AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 8, 2000
REGISTRATION NO. 33-28452
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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POST-EFFECTIVE AMENDMENT NO. 10
TO
FORM S-6
-------------------------------------
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
------------------------------
A. EXACT NAME OF TRUST:
DEFINED ASSET FUNDS--
GOVERNMENT SECURITIES INCOME FUND
U.S. TREASURY SERIES--7
(LADDERED ZERO COUPONS)
(A UNIT INVESTMENT TRUST)
B. NAMES OF DEPOSITORS:
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
SALOMON SMITH BARNEY INC.
PRUDENTIAL SECURITIES INCORPORATED
DEAN WITTER REYNOLDS INC.
PAINEWEBBER INCORPORATED
C. COMPLETE ADDRESSES OF DEPOSITORS' PRINCIPAL EXECUTIVE OFFICES:
<TABLE>
<S> <C> <C>
MERRILL LYNCH, PIERCE,
FENNER & SMITH
INCORPORATED
UNIT INVESTMENT TRUSTS
POST OFFICE BOX 9051
PRINCETON, NJ 08543-9051 SALOMON SMITH BARNEY INC.
TWO WORLD TRADE CENTER
101ST FLOOR
NEW YORK, NY 10048
</TABLE>
<TABLE>
<S> <C> <C>
PRUDENTIAL SECURITIES PAINEWEBBER INCORPORATED DEAN WITTER REYNOLDS INC.
INCORPORATED 1285 AVENUE OF THE TWO WORLD TRADE
ONE NEW YORK PLAZA AMERICAS CENTER--59TH FLOOR
NEW YORK, NY 10292 NEW YORK, NY 10019 NEW YORK, NY 10048
</TABLE>
D. NAMES AND COMPLETE ADDRESSES OF AGENTS FOR SERVICE:
<TABLE>
<S> <C> <C>
TERESA KONCICK, ESQ. ROBERT E. HOLLEY LAURIE A. HESSLEIN
P.O. BOX 9051 1200 HARBOR BLVD. 388 GREENWICH ST.
PRINCETON, NJ 08543-9051 WEEHAWKEN, NJ 07087 NEW YORK, NY 10013
LEE B. SPENCER, JR. COPIES TO: DOUGLAS LOWE, ESQ.
ONE NEW YORK PLAZA PIERRE DE SAINT PHALLE, DEAN WITTER REYNOLDS INC.
NEW YORK, NY 10292 ESQ. TWO WORLD TRADE
450 LEXINGTON AVENUE CENTER--59TH FLOOR
NEW YORK, NY 10017 NEW YORK, NY 10048
</TABLE>
The issuer has registered an indefinite number of Units under the Securities Act
of 1933 pursuant to Rule 24f-2 and will file the Rule 24f-2 Notice for the most
recent fiscal year in March, 2000.
Check box if it is proposed that this Registration Statement shall become
effective on March 17, 2000 pursuant to paragraph (b) of Rule 485. /X/
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<PAGE>
DEFINED ASSET FUNDS--REGISTERED TRADEMARK--
-------------------------------
---------------------
GOVERNMENT SECURITIES INCOME FUND
U.S. TREASURY SERIES--7
(LADDERED ZERO COUPONS)
ASSURANCE TRUST 2005 (C)
(A UNIT INVESTMENT TRUST)
- PORTFOLIO OF U.S. TREASURY SECURITIES
- LADDERED MATURITIES
- U.S. TAX EXEMPT FOR MANY FOREIGN HOLDERS
SPONSOR:
MERRILL LYNCH, -----------------------------------------------------
PIERCE, FENNER & SMITH The Securities and Exchange Commission has not
INCORPORATED approved or disapproved these Securities or passed
SALOMON SMITH BARNEY INC. upon the adequacy of this prospectus. Any
PAINEWEBBER INCORPORATED representation to the contrary is a criminal offense.
DEAN WITTER REYNOLDS INC. Prospectus dated March 17, 2000.
<PAGE>
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Defined Asset Funds--Registered Trademark--
Defined Asset Funds-Registered Trademark- is America's oldest and largest family
oldest and largest family of unit investment trusts, with over $160 billion
sponsored over the last 28 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:
- A disciplined strategy of buying and holding with a long-term view is the
cornerstone of Defined Asset Funds.
- Fixed portfolio: Defined Funds follow a buy and hold investment strategy;
funds are not managed and portfolio changes are limited.
- Defined Portfolios: We choose the stocks and bonds in advance, so you know
what you're investing in.
- Professional research: Our dedicated research team seeks out stocks or bonds
appropriate for a particular fund's objectives.
- 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.
THE FINANCIAL INFORMATION IN THIS PROSPECTUS IS AS OF THE EVALUATION DATE,
NOVEMBER 30, 1999.
<TABLE>
<S> <C>
CONTENTS
PAGE
---
Risk/Return Summary.................. 3
What You Can Expect From Your
Investment......................... 5
Periodic Distributions at
Maturity......................... 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 or Exchanging Units.......... 6
Sponsors' Secondary Market......... 6
Selling Units to the Trustee....... 6
How The Fund Works................... 7
Pricing............................ 7
Evaluations........................ 7
Income............................. 7
Expenses........................... 7
Portfolio Changes.................. 8
Fund Termination................... 8
Certificates....................... 9
Trust Indenture.................... 9
Legal Opinion...................... 10
Auditors........................... 10
Sponsors........................... 10
Trustee............................ 10
Underwriters' and Sponsors'
Profits.......................... 10
Public Distribution................ 11
Code of Ethics..................... 11
Year 2000 Issues................... 11
Taxes................................ 11
Supplemental Information............. 12
Financial Statements................. D-1
</TABLE>
2
<PAGE>
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RISK/RETURN SUMMARY
<TABLE>
<C> <S>
1. WHAT IS THE FUND'S OBJECTIVE?
The Fund seeks safety of capital and a
high yield to maturity by investing in a
fixed, laddered portfolio of stripped
U.S. Treasury securities maturing each
year 2005-2009.
2. WHAT ARE STRIPPED U.S. TREASURY
SECURITIES?
These are directly issued by the U.S.
Treasury and are issued to fund various
government activities. They do not make
any periodic payments of interest before
maturity and are priced at a deep
discount from face amount. They pay a
fixed rate of interest and principal at
maturity.
3. WHAT IS THE FUND'S INVESTMENT STRATEGY?
- The Fund plans to hold to maturity 6
intermediate-term stripped U.S. Treasury
securities with a current aggregate face
amount of $8,700,000. The Fund is a unit
investment trust which means that, unlike
a mutual fund, the Fund's portfolio is
not managed.
- The Fund was designed to accumulate
income for a fixed period and then
distribute that income in approximately
equal amounts over a five-year period.
Income is accumulated at a predictable
yield to maturity, because income is not
distributed on a current basis but in
effect reinvested and compounded.
- For each unit of the Fund purchased, an
investor will receive a total
distribution of approximately $1,000 for
units held until maturity of all the
underlying securities.
- The securities BUT NOT THE FUND OR THE
UNITS are backed by the full faith and
credit of the United States.
- 100% of the Portfolio consists of U.S.
Treasury securities.
4. WHAT ARE THE SIGNIFICANT RISKS?
YOU CAN LOSE MONEY BY INVESTING IN THE
FUND. THIS CAN HAPPEN FOR VARIOUS
REASONS, INCLUDING:
- Rising interest rates can reduce the
value of your units.
- 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.
- The Fund will receive early returns of
principal if securities are sold before
they mature. If this happens 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 safety of capital and a
high yield to maturity. You will benefit
from a professionally selected and
supervised portfolio of U.S. government
securities. Because of tax considerations
the Fund may be most appropriate for
tax-advantaged accounts such s IRAs,
pension funds, Keogh plans or for foreign
investors.
The Fund is NOT appropriate for you if
you want current income or a speculative
investment that changes to take advantage
of market movements, or if you do not
wish to have taxable income attributed to
you before you actually receive any cash.
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
Maximum Sales Fee (Load) on new
purchases (as a percentage of $1,000
invested) 3.00%
Employees of some of the Sponsors and
their affiliates may be charged a reduced
sales fee of no less than $5.00 per Unit.
The maximum sales fee is reduced if you
invest at least $250,000, as follows:
</TABLE>
<TABLE>
<CAPTION>
YOUR MAXIMUM
SALES FEE
IF YOU INVEST: WILL BE:
-------------- ------------
<C> <S> <C>
Less than $250,000 3.00%
$250,000-$499,999 2.50%
$500,000-$749,999 2.00%
$750,000-$999,999 1.50%
$1,000,000 and over 1.00%
</TABLE>
3
<PAGE>
<TABLE>
<C> <S>
ESTIMATED ANNUAL FUND OPERATING EXPENSES
</TABLE>
<TABLE>
<CAPTION>
AMOUNT
PER
UNIT
------
<C> <S> <C>
$ 0.35
Portfolio Supervision,
Bookkeeping and
Administrative Fees
(including updating
expenses)
$ 0.11
Evaluator's Fee
$ 0.05
Other Operating Expenses
------
$ 0.51
TOTAL
</TABLE>
<TABLE>
<C> <S>
The Sponsor historically paid updating
expenses.
7. IS THE FUND MANAGED?
Unlike a mutual fund, the Fund is not
managed and securities are not sold
because of market changes. Rather,
experienced Defined Asset Funds financial
analysts regularly review the securities
in the Fund. The Fund may sell a security
if certain adverse credit or other
conditions exist.
8. HOW DO I BUY UNITS?
The minimum investment is one unit.
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 $638.81
(as of November 30, 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.
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?
There will be no payments of interest on
the Stripped Treasury Securities;
consequently, there should be no
distributions of interest income.
Nevertheless, the Fund's gross income is
taxable to investors, as explained under
Taxes. As each stripped Treasury security
matures, the proceeds will be distributed
to investors, returning approximately
equal portions of principal each year
during the maturity period. Distributions
will be made in cash two business days
following the maturity of each security.
You will have significant amounts of
income attributed to you annually as
original issue discount is accrued on the
non-maturing securities, but there will
be no distributions of cash with which to
pay those taxes. Interest income is
exempt from state and local personal
income taxes in all states, and from
federal withholding taxes for qualifying
foreign investors.
11. WHAT OTHER SERVICES ARE AVAILABLE?
EXCHANGE PRIVILEGES
You may exchange units of this Fund for
units of certain other Defined Asset
Funds. You may also exchange into this
Fund from certain other funds. We charge
a reduced sales fee on exchanges.
</TABLE>
4
<PAGE>
WHAT YOU CAN EXPECT FROM YOUR INVESTMENT
PERIODIC DISTRIBUTIONS AT MATURITY
The Fund will accumulate income for a fixed period and then distribute it in
approximately equal amounts over a five-year period 2005-2009.
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):
<TABLE>
<S> <C> <C>
Estimated Annual Estimated
Interest Income - Annual Expenses
- -------------------------------------
Unit Price
</TABLE>
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:
- - with each distribution, a statement of income payments;
- - a notice from the Trustee when new securities are deposited in exchange or
substitution for securities originally deposited;
- - an annual report on Fund activity; and
- - 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:
- - copies of evaluations to enable you to comply with federal and state tax
reporting requirements; and
- - audited financial statements of the Fund.
You may inspect records of Fund transactions at the Trustee's office during
regular business hours.
5
<PAGE>
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, securities with longer maturities
will change in value more than securities 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 securities. 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 OR EXCHANGING 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:
- ADDING the value of the securities, net accrued interest, cash and any other
Fund assets;
- 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
- 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.
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
higher price, but it is not obligated to
6
<PAGE>
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 securities to be sold. Securities will be
selected based on market and credit factors. These sales could be made at times
when the securities 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:
- if the New York Stock Exchange is closed (other than customary weekend and
holiday closings);
- 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
- for any other period permitted by SEC order.
HOW THE FUND WORKS
PRICING
The price of a unit includes interest accrued on the securities, less expenses,
from the most recent Record Day up to, but not including, the settlement date,
which is usually three business days after the purchase date of the unit.
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. Treasury
securities of the type in this Fund has been about 0.04%.
INCOME
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:
- to reimburse the Trustee for the Fund's operating expenses;
- for extraordinary services and costs of indemnifying the Trustee and the
Sponsors;
- costs of actions taken to protect the Fund and other legal fees and
expenses;
- expenses for keeping the Fund's registration statement current; and
- Fund termination expenses and any governmental charges.
7
<PAGE>
The Sponsors are currently reimbursed up to 55 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. Legal,
typesetting, electronic filing and regulatory filing fees and expenses
associated with updating the Fund's registration statement yearly are now
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.
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 security.
Unlike a mutual fund, the portfolio is designed to remain intact and we may keep
securities in the portfolio even if their credit quality declines or other
adverse financial circumstances occur. However, we may sell a security 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 may affect the
composition of the portfolio. Units offered in the secondary market may not
represent the same face amount of securities that they did originally.
We decide whether or not to offer units for sale that we acquire in the
secondary market after reviewing:
- diversity of the portfolio;
- size of the Fund relative to its original size;
- ratio of Fund expenses to income;
- current and long-term returns;
- degree to which units may be selling at a premium over par; and
- cost of maintaining a current prospectus.
FUND TERMINATION
The Fund will terminate following the stated maturity or sale of the last
security 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 securities 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 security that cannot be sold at a reasonable price may
8
<PAGE>
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 securities. 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:
- to cure ambiguities;
- to correct or supplement any defective or inconsistent provision;
- to make any amendment required by any governmental agency; or
- 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:
- it fails to perform its duties and the Sponsors determine that its
replacement is in your best interest; or
- 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:
- remove it and appoint a replacement Sponsor;
- liquidate the Fund; or
- continue to act as Trustee without a Sponsor.
Merrill Lynch, Pierce, Fenner & Smith Incorporated acts as agent for the
Sponsors.
9
<PAGE>
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
PRUDENTIAL SECURITIES INCORPORATED (an
indirect wholly-owned subsidiary of the
Prudential Insurance Company of America)
One New York Plaza
New York, NY 10292
PAINEWEBBER INCORPORATED (a wholly-owned subsidiary of PaineWebber Group Inc.)
1285 Avenue of the Americas,
New York, NY 10019
Each Sponsor is a Delaware corporation and it, or its predecessor, has acted as
sponsor to many unit investment trusts. As a registered broker-dealer each
Sponsor buys and sells securities (including investment company shares) for
others (including investment companies) and participates as an underwriter in
various selling groups.
TRUSTEE
The 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.
10
<PAGE>
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. The Year 2000 Problem may adversely affect the U.S. Treasury, as issuer of
the securities contained in the Fund, but we cannot predict whether any impact
will be material to the Fund as a whole.
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 or subject to
special rules. 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 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:
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.
ORIGINAL ISSUE DISCOUNT
The zero coupon bonds will be considered to have been issued at an "original
issue discount" for federal income tax purposes. As a result, you will be
required to include original issue discount in respect of the zero coupon bonds
as it accrues, in accordance with a constant yield method based on a compounding
of interest, before the Trust receives cash payments attributable to these
income inclusions. Under the constant yield
11
<PAGE>
method, you generally will be required to include in income increasingly greater
amounts of original issue discount in successive accrual periods. The tax basis
of your pro rata share of zero coupon bonds will be increased by the amount of
original issue discount that you include in income. However, to the extent that
your basis in a zero coupon bond when you purchase a Unit is greater than the
bond's original issue price increased by original issue discount that has
already accrued on the bond, you will have "acquisition premium," and your
original issue discount inclusions will be reduced by acquisition premium. You
should consult your tax advisor in this regard.
GAIN OR LOSS UPON DISPOSITION
When all or part of your share of a security is disposed of (for example, when
the Fund sells, exchanges or redeems a security 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 the issue
price of a security, increased by original issue discount that has accrued on
the security before your purchase, is greater than your basis in the security
when you purchase a unit. 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 security for more than one year and short-term
otherwise. Because the deductibility of capital losses is subject to
limitations, you may not be able to deduct all of your capital losses. You
should consult your tax adviser in this regard.
YOUR BASIS IN THE SECURITIES
Your aggregate basis in the securities will be equal to the cost of your units,
including any sales charges 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 $128,950 ($64,475 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 security 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
12
<PAGE>
application of federal, state and local, and foreign taxes.
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 Defined Asset Funds - Government Securities Income Fund,
U.S. Treasury Series 7 - Laddered Zero Coupons:
We have audited the accompanying statements of condition of the Assurance Trust
2005 (C) of Defined Asset Funds - Government Securities Income Fund, U.S.
Treasury Series 7 - Laddered Zero Coupons, including the portfolio, as of
November 30, 1999 and the related statements of operations and of changes in net
assets for the years ended November 30, 1999, 1998 and 1997. These financial
statements are the responsibility of the Trustee. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Securities owned at
November 30, 1999, as shown in such portfolio, were confirmed to us by The Bank
of New York, 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
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the above-mentioned Trust of
Defined Asset Funds - Government Securities Income Fund, U.S. Treasury Series 7
- - Laddered Zero Coupons at November 30, 1999 and the results of its operations
and changes in its net assets for the above-stated years in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
February 17, 2000
New York, N.Y.
D-1
<PAGE>
DEFINED ASSET FUNDS - GOVERNMENT SECURITIES INCOME FUND,
U.S. TREASURY SERIES 7 - LADDERED ZERO COUPONS
STATEMENTS OF CONDITION
AS OF NOVEMBER 30, 1999
<TABLE>
<S> <C> <C>
TRUST PROPERTY:
Investment in marketable securities - at value
(see Portfolio and Note 1) $5,390,946
Accrued interest receivable 1,950
Receivable from securities sold 153,574
----------
Total trust property 5,546,470
LESS LIABILITIES:
Accrued expenses $ 4,406
Advance from Trustee 34,391
Redemptions payable 153,574 192,371
-------- ----------
NET ASSETS (Note 2) $5,354,099
==========
UNITS OUTSTANDING 8,700
=====
UNIT VALUE 615.41
======
</TABLE>
See Notes to Financial Statements.
D-2
<PAGE>
DEFINED ASSET FUNDS - GOVERNMENT SECURITIES INCOME FUND,
U.S. TREASURY SERIES 7 - LADDERED ZERO COUPONS
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
ASSURANCE TRUST
2005(C)
Years Ended November 30,
1999 1998 1997
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income $ 7,984 $ 7,216 $ 7,710
Accretion of original issue discount 378,522 354,733 388,239
Trustee's fees and expenses (6,297) (6,647) (8,141)
Sponsors' fees (236) (6,504) (4,768)
--------- -------- --------
Net investment income 379,973 348,798 383,040
--------- -------- --------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain on securities sold 71,449 482,259 28,783
Unrealized appreciation (depreciation) of
investments (841,081) 133,245 117,061
--------- -------- --------
Net realized and unrealized gain (loss) on
investments (769,632) 615,504 145,844
--------- -------- --------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $(389,659) $964,302 $528,884
========= ======== ========
</TABLE>
See Notes to Financial Statements.
D-3
<PAGE>
DEFINED ASSET FUNDS - GOVERNMENT SECURITIES INCOME FUND,
U.S. TREASURY SERIES 7 - LADDERED ZERO COUPONS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
ASSURANCE TRUST
2005(C)
Years Ended November 30,
1999 1998 1997
<S> <C> <C> <C>
OPERATIONS:
Net investment income $379,973 $348,798 $383,040
Realized gain on securities sold 71,449 482,259 28,783
Unrealized appreciation (depreciation) of
investments (841,081) 133,245 117,061
---------- ---------- ----------
Net increase (decrease) in net assets
resulting from operations (389,659) 964,302 528,884
---------- ---------- ----------
INCOME DISTRIBUTION (1,276)
----------
CAPITAL SHARE TRANSACTIONS (Note 3):
Redemption of units (620,495) (1,354,906) (125,740)
---------- ---------- ----------
NET DECREASE (INCREASE) IN NET ASSETS (1,010,154) (390,604) 401,868
NET ASSETS AT BEGINNING OF YEAR 6,364,253 6,754,857 6,352,989
---------- ---------- ----------
NET ASSETS AT END OF YEAR $5,354,099 $6,364,253 $6,754,857
========== ========== ==========
PER UNIT:
Income distribution during the year $0.1068
=======
Net asset value at end of year $615.41 $656.11 $565.26
======= ======= =======
TRUST UNITS OUTSTANDING AT END OF YEAR 8,700 9,700 11,950
===== ===== ======
</TABLE>
See Notes to Financial Statements.
D-4
<PAGE>
DEFINED ASSET FUNDS - GOVERNMENT SECURITIES INCOME FUND,
U.S. TREASURY SERIES 7 - LADDERED ZERO COUPONS
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Fund is registered under the Investment Company Act of 1940 as a Unit
Investment Trust. The following is a summary of significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements. The policies are in conformity with generally
accepted accounting principles.
(a) Securities are stated at value as determined by the Evaluator based on
bid side evaluations for the securities.
(b) Cost of securities purchased is based on offering side evaluations at
dates of purchases and has been adjusted to include the accretion of
original issue discount on the Stripped Treasury Securities.
(c) The Trust is not subject to income taxes. Accordingly, no provision
for such taxes is required.
2. NET ASSETS, NOVEMBER 30, 1999
ASSURANCE TRUST 2005(C)
Cost of 8,700 units at Dates of Deposit $3,399,645
Less sales charges 130,765
----------
Net amount applicable to Holders 3,268,880
Net cost of units redeemed less redemption amounts (1,250,430)
Realized gain on securities sold 1,250,430
Unrealized appreciation of investments 98,575
----------
Net capital applicable to Holders 3,367,455
Overdistributed net investment income (including $2,023,491
of accretion of original issue discount) 1,986,644
----------
Net assets $5,354,099
==========
3. CAPITAL SHARE TRANSACTIONS
Units were redeemed as follows:
Years Ended November 30,
Trust 1999 1998 1997
Assurance Trust 2005(C) 1,000 2,250 250
Units may be redeemed at the office of The Bank of New York, the Trustee,
upon tender thereof generally on any business day or, in the case of
uncertified units, upon delivery of a request for redemption and payment of
any relevant tax. The Trustee will redeem units either in cash or in kind
at the option of the Holder as specified in writing to the Trustee.
D-5
<PAGE>
DEFINED ASSET FUNDS - GOVERNMENT SECURITIES INCOME FUND,
U.S. TREASURY SERIES 7 - LADDERED ZERO COUPONS
NOTES TO FINANCIAL STATEMENTS
4. INCOME TAXES
All Trust items of income received, accretion of original issue discount,
expenses paid, and realized gains and losses on securities sold are
attributable to the Holders, on a pro rata basis, for Federal income tax
purposes in accordance with the grantor trust rules of the United States
Internal Revenue Code.
At November 30, 1999, the cost of investment securities for Federal income
tax purposes was approximately equivalent to the adjusted cost as shown in
the Trust's portfolio.
5. DISTRIBUTIONS
It is anticipated that the Trust will make distributions two business days
following the maturity of each security in that Trust to Holders of record
five business days prior to the date of such distribution.
D-6
<PAGE>
DEFINED ASSET FUNDS - GOVERNMENT SECURITIES INCOME FUND,
U.S. TREASURY SERIES 7 - LADDERED ZERO COUPONS
PORTFOLIOS
AS OF NOVEMBER 30, 1999
<TABLE>
<CAPTION>
Portfolio No. and Interest Face Adjusted
Title of Securities Rates Maturities Amount Cost(1) Value(1)
ASSURANCE TRUST 2005(C)
<S> <C> <C> <C> <C> <C>
1. Stripped Treasury Securities(2) 0.000% 8/15/05 $1,740,000 $1,214,935 $1,217,250
2. Stripped Treasury Securities(2) 0.000 8/15/06 1,740,000 1,128,122 1,141,160
3. Stripped Treasury Securities(2) 0.000 8/15/07 1,740,000 1,043,864 1,065,992
4. Stripped Treasury Securities(2) 0.000 8/15/08 1,740,000 965,759 995,278
5. Stripped Treasury Securities(2) 0.000 8/15/09 1,671,000 858,629 891,377
6. U.S. Treasury Bond 9.375 2/15/06 69,000 81,062 79,889
---------- ---------- ----------
Total $8,700,000 $5,292,371 $5,390,946
========== ========== ==========
</TABLE>
(1) See Notes to Financial Statements.
(2) See "Risk Factors - Special Characteristics of Stripped Treasury
Securities" in this Prospectus, Part B.
D-7
<PAGE>
Defined
Asset Funds-Registered Trademark->
<TABLE>
<S> <C>
HAVE QUESTIONS ? GOVERNMENT SECURITIES INCOME FUND
Request the most U.S. TREASURY SERIES--7
recent free Information (LADDERED ZERO COUPONS)
Supplement that gives more (A Unit Investment Trust)
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:
- Securities Act of 1933 (file no.
33-228452) and
- 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.
12960--3/00
</TABLE>
<PAGE>
DEFINED ASSET FUNDS--
GOVERNMENT SECURITIES INCOME FUND
CONTENTS OF REGISTRATION STATEMENT
This Post-Effective Amendment to the Registration Statement on Form S-6
comprises the following papers and documents:
The facing sheet of Form S-6.
The cross-reference sheet (incorporated by reference to the Cross-Reference
Sheet to the Registration Statement on Form S-6 of Defined Asset Funds Municipal
Insured Series, 1933 Act File No. 33-54565).
The Prospectus.
The Signatures.
The following exhibits:
1.1.1-- Form of Standard Terms and Conditions of Trust Effective as of
October 21, 1993 (incorporated by reference to Exhibit 1.1.1 to the
Registration Statement of Municipal Investment Trust Fund, Multi-
state Series--48, 1933 Act File No. 33-50247).
1.11.1-- Merrill Lynch Code of Ethics
1.11.2-- Government Securities Income Fund Code of Ethics
4.1 --Consent of the Evaluator.
5.1 --Consent of independent accountants.
9.1 -- Information Supplement (incorporated by reference to Exhibit 9.1 to
the Registration Statement of Government Securities Income Fund,
Freddie Mac Series 12, 1933 Act File No. 33-56849.
R-1
<PAGE>
DEFINED ASSET FUNDS--
GOVERNMENT SECURITIES INCOME FUND
U.S. TREASURY SERIES--7
(LADDERED ZERO COUPONS)
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT,
DEFINED ASSET FUNDS--GOVERNMENT SECURITIES INCOME FUND, U.S. TREASURY SERIES--7
(LADDERED ZERO COUPONS) (A UNIT INVESTMENT TRUST), HAS DULY CAUSED THIS
AMENDMENT TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED IN THE CITY OF NEW YORK AND STATE OF NEW
YORK ON THE 8TH DAY OF MARCH, 2000.
SIGNATURES APPEAR ON PAGES R-3, R-4, R-5, R-6 AND R-7.
A majority of the members of the Board of Directors of Merrill Lynch,
Pierce, Fenner & Smith Incorporated has signed this Registration Statement or
Amendment to the Registration Statement pursuant to Powers of Attorney
authorizing the person signing this Registration Statement or Amendment to the
Registration Statement to do so on behalf of such members.
A majority of the members of the Board of Directors of Salomon Smith Barney
Inc. has signed this Registration Statement or Amendment to the Registration
Statement pursuant to Powers of Attorney authorizing the person signing this
Registration Statement or Amendment to the Registration Statement to do so on
behalf of such members.
A majority of the members of the Board of Directors of Prudential Securities
Incorporated has signed this Registration Statement or Amendment to the
Registration Statement pursuant to Powers of Attorney authorizing the person
signing this Registration Statement or Amendment to the Registration Statement
to do so on behalf of such members.
A majority of the members of the Executive Committee of the Board of
Directors of PaineWebber Incorporated has signed this Registration Statement or
Amendment to the Registration Statement pursuant to Powers of Attorney
authorizing the person signing this Registration Statement or Amendment to the
Registration Statement to do so on behalf of such members.
A majority of the members of the Board of Directors of Dean Witter Reynolds
Inc. has signed this Registration Statement or Amendment to the Registration
Statement pursuant to Powers of Attorney authorizing the person signing this
Registration Statement or Amendment to the Registration Statement to do so on
behalf of such members.
R-2
<PAGE>
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
DEPOSITOR
<TABLE>
<S> <C>
By the following persons, who constitute Powers of Attorney have been filed
a majority of under
the Board of Directors of Merrill Form SE and the following 1933 Act
Lynch, Pierce, File
Fenner & Smith Incorporated: Number: 333-70593
</TABLE>
GEORGE A. SCHIEREN
JOHN L. STEFFENS
By J. DAVID MEGLEN
(As authorized signatory for Merrill Lynch, Pierce,
Fenner & Smith Incorporated and
Attorney-in-fact for the persons listed above)
R-3
<PAGE>
SALOMON SMITH BARNEY INC.
DEPOSITOR
<TABLE>
<S> <C>
By the following persons, who constitute a majority of Powers of Attorney
the Board of Directors of Salomon Smith Barney Inc.: have been filed
under the 1933 Act
File Numbers:
333-63417 and
333-63033
</TABLE>
MICHAEL A. CARPENTER
DERYCK C. MAUGHAN
By GINA LEMON
(As authorized signatory for
Salomon Smith Barney Inc. and
Attorney-in-fact for the persons listed above)
R-4
<PAGE>
PRUDENTIAL SECURITIES INCORPORATED
DEPOSITOR
<TABLE>
<S> <C>
By the following persons, who constitute a majority of Powers of Attorney
the Board of Directors of Prudential Securities have been filed
Incorporated: under Form SE and
the following 1933
Act File Numbers:
33-41631 and
333-15919
</TABLE>
ROBERT C. GOLDEN
ALAN D. HOGAN
A. LAURENCE NORTON, JR.
LELAND B. PATON
VINCENT T. PICA II
MARTIN PFINSGRAFF
HARDWICK SIMMONS
LEE B. SPENCER, JR.
BRIAN M. STORMS
By RICHARD R. HOFFMANN
(As authorized signatory for Prudential Securities
Incorporated and Attorney-in-fact for the persons
listed above)
R-5
<PAGE>
PAINEWEBBER INCORPORATED
DEPOSITOR
<TABLE>
<S> <C>
By the following persons, who constitute Powers of Attorney have been filed
the Board of Directors of PaineWebber under
Incorporated: the following 1933 Act File
Number: 33-55073
</TABLE>
MARGO N. ALEXANDER
TERRY L. ATKINSON
BRIAN M. BAREFOOT
STEVEN P. BAUM
MICHAEL CULP
REGINA A. DOLAN
JOSEPH J. GRANO, JR.
EDWARD M. KERSCHNER
JAMES P. MacGILVRAY
DONALD B. MARRON
ROBERT H. SILVER
MARK B. SUTTON
By ROBERT E. HOLLEY
(As authorized signatory for
PaineWebber Incorporated
and Attorney-in-fact for the persons listed above)
R-6
<PAGE>
DEAN WITTER REYNOLDS INC.
DEPOSITOR
<TABLE>
<S> <C>
By the following persons, who constitute Powers of Attorney have been filed
a majority of under Form SE and the following 1933
the Board of Directors of Dean Witter Act File Numbers: 33-17085 and
Reynolds Inc.: 333-13039
</TABLE>
RICHARD M. DeMARTINI
ROBERT J. DWYER
CHRISTINE A. EDWARDS
JAMES F. HIGGINS
MITCHELL M. MERIN
STEPHEN R. MILLER
RICHARD F. POWERS III
PHILIP J. PURCELL
THOMAS C. SCHNEIDER
WILLIAM B. SMITH
By MICHAEL D. BROWNE
(As authorized signatory for
Dean Witter Reynolds Inc.
and Attorney-in-fact for the persons listed above)
R-7
Exhibit 1.11.1
CONFIDENTIAL AS OF [March 1, 2000]
MERRILL LYNCH
DEFINED ASSET FUNDS
CODE OF ETHICS
Section 1 - Purpose of the Code of Ethics
This Code of Ethics ("Code") is intended to provide guidance to the
management and employees of the Defined Asset Funds unit ("DF") of Merrill
Lynch, Pierce, Fenner & Smith, Incorporated ("Firm") as to the minimum standards
of conduct in personal securities transactions that are consistent with the
Firm's responsibilities to its clients and the unitholders in the unit
investment trusts or advisory accounts ("Trusts") sponsored or advised by the
Firm, and to provide assurance that those persons are in a position to act in
the best interests of clients and the unitholders of the Trusts. The Code is
administered by DF Legal.
The management and employees of DF have a duty to put the interests of the
Trusts' unitholders first, ahead of any personal interests in investing and
trading in securities. This Code is intended to ensure that personal trading be
conducted consistent with the Code and in such a manner as to avoid any actual
or potential conflicts of interest. Management and employees of DF have a
fundamental duty not to take inappropriate advantage of their positions of trust
and responsibility. Accordingly, all personal securities transactions of
management and employees of DF must comply with the requirements of this Code,
or risk the imposition of sanctions as set forth in Section 12 below.
Furthermore, all personal trading should avoid even the appearance of a conflict
of interest with the Firm's clients or the Trusts' unitholders.
This Code is not intended to discourage personal securities investments or
sound personal investment programs on the part of persons who are subject to the
Code. The purpose of the Code is to provide guidance to ensure that personal
investing is consistent with the interests of our unitholders. The Code must be
read in conjunction with all of the Firm's policies relating to business
conduct, including prohibitions against trading on inside information generally,
<PAGE>
communicating inside information to others (including by e-mail) and as set
forth in the Merrill Lynch Defined Asset Funds Ethical Wall Policy.
As more fully described below, this Code contains two general prohibitions
of personal securities transactions:
(a) Trading in a security during a period when DF is considering a
recommendation or making a decision to purchase or sell any of that
security for the account of a Trust and for a period of time after
the Trust's purchase. Your trading at this time could take advantage
of, avoid possible short-run market effects of, or have a negative
effect on, the Trust's securities transactions and be inconsistent
with Firm policy.
(b) Trading on the basis of material nonpublic information, or
communicating this information to others who trade on the basis of
such information ("tipping"). These trading or tipping practices are
abusive of the securities markets, violates Federal and State law,
and is a serious concern to market regulators and enforcement
authorities. This activity is in direct contravention of Firm policy.
A person covered by the requirements of this Code violates the Code if
they engage in these prohibited transactions directly or indirectly, such as
through a partnership, personal holding company or trust account over which such
person has investment control or in which the person holds a beneficial
interest, or if any member of the person's immediate family sharing the same
residence engages in the described transactions. This Code also applies to
transactions in derivative securities, such as options or futures, and unit
investment trusts and mutual funds sponsored by the Firm as well.
Employees are required to have a reasonable understanding of and comply
with the policies of the Firm that are designed to ensure compliance with
applicable Federal and state laws, and rules of the Securities and Exchange
Commission and various self-regulatory organizations which may govern employees'
activities. Any person encountering evidence of activity that may violate
applicable statutes or regulations or provisions of this Code should
2
<PAGE>
promptly report such evidence to the DF Compliance Director. Each person should
be sensitive not only to actual conflicts but also to the appearance of
conflicts. Conduct that violates this Code can harm not only the person
involved, but also the Firm's clients and the reputation of the Firm. Violations
of the Code may result in sanctions, including dismissal, and could involve
personal civil or criminal liability.
Each employee and management person of DF will be given a copy of the Code
when he or she commences employment and annually thereafter, and each time will
be asked to sign a statement that he or she has received and read the Code, and
that he or she agrees to report all personal securities transactions as may be
required in this Code and as may be required by Firm policies. Any employee who
has any questions regarding any aspect of this Code or, whether a proposed act
or transaction involves a conflict of interest or material nonpublic
information, should speak to the Compliance Director. In addition, employees may
report any unethical behavior on a confidential basis through the HOTLINE
established by the Firm's General Counsel's Office. The hotline number is (800)
338-8954 . In New York State or outside the United States, the hotline can be
reached at (212) 449-9590.
Section 2 - Federal Securities Law Standards
Rule 17j-1 under the Investment Company Act of 1940 ("Investment Company
Act") makes it unlawful for any affiliated person of any Trust sponsored by the
Firm (or any other registered investment company) or of any principal
underwriter for any such Trust in connection with that person's purchase or
sale, directly or indirectly, of securities that are "held or to be acquired"
(as defined in Section 3(i)) by any Trust:
(a) To employ any device, scheme, or artifice to defraud any Trust;
(b) To make to any Trust any untrue statement of a material fact or omit
to state to any Trust such a material fact necessary in order to
make the statements made, in light of the circumstances under which
they are made, not misleading;
3
<PAGE>
(c) To engage in any act, practice or course of business that operates
or would operate as a fraud or deceit on any Trust; or
(d) To engage in any manipulative practices with respect to any Trust.
The Rule requires that the Trusts and each sponsor of the Trusts (i) adopt a
written code of ethics containing provisions reasonably necessary to prevent
certain persons (known as "Access Persons" -- defined in Section 3(a), below)
from engaging in any of the unlawful activities described above, and (ii) use
reasonable diligence and institute procedures necessary to prevent violations of
such code.
Section 3 - Definitions
(a) Any person described in (1) or (2), below, must comply with all
provisions of this Code that apply to "Access Persons." Any person
described in (1) also must comply with all provisions in this Code
that apply to "Investment Personnel" (formerly "Decision Making
Access Persons"). DF Legal will notify each person who is considered
to be an Access Person or an Investment Person.
(1) The term "Investment Person" (or "Investment Personnel")
includes: (i) any employee of DF or of any company controlling
DF who, in connection with his or her regular functions or
duties, makes or participates in making recommendations
regarding the purchase, sale or holding of a security by or
for the account of any Trust or any accumulation account for
any Trust, and (ii) any natural person who controls DF and who
obtains information concerning recommendations made to any
Trust regarding the purchase, sale or holding of a security by
or for the account of any Trust or any accumulation account
for any Trust.
4
<PAGE>
(2) The term "Access Person" includes any person who falls within
the definition of an "Investment Person" in paragraph (1),
above, and also (i) any employee of DF or of any company
controlling DF who, in connection with his or her regular
functions or duties, makes, participates in or obtains
information regarding the purchase or sale of a security by
any Trust or any accumulation account for any Trust, or whose
functions or duties related to the making of any
recommendations with respect to the purchases or sales and
(ii) any natural person who controls DF who obtains
information concerning recommendations made to any Trust
regarding the purchase, sale or holding of a security by or
for the account of any Trust or any accumulation account for
any Trust.
(b) A security is "being considered for purchase, sale or holding" when
a recommendation to purchase, sell or hold a security has been made
or communicated and, with respect to the person making the
recommendation, when that person seriously considers making such a
recommendation.
(c) "Beneficial ownership" of, or "beneficial interest" in, a security
shall be interpreted in the same manner as it would be in
determining whether a person is subject to the provisions of Section
16 of the Securities Exchange Act of 1934 and the rules and
regulations thereunder, except that it shall apply to all securities
which an Access Person has or acquires. This means that an Access
Person should consider himself or herself to be the beneficial owner
of any securities in which he or she has a direct or indirect
pecuniary interest. In addition, an Access Person should consider
himself or herself the beneficial owner of securities held by his or
her spouse, minor children, any relative living in the same
household, or any other person by reason of any contract,
arrangement, or understanding that provides him or her with sole or
shared voting or investment power.
5
<PAGE>
(d) "Control" shall have the same meaning as that set forth in Section
2(a)(9) of the Investment Company Act. Section 2(a)(9) provides that
"control" "means the power to exercise a controlling influence over
the management or policies of a company, unless such power is solely
the result of an official position with such company." Ownership by
any person other than a natural person of 25% or more of a company's
voting securities is presumed to give the holder of those securities
control of the company. A person who owns less than 25% of the
voting securities of a company is presumed not to control the
company. Either of these two presumptions may be overcome by the
facts and circumstances of the particular situation. For purposes of
this definition, control of a company includes control of (1) a
corporation, partnership, association, joint-stock company, trust,
fund, any organized group of persons, whether incorporated or not;
(2) a receiver, trustee in a case under title 11 of the United
States Code or similar official, or any liquidating agent for any of
the foregoing, in his capacity as such; or (3) an account that
invests in securities.
(e) "Initial Public Offering" means an offering of securities registered
under the Securities Act of 1933 (other than securities issued by an
open-end management company or units issued by a unit investment
trust registered under the Investment Company Act of 1940), the
issuer of which, immediately before the registration, was not
subject to the reporting requirements of Sections 13 or 15(d) of the
Securities Exchange Act of 1934.
(f) "Private Placement" means an offering that is exempt from
registration under the Securities Act of 1933 pursuant to Section
4(2) or Section 4(6) or pursuant to Rule 504, Rule 505, or Rule 506
under the Securities Act of 1933.
(g) "Purchase" or "sale" of a security includes, among other things, (i)
the buying or writing of an option to purchase or sell a security,
or (ii) an indirect purchase or sale by a person through a
partnership, personal holding company or trust account
6
<PAGE>
over which such person has investment control or holds a beneficial
interest, or by any member of the person's immediate family sharing
the same residence.
(h) "Security" shall have the meaning set forth in Section 2(a)(36) of
the Investment Company Act, except that (i) it shall also include
any instrument commonly known as a derivative (including, but not
limited to, any forward contract, future, swap, or option), and (ii)
other than for purposes of pre-clearing securities issued in an
Initial Public Offering or a Private Placement, it shall not include
securities that are direct obligations of the U.S. Government,
bankers' acceptances, bank certificates of deposit, commercial
paper, high quality short-term debt instruments and shares of
open-end investment companies.
(i) "Security Held or to be Acquired" means (i) any security which,
within the most recent 15 days, (A) is or has been held by a Trust
or (B) is being or has been considered for purchase on behalf of a
Trust, and (ii) any option to purchase or sell, and any security
convertible into or exchangeable for, a security which, within the
most recent 15 days, (A) is or has been held by a Trust or (B) is
being or has been considered for purchase on behalf of a Trust.
(j) "Trusts" means the unit investment trusts sponsored or underwritten
by Merrill Lynch, Pierce, Fenner & Smith Incorporated.
Section 4 - Exempted Transactions
The requirements of Section 5 of this Code, except for the requirement to
pre-clear securities issued in an Initial Public Offering or a Private
Placement, shall not apply to:
(a) A purchase or sale of securities effected in any account over which
the Access Person has no direct or indirect influence, control, or
beneficial interest.
7
<PAGE>
(b) A purchase or sale of securities which are not eligible for purchase
or sale by any of the Trusts.
(c) A purchase or sale of securities which is non-volitional on the part
of the Access Person (for example, a purchase or sale effected by an
investment manager for a pension or retirement plan, other than an
individual retirement account, in which an Access Person is a
beneficiary)(d) A purchase of securities which is made through an
automatic dividend reinvestment plan.
(e) Purchases effected upon the exercise of rights issued by an issuer
pro rata to all holders of a class of its securities, to the extent
those rights were acquired from such issuer, and sales of such
rights so acquired.
(f) A purchase or sale of securities issued by an open-end mutual fund.
(g) A purchase or sale of securities issued by any Defined Government
Securities Income Funds.
(h) A purchase or sale of securities that are direct obligations of the
U.S. government.
(i) A purchase or sale of bankers' acceptances, bank certificates of
deposit, commercial paper, high quality short-term debt instruments.
(j) A purchase or sale of securities issued by any unit investment trust
with 50 or more securities as of the initial date of deposit,
including the S&P 500, Midcap and Defined Technology Series.
(k) Transactions occurring in the process of rolling over a Select
Series Trust into the successor Series, resulting in a sale and a
related purchase of Trust units.
8
<PAGE>
(l) Crossover (e.g. Dow to International) and regular (e.g. Dow to Dow)
rollover transactions in the Select Series.
(m) Subsequent reinvestments in an AIPS account; initial investment is
not exempt.
(n) A purchase or sale of a security issued by any unit investment
trust, including all RIC and grantor trusts, in which the underlying
securities are traded on a national securities exchange, unless the
Trust is a "Hot Issue". A "Hot Issue" is defined as a newly issued
stock that is in great public demand. Hot Issues typically increase
rapidly in price during their initial offering, since the demand
exceeds the supply of shares.
Section 5 - Procedures Relating to Securities Transactions
(a) All officers and employees of DF are reminded that it is the Firm's
policy that their securities accounts must generally be maintained
at the Firm. See --- Policy Manual Section 2.01.4.
(b) The following procedures apply to every Access Person, including
every Investment Person.
(1) Every Access Person must pre-clear each personal securities
transaction, including any acquisition of securities issued in
an Initial Public Offering or a Private Placement, by
contacting the Compliance Director by telephone, electronic
mail, in person, or by other means. Preclearance is valid only
on the day it is given. If an Access Person obtains
preclearance of a transaction, but waits until the next day to
trade, the Access Person must pre-clear the trade again. As
described in Section 6(a), below, after an Access Person has
effected a trade, the Access Person must file the Transactions
Required To Be Reported Under The Code Of Ethics
9
<PAGE>
("Transaction Form") form with the Compliance Director
describing the transaction. A copy of the Transaction Form is
attached.
(2) Every Access Person who owns, directly or indirectly,
securities obtained in a Private Placement must notify the
Compliance Director in writing prior to participating in a
Trust's subsequent consideration of an investment in that
issuer. The Trust's decision to invest in that issuer will be
subject to an independent review by DF investment persons who
do not have any personal interest in the issuer.
(3) No Access Person may purchase any security (i) seven calendar
days prior to and seven calendar days after the purchase of
the same security for initial deposit in any Trust or (ii) at
a time when he or she knows that the same security is being
considered for purchase by any Trust or any accumulation
account for any Trust.
(4) No Access Person may sell any security (i) seven calendar days
prior to and seven calendar days after the sale of the same
security as a result of a 22 Meeting and the termination or
rollover of any Trust, or (ii) at a time when he or she knows
that the same security is being considered for sale by any
Trust or any accumulation account for any Trust.
(5) For accounts that are not maintained at the Firm, every Access
Person must instruct his or her broker to send to the
Compliance Director (i) duplicate copies of confirmations of
that Access Person's personal securities transactions and (ii)
copies of all periodic account statements relating to that
Access Person's securities accounts within ten days of the end
of each calendar quarter.(1)
- ----------
(1) The Compliance Director receives daily reports of activity in employee
accounts maintained at the Firm. The Compliance Director also receives copies of
monthly account statements for employee accounts maintained at the Firm.
10
<PAGE>
(c) Investment Personnel must observe the following procedures, in
addition to the procedures described, above, in Section 5(b):
(1) An Investment Person must notify the Compliance Director in
writing of any intended purchase by any Trust or any
accumulation account for any Trust of a security which that
Investment Person beneficially owns.
(2) After a Trust has purchased a security for initial deposit
that an Investment Person also beneficially owns, the
Investment Person may not sell that security until seven
calendar days after the Trust's purchase of that security,
unless the Investment Person demonstrates to the satisfaction
of the Compliance Director a bona fide reason why such seven
calendar day period should be waived. Examples of such bona
fide reasons would be unexpected personal hardship occasioning
a need for funds or special year-end tax considerations. A
change in the Investment Person's investment objectives or
special new investment opportunities do not constitute
acceptable reasons for a waiver.
(3) After a Trust has sold a security as a result of a 22 Meeting
or the Trust's termination or rollover that a Investment
Personnel also beneficially owns, the Investment Person may
not purchase that security within seven calendar days unless
such Investment Person obtains preclearance approval by
notifying the Compliance Director in writing of his or her
intended purchase.
Section 6 - Reporting and Monitoring
11
<PAGE>
(a) Access Person Transaction Reports. Every Access Person shall report
to the Compliance Director the information described in Section
6(d)(1) of this Code, below, in the Transaction Form attached to
this Code, relating to transactions in any security of which that
Access Person has, or by reason of such transaction acquires, any
direct or indirect beneficial ownership in the security. Transaction
Forms are not required for those exempted transactions, as described
above in Section 4. The Compliance Director will retain a copy of
each Transaction Form. In addition, for each approval granted to an
Investment Person to acquire securities issued in an Initial Public
Offering or a Private Placement, the compliance Director will make
and retain a written record of the reasons for granting the
approval.
(b) Initial and Annual Reports.
(1) Non-Access Person Employees. Each non-Access Person employee
shall complete, at the time they commence employment with DF
and at least once annually thereafter, the Employee Personal
Securities Accounts Report, as attached, concerning their
securities holdings and provide this information to the
Compliance Director.
(2) DF Access Persons. Each Access Person shall complete and
submit to the Compliance Director, within 10 days of becoming
an Access Person and by each January 30 thereafter, the Access
Person Personal Securities Holdings Report, which must include
the following information:
(i) The title, number of shares and principal amount of each
security in which the Access Person has any direct or
indirect beneficial interest;
12
<PAGE>
(ii) The name of any broker, dealer or bank with whom the
Access Person maintains an account in which any
securities are held for the direct or indirect benefit
of the Access Person; and
(iii) The date the report is submitted by the Access Person.
In lieu of providing the required details about securities
holdings, Access Persons may confirm in writing the accuracy
of information maintained by the Compliance Director, as
explained more fully on the Access Person Personal Securities
Holdings Report.
(c) Access Person Quarterly Transaction Reports. In addition to
preclearing securities transactions and submitting initial and
annual holdings reports, each Access Person must also file with the
Compliance Director on a quarterly basis a report describing every
securities transaction that occurred during the quarter in any
account that is not maintained with the Firm and in which the Access
Person had any direct or indirect beneficial ownership. Each report
must be filed within ten days after March 31, June 30, September 30
and December 31 of each year.
(1) Securities Transactions. Each report must contain the
following information with respect to each securities
transactions during the quarter:
(i) The date of the transaction, the title, the interest
rate and maturity date (if applicable), the number of
shares or units, or the principal amount of each
security involved;
(ii) The nature of the transaction (e.g., purchase, sale or
any other type of acquisition or disposition);
(iii) The price at which the transaction was effected; and
13
<PAGE>
(iv) The name of the broker, dealer or bank with or through
whom the transaction was effected.
Alternatively, this requirement can be satisfied by providing
DF Legal with quarterly statements of any account that is not
maintained with the Firm, if provided within the required 10
day period.
(2) Brokerage Accounts. Each report must also disclose, for any
securities account established by the Access Person during the
quarter, the name of the broker, dealer or bank with whom the
Access Person established the account and the date the account
was established.
(3) Date of Submission. All quarterly transaction reports must
state the date submitted to DF Legal.
(e) Identification of Access Persons. DF Legal must identify all Access
Persons who are under a duty to make reports and inform them of such
duty.
(f) Review of Initial, Quarterly and Annual Reports. The Compliance
Director or a designated person is responsible for reviewing each
initial, quarterly and annual Access Person report.
Section 7 - Gifts
All officers and employees of DF are reminded that they are subject to the
Firm's policies regarding the acceptance of gratuities. See Policy Manual
Section 2.01.9.
Section 8 - Service on Boards of Directors
14
<PAGE>
All officers and employees are reminded that they are subject to the
Firm's policies regarding service as a director of a company. See Policy Manual
Section 2.01.8.
Section 9 - Insider Trading
No Access Person or employee of DF shall purchase or sell, directly or
indirectly, either personally or on behalf of others, any security while in
possession of material nonpublic information relating to that security or the
issuer of that security, or communicate material nonpublic information to others
in violation of the law. This prohibition extends to activities within and
outside such person's duties at DF.
(a) Information is generally considered material when there is a
substantial likelihood that a reasonable investor would consider it
important in making his or her investment decisions, or when it is
reasonably certain to have a substantial effect on the price of a
company's securities. Examples of this type of information include,
but are not limited to, dividend changes, earnings estimates,
changes in previously released earnings estimates, significant
merger or acquisition proposals or agreements, major litigation,
liquidation problems and extraordinary management developments.
Material information need not relate to a company's business, but
can include knowledge of a forthcoming report or recommendation
concerning an issuer's securities that will have a significant
market effect.
(b) Information is generally considered nonpublic until it has been
effectively communicated to the market-place. One must be able to
point to some fact to show that the information is generally public.
Examples would include information found in a report filed with the
Securities and Exchange Commission, appearing on the Dow Jones broad
tape, or available through any electronic publication service or in
publications of general circulation.
15
<PAGE>
(c) It is unlawful not only to use inside information by trading while
in possession of it but also to communicate (tip) such information
to others who then trade on the basis of the information.
(d) Access Persons and employees of DF should consult with the
Compliance Director if they have any questions about whether
information in their possession is material nonpublic information
subject to the prohibition against insider trading.
Section 10 - Exceptions
The Compliance Director may, upon a written demonstration of hardship or
other significant factors, permit exceptions on a case-by-case basis, which
shall be in writing, to any of the prohibitions contained in this Code except
for the prohibition against insider trading described in Section 9, above. An
exception shall only be valid when provided in writing by the Compliance
Director.
Section 11 - Other Restrictions
Certain transactions may be prohibited because of considerations relating
to the Firm's and DF's restricted lists. Securities are routinely placed on the
Firm's and DF's restricted lists for a variety of reasons. When a security
appears on the list, employees generally are not permitted to transact in that
security. The DF Ethical Wall Policy also describes instances where restrictions
are placed on employee trading.
Section 12 - Sanctions
Upon discovering a violation of this Code, DF shall report such violation
to the Firm's Compliance Department which may take such steps as it deems
appropriate, including, among
16
<PAGE>
other things, the issuance of a letter of censure or suspension or
recommendation of termination of the employment of the violator, or may refer
the matter to the appropriate regulatory or governmental authority.
Section 13 - Review of Code
The Compliance Director of DF shall prepare an annual report relating to
this Code for submission to the Firm's Office of General Counsel. This report
shall summarize existing procedures concerning personal investing and any
changes in the procedures made during the past year; identify any violations
requiring significant remedial action during the past year; and identify any
recommended changes in the existing restrictions or procedures based upon DF's
experience under the Code, evolving industry practices or developments in
applicable laws or regulations.
Section 14 - Retention of Records
The Compliance Director shall be responsible for maintaining the following
records in accordance with the requirements of Rule 17j-1 of the Investment
Company Act:
(a) A copy of the Code currently in effect and any versions of the Code
in effect at any time within the past five years, as well as a copy
of all codes of ethics for any Trust sponsored or co-sponsored by DF
and any version of the codes in effect within the past five years,
maintained in an easily accessible place;
(b) A record of any violations of the Code, and of any action taken as a
result of the violation, maintained in an easily accessible place
for at least five years after the end of the fiscal year in which
the violation occurs;
17
<PAGE>
(c) A copy of each (1) Non Access Person Securities Accounts Report, (2)
Access Person Securities Holdings Report and (3) quarterly
transaction report made by an Access Person, including any
information provided in lieu of these reports, maintained for at
least five years after the end of the fiscal year in which the
report is made or the information is provided, the first two years
in an easily accessible place;
(d) A record of all persons, currently or within the past five years,
who are or were required to submit Access Person Securities Holdings
Reports or quarterly transaction reports, or who are or were
responsible for reviewing these reports, maintained in an easily
accessible place;
(e) A record of any decision, and the reasons supporting the decision,
to approve the acquisition of securities issued in an Initial Public
Offering or Private Placement by an Investment Person, maintained
for at least five years after the end of the fiscal year in which
the approval is granted; and
(f) A copy of each Transaction Form, maintained for at least five years
after the end of the fiscal year in which the approval is granted.
Section 15 - Compliance Director
For purposes of this Code the Compliance Director shall be Teresa A.
Koncick or any other individual designated by the Compliance Director.
* * * * *
All questions concerning any requirements contained in this Code should be
directed to Ms. Koncick at 282-8717 or Debra Campanella at 282-8589.
18
<PAGE>
NON-ACCESS PERSON
SECURITIES ACCOUNTS REPORT
NAME: ___________________________ DEPT/GROUP: _____________________
TITLE: ___________________________ TELEPHONE: _____________________
1. Do you maintain securities accounts with Merrill Lynch, Pierce, Fenner &
Smith?
YES NO
If yes, provide the following information for all accounts maintained with
Merrill Lynch, Pierce, Fenner & Smith:
Type of Account Office(s) Where
Account(s) Number(s) Maintained
- ---------- --------- ----------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
2. Do you maintain securities accounts outside Merrill Lynch?
YES NO
If yes, provide the following information for all accounts maintained
outside Merrill Lynch:
Type of Account Office(s) Where
Account(s) Number(s) Maintained
- ---------- --------- ----------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
The DF Division Compliance Director must be informed if you establish additional
accounts with either Merrill Lynch or with outside firms.
Return this report to the DF Legal Department
Signature: ________________________________
Date: ________________________________
19
<PAGE>
ACCESS PERSON
SECURITIES HOLDINGS REPORT
NAME: ___________________________ DEPT/GROUP: _____________________
TITLE: ___________________________ TELEPHONE: _____________________
1. Personal Securities Holdings. Do you have any direct or indirect
beneficial interest in any securities (as defined in Section 3(h) of the
Code)?
YES NO
If yes, you must provide information called for on page 2 of this report.
2. Merrill Lynch Accounts. Do you maintain securities accounts with Merrill
Lynch, Pierce, Fenner & Smith in which any securities are held for your
direct or indirect benefit?
YES NO
If yes, provide the following information for all accounts maintained with
Merrill Lynch:
Type of Account Office(s) Where
Account(s) Number(s) Maintained
- ---------- --------- ----------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
3. Outside Accounts. Do you maintain securities accounts outside Merrill
Lynch?
YES NO
If yes, provide the following information for all accounts maintained
outside Merrill Lynch:
Name of Broker, Date Account Account
Dealer or Bank Established Number
- -------------- ----------- ------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Reminder: The DF Division Compliance Director must be informed if you
established additional accounts with either Merrill Lynch or with outside firms.
In addition, if you establish an account with an outside firm, you must make
arrangements to have duplicate account statements sent to us within 10 days of
the end of each calendar quarter.
(Continue to page 2)
20
<PAGE>
Page 2
ACCESS PERSON
SECURITIES HOLDINGS REPORT
LIST OF BENEFICIALLY OWNED SECURITIES
Please Circle One
1. I have listed below all securities in which I have any direct or indirect
beneficial ownership (as defined in Section 3(c) of the Code).
2. I have attached a copy of my most recent account statement for each
account which contains securities in which I have any direct or indirect
beneficial ownership. Any beneficially-owned security that does not appear
on my account statement(s) is listed below.
3. I have received from the Compliance Director the attached Merrill Lynch
monthly report(s) which contain(s) information about securities in which I
have a direct or indirect beneficial ownership. Any beneficially-owned
security that does not appear on my monthly report(s) is either included
on the attached account statement(s) or listed below.
Title or Number of Principal
Name Shares Amount
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
o Please check here if additional pages listing your beneficially owned
securities are attached and indicate the number of additional pages:
_____.
o Please check here if copies of account statements are attached and
indicate the number of pages: _____.
My signature on this page certifies that the information about my personal
securities holdings listed on this report and any attached pages, if any, is
accurate, discloses all securities in which I have a direct or indirect
beneficial ownership, and is current as of the date I became an access person or
[December 31] of this past year, as applicable.
Signature: ________________________________
Date: ________________________________
Please return this report to the DF Legal Department
21
Exhibit 1.11.2
Code of Ethics for the
Government Securities Income Fund
A. Introduction
This Code of Ethics ("Code") has been prepared for the Government
Securities Income Fund, (the "UIT"), as required by Rule 17j-1 under the
Investment Company Act of 1940 (the "1940 Act"). A unit investment trust, by its
nature, does not have any directors, officers or employees. This Code therefore
applies by reference to individuals associated with each of the UIT's sponsors
(each, a "Sponsor"). The Code establishes the minimum standards to which each
Sponsor's directors, officers and employees must abide. It is the responsibility
of each Sponsor to (1) approve this Code and (2) adopt its own code of ethics
incorporating these minimum standards, as well as any other provisions
necessary, taking into consideration the nature of the Sponsor's particular
business operations, to prevent employees from engaging in fraudulent or
manipulative conduct.
B. Definitions
For purposes of this Code:
1. Access Person means:
(a) Any director, officer, general partner or Advisory Person
of any of the UIT's Sponsors.
Note: If a Sponsor is primarily engaged in a business or
businesses other than Sponsoring the UIT or advising
other advisory clients, the term Access Person means any
director, officer, general partner or Advisory Person of
the Sponsor who, with respect to the UIT, makes any
recommendation, participates in the determination of
which recommendation will be made, or whose principal
function or duties relate to the determination of which
recommendation will be made, or who, in connection with
his or her duties, obtains any information concerning
recommendations on Covered Securities being made to the
UIT.
A Sponsor is "primarily engaged in a business or
businesses other than Sponsoring UITs or advising other
advisory clients" if, for each of its most recent
<PAGE>
three fiscal years or for the period of time since its
organization, whichever is less, the Sponsor derived, on
an unconsolidated basis, more than 50 percent of its
total sales and revenues and more than 50 percent of its
income (or loss), before income taxes and extraordinary
items, from the other business or businesses.
2. Advisory Person means:
(a) Any employee of the UIT Sponsor (or of any company in a
control relationship to the UIT Sponsor) who, in connection
with his or her regular functions or duties, makes,
participates in, or obtains information regarding the purchase
or sale of Covered Securities by the UIT, or whose functions
relate to the making of any recommendations with respect to
the purchases or sales; and
(b) Any natural person in a control relationship to the UIT
Sponsor who obtains information concerning recommendations
made with regard to the purchase or sale of Covered Securities
by the UIT.
3. Beneficial Ownership. For purposes of the Code, beneficial ownership is
interpreted in the same manner as it would be under Rule 16a_1(a)(2) under
the Securities Exchange Act of 1934 ("Exchange Act") in determining
whether a person is the beneficial owner of a security for purposes of
Section 16 of the Exchange Act and the rules and regulations thereunder.
4. Control has the same meaning as in Section 2(a)(9) of the 1940 Act.
5. Covered Security means a security as defined in Section 2(a)(36) of the
1940 Act, except that it does not include:
(a) Direct obligations of the Government of the United States;
(b) Bankers' acceptances, bank certificates of deposit, commercial
paper and high quality short-term debt instruments, including
repurchase agreements; and
(c) Shares issued by open-end funds.
2
<PAGE>
6. Fund means any investment company registered under the 1940 Act.
7. An Initial Public Offering means an offering of securities registered
under the Securities Act of 1933 (the "Securities Act") (other than
securities issued by an open-end management company or units issued by a
unit investment trust registered under the Investment Company Act of
1940), the issuer of which, immediately before the registration, was not
subject to the reporting requirements of Sections 13 or 15(d) of the
Exchange Act.
8. Investment Personnel of a UIT Sponsor means:
(a) Any employee of the UIT Sponsor (or of any company in a
control relationship to the UIT Sponsor) who, in connection
with his or her regular functions or duties, makes or
participates in making recommendations regarding the purchase
or sale of securities by the UIT.
(b) Any natural person who controls the UIT Sponsor and who
obtains information concerning recommendations made regarding
the purchase or sale of securities by the UIT.
9. A Limited Offering means an offering that is exempt from registration
under the Securities Act pursuant to Section 4(2) or Section 4(6) or
pursuant to Rule 504, Rule 505, or Rule 506 under the Securities Act.
10. Purchase or sale of a Covered Security includes, among other things,
the writing of an option to purchase or sell a Covered Security.
11. Security Held or to be Acquired by a UIT means:
(a) Any Covered Security which, within the most recent 15 days:
(1) Is or has been held by the UIT; or
(2) Is being or has been considered by the UIT or its Sponsor
for purchase by the UIT; and
(b) Any option to purchase or sell, and any security convertible
into or exchangeable for, a Covered Security described above in
Section B.11.(a) of the Code.
3
<PAGE>
C. Unlawful Actions - Generally
It is unlawful for any affiliated person of any UIT Sponsor, in connection
with the purchase or sale, directly or indirectly, by the person of a Security
Held or to be Acquired by the UIT:
1. To employ any device, scheme or artifice to defraud the UIT;
2. To make any untrue statement of a material fact to the UIT or omit to
state a material fact necessary in order to make the statements made to
the UIT, in light of the circumstances under which they are made, not
misleading;
3. To engage in any act, practice or course of business that operates or
would operate as a fraud or deceit on the UIT; or
4. To engage in any manipulative practice with respect to the UIT.
D. Requirements
1. Code of Ethics Adoption and Approval.
(a) Each UIT Sponsor must adopt a written code of ethics containing
the provisions set forth in this Code, as well as any other
provisions reasonably necessary to prevent its Access Persons from
engaging in any conduct prohibited by Section C of this Code.
(b) Each UIT Sponsor must approve its own code of ethics and any
material change to that code of ethics within six months of the
material change.
(c) Each UIT Sponsor must approve this Code. Each UIT Sponsor must
also approve any material change to this Code no later than six
months after the incorporation of the material change.
2. Administration of Code of Ethics. Each Sponsor must use reasonable diligence
and institute procedures reasonably necessary to prevent violations of this Code
and its own code of ethics.
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E. Reporting Requirements of Access Persons
1. Reports Required. Unless excepted by Section E.2. of this Code, every
Access Person of a UIT Sponsor, must report to that Sponsor:
(a) Initial Holdings Reports. No later than 10 days after the person
becomes an Access Person, the following information:
(i) The title, number of shares and principal amount of each
Covered Security in which the Access Person had any direct or
indirect beneficial ownership when the person became an Access
Person;
(ii) The name of any broker, dealer or bank with whom the
Access Person maintained an account in which any securities
were held for the direct or indirect benefit of the Access
Person as of the date the person became an Access Person; and
(iii) The date that the report is submitted by the Access
Person.
(b) Quarterly Transaction Reports. No later than 10 days after the
end of every calendar quarter, the following information:
(i) With respect to any transaction during the quarter in a
Covered Security in which the Access Person had any direct or
indirect beneficial ownership:
(1) The date of the transaction, the title, the interest
rate and maturity date (if applicable), the number of
shares and the principal amount of each Covered Security
involved;
(2) The nature of the transaction (i.e., purchase, sale
or any other type of acquisition or disposition);
(3) The price of the Covered Security at which the
transaction was effected;
(4) The name of the broker, dealer or bank with or
through which the transaction was effected; and
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<PAGE>
(5) The date that the report is submitted by the Access
Person.
(ii) With respect to any account established by the Access
Person in which any securities were held during the quarter
for the direct or indirect benefit of the Access Person:
(1) The name of the broker, dealer or bank with whom the
Access Person established the account;
(2) The date the account was established; and
(3) The date that the report is submitted by the Access
Person.
(c) Annual Holdings Reports. Annually, the following
information (which information must be current as of a date no
more than 30 days before the report is submitted):
(i) The title, number of shares and principal amount of
each Covered Security in which the Access Person had any
direct or indirect beneficial ownership;
(ii) The name of any broker, dealer or bank with whom
the Access Person maintains an account in which any
securities are held for the direct or indirect benefit
of the Access Person; and
(iii) The date that the report is submitted by the
Access Person.
2. Exceptions from Reporting Requirements
(a) An Access Person to a UIT Sponsor need not make a report
under Section E.1 of this Code with respect to transactions
effected for, and Covered Securities held in, any account over
which the Access Person has no direct or indirect influence or
control.
(b) An Access Person to a UIT Sponsor need not make a
quarterly transaction report to the Sponsor under Section
E.1.(b) of this Code if all the information in the report
6
<PAGE>
would duplicate information required to be recorded under Rule
204_2(a)(12) or Rule 204_2(a)(13) under the Investment
Advisers Act of 1940.
(c) An Access Person to a UIT Sponsor need not make a
quarterly transaction report under paragraph E.1.(b) of this
section if the report would duplicate information contained in
broker trade confirmations or account statements received by
the Sponsor with respect to the Access Person in the time
period required by Section E.1.(b), if all of the information
required by that provision is contained in the broker trade
confirmations or account statements, or in the records of the
Sponsor.
3. Review of Reports. Each UIT Sponsor to which reports are required
to be made by Section E.1. of this Code must institute procedures by
which appropriate management or compliance personnel review these
reports.
4. Notification of Reporting Obligation. Each UIT Sponsor to which
reports are required to be made by Section E.1. of this Code must
identify all Access Persons who are required to make these reports
and must inform those Access Persons of their reporting obligation.
5. Disclaimer of Beneficial Ownership. Any report required by
Section E.1 of this Code may contain a statement that the report
will not be construed as an admission that the person making the
report has any direct or indirect beneficial ownership in the
Covered Security to which the report relates.
6. Pre-approval of Investments in IPOs and Limited Offerings.
Investment Personnel of each UIT Sponsor must obtain approval from
their respective Sponsor before directly or indirectly acquiring
beneficial ownership in any securities issued in any Initial Public
Offering or Limited Offering.
F. Recordkeeping Requirements
Each UIT Sponsor must, at its principal place of business, maintain
records in the manner and to the extent set out in this Section F of the Code,
and must make these records available for examination by the SEC:
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1. The Code. A copy of each code of ethics for the Sponsor that is in
effect, or at any time within the past five years was in effect, as well
as a copy of this code and any version of this code in effect within the
past five years, must be maintained in an easily accessible place;
2. Code Violations. A record of any violation of the Sponsor's code of
ethics, and of any action taken as a result of the violation, must be
maintained in an easily accessible place for at least five years after the
end of the fiscal year in which the violation occurs;
3. Access Person Reports. A copy of each report made by an Access Person
as required by Section E.1. of the Code, including any information
provided in lieu of the reports under Section E.2.(c) of the Code, must be
maintained for at least five years after the end of the fiscal year in
which the report is made or the information is provided, the first two
years in an easily accessible place;
4. Reporting Persons and Reviewers. A record of all persons, currently or
within the past five years, who are or were required to make reports under
Section E.1. of the Code, or who are or were responsible for reviewing
these reports, must be maintained in an easily accessible place; and
5. Transaction Approvals. A record of any decision, and the reasons
supporting the decision, to approve the acquisition by investment
personnel of any securities issued in an Initial Public Offering or a
Limited Offering, must be maintained for at least five years after the end
of the fiscal year in which the approval is granted.
8
EXHIBIT 4.1
INTERACTIVE DATA
FINANCIAL TIMES INFORMATION
14 WALL STREET, 11th FLOOR
NEW YORK, NEW YORK 10005
(212) 306-6596
FAX 212-306-6698
March 8, 2000
<TABLE>
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Defined Asset Funds
P.O. Box 9051
Princeton, New Jersey 08543-9051
The Bank of New York
101 Barclay Street
New York, New York 10286
</TABLE>
RE: DEFINED ASSET FUNDS--GOVERNMENT SECURITIES INCOME FUND,
U.S. TREASURY SERIES, LADDERED ZERO COUPON BOND SERIES 7
(A Unit Investment Trust) Units of Fractional Undivided Interest-Registered
Under the Securities Act of 1933, File No. 33-28452)
Gentlemen:
We have examined the Registration Statement for the above captioned Fund.
We hereby consent to the reference to Interactive Data Services, Inc. in the
Prospectus contained in the Post-Effective Amendment No. 10 to the Registration
Statement for the above captioned Fund and to the use of the evaluations of the
Obligations prepared by us which are referred to in such Prospectus and
Registration Statement.
You are authorized to file copies of this letter with the Securities and
Exchange Commission.
Sincerely,
JAMES PERRY
Vice President
Exhibit 5.1
CONSENT OF INDEPENDENT ACCOUNTANTS
The Sponsors and Trustee of
Defined Asset Funds--Government Securities Income Fund--U.S. Treasury Series--7
(Laddered Zero Coupons)
We consent to the use in this Post-Effective Amendment No. 10 to Registration
Statement No. 33-28452 of our opinion dated February 17, 2000 appearing in the
Prospectus, which is part of such Registration Statement, and to the reference
to us under the heading "How The Fund Works--Auditors" in such Prospectus.
DELOITTE & TOUCHE LLP
New York, N.Y.
March 8, 2000
