DEFINED ASSET FUNDS--REGISTERED TRADEMARK--
----------------------------------------------------
CORPORATE INCOME FUND
INSURED SERIES--28
(A UNIT INVESTMENT TRUST)
- PORTFOLIO OF INSURED LONG TERM CORPORATE BONDS
- DESIGNED FOR HIGH CURRENT INCOME
- MONTHLY INCOME DISTRIBUTIONS
- U.S. TAX EXEMPT FOR MANY FOREIGN HOLDERS
SPONSORS:
MERRILL LYNCH, -----------------------------------------------------
PIERCE, FENNER & SMITH The Securities and Exchange Commission has not
INCORPORATED approved or disapproved these Securities or passed
SALOMON SMITH BARNEY INC. upon the adequacy of this prospectus. Any
PAINEWEBBER INCORPORATED representation to the contrary is a criminal offense.
DEAN WITTER REYNOLDS INC. Prospectus dated May 26, 2000.
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Defined Asset Funds--Registered Trademark--
Defined Asset Funds-Registered Trademark- is America's oldest and largest family
of unit investment trusts, with over $160 billion sponsored over the last 28
years. Defined Asset Funds has been a leader in unit investment trust research
and product innovation. Our family of Funds helps investors work toward their
financial goals with a full range of quality investments, including municipal,
corporate and government bond portfolios, as well as domestic and international
equity portfolios.
Defined Asset Funds offer a number of advantages:
- A disciplined strategy of buying and holding with a long-term view is the
cornerstone of Defined Asset Funds.
- Fixed portfolio: Defined Funds follow a buy and hold investment strategy;
funds are not managed and portfolio changes are limited.
- Defined Portfolios: We choose the stocks and bonds in advance, so you know
what you're investing in.
- Professional research: Our dedicated research team seeks out stocks or bonds
appropriate for a particular fund's objectives.
- Ongoing supervision: We monitor each portfolio on an ongoing basis.
No matter what your investment goals, tolerance for risk or time horizon,
there's probably a Defined Asset Fund that suits your investment style. Your
financial professional can help you select a Defined Asset Fund that works best
for your investment portfolio.
THE FINANCIAL INFORMATION IN THIS PROSPECTUS IS AS OF THE EVALUATION DATE,
FEBRUARY 29, 2000.
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CONTENTS
PAGE
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Risk/Return Summary.................. 3
What You Can Expect From Your
Investment......................... 6
Monthly Income..................... 6
Return Figures..................... 6
Records and Reports................ 6
The Risks You Face................... 6
Interest Rate Risk................. 6
Call Risk.......................... 7
Reduced Diversification Risk....... 7
Liquidity Risk..................... 7
Concentration Risk................. 7
Bond Quality Risk.................. 7
Insurance Related Risk............. 7
Litigation Risk.................... 8
Selling or Exchanging Units.......... 8
Sponsors' Secondary Market......... 8
Selling Units to the Trustee....... 8
Exchange Option.................... 9
How The Fund Works................... 9
Pricing............................ 9
Evaluations........................ 9
Income............................. 9
Expenses........................... 10
Portfolio Changes.................. 10
Fund Termination................... 11
Certificates....................... 11
Trust Indenture.................... 11
Legal Opinion...................... 12
Auditors........................... 12
Sponsors........................... 12
Trustee............................ 12
Underwriters' and Sponsors'
Profits.......................... 13
Public Distribution................ 13
Code of Ethics..................... 13
Year 2000 Issues................... 13
Taxes................................ 13
Supplemental Information............. 14
Financial Statements................. D-1
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RISK/RETURN SUMMARY
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1. WHAT IS THE FUND'S OBJECTIVE?
The Fund seeks high current interest
income by investing in a fixed portfolio
consisting primarily of insured
corporate bonds.
2. WHAT ARE CORPORATE BONDS?
Corporate bonds are bonds issued by
companies, governments or other
institutions to raise money to use in
their business or to fund their
activities. In return, they pay a fixed
rate of interest and principal at
maturity.
3. WHAT IS THE FUND'S INVESTMENT STRATEGY?
- The Fund plans to hold to maturity 8
insured long-term corporate bonds with a
current aggregate face amount of
$27,165,000.
- The Fund is a unit investment trust
which means that, unlike a mutual fund,
the Fund's portfolio is not managed.
- The bonds are insured by MBIA while they
remain in the Portfolio.
- All of the bonds are rated AAA by
Standard & Poor's for as long as they
remain in the Portfolio.
- Many of the bonds can be called at a
premium declining over time to par
value. Some bonds may be called earlier
at par for extraordinary reasons.
The Portfolio consists of corporate
bonds of the following types of issuers:
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- Corporate Utilities 100%
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4. WHAT ARE THE SIGNIFICANT RISKS?
YOU CAN LOSE MONEY BY INVESTING IN THE
FUND. THIS CAN HAPPEN FOR VARIOUS
REASONS, INCLUDING:
- Rising interest rates, an issuer's
worsening financial condition or a drop
in bond ratings can reduce the price of
your units.
- Because the Fund is concentrated in
corporate utility bonds, adverse
developments in this industry may affect
the value of your units.
- Assuming no changes in interest rates,
when you sell your units, they will
generally be worth less than your cost
because your cost included a sales fee.
- The Fund will receive early returns of
principal if bonds are called or sold
before they mature. If this happens your
income will decline and you may not be
able to reinvest the money you receive
at as high a yield or as long a
maturity.
5. IS THIS FUND APPROPRIATE FOR YOU?
Yes, if you want current monthly income.
You will benefit from a professionally
selected and supervised portfolio whose
risk is reduced by investing in insured
bonds of several different issuers.
The Fund is NOT appropriate for you if
you want a speculative investment that
changes to take advantage of market
movements or if you cannot tolerate any
risk.
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DEFINING YOUR INCOME
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WHAT YOU MAY EXPECT (Payable on the 25th day each
month):
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Regular Monthly Income per unit: $ 4.53
Annual Income per unit: $54.37
RECORD DAY: 10th day of each month
THESE FIGURES ARE ESTIMATES ON THE EVALUATION DATE;
ACTUAL PAYMENTS MAY VARY.
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6. WHAT ARE THE FUND'S FEES AND EXPENSES?
This table shows the costs and expenses you may pay,
directly or indirectly, when you invest in the Fund.
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INVESTOR FEES
3.50%
Maximum Sales Fee (Load) on new
purchases (as a percentage of $1,000
invested)
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Employees of some of the Sponsors and their
affiliates may be charged a reduced sales fee
of no less than $5.00 per Unit.
The maximum sales fee is reduced if you invest
at least $100,000, as follows:
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YOUR MAXIMUM
SALES FEE
IF YOU INVEST: WILL BE:
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Less than $100,000 3.50%
$100,000 to $249,999 3.25%
$250,000 to $499,999 3.00%
$500,000 to $999,999 2.75%
$1,000,000 and over 2.50%
Maximum Exchange Fee 2.50%
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ESTIMATED ANNUAL FUND OPERATING EXPENSES
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AMOUNT
PER UNIT
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$0.38
Trustee's Fee
$0.48
Portfolio Supervision,
Bookkeeping and
Administrative Fees (including
updating
expenses)
$0.10
Evaluator's Fee
$1.55
Insurance Premium
$0.20
Organization Costs
$0.31
Other Operating Expenses
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$3.02
TOTAL
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The Sponsors historically paid
organization costs and updating
expenses.
7. HOW HAVE SIMILAR FUNDS PERFORMED IN THE
PAST?
IN THE FOLLOWING CHART WE SHOW PAST
PERFORMANCE OF PRIOR INSURED SERIES OF
CORPORATE INCOME FUND, WHICH HAD THE
SAME INVESTMENT OBJECTIVES, STRATEGIES
AND TYPES OF BONDS AS THIS FUND. THESE
PRIOR SERIES DIFFERED IN THAT THEY
CHARGED A HIGHER SALES FEE. These prior
Insured Series were offered after 1987
and were outstanding on March 31, 2000.
OF COURSE, PAST PERFORMANCE OF PRIOR
SERIES IS NO GUARANTEE OF FUTURE
RESULTS OF THIS FUND.
AVERAGE ANNUAL COMPOUND TOTAL RETURNS
FOR PRIOR SERIES
REFLECTING ALL EXPENSES. FOR PERIODS
ENDED 3/31/00.
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WITH SALES FEE NO SALES FEE
1 YEAR 5 YEARS 1 YEAR 5 YEARS
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High 1.82% 6.88% 5.42% 8.07%
Average -4.61 6.26 -1.21 7.43
Low -8.07 5.50 -4.79 6.67
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managed and bonds are not sold because of market
changes. Rather, experienced Defined Asset Funds
financial analysts regularly review the bonds in
the Fund. The Fund may sell a bond if certain
adverse credit or other conditions exist.
9. HOW DO I BUY UNITS?
The minimum investment is one unit.
You can buy units from any of the Sponsors and
other broker-dealers. The Sponsors are listed
later in this prospectus. Some banks may offer
units for sale through special arrangements with
the Sponsors, although certain legal
restrictions may apply.
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UNIT PRICE PER UNIT $740.42
(as of February 29, 2000)
Unit price is based on the net asset
value of the Fund plus the up-front
sales fee. An amount equal to any
principal cash, as well as net accrued
but undistributed interest on the unit,
is added to the unit price. An
independent evaluator prices the bonds
at 3:30 p.m. Eastern time every business
day. Unit price changes every day with
changes in the prices of the bonds in
the Fund.
10. HOW DO I SELL UNITS?
You may sell your units at any time to
any Sponsor or the Trustee for the net
asset value determined at the close of
business on the date of sale. You will
not pay any other fee when you sell your
units.
11. HOW ARE DISTRIBUTIONS MADE AND TAXED?
The Fund pays income monthly. Interest
on the bonds in this Fund is subject to
federal income taxes for U.S. investors,
but if you are a non-U.S. investor, your
interest may be exempt from U.S. federal
income taxes, including withholding
taxes.
You will also receive principal payments
if bonds are sold or called or mature,
when the cash available is more than
$5.00 per unit. You will be subject to
tax on any gain realized by the Fund on
the disposition of bonds.
12. WHAT OTHER SERVICES ARE AVAILABLE?
REINVESTMENT
You will receive your monthly income in
cash unless you choose to compound your
income by reinvesting at no sales fee in
the Corporate Fund Investment
Accumulation Program, Inc. This program
is an open-end mutual fund with a
comparable investment objective, but
those bonds are not insured. Income from
this program will be subject to U.S.
federal income taxes for both U.S. and
foreign investors. FOR MORE COMPLETE
INFORMATION ABOUT THE PROGRAM, INCLUDING
CHARGES AND FEES, ASK THE TRUSTEE FOR
THE PROGRAM'S PROSPECTUS. READ IT
CAREFULLY BEFORE YOU INVEST. THE TRUSTEE
MUST RECEIVE YOUR WRITTEN ELECTION TO
REINVEST AT LEAST 10 DAYS BEFORE THE
RECORD DAY OF AN INCOME PAYMENT.
EXCHANGE PRIVILEGES
You may exchange units of this Fund for
units of certain other Defined Asset
Funds. You may also exchange into this
Fund from certain other funds. We charge
a reduced sales fee on exchanges.
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WHAT YOU CAN EXPECT FROM YOUR INVESTMENT
MONTHLY INCOME
The Fund will pay you regular monthly income. Your monthly income may vary
because of:
- elimination of one or more bonds from the Fund's portfolio because of calls,
redemptions or sales;
- a change in the Fund's expenses; or
- the failure by a bond's issuer to pay interest.
Changes in interest rates generally will not affect your monthly income because
the portfolio is fixed.
Along with your monthly income, you will receive your share of any available
bond principal.
RETURN FIGURES
We cannot predict your actual return, which will vary with unit price, how long
you hold your investment and changes in the portfolio, interest income and
expenses.
ESTIMATED CURRENT RETURN equals the estimated annual cash to be received from
the bonds in the Fund less estimated annual Fund expenses, divided by the Unit
Price (including the maximum sales fee):
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Estimated Annual Estimated
Interest Income - Annual Expenses
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Unit Price
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ESTIMATED LONG TERM RETURN is a measure of the estimated return over the
estimated life of the Fund. Unlike Estimated Current Return, Estimated Long Term
Return reflects maturities, discounts and premiums of the bonds in the Fund. It
is an average of the yields to maturity (or in certain cases, to an earlier call
date) of the individual bonds in the portfolio, adjusted to reflect the Fund's
maximum sales fee and estimated expenses. We calculate the average yield for the
portfolio by weighting each bond's yield by its market value and the time
remaining to the call or maturity date.
Yields on individual bonds depend on many factors including general conditions
of the bond markets, the size of a particular offering and the maturity and
quality rating of the particular issues. Yields can vary among bonds with
similar maturities, coupons and ratings.
These return quotations are designed to be comparative rather than predictive.
RECORDS AND REPORTS
You will receive:
- - a monthly statement of income payments and any principal payments;
- - a notice from the Trustee when new bonds are deposited in exchange or
substitution for bonds originally deposited;
- - an annual report on Fund activity; and
- - annual tax information. THIS WILL ALSO BE SENT TO THE IRS. YOU MUST REPORT THE
AMOUNT OF INTEREST RECEIVED DURING THE YEAR.
You may request:
- - copies of bond evaluations to enable you to comply with federal and state tax
reporting requirements; and
- - audited financial statements of the Fund.
You may inspect records of Fund transactions at the Trustee's office during
regular business hours.
THE RISKS YOU FACE
INTEREST RATE RISK
Investing involves risks, including the risk that your investment will decline
in value if
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interest rates rise. Generally, bonds with longer maturities will change in
value more than bonds with shorter maturities. Bonds in the Fund are more likely
to be called when interest rates decline. This would result in early returns of
principal to you and may result in early termination of the Fund. Of course, we
cannot predict how interest rates may change.
CALL RISK
Many bonds can be prepaid or "called" by the issuer before their stated
maturity. For example, some bonds may be required to be called pursuant to
mandatory sinking fund provisions.
Also, an issuer might call its bonds during periods of falling interest rates,
if the issuer's bonds have a coupon higher than current market rates.
If the bonds are called, your income will decline and you may not be able to
reinvest the money you receive at as high a yield or as long a maturity. An
early call at par of a premium bond will reduce your return.
REDUCED DIVERSIFICATION RISK
If many investors sell their units, the Fund will have to sell bonds. This could
reduce the diversification of your investment and increase your share of Fund
expenses.
LIQUIDITY RISK
The bonds will generally trade in the over-the-counter market. We cannot assure
you that a liquid trading market will exist, especially since current law may
restrict the Fund from selling bonds to any Sponsor. The value of the bonds, and
of your investment, may be reduced if trading in bonds is limited or absent.
CONCENTRATION RISK
When a certain type of bond makes up 25% or more of the portfolio, the Fund is
said to be "concentrated" in that bond type, which makes the Fund less
diversified.
Here is what you should know about the Fund's concentration in corporate utility
bonds, including telecommunications bonds:
- payment for these bonds depends on rates that the utility companies may
charge, the demand for their services and their operating costs;
- electric utilities face pressure to keep rates low, which may make it
difficult to recover investments in generating plant;
- utilities generally are sensitive to costs and availability of fuel;
- some electric utilities are subject to the risks of the nuclear industry;
- telecommunications companies are extensively regulated and the industry is
increasingly competitive; and
- the rate of technological innovation has a major impact on
telecommunications companies.
Changes to the portfolio from bond redemptions, maturities and sales may affect
the Fund's concentration over time.
BOND QUALITY RISK
A reduction in a bond's rating may decrease its value and, indirectly, the value
of your investment in the Fund.
INSURANCE RELATED RISK
The bonds are backed by MBIA Insurance Corporation as long as they remain in the
Fund. Insurance policies generally make payments only according to a bond's
original payment schedule and do not make early payments when a bond defaults or
becomes taxable. Although the federal government does not regulate the insurance
business,
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various state laws and federal initiatives and tax law changes could
significantly affect the insurance business. The claims-paying ability of MBIA
is rated AAA by Standard & Poor's. Insurance company ratings are subject to
change at any time at the discretion of the rating agencies.
LITIGATION RISK
We do not know of any pending litigation that might have a material adverse
effect upon the Fund.
SELLING OR EXCHANGING UNITS
You can sell your units at any time for a price based on net asset value. Your
net asset value is calculated each business day by:
- ADDING the value of the bonds, net accrued interest, cash and any other Fund
assets;
- SUBTRACTING accrued but unpaid Fund expenses, unreimbursed Trustee advances,
cash held to buy back units or for distribution to investors and any other
Fund liabilities; and
- DIVIDING the result by the number of outstanding units.
Your net asset value when you sell may be more or less than your cost because of
sales fees, market movements and changes in the portfolio.
SPONSORS' SECONDARY MARKET
While we are not obligated to do so, we will buy back units at net asset value
without any other fee or charge. We may resell the units to other buyers or to
the Trustee. You should consult your financial professional for current market
prices to determine if other broker-dealers or banks are offering higher prices.
We have maintained a secondary market continuously for over 28 years, but we
could discontinue it without prior notice for any business reason.
SELLING UNITS TO THE TRUSTEE
Regardless of whether we maintain a secondary market, you can sell your units to
the Trustee at any time by sending the Trustee a letter (with any outstanding
certificates if you hold unit certificates). You must properly endorse your
certificates (or execute a written transfer instrument with signatures
guaranteed by an eligible institution). Sometimes, additional documents are
needed such as a trust document, certificate of corporate authority, certificate
of death or appointment as executor, administrator or guardian.
Within seven days after your request and the necessary documents are received,
the Trustee will mail a check to you. Contact the Trustee for additional
information.
As long as we are maintaining a secondary market, the Trustee will sell your
units to us at a price based on net asset value. If there is no secondary
market, the Trustee may sell your units in the over-the-counter market for a
higher price, but it is not obligated to do so. In that case, you will receive
the net proceeds of the sale.
If the Fund does not have cash available to pay you for units you are selling,
the agent for the Sponsors will select bonds to be sold. Bonds will be selected
based on market and credit factors. These sales could be made at times when the
bonds would not otherwise be sold and may result in your receiving less than the
unit par value and also reduce the size and diversity of the Fund.
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There could be a delay in paying you for your units:
- if the New York Stock Exchange is closed (other than customary weekend and
holiday closings);
- if the SEC determines that trading on the New York Stock Exchange is
restricted or that an emergency exists making sale or evaluation of the
bonds not reasonably practicable; and
- for any other period permitted by SEC order.
EXCHANGE OPTION
You may exchange units of certain Defined Asset Funds for units of this Fund at
a maximum exchange fee of 2.50%. You may exchange units of this Fund for units
of certain other funds at a reduced sales fee if your investment goals change.
To exchange units, you should talk to your financial professional about what
funds are exchangeable, suitable and currently available.
Normally, an exchange is taxable and you must recognize any gain or loss on the
exchange. However, the IRS may try to disallow a loss if the portfolios of the
two funds are not materially different; you should consult your own tax adviser.
We may amend or terminate this exchange option at any time without notice.
HOW THE FUND WORKS
PRICING
The price of a unit includes interest accrued on the bonds, less expenses, from
the most recent Record Day up to, but not including, the settlement date, which
is usually three business days after the purchase date of the unit.
A portion of the price of a unit consists of cash so that the Trustee can
provide you with regular monthly income. When you sell your units you will
receive your share of this cash.
In addition, as with mutual funds, the Fund (and therefore the investors) pay
all or some of the costs of organizing the Fund including:
- cost of initial preparation of legal documents;
- federal and state registration fees;
- initial fees and expenses of the Trustee;
- initial audit; and
- legal expenses and other out-of-pocket expenses.
EVALUATIONS
An independent Evaluator values the bonds on each business day (excluding
Saturdays, Sundays and the following holidays as observed by the New York Stock
Exchange: New Year's Day, Presidents' Day, Martin Luther King, Jr. Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas).
Bond values are based on current bid or offer prices for the bonds or comparable
bonds. In the past, the difference between bid and offer prices of publicly
offered bonds has ranged from 0.25% of face amount on actively traded issues to
1.5% on inactively traded issues; the difference has averaged between 0.5% and
1%.
INCOME
The Trustee credits interest to an Income Account and other receipts to a
Capital Account. The Trustee may establish a
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Reserve Account by withdrawing from these accounts amounts it considers
appropriate to pay any material liability. These accounts do not bear interest.
EXPENSES
The Trustee is paid monthly. It also benefits when it holds cash for the Fund in
non-interest bearing accounts. The Trustee may also receive additional amounts:
- to reimburse the Trustee for the Fund's operating expenses;
- for extraordinary services and costs of indemnifying the Trustee and the
Sponsors;
- costs of actions taken to protect the Fund and other legal fees and
expenses;
- expenses for keeping the Fund's registration statement current; and
- Fund termination expenses and any governmental charges.
The Sponsors are currently reimbursed up to 55 CENTS per $1,000 face amount
annually for providing portfolio supervisory, bookkeeping and administrative
services and for any other expenses properly chargeable to the Fund. Legal,
typesetting, electronic filing and regulatory filing fees and expenses
associated with updating the Portfolio's registration statement yearly are also
now chargeable to the Portfolio. While this fee may exceed the amount of these
costs and expenses attributable to this Fund, the total of these fees for all
Series of Defined Asset Funds will not exceed the aggregate amount attributable
to all of these Series for any calendar year. The Fund also pays the Evaluator's
fees.
The Trustee's, Sponsors' and Evaluator's fees may be adjusted for inflation
without investors' approval.
The Sponsors will pay advertising and selling expenses at no charge to the Fund.
If Fund expenses exceed initial estimates, the Fund will owe the excess. The
Trustee has a lien on Fund assets to secure reimbursement of Fund expenses and
may sell bonds if cash is not available.
PORTFOLIO CHANGES
The Sponsors and Trustee are not liable for any default or defect in a bond.
Unlike a mutual fund, the portfolio is designed to remain intact and we may keep
bonds in the portfolio even if their credit quality declines or other adverse
financial circumstances occur. However, we may sell a bond in certain cases if
we believe that certain adverse credit or certain other conditions exist.
If we maintain a secondary market in units but are unable to sell the units that
we buy in the secondary market, we will redeem units, which may affect the
composition of the portfolio. Units offered in the secondary market may not
represent the same face amount of bonds that they did originally.
We decide whether or not to offer units for sale that we acquire in the
secondary market after reviewing:
- diversity of the portfolio;
- size of the Fund relative to its original size;
- ratio of Fund expenses to income;
- current and long-term returns;
- degree to which units may be selling at a premium over par; and
- cost of maintaining a current prospectus.
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FUND TERMINATION
The Fund will terminate following the stated maturity or sale of the last bond
in the portfolio. The Fund may also terminate earlier with the consent of
investors holding 51% of the units or if total assets of the Fund have fallen
below 40% of the face amount of bonds deposited. We will decide whether to
terminate the Fund early based on the same factors used in deciding whether or
not to offer units in the secondary market.
When the Fund is about to terminate you will receive a notice, and you will be
unable to sell your units after that time. On or shortly before termination, we
will sell any remaining bonds, and you will receive your final distribution. Any
bond that cannot be sold at a reasonable price may continue to be held by the
Trustee in a liquidating trust pending its final sale.
You will pay your share of the expenses associated with termination, including
brokerage costs in selling bonds. This may reduce the amount you receive as your
final distribution.
CERTIFICATES
Certificates for units are issued on request. You may transfer certificates by
complying with the requirements for redeeming certificates, described above. You
can replace lost or mutilated certificates by delivering satisfactory indemnity
and paying the associated costs.
TRUST INDENTURE
The Fund is a "unit investment trust" governed by a Trust Indenture, a contract
among the Sponsors, the Trustee and the Evaluator, which sets forth their duties
and obligations and your rights. A copy of the Indenture is available to you on
request to the Trustee. The following summarizes certain provisions of the
Indenture.
The Sponsors and the Trustee may amend the Indenture without your consent:
- to cure ambiguities;
- to correct or supplement any defective or inconsistent provision;
- to make any amendment required by any governmental agency; or
- to make other changes determined not to be materially adverse to your best
interest (as determined by the Sponsors).
Investors holding 51% of the units may amend the Indenture. Every investor must
consent to any amendment that changes the 51% requirement. No amendment may
reduce your interest in the Fund without your written consent.
The Trustee may resign by notifying the Sponsors. The Sponsors may remove the
Trustee without your consent if:
- it fails to perform its duties and the Sponsors determine that its
replacement is in your best interest; or
- it becomes incapable of acting or bankrupt or its affairs are taken over by
public authorities.
Investors holding 51% of the units may remove the Trustee. The Evaluator may
resign or be removed by the Sponsors and the Trustee without the consent of
investors. The resignation or removal of either becomes effective when a
successor accepts appointment. The Sponsors will try to appoint a successor
promptly; however, if no successor has accepted within 30 days after notice of
resignation, the resigning Trustee
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or Evaluator may petition a court to appoint a successor.
Any Sponsor may resign as long as one Sponsor with a net worth of $2 million
remains and agrees to the resignation. The remaining Sponsors and the Trustee
may appoint a replacement. If there is only one Sponsor and it fails to perform
its duties or becomes bankrupt the Trustee may:
- remove it and appoint a replacement Sponsor;
- liquidate the Fund; or
- continue to act as Trustee without a Sponsor.
Merrill Lynch, Pierce, Fenner & Smith Incorporated acts as agent for the
Sponsors.
The Trust Indenture contains customary provisions limiting the liability of the
Trustee, the Sponsors and the Evaluator.
LEGAL OPINION
Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York 10017, as
special counsel for the Sponsors, has given an opinion that the units are
validly issued.
AUDITORS
Deloitte & Touche LLP, 2 World Financial Center, New York, New York 10281,
independent accountants, audited the Statement of Condition included in this
prospectus.
SPONSORS
The Sponsors are:
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED (a wholly-owned subsidiary of
Merrill Lynch & Co., Inc.)
P.O. Box 9051,
Princeton, NJ 08543-9051
SALOMON SMITH BARNEY INC. (an indirectly wholly-owned subsidiary of Citigroup
Inc.)
388 Greenwich Street--23rd Floor,
New York, NY 10013
DEAN WITTER REYNOLDS INC. (a principal operating subsidiary of Morgan Stanley
Dean Witter & Co.)
Two World Trade Center--59th Floor,
New York, NY 10048
PRUDENTIAL SECURITIES INCORPORATED (an
indirect wholly-owned subsidiary of the
Prudential Insurance Company of America)
One New York Plaza
New York, NY 10292
PAINEWEBBER INCORPORATED (a wholly-owned subsidiary of PaineWebber Group Inc.)
1285 Avenue of the Americas,
New York, NY 10019
Each Sponsor is a Delaware corporation and it, or its predecessor, has acted as
sponsor to many unit investment trusts. As a registered broker-dealer each
Sponsor buys and sells securities (including investment company shares) for
others (including investment companies) and participates as an underwriter in
various selling groups.
TRUSTEE
The Bank of New York,101 Barclay Street--17W, New York, New York 10268, is the
Trustee. It is supervised by the Federal Deposit Insurance Corporation, the
Board of Governors of the Federal Reserve System and New York State banking
authorities.
12
<PAGE>
UNDERWRITERS' AND SPONSORS' PROFITS
Underwriters receive sales charges when they sell units. The Sponsors also
realized a profit or loss on the initial deposit of the bonds. Any cash made
available by you to the Sponsors before the settlement date for those units may
be used in the Sponsors' businesses to the extent permitted by federal law and
may benefit the Sponsors.
A Sponsor or Underwriter may realize profits or sustain losses on bonds in the
Fund which were acquired from underwriting syndicates of which it was a member.
In maintaining a secondary market, the Sponsors will also realize profits or
sustain losses in the amount of any difference between the prices at which they
buy units and the prices at which they resell or redeem them.
PUBLIC DISTRIBUTION
The Sponsors do not intend to qualify units for sale in any foreign countries.
This prospectus does not constitute an offer to sell units in any country where
units cannot lawfully be sold.
CODE OF ETHICS
The Fund and the Agent for the Sponsors have each adopted a code of ethics
requiring reporting of personal securities transactions by its employees with
access to information on Fund transactions. Subject to certain conditions, the
codes permit employees to invest in Fund securities for their own accounts. The
codes are designed to prevent fraud, deception and misconduct against the Fund
and to provide reasonable standards of conduct. These codes are on file with the
Commission and you may obtain a copy by contacting the Commission at the address
listed on the back cover of this prospectus.
YEAR 2000 ISSUES
Many computer systems were designed in such a way that they may be unable to
distinguish between the year 2000 and the year 1900 (commonly known as the "Year
2000 Problem"). To date we are not aware of any major operational difficulties
resulting from the computer system changes necessary to prepare for the Year
2000. However, there can be no assurance that the Year 2000 Problem will not
adversely affect the issuers of the bonds contained in the Portfolio. We cannot
predict whether any impact will be material to the Fund as a whole.
TAXES
The following summary describes some of the important income tax consequences of
holding units. It assumes that you are not a dealer, financial institution,
insurance company or other investor with special circumstances or subject to
special rules. You should consult your own tax adviser about your particular
circumstances.
In the opinion of our counsel, under existing law:
GENERAL TREATMENT OF THE FUND AND YOUR INVESTMENT
The Fund will not be taxed as a corporation for federal income tax purposes, and
you will be considered to own directly your share of each bond in the Fund.
GAIN OR LOSS UPON DISPOSITION
When all or part of your share of a bond is disposed of (for example, when the
Fund sells, exchanges or redeems a bond or when you sell or exchange your
units), you will generally recognize capital gain or loss.
13
<PAGE>
Your gain, however, will generally be ordinary income to the extent of any
accrued "market discount". Generally you will have market discount to the extent
that your basis in a bond when you purchase a unit is less than its stated
redemption price at maturity (or, if it is an original issue discount bond, the
issue price increased by original issue discount that has accrued on the bond
before your purchase). You should consult your tax adviser in this regard.
If your net long-term capital gains exceed your net short-term capital losses,
the excess may be subject to tax at a lower rate than ordinary income. Any
capital gain from the Fund will be long-term if you are considered to have held
your investment on each bond for more than one year and short-term otherwise.
Because the deductibility of capital losses is subject to limitations, you may
not be able to deduct all of your capital losses. You should consult your tax
advisor in this regard.
YOUR BASIS IN THE BONDS
Your aggregate basis in the bonds will be equal to the cost of your units,
including any sales charges and the organizational expenses you pay, adjusted to
reflect any accruals of "original issue discount," "acquisition premium" and
"bond premium". You should consult your tax adviser in this regard.
EXPENSES
If you are an individual who itemizes deductions, you may deduct your share of
Fund expenses, but only to the extent that such amount, together with your other
miscellaneous deductions, exceeds 2% of your adjusted gross income. Your ability
to deduct Fund expenses will be limited further if your adjusted gross income
exceeds a specified amount (currently, $128,950 or $64,475 for a married person
filing separately).
FOREIGN INVESTORS
If you are a foreign investor and you are not engaged in a U.S. trade or
business, you generally will not be subject to U.S. federal income tax,
including withholding tax, on the interest or gain on a bond issued after July
18, 1984 if you meet certain requirements, including the certification of
foreign status and other matters. You should consult your tax adviser about the
possible application of federal, state and local, and foreign taxes.
SUPPLEMENTAL INFORMATION
You can receive at no cost supplemental information about the Fund by calling
the Trustee. The supplemental information includes more detailed risk disclosure
about the types of bonds that may be in the Fund's portfolio, general risk
disclosure concerning any insurance securing certain bonds, and general
information about the structure and operation of the Fund. The supplemental
information is also available from the SEC.
14
<PAGE>
CORPORATE INCOME FUND,
INSURED SERIES - 28,
DEFINED ASSET FUNDS
REPORT OF INDEPENDENT ACCOUNTANTS
The Sponsors, Trustee and Holders
of Corporate Income Fund,
Insured Series - 28,
Defined Asset Funds:
We have audited the accompanying statement of condition of Corporate Income
Fund, Insured Series - 28, Defined Asset Funds, including the portfolio, as of
February 29, 2000 and the related statements of operations and of changes in net
assets for the years ended February 29, 2000, and February 28, 1999 and 1998.
These financial statements are the responsibility of the Trustee. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Securities owned at February 29, 2000, as shown in such portfolio,
were confirmed to us by The Bank of New York, the Trustee. An audit also
includes assessing the accounting principles used and significant estimates made
by the Trustee, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Corporate Income Fund, Insured
Series - 28, Defined Asset Funds at February 29, 2000 and the results of its
operations and changes in its net assets for the above-stated years in
accordance with accounting principles generally accepted in the United States of
America.
DELOITTE & TOUCHE LLP
New York, N.Y.
May 4, 2000
D - 1
<PAGE>
CORPORATE INCOME FUND,
INSURED SERIES - 28,
DEFINED ASSET FUNDS
STATEMENT OF CONDITION
AS OF FEBRUARY 29, 2000
<TABLE>
<S> <C> <C>
TRUST PROPERTY:
Investment in marketable securities - at value
(cost $24,821,926)(Note 1)..................... $24,343,732
Accrued interest receivable...................... 619,321
Deferred organization costs...................... 11,848
-------------
Total trust property................. 24,974,901
LESS LIABILITIES:
Advance from Trustee............................. $ 64,027
Accrued expenses................................. 19,035 83,062
------------- -------------
NET ASSETS, REPRESENTED BY:
34,071 units of fractional undivided
interest outstanding (Note 3).................. 24,787,300
Undistributed net investment income.............. 104,539
-------------
$24,891,839
=============
UNIT VALUE ($24,891,839/34,071 units).............. $730.59
=============
</TABLE>
See Notes to Financial Statements.
D - 2
<PAGE>
CORPORATE INCOME FUND,
INSURED SERIES - 28,
DEFINED ASSET FUNDS
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended
February 29, Years Ended February 28,..
2000 1999 1998
-----------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income........................... $ 2,200,679 $2,789,106 $3,687,004
Trustee's fees and expenses............... (23,642) (28,113) (33,311)
Sponsors' fees............................ (13,881) (15,341) (24,843)
Insurance expenses........................ (66,463) (72,241) (101,699)
Organizational expenses................... (11,848) (11,847) (11,847)
-----------------------------------------
Net investment income..................... 2,084,845 2,661,564 3,515,304
-----------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Realized gain on securities sold
or redeemed............................. 508,148 487,732 535,198
Unrealized appreciation (depreciation)
of investments.......................... (3,806,042) (510,620) 2,558,740
-----------------------------------------
Net realized and unrealized gain (loss)
on investments.......................... (3,297,894) (22,888) 3,093,938
-----------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS................. $(1,213,049) $2,638,676 $6,609,242
=========================================
</TABLE>
See Notes to Financial Statements.
D - 3
<PAGE>
CORPORATE INCOME FUND,
INSURED SERIES - 28,
DEFINED ASSET FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
Year Ended
<TABLE>
<CAPTION> Year Ended
February 29, Years Ended February 28,...
2000 1999 1998
-----------------------------------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income....................... $ 2,084,845 $ 2,661,564 $ 3,515,304
Realized gain on securities sold
or redeemed............................... 508,148 487,732 535,198
Unrealized appreciation (depreciation)
of investments............................ (3,806,042) (510,620) 2,558,740
-----------------------------------------
Net increase (decrease) in net assets
resulting from operations................. (1,213,049) 2,638,676 6,609,242
-----------------------------------------
DISTRIBUTIONS TO HOLDERS (Note 2):
Income...................................... (2,111,154) (2,658,266) (3,540,011)
Principal................................... (3,809,162) (59,743) (4,643,121)
-----------------------------------------
Total distributions......................... (5,920,316) (2,718,009) (8,183,132)
-----------------------------------------
CAPITAL SHARE TRANSACTIONS - Redemptions of
6,533, 6,123 and 9,074 units, respectively.. (5,026,357) (5,684,594) (8,846,914)
-----------------------------------------
NET DECREASE IN NET ASSETS.................... (12,159,722) (5,763,927) (10,420,804)
NET ASSETS AT BEGINNING OF YEAR............... 37,051,561 42,815,488 53,236,292
-----------------------------------------
NET ASSETS AT END OF YEAR..................... $24,891,839 $37,051,561 $42,815,488
=========================================
PER UNIT:
Income distributions during year............ $56.06 $61.51 $68.56
=========================================
Principal distributions during year......... $96.00 $1.44 $97.23
=========================================
Net asset value at end of year.............. $730.59 $912.51 $916.29
=========================================
TRUST UNITS OUTSTANDING AT END OF YEAR........ 34,071 40,604 46,727
=========================================
</TABLE>
See Notes to Financial Statements.
D - 4
<PAGE>
CORPORATE INCOME FUND,
INSURED SERIES - 28,
DEFINED ASSET FUNDS
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Fund is registered under the Investment Company Act of 1940 as a Unit
Investment Trust. The following is a summary of significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements. The policies are in accordance with accounting
principles generally accepted in the United States of America.
(a) Securities are stated at value as determined by the Evaluator
based on bid side evaluations for the securities.
(b) The Fund is not subject to income taxes. Accordingly, no
provision for such taxes is required.
(c) Interest income is recorded as earned.
2. DISTRIBUTIONS
A distribution of net investment income is made to Holders each month.
Receipts other than interest, after deductions for redemptions and
applicable expenses, are also distributed periodically.
3. NET CAPITAL
<TABLE>
<S> <C>
Cost of 34,071 units at Date of Deposit............. $33,048,663
Less sales charge................................... 1,423,148
--------------
Net amount applicable to Holders.................... 31,625,515
Redemptions of units - net cost of 25,167 units
redeemed less redemption amounts.................. 540,531
Realized gain on securities sold or redeemed........ 1,642,346
Principal distributions............................. (8,542,898)
Net unrealized depreciation of investments.......... (478,194)
--------------
Net capital applicable to Holders................... $24,787,300
==============
</TABLE>
4. INCOME TAXES
As of February 29, 2000, Net unrealized depreciation of investments, based
on cost for Federal income tax purposes, aggregated $478,193, of which
$562,576 related to depreciated securities and $84,382 related to
appreciated securities. The cost of investment securities for Federal
income tax purposes was $24,821,926 at February 29, 2000.
D - 5
<PAGE>
CORPORATE INCOME FUND,
INSURED SERIES - 28,
DEFINED ASSET FUNDS
PORTFOLIO
AS OF FEBRUARY 29, 2000
<TABLE>
<CAPTION>
Rating of Issues(1) Optional
Portfolio No. and Title of Moody's Standard Face Redemption
Securities Investor & Poors Amount Coupon Maturities(3) Provisions(3) Cost Value(2)
---------- --------- -------- ------ ------ ------------- ------------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Consolidated Edison Company, A1 A+ $ 2,730,000 7.500% 2023 06/15/03 $ 2,574,938 $ 2,534,789
Debentures, Ser. 93 G @103.270
2 New York Telephone Company, A2 A+ 3,960,000 7.000 2025 08/15/03 3,588,776 3,425,372
Debentures @102.340
3 Pacific Bell Telephone Company, Aa3 AA 2,860,000 7.500 2033 02/01/03 2,702,461 2,599,517
Debentures @102.940
4 Pacific Gas & Electric Co., A1 AA- 2,495,000 7.250 2026 06/01/03 2,269,413 2,237,553
First and Rfdg. Mtge. Bonds, @102.020
Ser. 93A
5 Public Service Electric & Gas Co., A3 A- 6,595,000 7.000 2024 09/01/03 5,765,165 5,849,547
First and Rfdg. Mortgage Bonds, @102.740
Ser. SS
6 Southern California Edison Company, A1 A+ 4,220,000 7.250 2026 03/01/03 3,864,675 3,809,858
First and Rfdg. Bonds, Ser. 93C @102.430
7 Southwestern Bell Telephone Aa2 AA 4,290,000 7.200 2026 10/15/05 4,042,405 3,873,265
Company, Debentures @103.540
8 Texas Utilities Company, First Baa1 BBB+ 15,000 7.625 2025 07/01/03 14,093 13,831
Mortgage Bonds @102.690
-------------- ----------- -----------
TOTAL $27,165,000 $24,821,926 $24,343,732
============== =========== ===========
</TABLE>
See Notes to Portfolio.
D - 6
<PAGE>
CORPORATE INCOME FUND,
INSURED SERIES - 28,
DEFINED ASSET FUNDS
NOTES TO PORTFOLIO
AS OF FEBRUARY 29, 2000
(1) "NR", if applicable, indicates that this security is not currently rated
by the indicated rating service. These ratings have been provided by the
Evaluator, but not confirmed with the rating agencies.
(2) See Notes to Financial Statements.
(3) Optional redemption provisions, which may be exercised in whole or in
part, are initially at prices of par plus a premium, then subsequently at
prices declining to par. Certain securities may provide for redemption at
par prior or in addition to any optional or mandatory redemption dates or
maturity, for example, through the operation of a maintenance and
replacement fund, if proceeds are not able to be used as contemplated,
the project is condemned or sold or the project is destroyed and
insurance proceeds are used to redeem the securities. Many of the
securities are also subject to mandatory sinking fund redemption
commencing on dates which may be prior to the date on which securities
may be optionally redeemed. Sinking fund redemptions are at par and
redeem only part of the issue. Some of the securities have mandatory
sinking funds which contain optional provisions permitting the issuer to
increase the principal amount of securities called on a mandatory
redemption date. The sinking fund redemptions with optional provisions
may, and optional refunding redemptions generally will, occur at times
when the redeemed securities have an offering side evaluation which
represents a premium over par. To the extent that the securities were
acquired at a price higher than the redemption price, this will represent
a loss of capital when compared with the Public Offering Price of the
Units when acquired. Distributions will generally be reduced by the
amount of the income which would otherwise have been paid with respect to
redeemed securities and there will be distributed to Holders any
principal amount and premium received on such redemption after satisfying
any redemption requests for Units received by the Fund. The estimated
current return may be affected by redemptions.
D - 7
<PAGE>
DEFINED ASSET FUNDS--REGISTERED TRADEMARK--
<TABLE>
<S> <C>
HAVE QUESTIONS ? CORPORATE INCOME FUND
Request the most INSURED SERIES--28
recent free Information (A Unit Investment Trust)
Supplement that gives more ---------------------------------------
details about the Fund, This Prospectus does not contain
by calling: complete information about the
The Bank of New York investment company filed with the
1-800-221-7771 Securities and Exchange Commission in
Washington, D.C. under the:
- Securities Act of 1933 (file no.
33-64103) and
- Investment Company Act of 1940 (file
no. 811-2295).
TO OBTAIN COPIES AT PRESCRIBED RATES--
WRITE: Public Reference Section of the
Commission
450 Fifth Street, N.W., Washington,
D.C. 20549-6009
CALL: 1-800-SEC-0330.
VISIT: http://www.sec.gov.
---------------------------------------
No person is authorized to give any
information or representations about
this Fund not contained in this
Prospectus or the Information
Supplement, and you should not rely on
any other information.
---------------------------------------
When units of this Fund are no longer
available, this Prospectus may be used
as a preliminary prospectus for a
future series, but some of the
information in this Prospectus will be
changed for that series.
UNITS OF ANY FUTURE SERIES MAY NOT BE
SOLD NOR MAY OFFERS TO BUY BE ACCEPTED
UNTIL THAT SERIES HAS BECOME EFFECTIVE
WITH THE SECURITIES AND EXCHANGE
COMMISSION. NO UNITS CAN BE SOLD IN ANY
STATE WHERE A SALE WOULD BE ILLEGAL.
15301--5/00
</TABLE>
