Rule 497(b)
Registration No. 33-62898
Note: Part A of This Prospectus May Not Be
Distributed Unless Accompanied by Part B.
EQUITY SECURITIES TRUST
SERIES 3
SIGNATURE SERIES, GABELLI COMMUNICATIONS INCOME TRUST
The Trust is a unit investment trust designated Equity Securities Trust,
Series 3, Signature Series, Gabelli Communications Income Trust
("Communications Trust" or "Trust"). The Sponsor is Bear, Stearns & Co.
Inc. The objectives of the Communications Trust are to seek to achieve
capital appreciation together with a high level of current income. In
addition, it is the Trust's objective to achieve growth in income with the
growth in capital. Neither the Sponsor nor the Portfolio Consultant can
give assurance that the Trust's objectives can be achieved. The Trust
contains an underlying portfolio consisting primarily of common stock,
convertible securities, preferred stock and American Depository Receipts
("ADRs") and contracts and funds for the purchase of such securities
(collectively, the "Securities"), which have been purchased by the Trust
based upon the recommendations of the portfolio consultant, Gabelli Funds,
Inc. (the "Portfolio Consultant"). The Trust is concentrated in the equity
securities of communications companies located both within and outside the
United States. There are certain risks inherent in an investment in common
stock, convertible securities and ADRs of companies in the communications
industry. 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 including descriptive material relating to the Trust
as of December 31, 1994 (the "Evaluation Date"), a summary of certain
specific information regarding 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.
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
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PROSPECTUS PART A DATED APRIL 28, 1995
109738.1
<PAGE>
THE TRUST
The Trust is a unit investment trust designated Equity Securities Trust,
Series 3, Signature Series, Gabelli Communications Income Trust
("Communications Trust" or "Trust"). The Sponsor is Bear, Stearns & Co. Inc.
The objectives of the Communications Trust are to seek to achieve capital
appreciation together with a high level of current income. In addition, it is
the Trust's objective to achieve growth in income with the growth in capital.
Neither the Sponsor nor the Portfolio Consultant can give assurance that the
Trust's objectives can be achieved. The Trust contains an underlying portfolio
consisting primarily of common stock, convertible securities, preferred stock,
American Depository Receipts ("ADRs") and contracts and funds for the purchase
of such securities (collectively, the "Securities"), which have been purchased
by the Trust based upon the recommendations of the portfolio consultant,
Gabelli Funds, Inc. (the "Portfolio Consultant"). In selecting Securities for
the Trust, the Portfolio Consultant considers the following factors, among
others: (1) the Portfolio Consultant's own evaluations of the private market
value of the underlying assets and business of the issuers of the Securities;
(2) the interest or dividend income generated by the Securities; (3) the
potential for capital appreciation for the Securities; (4) the prices of the
Securities relative to other comparable securities; (5) whether the Securities
are entitled to the benefits of sinking funds or other protective conditions;
(6) the existence of any anti-dilution protections of the Security; and (7)
the diversification of the Trust's portfolio as to issuers. The Trust is
concentrated in the equity securities of communications companies located both
within and outside the United States. All of the Securities which are issued
by foreign issuers are in the form of ADRs or are listed on a U.S. stock
exchange. There are certain risks inherent in an investment in a portfolio of
domestic common stocks, ADRs and convertible securities of companies in the
communications industry. See "Risk Considerations" in this Part A and in Part
B. The Trust will terminate on the earlier of August 17, 1996 (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 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. 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. 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
A-2
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<PAGE>
Units are issued by the Trust as a result of the deposit of 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 1/9915929th 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 makes a primary over-the-counter market in the shares of
Portfolio No. 22. The Sponsor has not participated 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
An investment in Units of the Trust should be made with an understanding
of the risks inherent in any investment in such Securities including: (i) for
common stocks, 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); (ii) for ADRs the
risks associated with government, economic, monetary and fiscal policies,
inflation and interest rates, economic expansion or contraction, and global or
regional political, economic or banking crises; and (iii) for convertible
securities that are rated lower than investment grade (i.e., "high yield" or
"junk bond" status) the increased risk as to the timely repayment of principal
and timely payment of interest or dividends on such Securities. (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 are 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
3.9% of the Public Offering Price per 100 Units (excluding any transaction
fees) or 4.058% of the net amount invested in Securities per 100 Units during
the initial public offering period. (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 every month (the "Monthly Distribution
Date"). Distributions of capital gains realized, if any, will be made to
Certificateholders of record on the record date immediately preceding such
Monthly Distribution Date. (See "Rights of Certificateholders--Distributions"
in Part B.)
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<PAGE>
MARKET FOR UNITS
The Sponsor, although not obligated to do so, presently maintains and
intends to continue to maintain a secondary market for the Units of the Trust.
The secondary market repurchase price will be based on the market value of the
Securities in the Trust portfolio. (See "Liquidity--Sponsor Repurchase" for a
description on how the secondary market repurchase price will be determined.)
If a market is not maintained a Certificateholder will be able to redeem his
Units with the Trustee. (See "Liquidity--Trustee Redemption" in Part B.) Some
of the Securities in the Trust portfolio have been purchased in ADR form in
United States dollars. However, ADRs are not necessarily listed on a national
securities exchange. The principal trading market for certain other 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
maintenance 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 The Treasurer's
Fund, Inc., U.S. Treasury Money Market Portfolio (the "Fund").
Gabelli-O'Connor Fixed Income Mutual Funds Management Co. serves as the
investment adviser of the Fund and GOC Fund Distributors, Inc. 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 (three
years after the initial Date of Deposit) (the "Liquidation Period"),
Securities will begin to be sold in connection with the termination of the
Trust and all Securities will be sold by the Mandatory Termination Date. The
Trustee may utilize the services of the Sponsor for the sale of all or a
portion of the Securities in the Trust. The Sponsor will receive brokerage
commissions from the Trust in connection with such sales in accordance with
applicable law. The Sponsor will determine the manner, timing and execution of
the sales of the underlying Securities. 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.
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.
It is expected (but not required) that the Sponsor will generally follow
the following guidelines in selling the Securities: for highly liquid
Securities, the Sponsor will generally sell Securities on the first day of the
Liquidation
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109738.1
<PAGE>
Period; for less liquid Securities, on each of the first two days of the
Liquidation Period, the Sponsor will generally sell any amount of any
underlying Securities at a price no less than 1/2 of one point under the last
closing sale price of those Securities. On each of the following two days, the
price limit will increase to one point under the last closing sale price.
After four days, the Sponsor intends to sell at least a fraction of the
remaining underlying Securities, the numerator of which is one and the
denominator of which is the total number of days remaining (including that
day) in the Liquidation Period, without any price restrictions.
During the Liquidation Period, Certificateholders who have not chosen to
receive distributions-in-kind will be at risk to the extent that Securities
are not sold; for this reason the Sponsor will be inclined to sell the
Securities in as short a period as it can without materially adversely
affecting the price of the Securities. However, Certificateholders who have
chosen to receive distributions-in-kind upon liquidation of the Trust should
be aware that this will be a taxable event to such Certificateholder, and that
the Certificateholder will recognize taxable gain or loss (equal to the
difference between such Certificateholder's tax basis in his Units and the
fair market value of Securities received upon liquidation), which will be a
capital gain or loss except in the case of a dealer in securities. (See "Tax
Status" in this Part B.)
Certificateholders should consult their own tax advisers in this regard.
A-5
109738.1
<PAGE>
<TABLE>
EQUITY SECURITIES TRUST, SERIES 3
SIGNATURE SERIES, GABELLI COMMUNICATIONS INCOME TRUST
<CAPTION>
SUMMARY OF ESSENTIAL INFORMATION AS OF DECEMBER 31, 1994
<S> <C>
DATE OF DEPOSIT*: June 17, 1993 LIQUIDATION PERIOD: Beginning 60 days prior
AGGREGATE VALUE OF SECURITIES**.....................$93,449.475 to the Mandatory Termination Date.
AGGREGATE VALUE OF SECURITIES MINIMUM VALUE OF TRUST: The Trust may
PER 100 UNITS....................................$942.42 be terminated if the value of the Trust is less than
NUMBER OF UNITS.....................................9,915,929 40% of the aggregate value of the Securities at the
FRACTIONAL UNDIVIDED INTEREST completion of the Deposit Period.
IN TRUST ........................................1/9915929 MANDATORY TERMINATION DATE: The
SECONDARY MARKET PUBLIC OFFERING PRICE*** earlier of August 17, 1996 or the disposition of the
Aggregate Value of Securities in Trust**.........$93,449,475 last Security in the Trust.
Divided By 9,915,929 Units (times 100)...........$942.42 TRUSTEE****: United States Trust Company of
Plus Sales Charge of 3.9% of Public New York.
Offering Price per 100 units...................$38.24 TRUSTEE'S ANNUAL FEE: $.90 per 100 Units
Public Offering Price per outstanding.
100 Units......................................$980.66 PORTFOLIO CONSULTANT: Gabelli Funds, Inc.
SPONSOR'S REPURCHASE PRICE OTHER ANNUAL FEES AND EXPENSES: $.63
AND REDEMPTION PRICE PER per 100 Units outstanding.
100 UNITS........................................$942.42 SPONSOR: Bear, Stearns & Co. Inc.
EXCESS OF SECONDARY MARKET SPONSOR'S ANNUAL SUPERVISORY FEE:
PUBLIC OFFERING PRICE OVER Maximum of $.25 per 100 Units outstanding (see
REDEMPTION PRICE PER 100 UNITS...................$38.24 "Trust Expenses and Charges" in Part B).
EVALUATION TIME: 4:00 p.m. New York Time. RECORD DATE: First of each month.
MINIMUM PRINCIPAL DISTRIBUTION: DIVIDEND DISTRIBUTION DATE: Fifteenth of
$1.00 per 100 Units each month.
</TABLE>
- -----------------------------
* The Date of Deposit is the date on which the Trust Agreement was
signed and the initial deposit of Securities with the Trustee was
made.
** Includes accrued income receivable.
*** For information regarding offering price per unit and applicable
sales charges under the Total Reinvestment Plan, see "Total
Reinvestment Plan" in Part B of this Prospectus.
**** The Trustee maintains its corporate trust office at 770
Broadway, New York, NY 10003 (Tel. No. 1-800-428-8890).
For information regarding redemption by the Trustee, see
"Trustee Redemption" in Part B of this Prospectus.
A-6
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<PAGE>
INFORMATION REGARDING THE TRUST AS OF DECEMBER 31, 1994
DESCRIPTION OF PORTFOLIO*
Number of Issues: 40 (40 issuers)
Domestic Issuers: 30 (83.51% of the aggregate market value of securities)
Foreign Issuers: 10 (16.49% of the aggregate market value of securities)
(NYSE 91.27%; AMEX 1.93%; Over the Counter 6.80%)
Ratings of Convertible Securities: (BBB + .64% Portfolio No.
38; BB + 6.57% Portfolio No. 37; B1 + 1.48% Portfolio No. 39; CCC + 5.16%
Portfolio No. 35; Caa 2.20% Portfolio Nos. 36 and 40)
144A Stock: (.64% Portfolio No. 38)
Common Stocks 71.66%; Convertible Securities 16.04%; ADRs 12.30%
Number of Issues by Industry:
Cable, 1 (2.07%); Cellular, 5 (12.65%); Publishing/Entertainment, 1
(6.57%) and Telecommunications, 33 (80.71%).
Percentage of Portfolio by Country of Organization or
Principal Place of Business of Issuers:
Brazil 1.48% Canada 4.01% Chile .52% Hong Kong .76% Mexico .99%
New Zealand 1.41% Philippines.18% Spain 2.92% United Kingdom4.22% United
States83.51%
--------
* For Changes in the Trust Portfolio from January 1, 1995 to
March 23, 1995 see Schedule A on pages A-9 - A-11.
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FINANCIAL AND STATISTICAL INFORMATION
Selected data for each Unit of the Trust outstanding for the periods listed
below:
<TABLE>
<CAPTION>
Distributions of Distributions of
Net Asset* Interest During Principal During
Value the Period the Period
Period Ended Units Outstandin per 100 Units (per 100 Units) (per 100 Units)
<S> <C> <C> <C> <C>
December 31, 1993 11,353,557 $1,019.55 $23.26 $0.33
December 31, 1994 9,915,929 936.79 42.51 - 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-8
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<PAGE>
SCHEDULE A
Changes in the Trust Portfolio:
On January 13, 1995, 446 shares ($13,506.65) of ALLTEL Corp. held by the
Trust (Portfolio no. 1) were sold.
On January 13, 1995, 2,890 shares ($115,697.27) of Ameritech Corp. held by
the Trust (Portfolio no. 2) were sold.
On January 13, 1995, 2,009 shares ($96,750.20) of AT&T held by the Trust
(Portfolio no. 3) were sold.
On January 13, 1995, 2,279 shares ($85,434.48) of Bell Canada held by the
Trust (Portfolio no. 4) were sold.
On January 13, 1995, 2,279 shares ($110,892.44) of Bell Atlantic held by
the Trust (Portfolio no. 5) were sold.
On January 13, 1995, 2,173 shares ($118,500.59) of BellSouth Corp. held by
the Trust (Portfolio no. 6) were sold.
On January 13, 1995, 1,962 shares ($33,666.78) of Cincinnati Bell Inc.
held by the Trust (Portfolio no. 7) were sold.
On January 13, 1995, 1,104 shares ($20,599.94) of Communications Satellite
held by the Trust (Portfolio no. 8) were sold.
On January 13, 1995, 683 shares ($8,390.37) of Citizens Utilities Co. held
by the Trust (Portfolio no. 9) were sold.
On January 13, 1995, 3,971 shares ($119,265.00) of GTE Corp. held by the
Trust (Portfolio no. 10) were sold.
On January 13, 1995, 1,174 shares ($17,903.50) of Lincoln
Telecommunications held by the Trust (Portfolio no. 11) were sold.
On January 13, 1995, 846 shares ($15,228.00) of MCI Communications held by
the Trust (Portfolio no. 12) were sold.
On January 13, 1995, 2,655 shares ($98,988.36) of NYNEX Corp. held by the
Trust (Portfolio no. 13) were sold.
On January 13, 1995, 1,562 shares ($46,860.00) of Pacific Telecom held by
the Trust (Portfolio no. 14) were sold.
On January 13, 1995, 3,889 shares ($111,941.12) of Pacific Telesis held by
the Trust (Portfolio no. 15) were sold.
On January 13, 1995, 70 shares ($3,773.56) of Philippine Long Distance
held by the Trust (Portfolio no. 16) were sold.
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On January 13, 1995, 587 shares ($11,980.27) of Frontier Corp. (formerly,
Rochester Telephone) held by the Trust (Portfolio no. 17) were sold.
On January 13, 1995, 282 shares ($5,226.68) of Scientific-Atlanta held by
the Trust (Portfolio no. 18) were sold.
On January 13, 1995, 3,043 shares ($100,141.77) of Southern New England
Telecom held by the Trust (Portfolio no. 19) were sold.
On January 13, 1995, 2,961 shares ($120,390.23) of Southwestern Bell held
by the Trust (Portfolio no. 20) were sold.
On January 13, 1995, 752 shares ($20,235.63) of Sprint Corp. held by the
Trust (Portfolio no. 21) were sold.
On January 13, 1995, 3,184 shares ($114,333.61) of US West held by the
Trust (Portfolio no. 22) were sold.
On January 13, 1995, 223 shares ($29,324.50) of LIN Broadcasting held by
the Trust (Portfolio no. 23) were sold.
On January 13, 1995, 810 shares ($35,262.17) of Telephone and Data Systems
held by the Trust (Portfolio no. 24) were sold.
On January 13, 1995, 2,009 shares ($64,105.04) of Vodafone Group held by
the Trust (Portfolio no. 25) were sold.
On January 13, 1995, 35 shares ($1,470.00) of QVC Network held by the
Trust (Portfolio no. 26) were sold.
On January 13, 1995, 904 shares ($54,269.82) of British Telecommunications
held by the Trust (Portfolio no. 27) were sold.
On January 13, 1995, 2,044 shares ($35,584.84) of Cable and Wireless plc
held by the Trust (Portfolio no. 28) were sold.
On January 13, 1995, 846 shares ($15,151.34) of Hong Kong
Telecommunications Limited held by the Trust (Portfolio no. 29) were sold.
On January 13, 1995, 587 shares ($30,470.14) of New Zealand Telecom
Corporation held by the Trust (Portfolio no. 30) were sold.
On January 13, 1995, 705 shares ($26,966.25) of
Telebras-Telecommunications Brasil, S.A. held by the Trust (Portfolio no.
31) were sold.
On January 13, 1995, 1,777 shares ($63,587.82) of Telefonica de Espana,
S.A. held by the Trust (Portfolio no. 32) were sold.
On January 13, 1995, 141 shares ($10,879.19) of Telefonos de Chile, S.A.
held by the Trust (Portfolio no. 33) were sold.
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On January 13, 1995, 517 shares ($19,017.20) of Telefonos
de Mexico, S.A. de C.V. held by the Trust (Portfolio no. 34) were sold.
On January 17, 1995, 45,000 shares ($100,800.00) of Cellular
Communications of Puerto Rico, Inc. held by the Trust (Portfolio no. 35)
were sold.
On January 17, 1995, 25,000 shares ($26,125.00) of Cellular Inc. held by
the Trust (Portfolio no. 36) were sold.
On January 17, 1995, 150,000 shares ($140,850.00) of Time Warner Inc. held
by the Trust (Portfolio no. 37) were sold.
On January 17, 1995, 10,000 shares ($11,650.00) of Century Tel. Ent. held
by the Trust (Portfolio no. 38) were sold.
On January 17, 1995, 25,000 shares ($30,875.00) of General Instrument
Corp. held by the Trust (Portfolio no. 39) were sold.
On January 17, 1995, 25,000 shares ($22,500.00) of M/A Communications held
by the Trust (Portfolio no. 40) were sold.
On February 3, 1995, 497,000 shares ($630,568.75) of Century Tel. Ent.
held by the Trust (Portfolio no. 38) were sold.
On March 14, 1995, 435 shares ($5,561.28) of Citizens Utilities Co. held
by the Trust (Portfolio no. 9) were sold.
On March 17, 1995, the Trust tendered its shares of QVC Network (Portfolio
no. 26) into a tender offer of $46 per share and received $69,092.00.
From January 1, 1995 to March 23, 1995, 303,673 Units were redeemed from
the Trust.
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<PAGE>
Independent Auditors' Report
The Sponsor, Trustee and Certificateholders
Equity Securities Trust Series 3,
Signature Series, Gabelli Communications Income Trust
We have audited the accompanying statement of net assets, including the
portfolio, of Equity Securities Trust Series 3, Signature Series, Gabelli
Communications Income Trust as of December 31, 1994, and the related statement
of operations, and changes in net assets for the year then ended and for the
period from June 17, 1993 (date of initial deposit) to December 31, 1993.
These financial statements are the responsibility of the Trustee (see note 2).
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test_basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of December 31, 1994,
by correspondence with the Trustee. An audit also includes assessing the
accounting principles used and significant estimates made by the Trustee, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Equity Securities Trust
Series 3, Signature Series, Gabelli Communications Income Trust as of December
31, 1994, and the results of its operations and the changes in its net assets
for the year then ended and for the period from June 17, 1993 (date of initial
deposit) to December 31, 1993 in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
New York, New York
March 31, 1995
<PAGE>
EQUITY SECURITIES TRUST SERIES 3,
SIGNATURE SERIES, GABELLI COMMUNICATIONS INCOME TRUST
Statement of Net Assets
December 31, 1994
Investments in marketable securities,
at value (cost $98,257,088) $ 93,075,198
Excess of total liabilities over other assets (183,842)
---------------
Net assets (9,915,929 units of fractional undivided
interest outstanding, $9.37 per unit) $ 92,891,356
===============
See accompanying notes to financial statements.
<PAGE>
<TABLE>
EQUITY SECURITIES TRUST SERIES 3,
SIGNATURE SERIES, GABELLI COMMUNICATIONS INCOME TRUST
Statements of Operations
<CAPTION>
For the Period
For the June 17, 1993
Year Ended (date of initial deposit)
Dec. 31, 1994 to Dec. 31, 1993
------------ --------------
<S> <C> <C>
Investment income:
Interest income $ 1,054,989 $ 295,550
Dividend income 4,298,742 1,155,409
------------ --------------
Total investment income 5,353,731 1,450,959
Expenses:
Trustee's fees 147,504 68,317
------------ --------------
Investment income, net 5,206,227 1,382,642
------------ --------------
Realized and unrealized gain on investments:
Realized gain on securities sold or called 3,687,017 288,830
Unrealized appreciation (depreciation)
of investments for the period (12,685,298) 7,503,408
------------ --------------
Net gain (loss) on investments (8,998,281) 7,792,238
------------ --------------
Net increase (decrease)
in net assets resulting
from operations $ (3,792,054) $ 9,174,880
============ ==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
EQUITY SECURITIES TRUST SERIES 3,
SIGNATURE SERIES, GABELLI COMMUNICATIONS INCOME TRUST
Statements of Changes in Net Assets
<CAPTION>
For the Period
For the June 17, 1993
Year Ended (date of initial deposit)
Dec. 31, 1994 to Dec. 31, 1993
--------------- ---------------
<S> <C> <C>
Operations:
Investment income, net $ 5,206,227 1,382,642
Realized gain on securities
sold or called 3,687,017 288,830
Unrealized appreciation (depreciation)
of investments for the period (12,685,298) 7,503,408
--------------- ---------------
Net increase (decrease)
in net assets resulting
from operations (3,792,054) 9,174,880
--------------- ---------------
Distributions:
To Certificateholders:
Investment income 4,625,334 1,811,324
_ Principal - 37,795
Redemptions:
Interest 336,718 5,798
Principal 14,109,786 1,737,849
--------------- ---------------
Total distributions
and redemptions 19,071,838 3,592,766
--------------- ---------------
Total increase (decrease) (22,863,892) 5,582,114
Value of additional units
acquired during offering period - 109,972,004
Net assets at beginning of period 115,755,248 201,130
--------------- ---------------
Net assets at end of period (including
distributions in excess of net
investment income of $190,305
and $434,480, respectively) $ 92,891,356 115,755,248
=============== ===============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
EQUITY SECURITIES TRUST SERIES 3
SIGNATURE SERIES, GABELLI COMMUNICATIONS INCOME TRUST
Notes to Financial Statements
December 31, 1994
(1) Organization
Equity Securities Trust Series 3, Signature Series, Gabelli Communications
Income Trust (Trust) was organized on June 17, 1993 by Bear, Stearns & Co.
Inc. (Sponsor) under the laws of the State of New York by a Trust Indenture
and Agreement, and is registered under the Investment Company Act of 1940. On
June 17, 1993 (date of initial deposit) the Trust had 20,986 units
outstanding. During the period June 17, 1993 to December 31, 1993 (the
offering period) the Trust issued an additional 11,444,282 units bringing the
total number of units issued to 11,465,268.
(2) Summary of Significant Accounting Policies
United States Trust Company of New York (Trustee) has custody of and
responsibility for the accounting records and financial statements of the
Trust and is responsible for establishing and maintaining a system of internal
control related thereto.
The Trustee is also responsible for all estimates of expenses and accruals
reflected in the Trust's financial statements. The accompanying financial
statements have been adjusted to record the unrealized appreciation
(depreciation) of investments and to record interest income and expenses on
the accrual basis.
Investments are carried at market value which is determined by United States
Trust Company of New York (Evaluator) based upon the closing bid prices of the
securities at the end of the period, except that the market value on the date
of deposit represents the cost to the Trust based on the offering prices for
investments at that date. The difference between cost and market value is
reflected as unrealized appreciation (depreciation) of investments. Securities
transactions are recorded on the trade date. Realized gains (losses) from
securities transactions are determined on the basis of average cost of the
securities sold or redeemed.
(3) Income Taxes
No provision for federal income taxes has been made in the accompanying
financial statements because the Trust intends to qualify for and elect the
tax treatment applicable to regulated investment companies under the Internal
Revenue Code. Under existing law, if the Trust so qualifies, it will not be
subject to federal income tax on net income and capital gains that are
distributed to unit holders.
(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 year ended December 31, 1994
and the period ended December 31, 1993.
The Trust Indenture and Agreement also requires the Trust to redeem units
tendered. 1,437,628 units were redeemed by the Trust during the year ended
December 31, 1994. 111,711 units were redeemed by the Trust during the period
from June 17, 1993 (date of initial deposit) to December 31, 1993.
(5) Net Assets
At December 31, 1994, the net assets of the Trust represented the
interest of Certificateholders as follows:
Original cost to Certificateholders $ 209,292
Less initial gross underwriting commission (8,162)
201,130
Cost of additional units acquired during
the offering period to Certificateholders 114,434,968
Less gross underwriting commission (4,462,964)
109,972,004
Cost of securities sold or called (11,916,046)
Net unrealized depreciation (5,181,890)
Distributions in excess of net
investment income (190,305)
Undistributed proceeds from
securities sold or called 6,463
Total $ 92,891,356
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 11,465,268 units of fractional undivided interest
of the Trust as of December 31, 1993 (end of the offering period).
<PAGE>
<TABLE>
EQUITY SECURITIES TRUST SERIES 3,
SIGNATURE SERIES, GABELLI COMMUNICATIONS INCOME TRUST
PORTFOLIO
December 31, 1994
<CAPTION>
Port- Cost
folio Number of
No. of shares Description Securities Value
--- --------- -------------------------- -------------- ------------
COMMON STOCK
<S> <C> <C> <C> <C>
Telecommunications 1 19,449 ALLTEL Corp. $ 543,943 $ 585,931
2 125,902 Ameritech 5,135,844 5,083,293
3 87,517 AT&T 5,366,233 4,397,729
4 116,178 Bell Canada 3,986,425 3,732,218
5 99,290 Bell Atlantic 5,915,645 4,939,678
6 94,683 Bell South Corp. 5,403,952 5,124,717
7 85,470 Cincinnati Bell 1,939,305 1,431,623
8 48,109 Communications Satellite 1,472,102 896,030
9 29,686 Citizens Utilities Co. 478,284 371,075
10 172,988 GTE Corp. 6,321,187 5,254,511
11 51,179 Lincoln Telecommunications 840,665 870,043
12 36,851 MCI Communications 1,039,387 677,137
13 115,666 NYNEX Corp. 5,195,701 4,250,726
14 68,070 Pacific Telecom 1,680,089 2,042,100
15 169,405 Pacific Telesis 5,054,293 4,828,043
16 3,073 Philippine Long Distance 189,869 169,399
17 25,591 Rochester Telephone 555,638 540,610
18 12,288 Scientific-Atlanta 205,102 258,048
19 132,556 Southern New England 4,728,951 4,258,362
Telecom
20 128,974 Southwestern Bell 5,270,983 5,207,325
21 32,756 Sprint Corp. 1,142,884 904,885
22 138,697 US West 6,444,744 4,941,081
Cellular 23 9,725 LIN Broadcasting 1,029,357 1,298,288
24 35,315 Telephone and Data Systems 1,673,515 1,628,904
25 87,517 Vodafone Group 2,181,144 $ $ 2,942,759
Cable 26 1,537 QVC Network 102,453 64,746
-------------- ------------
Total Common Stock 73,897,695 66,699,261
-------------- ------------
PREFERRED STOCK
ADRs
Telecommunications 27 39,409 British Telecommunications 2,580,930 2,369,466
28 89,070 Cable and Wireless 1,695,330 1,558,725
29 36,850 Hong Kong 578,096 704,756
Telecommunications Limited
30 25,590 New Zealand Telecom 960,885 1,314,686
Corporation
31 30,709 Telebras-Telecommunications 1,007,919 1,372,999
Brasil, S.A.
32 77,407 Telefonica de Espana, S.A. 2,620,058 2,718,921
33 6,143 Telefonos de Chile, S.A. 451,242 483,761
34 22,520 Telefonos de Mexico, S.A. 1,130,603 923,320
de C.V.
-------------- ------------
Total ADRS 11,025,063 11,446,634
-------------- ------------
</TABLE>
<PAGE>
<TABLE>
EQUITY SECURITIES TRUST SERIES 3,
SIGNATURE SERIES, GABELLI COMMUNICATIONS INCOME TRUST
PORTFOLIO
December 31, 1994
<CAPTION>
Port- Cost
folio Face of
No. Amount Description Securities Value
----- --------- -------------------------- -------------- ------------
CONVERTIBLE
SECURITIES
<S> <C> <C> <C> <C>
Cellular 35 $ 2,041,600 Cellular Communications of $ 3,112,714 $ 4,798,700
Puerto Rico, Inc. Conv.
Sr. Sub. Notes 8 1/4% due
2000
36 1,020,800 C%l,ular In#. Conv. Sub. 973,897 1,107,785
Deb. 6 3/4% due 2009
Publishing/
Entertainment 37 6,509,700 Time Warner Inc. Conv. Sub. 6,330,495 6,110,699
Deb. 8 3/4% due 2015
Telecommunications 38 506,400 Century Tel. Ent. Conv. 670,785 595,725
Sub. Deb. 6% due 2007
39 1,020,800 General Instruments Corp. 1,175,499 1,377,074
Conv. Jr. Sub. Notes 5 1/2%
due 2000
40 1,020,800 M/A Communications Conv. 1,070,940 939,320
Sub. Deb. 9 1/4%
due 2006
-------------- ------------
Total Convertible 13,334,330 14,929,303
Securities
-------------- ------------
Total investments in $ 98,257,088 $ 93,075,198
marketable securities
============== ============
</TABLE>
<PAGE>
Note: PART B OF THIS PROSPECTUS MAY NOT BE
DISTRIBUTED UNLESS ACCOMPANIED BY
PART A
Please Read and Retain Both Parts
of this Prospectus for Future Reference
EQUITY SECURITIES TRUST
SERIES 3
SIGNATURE SERIES
GABELLI COMMUNICATIONS INCOME TRUST
PROSPECTUS PART B
Dated: April 28, 1995
THE TRUST
ORGANIZATION
"Equity Securities Trust, Series 3, Signature Series, Gabelli
Communications Income Trust" consists of the "unit investment trusts"
designated as set forth in Part A. The Trust was created under the laws of the
State of New York pursuant to the Trust Indenture and Agreements* (the "Trust
Agreement"), dated the initial Date of Deposit, among Bear, Stearns & Co.
Inc., as Sponsor, and United States Trust Company of New York as Trustee.
On the initial Date of Deposit, the Sponsor deposited with the Trustee
common stock, convertible securities, preferred stock and American Depository
Receipts ("ADRs") 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
- --------
* References in this Prospectus to the Trust Agreements are qualified in
their entirety by the respective Trust Indentures and Agreements which are
incorporated herein by reference.
C/M: 01472.0018 178806.1
<PAGE>
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 (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. 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
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. 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.
OBJECTIVES
The objectives of the Trust are to seek to achieve capital appreciation
together with a high level of current income. In addition, it is the Trust's
objective to achieve growth in income with the growth in capital. The Trust
seeks to achieve these objectives by investing primarily in a portfolio of
common stocks, preferred stocks and convertible securities of foreign and
domestic issuers, and contracts to purchase such Securities, selected by the
Trust's Portfolio Consultant which the Portfolio Consultant believes will
enable the Trust to achieve these objectives. All of the Securities in the
Trust, except convertible securities and Securities that are in the form of
ADRs, are listed on the New York Stock Exchange, the American Stock Exchange
or the National Association of Securities Dealers Automated Quotations
("NASDAQ") National Market System and are generally followed by independent
investment research firms. There is no minimum capitalization or market
trading activity requirement for the selection of Securities for the Trust's
portfolio. There can be no assurance that the Trust's investment objectives
can be achieved.
THE SECURITIES
In selecting Securities for the Trust, the Portfolio Consultant considers
the following factors, among others: (1) the Portfolio Consultant's own
evaluations of the private market value of the underlying assets and business
of the issuers of the Securities; (2) the interest or dividend income
generated by the Securities; (3) the potential for capital appreciation for
the Securities; (4) the prices of the Securities relative to other comparable
securities; (5) whether the Securities are entitled to the benefits of sinking
funds or other protective conditions; (6) the existence of any anti-dilution
protections of the Security; and (7) the diversification of the Trust's
portfolio as to issuers. The Portfolio Consultant's investment philosophy
hinges on identifying assets that are selling in the public market at a
discount to the private market value, which the Portfolio Consultant defines
as the value informed purchasers are willing to pay to acquire assets with
similar characteristics. The Portfolio
-2-
C/M: 01472.0018 178806.1
<PAGE>
Consultant also evaluates the issuers' free cash flow and long-term earnings
trends. Finally, the Portfolio Consultant looks for a catalyst; something in
the company's industry or indigenous to the company itself that will surface
value.
Some of the Securities in the Trust may be in the form of ADRs. ADRs
evidence American Depository Receipts which, in turn, represent common stock
of non-U.S. issuers deposited with a custodian in a depository. In selecting
ADRs for deposit into the Trust portfolio, in addition to the factors
associated with the selection of Securities of any issuer, the Portfolio
Consultant considers the following factors, among others: (1) the location of
the issuer of the Securities underlying the ADRs; (2) the likelihood of
favorable market and political conditions in the country in which such issuer
is located; (3) the amount of publicly available information available from
such issuer; and (4) historical and recent fluctuations in the exchange rate
of the currency of such issuer relative to the United States dollar.
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 senior in rank to
common stock in a corporation's capital structure and, therefore, generally
entail less risk than the corporation's common stock.
In selecting convertible securities for the Trust, in addition to the
factors associated with the selection of Securities of any issuer, the price
of the convertible securities relative to the underlying common stock and the
potential for capital appreciation of the underlying common stock, will be
considered by the Portfolio Consultant. The Trust may convert a convertible
security which it holds only in certain limited circumstances.
(See "Risk Considerations--Convertible Securities.")
The Trust is concentrated in the equity securities of communications
companies. A communications company is a company which derives at least 50% of
either of its revenues or earnings from communications activities, or which
devotes at least 50% of its assets to such activities, based on the company's
most recent fiscal year for which audited financial information is available.
The communications industry is comprised of a variety of sectors, ranging from
companies concentrating in established technologies to those primarily engaged
in emerging or developing technologies. Examples of communications companies
include, but are not limited to, those engaged in providing the following
products or services: regular telephone service throughout the world; wireless
communications services and equipment, including cellular telephone, microwave
and satellite communications, paging, and other emerging wireless
technologies; equipment and services for both data and voice transmission,
including computer equipment; electronic components and communications
equipment; video conferencing; electronic mail; local and wide area
networking, and linkage of data and word processing systems; publishing and
information systems; video text and teletext; emerging technologies combining
television, telephone and computer systems; broadcasting, including television
and radio via VHF, UHF, satellite and microwave transmission, and cable
television.
Communications is an expanding global industry. The Portfolio Consultant
believes that at the present time a portfolio of the securities of
communications companies located throughout the world presents greater
potential for achieving capital appreciation and earning higher income than a
portfolio comprised solely of U.S. communications issuers. While the Portfolio
Consultant expects that a substantial portion of the Trust portfolio's assets
may be invested in the securities of domestic communications companies, a
significant portion of the Trust portfolio may also be comprised of the
securities of communications issuers headquartered outside the United States.
For the percentage of domestic and foreign companies, see "Description of
Portfolio" in Part A of this Prospectus.
-3-
C/M: 01472.0018 178806.1
<PAGE>
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 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.
Common Stock. Since the Trust contains common stocks of both foreign and
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 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,
-4-
C/M: 01472.0018 178806.1
<PAGE>
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--Communications
Issuers" for a discussion of the types of risks that affect holders of common
stock of issuers in the communication industries.)
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.
ADRs. An investment in Units of the Trust should be made with an
understanding of the risks inherent in an investment in foreign equity
securities in the form of American Depository Receipts, including risks
associated with government, economic, monetary and fiscal policies, inflation
and interest rates, economic expansion or contraction, and global or regional
political, economic or banking crises. ADRs evidence American Depository
Receipts which, in turn, represent common stock of non-U.S. issuers deposited
with a custodian in a depository.
The characteristics and rights and privileges of equity securities vary
from country to country, and governments may impose restrictions on foreign
ownership of certain classes of equity securities unless a non- national
purchaser acquires a license or unless the particular issuer receives
permission for ownership by non- nationals. The Trust has not obtained any of
these licenses nor does the Sponsor anticipate the need to obtain them. In
general, foreign ownership restrictions are more likely to be imposed on
voting shares than non-voting shares. Equity securities, in general, trade on
the market at a multiple of their issuers' earnings, which multiple varies
from country to country, industry to industry and company to company and may
fluctuate over time based on general perceptions of the marketplace whether or
not related to specific actions or performance results of a particular issuer.
This multiple for any particular issuer may not be uniform for all classes of
the issuer's equity securities. General perceptions of the marketplace are
based on unpredictable factors including expectations regarding government
economic, monetary and fiscal policies, inflation and interest rates, economic
expansion or contraction, the balance of payments (both on capital and current
account) and global or regional political, economic or banking crises.
Moreover, because the market for restricted stocks traded by non- nationals
generally has less volume than the market for unrestricted stocks, the market
for these unrestricted stocks may be more volatile and less liquid than the
market for shares that may be owned only by nationals of the particular
country. Investors should carefully review the objectives of the Trust and
consider their ability to assume the risks involved before making an
investment in the Trust.
The Trust may purchase ADRs 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.
In addition, for the foreign issuers that are not subject to the reporting
requirements of the Securities Exchange Act of 1934, there may be less
publicly available information than is available from a domestic issuer. Also,
foreign issuers are not necessarily subject to uniform accounting, auditing
and financial reporting standards, practices and requirements comparable to
those applicable to domestic issuers. However, the Sponsor anticipates that
adequate information will be available to allow the Sponsor and Portfolio
Consultant to supervise and/or monitor the Trust portfolio.
The ADRs in the Portfolio have been issued by non-U.S. issuers whose
earnings are stated in foreign currencies. Further, ADRs in the Trust
portfolio may pay dividends in foreign currencies, and the securities
underlying the ADRs are principally traded in foreign currencies. Most foreign
currencies have fluctuated widely in value against the United States dollar
for many reasons, including supply and demand of the respective currency, the
soundness of the world economy and the strength of the respective economy as
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compared to the economies of the United States and other countries. Therefore,
for those Securities of issuers whose earnings are stated in foreign
currencies, or which pay dividends in foreign currencies, or which are traded
in foreign currencies, there is a likelihood that their United States dollar
value will vary to some degree with fluctuations in the United States dollar
foreign exchange rates for the relevant currencies. Moreover, ADR currency
fluctuations will affect the U.S. dollar equivalent of the local currency
price of the underlying domestic share and, as a result, are likely to affect
the value of the ADRs and consequently the value of the Securities. In
addition, the rights of holders of ADRs may be different than those of holders
of the underlying shares, and the market for ADRs may be less liquid than that
for the underlying shares.
The following table sets forth end-of-month United States dollar exchange
rates for the currencies of the securities underlying the ADRs that may be
included in the portfolio for the past three years. Fluctuation of the rates
that have occurred in the past are not necessarily indicative of fluctuations
that may occur over the term of the Trust. This table shows the units of
foreign currency received for a U.S. dollar.
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United
Canada Chilean Hong Kong Mexican New Zealand Spain Kingdom
Dollar Peso Dollar Peso* Dollar Peseta Pound
Dec. 1994 1.4027 401.1231 7.7399 4.9261 1.562 131.63 .639
Nov. 1994 1.3753 402.5764 7.7339 3.4376 1.593 131.06 .638
Oct. 1994 1.3526 411.0152 7.7279 3.4364 1.624 125.45 .613
Sept. 1994 1.3413 412.3711 7.7279 3.4013 1.660 128.58 .634
Aug. 1994 1.3715 419.1114 7.7339 3.3955 1.661 130.73 .650
July 1994 1.3821 424.0882 7.7279 3.4013 1.662 130.53 .650
June 1994 1.3815 418.0602 7.7339 3.3875 1.679 131.61 .647
May 1994 1.3865 421.7629 7.7279 3.3233 1.682 135.57 .661
Apr. 1994 1.3814 426.2574 7.7279 3.2701 1.734 135.00 .659
Mar. 1994 1.3825 426.6211 7.7279 3.3579 1.779 136.12 .673
Feb. 1994 1.3522 429.1845 7.7279 3.1959 1.737 139.12 .672
Jan. 1994 1.3264 431.5925 7.7279 3.1055 1.760 140.78 .667
Dec. 1993 1.3240 434.5725 7.7275 3.1060 1.797 142.92 .670
Nov. 1993 1.3368 414.6698 7.7123 3.0986 1.825 140.78 .675
Oct. 1993 1.3212 411.7272 7.7228 3.1257 1.809 134.37 .665
Sept.1993 1.3357 414.3334 7.7342 3.1212 1.813 131.96 .655
Aug. 1993 1.3216 414.5161 7.7480 3.1130 1.809 134.85 .670
July 1993 1.2843 409.4836 7.7557 3.1208 1.821 1.95 .668
June 1993 1.2824 400.9826 7.7436 3.1170 1.853 130.19 .663
May 1993 1.2717 405.3064 7.7247 3.1205 1.841 125.85 .646
Apr. 1993 1.2713 406.0867 7.7372 3.1181 1.855 116.18 .647
Mar. 1993 1.2573 375.8884 7.7305 3.0931 1.885 115.15 .684
Feb. 1993 1.2497 396.9904 7.7327 3.0992 1.937 117.91 .694
Jan. 1993 1.2779 259.800 7.7376 3.1135 1.950 114.62 .652
Dec. 1992 1.2725 262.100 7.7416 3200.0000 1.932 112.95 .644
Nov. 1992 1.2674 262.300 7.7348 3210.0000 1.923 113.83 .654
Oct. 1992 1.2453 266.200 7.7298 3200.0000 1.853 105.74 .604
Sept. 1992 1.2225 266.300 7.7298 3210.0000 1.848 98.19 .541
Aug. 1992 1.1907 259.940 7.7318 3250.0000 1.849 93.05 .514
July 1992 1.1924 273.600 7.7341 3210.0000 1.831 94.88 .521
June 1992 1.1960 278.300 7.7343 3200.0000 1.844 99.02 .539
May 1992 1.1991 284.300 7.7421 3210.0000 1.868 101.47 .552
Apr. 1992 1.1874 283.700 7.7404 3200.0000 1.847 103.90 .569
Mar. 1992 1.1928 350.600 7.7463 3060.7130 1.825 104.88 .580
Feb. 1992 1.1825 343.840 7.7582 3060.5000 1.845 101.73 .562
Jan. 1992 1.1571 357.569 7.7612 3066.4990 1.845 100.05 .552
ADRs may be sponsored or unsponsored. In an unsponsored facility, the
depository initiates and arranges the facility at the request of market makers
and acts as agent for the ADR holder, while the company itself is not involved
in the transaction. In a sponsored facility, the issuing company initiates the
facility and agrees to pay certain administrative and shareholder-related
expenses. Sponsored facilities use a single depository and entail a
contractual relationship among the issuer, the shareholder and the depository;
unsponsored facilities
- --------
* As of January 1, 1993 the Mexican Peso became the "new peso" or "nuevo
peso." One new peso equals 1,000 old pesos. The value of the currency did
not change; the conversion was designed to simplify monetary transactions.
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involve several depositaries with no contractual relationship to the company.
ADRs designed for use in United States securities markets may be registered
securities pursuant to the Securities Act of 1933 and/or subject to the
reporting requirements of the Securities Exchange Act of 1934.
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 Federal legislation could limit the
availability of such securities and the tax advantages to issuers of the
securities. See "Summary of Essential Information" in Part A for a description
of the ratings of the convertible securities held in the Trust portfolio.
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 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
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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.
Communications Issuers. The Trust may concentrate its assets in the
communications industry and, as a result, the value of the Units of the Trust
may be susceptible to factors affecting the communications industry. The
communications industry is subject to governmental regulation and the products
and services of communications companies may be subject to rapid obsolescence.
These factors could affect the value of the Trust's Units. Telephone companies
in the United States, for example, are subject to both state and federal
regulations affecting permitted rates of returns and the kinds of services
that may be offered. Congress is currently considering legislation that would
encourage competition in local phone service by opening the local telephone
networks to competition from cable television companies and others, while
permitting phone companies to provide cable TV service and that would allow
the regional telephone companies to enter the long-distance services and
telecommunication equipment manufacturing markets. Changes in federal and
state regulation of the telecommunications industries could have a material
adverse affect on the communications industry, which includes companies
represented in the Trust's portfolio and, as a result, the value of Units of
the Trust could be adversely impacted. In addition, federal communications
laws regarding the cable television industry have recently been amended to
eliminate government regulation of cable television rates where competition is
present and allow rates to be dictated by market conditions. In the absence of
competition, however, rates shall be regulated by federal and state
governments to protect the interest of subscribers. Certain types of companies
represented in the Trust portfolio are engaged in fierce competition for a
share of the market of their products. As a result, competitive pressures are
intense and the stocks are subject to rapid price volatility. While the Trust
portfolio will concentrate on the securities of established suppliers of
traditional communication products and services, the Trust may invest in
smaller communications companies which may benefit from the development of new
products and services. These smaller companies may present greater
opportunities for capital appreciation, and may also involve greater risk than
large, established issuers. Such smaller companies may have limited product
lines, market or financial resources, and their securities may trade less
frequently and in limited volume than the securities of larger, more
established companies. As a result, the prices of the securities of such
smaller companies may fluctuate to a greater degree than the prices of
securities of other issuers.
Liquidity. Some of the Securities in the Trust portfolio have been
purchased in ADR form in United States dollars. However, ADRs are not
necessarily listed on a national securities exchange. Even when ADRs or other
Securities are listed, the principal trading market for such Securities may be
in the over-the-counter market. As a result, 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.
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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 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. Settlement of the contracts for Securities is thus
expected to take place prior to the settlement of purchase of Units on the
Date of Deposit. Settlement of the contracts for Securities is thus expected
to take place prior to the settlement of purchase of Units on the Date of
Deposit.
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 or Additional 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. In addition, the Sponsor, at its option, is authorized
under the Trust Agreement to 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 unusual circumstances as set forth under "Trust
Administration--Portfolio Supervision."
The Substitute Securities must be purchased within 20 days after the sale
of the portfolio Security or Additional Security or delivery of the notice of
the failed contract. Where the Sponsor purchases 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 equity 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
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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 or Additional 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 or 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.")
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
3.9% of the Public Offering Price per 100 Units (excluding any transaction
fees) or 4.058% of the net amount invested in Securities per 100 Units during
the initial public offering period. (See "Summary of Essential Information.")
In addition, the net amount invested in Securities will involve a
proportionate share of amounts in the Income Account and Principal Account, if
any. The Public Offering Price can vary on a daily basis from the amount
stated on the cover of this Prospectus in accordance with fluctuations in the
market value of the Securities and the price to be paid by each investor will
be computed as of the date the Units are purchased.
The aggregate value of the Securities is determined in good faith by the
Trustee on each "Business Day" as defined in the Indenture in the following
manner: if the Securities are listed on a national securities exchange or on
the NASDAQ National Market System, this evaluation is generally based on the
closing sale prices on that exchange as of the Evaluation Time (unless the
Trustee deems these prices inappropriate as a basis for valuation). If the
Securities are not so listed or, if so listed and the principal market
therefor is other than on the exchange, the evaluation generally shall be
based on the closing purchase price in the over-the-counter market (unless the
Trustee deems these prices inappropriate as a basis for evaluation) or if
there is no such closing purchase price, then the Trustee may utilize, at the
Trust's expense, an independent evaluation service or services to ascertain
the values of the Securities. The independent evaluation service shall use any
of the following methods, or a combination thereof, which it deems
appropriate: (a) on the basis of current bid prices for comparable securities,
(b) by appraising the value of the Securities on the bid side of the market or
by such other appraisal deemed appropriate by the Trustee or (c) by any
combination of the above, each as of the Evaluation Time.
VOLUME AND OTHER DISCOUNTS
Units of the Trust are available at a volume discount from the Public
Offering Price during the initial public offering. This volume discount
results in a reduction of the sales charge applicable to such purchases. The
amount of the volume discount and the approximate reduced sales charge on the
Public Offering Price applicable to such purchases are as follows:
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NUMBER OF UNITS APPROXIMATE REDUCED SALES CHARGE
- --------------------------- --------------------------------
10,000 but less than 25,000 3.77%
25,000 but less than 50,000 3.65%
50,000 but less than 75,000 3.40%
75,000 but less than 100,000 3.15%
100,000 or more 2.90%
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 Bear, Stearns & Co. Inc., the
Portfolio Consultant, and of any underwriter of the Trust may, pursuant to
employee benefit arrangements, purchase Units of the Trust at a price equal to
the then market value of the underlying securities in the Trust during the
initial offering period, divided by the number of Units outstanding plus a
reduced sales charge of up to a maximum of 1.75% 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 2% per Unit, subject to the Sponsor's right to change the
dealers' concession from time to time. In addition, for transactions of $1
million or more, the Sponsor intends to negotiate the applicable sales charge
and such charge will be disclosed to any such purchaser. Such Units may then
be distributed to the public by the dealers at the Public Offering Price then
in effect. The Sponsor reserves the right to reject, in whole or in part, any
order for the purchase of Units. 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 Bear, Stearns & Co.
Inc. ("MST/EST Units") from Bear, Stearns & Co. Inc. in a single calendar
month fall in any of the levels listed below, are paid an additional
concession.
ADDITIONAL
CONCESSION
AGGREGATE MONTHLY AMOUNT OF MST/EST (PER $1,000.00)
UNITS SOLD AT PUBLIC OFFERING PRICE 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 3.9% of the Public Offering Price per 100 Units (equivalent to 4.058%
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.
All or a portion of the Securities deposited in the Trust may have been
acquired through one of 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.
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In maintaining a market for the Units (see "Sponsor Repurchase") the
Sponsor will realize profits or sustain losses in the amount of any difference
between the price at which they buy Units and the price at which they resell
such Units.
RIGHTS OF CERTIFICATEHOLDERS
CERTIFICATES
Ownership of Units of the Trust is evidenced by registered Certificates
executed by the Trustee and the Sponsor. Certificates may be issued in
denominations of one hundred or more Units. Certificates are transferable by
presentation and surrender to the Trustee properly endorsed and/or accompanied
by a written instrument or instruments of transfer. Although no such charge is
presently made or contemplated, the Trustee may require a Certificateholder to
pay $2.00 for each Certificate reissued or transferred and any governmental
charge that may be imposed in connection with each such transfer or
interchange. Mutilated, destroyed, stolen or lost Certificates will be
replaced upon delivery of satisfactory indemnity and payment of expenses
incurred.
DISTRIBUTIONS
Dividends and interest received by the Trust are credited by the Trustee
to an Income Account for the Trust. Other receipts, including the proceeds of
Securities disposed of, are credited to a Principal Account for the Trust.
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)
are computed as of each Record Date, and are 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
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calendar year the Trustee will furnish to each person who at any time during
the calendar year was a Certificateholder of record, a statement showing (a)
as to the Income Account: dividends, interest and other cash amounts received,
amounts paid for purchases of Substitute Securities and redemptions of Units,
if any, deductions for applicable taxes and fees and expenses of the Trust,
and the balance remaining after such distributions and deductions, expressed
both as a total dollar amount and as a dollar amount representing the pro rata
share of each 100 Units outstanding on the last business day of such calendar
year; (b) as to the Principal Account: the dates of disposition of any
Securities and the net proceeds received therefrom, deductions for payments of
applicable taxes and fees and expenses of the Trust, amounts paid for
purchases of Substitute Securities and redemptions of Units, if any, and the
balance remaining after such distributions and deductions, expressed both as a
total dollar amount and as a dollar amount representing the pro rata share of
each 100 Units outstanding on the last business day of such calendar year; (c)
a list of the Securities held, a list of Securities purchased, sold or
otherwise disposed of during the calendar year and the number of Units
outstanding on the last business day of such calendar year; (d) the Redemption
Price per 100 Units based upon the last computation thereof made during such
calendar year; and (e) amounts actually distributed to Certificateholders
during such calendar year from the Income and Principal Accounts, separately
stated, of the Trust, expressed both as total dollar amounts and as dollar
amounts representing the pro rata share of each 100 Units outstanding on the
last business day of such calendar year.
The Trustee shall keep available for inspection by Certificateholders,
at all reasonable times during usual business hours, books of record and
account of its transactions as Trustee, including records of the 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.
The Trust intends to qualify for and elect the special tax treatment
applicable to "regulated investment companies" under Sections 851-855 of the
Code. If the Trust qualifies as a "regulated investment company" and
distributes to Certificateholders 90% or more of its investment company
taxable income (without regard to its net capital gain, i.e., the excess of
its net long-term capital gain over its net short-term capital loss), it will
not be subject to Federal income tax on the portion of its investment company
taxable income (including any net capital gain) it distributes to
Certificateholders in a timely manner. In addition, to the extent the Trust
distributes to Certificateholders in a timely manner at least 98% of its
taxable income (including any net capital gain) it will not be subject to the
4% excise tax on certain undistributed income of "regulated investment
companies." The Indenture requires the distribution of the Trust's investment
company taxable income (including any net capital gain) in a timely manner. As
a result, it is anticipated that the Trust will not be subject to Federal
income tax or the excise tax. Although all or a portion of the Trust's taxable
income (including any net capital gain) for a calendar year may be distributed
shortly after the end of the calendar year, such a distribution will be
treated for Federal income tax purposes as having been received by
Certificateholders during the calendar year.
Sections 1291-1297 of the Code impose certain additional taxes and
interest on shareholders of a "passive foreign investment company," which is
defined as a foreign corporation more than 75% of the gross income of which is
from passive investments or more than 50% of the average value of its assets
consists of assets that produce passive income. The additional tax and
interest are imposed on the shareholders of the passive foreign investment
company in the event of a distribution of accumulated earnings or the holder's
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recognition of gain from the sale of stock of the company. In the case of a
"regulated investment company" that is the shareholder, this tax and interest
will be imposed on the "regulated investment company," not on the shareholders
of the "regulated investment company."
Distributions to Certificateholders of the Trust's taxable income (other
than its net capital gain) for a year will be taxable as ordinary income to
Certificateholders. To the extent that distributions to a Certificateholder in
any year are not taxable as ordinary income, they will be treated as a return
of capital and will reduce the Certificateholder's basis in his Units and, to
the extent that they exceed his basis, will be treated as a gain from the sale
of his Units as discussed below. It is anticipated that substantially all of
the distributions of the Trust's taxable income (other than net capital gain
distributions) will be taxable as ordinary income to Certificateholders.
Distributions of the Trust's net capital gain (designated as capital
gain dividends by the Trust) will be taxable to Certificateholders as
long-term capital gain, regardless of the length of time the Units have been
held by a Certificateholder. A Certificateholder may recognize a taxable gain
or loss if the Certificateholder sells or redeems his Units. Any gain or loss
arising from (or treated as arising from) the sale or redemption of Units will
generally be a capital gain or loss, except in the case of a dealer. Although
capital gains are generally taxed at the same rate as ordinary income, the
excess of net long-term capital gains over net short-term capital losses may
be taxed at a lower rate than ordinary income for certain noncorporate
taxpayers. A capital gain or loss is long-term if the asset is held for more
than one year and short-term if held for one year or less. To the extent that
a capital gain dividend with respect to Units is afforded long-term capital
gain treatment, a Certificateholder who realized a capital loss upon the sale
of such Unit that was owned for six months or less must treat the loss as
long-term. The deduction of capital losses is subject to limitations. 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.
A distribution of Securities to a Certificateholder upon liquidation
will be a taxable event to such Certificateholder, and that Certificateholder
will recognize taxable gain or loss (equal to the difference between such
Certificateholder's tax basis in his Units and the fair market value of
Securities received), which will generally be capital gain or loss except in
the case of a dealer in securities. Certificateholders who, upon liquidation,
elect to receive cash or units in a subsequent series of the Communications
Trust will also recognize taxable gain or loss. Certificateholders receiving
Securities or Units in a subsequent series of the Communications Trust as a
liquidating distribution should be aware that the Trust may not distribute any
cash proceeds with the distribution of such Securities or Units,
notwithstanding that there may be a tax liability resulting from such
distribution. Certificateholders should consult their own tax advisers in this
regard.
Distributions that are taxable as ordinary income to Certificateholders
will constitute dividends for Federal income tax purposes but will be eligible
for the dividends-received deduction for corporations (other than corporations
such as "S" corporations, which are not eligible for such deduction because of
their special characteristics, and other than for purposes of special taxes
such as the accumulated earnings tax and the personal holding company tax)
only to the extent of dividends received from domestic issuers by the Trust
with respect to stock held by the Trust for more than 45 days and only if the
Certificateholder has held his Units for more than 45 days. The
dividends-received deduction is currently 70%. However, Congress from time to
time considers proposals to reduce the rate, and enactment of such a proposal
would adversely affect the after-tax return to investors who can take
advantage of the deduction. Certificateholders are urged to consult their own
tax advisers. Sections 246 and 246A of the Code contain limitations on the
eligibility of dividends for the corporate dividends-received deduction (in
addition to the limitation discussed above). Depending upon the corporate
Certificateholder's circumstances (including whether it has a 45-day holding
period for its Units and whether its Units are debt financed), these
limitations may be applicable to dividends received by a Certificateholder
from the Trust that would otherwise qualify for the dividends-received
deduction under the principles discussed above. Accordingly,
Certificateholders should consult their own tax advisers in this regard. A
corporate Certificateholder should be aware that the receipt of dividend
income for which the dividends-
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received deduction is available may give rise to an alternative minimum tax
liability (or increase an existing liability) because the dividend income will
be included in the corporation's "adjusted current earnings" for purposes of
the adjustment to alternative minimum taxable income required by Section 56(g)
of the Code. Dividends received by the Trust from foreign issuers will in most
cases be subject to foreign withholding taxes. The Trust expects that it will
not qualify to make an election that will enable Certificateholders to credit
foreign withholding taxes against their Federal income tax liability on
distributions by the Trust.
The Federal tax status of each year's distributions will be reported to
Certificateholders and to the Internal Revenue Service. The foregoing
discussion relates only to the Federal income tax status of the Trust and to
the tax treatment of distributions by the Trust to U.S. Certificateholders.
Certificateholders who are not United States citizens or residents should be
aware that distributions from the Trust will generally be subject to a
withholding tax of 30%, or a lower treaty rate, and should consult their own
tax advisers to determine whether an investment in the Trust is appropriate.
Distributions may also be subject to state and local taxation and
Certificateholders should consult their own 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 a
secondary market for the Units and intends to continue to offer to repurchase
the Units. The Sponsor's secondary market repurchase price will be based on
the aggregate value of the Securities in the Trust portfolio and will be the
same as the redemption price. The aggregate value of the Securities will be
determined by the Trustee on a daily basis and computed on the basis set forth
under "Trustee Redemption." The Sponsor does not guarantee the enforceability,
marketability or price of any Securities in the Portfolio or of the Units.
Certificateholders who wish to dispose of their Units should inquire of the
Sponsor as to current market prices prior to making a tender for redemption.
The Sponsor may discontinue repurchase of Units if the supply of Units exceeds
demand, or for other business reasons. The date of repurchase is deemed to be
the date on which Certificates representing Units are physically received in
proper form, i.e., properly endorsed, by Bear, Stearns & Co. Inc., 245 Park
Avenue, New York, New York 10167, on behalf of the Sponsor. Units received
after 4 P.M., New York Time, will be
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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 3.9% sales charge (of 4.038% 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 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
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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.
Distributions of dividend income and capital gain, if any, from the
Trust are made to Certificateholders monthly. The Certificateholder has the
option, however, of either receiving his dividend check, together with any
other payments, from the Trustee or participating in a reinvestment program
offered by the Sponsor in shares of The Treasurer's Fund, Inc., U.S. Treasury
Money Market 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 short term U.S. Treasury Obligations which have effective
maturities of 397 days or less. For more complete information concerning the
Fund, including charges and expenses, the Certificateholder
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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;
4. the determination of the Sponsor that such sale is desirable to
maintain the qualification of the Trust as a "regulated
investment company" under the Internal Revenue Code;
5. 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
6. 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 Sponsor, at its option, is authorized under the Trust Agreement to
direct the Trustee to reinvest in Substitute Securities the proceeds of sale
of any of the Securities sold pursuant to provisions 1, 2, 3 and 6 above or in
order to replace Failed Securities. (See "Substitute Securities" above.)
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, or the Sponsor anticipates such issuer will fail to
declare or pay, anticipated dividends 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 from time to time subsequent to the
initial Date of Deposit, provided that the original proportionate relationship
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among the number of shares of each Security established on the Initial Date of
Deposit is maintained to the extent practicable.
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 aggregate value of at
least $25,000 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
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distribution of the Certificateholder's pro rata share of the net asset
value of the Trust on such date distributed in kind to the extent
represented by whole shares of underlying Securities and the balance in
cash within 7 calendar days next following the commencement of the
Liquidation Period. Certificateholders subsequently selling such
distributed Securities will incur brokerage costs when disposing of such
Securities. An election of this option will not prevent the
Certificateholder from recognizing taxable gain or loss as a result of
the liquidation, even though no cash will be distributed to pay any
taxes. Certificateholders should consult their own tax adviser in this
regard.
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 a subsequent series of the Communications Trust (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. An election of this option will not prevent the
Certificateholder from recognizing taxable gain or loss (except in the
case of a loss, if the New Series is treated as substantially identical
to the Trust) as a result of the liquidation, even though no cash will
be distributed to pay any taxes.
Certificateholders should consult their own tax advisers in this regard.
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.
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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' buying of securities may tend to raise the market prices
of these securities. The actual market impact of the Sponsor's purchases,
however, is currently unpredictable because the actual amount of Securities to
be purchased and the supply and price of those Securities is unknown. A
similar problem may occur in connection with the sale of Securities during the
60 business day period immediately following the commencement of the
Liquidation Period; depending on the number of sales required, the prices of
and demand for Securities, such sales may tend to depress the market prices
and thus reduce the proceeds of such sales. The Sponsor believes that the sale
of underlying Securities over a 60 business day period as described above is
in the best interest of a Certificateholder and may mitigate the negative
market price consequences stemming from the trading of large amounts of
Securities. The Securities may be sold in fewer than 60 days if, in the
Sponsor's judgment, such sales are in the best interest of Certificateholders.
The Sponsor, in implementing such sales of securities on behalf of the
Trustee, will seek to maximize the sales proceeds and will act in the best
interests of the Certificateholders. There can be no assurance, however, that
any adverse price consequences of heavy trading will be mitigated.
Certificateholders who do not make any election will be deemed to have
elected to receive the Redemption Price per Unit in cash (option number 2).
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 expect, 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 Sponsor reserves the right to modify, suspend or terminate the
reinvestment privilege at any time.
THE SPONSOR
The Sponsor, Bear, Stearns & Co. Inc., a Delaware corporation, is
engaged in the underwriting, investment banking and brokerage business and is
a member of the National Association of Securities Dealers, Inc. and all
principal securities and commodities exchanges, including the New York Stock
Exchange, the American Stock Exchange, the Midwest Stock Exchange and the
Pacific Stock Exchange. Bear Stearns maintains its principal business offices
at 245 Park Avenue, New York, New York 10167 and, since its reorganization
from a partnership to a corporation in October, 1985 has been a wholly-owned
subsidiary of The Bear Stearns Companies Inc. Bear Stearns, through its
predecessor entities, has been engaged in the investment banking and brokerage
business since 1923. Bear Stearns is the sponsor for numerous series of unit
investment trusts, including, A Corporate Trust, Series 1 (and Subsequent
Series), New York Municipal Trust, Series 1 (and Subsequent Series), New York
Discount and Zero Coupon Fund, 1st Series (and Subsequent Series), Municipal
Securities Trust, Series 1 (and Subsequent Series), 1st Discount Series (and
Subsequent Series), Multi-State Series 1 (and Subsequent Series), High Income
Series 1 (and Subsequent Series), Short-Intermediate Term Series 1 (and
Subsequent Series), Mortgage Securities Trust, Series 1 (and Subsequent
Series), Insured
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Municipal Securities Trust, Series 1 (and Subsequent Series) and 5th Discount
Series (and Subsequent Series) and Equity Securities Trust, Signature Series,
Gabelli Communications Income Trust (and Subsequent Series).
The information included herein is only for the purpose of informing
investors as to the financial responsibility of the Sponsor and its ability to
carry out its contractual obligations.
The Sponsor will be under no liability to Certificateholders for taking
any action, or refraining from taking any action, in good faith pursuant to
the Trust Agreement, or for errors in judgment except in cases of its own
willful misfeasance, bad faith, gross negligence or reckless disregard of
their obligations and duties.
The Sponsor may resign at any time by delivering to the Trustee an
instrument of resignation executed by the Sponsor.
If at any time the Sponsor shall resign or fail to perform any of its
duties under the Trust Agreement or becomes incapable of acting or becomes
bankrupt or its affairs are taken over by public authorities, then the Trustee
may either (a) appoint a successor Sponsor; (b) terminate the Trust Agreement
and liquidate the Trust; or (c) continue to act as Trustee without terminating
the Trust Agreement. Any successor Sponsor appointed by the Trustee shall be
satisfactory to the Trustee and, at the time of appointment, shall have a net
worth of at least $1,000,000.
THE TRUSTEE
The Trustee is United States Trust Company of New York, with its
principal place of business at 770 Broadway, New York, New York 10003. United
States Trust Company of New York has, since its establishment in 1853, engaged
primarily in the management of trust and agency accounts for individuals and
corporations. The Trustee is a member of the New York Clearing House
Association and is subject to supervision and examination by the
Superintendent of Banks of the State of New York, the Federal Deposit
Insurance Corporation and the Board of Governors of the Federal Reserve
System.
The Trustee shall not be liable or responsible in any way for taking any
action, or for refraining from taking any action, in good faith pursuant to
the Trust Agreement, or for errors in judgment; or for any disposition of any
moneys, Securities or Certificates in accordance with the Trust Agreement,
except in cases of its own willful misfeasance, bad faith, gross negligence or
reckless disregard of its obligations and duties; provided, however, that the
Trustee shall not in any event be liable or responsible for any evaluation
made by any independent evaluation service employed by it. In addition, the
Trustee shall not be liable for any taxes or other governmental charges
imposed upon or in respect of the Securities or the Trust which it may be
required to pay under current or future law of the United States or any other
taxing authority having jurisdiction. The Trustee shall not be liable for
depreciation or loss incurred by reason of the sale by the Trustee of any of
the Securities pursuant to the Trust Agreement.
For further information relating to the responsibilities of the Trustee
under the Trust Agreement, reference is made to the material set forth under
"Rights of Certificateholders."
The Trustee may resign by executing an instrument in writing and filing
the same with the Sponsor, and mailing a copy of a notice of resignation to
all Certificateholders. In such an event the Sponsor is obligated to appoint a
successor Trustee as soon as possible. In addition, if the Trustee becomes
incapable of acting or becomes bankrupt or its affairs are taken over by
public authorities, the Sponsor may remove the Trustee and appoint a successor
as provided in the Trust Agreement. Notice of such removal and appointment
shall be mailed to each Certificateholder by the Sponsor. If upon resignation
of the Trustee no successor has been appointed and has accepted the
appointment within thirty days after notification, the retiring Trustee may
apply to a court of competent jurisdiction for the appointment of a successor.
The resignation or removal of the Trustee becomes effective only when the
successor Trustee accepts its appointment as such or when a court of
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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 Gabelli Funds, Inc., a New York corporation,
with offices at One Corporate Center at Rye, New York 10580-1430. The
Portfolio Consultant is a registered investment advisor, and with its
affiliates, acts as an investment manager, administrator or advisor for assets
aggregating in excess of $8.0 billion as of December 31, 1993.
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 Sponsor regarding the
disposition of the Securities held by the Trust. The responsibility of
monitoring the Securities of the Portfolio means that if the Portfolio
Consultant's views materially change regarding the appropriateness of an
investment in any Security then held in the Trust based upon the investment
objectives, guidelines, term, parameters, policies and restrictions supplied
to the Portfolio Consultant by the Sponsor, the Portfolio Consultant will
notify the Sponsor of such change to the extent consistent with applicable
legal requirements. The Sponsor is not obligated to adhere to the
recommendations of the Portfolio Consultant regarding the disposition of
Securities. The Sponsor has the sole authority to direct the Trustee to
dispose of Securities under the Trust Agreement. The Portfolio Consultant has
no other responsibilities or obligations to the Trust or the
Certificateholders. Investors should be aware that the Portfolio Consultant,
with its affiliates, is an investment adviser for managed investment companies
and managed private accounts that may have similar or different investment
objectives than the Trust. Some of the Securities in the Trust may also be
owned by these other clients of the Portfolio Consultant and its affiliates.
However, because these clients have "managed" portfolios and may have
differing investment objectives, the Portfolio Consultant may sell certain
Securities for those accounts in instances where a sale of the Trust would be
impermissible, such as to maximize return by taking advantage of market
fluctuations.
The Portfolio Consultant may resign or may be removed by the Sponsor at
any time on sixty days' prior notice. The Sponsor shall use its best efforts
to appoint a satisfactory successor. Such resignation or removal shall become
effective upon the acceptance of appointment by the successor Portfolio
Consultant. If upon resignation of the Portfolio Consultant no successor has
accepted appointment within sixty days after notice of resignation, the
Sponsor has agreed to perform this function.
EVALUATION OF THE TRUST
The value of the Securities in the Trust portfolio is determined in good
faith by the Trustee on the basis set forth under "Public Offering--Offering
Price." The Sponsor and the Certificateholders may rely on any evaluation
furnished by the Trustee and shall have no responsibility for the accuracy
thereof. Determinations by the Trustee under the Trust Agreement shall be made
in good faith upon the basis of the best information available to it,
provided, however, that the Trustee shall be under no liability to the Sponsor
or Certificateholders for errors in judgment, except in cases of its own
willful misfeasance, bad faith, gross negligence or reckless disregard of its
obligations and duties. The Trustee, the Sponsor and the
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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 its 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 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 sponsor 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.
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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, Mortgage Securities Trust, Insured Municipal Securities
Trust, Municipal Securities Trust, New York Municipal Trust, Mortgage
Securities Trust or A Corporate Trust (the "Exchange Trusts") at a reduced
sales charge as set forth below. Under the Exchange Privilege, the Sponsor's
repurchase price 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 Exchange Trust Portfolios; and after the initial
offering period has been completed, the repurchase price 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 (or
based for units of Equity Securities Trust, based on the market value of the
underlying securities in the 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 plus accrued interest (or based for units of
Equity Securities Trust, based on the market value of the underlying
securities in the Trust Portfolio) 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 its intention
to maintain a market in the Units of all Trusts sponsored by it, the
Sponsor is under no obligation to continue to maintain a secondary
market and therefore there is no assurance that the Exchange Privilege
will be available to a Certificateholder at any specific time in the
future. At the time of the Certificateholder's election to participate
in the Exchange Privilege, there also must be Units of the Exchange
Trust available for sale, either under the initial primary distribution
or in the Sponsor's secondary market.
2. Exchanges will be effected in whole units only. Any excess
proceeds from the Units surrendered for exchange will be remitted and
the selling Certificateholder will not be permitted to advance any new
funds in order to complete an exchange. Units of the Mortgage Securities
Trust may only be acquired in blocks of 1,000 Units. Units of the Equity
Securities Trust may only be acquired in blocks of 100 Units.
3. The Sponsor reserves the right to suspend, modify or terminate
the Exchange Privilege. The Sponsor will provide unitholders of the
Trust with 60 days prior written notice of any termination or material
amendment to the Exchange Privilege, provided that, no notice need be
given if (i) the only material effect of an amendment is to reduce or
eliminate the sales charge payable at the time of the exchange, to add
one or more series of the Trust eligible for the Exchange Privilege or
to delete a series which has been terminated from eligibility for the
Exchange Privilege, (ii) there is a suspension of the redemption of
units of an Exchange Trust under Section 22(e) of the Investment Company
Act of
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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, Mortgage Securities Trust, A Corporate Trust, Municipal
Securities Trust, Insured Municipal Securities Trust, or New York Municipal
Trust sponsored by Bear, Stearns & Co. Inc. (the "Conversion Trusts") at the
Public Offering Price for units of the Conversion Trust based on a reduced
sales charge as set forth below. Under the Conversion Offer, units of the
Redemption Trust must be tendered to the trustee of such trust for redemption
at the redemption price, which is based upon the market value of the
underlying securities in the Trust portfolio or the aggregate bid side
evaluation of the underlying bonds in other Trust portfolios and is generally
about 1-1/2% to 2% lower than the offering price for such bonds. The purchase
price of the units will be based on the aggregate offer price of the
underlying bonds in the Conversion Trust portfolio during its initial offering
period; or, at a price based on the aggregate bid price of the underlying
bonds if the initial public offering of the Conversion Trust has been
completed, plus accrued interest and a sales charge as set forth below. If the
participant elects to purchase units of the Equity Series Trust under the
Conversion Offer, the purchase price of the Units will be based, at all times,
on the market value of the underlying securities in the Trust portfolio plus a
sales charge.
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
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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 Sponsor reserves 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 Sponsor also
reserves the right to raise the sales charge based on actual increases
in the Sponsor's costs and expenses in connection with administering the
program, up to a maximum sales charge of 2% per unit (or per 1,000 units
for the Mortgage Securities Trust or 100 Units for the Equity Securities
Trust).
To exercise the Conversion Offer, a unit owner of a Redemption Trust
should notify his retail broker of his desire to redeem his Redemption Trust
Units and use the proceeds from the redemption to purchase Units of one or
more of the Conversion Trusts. If Units of a designated, outstanding series of
a Conversion Trust are at that time available for sale and if such Units may
lawfully be sold in the state in which the unit owner is a resident, the unit
owner will be provided with a current prospectus or prospectuses relating to
each Conversion Trust in which he indicates an interest. He then may select
the Trust or Trusts into which he decides to invest the proceeds from the sale
of his Units. The transaction will be handled entirely through the unit
owner's retail broker. The retail broker must tender the units to the trustee
of the Redemption Trust for redemption and then apply the proceeds to the
redemption toward the purchase of units of a Conversion Trust at a price based
on the aggregate offer or bid side evaluation per Unit of the Conversion
Trust, depending on which price is applicable, plus accrued interest and the
applicable sales charge. The certificates must be surrendered to the broker at
the time the redemption order is placed and the broker must specify to the
Sponsor that the purchase of Conversion Trust Units is being made pursuant to
the Conversion Offer. The unit owner's broker will be entitled to retain $5 of
the applicable sales charge.
EXAMPLE: Assume a unit owner has five units of a Redemption Trust which has
held for more than 5 months with a current redemption price of $675 per unit
based on the aggregate bid price of the underlying bonds and the unit owner
wishes to participate in the Conversion Offer and exchange the proceeds for
units of a secondary market Conversion Trust with a current price of $750 per
Unit. The proceeds for the unit owner's redemption of units will aggregate
$3,375. Since only whole units of a Redemption Trust may be purchased under
the Conversion Offer, the unit owner will be able to acquire four units of the
Conversion Trust (or 4,000 units of the Mortgage Securities Trust or 400 Units
of the Equity Securities Trust) for a total cost of $3,045 ($3,000 for units
and $45 for the sales charge). The remaining $330 would be remitted to the
unit owner in cash. If the
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unit owner acquired the same number of Conversion Trust units at the same time
in a regular secondary market transaction, the price would have been $3,165
($3,000 for units and $165 sales charge, assuming a 5 1/2% sales charge times
the public offering price).
DESCRIPTION OF THE EXCHANGE TRUSTS AND THE CONVERSION TRUSTS
A Corporate Trust may be an appropriate investment vehicle for an
investor who is more interested in a higher current return on his investment
(although taxable) than a tax-exempt return (resulting from the fact that the
current return from taxable fixed income securities is normally higher than
that available from tax-exempt fixed income securities). Municipal Securities
Trust and New York Municipal Trust may be appropriate investment vehicles for
an investor who is more interested in tax-exempt income. The interest income
from New York Municipal Trust is, in general, also exempt from New York State
and local New York income taxes, while the interest income from Municipal
Securities Trust is subject to applicable New York State and local New York
taxes, except for that portion of the income which is attributable to New York
obligations in the Trust portfolio, if any. The interest income from each
State Trust of the Municipal Securities Trust, Multi-State Series is, in
general, exempt from state and local taxes when held by residents of the state
where the issuers of bonds in such State Trusts are located. The Insured
Municipal Securities Trust combines the advantages of providing interest
income free from regular federal income tax under existing law with the added
safety of irrevocable insurance. Insured Navigator Series further combines the
advantages of providing interest income free from regular federal income tax
and state and local taxes when held by residents of the state where issuers of
bonds in such State Trusts are located with the added safety of irrevocable
insurance. Mortgage Securities Trust offers an investment vehicle for
investors who are interested in obtaining safety of capital and a high level
of current distribution of interest 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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C/M: 01472.0018 178806.1
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I am the owner of _______________________ units of Equity Securities
Trust, Series _______ Signature Series, Gabelli Communications Income Trust.
I would like to learn more about The Treasurer's Fund, Inc., U.S.
Treasury Money Market 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 The Treasurer's Fund, Inc., U.S. Treasury Money Market
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:
THE TREASURER'S FUND, INC.
19 OLD KINGS HIGHWAY SOUTH
DARIEN, CONNECTICUT 06820
C/M: 01472.0018 178806.1
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NO PERSON IS AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTA-
TIONS NOT CONTAINED IN PARTS A AND B OF
THIS PROSPECTUS; AND ANY INFORMATION OR
REPRESENTATION NOT CONTAINED HEREIN ___________________
MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE TRUST, THE TRUSTEE OR EST SIGNATURE SERIES
THE SPONSOR. THE TRUST IS REGISTERED AS A ___________________
UNIT INVESTMENT TRUST UNDER THE
INVESTMENT COMPANY ACT OF 1940. SUCH
REGISTRATION DOES NOT IMPLY THAT THE GABELLI COMMUNICATIONS INCOME TRUST
TRUST OR ANY OF ITS UNITS HAVE BEEN SERIES 3
GUARANTEED, SPONSORED, RECOMMENDED OR SIGNATURE SERIES
APPROVED BY THE UNITED STATES OR ANY GABELLI COMMUNICATIONS INCOME
STATE OR ANY AGENCY OR OFFICER THEREOF. TRUST
-----------------
(UNIT INVESTMENT TRUST)
THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO BUY, SECURITIES IN ANY STATE TO
ANY PERSON TO WHOM IT IS NOT LAWFUL TO PROSPECTUS
MAKE SUCH OFFER IN SUCH STATE.
TABLE OF CONTENTS
DATED: April 28, 1995
Title Page
PART A
SPONSOR:
Summary of Essential Information.......A-6
Information Regarding the Trust....... A-7 BEAR, STEARNS & CO. INC.
Financial and Statistical Information..A-8 245 PARK AVENUE
NEW YORK, NEW YORK 10167
212-272-2500
PART B
The Trust............................ 1 PORTFOLIO CONSULTANT:
Risk Considerations................... 4
Public Offering...................... 11 GABELLI FUNDS, INC.
Rights of Certificateholders......... 14 ONE CORPORATE CENTER
Tax Status........................... 15 RYE, NEW YORK 10580-1430
Liquidity............................ 17
Total Reinvestment Plan.............. 19
Trust Administration................. 20 TRUSTEE:
Trust Expenses and Charges........... 26
Exchange Privilege and Conversion UNITED STATES TRUST COMPANY
Offer............................... 27 OF NEW YORK
Other Matters........................ 30 770 BROADWAY
NEW YORK, N.Y. 10003
PARTS A AND B OF THIS PROSPECTUS DO
NOT CONTAIN ALL OF THE INFORMATION SET
FORTH IN THE REGISTRATION STATEMENT AND
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.
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