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SUBJECT TO COMPLETION, PRELIMINARY PROSPECTUS DATED JANUARY 12, 1999
DEFINED ASSET FUNDSSM
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GOVERNMENT SECURITIES INCOME FUND
U.S. GOVERNMENT AGENCY
LADDERED SERIES
(A UNIT INVESTMENT TRUST)
O PORTFOLIO OF AAA-RATED INTERMEDIATE TERM BONDS
O LADDERED MATURITIES
O MONTHLY INCOME DISTRIBUTIONS
O EXEMPT FROM STATE AND LOCAL TAXES
O U.S. TAX EXEMPT FOR MANY FOREIGN HOLDERS
SPONSORS: -------------------------------------------------
Merrill Lynch, The Securities and Exchange Commission has not
Pierce, Fenner & Smith approved or disapproved these Securities or
Incorporated passed upon the adequacy of this prospectus. Any
Salomon Smith Barney Inc. representation to the contrary is a criminal
PaineWebber Incorporated offense.
Dean Witter Reynolds Inc. Prospectus dated January , 1999.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY STATE.
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Defined Asset FundsSM
Defined Asset FundsSM is America's oldest and largest family of unit investment
trusts, with over $115 billion sponsored over the last 25 years. Defined Asset
Funds has been a leader in unit investment trust research and product
innovation. Our family of Funds helps investors work toward their financial
goals with a full range of quality investments, including municipal, corporate
and government bond portfolios, as well as domestic and international equity
portfolios.
Defined Asset Funds offer a number of advantages:
o A disciplined strategy of buying and holding with a long-term view is the
cornerstone of Defined Asset Funds.
o Fixed portfolio: Defined Funds follow a buy and hold investment strategy;
funds are not managed and portfolio changes are limited.
o Defined Portfolios: We choose the stocks and bonds in advance, so you know
what you're investing in.
o Professional research: Our dedicated research team seeks out stocks or
bonds appropriate for a particular fund's objectives.
o Ongoing supervision: We monitor each portfolio on an ongoing basis.
No matter what your investment goals, tolerance for risk or time horizon,
there's probably a Defined Asset Fund that suits your investment style. Your
financial professional can help you select a Defined Asset Fund that works best
for your investment portfolio.
CONTENTS
PAGE
-----------
Risk/Return Summary and
Portfolio............................................ 3
What You Can Expect From Your Investment................ 5
Monthly Income....................................... 5
Return Figures....................................... 5
Records and Reports.................................. 5
The Risks You Face...................................... 6
Interest Rate Risk................................... 6
Reduced Diversification Risk......................... 6
Litigation Risk...................................... 6
Selling Units........................................... 6
Sponsors' Secondary Market........................... 6
Selling Units to the Trustee......................... 6
How The Fund Works...................................... 7
Pricing.............................................. 7
Evaluations.......................................... 7
Income............................................... 8
Expenses............................................. 8
Portfolio Changes.................................... 8
Fund Termination..................................... 9
Certificates......................................... 9
Trust Indenture...................................... 9
Legal Opinion........................................ 10
Auditors............................................. 10
Sponsors............................................. 10
Trustee.............................................. 11
Underwriters' and Sponsors' Profits.................. 11
Public Distribution.................................. 11
Code of Ethics....................................... 11
Year 2000 Issues..................................... 11
Taxes................................................... 11
Supplemental Information................................ 13
Financial Statements.................................... 14
Report of Independent Accountants.................... 14
Statement of Condition............................... 14
2
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RISK/RETURN SUMMARY
1. WHAT IS THE FUND'S OBJECTIVE?
The Fund seeks current interest income, safety of capital
and flexibility by investing in a fixed, laddered portfolio
of U.S. government agency bonds maturing 2001-2008.
2. WHAT ARE U.S. GOVERNMENT AGENCY BONDS?
These are directly issued by the Federal Home Loan Bank,
the Federal Farm Credit Bank and the Tennessee Valley
Authority to fund sectors of the U.S. economy such as
agriculture, education, transportation, housing, electric
power and deposit insurance. In return, they pay a fixed
rate of interest and principal at maturity.
3. WHAT IS THE FUND'S INVESTMENT STRATEGY?
o The Fund plans to hold to maturity short-and
intermediate-term U.S. government agency bonds with a
current aggregate face amount of $ .
o The Fund is a unit investment trust which means that,
unlike a mutual fund, the Fund's portfolio is not managed.
o You will periodically receive your share of the principal
received as each bond matures.
o 100% of the Portfolio consists of U.S. government agency
bonds.
o The bonds are rated Aaa by Moody's.
4. WHAT ARE THE SIGNIFICANT RISKS?
YOU CAN LOSE MONEY BY INVESTING IN THE FUND. THIS CAN HAPPEN
FOR VARIOUS REASONS, INCLUDING:
o Rising interest rates can reduce the price of your units.
o Assuming no changes in interest rates, when you sell your
units, they will generally be worth less than your cost
because your cost included a sales fee.
o The Fund will receive early returns of principal if
securities are sold before they mature. If this happens your
income will decline and you may not be able to reinvest the
money you receive at as high a yield or as long a maturity.
5. IS THIS FUND APPROPRIATE FOR YOU?
Yes, if you want current monthly income exempt from state
and local personal income taxes in all states. You will
benefit from a professionally selected and supervised
portfolio of U.S. government agency bonds.
The Fund is not appropriate for you if you want a
speculative investment that changes to take advantage of
market movements or if you are a U.S. investor and want an
investment free from federal income tax.
DEFINING YOUR INCOME AND ESTIMATING YOUR RETURN
WHAT YOU MAY EXPECT (Payable on the 25th day of each
month):
Regular Monthly Income per 1,000 units: $
Annual Income per 1,000 units: $
RECORD DAY: 10th day of each month
These figures are estimates on the evaluation date; actual
payments may vary.
Estimated Current Return %
Estimated Long Term Return %
These returns will vary (see page 5).
6. WHAT ARE THE FUND'S FEES AND EXPENSES?
This table shows the costs and expenses you may pay,
directly or indirectly, when you invest in the Fund.
INVESTOR FEES
2.00%
Maximum Sales Fee (Load) on new purchases (as a
percentage of $1,000 invested)
Employees of some of the Sponsors and their affiliates may
be charged a reduced sales fee of no less than $5.00 per
1,000 Units.
The maximum sales fee is reduced if you invest at least
$500,000, as follows:
YOUR MAXIMUM
SALES FEE
IF YOU INVEST: WILL BE:
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Less than $500,000 2.00%
$500,000--$999,999 1.50%
$1,000,000 and over 1.00%
ESTIMATED ANNUAL FUND OPERATING EXPENSES
AMOUNT
PER
1,000 UNITS
-----------
$ 0.
Trustee's Fee
$ 0.
Portfolio Supervision,
Bookkeeping and
Administrative Fees
$ 0.
Evaluator's Fee
$ 0.
Other Operating Expenses
-----------
TOTAL
3
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Defined Portfolio
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Government Securities Income Fund
U.S. Government Agency Laddered Series
<TABLE>
<CAPTION>
MOODY'S COST
PORTFOLIO NO. AND TITLE RATING FACE AMOUNT COUPON MATURITY TO FUND(1)
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<S> <C> <C> <C> <C> <C>
1. Federal Farm Credit Bank Aaa $100,000 5.750% 9/1/05 $
2. Federal Home Loan Bank Aaa $100,000 5.500% 8/15/01 $
3. Federal Home Loan Bank Aaa $100,000 5.125% 9/15/03 $
4. Tennessee Valley Authority Aaa $100,000 5.375% 11/13/08 $
----------------
$400,000
----------------
----------------
</TABLE>
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(1) Evaluation of the Securities by the Evaluator is made on the basis of
current offer side evaluation. On this basis, % of the Securities were
deposited at a premium and % at a discount from par.
AMOUNT
PER 1,000
UNITS
-------------------
$ 2.00
ORGANIZATIONAL COSTS (deducted from
Fund assets at the close of the
initial offering period)
EXAMPLE
This example may help you compare the cost of investing
in the Fund to the cost of investing in other funds.
The example assumes that you invest $10,000 in the Fund
for the periods indicated and sell all your units at the
end of those periods. The example also assumes a 5%
return on your investment each year and that the Fund's
operating expenses stay the same. Although your actual
costs may be higher or lower, based on these assumptions
your costs would be:
1 Year 3 Years 5 Years
$ $ $
You will pay the following expenses if you do not
sell your units:
1 Year 3 Years 5 Years
$ $ $
7. IS THE FUND MANAGED?
Unlike a mutual fund, the Fund is not managed and bonds
are not sold because of market changes. Rather,
experienced Defined Asset Funds financial analysts
regularly review the bonds in the Fund. The Fund may
sell a bond if certain adverse credit or other
conditions exist.
8. HOW DO I BUY UNITS?
The minimum investment is $250.
You can buy units from any of the Sponsors and other
broker-dealers. The Sponsors are listed later in this
prospectus. Some banks may offer units for sale through
special arrangements with the Sponsors, although
certain legal restrictions may apply.
UNIT PRICE PER 1,000 UNITS $
(as of January , 1999)
Unit price is based on the net asset value of the Fund
plus the up-front sales fee. An amount equal to any
principal cash, as well as net accrued but
undistributed interest on the unit, is added to the
unit price. An independent evaluator prices the bonds
at 3:30 p.m. Eastern time every business day. Unit
price changes every day with changes in the prices of
the bonds in the Fund.
UNIT PAR VALUE $1.00
Unit par value means the total amount of money you
should generally receive on each unit by the
termination of the Fund (other than interest and
premium on the bonds). This total amount assumes that
all bonds in the Fund are either paid at maturity at
par or are sold by the Fund at par. If you sell your
units before the Fund terminates, you may receive more
or less than the unit par value.
9. HOW DO I SELL UNITS?
You may sell your units at any time to any Sponsor or
the Trustee for the net asset value determined at the
close of business on the date of sale. You will not pay
any other fee when you sell your units.
10. HOW ARE DISTRIBUTIONS MADE AND TAXED?
The Fund pays income monthly. Interest on the bonds in
this Fund is subject to federal income taxes for U.S.
investors, but exempt from state and local personal
income taxes. If you are a non-U.S. investor, your
interest may be exempt from U.S. federal income taxes,
including withholding taxes.
You will also receive principal payments when the
securities mature or if they are sold (when the cash
available is more than $5.00 per 1,000 units. You will
be subject to tax on any gain realized by the Fund on
the disposition of bonds.
11. WHAT OTHER SERVICES ARE AVAILABLE?
REINVESTMENT
You will receive your monthly income in cash unless you
choose to compound your interest income by reinvesting
into additional units of the Fund with no sales charge.
Contact your broker, dealer or financial institution.
4
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WHAT YOU CAN EXPECT FROM YOUR INVESTMENT
MONTHLY INCOME
The Fund will pay you regular monthly income. Your monthly income may vary
because of:
o elimination of one or more securities from the Fund's portfolio because of
redemptions or sales; or
o a change in the Fund's expenses;
Changes in interest rates generally will not affect your monthly income because
the portfolio is fixed.
Along with your monthly income, you will receive your share of any available
principal.
RETURN FIGURES
We cannot predict your actual return, which will vary with unit price, how long
you hold your investment and changes in the portfolio, interest income and
expenses.
Estimated Current Return equals the estimated annual cash to be received from
the securities in the Fund less estimated annual Fund expenses, divided by the
Unit Price (including the maximum sales fee):
Estimated Annual Estimated
Interest Income - Annual Expenses
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Unit Price
Estimated Long Term Return is a measure of the estimated return over the
estimated life of the Fund. Unlike Estimated Current Return, Estimated Long Term
Return reflects maturities, discounts and premiums of the securities in the
Fund. It is an average of the yields to maturity of the individual securities in
the portfolio, adjusted to reflect the Fund's maximum sales fee and estimated
expenses. We calculate the average yield for the portfolio by weighting each
security's yield by its market value and the time remaining to the maturity
date.
Yields on individual securities depend on many factors including general
conditions of the bond markets, the size of a particular offering and the
maturity and quality rating of the particular issues. Yields can vary among
bonds with similar maturities, coupons and ratings.
These return quotations are designed to be comparative rather than predictive.
RECORDS AND REPORTS
You will receive:
o a monthly statement of income payments and any principal payments;
o a notice from the Trustee when new securities are deposited in exchange or
substitution for securities originally deposited;
o an annual report on Fund activity; and
o annual tax information. This will also be sent to the IRS. You must report the
amount of interest received during the year.
You may request:
o copies of evaluations to enable you to comply with federal and state tax
reporting requirements; and
o audited financial statements of the Fund.
You may inspect records of Fund transactions at the Trustee's office during
regular business hours.
5
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THE RISKS YOU FACE
INTEREST RATE RISK
Investing involves risks, including the risk that your investment will decline
in value if interest rates rise. Generally, bonds with longer maturities will
change in value more than bonds with shorter maturities. Of course, we cannot
predict how interest rates may change.
REDUCED DIVERSIFICATION RISK
If many investors sell their units, the Fund will have to sell bonds. This could
reduce the diversification of your investment and increase your share of Fund
expenses.
LITIGATION RISK
We do not know of any pending litigation that might have a material adverse
effect upon the Fund.
SELLING UNITS
You can sell your units at any time for a price based on net asset value. Your
net asset value is calculated each business day by:
o adding the value of the bonds, net accrued interest, cash and any other
Fund assets;
o subtracting accrued but unpaid Fund expenses, unreimbursed Trustee
advances, cash held to buy back units or for distribution to investors and
any other Fund liabilities; and
o dividing the result by the number of outstanding units.
Your net asset value when you sell may be more or less than your cost because of
sales fees, market movements and changes in the portfolio.
As of the close of the initial offering period, the price you receive will be
reduced to reflect estimated organization costs.
SPONSORS' SECONDARY MARKET
While we are not obligated to do so, we will buy back units at net asset value
without any other fee or charge. We may resell the units to other buyers or 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.
We have maintained a secondary market continuously for over 25 years, but we
could discontinue it without prior notice for any business reason.
SELLING UNITS TO THE TRUSTEE
Regardless of whether we maintain a secondary market, you can sell your units to
the Trustee at any time by sending the Trustee a letter (with any outstanding
certificates if you hold Unit certificates). You must properly endorse your
certificates (or execute a written transfer instrument with signatures
guaranteed by an eligible institution). Sometimes, additional documents are
needed such as a trust document, certificate of corporate authority, certificate
of death or appointment as executor, administrator or guardian.
Within seven days after your request and the necessary documents are received,
the Trustee will mail a check to you. Contact the Trustee for additional
information.
As long as we are maintaining a secondary market, the Trustee will sell your
units to us at a price based on net asset value. If there is no secondary
market, the Trustee may sell your units in the over-the-counter market for a
6
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higher price, but it is not obligated to do so. In that case, you will receive
the net proceeds of the sale.
If the Fund does not have cash available to pay you for units you are selling,
the agent for the Sponsors will select bonds to be sold. Bonds will be selected
based on market and credit factors. These sales could be made at times when the
bonds would not otherwise be sold and may result in your receiving less than the
unit par value and also reduce the size and diversity of the Fund.
There could be a delay in paying you for your units:
o if the New York Stock Exchange is closed (other than customary weekend and
holiday closings);
o if the SEC determines that trading on the New York Stock Exchange is
restricted or that an emergency exists making sale or evaluation of the
bonds not reasonably practicable; and
o for any other period permitted by SEC order.
We may amend or terminate this exchange option at any time without notice.
HOW THE FUND WORKS
PRICING
The price of a unit includes interest accrued on the bonds, less expenses, from
the initial date of deposit up to, but not including, the settlement date, which
is usually three business days after the purchase date of the unit.
Bonds also carry accrued but unpaid interest up to the initial date of deposit.
To avoid having you pay this additional accrued interst (which earns no return)
when you buy, the Trustee advances this amount to the Sponsors. The Trustee
recovers this advance from interest received on the bonds.
In addition, a portion of the price of a unit consists of cash so that the
Trustee can provide you with regular monthly income. When you sell your units
you will receive your share of this cash.
In addition, as with mutual funds, the Fund (and therefore the investors) pay
all or some of the costs of organizing the Fund including:
o cost of initial preparation of legal documents;
o federal and state registration fees;
o initial fees and expenses of the Trustee;
o initial audit; and
o legal expenses and other out-of-pocket expenses.
EVALUATIONS
An independent Evaluator values the securities on each business day (excluding
Saturdays, Sundays and the following holidays as observed by the New York Stock
Exchange: New Year's Day, Presidents' Day, Martin Luther King, Jr. Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas;
and the following federal holidays: Columbus Day and Veterans Day). Values are
based on current bid or offer prices for the securities or comparable bonds. In
the past, the difference between bid and offer prices of U.S. government agency
bonds of the type in this Fund has ranged from about 1/8 to 1/4 of 1%.
7
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INCOME
Interest on any bonds purchased on a when-issued basis or for a delayed delivery
does not begin to accrue until the bonds are delivered to the Fund. If a bond is
not delivered on time and the Trustee's annual fee and expenses do not cover the
additional accrued interest, we will treat the contract to buy the bond as
failed.
The Trustee credits interest to an Income Account and other receipts to a
Capital Account. The Trustee may establish a Reserve Account by withdrawing from
these accounts amounts it considers appropriate to pay any material liability.
These accounts do not bear interest.
EXPENSES
The Trustee is paid monthly. It also benefits when it holds cash for the Fund in
non-interest bearing accounts. The Trustee may also receive additional amounts:
o to reimburse the Trustee for the Fund's operating expenses;
o for extraordinary services and costs of indemnifying the Trustee and the
Sponsors;
o costs of actions taken to protect the Fund and other legal fees and
expenses;
o expenses for keeping the Fund's registration statement current; and
o Fund termination expenses and any governmental charges.
The Sponsors are currently reimbursed up to 45 cents per $1,000 face amount
annually for providing portfolio supervisory, bookkeeping and administrative
services and for any other expenses properly chargeable to the Fund. While this
fee may exceed the amount of these costs and expenses attributable to this Fund,
the total of these fees for all Series of Defined Asset Funds will not exceed
the aggregate amount attributable to all of these Series for any calendar year.
The Fund also pays the Evaluator's fees. Certain of these expenses were
previously paid for by the Sponsors.
The Trustee's, Sponsors' and Evaluator's fees may be adjusted for inflation
without investors' approval.
The Sponsors will pay advertising and selling expenses at no charge to the Fund.
If Fund expenses exceed initial estimates, the Fund will owe the excess. The
Trustee has a lien on Fund assets to secure reimbursement of Fund expenses and
may sell bonds if cash is not available.
PORTFOLIO CHANGES
The Sponsors and Trustee are not liable for any default or defect in a bond, if
a contract to buy any bond fails in the first 90 days of the Fund, we generally
will deposit a replacement government agency bond with a similar yield,
maturity, rating and price.
Unlike a mutual fund, the portfolio is designed to remain intact and we may keep
bonds in the portfolio even if their credit quality declines or other adverse
financial circumstances occur. However, we may sell a bond in certain cases if
we believe that certain adverse credit or certain other conditions exist.
If we maintain a secondary market in units but are unable to sell the units that
we buy in the secondary market, we will redeem units, which will affect the size
and composition of the portfolio. Units offered in the secondary
8
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market may not represent the same face amount of bonds that they did originally.
We decide whether or not to offer units for sale that we acquire in the
secondary market after reviewing:
o diversity of the portfolio;
o size of the Fund relative to its original size;
o ratio of Fund expenses to income;
o current and long-term returns;
o degree to which units may be selling at a premium over par; and
o cost of maintaining a current prospectus.
FUND TERMINATION
The Fund will terminate following the stated maturity or sale of the last bond
in the portfolio. The Fund may also terminate earlier with the consent of
investors holding 51% of the units or if total assets of the Fund have fallen
below 40% of the face amount of bonds deposited. We will decide whether to
terminate the Fund early based on the same factors used in deciding whether or
not to offer units in the secondary market.
When the Fund is about to terminate you will receive a notice, and you will be
unable to sell your units after that time. On or shortly before termination, we
will sell any remaining securities, and you will receive your final
distribution. Any bond that cannot be sold at a reasonable price may continue to
be held by the Trustee in a liquidating trust pending its final sale.
You will pay your share of the expenses associated with termination, including
brokerage costs in selling bonds. This may reduce the amount you receive as your
final distribution.
CERTIFICATES
Certificates for units are issued on request. You may transfer certificates by
complying with the requirements for redeeming certificates, described above. You
can replace lost or mutilated certificates by delivering satisfactory indemnity
and paying the associated costs.
TRUST INDENTURE
The Fund is a 'unit investment trust' governed by a Trust Indenture, a contract
among the Sponsors, the Trustee and the Evaluator, which sets forth their duties
and obligations and your rights. A copy of the Indenture is available to you on
request to the Trustee. The following summarizes certain provisions of the
Indenture.
The Sponsors and the Trustee may amend the Indenture without your consent:
o to cure ambiguities;
o to correct or supplement any defective or inconsistent provision;
o to make any amendment required by any governmental agency; or
o to make other changes determined not to be materially adverse to your best
interest (as determined by the Sponsors).
Investors holding 51% of the units may amend the Indenture. Every investor must
consent to any amendment that changes the 51% requirement. No amendment may
reduce your interest in the Fund without your written consent.
The Trustee may resign by notifying the Sponsors. The Sponsors may remove the
Trustee without your consent if:
9
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o it fails to perform its duties and the Sponsors determine that its
replacement is in your best interest; or
o it becomes incapable of acting or bankrupt or its affairs are taken over by
public authorities.
Investors holding 51% of the units may remove the Trustee. The Evaluator may
resign or be removed by the Sponsors and the Trustee without the consent of
investors. The resignation or removal of either becomes effective when a
successor accepts appointment. The Sponsors will try to appoint a successor
promptly; however, if no successor has accepted within 30 days after notice of
resignation, the resigning Trustee or Evaluator may petition a court to appoint
a successor.
Any Sponsor may resign as long as one Sponsor with a net worth of $2 million
remains and agrees to the resignation. The remaining Sponsors and the Trustee
may appoint a replacement. If there is only one Sponsor and it fails to perform
its duties or becomes bankrupt the Trustee may:
o remove it and appoint a replacement Sponsor;
o liquidate the Fund; or
o continue to act as Trustee without a Sponsor.
Merrill Lynch, Pierce, Fenner & Smith Incorporated acts as agent for the
Sponsors.
The Trust Indenture contains customary provisions limiting the liability of the
Trustee, the Sponsors and the Evaluator.
LEGAL OPINION
Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York 10017, as
special counsel for the Sponsors, has given an opinion that the units are
validly issued.
AUDITORS
Deloitte & Touche LLP, 2 World Financial Center, New York, New York 10281,
independent accountants, audited the Statement of Condition included in this
prospectus.
SPONSORS
The Sponsors are:
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED (a wholly-owned subsidiary of
Merrill Lynch & Co., Inc.)
P.O. Box 9051,
Princeton, NJ 08543-9051
SALOMON SMITH BARNEY INC. (an indirectly wholly-owned subsidiary of Citigroup
Inc.)
388 Greenwich Street--23rd Floor,
New York, NY 10013
DEAN WITTER REYNOLDS INC. (a principal operating subsidiary of Morgan Stanley
Dean Witter & Co.)
Two World Trade Center--59th Floor,
New York, NY 10048
PAINEWEBBER INCORPORATED (a wholly-owned subsidiary of PaineWebber Group Inc.)
1285 Avenue of the Americas,
New York, NY 10019
Each Sponsor is a Delaware corporation and it, or its predecessor, has acted as
sponsor to many unit investment trusts. As a registered broker-dealer each
Sponsor buys and sells securities (including investment company shares) for
others (including investment companies) and participates as an underwriter in
various selling groups.
10
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TRUSTEE
The Bank of New York,101 Barclay Street-- 17W, New York, New York 10268, is the
Trustee. It is supervised by the Federal Deposit Insurance Corporation, the
Board of Governors of the Federal Reserve System and New York State banking
authorities.
UNDERWRITERS' AND SPONSORS' PROFITS
Underwriters receive sales charges when they sell units. The Sponsors also
realized a profit or loss on the initial deposit of the securities. Any cash
made available by you to the Sponsors before the settlement date for those units
may be used in the Sponsors' businesses to the extent permitted by federal law
and may benefit the Sponsors.
In maintaining a secondary market, the Sponsors will also realize profits or
sustain losses in the amount of any difference between the prices at which they
buy units and the prices at which they resell or redeem them.
PUBLIC DISTRIBUTION
The Sponsors do not intend to qualify units for sale in any foreign countries.
This prospectus does not constitute an offer to sell units in any country where
units cannot lawfully be sold.
CODE OF ETHICS
Merrill Lynch, as agent for the Sponsors, has adopted a code of ethics requiring
preclearance and reporting of personal securities transactions by its employees
with access to information on portfolio transactions. The goal of the code is to
prevent fraud, deception or misconduct against the Fund and to provide
reasonable standards of conduct.
YEAR 2000 ISSUES
Many computer systems were designed in such a way that they may be unable to
distinguish between the year 2000 and the year 1900 (commonly known as the 'Year
2000 Problem'). We do not expect that the computer system changes necessary to
prepare for the Year 2000 will cause any major operational difficulties for the
Fund.
TAXES
The following summary describes some of the important income tax consequences of
holding units. It assumes that you are not a dealer, financial institution,
insurance company or other investor with special circumstances. You should
consult your own tax adviser about your particular circumstances.
The Sponsors believe that individual investors will not be subject to any state
or local personal income taxes on interest received by the Fund. However, you
may be subject to alternative minimum tax, state and local taxes on capital
gains (or 'market discount'), and possibly other state and local taxes on your
units. Also, you probably will not be entitled to a deduction for state and
local tax purposes for your share of fees and expenses paid by the Fund, for any
amortized 'bond premium' or for any interest on money borrowed to purchase your
units. You should consult your tax adviser in this regard.
In the opinion of our counsel, under existing law:
11
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GENERAL TREATMENT OF THE FUND AND YOUR INVESTMENT
The Fund will not be taxed as a corporation for federal income tax purposes, and
you
will be considered to own directly your share of each security in the Fund.
INCOME OR LOSS UPON DISPOSITION
When all or part of your share of a bond is disposed of (for example, when the
Fund sells, exchanges or redeems a bond or when you sell or exchange your
units), you will generally recognize capital gain or loss. Your gain, however,
will generally be ordinary income to the extent of any accrued 'market
discount'. Generally you will have market discount to the extent that your basis
in a bond when you purchase a unit is less than its stated redemption price at
maturity (or, if it is an original issue discount bond, the issue price
increased by original issue discount that has accrued on the bond before your
purchase). You should consult your tax adviser in this regard.
If your net long-term capital gains exceed your net short-term capital losses,
the excess may be subject to tax at a lower rate than ordinary income. Any
capital gain from the Fund will be long-term if you are considered to have held
your investment on each bond for more than one year and short-term if you held
it for one year or less. Because the deductibility of capital losses is subject
to limitations, you may not be able to deduct all of your capital losses. You
should consult your tax advisor in this regard.
YOUR BASIS IN THE SECURITIES
Your aggregate basis in the bonds will be equal to the cost of your units,
including any sales charges and the organizational expenses you pay, adjusted to
reflect any accruals of 'original issue discount,' 'acquisition premium' and
'bond premium'. You should consult your tax adviser in this regard.
EXPENSES
If you are an individual who itemizes deductions, you may deduct your share of
Fund expenses, but only to the extent that such amount, together with your other
miscellaneous deductions, exceeds 2% of your adjusted gross income. Your ability
to deduct Fund expenses will be limited further if your adjusted gross income
exceeds a specified amount (currently, $124,500 or $62,250 for a married person
filing separately).
FOREIGN INVESTORS
If you are a foreign investor and you are not engaged in a U.S. trade or
business, you generally will not be subject to U.S. federal income tax,
including withholding tax, on the interest or gain on a bond issued after July
18, 1984 if you meet certain requirements, including the certification of
foreign status and other matters. You should consult your tax adviser about the
possible application of federal, state and local, and foreign taxes.
RETIREMENT PLANS
You may wish to purchase units for an Individual Retirement Account (IRA) or
other retirement plan. Generally, capital gains and income received in each of
these plans are exempt and are generally treated as ordinary
12
<PAGE>
income but may, in some cases, be eligible for tax-deferred rollover treatment.
You should consult your attorney or tax adviser about the specific tax rules
relating to these plans. These plans are offered by brokerage firms, including
the Sponsors of this Fund, and other financial institutions. Fees and charges
with respect to such plans may vary.
SUPPLEMENTAL INFORMATION
You can receive at no cost supplemental information about the Fund by calling
the Trustee. The supplemental information includes more detailed risk disclosure
about the securities that may be in the Fund's portfolio and general information
about the structure and operation of the Fund. The supplemental information is
also available from the SEC.
13
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Sponsors, Trustee and Holders of Government Securities Income Fund, U.S.
Government Agency Laddered Series, 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 January , 1999. 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 cash, securities and 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 January ,
1999 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
NEW YORK, N.Y.
JANUARY , 1999
STATEMENT OF CONDITION AS OF JANUARY , 1999
TRUST PROPERTY
Investments--Bonds and Contracts to purchase Bonds(1) $
Cash
Accrued interest to Initial Date of Deposit on underlying
Bonds
--------------------
Total $
--------------------
--------------------
LIABILITIES AND INTEREST OF HOLDERS
Liabilities: Advance by Trustee for accrued interest (2) $
Reimbursement of Sponsors for organization expenses (3)
--------------------
Subtotal $
--------------------
Interest of Holders of Units of fractional
undivided interest outstanding:
Cost to investors (3)(4)(5) $
Organization expenses (3) and gross underwriting
commissions (4) ()
--------------------
Subtotal
--------------------
Total $
--------------------
--------------------
- ---------------
(1) Aggregate cost to the Fund of the bonds listed under Defined
Portfolio is based upon the offer side evaluation determined by the Evaluator at
the evaluation time on the business day prior to the Initial Date of Deposit.
The contracts to purchase the bonds are collateralized by an irrevocable letter
of credit which has been issued by Bank, New York Branch, in the
amount of $ and deposited with the Trustee. The amount of the
letter of credit includes $ for the purchase of $ face
amount of the bonds, plus $ for accrued interest.
(2) Representing a special distribution to the Sponsors by the Trustee
of an amount equal to the accrued interest on the bonds.
(3) A portion of the Unit Price consists of cash in an amount
sufficient to pay for costs incurred in establishing the Fund. These costs have
been estimated at $ per 1,000 Units. A distribution will be made at the close
of the initial offering period to an account maintained by the Trustee from
which the organizational expense obligation of the investors to the Sponsors
will be satisfied.
(4) Assumes the maximum up-front sales fee per 1,000 units of 2.00% of
the Unit Price.
(5) Aggregate Unit Price (exclusive of interest) computed on the basis
of the offer side evaluation of the underlying bonds as of the evaluation time
on the business day prior to the Initial Date of Deposit.
14
<PAGE>
DEFINED
ASSET FUNDSSM
HAVE QUESTIONS ? GOVERNMENT SECURITIES INCOME FUND
Request the most recent free U.S GOVERNMENT AGENCY LADDERED SERIES
Information Supplement (A Unit Investment Trust)
that gives more details about ---------------------------------------
the Fund, by calling: This Prospectus does not contain
The Bank of New York complete information about the
1-800-221-7771 investment company filed with the
Securities and Exchange Commission in
Washington, D.C. under the:
o Securities Act of 1933 (file no.
333-69539) and
o Investment Company Act of 1940 (file
no. 811-2810).
TO OBTAIN COPIES AT PRESCRIBED RATES--
WRITE: Public Reference Section of the
Commission
450 Fifth Street, N.W., Washington,
D.C. 20549-6009
CALL: 1-800-SEC-0330.
VISIT: http://www.sec.gov.
---------------------------------------
No person is authorized to give any
information or representations about
this Fund not contained in this
Prospectus or the Information
Supplement, and you should not rely on
any other information.
---------------------------------------
When units of this Fund are no longer
available, this Prospectus may be used
as a preliminary prospectus for a
future series, but some of the
information in this Prospectus will be
changed for that series.
Units of any future series may not be
sold nor may offers to buy be accepted
until that series has become effective
with the Securities and Exchange
Commission. No units can be sold in any
State where a sale would be illegal.
32730--1/99
