As filed with the Securities and Exchange Commission on April 29, 1999
Registration No. 33-51009
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST-EFFECTIVE AMENDMENT No. 5
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: REICH & TANG DISTRIBUTORS, INC.
C. Complete address of depositor's principal executive offices:
REICH & TANG DISTRIBUTORS, INC.
600 Fifth Avenue
New York, New York 10020
D. Name and complete address of agent for service:
PETER J. DeMARCO Copy of comments to:
Executive Vice President MICHAEL R. ROSELLA, ESQ.
Reich & Tang Distributors, Inc. Battle Fowler LLP
600 Fifth Avenue 75 East 55th Street
New York, NY 10020 New York, NY 10022
(212) 856-6858
It is proposed that this filing become effective (check appropriate box)
/ / immediately upon filing pursuant to paragraph (b) of Rule 485
/x / on April 30, 1999 pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)
/ / on ( date ) pursuant to paragraph (a) of Rule 485
================================================================================
The Registrant filed a Rule 24f-2 Notice for its fiscal year ended December 31,
1998 on or about March 31, 1999.
264469.1
<PAGE>
- --------------------------------------------------------------------------------
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 Reich & Tang Distributors, 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 "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, 1998 (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. The Securities and Exchange Commission ("SEC") maintains
a website that contains reports, proxy and information statements and other
information regarding the Trust which is filed electronically with the SEC. The
SEC's Internet address is http:www.sec.gov. Offering materials for the sale of
these units available through the Internet are not being offered directly or
indirectly to residents of a particular state nor is an offer of these units
through the Internet specifically directed to any person in a state by, or on
behalf of, the issuer.
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 30, 1999
148298.3
<PAGE>
THE TRUST
The Trust is a unit investment trust designated Equity Securities
Trust, Series 4, EquiT's (the "Trust"). The Sponsor is Reich & Tang
Distributors, 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 (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) 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. 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.
A-2
148298.3
<PAGE>
The number and identity of Securities in the Trust will be adjusted
to reflect the disposition of Securities and/or distribution of such Securities.
The portfolio of the Trust may change slightly based on such disposition or
distribution. 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).
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.
A-3
148298.3
<PAGE>
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 5.2% of the
Public Offering Price per 100 Units or 5.485% 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 $1,900.27 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 Fixed Income LLC serves
as the investment adviser of the Treasurer's Fund and Gabelli Fixed Income
Distributors, Inc. serves as distributor for 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. 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 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
A-4
148298.3
<PAGE>
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.
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) 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.
A-5
148298.3
<PAGE>
EQUITY SECURITIES TRUST, SERIES 4, EQUIT'S
SUMMARY OF ESSENTIAL INFORMATION AS OF DECEMBER 31, 1998
<TABLE>
<S> <C>
DATE OF DEPOSIT+: January 21, 1994 EVALUATION TIME: 4:00 p.m. New York Time.
MINIMUM PRINCIPAL DISTRIBUTION: $1.00
NUMBER OF UNITS...............................................192,792 per 100 Units.
FRACTIONAL UNDIVIDED LIQUIDATION PERIOD: Beginning 60 days prior
INTEREST IN TRUST.......................................1/192,792 to the Mandatory Termination Date.
SECONDARY MARKET PUBLIC OFFERING MINIMUM VALUE OF TRUST: The Trust may
PRICE be terminated if the value of the Trust is less than
Total Aggregate Bid Price..............................$3,484,082 40% of the aggregate value of the Securities at
Divided By # of Units the completion of the Deposit Period.
(times 100)...........................................$1,807.17 MANDATORY TERMINATION DATE: The
Plus Sales Charge of 5.2% earlier of August 15, 2008 or the disposition of
of Public Offering Price.................................$93.10 the last Security in the Trust.
Public Offering Price per TRUSTEE: The Chase Manhattan Bank
100 Units.............................................$1,900.27 TRUSTEE'S ANNUAL FEE++: $.93 per 100
REDEMPTION & SPONSOR'S REPURCHASE Units outstanding.
PRICE PER 100 UNITS+++..................................$1,807.17 SPONSOR: Reich & Tang Distributors, Inc.
EXCESS OF SECONDARY MARKET PUBLIC EVALUATOR: Kenny S&P Evaluation Services.
OFFERING PRICE OVER REDEMPTION & EVALUATOR'S FEE FOR EACH EVALUATION
SPONSOR'S REPURCHASE PRICE OF TREASURY OBLIGATIONS: $5.00 per
PER 100 UNITS..............................................$93.10 evaluation.
SPONSOR'S ANNUAL SUPERVISORY FEE:
Maximum of $.25 per 100 Units outstanding (see
"Trust Expenses and Charges" in Part B).
RECORD DATE: First of January, Annually.
DIVIDEND DISTRIBUTION DATE: Fifteenth of
January, Annually.
</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.
+++ Based on bid side evaluations of underlying Treasury Obligations
and net asset value of the Fund Shares.
A-6
148298.3
<PAGE>
INFORMATION REGARDING THE TRUST AS OF DECEMBER 31, 1998
DESCRIPTION OF PORTFOLIO*
$2,879,000 face amount of Treasury Obligations maturing on August 15, 2008
and 94,906 Fund Shares were held in the Trust on December 31, 1998. The Treasury
Obligations and the Fund Shares represent 54.06% and 45.94%, respectively, of
the total of the aggregate offering side valuation of Treasury Obligations in
the Trust and the aggregate value of Fund Shares on December 31, 1998.
------------------------------
*Changes in the Trust Portfolio: From January 1, 1999 to March 19, 1999, 877
Units were redeemed from the Trust.
A-7
148298.3
<PAGE>
FINANCIAL AND STATISTICAL INFORMATION
Selected data for each Unit of the Trust outstanding for the periods listed
below:
<TABLE>
<S> <C> <C> <C> <C>
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)
- ------------ ----------------- --------------- ----------------- ----------------
December 31, 1996 299,288 $1,324.48 $.84 $ 58.37
December 31, 1997 226,712 1,644.00 -0- 53.20
December 31, 1998 192,792 1,791.00 -0- 133.31
</TABLE>
- --------
* Net Asset Value per 100 Units is calculated by dividing net assets as
disclosed in the "Statement of Net Assets" by the number of units
outstanding as of the date of the Statement of Net Assets. See Note 5 of
Notes to Financial Statements for a description of the components of Net
Assets.
A-8
148298.3
<PAGE>
Report of Independent Accountants
To the Sponsor, Trustee and Certificateholders of
Equity Securities Trust Series 4, EquiT's
In our opinion, the accompanying statement of net assets, including the
portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Equity Securities Trust Series 4,
EquiT's (the "Trust") at December 31, 1998, the results of its operations, the
changes in its net assets and the financial highlights for the three years then
ended, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Trust's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 1998 by correspondence with the Trustee, provide a reasonable basis
for the opinion expressed above.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, MA
March 19, 1999
<PAGE>
<TABLE>
<CAPTION>
Equity Securities Trust Series 4, EquiT's
Portfolio
December 31, 1998
- ------------------------------------------------------------------------------------------
Portfolio Principal Percentage of
No. Amount/Shares Name of Issuer Trust (1)
<S> <C> <C> <C>
1 $ 2,879,000 Zero Coupon U.S. Treasury Bonds 54.06%
Maturing August 15, 2008
2 94,906shs. The Gabelli Value Fund Inc. 45.94
-------
Total Investment in Securities 100.00%
-------
Portfolio Cost of Market
No. Securities (2) Value (3)
<S> <C> <C>
1 $ 1,781,755 $1,795,949
2 1,147,269 1,526,088
----------- -------------
$ 2,929,024 $3,322,037
=========== =============
See accompanying footnotes to portfolio and notes to financial statements.
</TABLE>
<PAGE>
Equity Securities Trust Series 4, EquiT's
Footnotes to Portfolio
- --------------------------------------------------------------------------------
1. Based on the market value of the securities in the Trust.
2. See "Tax Status" in Part B of this Prospectus for a statement of the
Federal tax consequences to a Certificateholder upon the sale,
redemption or maturity of a security.
3. At December 31, 1998, the net unrealized appreciation of all the
securities was comprised of the following:
Gross unrealized appreciation $ 393,013
Gross unrealized depreciation -
---------------
Net unrealized appreciation $ 393,013
===============
The accompanying notes form an integral part of the financial statements.
<PAGE>
Equity Securities Trust Series 4, EquiT's
Statement of Net Assets
December 31, 1998
- --------------------------------------------------------------------------------
Investments in Securities,
at Market Value (Cost $2,929,024) $ 3,322,037
--------------
Other Assets
Cash 100,446
Dividend Receivable 146,297
--------------
Total Other Assets 246,743
--------------
Liabilities
Redemptions Payable 116,375
--------------
Total Liabilities 116,375
--------------
Excess of Other Assets over Total Liabilities 130,368
--------------
Net Assets (192,792 Units of Fractional Undivided
Interest Outstanding, $17.91 per Unit) $ 3,452,405
==============
The accompanying notes form an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
Equity Securities Trust Series 4, EquiT's
Statement of Operations
- --------------------------------------------------------------------------------
For the Years Ended December 31,
1998 1997 1996
<S> <C> <C> <C>
Investment Income
Interest $ 146,312 $ 118,446 $ 169,270
Dividends 146,297 305,135 168,956
----------- ----------- -----------
Total Investment Income 292,609 423,581 338,226
----------- ----------- -----------
Expenses
Trustee's Fees 6,666 7,166 7,093
Evaluator's Fee 1,364 1,364 1,597
Sponsor's Advisory Fee 1,102 1,359 1,604
----------- ----------- -----------
Total Expenses 9,132 9,889 10,294
----------- ----------- -----------
Net Investment Income 283,477 413,692 327,932
----------- ----------- -----------
Realized and Unrealized Gain (Loss)
Realized Gain on
Investments 150,674 110,145 70,997
Unrealized Appreciation
(Depreciation) on Investments 155,046 367,195 (293,326)
----------- ----------- -----------
Net Gain (Loss) on Investments 305,720 477,340 (222,329)
----------- ----------- -----------
Net Increase
in Net Assets
Resulting From Operations $ 589,197 $ 891,032 $ 105,603
=========== =========== ===========
The accompanying notes form an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Equity Securities Trust Series 4, EquiT's
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
For the Years Ended December 31,
1998 1997 1996
<S> <C> <C> <C>
Operations
Net Investment Income $ 283,477 $ 413,692 $ 327,932
Realized Gain
on Investments 150,674 110,145 70,997
Unrealized Appreciation
(Depreciation) on Investments 155,046 367,195 (293,326)
------------ ------------ ------------
Net Increase in
Net Assets Resulting
From Operations 589,197 891,032 105,603
------------ ------------ ------------
Distributions to Certificateholders
Investment Income ---- ---- 3,934
Principal 302,230 159,233 271,815
Redemptions
Interest 109 ---- ----
Principal 561,594 968,663 2,171,812
------------ ------------ ------------
Total Distributions
and Redemptions 863,933 1,127,896 2,447,561
------------ ------------ ------------
Total (Decrease) (274,736) (236,864) (2,341,958)
Net Assets
Beginning of Year 3,727,141 3,964,005 6,305,963
------------ ------------ ------------
End of Year (Including
Undistributed Net Investment
Income of $2,220,614, $1,937,246
and $1,523,554, Respectively) $ 3,452,405 $ 3,727,141 $ 3,964,005
============ ============ ============
The accompanying notes form an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Equity Securities Trust Series 4, EquiT's
Financial Highlights
- --------------------------------------------------------------------------------
Selected data for a unit of the Trust outstanding: *
For the years ended December 31,
1998 1997 1996
<S> <C> <C> <C>
Net Asset Value, Beginning of Year** $ 16.44 $ 13.24 $ 13.54
----------- ----------- -----------
Interest Income .70 .45 .44
Dividend Income .70 1.16 .44
Expenses (.04) (.04) (.03)
----------- ----------- -----------
Net Investment Income 1.36 1.57 .85
----------- ----------- -----------
Net Gain or Loss on Investments(1) 1.55 2.24 (.43)
----------- ----------- -----------
Total from Investment Operations 2.91 3.81 .42
----------- ----------- -----------
Less Distributions
to Certificateholders
Income ---- ---- .01
Principal 1.44 .61 .71
----------- ----------- -----------
Total Distributions 1.44 .61 .72
----------- ----------- -----------
Net Asset Value, End of Year** $ 17.91 $ 16.44 $ 13.24
=========== =========== ===========
(1) Net gain or loss on investments is a result of changes in outstanding units
since January 1, 1998, 1997 and 1996, respectively, and the dates of net
gain and loss on investments.
- --------
* Unless otherwise stated, based upon average units outstanding during
the year of 209,252 ([192,792 + 226,712]/2) for 1998, 263,000
([226,712 + 299,288]/2) for 1997 and of 382,454 ([299,288 +
465,620]/2) for 1996.
** Based upon actual units outstanding
The accompanying notes form an integral part of the financial statements.
</TABLE>
<PAGE>
Equity Securities Trust Series 4, EquiT's
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. Organization
Equity Securities Trust Series 4, EquiT's (the "Trust") was organized
on January 21, 1994 by Bear, Stearns & Co. Inc. under the laws of the
State of New York by a Trust Indenture and Agreement, and is
registered under the Investment Company Act of 1940. The objective of
the Trust is to seek long term capital appreciation.
Effective September 28, 1995, Reich & Tang Distributors, Inc. ("Reich
& Tang") has become the successor sponsor (the "Sponsor") to certain
of the unit investment trusts previously sponsored by Bear, Stearns &
Co. Inc. As successor Sponsor, Reich & Tang has assumed all of the
obligations and rights of Bear, Stearns & Co. Inc., the previous
sponsor.
2. Summary of Significant Accounting Policies
The following is a summary of significant accounting policies
consistently followed by the Trust in preparation of its financial
statements. The policies are in conformity with generally accepted
accounting principles ("GAAP"). The preparation of financial
statements in accordance with GAAP requires management to make
estimates and assumptions that affect the reported amounts and
disclosures in the financial statements. Actual amounts could differ
from those estimates.
Dividend and Interest Income
Dividend income is recognized as of the ex-dividend date. The
discount on the zero-coupon bonds is accreted by the interest method
over the respective lives of the bonds. The accretion of such
discount is reported as interest income; however, it is not
distributed until realized in cash upon maturity or sale of the
respective bonds.
Security Valuation
Investments are carried at market value which is determined by Kenny
S&P Evaluation Services, a business unit of J.J Kenny Company, Inc.,
a subsidiary of The McGraw-Hill Companies, Inc. The market value of
the portfolio is based upon the bid prices for the securities at the
end of the year, which approximates the fair value of the securities
at that date, 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 (including
accumulated accretion of original issue discount on zero-coupon
bonds) 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.
<PAGE>
Equity Securities Trust Series 4, EquiT's
Notes to Financial Statements
- --------------------------------------------------------------------------------
3. Income Taxes
No provision for federal income taxes has been made in the
accompanying financial statements because the Trust intends to
continue to qualify for the tax treatment applicable to Grantor
Trusts 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 unitholders.
4. Trust Administration
The Chase Manhattan Bank (the "Trustee") has custody of assets 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 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, other than those
securities sold in connection with the redemption of units, be
distributed to Certificateholders.
The Trust Indenture and Agreement also requires the Trust to redeem
units tendered. For the years ended December 31, 1998, 1997 and 1996,
33,920, 72,576 and 166,332 units were redeemed, respectively.
The Trust pays an annual fee for trustee services rendered by the
Trustee of $.93 per 100 units outstanding. In addition, a minimum fee
of $5.00 is paid to a service bureau for each portfolio valuation. A
maximum fee of $.25 per 100 units outstanding is paid to the Sponsor.
For the years ended December 31, 1998, 1997 and 1996, the "Trustee's
Fees" are comprised of Trustee fees of $2,783, $2,108 and $1,420 and
other expenses of $3,883, $5,058 and $5,673, respectively. The other
expenses include professional, printing and miscellaneous fees.
<PAGE>
Equity Securities Trust Series 4, EquiT's
Notes to Financial Statements
- --------------------------------------------------------------------------------
5. Net Assets
At December 31, 1998, 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
Accumulated Cost of Securities Sold,
Matured or Called (5,258,294)
Net Unrealized Appreciation 393,013
Undistributed Net Investment Income 2,220,614
Distributions in Excess of Proceeds
From Investments (1,193,839)
----------------
Total $ 3,452,405
================
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).
Undistributed net investment income includes accumulated accretion of
original issue discount of $896,407.
<PAGE>
PART B OF THIS PROSPECTUS MAY NOT BE
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 30, 1999
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
Reich & Tang Distributors, Inc., as Sponsor, The Chase Manhattan Bank, 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 ("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
261356.5
<PAGE>
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
"Description of Portfolio," in Part A, 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
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
261356.5
-2-
<PAGE>
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, 1998, the total net assets of the Fund were
$798,812,261. 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 will, however, comply with the diversification
requirements imposed by the Internal Revenue Code of 1986, as amended
(the "Code").
In pursuing the Fund's investment objective, the Adviser seeks companies
that it believes are undervalued and that by virtue of anticipated
developments or catalysts particularly applicable to such companies may,
in the Adviser's judgment, achieve significant capital appreciation. In
identifying such companies, the Adviser seeks to invest in companies
that, in the public market, are selling at a significant discount to
their private market value, the value the Adviser believes informed
industrialists would be willing to pay to acquire companies with similar
characteristics. If investor attention is focused on the underlying
asset values of these companies through an emerging or anticipated
development or other catalyst, an investment opportunity to realize this
private market value may exist. Undervaluation of a company can result
from a variety of factors, such as a lack of investor recognition of (1)
the underlying value of a company's fixed assets, (2) the value of a
consumer or commercial franchise, (3) changes in the economic or
financial environment particularly affecting a company, (4) new,
improved or unique products or services, (5) new or rapidly expanding
markets, (6) technological developments or advancements affecting a
company or its products, or (7) changes in governmental regulations,
political climate or competitive conditions. The actual developments or
catalysts particularly applicable to a given company that may, in the
Adviser's judgment, lead to significant appreciation of that company's
securities include: a change in management or management policies; the
acquisition of a significant equity position by an investor or group of
investors acting in concert; a merger, reorganization, sale of a
division, or a third-party or issuer tender offer; the spin-off to
shareholders of a subsidiary, division or other substantial assets; or a
recapitalization, an internal reorganization or the retirement or death
of a senior officer or substantial shareholder. In addition to the
foregoing factors, developments and
261356.5
-3-
<PAGE>
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, a wholly-owned subsidiary of Mellon Bank Corporation, 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 Year Year Year
ended ended ended ended ended ended ended
12/31/98 12/31/97 12/31/96 2/31/95 12/31/94 12/31/93 12/31/92
-------- -------- -------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of year.... $14.30 $11.52 $11.61 $10.49 12.09 10.13 9.48
------ ------ ------ ------ ----- ----- -----
Net investment income/(loss).......... (0.05) (0.05) (0.02) 0.05 0.09 0.05 0.09
Net realized and unrealized gain
(loss)on investments............... 3.32 5.55 1.04 2.30 (0.09) 3.95 1.11
---- ---- ---- ---- ------ ---- ----
Total from investment operations...... 3.27 5.50 1.02 2.35 0.00 4.00 1.20
---- ---- ---- ---- ---- ---- ----
Distributions to shareholders
from:
Net Investment income................. --- --- --- (0.05) (0.09) (0.01) (0.09)
Distribution in excess of net
investment income.................. --- --- --- --- (0.01)(b) (0.04) ---
Net realized gains.................... (1.49) (2.72) (1.10) (1.18) (1.50) (1.99) (0.46)
Distributions in excess of net
realized gains...................... --- --- --- --- (0.01) --- ---
Paid-in capital....................... --- (0.01) --- --- --- --- ---
--- ------ --- --- --- --- ---
Total distributions................... (1.49) (2.72) (1.11) (1.23) (1.60) (2.04) (0.55)
------ ------ ------- -------- ------- ------ -------
Net asset value, end of year.......... $16.08 $14.30 $11.52 $11.61 $10.49 $12.09 $10.13
====== ====== ======= ======= ======= ====== =======
Total Return**........................ 23.2% 48.2% 8.7% 22.5% 0.0% 39.4% 12.7%
====== ====== ======= ======= ======= ======= =======
Ratio to average net
assets/supplemental data:
Net assets, end of year (in 000's).... $798,812 $596,547 $460,836 $486,144 $436,629 $491,193 $423,381
Ratio of net investment income/loss
to average net assets............... (0.41)% (0.45)% (0.12)% 0.42% 73% 0.38% 0.75%
Ratio of operating expenses to
average net assets.................. 1.40% 1.42% 1.40% 1.50% 1.50% 1.53% 1.52%
Portfolio turnover rate............... 46.00% 43.90% 37.10% 64.60% 66.60% 21.40% 0.10%
Year Year 9/29/89
ended ended through
12/31/91(a) 12/31/90 12/31/89*
----------- -------- ---------
<S> <C> <C>
Operating performance:
Net asset value, beginning of year.... 8.51 9.58 $9,000
----- ----- ------
Net investment income/(loss).......... 0.13 0.45 0.16
Net realized and unrealized gain
(loss)on investments............... 1.17 (0.98) 0.04
---- ---- ----
Total from investment operations...... 1.30 (0.53) 0.20
---- ----- ----
Distributions to shareholders
from:
Net Investment income................. (0.19) (0.54) (0.06)
Distribution in excess of net
investment income.................. ---- ----- ---
Net realized gains.................... (0.14) --- (0.01)
Distributions in excess of net
realized gains...................... --- --- ---
Paid-in capital....................... --- --- ---
--- --- -----
Total distributions................... (0.33) (0.54) 0.07
------ ------ -----
Net asset value, end of year.......... $9.48 $8.51 $9.85
====== ====== =====
Total Return**........................ 15.3% (5.6) 2.1%
====== ====== =====
Ratio to average net
assets/supplemental data:
Net assets, end of year (in 000's).... $574,676 $850,685 $1,126,146
Ratio of net investment income/loss
to average net assets............... 1.43% 4.45% 6.06
Ratio of operating expenses to
average net assets.................. 1.45% 1.39% 1.48%+
Portfolio turnover rate............... 16.20% 58.60% 73.30%
</TABLE>
- ---------------------
* The Fund commenced operations on September 29, 1989.
** Total return represents aggregate total return of a hypothetical $1,000
investment at the beginning of the period and sold at the end of the
period including reinvestment of dividends and does not reflect any
applicable sales charges. Total return for the period of less than one
year is not annualized.
+ Annualized.
(a) Per share amounts have been calculated using the monthly average share
method for the year ended December 31, 1991.
(b) Amount represents less than $0.05 per share.
261356.5
-4-
<PAGE>
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. 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;
261356.5
-5-
<PAGE>
7. Engage in the underwriting of securities, except insofar as the Fund
may be deemed an underwriter under the Securities Act of 1933, as
amended, in disposing of a portfolio security;
8. Invest, in the aggregate more than 10% of the value of its net assets
in securities for which market quotations are not readily available,
securities which are restricted for public sale, in repurchase
agreements maturing or terminable in more than seven days and all other
illiquid securities;
9. Purchase or otherwise acquire interests in real estate, real estate
mortgage loans or interests in oil, gas or other mineral exploration or
development programs;
10. Purchase or acquire commodities or commodity contracts except that
the Fund may purchase or sell futures contracts and related options
thereon if thereafter no more than 5% of its total assets are invested
in margin and premiums;
11. Issue senior securities, except insofar as the Fund may be deemed to
have issued a senior security in connection with: (a) borrowing money in
accordance with restriction (4) above, (b) lending portfolio securities,
(c) entering into repurchase agreements, (d) purchasing or selling
options contracts, (e) purchasing or selling futures contracts and
related options thereon, or (f) acquiring when issued or delayed
delivery securities and forward commitments;
12. Sell securities short, except transactions involving selling
securities short "against the box;"
13. Purchase warrants if, thereafter, more than 5% of the value of the
Fund's net assets would consist of such warrants, but warrants attached
to other securities or acquired in units by the Fund are not subject to
this restriction; or
14. Invest in companies for the purpose of exercising control, except
transactions involving investments in investment companies for the
purpose of effecting mergers and other corporate reorganizations
involving the Fund and such other investment companies.
If any percentage 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 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
261356.5
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<PAGE>
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. 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
261356.5
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<PAGE>
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
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.
261356.5
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<PAGE>
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 a
decline in the value of a security owned by the Fund or security
convertible into, or exchangeable for, the security, or when the Fund
does not want to sell the security it owns, because, among other things,
it wishes to defer recognition of gain or loss for U.S. Federal income
tax purposes.
261356.5
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<PAGE>
Options. The Fund may purchase or sell (that is, write) listed options
on securities as a means of achieving additional return or of hedging
the value of the Fund's portfolio. The Fund may write covered call
options on common stocks that it owns or has an immediate right to
acquire through conversion or exchange of other securities in an amount
not to exceed 25% of total assets; or invest up to 10% of its total
assets in the purchase of put options on common stocks that the Fund
owns or may acquire through the conversion or exchange of other
securities that it owns. The Fund may only buy options that are listed
on a national securities exchange.
A call option is a contract that gives the holder of the option the
right to buy from the writer (seller) of the call option, in return for
a premium paid, the security underlying the option at a specified
exercise price at any time during the term of the option. The writer of
the call option has the obligation upon exercise of the option to
deliver the underlying security upon payment of the exercise price
during the option period.
A put option is a contract that, in return for the premium, gives the
holder of the option the right to sell to the writer (seller) the
underlying security at a specified price during the term of the option.
The writer of the put, who receives the premium, has the obligation to
buy the underlying security upon exercise, at the exercise price during
the option period.
If the Fund has written an option, it may terminate its obligation by
effecting a closing purchase transaction. This is accomplished by
purchasing an option of the same series as the option previously
written. There can be no assurance that a closing purchase transaction
can be effected when the Fund so desires.
An option may be closed out only on an exchange that provides a
secondary market for an option of the same series. Although the Fund
will generally purchase or write only those options for which there
appears to be an active secondary market, there is no assurance that a
liquid secondary market on an exchange will exist for any particular
option. The Fund will not purchase options if, as a result, the
aggregate cost of all outstanding options exceeds 10% of the Fund's
total assets.
The Fund may write put and call options on stock indexes for the 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.
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
261356.5
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<PAGE>
"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, Martin Luther King, Jr. 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 ABC Fund, The Gabelli
Small Cap Growth Fund, The Gabelli Equity Income Fund, The
261356.5
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<PAGE>
Gabelli Growth Fund, The Gabelli Asset Fund, The Gabelli Global
Telecommunications Fund, The Gabelli Global Interactive Couch Potato(R)
Fund, The Gabelli Global Convertible Securities Fund, The Gabelli U.S.
Treasury Money Market Fund, Gabelli Gold Fund, Inc., Gabelli Capital
Asset Fund and Gabelli International Growth Fund, Inc. which are
open-end investment companies; and The Gabelli Equity Trust Inc., The
Gabelli Convertible Securities Fund, Inc. and The Gabelli Global
Multimedia Trust Inc., which are closed-end investment companies; having
aggregate assets as of March 31, 1998, in excess of $6.6 billion.
Gabelli Advisers, Inc., an affiliate of the Adviser, manages the Gabelli
Westwood Funds with aggregate assets under management of approximately
$348 million as of March 31, 1998. Gabelli Fixed Income LLC is an
affiliated Investment Adviser to The Treasurer's Fund, Inc. and separate
accounts and as of March 31, 1998 had aggregate assets under management
of $1.2 billion. GAMCO Investors, Inc. ("GAMCO"), a wholly-owned
subsidiary of the Adviser, acts as investment adviser for individuals,
pension trusts, profit-sharing trusts and endowments, and had aggregate
assets in excess of $7.2 billion under its management as of March 31,
1998. The current business address of the Adviser 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. The Fund may invest in the
securities of companies which are investment management clients of
GAMCO. In addition, portfolio companies or their officers or directors
may be minority shareholders of the Adviser or its affiliates.
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. Mr. Gabelli also 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 the Adviser. 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 the Adviser and its subsidiaries, Mr. Gabelli serves as
an officer and/or director of various other companies. Owing to the
diverse nature of Mr. Gabelli's responsibilities with respect to the
Adviser, 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 the Adviser 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.
261356.5
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<PAGE>
The Fund's Plan of Distribution. Pursuant to a Distribution Plan (the
"Plan") adopted by the Fund pursuant to Rule 12b-1 under the 1940 Act,
the Fund will make monthly payments to registered broker-dealers,
including the underwriters, who enter into agreements with the Fund
(each, a "Designated Dealer") calculated at the annual rate of 0.25% of
the value of the average daily net assets of the Fund attributable to
outstanding shares of the Fund sold by the Designated Dealer (including
additional shares acquired by reinvestment of dividends). Gabelli &
Company also will be reimbursed annually by other Designated Dealers
(pro rata based on the amounts paid to such Designated Dealers under the
Plan) for out-of-pocket distribution expenses incurred in respect of the
Fund in an amount equal to the excess, if any, of (i) $150,000 over (ii)
the amounts otherwise paid to Gabelli & Company as a Designated Dealer
during such year. Such reimbursements, however, will not increase the
amounts payable under the Plan by the Fund to Gabelli & Company or other
Designated Dealers. Gabelli & Company may in turn enter into selling
agreements with Soliciting Broker-Dealers whereby all or a portion of
the monthly payments paid 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.
261356.5
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<PAGE>
SUBSTITUTION OF SECURITIES. Neither the Sponsor nor the Trustee shall
be liable in any way for any default, failure or defect in any of the
Securities. In the event of a failure to deliver any Security that has been
purchased for the Trust under a contract ("Failed Securities"), the Sponsor is
authorized under the Trust Agreement to direct the Trustee to acquire other
securities ("Substitute Securities") to make up the original corpus of the
Trust.
The Substitute Securities must be purchased within 20 days after the
sale of the portfolio Security or delivery of the notice of the failed contract.
Where the Sponsor purchases Substitute Securities in order to replace Failed
Securities, the purchase price may not exceed the purchase price of the Failed
Securities and the Substitute Securities must be substantially similar to the
Securities originally contracted for and not delivered.
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.
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 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
261356.5
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<PAGE>
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 Certificateholders of the acquisition of the Replacement
Treasury Obligation.
In the event a contract to purchase Securities fails and Replacement
Treasury Obligations are not acquired, the Trustee will distribute to
Certificateholders the funds attributable to the failed contract. The Sponsor
will, in such case, refund the sales charge applicable to the failed contract.
If less than all the funds attributable to a failed contract are applied to
purchase Replacement Treasury Obligations, the remaining money will be
distributed to Certificateholders.
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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.
YEAR 2000 ISSUE. Many existing computer programs use only two digits
to identify a year in the date field and were designed and developed without
considering the impact of the upcoming change in the century. Therefore, for
example, the year "2000" would be incorrectly identified as the year "1900." If
not corrected, many computers applications could fail or create erroneous
results by or at the Year 2000, requiring
261356.5
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substantial resources to remedy. The Sponsor and Trustee believe that the "Year
2000" problem is material to their business and operations and could have a
material adverse effect on the Sponsor's and the Trustee's results of operations
and, in turn, cash available for distribution by the Trustee. Although the
Sponsor and the Trustee are addressing the problem with respect to their
business operations, there can be no assurance that the "Year 2000" problem will
be properly or timely resolved. The "Year 2000" problem may also adversely
affect issuers of the Securities contained in the Trust to varying degrees based
upon various factors. The Sponsor is unable to predict what effect, if any, the
"Year 2000" problem will have on such issuers.
PUBLIC OFFERING
OFFERING PRICE. The Public Offering Price per 100 Units of the Trust
is equal to the aggregate value of the underlying Securities (the price at which
they could be directly purchased by the public assuming they were available) in
the Trust divided by the number of Units outstanding times 100 plus a sales
charge of 5.2% of the Public Offering Price per 100 Units (excluding any
transaction fees) or 5.485% 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.
The method used for computing the sales charge for secondary market
purchases shall be based upon the number of years remaining to the Trust's
Termination Date. The table below sets forth the various sales charges based on
the number of years remaining to the Trust's Termination Date.
As Percent of Public
Years to Termination Offering Price
less than 6 months 0%
6 months to 1 year 2.95%
over 1 yr. to 2 yrs. 3.45%
over 2 yrs. to 3 yrs. 3.90%
over 3 yrs. to 4 yrs. 4.50%
over 4 yrs. 4.90%
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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
5,000 but less than 10,000 2.70%
10,000 but less than 25,000 2.45%
25,000 but less than 50,000 2.20%
50,000 but less than 100,000 2.00%
100,000 or more 1.75%
These discounts 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.
Employees (and their immediate families) of Reich & Tang
Distributors, Inc. (and its affiliates), 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
261356.5
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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.
SPONSOR'S AND UNDERWRITERS' PROFITS. The Sponsor and the Underwriters
receive a gross underwriting commission equal to 5.2% of the Public Offering
Price per 100 Units (equivalent to 5.485% 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.
261356.5
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RIGHTS OF CERTIFICATEHOLDERS
CERTIFICATES. Ownership of Units of the Trust is evidenced by
registered Certificates executed by the Trustee and the Sponsor. Certificates
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 Certificateholders of the Trust on or
shortly after the Distribution Date. Proceeds representing principal received
from the disposition of any of the Securities between a Record Date and a
Distribution Date which are not used for redemptions of Units will be held in
the Principal Account and not distributed until the next Distribution Date. No
distributions will be made to Certificateholders electing to participate in the
Total Reinvestment Plan. Persons who purchase Units between a Record Date and a
Distribution Date will receive their first distribution on the Distribution Date
following the first Record Date on which they are a Certificateholder of record.
As of 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
Certificateholders during such calendar year from the Income and Principal
Accounts, separately stated, of the Trust, expressed both as total dollar
amounts and as dollar amounts representing the pro rata share of each 100 Units
outstanding on the last business day of such calendar year.
The Trustee shall keep available for inspection by Certificateholders
at all reasonable times during usual business hours, books of record and account
of its transactions as Trustee, including records of the names and addresses of
Certificateholders, Certificates issued or held, a current list of Securities in
the portfolio and a copy of the Trust Agreement.
TAX STATUS
The following is a general discussion of certain of the Federal
income tax consequences of the purchase, ownership and disposition of the Units
by U.S. citizens and residents and corporations organized in the United States.
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. 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
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 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
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Certificateholder. The price a Certificateholder pays for its Units, including
sales charges, is allocated among its pro rata portion of each Security held by
the Trust (in proportion to the fair market values thereof on the date the
Certificateholder purchases its Units) in order to determine its initial cost
for its pro rata portion of each Security held by the Trust.
The Trust will contain Treasury Obligations originally issued at a
discount. In general, original issue discount is 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 that
corresponds in general to the economic accrual of interest (adjusted, in the
case of a holder that did not purchase the security on its original issuance, to
eliminate any premiums paid for the Treasury Obligation over the sum of the
issue price and the accrued original issue discount).
Each Certificateholder will be required to include in its gross
income, original issue discount with respect to its 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 its 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 its 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 purchased after April 30, 1993, 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 its 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 to be treated as a regulated investment company. If the
Fund distributes 90% or more of its investment company taxable income and its
net capital gains 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 ordinary income and its capital gain net income for the taxable year
it will not be subject to the 4% excise tax on certain undistributed income of
regulated investment companies. Distributions by the Fund of its investment
company taxable income to its shareholders will be taxable as ordinary income to
such shareholders. Distributions of the Fund's net capital gain, which are
designated as capital gain dividends by the Fund, will be taxable to its
shareholders as long-term capital gain, regardless of the length of time the
shareholders have held their investment in the Fund.
A Certificateholder's portion of gain, if any, upon the sale,
exchange or redemption of Units or the disposition of Securities held by the
Trust that is not attributable to accrued market discount will generally be
considered a capital gain and will be long-term if the Certificateholder has
held its Units (and the Trust has held the Securities) for more than one year.
Capital gains realized by corporations are generally taxed at the same rate as
ordinary income but non-corporate Certificateholders who have a holding period
of more than 12 months realize long-term capital gain and may be subject to a
reduced rate of 20%, 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.
261356.5
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Certificateholders will be subject to tax on their shares of
dividends or capital gains with respect to Securities held by the Trust whether
those amounts are received in cash or reinvested pursuant to the Total
Reinvestment Plan.
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 (and the Trust has held the Securities) for
more than one year. Capital losses are deductible to the extent of capital
gains; in addition, up to $3,000 ($1,500 in the case of married individuals
filing separate returns) of capital losses recognized by non-corporate
Certificateholders may be deducted against ordinary income.
A Certificateholder that itemizes its deductions may also deduct its
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 its 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
income 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 taxable as ordinary income received by the Trust from the
Fund and derived by the Fund from domestic corporations or from qualifying
foreign corporations. 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) during the 90-day period beginning on the date that is 45 days before the
date on which the stock becomes ex-dividend. Moreover, the allowable percentage
of the deduction will be reduced if a corporate Certificateholder owns Units the
financing of which is directly attributable to indebtedness incurred by such
corporation. The dividends received deduction is currently 70%. Congress from
time to time considers proposals to reduce this percentage.
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).
A Certificateholder that chooses option (i) should be treated as
merely exchanging its undivided pro rata ownership of Fund Shares held by the
Trust for sole ownership of a proportionate share of Fund Shares 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
its undivided interest in all of the Trust's Fund Shares for its 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.
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Entities that generally qualify for an exemption from Federal income
tax, such as many pension trusts, are nevertheless taxed under Section 511 of
the Code on unrelated business taxable income. Unrelated business taxable income
is income from a trade or business regularly carried on by the tax-exempt entity
that is unrelated to the entity's exempt purpose. Unrelated business taxable
income generally does not include dividend or interest income or gain from the
sale of investment property, unless such income is derived from property that is
debt-financed or is dealer property. A tax-exempt entity's dividend income from
the Trust and gain from the sale of Units in the Trust or the Trust's sale of
Securities is not expected to constitute unrelated business taxable income to
such tax-exempt entity unless the acquisition of the Unit itself is
debt-financed or constitutes dealer property in the hands of the tax-exempt
entity.
Before investing in the Trust, the trustee or investment manager of
an employee benefit plan (e.g., a pension or profit sharing retirement plan)
should consider among other things (a) whether the investment is prudent under
the Employee Retirement Income Security Act of 1974 ("ERISA"), taking into
account the needs of the plan and all of the facts and circumstances of the
investment in the Trust; (b) whether the investment satisfies the
diversification requirement of Section 404(a)(1)(C) of ERISA; and (c) whether
the assets of the Trust are deemed "plan assets" under ERISA and the Department
of Labor regulations regarding the definition of "plan assets."
Prospective investors are urged to consult their own tax advisers
concerning Federal, state, local and any other tax consequences of purchase,
ownership and disposition of Units 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 Reich & Tang Distributors, Inc., 600 Fifth Avenue, New York, New
York 10020. Units received after 4 P.M., New York Time, will be deemed to have
been repurchased on the next business day. In the event a market is not
maintained for the Units, a Certificateholder may be able to dispose of Units
only by tendering them to the Trustee for redemption.
Units purchased by the Sponsor in the secondary market may be
reoffered for sale by the Sponsor at a price based on the aggregate value of the
Securities in the Trust plus a 4.9% sales charge (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
261356.5
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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 4 New York Plaza, New York, New York
10004, 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 three business days following a tender for redemption, 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 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
261356.5
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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 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,
261356.5
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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. Because certain of the
Securities and Additional Securities may be sold under certain circumstances, no
assurance can be given that the Trust will retain its present size and
composition for any length of time. The proceeds from the sale of a Security or
the exercise of any redemption or call provision will be distributed to
Certificateholders except to the extent such proceeds are applied to meet
redemptions of Units. (See "Liquidity--Trustee Redemption.")
If a default in the payment of amounts due on any Security occurs and
if the Sponsor fails to give immediate instructions to sell or hold that
Security, the Trust Agreement provides that the Trustee, within 30 days of that
failure by the Sponsor, may sell the Security.
The Trust Agreement provides that it is the responsibility of the
Sponsor to instruct the Trustee to reject any offer made by an issuer of any of
the Securities to issue new securities in exchange and substitution for any
Security pursuant to a recapitalization or reorganization, except that the
Sponsor may instruct the Trustee to accept such an offer or to take any other
action with respect thereto as the Sponsor may deem proper if the issuer failed
to declare or pay, or the Sponsor anticipates such issuer will fail to declare
or pay, anticipated dividends with respect thereto.
The Trust Agreement also authorizes the Sponsor to increase the size
and number of Units of the Trust by the deposit of Additional Securities,
contracts to purchase Additional Securities or cash or a letter of credit with
instructions to purchase Additional Securities in exchange for the corresponding
number of additional Units within 90 days subsequent to the initial Date of
Deposit, provided that the original proportionate relationship between the Fund
Shares and Treasury Obligations established on the initial Date of Deposit is
maintained to the extent practicable. Deposits of Additional Securities in the
Trust subsequent to the initial Date of Deposit must replicate exactly the
proportionate relationship between the Fund Shares and Treasury Obligations in
the Trust portfolio at the end of the initial 90-day period.
With respect to deposits of Additional Securities (or cash or a
letter of credit with instructions to purchase Additional Securities), in
connection with creating additional Units of the Trust, the Sponsor may specify
the minimum numbers in which Additional Securities will be deposited or
purchased. If a deposit is not sufficient to acquire minimum amounts of each
Security, Additional Securities may be acquired in the order of the Security
most under-represented immediately before the deposit when compared to the
original proportionate relationship. If Securities of an issue originally
deposited are unavailable at the time of the subsequent deposit, the Sponsor may
(1) deposit cash or a letter of credit with instructions to purchase the
Security when it becomes available, or (2) deposit (or instruct the Trustee to
purchase) either Securities of one or more other issues originally deposited or
a Substitute Security.
TRUST AGREEMENT AND AMENDMENT. The Trust Agreement may be amended by
the Trustee and the Sponsor without the consent of any of the
Certificateholders: (1) to cure any ambiguity or to correct or supplement any
provision which may be defective or inconsistent; (2) to change any provision
thereof as may be required by the Securities and Exchange Commission or any
successor governmental agency; or (3) to make such other provisions in regard to
matters arising thereunder as shall not adversely affect the interests of the
Certificateholders.
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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 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. 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
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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 and to the extent 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. A Certificateholder's tax
basis for the Units acquired pursuant to this option will
generally be equal to the purchase price of those Units.
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).
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 Certificate holder
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.
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THE SPONSOR. The Sponsor, Reich & Tang Distributors, Inc. ("Reich &
Tang"), a Delaware corporation, is engaged in the brokerage business and is a
member of the National Association of Securities Dealers, Inc. Reich & Tang is
also a registered investment advisor. Reich & Tang maintains its principal
business offices at 600 Fifth Avenue, New York, New York 10020. The sole
shareholder of the Sponsor, Reich & Tang Asset Management, Inc. ("RTAM Inc.") is
wholly owned by NEIC Holdings, Inc. which, effective December 29, 1997, was
wholly owned by NEIC Operating Partnership, L.P. ("NEICOP"). Subsequently, on
March 31, 1998, NEICOP changed its name to Nvest Companies, L.P. ("Nvest"). The
general partners of Nvest are Nvest Corporation and Nvest, L.P. As of March 31,
1998, Metropolitan Life Insurance Company ("MetLife") owned approximately 47% of
the partnership interests of Nvest. Nvest, with a principal place of business at
399 Boylston Street, Boston, MA 02116, is a holding company of firms engaged in
the securities and investment advisory business. These affiliates in the
aggregate are investment advisors or managers to over 80 registered investment
companies. Reich & Tang is Sponsor (and Co-Sponsor, as the case may be) for
numerous series of unit investment trusts, including New York Municipal Trust,
Series 1 (and Subsequent Series), Municipal Securities Trust, Series 1 (and
Subsequent Series), 1st Discount Series (and Subsequent Series), Multi-State
Series 1 (and Subsequent Series), Mortgage Securities Trust, Series 1 (and
Subsequent Series), Insured Municipal Securities Trust, Series 1 (and Subsequent
Series) and 5th Discount Series (and Subsequent Series), Equity Securities
Trust, Series 1, Signature Series, Gabelli Communications Income Trust (and
Subsequent Series) and Schwab Trusts.
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.
THE TRUSTEE. The Trustee is The Chase Manhattan Bank with its
principal executive office located at 270 Park Avenue, New York, New York 10017
and its unit investment trust office at 4 New York Plaza, New York, New York
10004 (800) 428-8890. The Trustee is subject to the supervision 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.
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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
business unit of J.J. Kenny Company, Inc., a subsidiary of The McGraw-Hill
Companies, Inc., with its main offices located at 65 Broadway, New York, New
York 10006. The Evaluator is a registered investment advisor and also provides
financial information services.
The value of the Securities in the Trust portfolio is determined in
good faith by the Evaluator on the basis set forth under "Public
Offering--Offering Price." The Sponsor, the Trustee and the Certificateholders
may rely on any evaluation furnished by the Evaluator and shall have no
responsibility for the accuracy thereof. Determinations by the Evaluator under
the Trust Agreement shall be made in good faith upon the basis of the best
information available to it, provided, however, that the Evaluator shall be
under no liability to the Sponsor, the Trustee or Certificateholders for errors
in judgment, except in cases of its own willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations and duties.
The 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.
261356.5
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<PAGE>
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 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.
Unless the Sponsor otherwise directs, 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.
261356.5
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<PAGE>
EXCHANGE PRIVILEGE AND CONVERSION OFFER
Unitholders will be able to elect to exchange any or all of their
Units of this Trust for Units of one or more of any available series of Equity
Securities Trust, Insured Municipal Securities Trust, Municipal Securities
Trust, New York Municipal Trust or Mortgage Securities Trust (the "Exchange
Trusts") subject to a reduced sales charge as set forth in the prospectus of the
Exchange Trust (the "Exchange Privilege"). 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 an Exchange Trust (the "Conversion Trusts") at the Public
Offering Price for units of the Conversion Trust subject to a reduced sales
charge as set forth in the prospectus of the Conversion Trust (the "Conversion
Offer"). Under the Exchange Privilege, the Sponsor's repurchase price during the
initial offering period of the Units being surrendered will be based on the
market value of the Securities in the Trust portfolio or on the aggregate offer
price of the Bonds in the other Trust Portfolios; and, after the initial
offering period has been completed, will be based on the aggregate bid price of
the securities in the particular Trust portfolio. Under the Conversion Offer,
units of the Redemption Trust must be tendered to the trustee of such trust for
redemption at the redemption price determined as set forth in the relevant
Redemption Trust's prospectus. Units in an Exchange or Conversion Trust will be
sold to the Unitholder at a price based on the aggregate offer price of the
securities in the Exchange or Conversion Trust portfolio (or for units of Equity
Securities Trust, based on the market value of the underlying securities in the
trust portfolio) during the initial public offering period of the Exchange or
Conversion Trust; and after the initial public offering period has been
completed, based on the aggregate bid price of the securities in the Exchange or
Conversion Trust portfolio if its initial offering has been completed plus
accrued interest (or for units of Equity Securities Trust, based on the market
value of the underlying securities in the trust portfolio) and a reduced sales
charge.
Except for Unitholders who wish to exercise the Exchange Privilege or
Conversion Offer within the first five months of their purchase of Units of the
Exchange or Redemption Trust, any purchaser who purchases Units under the
Exchange Privilege or Conversion Offer will pay a lower sales charge than that
which would be paid for the Units by a new investor. For Unitholders who wish to
exercise the Exchange Privilege or Conversion Offer within the first five months
of their purchase of Units of the Exchange or Redemption Trust, the sales charge
applicable to the purchase of units of an Exchange or Conversion Trust shall be
the greater of (i) the reduced sales charge or (ii) an amount which when coupled
with the sales charge paid by the Unitholder upon his original purchase of Units
of the Exchange or Redemption Trust would equal the sales charge applicable in
the direct purchase of units of an Exchange or Conversion Trust.
In order to exercise the Exchange Privilege the Sponsor must be
maintaining a secondary market in the units of the available Exchange Trust. The
Conversion Offer is limited only to unit owners of any Redemption Trust.
Exercise of the Exchange Privilege and the Conversion Offer by Unitholders is
subject to the following additional conditions (i) at the time of the
Unitholder's election to participate in the Exchange Privilege or the Conversion
Offer, there must be units of the Exchange or Conversion Trust available for
sale, either under the initial primary distribution or in the Sponsor's
secondary market, (ii) exchanges will be effected in whole units only, (iii)
Units of the Mortgage Securities Trust may only be acquired in blocks of 1,000
Units and (iv) Units of the Equity Securities Trust may only be acquired in
blocks of 100 Units. Unitholders will not be permitted to advance any funds in
excess of their redemption in order to complete the exchange. Any excess
proceeds received from a Unitholder for exchange, or from units being redeemed
for conversion, will be remitted to such Unitholder.
The Sponsor reserves the right to suspend, modify or terminate the
Exchange Privilege and/or the Conversion Offer. The Sponsor will provide
Unitholders of the Trust with 60 days' prior written notice of any termination
or material amendment to the Exchange Privilege or the Conversion Offer,
provided that, no notice
261356.5
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<PAGE>
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 the Conversion
Offer, to add any new unit investment trust sponsored by Reich & Tang or a
sponsor controlled by or under common control with Reich & Tang, or to delete a
series which has been terminated from eligibility for the Exchange Privilege or
the Conversion Offer, (ii) there is a suspension of the redemption of units of
an Exchange or Conversion Trust under Section 22(e) of the Investment Company
Act of 1940, or (iii) an Exchange Trust temporarily delays or ceases the sale of
its units because it is unable to invest amounts effectively in accordance with
its investment objectives, policies and restrictions. During the 60-day notice
period prior to the termination or material amendment of the Exchange Privilege
described above, the Sponsor will continue to maintain a secondary market in the
units of all Exchange Trusts that could be acquired by the affected Unitholders.
Unitholders may, during this 60-day period, exercise the Exchange Privilege in
accordance with its terms then in effect.
To exercise the Exchange Privilege, a Unitholder should notify the
Sponsor of his desire to exercise his Exchange Privilege. 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 an Exchange or Conversion Trust
are at the time available for sale and such Units may lawfully be sold in the
state in which the Unitholder is a resident, the Unitholder will be provided
with a current prospectus or prospectuses relating to each Exchange or
Conversion 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. The conversion 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 a
portion of the sales charge.
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 ACCOUNTANTS. The financial statements of the Trust for
the year ended December 31, 1998, December 31, 1997 and December 31, 1996,
included in Part A of this Prospectus have
261356.5
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<PAGE>
been examined by PricewaterhouseCoopers LLP, independent accountants. The
financial statements have been so included in reliance on their report given
upon the authority of said firm as experts in accounting and auditing.
LEGAL MATTERS. The Investment Company Act of 1940 (the "Act") limits
the amounts that registered investment companies (such as the Trust) can own of
other registered investment companies (such as the Fund). However, Section
12(d)(1)(E) of the Act would exempt the Trust from these limitations if the Fund
is the only "investment security" held by the Trust. While the term "investment
security" is not defined in Section 12(d) of the Act, it is defined in another
section of the Act to exclude government securities (such as the Treasury
Obligations) from its scope. Therefore, since the Trust only owns shares of the
Fund and Treasury Obligations it complies with the exception of Section
12(d)(1)(E). Further, the Office of Chief Counsel of the Division of Investment
Management of the Securities and Exchange Commission granted the Sponsor "no
action" assurance on this issue.
DESCRIPTION OF CORPORATE BOND RATINGS
MOODY'S INVESTORS SERVICE, INC.
Aaa: Bonds which are rated Aaa are judged to be the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as Aaa securities or fluctuations of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A: Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
Baa: Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
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.
261356.5
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<PAGE>
Ca: Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
market shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Unrated: Where no rating has been assigned or where a rating has been
suspended or withdrawn, it may be for reasons unrelated to the quality of the
issue.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of
securities that are not rated as a matter of
policy.
3. There is a lack of essential data pertaining to the
issue or issuer.
4. The issue was privately based, in which case the
rating is not published in Moody's Investors
Service, Inc.'s publications.
Suspension or withdrawal may occur if new and material circumstances
arise, the effects of which preclude satisfactory analysis; if there is no
longer available reasonable up-to-date data to permit a judgment to be formed;
if a bond is called for redemption; or for other reasons.
Note: Those bonds in the Aa, A, Baa, Ba and B groups which Moody's
believe possess the strongest investment attributes are designated by the
symbols, Aa-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
261356.5
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<PAGE>
bonds will likely have some quality and protective characteristics, they are
outweighed by large uncertainties of major risk exposures to adverse conditions.
C1: The rating C1 is reserved for income bonds on which no interest
is being paid.
D: Bonds rated D are in default, and payment of interest and/or
repayment of principal is in arrears.
Plus (+) or minus (-): The ratings from "AA" to "CCC" may be modified
by the addition of a plus or minus sign to show relative standing within the
major rating categories.
NR: Indicates that no rating has been requested, that there is
insufficient information on which to base a rating or that S&P does not rate a
particular type of obligation as a matter of policy.
261356.5
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<PAGE>
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
261356.5
-38-
<PAGE>
<TABLE>
<S> <C>
No person is authorized to give any information or to EST EQUITY SECURITIES
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 30, 1999
state to any person to whom it is not lawful to make
such offer in such state.
Sponsor:
Table of Contents Reich & Tang Distributors, Inc.
600 Fifth Avenue
Title Page New York, N.Y. 10020
212-830-5200
PART A
Summary of Essential Information ......................................A-6
Portfolio..............................................................A-7
Audit and Financial Information........................................F-1 Trustee:
PART B The Chase Manhattan Bank
The Trust................................................................1 4 New York Plaza
Risk Factors............................................................14 New York, N.Y. 10003
Public Offering.........................................................17
Rights of Certificateholders............................................20
Tax Status..............................................................21
Liquidity...............................................................24 Evaluator:
Total Reinvestment Plan.................................................26
Trust Administration....................................................26 Kenny S&P Evaluation Services
Trust Expenses and Charges..............................................31 65 Broadway
Exchange Privilege and Conversion Offer.................................33 New York, N.Y. 10006
Other Matters...........................................................34
Description of Corporate Bond Ratings...................................35
</TABLE>
Parts A and B of this Prospectus do not contain all of the information set
forth in the registration statement and exhibits relating thereto, filed with
the Securities and Exchange Commission, Washington, D.C., under the Securities
Act of 1933, and the Investment Company Act of 1940, and to which reference is
made.
261356.5
<PAGE>
PART II
ADDITIONAL INFORMATION NOT REQUIRED
IN PROSPECTUS
CONTENTS OF REGISTRATION STATEMENT
This Post-Effective Amendment to the Registration Statement on Form S-6
comprises the following papers and documents:
The facing sheet on Form S-6.
The Cross-Reference Sheet (incorporated by reference to the Post-Effective
Amendment to Form S-6 Registration Statement No. 33-51009, filed on April 29,
1996).
The Prospectus consisting of pages.
Signatures.
Consent of Independent Accountants.
Consent of Counsel (included in Exhibit 99.3.1).
The following exhibits:
99.1.1 -- Reference Trust Agreement including certain amendments to the
Trust Indenture and Agreement (filed as Exhibit 99.1.1 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
99.1.1.1 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 Reich & Tang Distributors,
Inc. (filed as Exhibit 99.1.3.5 to Form S-6 Registration
Statement No. 333-44301 on January 15, 1998 and incorporated
herein by reference).
99.1.3.5 -- By-Laws of Reich & Tang Distributors, Inc. (filed as Exhibit
99.1.3.6 to Form S-6 Registration Statement No. 333-44301 on
January 15, 1998 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 99.3.1 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.
99.6.0 -- Powers of Attorney of Reich & Tang Distributors, Inc., by its
officers and a majority of its Directors (filed as Exhibit
99.6.0 to Form S-6 Registration Statement No. 333-44301 on
January 15, 1998 and incorporated herein by reference).
II-1
264469.1
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant, Equity Securities Trust, Series 4, EquiT'S certifies that it has met
all of the requirements for effectiveness of this Post-Effective Amendment to
the Registration Statement pursuant to Rule 485(b) under the Securities Act of
1933. The registrant has duly caused this Post-Effective Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York and State of New York on the 19th day
of April, 1999.
EQUITY SECURITIES TRUST, SERIES 4, EquiT'S
(Registrant)
REICH & TANG DISTRIBUTORS, INC.
(Depositor)
By: /s/PETER J. DeMARCO
--------------------------
Peter J. DeMarco
(Executive Vice President)
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment to the Registration Statement has been signed below by the
following persons, who constitute the principal officers and a majority of the
directors of Reich & Tang Distributors, Inc., the Depositor, in the capacities
and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
<S> <C> <C>
RICHARD E. SMITH, III President and Director )
PETER S. VOSS Director ) April 19, 1999
G. NEAL RYLAND Director )
STEVEN W. DUFF Director )By: /s/PETER J. DEMARCO
-------------------
PETER J. DeMARCO Executive Vice President ) Peter J. DeMarco
RICHARD I. WEINER Vice President ) as Executive Vice
BERNADETTE N. FINN Vice President ) President and
LORRAINE C. HYSLER Secretary ) Attorney-In-Fact*
RICHARD DE SANCTIS Treasurer )
EDWARD N. WADSWORTH Executive Officer )
</TABLE>
- --------
* Executed copies of Powers of Attorney were filed as Exhibit 99.6.0 to Form
S-6 to Registration Statement No. 333-44301 on January 15, 1998.
II-2
264469.1
<PAGE>
Consent of Independent Accountants
We hereby consent to the use in the Prospectus constituting part of this
Post-Effective Amendment to the registration statement on Form S-6 of our report
dated March 19, 1999, relating to the financial statements and financial
highlights for the three years ended December 31, 1998 of the Equity Securities
Trust Series 4, EquiT's, which appear in such Prospectus. We also consent to the
reference to us under the heading "Independent Accountants" in the Prospectus.
PricewaterhouseCoopers LLP
Boston, MA
April 26, 1999
II-3
264469.1
<PAGE>
Standard & Poor's J.J. Kenny Frank A. Ciccotto, Jr.
65 Broadway Senior Vice President and
New York, NY 10006-2551 General Manager
Tel 212 770 4417 Office Evaluation Department
212 770 4422 Desk
Fax 212 797 8681
[email protected] Standard & Poor's
A Division of The McGraw-Hill Companies
April 30, 1999
Reich & Tang Distributors, Inc.
600 Fifth Avenue
New York, NY 10020
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, a division of
J.J. Kenny Co., Inc. as evaluator.
In addition, we hereby confirm that the ratings indicated in the
above-referenced Amendment to the Registraton Statement for the respective bonds
comprising the trust portfolio are the ratings indicated in our KENNYBASE
database.
You are hereby authorized to file a copy of this letter with the
Securities and Exchange Commission.
Sincerely,
/s/ Frank A. Ciccotto
----------------------------------
Frank A. Ciccotto
FAC/trh
