As filed with the Securities and Exchange Commission on April 28, 2000
Registration No. 33-51009
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST-EFFECTIVE AMENDMENT No. 6
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: ING FUNDS DISTRIBUTOR, INC.
C. Complete address of depositor's principal executive offices:
ING FUNDS DISTRIBUTOR, INC.
1475 Dunwoody Drive
West Chester, Pennsylvania 19380
D. Name and complete address of agent for service:
PETER J. DeMARCO Copy of comments to:
Senior Vice President MICHAEL R. ROSELLA, ESQ.
ING Funds Distributor, Inc. Battle Fowler LLP
1475 Dunwoody Drive 75 East 55th Street
West Chester, Pennsylvania 19380 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 29, 2000 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,
1999 on or about March 29, 2000.
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 ING Funds Distributor, Inc. (successor to
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, 1999 (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, 2000
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 ING Funds Distributor, 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 4.9% of the
Public Offering Price per 100 Units or 5.152% of the net amount invested in
Securities per 100 Units. (See "Summary of Essential Information.") Any cash
held by the Trust will be added to the Public Offering Price. For additional
information regarding the Public Offering Price, the descriptions of dividend
and principal distributions, repurchase and redemption of Units and other
essential information regarding the Trust, see the "Summary of Essential
Information" for the Trust. If Units had been purchased on the Evaluation Date,
the Public Offering Price would have been $1,974.04 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
A-4
148298.3
<PAGE>
Period. The Sponsor does not anticipate that the period will be as long as 60
days, and it could be as short as one day, depending on the liquidity of the
Securities being sold. The liquidity of any Security depends on the daily
trading volume of the Security and the amount that the Sponsor has available for
sale on any particular day. During the Liquidation Period, Certificateholders
who have not chosen to receive distributions-in-kind will be at risk to the
extent that Fund Shares are not sold; for this reason the Sponsor will be
inclined to sell the Securities in as short a period as they can without
materially adversely affecting the price of the Securities. Fund Shares, as more
fully described in the prospectus for the Fund, will be redeemed through certain
broker-dealers and the Fund's transfer agent at the net asset value next
computed after the redemption request is received.
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, 1999
<TABLE>
<S> <C> <C>
DATE OF DEPOSIT+: January 21, 1994 EVALUATION TIME: 4:00 p.m. New York
AGGREGATE VALUE OF SECURITIES............. ......$3,200,501 Time.
NUMBER OF UNITS.....................................177,387 MINIMUM PRINCIPAL DISTRIBUTION: $1.00
FRACTIONAL UNDIVIDED per 100 Units.
INTEREST IN TRUST.............................1/177,387 LIQUIDATION PERIOD: Beginning 60 days prior
SECONDARY MARKET PUBLIC OFFERING to the Mandatory Termination Date.
PRICE MINIMUM VALUE OF TRUST: The Trust may
Total Net Assets of the Trust................$3,331,146 be terminated if the value of the Trust is less
Divided By # of Units than 40% of the aggregate value of the Securities
(times 100).................................$1,877.90 at the completion of the Deposit Period.
Plus Sales Charge of 4.9% MANDATORY TERMINATION DATE: The
of Public Offering Price.......................$96.14 earlier of August 15, 2008 or the disposition of
Public Offering Price per the last Security in the Trust.
100 Units...................................$1,974.04 TRUSTEE: The Chase Manhattan Bank
REDEMPTION & SPONSOR'S REPURCHASE TRUSTEE'S ANNUAL FEE++: $.93 per 100
PRICE PER 100 UNITS+++........................$1,877.90 Units outstanding.
EXCESS OF SECONDARY MARKET PUBLIC SPONSOR: ING Funds Distributor, Inc.
OFFERING PRICE OVER REDEMPTION & EVALUATOR: Kenny S&P Evaluation Services.
SPONSOR'S REPURCHASE PRICE EVALUATOR'S FEE FOR EACH EVALUATION
PER 100 UNITS....................................$96.14 OF TREASURY OBLIGATIONS: $5.00 per
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, 1999
DESCRIPTION OF PORTFOLIO*
$2,669,000 face amount of Treasury Obligations maturing on August 15, 2008
and 87,226 Fund Shares were held in the Trust on December 31, 1999. The Treasury
Obligations and the Fund Shares represent 46.99% and 53.01%, 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, 1999.
- --------------------------
*Changes in the Trust Portfolio: From January 1, 2000 to March 15, 2000,
$325,000 ($181,870.80 principal amount) of Treasury Obligations and 8,700 Fund
Shares were sold and are no longer contained in the Trust. 7,299 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>
<CAPTION>
Distributions of Distributions of
Net Asset* Interest During Principal During
Value the Period the Period
Period Ended Units Outstanding per 100 Units (per 100 Units) (per 100 Units)
- ------------ ----------------- --------------- ----------------- ----------------
<S> <C> <C> <C> <C>
December 31, 1997 226,712 $1,644.00 -0- $53.20
December 31, 1998 192,792 1,791.00 -0- 133.31
December 31, 1999 177,387 1,877.90 $16.33 55.41
</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 Auditors
The Sponsor, Trustee and Certificateholders of
Equity Securities Trust Series 4, EquiT's
We have audited the accompanying statement of net assets of Equity Securities
Trust Series 4, EquiT's, including the portfolio, as of December 31, 1999 and
the related statement of operations, and changes in net assets and financial
highlights for the year then ended. These financial statements and financial
highlights are the responsibility of the Trustee. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audit. The statement of operations, statement of changes in net assets
and financial highlights for each of the two years in the period ended December
31, 1998 were audited by other auditors whose report thereon dated March 19,
1999, expressed an unqualified opinion on those financial statements and
financial highlights.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of the securities
owned by correspondence with the Trustee. An audit also includes assessing the
accounting principles used and significant estimates made by the Trustee, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the 1999 financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Equity Securities Trust, Series 4, EquiT's at December 31, 1999, the results of
its operations, changes in its net assets and financial highlights for the year
then ended, in conformity with accounting principles generally accepted in the
United States.
/s/ERNST & YOUNG LLP
New York, New York
April 15, 2000
<PAGE>
Equity Securities Trust Series 4, EquiT's
Portfolio
December 31, 1999
<TABLE>
<CAPTION>
Portfolio Principal Percentage Cost of Market
No. Amount/ Shares Name of Issuer of Trust (1) Securities (2) Value (3)
- ------------- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 $ 2,669,000 Zero Coupon U.S. Treasury Bonds 46.99% $ 1,737,583 $ 1,503,955
Maturing August 15, 2008
2 87,226 shs. The Gabelli Value Fund Inc. 53.01 1,054,430 1,696,546
-----------------------------------------------
Total Investment in Securities 100.00% $ 2,792,013 $ 3,200,501
===============================================
</TABLE>
See accompanying footnotes to portfolio and notes to financial statements.
<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, 1999, the net unrealized appreciation of all the securities
was comprised of the following:
Gross unrealized appreciation $ 642,116
Gross unrealized depreciation (233,628)
-------------------
Net unrealized appreciation $ 408,488
===================
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, 1999
<TABLE>
<CAPTION>
<S> <C>
Investments in securities, at market value (cost $2,792,013) $ 3,200,501
Other assets
Receivable for securities sold 27,807
Dividend receivable 152,996
--------------------
Total other assets 180,803
--------------------
Liabilities
Advance from Trustee 50,158
--------------------
Total liabilities 50,158
--------------------
Excess of other assets over total liabilities 130,645
--------------------
Net assets (177,387 units of fractional undivided interest
outstanding, $18.78 per unit) $ 3,331,146
====================
</TABLE>
The accompanying notes form an integral part of the financial statements.
<PAGE>
Equity Securities Trust Series 4, EquiT's
Statements of Operations
<TABLE>
<CAPTION>
Year ended December 31,
1999 1998 1997
---------------------------------------------------------
<S> <C> <C> <C>
Investment income
Interest $154,871 $ 146,312 $ 118,446
Dividends 89,471 146,297 305,135
---------------------------------------------------------
Total investment income 244,342 292,609 423,581
---------------------------------------------------------
Expenses
Trustee's fees 3,008 6,666 7,166
Evaluator's fee 1,369 1,364 1,364
Sponsor's advisory fee 577 1,102 1,359
---------------------------------------------------------
Total expenses 4,954 9,132 9,889
---------------------------------------------------------
Net investment income 239,388 283,477 413,692
---------------------------------------------------------
Realized and unrealized gain (loss)
Realized gain on investments 35,249 150,674 110,145
Unrealized appreciation on investments 15,475 155,046 367,195
---------------------------------------------------------
Net gain on investments 50,724 305,720 477,340
---------------------------------------------------------
Net increase in net assets resulting from
operations $ 290,112 $ 589,197 $ 891,032
=========================================================
</TABLE>
The accompanying notes form an integral part of the financial statements.
<PAGE>
Equity Securities Trust Series 4, EquiT's
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Year ended December 31,
1999 1998 1997
---------------------------------------------------------
<S> <C> <C> <C>
Operations
Net investment income $ 239,388 $ 283,477 $ 413,692
Realized gain on investments 35,249 150,674 110,145
Unrealized appreciation on investments 15,475 155,046 367,195
---------------------------------------------------------
Net increase in net assets resulting from
operations 290,112 589,197 891,032
---------------------------------------------------------
Distributions to Certificateholders
Investment income 31,483 - -
Principal 106,826 302,230 159,233
Redemptions
Interest - 109 -
Principal 273,062 561,594 968,663
---------------------------------------------------------
Total distributions and redemptions 411,371 863,933 1,127,896
---------------------------------------------------------
Total (decrease) (121,259) (274,736) (236,864)
Net assets
Beginning of year 3,452,405 3,727,141 3,964,005
---------------------------------------------------------
End of year (including undistributed net investment
income of $2,359,455, $2,220,614 and $1,937,246,
respectively) $ 3,331,146 $ 3,452,405 $ 3,727,141
=========================================================
</TABLE>
The accompanying notes form an integral part of the financial statements.
<PAGE>
Equity Securities Trust Series 4, EquiT's
Financial Highlights
Selected data for a unit of the Trust outstanding:*
<TABLE>
<CAPTION>
Year ended December 31,
1999 1998 1997
---------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of year** $17.91 $16.44 $13.24
---------------------------------------------------------
Interest income .84 .70 .45
Dividend income .48 .70 1.16
Expenses (.03) (.04) (.04)
---------------------------------------------------------
Net investment income 1.29 1.36 1.57
---------------------------------------------------------
Net gain or loss on investments(1) .33 1.55 2.24
---------------------------------------------------------
Total from investment operations 1.62 2.91 3.81
---------------------------------------------------------
Less distributions
to Certificateholders
Income .17 - -
Principal .58 1.44 .61
---------------------------------------------------------
Total distributions .75 1.44 .61
---------------------------------------------------------
Net asset value, end of year** $18.78 $17.91 $16.44
=========================================================
</TABLE>
(1) Net gain or loss on investments is a result of changes in outstanding units
since January 1, 1999, 1998 and 1997, respectively, and the dates of net gain
and loss on investments.
* Unless otherwise stated, based upon average units outstanding during the year
of 185,090 ([177,387 + 192,792]/2) for 1999, 209,252 ([192,792 +226,712]/2)
for 1998 and of 263,000 ([226,712 + 299,288]/2) for 1997.
** Based upon actual units outstanding.
The accompanying notes form an integral part of the financial statements.
<PAGE>
Equity Securities Trust Series 4, EquiT's
Notes to Financial Statements
December 31, 1999
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) had
become the successor sponsor to certain of the unit investment trusts previously
sponsored by Bear, Stearns & Co. Inc. As successor sponsor, Reich & Tang had
assumed all of the obligations and rights of Bear, Stearns & Co. Inc., the
previous sponsor.
Effective February 9, 2000, ING Funds Distributor, Inc. ("ING") has become the
successor sponsor to certain unit investment trusts previously sponsored by
Reich & Tang. As successor sponsor, ING has assumed all of the obligations and
rights of Reich & Tang, 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.
<PAGE>
Equity Securities Trust Series 4, EquiT's
Notes to Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
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.
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.
<PAGE>
Equity Securities Trust Series 4, EquiT's
Notes to Financial Statements (continued)
4. Trust Administration (continued)
The Trust Indenture and Agreement also requires the Trust to redeem units
tendered. For the years ended December 31, 1999, 1998 and 1997, 15,405, 33,920
and 75,576 units were redeemed, respectively.
The Trust pays an annual fee for trustee services rendered by the Trustees 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, 1999,
1998 and 1997, the "Trustee's Fees" are comprised of Trustee fees of $1,256,
$2,783, and $2,108 and other expenses of $1,752, $3,883, and $5,058,
respectively. The other expenses include professional, printing, and
miscellaneous fees.
5. Net Assets
At December 31, 1999, the net assets of the Trust represented the interest of
Certificateholders as follows:
<TABLE>
<S> <C>
Original cost of 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 (5,415,712)
Net unrealized appreciation 408,488
Undistributed net investment income 2,359,455
Distributions in excess of proceeds from investments (1,311,996)
--------------------
Total $ 3,331,146
====================
</TABLE>
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 $916,814.
<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, 2000
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., the predecessor to ING Funds Distributor, 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 referred to as "Securities".) These additional Units each
represent, to the extent practicable, an undivided interest in the same number
and type
261356.6
<PAGE>
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
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
261356.6
-2-
<PAGE>
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 Class A shares of the Gabelli Value Fund Inc. (the
"Fund"). On December 31, 1999, the total net assets of the Fund were
$1,205,320,444. 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 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
261356.6
-3-
<PAGE>
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 Year
ended ended ended ended ended ended ended ended
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94 12/31/93 12/31/92
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of year. $16.08 $14.30 $11.52 $11.61 $10.49 $12.09 $10.13 $9.48
------ ------ ------ ------ ------ ------ ------ -----
Net investment income/(loss).. (0.06) (0.05) (0.05) (0.02) 0.05 0.09 0.05 0.09
Net realized and unrealized gain
(loss)on investments....... 5.15 3.32 5.55 1.04 2.30 (0.09) 3.95 1.11
---- ---- ---- ---- ---- ------ ---- ----
Total from investment operations 5.09 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............ (1.72) (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........... (1.72) (1.49) (2.72) (1.11) (1.23) (1.60) (2.04) (0.55)
------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of year.. $19.45 $16.08 $14.30 $11.52 $11.61 $10.49 $12.09 $10.13
====== ====== ====== ====== ====== ====== ====== ======
Total Return**................ 31.9% 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) $1,205,320 $798,812 $596,547 $460,836 $486,144 $436,629 $491,193 $423,381
Ratio of net investment income/loss
to average net assets....... (0.40)% (0.41)% (0.45)% (0.12)% 0.42% 0.73% 0.38% 0.75%
Ratio of operating expenses to
average net assets.......... 1.38% 1.40% 1.42% 1.40% 1.50% 1.50% 1.53% 1.52%
Portfolio turnover rate....... 59.00% 46.00% 43.90% 37.10% 64.60% 66.60% 21.40% 0.10%
</TABLE>
Year Year 9/29/89
ended ended through
12/31/91(a) 12/31/90 12/31/89*
----------- -------- --------
Operating performance:
Net asset value, beginning of year. $8.51 $9.58 $9.0000
----- ----- -------
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 $9.58
===== ====== =====
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%
- ---------------------
* 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.
261356.6
-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;
261356.6
-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 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.
261356.6
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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 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
261356.6
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<PAGE>
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.
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
261356.6
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<PAGE>
(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.
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
261356.6
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<PAGE>
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 "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.
261356.6
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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 LLC serves as investment
advisor to the Fund. Gabelli Funds LLC is a New York limited liability
company which also serves as an investment adviser to 15 other open-end
investment companies, and 4 closed-end investment companies with
aggregatge assets in excess of $10.6 billion as of December 31, 1999. The
Adviser is a registered investment adviser under the Investment Advisers
Act of 1940, as amended. Mr. Mario J. Gabelli may be deemed a
"controlling person" of the Adviser on the basis of his controlling
interest of the ultimate parent company of the Adviser. The Adviser has
several affiliates that provide investment advisory services; 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 assets under management of approximately
$9.4 billion under its management as of December 31, 1999; Gabelli
Advisers, Inc. acts as investment adviser to the Gabelli Westwood Funds
with assets under management of approximately $390 million as of December
31, 1999; Gabelli Securities, Inc. acts as investment adviser to certain
alternative investment products, consisting primarily of risk arbitrage
and merchant banking limited partnerships and offshore companies, with
assets under management of approximately $230 million as of December 31,
1999; and Gabelli Fixed Income LLC acts as investment adviser for the
three portfolios of The Treasurer's Fund and separate accounts having
assets under management of approximately $1.4 billion as of December 31,
1999. The current business address of the Advisor is One Corporate
Center, Rye, New York, 10580-1434.
261356.6
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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 daily and payable monthly,
equal, on an annual basis, to 1.00% of the value of the Fund's average
daily net assets, payable out of the Fund's net assets, which is higher
than that paid by most mutual funds. By its agreement with the Fund, the
Adviser has undertaken certain expense reimbursement obligations.
The Fund's Plan of Distribution. Pursuant to a Distribution Plan (the
"Plan") adopted by the Fund pursuant to Rule 12b-1 under the 1940 Act,
the Fund will make monthly payments to registered broker-dealers,
including the underwriters, who enter into agreements with the Fund
(each, a "Designated Dealer") calculated at the annual rate of 0.25% of
the value of the average daily net assets of the Fund attributable to
outstanding shares of the Fund sold by the Designated Dealer (including
additional shares acquired by reinvestment of dividends). Gabelli &
Company also will be reimbursed annually by other Designated Dealers (pro
rata based on the amounts paid to such Designated Dealers under the Plan)
for out-of-pocket distribution expenses incurred in respect of the 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
261356.6
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<PAGE>
pursuant to the Plan will be paid by Gabelli & Company to a Soliciting
Broker-Dealer for activities intended to result in the distribution of
Fund shares.
Payments under the Plan are not tied exclusively to the distribution
expenses actually incurred by Designated Dealers and such payments may
exceed their distribution expenses. Expenses incurred in connection with
the offering and sale of shares may include, but are not limited to,
payments to the Designated Dealer's (or its affiliates') sales personnel
for selling shares of the Fund; costs of printing and distributing the
other Designated Dealer branch office distribution-related expenses;
payments to and expenses of persons who provide support services in
connection with the distribution of shares of the Fund; and financing
costs on the amount of the foregoing expenses.
The Fund's Board of Directors will evaluate the appropriateness of the
Plan and its payment terms on a continuing basis and in doing so will
consider all relevant factors, including expenses borne by Designated
Dealers in the current year and in prior years and amounts received under
the Plan.
The Sponsor will not receive any Rule 12b-1 fees from the Fund. Any Rule
12b-1 fees paid by the Fund's distributor to the Trustee for performing
servicing functions with respect to the Fund Shares will be used to
reduce directly the expenses and fees otherwise payable by the Trust to
the Trustee. There can be no assurance that the Trustee will receive any
Rule 12b-1 fees in the future.
PORTFOLIO. The Trust consists of the Securities (or contracts to
purchase such Securities together with an irrevocable letter or letters of
credit for the purchase of such contracts) and Additional Securities deposited
upon the creation of additional Units as set forth above and Substitute
Securities acquired by the Trust as long as such Securities may continue to be
held from time to time in the Trust together with uninvested cash realized from
the disposition of Securities. Because certain of the Securities and Additional
Securities from time to time may be sold under certain circumstances, as
described herein, no assurance can be given that the Trust will retain for any
length of time its present size and composition. The Trustee has not
participated and will not participate in the selection of Securities for the
Trust, and neither the Sponsor nor the Trustee will be liable in any way for any
default, failure or defect in any Securities.
Some of the Securities are publicly traded in the over-the-counter
market. The contracts to purchase Securities deposited in the Trust are expected
to settle in five business days, in the ordinary manner for such Securities.
SUBSTITUTION OF SECURITIES. Neither the Sponsor nor the Trustee shall
be liable in any way for any default, failure or defect in any of the
Securities. In the event of a failure to deliver any Security that has been
purchased for the Trust under a contract ("Failed Securities"), the Sponsor is
authorized under the Trust Agreement to direct the Trustee to acquire other
securities ("Substitute Securities") to make up the original corpus of the
Trust.
The Substitute Securities must be purchased within 20 days after the
sale of the portfolio Security or delivery of the notice of the failed contract.
Where the Sponsor purchases Substitute Securities in order to replace Failed
Securities, 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.
261356.6
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<PAGE>
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 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.
261356.6
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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.
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
261356.6
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BBB by S&P) and comparable unrated securities (collectively commonly known as
"junk bonds"). No minimum rating standard is required by the Fund. These lower
rated securities are considered speculative and, while generally providing
greater income than investments in higher rated securities, will involve greater
risk of principal and income (including the possibility of default or bankruptcy
of the issuers of such securities) and may involve greater volatility of price
(especially during periods of economic uncertainty or change) than securities in
the higher rating categories and because yields vary over time, no specific
level of income can ever be assured. These lower rated securities generally tend
to reflect economic changes (and the outlook for economic growth) short-term
corporate and industry developments and the market's perception of their credit
quality (especially during times of adverse publicity) to a greater extent than
during times of adverse publicity to a greater extent than higher rated
securities which react primarily to fluctuations in the general level of
interest rates (although these lower rated securities are also affected by
changes in interest rates). In the past, economic downturns or an increase in
interest rates have, under certain circumstances, caused a higher incidence of
default by the issuers of these securities and may do so in the future,
especially in the case of highly leveraged issuers. The prices for these
securities may be affected by legislative and regulatory developments. For
example, federal rules require that savings and loan associations gradually
reduce their holdings of securities. An effect of such legislation may be to
depress the prices of outstanding lower rated securities. In addition,
investment in these lower rated securities may involve greater liquidity and
valuation risks than those for investment grade securities. To the extent there
is no established secondary market for these securities, there could be thin
trading of such securities which could adversely impact the Board of Directors'
ability to accurately value such securities and the Fund's assets. Furthermore,
the liquidity of these lower rated securities may be affected by the market's
perception of their credit quality. Therefore, the judgment of the Fund's
Adviser may at times play a greater role in valuing these securities than in the
case of investment grade securities, and it also may be more difficult during
times of certain adverse market conditions to dispose of these lower rated
securities to meet redemption requests or to respond to changes in the market.
PUBLIC OFFERING
OFFERING PRICE. The Public Offering Price per 100 Units of the Trust is
equal to the aggregate value of the underlying Securities (the price at which
they could be directly purchased by the public assuming they were available) in
the Trust divided by the number of Units outstanding times 100 plus a sales
charge of 4.9% of the Public Offering Price per 100 Units (excluding any
transaction fees) or 5.152% of the net amount invested in Securities per 100
Units. In addition, the net amount invested in Securities involves a
proportionate share of amounts in the Income Account and Principal Account, if
any. The Public Offering Price can vary on a daily basis from the amount stated
on the cover of this Prospectus in accordance with fluctuations in the market
value of the Securities and the price to be paid by each investor will be
computed as of the date the Units are purchased.
The aggregate value of the Securities is determined in good faith by
the Evaluator on each "Business Day" as defined in the Trust Agreement in the
following manner: during the initial offering period on the basis of the net
asset value of the Fund Shares and the offering side evaluation of the Treasury
Obligations and following the initial offering period on the basis of the net
asset value of the Fund Shares and the bid side evaluation of the Treasury
Obligations. The evaluation generally shall be based on the closing purchase
price in the over-the- counter market (unless the Evaluator deems these prices
inappropriate as a basis for evaluation) or if there is no such closing purchase
prices, then the Evaluator may ascertain the values of the Treasury Obligations
using any of the following methods, or a combination thereof, which it deems
appropriate: (a) on the basis of current offering prices for the Treasury
Obligations as obtained from investment dealers or brokers who customarily deal
in securities comparable to those held in the Trust, (b) if offering prices are
not available for the Treasury Obligations, on the basis of current offering
prices for comparable securities, (c) by appraising the value of the Treasury
Obligations on the offering side of the market or by such other appraisal deemed
appropriate by the Evaluator or (d) by any combination of the above, each as of
the Evaluation Time.
261356.6
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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%
EMPLOYEE DISCOUNTS. Employees (and their immediate families) of ING
Funds Distributor, 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
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
261356.6
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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 4.9% of the Public Offering
Price per 100 Units (equivalent to 5.152% of the net amount invested in the
Securities). Additionally, the Sponsor may realize a profit on the deposit of
the Securities in the Trust representing the difference between the cost of the
Securities to the Sponsor and the cost of the Securities to the Trust (See
"Portfolio.") The Sponsor or any Underwriter may realize profits or sustain
losses with respect to Securities deposited in the Trust which were acquired
from underwriting syndicates of which they were a member.
The Sponsor may have participated as an underwriter or manager,
co-manager or member of underwriting syndicates from which some of the aggregate
principal amount of the Securities were acquired for the Trust. All or a portion
of the Securities deposited in the Trust may have been acquired through the
Sponsor.
During the initial offering period and thereafter to the extent
additional Units continue to be offered by means of this Prospectus, the
underwriting syndicate may also realize profits or sustain losses as a result of
fluctuations after the initial Date of Deposit in the aggregate value of the
Securities and hence in the Public Offering Price received by the Sponsor and
the Underwriters for the Units. Cash, if any, made available to the Sponsor
prior to settlement date for the purchase of Units may be used in the Sponsor's
business subject to the limitations of 17 CFR 240.15c3-3 under the Securities
Exchange Act of 1934 and may be of benefit to the Sponsor.
Upon termination of the Trust, the Trustee may utilize the services of
the Sponsor for the sale of all or a portion of the Securities in the Trust.
In maintaining a market for the Units (see "Sponsor Repurchase") the
Sponsor will realize profits or sustain losses in the amount of any difference
between the price at which they buy Units and the price at which they resell
such Units.
RIGHTS OF CERTIFICATEHOLDERS
CERTIFICATES. 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.
261356.6
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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 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.
261356.6
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<PAGE>
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 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 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 and
acquired after March 1, 1984, 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
261356.6
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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 issued after July 18, 1984 and obligations issued on or
before July 18, 1984 that were 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.
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
261356.6
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itemized deductions, exceed 2% of its adjusted gross income. The deduction of
fees and expenses is subject to limitations 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
the Code imposes 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 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.
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
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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 ING Funds Distributor, Inc., 1475 Dunwoody Drive, West Chester,
Pennsylvania 19380. 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 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
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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 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
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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, 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
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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.
In determining whether to dispose of or hold Securities, new securities
or property, the Sponsor may be advised by the Portfolio Supervisor.
TRUST AGREEMENT AND AMENDMENT. The Trust Agreement may be amended by
the Trustee and the Sponsor without the consent of any of the
Certificateholders: (1) to cure any ambiguity or to correct or supplement any
provision which may be defective or inconsistent; (2) to change any provision
thereof as may be required by the Securities and Exchange Commission or any
successor governmental agency; or (3) to make such other provisions in regard to
matters arising thereunder as shall not adversely affect the interests of the
Certificateholders.
The Trust Agreement may also be amended in any respect, or performance
of any of the provisions thereof may be waived, with the consent of the holders
of Certificates evidencing 662/3% of the Units then outstanding for the purpose
of modifying the rights of Certificateholders; provided that no such amendment
or waiver shall reduce any Certificateholder's interest in the Trust without his
consent or reduce the percentage of Units required to consent to any such
amendment or waiver without the consent of the holders of all Certificates. The
Trust Agreement may not be amended, without the consent of the holders of all
Certificates in the Trust then outstanding, to increase the number of Units
issuable or to permit the acquisition of any Securities in addition to or in
substitution for those initially deposited in such Trust, except in accordance
with the provisions of the Trust Agreement. The Trustee shall promptly notify
Certificateholders, in writing, of the substance of any such amendment.
TRUST TERMINATION. The Trust Agreement provides that the Trust shall
terminate upon the maturity, redemption or other disposition, as the case may
be, of the last of the Securities held in such Trust but in no event is it to
continue beyond the Mandatory Termination Date. If the value of the Trust shall
be less than the minimum amount set forth under "Summary of Essential
Information" in Part A, the Trustee may, in its discretion, and shall, when so
directed by the Sponsor, terminate the Trust. The Trust may also be terminated
at any time with the consent of the holders of Certificates representing 100% of
the Units then outstanding. The Trustee may utilize the services of the Sponsor
for the sale of all or a portion of the Securities in the Trust. In the
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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 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.
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Depending on the amount of proceeds to be invested in Units of the New
Series and the amount of other orders for Units in the New Series, the Sponsor
may purchase a large amount of securities for the New Series in a short period
of time. The actual market impact of the Sponsor's purchases, however, is
currently unpredictable because the actual amount of securities to be purchased
and the supply and price of those securities is unknown. A similar problem may
occur in connection with the sale of Securities during the 60 day period
immediately following the commencement of the Liquidation Period. The Sponsor
believes that the sale of underlying Securities over a 60 day period as
described above is in the best interest of a Certificateholder and may mitigate
the negative market price consequences stemming from the trading of large
amounts of Securities. The Securities may be sold in fewer than 60 days if, in
the Sponsor's judgment, such sales are in the best interest of
Certificateholders. The Sponsor, in implementing such sales of securities on
behalf of the Trustee, will seek to maximize the sales proceeds and will act in
the best interests of the Certificateholders. There can be no assurance,
however, that any adverse price consequences of heavy trading will be mitigated.
Certificateholders who do not make any election will be deemed to have
elected to receive the Redemption Price per Unit in cash (option number 2).
The Sponsor may for any reason, in its sole discretion, decide not to
sponsor any subsequent series of the Trust, without penalty or incurring
liability to any Certificateholder. If the Sponsor so decides, the Sponsor will
notify the Trustee of that decision, and the Trustee will notify the
Certificateholders before the Termination Date. All Certificateholders will then
elect either option 1 or option 2.
By electing to reinvest in the New Series, the Certificateholder
indicates his interest in having his terminating distribution from the Trust
invested only in the New Series created following termination of the Trust; the
Sponsor expects, however, that a similar reinvestment program will be offered
with respect to all subsequent series of the Trust, thus giving
Certificateholders a yearly opportunity to elect to "rollover" their termination
distributions into a New Series. The availability of the reinvestment privilege
does not constitute a solicitation of offers to purchase units of a New Series
or any other security. A Certificateholder's election to participate in the
reinvestment program will be treated as an indication of interest only. The
Sponsor intends to coordinate the date of deposit of a future series so that the
terminating trust will terminate contemporaneously with the creation of a New
Series.
The Sponsor reserves the right to modify, suspend or terminate the
reinvestment privilege at any time.
THE SPONSOR. Effective February 9, 2000, ING Funds Distributor, Inc.
has become the successor to Reich & Tang Distributors, Inc. as Sponsor to the
Trust. ING Funds Distributor, Inc., an Iowa corporation, is a wholly owned
indirect subsidiary of ING Group. ING Group, among the leading global financial
services organizations, is engaged in asset management, banking and insurance
activities in 60 countries worldwide with over 82,000 employees. The Sponsor is
a member of the National Association of Securities Dealers, Inc.
The information included herein is only for the purpose of informing
investors as to the financial responsibility of the Sponsor and its ability to
carry out its contractual obligations. The Sponsor will be under no liability to
Unitholders for taking any action, or refraining from taking any action, in good
faith pursuant to the Trust Agreement, or for errors in judgment except in cases
of its own willful misfeasance, bad faith, gross negligence or reckless
disregard of its 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
become incapable of acting or become bankrupt or their affairs are taken over by
public authorities, then the Trustee may either (i) appoint a successor sponsor;
(ii) terminate the Trust Agreement and liquidate the Trust; or (iii) continue to
act as Trustee without terminating the Trust Agreement. Any successor sponsor
appointed by the
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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.
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
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information available to it, provided, however, that the Evaluator shall be
under no liability to the Sponsor, the Trustee or Certificateholders for errors
in judgment, except in cases of its own willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations and duties.
The Evaluator may resign or may be removed by the Sponsor and the
Trustee, and the Sponsor and the Trustee are to use their best efforts to
appoint a satisfactory successor. Such resignation or removal shall become
effective upon the acceptance of appointment by the successor Evaluator. If upon
resignation of the Evaluator no successor has accepted appointment within the
thirty days after notice of resignation, the Evaluator may apply to a court of
competent jurisdiction for the appointment of a successor.
TRUST EXPENSES AND CHARGES
At no cost to the Trust, the Sponsor has borne all the expenses of
creating and establishing the Trust, including the cost of initial preparation
and execution of the Trust Agreement, registration of the Trust and the Units
under the Investment Company Act of 1940 and the Securities Act of 1933, the
initial preparation and printing of the Certificates, legal expenses,
advertising and selling expenses, expenses of the Trustee, initial fees and
other out-of-pocket expenses.
The Sponsor will not charge the Trust a fee for their services as such.
(See "Sponsor's and Underwriters' Profits.")
The Trustee receives, for its ordinary recurring services to the Trust,
an annual fee in the amount set forth under "Summary of Essential Information"
in Part A. Such fee shall be reduced directly by any Rule 12b-1 fees paid by the
Fund's distributor to the Trustee for performing servicing functions with
respect to the Fund Shares. There can be no assurance that the Trustee will
receive any Rule 12b-1 fees in the future. For a discussion of the services
performed by the Trustee pursuant to its obligations under the Trust Agreement,
see "Trust Administration" and "Rights of Certificateholders."
For each evaluation of the Treasury Obligations in the Trust, the
Evaluator shall receive a fee as set forth in the "Summary of Essential
Information."
ING Mutual Funds Management Co. LLC, an affiliate of ING Funds
Distributor, Inc., will receive, for portfolio supervisory services to the
Trust, an annual fee in the amount set forth under "Summary of Essential
Information" in Part A. This fee may exceed the actual cost of providing
portfolio supervisory services for the Trust, but at no time will the total
amount received for portfolio supervisory services rendered to all series of the
Equity Securities Trust in any calendar year exceed the aggregate cost to ING
Mutual Funds Management Co. LLC of supplying such services in such year. (See
"Trust Administration-Portfolio Supervision.")
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. The
Trustee's fees, the Evaluator's fees and the Portfolio Supervisor's 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
261356.6
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<PAGE>
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.
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.
261356.6
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<PAGE>
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 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 ING or a sponsor controlled by or under common control with ING, 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
261356.6
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<PAGE>
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. Battle
Fowler LLP, 75 East 55th Street, New York, New York 10022 as counsel for the
Sponsor. Messrs. Carter, Ledyard & Milburn, Two Wall Street, New York, New York
10005 have acted as counsel for the Trustee.
INDEPENDENT ACCOUNTANTS/AUDITORS. The financial statements of the Trust
for the year ended December 31, 1999 included in Part A of this Prospectus have
been examined by Ernst & Young LLP, independent auditors. 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.
PricewaterhouseCoopers LLP has consented to the incorporation by reference of
their report on the statements of operations, changes in net assets and
financial highlights for the Trusts included in Part A of this Prospectus for
the periods ended December 31, 1997 and December 31, 1998, respectively.
PORTFOLIO SUPERVISOR. ING Mutual Funds Management Co. LLC, a Delaware
limited liability company, is a wholly-owned indirect subsidiary of ING Group
and is an affiliate of the Sponsor.
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.
261356.6
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<PAGE>
Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as Aaa securities or fluctuations of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of a
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be
present elements of danger with respect to principal or interest.
Ca: Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
market shortcomings.
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.
261356.6
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<PAGE>
Note: Those bonds in the Aa, A, Baa, Ba and B groups which Moody's
believe possess the strongest investment attributes are designated by the
symbols, Aa-1, A-1, Baa-1, and B-1.
STANDARD & POOR'S CORPORATION
AAA: Bonds rated AAA have the highest rating assigned by Standard &
Poor's Corporation ("S&P"). Capacity to pay interest and repay principal is
extremely strong.
AA: Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the higher rated issues only in small degree.
A: Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in the highest rated
categories.
BBB: Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than in higher rated categories.
BB, B, CCC, CC, C: Bonds rated BB, B, CCC, CC and C are regarded, on
balance, as predominantly speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of this obligation. BB
indicates the lowest degree of speculation and C the highest degree of
speculation. While such bonds will likely have some quality and protective
characteristics, they are outweighed by large uncertainties of major risk
exposures to adverse conditions.
C1: The rating C1 is reserved for income bonds on which no interest is
being paid.
D: Bonds rated D are in default, and payment of interest and/or
repayment of principal is in arrears.
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.
261356.6
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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
261356.6
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<PAGE>
No person is authorized to give any EST EQUITY SECURITIES
information or to make any TRUST SERIES 4
representations not contained in
Parts A and B of the Prospectus; and GABELLI VALUE FUND AND
any information or representation not U.S. TREASURIES
contained herein must not be relied
upon as having been authorized by the EquiT's
Trust, the Trustee or the Sponsor.
The Trust is registered as a unit
investment trust under the Investment
Company Act of 1940. Such
registration does not imply that the
Trust or any of its Units have been
guaranteed, sponsored, recommended or (Unit Investment Trust)
approved by the United States or any
state or agency or officer thereof. Prospectus
Dated: April 30, 2000
This Prospectus does not constitute Sponsor:
an offer to sell, or a solicitation
of an offer to buy, securities in any ING Funds Distributor, Inc.
state to any person to whom it is not
lawful to make such offer in such 1475 Dunwoody Drive
state. West Chester, P.A. 19380
1-877-463-6464
Table of Contents
Title Page Trustee:
- ----- ----
The Chase Manhattan Bank
PART A 4 New York Plaza
Summary of Essential Information .........A-6 New York, N.Y. 10003
Portfolio.................................A-7
Audit and Financial Information...........A-1
PART B Evaluator:
The Trust...................................1
Risk Factors...............................14 Kenny S&P Evaluation Services
Public Offering............................16 65 Broadway
Rights of Certificateholders...............18 New York, N.Y. 10006
Tax Status.................................20
Liquidity..................................23
Total Reinvestment Plan....................25
Trust Administration.......................25
Trust Expenses and Charges.................30
Exchange Privilege and Conversion Offer....31
Other Matters..............................33
Description of Corporate Bond Ratings......33
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.
261356.6
<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/Auditors.
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 -- Articles of Incorporation and Articles of Amendment of ING Funds
Distributor, Inc. (filed as Exhibit 99.1.3.5 to Amendment No. 2
to Form S-6 Registration Statement No. 333-31048 on March 28,
2000 and incorporated herein by reference).
99.1.3.5 -- By-Laws of ING Funds Distributor, Inc. (filed as Exhibit
99.1.3.6 to Amendment No. 2 to Form S-6 Registration Statement
No. 333-31048 on March 28, 2000 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 ING Funds Distributor, Inc., by its
officers and a majority of its Directors (filed as Exhibit
99.6.0 to Form S-6 Registration Statement No. 333-31048 on
February 24, 2000 and incorporated herein by reference).
- --------------
* Being filed by this Amendment
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, 2000.
EQUITY SECURITIES TRUST, SERIES 4, EquiT'S
(Registrant)
ING FUNDS DISTRIBUTOR, INC.
(Depositor)
By: /s/ PETER J. DEMARCO
------------------------
Peter J. DeMarco
(Senior 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 ING Funds Distributor, Inc., the Depositor, in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
<S> <C> <C>
JOHN J. PILEGGI Chief Executive Officer and Director )
MITCHELL J. MELLEN President and Director ) April 19, 2000
DONALD E. BROSTROM Chief Financial Officer, Treasurer )
and Director
ERIC M. RUBIN Director ) By:/s/ PETER J. DEMARCO
____________________
Peter J. DeMarco
as Senior Vice
President and
Attorney-in-Fact*
</TABLE>
- --------
* Executed copies of Powers of Attorney were filed as Exhibit 99.6.0 to Form
S-6 Registration Statement No. 333-31048 on February 24, 2000.
II-2
264469.1
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the reference to our firm under the caption "Independent Auditors"
and to the use of our report dated April 15, 2000, in the Registration Statement
and related Prospectus of Equity Securities Trust Series 4, EquiT's.
ERNST & YOUNG LLP
New York, New York
April 25, 2000
S
II-3
264469.1
<PAGE>
Consent of Independent Accountants
We hereby consent to the incorporation by reference 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 two years ended December 31, 1998 of
the Equity Securities Trust, Series 4, EquiT's which appears in such Prospectus.
We also consent to the reference to us under the heading "Independent
Accountants" in the Prospectus.
PricewaterhouseCoopers LLP
Boston, MA
April 24, 2000
948964.1
Standard & Poor's J.J. Kenny Frank A. Ciccotto, Jr.
55 Water Street, 45th Floor Senior Vice President and
New York, NY 10041 General Manager
Tel 212 438 4417/Office Evaluation Department
212 438 4422/Desk
Fax 212 438 7747
[email protected] Standard & Poor's
A Division of The McGraw Hill Companies
April 28, 2000
ING Funds Distributors, Inc.
230 Park Avenue
New York, NY 10169
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 Registration 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,
Frank A. Ciccotto
