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DEFINED ASSET FUNDSSM
- --------------------------------------------
- ----------------------------------
EQUITY INVESTOR FUND
SELECT SERIES STANDARD & POOR'S INDUSTRY
TURNAROUND PORTFOLIO
(A UNIT INVESTMENT TRUST)
O TOTAL RETURN FROM:
-- CAPITAL APPRECIATION
-- CURRENT DIVIDEND INCOME
O REINVESTMENT OPTION
SPONSORS:
Merrill Lynch,
Pierce, Fenner & Smith -------------------------------------------------
Incorporated The Securities and Exchange Commission has not
Salomon Smith Barney Inc. approved or disapproved these Securities or
Prudential Securities passed upon the adequacy of this prospectus. Any
Incorporated representation to the contrary is a criminal
PaineWebber Incorporated offense.
Dean Witter Reynolds Inc. Prospectus dated January 27, 1999.
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Defined Asset FundsSM
Defined Asset FundsSM is America's oldest and largest family of unit investment
trusts, with over $115 billion sponsored over the last 25 years. Defined Asset
Funds has been a leader in unit investment trust research and product
innovation. Our family of Funds helps investors work toward their financial
goals with a full range of quality investments, including municipal, corporate
and government bond portfolios, as well as domestic and international equity
portfolios.
Defined Asset Funds offer a number of advantages:
o A disciplined strategy of buying and holding with a long-term view is the
cornerstone of Defined Asset Funds.
o Fixed portfolio: Defined Funds follow a buy and hold investment strategy;
funds are not managed and portfolio changes are limited.
o Defined Portfolios: We choose the stocks and bonds in advance, so you know
what you're investing in.
o Professional research: Our dedicated research team seeks out stocks or bonds
appropriate for a particular fund's objectives.
o Ongoing supervision: We monitor each portfolio on an ongoing basis.
No matter what your investment goals, risk tolerance or time horizon, there's
probably a Defined Asset Fund that suits your investment style. Your financial
professional can help you select a Defined Asset Fund that works best for your
investment portfolio.
THE FINANCIAL INFORMATION IN THIS PROSPECTUS IS AS OF THE EVALUATION DATE,
OCTOBER 31, 1998.
CONTENTS
Page
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Risk/Return Summary..................................... 3
What You Can Expect From Your Investment................ 5
Income............................................... 5
Records and Reports.................................. 5
The Risks You Face...................................... 5
Concentration Risk................................... 5
Litigation and Legislation Risks..................... 5
Selling or Exchanging Units............................. 6
Sponsors' Secondary Market........................... 6
Selling Units to the Trustee......................... 6
Rollover/Exchange Option............................. 7
How The Fund Works...................................... 7
Pricing.............................................. 7
Evaluations.......................................... 8
Income............................................... 8
Expenses............................................. 8
Portfolio Changes.................................... 9
Portfolio Termination................................ 9
No Certificates...................................... 9
Trust Indenture...................................... 9
Legal Opinion........................................ 10
Auditors............................................. 10
Sponsors............................................. 10
Trustee.............................................. 11
Underwriters' and Sponsors' Profits.................. 11
Public Distribution.................................. 11
Code of Ethics....................................... 11
Year 2000 Issues..................................... 11
Taxes................................................... 11
Supplemental Information................................ 13
Financial Statements.................................... D-1
2
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RISK/RETURN SUMMARY
1. WHAT IS THE PORTFOLIO'S OBJECTIVE?
O The Portfolio seeks total return through a combination of
current dividend income and capital appreciation.
You can participate in the Portfolio by purchasing units.
Each unit represents an equal share of the stocks in the
Portfolio and receives an equal share of income and
principal distributions.
2. WHAT IS THE PORTFOLIO'S INVESTMENT STRATEGY?
O We selected the 17 stocks in the Portfolio through the
following screening process.
- -- The strategy was to identify those industries that have
recently underperformed the S&P 500 Index but that, in
the opinion of the Sponsors and the Portfolio Consultant
(Standard & Poor's), had begun to turn around.
- -- First, we measured relative industry returns by
comparing the last 12-month performance of each of the
approximately 100 industries within the S&P 500 Index to
the performance of the Index as a whole.
- -- Next, we identified those industries that had broken
above their nine-month average of relative annual
returns.
- -- We then selected the five most underperforming
industries.
- -- Finally, from each industry we chose up to four stocks.
If there were more than four stocks in an industry, we
chose the stocks with the highest S&P Common Stock
Rankings or those whose issuers have the largest market
capitalization.
O The Portfolio plans to hold the stocks in the Portfolio for
about one year. At the end of the year, we will liquidate
the Portfolio and apply the same Strategy to select a new
portfolio, if available.
o Each Industry Turnaround Portfolio is designed to be part
of a longer term strategy. We believe that more consistent
results are likely if the Strategy is followed for at least
three to five years but you are not required to stay with
the Strategy or to roll over your investment. You can sell
your units any time.
3. WHAT INDUSTRIES ARE REPRESENTED IN THE PORTFOLIO?
Based upon the principal business of each issuer and
current market values, the Portfolio represents the
following turnaround industry groups.
APPROXIMATE
PORTFOLIO
PERCENTAGE
/ / Chemicals 17%
/ / Gaming/Lottery/Parimutuel 14
/ / Electric Utilities 25
/ / Restaurants 26
/ / Specialty Printing 18
4. WHAT ARE THE SIGNIFICANT RISKS?
YOU CAN LOSE MONEY BY INVESTING IN THE PORTFOLIO. THIS CAN
HAPPEN FOR VARIOUS REASONS, INCLUDING:
o Each industry may be out of favor with the market;
o The underperforming industries from which the stocks were
selected may not turn around.
o Stock prices can be volatile.
o Dividend rates on the stocks or share prices may decline
during the life of the Portfolio.
o Because the Portfolio is concentrated in stocks in the
electric utility and restaurant sectors, adverse
developments in these sectors may affect the value of your
units.
o The Portfolio may continue to purchase or hold the stocks
originally selected even though their market value or yield
may have changed or the Common Stock Rankings on the stocks
may fall.
5. IS THIS PORTFOLIO APPROPRIATE FOR YOU?
Yes, if you want current dividend income and capital
appreciation. You will benefit from a professionally
selected and supervised portfolio whose risk is reduced by
investing in equity securities of different issuers in a
variety of industries.
The Portfolio is not appropriate for you if you are not
comfortable with the Strategy or are unwilling to take the
risk involved with an equity investment. It may not be
appropriate for you if you are seeking preservation of
capital or high current income.
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RISK/RETURN SUMMARY (Continued)
6. WHAT ARE THE PORTFOLIO'S FEES AND EXPENSES?
This table shows the costs and expenses you may pay,
directly or indirectly, when you invest in the Portfolio.
ESTIMATED ANNUAL OPERATING EXPENSES
AMOUNT
PER 1,000
UNITS
-----------
$ 0.89
Trustee's Fee
$ 0.45
Portfolio Supervision,
Bookkeeping and
Administrative Fees (including updating
expenses)
$ 1.16
Organizational Expenses
$ 0.37
Other Operating Expenses
-----------
$ 2.87
TOTAL
The Sponsors historically paid organization costs and
updating expenses.
You will pay an up-front sales fee of 1.00%, as well as a
deferred sales fee of $17.50 ($2.50 per 1,000 units
deducted monthly from the Portfolio's net asset value,
from November 25, 1998 through May 1, 1999).
The maximum sales fees are as follows:
YOUR MAXIMUM
SALES FEE
IF YOU INVEST: WILL BE:
----------------------------------- -----------------
Less than $50,000 2.75%
$ 50,000 to $99,999 2.50%
$100,000 to $249,999 2.00%
$250,000 to $999,999 1.75%
$1,000,000 or more 1.00%
7. IS THE PORTFOLIO MANAGED?
Unlike a mutual fund, the Portfolio is not managed and
stocks are not sold because of market changes. The
Sponsors monitor the portfolio and may instruct the
Trustee to sell securities under certain limited
circumstances. However, given the investment philosophy of
the Portfolio, the Sponsors are not likely to do so.
8. HOW DO I BUY UNITS?
The minimum investment is $250.
You can buy units from any of the Sponsors. The Sponsors
are listed later in this prospectus.
UNIT PRICE PER 1,000 UNITS $987.43
(as of October 31, 1998)
Unit price is based on the net asset value of the
Portfolio plus the up-front sales fee.
The Portfolio stocks are valued by the Trustee on the
basis of their closing prices at 4:00 p.m. Eastern time
every business day. Unit price changes every day with
changes in the prices of the stocks.
9. HOW DO I SELL UNITS?
You may sell your units at any time to any Sponsor or the
Trustee for the net asset value determined at the close of
business on the date of sale, less any remaining deferred
sales fee and the costs of liquidating securities to meet
the redemption.
10. HOW ARE DISTRIBUTIONS MADE AND TAXED?
The Fund pays distributions of any dividend income, net of
expenses, on the 25th of November, 1998, February, May,
August and October, 1999, if you own units on the 10th of
those months. For tax purposes, you will be considered to
have received all the dividends paid on your pro rata
portion of each security in the Portfolio when those
dividends are received by the Portfolio regardless of
whether you reinvest your dividends in the Portfolio. A
portion of the dividend payments may be used to pay
expenses of the Portfolio.
11. WHAT OTHER SERVICES ARE AVAILABLE?
REINVESTMENT
You may choose to reinvest your distributions into
additional units of the Portfolio. You will pay only the
deferred sales fee remaining at the time of reinvestment.
Unless you choose reinvestment, you will receive your
income distributions in cash.
EXCHANGE PRIVILEGES
You may exchange units of this Portfolio for units of
certain other Defined Asset Funds. You may also exchange
into this Portfolio from certain other funds. We charge a
reduced sales fee on designated exchanges.
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WHAT YOU CAN EXPECT FROM YOUR INVESTMENT
INCOME
The Portfolio will pay to you any income it has received four times during its
life. Because the Portfolio generally pays dividends as they are received,
individual income payments will fluctuate based upon the amount of dividends
declared and paid by each issuer. Other reasons your income may vary are:
o changes in the Portfolio because of additional securities purchases or
sales;
o a change in the Portfolio's expenses; and
o the amount of dividends declared and paid.
There can be no assurance that any dividends will be declared or paid.
RECORDS AND REPORTS
You will receive:
o a notice from the Trustee if new equity securities are deposited in exchange
or substitution for equity securities originally deposited;
o a final report on Portfolio activity; and
o annual tax information. This will also be sent to the IRS. You must report the
amount of income received during the year. Please contact your tax advisor in
this regard.
You may request audited financial statements of the Portfolio from the Trustee.
You may inspect records of Portfolio transactions at the Trustee's office during
regular business hours.
THE RISKS YOU FACE
CONCENTRATION RISK
When stocks in a particular industry make up 25% or more of the Portfolio, it is
said to be 'concentrated' in that industry, which makes the Portfolio less
diversified.
Here is what you should know about the Portfolio's concentration in stocks of
the restaurant industry.
The companies in the portfolio operate fast-food or casual dining chains. Risks
in these kinds of restaurants include:
o high costs of store construction and kitchen equipment;
o increases in minimum wage;
o labor shortages;
o fluctuating costs of food, paper and commodities;
o competitive pressures;
o cash flow sensitivity to regional economic weaknesses; and
o problems associated with franchising.
Here is what you should know about the Portfolio's concentration in public
utility stocks:
o dividends on these stocks may depend on rates that the utility companies may
charge, the demand for their services and their operating costs;
o electric utilities face pressure to keep rates low, which may make it
difficult to recover investments in generating plant;
o utilities generally are sensitive to costs and availability of fuel; and
o some electric utilities are subject to the risks of the nuclear industry.
LITIGATION AND LEGISLATION RISKS
We do not know of any pending litigation that might have a material adverse
effect upon the Portfolio.
Future tax legislation could affect the value of the Portfolio by:
o reducing the dividends-received deduction or
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o increasing the corporate tax rate resulting in less money available for
dividend payments.
SELLING OR EXCHANGING UNITS
You can sell your units at any time for a price based on their net asset value.
Your net asset value is calculated each business day by:
o adding the value of the Portfolio Securities, cash and any other Portfolio
assets;
o subtracting accrued but unpaid Portfolio expenses, unreimbursed Trustee
advances, cash held to buy back units or for distribution to investors,
and any other Portfolio liabilities; and
o dividing the result by the number of outstanding units.
Your net asset value when you sell may be more or less than your cost because of
sales fees, market movements and changes in the Portfolio.
If you sell your units before the final deferred sales fee installment, the
amount of any remaining payments will be deducted from your proceeds.
SPONSORS' SECONDARY MARKET
While we are not obligated to do so, we will buy back units at net asset value
less any remaining deferred sales fee and the cost of liquidating Securities to
meet the redemption. We may resell the units to other buyers or to the Trustee.
We have maintained a secondary market continuously for more than 25 years, but
we could discontinue it without prior notice for any business reason.
SELLING UNITS TO THE TRUSTEE
Regardless of whether we maintain a secondary market, you can sell your units to
the Trustee at any time by contacting your broker, dealer or financial
institution that holds your units in street name. Sometimes, additional
documents are needed such as a trust document, certificate of corporate
authority, certificate of death or appointment as executor, administrator or
guardian.
Within seven days after your request and the necessary documents are received,
the Trustee will mail a check to you. Contact the Trustee for additional
information.
As long as we are maintaining a secondary market, the Trustee will sell your
units to us at a price based on net asset value. If there is no secondary
market, the Trustee will sell your units in the over-the-counter market if it
believes it can obtain a higher price. In that case, you will receive the net
proceeds of the sale.
If the Portfolio does not have cash available to pay you for the units you are
selling, the agent for the Sponsors will select securities to be sold. These
sales could be made at times when the securities would not otherwise be sold and
may result in your receiving less than you paid for your unit and also reduce
the size and diversity of the Portfolio.
If you sell units with a value of at least $250,000, you may choose to receive
your distribution 'in kind.' If you so choose, you will receive securities and
cash with a total value equal to the price of your units. The Trustee will try
to distribute securities in the portfolio pro rata, but it reserves the right to
distribute only one or a few securities. The Trustee will act as your agent in
an in-kind distribution and will either hold the securities for your account or
transfer them as you
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instruct. You must pay any transaction costs as well as transfer and ongoing
custodial fees on sales of securities distributed in kind.
There could be a delay in paying you for your units:
o if the New York Stock Exchange is closed (other than customary weekend and
holiday closings);
o if the SEC determines that trading on the New York Stock Exchange is
restricted or that an emergency exists making sale or evaluation of the
securities not reasonably practicable; and
o for any other period permitted by SEC order.
ROLLOVER/EXCHANGE OPTION
When this Portfolio is about to terminate, you may have the option to roll your
proceeds into the next Industry Turnaround Portfolio if one is available.
If you hold your Units with one of the Sponsors and notify your financial
adviser by November 19, 1999, your units will be redeemed and certain
distributed securities plus the proceeds from the sale of the remaining
distributed securities will be reinvested in units of a new Select S&P
Industrial Portfolio Series. If you decide not to roll over your proceeds, you
will receive a cash distribution (or, if you so choose, an in-kind distribution)
after the Portfolio terminates.
The Portfolio will terminate by January 7, 2000. You may, by written notice to
the Trustee at least ten business days prior to termination, elect to receive an
in-kind distribution of your pro rata share of the Securities remaining in the
Portfolio at that time (net of your share of expenses). Of course you can sell
your Units at any time prior to termination.
You may exchange units of this Portfolio for units of another Select or Focus
Series or certain other Defined Asset Funds any time before this Portfolio
terminates. If you continue to hold your Units, you may exchange units of this
Portfolio for units of certain other Defined Asset Funds at a reduced sales fee
if your investment goals change. To exchange units, you should talk to your
financial professional about what Portfolios are exchangeable, suitable and
currently available.
Normally, a rollover is taxable and you must recognize any gain or loss on the
rollover. However, the IRS may try to disallow a loss if the portfolios of the
two funds are not materially different; you should consult your own tax adviser.
We may amend or terminate the options to exchange your units or roll your
proceeds at any time without notice.
HOW THE FUND WORKS
PRICING
Units are charged a combination of initial and deferred sales fees.
In addition, during the initial offering period, a portion of the price of a
unit also consists of cash to pay all or some of the costs of organizing the
Portfolio including:
o cost of initial preparation of legal documents;
o federal and state registration fees;
o initial fees and expenses of the Trustee;
o initial audit; and
o legal expenses and other out-of-pocket expenses.
The estimated organization costs will be deducted from the assets of the
Portfolio as of the close of the initial offering period.
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The deferred sales fee is generally a monthly charge of $2.50 per 1,000 units
and is accrued in seven monthly installments. Units redeemed or repurchased
prior to the accrual of the final deferred sales fee installment will have the
amount of any remaining installments deducted from the redemption or repurchase
proceeds or deducted in calculating an in-kind distribution, however, 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 fee is
equal to the aggregate sales fee less the aggregate amount of any remaining
installments of the deferred sales fee.
It is anticipated that securities will not be sold to pay the deferred sales fee
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.
EVALUATIONS
The Trustee values the securities on each business day (i.e., any day other than
Saturdays, Sundays and the following holidays as observed by the New York Stock
Exchange: New Year's Day, Martin Luther King, Jr. 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 that system or, if closing sales prices are not available, at the
mean between the closing bid and offer prices.
INCOME
o The annual income per unit, after deducting estimated annual Portfolio
expenses 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
Portfolio 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 continue at their current levels or be declared at all.
o Each unit receives an equal share of distributions of dividend income net of
estimated expenses. Because dividends on the securities are not received at a
constant rate throughout the year, any distribution may be more or less than
the amount then credited to the income account. The Trustee credits dividends
received to an Income Account and other receipts to a Capital Account. The
Trustee may establish a reserve account by withdrawing from the these accounts
amounts it considers appropriate to pay any material liability. These accounts
do not bear interest.
EXPENSES
The Trustee is paid a fee monthly. It also benefits when it holds cash for the
Portfolio in non-interest bearing accounts. The Trustee may also receive
additional amounts:
o for extraordinary services and costs of indemnifying the Trustee and the
Sponsors;
o costs of actions taken to protect the Portfolio and other legal fees and
expenses;
o expenses for keeping the Portfolio's registration statement current; and
o Portfolio termination expenses and any governmental charges.
Legal, typesetting, electronic filing and regulatory filing fees and expenses
associated with updating the Fund's registration statement yearly are also now
chargeable to
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the Fund; the Sponsors historically paid these amounts.
The Sponsors are currently reimbursed up to 45 cents per 1,000 units annually
for providing portfolio supervisory, bookkeeping and administrative services and
for any other expenses properly chargeable to the Portfolio. While this fee may
exceed the amount of these costs and expenses attributable to this Portfolio,
the total of these fees for all Series of Defined Asset Funds will not exceed
the aggregate amount attributable to all of these Series for any calendar year.
Certain of these expenses were previously paid for by the Sponsors.
S&P receives a minimal annual fee from the Portfolio to cover its license to the
agent for the Sponsors of the use of the trademarks and trade names 'Standard &
Poor's', 'S&P' and other trademarks and trade names, and the S&P Common Stock
Rankings.
The Trustee's and Sponsors'fees may be adjusted for inflation without investors'
approval.
The deferred sales fees you owe are paid from the Capital Account. Although we
may collect the deferred sales charge monthly, to keep Units more fully invested
we do not currently plan to pay the deferred sales charge until after the
rollover notification date.
The Sponsors will pay advertising and selling expenses at no charge to the
Portfolio. If Portfolio expenses exceed initial estimates, the Portfolio will
owe the excess. The Trustee has a lien on Portfolio assets to secure
reimbursement of Portfolio expenses and may sell securities if cash is not
available.
PORTFOLIO CHANGES
If we maintain a secondary market in units but are unable to sell the units that
we buy in the secondary market, we will redeem units, which will affect the size
and composition of the portfolio.
We decide whether to offer units for sale that we acquire in the secondary
market after reviewing:
o diversity of the Portfolio;
o size of the Portfolio relative to its original size;
o ratio of Portfolio expenses to income; and
o cost of maintaining a current prospectus.
PORTFOLIO TERMINATION
When the Portfolio is about to terminate you will receive a notice, and you will
be unable to sell your units after that time. Unless you choose to receive an
in-kind distribution of securities, we will sell any remaining securities, and
you will receive your final distribution in cash.
You will pay your share of the expenses associated with termination, including
brokerage costs in selling securities. This may reduce the amount you receive as
your final distribution.
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.
TRUST INDENTURE
The Portfolio is a 'unit investment trust' governed by a Trust Indenture, a
contract among the Sponsors and the Trustee, which sets forth their duties and
obligations and your rights. A copy of the Indenture is available to you on
request to the Trustee. The following summarizes certain provisions of the
Indenture.
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The Sponsors and the Trustee may amend the Indenture without your consent:
o to cure ambiguities;
o to correct or supplement any defective or inconsistent provision;
o to make any amendment required by any governmental agency; or
o to make other changes determined not to be materially adverse to your best
interest (as determined by the Sponsors).
Investors holding 51% of the units may amend the Indenture. Every investor must
consent to any amendment that changes the 51% requirement. No amendment may
reduce your interest in the Portfolio without your written consent.
The Trustee may resign by notifying the Sponsors. The Sponsors may remove the
Trustee without your consent if:
o it fails to perform its duties;
o it becomes incapable of acting or bankrupt or its affairs are taken over by
public authorities; or
o the Sponsors determine that its replacement is in your best interest.
Investors holding 51% of the units may remove the Trustee. The Trustee may
resign or be removed by the Sponsors without the consent of investors. The
resignation or removal of the Trustee becomes effective when a successor accepts
appointment. The Sponsors will try to appoint a successor promptly; however, if
no successor has accepted within 30 days after notice of resignation, the
resigning Trustee may petition a court to appoint a successor.
Any Sponsor may resign as long as one Sponsor with a net worth of $2 million
remains and agrees to the resignation. The remaining Sponsors and the Trustee
may appoint a replacement. If there is only one Sponsor and it fails to perform
its duties or becomes bankrupt the Trustee may:
o remove it and appoint a replacement Sponsor;
o liquidate the Portfolio; or
o continue to act as Trustee without a Sponsor.
Merrill Lynch, Pierce, Fenner & Smith Incorporated acts as agent for the
Sponsors.
The Trust Indenture contains customary provisions limiting the liability of the
Trustee and the Sponsors.
LEGAL OPINION
Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York 10017, as
special counsel for the Sponsors, has given an opinion that the units are
validly issued.
AUDITORS
Deloitte & Touche LLP, 2 World Financial Center, New York, New York 10281,
independent accountants, audited the Statement of Condition included in this
prospectus.
SPONSORS
The Sponsors are:
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED (a wholly-owned subsidiary of
Merrill Lynch & Co., Inc.)
P.O. Box 9051,
Princeton, NJ 08543-9051
SALOMON SMITH BARNEY INC. (an indirectly wholly-owned subsidiary of Citigroup
Inc.)
388 Greenwich Street--23rd Floor,
New York, NY 10013
DEAN WITTER REYNOLDS INC. (a principal operating subsidiary of Morgan Stanley
Dean Witter & Co.)
Two World Trade Center--59th Floor,
New York, NY 10048
PRUDENTIAL SECURITIES INCORPORATED (a wholly-owned subsidiary of the Prudential
Insurance Company of America)
One New York Plaza, New York, NY 10292
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PAINEWEBBER INCORPORATED (a wholly-owned subsidiary of PaineWebber Group Inc.)
1285 Avenue of the Americas,
New York, NY 10019
Each Sponsor is a Delaware corporation and it, or its predecessor, has acted as
sponsor to many unit investment trusts. As a registered broker-dealer each
Sponsor buys and sells securities (including investment company shares) for
others (including investment companies) and participates as an underwriter in
various selling groups.
TRUSTEE
The Chase Manhattan Bank, Unit Trust Department, 4 New York Plaza--6th Floor,
New York, New York 10004, is the Trustee. It is supervised by the Federal
Deposit Insurance Corporation, the Board of Governors of the Federal Reserve
System and New York State banking authorities.
UNDERWRITERS' AND SPONSORS' PROFITS
Underwriters receive sales charges when they sell units. Sponsors also realized
a profit or loss on deposit of the securities. Any cash made available by you to
the Sponsors before the settlement date for those units may be used in the
Sponsors' businesses to the extent permitted by federal law and may benefit the
Sponsors.
A Sponsor or Underwriter may realize profits or sustain losses on stocks in the
Portfolio which were acquired from underwriting syndicates of which it was a
member.
In maintaining a secondary market, the Sponsors will also realize profits or
sustain losses in the amount of any difference between the prices at which they
buy units and the prices at which they resell or redeem them.
PUBLIC DISTRIBUTION
During the initial offering period, units will be distributed to the public by
the Sponsors and dealers who are members of the National Association of
Securities Dealers, Inc.
Dealers will be entitled to the concession stated below on Units sold or
redeemed during the first year. On Units held in the second year, the dealer
will be entitled to an additional concession of $11 per 1,000 Units ($5 per
1,000 Units for purchases of $1 million or more).
DEALER CONCESSION AS
A % OF PUBLIC
AMOUNT PURCHASED OFFERING PRICE
---------------------------- ---------------------
Less than $50,000 2.00%
$50,000 to $99,999 1.80%
$100,000 to $249,999 1.45%
$250,000 to $999,999 1.25%
$1,000,000 and over 0.50%
The Sponsors do not intend to qualify units for sale in any foreign countries.
This prospectus does not constitute an offer to sell units in any country where
units cannot lawfully be sold.
CODE OF ETHICS
Merrill Lynch, as agent for the Sponsors, has adopted a code of ethics requiring
reporting of personal securities transactions by its employees with access to
information on portfolio transactions. The goal of the code is to prevent fraud,
deception or misconduct against the Portfolio and to provide reasonable
standards of conduct.
YEAR 2000 ISSUES
Many computer systems were designed in such a way that they may be unable to
distinguish between the year 2000 and the year 1900 (commonly known as the 'Year
2000 Problem'). We do not expect that the computer system changes necessary to
prepare
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for the Year 2000 will cause any major operational difficulties for the
Portfolio.
TAXES
The following summary describes some of the important income tax consequences of
holding units. It assumes that you are not a dealer, financial institution,
insurance company or other investor with special circumstances. You should
consult your own tax adviser about your particular circumstances.
In the opinion of our counsel, under existing law:
GENERAL TREATMENT OF THE FUND AND YOUR INVESTMENT
The Portfolio will not be taxed as a corporation for federal income tax
purposes, and you will be considered to own directly your share of each Security
in the Portfolio.
INCOME OR LOSS UPON DISPOSITION
You will generally recognize gain or loss when you dispose of your units for
cash (by sale or redemption) or when the Trustee disposes of the Securities in
the Portfolio. You generally will not recognize gain or loss on Securities
distributed to you 'in-kind,' either in redemption of your units or upon
termination of the Portfolio. Your basis for Securities distributed to you will
be the same as the portion of your basis in your units which are attributable to
the distributed Securities, and your holding period for the distributed
Securities will include your holding period in your units.
If you elect to roll over your investment in the portfolio, you will not
recognize gain or loss on your units except to the extent that your share of the
Securities in the Portfolio is sold and the proceeds are paid to you. Your basis
in the Securities that are rolled over into a new portfolio will be the same as
the portion of your basis in your units which was attributable to the rolled
over Securities.
If your net long-term capital gains exceed your net short-term capital losses,
the excess may be subject to tax at a lower rate than ordinary income. Any
capital gain or loss from the Portfolio will be long-term if you are considered
to have held your investment which produces the gain or loss for more than one
year and short-term if you held it for one year or less. Because the
deductibility of capital losses is subject to limitations, you may not be able
to deduct all of your capital losses. You should consult your tax adviser in
this regard.
YOUR TAX BASIS IN THE SECURITIES
Your aggregate tax basis in your units will be equal to the cost of the units,
including the sales fee. You should not increase your basis in your units by
deferred sales charges or organizational expenses. The tax reporting form and
annual statements you receive will be based on the net amounts paid to you, from
which these expenses will already be deducted.
EXPENSES
If you are an individual who itemizes deductions, you may deduct your share of
Portfolio expenses, but only to the extent that your share of the expenses,
together with your other miscellaneous deductions, exceeds 2% of your adjusted
gross income. Your ability to deduct Portfolio expenses will be limited further
if your adjusted gross income exceeds a specified amount (currently, $124,500 or
$62,250 for a married person filing separately).
12
<PAGE>
STATE AND LOCAL TAXES
Under the income tax laws of the State and City of New York, the Portfolio will
not be taxed as a corporation, and the income of the Portfolio will be treated
as the income of the investors in the same manner as for federal income tax
purposes.
FOREIGN INVESTORS
If you are a foreign investor and you are not engaged in a U.S. trade or
business, you generally will be subject to 30% withholding tax (or a lower
applicable treaty rate) on distributions. You should consult your tax adviser
about the possible application of federal, state and local, and foreign taxes.
RETIREMENT PLANS
You may wish to purchase units for an Individual Retirement Account ('IRAs') or
other retirement plan. Generally, capital gains and income received in each of
these plans are exempt from federal taxation. All distributions from these types
of plans are generally treated as ordinary income but may, in some cases, be
eligible for tax-deferred rollover treatment. You should consult your attorney
or tax adviser about the specific tax rules relating to these plans. These plans
are offered by brokerage firms, including the Sponsors of this Portfolio, and
other financial institutions. Fees and charges with respect to such plans may
vary.
SUPPLEMENTAL INFORMATION
You can receive at no cost supplemental information about the Portfolio by
calling the Trustee. The supplemental information includes more detailed risk
disclosure and general information about the structure and operation of the
Portfolio. The supplemental information is also available from the SEC.
13
<PAGE>
EQUITY INVESTOR FUND -
SELECT SERIES STANDARD AND POOR'S INDUSTRY TURNAROUND PORTFOLIO
DEFINED ASSET FUNDS
REPORT OF INDEPENDENT ACCOUNTANTS
The Sponsors, Trustee and Holders
of Equity Investor Fund,
Select Series Standard & Poor's
Industry Turnaround Portfolio, Defined Asset Funds:
We have audited the accompanying statement of condition of Equity Investor
Fund - Select Series Standard & Poor's Industry Turnaround Portfolio, Defined
Asset Funds as of October 31, 1998 and the related statements of operations and
of changes in net assets for the period November 22, 1997 to October 31, 1998.
These financial statements are the responsibility of the Trustee. Our
responsibility is to express an opinion on these financial statements 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 statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Securities owned at
October 31, 1998, as shown in such portfolio, were confirmed to us by The Chase
Manhattan Bank, 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 statements referred to above present fairly, in
all material respects, the financial position of Equity Investor Fund - Select
Series Standard & Poor's Industry Turnaround Portfolio, Defined Asset Fund at
October 31, 1998 and the results of its operations and changes in its net assets
for the above-stated period in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
New York, N.Y.
December 18, 1998
D-1
<PAGE>
EQUITY INVESTOR FUND -
SELECT SERIES STANDARD & POOR'S INDUSTRY TURNAROUND PORTFOLIO
DEFINED ASSET FUNDS
STATEMENT OF CONDITION
AS OF OCTOBER 31, 1998
TRUST PROPERTY:
<TABLE><CAPTION>
<S> <C> <C>
Investment in marketable securities - at value
(cost $59,840,665) $59,734,450
Deferred organization costs (Note 5) 85,179
Receivable from securities sold 151,336
Accrued dividends receivable 104,399
Cash 269,828
Total trust property 60,345,192
LESS LIABILITIES:
Other liabilities (Note 5) $ 150,000
Redemption payable 147,367
Accrued fees and expenses 24,230 321,597
NET ASSETS, REPRESENTED BY:
61,139,110 units of fractional
undivided interest outstanding (Note 3) 59,677,635
Undistributed net investment income 345,960 $60,023,595
UNIT VALUE ($60,023,595 / 61,139,110 units) 0.98175
See Notes to Financial Statements.
</TABLE>
D-2
<PAGE>
EQUITY INVESTOR FUND -
SELECT SERIES STANDARD & POOR'S INDUSTRY TURNAROUND PORTFOLIO
DEFINED ASSET FUNDS
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
November 22,
1997 to
October 31,
1998
<S> <C>
INVESTMENT INCOME:
Dividend income $1,140,174
Trustee's fees and expenses (69,112)
Sponsors' fees (25,859)
Net investment income 1,045,203
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Realized gain on securities sold 346,225
Net unrealized depreciation of investments (106,215)
Net realized and unrealized gain on investments 240,010
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $1,285,213
See Notes to Financial Statements.
</TABLE>
D-3
<PAGE>
EQUITY INVESTOR FUND -
SELECT SERIES STANDARD & POOR'S INDUSTRY TURNAROUND PORTFOLIO
DEFINED ASSET FUNDS
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
November 22,
1997 to
October 31,
1998
<S> <C>
OPERATIONS:
Net investment income $ 1,045,203
Realized gain on securities sold 346,225
Unrealized depreciation of investments (106,215)
Net increase in net assets resulting from
operations 1,285,213
INCOME DISTRIBUTIONS TO HOLDERS (Note 2) (708,940)
CAPITAL SHARE TRANSACTIONS:
Creation of 68,773,158 units 68,515,055
Redemption of 8,041,630 units (8,248,129)
Deferred sales charge (1,156,053)
Deferred organizational cost (64,820)
Net capital share transactions 59,046,053
NET INCREASE IN NET ASSETS 59,622,326
NET ASSETS AT BEGINNING OF PERIOD 401,269
NET ASSETS AT END OF PERIOD $60,023,595
PER UNIT:
Income distributions during period $0.01072
Net asset value at end of period $0.98175
UNITS OUTSTANDING AT END OF PERIOD 61,139,110
See Notes to Financial Statements.
</TABLE>
D-4
<PAGE>
EQUITY INVESTOR FUND -
SELECT SERIES STANDARD & POOR'S INDUSTRY TURNAROUND PORTFOLIO
DEFINED ASSET FUNDS
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Fund is registered under the Investment Company Act of 1940 as a Unit
Investment Trust. The following is a summary of significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements. The policies are in conformity with generally
accepted accounting principles.
(a) Securities are stated at market value; for securities listed on a
national securities exchange, value is based on the closing sale price
on such exchange, and for securities not so listed, value is based on
the current bid price on the over-the-counter market. See "How to
Sell Units - Trustee's Redemption of Units" in this Prospectus,
Part B. Gains or losses on sales of securities are computed using the
first-in, first-out method.
(b) The Fund is not subject to income taxes. Accordingly, no provision
for such taxes was required.
(c) Dividend income is recorded on the ex-dividend date.
2. DISTRIBUTIONS
A distribution of net investment income is made to Holders on the twenty-
fifth day of February, May and August 1998. Receipts other than dividends,
after deductions for redemptions and applicable expenses, are distributed
as explained in "Income, Distributions and Reinvestment - Distributions" in
this Prospectus, Part B.
3. NET CAPITAL
Cost of 61,139,110 units at Dates of Deposit $60,868,177
Less deferred sales charge (1,156,053)
Net amount applicable to Holders 59,712,124
Redemptions of units - net cost of 8,041,630 units (209,679)
Realized gain on securities sold 346,225
Deferred organization costs (64,820)
Net unrealized depreciation of investments (106,215)
Net capital applicable to Holders $59,677,635
4. INCOME TAXES
As of October 31, 1998, net unrealized depreciation of investments, based
on cost for Federal income tax purposes, aggregated $106,215, of which
$6,537,678 relates to appreciated securities and $6,643,893 relates to
depreciated securities. The cost of the investment securities for Federal
income tax purposes was $59,840,665 at October 31, 1998.
5. DEFERRED ORGAINIZATION COSTS
Deferred organization costs are being amortized over the life of the Fund.
Included in "Other liabilities" in the accompanying Statement of Condition
is $150,000 payable to the Trustee for reimbursement of costs related to
the organization of the Trust.
D-5
<PAGE>
EQUITY INVESTOR FUND -
SELECT SERIES STANDARD & POOR'S INDUSTRY TURNAROUND PORTFOLIO
DEFINED ASSET FUNDS
PORTFOLIO AS OF OCTOBER 31, 1998
<TABLE>
<CAPTION>
Current
Number of Annual
Shares of Percentage Dividend Cost of
Portfolio No. and Title Common of Per Securities
Of Securities Stock Fund (1) Share (2) to Fund Value (1)
<S> <C> <C> <C> <C> <C>
1 Carolina Power & Light Company 80,050 6.15% $1.94 $ 3,154,996 $ 3,672,294
2 Consolidated Edison Company
of New York Inc. 81,050 6.80 1.06 3,204,506
4,062,631
3 Darden Restaurants Inc. 360,650 9.96 0.16 4,352,769 5,950,725
4 Deluxe Corporation 110,050 5.96 1.48 3,817,938 3,562,869
5 R.R. Donnelley & Sons Company 109,400 7.90 0.80 3,982,473 4,717,874
6 Duke Energy Corporation 58,400 6.32 2.20 3,120,020 3,777,750
7 Great Lakes Chemicals Corporation (4) 64,900 4.52 0.64 2,542,052 2,701,463
8 John H. Harland Company 184,600 4.48 0.30 3,611,787 2,676,700
9 Harrah's Entertainment, Inc. 286,300 6.77 - 5,813,104 4,043,988
10 International Flavors & Fragrances, Inc. 59,300 3.72 1.48 2,843,099 2,220,043
11 Mc Donald's Corporation 80,400 9.00 0.33 3,876,873 5,376,750
12 Mirage Resorts, Incorporated 243,250 6.90 - 5,690,509 4,120,047
13 Nalco Chemical Company 72,400 3.75 1.00 2,814,751 2,239,875
14 Octel Corporation 16,437 0.40 - 357,550 237,309
15 Sigma-Aldrich Corporation 81,200 4.20 0.28 3,089,509 2,509,588
16 Southern Company 130,900 6.18 1.34 3,177,845 3,689,744
17 Wendy's International Inc. 198,800 6.99 0.24 4,390,884 4,174,800
100.00% $59,840,665 $59,734,450
</TABLE>
(1) See notes to Financial Statements.
(2) Based on latest quarterly or semi-annual ordinary dividend declared.
(3) Based on valued.
(4) Includes adjustment for 1 per 4 spinoff.
<PAGE>
Defined
Asset FundsSM
HAVE QUESTIONS ? EQUITY INVESTOR FUND
Request the most SELECT SERIES STANDARD & POOR'S
recent free Information INDUSTRY TURNAROUND
Supplement that gives more (A Unit Investment Trust)
details about the Fund, ---------------------------------------
by calling: This Prospectus does not contain
The Chase Manhattan Bank complete information about the
1-800-323-1508 investment company filed with the
Securities and Exchange Commission in
Washington, D.C. under the:
o Securities Act of 1933 (file no.
333-39121) and
o Investment Company Act of 1940 (file
no. 811-3044).
TO OBTAIN COPIES AT PRESCRIBED RATES--
WRITE: Public Reference Section of the
Commission
450 Fifth Street, N.W., Washington,
D.C. 20549-6009
CALL: 1-800-SEC-0330.
VISIT: http://www.sec.gov.
---------------------------------------
No person is authorized to give any
information or representations about
this Fund not contained in this
Prospectus or the Information
Supplement, and you should not rely on
any other information.
---------------------------------------
When units of this Fund are no longer
available, this Prospectus may be used
as a preliminary prospectus for a
future series, but some of the
information in this Prospectus will be
changed for that series.
Units of any future series may not be
sold nor may offers to buy be accepted
until that series has become effective
with the Securities and Exchange
Commission. No units can be sold in any
State where a sale would be illegal.
11343--1/99
