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<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 21, 1994
REGISTRATION NO. 33-51009
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
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A. EXACT NAME OF TRUST:
Equity Securities Trust, Series 4, EquiT's
B. NAME OF DEPOSITOR:
Bear, Stearns & Co. Inc.
C. COMPLETE ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES:
Bear, Stearns & Co. Inc.
245 Park Avenue
New York, New York 10167
D. NAME AND COMPLETE ADDRESS OF AGENT FOR SERVICE:
COPY OF COMMENTS TO:
Peter J. DeMarco MICHAEL R. ROSELLA, Esq.
Managing Director Battle Fowler
Bear, Stearns & Co. Inc. 280 Park Avenue
245 Park Avenue New York, New York 10017
New York, New York 10167 (212) 856-6858
E. TITLE AND AMOUNT OF SECURITIES BEING REGISTERED:
An indefinite number of Units of Equity Securities Trust, Series 4,
EquiT's is being registered under the Securities Act of 1933 pursuant to
Section 24(f) of the Investment Company Act of 1940, as amended, and Rule
24f-2 thereunder.
F. PROPOSED MAXIMUM AGGREGATE OFFERING PRICE TO THE PUBLIC OF THE SECURITIES
BEING REGISTERED:
Indefinite
G. AMOUNT OF FILING FEE:
$500* (as required by Rule 24f-2)
H. APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after the effective date of the Registration
Statement.
/ / Check if it is proposed that this filing will become effective
immediately upon filing pursuant to Rule 487.
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* Previously paid.
<PAGE>
EQUITY SECURITIES TRUST, SERIES 4
EQUIT'S
CROSS-REFERENCE SHEET
PURSUANT TO RULE 404 OF REGULATION C
UNDER THE SECURITIES ACT OF 1933
(FORM N-8B-2 ITEMS REQUIRED BY INSTRUCTION AS
TO THE PROSPECTUS IN FORM S-6)
<TABLE>
<CAPTION>
FORM N-8B-2 FORM S-6
ITEM NUMBER HEADING IN PROSPECTUS
----------------------------------------------------- -----------------------------------------------------
I. ORGANIZATION AND GENERAL INFORMATION
<S> <C> <C>
1. (a) Name of trust.................................... Front cover of Prospectus
(b) Title of securities issued....................... Front cover of Prospectus
2. Name and address of each depositor................... The Sponsor
3. Name and address of trustee.......................... The Trustee
4. Name and address of principal underwriters........... Distribution of Units
5. State of organization of trust....................... Organization
6. Execution and termination of trust agreement......... Trust Agreement, Amendment and Termination
7. Changes of name...................................... Not Applicable
8. Fiscal year.......................................... Not Applicable
9. Litigation........................................... None
II. GENERAL DESCRIPTION OF THE TRUST AND SECURITIES OF THE TRUST
10. (a) Registered or bearer securities.................. Certificates
(b) Cumulative or distributive securities............ Interest and Principal Distributions
(c) Redemption....................................... Trustee Redemption
(d) Conversion, transfer, etc........................ Certificates, Sponsor's Repurchase, Trustee
Redemption
(e) Periodic payment plan............................ Not Applicable
(f) Voting rights.................................... Trust Agreement, Amendment and Termination
(g) Notice to certificateholders..................... Records, Portfolio, Substitution of Securities, Trust
Agreement, Amendment and Termination, The Sponsor,
The Trustee
(h) Consents required................................ Trust Agreement, Amendment and Termination
(i) Other provisions................................. Tax Status
11. Type of securities comprising units.................. Objectives, Portfolio, Portfolio Summary
12. Certain information regarding periodic payment
certificates....................................... Not Applicable
13. (a) Load, fees, expenses, etc........................ Summary of Essential Information, Public Offering
Price, Market for Units, Volume and Other
Discounts, Sponsor's Profits, Trust Expenses and
Charges
(b) Certain information regarding periodic payment
certificates.................................... Not Applicable
(c) Certain percentages.............................. Summary of Essential Information, Public Offering
Price, Market for Units, Volume and Other Discounts
</TABLE>
i
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<TABLE>
<CAPTION>
FORM N-8B-2 FORM S-6
ITEM NUMBER HEADING IN PROSPECTUS
----------------------------------------------------- -----------------------------------------------------
<S> <C> <C>
(d) Price differences................................ Volume and Other Discounts, Distribution of Units
(e) Other loads, fees, expenses...................... Certificates
(f) Certain profits receivable by depositors,
principal underwriters, trustee or affiliated
persons......................................... Sponsor's Profits, Portfolio Summary
(g) Ratio of annual charges to income................ Not Applicable
14. Issuance of trust's securities....................... Organization, Certificates
15. Receipt and handling of payments from purchasers..... Organization
16. Acquisition and disposition of underlying
securities......................................... Organization, Objectives, Portfolio, Portfolio
Supervision
17. Withdrawal or redemption............................. Comparison of Public Offering Price, Sponsor's
Repurchase Price and Redemption Price, Sponsor's
Repurchase, Trustee Redemption
18. (a) Receipt, custody and disposition of income....... Distributions, Dividend and Principal Distributions,
Portfolio Supervision
(b) Reinvestment of distributions.................... Not Applicable
(c) Reserves or special funds........................ Dividend and Principal Distributions
(d) Schedule of distributions........................ Not Applicable
19. Records, accounts and reports........................ Records
20. Certain miscellaneous provisions of trust
agreement..........................................
(a) Amendment........................................ Trust Agreement, Amendment and Termination
(b) Termination...................................... Trust Agreement, Amendment and Termination
(c) and (d) Trustee, removal and successor........... The Trustee
(e) and (f) Depositor, removal and successor......... The Sponsor
21. Loans to security holders............................ Not Applicable
22. Limitations on liability............................. The Sponsor, The Trustee, The Evaluator
23. Bonding arrangements................................. Part II - Item A
24. Other material provisions of trust agreement......... Not Applicable
III. ORGANIZATION, PERSONNEL AND AFFILIATED PERSONS OF DEPOSITOR
25. Organization of depositor............................ The Sponsor
26. Fees received by depositor........................... Not Applicable
27. Business of depositor................................ The Sponsor
28. Certain information as to officials and affiliated
persons of depositor............................... Not Applicable
29. Voting securities of depositor....................... Not Applicable
30. Persons controlling depositor........................ Not Applicable
31. Payments by depositor for certain services rendered
to trust........................................... Not Applicable
32. Payments by depositor for certain other services
rendered to trust.................................. Not Applicable
33. Remuneration of employees of depositor for certain
services rendered to trust......................... Not Applicable
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
FORM N-8B-2 FORM S-6
ITEM NUMBER HEADING IN PROSPECTUS
----------------------------------------------------- -----------------------------------------------------
<S> <C> <C>
34. Remuneration of other persons for certain services
rendered to trust.................................. Not Applicable
IV. DISTRIBUTION AND REDEMPTION OF SECURITIES
35. Distribution of trust's securities by states......... Distribution of Units
36. Suspension of sales of trust's securities............ Not Applicable
37. Revocation of authority to distribute................ None
38. (a) Method of distribution........................... Distribution of Units
(b) Underwriting agreements.......................... Distribution of Units
(c) Selling agreements............................... Distribution of Units
39. (a) Organization of principal underwriters........... The Sponsor
(b) N.A.S.D. membership of principal underwriters.... The Sponsor
40. Certain fees received by principal underwriters...... The Sponsor
41. (a) Business of principal underwriters............... The Sponsor
(b) Branch offices of principal underwriters......... The Sponsor
(c) Salesmen of principal underwriters............... The Sponsor
42. Ownership of trust's securities by certain persons... Not Applicable
43. Certain brokerage commissions received by principal
underwriters....................................... Not Applicable
44. (a) Method of valuation.............................. Summary of Essential Information, Market for Units,
Offering Price, Accrued Interest, Volume and Other
Discounts, Distribution of Units, Comparison of
Public Offering Price, Sponsor's Repurchase Price
and Redemption Price, Sponsor's Repurchase, Trustee
Redemption
(b) Schedule as to offering price.................... Summary of Essential Information
(c) Variation in offering price to certain persons... Distribution of Units, Volume and Other Discounts
45. Suspension of redemption rights...................... Not Applicable
46. (a) Redemption valuation............................. Comparison of Public Offering Price, Sponsor's
Repurchase Price and Redemption Price, and
Redemption Price, and Trustee Redemption
(b) Schedule as to redemption price.................. Summary of Essential Information
47. Maintenance of position in underlying securities..... Comparison of Public Offering Price, Sponsor's
Repurchase Price and Redemption Price, Sponsor's
Repurchase, Trustee Redemption
V. INFORMATION CONCERNING THE TRUSTEE OR CUSTODIAN
48. Organization and regulation of trustee............... The Trustee
49. Fees and expenses of trustee......................... Trust Expenses and Charges
50. Trustee's lien....................................... Trust Expenses and Charges
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
FORM N-8B-2 FORM S-6
ITEM NUMBER HEADING IN PROSPECTUS
----------------------------------------------------- -----------------------------------------------------
<S> <C> <C>
VI. INFORMATION CONCERNING INSURANCE OF HOLDERS OF SECURITIES
51. Insurance of holders of trust's securities........... None
VII. POLICY OF REGISTRANT
52. (a) Provisions of trust agreement with respect to
selection or elimination of underlying
securities...................................... Objectives, Portfolio, Portfolio Supervision,
Substitution of Securities
(b) Transactions involving elimination of underlying
securities...................................... Not Applicable
(c) Policy regarding substitution or elimination of
underlying securities........................... Substitution of Securities
(d) Fundamental policy not otherwise covered......... Not Applicable
53. Tax status of trust.................................. Tax Status
VIII. FINANCIAL AND STATISTICAL INFORMATION
54. Trust's securities during last ten years............. Not Applicable
55. Hypothetical account for issuers of periodic payment
plans.............................................. Not Applicable
56. Certain information regarding periodic payment
certificates....................................... Not Applicable
57. Certain information regarding periodic payment
plans.............................................. Not Applicable
58. Certain other information regarding periodic payment
plans.............................................. Not Applicable
59. Financial statements (Instruction 1(c) to Form S-6).. Statement of Financial Condition
</TABLE>
iv
<PAGE>
[LOGO] EQUITY SECURITIES TRUST SERIES 4
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GABELLI VALUE FUND AND U.S. TREASURIES
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EquiT's
The Trust is a unit investment trust designated Equity Securities Trust, Series
4, EquiT's. The Sponsor is Bear, Stearns & Co. Inc. The objectives of the Trust
are to seek to achieve safety of capital through investment in stripped United
States Treasury issued notes or bonds paying no current interest ('Treasury
Obligations') and to attempt to provide for capital appreciation through
investment in shares of The Gabelli Value Fund Inc. (the 'Fund'), a non-
diversified, open-end Management Investment Company (the Treasury Obligations
and Fund Shares collectively, the 'Securities'). The objective of the Fund is
long-term capital appreciation which the Fund attempts to achieve by investing
primarily in equity securities of companies that the Fund's investment adviser,
Gabelli Funds, Inc., believes are undervalued and that by virtue of anticipated
developments or catalysts particularly applicable to such companies may, in the
adviser's judgement, achieve significant appreciation. The allocation between
the Treasury Obligations and the Fund would seek to assure that an investor
purchasing units in the Trust at inception would at least receive back the
original unit purchase price at the termination of the Trust from the maturity
value of the Treasury Obligations. The Sponsor can not give assurance that the
Trust's objectives can be achieved. There are certain risks inherent in an
investment in the Fund and Treasury Obligations. See 'Special Risk
Considerations' in Part A and 'Risk Factors' in Part B of this Prospectus.
Minimum Purchase: 100 Units
This Prospectus consists of two parts. Part A contains the Summary of Essential
Information including descriptive material relating to the Trust, and the
Statement of Condition of the Trust. Part B contains general information about
the Trust. Part A may not be distributed unless accompanied by Part B.
PLEASE READ AND RETAIN BOTH PARTS OF THIS PROSPECTUS FOR FUTURE REFERENCE.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
PROSPECTUS PART A DATED JANUARY 21, 1994
<PAGE>
EQUITY SECURITIES TRUST, SERIES 4, EQUIT'S
SUMMARY OF ESSENTIAL INFORMATION AS OF JANUARY 20, 1994*
<TABLE>
<S> <C>
INITIAL DATE OF DEPOSIT: JANUARY 21, 1994
AGGREGATE MATURITY VALUE OF TREASURY
OBLIGATIONS INITIALLY DEPOSITED......... $300,000
AGGREGATE NUMBER OF FUND SHARES INITIALLY
DEPOSITED............................... 9,896
INITIAL NUMBER OF UNITS................... 20,000
FRACTIONAL UNDIVIDED INTEREST IN TRUST.... 1/20,000
PUBLIC OFFERING PRICE**
Aggregate offering side evaluation of
Treasury Obligations in Trust......... $118,101
Aggregate Net Asset Value of Fund Shares
in Trust.............................. $119,643
Total................................... $237,744
Divided By 20,000 Units (times 100)..... $1,188.72
Plus Sales Charge of 4.9% of Public
Offering Price per 100 Units.......... $61.24
Public Offering Price per 100 Units++... $1,249.96
REDEMPTION PRICE PER 100 UNITS+++......... $1,185.51
SPONSOR'S INITIAL REPURCHASE PRICE PER 100
UNITS................................... $1,188.72
EXCESS OF PUBLIC OFFERING PRICE OVER
REDEMPTION PRICE PER 100 UNITS.......... $64.45
EXCESS OF SPONSOR'S INITIAL REPURCHASE
PRICE OVER REDEMPTION PRICE PER 100
UNITS................................... $3.21
EVALUATION TIME: 4:00 p.m. New York Time.
MINIMUM PRINCIPAL DISTRIBUTION: $1.00 per 100 Units
LIQUIDATION PERIOD: Beginning 60 days prior to the
Mandatory Termination Date.
MINIMUM VALUE OF TRUST: The Trust may be terminated if
the value of the Trust is less than 40% of the
aggregate value of the Securities at the completion
of the Deposit Period.
MANDATORY TERMINATION DATE: The earlier of August 15,
2008 or the disposition of the last Security in the
Trust.
TRUSTEE: United States Trust Company of New York.
TRUSTEE'S ANNUAL FEE***: $.93 per 100 Units
outstanding.
SPONSOR: Bear, Stearns & Co. Inc.
EVALUATOR: Kenny S&P Evaluation Services
EVALUATOR'S FEE FOR EACH EVALUATION OF TREASURY
OBLIGATIONS: $5.00 per evaluation.
RECORD DATE+: First of January, Annually.
DIVIDEND DISTRIBUTION DATE+: Fifteenth of January,
Annually.
</TABLE>
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* The business day prior to the Initial Date of Deposit. The Initial Date of
Deposit is the date on which the Trust Agreement was signed and the initial
deposit of Securities with the Trustee made.
** Per 100 Units.
*** Any Rule 12b-1 fees paid by the Fund's distributor to the Trustee for
performing servicing functions with respect to the Fund Shares will be used to
reduce directly the expenses and fees otherwise payable by the Trust to the
Trustee and any excess will be rebated to the Trust.
+ The first distribution will be made on January 15, 1995 (the 'First
Distribution Date') to all Certificateholders of record on January 1, 1995 (the
'First Record Date').
++ On the Initial Date of Deposit there will be no cash in the Income or
Principal Accounts. Anyone purchasing Units after such date will have included
in the Public Offering Price a pro rata share of any cash in such Accounts.
+++ Based on bid side evaluations of underlying Treasury Obligations and net
asset value of the Fund Shares.
A-2
<PAGE>
THE TRUST
The Trust is a unit investment trust designated Equity Securities Trust, Series
4, EquiT's. The Sponsor is Bear, Stearns & Co. Inc. The Trust consists of
stripped United States Treasury issued notes or bonds bearing no current
interest (the 'Treasury Obligations') and shares (the 'Fund Shares') of The
Gabelli Value Fund Inc. (the 'Fund'), a non-diversified, open-end management
investment company, or contracts and funds for the purchase thereof (the
Treasury Obligations and Fund Shares, collectively, the 'Securities'). The Trust
contains Treasury Obligations maturing approximately 14 years from the Date of
Deposit. The objectives of the Trust are to attempt to obtain safety of capital
through investment in Treasury Obligations and to attempt to provide for capital
appreciation through investment in shares of the Fund. The objective of the Fund
is long-term capital growth which the Fund attempts to achieve by investing
primarily in equity securities of companies that the Fund's investment adviser,
Gabelli Funds, Inc., believes are undervalued and that by virtue of anticipated
developments or catalysts particularly applicable to such companies may, in the
adviser's judgment, achieve significant appreciation. The Fund may invest in,
among other things, unregistered convertible securities, securities of issuers
involved in corporate reorganizations, warrants, rights, securities of foreign
issuers and forward commitments for securities purchased on a 'when issued' or
'delayed delivery' basis. While the Fund may offer its shareholders an ability
to reinvest distributions that are payable to such shareholders, the Trust will
elect to receive all distributions declared by the Fund in cash. There is, of
course, no assurance that the Trust's objectives will be achieved.
The Trust is structured to contain a sufficient amount of Treasury Obligations
to insure that an initial investor will receive, at the maturity of the Trust,
$15.00 per Unit. On the Initial Date of Deposit, the Public Offering Price,
including the sales charge, will be approximately $12.50 per Unit and
consequently, Certificateholders purchasing Units on such date can anticipate
realizing proceeds at maturity of the Treasury Obligations greater than their
initial investment of approximately $12.50 per Unit. However, an investor
holding his Units to Trust maturity may suffer a loss to the extent the
investor's purchase cost of a Unit exceeds $15.00 since the capital protection
is limited to the aggregate maturity value per Unit of Treasury Obligations. An
investor who sells his Units prior to Trust maturity, or all investors if the
Trust is terminated before the Treasury Obligations mature, may suffer a loss to
the extent that the price he receives upon the sale or redemption of his Units
is less than the purchase price of his Units. The price paid for a Unit may
differ from that set forth herein due to changes in the value of the Securities
in the portfolio subsequent to the Date of Deposit. There is no assurance that a
purchaser of Units on the date of the Prospectus or subsequent to such date will
receive, upon termination, his purchase price per Unit. The Fund has not been
structured to generate dividends and therefore dividend distributions by the
Trust are likely to be insignificant. The maximization of dividend income is not
an objective of the Trust. The Trust is 'concentrated' in Fund Shares, so
investors should be aware that the potential for capital appreciation is
directly related to the investment performance of the Fund itself. There are
certain risks inherent in an investment in a portfolio of Fund Shares and
Treasury Obligations. See 'Special Risk Considerations' in this Part A and 'Risk
Factors' in Part B. The Trust will terminate approximately 14 years after the
Initial Date of Deposit. Upon termination, Certificateholders may elect to
receive their terminating distributions of the Trust's Securities in cash, in
the form of an in-kind distribution of the Certificateholder's proportionate
share of Fund Shares held by the Trust and cash representing a
Certificateholder's proportionate share of Treasury Obligations or may utilize
their terminating distributions to purchase units of a future series of the
Trust at a reduced sales charge. Any election made by a Certificateholder may
result in the current taxation of all or a portion of the gain, if any, realized
by a Certificateholder upon the receipt of the terminating distribution. See
'Termination' in this Part A and 'Trust Administration--Trust Termination' in
Part B. All of the Securities are represented by the Sponsor's contracts to
purchase such Securities, which are expected to settle on or about January 28,
1994.
With the deposit of the Securities in the Trust on the Initial Date of Deposit,
the Sponsor established a proportionate relationship among the aggregate value
of the specified Securities in the Trust. During the 90 days subsequent to the
Initial Date of Deposit, the Sponsor may, but is not obligated to, deposit from
time to time additional Securities in the Trust ('Additional Securities') or
contracts to purchase Additional Securities,
A-3
<PAGE>
maintaining to the extent practicable, an undivided interest in the same number
and type of securities of identical issuers as are represented by Units issued
on the Initial Date of Deposit. It may not be possible to maintain the exact
original proportionate relationship between the Fund Shares and Treasury
Obligations in the Trust portfolio on the Initial Date of Deposit with the
deposit of Additional Securities, because of, among other reasons, purchase
requirements, changes in prices, or the unavailability of Securities. Deposits
of Additional Securities in the Trust subsequent to the 90-day period following
the Initial Date of Deposit must replicate exactly the proportionate
relationship between the Fund Shares and Treasury Obligations in the Trust
Portfolio at the end of the initial 90-day period. The number and identity of
Securities in the Trust will be adjusted to reflect the disposition of
Securities and/or the distribution with respect to such Securities or the
reinvestment of the proceeds distributed to Certificateholders. The portfolio of
the Trust may change slightly based on such disposition and reinvestment.
Securities received in exchange for Securities will be similarly treated.
Substitute Treasury Obligations may be acquired under specified conditions when
Treasury Obligations originally deposited in the Trust are unavailable (see 'The
Trust--Substitution of Securities' in Part B). As additional Units are issued by
the Trust as a result of the deposit of Additional Securities by the Sponsor,
the aggregate value of the Securities in the Trust will be increased and the
fractional undivided interest in the Trust represented by each unit will be
decreased. As of the Date of Deposit, Units in the Trust represent an undivided
interest in the principal and net income of the Trust in the ratio of one
hundred Units for the indicated initial aggregate value of Securities in the
Trust on the Initial Date of Deposit as is set forth in the Summary of Essential
Information (See 'The Trust-- Organization' in Part B) (For the specific number
of Units in the Trust as of the Initial Date of Deposit, see 'Summary of
Essential Information' in this Part A).
The Sponsor does not act as an underwriter, manager or co-manager of a public
offering of the securities of any of the issuers in the Trust portfolio.
THE FUND
The Fund's investment objective is long-term capital appreciation. The Fund
seeks to achieve its objective by investing primarily in equity securities of
companies that the Fund's investment adviser believes are undervalued and that
by virtue of anticipated developments or catalysts particularly applicable to
such companies may, in the investment adviser's judgment, achieve significant
appreciation.
The Fund may invest in, among other things, unregistered convertible securities,
securities of issuers involved in corporate reorganizations, warrants, rights,
securities of foreign issuers and forward commitments for securities purchased
on a 'when issued' or 'delayed delivery' basis. Convertible securities are not
typically rated within the four highest categories by the rating agencies and
are, therefore, not generally considered investment grade. There is no minimum
rating that is acceptable for investment by the Fund; however, it is the Fund's
current operating policy that not more than 35% of the Fund's portfolio will
consist of debt securities considered by the rating agencies, or, if unrated,
judged by the investment adviser to be predominantly speculative and involving
major risk exposure to adverse conditions, including securities of issuers in
default. The Fund will, however, limit its investments in securities of issuers
in default, which are included within the 35% limitation, to not more than 5% of
its total assets. These investments may involve special risks. See 'Risks of
Investing in Lower Rated Securities' and 'Description of Corporate Bond Ratings'
in Part B. The Fund may also purchase or sell exchange traded options, engage in
short sales of securities it owns or has the right to acquire, enter into
repurchase agreements, lend its portfolio securities to securities
broker-dealers or financial institutions and borrow money for short-term credits
from banks as may be necessary for the clearance of portfolio transactions and
for temporary or emergency purposes. Although the Fund will consistently seek to
attain the objective of long-term capital appreciation, there can be no
assurance it will be attained. The objective of the Fund may not be changed
without shareholder approval. There is, of course, no guarantee that the Fund's
investment objective will be achieved.
A-4
<PAGE>
SPECIAL RISKS CONSIDERATIONS
Investors should be aware of the risks which an investment in Units of the Trust
may entail. During the life of the Trust, the value of the portfolio Securities
and hence the Units may fluctuate and therefore the Public Offering Price and
Redemption Price per Unit may be more or less than the price paid by the
investor. The value of the Treasury Obligations will fluctuate inversely with
changes in interest rates and the value of Fund Shares will vary as the value of
the underlying portfolio securities of the Fund increases or decreases. The
Treasury Obligations are subject to substantially greater price fluctuations
during periods of changing interest rates than securities of comparable quality
which make periodic interest payments. See 'The Trust--Stripped U.S. Treasury
Obligations.' Although the Trust is structured to return to an initial
Certificateholder his purchase cost of a Unit through the distribution of the
Treasury Obligations maturity value on the mandatory termination date of the
Trust, an investor will have included the accrual of original issue discount on
such Treasury Obligations in income for Federal income tax purposes and will
have paid Federal income tax on such accrual. An investor holding his Units to
Trust maturity may suffer a loss to the extent the investor's purchase cost of a
Unit exceeds $15.00 since the capital protection is limited to the aggregate
maturity value per Unit of Treasury Obligations. Similarly, an investor who
sells his Units prior to Trust maturity, or all investors if the Trust is
terminated before the Treasury Obligations mature, may suffer a loss to the
extent that the price he receives upon the sale or redemption of his Units is
less than the purchase price of his Units.
PUBLIC OFFERING PRICE
The Public Offering Price per 100 Units of the Trust is equal to the aggregate
offering side evaluation during the initial offering period, and the aggregate
bid side evaluation thereafter, of the underlying Treasury Obligations and the
net asset value of the Fund Shares (excluding any sales charge) divided by the
number of Units outstanding times 100 plus a sales charge of 4.9% of the Public
Offering Price per 100 Units or 5.152% of the net amount invested in Securities
per 100 Units. (See 'Summary of Essential Information.') Any cash held by the
Trust will be added to the Public Offering Price. For additional information
regarding the Public Offering Price, the descriptions of dividend and principal
distributions, repurchase and redemption of Units and other essential
information regarding the Trust, see the 'Summary of Essential Information' for
the Trust. During the initial offering period orders involving at least 10,000
Units will be entitled to a volume discount from the Public Offering Price. The
Public Offering Price per Unit may vary on a daily basis in accordance with
fluctuations in the aggregate value of the underlying Securities. (See 'Public
Offering' in Part B.) The figures above assume a purchase of 100 Units. The
price of a single Unit, or any multiple thereof, is calculated by dividing the
Public Offering Price per 100 Units by 100 and multiplying by the number of
Units.
DISTRIBUTIONS
Distributions of net income (other than amortized discount) and long-term
capital gains distributions received in respect to any of the Securities by the
Trust will be made by the Trust annually. The first dividend distributions will
be made on the First Distribution Date to all Certificateholders of record on
the First Record Date and thereafter distributions will be made annually on the
15th day of January (the 'Distribution Date'). (See 'Rights of
Certificateholders--Distributions' in Part B. For the specific dates
representing the First Distribution Date and the First Record Date, see 'Summary
of Essential Information.') Although Certificateholders will be required to
include in income amounts of original issue discount that have accrued during
the taxable year on the Treasury Obligations, no income will be currently
distributed to the Certificateholders. (See 'Tax Status' in Part B.)
A-5
<PAGE>
MARKET FOR UNITS
The Sponsor, although not obligated to do so, intends to maintain a secondary
market for the Units of the Trust after the initial public offering has been
completed. The secondary market repurchase price will be based on the aggregate
bid side evaluation of the Treasury Obligations and the net asset value of the
Fund Shares (excluding any sales charge on Fund Shares). (See
'Liquidity--Sponsor Repurchase' for a description on how the secondary market
repurchase price will be determined.) If a market is not maintained a
Certificateholder will be able to redeem his Units with the Trustee. (See
'Liquidity--Trustee Redemption' in Part B.) There can be no assurance of the
making or the maintenance of a market for any of the Securities contained in the
Trust portfolio. Notwithstanding the foregoing, the Sponsor undertakes to
maintain the secondary market during the initial public offering period. In
addition, the Trust may be restricted under the Investment Company Act of 1940
from selling Securities to the Sponsor. The price at which the Securities may be
sold to meet redemptions and the value of the Units will be adversely affected
if trading markets for the Securities are limited or absent.
TOTAL REINVESTMENT PLAN
Distributions from the Trust are made to Certificateholders annually. The
Certificateholder has the option, however, of either receiving his distribution
check from the Trustee or participating in a reinvestment program offered by the
Sponsor in shares of GOC Fund, Inc. (formerly The Manager's Fund, Inc.), U.S.
Treasury Money Market Portfolio (the 'GOC Fund'). Gabelli-O'Connor Fixed Income
Mutual Funds Management Co. serves as the investment adviser of the GOC Fund and
GOC Fund Distributors, Inc. serves as distributor for the GOC Fund.
Participation in the reinvestment option is conditioned on the GOC Fund's lawful
qualification for sale in the state in which the Certificateholder is a
resident. The Plan is not designed to be a complete investment program. See
'Total Reinvestment Plan' in Part B for details on how to enroll in the Total
Reinvestment Plan and how to obtain a GOC Fund prospectus.
TERMINATION
During the 60 day period prior to the Mandatory Termination Date (approximately
14 years after the Initial Date of Deposit) (the 'Liquidation Period'),
Securities will begin to be sold in connection with the termination of the Trust
and all Securities will be sold by the Mandatory Termination Date. The Trustee
may utilize the services of the Sponsor for the sale of all or a portion of the
Securities in the Trust. The Sponsor will determine the manner, timing and
execution of the sales of the underlying Securities. Certificateholders may
elect one of the three options in receiving their terminating distributions.
Certificateholders may elect: (1) to receive their pro rata share of the
underlying Fund Shares in kind and the maturity value of Treasury Obligations in
cash, if they own at least 2,500 Units, (2) to receive cash upon the liquidation
of their pro rata share of the underlying Securities or (3) subject to the
receipt by the Trust of an appropriate exemptive order from the Securities and
Exchange Commission, to invest the amount of cash they would have received upon
the liquidation of their pro rata share of the underlying Securities in units of
a future series of the Trust (if one is offered) at a reduced sales charge. See
'Trust Administration--Trust Termination' in Part B for a description of how to
select a termination distribution option. Any election made by a
Certificateholder may result in the current taxation of all or a portion of the
gain, if any, realized upon the Certificateholder's receipt of the terminating
distribution. See 'Tax Status of the Trust' in Part B for further discussion.
The Sponsor will attempt to sell the Securities as quickly as they can during
the Liquidation Period without, in its judgment, materially adversely affecting
the market price of the Securities, but all of the Securities will in any event
be disposed of by the end of the Liquidation Period. The Sponsor does not
anticipate that the period will be as long as 60 days, and it could be as short
as one day, depending on the liquidity of the Securities being sold. The
liquidity of any Security depends on the daily trading volume of the Security
and the amount that the Sponsor has available for sale on any particular day.
A-6
<PAGE>
During the Liquidation Period, Certificateholders who have not chosen to receive
distributions-in-kind will be at risk to the extent that Fund Shares are not
sold; for this reason the Sponsor will be inclined to sell the Securities in as
short a period as they can without materially adversely affecting the price of
the Securities. Fund Shares, as more fully described in the prospectus for the
Fund, will be redeemed through certain broker-dealers and the Fund's transfer
agent at the net asset value next computed after the redemption request is
received.
DESCRIPTION OF PORTFOLIO AS OF INITIAL DATE OF DEPOSIT
$300,000 face amount of Treasury Obligations maturing on August 15, 2008 and
9,896 Fund Shares were held in the Trust on the Initial Date of Deposit. The
Treasury Obligations and the Fund Shares represent 49.68% and 50.32%,
respectively, of the total of the aggregate offering side evaluation of Treasury
Obligations in the Trust and the aggregate value of Fund Shares on the Initial
Date of Deposit.
A-7
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Sponsor, Trustee, and Certificateholders,
Equity Securities Trust, Series 4, EquiT's
We have audited the accompanying Statement of Condition and Portfolio (the
'financial statements') of the Equity Securities Trust, Series 4, EquiT's as of
January 21, 1994. These financial statements are the responsibility of the
Sponsor. Our responsibility is to express an opinion on the financial statements
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 financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion. The irrevocable letter of
credit deposited in connection with the securities owned as of January 21, 1994,
pursuant to contracts to purchase, as shown in the Statement of Condition, was
confirmed to us by United States Trust Company of New York, the Trustee.
In our opinion, the financial statements present fairly, in all material
respects, the financial position of the Equity Securities Trust, Series 4,
EquiT's at January 21, 1994, in conformity with generally accepted accounting
principles.
New York, New York KPMG PEAT MARWICK
January 21, 1994
A-8
<PAGE>
EQUITY SECURITIES TRUST, SERIES 4, EQUIT'S
STATEMENT OF CONDITION
AS OF THE INITIAL DATE OF DEPOSIT, JANUARY 21, 1994
TRUST PROPERTY
<TABLE>
<S> <C>
SERIES 4
---------
Investment in Securities--Sponsor's Contracts to Purchase Underlying
Securities Backed by Letter of Credit(1)............................. $ 237,744
---------
---------
</TABLE>
INTEREST OF CERTIFICATEHOLDERS
<TABLE>
<S> <C>
Interest of Certificateholders--Units of Fractional Undivided Interest
Outstanding
(Series 4: 20,000 Units):
Cost to Certificateholders(2)..................................... 249,994
Less-Gross Underwriting Commissions(3)............................ 12,250
---------
Net Amount Applicable to Certificateholders....................... $ 237,744
---------
---------
</TABLE>
- ------------------------------------
(1) Aggregate cost to the Trust of the Securities listed in the Portfolio
is determined by the Evaluator on the basis set forth under 'Public
Offering--Offering Price' as of 4:00 p.m. on January 20, 1994. An irrevocable
letter of credit issued by Morgan Guaranty Trust Company in an aggregate amount
of $5,000,000 has been deposited with the Trustee to cover the purchase of
$237,744 of Securities pursuant to contracts to purchase such Securities.
(2) Aggregate public offering price computed on 20,000 Units of Series 4 on
the basis set forth under 'Public Offering--Offering Price' in Part B.
(3) Sales charge of 4.9% computed on 20,000 Units of Series 4 on the basis
set forth under 'Public Offering--Offering Price' in Part B.
A-9
<PAGE>
SCHEDULE OF PORTFOLIO SECURITIES
EQUITY SECURITIES TRUST
SERIES 4
EQUIT'S
PORTFOLIO
AS OF JANUARY 21, 1994
AN ANNUAL PAYMENT SERIES
<TABLE>
<CAPTION>
PORTFOLIO NAME OF ISSUER AND TITLE OF SECURITIES COST OF SECURITIES
NO. REPRESENTED BY CONTRACTS TO PURCHASE(1) PERCENTAGE OF FUND TO TRUST(2)
- --------- ------------------------------------------------------------------ ------------------ ------------------
<S> <C> <C> <C>
1 $300,000 Zero Coupon U.S. Treasury Bonds Maturing August 15, 2008 49.68% $118,101
2 9,896 Shares of The Gabelli Value Fund Inc. ($12.09 per Fund
Share) 50.32% 119,643
-------
------------------
100.00% $237,744
-------
-------
------------------
------------------
</TABLE>
FOOTNOTES TO PORTFOLIO
(1) The Treasury Obligations have been purchased at a discount from the maturity
value because there is no stated interest income thereon (such securities
are often referred to as zero coupon securities). Over the life of the
Treasury Obligations such discount accrues and upon maturity thereof the
holder receives 100% of the Treasury Obligation maturity amount.
Shares in the Fund have been valued at their net asset value as of the
Evaluation Time on the day prior to the Date of Deposit. The Fund's
investment adviser is Gabelli Funds, Inc.
All Securities are represented by contracts to purchase such Securities.
Forward contracts to purchase the Securities were entered into from January
19, 1994 to January 20, 1994. All such contracts are expected to be settled
on or about the First Settlement Date of the Trust which is expected to be
January 28, 1994.
(2) Offering prices of Treasury Obligations are determined by the Evaluator on
the basis stated under 'Public Offering--Offering Price' herein. The
offering side evaluation is greater than the current bid side evaluation of
the Treasury Obligations, which is the basis on which Redemption Price per
Unit is determined (see 'Liquidity--Trustee Redemption' herein). The
aggregate value of the Treasury Obligations based on the bid side evaluation
of the Treasury Obligations on the day prior to the Date of Deposit was
$117,459 (which is $642 lower than the aggregate cost of the Treasury
Obligations to the Trust based on the offering side evaluation). The profit
to Sponsor on deposit totals $171.
A-10
<PAGE>
UNDERWRITING SYNDICATE
The names and addresses of the Underwriters of the Units and their
participation in the offering of Equity Securities Trust, Series 4 are as
follows:
<TABLE>
<CAPTION>
% OF
UNDERWRITER EST SERIES 4
- ---------------------------------------------------------------------------------------------------- ------------
<S> <C>
BEAR, STEARNS & CO. INC.
245 Park Avenue
New York, NY 10167.................................................................................. 14.10%
J.C. BRADFORD & CO.
330 Commerce Street
Nashville, TN 37201................................................................................. 12.13
RAYMOND JAMES & ASSOCIATES, INC.
The Raymond James Financial Center
880 Carillon Parkway
St. Petersburg, FL 33716............................................................................ 12.13
RODMAN & RENSHAW, INC.
120 South LaSalle Street
Chicago, IL 60603................................................................................... 6.07
GIBRALTAR SECURITIES CO.
Ten James Street
Florham Park, NJ 07932.............................................................................. 3.04
GRUNTAL & CO., INCORPORATED
14 Wall Street
New York, NY 10005.................................................................................. 3.04
JOSEPTHAL, LYON & ROSS, INC.
45 Broadway
New York, NY 10006.................................................................................. 3.04
DAVID LERNER ASSOCIATES, INC.
477 Jericho Turnpike
Syosset, NY 11791................................................................................... 3.04
NEW ENGLAND SECURITIES
399 Boylston Street, 10th Floor
Boston, MA 02116.................................................................................... 3.04
QUICK & REILLY, INC.
26 Broadway, 12th Floor
New York, NY 10004.................................................................................. 3.04
SAMUEL A. RAMIREZ & CO., INC.
61 Broadway
New York, NY 10006.................................................................................. 3.04
M.L. STERN & CO., INC.
8350 Wilshire Boulevard
Beverly Hills, CA 90211............................................................................. 3.04
THOMAS JAMES ASSOCIATES, INC.
1895 Mount Hope Avenue
Rochester, NY 14620................................................................................. 3.04
</TABLE>
A-11
<PAGE>
UNDERWRITING SYNDICATE
<TABLE>
<CAPTION>
% OF
UNDERWRITER EST SERIES 4
- ---------------------------------------------------------------------------------------------------- ------------
<S> <C>
H.C. WAINWRIGHT & CO., INC.
One Boston Place
Boston, MA 02108.................................................................................... 3.04%
WHEAT FIRST, BUTCHER & SINGER CAPITAL MARKETS
901 East Byrd Street
Richmond, VA 23219.................................................................................. 3.04
FIRST MONTAUK SECURITIES CORP.
328 Newman Springs Road
Red Bank, NJ 07701.................................................................................. 1.52
LPL FINANCIAL SERVICES
155 Federal Street, 14th Floor
Boston, MA 02110.................................................................................... 1.52
NORI, HENNION, WALSH, INC.
3799 Route 46, Suite 102
Parsippany, NJ 07054................................................................................ 1.52
THE PRINCIPAL/EPPLER, GUERIN & TURNER, INC.
1445 Ross Avenue
Dallas, TX 75202.................................................................................... 1.52
BARRON CHASE SECURITIES
One Arin Park
1715 U.S. Highway 35, Suite 301
Middletown, NJ 07748................................................................................ .75
BUELL SECURITIES CORP.
1310 Silas Deane Highway
Wethersfield, CT 06109.............................................................................. .75
B.C. CHRISTOPHER
DIV. OF FAHNESTOCK & CO. INC.
4717 Grand Avenue
Kansas City, MO 64112............................................................................... .75
EMANUEL AND COMPANY
110 Wall Street
New York, NY 10005.................................................................................. .75
FIDELITY CAPITAL MARKETS, A DIVISION OF
NATIONAL FINANCIAL SERVICES CORPORATION
161 Devonshire Street D4
Boston, MA 02110.................................................................................... .75
FINANCIAL NETWORK INVESTMENT CORPORATION
2780 Skypark Drive, Suite 300
Torrance, CA 90505.................................................................................. .75
FIRST AFFILIATED SECURITIES, INC.
4225 Executive Square, Suite 500
La Jolla, CA 92037.................................................................................. .75
GILMORE SECURITIES & CO.
21-00 Route 208 South
Fair Lawn, NJ 07410................................................................................. .75
</TABLE>
A-12
<PAGE>
UNDERWRITING SYNDICATE
<TABLE>
<CAPTION>
% OF
UNDERWRITER EST SERIES 4
- ---------------------------------------------------------------------------------------------------- ------------
<S> <C>
J.W. CHARLES/CSG
SUBSIDIARIES OF CORPORATE MANAGEMENT GROUP, INC.
980 North Federal Highway, Suite 210
Boca Raton, FL 33432................................................................................ .75%
LEGG MASON WOOD WALKER, INCORPORATED
Legg Mason Tower
111 South Calvert Street
Baltimore, MD 21202................................................................................. .75
McDONALD & COMPANY SECURITIES, INC.
800 Superior Avenue
Cleveland, OH 44114................................................................................. .75
MORGAN KEEGAN & COMPANY INCORPORATED
Morgan Keegan Tower
Fifty North Front Street
Memphis, TN 38103................................................................................... .75
SOUTHWEST SECURITIES INC.
1201 Elm Street, Suite 4300
Dallas, TX 75270.................................................................................... .75
DAIN BOSWORTH INCORPORATED
Dain Bosworth Plaza
60 South Sixth Street
Minneapolis, MN 55402............................................................................... .30
FIXED INCOME SECURITIES, INC.
7220 Trade Street, Suite 315
San Diego, CA 92121................................................................................. .30
HAMILTON INVESTMENTS, INC.
Two North LaSalle Street
Chicago, IL 60602................................................................................... .30
J.B. HANAUER & CO.
Four Gate Hall Drive
Parsippany, NJ 07054................................................................................ .30
HORWITZ & ASSOCIATES
630 Dundee Road, Suite 345
Northbrook, IL 60002................................................................................ .30
HUNTLEIGH SECURITIES CORPORATION
222 South Central Avenue
St. Louis, MO 63105................................................................................. .30
JANNEY MONTGOMERY SCOTT INC.
1801 Market Street
Philadelphia, PA 19103.............................................................................. .30
JURAN & MOODY, INC.
400 North Robert Street, Suite 800
St. Paul, MN 55101.................................................................................. .30
LADENBURG, THALMANN & CO. INC.
540 Madison Avenue
New York, NY 10022.................................................................................. .30
</TABLE>
A-13
<PAGE>
UNDERWRITING SYNDICATE
<TABLE>
<CAPTION>
% OF
UNDERWRITER EST SERIES 4
- ---------------------------------------------------------------------------------------------------- ------------
<S> <C>
LAIDLAW EQUITIES INC.
275 Madison Avenue
New York, NY 10016.................................................................................. .30%
LEW LIEBERBAUM & CO., INC.
600 Old Country Road, Suite 518
Garden City, NY 11530............................................................................... .30
MEYERS, POLLOCK, ROBBINS INC.
One World Trade Center, Suite 9151
New York, NY 10048.................................................................................. .30
NATHAN & LEWIS SECURITIES, INC.
119 West 40th Street
New York, NY 10018.................................................................................. .30
THE OHIO COMPANY
155 East Broad Street
Columbus, OH 43215.................................................................................. .30
OPPENHEIMER & CO., INC.
Oppenheimer Tower
World Financial Center
New York, NY 10281.................................................................................. .30
RAUSCHER PIERCE REFSNES, INC.
Plaza of the Americas
2500 RPR Tower
Dallas, TX 75201.................................................................................... .30
STATEWIDE SECURITIES GROUP, INC.
7820 South Holiday Drive, Suite 300
Sarasota, FL 34231.................................................................................. .30
STIFEL, NICOLAUS & COMPANY, INCORPORATED
500 North Broadway
St. Louis, MO 63102................................................................................. .30
STUART, COLEMAN & CO., INC.
11 West 42nd Street, 15th Floor
New York, NY 10036.................................................................................. .30
SUTRO & CO.
350 Sansome Street
San Francisco, CA 94104............................................................................. .30
WEDBUSH MORGAN SECURITIES INC.
1000 Wilshire Boulevard
Los Angeles, CA 90017............................................................................... .30
------------
Total.......................................................................................... 100%
------------
------------
</TABLE>
A-14
<PAGE>
[LOGO] EQUITY SECURITIES TRUST SERIES 4
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GABELLI VALUE FUND AND U.S. TREASURIES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INTRODUCING EQUIT'S
EquiT's has been designed to combine the upside growth potential and inflation
protection of a value oriented equity portfolio with the capital preservation
afforded by zero coupon U.S. Treasury obligations held to maturity.
EquiT's is a unit investment trust with an approximate maturity of fourteen
years. The dual objective of this trust is long term capital appreciation with
capital preservation. The twin objectives of the Trust will be reflected in its
two components.
The Equity component of EquiT's units will consist of shares in The Gabelli
Value Fund, an open end equity mutual fund managed by Gabelli Funds Inc.
The fixed income component will be structured so that the maturity value of zero
coupon Treasuries will provide a minimum value for each EquiT's unit of $15.00
at the scheduled maturity of the Trust.
The combined value of an EquiT's unit at the scheduled termination of the Trust
will be the $15.00 per unit minimum provided by the U.S. Treasury securities
plus the value of the unit's proportional interest in shares of The Gabelli
Value Fund.
The relative proportions of Gabelli Value Fund shares and U.S. Treasury zero
coupon obligations in the Trust will depend upon the scheduled maturity of the
EquiT's trust and the level of zero coupon Treasury yields at the time of
deposit of the Trust.
THE GABELLI VALUE FUND
The Fund's investment objective is long term capital appreciation. The Fund
seeks to achieve its objective by investing primarily in equity securities of
companies that the fund's investment adviser believes are undervalued, and that
by virtue of anticipated developments or catalysts particularly applicable to
such companies may, in the adviser's judgement, achieve significant
appreciation. These include macro trends such as globalization of the market in
filmed entertainment, and telecommunications, and micro trends such as,
increased focus on productivity enhancing goods and services.
INVESTMENT PHILOSOPHY
Creating Wealth Through Research 'We view fundamental research as a three
pronged approach: free cash flow, earnings per share, and private market value
(PMV). We blend our intrinsic value analysis with the search for a catalyst that
will surface and attract investor attention.'
'We do what is described as bottoms-up research: we read annual reports; visit
the competition; talk to customers; go belly to belly with management. We are
stock pickers. We look at earnings per share trends, but we do not try to
forecast earnings with accounting precision and then trade stocks based on
quarterly expectations and realities. We want to know everything and anything
that will add to or detract from our private market value estimates. We look for
a catalyst; something happening in the companies' industries or indigenous to
the companies themselves that will surface value.'
'When we identify stocks that qualify as bargains, based on these fundamental
and conceptual considerations, we become patient long term investors. This has
been a proven long term method for creating wealth in the stock market.'
- MARIO J. GABELLI, C.F.A.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GABELLI VALUE FUND AND U.S. TREASURIES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INVESTING IN ZERO COUPON
U.S. TREASURY OBLIGATIONS
AAA rated U.S. Treasury obligations are considered the most secure fixed income
investments in the U.S. capital markets and are among the most secure
investments in the world.
Zero coupon securities are deeply discounted debt obligations which pay no
periodic cash interest. If held to maturity, zero coupon bonds produce an
investment return which is 'locked in,' determined solely by the original
discounted price at purchase and the number of years to maturity, irrespective
of interim interest rate movements.
Since the return on zero coupon bonds held to maturity does not depend upon the
reinvestment of periodic interest payments, but rather depends upon a lump sum
paid at maturity, they are recommended for investment programs targeted toward
events such as retirement or the beginning of college.
In addition, the steady appreciation toward a predetermined sum provided by zero
coupon bonds held to maturity makes them an ideal investment vehicle to provide
the minimum $15 per unit valuation floor for EquiT's units at the scheduled
termination of the Trust.
Because zero coupon investments provide a one time lump sum cash payment, rather
than a series of cash interest payments over time with a final payment of
principal, their interim price movements before maturity tend to be more
volatile than those of interest bearing bonds. The annual accretion of interest
income on taxable zero coupon bonds such as the U.S. Treasury obligations which
will be held in the Trust is includable in gross income for federal income tax
purposes.
HEDGING YOUR BETS /A BALANCED
APPROACH TO INVESTING
EquiT's has been developed to offer individuals the best of both worlds in an
uncertain investment environment.
The stock market has produced superior investment results with excellent
inflation protection for most of this century. It is a key component of long
term financial planning for individual investors, and it can be an important
component of investment programs for individuals nearing retirement age and even
for retired investors.
U.S. Treasury Zero's held to maturity provide safety of capital, but on average,
over long periods, they have not provided as generous returns as have common
stocks.
WITH EQUIT'S YOU HAVE
THE BEST OF ALL WORLDS:
o Zero coupon U.S. Treasuries will provide a floor valuation of $15.00 per unit
at the scheduled termination of the Trust, a value above the original purchase
price of EquiT's units.
o An Equity portfolio which seeks to keep pace with inflation and capture growth
as the economy recovers from recession.
o An equity value orientation, focusing on stocks which trade at discounts to
the 'private market value' detected by Gabelli research. A value orientation
provides its own hedge against the possibility that current stock market
levels are unsustainable.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GABELLI VALUE FUND AND U.S. TREASURIES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ADDITIONAL FEATURES OF EQUIT'S
CONVENIENCE
EquiT's provides an easy, low cost way to start an investment program which
provides upside potential with downside safeguards. A minimum purchase
denomination of 100 units makes EquiT's affordable to a wide range of investors,
and could be used to meet a number of financial objectives including:
- Retirement needs
- Various educational costs
- Conservative long-term capital appreciation
LIQUIDITY
The trusts' units may be sold at any time during its life at the then market
value, which may be more or less than the original offering price.
REINVESTMENT OPTIONS
Any income and capital gains distributed by the trust can be reinvested in GOC
Fund, Inc., U.S. Treasury Money Market Portfolio.
OPTIONS AT TERMINATION
Unitholders have the choice at the time of termination to receive the value of
their U.S. Treasury zero coupon bonds and The Gabelli Value Fund shares paid in
cash or, if preferred, may receive shares of The Gabelli Value Fund at no
additional charge.
<PAGE>
[LOGO] EQUITY SECURITIES TRUST SERIES 4
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GABELLI VALUE FUND AND U.S. TREASURIES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EquiT's
PROSPECTUS PART B
PART B OF THIS PROSPECTUS MAY NOT BE
DISTRIBUTED UNLESS ACCOMPANIED BY
PART A
THE TRUST
ORGANIZATION
'Equity Securities Trust, Series 4, EquiT's' consists of a 'unit investment
trust' designated as set forth in Part A. The Trust was created under the laws
of the State of New York pursuant to a Trust Indenture and Agreement (the 'Trust
Agreement'), dated the Initial Date of Deposit, among Bear, Stearns & Co. Inc.,
as Sponsor, United States Trust Company of New York, as Trustee and Kenny S&P
Evaluation Services, as Evaluator.
On the Initial Date of Deposit, the Sponsor deposited with the Trustee
stripped United States Treasury issued notes or bonds paying no current return
(the 'Treasury Obligations') and shares of Gabelli Value Fund Inc., a
non-diversified, open-end Management Investment Company (the 'Fund Shares')
including funds and delivery statements relating to contracts for the purchase
of certain such securities (collectively, the 'Securities') with an aggregate
value as set forth in Part A and cash or an irrevocable letter of credit issued
by a major commercial bank in the amount required for such purchases. Thereafter
the Trustee, in exchange for the Securities so deposited, delivered to the
Sponsor the Certificates evidencing the ownership of all Units of the Trust. The
Sponsor has a limited right to substitute other securities in the Trust
portfolio in the event of a failed contract ('Substitute Securities'). See 'The
Trust--Substitution of Securities'. The Sponsor may also, in certain
circumstances, direct the Trustee to dispose of certain Securities if the
Sponsor believes that, because of market or credit conditions, or for certain
other reasons, retention of the Security would be detrimental to
Certificateholders. (See 'Trust Administration--Portfolio Supervision.')
As of the day prior to the Initial Date of Deposit, a 'Unit' represents an
undivided interest or pro rata share in the Securities of the Trust in the ratio
of one hundred Units for the indicated amount of the aggregate market value of
the Securities initially deposited in the Trust as is set forth in the 'Summary
of Essential Information'. To the extent that any Units are redeemed by the
Trustee, the fractional undivided interest or pro rata share in such Trust
represented by each unredeemed Unit will increase, although the actual interest
in such Trust represented by such fraction will remain unchanged. Units will
remain outstanding until redeemed upon tender to
1
<PAGE>
the Trustee by Certificateholders, which may include the Sponsor or the
Underwriters, or until the termination of the Trust Agreement.
With the deposit of the Securities in the Trust on the Initial Date of
Deposit, the Sponsor established a proportionate relationship between the
maturity amounts of Treasury Obligations and the number of Fund Shares in the
Portfolio. During the 90 days subsequent to the Initial Date of Deposit, the
Sponsor may deposit additional Securities in the Trust that are substantially
similar to the Securities already deposited in the Trust ('Additional
Securities') or contracts to purchase Additional Securities, in order to create
additional Units, maintaining to the extent practicable the original
proportionate relationship of each Security in the Trust portfolio on the
Initial Date of Deposit. These additional Units will each represent, to the
extent practicable, an undivided interest in the same number and type of
securities of identical issuers as are represented by Units issued on the
Initial Date of Deposit. It may not be possible to maintain the exact original
proportionate relationship among the Securities deposited on the Initial Date of
Deposit because of, among other reasons, purchase requirements, changes in
prices, or unavailability of Securities. Deposits of Additional Securities in
the Trust subsequent to the 90-day period following the Initial Date of Deposit
must replicate exactly the proportionate relationship among the shares of each
Security in the Trust Portfolio at the end of the initial 90-day period. The
number and identity of Securities in the Trust will be adjusted to reflect the
disposition of Securities and/or the receipt of a distribution with respect to
shares or the reinvestment of the proceeds distributed to Certificateholders.
The portfolio of the Trust may change slightly based on such disposition and
reinvestment. Securities received in exchange for Securities will be similarly
treated. Substitute Treasury Obligations may be acquired under specified
conditions when Treasury Obligations originally deposited in the Trust are
unavailable (see 'The Trust--Substitution of Securities'). Units may be
continuously offered to the public by means of this Prospectus (see 'Public
Offering--Distribution of Units') resulting in a potential increase in the
number of Units outstanding. As additional Units are issued by the Trust as a
result of the deposit of Additional Securities, the aggregate value of the
Securities in the Trust will be increased and the fractional undivided interest
in the Trust represented by each Unit will be decreased.
OBJECTIVES
The objectives of the Trust are to seek to achieve safety of capital and to
attempt to provide capital appreciation. In addition, it is the Trust's
objective to achieve growth in income with the growth in capital. The Trust
seeks to achieve these objectives by investing primarily in a portfolio of
stripped United States Treasury issued notes or bonds paying no current interest
and shares of The Gabelli Value Fund Inc., a non-diversified, open-end
Management Investment Company. The Fund's objective is long-term capital
appreciation which the Fund attempts to achieve by investing primarily in equity
securities companies that the Fund's investment adviser believes are undervalued
and that by virtue of anticipated developments or catalysts particularly
applicable to such companies may, in the adviser's judgment, achieve significant
appreciation, and contracts to purchase such Securities. The allocation between
the Treasury Obligations and the Fund Shares would seek to assure that an
investor purchasing units in the Trust at inception would at least receive back
the original unit purchase price at the termination of the Trust from the
maturity value of the Treasury Oblications. There can be no assurance that the
Trust's investment objectives can be achieved.
THE SECURITIES
In selecting Treasury Obligations for the Trust, the Sponsor normally will
consider the following factors, among others: (i) the prices and yields of such
securities and (ii) the maturities of such securities. In selecting the Fund
Shares for deposit in the Trust, the following factors, among others, were
considered by the Sponsor: (i) the historical performance of the Fund and (ii)
the nature of the underlying Fund portfolio.
The Trust consists of such of the Securities listed under 'Schedule of
Portfolio Securities,' herein as may continue to be held from time to time in
the Trust, newly deposited Securities meeting requirements for creation
2
<PAGE>
of additional Units, undistributed cash receipts from the Fund and proceeds
realized from the disposition of Securities.
Stripped U.S. Treasury Obligations
The Treasury Obligations in the portfolio consist of United States Treasury
Obligations which have been stripped by the United States Treasury of their
unmatured interest coupons or such stripped coupons or receipts or certificates
evidencing such obligations or coupons. The obligor with respect to the Treasury
Obligations is the United States Government. Such Treasury Obligations may
include certificates that represent rights to receive the payments that comprise
a U.S. Government bond.
Stripped U.S. Treasury bonds evidence the right to receive a fixed payment
at a future date from the U.S. Government, and are backed by the full faith and
credit of the U.S. Government. The Treasury Obligations can be purchased at a
deep discount because the buyer receives only the right to receive one fixed
payment at a specific date in the future and does not receive any periodic
interest payments. The effect of owning deep discount obligations which do not
make current interest payments is that a fixed yield is earned not only on the
original investment but also, in effect, on all discount earned during the life
of the discount obligations. This implicit reinvestment of earnings at the same
rate eliminates the risk of being unable to reinvest the income on such
obligations at a rate as high as the implicit yield on the discount obligation,
but at the same time eliminates the holder's ability to reinvest at higher rates
in the future. For this reason, the Treasury Obligations are subject to
substantially greater price fluctuations during periods of changing market
interest rates than are securities of comparable quality which pay interest on a
current basis. Investors should be aware that income in respect of the accrual
of original issue discount on the Treasury Obligations, although not distributed
on a current basis, will be includable by a Certificateholder as income and will
be subject to income tax on a current basis at ordinary income tax rates (see
'Tax Status of the Trust').
The Gabelli Value Fund Inc.
The following disclosure concerning the Fund and its affiliates has been
derived from the prospectus, semi-annual report and proxy statement of The
Gabelli Value Fund Inc. While the Sponsor has not independently verified its
information, it has no reason to believe that such information is not correct in
all material respects. No representation is made herein as to the accuracy or
adequacy of such information.
The Portfolio contains shares of The Gabelli Value Fund Inc. (the 'Fund').
On June 30, 1993, the net assets of the Fund were $447,920,911. The Fund has
retained an Investment Adviser, Gabelli Funds, Inc. (herein referred to as
'Gabelli' or the 'Adviser').
The Fund's investment objective is long-term capital appreciation. The Fund
regards its receipt of income as an incidental consideration. The investment
objective is fundamental and may not be changed without the approval of the
holders of a majority of the Fund's shares. There is, of course, no guarantee
that the Fund will achieve its investment objective. As a 'non-diversified'
investment company, the Fund is not subject to the provisions of the 1940 Act
that otherwise would limit the proportion of its assets that may be reinvested
in obligations of a single issuer. Consequently, because the Fund may hold a
relatively high proportion of its assets in a limited number of portfolio
companies, an investment in the Fund may, under certain circumstances, present
greater risk to an investor than an investment in a diversified investment
company. The Fund intends, however, to comply with the diversification
requirements imposed by the Internal Revenue Code of 1986, as amended (the
'Code').
In pursuing the Fund's investment objective, the Adviser seeks companies
that it believes are undervalued and that by virtue of anticipated developments
or catalysts particularly applicable to such companies may, in the Adviser's
judgment, achieve significant capital appreciation. In identifying such
companies, the Adviser seeks to
3
<PAGE>
invest in companies that, in the public market, are selling at a significant
discount to their private market value, the value the Adviser believes informed
industrialists would be willing to pay to acquire companies with similar
characteristics. If investor attention is focused on the underlying asset values
of these companies through an emerging or anticipated development or other
catalyst, an investment opportunity to realize this private market value may
exist. Undervaluation of a company can result from a variety of factors, such as
a lack of investor recognition of (1) the underlying value of a company's fixed
assets, (2) the value of a consumer or commercial franchise, (3) changes in the
economic or financial environment particularly affecting a company, (4) new,
improved or unique products or services, (5) new or rapidly expanding markets,
(6) technological developments or advancements affecting a company or its
products, or (7) changes in governmental regulations, political climate or
competitive conditions. The actual developments or catalysts particularly
applicable to a given company that may, in the Adviser's judgment, lead to
significant appreciation of that company's securities include: a change in
management or management policies; the acquisition of a significant equity
position by an investor or group of investors acting in concert; a merger,
reorganization, sale of a division, or a third-party or issuer tender offer; the
spin-off to shareholders of a subsidiary, division or other substantial assets;
or a recapitalization, an internal reorganization or the retirement or death of
a senior officer or substantial shareholder. In addition to the foregoing
factors, developments and catalysts, the Adviser, in selecting investments, also
considers the market price of the issuer's securities, its balance sheet
characteristics and the perceived strength of its management.
The Fund seeks to achieve its objective by investing primarily in a
portfolio of common stocks, preferred stocks and other securities convertible
into, or exchangeable for, common stocks. When the Adviser believes that a
defensive investment posture is warranted or when opportunities for capital
appreciation do not appear attractive, the Fund may temporarily invest all or a
portion of its assets in short-term money market instruments, such as
obligations of the U.S. Government and its agencies and instrumentalities,
high-quality commercial paper and bank certificates of deposit and time
deposits, repurchase agreements with respect to such instruments, and money
market mutual funds not affiliated with the Fund, Lehman Brothers Inc. ('Lehman
Brothers') or Gabelli & Company, Inc. ('Gabelli & Company').
Boston Safe Deposit and Trust Company is the custodian of the Fund's
assets. State Street Bank and Trust Company, Inc. acts as the Fund's transfer
agent and dividend disbursing agent for its shares. The Fund's prospectus is
available upon request.
General Information Regarding the Fund
Shown below for the periods indicated are per share income and capital
changes for a share of capital stock outstanding ('per share information') of
the Fund.
<TABLE>
<CAPTION>
YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
12/31/92 12/31/91(C) 12/31/90 12/31/89(A)
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Investment income................................................ $ 0.28 $ 0.27 $ 0.59 $ 0.20
Expenses......................................................... (0.19) (0.14) (0.14) (0.04)
--------- ----------- --------- -----------
Net Investment income............................................ $ 0.09 $ 0.13 $ 0.45 $ 0.16
Net realized and unrealized gain/(loss) or investments........... 1.11 1.17 (0.98) 0.04
Distributions from:
Net investment income.......................................... (0.09) (0.19) (0.54) (0.06)
Net realized gains............................................. (0.46) (0.14) -- (0.01)
--------- ----------- --------- -----------
Net increase/(decrease) in net asset value....................... 0.65 0.97 (1.07) 0.13
NET ASSET VALUE:
Beginning of year.............................................. 9.48 8.51 9.58 9.45
--------- ----------- --------- -----------
End of year.................................................... $ 10.13 $ 9.48 $ 8.51 $ 9.58
--------- ----------- --------- -----------
--------- ----------- --------- -----------
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
12/31/92 12/31/91(C) 12/31/90 12/31/89(A)
--------- ----------- --------- -----------
RATIOS TO AVERAGE NET ASSETS:
<S> <C> <C> <C> <C>
Net investment income.......................................... 0.75% 1.43% 4.45% 6.06%(b)
Operating expenses............................................. 1.52% 1.45% 1.39% 1.48%(b)
Portfolio turnover rate.......................................... 0.1% 16.2% 58.6% 73.3%
Number of shares outstanding at end of year (000's).............. 41,790 60,638 99,944 117,588
</TABLE>
- ------------------
(a) The Fund commenced operations on September 29, 1989.
(b) Annualized.
(c) Per share amounts have been calculated using the monthly average shares
outstanding method, which more appropriately presents the per share data for
the year.
Investment Strategies and Restrictions
From time to time, the Fund may engage in the following investment
techniques:
The Fund, consistent with its investment objective and policies of seeking
long-term capital appreciation from securities of companies that, in the public
market, are selling at a significant discount to their private market value, may
invest up to 50% of its total assets in securities for which a tender or
exchange offer has been made or announced and in securities of companies for
which a merger, consolidation, liquidation or similar reorganization proposal
has been announced ('reorganization securities'). Frequently the holders of
securities of companies involved in such transactions will receive new
securities ('substituted securities') in exchange therefor. No more than 30% of
the Fund's total assets, however, may be invested in reorganization securities
where the Adviser anticipates selling the reorganization securities or the
substituted securities within six months or less of the initial purchase of the
reorganization securities, except that this limitation will not apply to
reorganization securities that have been purchased to supplement a position in
such securities held by the Fund for more than six months. The principal risk of
this type of investing is that the anticipated offers or proposals may not be
consummated within the time and under the terms contemplated at the time of the
investment, in which case, unless replaced by an equivalent or increased offer
or proposal that is consummated, the Fund may sustain a loss on its investments.
The Fund has adopted the following investment restrictions for the
protection of shareholders that may not be changed without the approval of a
majority of the Fund's shareholders, defined as the lesser of (1) 67% of the
Fund's shares present at a meeting if the holders of more than 50% of the
outstanding shares are present in person or by proxy, or (2) more than 50% of
the Fund's outstanding shares. Under these restrictions, the Fund may not:
1. Invest more than 25% of the value of its total assets in any
particular industry (this restriction does not apply to obligations issued
or guaranteed by the U.S. Government or its agencies or instrumentalities);
2. Purchase securities on margin, but it may obtain short-term credits
from banks as may be necessary for the clearance of purchase and sales of
portfolio securities;
3. Make loans of its assets except for: (a) purchasing debt
securities, (b) engaging in repurchase agreements as set forth in the
Fund's Prospectus, and (c) lending its portfolio securities consistent with
applicable regulatory requirements and as set forth in the Fund's
Prospectus;
4. Borrow money except subject to the restrictions set forth in the
Fund's Prospectus;
5
<PAGE>
5. Mortgage, pledge or hypothecate any of its assets except that, in
connection with permissible borrowings mentioned in restriction (4) above,
not more than 20% of the assets of the Fund (not including amounts
borrowed) may be used as collateral and that collateral arrangements with
respect to the writing or options or any other hedging activity are not
deemed to be pledges of assets and these arrangements are not deemed to be
the issuance of a senior security as set forth below in restriction (11);
6. Except to the extent permitted by restriction (14) below, invest in
any investment company affiliated with the Fund, Lehman Brothers or Gabelli
& Company, invest more than 5% of its total assets in the securities of any
one investment company, own more than 3% of the securities of any
investment company or invest more than 10% of its total assets in the
securities of all other investment companies;
7. Engage in the underwriting of securities, except insofar as the
Fund may be deemed an underwriter under the Securities Act of 1933, as
amended, in disposing of a portfolio security;
8. Invest, in the aggregate more than 10% of the value of its net
assets in securities for which market quotations are not readily available,
securities which are restricted for public sale, in repurchase agreements
maturing or terminable in more than seven days and all other illiquid
securities;
9. Purchase or otherwise acquire interests in real estate, real estate
mortgage loans or interests in oil, gas or other mineral exploration or
development programs;
10. Purchase or acquire commodities or commodity contracts except that
the Fund may purchase or sell futures contracts and related options thereon
if thereafter no more than 5% of its total assets are invested in margin
and premiums;
11. Issue senior securities, except insofar as the Fund may be deemed
to have issued a senior security in connection with: (a) borrowing money in
accordance with restriction (4) above, (b) lending portfolio securities,
(c) entering into repurchase agreements, (d) purchasing or selling options
contracts, (e) purchasing or selling futures contracts and related options
thereon, or (f) acquiring when issued or delayed delivery securities and
forward commitments;
12. Sell securities short, except transactions involving selling
securities 'short against the box;'*
13. Purchase warrants if, thereafter, more than 5% of the value of the
Fund's net assets would consist of such warrants, but warrants attached to
other securities or acquired in units by the Fund are not subject to this
restriction; or
14. Invest in companies for the purpose of exercising control, except
transactions involving investments in investment companies for the purpose
of effecting mergers and other corporate reorganizations involving the Fund
and such other investment companies.
If any percentage limitation is adhered to at the time of an investment, a
later increase or decrease in the percentage of assets resulting from a change
in the values of portfolio securities or in the amount of the Fund's assets will
not constitute a violation of such restriction. In order to permit the sale of
the Fund's shares in certain states, the Fund may make commitments more
restrictive than the investments restrictions described above.
- ------------------
* The Board of Directors of the Fund has approved, subject to shareholder
approval, the elimination of this fundamental investment limitation. (See
'Short Sales Against the Box'.)
6
<PAGE>
Convertible and Nonconvertible Corporate Obligations
Corporate obligations include securities such as bonds, debentures, notes
or other similar securities issued by corporations. These obligations can be
further subdivided into convertible and nonconvertible securities. Unlike a
nonconvertible corporate obligation, a convertible corporate obligation may be
converted into or exchanged for a prescribed amount of common stock or other
equity security of the same or different issuer within a particular period of
time at a specified price or formula.
The Fund believes that investing in convertible and nonconvertible
corporate obligations is consistent with the Fund's investment objective of
seeking securities of companies that, in the public market, can provide
significant long-term capital appreciation. Due to a variety of factors, it is
possible that the potential for capital gain on a convertible security may be
less than that of the underlying common stock. Convertible securities, however,
are senior to common stock in an issuer's capital structure and are consequently
of higher quality and entail less risk than the issuer's common stock, although
the extent to which the risk is reduced depends in large measure upon a variety
of factors, including the creditworthiness of the issuer and its overall capital
structure.
The Fund may purchase convertible securities or nonconvertible debt
securities without limitation, except that no more than 35% of the Fund's total
assets may be invested in convertible securities or nonconvertible debt
securities having a rating lower than a Standard & Poor's Corporation ('S&P')
rating of 'CCC', a Moody's Investor Service, Inc. ('Moody's') rating of 'Caa'
or, if unrated, judged by the Adviser to be of comparable quality. However, as a
matter of current operating policy, the Adviser and the Fund have agreed that
the Fund will not invest more than 35% of the Fund's total assets in debt
securities rated less than S&P's BBB or the equivalent by other major rating
agencies or, if unrated, judged by the Adviser to be of comparable quality.
These debt securities are predominantly speculative and involve major risk
exposure to adverse conditions, and are often referred to in the financial press
as 'junk bonds.' (See 'Risks of Investing in Lower Rated Securities'.)
The ratings of Moody's and S&P generally represent the opinions of those
organizations as to the quality of the securities that they rate. Such ratings,
however, are relative and subjective, are not absolute standards of quality and
do not evaluate the market risk of the securities. Although the Adviser uses
these ratings as a criterion for the selection of securities for the Fund, the
Adviser also relies on its independent analysis to evaluate potential
investments for the Fund.
Within the Fund's limitation on the purchase of lower-rated and unrated
securities, the Fund may invest up to 5% of its total assets in securities of
issuers in default.
Warrants and Rights
The Fund may invest up to 5% of its net assets in warrants or rights (other
than those acquired in units or attached to other securities) that entitle the
holder to buy equity securities at a specific price for a specific period of
time but will do so only if the equity securities are deemed appropriate by the
Adviser for inclusion in the Fund's portfolio. It is the current intention of
the Fund not to invest more than 2% of its net assets in warrants or rights that
are not listed on the New York or American Stock Exchange, although the Board of
Directors in the future may permit up to 5% of the Fund's net assets to be
invested in such unlisted warrants and rights.
Foreign Securities
The Fund may invest up to 25% of its total assets in foreign securities.
Investing in securities of foreign companies and foreign governments, which
generally are denominated in foreign currencies, may involve certain risk and
opportunity considerations not typically associated with investing in domestic
companies and could cause the Fund to be affected favorably or unfavorably by
changes in currency exchange rates and revaluations of currencies. In addition,
less information may be available about foreign companies than about domestic
7
<PAGE>
companies, and foreign companies and foreign governments generally are not
subject to uniform accounting, auditing and financial reporting standards or to
other regulatory practices and requirements comparable to those applicable to
domestic companies. Foreign securities and their markets may not be as liquid as
United States securities and their markets. Securities of some foreign companies
may involve greater market risk than securities of United States companies.
Investment in foreign securities may result in higher expenses than investing in
domestic securities because of the payment of fixed brokerage commissions on
foreign exchanges, which generally are higher than commissions on United States
exchanges, and the imposition of transfer taxes or transaction charges
associated with foreign exchanges. Investment in foreign securities also may be
subject to local economic or political risks, including instability of some
foreign governments, the possibility of currency blockage or the imposition of
withholding taxes on dividend or interest payments, and the potential for
expropriation, nationalization or confiscatory taxation and limitations on the
use or removal of funds or other assets.
Among the foreign securities in which the Fund may invest are those issued
by companies located in developing countries, which are countries in the initial
stages of their industrialization cycles. Investing in the equity and debt
markets of developing countries involves exposure to economic structures that
are generally less diverse and less mature, and to political systems that can be
expected to have less stability, than those of developed countries. The markets
of developing countries historically have been more volatile than the markets of
the more mature economies of developed countries, but often have provided higher
rates of return to investors. The Fund may also invest in debt securities of
foreign governments.
The Fund may purchase American Depositary Receipts ('ADRs') or U.S.
dollar-denominated securities of foreign issuers that are not included in the
25% foreign securities limitation. ADRs are receipts issued by U.S. banks or
trust companies in respect of securities of foreign issuers held on deposit for
use in the U.S. securities markets. While ADRs may not necessarily be
denominated in the same currency as the securities into which they may be
converted, many of the risks associated with foreign securities may also apply
to ADRs.
Short-Term Investments
As noted above, in certain circumstances the Fund may invest in short-term
money market instruments such as obligations of the U.S. Government and its
agencies and instrumentalities, high quality commercial paper (rated 'A-1' or
better by S&P or 'P-1' or better by Moody's) and bank certificates of deposit
and time deposits, and may engage in repurchase agreement transactions with
respect to those instruments.
In addition, the Fund may invest in money market mutual funds not
affiliated with the Fund, Lehman Brothers or Gabelli & Company. The investment
policy with respect to investment companies generally is set forth below under
'Other Investment Companies.'
Other Investment Companies
The Fund reserves the right to invest up to 10% of its total assets in the
securities of money market mutual funds, which are open-end investment
companies, and closed-end investment companies, including small business
investment companies, none of which are affiliated with the Fund, Lehman
Brothers or Gabelli & Company. Not more than 5% of the Fund's total assets may
be invested in the securities of any one investment company and the Fund may not
own more than 3% of the securities of any investment company.
Investment in Small, Unseasoned Companies and Other Illiquid Securities
The Fund may invest up to 5% of its net assets in small, less well-known
companies which (including predecessors) have operated less than three years.
The securities of these kinds of companies may have limited liquidity.
8
<PAGE>
The Fund will not, in the aggregate, invest more than 10% of its net assets
in small, unseasoned companies, securities that are restricted for public sale,
securities for which market quotations are not readily available, repurchase
agreements maturing or terminable in more than seven days and all other illiquid
securities. Securities freely salable among qualified institutional investors
under special rules adopted by the Securities and Exchange Commission ('Rule
144A') may be treated as liquid if they satisfy liquidity standards established
by the Board of Directors. The continued liquidity of such securities is not as
well assured as that of publicly traded securities, and accordingly, the Board
of Directors will monitor their liquidity.
Borrowing
The Fund may not borrow money except for (1) short-term credits from banks
as may be necessary for the clearance of portfolio transactions, and (2)
borrowings from banks for temporary or emergency purposes, including the meeting
of redemption requests, that would otherwise require the untimely disposition of
the Fund's portfolio securities. Borrowing for any purpose, including
redemptions, may not, in the aggregate, exceed 15% of the value of the Fund's
total assets, and borrowing for purposes other than meeting redemptions may not
exceed 5% of the value of the Fund's total assets, and borrowing for purposes
other than meeting redemptions may not exceed 5% of the value of the Fund's
total assets at the time borrowing is made. The Fund will not borrow (leverage)
to make additional investment when any borrowing remains unpaid. The Fund will
not mortgage, pledge or hypothecate any of its assets except that, in connection
with the borrowings described above, not more than 20% of the total assets of
the Fund may be used as collateral.
Repurchase Agreements
The Fund may enter into repurchase agreements with primary government
securities dealers recognized by the Federal Reserve Bank of New York and member
banks of the Federal Reserve System that furnish collateral at least equal in
value or market price to the amount of their repurchase obligation. In a
repurchase agreement, the Fund purchases a debt security from a seller which
undertakes to repurchase the security at a specified resale price on an agreed
future date. Repurchase agreements are generally for one business day and
generally will not have a duration of longer than one week. The SEC has taken
the position that, in economic reality, a repurchase agreement is a loan by the
Fund to the other party to the transaction secured by securities transferred to
the Fund. The resale price generally exceeds the purchase price by an amount
which reflects an agreed upon market interest rate for the term of the
repurchase agreement. The primary risk is that, if the seller defaults, the Fund
might suffer a loss to the extent that the proceeds from the sale of the
underlying securities and other collateral held by the Fund are less than the
repurchase price. The Board of Directors will monitor the creditworthiness of
the other parties to the repurchase agreements.
The Fund may not enter into repurchase agreements which would cause more
than 5% of the value of its total asset to be so invested. This percentage
limitation does not apply to repurchase agreements involving U.S. Government
obligations, or obligations of its agencies or instrumentalities, for a period
of a week or less. The term of each of the Fund's repurchase agreements will
always be less than one year and the Fund will not enter into repurchase
agreements of a duration of more than seven days if, taken together with all
other illiquid securities in the Fund's portfolio, more than 10% of its net
assets would be so invested.
Short Sales Against the Box
Currently, the Fund may from time to time make short sales of securities it
owns or has the right to acquire through conversion or exchange of other
securities its owns. A short sale is 'against the box' to the extent that the
Fund contemporaneously owns or has the right to obtain at no added cost
securities identical to those sold short. In a short sale, the Fund does not
immediately deliver the Securities sold or receive the proceeds from the sale.
The Fund may not make short sales or maintain a short position if it would cause
more than 25% of the Fund's total assets, taken at market value, to be held as
collateral for the sales.
9
<PAGE>
The Fund may make a short sale in order to hedge against market risks when
it believes that the price of a security may decline, causing in the value of a
security owned by the Fund or security convertible into, or exchangeable for,
the security, or when the Fund does not want to sell the security it owns,
because, among other reasons, it wishes to defer recognition of gain or loss for
U.S. Federal income tax purposes.
If approved by the Fund's shareholders, the Board of Directors of the Fund
intends to replace the current fundamental limitation with a non-fundamental
limitation that could be changed by the Fund's Directors without a vote of
shareholders. The proposed non-fundamental limitation would allow the Fund to
make short sales of securities so long as the market value of the securities
sold short of any one issuer will not exceed either 5% of the Fund's total
assets or 5% of such issuer's voting securities. The Fund will not make a short
sale if, after giving effect to such sale, the market value of all securities
sold short by the Fund exceeds 25% of the value of its total assets or the
Fund's aggregate short sales of a particular class of securities exceeds 25% of
the outstanding securities of that class. However, the Fund may make short sales
against the box without regard to such limitations.
Options
The Fund may purchase or sell (that is, write) listed options on securities
as a means of achieving additional return or of hedging the value of the Fund's
portfolio. The Fund may write covered call options on common stocks that it owns
or has an immediate right to acquire through conversion or exchange of other
securities in an amount not to exceed 25% of total assets; or invest up to 10%
of its total assets in the purchase of put options on common stocks that the
Fund owns or may acquire through the conversion or exchange of other securities
that it owns. The Fund may only buy options that are listed on a national
securities exchange.
A call option is a contract that gives the holder of the option the right
to buy from the writer (seller) of the call option, in return for a premium
paid, the security underlying the option at a specified exercise price at any
time during the term of the option. The writer of the call option has the
obligation upon exercise of the option to deliver the underlying security upon
payment of the exercise price during the option period.
A put option is a contract that, in return for the premium, gives the
holder of the option the right to sell to the writer (seller) the underlying
security at a specified price during the term of the option. The writer of the
put, who receives the premium, has the obligation to buy the underlying security
upon exercise, at the exercise price during the option period.
If the Fund has written an option, it may terminate its obligation by
effecting a closing purchase transaction. This is accomplished by purchasing an
option of the same series as the option previously written. There can be no
assurance that a closing purchase transaction can be effected when the Fund so
desires.
An option may be closed out only on an exchange that provides a secondary
market for an option of the same series. Although the Fund will generally
purchase or write only those options for which there appears to be an active
secondary market, there is no assurance that a liquid secondary market on an
exchange will exist for any particular option. The Fund will not purchase
options if, as a result, the aggregate cost of all outstanding options exceeds
10% of the Fund's total assets.
The Fund may write put and call options on stock indexes for the purposes
of increasing its gross income and to protect its portfolio against declines in
the value of the securities it owns or increases in the value of securities to
be acquired. In addition, the Fund may purchase the put and all options on stock
indexes in order to hedge its investments against a decline in value or to
attempt to reduce the risks of missing a market or industry segment advance.
Options on stock indexes are similar to options on specific securities. However,
because options on stock indexes do not involve the delivery of an underlying
security, the option represents the holder's right to obtain from the writer
cash in an amount equal to a fixed multiple of the amount by which the exercise
price exceeds (in the case of a put) or is less than (in the case of a call) the
closing value of the underlying stock
10
<PAGE>
index on the exercise date. Therefore, while one purpose of writing such options
is to generate additional income for the Fund, the Fund recognizes that it may
be required to deliver an amount of cash in excess of the market value of a
stock index at such time as an option written by the Fund is exercised by the
holder. The writing and purchase of options is a highly specialized activity
which involves investment techniques and risks different from those associated
with ordinary portfolio securities transactions. The successful use of
protective puts for hedging purposes depends in part on the Adviser's ability to
predict future price fluctuations and the degree of correlation between the
options and securities markets.
When Issued, Delayed Delivery Securities and Forward Commitments
The Fund may enter into forward commitments for the purchase of securities.
Such transactions may include purchase on a 'when issued' or 'delayed delivery'
basis. In some cases, a forward commitment may be conditioned upon the
occurrence of a subsequent event, such as approval and consummation of a merger,
corporate reorganization of debt restructuring, i.e., a when, as and if issued
security. When such transactions are negotiated, the price is fixed at the time
of the commitment, with payment and delivery taking place in the future,
generally a month or more after the date of the commitment. While the Fund will
only enter into a forward commitment with the intention of actually acquiring
the security, the Fund may sell the security before the settlement date if it is
deemed advisable. Securities purchased under a forward commitment are subject to
market fluctuation, and no interest or dividends accrue to the Fund prior to the
settlement date.
Lending of Portfolio Securities
The Fund may lend securities from its portfolio to brokers, dealers and
other financial organizations. This practice is expected to help the Fund
generate revenue to defray certain operating expenses. Loans by the Fund, if and
when made, (1) will be collateralized in accordance with applicable regulatory
requirements and (2) will be limited so that the value of all loaned securities
does not exceed 33% of the value of the Fund's total assets. The current
intention of the Fund, however, is to limit the value of all loaned securities
to no more than 5% of the Fund's total assets. Under extreme circumstances,
there may be a restriction on the Fund's ability to sell the collateral and the
Fund could suffer a loss.
Futures Contracts and Options on Futures
Depending upon market conditions prevailing at such time and its perceived
investment needs, the Fund may enter into futures contracts and options on
futures contracts that are traded on a U.S. exchange or board of trade. These
investments, if any, may be made by the Fund solely for the purpose of hedging
against changes in the value of its portfolio securities and the aggregate
initial margins and premiums thereon would not constitute more than 5% of the
Fund's total assets.
Futures and options on futures entail certain risks, including but not
limited to the following: no assurance that futures contacts or options on
futures can be offset at favorable prices, possible reduction of the Fund's
yield due to the use of hedging, possible reduction in value of both the
securities hedged and the hedging instrument, possible lack of liquidity due to
daily limits on price fluctuation, imperfect correlation between the contracts
and the securities being hedged, and potential losses in excess of the amount
invested in the futures contracts themselves.
Net Asset Value of the Fund Shares
The Fund's net asset value per share is calculated on each day, Monday
through Friday, except days on which the New York Stock Exchange ('NYSE') is
closed. The NYSE is currently scheduled to be closed on New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving
11
<PAGE>
and Christmas and on the preceding Friday or subsequent Monday when one of these
holidays falls on a Saturday or Sunday, respectively.
The Fund's net asset value per share is determined as of the close of
regular trading on the NYSE, currently 4:00 p.m., New York time, and is computed
by dividing the value of the Fund's net assets by the total number of its shares
outstanding. The Fund uses market quotations in valuing its portfolio
securities. Short-term investments that mature in 60 days or less are valued at
amortized cost whenever the Fund's Board of Directors determines that amortized
cost reflects fair value of these investments.
The Fund's Investment Manager
Gabelli Funds, Inc. was organized in 1980 and serves as investment adviser
to the Fund. Gabelli Funds, Inc. also serves as the investment adviser to The
Gabelli Small Cap Growth Fund; The Gabelli Equity Income Fund; The Gabelli
Growth Fund; The Gabelli Asset Fund; The Gabelli Convertible Securities Fund;
The Gabelli ABC Fund; The Gabelli Global Telecommunications Fund; and The
Gabelli US Treasury Money Market Fund, open-end investment companies having
assets as of December 31, 1993 in excess of $200 million, $50 million, $675
million, $925 million, $105 million, $9 million, $45 million and $180 million,
respectively, and The Gabelli Equity Trust Inc., a closed-end investment company
having assets in excess of $925 million. Another subsidiary of Gabelli Funds,
Inc. is GAMCO Investors, Inc. ('GAMCO'), an investment adviser for individuals,
pension trusts, profit-sharing trusts and endowments, having aggregate assets in
excess of $4.2 billion under its management. The current business address of
Gabelli Funds, Inc. is One Corporate Center, Rye, New York 10580-1434.
The Adviser and its affiliates act as investment advisers to the other
clients that may invest in the same securities. As a result, clients of the
Adviser and its affiliates hold substantial positions in the same issuers of
securities. If a substantial position in an issuer is held, liquidity and
concentration considerations may limit the ability of the Adviser to add to the
position on behalf of the Fund or other clients or to readily dispose of the
position. Although the availability at acceptable prices of such securities may
from time to time be limited, it is the policy of the Adviser and its affiliates
to allocate purchases and sales of such securities in a manner believed by the
Adviser to be equitable to all clients, including the Fund. The Adviser may on
occasion give advice or take action with respect to other clients from the
actions taken with respect to the Fund.
Mr. Mario J. Gabelli is Chairman of the Board, President and Chief
Investment Officer of the Adviser and of the Fund. He acts as Chairman of the
Board of GAMCO. Mr. Gabelli is also the Chief Executive Officer of GAMCO and
various other companies owned or controlled by Gabelli Funds, Inc. Except for
The Gabelli Growth Fund, accounts under the management of the Adviser and GAMCO
will tend, subject to differences in investment objectives and authorized
investment practices, to hold many of the same securities because all the
accounts are under the overall direction of Mr. Gabelli. In addition to his
positions with Gabelli Funds, Inc. and its subsidiaries, Mr. Gabelli serves as
an officer and/or director of various other companies. Owing to the diverse
nature of Mr. Gabelli's responsibilities with respect to Gabelli Funds, Inc.,
its subsidiaries and other companies with which he is affiliated, he will devote
less than substantially all of his time to the Fund, although this is not
expected to affect adversely the operations or management of the Fund. There is
no contract of employment between Mr. Gabelli and Gabelli Funds, Inc. or any of
its subsidiaries and there can be no assurance that a suitable replacement could
be found for him in the event of his death, disability or resignation.
As compensation for its services and the related expenses borne by the
Adviser, the Adviser is paid a fee, computed and payable monthly, equal, on an
annual basis, to 0.75% of the value of the Fund's average daily net assets,
which is higher than that paid by most mutual funds. By its agreement with the
Fund, the Adviser has undertaken certain expense reimbursement obligations.
12
<PAGE>
The Fund's Plan of Distribution
Pursuant to a Distribution Plan (the 'Plan') adopted by the Fund pursuant
to Rule 12b-1 under the 1940 Act, the Fund will make monthly payments to
registered broker-dealers, including the underwriters, who enter into agreements
with the Fund (each, a 'Designated Dealer') calculated at the annual rate of
0.25% of the value of the average daily net assets of the Fund attributable to
outstanding shares of the Fund sold by the Designated Dealer (including
additional shares acquired by reinvestment of dividends). Gabelli & Company also
will be reimbursed annually by other Designated Dealers (pro rata based on the
amounts paid to such Designated Dealers under the Plan) for out-of-pocket
distribution expenses incurred in respect of the Fund in an amount equal to the
excess, if any, of (i) $150,000 over (ii) the amounts otherwise paid to Gabelli
& Company as a Designated Dealer during such year. Such reimbursements, however,
will not increase the amounts payable under the Plan by the Fund to Gabelli &
Company or other Designated Dealers. Gabelli & Company may in turn enter into
selling agreements with Soliciting Broker-Dealers whereby all or a portion of
the monthly payments paid to Gabelli & Company pursuant to the Plan will be paid
by Gabelli & Company to a Soliciting Broker-Dealer for activities intended to
result in the distribution of Fund shares.
Payments under the Plan are not tied exclusively to the distribution
expenses actually incurred by Designated Dealers and such payments may exceed
their distribution expenses. Expenses incurred in connection with the offering
and sale of shares may include, but are not limited to, payments to the
Designated Dealer's (or its affiliates') sales personnel for selling shares of
the Fund; costs of printing and distributing the other Designated Dealer branch
office distribution-related expenses; payments to and expenses of persons who
provide support services in connection with the distribution of shares of the
Fund; and financing costs on the amount of the foregoing expenses.
The Fund's Board of Directors will evaluate the appropriateness of the Plan
and its payment terms on a continuing basis and in doing so will consider all
relevant factors, including expenses borne by Designated Dealers in the current
year and in prior years and amounts received under the Plan.
The Sponsor will not receive any Rule 12b-1 fees from the Fund. Any Rule
12b-1 fees paid by the Fund's distributor to the Trustee for performing
servicing functions with respect to the Fund Shares will be used to reduce
directly the expenses and fees otherwise payable by the Trust to the Trustee.
There can be no assurance that the Trustee will receive any Rule 12b-1 fees in
the future.
PORTFOLIO
The Trust consists of the Securities (or contracts to purchase such
Securities together with an irrevocable letter or letters of credit for the
purchase of such contracts) and Additional Securities deposited upon the
creation of additional Units as set forth above and Substitute Securities
acquired by the Trust as long as such Securities may continue to be held from
time to time in the Trust together with uninvested cash realized from the
disposition of Securities. Because certain of the Securities from time to time
may be sold under certain circumstances, as described herein, no assurance can
be given that the Trust will retain for any length of time its present size and
composition. The Trustee has not participated and will not participate in the
selection of Securities for the Trust, and neither the Sponsor nor the Trustee
will be liable in any way for any default, failure or defect in any Securities.
Some of the Securities are publicly traded in the over-the-counter market.
The contracts to purchase Securities deposited initially in the Trust are
expected to settle in five business days, in the ordinary manner for such
Securities. Settlement of the contracts for Securities is thus expected to take
place prior to the settlement of purchase of Units on the Initial Date of
Deposit.
13
<PAGE>
SUBSTITUTION OF SECURITIES
Neither the Sponsor nor the Trustee shall be liable in any way for any
default, failure or defect in any of the Securities. In the event of a failure
to deliver any Security that has been purchased for the Trust under a contract
('Failed Securities'), the Sponsor is authorized under the Trust Agreement to
direct the Trustee to acquire other securities ('Substitute Securities') to make
up the original corpus of the Trust.
The Substitute Securities must be purchased within 20 days after the sale
of the portfolio Security or delivery of the notice of the failed contract.
Where the Sponsor purchases Substitute Securities in order to replace Failed
Securities, (i) the purchase price may not exceed the purchase price of the
Failed Securities and (ii) the Substitute Securities must be substantially
similar to the Securities originally contracted for and not delivered. Where the
Sponsor purchases Substitute Securities in order to replace Securities they
sold, the Sponsor will endeavor to select Securities which are securities that
possess characteristics that are consistent with the objectives of the Trust as
set forth above. Such selection may include or be limited to Securities
previously included in the portfolio of the Trust.
Whenever a Substitute Security has been acquired for the Trust, the Trustee
shall, within five days thereafter, notify all Certificateholders of the Trust
of the acquisition of the Substitute Security and the Trustee shall, on the next
Distribution Date which is more than 30 days thereafter, make a pro rata
distribution of the amount, if any, by which the cost to the Trust of the Failed
Security exceeded the cost of the Substitute Security plus accrued interest, if
any.
In the event no reinvestment is made, the proceeds of the sale of
Securities will be distributed to Certificateholders as set forth under 'Rights
of Certificateholders--Distributions.' In addition, if the right of substitution
shall not be utilized to acquire Substitute Securities in the event of a failed
contract, the Sponsor will cause to be refunded the sales charge attributable to
such Failed Securities to all Certificateholders of the Trust, and distribute
the principal and accrued interest attributable to such Failed Securities on the
next Distribution Date.
Because certain of the Securities from time to time may be substituted (see
'Trust Administration-- Portfolio Supervision') or may be sold under certain
circumstances, no assurance can be given that the Trust will retain its present
size and composition for any length of time. The proceeds from the sale of a
Security or the exercise of any redemption or call provision will be distributed
to Certificateholders except to the extent such proceeds are applied to meet
redemptions of Units. (See 'Liquidity--Trustee Redemption.')
RISK FACTORS
FIXED PORTFOLIO
The value of the Units will fluctuate depending on all the factors that
have an impact on the economy and the equity markets. These factors similarly
impact on the ability of an issuer to distribute dividends. The Trust is not a
'managed registered investment company' and Securities will not be sold by the
Trustee as a result of ordinary market fluctuations. Additionally, the Trust
will not elect to reinvest any distributions it is entitled to as a result of
its ownership of shares on the Fund. Unlike a managed investment company in
which there may be frequent changes in the portfolio of securities based upon
economic, financial and market analyses, securities of a unit investment trust,
such as the Trust, are not subject to such frequent changes based upon
continuous analysis. However, the Sponsor may direct the disposition by the
Trustee of Securities upon the occurrence of certain events. (See 'Trust
Administration--Portfolio Supervision' below.)
14
<PAGE>
FUND SHARES AND TREASURY OBLIGATIONS
The Sponsor has taken steps to ensure that an investment in Fund Shares is
equitable to all parties and particularly that the interest of the
Certificateholders are protected. Accordingly, any sales charges which would
otherwise be applicable will be waived on Fund Shares sold to the Trust, since
the Sponsor is receiving the sales charge on all Units sold. In addition, the
Trust Agreement requires the Trustee to vote all Fund Shares held in the Trust
in the same manner and ratio on all proposals as the vote of owners of Fund
Shares not held by the Trust.
The Fund's Shares may appreciate or depreciate in value (or pay dividends)
depending on the full range or economic and market influences affecting the
securities in which the Fund is invested and the success of the Fund's
management in anticipating or taking advantage or such opportunities as may
occur. In addition, in the event of the inability of the Fund's Adviser to act
and/or claims or actions against the Fund by regulatory agencies or other
persons or entities, the value of the Fund Shares may decline thereby causing a
decline in the value of Units. Termination of the Fund prior to the Termination
Date of the Trust may result in the termination of the Trust sooner than
anticipated. Prior to a purchase of Units, investors should determine that the
aforementioned risks are consistent with their investment objectives.
The net asset value of the Fund's Shares, like the value of the Treasury
Obligations, will fluctuate over the life of the Trust and may be more or less
than the price paid therefor by the Trust. An investment in Units of the Trust
should be made with an understanding of the risks inherent in ownership of
equity securities since the Portfolio of the Fund is invested in equity
securities which the Fund's Adviser believes are undervalued and that by virtue
of anticipated developments or catalysts particularly applicable to such
companies may, in the Adviser's judgment, achieve significant appreciation.
However, the Sponsor believes that, upon termination of the Trust on the
mandatory termination date, even if the Fund Shares are worthless, the Treasury
Obligations will provide sufficient cash at maturity to equal $15.00 per Unit.
Part of such cash will, however, represent an amount of taxable original issue
discount of the Treasury Obligations which was previously accrued and included
in the income of the Certificateholders.
A CERTIFICATEHOLDER PURCHASING A UNIT ON THE DATE OF THIS PROSPECTUS OR
THEREAFTER MAY RECEIVE TOTAL DISTRIBUTIONS, INCLUDING DISTRIBUTIONS MADE UPON
TERMINATION OF THE TRUST THAT ARE LESS THAN THE AMOUNT PAID FOR SUCH UNIT.
Sales of Securities in the Portfolio under certain permitted circumstances
may result in an accelerated termination of the Trust. It is also possible that,
in the absence of a secondary market for the Units or otherwise, redemptions of
Units may occur in sufficient numbers to reduce the portfolio to a size
resulting in such termination. In addition, the Trust may be terminated if the
net aggregate value of the Trust is less than 40% of the aggregate maturity
values of the Treasury Obligations calculated immediately after the most recent
deposit of Treasury Obligations in the Trust. Early termination of the Trust may
have important consequences to the Certificateholder; e.g., to the extent that
Units were purchased with a view to an investment of longer duration, the
overall investment program of the investor may require readjustment; or the
overall return on investment may be less than anticipated, and may result in a
loss to a Certificateholder.
In the event of the early termination of the Trust, the Trustee will cause
the Fund Shares to be sold and the proceeds thereof distributed to the
Certificateholders in proportion to their respective interests therein, unless a
Certificateholder elects to receive Fund Shares 'in kind.' (See 'Trust
Administration--Trust Termination.') Proceeds from the sale of the Treasury
Obligations will be paid in cash.
In the event of a notice that any Treasury Obligation will not be delivered
('Failed Treasury Obligations'), the Sponsor is authorized under the Indenture
to direct the Trustee to acquire other Treasury Obligations ('Replacement
Treasury Obligations') within a period ending on the earlier of the first
distribution of cash to the Trust Certificateholders or 90 days after the Date
of Deposit. The cost of the Replacement Treasury Obligations may not exceed the
cost of the Treasury Obligations which they replace. Any Replacement Treasury
15
<PAGE>
Obligation deposited in the Trust will be substantially identical to every
Treasury Obligation then in the Trust. Whenever a Replacement Treasury
Obligation has been acquired for the Trust, the Trustee shall, within 5 days
thereafter, notify Certificateholders of the acquisition of the Replacement
Treasury Obligation.
In the event a contract to purchase Securities fails and Replacement
Treasury Obligations are not acquired, the Trustee will distribute to
Certificateholders the funds attributable to the failed contract. The Sponsor
will, in such case, refund the sales charge applicable to the failed contract.
If less than all the funds attributable to a failed contract are applied to
purchase Replacement Treasury Obligations, the remaining money will be
distributed to Certificateholders.
The Trustee will have no power to vary the investments of the Trust, i.e.,
the Trustee will have no managerial power to take advantage of market variations
to improve a Certificateholder's investment but may dispose of Securities only
under limited circumstances.
To the best of the Sponsor's knowledge there was no litigation pending as
of the Initial Date of Deposit in respect of any Security which might reasonably
be expected to have a material adverse effect on the Trust. At any time after
the Initial Date of Deposit, litigation may be instituted on a variety of
grounds with respect to the Securities. The Sponsor is unable to predict whether
any such litigation may be instituted, or if instituted, whether such litigation
might have a material adverse effect on the Trust.
Investors should consult with their own financial advisers prior to
investing in the Trust to determine its suitability. (See 'Trust
Administration--Portfolio Supervision.') All the Securities in the Trust are
liquidated during a 60 day period prior to the termination of the Trust. Since
the Trust will not sell Securities in response to ordinary market fluctuation,
but only at the Trust's termination, the amount realized upon the sale of the
Securities may not be the highest price attained by an individual Security
during the life of the Trust.
There is no assurance that any dividends will be declared or paid in the
future on the Fund Shares. Investors should be aware that there is no assurance
that the Trust's objectives will be achieved.
RISKS OF INVESTING IN LOWER RATED SECURITIES
The Fund may invest no more than 35% of its total assets in lower rated
securities (Caa by Moody's or CCC by S&P) and comparable unrated securities,
collectively commonly known as 'junk bonds') to the extent described in the
Fund's Prospectus. No minimum rating standard is required by the Fund. These
lower rated securities are considered speculative and, while generally providing
greater income than investments in higher rated securities, will involve greater
risk of principal and income (including the possibility of default or bankruptcy
of the issuers of such securities) and may involve greater volatility of price
(especially during periods of economic uncertainty or change) than securities in
the higher rating categories and because yields vary over time, no specific
level of income can ever be assured. These lower rated securities generally tend
to reflect economic changes (and the outlook for economic growth) short-term
corporate and industry developments and the market's perception of their credit
quality (especially during times of adverse publicity) to a greater extent than
during times of adverse publicity) to a greater extent than higher rated
securities which react primarily to fluctuations in the general level of
interest rates (although these lower rated securities are also affected by
changes in interest rates). In the past, economic downturns or an increase in
interest rates have, under certain circumstances, caused a higher incidence of
default by the issuers of these securities and may do so in the future,
especially in the case of highly leveraged issuers. The prices for these
securities may be affected by legislative and regulatory developments. For
example, federal rules require that savings and loan associations gradually
reduce their holdings of securities. An effect of such legislation may be to
depress the prices of outstanding lower rated securities. In addition,
investment in these lower rated securities may involve greater liquidity and
valuation risks than those for investment grade securities. To the extent there
is no established secondary market for these securities, there could be thin
trading of such securities which could adversely impact the Board of Directors'
ability to accurately value such securities and the Fund's assets. Furthermore,
the liquidity of these lower rated
16
<PAGE>
securities may be affected by the market's perception of their credit quality.
Therefore, the judgment of the Fund's Adviser may at times play a greater role
in valuing these securities than in the case of investment grade securities, and
it also may be more difficult during times of certain adverse market conditions
to dispose of these lower rated securities to meet redemption requests or to
respond to changes in the market.
PUBLIC OFFERING
OFFERING PRICE
The Public Offering Price per 100 Units of the Trust is equal to the
aggregate value of the underlying Securities (the price at which they could be
directly purchased by the public assuming they were available) in the Trust
divided by the number of Units outstanding times 100 plus a sales charge of 4.9%
of the Public Offering Price per 100 Units (excluding any transaction fees) or
5.152% of the net amount invested in Securities per 100 Units. In addition, the
net amount invested in Securities will involve a proportionate share of amounts
in the Income Account and Principal Account, if any. The Public Offering Price
can vary on a daily basis from the amount stated on the cover of this Prospectus
in accordance with fluctuations in the market value of the Securities and the
price to be paid by each investor will be computed as of the date the Units are
purchased.
The aggregate value of the Securities is determined in good faith by the
Evaluator on each 'Business Day' as defined in the Trust Agreement in the
following manner: during the initial offering period on the basis of the net
asset value of the Fund Shares and the bid side evaluation of the Treasury
Obligations and following the initial offering period on the basis of the net
asset value of the Fund Shares and the bid side evaluation of the Treasury
Obligations. The evaluation generally shall be based on the closing purchase
price in the over-the-counter market (unless the Evaluator deems these prices
inappropriate as a basis for evaluation) or if there is no such closing purchase
price, then the Evaluator may ascertain the values of the Treasury Obligations
using any of the following methods, or a combination thereof, which it deems
appropriate: (a) on the basis of current offering prices for the Treasury
Obligations as obtained from investment dealers or brokers who customarily deal
in securities comparable to those held in the Trust, (b) if offering prices are
not available for the Treasury Obligations, on the basis of current offering
prices for comparable securities, (c) by appraising the value of the Treasury
Obligations on the offering side of the market or by such other appraisal deemed
appropriate by the Evaluator or (d) by any combination of the above, each as of
the Evaluation Time.
VOLUME AND OTHER DISCOUNTS
Units of the Trust are available at a volume discount from the Public
Offering Price during the initial public offering. This volume discount will
result in a reduction of the sales charge applicable to such purchases. The
amount of the volume discount and the approximate reduced sales charge on the
Public Offering Price applicable to such purchases are as follows:
<TABLE>
<CAPTION>
NUMBER OF UNITS APPROXIMATE REDUCED SALES CHARGE
- ------------------------------ -----------------------------------
<S> <C>
10,000 but less than 25,000 4.66%
25,000 but less than 50,000 4.42%
50,000 but less than 75,000 4.18%
75,000 but less than 100,000 3.94%
100,000 or more 3.45%
</TABLE>
These discounts will apply to all purchases of Units by the same purchaser
during the initial public offering period. Units purchased by the same
purchasers in separate transactions during the initial public offering period
will be aggregated for purposes of determining if such purchaser is entitled to
a discount provided that such purchaser must own at least the required number of
Units at the time such determination is made. Units held in
17
<PAGE>
the name of the spouse of the purchaser or in the name of a child of the
purchaser under 21 years of age are deemed for the purposes hereof to be
registered in the name of the purchaser. The discount is also applicable to a
trustee or other fiduciary purchasing securities for a single trust estate or
single fiduciary account.
Employees (and their immediate families) of Bear, Stearns & Co. Inc.,
Gabelli Funds, Inc., and of any underwriter of the Trust may, pursuant to
employee benefit arrangements, purchase Units of the Trust at a price equal to
the then market value of the underlying securities in the Trust during the
initial offering period, divided by the number of Units outstanding plus a
reduced sales charge of up to a maximum of 1.75% per Unit. Such arrangements
result in less selling effort and selling expenses than sales to employee groups
of other companies. Resales or transfers of Units purchased under the employee
benefit arrangements may only be made through the Sponsor's secondary market, so
long as it is being maintained.
DISTRIBUTION OF UNITS
During the initial offering period (i) Units issued on the Initial Date of
Deposit and (ii) additional Units issued after such date in respect of deposits
of Additional Securities, will be distributed by the Sponsor, the Underwriters
and dealers at the Public Offering Price. (See 'Underwriting Syndicate' in Part
A.) The initial offering period in each case is thirty days unless extended by
the Sponsor for Units specified in (i) and (ii) in the preceding sentence.
Certain banks and thrifts will make Units of the Trust available to their
customers on an agency basis. A portion of the sales charge paid by their
customers is retained by or remitted to the banks. Under the Glass-Steagall Act,
banks are prohibited from underwriting Units; however, the Glass-Steagall Act
does permit certain agency transactions and the banking regulators have
indicated that these particular agency transactions are permitted under such
Act. In addition, state securities laws on this issue may differ from the
interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law.
The Sponsor intends to qualify the Units for sale in substantially all
States through the Underwriters and through dealers who are members of the
National Association of Securities Dealers, Inc. Units may be sold to dealers at
prices which represent a concession of up to 3% per Unit, subject to the
Sponsor's right to change the dealers' concession from time to time. In
addition, for transactions of 10,000 Units or more, the Sponsor intends to
negotiate the applicable sales charge and such charge will be disclosed to any
such purchaser. Such Units may then be distributed to the public by the dealers
at the Public Offering Price then in effect. The Sponsor reserves the right to
reject, in whole or in part, any order for the purchase of Units. In addition,
any dealer, underwriter or firm who purchases Units on the Initial Date of
Deposit will be paid an additional concession of $1.00 per 100 Units purchased
that day. The Sponsor reserves the right to reject, in whole or in part, any
order for the purchase of Units. The Sponsor reserves the right to change the
discounts from time to time.
Underwriters and broker-dealers of the Trust, banks and/or others are
eligible to participate in a program in which such firms receive from the
Sponsor a nominal award for each of their registered representatives who have
sold a minimum number of units of unit investment trusts created by the Sponsor
during a specified time period. In addition, at various times the Sponsor may
implement other programs under which the sales forces of underwriters, brokers,
dealers, banks and/or others may be eligible to win other nominal awards for
certain sales efforts, or under which the Sponsor will reallow to any such
underwriters, brokers, dealers, banks and/or others that sponsor sales contests
or recognition programs conforming to criteria established by the Sponsor, or
participate 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 underwriters, brokers, dealers, banks and/or others 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 Certificateholders pay for their Units or the amount that the Trust
will receive from the Units sold.
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<PAGE>
FREQUENT BUYER PROGRAM
Any dealer, underwriter, or firm whose total combined purchases of the
Trust and other unit investment trusts sponsored by Bear, Stearns & Co. Inc.
('MST/EST Units') from Bear, Stearns & Co. Inc. in a single calendar month fall
in any of the levels listed below, will be paid an additional concession.
<TABLE>
<CAPTION>
AGGREGATE MONTHLY ADDITIONAL
AMOUNTS OF MST/EST CONCESSION
UNITS SOLD AT (PER $1,000.00)
PUBLIC OFFERING PRICE SOLD
- --------------------------------------------------------------------------------------- ---------------
<S> <C>
$1,000,000 but less than $2,000,000.................................................... $ 0.50
$2,000,000 but less than $4,500,000.................................................... $ 1.00
$4,500,000 but less than $7,000,000.................................................... $ 1.50
$7,000,000 or more..................................................................... $ 2.00
</TABLE>
SPONSOR'S AND UNDERWRITERS' PROFITS
The Sponsor and the Underwriters will receive a gross underwriting
commission equal to 4.9% of the Public Offering Price per 100 Units (equivalent
to 5.152% of the net amount invested in the Securities). Additionally, the
Sponsor may realize a profit on the deposit of the Securities in the Trust
representing the difference between the cost of the Securities to the Sponsor
and the cost of the Securities to the Trust (See 'Portfolio.') The Sponsor or
any Underwriter may realize profits or sustain losses with respect to Securities
deposited in the Trust which were acquired from underwriting syndicates of which
they were a member.
The Sponsor did not participate as an underwriter or manager, co-manager or
member of underwriting syndicates from which any of the aggregate principal
amount of the Securities were acquired for the Trust. All or a portion of the
Securities deposited in the Trust may have been acquired through the Sponsor.
During the initial offering period and thereafter to the extent additional
Units continue to be offered by means of this Prospectus, the underwriting
syndicate may also realize profits or sustain losses as a result of fluctuations
after the Initial Date of Deposit in the aggregate value of the Securities and
hence in the Public Offering Price received by the Sponsor and the Underwriters
for the Units. Cash, if any, made available to the Sponsor prior to settlement
date for the purchase of Units may be used in the Sponsor's business subject to
the limitations of 17 CFR 240.15c3-3 under the Securities Exchange Act of 1934
and may be of benefit to the Sponsor.
Upon termination of the Trust, the Trustee may utilize the services of the
Sponsor for the sale of all or a portion of the Securities in the Trust. The
Sponsor will receive brokerage commissions from the Trust in connection with
such sales in accordance with applicable law.
In maintaining a market for the Units (see 'Sponsor Repurchase') the
Sponsor will realize profits or sustain losses in the amount of any difference
between the price at which they buy Units and the price at which they resell
such Units.
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RIGHTS OF CERTIFICATEHOLDERS
CERTIFICATES
Ownership of Units of the Trust is evidenced by registered Certificates
executed by the Trustee and the Sponsor. Certificates may be issued in
denominations of one hundred or more Units. Certificates are transferable by
presentation and surrender to the Trustee properly endorsed and/or accompanied
by a written instrument or instruments of transfer. Although no such charge is
presently made or contemplated, the Trustee may require a Certificateholder to
pay $2.00 for each Certificate reissued or transferred and any governmental
charge that may be imposed in connection with each such transfer or interchange.
Mutilated, destroyed, stolen or lost Certificates will be replaced upon delivery
of satisfactory indemnity and payment of expenses incurred.
DISTRIBUTIONS
Dividends and interest received by the Trust are credited by the Trustee to
an Income Account for the Trust. Other receipts, including the proceeds of
Securities disposed of, are credited to a Principal Account for the Trust.
Distributions to each Certificateholder from the Income Account are
computed as of the close of business on the Record Date for the Distribution
Date. Distributions from the Principal Account of the Trust (other than amounts
representing failed contracts, as previously discussed) will be computed as of
the Record Date, and will be made to the Certificateholders of the Trust on or
shortly after the Distribution Date. Proceeds representing principal received
from the disposition of any of the Securities between a Record Date and a
Distribution Date which are not used for redemptions of Units will be held in
the Principal Account and not distributed until the next Distribution Date. No
distributions will be made to Certificateholders electing to participate in the
Total Reinvestment Plan. Persons who purchase Units between a Record Date and a
Distribution Date will receive their first distribution on the Distribution Date
following the first Record Date on which they are a Certificateholder of record.
As of the first day of each month, the Trustee will deduct from the Income
Account of the Trust, and, to the extent funds are not sufficient therein, from
the Principal Account of the Trust, amounts necessary to pay the expenses of the
Trust (as determined on the basis set forth under 'Trust Expenses and Charges').
The Trustee also may withdraw from said accounts such amounts, if any, as it
deems necessary to establish a reserve for any applicable taxes or other
governmental charges that may be payable out of the Trust. Amounts so withdrawn
shall not be considered a part of such Trust's assets until such time as the
Trustee shall return all or any part of such amounts to the appropriate
accounts. In addition, the Trustee may withdraw from the Income and Principal
Accounts such amounts as may be necessary to cover redemptions of Units by the
Trustee.
The dividend distribution per 100 Units cannot be estimated and will change
and may be reduced as Securities are redeemed, exchanged or sold, or as expenses
of the Trust fluctuate. No distribution need be made from the Principal Account
until the balance therein is an amount sufficient to distribute $1.00 per 100
Units.
RECORDS
The Trustee shall furnish Certificateholders in connection with each
distribution a statement of the amount of dividends and interest, if any, and
the amount of other receipts, if any, which are being distributed, expressed in
each case as a dollar amount per 100 Units. Within a reasonable time after the
end of each calendar year the Trustee will furnish to each person who at any
time during the calendar year was a Certificateholder of record, a statement
showing (a) as to the Income Account: dividends, interest and other cash amounts
received, amounts paid for purchases of Substitute Securities and redemptions of
Units, if any, deductions for applicable taxes and fees and expenses of the
Trust, and the balance remaining after such distributions and deductions,
expressed both as a total dollar amount and as a dollar amount representing the
pro rata share of each 100 Units outstanding on the last business day of such
calendar year; (b) as to the Principal Account: the dates of disposition of any
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Securities and the net proceeds received therefrom, deductions for payments of
applicable taxes and fees and expenses of the Trust, amounts paid for purchases
of Substitute Securities and redemptions of Units, if any, and the balance
remaining after such distributions and deductions, expressed both as a total
dollar amount and as a dollar amount representing the pro rata share of each 100
Units outstanding on the last business day of such calendar year; (c) a list of
the Securities held, a list of Securities purchased, sold or otherwise disposed
of during the calendar year and the number of Units outstanding on the last
business day of such calendar year; (d) the Redemption Price per 100 Units based
upon the last computation thereof made during such calendar year; and (e)
amounts actually distributed to Certificateholders during such calendar year
from the Income and Principal Accounts, separately stated, of the Trust,
expressed both as total dollar amounts and as dollar amounts representing the
pro rata share of each 100 Units outstanding on the last business day of such
calendar year.
The Trustee shall keep available for inspection by Certificateholders at
all reasonable times during usual business hours, books of record and account of
its transactions as Trustee, including records of the names and addresses of
Certificateholders, Certificates issued or held, a current list of Securities in
the portfolio and a copy of the Trust Agreement.
TAX STATUS
The following is a general discussion of certain of the Federal income tax
consequences of the purchase, ownership and disposition of the Units. The
summary is limited to investors who hold the Units as 'capital assets'
(generally, property held for investment) within the meaning of Section 1221 of
the Internal Revenue Code of 1986, as amended (the 'Code'). Certificateholders
should consult their tax advisers in determining the Federal, state, local and
any other tax consequences of the purchase, ownership and disposition of Units.
In rendering the opinion set forth below, Battle Fowler has examined the
Agreement, the final form of Prospectus dated the date hereof (the 'Prospectus')
and the documents referred to therein, among others, and has relied on the
validity of said documents and the accuracy and completeness of the facts set
forth therein. In the Opinion of Battle Fowler, special counsel for the Sponsor,
under existing law:
1. The Trust will be classified as a grantor trust for Federal income
tax purposes and not as a partnership or association taxable as a
corporation. Classification of the Trust as a grantor trust will cause the
Trust not to be subject to Federal Income tax, and will cause the
Certificateholders of the Trust to be treated for Federal income tax
purposes as the owners of a pro rata portion of the assets of the Trust.
All income received by the Trust will be treated as income of the
Certificateholders in the manner set forth below.
2. The Trust is not subject to the New York Franchise Tax on Business
Corporations or the New York City General Corporation Tax. For a
Certificateholder who is a New York resident, however, a pro rate portion
of all or part of the income of the Trust will be treated as the income of
the Certificateholder under the income tax laws of the State and City of
New York. Similar treatment may apply in other states.
3. During the 90-day period subsequent to the initial issuance date,
the Sponsor reserves the right to deposit Additional Securities that are
substantially similar to those establishing the Trust. This retained right
falls within the guidelines promulgated by the Internal Revenue Service
('IRS') and should not affect the taxable status of the Trust.
A taxable event will generally occur with respect to each Certificateholder
when the Trust disposes of a Security (whether by sale, exchange or redemption)
or upon the sale, exchange or redemption of Units by such Certificateholder. The
price a Certificateholder pays for his Units, including sales charges, is
allocated among his pro rata portion of each Security held by the Trust (in
proportion to the fair market values thereof on the date the Certificateholder
purchases his Units) in order to determine his initial cost for his pro rata
portion of each Security held by the Trust.
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For Federal income tax purposes, a Certificateholder's pro rata portion of
dividends paid with respect to a Fund Shares held by a Trust are taxable as
ordinary income to the extent of such payor corporation's current and
accumulated 'earnings and profits' as defined by Section 316 of the Code. A
Certificateholder's pro rata portion of dividends paid on such Security that
exceed such current and accumulated earnings and profits will first reduce a
Certificateholder's tax basis in such Security, and to the extent that such
dividends exceed a Certificateholder's tax basis in such Security will generally
be treated as capital gain. In instances where a Certificateholder acquires his
Units shortly before the Fund declares a dividend, such Certificateholder may
realize taxable income upon the receipt of the dividend, even though the payment
is, in effect, a return of capital.
The Trust will contain Treasury Obligations which were originally issued at
a discount ('original issue discount'). In general, original issue discount can
be defined as the difference between the price at which a security was issued
and its stated redemption price at maturity. In the case of a Treasury
Obligation issued after July 2, 1982, original issue discount is deemed to
accrue on a constant interest method, which corresponds in general to the
economic accrual of interest (adjusted to eliminate proportionately on a
elapsed-time basis any excess of the amount paid for the Treasury Obligation
over the sum of the issue price and the accrued original issue discount on the
acquisition date).
Each Certificateholder will be required to include in his gross income,
original issue discount with respect to his interest in a Treasury Obligation
held by the Trust at the same time and in the same manner as though the
Certificateholder was the direct holder of such interest. The tax basis of a
Certificateholder with respect to his interest in a Treasury Obligation will be
increased by the amount of original issue discount thereon properly included in
the Certificateholder's gross income as determined for federal income tax
purposes.
The amount of gain recognized by a Certificateholder on a disposition of a
Treasury Obligation by the Trust will be equal to the difference between such
Certificateholder's pro rata portion of the gross proceeds realized by the Trust
on the disposition and the Certificateholder's tax basis in his pro rata portion
of the Treasury Obligation disposed of. Any gain recognized on a sale or
exchange of a Certificateholder's pro rata interest in a Treasury Obligation,
and not constituting a realization of accrued 'market discount' in the case of a
Treasury Obligation issued after July 18, 1984, will be capital gain. Gain
realized on the disposition of the interest of a Certificateholder in a market
discount Treasury Obligation is treated as ordinary income to the extent the
gain does not exceed the accrued market discount. A Certificateholder has an
interest in a market discount Treasury Obligation when the Certificateholder's
tax cost for his pro rata interest in the Treasury Obligation is less than the
stated redemption price thereof at maturity (or the issue price plus original
issue discount accrued up to the acquisition date, in the case of an original
issue discount Treasury Obligation). If a Certificateholder has an interest in a
market discount Treasury Obligation and has incurred debt to acquire Units, the
deductibility of a portion of the interest incurred on such debt may be
deferred.
The Trust will also own shares in the Fund, an entity that has elected and
qualified for the special tax treatment applicable to 'regulated investment
companies.' If the Fund distributes 90% or more of its investment company
taxable income to its shareholders, it will not be subject to Federal income tax
on the amounts so distributed. Moreover, if the Fund distributes at least 98% of
its investment company taxable income (including any net capital gain) it will
not be subject to the 4% excise tax on certain undistributed income of
'regulated investment companies.' Distributions by the Fund of its taxable
income to its shareholders will be taxable as ordinary income to such
shareholders. Distributions of the Fund's net capital gain, which are designated
as capital gain dividends by the Fund, will be taxable to its shareholders as
long-term capital gain, regardless of the length of time the shareholders have
held their investment in the Fund.
A Certificateholder's portion of gain, if any, upon the sale, exchange or
redemption of Units or the disposition of Securities held by the Trust will
generally be considered a capital gain and will be long-term if the
Certificateholder has held his Units for more than one year. Long-term capital
gains are generally taxed at the same rates applicable to ordinary income,
although individuals who realize long-term capital gains will be subject to a
maximum tax rate of 28% on such gains, rather than the 'regular' maximum tax
rate of 39.6%. Tax rates may increase prior to the time when Certificateholders
may realize gains from the sale, exchange or redemption of the Units or
Securities.
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A Certificateholder's portion of loss, if any, upon the sale or redemption
of Units or the disposition of Securities held by the Trust will generally be
considered a capital loss and will be long-term if the Certificateholder has
held his Units for more than one year. Capital losses are deductible to the
extent of capital gains; in addition, up to $3,000 of capital losses recognized
by non-corporate Certificateholders may be deducted against ordinary income.
A Certificateholder who itemizes his deductions may also deduct his pro
rata share of the fees and expenses of the Trust, but only to the extent that
such amounts, together with the Certificateholder's other miscellaneous itemized
deductions, exceed 2% of his adjusted gross income. The deduction of fees and
expenses may also be limited by Section 68 of the Code, which reduces the amount
of itemized deductions that are allowed for individuals with incomes in excess
of certain thresholds.
After the end of each calendar year, the Trustee will furnish to each
Certificateholder an annual statement containing information relating to the
dividends received by the Trust on the Securities, the gross proceeds received
by the Trust from the disposition of any Security, and the fees and expenses
paid by the Trust. The Trustee will also furnish annual information returns to
each Certificateholder and to the Internal Revenue Service.
A corporation that owns Units will generally be entitled to a 70% dividends
received deduction with respect to such Certificateholder's pro rata portion of
dividends that are taxable as ordinary income to Certificateholders which are
received by the Trust from a domestic corporation under section 243 of the Code
or from a qualifying foreign corporation under section 245 of the Code (to the
extent the dividends are taxable as ordinary income, as discussed above) in the
same manner as if such corporation directly owned the Securities paying such
dividends. However, a corporation owning Units should be aware that Section 246
and 246A of the Code impose additional limitations on the eligibility of
dividends for the 70% dividends received deduction. These limitations include a
requirement that stock (and therefore Units) must generally be held at least 46
days (as determined under Section 246(c) of the Code). Moreover, the allowable
percentage of the deduction will be reduced from 70% if a corporate
Certificateholder owns certain stock (or Units) the financing or which is
directly attributable to indebtedness incurred by such corporation. Accordingly,
corporate Certificateholders should consult their tax adviser in this regard.
As discussed in the section 'Termination,' each Certificateholder may have
three options in receiving their termination distributions, which are (i) to
receive their pro rata share of the underlying Fund Shares in kind, and the
maturity value of the Treasury Obligations in cash, if the Certificateholder
owns at least 2,500 Units (ii) to receive cash upon liquidation of their pro
rata share of the underlying Securities, or (iii) to invest the amount of cash
they would receive upon the liquidation of their pro rata share of the
underlying Securities in units of a future series of the Trust (if one is
offered).
There are special tax consequences should a Certificateholder choose option
(i), the exchange of the Certificateholder's pro rata portion of the Securities
held by the Trust for a proportionate number of Fund Shares plus cash equal to
the Certificateholder's proportionate share of Treasury Obligations. Treasury
Regulations provide that gain or loss is recognized when there is a conversion
of property into property that is materially different in kind or extent. In
this instance, the Certificateholder may be considered the owner of an undivided
interest in all of the Trusts's assets, and by accepting the proportionate
number of Fund Shares of the Trust in partial exchange for his Unit, the
Certificateholder should be treated as merely exchanging his undivided pro rata
ownership of Fund Shares held by the Trust into sole ownership of a
proportionate share of Fund Shares. As such, there should be no material
difference in the Certificateholder's ownership, and therefore the transaction
should be tax free to the extent the Fund Shares are received. Alternatively,
the transaction may be treated as an exchange that would qualify for
nonrecognition treatment to the extent the Certificateholder is exchanging his
undivided interest in all of the Trust's Fund Shares for his proportionate
number of shares of the underlying Fund Shares. In either instance, the
transaction should result in a non-taxable event for the Certificateholder to
the extent Fund Shares are received. However, there is no specific authority
addressing the income tax consequences of an in-kind distribution from a grantor
trust, and investors are urged to consult their tax advisers in this regard.
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Entities that generally qualify for an exemption from Federal income tax,
such as many pension trusts, are nevertheless taxed under Section 511 of the
Code on 'unrelated business taxable income.' Unrelated business taxable income
is income from a trade or business regularly carried on by the tax-exempt entity
that is unrelated to the entity's exempt purpose. Unrelated business taxable
income generally does not include dividend or interest income or gain from the
sale of investment property, unless such income is derived from property that is
debt-financed or is dealer property. A tax-exempt entity's dividend income from
the Trust and gain from the sale of Units in the Trust or the Trust's sale of
Securities is not expected to constitute unrelated business taxable income to
such tax-exempt entity unless the acquisition of the Unit itself is
debt-financed or constitutes dealer property in the hands of the tax-exempt
entity.
Before investing in the Trust, the trustee or investment manager of an
employee benefit plan (e.g., a pension or profit sharing retirement plan) should
consider among other things (a) whether the investment is prudent under the
Employee Retirement Income Security Act of 1974 ('ERISA'), taking into account
the needs of the plan and all of the facts and circumstances of the investment
in the Trust; (b) whether the investment satisfies the diversification
requirement of Section 404(a)(1)(C) of ERISA; and (c) whether the assets of the
Trust are deemed 'plan assets' under ERISA and the Department of Labor
regulations regarding the definition of 'plan assets.'
Prospective tax-exempt investors are urged to consult their own tax
advisers prior to investing in the Trust.
LIQUIDITY
SPONSOR REPURCHASE
The Sponsor, although not obligated to do so, intends to maintain a
secondary market for the Units and continuously to offer to repurchase the
Units. The Sponsor's secondary market repurchase price will be based on the
aggregate value of the Securities in the Trust portfolio and will be the same as
the redemption price. The aggregate value of the Securities will be determined
by the Trustee on a daily basis and computed on the basis set forth under
'Trustee Redemption.' The Sponsor does not guarantee the enforceability,
marketability or price of any Securities in the Portfolio or of the Units.
Certificateholders who wish to dispose of their Units should inquire of the
Sponsor as to current market prices prior to making a tender for redemption. The
Sponsor may discontinue repurchase of Units if the supply of Units exceeds
demand, or for other business reasons. The date of repurchase is deemed to be
the date on which Certificates representing Units are physically received in
proper form, i.e., properly endorsed, by Bear, Stearns & Co. Inc., 245 Park
Avenue, New York, New York 10167. Units received after 4 P.M., New York Time,
will be deemed to have been repurchased on the next business day. In the event a
market is not maintained for the Units, a Certificateholder may be able to
dispose of Units only by tendering them to the Trustee for redemption.
Units purchased by the Sponsor in the secondary market may be reoffered for
sale by the Sponsor at a price based on the aggregate value of the Securities in
the Trust plus a 4.9% sales charge (of 5.152% of the net amount invested) plus a
pro rata portion of amounts, if any, in the Income Account. Any Units that are
purchased by the Sponsor in the secondary market also may be redeemed by the
Sponsor if it determines such redemption to be in its best interest.
The Sponsor may, under certain circumstances, as a service to
Certificateholders, elect to purchase any Units tendered to the Trustee for
redemption (see 'Trustee Redemption'). Factors which the Sponsor will consider
in making a determination will include the number of Units of all Trusts which
it has in inventory, its estimate of the salability and the time required to
sell such Units and general market conditions. For example, if in order to meet
redemptions of Units the Trustee must dispose of Securities, and if such
disposition cannot be made by the redemption date (seven calendar days after
tender), the Sponsor may elect to purchase such Units. Such purchase shall be
made by payment to the Certificateholder not later than the close of business on
the redemption date of an amount equal to the Redemption Price on the date of
tender. Notwithstanding the foregoing, the Sponsor undertakes to maintain the
secondary market during the initial public offering period.
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TRUSTEE REDEMPTION
Units may also be tendered to the Trustee for redemption at its corporate
trust office at 770 Broadway, New York, New York 10003, upon proper delivery of
Certificates representing such Units and payment of any relevant tax. At the
present time there are no specific taxes, other than the income taxes discussed
above, related to the redemption of Units. No redemption fee will be charged by
the Sponsor or the Trustee. Units redeemed by the Trustee will be cancelled.
Certificates representing Units to be redeemed must be delivered to the
Trustee and must be properly endorsed or accompanied by proper instruments of
transfer with signature guaranteed (or by providing satisfactory indemnity, as
in the case of lost, stolen or mutilated Certificates). Thus, redemptions of
Units cannot be effected until Certificates representing such Units have been
delivered by the person seeking redemption. (See 'Certificates.')
Certificateholders must sign exactly as their names appear on the faces of their
Certificates. In certain instances the Trustee may require additional documents
such as, but not limited to, trust instruments, certificates of death,
appointments as executor or administrator or certificates of corporate
authority.
Within seven calendar days following a tender for redemption, or, if such
seventh day is not a business day, on the first business day prior thereto, the
Certificateholder will be entitled to receive an amount for each Unit tendered
equal to the Redemption Price per Unit computed as of the Evaluation Time set
forth under 'Summary of Essential Information' in Part A on the date of tender.
The 'date of tender' is deemed to be the date on which Units are received by the
Trustee, except that with respect to Units received after the close of trading
on the New York Stock Exchange (4:00 p.m. Eastern Time), the date of tender is
the next day on which such Exchange is open for trading, and such Units will be
deemed to have been tendered to the Trustee on such day for redemption at the
Redemption Price computed on that day.
A Certificateholder will receive his redemption proceeds in cash and
amounts paid on redemption shall be withdrawn from the Income Account, or, if
the balance therein is insufficient, from the Principal Account. All other
amounts paid on redemption shall be withdrawn from the Principal Account. The
Trustee is empowered to sell Securities in order to make funds available for
redemptions. Such sales, if required, could result in a sale of Securities by
the Trustee at a loss. To the extent Securities are sold, the size and diversity
of the Trust will be reduced. The Securities to be sold will be selected by the
Trustee in order to maintain, to the extent practicable, the proportionate
relationship among the number of shares of each Stock. Provision is made in the
Trust Agreement under which the Sponsor may, but need not, specify minimum
amounts in which blocks of Securities are to be sold in order to obtain the best
price for the Fund. While these minimum amounts may vary from time to time in
accordance with market conditions, the Sponsor believes that the minimum amounts
which would be specified would be approximately 100 shares for readily
marketable Securities.
The Redemption Price per Unit is the pro rata share of the Unit in the
Trust determined by the Trustee on the basis of (i) the cash on hand in the
Trust or moneys in the process of being collected, (ii) the value of the
Securities in the Trust as determined by the Evaluator, less (a) amounts
representing taxes or other governmental charges payable out of the Trust, (b)
the accrued expenses of the Trust and (c) cash allocated for the distribution to
Certificateholders of record as of the business day prior to the evaluation
being made. The Evaluator may determine the value of the Securities in the Trust
in the following manner: the net asset value of the Fund Shares and the bid side
evaluation of the Treasury Obligations. The evaluation shall generally be based
on the closing purchase price in the over-the-counter market (unless the
Evaluator deems these prices inappropriate as a basis for evaluation) or if
there is no such closing purchase price, then the Evaluator may ascertain the
values of the Treasury Obligations using any of the following methods, or a
combination thereof, which it deems appropriate: (a) on the basis of the current
bid prices for the Treasury Obligations as obtained from investment dealers or
brokers who customarily deal in securities comparable to those held in the
Trust, (b) if bid prices are not available for the Treasury Obligations, on the
basis of current bid prices for comparable securities, (c) by appraising the
value of the Treasury Obligations on the bid side of the market or (d) by any
combination of the above.
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The Trustee is irrevocably authorized in its discretion, if the Sponsor
does not elect to purchase a Unit tendered for redemption or if the Sponsor
tenders a Unit for redemption, in lieu of redeeming such Unit, to sell such Unit
in the over-the-counter market for the account of the tendering
Certificateholder at prices which will return to the Certificateholder an amount
in cash, net after deducting brokerage commissions, transfer taxes and other
charges, equal to or in excess of the Redemption Price for such Unit. The
Trustee will pay the net proceeds of any such sale to the Certificateholder on
the day he would otherwise be entitled to receive payment of the Redemption
Price.
The Trustee reserves the right to suspend the right of redemption and to
postpone the date of payment of the Redemption Price per Unit for any period
during which the New York Stock Exchange is closed, other than customary weekend
and holiday closings, or trading on that Exchange is restricted or during which
(as determined by the Securities and Exchange Commission) an emergency exists as
a result of which disposal or evaluation of the Securities is not reasonably
practicable, or for such other periods as the Securities and Exchange Commission
may by order permit. The Trustee and the Sponsor is not liable to any person or
in any way for any loss or damage which may result from any such suspension or
postponement.
A Certificateholder who wishes to dispose of his Units should inquire of
his bank or broker in order to determine if there is a current secondary market
price in excess of the Redemption Price.
TOTAL REINVESTMENT PLAN
Distributions of dividend income and capital gain, if any, from the Trust
are made to Certificateholders annually. The Certificateholder has the option,
however, of either receiving his distribution check, together with any other
payments, from the Trustee or participating in a reinvestment program offered by
the Sponsor in shares of GOC Fund, Inc. (formerly The Manager's Fund, Inc.),
U.S. Treasury Money Market Portfolio (the 'GOC Fund'). Participation in the
reinvestment option is conditioned on the GOC Fund's lawful qualification for
sale in the state in which the Certificateholder is a resident. For income tax
purposes, however, Certificateholders who participate in the Total Reinvestment
Plan are taxed in the same manner as those Certificateholders who do not
participate in the plan.
Upon enrollment in the reinvestment option, the Trustee will direct
dividend and/or other distributions, if any, to the GOC Fund. The GOC Fund seeks
to maximize current income and to maintain liquidity and a stable net asset
value by investing in short term U.S. Treasury Obligations which have effective
maturities of 397 days or less. For more complete information concerning the GOC
Fund, including charges and expenses, the Certificateholder should fill out and
mail the card attached to the inside back cover of the Prospectus. The
prospectus for the GOC Fund will be sent to Certificateholders. The
Certificateholder should read the prospectus for the GOC Fund carefully before
deciding to participate.
TRUST ADMINISTRATION
PORTFOLIO SUPERVISION
The Trust is a unit investment trust and is not a managed fund. Traditional
methods of investment management for a managed fund typically involve frequent
changes in a portfolio of securities on the basis of economic, financial and
market analyses. The Portfolio of the Trust, however, will not be managed and
therefore the adverse financial condition of an issuer will not necessarily
require the sale of its Securities from the Portfolio. However, the Sponsor may
direct the disposition of Securities upon the occurrence of certain events
including:
1. default in payment of amounts due on any of the Securities;
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2. institution of certain legal proceedings;
3. default under certain documents materially and adversely affecting
future declaration or payment of amounts due or expected; or
4. decline in price as a direct result of serious adverse credit
factors affecting the issuer of a Security which, in the opinion of the
Sponsor, would make the retention of the Security detrimental to the Trust
or the Certificateholders.
If a default in the payment of amounts due on any Security occurs and if
the Sponsor fails to give immediate instructions to sell or hold that Security,
the Trust Agreement provides that the Trustee, within 30 days of that failure by
the Sponsor, may sell the Security.
The Trust Agreement provides that it is the responsibility of the Sponsor
to instruct the Trustee to reject any offer made by an issuer of any of the
Securities to issue new securities in exchange and substitution for any Security
pursuant to a recapitalization or reorganization, except that the Sponsor may
instruct the Trustee to accept such an offer or to take any other action with
respect thereto as the Sponsor may deem proper if the issuer failed to declare
or pay, or the Sponsor anticipates such issuer will fail to declare or pay,
anticipated dividends with respect thereto.
The Trust Agreement also authorizes the Sponsor to increase the size and
number of Units of the Trust by the deposit of Additional Securities, contracts
to purchase Additional Securities or cash or a letter of credit with
instructions to purchase Additional Securities in exchange for the corresponding
number of additional Units within 90 days subsequent to the Initial Date of
Deposit, provided that the original proportionate relationship between the Fund
Shares and Treasury Obligations established on the Initial Date of Deposit is
maintained to the extent practicable. Deposits of Additional Securities in the
Trust subsequent to the Initial Date of Deposit must replicate exactly the
proportionate relationship between the Fund Shares and Treasury Obligations in
the Trust portfolio at the end of the initial 90-day period.
With respect to deposits of Additional Securities (or cash or a letter of
credit with instructions to purchase Additional Securities), in connection with
creating additional Units of the Trust, the Sponsor may specify the minimum
numbers in which Additional Securities will be deposited or purchased. If a
deposit is not sufficient to acquire minimum amounts of each Security,
Additional Securities may be acquired in the order of the Security most
under-represented immediately before the deposit when compared to the original
proportionate relationship. If Securities of an issue originally deposited are
unavailable at the time of the subsequent deposit, the Sponsor may (1) deposit
cash or a letter of credit with instructions to purchase the Security when it
becomes available, or (2) deposit (or instruct the Trustee to purchase) either
Securities of one or more other issues originally deposited or a Substitute
Security.
TRUST AGREEMENT AND AMENDMENT
The Trust Agreement may be amended by the Trustee and the Sponsor without
the consent of any of the Certificateholders: (1) to cure any ambiguity or to
correct or supplement any provision which may be defective or inconsistent; (2)
to change any provision thereof as may be required by the Securities and
Exchange Commission or any successor governmental agency; or (3) to make such
other provisions in regard to matters arising thereunder as shall not adversely
affect the interests of the Certificateholders.
The Trust Agreement may also be amended in any respect, or performance of
any of the provisions thereof may be waived, with the consent of the holders of
Certificates evidencing 66 2/3% of the Units then outstanding for the purpose of
modifying the rights of Certificateholders; provided that no such amendment or
waiver shall reduce any Certificateholder's interest in the Trust without his
consent or reduce the percentage of Units required to consent to any such
amendment or waiver without the consent of the holders of all Certificates. The
Trust Agreement may not be amended, without the consent of the holders of all
Certificates in the Trust then
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outstanding, to increase the number of Units issuable or to permit the
acquisition of any Securities in addition to or in substitution for those
initially deposited in such Trust, except in accordance with the provisions of
the Trust Agreement. The Trustee shall promptly notify Certificateholders, in
writing, of the substance of any such amendment.
TRUST TERMINATION
The Trust Agreement provides that the Trust shall terminate upon the
maturity, redemption or other disposition, as the case may be, of the last of
the Securities held in such Trust but in no event is it to continue beyond the
Mandatory Termination Date. If the value of the Trust shall be less than the
minimum amount set forth under 'Summary of Essential Information' in Part A, the
Trustee may, in its discretion, and shall, when so directed by the Sponsor,
terminate the Trust. The Trust may also be terminated at any time with the
consent of the holders of Certificates representing 100% of the Units then
outstanding. The Trustee may utilize the services of the Sponsor for the sale of
all or a portion of the Securities in the Trust. In the event of termination,
written notice thereof will be sent by the Trustee to all Certificateholders.
Such notice will provide Certificateholders with three options by which to
receive their pro rata share of the net asset value of the Trust.
1. A Certificateholder who owns at least 2,500 units and who so elects
by notifying the Trustee prior to the commencement of the Liquidation
Period by returning a properly completed election request (to be supplied
to Certificateholders at least 20 days prior to such date) (see Part
A--'Summary of Essential Information' for the date of the commencement of
the Liquidation Period) will have his Units redeemed on commencement of the
Liquidation Period by distribution of the Certificateholder's pro rata
share of the net asset value of the Trust on such date distributed in kind
to the extent represented by Fund Shares and the balance in cash to the
extent represented by Treasury Obligations, within 7 calendar days next
following the commencement of the Liquidation Period. Certificateholders
subsequently selling such distributed Fund Shares will incur brokerage
costs when disposing of such Fund Shares. An election of this option will
not prevent the Certificateholder from recognizing taxable gain or loss as
a result of the liquidation of the Treasury Obligations. Certificateholders
should consult their own tax adviser in this regard.
A Certificateholder may also elect prior to the Mandatory Termination Date
by so specifying in a properly completed election request, the following two
options with regard to the termination distribution of such Certificateholder's
interest in the Trust as set forth below:
2. to receive in cash such Certificateholder's pro rata share of the
net asset value of the Trust derived from the sale by the Sponsor as the
agent of the Trustee of the underlying Securities over a period not to
exceed 60 days immediately following the commencement of the Liquidation
Period. The Certificateholder's Redemption Price per Unit on the settlement
date of the last trade of a Security in the Trust will be distributed to
such Certificateholder within 7 days of the settlement of the trade of the
last Security to be sold; and/or
3. upon the receipt by the Trust of an appropriate exemptive order
from the Securities and Exchange Commission, to invest such
Certificateholder's pro rata share of the net asset value of the Trust
derived from the sale by the Sponsor as agent of the Trustee of the
underlying Securities over a period not to exceed 60 days immediately
following the commencement of the Liquidation Period, in units of a
subsequent series of Equity Securities Trust, Signature Series (the 'New
Series'). The Units of a New Series will be purchased by the
Certificateholder within 7 days of the settlement of the trade for the last
Security to be sold. Such purchaser will be entitled to a reduced sales
load of approximately 2.5% of the Public Offering Price upon the purchase
of units of the New Series. It is expected that the terms of the New Series
will be substantially the same as the terms of the Trust described in this
Prospectus, and that similar options with respect to the termination of
such New Series will be available. The availability of this option does not
constitute a solicitation of an offer to purchase Units of a New Series or
any other security. A Certificateholder's election to participate in this
option will be treated as an indication of interest only. At any time prior
to the purchase by the Certificateholder of units of a New Series such
Certificateholder may change his investment
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strategy and receive, in cash, the proceeds of the sale of the Securities.
An election of this option will not prevent the Certificateholder from
recognizing taxable gain or loss (except in the case of a loss, if the New
Series is treated as substantially identical to the Trust) as a result of
the liquidation, even though no cash will be distributed to pay any taxes.
Certificateholders should consult their own tax advisers in this regard.
The Sponsor has agreed to effect the sales of underlying securities for the
Trustee in the case of the second and third options over a period not to exceed
60 days immediately following the commencement of the Liquidation Period free of
brokerage commissions. The Sponsor, on behalf of the Trustee, will sell, unless
prevented by unusual and unforeseen circumstances, such as, among other reasons,
a suspension in trading of a Security, the close of a stock exchange, outbreak
of hostilities and collapse of the economy, on each business day during the 60
day period at least a number of shares of each Security which then remains in
the portfolio (based on the number of shares of each issue in the portfolio)
multiplied by a fraction the numerator of which is one and the denominator of
which is the number of days remaining in the 60 day sales period. The Redemption
Price Per Unit upon the settlement of the last sale of Securities during the 60
day period will be distributed to Certificateholders in redemption of such
Certificateholders' interest in the Trust.
Depending on the amount of proceeds to be invested in Units of the New
Series and the amount of other orders for Units in the New Series, the Sponsor
may purchase a large amount of securities for the New Series in a short period
of time. The actual market impact of the Sponsor's purchases, however, is
currently unpredictable because the actual amount of securities to be purchased
and the supply and price of those securities is unknown. A similar problem may
occur in connection with the sale of Securities during the 60 day period
immediately following the commencement of the Liquidation Period. The Sponsor
believes that the sale of underlying Securities over a 60 day period as
described above is in the best interest of a Certificateholder and may mitigate
the negative market price consequences stemming from the trading of large
amounts of Securities. The Securities may be sold in fewer than 60 days if, in
the Sponsor's judgment, such sales are in the best interest of
Certificateholders. The Sponsor, in implementing such sales of securities on
behalf of the Trustee, will seek to maximize the sales proceeds and will act in
the best interests of the Certificateholders. There can be no assurance,
however, that any adverse price consequences of heavy trading will be mitigated.
Certificateholders who do not make any election will be deemed to have
elected to receive the Redemption Price per Unit in cash (option number 2).
The Sponsor may for any reason, in its sole discretion, decide not to
sponsor any subsequent series of the Trust, without penalty or incurring
liability to any Certificateholder. If the Sponsor so decides, the Sponsor will
notify the Trustee of that decision, and the Trustee will notify the
Certificateholders before the Termination Date. All Certificateholders will then
elect either option 1 or option 2.
By electing to reinvest in the New Series, the Certificateholder indicates
his interest in having his terminating distribution from the Trust invested only
in the New Series created following termination of the Trust; the Sponsor
expects, however, that a similar reinvestment program will be offered with
respect to all subsequent series of the Trust, thus giving Certificateholders a
yearly opportunity to elect to 'rollover' their terminating distributions into a
New Series. The availability of the reinvestment privilege does not constitute a
solicitation of offers to purchase units of a New Series or any other security.
A Certificateholder's election to participate in the reinvestment program will
be treated as an indication of interest only. The Sponsor intends to coordinate
the date of deposit of a future series so that the terminating trust will
terminate contemporaneously with the creating of a New Series.
The Sponsor reserves the right to modify, suspend or terminate the
reinvestment privilege at any time.
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THE SPONSOR
The Sponsor, Bear, Stearns & Co. Inc., a Delaware corporation, is engaged
in the underwriting, investment banking and brokerage business and is a member
of the National Association of Securities Dealers, Inc. and all principal
securities and commodities exchanges, including the New York Stock Exchange, the
American Stock Exchange, the Midwest Stock Exchange and the Pacific Stock
Exchange. Bear Stearns maintains its principal business offices at 245 Park
Avenue, New York, New York 10167 and, since its reorganization from a
partnership to a corporation in October, 1985 has been a wholly-owned subsidiary
of The Bear Stearns Companies Inc. Bear Stearns, through its predecessor
entities, has been engaged in the investment banking and brokerage business
since 1923. Bear Stearns is the sponsor for numerous series of unit investment
trusts, including, A Corporate Trust, Series 1 (and Subsequent Series), New York
Municipal Trust, Series 1 (and Subsequent Series), New York Discount and Zero
Coupon Fund, 1st Series (and Subsequent Series), Municipal Securities Trust,
Series 1 (and Subsequent Series), 1st Discount Series (and Subsequent Series),
Multi-State Series 1 (and Subsequent Series), High Income Series 1 (and
Subsequent Series), Short-Intermediate Term Series 1 (and Subsequent Series),
Mortgage Securities Trust, Series 1 (and Subsequent Series), Insured Municipal
Securities Trust, Series 1 (and Subsequent Series) and 5th Discount Series (and
Subsequent Series) and Equity Securities Trust, Series 1, Signature Series,
Gabelli Communications Income Trust (and Subsequent Series).
The information included herein is only for the purpose of informing
investors as to the financial responsibility of the Sponsor and its ability to
carry out their contractual obligations.
The Sponsor will be under no liability to Certificateholders for taking any
action, or refraining from taking any action, in good faith pursuant to the
Trust Agreement, or for errors in judgment except in cases of their own willful
misfeasance, bad faith, gross negligence or reckless disregard of their
obligations and duties.
The Sponsor may resign at any time by delivering to the Trustee an
instrument of resignation executed by the Sponsor.
If at any time the Sponsor shall resign or fail to perform any of its
duties under the Trust Agreement or becomes incapable of acting or becomes
bankrupt or its affairs are taken over by public authorities, then the Trustee
may either (a) appoint a successor Sponsor; (b) terminate the Trust Agreement
and liquidate the Trust; or (c) continue to act as Trustee without terminating
the Trust Agreement. Any successor Sponsor appointed by the Trustee shall be
satisfactory to the Trustee and, at the time of appointment, shall have a net
worth of at least $1,000,000.
THE TRUSTEE
The Trustee is United States Trust Company of New York, with its principal
place of business at 770 Broadway, New York, New York 10003. United States Trust
Company of New York has, since its establishment in 1853, engaged primarily in
the management of trust and agency accounts for individuals and corporations.
The Trustee is a member of the New York Clearing House Association and is
subject to supervision and examination by the Superintendent of Banks of the
State of New York, the Federal Deposit Insurance Corporation and the Board of
Governors of the Federal Reserve System.
The Trustee shall not be liable or responsible in any way for taking any
action, or for refraining from taking any action, in good faith pursuant to the
Trust Agreement, or for errors in judgment; or for any disposition of any
moneys, Securities or Certificates in accordance with the Trust Agreement,
except in cases of its own willful misfeasance, bad faith, gross negligence or
reckless disregard of its obligations and duties; provided, however, that the
Trustee shall not in any event be liable or responsible for any evaluation made
by any independent evaluation service employed by it. In addition, the Trustee
shall not be liable for any taxes or other governmental charges imposed upon or
in respect of the Securities or the Trust which it may be required to pay under
current or future law of the United States or any other taxing authority having
jurisdiction. The Trustee shall not be liable
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for depreciation or loss incurred by reason of the sale by the Trustee of any of
the Securities pursuant to the Trust Agreement.
For further information relating to the responsibilities of the Trustee
under the Trust Agreement, reference is made to the material set forth under
'Rights of Certificateholders.'
The Trustee may resign by executing an instrument in writing and filing the
same with the Sponsor, and mailing a copy of a notice of resignation to all
Certificateholders. In such an event the Sponsor is obligated to appoint a
successor Trustee as soon as possible. In addition, if the Trustee becomes
incapable of acting or becomes bankrupt or its affairs are taken over by public
authorities, the Sponsor may remove the Trustee and appoint a successor as
provided in the Trust Agreement. Notice of such removal and appointment shall be
mailed to each Certificateholder by the Sponsor. If upon resignation of the
Trustee no successor has been appointed and has accepted the appointment within
thirty days after notification, the retiring Trustee may apply to a court of
competent jurisdiction for the appointment of a successor. The resignation or
removal of the Trustee becomes effective only when the successor Trustee accepts
its appointment as such or when a court of competent jurisdiction appoints a
successor Trustee. Upon execution of a written acceptance of such appointment by
such successor Trustee, all the rights, powers, duties and obligations of the
original Trustee shall vest in the successor.
Any corporation into which the Trustee may be merged or with which it may
be consolidated, or any corporation resulting from any merger or consolidation
to which the Trustee shall be a party, shall be the successor Trustee. The
Trustee must always be a banking corporation organized under the laws of the
United States or any State and have at all times an aggregate capital, surplus
and undivided profits of not less than $2,500,000.
THE EVALUATOR
The Evaluator is Kenny S&P Evaluation Services, a division of Kenny
Information Systems, Inc., with its main offices located at 65 Broadway, New
York, New York 10006. The Evaluator is a wholly-owned subsidiary of McGraw-Hill,
Inc. The Evaluator is a registered investment advisor and also provides
financial information services.
The value of the Securities in the Trust portfolio is determined in good
faith by the Evaluator on the basis set forth under 'Public Offering--Offering
Price.' The Sponsor, the Trustee and the Certificateholders may rely on any
evaluation furnished by the Evaluator and shall have no responsibility for the
accuracy thereof. Determinations by the Evaluator under the Trust Agreement
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
Sponsor, the Trustee or Certificateholders for errors in judgment, except in
cases of its own willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations and duties. The Trustee, the Sponsor, the Evaluator
and the Certificateholders may rely on any evaluation furnished to the Evaluator
by an independent evaluation service and shall have no responsibility for the
accuracy thereof.
The Evaluator may resign or may be removed by the Sponsor and Trustee, and
the Sponsor and the Trustee are to use their best efforts to appoint a
satisfactory successor. Such resignation or removal shall become effective upon
the acceptance of appointment by the successor Evaluator. If upon resignation of
the Evaluator no successor has accepted appointment within the thirty days after
notice of resignation, the Evaluator may apply to a court of competent
jurisdiction for the appointment of a successor.
TRUST EXPENSES AND CHARGES
At no cost to the Trust, the Sponsor has borne all the expenses of creating
and establishing the Trust, including the cost of initial preparation and
execution of the Trust Agreement, registration of the Trust and the Units under
the Investment Company Act of 1940 and the Securities Act of 1933, the initial
preparation and
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printing of the Certificates, legal expenses, advertising and selling expenses,
expenses of the Trustee, initial fees and other out-of-pocket expenses.
The Sponsor will not charge the Trust a fee for their services as such.
(See 'Sponsor's and Underwriters' Profits.')
The Trustee will receive, for its ordinary recurring services to the Trust
an annual fee in the amount set forth under 'Summary of Essential Information'
in Part A. Such fee shall be reduced by any Rule 12b-1 fees paid by the Fund's
distributor to the Trustee for performing servicing functions with respect to
the Fund Shares. There can be no assurance that the Trustee will receive any
Rule 12b-1 fees in the future. For a discussion of the services performed by the
Trustee pursuant to its obligations under the Trust Agreement, see 'Trust
Administration' and 'Rights of Certificateholders.'
For each evaluation of the Treasury Obligations in the Trust, the Evaluator
shall receive a fee as set forth in the 'Summary of Essential Information.'
The Trustee's fees and The Evaluator's fees applicable to a Trust are
payable annually as of the Record Date from the Income Account of the Trust to
the extent funds are available and then from the Principal Account. Both fees
may be increased without approval of the Certificateholders by amounts not
exceeding proportionate increases in consumer prices for services as measured by
the United States Department of Labor's Consumer Price Index entitled 'All
Services Less Rent.'
The following additional charges are or may be incurred by the Trust: all
expenses (including counsel fees) of the Trustee incurred and advances made in
connection with its activities under the Trust Agreement, including the expenses
and costs of any action undertaken by the Trustee to protect the Trust and the
rights and interests of the Certificateholders; fees of the Trustee for any
extraordinary services performed under the Trust Agreement; indemnification of
the Trustee for any loss or liability accruing to it without gross negligence,
bad faith or willful misconduct on its part, arising out of or in connection
with its acceptance or administration of the Trust; indemnification of the
Sponsor for any losses, liabilities and expenses incurred in acting as sponsors
of the Trust without gross negligence, bad faith or willful misconduct on its
part; and all taxes and other governmental charges imposed upon the Securities
or any part of the Trust (no such taxes or charges are being levied, made or, to
the knowledge of the Sponsor, contemplated). The above expenses, including the
Trustee's fees, when paid by or owing to the Trustee are secured by a first lien
on the Trust to which such expenses are charged. In addition, the Trustee is
empowered to sell the Securities in order to make funds available to pay all
expenses.
The fees and expenses set forth herein are payable out of the Trust and
when paid by or owing to the Trustee are secured by a lien on the Trust. If the
cash dividend, capital gains distributions and Rule 12b-1 fees paid to the
Trustee by the Fund's distributor are insufficient to provide for amounts
payable by the Trust, the Trustee has the power to sell Fund Shares (not
Treasury Obligations) to pay such amounts. To the extent Fund Shares are sold,
the size of the Trust will be reduced and the proportions of the types of
Securities will change. Such sales might be required at a time when Fund Shares
would not otherwise be sold and might result in lower prices than might
otherwise be realized. Moreover, due to the minimum amount in which Fund Shares
may be required to be sold, the proceeds of such sales may exceed the amount
necessary for the payment of such fees and expenses. If the cash dividends,
capital gains distributions, Rule 12b-1 fees paid to the Trustee by the Fund's
distributor and proceeds of Fund Shares sold after deducting the ordinary
expenses are insufficient to pay the extraordinary expenses of the Trust the
Trustee has the power to sell Treasury Obligations to pay such extraordinary
expenses.
The accounts of the Trust shall be audited not less than annually by
independent public accountants selected by the Sponsor. The expenses of the
audit shall be an expense of the Trust. So long as the Sponsor maintains a
secondary market, the Sponsor will bear any audit expense which exceeds $.50
Cents per Unit. Certificateholders covered by the audit during the year may
receive a copy of the audited financials upon request.
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EXCHANGE PRIVILEGE AND CONVERSION OFFER
Upon receipt by the Trust of an appropriate exemptive order from the
Securities and Exchange Commission, Certificateholders will be able to elect to
exchange any or all of their Units of this Trust for Units of one or more of any
available series of Equity Securities Trust, Mortgage Securities Trust, Insured
Municipal Securities Trust, Municipal Securities Trust, New York Municipal
Trust, Mortgage Securities Trust or A Corporate Trust (the 'Exchange Trusts') at
a reduced sales charge as set forth below. Under the Exchange Privilege, the
Sponsor's repurchase price during the initial offering period of the Units being
surrendered will be based on the market value of the Securities in the Trust
portfolio or on the aggregate offer price of the securities in the other Trust
Portfolios; and, after the initial offering period has been completed, will be
based on the aggregate bid price of the securities in the particular Trust
portfolio. Units in an Exchange Trust then will be sold to the Certificateholder
at a price based on the aggregate offer price of the Bonds in the Exchange Trust
portfolio during the initial public offering period of the Exchange Trust; or
based on the aggregate bid price of the securities in the Exchange Trust
Portfolio if its initial offering has been completed plus accrued interest and a
reduced sales charge as set forth below.
Except for unitholders who wish to exercise the Exchange Privilege within
the first five months of their purchase of Units of the Trust, the sales charge
applicable to the purchase of units of an Exchange Trust shall be approximately
1.5% of the price of each Exchange Trust unit (or 1,000 Units for the Mortgage
Securities Trust or 100 Units for the Equity Securities Trust). For unitholders
who wish to exercise the Exchange Privilege within the first five months of
their purchase of Units of the Trust, the sales charge applicable to the
purchase of units of an Exchange Trust shall be the greater of (i) approximately
1.5% of the price of each Exchange Trust unit (or 1,000 Units for the Mortgage
Securities Trust or 100 Units for the Equity Securities Trust), or (ii) an
amount which when coupled with the sales charge paid by the unitholder upon his
original purchase of Units of the Trust at least equals the sales charge
applicable in the direct purchase of units of an Exchange Trust. The Exchange
Privilege is subject to the following conditions:
1. The Sponsor must be maintaining a secondary market in both the
Units of the Trust held by the Certificateholder and the Units of the
available Exchange Trust. While the Sponsor has indicated its intention to
maintain a market in the Units of all Trusts sponsored by it, the Sponsor
is under no obligation to continue to maintain a secondary market and
therefore there is no assurance that the Exchange Privilege will be
available to a Certificateholder at any specific time in the future. At the
time of the Certificateholder's election to participate in the Exchange
Privilege, there also must be Units of the Exchange Trust available for
sale, either under the initial primary distribution or in the Sponsor's
secondary market.
2. Exchanges will be effected in whole units only. Any excess proceeds
from the Units surrendered for exchange will be remitted and the selling
Certificateholder will not be permitted to advance any new funds in order
to complete an exchange. Units of the Mortgage Securities Trust may only be
acquired in blocks of 1,000 Units. Units of the Equity Securities Trust may
only be acquired in blocks of 100 Units.
3. The Sponsor reserves the right to suspend, modify or terminate the
Exchange Privilege. The Sponsor will provide unitholders of the Trust with
60 days prior written notice of any termination or material amendment to
the Exchange Privilege, provided that, no notice need be given if (i) the
only material effect of an amendment is to reduce or eliminate the sales
charge payable at the time of the exchange, to add one or more series of
the Trust eligible for the Exchange Privilege or to delete a series which
has been terminated from eligibility for the Exchange Privilege, (ii) there
is a suspension of the redemption of units of an Exchange Trust under
Section 22(e) of the Investment Company Act of 1940, or (iii) an Exchange
Trust temporarily delays or ceases the sale of its units because it is
unable to invest amounts effectively in accordance with its investment
objectives, policies and restrictions. During the 60 day notice period
prior to the termination or material amendment of the Exchange Privilege
described above, the Sponsor will continue to maintain a secondary market
in the units of all Exchange Trusts that could be acquired by the affected
unitholders. Unitholders may, during this 60 day period, exercise the
Exchange Privilege in accordance with its terms then in effect. In the
event the Exchange Privilege is not available to a
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Certificateholder at the time he wishes to exercise it, the
Certificateholder will immediately be notified and no action will be taken
with respect to his Units without further instructions from the
Certificateholder.
To exercise the Exchange Privilege, a Certificateholder should notify the
Sponsor of his desire to exercise his Exchange Privilege. If Units of a
designated, outstanding series of an Exchange Trust are at the time available
for sale and such Units may lawfully be sold in the state in which the
Certificateholder is a resident, the Certificateholder will be provided with a
current prospectus or prospectuses relating to each Exchange Trust in which he
indicates an interest. He may then select the Trust or Trusts into which he
desires to invest the proceeds from his sale of Units. The exchange transaction
will operate in a manner essentially identical to a secondary market transaction
except that units may be purchased at a reduced sales charge.
EXAMPLE: Assume that after the initial public offering has been completed, a
Certificateholder has five units of a Trust with a current value of $700 per
unit which he has held for more than 5 months and the Certificateholder wishes
to exchange the proceeds for units of a secondary market Exchange Trust with a
current price of $725 per unit. The proceeds from the Certificateholder's
original units will aggregate $3,500. Since only whole units of an Exchange
Trust may be purchased under the Exchange Privilege, the Certificateholder would
be able to acquire four units (or 4,000 Units of the Mortgage Securities Trust
or 400 Units of the Equity Securities Trust) for a total cost of $2,960 ($2,900
for units and $60 for the sales charge). The remaining $540 would be remitted to
the Certificateholder in cash. If the Certificateholder acquired the same number
of units at the same time in a regular secondary market transaction, the price
would have been $3,068.80 ($2,900 for units and $168.80 for the sales charge,
assuming a 5 1/2% sales charge times the public offering price).
THE CONVERSION OFFER
Upon receipt by the Trust of an appropriate exemptive order from the
Securities and Exchange Commission, Unit owners of any registered unit
investment trust for which there is no active secondary market in the units of
such trust (a 'Redemption Trust') will be able to elect to redeem such units and
apply the proceeds of the redemption to the purchase of available Units of one
or more series of Mortgage Securities Trust, A Corporate Trust, Municipal
Securities Trust, Insured Municipal Securities Trust, Mortgage Securities Trust,
New York Municipal Trust or Equity Securities Trust (the 'Conversion Trusts') at
the Public Offering Price for units of the Conversion Trust based on a reduced
sales charge as set forth below. Under the Conversion Offer, units of the
Redemption Trust must be tendered to the trustee of such trust for redemption at
the redemption price, which is based upon the market value of the underlying
securities in the Trust portfolio or the aggregate bid side evaluation of the
underlying bonds in other Trust portfolios and is generally about 1 1/2% to 2%
lower than the offering price for such bonds. The purchase price of the units
will be based on the aggregate offer price of the underlying bonds in the
Conversion Trust portfolio during its initial offering period; or, at a price
based on the aggregate bid price of the underlying bonds if the initial public
offering of the Conversion Trust has been completed, plus accrued interest and a
sales charge as set forth below.
Except for unitholders who wish to exercise the Conversion Offer within the
first five months of their purchase of units of a Redemption Trust, the sales
charge applicable to the purchase of Units of the Conversion Trust shall be
approximately 1.5% of the price of each Unit (or per 1,000 Units for the
Mortgage Securities Trust or 100 Units for the Equity Securities Trust). For
unitholders who wish to exercise the Conversion Offer within the first five
months of their purchase of units of a Redemption Trust, the sales charge
applicable to the purchase of Units of a Conversion Trust shall be the greater
of (i) approximately 1.5% of the price of each Unit (or per 1,000 Units for the
Mortgage Securities Trust or 100 Units for the Equity Securities Trust) or (ii)
an amount which when coupled with the sales charge paid by the unitholder upon
his original purchase of units of the Redemption Trust at least equals the sales
charge applicable in the direct purchase of Units of a Conversion Trust. The
Conversion Offer is subject to the following limitations:
1. The Conversion Offer is limited only to unit owners of any
Redemption Trust, defined as a unit investment trust for which there is no
active secondary market at the time the Certificateholder elects to
participate in the Conversion Offer. At the time of the unit owner's
election to participate in the Conversion
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Offer, there also must be available units of a Conversion Trust, either
under a primary distribution or in the Sponsor's secondary market.
2. Exchanges under the Conversion Offer will be effected in whole
units only. Unit owners will not be permitted to advance any new funds in
order to complete an exchange under the Conversion Offer. Any excess
proceeds from units being redeemed will be returned to the unit owner.
Units of the Mortgage Securities Trust may only be acquired in blocks of
1,000 units. Units of the Equity Securities Trust may only be acquired in
blocks of 100 Units.
3. The Sponsor reserves the right to modify, suspend or terminate the
Conversion Offer at any time without notice to unit owners of Redemption
Trusts. In the event the Conversion Offer is not available to a unit owner
at the time he wishes to exercise it, the unit owner will be notified
immediately and no action will be taken with respect to his units without
further instruction from the unit owner. The Sponsor also reserves the
right to raise the sales charge based on actual increases in the Sponsor's
costs and expenses in connection with administering the program, up to a
maximum sales charge of 2% per unit (or per 1,000 units for the Mortgage
Securities Trust or 100 Units for the Equity Securities Trust).
To exercise the Conversion Offer, a unit owner of a Redemption Trust should
notify his retail broker of his desire to redeem his Redemption Trust Units and
use the proceeds from the redemption to purchase Units of one or more of the
Conversion Trusts. If Units of a designated, outstanding series of a Conversion
Trust are at that time available for sale and if such Units may lawfully be sold
in the state in which the unit owner is a resident, the unit owner will be
provided with a current prospectus or prospectuses relating to each Conversion
Trust in which he indicates an interest. He then may select the Trust or Trusts
into which he decides to invest the proceeds from the sale of his Units. The
transaction will be handled entirely through the unit owner's retail broker. The
retail broker must tender the units to the trustee of the Redemption Trust for
redemption and then apply the proceeds to the redemption toward the purchase of
units of a Conversion Trust at a price based on the aggregate offer or bid side
evaluation per Unit of the Conversion Trust, depending on which price is
applicable, plus accrued interest and the applicable sales charge. The
certificates must be surrendered to the broker at the time the redemption order
is placed and the broker must specify to the Sponsor that the purchase of
Conversion Trust Units is being made pursuant to the Conversion Offer. The unit
owner's broker will be entitled to retain $5 of the applicable sales charge.
EXAMPLE: Assume a unit owner has five units of a Redemption Trust which has held
for more than 5 months with a current redemption price of $675 per unit based on
the aggregate bid price of the underlying bonds and the unit owner wishes to
participate in the Conversion Offer and exchange the proceeds for units of a
secondary market Conversion Trust with a current price of $750 per Unit. The
proceeds for the unit owner's redemption of units will aggregate $3,375. Since
only whole units of a Redemption Trust may be purchased under the Conversion
Offer, the unit owner will be able to acquire four units of the Conversion Trust
(or 4,000 units of the Mortgage Securities Trust or 400 Units of the Equity
Securities Trust) for a total cost of $2,860 ($2,800 for units and $60 for the
sales charge). The remaining $515 would be remitted to the unit owner in cash.
If the unit owner acquired the same number of Conversion Trust units at the same
time in a regular secondary market transaction, the price would have been
$2,962.96 ($2,800 for units and $162.96 sales charge, assuming a 5 1/2% sales
charge times the public offering price).
TAX CONSEQUENCES OF THE EXCHANGE PRIVILEGE AND THE CONVERSION OFFER
A surrender of units pursuant to the Exchange Privilege or the Conversion
Offer will constitute a 'taxable event' to the Certificateholder under the
Internal Revenue Code. The Certificateholder will realize a tax gain or loss
that will be of a long-or short-term capital or ordinary income nature depending
on the length of time the units have been held and other factors. (See 'Tax
Status'.) A Certificateholder's tax basis in the Units acquired pursuant to the
Exchange Privilege or Conversion Offer will be equal to the purchase price of
such Units. Investors should consult their own tax advisers as to the tax
consequences to them of exchanging or redeeming units and participating in the
Exchange Privilege or Conversion Offer.
35
<PAGE>
OTHER MATTERS
LEGAL OPINIONS
The legality of the Units offered hereby and certain matters relating to
federal tax law have been passed upon by Messrs. Battle Fowler, 280 Park Avenue,
New York, New York 10017 as counsel for the Sponsor. Messrs. Carter, Ledyard &
Milburn, Two Wall Street, New York, New York 10005 have acted as counsel for the
Trustee.
INDEPENDENT AUDITORS
The Statement of Condition and Portfolio are included herein in reliance
upon the report of KPMG Peat Marwick, independent auditors, and upon the
authority of said firm as experts in accounting and auditing.
LEGAL MATTERS
The Investment Company Act of 1940 (the 'Act') limits the amounts that
registered investment companies (such as the Trust) can own of other registered
investment companies (such as the Fund). However, Section 12(d)(1)(E) of the Act
would exempt the Trust from these limitations if the Fund is the only
'investment security' held by the Trust. While the term 'investment security' is
not defined in Section 12(d) of the Act, it is defined in another section of the
Act to exclude government securities (such as the Treasury Obligations) from its
scope. Therefore, since the Trust only owns shares of the Fund and Treasury
Obligations it complies with the exception of Section 12(d)(1)(E). Further, the
Office of Chief Counsel of the Division of Investment Management of the
Securities and Exchange Commission granted the Sponsor 'no action' assurance on
this issue.
DESCRIPTION OF CORPORATE BOND RATINGS
MOODY'S INVESTORS SERVICE, INC.
Aaa: Bonds which are rated Aaa are judged to be the best quality. They
carry the smallest degree of investment risk and are generally referred to as
'gilt edge.' Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as Aaa securities or fluctuations of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well
36
<PAGE>
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca: Bonds which are rated Ca represent obligations which are speculative in
a high degree. Such issues are often in default or have other market
shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Unrated: Where no rating has been assigned or where a rating has been
suspended or withdrawn, it may be for reasons unrelated to the quality of the
issue.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities that are not
rated as a matter of policy.
3. There is a lack of essential data pertaining to the issue or
issuer.
4. The issue was privately based, in which case the rating is not
published in Moody's Investors Service, Inc.'s publications.
Suspension or withdrawal may occur if new and material circumstances arise,
the effects of which preclude satisfactory analysis; if there is no longer
available reasonable up-to-date data to permit a judgment to be formed; if a
bond is called for redemption; or for other reasons.
Note: Those bonds in the Aa, A, Baa, Ba and B groups which Moody's believe
possess the strongest investment attributes are designated by the symbols Aa-l,
A-l, Baa-l, and B-l.
STANDARD & POOR'S CORPORATION
AAA: Bonds rated AAA have the highest rating assigned by Standard & Poor's
Corporation ('S&P'). Capacity to pay interest and repay principal is extremely
strong.
AA: Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the higher rated issues only in small degree.
A: Bonds rated A have a strong capacity to pay interest and repay principal
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in the highest rated
categories.
BBB: Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than in higher rated categories.
37
<PAGE>
BB, B, CCC, CC, C: Bonds rated BB, B, CCC, CC and C are regarded, on
balance, as predominantly speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of this obligation. BB
indicates the lowest degree of speculation and C the highest degree of
speculation. While such bonds will likely have some quality and protective
characteristics, they are outweighed by large uncertainties of major risk
exposures to adverse conditions.
C1: The rating C1 is reserved for income bonds on which no interest is
being paid.
D: Bonds rated D are in default, and payment of interest and/or repayment
of principal is in arrears.
Plus (+) or minus (-): The ratings from 'AA' to 'CCC' may be modified by
the addition of a plus or minus sign to show relative standing within the major
rating categories.
NR: Indicates that no rating has been requested, that there is insufficient
information on which to base a rating, or that S&P does not rate a particular
type of obligation as a matter of policy.
38
<PAGE>
I am the owner of ______ units of Equity Securities Trust, Series ______.
I would like to learn more about GOC Fund, Inc. (formerly The Manager's
Fund), Inc., U.S. Treasury Money Market Portfolio including charges and
expenses. I understand that my request for more information about this
fund in no way obligates me to participate in the reinvestment option,
and that this request form is not an offer to sell. Please send me more
information, including a copy of the current prospectus of GOC Fund,
Inc., U.S. Treasury Money Market Portfolio.
Date ______________________________, 199___
_________________________________ _________________________________
Registered Holder (Print) Registered Holder (Print)
_________________________________ _________________________________
Registered Holder top Signature Registered Holder Signature
(Two signatures if joint tenancy)
My Brokerage Firm's Name ___________________________________________________
Name _______________________________________________________________________
Address, City & State ______________________________________________________
Broker's Name __________________________ Broker's No. ______________________
MAIL TO
GOC FUND, INC.
8 SOUND SHORE DRIVE
GREENWICH, CONNECTICUT 06830
<PAGE>
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN PARTS A AND B OF THIS PROSPECTUS; AND 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 ANY OF ITS 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.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Title Page
- ----- ----
<S> <C>
PART A
Summary of Essential Information............ A-2
Independent Auditors' Report................ A-8
Statement of Condition...................... A-9
Portfolio................................... A-10
Underwriting Syndicate...................... A-11
PART B
The Trust................................... 1
Risk Factors................................ 14
Public Offering............................. 17
Rights of Certificateholders................ 20
Tax Status.................................. 21
Liquidity................................... 24
Total Reinvestment Plan..................... 26
Trust Administration........................ 26
Trust Expenses and Charges.................. 31
Exchange Privilege and Conversion Offer..... 33
Other Matters............................... 35
Description of Corporate Bond Ratings....... 36
</TABLE>
PARTS A AND B OF THIS PROSPECTUS DO NOT CONTAIN ALL OF THE INFORMATION SET
FORTH IN THE REGISTRATION STATEMENT AND EXHIBITS RELATING THERETO, FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION, WASHINGTON, D.C., UNDER THE SECURITIES
ACT OF 1933, AND THE INVESTMENT COMPANY ACT OF 1940, AND TO WHICH REFERENCE IS
MADE.
[LOGO] EQUITY SECURITIES TRUST SERIES 4
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
GABELLI VALUE FUND AND U.S. TREASURIES
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
EquiT's
(UNIT INVESTMENT TRUST)
PROSPECTUS
DATED: JANUARY 21, 1994
SPONSOR:
BEAR, STEARNS & CO. INC.
245 PARK AVENUE
NEW YORK, N.Y. 10167
212-272-2500
TRUSTEE:
UNITED STATES TRUST COMPANY
OF NEW YORK
770 BROADWAY
NEW YORK, N.Y. 10003
EVALUATOR:
KENNY S&P EVALUATION SERVICES
65 BROADWAY
NEW YORK, N.Y. 10006
<PAGE>
PART II -- ADDITIONAL INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM A -- BONDING ARRANGEMENTS
The employees of Bear, Stearns & Co. Inc. are covered under Brokers'
Blanket Policy, Standard Form 14, in the amount of $11,000,000 (plus
$196,000,000 excess coverage under Brokers' Blanket Policies, Standard Form 14
and Form B Consolidated). This policy has an aggregate annual coverage of $15
million.
ITEM B -- CONTENTS OF REGISTRATION STATEMENT
This Registration Statement on Form S-6 comprises the following papers and
documents:
The facing sheet on Form S-6.
The Cross-Reference Sheet.
The Prospectus consisting of pages.
Undertakings.
Signatures.
Written consents of the following persons:
Battle Fowler (included in Exhibit 3.1)
KPMG Peat Marwick
Kenny S&P Evaluation Services (included in Exhibit 5.1)
The following exhibits:
<TABLE>
<S> <C>
*99.1.1 --Reference Trust Agreement including certain amendments to the Trust Indenture and Agreement referred
to under Exhibit 99.1.1.1 below.
*99.1.1.1 --Form of Trust Indenture and Agreement.
99.1.3.4 --Certificate of Incorporation of Bear, Stearns & Co. Inc., as amended (filed as Exhibit 99.1.3.4 to
Form S-6 Registration Statement Nos. 33-50891 and 33-50901 of Insured Municipal Securities Trust, New
York Navigator Insured Series 15 and New Jersey Navigator Insured Series 11; and Municipal Securities
Trust, Multi-State Series 44, respectively, on December 9, 1993 and incorporated herein by
reference).
99.1.3.5 --By-Laws of Bear, Stearns & Co. Inc., as amended (filed as Exhibit 99.1.3.5 to Form S-6 Registration
Statement Nos. 33-50891 and 33-50901 of Insured Municipal Securities Trust, New York Navigator
Insured Series 15 and New Jersey Navigator Insured Series 11; and Municipal Securities Trust,
Multi-State Series 44, respectively, on December 9, 1993 and incorporated herein by reference).
99.1.4 --Form of Agreement Among Underwriters (filed as Exhibit 1.4 to Amendment No. 1 to Form S-6
Registration Statement No. 33-28384 of Insured Municipal Securities Trust, 47th Discount Series and
Series 20 on June 16, 1989 and incorporated herein by reference).
*99.2.1 --Form of Certificate.
*99.3.1 --Opinion of Battle Fowler as to the legality of the securities being registered, including their
consent to the filing thereof and to the use of their name under the headings 'Tax Status' and 'Legal
Opinions' in the Prospectus, and to the filing of their opinion regarding tax status of the Trust.
</TABLE>
- ------------------
* Filed herewith.
II-1
<PAGE>
<TABLE>
<S> <C>
*99.5.1 --Consent of the Evaluator.
99.6.0 --Power of Attorney of Bear, Stearns & Co. Inc., the Depositor, by its officers and a majority of its
Directors (filed as Exhibit 6.0 to Post-Effective Amendment No. 8 to Form S-6 Registration Statement
Nos. 2-92113, 2-92660, 2-93073, 2-93884 and 2-94545 of Municipal Securities Trust, Multi-State
Series 4, 5, 6, 7 and 8, respectively on October 30, 1992 and incorporated herein by reference).
</TABLE>
- ------------------
* Filed herewith.
II-2
<PAGE>
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT,
EQUITY SECURITIES TRUST, SERIES 4, EQUIT'S HAS DULY CAUSED THIS AMENDMENT NO. 1
TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
HEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW YORK AND STATE OF NEW YORK ON THE
21ST DAY OF JANUARY, 1994.
EQUITY SECURITIES TRUST, SERIES 4, EquiT's
(Registrant)
BEAR, STEARNS & CO. INC.
(Depositor)
By /s/ PETER J. DEMARCO
----------------------------------------
Peter J. DeMarco
(Authorized Signator)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING
PERSONS, WHO CONSTITUTE THE PRINCIPAL OFFICERS AND A MAJORITY OF THE DIRECTORS
OF BEAR, STEARNS & CO. INC., THE DEPOSITOR, IN THE CAPACITIES AND ON THE DATES
INDICATED.
<TABLE>
<CAPTION>
NAME TITLE DATE
- ---------------------- ------------------------------------------- ------------------------------------
<S> <C> <C>
ALAN C. GREENBERG Chairman of the Board, Chief Executive )
Officer, Director and Senior Managing )
Director )
)
JAMES E. CAYNE President, Director and Senior Managing ) January 21, 1994
Director )
)
ALVIN H. EINBENDER Chief Operating Officer, Executive Vice )
President, Director and Senior Managing )
Director )
)
JOHN C. SITES, JR. Executive Vice President, Director and )
Senior Managing Director )
)
MICHAEL L. TARNOPOL Executive Vice President, Director and )
Senior Managing Director ) By /s/ PETER J. DEMARCO
) --------------------------
VINCENT J. MATTONE Executive Vice President, Director and ) Peter J. DeMarco
Senior Managing Director ) Attorney-in-Fact*
)
ALAN D. SCHWARTZ Executive Vice President, Director and )
Senior Managing Director )
)
DOUGLAS P.C. NATION Director and Senior Managing Director )
)
WILLIAM J. MONTGORIS Chief Financial Officer, Senior Vice )
President--Finance and Senior Managing )
Director )
)
KENNETH L. EDLOW Secretary and Senior Managing Director )
)
MICHAEL MINIKES Treasurer and Senior Managing Director )
)
MICHAEL J. ABATEMARCO Controller, Assistant Secretary and )
Senior Managing Director )
)
MARK E. LEHMAN Senior Vice President--General Counsel )
and Senior Managing Director )
)
FREDERICK B. CASEY Assistant Treasurer and Senior Managing )
Director )
</TABLE>
- ------------
* An executed copy of the power of attorney was filed as Exhibit 6.0 to
Post-Effective Amendment No. 8 to Registration Statement Nos. 2-92113, 2-92660,
2-93073, 2-93884 and 2-94545 on October 30, 1992.
II-3
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
The Sponsor, Trustee, and Certificateholders
Equity Securities Trust, Series 4, EquiT's
We hereby consent to the use of our report dated January 21, 1994, included
herein and to the reference to our Firm under the heading 'Independent Auditors'
in the Prospectus.
KPMG PEAT MARWICK
New York, New York
January 21, 1994
II-4
<PAGE>
<PAGE>
EXHIBIT 99.1.1
EQUITY SECURITIES TRUST, SERIES 4
EquiT's
REFERENCE TRUST AGREEMENT
This Reference Trust Agreement (the "Agreement") dated
January 21, 1994 among Bear, Stearns & Co. Inc., as Depositor,
United States Trust Company of New York, as Trustee, and Kenny
S&P Evaluation Services, a division of Kenny Information Systems,
Inc., as Evaluator, sets forth certain provisions in full and
incorporates other provisions by reference to the document
entitled "Equity Securities Trust, Series 4, EquiT's, and
Subsequent Series, Trust Indenture and Agreement" dated
January 21, 1994 (the "Indenture") as amended in part by this
Agreement (collectively, such documents hereinafter called the
"Indenture and Agreement"). This Agreement and the Indenture, as
incorporated by reference herein, will constitute a single
instrument.
WITNESSETH THAT:
WHEREAS, this Agreement is a Reference Trust Agreement
as defined in Section 1.1 of the Indenture, and shall be amended
and modified from time to time by an Addendum as defined in
Section 1.1 (1) of the Indenture, such Addendum setting forth any
Additional Securities as defined in Section 1.1 (2) of the
Indenture;
WHEREAS, the Depositor wishes to deposit Securities,
and any Additional Securities as listed on any Addendums hereto,
into the Trust and issue Units, and Additional Units as the case
maybe, in respect thereof pursuant to Sections 2.1 and 2.6 of
the Indenture; and
NOW THEREFORE, in consideration of the premises and of
the mutual agreements herein contained, the Depositor and the
Trustee as follows:
Part I
STANDARD TERMS AND CONDITIONS OF TRUST
Section 1. Subject to the provisions of Part II
hereof, all the provisions contained in the Indenture 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 full in this
instrument.
<PAGE>
Section 2. This Reference Trust Agreement may be
amended and modified by Addendums, attached hereto, evidencing
the purchase of Additional Securities which have been deposited
to effect an increase over the number of Units initially
specified in Part II of this Reference Trust Agreement
("Additional Closings"). The Depositor and Trustee hereby agree
that their respective representations, agreements and
certifications contained in the Closing Memorandum dated
January 21, 1994, relating to the initial deposit of Securities
continue as if such representations, agreements and
certifications were made on the date of such Additional Closings
and with respect to the deposits made therewith, except as such
representations, agreements and certifications relate to their
respective By-Laws and as to which they each represent that their
has been no amendment affecting their respective abilities to
perform their respective obligations under the Indenture.
Part II
SPECIAL TERMS AND CONDITIONS OF TRUST
Section 1. The following special terms and conditions
are hereby agreed to:
(a) The Securities (including Contract Securities)
listed in Schedule A hereto have been deposited in the Trust
under this Agreement.
(b) The number of Units delivered by the Trustee in
exchange for the Securities referred to in Section 2.3 is
20,000.
(c) For the purposes of the definition of Unit in item
(22) of Section 1.1, the fractional undivided interest in and
ownership of the Trust initially is 1/20,000 as of the date
hereof.
(d) For the purposes of item (13) of Section 1.1 the
definition of the Fund shall mean the Gabelli Value Fund Inc.
(e) The term Record Date shall mean the first Business
Day following the first day of January of each year commencing on
January 3, 1995.
(f) The term Distribution Date shall mean the
fifteenth day of January of each year (or if such day is not a
Business Day, the next Business Day thereafter) commencing on
January 15, 1995.
(g) The First Settlement Date shall mean January 28,
1994.
-2-
<PAGE>
(h) For purposes of Section 4.4, the Evaluator shall
receive for each evaluation of the Treasury Obligations in they
Trust $5.00 for each valuation.
(i) For purposes of Section 6.1(g), the liquidation
amount is hereby specified to be 40% of the aggregate value of
the Securities at the completion of the Deposit Period.
(j) For purposes of Section 6.4, the Trustee shall be
paid per annum $.93 per 100 Units outstanding.
(k) The Termination Date shall be August 15, 2008 or
the disposition of the last Security in the Trust.
(l) The fiscal year for the Trust shall end on
December 31st of each year.
(m) For purposes of this Series of Equity Securities
Trust, the form of Certificate set forth in Indenture shall be
appropriately modified to reflect the title of this Series and
represent as set forth above.
IN WITNESS WHEREOF, the parties hereto have caused this
Reference Trust Agreement to be duly executed on the date first
above written.
[Signatures on separate pages]
-3-
<PAGE>
<PAGE>
BEAR, STEARNS & CO. INC.
Depositor
PETER J. DEMARCO
Managing Director
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
I, Teresa Scilla, a Notary Public in and for the said
County in the State aforesaid, do hereby certify that Peter J.
DeMarco personally known to me to be the same person whose name
is subscribed to the foregoing instrument and personally known to
me to be a Managing Director of Bear, Stearns & Co. Inc., a
corporation, appeared before me this day in person, and
acknowledged that he signed and delivered the said instrument as
his free and voluntary act as such Managing Director and as the
free and voluntary act of said Bear, Stearns & Co. Inc., for the
uses and purposes therein set forth.
GIVEN under my hand and notarial seal this 20th day of
January, 1994.
TERESA SCILLA
Notary Public
(SEAL)
My Commission expires:
TERESA SCILLA
NOTARY PUBLIC, State of New York
No.31-4752676
Qualified in the COunty of New York
Term Expires 8/31/94
<PAGE>
<PAGE>
UNITED STATES TRUST COMPANY
OF NEW YORK
Trustee
THOMAS CENTRONE
Vice President
(SEAL)
ATTEST:
ANDREW TURNER
Assistant Secretary
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On this 19 day of January, 1994, before me personally
came Thomas Centrone, to me known, who being by me duly sworn,
said that he is a Vice President of United States Trust Company
of New York, one of the corporations described in and which
executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to the said instrument is such
corporate seal; that it was so affixed by authority of the Board
of Directors of said corporation; and that he signed his name
thereto by like authority.
DOROTHY S. BOCHINO
Notary Public
(SEAL)
My Commission expires:
DOROTHY S. BOCHINO
NOTARY PUBLIC, State of New York
No. 01B04950864
Qualified in Richmond County
Commission Expires 5-8-95
<PAGE>
<PAGE>
KENNY INFORMATION SYSTEMS, INC.,
Evaluator
By: JAMES R. QUANDT
President
SEAL
ATTEST:
F.A. SHINAL
Senior Vice President
<PAGE>
<PAGE>
SCHEDULE A
SCHEDULE OF PORTFOLIO SECURITIES
EQUITY SECURITIES TRUST
SERIES 4
EQUIT'S
PORTFOLIO
AS OF JANUARY 21, 1994
AN ANNUAL PAYMENT SERIES
<TABLE>
<CAPTION>
PORTFOLIO NAME OF ISSUER AND TITLE OF SECURITIES COST OF SECURITIES
NO. REPRESENTED BY CONTRACTS TO PURCHASE(1) PERCENTAGE OF FUND TO TRUST(2)
- --------- ----------------------------------------------------------------- ------------------ ------------------
<S> <C> <C> <C>
1 $300,000 Zero Coupon U.S. Treasury Bonds Maturing August 15, 2008 49.68% $118,101
2 9,896 Shares of The Gabelli Value Fund Inc. ($12.09 per Fund
Share) 50.32% 119,643
------- -----------------
100.00% $237,744
------- -----------------
------- -----------------
</TABLE>
FOOTNOTES TO PORTFOLIO
(1) The Treasury Obligations have been purchased at a discount from the maturity
value because there is no stated interest income thereon (such securities
are often referred to as zero coupon securities). Over the life of the
Treasury Obligations such discount accrues and upon maturity thereof the
holder receives 100% of the Treasury Obligation maturity amount.
Shares in the Fund have been valued at their net asset value as of the
Evaluation Time on the day prior to the Date of Deposit. The Fund's
investment adviser is Gabelli Funds, Inc.
All Securities are represented by contracts to purchase such Securities.
Forward contracts to purchase the Securities were entered into from January
19, 1994 to January 20, 1994. All such contracts are expected to be settled
on or about the First Settlement Date of the Trust which is expected to be
January 28, 1994.
(2) Offering prices of Treasury Obligations are determined by the Evaluator on
the basis stated under 'Public Offering--Offering Price' herein. The
offering side evaluation is greater than the current bid side evaluation of
the Treasury Obligations, which is the basis on which Redemption Price per
Unit is determined (see 'Liquidity--Trustee Redemption' herein). The
aggregate value of the Treasury Obligations based on the bid side evaluation
of the Treasury Obligations on the day prior to the Date of Deposit was
$117,459 (which is $642 lower than the aggregate cost of the Treasury
Obligations to the Trust based on the offering side evaluation). The profit
to Sponsor on deposit totals $171.
<PAGE>
<PAGE>
EXHIBIT 99.1.1.1
EQUITY SECURITIES TRUST
SERIES 4
EquiT's
for all series formed on or subsequent to the effective
date specified below
__________
TRUST INDENTURE AND AGREEMENT
Between
BEAR, STEARNS & CO. INC.
As Depositor,
UNITED STATES TRUST COMPANY OF NEW YORK
As Trustee
and
KENNY S&P EVALUATION SERVICES
As Evaluator
__________
Dated: January 21, 1994
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TRUST INDENTURE AND AGREEMENT
EQUITY SECURITIES TRUST
SERIES 4
EquiT's
and Subsequent Series
CONTENTS
Article and Section Page
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 1 DEFINITIONS; CERTIFICATES. . . . . . . . . . . 2
Section 1.1. Definitions. . . . . . . . . . . . . . . . . . 2
Section 1.2. Form of Certificate. . . . . . . . . . . . . . 6
ARTICLE 2 DEPOSIT OF SECURITIES; DECLARATION OF TRUST;
FORM AND ISSUANCE OF CERTIFICATES . . . . . . 9
Section 2.1. Deposit of Securities. . . . . . . . . . . . . 9
Section 2.2. Declaration of Trust . . . . . . . . . . . . . 9
Section 2.3. Issue of Certificates. . . . . . . . . . . . . 9
Section 2.4. Form of Certificates . . . . . . . . . . . . . 9
Section 2.5. Certain Contracts Satisfactory . . . . . . . . 10
Section 2.6. Deposit of Additional Securities . . . . . . . 10
ARTICLE 3 ADMINISTRATION OF TRUST. . . . . . . . . . . . 11
Section 3.1. Initial Cost . . . . . . . . . . . . . . . . . 11
Section 3.2. Income Account . . . . . . . . . . . . . . . . 11
Section 3.3. Principal Account. . . . . . . . . . . . . . . 11
Section 3.4. Reserve Account. . . . . . . . . . . . . . . . 12
Section 3.5. Payments and Distributions . . . . . . . . . . 12
Section 3.6. Distribution Statements. . . . . . . . . . . . 15
Section 3.7. Substitute Securities. . . . . . . . . . . . . 16
Section 3.8. Sale of Securities:. . . . . . . . . . . . . . 17
Section 3.9. Counsel. . . . . . . . . . . . . . . . . . . . 18
Section 3.10. Notice and Sale by Trustee . . . . . . . . . . 18
Section 3.11. Refunding Securities . . . . . . . . . . . . . 18
Section 3.12. Notice of Actions. . . . . . . . . . . . . . . 19
Section 3.13. Notice of Change in Principal Account. . . . . 19
Section 3.14. Extraordinary Distributions. . . . . . . . . . 19
ARTICLE 4 EVALUATION OF SECURITIES . . . . . . . . . . . 20
Section 4.1. Evaluation of Evaluator. . . . . . . . . . . . 20
Section 4.2. Tax Reports. . . . . . . . . . . . . . . . . . 20
Section 4.3. Liability of Evaluator with respect to
Evaluations . . . . . . . . . . . . . . . . . 21
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Article and Section Page
Section 4.4. Evaluator's Compensation . . . . . . . . . . . 21
Section 4.5. Successor Evaluator. . . . . . . . . . . . . . 21
ARTICLE 5 TRUST EVALUATION, REDEMPTION, PURCHASE,
TRANSFER, INTERCHANGE OR REPLACEMENT OF
CERTIFICATES. . . . . . . . . . . . . . . . . 22
Section 5.1. Trust Evaluation . . . . . . . . . . . . . . . 22
Section 5.2. Redemptions by Trustee; Purchases by Depositor 24
Section 5.3. Transfer or Interchange of Certificates. . . . 26
Section 5.4. Certificates Mutilated, Destroyed, Stolen or
Lost. . . . . . . . . . . . . . . . . . . . . 27
ARTICLE 6 TRUSTEE; REMOVAL OF DEPOSITOR. . . . . . . . . 28
Section 6.1. General Definition of Trustee's Liabilities,
Rights and Duties; Removal of Depositor . . . 28
Section 6.2. Books, Records and Reports . . . . . . . . . . 31
Section 6.3. Indenture and List of Securities on File . . . 32
Section 6.4. Compensation . . . . . . . . . . . . . . . . . 32
Section 6.5. Removal and Resignation of the Trustee;
Successor . . . . . . . . . . . . . . . . . . 33
Section 6.6. Qualifications of Trustee. . . . . . . . . . . 35
ARTICLE 7 DEPOSITOR. . . . . . . . . . . . . . . . . . . 35
Section 7.1. Succession . . . . . . . . . . . . . . . . . . 35
Section 7.2. Resignation of Depositor . . . . . . . . . . . 35
Section 7.3. Liability of Depositor and Indemnification . . 36
ARTICLE 8 RIGHTS OF CERTIFICATEHOLDERS . . . . . . . . . 37
Section 8.1. Beneficiaries of Trust . . . . . . . . . . . . 37
Section 8.2. Rights, Terms and Conditions . . . . . . . . . 37
ARTICLE 9 ADDITIONAL COVENANTS; MISCELLANEOUS PROVISIONS 38
Section 9.1. Amendments . . . . . . . . . . . . . . . . . . 38
Section 9.2. Termination. . . . . . . . . . . . . . . . . . 39
Section 9.3. Construction . . . . . . . . . . . . . . . . . 41
Section 9.4. Registration of Certificates . . . . . . . . . 42
Section 9.5. Written Notice . . . . . . . . . . . . . . . . 42
Section 9.6. Severability . . . . . . . . . . . . . . . . . 42
Section 9.7. Dissolution of Depositor Not to Terminate. . . 42
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EQUITY SECURITIES TRUST
SERIES 4
EquiT's
AND
SUBSEQUENT SERIES
TRUST INDENTURE AND AGREEMENT
DATED JANUARY 21, 1994
This Trust Indenture and Agreement ("Indenture") dated
January 21, 1994, among Bear, Stearns & Co. Inc., as Depositor,
United States Trust Company of New York, as Trustee, and Kenny
Information Systems Inc., a division of Kenny Information
Systems, Inc., as Evaluator.
WITNESSETH THAT
In consideration of the premises and of the mutual
agreements herein contained, the Depositor, the Trustee and the
Evaluator agree as follows:
INTRODUCTION
The Depositor concurrently with the execution and
delivery hereof is establishing Equity Securities Trust,
Series 4, EquiT's (and subsequent series), wherein certain
securities consisting of Fund Shares and Treasury Obligations,
and contracts and funds for the purchase of such securities
(collectively, the "Securities") will be deposited by the
Depositor, to be held by the Trustee in trust for the use and
benefit of the registered holders of certificates of ownership
(the "Certificateholders") to be issued as hereinafter provided.
The parties hereto are entering into this Indenture for the
purpose of establishing certain of the terms, covenants and
conditions of Equity Securities Trust, Series 4, EquiT's, and of
each additional series of such Trust which may be established
from time to time hereafter. For Equity Securities Trust,
Series 4, EquiT's and each subsequent series of the Equity
Securities Trust (sometimes referred to herein as the "Trust")
(as to which this Indenture is to be applicable) the parties
hereto shall execute a separate Reference Trust Agreement
incorporating by reference this Indenture and effecting any
amendment, supplement or variation from or to such incorporation
by reference with respect to the related series and specifying
for that series (i) the Securities deposited in trust and the
number of Units delivered by the Trustee in exchange for the
Securities pursuant to Section 2.3; (ii) the initial fractional
undivided interest represented by each Unit; (iii) the first and
subsequent Record Dates; (iv) the first and subsequent
Distribution Dates; (v) the First Settlement Date; (vi) the
liquidation amount for purposes of Section 6.1(g); (vii) the
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Trustee's fee; (viii) the Evaluator's fee; (ix) the Termination
Date; and (x) any other change or addition contemplated or
permitted by this Indenture.
ARTICLE 1
DEFINITIONS; CERTIFICATES
Section 1.1. Definitions: Whenever used in this
Indenture the following words and phrases, unless the context
clearly indicates otherwise, shall have the following meanings:
(1) "Addendum to the Reference Trust Agreement" shall
mean the addendum which evidences the Additional Securities
deposited into the Trust and the number of Additional Units
created.
(2) "Additional Securities" shall mean such Securities
as are listed in Supplementary Schedules to Addendums to the
Reference Trust Agreement and which have been deposited to effect
an increase over the number of Units initially specified in the
Reference Trust Agreement.
(3) "Additional Units" shall mean such Units as are
issued in respect of Additional Securities.
(4) "Business Day" shall mean any day other than a
Saturday, Sunday, or other day on which the New York Stock
Exchange is closed for trading, a legal holiday in the City of
New York, or a day on which banking institutions are authorized
by law to close.
(5) "Certificate" shall mean any one of the
certificates substantially in the form hereinafter recited
executed by the Trustee and on behalf of the Depositor evidencing
ownership of an undivided fractional interest in the Trust.
(6) "Certificateholder" shall mean the registered
holder of any Certificate as recorded on the books of the
Trustee, his legal representatives and heirs and the successors
of any corporation, partnership or legal entity which is a
registered holder of any Certificate, and as such shall be deemed
a beneficiary of the Trust created by the Indenture to the extent
of his pro rata share thereof.
(7) "Contract Securities" shall mean Securities which
are to be acquired by the Trust pursuant to contracts, including
(i) Securities listed in Schedule A to the Reference Trust
Agreement and (ii) Securities which the Depositor has contracted
to purchase for the Trust pursuant to Sections 2.6 and 3.7.
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(8) "Depositor" shall mean Bear, Stearns & Co. Inc. or
its successor or any successor Depositor appointed as herein
provided.
(9) "Distribution Date" shall have the meaning
assigned to it in Part II of the Reference Trust Agreement.
(10) "Evaluator" shall mean Kenny S&P Evaluation
Services, a division of Kenny Information Systems, Inc., or any
corporation into which such firm may be merged or with which it
may be consolidated, or any corporation resulting from any merger
or consolidation to which such firm shall be a party, or any firm
succeeding to all or substantially all of the business of such
firm; or any successor evaluator as hereinafter provided for.
(11) "Failed Security" shall have the meaning assigned
to it in Section 3.7 hereof.
(12) "First Settlement Date" shall mean the date
specified in Part II of the Reference Trust Agreement.
(13) "Fund" shall mean the mutual fund set forth in
Part II of the Reference Trust Agreement.
(14) "Fund Shares" shall mean shares of the mutual
fund set forth in Part II of the Reference Trust Agreement
relating to such Trust or contracts and funds for the purchase
thereof.
(15) "Indenture" shall mean this Trust Indenture and
Agreement as originally executed or, if amended as herein
provided, as so amended.
(16) "Plan Units" shall mean fractional Units offered
by the Depositor pursuant to the reinvestment plans described in
the final prospectus of the Trust filed within the appropriate
registration forms under the Securities Act of 1933, and for
which Plan Units the Trustee is acting as Trustee.
(17) "Record Date" shall have the meaning assigned to
it in Part II of the Reference Trust Agreement.
(18) "Redemption Form" shall mean the form provided by
the Trustee at the request of holders of Plan Units for the
purposes of redeeming such Units, as such form may be reasonably
acceptable to the Depositor and the Trustee from time to time.
(19) "Reference Trust Agreement" shall mean the
indenture for the particular series of Equity Securities Trust
into which the terms of this Indenture are incorporated.
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(20) "Securities" shall mean the Fund Shares and
Treasury Obligations, including contracts and funds for the
purchase of such securities as are (i) deposited in irrevocable
trust and listed in the Schedule to the Reference Trust Agreement
and on any supplemental schedule thereto, and (ii) received in
exchange or substitution for any Securities pursuant to
Section 3.7 hereof, as may from time to time be acquired and
continue to be held as a part of the Trust to which such
Reference Trust Agreement relates.
(21) "Substitute Security" shall mean a Security
purchased by the Trustee pursuant to Section 3.7 hereof.
(22) "Termination Date" shall have the meaning
assigned to it in Part II of the Reference Trust Agreement.
(23) "Trust" shall mean the Trust created by this
Indenture, which shall consist of the Securities held pursuant
and subject to this Indenture together with all dividends
thereon, received but undistributed, any undistributed cash
realized from the sale, redemption, liquidation thereof, such
amounts as may be on deposit in the Reserve Accounts hereinafter
established and all other property and rights to which
Certificateholders may be entitled under the provisions of this
Indenture.
(24) "Treasury Obligations" shall mean the debt
obligations of the government of the United States or agencies
thereof or obligations of an entity the payment of which is
guaranteed by the full faith and credit of the United States
which have been stripped of their unmatured interest coupons or
such coupons or receipts or certificates evidencing such
obligations or coupons or contracts and funds for the purchase
thereof. The obligor or guarantor of each obligation is the
United States government. Such obligations may include
certificates that represent ownership of the payments that
comprise a United States government bond.
(25) "Trustee" shall mean United States Trust Company
of New York, or its successors or any successor Trustee appointed
as herein provided.
(26) "12b-1 Fee Rebate Amounts" shall mean, where
applicable, an amount of Rule 12b-1 fees received by the Trustee
with respect to Fund Shares held by the Trust in excess of the
Trustee Fee Reduction (as defined in Section 6.4 hereof), if any.
(27) "Unit" shall mean the fractional undivided
interest in and ownership of the Trust initially specified in
Part II of the Reference Trust Agreement, the denominator of
which shall be decreased by the number of any such Units redeemed
as provided in Section 5.2.
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(28) The words "herein," "hereby," "herewith,"
"hereof," "hereinafter," "hereunder," "hereinabove," "hereafter,"
"heretofore" and similar words or phrases of reference and
association shall refer to this Indenture in its entirety.
(29) Words importing singular number shall include the
plural number in each case and vice versa, and words importing
person shall include corporations and associations, as well as
natural persons.
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Section 1.2. Form of Certificate: The form of
Certificate evidencing ownership or fractional undivided
interests in each Trust shall be substantially as follows:
No. 1
CERTIFICATE OF OWNERSHIP
--evidencing--
A Fractional Undivided Interest
--in--
EQUITY SECURITIES TRUST
SERIES _____
EquiT's
_____________________
UNITS
_____________________
CUSIP
This is to certify that ______________________________ is the
owner and registered holder of this Certificate evidencing the
ownership of _______ unit(s) of fractional undivided interest in
Equity Securities Trust of the above Series (hereinafter called
the "Trust") created under the laws of the State of New York by a
Trust Indenture and Agreement as incorporated by a Reference
Trust Agreement applicable to the above Series (hereinafter
collectively called the "Indenture") among BEAR, STEARNS & CO.
INC. (hereinafter called the "Depositor"), UNITED STATES TRUST
COMPANY OF NEW YORK (hereinafter called the "Trustee") and KENNY
S&P EVALUATION SERVICES (hereinafter called the "Evaluator").
This Certificate is issued under and is subject to the terms,
provisions and conditions of the Indenture to which the holder of
this Certificate by virtue of the acceptance hereof assents and
is bound, a summary of which Indenture is contained in the
Prospectus relating to the Trust. The Depositor hereby grants
and conveys all of its right, title and interest in and to the
Trust to the extent of the fractional undivided interest
represented hereby to the registered holder of this Certificate
subject to and in pursuance of the Indenture. This Certificate
is transferable and interchangeable by the registered holder in
person or by his duly authorized attorney at the unit investment
trust office of the Trustee upon surrender of this Certificate
properly endorsed or accompanied by a written instrument of
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transfer in form satisfactory to the Trustee and payment of the
fees and expenses applicable hereto set forth herein.
This Certificate shall not become valid or binding for
any purpose until properly executed by the Trustee under the
Indenture.
IN WITNESS WHEREOF, Bear, Stearns & Co. Inc., as
Depositor, has caused this Certificate to be executed in
facsimile by a duly authorized officer and United States Trust
Company of New York, as Trustee, has caused this Certificate to
be executed in its corporate name by an authorized officer.
Date: BEAR, STEARNS & CO. INC., Depositor
_____________________________________
UNITED STATES TRUST COMPANY
OF NEW YORK, Trustee
By:__________________________________
Authorized Officer
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ASSIGNMENT
For Value Received ____________ hereby sells, assigns
and transfers unto _________________ the within Certificate and
does hereby irrevocably constitute and appoint ______________
attorney, to transfer the within Certificate on the books of the
Trustee, with full power of substitution in the premises.
Dated: ________________
Note: The signature(s) to this assignment must
correspond with the name(s) as written above upon the
face of this Certificate in every particular, without
alteration or enlargement or any change whatever.
_____________________
Signature Guaranteed
[end of certificate]
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ARTICLE 2
DEPOSIT OF SECURITIES; DECLARATION OF TRUST;
FORM AND ISSUANCE OF CERTIFICATES
Section 2.1. Deposit of Securities: The Depositor,
concurrently with the execution and delivery of a Reference Trust
Agreement, has deposited with the Trustee in trust the Securities
listed in Schedule A to the Reference Trust Agreement in bearer
form or registered in the name of the Trustee, or its nominee, or
duly endorsed in blank or accompanied by all necessary
instruments of assignment and transfer in proper form to be held,
managed and applied by the Trustee as herein provided. In the
event that the purchase of Securities represented by "when-
issued" and/or "regular way" contracts shall not be consummated
in accordance with said contracts, the Trustee shall credit to
the Principal Account pursuant to Section 3.3 hereof the cash or
cash equivalents (including such portion of any letter of credit
applicable to such contracts) deposited by the Depositor, for the
purpose of such purchase. Such monies, unless invested in
Substitute Securities in accordance with Section 3.7 hereof,
shall be distributed to Certificateholders pursuant to
Section 3.5 hereof on the Distribution Date following the failure
of consummation of such purchase or such earlier date as the
Trustee shall determine. The Depositor shall deliver the
Securities listed on said Schedule or Schedules to the Trustee
which were not actually delivered concurrently with the execution
and delivery of the Reference Trust Agreement within 90 days
after said execution and delivery or, if Section 3.7 applies,
within such shorter period as is specified in Section 3.7.
The Trustee is irrevocably authorized hereto to effect
registration of transfer of the Securities in fully registered
form in the name of the Trustee or its nominee.
Section 2.2. Declaration of Trust: The Trustee
declares that it holds and will hold the Trust as Trustee in
trust upon the terms herein set forth for the use and benefit of
all present and future Certificateholders.
Section 2.3. Issue of Certificates: The Trustee
hereby acknowledges receipt of the deposit referred to in
Section 2.1, and simultaneously with the receipt of said deposit,
has executed Certificates substantially in the form above recited
representing the ownership of the number of Units specified in
Part II of the Reference Trust Agreement.
Section 2.4. Form of Certificates: Each Certificate
referred to in Section 2.3 is, and each Certificate hereafter
issued shall be, in substantially the form hereinabove recited,
numbered serially for identification, in fully registered form,
transferable only on the books of the Trustee as herein provided,
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executed manually by an authorized officer of the Trustee and in
facsimile by an Associate or Managing Director of Bear, Stearns &
Co. Inc., on behalf of the Depositor.
Section 2.5. Certain Contracts Satisfactory: The
Depositor approves as satisfactory in form and substance the
contracts to be assumed by the Trustee with regard to any
Securities listed in Schedule A to the Reference Trust Agreement
and authorizes the Trustee on behalf of the Trust to assume such
contracts and otherwise to carry out the terms and provisions
thereof or to take other appropriate action in order to complete
the deposit of the Securities covered thereby into the Trust.
Section 2.6. Deposit of Additional Securities. From
time to time and in the discretion of the Depositor, the
Depositor may make deposits of Additional Securities duly
endorsed in blank or accompanied by all necessary instruments of
assignment and transfer in proper form (or contracts to purchase
Additional Securities and cash or an irrevocable letter of credit
in an amount necessary to consummate the purchase of any
Additional Securities pursuant to such contracts ("Additional
Contract Securities")) and Cash (as defined below), provided that
each deposit of Additional Securities and Cash, if any, shall
replicate, to the extent practicable, the proportional
relationship between the maturity amount of the Treasury
Obligations and the number of Fund Shares represented by each
Unit of the Trust immediately prior to each such deposit and
shall exactly replicate Cash; also provided that any additional
Treasury Obligations are substantially identical to those then
held in the Trust. For purposes of this paragraph, "Cash" means,
as to the Principal Account, cash or other property (other than
Securities) on hand in the Principal Account or receivable and to
be credited to the Principal Account as of the date of the
supplemental deposit (other than amounts to be distributed solely
to persons other than persons receiving the distribution from the
Principal Account as holders of Additional Units created by the
deposit), and, as to the Income Account, cash or other property
(other than Securities) received by the Trust as of the date of
the supplemental deposit or receivable by the Trust in respect of
dividends or other distributions declared but not received as of
the date of the supplemental deposit, reduced by the amount of
any cash or other property received or receivable on any Security
allocable to a distribution made or to be made in respect of the
Record Date occurring prior to the supplemental deposit. Each
deposit of Additional Securities shall be listed in a
Supplementary Schedule to an Addendum to the Reference Trust
Agreement stating the date of such deposit and the number of
Additional Units being issued therefor. The Trustee shall
acknowledge in such Addendum receipt of the deposit, and
simultaneously with the receipt of said deposit, reflect the
aggregate number of Additional Units specified in such Addendum
by recording such Units on its books. Such Additional Securities
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shall be held, administered and applied by the Trustee in the
same manner as herein provided for the Securities. The execution
by the Depositor in connection with the deposit of Additional
Securities of an Addendum to the Reference Trust Agreement shall
constitute the approval by the Depositor as satisfactory in form
and substance of the contracts to be entered into or assumed on
such Addendum and authorization to the Trustee on behalf of the
Trust to enter into or assume such contracts and otherwise to
carry out the terms and provisions thereof or to take other
appropriate action in order to complete the deposit of the
Additional Securities covered thereby into the Trust.
ARTICLE 3
ADMINISTRATION OF TRUST
Section 3.1. Initial Cost: The cost of the initial
preparation, printing and execution of the Certificates and this
Indenture, the initial fees of the Trustee and its counsel, and
other reasonable expenses in connection therewith, shall be paid
by the Depositor, provided, however, that the liability on the
part of the Depositor for such initial costs, fees and expenses
shall not include any fees, costs or other expenses incurred in
connection herewith after the execution of this Indenture and the
deposit referred to in Section 2.1.
Section 3.2. Income Account: The Trustee shall
collect the dividends or other like cash distributions on the
Securities in the Trust as such are paid, and any 12b-1 Fee
Rebate Amounts, and credit such amounts, as collected, to a
separate account to be known as the "Income Account."
Section 3.3. Principal Account: (a) The Securities
and all cash, including capital gains distributions paid on the
Fund Shares, other than amounts credited to the Income Account,
received by the Trustee in respect of the Securities shall be
credited to a separate account to be known as the "Principal
Account".
(b) Moneys and/or irrevocable letters of credit
required to purchase Contract Securities or deposited to secure
such purchases are hereby declared to be held specially by the
Trustee for such purchases and shall not be deemed to be part of
the Principal Account until (i) the Depositor fails to timely
purchase Contract Securities and have not given the Failed
Contract Notice (as defined in Section 3.7) at which time the
moneys and/or letters of credit attributable to the Contract
Securities not purchased by the Depositor shall be credited to
the Principal Account; or (ii) the Depositor has given the
Trustee the Failed Contract Notice at which time the moneys
and/or letters of credit attributable to failed contracts
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referred to in such Notice shall be credited to the Principal
Account; provided, however, that if the Depositor also notifies
the Trustee in the Failed Contract Notice that it has purchased
or entered into a contract to purchase Substitute Securities (as
defined in Section 3.7), the Trustee shall not credit such moneys
and/or letters of credit to the Principal Account unless the
Securities shall also have failed or are not delivered by the
Depositor within two business days after the settlement date of
such Securities, in which event the Trustee shall forthwith
credit such moneys and/or letters of credit to the Principal
Account. To the extent of moneys, and/or moneys drawn under a
letter of credit, deposited by the Depositor and then held by the
Trustee, the Trustee shall credit to the Principal Account, and
to the extent such moneys are insufficient the Depositor shall
deposit in the Principal Account, the difference, if any, between
the purchase price of the failed Contract Securities and the
purchase price of the Securities, together with any sales charge
and accrued dividends applicable to such difference and
distribute such moneys to Certificateholders pursuant to
Section 3.5.
Section 3.4. Reserve Account: From time to time the
Trustee shall withdraw from the cash on deposit in the Income
Account or the Principal Account such amounts as it, in its sole
discretion, shall deem requisite to establish a reserve for any
applicable taxes or other governmental charges that may be
payable out of or by the Trust. Such amounts so withdrawn shall
be credited to a separate account which shall be known as the
"Reserve Account". The Trustee shall not be required to
distribute to the Certificateholders any of the amounts in the
Reserve Account; provided, however, that if it shall, in its sole
discretion, determine that such amounts are no longer necessary
for payment of any applicable taxes or other governmental
charges, then it shall promptly deposit such amounts in the
appropriate account from which withdrawn or, if the Trust has
been terminated or is in the process of termination, the Trustee
shall distribute to each Certificateholder such holder's interest
in the Reserve Account in accordance with Section 9.2.
Section 3.5. Payments and Distributions:
Distributions to each Certificateholder from the Income Account
are computed as of the close of business on each Record Date for
the following Distribution Date. Distributions from the
Principal Account of the Trust (other than amounts representing
failed contracts, as discussed in Section 3.3.(b)) will be
computed as of each Record Date, and will be made to the
Certificateholders of the Trust on or shortly after the next
Distribution Date. Proceeds representing principal received
from the disposition of any of the Securities between a Record
Date and a Distribution Date which are not used for redemptions
of Units will be held in the Principal Account and not
distributed until the next succeeding Distribution Date. No
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distributions will be made to Certificate holders electing to
participate in the Total Reinvestment Plan. Persons who purchase
Units between a Record Date and a Distribution Date will receive
their first distribution on the next succeeding Distribution Date
after such purchase.
As of each Record Date the Trustee shall:
(a) deduct from the Income Account of the Trust, and,
to the extent funds are not sufficient therein, from the
Principal Account of the Trust, amounts necessary to pay the
expenses of the Trust, including registration charges, Blue Sky
fees, printing costs, attorneys' fees, auditing costs and other
miscellaneous out-of-pocket expenses, as certified by the
Depositor, incurred in keeping the registration of the
Certificates and the Trust on a current basis pursuant to
Section 9.4, provided, however, that no portion of such amount
shall be deducted or paid unless the payment thereof from the
Trust is at that time lawful;
(b) deduct from the Income Account or, to the extent
funds are not available in such Account, from the Principal
Account, and (i) pay to itself individually the amounts that it
is at the time entitled to receive pursuant to Section 6.4 or
pursuant to this Section 3.5; and (ii) reserve for payment any
expenses and disbursements not yet paid but attributable to the
period prior to such Record Date and subsequent to the preceding
Record Date or date of initial deposit, as applicable.
(c) deduct from the Income Account, or, to the extent
funds are not available in such Account, from the Principal
Account, and pay to the Evaluator the amount that it is at the
time entitled to receive pursuant to Section 4.4; and
(d) deduct from the Income Account, or, to the extent
funds are not available in such Account, from the Principal
Account, and pay an amount equal to the unpaid fees and expenses,
if any, of counsel pursuant to Section 3.9 as certified to it by
the Depositor.
The Trustee also may withdraw from said accounts such
amounts, if any, as it deems necessary to establish a reserve for
any applicable taxes or other governmental charges that may be
payable out of the Trust. Amounts so withdrawn shall not be
considered a part of such Trust's assets until such time as the
Trustee shall return all or any part of such amounts to the
appropriate accounts. In addition, the Trustee may withdraw from
the Income and Principal Accounts such amounts as may be
necessary to cover redemptions of Units by the Trustee.
The Principal Account shall be reimbursed for any
amounts permitted to be withdrawn from the Principal Account
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under this Indenture in order to satisfy obligations which,
pursuant to the terms hereof, are first to be paid out of the
Income Account to the extent funds are available therein, when
sufficient funds are next available in the Income Account after
giving effect to the payment from the Income Account of all
amounts otherwise required to be deducted therefrom at that time.
In the event the balance available in the Income and Principal
Accounts shall be insufficient for payment of the expenses and
fees payable on any Record Date, the Trustee shall have the power
to sell Securities in the manner provided in Section 6.4 to fund
such shortfall.
On each Distribution Date or within a reasonable period
of time thereafter, the Trustee shall distribute by mail to each
Certificateholder of record at the close of business on the
preceding Record Date, at the post office address appearing on
the registration books of the Trustee, such holder's pro rata
share of the distributable cash balance in the Income Account,
plus such holder's pro rata share of the distributable cash
balance of the Principal Account, as of the preceding Record
Date, in each case after deduction of the amounts of expenses and
fees chargeable to the appropriate Accounts on such Record Date.
The Trustee shall not be required to make a distribution from the
Principal Account unless the cash balance on deposit therein
available for distribution shall be sufficient to distribute at
least $1.00 per Unit in the case of Units initially offered at
approximately $1,000, or a proportionately lower amount in the
case of Units initially offered at less than $1,000 (e.g., .001
per Unit in the case of Units initially offered at approximately
$1.00).
The amounts to be so distributed to each Certificate-
holder of the Trust of record as of each Record Date shall be
that pro rata share of the cash balance as of such Record Date of
the Income and Principal Accounts of the Trust, computed as set
forth above, as shall be represented by the Units registered in
the name of such Certificateholder on the registration or other
record books of the Trustee.
In the computation of each such share, fractions of
less than one cent shall be omitted. After any such distribution
provided for above, any cash balance remaining in the Income
Account or the Principal Account shall be held in the same manner
as other amounts subsequently deposited in each of such Accounts,
respectively.
For the purpose of distribution as herein provided, the
holders of record on the registration books of the Trustee at the
close of business on each Record Date shall be conclusively
entitled to such distribution, and no liability shall attach to
the Trustee by reason of payment to any such registered Certifi-
cateholder of record. Nothing herein shall be construed to
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prevent the payment of amounts from the Income Account and the
Principal Account to individual Certificateholders by means of
one check, draft or other proper instrument, provided that the
appropriate statement of such distribution shall be furnished
therein as provided in Section 3.6 hereof.
Section 3.6. Distribution Statements: With each
distribution from the Income or Principal Accounts the Trustee
shall set forth, either in the instrument by means of which
payment of such distribution is made or in any accompanying
statement the amount being distributed from each such account
expressed as a dollar amount per Unit.
Within a reasonable period of time after the last
business day of each calendar year, the Trustee shall furnish to
each person who at any time during such calendar year was a
Certificateholder a statement setting forth, with respect to such
calendar year:
(A) as to the Income Account:
(1) the amount of dividends received on the
Securities,
(2) the amounts paid from the Income Account for
redemptions pursuant to Section 5.2,
(3) the deductions for applicable taxes and fees
and expenses of the Trustee, the Evaluator and counsel
pursuant to Section 3.9, and the annual audit fees referred
to in Section 6.2,
(4) the amount distributed from the Income
Account, identifying separately amounts distributed as
dividends and as other income,
(5) all 12b-1 Fee Rebate Amounts,
(6) any other amount credited to or deducted from
the Income Account, and
(7) the balance remaining after such
distributions and deductions, expressed both as a total
dollar amount and as a dollar amount per Unit outstanding on
the last business day of such calendar year;
(B) as to the Principal Account:
(1) The number of shares of each issue of
Securities sold or liquidated, and the aggregate net
proceeds received with respect to each issue, excluding any
portion thereof credited to the Income Account,
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(2) the amounts paid for the purchase of
Substitute Securities pursuant to Section 3.7, and from the
Principal Account for redemption pursuant to Section 5.2,
(3) the amounts credited to or deducted from the
Principal Account on account of distributions of capital
gains, if any, on Fund Shares,
(4) the deductions for payment of applicable
taxes and fees and expenses of the Trustee, the Evaluator
and counsel pursuant to Section 3.9, and the annual audit
fees referred to in Section 6.2,
(5) the amounts paid from the Principal Account
for redemption pursuant to Section 5.2,
(6) the amounts distributed from the Principal
Account, and
(7) the balance remaining after such
distributions and deductions, expressed both as a total
dollar amount and as a dollar amount per Unit outstanding on
the last business day of such calendar year; and
(C) the following information:
(1) a list of Securities held in the Trust as of
the last business day of such calendar year,
(2) the number of Units outstanding on the last
business day of such calendar year,
(3) the Unit Cash Value per Unit based on the
last Trust Evaluation made during such calendar year, and
(4) the amounts actually distributed to
Certificateholders during such calendar year from the
Interest and Principal Accounts, separately stated,
expressed both as total dollar amounts and as dollar amounts
per Unit outstanding on the Record Dates for such
distributions and the status of such distributions for
Federal income tax purposes.
Section 3.7. Substitute Securities: In the event that
any Contract Security is not delivered due to any occurrence, act
or event beyond the control of the Depositor and of the Trustee
(such a Contract Security being herein called a "Failed
Security"), the Depositor may instruct the Trustee to purchase
Substitute Securities which have been selected by the Depositor
having a cost not in excess of the cost of the Failed Securities.
To be eligible for inclusion in the Trust, the Substitute
Securities which the Depositor selects must: (a) be of the same
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type as that replaced (e.g., Treasury Obligations will be
substantially identical to every Treasury Obligation then held in
the Trust); (b) in the Depositor's judgment, be substantially
similar to the Failed Security, as the case may be, as respects
the investment characteristics which led the Depositor to select
the Failed Security for inclusion in the Trust; and (c) be
purchased prior to, simultaneously with, or no more than twenty
days after delivery of written notice to the Trustee of the
failed contract (the "Failed Contract Notice").
Any Substitute Securities received by the Trustee shall
be deposited hereunder and shall be subject to the terms and
conditions of this Indenture to the same extent as other
Securities deposited hereunder. No such deposit of Substitute
Securities shall be made after the earlier of (i) 90 days after
the date of execution and delivery of the applicable Reference
Trust Agreement or (ii) the first Distribution Date to occur
after the date of execution and delivery of the applicable
Reference Trust Agreement.
Whenever a Substitute Security is acquired by the
Depositor pursuant to the provisions of this Section 3.7, the
Trustee shall, within five days thereafter, mail to all Certifi-
cateholders notices of such acquisition, including an
identification of the Failed Security or the Section 3.8
Security, as the case may be, and the Substitute Security
acquired. The purchase price of a Substitute Security shall be
paid out of the funds in the Principal Account attributable to
the Failed Security which it replaces. The Trustee shall not be
liable or responsible in any way for depreciation or loss
incurred by reason of any purchase made pursuant to any such
instructions from the Depositor and in the absence of such
instructions the Trustee shall have no duty to purchase any
Substitute Securities under this Indenture. The Depositor shall
not be liable for any failure to instruct the Trustee to purchase
any Substitute Security or for errors of judgment in selecting
any Substitute Security.
Section 3.8. Sale of Securities: In order to maintain
the sound investment character of the Trust, the Depositor may
direct the Trustee to sell or liquidate Securities at such price
and time and in such manner as shall be determined by the
Depositor, provided that the Depositor has determined that any
one or more of the following conditions exist:
(i) default in payment of amounts due on any of the
Securities, including, but not limited to, declared dividends or
redemptions of Fund Shares;
(ii) institution of certain legal proceedings;
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(iii) default under certain documents materially and
adversely affecting future declaration or payment of amounts due
or expected;
(iv) decline in price that is a direct result of
serious adverse credit factors affecting the issuer of a Security
which, in the opinion of the Depositor, would make the retention
of the security detrimental to the Trust or the
Certificateholders.
Upon receipt of such direction from the Depositor, upon
which the Trustee shall rely, the Trustee shall proceed to sell
the specified Security in accordance with such direction. The
Trustee shall not be liable or responsible in any way for
depreciation or loss incurred by reason of any sale made pursuant
to any such direction or by reason of the failure of the
Depositor to give any such direction, and in the absence of such
direction the Trustee shall have no duty to sell any Securities
under this Section 3.8.
Section 3.9. Counsel: The Depositor may employ from
time to time as it may deem necessary a firm of attorneys for any
legal services that may be required in connection with the
disposition of Securities pursuant to Section 3.7. The fees and
expenses of such counsel shall be paid by the Trustee from the
Interest and Principal Accounts as provided for in Section 3.5(d)
hereof.
Section 3.10. Notice and Sale by Trustee: If at any
time there has been a failure by the issuer to pay a dividend
that is declared and payable on the Fund Shares, the Trustee
shall notify the Depositor thereof. If within thirty days after
such notification the Trustee has not received any instruction
from the Depositor to sell or to hold or to take any other action
in connection with such Fund Shares, the Trustee shall sell such
Fund Shares forthwith, and the Trustee shall not be liable or
responsible in any way for depreciation or loss incurred by
reason of such sale or by reason of any action or inaction in
accordance with such written instructions of the Depositor. The
Trustee shall promptly notify the Depositor of such action in
writing and shall set forth therein the Securities sold and the
proceeds received therefrom.
Section 3.11. Refunding Securities: In the event that
an offer by the issuer of any of the Securities or any other
party shall be made to issue new Securities, the Trustee shall
reject such offer. However, should any exchange or substitution
be effected notwithstanding such rejection or without an initial
offer, any Securities, cash and/or property received in exchange
shall be deposited hereunder and shall be promptly sold, if
securities or property, by the Trustee. The cash then remaining
shall be distributed to Certificateholders on the next
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Distribution Date in the manner set forth in Section 3.5
regarding distributions from the Principal Account. This section
shall apply, but its application shall not be limited, to public
tender offers, mergers, acquisitions, reorganizations and
recapitalizations.
Section 3.12. Notice of Actions: In the event that
the Trustee shall have been notified at any time of any action to
be taken or proposed to be taken by holders of any Securities
held by the Trust (including, but not limited to, the making of
any demand, direction, request, giving of any notice, consent or
waiver or the voting with respect to election of directors or any
amendment or supplement to any corporate resolution, agreement or
other instrument under or pursuant to which such Securities have
been issued) the Trustee shall promptly notify the Depositor and
shall thereupon take such action or refrain from taking any
action as the Depositor shall in writing direct; provided,
however, that the Trustee shall vote the Fund Shares as closely
as possible, in the same manner and the same general proportion,
as the shares of such Fund held by owners other than the Trust
are voted; and provided, further however, that if the Depositor
shall not within five business days of the giving of such notice
to the Depositor direct the Trustee to take or refrain from
taking any action, the Trustee shall take such action as it, in
its sole discretion, shall deem advisable. Neither the Depositor
nor the Trustee shall be liable to any person for any action or
failure to take action with respect to this section.
Section 3.13. Notice of Change in Principal Account:
The Trustee shall give prompt written notice to the Depositor of
all amounts credited to or withdrawn from the Principal Account
pursuant to any provisions of this Article III, and the balance
of such account after giving effect to such credit or withdrawal.
Section 3.14. Extraordinary Distributions: Any
property received by the Trustee after the initial date of
Deposit in a form other than cash or additional shares of the
Securities listed on Schedule A or of a Substitute Security,
shall be sold and the proceeds of sale credited to the Principal
Account of the Trust, as the Depositor may direct. In no event
shall the Trustee hold as part of the Trust, except temporarily
pending sale or distribution as described in the preceding
sentence, any property other than cash (including a letter of
credit) and the Securities described on Schedule A or a
Substitute Security.
The Securities and cash represented by a Unit shall be
uniform so that each Unit shall at all times represent property
identical to that represented by every other Unit. Securities
identical to those represented by a Unit and received as the
result of a nontaxable Fund Share dividend may be retained in the
Trust and the number of shares of such a Security represented by
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a Unit adjusted accordingly. All other non-cash distributions in
respect of any Securities held in the Trust shall be sold.
ARTICLE 4
EVALUATION OF SECURITIES
Section 4.1. Evaluation of Evaluator. (a) The
Evaluator shall determined separately, and shall promptly furnish
to the Trustee and the Depositor upon request, the value of each
issue of Securities (including Contract Securities)
("Evaluation") as of the Evaluation Time (as defined in Section
5.1) (i) on each Business Day during the period in which the
Units are being offered for sale to the public and (ii) on any
other day on which a Trust Evaluation is to be made pursuant to
Section 5.1 or which is requested by the Depositor or the
Trustee. As part of the Trust Evaluation, the Evaluator shall
determine separately and promptly furnish to the Trustee and the
Depositor upon request the Evaluation of each issue of Securities
initially deposited in the Trust on the initial date of deposit.
The Evaluator's determination of the offering prices of the
Securities on the initial date of deposit shall be included in
the Schedules attached to the Reference Trust Agreement.
(b) During the initial offering period, namely, from
the date of effectiveness of the Registration Statement under the
Securities Act of 1933 relating to the Units, to and including
the day which is designated in writing by the Depositor to the
Trustee and Evaluator as the conclusion of such period, such
Evaluation shall generally be based on the following methods or
any combination thereof whichever the Evaluator deems
appropriate: (a) on the basis of current offering prices for the
Treasury Obligations as obtained from investment dealers or
brokers who customarily deal in securities comparable to those
held by the Trust and, with respect to any Fund Shares deposited
in a Trust, the net asset value of such shares, (b) if offering
prices are not available for the Treasury Obligations, on the
basis of offering price for comparable securities, (c) by
determining the valuation of the Treasury Obligations on the
offering side of the market by appraisal, or (d) by any
combination of the above.
(c) After the initial offering period and both during
and after the initial offering period for purposes of the Trust
Evaluations required by Section 5.1, Evaluation of the Securities
shall be made in the manner described in 4.01(b), on the basis of
current bid prices for the Treasury Obligations and the net asset
value of the Fund Shares.
Section 4.2. Tax Reports: For the purpose of
permitting Certificateholders to satisfy any reporting
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requirements of applicable Federal or State tax law, the
Evaluator shall make available to the Trustee and the Trustee
shall transmit to any Certificateholder upon written request any
determinations made by the Evaluator pursuant to Section 4.1.
Section 4.3. Liability of Evaluator with respect to
Evaluations: The Trustee, the Depositor and the Certificate-
holders may rely on any evaluation furnished by the Evaluator and
shall have no responsibility for the accuracy thereof. The
determinations made by the Evaluator hereunder shall be made in
good faith upon the basis of, and shall have no liability for
errors in, the information reasonably available to it. The
Evaluator shall be under no liability to the Trustee, the
Depositor or the Certificateholders for errors in judgment or any
action taken in good faith, provided, however, that this
provision shall not protect the Evaluator against any liability
to which it would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of
its duties or by reason of its reckless disregard of its
obligations and duties hereunder.
Section 4.4. Evaluator's Compensation: As
compensation for its services hereunder, the Evaluator, with
respect to each series of the Trust, shall receive against a
statement therefor submitted to the Trustee annually on or before
each Distribution Date from the Income Account to the extent
funds are available and thereafter from the Principal Account the
amounts set forth in part II of the Reference Trust Agreement for
such series, provided, however, that if at any time the fee of
the Trustee shall have been increased pursuant to Section 6.4,
the compensation of the Evaluator hereunder shall at the same
time be ratably increased.
Section 4.5. Successor Evaluator: (a) The Evaluator
may resign and be discharged hereunder, by executing an
instrument in writing resigning as Evaluator and filing the same
with the Depositor and the Trustee, not less than 60 days before
the date specified in such instrument when, subject to Section
4.5(e), such resignation is to take effect. Upon receiving such
notice of resignation, the Depositor and the Trustee shall use
their best efforts to appoint a successor evaluator having
qualifications and at a rate of compensation satisfactory to the
Depositor and the Trustee. Such appointment shall be made by
written instrument executed by the Depositor and the Trustee, in
duplicate, one copy of which shall be delivered to the resigning
Evaluator and one copy to the successor evaluator. The Depositor
may remove the Evaluator at any time upon 30 days' written notice
and appoint a successor evaluator having qualifications and at a
rate of compensation satisfactory to the Depositor and the
Trustee. Such appointment shall be made by written instrument
executed by the Depositor, in duplicate, one copy of which shall
be delivered by the Evaluator so removed and one copy to the
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successor evaluator. Notice of such resignation or removal and
appointment of a successor evaluator shall be mailed by the
Trustee to each Certificateholder.
(b) Any successor evaluator appointed hereunder shall
execute, acknowledge and deliver to the Depositor and the Trustee
an instrument accepting such appointment hereunder, and such
successor evaluator without any further act, deed or conveyance
shall become vested with all the rights, powers, duties and
obligations of its predecessor hereunder with like effect as if
originally named Evaluator herein and shall be bound by all the
terms and conditions of this Indenture.
(c) In case at any time the Evaluator shall resign
and no successor evaluator shall have been appointed and have
accepted appointment within 30 days after notice of resignation
has been received by the Depositor and the Trustee, the Evaluator
may forthwith apply to a court of competent jurisdiction for the
appointment of a successor evaluator. Such court may thereupon,
after such notice, if any, as it may deem proper and prescribe,
appoint a successor evaluator.
(d) Any corporation into which the Evaluator hereunder
may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which
the Evaluator hereunder shall be a party, or any corporation
succeeding to all or substantially all of the business of the
Evaluator hereunder, shall be the successor evaluator under this
Indenture without the execution or filing of any paper,
instrument or further act to be done on the part of the parties
hereto, anything herein, or in any agreement relating to such
merger or consolidation, by which the Evaluator may seek to
retain certain powers, rights and privileges theretofore
obtaining for any period of time following such merger or
consolidation, to the contrary notwithstanding.
(e) Any resignation or removal of the Evaluator and
appointment of a successor evaluator pursuant to this Section
shall become effective upon acceptance of appointment by the
successor evaluator as provided in subsection (b) hereof.
ARTICLE 5
TRUST EVALUATION, REDEMPTION, PURCHASE, TRANSFER,
INTERCHANGE OR REPLACEMENT OF CERTIFICATES
Section 5.1. Trust Evaluation: The Trustee shall make
an evaluation of the Trust as of the close of trading on the New
York Stock Exchange (4:00 p.m. Eastern Time) (sometimes referred
to herein as the "Evaluation Time") (i) on the last Business Day
of each of the months of June and December, (ii) on the day on
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which any unit of the Trust is tendered for redemption (unless
tender is made after the Evaluation Time on such day, in which
case Tender shall be deemed to have been made on the next day
subsequent thereto on which the New York Stock Exchange is open
for trading), and (iii) on any other day desired by the Trustee
or requested by the Depositor. Such evaluations shall take into
account and itemize separately (a)(1) the cash on hand in the
Trust (other than monies on deposit in the Reserve Account, funds
deposited on the date hereof by the Depositor for the purchase of
Securities and not theretofore credited to the Principal Account
pursuant to Section 3.3 and funds in the Principal Account with
respect to which contracts for the purchase of the Substitute
Securities have been entered into pursuant to Section 3.7
hereof), including dividends receivable on Fund Shares trading ex
dividend, (a)(2) the value of each issue of the Securities in the
Trust as determined by the Trustee pursuant to Section 4.1, and
(a)(3) all other assets of the Trust. For purposes of such
calculation, 12b-1 Fee Rebate Amounts shall be deemed an asset of
the Trust only upon receipt thereof by the Trust. In calculating
the amount of accrued fees and expenses of the Trust, the Trustee
is authorized to estimate the amount of the Trustee Fee Reduction
(as provided for in Section 6.4) and such estimate shall be
conclusive on all persons interested in the Trust. For each such
evaluation there shall be deducted from the sum of the above
(b)(1) amounts representing any applicable taxes or other
governmental charges payable out of the Trust and for which no
deductions shall have previously been made for the purpose of
addition to the Reserve Account, (b)(2) amounts representing
accrued fees of the Trustee and expenses of the Trust including
but not limited to unpaid fees of the Trustee and expenses of the
Trust including but not limited to unpaid fees of the Trustee and
expenses of the Trust (including legal and auditing expenses),
accrued fees and expenses of the Evaluator and the Depositor and
their respective successors, if any, and (b)(3) cash held for
distribution to Certificateholders of record as of a date on or
prior to the evaluation then being made. The value of the pro
rata share of each Unit of the Trust determined on the basis of
any such evaluation shall be referred to herein as the "Unit
Value."
The sum of (a)(1) and (a)(3) reduced by the sum of
(b)(1) and (b)(2) and (b)(3) shall be referred to herein as the
"Unit Cash Value".
The Trustee shall promptly advise the Depositor of each
determination of Unit Value made by it as above provided, and, in
addition, upon each valuation by the Evaluator under Section 4.1
other than those involved in such calculations of Unit Value, the
Trustee shall promptly furnish to Depositor, for purposes of
assisting it in maintaining a market in the Units, with such
information regarding the Principal, Income and Reserve Accounts
as the Depositor may reasonably request.
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Section 5.2. Redemptions by Trustee; Purchases by
Depositor: Any Certificate tendered for redemption by a
Certificateholder or his duly authorized attorney to the Trustee
at its unit investment trust office, or any Plan Unit tendered to
the Trustee for redemption by the registered holder thereof
pursuant to the Redemption Form, shall be redeemed by the Trustee
on the seventh calendar day following the day on which tender for
redemption is made, provided that if such day of redemption is
not a business day, then such Certificate or Plan Unit shall be
redeemed on the first business day prior thereto (such seventh
calendar day or first business day prior thereto being herein
called the "Redemption Date"). Subject to payment by such
Certificateholder of any tax or other governmental charges which
may be imposed thereon, such redemption is to be made by payment
on the Redemption Date of cash equivalent to the Unit Cash Value
per Unit or Plan Unit determined by the Trustee as of the
Evaluation Time on the date of tender, multiplied by the number
of Units represented by such Certificate or Redemption Form
(herein called the "Redemption Price"). Certificates or
Redemption Forms received for redemption by the Trustee on any
day after the Evaluation Time will be held by the Trustee until
the next day on which the New York Stock Exchange is open for
trading and will be deemed to have been tendered on such day for
redemption at the Redemption Price computed on that day.
The Trustee may in its discretion, and shall when so
directed by the Depositor in writing, suspend the right of
redemption or postpone the date of payment of the Redemption
Price for more than seven calendar days following the day on
which tender for redemption is made:
(1) for any period during which the New York Stock
Exchange is closed other than customary weekend and holiday
closings or during which trading on the New York Stock
Exchange is restricted;
(2) for any period during which an emergency exists as
a result of which disposal by the Trust of the Securities is
not reasonably practicable or it is not reasonably
practicable fairly to determine in accordance herewith the
value of the Securities; or
(3) for such other periods as the Securities and
Exchange Commission may by order permit,
and the Trustee shall not be liable to any person or in any way
for any loss or damage which may result from any such suspension
or postponement.
Not later than the close of business on the day of
tender of a Certificate or Redemption Form for redemption by a
Certificateholder other than the Depositor, the Trustee shall
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notify the Depositor of such tender. The Depositor shall have
the right to purchase such Certificate or Plan Unit tendered by
such Redemption Form by notifying the Trustee of its election to
make such purchase as soon as practicable thereafter, but in no
event subsequent to the close of business on the second business
day after the day on which such Certificate or Redemption Form
was tendered for redemption. Such purchase shall be made by
payment for such Certificate or Plan Unit by the Depositor to the
Certificateholder or Plan Unit holder not later than the close of
business on the Redemption Date of an amount equal to the
Redemption Price which would otherwise be payable by the Trustee
to such Certificateholder or Plan Unit holder.
Any Certificate or Plan Unit so purchased by the
Depositor may, at the option of the Depositor, be tendered to the
Trustee for redemption at the corporate trust office of the
Trustee in the manner provided in the first paragraph of this
Section 5.2.
If the Depositor does not elect to purchase any
Certificate or Plan Unit tendered to the Trustee for redemption,
or if a Certificate or Plan Unit is being tendered by the
Depositor for redemption, that portion of the Redemption Price
which represents dividends shall be withdrawn from the Income
Account to the extent funds are available. The balance paid on
any redemption, including accrued dividends, if any, shall be
withdrawn from the Principal Account to the extent that funds are
available for such purpose. If such available balance shall be
insufficient, the Trustee shall sell Securities in the manner
provided below. In the event that funds are withdrawn from the
Principal Account or Securities are sold for payment of any
portion of the Redemption Price representing accrued dividends,
the Principal Account shall be reimbursed when sufficient funds
are next available in the Income Account for such funds so
applied.
The Depositor shall designate Securities to be sold for
the purpose of redemption of Certificates or Plan Units tendered
for redemption and not purchased for the Depositor, and for
payment of expenses hereunder, provided that if the Depositor
shall fail so to designate, the Trustee shall sell Fund Shares
and Treasury Obligations in such amounts as will result in the
remaining Fund Shares and Treasury Obligations held in the Trust
approximating, as closely as possible, the proportionate ratio of
such Fund Shares and Treasury Obligations on the initial date of
deposit referred to in Section 2.1, provided, however, that
Treasury Obligations shall not be sold to the extent that the
maturity value, per Unit, of the Treasury Obligations remaining
after such sale would be less than the maturity value, per Unit,
of the Treasury Obligations on the initial date of deposit. The
net proceeds of any sales of Securities from such list
representing principal shall be credited to the Principal Account
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and the proceeds of such sales representing accrued interest
shall be credited to the Income Account.
Neither the Trustee nor the Depositor shall be liable
or responsible in any way for depreciation or loss incurred by
reason of any sale of Securities made pursuant to this
Section 5.2.
Certificates evidencing Units redeemed pursuant to this
Section 5.2 shall be canceled by the Trustee and the Units
evidenced by such Certificates or Plan Units tendered by
Redemption Forms shall be terminated by such redemptions. In the
event that a Certificate shall be tendered representing a number
of Units greater than those requested to be redeemed by the
Certificateholder, the Trustee shall issue to each Certificate-
holder, upon payment of any tax or charges of the character
referred to in the second paragraph to Section 5.3, a new
Certificate evidencing the Units representing the balance of the
Certificate so tendered.
Notwithstanding the foregoing provisions of this
Section 5.2, the Trustee is hereby irrevocably authorized in its
discretion, in the event that the Depositor do not elect to
purchase any Certificate or Plan Unit tendered to the Trustee for
redemption, or in the event that a Certificate or Plan Unit is
being tendered by the Depositor for redemption, in lieu of
redeeming Units or Plan Units tendered for redemption, to sell
such Units or Plan Units in the over-the-counter market or by
private sale for the account of tendering Unit or Plan Unit
holders at prices which will return to the Unit or Plan Unit
holders amounts in cash, net after deducting brokerage
commissions, transfer taxes and other charges, equal to or in
excess of the Redemption Prices which such Unit or Plan Unit
holders would otherwise be entitled to receive on redemption
pursuant to this Section 5.2. The Trustee shall pay to the Unit
or Plan Unit holders the net proceeds of any such sale on the day
they would otherwise be entitled to receive payment of the
Redemption Price hereunder.
Section 5.3. Transfer or Interchange of Certificates:
A Certificate may be transferred by the registered holder thereof
by presentation and surrender of such Certificate at the unit
investment trust office of the Trustee properly endorsed or
accompanied by a written instrument or instruments of transfer in
form satisfactory to the Trustee and executed by the Certificate-
holder or his authorized attorney, whereupon a new registered
Certificate or Certificates for the same number of Units executed
by the Trustee and the Depositor will be issued in exchange and
substitution therefor. Certificates issued pursuant to this
Indenture are interchangeable for one or more other Certificates
in an equal aggregate number of Units and all Certificates issued
shall be issued in denominations of one Unit or any multiple
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thereof as may be requested by the Certificateholder. The
Trustee may deem and treat the person in whose name any
Certificate shall be registered upon the books of the Trustee as
the owner of such Certificate for all purposes hereunder and the
Trustee shall not be affected by any notice to the contrary, nor
be liable to any person or in any way for so deeming or treating
the person in whose name any Certificate shall be so registered.
A sum sufficient to pay any tax or other governmental
charge that may be imposed in connection with any such transfer
or interchange shall be paid by the Certificateholder to the
Trustee. The Trustee may require a Certificateholder to pay
$2.00 for each new Certificate issued on any such transfer or
interchange.
All Certificates canceled pursuant to this Indenture
shall be disposed of by the Trustee without liability on its
part.
Section 5.4. Certificates Mutilated, Destroyed, Stolen
or Lost: In case any Certificate shall become mutilated or be
destroyed, stolen or lost, the Trustee shall execute and deliver
a new Certificate in exchange and substitution therefor upon the
holder's furnishing the Trustee with proper identification and
indemnity satisfactory to the Trustee, and complying with such
other reasonable regulations and conditions as the Trustee may
prescribe and paying such expenses as the Trustee may incur. Any
mutilated Certificate shall be duly surrendered and canceled
before any new Certificate shall be issued in exchange and
substitution therefor. Upon the issuance of any new Certificate
a sum sufficient to pay any tax or other governmental charge and
the fees and expenses of the Trustee may be imposed. Any such
new Certificate issued pursuant to this Section shall constitute
complete and indefeasible evidence of ownership in the Trust, as
if originally issued, whether or not the lost, stolen or
destroyed Certificate shall be found at any time.
In the event the Trust has terminated or is in the
process of termination, the Trustee may, instead of issuing a new
Certificate in exchange and substitution for any Certificate
which shall have become mutilated or shall have been destroyed,
stolen or lost, make the distributions in respect of such
mutilated, destroyed, stolen or lost Certificate (without
surrender thereof except in the case of a mutilated Certificate)
as provided in Section 9.2 hereof if the Trustee is furnished
with such security or indemnity as it may require to save it
harmless, and in the cause of destruction, loss or theft of a
Certificate, evidence to the satisfaction of the Trustee of the
destruction, loss or theft of such Certificate and of the
ownership thereof.
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ARTICLE 6
TRUSTEE; REMOVAL OF DEPOSITOR
Section 6.1. General Definition of Trustee's
Liabilities, Rights and Duties; Removal of Depositor: In
addition to and notwithstanding the other duties, rights,
privileges and liabilities of the Trustee otherwise set forth
herein, the liabilities of the Trustee are further defined as
follows:
(a) All moneys deposited with or received by the
Trustee hereunder shall be held by the Trustee without interest
in trust as part of the Trust or the Reserve Account until
required to be disbursed in accordance with the provisions of
this Indenture and such moneys will be segregated by separate
recordation on the trust ledgers of the Trustee so long as such
practice preserves a valid preference under applicable law, or if
such preference is not so preserved the Trustee shall handle such
moneys in such other manner as shall constitute the segregation
and holding thereof in trust within the meaning of the Investment
Company Act of 1940.
(b) The Trustee shall be under no liability for any
action taken in good faith on any appraisal, paper, order, list,
demand, request, consent, affidavit, notice, opinion, direction,
evaluation, endorsement, assignment, resolution, draft or other
document, whether or not of the same kind, prima facie properly
executed, or for the disposition of moneys, Securities or
Certificates pursuant to this Indenture, or in respect of any
evaluation which the Trustee is required to make or is required
or permitted to have made by others under this Indenture or
otherwise except by reason of its gross negligence, lack of good
faith or willful misconduct. The Trust shall pay and hold the
Trustee harmless from and against any loss, liability or expense
incurred in acting as Trustee of the Trust other than by reason
of willful misfeasance, bad faith or gross negligence in the
performance of its duties or by reason of its reckless disregard
of its obligations and duties hereunder, including the costs and
expenses of the defense against any claim or liability in the
premises; provided, however, that the Trustee shall not in any
event be liable or responsible for any evaluation made by the
Evaluator. The Trustee may construe any of the provisions of
this Indenture, insofar as the same may appear to be ambiguous or
inconsistent with any other provisions hereof, and any
construction of any such provisions hereof by the Trustee in good
faith shall be binding upon the parties hereto. The Trustee
shall in no event be deemed to have assumed or incurred any
liability, duty or obligation to any Certificateholder or the
Depositor, other than as expressly provided for herein.
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(c) The Trustee shall not be responsible for or in
respect of the recitals herein, the validity or sufficiency of
this Indenture or for the due execution hereof by the Depositor,
or for the form, character, genuineness, sufficiency, value or
validity of any Securities (except that the Trustee shall be
responsible for the exercise of due care in determining the
genuineness of Securities delivered to it pursuant to contracts
for the purchase of such Securities) or for or in respect of the
validity or sufficiency of the Certificates or of the due
execution thereof by the Depositor, and the Trustee shall in no
event assume or incur any liability, duty or obligation to any
Certificateholder or the Depositor other than as expressly
provided for herein. The Trustee shall not be responsible for or
in respect of the validity of any signature by or on behalf of
the Depositor.
(d) The Trustee shall not be under any obligation to
appear in, prosecute or defend any action, which in its opinion
may involve it in expense or liability, unless as often as
required, it shall be furnished with reasonable security and
indemnity against such expense or liability as it may require,
and any pecuniary cost of the Trustee from such actions shall be
deductible from and a charge against the Income and Principal
Accounts. The Trustee shall in its discretion undertake such
action as it may deem necessary at any and all times to protect
the Trust and the rights and interests of the Certificateholders
pursuant to the terms of this Indenture, provided, however, that
the expenses and costs of such actions, undertakings or
proceedings shall be reimbursable to the Trustee from the Income
and Principal Accounts, and the payment of such costs and
expenses shall be secured by a lien on the Trust prior to the
interests of the Certificateholders.
(e) The Trustee may employ agents, attorneys,
accountants and auditors and shall not be answerable for the
default or misconduct of any such agents, attorneys, accountants
or auditors if such agents, attorneys, accountants or auditors
shall have been selected with reasonable care; provided, however,
that if the Trustee chooses to employ the Depository Trust
Company in connection with the storage and handling of, and the
furnishing of administrative services in connection with the
Securities, the Trustee will be answerable for any default or
misconduct of the Depository Trust Company and its employees and
agents as fully and to the same extent as if such default or
misconduct had been committed or occasioned by the Trustee. The
Trustee shall be fully protected in respect of any action under
this Agreement taken, or suffered, in good faith by the Trustee,
in accordance with the opinion of its counsel, which may be
counsel to the Depositor acceptable to the Trustee. The account
of the Trust shall be audited not less frequently than annually
by independent certified public accountants designated from time
to time by the Depositor, and the reports of such accountants
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shall be furnished by the Trustee to Certificateholders upon
request. The fees and expenses charged by such agents,
attorneys, accountants or auditors shall constitute an expense of
the Trustee reimbursable from the Income and Principal Accounts
as set forth in Sections 3.5 and 6.4 hereof.
(f) Other than as provided in Article 7 hereunder, if
at any time the Depositor shall resign or fail to undertake or
perform or become incapable of undertaking or performing any of
the duties which by the terms of this Indenture are required by
them to be undertaken or performed and no express provision is
made for action to be taken by the Trustee in such event, or the
Depositor shall be adjudged bankrupt or insolvent, or a receiver
of such Depositor or of its property shall be appointed, or any
public officer shall take charge or control of such Depositor or
of its property or affairs for the purpose of rehabilitation,
conservation or liquidation, then in any such case, the Trustee
may do any one or more of the following: (1) appoint a successor
Depositor (which may be the Trustee) who shall act hereunder in
all respects in place of the Depositor, who shall be compensated
pursuant to Section 3.5, at rates deemed by the Trustee to be
reasonable under the circumstances, by deduction from the Income
Account or from the Principal Account, but no such deduction
shall be made exceeding such reasonable amount as the Securities
and Exchange Commission may prescribe in accordance with
Section 26(a)(2)(C) of the Investment Company Act of 1940; or
(2) terminate this Indenture and the Trust created hereby and
liquidate the Trust, all in the manner provided in Section 9.2.
(g) If the value of the Trust as shown by any
evaluation by the Trustee pursuant to Section 5.1 hereof shall be
less than the liquidation amount specified in Part II of the
Reference Trust Agreement, the Trustee may in its discretion, and
shall, when so directed by the Depositor, terminate this
Indenture and the Trust created hereby and liquidate the Trust,
all in the manner provided in Section 9.2.
(h) In no event shall the Trustee be liable for any
taxes or other governmental charges imposed upon or in respect of
the Securities or upon the dividends thereon or upon it as
Trustee hereunder or upon or in respect of the Trust which it may
be required to pay under any present or future law of the United
States of America or any other taxing authority having
jurisdiction in the premises. For all such taxes and charges and
for any expenses, including counsel fees, which the Trustee may
sustain or incur with respect to such taxes or charges, the
Trustee shall be reimbursed and indemnified out of the Income and
Principal Accounts of the Trust, and the payment of such amounts
so paid by the Trustee shall be secured by a lien on the Trust
prior to the interests of the Certificateholders.
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(i) The Trustee, except by reason of its gross
negligence, lack of good faith, reckless disregard of its
obligations hereunder or willful misconduct, shall not be liable
for any action taken or suffered to be taken by it in good faith
and believed by it to be authorized or within the discretion or
rights or powers conferred upon it by this Indenture.
(j) Notwithstanding anything in this Indenture to the
contrary, the Trustee is authorized and empowered to enter into
any safekeeping arrangement or arrangements it deems necessary or
appropriate for holding the Securities then owned by the Trust
and the Trustee is authorized and empowered in its sole right to
amend, supplement or terminate any safekeeping arrangement or
arrangements made under this provision. In addition, the Trustee
is authorized and empowered, at the request and discretion of the
Depositor, to execute and file on behalf of the Trust any and all
documents, in connection with consents to service of process,
required to be filed under the securities laws of the various
States in order to permit the sale of Units of the Trust in such
States by the Depositor.
Section 6.2. Books, Records and Reports: The Trustee
shall keep proper books of record and account of all the
transactions under this Indenture at its unit investment trust
office including a record of the name and address of, and the
Certificates issued by the Trust and held by, every Certificate-
holder, and such books and records shall be open to inspection by
any Certificateholder at all reasonable times during the usual
business hours, and such books and records shall be made
available to the Depositor upon the request of the Depositor
including, but not limited to, a record of the name and address
of, and the Certificates issued by the Trust and held by, every
Certificateholder.
The Trustee shall cause audited statements as to the
assets and income of the Trust to be prepared on an annual basis
by independent public accountants selected by the Depositor,
provided, however, that if the Depositor is then making a market
for units of the Trust, the Depositor shall bear the cost of such
audit to the extent that it exceeds $.50/unit of approximately
$1000 initial value (or such proportionate amount in the case of
units of greater or lesser initial value). Such audited
statement will be made available to Certificateholders upon
request.
To the extent permitted under the Investment Company
Act of 1940 as evidenced by an opinion of counsel to the
Depositor, reasonably acceptable to the Trustee, the Trustee
shall pay, or reimburse to the Depositor or others, the costs of
the preparation of documents and information with respect to the
Trust required by law or regulation in connection with the
maintenance of a secondary market in units of the Trust. Such
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costs may include but are not limited to accounting and legal
fees, blue sky registration and filing fees, printing expenses
and other reasonable expenses related to documents required under
Federal and state securities laws.
The Trustee shall make such annual or other reports as
may from time to time be required under any applicable state or
federal statute or rule or regulation thereunder.
Section 6.3. Indenture and List of Securities on File:
The Trustee shall keep a certified copy or duplicate original of
this Indenture on file at its unit investment trust office
available for inspection at all reasonable times during the usual
business hours by any Certificateholder and the Trustee shall
keep and so make available for inspection a current list of the
Securities.
Section 6.4. Compensation: For services performed
under this Indenture the Trustee shall be paid at the rate per
annum set forth in Part II of the Reference Trust Agreement which
shall be computed on the basis of the greatest number of units of
the Trust outstanding at any time during the period with respect
to which such compensation is being computed. The Trustee may
from time to time adjust its compensation as set forth above
provided that the total adjustment upward does not, at the time
of such adjustment, exceed the percentage of the total increase,
after the date hereof, in consumer prices for services as
measured by the United States Department of Labor Consumer Price
Index entitled "All Services Less Rent," or, if such index shall
cease to be published, then as measured by the available index
most nearly comparable to such index. The consent or concurrence
of any Certificateholder hereunder shall not be required for any
such adjustment or increase, however, the consent of the
Depositor shall be required. Such compensation shall be charged
by the Trustee against the Income and Principal Accounts as
provided in Section in 3.5; provided, however, that such
compensation shall be deemed to provide only for the usual normal
and recurring functions undertaken as Trustee pursuant to this
Indenture. The Trustee agrees to reduce its compensation under
this Indenture by any Rule 12b-1 fee amounts it receives for
performing servicing functions with respect to the Fund Shares
("Trustee Fee Reduction").
The Trustee shall charge the Income and Principal
Accounts as provided for in Section 3.5(b) for any and all
expenses, including the fees of counsel which may be retained by
the Trustee in connection with its activities hereunder, and
disbursements incurred hereunder and any extraordinary services
performed by the Trustee hereunder. The Trustee shall be
indemnified and held harmless against any loss or liability
accruing to it without gross negligence, bad faith or willful
misconduct on its part, arising out of or in connection with the
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acceptance or administration of this trust, including the costs
and expenses (including counsel fees) of defending itself against
any claim of liability in the premises. If the cash balances in
the Income and Principal Accounts shall be insufficient to
provide for amounts payable pursuant to this Section 6.4, the
Trustee shall have the power to sell Securities. The Depositor
shall, upon request by the Trustee, designate Securities to be
sold for the purpose of payment of expenses hereunder, provided
that if the Depositor shall fail so to designate, the Trustee
shall sell Fund Shares and Treasury Obligations in such amounts
as will result in the remaining Fund Shares and Treasury
Obligations held in the Trust approximating, as closely as
possible, the proportionate ratio of such Fund Shares and
Treasury Obligations on the initial date of deposit referred to
in Section 2.1, provided, however, that Treasury Obligations
shall not be sold to the extent that the maturity value, per
Unit, of the Treasury Obligations remaining after such sale would
be less than the maturity value, per Unit, of the Treasury
Obligations on the initial date of deposit. The Trustee shall
not be liable or responsible in any way for depreciation or loss
incurred by reason of any sale of Securities made pursuant to
this Section 6.4. Any moneys payable to the Trustee pursuant to
this section shall be secured by a prior lien on the Trust.
The Depositor shall, upon request by the Trustee,
provide the Trustee with a current list of Securities designated
to be sold for the purpose of payment of expenses hereunder,
provided that if the Depositor shall for any reason fail to
provide such a list, the Trustee, in its sole discretion, may
designate a current list of Securities for such purposes. The
net proceeds of any such sales of Securities from such list
representing principal shall be credited to the Principal
Account.
Section 6.5. Removal and Resignation of the Trustee;
Successor: The following provisions shall provide for the
removal and resignation of the Trustee and the appointment of any
successor Trustee:
(a) any resignation or removal of the Trustee and
appointment of a successor pursuant to this section shall not
become effective until acceptance of appointment by the successor
Trustee as provided in subsection (b) hereof;
(b) the Trustee or any trustee hereafter appointed may
resign and be discharged of the Trust created by this Indenture
by executing an instrument in writing resigning as such Trustee,
filing the same with the Depositor and mailing a copy of a notice
of resignation to all Certificateholders then on record not less
than sixty days before the date specified in such instrument
when, subject to Section 6.5(d), such resignation is to take
effect. Upon receiving such notice of resignation, the Depositor
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shall use its best efforts to promptly appoint a successor
Trustee as hereinafter provided, by written instrument, in
duplicate, one copy of which shall be delivered to the resigning
Trustee and one copy to the successor Trustee. In case at any
time the Trustee shall become incapable of acting or shall be
deemed incapable of acting by the written consent of holders of
Certificates evidencing 66 2/3% of the outstanding Units
comprising a particular series, or shall be adjudged a bankrupt
or insolvent, or a receiver of the Trustee or of its property
shall be appointed, or any public officer shall take charge or
control of the Trustee or of its property or affairs for the
purposes of rehabilitation, conservation, or liquidation, then in
any such case the Depositor may remove the Trustee and appoint a
successor Trustee by written instrument, in duplicate, one copy
of which shall be delivered to the Trustee so removed and one
copy to the successor Trustee; provided that notice of such
removal and appointment of a successor shall be given to each
Certificateholder then of record;
(c) any successor Trustee appointed hereunder shall
execute, acknowledge and deliver to the Depositor and the
retiring Trustee an instrument accepting such appointment
hereunder, and such successor Trustee without any further act,
deed or conveyance shall become vested with all the rights,
powers, duties and obligations of its predecessor hereunder with
like effect as if originally named Trustee herein and shall be
bound by all the terms and conditions of this Indenture. Upon
the request of such successor Trustee, the Depositor and the
retiring Trustee shall, upon payment of any amounts due the
retiring Trustee or provision therefor to the satisfaction of
such retiring Trustee, execute and deliver an instrument
acknowledged by it transferring to such successor Trustee all the
rights and powers of the retiring Trustee; and the retiring
Trustee shall transfer, deliver and pay over to the successor
Trustee all Securities and moneys at the time held by it
hereunder, together with all necessary instruments of transfer
and assignment or other documents properly executed necessary to
effect such transfer and such of the records or copies thereof
maintained by the retiring Trustee in the administration hereof
as may be requested by the successor Trustee, and shall thereupon
be discharged from all duties and responsibilities under this
Indenture. The retiring Trustee shall, nevertheless, retain a
lien upon all Securities and moneys at the time held by it
hereunder to secure any amounts then due the retiring Trustee
hereunder;
(d) in case at any time the Trustee shall resign and
no successor Trustee shall have been appointed and have accepted
appointment within thirty days after notice of resignation has
been received by the Depositor, the retiring Trustee may
forthwith apply to a court of competent jurisdiction for the
appointment of a successor Trustee. Such court may thereupon,
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after such notice, if any, as it may deem proper and prescribe,
appoint a successor Trustee; and
(e) any corporation into which any Trustee hereunder
may be merged or with which it may consolidate, or any
corporation resulting from any merger or consolidation to which
any Trustee hereunder shall be a party, shall be the successor
Trustee under this Indenture without the execution or filing of
any paper, instrument or further act to be done on the part of
the parties hereto, anything herein, or in any agreement relating
to such merger or consolidation, by which any such Trustee may
seek to retain certain powers, rights and privileges theretofore
obtaining for any period of time following such merger or
consolidation, to the contrary notwithstanding.
Section 6.6. Qualifications of Trustee: The Trustee,
or any successor thereof, shall be a corporation organized and
doing business under the laws of the United States or any state
thereof, which is authorized under such laws to exercise
corporate trust powers and having at all times an aggregate
capital, surplus, and undivided profits of not less than
$2,500,000.
ARTICLE 7
DEPOSITOR
Section 7.1. Succession: The covenants, provisions
and agreements herein contained shall in every case be binding
upon any successor to the business of the Depositor. In the
event of the death, resignation or withdrawal of any partner of a
Depositor or of any successor Depositor which may be a
partnership, the deceased, resigning or withdrawing partner shall
be relieved of all further liability hereunder if at the time of
such death, resignation or withdrawal such Depositor maintains a
net worth (determined in accordance with generally accepted
accounting principles) of at least $1,000,000. In the event of
an assignment by the Depositor to a successor corporation or
partnership as permitted by the next following sentence, the
Depositor and, if the Depositor is a partnership, its partners,
shall be relieved of all further liability under this Indenture.
A Depositor may transfer all or substantially all of its assets
to a corporation or partnership which carries on the business of
the Depositor, if at the time of such transfer such successor
duly assumes all the obligations of the Depositor under this
Indenture and if at such time such successor maintains a net
worth of at least $1,000,000 (determined in accordance with
generally accepted accounting principles).
Section 7.2. Resignation of Depositor: If at any time
any Depositor desires to resign its position as Depositor
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hereunder, it may resign by delivering to the Trustee an
instrument of resignation executed by such Depositor. Such
resignation shall become effective upon the expiration of thirty
days from the date on which such instrument is delivered to the
Trustee. Upon effective resignation hereunder, the resigning
Depositor shall be discharged and shall no longer be liable in
any manner hereunder except as to acts or omissions occurring
prior to such resignation, any successor Depositor appointed by
the Trustee pursuant to Section 6.1(f) shall thereupon perform
all duties and be entitled to all rights under this Indenture.
The successor Depositor shall not be under any liability
hereunder for occurrences or omissions prior to the execution of
such instrument.
Section 7.3. Liability of Depositor and
Indemnification: (a) The Depositor shall be under no liability
to the Trust or the Certificateholders for any action or for
refraining from the taking of any action in good faith pursuant
to this Indenture, or for errors in judgment or for depreciation
or loss incurred by reason of the purchase or sale of any
Securities, provided, however, that this provision shall not
protect the Depositor against any liability to which it would
otherwise be subject by reason of willful misfeasance, bad faith
or gross negligence in the performance of its duties or by reason
of its reckless disregard of its obligations and duties
hereunder. The Depositor may rely in good faith on any paper,
order, notice, list, affidavit, receipt, evaluation, opinion,
endorsement, assignment, draft or any other document of any kind
prima facie properly executed and submitted to it by the Trustee,
the Trustee's counsel or any other person for any matters arising
hereunder. The Depositor shall in no event be deemed to have
assumed or incurred any liability, duty, or obligation to any
Certificateholder or the Trustee other than as expressly provided
for herein.
(b) The Trust shall pay and hold the Depositor
harmless from and against any loss, liability or expense incurred
in acting as Depositor of the Trust other than by reason of
willful misfeasance, bad faith or gross negligence in the
performance of their duties or by reason of their reckless
disregard of their obligations and duties hereunder, including
the costs and expenses of the defense against any claim or
liability in the premises. The Depositor shall not be under any
obligation to appear in, prosecute or defend any legal action
which in their opinion may involve them in any expense or
liability, provided, however, that the Depositor may in their
discretion undertake any such action which they may deem
necessary or desirable in respect of this Indenture and the
rights and duties of the parties hereto and the interests of the
Certificateholders hereunder and, in such event, the legal
expenses and costs of any such action and any liability resulting
therefrom shall be expenses, costs and liabilities of the Trust
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and shall be paid directly by the Trustee out of the Income and
Principal Accounts as provided by Section 3.5.
(c) None of the provisions of this Indenture shall be
deemed to protect or purport to protect the Depositor against any
liability to the Trust or to the Certificateholders to which the
Depositor would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of
its duties, or by reason of the Depositor's reckless disregard of
their obligations and duties under this Indenture.
ARTICLE 8
RIGHTS OF CERTIFICATEHOLDERS
Section 8.1. Beneficiaries of Trust: By the purchase
and acceptance or other lawful delivery and acceptance of any
Certificate the Certificateholder shall be deemed to be a
beneficiary of the Trust created by this Indenture and vested
with all right, title and interest in the Trust to the extent of
the Unit or Units set forth and evidenced by such Certificate,
subject to the terms and conditions of this Indenture and of such
Certificate.
Section 8.2. Rights, Terms and Conditions: In
addition to the other rights and powers set forth in the other
provisions and conditions of this Indenture the Certificate-
holders shall have the following rights and powers and shall be
subject to the following terms and conditions:
(a) A Certificateholder may at any time prior to the
Evaluation Time on the date the Trust is terminated tender his
Certificate or Certificates to the Trustee for redemption in
accordance with Section 5.2.
(b) The death or incapacity of any Certificateholder
shall not operate to terminate this Indenture or the Trust, nor
entitle his legal representatives or heirs to claim an accounting
or to take any action or proceeding in any court of competent
jurisdiction for a partition or winding up of the Trust, nor
otherwise affect the rights, obligations and liabilities of the
parties hereto or any of them. Each Certificateholder expressly
waives any right he may have under any rule of law, or the
provisions of any statute, or otherwise, to require the Trustee
at any time to account, in any manner other than as expressly
provided in this Indenture, in respect of the Bonds or moneys
from time to time received, held and applied by the Trustee
hereunder.
(c) No Certificateholder shall have any right to vote
or in any manner otherwise control the operation and management
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of the Trust, or the obligations of the parties hereto, nor shall
anything herein set forth, or contained in the terms of the
Certificates, be construed so as to constitute the Certificate-
holders from time to time as partners; nor shall any Certificate-
holder ever be under any liability to any third persons by reason
of any action taken by the parties to this Indenture for any
other cause whatsoever.
ARTICLE 9
ADDITIONAL COVENANTS; MISCELLANEOUS PROVISIONS
Section 9.1. Amendments: This Indenture may be
amended from time to time by the parties hereto or their
respective successors, without the consent of any of the
Certificateholders (a) to cure any ambiguity or to correct or
supplement any provision contained herein which may be defective
or inconsistent with any other provision contained herein; (b) to
change any provision required by Securities and Exchange
Commission or any successor governmental agency to be changed; or
(c) to make such other provision in regard to matters or
questions arising hereunder as shall not adversely affect the
interests of the Certificateholders; provided, however, that the
parties hereto may not amend this Indenture so as to (1) increase
the number of Units above the number set forth in Part II of the
Reference Trust Agreement or such lesser amount as may be
outstanding at any time during the term of this Indenture, except
as the result of the deposit of Additional Securities as herein
provided, or (2) except in the manner permitted by the Indenture
as in effect on the date of the first deposit of Securities under
a particular Indenture, permit the deposit or acquisition
hereunder of securities either in addition to or in replacement
of any of the Bonds.
This Indenture may also be amended from time to time by
the Depositor and the Trustee (or the performance of any of the
provisions or this Agreement may be waived) with the expressed
written consent of holders of Certificates evidencing 66-2/3% of
the Units at the time outstanding under the Indenture for the
purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Indenture or of
modifying in any manner the rights of the holders of
Certificates; provided, however, that no such amendment or waiver
shall (i) reduce the interest in the Trust represented by Units
evidenced by any Certificate without the consent of the holder of
such Certificate, (ii) reduce the aforesaid percentage of Units,
the holders of which are required to consent to any such
amendment, without the consent of the holders of all Certificates
then outstanding or (iii) affect the duties, obligations and
responsibilities of the Trustee without its consent.
-38-
<PAGE>
Promptly after the execution of any such amendment the
Trustee shall furnish written notification to all then out-
standing Certificateholders of the substance of such amendment.
Section 9.2. Termination: This Indenture and the
Trust created hereby shall terminate upon the maturity,
redemption, sale or other disposition as the case may be of the
last Security held hereunder unless sooner terminated as herein-
before specified and may be terminated at any time by written
consent of all the holders of Certificates; provided that in no
event shall the Trust continue beyond the end of the Mandatory
Termination Date specified in the prospectus for the Trust.
Written notice of any termination, specifying the time
or times at which the Certificateholders may surrender their
Certificates for cancellation shall be given by the Trustee to
each Certificateholder at his address appearing on the
registration books of the Trustee.
In the event of any termination of the Trust prior to
the Termination Date, the Trustee shall proceed to liquidate the
Securities then held and make the payments and distributions
provided for hereinafter in this Section 9.2 except that in such
event, the distribution to each Certificateholder shall be made
in cash and shall be such Certificateholder's pro rata interest
in the balance of the Principal and Income Account after the
deductions herein provided.
In the event that the Trust terminates on the
Termination Date, the Trustee shall, not less than 20 days prior
to the Termination Date, send a written notice to each
Certificateholder of record owning, as of such date, Units in the
aggregate value of at least $25,000. Such notice shall allow
such Certificateholder to elect to redeem his Units at the net
asset value on the Termination Date and to receive, in partial
payment of the Redemption Price per Unit, an in-kind distribution
of such Certificateholder's pro rata share of the Fund Shares, to
the extent of whole shares. The Trustee shall liquidate all Fund
Shares not distributed in kind. The Trustee will honor duly
executed requests for such in-kind distribution received
(accompanied by the electing Certificateholder's Certificate) by
the close of business on the Termination Date.
Certificateholders who do not effectively request an in-kind
distribution shall receive their distribution upon termination in
cash. Redemption of the Units of Certificateholders electing
such in-kind distribution shall be made within 7 calendar days
following the Termination Date and shall consist of (i) such
Certificateholder's pro rata share of Fund Shares (valued as of
the Termination Date) to the extent of whole shares and (ii) cash
equal to the balance of such Certificateholder's Redemption
Price. In any case, Certificateholders will receive their pro
rata share of the Treasury Obligations and any other assets of
-39-
<PAGE>
the Trust, including fractional share entitlements of Fund
Shares, in cash.
On the Termination Date, this Indenture and the Trust
created hereby shall terminate. In connection with such
Termination, the Trustee shall segregate such number of shares of
Securities as shall be necessary to satisfy in-kind distributions
to Certificateholders electing such distribution.
The balance of the Securities shall be sold over a
period of 60 business days immediately following the Termination
Date. The Depositor shall direct the Trustee to sell the
Securities in such manner as the Depositor determine will produce
the best price for the Trust. Pursuant to such direction, the
Trustee may use the services of the Depositor to effect such
sales.
Within a reasonable period of time after such
termination and liquidation of Securities, the Trustee shall:
(a) deduct from the Income Account or, to the extent
that funds are not available in such account, from the Principal
Account and pay to itself individually an amount equal to the sum
of
(1) its accrued compensation for its ordinary
recurring services,
(2) any compensation due it for its extraordinary
services, and
(3) any other costs, expenses, advances or indemnities
as provided herein;
(b) deduct from the Income Account or, to the extent
that funds are not available in such account, from the Principal
Account and pay accrued and unpaid fees of counsel pursuant to
Section 3.9 unpaid fees of the Evaluator pursuant to Section 4.4,
and unpaid fees, expenses and indemnities of the Depositor
pursuant to Sections 7.3;
(c) deduct from the Income Account or the Principal
Account any amounts which may be required to be deposited in the
Reserve Account to provide for payment of any applicable taxes or
other governmental charges and any other amounts which may be
required to meet expenses incurred under this Indenture;
(d) make a final distribution from the Trust, against
surrender for cancellation of each Certificateholder's
Certificate or Certificates, such Certificateholder's pro rata
share of the cash balances of the Income and Principal Accounts
-40-
<PAGE>
and, on the conditions set forth in Section 3.04 hereof, the
balance of the Reserve Account, if any;
(e) together with such distribution to each
Certificateholder as provided for in (d), furnish to each such
Certificateholder a final distribution statement as of the date
of the computation of the amount distributable to Certificate-
holders, setting forth the data and information in substantially
the form and manner provided for in Section 3.6 hereof; and
(f) distribute to each Certificateholder receiving the
distribution provided in paragraph (d) any dividends, which on
the Termination Date were declared, but not received, net of any
and all expenses not previously deducted, within a reasonable
time of their receipt.
The amounts to be so distributed to each Certificate-
holder shall be that pro rata share of the balance of the total
Income and Principal Accounts as shall be represented by the
Units therein evidenced by the outstanding Certificate or
Certificates held of record by such Certificateholder.
The Trustee shall be under no liability with respect to
moneys held by it in the Income, Reserve and Principal Accounts
upon termination except to hold the same in trust without
interest until disposed of in accordance with the terms of this
Indenture.
Upon the Depositor's request, the Trustee will include
in the written notice to be sent to Certificateholders referred
to in the fourth paragraph of this section a form of election
whereby Certificateholders electing a cash distribution may
express interest in investing such cash distribution in units of
another series of the Equity Securities Trust (the "New Series").
The Trustee will inform the Depositor of all Certificateholders
who, within the time period specified in such notice, express
such interest. The Depositor will provide to such
Certificateholders any applicable sales material with respect to
the New Series and a form, acceptable to the Trustee, whereby a
Certificateholder may appoint the Trustee the Certificateholder's
agent to apply the Certificateholder's cash distribution for the
purchase of a unit or units of the New Series. Such form will
specify, among other things, the time by which it must be
returned to the Trustee in order to be effective and the manner
in which such purchase shall be made. This paragraph shall not
obligate the Depositor to create any New Series or to provide any
such investment election.
Section 9.3. Construction: This Indenture is executed
and delivered in the State of New York, and all local laws or
rules of construction of such State shall govern the rights of
-41-
<PAGE>
the parties hereto and the Certificateholders and the
interpretation of the provisions hereof.
Section 9.4. Registration of Certificates: The
Depositor agrees and undertakes to register the Certificates with
the Securities and Exchange Commission or other applicable
governmental agency pursuant to applicable Federal or State
statutes, if such registration shall be required, and to do all
things that may be necessary or required to comply with this
provision during the term of the Trust created hereunder, and the
Trustee shall incur no liability or be under any obligation or
expense in connection therewith.
Section 9.5. Written Notice: Any notice, demand,
direction or instruction to be given to the Depositor hereunder
shall be in writing and shall be duly given if mailed or
delivered to the Depositor as follows: Bear, Stearns & Co. Inc.,
245 Park Avenue, New York, New York 10167 or at such other
address as shall be specified by the Depositor to the Trustee in
writing. Any notice, demand, direction or instruction to be
given to the Trustee shall be in writing and shall be duly given
if mailed or delivered to the Trustee at 770 Broadway, New York,
New York 10003, Attention: Unit Investment Trust Division, or
such other address as shall be specified to the Depositor by the
Trustee in writing. Any notice, demand, direction or instruction
to be given to the Evaluator shall be in writing and shall be
duly given if mailed or delivered to the Evaluator, Attention:
Vice President, 65 Broadway, New York, New York 10006 or such
other address as shall be specified to the other parties hereto
by the Evaluator in writing. Any notice to be given to the
Certificateholders shall be duly given if mailed or delivered to
each Certificateholder at the address of such holder appearing on
the registration books of the Trustee.
Section 9.6. Severability: If any one or more of the
covenants, agreements, provisions or terms of this Indenture
shall be held contrary to any express provision of law or
contrary to policy or express law, though not expressly
prohibited, or against public policy, or shall for any reason
whatsoever be held invalid, then such covenants, agreements,
provisions or terms shall be deemed severable from the remaining
covenants, agreements, provisions or terms of this Indenture and
shall in no way affect the validity or enforceability of the
other provisions of this Indenture or of the Certificates or the
rights of the holders thereof.
Section 9.7. Dissolution of Depositor Not to
Terminate: The dissolution of the Depositor from or for any
cause whatsoever shall not operate to terminate this Indenture or
the Trust.
-42-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed as of the date first above written.
[Signatures and acknowledgements on separate pages.]
-43-
<PAGE>
<PAGE>
BEAR, STEARNS & CO. INC.
Depositor
PETER J. DEMARCO
Managing Director
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
I, Teresa Scilla, a Notary Public in and for the said
County in the State aforesaid, do hereby certify that Peter J.
DeMarco personally known to me to be the same person whose name
is subscribed to the foregoing instrument and personally known to
me to be a Managing Director of Bear, Stearns & Co. Inc., a
corporation, appeared before me this day in person, and
acknowledged that he signed and delivered the said instrument as
his free and voluntary act as such Managing Director and as the
free and voluntary act of said Bear, Stearns & Co. Inc., for the
uses and purposes therein set forth.
GIVEN under my hand and notarial seal this 20th day of
January, 1994.
TERESA SCILLA
Notary Public
(SEAL)
My Commission expires:
TERESA SCILLA
NOTARY PUBLIC, State of New York
No.31-4752676
Qualified in the COunty of New York
Term Expires 8/31/94
-44-
<PAGE>
<PAGE>
UNITED STATES TRUST COMPANY
OF NEW YORK
Trustee
THOMAS CENTRONE
Vice President
(SEAL)
ATTEST:
ANDREW TURNER
Assistant Secretary
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On this 19 day of January, 1994, before me personally
came Thomas Centrone, to me known, who being by me duly sworn,
said that he is a Vice President of United States Trust Company
of New York, one of the corporations described in and which
executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to the said instrument is such
corporate seal; that it was so affixed by authority of the Board
of Directors of said corporation; and that he signed his name
thereto by like authority.
DOROTHY S. BOCHINO
Notary Public
(SEAL)
My Commission expires:
DOROTHY S. BOCHINO
NOTARY PUBLIC, State of New York
No. 01B04950864
Qualified in Richmond County
Commission Expires 5-8-95
-45-
<PAGE>
<PAGE>
KENNY INFORMATION SYSTEMS, INC.,
Evaluator
By: JAMES R. QUANDT
President
SEAL
ATTEST:
F.A. SHINAL
Senior Vice President
-46-
<PAGE>
<PAGE>
EXHIBIT 99.2.1
No. 1
CERTIFICATE OF OWNERSHIP
--evidencing--
A Fractional Undivided Interest
--in--
EQUITY SECURITIES TRUST
SERIES _____
EquiT's
_____________________
UNITS
_____________________
CUSIP
This is to certify that ______________________________ is the
owner and registered holder of this Certificate evidencing the
ownership of _______ unit(s) of fractional undivided interest in
Equity Securities Trust of the above Series (hereinafter called
the "Trust") created under the laws of the State of New York by a
Trust Indenture and Agreement as incorporated by a Reference
Trust Agreement applicable to the above Series (hereinafter
collectively called the "Indenture") among BEAR, STEARNS & CO.
INC. (hereinafter called the "Depositor"), UNITED STATES TRUST
COMPANY OF NEW YORK (hereinafter called the "Trustee") and KENNY
S&P EVALUATION SERVICES (hereinafter called the "Evaluator").
This Certificate is issued under and is subject to the terms,
provisions and conditions of the Indenture to which the holder of
this Certificate by virtue of the acceptance hereof assents and
is bound, a summary of which Indenture is contained in the
Prospectus relating to the Trust. The Depositor hereby grants
and conveys all of its right, title and interest in and to the
Trust to the extent of the fractional undivided interest
represented hereby to the registered holder of this Certificate
subject to and in pursuance of the Indenture. This Certificate
is transferable and interchangeable by the registered holder in
person or by his duly authorized attorney at the unit investment
trust office of the Trustee upon surrender of this Certificate
properly endorsed or accompanied by a written instrument of
transfer in form satisfactory to the Trustee and payment of the
fees and expenses applicable hereto set forth herein.
<PAGE>
This Certificate shall not become valid or binding for
any purpose until properly executed by the Trustee under the
Indenture.
IN WITNESS WHEREOF, Bear, Stearns & Co. Inc., as
Depositor, has caused this Certificate to be executed in
facsimile by a duly authorized officer and United States Trust
Company of New York, as Trustee, has caused this Certificate to
be executed in its corporate name by an authorized officer.
Date: BEAR, STEARNS & CO. INC., Depositor
UNITED STATES TRUST COMPANY
OF NEW YORK, Trustee
By:
Authorized Officer
<PAGE>
<PAGE>
ASSIGNMENT
For Value Received ____________ hereby sells, assigns
and transfers unto _________________ the within Certificate and
does hereby irrevocably constitute and appoint ______________
attorney, to transfer the within Certificate on the books of the
Trustee, with full power of substitution in the premises.
Dated: ________________
Note: The signature(s) to this assignment must
correspond with the name(s) as written above upon the
face of this Certificate in every particular, without
alteration or enlargement or any change whatever.
_____________________
Signature Guaranteed
[end of certificate]
<PAGE>
<PAGE>
EXHIBIT 99.3.1
Battle Fowler
280 Park Avenue
New York, New York 10017
January 21, 1994
Bear, Stearns & Co. Inc.
245 Park Avenue
New York, New York 10167
Re: Equity Securities Trust, Series 4, EquiT's
Dear Sirs:
We have acted as special counsel for Bear, Stearns & Co.
Inc., as Depositor, Sponsor and Principal Underwriter
(collectively, the "Depositor") of Equity Securities Trust, Series
4, EquiT's (the "Trust") in connection with the issuance by the
Trust of 20,000 units of fractional undivided interest (the
"Units") in the Trust. Pursuant to the Trust Agreements referred
to below, the Depositor has transferred to the Trust certain
securities and contracts to purchase certain securities together
with an irrevocable letter of credit to be held by the Trustee
upon the terms and conditions set forth in the Trust Agreements.
(All securities to be acquired by the Trust are collectively
referred to as the "Securities").
In connection with our representation, we have examined
copies of the following documents relating to the creation of the
Trust and the issuance and sale of the Units: (a) the Trust
Indenture and Agreement and related Reference Trust Agreement,
each of even date herewith, relating to the Trust (collectively
the "Trust Agreements") among the Depositor, United States Trust
Company of New York, as Trustee, and Kenny S&P Evaluation
Services, as Evaluator; (b) the Notification of Registration on
Form N-8A and the Registration Statement on Form N-8B-2, as
amended, relating to the Trust, as filed with the Securities and
Exchange Commission (the "Commission") pursuant to the Investment
Company Act of 1940 (the "1940 Act"); (c) the Registration
Statement on Form S-6 (Registration No. 33-51009) filed with the
Commission pursuant to the Securities Act of 1933 (the "1933
Act"), and all Amendments thereto (said Registration Statement, as
amended by said
<PAGE>
Bear, Stearns & Co. Inc. Page 2
January 21, 1994
Amendment(s) being herein called the "Registration
Statement"); (d) the proposed form of final Prospectus (the
"Prospectus") relating to the Units, which is expected to be filed
with the Commission this day; (e) certified resolutions of the
Executive Committee of the Depositor authorizing the execution and
delivery by the Depositor of the Trust Agreements and the
consummation of the transactions contemplated thereby; (f) the
Certificate of Incorporation and By-Laws of the Depositor, each
certified to by an authorized officer of the Depositor as of a
recent date; and (g) a certificate of an authorized officer of the
Depositor with respect to certain factual matters contained
therein.
We have also examined (i) the Application for an Amended
Order of Exemption from certain provisions of Section 11(a) of the
1940 Act, which has been filed with the Commission by the
Depositors; Mortgage Securities Trust, CMO Series 1 (and
Subsequent Series); Municipal Securities Trust, Series 1 (and
Subsequent Series (including Insured Municipal Securities Trust,
Series 1 (and Subsequent Series) and 5th Discount Series (and
Subsequent Series)); New York Municipal Trust, Series 1 (and
Subsequent Series); and A Corporate Trust, Series 1 (and
Subsequent Series) on October 2, 1990 and as amended thereafter
and the related Exemptive Order (IC-18290) issued by the
Commission on August 28, 1991 and (ii) the Application for an
Amended Order of Exemption from certain provisions of
Section 11(a) of the 1940 Act, which has been filed with the
Commission by the Depositors on behalf of Municipal Securities
Trust, Series 1 (and Subsequent Series (including Insured
Securities Trust, Series 1 (and Subsequent Series) and 5th
Discount Series (and Subsequent Series)); New York Municipal
Trust, Series 1 (and Subsequent Series); A Corporate Trust,
Series 1 (and Subsequent Series); Mortgage Securities Trust, CMO
Series 1 (and Subsequent Series); and Equity Securities Trust
(Series 1, Signature Series, Gabelli Communications Income Trust
and Subsequent Series) on November 12, 1992.
We have not reviewed the financial statements, compilation
of the Securities held by the Trust, or other financial or
statistical data contained in the Registration Statement and the
Prospectus, as to which you have been furnished with the reports
of the accountants appearing in the Registration Statement and the
Prospectus.
In addition, we have assumed the genuineness of all
agreements, instruments and documents submitted to us as originals
and the conformity to originals of all copies thereof submitted to
us. We have also assumed the genuineness of all signatures and
<PAGE>
Bear, Stearns & Co. Inc. Page 3
January 21, 1994
the legal capacity of all persons executing agreements,
instruments and documents examined or relied upon by us.
Statements in this opinion as to the validity, binding
effect and enforceability of agreements, instruments and documents
are subject: (i) to limitations as to enforceability imposed by
bankruptcy, reorganization, moratorium, insolvency and other laws
of general application relating to or affecting the enforceability
of creditors' rights, and (ii) to limitations under equitable
principles governing the availability of equitable remedies.
We are not admitted to the practice of law in any
jurisdiction but the State of New York and we do not hold
ourselves out as experts in or express any opinion as to the laws
of other states or jurisdictions except as to matters of Federal
and Delaware corporate law.
Based exclusively on the foregoing, we are of the opinion
that under existing law:
(1) The Trust Agreements have been duly authorized and
entered into by an authorized officer of the Depositor and is a
valid and binding obligation of the Depositor in accordance with
its terms.
(2) The execution and delivery of the Certificate
evidencing the Units has been duly authorized by the Depositor and
such Certificate, when executed by the Depositor and the Trustee
in accordance with the provisions of the Certificate and the
respective Trust Agreements and issued for the consideration
contemplated therein, will constitute fractional undivided
interests in the Trust, will be entitled to the benefits of the
Trust Agreements, will conform in all material respects to the
description thereof for the Units as provided in the Trust
Agreements and the Registration Statement, and the Units will be
fully paid and non-assessable by the Trust.
We hereby consent to the filing of this opinion as an
exhibit to the Registration Statement and to the use of our name
in the Registration Statement and in the Prospectus under the
headings "Tax Status" and "Legal Opinions". We authorize you to
deliver copies of this opinion to the Trustee and the Underwriters
named in Schedule A to the Master Agreement Among Underwriters, as
amended, relating to the Trust and the Trustee may rely on this
opinion as fully and to the same extent as if it had been
addressed to it.
<PAGE>
Bear, Stearns & Co. Inc. Page 4
January 21, 1994
This opinion is intended solely for the benefit of the
addressees and the Trustee in connection with the issuance of the
Units of the Trust and may not be relied upon in any other manner
or by any other person without our express written consent.
Very truly yours,
Battle Fowler
<PAGE>
<PAGE>
EXHIBIT 99.5.1
KENNY S&P EVALUATION SERVICES
A Division of Kenny Information Systems, Inc.
65 Broadway
New York, New York 10006-2511
Telephone 212/770-4900
F.A. SHINAL
Senior Vice President
Chief Financial Officer
January 21, 1994
Bear Stearns & Co., Inc.
245 Park Avenue
New York, NY 10167
RE: Equity Securities Trust
Series 4, EquiT's
Gentlemen:
We have examined Registration Statement File No. 33-51009 for the above-
captioned trust. We hereby acknowledge that Kenny S&P Evaluation
Services, a division of Kenny Information Systems, Inc. is currently
acting as the evaluator for the trust. We hereby consent to the use in
the Registration Statement of the reference to Kenny S&P Evaluation
Services, a division of Kenny Information Systems, Inc. as evaluator.
You are hereby authorized to file a copy of this letter with the
Securities and Exchange Commission.
Sincerely,
F.A. SHINAL
Senior Vice President
