As filed with the Securities and Exchange Commission on April 27, 1995
Registration No. 33-51009
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST-EFFECTIVE 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
A. Exact name of trust: EQUITY SECURITIES TRUST, SERIES 4, EquiT'S
B. Name of depositor: BEAR, STEARNS & CO.
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 LLP
Bear, Stearns & Co. Inc. 75 East 55th Street
245 Park Avenue New York, New York 10022
New York, New York 10167 (212) 856-6858
It is proposed that this filing become effective (check appropriate box)
/ / immediately upon filing pursuant to paragraph (b) of Rule 485
/x / x on April 28, 1995 pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)
/ / I. A. 1.(a)(i) a.(1) a)
/ / on ( date ) pursuant to paragraph (a) of Rule 485
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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)
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
I. Organization and General Information
1. (a)Name of trust................... Front Cover of Prospectus
(b)Title of securities issued...... "
2. Name and address of the depositor.. The Sponsor
3. Name and address of trustee.........The Trustee
4. Name and address of principal
underwriters...................... The Sponsor
5. State of organization of trust......Organization
6. Execution and termination of
trust agreement................... Trust Agreement, Amendment and
Termination
7. Changes of name.....................Not Applicable
8. Fiscal year......................... "
9. Litigation..........................None
II. General Description of the Trust and Securities of the Trust
10. (a) Registered or bearer
securities...................... Certificates
(b) Cumulative or distributive
securities...................... Interest and Principal Distributions
(c) Redemption......................Trustee Redemption
(d) Conversion, transfer, etc.......Certificates, Sponsor Repurchase,
Trustee Redemption, Exchange
Privilege and Conversion Offer
(e) Periodic payment plan...........Not Applicable
(f) Voting rights...................Trust Agreement, Amendment and
Termination
(g)Notice to certificateholders.... Records, Portfolio, Trust Agreement,
Amendment and Termination, The
Sponsor, The Trustee
(h)Consents required............... Trust Agreement, Amendment and
Termination
(i)Other provisions................ Tax Status
11. Type of securities
comprising units.................. Objectives, Portfolio, Description
of Portfolio
12. Certain information regarding
periodic payment certificates..... Not Applicable
13. (a)Load, fees, expenses, etc....... Summary of Essential Information,
Offering Price, Volume and Other
Discounts, Sponsor's and
Underwriters' Profits, Total
Reinvestment Plan, Trust Expenses
and Charges
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Form N-8B-2 Form S-6
Item Number Heading in Prospectus
(b)Certain information regarding
periodic payment certificates... Not Applicable
(c)Certain percentages............. Summary of Essential Information,
Offering Price, Total
Reinvestment Plan
(d)Price differences............... Volume and Other Discounts
(e)Other loads, fees, expenses..... Certificates
(f)Certain profits receivable
by depositors, principal
underwriters, trustee or
affiliated persons.............. Sponsor's and Underwriters' Profits
(g)Ratio of annual charges
to income....................... Not Applicable
14. Issuance of trust's securities......Organization, Certificates
15. Receipt and handling of payments
from purchasers................... Organization
16. Acquisition and disposition of
underlying securities............. Organization, Objectives, Portfolio,
Portfolio Supervision
17. Withdrawal or redemption............Comparison of Public Offering Price,
Sponsor's Repurchase Price and
Redemption Price, Sponsor
Repurchase, Trustee Redemption
18. (a)Receipt, custody and
disposition of income........... Distribution Elections, Interest and
Principal Distributions, Records,
Total Reinvestment Plan
(b)Reinvestment of distributions... Total Reinvestment Plan
(c)Reserves or special funds....... Interest and Principal Distributions
(d)Schedule of distributions....... Not Applicable
19. Records, accounts and reports.......Records, Total Reinvestment Plan
20. Certain miscellaneous provisions
of trust agreement................ Trust Agreement, Amendment and
Termination
(a)Amendment....................... "
(b)Termination..................... "
(c)and (d) Trustee, removal and
successor....................... The Trustee
(e)and (f) Depositor, removal
and successor................... The Sponsor
21. Loans to security holders...........Not Applicable
22. Limitations on liability............The Sponsor, The Trustee,
The Evaluator
23. Bonding arrangements................Part II--Item A
24. Other material provisions
of trust agreement................ Not Applicable
III. Organization, Personnel and Affiliated Persons of Depositor
25. Organization of depositor...........The Sponsor
26. Fees received by depositor..........Not Applicable
27. Business of depositor...............The Sponsor
28. Certain information as to
officials and affiliated
persons of depositor.............. Part II--Item C
29. Voting securities of depositor......Not Applicable
30. Persons controlling depositor....... "
31. Payments by depositor for certain
services rendered to trust........ "
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Form N-8B-2 Form S-6
Item Number Heading in Prospectus
32. Payment by depositor for certain
other services rendered to trust.. "
33. Remuneration of employees of
depositor for certain services
rendered to trust................... "
34. Remuneration of other persons for
certain services rendered to trust.. "
IV. Distribution and Redemption of Securities
35. Distribution of trust's
securities by states.............. Distribution of Units
36. Suspension of sales of
trust's securities................ Not Applicable
37. Revocation of authority
to distribute..................... "
38. (a)Method of distribution.......... Distribution of Units, Total
Reinvestment Plan
(b)Underwriting agreements......... "
(c)Selling agreements.............. "
39. (a)Organization of principal
underwriters.................... The Sponsor
(b)N.A.S.D. membership of
principal underwriters.......... "
40. Certain fees received by
principal underwriters............ Not Applicable
41. (a)Business of principal
underwriters.................... The Sponsor
(b)Branch offices of principal
underwriters.................... Not Applicable
(c)Salesmen of principal
underwriters.................... "
42. Ownership of trust's
securities by certain persons..... "
43. Certain brokerage commissions
received by principal
underwriters...................... "
44. (a)Method of valuation............. Summary of Essential Information,
Offering Price, Accrued Interest,
Volume and Other Discounts,
Total Reinvestment Plan,
Distribution of Units
(b)Schedule as to offering price... Not Applicable
(c)Variation in offering price
to certain persons.............. Distribution of Units, Total
Reinvestment Plan, Volume and
Other Discounts
45. Suspension of redemption rights.....Trustee Redemption
46. (a)Redemption valuation............ Comparison of Public Offering Price,
Sponsor's Repurchase Price and
Redemption Price, Trustee
Redemption
(b)Schedule as to
redemption price................ Not Applicable
47. Maintenance of position in
underlying securities............. Comparison of Public Offering Price,
Sponsor's Repurchase Price and
Redemption Price, Sponsor
Repurchase, Trustee Redemption
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Form N-8B-2 Form S-6
Item Number Heading in Prospectus
V. Information Concerning the Trustee or Custodian
48. Organization and regulation
of trustee........................ The Trustee
49. Fees and expenses of trustee........Trust Expenses and Charges
50. Trustee's lien...................... "
VI. Information Concerning Insurance of Holders of Securities
51. Insurance of holders of
trust's securities................ Not Applicable
VII. Policy of Registrant
52. (a)Provisions of trust agreement
with respect to selection or
elimination of underlying
securities...................... Objectives, Portfolio, Portfolio
Supervision
(b)Transactions involving
elimination of underlying
securities...................... Not Applicable
(c)Policy regarding substitution
or elimination of underlying
securities...................... Objectives, Portfolio, Portfolio
Supervision, Substitution of
Bonds
(d)Fundamental policy not
otherwise covered............... Not Applicable
53. Tax status of trust.................Tax Status
VIII. Financial and Statistical Information
54. Trust's securities during
last ten years.................... Not Applicable
55. Hypothetical account for issuers
of periodic payment plans......... "
56. Certain information regarding
periodic payment certificates..... "
57. Certain information regarding
periodic payment plans............ "
58. Certain other information
regarding periodic payment plans.. "
59. Financial Statements
(Instruction 1(c) to Form S-6)......Statement of Financial Condition
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NOTE: Part A of this Prospectus May Not be Distributed Unless
Accompanies by Part B.
GABELLI VALUE FUND AND U.S. TREASURIES
EQUITY SECURITIES TRUST SERIES 4
EquiT's
The Trust is a unit investment trust designated Equity Securities Trust,
Series 4, EquiT's ("Trust"). 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 Part B of this Prospectus.
Minimum Purchase: 100 Units
This Prospectus consists of two parts. Part A contains the Summary of
Essential Information including descriptive material relating to the Trust as
of December 31, 1994 (the "Evaluation Date") and audited financial statements
of the Trust, including the Portfolio as of the Evaluation Date of the Trust.
Part B contains general information about the Trust. Part A may not be
distributed unless accompanied by Part B.
Investors should read and retain both parts of this Prospectus for future
reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PROSPECTUS PART A DATED APRIL 28, 1995
148298.2
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THE TRUST
The Trust is a unit investment trust designated Equity Securities Trust,
Series 4, EquiT's (the "Trust"). 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 the 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, was $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 $12.50 per Unit. However, an investor holding his Units
to Trust maturity or all investors if the Trust is terminated before the
Treasury Obligations mature, 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 "Risk Considerations"
in this Part A and in Part B. The Trust will terminate 14 years after the
initial Date of Deposit. Upon termination, Certificateholders may elect to
receive their terminating distributions of the Trust's Treasury Obligations or
Fund Shares in cash, in the form of an in-kind distribution of the
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.
With the deposit of the Securities in the Trust on the initial Date of
Deposit, the Sponsor established a proportionate relationship among the
aggregate value of the specified Securities in the Trust. During the 90 days
subsequent to the initial Date of Deposit, the Sponsor may, but is not
obligated to, deposit from time to time additional Securities in the Trust
("Additional Securities") or contracts to purchase Additional Securities,
maintaining to the extent practicable, 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 maintain the
exact original proportionate relationship among the number of shares of
Securities in the Trust portfolio on the initial Date of Deposit with the
deposit of Additional Securities, because of, among other reasons, purchase
requirements, changes in prices, or the unavailability of Securities. Deposits
of Additional Securities in the Trust subsequent to the 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
A-2
148298.2
<PAGE>
Trust may change slightly based on such disposition and reinvestment.
Securities received in exchange for shares 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 aggregate value of
Securities in the Trust on the 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 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.
RISK 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.
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148298.2
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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. If Units had been purchased on
the Evaluation Date, the Public Offering Price would have been $1,132.98 under
the annual distribution plan. 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 on the 15th day of
January (the "Distribution Date"). (See "Rights of
Certificateholders--Distributions"). 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).
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 The Treasurer's Fund, Inc., U.S.
Treasury Money Market Portfolio (the "Treasurer's Fund"). Gabelli-O'Connor
Fixed Income Mutual Funds Management Co. serves as the investment adviser of
the Fund and GOC Fund Distributors, Inc. serves as distributor for the Fund.
Participation in the reinvestment option is conditioned on the 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 Treasurer's Fund prospectus.
TERMINATION
During the 60 day period prior to the Mandatory Termination Date (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,
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148298.2
<PAGE>
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 discussions.
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.
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.
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<TABLE>
EQUITY SECURITIES TRUST, SERIES 4, EQUIT'S
SUMMARY OF ESSENTIAL INFORMATION AS OF DECEMBER 31, 1994
<S> <C>
DATE OF DEPOSIT+: January 21, 1994 EVALUATION TIME: 4:00 p.m. New York
AGGREGATE MATURITY VALUE OF Time.
TREASURY OBLIGATIONS MINIMUM PRINCIPAL DISTRIBUTION: $1.00
INITIALLY DEPOSITED..........$300,000 per 100 Units.
AGGREGATE NUMBER OF FUND LIQUIDATION PERIOD: Beginning 60 days prior
SHARES INITIALLY DEPOSITED......9,896 to the Mandatory Termination Date.
NUMBER OF UNITS..................617,000 MINIMUM VALUE OF TRUST: The Trust may
FRACTIONAL UNDIVIDED be terminated if the value of the Trust is less
INTEREST IN TRUST...........1/617,000 than 40% of the aggregate value of the
PUBLIC OFFERING PRICE Securities at the completion of the Deposit
Aggregate offering side Period.
evaluation of Treasury MANDATORY TERMINATION DATE: The
Obligations in Trust....$3,176,594 earlier of August 15, 2008 or the disposition of
Aggregate Net Asset the last Security in the Trust.
Value of Fund TRUSTEE: United States Trust Company of New
Shares in Trust.........$3,202,502 York.
Total......................$6,379,096 TRUSTEE'S ANNUAL FEE++: $.93 per 100
Divided By 617,000 Units Units outstanding.
(times 100)...............$1,033.89 SPONSOR: Bear, Stearns & Co. Inc.
Plus Sales Charge of 4.9% EVALUATOR: Kenny S&P Evaluation Services.
of Public Offering Price EVALUATOR'S FEE FOR EACH EVALUATION
per 100 Units................$53.27 OF TREASURY OBLIGATIONS: $5.00 per
Public Offering Price per evaluation.
100 Units+++..............$1,087.16 SPONSOR'S ANNUAL SUPERVISORY FEE:
REDEMPTION PRICE PER 100 Maximum of $.25 per 100 Units outstanding
UNITS++++...................$1,033.89 (see "Trust Expenses and Charges" in Part B).
SPONSOR'S REPURCHASE PRICE RECORD DATE: First of January, Annually.
PER 100 UNITS++++...........$1,033.89 DIVIDEND DISTRIBUTION DATE: Fifteenth of
EXCESS OF PUBLIC OFFERING January, Annually.
PRICE OVER REDEMPTION
PRICE PER 100 UNITS............$53.27
EXCESS OF SPONSOR'S INITIAL REPURCHASE
PRICE OVER REDEMPTION PRICE PER 100
UNITS...........................$3.21
</TABLE>
- ------------------------
+ The Date of Deposit is the date on which the Trust Agreement was
signed and contracts to purchase Securities were initially deposited
with the Trustee.
++ 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 the expenses and fees otherwise payable by the
Trust to the Trustee and any excess will be rebated to the Trust.
+++ 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-6
148298.2
<PAGE>
INFORMATION REGARDING THE TRUST AS OF DECEMBER 31, 1994
DESCRIPTION OF PORTFOLIO
$9,255,000 face amount of Treasury Obligations maturing on August 15,
2008 and 305,291 Fund Shares were held in the Trust on the Evaluation Date.
The Treasury Obligations and the Fund Shares represent 49.8% and 50.2%,
respectively, of the total of the aggregate market value of Treasury
Obligations in the Trust and the aggregate value of Fund Shares on the
Evaluation Date.
A-7
148298.2
<PAGE>
FINANCIAL AND STATISTICAL INFORMATION
Selected data for each Unit of the Trust outstanding for the periods listed
below:
<TABLE>
<CAPTION>
Distributions of Distributions of
Net Asset* Interest During Principal During
Value the Period the Period
Period Ended Units Outstanding per 100 Units (per 100 Units) (per 100 Units)
<S> <C> <C> <C> <C>
December 31, 1994 617,000 $103.41 -0- -0-
</TABLE>
- --------
* Net Asset Value per Unit is calculated by dividing net assets as
disclosed in the "Statement of Net Assets" by the number of units
outstanding as of the date of the Statement of Net Assets. See Note 5 of
Notes to Financial Statements for a description of the components of Net
Assets.
A-8
148298.2
<PAGE>
Independent Auditors' Report
The Sponsor, Trustee and Certificateholders
Equity Securities Trust, Series 4
EquiT's
We have audited the accompanying statement of net assets, including the
portfolio, of Equity Securities Trust, Series 4 - EquiT's as of December 31,
1994, and the related statements of operations, and changes in net assets for
the period January 21, 1994 (date of initial deposit) to December 31, 1994.
These financial statements are the responsibility of the Trustee (see note 2).
Our responsibility is to express an opinion on these financial statements
based on our 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. Our
procedures included confirmation of securities owned as of December 31, 1994,
by correspondence with the Trustee. An audit also includes assessing the
accounting principles used and significant estimates made by the Trustee, as
well as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Equity Securities Trust,
Series 4 - EquiT's as of December 31, 1994, and the results of its operations
and the changes in its net assets for the period January 21, 1994 (date of
initial deposit) to December 31, 1994 in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
New York, New York
March 31, 1994
<PAGE>
EQUITY SECURITIES TRUST, SERIES 4
EquiT's
Statement of Net Assets
December 31, 1994
Investments in marketable securities,
at market value (cost $7,517,223) $ 6,379,096
Excess of total liabilities over other assets 1,285
----------
Net assets (617,000 units of fractional undivided
interest outstanding,$10.34 per unit) $ 6,380,381
==========
See accompanying notes to financial statements.
<PAGE>
EQUITY SECURITIES TRUST, SERIES 4
Statement of Operations
For the Period
January 21, 1994
(date of deposit)
to December 31, 1994
--------------------
Investment Income:
Interest Income $ 226,312
Dividend Income 4,634
-------------
Total Investment Income 230,946
Expenses:
Trustee's fees 3,349
-------------
Investment income, net 227,597
Unrealized loss on investments:
Unrealized depreciation
of investments for the period (1,138,127)
-------------
Net decrease in net
assets resulting
from operations $ (910,530)
=============
See accompanying notes to financial statements.
<PAGE>
EQUITY SECURITIES TRUST, SERIES 4
EquiT's
Statement of Changes in Net Assets
For the Period
January 21, 1994
(date of initial deposit)
to December 31, 1994
--- -------------- ---
Operations:
Investment income, net $ 227,597
Unrealized depreciation
of investments for the period (1,138,127)
--------------
Net decrease in net
assets resulting
from operations (910,530)
Value of additional units acquired during offering period 7,053,167
Net assets at date of deposit 237,744
--------------
Net assets at end of period (including
undistributed net investment income
of $227,597) $ 6,380,381
==============
See accompanying notes to financial statements.
<PAGE>
EQUITY SECURITIES TRUST, SERIES 4
EQUIT'S
Notes to Financial Statements
December 31, 1994
(1) Organization
Equity Securities Trust Series 4, EquiT's (Trust) was organized on January 21,
1994 by Bear, Stearns & Co. Inc. (Sponsor) under the laws of the State of New
York by a Trust Indenture and Agreement, and is registered under the
Investment Company Act of 1940. On January 21, 1994 (date of initial deposit)
the Trust had 20,000 units outstanding. During the period January 21, 1994 to
December 31, 1994 (the offering period) the Trust issued an additional 597,000
units bringing total units issued to 617,000.
(2) Summary of Significant Accounting Policies
United States Trust Company of New York (Trustee) has custody of and
responsibility for the accounting records and financial statements of the
Trust and is responsible for establishing and maintaining a system of internal
control related thereto.
The Trustee is also responsible for all estimates of expenses and accruals
reflected in the Trust's financial statements. The accompanying financial
statements have been adjusted to record the unrealized appreciation
(depreciation) of investments and to record interest income and expenses on
the accrual basis.
Investments are carried at market value which is determined by United States
Trust Company of New York (Evaluator) based upon the closing bid prices of the
securities at the end of the period, except that the market value on the date
of deposit represents the cost to the Trust based on the offering prices for
investments at that date. The difference between cost and market value is
reflected as unrealized appreciation (depreciation) of investments. Securities
transactions are recorded on the trade date. Realized gains (losses) from
securities transactions are determined on the basis of average cost of the
securities sold or redeemed.
(3) Income Taxes
No provision for federal income taxes has been made in the accompanying
financial statements because the Trust intends to qualify for and elect the
tax treatment applicable to regulated investment companies under the Internal
Revenue Code. Under existing law, if the Trust so qualifies, it will not be
subject to federal income tax on net income and capital gains that are
distributed to unit holders.
(4) Trust Administration
The fees and expenses of the Trust are incurred and paid on the basis set
forth under "Trust Expenses and Charges" in Part B of this Prospectus.The
Trust Indenture and Agreement provides for income distributions as often as
monthly (depending upon the distribution plan elected by the
Certificateholders).
The Trust Indenture and Agreement further requires that principal received
from the disposition of securities, be distributed to Certificateholders.
See "Financial and Statistical Information" in Part A of this Prospectus for
the amounts of per unit distributions during the period ended December 31,
1994.
The Trust Indenture and Agreement also requires the Trust to redeem units
tendered. No units have been redeemed since the inception of the trust.
(5) Net Assets
At December 31, 1994, the net assets of the Trust represented the
interest of Certificateholders as follows:
Original cost to Certificateholders $ 249,994
Less initial gross underwriting commission (12,250)
237,744
Cost of additional units acquired
during the offering period
to Certificateholders 7,053,167
Net unrealized depreciation (1,138,127)
Undistributed net investment income 227,597
Total $ 6,380,381
The original cost to Certificateholders, less the initial gross
underwriting commission, represents the aggregate initial public offering
price net of the applicable sales charge on 617,000 units of fractional
undivided interest of the Trust as of December 31, 1994 (end of the offering
period).
<PAGE>
<TABLE>
EQUITY SECURITIES TRUST SERIES 4
EquiT's
Portfolio
December 31, 1994
<CAPTION>
Port- Face amount/ Cost
folio Number of Market
No. of shares Description Securities Value
- --- --------------- ------------------------ ------------- ---------------
<S> <C> <C> <C> <C>
1 $9,255,000 Zero Coupon US Treasury $3,826,719 $3,176,594
2 305,291 shs. The Gabelli Fund Inc. 3,690,504 3,202,502
Total Investment in Securities $7,517,223 $6,379,096
============= ===============
</TABLE>
<PAGE>
DISTRIBUTED UNLESS ACCOMPANIED BY
PART A
EQUITY SECURITIES TRUST SERIES 4
GABELLI VALUE FUND
AND U.S. TREASURIES
EquiT's
PROSPECTUS PART B
Dated: April 28, 1995
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 Kenney 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.")
Each "Unit" outstanding on the Evaluation Date represented an
undivided interest or pro rata share in the Securities of the Trust in the
ratio of one hundred Units for the indicated amount of the aggregate market
value of the Securities 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 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
261356.1
<PAGE>
("Additional Securities") or contracts to purchase Additional Securities, in
order to create additional Units, maintaining to the extent practicable the
original proportionate relationship between the Securities in the Trust
portfolio on the initial Date of Deposit. (Securities and Additional
Securities collectively may be hereinafter referred to as "Securities".) These
additional Units 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 between the
Treasury Obligations and the Fund Shares 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 between the
Treasury Obligations and the Fund Shares 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 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 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 Obligations. 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 considers
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 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 consists 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
-2-
261356.1
<PAGE>
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
includible by a Certificateholder as income and will be subject to income tax
on a current basis at ordinary income tax rates (see "Tax Status").
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 December 31, 1993, the net assets of the Fund were
$491,193,000. 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 to such companies may, in the
Adviser's judgment, achieve significant capital appreciation. In
identifying such companies, the Adviser seeks to 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
-3-
261356.1
<PAGE>
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 Year 9/29/89
ended ended ended ended through
12/31/93 12/31/92 12/31/91++ 12/31/90 12/31/89*
<S> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of year .............. $ 10.13 $ 9.48 $ 8.51 $ 9.58 $ 9.45
Net investment income ........................... 0.05 0.09 0.13 0.45 0.16
Net realized and unrealized gain/
(loss) on investments ......................... 3.95 1.11 1.17 (0.98) 0.04
Total from investment operations ................ 4.00 1.20 1.30 (0.53) 0.20
Distributions to shareholders from:
Net realized capital gains .................... (1.99) (0.46) (0.14) --- (0.01)
Net investment income ......................... (0.01) (0.09) (0.19) (0.54) (0.06)
Distributions in excess of net
investment income ........................... (0.04) ---- ---- ---- ----
Total distributions ............................. (2.04) (0.55) (0.33) (0.54) (0.07)
Net asset value, end of year .................... $ 12.09 $ 10.13 $ 9.48 $ 8.51 $ 9.58
Total Return** .................................. 39.4% 12.7% 15.3% (5.6)% 2.1%
Ratios to average net assets/supplemental data:
Net assets, end of year (in 000's) .............. $491,193 $423,381 $574,676 $850,685 $1,126,146
Ratio of net investment income to
average net assets .......................... 0.38% 0.75% 1.43% 4.45% 6.06%+
</TABLE>
-4-
261356.1
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Ratio of operating expenses to
average net assets............... 1.53% 1.52% 1.45% 1.39% 1.48%+
Portfolio turnover rate.............. 21.4% 0.1% 16.2% 58.6% 73.3%
</TABLE>
- ---------------------
* The Fund commenced operations on September 29, 1989.
** Total return represents aggregate total return for the period indicated
and does not reflect any applicable sales charges. Total return for the
period of less than one year is not annualized.
+ Annualized.
++ Per share amounts have been calculated using the monthly average share
method.
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) leading 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-
261356.1
<PAGE>
5. Mortgage, pledge or hypothecate any of its assets except that, in
connection with permissible borrowings mentioned in restrictions (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 leading
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 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. 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
13. 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 limitations 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 describe above.
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
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exchanged for a prescribed amount of common stock or other equity 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 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.
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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.
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
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<PAGE>
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 excess
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 assets 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 terms 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. 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 it 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.
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
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<PAGE>
security it owns, because, among other things, it wishes to defer
recognition of gain or loss for U.S. Federal income tax purposes.
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 nay 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 purpose
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 call 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 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.
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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 fluctuations, 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 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 the 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
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Gabelli Asset Fund; The Gabelli Convertible Securities Fund; The Gabelli
ABC Fund; The Gabelli Global Telecommunications Fund; The Gabelli Global
Interactive Couch Potato TM(C) Fund; The Gabelli Global Convertible
Securities Fund; and The Gabelli US Treasury Money Market Fund, open-end
investment companies having assets as of March 31, 1994 in excess of
$208 million, $50 million, $589 million, $979 million, $120 million, $29
million, $108 million, $13 million, $6 million and $200 million,
respectively, and The Gabelli Equity Trust Inc., a closed-end investment
company having assets in excess of $899 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 $4.1 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, Chairman of the Board, Chief Executive Officer and
Chief Investment Officer of the Adviser and Chairman of the Board,
President and Chief Investment Officer of the Fund, is responsible for
managing the day-to-day investment operations of the Fund, including the
making of investment decisions. He acts as Chairman of the Board and
Chief Executive Officer of GAMCO and is an officer or director of
various other companies owned or controlled by Gabelli Funds, Inc.
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.
Owning 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 1.00% 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.
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
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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 by 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 and Additional
Securities from time to time may be sold under certain circumstances, as
described herein, no assurance can be given that the Trust will retain for any
length of time its present size and composition. The Trustee has not
participated and will not participate in the selection of Securities for the
Trust, and neither the Sponsor 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 in the Trust are
expected to settle in five business days, in the ordinary manner for such
Securities.
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, (1) 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
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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 and Additional Securities from time
to time may be substituted (see "Trust Administration--Portfolio Supervision")
or may be sold under certain circumstances, no assurance can be given that the
Trust will retain its present size and composition for any length of time. The
proceeds from the sale of a Security or the exercise of any redemption or call
provision will be distributed to Certifcateholders 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 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.)
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 is 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
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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, fluctuates 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 or 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, redemption 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 value of the Securities calculated immediately after the most recent
deposit of Securities 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 Certificateholder 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 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 Certifcateholders 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.
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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
As a matter of current operating policy, the Fund will not invest more
than 35% of its total assets in lower rated securities (Baa by Moody's or BBB
by S&P) and comparable unrated securities (collectively commonly known as
"junk bonds"). 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 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
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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 involves 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 offering 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 prices, 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:
Approximate
Reduced Sales
Number of Units Charge
10,000 but less than 25,000 4.7%
25,000 but less than 50,000 4.5%
50,000 but less than 75,000 4.3%
75,000 but less than 100,000 4.1%
100,000 or more 3.7%
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
the name of the spouse of the purchaser or in the name of the 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.
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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 1.7% 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. 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 presently maintains and intends to continue to qualify the
Units for sale in substantially all States through the Underwriters and
through dealers who are members of the National Association of Securities
Dealers, Inc. Units may be sold to dealers at prices which represent a
concession of up to 3% per Unit, subject to the Sponsor's right to change the
dealers' concession from time to time. In addition, for transactions of
100,000 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 purchase Units on the initial Date of Deposit are 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 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 program 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.
Frequent Buyer Program
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Any dealer, underwriter, or firm whose total combined purchases
of the Trust and other unit investment trusts sponsored by
Bear, Stearns & Co. Inc. ("MST/EST Units") from Bear, Stearns &
Co. Inc. in a single calendar month fall in any of the levels
listed below, are paid an additional concession.
Aggregate Monthly Additional
Amounts of MST/EST Concession
Units Sold at (per $1,000.00)
Public Offering Price Sold
$1,000,000 but less than $2,000,000............................$0.50
$2,000,000 but less than $4,500,000............................$1.00
$4,500,000 but less than $7,000,000............................$1.50
$7,000,000 or more.............................................$2.00
Sponsor's and Underwriters' Profits
The Sponsor and the Underwriters receive a gross underwriting
commission equal to 4.9% of the Public Offering Price per 100 Units
(equivalent to 5.152% of the net amount invested in the Securities).
Additionally, the Sponsor may realize a profit on the deposit of the
Securities in the Trust representing the difference between the cost of the
Securities to the Sponsor and the cost of the Securities to the Trust (See
"Portfolio.") The Sponsor or any Underwriter may realize profits or sustain
losses with respect to Securities deposited in the Trust which were acquired
from underwriting syndicates of which they were a member.
The Sponsor may have participated as an underwriter or manager,
co-manager or member of underwriting syndicates from which some of the
aggregate principal amount of the Securities were acquired for the Trust. 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.
In maintaining a market for the Units (see "Sponsor Repurchase") the
Sponsor will realize profits or sustain losses in the amount of any difference
between the price at which they buy Units and the price at which they resell
such Units.
RIGHTS OF CERTIFICATEHOLDERS
Certificates
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Ownership of Units of the Trust is evidenced by registered
Certificates executed by the Trustee and the Sponsor. Certificates are 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 Certifcateholders 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 each Record Date, the Trustee deducts 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 representing the pro rata
share of each 100 Units outstanding on the last business day of such calendar
year; (b) as to the Principal Account: the dates of disposition of any
Securities and the net proceeds received therefrom, deductions for payments of
applicable taxes and fees and expense of the Trust, amounts paid for purchases
of Substitute Securities and redemptions of
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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 Certifcateholders during such calendar year from the Income and
Principal Accounts, separately stated, of the Trust, expressed both as total
dollar amounts and as dollar amounts representing the pro rata share of each
100 Units outstanding on the last business day of such calendar year.
The Trustee shall keep available for inspection by Certificateholders
at all reasonable times during usual business hours, books of record and
account of its transactions as Trustee, including records of the names and
addresses of Certificateholders, Certificates issued or held, a current list
of Securities in the portfolio and a copy of the Trust Agreement.
TAX STATUS
The following is a general discussion of certain of the Federal income
tax consequences of the purchase, ownership and disposition of the Units. The
summary is limited to investors who hold the Units as "capital assets"
(generally, property held for investment) within the meaning of Section 1221
of the Internal Revenue Code of 1986, as amended (the "Code").
Certificateholders should consult their tax advisers in determining the
Federal, state, local, and any other tax consequences of the purchase,
ownership and disposition of Units.
In rendering the opinion set forth below, Battle Fowler LLP, has
examined the Trust Agreement, the final form of Prospectus dated the date
hereof (the "Prospectus") and the documents referred to therein, among others,
and has relied on the validity of said documents and the accuracy and
completeness of the facts set forth therein. In the Opinion of Battle Fowler
LLP, special counsel for the Sponsor, under existing law:
1. The Trust will be classified as a grantor trust for Federal
income tax purposes and not as a partnership or association taxable as
a corporation. Classification of the Trust as a grantor trust will
cause the Trust not to be subject to Federal income tax, and will
cause the Certificateholders of the Trust to be treated for Federal
income tax purposes as the owners of a pro rata portion of the assets
of the Trust. All income received by the Trust will be treated as
income of the Certificateholders in the manner set forth below.
2. The Trust is not subject to the New York Franchise Tax on
Business Corporations or the New York City General Corporation Tax.
For a Certificateholder who is a New York resident, however, a pro
rata portion of all or part of the income of the Trust will be treated
as the income of the Certificateholder under the income tax laws of
the State and City of New York. Similar treatment may apply in other
states.
3. During the 90-day period subsequent to the initial issuance
date, the Sponsor reserves the right to deposit Additional Securities
that are substantially similar to those establishing the Trust. This
retained right falls within the guidelines promulgated by the Internal
Revenue Service ("IRS") and should not affect the taxable status of
the Trust.
A taxable event will generally occur with respect to each
Certificateholder when the Trust disposes of a Security (whether by sale,
exchange or redemption) or upon the sale, exchange or redemption of Units by
such Certificateholder. The price a Certificateholder pays for his Units,
including sales charges, is allocated among his pro rata portion of each
Security held by the Trust (in proportion to the fair market values thereof on
the
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date the Certificateholder purchases his Units) in order to determine his
initial cost for his pro rata portion of each Security held by the Trust.
For Federal income tax purposes, a Certificateholder's pro rata
portion of dividends paid with respect to 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
an 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.
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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.
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 Sections 246 and 246A of the Code impose additional limitations on the
eligibility of dividends for the 70% dividends received deduction. These
limitations include a requirement that stock (and therefore Units) must
generally be held at least 46 days (as determined under Section 246(c) of the
Code). Moreover, the allowable percentage of the deduction will be reduced
from 70% if a corporate Certificateholder owns certain stock (or Units) the
financing of which is directly attributable to indebtedness incurred by such
corporation. Accordingly, corporate Certificateholders should consult their
tax advisers in this regard.
As discussed in the section "Trust 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 Trust's assets, and by
accepting the proportionate number of Fund Shares of the
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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.
Entities that generally qualify for an exemption from Federal income
tax, such as many pension trusts, are nevertheless taxed under Section 511 of
the Code on "unrelated business taxable income." Unrelated business taxable
income is income from a trade or business regularly carried on by the
tax-exempt entity that is unrelated to the entity's exempt purpose. Unrelated
business taxable income generally does not include dividend or interest income
or gain from the sale of investment property, unless such income is derived
from property that is debt-financed or is dealer property. A tax-exempt
entity's dividend income from the Trust and gain from the sale of Units in the
Trust or the Trust's sale of Securities is not expected to constitute
unrelated business taxable income to such tax-exempt entity unless the
acquisition of the Unit itself is debt-financed or constitutes dealer property
in the hands of the tax-exempt entity.
Before investing in the Trust, the trustee or investment manager of an
employee benefit plan (e.g., a pension or profit sharing retirement plan)
should consider among other things (a) whether the investment is prudent under
the Employee Retirement Income Security Act of 1974 ("ERISA"), taking into
account the needs of the plan and all of the facts and circumstances of the
investment in the Trust; (b) whether the investment satisfies the
diversification requirement of Section 404(a)(1)(C) of ERISA; and (c) whether
the assets of the Trust are deemed "plan assets" under ERISA and the
Department of Labor regulations regarding the definition of "plan assets."
Prospective tax-exempt investors are urged to consult their own tax
advisers prior to investing in the Trust.
LIQUIDITY
Sponsor Repurchase
The Sponsor, although not obligated to do so, presently maintains and
intends to continue to maintain a secondary market for the Units and
continuously to offer to repurchase the Units. The Sponsor's secondary market
repurchase price will be based on the aggregate value of the Securities in the
Trust portfolio and will be the same as the redemption price. The aggregate
value of the Securities will be determined by the Trustee on a daily basis and
computed on the basis set forth under "Trustee Redemption." The Sponsor does
not guarantee the enforceability, marketability or price of any Securities in
the Portfolio or of the Units. Certificateholders who wish to dispose of their
Units should inquire of the Sponsor as to current market prices prior to
making a tender for redemption. The Sponsor may discontinue repurchase of
Units if the supply of Units exceeds demand, or for other business reasons.
The date of repurchase is deemed to be the date on which Certificates
representing Units are physically received in proper form, i.e., properly
endorsed, by Bear, Stearns & Co. Inc., 245 Park Avenue, New York, New York
10167. Units received after 4 P.M., New York Time, will be deemed to have been
repurchased on the next business day. In the event a market is not maintained
for the Units, a Certificateholder may be able to dispose of Units only by
tendering them to the Trustee for redemption.
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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 (or 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.
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 between the Treasury Obligations and Fund Shares.
Treasury Obligations will not be sold, however, to the extent that the
aggregate maturity value per Unit of the Treasury
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Obligations remaining after such sale would be less than the aggregate
maturity value per Unit of the Treasury Obligations as of the initial Date of
Deposit.
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.
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 are not liable to any person or in any way for any loss or damage
which may result from any such suspension or postponement.
A Certificateholder who wishes to dispose of his Units should inquire
of his bank or broker in order to determine if there is a current secondary
market price in excess of the Redemption Price.
TOTAL REINVESTMENT PLAN
Distributions of dividend income and capital gain, if any, from the
Trust are made to Certificateholders 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 the Treasurer's Fund, Inc., U.S. Treasury
Money Market Portfolio (the "Treasurer's Fund"). Participation in the
reinvestment option is conditioned on the Treasurer's 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 Treasurer's Fund. The
Treasurer's Fund seeks to maximize current income and to maintain
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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 Treasurer's 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 Treasurer's
Fund will be sent to Certificateholders. The Certificateholder should read the
prospectus for the Treasurer's Fund carefully before deciding to participate.
TRUST ADMINISTRATION
Portfolio Supervision
The Trust is a unit investment trust and is not a managed fund.
Traditional methods of investment management for a managed fund typically
involve frequent changes in a portfolio of securities on the basis of
economic, financial and market analyses. The Portfolio of the Trust, however,
is not managed and therefore the adverse financial condition of an issuer will
not necessarily require the sale of its Securities from the Portfolio.
However, the Sponsor may direct the disposition of Securities upon the
occurrence of certain events including:
1. default in payment of amounts due on any of the Securities;
2. institution of certain legal proceedings;
3. default under certain documents materially and adversely
affecting future declaration or payment of amounts due or
expected; or
4. decline in price as a direct result of serious adverse credit
factors affecting the issuer of a Security which, in the
opinion of the Sponsor, would make the retention of the
Security detrimental to the Trust or 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
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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 662/3% of the Units then outstanding for
the purpose of modifying the rights of Certificateholders; provided that no
such amendment or waiver shall reduce any Certificateholder's interest in the
Trust without his consent or reduce the percentage of Units required to
consent to any such amendment or waiver without the consent of the holders of
all Certificates. The Trust Agreement may not be amended, without the consent
of the holders of all Certificates in the Trust then outstanding, to increase
the number of Units issuable or to permit the acquisition of any Securities in
addition to or in substitution for those initially deposited in such Trust,
except in accordance with the provisions of the Trust Agreement. The Trustee
shall promptly notify Certificateholders, in writing, of the substance of any
such amendment.
Trust Termination
The Trust Agreement provides that the Trust shall terminate upon the
maturity, redemption or other disposition, as the case may be, of the last of
the Securities held in such Trust but in no event is it to continue beyond the
Mandatory Termination Date. If the value of the Trust shall be less than the
minimum amount set forth under "Summary of Essential Information" in Part A,
the Trustee may, in its discretion, and shall, when so directed by the
Sponsor, terminate the Trust. The Trust may also be terminated at any time
with the consent of the holders of Certificates representing 100% of the Units
then outstanding. The Trustee may utilize the services of the Sponsor for the
sale of all or a portion of the Securities in the Trust. 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
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taxable gain or loss as a result of the liquidation of the
Treasury Obligations. Certificateholders should consult their
own tax advisers 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 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.
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).
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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
termination 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 creation of a New Series.
The Sponsor reserves the right to modify, suspend or terminate the
reinvestment privilege at any time.
The Sponsor
The Sponsor, Bear, Stearns & Co. Inc., a Delaware corporation, is
engaged in the underwriting, investment banking and brokerage business and is
a member of the National Association of Securities Dealers, Inc. and all
principal securities and commodities exchanges, including the New York Stock
Exchange, the American Stock Exchange, the Midwest Stock Exchange and the
Pacific Stock Exchange. Bear Stearns maintains its principal business offices
at 245 Park Avenue, New York, New York 10167 and, since its reorganization
from a partnership to a corporation in October, 1985, has been a wholly-owned
subsidiary of The Bear Stearns Companies Inc. Bear Stearns, through its
predecessor entities, has been engaged in the investment banking and brokerage
business since 1923. Bear Stearns is the sponsor for numerous series of unit
investment trusts, including, A Corporate Trust, Series 1 (and Subsequent
Series), New York Municipal Trust, Series 1 (and Subsequent Series), 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), Mortgage Securities Trust, Series 1 (and
Subsequent Series), Insured Municipal Securities Trust, Series 1 (and
Subsequent Series), 5th Discount Series (and Subsequent Series) and Equity
Securities Trust, Series 1, Signature Series, Gabelli Communications Income
Trust (and Subsequent Series).
The information included herein is only for the purpose of informing
investors as to the financial responsibility of the Sponsor and their 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.
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The Trustee
The Trustee is United States Trust Company of New York, with its
principal place of business at 770 Broadway, New York, New York 10003. United
States Trust Company of New York has, since its establishment in 1853, engaged
primarily in the management of trust and agency accounts for individuals and
corporations. The Trustee is a member of the New York Clearing House
Association and is subject to supervision and examination by the
Superintendent of Banks of the State of New York, the Federal Deposit
Insurance Corporation and the Board of Governors of the Federal Reserve
System.
The Trustee shall not be liable or responsible in any way for taking
any action, or for refraining from taking any action, in good faith pursuant
to the Trust Agreement, or for errors in judgment; or for any disposition of
any moneys, Securities or Certificates in accordance with the Trust Agreement,
except in cases of its own willful misfeasance, bad faith, gross negligence or
reckless disregard of its obligations and duties; provided, however, that the
Trustee shall not in any event be liable or responsible for any evaluation
made by any independent evaluation service employed by it. In addition, the
Trustee shall not be liable for any taxes or other governmental charges
imposed upon or in respect of the Securities or the Trust which it may be
required to pay under current or future law of the United States or any other
taxing authority having jurisdiction. The Trustee shall not be liable for
depreciation or loss incurred by reason of the sale by the Trustee of any of
the Securities pursuant to the Trust Agreement.
For further information relating to the responsibilities of the
Trustee under the Trust Agreement, reference is made to the material set forth
under "Rights of Certificateholders."
The Trustee may resign by executing an instrument in writing and
filing the same with the Sponsor, and mailing a copy of a notice of
resignation to all Certificateholders. In such an event the Sponsor is
obligated to appoint a successor Trustee as soon as possible. In addition, if
the Trustee becomes incapable of acting or becomes bankrupt or its affairs are
taken over by public authorities, the Sponsor may remove the Trustee and
appoint a successor as provided in the Trust Agreement. Notice of such removal
and appointment shall be mailed to each Certificateholder by the Sponsor. If
upon resignation of the Trustee no successor has been appointed and has
accepted the appointment within thirty days after notification, the retiring
Trustee may apply to a court of competent jurisdiction for the appointment of
a successor. The resignation or removal of the Trustee becomes effective only
when the successor Trustee accepts its appointment as such or when a court of
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 J.J.
Kenny Co., 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.
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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 Evaluator may resign or may be removed by the Sponsor and the
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 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 receives, 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 directly 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 sponsor of the Trust without gross negligence, bad faith
or willful misconduct on its part; and all taxes and other governmental
charges imposed upon the Securities or any part of the Trust (no such taxes or
charges are being
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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(cent) per Unit. Certificateholders covered by the audit during the year may
receive a copy of the audited financials upon request.
EXCHANGE PRIVILEGE AND CONVERSION OFFER
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, 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:
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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 unithholders. Unitholders may,
during this 60 day period, exercise the Exchange Privilege in
accordance with its terms then in effect. In the event the Exchange
Privilege is not available to a Certificateholder at the time he
wishes to exercise it, the Certificateholder will immediately be
notified and no action will be taken with respect to his Units without
further instructions from the Certificateholder.
To exercise the Exchange Privilege, a Certificateholder should notify
the Sponsor of his desire to exercise his Exchange Privilege. If Units of a
designated, outstanding series of an Exchange Trust are at the time available
for sale and such Units may lawfully be sold in the state in which the
Certificateholder is a resident, the Certificateholder will be provided with a
current prospectus or prospectuses relating to each Exchange Trust in which he
indicates an interest. He may then select the Trust or Trusts into which he
desires to invest the proceeds from his sale of Units. The exchange
transaction will operate in a manner essentially identical to a secondary
market transaction except that units may be purchased at a reduced sales
charge.
Example: Assume that after the initial public offering has been completed, a
Certificateholder has five units of a Trust with a current value of $700 per
unit which he has held for more than 5 months and the Certificateholder wishes
to exchange the proceeds for units of a secondary market Exchange Trust with a
current price of $725 per unit. The proceeds from the Certificateholder's
original units will aggregate $3,500. Since only whole units of an Exchange
Trust may be purchased under the Exchange Privilege, the Certificateholder
would be able to acquire four units (or 4,000 Units of the Mortgage Securities
Trust or 400 Units of the Equity Securities Trust) for a total cost of
$2,943.50 ($2,900 for units and $43.50 for the sales charge). The remaining
$556.50 would be remitted to the Certificateholder in cash. If the
Certificateholder acquired the same number of units at the same time in a
regular secondary market transaction, the price would have been $3,059.50
($2,900 for units and $159.50 for the sales charge, assuming a 5 1/2% sales
charge times the public offering price).
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The Conversion Offer
Unit owners of any registered unit investment trust for which there is
no active secondary market in the units of such trust (a "Redemption Trust")
will be able to elect to redeem such units and apply the proceeds of the
redemption to the purchase of available Units of one or more series of
Mortgage Securities Trust, A Corporate Trust, Municipal Securities Trust,
Insured Municipal Securities Trust, New York Municipal Trust or Equity
Securities Trust (the "Conversion Trust") at the Public Offering Price for
units of the Conversion Trust based on a reduced sales charge as set forth
below. Under the Conversion Offer, units of the Redemption Trust must be
tendered to the trustee of such trust for redemption at the redemption price,
which is based upon the market value of the underlying securities in the Trust
portfolio or the aggregate bid side evaluation of the underlying bonds in
other Trust portfolios and is generally about 1 1/2% to 2% lower than the
offering price for such bonds. The purchase price of the units will be based
on the aggregate offer price of the underlying bonds in the Conversion Trust
portfolio during its initial offering period; or, at a price based on the
aggregate bid price of the underlying bonds if the initial public offering of
the Conversion Trust has been completed, plus accrued interest and a sales
charge as set forth below.
Except for unitholders who wish to exercise the Conversion Offer
within the first five months of their purchase of units of a Redemption Trust,
the sales charge applicable to the purchase of Units of the Conversion Trust
shall be approximately 1.5% of the price of each Unit (or per 1,000 Units for
the Mortgage Securities Trust or 100 Units for the Equity Securities Trust).
For unitholders who wish to exercise the Conversion Offer within the first
five months of their purchase of units of a Redemption Trust, the sales charge
applicable to the purchase of Units of a Conversion Trust shall be the greater
of (i) approximately 1.5% of the price of each Unit (or per 1,000 Units for
the Mortgage Securities Trust or 100 Units for the Equity Securities Trust) or
(ii) an amount which when coupled with the sales charge paid by the unitholder
upon his original purchase of units of the Redemption Trust at least equals
the sales charge applicable in the direct purchase of Units of a Conversion
Trust. The Conversion Offer is subject to the following limitations:
1. The Conversion Offer is limited only to unit owners of any
Redemption Trust, defined as a unit investment trust for which there
is no active secondary market at the time the Certificateholder elects
to participate in the Conversion Offer. At the time of the unit
owner's election to participate in the Conversion Offer, there also
must be available units of a Conversion Trust, either under a primary
distribution or in the Sponsor's secondary market.
2. Exchanges under the Conversion Offer will be effected in
whole units only. Unit owners will not be permitted to advance any new
funds in order to complete an exchange under the Conversion Offer. Any
excess proceeds from units being redeemed will be returned to the unit
owner. Units of the Mortgage Securities Trust may only be acquired in
blocks of 1,000 units. Units of the Equity Securities Trust may only
be acquired in blocks of 100 Units.
3. The 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
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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 he has
held for more than 5 months with a current redemption price of $675 per unit
based on the aggregate bid price of the underlying bonds and the unit owner
wishes to participate in the Conversion Offer and exchange the proceeds for
units of a secondary market Conversion Trust with a current price of $750 per
Unit. The proceeds for the unit owner's redemption of units will aggregate
$3,375. Since only whole units of a Redemption Trust may be purchased under
the Conversion Offer, the unit owner will be able to acquire four units of the
Conversion Trust (or 4,000 units of the Mortgage Securities Trust or 400 Units
of the Equity Securities Trust) for a total cost of $3,045 ($3,000 for units
and $45 for the sales charge). The remaining $330 would be remitted to the
unit owner in cash. If the unit owner acquired the same number of Conversion
Trust units at the same time in a regular secondary market transaction, the
price would have been $3,165 ($3,000 for units and $165 for the 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.
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. Battler Fowler LLP, 75
East 55th Street, New York, New York 10022 as counsel for the Sponsor. Messrs.
Carter, Ledyard & Milburn, Two Wall Street, New York, New York 10005 have
acted as counsel for the Trustee.
Independent Auditors
The Statement of Condition and Portfolio are included herein in
reliance upon the report of KPMG Peat Marwick LLP, independent auditors, and
upon the authority of said firm as experts in accounting and auditing.
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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
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.
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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-1, A-1, Baa-1, and B-1.
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.
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.
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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.
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- ------------------------------------------------------------------------------
I am the owner of ____________ units of Equity Securities Trust, Series _____
I would like to learn more about The Treasurer's Fund, Inc., U.S. Treasury
Money Market Portfolio including charges and expenses. I understand that my
request for more information about this fund in no way obligates me to
participate in the reinvestment option, and that this request form is not an
offer to sell. Please send me more information, including a copy of the
current prospectus of The Treasurer's Fund, Inc., U.S. Treasury Money Market
Portfolio.
Date _________________________, 19___
- ------------------------------------------ ----------------------------------
Registered Holder (Print) Registered Holder (Print)
- ------------------------------------------ ----------------------------------
Register Holder top Signature Registered Holder Signature
(Two signatures if joint tenancy)
My Brokerage Firm's Name _____________________________________________________
Street Address _______________________________________________________________
City, State, Zip Code ________________________________________________________
Broker's Name ______________________________ Broker's No. ____________________
- ------------------------------------------------------------------------------
MAIL TO
The Treasurer's Fund, Inc.
19 Old Kings Highway South
Darien, Connecticut 06820-4526
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<TABLE>
- --------------------------------------------------------------------------------------------
<S> <C>
No person is authorized to give any information or EST EQUITY SECURITIES
to make any representations not contained in Parts A TRUST SERIES 4
and B of the Prospectus; and any information or
representation not contained herein must not be GABELLI VALUE FUND AND
relied upon as having been authorized by the Trust, U.S. TREASURIES
the Trustee or the Sponsor. The Trust is registered
as a unit investment trust under the Investment EquiT's
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 agency or
officer thereof.
________________________ (Unit Investment Trust)
Prospectus
This Prospectus does not constitute an offer to sell,
or a solicitation of an offer to buy, securities in any Dated: April 28, 1995
state to any person to whom it is not lawful to make
such offer in such state.
Sponsor:
Table of Contents Bear, Stearns & Co. Inc.
245 Park Avenue
Title Page New York, N.Y. 10167
212-272-2500
PART A
Summary of Essential Information ...............A-2
Independent Auditors' Report....................A-8
Statement of Condition..........................A-9 Trustee:
Portfolio......................................A-10
Underwriting Syndicate.........................A-11 United States Trust Company
of New York
PART B 770 Broadway
The Trust.........................................1 New York, N.Y. 10003
Risk Factors.....................................14
Public Offering..................................16
Rights of Certificateholders.....................19
Tax Status.......................................21 Evaluator:
Liquidity........................................24
Total Reinvestment Plan..........................26 Kenny S&P Evaluation Services
Trust Administration.............................27 65 Broadway
Trust Expenses and Charges.......................32 New York, N.Y. 10006
Exchange Privilege and Conversion Offer..........33
Other Matters....................................36
Description of Corporate Bond Ratings............37
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.
- ---------------------------------------------------------------------------------------------------
</TABLE>
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PART II
ADDITIONAL INFORMATION NOT REQUIRED
IN PROSPECTUS
CONTENTS OF REGISTRATION STATEMENT
This Post-Effective Amendment to the Registration Statement on Form S-6
comprises the following papers and documents:
The facing sheet on Form S-6.
The Cross-Reference Sheet.
The Prospectus consisting of pages.
Signatures.
Written consents of the following persons:
Battle Fowler LLP (included in Exhibit 99.3.1)
KPMG Peat Marwick
Kenny S&P Evaluation Services (filed with Amendment No. 1 to Form S-6
Registration Statement No. 33-51009 on January 21, 1994 and incorporated
herein by reference).
The following exhibits:
99.1.1 -- Reference Trust Agreement including certain amendments to the
Trust Indenture and Agreement (filed as Exhibit 1.1 to
Amendment No. 1 to Form S-6 Registration Statement No. 33-51009
of Equity Securities Trust, Series 4 on January 21, 1994 and
incorporated herein by reference).
99.1.1.1 -- Form of Trust Indenture and Agreement (filed as Exhibit 1.1.1
to Amendment No. 1 to Form S-6 Registration Statement
No. 33-51009 on January 21, 1994 and incorporated herein by
reference).
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 (filed as Exhibit 2.1 to Amendment No. 1 to
Form S-6 Registration Statement No. 33-51009 on January 21,
1994 and incorporated herein by reference).
II-1
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<PAGE>
99.3.1 -- Opinion of Battle Fowler LLP as to the legality of the
securities being registered, including their consent to the
filing thereof and to the use of their name under the headings
"Tax Status" and "Legal Opinions" in the Prospectus, and to the
filing of their opinion regarding tax status of the Trust
(filed as Exhibit 3.1 to Amendment No. 1 to Form S-6
Registration Statement No. 33-51009 of Equity Securities
Trust, Series 4 on January 21, 1994 and incorporated herein by
reference).
99.5.1 -- Consent of the Evaluator including confirmation of Ratings.
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 Statements 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).
II-2
264469.1
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant, Equity Securities Trust, Series 4, EquiT'S has duly caused this
Post-Effective Amendment to the Registration Statement to be signed on its
behalf by the undersigned, hereunto duly authorized, in the City of New York
and State of New York on the 17th day of April, 1995.
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
Post-Effective Amendment to the Registration Statement has been signed below
by the following persons, who constitute the principal officers and a majority
of the directors of Bear, Stearns & Co. Inc., the Depositor, in the capacities
and on the dates indicated.
Name Title Date
ALAN C. GREENBERG Chairman of the Board, Director and )
Senior Managing Director )
JAMES E. CAYNE President, Chief Executive Officer, ) April 17, 1995
Director and Senior Managing )
Director )
JOHN C. SITES, JR. Executive Vice President, Director )
and Senior Managing Director )By:PETER J.DeMARCO
MICHAEL L. TARNOPOL Executive Vice President, Director )Attorney-in-Fact*
and Senior Managing Director )
VINCENT J. MATTONE Executive Vice President, Director )
and Senior Managing Director )
ALAN D. SCHWARTZ Executive Vice President, Director )
and Senior Managing Director )
DOUGLAS P.C. NATION Director and Senior Managing )
Director )
WILLIAM J. MONTGORIS Chief Operating Officer/Chief )
Financial Officer/Chief Operations )
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/Chief Legal Officer and )
Senior Managing Director )
FREDERICK B. CASEY Assistant Treasurer and Senior )
Managing Director )
- ---------------
* An executed power of attorney was filed as Exhibit 6.0 to Post-Effective
Amendment No. 8 to Registration Statements Nos. 2-92113, 2-92660,
2-93073, 2-93884 and 2-94545 on October 30, 1992.
II-3
264469.1
<PAGE>
CONSENT OF INDEPENDENT AUDITORS'
We consent to the use in the Post-Effective Amendment to the Registration
Statement of our report on the financial statements of Equitiy Securities
Trust Series 4 Signature Series, Gabelli Communications Income Trust included
herein and to the reference to our firm under the heading "Independent
Auditors" in the Prospectus which is part of this Registration Statement.
KPMG PEAT MARWICK LLP
New York, New York
April 17, 1995
II-4
264469.1
<PAGE>
EXHIBIT INDEX
Exhibit Description Page No.
99.1.1 Reference Trust Agreement including
certain amendments to the Trust Indenture
and Agreement (filed as Exhibit 1.1 to
Amendment No. 1 to Form S-6 Registration
Statement No. 33-51009 of Equity
Securities Trust, Series 4 on January 21,
1994 and incorporated herein by
reference).
99.1.1.1 Form of Trust Indenture and Agreement
(filed as Exhibit 1.1.1 to Amendment No. 2
to Form S-6 Registration Statement
No. 33-51009 on January 21, 1994 and
incorporated herein by reference).
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 (filed as Exhibit 2.1
to Amendment No. 1 to Form S-6
Registration Statement No. 33-51009 on
January 21, 1994 and incorporated herein
by reference).
99.3.1 Opinion of Battle Fowler LLP as to the
legality of the securities being
registered, including their consent to the
filing thereof and to the use of their
name under the headings "Tax Status" and
"Legal Opinions" in the Prospectus, and to
the filing of their opinion regarding tax
status of the Trust (filed as Exhibit 3.1
to Amendment No. 1 to Form S-6
Registration Statement No. 33-51009 of
Equity Securities Trust, Series 4 on
January 21, 1994 and incorporated herein
by reference).
-1-
264469.1
<PAGE>
Exhibit Description Page No.
99.5.1 Consent of the Evaluator including Confirmation of Ratings.
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 Statements
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).
-2-
264469.1
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND> The schedule contains summary financial
information extracted from the financial
statements and supporting schedules as of the end
of the most current period and is qualified in its
entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0000914273
<NAME> EST 4 GCIT
<SERIES>
<NUMBER> 1
<NAME> EST 4 GCIT
<S> <C>
<FISCAL-YEAR-END> Dec-31-1994
<PERIOD-START> Jan-21-1994
<PERIOD-END> Dec-31-1994
<PERIOD-TYPE> Year
<INVESTMENTS-AT-COST> 7517223
<INVESTMENTS-AT-VALUE> 6379096
<RECEIVABLES> 0
<ASSETS-OTHER> 1285
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1285
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 6380381
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 227597
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 4634
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (1138127)
<NET-ASSETS> 6380381
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 226312
<OTHER-INCOME> 0
<EXPENSES-NET> 3349
<NET-INVESTMENT-INCOME> 227597
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> (1138127)
<NET-CHANGE-FROM-OPS> (1138127)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 12250
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 10.34
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.34
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
KENNY S&P EVALUATION SERVICES
A Division of J.J. Kenny Co., Inc.
65 Broadway
New York, New York 10006-2511
Telephone 212/770-4422
Fax 212/797-8681
Frank A. Ciccotto, Jr.
Vice President
April 28, 1995
Bear, Stearns & Co., Inc.
245 Park Avenue
New York, NY 10167
RE: Equity Securities Trust
Series 4, EquiT's
Gentlemen:
We have examined the post-effective Amendment to the Registration Statement
File No. 33-51009 for the above-captioned trust. We hereby acknowledge that
Kenny S&P Evaluation Services, a division of J. J. Kenny Co., Inc. is
currently acting as the evaluator for the trust.
We hereby consent to the use in the Amendment of the reference to Kenny S&P
Evaluation Services as evaluator.
You are hereby authorized to file a copy of this letter with the Securities
and Exchange Commission.
Sincerely,
Frank A. Ciccotto
FAC/cns
