ITEM 1. BUSINESS.
The Equity Investor Fund, First Exchange Series - AT&T Shares (the "Fund") was formed in 1983 as a unit investment trust under New York law and in accordance with the Investment Company Act of 1940 by a trust indenture among Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley Dean Witter, Prudential Securities Incorporated and Smith Barney Inc. as Sponsors and The Bank of New York as Trustee.
The Fund was formed for the purpose of permitting an investor in common shares of the predivestiture American Telephone and Telegraph Company ("AT&T") to hold an investment in AT&T and the seven regional holding companies created pursuant to the AT&T Plan of Reorganization in the form of units of beneficial interest (the "Units") of the Fund, which consists solely of shares of AT&T common stock and those securities which are distributed to holders of such AT&T common stock pursuant to the reorganization. The Fund is not sponsored by, or affiliated with, AT&T or any of the regional holding companies.
ITEM 2.
ITEM 2. PROPERTIES.
The Fund owns no physical properties.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS.
None.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
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PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
(a)
(i) MARKET INFORMATION
The principal United States markets in which Units of the Fund are traded are the American Stock Exchange, Inc. and the Pacific Stock Exchange, Incorporated.
The following are the high and low sale prices of Units of the Fund during each quarter for the last two fiscal years in which the Units were traded on the American Stock Exchange, Inc., which was the principal exchange market for the Units:
(ii) HOLDERS
There were 4,430 record holders of Units of the Fund on the books of the Trustee on February 29, 2000, eighty-seven and ninety-eight hundredths of a percent (87.98%) of such Units were held of record by Cede & Co., a nominee of the Depository Trust Company, for certain of its participants on that date.
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(iii) DIVIDENDS
The following are the cash distributions which were paid to holders of Units of the Fund during the last two fiscal years:
(b) If required pursuant to Rule 463 of the Securities Act of 1933, furnish the information required by Item 701(f) of Regulation S-K.
Not Applicable.
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ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA.
SELECTED FINANCIAL DATA (in thousands except for outstanding Units and Per Unit Data)
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The Fund, as a non-managed unit investment trust, has no officers or directors. The Trustees and Sponsors of the Fund are named in Item 1.
The Fund had net investment income of $38.6 million and net realized and unrealized gain on investments of $283.1 million for the year 1999 as compared with net investment income of $40.6 million and net realized and unrealized gain on
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investments of $895.8 million for the year 1998 and net investment income of $42.0 million and net realized and unrealized gain on investments of $542.8 million for the year 1997.
The net increase in net assets resulting from operations for the year 1999 was $321.7 million as compared to a net increase of $936.4 million for the year 1998 and a net increase of $584.7 million for the year 1997. The increase in net assets resulting from operations of $321.7 million for the year 1999 was substantially the result of realized and unrealized gain on investments. The net increase in net assets resulting from operations of $936.4 for the year 1998 was also the result of realized and unrealized gain on investments.
Income distributions accrued per Unit during each year amounted to $2.99 for the year ending December 31, 1999 as compared to $2.85 for the year ending December 31, 1998. The income distribution per Unit for the year ending December 31, 1997 was $2.79.
Principal distributions accrued per Unit during the year ended December 31, 1999 amounted to $1.18. No such principal distribution occurred in the respective periods for 1998 and 1997.
The per Unit net asset value was $203.87 at December 31, 1999, $184.02 at December 31, 1998 and $119.63 at December 31, 1997. The per Unit net asset value increased $19.85 from 1998 to 1999 and increased $64.39 from 1997 to 1998.
There were 13,016,125 Units outstanding as of December 31, 1999, 13,657,832 Units outstanding as of December 31, 1998 and 14,505,395 Units outstanding as of December 31, 1997. There was a decrease of 641,707 Units during fiscal year 1999, a decrease of 847,563 Units during fiscal year 1998 and decrease of 1,220,658 Units during fiscal year 1997 as a result of redemptions.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not Applicable
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See following pages 6 through 13.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
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INDEPENDENT ACCOUNTANTS' REPORT
The Sponsors, Trustee and Holders of The Equity Investor Fund, First Exchange Series - AT&T Shares:
We have audited the accompanying statements of condition of The Equity Investor Fund, First Exchange Series - AT&T Shares as of December 31, 1999 and 1998 and the related statements of operations and of changes in net assets for the years ended December 31, 1999, 1998 and 1997. These financial statements are the responsibility of the Trustee. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Securities owned at December 31, 1999 and 1998 were confirmed to us by The Bank of New York, the Trustee. An audit also includes assessing the accounting principles used and significant estimates made by the Trustee, as well as evaluating the overall financial statement presentation. We believe that our audits provide 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 The Equity Investor Fund, First Exchange Series - AT&T Shares at December 31, 1999 and 1998 and the results of its operations and changes in its net assets for the above-stated years in conformity with generally accepted accounting principles.
Deloitte & Touche LLP New York, N.Y.
March 7, 2000
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THE EQUITY INVESTOR FUND, FIRST EXCHANGE SERIES - AT&T SHARES
STATEMENTS OF CONDITION
See Notes to Financial Statements.
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THE EQUITY INVESTOR FUND, FIRST EXCHANGE SERIES - AT&T SHARES
STATEMENTS OF OPERATIONS
See Notes to Financial Statements.
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THE EQUITY INVESTOR FUND,
FIRST EXCHANGE SERIES - AT&T SHARES
STATEMENTS OF CHANGES IN NET ASSETS
See Notes to Financial Statements.
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THE EQUITY INVESTOR FUND,
FIRST EXCHANGE SERIES - AT&T SHARES
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Fund is registered under the Investment Company Act of 1940 as a Unit Investment Trust. A summary of the significant accounting policies, which are in conformity with generally accepted accounting principles, followed by the Fund in the preparation of its financial statements since July 7, 1983, its initial date of deposit, is as follows:
(a) Securities are stated at market value based on the last sales price reported at the close of business on the New York Stock Exchange. Substantially all of the aggregate cost of securities represents the market value of the shares of common stock of American Telephone and Telegraph Company (AT&T) on the days the shares were exchanged for units of the Fund; such aggregate cost was subsequently allocated among the portfolio holdings in shares of AT&T and the seven regional holding companies following their divestiture by AT&T in accordance with its Plan of Reorganization. Realized gains or losses on sales of securities are determined using the identified cost basis.
(b) The Fund is not subject to income taxes. Accordingly, no provision for such taxes is required.
(c) Dividend income has been recognized on the ex-dividend date.
2. MARKETABLE SECURITIES, AT DECEMBER 31, 1998:
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THE EQUITY INVESTOR FUND, FIRST EXCHANGE SERIES - AT&T SHARES
NOTES TO FINANCIAL STATEMENTS
MARKETABLE SECURITIES, AT DECEMBER 31, 1999:
3. DISTRIBUTIONS
Any monthly distributions to Holders, who have not elected to participate in the Fund's Reinvestment Plan, are made on or about the first day of each month. The income distribution payable at December 31, 1998 and 1999 to holders of record at December 15, 1998 and December 15, 1999 was at the rate of $.242 and $.252 per unit, respectively.
4. REINVESTMENT PLAN
Holders could reinvest any distributions in the Fund prior to April 1, 1984, or in certain subsequent series of The Equity Income Fund after March 31, 1984, by executing an appropriate notice of election to participate in the Fund's Reinvestment Plan. The Sponsors (Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley Dean Witter, Prudential Securities Incorporated and Smith Barney Inc.) may, in their sole discretion, cancel the Fund's Reinvestment Plan at any time.
5. REDEMPTIONS
Holders may request redemptions of units by presentation thereof to the Trustee, The Bank of New York. Redemptions of units are made in kind by the Trustee; fractional undivided interests are redeemed in cash. Under certain circumstances, Holders may request redemptions of units in cash. Units of the Fund are listed and traded on the American and Pacific Stock Exchanges.
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THE EQUITY INVESTOR FUND, FIRST EXCHANGE SERIES - AT&T SHARES
NOTES TO FINANCIAL STATEMENTS
6. NET CAPITAL
7. INCOME TAXES
All Fund items of income received, expenses paid, and realized gains and losses on securities sold are attributable to the Holders, on a pro rata basis, for Federal income tax purposes in accordance with the grantor trust rules of the United States Internal Revenue Code.
8. QUARTERLY RESULTS OF OPERATIONS - UNAUDITED
A summary of the Fund's 1999 and 1998 quarterly results of operations, in thousands of dollars, is as follows:
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THE EQUITY INVESTOR FUND, FIRST EXCHANGE SERIES - AT&T SHARES
NOTES TO FINANCIAL STATEMENTS
Year Ended December 31, 1999
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PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
None.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION.
None.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
None.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
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ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
Page
a. 1.1 - Statements of Condition as of December 31, 1998 and 1999 ......................... 7
1.2 - Statements of Operations for the years ended December 31, 1997, December 31, 1998 and December 31, 1999 .............................. 8
1.3 - Statements of Changes in Net Assets for the years ended December 31, 1997, December 31, 1998 and December 31, 1999 ............ 9
2 - Financial schedules are not filed because of the absence of conditions under which they are required or because the required information, where material, is included in the financial statements or the footnotes thereto.
b. None.
c. 4.1 - Form of Trust Indenture (incorporated by reference to Exhibit 1.1 to the Registration Statement of The Equity Income Fund, First Exchange Series - AT&T Shares, 1933 Act File No. 2-83192)
4.1.1 - Form of Certificate of Amendment to Trust Indenture dated August 8, 1983 (incorporated by reference to Registration Statement on Form 8-A of The Equity Income Fund, First Exchange Series - AT&T Shares, 1934 Act File No. 001-08642)
4.1.2 - Form of Standard Terms and Conditions of Trust effective January 1, 1983 (incorporated by reference to Exhibit 1.1.1 to the Registration Statement of The Equity Income Fund, First Exchange Series - AT&T Shares, 1933 Act File No. 2-83192)
9. - None.
11. - Computation of per Unit earnings (See Statement of Changes in Net Assets, Item 1.3, above)
13.1 - Form 10-Q, for the quarter ended March 31, 1998, incorporated by reference to 1934 Act File No. 001-08642.
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13.2 - Form 10-Q, for the quarter ended June 30, 1998, incorporated by reference to 1934 Act File No. 001-08642.
13.3 - Form 10-Q, for the quarter ended September 30, 1998, incorporated by reference to 1934 Act File No. 001-08642.
13.4 - Form 10-K for the fiscal year ended December 31, 1998, incorporated by reference to 1934 Act File No. 001-08642.
13.5 - Form 10-Q for the quarter ended March 31, 1999, incorporated by reference to 1934 Act File No. 001-08642.
13.6 - Form 10-Q for the quarter ended June 30, 1999, incorporated by reference to 1934 Act File No. 001-08642.
13.7 - Form 10-Q for the quarter ended September 30, 1999, incorporated by reference to 1934 Act File No. 001-08642.
18. - None.
21. - None.
22. - None.
23 - Consents (incorporated by reference to Registration Statement of The Equity Income Fund, First Exchange Series - AT&T Shares, 1933 Act File No. 2-83192).
27. - Financial Data Schedule.
d. None.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Trustee of the Fund has duly caused this report to be signed on behalf of the Fund by the undersigned, thereunto duly authorized.
The Equity Investor Fund, First Exchange Series - AT&T Shares
By: The Bank of New York, as Trustee
Date: March 28, 2000 By: /s/ Alfred Irving --------------------- Name: Alfred Irving Title: Vice President