<PAGE>
File No. 333-35615
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2
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:
THE PAINEWEBBER EQUITY TRUST,
GROWTH STOCK SERIES 21
B. Name of Depositor:
PAINEWEBBER INCORPORATED
C. Complete address of Depositor's principal executive
office:
PAINEWEBBER INCORPORATED
1285 Avenue of the Americas
New York, New York 10019
D. Name and complete address of agents for service:
PAINEWEBBER INCORPORATED
Attention: Mr. Robert E. Holley
1200 Harbor Boulevard
Weehawken, New Jersey 07087
Copy to:
CARTER, LEDYARD & MILBURN
Attention: Kathleen H. Moriarty, Esq.
2 Wall Street
New York, New York 10005
E. Total and amount of securities being registered:
An indefinite number of Units pursuant to Rule 24f-2
of the Investment Company Act of 1940.
F. Proposed maximum offering price to the public
of the securities being registered:
Indefinite
<PAGE>
G. Amount of filing fee, computed at one-thirty-
fourth of 1 percent of the proposed maximum
aggregate offering price to the public:
None required pursuant to Rule 24f-2.
H. Approximate date of proposed sale to public:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF
THE REGISTRATION STATEMENT
/ / Check box if it is proposed that this filing will
become effective on January _, 1998 at 3:00 p.m.
pursuant to Rule 487.
<PAGE>
THE PAINEWEBBER EQUITY TRUST,
GROWTH STOCK SERIES 21
Cross Reference Sheet
Pursuant to Rule 404(c) of Regulation C
under the Securities Act of 1933
(Form N-8B-2 Items required by Instruction 1
as to Prospectus on Form S-6)
Form N-8B-2 Form S-6
Item Number Heading in
- ----------- ----------
Prospectus
- ----------
I. Organization and General Information
- ----------------------------------------
1. (a) Name of Trust ) Front Cover
(b) Title of securities issued )
2. Name and address of Depositor ) Back Cover
3. Name and address of Trustee ) Back Cover
4. Name and address of principal ) Back Cover
Underwriter )
5. Organization of Trust ) The Trust
6. Execution and termination of ) The Trust
Trust Agreement ) Termination of the
) Trust
7. Changes of name ) *
8. Fiscal Year ) *
9. Litigation ) *
II. General Description of the Trust
and Securities of the Trust
---------------------------
10. General Information regarding Trust's ) The Trust
Securities and Rights of Holders ) Rights of
Unitholders
- -------------
* Not applicable, answer negative or not required.
<PAGE>
(a) Type of Securities ) The Trust
(Registered or Bearer) )
(b) Type of Securities ) The Trust
(Cumulative or Distributive) )
(c) Rights of Holders as to ) Rights of Unitholders
Withdrawal or Redemption ) Redemption
) Public Offering of
) Units, Secondary
) Market for Units
) Exchange Option
(d) Rights of Holders as to ) Public Offering of
conversion, transfer, etc. ) Units-Administration
) of the Trust
(e) Rights of Trust issues periodic ) *
payment plan certificates )
(f) Voting rights as to Securities, ) Rights of Unitholders
under the Indenture ) Amendment of the Trust
) Termination of the
) Trust
(g) Notice to Holders as to )
change in )
(1) Assets of Trust )
(2) Terms and Conditions )
of Trust's Securities )
(3) Provisions of Trust ) Amendment of the Indenture
(4) Identity of Depositor ) Administration of the Trust-
and Trustee ) Portfolio Supervision
(h) Consent of Security Holders )
required to change )
(1) Composition of assets ) Amendment of the Indenture
of Trust
(2) Terms and conditions ) Amendment of the Indenture
of Trust's Securities )
(3) Provisions of Indenture )
(4) Identity of Depositor and ) Amendment of the Indenture
Trustee )
11. Type of securities comprising ) The Trust Rights of Unit-
security holder's interest ) holders Administration of
) the Trust-Portfolio
) Supervision
- -------------
* Not applicable, answer negative or not required.
<PAGE>
12. Information concerning periodic ) *
payment certificates )
13. (a) Load, fees, expenses, etc. ) Public Offering Price of
) Units, Administration of
) the Trust, Expenses of the
) Trust
(b) Certain information regarding ) *
periodic payment certificates )
(c) Certain percentages ) Public offering of Units
(d) Certain other fees, etc. )
payable by holders ) Rights of Unitholders
(e) Certain profits receivable by ) Public Offering of Units-
depositor, principal under- ) Public Offering Price;
writers, trustee or affiliated ) -Sponsor's Profit-Secondary
persons ) Market for Units
(f) Ratio of annual charges to ) *
income )
14. Issuance of trust's securities ) The Trust
) Public Offering of Units
15. Receipt and handling of payments ) Public offering of Units
from purchasers )
16. Acquisition and disposition of ) The Trust, Administration
Underlying Securities ) of the Trust, Amendment of
) the Indenture, Termination
) of the Trust
17. Withdrawal or redemption ) Public Offering of Units
) Administration of the Trust
18. (a) Receipt and disposition of ) Distributions, The Trust,
income ) Distributions, Administra-
) tion of the Trust
(b) Reinvestment of distributions ) *
(c) Reserves or special fund ) Distributions, Redemption,
) Expenses of the Trust,
) Termination of the Trust,
) Amendment of the Indenture
- -------------
* Not applicable, answer negative or not required.
<PAGE>
(d) Schedule of distribution ) *
19. Records, accounts and report ) Distributions, Administra-
) tion of the Trust
20. Certain miscellaneous provisions ) Trustee, Sponsor, Termina-
of trust agreement ) tion of the Trust, Amend-
) ment of the Indenture
21. Loans to security holders ) *
22. Limitations on liability ) Sponsor, Trustee, Redemp-
) tion
23. Bonding arrangements ) Included in Form N-8B-2
24. Other material provisions of ) *
trust agreement )
III. Organization Personnel and
Affiliated Persons of Depositor
-------------------------------
25. Organization of Depositor ) Sponsor
26. Fees received by Depositor ) Public Offering of
) Units-Public Offering
) Price, Expenses of the
) Trust
27. Business of Depositor ) Sponsor
28. Certain information as to ) Sponsor
officials and affiliated )
persons of Depositor )
29. Voting securities of Depositor ) *
30. Persons controlling Depositor ) Sponsor
31. Payments by Depositor for certain ) *
other services trust )
32. Payments by Depositor for certain ) *
certain other services )
rendered to trust )
33. Remuneration of employees of ) *
Depositor for certain services )
rendered to trust )
- -------------
* Not applicable, answer negative or not required.
<PAGE>
34. Remuneration of other persons ) *
for certain services rendered )
to trust )
IV. Distribution and Redemption of Securities
---------------------------------------------
35. Distribution of trust's ) Public Offering of Units
securities by states )
36. Suspension of sales of trust's ) *
securities )
37. Revocation of authority to ) *
distribute )
38. (a) Method of distribution ) Public Offering of Units
(b) Underwriting agreements ) The Trust, Administration
(c) Selling agreements ) of The Trust
39. (a) Organization of principal ) Sponsor
Underwriter )
(b) N.A.S.D. membership of ) Sponsor
principal underwriter )
40. Certain fees received by ) Public Offering of Units,
principal underwriter ) Expenses of the Trust
41. (a) Business of principal ) Sponsor
underwriter )
(b) Branch officers of principal )
underwriter )
(c) Salesman of principal ) *
underwriter )
42. Ownership of trust's securities ) *
by certain persons )
43. Certain brokerage commissions ) *
received by principal underwriter )
44. (a) Method of valuation ) Public Offering of Units
) Valuation
(b) Schedule as to offering price ) *
(c) Variation in offering ) Public Offering of Units
Price to certain persons ) Administration of the Trust
- -------------
* Not applicable, answer negative or not required.
<PAGE>
45. Suspension of redemption rights ) *
46. (a) Redemption valuation ) Public Offering of Units
) -Public Offering Price
) -Secondary Market for Units
) Valuation, Redemption
(b) Schedule as to redemption ) *
price )
V. Information concerning the Trustee or Custodian
--------------------------------------------------
47. Maintenance of position in ) Redemption, Public Offering
underlying securities ) of Units-Public Offering
) Price
48. Organization and regulation of ) Trustee
Trustee )
49. Fees and expenses of Trustee ) Expenses of the Trust
50. Trustee's lien ) Expenses of the Trust
VI. Information concerning Insurance of Holders of Securities
-------------------------------------------------------------
51. (a) Name and address of Insurance ) *
Company )
(b) Type of policies ) *
(c) Type of risks insured and ) *
excluded )
(d) Coverage of policies ) *
(e) Beneficiaries of policies ) *
(f) Terms and manner of ) *
cancellation )
(g) Method of determining premiums ) *
(h) Amount of aggregate premiums ) *
paid )
(i) Who receives any part of ) *
premiums )
(j) Other material provisions of ) *
the Trust relating to insurance )
- -------------
* Not applicable, answer negative or not required.
<PAGE>
VII. Policy of Registrant
-------------------------
52. (a) Method of selecting and ) The Trust, Administration
eliminating securities from ) of the Trust
the Trust )
(b) Elimination of securities ) *
from the Trust )
(c) Policy of Trust regarding ) The Trust, Administration
substitution and elimination ) of the Trust
of securities )
(d) Description of any funda- ) The Trust, Administration
mental policy of the Trust ) of the Trust-Portfolio
) Supervision
53. (a) Taxable status of the Trust ) Federal Income Taxes
(b) Qualification of the Trust as )
a regulated investment company )
VIII. Financial and Statistical Information
-------------------------------------------
54. Information regarding the Trust's ) *
past ten fiscal years )
55. Certain information regarding ) *
periodic payment plan certificates )
56. Certain information regarding ) *
periodic payment plan certificates )
57. Certain information regarding ) *
periodic payment plan certificates )
58. Certain information regarding ) *
periodic payment plan certificates )
59. Financial statements ) Statement of Financial
(Instruction 1(c) to Form S-6) ) Condition
- -------------
* Not applicable, answer negative or not required.
<PAGE>
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the
Securities Exchange Act of 1934, the undersigned registrant hereby undertakes
to file with the Securities and Exchange Commission such supplementary and
periodic information, documents and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
<PAGE>
PAINEWEBBER EQUITY TRUST
Growth Stock Series 21
[POWERGRAB LOGO]
- -----------------------------------------------------------------------------
The investment objective of this Trust is to provide for capital
appreciation through an investment in equity stocks having, in Sponsor's
opinion on the Initial Date of Deposit, an above-average potential for
capital appreciation because the issuers thereof may be attractive candidates
for acquisitions. PaineWebber believes that merger and acquisition activity
is likely to accelerate over the next few years, leading to a "power grab"
for attractive acquisition candidates. The value of the Units will fluctuate
with the value of the portfolio of underlying securities.
The minimum purchase is $250. Only whole Units may be purchased.
- -----------------------------------------------------------------------------
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.
- -----------------------------------------------------------------------------
SPONSOR:
PAINEWEBBER INCORPORATED
Read and retain this prospectus for future reference.
PROSPECTUS DATED JANUARY 8, 1998
<PAGE>
ESSENTIAL INFORMATION REGARDING THE TRUST
AS OF JANUARY 7, 1998(1)
<TABLE>
<CAPTION>
<S> <C>
Sponsor: PaineWebber Incorporated
Trustee: Investors Bank & Trust Company
Initial Date of Deposit: January 8, 1998
Aggregate Value of Securities in Trust: ................. $962,500
Number of Units: ........................................ 100,000
Fractional Undivided Interest in the Trust Represented
by Each Unit: .......................................... 1/100,000th
Calculation of Public Offering Price Per Unit(2)
Aggregate Value of Underlying Securities in Trust ...... $962,500
Divided by 100,000 Units ............................... $9.625
Plus Sales Charge of 3.75% of Public Offering Price
(3.90% of net amount invested per Unit) ............... $.375
Public Offering Price per Unit ......................... $10.00
Redemption Value: ........................................... $9.625
Evaluation Time:............................................. 4:00 P.M. New York time.
Income Account Distribution Dates(3): ....................... April 20, 1998 and quarterly
thereafter and on the Mandatory
Termination Date.
Capital Account Distribution Dates(3):....................... January 20, 1999 and annually
thereafter and on the Mandatory
Termination Date. No distributions of
less than $.05 per Unit need be made
from the Capital Account on any
Distribution Date.
Record Dates:................................................ March 31, 1998 and quarterly
thereafter.
Mandatory Termination Date:.................................. January 30, 2003
Discretionary Liquidation Amount:............................ 50% of the value of Securities upon
completion of the deposit of
Securities.
Estimated Annual Organizational Expenses of the Trust(4): .. $.0080 per Unit.
Estimated Other Expenses of the Trust........................ $.0312 per Unit.
-----------------
Total Estimated Annual Expenses of the Trust(5): ........... $.0392 per Unit.
</TABLE>
- ------------
(1) The date prior to the Initial Date of Deposit.
(2) The Public Offering Price will be based upon the value of the Stocks
next computed following receipt of the purchase order plus the
applicable sales charges. Following the Initial Date of Deposit, costs
incurred in connection with the acquisition of additional Stocks will be
at the expense of the Trust. (See "Essential Information Regarding the
Trust--Additional Deposits," "Risk Factors and Special Considerations"
and "Valuation").
(3) See "Distributions".
(4) This Trust (and therefore the investors) will bear all or a portion of
its organizational costs--including costs of preparing the initial
registration statement, the trust indenture and other closing documents,
registering Units with the SEC and the states and the initial audit of
the Portfolio--as is common for mutual funds. Historically, the sponsors
of unit investment trusts have paid all the costs of establishing those
trusts.
(5) See "Expenses of the Trust". Estimated dividends from the Stocks, based
upon last dividends actually paid, are expected by the Sponsor to be
sufficient to pay estimated expenses of the Trust. If such dividends and
income paid are insufficient to pay expenses, the Trustee is authorized
to sell Securities in an amount sufficient to pay such expenses. (See
"Administration of the Trust" and "Expenses of the Trust".)
2
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ESSENTIAL INFORMATION REGARDING THE TRUST (CONTINUED)
THE TRUST. The objective of the PaineWebber Equity Trust, Growth Stock
Series 21 (the "Trust") is to provide for capital appreciation through an
investment in equity stocks which have, in the Sponsor's opinion, on the
Initial Date of Deposit, an above-average potential for capital appreciation,
because the issuers thereof may be attractive candidates for acquisition
(referred to herein as the "Stocks" or the "Securities"). OF COURSE, THERE
CAN BE NO ASSURANCE THAT THE OBJECTIVE OF THE TRUST WILL BE ACHIEVED.
PaineWebber believes that many companies present attractive opportunities
to acquirors and on the Initial Date of Deposit has identified issuers of
Stocks contained in the Trust as potential candidates for acquisition. The
Trust will seek to achieve its objective of capital appreciation through an
investment in a diversified portfolio of such Stocks. PaineWebber believes
that merger and acquisition ("M&A") activity will accelerate for the reasons
described below under the heading "The Composition of the Portfolio."
SUMMARY OF RISK FACTORS. There are certain investment risks inherent in
unit trust portfolios which hold equity securities. The Stocks may appreciate
or depreciate in value or pay dividends depending on the full range of
economic and market influences affecting corporate profitability, the
financial condition of the issuers, the prices of equity securities, the
condition of the stock markets in general and the prices of the stocks in
particular. In addition, rights of common stock holders are generally
inferior to those of holders of debt obligations or preferred stock. See
"Risk Factors and Special Considerations" for a discussion of these risks.
There can also be no assurance that the Trust portfolio will remain
constant during the life of the Trust. For example, the Trustee may be
required to sell Securities to pay for the expenses of the Trust (see
"Expenses of the Trust" and "Administration of the Trust--Accounts"). Also,
certain events might occur which could lead to the elimination of one or more
Stocks from the Portfolio (see "Administration of the Trust--Portfolio
Supervision"), thereby reducing the diversity of the Trust's investments.
Further, under certain circumstances, if a tender offer is made for any of
the Stocks in the Trust, or in the event of a merger or reorganization, the
Trust will either tender the Stocks or sell them as more fully described
under the captions "The Trust" and "Administration of the Trust--Portfolio
Supervision," herein.
3
<PAGE>
THE COMPOSITION OF THE PORTFOLIO.
THE ACQUISITION ACCELERATION
PaineWebber believes that M&A (merger and acquisition) activity is strong
and likely to become even stronger--probably surpassing the late 1980s peak
levels--because acquisitions offer a source of sales growth at a time when a
muted business cycle and deflationary pressures make it very difficult to
raise prices. PaineWebber identifies two ways to invest in this trend: a)
companies that are adept at growing via acquisition and b) companies that are
likely to be acquired at a premium to their market price. M&A activity should
accelerate because companies need to do deals to grow sales, and they have
the ability to do them.
And with PaineWebber's forecast that S&P (Standard & Poor's 500) earnings
growth will slow in 1998 and a concomitant rise in the number of
company-specific earnings disappointments, two other drivers of M&A
activity--albeit somewhat spurious--will be:
o acquisitions undertaken by firms anxious to deflect attention from
their deteriorating financial results, and
o mergers initiated by managers who realize that, if they cannot "fix"
their firm's earnings problems, then selling out is the best route for
them as shareholders and option holders.
NEED
PaineWebber observes that during the 1980s, CEOs (Chief Executive
Officers) could count on price increases for a few points of sales growth.
Adding some unit growth, a little margin expansion and maybe a share buyback
program resulted in earnings-per-share ("EPS") growing at a 10-12% rate.
PaineWebber asserts that those days are over. Over the past year, the
Producer Price Index actually fell 0.6% versus rising 2.2% in the second half
of the 1980s. Today, many CEOs are grateful if their product prices are not
declining, and recent trends in Asia will only accentuate deflationary
pressures.
PaineWebber believes that with price increases a thing of the past,
acquisitions provide an important alternative source of top-line growth. And
acquisitions do so without adding to industry capacity, which is vital at a
time when many industries already have current or incipient gluts. Better
still, after sales are increased via acquisition, margins on these new sales
can be increased by eliminating redundant overhead, cutting costs, etc.
Although there are many specific reasons why companies do
acquisitions--reasons that are set forth below--the underlying motivation is
that they provide an important source of unit growth at a time when price
trends in most industries are flat to down.
ABILITY
PaineWebber believes that most corporations have the ability to make
acquisitions today because they are generating plenty of free cash flow or
can use shares as an acquisition currency. Thanks to the muted business
cycle, S&P profit margins have been at or near peak levels for the past three
years. And sales per share have been climbing at a mid-single-digit rate.
Consequently the earnings and gross cash flow of S&P 500 companies has been
strong. Much of this money is going into capital investment; U.S. business
fixed investment grew at a real rate of 10% over the past three years. But
alot of money is left over for companies to spend on:
o dividend hikes
o debt paydown
4
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o share buybacks
o acquisitions
PaineWebber observes that two of these four possible uses of capital are
not attracting much new money. Dividend increases are out of fashion; the
payout ratio of the S&P 500 is at an all-time low. Debt paydown is also a low
priority because, after six years of economic expansion, balance sheets are
in good shape, with the debt to total equity ratio of the S&P Industrials
moving down over the past four years, and now at the best level in almost ten
years. Debt is a low-cost form of capital. Although a few companies have more
debt than they would like, there are probably more firms with too little debt
than too much.
PaineWebber notes the other two possible uses of capital are share
buybacks and acquisitions. Although they are important for certain firms,
buybacks are over-exaggerated as a source of EPS growth. They are important
for preventing EPS dilution from employee options. But only about 10% of S&P
500 firms actually shrank their share base more than 2% annually over the
past four years.
Consequently, PaineWebber believes, plenty of cash is available to spend
on acquisitions, and deals can also be financed with shares. Over the 1994-96
period, about half of major deals by S&P firms were for cash, and half for
shares. Moreover, CEOs have not only the financial ability to do deals, but
the time and inclination. The heavy lifting of corporate restructuring is
over. Costs have been cut, weak businesses have been sold, margins are high.
Unfortunately, once margins are high, it is difficult to get them higher,
particularly with labor markets tight and plenty of capacity being added
around the world. So generating sales growth becomes a more pressing priority
for CEOs, and acquisitions are an excellent source of top-line growth. With
business conditions healthy in most industries, CEOs have the confidence to
do deals.
THE FEAR FACTOR
PaineWebber observes that most corporations would rather acquire than be
acquired. As competition becomes ever more vicious in a world without price
hikes, bigger is better. "Gorillas" (a term PaineWebber uses to refer to
companies that have dominant market share and are still growing) that
dominate their markets tend to prosper, while weaker firms are at risk of
losing market share and thus their competitiveness. This creates a strong
extra incentive for firms to make acquisitions in order to become the
"gorilla" in their market--or at least to remain competitive with them. And
if a firm decides to make an acquisition, it is better to be early to choose
from potential takeover candidates, before rivals have acquired the prime
companies. This competitive dynamic should lend a further impetus to the
coming acquisition boom.
VALUATIONS WILL NOT DAMPEN DEAL ACTIVITY
Some people argue that M&A activity will slow because deals are too
expensive. PaineWebber disagrees, for several reasons. In the first place, at
a 21x normal price over earnings ratio ("P/E"), the stock market (as measured
by the S&P 500) as a whole is not expensive in the context of 2.5% inflation;
PaineWebber asserts that it is fairly valued. Furthermore, a corporation's
prime alternative to acquiring other companies is to buy back its own stock,
which in many cases is no cheaper than that of potential targets. And if
firms increase dividends instead of doing acquisitions and repurchasing
shares, many shareholders must pay taxes on those dividends at a high
marginal rate--and then, in many cases, reinvest the money back into the
stock market anyway. Finally, although the shares of many target companies
carry high P/Es by the standards of recent history, so do the shares of
acquirors, which can be used as acquisition currency. This is a critical
point and explains, for example, why the pace of deals in the banking
5
<PAGE>
industry has not slowed even though the valuation of deals has climbed from
about a P/E of 15x a few years ago to 20x today. In any case, many
acquisition decisions are driven not by narrow financial criteria but rather
by strategic considerations involving the viability of the company.
EIGHT DEAL DRIVERS
Although the broad reason for acquisitions is a quest for sales growth
that will enhance competitiveness, the specific motivation for deals varies
greatly from industry to industry, depending on competitive dynamics.
PaineWebber identifies eight drivers, discussed below, as among the most
important. Since PaineWebber expects all of them to remain in place over the
next few years, M&A activity will continue to be heavy:
o TO GAIN ECONOMIES OF SCALE in buying materials (particularly important
in packaging), building brands (which is becoming a challenge for
energy utilities), spreading administrative costs over more customers
and investing in cutting-edge technology. Both the food retailing and
banking industries, for example, are beginning to divide between giant
firms that can afford the latest technology and other firms that
cannot. One reason is that software is expensive but "scalable." If it
costs two supermarket chains the same $2 million to develop a
sophisticated inventory control system, but one store has ten times as
many stores, the bigger chain's software investment per store will be
only one tenth as big.
o TO GAIN ECONOMIES OF SCOPE. Many customers prefer "one-stop shopping,"
so the large company that sells a broad range of products has a
competitive advantage. Corporations want to get everything from laptops
to servers from a single hardware vendor. Hospitals would rather deal
with a medical device company that provides a full range of coronary
care products. And managed care providers would rather deal with
hospital companies that have hospitals throughout a metropolitan
region. Auto makers desire fewer, larger, and more sophisticated parts
makers that can help with design work and offer a larger, integrated
product--e.g., all of a car's interior, rather than just the seats or
the dashboard.
o VERTICAL INTEGRATION INTO HIGHER-MARGIN BUSINESSES. Compaq, for
example, acquired Tandem to increase its presence in the high-margin
corporate market, and technology companies may acquire high-margin
content businesses, such as newspapers. Some electrical utilities are
acquiring utilities in foreign countries where margins are higher.
o TO ACQUIRE NEW TECHNOLOGY. In order to migrate from voice to data,
telecom equipment companies such as Lucent and Northern Telecom are
likely to acquire data networking companies. Large healthcare companies
are constantly buying or partnering with small biotech and medical
device companies. Indeed, healthcare is a two-tier sector consisting of
a gradually shrinking number of corporate giants and hundreds of small,
innovative companies that, if successful, are likely to be acquired by
the giants.
o TO ACQUIRE STRATEGIC ASSETS that would be impossible to duplicate in a
timely manner--assets ranging from bank branches and store sites in
crowded cities, to AOL's proprietary spot on the Internet, to electric
utilities that would give energy firms access to major markets
undergoing deregulation. As the global shortage of high-tech workers
intensifies, companies may buy companies partly to acquire their
workforce.
o TO KEEP COMPETITORS OUT OF YOUR BACKYARD. If you own an electric
utility, for example, the last thing you want is for a national energy
company to acquire the natural gas distributor in your area, securing a
business relationship with nearly all of your customers, which could be
used to sell electricity cheaper. It might well make sense to buy the
local gas company for defensive reasons.
6
<PAGE>
o TO RESPOND TO DEREGULATION, which is transforming the competitive
landscape in some of America's biggest industries--finance,
telecommunications, natural gas utilities and electrical utilities,
which collectively account for about 30% of S&P 500 earnings.
o TO EXPAND INTERNATIONALLY. Often the best way to expand overseas is to
buy foreign firms that possess not only factories, products and
employees but also expertise in local business practices and consumer
preferences as well as contacts with suppliers, distributors and
government regulators.
PLAYING THE "POWER GRAB"
Because acquisitions are likely to play a central role in stock market
investing over the next few years, PaineWebber's research analysts have
selected certain stocks in the industries listed below which they believe are
likely acquisition candidates over the next several years. In PaineWebber's
search for such stocks, there was no particular bias toward large
capitalization or small capitalization issues. These are common stocks issued
by companies who may receive income and derive revenues from multiple
industry sources but whose primary industry is listed in the "Schedule of
Investments."
<TABLE>
<CAPTION>
APPROXIMATE PERCENT OF AGGREGATE
PRIMARY INDUSTRY SOURCE MARKET VALUE OF THE TRUST
- ---------------------------- --------------------------------
<S> <C>
Appliances .................. 1.42%
Applications Software ....... 4.28%
Auto/Truck Parts &
Equipment................... 5.00%
Cellular Communications .... 4.32%
Computers ................... 5.70%
Containers .................. 2.85%
Data Processing/Management . 1.43%
Direct Marketing ............ 1.42%
Drug Delivery Systems........ 1.43%
Electric..................... 4.31%
Electronics ................. 4.98%
Finance ..................... 12.92%
Food......................... 2.85%
Gas Distribution............. 4.25%
Internet Software............ 1.31%
Machinery.................... 2.87%
Medical...................... 11.49%
Manufacturing................ 1.43%
Networking Products.......... 5.71%
Oil.......................... 5.72%
Publishing................... 2.84%
Seismic Data Collection ..... 1.41%
Soap & Cleaning
Preparations................ 2.88%
Telecommunications........... 7.18%
</TABLE>
The Stocks may also be grouped into broader industry sectors which present
certain acquisition opportunities as discussed below.
POSSIBLE TAKEOVER ACTIVITY BY INDUSTRY
AUTOS AND AUTO PARTS
The "Big Three" (Ford, Chrysler and General Motors) have significant
amounts of cash but are more likely to spend it on building plants in
emerging markets than on acquisitions. But auto parts is rapidly
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consolidating because auto makers want fewer suppliers that are bigger and
smarter. Current valuation parameters suggest that ARVIN INDUSTRIES, EXCEL
INDUSTRIES, STANDARD PRODUCTS and WALBRO are acquisition candidates. Deals
have been occurring at 70% of trailing sales and 7.4x trailing "earnings
before interest, taxation, depreciation and amortization" ("EBITDA").
ENERGY
PaineWebber believes that large integrated oil companies are unlikely to
make huge acquisitions. Their capital is better spent developing properties.
However, one of the smaller companies, UNOCAL, might be acquired.
But M&A should be plentiful in the Exploration & Production sector, where
NUEVO ENERGY and SANTA FE ENERGY are takeover candidates. The oil service
industry is consolidating as firms attempt to gain pricing power, secure
top-line growth and acquire new technology. VERITAS and WESTERN ATLAS are
likely to be acquired for their seismic technology.
FINANCIALS
PaineWebber believes that there will be more consolidation in banks, S&Ls
(savings & loans), life insurance and REITs (real estate investment trusts)
as firms search for economies of scale in technology, branding, etc. Banks
can afford to pay up for good targets because most deals are for
stock-for-stock, and P/Es of acquirers are rising.
Acquisition candidates include H.F. AHMANSON, BENEFICIAL CORP., FIRST
CHICAGO, FLEET FINANCIAL, GOLDEN STATE BANCORP, MELLON BANK, MONEY STORE,
SOUTHTRUST and STATE STREET.
HEALTHCARE
Healthcare is a two-tier sector comprising of a limited group of big
companies and hundreds of small ones that are either in the development stage
or have a few products on the market. This two-tier sector has hundreds of
small innovative biotech and medical device companies that might be bought
by, or collaborate with, large firms. PaineWebber believes that ALKERMES,
GENZYME TRANSGENICS and TEXAS BIOTECHNOLOGY CORP. are likely to form
collaborations that would boost their share prices; acquisition targets
include CARDIOTHORACIC, ECLIPSE SURGICAL, HEARTPORT, ST. JUDE MEDICAL and
SOFAMOR/DANEK GROUP. The drug industry is relatively fragmented, with the
largest firm's global market share under 5%. Drug companies tend to merge
when the new product flow dries up; SCHERING-PLOUGH and WARNER-LAMBERT may
eventually merge with other firms.
HOUSEHOLD PRODUCTS
PaineWebber believes that U.S. household products' firms are making
acquisitions to grow the top line in a mature industry. Buying makes more
sense than building (e.g., introducing new brands) in this industry because
history has shown that 90% of all brands ultimately fail, only 4% of brands
generate sales of more than $20 million, and only 0.4% of brands generate
sales of more than $100 million.
Clorox might buy CHURCH & DWIGHT; Colgate could merge with CLOROX.
SUNBEAM-OSTER will likely acquire or be acquired while SAMSONITE is likely to
be bought.
MACHINERY
PaineWebber believes that many of the machinery companies are generating
considerable free cash flow. With debt already low, firms are using this cash
primarily to repurchase shares and make acquisitions.
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Two logical acquisitions for Caterpillar would be HARNISCHFEGER, the
dominant maker of mining equipment, and NEW HOLLAND, number two in
agricultural equipment.
PACKAGING
PaineWebber believes that the packaging industry is consolidating as firms
seek economies of scale. BEMIS and SHOREWOOD PACKAGING could be bought by
larger paperboard companies that want to enter a higher value-added business
that is taking share from paperboard.
RETAILING
PaineWebber believes that the supermarket industry is consolidating as
firms seek economies of scale, particularly in technology. Most larger firms
could make acquisitions; two likely targets are DOMINICK'S SUPERMARKETS and
HANNAFORD BROTHERS.
TECHNOLOGY/MEDIA/TELECOM
PaineWebber believes that industries are converging as firms make deals to
enter higher-margin businesses. Tech firms may acquire content providers such
as newspapers (KNIGHT-RIDDER) and Internet firms (AMERICA ONLINE). Cendant,
created by the merger of CUC International and HFS, should prosper as true
synergies are realized; Cendant will make acquisitions, possibly CATALINA
MARKETING and READERS DIGEST. Companies expanding into the high-margin
corporate market might acquire BAAN, CLARIFY, DATA GENERAL, DIGITAL
EQUIPMENT, PEOPLESOFT, STRATUS and VANTIVE. Four consolidating industries
are:
o Networking equipment to enter the fast-growing data networking market,
major telecom equipment firms may acquire ASCEND COMMUNICATIONS, BAY
NETWORKS, CABLETRON SYSTEMS or FORE SYSTEMS. (Separately, Ascend could
look to buy XYLAN.)
o Semiconductor equipment: CREDENCE SYSTEMS, ETEC SYSTEMS, GENUS and LTX
CORP may be bought.
o Wireless services: AIRTOUCH, CENTURY TELEPHONE, PRICELLULAR and 360
COMMUNICATIONS could merge; AT&T might acquire PRICELLULAR; foreign
firms might buy AIRTOUCH, NEXTEL or 360 COMMUNICATIONS.
o Telecommunications: GTE, TELEPORT and U.S. WEST are logical acquisition
candidates as the sector consolidates.
UTILITIES
PaineWebber observes that traditionally, the natural gas and electric
utility industries have been separate and have been regulated at the federal
and state level. This arrangement left the industry fragmented, preventing
economies of scale. In the absence of competition, there was no incentive for
utilities to cut costs, because companies were paid a regulated rate of
return on their asset bases. Greater assets meant higher profits.
Gradually, however, the electric utility and natural gas industries are
simultaneously deregulating and converging--a tremendously complex process
that should eventually cut electricity prices about 25%. Takeover candidates
include IDAHO POWER, NEW YORK STATE ELECTRIC AND GAS and NIPSCO, which
provide an entrance to major electricity markets that are being deregulated.
Recent takeover premiums have been 30-40%. Gas companies that may be bought
are CONSOLIDATED NATURAL GAS; MCN ENERGY; and SONAT.
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ADDITIONAL DEPOSITS. After the first deposit on the Initial Date of
Deposit the Sponsor may, from time to time, cause the deposit of additional
Securities in the Trust where additional Units are to be offered to the
public, maintaining, as closely as practicable, the original percentage
relationships between the number of shares of Stock deposited on the Initial
Date of Deposit, subject to certain adjustments. Costs incurred in acquiring
such additional Stocks will be borne by the Trust. Unitholders will
experience a dilution of their investment as a result of such brokerage fees
and other expenses paid by the Trust during additional deposits of Securities
purchased by the Trustee with cash or cash equivalents pursuant to
instructions to purchase such Securities. (See "The Trust" and "Risk Factors
and Special Considerations".)
TERMINATION. Unless advised to the contrary by the Sponsor, the Trustee
will begin to sell the Securities held in the Trust twenty days prior to the
Mandatory Termination Date. Moneys held upon such sale or maturity of
Securities will be held in non-interest bearing accounts created by the
Indenture until distributed and will be of benefit to the Trustee. The Trust
will terminate approximately five (5) years after the Initial Date of Deposit
regardless of market conditions at the time. (See "Termination of the Trust"
and "Federal Income Taxes".)
PUBLIC OFFERING PRICE. The Public Offering Price per Unit is computed by
dividing the Trust Fund Evaluation by the number of Units outstanding and
then adding a sales charge of 3.75% of the Public Offering Price (3.90% of
the net amount invested). The sales charge is reduced on a graduated scale
for volume purchasers and is reduced for certain other purchasers. Units are
offered at the Public Offering Price computed as of the Evaluation Time for
all sales subsequent to the previous evaluation. The Public Offering Price on
the Initial Date of Deposit, and on subsequent dates, will vary from the
Public Offering Price set forth on page 2. (See "Public Offering of
Units--Public Offering Price".)
DISTRIBUTIONS. The Stocks in the Trust were chosen for their potential as
acquisition candidates, not for their income potential. The Trustee will make
distributions, on the Distribution Dates. (See "Distributions" and
"Administration of the Trust".) Unitholders may elect to have their Income
Account distributions automatically reinvested into additional Units of the
Trust at no sales charge (see "Reinvestment Plan"). Upon termination of the
Trust, the Trustee will distribute to each Unitholder of record on such date
his pro rata share of the Trust's assets, less expenses. The sale of
Securities in the Trust in the period prior to termination and upon
termination may result in a lower amount than might otherwise be realized if
such sale were not required at such time due to impending or actual
termination of the Trust. For this reason, among others, the amount realized
by a Unitholder upon termination may be less than the amount paid by such
Unitholder.
MARKET FOR UNITS. The Sponsor, though not obligated to do so, presently
intends to maintain a secondary market for Units. The public offering price
in the secondary market will be based upon the value of the Securities next
determined after receipt of a purchase order, plus the applicable sales
charge. (See "Public Offering of Units--Public Offering Price" and
"Valuation".) If a secondary market is not maintained, a Unitholder may
dispose of his Units only through redemption. With respect to redemption
requests in excess of $100,000, the Sponsor may determine in its sole
discretion to direct the Trustee to redeem units "in kind" by distributing
Securities to the redeeming Unitholder. (See "Redemption".)
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THE TRUST
The Trust is one of a series of similar but separate unit investment
trusts created under New York law by the Sponsor pursuant to a Trust
Indenture and Agreement * (the "Indenture") dated as of the Initial Date of
Deposit, between PaineWebber Incorporated, as Sponsor and Investors Bank &
Trust Company, as Trustee (the "Trustee"). The objective of the Trust is
capital appreciation through an investment principally in equity stocks
having, in Sponsor's opinion on the Initial Date of Deposit, potential for
capital appreciation. Of course, there can be no assurance that the objective
of the Trust will be achieved.
On the Initial Date of Deposit, the Sponsor deposited with the Trustee
confirmations of contracts for the purchase of Stocks together with an
irrevocable letter or letters of credit of a commercial bank or banks in an
amount at least equal to the purchase price. The value of the Securities was
determined on the basis described under "Valuation". In exchange for the
deposit of the contracts to purchase Securities, the Trustee delivered to the
Sponsor a receipt for Units representing the entire ownership of the Trust.
With the deposit on the Initial Date of Deposit, the Sponsor established a
proportionate relationship between the Securities in the Trust (determined by
reference to the number of shares of each issue of Stock). The Sponsor may,
from time to time, cause the deposit of additional Securities in the Trust
when additional Units are to be offered to the public or pursuant to the
Reinvestment Plan, maintaining as closely as practicable the original
percentage relationship between the Securities deposited on the Initial Date
of Deposit and replicating any cash or cash equivalents held by the Trust
(net of expenses). The original proportionate relationship is subject to
adjustment to reflect the occurrence of a stock split or a similar event
which affects the capital structure of the issuer of a Stock but which does
not affect the Trust's percentage ownership of the common stock equity of
such issuer at the time of such event, to reflect a sale or maturity of
Security or to reflect a merger or reorganization. Stock dividends issued in
lieu of cash dividends, if any, received by the Trust will be sold by the
Trustee and the proceeds therefrom shall be added to the Income Account. (See
"Administration of the Trust" and "Reinvestment Plan").
On the Initial Date of Deposit each Unit represented the fractional
undivided interest in the Securities and net income of the Trust set forth
under "Essential Information Regarding the Trust". However, if additional
Units are issued by the Trust (through the deposit of additional Securities
for purposes of the sale of additional Units or pursuant to the Reinvestment
Plan), the aggregate value of Securities in the Trust will be increased and
the fractional undivided interest represented by each Unit in the balance
will be decreased. If any Units are redeemed, the aggregate value of
Securities in the Trust will be reduced, and the fractional undivided
interest represented by each remaining Unit in the balance will be increased.
Units will remain outstanding until redeemed upon tender to the Trustee by
any Unitholder (which may include the Sponsor) or until the termination of
the Trust. (See "Termination of the Trust".)
The Stocks have been selected for their capital appreciation potential in
light of the Sponsor's opinion, on the Initial Date of Deposit, that the
issuers of such Stocks may be attractive acquisition candidates pursuant to
mergers, acquisitions and tender offers. In general, tender offers involve a
bid by an issuer or other acquiror to acquire a stock pursuant to the terms
of its offer. Payment generally takes the form of cash, securities (typically
bonds or notes), or cash and securities. Pursuant to federal law a tender
offer must remain open for at least 20 days and withdrawal rights apply
during the entire offering period. Frequently offers are conditioned upon a
specified number of shares being tendered and upon the obtaining of
financing. There may be other conditions to the tender offer as well.
Additionally, an offeror
- ------------
*Reference is hereby made to said Trust Indenture and Agreement and any
statements contained herein are qualified in their entirety by the provisions
of said Trust Indenture and Agreement.
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may only be willing to accept a specified number of shares. In the event a
greater number of shares is tendered, the offeror must take up and pay for a
pro rata portion of the shares deposited by each depositor during the period
the offer remains open.
Because the Stocks have been selected with a view to potential
acquisition, the Indenture sets forth criteria to be applied in the event of
a tender offer, merger or reorganization. The Trust is not managed and has
been structured with certain automatic provisions contained in the Indenture.
The foregoing may interfere with the Trust's ability to maximize its
objectives and, consequently, a Unitholder's value. In such case, Unitholders
shall have no rights against the Trust, the Sponsor, the Trustee or any other
party associated with the Trust. The foregoing is not a disclaimer of
responsibilities under Section 36 of the Investment Company Act of 1940.
In the event a tender offer is made for a Stock, on the third business day
prior to the expiration of the best tender offer then in effect, as
determined by the Sponsor, the Sponsor will instruct the Trustee, and the
Trustee will, tender the Stock; provided, however that the Trustee will sell
the Stock on such date if it can realize at least 90% of the value of the
price to be paid pursuant to the tender offer (such value to be determined by
the Sponsor) except where the best tender offer is an offer for any and all
outstanding Stock and is not conditioned upon the offeror's receipt of
financing. In the event the Trustee has tendered and, in Sponsor's opinion, a
better offer is made prior to the expiration of the prior offer, the Trustee
will use its best efforts to exercise its withdrawal rights and follow the
procedures set forth in the preceding sentence. Upon consummation of the
tender offer, in the event any of the Stock tendered is not purchased (which
could occur if such Stock is excluded due to pro rationing) the Trustee will
sell the Stock as soon as practicable. Any securities received pursuant to a
consummated tender offer will be sold by the Trustee as soon as practicable.
If a tender offer fails, the Stock will be returned to the Trust. The
Trustee, pursuant to the terms of the Indenture, will not tender or sell any
Stock subject to a tender offer during any period in which the Trustee is
purchasing Stock to create additional Units, except in those cases where,
pursuant to the Reinvestment Plan, the Trustee creates additional Units on an
Income Account Distribution Date. In such event, the Trustee shall not
include such Stock subject to sale or tender on such date in the deposit of
additional Securities but shall adjust the Percentage Ratios so that the
Trust's percentage ownership shall be allocated on a pro-rata basis to the
remaining Securities held in the Trust Fund.
In the event an issuer of a Stock announces a proposed merger into another
company and certain compensation is to be paid in exchange for the Stock, or
in the event the issuer of a Stock announces a sale of substantially all of
its assets, the Trustee will sell the Stock if it can realize 90% of the
value to be received by shareholders upon completion of the merger or sale
(such value to be determined by the Sponsor). If the Trust holds the Stock
upon completion of the merger, any securities received as compensation will
be sold by the Trustee as soon as practicable. In the event an issuer of
Stock announces that another company will be merged into it, the Stock of
such issuer will be retained unless the Sponsor directs the Trustee to sell
the Stock for reasons set forth under the heading "Administration of the
Trust--Portfolio Supervision." In the event of a corporate reorganization any
securities received by the Trust will be sold as soon as practicable.
In its investment banking, underwriting or merchant banking activities the
Sponsor may acquire material non-public information about an issuer of Stocks
in the Trust. Use of this information by the Sponsor in connection with the
Trust may constitute a violation of the federal securities laws. Therefore,
in order to avoid the possible use of this information there may be
circumstances where the Sponsor is unable to give advice to the Trust,
including advice on the value of a transaction or whether an offer is the
best offer. In such case the Sponsor shall immediately advise the Trustee of
its inability and, in such
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event, (a) with respect to a tender offer, the Trustee is required to sell
the applicable Stock as close to the opening of the stock exchanges as is
practicable on the last business day a tender offer is in effect and (b) with
respect to a sale of substantially all of an issuer's assets or its merger
into another issuer, the Trust will continue to hold the Stocks.
In most circumstances the Trust has been structured to provide for the
sale of Stock at 90% of the value to be received upon completion of a tender,
merger or acquisition in order to provide the Trust a price close to the
price which could be received in the future if certain conditions to such
completion are met. The percentage accommodates a discount reflecting the
time value of money and the uncertainties of the tender, merger or
acquisition taking place.
There is no guarantee that there will be a tender offer for any of the
Stocks, or merger or acquisition of any of the issuers whose stock is
contained in the Trust. In addition, it is possible that legislation or
regulations affecting merger and acquisition activity in the future may be
passed and, if passed, the Sponsor cannot predict the impact upon the Trust.
There is also no guarantee that the price received upon sale or pursuant to
an acquisition will be the best price which could be received by the Trust at
any time. For example, after stock is sold, the value may increase due to
general market factors or due to subsequent tender offers. Additionally, the
price of a Stock may decline for Stocks not taken up pursuant to a tender
offer or in the event a merger or acquisition is not completed.
RISK FACTORS AND SPECIAL CONSIDERATIONS
An investment in Units of the Trust should be made with an understanding
of the risks inherent in an investment in common stocks in general. The
general risks are associated with the rights to receive payments from the
issuer which are generally inferior to creditors of, or holders of debt
obligations or preferred stocks issued by, the issuer. Holders of common
stocks have a right to receive dividends only when and if, and in the
amounts, declared by the issuer's board of directors and to participate in
amounts available for distribution by the issuer only after all other claims
against the issuer have been paid or provided for. By contrast, holders of
preferred stocks have the right to receive dividends at a fixed rate when and
as declared by the issuer's board of directors, normally on a cumulative
basis, but do not participate in other amounts available for distribution by
the issuing corporation. Dividends on cumulative preferred stock must be paid
before any dividends are paid on common stock. Preferred stocks are also
entitled to rights on liquidation which are senior to those of common stocks.
For these reasons, preferred stocks generally entail less risk than common
stocks.
Common stocks do not represent an obligation of the issuer. Therefore they
do not offer any assurance of income or provide the degree of protection of
debt securities. The issuance of debt securities or even preferred stock by
an issuer will create prior claims for payment of principal, interest and
dividends which could adversely affect the ability and inclination of the
issuer to declare or pay dividends on its common stock or the rights of
holders of common stock with respect to assets of the issuer upon liquidation
or bankruptcy. Unlike debt securities which typically have a stated principal
amount payable at maturity, common stocks do not have a fixed principal
amount or a maturity. Additionally, the value of the Stocks in the Trust may
be expected to fluctuate over the life of the Trust.
In addition, there are investment risks common to all equity issues. The
Stocks may appreciate or depreciate in value depending upon a variety of
factors, including the full range of economic and market influences affecting
corporate profitability, the financial condition of issuers, changes in
national or worldwide economic conditions, and the prices of equity
securities in general and the Stocks in particular. Distributions of income,
generally made by declaration of dividends, is also dependent upon several
factors, including those discussed above in the preceding sentence.
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Investors should note that the creation of additional Units subsequent to
the Initial Date of Deposit may have an effect upon the value of previously
existing Units. To create additional Units the Sponsor may deposit cash (or
cash equivalents, e.g., a bank letter of credit in lieu of cash) with
instructions to purchase Securities in amounts sufficient to maintain, to the
extent practicable, the percentage relationship among the Securities based on
the price of the Securities at the Evaluation Time on the date the cash is
deposited. To the extent the price of a Security increases or decreases
between the time cash is deposited with instructions to purchase the Security
and the time the cash is used to purchase the Security, Units will represent
less or more of that Security and more or less of the other Securities in the
Trust. Unitholders will be at risk because of price fluctuations during this
period since if the price of shares of a Security increases, Unitholders will
have an interest in fewer shares of that Security, and if the price of a
Security decreases, Unitholders will have an interest in more shares of that
Security, than if the Security had been purchased on the date cash was
deposited with instructions to purchase the Security. In order to minimize
these effects, the Trust will attempt to purchase Securities as closely as
possible to the Evaluation Time or at prices as closely as possible to the
prices used to evaluate the Trust at the Evaluation Time. Thus price
fluctuations during this period will affect the value of every Unitholder's
Units and the income per Unit received by the Trust. In addition, costs
incurred in connection with the acquisition of Securities will be at the
expense of the Trust and will affect the value of every Unitholder's Units.
In the event a contract to purchase a Stock to be deposited on the Initial
Date of Deposit or any other date fails, cash held or available under a
letter or letters of credit, attributable to such failed contract may be
reinvested in another stock or stocks having characteristics sufficiently
similar to the Stocks originally deposited (in which case the original
proportionate relationship shall be adjusted) or, if not so reinvested,
distributed to Unitholders of record on the last day of the month in which
the failure occurred. The distribution will be made twenty days following
such record date and, in the event of such a distribution, the Sponsor will
refund to each Unitholder the portion of the sales charge attributable to
such failed contract.
BECAUSE THE TRUST IS ORGANIZED AS A UNIT INVESTMENT TRUST, RATHER THAN AS
A MANAGEMENT INVESTMENT COMPANY, THE TRUSTEE AND THE SPONSOR DO NOT HAVE
AUTHORITY TO MANAGE THE TRUST'S ASSETS FULLY IN AN ATTEMPT TO TAKE ADVANTAGE
OF VARIOUS MARKET CONDITIONS TO IMPROVE THE TRUST'S NET ASSET VALUE, BUT MAY
DISPOSE OF SECURITIES ONLY UNDER LIMITED CIRCUMSTANCES. (SEE THE DISCUSSION
ABOVE UNDER THE CAPTION "THE TRUST" RELATING TO DISPOSITION OF STOCKS WHICH
MAY BE THE SUBJECT OF A TENDER OFFER, MERGER OR REORGANIZATION AND ALSO THE
DISCUSSION UNDER THE CAPTION "ADMINISTRATION OF THE TRUST--PORTFOLIO
SUPERVISION".)
FEDERAL INCOME TAXES
The Trust intends to qualify for and elect tax treatment as a "regulated
investment company" under the Internal Revenue Code of 1986, as amended (the
"Code"). By qualifying for and electing such treatment, subject to certain
conditions and requirements, the Trust will not be subject to federal income
tax to the extent its income is distributed to Unitholders in a timely
manner. Any undistributed income may be subject to tax, including a four
percent (4%) excise tax imposed by Section 4982 of the Code on certain
undistributed income of a regulated investment company that does not
distribute to shareholders in a timely manner at least ninety-eight percent
(98%) of its taxable income (including capital gains). The Trust intends to
distribute all of its income, including capital gains, annually.
The gross income of the Trust typically will include dividends, interest
and gains on sales or other dispositions of Securities. In order to qualify
as a "regulated investment company", the Trust must, among
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other things (1) in the course of a taxable year derive at least 90% of its
gross income from dividends, interest, gains on sales or other dispositions
of Securities and certain other sources (referred to herein as "eligible
sources"), (2) meet certain diversification tests, and (3) distribute in each
year at least 90% of its investment company taxable income. If during a
taxable year it appears that less than 90% of the Trust income will be
derived from eligible sources, the Sponsor may direct the Trustee to sell
Securities which, upon the realization of sufficient aggregate gain, will
enable the Trust to maintain its qualification as a regulated investment
company.
In any taxable year, the distributions of any ordinary income (such as
dividends) and the excess of net short-term capital gains over net long-term
capital losses will be taxable as ordinary income to Unitholders. A
distribution paid shortly after a purchase of shares may be taxable even
though, in effect, it may represent a return of capital to Unitholders. A
dividend paid by the Trust in January will be considered for federal income
tax purposes to have been paid by the Trust and received by the Unitholders
on the preceding December 31, if the dividend was declared in the preceding
October, November or December to Unitholders of record in any one of those
months. Distributions which are taxable as ordinary income to Unitholders
will not constitute dividends for purposes of the dividends-received
deduction for corporations except for, and only to the extent of, a specific
designation by the Trust.
Distributions by the Trust that are designated by it as "net capital gain"
will be taxable to Unitholders as long-term capital gain, regardless of the
length of time the Units have been held by a Unitholder. Distributions will
not be taxable to Unitholders to the extent that they represent a return of
capital; such distributions will, however, reduce a Unitholder's basis in his
Units, and to the extent they exceed the basis of his Units will be treated
as a gain from the sale of his Units. Any loss realized by a Unitholder on
the sale or exchange of Units that are held by him for not more than six
months will be treated as a long-term capital loss to the extent of any
long-term capital gain distributions paid to such Unitholder with respect to
such Units.
Under the Taxpayer Relief Act of 1997, capital gains realized on the sale
of property held for more than one year but not more than eighteen months are
considered "mid-term gains." In the case of individuals, mid-term gains are
taxed at lower rates than ordinary income, but not as favorably as capital
gains on property held for more than eighteen months. The Trustee will
identify in the annual tax information statement mailed to Unitholders the
portion of capital gain dividends which are considered mid-term gains.
Unitholders will be taxed in the manner described above regardless of
whether distributions from the Trust are actually received by the Unitholder
or are reinvested pursuant to the Reinvestment Plan.
Withholding For Citizen or Resident Investors. In the case of any
noncorporate Unitholder that is a citizen or resident of the United States, a
31 percent "backup" withholding tax will apply to certain distributions of
the Trust unless the Unitholder properly completes and files under penalties
of perjury, IRS Form W-9 (or its equivalent).
The foregoing discussion of taxation is a general summary and relates only
to certain aspects of the federal income tax consequences of an investment in
the Trust for Unitholders that hold their Units as capital assets.
Unitholders may also be subject to state and local taxation. Each Unitholder
should consult its own tax advisor regarding the Federal, state and local tax
consequences to it of ownership of Units.
Investment in the Trust may be suited for purchase by funds and accounts
of individual investors that are exempt from federal income taxes such as
Individual Retirement Accounts, tax-qualified retirement plans including
Keogh Plans, and other tax-deferred retirement plans. Unitholders desiring to
purchase
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Units for tax-deferred plans and IRA's should consult their PaineWebber
Investment Executive for details on establishing such accounts. Units may
also be purchased by persons who already have self-directed accounts
established under tax-deferred retirement plans.
PUBLIC OFFERING OF UNITS
Public Offering Price. The public offering price per Unit is based on the
aggregate market value of the Securities, next determined after the receipt
of a purchase order, divided by the number of Units outstanding plus the
sales charge set forth below. The public offering price per Unit is computed
by dividing the Trust Fund Evaluation, next determined after receipt of a
purchase order by the number of Units outstanding plus the sales charge. (See
"Valuation".) The Public Offering Price on the Initial Date of Deposit or on
any subsequent date will vary from the Public Offering Price calculated on
the business day prior to the Initial Date of Deposit (as set forth on page 2
hereof) due to fluctuations in the value of the Stocks among other factors.
Sales Charge and Volume Discount. The Public Offering Price of Units of
the Trust includes a sales charge which varies based upon the number of Units
purchased by a single purchaser. (See the sales charge schedule set forth
below.) During the initial public offering period, the sales charge will be
based on the number of Trust Units purchased on the same or any preceding day
by a single purchaser. Such purchaser or his dealer must notify the Sponsor
at the time of purchase of any previous purchase of Trust Units in order to
aggregate all such purchases and must supply the Sponsor with sufficient
information to permit confirmation of such purchaser's eligibility;
acceptance of such purchase order is subject to confirmation. Purchases of
Units of other trusts may not be aggregated with purchases of Trust Units to
qualify for this procedure. This procedure may be amended or terminated at
any time without notice. In the event of such termination, the procedure will
revert to that stated under the sales charge schedule referred to below.
Sales charges during the initial public offering period and for secondary
market sales are set forth below. A discount in the sales charge is available
to volume purchasers of Units due to economies of scale in sales effort and
sales related expenses relating to volume purchases. The sales charge
applicable to volume purchasers of Units is reduced on a graduated scale for
sales to any person of at least $50,000 or 5,000 Units, applied on whichever
basis is more favorable to the purchaser.
INITIAL PUBLIC OFFERING PERIOD AND SECONDARY MARKET THEREAFTER
<TABLE>
<CAPTION>
PERCENT OF
PUBLIC PERCENT OF
OFFERING NET AMOUNT
AGGREGATE DOLLAR VALUE OF UNITS* PRICE INVESTED
- -------------------------------- ------------ ------------
<S> <C> <C>
Less than $50,000................ 3.75% 3.90%
$50,000 to 99,999................ 3.50 3.63
$100,000 to 199,999.............. 3.25 3.36
$200,000 to 399,999.............. 2.75 2.83
$400,000 to 499,999.............. 2.50 2.56
$500,000 to 999,999.............. 2.00 2.04
$1,000,000 or more .............. 1.75 1.78
<FN>
- ------------
* The sales charge applicable to volume purchasers according to the table
above will be applied either on a dollar or Unit basis, depending upon
which basis provides a more favorable purchase price to the purchaser.
</TABLE>
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<PAGE>
The volume discount sales charge shown above will apply to all purchases
of Units on any one day by the same person in the amounts stated herein, and
for this purpose purchases of Units of this Trust will be aggregated with
concurrent purchases of any other trust which may be offered by the Sponsor.
Units held in the name of the purchaser's spouse or in the name of a
purchaser's child under the age of 21 are deemed for the purposes hereof to
be registered in the name of the purchaser. The reduced sales charges are
also applicable to a trustee or other fiduciary purchasing Units for a single
trust estate or single fiduciary account.
No sales charge will be imposed on Units of the Trust acquired by
Unitholders in connection with participation in the Reinvestment Plan (see
"Reinvestment Plan").
Employee Discount. Due to the realization of economies of scale in sales
effort and sales related expenses with respect to the purchase of Units by
employees of the Sponsor and its affiliates, the Sponsor intends to permit
employees of the Sponsor and its affiliates and certain of their relatives to
purchase units of the Trust at a reduced sales charge of $1.00 per 100 Units.
Exchange Option. Unitholders may elect to exchange any or all of their
Units of this series for units of one or more of any series of PaineWebber
Municipal Bond Fund (the "PaineWebber Series"); The Municipal Bond Trust (the
"National Series"); The Municipal Bond Trust, Multi-State Program (the
"Multi-State Series"); The Municipal Bond Trust, California Series (the
"California Series"); The Corporate Bond Trust (the "Corporate Series");
PaineWebber Pathfinder's Trust (the "Pathfinder's Trust"); the PaineWebber
Federal Government Trust (the "Government Series"); The Municipal Bond Trust,
Insured Series (the "Insured Series"); or the PaineWebber Equity Trust (the
"Equity Series") (collectively referred to as the "Exchange Trusts"), at a
Public Offering Price for the Units of the Exchange Trusts to be acquired
based on a reduced sales charge of $15 per Unit, per 100 Units in the case of
a trust whose Units cost approximately $10 or per 1,000 units in the case of
a trust whose Units cost approximately one dollar. Unitholders of this Trust
are not eligible for the Exchange Option into an Equity Trust, Growth Stock
Series designated as a rollover series for the 30 day period prior to
termination of the Trust. The purpose of such reduced sales charge is to
permit the Sponsor to pass on to the Unitholder who wishes to exchange Units
the cost savings resulting from such exchange of Units. The cost savings
result from reductions in time and expense related to advice, financial
planning and operational expenses required for the Exchange Option. Each
Exchange Trust has different investment objectives, therefore a Unitholder
should read the prospectus for the applicable exchange trust carefully prior
to exercising this option. Exchange Trusts having as their objective the
receipt of tax-exempt interest income would not be suitable for tax-deferred
investment plans such as Individual Retirement Accounts. A Unitholder who
purchased Units of a series and paid a per Unit, per 100 Unit or per 1,000
Unit sales charge that was less than the per Unit, per 100 Unit or per 1,000
Unit sales charge of the series of the Exchange Trusts for which such
Unitholder desires to exchange into, will be allowed to exercise the Exchange
Option at the Unit Offering Price plus the reduced sales charge, provided the
Unitholder has held the Units for at least five months. Any such Unitholder
who has not held the Units to be exchanged for the five-month period will be
required to exchange them at the Unit Offering Price plus a sales charge
based on the greater of the reduced sales charge, or an amount which,
together with the initial sales charge paid in connection with the
acquisition of the Units being exchanged, equals the sales charge of the
series of the Exchange Trust for which such Unitholder desires to exchange
into, determined as of the date of the exchange.
The Sponsor will permit exchanges at the reduced sales charge provided
there is either a primary market for Units or a secondary market maintained
by the Sponsor in both the Units of this series and units of the applicable
Exchange Trust and there are units of the applicable Exchange Trust available
for
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<PAGE>
sale. While the Sponsor has indicated that it intends to maintain a market
for the Units of the respective Trusts, there is no obligation on its part to
maintain such a market. Therefore, there is no assurance that a market for
Units will in fact exist on any given date at which a Unitholder wishes to
sell his Units of this series and thus there is no assurance that the
Exchange Option will be available to a Unitholder. Exchanges will be effected
in whole Units only. Any excess proceeds from Unitholders' Units being
surrendered will be returned. Unitholders will be permitted to advance new
money in order to complete an exchange to round up to the next highest number
of Units. An exchange of Units pursuant to the Exchange Option generally will
constitute a "taxable event" under the Code, i.e., a Unitholder will
recognize a tax gain or loss at the time of exchange. Unitholders are urged
to consult their own tax advisors as to the tax consequences to them of
exchanging Units in particular cases.
The Sponsor reserves the right to modify, suspend or terminate this
Exchange Option at any time with notice to Unitholders. In the event the
Exchange Option is not available to a Unitholder at the time he wishes to
exercise it, the Unitholder will be immediately notified and no action will
be taken with respect to his Units without further instruction from the
Unitholder.
To exercise the Exchange Option, a Unitholder should notify the Sponsor of
his desire to exercise the Exchange Option and to use the proceeds from the
sale of his Units to the Sponsor of this series to purchase Units of one or
more of the Exchange Trusts from the Sponsor. If Units of the applicable
outstanding series of the Exchange Trust are at that time available for sale,
and if such Units may lawfully be sold in the state in which the Unitholder
is resident, the Unitholder may select the series or group of series for
which he desires his investment to be exchanged. The Unitholder will be
provided with a current prospectus or prospectuses relating to each series in
which he indicates interest.
The exchange transaction will operate in a manner essentially identical to
any secondary market transaction, i.e., Units will be repurchased at a price
based on the market value of the Securities in the portfolio of the Trust
next determined after receipt by the Sponsor of an exchange request and
properly endorsed documents. Units of the Exchange Trust will be sold to the
Unitholder at a price based upon the next determined market value of the
Securities in the Exchange Trust plus the reduced sales charge. Exchange
transactions will be effected only in whole units; thus, any proceeds not
used to acquire whole units will be paid to the selling Unitholder.
For example, assume that a Unitholder, who has three thousand units of a
trust with a current price of $1.30 per unit, desires to sell his units and
seeks to exchange the proceeds for units of a series of an Exchange Trust
with a current price of $890 per Unit based on the bid prices of the
underlying securities. In this example, which does not contemplate any
rounding up to the next highest number of Units, the proceeds from the
Unitholder's Units would aggregate $3,900. Since only whole units of an
Exchange Trust may be purchased under the Exchange Option, the Unitholder
would be able to acquire four Units in the Exchange Trust for a total cost of
$3,620 ($3,560 for the Units and $60 for the sales charge). If all 3,000
Units were tendered, the remaining $280 would be returned to the Unitholder.
Conversion Option. Owners of units of any registered unit investment trust
sponsored by others which was initially offered at a maximum applicable sales
charge of at least 3.0% (a "Conversion Trust") may elect to apply the cash
proceeds of the sale or redemption of those units directly to acquire
available units of any Exchange Trust at a reduced sales charge of $15 per
Unit, per 100 Units in the case of Exchange Trusts having a Unit price of
approximately $10, or per 1,000 Units in the case of Exchange Trusts having a
Unit price of approximately $1, subject to the terms and conditions
applicable to the Exchange Option (except that no secondary market is
required for Conversion Trust units). To exercise this option, the owner
should notify his retail broker. He will be given a prospectus for each
series in which
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<PAGE>
he indicates interest and for which units are available. The dealer must sell
or redeem the units of the Conversion Trust. Any dealer other than
PaineWebber must certify that the purchase of the units of the Exchange Trust
is being made pursuant to and is eligible for the Conversion Option. The
dealer will be entitled to two thirds of the applicable reduced sales charge.
The Sponsor reserves the right to modify, suspend or terminate the Conversion
Option at any time with notice, including the right to increase the reduced
sales charge applicable to this option (but not in excess of $5 more per
Unit, per 100 Units or per 1,000 Units, as applicable than the corresponding
fee then being charged for the Exchange Option). For a description of the tax
consequences of a conversion reference is made to the Exchange Option section
herein.
Distribution of Units. The minimum purchase in the initial public offering
is $250. Only whole Units may be purchased.
The Sponsor is the sole underwriter of the Units. Sales may, however, be
made to dealers who are members of the National Association of Securities
Dealers, Inc. ("NASD") at prices which include a concession of $.30 per Unit
at the highest sales charge, subject to change from time to time. The
difference between the sales charge and the dealer concession will be
retained by the Sponsor. In the event that the dealer concession is 90% or
more of the sales charge per Unit, dealers taking advantage of such
concession may be deemed to be underwriters under the Securities Act of 1933.
The Sponsor reserves the right to reject, in whole or in part, any order
for the purchase of Units. The Sponsor intends to qualify the Units in all
states of the United States, the District of Columbia and the Commonwealth of
Puerto Rico.
Secondary Market for Units. While not obligated to do so, the Sponsor
intends to maintain a secondary market for the Units and continuously offer
to purchase Units at the Trust Fund Evaluation per Unit next computed after
receipt by the Sponsor of an order from a Unitholder. The Sponsor may cease
to maintain such a market at any time, and from time to time, without notice.
In the event that a secondary market for the Units is not maintained by the
Sponsor, a Unitholder desiring to dispose of Units may tender such Units to
the Trustee for redemption at the price calculated in the manner set forth
under "Redemption". Redemption requests in excess of $100,000 may be redeemed
"in kind" as described under "Redemption." The Sponsor does not in any way
guarantee the enforceability, marketability, value or price of any of the
stocks in the Trust, nor that of the Units.
Investors should note the Trust Fund Evaluation per Unit at the time of
sale or tender for redemption may be less than the price at which the Unit
was purchased.
The Sponsor may redeem any Units it has purchased in the secondary market
if it determines for any reason that it is undesirable to continue to hold
these Units in its inventory. Factors which the Sponsor may consider in
making this determination will include the number of units of all series of
all trusts which it holds in its inventory, the saleability of the Units and
its estimate of the time required to sell the Units and general market
conditions.
A Unitholder who wishes to dispose of his Units should inquire of his bank
or broker as to current market prices in order to determine if
over-the-counter prices exist in excess of the redemption price and the
repurchase price (see "Redemption").
Sponsor's Profits. In addition to the applicable sales charge, the Sponsor
realizes a profit (or sustains a loss) in the amount of any difference
between the cost of the Stocks to the Sponsor and the price at which it
deposits the Stocks in the Trust in exchange for Units, which is the value of
the Stocks, determined by the Trustee as described under "Valuation". The
cost of Stock to the Sponsor includes the amount paid by the Sponsor for
brokerage commissions. These amounts are an expense of the Trust.
19
<PAGE>
Cash, if any, received from Unitholders prior to the settlement date for
the purchase of Units or prior to the payment for Securities upon their
delivery may be used in the Sponsor's business subject to the limitations of
Rule 15c3-3 under the Securities and Exchange Act of 1934 and may be of
benefit to the Sponsor.
In selling any Units in the initial public offering after the Initial Date
of Deposit, the Sponsor may realize profits or sustain losses resulting from
fluctuations in the net asset value of outstanding Units during the period.
In maintaining a secondary market for the Units, the Sponsor may realize
profits or sustain losses in the amount of any differences between the price
at which it buys Units and the price at which it resells or redeems such
Units.
REDEMPTION
Units may be tendered to Investors Bank & Trust Company for redemption at
its office in person, or by mail at Hancock Towers, 200 Clarendon Street,
Boston, MA 02116 upon payment of any transfer or similar tax which must be
paid to effect the redemption. At the present time there are no such taxes.
No redemption fee will be charged by the Sponsor or Trustee. If the Units are
represented by a certificate it must be properly endorsed accompanied by a
letter requesting redemption. If held in uncertificated form, a written
instrument of redemption must be signed by the Unitholder. Unitholders must
sign exactly as their names appear on the records of the Trustee with
signatures guaranteed by an eligible guarantor institution or in such other
manner as may be acceptable to the Trustee. In certain instances the Trustee
may require additional documents such as, but not limited to, trust
instruments, certificates of death, appointments as executor or
administrator, or certificates of corporate authority. Unitholders should
contact the Trustee to determine whether additional documents are necessary.
Units tendered to the Trustee for redemption will be cancelled, if not
repurchased by the Sponsor.
Units will be redeemed at the Redemption Value per Unit next determined
after receipt of the redemption request in good order by the Trustee. The
Redemption Value per Unit is determined by dividing the Trust Fund Evaluation
by the number of Units outstanding. (See "Valuation".)
A redemption request is deemed received on the business day (see
"Valuation" for a definition of business day) when such request is received
prior to 4:00 p.m. If it is received after 4:00 p.m., it is deemed received
on the next business day. During the period in which the Sponsor maintains a
secondary market for Units, the Sponsor may repurchase any Unit presented for
tender to the Trustee for redemption no later than the close of business on
the second business day following such presentation and Unitholders will
receive the Redemption Value next determined after receipt by the Trustee of
the redemption request. Proceeds of a redemption will be paid to the
Unitholder no later than the seventh calendar day following the date of
tender (or if the seventh calendar day is not a business day on the first
business day prior thereto).
With respect to cash redemptions, amounts representing income received
shall be withdrawn from the Income Account, and, to the extent such balance
is insufficient and for remaining amounts, from the Capital Account. The
Trustee is empowered, to the extent necessary, to sell Securities to meet
redemptions. The Trustee will sell Securities in such manner as is directed
by the Sponsor. In the event no such direction is given, Stocks will be sold
pro rata, to the extent possible, and if not possible Stocks having the
greatest amount of capital appreciation will be sold first. (See
"Administration of the Trust".) However, with respect to redemption requests
in excess of $100,000, the Sponsor may determine in its discretion to direct
the Trustee to redeem Units "in kind" by distributing Stocks to the redeeming
Unitholder. When Stocks are so distributed, a proportionate amount of each
Stock will be distributed, rounded to avoid the distribution of fractional
shares and using cash or checks where rounding is not
20
<PAGE>
possible. The Sponsor may direct the Trustee to redeem Units "in kind" even
if it is then maintaining a secondary market in Units of the Trust.
Securities will be valued for this purpose as set forth under "Valuation". A
Unitholder receiving a redemption "in kind" may incur brokerage or other
transaction costs in converting the Stocks distributed into cash. The
availability of redemption "in kind" is subject to compliance with all
applicable laws and regulations, including the Securities Act of 1933, as
amended.
To the extent that Securities are redeemed in kind or sold, the size and
diversity of the Trust will be reduced. Sales will usually be required at a
time when Securities would not otherwise be sold and may result in lower
prices than might otherwise be realized. The price received upon redemption
may be more or less than the amount paid by the Unitholder depending on the
value of the Securities in the portfolio at the time of redemption. In
addition, because of the minimum amounts in which Securities are required to
be sold, the proceeds of sale may exceed the amount required at the time to
redeem Units; these excess proceeds will be distributed to Unitholders on the
Distribution Dates.
The Trustee may, in its discretion, and will, when so directed by the
Sponsor, suspend the right of redemption, or postpone the date of payment of
the Redemption Value, for more than seven calendar days following the day of
tender for any period during which the New York Stock Exchange, Inc. is
closed other than for weekend and holiday closings; or for any period during
which the Securities and Exchange Commission determined that trading on the
New York Stock Exchange, Inc. is restricted or for any period during which an
emergency exists as a result of which disposal or evaluation of the
Securities is not reasonably practicable; or for such other period as the
Securities and Exchange Commission may by order permit for the protection of
Unitholders. The Trustee is not liable to any person or in any way for any
loss or damages which may result from any such suspension or postponement, or
any failure to suspend or postpone when done in the Trustee's discretion.
VALUATION
The Trustee will calculate the Trust's value (the "Trust Fund Evaluation")
per Unit at the Evaluation Time set forth under "Summary of Essential
Information Regarding the Trust" (1) on each business day as long as the
Sponsor is maintaining a bid in the secondary market, (2) on the business day
on which any Unit is tendered for redemption, (3) on any other day desired by
the Sponsor or the Trustee and (4) upon termination, by adding (a) the
aggregate value of the Securities and other assets determined by the Trustee
as set forth below, (b) cash on hand in the Trust, including dividends
receivable on Stock trading ex-dividend and income accrued held but not yet
distributed (other than any cash held in any reserve account established
under the Indenture or cash held for the purchase of Contract Securities) and
(c) accounts receivable for Securities sold and any other assets of the Trust
not included in (a) and (b) above, and deducting therefrom the sum of (v)
taxes or other governmental charges against the Trust not previously
deducted, (w) accrued fees and expenses of the Trustee and the Sponsor
(including legal and auditing expenses) and other Trust expenses (x) cash
allocated for distributions to Unitholders and (y) accounts payable for Units
tendered for redemption and any other liabilities of the Trust Fund not
included in (v), (w), (x) and (y) above. The per Unit Trust Fund Evaluation
is calculated by dividing the result of such computation by the number of
Units outstanding as of the date thereof. Business days do not include
Saturdays, Sundays, New Year's Day, Martin Luther King, Jr. Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day and other days that the New York Stock Exchange is closed.
The value of Stocks shall be determined by the Trustee in good faith in
the following manner: (1) if the domestic Stocks are listed on one or more
national securities exchanges or on the National Market System maintained by
the National Association of Securities Dealers Automated Quotations System,
21
<PAGE>
such evaluation shall be based on the closing sale price on that day (unless
the Trustee deems such price inappropriate as a basis for evaluation) on the
exchange which is the principal market thereof (deemed to be the New York
Stock Exchange in the case of the domestic Stocks if such Stocks are listed
thereon), (2) if there is no such appropriate closing sales price on such
exchange or system, at the mean between the closing bid and asked prices on
such exchange or system (unless the Trustee deems such price inappropriate as
a basis for evaluation), (3) if the Stocks are not so listed or, if so listed
and the principal market therefor is other than on such exchange or there are
no such appropriate closing bid and asked prices available, such evaluation
shall be made by the Trustee in good faith based on the closing sale price in
the over-the-counter market (unless the Trustee deems such price
inappropriate as a basis for evaluation) or (4) if there is no such
appropriate closing price, then (a) on the basis of current bid prices, (b)
if bid prices are not available, on the basis of current bid prices for
comparable securities, (c) by the Trustee's appraising the value of the Stock
in good faith on the bid side of the market or (d) by any combination
thereof. The tender of a Stock pursuant to a tender offer will not affect the
method of valuing such Stock.
COMPARISON OF PUBLIC OFFERING PRICE AND REDEMPTION VALUE
The Stocks are valued on the same basis for the initial and secondary
markets and for purposes of redemptions. On the business day prior to the
Date of Deposit, the Public Offering Price per Unit (which figure includes
the sales charge) exceeded the Redemption Value. (See "Essential
Information"). The prices of Stocks are expected to vary. For this reason and
others, including the fact that the Public Offering Price includes the sales
charge, the amount realized by a Unitholder upon redemption of Units may be
less than the price paid by the Unitholder for such Units.
EXPENSES OF THE TRUST
The cost of the preparation and printing of the Indenture and this
Prospectus, the initial fees of the Trustee and the Trustee's counsel, and
expenses incurred in establishing the Trust, including legal and auditing
fees (the "Organizational Expenses"), will be paid by the Trust, as is common
for mutual funds. Historically, the Sponsors of Unit Trusts have paid all
organizational expenses. The Sponsor will receive no fee from the Trust for
its services in establishing the Trust.
The Sponsor will receive a fee, which is earned for portfolio supervisory
services, and which is based upon the largest number of Units outstanding
during the calendar year. The Sponsor's fee, which is not to exceed $.0035
per Unit per calendar year, may exceed the actual costs of providing
portfolio supervisory services for the Trust, but at no time will the total
amount it receives for portfolio supervisory services rendered to all series
of the PaineWebber Equity Trust in any calendar year exceed the aggregate
cost to it of supplying such services in such year.
For its services as Trustee and Evaluator, the Trustee will be paid in
monthly installments, annually $.0170 per Unit, based on the largest number
of Units outstanding during the previous month. In addition, the regular and
recurring expenses of the Trust are estimated to be $.0187 which include, but
are not limited to Organizational Expenses of $.0080 per Unit, and certain
mailing, printing, and audit expenses. Expenses in excess of this estimate
will be borne by the Trust. The Trustee could also benefit to the extent that
it may hold funds in non-interest bearing accounts created by the Indenture.
The Sponsor's fee and Trustee's fee may be increased without approval of
the Unitholders by an amount not exceeding a proportionate increase in the
category entitled "All Services Less Rent" in the Consumer Price Index
published by the United States Department of Labor or, if the Price Index is
no longer published, a similar index as determined by the Trustee and
Sponsor.
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<PAGE>
In addition to the above, the following charges are or may be incurred by
the Trust and paid from the Income Account, or, to the extent funds are not
available in such Account, from the Capital Account (see "Administration of
the Trust--Accounts"): (1) fees for the Trustee for extraordinary services;
(2) expenses of the Trustee (including legal and auditing expenses) and of
counsel; (3) various governmental charges; (4) expenses and costs of any
action taken by the Trustee to protect the Trust and the rights and interests
of the Unitholders; (5) indemnification of the Trustee for any loss,
liabilities or expenses incurred by it in the administration of the Trust
without gross negligence, bad faith or wilful misconduct on its part; (6)
brokerage commissions and other expenses incurred in connection with the
purchase and sale of Securities; and (7) expenses incurred upon termination
of the Trust. In addition, to the extent then permitted by the Securities and
Exchange Commission, the Trust may incur expenses of maintaining registration
or qualification of the Trust or the Units under Federal or state securities
laws so long as the Sponsor is maintaining a secondary market (including, but
not limited to, legal, auditing and printing expenses).
The accounts of the Trust shall be audited not less than annually by
independent public accountants selected by the Sponsor. The expenses of the
audit shall be an expense of the Trust. So long as the Sponsor maintains a
secondary market, the Sponsor will bear any annual audit expense which
exceeds $.0050 per Unit. Unitholders covered by the audit during the year may
receive a copy of the audited financial statements upon request.
The fees and expenses set forth above are payable out of the Trust and
when unpaid will be secured by a lien on the Trust. Based upon the last
dividend paid prior to the Initial Date of Deposit, dividends on the Stocks
are expected to be sufficient to pay the entire amount of estimated expenses
of the Trust. To the extent that dividends paid with respect to the Stocks
and income received on the Treasury Obligations are not sufficient to meet
the expenses of the Trust, the Trustee is authorized to sell Securities to
meet the expenses of the Trust. Securities will be selected in the same
manner as is set forth under "Redemption".
RIGHTS OF UNITHOLDERS
Ownership of Units is evidenced by recordation on the books of the
Trustee. In order to avoid additional operating costs and for investor
convenience, certificates will not be issued unless a request, in writing
with signature guaranteed by an eligible guarantor institution or in such
other manner as may be acceptable to the Trustee, is delivered by the
Unitholder to the Sponsor. Issued Certificates are transferable by
presentation and surrender to the Trustee at its office in Boston,
Massachusetts properly endorsed or accompanied by a written instrument or
instruments of transfer. Uncertificated Units are transferable by
presentation to the Trustee at its office in Boston of a written instrument
of transfer.
Certificates may be issued in denominations of one Unit or any integral
multiple thereof as deemed appropriate by the Trustee. A Unitholder may be
required to pay $2.00 per certificate reissued or transferred, and shall be
required to pay any governmental charge that may be imposed in connection
with each such transfer or interchange. For new certificates issued to
replace destroyed, mutilated, stolen or lost certificates, the Unitholder
must furnish indemnity satisfactory to the Trustee and must pay such expenses
as the Trustee may incur. Mutilated certificates must be surrendered to the
Trustee for replacement.
DISTRIBUTIONS
The Trustee will distribute net dividends and interest, if any, from the
Income Account on the quarterly Distribution Dates to Unitholders of record
on the preceding Record Date. Distributions from the Capital Account will be
made on annual Distribution Dates to Unitholders of record on the preceding
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<PAGE>
Record Date. Distributions of less than $.05 per Unit need not be made from
the Capital Account on any Distribution Date. See "Essential Information".
Whenever required for regulatory or tax purposes, the Trustee will make
special distributions of any dividends or capital on special Distribution
Dates to Unitholders of record on special Record Dates declared by the
Trustee.
If and to the extent that the Sponsor, on behalf of the Trust, receives a
favorable response to a no-action letter request which it intends to submit
to the Division of Investment Management of the Securities and Exchange
Commission (the "SEC") with respect to reinvesting cash proceeds received by
the Trust, the Trustee may reinvest such cash proceeds in additional
Securities held in the Trust Fund at such time. Such reinvestment shall be
made so that each deposit of additional Securities shall be made so as to
match as closely as practicable the percentage relationships of shares of
Stocks and such reinvestment shall be made in accordance with the parameters
set forth in the no-action letter response. If the Sponsor and the Trustee
determine that it shall be necessary to amend the Indenture to comply with
the parameters set forth in the no-action letter response, such documents may
be amended without the consent of Unitholders. There can be no assurance that
the Sponsor will receive a favorable no-action letter response.
Unitholders may elect to have their Income Account distributions
automatically reinvested into additional Units of the Trust at no sales
charge. (See "Reinvestment Plan").
Upon termination of the Trust, each Unitholder of record on such date will
receive his pro rata share of the amounts realized upon disposition of the
Securities plus any other assets of the Trust, less expenses of the Trust.
(See "Termination of the Trust".)
REINVESTMENT PLAN
Income Account distributions on Units may be reinvested by participating
in the Trust's Reinvestment Plan (the "Reinvestment Plan"). To participate in
the Reinvestment Plan, a Unitholder must contact his broker, dealer or
financial institution to determine whether he may participate in the
Reinvestment Plan. Under the Reinvestment Plan, the Units acquired for
current Unitholders will be either Units already held in inventory by the
Sponsor or new Units created by the Sponsor's deposit of additional
Securities, contracts to purchase additional Securities or cash (or a bank
letter of credit in lieu of cash) with instructions to purchase additional
Securities. Deposits or purchases of additional Securities will be made so as
to maintain the percentage relationships of shares of Stocks, except as
discussed under "The Trust". Purchases made pursuant to the Reinvestment Plan
will be made without any sales charge at the net asset value for Units of the
Trust. Under the Reinvestment Plan, the Trust will pay the distributions to
the Trustee which in turn will purchase for those participating Unitholders
whole Units of the Trust at the price determined as of the close of business
on the Distribution Date and will add such Units to the Unitholder's account.
The Unitholder's account statement will reflect the reinvestment. The Trustee
will not issue fractional Units, thus any cash remaining after purchasing the
maximum number of whole Units will be distributed to the Unitholder.
Unitholders wishing to terminate their participation in the Reinvestment Plan
must notify their broker, dealer or financial institution of such decision.
The Sponsor reserves the right to amend, modify or terminate the Reinvestment
Plan at any time without prior notice.
ADMINISTRATION OF THE TRUST
Accounts. All dividends and interest received on Securities, proceeds from
the sale of Securities or other moneys received by the Trustee on behalf of
the Trust may be held in trust in non-interest bearing accounts until
required to be disbursed.
24
<PAGE>
The Trustee will credit on its books to an Income Account dividends, if
any, and interest income, on Securities in the Trust. All other receipts
(i.e., return of principal and gains) are credited on its books to a Capital
Account. A record will be kept of qualifying dividends within the Income
Account. The pro rata share of the Income Account and the pro rata share of
the Capital Account represented by each Unit will be computed by the Trustee
as set forth under "Valuation".
The Trustee will deduct from the Income Account and, to the extent funds
are not sufficient therein, from the Capital Account, amounts necessary to
pay expenses incurred by the Trust. (See "Expenses and Charges.") In
addition, the Trustee may withdraw from the Income Account and the Capital
Account such amounts as may be necessary to cover redemption of Units by the
Trustee. (See "Redemption.")
The Trustee may establish reserves (the "Reserve Account") within the
Trust for state and local taxes, if any, and any other governmental charges
payable out of the Trust.
Reports and Records. With any distribution from the Trust, Unitholders
will be furnished with a statement setting forth the amount being distributed
from each account.
The Trustee keeps records and accounts of the Trust at its office in
Boston, including records of the names and addresses of Unitholders, a
current list of underlying Securities in the portfolio and a copy of the
Indenture. Records pertaining to a Unitholder or to the Trust (but not to
other Unitholders) are available to the Unitholder for inspection at
reasonable times during business hours.
Within a reasonable period of time after the end of each calendar year,
commencing with calendar year 1998, the Trustee will furnish each person who
was a Unitholder at any time during the calendar year an annual report
containing the following information, expressed in reasonable detail both as
a dollar amount and as a dollar amount per Unit: (1) a summary of
transactions for such year in the Income and Capital Accounts and any
Reserves; (2) any Securities sold during the year and the Securities held at
the end of such year; (3) the Trust Fund Evaluation per Unit, based upon a
computation thereof on the 31st day of December of such year (or the last
business day prior thereto); and (4) amounts distributed to Unitholders
during such year.
Portfolio Supervision. The portfolio of the Trust is not "managed" by the
Sponsor or the Trustee; their activities described herein are governed solely
by the provisions of the Indenture. The Indenture provides that the Sponsor
may (but need not) direct the Trustee to dispose of a Security under the
following circumstances:
(1) upon the failure of the issuer to declare or pay anticipated
dividends or interest;
(2) upon the institution of a materially adverse action or proceeding at
law or in equity seeking to restrain or enjoin the declaration or payment
of dividends or interest on any such Securities or the existence of any
other materially adverse legal question or impediment affecting such
Securities or the declaration or payment of dividends or interest on the
same;
(3) upon the breach of covenant or warranty in any trust indenture or
other document relating to the issuer which might materially and adversely
affect either immediately or contingently the declaration or payment of
dividends on such Securities;
(4) upon the default in the payment of principal or par or stated value
of, premium, if any, or income on any other outstanding securities of the
issuer or the guarantor of such Securities which might materially and
adversely, either immediately or contingently, affect the declaration or
payment of dividends on the Securities;
25
<PAGE>
(5) upon the decline in price or the occurrence of any materially adverse
credit factors, that in the opinion of the Sponsor, make the retention of
such Securities not in the best interest of the Unitholder;
(6) upon a decrease in the Sponsor's internal rating of the Security;
(7) if the sale of such Securities is desirable to maintain the
qualification of the Trust Fund as a "regulated investment company"; or
(8) upon the happening of events which, in the opinion of the Sponsor,
negatively affect the economic fundamentals of the issuer of the Security
or the industry of which it is a part.
Securities may also be tendered or sold in the event of a tender offer,
merger or acquisition in the manner described under "The Trust." The Trustee
may also dispose of Securities where necessary to pay Trust expenses or to
satisfy redemption requests as directed by the Sponsor and in a manner
necessary to maximize the objectives of the Trust, or if not so directed in
its own discretion, and Stocks having the greatest appreciation shall be sold
first.
AMENDMENT OF THE INDENTURE
The Indenture may be amended by the Trustee and the Sponsor without the
consent of any of the Unitholders to cure any ambiguity or to correct or
supplement any provision thereof which may be defective or inconsistent or to
make such other provisions as will not adversely affect the interest of the
Unitholders.
The Indenture may also be amended by the Trustee and the Sponsor without
the consent of any of the Unitholders to implement a program to reinvest cash
proceeds received by the Trust in connection with corporate actions and in
other situations, when and if the Sponsor receives a favorable response to
the no-action letter request which it intends to submit to the Division of
Investment Management at the SEC discussed above (see "Distributions"). There
can be no assurance that a favorable no-action letter response will be
received.
The Indenture may be amended in any respect by the Sponsor and the Trustee
with the consent of the holders of 51% of the Units then outstanding;
provided that no such amendment shall (1) reduce the interest in the Trust
represented by a Unit or (2) reduce the percentage of Unitholders required to
consent to any such amendment, without the consent of all Unitholders.
The Trustee will promptly notify Unitholders of the substance of any
amendment affecting Unitholders' rights or their interest in the Trust.
TERMINATION OF THE TRUST
The Indenture provides that the Trust will terminate on the Mandatory
Termination Date. If the value of the Trust as shown by any evaluation is
less than fifty per cent (50%) of the market value of the Stocks upon
completion of the deposit of Stocks, the Trustee may in its discretion, and
will when so directed by the Sponsor, terminate such Trust. The Trust may
also be terminated at any time by the written consent of 51% of the
Unitholders or by the Trustee upon the resignation or removal of the Sponsor
if the Trustee determines termination to be in the best interest of the
Unitholders. In no event will the Trust continue beyond the Mandatory
Termination Date.
Unless advised to the contrary by the Sponsor, approximately 20 days prior
to the termination of the Trust the Trustee will begin to sell the Securities
held in the Trust and will then, after deduction of any
26
<PAGE>
fees and expenses of the Trust and payment into the Reserve Account of any
amount required for taxes or other governmental charges that may be payable
by the Trust, distribute to each Unitholder, after due notice of such
termination, such Unitholder's pro rata share in the Income and Capital
Accounts. Moneys held upon the sale of Securities may be held in non-interest
bearing accounts created by the Indenture until distributed and will be of
benefit to the Trustee. The sale of Securities in the Trust in the period
prior to termination may result in a lower amount than might otherwise be
realized if such sale were not required at such time due to impending or
actual termination of the Trust. For this reason, among others, the amount
realized by a Unitholder upon termination may be less than the amount paid by
such Unitholder.
SPONSOR
The Sponsor, PaineWebber Incorporated, is a corporation organized under
the laws of the State of Delaware. The Sponsor is a member firm of the New
York Stock Exchange, Inc. as well as other major securities and commodities
exchanges and is a member of the National Association of Securities Dealers,
Inc. The Sponsor is engaged in a security and commodity brokerage business as
well as underwriting and distributing new issues. The Sponsor also acts as a
dealer in unlisted securities and municipal bonds and in addition to
participating as a member of various selling groups or as an agent of other
investment companies, executes orders on behalf of investment companies for
the purchase and sale of securities of such companies and sells securities to
such companies in its capacity as a broker or dealer in securities.
The Indenture provides that the Sponsor will not be liable to the Trustee,
the Trust or to the Unitholders for taking any action or for refraining from
taking any action made in good faith or for errors in judgment, but will be
liable only for its own willful misfeasance, bad faith, gross negligence or
willful disregard of its duties. The Sponsor will not be liable or
responsible in any way for depreciation or loss incurred by reason of the
sale of any Securities in the Trust.
The Indenture is binding upon any successor to the business of the
Sponsor. The Sponsor may transfer all or substantially all of its assets to a
corporation or partnership which carries on the business of the Sponsor and
duly assumes all the obligations of the Sponsor under the Indenture. In such
event the Sponsor shall be relieved of all further liability under the
Indenture.
If the Sponsor fails to undertake any of its duties under the Indenture,
becomes incapable of acting, becomes bankrupt, or has its affairs taken over
by public authorities, the Trustee may either appoint a successor Sponsor or
Sponsors to serve at rates of compensation determined as provided in the
Indenture or terminate the Indenture and liquidate the Trust.
TRUSTEE
The Trustee is Investors Bank & Trust Company, a Massachusetts trust
company with its principal office at Hancock Towers, 200 Clarendon Street,
Boston, Massachusetts 02116, toll-free number 800-356-2754, which is subject
to supervision by the Massachusetts Commissioner of Banks, the Federal
Deposit Insurance Corporation and the Board of Governors of the Federal
Reserve System.
The Indenture provides that the Trustee will not be liable for any action
taken in good faith in reliance on properly executed documents or the
disposition of moneys, Securities or Certificates or in respect of any
valuation which it is required to make, except by reason of its own gross
negligence, bad faith or willful misconduct, nor will the Trustee be liable
or responsible in any way for depreciation or loss incurred by reason of the
sale by the Trustee of any Securities in the Trust. In the event of the
failure of the Sponsor to act, the Trustee may act and will not be liable for
any such action taken by it in good faith. The Trustee will not be personally
liable for any taxes or other governmental charges imposed upon or
27
<PAGE>
in respect of the Securities or upon the interest thereon or upon it as
Trustee or upon or in respect of the Trust which the Trustee may be required
to pay under any present or future law of the United States of America or of
any other taxing authority having jurisdiction. In addition, the Indenture
contains other customary provisions limiting the liability of the Trustee.
The Trustee will be indemnified and held harmless against any loss or
liability accruing to it without gross negligence, bad faith or willful
misconduct on its part, arising out of or in connection with its acceptance
or administration of the Trust, including the costs and expenses (including
counsel fees) of defending itself against any claim of liability.
INDEPENDENT AUDITORS
The Statement of Financial Condition and Schedule of Investments audited
by Ernst & Young LLP, independent auditors, have been included in reliance on
their report given on their authority as experts in accounting and auditing.
LEGAL OPINIONS
The legality of the Units offered hereby has been passed upon by Carter,
Ledyard & Milburn, 2 Wall Street, New York, New York, as counsel for the
Sponsor.
28
<PAGE>
REPORT OF INDEPENDENT AUDITORS
THE UNITHOLDERS, SPONSOR AND TRUSTEE
THE PAINEWEBBER EQUITY TRUST, GROWTH STOCK SERIES 21
We have audited the accompanying Statement of Financial Condition of The
PaineWebber Equity Trust, Growth Stock Series 21, including the Schedule of
Investments, as of January 8, 1998. This financial statement is the
responsibility of the Trustee. Our responsibility is to express an opinion on
this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statement is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement. Our
procedures included confirmation with Investors Bank & Trust Company,
Trustee, of an irrevocable letter of credit deposited for the purchase of
securities, as shown in the financial statement as of January 8, 1998. An
audit also includes assessing the accounting principles used and significant
estimates made by the Trustee, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statement referred to above presents fairly,
in all material respects, the financial position of The PaineWebber Equity
Trust, Growth Stock Series 21 at January 8, 1998, in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
New York, New York
January 8, 1998
29
<PAGE>
THE PAINEWEBBER EQUITY TRUST,
GROWTH STOCK SERIES 21
STATEMENT OF FINANCIAL CONDITION
AS OF INITIAL DATE OF DEPOSIT, JANUARY 8, 1998
<TABLE>
<CAPTION>
<S> <C>
TRUST PROPERTY
Sponsor's Contracts to Purchase underlying Securities backed
by irrevocable letter of credit (a)........................... $ 962,500
Organizational Expenses (b).................................... 100,000
------------
Total...................................................... $1,062,500
============
INTEREST OF UNITHOLDERS
Accrued Liability (b).......................................... $ 100,000
------------
100,000 Units outstanding:
Cost to investors (c)......................................... 1,000,000
Less: Gross underwriting commissions (d)...................... (37,500)
------------
Total liabilities and net assets........................... $1,062,500
============
</TABLE>
- ------------
(a) The aggregate cost to the Trust of the securities listed under
"Schedule of Investments" is determined by the Trustee on the basis set forth
above under "Public Offering of Units--Public Offering Price." See also the
column headed Cost of Securities to Trust under "Schedule of Investments."
Pursuant to contracts to purchase securities, an irrevocable letter of credit
drawn on Kredietbank N.V., New York Branch in the amount of $1,500,000 has
been deposited with the Trustee, Investors Bank & Trust Company for the
purchase of $962,500 aggregate value of Securities in the initial deposit and
for the purchase of Securities in subsequent deposits.
(b) Organizational Expenses incurred by the Trust have been deferred and
will be amortized over the 5 year life of the Trust. Organizational Expenses
have been estimated on projected total assets of $25 million. To the extent
the Trust is larger or smaller, the estimate may vary.
(c) The aggregate public offering price is computed on the basis set forth
under "Public Offering of Units--Public Offering Price."
(d) Sales charge of 3.75% of the Public Offering Price per Unit is
computed on the basis set forth under "Public Offering of Units--Sales Charge
and Volume Discount."
30
<PAGE>
THE PAINEWEBBER EQUITY TRUST
GROWTH STOCK SERIES 21
SCHEDULE OF INVESTMENTS
AS OF INITIAL DATE OF DEPOSIT, JANUARY 8, 1998
COMMON STOCKS (1)
<TABLE>
<CAPTION>
PRIMARY INDUSTRY SOURCE AND NUMBER OF COST OF SECURITIES
NAME OF ISSUER SHARES TO TRUST(2)
- ------------------------------------- ----------- ------------------
<S> <C> <C>
Appliances (1.42%)
Sunbeam Corporation.................. 340 $13,685.00
Applications Software (4.28%)
Clarify, Inc.*....................... 1,050 13,781.25
PeopleSoft, Inc.*.................... 400 13,650.00
The Vantive Corporation*............. 490 13,781.25
Auto/Truck Parts & Equipment (5.00%)
Arvin Industries, Inc................ 420 13,728.75
Excel Industries, Inc................ 750 13,781.25
The Standard Products Company ....... 510 13,865.63
Walbro Corporation................... 490 6,737.50
Cellular Communications (4.32%)
360 Communications Company*.......... 740 14,013.75
Nextel Communications, Inc.*......... 540 13,736.25
PriCellular Corporation*............. 1,260 13,781.25
Computers (5.70%)
Cabletron Systems, Inc.*............. 920 13,742.50
Data General Corporation*............ 730 13,687.50
Digital Equipment Corporation* ...... 350 13,628.13
Stratus Computer, Inc.*.............. 360 13,837.50
Containers (2.85%)
Bemis Company, Inc................... 320 13,700.00
Shorewood Packaging Corporation* .... 540 13,770.00
Data Processing/Management (1.43%)
Baan Company, N.V.*.................. 390 13,796.25
Direct Marketing(1.42%)
Catalina Marketing Corporation* ..... 310 13,659.38
Drug Delivery Systems (1.43%)
Alkermes, Inc.*...................... 650 13,731.25
Electric (4.31%)
Idaho Power Company.................. 380 13,798.75
New York State Electric & Gas Corp. . 410 13,837.50
NIPSCO Industries, Inc............... 280 13,860.00
Electronics (4.98%)
Credence Systems Corporation* ....... 520 13,650.00
Etec Systems, Inc. *................. 320 13,840.00
Genus, Inc.*......................... 1,750 6,671.88
LTX Corporation*..................... 2,820 13,747.50
31
<PAGE>
THE PAINEWEBBER EQUITY TRUST
GROWTH STOCK SERIES 21
SCHEDULE OF INVESTMENTS
AS OF INITIAL DATE OF DEPOSIT, JANUARY 8, 1998 (CONTINUED)
COMMON STOCKS (1)
PRIMARY INDUSTRY SOURCE AND NUMBER OF COST OF SECURITIES
NAME OF ISSUER SHARES TO TRUST(2)
- ------------------------------------- ----------- ------------------
Finance (12.92%)
Beneficial Corporation............... 170 $13,833.75
First Chicago NBD Corporation ....... 180 14,152.50
Fleet Financial Group, Inc........... 190 13,858.13
H.F. Ahmanson & Company.............. 240 13,845.00
Golden State Bancorp, Inc.*.......... 400 13,600.00
Mellon Bank Corporation.............. 230 13,800.00
The Money Store, Inc................. 710 13,756.25
Southtrust Corporation............... 230 13,785.60
State Street Corporation............. 250 13,718.75
Food (2.85%)
Dominick's Supermarkets, Inc.* ...... 400 13,850.00
Hannaford Brothers Company........... 320 13,620.00
Gas Distribution(4.25%)
Consolidated Natural Gas Company .... 240 13,485.00
MCN Corporation...................... 370 13,875.00
Sonat, Inc........................... 310 13,543.13
Internet Software (1.31%)
America Online, Inc*................. 140 12,582.50
Machinery (2.87%)
Harnischfeger Industries, Inc. ...... 370 13,851.88
New Holland N.V...................... 540 13,770.00
Medical (11.49%)
CardioThoracic Systems, Inc.* ....... 1,140 6,697.50
Eclipse Surgical Technologies,
Inc.*................................ 1,040 6,695.00
Genzyme Transgenics Corporation* .... 1,310 13,755.00
Heartport, Inc.*..................... 580 13,775.00
Schering-Plough Corporation.......... 220 14,025.00
Sofamor Danek Group, Inc.*........... 210 13,741.85
St. Jude Medical, Inc.*.............. 440 13,915.00
Texas Biotechnology Corporation* .... 2,340 13,747.50
Warner-Lambert Company............... 110 14,231.25
Manufacturing (1.43%)
Samsonite Corporation*............... 400 13,775.00
Networking Products (5.71%)
Ascend Communications, Inc.*......... 500 13,781.25
Bay Networks, Inc.*.................. 490 13,750.63
FORE Systems, Inc.*.................. 810 13,770.00
Xylan Corporation*................... 830 13,695.00
32
<PAGE>
THE PAINEWEBBER EQUITY TRUST
GROWTH STOCK SERIES 21
SCHEDULE OF INVESTMENTS
AS OF INITIAL DATE OF DEPOSIT, JANUARY 8, 1998 (CONTINUED)
COMMON STOCKS (1)
PRIMARY INDUSTRY SOURCE AND NUMBER OF COST OF SECURITIES
NAME OF ISSUER SHARES TO TRUST(2)
- ------------------------------------- ----------- ------------------
Oil (5.72%)
Nuevo Energy Company*................ 370 $ 13,666.88
Sante Fe Energy Resources, Inc.* .... 1,460 13,778.75
Unocal Corporation................... 370 13,782.50
Western Atlas, Inc.*................. 200 13,775.00
Publishing (2.84%)
Knight-Ridder, Inc................... 250 13,562.50
The Reader's Digest Association,
Inc.................................. 580 13,738.75
Seismic Data Collection (1.41%)
Veritas DGC, Inc.*................... 410 13,606.88
Soap & Cleaning Preparation (2.88%)
Church & Dwight Co., Inc............. 480 13,830.00
The Clorox Company................... 180 13,916.25
Telecommunications (7.18%)
AirTouch Communications, Inc.* ...... 330 13,695.00
Century Telephone Enterprises, Inc. 270 13,837.50
GTE Corporation...................... 270 13,736.25
Teleport Communications Group,
Inc.*................................ 240 13,860.00
U.S. West Communications Group ...... 300 13,931.25
------------------
TOTAL INVESTMENTS................... $962,500.00
==================
</TABLE>
- ------------
(1) All Securities are represented entirely by contracts to purchase
Securities.
(2) Valuation of the Securities by the Trustee was made as described in
"Valuation" as of the close of business on the business day prior to
the Initial Date of Deposit.
(3) The loss to the Sponsor on the date of deposit is $384.
* Non-income producing security.
33
<PAGE>
PAINEWEBBER EQUITY TRUST
Growth Stock Series 21
[POWERGRAB LOGO]
TRUSTEE:
INVESTORS BANK & TRUST COMPANY
Hancock Towers
200 Clarendon Street
Boston, Mass. 02116
(800) 356-2754
SPONSOR:
PAINEWEBBER INCORPORATED
1200 Harbor Boulevard,
Weehawken, N.J. 07087
(201) 902-3000
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Essential Information Regarding the
Trust ................................... 2
The Trust ............................... 11
Risk Factors and Special Considerations . 13
Federal Income Taxes .................... 14
Public Offering of Units ................ 16
Public Offering Price ................. 16
Sales Charge and Volume Discount ...... 16
Employee Discount ..................... 17
Exchange Option ....................... 17
Conversion Option ..................... 18
Distribution of Units ................. 19
Secondary Market for Units ............ 19
Sponsor's Profits ..................... 19
Redemption .............................. 20
Valuation ............................... 21
Comparison of Public Offering Price and
Redemption Value ....................... 22
Expenses of the Trust ................... 22
Rights of Unitholders ................... 23
Distributions ........................... 23
Reinvestment Plan ....................... 24
Administration of the Trust ............. 24
Accounts .............................. 24
Reports and Records ................... 25
Portfolio Supervision ................. 25
Amendment of the Indenture .............. 26
Termination of the Trust ................ 26
Sponsor ................................. 27
Trustee ................................. 27
Independent Auditors .................... 28
Legal Opinions .......................... 28
Report of Independent Auditors .......... 29
Statement of Financial Condition ........ 30
Schedule of Investments ................. 31
</TABLE>
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION
NOT CONTAINED IN THIS PROSPECTUS; AND ANY INFORMATION OR REPRESENTATION NOT
CONTAINED HEREIN MUST NOT BE RELIED ON AS HAVING BEEN AUTHORIZED BY THE
TRUST, THE TRUSTEE OR THE SPONSOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY SECURITIES IN ANY STATE TO
ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE SUCH OFFER IN SUCH STATE.
THIS PROSPECTUS CONTAINS INFORMATION CONCERNING THE TRUST AND THE SPONSOR,
BUT DOES NOT CONTAIN ALL THE INFORMATION SET FORTH IN THE TRUST'S
REGISTRATION STATEMENTS, AMENDMENTS AND EXHIBITS RELATING THERETO, WHICH HAVE
BEEN 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 HEREBY MADE.
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This registration statement comprises the following
documents:
The facing sheet.
The Prospectus.
The Undertaking to file reports.
The signatures.
Written consents of the following persons:
Ernst & Young LLP
(included in Exhibit 99.C2)
Carter, Ledyard & Milburn
(included in Exhibits 99.2 and 99.C1)
The following exhibits:
1. Ex.-27 - Financial Data Schedule
2. Ex.-99.A1 - Standard Terms and Conditions of
Trust dated as of July 10, 1990 between
PaineWebber Incorporated, Depositor and
Investors Bank & Trust Company, as Trustee
(incorporated by reference to Exhibit 2 in
File No. 33-30404).
3. Ex.-99.A2 - Copy of Trust Indenture and
Agreement between PaineWebber Incorporated,
Depositor, and Investors Bank & Trust Company,
as Trustee, incorporating by reference Standard
Terms and Conditions of Trust dated
as of July 10, 1990.
4. Ex.-99.A5 - Form of Certificate of Ownership
(included in Standard Terms and Conditions of
Trust).
5. Ex.-99.A6 - Certificate of Incorporation of
PaineWebber Incorporated, as amended
(incorporated by reference to Exhibit 8 in
File No. 2-88344).
6. Ex.-99.A6 - By-Laws of PaineWebber
Incorporated, as amended (incorporated by
reference to Exhibit A(6)(a) in File No.
811-3722).
7. Ex.-99.2 - Opinion of Counsel as to legality
of securities being registered.
<PAGE>
8. Ex.-99.C1 - Opinion of Counsel as to income
tax status of securities being registered.
9. Ex.-99.C2 - Consent of Ernst & Young LLP,
Independent Auditors.
<PAGE>
FINANCIAL STATEMENTS
1. Statement of Condition of the Trust as shown in the current Prospectus for
this series.
2. Financial Statements of the Depositor.
PaineWebber Incorporated-Financial Statements incorporated by reference to Form
10-K and Form 10-Q(File No. 1-7367), respectively.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Act of 1933,
the registrant has duly caused this 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 8th day of January, 1998*.
THE PAINEWEBBER EQUITY TRUST,
GROWTH STOCK SERIES 21
(Registrant)
By: PaineWebber Incorporated
(Depositor)
/s/ Robert E. Holley
-------------------------------
Robert E. Holley
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933,
this Amendment to the Registration Statement has been signed on behalf of
PaineWebber Incorporated the Depositor by the following persons who constitute
a majority of the Executive Committee of its Board of Directors in the
following capacities and in the City of New York, and State of New York, on
this 8th of January, 1998*.
PAINEWEBBER INCORPORATED
Name
Office
Donald B. Marron Chairman, Chief Executive
Officer, Director & Member of
the Executive Committee*
Regina A. Dolan Executive Vice President, Chief
Financial Officer & Director of PaineWebber
Incorporated*
Joseph J. Grano, Jr. President, Retail Sales & Marketing,
Director & Member of the Executive
Committee*
Steve P. Baum Executive Vice President, Director of
PaineWebber Incorporated*
Robert H. Silver Executive Vice President Director of
Paine Webber Incorporated*
Mark B. Sutton Executive Vice President, Director of
PaineWebber Incorporated*
Margo N. Alexander Executive Vice President, Director of
PaineWebber Incorporated*
Terry L. Atkinson Managing Director, Director of PaineWebber
Incorporated*
Brian M. Barefoot Executive Vice President, Director of
PaineWebber Incorporated*
Michael Culp Managing Director, Director of PaineWebber
Incorporated*
Edward M. Kerschner Managing Director, Director of PaineWebber
Incorporated*
James P. MacGilvray Executive Vice President, Director of
PaineWbber Incorporated*
By
/s/ Robert E. Holley
--------------------------------
Robert E. Holley
Attorney-in-fact*
* Executed copies of the powers of attorney have been filed with the
Securities and Exchange Commission in connection with Post Effective
Amendment No.19 to the Registration Statement File No. 2-61279.
<PAGE>
EXHIBIT INDEX
1. Ex.-27 - Financial Data Schedule
2. Ex.-99.A1 - Standard Terms and Conditions of Trust dated as of July
10, 1990 between PaineWebber Incorporated, Depositor and Investors
Bank & Trust Company, as Trustee (incorporated by reference to Exhibit
2 in File No.
33-30404).
3. Ex.-99.A2 - Copy of Trust Indenture and Agreement between PaineWebber
Incorporated, Depositor, and Investors Bank & Trust Company, as
Trustee, incorporating by reference Standard Terms and Conditions of
Trust dated as of July 10, 1990.
4. Ex.-99.A5 - Form of Certificate of Ownership (included in
Standard Terms and Conditions of Trust).
5. Ex.-99.A6 - Certificate of Incorporation of PaineWebber
Incorporated, as amended (incorporated by reference to
Exhibit 8 in File No. 2-88344).
6. Ex.-99.A6 - By-Laws of PaineWebber Incorporated, as
amended (incorporated by reference to Exhibit A(6)(a) in
File No. 811-3722).
7. Ex.-99.2 - Opinion of Counsel as to legality of
securities being registered.
8. Ex.-99.C1 - Opinion of Counsel as to income tax status of
securities being registered.
9. Ex.-99.C2 - Consent of Ernst & Young LLP, Independent
Auditors.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 0
<SECURITIES> 962,500
<RECEIVABLES> 0
<ALLOWANCES> 100,000
<INVENTORY> 0
<CURRENT-ASSETS> 962,500
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,062,500
<CURRENT-LIABILITIES> 100,000
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,062,500
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE>
Exhibit 1
THE PAINEWEBBER EQUITY TRUST,
GROWTH STOCK SERIES 21
TRUST INDENTURE AND AGREEMENT
Dated as of January 8, 1998
Incorporating
Standard Terms and Conditions of Trust
Dated as of July 10, 1990,
Between
PAINEWEBBER INCORPORATED,
as Depositor
and
INVESTORS BANK & TRUST COMPANY
as Trustee
<PAGE>
THIS TRUST INDENTURE AND AGREEMENT dated as of January 8,
1998 between PaineWebber Incorporated, as Depositor and Investors Bank & Trust
Company, as Trustee, which sets forth certain of its provisions in full and
incorporates other of its provisions by reference to a document entitled
"Standard Terms and Conditions of Trust" dated as of July 10, 1990, among the
parties hereto (hereinafter called the "Standard Terms"), such provisions as
are set forth in full and such provisions as are incorporated by reference
constituting a single instrument.
W I T N E S S E T H T H A T :
WHEREAS, the parties hereto have heretofore or concurrently
herewith entered into the Standard Terms in order to facilitate creation of a
series of securities issued under a unit investment trust pursuant to the
provisions of the Investment Company Act of 1940 and the laws of the State of
New York, each of which series will be composed of redeemable securities
representing undivided interests in a trust fund composed of publicly traded
common or preferred stocks issued by domestic companies, and, in certain cases,
interest-bearing United States Treasury Obligations ("Treasury Obligations");
and
WHEREAS, the parties now desire to create the Twenty-first
Growth Stock trust of the aforesaid series;
NOW THEREFORE, in consideration of the premises and of the
mutual agreements herein contained, the Depositor and the Trustee agrees as
follows:
Section 1. Incorporation of Standard Terms and Conditions of
Trust. Subject to the provisions of Sections 2, 3 and 4 of this Trust Indenture
and Agreement set forth below, all of the provisions of the Standard Terms
incorporated by reference in their entirety and shall be deemed to be a part of
this instrument as fully to all intents and purposes as though said provisions
had been set forth in full in this instrument. Unless otherwise stated, section
references shall refer to sections in the Standard Terms.
Section 2. Specific Terms of this Series. The following terms
are hereby agreed to for this series of The PaineWebber Equity Trust, which
series shall be known and designated as "The PaineWebber Equity Trust, Growth
Stock Series 21".
A. (1) The aggregate number of Units outstanding on the date
hereof for this Series is 100,000.
(2) The initial fractional undivided interest represented
by each Unit of this series shall be 1/100,000th of the Trust Fund. A receipt
evidencing the ownership of this total number of Units outstanding on the date
hereof is being delivered by the Trustee to the Depositor.
<PAGE>
B. The term "Record Date" shall mean March 31, 1998 and
quarterly thereafter; provided, however, that with respect to a distribution
required by Section 2.02(b), the Record Date shall be the last business day of
the month during which the contract to purchase the Security fails.
Record Date shall also include such date or dates determined
by the Sponsor and the Trustee as necessary or desirable and in the best
interest of the Unitholders for federal or state tax purposes, or for other
purposes (hereinafter a "Special Record Date") which date may replace a
regularly scheduled Record Date if such regularly scheduled Record Date is
within 30 days of a Special Record Date.
C. The term "Distribution Date" shall mean the 20th day
following each Record Date, commencing April 20, 1998, and quarterly
thereafter with respect to Income Account Distributions and shall mean
January 20, 1999 and annually thereafter with respect to Capital Account
Distributions, except that the Trustee may declare a Record Date of December
31 in any year for a Distribution Date of January 20 of the following year, if
required for compliance with the rules and regulations governing regulated
investment companies. With respect to a distribution required by Section
2.02(b), the Distribution Date shall be twenty days after the Record Date with
respect thereto.
In the event a Special Record Date is declared, Distribution
Date shall also include such Date as is determined by the Sponsor and the
Trustee to be the Distribution Date in respect of such Special Record Date.
D. The Discretionary Liquidation Amount shall be fifty per
centrum (50%) of the aggregate value of the Securities originally deposited on
the date hereof and subsequently deposited pursuant to any Supplemental
Indenture pursuant to Section 2.02.
E. The Mandatory Termination Date shall be January 30, 2003.
Unless advised to the contrary by the Sponsor, the date on which the Trustee
shall begin to sell equity Securities in accordance with Section 9.01 shall be
January 10, 2003.
F. The Trustee's annual compensation as referred to in
Section 8.05 shall be $.0170 per Unit computed monthly based on the largest
number of Units outstanding during the preceding month.
G. The Sponsor's annual compensation pursuant to Section 7.02
shall be computed as $.0035 per Unit, based on the largest number of Units
outstanding in a calendar year.
H. The balance in the Capital Account below which no
distribution need be made, as referred to in Section 3.04, is $.05 per Unit
Outstanding.
I. Article I shall be amended as follows:
<PAGE>
1. The definition of "Securities" shall be deleted in its
entirety and the following text shall be inserted in replacement thereof:
"Shall mean the Securities, including Contract Securities,
(a) which are listed or referred to as Securities in Schedule
A to the Trust Indenture or any Supplemental Indenture, (b)
which have been received by the Trust in exchange or
substitution pursuant to Section 3.07 hereof as may from time
to time continue to be held as part of a Trust and (c) which
are additional deposits of Securities made pursuant to
Section 2.02, 3.02 and 3.15."
2. The definition of "Supplemental Indenture" shall be
deleted in its entirety and the following text shall be inserted in replacement
thereof:
"Shall mean a written direction from the Sponsor to the
Trustee instructing the Trustee to create additional Units
pursuant to and in accordance with 2.02(c) hereof."
3. The definition of "Percentage Ratios" shall be deleted in
its entirety and the following text shall be inserted in replacement thereof:
"Shall have the meaning assigned to it in Section 2.02."
J. Section 2.02 shall be deleted in its entirety and the
following text shall be inserted in its place:
"Section 2.02. Deposit of Securities. (a) The Sponsor
concurrently with the execution and delivery hereof, hereby
grants and conveys all of its right, title and interest in
and to and hereby conveys to and deposits with the Trustee in
an irrevocable Trust, the Securities (together with accrued
and unpaid income thereon) and Contract Securities, listed in
Schedule A to the Indenture, duly endorsed in blank or
accompanied by all necessary instruments of assignment and
transfer in proper form, to be held, managed and applied by
the Trustee as herein provided for the benefit of each
Unitholder to the extent of such Unitholder's interest in the
Trust Fund. The Sponsor hereby also delivers to the Trustee a
certified check or checks, cash or cash equivalents or an
irrevocable letter or letters of credit issued by a
commercial bank or banks in an amount necessary to consummate
the purchase of any Contract Securities. The Percentage
Ratios for the Trust Fund shall be the percentage ratios
between the number of shares of each issue of stock in such
Trust deposited in such Trust Fund on
<PAGE>
the initial date of deposit thereof (the "Initial Date of
Deposit") and determined by reference to Schedule A to the
Indenture for such Trust Fund. Such Percentage Ratios are
subject to adjustment to reflect the occurrence of (i) a
stock split or a similar event which affects the capital
structure of the issuer of a stock but which does not affect
the Trust's percentage ownership of the common stock equity
of such issuer at the time of such event, (ii) a merger or
reorganization, (iii) a sale of any Securities from the Trust
portfolio, or (iv) Securities deposited pursuant to Section
2.02(b). Stock dividends received by the Trust, if any,
pursuant to Section 3.07(d) will be sold by the Trustee and
the proceeds therefrom shall be treated as income to the
Trust.
(b) In the event that the purchase of Contract Securities
pursuant to any contract shall not be consummated in
accordance with said contracts, moneys held for the purchase
of such Contract Securities shall be credited to the Capital
Account and the Trustee, as directed by the Sponsor, shall
either (1) use the cash held or available under a letter or
letters of credit to purchase other stock or stocks having
characteristics sufficiently similar to the stocks originally
deposited or (2) distribute such moneys pursuant to Section
3.04 to Unitholders of record as of the Record Date next
following the failure of consummation of such purchase. The
Sponsor shall cause to be refunded to each Unitholder his pro
rata portion of the sales charge levied on the sale of Units
to such Unitholder attributable to such Contract Security.
(c) From time to time, following the Initial Date of Deposit,
the Sponsor is hereby authorized, in its discretion to cause
the Trustee to issue additional Units pursuant to a
Supplemental Indenture directing such additional Units to be
created based upon the following:
(1) the deposit of additional Securities in respect of
such additional Units and/or contracts for the
purchase of such additional Securities; and/or
(2) the deposit of cash in an amount to purchase such
additional Securities based upon the price of such
additional Securities at the Valuation Time on such
date of deposit.
To accomplish the issuance of additional Units by means of a
deposit of additional Securities, the Sponsor is authorized
to assign, convey to and deposit with the Trustee (i)
additional Securities, duly endorsed in blank or accompanied
by all necessary instruments of assignment, and/or (ii)
contracts for the purchase of such additional Securities, and
<PAGE>
the Sponsor shall transfer and deliver such necessary
instruments of assignment and/or contracts for the purchase
of such additional Securities to the Trustee along with a
certified check or checks, cash, cash equivalents or an
irrevocable letter or letters of credit issued by a
commercial bank in an amount necessary to consummate the
purchase of any such additional Securities represented by
contracts for the purchase of additional Securities.
To accomplish the issuance of additional Units by means of
depositing sufficient cash amounts with the Trustee to enable
the Trustee to purchase and deposit the additional
Securities, the Sponsor is hereby authorized to, and shall,
instruct the Trustee to create a specified number of
additional Units whereupon the Trustee shall purchase and
deposit the additional Securities in respect thereof.
Brokerage commissions with respect to the Trustee's purchase
of additional Securities, if any, shall be an expense borne
by the Trust. In all cases of creating additional Units, the
Sponsor shall also pay to the Trustee for deposit into the
Income Account an amount equal to the Cash Component per Unit
(as defined below), multiplied by the number of new Units
created in respect of the additional Securities deposited
into the Trust Fund pursuant to this Section 2.02(c). For
purposes of this paragraph, Cash Component means cash on hand
in the Trust Fund (excluding cash held for the purchase of
Contract Securities) and/or cash receivable by the Trust as
of the date of the deposit of additional Securities, reduced
by payables and accrued expenses and amounts allocated for
redemption of Units or for distribution to holders of record
as of a preceding Record Date. Such purchase and deposit of
additional Securities shall be made, in each case, pursuant
to a Supplemental Indenture. Except as provided in Section
3.07(d) the Sponsor, if depositing additional Securities with
the Trustee pursuant to this Section 2.02(c), and the Trustee,
if purchasing additional Securities with amounts provided to
it by the Sponsor pursuant to this Section 2.02(c), in each
case shall ensure that each deposit of additional Securities
pursuant to this Section shall be made so as to maintain as
closely as practicable the Percentage Ratios for such
Securities determined by reference to Schedule A of the Trust
Indenture for each Trust Fund and subject to adjustment as
provided herein.
The Securities deposited pursuant to this Section 2.02 are
comprised of (1) the Securities set forth in Schedule A of
the Trust Indenture, (2) any additional deposits of
Securities made in connection with the reinvestment of cash
proceeds in accordance with Section 3.02 and
<PAGE>
pursuant to the provisions of Section 3.15, (3) any Treasury
Securities which may be deposited as temporary reinvestment
for sale proceeds pursuant to Section 3.02, and (4)
additional deposits of Securities pursuant to Section 2.02(b)
and this Section 2.02(c). Such additional Securities shall be
held, managed and applied by the Trustee as herein provided
and as provided in the applicable Trust Indenture.
(d) The Trustee is hereby irrevocably authorized to effect
registration or transfer of the Securities in fully
registered form to the name of the Trustee or to the name of
its nominee or the nominee of its agent."
K. Section 3.01 shall be deleted in its entirety and the
following text shall be inserted in its place:
"Section 3.01. Certain Moneys to Be Credited to Income
Account. The Trustee shall collect the Income on the
Securities as it becomes payable and credit all income to a
separate non-interest bearing account to be known as the
"Income Account", on the date on which the Trust Fund
receives such Income, or on the date it accrues with respect
to Securities issued at an original issue discount (including
all moneys realized by the Trustee from the sale of options,
warrants or other similar rights received in respect of the
Securities and including any stock dividends sold pursuant to
Section 3.07)."
L. The text of Section 3.02 shall be deleted and the
following text shall be inserted in its place:
"Section 3.02. Certain Moneys to Be Credited to Capital
Account. All moneys other than amounts credited to the Income
Account received by the Trustee in respect of the Securities
under this Indenture shall be credited to a separate
non-interest bearing account to be known as the "Capital
Account". If Securities in a Trust are to be sold pursuant to
Section 3.06 or 3.07, the proceeds of such sale, or moneys
received as a distribution of capital as the result of any
corporate or other business action of the issuer of a
Security in the Trust, may be reinvested, upon the
instruction of the Sponsor, (x) in additional Securities held
at such time in the Trust Fund on a pro rata basis in the
manner set forth in, and to the extent permitted by, Section
3.15 or (y) if not so permitted by Section 3.15, if (1) at
the time there is no legal or regulatory impediment and (2)
in the opinion of the Sponsor it is in the best interests of
the Unitholders to do so, in U.S. Treasury Obligations which
mature on or prior to the next scheduled Distribution Date
(the "Short-Term Treasury
<PAGE>
Obligations"). Any Short-Term Treasury Obligations purchased
pursuant to this Section 3.02 shall be deposited into the
applicable Trust and shall be subject to the terms of such
Trust Indenture and Agreement to the same extent as any
Security deposited into such Trust on the Initial Date of
Deposit and the terms "Trust Fund" and "Securities" shall
thereafter be defined as including such Short-Term Treasury
Obligations. Brokerage commissions with respect to the
purchase of such Securities or Short-Term Treasury
Obligations, if any, shall be an expense borne by the Trust.
Anything in this Section 3.02 to the contrary
notwithstanding, moneys which are required to cover the
purchase of Contract Securities shall be held specially by
the Trustee for such purchase and shall not be deemed to be
part of the Capital Account until the Sponsor shall have
notified the Trustee that such contracts have failed,
whereupon such moneys shall be credited to the Capital
Account and, unless reinvested pursuant to Section 2.02(b),
shall be held specially for distribution in the manner
provided in Section 2.02(b)."
M. The text of Section 3.04 shall be deleted and the
following text shall be inserted in its place:
"Section 3.04. Certain Deductions and Distributions. Each
month the Trustee shall satisfy itself as to the adequacy of
the Reserve Account, making any further credits thereto as
may appear appropriate in accordance with Section 3.03 and
shall then:
(a) deduct from the Income Account or, to the extent such
funds are not available in such Account, from the Capital
Account, or to the extent such funds are not available in
such Account, sell Securities in accordance with Section
5.02, and pay to itself individually the amounts that it is
at the time entitled to receive pursuant to Sections 8.01 and
8.05 on account of its services theretofore performed and
expenses, losses and liabilities theretofore incurred, if
any;
(b) deduct from the Income Account or, to the extent funds
are not available in such Account, from the Capital Account,
and pay to itself individually an amount equal to the portion
of the advance for Initial Costs specified in 10.02(b) for
which it is then entitled to reimbursement pursuant to such
section;
(c) deduct from the Income Account or, to the extent funds
are not available in such Account, from the Capital Account,
and pay to the Sponsor or successor Sponsor the amount that
it is entitled to receive pursuant to Sections 7.02 and
8.01(f); and
<PAGE>
(d) to the extent that the Trustee has been advised that
costs incurred in keeping the registration of Units and the
Trust on a current basis are permitted to be deducted at that
time by the Securities and Exchange Commission, deduct from
the Income Account, or to the extent funds are not available
in such Account, from the Capital Account, an amount equal to
the unpaid fees and expenses incurred in keeping the
registration statement current as provided in Section 10.03.
Any amounts that the Trustee has paid pursuant to (c) above
in excess of the amount to which the Sponsor is entitled
pursuant to Section 7.02, shall be returned to the Trust and
distributed on the next Distribution Date to Unitholders of
record on the preceding Record Date.
On each quarterly Distribution Date with respect to Income
Account Distributions ("Income Distributions"), and on each
annual Distribution Date with respect to Capital Account
Distributions ("Capital Distributions"), or within a
reasonable period of time thereafter, the Trustee shall
distribute by mail to each Unitholder of record at the close
of business on the preceding Record Date at his address
appearing on such Record Date on the registration books of
the Trustee or by such other means as may be mutually agreed
upon by the Trustee and the Unitholder, such Unitholder's
pro rata share of the balance of the Income and/or Capital
Accounts, as the case may be, computed as of such Record Date
in the manner set forth below provided, however that the
Trustee, if so directed with respect to such distributions
from the Income Account only in a writing signed by the
Sponsor on behalf of Unitholders electing the reinvestment
plan offered in the Prospectus ("Reinvestment Plan") and
received by the Trustee on or before the Record Date for the
first distribution to which such notice is to apply, use
such distributions to purchase Units from the Sponsor, which
may be Units held by the Sponsor or additional Units created
pursuant to the provisions of Section 2.02, for the accounts
of such Unitholders under the terms and conditions set forth
in the Prospectus. Only whole Units shall be purchased
pursuant to this Section.
The Trustee shall on or before each Distribution Date in
respect of Income Distributions and/or Capital Distributions,
as the case may be, compute the amount of the distribution
per Unit for such Distribution Date (i) by deducting, as
applicable, from the cash on hand in the Capital and Income
Accounts as of the Record Date immediately preceding such
Distribution Date the total of (X) cash required for the
redemption of unredeemed tendered Units and (Y) the sum of
the amounts to be deducted from such Accounts on or before
such Distribution Date pursuant to the foregoing provisions
of this Section 3.04 and (ii) dividing the amount
<PAGE>
so obtained by the number of Units outstanding on the Record
Date immediately preceding such Distribution Date.
No distribution need be made from the Capital Account if the
balance therein is less than an amount set forth in the
Indenture.
The amount to be so distributed to each Unitholder shall be
that pro rata share of the cash balance of the Income or
Capital Accounts, as the case may be, computed as set forth
herein, as shall be represented by the number of Units
evidenced by the number of Units held of record by such
Unitholder. In making the computation of such holder's pro
rata share of the balance of the Income and Capital Accounts,
fractions of less than one cent shall be omitted.
In the event a Unitholder of a particular series of any Trust
fund is also a Unitholder of one or more other series of a
trust for which the Trustee is the trustee and for which the
Sponsor is the sole depositor, and such Unitholder has not
elected to participate in the Reinvestment Plan, then the
Trustee shall consolidate in one check the distribution
required to be made to a Unitholder hereunder with all other
distributions required to be made on such Distribution Date
to such Unitholder pursuant to the indenture governing such
other series; provided that an appropriate statement of
distribution be furnished therewith as required by the
applicable Trust Indenture."
N. The second paragraph of Section 3.05 shall be amended as
follows:
the phrase "Within a reasonable period of time after
the last day of each calendar year. . ." shall be
deleted and the following phrase shall be
substituted therefor: "Within 60 days following the
last day of each calendar year commencing with
calendar year 1998.
O. The text of Section 3.06 shall be deleted in its entirety
and the following text shall be inserted in its place:
"Section 3.06. Sale of Securities and of Certain Rights. The
Sponsor by written notice may direct the Trustee to sell
Securities at such price and time and in such manner as shall
be deemed appropriate by the Sponsor if the Sponsor shall
have determined that any one or more of the following
conditions exist:
<PAGE>
(a) that there has been a failure to declare or pay
anticipated dividends or interest;
(b) that any materially adverse action or proceeding has been
instituted at law or in equity seeking to restrain or enjoin
the declaration or payment of dividends or interest on any
such Securities or that there exists any other materially
adverse legal question or impediment affecting such
Securities or the declaration or payment of dividends or
interest on the same;
(c) that there has occurred any breach of covenant or
warranty in any trust indenture or other document relating to
the issuer or obligor or guarantor which might materially and
adversely affect either immediately or contingently the
declaration or payment of dividends or interest on such
Securities;
(d) that there has been a default in the payment of the
principal or par or stated value of, premium, if any, or
income on any other outstanding securities of the issuer or
the guarantor of such securities which might materially and
adversely, either immediately or contingently, affect the
declaration or payment of dividends on the Securities;
(e) that a decline in price has occurred or such materially
adverse market or credit factors have occurred, that in the
opinion of the Sponsor the retention of such Securities would
not be in the best interest of the Unitholders;
(f) that the sale of such Securities is desirable in order to
maintain the qualification of the Trust Fund as a "Regulated
Investment Company" in the case of a trust which has elected
to qualify as such;
(g) that there has been a decrease in the Sponsor's internal
rating of the Security; or
(h) that there has been a happening of events which, in the
opinion of the Sponsor, negatively affects the economic
fundamentals of the issuer of the Security or the industry of
which it is a part.
<PAGE>
Upon receipt of such direction from the Sponsor with respect
to any Securities, or in the case of options, warrants or
other rights to purchase securities distributed to the Trust
in respect of Securities as soon as is practicable after
receipt of such options, warrants or other rights, the
Trustee shall proceed to sell the specified Securities or any
such rights. The Trustee shall not be liable or responsible
in any way for depreciation or loss incurred by reason of any
sale made pursuant to any such direction or by reason of the
failure of the Sponsor to give any such direction, and in the
absence of such direction the Trustee shall have no duty to
sell any Securities under this Section 3.06 except to the
extent otherwise required by Section 3.10. The Sponsor shall
not be liable for errors of judgment in directing or failing
to direct the Trustee pursuant to this Section 3.06. This
provision, however, shall not protect the Trustee or Sponsor
against any liability for which they would otherwise be
subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of their obligations and duties
hereunder."
P. The text of Section 3.07 shall be deleted in its entirety
and the following text shall be inserted in its place:
"Section 3.07. Tender Offers, Reorganizations and Similar
Events, Stock Dividends.
The Sponsor irrevocably instructs the Trustee as follows:
(a) In the event of a tender offer for any Security (a
"Tender Stock") deposited in the Trust, by 1:00 p.m. three
Business days before the
<PAGE>
expiration of the best tender offer then in effect (that
being the tender offer of the highest value as determined by
the Sponsor and timely communicated to the Trustee) (the
"Best Offer") that (except as further provided in clause (d)
below) the Sponsor shall instruct the Trustee and the Trustee
shall tender the Tender Stock; provided however, the Trustee
shall place a limit order on such date, expiring at the close
of business on such date, for 90% of such Best Offer's value
as determined by the Sponsor; provided further, that in the
event the Best Offer is of an unconditional tender offer for
all outstanding Tender Stock and is not conditioned upon the
offeror's receipt of financing, such Tender Stock shall be
tendered and not sold. Any securities received pursuant to a
consummated tender offer shall be sold by the Trustee as soon
as practicable. Any Tender Stock which cannot be sold as set
forth above will be tendered;
(b) In the event Tender Stock has been tendered but a better
tender offer (that being a tender offer with a higher value
than a previous Best Offer, as determined by the Sponsor) (a
"Better Offer") is thereafter made prior to the expiration of
any withdrawal rights, the Sponsor shall timely notify the
Trustee and the Trustee shall use its best efforts to
exercise its withdrawal rights and apply the procedures set
forth in (a) above for the Better Offer;
(c) Upon the consummation of a tender offer, in the event any
Tender Stock is not accepted pursuant to the terms of a
tender offer, the Trustee shall sell the Tender Stock as soon
as practicable;
(d) Except as provided in subparagraph (2) below,
(1) during the periods during which the Sponsor creates
Additional Units for the Trust, the Trustee shall not
tender or sell Tender Stock.
(2) On any Distribution Date relating to an Income
Distribution, if the Trustee creates Additional Units for
the Reinvestment Plan in accordance with Section 2.02,
and if the Trustee sells or tenders Tender Stock(s) in
accordance with subparagraphs (a), (b) or (c) on such
Distribution Date, then the Trustee shall not include
such Tender Stock(s) in the deposit of additional
Securities but instead shall adjust the Percentage Ratios
so that the Trust's percentage ownership of such Tender
Stock(s) shall be allocated on a pro rata basis to the
remaining Securities held in the Trust Fund.
(e) In the event of a sale of substantially all of the assets
of an issuer of a Security or merger of an issuer of a
Security into another issuer, the Trustee shall sell the
affected Security pursuant to a limit order for 90% of the
value to be received by shareholders in such transaction (as
determined by the Sponsor), after the announcement of such
transaction. If after such acquisition or merger the Trustee
still holds Security upon such acquisition or merger or any
resulting securities are received in respect to Security the
Trustee shall sell them as soon as practicable.
(f) In the event the issuer of a Security announces that
another company or companies will be merged into it, the
Trustee shall retain such Security
<PAGE>
unless the Sponsor directs the Trustee to sell the Security
for one or more of the reasons set forth in Section 3.06.
(g) In the event of a corporate reorganization, the Trustee
shall sell securities received in respect of a Security as
soon as practicable.
(h) The Sponsor shall immediately advise the Trustee if it is
unable to determine (i) if an offer is a Best Offer or Better
Offer or (ii) the value of a tender offer, sale of
substantially all assets or merger. In such event, (a) in the
case of a tender offer, the Trustee shall sell the Tender
Stock as close to the opening of the stock exchanges as is
practicable on the last business day a tender offer is in
effect and (b) in the event of a sale of substantially all
assets or mergers, the Trustee shall continue to hold the
Security.
(i) In the event the Trustee is notified of any vote to be
taken or proposed to be taken by holders of the Securities
held by the Trust Fund in connection with any activity or
matter not otherwise covered by this Section 3.07, the
Trustee shall take such action with respect thereto as the
Sponsor shall direct.
(j) If, stock or securities are received by the Trustee, with
or without cash, as a result of any activity or matter not
otherwise covered by subsections (a) through (h) of this
Section 3.07 (including any stock or securities received
notwithstanding the Trustee's rejection of an offer or
received without an initial offer), the Trustee at the
direction of the Sponsor may retain or sell such stock or
securities in the Trust Fund. Any stock
<PAGE>
or securities so retained shall be subject to the terms and
conditions of the Indenture to the same extent as the
Securities originally deposited hereunder. The Trustee shall
give notice to the Unitholders of the retention of stock or
securities acquired in exchange for Securities within five
days after such acquisition.
(k) Additional shares of Securities received as a
distribution on Securities (other than shares received in a
non-taxable distribution which shall be retained by the Trust
Fund) shall be sold and the proceeds credited to the Income
Account."
Q. The first paragraph of Section 3.10 shall be amended by
deleting the first word of the paragraph, "In", and inserting the following
text in its place:
"Except as otherwise provided for in Section 3.07, in".
R. In the event that the Sponsor directs the Trustee to
distribute Securities in lieu of a cash redemption pursuant to Section 5.02 of
the Standard Terms, the Trustee shall so distribute the stocks and distribute
only stocks in a proportionate amount, rounding to avoid the delivery of
fractional shares and where such rounding is not possible by delivering stocks
and an amount equal to the difference between the Redemption Value and the
value of such stocks delivered (determined in accordance with Section 4.01 on
the date of tender).
S. The text of Section 3.13 shall be deleted and the
following text shall be inserted in its place:
"Section 3.13. Election to Qualify as Regulated Investment
Company; Diversification Tests. (a) The Trust intends to
elect to be treated and to qualify as a Regulated Investment
Company as defined in the Internal Revenue Code and the
Trustee is directed to make such elections, including any
appropriate election to be taxed as a corporation, as shall
be necessary to effect such qualification.
(b) The Trustee shall furnish to independent certified public
accountants designated by the Sponsor pursuant to Section
8.01(e) the value of the Securities in the Trust Fund as of
(1) the Friday (or the immediately preceding Business Day if
such Friday is not a Business Day) before the last Business
Day of the first quarter of the Trust Fund's first taxable
year (2) the last Business Day of the first quarter of the
Trust Fund's first taxable year, and (3) the last Business
Day of any subsequent quarter during which any Securities are
acquired by the Trust Fund. For purposes of this Section 3.13
each said day shall,
<PAGE>
except as the context may otherwise require, be hereinafter
referred to as the "Diversification Test Date".
On each Diversification Test Date upon written request from
the Trustee no later than five Business Days prior thereto,
which date shall be specified by the Trustee in such request,
such accountants shall send a written report, in form and
substance satisfactory to the Trustee and its counsel, to the
Trustee and to the Sponsor stating whether or not the
aggregate value of all Securities (other than U.S. Government
Securities) of each issuer, Securities issued by which are
valued at greater than 5% of the total assets of the Trust
Fund, exceeds 50% of the value of the total assets of the
Trust Fund on such Diversification Test Date. In making the
necessary computations, such accountants shall compute the
value of the Securities by taking the value of the Securities
in the Trust Fund, as so furnished by the Trustee, including
the amount of any accrued interest thereon, by treating as
Securities of the same issuer only those Securities whose
name so indicates; by treating contracts to purchase
Securities as if the Securities subject to such contracts had
been acquired by the Trust Fund; and by the settlement of
contracts to purchase Securities as the acquisition of
Securities on their respective settlement dates.
In the event the foregoing certification by such accountants
states that the aggregate value of Securities (other than
U.S. Government Securities) of each issuer, Securities issued
by which are valued at more than 5% of the total assets of
the Trust Fund, on the Friday (or the immediately prior
Business Day if such Friday is not a Business Day) before the
last Business Day in the first quarter of the first taxable
year of the Trust Fund exceeds 50% of the total assets of the
Trust Fund on such date, as provided in Section 3.06, the
Sponsor shall direct the Trustee to sell all or any portion
of the Securities whose value is greater than 5% of total
assets of the Trust Fund or take such other action as is
necessary so that the aggregate value of Securities (other
than U.S. Government Securities) of each issuer, Securities
issued by which have values greater than 5% of the total
assets of the Trust Fund, does not exceed 50% of the value of
the total assets of the Trust Fund on the last Business Day
of the first quarter of the first taxable year of the Trust
Fund. On the last day of the first quarter of the first
taxable year of the Trust Fund the Sponsor shall provide a
certificate satisfactory in form and substance to the Trustee
and its counsel to the effect that the aggregate value of all
Securities (other than U.S. Government Securities) of each
issuer, Securities issued by which are valued at greater than
5% of the total assets of the Trust
<PAGE>
Fund does not exceed 50% of the value of the Fund's total
assets on the last day of the quarter.
In order to ensure the continued qualification as a Regulated
Investment Company of a trust which has elected to so
qualify, the Trustee shall cause a review of the Trust to be
performed by such accountants prior to the end of the
calendar year. The purpose of such review shall be to
determine whether the Trust is deriving at least 90% of its
gross income from dividends, interest and gains from the sale
or other disposition of the Securities. The Trustee shall
submit the written results of such review to the Sponsor.
In the event that the foregoing audit states that less than
90% of the gross income of the Trust is derived from
dividends, interest and gains from the sale or other
disposition of the Securities, the Sponsor shall direct the
Trustee to sell certain of the Securities pursuant to Section
3.06 in an amount deemed necessary by the Sponsor to maintain
the status of the Trust as a Regulated Investment Company."
In performing the duties set forth in this Section 3.13, the Trustee
may seek the advice of the independent certified public accountants designated
by the Sponsor pursuant to Section 8.01 hereof and may rely upon the advice of
such accountants."
S. The Trustee will calculate the Trust's value, as provided
in Section 5.01 on the dates set forth in said Section 5.01 and additionally
upon termination (or the last business day prior thereto).
T. The Standard Terms shall be amended to add new Section
3.15 as follows:
Section 3.15. Reinvestment of Cash Proceeds. If and to the
extent that the Sponsor, on behalf of the Trust, receives a
favorable response to its no-action letter request submitted
to the Securities and Exchange Commission with respect to
reinvesting cash proceeds received by the Trust, the Trustee
shall, upon receipt of instructions from the Sponsor,
reinvest such cash proceeds in additional Securities held in
the Trust Fund at such time. Such reinvestment shall be made
so that each deposit of additional Securities shall be made
so as to match as closely as practicable the Percentage
Ratios, and such reinvestment shall be made in accordance
with the parameters set forth in the no-action letter
response. If the Sponsor and the Trustee determine that it
shall be
<PAGE>
necessary to amend the Standard Terms and Agreement and/or
the Indenture to comply with the parameters set forth in the
no-action letter response, such documents may be so amended
without the consent of Unitholders.
U. In the event that any issuer of a Security in the Trust
issues a stock dividend in lieu of a cash dividend, such dividend shall be sold
by the Trustee, and the proceeds thereof shall be Income, as defined in the
Standard Terms, and shall be deposited into the Income Account and distributed
as of the next succeeding Income Account Distribution Date.
V. All Units will be held in book-entry form, except that
upon request a Unitholder may receive a certificate representing beneficial
ownership of its Units.
W. Section 10.02 of the Standard Terms shall hereby be
amended as follows:
1. the text of Section 10.02 shall be deleted in its
entirety and;
2. the following text set forth below shall be inserted
in replacement of such Section 10.02: "Section
10.02. Initial Costs (a) The Initial Costs incurred
by the Sponsor and the Trustee in connection with
the organization and establishment of the Trust (the
"Initial Costs") shall be paid by the Trust, or if
paid for by the Trustee initially, shall be
reimbursed by the Trust to the Trustee in accordance
with Sections 3.04(b) and 8.05.
(b) Initial Costs to be charged to the Trust
include, but are not limited to
(1) the costs of the initial
preparation, typesetting and
execution of the registration
statement, prospectuses (including
preliminary prospectuses), the
trust indenture and other legal
documents relating to the
establishment of the Trust, and
the costs of submitting such
documents in electronic format to
the SEC,
(2) SEC and state blue sky
registration fees for the initial
registration of Trust Units,
(3) the cost of the initial audit of
the Trust,
(4) the legal costs incurred by the
Sponsor and the Trustee related to
any and all of the foregoing, and
(5) other out-of-pocket expenses
related to any and all of the
foregoing.
<PAGE>
(c) Costs and expenses incurred in the
marketing and selling of Trust Units, shall
not be borne by the Trust but shall be paid
for by the Sponsor. Such costs and expenses
include but are not limited to (1) any
expenses incurred in the printing of
prospectuses (including preliminary
prospectuses), (2) the preparation and
printing of brochures and other advertising
or marketing materials, including any legal
costs incurred in the review thereof, and
(3) any other selling or promotional costs
or expenses.
(d) Promptly after the Initial Date of Deposit,
upon written certification to the Trustee,
the Sponsor shall receive reimbursement for
any of the Initial Costs set forth in
subsection (b) above which are payable from
the Trust but which were paid for by the
Sponsor, without profit. The Trustee shall
advance out of its own funds such
reimbursement, provided, however that the
Trustee shall be entitled to be reimbursed
without interest out of the Trust Fund for
any and all amounts advanced by it pursuant
to this Section 10.02(d), in the manner set
forth in Section 3.04(a). Such advances
shall be considered a lien on the Trust
Fund, and the Trustee shall have a priority
over Unitholders on funds received in
respect of the Securities in the Trust, as
such funds are received.
(e) The Trustee shall reimburse itself for the
advances made pursuant to subsection (d)
above in 60 months approximately equal
installments over a five (5) year period
unless (i) the Trust is sooner terminated,
in which case all amounts still due and
owing shall be payable to the Trustee from
the assets of the Trust or (ii) by law or
regulation the Trust is required to
amortize costs set forth in subsection (b)
over a period of time shorter than 60
months, in which case the Trustee shall
follow the requisite time period for such
reimbursement.
(f) The Sponsor shall bear the Initial Costs,
if any, in excess of $100,000."
X. For the purpose of this Trust, Section 10.03(e) shall be
amended so that the text below shall be added to the paragraph following the
last sentence thereof:
"So long as the Sponsor is maintaining a secondary
market for Units, the Sponsor shall bear any audit
expense which exceeds $.0050 per Unit".
<PAGE>
Section 3. The Trust hereby elects to qualify as a Regulated
Investment Company under the Internal Revenue Code of 1986, as amended.
Section 4. All references in the Standard Terms to the First
National Bank of Chicago shall be deleted in their entirety, all references to
the term "Co-Trustees" shall be deleted and the term "Trustee" shall be
inserted in replacement thereof, the definition of "Trustee" in Article I shall
be amended to delete the reference to First National Bank of Chicago and all
terms relative to the Trustee shall be interpreted in the singular.
<PAGE>
IN WITNESS WHEREOF, PaineWebber Incorporated has caused this
Trust Indenture and Agreement to be executed by one of its Vice Presidents and
its corporate seal to be hereto affixed and attested by one of its Assistant
Secretaries, and Investors Bank & Trust Company has caused this Trust Indenture
to be executed by one of its Authorized Signatories and its corporate seals to
be hereto affixed and attested by one of its Authorized Signatories, all as of
the date first above written.
PAINEWEBBER INCORPORATED
as Depositor and Sponsor
SEAL By
-------------------------------
Senior Vice President
Attest:
- --------------------------
Secretary
<PAGE>
STATE OF NEW YORK )
:ss.:
COUNTY OF NEW YORK )
On this 8th day of January, 1998 before me personally
appeared Robert E. Holley, to me known, who being by me duly sworn, said that
he is a Senior Vice President of PaineWebber Incorporated, one of the
corporations described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by authority of the Board of
Directors of said corporation, and that he signed his name thereto by like
authority.
-------------------------------
Notary Public
<PAGE>
SCHEDULE A TO TRUST INDENTURE
THE PAINEWEBBER EQUITY TRUST
GROWTH STOCK SERIES 21
SCHEDULE OF INVESTMENTS
AS OF INITIAL DATE OF DEPOSIT, JANUARY 8, 1998
COMMON STOCKS (1)
<TABLE>
<CAPTION>
PRIMARY INDUSTRY SOURCE AND NUMBER OF COST OF SECURITIES
NAME OF ISSUER SHARES TO TRUST(2)
- -------------------------------------- ----------- ------------------
<S> <C> <C>
Appliances (1.42%)
Sunbeam Corporation................... 340 $13,685.00
Applications Software (4.28%)
Clarify, Inc.*........................ 1,050 13,781.25
PeopleSoft, Inc.*..................... 400 13,650.00
The Vantive Corporation*.............. 490 13,781.25
Auto/Truck Parts & Equipment (5.00%)
Arvin Industries, Inc................. 420 13,728.75
Excel Industries, Inc................. 750 13,781.25
The Standard Products Company......... 510 13,865.63
Walbro Corporation.................... 490 6,737.50
Cellular Communications (4.32%)
360 Communications Company*........... 740 14,013.75
Nextel Communications, Inc.*.......... 540 13,736.25
PriCellular Corporation*.............. 1,260 13,781.25
Computers (5.70%)
Cabletron Systems, Inc.*.............. 920 13,742.50
Data General Corporation*............. 730 13,687.50
Digital Equipment Corporation* ....... 350 13,628.13
Stratus Computer, Inc.*............... 360 13,837.50
Containers (2.85%)
Bemis Company, Inc.................... 320 13,700.00
Shorewood Packaging Corporation* ..... 540 13,770.00
Data Processing/Management (1.43%)
Baan Company, N.V.*................... 390 13,796.25
Direct Marketing(1.42%)
Catalina Marketing Corporation* ...... 310 13,659.38
Drug Delivery Systems (1.43%)
Alkermes, Inc.*....................... 650 13,731.25
Electric (4.31%)
Idaho Power Company................... 380 13,798.75
New York State Electric & Gas Corp. .. 410 13,837.50
NIPSCO Industries, Inc................ 280 13,860.00
Electronics (4.98%)
Credence Systems Corporation*......... 520 13,650.00
Etec Systems, Inc. *.................. 320 13,840.00
Genus, Inc.*.......................... 1,750 6,671.88
LTX Corporation*...................... 2,820 13,747.50
<PAGE>
THE PAINEWEBBER EQUITY TRUST
GROWTH STOCK SERIES 21
SCHEDULE OF INVESTMENTS
AS OF INITIAL DATE OF DEPOSIT, JANUARY 8, 1998 (CONTINUED)
COMMON STOCKS (1)
PRIMARY INDUSTRY SOURCE AND NUMBER OF COST OF SECURITIES
NAME OF ISSUER SHARES TO TRUST(2)
- -------------------------------------- ----------- ------------------
Finance (12.92%)
Beneficial Corporation................ 170 $13,833.75
First Chicago NBD Corporation......... 180 14,152.50
Fleet Financial Group, Inc............ 190 13,858.13
H.F. Ahmanson & Company............... 240 13,845.00
Golden State Bancorp, Inc.*........... 400 13,600.00
Mellon Bank Corporation............... 230 13,800.00
The Money Store, Inc.................. 710 13,756.25
Southtrust Corporation................ 230 13,785.60
State Street Corporation.............. 250 13,718.75
Food (2.85%)
Dominick's Supermarkets, Inc.* ....... 400 13,850.00
Hannaford Brothers Company............ 320 13,620.00
Gas Distribution(4.25%)
Consolidated Natural Gas Company ..... 240 13,485.00
MCN Corporation....................... 370 13,875.00
Sonat, Inc............................ 310 13,543.13
Internet Software (1.31%)
America Online, Inc*.................. 140 12,582.50
Machinery (2.87%)
Harnischfeger Industries, Inc. ....... 370 13,851.88
New Holland N.V....................... 540 13,770.00
Medical (11.49%)
CardioThoracic Systems, Inc.*......... 1,140 6,697.50
Eclipse Surgical Technologies, Inc.* . 1,040 6,695.00
Genzyme Transgenics Corporation* ..... 1,310 13,755.00
Heartport, Inc.*...................... 580 13,775.00
Schering-Plough Corporation........... 220 14,025.00
Sofamor Danek Group, Inc.*............ 210 13,741.85
St. Jude Medical, Inc.*............... 440 13,915.00
Texas Biotechnology Corporation* ..... 2,340 13,747.50
Warner-Lambert Company................ 110 14,231.25
Manufacturing (1.43%)
Samsonite Corporation*................ 400 13,775.00
Networking Products (5.71%)
Ascend Communications, Inc.*.......... 500 13,781.25
Bay Networks, Inc.*................... 490 13,750.63
FORE Systems, Inc.*................... 810 13,770.00
Xylan Corporation*.................... 830 13,695.00
<PAGE>
THE PAINEWEBBER EQUITY TRUST
GROWTH STOCK SERIES 21
SCHEDULE OF INVESTMENTS
AS OF INITIAL DATE OF DEPOSIT, JANUARY 8, 1998 (CONTINUED)
COMMON STOCKS (1)
PRIMARY INDUSTRY SOURCE AND NUMBER OF COST OF SECURITIES
NAME OF ISSUER SHARES TO TRUST(2)
- -------------------------------------- ----------- ------------------
Oil (5.72%)
Nuevo Energy Company*................. 370 $ 13,666.88
Sante Fe Energy Resources, Inc.* ..... 1,460 13,778.75
Unocal Corporation.................... 370 13,782.50
Western Atlas, Inc.*.................. 200 13,775.00
Publishing (2.84%)
Knight-Ridder, Inc.................... 250 13,562.50
The Reader's Digest Association,
Inc................................... 580 13,738.75
Seismic Data Collection (1.41%)
Veritas DGC, Inc.*.................... 410 13,606.88
Soap & Cleaning Preparation (2.88%)
Church & Dwight Co., Inc.............. 480 13,830.00
The Clorox Company.................... 180 13,916.25
Telecommunications (7.18%)
AirTouch Communications, Inc.* ....... 330 13,695.00
Century Telephone Enterprises, Inc. . 270 13,837.50
GTE Corporation....................... 270 13,736.25
Teleport Communications Group, Inc.* . 240 13,860.00
U.S. West Communications Group ....... 300 13,931.25
------------------
TOTAL INVESTMENTS.................... $962,500.00
==================
</TABLE>
- ------------
(1) All Securities are represented entirely by contracts to purchase
Securities.
(2) Valuation of the Securities by the Trustee was made as described in
"Valuation" as of the close of business on the business day prior to
the Initial Date of Deposit.
(3) The loss to the Sponsor on the date of deposit is $384.
* Non-income producing security.
<PAGE>
Exhibit 99.2
PaineWebber Inc.
1200 Harbor Boulevard
Weehawken, New Jersey 07087 January 8, 1998
Investors Bank & Trust Company
Hancock Towers
200 Clarendon Street
Boston, Massachusetts 02116
Re: PaineWebber Equity Trust,
Growth Stock Series 21
Ladies and Gentlemen:
We have served as counsel for PaineWebber Incorporated as
sponsor and depositor (the "Sponsor") of PaineWebber Equity Trust, Growth Stock
Series 21 (hereinafter referred to as the "Trust") in connection with the
issuance by the Trust of an initial 100,000 units of fractional undivided
interest in the Trust (hereinafter referred to as the "Units").
In this regard, we have examined executed originals or copies
of the following:
(a) The Restated Certificate of Incorporation, as
amended, and the By-Laws of the Sponsor, as amended,
certified by the Secretary of the Sponsor on the date hereof;
<PAGE>
(b) Resolutions of the Board of Directors of the
Sponsor adopted on December 3, 1971 relating to the Trust and
the sale of the Units, certified by the Secretary of the
Sponsor on the date hereof;
(c) Resolutions of the Executive Committee of the
Sponsor adopted on September 24, 1984, certified by the
Secretary of the Sponsor on the date hereof;
(d) Powers of Attorney as set forth in the
certificate of the Secretary of the Sponsor dated the date
hereof;
(e) The Registration Statement on Form S-6 (File No.
333-35615) filed with the Securities and Exchange Commission
(the "Commission") in accordance with the Securities Act of
1933, as amended, and the rules and regulations of the
Commission promulgated thereunder (collectively, the "1933
Act") and amendments thereto including Amendment No. 2
("Amendment No. 2") proposed to be filed on January 8, 1998
(the "Registration Statement");
(f) The Notification of Registration of the Trust
filed with the Commission under the Investment Company Act of
1940, as amended (collectively, the "1940 Act") on Form N-8A,
as amended, (the "1940 Act Notification");
(g) The registration of the Trust filed with the
Commission under the 1940 Act on Form N-8B-2 (File No.
811-3722), as amended (the "1940 Act Registration);
(h) The prospectus included in Amendment No. 2 (the
"Prospectus");
(i) The Standard Terms and Conditions of the Trust
dated as of July 10, 1990, as amended, between the Sponsor
and Investors Bank & Trust Company, (the "Trustee") (the
"Standard Terms");
(j) The Trust Indenture dated as of January 8, 1998
between the Sponsor and the Trustee (the "Trust Indenture"
and, collectively with the Standard Terms, the "Indenture and
Agreement");
(k) The Closing Memorandum dated January 8, 1998,
between the Sponsor and the Trustee (the "Closing
Memorandum");
(l) Officers Certificates required by the Closing
Memorandum;
(m) The form of certificate of ownership for units
(the "Certificate") to be issued under the Indenture and
Agreement; and
<PAGE>
(n) Such other pertinent records and documents as we
have deemed necessary.
With your permission, in such examination, we have assumed
the following: (a) the authenticity of original documents and the genuineness
of all signatures; (b) the conformity to the originals of all documents
submitted to us as copies; (c) the truth, accuracy, and completeness of the
information, representations, and warranties contained in the records,
documents, instruments and certificates we have reviewed; (d) except as
specifically covered in the opinions set forth below, the due authorization,
execution, and delivery on behalf of the respective parties thereto of
documents referred to herein and the legal, valid, and binding effect thereof
on such parties; and (e) the absence of any evidence extrinsic to the
provisions of the written agreement(s) between the parties that the parties
intended a meaning contrary to that expressed by those provisions. However, we
have not examined the securities deposited pursuant to the Indenture and
Agreement (the "Securities") nor the contracts for the Securities.
We express no opinion as to matters of law in jurisdictions
other than the laws of the State of New York (except "Blue Sky" laws)and the
federal laws of the United States, except to the extent necessary to render the
opinion as to the Sponsor and the Indenture and Agreement in paragraphs (i) and
(iii) below with respect to Delaware law. As you know we are not licensed to
practice law in the State of Delaware, and our opinion in paragraph (i) and
(iii) as to Delaware law is based solely on review of the official statutes of
the State of Delaware.
Based upon such examination, and having regard for legal
considerations which we deem relevant, we are of the opinion that:
(i) The Sponsor is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Delaware with
full corporate power to conduct its business as described in the Prospectus;
(ii) The Sponsor is duly qualified as a foreign corporation
and is in good standing as such within the State of New York;
(iii) The Indenture and Agreement has been duly authorized,
executed and delivered by the Sponsor and, assuming the due authorization,
execution and delivery by the Trustee, is a valid and binding agreement of the
Sponsor, enforceable against the Sponsor in accordance with its terms;
(iv) The Trust has been duly formed and is validly existing
as an investment trust under the laws of the State of New York and has been
duly registered under the Investment Company Act of 1940;
(v) The terms and provisions of the Units conform in all
material respects to the description thereof contained in the Prospectus;
<PAGE>
(vi) The consummation of the transactions contemplated under
the Indenture and Agreement and the fulfillment of the terms thereof will not
be in violation of the Sponsor's Restated Certificate of Incorporation, as
amended, or By-Laws, as amended and will not conflict with any applicable laws
or regulations applicable to the Sponsor in effect on the date hereof;
(vii) The Certificates to be issued by the Trust, when duly
executed by the Sponsor and the Trustee in accordance with the Indenture and
Agreement, upon delivery against payment therefor as described in the
Registration Statement and Prospectus will constitute fractional undivided
interests in the Trust enforceable against the Trust in accordance with their
terms, will be entitled to the benefits of the Indenture and Agreement and will
be fully paid and non-assessable; and
(viii) While the Registration Statement has not yet become
effective we have no reason to believe that such Registration Statement will
not become effective within 30 days after the date hereof.
In addition, we have participated in conferences with
representatives of the Sponsor, the Trustee, the Trust's accountants and others
concerning the Registration Statement and the Prospectus and have considered
the matters required to be stated therein and the statements contained therein,
although we have not independently verified the accuracy, completeness or
fairness of such statements. Based upon and subject to the foregoing, nothing
has come to our attention to cause us to believe that the Registration
Statement, as of the date hereof, contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, or that the Prospectus, as of the date
hereof, contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading (it being understood that we have not been requested to and do
not make any comment in this paragraph with respect to the financial
statements, schedules and other financial and statistical information contained
in the Registration Statement or the Prospectus).
Our opinion that any document is valid, binding, or
enforceable in accordance with its terms is qualified as to:
(a) limitations imposed by bankruptcy, insolvency,
reorganization, arrangement, fraudulent conveyance, moratorium, or other laws
relating to or affecting the enforcement of creditors' rights generally;
(b) rights to indemnification and contribution which may be
limited by applicable law or equitable principles; and
<PAGE>
(c) general principles of equity, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement and to the use of our name wherever it appears in
the Registration Statement and the Prospectus.
Very truly yours,
CARTER, LEDYARD & MILBURN
KHM:def
<PAGE>
Exhibit 99.C1
PaineWebber Incorporated January 8, 1998
1200 Harbor Boulevard
Weehawken, New Jersey 07087
Investors Bank & Trust Company
Hancock Towers
200 Clarendon Street
Boston, Massachusetts 02116
Ladies & Gentlemen:
As counsel for PaineWebber Incorporated (the "Depositor"), we
have examined an executed copy of the Trust Indenture and Agreement dated as of
January 8, 1998 (the "Indenture") and Standard Terms and Conditions of Trust,
dated as of July 10, 1990 (the "Agreement"), both between the Depositor, and
Investors Bank & Trust Company, as Trustee. The Indenture established a trust
called The PaineWebber Equity Trust, Growth Stock Series 21 (the "Trust") into
which the Depositor deposited certain stocks, (the "Securities"), and moneys to
be held by the Trustee upon the terms and conditions set forth in the Indenture
and Agreement. Under the Indenture, units were issued representing fractional
undivided interests in the Trust (the "Units").
Based upon the foregoing and upon an examination of such
other documents and an investigation of such matters of law as we have deemed
necessary, we are of the opinion that, under existing statutes and decisions:
<PAGE>
1. The Trust intends to qualify for and elect tax treatment
as a regulated investment company under the Internal Revenue Code of 1986, as
amended (the "Code"). Assuming that such election is made and the Trust so
qualifies, the Trust would not be subject to federal income tax on such part of
its net income and capital gain, if any, as is timely distributed to
Unitholders.
2. The Trust will be subject to New York State and New York
City franchise and income tax. However, in any fiscal year in which the Trust
qualifies as a regulated investment company under Section 851 of the Code, and
in which the Trust distributes all of its net income and capital gains to
Unitholders, the sum of such New York State and New York City tax to which the
Trust will be subject will not exceed $2,055.00.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement (File No. 333-35615) relating to the Units
referred to above and to the use of our name and to the reference to our firm
in said Registration Statement and in the related Prospectus.
Very truly yours,
CARTER, LEDYARD & MILBURN
KHM:def
<PAGE>
Exhibit 99.C2
CONSENT OF INDEPENDENT AUDITORS
We consent to the use in this Amendment to the Registration Statement of our
report dated January 8, 1998 relating to the Statement of Financial Condition
of The PaineWebber Equity Trust, Growth Stock Series 21, including the Schedule
of Investments, included herein, and to the reference made to us under the
caption "Independent Auditors" in the Prospectus.
ERNST & YOUNG LLP
January 8, 1998
New York, New York
