SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
N-8B-2
REGISTRATION STATEMENT OF UNIT INVESTMENT TRUST
Pursuant to Section 8(b) of the
Investment Company Act of 1940
------------------------------
Enhanced Index Trust (EIT)
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Name of Unit Investment Trust
[X] Not the issuer of periodic payment plan certificates.
[ ] Issuer of periodic plan certificates.
<PAGE>
CONTENTS
Items
I
1-9 ORGANIZATION AND GENERAL INFORMATION
II
GENERAL DESCRIPTION OF TRUST AND SECURITIES OF THE TRUST
10 General Information Concerning the Securities of the Trust and the
Rights of Holders
11-12 Information Concerning the Securities Underlying the Trust's
Securities
13 Information Concerning Loads, Fees, Charges and Expenses
14-24 Information Concerning the Operations of the Trust
14 Issuance of Securities
15 Receipt of Payment
16 Purchase and Sale of Underlying Securities
17 Redemption of Securities
18 Distributions and Reinvestment
19 Records and Accounts
20 Indenture Provisions Regarding Depositor, Trustee or Indenture Charges
21 Loans to Security Holders
22 Limitations on Liability
23 Bonding of Officers and Employees
24 Other Material Provisions
<PAGE>
III
ORGANIZATION, PERSONNEL AND AFFILIATED PERSONS OF DEPOSITOR
25-27 Organizations and Operations of Depositor
28 Officials and Affiliated Persons of Depositor
29 Companies Owning Securities of Depositor
30 Controlling Persons
Compensation of Officer and Directors of Depositor:
31 Compensation of Officer of Depositor
32 Compensation of Directors
33 Compensation of Employees
34 Compensation of Other Persons
IV
DISTRIBUTION AND REDEMPTION OF SECURITIES
35-38 Distribution of Securities
39-43 Information Concerning Principal Underwriter
44 Offering Price or Acquisition Valuation of Securities of the Trust
45 Suspension of Redemption Rights
46 Redemption Valuation of Securities of the Trust
47 Purchase and Sale of Interests in Underlying Securities from and to
Security Holders
<PAGE>
V
INFORMATION CONCERNING THE TRUSTEE OR CUSTODIAN
48 General Information
49 Fees Paid
50 Lien on Assets
VI
51 Information Concerning Insurance of Holders of Securities
VII
52 Policy of Registrant
53 Mutual Investment Company
VIII
FINANCIAL AND STATISTICAL INFORMATION
54 Asset Values and Dividends
55 Transcript of Hypothetical Periodic Payment Plan Account
56 Experience and Performance Table
57 Termination Experience Table
58 Lapse Experience Table
59 Instructions as to Financial Statements
IX
EXHIBITS
SIGNATURE
<PAGE>
I. ORGANIZATIONAL AND GENERAL INFORMATION
--------------------------------------
1. (a) Furnish name of the trust and the Internal Revenue Service Employer
Identification Number.
Enhanced Index Trust (EIT)
Employer Identification Number: None
(b) Furnish title of each class or series of securities issued by the
trust.
Blue Chip 30- Enhanced Index Trust (EIT), Series D1107
Large Chip 500- Enhanced Index Trust (EIT), Series S1107
Technology 100- Enhanced Index Trust (EIT)- Series N1107
2. Furnish name and principal business address and ZIP Code and the Internal
Revenue Service Employer Identification Number of each depositor of the
trust.
Enhanced Index Distributors, LLC
C/o Declaration Service Company
500 North Lane Suite 6160
Conshohocken, PA 19428
Employee Identification Number:
3. Furnish name and principal business address and ZIP Code and the Internal
Revenue Service Employer Identification Number of each custodian or trustee
of The trust indicating for which class or series of securities each
custodian or Trustee is acting.
Declaration Fund
555 North Lane Suite 6160
Conshohocken, PA 19428
4. Furnish name and principal business address and ZIP Code and the Internal
Revenue Service Employer Identification Number of each principal
underwriter currently distributing securities of the trust.
Declaration Distributors, Inc.
P.O. Box 844
Conshohocken, PA 19428
EIN:
Will be the principal underwriter of the Trust
<PAGE>
5. Furnish name of state or other sovereign power, the laws of which govern
with respect to the organization of the trust.
Pennsylvania
6. (a) Furnish the dates of execution and termination of any indenture or or
agreement currently in effect under the terms of which the trust was
organized and issued or proposes to issue securities.
The form of the Trust Indenture and Trust Agreement proposed to
be entered into among Enhanced Index Distributors, LLC, as
Sponsor; Declaration Fund, as Trustee, and Declaration Service
Company as Evaluator, under the terms of which the Trust will be
created and the securities described in item Item 1(b) will be
issued, is filed as Exhibits 1.1(a) and 1.1(b) to the
Registration Statement on Form S-6 filed pursuant to the
Securities Act of 1933 relating to each series of Enhanced Index
Trust. It is expected that the Trust Indenture and Trust
Agreement will be entered into shortly prior to the filing of the
"price" amendments to such Registration Statements since the
Securities comprising the portfolio of a Series of the Trust will
be listed in the related prospectus. Each Series of Enhanced
Index Trust shall terminate within 60 days after the maturity,
redemption or other disposition of the last of the Zero Coupon
Obligations held in such series of the Trust.
(b) Furnish the dates of execution and termination of any indenture or
Agreement currently in effect pursuant to which the proceeds of
payments On securities issued or to be issued by the trust are held by
the custodian or Trustee.
Not Applicable
7. Furnish in chronological order the following information with respect to
each change of name of the trust since January 1, 1930. If the name has
never been changed, so state.
Not Applicable
8. State the date on which the fiscal year of the trust ends.
December 31
<PAGE>
Material Litigation
-------------------
9. Furnish a description of any pending legal proceedings, material with
respect to The security holders of the trust by reason of the nature of the
claim or the amount thereof, to which the trust, the depositor, or the
principal underwriter is a party or of which the assets of the trust are
the subject, including the substance of the claims involved in such
proceeding and the title of the proceeding. Furnish a similar statement
with respect to any pending administrative proceeding commenced by a
governmental authority or any such proceeding or legal proceeding known to
be contemplated by a governmental authority. Include any proceeding which,
although immaterial itself, is representative of, or one of, a group which
in the aggregate is material.
None
II. GENERAL DESCRIPTION OF THE TRUST AND SECURITIES OF THE TRUST
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General Information Concerning the Securities of the Trust and the Rights
---------------------------------------------------------------------------
of Holders
----------
10. Furnish a brief statement with respect to the following matters for each
class or Series of securities issued by the trust.
(a) Whether the securities are of the registered or bearer type.
Registered
(b) Whether the securities are of the cumulative or distributive type.
Distributive
(c) The rights of security holders with respect to withdrawal or
redemption.
(d) The rights of security holders with respect to conversion, transfer,
partial redemption, and similar matters.
For imformation relating to Items 10(a),(b) and (c), reference is
made to statements under the captions," Distributions to
Unitholders", "Dividend and Distribution Reinvestment" and
"Redemption" in Exhibit D filed herewith.
(e) If the trust is the issuer of periodic payment plan certificates, the
substance of the provisions of any indenture or agreement with respect
to lapses or defaults by security holders in making principal
payments, and with respect to reinstatement.
Inapplicable
<PAGE>
(f) The substance of the provisions of any indenture or agreement with
respect to voting rights, together with the names of any persons other
than security holders given the right to exercise voting rights
pertaining to the trust's securities or the underlying securities and
the relationship of such persons to the trust.
Unitholders shall have the right to vote with respect to the
amendment of the Trust Agreement and Termination of a Series.
(g) Whether security holders must be given notice of any change in:
(1) the composition of the assets of the trust.
(2) the terms and the conditions of the securities issued by the
trust.
(3) the provisions of any indenture or agreement of the trust.
(4) the identity of the depositor, trustee or custodian.
Reference is made to statements under the captions, " Amendment
and Termination", and " The Trust Fund " in Exhibit D filed
herewith.
(h) Whether the consent of security holders is required in order for
action to be taken concerning any change in:
(1) the composition of the assets of the trust.
(2) the terms and the conditions of the securities issued by the
trust.
(3) the provisions of any indenture or agreement of the trust.
(4) the identity of the depositor, trustee or custodian.
Reference is made to statements under the captions, " Amendment
and Termination", and "The Trust Fund " in Exhibit D filed
herewith.
(i) Any other principal feature of the securities issued by the trust or
any other principal right, privilege or obligation not covered by
subdivisions (a) to (g) or by any other item in this form.
For information relating to item 10 (i) reference is made to
statements under the captions, " The Series Portfolios" and "
Administration of the Trust", in Exhibit D filed herewith.
Information Concerning the Securities Underlying the Trust's Securities
-----------------------------------------------------------------------
11. Describe briefly the kind or type of securities comprising the unit of
specified securities in which security holders have an interest. ( If the
unit consists of a single security issued by an investment company, name
such investment company and furnish a description of the type of securities
comprising the portfolio of such investment company.)
State whether the trust owns or will own any securities of the ten brokers
who executed the largest dollar amounts of the registrant's portfolio
transactions, the ten dealers who executed the largest dollar amounts of
principal transactions with the registrant or the ten dealers who sold the
largest dollar amounts of the Registrant's shares during the registrant's
most recent fiscal year or securities of
<PAGE>
the parents of those broker dealers; identify those broker-dealers; and
state the value of the registrant's aggregate holdings of the securities of
each subject issuer as of the close of the registrant's most recent fiscal
year.
Reference is made to the captions "Summary", " The Trust" and " The
Series Portfolios" in Exhibit D filed herewith.
12. If the trust is the issuer of periodic payment plan certificates and if any
Underlying securities were issued by another investment company, furnish
the Following information for each such company:
(a) Name of company.
(b) Name of principal business address of depositor.
(c) Name and principal business address of trustee or custodian.
(d) Name and principal business address of principal underwriter.
(e) The period during which the securities of such company have been the
underlying securities.
Inapplicable
Information Concerning Loads, Fees, Charges and Expenses
--------------------------------------------------------
13. (a) Furnish the following information with respect to each load, fee,
expense or charge to which (1) principal payments, (2) underlying
securities, (3) distributions, (4) cumulated or reinvested
distributions or income, and (5) redeemed or liquidated assets of the
trust's securities are subject:
(A) the nature of such load, fee, expense or charge;
(B) the amount thereof;
(C) the name of the person to whom such amounts are paid and his
relationship to the trust;
(D) the nature of the services performed by such person in
consideration for such load, fee, expense or charge.
For information relating to Items 13(a)(A), (B), (C) and (D) reference
is made to statements under the captions " Essential Information", "
Fee Table", "Reinvestment", "Public Offering Price", "Sponsor
Profits", and "Expenses of the Series" in Exhibit D filed herewith.
(b) For each installment payment type of periodic payment plan certificate
of The trust, furnish the following information with respect to sales
load and Other deductions from principal payments.
Inapplicable
<PAGE>
(c) State the amount of total deductions as a percentage of the net amount
Invested for each type of security issued by the trust. State each
different Sales charge available as a percentage of the public
offering price and as a Percentage of the net amount invested. List
any special purchase plans or Methods established by rule or exemptive
order that reflect scheduled Variations in, or elimination of, the
sales load and identify each class of Individuals or transactions to
which such plans apply.
(d) Explain fully the reasons for any difference in the price at which
securities Are offered generally to the public, and the price at which
securities are Offered for any class of transactions to any class or
group of individuals, Including officers, directors, or employees of
the depositor, trustee Custodian or principal underwriter.
For information relating to Items 13(c) and (d) reference is made
to statements under the caption "Fee Table" and "Public Offering
Price" in Exhibit D filed herewith.
(e) Furnish a brief description of any loads, fees, expenses or charges
not covered in Item 13(a) which may be paid by security holders in
connection with the trust or its securities.
None
(f) State whether the depositor, principal underwriter, custodian or
trustee, of any affiliated person of the foregoing may receive profits
or other benefits not included in answer to Item 13(a) or 13(d)
through the sale or purchase of the trust securities or interest in
such securities, or underlying securities or interests in underlying
securities, and describe fully the nature and extent of such profits
or benefits.
For information relating to Item 13(f) reference is made to
statements under the caption " Sponsor " in Exhibit D filed
herewith.
(g) State the percentage that the aggregate annual charges and deductions
for Maintenance and other expenses of the trust bear to the dividend
and Interest income from the trust property during the period covered
by the Financial statements filed herewith.
Inapplicable.
Information Concerning the Operations of the Trust
--------------------------------------------------
<PAGE>
14. Describe the procedure with respect to applications (if any) and the
issuance and authentication to the trust's securities, and state the
substance of the provisions of any indenture or agreement pertaining
thereto.
For information relating to Item 14, reference is made to statements
under the captions "Public Offering of Units", and " Rights of
Unitholders" in Exhibit D filed herewith.
15 Describe the procedure with respect to the receipt of payments from
purchasers of the trust's securities and the handling of the proceeds
thereof, and state the substance of the provisions of any indenture or
agreement pertaining thereto.
Investors' payments will be transmitted to and received by trustee for
investment in the securities held in the portfolios of the Trust's
Series. Reference is made to Section 2.01 of Article II of Standard
Terms and Conditions of Trust ( Exhibit 1.1).
16 Describe the procedure with respect to the acquisition of underlying
securities and The disposition thereof, and state the substance of the
provisions of any indenture Or agreement pertaining thereto.
Reference is made to statements under the captions " The Trust", " The
Series Portfolios" in Exhibit D filed herewith.
17. (a) Describe the procedures with the respect to withdrawal or redemption
by security holders.
(b) Furnish the names of any persons who may redeem or repurchase, or are
required to redeem or repurchase, the trust's securities or underlying
Securities from security holders, and the substance of the provisions
of any Indenture or Agreement pertaining thereto.
(c) Indicate whether repurchased or redeemed securities will be cancelled
or may be resold.
For information relating to Items 17(a), (b) and (c), reference
is made to statements under the captions "Secondary Market for
Units", "Redemption "and "Sponsor's Secondary Market" in Exhibit
D filed herewith.
18. (a) Describe the procedure with respect to the receipt, custody and
disposition of the income and other distributable funds of the trust
and state the substance of the provisions of any indenture or
agreement pertaining thereto.
For information relating to Item 18(a) reference is made to
Statements under the captions " Distributions to Unitholders",
and "Dividend and Distributor Reinvestment" in Exhibit D filed
herewith.
<PAGE>
(a) Describe the procedure, if any, with respect to the reinvestment of
distributions to security holders and state the substance of the
provisions of any indenture or agreement pertaining thereto.
For information relating to Item 18(a) reference is made to
Statements under the caption "Distributions to Unitholders" and
"Dividend and Distribution Reinvestment" in Exhibit D filed
herewith.
(b) If any reserves or special funds are created out of income or
principal, state with respect to each such reserve or fund the purpose
and ultimate disposition thereof, and describe the manner of handling
of same.
Not Applicable
(c) Submit a schedule showing the periodic and special distributions which
have been made to security holders during the three years covered by
the financial statements filed herewith. State for each such
distribution the aggregate amount and amount per share. If
distributions from sources other than current income have been made,
identify each other source and indicate whether such distribution
represents the return of principal payments to security holders. If
payments other than cash were made, describe the nature thereof, the
account charged and the basis of determining the amount of such
charge.
Not Applicable
19. Describe the procedure with respect to the keeping of records and accounts
of the Trust, the making of reports and the furnishing of information to
security holders, And the substance of the provisions of any indenture or
agreement pertaining thereto.
Pursuant to the terms of the Trust Indenture and the Trust Agreement
the Trustee is required to maintain ledger accounts for each
Unitholder indicating the name, address and total units owned by each
holder (Section 6.02), a certified copy or a duplicate original of the
Trust Indenture and the Trust Agreement (Section 6.03), a current list
of the securities comprising the portfolio of each Series of the Trust
(Section 6.03), and cash records of the principal and income collected
in each Series of the Trust of the Fund ( Sections 3.02 and 3.03).
Additionally the Trustee is required to make such annual or other
Reports as may from time to time be required under any applicable
state or federal statute or rule or regulation thereunder (Section
6.02).
With each distribution the Unitholder is informed by the Trustee of
the total amount being distributed from the Income and Principal
Accounts (Section 3.05). Promptly after the end of each calender year
theTrustee must furnish each Unitholder with a statement setting
forth, among other things, the amounts received and deductions
therefrom in each Acocunt and the amounts distributed or otherwise
attributable to Unitholders from each account during such calendar
year ( Section 3.05).
<PAGE>
Reference is also made to statements under the captions " Statements
to Unitholders", " Administration of the Series", and " What Reports
Will Unitholders Receive".
20. State the substance of the provisions of any indenture or agreement
concerning The trust with respect to the following:
(a) Amendments to such indenture or agreement.
(b) The extension or termination of such indenture or agreement.
(c) The removal or resignation of the trustee or custodian, or the failure
of The trustee or custodian to perform its duties, obligations, and
functions.
(d) The appointment of a successor trustee and the procedure if a
successor Trustee is not appointed.
(e) The removal or resignation of the depositor, or the failure of the
depositor To perform its duties, obligations, and functions.
(f) The appointment of a successor depositor and the procedure if a
successor Depositor is not appointed.
For information relating to Items 20(a), (b), (c), (d), (e) and
(f) reference is made to statements under the captions "
Amendment and Termination", "The Sponsor", and " Administration
of the Series" in Exhibit D filed herewith.
21. (a) State the substance of the provisions of any indenture or agreement
with respect to loans to security holders.
Inapplicable
(b) Furnish a brief description of any procedure or arrangement by which
loans are made available to security holders by the depositor,
principal underwriter, trustee or custodian, or any affiliated person
of the foregoing. The following items should be covered:
(1) The name of each person who makes such agreements or arrangements
with security holders.
(2) The rate of interest payable on such loans.
(3) The period for which loans may be made.
(4) Costs or charges for default in repayment at maturity.
(5) Other material provisions of the agreement or arrangement.
<PAGE>
Inapplicable
(c) If such loans are made, furnish the aggregate amount of loans
outstanding at the end of the last fiscal year, the amount of interest
collected during the last fiscal year allocated to the depositor,
principal underwriter, Trustee or custodian or affiliated person of
the foregoing and the aggregate amount of loans in default at the end
of the last fiscal year covered by financial statements filed
herewith.
Inapplicable
22. State the substance of the provisions of any indenture or agreement with
respect to limitations on the liabilities of the depositor, trustee or
custodian, or any other party to such indenture or agreement.
For information relating to Item 22, Reference is made to statements
under the captions "Limitations on Liability" in Exhibit D filed
herewith.
23. Describe any bonding arrangement for officers, directors, partners or
employees of the depositor or principal underwriter of the trust, including
the amount of coverage and type of bond.
None
24. State the substance of any other material provisions of any indenture or
agreement concerning the trust or its securities and a description of any
other material functions or duties of the depositor, trustee or custodian
not stated in Item 10 or Items 14 to 23 inclusive.
None
III ORGANIZATION, PERSONNEL AND AFFILIATED PERSONS OF DEPOSITOR
-----------------------------------------------------------
Organization and Operations of Depositor
----------------------------------------
25. State the form of organization of the depositor of the trust, the name of
the state Or other sovereign power under the laws of which the depositor
was organized and The date of organization.
Sponsor is a corporation incorporated
26. (a) Furnish the following information with respect to all fees received by
the depositor of the trust in connection with the exercise of any
functions or duties concerning securities of the trust during the
period covered by the financial statements filed herewith.
Inapplicable
<PAGE>
(b) Furnish the following information with respect to any fee or any
participation in fees received by the depositor from any underlying
investment company or any affiliated person or investment advisor of
such company;
(1) The nature of such fee or participation
(2) The name of the person of making the payment
(3) The nature of the services rendered in consideration for such Fee
or participation
(4) The aggregate amount received during the last fiscal year Covered
by the financial statements filed herewith.
Inapplicable
27. Describe the general character of the business engaged in by the depositor
including a statement as to any business other than that of depositor of
the trust. of the depositor acts or has acted in any capacity with respect
to any investment company or companies other than the trust, state the name
or names of such company or companies, their relationship, if any, to the
trust, and the nature of the depositor's activities therewith. If the
depositor has ceased to act in such named capacity, state the date of and
circumstances surrounding such cessation.
Reference is made to statements under the caption " The Sponsor" in
Exhibit D filed herewith.
Officials and Affiliated Persons of Depositor
---------------------------------------------
28. (a) Furnish as at latest practicable date the following information with
respect to the depositor of the trust, with respect to each officer,
director, or partner of the depositor, and with respect to each
natural person directly or indirectly owning, controlling or holding
with power to vote 5% or more of the outstanding voting securities of
the depositor.
Information responsive to this item is filed by exhibit to the
related registration statement on Form S-6 under the Securities
Act of 1933 for Enhanced Index Trust (EIT) and for each
subsequent series, the same being incorporated herein as follows:
Exhibit 6.1. List of Directors and Officers of the Depositor and
other related information.
(b) Furnish a brief statement of the business experience during the last
five years of each officer, director or partner of the depositor.
Information responsive to this item is filed by exhibit to the
related registration statement on Form S-6 under the Securities
Act of 1933 for Enhanced Index Trust and for each subsequent
series, the same being incorporated herein as follows:
<PAGE>
Exhibit 6.1. List of Directors and Officers of the Depositor and
other related information.
Companies Owning Securities of Depositor
----------------------------------------
29. Furnish as at latest practicable date the following information with
respect to each company which directly or indirectly owns, controls or
holds with power to vote 5% or more of the outstanding voting securities of
the depositor.
None.
Controlling Persons
-------------------
30. Furnish as at latest practicable date the following information with
respect to any person, other than those covered by Items 28, 29 and 42, who
directly or indirectly controls the depositor.
None.
Compensation of Officers and Directors of Depositor
---------------------------------------------------
Compensation of Officers of Depositor
-------------------------------------
31. Furnish the following information with respect to the remuneration for
services paid by the depositor during the last fiscal year covered by
financial statements filed herewith.
(a) Directly to each of the officers or partners of the depositor directly
receiving the three highest amounts of remuneration:
None.
(b) Directly to all officers or partners of the depositor as a group
exclusive of persons whose remuneration is included under item 31(a),
stating separately the aggregate amount paid by the depositor itself
and the aggregate amount paid by all the subsidiaries:
None
(c) Indirectly or through subsidiaries to each of the officers or partners
of the depositor:
None.
Compensation of Directors
-------------------------
32. Furnish the following information with respect to the remuneration for
services, exclusive of remuneration reported under Item 31, paid by the
depositor during the last fiscal year covered by financial statements filed
herewith:
None
Compensation to Employees
-------------------------
33. (a) Furnish the following information with respect to the aggregate amount
of remuneration
<PAGE>
for services of all employees of the depositor (exclusive of persons
whose remuneration is reported in Items 31 or 32) who received
remuneration in excess of $10,000 during the last fiscal year covered
by financial statements filed herewith from the depositor and any of
its subsidiaries.
None.
(b) Furnish the following information with respect to the remuneration for
services paid directly during the last fiscal year covered by the
financial statements filed herewith to the following classes of
persons (exclusive of those persons covered by Item 33(a))
(1) Sales managers, branch managers, district managers and other
persons supervising the sale of registrant's securities;
(2) Salesmen, sales agents, canvassers and other persons making
solicitations but not in supervisory capacity;
(3) Administrative and clerical employees; and
(4) Others (specify). If a person is employed in more than one
capacity, classify according to predominant type of work.
None.
Compensation to Other Persons
-----------------------------
34. Furnish the following information with respect to the aggregate amount of
compensation for services paid any person (exclusive of persons whose
remuneration is reported in Items 31, 32 and 33), whose aggregate
compensation in connection with services rendered with respect tot he trust
in all capacities exceeded $10,000 during the last fiscal year covered by
financial statements filed herewith from the depositor and any of its
subsidiaries.
None.
IV. DISTRIBUTION AND REDEMPTION OF SECURITIES
-----------------------------------------
Distribution of Securities
--------------------------
35. Furnish the names of the states in which sales of the trust's securities
(A) are currently being made, (B) are presently proposed to be made, and
(C) have been discontinued, indication by appropriate letter the status
with respect to each state.
(A) Sales of the trust's securities are currently being made.
None
(B) It is proposed that initially the states in which the trust's
securities will be sold will include, but not necessarily be limited
to, the following:
Any or all 50 States of the United States and Washington, DC
(C) None
36. If sales of the trust's securities have at any time since January 1, 1936
been suspended for more than a month describe briefly the reasons for such
suspension.
Inapplicable.
37. (a) Furnish the following information with respect to each instance where
subsequent to
<PAGE>
January 1, 1937, any federal or state governmental officer, agency, or
regulatory body denied authority to distribute securities of the
trust, excluding a denial which was merely a procedural step prior to
any determination by such officer, etc. and which denial was
subsequently rescinded.
(1) Name of Officer, agency or body.
(2) Date of denial.
(3) Brief statement of reason given for denial.
(b) Furnish the following information with regard to each instance where
subsequent to January 1, 1937, the authority to distribute securities
of the trust has been revoked by any federal or state governmental
officer, agency or regulatory body.
(1) Name of officer, agency or body.
(2) Date of revocation.
(3) Brief statement of reason given for revocation.
Inapplicable.
38. (a) Furnish a general description of the method of distribution of
securities of trust.
(b) State the substance of any current selling agreement between each
principal underwriter and the trust or the depositor, including a
statement as to the inception and termination dates of the agreement,
any renewal and termination provisions, and any assignment provisions.
(c) State the substance of any current agreements or arrangements of each
principal underwriter with dealers, agents, salesmen, etc. with
respect to commissions and overriding commissions, territories,
franchises, qualifications, and revocations. If the trust is the
issuer of periodic payment plan certificates, furnish schedules of
commissions and the bases thereof. In lieu of a statement concerning
schedules of commissions, such schedules of commissions may be filed
as Exhibit A(3)(c).
For information relating to Items 38(a)(b) and (c), reference is
made to statements under the captions "Public Offering of Units",
"Public Distribution of Units","Secondary Market for the Units"
and " Distributor" in Exhibit D filed herewith.
Information Concerning Principal Underwriter
--------------------------------------------
39. (a) State the form of organization of each principal underwriter of
securities of the trust, the name of the state or other sovereign
power under the laws of which each underwriter was organized and the
date of organization.
(b) State whether any principal underwriter currently distributing
securities of the trust is a member of the National Association of
Securities Dealers, Inc.
For information relating to Items 39(a) and (b), reference is
made to the caption "Distributor" in Exhibit D filed herewith.
40. (a) Furnish the following information with respect to all fees received by
each principal underwriter of the trust from the sale of securities of
the trust and any other functions in connection therewith exercised by
such underwriter in such capacity or otherwise during the period
covered by the financial statements filed herewith.
<PAGE>
(b) Furnish the following information with respect to any fee or any
participation in fees received by each principal underwriter from any
underlying investment company or any affiliated person or investment
advisor of such company.
(1) The nature of such fee or participation.
(2) The name of the person making payment.
(3) The nature of the services rendered in consideration for such fee
or participation.
(4) The aggregate amount received during the last fiscal year covered
by the financial statements filed herewith.
None.
41. (a) Describe the general character of the business engaged in by each
principal underwriter, including a statement as to any business other
than the distribution of securities of the trust. If a principal
underwriter acts or has acted in any capacity with respect to any
investment company or companies other than the trust, state the name
or names of such company or companies, their relationship, if any, to
the trust and the nature of such activities. If a principal
underwriter has ceased to act in such named capacity, state the date
of and the circumstances surrounding such cessation.
Declaration Distributors, Inc.( "Declaration Distributors") the
principal underwriter for the Series of the Trust is a registered
broker-dealer and a member of The National Association of
Securities Dealers, Inc. The offer and sale of investment company
securities is the sole business of Declaration Distributors. It
presently serves as principal underwriter for Declaration Fund, a
series investment company and The Santa Barbara Group of Mutual
Funds, The Shepherd Street Fund, StockCar Stocks Index Fund, The
Henssler Equity Fund, The Noah Fund and The Quaker Family of
Funds. Declaration Distributors formerly served as principal
underwriter for The Michigan Heritage Fund.
(b) Furnish as at latest practicable date the address of each branch
office of each principal underwriter currently selling securities of
the trust and furnish the name and residence address of the person in
charge of such office.
Inapplicable.
(c) Furnish the number of individual salesmen of each principal
underwriter through whom any of the securities of the trust were
distributed for the last fiscal year of the trust covered by the
financial statements filed herewith and furnish the aggregate amount
of compensation received by such salesmen in such year.
Inapplicable.
42. Furnish as at latest practicable date the following information with
respect to each principal underwriter currently distributing securities of
the trust and with respect to each of the officers, directors or partners
of such underwriter.
Inapplicable.
43. Furnish, for the last fiscal year covered by the financial statements filed
herewith, the amount of brokerage commissions received by any principal
underwriter who is a member of a national
<PAGE>
securities exchange and who is currently distributing the securities of the
trust or effecting transactions for the trust in the portfolio securities
of the trust.
Inapplicable.
Offering Price or Acquisition Valuation of Securities of the Trust
------------------------------------------------------------------
44. (a) Furnish the following information with respect to the method of
valuation used by the trust for purpose of determining the offering
price to the public of securities issued by the trust or the valuation
of shares or interests in the underlying securities acquired by the
holder of a periodic payment plan certificate:
(1) The source of quotations used to determine the value of portfolio
securities.
(2) Whether opening, closing, bid, asked or any other price is used.
(3) Whether price is as of the day of sale or as of any other time.
(4) A brief description of the methods used by registrant for
determining other assets and liabilities including accrual for
expenses and taxes (including taxes on unrealized appreciation).
(5) Other items which registrant adds to the net asset value in
computing offering price of its securities.
(6) Whether adjustments are made for fractions:
(i) before adding distributor's compensation (load);
(ii) after adding distributor's compensation (load).
For information relating to Item(a)(1), (2), (3), (4), (5) and
(6), reference is made to the statements under the captions
"Public Offering Price"and "Evaluation" in Exhibit D filed
herewith.
(b) Furnish a specimen schedule showing the components of the offering
price of the trust's securities as at the latest practicable date.
Inapplicable
(c) If there is any variation in the offering price of the trust's
securities to any person or classes of persons other than
underwriters, state the nature and amount of such variation and
indicate the person or classes of persons to whom such offering is
made.
Inapplicable.
44. Furnish the following information with respect to any suspension of the
redemption rights of the securities issued by the trust during the three
fiscal years covered by the financial statements filed herewith:
(a) by whose action redemption rights were suspended.
(b) the number of days' notice given to security holders prior to
suspension of redemption rights
(c) reason for suspension.
<PAGE>
(d) period during which suspension was in effect.
Inapplicable.
Redemption Valuation of Securities of the Trust
-----------------------------------------------
46. (a) Furnish the following information with respect to the method of
deterring the redemption or withdrawal valuation of securities issued
by the trust:
(1) The source of quotations used to determine the value of portfolio
securities.
(2) Whether opening, closing, bid, asked or any other price is used.
(3) Whether price is as of the day of sale or as of any other time.
(4) A brief description of the methods used by registrant for
determining other assets and liabilities including accrual for
expenses and taxes (including taxes on unrealized appreciation).
(5) Other items which registrant deducts from the net asset value in
computing redemption value of its securities.
(6) Whether adjustments were made for fractions.
For information relating to Items 46(a), (1), (2),(3),(4),(5) and
(6), reference is made to statements under the caption
"Redemption" in Exhibit D filed herewith.
(b) Furnish a specimen schedule showing the components of the redemption
price to the holders of the trust's securities as at the latest
practicable date.
Inapplicable.
Purchase and Sale of Interests in Underling Securities from and to Security
---------------------------------------------------------------------------
Holders
-------
47. Furnish a statement as to the procedure with respect to the maintenance of
a position in the underlying securities or interests in the underlying
securities, the extent and nature thereof and the person who maintains such
a position. Include a description of the procedure with respect tot he
purchase of underlying securities and interests in the underlying
securities to other security holders. State whether the method of valuation
of such underlying securities or interests in underlying securities differs
from that set forth in Items 44 and 46. If any item of expenditure included
in the determination of the valuation is not or may not actually be
incurred or expended, explain the nature of such item and who may benefit
from the transaction.
There is no procedure for the purchase or sale of interests in
underlying securities.
INFORMATION CONCERNING THE TRUSTEE OR CUSTODIAN
- -----------------------------------------------
48. Furnish the following information as to each trustee or custodian of the
trust.
(a) Name and principal business address.
Declaration 555 North Lane Suite 6160
Conshocken, PA 19428
<PAGE>
(b) Form of organization.
Trust
(c) State or other sovereign power under the laws of which the trustee or
custodian was organized.
Pennsylvania
(d) Name of governmental supervising or examining authority.
None
49. State the basis for payment of fees or expenses of the trustee or custodian
for services rendered with respect to the trust and its securities, and the
aggregate amount thereof for the last fiscal year. Indicate the person
paying such fees or expenses. If any fees or expenses are prepaid, state
the unearned amount.
Inapplicable
50. State whether the trustee or custodian or any other person has or may
create a lien on the assets of the trust, and if so, give full particulars,
outlining the substance of the provisions of any indenture or agreement
with respect thereto.
Reference is made to statements under the caption "Expenses of the
Series" in Exhibit D filed herewith.
VI. INFORMATION CONCERNING INSURANCE OF HOLDERS OF SECURITIES
---------------------------------------------------------
51. Furnish the following information with respect to insurance of holders of
securities:
(a) The name and address of the insurance company.
(b) The types of policies and whether individual or group policies.
(c) The types of risks insured and excluded.
(d) The coverage of the policies.
(e) The beneficiaries of such policies and the uses to which the proceeds
of the policies and the uses to which the proceeds of the policies
must be put.
(f) The terms and manner of cancellation and of reinstatement.
(g) The method of determining the amount of premiums to be paid by holders
of securities.
(h) The amount of aggregate premiums paid to insurance company during the
last fiscal year.
(i) Whether any person other than the insurance company receives any part
of such premiums, the name of each such person and the amounts
involved, and the nature of the services rendered therefor.
(j) The substance of any other material provisions of any indenture or
agreement of the trust relating to insurance.
None.
VII. POLICY OF REGISTRANT
--------------------
<PAGE>
52. (a) Furnish the substance of the provisions of any indenture or agreement
with respect to the conditions upon which and the method of selection
by which particular portfolio securities must or may be eliminated
from assets of the trust or must or may be replaced by other portfolio
securities. If an investment advisor or other person is to be employed
in connection with such selection, elimination or substitution, state
the name of such person, the nature of any affiliation to the
depositor, trustee or custodian and any principal underwriter, and the
amount of remuneration to be received for such services. If any
particular person is not designated in the indenture or agreement,
describe briefly the method of selection of such person.
Reference is made to statements under the caption "The Trust" and
"The Series Portfolios" .in Exhibit D
(b) Furnish the following information with respect to each transaction
involving the elimination of any underlying security during the period
covered by the financial statements filed herewith:
(1) Title of security.
(2) Date of elimination.
(3) Reasons for elimination.
(4) The use of the proceeds from the sale of the eliminated security.
(5) Title of security substituted, if any.
(6) Whether depositor, principal underwriter, trustee or custodian or
any affiliated person of the foregoing were involved in the
transaction.
(7) Compensation or remuneration received by each such person
directly or indirectly as a result of the transaction.
Inapplicable.
(c) Describe the policy of the trust with respect to the substitution and
elimination of the underlying securities of the trust with respect to:
(1) the grounds for elimination and substitution;
(2) the type of securities which may be substituted for any
underlying security;
(3) whether the acquisition of such substituted security or
securities would constitute the concentration of investment in a
particular industry or group of industries or would conform to a
policy of concentration of investment in a particular industry or
group of industries;
(4) whether such substituted securities may be the securities of
another investment company; and
(5) the substance of the provisions of any indenture or agreement
which authorize or restrict the policy of the registrant in this
regard.
For information relating to Items 52(c)(1), (2), (3), (4), and
(5), reference is made to statements under the caption "The Trust
Fund" and "Investment Supervision"" in Exhibit D filed herewith.
(d) Furnish a description of any policy (exclusive of policies covered by
paragraphs (a) and (b) herein) of the trust which is deemed a matter
of fundamental policy and which is elected to be treated as such.
Inapplicable.
<PAGE>
Regulated Investment Company
----------------------------
53. (a) State the taxable status of the trust.
For information relating to item 53(a) reference is made to
statements under the caption "Federal Tax Status" in Exhibit D
(b) State whether the trust qualified for the last taxable year as a
regulated investment company as defined in Section 851 of the Internal
Revenue Code of 1954, and state its present intention with respect to
such qualifications during the taxable year in which it commences
operation.
The trust was not in existence for the last taxable year and its
present intention is to qualify as a regulated investment company
for the current taxable year.
VIII. FINANCIAL AND STATISTICAL INFORMATION
-------------------------------------
54. If the trust is not the issuer of periodic payment plan certificates,
furnish the following information with respect to each class or series of
its securities:
- --------------------------------------------------------------------------------
As at the end of each of registrant's past 10 fiscal years
- --------------------------------------------------------------------------------
Dividends paid
per share (if)
Total number of other than
Year shares Asset value per share cash, explain)
- --------------------------------------------------------------------------------
Not applicable, as no securities issued by the registrant are outstanding
at the date hereof.
55. If the trust is the issuer of periodic payment plan certificates, a
transcript of a hypothetical account shall be filed in approximately the
following form on the basis of the certificate calling for the smallest
amount of payments. The schedule shall cover a certificate of the type
currently being sold, assuming that such certificate had been sold at a
date approximately ten years prior to the date of registration or at the
approximate date of organization of the trust.
The trust is not the issuer of periodic payment plan certificates.
56. If the trust is the issuer of periodic payment plan certificates, furnish
by years, for the period covered by the financial statements filed herewith
in respect of certificates sold during such period, the following
information for each fully paid type and each installment payment type of
periodic payment plan certificate currently being issued by the trust.
The trust is not the issuer of periodic payment plan certificates.
57. If the trust is the issuer of periodic payment plan certificates, furnish
by years for the period covered by the financial statements filed herewith
the following information for each installment payment type of periodic
payment plan certificate currently being issued by the trust.
The trust is not the issuer of periodic payment plan certificates.
<PAGE>
FINANCIAL STATEMENTS
- --------------------
Financial Statements of the Trust
- ---------------------------------
None.
Financial Statements of the Depositor
- -------------------------------------
None.
EXHIBITS
- --------
Exhibit A(1)
- ------------
Form of Proposed Standard Terms and Conditions of Trust and Trust Agreement
between he Depositor, the Trustee and the Evaluator.
Exhibit A(3)(a)
- ---------------
Form of Principal Underwriting Agreement between the Trust and Declaration
Distributors, Inc.- to be supplied by amendment
Exhibit A(4)
- ------------
Form of Investment Company Services Agreement between the Trust and
Declaration Service Company for the provision of record keeping services
Exhibit A(5)
- ------------
Not applicable
Exhibit A(6)
- ------------
Copy of Certificate of Incorporation and By-Laws of Enhanced Index
Distributors, LLC, Depositor- to be supplied by amendment
Exhibit D
- ---------
Copy of Prospectus filed as part of the Registration Statement on Form S-6
Enhanced Index Trust (EIT).
Exhibit E
- ---------
Statement of business of Depositor, officials and affiliates of the
Depositor and company affiliates and control persons of the Depositor- to
be supplied by amendment.
<PAGE>
Prospectus ,2000
UNTERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to file
with the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the commission heretofore or hereafter duly adopted pursuant
to authority conferred in that section.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents.
The facing sheet
The Prospectus
The Signatures
The following exhibits.
A.1. Trust Agreement. Reference is made to Exhibit A.1 to the Investment Company
Act Registration Statement on Form N-8B-2 for Enhanced Index Trust (EIT).
3.1 Opinion of counsel to the Sponsor as to legality of the securities being
registered including a consent to the use of its name under "Legal
Opinions" in the Prospectus to be supplied by Amendment.
<PAGE>
S-1
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement to be signed on its behalf by the undersigned thereunto duly
authorized, in the City of Conshohocken, and State of Pennsylvania, on the 15th
day of February 2000.
ENHANCED INDEX TRUST (EIT)
Registrant
By: Enhanced Index Distributors, LLC
Depositor
By: /s/ Anthony Fischer
-----------------------
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below on February 15, 2000 by the following persons,
who constitute a majority of the Board of Directors of Enhanced Index
Distributors of Enhanced Index Distributors, LLC.
SIGNATURE TITLE
/s/ Anthony Fischer Chairman of the Board of Directors
/s/ Terence P. Smith President, Secretary, Treasurer
and Director
/s/ Michael T. Sherzan Director
STANDARD TERMS AND CONDITIONS OF TRUST
For
ENHANCED INDEX TRUST (EIT)
Blue Chip 30 - Enhanced Index Trust (EIT)
Large Cap 500 - Enhanced Index Trust (EIT)
Technology 100 - Enhanced Index Trust (EIT)
(and subsequent Series)
Effective: ___________________, 2000
Between
Enhanced Index Distributors LLC
Depositor
Declaration Fund
Trustee
Declaration Service Company
Evaluator
Portfolio Supervisor
<PAGE>
TABLE OF CONTENTS
PREAMBLE..................................................................
ARTICLE I - DEFINITIONS...................................................
ARTICLE II - DEPOSIT OF SECURITIES; ACCEPTANCE OF TRUST...
Sec. 2.01. Deposit of Securities.....................................
Sec. 2.02. Acceptance of Trust.......................................
Sec. 2.03. Issuance of Units.........................................
Sec. 2.04. Guidelines for Selection of Securities....................
Sec. 2.05. Separate Trusts...........................................
ARTICLE III - ADMINISTRATION OF FUND......................................
Sec. 3.01. Initial Cost..............................................
Sec. 3.02. Income Account............................................
Sec. 3.03. Principal Account.........................................
Sec. 3.04. Reserve Account...........................................
Sec. 3.05. Distribution Statements...................................
Sec. 3.06. Sale of Securities........................................
Sec. 3.07. Counsel...................................................
Sec. 3.08. Notice and Sale by Trustee................................
Sec. 3.09. Trustee not Required to Amortize..........................
Sec. 3.10. Liability of Depositor....................................
Sec. 3.11. Notice to Depositor.......................................
Sec. 3.12. Replacement Securities; Replacement Contract
Obligations; Substitute Securities........................
Sec. 3.13. Portfolio Supervisor......................................
Sec. 3.14. Expenses Borne by the Trustee.............................
ARTICLE IV - EVALUATION OF SECURITIES; EVALUATOR..........................
Sec. 4.01. Evaluation by Evaluator...................................
Sec. 4.02. Information for Unit holders..............................
Sec. 4.03. Compensation of Evaluator.................................
Sec. 4.04. Liability of Evaluator....................................
Sec. 4.05. Resignation and Removal of Evaluator;
Successor.................................................
<PAGE>
ARTICLE V - EVALUATION, REDEMPTION, PURCHASE, TRANSFER,
INTERCHANGE OR REPLACEMENT OF UNITS...........................
Sec. 5.01. Trust Evaluation..........................................
Sec. 5.02. Redemptions by Trustee; Purchases
By Depositor..............................................
Sec. 5.03. Transfer or Interchange of Units..........................
ARTICLE VI - TRUSTEE......................................................
Sec. 6.01. General Definitions of Trustee's Liabilities,
Rights and Duties.........................................
Sec. 6.02. Books, Records and Reports................................
Sec. 6.03. Indenture and List of Securities on File..................
Sec. 6.04. Compensation..............................................
Sec. 6.05. Removal and Resignation of Trustee; Successor............
Sec. 6.06. Qualifications of Trustee.................................
ARTICLE VII - RIGHTS OF UNITHOLDERS.......................................
Sec. 7.01. Beneficiaries of Trust....................................
Sec. 7.02. Rights, Terms and Conditions..............................
ARTICLE VIII - ADDITIONAL COVENANTS; MISCELLANEOUS
PROVISIONS.................................................
Sec. 8.01. Amendments................................................
Sec. 8.02. Termination...............................................
Sec. 8.03. Construction..............................................
Sec. 8.04. Written Notice............................................
Sec. 8.05. Severability..............................................
Sec. 8.06. Dissolution of Depositor Not to Terminate.................
<PAGE>
FORM of
Enhanced Index Trust ( EIT )
STANDARD TERMS AND CONDITIONS OF TRUST
For Blue Chip 30 - Enhanced Index Trust ( EIT )
Large Chip 500 - Enhanced Index Trust ( EIT )
Technology 100 - Enhanced Index Trust ( EIT )
Effective: _________________, 2000
These Standard Terms and Conditions of the Trust effective ____________,
2000 are executed between Enhanced Index Distributors, LLC as Depositor,
Declaration Fund, as Trustee, and Declaration Service Company, as Evaluator.
WITNESSETH THAT:
In consideration of the premises and of the mutual agreements herein
contained, The Depositor, the Trustee and the Evaluator agree as follows:
INTRODUCTION
These Standard Terms and Conditions of Trust, effective ______________,
2000, Shall be applicable to Blue Chip 30 - Enhanced Index Trust, Large Cap 500-
Enhanced Index Trust, Technology 100 - Enhanced Index Trust and all subsequent
Series Established after the date of effectiveness hereof, as provided in this
paragraph. For Blue Chip 30 - Enhanced Index Trust ( EIT) and all subsequent
Series established after the Date of effectiveness hereof to which theses
Standard Terms and Conditions of Trust, Effective _____________, 2000, are to be
applicable, the Depositor, the Trustee and the Evaluator shall execute a Trust
Agreement, incorporating by reference these Standard Terms and Conditions of
Trust, effective _______________, 2000, and designating Any exclusion from or
exception to such incorporation by reference for the purposes of these Series or
variation of the terms hereof for the purpose of those Series and Specifying for
those Series ( I ) the Securities deposited in trust and the number of Units
delivered by the Trustee in exchange for the Securities pursuant to Section
2.03, (ii) the fractional undivided interest represented by each Unit and (iii)
the number of Units of the Series.
<PAGE>
NOW, THEREFORE, in consideration of the premises and of the mutual
Agreements herein contained, the Depositor, the Trustee and the Evaluator agree
As follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Whenever used in this Indenture the following words and
phrases, unless the context clearly indicates otherwise, shall have the
following:
(1) "Depositor" shall mean Enhanced Index Distributors, LLC and its
successors in interest, or any successor depositor appointed as
hereinafter provided.
(2) "Trustee" shall mean Declaration Fund, or any successor trustee
appointed as hereinafter provided.
(3) "Evaluator" shall mean Declaration Service Company, and its successors
in interest, or any successor evaluator appointed as hereinafter
provided.
(4) "Business Day" shall mean any day other than a Saturday, Sunday or a
legal holiday or a day on which banking institutions are authorized by
law or executive order to close.
(5) "Contract Obligations" shall mean Securities which are to be acquired
by the Trust including any purchased on a when, as and if issued
basis, pursuant to purchase contracts which have been assigned to the
Trustee.
(6) "Date of Deposit" shall have the meaning assigned to it in the Trust
Agreement.
(7) "Distribution Date" shall have the meaning assigned to it in the
Prospectus.
(8) "Indenture" shall mean these Standard Terms and Conditions of Trust as
originally executed or, if amended as hereinafter provided, as so
amended, together with the Trust Agreement creating a particular
series of the Fund.
(9) "Percentage Ratio" shall mean, for each Trust which will issue
Additional Units pursuant to Section 2.03 hereof, the percentage
relationship existing On the Initial Date of Deposit between (1) the
maturity value per Unit of the Zero Coupon Obligations and (2) the
number of Mutual Fund shares per Unit. Such Percentage Ratio Shall be
calculated and included in each Trust Agreement and each Supplemental
Trust Agreement.
(10) "Prospectus" shall mean the prospectus relating to the Trust filed
with the Securities and Exchange Commission under the Securities Act
of 1933, as amended, and dated the date of the Trust Agreement.
(11) "Reinvestment Program" shall mean the program for reinvestment of
principal, income and capital gains payments payable to a Unit holder,
in additional Units of a Series then offered by the Depositor.
(12) "Replacement Contract Obligation" shall have the meaning assigned to
it in Section 3.12 hereof.
<PAGE>
(13) "Replacement Security" shall have the meaning assigned to it in
Section 3.12 hereof.
(14) "Securities" shall mean Zero Coupon Obligations, Future Contracts and
Options deposited in the Trust, which Securities are listed in
Schedule A to the Trust Agreement or are Securities deposited in the
Trust Fund pursuant to Section 2.01(b) hereof, and Replacement
Securities on Replacement Contract obligations acquired pursuant to
Section 3.12 hereof, as may from time to time construe to be held as
part of the Trust Fund.
(15) "Supplemental trust Agreement" shall mean an amendment or supplement
to the Indenture executed pursuant to Section 2.01(b) for the purpose
of depositing additional Securities in the Trust Fund and issuing
additional Units.
(16) "Trust Fund" or "Fund" shall mean the collective Series created by the
Trust Agreement, which shall consist of Securities held pursuant and
subject to the Indenture, together with all undistributed income or
other received or accrued Thereon, any undistributed cash held in the
Income and Principal Accounts or Otherwise realized from the sale,
redemption, liquidation or maturity thereof. Such amounts as may be on
deposit in the Reserve Account hereinafter Established shall be
executed from the Trust Fund.
(17) "Trust" or "Trusts" shall mean the separate Series created by the
Trust Agreement, the Securities constituting the portfolio of which
are listed in Schedule A attached to the Trust Agreement.
(18) "Trust Agreement" shall mean the Trust Agreement for the particular
series of the Fund into which these Standard Terms and Conditions is
incorporated.
(19) "Unit" shall mean each Unit of fractional undivided interest in and
ownership of the Trust which shall be initially equal to the fraction
specified in the Trust Agreement, the denominator of which fraction
shall be (1) increased by the number of any additional Units issued
pursuant to Section 2.03 hereof and (2) decreased by the number of any
Units redeemed as provided in Section 5.02 hereof. Whenever reference
is made herein to the "interest" of a Unit holder in the Trust or in
the Income and Principal Accounts, it shall mean such fractional
undivided interest represented by the number of Units held of record
by such Unit Holder.
(20) "Unit holder" shall mean the registered holder of any Unit, as
recorded on the registration books of the Trustee.
(21) "Zero Coupon Obligations" shall mean any zero coupon bonds, i.e.,
obligations which accrue but do not pay income currently, are sold at
a future date, issued by the U.S. government which are deposited in a
Trust Fund.
(22)
(23) Words importing singular number shall include the plural number In
each case and vice versa, and words importing persons shall include
corporations And associations, as well as natural persons.
(24) The words "herein" "hereby", "herewith", "hereof", "hereinafter",
"hereunder", "hereinabove", "hereafter", "heretofore" and similar
words or phrases of reference and association shall refer to this
Indenture in its entirety.
<PAGE>
ARTICLE II
DEPOSIT OF SECURITIES; ACCEPTANCE OF TRUST;
SEPARATE TRUSTS
SECTION 2.01. DEPOSIT OF SECURITIES. (a) The Depositor, on the Date of the
Trust Agreement, has deposited with the Trustee in trust the Securities listed
in Schedule A to the Trust Agreement in bearer form or duly endorsed in blank or
accompanied by all necessary instruments of assignment and transfer in proper
form to deliver the Securities listed on said Schedule A to the Trustee which
were not actually delivered concurrently with the execution and delivery of the
Trust Agreement within days after said execution and delivery, or if the
contract to buy such Securities between the Depositor and seller is terminated
by the seller thereof for any reason beyond the control of the Depositor, the
Depositor shall forthwith take the remedial action specified in Section 3.12.
(b) From time to time following the Initial Date of Deposit, the Depositor
is hereby authorized, in its discretion, to assign, convey to and
deposit with the Trustee additional Securities, duly endorsed in blank
or accompanied by all necessary instruments of assignment and transfer
in proper form, to be held, Managed and applied by the Trustee as
herein provided. Such deposit of additional Securities shall be made,
in each case, shall ensure that each deposit of additional Securities
pursuant to this Section shall be in the identical ratio as the
Percentage Ratio for such Securities as is specified in the Trust
Agreement for each Trust and The Depositor shall ensure that such
Securities are identical to those deposited on The Initial Date of
Deposit.
(c) The Trustee may deposit a certified check or checks, cash or cash
equivalents, or cash drawn on the irrevocable letter or letters of
credit deposited by the Depositor to purchase Securities or Contract
Obligations in a non-interest bearing account for the Trust.
(d) In the event that the purchase of Securities or contract obligations
pursuant to any contract shall not be consummated in accordance with
said contract, and the depositor does not, on or before the next
following Distribution Date, direct the Trustee to utilize monies
deposited for the purchase of replacement Securities or Replacement
Contract Obligations, the Trustee shall credit to the Principal
Account referred to in Section 3.03 the monies, or, if applicable, the
monies drawn on an irrevocable letter of credit, deposited by the
depositor for the purpose of such purchase. Such funds shall be
distributed pursuant to Section 3.05 to Unit holders of record as of
the Record Date next following the failure of consummation of such
purchase. The Depositor shall cause to be refunded to each unit holder
his pro rata portion of the sales charge levied on the sale of Units,
if any, to such Unit holder attributable to such Failed Contract
Obligation. The Depositor shall also pay to the Trustee, for
distribution to the Unit holders, interest on such failed Security or
Failed Contract Obligation at the rate of 5% per annum or the coupon
rated thereon, whichever is greater, to the date the Depositor is
notified of the failure.
(e) The Trustee is hereby irrevocably authorized to effect registration or
transfer of the Securities in fully registered form to the name of the
Trustee or to the name of its nominee.
SECTION 2.02. ACCEPTANCE OF TRUST. The Trustee hereby declares it holds and
will hold each Trust as Trustee in trust upon the trusts herein created for the
use and benefit of the Unit holders, subject to the terms and conditions of this
Indenture.
<PAGE>
SECTION 2.03. ISSUANCE OF UNITS. (a) The Trustee hereby acknowledges
receipt of the deposit of the Securities listed in Schedule A to the Trust said
deposit, has recorded on its books the ownership, by the Depositor or such other
person or persons as may be indicated by the Depositor, of the aggregate number
of Units specified in the Trust Agreement and has delivered, or on the order of
the Depositor will deliver, in exchange for such Securities, documentation
evidencing the ownership of the number of Units specified substantially in the
form above recited, representing the Supplemental Trust Agreement, it shall
acknowledge that the additional Securities identified therein have been
deposited with it by recording on its books the ownership, by the depositor or
such other person or persons as may be indicated by the Depositor, of the
aggregate number of Units to be issued in respect of such additional Securities
so deposited, and Shall, if so requested, execute documentation substantially in
the form above recited representing the ownership of an aggregate number of
those units. In the event that the Depositor determines that the actual
Percentage Ratio between the Zero Coupon Obligations and the other Securities is
Different from the original Percentage Ratio established on the Initial Date of
Deposit, no additional Securities may be deposited in the Trust nor may
additional Units be issued.
SECTION 2.04 GUIDELINES FOR SELECTION OF SECURITIES. In selecting
Securities for deposit in the Trust, the following factors, among others shall
be considered by the Depositor: (a) maturities or mandatory payment dates
consistent with the life of the Trust, (b) prices and yields of the Securities
relative to other securities of comparable quality and maturity, and (c) types
of such Securities available. In addition to the considerations listed above,
the Depositor may utilize other factors which it considers applicable or
pertinent, in its selection of Securities for deposit in the Trust.
SECTION 2.05 SEPARATE TRUSTS. The Trusts Created by this Indenture are
separate and distinct trusts for all purposes and the assets of one Trust may
not be commingled with the assets of any other nor shall the expenses of any
Trust be charged against the other.
ARTICLE III
ADMINISTRATION OF FUND
SECTION 3.01. INITIAL COST. The cost of the initial preparation and
execution of the Indenture, the initial fees of the Trustee, the fees of the
Evaluator during the initial Offering period, and other reasonable expenses in
connection therewith shall be paid By the Depositor; provided, however, that the
liability on the part of the Depositor For such initial costs, fees and expenses
shall not include any fees, costs or other expenses incurred in connection
herewith after the execution of the Trust Agreement and the deposit referred to
in Section 2.01.
SECTION 3.02. Income Account. The Trustee shall cCollect the income from
the Securities in each Trust as such becomes payable (including all monies
liquidated damages for default or breach of any condition or term of the
Securities or of the underlying instrument relating to any Securities and other
income attributable to a Failed Security or a Failed Contract Obligation for
which no Replacement Security or Replacement Contract Obligation has been
obtained pursuant to Section 3.12 hereof) and credit such income to separate
account for each Trust to be known as the "Income Account".
SECTION 3.03. PRINCIPAL ACCOUNT. All monies received by the Trustee in
respect of the Securities, other than amounts credited to the Income account,
shall be credited to a separate account to be known as the "Principal Account"
(except for (I) monies deposited by the Depositor for purchase of Securities or
contract Obligations pursuant to Section 2.01, which shall be separately held in
trust by the Trustee for such purpose and shall not be credited to the Principal
Account unless and until the Depositor notifies the Trustee that the purchase of
such Securities
<PAGE>
Or Contract Obligations has failed and no other Replacement Securities or
replacement Contract Obligations will be substituted therefor pursuant to
Section 3.12 hereof).
SECTION 3.04. RESERVE ACCOUNT. From time to time, the Trustee shall
withdraw from the cash on deposit in the Income Account or the Principal Account
of the appropriate Trust such amounts as it, in its sole discretion, shall deem
requisite to establish a reserve for any applicable taxes or other governmental
charges that may be payable out of the Trust. Such amounts so withdrawn shall be
credited to a separate account for each Trust Which shall be known as the
"Reserve Account". The Trustee shall not be required to distribute to the Unit
holders any of the amounts in the Reserve Account; provided, however, that if it
shall, in its sole discretion, determine that such amounts are no longer
necessary for the payment of any applicable taxes or other governmental charges,
then it shall promptly deposit such amounts in the account from which withdrawn,
or if the Trust shall have terminated or shall be in the Process of termination,
the Trustee shall distribute same in accordance with Section 8.02(d) to each
Unitholder such holder's interest in the Reserve Account.
On or immediately prior to each Distribution Date, the Trustee shall
satisfy itself as to the adequacy of the Reserve Account, making any further
credits thereto as may appear appropriate in accordance with Section 3.04 and
shall then with respect to each Trust:
(a) deduct from the Income Account or, to the extent funds are not
available in such Account, from the Principal Account and pay to
itself individually the amounts that it is at the time entitled to
receive pursuant to Section 6.04;
(b) deduct from the Income Account or, to the extent funds are not
available in such Account, from the Principal Account and pay to the
Evaluator the amount that it is at the time entitled to receive
pursuant to Section 4.03;
(c) deduct from the Income Account or, to the extent funds are not
available in such Account, from the Principal Account and pay to
counsel, as hereinafter provided for, an amount equal to unpaid fees
and expenses, if any, of such counsel pursuant to Section 3.07, as
certified to by the Depositor; and
II.
(a) On each Distribution Date, the Trustee shall distribute an amount per
Unit equal to such Unit holder's Income Distribution (as defined
below) computed as of the close of business on the Record Date
immediately preceding such Distribution Date plus such Unit holder's
pro rata share of the balance of the Principal Account (except for
monies on deposit therein required to purchase Contract Obligations)
to each Unit holder of record at the close of business on the
preceding Record Date. The Trust shall provide the following
distribution elections: (1) Distributions to be made by mail addressed
to the post office address of the Unit holder as it appears on the
registration books of the Trustee, (2) distributions to be made to the
designated agent for any other reinvestment program when, as and if
available to the Unit holder through the Depositor. If no election is
offered by the Depositor or if no election is specified by the Unit
holder at the time or purchase of any Unit, Distribution of principal
and income and capital gains, if any, shall be invested as provided in
(2) above. Once a distribution election has been chosen by the Unit
holder, such election shall remain in effect until changed by the Unit
holder. Such change of election may be made by notification thereof to
the Trustee at any time in form satisfactory to the Trustee. A
transferee of any Unit may make his distribution election in the
manner as set forth above. The Trustee shall be entitled to receive in
writing a notification from the Unit holder as to his or her change of
address.
<PAGE>
(b) For the purposes of this Section 3.05, the Unit holder's Income
distribution shall be equal to such Unit holder's pro rata share of
the cash balance (other than amortized discount) in the Income Account
computed as of the close of business on the Record Date immediately
preceding such Income Distribution.
(c) The amount to be so distributed to each Unit holder shall be that pro
rata share of the balance of the Income and Principal Accounts,
computed as set forth herein, as shall be represented by the Units
registered in the name of such Unit holder. In the computation of each
such pro rata share, fractions of less than one cent shall be omitted.
After any such distribution provided for above, any cash balance
remaining in the Income Account or Principal Account shall be held in
the same manner as other amounts subsequently deposited in each of
such accounts, respectively.
(d) Principal and other income attributable to Securities or Contract
obligations with the Depositor shall have declared by written notice
to the Trustee to either be Failed Securities or Failed Contract
Obligations for which Replacement Securities or Replacement Contract
Obligations are not to be substituted pursuant to Section 3.12 hereof
shall be distributed not more than 60 days after the receipt of such
notice by the Trustee or at such earlier time in such manner as the
Trustee in its sole discretion deems to be in the best interest of
Unit holders.
(e) For the purpose of distributions herein provided, the Unit holders of
record on the registration books of the Trustee at the close of
business on each Record Date shall be conclusively entitled to such
distribution, and no liability shall attach to the Trustee by reason
of payment to any Unit holder of record. Nothing herein shall be
construed to prevent the payment of amounts from the Income Account
and Principal Account to individual Unit holders by means of one
check, draft or other instrument or device provided that the
appropriate statement of such distribution shall be furnished
therewith as provided in Section 3.05 hereof.
SECTION 3.05. DISTRIBUTION STATEMENTS. With each distribution from the
Income or Principal Accounts of a Trust, the Trustee shall set forth, either in
the instrument by means of which payment of such distribution from each account,
expressed as a dollar amount per Unit of such Trust. The Trustee shall also
furnish each Unit holder with a change of address form as part of each statement
and, at such times as shall be directed by the Depositor, an election card
whereby the Unit holder may elect to participate in the Reinvestment Program.
Within a reasonable period of time after the last business day of each
calendar year, the Trustee shall furnish to each person who at any time during
such calendar year was a Unit holder of a Trust a statement setting forth, with
respect to such calendar year and with respect to such Trust:
(A) as to the Income Account:
(1) the amount of income received or accrued on the Securities
(including amounts received as a portion of the proceeds of any
disposition of Securities),
(2) the amounts paid from the Income Account for purchases of
Securities pursuant to Section 3.12 and for redemptions pursuant
to Section 5.02,
(3) the deductions from the Income Account for payment into the
Revenue Fund.
<PAGE>
(4) the deductions for applicable taxes and fees and expenses of the
Trustee, the Evaluator, counsel, auditors and any expense paid by
the Trust pursuant to Section 3.05, and
(5) the amounts reserved for purchases of Contract Obligations or for
purchases made pursuant to Section 3.08; and
(6) the balance remaining after such distributions and deductions,
expressed both as a total dollar amount and as a dollar amount
per 1,000 Units outstanding on the last Business Day of sucj
calendar year;
(B) as to Principal Account:
(1) the date of principal payments and prepayments due to sale,
maturity, redemption, liquidation or disposition of any of the
Securities and the net proceeds received therefrom, separately
stating amounts attributable to short-term capital gains
excluding any portion thereof credited to the Income Account,
(2) the deductions from the Principal Account, if any, for payment of
applicable taxes and fees and expenses of the Trustee, the
Evaluator, counsel, auditors and any expenses paid by the Trust
under Section 3.05;
(3) the amount paid for purchases of Securities pursuant to Section
3.12 and for redemptions pursuant to Section 5.02,
(4) the deductions from the Principal Account for payments into the
Reserve Account;
(5) the amounts reserved for purchases of Contract Obligations or for
purchases made pursuant to Section 3.12; and
(6) the balance remaining after such distributions and deductions,
expressed both as a total dollar amount and as a dollar amount
per Unit outstanding on the last Business Day of such calendar
year; and
(C) the following information:
(1) a list of Securities as of the last Business Day of such calendar
year, (grouped in the case of fixed income obligations by coupon
and maturity range) and a list which identifies all Securities
sold or other Securities acquired during such calendar year, if
any;
(2) the number of Units outstanding on the last Business Day of such
calendar year,
(3) the Unit Value as defined in Section 5.01 based on the last Trust
Fund Evaluation pursuant to Section 5.01 made during such
calendar year, and
(4) the amounts actually distributed or which are otherwise
attributable to Unit holders during such calendar year from the
Income and Principal Accounts, separately stated, expressed both
as total dollar amounts and as dollar amounts per Unit
outstanding on the Record Dates for such distributions and the
status of such distributions for federal income tax purposes.
<PAGE>
SECTION 3.06. SALE OF SECURITIES. If necessary, in order to Maintain the
sound investment character of a Trust, the Depositor may direct the Trustee to
sell or liquidate Securities in such Trust at such price and time and in such
manner as Shall be determined by the Depositor, provided that the Depositor has
determined that any one or more of the following conditions exist:
(a) that there has been a default on any of the Securities in the payment
of principal or income, or both, when due and payable;
(b) that any action or proceeding has been instituted at law or equity
seeking to restrain or enjoin the payment of principal or income on
any such Securities, or that there exists any other legal question or
impediment affecting such Securities or the payment of principal of or
income from the same;
(c) that there has occurred any breach of covenant or warranty in any
trust indenture or other document, under which such Securities are
outstanding or otherwise relating to the issuer or the guarantor
thereof which would adversely affect either immediately or
contingently the payment of principal of or income from the
Securities, or their general credit standing, or otherwise impair the
sound investment character of such Securities;
(d) that there has been a default in the payment of principal of or income
or premium, if any on any other outstanding obligations of the issuer
of such Securities;
(e) that the price of any such Securities had declined to such an extent
or other such market or credit factors exist so that in the opinion of
the Depositor as evidenced in writing to the Trustee, the retention of
such Securities would be determined to the Trust Fund and to the
interest of the Unit holders;
(f) that all of the Securities in the Trust Fund will be sold pursuant to
termination of the Trust pursuant to Section 8.02 hereof:
(g) that such sale is required due to Units tendered for redemption.
Upon receipt of such direction from the Depositor, upon which the Trustee
Shall rely, the Trustee shall proceed to sell or liquidate the specifies
Securities in accordance with Such direction, and upon the receipt of the
proceeds of any such sale or liquidation, after Deducting therefrom any fees and
expenses of the Trustee and any brokerage charges, taxes or Other governmental
charges shall deposit such net proceeds in the Principal Account; provided,
However, that Zero Coupon Obligations may not be sold to pay the fees and
expenses of the Trust, includingthe Trustee's fees, unless the Depositor
certifies to the Trustee that the sale of such Zero Coupon Obligations will not
reduce the face value of Zero Coupon Obligations still held in the Trust below
the amount needed to comply with the representations set forth in the
Prospectus.
The Trustee shall not be liable or responsible in any way for depreciation
or loss Incurred by reason of any sale made pursuant to any such direction or by
reason of the failure of Of the Depositor to give any such direction, and in the
absence of such direction the Trustee shall Have no duty to sell or liquidate
any Securities under this Section 3.06 except to the extent Otherwise required
by Section 3.08 of this Indenture.
<PAGE>
SECTION 3.07. COUNSEL.The Depositor may employ from time to time, as it
deems necessary or desirable, a firm of attorneys for any legal services which
may be required in connection with the Securities, including any advice as to
whether any Securities constitute Restricted Securities and any legal matters
relating to the possible disposition or acquisition of any Securities pursuant
to any provisions hereof or for any other reasons deemed advisable by the
Depositor or the Trustee, in their discretion. The fees and expenses of such
counsel may, at the discretion of the Depositor, be paid by the Trustee from the
Income Account and Principal Account as provided for in Section 3.05(I)(C)
hereof.
SECTION 3.08. NOTICE AND SALE BY TRUSTEE. If at any time the principal
stated value or par value of or income from any of the Securities shall be in
default and not paid or provision for payment thereof shall not have been duly
made, the Trustee shall notify the Depositor thereof. If within 30 days of such
notification the Depositor has not given any instruction to sell or hold or has
not taken any other action in connection with such Securities The Trustee may in
its discretion sell such Securities forthwith, and neither the Depositor nor the
Trustee shall be liable or responsible in any way for depreciation or loss
incurred by reason Of such sale.
SECTION 3.09. TRUSTEE NOT REQUIRED TO AMORTIZE. Nothing in this Indenture,
or otherwise, shall be construed to require the Trustee to make any adjustments
between the Income and Principal Accounts by reason of any premium or discount
in respect of any of the Securities.
SECTION 3.10. LIABILITY OF DEPOSITOR. The Depositor shall be under no
liability to the Unit holders for any action taken or for refraining from the
taking of any action in good faith pursuant to this indenture or for errors in
judgment, but shall be liable only for its own willful misfeasance, bad faith or
gross negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties hereunder. The Depositor may rely in
good faith on any paper, order, notice list, affidavit, receipt, opinion,
endorsement, assignment, draft or any other document of any kind prima facie
properly executed and submitted to it by the Trustee, bond counsel or any other
persons pursuant to this indenture and in furtherance of its duties.
SECTION 3.11. NOTICE TO DEPOSITOR. In the event that the Trustee shall have
been notified at any time of any action to be taken or proposed to be taken by
at least a legally required number of holders of any Zero Coupon Obligation
(including but not limited to the making of any demand, direction, request,
giving of any notice, consent or waiver or the voting with respect to any
amendment or supplement to any indenture, resolution, agreement or other
instrument under or pursuant to which the Zero Coupon Obligations have been
issued) the Trustee shall promptly notify the Depositor and shall thereupon take
such action or refrain from taking any action as the Depositor shall in writing
direct; however, that if the Depositor shall not within five Business Days of
the giving of such notice to the Depositor direct the Trustee to take or refrain
from taking any action, the Trustee shall take such action as it, in its sole
discretion, shall deem advisable.
Neither the Depositor nor the Trustee shall be liable to any person for any
action or failure to take action pursuant to the terms of this Section 3.11
other than failure to notify the Depositor.
SECTION 3.12. REPLACEMENT OF SECURITIES; REPLACEMENT CONTRACT OBLIGATIONS;
SUBSTITUTE SECURITIES. In the event that any contract to purchase Securities, or
any Contract Obligation is declared by the Depositor to have failed (a "Failed
Security" or a "Failed Contract Obligation," respectively), the Depositor may
instruct the Trustee in writing to purchase a replacement security or a
replacement contract obligation, as defined herein which has been selected by
the Depositor (the "Replacement Security" or "Replacement Contract Obligation")
out of funds held by the Trustee pursuant to Section 3.03 for the original
purchase of such Failed Security or Failed Contract Obligation. Purchases of
Replacement Contract Obligations or
<PAGE>
Replacement Securities or Substitute Securities (the "New Securities") may be
made subject to the conditions set forth below:
(a) The New Securities shall be of the same general type and
characteristics as the Securities originally selected for deposit in that Series
of the Trust and at least as high in quality as the minimum , if any,
established for such Series at the Date of Deposit;
(b) The new Securities shall not constitute Restricted Securities;
(c) The purchase of the new Securities shall not adversely affect the
federal income tax status of the Trust;
(d) The purchase price of the new Securities shall not exceed the balance
in the Principal Account, at the time of such direction resulting (i) from the
deposit of money therein as a result of any failure of contracts to purchase
Contract Obligations or Securities, (ii) from proceeds of any sale of Securities
pursuant to Section 3.06 and (iii) from the proceeds of any sale of Securities
pursuant to Section 5.02; and
(e) The written instructions of the Depositor shall (i) identify the New
Securities to be purchased, (ii) state that the contract to purchase, if any, to
be entered into by the Trustee is satisfactory in form and substance and (iii)
state that the foregoing conditions of clauses (a) through (d) have been
satisfied with respect to the New Securities.
Upon satisfaction of the foregoing conditions with respect to any New
Securities, the Trustee shall enter into the contract to purchase such New
Securities and take all steps reasonably necessary to complete the purchase
thereof. Whenever a New Security is acquired by the Trustee pursuant to the
provisions of this Section, the Trustee will, as agent for the Depositor, not
later than 5 days after such acquisition, mail to each Unity holder a notice of
such acquisition, including an identification of the Securities eliminated and
the Securities acquired. Amounts in respect of the purchase price thereof on
account of principal shall be paid out of and charged against the Principal
Account. The Trustee shall not be liable or responsible in any way for
depreciation or loss incurred by reason of any purchase made pursuant to any
such directions an in the absence of such directions the Trustee shall have no
duty to purchase any New Securities under this Indenture. The Depositor shall
not be liable for any failure to instruct the Trustee to purchase any New
Securities or for errors of judgment in respect to this Section 3.12; provided,
however, that this provision shall not protect the Depositor against any
liability to which it would otherwise by subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of its reckless disregard of its obligations and duties hereunder.
SECTION 3.13. EXPENSES BORNE BY THE TRUSTEE. The following regular and
recurring expenses of the Trust shall be borne by the Trustee: postage,
stationery, printing and reproduction charges incurred in preparing and mailing
the statements and reports furnished pursuant to Sections 3.05 and 6.02 and the
distributions made pursuant to Section 3.04; provided, however, that the Trustee
shall not be obligated to bear expenses pursuant to this Section in excess of
the amount, if any, specified in the indenture with regard to any calendar year
of the Trust (or in excess of a prorated portion of such amount in regard to
periods of less than one year) and any such amount in excess so paid by the
Trustee may be reimbursed to the Trustee pursuant to Section 6.04.
ARTICLE IV
EVALUATION OF SECURITIES; EVALUATOR
SECTION 4.01. EVALUATION BY EVALUATOR. (a) The Evaluator shall determine
separately and shall promptly furnish to the Trustee and the Depositor upon
request the value of each issue of
<PAGE>
Securities (including Contract Obligations) ("Evaluation") as of the Evaluation
Time on each Business Day during the period which the Units are being offered
for sale to the public, such Evaluation to be effective for all purchases
received in proper form in the preceding 24 hour period. As part of the Trust
Evaluation, the Evaluator shall determine separately and promptly furnish to the
Trustee and the Depositor upon request the Evaluation of each issue of
Securities initially deposited in the Trust on the Date of Deposit. The
Evaluator's determination of the offering prices of the Securities on the Date
of Deposit shall be included in Schedule A attached to the Trust Agreement.
(b) During the initial offering period namely, from the date of
effectiveness of the Registration Statement under the Securities Act
of 1933 relating to the Units, to and including the day which is
designated in writing by the Depositor to the Trustee and Evaluator as
the conclusion of such period, such Evaluation shall be made in the
following manners if the Securities are listed on a national
securities exchange, such Evaluation shall generally be based on the
closing sale price on such exchange (unless the Evaluator deems such
price inappropriate as a basis for Evaluation). If the Securities are
not so listed or, if so listed, the principal market therefor is other
than on such exchange or there is no closing sale price on such
exchange, such Evaluation shall generally be based on the following
methods or any combination thereof whichever the Evaluator deems
appropriate: (a) on the basis of current offering prices for the Zero
coupon Obligations as obtained from investment dealers or brokers who
customarily deal in securities comparable to those held by the Trust
and, with respect to any Mutual Fund shares deposited in a Trust, the
net asset value of such shares, (b) if offering prices are not
available for the Zero Coupon Obligations, on the basis of current
offering value as determined in good faith by the Evaluator, (c) by
determining the valuation of the Zero Coupon Obligations on the
offering side of the market by appraisal, or, in the case of the
Mutual Fund shares, the net asset value as determined in good faith by
the Evaluator, or (d) by any combination of the above. For each
Evaluation, the Evaluator shall also determine and furnish to the
Trustee and the Depositor the aggregate of (a) the value of all
Securities on the basis of such Evaluation and (b) on the basis of the
information furnished to the Evaluator by the Trustee pursuant to
Section 3.14, cash on hand in the Trust (other than cash specifically
for the purchase of Contract Obligations),
(c) After the initial offering period, Evaluation of the Securities shall
be made for purposes of the Trust Fund Evaluations required by
Sections 4.01(a), 5.01 and 5.02 in determining Redemption Value and
Unit Value in the manner described in 4.01(b) on the basis of current
bid prices for the Zero Coupon Obligations and the net asset value of
the Mutual Fund shares.
SECTION 4.02. INFORMATION FOR UNIT HOLDERS. For the purpose of permitting
Unit holders to satisfy any reporting requirements of applicable federal or
state tax law, the Evaluator shall make available to the Trustee and the Trustee
shall transmit to any Unit holder upon request any determinations made by it
pursuant to Section 4.01.
SECTION 4.03. COMPENSATION OF EVALUATOR. As compensation for its services
hereunder, the Evaluator shall receive against a statement therefor submitted to
the Trustee on or before each Record Date, an amount equal to the amount
specified as compensation for the Evaluator in the Trust Agreement provided,
however, if at any time the fee of the Trustee shall have been increased
pursuant to Section 6.04, the compensation of the Evaluator hereunder shall at
the same time be ratably increased.
SECTION 4.04. LIABILITY OF EVALUATOR. The Trustee, the Depositor and the
Unit holders may rely on any Evaluation furnished by the Evaluator and shall
have no responsibility for the accuracy thereof. The determinations made by the
Evaluator hereunder shall be made in good faith upon the basis of the best
information available to it. The Evaluator against any liability to which it
would otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties hereunder.
<PAGE>
SECTION 4.05. RESIGNATION AND REMOVAL OF EVALUATOR; SUCCESSOR. (a) The
Evaluator may resign and be discharged hereunder, by executing an instrument in
writing resigning as Evaluator and filing the same with the Depositor and the
Trustee, not less than 60 days before the date specified in such instrument
when, subject to Section 4.05(e), such resignation is to take effect. Upon
receiving such notice of resignation, the Depositor and the Trustee shall use
their best efforts to appoint a successor evaluator having qualifications and at
a rate of compensation satisfactory to the Depositor and the Trustee. Such
appointment shall be made by written instrument executed by the Depositor and
the Trustee, in duplicate, one copy of which shall be delivered to the resigning
Evaluator and one copy to the successor evaluator. The Depositor or the Trustee
may remove the Evaluator at any time upon 30 days' written notice and appoint a
successor evaluator having qualifications and at a rate of compensation
satisfactory to Depositor and the Trustee. Such appointment shall be made by
written instrument executed by the Depositor and the Trustee, in duplicate, one
copy of which shall be delivered to the Evaluator so removed and one copy to the
successor evaluator. Notice of such resignation or removal and appointment of a
successor evaluator shall be mailed by the Trustee to each Unit holder then of
record.
(b) Any successor evaluator appointed hereunder shall execute, acknowledge
and deliver to the Depositor and the Trustee an instrument accepting
such appointment hereunder, and such successor evaluator without any
further act, deed or conveyance shall become vested with all the
rights, powers, duties and obligations of its predecessor hereunder
with like effect as if originally named Evaluator herein and shall be
bound by all the terms and conditions of this Indenture.
(c) In case at any time the Evaluator shall resign and no successor
evaluator shall have been appointed and have accepted appointment
within 30 days after notice of resignation has been received by the
Depositor and the Trustee, the Evaluator may forthwith apply to a
court of competent jurisdiction for the appointment of a successor
evaluator. Such court may thereupon after such notice, if any, as it
may deem proper and prescribe, appoint a successor evaluator.
(d) Any corporation into which the Evaluator hereunder may be merged or
with which it may be consolidated, or any corporation resulting from
any merger or consolidation to which the Evaluator hereunder shall be
a party, shall be the successor evaluator under this Indenture without
the execution or filing of any paper, instrument or further act to be
done to the part of the parties hereto, anything herein, or in any
agreement relating to such merger or consolidation, by which the
Evaluator may seek to retain certain powers, rights and privileges
theretofore obtaining for any period of time following such merger or
consolidation, to the contrary notwithstanding.
(e) Any resignation or removal of the Evaluator and appointment of a
successor evaluator pursuant to this Section shall become effective
upon acceptance of appointment by the successor evaluator as provided
in subsection (b) hereof.
ARTICLE V
EVALUATION, REDEMPTION, PURCHASE, TRANSFER, INTERCHANGE OR REPLACEMENT OF UNITS
SECTION 5.01. TRUST EVALUATION. As of the Evaluation Time on each business
Day, the Trustee shall: Add (1) all monies on deposit in the Trust (excluding
(a) cash, cash equivalents or letters of credit deposited pursuant to Section
2.01 hereof for the purchase of Securities or Contract Obligations, unless such
cash or letters of credit have been deposited in the Principal Account because
of failure to apply such monies to the purchase of Securities or Contract
Obligations, unless such cash or letters of credit have been deposited in the
Principal Account because of failure to apply such monies to the purchase of
Securities or Contract Obligations pursuant to the provisions of Sections 2.01
and 3.03 hereof and, excluding (b) monies credited to the Reserve Account
pursuant to Section 3.04 hereof), plus (2) the aggregate Evaluation of all
Securities (including Contract Obligations) on deposit in the Trust as is
determined by the Evaluator (such Evaluation to be made on the basis of bid
prices for the Securities for the purpose of computing redemption
<PAGE>
value of Units as set forth in Section 5.02 hereof), plus (3) all other income
from the Securities as of the close of business on the date of such Evaluation
together with all other assets of the Trust. For each such evaluation there
shall be deducted from the sum of the above (I) amounts representing any
applicable taxes or governmental charges payable our of the respective Trust and
for which no deductions shall have previously been made for the purpose of
addition to the Reserve Account, (ii) amounts representing estimated accrued
expenses of such Trust including but not limited to unpaid fees and expenses of
the Trustee, the Evaluator, the Portfolio Supervisor, the Depositor and counsel,
in each case as reported by the Trustee to the Depositor on or prior to the date
of evaluation, and (iii) if on or after a record date and prior to the next
following Income Distribution Date, any monies held for distribution to Unit
holders of Record as of such Record Date. The resulting figure is herein called
a "Trust Fund Evaluation." The value of the pro rata share of each Unit of the
respective Trust determined on the basis of any such evaluation shall be
referred to herein as the "Unit Value"
For each day on which the Trustee shall make a Trust Fund Evaluation it
shall also determine "Unit Value" for such day. Such "Unit Value" shall be
determined by dividing said Trust Fund Evaluation by the number of Units
outstanding on such day.
SECTION 5.02. REDEMPTIONS BY TRUSTEE; PURCHASES BY DEPOSITOR. Any Unit by
means of an appropriate request for redemption in form approved by Trustee shall
be paid by the Trustee on the seventh calendar day following the day on which
tender for redemption is made in proper form, provided that if such day of
payment is not a Business Day, then such payment shall be on the first Business
Day prior thereto (being herein called the "Settlement Date"). Subject to
payment by such Unit holder of any tax or other governmental charges which may
be imposed thereon, such redemption is to be made by distributing Securities in
an amount equivalent to the Unit Value, to such Unit holder or by payment of
cash equivalent to the Unit Value determined on the basis of a Trust Fund
Evaluation made in accordance with Section 5.01 determined by the Trustee as of
the close of business on the Redemption Date, multiplied by the number of Units
tendered for redemption (herein called the "Redemption Value"), or if the Unit
holder wishes to redeem a number of Units less than all those so tendered,
multiplied by the number Units so designated by such Unit holder for redemption.
Units received for redemption by the Trustee on any day after the close of
trading on the New York Stock Exchange will be held by the Trustee until the
next day on which the New York Stock Exchange is open for trading and will be
deemed to have been tendered on such day for redemption at he Redemption Value
computed on that day.
The portion of the Redemption Value, which represents income, shall be
withdrawn from the Income Account to the extent available. The balance paid on
any Redemption Value, including income not paid from the Income Account, if any,
shall be withdrawn from the Principal Account to the extent available for such
purpose. If such available funds shall be insufficient, the Trustee shall sell
such Securities as have been designated on the current list for such purpose by
the Depositor, as hereinafter in this Section 5.02 provided, in amounts as the
Trustee in its discretion shall deem advisable or necessary in order to fund the
Principal Account for purposes of such redemption, but in no event shall the
Trustee sell Securities in an amount less than the minimum amount specified by
the Depositor in the Trust Agreement. If Securities are sold from any Trust,
they will be sold in amounts which are consistent with the Percentage Ratio as
defined in Section 1.02 hereof. Sale of Securities by the Trustee shall be made
in such manner as the Trustee shall determine will bring the best price
obtainable for the Trust. In the event that either (i) funds are withdrawn from
the Principal Account and are applied to the payment of income upon any
redemption of Units or (ii) Securities are sold for the payment of the
Redemption Value and any portion of the proceeds of such sale is applied to the
payment of income upon such redemption, then, in either such event, the
Principal Account shall be reimbursed therefore at such time as sufficient funds
may be next available in the Income Account for such purpose.
The Trustee may in its discretion, and shall when so directed by the
Depositor in writing, suspend the right of redemption for Units of a Trust or
postpone the date of payment of the Redemption Value for more than seven
calendar days following the day on which tender for redemption is made (i) for
any period during which the New York Stock Exchange is closed other than
customary weekend and holiday closings or during which trading on the New York
Stock Exchange is restricted; (ii) for any period during which an emergency
exists as a result of which disposal by such Trust of the Securities is not
reasonably practicable
<PAGE>
or it is not reasonable practicable fairly to determine in accordance herewith
the value of the Securities; or (iii) for such other period ad the Securities
and Exchange Commission may by order permit, and shall not be liable to any
person or in any way for any loss or damage which may result from any such
suspension or postponement.
Not later than the close of business on the day of tender of any Unit for
redemption by a Unit holder other than the Depositor, the Trustee shall notify
the Depositor of such tender. The Depositor shall have the right to purchase
such Unit by notifying the Trustee of its election to make such purchase as soon
as practicable thereafter but in no event subsequent to the close off business
on the second Business Day after the day on which such Unit was tendered for
redemption. Such purchase shall be made by payment by the Depositor to the Unit
holder on the Redemption Date of an amount not less than the Redemption Value
which would otherwise be payable by the Trustee to such Unit holder. So long as
the Depositor maintains a bid in the secondary market, the Depositor may
repurchase the Units tendered to the Trustee for redemption by the Depositor but
shall be under no obligation to maintain any bids and may, at any time while so
maintaining such bids, cease to do so immediately at any time or from time to
time without notice.
Any Units so purchased by the Depositor may at the option of the Depositor
be tendered to the Trustee for redemption at the corporate trust office of the
Trustee in the manner provided in the first paragraph of this Section 5.02.
Notwithstanding the foregoing provisions of this Section 5.02, the Trustee
is hereby irrevocably authorized in its discretion, in the event that the
Depositor does not purchase any Units tendered to the Trustee for redemption, or
in the event that a Unit is being tendered by the Depositor for redemption, in
lieu of redeeming Units to sell Units in the over-the-counter market through any
broker-dealer of its choice for the account of the tendering Unit holder at
prices which will return to the Unit holder an amount in cash, net after
deduction brokerage commissions, transfer taxes and other charges, equal to or
in excess of the Redemption Value which such Unit holder would otherwise be
entitled to receive on redemption pursuant to this Section 5.02. The Trustee
shall pay to the Unit holder the net proceeds of any such sale of the day on
which such Unit holder would otherwise be entitled to receive payment of the
Redemption Value hereunder.
The Depositor shall maintain with the Trustee a current list of Securities
designated to be sold for the purpose of funding the Principal Account for
redemption of Units tendered for redemption and, to the extent necessary, for
payment of expenses under this Indenture. In Connection therewith, the Depositor
may specify in the Trust Agreement the minimum principal amounts of any
Securities to be sold at any one time. If the Depositor shall for any reason
fail to maintain such a list, the Trustee may in its sole discretion designate a
current list of Securities for such purposes. The net proceeds of any sale of
Securities from such list representing income shall be credited to the Income
Account and then disbursed therefrom for payment of expenses and payments to
Unit holders required to be paid under this Indenture. Any balance remaining
after such disbursements shall remain credited to the Principal Account.
Neither the Depositor nor the Trustee shall be liable or responsible in any
way for depreciation or loss incurred by reason of any sale of Securities made
pursuant to this Section 5.02.
SECTION 5.03. TRANSFER OR INTERCHANGE OF UNITS. The registered holder of
any Unit held may transfer such Unit merely by the presentation of transfer
instructions to the Trustee at the corporate trust office of the Trustee
accompanied by such documents as the Trustee deems necessary to evidence the
authority of the person making such transfer and executed by the registered
holder or his authorized attorney, whereupon he Trustee shall make proper
notification of such transfer on the registration books of the Trustee. The
Trustee may deem and treat the registered Unit holder as the owner of the Units
for all purposes hereunder.
<PAGE>
ARTICLE VI
TRUSTEE
SECTION 6.01. GENERAL DEFINITION OF TRUSTEE'S LIABILITIES, RIGHTS AND
DUTIES. The Trustee shall in its discretion undertake such action as it may deem
necessary at any and all times to protect each Trust and the rights and
interests of the Unit holders pursuant to the terms of this Indenture; provided,
however, that the expenses and costs of such actions, undertakings or
proceedings shall be reimbursable to the Trustee from the Income and Principal
Accounts of such Trust, and the payment of such costs and expenses shall be
secured by a prior lien on such Trust.
In addition to and notwithstanding the other duties, rights, privileges and
liabilities of the Trustee as otherwise set forth, the liabilities of the
Trustee are further defined as follows:
(a) All money deposited with or received by the Trustee hereunder related
to a Trust shall be held by it without interest in trust within the
meaning of the Investment company Act of 1940, as part of the Trust
Fund or the Reserve Account of such Trust until required to be
disbursed in accordance with the provisions of this Indenture, and
such moneys will be segregated by separate recordation on the trust
ledger of the Trustee so long as such practice preserves a valid
preference under applicable law, or if such preference under
applicable law, or if such preference is not so preserved the Trustee
shall handle such moneys in such other manner as shall constitute the
segregation and holding thereof in trust within the meaning of the
Investment Company Act of 1940.
(b) The Trustee shall be under no liability for any action taken in good
faith on any appraisal, paper, order list, demand, request, consent,
affidavit, notice, opinion, direction, evaluation, endorsement,
assignment, resolution, draft or other document whether or not of the
same kind prima facie properly executed, or for the disposition of
moneys, or Units pursuant to this Indenture, or in respect of any
evaluation which it is required to make or is required or permitted to
have made by others under this Indenture or otherwise, except by
reason of its own negligence, lack of good faith or willful
misconduct, provided that the Trustee shall not in any event be liable
or responsible for any evaluation made by the Evaluator. The Trustee
may construe any of the provisions of this Indenture, insofar as the
same may appear to be ambiguous or inconsistent with any other
provisions here of, and any construction of any such provisions hereof
by the Trustee in good faith shall be binding upon the parties hereto.
(c) The Trustee shall not be responsible for or in respect of the recitals
herein, the validity or sufficiency of this Indenture or for the due
execution hereof by the Depositor, the Portfolio Supervisor, or the
Evaluator, or for the form, character, genuineness, sufficiency, value
or validity of any of the Securities (except that the Trustee shall be
responsible for the exercise of due care in determining the
genuineness of Securities delivered to it pursuant to contracts for
the purchase of such Securities) or for or in respect of the validity
or sufficiency of the Units (except for the due execution thereof by
the Trustee) or for the payment by the Insurer of amounts due under,
and the Trustee shall in no event assume or incur any liability, duty
or obligation to any Unit holder or the Depositor other than as
expressly provided for herein. The Trustee shall not be responsible
for or in respect of the validity of any signature by or on behalf of
the Depositor, the Portfolio Supervisor or the Evaluator.
(d) The Trustee shall be under no obligation to appear in, prosecute or
defend any action which in its opinion may involve it in expense or
liability, unless as often as required by the Trustee it shall be
furnished with reasonable security and indemnity against such expense
or liability, and any pecuniary cost of the Trustee from such actions
shall be deductible from and a charge against the Income and Principal
Accounts of the affected Trust or Trusts. The Trustee shall, in its
discretion, undertake such action as it may deem
<PAGE>
necessary at any and all times to protect the Trust and the rights and
interests of the Unit holders pursuant to the terms of this Indenture,
provided however, that the expenses and costs of such actions,
undertakings or proceedings shall be reimbursable tot he Trustee from
the Income and principle Accounts.
(e) The Trustee may employ agents, attorneys, accountants and auditors and
shall not be answerable for the default or misconduct of any such
agents, attorneys, accountants or auditors if such agents, attorneys,
accountants or auditors shall have been selected with reasonable care.
The Trustee shall be fully protected in respect of any action under
his Indenture taken or suffered in good faith by the Trustee, in
accordance with the opinion of its counsel. The fees and expenses
charged by such agents, attorneys, accountants and auditors shall
constitute an expense of the Trustee, reimbursable from the Income and
Principal Accounts of the affected Trust as set forth in Section 6.04
hereof.
(f) If at any time the Depositor shall fail to undertake or perform any of
the duties which by the terms of this Indenture are required by it to
be undertaken or performed, or such Depositor shall become incapable
of acting or shall be adjudged a bankrupt or insolvent, or a receiver
of such Depositor or of its property shall be adjudged a bankrupt or
insolvent, or a receiver of such Depositor or of its property shall be
appointed, or any public officer shall take charge or control of such
Depositor or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation, then in any such case,
the Trustee may (1) appoint a successor depositor who shall act
hereunder in all respects in place of such Depositor, which successor
shall be satisfactory to the Trustee, and which may be compensated at
rates deemed by the Trustee to be reasonable under the circumstances,
by deduction ratably from the Income Account of the affected Trusts
or, to the extent funds are not available in such Account, from the
Principal Account of the affected Trusts, but no such deduction shall
be made exceeding such reasonable amount as the Securities and
Exchange Commission may prescribe in accordance with Section
26(a)(2)(c) of the Investment Company Act of 1940, or (2) terminate
this Indenture and the trust created hereby and liquidate the Trust
Fund in the manner provided in Section 8.02.
(g) If (I) the value of any Trust as shown by any evaluation by the
Trustee pursuant to Section 5.01 hereof shall be less than 20% of the
aggregate principal amount of Securities initially deposited in such
Trust, or (ii) by reason of the Depositor's redemption of Units of a
Trust not theretofore sold constituting more than 60% of the number of
units initially authorized, the net worth of the Trust is reduced to
less than 40% of the aggregate principal amount of Securities
initially deposited in such Trust, the Trustee may in its discretion,
and shall when so directed by the Depositor, terminate this Indenture
and the trust created hereby and liquidate such Trust, all in the
manner provided in Section 8.02.
(h) In no event shall the Trustee be 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 hereunder or upon or
in respect of any Trust which it 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 the premises. For all such
taxes and charges and for any expenses, including counsel fees, which
the trustee may sustain or incur with respect to such taxes or
charges, the Trustee shall be reimbursed and indemnified out of the
Income and principal Accounts of the affected Trust, and the payment
of such amounts so paid by the Trustee shall be secured by a prior
lien on such Trust.
(i) No payment to a Depositor or to any principal underwriter (as defined
in the investment Company Act of 1940) for the Trust or to any
affiliated person (as so defined) or agent of a Depositor or such
underwriter shall be allowed the trustee as an expense except for
payment of such reasonable amounts as the Securities and Exchange
Commission may prescribe as compensation for performing bookkeeping
and other administrative services of a character normally performed by
the Trustee.
<PAGE>
(j) The Trustee, except by reason of its own negligence or willful
misconduct, shall not be liable for any action taken or suffered to be
taken by it in good faith and believed by it to be authorized or
within the discretion, rights or powers conferred upon it by this
Indenture.
(k) The Trustee in its individual or any other capacity may become an
owner or pledgee of, or be an underwriter or dealer in respect of,
obligations issued by the same issuer (or an affiliate of such issuer)
of any Securities at any time held as part of the Trust and may deal
in any manner with the same or with the issuer (or an affiliate of the
issuer) with the rights and powers as if it were not the Trustee
hereunder.
(l) The Trust may include a letter or letters of credit for the purchase
of Securities or Contract Obligations issued by the Trustee in its
individual capacity for the account of the Depositor and the Trust
within the same rights and powers as if it were not the Trustee
hereunder.
SECTION 6.02. BOOKS, RECORDS AND REPORTS. The Trustee shall keep proper
books of record and account of all the transactions of each Trust under this
Indenture at its corporate trust office, including a record of the name and
address of, and held by, every Unit holder, and such books and records of each
Trust shall be open to inspection by any Unit holder of such Trust at all
reasonable times during the usual business hours. The Trustee shall make such
annual or other reports as may from time to time be required under any
applicable state or federal statute or rule or regulation thereunder.
Unless the Depositor determines that such an audit is not required, the
Trustee shall cause audited statements as to the assets and income of each Trust
of the Fund to be prepared on an annual basis by independent public accountants
selected by the Depositor, provided, however, if the cost to a Trust for
preparation of such statements shall excess an amount equivalent to $.50 per
1,000 Units on an annual basis then the Trustee shall not be required to have
such statements prepared.
To the extent permitted under the Investment Company Act of 1940 as
evidenced by an opinion of independent counsel tot he Depositor or "no-action"
letters issued by or published interpretations of the staff of the Securities
and exchange Commission, the Trustee shall pay, or reimburse to the Depositor or
others, from the Income or Principal Account the costs of the preparation of
documents and information with respect to each Trust required by law or
regulation in connection with the maintenance of a secondary market in units of
each Trust. Such costs may include but are not limited to accounting and legal
fees, blue sky registration and filing fees, printing expenses and other
reasonable expenses related to documents required under Federal and state
securities laws.
SECTION 6.03. INDENTURE AND LIST OF SECURITIES ON FILE. The Trustee shall
keep a certified copy or duplicate original of this Indenture on file at its
corporate trust office available for inspection at all reasonable times during
the usual business hours by any Unit holder, together with a current list of the
Securities in each Trust.
SECTION 6.04. COMPENSATION. The Trustee shall receive at the times set
forth in Section 3.04, as compensation for performing ordinary normal recurring
services under this Indenture, an amount per 1,000 Units equal to the amount per
period specified as compensation for the Trustee in the Trust Agreement. The
computation of such compensation shall be made on the basis of the largest
number of Units in the Trust at any time during such period. The Trustee may
from time to time adjust its compensation as set forth above, provided that
total adjustment upward does not, at the time of such adjustment, exceed the
percentage of the total increase, after the date hereof, in consumer prices for
services as measured by the United States Department of Labor Consumer Price
Index entitled "All Services less Rent". The consent or concurrence of any Unit
holder hereunder shall not be required for any such adjustment or increase. Such
compensation shall be charged by the Trustee against the Income and Principal
Accounts of each Trust on or before the Distribution Date on which such period
terminates;
<PAGE>
provided, however, that such compensation shall be deemed to provide only for
the usual, normal and proper functions undertaken as Trustee pursuant to this
Indenture.
Except as provided in Section 3.15 hereof, the Trustee shall charge the
Income and Principal Accounts for any and all expenses and disbursements
incurred hereunder, including legal and auditing expenses, and for any
extraordinary services performed hereunder, which extraordinary services shall
include but not be limited to all costs and expenses incurred by the Trustee in
making any annual or other reports or other documents referred to in Section
6.02; provided, however, that the amount of any such charge which has not been
finally determined as of any Distribution Date may be estimated and any
necessary adjustments shall be made. If the balances in the Income and Principal
Accounts shall be insufficient to provide for amounts payable pursuant to this
Section 6.04, the Trustee shall have the power to sell Securities in the manner
provided in Section 5.02; provided, however, that no Zero Coupon Obligations may
be sold to pay the expenses of the Trust, including Trustee's fees unless the
Depositor certifies to the Trustee in writing that the sale of such Zero Coupon
Obligations will not reduce the maturity value per Unit of the Zero Coupon
Obligations below that established on the Date of Deposit. If Zero Coupon
Obligations may not be sold and other Securities are not available in the
Trust's Accounts to sell for such purpose, then such fees and expenses shall be
paid by the Depositor. The Trustee shall not be liable or responsible in any way
for depreciation or loss incurred by reason of any such sale. Any monies payable
to the Trustee under this subsection shall be secured by a prior lien on the
Trust.
In the event that Contract Obligations (1) are issued later than their
expected date(s) of issue (but no more than two months after such expected date
in the case of Contract Obligations originally deposited in the Trust and no
more than one month after such expected date in the case of Replacement Contract
Obligations) and (2) are deemed not be Failed Contract Obligations, the Trustee
shall also reduce its fee by an amount equal to the amount of income, if any,
which would have accrued on such Contract Obligations from the expected date of
issue to the actual date of issue. If the Trustee's fee is inadequate to cover
this additional amount of income, the Contract Obligations shall be deemed and
treated as Failed Contract Obligations.
The Trustee shall be indemnified ratable by the affected Trust and held
harmless against any loss or liability accruing to it without negligence, bad
faith or willful misconduct on its par, arising out of or in connection with the
acceptance or administration of this Trust, including the costs and expenses
(including counsel fees) of defending itself against any claim of liability in
the premises, including any loss, liability of expense incurred in acting
pursuant to written directions to the Trustee given by the Depositor from time
to time in accordance with the provisions of this Indenture or in undertaking
actions from time to time which the Trustee deems necessary in its discretion to
protect the Trust and the rights and interests of the Unit holders pursuant to
the terms of this Indenture. Any monies payable to the Trustee under this
Section 6.04 shall be secured by a lien on the Trust.
SECTION 6.05. REMOVAL AND RESIGNATION OF TRUSTEE; SUCCESSOR. The following
provisions shall provide for the removal and resignation of the Trustee and the
appointment of any successor trustee:
(a) The Trustee or any trustee or trustees hereafter appointed may resign
and be discharged of the Trusts created by this Indenture, by
executing an instrument in writing resigning as Trustee of such Trusts
and filing same with the Depositor and mailing a copy of a notice of
resignation to all Unit holders then of record, not less than 60 days
before the date specified in such instrument when, subject to Section
6.05(e), such resignation is to take effect. Upon receiving such
notice of resignation, the Depositor shall promptly appoint a
successor trustee as hereinafter provided, by written instrument, in
duplicate, one copy of which shall be delivered to the resigning
Trustee and one copy to the successor trustee. The Depositor may at
any time, with or without cause, remove the Trustee and appoint a
successor trustee by written instrument, in duplicate, one copy of
which shall be delivered to the Trustee so removed and one copy to the
successor trustee. Notice of such resignation or removal of a trustee
and appointment of a successor trustee shall be mailed by the
successor trustee, promptly of a successor trustee shall be mailed by
the successor trustee, promptly after its acceptance of such
appointment, to each unit holder then of record.
<PAGE>
(b) Any successor trustee appointed hereunder shall execute, acknowledge
and deliver to the Depositor and to the resigning or removed Trustee
an instrument accepting such appointment hereunder, and such successor
trustee without any further act, deed or conveyance shall become
vested with all the rights, powers and duties and obligations of its
predecessor hereunder with like effect as if originally named Trustee
herein and shall be bound by all the terms and conditions of this
Indenture. Upon the request of such successor trustee, the Depositor
and the resigning or removed Trustee shall, upon payment of any
amounts due the resigning or removed Trustee, or provision therefor to
the satisfaction of such resigning or removed Trustee, execute and
deliver an instrument acknowledged by it transferring to such
successor trustee all the rights and powers of the resigning or
removed Trustee; and the resigning or removed Trustee shall transfer,
deliver and pay over to the successor trustee all Bonds and moneys at
the time held by it hereunder, together with all necessary instruments
of transfer and assignment or to her documents properly executed
necessary to effect such transfer and such of the records or copies
thereof maintained by the resigning or removed Trustee in the
administration hereof as may be requested by the successor trustee,
and shall thereupon be discharged from all duties and
responsibilities.
(c) In case at any time the Trustee shall resign and no successor trustee
shall have been appointed and have accepted appointment within 30 days
after notice of resignation has been received by the Depositor, the
retiring Trustee may forthwith apply to a court of competent
jurisdiction for the appointment of a successor trustee. Such court
may thereupon, after such notice, if any, as it may deem proper and
prescribe, appoint a successor trustee.
(d) Any corporation into which any trustee hereunder maybe merged or with
which it may be consolidated, or any corporation resulting from any
merger or consolidation to which any trustee hereunder shall be a
party, shall be the successor trustee under this Indenture without the
execution or filing of any paper, instrument or further act to be done
on the part of the parties hereto, anything herein, or in any
agreement relating to such merger or consolidation, by which any such
trustee may seek to retain certain powers, rights and privileges
theretofore obtaining for any period of time following such merger or
consolidation, to the contrary notwithstanding.
(e) Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to this Section shall become effective upon
acceptance of appointment by the successor trustee as provided in
subsection (b) hereof.
SECTION 6.06. QUALIFICATIONS OF TRUSTEE. The Trustee shall be a corporation
organized and doing business under the laws of the United States or any state
thereof, which is authorized under such laws to exercise corporate trust powers
and having at all times an aggregate capital, surplus and undivided profits of
not less than $500,000.
ARTICLE VII
RIGHTS OF UNIT HOLDERS
SECTION 7.01. BENEFICIARIES OF TRUST. By the purchase and acceptance or
other lawful delivery and acceptance of any Unit, the Unit holder shall be
deemed to be a beneficiary of such Trust created by this Indenture and vested
with all right, title and interest in such Trust to the extent of the Unit or
Units set forth are subject to the terms and conditions of this Indenture
<PAGE>
SECTION 7.02. RIGHTS, TERMS AND CONDITIONS. In addition to the other
rights and powers set forth in the other provisions and conditions of this
Indenture, the Unit holders shall have the following rights and powers and shall
be subject to the following terms and conditions:
(a) A Unit holder may at any time tender his Units to the Trustee for
redemption, subject to and in accordance with Section 5.02.
(b) The death or incapacity of any Unit holder shall not operate to
terminate this Indenture or a related Trust, nor entitle his legal
representatives or heirs to claim an accounting or to take any action
or proceeding in any court of competent jurisdiction for a partition
or winding up of the Trust Fund or a related Trust, nor otherwise
affect the rights, obligations and liabilities of the parties hereto
or any of them. Each Unit holder expressly waives any right he may
have under any rule of law, of the provisions of any statute, or
otherwise, to require the Trustee at any time to account, in any
manner other than as expressly provided in this Indenture, in respect
of the Securities or moneys from time to time received, held and
applied by the Trustee hereunder.
(c) No Unit holder shall have any right to vote or in any manner otherwise
control the operation and management of the Trust Fund, a related
Trust, or the obligations and management of the Trust Fund, or the
obligations of the parties hereto, nor shall anything herein set
forth, shall be construed so as to constitute the Unit holders from
time to time as partners or members of an association; nor shall any
Unit holder ever be under any liability to any third persons by reason
of any action taken by the parties to this Indenture, or any other
cause whatsoever.
ARTICLE VIII
ADDITIONAL COVENANTS; MISCELLANEOUS PROVISIONS
SECTION 8.01. AMENDMENTS. This Indenture may be amended from time to time
by the Depositor and Trustee hereto or their respective successors, without the
consent of any of the Unit holders (a) to cure any ambiguity or to correct or
supplement any provision contained herein which may be defective or inconsistent
with any other provision contained herein; or (b) to make such other provision
regarding matters or questions arising hereunder as shall not adversely affect
the interests of the Unit holders; provided, however, that in no event may any
amendment be made which would (1) alter the rights to the Unit holders as
against each other, (2) provide the Trustee with the power to engage in business
or investment activities other than as specifically provided in this Indenture
or (3) adversely affect the characterization of the Trust as a grantor trust for
federal income tax purposes. This Indenture may not be amended, however, without
the consent of all Unit holders then outstanding, so as (1) to permit, except in
accordance with the terms and conditions hereof, the acquisition hereunder of
any Securities other than those specified in Schedule A to the Trust Agreement,
or (2) to reduce the aforesaid percentage of Units the Holders of which are
required to consent to certain amendments. This Indenture may not be amended so
as to reduce the interest in the Trust represented by Units without the consent
of all affected Unit holders.
Promptly after execution of any such amendment, the Trustee shall furnish
written notification to all then outstanding Unit holders of the substance of
such amendment. It shall not be necessary for the consent of Unit holders under
Section 6.06, 9.01 or 10.0) to approve the particular from of any proposed
amendment, but it shall be sufficient if such consent shall approve the
substance thereof. The manner of obtaining such consents and of evidencing the
authorization of the execution thereby by Unit holders shall be subject to such
reasonable regulations as the Trustee may prescribe.
<PAGE>
SECTION 8.02. TERMINATION. This Indenture and each Trust created hereby
shall terminate upon the maturity, redemption, sale or other disposition as the
case may be of the last Security held in such Trust hereunder unless sooner
terminated as hereinbefore specified, and may be terminated at any time by the
written consent of 100% of the Unit holders of the respective Trust; provided
that in no event shall any Trust continue beyond December 31 of (a) the calendar
year after the year in which the Zero Coupon Obligations deposited in the Trust
have matured or (b) the calendar year preceding the fiftieth anniversary of the
execution of this Indenture.
Written notice of any termination, specifying the time or times at which
the Unit holders holding Units may surrender such Units for Redemption and the
date, determined by the Trustee, upon which the transfer books of the Trustee,
maintained pursuant to Section 6.01, shall be closed with respect to the
termination Trust shall be given by the Trustee to Unit holders of such
terminated Trust. Within a reasonable period of time after such termination, the
Trustee shall sell or distribute all of the Securities of such Trust then held,
if any and shall:
(a) deduct from the Income Account of such Trust or, to the extent that
funds are not available in such Account of such Trust, from the
Principal Account of such Trust, and pay to itself individually an
amount equal to the sum of (I) its accrued compensation for its
ordinary recurring services, (ii) any compensation due it for its
extraordinary services in connection with such Trust, and (iii) any
costs, expenses or indemnities in connection with such Trust as
provided herein;
(b) deduct from the Income Account of such Trust or, to the extent that
funds are not available in such Account, from the Principal Account of
such of such Trust, and pay accrued and unpaid fees of the Evaluator,
the Portfolio Supervisor and counsel in connection with such Trust, if
any,
(c) deduct from the Income Account of such Trust or the Principal Account
of such Trust any amounts which may be required to be deposited in the
Reserve Account to provide for payment of any applicable taxes or
other governmental charges and any other amounts which may be required
to meet expenses incurred under this Indenture in connection with such
Trust;
(d) distribute to each Unit holder such Unit holder's interest in the
balances of the Income and Principal Accounts and, on the conditions
set forth in Section 3.04 hereof, the Reserve Accounts of the Trust in
which he holds Units. The distribution shall consist of shares of the
Mutual Fund held in the Trust at the date of computation and the
proceeds of the maturity or other disposition of the Zero Coupon
Obligations; provided, however, that not less than 60 nor more than
180 days prior to termination at the Mandatory Termination Date, the
Trustee shall send a written notice to all Unit holders of record at
such time, indicating that they may, if they so elect, have the
proceeds received upon maturity of the Zero Coupon Obligations
invested, at net asset value, in additional shares of the Mutual Fund.
Such distribution shall be made to Unit holders of record as of the
date of such computation and shall be distributed to them within five
days or shortly thereafter;
(e) together with such distribution to each Unit holder as provided for in
(d) furnish to each such Unit holder a final distribution statement as
of the date of the computation of the amount distributable to Unit
holders, setting forth the data and information in substantially the
form and manner provided for in Section 3.06 hereof.
The Trustee shall be under no liability with respect to moneys held by it
in the Income, Reserve and Principal Accounts of a Trust upon termination except
to hold the same in trust within the meaning of the Investment company Act of
1940, without interest until disposed of in accordance with the terms of this
Indenture.
<PAGE>
SECTION 8.03. CONSTRUCTION. This Indenture is executed and delivered in the
state of Pennsylvania, and all laws or rules of construction of such state shall
govern the rights of the parties hereto and the Unit holders and the
interpretation of the provision hereof.
SECTION 8.04. WRITTEN NOTICE. Any notice, demand, direction or instruction
to be given to the Depositor hereunder shall be in writing and shall be duly
given if mailed or delivered to the Depositor, 555 North Lane, Suite 6160,
Conshohocken, Pennsylvania, 19428, or such other address as shall be specified
by the Depositor to the other parties hereto in writing.
Any notice, demand, direction or instruction to be given to the Trustee
shall be in writing and shall be duly given if delivered to the corporate trust
office of the Trustee, 555 North Lane, Suite 6160, Conshohocken, Pennsylvania,
19428, Attention: Unit Investment Trust Division, or such other address as shall
be specified by the Trustee to the other parties in writing.
Any notice, demand, direction or instruction to be given to the Evaluator
hereunder shall be in writing and shall be duly given if mailed or delivered to
the Evaluator at 555 North Lane, Suite 6160, Conshohocken, Pennsylvania, 19428,
or at such other address as shall be specified by the Evaluator to the other
parties hereto in writing.
Any notice, demand direction or instruction to be given to the Portfolio
Supervisor shall be in writing and shall be duly given if mailed or delivered to
the Portfolio Supervisor at 555 North Lane, Suite 6160, Conshohocken,
Pennsylvania, 19428, or such other address as shall be specified by the
Portfolio Supervisor to the other parties in writing.
Any notice to be given to the Unit holders shall be duly given if mailed by
first class mail with postage prepaid or delivered to each Unit holder at the
address of such holder appearing on the registration books of the Trustee.
SECTION 8.05. SEVERABILITY. If any one or more of the covenants, agreements
provisions or terms of this Indenture shall be held contrary to any express
provision of law or contrary to policy of express law, though not expressly
prohibited, or against public policy, or shall for any reason whatsoever be held
invalid, then such covenants, agreements, provisions or terms shall be deemed
severable from the remaining covenants, agreements, provisions or terms of this
Indenture and shall in no way affect the validity or enforceability of the other
provisions of this Indenture or the rights of the holders thereof.
SECTION 8.06. DISSOLUTION OF DEPOSITOR NOT TO TERMINATE. The dissolution of
the Depositor for any cause whatsoever shall not operate to terminate this
Indenture or any Trust Fund insofar as the duties and obligations of the Trustee
are concerned.
<PAGE>
SCHEDULE TO TRUST AGREEMENT
Securities Initially Deposited
Enhanced Index Trust, Series 1
(Note: Incorporated herein and made a part hereof for the Trust is the "Schedule
of Investments" for the Trust as set forth in the Prospectus.)
<PAGE>
IN WITNESS WHEREOF, Enhanced Index Distributors, LLC, Declaration Fund and
Declaration Service Company have each caused these Standard Terms and Conditions
of Trust to be executed and the respective corporate seal to be hereto affixed
and attested by authorized officers; all as of the day, month and year first
above written.
ENHANCED INDEX DISTRIBUTORS, LLC
Depositor
By /Anthony J. Fischer/
___________________________________
(SEAL)
Attest:
/Linda K. Coyne/
- -------------
DECLARATION FUND
Trustee
By /Terence P. Smith/
___________________________________
President
(SEAL)
Attest:
/Linda K. Coyne/
- -------------
Secretary
DECLARATION SERVICE COMPANY
Evaluator
By /Terence P. Smith/
___________________________________
Chief Executive Officer
Exhibit A(4) Form of Investment Company Services Agreement
Enhanced Index Trust
Investment Company Services Agreement
This AGREEMENT, dated as of the (___) day of (_____), 2000, made by and
between Declaration Fund, (the "Fund"), a Pennsylvania business trust operating
as an open-end, management investment company registered under the Investment
Company Act of 1940, as amended (the "Act"), Enhanced Index Trust, (the
"Trust"), a Pennsylvania business trust, and Declaration Service Company
("Declaration"), a corporation duly organized under the laws of the Commonwealth
of Pennsylvania (collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, the Trust is authorized by its Trust Instrument to issue separate
series of shares representing interests in separate investment portfolios which
are identified on Schedule "C" attached hereto and which Schedule "C" may be
amended from time to time by mutual agreement of the Trust and Declaration; and
WHEREAS, the Parties desire to enter into an agreement whereby Declaration
will provide the services to the Trust as specified herein and set forth in
particular in Schedule "A" which is attached hereto and made a part hereof.
NOW THEREFORE, in consideration of the premises and mutual covenants
contained herein, and in exchange of good and valuable consideration, the
sufficiency and receipt of which are hereby acknowledged, the Parties hereto,
intending to be legally bound, do hereby agree as follows:
GENERAL PROVISIONS
SECTION 1. APPOINTMENT. The Trust hereby appoints Declaration as servicing
agent and Declaration hereby accepts such appointment. In order that Declaration
may perform its duties under the terms of this Agreement, the Board of Trustees
of the Trust shall direct the officers, investment adviser(s), legal counsel,
independent accountants and custodian of the Trust to
<PAGE>
cooperate fully with Declaration and, upon request of Declaration, to provide
such information, documents and advice relating to the Trust which Declaration
requires to execute its responsibilities hereunder. In connection with its
duties, Declaration shall be entitled to rely, and will be held harmless by the
Trust when acting in reasonable reliance, upon any instruction, advice or
document relating to the Trust as provided to Declaration by any of the
aforementioned persons on behalf of the Trust. All fees charged by any such
persons acting on behalf of the Trust will be deemed an expense of the Trust.
Any services performed by Declaration under this Agreement will conform to
the requirements of:
(a) the provisions of the Act and the Securities Act of 1933, as amended,
and any rules or regulations in force thereunder;
(b) any other applicable provision of state and federal law;
(c) the provisions of the Trust Instrument and the By-Laws as amended from
time to time and delivered to Declaration;
(d) any policies and determinations of the Board of Trustees of the Trust
which are communicated to Declaration; and
(e) the policies of the Trust as reflected in the Trust's registration
statement as filed with the U.S. Securities and Exchange Commission.
Nothing in this Agreement will prevent Declaration or any officer thereof
from providing the same or comparable services for or with any other person,
firm or corporation. While the services supplied to the Trust may be different
than those supplied to other persons, firms or corporations, Declaration will
provide the Trust equitable treatment in supplying services. The Trust
recognizes that it will not receive preferential treatment from Declaration as
compared with
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the treatment provided to other Declaration clients.
Section 2. Duties and Obligations of Declaration.
-------------------------------------------------
Subject to the provisions of this Agreement, Declaration will provide to
the Trust the specific services as set forth in Schedule "A" attached hereto.
Section 3. Definitions. For purposes of this Agreement:
-------------------------------------------------------
"CERTIFICATE" will mean any notice, instruction, or other instrument in
writing, authorized or required by this Agreement. To be effective, such
Certificate shall be given to and received by the custodian and shall be signed
on behalf of the Trust by any two of its designated officers, and the term
Certificate shall also include instructions communicated to the custodian by
Declaration.
"CUSTODIAN" will refer to that agent which provides safekeeping of the
assets of the Trust.
"INSTRUCTIONS" will mean communications containing instructions transmitted
by electronic or telecommunications media including, but not limited to,
Industry Standardization for Institutional Trade Communications,
computer-to-computer interface, dedicated transmission line, facsimile
transmission (which may be signed by an officer or unsigned) and tested telex.
"ORAL INSTRUCTION" will mean an authorization, instruction, approval, item
or set of data, or information of any kind transmitted to Declaration in person
or by telephone, telegram, telecopy or other mechanical or documentary means
lacking original signature, by a person or persons reasonably identified to
Declaration to be a person or persons so authorized by a resolution of the Board
of Trustees of the Trust to give Oral Instructions to Declaration on behalf of
the Trust.
"SHAREHOLDERS" will mean the registered owners of the shares of the Trust
in accordance with the share registry records maintained by Declaration for the
Trust.
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<PAGE>
"SHARES" will mean the issued and outstanding shares of the Trust.
"SIGNATURE GUARANTEE" will mean the guarantee of signatures by an "eligible
guarantor institution" as defined in Rule 17Ad-15 under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). Eligible guarantor institutions
include banks, brokers, dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings associations.
Broker-dealers guaranteeing signatures must be members of a clearing corporation
or maintain net capital of at least $100,000. Signature guarantees will be
accepted from any eligible guarantor institution which participates in a
signature guarantee program.
"WRITTEN INSTRUCTION" will mean an authorization, instruction, approval,
item or set of data or information of any kind transmitted to Declaration in an
original writing containing an original signature or a copy of such document
transmitted by telecopy including transmission of such signature reasonably
identified to Declaration to be the signature of a person or persons so
authorized by a resolution of the Board of Trustees of the Trust, or so
identified by the Trust to give Written Instructions to Declaration on behalf of
the Trust.
CONCERNING ORAL AND WRITTEN INSTRUCTIONS For all purposes under this
Agreement, Declaration is authorized to act upon receipt of the first of
any Written or Oral Instruction it receives from the Trust or its agents.
In cases where the first instruction is an Oral Instruction that is not in
the form of a document or written record, a confirmatory Written
Instruction or Oral Instruction in the form of a document or written record
shall be delivered. In cases where Declaration receives an Instruction,
whether Written or Oral, to enter a portfolio transaction onto the Trust's
records, the Trust shall cause the broker/dealer executing such transaction
to send a written confirmation to the Custodian.
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<PAGE>
Declaration shall be entitled to rely on the first Instruction
received. For any act or omission undertaken by Declaration in compliance
therewith, it shall be free of liability and fully indemnified and held
harmless by the Trust, provided however, that in the event a Written or
Oral Instruction received by Declaration is countermanded by a subsequent
Written or Oral Instruction received prior to acting upon such
countermanded Instruction, Declaration shall act upon such subsequent
Written or Oral Instruction. The sole obligation of Declaration with
respect to any follow-up or confirmatory Written Instruction or Oral
Instruction in documentary or written form shall be to make reasonable
efforts to detect any such discrepancy between the original Instruction and
such confirmation and to report such discrepancy to the Trust. The Trust
shall be responsible and bear the expense of its taking any action,
including any reprocessing, necessary to correct any discrepancy or error.
To the extent such action requires Declaration to act, the Trust shall give
Declaration specific Written Instruction as to the action required.
The Trust will file with Declaration a certified copy of each resolution of
the Trust's Board of Trustees authorizing execution of Written Instructions
or the transmittal of Oral Instructions as provided above.
Section 4. Indemnification.
---------------------------
(a) Declaration, its directors, officers, employees, shareholders, and
agents will be liable for any loss suffered by the Trust resulting from the
willful misfeasance, bad faith, negligence or disregard on the part of
Declaration in the performance of its obligations and duties under this
Agreement.
(b) Any director, officer, employee, shareholder or agent of Declaration,
who may be or become an officer, director, employee or agent of the Trust, will
be deemed, when rendering services to the Trust, or acting on any business of
the Trust (other than services or business in
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<PAGE>
connection with Declaration' duties hereunder), to be rendering such services to
or acting solely for the Trust and not as a director, officer, employee,
shareholder or agent of, or under the control or direction of Declaration even
though such person may be receiving compensation from Declaration.
(c) The Trust agrees to indemnify and hold Declaration harmless, together
with its directors, officers, employees, shareholders and agents from and
against any and all claims, demands, expenses and liabilities (whether with or
without basis in fact or law) of any and every nature which Declaration may
sustain or incur or which may be asserted against Declaration by any person by
reason of, or as a result of:
(i) any action taken or omitted to be taken by Declaration except claims,
demands, expenses and liabilities arising from willful misfeasance, bad faith,
negligence or disregard on the part of Declaration in the performance of its
obligations and duties under this Agreement; or
(ii) any action taken or omitted to be taken by Declaration in reliance
upon any Certificate, instrument, order or stock certificate or other document
reasonably believed by Declaration to be genuine and signed, countersigned or
executed by any duly authorized person, upon the Oral Instructions or Written
Instructions of an authorized person of the Trust, or upon the written opinion
of legal counsel for the Trust or Declaration; or
(iii) the offer or sale of shares of the Trust to any person, natural or
otherwise, which is in violation of any state or federal law.
If a claim is made against Declaration as to which Declaration may seek
indemnity under this Section, Declaration will notify the Trust promptly after
receipt of any written assertion of such claim threatening to institute an
action or proceeding with respect thereto and will notify the Trust promptly of
any action commenced against Declaration within ten (10) days after Declaration
has been served with a summons or other legal process. Failure to notify the
Trust will not, however, relieve the Trust from any liability which it may have
on account of the
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<PAGE>
indemnity under this Section so long as the Trust has not been prejudiced in any
material respect by such failure.
The Trust and Declaration will cooperate in the control of the defense of
any action, suit or proceeding in which Declaration is involved and for which
indemnity is being provided by the Trust to Declaration. The Trust may negotiate
the settlement of any action, suit or proceeding subject to Declaration's
approval, which will not be unreasonably withheld. Declaration reserves the
right, but not the obligation, to participate in the defense or settlement of a
claim, action or proceeding with its own counsel. Costs or expenses incurred by
Declaration in connection with, or as a result of such participation, will be
borne solely by the Trust if:
(i) Declaration has received an opinion of counsel from counsel to the
Trust stating that the use of counsel to the Trust by Declaration would present
an impermissible conflict of interest;
(ii) the defendants in, or targets of, any such action or proceeding
include both Declaration and the Trust, and legal counsel to Declaration has
reasonably concluded that there are legal defenses available to it which are
different from or additional to those available to the Trust or which may be
adverse to or inconsistent with defenses available to the Trust (in which case
the Trust will not have the right to direct the defense of such action on behalf
of Declaration); or
(iii) the Trust authorizes Declaration to employ separate counsel at the
expense of the Trust.
(d) The terms of this Section will survive the termination of this
Agreement.
Section 5. Representations and Warranties.
------------------------------------------
7
<PAGE>
(a) Declaration represents and warrants that:
(i) it is a corporation duly organized and existing and in good standing
under the laws of the Commonwealth of Pennsylvania;
(ii) it is empowered under applicable laws and by its Certificate of
Incorporation and By-Laws to enter into and perform this Agreement;
(iii) all requisite corporate proceedings have been taken to authorize
Declaration to enter into and perform this Agreement;
(iv) it has and will continue to have access to the facilities, personnel
and equipment required to fully perform its duties and obligations hereunder;
(v) no legal or administrative proceeding have been instituted or
threatened which would impair Declarations' ability to perform its duties and
obligations under this Agreement;
(vi) its entrance into this Agreement shall not cause a material breach or
be in material conflict with any other agreement or obligation of Declaration or
any law or regulation applicable to it;
(vii) it is registered as a transfer agent under Section 17A(c)(2) of the
Exchange Act;
(viii) this Agreement has been duly authorized by Declaration and, when
executed and delivered, will constitute valid, legal and binding obligation of
Declaration, enforceable in accordance with its terms.
(b) The Trust represents and warrants that:
8
<PAGE>
(i) it is a business trust duly organized and existing and in good standing
under the laws of the Commonwealth of Pennsylvania;
(ii) it is empowered under applicable laws and by its Trust Instrument and
By-Laws to enter into and perform this Agreement;
(iii) all requisite proceedings have been taken to authorize the Trust to
enter into and perform this Agreement;
(iv) no legal or administrative proceedings have been instituted or
threatened which would impair the Trust's ability to perform its duties and
obligations under this Agreement;
(v) the Trust's entrance into this Agreement shall not cause a material
breach or be in material conflict with any other agreement or obligations of the
Trust, or any law or regulation applicable to either;
(vi) the Shares are properly registered or otherwise authorized for
issuance and sale;
(vii) this Agreement has been duly authorized by the Trust and, when
executed and delivered, will constitute valid, legal and binding obligation of
the Trust, enforceable in accordance with its terms.
(c) Delivery of Documents
The Trust will furnish or cause to be furnished to Declaration the
following documents;
(i) current Prospectus and Statement of Additional Information;
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<PAGE>
(ii) most recent Annual Report;
(iii) most recent Semi-Annual Report for registered investment companies on
Form N-SAR;
(iv) certified copies of resolutions of the Trust's Board of Trustees
authorizing the execution of Written Instructions or the transmittal of Oral
Instructions and those persons authorized to give those Instructions.
(d) Record Keeping and Other Information
Declaration will create and maintain all records required of it pursuant to
its duties hereunder and as set forth in Schedule "A" in accordance with all
applicable laws, rules and regulations, including records required by Section
31(a) of the Act. All such records will be the property of the Trust and will be
available during regular business hours for inspection, copying and use by the
Trust. Where applicable, such records will be maintained by Declaration for the
periods and in the places required by Rule 31a-2 under the Act. Upon termination
of this Agreement, Declaration will deliver all such records to the Trust or
such person as the Trust may designate.
SECTION 6. COMPENSATION. The Trust agrees to pay Declaration compensation
for its services, and to reimburse it for expenses at the rates, times, manner
and amounts as set forth in Schedule "B" attached hereto and incorporated herein
by reference and as will be set forth in any amendments to such Schedule "B"
agreed upon in writing by the Parties. Upon receipt of an invoice therefor,
Declaration is authorized to collect such fees by debiting the Trust's custody
account following review and approval of such fees by an authorized
representative of the Trust, which will not be unreasonably withheld. In
addition, the Trust agrees to reimburse Declaration for any out-of-pocket
expenses paid by Declaration on behalf of the Trust within ten (10) calendar
10
<PAGE>
days of the Trust's receipt and approval of an invoice therefor, such approval
will not be unreasonably withheld.
For the purpose of determining fees payable to Declaration, the value of
the Trust's net assets will be computed at the times and in the manner specified
in the Trust's Prospectus and Statement of Additional Information then in
effect, and the fees due Declaration will be calculated daily and paid monthly
on the value of the Trust's assets thus determined.
During the term of this Agreement, should the Trust seek services or
functions in addition to those outlined below or in Schedule "A" attached
hereto, a written amendment to this Agreement specifying the additional services
and corresponding compensation will be executed by the Parties.
In the event that the Trust is more than sixty (60) days delinquent in its
payments of monthly billings in connection with this Agreement (with the
exception of specific amounts which may be contested in good faith by the
Trust), this Agreement may be terminated upon thirty (30) days' written notice
to the Trust by Declaration. The Trust must notify Declaration in writing of any
contested amounts within thirty (30) days of receipt of a billing for such
amounts. Disputed amounts are not due and payable while they are being disputed
SECTION 7. DAYS OF OPERATION. Nothing contained in this Agreement is
intended to or will require Declaration, in any capacity hereunder, to perform
any functions or duties on any holiday, day of special observance or any other
day on which the New York Stock Exchange ("NYSE") is closed. Functions or duties
normally scheduled to be performed on such days will be performed on and as of
the next succeeding business day on which the NYSE is open. Notwithstanding the
foregoing, Declaration will compute the net asset value of the Trust on each day
required pursuant to Rule 22c-1 promulgated under the Act.
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<PAGE>
SECTION 8. ACTS OF GOD, ETC. Declaration will not be liable or responsible
for delays or errors caused by acts of God or by reason of circumstances beyond
its control including, acts of civil or military authority, national
emergencies, insurrection, war, riots, or failure or unavailability of
transportation, communication or power supply, fire, flood or other catastrophe.
In the event of equipment failures beyond Declaration' control, Declaration
will, at no additional expense to the Trust, take reasonable steps to minimize
service interruptions but will have no liability with respect thereto. The
foregoing obligation will not extend to computer terminals located outside of
premises maintained by Declaration. Declaration has entered into and maintains
in effect agreements making reasonable provision for emergency use of electronic
data processing equipment.
SECTION 9. INSPECTION AND OWNERSHIP OF RECORDS. In the event of a request
or demand for the inspection of the records of the Trust, Declaration will use
its best efforts to notify the Trust and to secure instructions as to permitting
or refusing such inspection. Declaration may, however, make such records
available for inspection to any person in any case where it is advised in
writing by its counsel that it may be held liable for failure to do so after
notice to the Trust.
Declaration recognizes that the records it maintains for the Trust are the
property of the Trust and will be surrendered to the Trust upon written notice
to Declaration as outlined under Section 10(c) below. The Trust is responsible
for the payment in advance of any fees owed to Declaration. Declaration agrees
to maintain the records and all other information of the Trust in a confidential
manner and will not use such information for any purpose other than the
performance of Declaration' duties under this Agreement. Declaration will
maintain off site secured storage of all electronic records of the Trust. Trust
understands Declaration maintains storage for physical
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<PAGE>
records at Declaration's location.
Section 10. Duration and Termination.
-------------------------------------
(a) The initial term of this Agreement will be for the period of thirty
(30) months, commencing on the date hereinabove first written (the "Effective
Date") and will continue thereafter subject to termination by either Party as
set forth in subsection (c) below.
(b) The fee schedules set forth in Schedule "B" attached hereto will be
fixed for the initial term commencing on the Effective Date of this Agreement
and will continue thereafter subject to review and any adjustment.
(c) After the initial term of this Agreement, a Party may give written
notice to the other (the day on which the notice is received by the Party
against which the notice is made shall be the "Notice Date") of a date on which
this Agreement shall be terminated ("Termination Date"). The Termination Date
shall be set on a day not less than sixty (60) days after the Notice Date. The
period of time between the Notice Date and the Termination Date is hereby
identified as the "Notice Period". Any time up to, but not later than fifteen
(15) days prior to the Termination Date, the Trust will pay to Declaration such
compensation as may be due as of the Termination Date and will likewise
reimburse Declaration for any out-of-pocket expenses and disbursements
reasonably incurred or expected to by incurred by Declaration up to and
including the Termination Date.
(d) In connection with the termination of this Agreement, if a successor to
any of Declaration' duties or responsibilities under this Agreement is
designated by the Trust by written notice to Declaration, Declaration will
promptly, on the Termination Date and upon receipt by Declaration of any
payments owed to it as set forth in Section 10(c) above, transfer to the
successor, at the Trust's expense, all records which belong to the Trust and
will provide appropriate, reasonable and professional cooperation in
transferring such records to the named successor.
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<PAGE>
(e) Should the Trust desire to move any of the services outlined in this
Agreement to a successor service provider prior to the Termination Date,
Declaration shall make a good faith effort to facilitate the conversion on such
prior date, however, there can be no guarantee that Declaration will be able to
facilitate a conversion of services prior to the end of the Notice Period.
Should services be converted to a successor service provider prior to the end of
the Notice Period, or if the Trust is liquidated or its assets merged or
purchased or the like with another entity, payment of fees to Declaration shall
be accelerated to a date prior to the conversion or termination of services and
calculated as if the services had remained at Declaration until the expiration
of the Notice Period and shall be calculated through the Notice Date.
(f) Notwithstanding any other provisions of Paragraph 10, and after the
passage of one (1) year from the effective date of this Agreement; in the event
the Fund deregisters as an Investment Company with the United States Securities
and Exchange Commission ("SEC"), this Agreement may be terminated by the Fund
upon ninety (90) days written notice to Declaration. The Termination Date shall
be ninety (90) days after the receipt of such notice by Declaration. Any time up
to, but not later than fifteen (15) days prior to the Termination Date, the Fund
will pay to Declaration such compensation as may be due as of the Termination
Date and will likewise reimburse Declaration for any out- of- pocket expenses
and disbursements reasonably incurred or expected to be incurred by Declaration
up to and including the Termination Date.
(g) Notwithstanding the foregoing, this Agreement may be terminated at any
time by either Party in the event of a material breach by the other Party
involving negligence, willful misfeasance, bad faith or a disregard of its
obligations and duties under this Agreement provided that such breach shall have
remained unremedied for sixty (60) days or more after receipt of written
specification thereof.
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<PAGE>
SECTION 11. RIGHTS OF OWNERSHIP. All computer programs and procedures
developed to perform services required to be provided by Declaration under this
Agreement are the property of Declaration. All records and other data, except
such computer programs and procedures are the exclusive property of the Trust
and all such other records and data will be furnished to the Trust in
appropriate form as soon as practicable after termination of this Agreement for
any reason. Ownership and control of toll free telephone line 800-220-8888 will
be retained by the Trust, even though this line may be connected from time to
time to the telephone system of Declaration.
SECTION 12. AMENDMENTS TO DOCUMENTS. The Trust will furnish Declaration
written copies of any amendments to, or changes in, the Trust Instrument,
By-Laws, Prospectus or Statement of Additional Information in a reasonable time
prior to such amendments or changes becoming effective. In addition, the Trust
agrees that no amendments will be made to the Prospectus or Statement of
Additional Information of the Trust which might have the effect of changing the
procedures employed by Declaration in providing the services agreed to hereunder
or which amendment might affect the duties of Declaration hereunder unless the
Trust first obtains Declaration' approval of such amendments or changes.
SECTION 13. CONFIDENTIALITY. Both Parties hereto agree that any non-public
information obtained hereunder concerning the other Party is confidential and
may not be disclosed to any other person without the consent of the other Party,
except as may be required by applicable law or at the request of the U.S.
Securities and Exchange Commission or other governmental agency. Declaration
agrees that it will not use any non-public information for any purpose other
than performance of its duties or obligations hereunder. The obligations of the
Parties under this Section will survive the termination of this Agreement. The
Parties further agree that a breach of this Section would irreparably damage the
other Party and accordingly agree that each of them is entitled, without bond or
other security, to an injunction or injunctions to prevent breaches of this
provision.
15
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SECTION 14. NOTICES. Except as otherwise provided in this Agreement, any
notice or other communication required by or permitted to be given in connection
with this Agreement will be in writing and will be delivered in person or sent
by first class mail, postage prepaid or by prepaid overnight delivery service to
the respective parties as follows:
If to the Trust: If to Declaration:
---------------- ------------------
Declaration Service Company.
555 North Lane, Suite 6160
Conshohocken, PA 19428
Attention: (______________) Attention: Terence P. Smith
President Chief Executive Officer
SECTION 15. AMENDMENT. No provision of this Agreement may be amended or
modified in any manner except by a written agreement properly authorized and
executed by the Parties. This Agreement may be amended from time to time by
supplemental agreement executed by the Parties and the compensation stated in
Schedule "B" attached hereto may be adjusted accordingly as mutually agreed
upon.
SECTION 16. AUTHORIZATION. The Parties represent and warrant to each other
that the execution and delivery of this Agreement by the undersigned officer of
each Party has been duly and validly authorized; and when duly executed, this
Agreement will constitute a valid and legally binding enforceable obligation of
each Party.
SECTION 17. COUNTERPARTS. This Agreement may be executed in two or more
counterparts,
16
<PAGE>
each of which when so executed will be deemed to be an original, but such
counterparts will together constitute but one and the same instrument.
SECTION 18. ASSIGNMENT. This Agreement will extend to and be binding upon
the Parties hereto and their respective successors and assigns; provided,
however, that this Agreement will not be assignable by the Trust without the
written consent of Declaration or by Declaration without the written consent of
the Trust which consent shall be authorized or approved by a resolution by its
respective Boards of Trustees.
SECTION 19. GOVERNING LAW. This Agreement will be governed by the laws of
the Commonwealth of Pennsylvania and the exclusive venue of any action arising
under this Agreement will be Montgomery County, Commonwealth of Pennsylvania.
SECTION 20. SEVERABILITY. If any part, term or provision of this Agreement
is held by any court to be illegal, in conflict with any law or otherwise
invalid, the remaining portion or portions will be considered severable and not
be affected and the rights and obligations of the parties will be construed and
enforced as if the Agreement did not contain the particular part, term or
provision held to be illegal or invalid, provided that the basic agreement is
not thereby materially impaired.
17
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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement
consisting of (_______) (__) typewritten pages, together with Schedules "A," "B"
and "C" (pages (_____), attached), to be signed by their duly authorized
officers as of the day and year first above written.
Enhanced Index Trust Declaration Service Company
-------------------- ---------------------------
By: (______________) By: Terence P. Smith
President Chief Executive Officer
18
<PAGE>
SCHEDULE A
ACCOUNTING SERVICES PROVIDED BY DECLARATION SERVICE COMPANY
- --------------------------------------------------------------------------------
o Journalize each Portfolio's investment, capital share and income and
expense activities.
o Verify investment buy/sell trade tickets when received from the advisor and
transmit trades to the Fund's custodian for proper settlement.
o Maintain individual ledgers for investment securities.
o Maintain historical tax lots for each security.
o Reconcile cash and investment balances of each Portfolio with the
custodian, and provide the advisor with the beginning cash balance
available for investment purposes.
o Update the cash availability throughout the day as required by the advisor.
o Post to and prepare each Portfolio's Statement of Assets and Liabilities
and Statement of Operations.
o Calculate expenses payable pursuant to the Fund's various contractual
obligations.
o Control all disbursements from the Fund on behalf of each Portfolio and
authorize such disbursements upon instructions of the Fund.
o Calculate capital gains and losses.
o Determine each Portfolio's net income.
o Obtain security market prices or if such market prices are not readily
available, then obtain such prices from services approved by the advisor,
and in either case calculate the market or fair value of each Portfolio's
investments.
o Where applicable, calculate the amortized cost value of debt instruments.
19
<PAGE>
o Transmit or mail a copy of the portfolio valuations to the advisor.
o Compute the net asset value of each Portfolio.
o Report applicable net asset value and performance data to performance
tracking organizations.
o Compute each Portfolio's yields, total returns, expense ratios and
portfolio turnover rate.
o Prepare and monitor the expense accruals and notify Fund management of any
proposed adjustments.
o Prepare monthly financial statements, which will include, without
limitation, the Schedule of Investments, the Statement of Assets and
Liabilities, the Statement of Operations, the Statement of Changes in Net
Assets, the Cash Statement, and the Schedule of Capital Gains and Losses.
o Prepare monthly security transactions listings.
o Prepare monthly broker security transactions summaries.
o Supply various Fund and Portfolio statistical data as requested on an
ongoing basis.
o Assist in the preparation of support schedules necessary for completion of
Federal and state tax returns.
o Assist in the preparation and filing of the Fund's annual and semiannual
reports with the SEC on Form N-SAR.
o Assist in the preparation and filing of the Fund's annual and semiannual
reports to shareholders and proxy statements.
o Assist with the preparation of amendments to the Fund's Registration
Statements on From N-1A and other filings relating to the registration of
shares.
o Monitor each Portfolio's status as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended from time to
time ("Code").
20
<PAGE>
o Determine the amount of dividends and other distributions payable to
shareholders as necessary to, among other things, maintain the
qualification as a regulated investment company of each Portfolio of the
Fund under the Code.
o Provide other accounting services as may be agreed upon from time to time
in writing by the Fund and the Accounting Services Agent.
21
<PAGE>
ADMINISTRATIVE SERVICES PROVIDED BY DECLARATION SERVICE COMPANY
- --------------------------------------------------------------------------------
o Provide overall day-to-day Fund administrative management, including
coordination with Quaker Funds, Inc., the sponsor of the Funds, investment
advisor(s), custodian, transfer agency, distribution and pricing and
accounting services.
o Preparation and filing of all Federal and State reports including:
o Fund's post-effective amendments under the Securities Act of 1933 and
the Investment Company Act of 1940.
o Form N-SAR - Semi-Annual report for Registered Investment Companies.
o The Fund's Annual and Semi-Annual Report.
o Rule 24f-2 Notice - filing regarding sale(s) of securities.
o Rule 17g-1 filing with the SEC regarding Fidelity Bond coverage.
o Ongoing monitoring and filing of State Blue Sky registrations.
o Prepare and file such reports, applications and documents as may be
necessary or desirable to register the Fund's shares with the Federal and
state securities authorities, and monitor the sale of Fund shares for
compliance with Federal and state securities laws.
o Prepare and file reports to shareholders, including the annual report to
shareholders, and coordinate mailing Prospectuses, notices, proxy
statements, proxies and other reports to shareholders.
o Assist with layout and printing of shareholder communications, including
Prospectuses and reports to shareholders.
o Administer contracts on behalf of the Fund with, among others, the Fund's
investment advisor(s), custodian, transfer agent/shareholder servicing
agent, distributor, and accounting services agent.
22
<PAGE>
o Prepare and maintain materials for directors/management meetings including,
agendas, minutes, attendance records and minute books.
o Coordinate shareholder meetings, including assisting Fund counsel in
preparation of proxy materials, preparation of minutes and tabulation of
results.
o Monitor and pay Fund bills, maintain Fund budget and report budget expenses
and variances to Fund management.
o Monitor the Fund's compliance with the investment restrictions and
limitations imposed by the 1940 Act and state Blue Sky laws and applicable
regulations thereunder, the fundamental and non-fundamental investment
policies and limitations set forth in the Fund's Prospectuses and Statement
of Additional Information, and the investment restrictions and limitations
necessary for each Portfolio of the Fund to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986,
as amended, or any successor statute.
o Prepare and distribute to appropriate parties notices announcing the
declaration of dividends and other distributions to shareholders.
o Provide administrative services as may be agreed from time to time in
writing by the Fund or Administrator.
23
<PAGE>
TRANSFER AGENT, SHAREHOLDER SERVICING AGENT AND DIVIDEND DISBURSING AGENT
SERVICES PROVIDED BY DECLARATION SERVICE COMPANY
- --------------------------------------------------------------------------------
o Examine and process new accounts, subsequent payments, liquidations,
exchanges, transfers, telephone transactions, check redemptions, automatic
withdrawals, and wire order trades.
o Reinvest or pay dividends and make other distributions.
o Answer investor and dealer telephone and/or written inquiries, except as
otherwise agreed by the Transfer Agent and the Fund.
o Process and confirm address changes.
o Process standard account record changes as required, i.e. Dividend Codes,
etc.
o Microfilm and/or store source documents for transactions, such as account
applications and correspondence.
o Perform backup withholding for those accounts in accordance with Federal
regulations.
o Solicit missing taxpayer identification numbers.
o Provide remote access inquiry to Fund records via Fund supplied hardware
(fund responsible for connection line and monthly fee).
o Maintain the following shareholder information in such a manner as the
Transfer Agent shall determine:
o Name and address, including zip code.
o Balance of Shares.
o Number of Shares, issuance date of each share outstanding and
cancellation date of each share no longer outstanding, if issued.
o Balance of dollars available for redemption.
o Dividend code (daily accrual, monthly reinvest, monthly cash or
quarterly cash).
o Type of account code.
o Establishment date indicating the date an account was opened, carrying
forward pre-conversion data as available.
24
<PAGE>
o Original establishment date for accounts opened by exchange.
o W-9 withholding status and periodic reporting.
o State of residence code.
o Social security or taxpayer identification number, and indication of
certification.
o Historical transactions on the account for the most recent 18 months,
or other period as mutually agreed to from time to time.
o Indication as to whether phone transaction can be accepted for this
account. Beneficial owner code, i.e. male, female, joint tenant, etc.
o Provide the following reports and statements:
o Prepare daily journals for Fund reflecting all shares and dollar
activity for the previous day.
o Provide Fund Sponsor with investor identification and transaction
information for all trades on a daily basis.
o Provide Fund Sponsor with total dollar value of each Fund daily
via fax or other automated transmission.
o Supply information monthly for Fund's preparation of Blue Sky
reporting.
o Supply monthly purchase, redemption and liquidation information for
use in Fund's N-SAR report.
o Provide monthly average daily balance reports for the Fund.
o Prepare and mail copies of summary statements to dealers and
investment advisors.
o Mail transaction confirmation statements daily to investors.
o Address and mail four periodic financial reports (material must be
adaptable to Transfer Agent's mechanical equipment as reasonably
specified by the Transfer Agent).
o Mail periodic statement to investors.
o Compute, prepare and furnish all necessary reports to governmental
authorities: Forms 1099R, 1099DIV, 1099B, 1042 and 1042S.
o Enclose various marketing material as designated by the Fund in
statement mailings, i.e. monthly and quarterly statements (material
must be adaptable to mechanical equipment as reasonably specified by
the Transfer Agent).
o Prepare and mail confirmation statements to dealers daily.
o Prepare certified list of stockholders for proxy mailing.
25
<PAGE>
SCHEDULE B
Compensation Schedule for Services Provided by Declaration Service Company
26
<PAGE>
SCHEDULE C
Enhanced Index Trust
Portfolios covered by this Agreement:
( )
----------------------
( )
----------------------
( )
----------------------
27
ENHANCED INDEX TRUST (EIT) PROSPECTUS
Enhanced Index Trust (EIT)
a Series Trust
Enhanced Index Distributors, LLC
Trust Sponsor
Blue Chip 30 - Enhanced Index Trust (EIT), Series D1107
Seeks to return approximately twice (200%) the performance of the Dow Jones
Industrial Average (the "DJIA" sm). The DJIA Index consists of 30 of the most
widely held and actively traded stocks in the U.S. stock market.
Large Cap 500 - Enhanced Index Trust (EIT), Series S1107
Seeks to return approximately twice (200%) the performance of the S & P 500
Index. The S &P 500 Index is made up of some of the largest and most dominate
firms in their respective industries.
Technology 100 - Enhanced Index Trust (EIT), Series N1107 Seeks to return
approximately twice (200%) the performance of the NASDAQ 100 Index tm. The
NASDAQ 100 Index is comprised of 100of the largest non-financial domestic
companies most with technology and/or a growth orientation listed on the Nasdaq
Stock Market's National Market.
When Units of the series are no longer available, this prospectus may be used as
a preliminary prospectus for one or more future series, in which case you should
note the following: The information in the prospectus is not complete and may be
changed. We may not sell, or accept offers to buy, securities of future series
until that series has become effective with the Securities and Exchange
Commission. No securities can be sold in any state where a sale would be
illegal.
PAGE
SUMMARY
THE TRUST FUND
TRUST PORTFOLIOS
RISK FACTORS
LEVERAGE
FEDERAL TAX STATUS
PUBLIC OFFERING OF UNITS
PUBLIC DISTRIBUTION OF UNITS
SECONDARY MARKET FOR UNITS
REDEMPTION
RETIREMENT PLANS
UNITHOLDERS
INVESTMENT SUPERVISION
ADMINISTRATION OF THE TRUST
AMENDMENT AND TERMINATION
LIMITATIONS ON LIABILITY
EXPENSES OF THE SERIES
OTHER INFORMATION
FOR MORE INFORMATION
<PAGE>
Units of the Trust will be offered to investors for ninety days (90) from the
effective date of the Registration Statement (the "Offering Period"). During the
Offering Period the units will be offered at their net unit value (plus the
applicable sales charge, if any). It is not expected that Units will be offered
after ninety days (90) from the effective date of the Registration Statement,
however, the Sponsor, at its discretion, may extend or shorten the offering
period. See "Purchase of Shares and Mandatory Trust Termination."
SUMMARY
-------
Enhanced Index Trust (EIT) (the " Trust ") is a series trust that offers
units of interest ("Units") in each of the following three series:
Blue Chip 30 - Enhanced Index Trust (EIT), Series D1107
Large Cap 500 - Enhanced Index Trust (EIT), Series S1107
Technology 100 - Enhanced Index Trust (EIT), Series N1107
The Series are substantially identical differing only in the benchmark
index against which the performance of the Series will be measured.
The Series are intended as investment vehicles for those investors who are
not seeking current income, but rather are looking for an investment vehicle
that offers total return potential plus a return of principal. Each Series of
the Trust consists of a portfolio of zero coupon U.S. Treasury Securities, Stock
Index Futures, Futures Options contracts, and Cash or Cash equivalents ("the
Securities").
The Trust has been created under the laws of the Commonwealth of
Pennsylvania pursuant to a Trust Agreement (the "Indenture"), with Enhanced
Index Distributors, LLC, as Sponsor and Declaration Fund, a Pennsylvania
Business Trust, as Trustee, Declaration Service Company, as Evaluator, and
Declaration Investment Management, Inc. as Portfolio Supervisor. See "The Trust"
and "The Series Portfolios" for a more complete description of the Trust, the
Series and the portfolio for each Series.
The investment objective of each Series is to provide investment results
that correspond to 200% of the performance of the relevant Index while
protecting a Unitholder's original investment principal. See "The Series
Portfolios" for a more specific description of the investment objectives.
The zero coupon U.S. Treasury Securities segment of each Series evidences
the right to receive a fixed payment at a future date from the U.S. Government.
They are backed by the full faith and credit of the U.S. Government. The
guarantee of the U.S. Government does not apply to the market value of the zero
coupon U.S. Treasury Securities which will fluctuate from time to time and
correspondingly cause the net asset value of the Series units to fluctuate prior
to the Mandatory Termination Date.
There is, of course, no guarantee that the objective of the Series will be
achieved.
The Series have been organized so that purchasers of units should receive,
at the termination of a Series, an amount per unit at least equal to the
original price paid for the units at the funding date of the Series, even if a
dividend or capital gain was never paid and the value of the securities in the
Series were to decrease to zero, which in the opinion of the Sponsor, is
unlikely.
The receipt of the Unitholder's original purchase price per unit for the
Series, upon termination of a series (an event which the Sponsor believes is
unlikely) represents a loss on a present value basis. Furthermore, the original
purchase price of a Series unit, does not protect investors against diminution
in the purchasing power of their investment due to inflation (although
expectations concerning inflation are a component in determining prevailing
interest rates, which in turn determine present unit values).
To the extent that units of a Series are redeemed, the aggregate value of
the Securities in the Series will be reduced and the undivided fractional
interest represented by each outstanding Series unit will increase. See
"Redemptions".
Each Series has a Mandatory Termination Date as set forth under "Summary of
Essential Information". Under most circumstances, an index Series created by the
Sponsor the investment objective of which is to provide investment results
corresponding to 200% of the performance of the stated Index of the Series, will
require the Unitholder to remain as an investor in the series for up to seven
(7) years until mandatory termination (See Mandatory Termination Date). The time
required for a Unitholder to receive his or her original investment principal
can vary depending on prevailing interest rates at the time of the Series
offering, thereby extending or shortening the Mandatory Termination Date for any
Series.
2
<PAGE>
INDEX TRADE AND SERVICE MARK DISCLOSURE: The owners of the Dow Jones Industrial
Average (the "DJIA"sm), the "S&P 500" Index and the "Nasdaq 100 Index" trade and
service marks has not granted the Trust, any Series of the Trust or the Sponsor
a license to use such trade and service marks. The Series Units are not
structured so that their prices will parallel or correlate with movements in the
Dow Jones Industrial Average , the S&P 500 Index or the Nasdaq 100 Index and it
is expected that their prices will not parallel or correlate with the movements
in the values of such indexes. The owners of such trade and service marks have
not created nor have they participated in the creation of the Trust or any
Series thereof or in the selection of securities included in the Trust and has
not approved any information herein relating thereto.
"Dow Jones Industrial Average sm", "Dow" and "DJIA (sm)" are service marks
of Dow Jones & Company, Inc. Dow Jones does not endorse, sell or promote the
Blue Chip 30 - Enhanced Index Series. Dow Jones makes no representation
regarding the advisability of investing in such Series.
"S&P," "S&P 500," and "Standard & Poor's" are trademarks of The McGraw-Hill
Companies, Inc. The Large-Cap 500 - Enhanced Index Series is not sponsored,
endorsed, sold or promoted by Standard & Poor's and Standard & Poor's makes no
representation regarding the advisability of investing in such Series.
The "Nasdaq 100 (registered trademark)," "Nasdaq 100 Index (registered
trademark)," and "Nasdaq (registered trademark)" are trade or service marks of
The Nasdaq Stock Market, Inc. (which with its affiliates are the "Corporations"
(??. The Technology 100 - Enhanced Index series is not sponsored, issued,
endorsed, sold, or promoted by the Corporations (?????). The Corporations make
no warranties and bear no liability with respect to the Series (??????)
portfolios
ESSENTIAL INFORMATION:
- - Initial Number of Units _______
- - Fractional Undivided Interest in the Trust per Unit (1) ________
- - Public Offering Price: _______ (1) (3)
- - Aggregate Offering Price Evaluation of Securities in Portfolio (2) _______
- - Aggregate Offering Price Evaluation of Securities per Unit (3) _____
- - Sponsor's Initial Repurchase Price per Unit (based on aggregate underlying
U.S. dollar value of
Securities, less liabilities and divided by current number of units outstanding)
- - Redemption Price per Unit (based on aggregate underlying U.S. dollar value of
Securities, less liabilities and divided by current number of units
outstanding) (2)
- - Initial Date of Offering: Effective date of the Series.
- - Funding Date: 90 days from the effective date of the series (3)
- - Mandatory Termination Date: November 30, 2007
A Series may be terminated if the value of the Securities in the portfolio is
less than the notional value of four futures index contracts or 66 2/3% of the
total value of Securities deposited in the series during the initial offering
period.
- - Sponsor's Annual Fee: 0.50% of average annual assets.
- - Unitholder Services Fee: 1.00% of average annual assets.
- - Trustee's Annual Fee: $------- per Unit outstanding.
- - Evaluator's Annual Fee: $------ per Unit outstanding.
- - Portfolio Supervisor's Annual Fee: 0.15% of average annual assets.
- - Estimated Organizational and Offering Costs: $------ per Unit.
- - Distribution Date: 12/31
3
<PAGE>
(1) Unit price at the time of first funding date. Subsequent Unit prices
during and after the Offering Period (90 days from the effective date of the
series) will fluctuate based on the change in the portfolio assets. A
Unitholders purchase price may be more or less than $10.00.
(2) Each Security is valued at the closing sale price on a National
Securities Exchange, the Chicago Mercantile Exchange the Chicago Board of Trade
or the Nasdaq National Market. Unitholders will bear all or a portion of the
expenses incurred in organizing and offering the Series. The Unit Public
Offering Price includes an estimated amount of these costs. The Trustee may
deduct these expenses as they occur from the Trust or at the end of the initial
offering period.
(3) As of the close of business on the Funding Date, the number of Units of
a Series may be adjusted so that the aggregate value of Securities and other
assets per Unit will equal approximately $10.00. Therefore, to the extent of any
such adjustment, the fractional undivided interest per Unit will increase or
decrease accordingly from the amounts indicated above.
4
<PAGE>
FEE TABLES
This Fee Table is intended to assist investors in understanding the costs
and expenses that an investor in a Series will bear, directly or indirectly.
Shareholder Fees: Class A Class B
(fees paid directly from your investment)
Maximum Sales Charge (Load) NONE NONE
Imposed On Purchases
(as a percentage of offering price)
Contingent Deferred Sales Charge (CDSC)
Charge on Redemption amounts within the first
and second year from the date of purchase.
Year One 2.00%
Year Two 1.00%
Annual Fund Operating Expenses: Class A Class B
(expenses that are deducted from Series assets
Distribution and Unitholder Service Fees 1.00% 1.00% 1
Sponsor Fees 0.50% 0.50% 2
Management Fees 0.15% 0.15% 3
Other Expenses 0.20% 0.20% 4
----- -----
Total Annual Trust Operating Expenses 1.85% 1.85%
1. Includes a maximum annual fee of 1.00% of average net assets (paid monthly
for Unitholder Services). You should be aware that if you hold your shares for a
substantial period of time, you may indirectly pay more than the economic
equivalent of similar investments
2. Compensation for promotion, distribution, Unitholder servicing and portfolio
supervision payable to the Sponsor or servicing organizations selected by the
Sponsor.
3. These fees are paid to the Series Investment Manager.
4. Because this is a new Trust without an operating history, "Other Expenses"
are estimated for each of the Series first fiscal years and include Trustee,
Evaluator Management and Administration fees.
Note: The Trustee does charge a $10 wire transfer fee for redemptions made by
wire transfer. That charge is not included in the Table of Fees and Expenses.
5
<PAGE>
Example: This example is intended to help a Unitholder to understand the costs
of investing in any of the Trust's Series.
The Example below assumes that you invest $10,000 in a Series for the time
periods indicated, reinvest all your dividends and distributions (if any), and
then redeem all your units at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that the Series' operating
expenses that were described above remain the same. Although a Unitholder's
actual costs may be higher or lower, based on these assumptions, your costs
would be:
Time Period Class A Class B
One Year $ 194.25 $ 400.37
Two Years $ 394.44 $ 500.65
Seven Years* $1,491.03 $1,491.03
(*Approximate Termination
of the Series)
PUBLIC OFFERING PRICE. The Public Offering Price per Unit is based on the
aggregate underlying value of the Securities in the Series, plus or minus a
pro-rata portion of the cash, if any, in the Income and Capital Accounts held or
owned, less liabilities and divided by the number of Units outstanding. Units of
the Series will be sold without a front-end sales commission. The minimum
purchase amount is $3,000 for regular accounts and $250.00 for retirement
accounts. The minimum redemption amount is $1,000.00.
DISTRIBUTIONS OF INCOME AND CAPITAL. Dividends consisting of substantially all
of a Series' net investment income, if any, are declared and paid annually. The
Series may also declare an additional dividend of net investment income and net
short term capital gains in a given year to the extent necessary to avoid the
imposition of federal excise taxes on the Series. The realization of dividends
and capital gains are secondary to the Series objective of capital appreciation.
REINVESTMENT. Unitholders may elect to have distributions of capital (including
capital gains, if any) or dividends or both automatically invested, without a
sales charge, in Units of certain series of trusts currently being offered and
sponsored by Enhanced Index Distributors, LLC at the current unit value provided
such series units are registered in the Unitholder's state of residence. The
Sponsor expects to offer portfolios with similar investment objectives every
ninety (90) days. However, there is no guarantee that a similar portfolio will
be available at the time of distribution. Detailed information with respect to
the investment objectives and the management of such series will be contained in
their respective prospectuses, which can be obtained from the Sponsor upon
request. In the event a similar portfolio is not available during the
distribution period, the Sponsor will offer alternative investments or may
require non-retirement accounts to accept distributions in cash . An investor
should read the prospectus of the reinvestment vehicle selected prior to making
the election to reinvest.
MARKET FOR UNITS. While under no obligation to do so and subject to change at
any time, the Sponsor intends to, and certain dealers may, maintain a market for
the Series Units and offer to repurchase such Units at prices which are based on
the current underlying value of the portfolio assets. If the supply of Units
exceeds demand or if some other business reason warrants it, the Sponsor and/or
the dealers may either discontinue all purchases of Units or discontinue
purchases of Units at such prices. A Unitholder may also redeem Units at the
Redemption Price on the date of tender to the Trustee. See " Redemptions".
TERMINATION. No later than the date specified as the "Mandatory Termination
Date" in "Essential Information", sales of portfolio Securities will begin in
connection with the termination of the particular Series and it is expected that
all Securities will be sold within a reasonable period of time after the
Mandatory Termination Date. The Sponsor will determine the manner, timing and
execution of the sale of
6
<PAGE>
the underlying Securities. At termination, Unitholders will receive a cash
distribution within a reasonable period of time after the Series is terminated.
See "Amendment and Termination."
RISK FACTORS. An investor should understand the risks associated with an
investment in a Series. Such risks include the possible decrease in the value of
the Securities in the Series portfolio or in the deterioration of the general
condition of the stock market. Additionally, it is anticipated that there will
be changes, from time to time, in the Securities of a Series.
However, the diminished financial condition of Securities within a Series
will not result directly in their elimination from the Series portfolio except
under extraordinary circumstances. Extraordinary circumstances would include
severe market turmoil. Stock, futures and commodities exchange trading limits
and suspended market trading are market events that might cause the manager to
halt implementation of the index futures and options strategy indefinitely or
until the manager feels market conditions have improved. Extraordinary
conditions may also include the elimination of a Series' assets either through
Unitholders' redemptions or a depletion of margin or margin reserves (cash) due
to a falling market which would also cause the Sponsor to halt the index futures
and options strategies.
During the Series offering period, the Manager may purchase futures
contracts or other securities in amounts that could cause large fluctuations in
a Series Unit value. On the Series funding date, the Sponsor will have purchased
securities in such proportions as the Sponsor believes are necessary for the
Series to attain its investment objectives. In any event, the Sponsor expects to
retain the remaining portion of zero coupon Securities in the Series' portfolio,
thereby providing existing Unitholders (after the funding date) with protection
for their original investment principal. Unitholders should be prepared to
remain invested in the Series for the long term. Frequent trading in the Series
could result in a substantial loss of principal and may effect the Series
ability to achieve its stated objectives. For risk considerations related to the
Series portfolios, see "Risk Factors."
THE TRUST FUND
--------------
The objective of each Series of the Trust, is to protect Unitholders'
capital and provide investors with the potential for capital appreciation. The
portfolio of each Series is described under " The Series Portfolios" herein. An
investor will be subjected to taxation on any dividend income received from the
Series and on gains from the sale or liquidation of Securities (see "Federal
Taxation"). The Series are intended for investors who are not seeking current
income, but rather are looking for an investment vehicle that offers total
return potential, plus the return of investment principal. Investors should be
aware that there is no assurance that the value of the underlying portfolio
Securities of the Series will increase. The Series however, were organized so
that investors should receive, at termination of each Series, an amount per unit
at least equal to $10.00 (or an investors original purchase price during the
offering period if the Series Unit is not set to $10.00 on the funding date of
the Series), which is equal to the per unit value upon maturity of the Treasury
Obligations, even if the Series never paid a distribution and the value of the
underlying Securities were to decrease to zero, which the Sponsor considers
unlikely.
As stated above the portfolios will be invested directly in zero coupon
U.S. Treasury Securities ("zero coupon securities") units of the Trust will be
offered to investors ninety days (90) from the effective date of the Series
registration statement (the "Offering Period"). During the Offering Period, the
units will be offered at their respective net asset values. The zero coupon
securities that each Series acquires with the proceeds of the sale of its units
during the offering period will be selected so as to mature at a specific face
value on or about the "Termination Date". The Sponsor will continually review
and adjust if necessary the proportion of the Series assets that are invested in
zero coupon securities so that the Series can meet its stated objective.
7
<PAGE>
The portion of a Series' assets that will be allocated to the purchase of
zero coupon securities will fluctuate during the offering period. This is
because the market value of the zero coupon securities and therefore the
offering price of the Series units, will fluctuate with changes in interest
rates and other market value fluctuations. If the offering price of the Series
units increases during the offering period, the minimum par value of zero coupon
securities per Series unit necessary to provide for the Series repayment
objective will increase.
During the offering period the Sponsor may purchases a disproportionate
amount of securities, including index futures, for a variety of reasons ("see
Offering Period") that could cause the Series unit value to fluctuate widely. In
order to maintain the Series investment objective, the Sponsor during the
offering period will purchase additional zero coupon securities as funds are
received with the effect of bringing the Series portfolio's holdings more in
line with the Series objective and provide the minimum par value of zero coupon
securities necessary to meet the Series repayment objective.
After the Offering Period, adjustments will be made in the Series portfolio
of zero coupon securities solely to meet requests for redemption and, if
required, to make payments of dividends and distributions. Thus, the minimum
face value of the zero coupon securities per Series unit necessary to provide
for the Series repayment objective will be continually determined
A Series may hold zero coupon securities in an amount in excess of the
amount necessary to provide for the Series repayment objective in the discretion
of the Sponsor.
During the offering period, as the percentage of zero coupon securities in
the Series portfolio increases, the portion of the Series assets invested in
futures contracts will also increase.
Zero coupon securities may be liquidated before the termination date to
meet redemptions and pay cash dividends, provided that the minimum amount of
zero coupon securities necessary to provide for the Series repayment objective
is maintained.
During the first year of operations, under normal market conditions, the
proportion of a Series portfolio invested in zero coupon securities may be
expected to range from 50% to 80%; but a greater or lesser percentage is also
possible.
When the zero coupon securities in a Series portfolio matures on or about
the Mandatory Termination Date, the Series will reinvest the principal amount in
a money market fund or short-term, highly liquid U.S. Treasury Securities. The
value of these securities is not expected to fluctuate significantly, with the
result that the full principal amount of Treasury Securities held by the Series
on the Mandatory Termination Date should continue to be available to redeeming
Unitholders after the Series Mandatory Termination Date. After that date, the
Series will redeem all of its outstanding units at their net asset value and
distribute the proceeds to Unitholders. In such event, the Series Treasury
Securities will be liquidated and the Series' interest in any other security
shall be sold or otherwise reduced to cash , the liabilities of the Series will
be discharged or otherwise provided for, the Series outstanding units will be
redeemed at the net asset value per unit determined on the date of redemption
and, within three business days thereafter, the Series net assets will be
distributed to Unitholders and the Series shall be terminated. Termination of
the series may require disposition of the series interest in equity securities
at a time when it is otherwise disadvantageous to do so and may involve selling
such interest at a substantial loss. Although it is not the Sponsor's intention
to purchase and hold equity securities in the any of the portfolios in order to
meet the Trust's investment objectives, provisions for the termination of equity
securities is made in the event portfolios hold equity securities as deemed
appropriate. The estimated expenses of liquidation and termination of the Series
are not expected to affect materially the net asset value of the Series Units,
and, Unitholders should expect to receive the full amount of their original
investment if Units are held until termination.
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Termination of the Series, as noted above, and the redemption of units
effected in connection with such termination would for current federal income
tax purposes constitute a sale upon which gain or loss will be realized
depending upon whether the net asset value of the Units being redeemed is more
or less than the Unitholder's adjusted cost basis. Gains and losses realized in
retirement accounts invested in a Series should be rolled over and continue to
receive a tax-deferred status unless distributed to the investor according to
IRS rules. Subject to Unitholder approval, other alternatives may be pursued by
the Series after the termination date. For instance, the Series may consider the
possibility of a tax-free reorganization between the Series and another
investment company or any other series offered by the Sponsor. No determination
has been made about the continued operation of any Series after the termination
date.
Investors should be aware that a Series is not a "managed" portfolio and as
a result any adverse economic or financial conditions effecting a Series will
not necessarily result in the elimination of securities from the Series
portfolio except under extraordinary circumstances. Extraordinary circumstances
might be characterized as, extreme market conditions. Even with stock and
commodities exchange trading limits, market halts and NYSE circuit breakers, the
Sponsor may decide to exit the Series' futures strategy indefinitely or for a
period of time until the Sponsor feels market conditions have improved.
Extraordinary conditions may also include the elimination of Series assets
through Unitholder redemptions or a depletion of margin or margin reserves due
to a falling market which would also cause the Sponsor to exit the Series
futures strategy and as such, prevent the Series from participating in index
futures returns. In either case, the Series expects to retain the remaining
portion of zero coupon securities in the portfolio, thereby providing existing
Unitholders of the Series with protection to principal as stated in the Series
objective.
In addition, Securities will not be sold by a Series to take advantage of
market fluctuations or changes in anticipated rates of appreciation. Investors
should note, in particular, that the Securities are selected by the Sponsor as
of the date the Securities were purchased by the Series involved. Each Series
may continue to purchase or hold Securities originally selected through this
process even though the evaluation of the attractiveness of the Securities may
have changed and, if the evaluation were performed again at that time, the
Securities would not be selected for such Series.
PRINCIPAL PROTECTION
--------------------
The Series portfolios are organized so that purchasers of units should
receive, at the termination of the Series, an amount per unit at least equal to
$10.00(or an investor's original purchase price during the offering period, if
the portfolio is not set to $10.00 on the funding date of the Series) which is
equal to the per unit value upon maturity of the zero coupon securities, even if
such Series never paid a distribution and the value of the index futures
contracts were to decrease to zero, which the Sponsor considers unlikely. This
feature of the Series provides Unitholders who purchase units at the price of
$10.00 (or an investors purchase price during the offering period if the
portfolio is not set to $10.00 on the funding date of the Series) with total
principal protection although they might forego any earnings on the amount
invested. To the extent that units are purchased at a lower price, usually in a
secondary market, this feature may also provide a potential for capital
appreciation. It should be remembered, however, that the value of the zero
coupon securities may fluctuate before maturity due to fluctuations in interest
rates.
Units of the Trust are not deposits or obligations of, and are not
guaranteed or endorsed by any bank, are not federally insured or otherwise
protected by the Federal Deposit Insurance Corporation, the Federal Reserve
Board or any other agency, and involve investment risk, including the possible
loss of principal.
TRUST PORTFOLIOS
----------------
Each Series consists of a number of different issues consisting of zero
coupon securities, stock index futures, futures options and cash all of which,
taken together, in the proper ratios, should achieve, in the opinion of the
Sponsor, investment results that correspond to 200% of the performance of the
Series' stock index while protecting a Unitholders' original investment
principal.
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<PAGE>
ZERO COUPON SECURITIES: There are currently two basic types of zero coupon
securities, those created by separating the interest and principal components of
a previously issued interest-paying security and those originally issued in a
face amount only form and paying no interest. Zero coupon securities of the U.S.
Government and certain of its agencies and instrumentalities and of private
corporate issuers are currently available, although the Series will purchase for
a Series only those that are direct obligations of the U.S. Treasury. Zero
coupon securities of the U.S. Government that are currently available are called
STRIPS (Separate Trading of Registered Interest and Principal of Securities).
STRIPS are issued under a program introduced by the U.S. Treasury and are direct
obligations of the U.S. Government. The U.S. Government does not issue zero
coupon securities directly. The STRIPS program, which is ongoing, is designed to
facilitate the secondary market stripping of selected Treasury notes and bonds
into individual interest and principal components. Under the program, the U.S.
Treasury continues to sell its bonds and other securities through its customary
auction process. However, a purchaser of those notes and bonds who has access to
a book-entry account at a Federal Reserve bank may separate the specified
Treasury notes and bonds into individual interest and principal components. The
selected Treasury Securities may thereafter be maintained in the book-entry
system operated by the Federal Reserve in a manner that permits the separate
trading and ownership of the interest and principal payments. The Federal
Reserve does not charge a fee for this service; however, the book-entry transfer
of interest and principal components is subject to the same fee schedule
generally applicable to the transfer of Treasury securities.
STRIPS are purchased at a discount from $1,000. Absent default by the U.S.
Government, a purchaser will receive face value for each of the STRIPS, provided
the STRIPS are held to their due dates. STRIPS can be purchased on any business
day. The Series will usually purchase zero coupon securities with a maturity
period of between six and eight years, with an average maturity of seven years
from the "Funding Date" of the Series but with a different maturity period if
the Sponsor deems it in the best interests of the Series to do so.
Component Indices.
- -----------------
- - Dow Jones Industrial Average (the "DJIA" sm) Index consists of 30 of the most
widely held and actively traded stocks in the U.S. stock market.
- - S & P 500 Index. The S &P 500 Index is made up of some of the largest and most
dominate firms in their respective industries.
- - NASDAQ 100 Index is comprised of 100 the largest non-financial domestic
companies most with technology and/or a growth orientation listed on the
Nasdaq Stock Market's National Market.
The owner of the Dow Jones Industrial Average (the DJIA"), S&P," "S&P 500,"
and "Standard & Poor's, and The "Nasdaq 100 has not granted to the Series or the
Sponsor a license to use the Dow Jones Industrial Average, S&P," "S&P 500," and
"Standard & Poor's, and The "Nasdaq 100.
Futures Contracts and Related Options
- -------------------------------------
A Series may purchase or sell stock index futures contracts and options
thereon as a substitute for a comparable market position in the underlying
securities or to satisfy regulatory requirements. A futures contract obligates
the seller to deliver (and the purchaser to take delivery of) the specified
commodity on the expiration date of the contract. A stock index futures contract
obligates the seller to deliver (and the purchaser to take) an amount of cash
equal to a specific dollar amount multiplied by the difference between the value
of a specific stock index at the close of the last trading day of the contract
and the price at which the agreement is made. No physical delivery of the
underlying stocks in the index is made.
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<PAGE>
When a Series purchases a put or call option on a futures contract, the
Series pays a premium for the right to sell or purchase the underlying futures
contract for a specified price upon exercise during the option period. By
writing (selling) a put or call option on a futures contract, a Series receives
a premium in return for granting to the purchaser of the option the right to
sell to or buy from the Series the underlying futures contract for a specified
price upon exercise during the option period.
Whether a Series realizes a gain or loss from futures activities depends
generally upon movements in the underlying commodity. The extent of a Series'
loss from an unhedged short position in futures contracts or from writing
options on futures contracts is potentially unlimited. The Series may engage in
related closing transactions with respect to options on futures contracts. The
Series will engage in transactions in futures contracts and related options that
are traded on a U.S. exchange or board of trade or that have been approved for
sale in the U.S. by the Commodities Futures Trading Commission.
When a Series purchases or sells a stock index futures contract, or sells
an option thereon, the Series will be considered "naked" and will not initially
"cover" its position. To cover a position, a Series would enter into an
offsetting position or maintain with its custodian bank (and mark-to-market on a
daily basis) a segregated account consisting of liquid instruments that, when
added to any amounts deposited with a futures commission merchant as margin, are
equal to the initial market value of the futures contract or otherwise "cover"
its position. Because the Series is unmanaged, fluctuations in the value of
underlying futures contracts or options cannot be covered with additional assets
in situations where the underlying futures contract or option have decreased in
value. Remaining securities in the portfolio (zero coupon securities) are
maintained in a ratio to margin and cash that would adequately provide for a
Unitholders return of original investment principal at the time of the Series'
termination. INDEX OPTIONS AND FUTURES CONTRACTS ARE SUBJECT TO SUBSTANTIAL
RISK. UNCOVERED ("NAKED") FUTURES CONTRACTS CAN, IN CERTAIN MARKET CONDITIONS
PROVIDE FOR UNLIMITED LOSSES TO THE SERIES.
Although the Series intend to buy or sell futures contracts only if there
is an active market for such contracts, no assurance can be given that a liquid
market will exist for any particular contract at any particular time.
Many futures exchanges and boards of trade limit the amount of fluctuation
permitted in futures contract prices during a single trading day. Once the daily
limit has been reached in a particular contract, no trades may be made that day
at a price beyond that limit or trading may be suspended for specified periods
during the day. Futures contract prices could move to the limit for several
consecutive trading days with little or no trading, thereby preventing prompt
liquidation of futures positions and potentially subjecting a Series to
substantial losses. If trading is not possible, or if a Series determines not to
close a futures position in anticipation of adverse price movements, the Series
will be required to make daily cash payments of variation margin. The risk that
the Series will be unable to close out a futures position will be minimized by
entering into such transactions on a national exchange with an active and liquid
secondary market.
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Index Options Transactions
- --------------------------
A Series may purchase and write options on stock indexes that are traded on
U.S. and foreign exchanges and options traded over-the-counter with
broker-dealers, financial institutions or other parties. Although the Series
will not initially invest in index options, the Sponsor may, from time to time,
determine that an options strategy would be beneficial for a Series. At the
Sponsor's discretion, a Series would enter into option transactions to create
investment exposure consistent with its investment objective or hedge or limit
the exposure of its positions.
A stock index fluctuates with changes in the market values of the stocks
included in the index. Options on stock indexes give the holder the right to
receive an amount of cash upon exercise of the option. Receipt of this cash
amount will depend upon the closing level of the stock index upon which the
option is based being exercise price of the option. The amount of cash received,
if any, will be the difference between the closing price of the index and the
exercise price of the option, multiplied by a specified dollar multiple. The
writer (seller) of the option is obligated, in return for the premiums received
from the purchaser of the option, to make delivery of this amount to the
purchaser. All settlements of index options transactions are in cash.
Index options are subject to substantial risks, including the risk of
imperfect correlation between the option price and the value of the underlying
securities composing the stock index selected and the risk that there might not
be a liquid secondary market for the option. Because the value of an index
option depends upon movements in the level of the index rather than the price of
a particular stock, whether a Series will realize a gain or loss from the
purchase or writing (sale) of options on an index depends upon movements in the
level of stock prices in the stock market generally or, in the case of certain
indexes, in an industry or market segment, rather than upon movements in the
price of a particular stock. Whether a Series will realize a profit or loss by
the use of options on stock indexes will depend on movements in the direction of
the stock market generally or of a particular industry or market segment. Use of
such options requires different skills and techniques than are required for
predicting changes in the price of individual stocks. A Series will not enter
into an option position that exposes the Series to an obligation to another
party, unless the Series either (i) owns an offsetting position in securities or
other options and/or (ii) maintains with the Series custodian bank liquid
instruments that, when added to the premiums deposited with respect to the
option, are equal to the market value of the underlying stock index not
otherwise covered.
Over-the-counter options are purchased or written by the Series in
privately negotiated transactions. Such options are subject to the Series
illiquid investment limitations. It may not be possible for a Series to dispose
of an option it has purchased or terminate its obligations under an option it
has written at a time when the Sponsor believes it would be advantageous to do
so. In addition, over-the-counter options involve the risk that the
"counterparty" participating is such transactions will not fulfill its
obligation. Initially, the Sponsor does not intend to use index options,
over-the-counter or otherwise, in a Series to achieve it's stated objective.
REGISTERED INVESTMENT COMPANIES.
The series may invest in other registered investment companies. These
investment companies will be principally money market funds. These funds
generally invest in short term money market instruments and the value of their
shares are typically set at $1.00. It is intended that each Series will invest
some or all of the excess cash remaining in the Series after the completion of
the purchase of its principal securities. This cash will be used to honor
Unitholder redemptions, to maintain futures margin, and to pay the Series
expenses. When a Series invests in other funds, Unitholders will be subject to
the risks associated with those funds, and Unitholders will pay, indirectly, a
portion of the fund's fees and expenses. The Trust may not invest more than 10%
of its net assets in other investment companies, and it cannot own more than 3%
of any one investment company's outstanding shares.
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<PAGE>
REPURCHASE AGREEMENTS
Under a repurchase agreement arrangement, a Series purchases a debt
security and simultaneously agrees to sell the security back to the seller at a
mutually agreed-upon future price and date, normally one day or a few days
later. The resale price is greater than the purchase price, reflecting an
agreed-upon market interest rate during the purchaser's holding period. While
the maturities of the underlying securities in repurchase transactions may be
more than one year, the term of each repurchase agreement will always be less
than one year. A Series will enter into repurchase agreements only with member
banks of the Federal Reserve System or primary dealers of U.S. government
securities. The Sponsor will monitor the creditworthiness of any firm which is a
party to a repurchase agreement with the Series. In the event of a seller's
default or bankruptcy, the Series will liquidate the securities (whose market
value, including accrued interest, must be at least equal to 100% of the dollar
amount invested by the Series in each repurchase agreement) held under the
applicable repurchase agreement, which securities constitute collateral for the
seller's obligation to pay. However, liquidation could involve costs or delays
and, to the extent proceeds from the sales of these securities were less than
the agreed-upon repurchase price, the Series would suffer a loss. The Series
also may experience difficulties and incur certain costs in exercising its
rights to the collateral and may lose the interest the Series expected to
receive under the repurchase agreement. Repurchase agreements usually are for
short periods, such as one week or less, but may be longer. It is the current
policy of the Series to treat repurchase agreements that do not mature within
seven days (or which may not be terminated within seven calendar days upon
notice by the Series) as illiquid for the purposes of its investment policies.
CASH RESERVES.
As a cash reserve for liquidity purposes or as "cover" for positions it has
taken, a Series may temporarily invest all or part of the Series' assets in cash
or cash equivalents, which include, but are not limited to, short-term money
market instruments, U.S. government securities, certificates of deposit, bankers
acceptances, or repurchase agreements secured by U.S. government securities.
LENDING OF PORTFOLIO SECURITIES.
Subject to the restrictions set forth below, each of the Series may lend
portfolio securities to brokers, dealers, and financial institutions, provided
that cash equal to at least 100% of the market value of the securities loaned is
deposited by the borrower with the Trust and is marked-to-market each business
day in a segregated account pursuant to applicable regulations. While such
securities are on loan, the borrower will pay the lending Series any income
accruing thereon, and the Series may invest the cash collateral in portfolio
securities thereby earning additional income on the securities, or use it to
maintain futures margin. A Series will not lend its portfolio securities if such
loans are not permitted by the laws or regulations of any state in which the
Fund's shares are qualified for sale, and the Series will not lend more than 33
1/3% of the value of the Series' total assets. Loans would be subject to
termination by the lending Series or by the borrower on an agreed upon notice
period. Borrowed securities must be returned when the loan is terminated. Any
gain or loss on the market price of the borrowed securities which occurs during
the term of the loan inures to the lending Series and that Series' Unitholders.
A lending Series may pay reasonable finders, borrowers, administrative, and
custodial fees in connection with a loan.
RISK FACTORS.
------------
An investment in units should be made with an understanding of the risks
inherent in an investment in zero coupon securities, index options and futures
contracts including the risk that the financial condition of the Securities may
become impaired or that the general condition of the stock market may worsen
(both of which may contribute directly to a decrease in the value of the
Securities and thus, in the value of the units)
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<PAGE>
The series will invest a percentage of their assets in leveraged
instruments such as futures and options contracts , although investments will
not be made in options contracts initially. The more a Series invests in
leveraged instruments, the more this leverage will magnify any gains or losses
on those instruments. The Series will use futures contracts and related options
to gain exposure to a particular market or instrument and intends to use
leveraged instruments in order to achieve the Series' investment objective. The
Series will only enter into futures contracts traded on a national futures
exchange or board of trade.
Unitholders should also consider the special factors discussed below that
are associated with the investment policies of the Series in determining the
appropriateness of investing in the Series.
Unitholders can expect that their returns over the approximately seven year
maturity period of each Series will deviate from their respective benchmarks,
both positively and negatively, depending on several factors. Among these
factors are: (1) a Series' expenses, including brokerage (which may be increased
by high portfolio turnover) and the cost of the investment techniques employed
by the Series; (2) an unbalance in the Series' portfolio alignment due to unit
redemptions; (3) an imperfect correlation between the performance of instruments
held by the Series, such as futures contracts and options, and the performance
of the underlying securities in the cash market; (4) bid-ask spreads (the effect
of which may be increased by portfolio turnover); (5) holding instruments traded
in a market that has become illiquid or disrupted (although the Series will only
purchase exchange-traded futures and options, due to market conditions there may
not be a liquid secondary market for a futures contract or option and as a
result, the Series may be unable to close out its futures or options contracts
at a time which is advantageous; (6) unit price rounding to the nearest cent;
(7) changes to the cash market index that are not disseminated in advance; (8)
the need to conform a portfolio's assets to comply with investment restrictions
or policies or regulatory or tax law requirements; (9) early and unanticipated
closings of the markets on which the securities of a Series trade: while a close
correlation of any of the Series to its Index may be achieved on any single
trading day, over time the cumulative percentage increase or decrease in the net
asset value of the Units of a Series may diverge significantly from the
cumulative percentage decrease or increase in the Index due to a compounding
effect. and (10) zero coupon securities of the type held by the Series can be
sold prior to their due date in the secondary market at their then prevailing
market value which, depending on prevailing levels of interest rates, the time
remaining to maturity and liquidity (i.e., relative levels of supply and demand
for the particular zero coupon securities), may be more or less than the
securities' "accreted value", that is, their value based solely on the amount
due at maturity and accretion of interest from the date of purchase. The market
prices of zero coupon securities are generally more volatile than the market
prices of securities that pay interest periodically and, accordingly, are likely
to respond to a greater degree to changes in interest dates than do bonds and
other securities having similar maturities and yields. For example, during the
Offering Period, an increase in prevailing interest rates of one-half of one
percent could be expected to cause the market value of the zero coupon
securities to decrease by more than four percent, and a one-half percent
decrease in such rates could be expected to cause the market value of such
securities to increase by more than four percent. Such fluctuations may be
larger or smaller depending on, among other things, the level of current rates
and the time remaining to maturity. As a result, the net asset value of Units of
the Series may fluctuate over a greater range than Units or shares of other
investment companies that invest in Treasury Securities having similar
maturities and yields but that make current distributions of interest. This is
especially true during the Series Offering Period when the Series' portfolios
will make periodic purchases of zero coupon securities.
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<PAGE>
LEVERAGE
--------
The Series intend to regularly use leveraged investment techniques in
pursuing their investment objectives. Utilization of leveraging involves special
risks and should be considered to be speculative. Leverage exists when a Series
achieves the right to a return on a capital base that exceeds the amount the
Series has invested. Leverage creates the potential for greater gains to
Unitholders of the Series during favorable market conditions and the risk of
magnified losses during adverse market conditions. Leverage should cause higher
volatility of the net Unit values of the Series. . Leverage may involve the
creation of a liability that requires the Series to pay interest which would
decrease the Series' total return to Unitholders. During adverse market
conditions, Unitholders of the Series may experience a loss of approximately
twice the amount they would have incurred (less accrued interest on zero coupon
securities to date) had the Series not been leveraged. The reverse is true in
positive market conditions.
Units of the Series are not deposits or obligations of, and are not
guaranteed or endorsed by, any bank, and are not federally insured or otherwise
protected by the Federal Deposit Insurance Corporation, the Federal Reserve
Board or any other agency, and involve investment risk, including the possible
loss of principal.
FEDERAL TAX STATUS.
-------------------
The Trust has elected and intends to qualify on a continuing basis for
special federal income tax treatment as a "regulated investment company" under
the Internal Revenue Code of 1986, as amended (the "Code"). If the Trust so
qualifies and timely distributes to the Unitholders of the Series 90% or more of
the Series taxable income (without regard to net capital gain, i. e. the excess
of its net long-term capital gain over net short-term capital loss), it will not
be subject to federal income tax on the portion of the Series taxable income
(including any net capital gain) that it distributes to Unitholders. In
addition, to the extent the Trust timely distributes to Unitholders at least 98%
of the taxable income of the Series (including any net capital gain), it will
not be subject to the 4% excise tax on certain undistributed income of
"regulated investment companies.
Because the Trust intends to timely distribute the taxable income of the
Series (including any net capital gain), it is anticipated that the Trust will
not be subject to federal income tax or the excise tax.
Although all or a portion of the Trust's taxable income (including any net
capital gain) for the taxable year may be distributed to Unitholders shortly
after the end of the calendar year, such a distribution will be treated for
federal income tax purposes as having been received by Unitholders during the
calendar year just ended. Distributions to Unitholders of the Series taxable
income (other than net capital gain) will be taxable as ordinary income to
Unitholders. The zero coupon securities will be treated as bonds that were
issued to the Series at an original issue discount. Original issue discount is
treated as interest for federal income tax purposes and the amount of original
issue discount generally will be the difference between the bond's purchase
price and its stated redemption price at maturity. The Series will be required
to include in gross income for each taxable year the daily portions of original
issue discount attributable to the zero coupon securities held by the Series as
such original issue discount accrues. Dividends derived from such original issue
discount that accrues for such year will be taxable to Unitholders as ordinary
income. ( In general, original issue discount accrues daily under a constant
interest rate method which takes into account the compounding of accrued
interest. In the case of zero coupon securities, this method will generally
result in an increasing amount of income to the series each year.) To the extent
that distributions to a Unitholder in any year exceed the Series' current and
accumulated earnings and profits, they will be treated as a return of capital
and will reduce the Unitholder's basis of his or her Units and, to the extent
that they exceed his or her basis, will be treated as a gain from the sale of
the Units as discussed below.
15
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It should be noted that certain legislative proposals have been made which
could affect the calculation of basis for investors holding securities that are
substantially identical to the Series securities. Unitholders should consult
their own tax advisors with regard to the calculation of basis.
Distributions by the Trust of a Series net capital gain which are properly
designated as capital gain dividends by the Series will be taxable to
Unitholders as long-term capital gain, regardless of the length of time the
Units have been held by a Unitholder. However, if a Unitholder receives a
long-term capital gain dividend (or is allocated a portion of the Series'
undistributed long-term capital gain) and sells his or her Units at a loss prior
to holding them for six months, such losses will be characterized as long-term
capital loss to the extent of such long-term capital gain received as a dividend
or allocable to a Unitholder. A Unitholder may recognize a taxable gain or loss
if the Unitholder sells or redeems his or her units. Any gain or loss arising
from (or treated as arising from) the sale or redemption of Units will generally
be a capital gain or loss, except in the case of a dealer or a financial
institution. (For taxpayers other than corporations, net capital gain (which is
defined as net long-term capital gain over net short- term capital loss for the
taxable year) is subject to a maximum marginal stated tax rate of either 28% or
20%, depending upon the holding periods of the capital assets. Capital loss is
long-term if the holding period for the asset is more than one year, and is
short-term if the holding period for the asset is one year or less. Generally,
capital gains realized from assets held for more than one year but not more than
18 months are taxed at a maximum marginal stated tax rate of 28% and capital
gains realized from assets (with certain exclusions) held for more than 18
months are taxed at a maximum marginal stated tax rate of 20% (10% in the case
of certain taxpayers in the lowest tax bracket). Further, capital gains realized
from assets held for one year or less are taxed at the same rates as ordinary
income. Legislation is currently pending that provides the appropriate
methodology that should be applied in netting the realized capital gains and
losses. Such legislation is proposed to be effective retro actively for tax
years ending after May 6, 1997. The Internal Revenue Service has released
preliminary guidance which provides that, in general, pass-through entities may
designate their capital gain dividends as either a 20% rate gain distribution or
a 28% rate gain distribution, depending on the nature of the gain received by
the pass-through entity.)
Unitholders should consult their own tax advisers as to the tax rate
applicable to capital gain dividends. (In addition, capital gains may be
recharacterized as ordinary income in the case of certain financial transactions
that are "conversion transactions" effective for transactions entered into after
April 30, 1993. Unitholders and prospective investors should consult with their
tax advisers regarding the potential effect of this provision on their
investment in Units.)
The 1997 Tax Act includes provisions that treat certain transactions
designed to reduce or eliminate risk of loss and opportunities for gain (e.g.,
short sales, offsetting notional principal contracts, futures or forward
contracts or similar transactions) as constructive sales for purposes of
recognition of gain (but not loss) and for purposes of determining the holding
period.
Distributions which are taxable as ordinary income to Unitholders will
constitute dividends for federal income tax purposes. (when units are held by
corporate Unitholders, Series distributions may qualify for the 70%
dividends-received deduction, subject to the limitations otherwise applicable to
the availability of the deduction, to the extent the distribution is
attributable to dividends received by the series from United States corporations
and is designated by such series as being eligible for such deduction. To the
extent dividends received by the series are attributable to foreign
corporations, a corporation that owns units will not be entitled to the
dividends-received deduction with respect to its pro rata portion of such
dividends, since the dividends-received deduction is generally available only
with respect to dividends paid by domestic corporations. The series will provide
each Unitholder with information annually concerning what part of series
distributions are eligible for the dividends-received deduction. Under the Code,
certain miscellaneous itemized deductions, such as investment expenses, tax
return preparation fees and employee business expenses, will be deductible by
individuals only to the extent they exceed 2% of adjusted gross income.
Miscellaneous itemized deductions subject to this limitation under present law
do not include expenses incurred by the Series so long as the units are held by
or for 500 or more persons at all times during the taxable year or another
exception is met. In the event the Units are held by fewer than 500
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persons, additional taxable income may be realized by the individual (and other
non-corporate) Unitholders in excess of the distributions received from the
Series.)
The federal tax status of each year's distributions will be reported to
Unitholders and to the Internal Revenue Service. Each Unitholder will be
requested to provide the Unitholder's taxpayer identification number to the
Trustee and to certify that the Unitholder has not been notified that payments
to the Unitholder are subject to back- up withholding. If the proper taxpayer
identification number and appropriate certification are not provided when
requested, distributions by the Series to such Unitholder (including amounts
received upon the redemption of Units) will be subject to back-up withholding. A
Unitholder who is a foreign investor (i.e., an investor other than a United
States citizen or resident or a United States corporation, partnership, estate
or series) should be aware that, generally, subject to applicable tax treaties,
distributions from the Series which constitute dividends for Federal income tax
purposes (other than dividends which the Series designates as capital gain
dividends) will be subject to United States income taxes, including withholding
taxes. However, distributions received by a foreign investor from the Series
that are designated by the Series as capital gain distributions should not be
subject to United States federal income taxes, including withholding taxes, if
all of the following conditions are met (i) the capital gain dividend is not
effectively connected with the conduct by the foreign investor of a trade or
business within the United States, (ii) the foreign investor (if an individual)
is not present in the United States for 183 days or more during his or her
taxable year, and (iii) the foreign investor provides all certification which
may be required of his status (foreign investors may contact the Sponsor to
obtain a Form W-8 which must be filed with the Trustee and refiled every three
calendar years thereafter). Foreign investors should consult their tax advisers
with respect to United States tax consequences of ownership of Units.
Units in the Series and Series distributions may also be subject to state
and local taxation and Unitholders should consult their tax advisers in this
regard.
The foregoing discussion relates only to the federal income tax status of
the Series and to the tax treatment of distributions by the Series to United
States Unitholders. Distributions by the Series will generally be subject to
United States income taxation and withholding in the case of Units held by
non-resident alien individuals, foreign corporations or other non-United States
persons. Such persons should consult their tax advisers. Unitholders desiring to
purchase Units for tax-deferred plans and IRAs should consult their
broker-dealers for details on establishing such accounts.
The Trust intends to qualify as a "regulated investment company" for
purposes of the Internal Revenue Code, which imposes diversification
requirements on the Series.
PUBLIC OFFERING OF UNITS
------------------------
PUBLIC OFFERING PRICE.
The Public Offering Price per unit is based on the aggregate underlying
value of the portfolio securities, plus or minus a pro-rata portion of the cash,
if any, in the Income and Capital Accounts held for or owned by the Series.
Units of the A and B classes of a Series will be sold without a sales
commission.
The minimum purchase amount is $3,000 for taxable accounts and $250.00 for
retirement accounts.
Units are available for purchase by investors who purchase units either
directly or through registered investment advisers, certified financial planners
or registered broker-dealers which in each case either charge periodic fees for
financial planning, investment advisory or asset management services, or provide
such services in connection with the establishment of an investment account for
which a
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comprehensive "wrap fee" charge is imposed. Both the A and B classes of a Series
will be available to those financial intermediaries described above. Shares of
the A class are available only for direct investors of the Series. Unitholders
of any Series may utilize their redemption or termination proceeds to purchase
Units of a similar or different series currently offered by the Sponsor.
As indicated above, the Public Offering Price of the Series' units was
established by dividing the aggregate underlying value of the Series portfolio
Securities less liabilities by the number of units outstanding. Such underlying
value shall include the proportionate share of any cash held in the Capital
Account. Such price determination as of the opening of business on the Initial
Date of Offering was made on the basis of an evaluation of the Securities in a
Series that was prepared by the Sponsor.
EVALUATION
----------
After the opening of business on the Initial Date of Offering, the Evaluator
will appraise or cause to be appraised daily the value of the underlying
Securities as of the valuation time on days the New York Stock Exchange (NYSE),
Chicago Mercantile Exchange (CME) and Chicago Board of trade (CBOT) are open for
business, normally 4:00 p.m. Eastern Time (ordinarily, the close of the regular
session for options trading on national securities exchanges is 4:15 p.m.
Eastern Time and the close of the regular session of commodities exchanges is
4:15 p.m. Eastern Time) and will adjust the Public Offering Price of the units
commensurate with such valuation. Such Public Offering Price will be effective
for all orders received at or prior to the close of trading on the New York
Stock Exchange on each such day. Orders received by the Trustee, Sponsor or any
dealer for purchases, sales or redemption's after that time, or on a day when
the New York Stock Exchange, Chicago Mercantile Exchange and Chicago Board of
trade are closed, will be held until the next determination of price.
(Currently, the CME, CBOT and the NYSE are closed on weekends, and the following
holiday closings have been scheduled for 2000: (i) 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 (ii) the preceding Friday
when any of those holidays falls on a Saturday or the subsequent Monday when any
of these holidays falls on a Sunday.) To the extent that portfolio securities of
the Series are traded in other markets on days when the Series' principal
trading markets are closed, the Series net asset value may be affected on days
when investors do not have access to the Series to purchase or redeem shares.
The unit value of each Series serves as the basis for the purchase and
redemption price of that Series' units. The net asset value per Unit of the
Series is calculated by dividing the market value of the Series assets, less all
Series' liabilities by the number of out standing Series Units. If market
quotations are not readily available, a security will be valued at fair value by
the Evaluator of the Series or by the Sponsor, using methods established or
ratified by the Trustee. Securities in the Series portfolio, except as otherwise
noted, that are listed or traded on a stock exchange, are valued on the basis of
the last sale on that day or, lacking any sales, at a price that is the mean
between the closing bid and asked prices. Other securities that are traded on
the OTC markets are priced using NASDAQ (National Association of Securities
Dealers Automated Quotations), which provides information on bid and asked
prices quoted by major dealers in such stocks. Bonds, other than convertible
bonds, are valued using a third-party pricing system. Short-term debt securities
are valued at amortized cost, which approximates market value. When market
quotations are not readily available, Series Securities and other assets are
valued at fair value as determined, in good faith, under procedures established
by and under the general supervision and responsibility of the Trustee. Puts,
calls and futures contracts purchased and held by the Series are valued at 4:00
p.m. Eastern Time which is not the close of the securities or commodities
exchanges on which they are traded. (Ordinarily, the close of the regular
session for options trading on national securities exchanges is 4:15 p.m.
Eastern Time and the close of the regular session of commodities exchanges is
4:15 p.m. Eastern Time.) Options on securities and indices purchased by the
Series generally are valued at their last bid price in the case of
exchange-traded options or, in the case of options traded in the OTC market, the
average of the last bid price as obtained from two or more dealers unless there
is only one dealer, in which case that dealer's price is used. Futures contracts
will be valued with reference to established futures exchanges. The value of a
futures contract purchased by a Series will be either the closing price of that
contract or the bid price. Conversely, the value of a futures contract sold by a
Series will be either the closing price or the asked price. The value of options
on futures contracts is determined
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based upon the current settlement price for a like option acquired on the day on
which the option is being valued. A settlement price may not be used for the
foregoing purposes if the market makes a limit move with respect to a particular
commodity.
PUBLIC DISTRIBUTION OF UNITS
----------------------------
The Sponsor intends to qualify units of each Series for sale in any or all
fifty states and the District of Columbia. During the initial offering period,
units will be sold at the current Public Offering Price. When the initial
offering period ends, units the Sponsor has reacquired may be offered by this
prospectus at the secondary market at prices based upon the unit redemption
price (see "Sponsor's Secondary Market" and "Secondary Market for the Units").
Units will be offered through dealers who are members of The National
Association of Securities Dealers, Inc. and through others. Sales may be made to
or through dealers at unit prices which do not include a front-end sales
commission. The Sponsor reserves the right to change the pricing structure on
either the A or B classes of the several Series from time to time to add or vary
a sales charge.
At various times the Sponsor, out of its own assets, may implement programs
under which the sales force of a broker, dealer or other intermediary may be
eligible to win nominal awards for certain sales efforts. Also, the Sponsor, in
its discretion, may, from time to time, pursuant to objective criteria
established by the Sponsor, pay fees to qualifying brokers, dealers or other
intermediaries for certain services or activities which are primarily intended
to result in sales of units. Such payments are made by the Sponsor out of its
own assets, and not out of the assets of the Series. These programs will not
change the price Unitholders pay for their units or the amount that the Series
will receive from the units sold. The Sponsor reserves the right to reject, in
whole or in part, any order for the purchase of units.
SECONDARY MARKET FOR THE UNITS.
------------------------------
Although not obligated to do so, the Sponsor intends to maintain a market
for the units after the initial offering period and continuously offer to
purchase units from investors at prices based on the unit Redemption Price.
The Sponsor will pay all expenses to maintain a secondary market, except
the Evaluator fees and Trustee costs to transfer and record the ownership of
units.
The Sponsor may discontinue purchases of units at any time. If a Unitholder
wishes to dispose of units by sale or redemption, he or she should ask the
Sponsor for the current market prices before making a tender for redemption to
the Trustee.
If a Unitholder either sells Class B units in the Secondary Market or
tenders them for redemption before the total deferred sales charge has been paid
on the units, he or she will have to pay the remaining deferred sales charge at
that time.
During extreme market conditions, a series may pledge portfolio securities
as collateral for loans used to maintain margin on futures contracts. During
this period the price of units redeemed will reflect a proportionate interest in
the amount borrowed.
DISTRIBUTOR.
Declaration Distributors, Inc. 555 North Lane Suite 6160 Conshohocken, PA
19428, a member of The National Association of Securities Dealers, Inc., will
serve as the distributor and principal underwriter for the Units of the Series
and each Series of the Trust in all fifty states and the District of Columbia.
Declaration Distributors, Inc. an affiliate of Declaration Holdings, Inc, and
will receive compensation for serving as distributor, as set forth in the
Unitholder Services Plan.
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REDEMPTION
----------
SELLING (REDEEMING) UNITS.
A Unitholder can sell units at any time for a redemption price based on the
Series' net Unit value. The net Unit value is calculated in the manner set forth
above. See Public Offering Price, above. If the amount of the redemption is
$25,000 or less and the proceeds are payable to the Unitholder(s)of record at
the address of record, no signature guarantee is necessary for redemption by
individual account owners (including joint owners). Additional documentation may
be requested, and a signature guarantee is always required, from corporations,
executors, administrators, trustees, guardians or associations. The signatures
must be guaranteed by a participant in the Securities Transfer Agents Medallion
Program ("STAMP") or such other signature guaranty program as may be accepted by
the Trustee.
SPONSORS' SECONDARY MARKET
While not obligated to do so, the Sponsor may repurchase Units at net asset
value less any remaining unpaid deferred sales fee and the cost of liquidating
securities (if any). The Sponsor may resell the Units to other buyers or tender
them to the Trustee for redemption. (The Sponsor has not maintained a secondary
market for units in the past) If a secondary market is maintained the Sponsor
may discontinue it without prior notice for any business reason.
SELLING (REDEEMING) UNITS BY TENDER TO THE TRUSTEE
Regardless of whether the Sponsor maintains a secondary market, a
Unitholder can redeem Units, at any time, by tender to the Trustee or, if the
Units are held in street name by contacting his or her broker, dealer or
financial institution that holds the Units in street name. Sometimes, additional
documents are needed such as a Series document, certificate of corporate
authority, certificate of death or appointment as executor, administrator or
guardian.
Within seven days after the request and the receipt of the necessary
documents, the Trustee will mail a check for the redemption proceeds to the
Unitholder.
As long as the Sponsor is maintaining a secondary market, the Trustee may
sell units to the Sponsor at a price based on unit net asset value. If there is
no secondary market, the Trustee may sell units in the over-the-counter market
if it believes it can obtain a higher price.
Redemptions will be made by the Trustee no later than the seventh calendar
day following the day on which a tender for redemption is received (the
"Redemption Date"), or if the seventh calendar day is not a business day, on the
first business day prior thereto, by payment of cash equivalent to the unit
Redemption Price for the Series ( as of the evaluation time next following such
tender), multiplied by the number of units being redeemed. Any units redeemed
shall be canceled and any undivided fractional interest in the Series
extinguished. The price received upon redemption might be more or less than the
amount paid by the Unitholder depending on the value of the Securities in the
Series at the time of redemption.
Unitholders who sell or redeem B class units prior to such time as the
entire deferred sales charge on such units has been collected will be assessed
the amount of the remaining deferred sales charge at the time of such sale or
redemption.
Under regulations issued by the Internal Revenue Service, the Trustee is
required to withhold a specified percentage of the principal amount of a unit
redemption if the Trustee has not been furnished the redeeming Unitholder's tax
identification number in the manner required by such regulations. Any amount so
withheld is transmitted to the Internal Revenue Service and may be recovered by
the Unitholder only when filing a tax return. Under normal circumstances the
Trustee obtains the Unitholder's tax identification number from either the
selling broker or the investor at the time of investment. However, any time a
Unitholder elects to tender Units for redemption, such Unitholder should make
sure that the Trustee has
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been provided a certified tax identification number in order to avoid "back-up
withholding". In the event the Trustee has not been previously provided such
number, the Unitholder must provide one at the time the redemption is requested.
Any amounts paid on redemption representing unpaid dividends shall be
withdrawn from the Income Account of the Series to the extent that funds are
available for such purpose. All other amounts paid on redemption shall be
withdrawn from the Capital Account for the Series.
The Trustee is empowered to sell Securities for the Series in order to make
funds available for the redemption of units of the Series. Such sale may be
required when Securities would not otherwise be sold and might result in lower
prices than might otherwise be realized.
Unitholders tendering units for redemption are not permitted a distribution
in kind from the Trustee in lieu of cash. A Unitholder may request a
distribution in kind, provided that the tendering Unitholder is (1) entitled to
receive at least $1,000,000 of proceeds as part of his or her distribution or if
he paid at least $1,000,000 to acquire the units being tendered and (2) the
Unitholder has elected to redeem at least one month prior to the Mandatory
Termination Date. If the Unitholder meets these requirements, a distribution in
kind will be made by the Trustee through the distribution of each of the
Securities of the Series in book entry form to the Unitholder's account at a
bank or broker-dealer. The tendering Unitholder shall be entitled to receive
whole shares of each of the Securities comprising the portfolio of the Series
and cash from the Capital Account equal to the fractional shares to which the
tendering Unitholder is entitled.
The Trustee shall make any adjustments necessary to reflect differences
between the Redemption Price of the units and the value of the Securities
distributed in kind as of the date of tender. If funds in the Capital Account
are insufficient to cover the required cash distribution to the tendering
Unitholder, the Trustee may sell Securities.
The in kind redemption option may be terminated by the Sponsor at any time.
To the extent that Securities are redeemed in kind or sold, the size (and
possibly the diversity) of the Series will be reduced but each remaining unit
will continue to represent approximately the same proportional interest in each
Security.
The Sponsor believes that significant redemptions in the Series will create
negative market price consequences to the remaining Unitholders stemming from
the trading of large volumes of securities in the Series in order to honor
redemption requests. This may alter the Series' performance alignment and result
in a diminished unit value. However such misalignment will not effect the
Series' goal of returning a Unitholder's original principal at Termination.
RETIREMENT PLANS
----------------
Units of the Series may be suitable for purchase by Individual Retirement
Accounts, Keogh Plans, pension funds and other tax qualified retirement plans.
Generally, capital gains and income received under such plans are not subject to
federal taxation. All distributions from such plans are generally treated as
ordinary income but may, in some cases, be eligible for special income averaging
or tax-deferred rollover treatment. Investors considering participation in any
such plan should carefully review specific tax laws related thereto and should
consult their attorneys or tax advisers with respect to the establishment and
maintenance of any such plan. Such plans are offered by brokerage firms and
other financial institutions. The Trust will waive the $3,000 minimum investment
requirement for IRA accounts. The minimum investment is $250 for tax-deferred
plans such as IRA accounts.
Fees and charges with respect to such plans may vary. ___________ has
agreed to act as custodian for certain retirement plan accounts. An annual fee
of $15.00 per account, if not paid separately, will be assessed by the Trustee
and paid through the liquidation of units. An individual wishing to
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establish a retirement account must complete an Enhanced Index Series UIT/IRA
application and forward it along with a check made payable to Custodian.
UNITHOLDERS
-----------
CERTIFICATES. The Series and each Series of the Trust will not issue stock
certificates evidencing units. Instead, your account will be credited with the
number of units purchased, relieving you of responsibility for safekeeping of
certificates and the need to deliver them upon redemption. Written confirmations
are issued to you for all purchases of shares.)
WHAT REPORTS WILL UNITHOLDERS RECEIVE
The Trustee shall furnish Unitholders in connection with each distribution,
a statement of the amount of income, if any, and the amount of other receipts,
if any, which are being distributed, expressed in each case as a dollar amount
per unit. Within a reasonable time after the end of each calendar year, the
Trustee will furnish to each person who at any time during the calendar year was
a Unit holder of the Trust, the following information in reasonable detail: (1)
a summary of transactions in the Trust for such year; (2) any Securities sold
during the year and the Securities held at the end of such year by the Trust;
(3) the redemption price per unit based upon a computation thereof on the 31st
day of December of such year (or the last business day prior thereto); and (4)
amounts of income and capital gains distributed during such year.
HOW IS EVIDENCE OF OWNERSHIP ISSUED AND TRANSFERRED
The Trustee is authorized to treat as the record owner of units that person
who is registered as such owner on the books of the Trustee.
BOOK ENTRY FORM
- ---------------
The Trustee will maintain an account for each such unit holder and will
credit each such account with the number of units purchased by that unit holder.
Within two business days of the issuance or transfer of units, the Trustee will
send to the registered owner of units a written initial transaction statement
containing a description of the Trust; the number of units issued or
transferred; the name, address and taxpayer identification number, if any, of
the new registered owner; a notation of any liens and restrictions of the issuer
and any adverse claims to which such units are or may be subject or a statement
that there are no such liens, restrictions or adverse claims; and the date the
transfer was registered.
DISTRIBUTIONS TO UNITHOLDERS
Dividends consisting of substantially all of a Series' net investment
income, if any, are declared and paid annually. The Series may also declare an
additional dividend of net investment income and net short term capital gains in
a given year to the extent necessary to avoid the imposition of federal excise
taxes on the Series. Distributions consisting of substantially all the realized
net capital gains for the Series are declared and paid on an annual basis,
except that an additional capital gain distribution may be made in a given year
to the extent necessary to avoid the imposition of federal excise tax on the
Series.
Declared dividends and distributions are payable to the Unitholder of
record on the record date. Dividends and capital gain distributions paid by the
Series will be automatically reinvested in additional units of similar Enhanced
Index Series then currently being offered by the Sponsor. Units will be
purchased at the current unit value if such Series are registered in such
Unitholder's state of residence. The
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Sponsor expects to offer portfolios with similar investment objectives every
ninety (90) days, however, there is no guarantee that a similar portfolio will
be available at the time of distribution. All distributions will be reinvested
unless the shareholder has elected to have them paid in cash. Dividends and
distributions to be paid in cash are mailed by check, ACH or are wire
transferred in accordance with the Unitholder's instructions.
DIVIDEND AND DISTRIBUTION REINVESTMENT
Unitholders may elect to have distributions of dividends or capital
(including capital gains, if any) or both automatically invested without a sales
charge in units of certain Enhanced Index Series currently being offered and
Sponsored by Enhanced Index Distributors, LLC at the current unit value if such
Series are registered in such Unitholder's state of residence. The Sponsor
expects to offer portfolios with similar investment objectives every ninety (90)
days, however, there is no guarantee that a similar portfolio will be available
at the time of distribution. Detailed information with respect to the investment
objectives and the management of each series is contained in their respective
prospectuses, which can be obtained from the Sponsor upon request. In the event
a similar portfolio is not available during the distribution period, the Sponsor
will offer alternative investments or may require non-retirement accounts to
accept distributions in cash. An investor should read the prospectus of the
reinvestment fund selected prior to making the election to reinvest.
Unitholders who desire to have such distributions automatically reinvested
should inform their broker at the time of purchase or should notify the Trustee
with a written notice of election.
Unitholders who are receiving distributions in cash may elect to
participate in distribution reinvestment by notifying the Trustee in writing.
Such election must be received by the Trustee at least ten days prior to the
Record Date applicable to any distribution in order to be in effect for such
Record Date. Any election shall remain in effect until a subsequent notice is
received by the Trustee. All inquiries concerning participation in dividend and
distribution reinvestment should be directed to Declaration Service Company
telephone number--------.
STATEMENTS TO UNITHOLDERS
With each distribution, the Trustee will furnish or cause to be furnished
to each Unitholder a statement of the amount of income and the amount of other
receipts, if any, which are being distributed, in each case as a dollar amount
per unit.
RIGHTS OF UNITHOLDERS.
A Unitholder may at any time tender units to the Trustee for redemption.
The death or incapacity of any Unitholder will not operate to terminate the
Series nor entitle legal representatives or heirs to claim an accounting or to
bring any action or proceeding in any court for partition or winding up of such
Series. No Unitholder shall have the right to control the operation and
management of the Series in any manner, except to vote with respect to the
amendment of the Series Agreement or termination of such Series.
INVESTMENT SUPERVISION.
----------------------
The Series is registered with the SEC as a unit investment series and is
not an "actively managed" fund. Traditional methods of investment management for
a managed fund typically involve frequent changes in a portfolio of securities
on the basis of economic, financial and market analyses. The portfolios of the
Series, however, will not be actively managed and therefore the adverse
financial condition of an issuer will not necessarily require the sale of its
securities from a portfolio. As a general rule, the only purchases and sales
that will be made with respect to a Series' portfolio will be those necessary to
maintain, to the extent feasible, a portfolio which reflects the current
components of the related stock index, taking into consideration redemptions,
sales of additional units and the other adjustments referred to elsewhere in
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this prospectus. See "The Series Portfolios". Such purchases and sales will be
made in accordance with the computer program utilized to maintain the
portfolios, the Series Agreement and procedures to be specified by the Sponsor.
The Sponsor may direct the Trustee to dispose of Securities and either to
acquire other Securities through the use of the proceeds of such disposition in
order to make changes in the portfolio or to distribute the proceeds of such
disposition to Unitholders (i) as necessary to minimize extraordinary market
conditions, (ii) as may be necessary to establish a closer correlation between a
Series portfolio and the related stock index or (iii) as may be required for
purposes of distributing to Unitholders, when required, their pro rata share of
any net realized capital gains or (iv) as the Sponsor may otherwise determine.
In the event the Trustee receives any securities or other properties relating to
the Securities (other than normal dividends) acquired in exchange for Securities
such as those acquired in connection with a reorganization, recapitalization,
merger or other transaction, the Manager is directed to sell such securities or
other property and reinvest the proceeds in shares of the Security to which such
securities or other property relates, or if such Security is thereafter removed
from the related stock index, then in any new security which is added as a
component of such index. In addition, the Sponsor will instruct the Manager to
dispose of certain Securities and to take such further action as may be needed
from time to time to ensure that the Series continues to satisfy the
qualifications of a regulated investment company, including the requirements
with respect to diversification under Section 851 of the Internal Revenue Code,
and as may be needed from time to time to avoid the imposition of any excise tax
on such Series as a regulated investment company. Proceeds from the sale of
Securities (or any securities or other property received by the Series in
exchange for Securities) are credited to the Capital Account for distribution to
Unitholders or to meet redemptions. Except as stated under "The Trust Fund" for
failed securities and as provided herein, the acquisition by the Series of any
securities other than the Securities is prohibited. The Manager may sell
Securities, designated by the Sponsor, from the Series for the purpose of
redeeming units of such Series tendered for redemption and the payment of
expenses.
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ADMINISTRATION OF THE SERIES
----------------------------
THE TRUSTEE
The Trustee is a Pennsylvania Business Trust organized under the laws of
Commonwealth of Pennsylvania. The Trust offices are located at 555 North Lane
Suite 6160, Conshohocken, PA 19428. The Trustee whose duties are ministerial in
nature, has not participated in selecting the securities portfolios of the
Series.
In accordance with the Series Agreement, the Trustee has appointed
Declaration Service Company ("DSC") as Administrator to keep records of all
transactions at its office.
Such records shall include the name and address of, and the number of units
held by, every Unitholder of the Series. Such books and records shall be open to
inspection by any Unitholder at all reasonable times during usual business
hours. DSC ( hereafter sometimes the "Administrator") shall make such annual or
other reports as may from time to time be required under any applicable state or
federal statute, rule or regulation. The Administrator shall keep a certified
copy or duplicate original of the Series Agreement on file in its office
available for inspection at all reasonable times during usual business hours by
any Unitholder, together with a current list of the Securities held in each
Series. Pursuant to the Series Agreement, the Trustee may employ one or more
agents for the purpose of custody and safeguarding of securities comprising the
Series.
Under the Series Agreement, the Trustee or any successor trustee may resign
and be discharged by executing an instrument in writing and filing the same with
the Sponsor.
The Trustee or successor trustee must mail a copy of the notice of
resignation to all Unitholders then of record, not less than sixty days before
the date specified in such notice when such resignation is to take effect. The
Sponsor upon receiving notice of such resignation is obligated to appoint a
successor trustee promptly. If, upon such resignation, no successor trustee has
been appointed and has accepted the appointment within thirty days after
notification, the retiring Trustee may apply to a court of competent
jurisdiction for the appointment of a successor. The Sponsor may at any time
remove the Trustee, with or without cause, and appoint a successor trustee as
provided in the Trust Agreement. Notice of such removal and appointment shall be
mailed to each Unitholder by the Sponsor. Upon execution of a written acceptance
of such appointment by such successor trustee, all the rights, powers, duties
and obligations of the original Trustee shall vest in the successor.
The custodian appointed by the Trustee must be a corporation organized
under the laws of the United States, or any state thereof, and be authorized
under such laws to exercise custodial powers.
THE SPONSOR.
Enhanced Index Distributors, LLC (EID), the Sponsor of the Series, is a
manufacture, investment and distribution company created on ________, 2000 as a
Delaware Limited Liability Company. EID was created by four investment
professionals each with extensive experience in the financial services industry.
The purpose of the company is to create, manage and distribute enhanced
investment products to both retail and institutional investors.
If at any time the Sponsor shall fail to perform any of its duties under
the Trust Agreement or shall become incapable of acting or shall be adjudged a
bankrupt or insolvent or shall have its affairs taken over by public
authorities, then the Trustee may (a) appoint a successor sponsor at rates of
compensation deemed by the Trustee to be reasonable and not exceeding such
reasonable amounts as may be prescribed by the Securities and Exchange
Commission, or (b) terminate the Trust Agreement and liquidate the Series as
provided therein, or (c) continue to act as Trustee without terminating the
Trust Agreement.
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Enhanced Index Distributors, LLC offices are located at: 555 North Lane,
Suite 6160, Conshohocken, PA 19428.
THE EVALUATOR.
Declaration Service Company, 555 North Lane, Suite 6160, Conshohocken, PA
19428 serves as Evaluator. The Evaluator may resign or be removed by the Trustee
in which event the Trustee is to use its best efforts to appoint a satisfactory
successor. Such resignation or removal shall become effective upon acceptance of
appointment by the successor evaluator. If upon resignation of the Evaluator no
successor has accepted appointment within thirty days after notice of
resignation, the Evaluator may apply to a court of competent jurisdiction for
the appointment of a successor. Notice of such registration or removal and
appointment shall be mailed by the Trustee to each Unitholder.
AMENDMENT AND TERMINATION.
-------------------------
The Trust Agreement may be amended by the Trustee and the Sponsor without
the consent of any of the Unitholders: (1) to cure any ambiguity or to correct
or supplement any provision which may be defective or inconsistent; (2) to
change any provision thereof as may be required by the Securities and Exchange
Commission or any successor governmental agency; or (3) to make such provisions
as shall not adversely affect the interests of the Unitholders. The Trust
Agreement may also be amended in any respect by the Sponsor and the Trustee, or
any of the provisions thereof may be waived, with the consent of the holders of
Units representing 66 2/3% of the Units then outstanding of the Series (or of a
Series, if only the Series is affected) provided that no such amendment or
waiver will reduce the interest of any Unitholder thereof without the consent of
such Unitholder or reduce the percentage of Units required to consent to any
such amendment or waiver without the consent of all Unitholders of the Series.
In no event shall the Trust Agreement be amended to increase the number of Units
issuable thereunder or to permit the acquisition of any Securities in addition
to or in substitution for those initially deposited in the Series, except in
accordance with the provisions of the Trust Agreement. The Trustee shall
promptly notify Unitholders of the substance of any such amendment.
The Trust Agreement provides that a Series shall terminate upon the
liquidation, redemption or other disposition of the last of the Securities held
in the Series but in no event is it to continue beyond the Mandatory Termination
Date set forth under "Essential Information." If the value of the Series shall
be less than the applicable minimum value stated under "Essential Information"
(66 2/3% of the aggregate value of the Securities-based on the value at the date
of deposit of such Securities into the Series), the Trustee may, in its
discretion, and shall, when so directed by the Sponsor, terminate the Series.
The Series may be terminated at any time by the holders of Units representing 66
2/3% of the Units thereof then outstanding. In addition, the Sponsor may
terminate the Series if the Index is no longer maintained.
No later than the Mandatory Termination Date set forth under "Essential
Information," the Trustee will begin to sell all of the remaining underlying
Securities on behalf of Unitholders in connection with the termination of the
Series. The Sponsor has agreed to assist the Trustee in these sales. The sale
proceeds will be net of any incidental expenses involved in the sales.
The Sponsor will attempt to sell the Securities as quickly as it can during
the termination proceedings without in its judgment materially adversely
affecting the market price of the Securities, but it is expected that all of the
Securities will in any event be disposed of within a reasonable time after the
Series' termination. The Sponsor does not anticipate that the period will be
longer than one month, and it could be as short as one day, depending on the
liquidity of the Securities being sold. The liquidity of any Security depends on
the daily trading volume of the Security and the amount that the Sponsor has
available for sale on any particular day.
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It is expected (but not required) that the Sponsor will generally follow
the following guidelines in selling the Securities: for most Securities, the
Sponsor will generally sell Securities on the Mandatory Termination Date. For
some Securities and in certain circumstances the Sponsor may delay the sale of
Securities on the termination date. Within a reasonable period after
termination, the Trustee will sell any remaining Securities in the Series and,
after paying all expenses and charges incurred by the series, will distribute to
Unitholders thereof their pro rata share of the balances remaining in the Income
and Capital Accounts of the Series.
The Sponsor currently intends, but is not obligated, to offer for sale
units of a subsequent series of the Series at approximately the time of the
Mandatory Termination Date. If the Sponsor does offer such units for sale,
Unitholders may be given the opportunity to purchase such units. There is,
however, no assurance that units of any new series of the Series will be offered
for sale at that time, or if offered, that there will be sufficient units
available for sale to meet the requests of any or all Unitholders.
LIMITATIONS ON LIABILITY.
------------------------
The Sponsor
The Sponsor will receive an annual fee equal to 0.50% on annual average net
assets paid monthly. This fee will cover services provided to the Series
Unitholders and portfolios and will include, but is not limited to, Unitholder
account services, the dissemination of Series and Unitholder information,
promotion and distribution of Units, Series portfolio supervision and the
management of those services provided to the Series by others. In addition, the
Sponsor may realize a profit (or sustain a loss) as of the Initial Date of
Deposit resulting from the difference between the purchase prices of the
Securities to the Sponsor and the cost of such Securities to the Series, which
is based on the evaluation of the Series Securities on the Initial Date of
Deposit. Thereafter, the Sponsor may realize profits or sustain losses
The Trustee:
The Trust Agreement provides that the Trustee shall be under no liability
for any action taken in good faith in reliance upon prima facie properly
executed documents or for the disposition of moneys or Securities except by
reason of its own negligence, bad faith or willful misconduct, or its reckless
disregard for its duties under the Trust Agreement, nor shall 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 event that the Sponsor shall
fail to act, the Trustee may act and shall not be liable for any such action
taken by it in good faith. The Trustee shall not be personally liable for any
taxes or other governmental charges imposed upon or in respect of the Securities
or upon the interest thereof. In addition, the Trust Agreement contains other
customary provisions limiting the liability of the Trustee.
The Evaluator:
The Trustee and Unitholders may rely on any evaluation furnished by the
Evaluator and shall have no responsibility for the accuracy thereof. The Trust
Agreement provides that the determinations made by the Evaluator shall be made
in good faith upon the basis of the best information available to it, provided,
however, that the Evaluator shall be under no liability to the Trustee or
Unitholders for errors in judgment, but shall be liable for its gross
negligence, bad faith or willful misconduct or its reckless disregard for its
obligations under the Trust Agreement.
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EXPENSES OF THE SERIES
----------------------
In its capacity as supervisor, the Sponsor will charge the Series a
surveillance fee for services performed for the Series in an amount set forth in
"Essential Information". Such fee shall be based on the Series average annual
assets.
The Trustee receives for its services that fee set forth under "Essential
Information." The Trustee's fee which is calculated monthly is based on the
largest number of units of the Series outstanding during the calendar year for
which such compensation relates. The Trustee's fees are payable monthly from the
Income Account to the extent funds are available and then from the Capital
Account. The Trustee benefits to the extent there are funds for future
distributions, payment of expenses and redemptions in the Capital and Income
Accounts since these Accounts are non-interest bearing and the amounts earned by
the Trustee are retained by the Trustee. Part of the Trustee's compensation for
its services to the Series is expected to result from the use of these funds.
For evaluation of the Securities, the Evaluator shall receive that fee set
forth under "Essential Information", payable monthly, based upon the largest
number of Units of the Series outstanding during the calendar year to which such
compensation relates.
The Trustee's fee, Supervisor's fee and Evaluator's fee are deducted from
the Income Account of the Series to the extent funds are available and then from
the Capital Account. Each such fee may be increased without approval of
Unitholders by amounts not exceeding a proportionate increase in the Consumer
Price Index or any equivalent index substituted therefor.
Expenses incurred in establishing the Series, including the cost of the
initial preparation of documents relating to the Series (including the
Prospectus and Series Agreement), federal and state registration fees, the
initial fees and expenses of the Trustee, legal and accounting expenses, payment
of closing fees and any other out-of-pocket expenses, will be paid by the Series
(out of the Capital Account). The following additional charges are or may be
incurred by the Series: (a) fees for the Trustee's extraordinary services; (b)
expenses of the Trustee (including legal and auditing expenses, but not
including any fees and expenses charged by an agent for custody and safeguarding
of Securities) and of counsel, if any; (c) various governmental charges; (d)
expenses and costs of any action taken by the Trustee to protect the Series or
the rights and interests of the Unitholders; (e) indemnification of the Trustee
for any loss, liability or expense incurred by it in the administration of the
Series not resulting from negligence, bad faith or willful misconduct on its
part or its reckless disregard for its obligations under the Series Agreement;
(f) indemnification of the Sponsor for any loss, liability or expense incurred
in acting in that capacity without gross negligence, bad faith or willful
misconduct or its reckless disregard for its obligations under the Series
Agreement; and (g) expenditures incurred in contacting Unitholders upon
termination of the Series. The fees and expenses set forth herein are payable
out of the Series and, when owing to the Trustee, are secured by a lien on the
Series. Since the Securities are all common stocks, and the income stream
produced by dividend payments, if any, is unpredictable, the Sponsor cannot
provide any assurance that dividends will be sufficient to meet any or all
expenses of the Series. If the balances in the Income and Capital Accounts are
insufficient to provide for amounts payable by the Series, the Trustee has the
power to sell Securities to pay such amounts. These sales may result in capital
gains or losses to Unitholders. See "Federal Tax Status."
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OTHER INFORMATION
-----------------
LEGAL OPINIONS
The legality of the units offered hereby have been passed upon by Martin V.
Miller, Esq.
INDEPENDENT AUDITORS
Sanville and Co.
1514 Old York Road
Abington, PA 19001
(215) 884-8460
FOR MORE INFORMATION
--------------------
By Mail:
Enhanced Index Distributors, LLC
C/o Declaration Service Company
555 North Lane, Suite 6160
Conshohocken, PA 19428
By Phone: 1-800-XXX-XXXX
On the Internet:
HYPERLINK "http://www.________.com"
www.TBD.com
You may also review the registration statements of the Trust:
In person: at the SEC's Public Reference Room
(Phone: 1-800-SEC-0330) in Washington, D.C.
By Mail: Public Reference Section, Securities and Exchange Commission
Washington, D.C.20549-6009 (duplicating fee required)
On the Internet: www.sec.gov
Investment Company Act Registration Statement.
No.811-
END
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