<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 25, 1997
REGISTRATION NO. 33-02455
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------------
POST-EFFECTIVE AMENDMENT NO. 14
TO
FORM S-6
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FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
------------------------------------------
A. EXACT NAME OF TRUST:
THE STRIPPED ('ZERO') U.S. TREASURY SECURITIES FUND
PROVIDENT MUTUAL SERIES A
B. NAMES OF DEPOSITOR:
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
C. COMPLETE ADDRESSES OF DEPOSITORS' PRINCIPAL EXECUTIVE OFFICE:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
DEFINED ASSET FUNDS
POST OFFICE BOX 9851
PRINCETON, N.J. 08543-9051
D. NAME AND COMPLETE ADDRESS OF AGENT FOR SERVICE:
TERESA KONCICK, ESQ.
P.O. BOX 9051
PRINCETON, N.J.
08543-9051
COPIES TO:
CATHY B. O'KELLY PIERRE DE SAINT PHALLE,
SUTHERLAND ASBILL & ESQ.
BRENNAN DAVIS POLK & WARDWELL
1875 PENNSYLVANIA AVENUE, 450 LEXINGTON AVENUE
N.W. NEW YORK, N.Y. 10017
WASHINGTON, D.C. 28884
Check box if it is proposed that this filing will become effective on May 1,
1997 pursuant to paragraph (b) of Rule 485. / x /
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<PAGE>
THE STRIPPED ('ZERO')
U.S. TREASURY
SECURITIES FUND
- ------------------------------------------------------------
PROVIDENT MUTUAL SERIES A
(A PROVIDENT MUTUAL VARIABLE
LIFE ACCOUNT INVESTMENT)
PROSPECTUS DATED MAY 1, 1997
SPONSOR:
Merrill Lynch,
Pierce, Fenner & Smith Incorporated
This Fund was formed to provide safety of capital and a high yield to maturity
through investment in a fixed portfolio consisting primarily of stripped debt
obligations of the United States of America ('Stripped Treasury Securities').
These objectives may not be realized if Units are sold before the underlying
Securities mature, because market prices of the Securities will vary as interest
rates change and with other factors. Stripped Treasury Securities do not make
any periodic payments of interest prior to maturity; accordingly, the Trust's
portfolio as a whole is priced at a deep discount from face amount, and Unit
prices may be subject to greater price fluctuations in response to changing
interest rates than in a fund comprised of debt obligations of comparable
maturities that pay interest currently. This risk is greater when the period to
maturity is longer. See Risk Factors. The Sponsor may deposit additional
Securities, with maturities identical to those initially deposited, in
connection with creation and sale of additional Units (see Fund Structure).
The Fund consists of the 2006 Trust designated by the year in which its Stripped
Treasury Securities mature. Units of the Fund are currently sold only to
separate investment accounts of Provident Mutual Life Insurance Company of
Philadelphia ('Provident Mutual'), including the Variable Zero Coupon Bond
Separate Account (the 'Account'), to fund the benefits under Variable Life
Insurance Policies (the 'Policies') issued by Provident Mutual. The Account
invests in Units of the Trust in accordance with allocation instructions
received from Policyowners. The rights of the Account as a Holder of Units
should be distinguished from the rights of a Policyowner as described in the
accompanying Prospectus for the Policies.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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Inquiries should be directed to the Trustee 1-800-323-1508
Read and retain this Prospectus for future reference.
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<PAGE>
INVESTMENT SUMMARY AS OF DECEMBER 31, 1996+
2006
TRUST
------------
FACE AMOUNT OF SECURITIES......................... $ 11,120,977
NUMBER OF UNITS................................... 11,012,916
FACE AMOUNT OF SECURITIES PER 1,000 UNITS......... $ 1,009.81
FRACTIONAL UNDIVIDED INTEREST IN TRUST REPRESENTED
BY EACH UNIT...................................... 1/11,012,916th
OFFERING PRICE PER 1,000 UNITS***.................
Aggregate offer side evaluation of Securities
in Trust*....................................... $ 6,224,457
------------
Net asset value (divided by number of Units,
times 1,000).................................... $ 565.19
Plus the applicable transaction charge**...... 8.60
Offering Price per 1,000 Units***++........... 573.79
------------
------------
SPONSORS' REPURCHASE PRICE PER 1,000 UNITS (based
on offer side evaluation of underlying
Securities)++................................... $ 565.19
REDEMPTION PRICE PER 1,000 UNITS (based on bid
side evaluation of underlying
Securities)****++............................... $ 564.62
CALCULATION OF ESTIMATED NET ANNUAL CASH INTEREST
INCOME PER $1,000 FACE AMOUNT
Gross cash annual income...................... $ 0.50
Less estimated annual expenses................ 0.50
------------
Estimated net annual cash income.............. $ 0.00
------------
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TRUSTEE'S ANNUAL FEE AND EXPENSES
Per $1,000 face amount of underlying
Securities (see Expenses and Charges)........... $ 0.50
EVALUATOR'S FEE FOR EACH EVALUATION
Minimum of $5.00 plus 25 cents for each issue
of underlying Securities in excess of 50
issues, treating separate maturities as
separate issues. (See Expenses and Charges).
MINIMUM FACE AMOUNT OF FUND
The Trust may be terminated if the face amount
is less than 40% of the face amount of
Securities on the Date of Deposit.
EVALUATION TIME
3:30 P.M. New York Time
- ------------------
+ The Indenture was signed and the initial deposit was made as of May 14,
1986.
++ Plus any net cash.
* Includes amortization of discount, calculated using the 'interest'
method, to expected date of settlement (normally three business days after
purchase) for Securities purchased on the Investment Summary date.
** The transaction charges applicable as of the date above are 1.50% of
its Offering Price (1.523% of the net amount invested in Securities).
Transaction charges will decrease as the Trust approaches maturity, as described
under Sales of Units.
*** These figures are computed by dividing the aggregate offering side
evaluation of the underlying Securities in the Trust (the price at which they
could be purchased directly by the public if they were available) by the number
of Units of the Trust outstanding, multiplying the result times 1,000 and adding
the applicable transaction charge as described in the preceding footnote. These
figures assume a purchase of 1,000 Units. The price of a single Unit, or any
multiple thereof, is calculated by dividing the Offering Price per 1,000 Units
above by 1,000, and multiplying by the number of Units. As explained under Sale
of Units--Offering Price, as it is assumed that income on the Treasury Note will
equal Trust expenses, no accrued interest is added to the Offering or Redemption
Prices.
**** Figures shown are $9.17 less than the Offering Price and $0.57 less
than the Sponsor's Repurchase Price per 1,000 units.
A-2
<PAGE>
INVESTMENT SUMMARY AS OF DECEMBER 31, 1996 (CONTINUED)
TRUST PORTFOLIOS (SEE PORTFOLIOS)
OBJECTIVES OF THE FUND--To provide safety of capital and a high yield to
maturity through investment in a fixed portfolio consisting primarily of
stripped debt obligations of the United States of America and receipts and
certificates for such stripped debt obligations ('Stripped Treasury
Securities'). See Risk Factors--Special Characteristics of Stripped Treasury
Securities. The Trust also contains an interest-bearing Treasury Security (the
'Treasury Note') to provide income to pay the expenses of the Trust. There is no
assurance that these objectives will be met if Units are sold prior to maturity
of the underlying Securities as market prices of the Securities before maturity
and therefore the value of the Units will vary with changes in interest rates
and other factors. It is intended that Securities selected for the Trust will
comply with any investment limitations required to assure favorable income tax
treatment for the Policies.
TRUST PORTFOLIO (See Portfolio.)
INVESTMENT QUALITY--The Securities are not rated, but in the opinion of the
Sponsor, have credit characteristics comparable to those of Securities rated
'AAA' by nationally recognized rating agencies.
ELIGIBLE PURCHASERS--Currently, Units of the Fund are sold only to
Provident Mutual's Variable Zero Coupon Bond Separate Account (the 'Account') to
fund the benefits under the Variable Life Insurance Policies (the 'Policies').
Accordingly, the interest of a Policyowner in the Units is subject to the terms
of the Policy and is described in the accompanying Prospectus for the Policies,
which should be reviewed carefully by a person considering the purchase of a
Policy. That Prospectus describes the relationship between increases or
decreases in the net asset value of, and any distributions on, Units and the
benefits provided under a Policy. The rights of the Account as a Holder of Units
should be distinguished from the rights of a Policyowner which are described in
the Policies. As long as Units of the Fund are sold only to the Account, the
term 'Holder' in this Prospectus shall refer to the Account (or the Sponsor if
it holds Units acquired in the secondary market--see Market for Units).
RISK FACTORS--An investment in Trust Units should be made with an
understanding of the risks which are inherent in an investment in deeply
discounted debt obligations, including the risk that the value of the Trust and
hence of the Units will decline with increases in interst rates. The market
value of Stripped Treasury Securities, and therefore the value of the Units, may
be subject to greater fluctuations in response to changing interest rates than
debt obligations of comparable maturities which pay interest currently. This
risk is greater when the period to maturity is longer. (See p. 1.) The interest
payments on the Treasury Note are expected to be just sufficient to cover the
expenses of the Trust, and no distributions of income are anticipated until
maturity of the Securities. Consequently, it is expected that a Holder will
receive total distributions of approximately $1,000 for each 1,000 Units held
until maturity of the underlying Securities. The Offering Price will vary in
accordance with fluctuations in the values of the Securities and the
distributions could change if the Securities are paid or sold, or if the
expenses of the Trust change. For a discussion of the economic differences
between the Trust and a fund consisting of customary securities, see Description
of the Fund--Income and Yield.
MARKET FOR UNITS--The Sponsor, though not obligated to do so, intends to
maintain a market for Units based on the aggregate offering side evaluation of
the underlying Securities. (See p. 6.) If that market is not maintained, a
Holder will be able to dispose of Units through redemption at prices based on
the lower, aggregate bid side evaluation of those Securities. (See Redemption.)
Market conditions may cause the prices available in the market maintained by the
Sponsor or upon exercise of redemption rights to be more or less than the amount
paid for Units. The market prices of Stripped Treasury Securities, and hence of
the Units, are subject to greater fluctuations than the prices of securities
making current payments of interest.
DISTRIBUTIONS--The final distribution will be made on the first business
day following the maturity of the Stripped Treasury Securities to holders of
record on the business day immediately preceding the date of distribution, and
may include any amount received upon the sale of Securities to meet redemptions
of Units which exceeds the amount necessary to meet those redemptions and any
accumulated net interest income. Principal from maturity of the Treasury Note
will not be distributed until disposition of the Stripped Treasury Security in
the Trust. (See Administration of the Fund--Accounts and Distributions.) There
will be no payments of interest on the Securities other than on the Treasury
Note, which will be used to pay the expenses of the Trust. Consequently, no
distributions of interest income should be expected. However, the Sponsor may
direct the Trustee to distribute to Holders as of the last Business Day in any
year any cash balance in the Income and Capital Accounts not otherwise
allocated. Nevertheless, the gross interest income on all Securities in the
Trust is taxable to Holders. Each Stripped Treasury Security will be treated for
Federal income tax purposes as having 'original issue discount,' which must be
amortized over the term of the Stripped Treasury Security and must be included
in a Holder's ordinary gross income before the Holder receives the cash
attributable to that income. (See Taxes.)
A-3
<PAGE>
THE STRIPPED ("ZERO") U.S. TREASURY SECURITIES FUND,
PROVIDENT MUTUAL SERIES A
REPORT OF INDEPENDENT ACCOUNTANTS
The Sponsor, Trustee and Holders
of The Stripped ("Zero")
U.S. Treasury Securities Fund,
Provident Mutual Series A:
We have audited the accompanying statement of condition of the 2006 Trust of The
Stripped ("Zero") U.S. Treasury Securities Fund, Provident Mutual Series A,
including the portfolio, as of December 31, 1996 and the related statements of
operations and of changes in net assets for the years ended December 31, 1996,
1995 and 1994. 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
December 31, 1996, as shown in such portfolio, were confirmed to us by The Chase
Manhattan Bank, the Trustee. An audit also includes assessing the accounting
principles used and significant estimates made by the Trustee, as well as
evaluating the overall financial statement presentation. We believe that our
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
The Stripped ("Zero") U.S. Treasury Securities Fund, Provident Mutual Series A
at December 31, 1996 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
New York, N.Y.
March 14, 1997
D-1
<PAGE>
THE STRIPPED ("ZERO") U.S. TREASURY SECURITIES FUND,
PROVIDENT MUTUAL SERIES A
STATEMENT OF CONDITION
AS OF DECEMBER 31, 1996
2006 TRUST
TRUST PROPERTY:
Investment in marketable securities
(see Portfolio and Note 1) $6,218,137
Other 2,511
Total trust property 6,220,648
LESS LIABILITY - Other 359
NET ASSETS (Note 2) $6,220,289
UNITS OUTSTANDING 11,012,916
UNIT VALUE $0.56482
See Notes to Financial Statements.
D-2
<PAGE>
THE STRIPPED ("ZERO") U.S. TREASURY SECURITIES FUND,
PROVIDENT MUTUAL SERIES A
<TABLE><CAPTION>
STATEMENTS OF OPERATIONS
2006 TRUST
Years Ended December 31,
1996 1995 1994
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income $ 4,511 $ 3,558 $ 2,762
Accretion of original issue discount 321,283 237,549 171,846
Trustee's fees and expenses (4,291) (3,476) (2,677)
Net investment income 321,503 237,631 171,931
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENTS (355,385) 790,801 (394,788)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $(33,882) $1,028,432 $(222,857)
See Notes to Financial Statements.
</TABLE>
D-3
<PAGE>
THE STRIPPED ("ZERO") U.S. TREASURY SECURITIES FUND,
PROVIDENT MUTUAL SERIES A
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE><CAPTION>
2006 TRUST
Years Ended December 31,
1996 1995 1994
<S> <C> <C> <C>
OPERATIONS:
Net investment income $ 321,503 $ 237,631 $ 171,931
Unrealized appreciation (depreciation)
of investments (355,385) 790,801 (394,788)
Net increase (decrease) in net assets resulting
from operations (33,882) 1,028,432 (222,857)
CAPITAL SHARE TRANSACTIONS (Note 3):
Issuance of units 1,596,441 930,417 553,957
NET INCREASE IN NET ASSETS 1,562,559 1,958,849 331,100
NET ASSETS, BEGINNING OF YEAR 4,657,730 2,698,881 2,367,781
NET ASSETS, END OF YEAR $6,220,289 $4,657,730 $2,698,881
UNIT VALUE, END OF YEAR $0.56482 $0.57250 $0.42813
UNITS OUTSTANDING, END OF YEAR 11,012,916 8,135,744 6,303,913
</TABLE>
See Notes to Financial Statements.
D-4
<PAGE>
THE STRIPPED ("ZERO") U.S. TREASURY SECURITIES FUND,
PROVIDENT MUTUAL SERIES A
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 an independent
evaluator based on bid side evaluations for the securities.
(b) Cost of securities is based on offering side evaluations for the
securities at Dates of Deposit. Cost of securities subsequent to
dates of purchase has been adjusted to include the accretion of
original issue discount on the Stripped Treasury Securities. Realized
gain and loss on sales of securities are determined using the first-
in, first-out cost basis.
(c) The Fund is not subject to income taxes. Accordingly, no provision
for such taxes is required.
2. NET ASSETS, DECEMBER 31, 1996
2006 Trust
Cost of 11,012,916 units at Dates of Deposit $4,814,960
Less sales charge 84,262
Net amount applicable to Holders 4,730,698
Redemptions of units - net cost of 1,910,512 units less
redemption amounts 204,564
Realized gain on securities sold or redeemed 53,640
Unrealized appreciation of investments 300,051
Undistributed net investment income - accretion of original
issue discount ($929,189) plus excess ($2,147) of interest
income over Trustee's fees and expenses 931,336
Net assets $6,220,289
3. CAPITAL SHARE TRANSACTIONS
Additional units were issued by the Trust during the years ended
December 31, 1996, 1995 and 1994 as follows:
Trust 1996 1995 1994
2006 2,877,172 1,831,831 1,284,272
Units may be redeemed at the office of the Trustee upon tender thereof
generally on any business day or, in the case of uncertificated 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>
THE STRIPPED ("ZERO") U.S. TREASURY SECURITIES FUND,
PROVIDENT MUTUAL SERIES A
NOTES TO FINANCIAL STATEMENTS
4. INCOME TAXES
All Fund 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 December 31, 1996, 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 not make any distributions until the
first business day following the maturity of its holdings in the Stripped
Treasury Securities which are noninterest-bearing.
D-6
<PAGE>
THE STRIPPED ("ZERO") U.S. TREASURY SECURITIES FUND,
PROVIDENT MUTUAL SERIES A
PORTFOLIO
AS OF DECEMBER 31, 1996
<TABLE><CAPTION>
Portfolio No. Adjusted
and Title of Interest Face Cost Value
Securities Rate Maturities Amount (Note A) (Note A)
2006 TRUST
<S> <C> <C> <C> <C> <C>
1 Stripped Treasury 0% 2/15/06 $11,062,000 $5,847,291 $6,147,177
Securities
(Note B)
2 U.S. Treasury
Bonds 9.375 2/15/06 58,977 70,795 70,960
Total $11,120,977 $5,918,086 $6,218,137
Note A - See Note 1 to Financial Statements.
Note B - See "Description of the Fund - Special Characteristics of
Stripped Treasury Securities" in this Prospectus, Part B.
</TABLE>
D-7
<PAGE>
THE STRIPPED ('ZERO')
U.S. TREASURY SECURITIES FUND, PROVIDENT MUTUAL SERIES
FUND STRUCTURE
STRUCTURE
This Series (the 'Fund' or the 'Trust') is a unit investment trust created
under New York law by one Trust Indenture (the 'Indenture') among the Sponsor,
the Trustee and the Evaluator. To the extent that references in the Prospectus
are to articles and sections of the Indenture, which are hereby incorporated by
reference, the statements made herein are qualified in their entirety by this
reference. On the initial date of deposit (the 'Initial Date of Deposit') the
Sponsor deposited the underlying Securities with the Trustee at prices equal to
the valuation of those Securities on the offer side of the market as determined
by the Evaluator, and the Trustee delivered to the Sponsor units of interest
('Units') representing the entire ownership of the Trust. Most if not all of the
Securities so deposited were represented by purchase contracts assigned to the
Trustee together with an irrevocable letter or letters of credit issued by a
commercial bank or banks in the amount necessary to complete their purchase. The
record holders ('Holders') of Units will have the right to have their Units
redeemed (see Redemption) at a price based on the aggregate bid side evaluation
of the Securities ('Redemption Price per Unit') if the Units cannot be sold in
the market that the Sponsor proposes to maintain (see Market for Units).
Redemptions will be made in securities ('in kind') or in cash at the option of
the Holder.
The Sponsor may deposit additional Securities, with an identical maturity
to that of the Securities initially deposited and Units may be continuously
offered for sale by means of this Prospectus (see Sale of Units-- Distribution),
resulting in a potential increase in the number of outstanding Units (see
Selection and Acquisition of Securities). Each Unit, however, will continue to
represent an identical face amount of Securities with identical maturity dates.
As used herein, 'Securities' includes the Stripped Treasury Securities and
interest-bearing Treasury Note deposited in the Trust and described under
Portfolio and any additional Treasury Securities deposited thereafter or
contracts for the purchase thereof together with an irrevocable letter or
letters of credit sufficient to perform such contracts.
RISK FACTORS
An investment in Units should be made with an understanding of the risks
which an investment in deep discount debt obligations may entail, including the
risk that the value of the Trust's portfolio (the 'Portfolio') and hence of the
Units will decline with increases in interest rates. High inflation and
recession, together with the fiscal and monetary measures adopted to attempt to
deal with those and other economic problems, have contributed to recent wide
fluctuations in interest rates and thus in the value of fixed-rate debt
obligations generally. The Sponsor cannot predict future economic policies or
their consequences or, therefore, the course or extent of any similar
fluctuations in the future. A direct Holder (but not necessarily a
Policyowner--see Taxes) will have significant amounts of taxable income
attributable to it before receipt of the cash attributable to that income.
Because interest on 'zero coupon' debt obligations is not distributed on a
current basis but in effect compounded, the value of securities of this type,
including the value of accrued and reinvested interest (and of a fund comprised
of these obligations), is subject to greater fluctuations than on obligations
that distribute income
1
<PAGE>
regularly. Accordingly, while the full faith and credit of the U.S. government
provides a high level of protection against credit risks on the Securities, sale
of Units before maturity of the Securities at a time when interest rates have
increased would involve greater market risk than in a fund invested in debt
obligations of comparable maturity that pay interest currently. This risk is
greater when the period to maturity is longer.
SPECIAL CHARACTERISTICS OF STRIPPED TREASURY SECURITIES
Bearer bonds are transferable by delivery; payments are made to the holder
of the bonds. Stripped bonds have been stripped of their unmatured interest
coupons; stripped coupons are coupons that have been stripped from an issuer's
bonds. Stripped Treasury Securities are sold at a deep discount because the
buyer of those securities receives only the right to receive a future fixed
payment on the security and not any rights to periodic interest payment thereon.
Purchasers of these securities acquire, in effect, discount obligations that are
economically identical to the 'zero-coupon bonds' that have been issued by
corporations. Zero Coupon bonds are debt obligations that do not make any
periodic payments of interest prior to maturity and accordingly are issued at a
deep discount.
Stripped Treasury Securities held by the Trust shall consist of one or more
of the following types of securities: (a) U.S. Treasury debt obligations which
have been stripped of their unmatured interest coupons and (b) coupons which
have been stripped from U.S. Treasury bearer bonds, either of which may be held
through the Federal Reserve Bank's book entry system called 'Separate Trading of
Registered Interest and Principal of Securities ('STRIPS'), or 'Coupon Under
Book-Entry Safekeeping' ('CUBES'). STRIPS and CUBES, while direct obligations of
the United States and issued under programs introduced by the U.S. Treasury, are
not issued directly by the U.S. government. The STRIPS program facilitates
secondary market stripping of selected Treasury notes and bonds into individual
principal and interest components by purchasers with access to a book-entry
account at a Federal Reserve bank. Those obligations may be maintained in the
book-entry system operated by the Federal Reserve in a manner that permits
separate trading and ownership of interest and principal payments. The Federal
Reserve does not charge a fee for this service, but book-entry transfers of
interest and principal components are subject to the same fee schedule generally
applicable to transfers of Treasury securities.
The Stripped Treasury Securities are payable in full at maturity at their
stated maturity amount and are not subject to redemption prior to maturity. The
Stripped Treasury Securities do not make any periodic payments of interest. The
Securities are sold at a substantial discount from their face amounts payable at
maturity. A holder of Stripped Treasury Securities will be required to include
annually in gross income an allocable portion of the deemed original issue
discount, prior to receipt of the cash attributable to that income. However,
when an insurance company separate account such as the Account is the Holder,
any taxable income will in effect be offset by deducting an equal amount for an
increase in reserves. Stripped Treasury Securities are marketable in
substantially the same manner as other discount Treasury securities.
Under generally accepted accounting principles, a holder of a security
purchased at a discount normally must report as an item of income for financial
accounting purposes the portion of the discount attributable to the applicable
reporting period. The calculation of this attributable income would be made on
the 'interest' method which generally will result in a lesser amount of
includible income in earlier periods and a correspondingly larger amount in
later periods. For Federal income tax purposes, the inclusion will be on a basis
that reflects the effective semi-annual compounding of accrued but unpaid
interest effectively represented by the discount. Although this treatment is
similar to the 'interest' method described above, the 'interest' method may
differ to
2
<PAGE>
the extent that generally accepted accounting principles permit or require the
inclusion of interest on the basis of a compounding period other than the
semi-annual period (see Taxes below).
DESCRIPTION OF THE FUND
THE PORTFOLIO
The Portfolio consists of Stripped Treasury Securities, with fixed maturity
dates and not having any equity or conversion features, that do not pay interest
before maturity and as such were purchased at a deep discount (see above) and of
the Treasury Note deposited in order to provide cash income with which to pay
the expenses of the Trust. It is intended that the Portfolio will comply with
any investment limitations required to assure favorable Federal income tax
treatment for the Policies issued by Provident Mutual.
SELECTION AND ACQUISITION OF SECURITIES
In selecting Securities for deposit in the Trust, the following factors,
among others, were considered by the Unit Investment Trusts division of Merrill
Lynch, Pierce, Fenner & Smith Incorporated: (i) the types of securities
available; (ii) the prices of those securities relative to other comparable
securities; (iii) the extent to which those securities trade at a discount from
par once the interest coupons are stripped; (iv) the yield to maturity of those
securities; and (v) the maturities of those securities.
The yield to maturity and discount from par on securities of the type
deposited in the Trust depends on a variety of factors, including general money
market conditions, general conditions of the bond market, prevailing interest
rates and the maturities of the securities.
The Trust consists of the Securities (or contracts to purchase these
Securities) listed under Portfolios and any additional Securities deposited in
the Trust pursuant to the terms of the Indenture (including provisions with
respect to deposit of Securities in connection with the sale of additional
Units) as long as they may continue to be held from time to time in the Trust,
together with accrued and undistributed interest on any interest bearing
securities deposited in order to pay the expenses of the Trust, undistributed
cash representing payments of principal and cash realized from the disposition
of Securities.
Neither the Sponsor nor the Trustee shall be liable in any way for any
default, failure or defect in any Security. In the event of a failure to deliver
any Security that has been purchased for the Trust under a contract ('Failed
Security'), the Sponsor is authorized under the Indenture to direct the Trustee
to acquire substitute securities ('Replacement Securities') to make up the
portfolio of the Trust. Replacement Securities must be deposited into the Trust
within 20 days after delivery of notice of the failed contract; the purchase
price may not exceed the amount of funds reserved for the purchase of the Failed
Security. The Replacement Securities must be Securities issued by the U.S.
Treasury (i) that make no periodic payments of interest (or, in the case of a
Treasury Note used to pay expenses, are of the same issue), (ii) that have a
fixed maturity identical to that of the Failed Security, (iii) that are
purchased at a price that results in a yield to maturity as of the date of
deposit of the Failed Security which is equivalent (taking into consideration
then-current market conditions) to the yield to maturity of the Failed Security
and (iv) that are not when, as and if issued obligations. If this right of
substitution is not utilized to acquire Replacement Securities in the event of a
failed contract, the Sponsor will cause to be refunded the attributable
transaction charge plus the attributable Cost of Securities to Trust, plus
accrued interest and amortization attributable to the relevant Security to the
date the Sponsor is notified of the failure.
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Because certain of the Securities from time to time may be sold under
certain circumstances described herein, the Trust is not expected to retain its
present size and composition (see Redemption). The Indenture also authorizes the
Sponsor to increase the size and number of Units by the deposit of additional
Securities and the issue of a corresponding number of additional Units, provided
that the maturity of any additional Securities deposited in the Trust is
identical to the maturity of the Securities initially deposited in the Trust.
THE UNITS
On the date of the Investment Summary, each Unit represented the fractional
undivided interest in the Securities held in the Trust and net income of the
Trust set forth under Investment Summary. Thereafter, if Units are redeemed the
face amount of Securities will be reduced by amounts allocable to redeemed
Units, and the fractional undivided interest represented by each remaining Unit
in the balance will be increased. However, if additional Units are issued
(through deposit of Securities by the Sponsor in connection with the sale of
additional Units), the aggregate face amount of Securities will be increased by
amounts allocable to additional Units, and the fractional undivided interest
represented by each Unit in the balance of the Trust will be decreased. Units
will remain outstanding until redeemed upon tender to the Trustee by a Holder
(which may include the Sponsor) or until the termination of the Indenture (see
Redemption and Administration of the Fund--Amendment and Termination).
INCOME AND YIELD
The economic effect of purchasing Units of the Trust is that the investor
who holds his Units until maturity of the underlying Securities should receive
approximately a fixed yield, not only on his original investment but on all
earned discount during the life of the Securities. The assumed or implicit
automatic reinvestment at market rates at the time of purchase of the portion of
the yield represented by earned discount differentiates the Trust from funds
comprising customary securities on which current periodic interest is paid at
market rates at the time of issue. Accordingly, an investor in the Units, unlike
an investor in a fund comprised of customary securities, virtually eliminates
his risk of being unable to invest distributions at a rate as high as the yield
on his Trust, but will forego the ability to reinvest at higher rates in the
future.
The Treasury Note deposited in order to pay Trust expenses includes an item
of accrued but unpaid interest up to its date of deposit. To avoid having
Holders pay for this accrued interest (which earns no return) when Units are
purchased, the Trustee pays this amount of accrued interest to the Sponsor as a
special distribution. The Trustee will recover the amount of this distribution
from interest received on the Treasury Note deposited in the Trust. Although the
Treasury Note will also accrue interest during the period between the date of
deposit and the date of settlement for Units, the Sponsor anticipates that any
such amount of accrued interest will be minimal and, therefore, will not be
added to the Offering Price of the Units.
The price per Unit will vary in accordance with fluctuations in the prices
of the Securities held by the Trust. Changes in the Offering Prices or in a
Trust's expenses will result in changes in the yields to maturity.
TAXES
The following discussion relates only to direct holders of Units of the
Fund, and not to Policyowners. For information on tax consequences to
Policyowners, see the attached Prospectus for the Policies.
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In the opinion of Davis Polk & Wardwell, special counsel for the Sponsor,
under existing law:
The Trust is not an association taxable as a corporation for Federal
income tax purposes, and income received by the Trust will be treated as
the income of the Holders of the Trust in the manner set forth below.
Each Holder will be considered the owner of a pro rata portion of each
Security in the Trust under the grantor trust rules of Sections 671-679 of
the Internal Revenue Code of 1986, as amended (the 'Code'). The total cost
to a Holder for its Units, including the transactions charge, is allocated
among its pro rata portion of each Security in the Trust (in proportion to
the fair market values thereof on the date the Holder purchases its Units)
in order to determine its tax cost for its pro rata portion of each
Security.
The Trust consists primarily of Stripped Treasury Securities. A Holder
is required to treat its pro rata portion of each Stripped Treasury
Security in the Trust as a bond that was originally issued on the date the
Holder purchased its Units at an original issue discount equal to the
excess of the stated redemption price at maturity over the Holder's tax
cost therefor, and to include annually in income a portion of such original
issue discount determined under a formula based on the compounding of
interest.
Upon a disposition of all or part of a Holder's pro rata portion of a
Security (by sale, exchange or redemption of the Security or by the sale or
redemption of all or part of its Units), a Holder will generally recognize
taxable gain or loss which will generally be capital gain or loss.
Under the income tax laws of the State and City of New York, the Trust
is not an association taxable as a corporation and income received by the
Trust will be treated as the income of the Holders of the Trust.
Holders will be required for Federal income tax purposes to include
amounts in ordinary gross income in advance of the receipt of the cash
attributable to such income. Therefore, the direct holding of Units may be
appropriate only for a tax-deferred account which can have taxable income
attributed in advance of the receipt of the cash attributable to such
income.
The foregoing discussion relates only to Federal and certain aspects of
New York State and City income taxes. Depending on their state of
residence, Holders may be subject to state and location taxation and should
consult their own tax advisors in this regard.
* * *
After the end of each calendar year, the Trustee will furnish to each
Holder an income report, including the Holder's pro rata portion of the fees and
expenses paid by the Trust. In order to enable them to comply with Federal and
state tax reporting requirements, upon request to the Trustee, Holders will be
furnished with evaluations of Securities furnished to it by the Evaluator
(Section 4.02).
SALE OF UNITS
OFFERING PRICE
The Offering Price of the Units is computed by adding (a) the aggregate
offer side evaluation of the Securities (as determined by the Evaluator), (b)
cash on hand (other than cash covering contracts to purchase Securities), (c)
accrued and unpaid interest as of the date of computation and (d) all other
assets of the Trust; deducting therefrom the sum of (x) taxes or other
government charges against the Trust not previously deducted, (y) accrued fees
and expenses of the Trustee (including legal and auditing expenses), the
Evaluator and counsel, and certain
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other expenses and (z) any cash held for distribution to Holders of record as of
a date prior to the evaluation; dividing the result by the number of Units
outstanding and adding the applicable transaction charge depending on the
remaining years to maturity of the Stripped Treasury Security:
PERCENT OF PERCENT OF
OFFERING NET AMOUNT
REMAINING YEAR TO MATURITY PRICE INVESTED
- --------------------------------------------- ---------- ----------
Less than 2 years............................ 0.25% 0.251%
At least 2 years but less than 3 years....... 0.50 0.503
At least 3 years but less than 5 years....... 0.75 0.756
At least 5 years but less than 8 years....... 1.00 1.010
At least 8 years............................. 1.50 1.523
Provident Mutual initially pays the transaction charge, which it intends to
recover through an asset charge. See accompanying Prospectus for the Policies
for further information. These transaction charges are less than sales charges
on comparable funds offered by the Sponsor reflecting elimination of
distribution expenses because all sales are made to the Account. Because the
income on the Treasury note is designed to equal Trust expenses, accrued
interest on the Note is not reflected in the offering, repurchase or redemption
prices of Units. In practice, as determined on an accrual basis by the auditors,
accumulated expenses have been slightly higher or lower than the interest on the
Treasury Note. These differences are immaterial and may change over time. If
there is an expense deficit at termination of the Trust, either the Trustee will
waive a part of its fees or the Sponsor will bear sufficient expenses to
eliminate the deficit. If a surplus remains at termination, the amount will be
distributed to Holders; alternatively, the Sponsor from time to time may direct
the Trustee to distribute part or all of any accumulated surplus. The Offering
Price on the date of this Prospectus or on any subsequent date will vary from
the Offering Price on the date of the Investment Summary in accordance with
fluctuations in the aggregate offering side evaluation of the underlying
Securities. Amortization of discount will have the effect of increasing at any
particular time the offering side evaluation of the underlying Securities.
The aggregate bid or offer side evaluation of the Securities is determined
by the Evaluator in the following manner: (a) on the basis of current bid or
offer prices for the Securities, (b) if bid or offer prices are not available
for any Securities, on the basis of current bid or offer prices for comparable
securities, (c) by appraising the value of the Securities on the bid or offer
side of the market, or (d) by any combination of the above. The Evaluator may
obtain current price information as to the Securities from investment dealers or
brokers (including the Sponsor) which customarily deal in that type of
securities.
The Offering Price is determined on each business day during any initial
offering as of the Evaluation Time, effective for all sales made since the last
of these evaluations and as of the Evaluation Time on the last business day of
each week during any period when there is no initial offering (i.e., when no
additional Units are being created), effective for all sales made during the
following week (Section 4.01). The term 'business day', as used herein and under
'Redemption', shall exclude Saturdays, Sundays; the following holidays as
observed by the New York Stock Exchange: New Year's Day, Washington's Birthday,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas; and the following Federal holidays: Martin Luther King's birthday,
Columbus Day and Veterans' Day.
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COMPARISON OF OFFERING PRICE, SPONSOR'S REPURCHASE PRICE AND REDEMPTION PRICE
On the date of the Investment Summary, the Offering Price per Unit (which
includes the transaction charge) and the Sponsor's Repurchase Price per Unit
(each based on the offer side evaluation of Securities--see above) exceeded the
Redemption Price per Unit (based on the bid side evaluation thereof--see
Redemption) by the amounts set forth under Investment Summary.
Because the bid side evaluation of the Units is lower than the offer side
evaluation by the amount set forth under Investment Summary and other reasons
(including fluctuations in the market prices of these Securities and the fact
that the Offering Price includes a transaction charge), the amount realized by a
Holder upon any sale or redemption of Units may be less than the price paid for
these Units.
DISTRIBUTION
During the initial offering period for Units issued in respect of
additional Securities deposited by the Sponsor, Units may be purchased by the
Account at the Offering Price by means of this Prospectus (except that, as
explained above, the transaction charge is initially paid by Provident Mutual).
The initial offering period will terminate on the date all newly issued Units
are sold. Upon the completion of any initial offering, Units acquired in the
secondary market may be offered by this Prospectus at the secondary market
Offering Price determined in the manner provided above as of the close of
business on the last business day of each week (see Market for Units), also less
the transaction charge paid by Provident Mutual.
SPONSOR'S PROFITS
Upon the sale of Units, the Sponsor will receive the transaction charge at
the rates set forth above. The Sponsor may also realize a profit or loss on each
deposit of Securities. This is the difference between the cost of the Securities
(which is based on the offer side evaluation of the Securities on the date of
deposit) and the purchase price of those Securities to the Sponsor. To the
extent additional Units continue to be offered for sale, the Sponsor also may
realize profits or sustain losses as a result of fluctuations after the date of
deposit in the Offering Price of the Units. Cash, if any, made available by
buyers of Units to the Sponsor prior to the settlement dates for purchase of
Units may be used in the Sponsor's business, subject to the limitations of Rule
15c3-3 under the Securities Exchange Act of 1934, and may be of benefit to the
Sponsor.
In maintaining a market for the Units the Sponsor will also realize profits
or sustain losses in the amount of any difference between the prices at which it
buys Units (based on the offer side evaluation of the Securities) and the prices
at which it resells those Units (which include the relevant transaction charge)
or the prices at which it may redeem those Units (based on the bid side
evaluation of the Securities), as the case may be.
MARKET FOR UNITS
The Sponsor, though not obligated to do so, intends to maintain a secondary
market for Units at its own expense and continuously to offer to purchase Units
at prices, subject to change at any time, that will be computed on the basis of
the offer side evaluation of the Securities, taking into account the same
factors referred to in determining the offer side evaluation of the Securities
for purposes of sale of Units (see Sale of Units--Offering Price). During the
initial offering period or thereafter, on a given day, the price offered by the
Sponsor for the purchase of Units shall be an amount not less than Redemption
Price per Unit, based on the aggregate bid side evaluation of Securities in the
Trust on the date on which the Units are tendered for redemption.
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The Sponsor may redeem any Units it has purchased in the secondary market
if it determines it is undesirable to continue to hold those Units in its
inventory, provided that it intends to redeem Units only in an amount to
substantially equal the value of one or more Securities, so that uninvested cash
generated by a redemption is de minimis. Factors which the Sponsor will consider
in making this determination will include the number of units of all series of
all funds which it has in its inventory, the saleability of the units and its
estimate of the time required to sell the units and general market conditions.
REDEMPTION
While it is anticipated that Units in most cases can be sold for amounts
exceeding the Redemption Price per Unit (see Market for Units), Units may be
redeemed at the office of the Trustee upon tender on any business day, as
defined under Sale of Units--Offering Price, of Certificates or, in the case of
uncertificated Units, delivery of a request for redemption, and payment of any
relevant tax without any other fee (Section 5.02). Certificates to be redeemed
must be properly endorsed or accompanied by a written instrument or instruments
of transfer.
The Trustee will redeem Units either in cash or in kind at the option of
the Holder as specified in writing to the Trustee. (Unless otherwise specified,
redemptions will be made in cash.) Not later than the seventh calendar day
following the tender (or if the seventh calendar day is not a business day on
the first business day prior thereto), the Holder will be entitled to receive
the proceeds of the redemption in an amount and value of Securities per Unit
equal to the Redemption Price per Unit (see below) as determined as of the
Evaluation Time next following the tender. The Redemption Price per Unit for in
kind distributions (the 'In Kind Distribution') will take the form of the
distribution of whole Securities represented by the fractional undivided
interest in the Trust of the Units tendered for redemption (based upon the
Redemption Price per Unit) (Section 5.02). So long as the Sponsor is maintaining
a market at prices in excess of the Redemption Price per Unit, the Sponsor will
repurchase any Units tendered for redemption in cash no later than the close of
business on the business day following the tender. The Trustee is authorized in
its discretion, if the Sponsor does not repurchase any Units tendered for
redemption or if the Sponsor tenders its Units for redemption, to sell the Units
in the over-the-counter market at prices which will return to the Holder a net
amount in cash equal to or in excess of the Redemption Price per Unit for the
Units (Section 5.02).
If the tendering Holder requests distribution in kind, the Trustee as
Distribution Agent for the account of the tendering Holder shall sell any
portion of the In Kind Distribution represented by fractional interests in
accordance with the instructions of the tendering Holder and distribute net cash
proceeds to the tendering Holder together with certificates representing whole
Securities received as the In Kind Distribution. In implementing these
redemption procedures, the Trustee shall make any adjustments necessary to
reflect differences between the Redemption Price of the Units and the value of
the In Kind Distribution as of the date of tender.
The Trustee is empowered to sell Securities in order to make funds
available for cash redemptions (Section 5.02). The Securities will be sold so as
to maintain, as closely as practicable, the percentage relationship between the
face amount of Stripped Treasury Securities and the Treasury Note in the Trust
at the time of sale. Provision is made under the Indenture for the Sponsor to
specify minimum face amounts in which blocks of Securities are to be sold in
order to obtain the best price for the Trust. While these minimum amounts may
vary from time to time in accordance with market conditions, the Sponsor
believes that the minimum face amounts which would be specified would range from
$25,000 to $100,000.
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To the extent that Securities are redeemed in kind or sold, the size of the
Trust will be reduced. Sales will usually be required at a time when Securities
would not otherwise be sold and may result in lower prices than might otherwise
be realized. In addition, because of the minimum face amounts in which
Securities are required to be sold, the proceeds of sale may, if the Sponsor
fails to maintain a secondary market as described above, exceed the amount
required at the time to redeem Units; any excess proceeds will be deposited in
the Capital Account. The price received upon redemption may be more than or less
than the amount paid by the Holder depending on the value of the Securities in
the Trust at the time of redemption.
The right of redemption may be suspended and payment postponed for any
period (1) during which the New York Stock Exchange, Inc. is closed other than
for customary weekend and holiday closings or (2) during which, as determined by
the Securities and Exchange Commission, (i) trading on that Exchange is
restricted or (ii) an emergency exists as a result of which disposal or
evaluation of the Securities is not reasonably practicable, or (3) which the
Commission may by order permit (Section 5.02).
Redemption Price per Unit is computed by the Trustee as of the Evaluation
Time on each June 30 and December 31 (or the last business day prior thereto),
on any business day, as of the Evaluation Time next following the tender of any
Unit for redemption, and on any other business day desired by the Trustee or the
Sponsor, on the bid side of the market, taking into account the same factors
referred to in determining the offer side evaluation for purposes of sale of
Units (see Sale of Units--Offering Price).
While Securities of the type included in the Portfolio involve minimal risk
of loss of principal when held to maturity, due to variations in interest rates
the market value of the Securities and Redemption Price per Unit can be expected
to fluctuate during the period of an investment in the Trust.
EXPENSES AND CHARGES
INITIAL EXPENSES
All expenses incurred in establishing the Fund and the initial offering of
Units and any additional Units, including the cost of the initial preparation
and printing of documents related to the Fund, cost of the initial evaluation,
the initial fees and expenses of the Trustee, legal expenses, advertising and
selling expenses and any other out-of-pocket expenses, will be paid by the
Sponsor at no charge to the Trust.
FEES
The Sponsor receives no fee from the Trust for its services as such.
However, while the transaction charge paid by Provident Mutual to the Sponsor is
not directly charged to the Account, because of the asset charge by Provident
Mutual, Policyowners will indirectly bear these charges (see the information
regarding fees and expenses in the accompanying Prospectus). The Trustee's and
Evaluator's fees are set forth under Investment Summary. The Trustee's fees,
payable in semi-annual installments, are based on the largest face amount of
Securities in the Trust during the preceding semi-annual period. For its
services as Trustee, the Trustee receives annually $0.25 per $1,000 face amount
of Treasury Securities. Certain regular and recurring expenses of the Trust,
including the Evaluator's fee and certain mailing and printing expenses, are
borne by the Trustee. Expenses in excess of the amount included for those
expenses in the Trustee's Annual Fee and Expenses under Investment Summary are
borne by the Trust (Section 3.14). The Trustee also receives benefits to the
extent that it holds funds on deposit in the various non-interest bearing
accounts created under the Indenture.
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OTHER CHARGES
These include: (a) fees of the Trustee for extraordinary services (Section
8.05), (b) certain expenses of the Trustee (including legal and auditing
expenses) and of counsel designated by the Sponsor (Sections 3.04, 3.09, 8.01[e]
and 8.05), (c) various governmental charges (Sections 3.03 and 8.01[h]), (d)
expenses and costs of any action taken to protect the Trust (Section 8.01[d]),
(e) indemnification of the Trustee for any loss, liabilities and expenses
incurred without gross negligence, bad faith or willful misconduct on its part
(Section 8.05) and (f) indemnification of the Sponsor for any losses,
liabilities and expenses incurred without gross negligence, bad faith, willful
misconduct or reckless disregard of its duties (Section 7.02[b]). The amounts of
these charges and fees are secured by a lien on the Trust (Section 8.05). If the
balances in the Income and Capital Accounts (see below) are insufficient, the
Trustee has the power to sell Securities to pay these amounts (Section 8.05).
ADMINISTRATION OF THE FUND
RECORDS
The Trustee keeps records of transactions of the Trust, including a current
list of the Securities and a copy of the Indenture, which are available to
record Holders for inspection at the office of the Trustee at reasonable times
during business hours (Sections 8.02 and 8.04).
ACCOUNTS AND DISTRIBUTIONS
The terms of the Securities provide for payment to the Holders thereof
(including the Trust) upon their maturities. Interest received on any Securities
in the Trust which bear current interest, including that part of the proceeds of
any disposition of any such Security which represents accrued interest and any
late payment penalties, is credited to an Income Account and all other receipts
are credited to a Capital Account (Sections 3.01 and 3.02). Distributions for
Holders as of the Record Day normally will be made by mail on the following
Distribution Day and shall consist of an amount substantially equal to each
Holder's pro rata share of the distributable cash balance in the Income and
Capital Accounts of the Trust computed as of the close of business on the Record
Day. The Distribution Day normally shall be the next business day following the
maturity of the Securities in the Trust Portfolio; the Record Day shall be the
business day immediately preceding the Distribution Day. However, the Sponsor
may direct distribution of any cash balance in the Income and Capital Accounts
not otherwise allocated on the last Business Day of any year.
The amount to be distributed may change as Securities are exchanged, paid
or sold. Proceeds received from the disposition or payment of any of the
Securities which are not used for redemption will be held in the Capital Account
(Section 3.04). The Sponsor, however, intends to maintain a secondary market and
to redeem Units only when the value of Units redeemed substantially equals the
value of one or more portfolio Securities. Amounts, if any, in the Income
Account will be distributed to Holders pro rata upon termination of the Trust. A
Reserve Account may be created by the Trustee by withdrawing from the Income or
Capital Accounts, from time to time, amounts which it deems requisite to
establish a reserve for any taxes or other governmental charges that may be
payable out of the Trust (Section 3.03). Funds held by the Trustee in the
various accounts created under the Indenture do not bear interest (Section
8.01).
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PORTFOLIO SUPERVISION
The Trust is a unit investment trust and is not an actively managed fund.
Traditional methods of investment management for a managed fund typically
involve frequent changes in portfolio of securities on the basis of economic,
financial and market analyses. The Portfolio, however, will not be actively
managed and adverse conditions will not necessarily require the sale of
Securities. The Sponsor, however, may direct the disposition of Securities upon
default in payment of amounts due on any of the Securities which is not promptly
cured, institution of certain legal proceedings, default in payment of amounts
due on other Treasury Securities, or decline in price or the occurrence of other
market or credit factors that in the opinion of the Sponsor would make the
retention of these Securities in the Trust detrimental to the interest of the
Holders. If a default in the payment of amounts due on any Security occurs and
if the Sponsor fails to give instructions to sell or hold the Security, the
Indenture provides that the Trustee, within 30 days of that failure by the
Sponsor, may sell the Security (Sections 3.07 and 3.10).
REPORTS TO HOLDERS
The Trustee will furnish Holders of record with each distribution a
statement of the amounts of interest and of other receipts which are being
distributed, expressed in each case as a dollar amount per Unit. After the end
of each calendar year, the Trustee will furnish to Holders of record a statement
(i) summarizing transactions for that year in the Income, Capital and Reserve
Accounts of the Trust, (ii) identifying Securities sold and purchased during the
year, and listing Securities held and the number of Units outstanding at the end
of the year by each Trust, (iii) stating the Redemption Price per Unit based
upon the computation thereof made at the end of the year and (iv) specifying any
amounts distributed during the year from the Income and Capital Accounts. The
accounts of the Trust shall be audited at least annually by independent
certified public accounts designated by the Sponsor, and the report of the
accountants shall be furnished by the Trustee to Holders upon request (Section
8.01[e]).
In order to enable them to comply with Federal and state tax reporting
requirements, Holders will be furnished upon request to the Trustee with
evaluations of Securities furnished to it by the Evaluator (Section 4.02).
CERTIFICATES
The Sponsor may collect additional charges for registering and shipping
certificates to purchasers. These Certificates are transferable or
interchangeable upon presentation at the office of the Trustee, with a payment
of $2.00 if required by the Trustee (or other amounts specified by the Trustee
and approved by the Sponsor) for each new Certificate and any sums payable for
taxes or other governmental charges imposed upon this transaction (Section 6.01)
and compliance with the formalities necessary to redeem Certificates (see
Redemption). Mutilated, destroyed, stolen or lost Certificates will be replaced
upon delivery of satisfactory indemnity and payment of expenses incurred
(Section 6.02).
Alternatively, Holders may elect to hold their Units in uncertificated
form. The Trustee will credit each such Holder's account with the number of
Units purchased by that Holder. This procedure relieves the Holder of the
responsibility for safekeeping of Certificates and of the need to deliver
Certificates upon sale of Units. Uncertificated Units are transferable through
the same procedures applicable to Units evidenced by Certificates (see above),
except that no Certificate need be presented to the Trustee and none will be
issued upon transfer
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unless requested by the Holder. A Holder may at any time request the Trustee (at
the Trust's cost) to issue Certificates for Units.
AMENDMENT AND TERMINATION
The Sponsor and Trustee may amend the Indenture without the consent of
Holders (a) to cure any ambiguity or to correct or supplement any provision
thereof which may be defective or inconsistent, (b) to change any provision
thereof as may be required by the Securities and Exchange Commission or any
successor governmental agency, or (c) to make any other provisions which do not
materially adversely affect the interest of the Holders (as determined in good
faith by the Sponsor). The Indenture may also be amended in any respect by the
Sponsor and Trustee, or any of the provisions thereof may be waived, with the
consent of the Holders of 51% of the Units, provided that none of these
amendments or waivers will reduce the interest of any Holder without the consent
of the Holder or reduce the percentage of Units required to consent to any of
these amendments or waivers without the consent of all Holders. (Section 10.01).
The Indenture will terminate upon the earlier of the disposition of the
last Security held thereunder or the mandatory termination date. The Indenture
may be terminated by the Sponsor if the face amount of the Trust is less than
the minimum set forth under Investment Summary and may be terminated at any time
by written instrument executed by the Sponsor and consented to by Holders of 51%
of the Units (Section 8.01[g] and 9.01). The Trustee will deliver written notice
of any termination to each Holder within a reasonable period of time prior to
the termination, specifying the times at which the Holders may surrender their
Certificates for cancellation. Within a reasonable period of time after the
termination, the Trustee must sell all of the Securities then held and
distribute to each Holder, upon surrender for cancellation of his Certificates,
and after deductions for accrued but unpaid fees, taxes and governmental and
other charges, the Holder's interest in the Income and Capital Accounts (Section
9.01). This distribution will normally be made by mailing a check in the amount
of each Holder's interest in these accounts to the address of the Holder
appearing on the record books of the Trustee.
RESIGNATION, REMOVAL AND LIMITATIONS ON LIABILITY
THE TRUSTEE
The Trustee or any successor may resign upon notice to the Sponsor. The
Trustee may be removed upon the direction of the Holders of 51% of the Units at
any time or by the Sponsor without the consent of any of the Holders if the
Trustee becomes incapable of acting or becomes bankrupt or its affairs are taken
over by public authorities. The resignation or removal shall become effective
upon the acceptance of appointment by the successor. In case of such resignation
or removal the Sponsor is to use its best efforts to appoint a successor
promptly and if upon resignation of the Trustee no successor has accepted
appointment within thirty days after notification, the Trustee may apply to a
court of competent jurisdiction for the appointment of a successor (Section
8.06). The Trustee shall be under no liability for any action taken in good
faith in reliance on prima facie properly executed documents or for the
disposition of monies or Securities, nor shall it be liable or responsible in
any way for depreciation or loss incurred by reason of the sale of any Security.
This provision, however, shall not protect the Trustee in cases of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations and duties. In the event of the failure of the Sponsor to act, the
Trustee may act under the Indenture and shall not be liable for any of these
actions taken in good faith. The Trustee shall not be personally liable for any
taxes or other governmental charges imposed upon or in respect of the Securities
or upon the interest thereon.
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In addition, the Indenture contains other customary provisions limiting the
liability of the Trustee (Sections 3.07, 3.10, 8.01 and 8.05).
THE EVALUATOR
The Evaluator may resign or may be removed, effective upon the acceptance
of appointment by its successor, by the Sponsor, who is to use its best efforts
to appoint a successor promptly. If upon resignation of the Evaluator no
successor has accepted appointment within thirty days after notification, the
Evaluator may apply to a court of competent jurisdiction for the appointment of
a successor (Section 4.05). Determinations by the Evaluator under the Indenture
shall be made in good faith upon the best information available to it; provided,
however, that the Evaluator shall be under no liability to the Trustee, the
Sponsor or the Holders for errors in judgment. This provision, however, shall
not protect the Evaluator in cases of willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations and duties (Section 4.04).
The Trustee, the Sponsor and the Holders may rely on any evaluation furnished by
the Evaluator and shall have no responsibility for the accuracy thereof.
THE SPONSOR
If the Sponsor fails to perform its duties or becomes incapable of acting
or becomes bankrupt or its affairs are taken over by public authorities, then
the Trustee may (a) appoint a successor Sponsor at rates of compensation deemed
by the Trustee to be reasonable and as may not exceed amounts prescribed by the
Securities and Exchange Commission, or (b) terminate the Indenture and liquidate
the Fund or (c) continue to act as Trustee without terminating the Indenture
(Section 8.01[f]). The Sponsor shall be under no liability to the Fund or to the
Holders for taking any action or for refraining from taking any action in good
faith or for errors in judgment and shall not be liable or responsible in any
way for depreciation or loss incurred by reason of the sale of any Security.
This provision, however, shall not protect the Sponsor in cases of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations and duties (Section 7.02). The Sponsor may transfer all or
substantially all of its assets to a corporation or partnership which carries on
its business and duly assumes all of its obligations under the Indenture and in
such event shall be relieved of all further liability under the Indenture
(Section 7.01).
MISCELLANEOUS
TRUSTEE
The Trustee is The Chase Manhattan Bank, with its Unit Trust Department at
Customer Service Retail Department, Bowling Green Station, P.O. Box 5187, New
York, New York 10274-5187, (which is subject to supervision by the Comptroller
of the Currency, the Federal Deposit Insurance Corporation and the Board of
Governors of the Federal Reserve System).
LEGAL OPINION
The legality of the Units has been passed upon by Davis Polk & Wardwell,
450 Lexington Avenue, New York, New York 10017, as special counsel for the
Sponsor.
AUDITORS
The financial statements of the Trust, included herein, have been examined
by Deloitte & Touche LLP, independent accountants, as stated in their opinion
and have been included in reliance upon that opinion given on the authority of
that firm as experts in accounting and auditing.
13
<PAGE>
SPONSOR
The Sponsor is a Delaware corporation and is engaged in the underwriting,
securities and commodities brokerage business, and is a member of the New York
Stock Exchange, Inc., other major securities exchanges and commodity exchanges,
and the National Association of Securities Dealers, Inc. Merrill Lynch, Pierce,
Fenner & Smith Incorporated and Merrill Lynch Asset Management, a Delaware
corporation, each of which is a subsidiary of Merrill Lynch & Co., Inc., are
engaged in the investment advisory business. The Sponsor has acted as principal
underwriter and managing underwriter of other unit investment trusts. The
Sponsor, in addition to participating as a member of various selling groups or
as an agent of other investment companies, executes orders on behalf of
investment companies for the purchase and sale of securities of these companies
and sells securities to these companies in its capacity as a broker or dealer in
securities.
14
<PAGE>
THE STRIPPED
('ZERO') U.S.
TREASURY SECURITIES
FUND,
PROVIDENT MUTUAL
SERIES A
This Prospectus does
not contain all of
the information with
respect to the
investment company
set forth in its
registration
statement and
exhibits relating
thereto which have
been filed with the
Securities and
Exchange Commission,
Washington, D.C.
under the Securities
Act of 1933 and the
Investment Company
Act of 1940, and to
which reference is
hereby made. Copies
of filed material
can be obtained from
the Public Reference
Section of the
Commission, 450
Fifth Street, N.W.,
Washington, D.C.
20549 at prescribed
rates. The
Commission also
maintains a Web site
that contains
information
statements and other
information
regarding
registrants such as
Defined Asset Funds
that file
electronically with
the Commission at
http://www.sec.gov.
No person is
authorized to give
SPONSOR: any information or
Merrill Lynch, to make any
Pierce, Fenner & Smith Incorporated representations with
Defined Asset Funds respect to this
P.O. Box 9051 investment company
Princeton, N.J. 08543-9051 not contained in
(609) 282-8500 this Prospectus; and
EVALUATOR: any information or
Kenny S&P Evaluation Services, representation not
a division of J. J. Kenny Co., Inc. contained herein
65 Broadway must not be relied
New York, N.Y. 10006 upon as having been
INDEPENDENT ACCOUNTANTS: authorized. This
Deloitte & Touche LLP Prospectus does not
2 World Financial Center constitute an offer
9th Floor to sell, or a
New York, N.Y. 10281-1414 solicitation of an
TRUSTEE: offer to buy,
The Chase Manhattan Bank securities in any
Customer Service Retail Department state to any person
Bowling Green Station to whom it is not
P.O. Box 5187 lawful to make such
New York, N.Y. 10274-5187 offer in such state.
1-800-323-1508 CONTENTS
Investment Summary...................... A-2
Fund Structure.............................................. 1
Risk Factors................................................ 1
Description of the Fund..................................... 2
Taxes....................................................... 3
Sale of Units............................................... 4
Market for Units............................................ 6
Redemption.................................................. 6
Expenses and Charges........................................ 7
Administration of the Fund.................................. 8
Resignation, Removal and Limitations on Liability........... 9
Miscellaneous............................................... 10
Accountants' Opinion Relating to the Fund................... D-1
Statement of Condition of the Fund.......................... D-2
Portfolio................................................... D-9
14205--5/97
<PAGE>
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 Post-Effective Amendment No. 1 to the Registration Statement on Form
S-6 of The Stripped ('Zero') U.S. Treasury Securities Fund, Provident Mutual
Series A, 1933 Act File No. 33-82455).
The Prospectus.
The Signatures.
The following exhibits:
4.1 --Consent of the Evaluator.
5.1 --Consent of independent accountants.
R-1
<PAGE>
SIGNATURES
The Stripped ('Zero') U.S. Treasury Securities Fund, Provident Mutual Series A.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT,
THE STRIPPED ('ZERO') U.S. TREASURY SECURITIES FUND, PROVIDENT MUTUAL SERIES A
CERTIFIES THAT IT MEETS ALL OF THE REQUIREMENTS FOR EFFECTIVENESS OF THIS
REGISTRATION STATEMENT PURSUANT TO RULE 485(B) UNDER THE SECURITIES ACT OF 1933
AND HAS DULY CAUSED THIS 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 25TH DAY OF APRIL, 1997.
SIGNATURES APPEAR ON PAGE R-3.
A majority of the members of the Board of Directors of Merrill Lynch,
Pierce, Fenner & Smith Incorporated has signed this Registration Statement or
Amendment to the Registration Statement pursuant to Powers of Attorney
authorizing the person signing this Registration Statement or Amendment to the
Registration Statement to do so on behalf of such members.
R-2
<PAGE>
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
DEPOSITOR
By the following persons, who constitute a majority of Powers of Attorney
the Board of Directors of Merrill Lynch, Pierce, have been filed
Fenner & Smith Incorporated: under
Form SE and the
following 1933 Act
File
Number: 33-43466
and 33-51607
HERBERT M. ALLISON, JR.
BARRY S. FREIDBERG
EDWARD L. GOLDBERG
STEPHEN L. HAMMERMAN
JEROME P. KENNEY
DAVID H. KAMANSKY
DANIEL T. NAPOLI
THOMAS H. PATRICK
JOHN L. STEFFENS
DANIEL P. TULLY
ROGER M. VASEY
ARTHUR H. ZEIKEL
DANIEL C. TYLER
(As authorized signatory for Merrill Lynch, Pierce,
Fenner & Smith Incorporated and
Attorney-in-fact for the persons listed above)
R-3
<PAGE>
EXHIBIT 4.1
KENNY S&P EVALUATION SERVICES
A Division of Kenny Information Systems, Inc.
65 BROADWAY
NEW YORK, N.Y. 10006-2511
TELEPHONE (212) 770-4000
April 24, 1996
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Unit Investment Trust Division
P.O. Box 9051
Princeton, New Jersey 08543-9051
The Chase Manhattan Bank, N.A.
1 Chase Manhattan Plaza--3B
New York, New York 10081
RE: THE STRIPPED ('ZERO') U.S. TREASURY SECURITIES FUND,
PROVIDENT MUTUAL SERIES A
Gentlemen:
We have examined the post-effective Amendment to the Registration Statement
File No. 33-02455 for the above-captioned trust. We hereby acknowledge that
Kenny S&P Evaluation Services, a division of J. J. Kenny Co., Inc. is currently
acting as the evaluator for the trust. We hereby consent to the use in the
Amendment of the reference to Kenny S&P Evaluation Services, a division of J. J.
Kenny Co., Inc. as evaluator.
You are hereby authorized to file copies of this letter with the Securities
and Exchange Commission.
Sincerely,
FRANK A. CICCOTTO
<PAGE>
Exhibit 5.1
THE STRIPPED ('ZERO') U.S. TREASURY SECURITIES FUND
PROVIDENT MUTUAL SERIES A
CONSENT OF INDEPENDENT ACCOUNTANTS
The Sponsors and Trustee of The Stripped ('Zero') U.S. Treasury Securities Fund,
Provident Mutual Series A:
We hereby consent to the use in Post-Effective Amendment No. 14 to Registration
Statement No. 33-02455 of our opinion dated March 14, 1997 relating to the
Financial Statements of The Stripped ('Zero') U.S. Treasury Securities Fund,
Provident Mutual Series A, and to the reference to us under the heading
'Auditors' in the Prospectus which is a part of this Registration Statement.
DELOITTE & TOUCHE LLP
New York, N.Y.
April 23, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1
<S>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 5,918,086
<INVESTMENTS-AT-VALUE> 6,218,137
<RECEIVABLES> 0
<ASSETS-OTHER> 2,511
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 6,220,648
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> (359)
<TOTAL-LIABILITIES> (359)
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,988,902
<SHARES-COMMON-STOCK> 11,012,916
<SHARES-COMMON-PRIOR> 8,135,744
<ACCUMULATED-NII-CURRENT> 931,336
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 300,051
<NET-ASSETS> 6,220,289
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4,511
<OTHER-INCOME> 321,283
<EXPENSES-NET> (4,291)
<NET-INVESTMENT-INCOME> 321,503
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> (355,385)
<NET-CHANGE-FROM-OPS> (33,882)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,877,172
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,562,559
<ACCUMULATED-NII-PRIOR> 609,833
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
DAVIS POLK & WARDWELL
450 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
(212) 450-4000
April 23, 1997
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Dear Sirs:
We hereby represent that the Post-Effective Amendments to the registered
unit investment trusts described in Exhibit A attached hereto do not contain
disclosures which would render them ineligible to become effective pursuant to
Rule 485(b) under the Securities Act of 1933.
Very truly yours,
Davis Polk & Wardwell
Attachment
<PAGE>
EXHIBIT A
<TABLE>
<CAPTION>
1933 ACT 1940 ACT
FUND NAME CIK FILE NO. FILE NO.
- --------- --- -------- --------
<S> <C> <C> <C>
DEFINED ASSET FUNDS-MUNICIPAL INSURED SERIES 926361 33-54565 811-2537
DEFINED ASSET FUNDS-- EIF S&P 500 TRUST 2/S&P MIDCAP 882432 33-44844 811-3044
DEFINED ASSET FUNDS-MITF IS-187 803864 33-49225 811-1777
DEFINED ASSET FUNDS- IS-200-DAF 803900 33-51867 811-1777
DEFINED ASSET FUNDS- IS-219 DAF 804016 33-57335 811-1777
DEFINED ASSET FUNDS-CIF ITS-42 883653 33-49231 811-2295
DEFINED ASSET FUNDS-ITS-52 DAF 914808 33-56957 811-2295
DEFINED ASSET FUNDS- ITS-263 DAF 924356 33-64581 811-1777
DEFINED ASSET FUNDS- ITS-264 DAF 924357 33-65143 811-1777
DEFINED ASSET FUNDS-CIF MPS-306 781808 33-43361 811-2295
DEFINED ASSET FUNDS-MPS-321 DAF 893501 33-62609 811-2295
DEFINED ASSET FUNDS- MPS-555 DAF 924291 33-57099 811-1777
DEFINED ASSET FUNDS- MSS-201 DAF 924295 33-64759 811-1777
DEFINED ASSET FUNDS-MITF MSS 27 895614 33-49297 811-1777
DEFINED ASSET FUNDS- MSS-55 DAF 910001 33-51607 811-1777
DEFINED ASSET FUNDS-MITF MSS 8F 868137 33-38575 811-1777
DEFINED ASSET FUNDS-SZUSTS Provident Mutual Series A 786284 33-02455 811-4541
DEFINED ASSET FUNDS-CONCEPT SERIES TELE-GLOBAL TRUST 2 100007 33-62265 811-3044
DEFINED ASSET FUNDS- ML-SUSTS Monarch A-K 740833 2-89536 811-3965
TOTAL: 19 FUNDS
</TABLE>
