<PAGE>
As filed with the Securities and Exchange Commission on June 21, 1994
Securities Act File No. 33-
Investment Company Act File No. 811-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________
Form N-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /x/
Pre-Effective Amendment No. / /
Post-Effective Amendment No. / /
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 /x/
Amendment No. / /
_________________
ENHANCED YIELD EQUITY TRUST
(Exact Name of the Registrant as Specified in its Charter)
World Financial Center, North Tower
New York, New York 10281-1305
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (212) 449-6577
Richard P. Sandulli
Merrill Lynch Global Equity Derivatives
World Financial Center, North Tower
New York, New York 10281-1305
(Name and Address of Agent for Service)
Copies to:
Richard P. Sandulli Frank P. Bruno, Esq.
Director Brown & Wood
Merrill Lynch Global One World Trade Center
Equity Derivatives New York, New York 10048
World Financial Center, North Tower
New York, New York 10281-1305
Approximate Date of the Proposed Public Offering: As soon as practicable
after the effective date of this Registration Statement.
_________________
<TABLE>
CALCULATION OF THE REGISTRATION FEE UNDER
THE SECURITIES ACT OF 1933
<CAPTION>
Proposed Proposed
Title of Maximum Maximum
Securities Offering Aggregate Amount of the
Being Amount Being Price Offering Registration
Registered Registered Per Unit(1) Price(1) Fee
<S> <C> <C> <C> <C>
Units of beneficial interest 11,600 $25.00 $290,000 $100
</TABLE>
_________________
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>
ENHANCED YIELD EQUITY TRUST
CROSS REFERENCE SHEET
PURSUANT TO RULE 404(C)
Item Number, Form N-2 Caption in Prospectus
PART A - INFORMATION REQUIRED IN A PROSPECTUS
1. Outside Front Cover Page . . . . Cover Page
2. Inside Front and Outside Back
Cover Pages . . . . . . . . . . Cover Page; Underwriting
3. Fee Table and Synopsis . . . . . Prospectus Summary; Fee Table
4. Financial Highlights . . . . . Not Applicable
5. Plan of Distribution . . . . . . Underwriting
6. Selling Shareholders . . . . . . Not Applicable
7. Use of Proceeds . . . . . . . . Use of Proceeds
8. General Description of the
Registrant . . . . . . . . . . The Trust; Investment Objectives and
Policies
9. Management . . . . . . . . . . .
10. Capital Stock, Long-Term Debt
and Other Securities . . . . . Management and Administration of the
Trust
11. Defaults and Arrears on Senior
Securities . . . . . . . . . .
12. Legal Proceedings . . . . . . . Description of the Units
13. Table of Contents of the Not Applicable
Statement of Additional Not Applicable
Information . . . . . . . . . .
Not Applicable
PART B - INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
14. Cover Page . . . . . . . . . . . Not Applicable
15. Table of Contents . . . . . . . Not Applicable
16. General Information and History Not Applicable
17. Investment Objectives and
Policies . . . . . . . . . . . Investment Objectives and Policies;
Investment Restrictions
18. Management . . . . . . . . . . . Management and Administration of the
Trust
19. Control Persons and Principal Management and Administration of the
Holders of Securities . . . . . Trust
20. Investment Advisory and Other Management and Administration of the
Services . . . . . . . . . . . Trust;
21. Brokerage Allocation and Other
Practices . . . . . . . . . . . Underwriting; Experts
22. Tax Status . . . . . . . . . . .
23. Financial Statements Investment Objectives and Policies
Taxes
Statement of Assets and Liabilities
PART C - OTHER INFORMATION
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
2
<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.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JUNE 21, 1994
PROSPECTUS
- ----------
UNITS
ENHANCED YIELD EQUITY TRUST
Enhanced Yield Equity Trust (the "Trust") is a newly-organized, finite-
term, passively-managed Trust established to purchase and hold a portfolio of
___ securities (individually, a "Security" and collectively, the
"Securities") of companies in the (computer and information technology
industry), subject to contracts giving one or more third parties the right to
purchase the Securities as described below, and a portfolio of U.S. Treasury
securities that will mature on a quarterly basis. The Trust's investment
objectives are to provide (i) regular cash dividends on the Securities, (ii)
the potential for capital appreciation up to a maximum of ____% on the
Securities, and (iii) quarterly cash distributions from the proceeds of the
U.S. Treasury securities. As a fundamental policy, the Trust will invest at
least 65% of its total assets in a portfolio consisting of Securities of
companies in the (computer and information technology industry). In order
for the Trust to provide Unitholders with quarterly cash distributions
greater than the regular cash dividends currently being paid on the
Securities, the Trust will write a single call option or series of call
options (in either case, individually, a "Contract" and collectively for all
of the Securities, the "Contracts") with third parties with respect to each
Security entitling the holder of a Contract to purchase the related Security
at a fixed price (the "Exercise Price") on ____________, 1998 (the
"Expiration Date"). Each Contract will give the holder thereof on the
Expiration Date the right (but not the obligation) to purchase from the Trust
the Security subject to that Contract at the Exercise Price, which is equal
to approximately ___% of the closing sales price of the related Security on
__________, 1994. The effect of the Trust's entering into the Contracts will
be to limit the Trust's opportunity for equity appreciation on any individual
Security to its Exercise Price, and to a maximum of $_______ in the
aggregate or $_______ per Unit. On or shortly after the Expiration Date, the
Trust will liquidate its portfolio, distribute all of its net assets to
Unitholders and then terminate. There can be no assurance that the value of
the Trust's portfolio on the Expiration Date will have appreciated.
The Trust will invest the net proceeds received from entering into the
Contracts in stripped U.S. Treasury securities which will mature on a
quarterly basis. The cash received from the U.S. Treasury securities
together with the regular cash dividends on the Securities will result in a
quarterly cash distribution per Unit, after estimated expenses, of
approximately $________ (or ___% per annum based on the Price to the Public),
assuming no change in the regular cash dividends on the Securities and
expenses of the Trust. The U.S. Treasury securities will contribute a
minimum of approximately $_______ quarterly per Unit (or ___% per annum
based on the Price to the Public) of the Trust's aggregate quarterly cash
distribution, while the regular cash dividends on the Securities will add, at
their current levels, an additional $_________ quarterly per Unit. No
assurance can be given that the regular cash dividends on the Securities will
continue at their current levels or be declared at all or that ongoing
expenses incurred by the Trust will not exceed the amounts estimated on the
date hereof.
The Trust's portfolio will be passively managed by its trustees (the
"Trustees") and its investment manager, ________________________ (the
"Investment Manager") (, and the Trust will pay no advisory fees). The
Trust's management powers will be limited to the disposition of the
Securities in certain circumstances. The proceeds of any distribution will
not be reinvested but will be distributed to Unitholders. Accordingly, the
Trust may retain the Securities despite significant declines in their market
prices or changes in the financial condition of the issuers of the
Securities. Proceeds from any sale of a Security will not be reinvested but
will be distributed to Unitholders.
Shares of closed-end investment companies frequently trade at a discount
from their net asset value. This risk may be greater for investors expecting
to sell their shares in a relatively short period after completion of the
public offering. The Trust is designed primarily for long-term investors and
should not be considered a vehicle for trading purposes. See "Risk Factors
and Special Considerations." Prior to this offering, there has been no
public market for the Trust's Units. The Trust's Units have been approved
for listing on the ________ Stock Exchange under the symbol "___." The
address of the Trust is World Financial Center, North Tower, New York, New
York 10281-1305 and its telephone number is (212) 449-6577.
<PAGE>
This Prospectus sets forth concisely information about the Trust that a
prospective investor should know before investing and should be read and
retained for future reference.
-----------------------
<TABLE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<CAPTION>
Maximum Price Maximum Proceeds to
to the Public Sales Load(1) the Trust(2)
<S> <C> <C> <C>
Per Unit . . . . . . . . . . . . $ $ $
Total . . . . . . . . . . . . . . $ $ $
____________
(1) The Trust and the Investment Adviser have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under
the Securities Act of 1933. See "Underwriting."
(2) Before deducting organizational and offering expenses payable by the
Trust estimated at $____________.
</TABLE>
The Units are offered by the Underwriters, subject to prior sale, when,
as and if issued by the Trust and accepted by the Underwriters, subject to
approval of certain legal matters by counsel for the Underwriters and certain
other conditions. The Underwriters reserve the right to withdraw, cancel or
modify such offer and to reject orders in whole or in part. It is expected
that delivery of the Units will be made in New York, New York on or about
_____________, 1994.
MERRILL LYNCH & CO. (ADD NAMES OF OTHER UNDERWRITERS)
The date of this Prospectus is _________________, 1994.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE UNITS
AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE _________ STOCK EXCHANGE OR OTHERWISE.
SUCH STABILIZATION, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the
more detailed information included elsewhere in this Prospectus. Certain
capitalized terms used in this summary are defined elsewhere in this
Prospectus.
THE TRUST The Trust is a newly-organized, finite-term, passively-managed
trust. The Trust will be registered as a non-diversified,
closed-end, management investment company under the Investment
Company Act of 1940, as amended (the "Investment Company
Act"). Under provisions of the Internal Revenue Code of 1986,
as amended (the "Code"), applicable to grantor trusts, neither
the Trustees nor the Investment Manager will have the power to
vary the investments held by the Trust. Accordingly, the
Trust's portfolio will be passively managed (and the Trust
will pay no advisory fees). The Trust's management powers
will be limited to the disposition of the Securities in
certain circumstances. The proceeds of any disposition will
not be reinvested but will be distributed to Unitholders. The
Trust will pay the administrative fees and certain expenses of
____________________ as the Trust's Administrator. See "The
Trust" and "Management and Administration of the Trust."
THE OFFERING The Trust is offering _____________ units of beneficial
interest (the "Units") to the public at a purchase price of
$______ per Unit. _________ additional Units have been
subscribed for by ________________________ at a purchase price
of $100,000, and no Units will be sold to the public until the
Units subscribed for have been purchased and the purchase
price thereof paid in full to the Trust. See "Underwriting."
INVESTMENT
OBJECTIVES
AND POLICIES The Trust's investment objectives are to provide (i) current
quarterly cash distributions from the proceeds of U.S.
Treasury securities and regular cash dividends on the
Securities listed below and (ii) the potential for capital
appreciation up to a maximum of ____% on the Securities.
The following table sets forth a tentative list of the issuers
of the Securities to be held by the Trust and, with respect to
each issuer, the closing sales price per share of its
Securities and the Exercise Price at which its Securities may
be purchased under the Contracts. The composition of the
Trust's portfolio may differ from that set forth below and
both the final composition of the Trust's portfolio and the
Exercise Price under the Contracts will be determined on the
day prior to the commencement of the offering by the Trustees
(the "Determination Date") with the advice of the Investment
Manager. The Trust will purchase ________ shares of the
Securities listed below. See "Investment Objectives and
Policies -- The Securities."
Exercise Price
Closing Sales Price Per Share on the
Per Share Expiration Date
Issuer(1) at / /94 under the Contracts
--------- ----------- -------------------
(To be provided by amendment)
__________________
(1) Based on a tentative list of selected issuers.
3
<PAGE>
In order for the Trust to provide Unitholders with a quarterly
cash distribution greater than the regular cash dividends
currently being paid on the Securities, the Trust will enter
into one or more Contracts with third parties with respect to
each of the Securities. Each Contract will give the holder
thereof, on the Expiration Date, the right (but not the
obligation) to purchase from the Trust the Security subject to
that Contract at the Exercise Price set forth in the preceding
table. The Exercise Price of each Contract is equal to
approximately ____% of the closing sales price of the related
Security on _____________, 1994. The Exercise Price of each
Contract will be adjusted downward in the event of certain
distributions which may be made to holders of the related
Security prior to the Expiration Date. The Contracts in the
aggregate will grant rights to purchase all of the Securities
held by the Trust at their respective Exercise Prices. The
effect of the Trust's entering into the Contracts will be to
limit the Trust's opportunity for equity appreciation on any
individual Security to its Exercise Price, and to a maximum of
$________ in the aggregate or $______ per Unit. See
"Investment Objectives and Policies -- The Contracts."
The Trust will invest the net proceeds received from entering
into the Contracts in stripped U.S. Treasury securities which
will mature on a quarterly basis. The cash received from the
U.S. Treasury securities together with the regular cash
dividends on the Securities will result in a quarterly cash
distribution per Unit, after estimated expenses, of
approximately $_______ (or ___% per annum based on the Price
to the Public), assuming no change in the regular cash
dividends on the Securities and expenses of the Trust. The
U.S. Treasury securities will contribute a minimum of
approximately $_______ quarterly per Unit (or ___% per annum
based on the Price to the Public) of the Trust's aggregate
quarterly cash distribution, while the regular cash dividends
on the Securities will add, at their current levels, an
additional $________ quarterly per Unit. No assurance can be
given that the regular cash dividends on the Securities will
continue at their current levels or be declared at all or that
ongoing expenses incurred by the Trust will not exceed the
amounts estimated on the date hereof. Accordingly, the actual
quarterly cash distribution and the percentage return based on
the Price to the Public may fluctuate. See "Investment
Objectives and Policies."
TAXES It currently is anticipated that a substantial portion of each
quarterly cash distribution to the Unitholders of the Trust
will be treated as a tax-free return of the Unitholders' basis
in the U.S. Treasury securities and therefore will not be
considered current income for Federal income tax purposes. It
also is expected that the tax-free portion of each quarterly
cash distribution will increase as a percentage of the total
distribution during the life of the Trust. However, a
Unitholder must recognize currently as income original issue
discount on the U.S. Treasury securities as it accrues.
Additionally, a Unitholder will be required to take into
account a portion of the payments made by the Contractholders
in connection with entering into the Contracts upon the
Unitholder's disposition of its Units in determining taxable
income and will be required to take such amount into income
upon the expiration or exercise of the Contracts. In the
opinion of counsel to the Trust, under existing law the Trust
will be taxable as a grantor trust for Federal income tax
purposes. Accordingly, income received (including original
issue discount treated as received) by the Trust generally
will be treated as income of the Unitholders. See "Taxes --
Federal Income Tax Considerations."
4
<PAGE>
MANAGEMENT AND
ADMINISTRATION
OF THE TRUST The administration of the Trust will be overseen by (three)
Trustees. ___________________________________ will act as the
Trust's investment manager (the "Investment Manager"), while
the day-to-day administration of the Trust will be carried out
by ____________________ (or its successor) as trust
administrator (the "Administrator"). __________________ (or
its successor) also will act as custodian for the Trust's
assets (the "Custodian") and as paying agent, registrar and
transfer agent (the "Paying Agent") with respect to the Units.
Except as aforesaid, ____________ has no other affiliation
with, and is not engaged in any other transaction with, the
Trust. See "Management and Administration of the Trust."
LIFE OF THE
TRUST The Trust will terminate automatically on or shortly after the
Expiration Date. If any Contract is exercised on the
Expiration Date, the cash received by the Trust (net of any
administrative expenses) will be distributed to Unitholders
promptly after receipt. Any remaining assets of the Trust,
including any Security with respect to which a Contract is not
exercised, will be liquidated within approximately five
business days following the Expiration Date with the resulting
proceeds, net of any remaining Trust expenses, paid out to
Unitholders within ten business days following the Expiration
Date. To the extent that any part of the portfolio of
Securities is liquidated shortly after the Expiration Date,
the amount to be realized upon liquidation may be adversely
affected by the volume of the Securities to be sold by the
Trust. See "Investment Objectives and Policies -- Trust
Termination" and "Risk Factors and Special Considerations --
Limited Term" and "--Liquidation of the Portfolio."
LISTING The Units have been approved for listing on the ________ Stock
Exchange under the symbol "___."
RISK FACTORS
AND SPECIAL
CONSIDERATIONS The Trust's portfolio will be passively managed by the
Trustees and the Investment Manager (and the Trust will pay no
advisory fees). The Trust will have the power, but not the
obligation, to dispose of Securities only in certain
circumstances. Proceeds from any sale of Securities may not
be reinvested. See "Risk Factors and Special Considerations
-- Passive Management" and "Management and Administration of
the Trust -- Trustees and Officers" and "--Investment
Manager."
The ability of Unitholders to participate in the appreciation,
if any, of the Securities will be limited to the Exercise
Price on any specific Securities and to a maximum of $________
in the aggregate or $______ per Unit. However, there can be
no assurance that the value of any Securities on the
Expiration Date will have appreciated. Moreover, even if an
individual Security has appreciated, there can be no assurance
that the aggregate value of the Securities will have
appreciated because gains on Securities which have appreciated
may be limited by their respective Exercise Prices and may be
more than offset by depreciation in other Securities forming
part of the Trust's portfolio. See "Investment Objectives and
Policies -- General."
(The technology industry is characterized by rapidly changing
technology, frequent new product introduction, short product
life cycles and intense competition. Success in this industry
requires a substantial commitment to research and development.
In addition, many technology companies are sensitive to shifts
in short- term demand for their products because a substantial
portion of their revenues in each quarter results from sales
in that quarter. For these and other reasons, technology
companies tend to be more
5
<PAGE>
susceptible than most other companies to fluctuations in their
operating results and to volatility in the price of their
securities. See "Risk Factors and Special Considerations --
(Technology Companies)."
The Trust is classified as a "non-diversified" management
investment company under the Investment Company Act.
Consequently, the Trust is not limited by the Investment
Company Act in the proportion of its assets that may be
invested in the securities of a single issuer. Since the only
equity securities held by the Trust will be the Securities,
the Trust may be subject to greater risk than would be the
case for an investment company with more diversified
investments. See "Investment Objectives and Policies" and
"Risk Factors and Special Considerations -- Non-Diversified
Status."
Investments in closed-end investment companies frequently
trade at a discount from net asset value. The Trust cannot
predict whether its shares will trade at, above, or below net
asset value. The net asset value of the portfolio will be
calculated by the Administrator on a (weekly) basis and will
be published semi-annually as part of the Trust's semi-annual
report to Unitholders. See "Risk Factors and Special
Considerations -- Net Asset Value."
6
<PAGE>
FEE TABLE
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load (as a percentage of the offering price).... %(a)
ANNUAL EXPENSES (as a percentage of net assets attributable to Units)
Management Fees(b)............................................ %
Interest Payments on Borrowed Funds........................... None
Other Expenses
Transfer Agent Fees............................... %
Custodian Fees.................................... %
Miscellaneous..................................... %
----
Total Other Expenses.......................................... %
----
TOTAL ANNUAL EXPENSES......................................... %
====
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
An investor would pay the following expenses
on a $1,000 investment, including the maximum
front-end sales load of $ and assuming
(1) total annual expenses of % and
(2) a 5% annual return throughout the period: $ $ $ $
_______________
(a) See the cover page of this Prospectus and "Underwriting."
(b) See "Management and Administration of the Trust -- Investment Manager."
</TABLE>
The foregoing Fee Table is intended to assist investors in
understanding the costs and expenses that a Unitholder in the Trust will bear
directly or indirectly. The expenses set forth under "Other Expenses" in the
Fee Table above are based on estimated amounts through the end of the Trust's
first fiscal year on an annualized basis. The Example set forth above
assumes (cash payment) to Unitholders of all dividends and distributions and
utilizes a 5% annual rate of return as mandated by Securities and Exchange
Commission regulations. THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF FUTURE EXPENSES OR ANNUAL RATES OF RETURN, AND ACTUAL
EXPENSES OR ANNUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE ASSUMED FOR
PURPOSES OF THE EXAMPLE.
7
<PAGE>
THE TRUST
Enhanced Yield Equity Trust (the "Trust") is a New York trust formed on
June __, 1994 pursuant to a trust agreement dated as of June __, 1994 (the
"Trust Agreement"). The Trust's portfolio will be passively managed (and the
Trust will pay no advisory fees). The Trust will pay certain administrative
fees and other necessary operating expenses.
The Trust's principal place of business is located at World Financial
Center, North Tower, New York, New York 10281-1305 and its telephone number
is (212) 449-6577.
USE OF PROCEEDS
The net proceeds of this offering will be used to purchase the
Securities identified under "Investment Objectives and Policies -- The
Securities." At the same time, the Trust will enter into the Contracts and
use the proceeds received from entering into the Contracts to purchase a
portfolio of U.S. Treasury securities.
INVESTMENT OBJECTIVES AND POLICIES
GENERAL
The Trust's investment objectives are to provide (i) current quarterly
cash distributions from the proceeds of U.S. Treasury securities and regular
cash dividends on the Securities and (ii) the potential for capital
appreciation up to a maximum of % on the Securities. As a fundamental
policy, the Trust will invest at least 65% of its total assets in a portfolio
consisting of Securities of companies in the (computer and information
technology industry), subject to one or more Contracts giving a third party
the right to purchase each of the Securities. In order for the Trust to
provide Unitholders with quarterly cash distributions greater than the
regular cash dividends currently being paid on the Securities, the Trust will
enter into one or more Contracts with third parties with respect to each
Security. Each Contract will give the holder thereof, on _____________, 1998
(the "Expiration Date"), the right (but not the obligation) to purchase from
the Trust the Security subject to that Contract at its Exercise Price. The
Contracts in the aggregate will grant rights to purchase all of the
Securities held by the Trust at their respective Exercise Prices.
The Trust will invest the net proceeds received from entering into the
Contracts in stripped U.S. Treasury securities which will mature on a
quarterly basis. The cash received from the U.S. Treasury securities
together with the regular cash dividends on the Securities will result in a
quarterly cash distribution per Unit, after estimated expenses, of
approximately $________ (or ___% per annum based on the Price to the Public),
assuming no change in the regular cash dividends on the Securities and
expenses of the Trust. The U.S. Treasury securities will contribute a
minimum of approximately $_______ quarterly per Unit (or ___% per annum based
on the Price to the Public) of the Trust's aggregate quarterly cash
distribution, while the regular cash dividends on the Securities will add, at
their current levels, an additional $________ quarterly per Unit. No
assurance can be given that the regular cash dividends on the Securities will
continue at their current levels or be declared at all or that ongoing
expenses incurred by the Trust will not exceed the amounts estimated on the
date hereof. Accordingly, the actual quarterly cash distribution and the
percentage return based on the Price to the Public may fluctuate.
If the value of a Security in the Trust's portfolio on the Expiration
Date is greater than its Exercise Price, it is expected that the holder of
the Contract with respect to that Security will exercise the Contract. As a
result, the ability of Unitholders to participate in the appreciation, if
any, of the Securities will be limited to the Exercise Price on any specific
Securities and to a maximum of $________ in the aggregate or $________ per
Unit. However, there can be no assurance that the value of any Security on
the Expiration Date will have appreciated. Moreover, even if an individual
Security has appreciated, there can be no assurance that the aggregate value
of the Securities will have appreciated because gains on Securities which
have appreciated may be limited by their respective Exercise Prices and be
more than offset by depreciation in other Securities forming part of the
Trust's portfolio.
8
<PAGE>
THE SECURITIES
As a fundamental policy, the Trust will invest at least 65% of its total
assets in a portfolio consisting of Securities of companies in the (computer
and information technology industry). The issuers of the Securities held by
the Trust are involved in the (development, design, manufacture and sale of
computers, computer peripherals, networking systems and semiconductors, the
development, design, support and sale of computer software, and are otherwise
involved in the computer, data communications and semiconductor industry.)
The selection of the specific companies will be based upon a review of their
operating histories, range of products and earnings prospects as well as the
market capitalization and trading liquidity of their securities. The
following table sets forth certain information regarding the shares of each
issuer that has been tentatively selected for purchase by the Trust. The
composition of the Trust's portfolio may change from that set forth below and
the final composition of the Trust's portfolio will be determined on the day
prior to the commencement of the offering by the Trustees (the "Determination
Date") with the advice of the Investment Manager.
<TABLE>
<CAPTION> Representation
Annualized Market Average Daily in Securities
Dividend Capitalization Trading Volume Portfolio
Issuer(3)(4) Rate(1) at / /94 at / /94-/ /94 at / /94(2)
<C> <C>
% %
(To be provided by amendment)
__________________
(1) Based on current dividends and closing sales prices at ________, 1994.
The annualized dividend rate for the Securities portfolio taken as a
whole was ____% per annum assuming no change in dividends.
(2) Weighted by closing sales price.
(3) _________________________________, the Trust's investment manager,
previously has participated as an underwriter in offerings of securities
of certain of the issuers of the Securities and has acted, and may
continue to act, as a financial adviser to certain of these issuers.)
(4) Based on a tentative list of selected issuers.
</TABLE>
Unitholders, at any time, may determine the value of the Securities
(subject to the Contracts) underlying each Unit by multiplying the lesser of
the then-current market price or the Exercise Price of each Security by the
number of shares of such stock held by the Trust, and then by dividing the
sum of such amounts by the number of Units outstanding. This computation is
meant to be indicative only of the value of the Securities held by the Trust
(subject to the Contracts) and is not equivalent to and may not bear any
relation to either the Trust's net asset value or the market value of the
Units. Certain events affecting the Securities, including taxable non-cash
dividends or distributions, mergers, tender or exchange offers and
extraordinary cash dividends or distributions may affect the Trust's holdings
of the Securities or change the Exercise Prices under the Contracts.
It is anticipated that the Trust's purchases of the Securities will be
effected at the closing sales prices of the Securities on __________, 1994
either in principal transactions with one or more dealers unaffiliated with
the Trust or through various brokers for the Trust, in either case selected
by the Trustees of the Trust with the advice of the Investment Manager, on
the basis of such factors as commission, size of order, difficulty of
execution and skill required of the broker or dealer.
The Trust's portfolio will be passively managed. Except in the
following events, and subject to the discretion of the Trustees to dispose of
Securities under certain circumstances as described under "Management and
Administration of the Trust" and to the rights of Contractholders in those
events as described under "Investment Objectives and Policies -- The
Contracts -- Exercise Price Adjustments" and " -- Acceleration of Contract
Rights," the Trust intends to hold each Security and any distributions
thereon until the Expiration Date:
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Taxable non-cash dividend or distribution -- If an issuer of
Securities pays a non-cash dividend or makes a non-cash distribution in
respect of its Securities that is taxable to its common stock holders
under Federal income tax laws, the Trust will be required to dispose of
the non-cash dividend or distribution it receives for cash and
distribute the proceeds to Unitholders at the next quarterly
distribution date. If stockholders may elect cash consideration in lieu
of the non-cash dividend or distribution, the Trust will elect to
receive cash and distribute the cash at the next quarterly distribution
date.
Merger -- If an issuer of Securities is acquired, whether in a cash
merger or a merger involving the distribution of securities, or is a
party to a consolidation, where it is not the surviving party, the Trust
will be required to distribute the cash or to dispose of any securities
it receives and distribute the proceeds to Unitholders at the next
quarterly distribution date. If stockholders may elect cash
consideration in connection with any such merger or consolidation, the
Trust will elect to receive cash and distribute the cash it receives at
the next quarterly distribution date.
Tender or exchange offer -- The Trust will be required to tender
into a tender or exchange offer for at least a majority interest in the
Securities of an issuer, provided, that if the offer is unsuccessful,
the Trust will withdraw the Securities it previously has tendered. If
the tender or exchange offer is successful but proration occurs and only
a portion of the Trust's shares of the Securities are purchased, the
Trust will be required to sell in the market the balance of its shares
of those Securities. Any new stock or securities received by the Trust
in connection with the tender and exchange offer will be sold and the
proceeds distributed to Unitholders at the next quarterly distribution
date. If stockholders may elect to receive cash in connection with any
tender or exchange offer for at least a majority interest in the issuer
of the Securities, the Trust will elect to receive cash in connection
with any required tender and distribute the cash it receives at the next
quarterly distribution date. If, however, a tender offer or exchange
offer is made for less than a majority interest in the Securities of an
issuer, the Trust will not tender.
Cash dividend or distribution -- If an issuer of Securities
declares a cash dividend or makes a cash distribution, the Trust will be
required to distribute the cash it receives at the next quarterly
distribution date. As a result of the Trust's passive nature, the Trust
will retain any securities or property obtained in a stock split,
reverse stock split or tax-free non-cash dividend or distribution
declared or made by any issuer of Securities in the portfolio. Any
retained securities or property will be subject to purchase by the
holder of the Contract relating to the underlying Security.
THE CONTRACTS
General. The Trust will enter into one or more Contracts with respect
to each of the Securities. The Contracts at all times will be covered
because the Trust at all times will own the Securities subject to the
Contracts. Subject to the exceptions and adjustments set forth below, each
Contract will entitle the third party holder thereof, upon exercise of the
Contract on the Expiration Date, to purchase from the Trust shares of the
Security subject to that Contract at the Exercise Price per share set forth
in the following table:
<TABLE>
<CAPTION> Exercise Price
Closing Sales Price per Share on the
per Share Expiration Date
Issuer(1) at / /94 under the Contracts
<C> <C>
$ $
(To be provided by amendment)
___________________
(1) Based on a tentative list of selected issuers.
</TABLE>
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The Contracts in the aggregate will grant rights to purchase all of the
Securities held by the Trust at their respective Exercise Prices. The
Contracts will result in proceeds of approximately $________ to the Trust,
which proceeds, after deductions for organizational and offering expenses and
sales loads, will be used to purchase the U.S. Treasury securities.
Certain Securities Changes. If the issuer of any Securities
reclassifies or subdivides its Securities, or combines its outstanding
Securities into a smaller number of shares, the holder of any Contract
relating to the Securities will be entitled thereafter to purchase on the
Expiration Date the kind and amount of shares of stock or other securities
into which the Securities have been reclassified, subdivided or combined with
corresponding changes in the Exercise Price for the reclassified, subdivided
or combined Securities.
If the issuer of any Security pays a non-cash dividend, or makes a
non-cash distribution, on its Security that is not taxable to its Security
holders under Federal income tax laws, the holder of a Contract for that
Security who thereafter exercises his or her purchase right on the Expiration
Date will be entitled to receive, together with any Security purchased under
the Contract, any non-cash dividend that has been so paid and any non-cash
distribution that has been so made on the purchased Security.
Exercise Price Adjustments. The Exercise Price for each Security will
be subject to adjustment under the circumstances set forth below.
Specifically, the Exercise Price for a Security will be reduced
dollar-for-dollar by the per share amount of (i) any Extraordinary Cash
Dividend and (ii) any non-cash dividend or non-cash distribution on the
Security that is taxable to holders of the Security under Federal income tax
laws valued as of the record date for the dividend or distribution. As used
herein, an "Extraordinary Cash Dividend" with respect to any Security is one
which exceeds the immediately preceding non-extraordinary Cash Dividend on
the Security by an amount equal to at least 10% of the closing sales price of
the Security on the business day preceding the ex-dividend date for the
current dividend. A downward adjustment in the Exercise Price for a Security
will have the effect of reducing the equity appreciation that a Unitholder
may receive for a share of the Security on the Expiration Date. The combined
effect of the downward adjustments in the Exercise Price of a Security and
the related distributions will be to preserve the original $________ per Unit
limitation on total equity appreciation and the original limitation on the
equity appreciation on any particular Security to its Exercise Price.
Acceleration of Contract Rights. If on or prior to the Expiration Date
(i) a merger or consolidation is consummated involving an issuer of a
Security where the issuer is not the surviving party or (ii) a successful
tender or exchange offer is made for at least a majority interest in an
issuer of Securities, the holder of any Contract relating to the affected
Security will have the right, but not the obligation, for a period of five
business days beginning on the date of consummation of the merger or
consolidation or the date the Security is accepted for payment under the
tender or exchange offer, to accelerate its purchase rights under the
Contract by purchasing the Replacement Consideration for a share of the
affected Security at the then applicable Exercise Price. As used herein,
"Replacement Consideration" for any share of a Security means the cash,
property, securities or other consideration that the Trust will receive in
replacement for a share of the affected Security after the consummation of
the merger or consolidation or the acceptance for payment under the tender or
exchange offer; provided, that if proration occurs under a successful tender
or exchange offer with respect to any Security tendered by the Trust, the
Replacement Consideration shall include the portion of the share of the
Security that was not accepted for payment as well as the cash, property,
securities or other consideration received in respect of the portion of the
share that was accepted. After the expiration of the applicable five
business day period, all rights of the holder of a Contract shall terminate.
If on or prior to the Expiration Date the Exercise Price of a Contract
on a Security has been reduced to zero or below, the holder of the Contract
shall be deemed to have exercised its purchase rights under the Contract on
that date, whereupon the holder of the Contract will receive from the Trust,
without the payment of additional consideration, the Security subject to the
Contract together with the portion, if any, of the Extraordinary Cash
Dividend or non-cash dividend on the Security that caused the Exercise Price
to fall below zero.
Other. Each Contractholder has agreed to negotiate in good faith with
the Trustees the early termination of the Contract in the event that the
Trustees seek to dispose of the underlying Security from the Trust. See
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"Management and Administration of the Trust -- Trustees and Officers."
Except for these negotiations and the provisions permitting early exercise
upon (i) reduction of the Exercise Price to zero or below, (ii) certain
merger and consolidation transactions and (iii) tender or exchange offers for
more than a majority interest in an issuer, the Contracts may not be
exercised or terminated prior to the Expiration Date.
The Contracts will be offered by the Trust to institutional purchasers
by competitive bid. The Trustees expect that the prices to be paid for the
Contracts will be fair and reasonable. It is expected that the prices to be
paid for the Contracts will be based on many factors, including but not
limited to, commonly used and generally accepted economic models for pricing
option contracts, comparisons to prices for similar instruments and
assessments of the demand and supply for contracts with similar terms. See
"Risk Factors and Special Considerations -- Net Asset Value."
TEMPORARY INVESTMENTS
For cash management purposes, the Trust may invest dividends received on
the Securities, the proceeds of U.S. Treasury securities and any other cash
held by the Trust in short-term obligations of the U.S. Government maturing
no later than the business day preceding the next following distribution
date.
TRUST TERMINATION
The Trust will terminate automatically on or shortly after the
Expiration Date. If any Contract is exercised on the Expiration Date, the
cash received by the Trust (net of any administrative expenses) will be
distributed to Unitholders promptly after receipt. Any remaining assets of
the Trust, including any Security with respect to which the related Contract
is not exercised, will be liquidated within approximately five business days
following the Expiration Date with their resulting proceeds, net of any
remaining Trust expenses, and paid out to Unitholders within ten business
days following the Expiration Date. The termination of the Trust may require
Unitholder approval.
The liquidation of any remaining Securities will be accomplished in a
series of brokerage transactions entered into by the Administrator on behalf
of the Trust. The Trust Agreement provides that Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("Merrill Lynch") will be selected as the
executing broker unless the Trustees of the Trust determine, taking into
account such factors as commission, size of order, difficulty of execution
and brokerage skill, that best execution for the Trust requires that another
broker be selected.
INVESTMENT RESTRICTIONS
As matters of fundamental policy, the Trust may not:
(1) purchase any securities or instruments other than the Securities,
the U.S. Treasury securities, and for cash management purposes,
short-term obligations of the U.S. Government; and those securities
or instruments issued or transferred in connection with any
acquisition contemplated by the Trust Agreement;
(2) to sell, pledge, assign or otherwise transfer any Securities except
as provided in the Trust Agreement and except in connection with
the Custodian's certification to holders of Contracts as set forth
in the Contracts;
(3) to close out any Contract prior to the Expiration Date, except as
provided in the Trust Agreement;
(4) issue any securities or instruments except for the Units and the
Contracts; or to issue any Units other than the Units to be
purchased pursuant to the Subscription Agreement dated as of
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<PAGE>
__________, 1994 between the Trust and (Merrill Lynch), until such
Units have been so purchased and paid for in full;
(5) make short sales or purchase securities on margin;
(6) write put or call options, other than the Contracts;
(7) borrow money;
(8) underwrite securities;
(9) purchase or sell real estate, commodities or commodities contracts;
(10) make loans; or
(11) take any action, or direct or permit the Trustees, the
Administrator, the Paying Agent or the Custodian to take any action
that would vary the investment of the Unitholders within the
meaning of Treasury Regulation Section 301.7701-4(c), or that would
or could cause the Trust not to be a "grantor trust" under the
Code.
DISTRIBUTIONS
The Trust intends to distribute to Unitholders, on a quarterly basis,
all of its cash remaining after expenses or accruals for expenses, including
cash dividends received on the Securities, the cash proceeds of U.S. Treasury
securities, the proceeds of the sale of any Securities or other securities
distributed to holders of any Securities and the cash received upon any
exercise of the Contracts prior to the Expiration Date. The first
distribution, reflecting the Trust's operations from the date of this
offering, will be made on ____________, 1994 to holders of record as of
____________, 1994. Thereafter, distributions will be made on or about the
last business day of _________, _________, _________, and _________ of each
year to Unitholders of record as of the tenth day of those months.
Additionally, the Trust will distribute on or shortly after the Expiration
Date the cash received upon exercise of the Contracts or the proceeds of the
liquidation of the Trust's portfolio.
RISK FACTORS AND SPECIAL CONSIDERATIONS
PASSIVE MANAGEMENT
Unlike a traditionally managed investment company, the Trust's portfolio
will be passively managed by the Trustees and the Investment Manager (and the
Trust will pay no advisory fees). The Trust intends that its portfolio of
Securities will generally remain fixed except for the events described under
"Investment Objectives and Policies
- -- The Securities," subject to the Trustees' power, but not obligation, to
dispose of Securities only in certain circumstances. As a result, Securities
may be retained by the Trust despite significant declines in their market
prices or changes in the financial condition of the issuers of the
Securities. Proceeds from any sale of a Security will not be reinvested but
will be distributed to Unitholders. See "Management and Administration of
the Trust -- Trustees and Officers."
LIMITED TERM
The Trust will have a limited term of (four) years and will terminate
shortly after the Expiration Date. At that time, some or all of the
Securities may be purchased by the holders of the Contracts at their
respective Exercise Prices and the remainder of the portfolio, if any, will
be liquidated. The cash received by the Trust upon exercise of the Contracts
or liquidation of the portfolio will be distributed to Unitholders promptly
after receipt. See "Investment Objectives and Policies -- Trust
Termination."
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<PAGE>
TRADING VALUE OF THE UNITS
The value of the Units will be affected by a number of factors,
including the value of the Securities. See ("Technology Companies") below.
In addition, the value of the Units will be affected by the value of the
Contracts and the U.S. Treasury securities held by the Trust. Based on
certain theoretical economic models, the value of the Contracts may be
affected by the value of the Securities, the volatility of the Securities,
the remaining time to the expiration of the Contracts, the level of U.S.
interest rates and the dividend yields on the Securities. At the same time,
the value of the U.S. Treasury securities will be affected by the level of
U.S. interest rates compared to the rates of the U.S. Treasury securities
held by the Trust.
(TECHNOLOGY COMPANIES
The technology industry is characterized by rapidly changing technology,
frequent introductions of new or enhanced products, short product life cycles
and intense competition. The success of technology companies is often
dependent upon their ability to obtain protection for and enforce rights
against infringement of proprietary technology. As a consequence of the need
for substantial on-going investment in research and development and the need
to retain funds to finance the development and expansion of operations, many
technology companies pay little or no dividends. Given the importance of
research and development to technology companies, retaining key personnel is
critical. It also is not uncommon in the technology industry for critical
components of products to be available only from a single or a limited number
of suppliers or for a significant portion of revenues to be derived from a
single or limited range of products or a single or limited number of
customers. In addition to the foregoing risks, some technology companies may
have limited operating histories and may be experiencing growth which places
strains on management, operational or financial resources. Finally, in many
technology companies a substantial portion of revenues in each quarter
results from sales in that quarter. As a result, shifts in near term demand
can cause significant fluctuations in operating results. Due to all these
factors, technology companies may be relatively more susceptible to stock
price volatility than companies in other industries.)
LIQUIDATION OF THE PORTFOLIO
To the extent that the portfolio of Securities is liquidated shortly
after the Expiration Date, the amount to be realized upon liquidation may be
affected by the volume of the Securities to be sold by the Trust. The
Securities in the Trust's portfolio may not have a sufficiently liquid market
to absorb sales in the volume necessary to liquidate the Trust which could
adversely affect the market price that can be realized. See "Investment
Objectives and Policies."
NON-DIVERSIFIED STATUS
Although the Trust will hold Securities of various issuers, it is
considered to be non-diversified under the Investment Company Act.
Accordingly, the Trust is not limited in the proportion of its assets that
may be invested in the obligations of a single issuer. Since the only equity
securities held by the Trust will be the Securities, the Trust may be subject
to greater risk than would be the case for a similar investment company with
more diversified investments.
NET ASSET VALUE
The Trust is a newly-organized, closed-end management investment company
with no previous operating history. Investments in closed-end investment
companies frequently trade at a discount from net asset value. This
characteristic of investments in a closed-end company is a risk separate and
distinct from the risk that the Trust's net asset value will decrease. The
Trust cannot predict whether its shares will trade at, below or above net
asset value. The risk of purchasing investments in a closed-end company that
might trade at a discount is more pronounced for investors who wish to sell
their investments in a relatively short period of time after the completion
of the Trust's initial public offering because for those investors,
realization of a gain or loss on their investments is likely to be more
dependent upon the existence of a premium or discount than upon portfolio
performance. The Units are not subject to redemption.
14
<PAGE>
The net asset value of the portfolio will be calculated by the
Administrator no less frequently than (weekly) by dividing the value of the
net assets of the Trust (the value of its assets less its liabilities and
less the value of the Contracts) by the total number of Units outstanding.
The Trust's net asset value will be published semi-annually as part of the
Trust's semi-annual report to Unitholders and at such other times as the
Trustees may determine. In valuing the Trust's assets, all Securities for
which market quotations are readily available are valued at the last sales
price prior to the time of determination, or, if there was no sales price on
such date, and if bid and asked quotations are available, at the mean between
the last current bid and asked prices. Securities that are traded
over-the-counter, if bid and asked quotations are available, are valued at
the mean between the current bid and asked prices, or, if quotations are not
available, are valued as determined in good faith by the Trustees. In
instances where the price determined above is deemed not to represent fair
market value, the price is determined in any manner as the Trustees may
prescribe. Short-term investments having a maturity of 60 days or less are
valued at cost with accrued interest or discount earned included in interest
receivable. The Contracts are valued at fair value as determined in good
faith by the Trustees (if necessary through consultation with accountants,
bankers and other specialists) although the actual calculation may be done by
others.
LISTING
The Units have been approved for listing on the ________ Stock Exchange
under the symbol "___." (The __________ Stock Exchange recommends that the
Units be sold only to investors whose accounts have been approved for trading
options.)
DESCRIPTION OF THE UNITS
Each Unit represents an equal proportional interest in the Trust and a
total of _____ Units will be issued. Upon liquidation of the Trust,
Unitholders are entitled to share pro rata in the net assets of the Trust
available for distribution. Units have no preemptive, redemption or
conversion rights. Units are fully paid and nonassessable by the Trust.
Unitholders are entitled to one full vote for each Unit held. The
Trustees of the Trust have been elected initially by (Merrill Lynch) as the
initial Unitholder of the Trust. The Trust intends to hold annual meetings
of Unitholders. The Trustees may call special meetings of Unitholders for
action by Unitholder vote as may be required by either the Investment Company
Act or the Trust Agreement. The Unitholders have the right, upon the
declaration in writing or vote of more than two-thirds of the outstanding
Units, to remove a Trustee. The Trustees will call a meeting of Unitholders
to vote on the removal of a Trustee upon the written request of the record
holders of 10% of the Units or to vote on other matters upon the written
request of the record holders of at least a majority of the Units (unless
substantially the same matter was voted on during the preceding 12 months).
The Trust also will assist in communications with other Unitholders as
required by the Investment Company Act.
MANAGEMENT AND ADMINISTRATION OF THE TRUST
TRUSTEES AND OFFICERS
The Trust will be overseen by (three) Trustees, none of whom will be an
"interested person" (as defined in the Investment Company Act), of the Trust.
Under the provisions of the Code applicable to grantor trusts, the Trustees
will not have the power to vary the investments held by the Trust.
Nevertheless, the Trustees may seek to dispose of a Security and to
distribute the proceeds to Unitholders in the event of (a) a decline in the
market price of the Security to less than 33 1/3% of its market price on the
Determination Date, or (b) the bankruptcy or insolvency of the issuer of the
Security or the default by the issuer in the payment of amounts due on any of
its outstanding securities. Any disposition of a Security will be subject to
the Trustees' ability to negotiate with the holder of the Contract relating
to the Security a fair and reasonable price for terminating the Contract.
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<PAGE>
The names of the persons who have been elected by (Merrill Lynch), the
initial holder of the Units, and who will serve as the Trustees and officers
of the Trust are set forth below. The positions and the principal
occupations of the individual Trustees during the past five years also are
set forth below.
PRINCIPAL OCCUPATIONS
NAME AND ADDRESS TITLE AND OTHER AFFILIATIONS
(To be provided by amendment)
The Trust intends to pay to each of the Trustees who is not a director,
officer or employee of any Underwriter or the Administrator, or of any
affiliate thereof, an annual fee of $_______ and to pay to the Trust's
Managing Trustee an additional fee of $_______ for serving in that capacity.
In addition, the Trust will reimburse all of the Trustees for their travel
and out-of-pocket expenses incurred in connection with Trustees' meetings.
INVESTMENT MANAGER
_________________________________ will serve as the investment manager
(the "Investment Manager") to the Trust pursuant to a management agreement
(the "Management Agreement") with the Trust. The Investment Manager, among
other things, will advise the Trustees in connection with the composition and
acquisition of the initial portfolio of the Trust and, thereafter, the
advisability of disposing of Securities or other assets of the Trust. (The
Investment Manager will not receive any investment advisory fee). The
Investment Manager is a (Delaware corporation) engaged in the underwriting,
securities and commodities brokerage business and a member of the New York
Stock Exchange, Inc., other major securities exchanges and commodity
exchanges and the National Association of Securities Dealers, Inc. (It is a
wholly-owned subsidiary of _________________________, a holding company that,
through its subsidiaries, engages in securities underwriting, distribution
and trading, merger, acquisition and restructuring advice and other
investment banking and corporate finance activities, merchant banking, stock
brokerage and research services, asset management, the trading of futures,
options, foreign exchange and commodities, real estate advice, financing and
investing, global custody, securities clearance services and securities
lending.) The Investment Manager's principal place of business is located at
_______________________________________.
The Management Agreement provides that the Investment Manager will not
be liable to the Trust for any error of judgment or for any loss suffered by
the Trust in connection with the performance of its duties thereunder except
a loss resulting from willful misfeasance, bad faith or gross negligence on
its part in the performance of its duties, or from reckless disregard by it
of its obligations and duties under the agreement. The Management Agreement
will continue in effect for a period of two years from its effective date.
If not sooner terminated, the Management Agreement will continue in effect
for successive periods of 12 months thereafter, provided, that each
continuance specifically is approved annually by (a) the vote of a majority
of the Trustees who are not parties to the agreement or "interested persons"
(as defined in the Investment Company Act), cast in person at a meeting
called for the purpose of voting on approval and (b) either (i) the vote of a
majority of the outstanding Units or (ii) the vote of a majority of the
Trustees. The Management Agreement may be terminated at any time by the
Trust on 60 days' written notice upon the vote of a majority of the Trustees
or a majority of the outstanding Units. The Management Agreement will
terminate automatically in the event of its assignment (as defined in the
Investment Company Act).
ADMINISTRATOR
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The day-to-day affairs of the Trust will be managed by
____________________ as the Administrator, pursuant to an administration
agreement with the Trust (the "Administration Agreement"). Under the
Administration Agreement, the Trustees have delegated most of their
operational duties to the Administrator, including without limitation, the
duties to: (i) receive invoices for expenses incurred by the Trust; (ii)
engage, with the approval of the Trustees, legal and other professional
advisers (other than the independent public accountants for the Trust);
(iii) instruct the Paying Agent to pay distributions on Units as described
herein; (iv) prepare and mail, file or publish all notices, proxies, reports,
tax returns and other communications and documents, and keep all books and
records, for the Trust; (v) at the direction of the Trustees, institute and
prosecute legal and other appropriate proceedings to enforce the rights and
remedies of the Trust; and (vi) make all necessary arrangements with respect
to meetings of Trustees and any meetings of holders of Units. The
Administrator, however, is not permitted to provide "investment advisory
services" as defined in the Investment Company Act or the Investment Advisers
Act of 1940, as amended, to select the independent public accountants for the
Trust, to sell or otherwise dispose of the Securities (except in accordance
with the provisions of the Trust Agreement upon the happening of certain
extraordinary events affecting the Trust's portfolio or except at the
direction of the Trustees), or to exercise any voting rights with respect to
the Securities (except at the direction of the Trustees).
The Administration Agreement may be terminated by the Trust for cause
upon 60 days' prior written notice to the Administrator or upon the
occurrence of certain events affecting the Administrator, and by the
Administrator upon 60 days' prior written notice to the Trust, except that no
termination shall become effective until a successor Administrator has been
chosen and has accepted the duties of the Administrator.
Except for its roles as Administrator, Custodian and Paying Agent for
the Trust, ____________________ has no other affiliation with, and is not
engaged in any other transactions with, the Trust.
The address of the Administrator is ___________________________________.
CUSTODIAN
_________________ acts as the Custodian for the Trust pursuant to a
custody agreement (the "Custody Agreement"). In the event of any termination
of the Custody Agreement by the Trust or the resignation of the Custodian,
the Trust must engage a new Custodian to carry out the duties of the
Custodian as set forth in the Custody Agreement.
PAYING AGENT
_________________ also acts as the Paying Agent for the Units pursuant
to a paying agent agreement (the "Paying Agent Agreement"). In the event of
any termination of the Paying Agent Agreement by the Trust or the resignation
of the Paying Agent, the Trust will use its best efforts to engage a new
Paving Agent to carry out the duties of the Paving Agent.
ESTIMATED EXPENSES
The Trust has agreed to pay to ____________________, for its services as
Administrator, Custodian and Paying Agent, a one-time fee of $________
payable at the inception of the Trust. The Trust also will pay on an ongoing
basis all expenses incurred in the operation of the Trust, including, among
other things, expenses for legal and independent accountants' services, costs
of printing proxies, Unit certificates, Unitholder reports, fees and expenses
of the Administrator, unaffiliated Trustees, accounting costs, fidelity bond
coverage for the Trustees, brokerage costs, stock exchange listing fees and
expenses, expenses of qualifying the Units for sale in various states and
certain other expenses properly payable by the Trust.
The Trust estimates that its annual normal operating expenses, excluding
amortization of organization expenses, will be approximately $________.
While the foregoing estimate has been made in good faith on the basis of
information currently available to the Trust, including estimates furnished
by the Trust's agents, there can be no assurance that actual annual operating
expenses will not be substantially more or less than this estimate.
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<PAGE>
Costs incurred by the Trust in connection with its organization are
estimated at $ , and the expenses of the offering are estimated to be
$________.
INDEMNIFICATION
The Trust will indemnify each Trustee, the Investment Manager, the
Paying Agent, the Administrator and the Custodian with respect to any claim,
liability, loss or expense (including the costs and expenses of the defense
against any claim or liability) which they may incur in acting as Trustee,
Investment Manager, Paying Agent, Administrator or Custodian, as the case may
be, except in the case of willful misfeasance, bad faith, gross negligence or
reckless disregard of their respective duties.
TAXES
FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of certain Federal income tax
consequences of the ownership of the Units with respect to a Unitholder who
acquires its Units from an Underwriter on the date on which the net proceeds
of this offering are received by the Trust (the "Closing Date"). It does
not discuss all of the tax consequences that may be relevant to a Unitholder
in light of his or her particular circumstances or to a Unitholder subject to
special treatment under Federal income tax laws (e.g., certain financial
institutions, insurance companies, dealers in stock or securities, tax exempt
organizations, persons who have entered into hedging transactions with
respect to the Securities or the U.S. Treasury securities, persons who borrow
in order to acquire the Units, and foreign taxpayers). Changes to existing
law, which could have retroactive effect, may alter the consequences
described below.
PROSPECTIVE PURCHASERS OF UNITS SHOULD CONSULT THEIR TAX ADVISERS AS TO
THE FEDERAL INCOME TAX CONSEQUENCES OF ACQUIRING, HOLDING AND DISPOSING OF
UNITS.
Tax Aspects of the Trust. In the opinion of Brown & Wood, counsel for
the Trust, under existing law the Trust will be taxable as a grantor trust
for Federal income tax purposes and income received by the Trust will be
treated as income of the Unitholders in the manner set forth below. The
opinion of counsel is not binding on the courts or on the Internal Revenue
Service (the "Service"), and is based in part upon an interpretation of
applicable Treasury regulations that have not been construed by the courts or
the Service with respect to an investment vehicle closely comparable to the
Trust. There can be no assurance that the Service will not take a contrary
view, and no ruling has been or will be requested. If the Service were to
assert that the Trust is taxable as a corporation and hence liable for an
entity level tax, that would materially adversely affect a Unitholder's
return on his investment in the Trust. Counsel is of the opinion that the
Service would not prevail if the matter were presented properly before a
court.
Tax Basis of the Securities and the U.S. Treasury Securities. Each
Unitholder will be considered the owner of a pro rata portion of the
Securities, subject to the Contracts, and the U.S. Treasury securities in the
Trust under the grantor trust rules of Sections 671-679 of the Code. The
cost to the Unitholder of its Units will be allocated among its pro rata
portion of the Securities (in proportion to the fair market values thereof on
the Closing Date) in order to determine their tax bases. A Unitholder's pro
rata portion of the proceeds received by the Trust (net of the one-time fee
payable to ____________________, expenses in connection with the organization
of the Trust and sales loads and commissions and other offering expenses --
See "Fees and Expenses of the Trust" below) from entering into the Contracts
(the "Contract Premiums") will be allocated among its pro rata portion of the
U.S. Treasury securities (in proportion to the fair market values thereof on
the Closing Date) in order to determine the Unitholder's tax basis for its
pro rata portion of each such U.S. Treasury security.
Recognition of Dividends Received on the Securities. A Unitholder will
be considered to have received all of the dividends paid on its pro rata
portion of a Security when such dividends are received by the Trust.
Corporate Unitholders should consult with their own tax advisers as to
whether they are entitled to the dividends received
18
<PAGE>
deduction with respect to the dividends. A corporate Unitholder should be
aware that the receipt of dividend income for which the dividends received
deduction is available may give rise to an alterative minimum tax liability
(or increase an existing liability).
Recognition of Interest on the U.S. Treasury Securities. The U.S.
Treasury securities in the Trust consist of stripped U.S. Treasury
securities. A Unitholder is required to treat its pro rata portion of each
U.S. Treasury security in the Trust as a bond that was originally issued on
the date the Unitholder purchased its Units and at an original issue discount
equal to the excess of the Unitholder's pro rata portion of the amount
payable on such U.S. Treasury security over the Unitholder's tax basis
therefor as discussed above. Except with respect to a U.S. Treasury security
having a maturity of one year or less from the date the Unitholder purchases
Units (a "short-term U.S. Treasury security"), the Unitholder (whether on the
cash or accrual method of tax accounting) is required to include annually in
income a portion of such original issue discount determined under a formula
which takes into account the compounding of interest. In the case of a
short-term U.S. Treasury security, a cash method Unitholder is not required
to accrue original issue discount for Federal income tax purposes unless it
elects or has elected to do so under Section 1282 of the Code. Unitholders
who make or have made such an election, accrual method Unitholders and
certain other Unitholders (including banks and dealers in securities) are
required to include such original issue discount in income on such U.S.
Treasury security as it accrues on a straight-line basis, unless an election
is made to accrue the original issue discount according to a formula which
takes into account the compounding of interest. In the case of a Unitholder
who is not required, and does not elect, to include original issue discount
in income currently, any gain realized at the maturity of the short-term U.S.
Treasury security will be ordinary income to the extent of the original issue
discount accrued on a straight-line basis (or, if elected, according to a
formula which takes into account the compounding of interest) through such
maturity date. The Unitholder's tax basis in a U.S. Treasury security will
be increased by the amounts of any original issue discount included in income
by the Unitholder with respect to such U.S. Treasury security.
Disposition of the Securities by the Trust. Upon the sale or other
taxable disposition of a Security (other than a sale pursuant to a Contract
(see the discussion below under "Tax Treatment of the Contracts")), the
Unitholder will recognize taxable gain or loss equal to the difference
between its pro rata portion of the sale proceeds from the sale of the
Security and the tax basis therefor as discussed above.
Tax Treatment of the Contracts. Each Unitholder is treated as having
entered into a Contract with respect to its pro rata portion of the related
Security in exchange for its pro rata portion of the Contract Premiums with
respect to that Contract. The amount deemed to have been received by a
Unitholder as consideration for entering into the Contracts is not currently
taxable to such Unitholder. If a Contract is not exercised by the holder
thereof on the Expiration Date or expires prior thereto, the Unitholder will
recognize a short-term capital gain equal to its pro rata portion of the
related Contract Premium. If a Contract is exercised by the holder thereof,
the Unitholder will be deemed to have sold its pro rata portion of the
Security subject to that Contract and realized an amount equal to its pro
rata portion of the sum of the Exercise Price received by the Trust plus its
pro rata portion of the Contract Premium related thereto. The Unitholder
will recognize taxable gain equal to the excess of such amount realized by
the Unitholder from the sale of the Security over the tax basis therein. For
this purpose, in the event that any Security, Extraordinary Cash Dividend or
non-cash dividend is distributed to the holder of a Contract because the
Exercise Price is reduced to zero or below (see "Investment Objectives and
Policies -- The Contracts"), such Contract will be considered to have been
exercised and the Unitholder will be treated as having sold the Security
pursuant to the Contract and having realized an amount equal to the related
cash distribution received by the Unitholder plus its pro rata portion of the
related Contract Premiums.
Sale of the Units. Upon a sale of all or some of a Unitholder's Units,
a Unitholder will be treated as having sold its pro rata portion of the
Security and the U.S. Treasury securities underlying the Units. A Unitholder
will be treated as having received total consideration ("Total
Consideration") equal to the sum of (1) the actual consideration received by
the Unitholder from the purchaser (the "Actual Consideration") and (2) an
additional amount equal to the aggregate fair market value of the Contracts
on the date of the sale (the "Additional Consideration"). The Total
Consideration will be allocated first to the Unitholder's portion of the U.S.
Treasury securities in proportion to and to the extent of the fair market
value of such securities on the date of sale and the balance will be
allocated to the Securities underlying the Units in proportion to and to the
extent of the fair market
19
<PAGE>
values thereof on the date of the sale of the Units. The selling Unitholder
will recognize gain or loss with respect to each U.S. Treasury security and
Securities underlying the Units equal to the difference between the amount of
Total Consideration so allocated to such Securities or U.S. Treasury
security, and the Unitholder's respective tax basis in such Securities or
U.S. Treasury security.
In the absence of an established trading market for the Contracts or
other objective measure of fair market value of the Contracts, it is believed
that the aggregate Additional Consideration (i.e., the aggregate fair market
value of the Contracts) appropriately could be determined by calculating the
excess of: (1) the aggregate fair market value of the Securities underlying
the Units on the date of the sale of the Units over (2) the Actual
Consideration received less the fair market value of the U.S. Treasury
securities underlying the Units on the date of the sale. The selling
Unitholder will be treated as having paid an amount equal to the Additional
Consideration to the purchaser of the Units as consideration for the
purchaser's assumption of the Contracts relating to the Securities underlying
the Units.
The difference between the Unitholder's pro rata portion of the Contract
Premium with respect to each Security and the Additional Consideration
attributable thereto paid to the purchaser of the Units will be recognized by
the Unitholder as short-term capital gain or loss.
Character of the Gain or Loss. Except as discussed above relating to
original issue discount accrued on a short-term U.S. Treasury security by
certain cash method Unitholders and gain or loss attributable to the
Contracts, any gain or loss recognized by a Unitholder resulting from a sale
of a Security by the Trust or a sale of any Units by the Unitholder will be
long-term capital gain or loss if the Unitholder has held the Units for more
than one year. Under current law, the excess of net long-term capital gains
over net short-term capital losses is taxed at a lower rate than ordinary
income for certain non-corporate taxpayers. The distinction between capital
gain or loss and ordinary income or loss is relevant for purposes of, among
other things, limitations on the deductibility of capital losses.
Fees and Expenses of the Trust. An individual Unitholder who itemizes
deductions may deduct its pro rata portion of fees and expenses described
under "Estimated Expenses" incurred by the Trust resulting from its ongoing
operations only to the extent that such amount together with such
Unitholder's other miscellaneous deductions exceeds 2% of such Unitholder's
adjusted gross income. It is unclear whether the one-time fee paid to
____________________, expenses in connection with the organization of the
Trust and sales loads and commissions and other offering expenses are
includable in the basis of the assets of the Trust, or, subject to the 2%
floor for miscellaneous deductions described above for individual
Unitholders, amortizable over the term of the Trust or deductible only upon
its termination.
NEW YORK STATE AND CITY INCOME TAX CONSIDERATIONS
Under the income tax laws of the State and City of New York, the Trust
will not be treated as an association taxable as a corporation. The income
of the Trust will be treated as the income of the Unitholders in the same
manner as for Federal income tax purposes.
* * *
After the end of each calendar year, the Trust will furnish to each
Unitholder an annual statement containing information relating to the
dividends on the Securities and payments on the U.S. Treasury securities
received by the Trust and relating to the fees and expenses paid by the
Trust. The Trust also will furnish annual information returns to each
Unitholder and to the Internal Revenue Service.
The foregoing discussion relates only to Federal and certain New York
State and City income taxes. Unitholders also may be subject to state and
local taxation in other jurisdictions and should consult their tax advisers
in this regard.
20
<PAGE>
UNDERWRITING
The Underwriters named below, acting through their representatives,
Merrill Lynch and ________ (the "Representatives"), severally have agreed,
subject to the terms and conditions of the Purchase Agreement with the Trust,
to purchase from the Trust the number of Units set forth opposite their
respective names below. The Underwriters are committed to purchase all of
such Units if any are purchased. Under certain circumstances, the
commitments of non-defaulting Underwriters may be increased.
Underwriter Number of Units
- ----------- ---------------
Merrill Lynch, Pierce, Fenner
& Smith Incorporated. . . . . . . . . .
_______________
Total
The Representatives of the Underwriters have advised the Trust that they
propose initially to offer the Units to the public at the public offering
price set forth on the cover page of this Prospectus. The Representatives of
the Underwriters also have advised the Trust that they may offer Units to
certain dealers at the initial offering price set forth in the preceding
sentence less a concession not in excess of $____ per share. The
Underwriters may allow, and such dealers may reallow, a discount on sales to
certain other dealers not in excess of $____ per Unit. After the initial
public offering, the public offering price, concession and discount may be
changed. The sales load of $___ per Unit is equal to ____% of the initial
public offering price. Investors must pay for any Units purchased in the
initial public offering on or before ________________________, 1994.
Prior to this offering, there has been no public market for the Units of
the Trust. The Trust's Units have been approved for listing on the ________
Stock Exchange. In order to meet the requirements for listing, the
Underwriters have undertaken to sell lots of (100) or more shares to a
minimum of (2,000) beneficial owners.
The Trust and the Investment Manager have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933.
LEGAL MATTERS
Certain legal matters will be passed upon for the Trust and the
Underwriters by their counsel, Brown & Wood, One World Trade Center, New
York, New York 10048.
EXPERTS
The financial statements included in this Prospectus have been audited
by __________________, independent public accountants, as stated in their
opinion appearing herein, and have been so included in reliance upon such
opinion given upon the authority of that firm as experts in accounting and
auditing.
ADDITIONAL INFORMATION
Additional information concerning the Units and the Trust may be found
in the Registration Statement, of which this Prospectus constitutes a part,
on file with the Securities and Exchange Commission.
21
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Unitholder
of Enhanced Yield Equity Trust:
We have audited the accompanying statement of assets and liabilities of
Enhanced Yield Equity Trust as of ____________, 1994. This financial
statement is the responsibility of the Trust's management. 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 statement of assets and
liabilities is free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statement. An audit also includes assessing the accounting
principles used and significant estimates made by the Trust's management, as
well as evaluating the overall financial statement presentation. We believe
that our audit of the financial statements provides a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Enhanced Yield
Equity Trust, as of ____________, 1994 in conformity with generally accepted
accounting principles.
______________, 1994
22
<PAGE>
ENHANCED YIELD EQUITY TRUST
STATEMENT OF ASSETS AND LIABILITIES
, 1994
ASSETS
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Deferred organization and offering expenses(2) . . . . . . . _______
Total assets . . . . . . . . . . . . . . . . . . .
LIABILITIES
Deferred organization and offering expenses(2) . . . . . . . _______
NET ASSETS(2)
Balance applicable to _____ Units outstanding . . . . . . . $_______
Net asset value per Unit . . . . . . . . . . . . . . . . $
___________________
(1) The Trust was established on June 21, 1994 and is registered as a
non-diversified, closed-end, management investment company under the
Investment Company Act of 1940. The Trust has entered into an agreement
with ____________________ to act as trust administrator, custodian,
paying agent, registrar and transfer agent at a fee of $ ___________ per
annum, payable up front.
(2) Costs incurred by the Trust in connection with its organization,
estimated at $ _________, will be payable upon the completion of the
offering and will be expensed during the first year of operations.
Offering expenses, estimated at _________________, will be payable upon
the completion of the offering and will be charged to capital upon the
commencement of operations of the Trust.
23
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATIONS IN CONNECTION
WITH ANY OFFERING HEREUNDER NOT Units
CONTAINED IN THIS PROSPECTUS AND, ---------
IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFERING OF ANY
SECURITIES OTHER THAN THE
REGISTERED SECURITIES TO WHICH IT ENHANCED YIELD EQUITY TRUST
RELATES OR AN OFFER TO ANY PERSON
IN ANY STATE OR JURISDICTION OF
THE UNITED STATES OR ANY COUNTRY
WHERE SUCH OFFER WOULD BE
UNLAWFUL.
---------------------
PROSPECTUS
------------
---------------------
TABLE OF CONTENTS
PAGE
----
Prospectus Summary . . . . . . .
Fee Table . . . . . . . . . . . .
The Trust . . . . . . . . . . . .
Use of Proceeds . . . . . . . . . Merrill Lynch & Co.
Investment Objective and Policies
Investment Restrictions . . . .
Distributions . . . . . . . . . .
Risk Factors and
Special Considerations . . . . .
Description of the Units . . . .
Management and Administration
of the Trust . . . . . . . . . . , 1994
Taxes . . . . . . . . . . . . . . -----------
Underwriting . . . . . . . . . .
Legal Matters . . . . . . . . .
Experts . . . . . . . . . . . .
Additional Information . . . . .
Report of Independent Accountants
Statement of Assets and
Liabilities . . . . . . . . . . .
--------------------
UNTIL , 1994 (90 DAYS
-----------
AFTER THE COMMENCEMENT OF THE
OFFERING), ALL DEALERS EFFECTING
TRANSACTIONS IN THE UNITS,
WHETHER OR NOT PARTICIPATING IN
THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS. THIS
DELIVERY REQUIREMENT IS IN
ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND
WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
Code #______
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(1) Financial Statements
Report of Independent Accountants
Statement of Assets and Liabilities as of ___________, 1994
(2) Exhibits:
(a)(1) -- Form of Trust Agreement*
(b) -- Not applicable
(c) -- Not applicable
(d)(1) -- Form of Specimen Certificate for the Units*
(d)(2) -- Portions of the Trust Agreement of
the Registrant defining the rights of
holders of shares of the Registrant**
(e) -- Not applicable
(f) -- Not applicable
(g) -- Form of Management Agreement between
t h e T r u s t a n d
__________________________*
(h)(1) -- Form of Purchase Agreement between
t h e T r u s t a n d
__________________________________
and Merrill Lynch, Pierce, Fenner &
Smith Incorporated as Representative
of the Underwriters*
(h)(2) -- Merrill Lynch Standard Dealer Agreement*
(i) -- Not applicable
(j) -- Custody Agreement between the Trust and
___________________*
(k)(1) -- Form of Administration Agreement between the Trust and
__________________________*
(k)(2) -- Form of Paying Agent Agreement between the Trust and
________________*
(l)(1) -- Opinion and Consent of Brown & Wood, counsel to the
Trust*
(l)(2) -- Tax Opinion of Brown & Wood, counsel to the Trust*
(m) -- Not applicable
(n) -- Consent of , independent auditors for the
Trust*
(o) -- Not applicable
(p) -- Certificate of ___________________________*
(q) -- Not applicable
- -----------------
* To be filed by amendment.
** Reference is made to Sections 7.04, 8.01, 8.04, 8.05 and 8.06 of the
Registrant's Trust Agreement, to be filed as Exhibit (a) to this
Registration Statement.
ITEM 25. MARKETING ARRANGEMENTS.
See Exhibits (h)(1) and (h)(2), to be filed as exhibits to this
Registration Statement.
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ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses to be incurred in
connection with the offering described in this Registration Statement:
Registration fees . . . . . . . . . . . . . . . . . . . . . . . . $ *
Stock Exchange listing fee . . . . . . . . . . . . . . . . . . . *
Printing (other than share certificates) . . . . . . . . . . . *
Engraving and printing share certificates . . . . . . . . . . . . *
Fees and expenses of qualifications under state
securities laws (including fees of counsel) . . . . . . . . . . *
Legal fees and expenses . . . . . . . . . . . . . . . . . . . . . *
Accounting fees and expenses *
NASD fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . *
-----
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . $ *
- --------------
* To be provided by amendment.
ITEM 27. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE REGISTRANT.
None.
ITEM 28. NUMBER OF HOLDERS OF SECURITIES.
There will be one record holder of the Units as of the effective date of
this Registration Statement.
ITEM 29. INDEMNIFICATION.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Securities Act"), may be provided to directors,
officers and controlling persons of the Trust, pursuant to the foregoing
provisions or otherwise, the Trust has been advised that in the opinion of
the Securities and Exchange Commission, such indemnification is against
public policy as expressed in the Securities Act and, therefore, is
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Trust of expenses incurred or paid
by a director, officer or controlling person of the Trust in connection with
any successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the Trust, unless in the opinion of its counsel the matter
has been settled by controlling precedent, will submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
Reference is made to Section Six of the Underwriting Agreement, a form
of which will be filed as Exhibit (h)(l) to this Registration Statement, for
provisions relating to the indemnification of the Underwriters.
Section 7.05 of the Trust Agreement of the Trust provides as follows:
"The Trustee shall not be liable to the Trust or to any Unitholder
for taking any action or for refraining from taking any action
except in the case of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties of his or her
office. Specifically, without limitation, the Trustee shall not be
responsible for or in respect of the validity or sufficiency of
this Trust Agreement or for the due execution hereof by any other
Person, or for or in respect of the validity or sufficiency of
Units, of Certificates representing Units or of Contracts, and in
no event shall the Trustee assume or incur any liability, duty or
obligation to any Unitholder, any holder of a Contract or to any
other Person, other than as expressly provided for herein. The
Trustee
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may employ agents, attorneys, administrators, accountants and auditors,
and shall not be answerable for the default or misconduct of any such
Persons if such Persons shall have been selected with reasonable care.
Action in good faith may include action taken in good faith in
accordance with an opinion of counsel. In no event shall any Trustee be
personally liable for any expenses incurred with respect to the Trust.
The Trust shall indemnify the Trustee with respect to any claim,
liability, loss or expense incurred in acting as trustee of the Trust,
including the costs and expenses of the defense against any such claim
or liability, except in the case of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties of his or her
office."
The Trust has agreed pursuant to the Management Agreement, a form of
which will be filed as Exhibit (g) to this Registration Statement, to
indemnify the Investment Manager against certain liabilities, including
liabilities under the Securities Act. The Management Agreement provides that
no provision therein shall protect the Investment Manager against any
liability to the Trust or any purchaser of the Units to which the Investment
Manager would otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence or by reason of its reckless disregard of its
obligations and duties thereunder.
ITEM 30. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER.
See "Management and Administration of the Trust -- Investment Manager."
Information regarding the directors and officers of the investment manager is
included in its Form ADV filed with the Commission and is incorporated herein
by reference thereto.
ITEM 31. LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the rules promulgated
thereunder are maintained at the offices of the Registrant
(______________________), the Investment Manager
(______________________________________), and the Administrator, Custodian
and Paying Agent (_________________________________).
ITEM 32. MANAGEMENT SERVICES.
Not applicable.
ITEM 33. UNDERTAKINGS.
(a) The Registrant undertakes to suspend offering of the Units covered
hereby until it amends its Prospectus contained herein if (1) subsequent to
the effective date of this Registration Statement, its net asset value per
Unit declines more than 10% from its net asset value per Unit as of the
effective date of this Registration Statement, or (2) its net asset value per
Unit increases to an amount greater than its net proceeds as stated in the
Prospectus contained herein.
(b) The Registrant hereby undertakes (i) if requested to do so by
Unitholders of at least 10% of the Units outstanding, to call a meeting of
Unitholders for the purpose of voting upon the question of removal of a
Trustee or Trustees, and
(ii) to assist in communications with other Unitholders as required by
Section 16(c) of the Investment Company Act of 1940.
(c) The Registrant undertakes that:
(1) For the purpose of determining any liability under the
Securities Act, the information omitted from the form of prospectus
filed as part of a registration statement in reliance upon Rule 430A and
contained in the form of prospectus filed by the Registrant pursuant to
Rule 497(h) under the Securities Act shall be deemed to be part of the
registration statement as of the time it was declared effective.
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<PAGE>
(2) For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of New York and State of New York, on the 21st
day of June, 1994.
ENHANCED YIELD EQUITY TRUST
(Registrant)
By: /s/ RICHARD P. SANDULLI
------------------------------
(Richard P. Sandulli, Trustee)
Pursuant to the requirements of the Securities Act of 1933 this
Registration Statement has been signed below by the following person in the
capacities and on the date indicated.
Name Title Date
---- ----- ----
/s/ RICHARD P. SANDULLI Principal Executive June 21, 1994
- -----------------------
(Richard P. Sandulli) Officer, Principal Accounting
Officer and Trustee
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