REGISTRATION NO. 333-57797
CIK # 910939
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
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AMENDMENT NO. 1
TO
REGISTRATION STATEMENT
ON
FORM S-6
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FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
A. EXACT NAME OF TRUST:
RANSON UNIT INVESTMENT TRUSTS, SERIES 71
B. NAME OF DEPOSITOR:
RANSON & ASSOCIATES, INC.
C. COMPLETE ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES:
Ranson & Associates, Inc.
250 North Rock Road, Suite 150
Wichita, Kansas 67206-2241
D. NAME AND COMPLETE ADDRESS OF AGENT FOR SERVICE:
Copy to:
ALEX R. MEITZNER MARK J. KNEEDY
Ranson & Associates, Inc. Chapman and Cutler
250 North Rock Road, Suite 150 111 West Monroe Street
Wichita, Kansas 67206-2241 Chicago, Illinois 60603
E. TITLE OF SECURITIES BEING REGISTERED: Units of Beneficial Interest
E. APPROXIMATE DATE OF PROPOSED SALE TO PUBLIC:
As soon as practicable after the effective date
of the Registration Statement.
_
|X| Check box if it is proposed that this filing will become effective at
2:00 P.M. on July 15, 1998 pursuant to paragraph (b) of Rule 487.
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The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
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RANSON UNIT INVESTMENT TRUSTS, SERIES 71
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CROSS-REFERENCE SHEET
(FORM N-8B-2 ITEMS REQUIRED BY INSTRUCTIONS AS
TO THE PROSPECTUS IN FORM S-6)
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
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<S> <C>
I. ORGANIZATION AND GENERAL INFORMATION
1. (a) Name of trust Prospectus front cover
(b) Title of securities issued Essential Information
2. Name and address of each depositor Administration of the Trust
3. Name and address of trustee Administration of the Trust
4. Name and address of principal underwriters *
5. State of organization of trust The Trust Fund
6. Execution and termination of trust agreement The Trust Fund; Administration of the Trust
7. Changes of name The Trust Fund
8. Fiscal year *
9. Litigation *
II. GENERAL DESCRIPTION OF THE TRUST AND
SECURITIES OF THE TRUST
10. (a) Registered or bearer securities Unitholders
(b) Cumulative or distributive securities The Trust Fund
(c) Redemption Redemption
(d) Conversion, transfer, etc. Unitholders; Market for Units
(e) Periodic payment plan *
(f) Voting rights Unitholders
(g) Notice of certificateholders Investment Supervision; Administration of the
Trust; Unitholders
(h) Consents required Unitholders; Administration of the Trust
(i) Other provisions Federal Tax Status
11. Type of securities comprising units The Trust Fund; Portfolio
12. Certain information regarding periodic payment
certificates *
13. (a) Load, fees, expenses, etc. Essential Information; Public Offering of Units;
Expenses of the Trust
(b) Certain information regarding periodic payment
certificates *
(c) Certain percentages Essential Information; Public Offering of Units
(d) Certain other fees, etc. payable by holders Unitholders
(e) Certain profits receivable by depositor, principal
underwriters, trustee or affiliated persons Expenses of the Trust; Public Offering of Units
(f) Ratio of annual charges to income *
14. Issuance of trust's securities The Trust Fund; Unitholders
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15. Receipt and handling of payments from purchasers *
16. Acquisition and disposition of underlying securities The Trust Fund; Investment
Supervision; Market for Units
17. Withdrawal or redemption Redemption; Public Offering of Units
18. (a) Receipt, custody and disposition of income Unitholders
(b) Reinvestment of distributions Unitholders
(c) Reserves or special funds Expenses of the Trust
(d) Schedule of distributions *
19. Records, accounts and reports Unitholders; Redemption; Administration of the
Trust
20. Certain miscellaneous provisions of trust agreement
(a) Amendment Administration of the Trust
(b) Termination
(c) and (d) Trustee, removal and successor
(e) and (f) Depositor, removal and successor
21. Loans to security holders *
22. Limitations on liability Administration of the Trust
23. Bonding arrangements *
24. Other material provisions of trust agreement *
III. ORGANIZATION, PERSONNEL AND
AFFILIATED PERSONS OF DEPOSITOR
25. Organization of depositor Administration of the Trust
26. Fees received by depositor See Items 13(a) and 13(e)
27. Business of depositor Administration of the Trust
28. Certain information as to officials and affiliated
persons of depositor Administration of the Trust
29. Voting securities of depositor
30. Persons controlling depositor
31. Payment by depositor for certain services rendered
to trust *
32. Payment by depositor for certain other services
rendered to trust *
33. Remuneration of employees of depositor for certain
services rendered to trust *
34. Remuneration of other persons for certain services
rendered to trust *
IV. DISTRIBUTION AND REDEMPTION
35. Distribution of Trust's securities by states Public Offering of Units
36. Suspension of sales of trust's securities *
37. Revocation of authority to distribute
38. (a) Method of Distribution Public Offering of Units;
(b) Underwriting Agreements Market for Units;
(c) Selling Agreements Public Offering of Units
39. (a) Organization of principal underwriters Administration of the Trust
(b) N.A.S.D. membership of principal underwriters
40. Certain fees received by principal underwriters See items 13(a) and 13(e)
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41. (a) Business of principal underwriters Administration of the Trust
(b) Branch offices of principal underwriters *
(c) Salesmen of principal underwriters
42. Ownership of trust's securities by certain persons
43. Certain brokerage commissions received by principal
underwriters Public Offering of Units
44. (a) Method of valuation Public Offering of Units
(b) Schedule as to offering price *
(c) Variation in offering price to certain persons Public Offering of Units
45. Suspension of redemption rights Redemption
46. (a) Redemption valuation Redemption; Market for Units; Public Offering of Units
(b) Schedule as to redemption price *
47. Maintenance of position in underlying securities Market for Units; Public Offering of Units; Redemption
V. INFORMATION CONCERNING THE TRUSTEE
OR CUSTODIAN
48. Organization and regulation of trustee Administration of the Trust
49. Fees and expenses of trustee Expenses of the Trust
50. Trustee's lien
VI. INFORMATION CONCERNING INSURANCE OF
HOLDERS OF SECURITIES
51. Insurance of holders of trust's securities Cover Page; Expenses of the Trust
VII. POLICY OF REGISTRANT
52. (a) Provisions of trust agreement with respect to
selection or elimination of underlying securities The Trust Fund; Investment Supervision
(b) Transactions involving elimination of underlying
securities
(c) Policy regarding substitution or elimination of
underlying securities Investment Supervision
(d) Fundamental policy not otherwise covered *
53. Tax status of Trust Essential Information; Portfolio; Federal Tax
Status
VIII. FINANCIAL AND STATISTICAL INFORMATION
54. Trust's securities during last ten years *
55.
56. Certain information regarding periodic payment
certificates
57.
58.
59. Financial statements (Instruction 1(c) to Form S-6) *
<FN>
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* Inapplicable, answer negative or not required.
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RANSON UNIT INVESTMENT TRUSTS, SERIES 71
Telebras Exchange Trust, Series 1 (the "Trust") was formed for the purpose of
permitting investors to hold an investment in the twelve holding companies to be
created under the plan of reorganization and privitization of Telecomunicacoes
Brasileiras, S.A. ("Telebras") in the convenient form of Units of the Trust. As
of the Initial Date of Deposit, Telebras preferred stock is traded in the United
States in the form of American Depositary Receipts ("ADRs") listed on the New
York Stock Exchange. Units may be acquired in exchange for Telebras ADRs or
ADRs of the separated companies and other required documents pursuant to the
Exchange Option described herein or for cash. It is anticipated that, if after
the completion of the offering of the Units of the Trust meets the listing
requirements of the American Stock Exchange, the Units be listed on the American
Stock Exchange. The Trust is not sponsored by or affiliated with Telebras or
any of its units.
Units of the Trust are not deposits or obligations of, or guaranteed by, any
bank and the Units are not federally insured or otherwise protected by the
Federal Deposit Insurance Corporation and involve investment risk including loss
of principal.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The investor is advised to read and retain this Prospectus for future reference.
THE DATE OF THIS PROSPECTUS IS JULY 15, 1998.
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SUMMARY
THE TRUST. Telebras Exchange Trust, Series 1 (the "Trust") is a unit investment
trust included in Ranson Unit Investment Trusts, Series 71 (the "Fund"), an
investment company registered under the Investment Company Act of 1940. The
Trust initially consists of Telebras ADR shares and all rights attendant thereto
pursuant to the plan of reorganization and privitization of Telebras or
otherwise. The Brazilian government has announced a plan to sell its
controlling interest in Telebras and reorganize the company into twelve separate
companies. Telebras ADR shares are currently listed on the New York Stock
Exchange under the symbol "TBR." Under the plan, Telebras will spin-off the
twelve underlying companies to Telebras shareholders. It is anticipated that
current owners of Telebras ADRs will receive one ADR of each company per
Telebras ADR. Upon completion of the spin-off, the Trust will consist of ADRs
of the twelve holding companies.
The value of all portfolio Securities and, therefore, the value of the Units
will fluctuate in value depending on the full range of economic and market
influences affecting corporate profitability, the financial condition of issuers
and the prices of equity securities in general and the Securities in particular.
Capital appreciation is, of course, dependent upon several factors including,
among other factors, the financial condition of the issuers of the Securities
(see "The Trust Portfolio").
PUBLIC OFFERING PRICE. The Public Offering Price per Unit during the initial
offering period is based on the aggregate underlying value of the Securities,
plus or minus a pro rata portion of the cash, if any, in the Income and Capital
Accounts of the Trust, plus a sales charge of 1.0% of the Public Offering Price
(equivalent to 1.010% of the net amount invested). The sales charge is
eliminated for sales of $250,000 or more. The minimum purchase is $1,000 in the
initial offering period.
DISTRIBUTIONS OF INCOME AND CAPITAL. Dividends, if any, received by the Trust
will be distributed quarterly and any funds in the Capital Account will be
distributed annually. See "Unitholders-Distributions to Unitholders."
MARKET FOR UNITS. Although not obligated to do so, the Sponsor intends to
maintain a secondary market for Units. If the Trust meets the listing
requirements of the American Stock Exchange after the completion of the offering
of the Units, it is anticipated that the Units will be listed on such Exchange.
If the Units are listed on the Exchange, the Sponsor will no longer maintain a
secondary market for the Units. In addition, Units may be redeemed through the
Trustee at the Redemption Price on the date of tender. See "Redemption".
TERMINATION. The Trust will terminate no later than the date specified under
the Mandatory Termination Date in "Essential Information." At termination,
Unitholders will receive a cash distribution within a reasonable time after the
Trust is terminated. See "Unitholders-Distributions to Unitholders" and
"Administration of the Trust-Amendment and Termination."
RISK FACTORS. An investment in the Trust should be made with an understanding
of the risks associated therewith, including the possible deterioration of
either the financial condition of the issuers or the general condition of the
stock market and risks related to an investment in the Brazilian
telecommunications industry. For risk considerations related to the Trust, see
"Risk Factors."
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RANSON UNIT INVESTMENT TRUSTS, SERIES 71
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ESSENTIAL INFORMATION
AS OF JULY 14, 1998*
SPONSOR, SUPERVISOR AND EVALUATOR: RANSON & ASSOCIATES, INC.
TRUSTEE: THE BANK OF NEW YORK
<S> <C>
Number of Units (1) 500
Fractional Undivided Interest Per Unit 1/500
Public Offering Price:
Aggregate Value of Securities in Portfolio (1) $11,787.50
Aggregate Value of Securities per Unit $ 23.575
Plus Sales Charge of 1.0% (1.010% of net amount invested) $ .238
Public Offering Price Per Unit (2) $ 23.813
Redemption Price Per Unit and Sponsor's Initial Repurchase Price Per Unit $ 23.575
Excess of Public Offering Price Per Unit over Redemption Price Per Unit and
over Sponsor's Initial Repurchase Price Per Unit $ .238
Minimum Value of a Trust under which Trust Agreement
may be Terminated 40% of aggregate value of Securities at deposit
Mandatory Termination Date December 31, 2023
Annual Surveillance and Evaluation Fee Maximum of 0.10% of the net assets
Trustee's Annual Fee $.0224 per Unit
Evaluation Time 4:00 p.m. Eastern Time
Record and Computation Dates (3) FIRST day of January, April, July and October
Distribution Dates (3) FIFTEENTH day of January, April, July and October
<FN>
* The business day prior to the Initial Date of Deposit
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(1) Each Security is valued at the closing sale price on a national
securities exchange or the Nasdaq National Market.
(2) On the Initial Date of Deposit there will be no accumulated dividends in
the Income Account. Anyone ordering Units after such date will pay his pro
rata share of any accumulated dividends in such Income Account.
(3) Distributions from the Capital Account, if any, will normally be made in
December.
</FN>
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THE TRUST FUND
Ranson Unit Investment Trusts, Series 71 (the "Fund") includes one underlying
unit investment trust designated as Telebras Exchange Trust, Series 1 (the
"Trust"). The Fund was created under the laws of the State of New York pursuant
to a trust indenture (the "Trust Agreement") dated the date of this prospectus
(the "Initial Date of Deposit") between Ranson & Associates, Inc. (the
"Sponsor") and The Bank of New York (the "Trustee").*
The Trust initially consists of Telebras ADR shares and upon completion of the
privitization and reorganization of Telebras the Trust will hold ADR shares of
the twelve Telebras holding companies. As used herein, the term "Securities"
means the securities (including contracts for the purchase thereof) initially
deposited in the Trust and described in the portfolio and any additional
securities acquired and held by the Trust pursuant to the provisions of the
Trust Agreement.
On the Initial Date of Deposit, the Sponsor delivered to the Trustee Securities
or contracts for the purchase thereof for deposit in the Trust. For the
Securities so deposited, the Trustee delivered to the Sponsor documentation
evidencing the ownership of that number of Units of the Trust set forth under
"Essential Information." Subsequent to the Initial Date of Deposit, the Sponsor
may deposit additional Securities in the Trust, contracts to purchase additional
Securities along with cash (or a bank letter of credit in lieu of cash) to pay
for such contracted Securities or cash (including a letter of credit) with
instructions to purchase additional Securities, maintaining, as closely as
practicable, the same proportionate relationship among the Securities in the
portfolio. Thus, although additional Units will be issued, each Unit will
continue to represent the same weighting among the Securities. If the Sponsor
deposits cash, existing and new investors may experience a dilution of their
investments and a reduction in their anticipated income because of fluctuations
in the prices of the Securities between the time of the cash deposit and the
purchase of the Securities and because the Trust will pay the associated
brokerage fees. To minimize this effect, the Trust will attempt to purchase the
Securities as close to the Evaluation Time or as close to the evaluation prices
as possible.
The Trust consists of (a) the Securities listed under the "Portfolio" as may
continue to be held from time to time in the Trust (b) any additional Securities
acquired and held by the Trust pursuant to the provisions of the Trust Agreement
and (c) any cash held in the Income and Capital Accounts of the Trust. Neither
the Sponsor nor the Trustee shall be liable in any way for any failure in any of
the Securities. However, should any contract for the purchase of any of the
Securities initially deposited hereunder fail, the Sponsor will, unless
substantially all of the moneys held in the Trust to cover such purchase are
reinvested in substitute Securities in accordance with the Trust Agreement,
refund the cash and sales charge attributable to such failed contract to all
Unitholders on the next distribution date.
Each Unit initially offered represents that undivided interest in the Trust
indicated under "Essential Information". To the extent that any Units are
redeemed by the Trustee or additional Units are issued as a result of additional
Securities being deposited by the Sponsor, the fractional undivided interest in
the Trust represented by each unredeemed Unit will increase or decrease
accordingly, although the actual interest in the Trust represented by such
fraction will remain unchanged. Units will remain outstanding until redeemed
upon tender to the Trustee by Unitholders, which may include the Sponsor, or
until the termination of the Trust Agreement.
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* Reference is made to the Trust Agreement and any statement contained herein
is qualified in its entirety by the provisions of the Trust Agreement.
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THE OFFER
Investors holding Telebras ADR shares have the option of exchanging their
Telebras shares for Units on the terms and subject to the conditions set forth
herein (the "Exchange Option"). Units may also be purchased for cash at a sales
charge of 1.00% of the Public Offering Price (1.010% of the net amount invested)
(the "Cash Option"). These two options are collectively referred to herein as
the "Offer".
EXCHANGE OPTION. Ranson & Associates, Inc., the Sponsor, is soliciting tenders
of Telebras ADR shares (including the rights attendant thereto pursuant to the
plan of reorganization and privitization or otherwise, or the separate company
shares after their distribution) in exchange for Units of the Trust pursuant to
the Exchange Option on the basis of five Units for each Telebras ADR share
tendered and accepted by the Sponsor plus a sales charge of 1.00% for exchanges
representing less than $250,000. The minimum tender is 10 Telebras ADR shares.
All tenders of Telebras ADR shares after the record date for distribution of
stock in connection with the spin-off of the separate companies but prior to
receipt by the tendering shareholder of the securities of the holding companies
must be accompanied by "due bills" representing the right to receive the
securities of the holding companies to be distributed in respect of the tendered
Telebras ADR shares. Tendered Telebras ADR shares accompanied by due bills will
be deposited in the Trust and Units created thereby will be distributed to the
Sponsor to be held until the securities of the holding companies represented by
the due bills are delivered to the Sponsor. The Units will be delivered to the
tendering shareholders only after the securities represented by the due bills
are delivered to the Sponsor.
The Sponsor currently intends to accept any and all Telebras ADR shares (subject
to the maximum amount stated below) properly tendered for exchange for Units
pursuant to the Exchange Option until the Sponsor, in its sole discretion,
decides to terminate the Offer. The Sponsor intends to accept such offers at 4
p.m. New York time on every Tuesday from July 10, 1998 through completion of the
spin-off of the separate Telebras companies. The Sponsor may extend or
discontinue this period at any time. The time and date of any acceptance of
Telebras ADR shares is herein referred to as an "Exchange Date". The Offer will
be consummated as of the applicable Exchange Date as to shares tendered prior to
such Exchange Date and thereafter on any subsequent Exchange Date by exchanging
that number of Units for an equal number of accepted Telebras ADR shares plus
the sales charge, if any. In no event will the Sponsor accept more than that
number of Telebras ADR shares which would be equal to approximately 4.9% of the
outstanding Telebras ADR shares (the "Maximum"). If a greater number of
Telebras ADR shares is tendered prior to any Exchange Date, the Sponsor will
accept such shares on a pro rata basis. Thus, if more than 4.9% of the Telebras
ADR shares are tendered prior to any Exchange Date, the Sponsor will accept from
each tendering holder that portion of his tendered Telebras ADR shares equal to
the number of the tendered shares multiplied by a fraction, the numerator of
which is the Maximum and the denominator of which is the number of Telebras ADR
shares tendered for exchange on such Exchange Date (with appropriate adjustments
to avoid exchanges of fractional shares).
The Sponsor reserves the right to accept additional Telebras ADR shares in
excess of the Maximum upon compliance with applicable law, if any.
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Participation in the Exchange Option is completely voluntary and neither
Telebras nor its board of directors has made any recommendation that holders of
Telebras ADR shares tender or refrain from tendering any or all of their
Telebras ADR shares. Each holder of Telebras ADR shares should consider
carefully his own circumstances and decide for himself whether to tender or
refrain from tendering his shares.
CASH OPTION. Units may be purchased from the Sponsor or broker-dealers for cash
at a sales charge of 1.00% of the Public Offering Price (1.010% of the net
amount invested). The minimum cash purchase is $1,000 or 50 Units. The Sponsor
may create Units for the settlement of cash sales by depositing additional
Securities in the Trust. The settlement for cash sales is normally the third
business day thereafter. Units sold for cash will be subject to the proration
provisions described above as if each day on which the Sponsor deposits
additional Securities in the Trust is considered an Exchange Date.
REASONS FOR THE OFFER. The Trust is designed for investors who would like to
hold an equity investment in Telebras and the separate companies in the
convenient Unit form without the record keeping, custody and other burdens that
might exist with ownership of stock in twelve separate companies. At the same
time, however, holders will forgo the opportunity to dispose directly of any of
the Securities and will not be able to vote the Securities (unless, in each
case, they subsequently redeem their Units for the underlying Securities).
While the Sponsor believes the Trust offers an attractive alternative to owning
separately the stock of the various companies, there can be no assurance that
this will be the case for all investors. Holders should carefully consider the
matters contained herein before deciding whether or not to tender their Telebras
ADR shares or to purchase Units for cash. Investors should note that if Units
are sold to the Sponsor in the secondary market (if the Units are not listed on
the American Stock Exchange) or if Units are redeemed through the Trustee, the
price of such a sale or redemption will be the price next computed after the
sale or tender for redemption at the Evaluation Time on the date of such tender
or sale. See "Market for Units" and "Redemption".
PROCEDURE FOR TENDERING TELEBRAS ADR SHARES. Except as otherwise stated below,
to properly be tendered pursuant to the Exchange Option, Telebras certificates,
if any, due bills representing the right to receive the securities of the twelve
companies (or certificates representing the securities of the companies after
their distribution) and any other required documents must be received by the
Sponsor or broker-dealers. If any certificates are registered in the name of a
person other than the individual tendering the certificates, the certificates
must be endorsed or accompanied by appropriate stock powers, and certain other
legal formalities may be required.
In all cases, delivery of Units in exchange for Telebras ADR shares tendered
pursuant to the Offer will be made by the Sponsor or broker-dealers only after
receipt of any certificates for the securities of the separate companies
(whether or not due bills are initially tendered representing these securities)
and any other required documents. Holders without certificates (for example, if
shares are held in street name) must request that appropriate documentation
representing their Telebras ADR shares be delivered to the Sponsor. If any
tendered shares are not accepted for exchange, or if fewer than all shares
evidenced by certificates are to be tendered, certificates for shares not so
exchanged will be returned without expense to the tendering shareholder as
promptly as practicable following the applicable Exchange Date.
By validly tendering his shares and subject to acceptance of the shares by the
Sponsor on or after the applicable Exchange Date, a tendering shareholder
irrevocably appoints designees of the Sponsor as his proxy, with full power of
substitution, to the full extent of such shareholder's rights with respect to
the shares tendered by such
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shareholder. By such action, a tendering shareholder will also authorize the
Trustee to receive for the account of the Trust all dividends and other
distributions with a record date after such exchange of shares and to exercise
all rights in respect thereof. Upon the acceptance for exchange, all prior
proxies given by such shareholder automatically will be revoked and no
subsequent proxies may be given.
The designees of the Sponsor will be empowered to exercise all voting and other
rights of tendering shareholders as they in their discretion may deem proper in
respect to any annual, special or adjourned meeting of shareholders of Telebras
or any of the separate companies, action by written consent or otherwise.
All questions as to the validity, form eligibility (including time of receipt)
and acceptance for exchange of any tendered shares will be determined by the
Sponsor, in its sole discretion, and the Sponsor's determination will be final
and binding. The Sponsor reserves the absolute right to reject any or all
tenders of any shares not in proper form or the acceptance for exchange of which
would, in the opinion of the Sponsor's counsel, be unlawful. Any shares not
accepted for exchange will be returned as promptly as practicable. The Sponsor
also reserves the absolute right to waive any of the conditions of the Offer or
any defect or irregularity in the tender of any shares and the Sponsor's
interpretation of the terms and conditions of the Offer will be final. Except
as aforesaid, no tender of shares will be deemed to have properly been made
until all defects and irregularities have been cured or waived. Neither the
Sponsor, the Trustee of the Trust nor any other person shall be under any duty
to give notification of any defects or irregularities in tenders nor shall any
of them incur any liability for failure to give such notification.
CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other provision of the
Offer, the Sponsor will not be required to accept for exchange any shares
tendered, and may terminate or amend the Offer, if at any time prior to any
Exchange Date any of the following events shall have occurred:
(a) there shall have occurred (i) any general suspension of or
limitation on prices for or trading in securities on the New York Stock
Exchange or (ii) a commencement of a war or armed hostilities or other
international or national calamity directly or indirectly involving the
United States; or in the case of any of the foregoing existing at the time
of the commencement of the Offer, a material worsening thereof; or
(b) there shall be threatened, instituted or pending any action or
proceeding before any court or governmental authority, domestic or foreign,
by any government or governmental authority or by any other person,
domestic or foreign, challenging the making of the Offer, or the
acquisition of tendered shares pursuant to the Offer, or otherwise directly
or indirectly relating to the Offer, or otherwise materially adversely
affecting Telebras, any of its subsidiaries or any of the holding
companies; or
(c) there shall be taken any action or shall be proposed, enacted,
issued or entered by any governmental authority or by any court any order
relating to the plan for the privitization and reorganization of Telebras;
which, in the sole judgment of the Sponsor in any such case, and regardless of
the circumstances, makes it inadvisable to proceed with the Offer or with the
acceptance for exchange of shares.
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Any determination by the Sponsor concerning the events described above shall be
final and binding upon all parties. The foregoing conditions are for the sole
benefit of the Sponsor and may be waived by the Sponsor in whole or in part.
In addition, the Sponsor reserves the right to amend, modify or terminate the
Offer at any time, in its sole discretion. This Prospectus will be amended to
reflect any material amendment or modification.
In the event of any termination of the Offer, the Sponsor will return without
cost all certificates for shares theretofore tendered and not accepted for
exchange and neither the Sponsor nor any broker-dealer will have any further
obligation or liability with respect to the Offer. Any termination shall be
deemed to be made at the time of the giving of public notice thereof by the
Sponsor.
Investors should note that the Trust is not sponsored, endorsed or promoted by
or affiliated with Telebras.
Although there can be no assurance that such Securities will appreciate in value
over the life of the Trust, over time stock investments have generally out-
performed most other asset classes. However, it should be remembered that
stocks carry greater risks, including the risk that the value of an investment
can decrease (see "Risk Factors-Certain Investment Considerations"), and past
performance is no guarantee of future results.
RISK FACTORS
GENERAL. An investment in Units of the Trust should be made with an
understanding of the risks inherent in an investment in equity securities,
including the risk that the financial condition of 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) or the risk that holders of
stock have a right to receive payments from the issuers of those stocks that is
generally inferior to that of creditors of, or holders of debt obligations
issued by, the issuers. Stocks are especially susceptible to general stock
market movements and to volatile increases and decreases in value as market
confidence in and perceptions of the issuers change. These perceptions are
based on unpredictable factors including expectations regarding government,
economic, monetary and fiscal policies, inflation and interest rates, economic
expansion or contraction, and global or regional political, economic or banking
crises.
Holders of stock incur more risk than the holders of debt obligations because
stockholders, as owners of the entity, have generally inferior rights to receive
payments from the issuer in comparison with the rights of creditors of, or
holders of debt obligations issued by the issuer. Holders of stock of the type
held by the Trust have a right to receive dividends only when and if, and in the
amounts, declared by the issuer's Board of Directors and to participate in
amounts available for distribution by the issuer only after all other senior
claims on the issuer have been paid or provided for. Holders of preferred stock
may have the right to receive dividends at a fixed rate when and as declared by
the issuer's Board of Directors, normally on a cumulative basis, but do not
participate in other amounts available for distribution by the issuing
corporation. Preferred stocks may also be entitled to rights on liquidation
which are senior to those of common stocks. The issuance of debt securities or
other senior securities will create prior claims for payment of principal,
interest, liquidation preferences and dividends which could adversely affect the
ability and inclination of the issuer to declare or pay dividends on its stock
or the rights of holders of 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
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(whose value, however, will be subject to market fluctuations prior thereto),
preferred stocks may not have a fixed principal amount nor a maturity and have
values which are subject to market fluctuations for as long as the stocks remain
outstanding. The value of the Securities in the portfolios thus may be expected
to fluctuate over the entire life of the Trust to values higher or lower than
those prevailing on the Initial Date of Deposit.
Whether or not the Securities are listed on a national securities exchange, the
principal trading market for the Securities may be in the over-the-counter
market. As a result, the existence of a liquid trading market for the
Securities may depend on whether dealers will make a market in the 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 is 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 Trust will be adversely affected if trading markets for the Securities are
limited or absent.
The Trust Agreement authorizes the Sponsor to increase the size of the Trust and
the number of Units thereof by the deposit of additional Securities, or cash
(including a letter of credit) with instructions to purchase additional
Securities, in the Trust and the issuance of a corresponding number of
additional Units. If the Sponsor deposits cash, existing and new investors may
experience a dilution of their investments and a reduction in their anticipated
income because of fluctuations in the prices of the Securities between the time
of the cash deposit and the purchase of the Securities and because the Trust
will pay the associated brokerage fees. To minimize this effect, the Trust will
attempt to purchase the Securities as close to the Evaluation Time or as close
to the evaluation prices as possible.
At any time after the Initial Date of Deposit, litigation may be initiated on a
variety of grounds, or legislation may be enacted with respect to the Securities
in the Trust or the issuers of the Securities. There can be no assurance that
future litigation or legislation will not have a material adverse effect on the
Trust or will not impair the ability of issuers to achieve their business goals.
Like other investment companies, financial and business organizations and
individuals around the world, the Trust could be adversely affected if the
computer systems used by the Sponsor, Evaluator or Trustee or other service
providers to the Trust do not properly process and calculate date-related
information and data from and after January 1, 2000. This is commonly known as
the "Year 2000 Problem." The Sponsor, Evaluator and Trustee are taking steps
that they believe are reasonably designed to address the Year 2000 Problem with
respect to computer systems that they use and to obtain reasonable assurances
that comparable steps are being taken by the Trust's other service providers.
At this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact to the Trust.
The Year 2000 Problem is expected to impact corporations, which may include
issuers of Securities contained in the Trust, to varying degrees based upon
various factors, including, but not limited to, their industry sector and degree
of technological sophistication. The Sponsor is unable to predict what impact,
if any, the Year 2000 Problem will have on issuers of the Securities contained
in the Trust.
TELECOMMUNICATIONS ISSUERS. Because the Trust is concentrated in the
telecommunications industry, the value of the Units may be susceptible to
factors affecting the telecommunications industry. The telecommunications
industry is subject to governmental regulation and the products and services of
telecommunications companies
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may be subject to rapid obsolescence. These factors could affect the value of
Units. Telephone companies are generally subject to a variety of government
regulations affecting permitted rates of returns and the kinds of services that
may be offered. Certain of the separated companies may be in competition for a
share of the market of their products. As a result, competitive pressures are
intense and the stocks may be subject to price volatility. While Telebras units
may be established suppliers of traditional telecommunication products and
services, once separated, these companies may become smaller companies in their
markets, and may also involve greater risk than other issuers. Such companies
may have limited product lines, markets or financial resources, and their
securities may trade less frequently and in limited volume compared to the
securities of other established companies. As a result, the prices of the
securities of such companies may fluctuate to a greater degree than the prices
of securities of other issuers.
FOREIGN ISSUERS. Since the Securities are issued by a foreign issuer, an
investment in Units involves some investment risks that are different in some
respects from an investment in a trust that invests entirely in securities of
domestic issuers. Those investment risks include future political and
governmental restrictions or instability which might adversely affect the
payment or receipt of payment of dividends on the Securities or the value of the
Securities. In addition, 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, due to the nature of the issuers of Securities, the Sponsor believes
that adequate information will be available to allow the Supervisor to provide
portfolio surveillance.
Telebras is currently traded in the United States in ADR form and it is
anticipated that the separate companies will also trade in ADR form in the
United States. ADRs evidence American Depositary Receipts which represent
common stock deposited with a custodian in a depositary. American Depositary
Shares, and receipts therefor (ADRs), are issued by an American bank or trust
company to evidence ownership of underlying securities issued by a foreign
corporation. These instruments may not necessarily be denominated in the same
currency as the securities into which they may be converted. For purposes of
the discussion herein, the term ADR generally includes American Depositary
Shares, ADRs may be sponsored or unsponsored. In an unsponsored facility, the
depositary 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 depositary and entail a contractual
relationship between the issuer, the shareholder and the depositary:
unsponsored facilities involve several depositaries with no contractual
relationship to the company. The depositary bank that issues an ADR generally
charges a fee, based on the price of the ADR, upon issuance, and cancellation of
the ADR. This fee would be in addition to the brokerage commissions paid upon
the acquisition or surrender of the security. In addition, the depository
incurs expenses in connection with the conversion of dividends or other cash
distributions paid in local currency into U.S. dollars and such expenses are
deducted from the amount of the dividend or distribution paid to holders,
resulting in a lower payout per underlying shares represented by the ADR than
would be the case if the underlying share were held directly. Investors should
be aware that the Trustee of the Trust is the depositary for Telebras and will
act as depositary for the separated companies. Certain tax considerations,
including tax rate differentials and withholding requirements, arising from
applications of the tax laws of one nation to nationals of another and from
certain practices in the ADR market may also exist with respect to certain ADRs.
In varying degrees, any or all of these factors may affect the value of the ADR
compared with the value of the
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underlying shares in the local market. 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. ADRs
are registered securities pursuant to the Securities Act of 1933 and may be
subject to the reporting requirements of the Securities Exchange Act of 1934.
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.
Foreign issuers of securities that are ADRs may pay dividends in foreign
currencies which must be converted into dollars. 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 compared to the
economies of the United States and other countries. Therefore, there is a risk
that the value of the Securities will vary with fluctuations in the United
States dollar and the Brazil Real.
On the basis of the best information available to the Sponsor at the present
time, none of the Securities are subject to exchange control restriction, under
existing law which would materially interfere with payment to the Trust of
dividends due on, or proceeds from the sale of, the Securities. However, there
can be no assurance that exchange control regulations might not be adopted in
the future which might adversely affect payment to the Trust. In addition, the
adoption of exchange control regulations and other legal restrictions could have
an adverse impact on the marketability, of the securities in the Trust and on
the ability of the Trust to satisfy its obligation to redeem Units tendered to
the Trustee for redemption.
TELEBRAS
Telebras is a holding company for the telecommunications systems in Brazil.
Telebras offers domestic and international telephone and data transmission
services throughout Brazil. Telebras preferred stock is currently listed on the
New York Stock Exchange in the form of American depositary shares. Each
Telebras ADR represents 1,000 shares of Telebras preferred stock. Certain
information regarding the Telebras ADRs is contained in information filed with
the Securities and Exchange Commission. Such information can be inspected at
the office of the Commission at 450 Fifth Street N.W., Washington, D.C. 20549,
as well as at the Regional Offices of the Commission at 219 South Dearborn
Street, Chicago, Illinois 60604 and 26 Federal Plaza, New York, New York 10278.
Copies of such information can be obtained by mail from the Public Reference
Section of the Commission at Washington, D.C. 20549 at prescribed rates and may
be available on the Commission's Internet site (www.sec.gov). Reports and other
information concerning Telebras may also be available at the offices of the ADR
custodian, The Bank of New York, 101 Barclay Street, New York, New York 10286,
or the New York Stock Exchange, 20 Broad Street, New York, New York 10005.
FEDERAL 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 (the "Code"). Unitholders should consult
their tax advisers in determining the federal, state, local and any other tax
consequences of the purchase, ownership and disposition of Units in the Trust.
For
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purposes of the following discussion and opinions, it is assumed that each
Security is equity for federal income tax purposes.
In the opinion of Chapman and Cutler, special counsel for the Sponsor, under
existing law:
1. The Trust is not an association taxable as a corporation for federal
income tax purposes; each Unitholder will be treated as the owner of a pro
rata portion of each of the assets of the Trust under the Code; and the
income of the Trust will be treated as income of the Unitholders thereof
under the Code. Each Unitholder will be considered to have received his pro
rata share of income derived from each Trust asset when such income is
considered to be received by the Trust.
2. A Unitholder will be considered to have received all of the dividends
paid on his pro rata portion of each Security when such dividends are
considered to be received by the Trust. Unitholders will be taxed in this
manner regardless of whether distributions from the Trust are actually
received by the Unitholder or are automatically reinvested.
3. Each Unitholder will have a taxable event when the Trust disposes of a
Security (whether by sale, taxable exchange, liquidation, redemption, or
otherwise) or upon the sale or redemption of Units by such Unitholder (except
to the extent an in kind distribution of stock is received by such Unitholder
as described below). The price a Unitholder pays for his Units, generally
including sales charges, is allocated among his or her pro rata portion of
each Security held by the Trust (in proportion to the fair market values
thereof on the valuation date nearest the date the Unitholder purchase his
Units) in order to determine his or her initial tax basis for his or her pro
rata portion of each Security held by the Trust. It is unclear whether
Unitholders who obtain their Units in exchange for Telebras ADRs or ADRs of
the separated companies will recognize gain or loss on the exchange. Such
Unitholders should consult their own tax advisers. As a result, it is
unclear whether a Unitholder's basis in any Units acquired pursuant to such
an exchange will be equal to such Unitholder's basis in the contributed ADRs
or whether such a Unitholder will have a new basis in the Units. Unitholders
should consult their own tax advisers with regard to the calculation of
basis. For federal income tax purposes, a Unitholder's pro rata portion of
dividends, as defined by Section 316 of the Code, paid by a corporation with
respect to a Security held by the Trust are taxable as ordinary income to the
extent of such corporation's current and accumulated "earnings and profits".
A Unitholder's pro rata portion of dividends paid on such Security which
exceeds such current and accumulated earnings and profits will first reduce a
Unitholder's tax basis in such Security, and to the extent that such
dividends exceed a Unitholder's tax basis in such Security shall generally be
treated as capital gain. In general, the holding period for such capital
gain will be determined by the period of time a Unitholder has held his
Units.
4. A Unitholder's portion of gain, if any, upon the sale or redemption of
Units or the disposition of Securities held by the Trust will generally be
considered a capital gain (except in the case of a dealer or a financial
institution). A Unitholder's portion of loss, if any, upon the sale or
redemption of Units or the disposition of Securities held by the Trust will
generally be considered a capital loss (except in the case of a dealer or a
financial institution). Unitholders should consult their tax advisers
regarding the recognition of such capital gains and losses for federal income
tax purposes.
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TELEBRAS REORGANIZATION. Please note that Telebras has announced that the
reorganization of Telebras will trigger capital gains or losses for United
States investors in Telebras. Accordingly, as Unitholders of the Trust are
treated as the owners of all of the assets of the Trust (i.e., the Telebras
stock), Unitholders may recognize gain or loss as a result of the reorganization
of Telebras. Unitholders should consult their own tax advisers regarding the
tax consequences of such transaction.
To the extent dividends received by the Trust are attributable to foreign
corporations, a corporation that owns Units will not be entitled to the
dividends received deduction with respect to its pro rata portion of such
dividends, since the dividends received deduction is generally available only
with respect to dividends paid by domestic corporations.
It should be noted that various legislative proposals that would affect the
dividends received deduction have been introduced. Unitholders should consult
with their tax advisers with respect to the limitations on and possible
modifications to the dividends received deduction.
LIMITATIONS ON DEDUCTIBILITY OF TRUST EXPENSES BY UNITHOLDERS. Each
Unitholder's pro rata share of each expense paid by the Trust is deductible by
the Unitholder to the same extent as though the expense had been paid directly
by him. It should be noted that as a result of the Tax Reform Act of 1986,
certain miscellaneous itemized deductions, such as investment expenses, tax
return preparation fees and employee business expenses will be deductible by an
individual only to the extent they exceed 2% of such individual's adjusted gross
income. Unitholders may be required to treat some or all of the expenses of the
Trust as miscellaneous itemized deductions subject to this limitation.
Unitholders should consult with their tax advisers regarding the limitations on
the deductibility of Trust expenses.
RECOGNITION OF TAXABLE GAIN OR LOSS UPON DISPOSITION OF SECURITIES BY THE TRUST
OR DISPOSITION OF UNITS. As discussed above, a Unitholder may recognize taxable
gain (or loss) when a Security is disposed of by the Trust or if the Unitholder
disposes of a Unit. For taxpayers other than corporations, net capital gain
(which is defined as net long-term capital gain over net short-term capital loss
for the taxable year) is subject to a maximum marginal stated tax rate of either
28% or 20%, depending upon the holding periods of the capital assets. Capital
gain or loss is long-term if the holding period for the asset is more than one
year, and is short-term if the holding period for the asset is one year or less.
The date on which a Unit is acquired (i.e., the "trade date") is excluded for
purposes of determining the holding period of the Unit. Generally, capital
gains realized from assets held for more than one year but not more than 18
months are taxed at a maximum marginal stated tax rate of 28% and capital gains
realized from assets (with certain exclusions) held for more than 18 months are
taxed at a maximum marginal stated tax rate of 20% (10% in the case of certain
taxpayers in the lowest tax bracket). Further, capital gains realized from
assets held for one year or less are taxed at the same rates as ordinary income.
Legislation is currently pending that provides the appropriate methodology that
should be applied in netting the realized capital gains and losses. Such
legislation is proposed to be effective retroactively for tax years ending after
May 6, 1997. Note also that legislation is currently pending under which net
capital gain realized from property (with certain exclusions) held for more than
one year (rather than more than 18 months) would be taxed at the maximum
marginal stated tax rate of 20% (10% for certain taxpayers) provided by the 1997
Act. Such legislation is proposed to be effective retroactively for amounts
properly taken into account on or after January 1, 1998.
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In addition, please note that capital gains may be recharacterized as ordinary
income in the case of certain financial transactions that are considered
"conversion transactions" effective for transactions entered into after April
30, 1993. Unitholders and prospective investors should consult with their tax
advisers regarding the potential effect of this provision on their investment in
Units.
If a Unitholder disposes of a Unit he is deemed thereby to have disposed of his
entire pro rata interest in all assets of the Trust including his pro rata
portion of all Securities represented by a Unit. The Taxpayer Relief Act of
1997 (the "1997 Tax Act") includes provisions that treat certain transactions
designed to reduce or eliminate risk of loss and opportunities for gain (e.g.,
short sales, off-setting notional principal contracts, futures or forward
contracts, or similar transactions) as constructive sales for purposes of
recognition of gain (but not loss) and for purposes of determining the holding
period. Unitholders should consult their own tax advisers with regard to any
such constructive sales rules.
SPECIAL TAX CONSEQUENCES OF IN KIND DISTRIBUTIONS UPON REDEMPTION OF UNITS OR
TERMINATION OF THE TRUST. As discussed in "Rights of Unitholders-Redemption of
Units", under certain circumstances a Unitholder tendering Units for redemption
may request an In Kind Distribution. A Unitholder may also under certain
circumstances request an In Kind Distribution upon the termination of the Trust.
See "Rights of Unitholders-Redemption of Units." As previously discussed, prior
to the redemption of Units or the termination of the Trust, a Unitholder is
considered as owning a pro rata portion of each of the Trust assets for federal
income tax purposes. The receipt of an In Kind Distribution will result in a
Unitholder receiving an undivided interest in whole shares of stock plus,
possibly, cash.
The potential tax consequences that may occur under an In Kind Distribution with
respect to each Security owned by the Trust will depend on whether or not a
Unitholder receives cash in addition to Securities. A "Security" for this
purpose is a particular class of stock issued by a particular corporation. A
Unitholder will not recognize gain or loss if a Unitholder only receives
Securities in exchange for his or her pro rata portion in the Securities held by
the Trust. However, if a Unitholder also receives cash in exchange for a
fractional share of a Security held by the Trust, such Unitholder will generally
recognize gain or loss based upon the difference between the amount of cash
received by the Unitholder and his tax basis in such fractional share of a
Security held by the Trust.
Because the Trust will own many Securities, a Unitholder who requests an In Kind
Distribution will have to analyze the tax consequences with respect to each
Security owned by the Trust. The amount of taxable gain (or loss) recognized
upon such exchange will generally equal the sum of the gain (or loss) recognized
under the rules described above by such Unitholder with respect to each Security
owned by the Trust. Unitholders who request an In Kind Distribution are advised
to consult their tax advisers in this regard.
COMPUTATION OF THE UNITHOLDER'S TAX BASIS. Initially, a Unitholder's tax basis
in his or her Units will generally equal the price paid by such Unitholder of
his or her Units. The cost of the Units is allocated among the Securities held
in the Trust in accordance with the proportion of the fair market values of such
Securities on the valuation date nearest the date the Units are purchased in
order to determine such Unitholder's tax basis for his pro rata portion of each
Security.
A Unitholder's tax basis in his Units and his or her pro rata portion of a
Security held by the Trust will be reduced to the extent dividends paid with
respect to such Security are received by the Trust which are not taxable as
ordinary income as described above.
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GENERAL. Each Unitholder will be requested to provide the Unitholder's taxpayer
identification number to the Trustee and to certify that the Unitholder has not
been notified that payments to the Unitholder are subject to back-up
withholding. If the proper taxpayer identification number and appropriate
certification are not provided when requested, distributions by the Trust to
such Unitholder (including amounts received upon the redemption of Units) will
be subject to back-up withholding. Distributions by the Trust (other than those
that are not treated as United States source income, if any) will generally be
subject to United States income taxation and withholding in the case of Units
held by non-resident alien individuals, foreign corporations or other non-United
States persons. Such persons should consult their tax advisers.
In general, income that is not effectively connected to the conduct of a trade
or business within the United States that is earned by non-U.S. Unitholders and
derived from dividends of foreign corporations will not be subject to U.S.
withholding tax provided that less than 25 percent of the gross income of the
foreign corporation for a three-year period ending with the close of its taxable
year preceding payment was not effectively connected to the conduct of a trade
or business within the United States. In addition, such earnings may be exempt
from U.S. withholding pursuant to a specific treaty between the United States
and a foreign country. Non-U.S. Unitholders should consult their own tax
advisers regarding the imposition of U.S. withholding on distributions from the
Trust.
It should be noted that payments to the Trust of dividends on Securities that
are attributable to foreign corporations may be subject to foreign withholding
taxes and Unitholders should consult their tax advisers regarding the potential
tax consequences relating to the payment of any such withholding taxes by the
Trust. Any dividends withheld as a result thereof will nevertheless be treated
as income to the Unitholders. Because, under the grantor trust rules, an
investor is deemed to have paid directly his share of foreign taxes that have
been paid or accrued, if any, an investor may be entitled to a foreign tax
credit or deduction for United States income tax purposes with respect to such
taxes. The 1997 Tax Act imposes a required holding period for such credits.
Investors should consult their tax advisers with respect to foreign withholding
taxes and foreign tax credits.
At the termination of the Trust, the Trustee will furnish to each Unitholder of
the Trust a statement containing information relating to the dividends received
by the Trust on the Securities, the gross proceeds received by the Trust from
the disposition of any Security (resulting from redemption or the sale of any
Security), and the fees and expenses paid by the Trust. The Trustee will also
furnish annual information returns to Unitholders and to the Internal Revenue
Service.
In the opinion of special counsel to the Trust for New York tax matters, the
Trust is not an association taxable as a corporation and the income of the Trust
will be treated as the income of the Unitholders under the existing income tax
laws of the State and City of New York.
The foregoing discussion relates only to the tax treatment of U.S. Unitholders
("U.S. Unitholders") with regard to federal and certain aspects of New York
State and City income taxes. Unitholders may be subject to taxation in New York
or in other jurisdictions and should consult their own tax advisers in this
regard. As used herein, the term "U.S. Unitholder" means an owner of a Unit of
the Trust that (a) is (i) for United States federal income tax purposes a
citizen or resident of the United States, (ii) a corporation, partnership or
other entity created or organized in or under the laws of the United States or
of any political subdivision thereof, or (iii) an estate or trust the income of
which is subject to United States federal income taxation regardless of its
source or (b) does not qualify as a U.S. Unitholder in paragraph (a) but whose
income from a Unit is effectively connected with
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such Unitholder's conduct of a United States trade or business. The term also
includes certain former citizens of the United States whose income and gain on
the Units will be taxable. Unitholders should consult their tax advisers
regarding potential foreign, state or local taxation with respect to the Units.
PUBLIC OFFERING OF UNITS
PUBLIC OFFERING PRICE. During the initial offering period, Units of the Trust
are offered at the Public Offering Price (which is based on the aggregate
underlying value of the Securities and includes a sales charge of 1.00% of the
Public Offering Price which charge is equivalent to 1.010% of the net amount
invested) plus a pro rata share of any accumulated dividends in the Income
Account of the Trust. Such underlying value shall also include the
proportionate share of any undistributed cash held in the Capital Account of the
Trust. The sales charge is eliminated for transactions of $250,000 or more.
Units may be acquired by delivering Telebras ADRs, shares of the component
companies of Telebras or cash.
An investor may aggregate purchases of Units of the Trust for purposes of
qualifying for the volume purchase discount listed above. The sales charge
structure will apply on all purchases of Units in the Trust by the same person
on any one day from any one dealer. Additionally, Units purchased in the name
of the spouse of a purchaser or in the name of a child of such purchaser under
21 years of age will be deemed, for purposes of determining the sales charge, to
be additional purchases by the purchaser. The sales charge structure will also
be applicable to a trustee or other fiduciary purchasing securities for a single
trust estate or single fiduciary account.
Units may be purchased at the Public Offering Price less the concession the
Sponsor typically allows to dealers and other selling agents for purchases (see
"Public Distribution of Units" below) by officers, directors and employees of
the Sponsor and its affiliates and registered representatives of selling firms
and by investors who purchase Units through registered investment advisers,
certified financial planners or registered broker-dealers who in each case
either charge periodic fees for financial planning, investment advisory or asset
management services, or provide such services in connection with the
establishment of an investment account for which a comprehensive "wrap fee"
charge is imposed.
As indicated above, the initial Public Offering Price of the Units was
established by dividing the aggregate underlying value of the Securities by the
number of Units outstanding plus the sales charge. Such underlying value shall
include the proportionate share of any cash held in the Capital Account. Such
price determination as of the opening of business on the Initial Date of Deposit
was made on the basis of an evaluation of the Securities prepared by the
Trustee. After the opening of business on the Initial Date of Deposit, the
Evaluator will appraise or cause to be appraised daily the value of the
underlying Securities as of the Evaluation Time on days the New York Stock
Exchange is open and will adjust the Public Offering Price of the Units
commensurate with such valuation. Such Public Offering Price will be effective
for all orders received at or prior to the close of trading on the New York
Stock Exchange on each such day. Orders received by the Trustee, Sponsor or any
dealer for purchases, sales or redemptions after that time, or on a day when the
New York Stock Exchange is closed, will be held until the next determination of
price.
The value of the Securities is determined on each business day by the Evaluator
based on the closing sale prices on a national securities exchange or The Nasdaq
National Market or by taking into account the same factors referred to under
"Redemption-Computation of Redemption Price."
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The minimum purchase is generally 50 Units or $1,000.
PUBLIC DISTRIBUTION OF UNITS. During the initial offering period, Units of the
Trust will be distributed to the public at the Public Offering Price thereof.
Upon the completion of the initial offering, Units which remain unsold or which
may be acquired in a secondary market maintained by the Sponsor (see "Market for
Units") may be offered at the Public Offering Price determined in the manner
provided above.
The Sponsor intends to qualify Units of the Trust for sale in a number of
states. Units will be sold through dealers who are members of the National
Association of Securities Dealers, Inc. and through others. Broker-dealers and
others will be allowed a concession or agency commission in connection with the
distribution of Units during the initial offering period of 0.75% of the Public
Offering Price.
Certain commercial banks are making 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 in the amounts shown above.
Under the Glass-Steagall Act, banks are prohibited from underwriting Trust
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 reserves the right to change the
concessions or agency commissions set forth above from time to time. In
addition to such concessions or agency commissions, the Sponsor may, from time
to time, pay or allow additional concessions or agency commissions, in the form
of cash or other compensation, to dealers employing registered representatives
who sell, during a specified time period, a minimum dollar amount of Units of
the Trust and other unit investment trusts underwritten by the Sponsor. At
various times the Sponsor may implement programs under which the sales force of
a broker or dealer may be eligible to win nominal awards for certain sales
efforts, or under which the Sponsor will reallow to any such broker or dealer
that sponsors sales contests or recognition programs conforming to criteria
established by the Sponsor, or participates in sales programs sponsored by the
Sponsor, an amount not exceeding the total applicable sales charges on the sales
generated by such person at the public offering price during such programs.
Also, the Sponsor in its discretion may from time to time pursuant to objective
criteria established by the Sponsor pay fees to qualifying brokers or dealers
for certain services or activities which are primarily intended to result in
sales of Units of the Trust. Such payments are made by the Sponsor out of its
own assets, and not out of the assets of the Trust. These programs will not
change the price Unitholders pay for their Units or the amount that the Trust
will receive from the Units sold. The difference between the discount and the
sales charge will be retained by the Sponsor.
The Sponsor reserves the right to reject, in whole or in part, any order for the
purchase of Units.
SPONSOR PROFITS. The Sponsor will receive gross sales charges equal to the
percentage of the Public Offering Price of the Units of the Trust as stated
under "Public Offering Price." In addition, the Sponsor may realize a profit (or
sustain a loss) as of the Initial Date of Deposit resulting from the difference
between the purchase prices of the Securities to the Sponsor and the cost of
such Securities to the Trust, which is based on the evaluation of the Securities
on the Initial Date of Deposit. Thereafter, on subsequent deposits the Sponsor
may realize profits or sustain losses from such deposits. See "Portfolio." The
Sponsor may realize additional profits or losses during the initial offering
period on unsold Units as a result of changes in the daily market value of the
Securities.
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MARKET FOR UNITS
While not obligated to do so, the Sponsor intends to maintain a market for Units
after the initial offering period and to continuously offer to purchase Units at
prices, determined by the Evaluator, based on the value of the underlying
Securities. Unitholders who wish to dispose of their Units should inquire of
their broker as to current market prices in order to determine whether there is
in existence any price in excess of the Redemption Price and, if so, the amount
thereof. The offering price of any Units resold by the Sponsor will be in
accord with that described in the currently effective prospectus describing such
Units. Any profit or loss resulting from the resale of such Units will belong
to the Sponsor. The Sponsor may suspend or discontinue purchases of Units if
the supply of Units exceeds demand, or for other business reasons.
At the completion of the initial offering period, if the Trust is able to comply
with the listing requirements of the American Stock Exchange, the Sponsor
intends to apply to such Exchange to list the Units of the Trust for trading
thereon. If so listed, the Sponsor would cease to maintain a secondary market
for the Units since Unitholders would be able to sell their Units at any time on
the American Stock Exchange. Additionally, Unitholders can redeem their Units
and receive an in kind distribution of the underlying Securities then in the
Trust.
REDEMPTION
GENERAL. A Unitholder who does not dispose of Units in a secondary market may
cause Units to be redeemed by the Trustee by making a written request to the
Trustee at its Unit Investment Trust Division office in the city of New York
and, in the case of Units evidenced by a certificate, by tendering such
certificate to the Trustee properly endorsed or accompanied by a written
instrument or instruments of transfer in form satisfactory to the Trustee.
Unitholders must sign the request, and such certificate or transfer instrument,
exactly as their names appear on the records of the Trustee and on any
certificate representing the Units to be redeemed. If the amount of the
redemption is $500 or less and the proceeds are payable to the Unitholder(s) of
record at the address of record, no signature guarantee is necessary for
redemptions by individual account owners (including joint owners). Additional
documentation may be requested, and a signature guarantee is always required,
from corporations, executors, administrators, trustees, guardians or
associations. The signatures must be guaranteed by a participant in the
Securities Transfer Agents Medallion Program ("STAMP") or such other signature
guaranty program in addition to, or in substitution for, STAMP, as may be
accepted by the Trustee. A certificate should only be sent by registered or
certified mail for the protection of the Unitholder. Since tender of the
certificate is required for redemption when one has been issued, Units
represented by a certificate cannot be redeemed until the certificate
representing such Units has been received by the purchasers.
Redemption shall be made by the Trustee on the third business day following the
day on which a tender for redemption is received (the "Redemption Date") by
payment of cash equivalent to the Redemption Price for a Trust, determined as
set forth below under "Computation of Redemption Price," as of the Evaluation
Time stated under "Essential Information," next following such tender,
multiplied by the number of Units being redeemed. Any Units redeemed shall be
canceled and any undivided fractional interest in the related Trust
extinguished. The price received upon redemption might be more or less than the
amount paid by the Unitholder depending on the value of the Securities at the
time of redemption. If at any time the Units are being traded on a national
securities exchange, Unitholders would, in lieu of a cash payment, receive an in
kind distribution of the underlying Securities in the Trust upon redemption.
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Under regulations issued by the Internal Revenue Service, the Trustee is
required to withhold a specified percentage of the principal amount of a Unit
redemption if the Trustee has not been furnished the redeeming Unitholder's tax
identification number in the manner required by such regulations. Any amount so
withheld is transmitted to the Internal Revenue Service and may be recovered by
the Unitholder only when filing a tax return. Under normal circumstances the
Trustee obtains the Unitholder's tax identification number from the selling
broker. However, any time a Unitholder elects to tender Units for redemption,
such Unitholder should make sure that the Trustee has been provided a certified
tax identification number in order to avoid this possible "back-up withholding."
In the event the Trustee has not been previously provided such number, one must
be provided at the time redemption is requested.
Any amounts paid on redemption representing unpaid dividends shall be withdrawn
from the Income Account of the Trust to the extent that funds are available for
such purpose. All other amounts paid on redemption shall be withdrawn from the
Capital Account for the Trust. The Trustee is empowered to sell Securities in
order to make funds available for the redemption of Units. Such sale may be
required when Securities would not otherwise be sold and might result in lower
prices than might otherwise be realized.
To the extent that Securities are sold, the size and diversity of the Trust will
be reduced but each remaining Unit will continue to represent approximately the
same proportional interest in each Security. Sales may be required at a time
when Securities would not otherwise be sold and may result in lower prices than
might otherwise be realized. The price received upon redemption may be more or
less than the amount paid by the Unitholder depending on the value of the
Securities in the portfolio at the time of redemption.
The right of redemption may be suspended and payment postponed (1) for any
period during which the New York Stock Exchange is closed, other than customary
weekend and holiday closings, or during which (as determined by the Securities
and Exchange Commission) trading on the New York Stock Exchange is restricted;
(2) for any period during which an emergency exists as a result of which
disposal by the Trustee of Securities is not reasonably practicable or it is not
reasonably practicable to fairly determine the value of the underlying
Securities in accordance with the Trust Agreement; or (3) for such other period
as the Securities and Exchange Commission may by order permit. The Trustee is
not liable to any person in any way for any loss or damage which may result from
any such suspension or postponement.
COMPUTATION OF REDEMPTION PRICE. The Redemption Price per Unit (as well as the
secondary market Public Offering Price) will generally be determined on the
basis of the last sale price of the Securities. On the Initial Date of Deposit,
the Public Offering Price per Unit (which includes the sales charge) exceeded
the value at which Units could have been redeemed by the amount shown under
"Essential Information." The Redemption Price per Unit is the pro rata share of
each Unit in the Trust determined on the basis of (i) the cash on hand in the
Trust or moneys in the process of being collected and (ii) the value of the
Securities less (a) amounts representing taxes or other governmental charges
payable out of the Trust, (b) any amount owing to the Trustee for its advances
and (c) the accrued expenses of the Trust. The Evaluator may determine the
value of the Securities in the following manner: if the Security is listed on a
national securities exchange or the Nasdaq National Market, the evaluation will
generally be based on the last sale price on the exchange or Nasdaq (unless the
Evaluator deems the price inappropriate as a basis for evaluation). If the
Security is not so listed or, if so listed and the principal market for the
Security is other than on the exchange or Nasdaq, the evaluation will generally
be made by the Evaluator in good faith based on the last bid price on the over-
the-counter market (unless the Evaluator deems such price inappropriate as a
basis for evaluation) or, if a bid price is not available,
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(1) on the basis of the current bid price for comparable securities, (2) by the
Evaluator's appraising the value of the Securities in good faith at the bid side
of the market or (3) by any combination thereof. See "Public Offering of Units-
Public Offering Price."
RETIREMENT PLANS
The Trust may be well suited for purchase by Individual Retirement Accounts,
Keogh Plans, pension funds and other qualified retirement plans. Generally,
capital gains and income received under each of the foregoing plans are deferred
from federal taxation. All distributions from such plans are generally treated
as ordinary income but may, in some cases, be eligible for special income
averaging or tax-deferred rollover treatment. Investors considering
participation in any such plan should review specific tax laws related thereto
and should consult their attorneys or tax advisers with respect to the
establishment and maintenance of any such plan. Such plans are offered by
brokerage firms and other financial institutions. The Trust will waive the
$1,000 minimum investment requirement for IRA accounts. The minimum investment
is $250 for tax-deferred plans such as IRA accounts. Fees and charges with
respect to such plans may vary.
The Trustee has agreed to act as custodian for certain retirement plan accounts.
An annual fee of $12.00 per account, if not paid separately, will be assessed by
the Trustee and paid through the liquidation of shares of the reinvestment
account. An individual wishing the Trustee to act as custodian must complete a
Ranson UIT/IRA application and forward it along with a check made payable to The
Bank of New York. Certificates for Individual Retirement Accounts cannot be
issued.
UNITHOLDERS
OWNERSHIP OF UNITS. Ownership of Units of the Trust will not be evidenced by
certificates unless a Unitholder, the Unitholder's registered broker/dealer or
the clearing agent for such broker/dealer makes a written request to the
Trustee. Units are transferable by making a written request to the Trustee and,
in the case of Units evidenced by a certificate, by presenting and surrendering
such certificate to the Trustee properly endorsed or accompanied by a written
instrument or instruments of transfer which should be sent by registered or
certified mail for the protection of the Unitholder. Unitholders must sign such
written request, and such certificate or transfer instrument, exactly as their
names appear on the records of the Trustee and on any certificate representing
the Units to be transferred. Such signatures must be guaranteed as stated under
"Redemption-General."
Units may be purchased and certificates, if requested, will be issued in
denominations of one Unit or any multiple thereof, subject to the minimum
investment requirement. Fractions of Units, if any, will be computed to three
decimal places. Any certificate issued will be numbered serially for
identification, issued in fully registered form and will be transferable only on
the books of the Trustee. The Trustee may require a Unitholder to pay a
reasonable fee, to be determined in the sole discretion of the Trustee, for each
certificate re-issued or transferred and to pay any governmental charge that may
be imposed in connection with each such transfer or interchange. The Trustee at
the present time does not intend to charge for the normal transfer or
interchange of certificates. Destroyed, stolen, mutilated or lost certificates
will be replaced upon delivery to the Trustee of satisfactory indemnity
(generally amounting to 3% of the market value of the Units), affidavit of loss,
evidence of ownership and payment of expenses incurred.
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DISTRIBUTIONS TO UNITHOLDERS. Income received by a Trust is credited by the
Trustee to the Income Account of the Trust. Other receipts are credited to the
Capital Account of the Trust. Income received by the Trust will be distributed
on or shortly after the 15th day of January, April, July and October of each
year on a pro rata basis to Unitholders of record as of the preceding record
date (which will be the first day of the related month). All distributions will
be net of applicable expenses. There is no assurance that any actual
distributions will be made since all dividends received may be used to pay
expenses. In addition, amounts from the Capital Account of the Trust, if any,
will be distributed at least annually to the Unitholders then of record.
Proceeds received from the disposition of any of the Securities after a record
date and prior to the following distribution date will be held in the Capital
Account and not distributed until the next distribution date applicable to the
Capital Account. The Trustee shall be required to make a distribution from the
Capital Account if the cash balance on deposit therein available for
distribution shall be sufficient to distribute at least $1.00 per 10 Units. The
Trustee is not required to pay interest on funds held in the Capital or Income
Accounts (but may itself earn interest thereon and therefore benefits from the
use of such funds). The Trustee is authorized to reinvest any funds held in the
Capital or Income Accounts, pending distribution, in U.S. Treasury obligations
which mature on or before the next applicable distribution date. Any
obligations so acquired must be held until they mature and proceeds therefrom
may not be reinvested.
The distribution to the Unitholders as of each record date will be made on the
following distribution date or shortly thereafter and shall consist of an amount
substantially equal to such portion of the Unitholders' pro rata share of the
dividend distributions then held in the Income Account after deducting estimated
expenses. Because dividends are not received by the Trust at a constant rate
throughout the year, such distributions to Unitholders are expected to
fluctuate. Persons who purchase Units will commence receiving distributions
only after such person becomes a record owner. A person will become the owner
of Units, and thereby a Unitholder of record, on the date of settlement provided
payment has been received. Notification to the Trustee of the transfer of Units
is the responsibility of the purchaser, but in the normal course of business
such notice is provided by the selling broker-dealer.
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 Capital Account of the Trust amounts necessary to pay the expenses of the
Trust (as determined on the basis set forth under "Expenses of the Trust"). The
Trustee also may withdraw from said accounts such amounts, if any, as it deems
necessary to establish a reserve for any governmental charges payable out of the
Trust. Amounts so withdrawn shall not be considered a part of the 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 Capital Accounts of the Trust such amounts as may be necessary to
cover redemptions of Units.
STATEMENTS TO UNITHOLDERS. With each distribution, the Trustee will furnish or
cause to be furnished to each Unitholder a statement of the amount of income and
the amount of other receipts, if any, which are being distributed, expressed in
each case as a dollar amount per Unit.
The accounts of the Trust are required to be audited annually, at the Trust's
expense, by independent public accountants designated by the Sponsor, unless the
Sponsor determines that such an audit would not be in the best interest of the
Unitholders. The accountants' report will be furnished by the Trustee to any
Unitholder upon written request. Within a reasonable period of time after the
end of each calendar year, the Trustee shall furnish to each person who at any
time during the calendar year was a Unitholder of the Trust a statement,
covering the calendar year, setting forth:
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(A) As to the Income Account:
(1) Income received;
(2) Deductions for applicable taxes and for fees and expenses of the Trust
and for redemptions of Units, if any; and
(3) The balance remaining after such distributions and deductions,
expressed in each case both as a total dollar amount and as a dollar
amount representing the pro rata share of each Unit outstanding on the
last business day of such calendar year; and
(B) As to the Capital Account:
(1) The dates of disposition of any Securities and the net proceeds
received therefrom;
(2) Deductions for payment of applicable taxes and fees and expenses of
the Trust held for distribution to Unitholders of record as of a date
prior to the determination; and
(3) 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 Unit outstanding on the last
business day of such calendar year; and
(C) The following information:
(1) A list of the Securities as of the last business day of such calendar
year;
(2) The number of Units outstanding on the last business day of such
calendar year;
(3) The Redemption Price based on the last evaluation made during such
calendar year;
(4) The amount actually distributed during such calendar year from the
Income and Capital Accounts separately stated, expressed both as total
dollar amounts and as dollar amounts per Unit outstanding on the Record
Dates for each such distribution.
RIGHTS OF UNITHOLDERS. A Unitholder may at any time tender Units to the Trustee
for redemption. The death or incapacity of any Unitholder will not operate to
terminate the Trust nor entitle legal representatives or heirs to claim an
accounting or to bring any action or proceeding in any court for partition or
winding up of the Trust.
No Unitholder shall have the right to control the operation and management of
the Trust in any manner, except to vote with respect to the amendment of the
Trust Agreement or termination of the Trust.
INVESTMENT SUPERVISION
The Trust is a unit investment trust and is not an "actively managed" fund.
Traditional methods of investment management for a managed fund typically
involve frequent changes in a portfolio of securities on the basis of economic,
financial and market analyses. The portfolio of the Trust, however, will not be
actively managed and therefore the adverse financial condition of an issuer will
not necessarily require the sale of its securities from the portfolio.
While the Sponsor intends to continue the Trust's investment in the separate
Telebras companies, the Trust Agreement provides that the Sponsor may (but need
not) direct the Trustee to dispose of a Security in certain events such as the
issuer having defaulted on the payment on any of its outstanding obligations or
the price of a Security has declined to such an extent or other such credit
factors exist so that in the opinion of the Sponsor
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the retention of such Securities would be detrimental to a Trust. Pursuant to
the Trust Agreement and with limited exceptions, the Trustee may sell any
securities or other properties acquired in exchange for Securities such as those
acquired in connection with a merger or other transaction. If offered such new
or exchanged securities or property, the Trustee shall reject the offer.
However, in the event such securities or property are nonetheless acquired by a
Trust, they may be accepted for deposit in such Trust and either sold by the
Trustee or held in such Trust pursuant to the direction of the Sponsor.
Proceeds from the sale of Securities (or any securities or other property
received by a Trust in exchange for Securities) are credited to the Capital
Account for distribution to Unitholders or to meet redemptions. Except as
stated under "The Fund" for failed securities or under "Unitholders-
Distributions to Unitholders" for short term investment in U.S. Treasury
obligations and as provided herein, the acquisition by a Trust of any securities
other than the Securities is prohibited. The Trustee may sell Securities,
designated by the Sponsor, from a Trust for the purpose of redeeming Units of
such Trust tendered for redemption and the payment of expenses.
ADMINISTRATION OF THE TRUST
THE TRUSTEE. The Trustee is The Bank of New York, a trust company organized
under the laws of New York. The Bank of New York has its Unit Investment Trust
Division offices at 101 Barclay Street, New York, New York 10286, telephone 1-
800-701-8178. The Bank of New York is subject to supervision and examination by
the Superintendent of Banks of the State of New York and the Board of Governors
of the Federal Reserve System, and its deposits are insured by the Federal
Deposit Insurance Corporation to the extent permitted by law.
The Trustee, whose duties are ministerial in nature, has not participated in
selecting the portfolio of the Trust. For information relating to the
responsibilities of the Trustee under the Trust Agreement, reference is made to
the material set forth under "Unitholders." The Trustee currently acts as
custodian for Telebras ADRs and has been selected as custodian for ADRs of the
separate companies to be formed in the spin-off transaction.
In accordance with the Trust Agreement, the Trustee shall keep records of all
transactions at its office. Such records shall include the name and address of,
and the number of Units held by, every Unitholder. Such books and records shall
be open to inspection by any Unitholder at all reasonable times during usual
business hours. The Trustee shall make such annual or other reports as may from
time to time be required under any applicable state or federal statute, rule or
regulation. The Trustee shall keep a certified copy or duplicate original of
the Trust Agreement on file in its office available for inspection at all
reasonable times during usual business hours by any Unitholder, together with a
current list of the Securities held in the Trust. Pursuant to the Trust
Agreement, the Trustee may employ one or more agents for the purpose of custody
and safeguarding of Securities comprising the Trust.
Under the Trust Agreement, the Trustee or any successor trustee may resign and
be discharged of the trust created by the Trust Agreement by executing an
instrument in writing and filing the same with the Sponsor.
The Trustee or successor trustee must mail a copy of the notice of resignation
to all Unitholders then of record, not less than sixty days before the date
specified in such notice when such resignation is to take effect. The Sponsor
upon receiving notice of such resignation is obligated to appoint a successor
trustee promptly. If, upon such resignation, no successor trustee has been
appointed and has accepted the appointment within thirty days after
notification, the retiring Trustee may apply to a court of competent
jurisdiction for the appointment of a
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successor. The Sponsor may remove the Trustee and appoint a successor at any
time as provided in the Trust Agreement. Notice of such removal and appointment
shall be mailed to each Unitholder by the Sponsor. Upon execution of a written
acceptance of such appointment by such successor trustee, all the rights,
powers, duties and obligations of the original Trustee shall vest in the
successor. The Trustee must be a corporation organized under the laws of the
United States, or any state thereof, be authorized under such laws to exercise
trust powers and have at all times an aggregate capital, surplus and undivided
profits of not less than $5,000,000.
THE SPONSOR. Ranson & Associates, Inc., the Sponsor of the Trust, is an
investment banking firm created in 1995 by a number of former owners and
employees of Ranson Capital Corporation. In 1996, Ranson & Associates, Inc.
purchased all existing unit investment trusts sponsored by EVEREN Securities,
Inc. Accordingly, Ranson & Associates, Inc. is the successor sponsor to unit
investment trusts formerly sponsored by EVEREN Unit Investment Trusts, a service
of EVEREN Securities, Inc. Ranson & Associates, Inc., is also the sponsor and
successor sponsor of Series of Ranson Unit Investment Trusts, The Kansas Tax-
Exempt Trust and Multi-State Series of The Ranson Municipal Trust. Ranson &
Associates, Inc. is the successor to a series of companies, the first of which
was originally organized in 1935. During its history, Ranson & Associates, Inc.
and its predecessors have been active in public and corporate finance and have
sold bonds and unit investment trusts and maintained secondary market activities
relating thereto. At present, Ranson & Associates, Inc., which is a member of
the National Association of Securities Dealers, Inc., is the Sponsor to unit
investment trusts and serves as the financial advisor and as an underwriter for
municipalities. The Sponsor's offices are located at 250 North Rock Road, Suite
150, Wichita, Kansas 67206-2241.
If at any time the Sponsor shall fail to perform any of its duties under the
Trust Agreement or shall become incapable of acting or shall be adjudged a
bankrupt or insolvent or shall have its affairs taken over by public
authorities, then the Trustee may (a) appoint a successor sponsor at rates of
compensation deemed by the Trustee to be reasonable and not exceeding such
reasonable amounts as may be prescribed by the Securities and Exchange
Commission, or (b) terminate the Trust Agreement and liquidate the Trust as
provided therein, or (c) continue to act as Trustee without terminating the
Trust Agreement.
The foregoing financial information with regard to the Sponsor relates to the
Sponsor only and not to the Trust. Such information is included in this
Prospectus only for the purpose of informing investors as to the financial
responsibility of the Sponsor and its ability to carry out its contractual
obligations with respect to the Trust. More comprehensive financial information
can be obtained upon request from the Sponsor.
THE EVALUATOR. Ranson & Associates, Inc., the Sponsor, also serves as
Evaluator. The Evaluator may resign or be removed by the Trustee in which event
the Trustee is to use its best efforts to appoint a satisfactory successor.
Such resignation or removal shall become effective upon acceptance of
appointment by the successor evaluator. If upon resignation of the Evaluator no
successor has accepted appointment within thirty days after notice of
resignation, the Evaluator may apply to a court of competent jurisdiction for
the appointment of a successor. Notice of such registration or removal and
appointment shall be mailed by the Trustee to each Unitholder.
AMENDMENT AND TERMINATION. The Trust Agreement may be amended by the Trustee
and the Sponsor without the consent of any of the Unitholders: (1) to cure any
ambiguity or to correct or supplement any provision which may be defective or
inconsistent; (2) to change any provision thereof as may be required by the
Securities and Exchange Commission or any successor governmental agency; or (3)
to make such
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provisions as shall not adversely affect the interests of the Unitholders. The
Trust Agreement may also be amended in any respect by the Sponsor and the
Trustee, or any of the provisions thereof may be waived, with the consent of the
holders of Units representing 66 2/3% of the Units then outstanding of the
Trust, provided that no such amendment or waiver will reduce the interest of any
Unitholder thereof without the consent of such Unitholder or reduce the
percentage of Units required to consent to any such amendment or waiver without
the consent of all Unitholders of the Trust. In no event shall the Trust
Agreement be amended to increase the number of Units issuable thereunder or to
permit the acquisition of any Securities in addition to or in substitution for
those initially deposited in the Trust, except in accordance with the provisions
of the Trust Agreement. The Trustee shall promptly notify Unitholders of the
substance of any such amendment.
The Trust Agreement provides that the Trust shall terminate upon the
liquidation, redemption or other disposition of the last of the Securities held
in the Trust but in no event is it to continue beyond the Mandatory Termination
Date set forth under "Essential Information." If the value of the Trust shall be
less than the applicable minimum value stated under "Essential Information" (40%
of the aggregate value of the Securities-based on the value at the date of
deposit of such Securities into the Trust), the Trustee may, in its discretion,
and shall, when so directed by the Sponsor, terminate the Trust. The Trust may
be terminated at any time by the holders of Units representing 66 2/3% of the
Units thereof then outstanding.
No later than the Mandatory Termination Date set forth under "Essential
Information," the Trustee will begin to sell all of the remaining underlying
Securities on behalf of Unitholders in connection with the termination of the
Trust. The Sponsor has agreed to assist the Trustee in these sales. The sale
proceeds will be net of any incidental expenses involved in the sales.
The Sponsor will attempt to sell the Securities as quickly as it can during the
termination proceedings without in its judgment materially adversely affecting
the market price of the Securities, but it is expected that all of the
Securities will in any event be disposed of within a reasonable time after the
Trust's termination. The Sponsor does not anticipate that the period will be
longer than one month, and it could be as short as one day, depending on the
liquidity of the Securities being sold. The liquidity of any Security depends
on the daily trading volume of the Security and the amount that the Sponsor has
available for sale on any particular day. Of course, no assurances can be given
that the market value of the Securities will not be adversely affected during
the termination proceedings.
In the event of termination of the Trust, written notice thereof will be sent by
the Trustee to all Unitholders of the Trust. Within a reasonable period after
termination, the Trustee will sell any Securities remaining in the Trust and,
after paying all expenses and charges incurred by the Trust, will distribute to
Unitholders thereof (upon surrender for cancellation of certificates for Units,
if issued) their pro rata share of the balances remaining in the Income and
Capital Accounts of the Trust.
LIMITATIONS ON LIABILITY. The Sponsor: The Sponsor is liable for the
performance of its obligations arising from its responsibilities under the Trust
Agreement, but will be under no liability to the Unitholders for taking any
action or refraining from any action in good faith pursuant to the Trust
Agreement or for errors in judgment, except in cases of its own gross
negligence, bad faith or willful misconduct or its reckless disregard for its
duties thereunder. The Sponsor shall not be liable or responsible in any way
for depreciation or loss incurred by reason of the sale of any Securities.
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The Trustee: The Trust Agreement provides that the Trustee shall be under no
liability for any action taken in good faith in reliance upon prima facie
properly executed documents or for the disposition of moneys, Securities or
certificates except by reason of its own negligence, bad faith or willful
misconduct, or its reckless disregard for its duties under the Trust Agreement,
nor shall the Trustee be liable or responsible in any way for depreciation or
loss incurred by reason of the sale by the Trustee of any Securities. In the
event that the Sponsor shall fail to act, the Trustee may act and shall not be
liable for any such action taken by it in good faith. The Trustee shall not be
personally liable for any taxes or other governmental charges imposed upon or in
respect of the Securities or upon the interest thereof. In addition, the Trust
Agreement contains other customary provisions limiting the liability of the
Trustee.
The Evaluator: The Trustee and Unitholders may rely on any evaluation furnished
by the Evaluator and shall have no responsibility for the accuracy thereof. The
Trust Agreement provides that the determinations made by the Evaluator shall be
made in good faith upon the basis of the best information available to it,
provided, however, that the Evaluator shall be under no liability to the Trustee
or Unitholders for errors in judgment, but shall be liable for its gross
negligence, bad faith or willful misconduct or its reckless disregard for its
obligations under the Trust Agreement.
EXPENSES OF THE TRUST
The Sponsor will not charge the Trust any fees for services performed as
Sponsor. The Sponsor will receive a portion of the sale commissions paid in
connection with the purchase of Units and will share in profits, if any, related
to the deposit of Securities in the Trust.
The Trustee receives for its services that fee set forth under "Essential
Information." However, in no event shall such fee amount to less than $2,000 in
any single calendar year. The Trustee's fee which is calculated monthly is
based on the largest number of Units of the Trust outstanding during the
calendar year for which such compensation relates. The Trustee's fees are
payable monthly on or before the fifteenth day of the month from the Income
Account to the extent funds are available and then from the Capital Account.
The Trustee benefits to the extent there are funds for future distributions,
payment of expenses and redemptions in the Capital and Income Accounts since
these Accounts are non-interest bearing and the amounts earned by the Trustee
are retained by the Trustee. Part of the Trustee's compensation for its
services to the Trust is expected to result from the use of these funds.
In its capacity as Supervisor and Evaluator, the Sponsor will charge the Trust a
fee for services performed for the Trust in an amount not to exceed that amount
set forth in "Essential Information" but in no event will such compensation,
when combined with all compensation received from other unit investment trusts
for which the Sponsor both acts as sponsor and provides portfolio surveillance
and evaluation services exceed the aggregate cost to the Sponsor for providing
such services. This fee is based upon the largest number of Units of the Trust
outstanding during the calendar year for which such compensation relates.
The Trustee fee and the Surveillance and Evaluation fee are deducted from the
Income Account of the Trust to the extent funds are available and then from the
Capital Account. Each such fee may be increased without approval of Unitholders
by amounts not exceeding a proportionate increase in the Consumer Price Index or
any equivalent index substituted therefor.
26
<PAGE>
The following additional charges are or may be incurred by the Trust: (a) fees
for the Trustee's extraordinary services; (b) expenses of the Trustee (including
legal and auditing expenses, but not including any fees and expenses charged by
an agent for custody and safeguarding of Securities) and of counsel, if any; (c)
various governmental charges; (d) expenses and costs of any action taken by the
Trustee to protect the Trust or the rights and interests of the Unitholders; (e)
indemnification of the Trustee for any loss, liability or expense incurred by it
in the administration of the Trust not resulting from negligence, bad faith or
willful misconduct on its part or its reckless disregard for its obligations
under the Trust Agreement; (f) indemnification of the Sponsor for any loss,
liability or expense incurred in acting in that capacity without gross
negligence, bad faith or willful misconduct or its reckless disregard for its
obligations under the Trust Agreement; and (g) expenditures incurred in
contacting Unitholders upon termination of the Trust. The fees and expenses set
forth herein are payable out of the Trust and, when owing to the Trustee, are
secured by a lien on the Trust. Since the Securities are all stocks, and the
income stream produced by dividend payments, if any, may be unpredictable, the
Sponsor cannot provide any assurance that dividends will be sufficient to meet
any or all expenses of the Trust. If the balances in the Income and Capital
Accounts are insufficient to provide for amounts payable by the Trust, the
Trustee has the power to sell Securities to pay such amounts. These sales may
result in capital gains or losses to Unitholders. See "Federal Tax Status."
LEGAL OPINIONS
The legality of the Units offered hereby and certain matters relating to federal
tax law have been passed upon by Chapman and Cutler, 111 West Monroe Street,
Chicago, Illinois 60603, as counsel for the Sponsor.
INDEPENDENT AUDITORS
The statement of net assets, including the Trust portfolio, of the Trust at the
Initial Date of Deposit, appearing in this Prospectus and Registration Statement
have been audited by Allen, Gibbs & Houlik, L.C., independent auditors, as set
forth in their report appearing elsewhere herein, and are included in reliance
upon such report given upon the authority of such firm as experts in accounting
and auditing.
--------------------
27
<PAGE>
REPORT OF INDEPENDENT AUDITORS
UNITHOLDERS
RANSON UNIT INVESTMENT TRUSTS, SERIES 71
We have audited the accompanying statement of net assets, including the Trust
portfolio, of Ranson Unit Investment Trusts, Series 71, as of July 15, 1998.
The statement of net assets is the responsibility of the Sponsor. Our
responsibility is to express an opinion on the statement of net assets based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of net assets is free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the statement of net assets. Our procedures
included confirmation of a letter of credit or cash deposited to purchase
Securities by correspondence with the Trustee. An audit also includes assessing
the accounting principles used and significant estimates made by the Sponsor, as
well as evaluating the overall statement of net assets presentation. We believe
our audit provides a reasonable basis for our opinion.
In our opinion, the statement of net assets referred to above presents fairly,
in all material respects, the financial position of Ranson Unit Investment
Trusts, Series 71 as of July 15, 1998, in conformity with generally accepted
accounting principles.
ALLEN, GIBBS & HOULIK, L.C.
Wichita, Kansas
July 15, 1998
28
<PAGE>
RANSON UNIT INVESTMENT TRUSTS, SERIES 71
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS
AT THE OPENING OF BUSINESS ON JULY 15, 1998, THE INITIAL DATE OF DEPOSIT
<S> <C>
TRUST PROPERTY
Contracts to purchase Securities (1) (2) $11,787.50
----------
Total $11,787.50
==========
NUMBER OF UNITS 500
==========
INTEREST OF UNITHOLDERS
Interest of Unitholders-
Cost to investors (3) $11,906.57
Less: Gross underwriting commission (3) 119.07
----------
Net interest to Unitholders (1) (2) (3) 11,787.50
----------
Total $11,787.50
==========
<FN>
- --------------------
Notes:
(1) Aggregate cost of the Securities is based on the last sale price
evaluations as determined by the Trustee.
(2) An irrevocable letter of credit issued by The Bank of New York or cash
has been deposited with the Trustee covering the funds (aggregating
$11,567.50) necessary for the purchase of the Securities in the Trust
represented by purchase contracts.
(3) The aggregate cost to investors includes the applicable sales charge
assuming no elimination of the sales charge for purchases of $250,000 or
more.
</FN>
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
RANSON UNIT INVESTMENT TRUSTS, SERIES 71
TELEBRAS EXCHANGE TRUST, SERIES 1
PORTFOLIO AS OF JULY 15, 1998
NUMBER PRICE PER AGGREGATE COST
SYMBOL NAME OF ISSUER OF SHARES SHARE OF SECURITIES
- ------ ------------------------------------ --------- --------- --------------
<S> <C> <C> <C> <C>
TBR Telecomunicacoes Brasileiras S.A. - 100 $117.875 $11,787.50
Telebras (American depositary shares)
<FN>
NOTES TO PORTFOLIO
(1) All or a portion of the Securities may have been deposited in the Trust.
Any undelivered Securities are represented by "regular way" contracts for
the performance of which an irrevocable letter of credit has been
deposited with the Trustee. At the Initial Date of Deposit, the Sponsor
has assigned to the Trustee all of its rights, title and interest in and
to such undelivered Securities. Contracts to purchase Securities were
entered into on July 13, 1998 and all have expected settlement dates of
July 17, 1998 (see "The Trust Fund"). The market value of each Security
is based on the last sale price of the Securities respective Market. As
of the Initial Date of Deposit other information regarding the Securities
is as follows: Cost to Sponsor: $11,567.50; Profit to Sponsor: $220.
</FN>
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
Contents Page
<S> <C>
SUMMARY 2
ESSENTIAL INFORMATION 3
THE TRUST FUND 4
THE OFFER 5
RISK FACTORS 8
TELEBRAS 11
FEDERAL TAX STATUS 11
PUBLIC OFFERING OF UNITS 16
Public Offering Price 16
Public Distribution of Units 17
Sponsor Profits 17
MARKET FOR UNITS 18
REDEMPTION 18
General 18
Computation of Redemption Price 19
RETIREMENT PLANS 20
UNITHOLDERS 20
Ownership of Units 20
Distributions to Unitholders 21
Statements to Unitholders 21
Rights of Unitholders 22
INVESTMENT SUPERVISION 22
ADMINISTRATION OF THE TRUST 23
The Trustee 23
The Sponsor 24
The Evaluator 24
Amendment and Termination 24
Limitations on Liability 25
EXPENSES OF THE TRUST 26
LEGAL OPINIONS 27
INDEPENDENT AUDITORS 27
REPORT OF INDEPENDENT AUDITORS 28
STATEMENT OF NET ASSETS 29
PORTFOLIO 30
NOTES TO PORTFOLIO 30
</TABLE>
--------------------
This Prospectus does 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.
--------------------
No person is authorized to give any information or to make any representations
not contained in this Prospectus and any information or representation not
contained herein must not be relied upon as having been authorized by the Trust,
the Trustee, or the Sponsor. The Trust is registered as a unit investment trust
under the Investment Company Act of 1940. Such registration does not imply that
the Trust or the Units have been guaranteed, sponsored, recommended or approved
by the United States or any state or any agency or officer thereof.
--------------------
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
make such offer in such state.
<PAGE>
- ------------------
RANSON
UNIT
INVESTMENT
TRUSTS
- ------------------
- ----------------------------------------
PROSPECTUS JULY 15, 1998
- ----------------------------------------
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents.
The facing sheet
The Cross-Reference sheets
The Prospectus
The Signatures
The following exhibits.
1.1. Trust Agreement.
1.1.1. Standard Terms and Conditions of Trust. Reference is made to
Exhibit 1.1.1 to the Registration Statement on Form S-6 for Ranson Unit
Investment Trusts, Series 53 (File No. 333-17811) as filed on January 7,
1997.
2.1. Form of Certificate of Ownership (pages three and four of the Standard
Terms and Conditions of Trust included as Exhibit 1.1.1).
3.1. Opinion of counsel to the Sponsor as to legality of the securities being
registered including a consent to the use of its name under "Legal
Opinions" in the Prospectus.
3.2. Opinion of counsel to the Sponsor as to the tax status of the securities
being registered.
4.1. Consent of Independent Auditors.
S-1
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Ranson Unit Investment Trusts, Series 71 has duly caused this Registration
Statement to be signed on its behalf by the undersigned thereunto duly
authorized, in the City of Wichita, and State of Kansas, on the 15th day of
July, 1998.
RANSON UNIT INVESTMENT TRUSTS, SERIES 71,
Registrant
By: RANSON & ASSOCIATES, INC., Depositor
By: ALEX R. MEITZNER
---------------------------------------
Alex R. Meitzner
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below on July 15, 1998 by the following persons, who
constitute a majority of the Board of Directors of Ranson & Associates, Inc.
SIGNATURE TITLE
- --------------------- --------------------
DOUGLAS K. ROGERS Executive Vice )
- --------------------- President and Director )
Douglas K. Rogers
ALEX R. MEITZNER Chairman of the Board )
- --------------------- of Directors )
Alex R. Meitzner
ROBIN K. PINKERTON President, Secretary, )
- --------------------- Treasurer and Director ) ALEX R. MEITZNER
Robin K. Pinkerton -----------------------
Alex R. Meitzner
- ------------------------------------------------------------------------------
An executed copy of each of the related powers of attorney was filed with the
Securities and Exchange Commission in connection with the Registration Statement
on Form S-6 of The Kansas Tax-Exempt Trust, Series 51 (File No. 33-46376) and
Series 52 (File No. 33-47687) and the same are hereby incorporated herein by
this reference.
S-2
EXHIBIT 1.1
RANSON UNIT INVESTMENT TRUSTS
SERIES 71
TRUST AGREEMENT
This Trust Agreement dated as of July 15, 1998 between Ranson & Associates,
Inc., as Depositor, and The Bank of New York, as Trustee, sets forth certain
provisions in full and incorporates other provisions by reference to the
document entitled "Standard Terms and Conditions of Trust For Equity Trusts
Sponsored by Ranson & Associates, Inc., Effective January 7, 1997" (herein
called the "Standard Terms and Conditions of Trust"), and such provisions as are
set forth in full and such provisions as are incorporated by reference
constitute a single instrument.
WITNESSETH THAT:
In consideration of the premises and of the mutual agreements herein
contained, the Depositor and the Trustee agree as follows:
PART I
STANDARD TERMS AND CONDITIONS OF TRUST
Subject to the provisions of Part II hereof, all the provisions contained
in the Standard Terms and Conditions of Trust are herein incorporated by
reference in their entirety and shall be deemed to be a part of this instrument
as fully and to the same extent as though said provisions had been set forth in
this instrument.
PART II
SPECIAL TERMS AND CONDITIONS OF TRUST
The following special terms and conditions are hereby agreed to:
(1) The equity securities listed in the Schedule hereto have been
deposited in trust under this Trust Agreement as indicated in each Trust
named on the attached Schedule.
(2) For the purposes of the definition of the term "Unit" in Article I,
it is hereby specified that the fractional undivided interest in and
ownership of a Trust is the amount set forth in the section captioned
"Essential Information" in the final Prospectus of the Trust (the
"Prospectus") contained in Amendment No. 1 to the Trust's Registration
Statement (Registration No. 333-57797) as filed with the Securities and
Exchange Commission on July 15, 1998. The fractional undivided interest
may (a) increase by the number of any additional Units issued pursuant to
<PAGE>
Section 2.03, (b) increase or decrease in connection with an adjustment to
the number of Units pursuant to Section 2.03, or (c) decrease by the number
of Units redeemed pursuant to Section 5.02.
(3) The term "Deferred Sales Charge" shall mean the "deferred sales
charge" as described in the Prospectus.
(4) The terms "Income Account Record Date" and "Capital Account Record
Date" shall mean the dates set forth under "Essential Information-Record
and Computation Dates" in the Prospectus.
(5) The terms "Income Account Distribution Date" and "Capital Account
Distribution Date" shall mean the dates set forth under "Essential
Information-Distribution Dates" in the Prospectus.
(6) The term "Initial Date of Deposit" shall mean the date of this Trust
Agreement as set forth above.
(7) The number of Units of a Trust referred to in Section 2.03 is as set
forth under "Essential Information-Number of Units" in the Prospectus.
(8) For the purposes of Section 6.01(g), the liquidation amount is the
amount set forth under "Essential Information-Minimum Value of Trust under
which Trust Agreement may be Terminated" in the Prospectus.
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to
be duly executed.
RANSON & ASSOCIATES, INC.,
Depositor
By /s/ ROBIN K. PINKERTON
___________________________
President
THE BANK OF NEW YORK,
Trustee
By /s/ JEFFREY BIESELIN
___________________________
Vice President
<PAGE>
SCHEDULE A
SECURITIES INITIALLY DEPOSITED
RANSON UNIT INVESTMENT TRUSTS
SERIES 71
(Note: Incorporated herein and made a part hereof is the "Portfolio" as
set forth in the Prospectus.)
EXHIBIT 3.1
CHAPMAN AND CUTLER
111 WEST MONROE STREET
CHICAGO, ILLINOIS 60603
July 15, 1998
Ranson & Associates, Inc.
250 North Rock Road, Suite 150
Wichita, Kansas 67206
Re: Ranson Unit Investment Trusts Series 71
---------------------------------------
Gentlemen:
We have served as counsel for Ranson & Associates, Inc., as Sponsor and
Depositor of Ranson Unit Investment Trusts Series 71 (the "Fund"), in connection
with the preparation, execution and delivery of the Trust Agreement dated the
date of this opinion between Ranson & Associates, Inc., as Depositor, and The
Bank of New York, as Trustee, pursuant to which the Depositor has delivered to
and deposited the Securities listed in the Schedule to the Trust Agreement with
the Trustee and pursuant to which the Trustee has issued to or on the order of
the Depositor a certificate or certificates representing all the Units of
fractional undivided interest in, and ownership of, the Fund, created under said
Trust Agreement.
In connection therewith we have examined such pertinent records and
documents and matters of law as we have deemed necessary in order to enable us
to express the opinions hereinafter set forth.
Based upon the foregoing, we are of the opinion that:
1. The execution and delivery of the Trust Agreement and the execution
and issuance of certificates evidencing the Units of the Fund have been
duly authorized; and
2. The certificates evidencing the Units of the Fund, when duly
executed and delivered by the Depositor and the Trustee in accordance with
the aforementioned Trust Agreement, will constitute valid and binding
obligations of the Fund and the Depositor in accordance with the terms
thereof.
<PAGE>
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement (File No. 333-57797) relating to the Units referred to
above and to the use of our name and to the reference to our firm in said
Registration Statement and in the related Prospectus.
Respectfully submitted,
CHAPMAN AND CUTLER
EXHIBIT 3.2
CHAPMAN AND CUTLER
111 WEST MONROE STREET
CHICAGO, ILLINOIS 60603
July 15, 1998
Ranson & Associates, Inc.
250 North Rock Road, Suite 150
Wichita, Kansas 67206
The Bank of New York
101 Barclay Street
New York, New York 10286
Re: Ranson Unit Investment Trusts, Series 71
----------------------------------------
Gentlemen:
We have acted as counsel for Ranson & Associates, Inc., as Sponsor and
Depositor of Ranson Unit Investment Trusts Series 71 (the "Fund"), in connection
with the issuance of Units of fractional undivided interest in the Fund, under a
Trust Agreement dated July 15, 1998 (the "Indenture") between Ranson &
Associates, Inc., as Depositor, and The Bank of New York, as Trustee. The Fund
is comprised of one separate unit investment trust, Telebras Exchange Trust,
Series 1 (the "Trust").
In this connection, we have examined the Registration Statement, the
Prospectus, the Indenture, and such other instruments and documents as we have
deemed pertinent.
The assets of the Trust will consist of a portfolio of equity securities
(the "Equity Securities") as set forth in the Prospectus. For purposes of the
following discussion and opinion, it is assumed that each Security is equity for
federal income tax purposes.
Based upon the foregoing and upon an investigation of such matters of law
as we consider to be applicable, we are of the opinion that, under existing
United States Federal income tax law:
(i) The Trust is not an association taxable as a corporation for
Federal income tax purposes but will be governed by the provisions of
subchapter J (relating to trusts) of chapter 1, Internal Revenue Code
of 1986 (the "Code").
(ii) A Unitholder will be considered as owning a pro rata share
of each asset of the Trust in the proportion that the number of Units
held by him bears to the total number of Units outstanding. Under
subpart E, subchapter J of chapter 1 of the Code, income of a Trust
will be treated as income of each Unitholder in the proportion
<PAGE>
described, and an item of Trust income will have the same character in
the hands of a Unitholder as it would have in the hands of the
Trustee. Each Unitholder will be considered to have received his pro
rata share of income derived from each Trust asset when such income is
considered to be received by the Trust. A Unitholder's pro rata
portion of distributions of cash or property by a corporation with
respect to an Security ("dividends" as defined by Section 316 of the
Code ) are taxable as ordinary income to the extent of such
corporation's current and accumulated "earnings and profits." A
Unitholder's pro rata portion of dividends which exceed such current
and accumulated earnings and profits will first reduce the
Unitholder's tax basis in such Security, and to the extent that such
dividends exceed a Unitholder's tax basis in such Security, shall be
treated as gain from the sale or exchange of property.
(iii) The price a Unitholder pays for his Units, generally
including sales charges, is allocated among his pro rata portion of
each Security held by the Trust (in the proportion to the fair market
values thereof on the valuation date closest to the date the
Unitholder purchases his Units), in order to determine his tax basis
for his pro rata portion of each Security held by the Trust. It is
unclear whether Unitholders who obtain their Units in exchange for
Telecommunicacoes Brasilieras, S.A., ("Telebras") ADRs or ADRs of the
separated companies will recognize gain or loss on the exchange. As a
result, it is unclear whether a Unitholder's basis in any Units
acquired pursuant to such an exchange will be equal to such
Unitholder's basis in the contributed ADRs or whether such a
Unitholder will have a new basis in the Units.
(iv) Gain or loss will be recognized to a Unitholder (subject to
various nonrecognition provisions under the Code) upon redemption or
sale of his Units, except to the extent an in kind distribution of
stock is received by such Unitholder from the Trust as discussed
below. Such gain or loss is measured by comparing the proceeds of
such redemption or sale with the adjusted basis of his Units. Before
adjustment, such basis would normally be cost if the Unitholder had
acquired his Units by purchase. Such basis will be reduced, but not
below zero, by the Unitholder's pro rata portion of dividends with
respect to each Security which are not taxable as ordinary income.
(v) If the Trustee disposes of a Trust asset (whether by sale,
exchange, liquidation, redemption, payment on maturity or otherwise)
gain or loss will be recognized to the Unitholder (subject to various
nonrecognition provisions under the Code) and the amount thereof will
be measured by comparing the Unitholder's aliquot share of the total
proceeds from the transaction with his basis for his fractional
interest in the asset disposed of. Such basis is ascertained by
apportioning the tax basis for his Units (as of the date on which his
<PAGE>
Units were acquired) among each of the Trust assets of such Trust (as
of the date on which his Units were acquired) ratably according to
their values as of the valuation date nearest the date on which he
purchased such Units. A Unitholder's basis in his Units and of his
fractional interest in each Trust asset must be reduced, but not below
zero, by the Unitholder's pro rata portion of dividends with respect
to each Security which are not taxable as ordinary income.
(vi) Under the Indenture, under certain circumstances, a
Unitholder tendering Units for redemption may request an in kind
distribution of Equity Securities upon the redemption of Units or upon
the termination of the Trust. As previously discussed, prior to the
redemption of Units or the termination of the Trust, a Unitholder is
considered as owning a pro rata portion of each of the Trust's assets.
The receipt of an in kind distribution will result in a United States
Unitholder receiving an undivided interest in whole shares of stock
and possibly cash. The potential federal income tax consequences
which may occur under an in kind distribution with respect to each
Security owned by the Trust will depend upon whether or not a United
States Unitholder receives cash in addition to Equity Securities. An
"Security" for this purpose is a particular class of stock issued by a
particular corporation. A Unitholder will not recognize gain or loss
if a Unitholder only receives Equity Securities in exchange for his or
her pro rata portion in the Equity Securities held by the Trust.
However, if a Unitholder also receives cash in exchange for a
fractional share of an Security held by the Trust, such Unitholder
will generally recognize gain or loss based upon the difference
between the amount of cash received by the Unitholder and his tax
basis in such fractional share of an Security held by the Trust. The
total amount of taxable gains (or losses) recognized upon such
redemption will generally equal the sum of the gain (or loss)
recognized under the rules described above by the redeeming Unitholder
with respect to each Security owned by the Trust.
To the extent dividends received by the Trust are attributable to foreign
corporations, a corporation that owns Units will not be entitled to the
dividends received deduction with respect to the pro rata portion of such
dividends since the dividends received deduction is generally available only
with respect to dividends paid by domestic corporations.
Section 67 of the Code provides that certain itemized deductions, such as
investment expenses, tax return preparation fees and employee business expenses
will be deductible by individuals only to the extent they exceed 2% of such
individual's adjusted gross income. Unitholders may be required to treat some
or all of the expenses of the Trust as miscellaneous itemized deductions subject
to this limitation.
A Unitholder will recognize taxable gain (or loss) when all or part of the
pro rata interest in an Security is either sold by the Trust or redeemed or when
<PAGE>
a Unitholder disposes of his Units in a taxable transaction, in each case for an
amount greater (or less) than his tax basis therefor (subject to various non-
recognition provisions of the Code).
It should be noted that payments to a Trust of dividends on Securities that
are attributable to foreign corporations may be subject to foreign withholding
taxes and Unitholders should consult their tax advisers regarding the potential
tax consequences relating to the payment of any such withholding taxes by the
Trust. Any dividends withheld as a result thereof will nevertheless be treated
as income to the Unitholders. Because under the grantor trust rules, an
investor is deemed to have paid directly his share of foreign taxes that have
been paid or accrued, if any, an investor may be entitled to a foreign tax
credit or deduction for United States tax purposes with respect to such taxes.
A required holding period is imposed for such credits.
Any gain or loss recognized on a sale or exchange will, under current law,
generally be capital gain or loss.
The scope of this opinion is expressly limited to the matters set forth
herein, and, except as expressly set forth above, we express no opinion with
respect to any other taxes, including foreign, state or local taxes or
collateral tax consequences with respect to the purchase, ownership and
disposition of Units.
Very truly yours,
CHAPMAN AND CUTLER
MJK/md
EXHIBIT 4.1
INDEPENDENT AUDITORS' CONSENT
-----------------------------
We have issued our report dated July 15, 1998 on the statement of net
assets and related portfolio of Ranson Unit Investment Trusts Series 71 as of
July 15, 1998 contained in the Registration Statement on Form S-6 and in the
Prospectus. We consent to the use of our report in the Registration Statement
and in the Prospectus and to the use of our name as it appears under the caption
"Independent Auditors".
ALLEN, GIBBS & HOULIK, L.C.
Wichita, Kansas
July 15, 1998
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 71
<NAME> RANSON UNIT INVESTMENTS TRUST SERIES 71
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> JUL-15-1998
<PERIOD-START> JUL-15-1998
<PERIOD-END> JUL-15-1998
<INVESTMENTS-AT-COST> 11,787
<INVESTMENTS-AT-VALUE> 11,787
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 11,787
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 11,787
<SHARES-COMMON-STOCK> 500
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 11,787
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
