As filed with the Securities and Exchange Commission on April 29, 1996
Registration No. 33-53688
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST-EFFECTIVE AMENDMENT No. 3
TO
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
A. Exact name of trust: EQUITY SECURITIES TRUST, SERIES 2, SIGNATURE SERIES,
REICH and TANG GROWTH and VALUE TRUST
B. Name of depositor: REICH & TANG DISTRIBUTORS L.P.
C. Complete address of depositor's principal executive offices:
REICH & TANG DISTRIBUTORS L.P.
600 Fifth Avenue
New York, New York 10020
D. Name and complete address of agent for service:
PETER J. DeMARCO Copy of comments to:
Executive Vice President MICHAEL R. ROSELLA, ESQ.
Reich & Tang Distributors L.P. Battle Fowler LLP
600 Fifth Avenue 75 East 55th Street
New York, NY 10020 New York, NY 10022
(212) 856-6858
It is proposed that this filing become effective (check appropriate box)
/ / immediately upon filing pursuant to paragraph (b) of Rule 485
/x/ on April 30, 1996 pursuant to pa agraph (b)
/ / 60 days after filing pursuant to paragraph (a)
/ / on ( date ) pursuant to paragraph (a) of Rule 485
175585.1
<PAGE>
EQUITY SECURITIES TRUST,
SERIES 2,
SIGNATURE SERIES,
REICH & TANG GROWTH AND VALUE TRUST
CROSS-REFERENCE SHEET
Pursuant to Rule 404 of Regulation C
under the Securities Act of 1933
(Form N-8B-2 Items required by Instruction as
to the Prospectus in Form S-6)
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
I. Organization and General Information
1. (a) Name of trust...................Front Cover of Prospectus
(b) Title of securities issued...... "
2. Name and address of each depositor..The Sponsor
3. Name and address of trustee.........The Trustee
4. Name and address of principal
underwriters......................The Sponsor
5. State of organization of trust......Organization
6. Execution and termination of
trust agreement...................Trust Agreement, Amendment and
Termination
7. Changes of name.....................Not Applicable
8. Fiscal year......................... "
9. Litigation..........................None
II. General Description of the Trust and Securities of the Trust
10. (a) Registered or bearer
securities......................Certificates
(b) Cumulative or distributive
securities......................Interest and Principal Distributions
(c) Redemption......................Trustee Redemption
(d) Conversion, transfer, etc.......Certificates, Sponsor Repurchase,
Trustee Redemption, Exchange
Privilege and Conversion Offer
(e) Periodic payment plan...........Not Applicable
(f) Voting rights...................Trust Agreement, Amendment and
Termination
(g) Notice to certificateholders....Records, Portfolio, Trust Agreement,
Amendment and Termination, The
Sponsor, The Trustee
(h) Consents required...............Trust Agreement, Amendment and
Termination
(i) Other provisions................Tax Status
11. Type of securities
comprising units..................Objectives, Portfolio, Description
of Portfolio
12. Certain information regarding
periodic payment certificates.....Not Applicable
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169254.1
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Form N-8B-2 Form S-6
Item Number Heading in Prospectus
13. (a) Load, fees, expenses, etc.......Summary of Essential Information,
Offering Price, Volume and Other
Discounts, Sponsor's and
Underwriters' Profits, Total
Reinvestment Plan, Trust Expenses
and Charges
(b) Certain information regarding
periodic payment certificates...Not Applicable
(c) Certain percentages.............Summary of Essential Information,
Offering Price, Total
Reinvestment Plan
(d) Price differences...............Volume and Other Discounts
(e) Other loads, fees, expenses.....Certificates
(f) Certain profits receivable
by depositors, principal
underwriters, trustee or
affiliated persons..............Sponsor's and Underwriters' Profits
(g) Ratio of annual charges
to income.......................Not Applicable
14. Issuance of trust's securities......Organization, Certificates
15. Receipt and handling of payments
from purchasers...................Organization
16. Acquisition and disposition of
underlying securities.............Organization, Objectives, Portfolio,
Portfolio Supervision
17. Withdrawal or redemption............Comparison of Public Offering Price,
Sponsor's Repurchase Price and
Redemption Price, Sponsor
Repurchase, Trustee Redemption
18. (a) Receipt, custody and
disposition of income...........Distribution Elections, Interest and
Principal Distributions, Records,
Total Reinvestment Plan
(b) Reinvestment of distributions...Total Reinvestment Plan
(c) Reserves or special funds.......Interest and Principal Distributions
(d) Schedule of distributions.......Not Applicable
19. Records, accounts and reports.......Records, Total Reinvestment Plan
20. Certain miscellaneous provisions
of trust agreement................Trust Agreement, Amendment and
Termination
(a) Amendment....................... "
(b) Termination..................... "
(c) and (d) Trustee, removal and
successor.......................The Trustee
(e) and (f) Depositor, removal
and successor...................The Sponsor
21. Loans to security holders...........Not Applicable
22. Limitations on liability............The Sponsor, The Trustee,
The Evaluator
23. Bonding arrangements................Part II--Item A
24. Other material provisions
of trust agreement................Not Applicable
III. Organization, Personnel and Affiliated Persons of Depositor
25. Organization of depositor..........The Sponsor
26. Fees received by depositor.........Not Applicable
27. Business of depositor..............The Sponsor
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169254.1
<PAGE>
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
28. Certain information as to
officials and affiliated
persons of depositor..............Part II--Item C
29. Voting securities of depositor......Not Applicable
30. Persons controlling depositor....... "
31. Payments by depositor for certain
services rendered to trust........ "
32. Payment by depositor for certain
other services rendered to trust.. "
33. Remuneration of employees of
depositor for certain services
rendered to trust................... "
34. Remuneration of other persons for
certain services rendered to trust.. "
IV. Distribution and Redemption of Securities
35. Distribution of trust's
securities by states..............Distribution of Units
36. Suspension of sales of
trust's securities................Not Applicable
37. Revocation of authority
to distribute..................... "
38. (a) Method of distribution..........Distribution of Units, Total
Reinvestment Plan
(b) Underwriting agreements......... "
(c) Selling agreements.............. "
39. (a) Organization of principal
underwriters....................The Sponsor
(b) N.A.S.D. membership of
principal underwriters.......... "
40. Certain fees received by
principal underwriters............Not Applicable
41. (a) Business of principal
underwriters....................The Sponsor
(b) Branch offices of principal
underwriters....................Not Applicable
(c) Salesmen of principal
underwriters.................... "
42. Ownership of trust's
securities by certain persons..... "
43. Certain brokerage commissions
received by principal
underwriters...................... "
44. (a) Method of valuation.............Summary of Essential Information,
Offering Price, Accrued Interest,
Volume and Other Discounts,
Total Reinvestment Plan,
Distribution of Units
(b) Schedule as to offering price...Not Applicable
(c) Variation in offering price
to certain persons..............Distribution of Units, Total
Reinvestment Plan, Volume and
Other Discounts
45. Suspension of redemption rights.....Trustee Redemption
46. (a) Redemption valuation............Comparison of Public Offering Price,
Sponsor's Repurchase Price and
Redemption Price, Trustee
Redemption
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169254.1
<PAGE>
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
(b) Schedule as to
redemption price................Not Applicable
47. Maintenance of position in
underlying securities.............Comparison of Public Offering Price,
Sponsor's Repurchase Price and
Redemption Price, Sponsor
Repurchase, Trustee Redemption
V. Information Concerning the Trustee or Custodian
48. Organization and regulation
of trustee........................The Trustee
49. Fees and expenses of trustee........Trust Expenses and Charges
50. Trustee's lien...................... "
VI. Information Concerning Insurance of Holders of Securities
51. Insurance of holders of
trust's securities...............Not Applicable
VII. Policy of Registrant
52. (a) Provisions of trust agreement
with respect to selection or
elimination of underlying
securities......................Objectives, Portfolio, Portfolio
Supervision
(b) Transactions involving
elimination of underlying
securities......................Not Applicable
(c) Policy regarding substitution
or elimination of underlying
securities......................Objectives, Portfolio, Portfolio
Supervision, Substitution of
Bonds
(d) Fundamental policy not
otherwise covered...............Not Applicable
53. Tax status of trust.................Tax Status
VIII. Financial and Statistical Information
54. Trust's securities during
last ten years....................Not Applicable
55. Hypothetical account for issuers
of periodic payment plans......... "
56. Certain information regarding
periodic payment certificates..... "
57. Certain information regarding
periodic payment plans............ "
58. Certain other information
regarding periodic payment plans.. "
59. Financial Statements
(Instruction 1(c) to Form S-6)......Statement of Financial Condition
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169254.1
<PAGE>
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 Reich & Tang Distributors L.P.
(successor Sponsor to Bear, Stearns & Co. Inc.). 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 "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, 1995 (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 30, 1996
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 Reich & Tang Distributors L.P.
(successor Sponsor to 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 1/269225th 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. 18, 24 and 30. 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
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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 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.
Certificateholders 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. 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-4
175962.1
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<TABLE>
EQUITY SECURITIES TRUST, SERIES 2
SIGNATURE SERIES, REICH & TANG GROWTH AND VALUE TRUST
SUMMARY OF ESSENTIAL INFORMATION AS OF DECEMBER 31, 1995
<S> <C>
Date of Deposit:* March 18, 1993 Liquidation Period: Beginning
Current Number of Shares............. 110,024 60 days prior to the Mandatory
Number of Units...................... 269,225 Termination Date.
Fractional Undivided Inter- Minimum Value of Trust: The
est in Trust....................... 1/269225 Trust may be terminated if the Trust is less
Number of Shares per 100 Units....... 40.87 than 40% of the aggregate value of the
Secondary Market Securities at the completion of the Deposit
Public Offering Price*** Period.
Aggregate Value.................... $3,830,403 Mandatory Termination Date:
Divided by # of Units The earlier of March 18, 1998 or the
(times $100)..................... $1,422.75 disposition of the last Security in the Trust.
Plus Sales Charge of 5.15% Trustee:**** The Chase Manhattan Bank, N.A.
of Public Offering Price......... $73.30 Trustee's Annual Fee: $.90 per 100 Units
Public Offering Price outstanding.
per 100 Units***................. $1,496.05 Other Annual Fees and Expenses:
Redemption & Sponsor's $.45 per 100 Units outstanding.
Repurchase Price Portfolio Consultant: Reich & Tang Asset
per 100 Units...................... $1,422.75 Management, L.P.
Excess of Secondary Market Sponsor: Reich & Tang Distributors L.P.
Public Offering Price Sponsor's Annual Supervisory Fee:
over Redemption & Sponsor's Maximum of $.25 per 100 Units outstanding
Repurchase Price per 100 Units..... $73.30 (see "Trust Expense and Charges"
in Part B).
Record date: First of each month.
Dividend distribution date: Fifteen of each
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 its principal executive office at 1 Chase
Manhattan Plaza, New York, New York 10081 and its unit investment trust
office at 770 Broadway, New York, NY 10003 (Tel. No. 1-800-882-9898).
For information regarding redemption by the Trustee, see "Trustee
Redemption" in Part B of this Prospectus.
A-5
175962.1
<PAGE>
INFORMATION REGARDING THE TRUST AS OF DECEMBER 31, 1995
Description of Portfolio
For Changes in the Trust Porfolio from January 1, 1996 to March 22, 1996 see
Schedule A on pages A-8 - A-10.
Number of Issues: 40 (40 issuers)
(NYSE 78.24%; AMEX 6.40%;
Over the Counter 15.36%)
Number of Issues by Industry:
Aerospace, 1 (3.099%);
Agribusiness, 2 (2.803%);
Automotive, 1 (1.141%);
Chemical--Specialty, 3 (10.340%);
Converted Paper Products, 2 (4.775%);
Energy, 3 (6.646%);
Financial, 2 (5.565%);
Food, 3 (9.550%);
Industrial Products, 9 (19.036%);
Industrial Services, 2 (7.315%);
Insurance, 3 (7.614%);
Media, 3 (6.884%);
Medical Supplies, 2 (9.259%);
Office Equipment & Supplies, 2 (3.047%);
Retailing, 1 (0.661%); and
Toy, 1 (2.265%)
A-6
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<TABLE>
FINANCIAL AND STATISTICAL INFORMATION
Selected data for each Unit of the Trust outstanding for the periods listed
below:
<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
December 31, 1995 269,225 1,422.00 15.02 -0-
</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-7
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<PAGE>
SCHEDULE A
Changes in the Trust Portfolio:
On March 11, 1996, 189 shares ($3,648.66) of Albany International Corp. held by
the Trust (Portfolio no. 1) were sold.
On March 11, 1996, 130 shares ($4,914.48) of Allergan Inc. held by the Trust
(Portfolio no. 2) were sold.
On March 11, 1996, 64 shares ($3,739.39) of Allied-Signal held by the Trust
(Portfolio no. 3) were sold.
On March 11, 1996, 77 shares ($3,786.73) of AMBAC Inc. held by the Trust
(Portfolio no. 4) were sold.
On March 11, 1996, 108 shares ($5,824.24) of Avery Dennison Corp. held by the
Trust (Portfolio no. 5) were sold.
On March 11, 1996, 178 shares ($14,939.04) of Becton, Dickinson & Co. held by
the Trust (Portfolio no. 6) were sold.
On March 11, 1996, 85 shares ($2,841.45) of Corning Inc. held by the Trust
(Portfolio no. 7) were sold.
On March 11, 1996, 122 shares ($4,352.81) of C.R. Bard Inc. held by the Trust
(Portfolio no. 8) were sold.
On March 11, 1996, 47 shares ($3,239.71) of DEKALB Genetics Corp. held by the
Trust (Portfolio no. 9) were sold.
On March 11, 1996, 112 shares ($2,764.06) of Dexter Corp. held by the Trust
(Portfolio no. 10) were sold.
On March 11, 1996, 89 shares ($3,954.13) of Dover Corp. held by the Trust
(Portfolio no. 11) were sold.
On March 11, 1996, 58 shares ($2,047.62) of Echlin, Inc. held by the Trust
(Portfolio no. 12) were sold.
On March 11, 1996, 286 shares ($5,878.53) of Equifax Inc. held by the Trust
(Portfolio no. 13) were sold.
On March 11, 1996, 113 shares ($3,226.61) of Equitable Resources Inc. held by
the Trust (Portfolio no. 14) were sold.
On March 11, 1996, 230 shares ($3,347.53) of Flowers Industries Inc. held by the
Trust (Portfolio no. 15) were sold.
On March 11, 1996, 136 shares ($4,784.32) of Hasbro Inc. held by the Trust
(Portfolio no. 16) were sold.
On March 11, 1996, 234 shares ($14,695.88) of Hercules Inc. held by the Trust
(Portfolio no. 17) were sold.
On March 11, 1996, 138 shares ($4,095.84) of Herman Miller Inc. held by the
Trust (Portfolio no. 18) were sold.
On March 11, 1996, 315 shares ($7,773.94) of IBP Inc. held by the Trust
(Portfolio no. 19) were sold.
On March 11, 1996, 92 shares ($5,639.87) of Kerr-McGee Corp. held by the Trust
(Portfolio no. 20) were sold.
A-8
175962.1
<PAGE>
On March 11, 1996, 188 shares ($4,005.20) of Lee Enterprises Inc. held by the
Trust (Portfolio no. 21) were sold.
On March 11, 1996, 49 shares ($1,478.77) of Lubrizol Corp. held by the Trust
(Portfolio no. 22) were sold.
On March 11, 1996, 235 shares ($7,503.30) of Marshall Industries Inc. held by
the Trust (Portfolio no. 23) were sold.
On March 11, 1996, 98 shares ($2,516.64) of Marshall & Isley Corp. held by the
Trust (Portfolio no. 24) were sold.
On March 11, 1996, 228 shares ($8,020.77) of Minerals Technologies Inc. held by
the Trust (Portfolio no. 25) were sold.
On March 11, 1996, 131 shares ($5,214.28) of Morton International Inc. held by
the Trust (Portfolio no. 26) were sold.
On March 11, 1996, 145 shares ($4,176.73) of The New York Times Inc. held by the
Trust (Portfolio no. 27) were sold.
On March 11, 1996, 141 shares ($5,136.63) of SAFECO Corp. held by the Trust
(Portfolio no. 30) were sold.
On March 11, 1996, 90 shares ($4,111.06) of Snap-on Tools Corp. held by the
Trust (Portfolio no. 31) were sold.
On March 11, 1996, 235 shares ($1,525.68) of TAB Products Co. held by the Trust
(Portfolio no. 33) were sold.
On March 11, 1996, 124 shares ($8,392.04) of Travelers Inc. held by the Trust
(Portfolio no. 35) were sold.
On March 12, 1996, 145 shares ($5,735.28) of Precision Castparts Corp. held by
the Trust (Portfolio no. 29) were sold.
On March 12, 1996, 133 shares ($3,697.94) of Sonoco Products Co. held by the
Trust (Portfolio no. 32) were sold.
On March 12, 1996, 46 shares ($2,078.21) of Teleflex Inc. held by the Trust
(Portfolio no. 34) were sold.
On March 12, 1996, 155 shares ($3,127.79) of Union Texas Petroleum Holdings Inc.
held by the Trust (Portfolio no. 36) were sold.
On March 12, 1996, 176 shares ($6,763.45) of Universal Foods Corp. held by the
Trust (Portfolio no. 37) were sold.
On March 12, 1996, 103 shares ($6,314.21) of UNUM Corp. held by the Trust
(Portfolio no. 38) were sold.
On March 12, 1996, 127 shares ($6,325.02) of Varian Associates Inc. held by the
Trust (Portfolio no. 39) were sold.
On March 12, 1996, 94 shares ($1,379.87) of Woolworth Corp. held by the Trust
(Portfolio no. 40) were sold.
A-9
175962.1
<PAGE>
On March 14, 1996, 133 shares ($3,631.44) of Sonoco Products Co. held by the
Trust (Portfolio no. 32) were sold.
On March 14, 1996, 155 shares ($3,108.42) of Union Texas Petroleum Holdings Inc.
held by the Trust (Portfolio no. 36) were sold.
On March 15, 1996, 55 shares ($3,021.05) of Pioneer Hi-Bred Interational Inc.
held by the Trust (Portfolio no. 28) were sold.
From January 1, 1996 to March 22, 1996, 256,106 Units were redeemed from the
Trust.
A-10
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, 1995, and the related statements of
operations, and changes in net assets for the years ended December 31, 1995 and
1994, and for the period from 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, 1995, 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,
1995, and the results of its operations and the changes in its net assets for
the years ended December 31, 1995 and 1994, and for the period from 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, 1996
<PAGE>
EQUITY SECURITIES TRUST SERIES 2
SIGNATURE SERIES, REICH AND TANG GROWTH AND VALUE TRUST
Statement of Net Assets
December 31, 1995
Investments in marketable securities, at market
value (cost $2,794,819) $ 3,834,547
Excess of total liabilities over other assets (7,114)
------------
Net assets (269,225 units of fractional undivided
interest outstanding $14.22 per unit $ 3,827,433
------------
------------
See accompanying notes to financial statements.
<PAGE>
<TABLE>
EQUITY SECURITIES TRUST SERIES 2,
SIGNATURE SERIES, REICH AND TANG GROWTH AND VALUE TRUST
Statements of Operations
<CAPTION>
For the Period
March 18, 1993 (date
For the Year Ended December 31, of initial deposit)
1995 1994 to December 31, 1993
------------ ------------ --- --------------- -
<S> <C> <C> <C>
Dividend Income $ 65,875 99,079 77,486
Expenses:
Trustee's fees 6,730 8,503 7,692
------------ ------------ ---------------
Investment income, net 59,145 90,576 69,794
------------ ------------ ---------------
Realized and unrealized gain on
investments:
Realized gain on securities sold 397,886 158,978 14
Unrealized appreciation
(depreciation) for the period 712,990 (105,986) 432,724
------------ ------------ ---------------
Net gain on investments 1,110,876 52,992 432,738
------------ ------------ ---------------
Net increase in net
assets resulting
from operations $ 1,170,021 143,568 502,532
============ ============ ===============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
EQUITY SECURITIES TRUST SERIES 2,
Statements of Changes in Net Assets
SIGNATURE SERIES, REICH AND TANG GROWTH AND VALUE TRUST
<CAPTION>
For the Period
March 18, 1993 (date
For the Year Ended December 31. of initial deposit)
1995 1994 to December 31, 1993
------------ ------------ --- --------------- ---
<S> <C> <C> <C>
Operations:
Investment income, net $ 59,145 90,576 69,794
Realized gain on securites sold 397,886 158,978 14
Unrealized appreciation (depreciation)
of investments for the period 712,990 (105,986) 432,724
------------ ------------ ---------------
Net increase in net
assets resulting
from operations 1,170,021 143,568 502,532
------------ ------------ ---------------
Distributions to Certificateholders:
Investment income 59,135 87,038 73,658
Principal - 9,695 2,364
Redemptions:
Investment income 129 4,105 -
Principal 959,684 1,983,744 -
------------ ------------ ---------------
Total distributions
and redemptions 1,018,948 2,084,582 76,022
------------ ------------ ---------------
Net increase (decrease) 151,073 (1,941,014) 426,510
Value of additional units
acquired during offering period - - 4,990,863
Net assets at beginning of period 3,676,360 5,617,374 200,001
------------ ------------ ---------------
Net assets at end of period (including
distributions in excess of
investment income of ($4,550),
($4,431) and ($3,864), respectively) $ 3,827,433 3,676,360 5,617,374
============ ============ ===============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
EQUITY SECURITIES TRUST SERIES 2
SIGNATURE SERIES, REICH AND TANG GROWTH AND VALUE TRUST
Notes to Financial Statements
December 31, 1995, 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. 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 from 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.
Effective September 28, 1995, Reich & Tang Distributors L.P. (Reich &
Tang) has become the successor sponsor (Sponsor) to certain of the unit
investments trusts previously sponsored by Bear, Stearns & Co. Inc. As
successor Sponsor, Reich & Tang has assumed all of the obligations and
rights of Bear Stearns & Co. Inc., the previous sponsor.
(2) Summary of Significant Accounting Policies
Effective September 2, 1995, United States Trust Company of New York was
merged into Chase Manhattan Bank (National Association) (Chase).
Accordingly, Chase is the successor trustee of the unit investment trusts.
The 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 Chase
Manhattan Bank (National Association) (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.
The preparation of financial statements in conformity with generally
accepted accounting principles requires the Trustee to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
(Continued)
F-5
<PAGE>
EQUITY SECURITIES TRUST SERIES 2
SIGNATURE SERIES, REICH AND TANG GROWTH AND VALUE TRUST
Notes to Financial Statements
(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 years ended December
31, 1995 and 1994, and the period from March 18, 1993 (date of initial
deposit) to December 31, 1993.
The Trust Indenture and Agreement also requires the Trust to redeem units
tendered. 79,570 and 192,849 units were redeemed during the years ended
December 31, 1995 and 1994, respectively. No units were redeemed during
the period from March 18, 1993 to December 31, 1993.
(5) Net Assets
At December 31, 1995, 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 (2,396,044)
Net unrealized appreciation 1,039,728
Distributions in Excess of net
investment income (4,550)
Distributions in excess of proceeds from
securities sold or called (2,565)
------
Total $ 3,827,433
==========
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).
F-6
<PAGE>
<TABLE>
EQUITY SECURITIES TRUST SERIES 2,
SIGNATURE SERIES, REICH AND TANG GROWTH AND VALUE TRUST
Portfolio
December 31, 1995
<CAPTION>
Port- Number Percentage Cost
folio of of of
No. shares Name of Issuer Fund (1) Securities Market Value
----- -------- ----------------------------------- ---------- ------------ ------------
COMMON
STOCK
<S> <C> <C> <C> <C> <C>
1 3,897 Albany International Corp. 1.842% $ 62,474 $ 70,633
2 2,668 Allergan Inc. 2.261% 61,668 86,710
3 1,319 Allied Signal 1.634% 44,485 62,653
4 1,590 AMBAC Inc. 1.944% 72,500 74,531
5 2,219 Avery Dennison Corp. 2.901% 62,686 111,227
6 3,657 Becton Dickinson & Co. 7.153% 132,404 274,275
7 1,754 Corning Inc. 1.464% 60,186 56,128
8 2,504 C.R. Bard Inc. 2.106% 59,979 80,754
9 976 Dekalb Genetics 1.149% 30,660 44,042
10 2,308 Dexter Corp. 1.422% 58,400 54,527
11 1,830 Dover Corp. 1.760% 43,532 67,481
12 1,199 Echlin, Inc. 1.141% 29,464 43,764
13 5,874 Equifax Inc. 3.274% 60,910 125,557
14 2,338 Equitable Resources Inc. 1.905% 91,498 73,063
15 4,722 Flowers Industries 1.493% 59,059 57,254
16 2,802 Hasbro Inc. 2.265% 89,155 86,862
17 4,811 Hercules Inc. 7.073% 116,243 271,220
18 2,846 Herman Miller Inc. 2.227% 68,079 85,380
19 3,237 IBP, Inc. 4.263% 59,594 163,469
20 1,889 Kerr-McGee Corp. 3.128% 92,260 119,952
21 3,868 Lee Enterprises Inc. 2.320% 61,562 88,964
22 1,021 Lubrizol Corp. 0.742% 31,177 28,460
23 4,824 Marshall Industries Inc. 4.041% 90,143 154,971
24 2,023 Marshall & Ilsley Corp. 1.372% 48,087 52,598
25 4,690 Minerals Technologies Inc. 4.464% 122,032 171,185
26 2,699 Morton International Inc. 2.525% 78,259 96,827
27 2,981 The New York Times Co. 2.303% 90,338 88,312
28 1,140 Pioneer Hi-Bred International Inc. 1.654% 30,421 63,413
29 2,990 Precision Castparts Corp. 3.099% 49,221 118,850
30 2,910 Safeco Corp. 2.618% 95,136 100,395
31 1,858 Snap-On Tools Corp. 2.193% 62,209 84,075
32 2,737 Sonoco Products Co. 1.874% 60,974 71,846
33 4,839 Tab Products Co. 0.820% 61,376 31,454
34 945 Teleflex Inc. 1.010% 30,116 38,745
35 2,557 Travelers Inc. 4.193% 89,014 160,771
36 3,192 Union Texas Petroleum Holdings Inc. 1.613% 76,543 61,845
37 3,626 Universal Foods Corp. 3.794% 125,286 145,493
38 2,128 Unum Corp. 3.052% 117,035 117,040
39 2,607 Varian Associates Inc. 3.246% 59,863 124,484
40 1,949 Woolworth Corp. 0.661% 60,791 25,337
---------- ------------ -----------
100.00% $ 2,794,819 $ 3,834,547
========== ============ ============
</TABLE>
See accompanying notes to the financial statements.
F-7
<PAGE>
EQUITY SECURITIES TRUST SERIES 2
SIGNATURE SERIES, REICH AND TANG GROWTH AND VALUE TRUST
Footnotes to Portfolio
December 31, 1995, 1994 and 1993
(1) Based on the cost of the Securities to the Trust.
F-8
<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 30, 1996
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 Reich & Tang Distributors L.P. (successor
Sponsor to Bear, Stearns & Co. Inc.), as Sponsor, and The Chase Manhattan Bank,
N.A. 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.
176822.2
<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 identifying 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
-2-
176822.2
<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 identifying 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-
176822.2
<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
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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
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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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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.
The method used for computing the sales charge for secondary market
purchases shall be based upon the number of years remaining to the Trust's
Termination Date (as defined in the Prospectus).
The table below sets forth the various sales charges for secondary
market purchases based on the number of years remaining to the Trust's
Termination Date.
As Percent of Public
Years to Termination Offering Price
less than 6 months 0%
6 months to 1 year 2.95%
over 1 yr. to 2 yrs. 3.45%
over 2 yrs. to 3 yrs. 3.90%
over 3 yrs. to 4 yrs. 4.50%
over 4 yrs. 4.90%
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:
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Number of Units Approximate Reduced Sales Charge
5,000 but less than 10,000 2.70%
10,000 but less than 25,000 2.45%
25,000 but less than 50,000 2.20%
50,000 but less than 100,000 2.00%
100,000 or more 1.75%
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 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 Reich & Tang
Distributors L.P. (and its affiliates), 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.
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Frequent Buyer Program
Any dealer, underwriter, or firm whose total combined purchases of
the Trust and other unit investment trusts sponsored by Reich & Tang
Distributors L.P. ("MST/EST Units") from Reich & Tang Distributors L.P. 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
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.
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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.
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,
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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
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.
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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 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.
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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, 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
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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 Reich & Tang Distributors
L.P., 600 Fifth Avenue, New York, New York 10020. 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. 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
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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 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
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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 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
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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.
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
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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 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
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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 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, Reich & Tang Distributors L.P. (successor to the Unit Investment
Trust Division of Bear, Stearns & Co. Inc.), a Delaware limited partnership, is
engaged in the brokerage business and is a member of the National Association of
Securities Dealers, Inc. Reich & Tang is also a registered investment adviser.
Reich & Tang maintains its principal business offices at 600 Fifth Avenue, New
York, New York 10020. Reich & Tang Asset Management L.P. ("RTAM LP"), a
registered investment adviser, having its principal place of business at 399
Boylston Street, Boston, MA 02116, is the 99% limited partner of the Sponsor.
RTAM LP is 99.5% owned by New England Investment Companies, LP ("NEIC LP") and
Reich & Tang Asset Management, Inc., a wholly owned subsidiary of NEIC LP, owns
the remaining .5% interest of RTAM LP and is its general partner. NEIC LP's
general partner is New England Investment Companies, Inc. ("NEIC"), a holding
company offering a broad array of investment styles across a wide range of asset
categories through ten investment advisory/management affiliates and two
distribution affiliates. These affiliates in the aggregate are investment
advisers or managers to over 57 registered investment companies. Reich & Tang is
the successor sponsor for numerous series of unit investment trusts, including:
New York Municipal Trust, Series 1 (and Subsequent Series); Municipal Securities
Trust, Series 1 (and Subsequent Series), 1st Discount Series (and Subsequent
Series); Mortgage Securities Trust, Series 1 (and Subsequent Series); Insured
Municipal Securities Trust, Series 1 (and Subsequent Series), 5th Discount
Series (and Subsequent Series); and Equity Securities Trust, Series 1, Signature
Series, Gabelli Communications Income Trust (and Subsequent Series). The
information included herein is only for the
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purpose of informing investors as to the financial responsibility of the Sponsor
and its ability to carry out its contractual obligations.
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 The Chase Manhattan Bank (National Association), a
national banking association with its principal executive office located at 1
Chase Manhattan Plaza, New York, New York 10081 and its unit investment trust
office at 770 Broadway, New York, New York 10003 (800) 882-9898. The Trustee is
subject to the supervision by the Comptroller of the Currency, 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
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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., a Delaware limited partnership with its principal office
at 600 Fifth Avenue, New York, New York 10020. The Portfolio Consultant was at
January 31, 1996 manager, adviser or supervisor with respect to assets
aggregating in excess of $8.7 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 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 67.3% of the total partnership units outstanding of NEICLP, and
Reich & Tang, Inc., owns approximately 22.6% 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 ten investment
advisory/management affiliates and two distribution 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.; Harris
Associates; and an affiliate, Capital Growth Management Limited Partnership.
These affiliates in the aggregate are investment advisors or managers to 42
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.
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<PAGE>
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.")
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
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<PAGE>
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 or Mortgage Securities
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; and after the initial public offering period has been completed,
based on the aggregate bid 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.
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<PAGE>
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.
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, 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 1/2% 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
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<PAGE>
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 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.
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<PAGE>
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.
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 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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176822.2
<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
-27-
176822.2
<PAGE>
No person is authorized to give any
information or to make any representations not
contained in Parts A and B of this Prospectus; and EST Signature Series
any information or representation not contained
herein must not be relied upon as havin _____________________
authorized by the Trust, the Trustee or the
Sponsors. The Trust is registered as a unit
investment Trust under Investment Company Act of REICH & TANG GROWTH AND VALUE
1940. Such registration does not imply that the TRUST
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 REICH & TANG GROWTH AND VALUE
offer to sell, or a solicitation of an offer TRUST
to buy, securities in any state to a 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 30, 1996
Summary of Essential Information...........A-6 Sponsor:
Information Regarding the Trust............A-7
Financial and Statistical Information......A-8
Reich & Tang Distributors L.P.
PART B 600 Fifth Avenue
New York, New York 10020
The Trust................................ 1 212-830-5200
Risk Considerations.................... 3
Public Offering.......................... 7
Rights of Certificateholders............ 10 Portfolio Consultant:
Tax Status................................ 11
Liquidity................................. 13 Reich & Tang Asset Management,
Total Reinvestment Plan................... 15 L.P.
Trust Administration...................... 16 600 Fifth Avenue
Trust Expenses and Charges................ 22 New York, NY 10020
Exchange Privilege and
Conversion Offer........................ 23 Trustee:
Other Matters............................. 26
The Chase Manhattan Bank, N.A.
Parts A and B of this Prospectus do not 770 Broadway
contain all of the information set forth in New York, NY 10003
the registration statement exhibits relating
thereto, filed with the Securities and Exchange
Commission, Washington, D.C., under the Securities
Act of 1933, and the Investment Company Act of
1940, and to which reference is made.
176822.2
<PAGE>
PART II
ADDITIONAL INFORMATION NOT REQUIRED
IN PROSPECTUS
CONTENTS OF REGISTRATION STATEMENT
This Post-Effective Amendment to the Registration Statement on Form S-6
comprises the following papers and documents:
The facing sheet on Form S-6.
The Cross-Reference Sheet.
The Prospectus consisting of pages.
Signatures.
Written consents of the following persons:
Battle Fowler LLP (included in Exhibit 99.3.1)
KPMG Peat Marwick
New England Investment Companies, L.P. (filed with Amendment No. 1 to Form S-6
Registration Statement No. 33-53688 on March 18, 1993 and incorporated
herein by reference).
The following exhibits:
99.1.1 -- Reference Trust Agreement including certain amendments to the
Trust Indenture and Agreement (filed as Exhibit 1.1 to
Amendment No. 1 to Form S-6 Registration Statement No. 33-53688
of Equity Securities Trust, Series 2 on March 18, 1993 and
incorporated herein by reference).
*99.1.1.1 -- Form of Trust Indenture and Agreement for Equity Securities
Trust, Series 1, Signature Series (and Subsequent Series).
99.1.3.4 -- Certificate of Formation and Agreement among Limited Partners,
as amended, of Reich & Tang Distributors L.P. (filed as Exhibit
99.1.3.4 to Post-Effective Amendment No. 10 to Form S-6
Registration Statements Nos. 2-98914, 33-00376, 33-00856 and
33-01869 of Municipal Securities Trust, Series 28, 39th
Discount Series, Series 29 & 40th Discount Series and Series 30
& 41st Discount Series, respectively, on October 31, 1995 and
incorporated herein by reference).
99.1.4 -- Form of Agreement Among Underwriters (filed as Exhibit 1.4 to
Amendment No. 1 to Form S-6 Registration Statement No. 33-28384
of Insured Municipal Securities Trust, 47th Discount Series and
Series 20 on June 16, 1989 and incorporated herein by
reference).
99.2.1 -- Form of Certificate (filed as Exhibit 2.1 to Amendment No. 1 to
Form S-6 Registration Statement No. 33-62898 on June 17, 1993
and incorporated herein by reference).
- --------
* Being filed by this Amendment.
II-1
175585.1
<PAGE>
99.3.1 -- Opinion of Battle Fowler LLP as to the legality of the
securities being registered, including their consent to the
filing thereof and to the use of their name under the headings
"Tax Status" and "Legal Opinions" in the Prospectus, and to the
filing of their opinion regarding tax status of the Trust
(filed as Exhibit 3.1 to Amendment No. 1 to Form S-6
Registration Statement No. 33-53688 of Equity Securities Trust,
Series 2 on March 18, 1993 and incorporated herein by
reference).
99.4.1 -- Form of Custody Agreement (filed as Exhibit 4.1 to Amendment
No. 1 to Form S-6 Registration Statement No. 33-36215 of
Insured Municipal Securities Trust, Series 25 and New York
Navigator Insured Series 4 and incorporated herein by
reference).
99.4.2 -- Form of First Amendment to Custody Agreement (filed as
Exhibit 4.2 to Amendment No. 1 to Form S-6 Registration
No. 33-36215 of Insured Municipal Securities Trust, Series 25
and New York Navigator Series 4 and incorporated herein by
reference).
99.6.0 -- Power of Attorney of Reich & Tang Distributors L.P., the
Depositor, by its officers and a majority of its Directors
(filed as Exhibit 99.6.0 to Amendment No. 1 to Form S-6
Registration Statement No. 33-62627 of Equity Securities Trust,
Series 6, Signature Series, Gabelli Entertainment and Media
Trust on November 16, 1995 and incorporated herein by
reference).
*27 -- Financial Data Schedule(s) (for EDGAR filing only).
- --------
* Being filed by this Amendment.
II-2
175585.1
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant, Equity Securities Trust, Series 2, Signature Series, Reich & Tang
Growth and Value Trust has duly caused this Post-Effective Amendment to the
Registration Statement to be signed on its behalf by the undersigned, hereunto
duly authorized, in the City of New York and State of New York on the 17th day
of April, 1996.
EQUITY SECURITIES TRUST, SERIES 2, SIGNATURE SERIES, REICH & TANG
GROWTH AND VALUE TRUST
(Registrant)
REICH & TANG DISTRIBUTORS L.P.
(Depositor)
By: Reich & Tang Asset Management, Inc.,
as general partner
By: PETER J. DeMARCO
(Authorized Signatory)
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below
by the following persons who constitute the principal officers and a majority
of the directors of Reich & Tang Asset Management, Inc., the general partner
of Reich & Tang Distributors L.P., the Depositor, in the capacities and on the
dates indicated.
Name Title Date
PETER S. VOSS President, Chief Executive Officer )
and Director )
G. NEAL RYLAND Executive Vice President, Treasurer ) April 17, 1996
and Chief Financial Officer )
EDWARD N. WADSWORTH Clerk )
RICHARD E. SMITH III Director )By: PETER J. DeMARCO
STEVEN W. DUFF Director ) Attorney-in-Fact*
BERNADETTE N. FINN Vice President )
LORRAINE C. HYSLER Secretary )
RICHARD DE SANCTIS Vice President and Treasurer )
- ---------------
* Executed copies of Powers of Attorney were filed as Exhibit 6.0 to
Amendment No. 1 to Registration Statement No. 33-62627 on November 16,
1995.
175585.1
<PAGE>
CONSENT OF INDEPENDENT AUDITORS'
We consent to the use in the Post-Effective Amendment to the Registration
Statement of our report on the financial statements of Equity Securities Trust
Series 2, Signature Series, Reich and Tang Growth and Value Trust included
herein and to the reference to our firm under the heading "Independent Auditors"
in the Prospectus which is part of this Registration Statement.
KPMG PEAT MARWICK LLP
New York, New York
April 17, 1996
II-4
<PAGE>
EXHIBIT INDEX
Exhibit Description Page No.
99.1.1 Reference Trust Agreement including
certain amendments to the Trust Indenture
and Agreement (filed as Exhibit 1.1 to
Amendment No. 1 to Form S-6 Registration
Statement No. 33-53688 of Equity
Securities Trust, Series 2 on March 18,
1993 and incorporated herein by
reference).
99.1.1.1 Form of Trust Indenture and Agreement for
Equity Securities Trust, Series 1, Signature
Series (and Subsequent Series)....................
99.1.3.4 Certificate of Formation and Agreement
among Limited Partners, as amended, of
Reich & Tang Distributors L.P. (filed as
Exhibit 99.1.3.4 to Post-Effective
Amendment No. 10 to Form S-6 Registration
Statements Nos. 2-98914, 33-00376,
33-00856 and 33-01869 of Municipal
Securities Trust, Series 28, 39th Discount
Series, Series 29 & 40th Discount Series
and Series 30 & 41st Discount Series,
respectively, on October 31, 1995 and
incorporated herein by reference).
99.1.4 Form of Agreement Among Underwriters
(filed as Exhibit 1.4 to Amendment No. 1
to Form S-6 Registration Statement
No. 33-28384 of Insured Municipal
Securities Trust, 47th Discount Series and
Series 20 on June 16, 1989 and
incorporated herein by reference).
99.2.1 Form of Certificate (filed as Exhibit 2.1
to Amendment No. 1 to Form S-6
Registration Statement No. 33-62898 on
June 17, 1993 and incorporated herein by
reference).
99.3.1 Opinion of Battle Fowler LLP as to the
legality of the securities being
registered, including their consent to the
delivery thereof and to the use of their
name under the headings "Tax Status" and
"Legal Opinions" in the Prospectus, and to
the filing of their opinion regarding the
tax status of the Trust (filed as
Exhibit 3.1 to Amendment No. 1 to Form S-6
Registration Statement No. 33-53688 of
Equity Securities Trust, Series 2 on March
18, 1993 and incorporated herein by
reference).
1
175585.1
<PAGE>
Exhibit Description Page No.
99.4.1 Form of Custody Agreement (filed as
Exhibit 4.1 to Amendment No. 1 to Form S-6
Registration Statement No. 33-36215 of
Insured Municipal Securities Trust,
Series 25 and New York Navigator Insured
Series 4 and incorporated herein by
reference).
99.4.2 Form of First Amendment to Custody
Agreement (filed as Exhibit 4.2 to
Amendment No. 1 to Form S-6 Registration
No. 33-36215 of Insured Municipal
Securities Trust, Series 25 and New York
Navigator Series 4 and incorporated herein
by reference).
99.6.0 Power of Attorney of Reich & Tang
Distributors L.P., the Depositor, by its
officers and a majority of its Directors
(filed as Exhibit 99.6.0 to Amendment No.
1 to Form S-6 Registration Statement No.
33-62627 of Equity Securities Trust,
Series 6, Signature Series, Gabelli
Entertainment and Media Trust on November
16, 1995 and incorporated herein by
reference).
27 Financial Data Schedule(s) (for EDGAR
filing only).
2
175585.1
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND> The schedule contains summary financial information
extracted from the financial statements and
supporting schedules as of the end of the most
current period and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0000816228
<NAME> EST 2 RTGVT
<SERIES>
<NUMBER> 1
<NAME> EST 2 RTGVT
<S> <C>
<FISCAL-YEAR-END> Dec-31-1995
<PERIOD-START> Jan-01-1995
<PERIOD-END> Dec-31-1995
<PERIOD-TYPE> Year
<INVESTMENTS-AT-COST> 2794819
<INVESTMENTS-AT-VALUE> 3834547
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 0
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 7114
<TOTAL-LIABILITIES> 7114
<SENIOR-EQUITY> 3827433
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (4550)
<OVERDISTRIBUTION-NII> (4550)
<ACCUMULATED-NET-GAINS> 65875
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1039728
<NET-ASSETS> 3827433
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 6730
<NET-INVESTMENT-INCOME> 59145
<REALIZED-GAINS-CURRENT> 397886
<APPREC-INCREASE-CURRENT> 712990
<NET-CHANGE-FROM-OPS> 1170021
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 59135
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 79570
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> (4431)
<ACCUMULATED-GAINS-PRIOR> (9528)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 1054.02
<PER-SHARE-NII> 15.02
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1421.65
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
EQUITY SECURITIES TRUST
SERIES 1
SIGNATURE SERIES, GABELLI COMMUNICATIONS INCOME TRUST
for all series formed on or subsequent to the effective
date specified below
----------
TRUST INDENTURE AND AGREEMENT
Among
BEAR, STEARNS & CO. INC. AND
GRUNTAL & CO., INCORPORATED
As Depositors
and
UNITED STATES TRUST COMPANY OF NEW YORK
As Trustee
----------
Dated: June 3, 1992
48266.2
<PAGE>
TRUST INDENTURE AND AGREEMENT
EQUITY SECURITIES TRUST
SERIES 1
Signature Series, Gabelli Equity Income Trust
and Subsequent Series
CONTENTS
Article and Section Page
INTRODUCTION............................................................... 1
ARTICLE 1 DEFINITIONS; CERTIFICATES................................ 2
Section 1.1. Definitions.............................................. 2
Section 1.2. Form of Certificate...................................... 5
ARTICLE 2 DEPOSIT OF SECURITIES; DECLARATION
OF TRUST; FORM AND ISSUANCE OF
CERTIFICATES.......................................... 8
Section 2.1. Deposit of Securities.................................... 8
Section 2.2. Declaration of Trust..................................... 8
Section 2.3. Issue of Certificates.................................... 8
Section 2.4. Form of Certificates..................................... 8
Section 2.5. Certain Contracts Satisfactory........................... 9
Section 2.6. Deposit of Additional Securities......................... 9
ARTICLE 3 ADMINISTRATION OF TRUST.................................. 10
Section 3.1. Initial Cost............................................. 10
Section 3.2. Income Account........................................... 10
Section 3.3. Principal Account........................................ 10
Section 3.4. Reserve Account.......................................... 11
Section 3.5. Payments and Distributions............................... 11
Section 3.6. Distribution Statements.................................. 16
Section 3.7. Substitute Securities.................................... 17
Section 3.8. Sale of Securities....................................... 18
Section 3.9. Counsel.................................................. 19
Section 3.10. Notice and Sale by Trustee............................... 19
Section 3.11. Refunding Securities..................................... 20
Section 3.12. Notice of Actions........................................ 20
Section 3.13. Notice of Change in Principal
Account............................................... 20
Section 3.14. Extraordinary Distributions.............................. 20
ARTICLE 4 EVALUATION OF SECURITIES................................. 21
Section 4.1. Evaluation of Securities................................. 21
Section 4.2. Tax Reports.............................................. 22
Section 4.3. Liability of Trustee with respect
to Evaluations........................................ 22
-i-
48266.2
<PAGE>
Article and Section Page
ARTICLE 5 TRUST EVALUATION, REDEMPTION,
PURCHASE, TRANSFER, INTERCHANGE
OR REPLACEMENT OF CERTIFICATES........................ 22
Section 5.1. Trust Evaluation......................................... 22
Section 5.2. Redemptions by Trustee; Purchases
by Depositors......................................... 23
Section 5.3. Transfer or Interchange of
Certificates.......................................... 26
Section 5.4. Certificates Mutilated, Destroyed,
Stolen or Lost........................................ 27
ARTICLE 6 TRUSTEE; REMOVAL OF DEPOSITORS........................... 27
Section 6.1. General Definition of Trustee's
Liabilities, Rights and Duties;
Removal of Depositors................................. 27
Section 6.2. Books, Records and Reports............................... 31
Section 6.3. Indenture and List of Securities on
File.................................................. 32
Section 6.4. Compensation............................................. 32
Section 6.5. Removal and Resignation of the
Trustee; Successor.................................... 33
Section 6.6. Qualifications of Trustee................................ 34
ARTICLE 7 DEPOSITORS............................................... 35
Section 7.1. Succession............................................... 35
Section 7.2. Resignation of Depositors................................ 35
Section 7.3. Liability of Depositors and
Indemnification....................................... 35
Section 7.4. Compensation............................................. 37
ARTICLE 8 RIGHTS OF CERTIFICATEHOLDERS............................. 38
Section 8.1. Beneficiaries of Trust................................... 38
Section 8.2. Rights, Terms and Conditions............................. 38
ARTICLE 9 ADDITIONAL COVENANTS; MISCELLANEOUS
PROVISIONS............................................ 39
Section 9.1. Amendments............................................... 40
Section 9.2. Termination.............................................. 40
Section 9.3. Construction............................................. 42
Section 9.4. Registration of Certificates............................. 42
Section 9.5. Written Notice........................................... 43
Section 9.6. Severability............................................. 43
Section 9.7. Dissolution of Depositors Not to
Terminate............................................. 43
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48266.2
<PAGE>
EQUITY SECURITIES TRUST
SERIES 1
SIGNATURE SERIES, GABELLI COMMUNICATIONS INCOME TRUST
AND
SUBSEQUENT SERIES
TRUST INDENTURE AND AGREEMENT
DATED JUNE 3, 1992
This Trust Indenture and Agreement ("Indenture") dated June 3, 1992,
among Bear, Stearns & Co. Inc. and Gruntal & Co., Incorporated, as Depositors
and United States Trust Company of New York, as Trustee.
WITNESSETH THAT
In consideration of the premises and of the mutual agreements herein
contained, the Depositors, the Trustee and the Evaluator agree as follows:
INTRODUCTION
The Depositors concurrently with the execution and delivery hereof
are establishing Equity Securities Trust, Series 1, Signature Series, Gabelli
Communications Income Trust (and subsequent Series), wherein certain securities
consisting of common stock, convertible securities, American Depository Receipts
("ADRs") and contracts and funds for the purchase of such securities
(collectively, the "Securities") will be deposited by the Depositors, to be held
by the Trustee in trust for the use and benefit of the registered holders of
certificates of ownership (the "Certificateholders") to be issued as hereinafter
provided. The parties hereto are entering into this Indenture for the purpose of
establishing certain of the terms, covenants and conditions of Equity Securities
Trust, Series 1, Signature Series, Gabelli Communications Income Trust and of
each additional series of such Trust which may be established from time to time
hereafter. For Equity Securities Trust, Series 1, Signature Series, Gabelli
Communications Income Trust and each subsequent series of the Equity Securities
Trust (sometimes referred to herein as the "Trust") (as to which this Indenture
is to be applicable) the parties hereto shall execute a separate Reference Trust
Agreement incorporating by reference this Indenture and effecting any amendment,
supplement or variation from or to such incorporation by reference with respect
to the related series and specifying for that series (i) the Securities
deposited in trust and the number of Units delivered by the Trustee in exchange
for the Securities pursuant to Section 2.3; (ii) the initial fractional
undivided interest represented by
48266.2
<PAGE>
each Unit; (iii) the first and subsequent Record Dates; (iv) the first and
subsequent Distribution Dates; (v) the First Settlement Date; (vi) the
liquidation amount for purposes of Section 6.1(g); (vii) the Trustee's fee;
(viii) the Depositors' fee; (ix) the Termination Date; and (x) any other change
or addition contemplated or permitted by this Indenture.
ARTICLE 1
DEFINITIONS; CERTIFICATES
Section 1.1. Definitions: Whenever used in this
Indenture the following words and phrases, unless the context
clearly indicates otherwise, shall have the following meanings:
(1) "Addendum to the Reference Trust Agreement" shall mean the
addendum which evidences the Additional Securities deposited into the Trust and
the number of Additional Units created.
(2) "Additional Securities" shall mean such Securities as are listed
in Supplementary Schedules to Addendums to the Reference Trust Agreement and
which have been deposited to effect an increase over the number of Units
initially specified in the Reference Trust Agreement.
(3) "Additional Units" shall mean such Units as are issued in
respect of Additional Securities.
(4) "Business Day" shall mean any day other than a Saturday, Sunday,
or other day on which the New York Stock Exchange is closed for trading, a legal
holiday in the City of New York, or a day on which banking institutions are
authorized by law to close.
(5) "Certificate" shall mean any one of the certificates
substantially in the form hereinafter recited executed by the Trustee and on
behalf of the Depositors evidencing ownership of an undivided fractional
interest in the Trust.
(6) "Certificateholder" shall mean the registered holder of any
Certificate as recorded on the books of the Trustee, his legal representatives
and heirs and the successors of any corporation, partnership or legal entity
which is a registered holder of any Certificate, and as such shall be deemed a
beneficiary of the Trust created by the Indenture to the extent of his pro rata
share thereof.
(7) "Contract Securities" shall mean Securities which
are to be acquired by the Trust pursuant to contracts, including
-2-
48266.2
<PAGE>
(i) Securities listed in Schedule A to the Reference Trust Agreement and (ii)
Securities which the Depositors have contracted to purchase for the Trust
pursuant to Sections 2.6 and 3.7.
(8) "Depositors" shall mean Bear, Stearns & Co. Inc.
and Gruntal & Co., Incorporated or their respective successors or
any successor Depositors appointed as herein provided.
(9) "Distribution Date" shall have the meaning assigned to it in
Part II of the Reference Trust Agreement.
(10) "Failed Security" shall have the meaning assigned
to it in Section 3.7 hereof.
(11) "First Settlement Date" shall mean the date specified in Part
II of the Reference Trust Agreement.
(12) "Indenture" shall mean this Trust Indenture and Agreement as
originally executed or, if amended as herein provided, as so amended.
(13) "Plan Units" shall mean fractional Units offered by the
Depositors pursuant to the reinvestment plans described in the final prospectus
of the Trust filed within the appropriate registration forms under the
Securities Act of 1933, and for which Plan Units the Trustee is acting as
Trustee.
(14) "Record Date" shall have the meaning assigned to it in Part II
of the Reference Trust Agreement.
(15) "Redemption Form" shall mean the form provided by the Trustee
at the request of holders of Plan Units for the purposes of redeeming such
Units, as such form may be reasonably acceptable to the Depositors and the
Trustee from time to time.
(16) "Reference Trust Agreement" shall mean the indenture for the
particular series of Equity Securities Trust into which the terms of this
Indenture are incorporated.
(17) "Securities" shall mean such common stock, convertible
securities, ADRs and contracts and funds for the purchase of such securities as
are (i) deposited in irrevocable trust and listed in the Schedule to the
Reference Trust Agreement and (ii) received in exchange or substitution for any
Securities pursuant to Section 3.7 hereof, as may from time to time be acquired
and continue to be held as a part of the Trust to which such Reference Trust
Agreement relates.
(18) "Substitute Security" shall mean a Security purchased by the
Trustee pursuant to Section 3.7 hereof.
-3-
48266.2
<PAGE>
(19) "Termination Date" shall have the meaning assigned to it in
Part II of the Reference Trust Agreement.
(20) "Trust" shall mean the Trust created by this Indenture, which
shall consist of the Securities held pursuant and subject to this Indenture
together with all dividends thereon, received but undistributed, any
undistributed cash realized from the sale, redemption, liquidation thereof, such
amounts as may be on deposit in the Reserve Accounts hereinafter established and
all other property and rights to which Certificateholders may be entitled under
the provisions of this Indenture.
(21) "Trustee" shall mean United States Trust Company of New York,
or its successors or any successor Trustee appointed as herein provided.
(22) "Unit" shall mean the fractional undivided interest in and
ownership of the Trust initially specified in Part II of the Reference Trust
Agreement, the denominator of which shall be decreased by the number of any such
Units redeemed as provided in Section 5.2.
(23) The words "herein," "hereby," "herewith," "hereof,"
"hereinafter," "hereunder," "hereinabove," "hereafter," "heretofore" and similar
words or phrases of reference and association shall refer to this Indenture in
its entirety.
(24) Words importing singular number shall include the plural number
in each case and vice versa, and words importing person shall include
corporations and associations, as well as natural persons.
-4-
48266.2
<PAGE>
Section 1.2. Form of Certificate: The form of Certificate evidencing
ownership or fractional undivided interests in each Trust shall be substantially
as follows:
No. 1
CERTIFICATE OF OWNERSHIP
--evidencing--
A Fractional Undivided Interest
--in--
EQUITY SECURITIES TRUST
SERIES _____
- ---------------------
UNITS
- ---------------------
CUSIP
This is to certify that ______________________________ is the owner and
registered holder of this Certificate evidencing the ownership of _______
unit(s) of fractional undivided interest in Equity Securities Trust of the above
Series (hereinafter called the "Trust") created under the laws of the State of
New York by a Trust Indenture and Agreement as incorporated by a Reference Trust
Agreement applicable to the above Series (hereinafter collectively called the
"Indenture") among BEAR, STEARNS & CO. INC. and GRUNTAL & CO., INCORPORATED
(hereinafter called the "Depositors") and UNITED STATES TRUST COMPANY OF NEW
YORK (hereinafter called the "Trustee"). This Certificate is issued under and is
subject to the terms, provisions and conditions of the Indenture to which the
holder of this Certificate by virtue of the acceptance hereof assents and is
bound, a summary of which Indenture is contained in the Prospectus relating to
the Trust. The Depositors hereby grant and convey all of their right, title and
interest in and to the Trust to the extent of the fractional undivided interest
represented hereby to the registered holder of this Certificate subject to and
in pursuance of the Indenture. This Certificate is transferable and
interchangeable by the registered holder in person or by his duly authorized
attorney at the unit investment trust office of the Trustee upon surrender of
this Certificate properly endorsed or accompanied by a written instrument of
transfer in form satisfactory to the Trustee and payment of the fees and
expenses applicable hereto set forth herein.
-5-
48266.2
<PAGE>
This Certificate shall not become valid or binding for any purpose
until properly executed by the Trustee under the Indenture.
IN WITNESS WHEREOF, Bear, Stearns & Co. Inc., as agent for the
Depositors, has caused this Certificate to be executed in facsimile by a duly
authorized officer and United States Trust Company of New York, as Trustee, has
caused this Certificate to be executed in its corporate name by an authorized
officer.
Date: AGENT FOR THE DEPOSITORS
UNITED STATES TRUST COMPANY
OF NEW YORK, Trustee
By:
Authorized Officer
-6-
48266.2
<PAGE>
ASSIGNMENT
For Value Received ____________ hereby sells, assigns and transfers
unto _________________ the within Certificate and does hereby irrevocably
constitute and appoint ______________ attorney, to transfer the within
Certificate on the books of the Trustee, with full power of substitution in the
premises.
Dated: ________________
Note: The signature(s) to this assignment must correspond with the
name(s) as written above upon the face of this Certificate in every
particular, without alteration or enlargement or any change
whatever.
Signature Guaranteed
[end of certificate]
-7-
48266.2
<PAGE>
ARTICLE 2
DEPOSIT OF SECURITIES; DECLARATION OF TRUST;
FORM AND ISSUANCE OF CERTIFICATES
Section 2.1. Deposit of Securities: The Depositors, concurrently
with the execution and delivery of a Reference Trust Agreement, have deposited
with the Trustee in trust the Securities listed in Schedule A to the Reference
Trust Agreement in bearer form or registered in the name of the Trustee, or its
nominee, or duly endorsed in blank or accompanied by all necessary instruments
of assignment and transfer in proper form to be held, managed and applied by the
Trustee as herein provided. In the event that the purchase of Securities
represented by "when-issued" and/or "regular way" contracts shall not be
consummated in accordance with said contracts, the Trustee shall credit to the
Principal Account pursuant to Section 3.3 hereof the cash or cash equivalents
(including such portion of any letter of credit applicable to such contracts)
deposited by the Depositors, for the purpose of such purchase. Such monies,
unless invested in substitute Securities in accordance with Section 3.7 hereof,
shall be distributed to Certificateholders pursuant to Section 3.5 hereof on the
Distribution Date following the failure of consummation of such purchase. The
Depositors shall deliver the Securities listed on said Schedule or Schedules to
the Trustee which were not actually delivered concurrently with the execution
and delivery of the Reference Trust Agreement within 90 days after said
execution and delivery or, if Section 3.7 applies, within such shorter period as
is specified in Section 3.7.
The Trustee is irrevocably authorized hereto to effect registration
of transfer of the Securities in fully registered form in the name of the
Trustee or its nominee.
Section 2.2. Declaration of Trust: The Trustee declares that it
holds and will hold the Trust as Trustee in trust upon the terms herein set
forth for the use and benefit of all present and future Certificateholders.
Section 2.3. Issue of Certificates: The Trustee hereby acknowledges
receipt of the deposit referred to in Section 2.1, and simultaneously with the
receipt of said deposit, has executed Certificates substantially in the form
above recited representing the ownership of the number of Units specified in
Part II of the Reference Trust Agreement.
Section 2.4. Form of Certificates: Each Certificate referred to in
Section 2.3 is, and each Certificate hereafter issued shall be, in substantially
the form hereinabove recited, numbered serially for identification, in fully
registered form, transferable only on the books of the Trustee as herein
provided,
-8-
48266.2
<PAGE>
executed manually by an authorized officer of the Trustee and in facsimile by an
Associate or Managing Director of Bear Stearns & Co., Inc., on behalf of the
Depositors.
Section 2.5. Certain Contracts Satisfactory: The Depositors approve
as satisfactory in form and substance the contracts to be assumed by the Trustee
with regard to any Securities listed in Schedule A to the Reference Trust
Agreement and authorizes the Trustee on behalf of the Trust to assume such
contracts and otherwise to carry out the terms and provisions thereof or to take
other appropriate action in order to complete the deposit of the Securities
covered thereby into the Trust.
Section 2.6. Deposit of Additional Securities. From time to time and
in the discretion of the Depositors, the Depositors may make deposits of
Additional Securities duly endorsed in blank or accompanied by all necessary
instruments of assignment and transfer in proper form (or contracts to purchase
Additional Securities and cash or an irrevocable letter of credit in an amount
necessary to consummate the purchase of any Additional Securities pursuant to
such contracts ("Additional Contract Securities")) and Cash (as defined below),
provided that each deposit of Additional Securities and Cash, if any, shall
replicate, to the extent practicable, the Securities (including Contract
Securities) held in the Trust immediately prior to each such deposit and shall
exactly replicate Cash. For purposes of this paragraph, "Cash" means, as to the
Principal Account, cash or other property (other than Securities) on hand in the
Principal Account or receivable and to be credited to the Principal Account as
of the date of the supplemental deposit (other than amounts to be distributed
solely to persons other than persons receiving the distribution from the
Principal Account as holders of Additional Units created by the deposit), and,
as to the Income Account, cash or other property (other than Securities)
received by the Trust as of the date of the supplemental deposit or receivable
by the Trust in respect of dividends or other distributions declared but not
received as of the date of the supplemental deposit, reduced by the amount of
any cash or other property received or receivable on any Security allocable (in
accordance with the Trustee's calculation of the monthly distribution from the
Income Account pursuant to Section 3.5) to a distribution made or to be made in
respect of Record Date occurring prior to the supplemental deposit. Each deposit
of Additional Securities shall be listed in a Supplementary Schedule to an
Addendum to the Reference Trust Agreement stating the date of such deposit and
the number of Additional Units being issued therefor. The Trustee shall
acknowledge in such Addendum receipt of the deposit, and simultaneously with the
receipt of said deposit, reflect the aggregate number of Additional Units
specified in such Addendum by recording such Units on its books. Such Additional
Securities shall be held, administered and applied by the Trustee in the
-9-
48266.2
<PAGE>
same manner as herein provided for the Securities. The execution by the
Depositors in connection with the deposit of Additional Securities of an
Addendum to the Reference Trust Agreement shall constitute the approval by the
Depositors as satisfactory in form and substance of the contracts to be entered
into or assumed on such Addendum and authorization to the Trustee on behalf of
the Trust to enter into or assume such contracts and otherwise to carry out the
terms and provisions thereof or to take other appropriate action in order to
complete the deposit of the Additional Securities covered thereby into the
Trust.
ARTICLE 3
ADMINISTRATION OF TRUST
Section 3.1. Initial Cost: The cost of the initial preparation,
printing and execution of the Certificates and this Indenture, the initial fees
of the Trustee and its counsel, and other reasonable expenses in connection
therewith, shall be paid by the Depositors, provided, however, that the
liability on the part of the Depositors for such initial costs, fees and
expenses shall not include any fees, costs or other expenses incurred in
connection herewith after the execution of this Indenture and the deposit
referred to in Section 2.1.
Section 3.2. Income Account: The Trustee shall collect the dividends
or other like cash distributions on the Securities in the Trust as such are
paid, and credit such amounts, as collected, to a separate account to be known
as the "Income Account."
Section 3.3. Principal Account: (a) The Securities and all cash,
other than amounts credited to the Income Account, received by the Trustee in
respect of the Securities shall be credited to a separate account to be known as
the "Principal Account".
(b) Moneys and/or irrevocable letters of credit required to purchase
Contract Securities or deposited to secure such purchases are hereby declared to
be held specially by the Trustee for such purchases and shall not be deemed to
be part of the Principal Account until (i) the Depositors fail to timely
purchase Contract Securities and have not given the Failed Contract Notice (as
defined in Section 3.7) at which time the moneys and/or letters of credit
attributable to the Contract Securities not purchased by the Depositors shall be
credited to the Principal Account; or (ii) the Depositors have given the Trustee
the Failed Contract Notice at which time the moneys and/or letters of credit
attributable to failed contracts referred to in such Notice shall be credited to
the Principal Account; provided, however, that if the Depositors also notify
-10-
48266.2
<PAGE>
the Trustee in the Failed Contract Notice that they have purchased or entered
into a contract to purchase Securities (as defined in Section 3.14), the Trustee
shall not credit such moneys and/or letters of credit to the Principal Account
unless the Securities shall also have failed or are not delivered by the
Depositors within two business days after the settlement date of such
Securities, in which event the Trustee shall forthwith credit such moneys and/or
letters of credit to the Principal Account. To the extent of moneys, and/or
moneys drawn under a letter of credit, deposited by the Depositors and then held
by the Trustee, the Trustee shall credit to the Principal Account, and to the
extent such moneys are insufficient the Depositors shall deposit in the
Principal Account, the difference, if any, between the purchase price of the
failed Contract Securities and the purchase price of the Securities, together
with any sales charge and accrued dividends applicable to such difference and
distribute such moneys to Certificateholders pursuant to Section 3.5.
Section 3.4. Reserve Account: From time to time the Trustee shall
withdraw from the cash on deposit in the Income Account or the Principal Account
such amounts as it, in its sole discretion, shall deem requisite to establish a
reserve for any applicable taxes or other governmental charges that may be
payable out of or by the Trust. Such amounts so withdrawn shall be credited to a
separate account which shall be known as the "Reserve Account". The Trustee
shall not be required to distribute to the Certificateholders any of the amounts
in the Reserve Account; provided, however, that if it shall, in its sole
discretion, determine that such amounts are no longer necessary for payment of
any applicable taxes or other governmental charges, then it shall promptly
deposit such amounts in the appropriate account from which withdrawn or, if the
Trust has been terminated or is in the process of termination, the Trustee shall
distribute to each Certificateholder such holder's interest in the Reserve
Account in accordance with Section 9.2.
Section 3.5. Payments and Distributions: 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 discussed in Section 3.3.(b) representing failed contracts, as
discussed in Section 3.3 (b) above) will be computed as of each Record Date, and
will be made to the Certificateholders of the Trust on or shortly after the next
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 Distribution. No distributions will be
made to Certificate holders electing to
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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 Distribution Date after such purchase.
As of each Record Date the Trustee shall:
(a) 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, including registration
charges, Blue Sky fees, printing costs, attorneys' fees, auditing costs and
other miscellaneous out-of-pocket expenses, as certified by the Depositors,
incurred in keeping the registration of the Certificates and the Trust on a
current basis pursuant to Section 9.4, provided, however, that no portion of
such amount shall be deducted or paid unless the payment thereof from the Trust
is at that time lawful;
(b) deduct from the Income Account or, to the extent funds are not
available in such Account, from the Principal Account, and pay to itself
individually the amounts that it is at the time entitled to receive pursuant to
Section 6.4 or pursuant to this Section 3.5;
(c) deduct from the Income Account, or, to the extent funds are not
available in such Account, from the Principal Account, and pay an amount equal
to the unpaid fees and expenses, if any, of counsel pursuant to Section 3.9 as
certified to it by the Depositors; and
(d) deduct from the Income Account, or, to the extent funds are not
available in such Account, from the Principal Account the estimated amount that
the Depositors are then entitled to receive pursuant to Section 7.4 and hold
such amount without interest until such time as it is payable to the Depositors
as set forth below.
On or before the first Distribution Date after the conclusion of
each calendar year, the Trustee shall, upon certification in satisfactory form
to the Trustee, upon which the Trustee may rely, distribute to the Depositors
from the amount so held pursuant to the immediately preceding paragraph the
amounts that the Depositors are at the time entitled to receive pursuant to
Section 7.4 on account of services theretofore performed and expenses
theretofore incurred.
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
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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.
All amounts (1) permitted to be withdrawn from the Principal Account
under this Indenture in order to satisfy obligations which, pursuant to the
terms hereof, are first to be paid out of the Income Account to the extent funds
are available, or (2) to be withdrawn from the Principal Account pursuant to
Section 5.2 hereof, may be made only from the balance in the Principal Account
after excluding capital gains. The Principal Account shall be reimbursed for any
such amounts described in clause (1) of the preceding sentence when sufficient
funds are next available in the Income Account after giving effect to the
payment from the Income Account of all amounts otherwise required to be deducted
therefrom at that time.
On each Distribution Date or within a reasonable period of time
thereafter, the Trustee shall distribute by mail to each Certificateholder of
record at the close of business on the preceding Record Date, at the post office
address appearing on the registration books of the Trustee, such holder's pro
rata share of the balance in the Income Account calculated as set forth in the
next paragraph, plus such holder's pro rata share of the distributable cash
balance of the Principal Account, as of the preceding Record Date; provided,
however, that funds credited to the Principal Account in the event of the
failure of consummation of a contract to purchase Securities pursuant to Section
2.1 hereof, funds representing the proceeds of the sale of Securities pursuant
to Section 3.8 hereof, and funds representing the proceeds of the sale of
Securities under Section 5.2, 6.4 or this Section 3.5 in excess of the aggregate
of (i) the amounts needed for the purposes of said Sections and (ii) such amount
as the Depositors have informed the Trustee is to be used to purchase securities
pursuant to Section 3.7 hereof, shall not be distributed until the following
Distribution Date or at such earlier date as shall be determined by the Trustee.
The Trustee shall not be required to make a distribution from the Principal
Account unless the cash balance on deposit therein available for distribution
shall be sufficient to distribute at least $1.00 per Unit in the case of Units
initially offered at approximately $1,000, or a proportionately lower amount in
the case of Units initially offered at less than $1,000 (e.g., .001 per Unit in
the case of Units initially offered at approximately $1.00).
The Trustee shall compute the amount of the Distribution from the
Income Account as follows:
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(a) The amount of the distribution from the Income Account on the
first Distribution Date shall be such amount as shall be specified in the
Reference Trust Agreement applicable to the Trust.
(b) On any subsequent Record Date occurring prior to the first
Quarterly Record Date hereafter specified, and thereafter on each Record
Date in the months of January, April, July and October (each a "Quarterly
Record Date"), the Trustee shall compute the distribution from the Income
Account by
(i) estimating the next following calendar quarter's income
(or, with respect to the computation made on the second Record Date,
if it occurs in the first calendar quarter of the Trust, the income
for such first calendar quarter) on the basis of the distributions
made on Securities during the preceding calendar quarter and
adjusted for any information with respect to dividends or other
income to be received during such next following calendar quarter
(or first calendar quarter of the Trust, as appropriate), as such
information may be received by the Trustee on or prior to such
Record Date from any reporting service then employed by the Trustee,
(ii) deducting from such amount the estimated
expenses attributable to such next following calendar
quarter, and
(iii) dividing the resulting amount by the product of three
multiplied by the number of Units outstanding on the Record Date on
which the computation is made, such computation being the amount of
the distribution to be made on the Distribution Dates occurring
until the next following computation is made pursuant to this
Section.
If the amount distributed in any calendar quarter shall be greater or less than
the net income of the Trust during such quarter, the Trustee shall reduce or
increase the amount of the distribution next calculated in accordance with this
Section by the amount necessary to reconcile over the next three distributions,
the amount distributed and net income received. In the event any issuer of
Securities fails to make an anticipated distribution, or there is a disposition
of Securities or other event that substantially reduces the net income which
will be received during a quarter from that estimated by the Trustee, the
Trustee shall, on the Record Date next following the Trustee's determination
that such event has occurred, (i) recalculate the amount of the monthly Income
Distribution to reflect the revised estimate of the quarter's net income, and
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(ii) reduce the following distribution by such amount as will enable the Trustee
to recover any advances to the Trust referable to the anticipated receipt of
such unpaid distributions. The Trustee shall increase the amount of the December
distribution as may be necessary in order that no Federal tax shall be payable
by the Trust by reason of a failure to distribute the required amount of the
Trust's net income for the year.
The amounts to be so distributed to each Certificate-holder of the
Trust of record as of each Record Date shall be that pro rata share of the cash
balance as of such Record Date of the Income and Principal Accounts of the
Trust, computed as set forth above, as shall be represented by a notation on the
registration or other record books of the Trustee.
In the computation of each such share, fractions of less than one
cent shall be omitted. After any such distribution provided for above, any cash
balance remaining in the Income Account or the Principal Account shall be held
in the same manner as other amounts subsequently deposited in each of such
Accounts, respectively.
For the purpose of distribution as herein provided, the holders of
record on the registration books of the Trustee at the close of business on each
Record Date shall be conclusively entitled to such distribution, and no
liability shall attach to the Trustee by reason of payment to any such
registered Certifi-cateholder of record. Nothing herein shall be construed to
prevent the payment of amounts from the Income Account and the Principal Account
to individual Certificateholders by means of one check, draft or other proper
instrument, provided that the appropriate statement of such distribution shall
be furnished therein as provided in Section 3.6 hereof.
In the event the amount on deposit in the Income Account on a
Distribution Date is not sufficient for the payment of the amount to be
distributed on the basis of the aforesaid computation, the Trustee shall advance
out of its own funds and cause to be deposited in and credited to the Income
Account such amount as may be required to permit payment of the distribution to
be made on such Distribution Date and shall be entitled to be reimbursed,
without interest, out of income received by the Trust on the first Record Date
following the date of such advance on which such reimbursement may be made
without reducing the amount in the Income Account to an amount less than that
required for the next ensuing income distribution. The Trustee shall be deemed
to be the beneficial owner of the dividends or other income received by the
Trust to the extent of all amounts advanced by it pursuant to this paragraph,
and such advances shall be considered a lien on the Trust prior to the interest
of Certificateholders.
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Section 3.6. Distribution Statements: With each distribution from
the Income or Principal Accounts the Trustee shall set forth, either in the
instrument by means of which payment of such distribution is made or in any
accompanying statement the amount being distributed from each such account
expressed as a dollar amount per Unit.
Within a reasonable period of time after the last business day of
each calendar year, the Trustee shall furnish to each person who at any time
during such calendar year was a Certificateholder a statement setting forth,
with respect to such calendar year:
(A) as to the Income Account:
(1) the amount of dividends received on the Securities,
(2) the amounts paid from the Income Account for
redemptions pursuant to Section 5.2,
(3) the deductions for applicable taxes and fees and expenses
of the Trustee, the Evaluator and counsel pursuant to Section 3.9, the
annual audit fees referred to in Section 6.2, and the annual fees of the
Depositors for portfolio supervisory services pursuant to Section 7.4,
(4) the amount distributed from the Income
Account, identifying separately amounts distributed as
dividends and as other income,
(5) any other amount credited to or deducted from
the Income Account, and
(6) the balance remaining after such distributions and
deductions, expressed both as a total dollar amount and as a dollar amount
per Unit outstanding on the last business day of such calendar year;
(B) as to the Principal Account:
(1) The number of shares of each issue of Securities sold or
liquidated, and the aggregate net proceeds received with respect to each
issue, excluding any portion thereof credited to the Income Account,
(2) the amounts paid from the Principal Account
for redemption pursuant to Section 5.2,
(3) the deductions for payment of applicable taxes and fees
and expenses of the Trustee, the Evaluator and counsel pursuant to Section
3.9, the annual audit fees
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referred to in Section 6.2, and the annual fee of the Depositors for
portfolio supervisory services pursuant to Section 7.4, and
(4) the balance remaining after such distributions and
deductions, expressed both as a total dollar amount and as a dollar amount
per Unit outstanding on the last business day of such calendar year; and
(C) the following information:
(1) a list of Securities held in the Trust as of
the last business day of such calendar year,
(2) the number of Units outstanding on the last
business day of such calendar year,
(3) the Net Asset Value per Unit based on the last Trust
Evaluation made during such calendar year, and
(4) the amounts actually distributed to Certificateholders
during such calendar year from the Interest and Principal Accounts,
separately stated, expressed both as total dollar amounts and as dollar
amounts per Unit outstanding on the Record Dates for such distributions
and the status of such distributions for Federal income tax purposes.
Section 3.7. Substitute Securities: In the event that any Contract
Security is not delivered due to any occurrence, act or event beyond the control
of the Depositors and of the Trustee (such a Contract Security being herein
called a "Failed Security"), the Depositors may instruct the Trustee to purchase
Substitute Securities which have been selected by the Depositors having a cost
not in excess of the cost of the Failed Securities. To be eligible for inclusion
in the Trust, the Substitute Securities which the Depositors select must: (a) be
of the same type as that replaced (e.g., both will be common stock or preferred
stock); (b) in the Depositors' judgment, be substantially similar to the Failed
Security, as the case may be, as respects the investment characteristics which
led the Depositors to select the Failed Security for inclusion in the Trust; and
(c) be purchased prior to, simultaneously with, or no more than twenty days
after delivery of written notice to the Trustee of the failed contract (the
"Failed Contract Notice"). In addition, the Depositors, at their option, may
direct the Trustee to reinvest in Substitute Securities the proceeds of the sale
of any of the Securities only if such sale was due to the conditions (i), (ii),
(iii) and (vi) of Section 3.8 (a "Section 3.8 Security") and provided that, with
respect to the funds in the Principal Account on any Record Date, the Depositors
shall have provided such direction no later than such Record Date.
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Any Substitute Securities received by the Trustee shall be deposited
hereunder and shall be subject to the terms and conditions of this Indenture to
the same extent as other Securities deposited hereunder. No such deposit of
Substitute Securities shall be made after the earlier of (i) 90 days after the
date of execution and delivery of the applicable Reference Trust Agreement or
(ii) the first Distribution Date to occur after the date of execution and
delivery of the applicable Reference Trust Agreement.
Whenever a Substitute Security is acquired by the Depositors
pursuant to the provisions of this Section 3.7, the Trustee shall, within five
days thereafter, mail to all Certifi-cateholders notices of such acquisition,
including an identification of the Failed Security or the Section 3.8 Security,
as the case may be, and the Substitute Security acquired. The purchase price of
a Substitute Security shall be paid out of the funds in the principal account
attributable to the Failed Security or Section 3.8 Security which it replaces.
The Trustee shall not be liable or responsible in any way for depreciation or
loss incurred by reason of any purchase made pursuant to any such instructions
from the Depositors and in the absence of such instructions the Trustee shall
have no duty to purchase any Substitute Securities under this Indenture. The
Depositors shall not be liable for any failure to instruct the Trustee to
purchase any Substitute Security or for errors of judgment in selecting any
Substitute Security.
Section 3.8. Sale of Securities; Conversion of Convertible
Securities: (a) In order to maintain the sound investment character of the
Trust, the Depositors may direct the Trustee to sell or liquidate Securities at
such price and time and in such manner as shall be determined by the Depositors,
provided that the Depositors have determined that any one or more of the
following conditions exist:
(i) default in payment of amounts due on any of the Securities;
(ii) institution of certain legal proceedings;
(iii) default under certain documents materially and adversely
affecting future declaration or payment of amounts due or expected;
(iv) determination of the Depositors that such sale is desirable to
maintain the qualification of the Trust as a "regulated investment company"
under the Internal Revenue Code (as the trust is intended to constitute an
association taxable as a corporation and that, as such, it intends to qualify as
a regulated investment company pursuant to sections 851 et seq. of
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the Internal Revenue Code) or to avoid the payment of tax by the Trust;
(v) if the disposition of these Securities is necessary in order to
enable the Trust to make distributions of the Trust's capital gain net income;
or
(vi) decline in price that is a direct result of serious adverse
credit factors affecting the issuer of a Security which, in the opinion of the
Depositor, would make the retention of the security detrimental to the Trust or
the Certificateholders.
Upon receipt of such direction from the Depositors, upon which the
Trustee shall rely, the Trustee shall proceed to sell the specified Security in
accordance with such direction. The Trustee shall not be liable or responsible
in any way for depreciation or loss incurred by reason of any sale made pursuant
to any such direction or by reason of the failure of the Depositors to give any
such direction, and in the absence of such direction the Trustee shall have no
duty to sell any Securities under this Section 3.8.
(b) The Depositors may direct the Trustee to 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 Depositors determine that such sale is appropriate
in accordance with conditions (i) through (vi) of this Section 3.8 (a).
Section 3.9. Counsel: The Depositors may employ from time to time as
they may deem necessary a firm of attorneys for any legal services that may be
required in connection with the disposition of Securities pursuant to Section
3.7. The fees and expenses of such counsel shall be paid by the Trustee from the
Interest and Principal Accounts as provided for in Section 3.5(d) hereof.
Section 3.10. Notice and Sale by Trustee: If at any time there has
been a failure by the issuer to pay a dividend that is due and payable, the
Trustee shall notify the Depositors thereof. If within thirty days after such
notification the Trustee has not received any instruction from the Depositors to
sell or to hold or to take any other action in connection with such Securities,
the Trustee shall sell such Securities forthwith, and the Trustee shall not be
liable or responsible in any way for depreciation or loss incurred by reason of
such sale or by reason of any action or inaction in accordance with such written
instructions of the Depositors. The Trustee shall promptly notify the Depositors
of such action in writing and
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shall set forth therein the Securities sold and the proceeds received therefrom.
Section 3.11. Refunding Securities: In the event that an offer by
the issuer of any of the Securities or any other party shall be made to issue
new Securities, the Trustee shall reject such offer. However, should any
exchange or substitution be effected notwithstanding such rejection or without
an initial offer, any Securities, cash and/or property received in exchange
shall be deposited hereunder and shall be promptly sold, if securities or
property, by the Trustee. The cash then remaining shall be distributed to
Certificateholders on the next Distribution Date in the manner set forth in
Section 3.5 regarding distributions from the Principal Account. This section
shall apply, but its application shall not be limited, to public tender offers,
mergers, acquisitions, reorganizations and recapitalizations.
Section 3.12. Notice of Actions: In the event that the Trustee shall
have been notified at any time of any action to be taken or proposed to be taken
by holders of any Securities held by the Trust (including, but not limited to,
the making of any demand, direction, request, giving of any notice, consent or
waiver or the voting with respect to election of directors or any amendment or
supplement to any corporate resolution, agreement or other instrument under or
pursuant to which such Securities have been issued) the Trustee shall promptly
notify the Depositors and shall thereupon take such action or refrain from
taking any action as the Depositors shall in writing direct; provided, however,
that if the Depositors shall not within five business days of the giving of such
notice to the Depositors direct the Trustee to take or refrain from taking any
action, the Trustee shall take such action as it, in its sole discretion, shall
deem advisable. Neither the Depositors nor the Trustee shall be liable to any
person for any action or failure to take action with respect to this section.
Section 3.13. Notice of Change in Principal Account: The Trustee
shall give prompt written notice to the Depositors of all amounts credited to or
withdrawn from the Principal Account pursuant to any provisions of this Article
III, and the balance of such account after giving effect to such credit or
withdrawal.
Section 3.14. Extraordinary Distributions: Any property received by
the Trustee after the initial date of Deposit in a form other than cash or
additional shares of the Securities listed on Schedule A or of a Substitute
Security, shall be sold and the proceeds of sale credited to the Principal
Account of the Trust, as the Depositors may direct. In no event shall the
Trustee hold as part of the Trust, except temporarily pending sale or
distribution as described in the preceding sentence, any property other than
cash (including a letter of
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credit) and the Securities described on Schedule A or a Substitute Security.
The Securities and cash represented by a Unit shall be uniform so
that each Unit shall at all times represent property identical to that
represented by every other Unit. Securities identical to those represented by a
Unit and received as the result of a nontaxable stock dividend or stock split
may be retained in the Trust and the number of shares of such a Security
represented by a Unit adjusted accordingly. All other non-cash distributions in
respect of any Securities held in the Trust shall be sold.
ARTICLE 4
EVALUATION OF SECURITIES
Section 4.1. Evaluation of Securities: The Trustee shall determine
separately and promptly furnish to the Depositors upon request the value of each
issue of the Securities in the Trust (determined as set forth below) as of the
Evaluation Time on each of the days on which the Trustee shall make the Trust
Evaluation required by Section 5.1. The value of each issue of Securities shall
be determined in good faith by the Trustee in accordance with the following
procedures: If the Securities are listed on one or more national securities
exchanges, such valuation shall be based on the closing purchase price on such
exchange which is the principal market thereof, deemed to be the New York Stock
Exchange if the Securities are listed thereon, (unless the Trustee deems such
price inappropriate as a basis for valuation). If the Securities are not so
listed, or, if so listed and the principal market therefor is other than such
exchange or there is no closing purchase price on such exchange, such valuation
shall be based on the closing purchase price in the over-the-counter market
(unless the Trustee deems such price inappropriate as a basis for valuation) 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 of such Securities as obtained from
investment dealers or brokers (including the Depositor) who customarily deal in
securities comparable to those held by the Trust, or (b) if bid prices are not
available for any of such Securities, on the basis of bid prices for comparable
securities, or (c) by appraisal of the value of the Securities on the bid side
of the market or by such other appraisal as is deemed appropriate, or (d) by any
combination of the above. The Trustee shall be permitted to rely on these
evaluations when determining the Unit Price. The Trustee shall have no
responsibility or
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liability for the valuations supplied to it by the independent evaluation
service. The Trustee shall also make an evaluation of the Securities deposited
in the Trust as of the time said Securities are deposited under this Indenture.
Such evaluation shall be made on the same basis as set forth above and shall be
included in the Schedules attached to the Reference Trust Agreement.
Section 4.2. Tax Reports: For the purpose of permitting
Certificateholders to satisfy any reporting requirements of applicable Federal
or State tax law, the Trustee shall transmit to any Certificateholder upon
written request any determinations made by the Trustee pursuant to Section 4.1.
Section 4.3. Liability of Trustee with respect to Evaluations: The
Depositors and the Certificateholders may rely on any evaluation furnished by
the Trustee and shall have no responsibility for the accuracy thereof. The
determinations made by the Trustee hereunder shall be made in good faith upon
the basis of, and shall have no liability for errors in, the information
reasonably available to it. The Trustee shall be under no liability to the
Depositors or the Certificateholders for errors in judgment or any action taken
in good faith, provided, however, that this provision shall not protect the
Trustee against any liability to which it would otherwise be subject by reason
of willful misfeasance, bad faith or gross negligence in the performance of its
duties or by reason of its reckless disregard of its obligations and duties
hereunder.
ARTICLE 5
TRUST EVALUATION, REDEMPTION, PURCHASE, TRANSFER,
INTERCHANGE OR REPLACEMENT OF CERTIFICATES
Section 5.1. Trust Evaluation: The Trustee shall make an evaluation
of the Trust as of the close of trading on the New York Stock Exchange (4:00
p.m. Eastern Time) (sometimes referred to herein as the "Evaluation Time") (i)
on the last Business Day of each of the months of June and December, (ii) on the
day on which any unit of the Trust is tendered for redemption (unless tender is
made after the Evaluation Time on such day, in which case Tender shall be deemed
to have been made on the next day subsequent thereto on which the New York Stock
Exchange is open for trading), and (iii) on any other day desired by the Trustee
or requested by the Depositor. Such evaluations shall take into account and
itemize separately (a)(1) the cash on hand in the Trust (other than monies on
deposit in the Reserve Account, funds deposited on the date hereof by the
Depositor for the purchase of Securities and not theretofore credited to the
Principal Account pursuant to Section 3.3 and funds in the Principal Account
with respect to which contracts for the purchase of the Substitute
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Securities have been entered into pursuant to Section 3.7 hereof), including
dividends receivable on stocks trading ex dividend, (a)(2) the value of each
issue of the Securities in the Trust as determined by the Trustee pursuant to
Section 4.1, and (a)(3) all other assets of the Trust. For each such evaluation
there shall be deducted from the sum of the above (b)(1) amounts representing
any applicable taxes or other governmental charges payable out of the Trust and
for which no deductions shall have previously been made for the purpose of
addition to the Reserve Account, (b)(2) amounts representing accrued fees of the
Trustee and expenses of the Trust including but not limited to unpaid fees of
the Trustee and expenses of the Trust including but not limited to unpaid fees
of the Trustee and expenses of the Trust (including legal and auditing
expenses), accrued fees and expenses of the Depositors and their respective
successor, if any, and (b)(3) cash held for distribution to Certificateholders
of record as of a date on or prior to the evaluation then being made. The value
of the pro rata share of each unit of the Trust determined on the basis of any
such evaluation shall be referred to herein as the "Unit Value."
The sum of (a)(1) and (a)(3) reduced by the sum of (b)(1) and (b)(2)
and (b)(3) shall be referred to herein as the "Unit Cash Value".
The Trustee shall promptly advise the Depositors of each
determination of Unit value made by it as above provided, and, in addition, upon
each valuation by the Trustee under Section 4.1 other than those involved in
such calculations of Unit Value, the Trustee shall promptly furnish to
Depositors, for purposes of assisting it in maintaining a market in the Units,
with such information regarding the Principal, Income and Reserve Accounts as
the Depositors may reasonably request.
Section 5.2. Redemptions by Trustee; Purchases by Depositors: Any
Certificate tendered for redemption by a Certificateholder or his duly
authorized attorney to the Trustee at its corporate trust office, or any Plan
Unit tendered to the Trustee for redemption by the registered holder thereof
pursuant to the Redemption Form, shall be redeemed by the Trustee on the seventh
calendar day following the day on which tender for redemption is made, provided
that if such day of redemption is not a business day, then such Certificate or
Plan Unit shall be redeemed on the first business day prior thereto (such
seventh calendar day or first business day prior thereto being herein called the
"Redemption Date"). Subject to payment by such Certificateholder of any tax or
other governmental charges which may be imposed thereon, such redemption is to
be made by payment on the Redemption Date of cash equivalent to the Net Asset
Value per Unit or Plan Unit determined by the Trustee as of the Evaluation Time
on the date of tender, multiplied by the number of Units represented by such
Certificate or Redemption Form
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(herein called the "Redemption Price"). Certificates or Redemption Forms
received for redemption by the Trustee on any day after the Evaluation Time will
be held by the Trustee until the next day on which the New York Stock Exchange
is open for trading and will be deemed to have been tendered on such day for
redemption at the Redemption Price computed on that day.
The Trustee may in its discretion, and shall when so directed by the
Depositors in writing, suspend the right of redemption or postpone the date of
payment of the Redemption Price for more than seven calendar days following the
day on which tender for redemption is made:
(1) for any period during which the New York Stock Exchange is
closed other than customary weekend and holiday closings or during which
trading on the New York Stock Exchange is restricted;
(2) for any period during which an emergency exists as a result of
which disposal by the Trust of the Securities is not reasonably
practicable or it is not reasonably practicable fairly to determine in
accordance herewith the value of the Securities; or
(3) for such other periods as the Securities and
Exchange Commission may by order permit,
and the Trustee shall not be liable to any person or in any way for any loss or
damage which may result from any such suspension or postponement.
Not later than the close of business on the day of tender of a
Certificate or Redemption Form for redemption by a Certificateholder other than
the Depositors, the Trustee shall notify the Depositors of such tender. The
Depositors shall have the right to purchase such Certificate or Plan Unit
tendered by such Redemption Form by notifying the Trustee of their election to
make such purchase as soon as practicable thereafter, but in no event subsequent
to the close of business on the second business day after the day on which such
Certificate or Redemption Form was tendered for redemption. Such purchase shall
be made by payment for such Certificate or Plan Unit by the Depositors to the
Certificateholder or Plan Unit holder not later than the close of business on
the Redemption Date of an amount equal to the Redemption Price which would
otherwise be payable by the Trustee to such Certificateholder or Plan Unit
holder.
Any Certificate or Plan Unit so purchased by the Depositors may, at
the option of the Depositors, be tendered to the Trustee for redemption at the
corporate trust office of the Trustee in the manner provided in the first
paragraph of this Section 5.2.
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If the Depositors do not elect to purchase any Certificate or Plan
Unit tendered to the Trustee for redemption, or if a Certificate or Plan Unit is
being tendered by the Depositors for redemption, that portion of the Redemption
Price which represents dividends shall be withdrawn from the Income Account to
the extent funds are available. The balance paid on any redemption, including
accrued dividends, if any, shall be withdrawn from the Principal Account to the
extent that funds are available for such purpose. If such available balance
shall be insufficient, the Trustee shall sell such Securities from among those
designated on the current list for such purpose as provided below and in the
manner, in its discretion, as it shall deem advisable or necessary in order to
fund the Principal Account for purposes of such redemption. Sales of Securities
by the Trustee shall be made in such manner as the Trustee shall determine,
subject to any minimum face amount limitations on sale which shall have been
specified by the Depositors and agreed to by the Trustee. In the event that
funds are withdrawn from the Principal Account or Securities are sold for
payment of any portion of the Redemption Price representing accrued dividends,
the Principal Account shall be reimbursed when sufficient funds are next
available in the Income Account for such funds so applied.
The Depositors shall maintain with the Trustee a current list of
Securities designated to be sold for the purpose of redemption of Certificates
or Plan Units tendered for redemption and not purchased by the Depositors, and
for payment of expenses hereunder, provided that if the Depositors shall for any
reason fail to maintain such a list, the Trustee, in its sole discretion, may
designate a current list of Securities for such purposes. The net proceeds of
any sales of Securities from such list representing principal shall be credited
to the Principal Account and the proceeds of such sales representing accrued
interest shall be credited to the Income Account.
Neither the Trustee nor the Depositors shall be liable or
responsible in any way for depreciation or loss incurred by reason of any sale
of Securities made pursuant to this Section 5.2.
Certificates evidencing Units redeemed pursuant to this Section 5.2
shall be canceled by the Trustee and the Units evidenced by such Certificates or
Plan Units tendered by Redemption Forms shall be terminated by such redemptions.
In the event that a Certificate shall be tendered representing a number of Units
greater than those requested to be redeemed by the Certificateholder, the
Trustee shall issue to each Certificate-holder, upon payment of any tax or
charges of the character referred to in the second paragraph to Section 5.3, a
new Certificate evidencing the Units representing the balance of the Certificate
so tendered.
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Notwithstanding the foregoing provisions of this Section 5.2, the
Trustee is hereby irrevocably authorized in its discretion, in the event that
the Depositors do not elect to purchase any Certificate or Plan Unit tendered to
the Trustee for redemption, or in the event that a Certificate or Plan Unit is
being tendered by the Depositors for redemption, in lieu of redeeming Units or
Plan Units tendered for redemption, to sell such Units or Plan Units in the
over-the-counter market or by private sale for the account of tendering Unit or
Plan Unit holders at prices which will return to the Unit or Plan Unit holders
amounts in cash, net after deducting brokerage commissions, transfer taxes and
other charges, equal to or in excess of the Redemption Prices which such Unit or
Plan Unit holders would otherwise be entitled to receive on redemption pursuant
to this Section 5.2. The Trustee shall pay to the Unit or Plan Unit holders the
net proceeds of any such sale on the day they would otherwise be entitled to
receive payment of the Redemption Price hereunder.
Section 5.3. Transfer or Interchange of Certificates: A Certificate
may be transferred by the registered holder thereof by presentation and
surrender of such Certificate at the unit investment trust office of the Trustee
properly endorsed or accompanied by a written instrument or instruments of
transfer in form satisfactory to the Trustee and executed by the
Certificate-holder or his authorized attorney, whereupon a new registered
Certificate or Certificates for the same number of Units executed by the Trustee
and the Depositors will be issued in exchange and substitution therefor.
Certificates issued pursuant to this Indenture are interchangeable for one or
more other Certificates in an equal aggregate number of Units and all
Certificates issued shall be issued in denominations of one Unit or any multiple
thereof as may be requested by the Certificateholder. The Trustee may deem and
treat the person in whose name any Certificate shall be registered upon the
books of the Trustee as the owner of such Certificate for all purposes hereunder
and the Trustee shall not be affected by any notice to the contrary, nor be
liable to any person or in any way for so deeming or treating the person in
whose name any Certificate shall be so registered.
A sum sufficient to pay any tax or other governmental charge that
may be imposed in connection with any such transfer or interchange shall be paid
by the Certificateholder to the Trustee. The Trustee may require a
Certificateholder to pay $2.00 for each new Certificate issued on any such
transfer or interchange.
All Certificates canceled pursuant to this Indenture shall be
disposed of by the Trustee without liability on its part.
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Section 5.4. Certificates Mutilated, Destroyed, Stolen or Lost: In
case any Certificate shall become mutilated or be destroyed, stolen or lost, the
Trustee shall execute and deliver a new Certificate in exchange and substitution
therefor upon the holder's furnishing the Trustee with proper identification and
indemnity satisfactory to the Trustee, and complying with such other reasonable
regulations and conditions as the Trustee may prescribe and paying such expenses
as the Trustee may incur. Any mutilated Certificate shall be duly surrendered
and canceled before any new Certificate shall be issued in exchange and
substitution therefor. Upon the issuance of any new Certificate a sum sufficient
to pay any tax or other governmental charge and the fees and expenses of the
Trustee may be imposed. Any such new Certificate issued pursuant to this Section
shall constitute complete and indefeasible evidence of ownership in the Trust,
as if originally issued, whether or not the lost, stolen or destroyed
Certificate shall be found at any time.
In the event the Trust has terminated or is in the process of
termination, the Trustee may, instead of issuing a new Certificate in exchange
and substitution for any Certificate which shall have become mutilated or shall
have been destroyed, stolen or lost, make the distributions in respect of such
mutilated, destroyed, stolen or lost Certificate (without surrender thereof
except in the case of a mutilated Certificate) as provided in Section 9.2 hereof
if the Trustee is furnished with such security or indemnity as it may require to
save it harmless, and in the cause of destruction, loss or theft of a
Certificate, evidence to the satisfaction of the Trustee of the destruction,
loss or theft of such Certificate and of the ownership thereof.
ARTICLE 6
TRUSTEE; REMOVAL OF DEPOSITORS
Section 6.1. General Definition of Trustee's Liabilities, Rights and
Duties; Removal of Depositors: In addition to and notwithstanding the other
duties, rights, privileges and liabilities of the Trustee otherwise set forth
herein, the liabilities of the Trustee are further defined as follows:
(a) All moneys deposited with or received by the Trustee hereunder
shall be held by the Trustee without interest in trust as part of the Trust or
the Reserve Account until required to be disbursed in accordance with the
provisions of this Indenture and such moneys will be segregated by separate
recordation on the trust ledgers of the Trustee so long as such practice
preserves a valid preference under applicable law, or if such preference is not
so preserved the Trustee shall handle such
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moneys in such other manner as shall constitute the segregation and holding
thereof in trust within the meaning of the Investment Company Act of 1940.
(b) The Trustee shall be under no liability for any action taken in
good faith on any appraisal, paper, order, list, demand, request, consent,
affidavit, notice, opinion, direction, evaluation, endorsement, assignment,
resolution, draft or other document, whether or not of the same kind, prima
facie properly executed, or for the disposition of moneys, Securities or
Certificates pursuant to this Indenture, or in respect of any evaluation which
the Trustee is required to make or is required or permitted to have made by
others under this Indenture or otherwise except by reason of its gross
negligence, lack of good faith or willful misconduct, provided that the Trustee
shall not in any event be liable or responsible for any evaluation made by any
independent evaluation service employed by it pursuant to Section 4.1. The Trust
shall pay and hold the Trustee harmless from and against any loss, liability or
expense incurred in acting as Trustee of the Trust other than by reason of
willful misfeasance, bad faith or gross negligence in the performance of its
duties or by reason of its reckless disregard of its obligations and duties
hereunder, including the costs and expenses of the defense against any claim or
liability in the premises. The Trustee may construe any of the provisions of
this Indenture, insofar as the same may appear to be ambiguous or inconsistent
with any other provisions hereof, and any construction of any such provisions
hereof by the Trustee in good faith shall be binding upon the parties hereto.
The Trustee shall in no event be deemed to have assumed or incurred any
liability, duty or obligation to any Certificateholder or the Depositors, other
than as expressly provided for herein.
(c) The Trustee shall not be responsible for or in respect of the
recitals herein, the validity or sufficiency of this Indenture or for the due
execution hereof by the Depositors, or for the form, character, genuineness,
sufficiency, value or validity of any Securities (except that the Trustee shall
be responsible for the exercise of due care in determining the genuineness of
Securities delivered to it pursuant to contracts for the purchase of such
Securities) or for or in respect of the validity or sufficiency of the
Certificates or of the due execution thereof by the Depositors, and the Trustee
shall in no event assume or incur any liability, duty or obligation to any
Certificateholder or the Depositors other than as expressly provided for herein.
The Trustee shall not be responsible for or in respect of the validity of any
signature by or on behalf of the Depositors.
(d) The Trustee shall not be under any obligation to appear in,
prosecute or defend any action, which in its opinion may involve it in expense
or liability, unless as often as
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required, it shall be furnished with reasonable security and indemnity against
such expense or liability as it may require, and any pecuniary cost of the
Trustee from such actions shall be deductible from and a charge against the
Income and Principal Accounts. The Trustee shall in its discretion undertake
such action as it may deem necessary at any and all times to protect the Trust
and the rights and interests of the Certificateholders pursuant to the terms of
this Indenture, provided, however, that the expenses and costs of such actions,
undertakings or proceedings shall be reimbursable to the Trustee from the Income
and Principal Accounts, and the payment of such costs and expenses shall be
secured by a lien on the Trust prior to the interests of the Certificateholders.
(e) The Trustee may employ agents, attorneys, accountants and
auditors and shall not be answerable for the default or misconduct of any such
agents, attorneys, accountants or auditors if such agents, attorneys,
accountants or auditors shall have been selected with reasonable care; provided,
however, that if the Trustee chooses to employ the Depository Trust Company in
connection with the storage and handling of, and the furnishing of
administrative services in connection with the Securities, the Trustee will be
answerable for any default or misconduct of the Depository Trust Company and its
employees and agents as fully and to the same extent as if such default or
misconduct had been committed or occasioned by the Trustee. The Trustee shall be
fully protected in respect of any action under this Agreement taken, or
suffered, in good faith by the Trustee, in accordance with the opinion of its
counsel, which may be counsel to the Depositors acceptable to the Trustee. The
account of the Trust shall be audited not less frequently than annually by
independent certified public accountants designated from time to time by the
Depositor, and the reports of such accountants shall be furnished by the Trustee
to Certificateholders upon request. The fees and expenses charged by such
agents, attorneys, accountants or auditors shall constitute an expense of the
Trustee reimbursable from the Income and Principal Accounts as set forth in
Section 3.5 hereof.
(f) Other than as provided in Article 7 hereunder, if at any time
both Depositors shall resign or fail to undertake or perform or become incapable
of undertaking or performing any of the duties which by the terms of this
Indenture are required by them to be undertaken or performed and no express
provision is made for action to be taken by the Trustee in such event, or both
Depositors shall be adjudged bankrupt or insolvent, or a receiver of such
Depositors or of their property shall be appointed, or any public officer shall
take charge or control of such Depositors or of their property or affairs for
the purpose of rehabilitation, conservation or liquidation, then in any such
case, the Trustee may do any one or more of the following: (1) appoint a
successor Depositor (which may be the Trustee) who
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shall act hereunder in all respects in place of the Depositor, who shall be
compensated semi-annually, at rates deemed by the Trustee to be reasonable under
the circumstances, by deduction from the Income Account or from the Principal
Account, but no such deduction shall be made exceeding such reasonable amount as
the Securities and Exchange Commission may prescribe in accordance with Section
26(a)(2)(C) of the Investment Company Act of 1940; or (2) terminate this
Indenture and the Trust created hereby and liquidate the Trust, all in the
manner provided in Section 9.2.
(g) If the value of the Trust as shown by any evaluation by the
Trustee pursuant to Section 5.1 hereof shall be less than the liquidation amount
specified in Part II of the Reference Trust Agreement, the Trustee may in its
discretion, and shall, when so directed by the Depositors, terminate this
Indenture and the Trust created hereby and liquidate the Trust, all in the
manner provided in Section 9.2.
(h) In no event shall the Trustee be liable for any taxes or other
governmental charges imposed upon or in respect of the Securities or upon the
dividends thereon or upon it as Trustee hereunder or upon or in respect of the
Trust which it may be required to pay under any present or future law of the
United States of America or any other taxing authority having jurisdiction in
the premises. For all such taxes and charges and for any expenses, including
counsel fees, which the Trustee may sustain or incur with respect to such taxes
or charges, the Trustee shall be reimbursed and indemnified out of the Income
and Principal Accounts of the Trust, and the payment of such amounts so paid by
the Trustee shall be secured by a lien on the Trust prior to the interests of
the Certificateholders.
The Depositors shall, upon request by the Trustee, provide the
Trustee with a current list of Securities designated to be sold for the purpose
of payment of expenses hereunder, provided that if the Depositors shall for any
reason fail to provide such a list, the Trustee, in its sole discretion, may
designate a current list of Securities for such purposes. The net proceeds of
any such sales of Securities from such list representing principal shall be
credited to the Principal Account.
(i) The Trustee, except by reason of its gross negligence, lack of
good faith, reckless disregard of its obligations hereunder or willful
misconduct, shall not be liable for any action taken or suffered to be taken by
it in good faith and believed by it to be authorized or within the discretion or
rights or powers conferred upon it by this Indenture.
(j) Notwithstanding anything in this Indenture to the contrary, the
Trustee is authorized and empowered to enter into
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any safekeeping arrangement or arrangements it deems necessary or appropriate
for holding the Securities then owned by the Trust and the Trustee is authorized
and empowered in its sole right to amend, supplement or terminate any
safekeeping arrangement or arrangements made under this provision. In addition,
the Trustee is authorized and empowered, at the request and discretion of the
Depositors, to execute and file on behalf of the Trust any and all documents, in
connection with consents to service of process, required to be filed under the
securities laws of the various States in order to permit the sale of Units of
the Trust in such States by the Depositor.
Section 6.2. Books, Records and Reports: The Trustee shall keep
proper books of record and account of all the transactions under this Indenture
at its unit investment trust office including a record of the name and address
of, and the Certificates issued by the Trust and held by, every
Certificate-holder, and such books and records shall be open to inspection by
any Certificateholder at all reasonable times during the usual business hours,
and such books and records shall be made available to the Depositors upon the
request of the Depositors including, but not limited to, a record of the name
and address of, and the Certificates issued by the Trust and held by, every
Certificateholder.
The Trustee shall cause audited statements as to the assets and
income of the Trust to be prepared on an annual basis by independent public
accountants selected by the Depositors, provided, however, that if the
Depositors are then making a market for units of the Trust, the Depositors shall
bear the cost of such audit to the extent that it exceeds $.50/unit of
approximately $1000 initial value (or such proportionate amount in the case of
units of greater or lesser initial value). Such audited statement will be made
available to Certificateholders upon request.
To the extent permitted under the Investment Company Act of 1940 as
evidenced by an opinion of counsel to the Depositors, reasonably acceptable to
the Trustee, the Trustee shall pay, or reimburse to the Depositors or others,
the costs of the preparation of documents and information with respect to the
Trust required by law or regulation in connection with the maintenance of a
secondary market in units of the Trust. Such costs may include but are not
limited to accounting and legal fees, blue sky registration and filing fees,
printing expenses and other reasonable expenses related to documents required
under Federal and state securities laws.
The Trustee shall make such annual or other reports as may from time
to time be required under any applicable state or federal statute or rule or
regulation thereunder.
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Section 6.3. Indenture and List of Securities on File: The Trustee
shall keep a certified copy or duplicate original of this Indenture on file at
its unit investment trust office available for inspection at all reasonable
times during the usual business hours by any Certificateholder and the Trustee
shall keep and so make available for inspection a current list of the
Securities.
Section 6.4. Compensation: For services performed under this
Indenture the Trustee shall be paid at the rate per annum set forth in Part II
of the Reference Trust Agreement which shall be computed on the basis of the
greatest number of units of the Trust outstanding at any time during the period
with respect to which such compensation is being computed. The Trustee may from
time to time adjust its compensation as set forth above provided that the total
adjustment upward does not, at the time of such adjustment, exceed the
percentage of the total increase, after the date hereof, in consumer prices for
services as measured by the United States Department of Labor Consumer Price
Index entitled "All Services Less Rent," or, if such index shall cease to be
published, then as measured by the available index most nearly comparable to
such index. The consent or concurrence of any Certificateholder hereunder shall
not be required for any such adjustment or increase, however, the consent of the
Depositors shall be required. Such compensation shall be charged by the Trustee
against the Income and Principal Accounts on or before the Payment Date on which
such period terminates; provided, however, that such compensation shall be
deemed to provide only for the usual normal and recurring functions undertaken
as Trustee pursuant to this Indenture.
The Trustee shall charge the Income and Principal Accounts as
provided for in Section 3.5(b) for any and all expenses, including the fees of
counsel which may be retained by the Trustee in connection with its activities
hereunder, and disbursements incurred hereunder and any extraordinary services
performed by the Trustee hereunder. The Trustee shall be indemnified and held
harmless against any loss or liability accruing to it without gross negligence,
bad faith or willful misconduct on its part, arising out of or in connection
with the acceptance or administration of this trust, including the costs and
expenses (including counsel fees) of defending itself against any claim of
liability in the premises. If the cash balances in the Income and Principal
Accounts shall be insufficient to provide for amounts payable pursuant to this
Section 6.4, the Trustee shall have the power to sell (i) Securities from the
current list of Securities designated to be sold pursuant to Section 5.2 hereof,
or (ii) if no such Securities have been so designated, such Securities as the
Trustee may see fit to sell in its own discretion, and to apply the proceeds of
any such sale in payment of the amounts payable pursuant to this Section 6.4.
The Trustee shall not be liable or responsible in any way for
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depreciation or loss incurred by reason of any sale of Securities made pursuant
to this Section 6.4. Any moneys payable to the Trustee pursuant to this section
shall be secured by a prior lien on the Trust.
Section 6.5. Removal and Resignation of the Trustee; Successor: The
following provisions shall provide for the removal and resignation of the
Trustee and the appointment of any successor Trustee:
(a) any resignation or removal of the Trustee and appointment of a
successor pursuant to this section shall not become effective until acceptance
of appointment by the successor Trustee as provided in subsection (b) hereof;
(b) the Trustee or any trustee hereafter appointed may resign and be
discharged of the trust created by this Indenture by executing an instrument in
writing resigning as such Trustee, filing the same with the Depositors and
mailing a copy of a notice of resignation to all Certificateholders then on
record not less than sixty days before the date specified in such instrument
when, subject to Section 6.5(d), such resignation is to take effect. Upon
receiving such notice of resignation, the Depositors shall use their best
efforts to promptly appoint a successor Trustee as hereinafter provided, by
written instrument, in duplicate, one copy of which shall be delivered to the
resigning Trustee and one copy to the successor Trustee. In case at any time the
Trustee shall become incapable of acting or shall be deemed incapable of acting
by the written consent of holders of Certificates evidencing 66 2/3% of the
outstanding Units comprising a particular series, or shall be adjudged a
bankrupt or insolvent, or a receiver of the Trustee or of its property shall be
appointed, or any public officer shall take charge or control of the Trustee or
of its property or affairs for the purposes of rehabilitation, conservation, or
liquidation, then in any such case the Depositors may remove the Trustee and
appoint a successor Trustee by written instrument, in duplicate, one copy of
which shall be delivered to the Trustee so removed and one copy to the successor
Trustee; provided that notice of such removal and appointment of a successor
shall be given to each Certificateholder then of record;
(c) any successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Depositors and the retiring Trustee an instrument
accepting such appointment hereunder, and such successor Trustee without any
further act, deed or conveyance shall become vested with all the rights, powers,
duties and obligations of its predecessor hereunder with like effect as if
originally named Trustee herein and shall be bound by all the terms and
conditions of this Indenture. Upon the request of such successor Trustee, the
Depositors and the retiring Trustee shall, upon payment of any amounts due the
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retiring Trustee or provision therefor to the satisfaction of such retiring
Trustee, execute and deliver an instrument acknowledged by it transferring to
such successor trustee all the rights and powers of the retiring Trustee; and
the retiring Trustee shall transfer, deliver and pay over to the successor
Trustee all Securities and moneys at the time held by it hereunder, together
with all necessary instruments of transfer and assignment or other documents
properly executed necessary to effect such transfer and such of the records or
copies thereof maintained by the retiring Trustee in the administration hereof
as may be requested by the successor Trustee, and shall thereupon be discharged
from all duties and responsibilities under this Indenture. The retiring Trustee
shall, nevertheless, retain a lien upon all Securities and moneys at the time
held by it hereunder to secure any amounts then due the retiring Trustee
hereunder;
(d) in case at any time the Trustee shall resign and no successor
Trustee shall have been appointed and have accepted appointment within thirty
days after notice of resignation has been received by the Depositors, the
retiring Trustee may forthwith apply to a court of competent jurisdiction for
the appointment of a successor Trustee. Such court may thereupon, after such
notice, if any, as it may deem proper and prescribe, appoint a successor
Trustee; and
(e) any corporation into which any Trustee hereunder may be merged
or with which it may consolidate, or any corporation resulting from any merger
or consolidation to which any Trustee hereunder shall be a party, shall be the
successor Trustee under this Indenture without the execution or filing of any
paper, instrument or further act to be done on the part of the parties hereto,
anything herein, or in any agreement relating to such merger or consolidation,
by which any such Trustee may seek to retain certain powers, rights and
privileges theretofore obtaining for any period of time following such merger or
consolidation, to the contrary notwithstanding.
Section 6.6. Qualifications of Trustee: The Trustee, or any
successor thereof, shall be a corporation organized and doing business under the
laws of the United States or any state thereof, which is authorized under such
laws to exercise corporate trust powers and having at all times an aggregate
capital, surplus, and undivided profits of not less than $2,500,000.
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ARTICLE 7
DEPOSITORS
Section 7.1. Succession: The covenants, provisions and agreements
herein contained shall in every case be binding upon any successor to the
business of the Depositors. In the event of the death, resignation or withdrawal
of any partner of a Depositor or of any successor Depositor which may be a
partnership, the deceased, resigning or withdrawing partner shall be relieved of
all further liability hereunder if at the time of such death, resignation or
withdrawal such Depositor maintains a net worth (determined in accordance with
generally accepted accounting principles) of at least $1,000,000. In the event
of an assignment by any Depositor to a successor corporation or partnership as
permitted by the next following sentence, such Depositor and, if such Depositor
is a partnership, its partners, shall be relieved of all further liability under
this Indenture. A Depositor may transfer all or substantially all of its assets
to a corporation or partnership which carries on the business of the Depositor,
if at the time of such transfer such successor duly assumes all the obligations
of the Depositor under this Indenture and if at such time such successor
maintains a net worth of at least $1,000,000 (determined in accordance with
generally accepted accounting principles).
Section 7.2. Resignation of Depositors: If at any time any Depositor
desires to resign its position as Depositor hereunder, it may resign by
delivering to the Trustee an instrument of resignation executed by such
Depositor. Such resignation shall become effective upon the expiration of thirty
days from the date on which such instrument is delivered to the Trustee. Upon
effective resignation hereunder, the resigning Depositor shall be discharged and
shall no longer be liable in any manner hereunder except as to acts or omissions
occurring prior to such resignation and the remaining Depositor, or in the event
both Depositors resign, any successor Depositor appointed by the Trustee
pursuant to Section 6.1(f) shall thereupon perform all duties and be entitled to
all rights under this Indenture. The successor Depositor shall not be under any
liability hereunder for occurrences or omissions prior to the execution of such
instrument.
Section 7.3. Liability of Depositors and Indemnification: (a) The
Depositors shall be under no liability to the Trust or the Certificateholders
for any action or for refraining from the taking of any action in good faith
pursuant to this Indenture, or for errors in judgment or for depreciation or
loss incurred by reason of the purchase or sale of any Securities, provided,
however, that this provision shall not protect any Depositor against any
liability to which it would otherwise be subject by reason of willful
misfeasance, bad faith
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or gross negligence in the performance of its duties or by reason of its
reckless disregard of its obligations and duties hereunder. The Depositors may
rely in good faith on any paper, order, notice, list, affidavit, receipt,
evaluation, opinion, endorsement, assignment, draft or any other document of any
kind prima facie properly executed and submitted to it by the Trustee, the
Trustee's counsel or any other person for any matters arising hereunder. The
Depositors shall in no event be deemed to have assumed or incurred any
liability, duty, or obligation to any Certificateholder or the Trustee other
than as expressly provided for herein.
(b) The Trust shall pay and hold the Depositors harmless from and
against any loss, liability or expense incurred in acting as Depositors of the
Trust other than by reason of willful misfeasance, bad faith or gross negligence
in the performance of their duties or by reason of their reckless disregard of
their obligations and duties hereunder, including the costs and expenses of the
defense against any claim or liability in the premises. The Depositors shall not
be under any obligation to appear in, prosecute or defend any legal action which
in their opinion may involve them in any expense or liability, provided,
however, that the Depositors may in their discretion undertake any such action
which they may deem necessary or desirable in respect of this Indenture and the
rights and duties of the parties hereto and the interests of the
Certificateholders hereunder and, in such event, the legal expenses and costs of
any such action and any liability resulting therefrom shall be expenses, costs
and liabilities of the Trust and shall be paid directly by the Trustee out of
the Income and Principal Accounts as provided by Section 3.5.
(c) None of the provisions of this Indenture shall be deemed to
protect or purport to protect the Depositors against any liability to the Trust
or to the Certificateholders to which the Depositors would otherwise be subject
by reason of willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of the Depositors' reckless disregard of
their obligations and duties under this Indenture.
At all times prior to the termination of the Trust and while the
Depositors thereof shall continue to act jointly hereunder, there shall be
maintained on file with the Trustee a power of attorney executed in favor of one
Depositor by the other Depositor constituting and appointing the non-executing
Depositor the true and lawful agent and attorney-in-fact of the executing
Depositor to execute and deliver for and on behalf of the executing Depositor
any and all notices, opinions, certificates, lists, demands, directions,
instruments, or other documents provided or permitted to be executed or
delivered by the Depositors hereunder in connection with the Trust or to take
any other action in respect hereof. Such power of attorney shall
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continue in effect as to the executing Depositor until written notice of
revocation thereof has been given by such executing Depositor to the Trustee.
Prior to receipt of such notice of revocation the Trustee shall be entitled to
rely conclusively upon such power of attorney as authorizing the non-executing
Depositor to give any notice, opinion, certificate, list, demand, direction,
instrument, or other document provided for or permitted hereunder or to take any
other action in respect hereof on behalf of the executing Depositor. In the
event that such power of attorney shall be revoked and shall not be replaced
within one business day by another power of attorney conforming with the
requirements of this paragraph, the Depositors shall be deemed to have been
unable to reach agreement with respect to action to be taken jointly by them
hereunder in connection with the Trust and thereupon the Depositor which has
revoked the power of attorney executed by it shall be discharged hereunder upon
the expiration of such one-day period and thereupon the other Depositor shall
act hereunder without the necessity of any other or further action on their part
or on the part of the Trustee. Notwithstanding the discharge of a Depositor of
the Trust, such Depositor shall continue to be fully liable in accordance with
the provisions hereof in respect of action taken or refrained from under this
Agreement by the Depositors before the date of such discharge as fully and to
the same extent as if no discharge had occurred.
Section 7.4. Compensation: The Depositors shall receive at the times
set forth in Section 3.5 as compensation for performing portfolio supervisory
services, such amount and for such periods as specified in Part II of the
Reference Trust Agreement. The computation of such compensation shall be made on
the basis of $.25 per 100 Units calculated on the basis of the largest number of
units outstanding at any time during the period for which such compensation is
being computed. At no time, however, will the total amount received by the
Depositors for services rendered to all series of the Equities Securities Trust
in any calendar year exceed the aggregate cost to it of supplying such services
in such year. Such rate may be increased by the Trustee from time to time,
without the consent or approval of any Certificateholder or the Depositors, by
amounts not exceeding the proportionate increase during the period from the date
of such Reference Trust Agreement to the date of any such increase, in consumer
prices as published either under the classification "All Services Less Rent" in
the Consumer Price Index published by the United States Department of Labor or,
if such Index is no longer published, a similar index.
In the event that any amount of the compensation paid to any
Depositor pursuant to Section 3.5 is found to be an improper charge against the
Trust, the Depositor shall reimburse the Trust in such amount. An improper
charge shall be established if a final judgment or order for reimbursement of
the
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Trust shall be rendered against the Depositor and such judgment or order shall
not be effectively stayed or a final settlement is established in which the
Depositor agrees to reimburse the Trust for amounts paid to the Depositor
pursuant to this Section 7.4.
ARTICLE 8
RIGHTS OF CERTIFICATEHOLDERS
Section 8.1. Beneficiaries of Trust: By the purchase and acceptance
or other lawful delivery and acceptance of any Certificate the Certificateholder
shall be deemed to be a beneficiary of the Trust created by this Indenture and
vested with all right, title and interest in the Trust to the extent of the Unit
or Units set forth and evidenced by such Certificate, subject to the terms and
conditions of this Indenture and of such Certificate.
Section 8.2. Rights, Terms and Conditions: In addition to the other
rights and powers set forth in the other provisions and conditions of this
Indenture the Certificate-holders shall have the following rights and powers and
shall be subject to the following terms and conditions:
(a) A Certificateholder may at any time prior to the Evaluation Time
on the date the Trust is terminated tender his Certificate or Certificates to
the Trustee for redemption in accordance with Section 5.2.
(b) The death or incapacity of any Certificateholder shall not
operate to terminate this Indenture or the Trust, nor entitle his legal
representatives or heirs to claim an accounting or to take any action or
proceeding in any court of competent jurisdiction for a partition or winding up
of the Trust, nor otherwise affect the rights, obligations and liabilities of
the parties hereto or any of them. Each Certificateholder expressly waives any
right he may have under any rule of law, or the provisions of any statute, or
otherwise, to require the Trustee at any time to account, in any manner other
than as expressly provided in this Indenture, in respect of the Bonds or moneys
from time to time received, held and applied by the Trustee hereunder.
(c) No Certificateholder shall have any right to vote or in any
manner otherwise control the operation and management of the Trust, or the
obligations of the parties hereto, nor shall anything herein set forth, or
contained in the terms of the Certificates, be construed so as to constitute the
Certificate-holders from time to time as partners; nor shall any
Certificate-holder ever be under any liability to any third persons by reason
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of any action taken by the parties to this Indenture for any other cause
whatsoever.
ARTICLE 9
ADDITIONAL COVENANTS; MISCELLANEOUS PROVISIONS
Section 9.1. Amendments: This Indenture may be amended from time to
time by the parties hereto or their respective successors, without the consent
of any of the Certificateholders (a) to cure any ambiguity or to correct or
supplement any provision contained herein which may be defective or inconsistent
with any other provision contained herein; (b) to change any provision required
by Securities and Exchange Commission or any successor governmental agency to be
changed; or (c) to make such other provision in regard to matters or questions
arising hereunder as shall not adversely affect the interests of the
Certificateholders; provided, however, that the parties hereto may not amend
this Indenture so as to (1) increase the number of Units above the number set
forth in Part II of the Reference Trust Agreement or such lesser amount as may
be outstanding at any time during the term of this Indenture, except as the
result of the deposit of Additional Securities as herein provided, or (2) except
in the manner permitted by the Indenture as in effect on the date of the first
deposit of Securities under a particular Indenture, permit the deposit or
acquisition hereunder of securities either in addition to or in replacement of
any of the Bonds.
This Indenture may also be amended from time to time by the
Depositors and the Trustee (or the performance of any of the provisions or this
Agreement may be waived) with the expressed written consent of holders of
Certificates evidencing 66-2/3% of the Units at the time outstanding under the
Indenture for the purpose of adding any provisions to or changing in any manner
or eliminating any of the provisions of this Indenture or of modifying in any
manner the rights of the holders of Certificates; provided, however, that no
such amendment or waiver shall (i) reduce the interest in the Trust represented
by Units evidenced by any Certificate without the consent of the holder of such
Certificate, (ii) reduce the aforesaid percentage of Units, the holders of which
are required to consent to any such amendment, without the consent of the
holders of all Certificates then outstanding or (iii) affect the duties,
obligations and responsibilities of the Trustee without its consent.
Promptly after the execution of any such amendment the Trustee shall
furnish written notification to all then outstanding Certificateholders of the
substance of such amendment.
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Section 9.2. Termination: This Indenture and the Trust created
hereby shall terminate upon the maturity, redemption, sale or other disposition
as the case may be of the last Security held hereunder unless sooner terminated
as herein-before specified and may be terminated at any time by written consent
of all the holders of Certificates; provided that in no event shall the Trust
continue beyond the end of the Mandatory Termination Date specified in the
prospectus for the Trust.
Written notice of any termination, specifying the time or times at
which the Certificateholders may surrender their Certificates for cancellation
shall be given by the Trustee to each Certificateholder at his address appearing
on the registration books of the Trustee.
In the event of any termination of the Trust prior to the
Termination Date, the Trustee shall proceed to liquidate the Securities then
held and make the payments and distributions provided for hereinafter in this
Section 9.2 except that in such event, the distribution to each
Certificateholder shall be made in cash and shall be such Certificateholder's
pro rata interest in the balance of the Principal and Income Account after the
deductions herein provided.
In the event that the Trust terminates on the Termination Date, the
Trustee shall, not less than 20 days prior to the Termination Date, send a
written notice to each Certificateholder of record owning, as of such date,
Units in the aggregate value of at least $25,000. Such notice shall allow such
Certificateholder to elect to redeem his Units at the net asset value on the
Termination Date and to receive, in partial payment of the Redemption Price per
Unit, an in-kind distribution of such Certificateholder's pro rata share of the
Securities, to the extent of whole shares. The Trustee will honor duly executed
requests for such in-kind distribution received (accompanied by the electing
Certificateholder's Certificate) by the close of business on the Termination
Date. Certificateholders who do not effectively request an in-kind distribution
shall receive their distribution upon termination in cash. Redemption of the
Units of Certificateholders electing such in-kind distribution shall be made
within 7 calendar days following the Termination Date and shall consist of (i)
such Certificateholder's pro rata share of Securities (valued as of the
Termination Date) to the extent of whole shares and (ii) cash equal to the
balance of such Certificateholder's Redemption Price.
On the Termination Date, this Indenture and the Trust created hereby
shall terminate. In connection with such Termination, the Trustee shall
segregate such number of shares of Securities as shall be necessary to satisfy
in-kind distributions to Certificateholders electing such distribution.
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The balance of the Securities shall be sold over a period of 60
business days immediately following the Termination Date. The Depositors shall
direct the Trustee to sell the Securities in such manner as the Depositors
determine will produce the best price for the Trust. Pursuant to such direction,
the Trustee may use the services of the Depositors to effect such sales.
Within a reasonable period of time after such termination and
liquidation of Securities, the Trustee shall:
(a) deduct from the Income Account or, to the extent that funds are
not available in such account, from the Principal Account and pay to itself
individually an amount equal to the sum of
(1) its accrued compensation for its ordinary
recurring services,
(2) any compensation due it for its extraordinary
services, and
(3) any other costs, expenses, advances or indemnities
as provided herein.
(b) deduct from the Income Account or, to the extent that funds are
not available in such account, from the Principal Account and pay accrued and
unpaid fees of counsel pursuant to Section 3.9;
(c) deduct from the Income Account or the Principal Account any
amounts which may be required to be deposited in the Reserve Account to provide
for payment of any applicable taxes or other governmental charges and any other
amounts which may be required to meet expenses incurred under this Indenture;
(d) make a final distribution from the Trust, against surrender for
cancellation of each Certificateholder's Certificate or Certificates, such
Certificateholder's pro rata share of the cash balances of the Income and
Principal Accounts and, on the conditions set forth in Section 3.04 hereof, the
balance of the Reserve Account, if any;
(e) together with such distribution to each Certificateholder as
provided for in (d), furnish to each such Certificateholder a final distribution
statement as of the date of the computation of the amount distributable to
Certificate-holders, setting forth the data and information in substantially the
form and manner provided for in Section 3.6 hereof; and
(f) distribute to each Certificateholder receiving the distribution
provided in paragraph (d) any dividends, which on
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the Termination Date were declared, but not received, net of any and all
expenses not previously deducted, within a reasonable time of their receipt.
The amounts to be so distributed to each Certificate-holder shall be
that pro rata share of the balance of the total Income and Principal Accounts as
shall be represented by the Units therein evidenced by the outstanding
Certificate or Certificates held of record by such Certificateholder.
The Trustee shall be under no liability with respect to moneys held
by it in the Income, Reserve and Principal Accounts upon termination except to
hold the same in trust without interest until disposed of in accordance with the
terms of this Indenture.
Upon the Depositors' request, the Trustee will include in the
written notice to be sent to Certificateholders referred to in the fourth
paragraph of this section a form of election whereby Certificateholders electing
a cash distribution may express interest in investing such cash distribution in
units of another series of the Equity Securities Trust (the "New Series"). The
Trustee will inform the Depositors of all Certificateholders who, within the
time period specified in such notice, express such interest. The Depositors will
provide to such Certificateholders any applicable sales material with respect to
the New Series and a form, acceptable to the Trustee, whereby a
Certificateholder may appoint the Trustee the Certificateholder's agent to apply
the Certificateholder's cash distribution for the purchase of a unit or units of
the New Series. Such form will specify, among other things, the time by which it
must be returned to the Trustee in order to be effective and the manner in which
such purchase shall be made. This paragraph shall not obligate the Depositors to
create any New Series or to provide any such investment election.
Section 9.3. Construction: This Indenture is executed and delivered
in the State of New York, and all local laws or rules of construction of such
State shall govern the rights of the parties hereto and the Certificateholders
and the interpretation of the provisions hereof.
Section 9.4. Registration of Certificates: The Depositors agree and
undertake to register the Certificates with the Securities and Exchange
Commission or other applicable governmental agency pursuant to applicable
Federal or State statutes, if such registration shall be required, and to do all
things that may be necessary or required to comply with this provision during
the term of the Trust created hereunder, and the Trustee shall incur no
liability or be under any obligation or expense in connection therewith.
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Section 9.5. Written Notice: Any notice, demand, direction or
instruction to be given to the Depositors hereunder shall be in writing and
shall be duly given if mailed or delivered to the Depositors as follows: Bear,
Stearns & Co. Inc., 245 Park Avenue, New York, New York 10167 or to Gruntal &
Co., Incorporated, 14 Wall Street, New York, New York 10005, or at such other
address as shall be specified by the Depositors to the Trustee in writing. Any
notice, demand, direction or instruction to be given to the Trustee shall be in
writing and shall be duly given if mailed or delivered to the Trustee at 770
Broadway, New York, New York 10003, or such other address as shall be specified
to the Depositors by the Trustee in writing. Any notice to be given to the
Certificateholders shall be duly given if mailed or delivered to each
Certificateholder at the address of such holder appearing on the registration
books of the Trustee.
Section 9.6. Severability: If any one or more of the covenants,
agreements, provisions or terms of this Indenture shall be held contrary to any
express provision of law or contrary to policy or express law, though not
expressly prohibited, or against public policy, or shall for any reason
whatsoever be held invalid, then such covenants, agreements, provisions or terms
shall be deemed severable from the remaining covenants, agreements, provisions
or terms of this Indenture and shall in no way affect the validity or
enforceability of the other provisions of this Indenture or of the Certificates
or the rights of the holders thereof.
Section 9.7. Dissolution of Depositors Not to Terminate: The
dissolution of the Depositors from or for any cause whatsoever shall not operate
to terminate this Indenture or the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed as of the date first above written.
[Signatures and acknowledgements on separate pages.]
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Bear, Stearns & Co. Inc.
Depositors
By_______________________
Managing Director
ATTEST:
- -------------------------------
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
I, Rachelle I. Rehner, a Notary Public in and for the said County in
the State aforesaid, do hereby certify that Peter J. DeMarco personally known to
me to be the same person whose name is subscribed to the foregoing instrument
and personally known to me to be a Managing Director of Bear, Stearns & Co.
Inc., a corporation, appeared before me this day in person, and acknowledged
that he signed and delivered the said instrument as his free and voluntary act
as such Managing Director and as the free and voluntary act of said Bear,
Stearns & Co. Inc., for the uses and purposes therein set forth.
GIVEN under my hand and notarial seal this 3rd day of June, 1992.
__________________________
Notary Public
(SEAL)
My Commission expires:
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<PAGE>
UNITED STATES TRUST COMPANY
OF NEW YORK
TRUSTEE
________________________________
Vice President
(SEAL)
ATTEST:
- -------------------------------
Assistant Secretary
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On this 3rd day of June, 1992, before me personally came Thomas
Centrone, to me known, who being by me duly sworn, said that he is a Vice
President of United States Trust Company of New York, one of the corporations
described in and which executed the foregoing instrument; that he knows the seal
of said corporation; that the seal affixed to the said instrument is such
corporate seal; that it was so affixed by authority of the Board of Directors of
said corporation; and that he signed his name thereto by like authority.
____________________________
Notary Public
(SEAL)
My Commission expires:
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<PAGE>
GRUNTAL & CO., INCORPORATED
Depositors
By__________________________
Senior Vice President
ATTEST:
- -------------------------------
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
I, Rachelle I. Rehner, a Notary Public in and for the said County in
the State aforesaid, do hereby certify that George Bernard personally known to
me to be the same person whose name is subscribed to the foregoing instrument
and personally known to me to be a Senior Vice President of Gruntal & Co.,
Incorporated, a corporation, appeared before me this day in person, and
acknowledged that he signed and delivered the said instrument as his free and
voluntary act as such Senior Vice President and as the free and voluntary act of
said Gruntal & Co., Incorporated, for the uses and purposes therein set forth.
GIVEN under my hand and notarial seal this 3rd day of June, 1992.
_____________________________
Notary Public
(SEAL)
My Commission expires:
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