certain mailing, printing, and audit expenses.
These expenses, including 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" in this Prospectus Part B): (1) fees for the Trustee for
extraordinary services; (2) expenses of the Trustee (including legal and
auditing expenses) and of counsel; (3) various governmental charges; (4)
expenses and costs of any action taken by the Trustee to protect the Trust and
the rights and interests of the Unitholders; (5) indemnification of the Trustee
for any loss, liabilities or expenses incurred by it in the administration of
the Trust without gross negligence, bad faith or wilful misconduct on its part;
(6) brokerage commissions and other expenses incurred in connection with the
purchase and sale of Securities; and (7) expenses incurred upon termination of
the Trust. In addition, to the extent then permitted by the 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).
B-16
<PAGE>
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
$0.50 per Unit, unless the Trustee has been advised that such expenses are
permitted by the SEC to be deducted from the Trust. 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" in this Prospectus Part B.
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 Income Account 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" in Part A of this Prospectus. 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" in this Prospectus Part B).
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" in this Prospectus Part B.)
B-17
<PAGE>
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" in this Prospectus Part B. 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. Unitholders receiving Units as a result of their participation in the
Reinvestment Plan will be taxed with respect to such Units in the manner
described in "Federal Income Taxes" earlier in this Prospectus Part B.
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 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 Special Redemption Date.
An exchange of a Unitholder's Units will be accomplished by the in-kind
redemption of such Units, followed by the distribution, and sale (for those
securities that do not appear on the ABCs List that is the subject of the new
ABCs Trust), 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 distributed securities and 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.
B-18
<PAGE>
The Sponsor intends to direct the sale of the distributed Securities not
appearing on the new ABCs List 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 such 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.
Certain of the stocks that appeared on the ABCs List used to create Series
1 may also appear on the Summer 1999 ABCs List which is used to create Series
3; if so, such stocks will be transferred to Series 3 ("Rollover Stocks").
Stocks in Series 1 which are not in Series 3 will be sold and the proceeds from
such sale will be used to buy the remaining stocks for Series 3. To the extent
that Rollover Stocks are transferred, for the account of electing Unitholders,
to ABCs Trust Series 3, rather than being sold, Unitholders electing the
Exchange Option will not recognize taxable gain or loss in respect of such
Rollover Stocks. Unitholders of Series 1 who make this election will recognize
a taxable gain or loss, to the extent that stocks held in the Series 1 which
are not Rollover Stocks are sold for their account, even though the proceeds of
sale will be reinvested in ABCs Trust Series 3. Series 1 Unitholders should be
aware that they will not receive a cash distribution to pay any taxes owed.
Unitholders are encouraged to consult with their own tax advisors as to the
consequences to them of electing the Exchange Option.
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. In
addition, Section 17(a) of the Investment Company Act prohibits one trust
series from selling securities to another trust series when such trust series
are under the control of a
B-19
<PAGE>
common sponsor. With regard to the Exchange Option, Section 17(a) would
prohibit the direct transfer of securities from one ABCs Trust Series to
another on the books of the Trustee without an exemptive order. The Sponsor has
received an exemptive order from the SEC which, subject to certain exceptions,
permits the direct transfer of securities from one ABCs Trust Series to another
on the books of the Trustee.
ADMINISTRATION OF THE TRUST
Accounts. All dividends and interest received on Securities, proceeds from
the sale of Securities or other moneys received by the Trustee on behalf of the
Trust may be held in trust in non-interest bearing accounts until required to
be disbursed.
The Trustee will credit on its books to an Income Account dividends, if
any, and interest income, on Securities in the Trust. All other receipts (i.e.,
return of principal and gains) are credited on its books to a Capital Account.
A record will be kept of qualifying dividends within the Income Account. The
pro rata share of the Income Account and the pro rata share of the Capital
Account represented by each Unit will be computed by the Trustee as set forth
under "Valuation" in this Prospectus Part B.
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 this Prospectus
Part B.) 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 this Prospectus Part B.) In addition,
distributions of amounts necessary to pay (1) the Initial Organizational Costs
and (2) the Deferred Sales Charges will be made from the Income Account and, to
the extent funds are not sufficient therein, 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 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
1999 and by , 2000, 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
B-20
<PAGE>
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;
(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" in this
Prospectus Part B.
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" in this
Prospectus Part B). 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
B-21
<PAGE>
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.
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.
B-22
<PAGE>
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
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.
B-23
<PAGE>
PAINEWEBBER EQUITY TRUST
ABCS TRUST SERIES 3
TRUSTEE: SPONSOR:
INVESTORS BANK & TRUST COMPANY PAINEWEBBER INCORPORATED
Hancock Towers, 1200 Harbor Boulevard,
200 Clarendon Street Weehawken, N.J. 07087
Boston, Mass. 02116 (201) 902-3000
(800) 356-2754
- --------------------------------------------------------------------------------
This Prospectus does not include all of the information with respect to The
PaineWebber Equity Trust, ABCs Trust Series 3 set forth in its Registration
Statement filed with the Securities and Exchange Commission (the "Commission")
in Washington, D.C. under the:
o Securities Act of 1933 (File No. 333- ) and
o Investment Company Act of 1940 (File No. 811-3722)
TO OBTAIN COPIES FROM THE COMMISSION AT PRESCRIBED RATES--
WRITE: Public Reference Section of the Commission
450 Fifth Street, N.W., Washington, D.C. 20549
CALL: 1--800--SEC--0330
VISIT: http://www.sec.gov
- --------------------------------------------------------------------------------
No person is authorized to give any information or make any representation
about this Trust not contained in this Prospectus, and you should not rely on
any other information. Read and keep both parts of the Prospectus for future
reference.
- --------------------------------------------------------------------------------
PROSPECTUS DATED , 1999
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This registration statement comprises the following
documents:
The facing sheet.
The Prospectus.
The Undertaking to file reports.
The signatures.
The following exhibits:
1. Ex. 99.A1 Standard Terms and Conditions of Trust dated as
of July 1, 1998 between PaineWebber Incorporated, Depositor, Investors Bank &
Trust Co., as Trustee (incorporated by reference to Exhibit 2 in File No.
333-55697).
2. Ex. 99.A6 Certificate of Incorporation of PaineWebber
Incorporated, as amended (incorporated by reference to Exhibit
8 in File No. 2-88344).
3. Ex. 99.A6 By-Laws of PaineWebber Incorporated, as amended
(incorporated by reference to Exhibit A(6)(a) in File No.
811-3722).
The following exhibits to be supplied by amendment:
1. Ex.99.A2 Copy of Trust Indenture and Agreement between
PaineWebber Incorporated, Depositor, Investors Bank & Trust Co. as Trustee
incorporating by reference Standard Terms and Conditions of Trust dated as of
July 1, 1998.
2. Ex.99.A5 Form of Certificate of Ownership (included in
Standard Terms and Conditions of Trust).
3. Ex.99.2 Opinion of Counsel as to legality of securities
being registered.
4. Ex.99.C1 Opinion of Counsel as to income tax status of
securities being registered.
5. Ex.99.C2 Consent of Ernst and Young, LLP Independent
Auditors.
<PAGE>
FINANCIAL STATEMENTS
1. Statement of Condition of the Trust as shown in
the current Prospectus for this series.
2. Financial Statements of the Depositor.
PaineWebber Group-Financial Statements incorporated by
reference to Form 10-K and 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 11th day of June, 1999.
THE PAINEWEBBER EQUITY TRUST,
ABCs TRUST SERIES 3
(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 11th day of
June, 1999.
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.
