10-Q 1 e52417e10-q.txt EQUITY INVESTOR FUND AT&T SHARES 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ---------- FORM 10-Q [X] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended June 30, 2001 -------------- Commission file number 001-08642 --------- The Equity Investor Fund, First Exchange Series - AT&T Shares -------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in Its Charter) New York 13-6824382 -------------------------------------------------------------------------------- (State or Other Jurisdiction (I.R.S. Employee of Incorporation or Organization) Identification No.)

Merrill Lynch, Pierce, Fenner Prudential Securities & Smith Incorporated Incorporated P.O. Box 9051 One Seaport Plaza Princeton, New Jersey 08543 199 Water Street New York, New York 10292 Morgan Stanley Dean Witter Smith Barney Inc. Two World Trade Center 388 Greenwich Street New York, New York 10048 New York, New York 10013 -------------------------------------------------------------------------------- (Addresses of Principal Executive Offices of Sponsors) The Bank of New York, 101 Barclay Street, New York, NY 10286 -------------------------------------------------------------------------------- (Addresses of Principal Executive Office of Trustee) (Zip Code) Trustee's Telephone Number, Including Area Code: (212) 815-2887 -------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] 2 PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. INDEPENDENT ACCOUNTANTS' REVIEW REPORT The Sponsors, Trustee and Holders of The Equity Investor Fund, First Exchange Series - AT&T Shares: We have reviewed the accompanying statements of condition of The Equity Investor Fund, First Exchange Series - AT&T Shares as of June 30, 2001 and the related statements of operations and of changes in net assets for the three-month and six-month periods ended June 30, 2001 and 2000. These financial statements are the responsibility of the Trustee. We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and of making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States of America, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to such financial statements for them to be in conformity with accounting principles generally accepted in the United States of America. We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the statement of condition of The Equity Investor Fund, First Exchange Series - AT&T Shares as of December 31, 2000, and the related statements of operations and of changes in net assets for the year then ended (not presented herein) and in our report dated February 6, 2001, we expressed an unqualified opinion on those financial statements. In our opinion, the information set forth in the accompanying statement of condition as of December 31, 2000 is fairly stated, in all material respects, in relation to the statement of condition from which it has been derived. Deloitte & Touche LLP New York, NY August 3, 2001 D-1 3 THE EQUITY INVESTOR FUND, FIRST EXCHANGE SERIES - AT&T SHARES STATEMENTS OF CONDITION (Unaudited) June 30, December 31, 2001 2000 TRUST PROPERTY: Investment in marketable securities - at market value (Notes 1 and 2): 2000 cost - $245,133,596 $1,660,498,880 2001 cost - $233,748,509 $1,423,716,175 Dividends receivable 601,783 659,840 Cash 1,989,684 2,377,773 Total 1,426,307,642 1,663,536,493 LESS LIABILITIES: Distribution payable (Note 3) 2,335,872 2,875,996 Unit redemptions payable 24,272 81,485 Accrued expenses 132,174 172,131 Total 2,492,318 3,129,612 TOTAL TRUST PROPERTY $1,423,815,324 $1,660,406,881 NET ASSETS, REPRESENTED BY: Units of fractional undivided interest outstanding: 2000 - 11,925,002 (Note 6) $1,660,334,222 2001 - 11,375,433 (Note 6) $1,423,658,916 Undistributed net investment income 156,408 72,659 NET ASSETS $1,423,815,324 $1,660,406,881 UNIT VALUE: 2000 - $1,660,406,881 / 11,925,002 units $139.24 2001 - $1,423,815,324 / 11,375,433 units $125.17

See Independent Accountants' Review Report and Notes to Financial Statements. D-2 4 THE EQUITY INVESTOR FUND, FIRST EXCHANGE SERIES - AT&T SHARES STATEMENTS OF OPERATIONS

See Independent Accountants' Review Report and Notes to Financial Statements. D-3 5 THE EQUITY INVESTOR FUND, FIRST EXCHANGE SERIES - AT&T SHARES STATEMENTS OF CHANGES IN NET ASSETS

See Independent Accountants' Review Report and Notes to Financial Statements. D-4 6 THE EQUITY INVESTOR FUND, FIRST EXCHANGE SERIES - AT&T SHARES STATEMENTS OF CHANGES IN NET ASSETS

See Independent Accountants' Review Report and Notes to Financial Statements. D-5 7 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 accounting principles generally accepted in the United States of America, 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 conformity 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, 2000:

See Independent Accountants' Review Report. D-6 8 THE EQUITY INVESTOR FUND, FIRST EXCHANGE SERIES - AT&T SHARES NOTES TO FINANCIAL STATEMENTS MARKETABLE SECURITIES, AT JUNE 30, 2001:

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 June 30, 2001 to holders of record at June 15, 2001 was at the rate of $.2050 per unit. 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. 6. INTERIM FINANCIAL STATEMENTS In the opinion of the management of the Fund, the unaudited financial statements as of June 30, 2001, and for the three-month and six-month periods then ended, reflect all adjustments necessary for the fair presentation of the results of the interim period. See Independent Accountants' Review Report. D-7 9 THE EQUITY INVESTOR FUND, FIRST EXCHANGE SERIES - AT&T SHARES NOTES TO FINANCIAL STATEMENTS 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. See Independent Accountants' Review Report. D-8 10 ITEM 2. TRUSTEE'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. During the second quarter ended June 30, 2001, The Equity Investor Fund, First Exchange Series - AT&T Shares (the "Fund") held securities of AT&T and eight other companies. The Fund had net investment income of approximately $7.4 million and net realized and unrealized loss on investments of approximately $77.4 million for the quarter ended June 30, 2001, causing a net decrease in net assets resulting from operations of approximately $70.0 million. In contrast, net investment income of approximately $10.3 million and net realized and unrealized loss on investments of approximately $297.0 million for the quarter ended June 30, 2000, resulted in a net decrease in net assets resulting from operations of approximately $286.7 million. For the year ended December 31, 2000, net investment income of approximately $36.4 million and net realized and unrealized loss on investments of approximately $743 million resulted in a net decrease in net assets resulting from operations of approximately $706.6 million. Income distributions during the second quarter of 2001 totaled $0.61 per Unit, compared with income distributions of $0.77 per Unit during the second quarter of 2000. As of the end of the second quarter of 2001, the per Unit net asset value of the fund had decreased to $125.17 from its $172.29 level at the end of the second quarter of 2000. There was a decrease of 260,042 Units outstanding during the second quarter of 2001 due to redemptions, and there were 11,375,433 Units outstanding at the end of that quarter. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Not Applicable. PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. None. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS. None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. ITEM 5. OTHER INFORMATION. None. ITEM 6. EXHIBITS AND REPORTS ON 8-K. (a) 4.1 - Form of Trust Indenture (incorporated by reference to Exhibit 1.1 to the Registration Statement of The Equity Investor 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 Investor 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 Investor Fund, First Exchange Series - AT&T Shares, 1933 Act File No. 2-83192). 19 - Forms 10-Q and 10-K (incorporated by reference to such forms filed under The Equity Investor Fund, First Exchange Series - AT&T Shares, 1934 Act file No. 001-08642). 23 - Consents (incorporated by reference to Registration Statement of The Equity Investor Fund, First Exchange Series - AT&T Shares, 1933 Act File No. 2-83192). 27 - Financial Data Schedule. (b) Reports on Form 8-K. No reports on Form 8-K have been filed during the quarter ended June 30, 2001. 11 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Trustee of the trust has duly caused this report to be signed on behalf of the trust by the undersigned thereto duly authorized. THE EQUITY INVESTOR FUND, First Exchange Series - AT&T Shares By: THE BANK OF NEW YORK, as Trustee By: /s/ Joanna Yedreyeski ---------------------- Joanna Yedreyeski Vice President Dated: August 14, 2001

EQUITY INVESTOR FUND FIRST EXCHANGE SERIES AT&T SHARES 10-Q