<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 8, 1995
REGISTRATION NO. 33-56849
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
------------------------------------------
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:
GOVERNMENT SECURITIES INCOME FUND
FREDDIE MAC SERIES 12
DEFINED ASSET FUNDS
A UNIT INVESTMENT TRUST
B. NAMES OF DEPOSITORS:
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
SMITH BARNEY INC.
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
DEAN WITTER REYNOLDS INC.
C. COMPLETE ADDRESSES OF DEPOSITORS' PRINCIPAL EXECUTIVE OFFICES:
<TABLE>
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MERRILL LYNCH, PIERCE, FENNER & SMITH BARNEY INC.
SMITH INCORPORATED 388 GREENWICH STREET
DEFINED ASSET FUNDS 23RD FLOOR
P.O. BOX 9051 NEW YORK, NY 10013
PRINCETON, N.J. 08543-9051
PAINEWEBBER INCORPORATED PRUDENTIAL SECURITIES INCORPORATED DEAN WITTER REYNOLDS INC.
1285 AVENUE OF THE AMERICAS ONE SEAPORT PLAZA TWO WORLD TRADE CENTER--59TH FLOOR
NEW YORK, N.Y. 10019 199 WATER STREET NEW YORK, N.Y. 10048
NEW YORK, N.Y. 10292
</TABLE>
D. NAMES AND COMPLETE ADDRESSES OF AGENTS FOR SERVICE:
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<S> <C> <C>
TERESA KONCICK, ESQ. DOUGLAS LOWE, ESQ. LEE B. SPENCER, JR.
P.O. BOX 9051 130 LIBERTY STREET--29TH FLOOR ONE SEAPORT PLAZA
PRINCETON, N.J. 08543-9051 NEW YORK, N.Y. 10006 199 WATER STREET
NEW YORK, N.Y. 10292
COPIES TO:
THOMAS D. HARMAN, ESQ. ROBERT E. HOLLEY PIERRE DE SAINT PHALLE, ESQ.
388 GREENWICH STREET 1200 HARBOR BLVD. 450 LEXINGTON AVENUE
NEW YORK, N.Y. 10013 WEEHAWKEN, N.J. 07087 NEW YORK, N.Y. 10017
</TABLE>
E. TITLE AND AMOUNT OF SECURITIES BEING REGISTERED:
An indefinite number of Units of Beneficial Interest pursuant to Rule 24f-2
promulgated under the Investment Company Act of 1940, as amended.
F. PROPOSED MAXIMUM OFFERING PRICE TO THE PUBLIC OF THE SECURITIES BEING
REGISTERED: Indefinite
G. AMOUNT OF FILING FEE: $500 (as required by Rule 24f-2)
H. APPROXIMATE DATE OF PROPOSED SALE TO PUBLIC.
As soon as practicable, after the effective date of the registration
statement.
/ x /Check box if it is proposed that this filing will become effective at 9:30
a.m. on March 8, 1995 pursuant to Rule 487.
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<PAGE>
<PAGE>
Defined
Asset Funds
<TABLE>
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Government This Fund is a
Securities defined portfolio
Income Fund of preselected
securities, formed
to obtain safety of
capital and current
monthly
distributions of
interest and
principal through
investment in a
portfolio of Gold
Mortgage
Participation
Certificates ('Gold
PCs'), representing
undivided inter-
ests in specified
fixed rate, first
lien conventional
residential mort-
gages guaranteed by
the Federal Home
Loan Mortgage
Corporation
('FHLMC' or
'Freddie Mac').
While Freddie Mac
is a corporate
instrumentality of
the United States,
the Freddie Mac PCs
are not guaranteed
by the United
States or by any
Federal Home Loan
Bank and do not
constitute debts or
obligations of the
United States or
any Federal Home
Loan Bank. The
obligations of
FHLMC under its
guarantee are
obligations solely
of FHLMC and are
not backed by, or
entitled
- ----------- to, the full faith
and credit of the
United States.
The value of the
Units and the
current and long
term returns will
FREDDIE MAC fluctuate with the
SERIES 12 value of the
A UNIT Portfolio which
INVESTMENT will decrease with
TRUST increases in
interest rates;
face amount per
Unit will decline
as principal is
paid on the
underlying
mortgages and
payments of
principal may
increase if
interest rates
decline.
Estimated Current
Return shows the
estimated annual
cash to be received
from interest
bearing securities
in the Portfolio
(net of esti-
7.05% mated annual
ESTIMATED expenses) divided
CURRENT by the Public
RETURN Offering Price
AS OF MARCH (including the
7, 1995 maximum sales
charge).
Estimated Long Term
Return is a measure
of the estimated
return over the
estimated life of
the Fund (about 6
years). This
represents an aver-
age of the yields
of the individual
securities in the
Portfolio, adjusted
to reflect the
maximum sales
charge and
estimated expenses.
The average
7.41% yield for the
ESTIMATED Portfolio is
LONG TERM derived by
RETURN weighting each
AS OF MARCH security's yield by
7, 1995 its market value
and its estimated
average life.
Unlike Estimated
Current Return,
Estimated Long Term
Return takes into
account estimated
average life,
discounts and
premiums of the
underlying
securities.
No return estimate
can be predictive
of your actual
return because
returns will vary
with purchase price
(including sales
charges), how
m INTERMEDIATE long units are
TERM held, changes in
Portfolio
composition,
changes in
m MONTHLY interest income and
INCOME changes in fees and
expenses.
Therefore, Estimat-
m AAA RATED ed Current Return
and Estimated Long
Term Return are
designed to be
comparative rather
than predictive. A
yield calculation
which is more
comparable to an
individual security
may be higher or
lower than
Estimated Current
Return or Estimated
Long Term Return
which are more
comparable to
return calculations
used by other
investment
products. Estimated
cash flows are set
forth in this
Prospectus.
Minimum purchase in
individual
transactions: 1,000
Units.
</TABLE>
<TABLE>
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THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION
SPONSORS: NOR HAS THE COMMISSION OR ANY STATE SECURITIES
Merrill Lynch, Pierce, Fenner & COMMISSION PASSED UPON THE ACCURACY OR ADE-
Smith Inc. QUACY OF THIS PROSPECTUS. ANY REPRESENTATION
Smith Barney Inc. TO THE CONTRARY IS A CRIMINAL OFFENSE.
PaineWebber Incorporated Inquiries should be directed to the Trustee 1-800-323-1508
Prudential Securities Incorporated Prospectus dated March 8, 1995
Dean Witter Reynolds 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 $95 billion sponsored since 1971. 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 Funds 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.
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Contents
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Investment Summary..................................... A-3
Fee Table.............................................. A-7
Report of Independent Accountants...................... A-8
Statement of Condition................................. A-8
Portfolio.............................................. A-9
Estimated Cash Flow to Holders......................... A-10
Fund Structure......................................... 1
Risk Factors........................................... 1
Description of the Fund................................ 4
Taxes.................................................. 8
Public Sale of Units................................... 10
Market for Units....................................... 13
Redemption............................................. 13
Expenses and Charges................................... 14
Administration of the Fund............................. 15
Resignation, Removal and Limitations on Liability...... 18
Miscellaneous.......................................... 19
Description of Standard & Poor's Rating................ 21
Exchange Option........................................ 21
</TABLE>
A-2
<PAGE>
<PAGE>
INVESTMENT SUMMARY AS OF MARCH 7, 1995 (THE BUSINESS DAY PRIOR TO THE INITIAL
DATE OF DEPOSIT)( A )
<TABLE>
<S> <C>
ESTIMATED CURRENT RETURN( B )
(based on Public Offering Price) 7.05%
ESTIMATED LONG TERM RETURN( B )
(based on Public Offering Price) 7.41%
PUBLIC OFFERING PRICE PER 1,000
UNITS (including 3.25% sales
charge) $ 1,005.97( C )
FACE AMOUNT OF SECURITIES $ 500,000
INITIAL NUMBER OF UNITS( D ) 500,000
FRACTIONAL UNDIVIDED INTEREST IN
FUND REPRESENTED BY EACH UNIT 1/500,000TH
SPONSORS' REPURCHASE PRICE AND
REDEMPTION PRICE PER 1,000
UNITS( E ) (based on bid side
evaluation) $ 972.03( C )
CALCULATION OF PUBLIC OFFERING
PRICE
Aggregate offer side
evaluation of Securities in
Fund....................... $ 486,637.50
--------------
Divided by Number of Units
times 1,000................ $ 973.28
Plus sales charge of 3.25% of
Public Offering Price
(3.359% of net amount
invested in
Securities)( F )........... 32.69
--------------
Public Offering Price per
1,000 Units................ $ 1,005.97
Plus accrued interest per
1,000 Units( G )........... 2.75
--------------
Total per 1,000 Units...... $ 1,008.72
--------------
--------------
</TABLE>
<TABLE>
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CALCULATION OF ESTIMATED NET ANNUAL
INTEREST RATE PER 1,000 UNITS (based on
face amount of $1,000 per 1,000 Units)
Annual interest rate per 1,000
Units............................ 7.250%
Less estimated annual expenses per
1,000 Units expressed as a
percentage( H ).................. .156%
---------
Estimated net annual interest rate
per 1,000 Units.................. 7.094%
---------
---------
</TABLE>
<TABLE>
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Daily Rate at which Estimated Net
Interest Accrues per 1,000 Units....... .0197%
MONTHLY INCOME DISTRIBUTIONS PER 1,000 UNITS
First distribution to be paid on
April 23, 1995 to Holders of
record on April 10, 1995......... $ 5.91
Second and subsequent distributions
will be paid on or shortly after
the twenty-third day of each
month to Holders of record of
Units on the tenth day of the
month.
REDEMPTION PRICE PER 1,000 UNITS LESS THAN:
Public Offering Price by............ $ 33.94
Sponsors' Initial Repurchase Price
by............................... $ 1.25
PREMIUM AND DISCOUNT ISSUES IN
PORTFOLIO
Face amount of Securities with offer
side evaluation at a discount
from par......................... 100%
SPONSORS' PROFIT (LOSS) ON DEPOSIT..... $ (3.13)
PORTFOLIO SUPERVISION FEE( I )
Maximum of $0.25 per $1,000 face amount of
underlying Debt Obligations (see Expenses and
Charges)
TRUSTEE'S ANNUAL FEE AND EXPENSES PER
1,000 UNITS( J ) (see Expenses
and Charges)..................... $ 1.56
RECORD DAY--THE TENTH DAY OF EACH MONTH
DISTRIBUTION DAY--THE TWENTY-THIRD DAY OF EACH MONTH
EVALUATOR'S FEE FOR EACH EVALUATION
Maximum of $10.00 (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 Fund is less
than 40% of the face amount of Securities
deposited in the Portfolio
</TABLE>
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(a) The Indenture was signed and the initial deposit was made on the date of
this Prospectus.
(b) Actual returns will vary with purchase price, principal payments and
prepayments on the underlying mortgages and changes in Fund income after
expenses (see Estimated Current Return; Estimated Long Term Return).
(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) Assumes the Fund will reach a size estimated by the Sponsors; expenses
will vary with the size of the Fund relative to this estimate.
( i ) In addition to this amount the Sponsors may be reimbursed for
bookkeeping or other administrative expenses not exceeding their actual costs,
currently at an annual rate of $0.10 per 1,000 Units.
( j ) Of this amount the Trustee receives annually $0.72 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.
A-3
<PAGE>
<PAGE>
INVESTMENT SUMMARY AS OF MARCH 7, 1995 (CONTINUED)
PORTFOLIO AT A GLANCE--
FUND PORTFOLIO--Two different issues of Gold Mortgage Participation
Certificates ('Gold PCs') representing undivided interests in specified fixed
rate, first lien conventional residential mortgages purchased by the Federal
Home Loan Mortgage Corporation ('FHLMC' or 'Freddie Mac') and guaranteed by
FHLMC as to timely payment of interest and principal. The percentage
relationship on the Initial Date of Deposit is as follows: 7.0% Freddie Mac Gold
PCs maturing 1/15/09 to 1/15/10, 50% and 7.5% Freddie Mac Gold PCs maturing
1/15/09 to 1/15/10, 50%. 100% of the Securities initially deposited have a
delayed delivery or have been purchased on a when, as and if issued basis, and
are expected to settle 5 days after the settlement date for the purchase of
Units (see Description of the Fund--The Portfolio).
INVESTMENT QUALITY--Based on the creditworthiness of FHLMC, the Units of the
Fund have been rated AAA by Standard & Poor's.
INTERMEDIATE-TERM MATURITIES--The issues have fixed final maturity dates in
2010. Underlying mortgages are amortized and there is no prepayment protection.
Accordingly, payments of principal may be received earlier than the maturity
dates; the estimated life of the Fund is about 6 years.
OBJECTIVES OF THE FUND--To obtain safety of capital and current monthly
distributions of interest and principal through investment in a fixed portfolio
initially consisting of contracts to purchase Gold Mortgage Participation
Certificates ('Gold PCs') fully guaranteed as to principal and interest by the
FHLMC. All of the Gold PCs in the Fund are backed by pools of intermediate-term
residential mortgages. A further objective of the Fund is to permit holders to
reinvest income or principal distributions in additional Units of the Fund.
The guaranteed payment of principal and interest afforded by Gold PCs may
make investment in the Fund particularly well suited for purchase by Individual
Retirement Accounts ('IRAs'), Keogh plans, and other tax-deferred retirement
plans. In addition, the ability to buy single Units enables these investors to
tailor the dollar amount of their purchases of Units to take maximum possible
advantage of the annual deductions available for contributions to these plans
(see Taxes--Retirement Plans).
Under certain circumstances, the Sponsors may direct the Trustee to sell
portfolio securities and to reinvest the proceeds of the sale in replacement
Gold PCs. The Sponsors may deposit additional Gold PCs in the Fund (where
additional Units are to be offered to the public), maintaining as closely as
practicable, the original percentage relationships between the principal amounts
of Gold PCs of specified interest rates and ranges of maturities in this
Portfolio. Holders of the Fund may elect to reinvest their distributions of
principal and interest, or both, in additional Units of the Fund at a reduced
sales charge by participating in the Reinvestment Plan (see Administration of
the Fund--Reinvestment). Holders of Units in IRAs, Keogh plans, and other
tax-deferred retirement plans should consult their plan custodian as to the
appropriate disposition of distributions (see Taxes--Retirement Plans).
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 without prepayment protection may entail, including the risk
that the value of the Portfolio and hence of the Units will decline with
increases in interest rates and that payments of principal may be received
sooner than anticipated especially if interest rates decline. The potential for
appreciation, which could otherwise be expected to result from a decline in
interest rates, may be limited by any increased prepayments by mortgagors as
interest rates decline. Investors should also note that prepayments of principal
on Freddie Mac Gold PCs purchased at a premium over par will result in some loss
on investment while prepayments on Freddie Mac Gold PCs purchased at a discount
from par will result in some gain on investment. Also, if interest rates rise,
the prepayment risk of higher yielding, premium Freddie Mac Gold PCs and the
prepayment benefit for lower yielding, discount Freddie Mac Gold PCs will be
reduced. The percentages of the aggregate face amount of the Portfolio currently
valued at a premium over and at a discount from par are set forth under
Investment Summary on page A-3. (See Risk Factors--Special Features of Market
Premium Securities; --Special Features of Market Discount Securities;
Description of the Fund--Life of the Securities and of the Fund.)
The Fund may recognize gain on the payment of principal on an underlying
Gold PC or on the sale of a Security. A distribution of such gain will be
taxable to a Holder as ordinary income or capital gain even though as to a
particular Holder the distribution may economically represent a return of
capital. (See Taxes.)
A-4
<PAGE>
<PAGE>
Defined
Asset Funds
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<S> <C>
Investor's Defined Government
Guide Securities Income
Funds
Our defined
portfolios of
mortgage-backed
Freddie Mac Gold
Participation
Certificates (Gold
PCs) offer
investors a simple
and convenient way
to participate in
the Federal Home
Loan Mortgage
Corporation (FHLMC)
market while
earning an
attractive return.
And by purchasing
Freddie Mac funds,
investors avoid the
problem of
selecting
securities by
themselves.
Government
Securities The Safety of FHLMC
Income Fund Backed Securities
The fund offers an
attractive rate of
return, convenience
and numerous
benefits, plus the
assurance of
investing only in
securities that are
guaranteed by the
FHLMC. While
Freddie Mac is a
corporate
instrumentality of
the U.S., the U.S.
government does not
guarantee these
securities. FHLMC
guarantees that the
holders
- ----------- of these securities
will be paid every
penny of interest
and principal due
to them. The fund
itself is not
guaranteed by
FREDDIE MAC FHLMC, only the
SERIES securities it
holds. The value of
the units will
fluctuate with
changes in market
conditions and
other factors.
Monthly
Distributions
The fund will
distribute
principal and
income monthly.
Principal from
sales, redemptions,
prepayments and
maturities of the
securities is
distributed as it
is received.
Interest payments,
of course, decrease
as principal is
returned.
AAA-Rated
Investment Quality
Based on the
creditworthiness of
the FHLMC
guarantee, Standard
& Poor's has rated
units of the fund
AAA, its highest
rating.
A Liquid Investment
Although not
legally required to
do so, the Sponsors
have maintained a
secondary market
for their 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. There is
never a fee for
cashing in your
investment.
Reinvestment Option
You can elect to
reinvest
distributions of
principal and
redemption
proceeds, interest,
or both in
additional units of
the fund at a
reduced sales
charge of 1.0% of
the public offering
price. Reinvesting
your interest
income can add the
power of compound
interest to your
investment.
Reinvesting your
principal in
additional units
keeps your capital
continuously
working for you and
helps you maintain
your income flow.
Risk Factors
Unit price
fluctuates and is
affected by
interest rates as
well as the
financial condition
of the issuer of
the securities.
</TABLE>
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 MARCH 7, 1995 (CONTINUED)
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.
PUBLIC OFFERING PRICE--The Fund is offered on the basis that each Unit
represents approximately $1.00 principal amount of deposited securities on the
Initial Date of Deposit. The minimum purchase in individual transactions is
1,000 Units. There is no minimum purchase for payroll deduction plans.
During the initial offering period, the Public Offering Price per 1,000
Units is based on the aggregate offering side evaluation of the underlying
Securities (the price at which they could be purchased directly by the public
assuming they were available), divided by the number of Units outstanding times
1,000, plus a sales charge of 3.359%* of the offer side evaluation per 1,000
Units (the net amount invested); this results in a sales charge of 3.25%* 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
3.627%* of the bid side evaluation per Unit; this results in a sales charge of
3.50%* 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 Date of Deposit, and on subsequent dates, will
vary from the Public Offering Price set forth above (see Public Sale of Units--
Public Offering Price and Redemption).
The figures above assume a purchase of 1,000 Units. The price of a single
Unit, or any multiple thereof, is calculated simply by dividing the Public
Offering Price per 1,000 Units above, by 1,000, and multiplying by the number of
Units.
ESTIMATED CURRENT RETURN; ESTIMATED LONG TERM RETURN--Estimated Current
Return represents annual cash to be received from interest-bearing securities in
the Portfolio (net of estimated annual expenses) divided by the Public Offering
Price (including the maximum sales charge). Estimated Current Return does not
take into account timing of distributions of income and other amounts (including
delays) on Units, and it only partially reflects the effect of premiums paid and
discounts realized in the purchase price of Units. 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 Securities in the Portfolio
weighted to reflect the estimated life and market value of each Security in the
Portfolio, adjusted to reflect the Public Offering Price (including the maximum
applicable sales charge) and estimated expenses.
The estimated long-term return figure is calculated using an estimated
average life for the Securities. Estimated average life is an essential factor
in the calculation of Estimated Long Term Return. When the Fund has a shorter
average life than is estimated, Estimated Long Term Return will be higher if the
Fund contains Securities priced at a discount and lower if the Securities are
priced at premium. Conversely, when the Fund has a longer average life than is
estimated, Estimated Long Term Return will be lower if the Securities are priced
at a discount and higher if the Securities are priced at a premium. To calculate
estimated average life an assumption of the present average age of available
Freddie Mac Gold PCs in the marketplace with the same coupon is made; the
calculation of estimated average life is based upon actual recent prepayments,
industry assumptions about prepayments and analysis of several factors
including, among other things, the coupon, the housing environment, the present
interest rate (no change in interest rate is assumed) and historical trends. For
a more detailed explanation of the calculation of estimated average life, see
Description of the Fund--Income; Estimated Current Return; Estimated Long Term
Return.
- ---------------
* This sales charge will be reduced on a graduated scale in the case of quantity
purchases of Units (see Public Sale of Units--Public Offering Price).
A-5
<PAGE>
<PAGE>
AUTHORIZATION FOR REINVESTMENT
GOVERNMENT SECURITIES INCOME FUND
FREDDIE MAC SERIES 12
DEFINED ASSET FUNDS
M Yes, I want to participate in the Fund's Reinvestment Plan and
purchase additional Units of the Fund each month. I hereby
acknowledge receipt of the Prospectus for Freddie Mac Series 12
of Government Securities Income Fund and authorize The Chase
Manhattan Bank, N.A. to pay distributions on my Units as
indicated below (distributions to be reinvested will be paid for
my account to The Chase Manhattan Bank (National Association)).
Income distributions reinvested M
Principal distributions reinvested M
My name (please print) ___________________________________________
My address (please print)
Street and Apt. No. ______________________________________________
City, State, Zip Code ____________________________________________
<PAGE>
<PAGE>
<TABLE>
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NO POSTAGE
NECESSARY
IF MAILED
IN THE
UNITED STATES
BUSINESS REPLY MAIL
FIRST CLASS PERMIT NO. 644, NEW YORK, NY
POSTAGE WILL BE PAID BY ADDRESSEE
THE CHASE MANHATTAN BANK, N.A. (Freddie Mac 12)
UNIT TRUST DEPARTMENT
BOX 2051
NEW YORK, NY 10081
</TABLE>
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(Fold along this line.)
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(Fold along this line.)
<PAGE>
<PAGE>
INVESTMENT SUMMARY AS OF MARCH 7, 1995 (CONTINUED)
The estimated average life for the Fund provided on the cover of this
Prospectus is subject to change with alterations in the data used in any of the
underlying assumptions. The actual average lives of the Securities and the
actual long term returns will be different from the estimated average lives and
the estimated long term returns. The net annual interest rate per Unit and the
net annual long-term return to investors will also 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 prepayment, exchange, redemption, sale or maturity
of underlying Securities; the Public Offering Price will vary with any reduction
in sales charges paid in the case of quantity purchases of Units, as well as
with fluctuations in the offer side evaluation of the underlying Securities.
Therefore, it can be expected that the current return and long term return will
fluctuate in the future. (See Description of the Fund--Income; Estimated Current
Return; Estimated Long Term Return.)
MONTHLY DISTRIBUTIONS--Monthly cash distributions of principal, premium, if
any, and interest received by the Fund will be made on or shortly after the
twenty-third day of each month to Holders of record on the tenth day of the
month commencing with the first distribution on the date indicated on page A-3
(see Administration of the Fund--Accounts and Distributions). However, Holders
may elect to reinvest their distributions into additional Units of the Fund (see
Administration of the Fund--Reinvestment).
TAXATION--Distributions of ordinary income or capital gain from the Fund
will be included in a U.S. Holder's gross income, but will not be eligible for
the dividends-received deduction for corporations. Distributions to Holders who
are not U.S. citizens or residents will generally be subject to withholding tax
at the statutory rate of 30% (or a lesser treaty rate). (See Taxes.)
MARKET FOR UNITS--The Sponsors intend to maintain a secondary market for
Units based on the aggregate bid side evaluation of the underlying Securities
(see Market for Units). If this 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). Market
conditions and principal amortization of the underlying Securities 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 amount paid for Units
plus accrued interest.
UNDERWRITING ACCOUNT
The names and addresses of the Underwriters are:
<TABLE>
<S> <C> <C> <C> <C>
Merrill Lynch, Pierce, Fenner & Smith Incorporated P.O. Box 9051, Princeton, N.J. 08543-9051
Smith Barney Inc. 388 Greenwich Street--23rd Floor
New York, NY 10013
PaineWebber Incorporated 1285 Avenue of the Americas, New York, N.Y.
10019
Prudential Securities Incorporated One Seaport Plaza, 199 Water Street, New York,
N.Y. 10292
Dean Witter Reynolds Inc. Two World Trade Center--59th Floor, New York,
N.Y. 10048
</TABLE>
____Each underwriter's interest in the Underwriting Account will depend upon the
number of Units acquired through the issuance of additional Units.
A-6
<PAGE>
<PAGE>
INVESTMENT SUMMARY AS OF MARCH 7, 1995 (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; 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)............................................................... 3.25%
Maximum Sales Charge Imposed on Purchases during the Secondary Offering Period (as a
percentage of Public Offering Price).................................................... 3.50%
ESTIMATED ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS1)
Trustee's Fee.............................................................................. .074%
Portfolio Supervision, Bookkeeping and Administrative Fees................................. .025%
Other Operating Expenses................................................................... .061%
------
Total................................................................................. .160%
------
------
</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 1,000 units
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 .160% and a 5% annual return on the investment
throughout the periods.................................. $34 $37 $41 $52
</TABLE>
The Example assumes reinvestment of all distributions into additional Units
of the Fund 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
$1.25 per 1,000 Units. 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.
A-7
<PAGE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Sponsors, Trustee and Holders of Government Securities Income Fund, Freddie
Mac Series 12, Defined Asset Funds:
____We have audited the accompanying statement of condition, including the
portfolio, of Government Securities Income Fund, Freddie Mac Series 12, Defined
Asset Funds as of March 8, 1995. 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 March 8,
1995 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
The Chase Manhattan Bank, N.A., 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 Government Securities Income
Fund, Freddie Mac Series 12, Defined Asset Funds at March 8, 1995 in conformity
with generally accepted accounting principles.
DELOITTE & TOUCHE
New York, N.Y.
March 8, 1995
GOVERNMENT SECURITIES INCOME FUND
FREDDIE MAC SERIES 12
DEFINED ASSET FUNDS
STATEMENT OF CONDITION AS OF INITIAL DATE OF DEPOSIT, MARCH 8, 1995
<TABLE>
<S> <C> <C>
TRUST PROPERTY
Investment in Securities--
Contracts to purchase Securities(1).................................... $486,637.50
Accrued interest to Initial Date of Deposit on underlying Securities............. 704.86
-----------
Total............................................................... $487,342.36
-----------
-----------
LIABILITY AND INTEREST OF HOLDERS
Liability--Accrued interest to Initial Date of Deposit on underlying
Securities(2)............................................................... $ 704.86
Interest of Holders--
500,000 Units of fractional undivided interest outstanding:
Cost to investors(3)................................... $502,982.50
Gross underwriting commissions(4)...................... (16,345.00)
-----------
Net amount applicable to investors............................................... 486,637.50
-----------
Total............................................................... $487,342.36
-----------
-----------
</TABLE>
- ------------
(1) Aggregate cost to the Fund of the Securities listed under Portfolio is based
on the offering 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. Irrevocable letter
or letters of credit in the aggregate amount of $488,553.82 has been
deposited with the Trustee. The amount of such letter or letters of credit
includes $486,640.63 (equal to the purchase price to the Sponsors) for the
purchase of $500,000 face amount of Securities pursuant to contracts to
purchase Securities, plus $1,913.19 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 has been issued by The
Bank of Yokohama, Ltd., 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 offering 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 3.25% computed on the basis set forth under Public
Sale of Units--Public Offering Price.
A-8
<PAGE>
<PAGE>
PORTFOLIO OF GOVERNMENT ON THE INITIAL DATE OF DEPOSIT,
SECURITIES INCOME FUND, March 8, 1995
FREDDIE MAC SERIES 12
DEFINED ASSET FUNDS
<TABLE>
<CAPTION>
COST OF
PORTFOLIO NO. AND TITLE OF FACE RANGE OF STATED SECURITIES
SECURITIES CONTRACTED FOR AMOUNT COUPON MATURITIES(1) TO FUND(2)
<C> <S> <C> <C> <C> <C>
--------- ------- ------------------- ------------
1. Federal Home Loan Gold Mortgage Participation $ 250,000 7.00% 1/15/09 to 1/15/10 $ 240,780.00
Certificates
2. Federal Home Loan Gold Mortgage Participation 250,000 7.50% 1/15/09 to 1/15/10 245,857.50
Certificates
--------- ------------
$ 500,000 $ 486,637.50
--------- ------------
--------- ------------
</TABLE>
- ---------------
NOTES
(1) The principal amount of Securities listed as having the range of maturities
shown is an aggregate of individual Securities having varying ranges of
maturities within that shown. They are listed as one category of Securities
with a single range of maturities because of current market conditions that
accord no difference in price among the Securities grouped together on the
basis of the difference in their maturity ranges. At some time in the
future, however, the difference in maturity ranges could affect the market
value of the individual Securities.
(2) The cost of the Securities to the Fund represents the offer side evaluation
of the Securities as determined by the Evaluator. 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 of the Portfolio based on the bid side evaluation on the
Initial Date of Deposit was $486,012.50 which is $625.00 (approximately .13%
of the aggregate principal amount) lower than the aggregate Cost of
Securities to Fund based on the offer side evaluation. Price of Securities
was computed on the basis of the offer side evaluation at the Evaluation
Time on the business day prior to the Initial Date of Deposit.
----------------------------------
All Securities are represented by contracts to purchase such Securities. The
contracts to purchase Securities were acquired on March 7, 1995 and are
expected to be settled 5 days after the initial settlement date for Units.
Interest will begin accruing to the benefit of Holders on the settlement
date for the Units.
In addition to the information as to the Securities set forth under
Portfolio, the Trustee will furnish Holders a statement listing the name of
issuer, pool number, interest rate, maturity date and principal amount for
each Security in the Portfolio upon written request.
A-9
<PAGE>
<PAGE>
GOVERNMENT SECURITIES INCOME FUND
FREDDIE MAC SERIES 12
ESTIMATED CASH FLOW TO HOLDERS
The table below sets forth the per 1,000 Units estimated monthly
distributions of principal and interest to Holders. The table assumes no changes
in expenses, no changes in current interest rates and no exchanges or
redemptions of the underlying Securities prior to maturity; the table does
assume a prepayment schedule based upon actual recent prepayments, industry
assumptions about prepayments and analysis of several other factors (see
Description of the Fund--Income; Estimated Current Return; Estimated Long Term
Return). Actual distributions may vary. All fractions have been rounded.
TABLE OF ESTIMATED CASH FLOW
<TABLE>
<CAPTION>
DATE AMOUNT
<S> <C>
DATE AMOUNT
</TABLE>
<TABLE>
<S> <C>
April 1995 $11.39
May 1995 11.70
June 1995 11.88
July 1995 12.05
August 1995 12.22
September 1995 12.38
October 1995 12.55
November 1995 12.70
December 1995 12.85
January 1996 12.99
February 1996 13.13
March 1996 13.26
April 1996 13.39
May 1996 13.51
June 1996 13.63
July 1996 13.74
August 1996 13.84
September 1996 13.94
October 1996 13.94
November 1996 13.93
December 1996 13.92
January 1997 13.92
February 1997 13.80
March 1997 13.69
April 1997 13.58
May 1997 13.46
June 1997 13.35
July 1997 13.24
August 1997 13.13
September 1997 13.02
October 1997 12.91
November 1997 12.81
December 1997 12.70
January 1998 12.59
February 1998 12.49
March 1998 12.38
April 1998 12.28
May 1998 12.18
June 1998 12.07
July 1998 11.97
August 1998 11.87
September 1998 11.77
October 1998 11.67
November 1998 11.57
December 1998 11.47
January 1999 11.37
February 1999 11.27
March 1999 11.18
April 1999 11.08
May 1999 10.99
June 1999 $10.89
July 1999 10.80
August 1999 10.71
September 1999 10.61
October 1999 10.52
November 1999 10.43
December 1999 10.34
January 2000 10.24
February 2000 10.16
March 2000 10.07
April 2000 9.98
May 2000 9.89
June 2000 9.81
July 2000 9.72
August 2000 9.63
September 2000 9.55
October 2000 9.46
November 2000 9.38
December 2000 9.29
January 2001 9.21
February 2001 9.12
March 2001 9.04
April 2001 8.96
May 2001 8.88
June 2001 8.80
July 2001 8.72
August 2001 8.64
September 2001 8.56
October 2001 8.48
November 2001 8.41
December 2001 8.33
January 2002 8.25
February 2002 8.18
March 2002 8.10
April 2002 8.02
May 2002 7.95
June 2002 7.87
July 2002 7.80
August 2002 7.73
September 2002 7.65
October 2002 7.58
November 2002 7.51
December 2002 7.44
January 2003 7.37
February 2003 7.30
March 2003 7.23
April 2003 7.16
May 2003 7.09
June 2003 7.02
July 2003 6.95
</TABLE>
A-10
<PAGE>
<PAGE>
TABLE OF ESTIMATED CASH FLOW (CONTINUED)
<TABLE>
<CAPTION>
DATE AMOUNT
<S> <C>
DATE AMOUNT
</TABLE>
<TABLE>
<S> <C>
August 2003 $ 6.88
September 2003 6.82
October 2003 6.75
November 2003 6.68
December 2003 6.62
January 2004 6.56
February 2004 6.49
March 2004 6.42
April 2004 6.36
May 2004 6.30
June 2004 6.23
July 2004 6.17
August 2004 6.11
September 2004 6.05
October 2004 5.99
November 2004 5.92
December 2004 5.86
January 2005 5.80
February 2005 5.74
March 2005 5.68
April 2005 5.62
May 2005 5.56
June 2005 5.51
July 2005 5.45
August 2005 5.39
September 2005 5.33
October 2005 5.28
November 2005 5.22
December 2005 5.16
January 2006 5.11
February 2006 5.06
March 2006 5.00
April 2006 4.94
May 2006 4.89
June 2006 4.84
July 2006 4.78
August 2006 $ 4.73
September 2006 4.68
October 2006 4.63
November 2006 4.57
December 2006 4.52
January 2007 4.47
February 2007 4.42
March 2007 4.37
April 2007 4.32
May 2007 4.27
June 2007 4.22
July 2007 4.17
August 2007 4.12
September 2007 4.07
October 2007 4.02
November 2007 3.98
December 2007 3.93
January 2008 3.88
February 2008 3.84
March 2008 3.79
April 2008 3.74
May 2008 3.69
June 3.65
July 2008 3.60
August 2008 3.56
September 2008 3.51
October 2008 3.47
November 2008 3.43
December 2008 3.38
January 2009 3.34
February 2009 3.30
March 2009 3.25
April 2009 1.50
May 2009 1.48
June 2009 1.46
July 2009 1.44
</TABLE>
A-11
<PAGE>
<PAGE>
GOVERNMENT SECURITIES INCOME FUND
FREDDIE MAC SERIES
DEFINED ASSET FUNDS
FUND STRUCTURE
This Series (the 'Fund') of Defined Asset Funds--Government Securities
Income 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.
To the extent that references in the Prospectus are to articles and sections of
the Indenture, which is hereby incorporated by reference, the statements made
herein are qualified in their entirety by such 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 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
they cannot be sold in the over-the-counter market which the Sponsors propose to
maintain (see Market for Units).
As used herein, the term 'Securities' means the Freddie Mac Gold PCs
initially deposited in the Fund and includes all contracts to purchase the
Freddie Mac Gold PCs accompanied by an irrevocable letter or letters of credit
sufficient to perform the contracts initially deposited in the Fund and
described herein under Portfolio and any additional Freddie Mac Gold PCs
deposited in the Fund following the Initial Date of Deposit in accordance with
the terms of the Indenture.
With the deposit of the Securities in the Fund on the Initial Date of
Deposit, the Sponsors established a percentage relationship between the
principal amounts of Freddie Mac Gold PCs of specified interest rates and ranges
of maturities in the Portfolio. Following the Initial Date of Deposit, the
Sponsors may deposit additional Securities in the Fund and Units may be
continuously offered for sale to the public by means of this Prospectus (see
Public Sale of Units), resulting in a potential increase in the number of Units
outstanding. The Sponsors anticipate that any additional Securities deposited in
the Fund will maintain as far as practicable the original percentage
relationship between the principal amounts of Freddie Mac Gold PCs of specified
interest rates and ranges of maturities in the Portfolio. Precise duplication of
this original percentage relationship may not ever be possible because fractions
of Freddie Mac Gold PCs may not be purchased, but duplication will continue to
be the goal in connection with any such additional Securities (see
Administration of the Fund--Portfolio Supervision). The original percentage
relationships on the Initial Date of Deposit are set forth under Investment
Summary.
RISK FACTORS
An investment in Units of a Fund should be made with an understanding of
the risks which an investment in fixed rate long-term debt obligations without
prepayment protection may entail, including the risk that the value of the
Portfolio and hence of the Units will decline with increases in interest rates
and that payments of principal may be received sooner than anticipated,
especially if interest rates decline. The potential for appreciation on the
Securities, which could otherwise be expected to result from a decline in
interest rates, may tend to be limited by any increased prepayments by
mortgagors as interest rates decline. In addition, prepayments of principal on
Securities purchased at a premium over par will result in some loss on
investment while prepayments on Securities purchased at a discount from par will
result in some gain on investment. The Sponsors cannot predict future economic
policies or their consequences or, therefore, the course or extent of interest
rate fluctuations in the future.
The Securities are generally not listed in 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.
1
<PAGE>
<PAGE>
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.
The Fund may be an appropriate medium for U.S. investors who desire to
participate in a portfolio of taxable fixed income securities offering the
safety of capital provided by an investment backed by the FHLMC. Investors may
find it advantageous to elect to reinvest their regular distributions of
principal and interest expected to be made by the Fund in additional Units of
the Fund (see Administration of the Fund--Reinvestment).
SPECIAL FEATURES OF MARKET PREMIUM SECURITIES
Certain of the Securities in the Fund may have been valued at a market
premium (see Premium and Discount Issues in Portfolio under Investment Summary).
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. 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. 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, early redemption of a premium security at par or early
prepayments of principal will result in a reduction in yield. Prepayments of
principal on securities purchased at a market premium are more likely than
prepayments on securities purchased at par or at a market discount and the level
of prepayments will generally increase if interest rates decline (see Life of
the Securities and of the Fund). Market premium attributable to interest rate
changes does not indicate market confidence in the issue.
SPECIAL FEATURES OF MARKET DISCOUNT SECURITIES
Certain of the Securities in the Fund may have been valued at a market
discount (see Premium and Discount Issues in Portfolio under Investment
Summary). Securities trade at less than par value because the interest coupons
on these Securities are at lower rates than interest coupons of 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. However, prepayments of principal on
securities purchased at a discount will result in an increase in yield. 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. Investors should also note
that the value of Securities purchased at a market discount will increase in
value faster than Securities purchased at a market premium if interest rates
decrease. Conversely, if interest rates increase, the value of Securities
purchased at a market discount will decrease faster than Securities purchased at
a premium. In addition, if interest rates rise, the prepayment risk of higher
yielding, premium Securities and the prepayment benefit for lower yielding,
discount Securities will be reduced. Market discount attributable to interest
rate changes does not indicate a lack of market confidence in the issue.
MORTGAGE-BACKED SECURITIES
The Freddie Mac Gold PCs included in the Portfolio are backed by the
indebtedness secured by the mortgages contained in the underlying mortgage
pools. Set forth below is a brief description of the current method of
origination of Freddie Mac Gold PCs; the nature of the Securities, including the
guaranty of FHLMC; the basis of selection and acquisition of the Gold PCs
included in the Portfolio; and the expected life of the Gold PCs and the Fund.
The Portfolio contains information concerning the coupon rate and range of
stated maturities of the Gold PCs in the Fund.
FHLMC
FHLMC is a corporate instrumentality of the United States created pursuant
to Title III of the Emergency Home Finance Act of 1970, as amended (the 'FHLMC
Act'). FHLMC's common stock is owned by the Federal Home Loan Banks. FHLMC was
established primarily for the purpose of increasing the availability of mortgage
credit for the financing of urgently needed housing. It seeks to provide an
enhanced degree of liquidity for residential mortgage investments primarily by
assisting in the development of secondary markets for
2
<PAGE>
<PAGE>
conventional mortgages. The principal activity of FHLMC currently consists of
the purchase of first lien conventional mortgage loans or participation
interests in such mortgage loans and the resale of the mortgage loans so
purchased in the form of guaranteed mortgage securities, primarily FHLMC
Certificates. All mortgage loans purchased by FHLMC must meet certain standards
set forth in the FHLMC Act. FHLMC is confined to purchasing, so far as
practicable, conventional mortgage loans which it deems to be of such quality,
type and class as to meet generally the purchase standards imposed by private
institutional mortgage investors. To minimize interest rate risk FHLMC generally
matches its purchases of mortgages and sales of guaranteed mortgage related
securities. Mortgages retained by FHLMC are financed with debt and equity
capital.
Copies of FHLMC's most recent Offering Circular for FHLMC Certificates,
FHLMC's Information Statement, and the most recent Supplement to the Information
Statement and any quarterly report made available by FHLMC can be obtained by
writing or calling Investor Inquiry Department at Freddie Mac at 8200 Jones
Branch Drive, McLean, Virginia 22102 (outside the Washington, D.C. metropolitan
area, telephone 800/336-FMPC; within the Washington, D.C. metropolitan area,
telephone 703/759-8160). The Sponsors do not participate in the preparation of
FHLMC's Offering Circulars, Information Statements or Supplements.
FHLMC GOLD CERTIFICATES
FHLMC Gold Mortgage Participation Certificates represent an undivided
interest in a group of mortgages (a 'FHLMC Certificate group') purchased by
FHLMC. FHLMC Gold Certificates are sold under the terms of a Mortgage
Participation Certificate Agreement. A FHLMC Gold Certificate may be issued
under either FHLMC's Cash Program or its Guarantor Program.
Mortgage loans underlying the FHLMC Gold Certificates included in the
Portfolio will consist of fixed rate mortgages with original terms to maturity
of approximately 15 years, substantially all of which are secured by first liens
on one-to-four family residential properties. Each mortgage loan must meet the
applicable standards set forth in the FHLMC Act. A FHLMC Certificate group may
include whole loans, participation interests in whole loans and undivided
interests in whole loans or participations comprising another FHLMC Certificate
group.
FHLMC guarantees the timely payment of interest, the amount of principal
scheduled to be paid by mortgagors due on the underlying mortgage loans to the
extent of the holder's pro rata share of the unpaid principal balance of such
mortgages, whether or not received by FMHLC, and the ultimate collection of all
principal on the underlying mortgage loans, without any offset or deduction.
FHLMC may remit the amount due on account of its guarantee of collection of
principal at any time after default on an underlying mortgage loan, but not
later than 30 days following (i) foreclosure sale, (ii) payment of the claim by
any mortgage insurer or the FHA or payment of the guaranty claim by the VA, or
(iii) the expiration of any right of redemption, whichever occurs later, but in
any event no later than one year after demand has been made upon the mortgagor
for accelerated payment of principal or payment of principal at maturity of a
mortgage. In taking actions regarding the collection of principal after default
on the mortgage loans underlying FHLMC Certificates, including the timing of
demand for acceleration, FHLMC reserves the right to exercise its judgment in
the same manner as for mortgages which it has purchased but not sold.
FHLMC Gold Certificates are not guaranteed by the United States or by any
Federal Home Loan Bank and do not constitute debts or obligations of the United
States or any Federal Home Loan Bank. The obligations of FHLMC under its
guarantee are obligations solely of FHLMC and are not backed by, nor entitled
to, the full faith and credit of the United States. Certain of the mortgages are
insured by the FHA or guaranteed by the VA, both of which are federal agencies.
Holders of the FHLMC Gold Certificates are entitled to receive interest at
the FHLMC Certificate rate on their pro rata share of the unpaid principal
balance of the underlying mortgage loans. Holders of FHLMC Gold Certificates are
also entitled to receive (i) their pro rata share of all principal payments on
the underlying mortgage loans received by FHLMC, including any scheduled
principal payments, full and partial prepayments of principal, and principal
received by FHLMC by virtue of condemnation, insurance, liquidation or
foreclosure, including repayments of principal resulting from acquisition by
FHLMC of the real property securing the mortgage and (ii) its pro rata share of
the amount of principal scheduled to be paid by mortgagors due on the underlying
mortgage loans, whether or not received by FMHLC. FHLMC is required to remit to
each registered FHLMC Gold Certificate holder its pro rata share of principal
payments on the underlying mortgage loans, interest at the FHLMC Gold
Certificate rate and any other sums such as prepayment fees, within 60 days of
the date on which payments are received by FHLMC.
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Under FHLMC's Cash Program, FHLMC purchases groups of whole mortgage loans
from sellers at specified percentages of their unpaid principal balances,
adjusted for accrued or prepaid interest, which, when applied to the interest
rate of the mortgage loans purchased, results in the yield (expressed as a
percentage) required by FHLMC. The required yield, which includes a minimum
servicing fee retained by the servicer, is calculated using the outstanding
principal balance of the mortgage loans, an assumed term and a prepayment period
as determined by FHLMC. Loans may be purchased by FHLMC at an amount above, at
or below 100% of the outstanding principal balance. The range of interest rates
on the mortgage loans in a FHLMC Certificate group under the Cash Program will
vary since mortgage loans are purchased and identified to a FHLMC Certificate
group based upon their yield to FHLMC rather than on the interest rate on the
mortgage loans. Under FHLMC's Guarantor Program, the interest rate on a FHLMC
Certificate is established based upon the lowest interest rate on the underlying
mortgage loans, minus a minimum servicing fee and the amount of FHLMC's
management and guaranty income as agreed upon between the seller and FHLMC.
The Federal Reserve Bank of New York maintains book-entry accounts with
respect to FHLMC Certificates and makes payments of interest and principal each
month to holders in accordance with the holders' instructions. The first payment
to a holder of a FHLMC Gold Certificate will normally be received by the holder
by the 15th day of the first month following the month in which the person
became a holder of the FHLMC Gold Certificate. Thereafter, payments will
normally be received by the 15th day of each month.
The FHLMC guarantees referred to herein relate only to timely payment of
principal of and interest on the Freddie Mac Gold PCs in the Portfolio and not
to the Units offered hereby.
DESCRIPTION OF THE FUND
THE PORTFOLIO
The Portfolio initially consists of contracts to purchase Freddie Mac Gold
PCs guaranteed as to payments of principal and interest by FHLMC, some of which
may have been purchased at a premium (see Risk Factors--Special Features of
Market Premium Securities). Certain Securities may have been purchased on a
when, as and if issued basis (see Investment Summary--Fund Portfolio). Interest
on these Securities begins accruing to the benefit of Holders on their
respective dates of delivery. Holders of Units will be 'at risk' with respect to
these Securities (i.e. may derive either gain or loss from fluctuations in the
offering side evaluation of the Securities) from the date they commit for Units.
Each group of Securities described above as having a specified range of
maturities includes individual Freddie Mac Gold PCs having varying ranges of
maturities within that mentioned. Each group is described as one category of
Securities with a single range of maturities because of current market
conditions that accord no difference in price among the Securities grouped
together on the basis of the difference in their maturity ranges. Accordingly,
as long as this market condition prevails, a purchase of securities with the
same coupon rate and a maturity date within the range mentioned above will be
considered as an acquisition of the same security.
SELECTION AND ACQUISITION OF SECURITIES
Experienced professional buyers and market analysts for Defined Asset
Funds, with access to thousands of different issues and extensive research, 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) the
types of these securities available; (ii) the prices of the securities relative
to other comparable securities and the extent to which certain of these
securities are trading at a discount from par or premium over par; and (iii) the
maturities of these securities.
The discount from par or premium over par on securities of the type
deposited in the Fund is dependent on a variety of factors, including general
money market conditions, general conditions of the corporate and mortgage backed
bond market and prevailing interest rates.
The Fund consists of the unamortized principal amount of the Securities (or
contracts to purchase the Securities) listed under Portfolio as may continue to
be held from time to time in the Fund and any additional Securities deposited in
the Fund in connection with the sale of additional Units to the public as
described under Structure above, together with the accrued and undistributed
interest thereon and undistributed cash representing payments and prepayments of
principal and uninvested cash realized from the disposition of Securities (see
Administration of the Fund--Portfolio Supervision). Neither the Sponsors nor the
Trustee shall be liable in any way for any default, failure or defect in any of
the Securities. However, should any contract
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deposited hereunder (or to be deposited in connection with the sale of
additional Units) fail, the Sponsors shall, on or before the next following
Distribution Day, deposit substitute securities pursuant to the terms of the
Indenture, or 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 obligation.
Because regular payments of principal are to be received over the life of
the Fund and certain of the Securities from time to time may be redeemed or will
mature in accordance with their terms or may be sold under certain circumstances
described herein, a Fund is not expected to retain its present size and
composition (see Life of the Securities and of the Fund below; Redemption). The
Indenture authorizes the Sponsors to increase the size and the number of Units
of a Trust by the deposit of additional Securities and the issue of a
corresponding number of additional Units.
THE UNITS
Because each Defined Asset Fund is a defined portfolio of preselected
securities, purchasers know in advance what they are investing in. A defined
portfolio is listed, so that generally the securities and their maturities are
known before they buy. Of course, the portfolio will change somewhat over time
as additional securities are deposited, as securities mature or as they are sold
to meet redemptions and in the limited other circumstances described below.
On the Initial Date of Deposit each Unit represented the fractional
undivided interest in the Fund set forth under Investment Summary. Thereafter,
if any Units are redeemed by the Trustee 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).
RATING OF UNITS
Standard & Poor's has rated the Units of the Fund AAA. This is the highest
rating assigned by Standard & Poor's (see Description of Standard & Poor's
Rating). Standard & Poor's has been compensated by the Underwriting Account for
its services in rating Units of the Fund.
LIFE OF THE SECURITIES AND OF THE FUND
Monthly payments and prepayments of principal are made to the Fund in
respect of the mortgages underlying the Securities (see Income; Estimated
Current Return; Estimated Long Term Return below). Also, Securities may be sold
under certain circumstances (see Redemption; Administration of the Fund--
Portfolio Supervision). Because the proceeds from such events received by the
Fund (less certain amounts deducted by the Trustee as described under Expenses
and Charges) will be distributed to Holders or paid out upon redemptions, the
aggregate principal amount of the Securities in the Portfolio, and accordingly
the principal amount of Securities underlying each Unit, will decrease over
time.
All of the mortgages in the pools relating to Freddie Mac Gold PCs in the
Portfolio are subject to prepayment without any significant premium or penalty
at the option of the mortgagors (i.e., the homeowners). While the mortgages on
one-to-four family dwellings underlying the Freddie Mac Gold PCs are amortized
over a period of up to 15 years, it has been the experience of the mortgage
industry that the average life of comparable mortgages, owing to prepayments, is
much less. Freddie Mac's weighted average life of 15-year conventional mortgages
in its portfolio is approximately 6 years. Pricing of FHLMC securities has been
based upon yield assumptions based on this estimate. The principal repayment
behavior of any individual mortgage will likely vary from this estimate. The
extent of this variation will depend on a variety of factors, including the
relationship between the coupon rate on a mortgage and prevailing mortgage
origination rates. As prevailing mortgage origination rates increase in
relationship to a mortgage coupon rate, the likelihood of prepayment of that
mortgage decreases. Conversely, during periods in which prevailing mortgage
origination rates are significantly less than a mortgage coupon rate, prepayment
of that mortgage becomes increasingly likely. Freddie Mac revises its weighted
average life estimate from time to time to better reflect both actual and
projected payment experience.
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Today, research analysts use complex formulae to scrutinize the prepayments
of mortgage pools in an attempt to predict more accurately the average life of
Freddie Mac Gold PCs. The bases for the calculation of the estimated average
life and the relationship of this calculation to Estimated Long Term Return are
more fully described below under Income; Estimated Current Return; Estimated
Long Term Return.
Generally speaking, a number of factors, including mortgage market interest
rates and homeowners mobility, will affect the average life of the Freddie Mac
Gold PCs in the Portfolio. Changes in prepayment patterns, as reported by FHLMC
on a periodic basis, if generally applicable to the mortgage pools related to
specific mortgage-backed securities, could influence yield assumptions used in
pricing the securities. Shifts in prepayment patterns are influenced by changes
in housing cycles and mortgage refinancing and are also subject to certain
limitations on the gathering of the data; it is impossible to predict how new
statistics will affect the yield assumptions that determine mortgage industry
norms and pricing of mortgage-backed Securities. Moreover, there is no assurance
that the pools of mortgage loans relating to the Securities in the Portfolio
will conform to prepayment experience as reported on a periodic basis, or the
prepayment experience of other mortgage lenders.
The value of the underlying Securities generally fluctuates inversely with
changes in interest rates. However, it should also be noted that the potential
for appreciation on the Securities, which could otherwise be expected to result
from a decline in interest rates, may tend to be limited by any increased
prepayments by mortgagors as interest rates decline. As payments and prepayments
of the principal of the underlying mortgages are received and paid out to
Holders, the principal amount of underlying Securities will decrease; in
addition, the termination of the Fund might be accelerated as a result of
prepayments made as described above (see Administration of the Fund--Amendment
and Termination). It is also possible that, in the absence of a secondary market
for the Units or otherwise, redemptions of Units may occur in sufficient numbers
to reduce the Portfolio to a size resulting in termination (termination for this
reason would be delayed if additional Units are issued).
Early termination of a Fund or early payments of principal may have
important consequences to the Holder; e.g., to the extent that Units were
purchased with a view to an investment of longer duration, the overall
investment program of the investor may require readjustment; or the overall
return on investment may be less or greater than anticipated, depending in part
on whether the purchase price paid for Units represented the payment of an
overall premium or a discount, respectively, above or below the stated principal
amounts of the underlying mortgages. In this connection, attention is directed
to the discussion of reinvestment (see Administration of the Fund--Reinvestment)
which affords to investors in Units the opportunity to automatically reinvest
distributions of principal resulting from prepayments or termination as
described above (as well as regular payments of interest and distributions of
principal) and thereby permits a continued investment in a portfolio of debt
securities the payments of interest and principal on which are backed by the
full faith and credit of the United States.
Additionally, the size and composition of a Fund will be affected by the
level of redemptions of Units that may occur from time to time and the
consequent sale of Securities (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 composition of the portfolio remaining at that time, the size of a
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 a Fund earlier than would otherwise
be the case (see Administration of the Fund--Amendment and Termination).
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 Securities 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
1,000 Units after deducting estimated annual fees and expenses expressed as a
percentage. It will change as Securities mature, are prepaid, exchanged,
redeemed, paid or sold, as replacement or additional Securities are purchased
and deposited in the Fund or as the expenses of the Fund change.
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In actual operation, payments received in respect of the mortgages
underlying the Securities will consist of a portion representing interest and a
portion representing principal. Although the aggregate monthly payment made by
the obligor on each mortgage remains constant (aside from optional prepayments
of principal), in the early years the larger proportion of each payment will
represent interest, while in later years, the proportion representing interest
will decline and the proportion representing principal will increase, although,
of course, the interest rate remains constant. Moreover, by reason of optional
prepayments, payments in the earlier years on the mortgages in the pools may be
substantially in excess of those required by the amortization schedules of these
mortgages; conversely, payments in later years may be substantially less since
the aggregate unpaid principal balances of the underlying mortgages may have
been greatly reduced--ultimately even sufficiently reduced to accelerate
termination of a Fund. To the extent that those underlying mortgages, bearing
the higher interest rates represented in a Portfolio are prepaid faster than the
other underlying mortgages, the net annual interest rate per Unit and the return
on the Units can be expected to decline. Monthly payments to the Holder will
reflect all of the foregoing factors.
Interest on the Securities in the Fund, less estimated fees of the Trustee,
Sponsors and Evaluator and certain other expenses, is expected to accrue at the
daily rate (based on a 360-day year) shown under Investment Summary. This rate
will change as securities are prepaid, 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 give different information
about the return to investors. Estimated Current Return on a Unit represents
annual cash to be received from the interest-bearing Securities in the Portfolio
(net of estimated annual expenses) divided by the Public Offering Price per Unit
(including sales charge). Estimated Current Return does not take into account
timing of distributions of income and other amounts (including delays) on Units,
and it only partially reflects the effect of premiums paid and discounts
realized in the purchase price of Units.
Estimated Long Term Return is a measure of the estimated return earned over
the estimated life of the Fund. This represents an average of the yields to
estimated average life of the Securities adjusted to reflect expenses and sales
charges. The estimated long-term return figure is calculated using an estimated
average life for the Securities. Estimated average life is an essential factor
in the calculation of Estimated Long Term Return. When the Fund has a shorter
average life than is estimated, Estimated Long Term Return will be higher if the
Fund contains Securities priced at a discount and lower if the Securities are
priced at premium. Conversely, if the Fund has a longer average life than is
estimated, Estimated Long Term Return will be lower when the Securities are
priced at a discount and higher if the Securities are priced at a premium. In
order to calculate estimated average life, an assumption is made about the
present average life of the Securities available in the marketplace with the
same coupon. With this profile, an annualized prepayment rate for the mortgages
underlying the Securities can be estimated using actual prepayment data reported
by FHLMC for recent periods. An industry model is also used to make assumptions
about the impact of aging on the prepayment of mortgage pools. Because recent
prepayment data and the industry model afford limited assumptions for
calculating estimated average life, analysis of several other factors is
included, among other things, the coupon, the housing environment, the present
interest rate (no change in interest rate is assumed) and historical trends.
Based upon these adjustments, an estimated prepayment rate for the remaining
term of the mortgage pool is determined, which is the basis for calculating the
estimated average life. Estimated average life is subject to change with
alterations in the data used in any of the underlying assumptions. The actual
average lives of the Securities and the actual long term returns will be
different from the estimated average lives and the estimated long term returns.
In calculating Estimated Long Term Return, the average yield for the
Portfolio is derived by weighing each Security's yield by the market value and
the time remaining to the estimated average life. The average Portfolio yield is
then adjusted to reflect estimated expenses and the maximum sales charge. This
calculation does not reflect certain delays in distributing income nor the
timing of other receipts and distributions on Units; depending on maturities, it
may therefore overstate or understate the impact of sales charges. Both of these
factors may result in a lower figure.
_____Both Estimated Current Return and Estimated Long Term Return can fluctuate
with changes in Portfolio composition, in market value of the Debt Obligations,
in Fund expenses and sales charges; these returns therefore can vary materially
from the figures at the time of purchase. Any difference between Estimated
Current Return and Estimated Long Term Return will probably fluctuate at least
as frequently. No return
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estimate can be predictive of an investor's actual return because an investor's
actual return will depend on many factors, including the value of the underlying
Debt Obligations when the investor purchases and sells Units of the Fund and the
period of time the investor holds the Units. Therefore, Estimated Current Return
and Estimated Long Term Return are designed to be comparative rather than
predictive. A yield calculation which is more comparable to an individual bond
may be higher or lower than Estimated Current Return or Estimated Long Term
Return which are more comparable to return calculations used by other investment
products.
Accrued Interest. In addition to the Public Offering Price, the price of a
Unit of a Fund 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 a Fund also include 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 Securities 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. 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 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.
Sales charges on Defined Asset Funds range from 5.5% to less than 0.5%.
This may be less than you might pay to buy a comparable fund, Defined Asset
Funds can be a cost-effective way to purchase and hold investments. Annual
operating expenses are generally lower than for managed funds. Because unit
investment trusts are not actively managed and have limited transactions, costs
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.
Record Days and Distribution Days are as set forth under Investment
Summary.
TAXES
TAXATION OF THE FUND
The Fund intends to qualify for and elect the special tax treatment
applicable to 'regulated investment companies' under Sections 851-855 of the
Internal Revenue Code of 1986, as amended (the 'Code'). Qualification and
election as a 'regulated investment company' involve no supervision of
investment policy or management by any government agency. If the Fund qualifies
as a 'regulated investment company' and distributes to Holders 90% or more of
its taxable income without regard to its net capital gain (net capital gain is
defined as the excess of net long-term capital gain over net short-term capital
loss), it will not be subject to Federal income tax on the portion of its
taxable income (including any net capital gain) it distributes to Holders in a
timely manner. In addition, the Fund will not be subject to the 4% excise tax on
certain undistributed income of 'regulated investment companies' to the extent
it distributes to Holders in a timely manner at least 98% of its taxable income
(including any net capital gain). It is anticipated that the Fund will not be
subject to Federal income tax or the excise tax because the Indenture requires
the distribution of the Fund's taxable income (including any net capital gain)
in a timely manner. Although all or a portion of the Fund's taxable income
(including any net capital gain) for a calendar year may be distributed shortly
after the end of the calendar year, such a distribution will be treated for
Federal income tax purposes as having been received by Holders during the
calendar year.
DISTRIBUTIONS
Distributions to Holders of the Fund's interest income, gain that is
treated as ordinary income under the market discount rules, and any net
short-term capital gain in any year will be taxable as ordinary income to
Holders to the extent of the Fund's taxable income (without regard to its net
capital gain) for the year. Any excess will be treated as a return of capital
and will reduce the Holder's basis in his Units and, to the extent that such
distributions exceed his basis, will be treated as a gain from the sale of his
Units as discussed below. It is anticipated that substantially all of the
distributions of the Fund's interest income, ordinary gain and any net
short-term capital gain will be taxable as ordinary income to Holders.
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Distributions that are taxable as ordinary income to Holders will
constitute dividends for Federal income tax purposes but will not be eligible
for the dividends-received deduction for corporations. Distributions of the
Fund's net capital gain (designated as capital gain dividends by the Fund) will
be taxable to Holders as long-term capital gain, regardless of the time the
Units have been held by a Holder. A Holder will recognize taxable gain or loss
if the Holder sells or redeems his Units. Any gain or loss arising from the sale
or redemption of Units will be capital gain or loss, except in the case of a
dealer. Capital gains are currently 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
noncorporate 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. However, any
capital loss on the sale or redemption of a Unit that a Holder has held for six
months or less will be a long-term capital loss to the extent of any capital
gain dividends previously distributed to the Holder by the Fund. The deduction
of capital losses is subject to limitations.
Payments of principal on underlying mortgages or sales of Securities by the
Fund (to meet redemptions or otherwise) may give rise to gain (including market
discount) to the Fund. The amount of gain will be based upon the cost of the
Security to the Fund and will be without regard to the value of the Security
when a particular Holder purchases his Units. Such gain must be distributed to
Holders to avoid Federal income (or excise) taxation to the Fund. In the case of
sales to meet redemptions, some or all of such gain must be so distributed to
nonredeeming Holders. Any such distribution will be taxable to Holders as
discussed above (i.e., as ordinary income or long-term capital gain), even if as
to a particular Holder the distribution economically represents a return of
capital. Since such distributions do not reduce a Holder's tax basis in his
Units, a Holder will have a corresponding capital loss (or a reduced amount of
gain) on a subsequent sale or redemption of his Units.
The Federal tax status of each year's distributions will be reported to
Holders and to the Internal Revenue Service. The foregoing discussion relates
only to the tax treatment of distributions by the Fund to U.S. Holders. Holders
who are not U.S. citizens or residents should be aware that distributions from
the Fund generally will be subject to a withholding tax of 30%, or a lower
treaty rate, and should consult their own tax advisers to determine whether
investment in the Fund is appropriate. Distributions may also be subject to
state and local taxation and Holders should consult their own tax advisors in
this regard.
Distributions from the Fund will be taxed in the manner described above
regardless of whether such distributions are actually received by the Holder or
are automatically reinvested.
RETIREMENT PLANS
This Series of Defined Asset Funds--Government Securities Income Fund may
be well suited for purchase by IRAs, Keogh plans, pension funds and other
qualified retirement plans, certain of which are briefly described below.
Generally, capital gains and income received in each of the foregoing plans are
exempt from Federal taxation. All distributions from these plans are generally
treated as ordinary income but may, in some cases, be eligible for special 5 or
10 year averaging or tax-deferred rollover treatment. Holders of units in IRAs,
Keogh plans and other tax-deferred retirement plans should consult their plan
custodian as to the appropriate disposition of distributions. Investors
considering participation in any of these plans should review specific tax laws
related thereto and should consult their attorneys or tax advisers with respect
to the establishment and maintenance of any of these plans. These plans are
offered by brokerage firms, including each of the Sponsors of the Fund, and
other financial institutions. Fees and charges with respect to these plans may
vary.
Retirement Plans for the Self-Employed--Keogh Plans. Units of a Fund may be
purchased by retirement plans established pursuant to the Self-Employed
Individuals Tax Retirement Act of 1962 ('Keogh plans') for self-employed
individuals, partnerships or unincorporated companies. Qualified individuals may
generally make annual tax-deductible contributions up to the lesser of 20% of
annual compensation or $30,000 in a Keogh plan. The assets of the plan must be
held in a qualified trust or other arrangement which meets the requirements of
the Code. Generally there are penalties for premature distributions from a plan
to certain participants before attainment of age 59 1/2, except in the case of a
participant's death or disability. Keogh plan participants may also establish
separate IRAs (see below) to which they may contribute up to an additional
$2,000 per year ($2,250 in a spousal account).
Individual Retirement Account--IRA. Any individual (including one covered
by an employer retirement plan) can establish an IRA or make use of a qualified
IRA arrangement set up by an employer or union for the purchase of Units. Any
individual can make a contribution to an IRA equal to the lesser of $2,000
($2,250 in a spousal account is also established) or 100% of earned income; such
investment must be made in cash. However,
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the deductible amount an individual may contribute will be reduced if the
individual's adjusted gross income exceeds $25,000 (in the case of a single
individual), $40,000 (in the case of married individuals filing a joint return)
or $200 (in the case of a married individual filing a separate return). A
married individual filing a separate return will not be entitled to any
deduction if the individual is covered by an employer-maintained retirement plan
without regard to whether the individual's spouse is an active participant in an
employer retirement plan. Unless nondeductible contributions were made in 1987
or a later year, all distributions from an IRA will be treated as ordinary
income but generally are eligible for tax-deferred rollover treatment. It should
be noted that certain transactions which are prohibited under Section 408 of the
Code will cause all or a portion of the amount in an IRA to be deemed to be
distributed and subject to tax at that time. A participant's entire interest in
an IRA must be, or commence to be, distributed to the participant not later than
the April 1 following the taxable year during which the participant attains age
70 1/2. Taxable distributions made before attainment of age 59 1/2, except in
the case of the participant's death or disability, or where the amount
distributed is part of a series of substantially equal periodic (at least
annual) payments that are to be made over the life expectancies of the
participant and his or her beneficiary, are generally subject to a surtax in an
amount equal to 10% of the distribution.
PUBLIC SALE OF UNITS
PUBLIC OFFERING PRICE
The Public Offering Price of Units during the initial offering period is
computed by dividing the offering 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 offering side evaluation per Unit (the net amount
invested). For 'secondary market' sales the Public Offering Price of 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 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 Price
of the Units will vary from day to day in accordance with fluctuations in the
evaluations of the underlying Securities.
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 100,000 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 and introducing dealer concessions are as follows:
INITIAL OFFERING PERIOD
<TABLE>
<CAPTION>
SALES CHARGE
(GROSS UNDERWRITING PROFIT) DEALER PRIMARY
---------------------------------- CONCESSION MARKET
AS PERCENT OF AS PERCENT OF AS PERCENT OF CONCESSIONS
OFFER SIDE PUBLIC NET AMOUNT PUBLIC TO INTRODUCING
NUMBER OF UNITS OFFERING PRICE INVESTED OFFERING PRICE DEALERS
<S> <C> <C> <C> <C>
----------------- ------------- -------------- ---------------
Less than 100,000................... 3.25% 3.359% 2.113% $ 23.40
100,000-499,999..................... 2.75 2.828 1.788 19.80
500,000-749,999..................... 2.00 2.041 1.300 14.40
750,000-999,999..................... 1.25 1.266 0.813 9.00
1,000,000 or more................... 1.00 1.010 0.650 7.20
</TABLE>
10
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SECONDARY MARKET SALES
<TABLE>
<CAPTION>
SALES CHARGE
(GROSS UNDERWRITING PROFIT) DEALER
-------------------------------- CONCESSION
AS PERCENT OF AS PERCENT OF AS PERCENT OF
BID SIDE PUBLIC NET AMOUNT PUBLIC
NUMBER OF UNITS OFFERING PRICE INVESTED OFFERING PRICE
<S> <C> <C> <C>
--------------- ------------- --------------
Less than 100,000................................. 3.50% 3.627% 2.275%
100,000-499,999................................... 3.00 3.093 1.950
500,000-749,999................................... 2.25 2.302 1.463
750,000-999,999................................... 1.50 1.523 0.975
1,000,000 or more................................. 1.25 1.266 0.813
</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 may purchase
Units of a Fund at prices based on a reduced sales charge of not less than $5.00
per 1,000 Units. In addition, certain foreign affiliates of certain of the
Sponsors may purchase Units at a price equal to the offering side evaluation of
the Securities divided by the number of Units outstanding plus a reduced sales
charge of 15% of the otherwise applicable sales charge.
Evaluations of the Securities are determined by the Evaluator, taking into
account the same factors referred to under Redemption--Computation of Redemption
Price per Units. 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). The term 'business day', as
used herein and under 'Redemption', shall exclude Saturdays and Sundays; the
following holidays as observed by the New York Stock Exchange: New Year's Day,
Washington's birthday, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas; and the following Federal holidays: Martin Luther
King's birthday, Columbus Day and
Veteran's Day.
There is a period of a few days, beginning on the first day of each month,
during which the total amount of payments (including prepayments, if any) of
principal for the preceding month on the various mortgages underlying each of
the Securities in the Portfolio will not yet have been reported by the issuer
and made generally available to the public. During this period, the precise
principal amount of the underlying mortgages remaining outstanding for each
Security in the Portfolio, and therefore the precise principal amount of such
Security, will not be known, although the precise principal amount outstanding
for the preceding month will be known. Therefore, the precise amount of
principal to be acquired by the Trustee as a holder of these Securities and
distributed to Holders with the next monthly distribution will not be known. The
Sponsors do not expect that the amounts of these prepayments and the differences
in principal amounts from month to month will be material in relation to the
Trusts due to the number of mortgages underlying each Freddie Mac Gold PC and
the number of these Securities in a Fund. However, there can be no assurance
that they will not be material. For purposes of the determination by the
Evaluator and for purposes of calculations of accrued interest on the Units,
during the period in each month prior to the time when the precise amounts of
principal of the Securities for the month become publicly available, the
Evaluator will base its evaluations and calculations, which are the basis for
calculations of the Public Offering Price, the Sponsors' Repurchase Price and
the Redemption Price per Unit, upon the principal amount outstanding for the
preceding month (see Redemption). The Sponsors expect that the differences in
these principal amounts from month to month will not be material to the Fund.
Nevertheless, the Sponsors will adopt procedures as to pricing and evaluation
for Units, with such modifications, if any, deemed necessary by the Sponsors for
the protection of the Holders, upon notice to the Holders, designed to minimize
the impact of these differences upon the calculation of the Public Offering
Price per Unit, the Repurchase Price per Unit in the secondary market or the
Redemption Price per Unit.
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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 offering side evaluation of
the Securities--see above) exceeded the Sponsors' Repurchase Price 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 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. Under current market
conditions the bid prices for Freddie Mac Gold PCs are expected to be
approximately 1/4 to 3/8 of 1% lower than the offering prices thereof. On the
business day prior to the date of this Prospectus, the bid side evaluation was
lower than the offering side evaluation by the amount set forth under Portfolio.
For this reason, among others (including fluctuations in the market prices of
these Securities and the fact that the Public Offering Price includes the 3.25%
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 those Units.
PUBLIC DISTRIBUTION
During the initial offering period (i) for Units issued on the Initial Date
of Deposit and (ii) for additional Units issued after the Initial Date of
Deposit in respect of additional Freddie Mac Gold PCs deposited by the Sponsors
following the Initial Date of Deposit, Units will be distributed to the public
at the Public Offering Price through the Underwriting Account set forth herein
and dealers. The initial offering period in each case is 30 days or less if all
Units are sold prior thereto. So long as all Units initially offered have not
been sold, the Sponsors may extend the initial offering period for up to four
additional successive 30-day periods. Upon the completion of the initial
offering 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 provided above.
The Sponsors intend to qualify Units for sale in any 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 amount per 1,000 Units 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 in the 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 offering 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. In addition, any Sponsor or
Underwriter may realize profits or sustain losses in respect of Securities
deposited in a Fund that 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 that additional Units
continue to be offered for sale to the public the Underwriting Account also may
realize profits or sustain losses as a result of fluctuations after the 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 the
settlement dates for 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 the Units (which include the
sales charge and
12
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<PAGE>
which may include the difference between the bid side and the offering side
evaluation for Units sold pursuant to the Reinvestment Plan) 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 on the basis of 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). The
secondary market provides Holders with a fully liquid investment. They can cash
in units at any time without a fee. The Sponsors may discontinue purchases of
Units of this Series at prices based on the bid side evaluation of Securities
should the supply of Units exceed demand, or for some other business reason. In
this event the Sponsors may nonetheless purchase Units, as a service to Holders,
at a price based on the current redemption price for those Units (see
Redemption). 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. On any given day on which the secondary market is maintained the
price offered by the Sponsors for the purchase of Units shall be an amount not
less than the Redemption Price per Unit, based on the aggregate bid side
evaluation of the Securities on the date on which the Units are tendered for
redemption (see Redemption). 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 procedures described below if
they determine it is undesirable to continue to hold these Units in their
inventory. Factors which the Sponsors will consider in making such a
determination will include the number of units of all series of all funds which
they hold in their inventory, 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 equal to the Redemption Price per Unit
(see Market for Units), Units may be redeemed at the corporate trust office of
the Trustee upon tender 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 such other manner as may be acceptable to the Trustee. Such guaranteed
signature must also accompany any request for redemption of an uncertificated
Unit. In certain instances the Trustee may require additional documents,
including 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 in cash an amount per Unit equal to the
Redemption Price per Unit (see below) as determined as of the Evaluation Time
next following the tender. 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 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).
13
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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 to meet redemptions (see Administration of the
Fund--Accounts and Distributions). The Securities will be selected by the
Sponsors in accordance with procedures specified in the Indenture and so as to
maintain, as closely as practicable, the percentage relationship between the
principal amounts of Securities of specified interest rates and ranges of
maturities in the Portfolio at the time of sale. 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 to $100,000.
To the extent that Securities are sold, the size 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. 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.
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.
The right of redemption may be suspended and payment postponed for any
period (1) during which the New York Stock Exchange, Inc. is closed other than
for customary weekend and holiday closings, or (2) during which, as determined
by the Securities and Exchange Commission ('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 such
other periods as the Commission 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 day on which the New York Stock Exchange is open, 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), (c) accrued and unpaid interest
on the Securities up to but not including the date of redemption and (d) all
other assets of the Fund; deducting therefrom the sum of (x) taxes or other
governmental charges against the Fund not previously deducted, (y) accrued fees
and expenses of the Trustee (including legal and auditing expenses), the
Evaluator and counsel, and certain other expenses and (z) cash held for
distribution to Holders of record as of a date prior to the evaluation; and
dividing the result by the number of Units outstanding as of the date of
computation (Sections 4.01 and 5.01).
The aggregate current bid or offering price evaluation of the Securities is
determined by the Evaluator in the following manner: (a) on the basis of current
bid or offering prices for the Securities, (b) if bid or offering prices are not
available for any Securities, on the basis of current bid or offering prices for
comparable securities, (c) by determining the value of the Securities on the bid
or offering side of the market by appraisal or (d) by any combination thereof.
The Evaluator may obtain current price information as to the Securities from
investment dealers or brokers (including the Sponsors) which customarily deal in
this type of security.
While Securities of the type included in the Portfolio involve minimal risk
of loss of principal, due to variations in interest rates the market value of
these Securities, and Redemption Price per Unit, can be expected to fluctuate
during the period of an investment in the Fund.
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, which is earned for portfolio
supervisory services, is based on the face amount of Securities in the Fund on
the Initial Date of Deposit and on the first business day of each calendar day
thereafter, except that
14
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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. The
Portfolio Supervision 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 a Fund, but at no time will the total amount they
receive for supervisory services rendered to all series of Defined Asset
Funds--Government Securities Income Fund in any calendar year exceed the
aggregate cost to them of supplying these services in that year. In addition,
the Sponsors may also be reimbursed for bookkeeping or other administrative
services provided to the Fund in amounts not exceeding their costs of providing
these services. The Trustee 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. 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.
OTHER CHARGES
These include: (a) fees of the Trustee for extraordinary services, (b)
certain expenses of the Trustee (including legal and auditing expenses) and of
counsel designated by the Sponsors, (c) various governmental charges, (d)
expenses and costs of any action taken to protect a Trust, (e) indemnification
of the Trustee for any losses, liabilities and expenses incurred without gross
negligence, bad faith or wilful misconduct on its part, (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
and (g) expenditures incurred in contacting Holders upon termination of a Trust.
The amounts of these charges and fees are secured by a lien on the Trust and, if
the balances in the Income and Capital Accounts (see below) are insufficient to
provide for amounts payable by the Trust, the Trustee has the power to sell
Securities to pay such amounts.
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 current lists of the Securities and a copy of the Indenture, which are
available to Holders for inspection at reasonable times during business hours.
ACCOUNTS AND DISTRIBUTIONS
The terms of the Securities provide for payment to the holders thereof
(including the Fund), on the fifteenth day of each month, of amounts collected
by or due to the issuers thereof with respect to the underlying mortgages during
the preceding month, except for the first payment, which is not due until 45
days after the initial issue date of the Security. Interest received, including
that part of the proceeds of any disposition of Securities which represents
accrued interest and any late payment penalties, is credited to an Income
Account and other receipts to a Capital Account. Distributions 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 distributable cash balance to the Income Account, plus his
pro rata share of the distributable cash balance of the Capital Account,
computed as of the close of business on the preceding Record Day. Proceeds
received from the disposition 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 second 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. No distribution (other than distributions of capital gains)
need be made from the Capital Account if the balance therein, exclusive of
capital gains therein, is less than the amount set forth under Investment
Summary. A Reserve Account may be created by the Trustee by withdrawing from the
Income or Capital Accounts, from time to time, such amounts as it deems
requisite to establish a reserve for any taxes or other governmental charges
that may be payable out of the Fund. Funds held by the Trustee in the various
accounts created under the Indenture do not bear interest.
REINVESTMENT
Monthly Income distributions and annual distributions of any net capital
gain income (i.e., the excess of capital gains over capital losses) and other
capital distributions in respect of Units may be reinvested in
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additional Units of the Fund at a reduced sales charge pursuant to a
reinvestment plan (the 'Reinvestment Plan'). Except under certain ineligible
retirement plans, any Holder (including a Holder which is a broker or nominee of
a bank or other financial institution) may, by filing with the Trustee a written
notice of election at least 10 days before the record date for the first
distribution to which it is to apply, elect to have distributions of principal
and redemption proceeds, or interest, or both reinvested in the Reinvestment
Plan. Elections must be in writing and received by the Trustee at least 10 days
before the record date for the first distribution to which they are to apply.
Elections may be modified or revoked on similar notice. Distributions on any
account for which no election is received will be paid in cash.
Monthly distributions, to the extent reinvested in the Fund pursuant to the
Reinvestment Plan, will be used by the Trustee to purchase additional Units in
accordance with the requirements for purchase of additional securities (see
Description of the Fund--Structure). Such reinvestment will be at a reduced
sales charge of 1.00% of the Public Offering Price--based on the offer side
evaluation of the Securities--on (or as soon as possible after) the close of
business on the Distribution Date (1.010% of the net amount invested in
Securities) to take into account that the purchase of Units for the Reinvestment
Plan results in less selling expense. Under the Reinvestment Plan, the Fund will
pay the distributions to the Trustee which in turn will purchase for the Holder
whole and fractional Units at the price and time indicated above, will add the
Units to the Holder's account, and will send the Holder an account statement
reflecting the reinvestment.
The Trustee will issue Certificates for whole Units purchased through the
Reinvestment Plan only if the Holder so requests. Certificates will not be
issued for fractional Units. When Certificates are not issued, the Trustee will
credit the Holder's account with the number of Units purchased. Each Holder will
receive account statements both annually and after each Reinvestment Plan
transaction to provide the Holder with a record of the total number of Units in
his account. This relieves the Holder of responsibility for safekeeping of
Certificates and, should he sell his Units, eliminates the need to deliver
Certificates. The Holder may at any time request the Trustee (at the Fund's
cost) to issue Certificates for Units. The costs of administering the
Reinvestment Plan will be borne by the Fund and thus will be borne indirectly by
all Holders.
Holders of Units held in 'street name' by their broker or dealer should
contact their account executive or sales representative to determine whether or
not participation in the Reinvestment Plan through that broker or dealer is
available. Holders of Units participating in the Reinvestment Plan through their
broker or dealer will receive confirmation of their reinvestments in their
regular account statements or on a quarterly basis.
Holders participating in the Reinvestment Plan will be taxed on their
reinvested distributions in the manner described under Taxes even though
distributions are automatically reinvested in the Fund.
The Sponsors may at any time cease to offer the Reinvestment Plan. After
that time, all Holders including those who participate in the Reinvestment Plan,
will receive all Monthly Income Distributions in cash unless the Sponsors
provide another reinvestment alternative at that time.
Holders of Units in IRA's, Keogh plans, and other tax-deferred retirement
plans should consult with their plan custodian as to the appropriate disposition
of distributions (see Taxes--Retirement Plans).
PORTFOLIO SUPERVISION
Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Agent for the
Sponsors, may direct the disposition of Securities upon default in payment of
principal or interest which is not promptly cured by the guarantor of the
Securities, institution of certain legal proceedings, default in payment of
principal or of interest on other securities guaranteed by instrumentalities of
the United States, or decline in price or the occurrence of other market or
credit factors that in the opinion of the Sponsors would make the retention of
such Securities detrimental to the interest of the Holders or if the disposition
of these Securities is necessary in order to enable the Fund to make
distributions of the Funds capital gain net income or desirable in order to
maintain the qualification of the Fund as a regulated investment company under
the Code.
If a default in the payment of principal or interest on any of the
Securities occurs and if the Sponsors fail to instruct the Trustee to sell or
hold such Securities the Indenture provides that the Trustee may, within 30 days
of such failure by the Sponsors, sell such Securities (Section 3.10). The
Sponsors are authorized by the Indenture to direct the Trustee to accept or
reject certain plans for the refunding or refinancing of any of the Securities.
The Sponsors are authorized to direct the Trustee to acquire replacement
obligations ('Replacement Securities') to replace contracts for securities which
have failed. Replacement Securities will be deposited into
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the Fund at a purchase price that does not exceed the amount of funds reserved
for the purchase of the failed securities and that results in a yield to
maturity and in a current return, in each case as of that date of deposit, that
are substantially 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 securities. The
Replacement Securities shall be Freddie Mac Gold PCs, with maturity dates
substantially the same as those of the failed securities and shall not be when,
as and if issued obligations. The Indenture also requires that the purchase of
Replacement Securities will not disqualify the Fund as a 'regulated investment
company' under the Code.
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 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. Exact duplication of
percentage relationships may be impossible because fractions of Gold PCs may not
be purchased. 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 Trust 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
Trust or any of the Sponsors, the Sponsors may (1) deposit cash or 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) Securities of one
or more other issues originally deposited or (3) deposit (or instruct the
Trustee to purchase) a Replacement Security which will meet the conditions
described above.
REPORTS TO HOLDERS
The Trustee will furnish Holders with each distribution a statement of the
amounts of interest and other receipts which are being distributed, expressed in
each case as a dollar amount per Unit. Within a reasonable period of time after
the end of each calendar year (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 such year in the Income,
Capital and Reserve Accounts, (ii) identifying Securities sold and purchased
during and listing Securities held at the end of such year, (iii) stating the
Redemption Price per Unit based upon the computation thereof made on the
thirty-first day of December (or the last business day prior thereto) of such
calendar year, and (iv) specifying amounts actually distributed during such
calendar year from the Income Account and from the Capital Account, separately
expressed both as total dollar amounts and as dollar amounts per Unit
outstanding on the record dates for such distributions. The accounts of the Fund
shall be audited not less frequently than annually by independent certified
public accountants designated by the Sponsors, and the report of such
accountants shall be furnished by the Trustee to Holders upon request.
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.
CERTIFICATES
Each purchaser is entitled to receive, on request, without charge (except
perhaps a small mailing charge) a registered Certificate for his Units. 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 such other amount as may be 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 such transaction
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.
Alternatively, Holders may elect to hold their Units in uncertificated
form. The Trustee will credit each such Holder's account with the number of
Units purchased by such Holder. This relieves the Holder of the
17
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<PAGE>
responsibility of safekeeping of Certificates and of the need to deliver
Certificates upon sale of Units. Uncertificated Units are transferable through
the same procedures applicable to Units evidenced by Certificates (see above),
except that no Certificate need be presented to the Trustee and none will be
issued upon transfer unless requested by the Holder. A Holder may at any time
request the Trustee (at the Trust's cost) to issue Certificates for Units.
AMENDMENT AND TERMINATION
The 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 such other provisions as shall 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 Trustee, or any
of the provisions thereof may be waived, with the consent of the Holders of 51%
of the Units then outstanding, provided that no such amendment or waiver will
reduce the interest in the Fund of any Holder without the consent of such Holder
or reduce the percentage of Units required to consent to any such amendment or
waiver without the consent of all Holders.
The Indenture will terminate 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. The Indenture 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 written instrument executed by the Sponsors and
consented to by the Holders of 51% of the Units. The Trustee will deliver
written notice of any termination to each Holder within a reasonable period of
time prior to such termination, specifying the times at which the Holders may
surrender their Certificates for cancellation. Within a reasonable period of
time after such 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 of accrued and unpaid fees, taxes and
governmental and other charges, such Holder's interest in the Income and Capital
Accounts. Such distribution will normally be made by mailing a check in the
amount of each Holder's interest in such accounts to the address of such Holder
appearing on the record books of the Trustee.
RESIGNATION, REMOVAL AND LIMITATIONS ON LIABILITY
THE TRUSTEE
The Trustee or any successor may resign upon notice to the 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 under certain conditions the Sponsors determine
in good faith that its replacement is in the best interests of the Holders. Such
resignation or removal shall become effective upon the acceptance of appointment
by the successor. In case of such 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. The Trustee shall be under no liability for any
action taken in good faith in reliance on prima facie properly executed
documents or for the disposition of monies or Securities, nor shall it be liable
or responsible in any way for depreciation or loss incurred by reason of the
sale of any Security. This provision, however, shall not protect the Trustee in
cases of wilful misfeasance, bad faith, gross 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
such action 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.
THE 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. Determinations by the Evaluator under the Indenture shall be made
in good faith upon the basis of the best information available to it; provided,
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<PAGE>
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. 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.
THE SPONSORS
Any Sponsor may resign if one remaining Sponsor maintains a net worth of
$2,000,000 and is agreeable to such resignation. 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 shall fail 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 Trust or (c) continue to act as Trustee without terminating the
Indenture. Merrill Lynch has been appointed by the other Sponsors as agent for
purposes of taking action under the Indentures. If the Sponsors are unable to
agree with respect to action to be taken jointly by them under the Indentures
and they cannot agree as to which Sponsor shall continue to act as sole Sponsor,
then Merrill Lynch shall continue to act as sole Sponsor. 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 such Sponsor is
automatically discharged and the other Sponsors shall act as sole Sponsors. 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. 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 such event it shall be relieved of all
further liability under the Indenture.
MISCELLANEOUS
TRUSTEE
The Trustee and its address are named on the back cover page of this
Prospectus. The Trustee is subject to supervision by the Federal Deposit
Insurance Corporation, the Board of Governors of the Federal Reserve System and
either the Comptroller of the Currency or state banking regulators.
LEGAL OPINION
The legality of the Units has been passed upon by Davis Polk & Wardwell,
450 Lexington Avenue, New York, New York 10017, as special counsel for the
Sponsors.
AUDITORS
The Statement of Condition, including the Portfolio of the Fund, included
herein, has been audited by Deloitte & Touche LLP, independent accountants, as
stated in their opinion appearing herein, and has been 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 directly or
indirectly in the investment advisory business, and in the underwriting,
securities and commodities brokerage business, and is a member of the New York
Stock Exchange, Inc., other major securities exchanges and commodity exchanges,
and the National Association of Securities Dealers, Inc. Merrill Lynch, Pierce,
Fenner & Smith Incorporated is a wholly-owned subsidiary of Merrill Lynch & Co.,
Inc. Smith Barney Inc. is an indirect wholly-owned subsidiary of The Travelers
Inc. Prudential Securities Incorporated is an indirectly wholly-owned subsidiary
of the Prudential Insurance Company of America. Dean Witter Reynolds Inc. is the
principal operating subsidiary of Dean Witter, Discover & Co. PaineWebber
Incorporated 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
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sale of securities of these companies and sell securities to such companies in
their capacities as brokers or dealers in securities.
DEFINED ASSET FUNDS
The Sponsors have maintained secondary markets in these funds for over 20
years. For decades informed investors have purchased unit investment trusts for
dependability and professional selection of investments. Different Defined Asset
Funds offer 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
Asset 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 Asset Funds to plan for your objectives.
One of your most important investment decisions may be how you divide your
money among asset classes. Spreading your money among different kinds of
investments can balance the risks and rewards of each one. Sales material for
the Fund may show the average annual compounded rate of return of selected asset
classes over the most recent 10-year and 20-year periods for which information
is available and may compare such returns to the rate of inflation over the same
periods.
By purchasing Defined Asset Funds, investors not only avoid the
responsibility of selecting individual securities by themselves, but also gain
the advantage of a higher degree of safety by holding interests in securities of
several different issuers. Spreading your investment among different securities
and issuers reduces your risk but does not eliminate it. Defined Municipal Bond
Funds offer a simple and convenient means for investors to earn monthly income
free from regular Federal income tax. When individual bonds are called or
mature, investors might consider reinvesting their proceeds in Defined Municipal
Bond Funds. The securities in managed funds continually change. In Defined Asset
Funds, the portfolio is defined, so that generally the securities, maturities,
call dates and ratings are known before you buy. The defined portfolio of
securities listed in the prospectus and regular income distributions make
Defined Bond Funds a dependable investment. Investors know when they buy what
their estimated income, current and long-term returns will be, subject to credit
and market risks on the bonds or if the fund portfolio or expenses change.
Investors buy bonds for dependability--they know what they can expect to
earn and that principal is distributed as the bonds mature. Defined Bond Funds
can offer most of these benefits, with steady income and a yield and maturity
similar to owning bonds directly. The tax exemption of municipal securities,
which makes them attractive to high-bracket taxpayers, is offered by Defined
Municipal Series. Defined Corporate Income Funds, with higher current returns
than municipal or government funds, are suitable for IRAs and other tax-
advantaged accounts. 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 a potential to profit
from changes in currency values and possibly from interest rates higher than
paid on comparable U.S. bonds, but investors incur a higher risk for these
potentially greater returns. Historically, stocks have offered growth of
capital, and thus some protection against inflation, over the long term. Defined
Equity Income Funds offer a participation in the stock market. 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 trends. Utility Stock Series, consisting of issuers with
established reputations for regular cash dividends, seek to benefit from
dividend increases. Select Ten Portfolios seek total return by investing for one
year in the ten highest yielding stocks on a designated stock index.
DESCRIPTION OF STANDARD & POOR'S RATING (AS DESCRIBED BY STANDARD & POOR'S)
A Standard & Poor's rating on the units of an investment trust (hereinafter
referred to collectively as 'units' and 'fund') is a current assessment of
creditworthiness with respect to the investments held by such fund. This
assessment takes into consideration the financial capacity of the issuers and of
any guarantors, insurers, lessees, or mortgagors with respect to such
investments. The assessment, however, does not take into account the extent to
which fund expenses will reduce payment to the unit holder of the interest and
principal required to be paid on portfolio assets. In addition, the rating is
not a recommendation to purchase, sell, or hold units, as the rating does not
comment as to market price of the units or suitability for a particular
investor.
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Units rated AAA represent interests in funds composed exclusively of
securities that, together with their credit support, are rated AAA by Standard &
Poor's and/or certain short-term investments. This AAA rating is the highest
rating assigned by Standard & Poor's to a security. Capacity to pay interest and
repay principal is extremely strong.
EXCHANGE OPTION
_____Holders may exchange Units at a reduced sales charge for units of one or
more series of the types listed in Appendix A ('Exchange Funds'). This includes
the current maximum sales charge and exchange fee for each type of Exchange
Fund. (If units held less than five months are exchanged for a series with a
higher regular sales charge, the Holder will pay the difference between the
sales charges paid on the units exchanged and the regular sales charge for the
units acquired, if greater than the exchange fee.)
_____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. Appendix A lists certain characteristics of each
type of Exchange Fund which a Holder should consider in determining whether it
would be an appropriate investment and therefore an appropriate exchange for
Units of the Fund.
_____Holders of Exchange Funds can similarly exchange units of those funds for
Units of the Fund. However, units of series offered at a maximum applicable
sales charge below 3.50% of the public offering price (including certain series
of Exchange Funds listed in Appendix A) are not eligible for exchange except
that Holders may exchange Units of the Fund for Freddie Mac or Select Ten Series
during their initial offering periods. Holders of other registered unit
investment trusts originally offered at a maximum applicable sales charge of at
least 3.0% ('Conversion Trusts') may similarly acquire Units at the exchange
fee.
_____To make an exchange, a Holder should contact his financial professional to
find out what suitable Exchange Funds are available and to obtain a prospectus.
The Holder may only acquire units of an Exchange Fund in which the Sponsors
maintain a secondary market and which are lawfully available for sale in the
state where the Holder resides. Except for the sales charge, an exchange is like
any other purchase and sale of units in the secondary market. An exchange is a
taxable event normally requiring recognition of any gain or loss on the units
exchanged. However, the Internal Revenue Service may seek to disallow a loss if
the portfolio of the units acquired is not materially different from the
portfolio of the units exchanged; Holders should consult their own tax advisers.
If the proceeds of units exchanged is insufficient to acquire a whole number of
Exchange Fund units, the Holder may pay the difference in cash (not exceeding
the price of a single unit acquired).
_____As the Sponsors are not obligated to maintain a secondary market in any
series, there can be no assurance that units of a desired series will be
available for exchange. The Exchange Option may be amended or terminated by the
Sponsors at any time, without notice to Holders.
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<PAGE>
APPENDIX A
EXCHANGE FUNDS
<TABLE>
<S> <C> <C> <C>
MAXIMUM REDUCED
NAME OF APPLICABLE SALES CHARGE FOR INVESTMENT
EXCHANGE FUND SALES CHARGE(A) SECONDARY MARKET(B) CHARACTERISTICS
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 income,
units with an initial face value of $1.00 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 %(c) $15 per unit long-term, fixed rate, tax-exempt
Series income
Intermediate Term Series 4.50 %(c) $15 per unit intermediate-term, fixed rate,
tax-exempt income
Insured Series 5.50 %(c) $15 per unit long-term, fixed rate, tax-exempt
income, underlying securities insured
by insurance companies
AMT Monthly Payment Series 5.50 %(c) $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 %(c) $15 per unit long-term, fixed rate insured,
tax-exempt 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
collateralized compound interest
obligations, taxable income,
appropriate for IRA's or tax-deferred
retirement plans
Select High Yield Series 5.50 % $15 per unit non-investment grade intermediate and
long-term, fixed rate, taxable income
Insured Series 5.50 % $15 per unit long-term, fixed-rate, taxable income,
underlying securities are insured.
DEFINED ASSET FUNDS--
INTERNATIONAL BOND FUND
Multi-Currency Series 3.75 % $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, payable
Series in Australian and New Zealand 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 3.50 % $15 per unit short intermediate term, fixed rate,
payable in Canadian dollars, taxable
income
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 10 highest dividend yielding stocks in
(domestic and international) units a designated stock index; seeks higher
total return than that stock index;
terminates after one year
</TABLE>
- ----------------------
(a) 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.
(b) 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 1,000 units for Series
for which the Reduced Sales Charge for Secondary Market is $15 per 1,000
units; and the same as in the secondary market for Series for which the
Reduced Sales Charge for Secondary Market is maximum $30 deferred sales
charge per 1,000 units.
(c) Subject to reduction depending on the maturities of the underlying
Securities.
a-1
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<PAGE>
<PAGE>
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<PAGE>
<PAGE>
<PAGE>
Defined
Asset Funds
<TABLE>
<S> <C>
SPONSORS: Government
Merrill Lynch, Securities Income Fund
Pierce, Fenner & Smith Incrporated
Defined Asset Funds Freddie Mac Series 12
P.O. Box 9051 A Unit Investment Trust
Princeton, NJ 08543-9051
(609) 282-8500
Smith Barney Inc.
Unit Trust Department
388 Greenwich Street--23rd Floor
New York, NY 10013
1-800-223-2532
PROSPECTUS
PaineWebber Incorporated This Prospectus does not contain all of the
1200 Harbor Blvd. information with respect to the investment
Weehawken, NJ 07087 company set forth in its registration
(201) 902-3000 statement and exhibits relating thereto
which have been filed with the Securities
Prudential Securities Incorporated and Exchange Commission, Washington, D.C.,
One seaport Plaza under the Securities Act of 1933 and the
199 Water Street Investment Company Act of 1940, and to
New York, NY 10292 which reference is hereby made.
(212) 776-1000
Dean Witter Reynolds Inc. No person is authorized to give any information
Two World Trade Center or to make any representations not contained
59th Floor in this Prospectus; and any information or
New York, NY 10048 representation not contained herein must not
(212) 392-2222 be relied upon. This Prospectus does not constitute
an offer to sell, or a solicitation of an offer
Evaluator: to buy, securities in any state to any person
Kenny S&P Evaluation Services to whom it is not lawful to make such offer
A Division of J. J. Kenny Co., Inc. in such state.
65 Broadway
New York, NY 10006
Independent Accountants:
Deloitte & Touche LLP
2 World Financial Center
9th Floor
New York, NY 10281-1414
Trustee:
The Chase Manhattan Bank, N.A.
Unit Trust Department
Box 2051
New York, NY 10081
1-800-323-1508
</TABLE>
15082-3/95
<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 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............. 8-7221
Prudential Securities Incorporated............................. 8-27154
Smith Barney 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 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............................. 22-2347336
Smith Barney Inc............................................... 13-1912900
Dean Witter Reynolds Inc....................................... 94-1671384
PaineWebber Incorporated....................................... 13-2638166
The Chase Manhattan Bank, N.A.................................. 13-2633612
</TABLE>
II-1
<PAGE>
<PAGE>
SERIES OF GOVERNMENT SECURITIES INCOME FUND
AND MUNICIPAL INVESTMENT TRUST FUND
DESIGNATED PURSUANT TO RULE 487 UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
SEC
SERIES NUMBER FILE NUMBER
<S> <C>
Government Securities Income Fund, Monthly Payment U.S. Treasury Series-1............... 2-81969
Municipal Investment Trust Fund, Four Hundred Thirty-Eighth Monthly Payment Series...... 33-16561
Government Securities Income Fund, Monthly Payment U.S. Treasury Series-8............... 33-31728
Municipal Investment Trust Fund, Multistate Series-48................................... 33-50247
Government Securities Income Fund, U.S. Treasury Strategy Trust-1....................... 33-48915
</TABLE>
CONTENTS OF REGISTRATION STATEMENT
The Registration Statement on Form S-6 comprises the following papers and
documents:
The facing sheet of Form S-6.
The Cross-Reference Sheet (incorporated by reference to the
Cross-Reference Sheet to the Registration
Statement of The Government Securities Income Fund, GNMA Series R, 1933 Act File
No. 2-88061).
The Prospectus.
Additional Information not included in the Prospectus (Part II). Consent
of independent accountants.
The following exhibits:
<TABLE>
<S> <C> <C>
1.1 -- Form of Trust Indenture (incorporated by reference to Exhibit 1.1 to the Registration
Statement of Government Securities Income Fund, GNMA Series 1W, 1933 Act File No.
33-53181).
1.1.1 -- Form of Standard Terms and Conditions of Trust Effective October 21, 1993
(incorporated by reference to Exhibit 1.1.1 to the Registration Statement of
Municipal Investment Trust Fund, Multistate Series 48, 1933 Act File No. 33-50247).
1.2 -- Form of Master Agreement Among Underwriters (incorporated by reference to Exhibit 1.2
to the Registration Statement of The Corporate Income Fund, One Hundred Ninety-Fourth
Monthly Payment Series, 1933 Act File No. 2-90925).
2.1 -- Form of Certificate of Beneficial Interest (included in Exhibit 1.1.1).
3.1 -- Opinion of counsel as to the legality of the securities being issued including their
consent to the
use of their names under the headings 'Taxes' and 'Miscellaneous--Legal Opinion' in
the
Prospectus.
4.1.1 -- Consent of the Evaluator.
4.1.2 -- Consent of Rating Agency.
5.1 -- Consent of Independent Accountants
</TABLE>
R-1
<PAGE>
<PAGE>
SIGNATURES
The registrant hereby identifies the series numbers of Government
Securities Income Fund and Municipal Investment Trust Fund listed on page R-1
for the purposes of the representations required by Rule 487 and represents the
following:
1) That the portfolio securities deposited in the series as to which this
registration statement is being filed do not differ materially in type
or quality from those deposited in such previous series;
2) That, except to the extent necessary to identify the specific portfolio
securities deposited in, and to provide essential information for, the
series with respect to which this registration statement is being filed,
this registration statement does not contain disclosures that differ in
any material respect from those contained in the registration statements
for such previous series as to which the effective date was determined
by the Commission or the staff; and
3) That it has complied with Rule 460 under the Securities Act of 1933.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
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 8TH DAY OF
MARCH, 1995.
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 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>
SMITH BARNEY 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 Inc.: following 1933 Act File Numbers: 33-56722
and 33-51999
</TABLE>
STEVEN D. BLACK
JAMES BOSHART III
ROBERT A. CASE
JAMES DIMON
ROBERT DRUSKIN
ROBERT F. GREENHILL
JEFFREY LANE
ROBERT H. LESSIN
JACK L. RIVKIN
GINA LEMON
------------------------
By: GINA LEMON
(As authorized signatory for
Smith Barney Inc. and
Attorney-in-fact for the persons listed above)
R-4
<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: 33-55073
</TABLE>
LEE FENSTERSTOCK
JOSEPH J. GRANO, JR.
PAUL B. GUENTHER
DONALD B. MARRON
ROBERT E. HOLLEY
---------------------------------
By: ROBERT E. HOLLEY
(As authorized signatory for
PaineWebber Incorporated and
Attorney-in-fact for the persons listed above)
R-5
<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-6
<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-7
<PAGE>
<PAGE>
EXHIBIT 3.1
DAVIS POLK & WARDWELL
450 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
(212) 450-4000
MARCH 8, 1995
Government Securities Income Fund,
Freddie Mac Series 12
Defined Asset Funds
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Smith Barney Inc.
PaineWebber Incorporated
Prudential Securities Incorporated
Dean Witter Reynolds Inc.
c/o Merrill Lynch, Pierce, Fenner & Smith Incorporated
Defined Asset Funds
P.O. Box 9051
Princeton, N.J. 08543-9051
Dear Sirs:
We have acted as special counsel for you, as sponsors (the 'Sponsors') of
Freddie Mac Series 12 of Government Securities Income Fund, Defined Asset Funds
(the 'Fund'), in connection with the issuance of units of fractional undivided
interest in the Fund (the 'Units') in accordance with the Trust Indenture
relating to the Fund (the 'Indenture').
We have examined and are familiar with originals or copies, certified or
otherwise identified to our satisfaction, of such documents and instruments as
we have deemed necessary or advisable for the purpose of this opinion.
Based upon the foregoing, we are of the opinion that (i) the execution and
delivery of the Indenture and the issuance of the Units have been duly
authorized by the Sponsors and (ii) the Units, when duly executed and delivered
by the Sponsors and the Trustee in accordance with the Indenture, will be
legally issued, fully paid and non-assessable.
We hereby consent to the use of this opinion as Exhibit 3.1 to the
Registration Statement relating to the Units filed under the Securities Act of
1933 and to the use of our name in such Registration Statement and in the
related prospectus under the heading 'Miscellaneous--Legal Opinion.'
Very truly yours,
Davis Polk & Wardwell
<PAGE>
<PAGE>
EXHIBIT 4.1.1
MARCH 8, 1995
Kenny S&P Evaluation Services
A Division of J. J. Kenny Co., Inc.
65 Broadway
New York, N.Y. 10006
Telephone 212/770-4405
Fax 212/797-8681
F. A. Shinal
Senior Vice President
Chief Financial Officer
<TABLE>
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith Incorporated The Chase Manhattan Bank, N.A.
Defined Asset Funds 1 Chase Manhattan Plaza-3B
P.O. Box 9051 New York, N.Y. 10081
Princeton, N.J. 08543-9051
</TABLE>
RE: GOVERNMENT SECURITIES INCOME FUND, FREDDIE MAC SERIES 12
DEFINED ASSET FUNDS
Gentlemen:
We have examined the Registration Statement No. 33-56849 for the above
captioned fund. We hereby acknowledge that Kenny S&P Evaluation Services, a
division of J. J. Kenny Co., Inc. is currently acting as the evaluator for the
Trust. We hereby consent to the use in the Registration Statement of the
reference to Kenny S&P Evaluation Services, a division of J. J. Kenny Co., Inc.
as evaluator.
You are hereby authorized to file a copy of this letter with the Securities
and Exchange Commission.
Sincerely,
F. A. Shinal
Senior Vice President
Chief Financial Officer
<PAGE>
<PAGE>
EXHIBIT 4.1.2
MARCH 8, 1995
Standard & Poor's Ratings Group
25 Broadway
New York, N.Y. 10004
Telephone 212/208-1061
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Defined Asset Funds
P.O. Box 9051
Princeton, N.J. 08543-9051
The Chase Manhattan Bank, N.A.
1 Chase Manhattan Plaza-3B
New York, NY 10081
RE: GOVENMENT SECURITIES INCOME FUND, FREDDIE MAC SERIES 12
DEFINED ASSET FUNDS
1933 ACT REGISTRATION NO. 33-56849
Dear Mr. Perini:
Pursuant to your request for a Standard & Poor's rating on the units of the
above-captioned trust, we have reviewed the information presented to us and have
assigned a 'AAA' rating to the units in the trust. The rating is a direct
reflection of the portfolio of the trust, which will be composed solely of U.S.
Treasury Debt Obligations fully guaranteed as to principal and interest by the
full faith and credit of the United States.
You have permission to use the name of Standard & Poor's and the
above-assigned rating in connection with your dissemination of information
relating to these units, provided that it is understood that the rating is not a
'market' rating nor recommendations to buy, hold, or sell the units of the
trust. Further, it should be understood that the rating does not take into
account the extent to which fund expenses or portfolio asset sales for less than
the fund's purchase price will reduce payment to the unit holders of the
interest and principal required to be paid on the portfolio assets. S&P reserves
the right to advise its own clients, subscribers, and the public of the rating.
S&P relies on the Sponsor and its counsel, accountants, and other experts for
the accuracy and completeness of the information submitted in connection with
the ratings. S&P does not independently verify the truth or accuracy of any such
information.
This letter evidences our consent to the use of the name of Standard &
Poor's Corporation and the above-assigned rating in the registration statement
or prospectus relating to the units of the trust. However, this letter should
not be construed as a consent by us, within the meaning of Section 7 of the
Securities Act of 1933, to the use of the name of Standard & Poor's Corporation
in connection with the ratings assigned to the securities contained in the
trust. You are hereby authorized to file a copy of this letter with the
Securities and Exchange Commission.
Please be certain to send us three copies of your final prospectus as soon
as it becomes available. Should we not receive them within a reasonable time
after the closing or should they not conform to the representations made to us,
we reserve the right to withdraw the rating.
We are pleased to have had the opportunity to be of service to you. Our bill
will be sent to you within one month. If we can be of further help, please do
not hesitate to call upon us.
Very truly yours,
Richard P. Larki
<PAGE>
<PAGE>
Exhibit 5.1
CONSENT OF INDEPENDENT ACCOUNTANTS
The Sponsors and Trustee of
Government Securities Income Fund,
Freddie Mac Series 12
Defined Asset Funds:
We hereby consent to the use in this Registration Statement No. 33-56849 of our
opinion dated March 8, 1995, relating to the Statement of Condition of
Government Securities Income Fund, Freddie Mac Series 12, 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.
March 8, 1995
<PAGE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> FEB-28-1995
<PERIOD-END> MAR-8-1995
<INVESTMENTS-AT-COST> 486,637
<INVESTMENTS-AT-VALUE> 486,637
<RECEIVABLES> 705
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 487,342
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 705
<TOTAL-LIABILITIES> 705
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 486,637
<SHARES-COMMON-STOCK> 500,000
<SHARES-COMMON-PRIOR> 0
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<OVERDISTRIBUTION-NII> 0
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<NET-ASSETS> 486,637
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<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<PAGE>
<PAGE>
</TABLE>
