<PAGE>
333-35615
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1 TO
FORM S-6
For Registration Under the Securities Act of 1933 of Securities of
Unit Investment Trusts Registered on Form N-8B-2
A. Exact name of Trust:
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
under the Investment Company Act of 1940.
F. Proposed maximum offering price to the public
of the securities being registered:
Indefinite
G. Amount of filing fee, computed at one-thirty-fourth of 1
percent of the proposed maximum aggregate offering price
to the public:
H. Approximate date of proposed sale to public:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF
THE REGISTRATION STATEMENT
The registrant hereby amends this registration statement
on such date or dates as may be necessary to delay its effective
date until the registrant shall file a further amendment which
specifically states that this registration statement shall
thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall
become effective on such date as the Commission, acting pursuant to
said Section 8(a), may determine.
<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 )The Trust
Trust's Securities and Rights of ) Rights of Unitholders
Holders
- ---------
* 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 ) Amendment of the Indenture
(2) Terms and Conditions ) Supervision of Trust
of Trust's Securities ) Investments
(3) Provisions of Trust ) Amendment of the Indenture
(4) Identity of Depositor ) Administration of the Trust
and Trustee )
(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-Reinvestment
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* 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 ) -Sponsor's Profit-Secondary
affiliated 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.
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(d) Schedule of distribution ) *
19. Records, accounts and report ) Distributions, Adminstra-
) 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 Price of
) Units, 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 other services )
rendered to trust )
33. Remuneration of employees of ) *
Depositor for certain services )
rendered to trust )
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* 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
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* 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
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* 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>
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 Group-Financial Statements incorporated by reference to Form 10-K
and Form 10-Q. (File No. 1-7367).
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH STATE.
PRELIMINARY, SUBJECT TO COMPLETION
DATED JANUARY 6, 1998
PAINEWEBBER EQUITY TRUST
Growth Stock Series 21
"Power Grab" Portfolio
- -----------------------------------------------------------------------------
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 acquisition. 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 , 1998
<PAGE>
ESSENTIAL INFORMATION REGARDING THE TRUST
AS OF JANUARY 7, 1998(1)
Sponsor: PaineWebber Incorporated
Co-Trustees: Investors Bank & Trust Company
The First National Bank of Chicago
Initial Date of Deposit: January 8, 1998
<TABLE>
<CAPTION>
<S> <C>
Aggregate Value of Securities in Trust: ................. $
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 ...... $
Divided by 100,000 Units ............................... $
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): .. $.0040 per Unit.
Estimated Other Expenses of the Trust........................ $.0280 per Unit.
----------------
Total Estimated Annual Expenses of the Trust(5): ........... $.0320 per Unit.
</TABLE>
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(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").
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.
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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 a lot 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 that leaves 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
companies, 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 acquirers, which can be used
as acquisition currency. This is a critical
5
<PAGE>
point and explains, for example, why the pace of deals in the banking
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 form 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
6
<PAGE>
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.
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 ............................ %
Applications Software.................. %
Auto/Truck Parts & Equipment .......... %
Cellular Communications ............... %
Computers ............................. %
Containers ............................ %
Data Processing/Management ............ %
Direct Marketing ...................... %
Drug Delivery Systems ................. %
Electronics ........................... %
Finance ............................... %
Food .................................. %
Gas Distribution ...................... %
Internet Software ..................... %
Machinery ............................. %
Medical ............................... %
Manufacturing ......................... %
Networking Products ................... %
Oil ................................... %
Publishing ............................ %
Seismic Data Collection ............... %
Soap & Cleaning Preparations .......... %
Telecommunications .................... %
</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 ( % OF PORTFOLIO)
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.
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But auto parts is rapidly 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 7.4% trailing "earnings before interest, taxation, depreciation and
amortization" ("EBITDA").
ENERGY ( % OF PORTFOLIO)
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 ( % OF PORTFOLIO)
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 ( % OF PORTFOLIO)
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 ( % OF PORTFOLIO)
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.
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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 (% OF PORTFOLIO)
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.
Two logical acquisitions for Caterpillar would be HAMISCHFEGER, the
dominant maker of mining equipment, and NEW HOLLAND, number two in
agricultural equipment.
PACKAGING (% OF PORTFOLIO)
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 (% OF PORTFOLIO)
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 DOMINICKS SUPERMARKETS and HANNAFORD
BROTHERS.
TECHNOLOGY/MEDIA/TELECOM (% OF PORTFOLIO)
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:
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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 (% OF PORTFOLIO)
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.
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
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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
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".)
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 and The First National Bank of Chicago, N.A., as Co-Trustees
(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.
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
- ------------
*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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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 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 Trust Indenture and Agreement 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 Trust Indenture and Agreement. 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 Trust Indenture and Agreement, 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.
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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 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
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<PAGE>
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.
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
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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 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
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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 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
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<PAGE>
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
- ------------
* 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>
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.
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<PAGE>
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 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.
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<PAGE>
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 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.
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<PAGE>
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.
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
20
<PAGE>
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 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
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<PAGE>
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 Day, President's
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,
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.
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<PAGE>
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 $.0115 which include, but
are not limited to Organizational Expenses of $.0040 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.
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
and income received on the Treasury Obligations 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
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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
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 and Capital 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".)
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REINVESTMENT PLAN
Income Account and Capital 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 and
Treasury Obligations. 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.
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
25
<PAGE>
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;
(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 set forth in the Indenture and 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.
26
<PAGE>
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 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
27
<PAGE>
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 Co-Trustees are The First National Bank of Chicago, a national banking
association with its corporate trust office at One First National Plaza,
Suite 0126, Chicago, Illinois 60670-0126 (which is subject to supervision by
the Comptroller of the Currency, the Federal Deposit Insurance Corporation
and the Board of Governors of the Federal Reserve System) and 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 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 CO-TRUSTEES
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 Co-Trustees. 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, a
Co-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 Co-Trustees, 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).................................. $
Organizational Expenses (b)........................................
------------
Total.......................................................... $
============
INTEREST OF UNITHOLDERS
-----------------------
Accrued Liability (b).............................................. $
------------
100,000 Units outstanding:
Cost to investors (c).............................................
Less: Gross underwriting commissions (d)..........................
------------
Total liabilities and net assets............................... $
============
</TABLE>
- ------------
(a) The aggregate cost to the Trust of the securities listed under
"Schedule of Investments" is determined by the Co-Trustees 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
$ has been deposited with the Co-Trustees, Investors Bank & Trust
Company and The First National Bank of Chicago, for the purchase of $
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 $50 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>
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)
- ------------------------------- ------------- ----------------------
<S> <C> <C>
</TABLE>
- ------------
(1) All Securities are represented entirely by contracts to purchase
Securities.
(2) Valuation of the Securities by the Co-Trustees 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 $ .
* Income producing security.
32
<PAGE>
PaineWebber Equity Trust
Growth Stock Series 21
CO-TRUSTEES:
INVESTORS BANK & TRUST COMPANY
Hancock Towers
200 Clarendon Street
Boston, Mass. 02116
(800) 356-2754
THE FIRST NATIONAL BANK OF CHICAGO
One First National Plaza,
Suite 0126
Chicago, Illinois 60670-0126
SPONSOR:
PAINEWEBBER INCORPORATED
1200 Harbor Boulevard,
Weehawken, N.J. 07087
(201) 902-3000
TABLE OF CONTENTS
Essential Information Regarding the
Trust .................................. 2
The Trust .............................. 11
Risk Factors and Special
Considerations ......................... 13
Federal Income Taxes ................... 15
Public Offering of Units ............... 16
Public Offering Price ................ 16
Sales Charge and Volume Discount ..... 16
Employee Discount .................... 17
Exchange Option ...................... 17
Conversion Option .................... 19
Distribution of Units ................ 19
Secondary Market for Units ........... 19
Sponsor's Profits .................... 20
Redemption ............................. 20
Valuation .............................. 21
Comparison of Public Offering Price and
Redemption Value ...................... 22
Expenses of the Trust .................. 23
Rights of Unitholders .................. 24
Distributions .......................... 24
Reinvestment Plan ...................... 25
Administration of the Trust ............ 25
Accounts ............................. 25
Reports and Records .................. 25
Portfolio Supervision ................ 26
Amendment of the Indenture ............. 26
Termination of the Trust ............... 27
Sponsor ................................ 27
Trustee ................................ 28
Independent Auditors ................... 28
Legal Opinions ......................... 28
Report of Independent Auditors ......... 29
Statement of Financial Condition ....... 30
Schedule of Investments ................ 31
- ------------------------------------------------------------------------------
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.
The following exhibits:
+ 1. Copy of Trust Indenture and Agreement
between PaineWebber Incorporated, Depositor,
and Investors Bank & Trust Company and The
First National Bank of Chicago, as
Co-Trustees, incorporating by reference
Standard Terms and Conditions of Trust dated
as of July 10, 1990.
2. Standard Terms and Conditions of Trust dated
as of July 10, 1990 between PaineWebber
Incorporated, Depositor and Investors Bank &
Trust Company and The First National Bank of
Chicago, as Co-Trustees, (incorporated by
reference to Exhibit 2 in File No. 33-30404).
3. Certificate of Incorporation of PaineWebber
Incorporated, as amended (incorporated by
reference to Exhibit 8 in File No. 2-88344).
4. By-Laws of PaineWebber Incorporated, as
amended (incorporated by reference to
Exhibit A(6)(a) in File No. 811-3722).
+ 5. Opinion of Counsel as to legality of
securities being registered.
+ 6. Opinion of Counsel as to income tax status
of securities being registered.
+ 7. Consent of Ernst & Young LLP, Independent
Auditors.
----------
+ To be filed by amendment.
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this 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 6th day of January, 1998.
THE PAINEWEBBER EQUITY TRUST,
GROWTH STOCK, SERIES 21
(Registrant)
By: PaineWebber Incorporated
(Depositor)
Robert E. Holley
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, this
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 6th day of
January, 1998.
PAINEWEBBER INCORPORATED
Name Office
Donald B. Marron Chairman, Chief Executive
By Officer, Director & Member of
the Executive Committee
Robert E. Holley
Attorney-in-Fact*
Regina Dolan Senior Vice President, Chief
By Financial Officer & Director
Robert E. Holley
Attorney-in-fact*
Joseph J. Grano, Jr. President, Retail Sales & Marketing,
By Director & Member of the Executive Committee
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 the Registration
Statement No. 33-19786.
