<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 19, 1994
REGISTRATION NO. 33-50887
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
------------------------------------------
POST-EFFECTIVE AMENDMENT NO. 1
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:
CORPORATE INCOME FUND
INTERMEDIATE TERM SERIES-49
DEFINED ASSET FUNDS
(A UNIT INVESTMENT TRUST)
B. NAMES OF DEPOSITORS:
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
SMITH BARNEY SHEARSON 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 BARNEY SHEARSON INC.
SMITH INCORPORATED TWO WORLD TRADE CENTER
UNIT INVESTMENT TRUSTS DIVISION 101ST FLOOR
P.O. BOX 9051 NEW YORK, N.Y. 10048
PRINCETON, N.J. 08543-9051
PRUDENTIAL SECURITIES INCORPORATED DEAN WITTER REYNOLDS INC. PAINEWEBBER INCORPORATED
ONE SEAPORT PLAZA TWO WORLD TRADE CENTER-- 1285 AVENUE OF THE AMERICAS
199 WATER STREET 59TH FLOOR NEW YORK, N.Y. 10019
NEW YORK, N.Y. 10292 NEW YORK, N.Y. 10048
</TABLE>
D. NAMES AND COMPLETE ADDRESSES OF AGENTS FOR SERVICE:
<TABLE>
<S> <C> <C>
TERESA KONCICK, ESQ. ROBERT E. HOLLEY LEE B. SPENCER, JR.
P.O. BOX 9051 1200 HARBOR BLVD. ONE SEAPORT PLAZA
PRINCETON, N.J. 08543-9051 WEEHAWKEN, N.J. 07087 199 WATER STREET
NEW YORK, N.Y. 10292
COPIES TO:
THOMAS D. HARMAN, ESQ. PHILIP BECKER PIERRE DE SAINT PHALLE,
388 GREENWICH STREET 130 LIBERTY STREET-29TH ESQ.
NEW YORK, N.Y. 10013 FLOOR 450 LEXINGTON AVENUE
NEW YORK, N.Y. 10006 NEW YORK, N.Y. 10017
</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 February, 1995.
/ x /Check box if it is proposed that this filing will become effective on May
19, 1994 pursuant to paragraph (b) of Rule 485.
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<PAGE>
<PAGE>
Defined
Asset FundsSM
<TABLE>
<S> <C>
Corporate This Defined Fund is a portfolio of preselected
Income Fund securities formed for the purpose of providing a high
level of current
income through investment in a fixed portfolio consisting
of
- -------------------- long-intermediate term debt obligations of corporations
issued after July 18, 1984. This income is taxable to
U.S. Holders but in
INTERMEDIATE TERM the opinion of counsel is exempt from U.S. Federal income
SERIES -- 49 taxes, including withholding taxes, for many foreign
A UNIT INVESTMENT Holders. The value of Units of the Fund will fluctuate
TRUST with the value of the Portfolio of underlying Securities.
The Estimated Current Return and Estimated Long Term
Return
/ /MONTHLY INCOME figures shown give different information about the return
to
/ /INVESTMENT GRADE investors. Estimated Current Return on a Unit shows a net
/ /PROFESSIONAL annual current cash return based on the initial Public
SELECTION Offering Price and the maximum applicable sales charge
and is computed by multiplying the estimated net annual
interest rate per Unit by $1,000 and dividing the result
by the Public Offering Price per Unit (including the
sales charge but not including accrued
7.13% interest).
ESTIMATED CURRENT
RETURN AS OF
MAY 18, 1994 Estimated Long Term Return shows a net annual long-term
return to investors holding to maturity based on the
yield on the individual bonds in the Portfolio, weighted
to reflect the time to maturity (or in certain cases to
an earlier call date) and market value of each bond in
the Portfolio, adjusted to reflect the
7.41% Public Offering Price (including the sales charge) and
ESTIMATED LONG TERM estimated expenses. Unlike Estimated Current Return,
RETURN AS OF Estimated Long Term Return takes into account maturities
MAY 18, 1994 of the underlying Securities and discounts and premiums.
Distributions of income on Units are generally subject to
certain delays; if the Estimated Long Term Return figures
shown took these delays into ac-
TAX-EXEMPT TO count, it would be lower. Both Estimated Current Return
FOREIGN and Estimated Long Term Return are subject to
HOLDERS WHEN CERTAIN fluctuations with changes in Portfolio composition
CONDITIONS ARE MET (including the redemption, sale or other disposition of
Securities in the Portfolio), changes in the market value
of the underlying Securities and changes in fees and
expenses. Estimated cash flows for the Fund are availa-
ble from the Sponsors at no charge.
Minimum purchase: 1 Unit.
</TABLE>
<TABLE>
<S> <C>
SPONSORS:
Merrill Lynch, ---------------------------------------------------------
Pierce, Fenner & THESE SECURITIES HAVE NOT BEEN APPROVED OR
Smith Inc. DISAPPROVED BY THE SECURITIES AND EXCHANGE
Smith Barney COMMISSION OR ANY STATE SECURITIES COMMISSION
Shearson Inc. NOR HAS THE COMMISSION OR ANY STATE SECURITIES
PaineWebber COMMISSION PASSED UPON THE ACCURACY OR ADE-
Incorporated QUACY OF THIS PROSPECTUS. ANY REPRESENTATION
Prudential TO THE CONTRARY IS A CRIMINAL OFFENSE.
Securities Inquiries should be directed to the Trustee at
Incorporated 1-800-735-7777.
Dean Witter Reynolds Prospectus dated May 19, 1994
Inc. Read and retain this Prospectus for future reference
</TABLE>
<PAGE>
<PAGE>
Defined Asset FundsSM is America's oldest and largest family of unit investment
trusts, with over $90 billion sponsored since 1970. Each Defined Fund is a
portfolio of preselected securities. The portfolio is divided into 'units'
representing equal shares of the underlying assets. Each unit receives an equal
share of income and principal distributions.
With Defined Asset Funds you know in advance what you are investing in and that
changes in the portfolio are limited. Most defined bond funds pay interest
monthly and repay principal as bonds are called, redeemed, sold or as they
mature. Defined equity funds offer preselected stock portfolios with defined
termination dates.
Your financial advisor can help you select a Defined Fund to meet your personal
investment objectives. Our size and market presence enable us to offer a wide
variety of investments. Defined Funds are available in the following types of
securities: municipal bonds, corporate bonds, government bonds, utility stocks,
growth stocks, even international securities denominated in foreign currencies.
Termination dates are as short as one year or as long as 30 years. Special funds
are available for investors seeking extra advantages: insured funds, double and
triple tax-free funds, and funds with 'laddered maturities' to help protect
against changing interest rates. Defined Funds are offered by prospectus only.
- ------------------------------------------------------------------------------
Contents
<TABLE>
<S> <C>
Investment Summary................................... A-3
Underwriting Account................................. A-5
Fee Table............................................ A-6
Report of Independent Accountants.................... A-7
Statement of Condition............................... A-7
Portfolio............................................ A-8
Fund Structure....................................... 1
Risk Factors......................................... 2
Description of the Fund.............................. 7
Taxes................................................ 10
Public Sale of Units................................. 11
Market for Units..................................... 13
Redemption........................................... 14
Expenses and Charges................................. 16
Administration of the Fund........................... 16
Resignation, Removal and Limitations on
Liability............................................ 19
Miscellaneous........................................ 20
Description of Ratings............................... 23
Exchange Option...................................... 24
</TABLE>
A-2
<PAGE>
<PAGE>
INVESTMENT SUMMARY AS OF MAY 18, 1994 (THE BUSINESS DAY PRIOR TO THE INITIAL
DATE OF DEPOSIT)( A )
<TABLE>
<S> <C>
ESTIMATED CURRENT RETURN( B )
(based on Public Offering Price) 7.13%
ESTIMATED LONG TERM RETURN( B )
(based on Public Offering Price) 7.41%
PUBLIC OFFERING PRICE PER UNIT
(including 4.00% sales charge) $ 983.18( C )
FACE AMOUNT OF SECURITIES-- $ 6,000,000
INITIAL NUMBER OF UNITS( D )-- 6,000
SPONSORS' REPURCHASE PRICE AND
REDEMPTION PRICE PER UNIT( E )
(based on bid side evaluation) $ 938.85( C )
FRACTIONAL UNDIVIDED INTEREST IN
FUND REPRESENTED BY EACH UNIT-- 1/6,000TH
CALCULATION OF PUBLIC OFFERING
PRICE
Aggregate offer side evaluation
of Securities in Fund........ $ 5,663,125.00
---------------
Divided by 6,000 Units.......... $ 943.85
Plus sales charge of 4.00% of
Public Offering Price (4.167%
of net amount invested in
Securities)( F )............. 39.33
---------------
Public Offering Price per
Unit............................ 983.18
Plus accrued interest( G )...... 1.36
---------------
Total........................ $ 984.54
---------------
---------------
</TABLE>
<TABLE>
<S> <C>
CALCULATION OF ESTIMATED NET
ANNUAL INTEREST RATE PER UNIT
(based on face amount of $1,000 per
Unit)
Annual interest rate per Unit........ 7.187%
Less estimated annual expenses per
Unit ($1.75) expressed as a
percentage........................ .175%
----------
Estimated net annual interest rate
per Unit.......................... 7.012%
----------
----------
DAILY RATE AT WHICH ESTIMATED NET
INTEREST
ACCRUES PER UNIT--...................... .0194%
</TABLE>
<TABLE>
<S> <C> <C>
PREMIUM AND DISCOUNT ISSUES IN PORTFOLIO
Face amount of Securities
with offer side evaluation: above
par-- 33%
at a discount from par-- 67%
</TABLE>
<TABLE>
<S> <C>
MONTHLY INCOME DISTRIBUTIONS
First distribution to be paid on the
25th day of August, 1994 to
Holders of record on the 10th day
of August, 1994.................. $ 2.77
Calculation of second and following
distributions, to be paid on the
25th day of each month:
Estimated net annual interest rate
per Unit times $1,000............ $ 70.12
Divided by 12.................... $ 5.84
REDEMPTION PRICE PER UNIT LESS THAN:
Public Offering Price by......... $ 44.33
Sponsors' Initial Repurchase
Price by......................... $ 5.00
RECORD DAY--The 10th day of each month
DISTRIBUTION DAY--The 25th day of each month
MINIMUM CAPITAL DISTRIBUTION--No distribution need be
made from Capital Account if balance is less
than $5.00 per Unit.
SPONSORS' PROFIT ON DEPOSIT............ $ 17,510.00
TRUSTEE'S ANNUAL FEE AND EXPENSES( H )
$1.75 per Unit (see Expenses and Charges)
PORTFOLIO SUPERVISION FEE( I )
Maximum of $0.25 per $1,000 face amount of
underlying Debt Obligations (see Expenses and
Charges)
EVALUATOR'S FEE FOR EACH EVALUATION
Minimum of $14.00 (see Expenses and Charges)
EVALUATION TIME
3:30 P.M. New York Time
MANDATORY TERMINATION DATE
Trust must be terminated no later than one year
after the maturity date of the last maturing
Debt Obligation listed under Portfolio (see
Portfolio).
MINIMUM VALUE OF FUND
Trust may be terminated if value of Securities
is less than 40% of the face amount of the
Securities on their dates of deposit.
</TABLE>
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(a) The Indenture was signed and the initial deposit was made on the date
of this Prospectus.
(b) Estimated Current Return represents annual interest income after
estimated annual expenses divided by the maximum public offering price including
a 4.00% maximum sales charge. Estimated Long Term return is the net annual
percentage return based on the yield on each underlying Debt Obligation weighted
to reflect market value and time to maturity or earlier call date. Estimated
Long Term return is adjusted for estimated expenses and the maximum offering
price but not for delays in the Fund's distribution of income. Estimated Current
Return shows current annual cash return to investors while Estimated Long Term
Return shows the return on Units held to maturity, reflecting maturities,
discounts and premiums on underlying Debt Obligations. Each figure will vary
with purchase price including sales charge, changes in net interest income and
the redemption, sale or other disposition of Debt Obligations in the Portfolio.
(c) Plus accrued interest.
(d) The Sponsors may create additional Units during the offering period
of the Fund.
(e) During the initial offering period, the Fund's Sponsors intend to
offer to purchase Units at prices based on the offer side value of the
underlying Securities. Thereafter, the Sponsors intend to maintain such a market
based on the bid side value of the underlying Securities which will be equal to
the Redemption Price. (See Market for Units.)
( f ) The sales charge during the initial offering period and in the
secondary market will be reduced on a graduated scale in the case of quantity
purchases (see Public Sale of Units--Public Offering Price). The resulting
reduction in the Public Offering Price will increase the effective current and
long term returns on a Unit.
(g) Figure shown represents interest accrued on underlying Securities
from the Initial Date of Deposit to expected date of settlement (normally five
business days after purchase) for Units purchased on the Initial Date of Deposit
(see Description of the Fund--Income; Estimated Current Return; Estimated Long
Term Return).
(h) Of this amount the Trustee receives annually $0.70 per $1,000 face
amount of securities for its services as Trustee, subject to reduction as the
size of the Fund increases. The Trustee's Annual Fee and Expenses also includes
the Portfolio Supervision Fee and Evaluator's Fee set forth herein and certain
other expenses.
( i ) In addition to this amount the Sponsors may be reimbursed for
bookkeeping or other administrative expenses not exceeding their actual costs,
currently at a maximum annual rate of $0.10 per Unit.
A-3
<PAGE>
<PAGE>
INVESTMENT SUMMARY AS OF MAY 18, 1994 (CONTINUED)
OBJECTIVE OF THE FUND--To provide a high level of current income through
investment in a fixed portfolio consisting of intermediate-term debt obligations
of corporations issued after July 18, 1984. This income is taxable to U.S.
Holders but in the opinion of counsel is exempt from U.S. Federal income taxes,
including withholding taxes, for many foreign Holders. There is no assurance
that this objective will be met because it is subject to the continuing ability
of issuers of the Debt Obligations held by the Fund to meet their principal and
interest requirements. Furthermore, the market value of the underlying Debt
Obligations, and therefore the value of the Units, will fluctuate with changes
in interest rates, changes in the credit quality of the Debt Obligations and
other factors.
PORTFOLIO AT A GLANCE--
DIVERSIFICATION--The Portfolio contains obligations of 10 issuers
representing financial institutions, a corporate utility and a consumer goods
company. Because of possible maturity, sale or other disposition of Securities,
the size, composition and return of the Portfolio may change at any time.
INVESTMENT QUALITY--All 10 issues are rated investment grade. Standard &
Poor's rated 2 issues AA, and 8 issues A. Moody's rated 1 issue Aa, and 9 issues
A. Fitch rated 1 issue AA, and 3 issues A. (See Description of Ratings.)
INTERMEDIATE-TERM MATURITIES--The issues have maturity dates ranging from
2002 to 2009.
CALL PROTECTION--Issuers are usually able to redeem bonds under optional
refunding and sinking fund provisions. Optional refunding redemptions, which may
redeem all or part of an issue, are in most cases initially at a premium, and
then in subsequent years at declining prices, but typically not below par value.
However, none of the bonds in this Portfolio is subject to optional refunding
redemption prior to maturity. Bonds may also provide for redemption at par prior
or in addition to any optional or mandatory redemption dates or maturity, for
example, through operation of a maintenance and replacement fund, if proceeds
are not able to be used as contemplated, the project is condemned or sold, the
project is destroyed and insurance proceeds are used to redeem the bonds, in the
event of certain tax events or in other special circumstances.
DEBT OBLIGATIONS--Approximately 100% of the aggregate face amount of the
Debt Obligations is unsecured. The 10 issues were issued by 10 different issuers
representing the following industry groups: 8 financial institutions, 1
corporate utility and 1 consumer goods company. (See Risk Factors for a brief
summary of certain investment risks pertaining to the obligations held by the
Fund.)
The Sponsors may deposit additional Securities in the Fund (where additional
Units are to be offered to the public) subsequent to the Initial Date of Deposit
(see Fund Structure).
RISK FACTORS--Investment in the Fund should be made with an understanding
that the value of the underlying Portfolio may decline with increases in
interest rates. In recent years, there have been wide fluctuations in interest
rates and thus in the value of fixed-rate, intermediate term debt obligations
generally. The Sponsors cannot predict whether these fluctuations will continue
in the future. In addition, 75% of the aggregate face amount of the Portfolio
consists of Debt Obligations of financial institutions*, 8% of the aggregate
face amount of the Portfolio consists of Debt Obligations of a corporate utility
and 17% of the aggregate face amount of the portfolio consists of Debt
Obligations of a consumer goods company. (See Risk Factors.)
The Portfolio consists primarily of publicly held Securities which, in many
cases, do not have the benefit of covenants which would prevent the issuer from
engaging in capital restructurings or borrowing transactions in connection with
corporate acquisitions, leveraged buy outs or restructurings which could have
the effect of reducing the ability of the issuer to meet its debt obligations
and might result in the ratings of the Securities and the value of the
underlying Portfolio being reduced. (See Risk Factors for a brief summary of
certain investment risks pertaining to the obligations held by the Fund.)
The Securities are generally not listed on a national securities exchange.
Whether or not the Securities are listed, the principal trading market for the
Securities will generally be in the over-the-counter market. As a result, the
existence of a liquid trading market for the Securities may depend on whether
dealers will make a market in the Securities. There can be no assurance that a
market will be made for any of the Securities, that any market for the
Securities will be maintained or of the liquidity of the Securities in any
markets made. In addition, the Fund may be restricted under the Investment
Company Act of 1940 from selling Securities to any Sponsor. The price at which
the Securities may be sold to meet redemptions and the value of the Fund will be
adversely affected if trading markets for the Securities are limited or absent.
MONTHLY DISTRIBUTIONS--Monthly distributions of interest and any principal
or premium received by the Fund will be made in cash on or shortly after the
25th day of each month to Holders of record on the 10th day of such month
commencing with the first distribution on the date indicated on page A-3 (see
Administration of the Fund--Accounts and Distributions). Alternatively, Holders
may elect to have their monthly distributions reinvested in the Corporate Fund
Accumulation Program, Inc. It should be noted, however, that interest
distributions to foreign Holders from the program will be subject to U.S.
Federal income taxes, including withholding taxes. Further information about the
program, including a current prospectus, may be obtained by returning the
enclosed form.
- ---------------
* A Fund is considered to be 'concentrated' in a particular category when the
Debt Obligations in that category constitute 25% or more of the aggregate face
amount of the Portfolio.
A-4
<PAGE>
<PAGE>
Defined
Asset Funds
Defined
Corporate
Income
Funds
Investor's Guide
Our defined portfolios of corporate bonds offer investors
a simple and convenient way to earn monthly income. And
by purchasing corporate Defined Funds, investors not only
avoid the problem of selecting corporate bonds by
themselves, but also gain the advantage of
diversification by investing in bonds of several
different issuers.
Corporate
Income Fund Monthly Income
Even though the securities in the portfolio pay interest
semi-annually or annually, the Fund will make monthly
distributions of net interest income.
Reinvestment Option
- -------------------- You can elect to automatically reinvest your
distributions into a separate portfolio of corporate
bonds. Reinvesting helps to
INTERMEDIATE TERM compound your income and keeps your capital continuously
SERIES working for you.
Investment Grade Quality
Each bond in the Fund has been selected by investment
professionals among available investment grade bonds or
those, in the opinion of Defined Asset Funds research
analysts, having comparable credit characteristics. Risk
is further reduced by purchasing bonds of a number of
different issuers and types.
Professional Selection and Supervision
Each bond in the Fund has been selected by experienced
buyers and market analysts. Spreading your investment
among different securities and issuers reduces your risk,
but does not eliminate it. The Fund is not actively
managed. However, the portfolio is regularly reviewed and
a security can be sold if retaining it could be
detrimental to investors' interests.
A Liquid Investment
Although not legally required to do so, the Sponsors have
maintained a secondary market for Defined Asset Funds for
over 20 years. You can cash in your units at any time.
Your price is based on the market value of the Fund's
securities at that time as determined by an independent
evaluator. Or, you can exchange your investment for
another Defined Fund at a reduced sales charge. There is
never a fee for cashing in your investment.
Principal Distributions
Principal from sales, redemptions and maturities of bonds
in the Fund is distributed to investors periodically.
Risk Factors
Unit price fluctuates and is affected by interest rates
as well as the financial condition of the issuers of the
bonds.
This page may not be distributed unless included in a current prospectus.
Investors should refer to the prospectus for further information.
<PAGE>
<PAGE>
INVESTMENT SUMMARY AS OF MAY 18, 1994 (CONTINUED)
PUBLIC OFFERING PRICE--During the initial offering period the Public
Offering Price of the Units is based on the aggregate offer side evaluation of
the underlying Securities (the price at which they could be directly purchased
by the public assuming they were available), divided by the number of Units
outstanding, plus a sales charge of 4.167%* of such offer side evaluation per
Unit (the net amount invested); this results in a sales charge of 4.00%* of the
Public Offering Price. The secondary market Public Offering Price is based on
the bid side evaluation of the underlying Securities, plus a sales charge of
4.987%* of the bid side evaluation per Unit; this results in a sales charge of
4.75%* of the secondary market Public Offering Price. Units are offered at the
Public Offering Price computed as of the Evaluation Time for all sales made
subsequent to the previous evaluation, plus cash per Unit in the Capital Account
not allocated to the purchase of specific Securities and net interest accrued.
The Public Offering Price on the Initial Date of Deposit, and on subsequent
dates, will vary from the Public Offering Price set forth on page A-3. (See
Public Sale of Units--Public Offering Price;--Redemption.)
ESTIMATED CURRENT RETURN; ESTIMATED LONG TERM RETURN--Estimated Current
Return on a Unit shows the return based on the Public Offering Price and the
maximum applicable sales charge of 4.00%* and is computed by multiplying the
estimated net annual interest rate per Unit (which shows the return per Unit
based on $1,000 face amount) by $1,000 and dividing the result by the Public
Offering Price per Unit (not including accrued interest). Estimated Long Term
Return on a Unit of the Fund shows a net annual long-term return to investors
holding to maturity based on the yield on the individual Debt Obligations in the
Portfolio weighted to reflect the time to maturity (or in certain cases to an
earlier call date) and market value of each Debt Obligation in the Portfolio,
adjusted to reflect the Public Offering Price (including the maximum applicable
sales charge of 4.00%*) and estimated expenses. The net annual interest rate per
Unit and the net annual long-term return to investors will vary with changes in
the fees and expenses of the Trustee and Sponsors and the fees of the Evaluator
which are paid by the Fund, and with the exchange, redemption, sale, prepayment
or maturity of the underlying Securities; the Public Offering Price will vary
with any reduction in sales charges paid in the case of quantity purchases, as
well as with fluctuations in the offer side evaluation of the underlying
Securities. Therefore, it can be expected that the Estimated Current Return and
Estimated Long Term Return will fluctuate in the future. (See Description of the
Fund--Income; Estimated Current Return; Estimated Long Term Return.)
TAXATION--In the opinion of special counsel to the Sponsors, each Holder
will be considered to have received the interest on his pro rata portion of each
Debt Obligation when interest on the Debt Obligations is received by the Fund.
This interest is taxable for U.S. Holders but, in the opinion of counsel, is
exempt from U.S. Federal income taxes, including withholding taxes, for many
foreign Holders. None of the Debt Obligations were issued at an original issue
discount (see Taxes).
MARKET FOR UNITS--The Sponsors, though not obligated to do so, intend to
maintain a secondary market for Units based on the aggregate bid side evaluation
of the underlying Securities (see Market for Units). If such market is not
maintained, a Holder will be able to dispose of his Units through redemption at
prices also based on the aggregate bid side evaluation of the underlying
Securities (see Redemption). There is no fee for selling Units. Market
conditions may cause the prices available in the market maintained by the
Sponsors or available upon exercise of redemption rights to be more or less than
the total amount paid for Units plus accrued interest.
UNDERWRITING--None of the Sponsors has participated as sole underwriter,
managing underwriter or member of an underwriting syndicate from which the
Securities in the Portfolio were acquired.
REPLACEMENT SECURITIES--The Indenture permits the deposit of Replacement
Securities not previously deposited in the Fund under certain circumstances
described under Administration of the Fund--Portfolio Supervision. The
Securities on the current list from which these Securities are to be selected
are:
Allstate Corporation, Notes, 6.75% due 6/15/03
United Telephone Florida Company, First Mortgage Bonds, 7.25%
due 12/15/04
UNDERWRITING ACCOUNT
The names and addresses of the Underwriters and their several interests in
the Underwriting Account are:
<TABLE>
<S> <C> <C>
Merrill Lynch, Pierce, Fenner & Smith Incorporated P.O. Box 9051, Princeton, N.J. 08543-9051 75.00%
Smith Barney Shearson Inc. Two World Trade Center--101st Floor, 6.67
New York, N.Y. 10048
PaineWebber Incorporated 1285 Avenue of the Americas, New York, N.Y. 10019 4.17
Prudential Securities Incorporated One Seaport Plaza--199 Water Street, 8.33
New York, N.Y. 10292
Dean Witter Reynolds Inc. Two World Trade Center--59th Floor, 5.00
New York, N.Y. 10048
Gruntal & Co. Incorporated 14 Wall Street, New York, N.Y. 10001 0.83
------
100.00%
------
------
</TABLE>
- ---------------
* This sales charge during the initial offering period and in the secondary
market will be reduced on a graduated scale in the case of purchases of 250 or
more Units (see Public Sale of Units--Public Offering Price).
A-5
<PAGE>
<PAGE>
CORPORATE INCOME FUND
INTERMEDIATE TERM SERIES
DEFINED ASSET FUNDS
I want to learn more about automatic reinvestment in the
Investment Accumulation Program. Please send me information
about participation in the Corporate Fund
Accumulation Program, Inc. and a current Prospectus.
My name (please print) _____________________________________
My address (please print):
Street and Apt. No. ____________________
City, State, Zip Code ______________________________________
This page is a self-mailer. Please complete the information
above, cut along the dotted line, fold along the lines on
the reverse side, tape, and mail with the Trustee's address
displayed on the outside.
1 2 3 4 5 6 7 8
<PAGE>
<PAGE>
<TABLE>
<S> <C>
NO POSTAGE
NECESSARY
IF MAILED
IN THE
UNITED STATES
BUSINESS REPLY MAIL
FIRST CLASS PERMIT NO. 6665 NEW YORK, NY
POSTAGE WILL BE PAID BY ADDRESSEE
BANKERS TRUST COMPANY
UNIT INVESTMENT TRUST
FOUR ALBANY STREET
7TH FLOOR
NEW YORK, NY 10015
</TABLE>
- --------------------------------------------------------------------------------
(Fold along this line.)
- --------------------------------------------------------------------------------
(Fold along this line.)
<PAGE>
<PAGE>
INVESTMENT SUMMARY AS OF MAY 18, 1994 (CONTINUED)
FEE TABLE
THIS FEE TABLE IS INTENDED TO ASSIST INVESTORS IN UNDERSTANDING THE COSTS
AND EXPENSES THAT AN INVESTOR IN THE FUND WILL BEAR DIRECTLY OR INDIRECTLY. SEE
PUBLIC SALE OF UNITS AND EXPENSES AND CHARGES. ALTHOUGH THE FUND IS A UNIT
INVESTMENT TRUST RATHER THAN A MUTUAL FUND, THIS INFORMATION IS PRESENTED TO
PERMIT A COMPARISON OF FEES.
<TABLE>
<S> <C>
UNITHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases during the Initial Offering Period (as a percentage
of Public Offering Price).................................................................... 4.00%
Maximum Sales Charge Imposed on Purchases during the Secondary Offering Period (as a
percentage of Public Offering Price)......................................................... 4.75%
ESTIMATED ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS1)
Trustee's Fee................................................................................... .074%
Portfolio Supervision, Bookkeeping and Administrative Fees...................................... .037%
Other Operating Expenses........................................................................ .075%
------
Total............................................................................................. .186%
------
------
</TABLE>
- ---------------
1 Based on the mean of the bid and the offer side evaluations; this figure may
differ from that set forth as estimated annual expenses per unit expressed as a
percentage on page A-3.
<TABLE>
<S> <C> <C> <C> <C>
EXAMPLE CUMULATIVE EXPENSES PAID FOR PERIOD OF:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- -------- -------- ---------
An investor would pay the following expenses on a $1,000
investment, assuming the Fund's estimated operating expense
ratio of .186% and a 5% annual return on the investment
throughout the periods....................................... $42 $46 $50 $63
</TABLE>
The Example assumes reinvestment of all distributions into additional Units
of the Fund (a reinvestment option different from that offered by this Fund--see
Administration of the Fund--Investment Accumulation Program) and utilizes a 5%
annual rate of return as mandated by Securities and Exchange Commission
regulations applicable to mutual funds. In addition to the charges described
above, a Holder selling or redeeming his Units in the secondary market (before
the Fund terminates) will receive a price based on the then-current bid side
evaluation of the underlying securities. The difference between this bid side
evaluation and the offer side evaluation (the basis for the Public Offering
Price), as of the day before the Initial Date of Deposit, is $5.00 per Unit. Of
course, this difference may change over time. The Example should not be
considered a representation of past or future expenses or annual rate of return;
the actual expenses and annual rate of return may be more or less than those
assumed for purposes of the Example.
<PAGE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Sponsors, Trustee and Holders of Corporate Income Fund, Intermediate Term
Series -- 49, Defined Asset Funds:
We have audited the accompanying statement of condition, including the
portfolio, of Corporate Income Fund, Intermediate Term Series -- 49, Defined
Asset Funds as of May 19, 1994. This financial statement is the responsibility
of the Trustee. Our responsibility is to express an opinion on this financial
statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. The deposit on May 19,
1994 of an irrevocable letter or letters of credit for the purchase of
securities, as described in the statement of condition, was confirmed to us by
Bankers Trust Company, the Trustee. An audit also includes assessing the
accounting principles used and significant estimates made by the Trustee, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the financial position of Corporate Income Fund,
Intermediate Term Series -- 49, Defined Asset Funds at May 19, 1994 in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE
New York, N.Y.
May 19, 1994
CORPORATE INCOME FUND
INTERMEDIATE TERM SERIES -- 49
DEFINED ASSET FUNDS
STATEMENT OF CONDITION AS OF INITIAL DATE OF DEPOSIT, MAY 19, 1994
<TABLE>
<S> <C> <C>
TRUST PROPERTY
Investment in Securities(1):
Contracts to purchase Securities.................... $ 5,663,125.00
Accrued interest to Initial Date of Deposit on underlying
Securities.................................................... 71,197.91
--------------
Total............................................ $ 5,734,322.91
--------------
--------------
LIABILITY AND INTEREST OF HOLDERS
Liability--Accrued interest to Initial Date of Deposit on
underlying Securities(2)................................. $ 71,197.91
Interest of Holders--
6,000 Units of fractional undivided interest outstanding:
Cost to investors(3)................................ $ 5,899,105.00
Gross underwriting commissions(4)................... (235,980.00)
--------------
Net amount applicable to investors............................ 5,663,125.00
--------------
Total............................................ $ 5,734,322.91
--------------
--------------
</TABLE>
- ------------
(1) Aggregate cost to the Fund of the Securities listed under Portfolio is based
on the offer side evaluation determined by the Evaluator at the Evaluation
Time on the business day prior to the Initial Date of Deposit as set forth
under Public Sale of Units--Public Offering Price. See also the column
headed Cost of Securities to Fund under Portfolio. An irrevocable letter or
letters of credit in the amount of $5,724,090.00 have been deposited with
the Trustee. The amount of such letter or letters of credit includes
$5,645,615.00 (equal to the purchase price to the Sponsors) for the purchase
of $6,000,000 face amount of Securities in connection with contracts to
purchase Securities, plus $78,475.00 covering accrued interest to the
earlier of the date of settlement for the purchase of Units or the date of
delivery of the Securities. The letter or letters of credit have been issued
by DG Bank, New York Branch.
(2) Representing, as set forth under Description of the Fund--Income; Estimated
Current Return; Estimated Long Term Return, a special distribution by the
Trustee of an amount equal to accrued interest on the Securities as of the
Initial Date of Deposit.
(3) Aggregate public offering price (exclusive of interest) computed on the
basis of the offer side evaluation of the underlying Securities as of the
Evaluation Time on the Business Day prior to the Initial Date of Deposit.
(4) Assumes sales charge of 4.00% on all Units computed on the basis set forth
under Public Sale of Units--Public Offering Price.
A-7
<PAGE>
<PAGE>
PORTFOLIO OF CORPORATE INCOME FUND, ON THE INITIAL DATE OF DEPOSIT,
INTERMEDIATE TERM SERIES -- 49 MAY 19, 1994
DEFINED ASSET FUNDS
<TABLE>
<CAPTION>
RATINGS OF ISSUES
STANDARD & MOODY'S FITCH
PORTFOLIO NO. AND POOR'S INVESTORS INVESTORS
SECURITIES CONTRACTED FOR CORP. SERVICE SERVICE FACE AMOUNT COUPON MATURITIES
<C> <S> <C> <C> <C> <C> <C> <C>
---------- ---------- ---------- ------------ ------ -----------
1. BankAmerica Corporation, A- A3 A+ $ 500,000 8.375 % 3/15/02
Subordinated Notes
2. Banque Paribas, A- A2 NA 1,000,000 6.875 3/01/09
Subordinated Notes
3. Citicorp, Subordinated A- A3 A- 500,000 7.125 3/15/04
Notes
4. First Union Corporation, A- A3 NR 500,000 6.625 7/15/05
Subordinated Notes
5. Ford Motor Credit, Notes A A2 NR 500,000 6.375 11/05/08
6. New York Telephone Company, A A2 A+ 500,000 6.500 3/01/05
Debentures
7. Progressive Corporation, A- A3 NA 500,000 6.600 1/15/04
Notes
8. Republic New York Corp., AA- A1 AA- 500,000 7.750 5/15/09
Subordinated Notes
9. Seagram Company Limited, A A2 NA 1,000,000 8.350 11/15/06
Debentures
10. Toronto-Dominion Bank, AA- Aa3 NA 500,000 6.450 1/15/09
Subordinated Notes
------------
$ 6,000,000
------------
------------
<CAPTION>
YIELD TO MATURITY
OPTIONAL SINKING COST OF ON THE INITIAL
REFUNDING FUND SECURITIES DATE
REDEMPTIONS (1) REDEMPTIONS (1) TO FUND (2) OF DEPOSIT (2)
<C> <S><C> <C> <C> <C>
--------------------- ---------------- --------------- -----------------
1. -- -- $ 520,625.00 7.660%
2. -- -- 885,000.00 8.230
3. -- -- 479,375.00 7.730
4. -- -- 457,500.00 7.770
5. -- -- 437,500.00 7.830
6. -- -- 460,625.00 7.580
7. -- -- 460,000.00 7.790
8. -- -- 501,250.00 7.721
9. -- -- 1,022,500.00 8.060
10. -- -- 438,750.00 7.873
---------------
$ 5,663,125.00
---------------
---------------
</TABLE>
A-8
<PAGE>
<PAGE>
- ------------
NOTES
(1) None of the Securities are subject to optional or sinking fund redemption.
Certain Securities may provide for redemption at par prior to maturity, for
example, through the operation of a maintenance and replacement fund, if
proceeds are not able to be used as contemplated, the project is condemned,
sold or the project is destroyed and insurance proceeds are used to redeem
the Securities, in the event of certain tax events or in other special
circumstances.
Sinking fund redemptions are all at par and generally redeem only part of
an issue. Some of the Securities have mandatory sinking funds which contain
optional provisions permitting the issuer to increase the principal amount
of bonds called on a mandatory redemption date. The sinking fund
redemptions with optional provisions may, and optional refunding
redemptions generally will, occur at times when the redeemed Securities
have an offer side evaluation which represents a premium over par. To the
extent that the Securities were acquired at a price higher than the
redemption price, this will represent a loss of capital when compared with
the original Public Offering Price of the Units. Monthly distributions will
generally be reduced by the amount of the income which would otherwise have
been paid with respect to redeemed Securities and there will be distributed
to Holders any principal amount and premium received on such redemption
after satisfying any redemption requests received by the Fund. The
estimated current return and estimated long term return in this event may
be affected by redemptions. The tax effect on Holders of redemptions and
related distributions is described under Taxes.
(2) Evaluation of Securities by the Evaluator made on the basis of current
offer side evaluation. The offer side evaluation is greater than the
current bid side evaluation of the Securities, which is the basis on which
Redemption Price per Unit is determined (see Redemption). The aggregate
value based on the bid side evaluation at the Evaluation Time on the
business day prior to the Initial Date of Deposit was $5,633,125.00 which
is $30,000.00 (.50% of the aggregate face amount) lower than the aggregate
Cost of Securities to Fund based on the offer side evaluation.
Yield to Maturity on the Initial Date of Deposit of Securities was computed
on the basis of the offering side evaluation at the Evaluation Time on the
business day prior to the Initial Date of Deposit. Percentages in this
column represent Yield to Maturity on Initial Date of Deposit unless
followed by '+' which indicates yield to an earlier redemption date. (See
Description of the Fund--Income; Estimated Current Return; Estimated Long
Term Return for a description of the computation of yield price.)
------------------------------------
All Securities are represented entirely by contracts to purchase such
Securities, which were entered into by the Sponsors on May 18, and May 19,
1994. All contracts are expected to be settled by the initial settlement
date for the purchase of Units.
A-9
<PAGE>
<PAGE>
CORPORATE INCOME FUND
INTERMEDIATE TERM SERIES
DEFINED ASSET FUNDS
FUND STRUCTURE
This Series (the 'Fund') is a 'unit investment trust' created under New
York law by a Trust Indenture (the 'Indenture') among the Sponsors, the Trustee
and the Evaluator. Unless otherwise indicated, when Investors Bank & Trust
Company and The First National Bank of Chicago act as Co-Trustees to the Fund,
reference to the Trustee in the Prospectus shall be deemed to refer to Investors
Bank & Trust Company and The First National Bank of Chicago, as Co-Trustees. To
the extent that references in this 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 date of this
Prospectus (the 'Initial Date of Deposit') the Sponsors, acting as managers for
the underwriters named under Underwriting Account, deposited the underlying
Securities with the Trustee at a price equal to the evaluation of the Securities
on the offer side of the market on that date as determined by the Evaluator, and
the Trustee delivered to the Sponsors units of interest ('Units') representing
the entire ownership of the Fund. Except as otherwise indicated under Portfolio
(the 'Portfolio'), 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 the purchase thereof.
The Portfolio contains different issues of debt obligations with fixed
final maturity or disposition dates. As used herein, the terms 'Debt
Obligations' and 'Securities' mean the intermediate-term debt obligations
initially deposited in the Fund and described under Portfolio and replacement
and additional Debt Obligations acquired and held by the Fund pursuant to the
provisions of the Indenture (see Description of the Fund--The Portfolio;
Administration of the Fund--Portfolio Supervision).
With the deposit of the Securities in the Fund on the Initial Date of
Deposit, the Sponsors established a proportionate relationship among the face
amounts of Securities of specified interest rates and maturities in the
Portfolio. During the 90-day period following the Initial Date of Deposit, the
Sponsors may deposit additional Securities ('Additional Securities'), contracts
to purchase Additional Securities or cash (or a bank letter of credit in lieu of
cash) with instructions to purchase Additional Securities in order to create new
Units, maintaining to the extent practicable the original proportionate
relationship among the face amounts of each Security in the Portfolio. It may
not be possible to maintain the original proportionate relationship among the
Securities deposited on the Initial Date of Deposit because of, among other
reasons, purchase requirements, changes in prices, or unavailability of
Securities. Replacement Securities may be acquired under specified conditions
(see Description of the Fund--The Portfolio; Administration of the
Fund--Portfolio Supervision). Units may be continuously offered to the public by
means of this Prospectus (see Public Sale of Units--Public Distribution)
resulting in a potential increase in the number of Units outstanding. Deposits
of Additional Securities subsequent to the 90-day period following the Initial
Date of Deposit must replicate exactly the proportionate relationship among the
face amounts of Securities comprising the Portfolio at the end of the initial
90-day period, subject to certain events as discussed under Administration of
the Fund--Portfolio Supervision.
Certain of the Securities in the Fund may have been valued at a market
discount. Securities trade at less than par value because the interest rates on
the Securities are lower than interest on comparable debt securities being
issued at currently prevailing interest rates. The current returns of securities
trading at a market discount are lower than the current returns of comparably
rated debt securities of a similar type issued at currently prevailing interest
rates because discount securities tend to increase in market value as they
approach maturity and the full principal amount becomes payable. If currently
prevailing interest rates for newly issued and otherwise comparable securities
increase, the market discount of previously issued securities will become deeper
and if currently prevailing interest rates for newly issued comparable
securities decline, the market discount of previously issued securities will be
reduced, other things being equal. Market discount attributable to interest rate
changes does not indicate a lack of market confidence in the issue.
Certain of the Securities in the Fund may have been valued at a market
premium. Securities trade at a premium because the interest rates on the
Securities are higher than interest on comparable debt securities being issued
at currently prevailing interest rates. The current returns of securities
trading at a market premium are higher than the current returns of comparably
rated debt securities of a similar type issued at currently prevailing interest
rates because premium securities tend to decrease in market value as they
approach maturity when the face amount becomes payable. Because part of the
purchase price is thus returned not at maturity but through current income
payments, an early redemption of a premium security at par will result in a
reduction in yield. If currently prevailing interest rates for newly issued and
otherwise comparable securities increase, the market premium of previously
issued securities will decline and if currently prevailing interest rates for
newly issued comparable securities decline, the market premium of previously
issued securities will increase, other things being equal. Market premium
attributable to interest rate changes does not indicate market confidence in the
issue.
1
<PAGE>
<PAGE>
The 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 over-the-counter market which the Sponsors propose to maintain at prices
determined in the same manner (see Market for Units). On the Initial Date of
Deposit each Unit represented the fractional undivided interest in the
Securities and net income of the Fund set forth under Investment Summary in the
ratio of one Unit for each approximately $1,000 face amount of Securities
initially deposited. Thereafter, if any Units are redeemed, the face amount of
Securities in the Fund will be reduced by amounts allocable to redeemed Units,
and the fractional undivided interest represented by each Unit in the balance
will be increased. However, if additional Units are issued by the Fund (through
deposit of Securities by the Sponsors in connection with the sale of additional
Units), the aggregate value of Securities in the Fund will be increased by
amounts allocable to additional Units, and the fractional undivided interest
represented by each Unit in the balance will be decreased. Units will remain
outstanding until redeemed upon tender to the Trustee by any Holder (which may
include the Sponsors) or until the termination of the Indenture (see Redemption;
Administration of the Fund--Amendment and Termination).
RISK FACTORS
An investment in Units of the Fund should be made with an understanding of
the risks which an investment in fixed rate intermediate-term debt obligations
may entail, including the risk that the value of the Portfolio and hence of the
Units will decline with increases in interest rates. In recent years there have
been wide fluctuations in interest rates and thus in the value of fixed rate
debt obligations generally. The Sponsors cannot predict future economic policies
or their consequences or, therefore, the course or extent of any similar
fluctuations in the future. The Portfolio consists primarily of publicly held
Securities which, in many cases, do not have the benefit of covenants which
would prevent the issuer from engaging in capital restructurings or borrowing
transactions in connection with corporate acquisitions, leveraged buy outs or
restructurings which could have the effect of reducing the ability of the issuer
to meet its debt obligations and might result in the ratings of the Securities
and the value of the underlying Portfolio being reduced.
The Securities are generally not listed on a national securities exchange.
Whether or not the Securities are listed, the principal trading market for the
Securities will generally be in the over-the-counter market. As a result, the
existence of a liquid trading market for the Securities may depend on whether
dealers will make a market in the Securities. There can be no assurance that a
market will be made for any of the Securities, that any market for the
Securities will be maintained or of the liquidity of the Securities in any
markets made. In addition, the Fund may be restricted under the Investment
Company Act of 1940 from selling Securities to any Sponsor. The price at which
the Securities may be sold to meet redemptions and the value of the Fund will be
adversely affected if trading markets for the Securities are limited or absent.
As set forth under Investment Summary and Portfolio, the Fund may contain
or be concentrated in one or more of the classifications of Debt Obligations
referred to below. Percentages of any concentrations for this Fund are set forth
under Investment Summary. An investment in Units of the Fund should be made with
an understanding of the risks that these investments may entail, certain of
which are described below.
UTILITIES
The ability of utilities to meet their obligations with respect to debt
obligations issued on their behalf is dependent on various factors, including
the rates they may charge their customers, the demand for a utility's services
and the cost of providing those services. Utilities, in particular
investor-owned utilities, are subject to extensive regulation relating to the
rates which they may charge customers. Utilities can experience regulatory,
political and consumer resistance to rate increases. Utilities engaged in
long-term capital projects are especially sensitive to regulatory lags in
granting rate increases. Any difficulty in obtaining timely and adequate rate
increases could adversely affect a utility's results of operations.
The demand for a utility's services is influenced by, among other factors,
competition, weather conditions and economic conditions. Electric utilities, for
example, have experienced increased competition as a result of the availability
of other energy sources, the effects of conservation on the use of electricity,
self-generation by industrial customers and the generation of electricity by
co-generators and other independent power producers. Also, increased competition
will result if Federal regulators determine that utilities must open their
transmission lines to competitors. Utilities which distribute natural gas also
are subject to competition from alternative fuels, including fuel oil, propane
and coal.
The utility industry is an increasing cost business making the cost of
generating electricity more expensive, heightening its sensitivity to
regulation. A utility's costs are influenced by the utility's cost of capital,
the availability and cost of fuel and other factors. In addition, natural gas
pipeline and distribution companies have incurred increased costs as a result of
long term natural gas purchase contracts containing 'take or pay' provisions
which require that they pay for natural gas even if natural gas is not taken by
them. There can be no assurance that a utility will be able to pass on these
increased costs to customers through increased rates. Utilities also incur
substantial capital expenditures and operating expenses to comply with
environmental, energy, licensing
2
<PAGE>
<PAGE>
and other laws and regulations relating to, among other things, air emissions,
the quality of drinking water, waste water discharge, solid and hazardous
substance handling and disposal, and siting and licensing of facilities.
Environmental legislation and regulations are changing rapidly and are the
subject of current public policy debate and legislative proposals. It is likely
that utilities will be subject to increasingly stringent environmental standards
in the future that could result in significant capital expenditures. Future
legislation and regulation could include, among other things, regulation of
so-called electromagnetic fields associated with electric transmission and
distribution lines as well as emissions of carbon dioxide and other so-called
greenhouse gases associated with the burning of fossil fuels. Compliance with
these requirements may limit a utility's operations or require substantial
investments in new equipment and, as a result, may adversely affect a utility's
results of operations.
The electric utility industry in general is subject to various external
factors including (a) the effects of inflation upon the costs of operation and
construction, (b) substantially increased capital outlays and longer
construction periods for larger and more complex new generating units, (c)
uncertainties in predicting future load requirements, (d) increased financing
requirements coupled with limited availability of capital, (e) exposure to
cancellation and penalty charges on new generating units under construction, (f)
problems of cost and availability of fuel, (g) compliance with rapidly changing
and complex environmental, safety and licensing requirements, (h) litigation and
proposed legislation designed to delay or prevent construction of generating and
other facilities, (i) the uncertain effects of conservation on the use of
electric energy, (j) uncertainties associated with the development of a national
energy policy, (k) regulatory, political and consumer resistance to rate
increases and (l) increased competition as a result of the availability of other
energy sources. These factors may delay the construction and increase the cost
of new facilities, limit the use of, or necessitate costly modifications to,
existing facilities, impair the access of electric utilities to credit markets,
or substantially increase the cost of credit for electric generating facilities.
The Sponsors cannot predict at this time the ultimate effect of such factors on
the ability of any issuers to meet their obligations with respect to the
Securities in the Fund.
The National Energy Policy Act ('NEPA'), which became law in October, 1992,
makes it mandatory for a utility to permit non-utility generators of electricity
access to its transmission system for wholesale customers, thereby increasing
competition for electric utilities. NEPA also mandated demand-side management
policies to be considered by utilities. NEPA prohibits the Federal Energy
Regulatory Commission from mandating electric utilities to engage in retail
wheeling, which is competition among suppliers of electric generation to provide
electricity to retail customers (opened particulary industrial retail customers)
of a utility. However, under NEPA, a state can mandate retail wheeling under
certain conditions.
There is concern by the public, the scientific community, and the U.S.
Congress regarding environmental damage resulting from the use of fossil fuels.
Congressional support for the increased regulation of air, water, and soil
contaminants is building and there are a number of pending or recently enacted
legislative proposals which may affect the electric utility industry. In
particular, on November 15, 1990, legislation was signed into law that
substantially revises the Clean Air Act (the '1990 Amendments'). The 1990
Amendments seek to improve the ambient air quality throughout the United States
by the year 2000. A main feature of the 1990 Amendments is the reduction of
sulphur dioxide and nitrogen oxide emissions caused by electric utility power
plants, particularly those fueled by coal. Under the 1990 Amendments the U.S.
Environmental Protection Agency ('EPA') must develop limits for nitrogen oxide
emissions by 1993. The sulphur dioxide reduction will be achieved in two phases.
Phases I addresses specific generating units named in the 1990 Amendments. In
Phase II the total U.S. emissions will be capped at 8.9 million tons by the year
2000. The 1990 Amendments contain provisions for allocating allowances to power
plants based on historical or calculated levels. An allowance is defined as the
authorization to emit one ton of sulphur dioxide.
The 1990 Amendments also provide for possible further regulation of toxic
air emissions from electric generating units pending the results of several
federal government studies to be conducted over the next three to four years
with respect to anticipated hazards to public health, available corrective
technologies, and mercury toxicity.
Electric utilities which own or operate nuclear power plants are exposed to
risks inherent in the nuclear industry. These risks include exposure to new
requirements resulting from extensive federal and state regulatory oversight,
public controversy, decommissioning costs, and spent fuel and radioactive waste
disposal issues. Nuclear power plants have experienced substantial cost
increases, construction delays and licensing difficulties. In addition, nuclear
plants typically require substantial capital additions and modifications
throughout their operating lives to meet safety, environmental, operational and
regulatory requirements and to replace and upgrade various plant systems. The
high degree of regulatory monitoring and controls imposed on nuclear plants
could cause a plant to be out of service or on limited service for long periods.
When a nuclear facility owned by an investor-owned utility or a state or local
municipality is out of service or operating on a limited service basis, the
utility operator or its owner may be liable for the recovery of replacement
power costs. Risks of substantial liability also arise from the operation of
nuclear facilities and from the use, handling, and possible radioactive
emissions associated with nuclear fuel. Insurance may not cover all types or
amounts of loss which may be experienced in connection with the ownership and
operation of a nuclear plant and severe financial consequences could result from
a significant accident or occurrence. The Nuclear Regulatory Commission has
3
<PAGE>
<PAGE>
promulgated regulations mandating the establishment of funded reserves to assure
financial capability for the eventual decommissioning of licensed nuclear
facilities. These funds are to be accrued from revenues in amounts currently
estimated to be sufficient to pay for decommissioning costs.
TELECOMMUNICATIONS. The Portfolio may contain obligations of companies engaged
in providing local, long-distance and cellular services, in the manufacture of
telecommunications products and in a wide range of other activities including
directory publishing, information systems and the operation of voice, data and
video telecommunications networks. Technological innovations in fiber optics,
cellular products and services, voice messaging, call waiting and automatic
dialing offer additional potential for significant expansion. Advances like
formation of a national cellular grid should also contribute to the anticipated
growth of this industry. The Fund may contain obligations of the Regional Bell
Holding Companies ('RBOCs') which were spun off from AT&T in 1984 pursuant to
approval of the U.S. District Court for the District of Columbia (the 'Court'),
implementing a consent decree relating to antitrust proceedings brought by the
U.S. Department of Justice. The RBOCs include: Ameritech Corporation, Bell
Atlantic Corporation, BellSouth Corporation, NYNEX Corporation, Pacific Telesis
Group, Southwestern Bell Corporation and U.S. West, Inc. These companies provide
near monopoly local and intrastate telephone service as well as cellular and
other generally unregulated services. The Fund may contain obligations of
certain independent telephone companies which are subject to regulation by the
Federal Communications Commissions (the 'FCC') and state utility commissions but
not subject to the consent decree binding the RBOCs and AT&T or of certain
long-distance telecommunications carriers, certain telecommunications equipment
manufacturers or of U.S. companies which provide telecommunitions services or
equipment mainly outside the United States. International communications
facilities in the United States are also subject to the jurisdiction of the FCC,
and the provision of service to foreign countries is subject to the approval of
the FCC and the appropriate foreign governmental agencies.
In accordance with the consent decree, the RBOCs provide local telephone
service, including exchange access for long-distance companies, and may provide
directory advertising and new customer equipment. Many of the RBOCs, pursuant to
waivers, may also engage in a broad range of businesses including foreign
consulting, servicing computers and marketing or leasing office equipment. AT&T
provides interexchange long distance telephone service in competition with
numerous other providers and certain other products, services and customer
equipment.
The Court's order approving the consent decree provided for periodic
reviews of the restrictions imposed by it. In April 1990, a Federal appeals
court directed the Court to review its ruling that restricts RBOC involvement in
the information services business and to determine whether removal of the
information services restriction would be in the public interest. On July 25,
1991, the Court lifted the information services ban. Other portions of the
consent decree are being litigated. As RBOCs are released from the restrictions
of the 1984 divestiture decree, they and other telephone companies are being
freed to create new products, services and businesses. For example, a federal
district court recently permitted Bell Atlantic to enter the cable business and
it has recently proposed a merger with Tele-Communications, Inc., a large cable
corporation. Bills have been introduced in the U.S. House of Representatives and
the Senate that would require the RBOCs to pass a competitive market test that
would block them from offering information services in the near future.
The independent telephone companies, like the RBOCs, provide local
telecommunications services, but operate in a more limited area. These companies
are not subject to the consent decree and therefore can provide the full range
of telecommunications services including local exchange services, the
installation of business systems, telephone consulting, the manufacture of
telecommunications equipment, operation of voice and data networks and directory
publishing. Cellular service is providing an increasing component of the
revenues of the RBOCs and independent telephone companies. Both the RBOCs and
independents are subject to regulation by the FCC and state regulatory
authorities. The FCC also has the power to regulate the types of
telecommunications equipment which may be used and therefore may affect the
business of companies in the manufacturing of telecommunications equipment.
Long-distance companies which provide long-distance telecommunications services
are subject to regulation by the FCC. The long-distance industry is
consolidating into larger carriers.
Certain telecommunications services have in the past been fairly resistant
to recession with the exception of long-distance carriers. The Sponsors believe
that companies in the telephone business may remain resistant to recession in
the next few years and may experience some growth in access lines and message
units. Cellular telephone service should continue to expand, although at lesser
rates of growth than in the recent past. Also, ongoing technological change may
lead to an increase in the development of new services such as voice messaging,
call screening and automatic dialing and the demand for business services such
as the use of fax machines and the movement of data information should continue
to grow.
Business conditions of the telecommunications industry may affect the
ability of the issuers of the Securities in the Fund to meet their obligations.
The FCC and certain state utility regulators have introduced certain incentive
plans such as price-cap regulation which apply to certain portions of the
business of certain local exchange carriers. Price-cap regulation offers local
exchange carriers an opportunity to share in higher earnings provided they
become more efficient. These new approaches to regulation by the FCC and various
state or other
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regulatory agencies result in increased competition, and could lead to greater
risks as well as greater rewards for operating telephone companies. Technology
has tended to offset the effects of inflation and is expected to continue to do
so. Under traditional regulation, continuing cost increases, to the extent not
offset by improved productivity and revenues from increased volume of business,
would result in a decreasing rate of return and a continuing need for rate
increases. Although allowance is generally made in ratemaking proceedings for
cost increases, delays may be experienced in obtaining the necessary rate
increases and there can be no assurance that the regulatory commissions in the
future will grant rate increases adequate to cover operating and other expenses
and debt service requirements. The long distance industry has been increasingly
opened to competition over the last number of years. As a result, the major long
distance companies compete actively for market share. Indeed, to meet increasing
competition, telephone companies will have to commit substantial capital,
technological and marketing resources.
Cellular and cable companies provide wireless services including paging,
dispatch and cellular services throughout the U.S. Most of the RBOCs, as well as
long distance companies, are seeking to increase their share of the cellular
market in view of perceived future growth prospects. It is unclear what effect,
if any, increased competition between wireless and traditional services will
have on the telecommunications industry. Other potential competition for local
service has also developed. The deregulated cellular telephone industry has a
limited operating history and there is significant uncertainty regarding its
future, particularly with regard to increased competition, the continued growth
in the number of customers, the usage and pricing of cellular services, and the
cost of providing cellular services, including the cost of attracting new
customers, developing new technology and the ability to obtain licenses to
provide cellular services. Recent industry developments may provide increased
competition and reduced revenues from cellular service for RBOCs and independent
telephone companies. The uncertain outcomes of future labor agreements and
employee and retiree benefit costs may also have a negative impact on
profitability. Telephone usage, and therefore revenues, could also be adversely
affected by any sustained economic recession. Each of these problems would
adversely affect the profitability of the telecommunications issuers of the
Securities in the Fund and their ability to meet their obligations.
Telecommunications equipment companies design, manufacture, and distribute
telecommunication equipment such as central office switching equipment,
switches, displays, mobile and cellular equipment and systems, network
transmission equipment, PBXs, satellite, microwave, antennas, and digital
communication networks. Growth of these companies may result from telephone
service industry expansion, modernization requirements and possible new
technology such as interactive television. As less developed countries modernize
their telecommunications infrastructure, the demand for these products
increases. This segment of the industry is subject to rapidly changing
technology and the risk of technological obsolescense although it is generally
not subject to regulation as other telecommunications issuers are.
In addition, the portfolio may contain securities issued by telephone
companies which provide telecommunications services or equipment outside the
United States; these companies are subject to regulation by foreign governments
or governmental authorities which have broad authority regulating the provision
of telecommunications services and the use of certain telecommunication
equipment. Consequently, certain Securities in the Fund may be affected by the
rules and regulations adopted by regulatory agencies in other countries from
time to time.
BANKS AND OTHER FINANCIAL INSTITUTIONS
Banks are subject to extensive governmental regulations which may limit
both the amounts and types of loans and other financial commitments which may be
made and interest rates and fees which may be charged. The profitability of
financial institutions is largely dependent upon the availability and cost of
funds for the purpose of financing lending operations under prevailing money
market conditions. General depositor worries over perceived risks at many banks
may keep funding costs unusually high. Also, general economic conditions play an
important part in the operations of this industry and exposure to credit losses
arising from possible financial difficulties of borrowers might affect an
institution's ability to meet its obligations.
Since the late 1980's the ratings of U.S. and foreign banks and holding
companies were subject to extensive downgrades due primarily to deterioration in
asset quality and the attendant impact on earnings and capital adequacy. Major
U.S. banks, in particular, suffered from a decline in asset quality in the areas
of loans to Lesser Developed Countries (LDC's), construction and commercial real
estate loans and lending to support Highly Leveraged Transactions (HLT's). LDC
and HLT loan problems have been largely addressed although construction and
commercial real estate loans remain areas of some concern. The Federal Deposit
Insurance Corporation ('FDIC') indicated that in 1990, 168 federally insured
banks with an aggregate total of $45.7 billion in assets failed; in 1991, 124
federally insured banks with an aggregate total of $64.3 billion in assets
failed. During 1992, the FDIC resolved 120 failed banks with combined assets of
$44.2 billion. Consumer loans would almost certainly begin to deteriorate should
economic and employment conditions worsen. These factors also affect bank
holding companies and other financial institutions, which may not be as highly
regulated as banks and may be more able to expand into other non-financial and
non-traditional businesses.
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The Resolution Trust Corporation Refinancing, Restructuring, and
Improvement Act of 1991 imposed many new limitations on the way in which banks,
savings banks, and thrifts may conduct their business and mandated early and
aggressive regulatory intervention for unhealthy institutions. Periodic efforts
to introduce legislation broadening the ability of banks and thrifts to compete
with new products have not been successful, but if enacted could lead to more
failures as a result of increased competition and added risks. Failure to enact
such legislation, on the other hand, may lead to declining earnings and an
inability to compete with unregulated financial institutions. Efforts to expand
the ability of federal thrifts to branch on an interstate basis have been
initially successful through promulgation of regulations, but legislation to
liberalize interstate branching for banks has stalled in the Congress.
Consolidation is likely to continue in both cases. The Securities and Exchange
Commission ('SEC') is attempting to require the expanded use of market value
accounting by banks and thrifts, and has imposed rules requiring market
accounting for investment securities held for sale. Adoption of additional such
rules may result in increased volatility in the reported health of the industry,
and mandated regulatory intervention to correct such problems.
HOSPITALS AND HEALTH CARE FACILITIES
The ability of hospitals and other health care facilities to meet their
obligations with respect to debt obligations issued on their behalf is dependent
on various factors, including the level of payments received from private
third-party payors and government programs and the cost of providing health care
services.
A significant portion of the revenues of hospitals and other health care
facilities is derived from private third-party payors and government programs,
including the Medicare and Medicaid programs. Both private third-party payors
and government programs have undertaken cost containment measures designed to
limit payments made to health care facilities. Furthermore, government programs
are subject to statutory and regulatory changes, retroactive rate adjustments,
administrative rulings and government funding restrictions, all of which may
materially decrease the rate of program payments for health care facilities.
Certain special revenue obligations (i.e., Medicare or Medicaid revenues) may be
payable subject to appropriations by state legislatures. There can be no
assurance that payments under governmental programs will remain at levels
comparable to present levels or will, in the future, be sufficient to cover the
costs allocable to patients participating in such programs. In addition, there
can be no assurance that a particular hospital or other health care facility
will continue to meet the requirements for participation in such programs.
The costs of providing health care services are subject to increase as a
result of, among other factors, changes in medical technology and increased
labor costs. In addition, health care facility construction and operation is
subject to federal, state and local regulation relating to the adequacy of
medical care, equipment, personnel, operating policies and procedures,
rate-setting, and compliance with building codes and environmental laws.
Facilities are subject to periodic inspection by governmental and other
authorities to assure continued compliance with the various standards necessary
for licensing and accreditation. These regulatory requirements are subject to
change and, to comply, it may be necessary for a hospital or other health care
facility to incur substantial capital expenditures or increased operating
expenses to effect changes in its facilities, equipment, personnel and services.
Hospitals and other health care facilities are subject to claims and legal
actions by patients and others in the ordinary course of business. Although
these claims are generally covered by insurance, there can be no assurance that
a claim will not exceed the insurance coverage of a health care facility or that
insurance coverage will be available to a facility. In addition, a substantial
increase in the cost of insurance could adversely affect the results of
operations of a hospital or other health care facility. The Clinton
Administration may impose regulations which could limit price increases for
hospitals or the level of reimbursements for third-party payors or other
measures to reduce health care costs and make health care available to more
individuals, which would reduce profits for hospitals. Some states, such as New
Jersey, have significantly changed their reimbursement systems. If a hospital
cannot adjust to the new system by reducing expenses or raising rates, financial
difficulties may arise. Also, Blue Cross has denied reimbursement for some
hospitals for services other than emergency room services. The lost volume would
reduce revenue unless replacement patients were found.
Certain hospital bonds may provide for redemption at par at any time upon
the sale by the issuer of the hospital facilities to a nonaffiliated entity if
the hospital becomes subject to ad valorem taxation, or in various other
circumstances. For example, certain hospitals may have the right to call bonds
at par if the hospital may legally be required because of the bonds to perform
procedures against specified religious principles or to disclose information
that it considers confidential or privileged. Certain FHA-insured bonds may
provide that all or a portion of those bonds, otherwise callable at a premium,
can be called at par in certain circumstances. Finally, if a hospital defaults
upon a bond obligation, the realization of Medicare and Medicaid receivables may
be uncertain and, if the bond obligation is secured by the hospital facilities,
legal restrictions on the ability to foreclose upon the facilities and the
limited alternative uses to which a hospital can be put may reduce severely its
collateral value.
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The Internal Revenue service is currently engaged in a program of intensive
audits of certain tax-exempt hospital and health care facility organizations.
Although these audits have not yet been completed, it has been reported that the
tax-exempt status of some of these organizations may be revoked. At this time,
it is uncertain whether any of the hospital and health care facility obligations
held by the Fund will be affected by such audit proceedings.
PAYMENT OF THE DEBT OBLIGATIONS AND LIFE OF THE FUND
Because certain of the Debt Obligations from time to time may be redeemed
or prepaid or will mature in accordance with their terms or may be sold under
certain circumstances described herein, no assurance can be given that the Fund
will retain for any length of time its present size and composition (see
Redemption). Many of the Debt Obligations may be subject to redemption prior to
their stated maturity dates pursuant to optional refunding or sinking fund
redemption provisions or otherwise. In general, optional refunding redemption
provisions are more likely to be exercised when the offer side evaluation is at
a premium over par than when it is at a discount from par. Generally, the offer
side evaluation of Debt Obligations will be at a premium over par when market
interest rates fall below the coupon rate on the Debt Obligations. The
percentage of the face amount of Debt Obligations in the Portfolio which were
acquired on the Date of Deposit at an offer side evaluation in excess of par is
set forth under Investment Summary. Certain Debt Obligations in the Portfolio
may be subject to sinking fund provisions early in the life of the Fund. These
provisions are designed to redeem a significant portion of an issue gradually
over the life of the issue; obligations to be redeemed are generally chosen by
lot. The Portfolio contains a listing of the sinking fund and optional
redemption provisions with respect to the Debt Obligations. Additionally, the
size and composition of the Fund will be affected by the level of redemptions of
Units that may occur from time to time and the consequent sale of Debt
Obligations (see Redemption). Principally, this will depend upon the number of
Holders seeking to sell or redeem their Units and whether or not the Sponsors
continue to reoffer Units acquired by them in the secondary market. Factors that
the Sponsors will consider in the future in determining to cease offering Units
acquired in the secondary market include, among other things, the diversity of
the portfolio remaining at the time, the size of the Fund relative to its
original size, the ratio of Fund expenses to income, the Fund's current and
long-term returns and the degree to which Units may be selling at a premium over
par relative to other funds sponsored by the Sponsors, and the cost of
maintaining a current prospectus for the Fund. These factors may also lead the
Sponsors to seek to terminate the Fund earlier than would otherwise be the case
(see Administration of the Fund--Amendment and Termination).
LITIGATION AND LEGISLATION
At any time after the Date of Deposit, litigation may be initiated on a
variety of grounds with respect to Debt Obligations in the Fund or the issuers
of the Debt Obligations. There can be no assurance that future litigation will
not have a material adverse effect on the Fund or will not impair the ability of
issuers to make payments due on the Debt Obligations. In addition, there can be
no assurance that foreign withholding taxes will not be imposed on interest on
Debt Obligations issued by non-United States issuers in the future.
DESCRIPTION OF THE FUND
THE PORTFOLIO
The Portfolio contains different issues of Debt Obligations with fixed
final maturity or disposition dates. On the Initial Date of Deposit up to 40
percent of the value of the Portfolio may consist of Debt Obligations which were
acquired in private placements or otherwise and which at the time cannot, in the
opinion of counsel designated by the Sponsors and satisfactory to the Trustee,
be sold publicly by the Trustee without registration under the Securities Act of
1933, as amended, or similar provisions of law subsequently enacted ('Restricted
Securities') (see Redemption; Administration of the Fund--Portfolio
Supervision). See Investment Summary for a summary of particular matters
relating to the Portfolio.
Each security and issuer must be approved by Defined Asset Funds research
analysts. Since 1970, the Sponsors have purchased more than $90 billion of
securities for Defined Asset Funds. Experienced professional buyers and research
analysts for Defined Asset Funds, with access to thousands of different issues
and extensive information, who are in close contact with the markets for
suitable securities, select securities for deposit in the Fund considering the
following factors, among others: (i) whether the Debt Obligations were rated in
the category BBB or better by either Standard & Poor's Ratings Group, a division
of McGraw-Hill, Inc. ('Standard & Poor's') or Fitch Investors Service, Inc.
('Fitch') or Baa or better by Moody's Investors Service, Inc. ('Moody's') (see
Description of Ratings), or had, in the opinion of Defined Asset Funds research
analysts, comparable credit characteristics; (ii) the yield and price of the
Debt Obligations relative to other comparable debt securities; and (iii) the
diversification of the Portfolio taking into account the availability in the
market of issues which meet the Fund's criteria; (iv) whether the Debt
Obligations were issued after July 18, 1984, if interest thereon is U.S. source
income. Subsequent to the Initial Date of Deposit, a Debt Obligation may cease
to be rated or its rating may be reduced. Neither event requires an elimination
of that Debt Obligation from the Portfolio, but may be considered in the
Sponsors' determination to direct the disposal of the Debt Obligation
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(see Administration of the Fund--Portfolio Supervision). There is no leverage or
borrowing to increase risk, nor is the portfolio modified with other kinds of
securities to enhance yields.
The yields on debt obligations of the type deposited in the Fund are
dependent on a variety of factors, including general money market conditions,
general conditions of the corporate bond market, size of a particular offering,
the maturity of the obligation and rating of the issue. The ratings represent
the opinions of the rating organizations as to the quality of the debt
obligations which they undertake to rate. It should be emphasized, however, that
ratings are general and are not absolute standards of quality. Consequently,
debt obligations with the same maturity, coupon and rating may have different
yields, while debt obligations of the same maturity and coupon with different
ratings may have the same yield.
Merrill Lynch, Pierce, Fenner & Smith Incorporated, as agent for the
Sponsors ('Agent for the Sponsors'), has made arrangements with a number of
different issuers which create a framework within which debt obligations may be
acquired for deposit in various series of The Corporate Income Fund on a private
placement basis. Under these arrangements the Agent for the Sponsors may make
bids to purchase debt obligations for deposit in a particular series on the
basis of a price and other terms it determines for the particular bid. However,
the Agent for the Sponsors is not obligated to make any bids to purchase debt
obligations under these arrangements and the issuers are not obligated to accept
any bid it may choose to make. See Investment Summary for the percentage of the
Securities in the Portfolio, if any, acquired pursuant to bids made under these
arrangements.
Each portfolio is divided into units, representing equal shares of
underlying assets. The Fund consists of the Securities (or contracts to purchase
the Securities) listed under Portfolio (including any Replacement Securities and
Additional Securities deposited in the Fund in connection with the sale of
additional Units to the public as described below) as long as they may continue
to be held from time to time in the Fund together with accrued and undistributed
interest therefrom and undistributed and uninvested cash realized from the
disposition of Securities that from time to time may be sold under certain
circumstances (see Administration of the Fund--Portfolio Supervision). The
Indenture authorizes the Sponsors to increase the size and the number of Units
of the Fund by the deposit of Additional Securities and the issue of a
corresponding number of additional Units subsequent to the Initial Date of
Deposit provided that the original relationship among the face amounts of
Securities of specified issuers, interest rates, maturities and call provisions,
if any, is maintained, subject to certain events. Also, Securities may be sold
under certain circumstances. (See Redemption; Administration of the
Fund--Portfolio Supervision.) As a result, the aggregate face amount of the
Securities in the Portfolio will vary over time.
Neither the Sponsors 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 Debt Obligation that has been purchased for the Fund under a contract
('Failed Debt Obligation'), including any Debt Obligation purchased on a when,
as and if issued basis, the Sponsors are authorized under the Indenture to
direct the Trustee to acquire replacement obligations substantially similar to
those originally contracted for and not delivered to make up the original
Portfolio of the Fund. If replacement obligations are not acquired, the Sponsors
will, on or before the next following Distribution Day, cause to be refunded the
attributable sales charge, plus the attributable Cost of Securities to Fund
listed under Portfolio, plus interest attributable to the Failed Debt
Obligations (see Administration of the Fund--Portfolio Supervision).
INCOME; ESTIMATED CURRENT RETURN; ESTIMATED LONG TERM RETURN
Generally. Each unit receives an equal share of monthly distributions of
interest income and of any principal distributions as bonds mature or are
called, redeemed or sold. The estimated net annual interest rate per Unit on the
business day prior to the date of this Prospectus is set forth under Investment
Summary. This rate shows the percentage return based on $1,000 face amount per
Unit, after deducting estimated annual fees and expenses expressed as a
percentage. This rate will change as Securities mature, are exchanged, redeemed,
paid or sold, as replacement Securities are purchased, as Additional Securities
are deposited and new Units created and as the expenses of the Fund change.
Because the Portfolio is not actively managed, the Fund's income distributions
would not necessarily be affected by changes in interest rates. Depending on the
financial condition of the issuers, the amount of monthly income from fixed
income obligations in the Portfolio would be substantially maintained as long as
the Portfolio remains unchanged. However, optional bond redemptions or other
Portfolio changes may occur more frequently when interest rates decline, which
would result in early return of principal.
The Sponsors deliver to the Trustee on the Initial Date of Deposit and each
subsequent date of deposit a letter or letters of credit in the amount of the
cost (plus accrued interest) of securities to be acquired pursuant to contracts
deposited in the Fund. The Trustee may draw down on this letter of credit at any
time and deposit the cash so drawn in a non-interest bearing account for the
Fund. The Trustee has the use of these funds, on which it pays no interest, for
the period prior to its purchase of when-issued and delayed-delivery securities.
Interest on the Securities in the Fund, less estimated fees of the Trustee
and Sponsors and certain other expenses, is expected to accrue at the daily rate
(based on a 360-day year) shown under Investment Summary.
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The actual daily rate will vary as Securities are exchanged, redeemed, paid or
sold or as the expenses of the Fund change.
The Estimated Current Return and the Estimated Long Term Return on the
business day prior to the date of this Prospectus are set forth under Investment
Summary and give different information about the return to investors. Estimated
Current Return on a Unit represents annual cash receipts from coupon-bearing
debt obligations in the Fund's Portfolio (after estimated annual expenses)
divided by the Public Offering Price (including the sales charge).
Unlike Estimated Current Return, Estimated Long Term Return is a measure of
the estimated return to the investor earned over the estimated life of the Fund.
The Estimated Long Term Return represents an average of the yields to maturity
(or earliest call date for obligations trading at prices above the particular
call price) of the Debt Obligations in the Portfolio, calculated in accordance
with accepted bond practice and adjusted to reflect expenses and sales charges.
Under accepted bond practice, bonds are customarily offered to investors on a
'yield price' basis, which involves computation of yield to maturity (or earlier
call date), and which takes into account not only the interest payable on the
bonds but also the amortization or accretion to a specified date of any premium
over or discount from the par (maturity) value in the bond's purchase price. In
calculating Estimated Long Term Return, the average yield for the Portfolio is
derived by weighting each Debt Obligation's yield by the market value of the
Debt Obligation and by the amount of time remaining to the date to which the
Debt Obligation is priced. Once the average Portfolio yield is computed, this
figure is then adjusted for estimated expenses and the effect of the maximum
sales charge paid by investors. The Estimated Long Term Return calculation does
not take into account certain delays in distributions of income and the timing
of other receipts and distributions on Units and may, depending on maturities,
over or understate the impact of sales charges. Both of these factors may result
in a lower figure.
While relatively fixed at the time of purchase, both Estimated Current
Return and Estimated Long Term Return are subject to fluctuation with changes in
Portfolio composition (including the redemption, sale or other disposition of
Debt Obligations in the Portfolio), changes in market value of the underlying
Debt Obligations and changes in fees and expenses, including sales charges, and
therefore can be materially different than the figures set forth under
Investment Summary. The size of any difference between Estimated Current Return
and Estimated Long Term Return can also be expected to fluctuate at least as
frequently. In addition, both return figures may not be directly comparable to
yield figures used to measure other investments, and since the return figures
are based on certain assumptions and variables the actual return received by a
Unitholder may be higher or lower.
Sales charges on Defined Asset Funds range from under 1.0% to 5.5%. This
may be less than you might pay to buy a comparable fund. Defined Funds have no
12b-1 or back-end load fees. While sales charges on certain Defined Funds are
deferred, only the previously accrued but unpaid portion of the sales charge is
deducted from sales proceeds. Defined Funds can be a cost-effective way to
purchase and hold investments. Annual operating expenses are generally lower
than for managed funds. Because Defined Funds have no management fees, limited
transaction costs and no ongoing marketing expenses, operating expenses are
generally less than 0.25% per year. Keeping costs low increases earnings. When
compounded annually, small differences in expense ratios can make a big
difference in earnings. A Defined Fund can be a convenient way to reinvest
proceeds of bonds that are called or mature.
Accrued Interest. In addition to the Public Offering Price, the price of a
Unit includes accrued interest on the Securities from the Initial Date of
Deposit. The accrued interest that is added to the Public Offering Price
represents the amount of accrued interest on the Securities from the Initial
Date of Deposit to, but not including, the settlement date for Units. However,
Securities deposited in the Fund also include an item of accrued but unpaid
interest up to the Initial Date of Deposit. To avoid having Holders pay this
additional accrued interest (which earns no return) when they purchase Units,
the Trustee is responsible for the payment of accrued interest on the Debt
Obligations to the Initial Date of Deposit and then recovers this amount from
the earliest interest payments received by the Fund. Thus, the Sponsors can sell
the Units at a price that includes interest from the Initial Date of Deposit to
the settlement date for the Units. Additionally, interest on the Debt
Obligations in the Fund is paid on a semi-annual (or less frequently, annual)
basis. Therefore, it may take several months after the Initial Date of Deposit
for the Trustee to receive sufficient interest payments on the Securities to
begin distributions to Holders (see Investment Summary for estimates of the
amounts of the first and following Monthly Income Distributions). Further,
because interest on the Securities is not received by the Fund at a constant
rate throughout the year, any Monthly Income Distribution may be more or less
than the interest actually received by the Fund. In order to eliminate
fluctuations, the Trustee is required to advance the amounts necessary to
provide approximately equal Monthly Income Distributions. The Trustee will be
reimbursed, without interest, for these advances from interest received on the
Securities. Therefore, to account for those factors, accrued interest is always
added to the value of the Units. And, because of the varying interest payment
dates of the Securities, accrued interest at any time will be greater than the
amount of interest actually received by the Fund and distributed to Holders. If
a Holder sells all or a portion of his Units, he will receive his proportionate
share of the accrued interest from the purchaser of his Units. Similarly, if a
Holder redeems all or a portion of his
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Units, the Redemption Price per Unit will include accrued interest on the
Securities. And if a Security is sold, redeemed or otherwise disposed of,
accrued interest will be received by the Fund and will be distributed
periodically to Holders.
Certain Debt Obligations may have been purchased on a when, as and if
issued basis or may have a delayed delivery (see Investment Summary). Holders of
Units will be 'at risk' with respect to these Debt Obligations (i.e., may derive
either gain or loss from fluctuations in the offer side evaluation of the Debt
Obligations) from the date they commit for Units. Since interest on when-issued
and delayed-delivery Debt Obligations does not begin accruing to the benefit of
Holders until their respective dates of delivery, in order to provide income to
the Holders for this non-accrual period, the Trustee will advance funds to the
Fund in an amount equal to the amount of interest that would have accrued on
these Debt Obligations between the date of settlement for the Units and the
dates of delivery of the Debt Obligations. These advances eliminate the
necessity of reducing Monthly Income Distributions until when-issued or
delayed-delivery Debt Obligations are delivered and sufficient interest payments
are received to begin distributions to Holders.
TAXES
The following discussion addresses only the tax consequences of Units held
as capital assets and does not address the tax consequences of Units held by
dealers, financial institutions, or insurance companies.
In the opinion of Davis Polk & Wardwell, special counsel for the Sponsors,
under existing law:
The Fund is not an association taxable as a corporation for Federal
income tax purposes, and income received by the Fund will be treated as the
income of the Holders in the manner set forth below.
Each Holder will be considered the owner of a pro rata portion of each
Debt Obligation in the Fund under the grantor trust rules of Sections
671-679 of the Internal Revenue Code of 1986, as amended (the 'Code'). In
order to determine the face amount of a Holder's pro rata portion of each
Debt Obligation on the Initial Date of Deposit, see Face Amount under
Portfolio. The total cost to a Holder of his Units, including sales
charges, is allocated to his pro rata portion of each Debt Obligation, in
proportion to the fair market values thereof on the date the Holder
purchases his Units, in order to determine his tax cost for his pro rata
portion of each Debt Obligation. In order for a Holder who purchases his
Units on the Initial Date of Deposit to determine the fair market value of
his pro rata portion of each Security on such date, see Cost of Securities
to Fund under Portfolio.
Each Holder will be considered to have received the interest on his pro
rata portion of each Debt Obligation when interest on the Debt Obligation
is received by the Fund. An individual Holder who itemizes deductions may
deduct his pro rata share of fees and other expenses of the Fund only to
the extent that such amount together with the Holder's other miscellaneous
deductions exceeds 2% of his adjusted gross income.
The Fund may contain Debt Obligations that were originally issued at a
discount ('original issue discount'). The following principles will apply
to each Holder's pro rata portion of any Debt Obligation originally issued
at a discount. In general, original issue discount is defined as the
difference between the price at which a debt obligation was issued and its
stated redemption price at maturity. Original issue discount will accrue as
interest over the life of the debt obligation under a formula based on the
compounding of interest. If a Holder's tax cost for his pro rata portion of
a Debt Obligation issued with original issue discount is greater than its
'adjusted issue price' but less than its stated redemption price at
maturity (as may be adjusted for certain payments), the Holder will be
considered to have purchased his pro rata portion of the Debt Obligation at
an 'acquisition premium.' The amount of original issue discount which must
be accrued will be reduced by the amount of such acquisition premium. Each
Holder will be required to include in income in each year the amount of
original issue discount that accrues during the year on his pro rata
portion of any Debt Obligation originally issued at a discount. The amount
of accrued original issued discount so included in income in respect of a
Holder's pro rata portion of a Debt Obligation is added to the Holder's tax
basis therefor.
If a Holder's tax cost for his pro rata portion of a Debt Obligation
exceeds the redemption price at maturity thereof (subject to certain
adjustments), the Holder will be considered to have purchased his pro rata
portion of the Debt Obligation at a 'premium'. The Holder may elect to
amortize the premium prior to the maturity of the Debt Obligation. The
amount amortized in any year should be applied to offset the Holder's
interest from the Debt Obligation and will result in a reduction of basis
for his pro rata portion of the Debt Obligation.
A Holder will recognize taxable gain or loss when all or part of his pro
rata portion of a Debt Obligation is disposed of by the Fund for an amount
greater or less than his adjusted tax basis. Any such taxable gain or loss
will be capital gain or loss, except that any gain from the disposition of
a Holder's pro rata portion of a Debt Obligation acquired by the Holder at
a 'market discount' (i.e., where the Holder's original cost for his pro
rata portion of the Debt Obligation (plus any original issue discount which
will
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accrue thereon) is less than its stated redemption price at maturity) will
be treated as ordinary income to the extent the gain does not exceed the
accrued market discount. Capital gains are generally taxed at the same rate
as ordinary income. However, the excess of net long-term capital gains over
net short-term capital losses may be taxed at a lower rate than ordinary
income for certain non-corporate taxpayers. A capital gain or loss is
long-term if the asset is held for more than one year and short-term if
held for one year or less. The deduction of capital losses is subject to
limitations. A Holder will also be considered to have disposed of all or
part of his pro rata portion of each Debt Obligation when he sells or
redeems all or some of his Units.
Under the income tax laws of the State and City of New York, the Fund is
not an association taxable as a corporation and income received by the Fund
will be treated as income of the Holders in the same manner as for Federal
income tax purposes.
Notwithstanding the foregoing, a Holder who is a non-resident alien
individual or a foreign corporation (a 'Foreign Holder') will generally not
be subject to U.S. Federal income taxes, including withholding taxes, on
the interest income (including any original issue discount) on, or any gain
from the sale or other disposition of, his pro rata portion of any Debt
Obligation provided that (i) the interest income or gain is not effectively
connected with the conduct by the Foreign Holder of a trade or business
within the United States, (ii) if the interest is United States source
income (which is the case on most Debt Obligations issued by United States
issuers), the Foreign Holder does not own, actually or constructively, 10%
or more of the total combined voting power of all classes of voting stock
of the issuer of the Debt Obligation and is not a controlled foreign
corporation related (within the meaning of Section 864(d)(4) of the Code)
to the issuer of the Debt Obligation, (iii) with respect to any gain, the
Foreign Holder (if an individual) is not present in the United States for
183 days or more during the taxable year and (iv) the Foreign Holder
provides the required certification of his status and of certain other
matters. Withholding agents will file with the Internal Revenue Service
foreign person information returns with respect to such interest payments
accompanied by such certifications. Foreign Holders should consult their
own tax advisers with respect to United States Federal income tax
consequences of ownership of Units.
Holders will be taxed in the manner described above regardless of
whether distributions from the Fund are actually received by the Holder or
are automatically reinvested in The Corporate Fund Accumulation Program,
Inc.
The foregoing discussion relates only to Federal and certain aspects of
New York State and City income taxes. Holders may be subject to taxation in
New York or in other jurisdictions (including a Foreign Holder's country of
residence) and should consult their own tax advisers in this regard.
* * *
Neither the Sponsors nor Davis Polk & Wardwell has made or will make a
review of the facts and circumstances relating to the issuance of any Debt
Obligation. To the best knowledge of the Sponsors, each Debt Obligation will be
treated as debt for tax purposes by the respective issuers. The Internal Revenue
Service, however, is not bound by an issuer's treatment and may take the
position that a Debt Obligation has more equity than debt features and,
accordingly, should be treated as equity. In the event of such a
recharacterization, a withholding tax at the statutory rate of 30% (or a lesser
treaty rate) would apply on distributions to Foreign Holders in respect of that
Debt Obligation.
After the end of each calendar year, the Trustee will furnish to each
Holder an annual statement containing information relating to the interest
received by the Fund on the Debt Obligations, the gross proceeds received by the
Fund from the disposition of any Debt Obligation (resulting from redemption or
payment at maturity of any Debt Obligation or the sale by the Fund of any Debt
Obligation), and the fees and expenses paid by the Fund. The Trustee will also
furnish annual information returns to each Holder and to the Internal Revenue
Service.
PUBLIC SALE OF UNITS
PUBLIC OFFERING PRICE
The Public Offering Price of the Units during the initial offering period
and any offering of additional Units is computed by dividing the offer side
evaluation of the Securities (as determined by the Evaluator), by the number of
Units outstanding and adding thereto the sales charge in effect during the
initial offering period at the applicable percentage of the offer side
evaluation per Unit (the net amount invested). For 'secondary market' sales the
Public Offering Price of the Units will be equal to the Evaluator's
determination of the aggregate bid side evaluation of the Securities in the
Fund, adding thereto the applicable sales charge in effect for the secondary
market and dividing the sum by the number of the Units outstanding. A
proportionate share of any cash held by the Fund in the Capital Account not
allocated to the purchase of specific Securities and net accrued and
undistributed interest on the Securities to the date of delivery of the Units to
the purchaser is added to the Public Offering Price. The Public Offering Prices
of the Units will vary from day to day in accordance with fluctuations in the
evaluations of the underlying Securities.
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The following tables set forth, where applicable, for both the initial
offering period and for secondary market sales the applicable percentage of
sales charge, the concession to dealers and the concession to introducing
dealers (i.e., dealers that buy and clear directly through a Sponsor or an
Underwriter who is an affiliate of a Sponsor). These amounts are reduced on a
graduated scale for sales to any purchaser of at least 250 Units and will be
applied on whichever basis is more favorable to the purchaser. To qualify for
the reduced sales charge and concession applicable to quantity purchases, the
dealer must confirm that the sale is to a single purchaser as defined below or
is purchased for its own account and not for distribution. Sales charges and
dealer concessions are as follows:
INITIAL OFFERING PERIOD
<TABLE>
<CAPTION>
SALES CHARGE
(GROSS UNDERWRITING PROFIT)
<S> <C> <C> <C> <C>
----------------------------------
<CAPTION>
AS PERCENT OF AS PERCENT OF DEALER CONCESSION AS PRIMARY MARKET
OFFER SIDE PUBLIC NET AMOUNT PERCENT OF PUBLIC CONCESSION TO
NUMBER OF UNITS OFFERING PRICE INVESTED OFFERING PRICE INTRODUCING DEALERS
----------------- ------------- -------------------- -------------------
<S> <C> <C> <C> <C>
Less than 250.............. 4.00% 4.167% 2.600% $ 28.80
250 - 499.................. 3.00 3.093 1.950 21.60
500 - 749.................. 2.50 2.564 1.625 18.00
750 - 999.................. 2.00 2.041 1.300 14.40
1,000 or more.............. 1.50 1.523 0.975 10.80
</TABLE>
SECONDARY MARKET SALES
<TABLE>
<CAPTION>
SALES CHARGE
(GROSS UNDERWRITING PROFIT)
<S> <C> <C> <C>
--------------------------------
<CAPTION>
AS PERCENT OF AS PERCENT OF DEALER CONCESSION AS
BID SIDE PUBLIC NET AMOUNT PERCENT OF PUBLIC
NUMBER OF UNITS OFFERING PRICE INVESTED OFFERING PRICE
--------------- ------------- --------------------
<S> <C> <C> <C>
Less than 250................................ 4.75% 4.987% 3.088%
250 - 499.................................... 3.75 3.896 2.438
500 - 749.................................... 2.75 2.828 1.788
750 - 999.................................... 2.00 2.041 1.300
1,000 or more................................ 1.50 1.523 0.975
</TABLE>
The above graduated sales charges will apply on all purchases on any one
day by the same purchaser of Units only in the amounts stated. For this purpose
purchases during the initial offering period will not be aggregated with
concurrent purchases of any other unit trusts sponsored by the Sponsors.
Purchases in the secondary market of one or more Series sponsored by the
Sponsors which have the same rates of sales charge will be aggregated. Units
held in the name of the spouse of the purchaser or in the name of a child of the
purchaser under 21 years of age are deemed to be registered in the name of the
purchaser. The graduated sales charges are also applicable to a trustee or other
fiduciary purchasing securities for a single trust estate or single fiduciary
account.
Employees of certain of the Sponsors and their affiliates and non-employee
directors of Merrill Lynch & Co., Inc. may purchase Units of this Fund at prices
based on a reduced sales charge of not less than $5.00 per Unit.
Evaluations of the Securities are determined by the Evaluator taking into
account the same factors referred to under Redemption--Computation of Redemption
Price per Unit. The determinations are made each business day as of the
Evaluation Time set forth under Investment Summary, effective for all sales made
since the last of these evaluations (Section 4.01). With respect to the
evaluation of Debt Obligations during their initial syndicate offering period,
the 'current offering price', as determined by the Evaluator, will normally be
equal to the syndicate offering price as of the Evaluation Time, unless the
Evaluator determines that a material event has occurred which it believes may
result in the syndicate offering price not accurately reflecting the market
value of the Debt Obligations, in which case the Evaluator, in making its
determination, will consider not only the syndicate offering price but also the
factors described in (b) and (c) in the description of how the bid side
evaluation of the Securities is determined for purposes of redemption of Units
(see Redemption). The term 'business day', as used herein and under
'Redemption', shall exclude Saturdays, Sundays and 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 and
Christmas.
COMPARISON OF PUBLIC OFFERING PRICE, SPONSORS' INITIAL REPURCHASE PRICE,
SECONDARY MARKET REPURCHASE PRICE, AND REDEMPTION PRICE
On the business day prior to the Initial Date of Deposit the Public
Offering Price per Unit (which includes the sales charge) and the Sponsors'
Initial Repurchase Price per Unit (each based on the offer side evaluation of
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the Securities in the Fund--see above) exceeded the Sponsors' Repurchase Price
per Unit and Redemption Price per Unit (each based on the bid side evaluation
thereof--see Redemption) by the amounts set forth under Investment Summary.
The initial Public Offering Price per Unit of the Trust and the initial
Repurchase Price are based on the offer side evaluations of the Securities. The
secondary market Public Offering Price and the Sponsors' Repurchase Price in the
secondary market are based on bid side evaluations of the Securities. In the
past, the bid prices of publicly offered issues have been lower than the offer
prices by as much as 1 1/2% or more of face amount in the case of inactively
traded issues and as little as 1/4% in the case of actively traded issues, but
the difference between the offer and bid prices has averaged about 1/2% to 1% of
face amount; the amount of this difference as of the Evaluation Time on the
business day prior to the Initial Date of Deposit, as determined by the
Evaluator, is set forth under Portfolio. For this and other reasons (including
fluctuations in the market prices of the Securities and the fact that the Public
Offering Price includes the sales charge), the amount realized by a Holder upon
any sale or redemption of Units may be less than the price paid by him for the
Units.
PUBLIC DISTRIBUTION
During the initial offering period and thereafter to the extent that
additional Units continue to be offered for sale to the public by means of this
Prospectus, the Units will be distributed to the public at the Public Offering
Price through the Underwriting Account herein and dealers. Upon the completion
of the initial offering or of the offering period for additional Units, Units
which remain unsold or which may be acquired in the secondary market (see Market
for Units) may be offered directly to the public by this Prospectus at the
secondary market Public Offering Price determined in the manner described above.
The Sponsors intend to qualify Units for sale in all states in the U.S. in
which qualification is deemed necessary through the Underwriting Account and by
dealers who are members of the National Association of Securities Dealers, Inc.
The Sponsors do not intend to qualify Units for sale in any foreign countries
and this Prospectus does not constitute an offer to sell Units in any country
where Units cannot lawfully be sold. Sales to dealers and to introducing
dealers, if any, will initially be made at prices which represent a concession
of the applicable rate specified in the table above, but the Agent for the
Sponsors reserves the right to change the amount of the concession to dealers
and the concession to introducing dealers from time to time. Any dealer or
introducing dealer may reallow a concession not in excess of the concession to
dealers.
UNDERWRITERS' AND SPONSORS' PROFITS
Upon sale of the Units, the Underwriters named under Underwriting Account,
including the Sponsors, will receive sales charges at the rates set forth in the
table above. The Sponsors also realized a profit or loss on deposit of the
Securities in the Fund in the amount set forth under Investment Summary. This is
the difference between the cost of the Securities to the Fund (which is based on
the offer side evaluation of the Securities on the Initial Date of Deposit) and
the purchase price of the Securities to the Sponsors. On each subsequent deposit
of Securities with respect to the sale of additional Units to the public the
Sponsors may realize a profit or loss. The amount of any additional fees
received in connection with the direct placement of certain Debt Obligations
deposited in the Portfolio is also set forth under Investment Summary. In
addition, any Sponsor or Underwriter may realize profits or sustain losses in
respect of Debt Obligations deposited in the Fund which were acquired by the
Sponsor or Underwriter from underwriting syndicates of which the Sponsor or
Underwriter was a member. During the initial offering period and thereafter to
the extent additional Units continue to be offered to the public, the Sponsors
also may realize profits or sustain losses as a result of fluctuations after the
Initial Date of Deposit in the Public Offering Price of the Units (see
Investment Summary). Cash, if any, made available by buyers of Units to the
Sponsors prior to a settlement date for the purchase of Units may be used in the
Sponsors' businesses subject to the limitations of Rule 15c3-3 under the
Securities Exchange Act of 1934 and may be of benefit to the Sponsors.
In maintaining a market for the Units (see Market for Units), the Sponsors
will also realize profits or sustain losses in the amount of any difference
between the prices at which they buy Units (based on the bid side evaluation of
the Securities) and the prices at which they resell these Units (which include
the sales charge) or the prices at which they redeem the Units (based on the bid
side evaluation of the Securities), as the case may be.
MARKET FOR UNITS
During the initial offering period the Sponsors intend to offer to purchase
Units of this Series at prices based upon the offer side evaluation of the
Securities. Thereafter, while the Sponsors are not obligated to do so, it is
their intention to maintain a secondary market for Units of this Series and
continuously to offer to purchase Units of this Series at prices, subject to
change at any time, which will be computed based on the bid side of the market,
taking into account the same factors referred to in determining the bid side
evaluation of Securities for purposes of redemption (see Redemption). This
secondary market provides Holders with a fully liquid investment. They can cash
in units at any time without a fee. The Sponsors also intend to use their best
efforts to maintain a current prospectus for this Series and subsequent series
for a period of approximately six years after
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initial distribution of the respective series, the anticipated period of active
trading in units of these series, to the extent required by applicable law in
order for them to dispose of Units held in their inventories. The Sponsors may
discontinue purchases of Units of this Series at prices based on the bid side
evaluation of the Securities (i) should the supply of Units exceed demand or for
other business reasons, or (ii) if there is no current prospectus for this
Series, or (iii) if, due to any change subsequent to the date of this Prospectus
in conditions imposed by regulatory or legislative action, the Sponsors cannot
at the time lawfully sell Units to the public without incurring expenses or
complying with conditions which they consider unreasonable or onerous, or (iv)
if the right of redemption shall have been suspended (see Redemption), or (v) if
the Indenture shall have been terminated (see Administration of the
Fund--Amendment and Termination) or (vi) at any time when the aggregate purchase
price to the Sponsors of units of all outstanding series of The Corporate Income
Fund held by the Sponsors in their inventories exceeds an aggregate amount equal
to $3,000,000. In this event the Sponsors may nonetheless under certain
circumstances purchase Units, as a service to Holders, at prices based on the
current redemption prices for those Units (see Redemption). For instance, if it
becomes necessary for the Fund to sell Restricted Securities in order to meet
redemptions, and if it is not feasible to dispose of these Restricted Securities
within seven days, the Sponsors intend to purchase the Units tendered for
redemption at prices based upon their current redemption prices; provided, that
the Sponsors do not intend to make these purchases if in their judgment,
exercised in good faith, the general market for corporate securities is, or will
become, unsatisfactory for an extended period of time or other inhibiting
business or regulatory factors exist. The Sponsors, of course, do not in any way
guarantee the enforceability, marketability or price of any Securities in the
Portfolio or of the Units.
Prospectuses relating to certain other unit trusts indicate an intention,
subject to change on the part of the respective sponsors of such trusts, to
purchase units of those trusts on the basis of a price higher than the bid
prices of the bonds in the trusts. Consequently, depending upon the prices
actually paid, the repurchase price of other sponsors for units of their trusts
may be computed on a somewhat more favorable basis than the repurchase price
offered by the Sponsors for Units of this Series in secondary market
transactions. As in this Series, the purchase price per unit of such unit trusts
will depend primarily on the value of the bonds in the portfolio of the trust.
The Sponsors may redeem any Units they have purchased in the secondary
market or through the Trustee in accordance with the procedures described below
if they determine it is undesirable to continue to hold these Units in their
inventories. Factors which the Sponsors will consider in making this
determination will include the number of units of all series of all funds which
they hold in their inventories, the saleability of the units and their estimate
of the time required to sell the units and general market conditions. For a
description of certain consequences of any redemption for remaining Holders, see
Redemption.
A Holder who wishes to dispose of his Units should inquire of his bank or
broker as to current market prices in order to determine if there exist
over-the-counter prices in excess of the redemption price.
REDEMPTION
While it is anticipated that Units in most cases can be sold in the
over-the-counter market for an amount at least equal to the Redemption Price per
Unit (see Market for Units), Units may be redeemed at the office of the Trustee
set forth on the back cover of this Prospectus, upon tender on any business day,
as defined under Public Sale of Units--Public 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. Holders must sign exactly as
their names appear on the face of the Certificate with the signatures guaranteed
by an eligible guarantor institution, or in some other manner acceptable to the
Trustee. In certain instances the Trustee may require additional documents
including, but not limited to, trust instruments, certificates of death,
appointments as executor or administrator or certificates of corporate
authority.
On 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
per Unit equal to the Redemption Price per Unit (see below) as determined as of
the Evaluation Time next following the tender. The price received upon
redemption may be more or less than the amount paid by the Holder depending on
the value of the Securities in the Portfolio at the time of redemption.
Principal is normally distributed as bonds mature, or are called, redeemed, or
sold. Except for sales of Securities (which would be at then current market
prices) and subject to the bond issuers paying the amounts due, return of
principal to Holders who retain their Units until termination of the Trust
should be relatively unaffected by changes in interest rates. Of course, a gain
or loss could be recognized if Units are sold before then. So long as the
Sponsors are maintaining a market at prices not less than the Redemption Price
per Unit, the Sponsors will repurchase any Units tendered for redemption no
later than the close of business on the second business day following the tender
(see Market for Units). The Trustee is authorized in its discretion, if the
Sponsors do not elect to repurchase any Units tendered for redemption or if a
Sponsor tenders Units for redemption, to sell the Units in the
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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).
Securities are to be sold from the Portfolio in order to make funds
available for redemption (Section 5.02) if funds are not otherwise available in
the Capital and Income Accounts (see Administration of the Fund--Accounts and
Distributions). The Securities to be sold will be selected by the Sponsors in
accordance with procedures specified in the Indenture on the basis of those
market and credit factors as they may determine are in the best interests of the
Fund. Provision is made under the Indenture for the Sponsors to specify minimum
face amounts in which blocks of Securities are to be sold in order to obtain the
best price for the Fund. While these minimum amounts may vary from time to time
in accordance with market conditions, the Sponsors believe that the minimum face
amounts which would be specified would range from $25,000 for readily marketable
Securities to $250,000 for certain Restricted Securities which can be
distributed on a short notice only by private sale, usually to institutional
investors. Provision is also made under the Indenture that sales of Securities
may not be made so as to (i) result in the Fund owning less than $250,000 of any
Restricted Security or (ii) result in more than 50% of the Fund consisting of
Restricted Securities. In addition, the Sponsors will use their best efforts to
see that these sales of Securities are carried out in such a way that no more
than 40% in face amount of the Fund is invested in Restricted Securities,
provided that sales of unrestricted Securities may be made if the Sponsors' best
efforts with regard to the timely sales of Restricted Securities at prices they
deem reasonable are unsuccessful and if as a result of these sales more than 50%
of the Fund does not consist of Restricted Securities. Thus the redemption of
Units may require the sale of larger amounts of Restricted Securities than of
unrestricted Securities.
To the extent that Securities are sold, the size and diversity of the Fund
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. The price received upon redemption may be more or less than the amount
paid by the Holder depending on the value of the Securities in the Portfolio at
the time of redemption. In addition, because of the minimum face amounts in
which Securities are required to be sold, the proceeds of sale may exceed the
amount required at the time to redeem Units; these excess proceeds will be
distributed to Holders unless reinvested in Replacement Securities (see
Administration of the Fund--Portfolio Supervision).
The right of redemption may be suspended and payment postponed (1) for any
period during which the New York Stock Exchange, Inc. is closed other than for
customary weekend and holiday closings or (2) for any period during which, as
determined by the SEC, (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) for any other periods which the SEC may by
order permit (Section 5.02).
COMPUTATION OF REDEMPTION PRICE PER UNIT
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
Sponsors, by adding (a) the aggregate bid side evaluation of the Securities, (b)
cash on hand in the Fund (other than cash covering contracts to purchase
Securities or credited to a reserve account), (c) accrued but unpaid interest on
the Securities up to but not including the date of redemption and (d) the
aggregate value of all other assets of the Fund; deducting therefrom the sum of
(v) taxes or other governmental charges against the Fund not previously
deducted, (w) accrued but unpaid expenses of the Fund, (x) amounts payable for
reimbursement of Trustee advances, (y) cash held for redemption of units for
distribution to Holders of record as of a date prior to the evaluation and (z)
the aggregate value of all other liabilities of the Fund; and dividing the
result by the number of Units outstanding as of the date of computation (Section
5.01).
The aggregate current bid or offer side evaluation of the Securities is
determined by the Evaluator in the following manner: if the Securities are
listed on a national securities exchange, this evaluation is generally based on
the closing sale prices on that exchange (unless the Evaluator deems these
prices inappropriate as a basis for valuation). If the Securities are not so
listed or, if so listed and the principal market therefor is other than on the
exchange or there are no closing sale prices on the exchange, the evaluation
shall generally be based on the closing sale prices on the over-the-counter
market (unless the Evaluator deems these prices inappropriate as a basis for
evaluation). If closing sale prices are unavailable, the evaluation is generally
determined (a) on the basis of current bid or offering 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. Among the factors to be considered in
determining the value of any Restricted Securities are (i) an estimate of the
existence and extent of any available market therefor, (ii) the extent of any
discount at which these Securities were acquired by the Fund, (iii) the
estimated period of time during which these Securities will not be freely
marketable, (iv) the estimated expenses of qualifying these Securities for
public sale, (v) estimated underwriting commissions, if any, and (vi) any credit
or other factors affecting the issuer or the guarantor of these Securities. In
making evaluations, opinions of counsel may be relied upon as to whether any
Securities are Restricted Securities.
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EXPENSES AND CHARGES
INITIAL EXPENSES
All expenses incurred in establishing the Fund, including the cost of the
initial preparation and printing of documents relating 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 Underwriting Account at no charge to the Fund.
FEES
An estimate of the total annual expenses of the Fund is set forth under
Investment Summary. The Portfolio Supervision Fee is based on the face amount of
Debt Obligations in the fund on the Initial Date of Deposit and on the first
business day of each calendar year thereafter, except that if in any calendar
year Additional Securities are deposited, the fee for the balance of the year
will be based on the face amounts on each Record Day. This fee, which is not to
exceed the maximum amount set forth under Investment Summary, may exceed the
actual costs of providing portfolio supervisory services for this Fund, but at
no time will the total amount they receive for portfolio supervisory services
rendered to all series of Corporate Income Fund in any calendar year exceed the
aggregate cost to them of supplying these services in that year (Section 7.05).
In addition, the Sponsors may be reimbursed for bookkeeping or other
administrative services provided to the Fund in amounts not exceeding their
costs of providing these services (Section 7.06). The Trustee (or Co-Trustees in
the case of Investors Bank & Trust Company and The First National Bank of
Chicago) receives for its services as Trustee and for reimbursement of expenses
incurred on behalf of the Fund, payable in monthly installments, the amount per
Unit set forth under Investment Summary as Trustee's Annual Fee and Expenses,
which includes the Evaluator's Fee, the estimated Portfolio Supervision Fee,
estimated reimbursable bookkeeping or other administrative expenses paid to the
Sponsors and certain mailing and printing expenses. Expenses in excess of this
amount will be borne by the Fund. 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. The foregoing fees may be adjusted for
inflation in accordance with the terms of the Indenture without approval of
Holders (Sections 3.04, 4.03 and 8.05).
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 Sponsors (Sections 3.04, 3.09, 8.01
and 8.05), (c) various governmental charges (Sections 3.03 and 8.01 (h)), (d)
expenses and costs of action taken to protect the Fund (Section 8.01 (d)), (e)
indemnification of the Trustee for any losses, liabilities and expenses incurred
without gross negligence, bad faith or wilful misconduct on its part (Section
8.05), (f) indemnification of the Sponsors for any losses, liabilities and
expenses incurred without gross negligence, bad faith, wilful misconduct or
reckless disregard of their duties (Section 7.05(b)) and (g) expenditures
incurred in contacting Holders upon termination of the Fund (Section 9.02). The
amounts of these charges and fees are secured by a lien on the Fund and, 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 a register of the names, addresses and holdings of all
Holders. The Trustee also keeps records of the transactions of the Fund,
including a current list of the Securities and a copy of the Indenture, which
are available to Holders for inspection at the office of the Trustee at
reasonable times during business hours (Sections 6.01, 8.02 and 8.04).
ACCOUNTS AND DISTRIBUTIONS
Interest received is credited to an Income Account and other receipts to a
Capital Account (Sections 3.01 and 3.02). The Monthly Income Distribution for
each Holder as of each Record Day will be made on the following Distribution Day
or shortly thereafter and shall consist of an amount substantially equal to the
Holder's pro rata share of the estimated net income accrued during the month
preceding the Record Day, after deducting estimated expenses. At the same time
the Trustee will distribute the Holder's pro rata share of the distributable
cash balance of the Capital Account computed as of the close of business on the
preceding Record Day (if at least equal to the Minimum Capital Distribution set
forth under Investment Summary). Estimates of the amounts of the first and
subsequent Monthly Income Distributions are set forth under Investment Summary.
Principal proceeds received from the disposition, payment or prepayment of any
of the Securities subsequent to a Record Day and prior to the succeeding
Distribution Day will be held in the Capital Account to be distributed on the
next succeeding Distribution Day. The first distribution for persons who
purchase Units between a Record Day and a Distribution Day will be made on the
second Distribution Day following their purchase of Units.
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A Reserve Account may be created by the Trustee by withdrawing from the Income
or Capital Accounts, from time to time, amounts deemed necessary to reserve for
any material amount that may be payable out of the Fund (Section 3.03). Funds
held by the Trustee in the various accounts created under the Indenture do not
bear interest (Section 8.01).
INVESTMENT ACCUMULATION PROGRAM
Monthly Income Distributions of interest and any principal or premium
received by the Fund will be paid in cash. However, a Holder may elect to have
these distributions reinvested in The Corporate Fund Accumulation Program, Inc.
(the 'Program'). The Program is an open-end management investment company whose
primary investment objective is to obtain a high level of current income through
investment in a diversified portfolio consisting primarily of long-term debt
obligations of corporations with credit characteristics comparable to those of
Securities in this Series of Corporate Income Fund. It should be noted, however,
that interest distributions to foreign Holders from this Program will be subject
to U.S. Federal income taxes, including withholding taxes. Holders participating
in the Program will be taxed on their reinvested distributions in the manner
described in Taxes even though distributions are automatically reinvested. For
more complete information about the Program, including charges and expenses,
return the enclosed form for a prospectus. Read it carefully before you decide
to participate. Notice of election to participate must be received by the
Trustee in writing at least ten days before the Record Day for the first
distribution to which the notice is to apply.
PORTFOLIO SUPERVISION
The Fund is a unit investment trust and is not an actively managed fund in
that it normally follows a buy and hold investment strategy. Traditional methods
of investment management for a managed fund (such as a mutual fund) typically
involve frequent changes in a portfolio of securities on the basis of economic,
financial and market analyses. The Portfolio of the Fund, however, will not be
actively managed and therefore the adverse financial condition of an issuer will
not necessarily require the sale of its securities from the Portfolio. Defined
Asset Funds investment professionals are dedicated exclusively to selecting and
then monitoring securities held by the various Defined Funds. On an ongoing
basis, Defined Asset Funds experienced financial analysts regularly review the
Portfolios and may direct the disposition of Securities under any of the
following circumstances: (i) a default in payment of amounts due on any
Security, (ii) institution of certain legal proceedings, (iii) any other legal
question or impediment affecting a Security or the payment of amounts due on the
Security, (iv) default under certain documents adversely affecting debt service
or default in payment of amounts due on other securities of the same issuer or
guarantor, (v) decline in projected income pledged for debt service on revenue
bond issues, (vi) decline in price of a Security or the occurrence of other
market or credit factors, including advance refunding (i.e., the issuance of
refunding bonds and the deposit of the proceeds thereof in trust or escrow to
retire the refunded Securities on their respective redemption dates), that in
the opinion of the Sponsors would make the retention of the Security detrimental
to the interests of the Holders, (vii) if a Security is not consistent with the
investment objective of the Fund or (viii) if the Trustee has a right to sell or
redeem a Security pursuant to any applicable guarantee or other credit support.
If a default in the payment of amounts due on any Security occurs and if the
Agent for the Sponsors fail to give instructions to sell or hold that Security,
the Indenture provides that the Trustee, within 30 days of that failure, shall
sell the Security (Section 3.08).
The Sponsors are required to instruct the Trustee to reject any offer made
by an issuer of any of the Debt Obligations to issue new Debt Obligations in
exchange or substitution for any Debt Obligations pursuant to a refunding or
refinancing plan, except that the Sponsors may instruct the Trustee to accept or
reject any offer or to take any other action with respect thereto as the
Sponsors may deem proper if (a) the issuer is in default with respect to these
Debt Obligations or (b) in the written opinion of the Sponsors the issuer will
probably default with respect to these Debt Obligations in the reasonably
foreseeable future. Any Debt Obligations so received in exchange or substitution
will be held by the Trustee subject to the terms and conditions of the Indenture
to the same extent as Debt Obligations originally deposited thereunder (Section
3.11). Within five days after the deposit of Debt Obligations in exchange or
substitution for existing Debt Obligations, the Trustee is required to give
notice thereof to each Holder, identifying the Debt Obligations removed from the
Portfolio and the Debt Obligations substituted therefor (Section 3.07).
The Sponsors are authorized to direct the Trustee to deposit replacement
securities ('Replacement Securities') into the Portfolio to replace any Failed
Debt Obligations or, in connection with the deposit of Additional Securities,
when Securities of an issue originally deposited are unavailable at the time of
subsequent deposit as described more fully below.
Replacement Securities that are replacing Failed Debt Obligations will be
deposited into the Trust Fund within 110 days of the Initial Date of Deposit of
the contracts that have failed at a purchase price that does not exceed the
amount of funds reserved for the purchase of the Failed Debt Obligations and
that results in a yield to maturity and in a current return, in each case as of
that date of deposit, that are equivalent (taking into consideration then
current market conditions and the relative creditworthiness of the underlying
obligation) to the yield to maturity and current return of the Failed Debt
Obligations. The Replacement Securities shall (i) be
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corporate bonds, debentures, notes or other straight debt obligations (whether
secured or unsecured and whether senior or subordinated) without equity or other
conversion features, with fixed maturity dates substantially the same as those
of the Failed Debt Obligations, having no warrants or subscription privileges
attached; (ii) be payable in United States currency; (iii) shall not constitute
Restricted Securities or be when, as and if issued obligations and (iv) be
issued or guaranteed by an issuer subject to or exempt from the reporting
requirements under Section 13 or 15(d) of the Securities Exchange Act of 1934
(or similar provisions of law) or in effect guaranteed, directly or indirectly,
by means of a lease agreement, agreement to buy securities, services or
products, or other similar commitment of the credit of such an issuer to the
payment of the substitute Securities. The Replacement Securities shall be
selected by the Sponsors from a list of Securities maintained by them and
updated from time to time. The Securities on the current list are set forth
under Investment Summary. Whenever a Replacement Security has been acquired for
the Fund, the Trustee shall, on the next monthly distribution date that is more
than 30 days thereafter, make a pro rata distribution of the amount, if any, by
which the cost to the Fund of the Failed Debt Obligation exceeded the cost of
the Replacement Security plus accrued interest. If Replacement Securities are
not acquired, the Sponsors will, on or before the next following Distribution
Day, cause to be refunded to the Holders the attributable sales charge, plus the
attributable Cost of Securities to the Fund listed under Portfolio, plus
interest attributable to the Failed Debt Obligation. The portion of interest
paid to a Holder which accrued after the expected date of settlement for
purchase of his Units will be paid by the Sponsors.
The Indenture also requires that the purchase of Replacement Securities
will not (i) result in more than 25% of the Fund consisting of securities of a
single issuer (or of two or more issuers which are Affiliated Persons as this
term is defined in the Investment Company Act of 1940) which are not registered
and are not being registered under the Securities Act of 1933 or (ii) result in
the Fund owning more than 50% of any single issue which has been registered
under the Securities Act of 1933 (Section 3.10).
The Indenture also authorizes the Sponsors to increase the size and number
of Units of the Fund by the deposit of Additional Securities, contracts to
purchase Additional Securities or cash or a letter of credit with instructions
to purchase Additional Securities, in exchange for the corresponding number of
additional Units during the 90-day period subsequent to the Initial Date of
Deposit provided that the original proportionate relationship among the face
amounts of each Security established on the Initial Date of Deposit (the
'Original Proportionate Relationship') is maintained to the extent practicable.
Deposits of Additional Securities subsequent to the 90-day period following the
Initial Date must replicate exactly the proportionate relationship among the
face amounts of Securities comprising the Portfolio at the end of the initial
90-day period, subject to certain events (Sections 3.07, 3.08, 3.10 and 3.10A).
With respect to deposits of Additional Securities (or cash or a letter of
credit with instructions to purchase Additional Securities), in connection with
creating additional Units of the Fund during the 90-day period following the
Initial Date of deposit, the Sponsors may specify minimum face amounts in which
Additional Securities will be deposited or purchased. If a deposit is not
sufficient to acquire minimum amounts of each Security, Additional Securities
may be acquired in the order of the Security most under-represented immediately
before the deposit when compared to the Original Proportionate Relationship. If
Securities of an issue originally deposited are unavailable at the time of
subsequent deposit, or cannot be purchased at reasonable prices or their
purchase is prohibited or restricted by law, regulation or policies applicable
to the Fund or any of the Sponsors, the Sponsors may (1) deposit cash or a
letter of credit with instructions to purchase the Security when it becomes
available (provided that it becomes available within 110 days after the Initial
Date of Deposit) or (2) deposit (or instruct the Trustee to purchase) (i)
Securities of one or more other issues originally deposited or (ii) a
Replacement Security that will meet the conditions described above except that
it must have a rating at least equal to the rating of the Security it replaces
(or in the opinion of the Sponsors have comparable credit characteristics) (if
not rated). Any funds held to acquire Additional or Replacement Securities which
have not been used to purchase Securities at the end of the 90-day period
beginning with the Initial Date of Deposit, shall be used to purchase Securities
as described above or shall be distributed to Holders together with the
attributable sales charge.
REPORTS TO HOLDERS
With each distribution the Trustee will furnish Holders a statement of the
amounts of interest and the amounts of other receipts, if any, which are being
distributed, expressed in each case as a dollar amount per Unit. After the end
of each calendar year during which a Monthly Income Distribution was made to
Holders (normally within 20 to 60 days), the Trustee will furnish to each person
who at any time during the calendar year was a Holder of record, a statement (i)
summarizing transactions for that year in the Income and Capital Accounts, (ii)
identifying Securities sold and purchased during the year and listing Securities
held and the number of Units outstanding at the end of that calendar year, (iii)
stating the Redemption Price per Unit based upon the computation thereof made at
the end of that calendar year and (iv) specifying the amounts distributed during
that calendar year from the Income and Capital Accounts (Section 3.07). The
accounts of the Fund shall be audited at least annually by independent certified
public accountants designated by the Sponsors and the report of the accountants
shall be furnished by the Trustee to Holders upon request (Section 8.01 (h)).
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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
Certain of the Sponsors 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 Sponsors) for each new Certificate and any sums payable for
taxes or other governmental charges imposed upon the 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).
AMENDMENT AND TERMINATION
The Sponsors and Trustee may amend the Indenture, without the consent of
the 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 SEC 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 Sponsors). The
Indenture may also be amended in any respect by the Sponsors and the 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 in the Fund 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 Fund will terminate and be liquidated upon the maturity, sale,
redemption or other disposition of the last Security held thereunder but in no
event is it to continue beyond the mandatory termination date set forth under
Investment Summary. A Fund may be terminated by the Sponsors if the value of the
Fund is less than the minimum value set forth under Investment Summary, and may
be terminated at any time by Holders of 51% of the Units (Sections 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
TRUSTEE
The Trustee or any successor may resign upon notice to the Sponsors. The
Trustee may be removed upon the direction of the Holders of 51% of the Units at
any time or by the Sponsors 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 or if for any reason the Sponsors determine in good
faith that the replacement of the Trustee is in the best interest of the
Holders. The resignation or removal shall become effective upon the acceptance
of appointment by the successor which may, in the case of a resigning or removed
Co-Trustee, be one or more of the remaining Co-Trustees. In case of resignation
or removal, the Sponsors are to use their 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, under the Indenture. This provision,
however, shall not protect the Trustee in cases of wilful misfeasance, bad
faith, negligence or reckless disregard of its obligations and duties. In the
event of the failure of the Sponsors 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. In addition, the Indenture contains other customary provisions limiting
the liability of the Trustee (Sections 8.01 and 8.05).
EVALUATOR
The Evaluator may resign or may be removed, effective upon the acceptance
of appointment by its successor, by the Sponsors, who are to use their 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 4.04). Determinations by the
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Evaluator under the Indenture shall be made in good faith upon the basis of the
best information available to it; provided, however, that the Evaluator shall be
under no liability to the Trustee, the Sponsors or the Holders for errors in
judgment. This provision, however, shall not protect the Evaluator in cases of
wilful misfeasance, bad faith, gross negligence or reckless disregard of its
obligations and duties (Section 4.04). The Trustee, the Sponsors and the Holders
may rely on any evaluation furnished by the Evaluator and shall have no
responsibility for the accuracy thereof.
SPONSORS
Any Sponsor may resign if one remaining Sponsor maintains a net worth of
$2,000,000 and is agreeable to the resignation (Section 7.04). A new Sponsor may
be appointed by the remaining Sponsors and the Trustee to assume the duties of
the resigning Sponsor. If there is only one Sponsor and it fails to perform its
duties or becomes incapable of acting or 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 SEC, or (b) terminate the Indenture and
liquidate the Fund or (c) continue to act as Trustee without terminating the
Indenture (Section 8.01(e)). The Agent for the Sponsors has been appointed by
the other Sponsors for purposes of taking action under the Indenture (Section
7.01). If the Sponsors are unable to agree with respect to action to be taken
jointly by them under the Indenture and they cannot agree as to which Sponsors
shall continue to act as sole Sponsors, then Merrill Lynch, Pierce, Fenner &
Smith Incorporated shall continue to act as sole Sponsor (Section 7.02(b)). If
one of the Sponsors fails to perform its duties or becomes incapable of acting
or becomes bankrupt or its affairs are taken over by public authorities, then
that Sponsor is automatically discharged and the other Sponsors shall act as
Sponsors (Section 7.02(a)). The Sponsors 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 Sponsors in cases of
wilful misfeasance, bad faith, gross negligence or reckless disregard of their
obligations and duties (Section 7.05). The Sponsors and their successors are
jointly and severally liable under the Indenture. A 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
that event it shall be relieved of all further liability under the Indenture
(Section 7.03).
MISCELLANEOUS
TRUSTEE
The Trustee of the Fund is named on the back cover page of this Prospectus
and is either Bankers Trust Company, a New York banking corporation with its
corporate trust office at Four Albany Street--7th Floor, New York, New York
10005 (which is subject to supervision by the New York Superintendent of Banks,
the FDIC and the Board of Governors of the Federal Reserve System ('Federal
Reserve')); The Chase Manhattan Bank N.A., a national banking association with
its Unit Trust Department at 1 Chase Manhattan Plaza-3B, New York, New York
10081 (which is subject to supervision by the Comptroller of the Currency, the
FDIC and the Federal Reserve) or (acting as Co-Trustees) Investors Bank & Trust
Company, a Massachusetts Trust Company with its unit investment trust servicing
group at One Lincoln Plaza, Boston, Massachusetts 02111 (which is subject to
supervision by the Massachusetts Commissioner of Banks, the FDIC and the Federal
Reserve) and The First National Bank of Chicago, a national banking association
with its corporate trust office at One First National Plaza, Suite 0126,
Chicago, Illinois 60670-0126 (which is subject to supervision by the Comptroller
of the Currency, the FDIC and the Federal Reserve).
LEGAL OPINION
The legality of the Units has been passed upon by Davis Polk & Wardwell,
450 Lexington Avenue, New York, New York 10017, as special counsel for the
Sponsors. Bingham, Dana & Gould, 150 Federal Street, Boston, Massachusetts
02110, act as counsel for The First National Bank of Chicago and Investors Bank
& Trust Company, as Co-Trustees. Hawkins, Delafield & Wood, 67 Wall Street, New
York, New York act as counsel for Bankers Trust Company, as Trustee.
AUDITORS
The Statement of Condition, including the Portfolio of the Fund, included
herein has been audited by Deloitte & Touche, independent accountants, as stated
in their opinion appearing herein and has been so included in reliance upon that
opinion given on the authority of that firm as experts in accounting and
auditing.
SPONSORS
Each 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
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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 subsidiary of Merrill Lynch
& Co., Inc., are engaged in the investment advisory business. Smith Barney
Shearson Inc., an investment banking and securities broker-dealer firm, is an
indirect wholly-owned subsidiary of The Travelers Inc. Prudential Securities
Incorporated, a wholly owned subsidiary of Prudential Securities Group Inc. and
an indirect wholly-owned subsidiary of the Prudential Insurance Company of
America, is engaged in the investment advisory business. Dean Witter Reynolds
Inc., a principal operating subsidiary of Dean Witter, Discover & Co. is engaged
in the investment advisory business. PaineWebber Incorporated is engaged in the
investment advisory business and is a wholly-owned subsidiary of PaineWebber
Group Inc. Each Sponsor, or one of its predecessor corporations, has acted as
Sponsor of a number of series of unit investment trusts. Each Sponsor has acted
as principal underwriter and managing underwriter of other investment companies.
The Sponsors, in addition to participating as members of various selling groups
or as agents of other investment companies, execute orders on behalf of
investment companies for the purchase and sale of securities of these companies
and sell securities to these companies in their capacities as brokers or dealers
in securities.
Each Sponsor (or a predecessor) has acted as Sponsor of various series of
Defined Asset Funds. A subsidiary of Merrill Lynch, Pierce, Fenner & Smith
Incorporated succeeded in 1970 to the business of Goodbody & Co., which had been
a co-Sponsor of Defined Asset Funds since 1964. That subsidiary resigned as
Sponsor of each of the Goodbody series in 1971. Merrill Lynch, Pierce, Fenner &
Smith Incorporated has been co-Sponsor and the Agent for the Sponsors of each
series of Defined Asset Funds created since 1971. Shearson Lehman Brothers Inc.
('Shearson') and certain of its predecessors have been underwriters beginning in
1962 and co-Sponsors from 1965 to 1967 and from 1980 to 1993 of various Defined
Asset Funds. As a result of the acquisition of certain of Shearson's assets by
Smith Barney, Harris Upham & Co. Incorporated and Primerica Corporation (now The
Travelers Inc.), Smith Barney Shearson Inc. now serves as co-Sponsor of various
Defined Asset Funds. Prudential Securities Incorporated and its predecessors
have been underwriters of Defined Asset Funds since 1961 and co-Sponsors since
1964, in which year its predecessor became successor co-Sponsor to the original
Sponsor. Dean Witter Reynolds, Inc. and its predecessors have been underwriters
of various Defined Asset Funds since 1964 and co-Sponsors since 1974.
PaineWebber Incorporated and its predecessor have co-Sponsored certain Defined
Asset Funds since 1983.
The Sponsors have maintained secondary markets in Defined Asset Funds for
over 20 years. For decades informed investors have purchased unit investment
trusts for dependability and professional selection of investments. Defined
Asset Funds offers an array of investment choices, suited to fit a wide variety
of personal financial goals--a buy and hold strategy for capital accumulation,
such as for children's education or a nest egg for retirement, or attractive,
regular current income consistent with relative protection of capital. There are
Defined Funds to meet the needs of just about any investor. Unit investment
trusts are particularly suited for the many investors who prefer to seek
long-term profits by purchasing sound investments and holding them, rather than
through active trading. Few individuals have the knowledge, resources or capital
to buy and hold a diversified portfolio on their own; it would generally take a
considerable sum of money to obtain comparable breadth and diversity. Sometimes
it takes a combination of Defined Funds to plan for your objectives.
One of your most important investment decisions may be how you divide your
money amoung asset classes. Spreading your money among different kinds of
investments can balance the risks and rewards of each one. Most investment
experts recommend stocks for long-term capital growth. For attractive income
consider long-term corporate bonds. By purchasing both defined equity and
defined bond funds, investors can receive attractive current income and growth
potential, offering some protection against inflation.
The following chart shows the average annual compounded rate of return of
selected asset classes over the 10-year and 20-year periods ending December 31,
1993, compared to the rate of inflation over the same periods. Of course, this
chart represents past performance of these investment categories and is no
guarantee of future results, either of these categories or of Defined Funds.
Defined Funds also have sales charges and expenses, which are not reflected in
this chart.
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<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Stocks (S&P 500)
20 yr. 12.76%
10 yr. 14.94%
Small-company stocks
20 yr. 18.82%
10 yr. 9.96%
Long-term corporate bonds
20 yr. 10.16%
10 yr. 14.00%
U.S. Treasury bills (short-term)
20 yr. 7.49%
10 yr. 6.35%
Consumer Price Index
20 yr. 5.92%
10 yr. 3.73%
0 2 4 6 8 10 12 14 16 18 20 %
</TABLE>
Source: Ibbotson Associates (Chicago)
Used with permission. All rights reserved.
Instead of having to select individual securities on their own, purchasers
of Defined Funds benefit from the expertise of Defined Asset Funds' experienced
buyers and research analysts. In addition, they gain the advantage of
diversification by investing in units of a Defined Fund holding securities of
several different issuers. Such diversification can reduce risk, but it does not
eliminate it. While the portfolio of a managed fund, such as a mutual fund,
continually changes, defined bond funds offer a defined portfolio and a schedule
of income distributions identified in the prospectus. Investors know, generally,
when they buy, the issuers, maturities, call dates and ratings of the securities
in the portfolio. Of course, the portfolio may change somewhat over time as
additional securities are deposited, as securities mature or are called or
redeemed or as they are sold to meet redemptions and in certain other limited
circumstances. Investors also know at the time of purchase their estimated
income and current and long-term returns, subject to credit and market risks and
to changes in the portfolio or the funds expenses.
Defined Asset Funds offers a variety of fund types. The tax exemption for
municipal bonds, which makes them attractive to high-bracket taxpayers, is
offered by Defined Municipal Investment Trust Funds. Municipal Defined Funds
offer a simple and convenient way for an investor to earn monthly income free
from Federal income tax. Defined Municipal Investment Trust Funds have provided
investors with tax-free income for more than 30 years. Defined Corporate Income
Funds, with higher current returns than municipal or government funds, are
suitable for Individual Retirement Accounts and other tax-advantaged accounts
and offer investors a simple and convenient way to earn monthly income. Defined
Government Securities Income Funds offer investors a simple and convenient way
to participate in markets for Government securities while earning an attractive
current return. Defined International Bond Funds, invested in bonds payable in
foreign currencies, offer the potential to profit from changes in currency
values and possibly from interest rates higher than paid on comparable US bonds,
but investors incur a higher risk for these potentially greater returns.
Historically, stocks have offered a potential for growth of capital, and thus
some protection against inflation, over the long term. Defined Equity Income
Funds offer participation in the stock market providing current income as well
as the possibility of capital appreciation. The S&P Index Trusts offer a
convenient and inexpensive way to participate in broad market movements. Concept
Series seek to capitalize on selected anticipated economic, political or
business
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trends. Utility Stock Series, consisting of stocks of issuers with established
reputations for regular cash dividends, seek to benefit from dividend increases.
Select 10 Portfolios seek total return by investing for one year in the ten
highest yielding stocks on a designated stock index.
DESCRIPTION OF RATINGS (AS DESCRIBED BY THE RATING COMPANIES THEMSELVES)
STANDARD & POOR'S
AAA--Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay
principal, and differs from the highest rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB--Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
The ratings may be modified by the addition of a plus or minus sign to show
relative standing within the major rating categories.
A provisional rating, indicated by 'p' following a rating, assumes the
successful completion of the project being financed by the issuance of the debt
being rated and indicates that payment of debt service requirements is largely
or entirely dependent upon the successful and timely completion of the project.
This rating, however, while addressing credit quality subsequent to completion
of the project, makes no comment on the likelihood of, or the risk of default
upon failure of, such completion.
NR--Indicates that no rating has been requested, that there is insufficient
information on which to base a rating or that Standard & Poor's does not rate a
particular type of obligation as a matter of policy.
MOODY'S
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
'gilt edge'. Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long term risks appear somewhat larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa--Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payment and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Rating symbols may include numerical modifiers 1, 2 or 3. The numerical
modifier 1 indicates that the security ranks at the high end, 2 in the
mid-range, and 3 nearer the low end, of the generic category. These modifiers of
rating symbols are to give investors a more precise indication of relative debt
quality in each of the historically defined categories.
Conditional ratings, indicated by 'Con.', are sometimes given when the
security for the bond depends upon the completion of some act or the fulfillment
of some condition. Such bonds are given a conditional rating that denotes their
probable credit stature upon completion of that act or fulfillment of that
condition.
NR--Should no rating be assigned, the reason may be one of the following:
(a) an application for rating was not received or accepted; (b) the issue or
issuer belongs to a group of securities that are not rated as a matter of
policy; (c) there is a lack of essential data pertaining to the issue or issuer
or (d) the issue was privately placed, in which case the rating is not published
in Moody's publications.
23
<PAGE>
<PAGE>
FITCH
AAA rated bonds are considered to be investment grade and of the highest
quality. The obligor has an extraordinary ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA rated bonds are considered to be investment grade and of high quality.
The obligor's ability to pay interest and repay principal, while very strong, is
somewhat less than for AAA rated securities or more subject to possible change
over the term of the issue.
A rated bonds are considered to be investment grade and of good quality.
The obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB rated bonds are considered to be investment grade and of satisfactory
quality. The obligor's ability to pay interest and repay principal is considered
to be adequate. Adverse changes in economic conditions and circumstances,
however, are more likely to weaken this ability than bonds with higher ratings.
A '+' or a '-' sign after a rating symbol indicates relative standing in
its rating.
EXCHANGE OPTION
ELECTION
Holders may elect to exchange any or all of their Units of this Series for
units of one or more of the series of Funds listed in the table set forth below
(the 'Exchange Funds'), which normally are sold in the secondary market at
prices which include the sales charge indicated in the table. Certain series of
the Funds listed have lower maximum applicable sales charges than those stated
in the table; also the rates of sales charges may be changed from time to time.
No series with a maximum applicable sales charge of less than 3.50% of the
public offering price is eligible to be acquired under the Exchange Option, with
the following exceptions: (1) Freddie Mac Series may be acquired by exchange
during the initial offering period from any of the Exchange Funds listed in the
table and (2) Units of any Select Ten Portfolio, if available, may be acquired
during their initial offering period or thereafter by exchange from any Exchange
Fund Series; units of Select Ten Portfolios may be exchanged only for units of
another Select Ten Series, if available. Units of the Exchange Funds may be
acquired at prices which include the reduced sales charge for Exchange Fund
units listed in the table, subject, however, to these important limitations:
First, there must be a secondary market maintained by the Sponsors in
units of the series being exchanged and a primary or secondary market in
units of the series being acquired and there must be units of the
applicable Exchange Fund lawfully available for sale in the state in which
the Holder is resident. There is no legal obligation on the part of the
Sponsors to maintain a market for any units or to maintain the legal
qualification for sale of any of these units in any state or states.
Therefore, there is no assurance that a market for units will in fact exist
or that any units will be lawfully available for sale on any given date at
which a Holder wishes to sell his Units of this Series and thus there is no
assurance that the Exchange Option will be available to any Holder.
Second, when units held for less than five months are exchanged for
units with a higher regular sales charge, the sales charge will be the
greater of (a) the reduced sales charge set forth in the table below or (b)
the difference between the sales charge paid in acquiring the units being
exchanged and the regular sales charge for the quantity of units being
acquired, determined as of the date of the exchange.
Third, exchanges will be effected in whole units only. If the proceeds
from the Units being surrendered are less than the cost of a whole number
of units being acquired, the exchanging Holder will be permitted to add
cash in an amount to round up to the next highest number of whole units.
Fourth, the Sponsors reserve the right to modify, suspend or terminate
the Exchange Option at any time without further notice to Holders. In the
event the Exchange Option is not available to a Holder at the time he
wishes to exercise it, the Holder will be immediately notified and no
action will be taken with respect to his Units without further instruction
from the Holder.
PROCEDURES
To exercise the Exchange Option, a Holder should notify one of the Sponsors
of his desire to use the proceeds from the sale of his Units of this Series to
purchase units of one or more of the Exchange Funds. If units of the applicable
outstanding series of the Exchange Fund are at that time available for sale, the
Holder may select the series or group of series for which he desires his Units
to be exchanged. Of course, the Holder will be provided with a current
prospectus or prospectuses relating to each series in which he indicates
interest. The exchange transaction will generally operate in a manner
essentially identical to any secondary market transaction, i.e., Units will be
repurchased at a price equal to the aggregate bid side evaluation per Unit of
the Securities
24
<PAGE>
<PAGE>
in the Portfolio plus accrued interest. Units of the Exchange Fund will be sold
to the Holder at a price equal to the bid side evaluation per unit of the
underlying securities in the Portfolio plus interest plus the applicable sales
charge listed in the table below. (Units of Equity Income Fund are sold, and
will be repurchased, at a price normally based on the closing sale price on the
New York Stock Exchange, Inc. of the underlying securities in the Portfolio.)
The maximum applicable sales charges for units of the Exchange Funds are also
listed in the table. Excess proceeds not used to acquire whole Exchange Fund
units will be paid to the exchanging Holder.
CONVERSION OPTION
Owners of units of any registered unit investment trust sponsored by others
which was initially offered at a maximum applicable sales charge of at least
3.0% ('Conversion Trust') may elect to apply the cash proceeds of sale or
redemption of those units directly to acquire available units of any Exchange
Fund at the reduced sales charge, subject to the terms and conditions applicable
to the Exchange Option (except that no secondary market is required in
Conversion Trust units). To exercise this option, the owner should notify his
retail broker. He will be given a prospectus of each series in which he
indicates interest of which units are available. The broker must sell or redeem
the units of the Conversion Trust. Any broker other than a Sponsor must certify
to the Sponsors that the purchase of units of the Exchange Fund is being made
pursuant to and is eligible for this conversion option. The broker will be
entitled to two-thirds of the applicable reduced sales charge. The Sponsors
reserve the right to modify, suspend or terminate the conversion option at any
time without further notice, including the right to increase the reduced sales
charge applicable to this option (but not in excess of $5 more per unit than the
corresponding fee then charged for the Exchange Option).
THE EXCHANGE FUNDS
The current return from taxable fixed income securities is normally higher
than that available from tax exempt fixed income securities. Certain of the
Exchange Funds do not provide for periodic payments of interest and are best
suited for purchase by IRA's, Keogh Plans, pension funds or other tax-deferred
retirement plans. Consequently, some of the Exchange Funds may be inappropriate
investments for some Holders and therefore may be inappropriate exchanges for
Units of this Series. The table below indicates certain characteristics of each
of the Exchange Funds which a Holder should consider in determining whether each
Exchange Fund would be an appropriate investment vehicle and an appropriate
exchange for Units of this Series.
TAX CONSEQUENCES
An exchange of Units pursuant to the Exchange or Conversion Option for
units of a series of another Fund should constitute a 'taxable event' under the
Code, requiring a Holder to recognize a tax gain or loss, subject to the
following limitation. The Internal Revenue Service may seek to disallow a loss
(or a pro rata portion thereof) on an exchange of units if the units received by
a Holder in connection with such an exchange represent securities that are not
materially different from the securities that his previous units represented
(e.g., both Funds contain securities issued by the same obligor that have the
same material terms). Holders are urged to consult their own tax advisers as to
the tax consequences to them of exchanging units in particular cases.
EXAMPLE
Assume that a Holder, who has three units of a fund with a 5.50% sales
charge in the secondary market and a current price (based on the bid side
evaluation plus accrued interest) of $1,100 per unit, sells his units and
exchanges the proceeds for units of a series of an Exchange Fund with a current
price of $950 per unit and the same sales charge. The proceeds from the Holder's
units will aggregate $3,300. Since only whole units of an Exchange Fund may be
purchased, the Holder would be able to acquire four units in the Exchange Fund
for a total cost of $3,860 ($3,800 for units and $60 for the $15 per unit sales
charge) by adding an extra $560 in cash. Were the Holder to acquire the same
number of units at the same time in the regular secondary market maintained by
the Sponsors, the price would be $4,021.16 ($3,800 for the units and $221.16 for
the 5.50% sales charge).
25
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
MAXIMUM REDUCED
NAME OF APPLICABLE SALES CHARGE FOR INVESTMENT
EXCHANGE FUND SALES CHARGE* SECONDARY MARKET** CHARACTERISTICS
<S> <C> <C> <C>
DEFINED ASSET FUNDS--GOVERNMENT
SECURITIES INCOME FUND
GNMA Series (other than those below) 4.25% $15 per unit long-term, fixed rate, taxable
income, underlying securities backed
by the full faith and credit of the
United States
GNMA Series E or other GNMA Series having 4.25% $15 per 1,000 units long-term, fixed rate, taxable
units with an initial face value of $1.00 income, underlying securities backed
by the full faith and credit of the
United States, appropriate for IRA's
or tax-deferred retirement plans
Freddie Mac Series 3.50% $15 per 1,000 units intermediate term, fixed rate,
taxable income, underlying securities
are backed by Federal Home Loan
Mortgage Corporation but not by U.S.
Government
DEFINED ASSET FUNDS--MUNICIPAL
INVESTMENT TRUST FUND
Monthly Payment, State and Multistate 5.50%+ $15 per unit long-term, fixed rate, tax-exempt
Series income
Intermediate Term Series 4.50%+ $15 per unit intermediate-term, fixed rate, tax-
exempt income
Insured Series 5.50%+ $15 per unit long-term, fixed rate, tax-exempt
current income, underlying securities
insured by insurance companies
AMT Monthly Payment Series 5.50%+ $15 per unit long-term, fixed rate, income exempt
from regular federal income tax but
partially subject to Alternative
Minimum Tax.
DEFINED ASSET FUNDS--MUNICIPAL
INCOME FUND
Insured Discount Series 5.50%+ $15 per unit long-term, fixed rate, tax-exempt
current income, taxable capital gains
DEFINED ASSET FUNDS--CORPORATE
INCOME FUND
Monthly Payment Series 5.50% $15 per unit long-term, fixed rate, taxable income
Intermediate Term Series 4.75% $15 per unit intermediate-term, fixed rate,
taxable income
Cash or Accretion Bond Series and SELECT 3.50% $15 per 1,000 units intermediate-term, fixed rate,
Series underlying securities composed of
compound interest obligations
principally secured by collateral
backed by the full faith and credit
of the United States, taxable return,
current distributions of new units in
lieu of principal or interest with
option to sell new units for cash
income, appropriate for IRA's or
tax-deferred retirement plans
Insured Series 5.50% $15 per unit long-term, fixed rate, taxable
income, underlying securities are
insured
</TABLE>
<TABLE>
<S> <C> <C> <C>
DEFINED ASSET FUNDS--
INTERNATIONAL BOND FUND
Multi-Currency Series 5.50% $15 per unit intermediate-term, fixed rate,
payable in foreign currencies,
taxable income
Australian and New Zealand Dollar Bonds 3.75% $15 per unit intermediate-term, fixed rate,
Series payable in Australian dollars,
taxable income
Australian Dollar Bonds Series 3.75% $15 per unit intermediate-term, fixed rate,
payable in Australian dollars,
taxable income
Canadian Dollar Bonds Series 3.75% $15 per unit short intermediate term, fixed rate,
payable in Canadian dollars, taxable
income
</TABLE>
- ----------------------
* As described in the prospectuses relating to certain Exchange Funds, this
sales charge for secondary market sales may be reduced on a graduated scale in
the case of quantity purchases.
** The reduced sales charge for Units acquired during their initial offering
period is: $20 per unit for Series for which the Reduced Sales Charge for
Secondary Market (above) is $15 per unit, $20 per 100 units for Series for
which the Reduced Sales Charge for Secondary Market is $15 per 100 units and
$20 per 1,000 units for Series for which the Reduced Sales Charge for
Secondary Market is $15 per 1,000 units.
+ Subject to reduction depending on maturities of underlying securities.
26
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
MAXIMUM REDUCED
NAME OF APPLICABLE SALES CHARGE FOR INVESTMENT
EXCHANGE FUND SALES CHARGE* SECONDARY MARKET** CHARACTERISTICS
<S> <C> <C> <C>
DEFINED ASSET FUNDS--EQUITY
INCOME FUND
Utility Common Stock Series 4.50% $15 per 1,000 units+ dividends, taxable income, underlying
securities are common stocks of
public utilities
Concept Series 4.00% $15 per 100 units underlying securities constitute a
professionally selected portfolio of
common stocks consistent with an
investment idea or concept
Select Ten Portfolios 2.75% $17.50 per 1,000 units 10 highest dividend yielding stocks
(domestic and international) in a specified stock index; seeks
higher total return than that stock
index; terminates after one year
</TABLE>
- ----------------------
* As described in the prospectuses relating to certain Exchange Funds, this
sales charge for secondary market sales may be reduced on a graduated scale in
the case of quantity purchases.
** The reduced sales charge for Units acquired during their initial offering
period is: $20 per unit for Series for which the Reduced Sales Charge for
Secondary Market (above) is $15 per unit, $20 per 100 units for Series for
which the Reduced Sales Charge for Secondary Market is $15 per 100 units and
$20 per 1,000 units for Series for which the Reduced Sales Charge for
Secondary Market is $15 per 1,000 units.
+ The reduced sales charge for Utiltiy Common Stock Series 6 is $15 per 2,000
units and for prior Utility Common Stock Series is $7.50 per unit.
27
<PAGE>
<PAGE>
Defined
Asset FundsSM
<TABLE>
<S> <C>
Sponsors: Corporate Income Fund
Merrill Lynch, Intermediate Term Series -- 49
Pierce, Fenner & Prospectus
Smith Inc.
Unit Investment
Trusts
P.O. Box 9051
Princeton, N.J.
08543-9051
(609) 282-8500
This Prospectus does not contain all of the information
with respect to the investment company set forth in its
registration
Smith Barney statement and exhibits relating thereto which have been
Shearson Inc. filed with the Securities and Exchange Commission,
Unit Trust Washington, D.C. under the Securities Act of 1933 and the
Department Investment Company Act of 1940, and to which reference is
Two World Trade hereby made.
Center--101st Floor
New York, N.Y. 10048
1-800-298-UNIT
PaineWebber
Incorporated
1200 Harbor No person is authorized to give any information or to
Boulevard make any representations with respect to this investment
Weehawken, N.J. company not contained in this Prospectus; and any
07087 information or representation not contained herein must
(201) 902-3000 not be relied upon
Prudential as having been authorized. This Prospectus does not
Securities constitute an offer to sell, or a solicitation of an
Incorporated offer to buy, securities in any state to any person to
One Seaport Plaza whom it is not lawful to make such offer in such state.
199 Water Street
New York, N.Y. 10292
(212) 776-1000
Dean Witter Reynolds
Inc.
Two World Trade
Center--59th Floor
New York, N.Y. 10048
(212) 392-2222
Evaluator:
Interactive Data
Services, Inc.
14 Wall Street
New York, N.Y. 10005
Independent
Accountants:
Deloitte & Touche
1633 Broadway
New York, N.Y. 10019
Trustee:
Bankers Trust
Company
Unit Investment
Trust
Four Albany Street
7th Floor
New York, NY 10015
1-800-735-7777
</TABLE>
14854-5/94
<PAGE>
<PAGE>
PART II
Additional Information Not Included in the Prospectus
<TABLE>
<C> <S> <C>
A. The following information relating to the Depositors is incorporated by reference to the SEC filings
indicated and made a part of this Registration Statement.
SEC FILE OR
IDENTIFICATION NUMBER
----------------------------
I. Bonding Arrangements and Date of Organization of the Depositors
filed pursuant to Items A and B of Part II of the Registration
Statement on Form S-6 under the Securities Act of 1933:
Merrill Lynch, Pierce, Fenner & Smith Incorporated................ 2-52691
Prudential Securities Incorporated................................ 2-61418
Smith Barney Shearson Inc......................................... 33-29106
Dean Witter Reynolds Inc.......................................... 2-60599
PaineWebber Incorporated.......................................... 2-87965
II. Information as to Officers and Directors of the Depositors filed
pursuant to Schedules A and D of Form BD under Rules 15b1-1 and
15b3-1 of the Securities Exchange Act of 1934:
Merrill Lynch, Pierce, Fenner & Smith Incorporated................ 8-7721
Prudential Securities Incorporated................................ 8-12321
Smith Barney Shearson Inc......................................... 8-8177
Dean Witter Reynolds Inc.......................................... 8-14172
PaineWebber Incorporated.......................................... 8-16267
III. Charter documents of the Depositors filed as Exhibits to the
Registration Statement on Form S-6 under the Securities Act of
1933 (Charter, By-Laws):
Merrill Lynch, Pierce, Fenner & Smith Incorporated................ 2-73866, 2-77549
Prudential Securities Incorporated................................ 2-86941, 2-86941
Smith Barney Shearson Inc......................................... 33-20499
Dean Witter Reynolds Inc.......................................... 2-60599, 2-86941
PaineWebber Incorporated.......................................... 2-87965, 2-87965
B. The Internal Revenue Service Employer Identification Numbers of the Sponsors and Trustee are as
follows:
Merrill Lynch, Pierce, Fenner & Smith Incorporated................ 13-5674085
Prudential Securities Incorporated................................ 13-6134767
Smith Barney Shearson Inc......................................... 13-1912900
Dean Witter Reynolds Inc.......................................... 94-1671384
PaineWebber Incorporated.......................................... 13-2638166
Bankers Trust Company, Trustee.................................... 13-4941297
</TABLE>
II-1
<PAGE>
<PAGE>
CORPORATE INCOME FUND
DEFINED ASSET 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 Post-Effective Amendment No. 5 to the Registration Statement on Form
S-6 of The Corporate Income Fund, Eighty-First Monthly Payment Series, 1933 Act
File No. 2-63010).
The Prospectus.
The Signatures.
The following exhibits:
<TABLE>
<S> <C> <C>
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, Multistate Series--48, 1993 Act File No. 33-50247).
4.1 --Consent of the Evaluator.
5.1 --Consent of independent accountants.
</TABLE>
R-1
<PAGE>
<PAGE>
CORPORATE INCOME FUND
INTERMEDIATE TERM SERIES--
DEFINED ASSET FUNDS
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT,
CORPORATE INCOME FUND, INTERMEDIATE TERM SERIES--49, DEFINED ASSET FUNDS, (A
UNIT INVESTMENT TRUST), 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 OR
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 19TH DAY OF MAY, 1994.
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 in 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 Smith Barney
Shearson 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 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 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 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>
<PAGE>
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
DEPOSITOR
<TABLE>
<S> <C>
By the following persons, who constitute a majority of Powers of Attorney have been filed under Form
the Board of Directors of Merrill Lynch, Pierce, SE and the following 1933 Act File Numbers:
Fenner & Smith Incorporated: 33-43466 and 33-51607
</TABLE>
HERBERT M. ALLISON, JR.
BARRY S. FREIDBERG
EDWARD L. GOLDBERG
STEPHEN L. HAMMERMAN
JEROME P. KENNEY
DAVID H. KOMANSKY
DANIEL T. NAPOLI
THOMAS H. PATRICK
JOHN L. STEFFENS
DANIEL P. TULLY
ROGER M. VASEY
ARTHUR H. ZEIKEL
ERNEST V. FABIO
------------------------------
By: ERNEST V. FABIO
(As authorized signatory for Merrill Lynch, Pierce,
Fenner & Smith Incorporated and
Attorney-in-fact for the persons listed above)
R-3
<PAGE>
<PAGE>
PRUDENTIAL SECURITIES INCORPORATED
DEPOSITOR
<TABLE>
<S> <C>
By the following persons, who constitute a majority of Powers of Attorney have been filed under Form
the Board of Directors of Prudential Securities SE and the following 1933 Act File Number:
Incorporated: 33-41631
</TABLE>
ALAN D. HOGAN
HOWARD A. KNIGHT
GEORGE A. MURRAY
LELAND B. PATON
HARDWICK SIMMONS
RICHARD R. HOFFMANN
---------------------------------------
By: RICHARD R. HOFFMANN
(As authorized signatory for Prudential Securities
Incorporated and Attorney-in-fact for the persons
listed above)
R-4
<PAGE>
<PAGE>
SMITH BARNEY SHEARSON INC.
DEPOSITOR
<TABLE>
<S> <C>
By the following persons, who constitute a majority of Powers of Attorney have been filed under the
the Board of Directors of Smith Barney Shearson following 1933 Act File Numbers: 33-49753
Inc.: and 33-51607
</TABLE>
RONALD A. ARTINIAN
STEVEN D. BLACK
JAMES BOSHART III
ROBERT A. CASE
ROBERT K. DIFAZIO
ROBERT DRUSKIN
HERBERT DUNN
TONI ELLIOTT
LEWIS GLUCKSMAN
ROBERT F. GREENHILT
THOMAS GUBA
HENRY U. HARRIS
JOHN B. HOFFMAN
A. RICHARD JANIAK, JR.
ROBERT Q. JONES
ROBERT B. KANE
JEFFREY LANE
JACK H. LEHMAN III
ROBERT H. LESSIN
JOEL N. LEVY
THOMAS A. MAGUIRE, JR.
JOHN J. MCATEE, JR.
HOWARD D. MARSH
JOHN F. MCCANN
WILLIAM J. MILLS II
JOHN C. MORRIS
CHARLES O'CONNOR
HUGH J. O'HARE
JOSEPH J. PLUMERI II
JACK L. RIVKIN
A. GEORGE SAKS
BRUCE D. SARGENT
DON M. SHAGRIN
DAVID M. STANDRIDGE
MELVIN B. TAUB
JACQUES S. THERIOT
STEPHEN J. TREADWAY
PAUL UNDERWOOD
PHILIP M. WATERMAN
GINA LEMON
------------------------
By: GINA LEMON
(As authorized signatory for
Smith Barney Shearson Inc. and
Attorney-in-fact for the persons listed above)
R-5
<PAGE>
<PAGE>
DEAN WITTER REYNOLDS INC.
DEPOSITOR
<TABLE>
<S> <C>
By the following persons, who constitute a majority of Powers of Attorney are being filed under Form
the Board of Directors of Dean Witter Reynolds Inc.: SE and the following 1933 Act File Number:
33-17085
</TABLE>
NANCY DONOVAN
CHARLES A. FIUMEFREDDO
JAMES F. HIGGINS
STEPHEN R. MILLER
PHILIP J. PURCELL
THOMAS C. SCHNEIDER
WILLIAM B. SMITH
MICHAEL D. BROWNE
------------------------------------
By: MICHAEL D. BROWNE
(As authorized signatory for
Dean Witter Reynolds Inc. and
Attorney-in-fact for the persons listed above)
R-6
<PAGE>
<PAGE>
PAINEWEBBER INCORPORATED
DEPOSITOR
<TABLE>
<S> <C>
By the following persons, who constitute a majority of Powers of Attorney are being filed under Form
the Executive Committee of the Board of Directors of SE and the following 1933 Act File Number:
PaineWebber Incorporated: 33-28452
</TABLE>
JOHN A. BULT
PAUL B. GUENTHER
DONALD B. MARRON
JAMES C. TREADWAY
ROBERT E. HOLLEY
---------------------------------
By: ROBERT E. HOLLEY
(As authorized signatory for
PaineWebber Incorporated and
Attorney-in-fact for the persons listed above)
R-7
<PAGE>
<PAGE>
EXHIBIT 4.1
MAY 19, 1994
Interactive Data
14 Wall Street
New York, N.Y. 10005
212-285-0700
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Unit Investment Trusts
P.O. Box 9051
Princeton, N.J. 08543-9051
Bankers Trust Company
Four Albany Street--7th Floor
New York, New York 10015
RE: CORPORATE INCOME FUND, INTERMEDIATE TERM SERIES-49 DEFINED ASSET FUND (A
UNIT INVESTMENT TRUST), UNITS OF FRACTIONAL UNDIVIDED INTEREST-REGISTERED
UNDER THE SECURITIES ACT OF 1933, FILE NO. 33-50887
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. 1 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.
Very truly yours,
James E. Perry
Vice President
R-8
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EXHIBIT 5.1
CORPORATE INCOME FUND,
INTERMEDIATE TERM SERIES--49
DEFINED ASSET FUNDS
CONSENT OF INDEPENDENT ACCOUNTANTS
The Sponsors and Trustee
of Corporate Income Fund, Intermediate Term Series--49 Defined Asset Funds:
We hereby consent to the use in Post-Effective Amendment No. 1 to Registration
Statement No. 33-50887 of our opinion dated May 19, 1994 relating to the
financial statements of Corporate Income Fund, Intermediate Term Series--49
Defined Asset Funds and to the reference to us under the heading 'Auditors' in
the Prospectus which is a part of this Registration Statement.
DELOITTE & TOUCHE
New York, N.Y.
May 19, 1994
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