AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 2, 1996
REGISTRATION NO. 333-07325
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-6
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FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
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A. EXACT NAME OF TRUST:
EQUITY INCOME FUND SELECT SERIES
1997 YEAR AHEAD PORTFOLIO
(FORMERLY EQUITY INCOME FUND SELECT YEAR AHEAD)
DEFINED ASSET FUNDS
B. NAMES OF DEPOSITOR:
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
C. COMPLETE ADDRESSES OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES:
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
DEFINED ASSET FUNDS
P.O. BOX 9051
PRINCETON, NJ 08543-9051
D. NAMES AND COMPLETE ADDRESSES OF AGENT FOR SERVICE:
TERESA KONCICK, ESQ.
P.O. BOX 9051
PRINCETON, NJ 08543-9051 COPIES TO:
PIERRE DE SAINT PHALLE,
ESQ.
450 LEXINGTON AVENUE
NEW YORK, NY 10017
E. TITLE AND AMOUNT OF SECURITIES BEING REGISTERED:
An indefinite number of Units of Beneficial Interest pursuant to Rule 24f-2
promulgated under the Investment Company Act of 1940, as amended.
F. PROPOSED MAXIMUM OFFERING PRICE TO THE PUBLIC OF THE SECURITIES BEING
REGISTERED: Indefinite
G. AMOUNT OF FILING FEE: Not applicable
H. APPROXIMATE DATE OF PROPOSED SALE TO PUBLIC:
As soon as practicable after the effective date of the Registration Statement.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL HEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO
SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
SUBJECT TO COMPLETION, PRELIMINARY PROSPECTUS DATED DECEMBER 2, 1996
DEFINED ASSET FUNDSSM
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EQUITY INCOME FUND The objective of this Defined Fund is total return
SELECT SERIES by investing for a period of about one year in a
1997 YEAR AHEAD portfolio of liquid, domestic common stocks. These
PORTFOLIO stocks represent industries that the Merrill Lynch
(A UNIT INVESTMENT Investment Strategy group believe should be
TRUST) overweighted in an equity portfolio and were
- ------------------------------selected from a larger list of stocks named by the
Merrill Lynch Global Research and Economics group
as their 'Top Stocks' for 1997. There can be no
assurance that the Fund will achieve its
objective.
The Fund is not an appropriate investment for
investors seeking preservation of capital.
The value of units will fluctuate with the value
of the common stocks in the Portfolio and no
assurance can be given that the underlying common
stocks or the units will appreciate in value.
Minimum purchase: $250.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS DOCUMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Inquiries should be directed to the Trustee at
SPONSOR: 1-800-221-7771.
Merrill Lynch, Prospectus dated December , 1996.
Pierce, Fenner & Smith INVESTORS SHOULD READ THIS PROSPECTUS CAREFULLY
Incorporated AND RETAIN IT FOR FUTURE REFERENCE.
<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 STATE.
<PAGE>
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Defined Asset FundsSM
Defined Asset Funds is America's oldest and largest family of unit investment
trusts, with over $115 billion sponsored in the last 25 years. Each Defined
Asset Fund is a portfolio of preselected securities. The portfolio is divided
into 'units' representing equal shares of the underlying assets. Each unit
receives an equal share of income and principal distributions.
Defined Asset Funds offer several defined 'distinctives'. You know in advance
what you are investing in and that changes in the portfolio are limited - a
defined portfolio. Most defined bond funds pay interest monthly - defined
income. The portfolio offers a convenient and simple way to invest - simplicity
defined.
Your financial professional can help you select a Defined Asset Fund to meet
your personal investment objectives. Our size and market presence enable us to
offer a wide variety of investments. The Defined Asset Funds family offers:
o Municipal bond portfolios
o Corporate bond portfolios
o Government bond portfolios
o Equity portfolios
o International bond and equity portfolios
The terms of Defined Funds are as short as one year or as long as 30 years.
Special defined bond funds are available including: insured funds, double and
triple tax-free funds and funds with 'laddered maturities' to help protect
against changing interest rates. Defined Asset Funds are offered by prospectus
only.
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Defined Select Year Ahead Portfolio
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The Portfolio contains common stocks selected by the Sponsor for total
return. This Select Series permits investors to buy and hold the Portfolio for
approximately one year. At the end of the year, the Portfolio will be liquidated
and the same selection process repeated to select a new Portfolio. Each Select
Portfolio is designed to be part of a longer term strategy and the Sponsor
believes that more consistent results are likely if the strategy is followed for
at least three to five years.
So long as the Sponsor continues to offer new portfolios, investors will have
the option to reinvest into a new portfolio each year at a reduced sales charge.
The Sponsor reserves the right, however, not to offer a new portfolio.
The Sponsor selected the Securities through a three-step screening process.
First, analysts in the Sponsor's Global Research and Economics group selected
their 'top' domestic common stock for the coming year. Second, from that list,
stocks were selected representing industry groups that the Merrill Lynch
Investment Strategy group believes should be overweighted in an equity
portfolio. Finally, the stocks were reviewed for market capitalization and
liquidity. (See Fund Description--Portfolio Selection in Part B.)
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Defining Your Portfolio
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Based upon the principal business of each issuer and current market values, the
following industries are represented in the Portfolio:
APPROXIMATE
PORTFOLIO PERCENTAGE
/ /
/ /
/ /
/ /
/ /
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Defining Your Risks
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There can be no assurance that the Portfolio will meet its objectives over its
one-year life or that portfolios selected through this process during
consecutive one-year periods will meet their objectives. The Portfolio is not
appropriate for investors who are unable or unwilling to assume the risk
involved generally with an equity investment and who are seeking preservation of
capital. The Portfolio is not designed to be a complete equity investment
program.
Unit price fluctuates with the value of the Portfolio, which could be affected
by changes in the financial condition of the issuers, changes in the various
industries represented in the Portfolio, movements in stock prices generally,
the impact of the Sponsor's purchase and sale of the securities (especially
during the primary offering period of units and during the rollover period) and
other factors.
Unlike a mutual fund, the Portfolio is not actively managed and the Sponsor
receives no management fee. Therefore, the adverse financial condition of an
issuer or any market movement in the price of a security will not require the
sale of securities from the Portfolio or mean that the Sponsor will not continue
to purchase the security in order to create additional Units. The Sponsor may
instruct the Trustee to sell securities under certain limited circumstances.
(See Portfolio Supervision in Part B.)
A-2
<PAGE>
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Defining Your Investment
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PUBLIC OFFERING PRICE PER 1,000 UNITS $1,000.00
The Public Offering Price as of December , 1996, the business day prior to
the initial date of deposit, is based on the aggregate value of the underlying
securities ($ ) and any cash held to purchase securities, divided by
the number of units outstanding ( ) times 1,000, plus the initial sales
charge. Units offered on the Initial Date of Deposit will also be priced at
$1,000 per 1,000 Units although the aggregate value of the underlying
securities, cash amount and number of Units may vary. The Public Offering Price
on any subsequent date will vary. The underlying securities are valued by the
Trustee on the basis of their closing sale prices at 4:00 p.m. Eastern time on
every business day.
SALES CHARGES
The total sales charge for this investment combines an initial up-front sales
charge and a deferred sales charge that will be deducted from the net asset
value of the Portfolio monthly beginning , 1997 and thereafter on
the 1st of each month through 1, 1997.
ROLLOVER OPTION
When this Select Year Ahead Portfolio is about to be liquidated, you may have
the option to roll your proceeds into the next Select Year Ahead Portfolio. If
you notify your financial professional by , 1997, your units will be redeemed
and your proceeds will be reinvested in units of the next Portfolio, if
available. If you decide not to roll over your proceeds, you will receive a cash
distribution after the Fund terminates. Of course you can sell or redeem your
Units at any time prior to termination.
DISTRIBUTIONS
In order to meet certain tax requirements, a special distribution of income
including capital gains may be payable to investors of record as of a date in
December. Any capital gain income will generally be distributed after the end of
the Trust's taxable year.
REINVESTMENT OPTION
You can elect to automatically reinvest your distributions into additional units
of the Portfolio subject only to the deferred sales charge remaining at the time
of reinvestment. Reinvesting helps to compound your income for a greater total
return.
TAXES
Distributions which are taxable as ordinary income to investors will constitute
dividends for Federal income tax purposes and may, subject to certain
limitations, be eligible for the dividends-received deduction for certain
corporations. Also, if a new portfolio is offered in less than one year, any
gains recognized on the redemption of units by investors who roll over on the
first offering date of the new portfolio would be considered short-term gains.
(See Taxes.) Foreign holders should be aware that distributions from the Fund
will generally be subject to withholding taxes.
MANDATORY TERMINATION DATE
The Portfolio will terminate by January , 1998. The final distribution will
be made within a reasonable time afterward. The Portfolio may be terminated
earlier if its value is less than 40% of the value of the securities when
deposited.
SPONSOR'S PROFIT OR LOSS
The Sponsor's profit or loss from the Portfolio will include the receipt of
applicable sales charges, fluctuations in the Public Offering Price or secondary
market price of units, a loss of $ on the initial deposit of the
securities and a gain or loss on subsequent deposits of securities (see
Sponsor's and Underwriters' Profits in Part B).
A-3
<PAGE>
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Defining Your Costs
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SALES CHARGE
First-time investors pay a 1% sales charge when they buy. For example, on a
$1,000 investment, $990 is invested in the Portfolio. In addition, a deferred
sales charge of $1.75 per 1,000 units will be deducted from the Portfolio's net
asset value each month over the last 10 months of the Portfolio's life ($17.50
total). This deferred method of payment keeps more of your money invested over a
longer period of time. If you roll the proceeds of your investment into a new
portfolio, you will not be subject to the 1% initial charge, just the $17.50
deferred fee. Although this is a unit investment trust rather than a mutual
fund, the following information is presented to permit a comparison of fees and
an understanding of the direct or indirect costs and expenses that you pay.
As a %
of Initial Public Amount per
Offering Price 1,000 Units
----------------- --------------
Maximum Initial Sales Charge 1.00% $ 10.00
Deferred Sales Charge per Year 1.75% 17.50
----------------- --------------
2.75% $ 27.50
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----------------- --------------
Maximum Sales Charge Imposed per
Year on Reinvested Dividends % $
ESTIMATED ANNUAL FUND OPERATING EXPENSES
As a % Amount per
of Net Assets 1,000 Units
----------------- --------------
Trustee's Fee % $
Portfolio Supervision,
Bookkeeping and Administrative
Fees % $
Organizational Expenses % $
Other Operating Expenses % $
----------------- --------------
TOTAL % $
This Portfolio (and therefore the investors) will bear all or a portion of its
organizational costs--including costs of preparing the registration statement,
the trust indenture and other closing documents, registering units with the SEC
and the states, and the initial audit of the Portfolio--as is common for mutual
funds.
COSTS OVER TIME
You would pay the following cumulative expenses on a $1,000 investment, assuming
5% annual return on the investment throughout the indicated periods and
redemption at the end of the period:
1 Year 3 Years 5 Years 10 Years
$ $ $ $
Although the Portfolio has a term of only one year and is a unit investment
trust rather than a mutual fund, this information is presented to permit a
comparison of fees, assuming the investment is rolled over each year into a new
portfolio subject only to the deferred sales charge and fund expenses.
The example assumes reinvestment of any dividends and distributions and uses a
5% annual rate of return as mandated by SEC regulations applicable to mutual
funds. For purposes of the example, the deferred sales charge imposed on
reinvestment of dividends is not reflected until the year following payment of
the dividend; the cumulative expenses would be higher if sales charges on
reinvested dividends were reflected in the year of reinvestment.
Reductions to the repurchase and cash redemption prices in the secondary market
to recoup the costs of liquidating securities to meet redemption (described
below) have not been reflected. The example should not be considered a
representation of past or future expenses or annual rates of return; the actual
expenses and annual rates of return may be more or less than the example.
REDEEMING OR SELLING YOUR INVESTMENT
You may redeem or sell your units at any time prior to the termination of the
Portfolio. Your price will be based on the then current net asset value. The
redemption and secondary market repurchase price as of December , 1996 was
$972.50 per 1,000 units ($27.50 per 1,000 units less than the Public Offering
Price). This price reflects deductions of the deferred sales charge which
declines over the last 10 months of the Portfolio ($17.50 initially). If you
redeem or sell your units before the termination of the Portfolio, you will pay
the remaining balance of the deferred sales charge. After the initial offering
period, the repurchase and cash redemption prices for units will be reduced to
reflect the estimated costs of liquidating securities to meet the redemption,
currently estimated at $ per 1,000 units. If you reinvest in the new
portfolio, you will pay your share of any brokerage commissions on the sale of
underlying securities when your units are liquidated during the rollover.
A-4
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Sponsors, Trustee and Holders of Equity Income Fund Select Series, 1997 Year
Ahead Portfolio, Defined Asset Funds (the 'Fund'):
We have audited the accompanying statement of condition and the defined
portfolio included in the prospectus of the Fund as of December , 1996. This
financial statement is the responsibility of the Trustee. Our responsibility is
to express an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. Our procedures included
confirmation of an irrevocable letter of credit deposited for the purchase of
securities, as described in the statement of condition, with 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the financial position of the Fund as of December ,
1996 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, N.Y.
December , 1996
STATEMENT OF CONDITION AS OF DECEMBER , 1996
TRUST PROPERTY
Investments--Contracts to purchase Securities(1).........$
Organizational Costs(2)..................................
--------------------
Total.........................................$
--------------------
--------------------
LIABILITIES AND INTEREST OF HOLDERS
Liabilities:.............................................$
Accrued Liability(2)...................................
--------------------
Subtotal...............................................$
--------------------
Interest of Holders of Units of fractional
undivided interest outstanding(3):
Cost to investors(4)...................................$
Gross underwriting commissions(5)...................... ()
--------------------
Subtotal...............................................$
--------------------
Total.........................................$
--------------------
--------------------
- ---------------
(1) Aggregate cost to the Fund of the securities listed under Defined
Portfolio determined by the Trustee at 4:00 p.m., Eastern time on December ,
1996. The contracts to purchase securities are collateralized by an irrevocable
letter of credit which has been issued by Bank
, New York Branch, in the amount of $ and
deposited with the Trustee. The amount of the letter of credit includes
$ for the purchase of securities.
(2) This represents a portion of the Fund's organizational costs,
which will be deferred and amortized over the life of the Fund. Organizational
costs have been estimated based on projected total assets of $ million. To the
extent the Fund is larger or smaller, the estimate may vary.
(3) Because the value of securities at the evaluation time on the
Initial Date of Deposit may differ from the amounts shown in this statement of
condition, the number of Units offered on the Initial Date of Deposit will be
adjusted from the initial number of Units to maintain the $1,000 per 1,000 Units
offering price.
(4) Aggregate public offering price computed on the basis of the
value of the underlying securities at 4:00 p.m., Eastern time on
, 1996.
(5) Assumes the maximum initial sales charge per 1,000 units of 1.00%
of the Public Offering Price. A deferred sales charge of $1.75 per 1,000 Units
per month is payable on , 1997 and thereafter on the 1st day of
each month through , 1997. Distributions will be made on behalf of
investors to an account maintained by the Trustee from which the deferred sales
charge obligation of the investors to the Sponsors will be satisfied. If units
are redeemed prior to , 1997, the remaining portion of the
distribution applicable to such units will be transferred to such account on the
redemption date.
A-5
<PAGE>
<TABLE><CAPTION>
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Defined Portfolio
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Equity Income Fund Select Series
1997 Year Ahead Portfolio December , 1996
Defined Asset Funds
PRICE
NUMBER OF SHARES PERCENTAGE PER SHARE COST
NAME OF ISSUER TICKER SYMBOL OF COMMON STOCK OF FUND (1) TO FUND TO FUND (2)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1. % $ $
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
</TABLE>
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(1) Based on Cost to Fund.
(2) Valuation by the Trustee made on the basis of closing sale prices at the
evaluation time on December , 1996, the initial date of deposit. The value
of the securities on any subsequent date will vary.
------------------------------------
The securities were acquired on December , 1996 and are represented entirely
by contracts to purchase the securities. The Sponsor may have acted as
underwriter, manager or comanager of a public offering of the securities in this
Fund
A-6
<PAGE>
<TABLE><CAPTION>
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Defined Portfolio
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Equity Income Fund Select Series
1997 Year Ahead Portfolio December , 1996
Defined Asset Funds (Continued)
PRICE
NUMBER OF SHARES PERCENTAGE PER SHARE COST
NAME OF ISSUER TICKER SYMBOL OF COMMON STOCK OF FUND (1) TO FUND TO FUND (2)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
16. % $ $
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
</TABLE>
- ------------------------------------
during the last three years. Affiliates of the Sponsors may serve as specialists
in the securities in this Fund on one or more stock exchanges and may have a
long or short position in any of these securities or in options on any of them,
and may be on the opposite side of public orders executed on the floor of an
exchange where the securities are listed. An officer, director or employee of
the Sponsor may be an officer or director of one or more of the issuers of the
securities in the Fund. The Sponsor may trade for its own account as an odd-lot
dealer, market maker, block positioner or arbitrageur in any of the securities
or in options on them. The Sponsor, its affiliates, directors, elected officers
and employee benefits programs may have either a long or short position in any
securities or in options on them.
A-7
<PAGE>
DEFINED ASSET FUNDSSM
PROSPECTUS--PART B
EQUITY INCOME FUND SELECT SERIES 1997 YEAR AHEAD PORTFOLIO
FURTHER INFORMATION REGARDING THE FUND MAY BE OBTAINED
WITHIN FIVE DAYS BY WRITING OR CALLING THE TRUSTEE AT THE ADDRESS AND
TELEPHONE NUMBER SET FORTH ON THE BACK COVER OF THIS PROSPECTUS.
INDEX
PAGE
---------
FUND DESCRIPTION................................................. 1
RISK FACTORS..................................................... 2
HOW TO BUY UNITS................................................. 3
HOW TO REDEEM OR SELL UNITS...................................... 4
INCOME, DISTRIBUTIONS AND REINVESTMENT........................... 6
FUND EXPENSES.................................................... 6
TAXES............................................................ 7
RECORDS AND REPORTS.............................................. 9
TRUST INDENTURE.................................................. 9
MISCELLANEOUS.................................................... 10
EXCHANGE OPTION.................................................. 12
SUPPLEMENTAL INFORMATION......................................... 12
FUND DESCRIPTION
THE SELECT YEAR AHEAD PORTFOLIO
This Select Series is designed to permit an investor to buy and hold a
portfolio of domestic equity securities for a period of approximately one
year based upon the Select Year Ahead selection process. At the end of the year
the process is repeated and the investor may reinvest in a new portfolio, if
available.
The Fund seeks total return by acquiring and holding for about one year
certain common stocks selected through a three-step selection process.
PORTFOLIO SELECTION
The Sponsor selected the Securities through a three-step screening process.
First, analysts in the Sponsor's Global Research and Economics group selected
their 'top' domestic common stock for the coming year. Second, stocks were
chosen from that list that represent industry groups that the Merrill Lynch
Investment Strategy group believes should be overweighted in an equity
portfolio. Finally, the resulting stocks were reviewed for liquidity and market
capitalization.
Investors should be aware that the Fund may not be able to buy each
Security at the same time because of availability of the Security, any
restrictions applicable to the Fund relating to the purchase of the Security by
reason of the federal securities laws or otherwise. Any monies allocated to the
purchase of a Security will generally be held for the purchase of the Security.
The deposit of the Securities in the Portfolio on the initial date of
deposit established a proportionate relationship among the number of shares of
each Security. Following the initial date of deposit the Sponsor may deposit
additional Securities in order to create new Units, maintaining to the extent
practicable that original proportionate relationship. The ability to acquire
each Security at the same time will generally depend upon the Security's
availability and any restrictions on the purchase of that Security under the
federal securities laws or otherwise.
Additional Units may also be created by the deposit of cash (including a
letter of credit) with instructions to purchase additional Securities. This
practice could cause both existing and new investors to experience a dilution of
their investments and a reduction in their anticipated income because of price
fluctuations in the Securities between the time of the cash deposit and the
actual purchase of the additional Securities and because the associated
brokerage
1
<PAGE>
fees will be an expense of the Portfolio. To minimize the risk of price
fluctuations when purchasing Securities, the Portfolio will try to purchase
Securities as close to the evaluation time or at prices as close to the
evaluated prices as possible. The Portfolio may also enter into program trades
with unaffiliated broker/dealers, which may have the effect of increasing
brokerage commissions, while reducing market risk.
PORTFOLIO SUPERVISION
The Portfolio follows an investment strategy that buys stocks and generally
holds them for one year, in contrast to the frequent portfolio changes of a
managed fund based on economic, financial and market analyses. In the event a
public tender offer is made for a Security or a merger or acquisition is
announced affecting a Security, the Sponsor may instruct the Trustee to tender
or sell the Security in the open market when in its opinion it is in the best
interests of investors to do so. The Portfolio is regularly reviewed and
evaluated and the Portfolio may sell Securities in the case of adverse
developments concerning a Security, including the adverse financial condition of
the issuer, the institution of legal proceedings against the issuer, or a
decline in the price or the occurrence of other market or credit factors that
might make retention of the Security detrimental to the interest of investors.
It is expected the proceeds of any sale will be reinvested in additional shares
of the remaining securities except that, should the sale occur close to the end
of the life of the Portfolio, the proceeds may be held in cash or reinvested
into short-term U.S. Treasury Securities. The Portfolio may, however, continue
to hold a Security and purchase additional shares even though the assessment of
a Security may have changed or subsequent to the initial date of deposit a
Security may no longer satisfy the Portfolio's selection criteria.
RISK FACTORS
An investment in the Fund entails certain risks, including the risk that
the value of your investment will decline if the financial condition of the
issuers of the Securities becomes impaired or if the general condition of the
stock market worsens and the risk that holders of common stocks have generally
inferior rights to receive payments from the issuer in comparison with the
rights of creditors of, or holders of debt obligations or preferred stocks
issued by, the issuer. Moreover, common stocks do not represent an obligation of
the issuer and therefore do not offer any assurance of income or provide the
degree of protection of capital provided by debt securities. Common stocks in
general may be especially susceptible to general stock market movements and to
volatile increases and decreases in value as market confidence in and
perceptions of the issuers change. These perceptions are based on unpredictable
factors including expectations regarding government, economic, monetary and
fiscal policies, inflation and interest rates, economic expansion or
contraction, and global or regional political, economic or banking crises. The
Sponsors cannot predict the direction or scope of any of these factors. There
can be no assurance that the Portfolio will be effective in achieving its
objective over the one-year life of the Fund or that future portfolios selected
through this process during consecutive one-year periods will meet their
objectives. The Portfolio is not designed to be a complete equity investment
program.
LIQUIDITY
Whether or not the Securities are listed on a national securities exchange,
the principal trading market for the Securities may be in the over-the-counter
market. As a result, the existence of a liquid trading market for the Securities
may depend on whether dealers will make a market in the Securities. There can be
no assurance that a market will be made for any of the Securities, that any
market for the Securities will be maintained or of the liquidity of the
Securities in any markets made. In addition, the Fund may be restricted under
the Investment Company Act of 1940 from selling Securities to the Sponsor. The
price at which the Securities may be sold to meet redemptions and the value of
the Fund will be adversely affected if trading markets for the Securities are
limited or absent.
LITIGATION AND LEGISLATION
The Sponsor does not know of any pending litigation as of the initial date
of deposit that might reasonably be expected to have a material adverse effect
on the Fund, although pending litigation may have a material adverse effect on
the value of Securities in the Fund. In addition, at any time after the initial
date of deposit, litigation may be initiated on a variety of grounds, or
legislation may be enacted, affecting the Securities in the Portfolio or the
issuers of the Securities. Changing approaches to regulation may have a negative
impact on certain companies represented in the Portfolio. There can be no
assurance that future litigation, legislation, regulation or deregulation will
not have a material adverse effect on the Portfolio or will not impair the
ability of the issuers of the Securities to achieve their business goals. From
time to time Congress considers proposals to reduce the rate of the
dividends-received deduction. This
2
<PAGE>
type of legislation, if enacted into law, would adversely affect the after-tax
return to investors who can take advantage of the deduction. See Taxes.
LIFE OF THE FUND; FUND TERMINATION
The size and composition of the Portfolio will be affected by the level of
redemptions of Units that may occur from time to time. Principally, this will
depend upon the number of investors seeking to sell or redeem their Units or
participating in a rollover. The Portfolio will be terminated no later than the
mandatory termination date specified in Part A of the Prospectus. It will
terminate earlier upon the disposition of the last Security or upon the consent
of investors holding 51% of the Units. The Portfolio may also be terminated
earlier by the Sponsors once its total assets have fallen below the minimum
value specified in Part A of the Prospectus. A decision by the Sponsors to
terminate the Portfolio early, which will likely be made following the rollover,
will be based on factors such as the size of the Portfolio relative to its
original size, the ratio of Portfolio expenses to income, and the cost of
maintaining a current prospectus.
Notice of impending termination will be provided to investors and
thereafter units will no longer be redeemable. On or shortly before termination,
the Trustee will seek to dispose of any Securities remaining in the Portfolio
although any Security unable to be sold at a reasonable price may continue to be
held by the Trustee in a liquidating trust pending its final disposition. A
proportional share of the expenses associated with termination, including
brokerage costs in disposing of Securities, will be borne by investors remaining
at that time. This may have the effect of reducing the amount of proceeds those
investors are to receive in any final distribution.
HOW TO BUY UNITS
Units are available from the Sponsors, Underwriter and other broker-dealers
at the Public Offering Price. The Public Offering Price varies each Business Day
with changes in the value of the Portfolio and other assets and liabilities of
the Fund.
PUBLIC OFFERING PRICE
Units are charged a combination of Initial and Deferred Sales Charges
equal, in the aggregate, to a maximum charge of 2.75% of the public offering
price or, for quantity purchases of units of all Select Portfolios by an
investor and the investor's spouse and minor children, or by a single trust
estate or fiduciary account, made on a single day, the following percentages of
the public offering price:
APPLICABLE SALES CHARGE
(GROSS UNDERWRITING PROFIT)
------------------------------------
AS % OF PUBLIC AS % OF NET
AMOUNT PURCHASED OFFERING PRICE AMOUNT INVESTED
- ---------------------------------------- ----------------- -----------------
Less than $50,000....................... 2.75% 2.778%
$50,000 to $99,999...................... 2.50 2.519
$100,000 to $249,999.................... 2.00 2.005
$250,000 to $999,999.................... 1.75 1.750
$1,000,000 or more...................... 1.00 1.000
The Deferred Sales Charge is a monthly charge of $1.75 per 1,000 units and
is accrued in ten monthly installments commencing on the date indicated in part
A of this Prospectus. Units redeemed or repurchased prior to the accrual of the
final Deferred Sales Charge installment will have the amount of any remaining
installments deducted from the redemption or repurchase proceeds although this
deduction will be waived in the event of the death or disability (as defined in
the Internal Revenue Code of 1986) of an investor. The Initial Sales Charge is
equal to the aggregate sales charge, determined as described above, less the
aggregate amount of any remaining installments of the Deferred Sales Charge.
It is anticipated that Securities will not be sold to pay the Deferred
Sales Charge until after the date of the last installment. Investors will be at
risk for market price fluctuations in the Securities from the several
installment accrual dates to the dates of actual sale of Securities to satisfy
this liability.
Employees of the Sponsor and Sponsor affiliates and non-employee directors
of Merrill Lynch & Co. Inc. may purchase Units subject only to the Deferred
Sales Charge.
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EVALUATIONS
Evaluations are determined by the Trustee on each Business Day. This
excludes Saturdays, Sundays and the following holidays as observed by the New
York Stock Exchange: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas. If the Securities are
listed on a national securities exchange or the Nasdaq National Market,
evaluations are generally based on closing sales prices on that exchange or
system (unless the Trustee deems these prices inappropriate) or, if closing
sales prices are not available, at the mean between the closing bid and offer
prices. If the Securities are not listed or if listed but the principal market
is elsewhere, the evaluation is generally determined based on sales prices of
the Securities on the over-the-counter market or, if sales prices in that market
are not available, on the basis of the mean between current bid and offer prices
for the Securities or for comparable securities or by appraisal or by any
combination of these methods. Neither the Sponsor nor the Trustee guarantees the
enforceability, marketability or price of any Securities.
NO CERTIFICATES
All investors are required to hold their Units in uncertificated form and
in 'street name' by their broker, dealer or financial institution at the
Depository Trust Company ('DTC').
HOW TO REDEEM OR SELL UNITS
You can redeem your Units at any time for net asset value. In addition, the
Sponsor has maintained an uninterrupted secondary market for Units for over 20
years and will ordinarily buy back Units at net asset value. The following
describes these two methods to redeem or sell Units in greater detail.
REDEEMING UNITS WITH THE TRUSTEE
You can always redeem your Units for net asset value. This can be done by
contacting your broker, dealer or financial institution that holds your Units in
street name. In certain instances, additional documents may be required such as
a trust instrument, certificate of corporate authority, certificate of death or
appointment as executor, administrator or guardian.
Within seven days after the Trustee's receipt of your request containing
the necessary documents, a check will be mailed to you in an amount equal to the
net asset value of your Units. Because of the sales charge, market movements or
changes in the Portfolio, net asset value at the time you redeem your Units may
be greater or less than the original cost of your Units. Net asset value is
calculated each Business Day by adding the value of the Securities, declared but
unpaid dividends on the Securities, cash and the value of any other Fund assets;
deducting unpaid taxes or other governmental charges, accrued but unpaid Fund
expenses and any remaining deferred sales charges, unreimbursed Trustee
advances, cash held to redeem Units or for distribution to investors and the
value of any other Fund liabilities; and dividing the result by the number of
outstanding Units. After the initial offering period, net asset value will be
reduced to reflect the cost to the Fund of liquidating Securities to pay the
redemption price.
As long as the Sponsor is maintaining a secondary market for Units (as
described below), the Trustee will not actually redeem your Units but will sell
them to the Sponsor for net asset value. If the Sponsor is not maintaining a
secondary market, the Trustee will redeem your Units for net asset value or will
sell your Units in the over-the-counter market if the Trustee believes it will
obtain a higher net price for your Units. If the Trustee is able to sell the
Units for a net price higher than net asset value, you will receive the net
proceeds of the sale.
If cash is not available in the Fund's Income and Capital Accounts to pay
redemptions, the Trustee may sell Securities selected by the Sponsor based on
market and credit factors determined to be in the best interest of the Fund.
These sales are often made at times when the Securities would not otherwise be
sold and may result in lower prices than might be realized otherwise and may
also reduce the size and diversity of the Fund. If Securities are being sold
during a time when additional Units are being created by the purchase of
additional Securities (as described under Portfolio Selection), Securities will
be sold in a manner designed to maintain, to the extent practicable, the
proportionate relationship among the number of shares of each Security in the
Portfolio.
Redemptions may be suspended or payment postponed (i) if the New York Stock
Exchange is closed (other than customary weekend and holiday closings), (ii) if
the SEC determines that trading on the New York Stock Exchange is restricted or
that an emergency exists making disposal or evaluation of the Bonds not
reasonably practicable or (iii) for any other period permitted by SEC order.
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SPONSOR'S SECONDARY MARKET FOR UNITS
The Sponsor, while not obligated to do so, will buy back Units at net asset
value without any other fee or charge as long as they are maintaining a
secondary market for Units. Because of the sales charge, market movements or
changes in the portfolio, net asset value at the time you sell your Units may be
greater or less than the original cost of your Units. You should consult your
financial professional for current market prices to determine if other
broker-dealers or banks are offering higher prices for Units.
The Sponsor may discontinue the secondary market for Units without prior
notice. Regardless of whether the Sponsor maintains a secondary market, you have
the right to redeem your Units for net asset value, as described above.
ROLLOVER
In lieu of redeeming their Units or receiving liquidation proceeds upon the
termination of the Fund, investors may elect, by written notice to the Trustee
prior to the rollover notification date indicated in Part A, to apply their
proportional interest in the Securities and other assets of the Fund toward the
purchase of units of a new Select Year Ahead Portfolio (if available). It is
expected that the terms of any new portfolio, including this rollover feature,
will be substantially the same as those of the Fund.
A rollover of an investor's units is accomplished by the in-kind redemption
of his Units of the Fund followed by the sale of the underlying Securities by a
distribution agent on behalf of participating investors and the reinvestment of
the sale proceeds (net of brokerage fees, governmental charges and other sale
expenses) in units of the new portfolio at their net asset value.
The Sponsor intends to sell the distributed Securities, on behalf of the
distribution agent, as quickly as practicable and then to create units of the
new portfolio as quickly as possible, subject in both cases to the Sponsor's
sensitivity that the concentrated sale and purchase of large volumes of
securities may affect market prices in a manner adverse to the interest of
investors. Accordingly, the Sponsor may, in its sole discretion, undertake a
more gradual sale of the distributed Securities and a more gradual creation of
units of the new portfolio to help mitigate any negative market price
consequences caused by this large volume of securities trades. In order to
minimize potential losses caused by market movement during the rollover period,
the Sponsor may enter into program trades, which might increase brokerage
commissions payable by investors. There can be no assurance, however, that any
trading procedures will be successful or might not result in less advantageous
prices. Pending the investment of rollover proceeds in the securities to
comprise the new portfolio, those moneys may be uninvested for up to several
days. For any Securities in the Portfolio that will also be in the portfolio of
the new Series, a direct sale of those securities between the two funds is now
permitted pursuant to an SEC exemptive order. These sales will be effected at
the securities' closing sales prices on the exchanges where they are principally
traded, free of any brokerage costs.
Investors participating in the rollover may realize taxable capital gains
from the rollover but will not be entitled to a deduction for certain capital
losses and, because of the rollover procedures, will not receive a cash
distribution with which to pay those taxes. Investors who do not participate
will continue to hold their Units until the termination of the Fund; however,
depending upon the extent of participation in the rollover, the aggregate size
of the Fund may be sharply reduced resulting in a significant increase in per
Unit expenses.
The Sponsor may, in its sole discretion and without penalty or liability to
investors, decide not to sponsor a new portfolio or to modify the terms of the
rollover. Prior notice of any decision would be provided to investors.
The Division of Investment Management of the SEC is of the view that the
rollover option constitutes an 'exchange offer', for the purposes of Section
11(c) of the Investment Company Act of 1940, and would therefore be prohibited
absent an exemptive order. The Sponsors have received exemptive orders under
Section 11(c) which they believe permit them to offer the rollover, but no
assurance can be given that the SEC will concur with the Sponsors' position and
additional regulatory approvals may be required.
5
<PAGE>
INCOME, DISTRIBUTIONS AND REINVESTMENT
INCOME AND DISTRIBUTIONS
The annual income per Unit will depend primarily upon the amount of
dividends declared and paid by the issuers of the Securities and changes in the
expenses of the Fund and, to a lesser degree, upon the level of purchases of
additional Securities and sales of Securities. There is no assurance that
dividends on the Securities will be paid.
Each Unit receives an equal share of distributions of dividend income.
Dividends received are credited to an Income Account and other receipts to a
Capital Account. A Reserve Account may be created by withdrawing from the Income
and Capital Accounts amounts considered appropriate by the Trustee to reserve
for any material amount that may be payable out of the Fund. Funds held by the
Trustee in the various accounts do not bear interest. In addition, distributions
of amounts necessary to pay the Deferred Sales Charge will be made from the
Capital Account to an account maintained by the Trustee for purposes of
satisfying investors' sales charge obligations. Although the Sponsors may
collect the Deferred Sales Charge monthly, to keep Units more fully invested the
Sponsors currently do not anticipate sales of Securities to pay the deferred
sales charge until after the rollover notification date. Proceeds of the
disposition of any Securities not used to pay Deferred Sales Charge or to redeem
Units will be held in the Capital Account and distributed following liquidation
of the Fund.
REINVESTMENT
Any income and principal distributions on Units may be reinvested by
participating in the Fund's reinvestment plan. Under the plan, the Units
acquired for investors will be either Units already held in inventory by the
Sponsor or new Units created by the Sponsor's deposit of additional Securities,
contracts to purchase additional Securities or cash (or a bank letter of credit
in lieu of cash) with instructions to purchase additional Securities. Deposits
or purchases of additional Securities will generally be made so as to maintain
the then existing proportionate relationship among the number of shares of each
Security in the Fund. Units acquired by reinvestment will not be subject to the
initial sales charge but will be subject to any remaining installments of
Deferred Sales Charge. The Sponsor reserves the right to amend, modify or
terminate the reinvestment plan at any time without prior notice. Investors
holding Units in 'street name' should contact their broker, dealer or financial
institution if they wish to participate in the reinvestment plan.
FUND EXPENSES
Estimated annual Fund expenses are listed in Part A of the Prospectus; if
actual expenses exceed the estimate, the excess will be borne by the Fund. To
the extent that expenses exceed the amount available in the Income Account, the
Trustee is authorized to sell Securities and pay the excess expenses from the
Capital Account. The estimated expenses do not include the brokerage commissions
payable by the Fund in purchasing and selling Securities. The Trustee's Fee
shown in Part A of this Prospectus assumes that the Portfolio will reach a size
estimated by the Sponsors and is based on a sliding scale that reduces the
Trustee's fee as the size of the Portfolio increases. The Trustee's annual fee
is payable in monthly installments. The Trustee also benefits when it holds cash
for the Fund in non-interest bearing accounts. Possible additional charges
include Trustee fees and expenses for extraordinary services, costs of
indemnifying the Trustee and the Sponsors, costs of action taken to protect the
Fund and other legal fees and expenses, Fund termination expenses and any
governmental charges. The Trustee has a lien on Fund assets to secure
reimbursement of these amounts and may sell Securities for this purpose if cash
is not available. The Sponsor receives an annual fee of a maximum of $0.35 per
1,000 Units to reimburse it for the cost of providing Portfolio supervisory
services to the Fund. While the fee may exceed its costs of providing these
services to the Fund, the total supervision fees from all Series of Equity
Income Fund will not exceed its costs for these services to all of those Series
during any calendar year. The Sponsor may also be reimbursed for its costs of
providing bookkeeping and administrative services to the Fund, currently
estimated at $0.10 per 1,000 Units. The Trustee's and Sponsor's fees may be
adjusted for inflation without investors' approval.
All or a portion of expenses incurred in establishing the Fund, including
the cost of the initial preparation of documents relating to the Fund, Federal
and State registration fees, the initial fees and expenses of the Trustee, legal
expenses and any other out-of-pocket expenses will be paid by the Fund and
amortized over the life of the Fund. Advertising and selling expenses will be
paid by the Sponsor at no charge to the Fund. Defined Asset Funds can be a cost-
effective way to purchase and hold investments. Annual operating expenses are
generally lower than for managed funds. Because Defined Asset Funds have no
management fees, limited transaction costs and no ongoing marketing
6
<PAGE>
expenses, operating expenses are generally less than 0.25% a year. When
compounded annually, small differences in expense ratios can make a big
difference in your investment results.
TAXES
TAXATION OF THE FUND
The Fund intends to qualify for and elect the special tax treatment
applicable to 'regulated investment companies' under Section 851-855 of the
Internal Revenue Code of 1986, as amended (the 'Code'). Qualification and
election as a 'regulated investment company' involve no supervision of
investment policy or management by any government agency. If the Fund qualifies
as a 'regulated investment company' and distributes to investors 90% or more of
its taxable income without regard to its net capital gain (i.e., the excess of
its net long-term capital gain over its net short-term capital loss), it will
not be subject to Federal income tax on any portion of its taxable income
(including any net capital gain) distributed to investors in a timely manner. In
addition, the Fund will not be subject to the 4% excise tax on certain
undistributed income of 'regulated investment companies' to the extent it
distributes to investors in a timely manner at least 98% of its taxable income
(including any net capital gain). It is anticipated that the Fund will not be
subject to Federal income tax or the excise tax because the Indenture requires
the distribution of the Fund's taxable income (including any net capital gain)
in a timely manner. Although all or a portion of the Fund's taxable income
(including any net capital gain) for a taxable year may be distributed shortly
after the end of the calendar year, such a distribution will be treated for
Federal income tax purposes as having been received by investors during the
calendar year.
DISTRIBUTIONS
Distribution to investors of the Fund's dividend income and net short-term
capital gain in any year will be taxable as ordinary income to investors to the
extent of the Fund's taxable income (without regard to its net capital gain) for
that year. Any excess will be treated as a return of capital and will reduce the
investor's basis in his Units and, to the extent that such distributions exceed
his basis, will be treated as a gain from the sale of his Units as discussed
below. It is anticipated that substantially all of the distributions of the
Fund's dividend income and net short-term capital gain will be taxable as
ordinary income to investors.
Distribution of the Fund's net capital gain (designated as capital gain
dividends by the Fund) will be taxable to investors as long-term capital gain,
regardless of the length of time the Units have been held by an investor.
However, if the Portfolio were to terminate in less than one year, the Fund
would not distribute any capital gain dividends. An investor will recognize a
taxable gain or loss if the investor sells or redeems his Units. Any gain or
loss arising from (or treated as arising from) the sale or redemption of Units
will be a capital gain or loss, except in the case of a dealer in securities.
The excess of net long-term capital gains over net short-term capital losses may
be taxed at a lower rate than ordinary income for certain noncorporate
taxpayers. A capital gain or loss recognized by an investor on the sale of a
Unit will be long-term if the investor's holding period for the Unit is more
than one year and short-term if the investor's holding period for the Unit is
one year or less. However, any capital loss on the sale or redemption of a Unit
that an investor has held for six months or less will be a long-term capital
loss to the extent of any capital gain dividends previously distributed to the
investor by the Fund. The deduction of capital losses is subject to limitations.
Distributions that are taxable as ordinary income to investors will
constitute dividends for Federal income tax purposes. To the extent that
distributions are appropriately designated by the Fund and are attributable to
dividends received by the Fund from domestic issuers with respect to whose
securities the Fund satisfied the requirements for the dividends-received
deduction, such distributions will be eligible for the dividends-received
deduction for corporations (other than corporations such as 'S' corporations
which are not eligible for such deduction because of their special
characteristics and other than for purposes of special taxes such as the
accumulated earnings tax and the personal holding company tax).
The dividends-received deduction generally is 70%. However, Congress from
time to time considers proposals that would adversely affect the after-tax
return to investors who can take advantage of the deduction. For example, on
December 7, 1995, the Clinton Administration proposed reducing the dividends
received deduction to 50% for dividends paid or accrued after January 31, 1996
and on March 19, 1996 amended the proposal to provide that the reduction would
apply only to dividends received or accrued after the 30th day after the
enactment of the proposal. Investors are urged to consult their own tax
advisers.
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Sections 246 and 246A of the Code contain additional limitations on the
eligibility of dividends for the corporate dividends-received deduction.
Depending upon the corporate investor's circumstances (including whether it has
a 45-day holding period for its Units and whether its Units are debt financed),
these limitations may be applicable to dividends received by an investor from
the Fund which would otherwise qualify for the dividends-received deduction
under the principles discussed above. Accordingly, investors should consult
their own tax advisers in this regard. A corporate investor should be aware that
the receipt of dividend income for which the dividends-received deduction is
available may give rise to an alternative minimum tax liability (or increase an
existing liability) because the dividend income will be included in the
corporation's 'adjusted current earnings' for purposes of the adjustment to
alternative minimum taxable income required by Section 56(g) of the Code.
The investor's basis in his Units will be equal to the cost of his Units,
including the initial sales charge. A portion of the sales charge is deferred
until the termination of the Fund or the redemption of the Units. The proceeds
received by an investor upon such event will reflect deduction of the deferred
amount (the 'Deferred Sales Charge'). The annual statement and the relevant tax
reporting forms received by investors will reflect the actual amounts paid to
them, net of the Deferred Sales Charge. Accordingly, investors should not
increase their basis in their Units by the Deferred Sales Charge amount.
Investors will be taxed in the manner described above regardless of whether
distributions from the Fund are actually received by the investor or are
reinvested pursuant to the reinvestment plan. The Federal tax status of each
year's distributions will be reported to investors and to the Internal Revenue
Service. The Fund intends to report to each investor no later than January 31
the amount of distributions to that investor.
The foregoing discussion relates only to the Federal income tax status of
the Fund and to the tax treatment of distributions by the Fund to U.S.
investors. Distributions may also be subject to state and local taxation and
investors should consult their own tax advisers in this regard.
FOREIGN INVESTORS
A 'Foreign Investor' is a person or entity that, for U.S. Federal income
tax purposes, is a non-resident alien individual, a foreign corporation, a
foreign partnership, or a non-resident fiduciary of a foreign estate or trust.
If a distribution of the Fund's taxable income (without regard to its net
capital gain) to a Foreign Investor is not effectively connected with a U.S.
trade or business carried on by the investor, such distribution will be subject
to withholding tax at a 30% rate or such lower rate as may be specified by an
applicable income tax treaty.
A Foreign Investor generally will not be subject to Federal income tax with
respect to gains arising from the sale or redemption of Units or distributions
of the Fund's net capital gain unless the income is effectively connected with a
trade or business of such Investor in the United States. In the case of a
Foreign Investor who is a non-resident alien individual, however, gain arising
from the sale or redemption of Units or distributions of the Fund's net capital
gain ordinarily will be subject to Federal income tax at a rate of 30% if such
individual is physically present in the U.S. for 183 days or more during the
taxable year and, either the gain is attributable to an office or other fixed
place of business maintained by the Investor in the United States or the
Investor has a 'tax home' in the United States. In addition, a Unit held by an
individual who is not a citizen or resident of the United States at the time of
his death will generally be subject to U.S. Federal estate tax unless an
applicable treaty provides otherwise.
The tax consequences to a Foreign Investor entitled to claim the benefits
of an applicable tax treaty may be different from those described herein.
Foreign Investors should consult their own tax advisers to determine whether
investment in the Fund is appropriate.
RETIREMENT PLANS
This Series of Equity Income Fund may be well suited for purchase by
Individual Retirement Accounts ('IRAs'), Keogh plans, pension funds and other
qualified retirement plans, certain of which are briefly described below.
Generally, capital gains and income received in each of the foregoing plans are
exempt from Federal taxation. All distributions from such plans are generally
treated as ordinary income but may, in some cases, be eligible for special 5 or
10 year averaging or tax-deferred rollover treatment. Holders of Units in IRAs,
Keogh plans and other tax-deferred retirement plans should consult their plan
custodian as to the appropriate disposition of distributions. Investors
considering participation in any of these plans should review specific tax laws
related thereto and should consult their attorneys or tax advisors with respect
to the establishment and maintenance of any of these plans. These plans
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<PAGE>
are offered by brokerage firms, including the Sponsor of this Fund, and other
financial institutions. Fees and charges with respect to such plans may vary.
Retirement Plans for the Self-Employed--Keogh Plans. Units of the Fund may
be purchased by retirement plans established for self-employed individuals,
partnerships or unincorporated companies ('Keogh plans'). The assets of a Keogh
plan must be held in a qualified trust or other arrangement which meets the
requirements of the Code. Keogh plan participants may also establish separate
IRAs (see below) to which they may contribute up to an additional $2,000 per
year ($2,250 in a spousal account).
Individual Retirement Account--IRA, Any individual can make use of a
qualified IRA arrangement for the purchase of Units of the Fund. Any individual
(including one covered by an employer retirement plan) can make a contribution
in an IRA equal to the lesser of $2,000 ($2,250 in a spousal account) or 100% of
earned income; such investment must be made in cash. However, the deductible
amount an individual may contribute will be reduced if the individual's adjusted
gross income exceeds $25,000 (in the case of a single individual), $40,000 (in
the case of married individuals filing a joint return) or $200 (in the case of a
married individual filing a separate return). Certain transactions which are
prohibited under Section 408 of the Code will cause all or a portion of the
amount in an IRA to be deemed to the distributed and subject to tax at that
time. Unless nondeductible contributions were made in 1987 or a later year, all
distributions from an IRA will be treated as ordinary income but generally are
eligible for tax-deferred rollover treatment. Taxable distributions made before
attainment of age 59 1/2, except in the case of the participant's death or
disability or where the amount distributed is part of a series of substantially
equal periodic (at least annual) payments that are to be made over the life
expectancies of the participant and his or her beneficiary, are generally
subject to a surtax in an amount equal to 10% of the distribution.
Corporate Pension and Profit-Sharing Plans. A pension or profit-sharing
plan for employees of a corporation may purchase Units of the Fund.
RECORDS AND REPORTS
The Trustee keeps a register of the names, addresses and holdings of all
investors. The Trustee also keeps records of the transactions of the Fund,
including a current list of the Securities and a copy of the Indenture, which
may be inspected by investors at reasonable times during business hours.
With each distribution, the Trustee includes a statement of the amounts of
income and any other receipts being distributed. Following the termination of
the Fund, the Trustee sends each investor of record a statement summarizing
transactions in the Fund's accounts including amounts distributed from them,
identifying Securities sold and purchased and listing Securities held and the
number of Units outstanding at termination and stating the Redemption Price per
1,000 Units at termination, and the fees and expenses paid by the Fund, among
other matters. Fund accounts may be audited by independent accountants selected
by the Sponsors and any report of the accountants will be available from the
Trustee on request.
TRUST INDENTURE
The Fund is a 'unit investment trust' created under New York law by a Trust
Indenture among the Sponsors and the Trustee. This Prospectus summarizes various
provisions of the Indenture, but each statement is qualified in its entirety by
reference to the Indenture.
The Indenture may be amended by the Sponsor and the Trustee without consent
by investors to cure ambiguities or to correct or supplement any defective or
inconsistent provision, to make any amendment required by the SEC or other
governmental agency or to make any other change not materially adverse to the
interest of investors (as determined in good faith by the Sponsors). The
Indenture may also generally be amended upon consent of investors holding 51% of
the Units. No amendment may reduce the interest of any investor in the Fund
without the investor's consent or reduce the percentage of Units required to
consent to any amendment without unanimous consent of investors. Investors will
be notified of the substance of any amendment.
The Trustee may resign upon notice to the Sponsor. It may be removed by
investors holding 51% of the Units at any time or by the Sponsor without the
consent of investors if it becomes incapable of acting or bankrupt, its affairs
are taken over by public authorities, or if under certain conditions the Sponsor
determines in good faith that its replacement is in the best interest of the
investors. The resignation or removal becomes effective upon acceptance of
appointment by a successor; in this case, the Sponsor will use its best efforts
to appoint a successor promptly; however, if upon
9
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resignation no successor has accepted appointment within 30 days after
notification, the resigning Trustee may apply to a court of competent
jurisdiction to appoint a successor.
If the Sponsor fails to perform its duties or becomes incapable of acting
or bankrupt or its affairs are taken over by public authorities, the Trustee may
appoint a successor Sponsor at reasonable rates of compensation, terminate the
Indenture and liquidate the Fund or continue to act as Trustee without a
Sponsor.
The Sponsor and the Trustee are not liable to investors or any other party
for any act or omission in the conduct of their responsibilities absent bad
faith, willful misfeasance, negligence (gross negligence in the case of the
Sponsor) or reckless disregard of duty. The Indenture contains customary
provisions limiting the liability of the Trustee.
MISCELLANEOUS
LEGAL OPINION
The legality of the Units has been passed upon by Davis Polk & Wardwell,
450 Lexington Avenue, New York, New York 10017, as special counsel for the
Sponsors.
AUDITORS
The Statement of Condition in Part A of the Prospectus was audited by
Deloitte & Touche LLP, independent accountants, as stated in their opinion. It
is included in reliance upon that opinion given on the authority of that firm as
experts in accounting and auditing.
TRUSTEE
The Trustee and its address are stated on the back cover of the Prospectus.
The Trustee is subject to supervision by the Federal Deposit Insurance
Corporation, the Board of Governors of the Federal Reserve System and New York
State banking authorities.
SPONSOR
The Sponsor is a wholly-owned subsidiary of Merrill Lynch Co. Inc. The
Sponsor, or one of its predecessor corporations, has acted as Sponsor of a
number of series of unit investment trusts and as principal underwriter and
managing underwriter of other investment companies. The Sponsor, in addition to
participating as a member of various selling groups or as agent of other
investment companies, executes orders on behalf of investment companies for the
purchase and sale of securities of these companies and sells securities to these
companies in its capacities as broker or dealer in securities.
CODE OF ETHICS
The Sponsor has adopted a code of ethics requiring preclearance and
reporting of personal securities transactions by its personnel who have access
to information on Defined Asset Funds portfolio transactions. The code is
intended to prevent any act, practice or course of conduct which would operate
as a fraud or deceit on any Fund and to provide guidance to these persons
regarding standards of conduct consistent with the Sponsor's responsibilities to
the Funds.
PUBLIC DISTRIBUTION
During the initial offering period and thereafter to the extent additional
Units continue to be offered for sale to the public by means of this Prospectus,
Units will be distributed directly to the public by this Prospectus at the
Public Offering Price determined in the manner provided above or to selected
dealers who are members of the National Association of Securities Dealers, Inc.
at a concession not in excess of the maximum sales charge. The Sponsor intends
to qualify Units for sale in all states in which qualification is deemed
necessary through the Underwriting Account and by dealers who are members of the
National Association of Securities Dealers, Inc.. The Sponsor does not intend to
qualify Units for sale in any foreign countries and this Prospectus does not
constitute an offer to sell Units in any country where Units cannot lawfully be
sold.
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UNDERWRITER'S AND SPONSOR'S PROFITS
Upon sale of the Units, the Sponsor will be entitled to receive sales
charges. The Sponsor also realizes a profit or loss on deposit of the Securities
equal to the difference between the cost of the Securities to the Fund (based on
the aggregate value of the Securities on their date of deposit) and the purchase
price of the Securities to the Sponsor plus commissions payable by the Sponsor.
In addition, the Sponsor or Underwriter may realize profits or sustain losses on
Securities it deposits in the Fund which were acquired from underwriting
syndicates of which it was a member. During the initial offering period, the
Sponsor also may realize profits or sustain losses as a result of fluctuations
after the initial date of deposit in the Public Offering Price of the Units. In
maintaining a secondary market for Units, the Sponsor will also realize profits
or sustain losses in the amount of any difference between the prices at which it
buys Units and the prices at which it resells these Units (which include the
sales charge) or the prices at which it redeems the Units. Cash, if any, made
available by buyers of Units to the Sponsor prior to a settlement date for the
purchase of Units may be used in the Sponsor's business to the extent permitted
by Rule 15c3-3 under the Securities Exchange Act of 1934 and may be of benefit
to the Sponsor.
PERFORMANCE INFORMATION
Total returns, average annualized returns or cumulative returns for various
periods of the current or one or more prior Select Portfolios may be included
from time to time in advertisements, sales literature and reports to current and
prospective investors. Total return shows changes in unit price during the
period plus reinvestment of dividends and capital gains, divided by the maximum
public offering price. Average annualized returns show the average return for
stated periods for longer than a year. Figures reflect deduction of all
Portfolio expenses and, unless otherwise stated, the maximum sales charge. No
provision is made for any income taxes payable. Investors should bear in mind
that this represents past performance and is no assurance of the future results
of any current or future Portfolio.
Past performance of any series may not be indicative of results of future
series. Fund performance may be compared to the performance of the DJIA, the S&P
500 Composite Price Stock Index, the S&P MidCap 400 Index, the S&P 500/Barra
Growth Index, the average growth mutual fund or performance data from
publications such as Lipper Analytical Services, Inc., Morningstar Publications,
Inc., Money Magazine, The New York Times, U.S. News and World Report, Barron's,
Business Week, CDA Investment Technology, Inc., Forbes Magazine or Fortune
Magazine.
DEFINED ASSET FUNDS
For decades informed investors have purchased unit investment trusts for
dependability and professional selection of investments. Defined Asset Funds'
philosophy is to allow investors to 'buy with knowledge' (because, unlike
managed funds, the portfolio is relatively fixed) and 'hold with confidence'
(because the portfolio is professionally selected and regularly reviewed).
Defined Asset Funds offers an array of simple and convenient investment choices,
suited to fit a wide variety of personal financial goals--a buy and hold
strategy for capital accumulation, such as for children's education or
retirement, or attractive, regular current income consistent with the
preservation of principal. Unit investment trusts are particularly suited for
the many investors who prefer to seek long-term profits by purchasing sound
investments and holding them, rather than through active trading. Few
individuals have the knowledge, resources or capital to buy and hold a
diversified portfolio on their own; it would generally take a considerable sum
of money to obtain the breadth and diversity that Defined Asset Funds offer.
Your investment objectives may call for a combination of Defined Asset Funds.
One of the most important investment decisions you face may be how to
allocate your investments among asset classes. Diversification among different
kinds of investments can balance the risks and rewards of each one. Most
investment experts recommend stocks for long-term capital growth. Long-term
corporate bonds offer relatively high rates of interest income. By purchasing
both defined equity and defined bond funds, investors can receive attractive
current income, as well as growth potential, offering some protection against
inflation. From time to time various advertisements, sales literature, reports
and other information furnished to current or prospective investors may present
the average annual compounded rate of return of selected asset classes over
various periods of time, compared to the rate of inflation over the same
periods.
Investors may pursue investment growth to meet long-term goals such as
children's education or retirement. But they are faced with decisions of
selecting stock groups, choosing individual stocks, determining when to buy and
sell and how to reinvest sales proceeds. Growth stocks--those whose price is
expected to appreciate above average usually because of superior growth in
earnings per share--can be difficult to select successfully because their prices
tend to
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be more volatile than more established stocks and, by the time they are
discovered by ordinary investors, their prices may have already increased beyond
attractive levels or may be susceptible to dramatic declines if actual
performance is less than anticipated.
EXCHANGE OPTION
You may exchange Fund Units for units of other Select Series Portfolios,
subject only to the remaining deferred sales charge on the units received.
Holders of units of any Select Portfolio or any other Defined Asset Fund with a
regular maximum sales charge of at least 3.50%, or of any unaffiliated unit
trust with a regular maximum sales charge of at least 3.0%, may exchange those
units for Units of this Fund at their relative net asset values, subject only to
the remaining Deferred Sales Charge on Fund Units.
To make an exchange, you should contact your financial professional to find
out what suitable exchange funds are available and to obtain a prospectus. You
may acquire units of only those exchange funds in which the Sponsor is
maintaining a secondary market and which are lawfully for sale in the state
where you reside. Except for the reduced sales charge, an exchange is a taxable
event normally requiring recognition of any gain or loss on the units exchanged.
However, the Internal Revenue Service may seek to disallow a loss if the
portfolio of the units acquired is not materially different from the portfolio
of the units exchanged; you should consult your own tax advisor. If the proceeds
of units exchanged are insufficient to acquire a whole number of exchange fund
units, you may pay the difference in cash (not exceeding the price of a single
unit acquired).
As the Sponsor is not obligated to maintain a secondary market in any
series, there can be no assurance that units of a desired series will be
available for exchange. The Exchange Option may be amended or terminated at any
time without notice.
SUPPLEMENTAL INFORMATION
Upon writing or calling the Trustee shown on the back cover of this
Prospectus, investors will receive without charge supplemental information about
the Fund, which has been filed with the SEC. The supplemental information
includes more detailed risk factor disclosure about the types of securities that
may be part of the Portfolio and general information about the structure and
operation of the Fund.
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Def ined
Asset FundsSM
SPONSOR: EQUITY INCOME FUND
Merrill Lynch, SELECT SERIES
Pierce, Fenner & Smith Incorporated1997 YEAR AHEAD PORTFOLIO
Defined Asset Funds
P.O. Box 9051
Princeton, NJ 08543-9051
(609) 282-8500 This Prospectus does not contain all of the
TRUSTEE: information with respect to the investment
The Bank of New York company set forth in its registration
Unit Investment Trust Department statement and exhibits relating thereto which
Box 974 have been filed with the Securities and
Wall Street Station Exchange Commission, Washington, D.C. under
New York, NY 10268-0974 the Securities Act of 1933 and the Investment
1-800-221-7771 Company Act of 1940, and to which reference
is hereby made. Copies of filed material can
be obtained from the Public Reference Section
of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates.
The Commission also maintains a Web site that
contains information statements and other
information regarding registrants such as
Defined Asset Funds that file electronically
with the Commission at http://www.sec.gov.
------------------------------
No person is authorized to give any
information or to make any representations
with respect to this investment company not
contained in its registration statement and
exhibits relating thereto; and any
information or representation not contained
therein must not be relied upon as having
been authorized.
------------------------------
When Units of this Fund are no longer
available or for investors who may reinvest
into subsequent Select Year Ahead Portfolios,
this Prospectus may be used as a preliminary
prospectus for a future series, and investors
should note the following:
Information contained herein is subject to
amendment. A registration statement relating
to securities of a future series 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 qualification under the securities laws of
any such State.
--12/96
<PAGE>
PART II
ADDITIONAL INFORMATION NOT INCLUDED IN THE PROSPECTUS
A. The following information relating to the Depositors is incorporated by
reference to the SEC filings indicated and made a part of this Registration
Statement.
I. Bonding arrangements of the Depositor are incorporated by reference to Item
A of Part II to the Registration Statement on Form S-6 under the Securities Act
of 1933 for Municipal Investment Trust Fund, Monthly Payment Series--573 Defined
Asset Funds (Reg. No. 333-08241).
II. The date of organization of the Depositor is set forth in Item B of Part II
to the Registration Statement on Form S-6 under the Securities Act of 1933 for
Municipal Investment Trust Fund, Monthly Payment Series--573 Defined Asset Funds
(Reg. No. 333-08241) and is herein incorporated by reference thereto.
III. The Charter and By-Laws of the Depositor are incorporated herein by
reference to Exhibits 1.3 and 1.4 to the Registration Statement on Form S-6
under the Securities Act of 1933 for Municipal Investment Trust Fund, Monthly
Payment Series--573 Defined Asset Funds (Reg. No. 333-08241).
IV. Information as to Officers and Directors of the Depositor has been filed
pursuant to Schedules A and D of Form BD under Rules 15b1-1 and 15b3-1 of the
Securities Exchange Act of 1934 and is incorporated by reference to the SEC
filing indicated and made a part of this Registration Statement:
IncorporatedMerrill Lynch, Pierce, Fenner & Smith 8-7221
------------------------------------
B. The Internal Revenue Service Employer Identification Numbers of the
Sponsors and Trustee are as follows:
IncorporatedMerrill Lynch, Pierce, Fenner & Smith 13-5674085
The Bank of New York, Trustee................... 13-4941102
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SERIES OF EQUITY INCOME FUND
AND DEFINED ASSET FUNDS MUNICIPAL INSURED SERIES
DESIGNATED PURSUANT TO RULE 487 UNDER THE SECURITIES ACT OF 1933
SEC
SERIES NUMBER FILE NUMBER
- --------------------------------------------------------------------------------
Equity Income Fund, 'MERIT' 1987 Series (Merrill Equity
Research Investment Trust).................................. 33-10989
Equity Income Fund, Select Ten Portfolio--1995 Winter
Series...................................................... 33-55811
Equity Income Fund, Select Ten Portfolio--1995 Spring
Series...................................................... 33-55807
Defined Asset Funds Municipal Insured Series................ 33-54565
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement on Form S-6 comprises the following papers and
documents:
The facing sheet of Form S-6.
The Cross-Reference Sheet (incorporated by reference from the
Cross-Reference Sheet of the Registration Statement of Defined Asset Funds
Municipal Insured Series, 1933 Act File No. 33-54565).
The Prospectus.
The Signatures.
The following exhibits:
1.1 --Form of Trust Indenture (incorporated by reference to Exhibit 1.1 to
Amendment No. 2 to the Registration Statement on Form S-6 of Equity
Income Fund, Select Growth Portfolio--1995 Series 2, Defined Asset
Funds, Reg. No. 33-58535).
1.1.1 --Form of Standard Terms and Conditions of Trust Effective as of October
21, 1993 (incorporated by reference to Exhibit 1.1.1 to the
Registration Statement of Municipal Investment Trust Fund, Multistate
Series-48, 1933 Act File No. 33-50247).
1.2 --Form of Master Agreement Among Underwriters (incorporated by reference
to Exhibit 1.2 to the Registration Statement under the Securities Act
of 1933 of The Corporate Income Fund, One Hundred Ninety-Fourth
Monthly Payment Series, 1933 Act File No. 2-90925).
*3.1 --Opinion of counsel as to the legality of the securities being issued
including their consent to the use of their name under the heading
'Miscellaneous--Legal Opinion' in the Prospectus.
*5.1 --Consent of independent accountants.
9.1 --Information Supplement (incorporated by reference to Exhibit 9.1 to
the Registration Statement of Equity Income Fund, Select Ten Portfolio
1996 International Series B (United Kingdom and Japan Portfolios),
1933 Act File No. 33-00593).
- ------------------------------------
* To be filed by amendment.
R-1
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SIGNATURE
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT OR AMENDMENT TO THE REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY
AUTHORIZED IN THE CITY OF NEW YORK AND STATE OF NEW YORK ON THE 2ND DAY OF
DECEMBER, 1996.
SIGNATURES APPEAR ON PAGE R-3.
A majority of the members of the Board of Directors of Merrill Lynch,
Pierce, Fenner & Smith Incorporated has signed this Registration Statement or
Amendment to the Registration Statement pursuant to Powers of Attorney
authorizing the person signing this Registration Statement or Amendment to the
Registration Statement to do so on behalf of such members.
R-2
<PAGE>
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
DEPOSITOR
By the following persons, who constitute Powers of Attorney have been filed
a majority of under
the Board of Directors of Merrill Form SE and the following 1933 Act
Lynch, Pierce, File
Fenner & Smith Incorporated: Number: 33-43466
HERBERT M. ALLISON, JR.
BARRY S. FREIDBERG
EDWARD L. GOLDBERG
STEPHEN L. HAMMERMAN
JEROME P. KENNEY
DAVID H. KOMANSKY
DANIEL T. NAPOLI
THOMAS H. PATRICK
JOHN L. STEFFENS
DANIEL P. TULLY
ROGER M. VASEY
ARTHUR H. ZEIKEL
By DANIEL C. TYLER
(As authorized signatory for Merrill Lynch, Pierce,
Fenner & Smith Incorporated and
Attorney-in-fact for the persons listed above)
R-3
