<PAGE>
DEFINED ASSET FUNDSSM
- --------------------------------------------------------------------------------
EQUITY INVESTOR FUND The objective of this Defined Fund is total return
SELECT TEN PORTFOLIO through a combination of capital appreciation and
1998 SERIES C current dividend income. The common stocks in the
(A UNIT INVESTMENT Portfolio were selected by following a strategy
TRUST) that invests for a period of about one year in
- ------------------------------approximately equal values of the ten common
/ / DESIGNED FOR TOTAL RETURN stocks in the Dow Jones Industrial Average (DJIA)
/ / DEFINED PORTFOLIO OF 10 having the highest dividend yields three business
HIGHEST DIVIDEND YIELDING days prior to the date of this Prospectus.
DOW STOCKS The value of units will fluctuate with the value
/ / DIVIDEND INCOME of the common stocks in the Portfolio and no
assurance can be given that dividends will be paid
or that the units will appreciate in value.
Minimum purchase: $250.
-------------------------------------------------
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
SPONSORS: CONTRARY IS A CRIMINAL OFFENSE.
Merrill Lynch, Inquiries should be directed to the Trustee at
Pierce, Fenner & Smith 1-800-323-1508.
Incorporated Prospectus dated September 28, 1998.
Salomon Smith Barney Inc. INVESTORS SHOULD READ THIS PROSPECTUS CAREFULLY
PaineWebber Incorporated AND RETAIN IT FOR FUTURE REFERENCE.
<PAGE>
- --------------------------------------------------------------------------------
Defined Asset FundsSM
Defined Asset Funds is America's oldest and largest family of unit investment
trusts, with over $115 billion sponsored over 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.
- ---------------------------------------------------
Defining the Strategy
- ---------------------------------------------------
The Select Ten Portfolio follows a simple, time-tested Strategy: buy
approximately equal amounts of the ten highest dividend-yielding common stocks
(Strategy Stocks) of the 30 stocks in the DJIA* (determined three business days
prior to the date of this Prospectus) and hold them for about one year. At the
end of the year, the Portfolio will be liquidated and the Strategy reapplied to
the DJIA to select a new portfolio. As of three business days prior to the
initial date of deposit, Select Ten Portfolios hold approximately $14.9 billion
of the DJIA Strategy Stocks. Each Select Ten Portfolio is designed to be part of
a longer term strategy and investors are advised to follow the Strategy for at
least three to five years. So long as the Sponsors continue to offer new
portfolios, investors will have the option to reinvest into a new portfolio each
year at a reduced sales charge. The Sponsors reserve the right not to offer new
portfolios.
- ---------
* The name 'Dow Jones Industrial Average' is the property of Dow Jones &
Company, Inc., which is not affiliated with the Sponsors, has not participated
in any way in the creation of the Portfolio or in the selection of stocks
included in the Portfolio and has not reviewed or approved any information
included in this Prospectus.
The Strategy provides a disciplined approach to investing, based on a buy and
hold philosophy, which ignores market timing and investment research and rejects
active management. The Sponsors anticipate that the Portfolio will remain
unchanged over its one-year life despite any adverse developments concerning an
issuer, an industry or the economy or stock market generally. While the Strategy
does not work perfectly each and every year, the Strategy had a higher total
return than the DJIA in 16 of the last 25 years (13 years if Portfolio sales
charges and expenses were deducted from Strategy Stock performance). Of course,
past performance of the Strategy is no guarantee of future results and there can
be no guarantee that the Portfolio will meet its objectives or will not lose
money over its one-year life or over consecutive annual periods.
- ---------------------------------------------------
Defining Your Portfolio
- ---------------------------------------------------
Based upon the principal business of each issuer and current market values, the
following industries are represented in the Portfolio:
APPROXIMATE
PORTFOLIO PERCENTAGE
/ / Oil/Gas-International 20%
/ / Auto Manufacturing 10
/ / Chemical Products 10
/ / Financial Services/Banking 10
/ / Forest Products and Paper 10
/ / Machinery-Construction & Mining 10
/ / Manufacturing 10
/ / Tobacco/Food Processing 10
/ / Utilities/Telecommunications 10
- ---------------------------------------------------
Defining Your Risks
- ---------------------------------------------------
The Strategy Stocks, as the 10 highest yielding stocks in the DJIA, generally
share attributes that have caused them to have lower prices or higher yields
relative to the other stocks in the DJIA. The Strategy Stocks may, for example,
be experiencing financial difficulty, or be out of favor in the market because
of weak performance, poor earnings forecasts, negative publicity or
litigation/legislation; or they may be reacting to general market cycles. The
Strategy is therefore contrarian in nature. The Portfolio does not reflect any
investment recommendations of the Sponsors and one or more of the stocks in the
Portfolio may, from time to time, be subject to sell recommendations from one or
more of the Sponsors.
The Portfolio is not an appropriate investment for those who are not comfortable
with the Strategy or for those who are unable or unwilling to assume the risk
involved generally with an equity investment. It may not be appropriate for
investors seeking either preservation of capital or high current income.
A-2
<PAGE>
There can be no assurance that the market factors that caused the relatively low
prices and high yields of the Strategy Stocks will change, that any negative
conditions adversely affecting the stock price will not deteriorate, that the
dividend rates on the Strategy Stocks will be maintained or that share prices
will not decline further during the life of the Portfolio, or that the Strategy
Stocks will continue to be included in the DJIA.
Unit price fluctuates with the value of the Portfolio, and the value of the
Portfolio 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 purchase and sale of
securities for the Portfolio (especially during the primary offering period of
units and during the rollover period) and other factors. Additionally, equity
markets have been at historically high levels and no assurance can be given that
these levels will continue. Therefore, there is no guarantee that the objective
of the Portfolio will be achieved. Also, the return on an investment in the
Portfolio will be lower than the hypothetical returns on Strategy Stocks because
the Portfolio has sales charges, brokerage commissions and expenses, purchases
Strategy Stocks at different prices and is not fully invested at all times and
because of other factors described under Performance Information.
Unlike a mutual fund, the Portfolio is not actively managed and the Sponsors
receive no management fee. Therefore, any 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. Although the Portfolio may sell
securities under certain limited circumstances, given the investment philosophy
of the Portfolio, it is not likely to do so. The Portfolio may continue to
purchase or hold securities originally selected even though the market value and
yields on the securities may have changed or the securities may no longer be
included in the DJIA.
The Portfolio is not considered to be 'concentrated' in stocks of any particular
industry.
- ---------------------------------------------------
Defining Your Investment
- ---------------------------------------------------
PUBLIC OFFERING PRICE PER 1,000 UNITS $999.99
The Public Offering Price as of September 25, 1998, the business day prior to
the initial date of deposit is based on the aggregate value of the underlying
securities ($627,484.38) and any cash held to purchase securities, divided by
the number of units outstanding (633,822) times 1,000, plus the initial sales
charge. The Public Offering Price includes the estimated organization costs of
$0.57 per 1,000 Units, to which no sales charge has been applied. Units offered
on the initial date of deposit will also be priced at $999.99 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 on the first of each month December 1, 1998 through
September 1, 1999.
ROLLOVER OPTION
When this Select Ten Portfolio is about to terminate, you may have the option to
roll your proceeds into the next portfolio of the then current Strategy Stocks
subject only to the $17.50 deferred fee. If you hold your Units with one of the
Sponsors and notify your financial adviser by October 1, 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 Ten Portfolio 1999 Series. If you decide not to roll over your proceeds,
you will receive a cash distribution (or, if you so elect, an in-kind
distribution) after the Fund terminates. Of course you can sell or redeem your
Units at any time prior to termination.
DISTRIBUTIONS
You will receive distributions of any dividend income, net of expenses, on the
25th of December 1998 and February, May and August 1999 if you own units on the
10th of those months.
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
In the opinion of counsel, 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, even though a portion of the
dividend payments may be used to pay expenses of the Portfolio and regardless of
whether you reinvest your dividends in the Portfolio. (See Taxes in Part B.)
TAX BASIS REPORTING
The proceeds received when you sell this investment will reflect the deduction
of the deferred sales charge and, after the initial offering period, the charge
for organizational expenses. In addition, the annual statement and the relevant
tax reporting forms you receive at year-end will be based upon the amount paid
to you (net of the deferred sales charge and the charge for organizational
expenses). Accordingly, you should not increase your basis in your units by the
deferred sales charge or the charge for organizational expenses.
A-3
<PAGE>
TERMINATION DATE
The Portfolio will terminate by October 29, 1999. 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.
SPONSORS' PROFIT OR LOSS
The Sponsors' 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 $520.00 on the initial deposit of the
securities and a gain or loss on subsequent deposits of securities (see
Sponsors' and Underwriters' Profits in Part B).
- ---------------------------------------------------
Defining Your Costs
- ---------------------------------------------------
SALES CHARGE
First-time investors pay a maximum sales charge of 2.75% of the offering price,
of which $17.50 per 1,000 units is deferred. For example, on a $1,000
investment, 2.75% less $17.50 (or about 1%) is deducted when they buy and the
remaining $990 is invested in the Strategy Stocks. The initial sales charge is
reduced on purchases of $50,000 or more, as described in Part B. 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 ten 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
Offering Amount per
Price 1,000 Units
----------- -----------
Initial Sales Charge 1.00% $ 10.00
Deferred Sales Charge
per Year 1.75 17.50
----------- -----------
Maximum Sales Charge 2.75% $ 27.50
----------- -----------
----------- -----------
Maximum Sales Charge
Imposed on Reinvested
Dividends 1.575% $ 15.75
ORGANIZATION COSTS
Investors will bear all or a portion of the expenses incurred in organizing the
Portfolio--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.
Estimated organization costs shown below are included in the public offering
price and will be deducted from the assets of the Portfolio as of the close of
the initial offering period.
Amount per
1,000 Units
-----------
Estimated Organization Costs $ 0.57
ESTIMATED ANNUAL FUND OPERATING EXPENSES
As a %
of Net Amount per
Assets 1,000 Units
----------- -----------
Trustee's Fee .068% $ 0.68
Portfolio Supervision,
Bookkeeping and
Administrative Fees .046% $ 0.45
Other Operating Expenses .011% $ 0.11
----------- -----------
TOTAL .125% $ 1.24
These estimates do not include the costs of purchasing and selling the
underlying Strategy Stocks.
COSTS OVER TIME
You would pay the following cumulative expenses on a $1,000 investment, assuming
a 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
$30 $71 $114 $235
Although each Series 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 principal amount and distributions are rolled over each
year into a new Series subject only to the deferred sales charge and fund
expenses.
The example assumes reinvestment of all 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 September 25, 1998 was
$972.50 per 1,000 units ($17.50 per 1,000 units less than the net asset value).
This price reflects deductions of the deferred sales charge which declines over
the last ten months of the Portfolio ($17.50 initially). If you sell your units
before the termination of the Portfolio, you will pay the remaining balance of
the deferred sales charge. As of the close of the initial public offering
period, these prices will be reduced to reflect the estimated organization costs
shown above.
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 $0.85 per 1,000 units. If you
reinvest in the new Series, 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>
- --------------------------------------------------------------------------------
Defined Portfolio
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
Equity Investor Fund
Select Ten Portfolio--1998 Series C September 28, 1998
Defined Asset Funds
PRICE
PERCENTAGE CURRENT PER SHARE COST
TICKER OF PORTFOLIO DIVIDEND YIELD TO TO PORTFOLIO
NAME OF ISSUER SYMBOL (1) (2) PORTFOLIO (3)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1. J.P. Morgan & Company, Inc. JPM 9.92% 4.27% $ 88.9375 $ 62,256.25
2. Philip Morris Companies, Inc. MO 9.88 3.83 45.9375 62,015.63
3. General Motors Corporation GM 10.29 3.41 58.6875 64,556.25
4. Minnesota Mining & Manufacturing
Company MMM 10.15 2.94 74.9375 63,696.88
5. Chevron Corporation CHV 9.97 2.93 83.3750 62,531.25
6. Caterpillar Inc. CAT 10.10 2.56 46.9375 63,365.62
7. Exxon Corporation XON 9.81 2.40 68.3750 61,537.50
8. Du Pont (E.I.) De Nemours &
Company DD 9.83 2.38 58.7500 61,687.50
9. AT&T Corporation T 10.02 2.20 59.8750 62,868.75
10. International Paper Company IP 10.03 2.06 48.4375 62,968.75
-------------- --------------
100.00% $ 627,484.38
-------------- --------------
-------------- --------------
</TABLE>
- ----------------------------
(1) Based on Cost to Portfolio.
(2) Current Dividend Yield for each security was calculated by annualizing the
last quarterly or semi-annual ordinary dividend declared on the security and
dividing the result by its market value as of the close of trading on
September 25, 1998.
(3) Valuation by the Trustee made on the basis of closing sale prices at the
evaluation time on September 25, 1998, the business day prior to the initial
date of deposit. The value of the Securities on any subsequent business day
will vary.
----------------------------
The securities were acquired on September 25, 1998 and are represented entirely
by contracts to purchase the securities. Any of the Sponsors may have acted as
underwriters, managers or co-managers of a public offering of the securities in
this Portfolio during the last three years. Affiliates of the Sponsors may serve
as specialists in the securities in this Portfolio 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 any of the Sponsors may be an officer or
director of one or more of the issuers of the securities in the Portfolio. A
Sponsor may trade for its own account as an odd-lot dealer, market maker, block
positioner and/or arbitrageur in any of the securities or in options on them.
Any 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-5
<PAGE>
- --------------------------------------------------------------------------------
Past Performance of Prior Select Ten Portfolios
- --------------------------------------------------------------------------------
Select Ten Portfolios, first available in 1991, are now offered in various
cycles -- or Series -- each starting at different times during a year. The
following table shows the actual performance of each Portfolio of certain of
these Series. The table also shows the Average Annual Total Return and the
Cumulative Total Return for these Series. These past performance returns reflect
an investment made in the initial Portfolio of each Series and assume annual
rollovers into successor Portfolios of the same Series. Past performance of the
Portfolios and the Series is no guarantee of future results of the Select Ten
Strategy or of any Portfolio currently offered.
<TABLE><CAPTION>
ANNUALIZED
--------------------------------------------- CUMULATIVE
DIVIDEND TOTAL TOTAL
SERIES A TERM YIELD(1) APPRECIATION(2) RETURN(3) RETURN
- -------------------- ------------------ ---------- -------------- ------------- ----------
<S> <C> <C> <C> <C> <C>
1992 Winter 1/3/92-1/15/93 4.31% -4.24% 0.07%
1993 Winter 1/4/93-1/14/94 3.91 19.18 23.09
1994 Winter 1/5/94-1/27/95 3.60 -4.00 -0.40
1995 Winter 1/9/95-2/23/96 4.08 31.19 35.27
1996 Winter 1/18/96-2/28/97 3.47 27.80 31.27
1997 Winter 1/27/97-2/27/98 3.19 15.71 18.90
Average Annual
Total Return(4) 1/3/92-6/30/98 -- -- 16.33
Cumulative
Total Return 1/3/92-6/30/98 -- -- -- 167.06%*
SERIES B
- --------------------
1991 Spring 5/17/91-6/19/92 4.24% 9.07% 13.31%
1992 Spring 5/5/92-5/21/93 4.32 0.15 4.47
1993 Spring 5/5/93-5/13/94 4.01 2.67 6.68
1994 Spring 5/6/94-5/31/95 3.98 14.14 18.12
1995 Spring 5/10/95-6/28/96 3.60 22.15 25.75
1996 Spring 5/20/96-6/27/97 3.19 24.35 27.54
1997 Spring 5/27/97-6/30/98 2.83 8.46 11.29
Average Annual
Total Return(4) 5/17/91-6/30/98 -- -- 16.24
Cumulative
Total Return 5/17/91-6/30/98 -- -- -- 192.32%*
SERIES C
- --------------------
1992 Autumn 9/1/92-9/14/93 3.76% 12.64% 16.40%
1993 Autumn 9/1/93-9/16/94 3.89 2.91 6.80
1994 Autumn 9/7/94-9/29/95 3.81 19.03 22.84
1995 Autumn 9/12/95-10/31/96 3.46 26.84 30.30
1996 Autumn 9/17/96-10/24/97 3.03 25.49 28.52
Average Annual
Total Return(4) 9/1/92-6/30/98 -- -- 20.21
Cumulative
Total Return 9/1/92-6/30/98 -- -- -- 192.44%*
</TABLE>
- ----------------------------
(1) Dividends paid on the securities to the Portfolio less ongoing expenses,
divided by maximum initial public offering price.
(2) Represents the difference between initial unit price and redemption or
liquidation price on the ending date (reflecting payment of deferred sales
charges, brokerage commissions paid by the Portfolio and, beginning with the
1995 Spring Portfolio organization expenses, and assumes reinvestment of
dividends on the distribution dates), divided by the maximum initial public
offering price.
A-6
<PAGE>
- --------------------------------------------------------------------------------
Past Performance of Prior Select Ten Portfolios (Continued)
- --------------------------------------------------------------------------------
Select Ten Portfolios, first available in 1991, are now offered in various
cycles -- or Series -- each starting at different times during a year. The
following table shows the actual performance of each Portfolio of certain of
these Series. The table also shows the Average Annual Total Return and the
Cumulative Total Return for these Series. These past performance returns reflect
an investment made in the initial Portfolio of each Series and assume annual
rollovers into successor Portfolios of the same Series. Past performance of the
Portfolios and the Series is no guarantee of future results of the Select Ten
Strategy or of any Portfolio currently offered.
<TABLE><CAPTION>
ANNUALIZED
--------------------------------------------- CUMULATIVE
DIVIDEND TOTAL TOTAL
SERIES 3 TERM YIELD(1) APPRECIATION(2) RETURN(3) RETURN
- -------------------- ------------------ ---------- -------------- ------------- ----------
<S> <C> <C> <C> <C> <C>
1996 7/22/96-8/29/97 3.64% 30.04% 33.68%
1997 7/28/97-8/28/98 2.82 - 1.23 1.59
Average Annual
Total Return(4) 7/22/96-6/30/98 -- -- 24.27
Cumulative
Total Return 7/22/96-6/30/98 -- -- -- 52.43%*
SERIES 5
- --------------------
1996 11/1/96-12/12/97 3.51% 22.34% 25.85%
Average Annual
Total Return(4) 11/1/96-6/30/98 -- -- 19.25
Cumulative
Total Return 11/1/96-6/30/98 -- -- -- 33.96%*
SERIES J
- --------------------
1997 1/2/97-1/30/98 2.85% 10.02% 12.87%
Average Annual
Total Return(4) 1/2/97-6/30/98 -- -- 14.26
Cumulative
Total Return 1/2/97-6/30/98 -- -- -- 21.97%*
SERIES 1
- --------------------
1997 2/25/97-3/27/98 2.87% 16.51% 19.38%
Average Annual
Total Return(4) 2/25/97-6/30/98 -- -- 10.26
Cumulative
Total Return 2/25/97-6/30/98 -- -- -- 14.01%*
SERIES 2
- --------------------
1997 4/28/97-6/5/98 3.18% 21.31% 24.49%
Average Annual
Total Return(4) 4/28/97-6/30/98 -- -- 16.77
Cumulative
Total Return 4/28/97-6/30/98 -- -- -- 19.94%*
</TABLE>
- ----------------------------
(3) Appreciation plus Dividend Yield. Reflects reinvestment of dividends,
deduction of maximum applicable sales charges and ongoing expenses, but no
adjustment for taxes payable.
(4) Average Annual Total Return for a Series includes the brokerage commissions
paid in selling securities received in kind on annual rollovers and the
waiver of any up-front sales charge on those rollovers.
* These figures are not annualized.
A-7
<PAGE>
- --------------------------------------------------------------------------------
Hypothetical Strategy Stock Performance Information
- --------------------------------------------------------------------------------
Select Ten Portfolios are based on a strategy of investing equal amounts in the
10 highest dividend-yielding stocks ('Strategy Stocks') in the DJIA each year.
Although the Strategy Stocks underperformed the DJIA in eight of the last 25
years (12 years if Portfolio sales charges and expenses were deducted from
Strategy Stock performance), their total return over several years generally
outperformed the DJIA. This is why the Sponsors recommend following the Strategy
for at least three to five years. Only the average annualized total return
figures at the bottom of each column reflect reinvestment of dividends (at the
end of each year). The results below are hypothetical for the following reasons:
None of these figures reflects brokerage commissions which investors in the
Portfolio bear. Portfolio performance will also differ from the hypothetical
performance of Strategy Stocks because Select Ten Portfolios are established at
various times during a year, Portfolios may not be fully invested at all times
or equally weighted in all 10 stocks, and their stocks are normally purchased or
sold at prices different from the closing prices used in buying and selling
Portfolio units. Past performance is no guaranty of future results of the
Strategy or any Select Ten Portfolio.
COMPARISON OF DIVIDENDS, APPRECIATION AND TOTAL RETURN
(STRATEGY STOCK FIGURES REFLECT SALES CHARGES AND FUND EXPENSES BUT NOT
BROKERAGE COMMISSIONS)
<TABLE><CAPTION>
STRATEGY STOCKS(1) DOW JONES INDUSTRIAL AVERAGE (DJIA)
-------------------------------------------------------- --------------------------------------------------------
ACTUAL DIVIDEND TOTAL ACTUAL DIVIDEND TOTAL
YEAR APPRECIATION(2) YIELD(3) RETURN(4) APPRECIATION(2) YIELD(3) RETURN(4)
- ----- -------------- ---------------------- -------------- -------------- ---------------------- --------------
<S> <C> <C> <C> <C> <C> <C>
1973 -9.09% 5.01% -4.08% -16.58% 3.46% -13.12%
1974 -9.63 7.23 -2.40 -27.57 4.43 -23.14
1975 47.89 7.77 55.65 38.32 6.08 44.40
1976 26.32 6.93 33.25 17.86 4.86 22.72
1977 -8.63 5.73 -2.90 -17.27 4.56 -12.71
1978 -8.82 6.91 -1.91 -3.15 5.84 2.69
1979 2.26 8.22 10.48 4.19 6.33 10.52
1980 16.34 8.35 24.69 14.93 6.48 21.41
1981 -2.71 8.22 5.51 -9.23 5.83 -3.40
1982 15.75 8.03 23.78 19.60 6.19 25.79
1983 28.88 8.05 36.93 20.30 5.38 25.68
1984 -1.05 6.46 5.41 -3.76 4.82 1.06
1985 20.22 6.78 27.00 27.66 5.12 32.78
1986 22.35 10.62 32.96 22.58 4.33 26.91
1987 0.15 4.91 5.06 2.26 3.76 6.02
1988 14.19 8.25 22.44 11.85 4.10 15.95
1989 18.90 6.76 25.65 26.96 4.75 31.71
1990 -15.01 4.87 -10.14 -4.34 3.77 -0.57
1991 26.79 5.02 31.81 20.32 3.61 23.93
1992 1.93 4.51 6.44 4.17 3.17 7.34
1993 21.28 4.02 25.30 13.72 3.00 16.72
1994 -1.94 3.89 1.95 2.14 2.81 4.95
1995 31.13 3.84 34.97 33.45 3.03 36.48
1996 23.05 3.29 26.34 26.01 2.56 28.57
1997 16.86 3.06 19.92 22.64 2.14 24.78
1998 4.87 1.31 6.18 13.20 0.91 14.11
(through
6/30)
Average Annualized Total Return 16.18 13.32
</TABLE>
- ----------------------------
(1) The Strategy Stocks for any given year were selected by ranking the dividend
yields for each of the stocks in the DJIA as of the beginning of the year,
based upon an annualization of the last quarterly or semi-annual regular
dividend distribution (which would have been declared in the preceding year)
divided by that stock's market value on the first trading day that year on
the New York Stock Exchange.
(2) Appreciation for the Strategy Stocks is calculated by subtracting the market
value of these stocks at the opening value on the first trading day on the
New York Stock Exchange in a given year from the market value of those
stocks at the closing value on the last trading day in the year, and
dividing the result by the market value of the stocks at the opening value
on the first trading day in that year. Appreciation for the DJIA is
calculated by subtracting the opening value of the DJIA on the first trading
day in each year from the closing value of the DJIA on the last trading day
in the year, and dividing the result by the opening value of the DJIA on the
first trading day in that year.
(3) Actual Dividend Yield for the Strategy Stocks is calculated by adding the
total dividends on the stocks in the year and dividing the result by the
market value of the stocks on the first trading day in that year. Actual
Dividend Yield for the DJIA is calculated by taking the total dividends
credited to the DJIA and dividing the result by the opening value of the
DJIA on the first trading day of the year.
(4) Total Return represents the sum of Appreciation and Actual Dividend Yield.
Individual year Total Returns do not take into consideration any
reinvestment of dividend income.
A-8
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Sponsors, Trustee and Holders of Equity Investor Fund, Select Ten
Portfolio--1998 Series C, Defined Asset Funds (the 'Fund'):
We have audited the accompanying statement of condition and the related defined
portfolio included in the prospectus of the Fund as of September 28, 1998. 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 September 28,
1998 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, N.Y.
September 28, 1998
STATEMENT OF CONDITION AS OF SEPTEMBER 28, 1998
TRUST PROPERTY
Investments--Contracts to purchase Securities(1).........$ 627,484.38
--------------------
Total............................................$ 627,484.38
--------------------
--------------------
LIABILITY AND INTEREST OF HOLDERS
Reimbursement of Sponsors for organization
expenses(2)........................................$ 361.28
--------------------
Subtotal 361.28
--------------------
Interest of Holders of 633,822 Units of fractional
undivided interest outstanding:(3)
Cost to investors(4)...................................$ 633,815.66
Gross underwriting commissions and organization
expenses(5)(2)....................................... (6,692.56)
--------------------
Subtotal 627,123.10
--------------------
Total............................................$ 627,484.38
--------------------
--------------------
- ------------
(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 September 25,
1998. The contracts to purchase securities are collateralized by an irrevocable
letter of credit which has been issued by DBS Bank, New York Branch, in the
amount of $628,004.38 and deposited with the Trustee. The amount of the letter
of credit includes $627,484.38 for the purchase of securities.
(2) A portion of the Public Offering Price consists of securities in an
amount sufficient to pay all or a portion of the costs incurred in establishing
the Portfolio. These costs have been estimated at $0.57 per 1,000 Units. A
distribution will be made as of the close of the initial offering period to an
account maintained by the Trustee from which the organization expenses
obligation of the investors will be satisfied.
(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 $999.99 per 1,000
Units offering price only for that day. The Public Offering Price on any
subsequent business day will vary.
(4) Aggregate public offering price computed on the basis of the value
of the underlying securities at 4:00 p.m., Eastern time on September 25, 1998.
(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 is
payable on the first of each month December 1, 1998 through September 1, 1999.
Distributions will be made 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 September 1, 1999, the remaining
portion of the distribution applicable to such units will be transferred to such
account on the redemption date.
A-9
<PAGE>
DEFINED ASSET FUNDSSM
PROSPECTUS--PART B
EQUITY INVESTOR FUND SELECT TEN PORTFOLIO
FURTHER INFORMATION REGARDING THE FUND MAY BE OBTAINED
WITHIN FIVE DAYS OF WRITING OR CALLING THE TRUSTEE AT THE ADDRESS AND
TELEPHONE NUMBER SET FORTH ON THE BACK COVER OF THIS PROSPECTUS.
Index
PAGE
----
Portfolio Description...................... 1
Risk Factors............................... 3
How to Buy Units........................... 4
How to Redeem or Sell Units................ 5
Trust Termination.......................... 7
Rollover................................... 7
Income, Distributions and Reinvestment..... 8
PAGE
----
Portfolio Expenses......................... 9
Taxes...................................... 9
Records and Reports........................ 11
Trust Indenture............................ 11
Miscellaneous.............................. 12
Exchange Option............................ 15
Supplemental Information................... 15
PORTFOLIO DESCRIPTION
THE STRATEGY
Simple strategies can sometimes be the most effective. The Portfolio seeks
total return by acquiring the ten highest dividend yielding stocks in the Dow
Jones Industrial Average* as of the date indicated in Part A, and holding them
for about one year. This investment strategy is based on three time-tested
investment principles: time in the market is more important than timing the
market; the stocks to buy are the ones everyone else is selling; and dividends
can be an important part of total return. Because issuers of DJIA stocks are
highly capitalized, established companies, they are generally able to survive
adverse developments. An investment in the Portfolio can be cost-efficient,
avoiding the odd-lot costs of buying small quantities of securities directly.
Purchasing a portfolio of these stocks as opposed to one or two provides a more
diversified holding. There is only one investment decision instead of ten, four
quarterly dividends instead of 40. Investments in a number of companies with
high dividends relative to their stock prices is designed to increase the
Portfolio's potential for higher returns. Investing in these stocks of the DJIA
may be effective as well as conservative because regular dividends are common
for established companies and dividends have accounted for a substantial portion
of the total return on stocks of the DJIA as a group. The Portfolio's return
will consist of a combination of capital appreciation and current dividend
income. The Portfolio will terminate in about one year, when investors may
choose to either receive the distribution in cash or reinvest in the next Series
(if available) at a reduced sales charge. There can be no assurance that the
dividend rates on the selected stocks will be maintained. Reduction or
elimination of a dividend could adversely affect the stock price as well.
The first DJIA, consisting of 12 stocks, was published in The Wall Street
Journal in 1896. The Dow Jones Industrial Average includes some of the most
well-known, widely followed and highly capitalized companies in America. These
companies are major factors in their industries. These companies file
information with the SEC which is available free of charge upon request from the
Trustee.
- --------------
* The name 'Dow Jones Industrial Average' is the property of Dow Jones &
Company, Inc., which is not affiliated with the Sponsors, has not participated
in any way in the creation of the Portfolio or in the selection of stocks
included in the Portfolio and has not reviewed or approved any information
included in this Prospectus.
1
<PAGE>
LIST AS OF OCTOBER 1, 1928 CURRENT LIST
- ----------------------------------------------------------------------
Allied Chemical Allied Signal
American Can Aluminum Co. of America
American Smelting American Express
American Sugar AT&T
American Tobbaco Boeing
Atlantic Refining Caterpillar
Bethlehem Steel Chevron
Chrysler Coca-Cola
General Electric Du Pont
General Motors Eastman Kodak
General Railway Signal Exxon
Goodrich General Electric
International Harvester General Motors
International Nickel Goodyear
Mack Trucks Hewlett-Packard
Nash Motors IBM
North American International Paper
Paramount Publix Johnson & Johnson
Postum, Inc. J.P. Morgan & Co.
Radio Corporation of America (RCA) McDonald's
Sears Roebuck Merck
Standard Oil of New Jersey Minnesota Mining & Manufacturing
Texas Corporation Philip Morris
Texas Gulf Sulphur Procter & Gamble
Union Carbide Sears Roebuck
United States Steel Travelers Group
Victor Talking Machine Union Carbide
Westinghouse Electric United Technologies
Woolworth Wal-Mart Stores
Wright Aeronautical Walt Disney
PORTFOLIO SELECTION
The Portfolio contains ten common stocks in the DJIA having the highest
dividend yields as of the date indicated in Part A. 'Highest dividend yield' is
calculated for each Security by annualizing the last quarterly or semi-annual
ordinary dividend distributed on the Security and dividing the result by its
closing sales price. This yield is historical and there is no assurance that any
dividends will be declared or paid in the future on the Securities. No leverage
or borrowing is used nor does the Portfolio contain other kinds of securities to
enhance yield.
The Strategy selection process is a straightforward, objective, mathematical
application that ignores any subjective factors concerning an issuer in the
DJIA, an industry or the economy generally. The application of the Strategy may
cause the Portfolio to own a stock that the Sponsors do not recommend for
purchase and, in fact, the Sponsors may have sell recommendations on a number of
the stocks in the Portfolio at the time the stocks are selected for inclusion in
the Portfolio. Various theories attempt to explain why a common stock is among
the ten highest yielding stocks in the DJIA at any given time: the issuer may be
in financial difficulty or out of favor in the market because of weak earnings
or performance or forecasts or negative publicity; uncertainties relating to
pending or threatened litigation or pending or proposed legislation or
government regulation; the stock may be a cyclical stock reacting to national
and international economic developments; or the market may be anticipating a
reduction in or the elimination of the issuer's dividend. Some of the foregoing
factors may be relevant to only a segment of an issuer's overall business yet
the publicity may be strong enough to outweigh otherwise solid business
performance. In addition, companies in certain industries have historically paid
relatively high dividends.
2
<PAGE>
The deposit of the Securities on the initial date of deposit established a
proportionate relationship among the number of shares of each Security. During
the 90-day period following the initial date of deposit the Sponsors may deposit
additional Securities in order to create new Units, maintaining to the extent
practicable that original proportionate relationship. Deposits of additional
Securities subsequent to the 90-day period must generally replicate exactly the
proportionate relationship among the number of shares of each Security at the
end of the initial 90-day period. 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 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 will have the effect of increasing
brokerage commissions while reducing market risk. Portfolio investors may
benefit from reduced commissions and institutional prices available to the
Portfolio.
Because each Defined Asset Fund is a preselected portfolio, you know the
securities before you invest. Of course, the Portfolio will change somewhat over
time, as Securities are purchased upon creation of additional Units, as
securities are sold to meet Unit redemptions or in other limited circumstances.
PORTFOLIO SUPERVISION
The Portfolio follows a buy and hold investment strategy in contrast to the
frequent portfolio changes of a managed fund based on economic, financial and
market analyses. Although the Portfolio is regularly reviewed, because of the
Strategy, the Portfolio is unlikely to sell any of the Securities, other than to
satisfy redemptions of units, or to cease buying additional shares in connection
with the issuance of Additional Units. More specifically, adverse developments
concerning a Security including the adverse financial condition of the issuer, a
failure to maintain a current dividend rate, the institution of legal
proceedings against the issuer, a default under certain documents materially and
adversely affecting the future declaration of dividends, or a decline in the
price or the occurrence of other market or credit factors (including a public
tender offer or a merger or acquisition transaction) that might otherwise make
retention of the Security detrimental to the interest of investors, will
generally not cause the Portfolio to dispose of a Security or cease buying it.
Furthermore, the Portfolio will likely continue to hold a Security and purchase
additional shares notwithstanding its ceasing to be included among the ten
highest dividend yielding stocks in the DJIA or even its deletion from the DJIA.
RISK FACTORS
An investment in the Portfolio 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. The rights of holders of common stocks to receive payments
from the issuer are generally inferior to the rights of creditors of, or holders
of debt obligations or preferred stocks issued by, the issuer. Moreover, because
common stocks do not represent an obligation of the issuer they 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. Equity markets
can be affected by 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. Additionally, equity markets have been at historically
high levels and no assurance can be given that these levels will continue. There
can be no assurance that the Portfolio will be effective in achieving its
objective over its one-year life 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 investment program.
3
<PAGE>
LITIGATION AND LEGISLATION
Philip Morris Companies common stock represents approximately 10% of the
value of the Portfolio. Pending legal proceedings against Philip Morris cover a
wide range of matters including product liability and consumer protection.
Damages claimed in many of the smoking and health cases alleging personal injury
(both individual and class actions), and in health cost recovery cases brought
by governments, unions and similar entities seeking reimbursement for health
care expenditures, aggregate many billions of dollars.
In June 1997, Philip Morris and other companies in the U.S. tobacco industry
entered into a settlement of significant litigation and regulatory issues
affecting the industry generally. While the costs of that settlement to the
tobacco industry would have been great, industry leaders considered that it at
least would reduce uncertainties facing the industry and increase stability in
business and capital markets. Now, however, legislation pending in Congress (the
McCain bill) threatens the negotiated settlement, substantially changing many
aspects of it and increasing the uncertainty surrounding the proposed resolution
of issues that could adversely affect the volume, operating revenues and
financial position of tobacco companies such as Philip Morris.
The Sponsors cannot predict the outcome of the litigation pending against
Philip Morris or how the current uncertainty concerning regulatory and
legislative measures will ultimately be resolved. The Sponsors cannot predict
whether these and other possible developments will have a material effect on the
price of Philip Morris stock over the term of the Portfolio, which could in turn
adversely affect Unit prices.
Except as stated above, the Sponsors do 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 Portfolio, although pending litigation may have a
material adverse effect on the value of Securities in the Portfolio. 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, particularly with respect to the environment or with
respect to the petroleum or tobacco industry, 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 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 PORTFOLIO
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. See Trust Termination.
HOW TO BUY UNITS
Units are available from any of the Sponsors 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 Portfolio.
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 and Focus Portfolios, or certain
other Selected Equity Investor Series, 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:
4
<PAGE>
<TABLE><CAPTION>
APPLICABLE SALES CHARGE
(GROSS UNDERWRITING PROFIT)
---------------------------
AS % OF
PUBLIC AS % OF NET
OFFERING AMOUNT
AMOUNT PURCHASED PRICE INVESTED
- -------------------------------------------------------------------------- ----------- ------------
<S> <C> <C>
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
</TABLE>
In addition, a portion of the Public Offering Price also consists of securities
in an amount sufficient to pay for all or a portion of the costs incurred in
establishing the Portfolio, including the cost of the initial preparation of
documents relating to the Portfolio, federal and state registration fees, and
the initial fees and expenses of the Trustee, legal expenses and any 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.
Prudential Securities Incorporated, which will participate only in rollover
sales, will receive a preferred dealer concession of $13.00 per 1,000 Units of
this Portfolio.
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 or deducted in
calculating an in-kind distribution, 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 certain Sponsors and Sponsor affiliates and non-employee
directors of Merrill Lynch & Co., Inc. may purchase Units subject only to the
Deferred Sales Charge.
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, 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 (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
Sponsors nor the Trustee guarantee 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
Sponsors have 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.
5
<PAGE>
REDEEMING UNITS
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 receipt of your request (and any 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 Portfolio assets;
deducting unpaid taxes or other governmental charges, accrued but unpaid
Portfolio 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 of liquidating Securities to pay the redemption
price.
As long as the Sponsors are maintaining a secondary market for Units (as
described below), the Trustee will not actually redeem your Units but will sell
them to the Sponsors for net asset value. If the Sponsors are 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 Income and Capital Accounts to pay
redemptions, the Trustee may sell Securities selected by the Agent for the
Sponsors based on market and credit factors determined to be in the best
interest of the Portfolio. 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
Portfolio. 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.
Any investor and related accounts owning Units representing Securities with
a value of at least $250,000 who redeems those Units prior to the rollover
notification date indicated in Part A of the Prospectus may, in lieu of cash
redemption, request distribution in kind of an amount and value of Securities
per Unit equal to the otherwise applicable Redemption Price per Unit. Generally,
whole shares of each Security together with cash from the Capital Account equal
to any fractional shares to which the investor would be entitled (less any
Deferred Sales Charge payable) will be paid over to a distribution agent and
either held for the account of the investor or disposed of in accordance with
instructions of the investor. Any brokerage commissions on sales of Securities
in connection with in-kind redemptions will be borne by the redeeming investors.
The in-kind redemption option is subject to all applicable legal restrictions
and may be terminated by the Sponsors at any time upon prior notice to
investors.
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 Securities not
reasonably practicable or (iii) for any other period permitted by SEC order.
SPONSORS' SECONDARY MARKET FOR UNITS
The Sponsors, 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. The Sponsors may resell
the Units to other buyers or redeem the Units by tendering them to the Trustee.
You should consult your financial professional for current market prices to
determine if other broker-dealers or banks are offering higher prices for Units.
6
<PAGE>
The Sponsors may discontinue the secondary market for Units without prior
notice if the supply of Units exceeds demand or for other business reasons.
Regardless of whether the Sponsors maintain a secondary market, you have the
right to redeem your Units for net asset value with the Trustee at any time, as
described above.
TRUST TERMINATION
Notice of impending termination of the Portfolio will be provided to
investors. A proportional share of the expenses associated with termination,
including brokerage costs incurred in disposing of Securities, will be borne by
investors remaining at that time. These expenses will reduce the amount of cash
or Securities those investors are to receive in any final distribution.
Upon termination of the Portfolio, the Trustee will distribute the
Securities and any cash in the Portfolio to a distribution agent that will act
as agent for the investors. Unless an investor elects to receive an in-kind
distribution of Securities, as discussed below, the distribution agent will, as
promptly as practicable, sell the investor's pro rata share of the Securities
and distribute to the investor the proceeds of the sale, less brokerage and
other related expenses, and the investor's pro rata share of any cash from the
Portfolio.
Any investor holding units at the termination of the Portfolio may, by
written notice to the Trustee at least ten business days prior to termination,
elect to received an in kind distribution of the investor's pro rata share of
the Securities remaining in the Portfolio at that time (net of the investor's
share of expenses). Fractional shares of Securities will be sold by the
distribution agent and the net proceeds distributed to investors. Investors
subsequently selling Securities received in kind will incur brokerage costs at
that time which may exceed the value of any tax deferral obtained through the
in-kind distribution. Securities received in an in-kind termination distribution
may not be contributed to acquire units of another Series.
ROLLOVER
In lieu of redeeming their units or receiving liquidation proceeds in cash
or in kind upon termination of the Portfolio, investors who hold their Units
with one of the Sponsors may elect, by contacting their financial adviser prior
to the rollover notification date indicated in Part A, to exchange their Units
in the Portfolio for units of next year's corresponding Select Ten Portfolio (if
available). No election to roll over may be made prior to 30 days before the
date of the rollover, and any rollover election will be revocable at any time
prior to the date of the rollover. It is expected that the terms of the new
portfolio will be substantially the same as those of the Portfolio.
The rollover of an investor's Units is intended to be effected in a manner
that will not result in the recognition of either gain or loss for U.S. federal
income tax purposes with respect to Securities that are included in the new
portfolio ('Duplicated Securities'). Units held by an investor who elects the
rollover option will be redeemed through an in-kind distribution to a
distribution agent of the investor's pro rata share of Securities. The
distribution agent will then adjust the Securities distributed to the investor
so that its composition matches the investment profile of the new portfolio.
This adjustment will involve the sale of non-Duplicated Securities and,
possibly, of a portion of certain Duplicated Securities in order to rebalance
the portfolio, and the purchase of replacement Securities. Any excess sales
proceeds, net of sales related expenses, will be distributed to the investor.
After this adjustment the distribution agent will make an in-kind contribution
of the adjusted Securities to the new portfolio. Upon receipt of the in-kind
contribution, the trustee of the new portfolio will issue the appropriate number
of units in the new portfolio to the investor.
An investor who elects the rollover option will recognize capital gain or
loss with respect to the Securities, including fractional Securities, sold by
the distribution agent, but will not recognize gain or loss with respect to the
Duplicated Securities that are contributed in kind to the new portfolio. The
Sponsors intend to provide investors with information that will assist them in
determining their tax liability on an eventual sale of the Duplicated
Securities.
The Sponsors intend to cause the distribution agent to sell those Securities
that will not be contributed to the new portfolio, and then to create units of
the new portfolio, in each case as quickly as possible subject to the Sponsors'
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 Sponsors may, in their sole discretion, undertake a
more gradual sale of 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 Sponsors may enter into
program trades, which may increase brokerage
7
<PAGE>
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 securities to comprise
the new portfolio, those moneys may be uninvested for several days.
Investors who participate in the rollover will not be entitled to receive a
cash distribution with which to pay any taxes incurred as a result of the
rollover procedure. Investors who do not participate in the rollover or
otherwise redeem their Units will continue to hold their Units until the
termination of the Portfolio; however, depending upon the extent of
participation in the rollover, the aggregate size of the Portfolio will be
reduced which could result in an increase in per Unit expenses.
The Sponsors may, in their 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.
INCOME, DISTRIBUTIONS AND REINVESTMENT
INCOME AND DISTRIBUTIONS
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 Portfolio expenses 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.
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. 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 on the final Distribution Day or following liquidation
of the Fund.
REINVESTMENT
Income and principal distributions on Units may be reinvested by
participating in the Portfolio's reinvestment plan. Under the plan, the Units
acquired for investors will be either Units already held in inventory by the
Sponsors or new Units created by the Sponsors' 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 Portfolio. 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 Sponsors reserve 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.
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<PAGE>
PORTFOLIO EXPENSES
Estimated annual Portfolio expenses are listed in Part A of the Prospectus;
if actual expenses exceed the estimate, the excess will be borne by the
Portfolio. The estimated expenses do not include the brokerage commissions
payable by the Portfolio 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 fee scale that reduces the
per 1,000 Units 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 Portfolio 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 Portfolio and other legal fees and expenses, termination
expenses and any governmental charges. The Trustee has a lien on Portfolio
assets to secure reimbursement of these amounts and may sell Securities for this
purpose if cash is not available. The Sponsors receive an annual fee currently
estimated at $0.45 per 1,000 Units to reimburse them for the cost of providing
Portfolio supervisory, bookkeeping and administrative services and for any other
expenses properly chargeable to the Portfolio. While the fee may exceed the
amount of these costs and expenses attributable to the Portfolio, the total of
these fees from all Series of Defined Asset Funds will not exceed the aggregate
amount attributable to all of those Series during any calendar year. The
Trustee's and Sponsors' fees may be adjusted for inflation without investors'
approval.
Advertising and selling expenses will be paid from the Underwriting Account
at no charge to the Portfolio. 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 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
The following discussion addresses only the tax consequences of Units held
as capital assets and does not address the tax consequences of Units held by
dealers, financial institutions or insurance companies.
In the opinion of Davis Polk & Wardwell, special counsel for the Sponsors,
under existing law:
The Portfolio is not an association taxable as a corporation for federal
income tax purposes. Each investor will be considered the owner of a pro
rata portion of each Security in the Portfolio under the grantor trust rules
of Sections 671-679 of the Internal Revenue Code of 1986, as amended (the
'Code'). Each investor will be considered to have received all of the
dividends paid on his pro rata portion of each Security when such dividends
are received by the Portfolio, regardless of whether such dividends are used
to pay a portion of Portfolio expenses or whether they are automatically
reinvested (see Reinvestment Plan).
Amounts considered to have been received by a corporate investor from
domestic corporations that constitute dividends for federal income tax
purposes will generally qualify for the dividends-received deduction, which
is currently 70%. Depending upon the particular corporate investor's
circumstances, limitations on the availability of the dividends-received
deduction may be applicable. Further, Congress from time to time considers
proposals that would adversely affect the after-tax return to investors that
can take advantage of the deduction. For example, the Taxpayer Relief Act of
1997 requires that the 46-day holding period for the dividends-received
deduction must begin before and include each ex-dividend date and excludes
the purchase date and any days during which the investor's investment is
hedged. Investors are urged to consult their own tax advisers in this
regard.
An individual investor who itemizes deductions will be entitled to deduct
his pro rata share of current Portfolio expenses only to the extent that
this amount together with the investor's other miscellaneous deductions
exceeds 2% of his adjusted gross income. The Code further restricts the
ability of an individual investor with an adjusted gross income in excess of
a specified amount (for 1998, $124,500 or $62,250 for a married person
filing a separate return) to claim itemized deductions (including his pro
rata share of Portfolio expenses).
The investor's basis in his Units will equal the cost of his Units,
including the initial sales charge. A portion of the sales charge is
deferred until the termination of the Portfolio 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
9
<PAGE>
Charge') and a charge for organizational expenses. The annual statement and
the relevant tax reporting forms received by investors will be based upon
the amounts paid to them, net of the Deferred Sales Charge and the charge
for organizational expenses. Accordingly, investors should not increase
their basis in their Units by the Deferred Sales Charge amount or any amount
used to pay organizational expenses.
An investor will generally recognize capital gain or loss when the
investor disposes of his Units for cash (by sale or redemption) or when the
Trustee disposes of the Securities from the Portfolio. An investor will not
recognize gain or loss upon the distribution of a pro rata amount of each of
the Securities by the Trustee to an investor (or to his agent) in redemption
of Units or upon termination of the Portfolio, except to the extent of cash
received in lieu of fractional shares. The redeeming investor's basis for
the Securities will be equal to his basis for the same Securities
(previously represented by his Units) prior to the redemption, and his
holding period for the Securities will include the period during which he
held his Units.
An investor who elects to roll over into a new portfolio (a 'rollover
investor') will not recognize gain or loss either upon the distribution of
Securities by the Trustee to the distribution agent or upon the contribution
of Duplicated Securities (as defined under Rollover) to the new portfolio.
The rollover investor will generally recognize capital gain or loss as a
consequence of the distribution agent's sale of non-Duplicated Securities.
The rollover investor's basis for the Duplicated Securities that are
contributed in kind to the new portfolio will be equal to his basis for the
same Duplicated Securities prior to the rollover.
A capital gain or loss is long-term if the relevant asset is held for
more than one year and short-term if held for one year or less. A
noncorporate investor may be entitled to the 20% maximum federal tax rate
for capital gains derived from the Portfolio if he has held his Units for
more than one year, or if his holding period for contributed Duplicated
Securities (which, in the case of a rollover investor, includes the period
during which he held an interest in the same Duplicated Securities in prior
years' corresponding Select Ten Portfolios) is greater than one year. The
deduction of capital losses is subject to limitations. Investors should
consult their tax advisers regarding these matters.
Under the income tax laws of the State and City of New York, the
Portfolio is not an association taxable 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.
The foregoing discussion summarizes only certain U.S. federal and New
York State and City income tax consequences of an investment in Units by
investors who are U.S. persons, as defined in the Code. Foreign investors
(including nonresident alien individuals and foreign corporations) not
engaged in U.S. trade or business will generally be subject to 30%
withholding tax (or lower applicable treaty rate) on dividend distributions.
Investors may be subject to taxation in New York or in other U.S. or foreign
jurisdictions and should consult their own tax advisers in this regard.
* * * *
At the termination of the Portfolio, the Trustee will furnish to each
investor an annual statement containing information relating to the dividends
received by the Portfolio on the Securities, the cash proceeds received by the
Portfolio from the disposition of any Security (resulting from redemption or the
sale by the Fund of any Security), and the fees and expenses paid by the
Portfolio. The Trustee will also furnish annual information returns to each
investor and to the Internal Revenue Service.
RETIREMENT PLANS
This Series of Equity Investor 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 (prior to the year 2000) or tax-deferred rollover treatment.
Investors 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 advisers with
respect to the establishment and maintenance of any of these plans.
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<PAGE>
These plans are offered by brokerage firms, including the Sponsor of this
Portfolio, and other financial institutions. Fees and charges with respect to
such plans may vary.
Retirement Plans for the Self-Employed--Keogh Plans. Units 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 ($4,000 in a
spousal account).
Individual Retirement Account--IRA. Any individual can make use of a
qualified IRA arrangement for the purchase of Units. Any individual (including
one covered by an employer retirement plan) can make a contribution to an IRA
equal to the lesser of $2,000 ($4,000 in a spousal account) or 100% of earned
income; such investment must be made in cash. However, the deductible amount of
a contribution by an individual covered by an employer retirement plan 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 a married individual filing a
joint return) or $200 (in the case of a married individual filing a separate
return). These income threshholds will gradually be increased by the year 2004
to $50,000 for a single individual and $80,000 for a married individual filing
jointly. 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. The 10% surtax will be waived for
withdrawals for certain educational and first-time homebuyer expenses. Subject
to certain income limitations, under a special type of IRA, contributions would
be non-deductible but distributions would be tax-free if the account were held
for at least five years and the account holder was at least 59 1/2 at the time
of the distribution.
Corporate Pension and Profit-Sharing Plans. A pension or profit-sharing plan
for employees of a corporation may purchase Units.
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 Portfolio,
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 Portfolio, the Trustee sends each investor of record a statement summarizing
transactions in the Portfolio'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 Portfolio,
among other matters. Portfolio 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 Portfolio 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 Sponsors 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 Portfolio
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.
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<PAGE>
The Trustee may resign upon notice to the Sponsors. It may be removed by
investors holding 51% of the Units at any time or by the Sponsors 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
Sponsors determine 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 Sponsors will use their best
efforts to appoint a successor promptly; however, if upon 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.
Any Sponsor may resign so long as one Sponsor with a net worth of $2,000,000
remains. A new Sponsor may be appointed by the remaining Sponsors and the
Trustee to assume the duties of the resigning Sponsor. If there is only one
Sponsor and it 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 Portfolio or continue to act as Trustee without a
Sponsor. Merrill Lynch, Pierce, Fenner & Smith Incorporated has been appointed
as Agent for the Sponsors by the other Sponsors.
The Sponsors 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 a
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.
SPONSORS
The Sponsors are listed on the back cover of the Prospectus. They may
include Merrill Lynch, Pierce, Fenner & Smith Incorporated, a wholly-owned
subsidiary of Merrill Lynch & Co., Inc.; Salomon Smith Barney Inc., an indirect
wholly-owned subsidiary of The Travelers Inc. and PaineWebber Incorporated, a
wholly-owned subsidiary of PaineWebber Group Inc. Each Sponsor, or one of its
predecessor corporations, has acted as Sponsor of a number of series of unit
investment trusts. Each Sponsor has acted as principal underwriter and managing
underwriter of other investment companies. The Sponsors, in addition to
participating as members of various selling groups or as agents of other
investment companies, execute orders on behalf of investment companies for the
purchase and sale of securities of these companies and sell securities to these
companies in their capacities as brokers or dealers in securities.
CODE OF ETHICS
The Agent for the Sponsors 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 Agent's
responsibilities to the Funds at a concession not in excess of the maximum sales
charge.
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<PAGE>
YEAR 2000 ISSUES
Many computer systems were designed using only two digits to designate
years. These systems may not be able to distinguish the Year 2000 from the Year
1900 (commonly known as the 'Year 2000 Problem'). Like other investment
companies and financial and business organizations, the Portfolio could be
adversely affected if the computer systems used by the Agent for the Sponsors or
Portfolio service providers do not properly address this problem prior to
January 1, 2000. The Agent for the Sponsors has established a dedicated group to
analyze these issues and to implement any systems modifications necessary to
prepare for the Year 2000. Currently, we do not anticipate that the transition
to the 21st century will have any material effect on the Portfolio. The Agent
for the Sponsors has sought assurances from the Portfolio's other service
providers that they are taking all necessary steps to ensure that their computer
systems will accurately reflect the Year 2000, and the Agent for the Sponsors
will continue to monitor the situation. At this time, however, no assurance can
be given that the Portfolio's other service providers have anticipated every
step necessary to avoid any adverse effect on the Portfolio attributable to the
Year 2000 Problem.
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 Sponsors intend
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 Sponsors do 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.
UNDERWRITERS' AND SPONSORS' PROFITS
Upon sale of the Units, the Underwriters will be entitled to receive sales
charges; each Underwriters' interest in the Underwriting Account will depend on
the number of Units acquired through the issuance of additional Units. The
Sponsors also realize a profit or loss on deposit of the Securities equal to the
difference between the cost of the Securities to the Portfolio (based on the
aggregate value of the Securities on their date of deposit) and the purchase
price of the Securities to the Sponsors plus commissions payable by the
Sponsors. In addition, a Sponsor or Underwriter may realize profits or sustain
losses on Securities it deposits in the Portfolio which were acquired from
underwriting syndicates of which it was a member. During the initial offering
period, the Underwriting Account 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 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
these Units (which include the sales charge) or the prices at which they redeem
the Units. Cash, if any, made available by buyers of Units to the Sponsors prior
to a settlement date for the purchase of Units may be used in the Sponsors'
businesses to the extent permitted by Rule 15c3-3 under the Securities Exchange
Act of 1934 and may be of benefit to the Sponsors.
PERFORMANCE INFORMATION
Total returns, average annualized returns or cumulative returns for various
periods of the Strategy Stocks, the related index, the current or one or more
prior Select Ten Portfolios may be included from time to time in advertisements,
sales literature and reports to current or 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 of longer than a year. Sales
material may also include an illustration of the cumulative results of like
annual investments in Strategy Stocks during an accumulation period and like
annual withdrawals during a distribution period. Figures for actual Portfolios
(but not Strategy Stocks or the related index) reflect deduction of all
Portfolio expenses and unless otherwise stated the maximum sales charge. No
provision is made for any income taxes payable. Similar figures may be given for
Strategy Stocks and other Select Ten Portfolios applying the Strategy to other
indexes. Returns of Strategy Stocks of the three Select Ten Strategies may also
be shown on a combined basis. Returns of Strategy Stocks may also be shown in
comparison to other indexes, to which may be added by year various national and
international political and economic events, milestones in price and market
indicators, and offerings of Defined Asset Funds. This performance may also be
compared for various periods with investments in short-term U.S. Treasury
securities. Investors should bear in mind that this represents past performance
and is no assurance of future results of the current or any future Portfolio.
Advertisements and other material distributed to prospective investors may
include the average annual compounded rate of return on selected
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types of assets for periods of at least 10 years, as compiled by Ibbotson
Associates, compared to the rate of inflation over the same period.
The following chart shows the average annual compounded rate of return of
selected asset classes over the 10-year and 20-year periods ending June 30,
1998, compared to the rate of inflation over the same periods. Of course, this
chart represents past performance of these investments and is no guarantee of
future results, either of these categories or of any Defined Fund. Defined Funds
also have sales charges and expenses which are not reflected in the chart.
<TABLE><CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Stocks (S&P 500)
20 yr 17.42%
10 yr 18.54%
Small-company stocks
20 yr 16.54%
10 yr 14.37%
Long-term corporate bonds
20 yr 10.62%
10 yr 10.72%
U.S. Treasury bills (short-term)
20 yr 7.26%
10 yr 5.42%
U.S. Inflation
20 yr 4.69%
10 yr 3.29%
0 2 4 6 8 10 12 14 16 18 20
Stocks
20 yr
10 yr
Small-
20 yr
10 yr
Long-t
20 yr
10 yr
U.S. T
20 yr
10 yr
U.S. I
20 yr
10 yr
0 22%
</TABLE>
Source: Ibbotson Associates. Used with permission. All rights
reserved.
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 generally 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 regular current income consistent with the preservation of
principal. Unit investment trusts are particularly suited for investors who
prefer to seek long-term profits by purchasing and holding investments, 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.
Defined Asset Funds reflect a buy and hold strategy that the Sponsors
believe can be more effective and less expensive than active management. This
strategy is premised on selection criteria and procedures, diversification and
regular review by investment professionals. Various advertisements and sales
literature may summarize the results of economic studies concerning how stock
movement has tended to be concentrated and how longer-term investments can tend
to reduce risk.
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. Defined equity
funds offer growth potential and some protection against inflation.
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EXCHANGE OPTION
You may exchange Units of this Portfolio for units of other Select or Focus
Series or certain other Defined Asset Funds Equity Investor Series with a
combination of initial and deferred sales charges. Select and Focus Portfolios
have a sales charge for first-time investors of 1% initially and annual deferred
sales charges of $17.50 per 1,000 units. On exchanges, the initial sales charge
is waived and units are acquired subject to any remaining deferred sales
charges. Investors can also exchange units of those Portfolios and similar
series of unaffiliated equity unit investment trusts for Portfolio Units,
subject only to the Portfolio's remaining deferred sales charges. In the future,
the Exchange Option may be extended to other series and types of trusts with
similar sales charge structures.
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 Sponsors are
maintaining a market and which are lawfully for sale in the state where you
reside. 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 adviser. 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 Sponsors are not obligated to maintain a market in any series, there
can be no assurance that units can be exchanged. 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 Portfolio, 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 Portfolio.
15
<PAGE>
Defined
Asset FundsSM
SPONSORS/UNDERWRITERS AND EQUITY INVESTOR FUND
SELECTED DEALER: SELECT TEN PORTFOLIO--
Merrill Lynch, 1998 SERIES C
Pierce, Fenner & Smith IncorporatedThis Prospectus does not contain all of the
Defined Asset Funds information with respect to the investment
P.O. Box 9051 company set forth in its registration
Princeton, NJ 08543-9051 statement and exhibits relating thereto which
(609) 282-8500 have been filed with the Securities and
Salomon Smith Barney Inc. Exchange Commission, Washington, D.C. under
Unit Trust Department the Securities Act of 1933 and the Investment
388 Greenwich Street--23rd Floor Company Act of 1940, and to which reference
New York, NY 10013 is hereby made. Copies of filed material can
(212) 816-4000 be obtained from the Public Reference Section
PaineWebber Incorporated of the Commission, 450 Fifth Street, N.W.,
1200 Harbor Boulevard Washington, D.C. 20549 at prescribed rates.
Weehawken, NJ 07087 The Commission also maintains a Web site that
(201) 902-3000 contains information statements and other
- ------------------------ information regarding registrants such as
Dean Witter Reynolds Inc. Defined Asset Funds that file electronically
Two World Trade Center--59th Floor with the Commission at http://www.sec.gov.
New York, NY 10048 ------------------------
(212) 392-2222 No person is authorized to give any
TRUSTEE: information or to make any representations
The Chase Manhattan Bank with respect to this investment company not
Customer Service Retail Department contained in its registration statement and
Bowling Green Station related exhibits; and any information or
P.O. Box 5187 representation not contained therein must not
New York, NY 10274-5187 be relied upon as having been authorized.
1-800-323-1508 ------------------------
When Units of this Fund are no longer
available, or for investors who will reinvest
into subsequent series of Select Ten
Portfolios, this Prospectus may be used as a
preliminary prospectus for a future series;
in which case 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 registration or qualification under the
securities laws of any such State.
70135--9/98
