Rule 497(b)
Registration No. 33-55780
Note: Part A of this Prospectus May Not Be
Distributed Unless Accompanied by Part B.
EQUITY SECURITIES TRUST
SERIES 2
SIGNATURE SERIES, REICH & TANG GROWTH AND VALUE TRUST
The Trust is a unit investment trust designated Equity Securities
Trust, Series 2, Signature Series, Reich & Tang Growth and Value Trust ("Value
Trust" or "Trust"). The Sponsor is Bear, Stearns & Co. Inc. (the "Sponsor").
The objective of the Value Trust is to seek growth of capital by investing in
securities based upon their potential for capital growth as determined by the
Portfolio Consultant. Current income will be secondary to the objective of
capital growth. Neither the Sponsor nor the Portfolio Consultant can give
assurance that the Trust's objectives can be achieved. The Trust contains an
underlying portfolio of common stocks (collectively, the "Securities"), which
have been purchased by the Trust based upon the recommendations of the
Portfolio Consultant, Reich & Tang Asset Management, L.P. (formerly New
England Investment Companies, L.P.) (the "Portfolio Consultant"). There are
certain risks inherent in an investment in common stocks. See "Special Risk
Considerations" in Part A and Part B of this Prospectus.
Minimum Purchase: 100 Units
This Prospectus consists of two parts. Part A contains the Summary
of Essential Information as of December 31, 1994 (the "Evaluation Date")
including descriptive material relating to the Trust, and audited financial
statements of the Trust, including the Portfolio as of the Evaluation Date.
Part B contains general information about the Trust. Part A may not be
distributed unless accompanied by Part B.
Investors should read and retain both parts of this Prospectus for
future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESEN-
TATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PROSPECTUS PART A DATED APRIL 28, 1995
175962.1
<PAGE>
THE TRUST
The Trust is a unit investment trust designated Equity Securities
Trust, Series 2, Signature Series, Reich & Tang Growth and Value Trust ("Value
Trust" or "Trust"). The Sponsor is Bear, Stearns & Co. Inc. The objective of
the Value Trust is to seek growth of capital by investing in stocks based upon
their potential for capital appreciation as determined by the portfolio
consultant Reich & Tang Asset Management, L.P. (formerly New England
Investment Companies, L.P.) (the "Portfolio Consultant"). Current income will
be secondary to the objective of capital growth. Neither the Sponsor nor the
Portfolio Consultant can give assurance that the Trust's objectives can be
achieved. The Trust contains an underlying portfolio of common stock
(collectively, the "Securities"), which have been purchased by the Trust based
upon the recommendations of the Portfolio Consultant. In selecting the
Securities for the Trust, the Portfolio Consultant normally will consider the
following factors, among others (1) values of individual securities relative
to other investment alternatives; (2) trends in the determinants of corporate
profits, corporate cash flow, balance sheet changes, management capability and
practices and (3) economic and political outlook. See "The Trust--The
Securities" in Part B. The Trust will terminate on the earlier of March 18,
1998 (the "Mandatory Termination Date") or the disposition of the last
security in the Trust. Upon termination, Certificateholders may elect to
receive their terminating distributions in cash, in the form of in-kind
distributions of the Trust's Securities, if they own units in aggregate value
of at least $25,000, or may utilize their terminating distributions to
purchase units of a future series of the Trust at a reduced sales charge. See
"Termination" in this Part A and "Trust Administration--Trust Termination" in
Part B.
The Portfolio Consultant is not a Sponsor of the Trust. The
Portfolio Consultant has been retained by the Sponsor, at its expense, to
utilize its equity expertise in selecting the Securities deposited in the
Trust. The Portfolio Consultant's only responsibilities with respect to the
Trust, in addition to its role in portfolio selection, is to monitor the
Securities in the Portfolio and make recommendations to the Sponsor in certain
circumstances regarding the disposition of the Securities held by the Trust.
The Sponsor is not obligated to adhere to the recommendations of the Portfolio
Consultant regarding the disposition of Securities. The Sponsor has the sole
authority to direct the Trustee to dispose of Securities under the Trust
Agreement. See "Trust Administration--The Portfolio Consultant" in Part B for
a description of the Portfolio Consultant's responsibilities.
With the deposit of the Securities in the Trust on the initial
Date of Deposit, the Sponsor established a proportionate relationship among
the aggregate value of the specified Securities in the Trust. During the 90
days subsequent to the initial Date of Deposit, the Sponsor may, but is not
obligated to, deposit from time to time additional Securities in the Trust
("Additional Securities") or contracts to purchase Additional Securities,
maintaining to the extent practicable the original proportionate relationship
of the number of shares of each Security in the Trust portfolio immediately
prior to such deposit, thereby creating additional Units which will be offered
to the public by means of this Prospectus. These additional Units will each
represent, to the extent practicable, an undivided interest in the same number
and type of securities of identical issuers as are represented by Units issued
on the initial Date of Deposit. It may not be possible to maintain the exact
original proportionate relationship among the number of shares of Securities
in the Trust portfolio on the initial Date of Deposit with the deposit of
Additional Securities because of, among other reasons, purchase requirements,
changes in prices, or the unavailability of Securities. Deposits of Additional
Securities in the Trust subsequent to the initial Date of Deposit must
replicate exactly the proportionate relationship among the shares of each
Security in the Trust portfolio at the end of the initial 90-day period. The
number and identity of Securities in the Trust will be adjusted to reflect the
disposition of Securities and/or the receipt of a stock dividend, a stock
split or other distribution with respect to such Securities or the
reinvestment of the proceeds distributed to Certificateholders. The portfolio
of the Trust may change slightly based on such disposition and reinvestment.
Securities received in exchange for shares will be similarly treated.
Substitute Securities may be acquired under specified conditions when
Securities originally deposited in the Trust are unavailable (see "The Trust--
Substitution of Securities" in Part B). As additional Units are issued by the
Trust as a result of the deposit of
A-2
175962.1
<PAGE>
Additional Securities by the Sponsor, the aggregate value of the Securities in
the Trust will be increased and the fractional undivided interest in the Trust
represented by each unit will be decreased.
Units in the Trust represent a 1/348795th undivided interest in
the principal and net income of the Trust (see "The Trust--Organization" in
Part B). The Units being offered hereby include issued and outstanding Units
which have been purchased by the Sponsor in the secondary market maintained by
the Sponsor. The Sponsor does not act as an underwriter, manager or co-manager
of a public offering of the securities of any of the issuers in the Trust
Portfolio, nor did it do so at the Date of Deposit.
The Sponsor makes a primary over-the-counter market in shares of
Portfolio Nos. 19, 25 and 31. The Sponsor does not act as an underwriter,
manager or co-manager of a public offering of the securities of any of the
issuers in the Trust portfolio.
Risk Considerations
Since the Trust may contain common stocks of domestic issuers, an
investment in Units of the Trust should be made with an understanding of the
risks inherent in any investment in common stocks including the risk that the
financial condition of the issuers 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). (See "Risk Considerations" in Part B of this
Prospectus.) The portfolio of the Trust is fixed and not "managed" by the
Sponsor or the Portfolio Consultant. All the Securities in the Trust will be
liquidated during a 60 day period prior to the Mandatory Termination Date of
the Trust. Since the Trust will not sell Securities in response to ordinary
market fluctuation, but only at the Trust's termination, the amount realized
upon the sale of the Securities may not be the highest price attained by an
individual Security during the life of the Trust.
Public Offering Price
The Public Offering Price per 100 Units of the Trust is equal to
the aggregate value of the underlying Securities (the price at which they
could be directly purchased by the public assuming they were available) in the
Trust divided by the number of Units outstanding times 100 plus a sales charge
of 4.9% of the Public Offering Price per 100 Units or 5.152% of the net amount
invested in Securities per 100 Units. (See "Summary of Essential
Information.") In addition, the net amount invested in Securities will involve
a proportionate share of amounts in the Income Account and Principal Account,
if any. For additional information regarding the Public Offering Price, the
descriptions of dividend and principal distributions, repurchase and
redemption of Units and other essential information regarding the Trust, see
the Summary of Essential Information for the Trust. During the initial
offering period orders involving at least 10,000 Units will be entitled to a
volume discount from the Public Offering Price. The Public Offering Price per
Unit may vary on a daily basis in accordance with fluctuations in the
aggregate value of the underlying Securities. (See "Public Offering" in Part
B.) The figures above assume a purchase of 100 Units. The price of a single
Unit, or any multiple thereof, is calculated by dividing the Public Offering
Price per 100 Units by 100 and multiplying by the number of Units. If the
Securities appreciate in value, purchasers of Units after the occurrence of
such appreciation will acquire their Units subject to a contingent liability
for the income tax inherent in the appreciated Securities. (See "Tax Status"
in Part B.)
Distributions
Distributions of dividends received, less expenses, will be made
by the Trust monthly on the 15th day of each month (the "Monthly Distribution
Date"). Distributions of capital gains realized, if any, will be made shortly
after the Monthly Distribution Date to Certificateholders of record on the
record date immediately preceding such Monthly Distribution Date. (See "Rights
of Certificate-holders--Distributions" in Part B.
A-3
175962.1
<PAGE>
Market For Units
The Sponsor, although not obligated to do so, presently maintains
and intends to continue to maintain a secondary market for the Units of the
Trust. The secondary market repurchase price will be based on the market value
of the Securities in the Trust portfolio. (See "Liquidity--Sponsor Repurchase"
for a description on how the secondary market repurchase price will be
determined.) If a market is not maintained a Certificateholder will be able to
redeem his Units with the Trustee. (See "Liquidity--Trustee Redemption" in
Part B.) The principal trading market for certain Securities may be in the
over-the-counter market. As a result, the existence of a liquid trading market
for these Securities may depend on whether dealers will make a market in these
Securities. There can be no assurance of the making or the maintaining of a
market for any of the Securities contained in the Trust portfolio or of the
liquidity of the Securities in any markets made. In addition, the Trust may be
restricted under the Investment Company Act of 1940 from selling Securities to
the Sponsor. The price at which the Securities may be sold to meet redemptions
and the value of the Units will be adversely affected if trading markets for
the Securities are limited or absent.
Total Reinvestment Plan
Distributions from the Trust are made to Certificateholders
monthly. The Certificateholder has the option, however, of either receiving
his dividend check, together with any principal payments, from the Trustee or
participating in a reinvestment program offered by the Sponsor in shares of
Short Term Income Fund, Inc., U.S. Government Portfolio (the "Fund"). Reich &
Tang Asset Management, L.P. serves as the investment manager of the Fund and
Reich & Tang Distributors L.P. serves as distributor for the Fund.
Participation in the reinvestment option is conditioned on the Fund's lawful
qualification for sale in the state in which the Certificateholder is a
resident. The Plan is not designed to be a complete investment program. See
"Total Reinvestment Plan" in Part B for details on how to enroll in the Total
Reinvestment Plan and how to obtain a Fund prospectus.
Termination
During the 60 day period prior to the Mandatory Termination Date
(five years after the initial Date of Deposit) (the "Liquidation Period"),
Securities will begin to be sold in connection with the termination of the
Trust and all Securities will be sold by the Mandatory Termination Date. The
Trustee may utilize the services of the Sponsor for the sale of all or a
portion of the Securities in the Trust. The Sponsor will receive brokerage
commissions from the Trust in connection with such sales in accordance with
applicable law. The Sponsor will determine the manner, timing and execution of
the sales of the underlying Securities. Certificate- holders may elect one of
the three options in receiving their terminating distributions.
Certificateholders may elect: (1) to receive their pro rata share of the
underlying Securities in kind, if they own units in aggregate value of at
least $25,000, (2) to receive cash upon the liquidation of their pro rata
share of the underlying Securities or (3) subject to the receipt by the Trust
of an appropriate exemptive order from the Securities and Exchange Commission,
to invest the amount of cash they would have received upon the liquidation of
their pro rata share of the underlying Securities in units of a future series
of the Trust (if one is offered) at a reduced sales charge. See "Trust
Administration--Trust Termination" in Part B for a description of how to
select a termination distribution option.
The Sponsor will attempt to sell the Securities as quickly as it
can during the Liquidation Period without, in their judgment, materially
adversely affecting the market price of the Securities, but all of the
Securities will in any event be disposed of by the end of the Liquidation
Period. The Sponsor does not anticipate that the period will be longer than 60
days, 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.
A-4
175962.1
<PAGE>
It is expected (but not required) that the Sponsor will generally
follow the following guidelines in selling the Securities: for highly liquid
Securities, the Sponsor will generally sell Securities on the first day of the
Liquidation Period; for less liquid Securities, on each of the first two days
of the Liquidation Period, the Sponsor will generally sell any amount of any
underlying Securities at a price no less than 1/2 of one point under the last
closing sale price of those Securities. On each of the following two days, the
price limit will increase to one point under the last closing sale price.
After four days, the Sponsor intends to sell at least a fraction of the
remaining underlying Securities, the numerator of which is one and the
denominator of which is the total number of days remaining (including that
day) in the Liquidation Period, without any price restrictions.
During the Liquidation Period, Certificateholders who have not
chosen to receive distributions-in-kind will be at risk to the extent that
Securities are not sold; for this reason the Sponsor will be inclined to sell
the Securities in as short a period as they can without materially adversely
affecting the price of the Securities.
A-5
175962.1
<PAGE>
<TABLE>
EQUITY SECURITIES TRUST, SERIES 2
SIGNATURE SERIES, REICH & TANG GROWTH AND VALUE TRUST
<CAPTION>
SUMMARY OF ESSENTIAL INFORMATION AS OF DECEMBER 31, 1994
<S> <C>
Date of Deposit:* March 18, 1993 Liquidation Period: Beginning
Aggregate Value of Securities**. $3,676,611 60 days prior to the Mandatory
Aggregated Value of Securities Termination Date.
per 100 Units................. $1,054.09 Minimum Value of Trust: The
Number of Units................. 348,795 Trust may be terminated if the Trust is less
Fractional Undivided Inter- than 40% of the aggregate value of the
est in Trust.................. 1/348795 Securities at the completion of the Deposit
Secondary Market Period.
Public Offering Price*** Mandatory Termination Date:
Aggregate Value of The earlier of March 18, 1998 or the
Securities in Trust**......... $3,676,611 disposition of the last Security in the Trust.
Divided by 348,795 Units Trustee:**** United States Trust
(times 100)................. $1,054.09 Company of New York.
Plus Sales Charge of 4.9% Trustee's Annual Fee: $.90 per 100 Units
of Public Offering Price outstanding.
per 100 Units............... $54.31 Other Annual Fees and Expenses:
Public Offering Price $.45 per 100 Units outstanding.
per 100 Units***............ $1,108.40 Portfolio Consultant: Reich & Tang Asset
Sponsor's Repurchase Price and Management, L.P. (formerly New England
Redemption Price Investment Companies, L.P.)
per 100 Units................. $1,054.09 Sponsor: Bear, Stearns & Co. Inc.
Excess of Public Offering Sponsor's Annual Supervisory Fee:
Price Over Redemption Maximum of $.25 per 100 Units outstanding
Price per 100 Units........... $54.31 (see "Trust Expense and Charges"
Evaluation Time: 4.00 p.m. in Part B).
New York Time. Record date: First of each month.
Minimum Principal Distribution: Dividend distribution date: Fifteen of each
$1.00 per 100 Units. month.
</TABLE>
- -------------------------
* The Date of Deposit is the date on which the Trust Agreement was signed
and contracts to purchase Securities were initially deposited with the
Trustee.
** Includes accrued income receivable.
*** For information regarding the offering price per unit and applicable
sales charge under the Total Reinvestment Plan, see "Total Reinvestment
Plan" in Part B of this Prospectus.
**** The Trustee maintains the corporate office at 770 Broadway, New York, NY
10003 (Tel. No. 1-800-428-8890). For information regarding redemption by
the Trustee, see "Trustee Redemption" in Part B of this Prospectus.
A-6
175962.1
<PAGE>
INFORMATION REGARDING THE TRUST AS OF DECEMBER 31, 1994
Description of Portfolio*
Number of Issues: 42 (42 issuers)
(NYSE 80.12%; AMEX 6.44%;
Over the Counter 13.44%)
Number of Issues by Industry:
Aerospace, 1 (1.80%); Agribusiness, 2 (2.0%); Automotive, 1 (1.1%);
Chemical--Specialty, 3 (8.9%);
Converted Paper Products, 2 (4.1%);
Energy, 3 (6.5%);
Financial, 2 (3.6%);
Food, 3 (7.6%);
Industrial Products, 9 (17.8%);
Industrial Services, 2 (6.2%);
Insurance, 3 (6.4%);
Media, 2 (4%);
Medical Supplies, 3 (9.5%);
Office Equipment & Supplies, 2 (3.2%);
Pharmaceutical, 1 (8%);
Retailing, 2 (6.8%); and
Toy, 1 (2.5%)
- --------
* Changes in the Trust Portfolio: On January 18, 1995 the Trust tendered
its shares of American Cyanamind Co. (Portfolio No. 5) into a tender
offer of $101.00 per share and received $296,334.00. On January 30,
1995, the Trust received one share for each share of Hercules, Inc.
(Portfolio No. 18) held by the Trust for an aggregate of 3,548 shares,
to effect a 3 for 1 stock split. On February 27, 1995, 25,902 units were
redeemed from the Trust.
A-7
175962.1
<PAGE>
FINANCIAL AND STATISTICAL INFORMATION
Selected data for each Unit of the Trust outstanding for the periods listed
below:
<TABLE>
<CAPTION>
Distributions of Distributions of
Net Asset* Interest During Principal During
Value the Period the Period
Period Ended Units Outstanding per 100 Units (per 100 Units) (per 100 Units)
- ----------------- ----------------- ------------- --------------- --------------
<S> <C> <C> <C> <C>
December 31, 1993 541,644 $1,037.10 $13.60 $ .44
December 31, 1994 348,795 1,054.02 18.88 1.79
</TABLE>
- --------
* Net Asset Value per 100 Units is calculated by dividing net assets as
disclosed in the "Statement of Net Assets" by the number of Units
outstanding as of the date of the Statement of Net Assets. See Note 5 of
Notes to Financial Statements for a description of the components of New
Assets.
A-8
175962.1
<PAGE>
Independent Auditors' Report
The Sponsor, Trustee and Certificateholders
Equity Securities Trust Series 2,
Signature Series, Reich and Tang Growth and Value Trust
We have audited the accompanying statement of net assets, including the
portfolio, of Equity Securities Trust Series 2, Signature Series, Reich and
Tang Growth and Value Trust as of December 31, 1994, and the related statement
of operations, and changes in net assets for the year then ended and for the
period March 18, 1993 (date of initial deposit) to December 31, 1993. These
financial statements are the responsibility of the Trustee (see note 2). Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of December 31, 1994,
by correspondence with the Trustee. An audit also includes assessing the
accounting principles used and significant estimates made by the Trustee, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Equity Securities Trust
Series 2, Signature Series, Reich and Tang Growth and Value Trust as of
December 31, 1994, and the results of its operations and the changes in its
net assets for the year then ended and for the period March 18, 1993 (date of
initial deposit) to December 31, 1993 in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
New York, New York
March 31, 1995
<PAGE>
EQUITY SECURITIES TRUST SERIES 2,
SIGNATURE SERIES, REICH AND TANG GROWTH AND VALUE TRUST
Statement of Net Assets
December 31, 1994
Investments in marketable securities,
at market value (cost $3,363,581) $ 3,690,319
Excess of total liabilities over other assets (13,959)
------------
Net assets (348,795 units of fractional undivided
interest outstanding $10.54 per unit) $ 3,676,360
============
See accompanying notes to financial statements.
<PAGE>
EQUITY SECURITIES TRUST SERIES 2,
SIGNATURE SERIES, REICH AND TANG GROWTH AND VALUE TRUST
Statement of Operations
For the Period
March 18, 1993
For the Year Ended (date of initial
December 31,1994 deposit) to
December 31, 1993
--------------- ----------------
Dividend Income $ 99,079 77,486
Expenses:
Trustee's fees 8,503 7,692
--------------- ----------
Investment income, net 90,576 69,794
--------------- ----------
Realized and unrealized gain on investments:
Realized gain on securities sold 158,978 14
Unrealized appreciation
(depreciation) for the period (105,986) 432,724
--------------- ----------
Net gain on investments 52,992 432,738
--------------- ----------
Net increase in net
assets resulting
from operations $ 143,568 502,532
=============== ==========
See accompanying notes to financial statements.
<PAGE>
<TABLE>
EQUITY SECURITIES TRUST SERIES 2,
SIGNATURE SERIES, REICH AND TANG GROWTH AND VALUE TRUST
Statement of Changes in Net Assets
<CAPTION>
For the Period
March 18, 1993
For the year Ended (date of initial deposit)
December 31,1994 to December 31, 1993
-------------- ----- ---------- -------
<S> <C> <C>
Operations:
Investment income, net $ 90,576 69,794
Realized gain on securites sold 158,978 14
Unrealized appreciation
of investments for the period (105,986) 432,724
-------------- ----------
Net increase in net
assets resulting
from operations 143,568 502,532
-------------- ----------
Distributions to Certificateholders:
Investment income 87,038 73,658
Principal 9,695 2,364
Redemptions
Investment income 4,105 -
Principal 1,983,744 -
-------------- ----------
Total distributions
and redemptions 2,084,582 76,022
-------------- ----------
Net increase (decrease) (1,941,014) 426,510
Value of additional units
acquired during offering period - 4,990,863
Net assets at beginning of period 5,617,374 200,001
-------------- ----------
Net assets at end of period (including
distributions in excess of
investment income of $4,431
and $3,864, respectively) $ 3,676,360 5,617,374
============== ==========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
EQUITY SECURITIES TRUST SERIES 2
SIGNATURE SERIES, REICH AND TANG GROWTH AND VALUE TRUST
Notes to Financial Statements
December 31, 1994 and 1993
(1) Organization
Equity Securities Trust Series 2, Signature Series, Reich and Tang Growth and
Value Trust (Trust) was organized on March 18, 1993 by Bear, Stearns & Co.
Inc. (Sponsor) under the laws of the State of New York by a Trust Indenture
and Agreement, and is registered under the Investment Company Act of 1940. On
March 18, 1993 (date of initial deposit) the Trust had 21,044 units
outstanding. During the period March 18, 1993 to May 24, 1993 (the offering
period) the Trust issued an additional 520,600 units bringing total units
issued to 541,644.
(2) Summary of Significant Accounting Policies
United States Trust Company of New York (Trustee) has custody of and
responsibility for the accounting records and financial statements of the
Trust and is responsible for establishing and maintaining a system of internal
control related thereto.
The Trustee is also responsible for all estimates of expenses and accruals
reflected in the Trust's financial statements. The accompanying financial
statements have been adjusted to record the unrealized appreciation
(depreciation) of investments and to record interest income and expenses on
the accrual basis. Dividend income is recognized on the ex-dividend date.
Investments are carried at market value which is determined by United States
Trust Company of New York (Evaluator) based upon the closing bid prices of the
securities at the end of_the period, except that the market value on the date
of deposit represents the cost to the Trust based on the offering prices for
investments at that date. The difference between cost and market value is
reflected as unrealized appreciation (depreciation) of investments. Securities
transactions are recorded on the trade date. Realized gains (losses) from
securities transactions are determined on the basis of average cost of the
securities sold or redeemed.
(3) Income Taxes
The Trust is not subject to Federal income taxes as provided for by the
Internal Revenue Code.
(4) Trust Administration
The fees and expenses of the Trust are incurred and paid on the basis set
forth under "Trust Expenses and Charges" in Part B of this Prospectus.The
Trust Indenture and Agreement provides for income distributions as often as
monthly (depending upon the distribution plan elected by the
Certificateholders).
The Trust Indenture and Agreement further requires that principal received
from the disposition of securities, be distributed to Certificateholders.
See "Financial and Statistical Information" in Part A of this Prospectus for
the amounts of per unit distributions during the period ended December 31,
1994.
The Trust Indenture and Agreement also requires the Trust to redeem units
tendered. 192,849 units were redeemed during the year ended December 31, 1994.
No units were redeemed during the period March 18, 1993 to December 31, 1993.
(5) Net Assets
At December 31, 1994, the net assets of the Trust represented the
interest of Certificateholders as follows:
Original cost to Certificateholders $ 210,440
Less initial gross underwriting commission (10,312)
Transaction fees (127)
200,001
Cost of additional units acquired
during the offering
period to Certificateholders 5,251,192
Less gross underwriting commission (257,153)
Transaction fees (3,176)
4,990,863
Cost of securities sold or called (1,827,283)
Net unrealized appreciation 326,738
Distributions in excess of
net investment income (4,431)
Distributions in excess of proceeds from
securities sold or called (9,528)
Total $ 3,676,360
The original cost to Certificateholders, less the initial gross
underwriting commission, represents the aggregate initial public offering
price net of the applicable sales charge on 541,644 units of fractional
undivided interest of the Trust as of May 24, 1993 (end of the offering
period).
<PAGE>
<TABLE>
EQUITY SECURITIES TRUST SERIES 2,
SIGNATURE SERIES, REICH AND TANG GROWTH AND VALUE TRUST
PORTFOLIO
December 31, 1994
<CAPTION>
Port- Cost
folio Number of
No. of Name of Issuer Securities Value
shares
<S> <C> <C> <C> <C>
COMMON
STOCK
1 4,311 Albany International $ 69,111 $ 82,987
Corp.
2 2,951 Allergan Inc. 68,076 83,366
3 1,459 Allied Signal 49,207 49,606
4 1,758 AMBAC Inc. 80,160 65,486
5 2,934 American Cyanamid 148,303 296,334
6 2,454 Avery Dennison 69,325 87,117
7 4,045 Becton Dickinson 146,452 194,160
8 1,940 Corning Inc. 66,568 57,958
9 2,769 C.R. Bard Inc. 66,327 74,763
10 1,079 DEKALB Genetics 33,896 28,863
11 2,553 Dexter Corp. 64,599 55,528
12 1,012 Dover Corp. 46,992 52,245
13 1,326 Echlin Inc. 32,585 39,780
14 3,249 Equifax Inc. 64,846 85,692
15 2,586 Equitable Resources 101,204 70,145
16 3,482 Flowers Industries 63,799 63,111
17 3,100 Hasbro Inc. 98,637 90,675
18 1,774 Hercules Inc. 132,983 204,675
19 3,149 Herman Miller 75,327 82,661
20 3,581 IBP, Inc. 65,927 108,325
21 2,089 Kerr-McRee Corp. 102,028 96,094
22 2,139 Lee Enterprises 65,531 73,796
23 1,128 Lubrizoil 34,444 38,211
24 5,337 Marshal Ind. 99,729 142,765
25 2,238 Marshall & Ilsley 53,197 42,522
26 5,189 Minerals Technologies 135,016 151,778
27 2,985 Morton International 86,552 85,073
28 3,298 New York Times Co. 99,945 72,968
29 1,260 Pioneer Hi-Bred Intl. 33,623 43,470
30 2,829 Travelers Inc. 98,483 91,943
31 1,609 SAFECO Corp. 101,259 83,668
32 2,055 Snap-On Tools 68,805 68,329
33 2,884 Sonoco Products 67,321 63,088
34 5,354 TAB Products 67,908 36,809
35 1,044 Teleflex Inc. 33,271 37,062
36 3,531 Union Texas Pet. 84,672 73,268
37 11,520 United States Shoe 131,528 216,000
38 4,012 Universal Foods 138,623 110,330
39 2,353 UNUM Corp. 129,410 88,826
40 2,884 Varian Associates 66,224 100,940
41 2,156 Woolworth Corp. 67,248 32,340
42 3,307 Precision Castparts 54,440 67,562
$ 3,363,581 $ 3,690,319
</TABLE>
<PAGE>
EQUITY SECURITIES TRUST
SERIES 2
SIGNATURE SERIES
REICH & TANG GROWTH AND VALUE TRUST
PROSPECTUS PART B
PART B OF THIS PROSPECTUS MAY NOT BE
DISTRIBUTED UNLESS ACCOMPANIED BY
PART A
DATED: APRIL 28, 1995
THE TRUST
Organization
"Equity Securities Trust, Series 2, Signature Series, Reich
& Tang Growth And Value Trust" consists of a "unit investment trust"
designated as set forth in Part A. The Trust was created under the laws of the
State of New York pursuant to a Trust Indenture and Agreement* (the "Trust
Agreement"), dated the initial Date of Deposit, between Bear, Stearns & Co.
Inc., as Sponsor, and United States Trust Company of New York as Trustee.
On the initial Date of Deposit, the Sponsor deposited with
the Trustee common stock including funds and delivery statements relating to
contracts for the purchase of certain such securities (collectively, the
"Securities") with an aggregate value as set forth in Part A and cash or an
irrevocable letter of credit issued by a major commercial bank in the amount
required for such purchases. Thereafter the Trustee, in exchange for the
Securities so deposited, delivered to the Sponsor the Certificates evidencing
the ownership of all Units of the Trust. The Sponsor has a limited right to
substitute other securities in the Trust portfolio in the event of a failed
contract. See "The Trust--Substitution of Securities". The Sponsor may also,
in certain circumstances, direct the Trustee to dispose of certain Securities
if the Sponsor believes that, because of market or credit conditions, or for
certain other reasons, retention of the Security would be detrimental to
Certificateholders.
(See "Trust Administration--Portfolio Supervision.")
Each "Unit" outstanding on the Evaluation Date represented
an undivided interest or pro rata share in the Securities of the Trust in the
ratio of one hundred Units for the indicated amount of the aggregate market
value of the Securities set forth in the "Summary of Essential Information".
To the extent that any Units are redeemed by the Trustee, the fractional
undivided interest or pro rata share in such Trust represented by each
unredeemed Unit will increase, although the actual interest in such Trust
represented by such fraction will remain unchanged. Units will remain
outstanding until redeemed upon tender to the Trustee by Certificateholders,
which may include the Sponsor or the Underwriters, or until the termination of
the Trust Agreement.
With the deposit of the Securities in the Trust on the
initial Date of Deposit, the Sponsor established a proportionate relationship
among the initial aggregate value of specified Securities in the Trust. During
the 90 days subsequent to the initial Date of Deposit, the Sponsor may deposit
additional Securities in the Trust that are substantially similar to the
Securities already deposited in the Trust ("Additional Securities") or
contracts to purchase Additional Securities, in order to create additional
Units, maintaining to the extent
- --------
* References in this Prospectus to the Trust Agreement are qualified in
their entirety by the respective Trust Indentures and Agreements
which are incorporated by reference herein.
176822.1
<PAGE>
practicable the original proportionate relationship of the number of shares of
each Security in the Trust portfolio on the initial Date of Deposit.
(Securities and Additional Securities collectively may be hereinafter referred
to as "Securities".) These additional Units will each represent, to the extent
practicable, an undivided interest in the same number and type of securities
of identical issuers as are represented by Units issued on the initial Date of
Deposit. It may not be possible to maintain the exact original proportionate
relationship among the Securities deposited on the initial Date of Deposit
because of, among other reasons, purchase requirements, changes in prices, or
unavailability of Securities. Deposits of Additional Securities in the Trust
subsequent to the 90-day period following the initial Date of Deposit must
replicate exactly the proportionate relationship among the shares of each
Security in the Trust portfolio at the end of the initial 90-day period. The
number and identity of Securities in the Trust will be adjusted to reflect the
disposition of Securities and/or the receipt of a stock dividend, a stock
split or other distribution with respect to shares or the reinvestment of the
proceeds distributed to Certificateholders. The portfolio of the Trust may
change slightly based on such disposition and reinvestment. Securities
received in exchange for shares will be similarly treated. Substitute
Securities may be acquired under specified conditions when Securities
originally deposited in the Trust are unavailable (see "The
Trust--Substitution of Securities" below). Units may be continuously offered
to the public by means of this Prospectus (see "Public Offering--Distribution
of Units") resulting in a potential increase in the number of Units
outstanding. As additional Units are issued by the Trust as a result of the
deposit of Additional Securities, the aggregate value of the Securities in the
Trust will be increased and the fractional undivided interest in the Trust
represented by each Unit will be decreased.
Objective
The objective of the Trust is to seek growth of capital by
investing in securities based upon their potential for capital appreciation as
determined by the Portfolio Consultant. In addition, current income will be
secondary to the objective of capital growth. The Trust seeks to achieve its
objective by investing in a portfolio of common stocks, securities convertible
into common stocks, debt securities and preferred stock of domestic issuers
which are selected by the Trust's Portfolio Consultant and which the Portfolio
Consultant believes will enable the Trust to achieve its objective. All of the
Securities in the Trust, except convertible securities, are listed on the New
York Stock Exchange, the American Stock Exchange or the National Association
of Securities Dealers Automated Quotations ("NASDAQ") National Market System
and are generally followed by independent investment research firms. There is
no minimum capitalization or market trading activity requirement for the
selection of Securities for the Trust's portfolio. There can be no assurance
that the Trust's investment objectives can be achieved.
The Securities
In selecting Securities for the Trust, the Portfolio
Consultant considers the following factors, among others: (1) values of
individual securities relative to other investment alternatives; (2) trends in
the determinants of corporate profits, corporate cash flow, balance sheet
changes, management capability and practices and (3) the economic and
political outlook. The Portfolio Consultant's investment philosophy hinges on
analyzing and understanding individual businesses in order to assess their
long-term potential. The Portfolio Consultant seeks to discover
well-positioned, evolving companies with substantial growth prospects which
are typically unnoticed in the marketplace. This enables the Portfolio
Consultant to commit its funds and build up its stake at relatively low
prices.
Some of the Securities in the Trust may be convertible
securities. A convertible security is a bond, debenture, corporate note,
preferred stock or other similar security that may be converted into or
exchanged for a prescribed amount of common stock or other equity security of
the same or a different issuer within a particular period of time at a
specified price or formula. Before conversion, convertible securities have
characteristics similar to nonconvertible debt securities in that they
ordinarily provide a stream of income with generally higher yields than those
of common stock of the same or similar issuers. Convertible securities are
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176822.1
<PAGE>
senior in rank to common stock in a corporation's capital structure and,
therefore, generally entail less risk than the corporation's common stock.
In selecting convertible securities for the Trust, in
addition to the factors associated with the selection of Securities of any
issuer, the price of the convertible securities relative to the underlying
common stock and the potential for capital appreciation of the underlying
common stock, will be considered by the Portfolio Consultant. The Trust may
convert a convertible security which it holds only in certain limited
circumstances. (See "Risk Considerations--Convertible Securities.")
Risk Considerations
Fixed Portfolio. The value of the Units will fluctuate
depending on all the factors that have an impact on the economy and the equity
markets. These factors similarly impact on the ability of an issuer to
distribute dividends. The Trust is not a "managed registered investment
company" and Securities will not be sold by the Trustee as a result of
ordinary market fluctuations. Unlike a managed investment company in which
there may be frequent changes in the portfolio of securities based upon
economic, financial and market analyses, securities of a unit investment
trust, such as the Trust, are not subject to such frequent changes based upon
continuous analysis. However, the Sponsor may direct the disposition by the
Trustee of Securities upon the occurrence of certain events. (See "Trust
Administration--Portfolio Supervision" below.) Potential investors also should
be aware that the Portfolio Consultant may change its views as to the
investment merits of any of the Securities during the life of the Trust and
therefore should consult their own financial advisers with regard to a
purchase of Units. In addition, investors should be aware that the Portfolio
Consultant, and its affiliates, currently act and will continue to act as
investment adviser for managed investment companies and managed private
accounts that may have similar or different investment objectives from the
Trust. Some of the Securities in the Trust may also be owned by these other
clients of the Portfolio Consultant and its affiliates. However, because these
clients have "managed" portfolios and may have differing investment
objectives, the Portfolio Consultant may sell certain Securities from those
accounts in instances where a sale by the Trust would be impermissible, such
as to maximize return by taking advantage of market fluctuation. Investors
should consult with their own financial advisers prior to investing in the
Trust to determine its suitability. (See "Trust Administration--Portfolio
Supervision.") All the Securities in the Trust are liquidated during a 60 day
period prior to the mandatory termination of the Trust on March 18, 1998.
Since the Trust will not sell Securities in response to ordinary market
fluctuation, but only at the Trust's termination, the amount realized upon the
sale of the Securities may not be the highest price attained by an individual
Security during the life of the Trust.
Common Stock. Since the Trust may contain common stocks of
domestic issuers, an investment in Units of the Trust should be made with an
understanding of the risks inherent in any investment in common stocks
including the risk that the financial condition of the issuers 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). Additional risks
include risks associated with the right to receive payments from the issuer
which is generally inferior to the rights of creditors of, or holders of debt
obligations or preferred stock issued by, the issuer. Holders of common stocks
have a right to receive dividends only when, if, and in the amounts declared
by the issuer's board of directors and to participate in amounts available for
distribution by the issuer only after all other claims on the issuer have been
paid or provided for. By contrast, holders of preferred stocks usually have
the right to receive dividends at a fixed rate when and as declared by the
issuer's board of directors, normally on a cumulative basis. Dividends on
cumulative preferred stock must be paid before any dividends are paid on
common stock and any cumulative preferred stock dividend which has been
omitted is added to future dividends payable to the holders of such cumulative
preferred stock. Preferred stocks are also usually entitled to rights on
liquidation which are senior to those of common stocks. For these reasons,
preferred stocks generally entail less risk than common stocks.
Moreover, common stocks do not represent an obligation of
the issuer and therefore do not offer any assurance of income or provide the
degree of protection of debt securities. The issuance of debt
-3-
176822.1
<PAGE>
securities or even preferred stock by an issuer will create prior claims for
payment of principal, interest and dividends which could adversely affect the
ability and inclination of the issuer to declare or pay dividends on its
common stock or the economic interest of holders of common stock with respect
to assets of the issuer upon liquidation or bankruptcy. Further, unlike debt
securities which typically have a stated principal amount payable at maturity
(which value will be subject to market fluctuations prior thereto), common
stocks have neither fixed principal amount nor a maturity and have values
which are subject to market fluctuations for as long as the common stocks
remain outstanding. Common stocks are especially susceptible to general stock
market movements and to volatile increases and decreases in value as market
confidence in and perceptions of the issuers change. These perceptions are
based on unpredictable factors including expectations regarding government,
economic, monetary and fiscal policies, inflation and interest rates, economic
expansion or contraction, and global or regional political, economic or
banking crises. The value of the common stocks in the Trust thus may be
expected to fluctuate over the life of the Trust to values higher or lower
than those prevailing on the initial Date of Deposit. (See "Risk
Considerations" for a discussion of the types of risks that affect holders of
common stock.)
The Trust may purchase Securities that are not registered
("Restricted Securities") under the Securities Act of 1933 (the "Securities
Act"), but can be offered and sold to "qualified institutional buyers" as that
term is defined in the Securities Act. See "Liquidity" below for the risks
inherent in the purchase of Restricted Securities.
Convertible Securities. The Portfolio Consultant believes
that the characteristics of convertible securities make them appropriate
investments for an investment company seeking to achieve capital appreciation
together with a high level of current income. These characteristics include
the potential for capital appreciation if the value of the underlying common
stock increases or interest rates decrease, the relatively high yield received
from dividend or interest payments as compared to common stock dividends and
decreased risks of decline in value relative to the underlying common stock
due to their fixed income nature. As a result of the conversion feature,
however, the interest rate or dividend preference on a convertible security is
generally less than would be the case if the securities were not convertible.
During periods of rising interest rates, it is possible that the potential for
capital gain on a convertible security may be less than that of a common stock
equivalent if the yield on the convertible security is at a level which would
cause it to sell at a discount.
The Trust may convert a convertible security only (i) when
necessary to permit orderly disposition of the investment when it approaches
maturity or has been called for redemption, or (ii) to facilitate its sale
after the Sponsor determines that such sale is appropriate in accordance with
the guidelines set forth under "Trust Administration-- Portfolio Supervision."
Since the Trust is not a "managed" investment company, the Trust will not be
able to exercise its conversion rights for any other reason. Investors should
be aware that the inability of the Trust to otherwise exercise its conversion
rights will prevent the Trust from taking advantage of market conditions that
may make conversion attractive to other holders of these convertible
securities.
Convertible securities are generally not investment grade,
that is, not rated within the four highest categories by Standard & Poor's
Corporation ("S&P") and Moody's Investor Service ("Moody's"). To the extent
that such convertible securities are rated lower than investment grade (i.e.,
"high yield" or "junk bond" status) or are not rated, there is a greater risk
as to the timely repayment of the principal of, and timely payment of interest
or dividends on, those securities. Such securities are considered by the
rating agencies to be predominantly speculative and involve major risk
exposures such as increased sensitivity to interest rate and economic changes
and limited liquidity resulting in the possibility that prices realized upon
the sale of such securities will be less than the prices used in calculating
the Trust's net asset value. Additionally, certain recently enacted Federal
legislation could limit the availability of such securities and the tax
advantages to issuers of the securities.
In the absence of adequate anti-dilution provisions in a
convertible security, dilution in the value of the Trust's holdings may occur
in the event the underlying stock is subdivided, additional securities are
-4-
176822.1
<PAGE>
issued, a stock dividend is declared, or the issuer enters into another type
of corporate transaction which increases its outstanding equity securities.
Every convertible security may be valued, on a theoretical basis, as if it did
not have a conversion privilege. This theoretical value is determined by the
yield it provides in comparison with the yields of other securities of
comparable character and quality which do not have a conversion privilege.
This theoretical value, which will change with prevailing interest rates, the
credit standing of the issuer and other pertinent factors, is often referred
to as the "investment value", and represents the security's theoretical price
support level.
"Conversion value" is the amount a convertible security
would be worth in market value if it were to be exchanged for the underlying
equity security pursuant to its conversion privilege. Conversion value
fluctuates directly with the price of the underlying equity security, usually
common stock. If, because of low prices for the common stock, the conversion
value is substantially below the investment value, the price of the
convertible security is governed principally by the factors described in the
preceding paragraph. If the conversion value rises near or above its
investment value, the price of the convertible security generally will rise
above its investment value and, in addition, will sell at some premium over
its conversion value. This premium represents the price investors are willing
to pay for the privilege of purchasing a fixed-income security with a
possibility of capital appreciation due to the conversion privilege. If this
appreciation potential is not realized, this premium may not be recovered. In
its selection of convertible securities for the Trust, the Portfolio
Consultant will not emphasize either investment value or conversion value, but
will consider both in light of the Trust's overall investment objectives.
Some of the convertible securities in the Trust portfolio
may be "Pay-In-Kind" securities. During a designated period from original
issuance, the issuer of such security may pay dividends or interest to the
holder by issuing additional fully paid and nonassessable shares or units of
the same security.
The Trust may purchase convertible securities that are
Restricted Securities and, therefore, can be offered and sold only to
"qualified institutional buyers" as defined in the Securities Act. See
"Liquidity" below for the risks inherent in the purchase of Restricted
Securities.
Liquidity. The existence of a liquid trading market for
Securities in the Trust portfolio, may depend on whether dealers will make a
market in these Securities. There can be no assurance that a market will be
made for any of the Securities, that any market for the Securities will be
maintained or of the liquidity of the Securities in any markets made. In
addition, the Trust may be restricted under the Investment Company Act of 1940
from selling Securities to the Sponsor. The price at which the Securities may
be sold to meet redemptions and the value of the Units will be adversely
affected if trading markets for the Securities are limited or absent.
The Trust may purchase securities that are not registered
("Restricted Securities") under the Securities Act, but can be offered and
sold to "qualified institutional buyers" under Rule 144A under the Securities
Act. Since it is not possible to predict with assurance exactly how this
market for Restricted Securities sold and offered under Rule 144A will
develop, the Sponsor will carefully monitor the Trust's investments in these
securities, focusing on such factors, among others, as valuation, liquidity
and availability of information. This investment could have the effect of
increasing the level of illiquidity in the Trust to the extent that qualified
institutional buyers become for a time uninterested in purchasing these
Restricted Securities. See "Summary of Essential Information" for the
percentage of Restricted Securities held in the Trust portfolio.
There is no assurance that any dividends will be declared or
paid in the future on the Securities. Investors should be aware that there is
no assurance that the Trust's objectives will be achieved.
Portfolio
The Trust consists of the Securities (or contracts to
purchase such Securities together with an irrevocable letter or letters of
credit for the purchase of such contracts) and Additional Securities deposited
upon
-5-
176822.1
<PAGE>
the creation of additional Units as set forth above and Substitute Securities
acquired by the Trust as long as such Securities may continue to be held from
time to time in the Trust together with uninvested cash realized from the
disposition of Securities. Because certain of the Securities and Additional
Securities from time to time may be sold under certain circumstances, as
described herein, no assurance can be given that the Trust will retain for any
length of time its present size and composition. The Trustee has not
participated and will not participate in the selection of Securities for the
Trust, and neither the Sponsor, the Portfolio Consultant nor the Trustee will
be liable in any way for any default, failure or defect in any Securities.
Some of the Securities are publicly traded either on a stock
exchange or in the over-the-counter market. The contracts to purchase
Securities deposited in the Trust are expected to settle in five business
days, in the ordinary manner for such Securities.
Substitution of Securities
Neither the Sponsor, the Portfolio Consultant nor the
Trustee shall be liable in any way for any default, failure or defect in any
of the Securities. In the event of a failure to deliver any Security that has
been purchased for the Trust under a contract ("Failed Securities"), the
Sponsor is authorized under the Trust Agreement to direct the Trustee to
acquire other securities ("Substitute Securities") to make up the original
corpus of the Trust.
The Substitute Securities must be purchased within 20 days
after the sale of the portfolio Security or delivery of the notice of the
failed contract. Where the Sponsors purchase Substitute Securities in order to
replace Failed Securities, (i) the purchase price may not exceed the purchase
price of the Failed Securities and (ii) the Substitute Securities must be
substantially similar to the Securities originally contracted for and not
delivered. Where the Sponsor purchases Substitute Securities in order to
replace Securities they sold, the Sponsor will endeavor to select Securities
which are securities that possess characteristics that are consistent with the
objectives of the Trust as set forth above. Such selection may include or be
limited to Securities previously included in the portfolio of the Trust.
Whenever a Substitute Security has been acquired for the
Trust, the Trustee shall, within five days thereafter, notify all
Certificateholders of the Trust of the acquisition of the Substitute Security
and the Trustee shall, on the next Monthly Distribution Date which is more
than 30 days thereafter, make a pro rata distribution of the amount, if any,
by which the cost to the Trust of the Failed Security exceeded the cost of the
Substitute Security plus accrued interest, if any.
In the event no reinvestment is made, the proceeds of the
sale of Securities will be distributed to Certificateholders as set forth
under "Rights of Certificateholders--Distributions." In addition, if the right
of substitution shall not be utilized to acquire Substitute Securities in the
event of a failed contract, the Sponsor will cause to be refunded the sales
charge attributable to such Failed Securities to all Certificateholders of the
Trust, and distribute the principal and accrued interest attributable to such
Failed Securities on the next Monthly Distribution Date.
Because certain of the Securities and Additional Securities
from time to time may be substituted (see "Trust Administration--Portfolio
Supervision") or may be sold under certain circumstances, no assurance can be
given that the Trust will retain its present size and composition for any
length of time. The proceeds from the sale of a Security or the exercise of
any redemption or call provision will be distributed to Certificateholders
except to the extent such proceeds are applied to meet redemptions of Units.
(See "Liquidity--Trustee Redemption.")
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<PAGE>
PUBLIC OFFERING
Offering Price
The Public Offering Price per 100 Units of the Trust is
equal to the aggregate value of the underlying Securities (the price at which
they could be directly purchased by the public assuming they were available)
in the Trust divided by the number of Units outstanding times 100 plus a sales
charge of 4.9% of the Public Offering Price per 100 Units or 5.152% of the net
amount invested in Securities per 100 Units. (See "Summary of Essential
Information.") In addition, the net amount invested in Securities will involve
a proportionate share of amounts in the Income Account and Principal Account,
if any. The Public Offering Price can vary on a daily basis from the amount
stated on the cover of this Prospectus in accordance with fluctuations in the
market value of the Securities and the price to be paid by each investor will
be computed as of the date the Units are purchased.
The aggregate value of the Securities is determined in good
faith by the Trustee on each "Business Day" as defined in the Indenture in the
following manner: if the Securities are listed on a national securities
exchange or on the NASDAQ National Market System, this evaluation is generally
based on the closing sale prices on that exchange as of the Evaluation Time
(unless the Trustee deems these prices inappropriate as a basis for
valuation). If the Securities are not so listed or, if so listed and the
principal market therefor is other than on the exchange, the evaluation
generally shall be based on the closing purchase price in the over-the-counter
market (unless the Trustee deems these prices inappropriate as a basis for
evaluation) or if there is no such closing purchase price, then the Trustee
may utilize, at the Trust's expense, an independent evaluation service or
services to ascertain the values of the Securities. The independent evaluation
service shall use any of the following methods, or a combination thereof,
which it deems appropriate: (a) on the basis of current bid prices for
comparable securities, (b) by appraising the value of the Securities on the
bid side of the market or by such other appraisal deemed appropriate by the
Trustee or (c) by any combination of the above, each as of the Evaluation
Time.
Volume and Other Discounts
Units of the Trust are available at a volume discount from
the Public Offering Price during the initial public offering. This volume
discount results in a reduction of the sales charge applicable to such
purchases. The amount of the approximate reduced sales charge on the Public
Offering Price applicable to such purchases is as follows:
Approximate Reduced
Number of Units Sales Charge
10,000 but less than 25,000 4.66%
25,000 but less than 50,000 4.42%
50,000 but less than 75,000 4.18%
75,000 but less than 100,000 3.94%
100,000 or more 3.45%
These discounts apply to all purchases of Units by the same
purchaser during the initial public offering period. Units purchased by the
same purchasers in separate transactions during the initial public offering
period will be aggregated for purposes of determining if such purchaser is
entitled to a discount provided that such purchaser must own at least the
required number of Units at the time such determination is made. Units held in
the name of the spouse of the purchaser or in the name of a child of the
purchaser under 21 years of age are deemed for the purposes hereof to be
registered in the name of the purchaser. The discount
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<PAGE>
is also applicable to a trustee or other fiduciary purchasing securities for a
single trust estate or single fiduciary account.
Employees (and their immediate families) of Bear, Stearns &
Co. Inc., the Portfolio Consultant, and of any underwriter of the Trust may,
pursuant to employee benefit arrangements, purchase Units of the Trust at a
price equal to the then market value of the underlying securities in the Trust
during the initial offering period, divided by the number of Units outstanding
plus a reduced sales charge of 1.5% per Unit. Such arrangements result in less
selling effort and selling expenses than sales to employee groups of other
companies. Resales or transfers of Units purchased under the employee benefit
arrangements may only be made through the Sponsor's secondary market, so long
as it is being maintained.
Distribution of Units
During the initial offering period and thereafter to the
extent additional Units continue to be offered by means of this Prospectus,
Units are distributed by the Sponsor, the Underwriters and dealers at the
Public Offering Price. The initial offering period is thirty days after each
deposit of Securities in the Trust and, unless all Units are sold prior
thereto, the Sponsor may extend the initial offering period up to four
additional successive thirty day periods. Certain banks and thrifts will make
Units of the Trust available to their customers on an agency basis. A portion
of the sales charge paid by their customers is retained by or remitted to the
banks. Under the Glass-Steagall Act, banks are prohibited from underwriting
Units; however, the Glass-Steagall Act does permit certain agency transactions
and the banking regulators have indicated that these particular agency
transactions are permitted under such Act. In addition, state securities laws
on this issue may differ from the interpretations of federal law expressed
herein and banks and financial institutions may be required to register as
dealers pursuant to state law.
The Sponsor presently maintains and intends to continue to
qualify the Units for sale in substantially all States through the
Underwriters and through dealers who are members of the National Association
of Securities Dealers, Inc. Units may be sold to dealers at prices which
represent a concession of up to 3% per Unit, subject to the Sponsor's right to
change the dealers' concession from time to time. Such Units may then be
distributed to the public by the dealers at the Public Offering Price then in
effect. In addition, any dealer, underwriter or firm who purchases Units on
the initial Date of Deposit will be paid an additional concession of $1.00 per
100 Units purchased that day. The Sponsor reserves the right to reject, in
whole or in part, any order for the purchase of Units. The Sponsor reserves
the right to change the discounts from time to time.
Frequent Buyer Program
Any dealer, underwriter, or firm whose total combined purchases of
the Trust and other unit investment trusts sponsored by Bear, Stearns & Co.
Inc. ("MST/EST Units") from Bear, Stearns & Co. Inc. in a single calendar
month fall in any of the levels listed below, is paid an additional
concession.
Aggregate Monthly Amount of MST/EST Additional Concession
Units Sold at Public Offering Price (Per $1,000,000) Sold
$1,000,000 but less than $2,000,000........................... $0.50
$2,000,000 but less than $4,500,000........................... $1.00
$4,500,000 but less than $7,000,000........................... $1.50
$7,000,000 or more............................................ $2.00
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<PAGE>
Sponsor's and Underwriters' Profits
The Sponsor and the Underwriters receive a gross
underwriting commission equal to 4.9% of the Public Offering Price per 100
Units (equivalent to 5.152% of the net amount invested in the Securities).
Additionally, the Sponsor may realize a profit on the deposit of the
Securities in the Trust representing the difference between the cost of the
Securities to the Sponsor and the cost of the Securities to the Trust (See
"Portfolio.") The Sponsor or any Underwriter may realize profits or sustain
losses with respect to Securities deposited in the Trust which were acquired
from underwriting syndicates of which they were a member.
The Sponsor may have participated as an underwriter or
manager, co-manager or member of underwriting syndicates from which some of
the aggregate principal amount of the Securities were acquired for the Trust
in the amounts set forth in "The Trust" in Part A.
All or a portion of the Securities deposited in the Trust
may have been acquired through the Sponsor. The Sponsor received brokerage
commissions from the Certificateholders in connection with such purchases, but
such fees will not exceed that amount indicated in footnote (+++) to the
"Summary of Essential Information."
During the initial offering period and thereafter to the
extent additional Units continue to be offered by means of this Prospectus,
the underwriting syndicate may also realize profits or sustain losses as a
result of fluctuations after the initial Date of Deposit in the aggregate
value of the Securities and hence in the Public Offering Price received by the
Sponsor and the Underwriters for the Units. Cash, if any, made available to
the Sponsor prior to settlement date for the purchase of Units may be used in
the Sponsor's business subject to the limitations of 17 CFR 240.15c3-3 under
the Securities Exchange Act of 1934 and may be of benefit to the Sponsor.
Upon termination of the Trust, the Trustee may utilize the
services of the Sponsor for the sale of all or a portion of the Securities in
the Trust. The Sponsor will receive brokerage commissions from the Trust in
connection with such sales in accordance with applicable law.
In maintaining a market for the Units (see "Sponsor
Repurchase") the Sponsor will realize profits or sustain losses in the amount
of any difference between the price at which they buy Units and the price at
which they resell such Units.
RIGHTS OF CERTIFICATEHOLDERS
Certificates
Ownership of Units of the Trust is evidenced by registered
Certificates executed by the Trustee and the Sponsor. Certificates may be
issued in denominations of one hundred or more Units. Certificates are
transferable by presentation and surrender to the Trustee properly endorsed
and/or accompanied by a written instrument or instruments of transfer.
Although no such charge is presently made or contemplated, the Trustee may
require a Certificateholder to pay $2.00 for each Certificate reissued or
transferred and any governmental charge that may be imposed in connection with
each such transfer or interchange. Mutilated, destroyed, stolen or lost
Certificates will be replaced upon delivery of satisfactory indemnity and
payment of expenses incurred.
Distributions
Dividends and interest received by the Trust are credited by
the Trustee to an Income Account for the Trust. Other receipts, including the
proceeds of Securities disposed of, are credited to a Principal Account for
the Trust.
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Distributions to each Certificateholder from the Income
Account are computed as of the close of business on each Record Date for the
following Distribution Date. Distributions from the Principal Account of the
Trust (other than amounts representing failed contracts, as previously
discussed) will be computed as of each Record Date, and will be made to the
Certificateholders of the Trust on or shortly after the next Monthly
Distribution Date. Proceeds representing principal received from the
disposition of any of the Securities between a Record Date and a Distribution
Date which are not used for redemptions of Units will be held in the Principal
Account and not distributed until the second succeeding Monthly Distribution
Date. No distributions will be made to Certificateholders electing to
participate in the Total Reinvestment Plan. Persons who purchase Units between
a Record Date and a Distribution Date will receive their first distribution on
the second Monthly Distribution Date after such purchase.
As of the first day of each month, the Trustee will deduct
from the Income Account of the Trust, and, to the extent funds are not
sufficient therein, from the Principal Account of the Trust, amounts necessary
to pay the expenses of the Trust (as determined on the basis set forth under
"Trust Expenses and Charges"). The Trustee also may withdraw from said
accounts such amounts, if any, as it deems necessary to establish a reserve
for any applicable taxes or other governmental charges that may be payable out
of the Trust. Amounts so withdrawn shall not be considered a part of such
Trust's assets until such time as the Trustee shall return all or any part of
such amounts to the appropriate accounts. In addition, the Trustee may
withdraw from the Income and Principal Accounts such amounts as may be
necessary to cover redemptions of Units by the Trustee.
The monthly dividend distribution per 100 Units cannot be
estimated and will change and may be reduced as Securities are redeemed,
exchanged or sold, or as expenses of the Trust fluctuate. No distribution need
be made from the Principal Account until the balance therein is an amount
sufficient to distribute $1.00 per 100 Units.
Records
The Trustee shall furnish Certificateholders in connection
with each distribution a statement of the amount of dividends and interest, if
any, and the amount of other receipts, if any, which are being distributed,
expressed in each case as a dollar amount per 100 Units. 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 Certificateholder of
record, a statement showing (a) as to the Income Account: dividends, interest
and other cash amounts received, amounts paid for purchases of Substitute
Securities and redemptions of Units, if any, deductions for applicable taxes
and fees and expenses of the Trust, and the balance remaining after such
distributions and deductions, expressed both as a total dollar amount and as a
dollar amount representing the pro rata share of each 100 Units outstanding on
the last business day of such calendar year; (b) as to the Principal Account:
the dates of disposition of any Securities and the net proceeds received
therefrom, deductions for payments of applicable taxes and fees and expenses
of the Trust, amounts paid for purchases of Substitute Securities and
redemptions of Units, if any, and the balance remaining after such
distributions and deductions, expressed both as a total dollar amount and as a
dollar amount representing the pro rata share of each 100 Units outstanding on
the last business day of such calendar year; (c) a list of the Securities
held, a list of Securities purchased, sold or otherwise disposed of during the
calendar year and the number of Units outstanding on the last business day of
such calendar year; (d) the Redemption Price per 100 Units based upon the last
computation thereof made during such calendar year; and (e) amounts actually
distributed to Certificateholders during such calendar year from the Income
and Principal Accounts, separately stated, of the Trust, expressed both as
total dollar amounts and as dollar amounts representing the pro rata share of
each 100 Units outstanding on the last business day of such calendar year.
The Trustee shall keep available for inspection by
Certificateholders at all reasonable times during usual business hours, books
of record and account of its transactions as Trustee, including records of the
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names and addresses of Certificateholders, Certificates issued or held, a
current list of Securities in the portfolio and a copy of the Trust Agreement.
TAX STATUS
The following is a general discussion of certain of the Federal income tax
consequences of the purchase, ownership and disposition of the Units. The
summary is limited to investors who hold the Units as "capital assets"
(generally, property held for investment) within the meaning of Section 1221
of the Internal Revenue Code of 1986, as amended (the "Code").
Certificateholders should consult their tax advisers in determining the
Federal, state, local and any other tax consequences of the purchase,
ownership and disposition of Units.
In rendering the opinion set forth below, Battle Fowler LLP
has examined the Agreement, the final form of Prospectus dated the date hereof
(the "Prospectus") and the documents referred to therein, among others, and
has relied on the validity of said documents and the accuracy and completeness
of the facts set forth therein.
In the opinion of Battle Fowler LLP, special counsel for the
Sponsor, under existing law:
1. The Trust will be classified as a grantor trust for
Federal income tax purposes and not as a partnership or association taxable as
a corporation. Classification of the Trust as a grantor trust will cause the
Trust not to be subject to Federal income tax, and will cause the
Certificateholders of the Trust to be treated for Federal income tax purposes
as the owners of a pro rata portion of the assets of the Trust. All income
received by the Trust will be treated as income of the Certificateholders in
the manner set forth below.
2. The Trust is not subject to the New York Franchise Tax on
Business Corporations or the New York City General Corporation Tax. For a
Certificateholder who is a New York resident, however, a pro rata portion of
all or part of the income of the Trust will be treated as the income of the
Certificateholder under the income tax laws of the State and City of New York.
Similar treatment may apply in other states.
3. During the 90-day period subsequent to the initial
issuance date, the Sponsor reserves the right to deposit additional Securities
that are substantially similar to those establishing the Trust. This retained
right falls within the guidelines promulgated by the Internal Revenue Service
("IRS") and should not affect the taxable status of the Trust.
A taxable event will generally occur with respect to each
Certificateholder when the Trust disposes of a Security (whether by sale,
exchange or redemption) or upon the sale, exchange or redemption of Units by
such Certificateholder. The price a Certificateholder pays for his Units,
including sales charges, is allocated among his pro rata portion of each
Security held by the Trust (in proportion to the fair market values thereof on
the date the Certificateholder purchases his Units) in order to determine his
initial cost for his pro rata portion of each Security held by the Trust.
For Federal income tax purposes, a Certificateholder's pro
rata portion of dividends paid with respect to a Security held by a Trust are
taxable as ordinary income to the extent of such corporation's current and
accumulated "earnings and profits" as defined by Section 316 of the Code. A
Certificateholder's pro rata portion of dividends paid on such Security that
exceed such current and accumulated earnings and profits will first reduce a
Certificateholder's tax basis in such Security, and to the extent that such
dividends exceed a Certificateholder's tax basis in such Security will
generally be treated as capital gain.
A Certificateholder's portion of gain, if any, upon the
sale, exchange or redemption of Units or the disposition of Securities held by
the Trust will generally be considered a capital gain and will be long-term if
the Certificateholder has held his Units for more than one year. Long-term
capital gains are generally taxed at the same rates applicable to ordinary
income, although individuals who realize long-term
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capital gains will be subject to a maximum tax rate of 28% on such gains. Tax
rates may increase prior to the time when Certificateholders may realize gains
from the sale, exchange or redemption of Units or Securities.
A Certificateholder's portion of loss, if any, upon the sale
or redemption of Units or the disposition of Securities held by the Trust will
generally be considered a capital loss and will be long-term if the
Certificateholder has held his Units for more than one year. Capital losses
are deductible to the extent of capital gains; in addition, up to $3,000 of
capital losses of non-corporate Certificateholders may be deducted against
ordinary income.
Under Section 67 of the Code and the accompanying
Regulations, a Certificateholder who itemizes his deductions may also deduct
his pro rata share of the fees and expenses of the Trust, but only to the
extent that such amounts, together with the Certificateholder's other
miscellaneous deductions, exceed 2% of his adjusted gross income. The
deduction of fees and expenses may also be limited by Section 68 of the Code,
which reduces the amount of itemized deductions that are allowed for
individuals with incomes in excess of certain thresholds.
After the end of each calendar year, the Trustee will
furnish to each Certificateholder an annual statement containing information
relating to the dividends received by the Trust on the Securities, the gross
proceeds received by the Trust from the disposition of any Security, and the
fees and expenses paid by the Trust. The Trustee will also furnish annual
information returns to each Certificateholder and to the Internal Revenue
Service.
A corporation that owns Units will generally be entitled to
a 70% dividends received deduction with respect to such Certificateholder's
pro rata portion of dividends received by the Trust from a domestic
corporation under Section 243 of the Code or from a qualifying foreign
corporation under Section 245 of the Code (to the extent the dividends are
taxable as ordinary income, as discussed above) in the same manner as if such
corporation directly owned the Securities paying such dividends. However, a
corporation owning Units should be aware that Sections 246 and 246A of the
Code impose additional limitations on the eligibility of dividends for the 70%
dividends received deduction. These limitations include a requirement that
stock (and therefore Units) must generally be held at least 46 days (as
determined under Section 246(c) of the Code). Moreover, the allowable
percentage of the deduction will be reduced from 70% if a corporate
Certificateholder owns certain stock (or Units) the financing of which is
directly attributable to indebtedness incurred by such corporation.
Accordingly, Certificateholders should consult their tax adviser in this
regard.
As discussed in the Section "Termination", each
Certificateholder will have three options in receiving their termination
distributions, which are (i) to receive their pro rata share of the underlying
Securities in kind, (ii) to receive cash upon liquidation of their pro rata
share of the underlying Securities, or (iii) to invest the amount of cash they
would receive upon the liquidation of their pro rata share of the underlying
Securities in units of a future series of the Trust (if one is offered).
There are special tax consequences should a
Certificateholder choose option (i), the exchange of the Certificateholder's
pro rata portion of each of the shares of stock and other assets held by the
Trust for shares of stock plus, possibly, cash. Treasury Regulations provide
that gain or loss is recognized when there is a conversion of property into
property that is materially different in kind or extent. In this instance, the
Certificateholder may be considered the owner of an undivided interest in all
of the Trust's assets. By accepting the proportionate number of shares of the
individual Securities representing the assets of the Trust, in exchange for
his Unit, the Certificateholder should be treated as merely exchanging his
undivided pro rata ownership of all of the assets of the Trust into sole
ownership of a proportionate share of Trust assets. As such, there should be
no material difference in the Certificateholder's ownership, and therefore the
transaction should be tax free to the extent Securities are received.
Alternatively, the transaction may be treated as an exchange that would
qualify for nonrecognition treatment to the extent the Certificateholder is
exchanging his undivided interest in all of the Trust's Securities for his
proportionate number of shares of the underlying Securities. In either
instance,
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the transaction should result in a non-taxable event for the Certificateholder
to the extent Securities are received. However, there is no specific authority
addressing the income tax consequences of an in kind distribution from a
grantor trust, and investors are urged to consult their tax advisers in this
regard.
Entities that generally qualify for an exemption from
Federal income tax, such as many pension trusts, are nevertheless taxed under
Section 511 of the Code on "unrelated business taxable income." Unrelated
business taxable income is income from a trade or business regularly carried
on by the tax-exempt entity that is unrelated to the entity's exempt purpose.
Unrelated business taxable income generally does not include dividend or
interest income or gain from the sale of investment property, unless such
income is derived from property that is debt-financed or is dealer property. A
tax-exempt entity's dividend income from the Trust and gain from the sale of
Units in the Trust or the Trust's sale of Securities is not expected to
constitute unrelated business taxable income to such tax-exempt entity unless
the acquisition of the Unit itself is debt-financed or constitutes dealer
property in the hands of the tax-exempt entity.
Before investing in the Trust, the trustee or investment
manager of an employee benefit plan (e.g., a pension or profit sharing
retirement plan) should consider among other things (a) whether the investment
is prudent under the Employee Retirement Income Security Act of 1974
("ERISA"), taking into account the needs of the plan and all of the facts and
circumstances of the investment in the Trust; (b) whether the investment
satisfies the diversification requirement of Section 404(a)(1)(C) of ERISA;
and (c) whether the assets of the Trust are deemed "plan assets" under ERISA
and the Department of Labor regulations regarding the definition of "plan
assets."
Prospective tax-exempt investors are urged to consult their
own tax advisers prior to investing in the Trust.
LIQUIDITY
Sponsor Repurchase. The Sponsor, although not obligated to
do so, presently maintains and intends to continue to maintain a secondary
market for the Units and continuously to offer to repurchase the Units. The
Sponsor's secondary market repurchase price will be based on the aggregate
value of the Securities in the Trust portfolio and will be the same as the
redemption price. The aggregate value of the Securities will be determined by
the Trustee on a daily basis and computed on the basis set forth under
"Trustee Redemption." The Sponsor does not guarantee the enforceability,
marketability or price of any Securities in the Portfolio or of the Units.
Certificateholders who wish to dispose of their Units should inquire of the
Sponsor as to current market prices prior to making a tender for redemption.
The Sponsor may discontinue repurchase of Units if the supply of Units exceeds
demand, or for other business reasons. The date of repurchase is deemed to be
the date on which Certificates representing Units are physically received in
proper form, i.e., properly endorsed, by Bear, Stearns & Co. Inc., 245 Park
Avenue, New York, New York 10167. Units received after 4 P.M., New York Time,
will be deemed to have been repurchased on the next business day. In the event
a market is not maintained for the Units, a Certificateholder may be able to
dispose of Units only by tendering them to the Trustee for redemption.
Units purchased by the Sponsor in the secondary market may
be reoffered for sale by the Sponsor at a price based on the aggregate value
of the Securities in the Trust plus a 4.9% sales charge (of 5.152% of the net
amount invested) plus a pro rata portion of amounts, if any, in the Income
Account. Any Units that are purchased by the Sponsor in the secondary market
also may be redeemed by the Sponsor if it determines such redemption to be in
its best interest.
The Sponsor may, under certain circumstances, as a service
to Certificateholders, elect to purchase any Units tendered to the Trustee for
redemption (see "Trustee Redemption"). Factors which the Sponsor will consider
in making a determination will include the number of Units of all Trusts which
it has in inventory, its estimate of the salability and the time required to
sell such Units and general market conditions.
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For example, if in order to meet redemptions of Units the Trustee must dispose
of Securities, and if such disposition cannot be made by the redemption date
(seven calendar days after tender), the Sponsor may elect to purchase such
Units. Such purchase shall be made by payment to the Certificateholder not
later than the close of business on the redemption date of an amount equal to
the Redemption Price on the date of tender.
Trustee Redemption. Units may also be tendered to the
Trustee for redemption at its corporate trust office at 770 Broadway, New
York, New York 10003, upon proper delivery of Certificates representing such
Units and payment of any relevant tax. At the present time there are no
specific taxes related to the redemption of Units. No redemption fee will be
charged by the Sponsor or the Trustee. Units redeemed by the Trustee will be
cancelled.
Certificates representing Units to be redeemed must be
delivered to the Trustee and must be properly endorsed or accompanied by
proper instruments of transfer with signature guaranteed (or by providing
satisfactory indemnity, as in the case of lost, stolen or mutilated
Certificates). Thus, redemptions of Units cannot be effected until
Certificates representing such Units have been delivered by the person seeking
redemption. (See "Certificates.") Certificateholders must sign exactly as
their names appear on the faces of their Certificates. In certain instances
the Trustee may require additional documents such as, but not limited to,
trust instruments, certificates of death, appointments as executor or
administrator or certificates of corporate authority.
Within seven calendar days following a tender for
redemption, or, if such seventh day is not a business day, on the first
business day prior thereto, the Certificateholder will be entitled to receive
an amount for each Unit tendered equal to the Redemption Price per Unit
computed as of the Evaluation Time set forth under "Summary of Essential
Information" in Part A on the date of tender. The "date of tender" is deemed
to be the date on which Units are received by the Trustee, except that with
respect to Units received after the close of trading on the New York Stock
Exchange (4:00 p.m. Eastern Time), the date of tender is the next day on which
such Exchange is open for trading, and such Units will be deemed to have been
tendered to the Trustee on such day for redemption at the Redemption Price
computed on that day.
A Certificateholder will receive his redemption proceeds in
cash and amounts paid on redemption shall be withdrawn from the Income
Account, or, if the balance therein is insufficient, from the Principal
Account. All other amounts paid on redemption shall be withdrawn from the
Principal Account. The Trustee is empowered to sell Securities in order to
make funds available for redemptions. Such sales, if required, could result in
a sale of Securities by the Trustee at a loss. To the extent Securities are
sold, the size and diversity of the Trust will be reduced. The Securities to
be sold will be selected by the Trustee in order to maintain, to the extent
practicable, the proportionate relationship among the number of shares of each
Stock. Provision is made in the Indenture under which the Sponsor may, but
need not, specify minimum amounts in which blocks of Securities are to be sold
in order to obtain the best price for the Fund. While these minimum amounts
may vary from time to time in accordance with market conditions, the Sponsor
believes that the minimum amounts which would be specified would be
approximately 100 shares for readily marketable Securities.
The Redemption Price per Unit is the pro rata share of the
Unit in the Trust determined by the Trustee on the basis of (i) the cash on
hand in the Trust or moneys in the process of being collected, (ii) the value
of the Securities in the Trust as determined by the Trustee, less (a) amounts
representing taxes or other governmental charges payable out of the Trust, (b)
the accrued expenses of the Trust and (c) cash allocated for the distribution
to Certificateholders of record as of the business day prior to the evaluation
being made. The Trustee may determine the value of the Securities in the Trust
in the following manner: if the Securities are listed on a national securities
exchange or the NASDAQ national market system, this evaluation is generally
based on the closing sale prices on that exchange or that system (unless the
Trustee deems these prices inappropriate as a basis for valuation). If the
Securities are not so listed or, if so listed and the principal market
therefor is other than on the exchange, the evaluation shall generally be
based on the closing purchase price in
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the over-the-counter market (unless the Trustee deems these prices
inappropriate as a basis for evaluation) or if there is no such closing
purchase price, then the Trustee may utilize, at the Trust's expense, an
independent evaluation service or services to ascertain the values of the
Securities. The independent evaluation service shall use any of the following
methods, or a combination thereof, which it deems appropriate: (a) on the
basis of current bid prices for comparable securities, (b) by appraising the
value of the Securities on the bid side of the market or (c) by any
combination of the above.
The Trustee is irrevocably authorized in its discretion, if
the Sponsor does not elect to purchase a Unit tendered for redemption or if
the Sponsor tenders a Unit for redemption, in lieu of redeeming such Unit, to
sell such Unit in the over-the-counter market for the account of the tendering
Certificateholder at prices which will return to the Certificateholder an
amount in cash, net after deducting brokerage commissions, transfer taxes and
other charges, equal to or in excess of the Redemption Price for such Unit.
The Trustee will pay the net proceeds of any such sale to the
Certificateholder on the day he would otherwise be entitled to receive payment
of the Redemption Price.
The Trustee reserves the right to suspend the right of
redemption and to postpone the date of payment of the Redemption Price per
Unit for any period during which the New York Stock Exchange is closed, other
than customary weekend and holiday closings, or trading on that Exchange is
restricted or during which (as determined by the Securities and Exchange
Commission) an emergency exists as a result of which disposal or evaluation of
the Bonds is not reasonably practicable, or for such other periods as the
Securities and Exchange Commission may by order permit. The Trustee and the
Sponsor are not liable to any person or in any way for any loss or damage
which may result from any such suspension or postponement.
A Certificateholder who wishes to dispose of his Units
should inquire of his bank or broker in order to determine if there is a
current secondary market price in excess of the Redemption Price.
TOTAL REINVESTMENT PLAN
Distributions of dividend income and capital gain, if any,
from the Trust are made to Certificateholders monthly. The Certificateholder
has the option, however, of either receiving his dividend check, together with
any other payments, from the Trustee or participating in a reinvestment
program offered by the Sponsor in shares of Short Term Income Fund, Inc., U.S.
Government Portfolio (the "Fund"). Participation in the reinvestment option is
conditioned on the Fund's lawful qualification for sale in the state in which
the Certificateholder is a resident.
Upon enrollment in the reinvestment option, the Trustee will
direct dividend and/or other distributions, if any, to the Fund. The Fund
seeks to maximize current income and to maintain liquidity and a stable net
asset value by investing in securities issued or guaranteed by the United
States government which have effective maturities of 397 days or less and
repurchase agreements with maturities of 397 days or less covering securities
issued or guaranteed by the United States government. For more complete
information concerning the Fund, including charges and expenses, the
Certificateholder should fill out and mail the card attached to the inside
back cover of the Prospectus. The prospectus for the Fund will be sent to
Certificateholders. The Certificateholder should read the prospectus for the
Fund carefully before deciding to participate.
TRUST ADMINISTRATION
Portfolio Supervision. The Trust is a unit investment trust
and is not a 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 Portfolio of the
Trust, however, is not managed and therefore the adverse financial condition
of an issuer will not necessarily require
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the sale of its Securities from the Portfolio. However, the Sponsor may direct
the disposition of Securities upon the occurrence of certain events including:
1. default in payment of amounts due on any of the Securities;
2. institution of certain legal proceedings;
3. default under certain documents materially and adversely
affecting future declaration or payment of amounts due or expected; or
4. decline in price as a direct result of serious adverse
credit factors affecting the issuer of a Security which, in the opinion of the
Sponsor, would make the retention of the Security detrimental to the Trust or
the Certificateholders.
If a default in the payment of amounts due on any Security
occurs and if the Sponsor fails to give immediate instructions to sell or hold
that Security, the Trust Agreement provides that the Trustee, within 30 days
of that failure by the Sponsor, may sell the Security.
The Trust Agreement provides that it is the responsibility
of the Sponsor to instruct the Trustee to reject any offer made by an issuer
of any of the Securities to issue new securities in exchange and substitution
for any Security pursuant to a recapitalization or reorganization, except that
the Sponsor may instruct the Trustee to accept such an offer or to take any
other action with respect thereto as the Sponsor may deem proper if the issuer
failed to declare or pay, amounts owed with respect thereto.
The Trust Agreement also authorizes the Sponsor to increase
the size and number of Units of the Trust by the deposit of Additional
Securities, contracts to purchase Additional Securities or cash or a letter of
credit with instructions to purchase Additional Securities in exchange for the
corresponding number of additional Units within 90 days subsequent to the
initial Date of Deposit, provided that the original proportionate relationship
among the number of shares of each Security established on the Initial Date of
Deposit is maintained to the extent practicable. Deposits of Additional
Securities in the Trust subsequent to the 90-day period following the initial
Date of Deposit must replicate exactly the proportionate relationship among
the shares of each Security in the Trust portfolio at the end of the initial
90-day period.
With respect to deposits of Additional Securities (or cash
or a letter of credit with instructions to purchase Additional Securities), in
connection with creating additional Units of the Trust, the Sponsor may
specify the minimum numbers in which Additional Securities will be deposited
or purchased. If a deposit is not sufficient to acquire minimum amounts of
each Security, Additional Securities may be acquired in the order of the
Security most under-represented immediately before the deposit when compared
to the original proportionate relationship. If Securities of an issue
originally deposited are unavailable at the time of the subsequent deposit,
the Sponsor may (1) deposit cash or a letter of credit with instructions to
purchase the Security when it becomes available, or (2) deposit (or instruct
the Trustee to purchase) either Securities of one or more other issues
originally deposited or a Substitute Security.
Trust Agreement and Amendment
The Trust Agreement may be amended by the Trustee and the
Sponsor without the consent of any of the Certificateholders: (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 other provisions in regard to matters arising thereunder as
shall not adversely affect the interests of the Certificateholders.
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The Trust Agreement may also be amended in any respect, or
performance of any of the provisions thereof may be waived, with the consent
of the holders of Certificates evidencing 66 2/3% of the Units then
outstanding for the purpose of modifying the rights of Certificateholders;
provided that no such amendment or waiver shall reduce any Certificateholder's
interest in the Trust without his consent or reduce the percentage of Units
required to consent to any such amendment or waiver without the consent of the
holders of all Certificates. The Trust Agreement may not be amended, without
the consent of the holders of all Certificates in the Trust then outstanding,
to increase the number of Units issuable or to permit the acquisition of any
Securities in addition to or in substitution for those initially deposited in
such Trust, except in accordance with the provisions of the Trust Agreement.
The Trustee shall promptly notify Certificateholders, in writing, of the
substance of any such amendment.
Trust Termination
The Trust Agreement provides that the Trust shall terminate
upon the maturity, redemption or other disposition, as the case may be, of the
last of the Securities held in such Trust but in no event is it to continue
beyond the Mandatory Termination Date. If the value of the Trust shall be less
than the minimum amount set forth under "Summary of Essential Information" in
Part A, the Trustee may, in its discretion, and shall, when so directed by the
Sponsor, terminate the Trust. The Trust may also be terminated at any time
with the consent of the holders of Certificates representing 100% of the Units
then outstanding. The Trustee may utilize the services of the Sponsor for the
sale of all or a portion of the Securities in the Trust. The Sponsor will
receive brokerage commissions from the Trust in connection with such sales in
accordance with applicable law. In the event of termination, written notice
thereof will be sent by the Trustee to all Certificateholders. Such notice
will provide Certificateholders with three options by which to receive their
pro rata share of the net asset value of the Trust.
1. A Certificateholder who owns units in the aggregate of at
least $25,000 in value and who so elects by notifying the Trustee prior to the
commencement of the Liquidation Period by returning a properly completed
election request (to be supplied to Certificateholders at least 20 days prior
to such date) (see Part A--"Summary of Essential Information" for the date of
the commencement of the Liquidation Period) and whose interest in the Trust
entitles him to receive at least one share of each underlying Security will
have his Units redeemed on commencement of the Liquidation Period by
distribution of the Certificateholder's pro rata share of the net asset value
of the Trust on such date distributed in kind to the extent represented by
whole shares of underlying Securities and the balance in cash within 7
calendar days next following the commencement of the Liquidation Period.
Certificateholders subsequently selling such distributed Securities will incur
brokerage costs when disposing of such Securities.
A Certificateholder may also elect prior to the Mandatory
Termination Date by so specifying in a properly completed election request,
the following two options with regard to the termination distribution of such
Certificateholder's interest in the Trust as set forth below:
2. to receive in cash such Certificateholder's pro rata
share of the net asset value of the Trust derived from the sale by the Sponsor
as the agent of the Trustee of the underlying Securities over a period not to
exceed 60 business days immediately following the commencement of the
Liquidation Period. The Certificateholder's Redemption Price per Unit on the
settlement date of the last trade of a Security in the Trust will be
distributed to such Certificateholder within 7 days of the settlement of the
trade of the last Security to be sold; and/or
3. upon the receipt by the Trust of an appropriate exemptive
order from the Securities and Exchange Commission, to invest such
Certificateholder's pro rata share of the net asset value of the Trust derived
from the sale by the Sponsor as agent of the Trustee of the underlying
Securities over a period not to exceed 60 business days immediately following
the commencement of the Liquidation Period, in units of any available series
of Equity Securities Trust, Signature Series (the "New Series"). The Units of
a New Series will
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be purchased by the Certificateholder within 7 days of the settlement of the
trade for the last Security to be sold. Such purchaser will be entitled to a
reduced sales load of 2.5% of the Public Offering Price upon the purchase of
units of the New Series. It is expected that the terms of the New Series will
be substantially the same as the terms of the Trust described in this
Prospectus, and that similar options with respect to the termination of such
New Series will be available. The availability of this option does not
constitute a solicitation of an offer to purchase Units of a New Series or any
other security. A Certificateholder's election to participate in this option
will be treated as an indication of interest only. At any time prior to the
purchase by the Certificateholder of units of a New Series such
Certificateholder may change his investment strategy and receive, in cash, the
proceeds of the sale of the Securities.
The Sponsor has agreed to effect the sales of underlying
securities for the Trustee in the case of the second and third options over a
period not to exceed 60 business days immediately following the commencement
of the Liquidation Period free of brokerage commissions. The Sponsor, on
behalf of the Trustee, will sell, unless prevented by unusual and unforeseen
circumstances, such as, among other reasons, a suspension in trading of a
Security, the close of a stock exchange, outbreak of hostilities and collapse
of the economy, on each business day during the 60 business day period at
least a number of shares of each Security which then remains in the portfolio
(based on the number of shares of each issue in the portfolio) multiplied by a
fraction the numerator of which is one and the denominator of which is the
number of days remaining in the 60 business day sales period. The Redemption
Price Per Unit upon the settlement of the last sale of Securities during the
60 business day period will be distributed to Certificateholders in redemption
of such Certificateholders' interest in the Trust.
Depending on the amount of proceeds to be invested in Units
of the New Series and the amount of other orders for Units in the New Series,
the Sponsor may purchase a large amount of securities for the New Series in a
short period of time. The Sponsor's buying of securities may tend to raise the
market prices of these securities. The actual market impact of the Sponsor's
purchases, however, is currently unpredictable because the actual amount of
securities to be purchased and the supply and price of those securities is
unknown. A similar problem may occur in connection with the sale of Securities
during the 60 business day period immediately following the commencement of
the Liquidation Period; depending on the number of sales required, the prices
of and demand for Securities, such sales may tend to depress the market prices
and thus reduce the proceeds of such sales. The Sponsor believes that the sale
of underlying Securities over a 60 business day period as described above is
in the best interest of a Certificateholder and may mitigate the negative
market price consequences stemming from the trading of large amounts of
Securities. The Securities may be sold in fewer than 60 days if, in the
Sponsor's judgment, such sales are in the best interest of Certificateholders.
The Sponsor, in implementing such sales of securities on behalf of the
Trustee, will seek to maximize the sales proceeds and will act in the best
interests of the Certificateholders. There can be no assurance, however, that
any adverse price consequences of heavy trading will be mitigated.
Certificateholders who do not make any election will be
deemed to have elected to receive the Redemption Price per Unit in cash
(option number 2).
It should also be noted that Certificateholders will realize
taxable capital gains or losses on the liquidation of the Securities
representing their Units for cash or a New Series, but, due to the procedures
for investing in the New Series, no cash would be distributed at that time to
pay any taxes.
The Sponsor may for any reason, in its sole discretion,
decide not to sponsor any subsequent series of the Trust, without penalty or
incurring liability to any Certificateholder. If the Sponsor so decides, the
Sponsor will notify the Trustee of that decision, and the Trustee will notify
the Certificateholders before the Termination Date. All Certificateholders
will then elect either option 1 or option 2.
By electing to reinvest in the New Series, the
Certificateholder indicates his interest in having his terminating
distribution from the Trust invested only in the New Series created following
termination of the
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Trust; the Sponsor expects, however, that a similar reinvestment program will
be offered with respect to all subsequent series of the Trust, thus giving
Certificateholders a yearly opportunity to elect to "rollover" their
terminating distributions into a New Series. The availability of the
reinvestment privilege does not constitute a solicitation of offers to
purchase units of a New Series or any other security. A Certificateholder's
election to participate in the reinvestment program will be treated as an
indication of interest only. The Sponsor intends to coordinate the date of
deposit of a future series so that the terminating trust will terminate
contemporaneously with the creating of a New Series.
The Sponsors reserve the right to modify, suspend or
terminate the reinvestment privilege at any time.
The Sponsor
The Sponsor, Bear, Stearns & Co. Inc., a Delaware
corporation, is engaged in the underwriting, investment banking and brokerage
business and is a member of the National Association of Securities Dealers,
Inc. and all principal securities and commodities exchanges, including the New
York Stock Exchange, the American Stock Exchange, the Midwest Stock Exchange
and the Pacific Stock Exchange. Bear Stearns maintains its principal business
offices at 245 Park Avenue, New York, New York 10167 and, since its
reorganization from a partnership to a corporation in October, 1985 has been a
wholly-owned subsidiary of The Bear Stearns Companies Inc. Bear Stearns,
through its predecessor entities, has been engaged in the investment banking
and brokerage business since 1923. Bear Stearns is the sponsor for numerous
series of unit investment trusts, including, A Corporate Trust, Series 1 (and
Subsequent Series), New York Municipal Trust, Series 1 (and Subsequent
Series), Municipal Securities Trust, Series 1 (and Subsequent Series), 1st
Discount Series (and Subsequent Series), Multi-State Series 1 (and Subsequent
Series), High Income Series 1 (and Subsequent Series), Equity Securities
Trust, Series 1 (and Subsequent Series), Mortgage Securities Trust, Series 1
(and Subsequent Series) and Insured Municipal Securities Trust, Series 1 (and
Subsequent Series) and 5th Discount Series (and Subsequent Series).
The information included herein is only for the purpose of
informing investors as to the financial responsibility of the Sponsor and its
ability to carry out its contractual obligations.
The Sponsor will be under no liability to Certificateholders
for taking any action, or refraining from taking any action, in good faith
pursuant to the Trust Agreement, or for errors in judgment except in cases of
its own willful misfeasance, bad faith, gross negligence or reckless disregard
of its obligations and duties.
The Sponsor may resign at any time by delivering to the
Trustee an instrument of resignation executed by the Sponsor.
If at any time the Sponsor shall resign or fail to perform
any of its duties under the Trust Agreement or becomes incapable of acting or
becomes bankrupt or its affairs are taken over by public authorities, then the
Trustee may either (a) appoint a successor Sponsor; (b) terminate the Trust
Agreement and liquidate the Trust; or (c) continue to act as Trustee without
terminating the Trust Agreement. Any successor Sponsor appointed by the
Trustee shall be satisfactory to the Trustee and, at the time of appointment,
shall have a net worth of at least $1,000,000.
The Trustee
The Trustee is United States Trust Company of New York, with
its principal place of business at 770 Broadway, New York, New York 10003.
United States Trust Company of New York has, since its establishment in 1853,
engaged primarily in the management of trust and agency accounts for
individuals and corporations. The Trustee is a member of the New York Clearing
House Association and is subject to
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supervision and examination by the Superintendent of Banks of the State of New
York, the Federal Deposit Insurance Corporation and the Board of Governors of
the Federal Reserve System.
The Trustee shall not be liable or responsible in any way
for taking any action, or for refraining from taking any action, in good faith
pursuant to the Trust Agreement, or for errors in judgment; or for any
disposition of any moneys, Securities or Certificates in accordance with the
Trust Agreement, except in cases of its own willful misfeasance, bad faith,
gross negligence or reckless disregard of its obligations and duties;
provided, however, that the Trustee shall not in any event be liable or
responsible for any evaluation made by any independent evaluation service
employed by it. In addition, the Trustee shall not be liable for any taxes or
other governmental charges imposed upon or in respect of the Securities or the
Trust which it may be required to pay under current or future law of the
United States or any other taxing authority having jurisdiction. The Trustee
shall not be liable for depreciation or loss incurred by reason of the sale by
the Trustee of any of the Securities pursuant to the Trust Agreement.
For further information relating to the responsibilities of
the Trustee under the Trust Agreement, reference is made to the material set
forth under "Rights of Certificateholders."
The Trustee may resign by executing an instrument in writing
and filing the same with the Sponsor, and mailing a copy of a notice of
resignation to all Certificateholders. In such an event the Sponsor is
obligated to appoint a successor Trustee as soon as possible. In addition, if
the Trustee becomes incapable of acting or becomes bankrupt or its affairs are
taken over by public authorities, the Sponsor may remove the Trustee and
appoint a successor as provided in the Trust Agreement. Notice of such removal
and appointment shall be mailed to each Certificateholder by the Sponsor. If
upon resignation of the Trustee no successor 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 resignation or removal of the Trustee becomes effective only
when the successor Trustee accepts its appointment as such or when a court of
competent jurisdiction appoints a successor Trustee. 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.
Any corporation into which the Trustee may be merged or with
which it may be consolidated, or any corporation resulting from any merger or
consolidation to which the Trustee shall be a party, shall be the successor
Trustee. The Trustee must always be a banking corporation organized under the
laws of the United States or any State and have at all times an aggregate
capital, surplus and undivided profits of not less than $2,500,000.
The Portfolio Consultant. The Portfolio Consultant is Reich
& Tang Asset Management L.P. (formerly New England Investment Companies, L.P.,
("NEICLP")), a Delaware limited partnership with its principal office at 600
Fifth Avenue, New York, New York 10020. The Portfolio Consultant was at
January 31, 1995 manager, adviser or supervisor with respect to assets
aggregating in excess of $8.6 billion. The Portfolio Consultant acts as
manager or administrator of eighteen registered investment companies and also
advises pension trusts, profit-sharing trusts and endowments.
NEICLP is the limited partner and owner of a 99.5% interest
in the newly created limited partnership, Reich & Tang Asset Management L.P.
Reich & Tang Asset Management, Inc. (a wholly-owned subsidiary of NEICLP) is
the general partner and owner of the remaining .5% interest of the Portfolio
Consultant. New England Investment Companies, Inc. ("NEIC"), a Massachusetts
corporation, serves as the sole general partner of NEICLP. The New England
Mutual Life Insurance Company ("The New England") owns approximately 68.1% of
the total partnership units outstanding of NEICLP, and Reich & Tang, Inc.,
owns approximately 22.8% of the outstanding partnership units of NEICLP. In
addition, NEIC is a wholly-owned subsidiary of The New England. NEIC is a
holding company offering a broad array of investment styles across a wide
range of asset categories through eight investment advisory/management
affiliates and three distribution
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subsidiaries which include, in addition to the Portfolio Consultant, Loomis,
Sayles & Company, L.P.; Copley Real Estate Advisors, Inc; Back Bay Advisors,
L.P.; Marlborough Capital Advisors, L.P.; Westpeak Investment Advisors, L.P.;
Draycott Partners, Ltd.; TNE Investment Services, L.P.; New England Investment
Associates, Inc.; and an affiliate, Capital Growth Management Limited
Partnership. These affiliates in the aggregate are investment advisors or
managers to 57 other registered investment companies.
The Portfolio Consultant is not a Sponsor of the Trust. The
Portfolio Consultant has been retained by the Sponsor, at its expense, to
utilize its equity expertise in selecting the Securities deposited in the
Trust. The Portfolio Consultant's only responsibility with respect to the
Trust, in addition to its role in Portfolio selection, is to monitor the
Securities of the Portfolio and make recommendations to the Sponsors regarding
the disposition of the Securities held by the Trust. The responsibility of
monitoring the Securities of the Portfolio means that if the Portfolio
Consultant's views materially change regarding the appropriateness of an
investment in any Security then held in the Trust based upon the investment
objectives, guidelines, term, parameters, policies and restrictions supplied
to the Portfolio Consultant by the Sponsor, the Portfolio Consultant will
notify the Sponsor of such change to the extent consistent with applicable
legal requirements. The Sponsor is not obligated to adhere to the
recommendations of the Portfolio Consultant regarding the disposition of
Securities. The Sponsor has the sole authority to direct the Trustee to
dispose of Securities under the Trust Agreement. The Portfolio Consultant has
no other responsibilities or obligations to the Trust or the
Certificateholders. Investors should be aware that the Portfolio Consultant,
with its affiliates, is an investment adviser for managed investment companies
and managed private accounts that may have similar or different investment
objectives than the Trust. Some of the Securities in the Trust may also be
owned by these other clients of the Portfolio Consultant and its affiliates.
However, because these clients have "managed" portfolios and may have
differing investment objectives, the Portfolio Consultant may sell certain
Securities for those accounts in instances where a sale of the Trust would be
impermissible, such as to maximize return by taking advantage of market
fluctuations.
The Portfolio Consultant may resign or may be removed by the
Sponsor at any time on sixty days' prior notice. The Sponsor shall use its
best efforts to appoint a satisfactory successor. Such resignation or removal
shall become effective upon the acceptance of appointment by the successor
Portfolio Consultant. If upon resignation of the Portfolio Consultant no
successor has accepted appointment within sixty days after notice of
resignation, the Sponsor has agreed to perform this function.
Evaluation of the Trust. The value of the Securities in the
Trust portfolio is determined in good faith by the Trustee on the basis set
forth under "Public Offering--Offering Price." The Sponsor and the
Certificateholders may rely on any evaluation furnished by the Trustee and
shall have no responsibility for the accuracy thereof. Determinations by the
Trustee under the Trust Agreement shall be made in good faith upon the basis
of the best information available to it, provided, however, that the Trustee
shall be under no liability to the Sponsor or Certificateholders for errors in
judgment, except in cases of its own willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations and duties. The Trustee,
the Sponsor and the Certificateholders may rely on any evaluation furnished to
the Trustee by an independent evaluation service and shall have no
responsibility for the accuracy thereof.
TRUST EXPENSES AND CHARGES
At no cost to the Trust, the Sponsor has borne all the
expenses of creating and establishing the Trust, including the cost of initial
preparation and execution of the Trust Agreement, registration of the Trust
and the Units under the Investment Company Act of 1940 and the Securities Act
of 1933, the initial preparation and printing of the Certificates, legal
expenses, advertising and selling expenses, expenses of the Trustee, initial
fees and other out-of-pocket expenses.
The Sponsor will not charge the Trust a fee for their services
as such. (See "Sponsor's and Underwriters" Profits.")
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The Sponsor will receive for portfolio supervisory services
to the Trust an Annual Fee in the amount set forth under "Summary of Essential
Information" in Part A. The Sponsor's fee may exceed the actual cost of
providing portfolio supervisory services for the Trust, but at no time will
the total amount received for portfolio supervisory services rendered to all
series of the Equity Securities Trust in any calendar year exceed the
aggregate cost to the Sponsor of supplying such services in such year. (See
"Portfolio Supervision.")
The Trustee will receive, for its ordinary recurring
services to the Trust an annual fee in the amount set forth under "Summary of
Essential Information" in Part A. For a discussion of the services performed
by the Trustee pursuant to its obligations under the Trust Agreement, see
"Trust Administration" and "Rights of Certificateholders".
The Trustee's fees applicable to a Trust are payable monthly
as of the Record Date from the Income Account of the Trust to the extent funds
are available and then from the Principal Account. Both fees may be increased
without approval of the Certificateholders by amounts not exceeding
proportionate increases in consumer prices for services as measured by the
United States Department of Labor's Consumer Price Index entitled "All
Services Less Rent."
The following additional charges are or may be incurred by
the Trust: all expenses (including counsel fees) of the Trustee incurred and
advances made in connection with its activities under the Trust Agreement,
including the expenses and costs of any action undertaken by the Trustee to
protect the Trust and the rights and interests of the Certificateholders; fees
of the Trustee for any extraordinary services performed under the Trust
Agreement; indemnification of the Trustee for any loss or liability accruing
to it without gross negligence, bad faith or willful misconduct on its part,
arising out of or in connection with its acceptance or administration of the
Trust; indemnification of the Sponsor for any losses, liabilities and expenses
incurred in acting as sponsors of the Trust without gross negligence, bad
faith or willful misconduct on its part; and all taxes and other governmental
charges imposed upon the Securities or any part of the Trust (no such taxes or
charges are being levied, made or, to the knowledge of the Sponsor,
contemplated). The above expenses, including the Trustee's fees, when paid by
or owing to the Trustee are secured by a first lien on the Trust to which such
expenses are charged. In addition, the Trustee is empowered to sell the
Securities in order to make funds available to pay all expenses.
The accounts of the Trust shall be audited not less than
annually by independent public accountants selected by the Sponsor. The
expenses of the audit shall be an expense of the Trust. So long as the Sponsor
maintains a secondary market, the Sponsor will bear any audit expense which
exceeds $.50 Cents per Unit. Certificateholders covered by the audit during
the year may receive a copy of the audited financials upon request.
EXCHANGE PRIVILEGE AND CONVERSION OFFER
Exchange Privilege. Certificateholders will be able to elect
to exchange any or all of their Units of this Trust for Units of one or more
of any available series of Equity Securities Trust, Insured Municipal
Securities Trust, Municipal Securities Trust, New York Municipal Trust,
Mortgage Securities Trust or A Corporate Trust (the "Exchange Trusts") at a
reduced sales charge as set forth below. Under the Exchange Privilege, the
Sponsor's repurchase price during the initial offering period of the Units
being surrendered will be based on the market value of the Securities in the
Trust portfolio or on the aggregate offer price of the Bonds in the other
Trust Portfolios; and, after the initial offering period has been completed,
will be based on the aggregate bid price of the Bonds in the particular Trust
portfolio. Units in an Exchange Trust then will be sold to the
Certificateholder at a price based on the aggregate offer price of the Bonds
in the Exchange Trust portfolio during the initial public offering period of
the Exchange Trust; or, based on the aggregate bid
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price of the Bonds in the Exchange Trust Portfolio if its initial offering has
been completed plus accrued interest and a reduced sales charge as set forth
below.
Except for unitholders who wish to exercise the Exchange
Privilege within the first five months of their purchase of Units of the
Trust, the sales charge applicable to the purchase of units of an Exchange
Trust shall be approximately 1.5% of the price of each Exchange Trust unit (or
1,000 Units for the Mortgage Securities Trust or 100 Units for the Equity
Securities Trust). For unitholders who wish to exercise the Exchange Privilege
within the first five months of their purchase of Units of the Trust, the
sales charge applicable to the purchase of units of an Exchange Trust shall be
the greater of (i) approximately 1.5% of the price of each Exchange Trust unit
(or 1,000 Units for the Mortgage Securities Trust or 100 Units for the Equity
Securities Trust), or (ii) an amount which when coupled with the sales charge
paid by the unitholder upon his original purchase of Units of the Trust at
least equals the sales charge applicable in the direct purchase of units of an
Exchange Trust. The Exchange Privilege is subject to the following conditions:
1. The Sponsor must be maintaining a secondary market in
both the Units of the Trust held by the Certificateholder and the Units of the
available Exchange Trust. While the Sponsor has indicated their intention to
maintain a market in the Units of all Trusts sponsored by it, the Sponsor is
under no obligation to continue to maintain a secondary market and therefore
there is no assurance that the Exchange Privilege will be available to a
Certificateholder at any specific time in the future. At the time of the
Certificateholder's election to participate in the Exchange Privilege, there
also must be Units of the Exchange Trust available for sale, either under the
initial primary distribution or in the Sponsor's secondary market.
2. Exchanges will be effected in whole units only. Any
excess proceeds from the Units surrendered for exchange will be remitted and
the selling Certificateholder will not be permitted to advance any new funds
in order to complete an exchange. Units of the Mortgage Securities Trust may
only be acquired in blocks of 1,000 Units. Units of the Equity Securities
Trust may only be acquired in blocks of 100 Units.
3. The Sponsor reserves the right to suspend, modify or
terminate the Exchange Privilege. The Sponsor will provide unitholders of the
Trust with 60 days prior written notice of any termination or material
amendment to the Exchange Privilege, provided that, no notice need be given if
(i) the only material effect of an amendment is to reduce or eliminate the
sales charge payable at the time of the exchange, to add one or more series of
the Trust eligible for the Exchange Privilege or to delete a series which has
been terminated from eligibility for the Exchange Privilege, (ii) there is a
suspension of the redemption of units of an Exchange Trust under Section 22(e)
of the Investment Company Act of 1940, or (iii) an Exchange Trust temporarily
delays or ceases the sale of its units because it is unable to invest amounts
effectively in accordance with its investment objectives, policies and
restrictions. During the 60 day notice period prior to the termination or
material amendment of the Exchange Privilege described above, the Sponsor will
continue to maintain a secondary market in the units of all Exchange Trusts
that could be acquired by the affected unitholders. Unitholders may, during
this 60 day period, exercise the Exchange Privilege in accordance with its
terms then in effect. In the event the Exchange Privilege is not available to
a Certificateholder at the time he wishes to exercise it, the
Certificateholder will immediately be notified and no action will be taken
with respect to his Units without further instructions from the
Certificateholder.
To exercise the Exchange Privilege, a Certificateholder
should notify the Sponsor of his desire to exercise his Exchange Privilege. If
Units of a designated, outstanding series of an Exchange Trust are at the time
available for sale and such Units may lawfully be sold in the state in which
the Certificateholder is a resident, the Certificateholder will be provided
with a current prospectus or prospectuses relating to each Exchange Trust in
which he indicates an interest. He may then select the Trust or Trusts into
which he desires to invest the proceeds from his sale of Units. The exchange
transaction will operate in a manner essentially identical to a secondary
market transaction except that units may be purchased at a reduced sales
charge.
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Example: Assume that after the initial public offering has been completed, a
Certificateholder has five units of a Trust with a current value of $700 per
unit which he has held for more than 5 months and the Certificateholder wishes
to exchange the proceeds for units of a secondary market Exchange Trust with a
current price of $725 per unit. The proceeds from the Certificateholder's
original units will aggregate $3,500. Since only whole units of an Exchange
Trust may be purchased under the Exchange Privilege, the Certificateholder
would be able to acquire four units (or 4,000 Units of the Mortgage Securities
Trust or 400 Units of the Equity Securities Trust) for a total cost of
$2,943.50 ($2,900 for units and $43.50 for the sales charge). The remaining
$556.50 would be remitted to the Certificateholder in cash. If the
Certificateholder acquired the same number of units at the same time in a
regular secondary market transaction, the price would have been $3,059.50
($2,900 for units and $159.50 for the sales charge, assuming a 5 1/2% sales
charge times the public offering price).
The Conversion Offer. Unit owners of any registered unit
investment trust for which there is no active secondary market in the units of
such trust (a "Redemption Trust") will be able to elect to redeem such units
and apply the proceeds of the redemption to the purchase of available Units of
one or more series of Equity Securities Trust, A Corporate Trust, Municipal
Securities Trust, Insured Municipal Securities Trust, Mortgage Securities
Trust or New York Municipal Trust (the "Conversion Trusts") at the Public
Offering Price for units of the Conversion Trust based on a reduced sales
charge as set forth below. Under the Conversion Offer, units of the Redemption
Trust must be tendered to the trustee of such trust for redemption at the
redemption price, which is based upon the market value of the underlying
securities in the Trust portfolio or the aggregate bid side evaluation of the
underlying bonds in other Trust portfolios and is generally about 1 1/2% to 2%
lower than the offering price for such bonds. The purchase price of the units
will be based on the aggregate offer price of the underlying bonds in the
Conversion Trust portfolio during its initial offering period; or, at a price
based on the aggregate bid price of the underlying bonds if the initial public
offering of the Conversion Trust has been completed, plus accrued interest and
a sales charge as set forth below.
Except for unitholders who wish to exercise the Conversion
Offer within the first five months of their purchase of units of a Redemption
Trust, the sales charge applicable to the purchase of Units of the Conversion
Trust shall be approximately 1.5% of the price of each Unit (or per 1,000
Units for the Mortgage Securities Trust or 100 Units for the Equity Securities
Trust) For unitholders who wish to exercise the Conversion Offer within the
first five months of their purchase of units of a Redemption Trust, the sales
charge applicable to the purchase of Units of a Conversion Trust shall be the
greater of (i) approximately 1.5% of the price of each Unit (or per 1,000
Units for the Mortgage Securities Trust or 100 Units for the Equity Securities
Trust) or (ii) an amount which when coupled with the sales charge paid by the
unitholder upon his original purchase of units of the Redemption Trust at
least equals the sales charge applicable in the direct purchase of Units of a
Conversion Trust. The Conversion Offer is subject to the following
limitations:
1. The Conversion Offer is limited only to unit owners of
any Redemption Trust, defined as a unit investment trust for which there is no
active secondary market at the time the Certificateholder elects to
participate in the Conversion Offer. At the time of the unit owner's election
to participate in the Conversion Offer, there also must be available units of
a Conversion Trust, either under a primary distribution or in the Sponsor's
secondary market.
2. Exchanges under the Conversion Offer will be effected in
whole units only. Unit owners will not be permitted to advance any new funds
in order to complete an exchange under the Conversion Offer. Any excess
proceeds from units being redeemed will be returned to the unit owner. Units
of the Mortgage Securities Trust may only be acquired in blocks of 1,000
units. Units of the Equity Securities Trust may only be acquired in blocks of
100 Units.
3. The Sponsors reserve the right to modify, suspend or
terminate the Conversion Offer at any time without notice to unit owners of
Redemption Trusts. In the event the Conversion Offer is not available
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to a unit owner at the time he wishes to exercise it, the unit owner will be
notified immediately and no action will be taken with respect to his units
without further instruction from the unit owner. The Sponsors also reserve the
right to raise the sales charge based on actual increases in the Sponsors'
costs and expenses in connection with administering the program, up to a
maximum sales charge of 2% per unit (or per 1,000 units for the Mortgage
Securities Trust or 100 Units for the Equity Securities Trust).
To exercise the Conversion Offer, a unit owner of a
Redemption Trust should notify his retail broker of his desire to redeem his
Redemption Trust Units and use the proceeds from the redemption to purchase
Units of one or more of the Conversion Trusts. If Units of a designated,
outstanding series of a Conversion Trust are at that time available for sale
and if such Units may lawfully be sold in the state in which the unit owner is
a resident, the unit owner will be provided with a current prospectus or
prospectuses relating to each Conversion Trust in which he indicates an
interest. He then may select the Trust or Trusts into which he decides to
invest the proceeds from the sale of his Units. The transaction will be
handled entirely through the unit owner's retail broker. The retail broker
must tender the units to the trustee of the Redemption Trust for redemption
and then apply the proceeds to the redemption toward the purchase of units of
a Conversion Trust at a price based on the aggregate offer or bid side
evaluation per Unit of the Conversion Trust, depending on which price is
applicable, plus accrued interest and the applicable sales charge. The
certificates must be surrendered to the broker at the time the redemption
order is placed and the broker must specify to the Sponsor that the purchase
of Conversion Trust Units is being made pursuant to the Conversion Offer. The
unit owner's broker will be entitled to retain $5 of the applicable sales
charge.
Example: Assume a unit owner has five units of a Redemption Trust which has
held for more than 5 months with a current redemption price of $675 per unit
based on the aggregate bid price of the underlying bonds and the unit owner
wishes to participate in the Conversion Offer and exchange the proceeds for
units of a secondary market Conversion Trust with a current price of $750 per
Unit. The proceeds for the unit owner's redemption of units will aggregate
$3,375. Since only whole units of a Redemption Trust may be purchased under
the Conversion Offer, the unit owner will be able to acquire four units of the
Conversion Trust (or 4,000 units of the Mortgage Securities Trust or 400 Units
of the Equity Securities Trust) for a total cost of $3,045 ($3,000 for units
and $45 for the sales charge). The remaining $330 would be remitted to the
unit owner in cash. If the unit owner acquired the same number of Conversion
Trust units at the same time in a regular secondary market transaction, the
price would have been $3,165 ($3,000 for units and $165 sales charge, assuming
a 5 1/2% sales charge times the public offering price).
Description of the Exchange Trusts and the Conversion
Trusts. A Corporate Trust may be an appropriate investment vehicle for an
investor who is more interested in a higher current return on his investment
(although taxable) than a tax-exempt return (resulting from the fact that the
current return from taxable fixed income securities is normally higher than
that available from tax-exempt fixed income securities). Municipal Securities
Trust and New York Municipal Trust may be appropriate investment vehicles for
an investor who is more interested in tax-exempt income. The interest income
from New York Municipal Trust is, in general, also exempt from New York State
and local New York income taxes, while the interest income from Municipal
Securities Trust is subject to applicable New York State and local New York
taxes, except for that portion of the income which is attributable to New York
obligations in the Trust portfolio, if any. The interest income from each
State Trust of the Municipal Securities Trust, Multi-State Series is, in
general, exempt from state and local taxes when held by residents of the state
where the issuers of bonds in such State Trusts are located. The Insured
Municipal Securities Trust combines the advantages of providing interest
income free from regular federal income tax under existing law with the added
safety of irrevocable insurance. Insured Navigator Series further combines the
advantages of providing interest income free from regular federal income tax
and state and local taxes when held by residents of the state where issuers of
bonds in such State Trusts are located with the added safety of irrevocable
insurance. Mortgage Securities Trust offers an investment vehicle for
investors who are interested in obtaining safety of capital and a high level
of current distribution of interest
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176822.1
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income through investment in a fixed portfolio of collateralized mortgage
obligations. Equity Securities Trust offers investors an opportunity to
achieve capital appreciation together with a high level of current income.
Tax Consequences of the Exchange Privilege and the
Conversion Offer. A surrender of units pursuant to the Exchange Privilege or
the Conversion Offer will constitute a "taxable event" to the
Certificateholder under the Internal Revenue Code. The Certificateholder will
realize a tax gain or loss that will be of a long-or short-term capital or
ordinary income nature depending on the length of time the units have been
held and other factors. (See "Tax Status".) A Certificateholder's tax basis in
the Units acquired pursuant to the Exchange Privilege or Conversion Offer will
be equal to the purchase price of such Units. Investors should consult their
own tax advisors as to the tax consequences to them of exchanging or redeeming
units and participating in the Exchange Privilege or Conversion Offer.
OTHER MATTERS
Legal Opinions. The legality of the Units offered hereby and certain
matters relating to federal tax law have been passed upon by Messrs. Battle
Fowler LLP, 75 East 55th Street, New York, New York 10022 as counsel for the
Sponsor. Messrs. Carter, Ledyard & Milburn, Two Wall Street, New York, New
York 10005 have acted as counsel for the Trustee.
Independent Auditors. The Statement of Condition and
Portfolio are included herein in reliance upon the report of KPMG Peat Marwick
LLP, independent certified public accountants, and upon the authority of said
firm as experts in accounting and auditing.
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176822.1
<PAGE>
==============================================================================
I am the owner of ___________ units of Equity Securities Trust, Series ____
Signature Series, Reich & Tang Growth and Value Trust. I would like to learn
more about Short Term Income Fund, Inc., U.S. Government Portfolio including
charges and expenses. I understand that my request for more information about
this fund in no way obligates me to participate in the reinvestment option,
and that this request form is not an offer to sell. Please send me more
information, including a copy of the current prospectus of Short Term Income
Fund, Inc., U.S. Government Portfolio.
Date _____________________, 199___
- ---------------------------- ---------------------------------
Registered Holder (Print) Registered Holder (Print)
- ---------------------------- ---------------------------------
Registered Holder Signature Registered Holder Signature
(Two signatures if joint tenancy)
My Brokerage Firm's Name: _____________________________________________
Street Address: ________________________________________________________
City, State & Zip _______________________________________________________
Broker's Name _______________________________ Broker's No._____________
=============================================================================
MAIL TO
SHORT TERM INCOME FUND, INC.
600 Fifth Avenue
New York, New York 10020
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No person is authorized to give any information or to
make any representations not contained in Parts A and B of EST Signature Series
this Prospectus; and any information or representation not
contained herein must not be relied upon as having been _________________________________
authorized by the Trust, the Trustee or the Sponsors. The
Trust is registered as a unit investment Trust under the REICH & TANG GROWTH AND VALUE
Investment Company Act of 1940. Such registration does not TRUST
imply that the Trust or any of its Units have been guaranteed, _________________________________
sponsored, recommended or approved by the United States or
any state or any agency or officer thereof.
EQUITY SECURITIES TRUST
_________________________ SERIES 2
SIGNATURE SERIES
This Prospectus does not constitute an offer to sell, or REICH & TANG GROWTH AND VALUE
a solicitation of an offer to buy, securities in any state to any TRUST
person to whom it is not lawful to make such offer in such
state. (Unit Investment Trust)
Table of Contents Prospectus
Title Page
PART A Dated: April 28, 1995
Summary of Essential Information........................A-6 Sponsor:
Information Regarding the Trust.........................A-7
Financial and Statistical Information...................A-8
Bear, Stearns & Co. Inc.
PART B 245 Park Avenue
New York, New York 10167
The Trust............................................... 1 212-272-2500
Risk Considerations.................................... 3
Public Offering......................................... 7
Rights of Certificateholders............................ 9 Portfolio Consultant:
Tax Status............................................ 11
Liquidity............................................. 13 Reich & Tang Asset Management, L.P.
Total Reinvestment Plan............................... 15 (formerly
Trust Administration.................................. 15 New England Investment Companies, L.P.)
Trust Expenses and Charges............................ 21 600 Fifth Avenue
Exchange Privilege and New York, NY 10020
Conversion Offer.................................... 22
Other Matters......................................... 26
Trustee:
Parts A and B of this Prospectus do not contain all of
the information set forth in the registration statement and United States Trust Company
exhibits relating thereto, filed with the Securities and of New York
Exchange Commission, Washington, D.C., under the Securities Act of 770 Broadway
1933, and the Investment Company Act of 1940, and to which New York, NY 10003
reference is made.
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