AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 6, 1995
REGISTRATION NO. 33-58535
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 2
TO
FORM S-6
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FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
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A. EXACT NAME OF TRUST:
EQUITY INCOME FUND
SELECT GROWTH PORTFOLIO--1995 SERIES 2
(FORMERLY CONCEPT SERIES 19)
DEFINED ASSET FUNDS
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:
MERRILL LYNCH, PIERCE, SMITH BARNEY INC.
FENNER & SMITH 388 GREENWICH ST.
INCORPORATED 23RD FLOOR
DEFINED ASSET FUNDS NEW YORK, N.Y. 10013
P.O. BOX 9051
PRINCETON, N.J.
08543-9051
PAINEWEBBER INCORPORATED PRUDENTIAL SECURITIES DEAN WITTER REYNOLDS INC.
1285 AVENUE OF THE INCORPORATED TWO WORLD TRADE
AMERICAS ONE SEAPORT PLAZA CENTER--59TH FLOOR
NEW YORK, N.Y. 10019 199 WATER STREET NEW YORK, N.Y. 10048
NEW YORK, N.Y. 10292
D. NAMES AND COMPLETE ADDRESSES OF AGENTS FOR SERVICE:
TERESA KONCICK, ESQ. LAURIE A. HESSLEIN ROBERT E. HOLLEY
P.O. BOX 9051 388 GREENWICH ST. 1285 AVENUE OF THE
PRINCETON, N.J. NEW YORK, N.Y. 10013 AMERICAS
08543-9051 NEW YORK, N.Y. 10019
COPIES TO:
LEE B. SPENCER, JR. DOUGLAS LOWE, ESQ. PIERRE DE SAINT PHALLE,
ONE SEAPORT PLAZA 130 LIBERTY STREET--29TH ESQ.
199 WATER STREET FLOOR 450 LEXINGTON AVENUE
NEW YORK, N.Y. 10292 NEW YORK, N.Y. 10006 NEW YORK, N.Y. 10017
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 June 6, 1995 pursuant to Rule 487.
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<PAGE>
DEFINED ASSET FUNDSSM
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EQUITY INCOME FUND The objective of this Defined Fund is capital
SELECT GROWTH appreciation by investing for a period of about
PORTFOLIO--1995 SERIES 2 one year in a portfolio of ten common stocks
(A UNIT INVESTMENT expected to show superior growth in earnings per
TRUST) share and having reasonable valuation levels and
- ------------------------------strong recent price performance. There can be no
assurance that the Fund will achieve its
objective. Current dividend income is not an
objective of the Fund.
The Portfolio may be considered speculative and
therefore may not be appropriate for investors
seeking either preservation of capital or current
dividend income.
The value of units will fluctuate with the value
of the common stocks in the Portfolio and no
assurance can be given that the underlying common
stocks will show growth in earnings per share or
that the underlying common stocks and or that the
units will appreciate in value.
Minimum purchase: $1,000.
Minimum purchase for Individual Retirement/Keogh
Accounts: $250.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
SPONSORS: HAS THE COMMISSION OR ANY STATE SECURITIES
Merrill Lynch, COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
Pierce, Fenner & Smith OF THIS DOCUMENT. ANY REPRESENTATION TO THE
Incorporated CONTRARY IS A CRIMINAL OFFENSE.
Smith Barney Inc. Inquiries should be directed to the Trustee at
PaineWebber Incorporated 1-800-221-7771.
Prudential Securities Prospectus dated June 6, 1995.
Incorporated INVESTORS SHOULD READ THIS PROSPECTUS CAREFULLY
Dean Witter Reynolds Inc. AND RETAIN IT FOR FUTURE REFERENCE.
<PAGE>
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Defined Asset FundsSM
Defined Asset Funds is America's oldest and largest family of unit investment
trusts, with over $95 billion sponsored since 1971. Each Defined Asset 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.
Defined Asset Funds offer several defined 'distinctives'. You know in advance
what you are investing in and that changes in the portfolio are limited - a
defined portfolio. Most defined bond funds pay interest monthly - defined
income. The portfolio offers a convenient and simple way to invest - simplicity
defined.
Your financial professional can help you select a Defined Asset Fund to meet
your personal investment objectives. Our size and market presence enable us to
offer a wide variety of investments. The Defined Asset Funds family offers:
o Municipal portfolios
o Corporate portfolios
o Government portfolios
o Equity portfolios
o International portfolios
The terms of Defined Funds are as short as one year or as long as 30 years.
Special defined bond funds are available including: insured funds, double and
triple tax-free funds and funds with 'laddered maturities' to help protect
against changing interest rates. Defined Asset Funds are offered by prospectus
only.
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Defined Select Growth Portfolio
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The Portfolio contains ten common stocks selected through the application of a
quantitative model developed by O'Shaughnessy Capital Management, Inc., designed
to identify those stocks that have a strong potential for capital appreciation.
This Select Growth Series permits investors to buy and hold the Portfolio for
approximately one year. At the end of the year, the Portfolio will be liquidated
and the Model reapplied to select a new portfolio. Each Select Growth Portfolio
is designed to be part of longer term strategy and the Sponsors believe that
more consistent results are likely if the strategy is followed for at least a
three to five year period.
So long as the Sponsors continue to offer new portfolios, investors will have
the option to reinvest into a new portfolio at a reduced sales charge. The
Sponsors reserve the right, however, not to offer a new portfolio.
The Stocks included in the Portfolio were selected for their potential for
growth in earnings per share, reasonable valuation levels and strong recent
price performance, from a database of 1,600 common stocks with capitalizations
averaging $3.7 billion and ranging from about $18 million to $99 billion. As
Portfolio Consultant, O'Shaughnessy Capital Management, Inc. applied its Model,
which identifies stocks with the following characteristics, among others: (i)
expected growth rates of earnings per share of at least 20% over the next fiscal
year; (ii) expected annual growth rates of at least 20% over the next three to
five years; (iii) a price to earnings ratio not exceeding the expected earnings
growth rate over the next three to five years; (iv) strong recent price
performance; and (v) a minimum market capitalization of $750 million. The Agent
for the Sponsors then reviewed the identified stocks for liquidity, market
capitalization and other factors. Because there is no active management of the
Portfolio, the Sponsors anticipate that the Portfolio will remain unchanged over
its one-year life despite adverse developments concerning an issuer, an industry
or the economy or stock market generally.
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Defining Your Portfolio
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Investing in the Portfolio, rather than in only one or two of the underlying
Stocks, is a way to diversify your investment. Additionally, the Portfolio is
diversified by industry. Based upon the principal business of each issuer and
current market values, the following industries are represented in the
Portfolio:
APPROXIMATE
PORTFOLIO PERCENTAGE
/ / Semiconductor/Electronics Manufacture 50%
/ / Computer Software 20%
/ / Financial Services 20%
/ / Hotels/Gaming 10%
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Defining Your Risks
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The Portfolio is not an appropriate investment for those who are not comfortable
with the Model or for those who are unable or unwilling to assume the risk
involved generally with an equity investment. It may be considered speculative
and therefore may not be appropriate for investors seeking either preservation
of capital or current income.
There can be no guarantee that the Portfolio will meet its objectives over its
one-year life or that portfolios selected through re-application of the Model
during consecutive one-year periods will meet their objectives. Current dividend
income is not a criterion for the selection of stocks for the Portfolio. The
Portfolio may not reflect any investment recommendations of any of the Sponsors,
and one or more of the stocks in the Portfolio may, from time to time, be
subject to sell recommendations from one or more of the Sponsors.
Unit price fluctuates with the value of the Portfolio, and the value of the
Portfolio could be affected by changes in the financial condition of the
issuers, changes in the various industries represented in the Portfolio,
movements in stock prices generally, the impact of the Sponsors' purchase and
sale of the
A-2
<PAGE>
securities (especially during the primary offering period of units and during
the rollover period) and other factors. Therefore, there is no guarantee that
the objective of the Portfolio will be achieved. In addition, the Model and the
Portfolio Consultant have only a limited track record. There can be no guarantee
that the Model will be effective in achieving the objective of the Fund.
Unlike a mutual fund, the Portfolio is not actively managed and the Sponsors
receive no management fee. Therefore, the adverse financial condition of an
issuer or any market movement in the price of a security will not require the
sale of securities from the Portfolio or mean that the Sponsors will not
continue to purchase the Security in order to create additional Units. Although
the Sponsors may instruct the Trustee to sell securities under certain limited
circumstances, given the investment philosophy of the Portfolio, the Sponsors
are not likely to do so. The Portfolio may continue to purchase or hold
securities originally selected even though the assessment of their earnings
growth potential may have changed or the Securities may no longer qualify for
selection were the Model to be applied on any later date.
In addition, the Portfolio is considered to be 'concentrated' in stocks of
companies deriving a substantial portion of their income from the semiconductor
and electronics manufacturing industry. Investment in this industry may pose
additional risks (see Risk Factors--Semiconductor and Electronics Companies in
Part B).
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Defining Your Investment
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PUBLIC OFFERING PRICE PER 1,000 UNITS $1,000.00
The Public Offering Price as of June 5, 1995, the business day prior to the
initial date of deposit is based on the aggregate value of the underlying
securities ($399,581.25) and any cash held to purchase securities, divided by
the number of units outstanding (403,617) times 1,000, plus the initial sales
charge. The Public Offering Price on any subsequent date will vary. The
underlying securities are valued by the Trustee on the basis of their closing
sale prices at 4:00 p.m. Eastern time on every business day.
SALES CHARGES
The total sales charge for this investment combines an initial up-front sales
charge and a deferred sales charge that will be deducted from the net asset
value of the Portfolio monthly beginning September 1, 1995 for the remaining ten
months of the Portfolio.
ROLLOVER OPTION
When this Select Growth Portfolio is about to be liquidated, you may have the
option to roll your proceeds into the next Select Growth portfolio. If you
notify your financial professional by June 10, 1996, your units will be redeemed
and your proceeds will be reinvested in units of the next Select Growth
Portfolio. If you decide not to roll over your proceeds, you will receive a cash
distribution after the Fund terminates. Of course you can sell or redeem your
Units at any time prior to termination.
INCOME DISTRIBUTION
The distribution of income, if any, will be paid on December 25, 1995, to
holders of record on December 10, 1995.
REINVESTMENT OPTION
You can elect to automatically reinvest your distributions into additional units
of the Portfolio subject only to the deferred sales charge remaining at the time
of reinvestment. Reinvesting helps to compound your income for a greater total
return.
TAXES
In the opinion of counsel, you will be considered to have received all the
dividends paid on your interest in each security in the Portfolio when those
dividends are received by the Portfolio, regardless of whether you reinvest your
dividends in the Portfolio.
TAX BASIS REPORTING
The proceeds received when you sell this investment will reflect the deduction
of the deferred sales charge. In addition, the annual statement and the relevant
tax reporting forms you receive at year-end will reflect the actual amount paid
to you (not including the deferred sales charge). Accordingly, you should not
increase your basis in your units by the deferred sales charge.
TERMINATION DATE
The Portfolio will terminate by July 12, 1996. The final distribution will be
made within a reasonable time afterward. The Portfolio may be terminated earlier
if its value is less than 40% of the value of the securities when deposited.
SPONSORS' PROFIT OR LOSS
The Sponsors' profit or loss from the Portfolio will include the receipt of
applicable sales charges, fluctuations in the Public Offering Price or secondary
market price of units, a loss of $287.50 on the initial deposit of the
securities and a gain or loss on subsequent deposits of securities (see
Sponsors' and Underwriters' Profits in Part B).
A-3
<PAGE>
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Defining Your Costs
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SALES CHARGE
First-time investors pay a 1% sales charge when they buy. For example, on a
$1,000 investment, $990 is invested in the Portfolio. In addition, a deferred
sales charge of $1.75 per 1,000 units will be deducted from the Portfolio's net
asset value each month over the last ten months of the Portfolio's life ($17.50
total). This deferred method of payment keeps more of your money invested over a
longer period of time. If you roll the proceeds of your investment into a new
portfolio, you will not be subject to the 1% initial charge, just the $17.50
deferred fee. Although this is a unit investment trust rather than a mutual
fund, the following information is presented to permit a comparison of fees and
an understanding of the direct or indirect costs and expenses that you pay.
As a %
of Initial Public Amount per
Offering Price 1,000 Units
----------------- --------------
Maximum Initial Sales Charge 1.00% $ 10.00
Deferred Sales Charge per Year 1.75% 17.50
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2.75% $ 27.50
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Maximum Sales Charge Imposed per
Year on Reinvested Dividends 1.05% $ 10.50
ESTIMATED ANNUAL FUND OPERATING EXPENSES
As a % Amount per
of Net Assets 1,000 Units
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Trustee's Fee .085% $ 0.84
Maximum Portfolio Supervision,
Bookkeeping and Administrative
Fees .046% $ 0.45
Organizational Expenses .034% $ 0.34
Other Operating Expenses .037% $ 0.37
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TOTAL .202% $ 2.00
This Portfolio (and therefore the investors) will bear all or a portion of its
organizational costs--including costs of preparing the registration statement,
the trust indenture and other closing documents, registering units with the SEC
and the states, fees of the Portfolio Consultant and the initial audit of the
Portfolio--as is common for mutual funds. Historically, the sponsors of unit
investment trusts have paid all the costs of establishing those trusts.
COSTS OVER TIME
You would pay the following cumulative expenses on a $1,000 investment, assuming
the estimated operating expense ratio of 0.202% and a 5% annual return on the
investment throughout the indicated periods and redemption at the end of the
period:
1 Year 3 Years 5 Years 10 Years
$30 $71 $115 $237
Although the Portfolio has a term of only one year and is a unit investment
trust rather than a mutual fund, this information is presented to permit a
comparison of fees, assuming the principal amount and distributions are rolled
over each year into a new portfolio subject only to the deferred sales charge
and fund expenses.
The example assumes reinvestment of all dividends and distributions and uses a
5% annual rate of return as mandated by SEC regulations applicable to mutual
funds. For purposes of the example, the deferred sales charge imposed on
reinvestment of dividends is not reflected until the year following payment of
the dividend; the cumulative expenses would be higher if sales charges on
reinvested dividends were reflected in the year of reinvestment.
Reductions to the repurchase and cash redemption prices in the secondary market
to recoup the costs of liquidating securities to meet redemption (described
below) have not been reflected. The example should not be considered a
representation of past or future expenses or annual rates of return; the actual
expenses and annual rates of return may be more or less than the example.
SELLING YOUR INVESTMENT
You may sell or redeem your units at any time prior to the termination of the
Portfolio. Your price will be based on the then current net asset value. The
redemption and secondary market repurchase price as of June 5, 1995 was $972.50
per 1,000 units ($27.50 per 1,000 units less than the Public Offering Price).
This price reflects deductions of the deferred sales charge which declines over
the last ten months of the Portfolio ($17.50 initially). If you sell your units
before the termination of the Portfolio, you will pay the remaining balance of
the deferred sales charge. After the initial offering period, the repurchase and
cash redemption prices for units will be reduced to reflect the estimated costs
of liquidating securities to meet the redemption, currently estimated at $0.73
per 1,000 units. If you reinvest in the new portfolio, you will pay your share
of any brokerage commissions on the sale of underlying securities when your
units are liquidated during the rollover.
A-4
<PAGE>
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Defined Portfolio
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<TABLE><CAPTION>
Equity Income Fund
Select Growth Portfolio--1995 Series 2 June 6, 1995
PRICE
TICKER NUMBER OF SHARES PERCENTAGE PER SHARE COST
NAME OF ISSUER SYMBOL OF COMMON STOCK OF FUND (1) TO FUND TO FUND (2)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1. 3COM Corp. COMS 600 9.80% $ 65.250 $ 39,150.00
2. Applied Materials Inc. AMAT 500 10.23 81.750 40,875.00
3. BMC Software Inc. BMCS 600 10.32 68.750 41,250.00
4. Cypress Semiconducter Corp. CY 1,150 10.04 34.875 40,106.25
5. First USA Inc.* FUS 850 10.35 48.625 41,331.25
6. Green Tree Financial Corp.* GNT 850 9.65 45.375 38,568.75
7. Micron Technology Inc.* MU 850 9.97 46.875 39,843.75
8. Mirage Resorts Inc. MIR 1,300 9.68 29.750 38,675.00
9. Varian Associates Inc.* VAR 750 9.97 53.125 39,843.75
10. VLSI Technology Inc. VLSI 1,500 9.99 26.625 39,937.50
-------------------- -----------------
100.00% $ 399,581.25
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-------------------- -----------------
</TABLE>
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* Only these stocks currently pay dividends. The current annual dividends per
share for the Securities in Portfolio Numbers 5, 6, 7 and 9 are $0.12, $0.37,
$0.20 and $0.28, respectively, based on the latest quarterly or semi-annual
declaration; there can be no assurance that future dividend payments, if any,
will be maintained in an amount equal to these dividends.
(1) Based on Cost to Fund.
(2) Valuation by the Trustee made on the basis of closing sale prices at the
evaluation time on June 5, 1995.
------------------------------------
The securities were acquired on June 5, 1995 and are represented entirely by
contracts to purchase the securities. Any of the Sponsors may have acted as
underwriters, managers or comanagers of a public offering of the securities in
this Fund during the last three years. Affiliates of the Sponsors may serve as
specialists in the securities in this Fund on one or more stock exchanges and
may have a long or short position in any of these securities or in options on
any of them, and may be on the opposite side of public orders executed on the
floor of an exchange where the securities are listed. An officer, director or
employee of any of the Sponsors may be an officer or director of one or more of
the issuers of the securities in the Fund. A Sponsor may trade for its own
account as an odd-lot dealer, market maker, block positioner and/or arbitrageur
in any of the securities or in options on them. Any Sponsor, its affiliates,
directors, elected officers and employee benefits programs may have either a
long or short position in any securities or in options on them.
A-5
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Sponsors, Trustee and Holders of Defined Asset Funds, Equity Income Fund
Select Growth Portfolio--1995 Series 2 (the 'Fund'):
We have audited the accompanying statement of condition and the defined
portfolio included in the prospectus of the Fund as of June 6, 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. Our procedures included
confirmation of the irrevocable letters of credit deposited for the purchase of
securities, as described in the statement of condition, with 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 the Fund as of June 6, 1995 in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, N.Y.
June 6, 1995
STATEMENT OF CONDITION AS OF JUNE 6, 1995
TRUST PROPERTY
Investments--Contracts to purchase Securities(1).........$ 399,581.25
Organizational Costs(2).................................. 8,500.00
--------------------
Total.........................................$ 408,081.25
--------------------
--------------------
LIABILITIES AND INTEREST OF HOLDERS
Liabilities: Payment of deferred portion of sales
charge(3)................................................$ 7,063.30
Accrued Liability(2)................................... 8,500.00
--------------------
Subtotal...............................................$ 15,563.30
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Interest of Holders of 403,617 Units of fractional
undivided interest outstanding:
Cost to investors(4)...................................$ 403,617.00
Gross underwriting commissions(5)...................... (11,099.05)
--------------------
Subtotal...............................................$ 392,517.95
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Total.........................................$ 408,081.25
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(1) Aggregate cost to the Fund of the securities listed under Defined
Portfolio determined by the Trustee at 4:00 p.m., Eastern time on June 5, 1995.
The contracts to purchase securities are collateralized by irrevocable letters
of credit which have been issued by Banca Di Roma, New York Branch, in the
amount of $399,868.75 and deposited with the Trustee. The amount of letters of
credit includes $399,581.25 for the purchase of securities.
(2) Organizational costs to be paid by the Fund have been deferred
and will be amortized over the life of the Fund. Organizational costs have been
estimated based on projected total assets of $25 million. To the extent the Fund
is larger or smaller, the estimate may vary.
(3) Represents the aggregate amount of mandatory distributions of
$1.75 per 1,000 Units per month payable on the 1st day of each month from
September, 1995 through June, 1996. Distributions will be made to an account
maintained by the Trustee from which the deferred sales charge obligation of the
investors to the Sponsors will be satisfied. If units are redeemed prior to June
1, 1996, the remaining portion of the distribution applicable to such units will
be transferred to such account on the redemption date.
(4) Aggregate public offering price computed on the basis of the
value of the underlying securities at 4:00 p.m., Eastern time on June 5, 1995.
(5) Assumes the maximum sales charge per 1,000 units of 2.75% of the
Public Offering Price.
A-6
<PAGE>
DEFINED ASSET FUNDSSM
PROSPECTUS--PART B
EQUITY INCOME FUND SELECT GROWTH PORTFOLIOS
FURTHER INFORMATION REGARDING THE FUND MAY BE OBTAINED
WITHIN FIVE DAYS OF WRITTEN OR TELEPHONIC REQUEST TO THE TRUSTEE AT THE ADDRESS
AND
TELEPHONE NUMBER SET FORTH ON THE BACK COVER OF THIS PROSPECTUS.
Index
PAGE
---------
Fund Description...................................... 1
Risk Factors.......................................... 3
How to Buy Units...................................... 4
How to Sell Units..................................... 5
Income, Distributions and Reinvestment................ 7
Fund Expenses......................................... 7
PAGE
---------
Taxes................................................. 8
Records and Reports................................... 9
Trust Indenture....................................... 10
Miscellaneous......................................... 10
Exchange Option....................................... 12
Supplemental Information.............................. 13
FUND DESCRIPTION
THE SELECT STRATEGY
The Select Series is designed to permit an investor to buy and hold a
portfolio of equity securities for a period of approximately one year based upon
a strategy. At the end of the year the strategy is reapplied and the investor
may reinvest in a new portfolio, if available.
The Fund seeks capital appreciation by acquiring and holding for about one
year 10 common stocks selected by the Sponsors through the application of a
quantitative model (the 'Model') developed by the Portfolio Consultant,
O'Shaughnessy Capital Management, Inc. The Model is designed to identify those
stocks that have a strong potential for capital appreciation. The Model
identifies stocks with the following characteristics, among others: (i) expected
growth rates of earnings per share of at least 20% over the next fiscal year;
(ii) expected annual growth rates of at least 20% over the next three to five
years; (iii) a price to earnings ratio not exceeding the expected earnings
growth rate over the next three to five years; (iv) strong recent price
performance; and (v) a minimum market capitalization of $750 million.
The Portfolio Consultant is a registered investment adviser, organized in
1988 and based in Greenwich, Connecticut. The Portfolio Consultant is
unaffiliated with any of the Sponsors.
PORTFOLIO SELECTION
The Portfolio Consultant applied the Model to a universe of 1,600 stocks
with capitalization averaging $3.7 billion and ranging from about $18 million to
$99 billion, and provided the Sponsors with a list of stocks from which the
Sponsors chose the 10 stocks in the Portfolio.
1
<PAGE>
The following table shows the percentage of stocks from the universe of
1,600 common stocks that passed the Model's expected earnings growth screens.
<TABLE><CAPTION>
PERCENTAGE
YEAR OF STOCKS
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<S> <C>
1985.......................................................................................... 7.56%
1986.......................................................................................... 9.00
1987.......................................................................................... 13.00
1988.......................................................................................... 13.06
1989.......................................................................................... 9.94
1990.......................................................................................... 8.75
1991.......................................................................................... 7.88
1992.......................................................................................... 9.56
1993.......................................................................................... 13.30
1994.......................................................................................... 17.19
1995 (as of June 2, 1995)..................................................................... 14.51
</TABLE>
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Copyright 1994. O'Shaughnessy Capital Management, Inc. All Rights Reserved.
The Stocks identified by the Model were next screened for minimum market
capitalization of $750 million. The Agent for the Sponsors further reviewed the
market capitalization, liquidity and other characteristics of the identified
stocks. The Securities selected through this process were those believed to have
significant potential for capital appreciation, without regard to expected
dividend income.
The deposit of the Securities in the Portfolio on the initial date of
deposit established a proportionate relationship among the number of shares of
each Security. During the 90-day period following the initial date of deposit
the Sponsors may deposit additional Securities in order to create new Units,
maintaining to the extent possible that original proportionate relationship.
Deposits of additional Securities subsequent to the 90-day period must generally
replicate exactly the proportionate relationship among the number of shares of
each Security at the end of the initial 90-day period. The ability to acquire
each Security at the same time will generally depend upon the Security's
availability and any restrictions on the purchase of that Security under the
federal securities laws or otherwise.
Additional Units may also be created by the deposit of cash (including a
letter of credit) with instructions to purchase additional Securities. This
practice could cause both existing and new investors to experience a dilution of
their investments and a reduction in their anticipated income because of price
fluctuations in the Securities between the time of the cash deposit and the
actual purchase of the additional Securities and because the associated
brokerage fees will be an expense of the Portfolio. To minimize these effects,
the Portfolio will try to purchase Securities as close to the Evaluation Time or
at prices as close to the evaluated prices as possible.
Because each Defined Asset Fund is a preselected portfolio, you know the
securities before you invest. Of course, the Portfolio will change somewhat over
time, as Securities are purchased upon creation of additional Units, as
securities are sold to meet Unit redemptions or in other limited circumstances.
PORTFOLIO SUPERVISION
The Portfolio follows a buy and hold investment strategy in contrast to the
frequent portfolio changes of a managed fund based on economic, financial and
market analyses. In the event a public tender offer is made for a Security or a
merger or acquisition is announced affecting a Security, the Sponsors may
instruct the Trustee to tender or sell the Security in the open market when in
its opinion it is in the best interests of investors to do so. Otherwise,
although the Portfolio is regularly reviewed and evaluated, because of the
Model, the Portfolio is unlikely to sell any of the Securities, other than to
satisfy redemptions of units, or to cease buying additional shares in connection
with the issuance of Additional Units. More specifically, adverse developments
concerning a Security including the adverse financial condition of the issuer,
the institution of legal proceedings against the issuer, or a decline in the
price or the occurrence of other market or credit factors that might otherwise
make retention of the Security detrimental to the interest of investors, will
generally not cause the Portfolio to dispose of a Security or cease buying it.
Furthermore, the Portfolio will likely continue to hold a Security and purchase
additional shares even though the assessment of a Security may have changed or
subsequent to the initial date of deposit a Security may no longer satisfy the
Portfolio's selection criteria.
2
<PAGE>
RISK FACTORS
An investment in the Fund entails certain risks, including the risk that
the value of your investment will decline if the financial condition of the
issuers of the Securities becomes impaired or if the general condition of the
stock market worsens and the risk that holders of common stocks have generally
inferior rights to receive payments from the issuer in comparison with the
rights of creditors of, or holders of debt obligations or preferred stocks
issued by, the issuer. Moreover, common stocks do not represent an obligation of
the issuer and therefore do not offer any assurance of income or provide the
degree of protection of capital provided by debt securities. Common stocks in
general may be especially susceptible to general stock market movements and to
volatile increases and decreases in value as market confidence in and
perceptions of the issuers change. These perceptions are based on unpredictable
factors including expectations regarding government, economic, monetary and
fiscal policies, inflation and interest rates, economic expansion or
contraction, and global or regional political, economic or banking crises. In
addition, the Model and the Portfolio Consultant have only a limited track
record. There can be no guarantee that the Model will be effective in achieving
the objective of the Fund. The Sponsors cannot predict the direction or scope of
any of these factors.
The Portfolio may be concentrated in one or more of types of issuers.
Concentration may involve additional risk because of the decreased
diversification of economic, financial and market risks. Set forth below is a
brief description of certain risks associated with Securities which may be held
by the Fund. Additional information is contained in the Information Supplement
which is available from the Trustee at no charge to the investor.
SEMICONDUCTOR AND ELECTRONICS COMPANIES
Semiconductor and electronics companies are highly competitive, both
domestically and internationally, and tend to be relatively volatile as compared
to other types of investments. Certain of these companies may be smaller and
less seasoned companies with limited product lines, markets or financial
resources and limited management or marketing personnel. The semiconductor and
electronics industry is characterized by a high degree of investment to maintain
competitiveness and is affected by worldwide scientific and technological
developments (and resulting product obsolescence) as well as government
regulation, increase in material or labor costs, changes in distribution
channels and the need to manage inventory levels in line with product demand.
Other factors that characterize this industry include short product life cycles,
aggressive pricing and reduced profit margins, dramatic and often unpredictable
changes in growth rates, frequent new product introduction, the need to enhance
existing products, intense competition from large established companies and
potential competition from small start up companies.
LIQUIDITY
Whether or not the Securities are listed on a national securities exchange,
the principal trading market for the Securities may 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 the Sponsors. 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.
LITIGATION AND LEGISLATION
The Sponsors do not know of any pending litigation as of the initial date
of deposit that might reasonably be expected to have a material adverse effect
on the Fund, although pending litigation may have a material adverse effect on
the value of Securities in the Fund. In addition, at any time after the initial
date of deposit, litigation may be initiated on a variety of grounds, or
legislation may be enacted, affecting the Securities in the Portfolio or the
issuers of the Securities. Changing approaches to regulation may have a negative
impact on certain companies represented in the Portfolio. There can be no
assurance that future litigation, legislation, regulation or deregulation will
not have a material adverse effect on the Portfolio or will not impair the
ability of the issuers of the Securities to achieve their business goals. From
time to time Congress considers proposals to reduce the rate of the
dividends-received deduction. This type of legislation, if enacted into law,
would adversely affect the after-tax return to investors who can take advantage
of the deduction. See Taxes.
LIFE OF THE FUND; FUND TERMINATION
The size and composition of the Portfolio will be affected by the level of
redemptions of Units that may occur from time to time. Principally, this will
depend upon the number of investors seeking to sell or redeem their Units or
participating in a rollover. The Portfolio will be terminated no later than the
mandatory termination date specified in
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Part A of the Prospectus. It will terminate earlier upon the disposition of the
last Security or upon the consent of investors holding 51% of the Units. The
Portfolio may also be terminated earlier by the Sponsors once its total assets
have fallen below the minimum value specified in Part A of the Prospectus. A
decision by the Sponsors to terminate the Portfolio early, which will likely be
made following the rollover, will be based on factors such as the size of the
Portfolio relative to its original size, the ratio of Portfolio expenses to
income, and the cost of maintaining a current prospectus.
Notice of impending termination will be provided to investors and
thereafter units will no longer be redeemable. On or shortly before termination,
the Trustee will seek to dispose of any Securities remaining in the Portfolio
although any Security unable to be sold at a reasonable price may continue to be
held by the Trustee in a liquidating trust pending its final disposition. A
proportional share of the expenses associated with termination, including
brokerage costs in disposing of Securities, will be borne by investors remaining
at that time. This may have the effect of reducing the amount of proceeds those
investors are to receive in any final distribution.
HOW TO BUY UNITS
Units are available from any of the Sponsors, Underwriters and other
broker-dealers at the Public Offering Price. The Public Offering Price varies
each Business Day with changes in the value of the Portfolio and other assets
and liabilities of the Fund.
PUBLIC OFFERING PRICE
Units are charged a combination of Initial and Deferred Sales Charges
equal, in the aggregate, to a maximum charge of 2.75% of the public offering
price or, for quantity purchases of units of all Select Portfolios by an
investor and the investor's spouse and minor children, or by a single trust
estate or fiduciary account, made on a single day, the following percentages of
the public offering price:
<TABLE><CAPTION>
APPLICABLE SALES CHARGE
(GROSS UNDERWRITING PROFIT)
------------------------------------
AS % OF PUBLIC AS % OF NET
AMOUNT PURCHASED OFFERING PRICE AMOUNT INVESTED
- --------------------------------------------------------------------------------------------- ----------------- -----------------
<S> <C> <C>
Less than $50,000............................................................................ 2.75% 2.778%
$50,000 to $99,999........................................................................... 2.50 2.519
$100,000 to $249,999......................................................................... 2.00 2.005
$250,000 or more............................................................................. 1.75 1.750
</TABLE>
The Deferred Sales Charge is a monthly charge of $1.75 per 1,000 units and
is accrued in ten monthly installments commencing on the date indicated in part
A of this Prospectus. Units redeemed or repurchased prior to the accrual of the
final Deferred Sales Charge installment will have the amount of any remaining
installments deducted from the redemption or repurchase proceeds or deducted in
calculating an in-kind distribution, although this deduction will be waived in
the event of the death or disability (as defined in the Internal Revenue Code of
1986) of an investor. The Initial Sales Charge is equal to the aggregate sales
charge, determined as described above, less the aggregate amount of any
remaining installments of the Deferred Sales Charge.
It is anticipated that Securities will not be sold to pay the Deferred
Sales Charge until after the date of the last installment. Investors will be at
risk for market price fluctuations in the Securities from the several
installment accrual dates to the dates of actual sale of Securities to satisfy
this liability.
Employees of certain Sponsors and Sponsor affiliates and non-employee
directors of Merrill Lynch & Co. Inc. may purchase Units subject only to the
Deferred Sales Charge.
EVALUATIONS
Evaluations are determined by the Trustee on each Business Day. This
excludes Saturdays, Sundays and the following holidays as observed by the New
York Stock Exchange: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas. If the Securities are
listed on a national securities exchange or the NASDAQ national market system,
evaluations are generally based on closing sales prices on that exchange or that
system (unless the Trustee deems these prices inappropriate) or, if closing
sales prices are not available, at the mean between the closing bid and offer
prices. If the Securities are not listed or if listed but the principal market
is elsewhere, the evaluation is generally determined based on sales prices of
the Securities on the over-the-
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<PAGE>
counter market or, if sales prices in that market are not available, on the
basis of the mean between current bid and offer prices for the Securities or for
comparable securities or by appraisal or by any combination of these methods.
Neither the Sponsors nor the Trustee guarantee the enforceability, marketability
or price of any Securities.
NO CERTIFICATES
All investors are required to hold their Units in uncertifcated form and in
'street name' by their broker, dealer or financial institution at the Depository
Trust Company ('DTC').
HOW TO SELL UNITS
SPONSORS' MARKET FOR UNITS
You can sell your Units at any time without a fee (other than the deduction
after the initial offering period for the costs of liquidating Securities). The
Sponsors (although not obligated to do so) will normally buy any Units offered
for sale at the repurchase price next computed after receipt of the order. The
Sponsors have maintained secondary markets in Defined Asset Funds for over 20
years. Primarily because of the sales charge and fluctuations in the market
value of the Securities, the sale price may be less than the cost of your Units.
You should consult your financial professional for current market prices to
determine if other broker-dealers or banks are offering higher prices for Units.
The Sponsors may discontinue this market without prior notice if the supply
of Units exceeds demand or for other business reasons. The Sponsors may reoffer
or redeem Units repurchased.
TRUSTEE'S REDEMPTION OF UNITS
You may redeem your Units by sending the Trustee a redemption request.
Signatures must be guaranteed by an eligible institution. In certain instances,
additional documents may be required such as a certificate of death, trust
instrument, certificate of corporate authority or appointment as executor,
administrator or guardian. If the Sponsors are maintaining a market for Units,
they will purchase any Units tendered at the repurchase price described above.
If they do not purchase Units tendered, the Trustee is authorized in its
discretion to sell Units in the over-the-counter market if it believes it will
obtain a higher net price for the redeeming investor.
By the seventh calendar day after tender you will be mailed an amount equal
to the Redemption Price per Unit. Because of market movements or changes in the
Portfolio, this price may be more or less than the cost of your Units. The
Redemption Price per Unit is computed each Business Day by adding the value of
the Securities, declared but unpaid dividends on the Securities, cash and the
value of any other Fund assets; deducting unpaid taxes or other governmental
charges, accrued but unpaid Fund expenses and accrued but unpaid Deferred Sales
Charges, unreimbursed Trustee advances, cash held to redeem Units or for
distribution to investors and the value of any other Fund liabilities; and
dividing the result by the number of outstanding Units.
Any investor owning Units representing Securities with a value of at least
$500,000 who redeems those Units prior to the rollover notification date
indicated in Part A of the Prospectus may, in lieu of cash redemption, request
distribution in kind of an amount and value of Securities per Unit equal to the
otherwise applicable Redemption Price per Unit. Whole shares of each Security
together with cash from the Capital Account equal to any fractional shares to
which the investor would be entitled (less any Deferred Sales Charge payable)
will be paid over to a distribution agent and either held for the account of the
investor or disposed of in accordance with instructions of the investor. Any
brokerage commissions on sales of Securities in connection with in-kind
redemptions will be borne by the redeeming investors. The in-kind redemption
option may be terminated by the Sponsors at any time upon prior notice to
investors.
After the initial offering period, the repurchase and cash redemption
prices will be reduced to reflect the cost to the Fund of liquidating Securities
to meet the redemption.
If cash is not available in the Fund's Income and Capital Accounts to pay
redemptions, the Trustee may sell Securities selected by the Agent for the
Sponsors in a manner designed to maintain, to the extent practicable, the
proportionate relationship among the number of shares of each Security. These
sales are often made at times when the Securities would not otherwise be sold
and may result in lower prices than might be realized otherwise and will also
reduce the size and diversity of the Fund.
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<PAGE>
Redemptions may be suspended or payment postponed if the New York Stock
Exchange is closed other than for customary weekend and holiday closings, if the
SEC determines that trading on that Exchange is restricted or that an emergency
exists making disposal or evaluation of the Securities not reasonably
practicable, or for any other period permitted by the SEC.
ROLLOVER
In lieu of redeeming their Units or receiving liquidation proceeds upon the
termination of the Fund, investors may elect, by written notice to the Trustee
prior to the rollover notification date indicated in Part A, to apply their
proportional interest in the Securities and other assets of the Fund toward the
purchase of units of a new Select Growth Portfolio (if available). It is
expected that the terms of any new portfolio, including this rollover feature,
will be substantially the same as those of the Fund.
A rollover of an investor's units is accomplished by the in-kind redemption
of his Units of the Fund followed by the sale of the underlying Securities by a
distribution agent on behalf of participating investors and the reinvestment of
the sale proceeds (net of brokerage fees, governmental charges and other sale
expenses) in units of the new Select Growth Portfolio at their net asset value.
The Sponsors intend to sell the distributed Securities, on behalf of the
distribution agent, as quickly as practicable and then to create units of the
new Select Growth Portfolio as quickly as possible, subject in both cases to the
Sponsors' sensitivity that the concentrated sale and purchase of large volumes
of securities may affect market prices in a manner adverse to the interest of
investors. Accordingly, the Sponsors may, in their sole discretion, undertake a
more gradual sale of the distributed Securities and a more gradual creation of
units of the new Select Growth Portfolio to help mitigate any negative market
price consequences caused by this large volume of securities trades. There can
be no assurance, however, that this procedure will be successful or might not
result in less advantageous prices than had this procedure not been practiced at
all. Pending the investment of rollover proceeds in the securities to comprise
the new portfolio, those moneys may be uninvested for up to several days.
Investors participating in the rollover may realize taxable capital gains
from the rollover but will not be entitled to a deduction for certain capital
losses and, because of the rollover procedures, will not receive a cash
distribution with which to pay those taxes. Investors who do not participate
will continue to hold their Units until the termination of the Fund; however,
depending upon the extent of participation in the rollover, the aggregate size
of the Fund may be sharply reduced resulting in a significant increase in per
Unit expenses.
The Sponsors may, in their sole discretion and without penalty or liability
to investors, decide not to sponsor a new Select Growth Portfolio or to modify
the terms of the rollover. Prior notice of any decision would be provided to
investors.
The Division of Investment Management of the SEC is of the view that the
rollover option constitutes an 'exchange offer', for the purposes of Section
11(c) of the Investment Company Act of 1940, and would therefore be prohibited
absent an exemptive order. The Sponsors have received exemptive orders under
Section 11(c) which they believe permit them to offer the rollover, but no
assurance can be given that the SEC will concur with the Sponsors' position and
additional regulatory approvals may be required.
INCOME, DISTRIBUTIONS AND REINVESTMENT
INCOME AND DISTRIBUTIONS
Although current dividend income is not an objective of the Fund, the
annual income per Unit will depend primarily upon the amount of dividends
declared and paid by the issuers of the Securities and changes in the expenses
of the Fund and, to a lesser degree, upon the level of purchases of additional
Securities and sales of Securities. There is no assurance that dividends on the
Securities will continue at their current levels or be declared at all.
Each Unit receives an equal share of distributions of dividend income.
Because dividends on the Securities are not received at a constant rate
throughout the year, the income distribution may be more or less than the amount
then credited to the Income Account. Dividends received are credited to an
Income Account and other receipts to a Capital Account. A Reserve Account may be
created by withdrawing from the Income and Capital Accounts amounts considered
appropriate by the Trustee to reserve for any material amount that may be
payable out of the Fund. Funds held by the Trustee in the various accounts do
not bear interest. In addition, distributions of amounts necessary to pay
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<PAGE>
the Deferred Sales Charge will be made from the Capital Account to an account
maintained by the Trustee for purposes of satisfying investors' sales charge
obligations. Although the Sponsors may collect the Deferred Sales Charge
monthly, to keep Units more fully invested the Sponsors currently do not
anticipate sales of Securities to pay the deferred sales charge until after the
rollover notification date. Proceeds of the disposition of any Securities not
used to pay Deferred Sales Charge or to redeem Units will be held in the Capital
Account and distributed on the final Distribution Day or following liquidation
of the Fund.
REINVESTMENT
Income and principal distributions on Units may be reinvested by
participating in the Fund's reinvestment plan. Under the plan, the Units
acquired for investors will be either Units already held in inventory by the
Sponsors or new Units created by the Sponsors' deposit of additional Securities,
contracts to purchase additional Securities or cash (or a bank letter of credit
in lieu of cash) with instructions to purchase additional Securities. Deposits
or purchases of additional Securities will generally be made so as to maintain
the then existing proportionate relationship among the number of shares of each
Security in the Fund. Units acquired by reinvestment will not be subject to the
initial sales charge but will be subject to any remaining installments of
Deferred Sales Charge. The Sponsors reserve the right to amend, modify or
terminate the reinvestment plan at any time without prior notice. Investors
holding Units in 'street name' should contact their broker, dealer or financial
institution if they wish to participate in the reinvestment plan.
FUND EXPENSES
Estimated annual Fund expenses are listed in Part A of the Prospectus; if
actual expenses exceed the estimate, the excess will be borne by the Fund. The
Trustee's annual fee is payable in monthly installments. The Trustee also
benefits when it holds cash for the Fund in non-interest bearing accounts.
Possible additional charges include Trustee fees and expenses for extraordinary
services, costs of indemnifying the Trustee and the Sponsors, costs of action
taken to protect the Fund and other legal fees and expenses, Fund termination
expenses and any governmental charges. The Trustee has a lien on Fund assets to
secure reimbursement of these amounts and may sell Securities for this purpose
if cash is not available. The Sponsors receive an annual fee of a maximum of
$0.35 per 1,000 Units to reimburse them for the cost of providing Portfolio
supervisory services to the Fund. While the fee may exceed their costs of
providing these services to the Fund, the total supervision fees from all Series
of Equity Income Fund will not exceed their costs for these services to all of
those Series during any calendar year. The Sponsors may also be reimbursed for
their costs of providing bookkeeping and administrative services to the Fund,
currently estimated at $0.10 per 1,000 Units. The Trustee's and Sponsors' fees
may be adjusted for inflation without investors' approval.
Expenses incurred in establishing the Fund, including the cost of the
initial preparation of documents relating to the Fund, Federal and State
registration fees, the initial fees and expenses of the Trustee, the fees of the
Portfolio Consultant, legal expenses and any other out-of-pocket expenses will
be paid by the Fund and amortized over the life of the Fund. Advertising and
selling expenses will be paid from the Underwriting Account at no charge to the
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 Defined Asset Funds have no management fees, limited transaction
costs and no ongoing marketing expenses, operating expenses are generally less
than 0.25% a year. When compounded annually, small differences in expense ratios
can make a big difference in your investment results.
TAXES
The following discussion addresses only the tax consequences of Units held
as capital assets and does not address the tax consequences of Units held by
dealers, financial institutions or insurance companies.
In the opinion of Davis Polk & Wardwell, special counsel for the Sponsors,
under existing law:
The Fund is not an association taxable as a corporation for federal
income tax purposes. Each investor will be considered the owner of a pro
rata portion of each Security in the Fund under the grantor trust rules of
Sections 671-679 of the Internal Revenue Code of 1986, as amended (the
'Code'). Each investor will be considered to have received all of the
dividends paid on his pro rata portion of each Security when such dividends
are received by the Fund, regardless of whether such dividends are used to
pay a portion of the expenses or whether they are automatically reinvested
(see Reinvestment Plan).
7
<PAGE>
Dividends considered to have been received by an investor from domestic
corporations which constitute dividends for federal income tax purposes
will generally qualify for the dividends-received deduction, which is
currently 70%, for corporate investors. Depending upon the individual
corporate investor's circumstances, limitations on the availability of the
dividends-received deduction may be applicable. Investors are urged to
consult their own tax advisers.
An individual investor who itemizes deductions will be entitled to
deduct his pro rata share of fees and expenses paid by the Fund only to the
extent that this amount together with the investor's other miscellaneous
deductions exceeds 2% of his adjusted gross income.
The investor's basis in his Units will equal the cost of his Units,
including the initial sales charge. A portion of the sales charge is
deferred until the termination of the Fund or the redemption of the Units.
The proceeds received by an investor upon such event will reflect deduction
of the deferred amount (the 'Deferred Sales Charge'). The annual statement
and the relevant tax reporting forms received by investors will reflect the
actual amounts paid to them, net of the Deferred Sales Charge. Accordingly,
investors should not increase their basis in their Units by the Deferred
Sales Charge amount.
A distribution of Securities by the Trustee to an investor (or to his
agent) upon redemption of Units will not be a taxable event to the investor
or to other investors. The redeeming or exchanging investor's basis for
such Securities will be equal to his basis for the same Securities
(previously represented by his Units) prior to such redemption or exchange,
and his holding period for such Securities will include the period during
which he held his Units. An investor will have a taxable gain or loss,
which will be a capital gain or loss, when the investor (or his agent)
sells the Securities so received in redemption for cash, when a redeeming
or exchanging investor receives cash in lieu of fractional shares, when the
investor sells his Units for cash or when the Trustee sells the Securities
from the Fund. However, deductions may be disallowed for losses realized by
investors who invest their redemption proceeds in a new Select Growth
Portfolio ('rollover investor') within 30 days of redemption to the extent
that the securities in that series are substantially identical to the old
Securities.
The lower net capital gain tax rate will be unavailable to those
noncorporate investors who, as of the Mandatory Termination Date (or
earlier termination of the Fund), have held their units for less than a
year and a day. Similarly, with respect to noncorporate rollover investors,
this lower rate will be unavailable if, as of the beginning of the rollover
period, those investors have held their shares for less than a year and a
day.
Under the income tax laws of the State and City of New York, the Fund is
not an association taxable as a corporation and the income of the Fund will
be treated as the income of the investors in the same manner as for federal
income tax purposes.
The foregoing discussion relates only to the tax treatment of U.S.
investors with regard to federal and certain aspects of New York State and
City income taxes. Investors may be subject to taxation in New York or in
other jurisdictions and should consult their own tax advisors in this
regard. Investors that are not U.S. citizens or residents ('foreign
investors') should be aware that dividend distributions from the Fund will
generally be subject to a withholding tax of 30%, or a lower treaty rate,
such as 15%, depending on their country of residence. Foreign investors
should consult their tax advisors on their eligibility for the withholding
rate under applicable treaties.
* * * *
At the termination of the Fund, the Trustee will furnish to each investor
an annual statement containing information relating to the dividends received by
the Fund on the Securities, the gross proceeds received by the Fund from the
disposition of any Security (resulting from redemption or the sale by the Fund
of any Security), and the fees and expenses paid by the Fund. The Trustee will
also furnish annual information returns to each investor and to the Internal
Revenue Service.
RETIREMENT PLANS
This Series of Equity Income Fund may be well suited for purchase by
Individual Retirement Accounts ('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 such plans are generally
treated as ordinary income but may, in some cases, be eligible for special 5
8
<PAGE>
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 advisors with respect
to the establishment and maintenance of any of these plans. These plans are
offered by brokerage firms, including the Sponsor of this Fund, and other
financial institutions. Fees and charges with respect to such plans may vary.
Retirement Plans for the Self-Employed--Keogh Plans. Units of the Fund may
be purchased by retirement plans established for self-employed individuals,
partnerships or unincorporated companies ('Keogh plans'). The assets of a Keogh
plan must be held in a qualified trust or other arrangement which meets the
requirements of the Code. 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 can make use of a
qualified IRA arrangement for the purchase of Units of the Fund. Any individual
(including one covered by an employer retirement plan) can make a contribution
in an IRA equal to the lesser of $2,000 ($2,250 in a spousal account) or 100% of
earned income; such investment must be made in cash. However, 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). 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 the distributed and subject to tax at that
time. 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. 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.
Corporate Pension and Profit-Sharing Plans. A pension or profit-sharing
plan for employees of a corporation may purchase Units of the Fund.
RECORDS AND REPORTS
The Trustee keeps a register of the names, addresses and holdings of all
investors. The Trustee also keeps records of the transactions of the Fund,
including a current list of the Securities and a copy of the Indenture, which
may be inspected by investors at reasonable times during business hours.
With each distribution, the Trustee includes a statement of the amounts of
income and any other receipts being distributed. Following the termination of
the Fund, the Trustee sends each investor of record a statement summarizing
transactions in the Fund's accounts including amounts distributed from them,
identifying Securities sold and purchased and listing Securities held and the
number of Units outstanding at termination and stating the Redemption Price per
1,000 Units at termination, and the fees and expenses paid by the Fund, among
other matters. Fund accounts may be audited by independent accountants selected
by the Sponsors and any report of the accountants will be available from the
Trustee on request.
TRUST INDENTURE
The Fund is a 'unit investment trust' created under New York law by a Trust
Indenture among the Sponsors and the Trustee. This Prospectus summarizes various
provisions of the Indenture, but each statement is qualified in its entirety by
reference to the Indenture.
The Indenture may be amended by the Sponsors and the Trustee without
consent by investors to cure ambiguities or to correct or supplement any
defective or inconsistent provision, to make any amendment required by the SEC
or other governmental agency or to make any other change not materially adverse
to the interest of investors (as determined in good faith by the Sponsors). The
Indenture may also generally be amended upon consent of investors holding 51% of
the Units. No amendment may reduce the interest of any investor in the Fund
without the investor's consent or reduce the percentage of Units required to
consent to any amendment without unanimous consent of investors. Investors will
be notified of the substance of any amendment.
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<PAGE>
The Trustee may resign upon notice to the Sponsors. It may be removed by
investors holding 51% of the Units at any time or by the Sponsors without the
consent of investors if it becomes incapable of acting or bankrupt, 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 interest of
the investors. The resignation or removal becomes effective upon acceptance of
appointment by a successor; in this case, the Sponsors will use their best
efforts to appoint a successor promptly; however, if upon resignation no
successor has accepted appointment within 30 days after notification, the
resigning Trustee may apply to a court of competent jurisdiction to appoint a
successor.
Any Sponsor may resign so long as one Sponsor with a net worth of
$2,000,000 remains. A new Sponsor may be appointed by the remaining Sponsors and
the Trustee to assume the duties of the resigning Sponsor. If there is only one
Sponsor and it fails to perform its duties or becomes incapable of acting or
bankrupt or its affairs are taken over by public authorities, the Trustee may
appoint a successor Sponsor at reasonable rates of compensation, terminate the
Indenture and liquidate the Fund or continue to act as Trustee without a
Sponsor. Merrill Lynch, Pierce, Fenner & Smith Incorporated has been appointed
as Agent for the Sponsors by the other Sponsors.
The Sponsors and the Trustee are not liable to investors or any other party
for any act or omission in the conduct of their responsibilities absent bad
faith, willful misfeasance, negligence (gross negligence in the case of a
Sponsor) or reckless disregard of duty. The Indenture contains customary
provisions limiting
the liability of the Trustee.
MISCELLANEOUS
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 in Part A of the Prospectus was audited by
Deloitte & Touche LLP, independent accountants, as stated in their opinion. It
is included in reliance upon that opinion given on the authority of that firm as
experts in accounting and auditing.
TRUSTEE
The Trustee and its address are stated on the back cover of the 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 authorities.
SPONSORS
The Sponsors are listed on the back cover of the Prospectus. They may
include Merrill Lynch, Pierce, Fenner & Smith Incorporated, a wholly-owned
subsidiary of Merrill Lynch Co. Inc.; Smith Barney Inc., an indirect wholly-
owned subsidiary of The Travelers Inc.; Prudential Securities Incorporated, an
indirect wholly-owned subsidiary of the Prudential Insurance Company of America,
and Dean Witter Reynolds, Inc., a principal operating subsidiary of Dean Witter
Discover & Co. Each Sponsor, or one of its predecessor corporations, has acted
as Sponsor of a number of series of unit investment trusts. Each Sponsor has
acted as principal underwriter and managing underwriter of other investment
companies. The Sponsors, in addition to participating as members of various
selling groups or as agents of other investment companies, execute orders on
behalf of investment companies for the purchase and sale of securities of these
companies and sell securities to these companies in their capacities as brokers
or dealers in securities.
PUBLIC DISTRIBUTION
During the initial offering period and thereafter to the extent additional
Units continue to be offered for sale to the public by means of this Prospectus,
Units will be distributed directly to the public by this Prospectus at the
Public Offering Price determined in the manner provided above or to selected
dealers who are members of the National Association of Securities Dealers, Inc.
at a concession not in excess of the maximum sales charge. The Sponsors intend
to qualify Units for sale in all states 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
10
<PAGE>
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.
UNDERWRITERS' AND SPONSORS' PROFITS
Upon sale of the Units, the Underwriters will be entitled to receive sales
charges; each Underwriters' interest in the Underwriting Account will depend on
the number of Units acquired through the issuance of additional Units. The
Sponsors also realize a profit or loss on deposit of the Securities equal to the
difference between the cost of the Securities to the Fund (based on the
aggregate value of the Securities on their date of deposit) and the purchase
price of the Securities to the Sponsors plus commissions payable by the
Sponsors. In addition, a Sponsor or Underwriter may realize profits or sustain
losses on Securities it deposits in the Fund which were acquired from
underwriting syndicates of which it was a member. During the initial offering
period, the Underwriting Account also may realize profits or sustain losses as a
result of fluctuations after the initial date of deposit in the Public Offering
Price of the Units. In maintaining a secondary 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 and the prices at which they resell
these Units (which include the sales charge) or the prices at which they redeem
the Units. Cash, if any, made available by buyers of Units to the Sponsors prior
to a settlement date for the purchase of Units may be used in the Sponsors'
businesses to the extent permitted by Rule 15c3-3 under the Securities Exchange
Act of 1934 and may be of benefit to the Sponsors.
PERFORMANCE INFORMATION
Information on the performance of the Fund for various periods, on the
basis of changes in Unit price plus the amount of dividends and capital gains
reinvested, may be included from time to time in advertisements, sales
literature, reports and other information furnished to current or prospective
Holders. Total return figures are not averaged, and may not reflect deduction of
the sales charge, which would decrease the return. Average annualized return
figures reflect deduction of the maximum sales charge. No provision is made for
any income taxes payable.
Past performance of any series may not be indicative of results of future
series. Fund performance may be compared to the performance of the DJIA, the S&P
500 Composite Price Stock Index, the S&P MidCap 400 Index, or performance data
from publications such as Lipper Analytical Services, Inc., Morningstar
Publications, Inc., Money Magazine, The New York Times, U.S. News and World
Report, Barron's, Business Week, CDA Investment Technology, Inc., Forbes
Magazine or Fortune Magazine. Performance of the Stocks may be compared in sales
literature to performance of the S&P 500 Stock Price Composite Index, to which
may be added by year various national and international political and economic
events, and certain milestones in price and market indicators and in offerings
of Defined Asset Funds. This performance may also be compared for various
periods with an investment in short-term U.S. Treasury securities; however, the
investor should bear in mind that Treasury securities are fixed income
obligations, having the highest credit characterisitics, while the Stocks
involve greater risk because they have no maturities, and income thereon is
subject to the financial condition of, and declaration by, the issuers.
DEFINED ASSET FUNDS
For decades informed investors have purchased unit investment trusts for
dependability and professional selection of investments. Defined Asset Funds'
philosophy is to allow investors to 'buy with knowledge' (because, unlike
managed funds, the portfolio is relatively fixed) and 'hold with confidence'
(because the portfolio is professionally selected and regularly reviewed).
Defined Asset Funds offers an array of simple and convenient 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
retirement, or attractive, regular current income consistent with the
preservation of principal. 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 the breadth and diversity that Defined Asset Funds offer.
Your investment objectives may call for a combination of Defined Asset Funds.
One of the most important investment decisions you face may be how to
allocate your investments among asset classes. Diversification among different
kinds of investments can balance the risks and rewards of each one. Most
investment experts recommend stocks for long-term capital growth. Long-term
corporate bonds offer relatively high rates of interest income. By purchasing
both defined equity and defined bond funds, investors can receive attractive
11
<PAGE>
current income, as well as growth potential, offering some protection against
inflation. From time to time various advertisements, sales literature, reports
and other information furnished to current or prospective investors may present
the average annual compounded rate of return of selected asset classes over
various periods of time, compared to the rate of inflation over the same
periods.
Investors may pursue investment growth to meet long-term goals such as
children's education or retirement. But they are faced with decisions of
selecting stock groups, choosing individual stocks, determining when to buy and
sell and how to reinvest sales proceeds. Growth stocks--those whose price is
expected to appreciate above average usually because of superior growth in
earnings per share--can be difficult to select successfully because their prices
tend to be more volatile than more established stocks and, by the time they are
discovered by ordinary investors, their prices may have already increased beyond
attractive levels or may be susceptible to dramatic declines if actual
performance is less than anticipated. The Select Growth Portfolio, through the
screening process to identify stocks with superior prospects for earnings
growth, seeks to provide definition and discipline, and to avoid emotional
reactions, in growth stock investing. This approach looks for 'discounted'
growth stocks that may otherwise be overlooked.
EXCHANGE OPTION
You may exchange Fund Units for units of other Select Growth Portfolios or
any Select Ten Portfolios subject only to the remaining deferred sales charge on
the units received. Holders of units of any Select Growth Portfolio, Select Ten
Portfolio, or any other Defined Asset Fund with a regular maximum sales charge
of at least 3.50%, or of any unaffiliated unit trust with a regular maximum
sales charge of at least 3.0%, may exchange those units for Units of this Fund
at their relative net asset values, subject only to the remaining Deferred Sales
Charge on Fund Units.
To make an exchange, you should contact your financial professional to find
out what suitable exchange funds are available and to obtain a prospectus. You
may acquire units of only those exchange funds in which the Sponsors are
maintaining a secondary market and which are lawfully for sale in the state
where you reside. Except for the reduced sales charge, 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; you should consult your own tax advisor. If the proceeds
of units exchanged are insufficient to acquire a whole number of exchange fund
units, you 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 at any
time without notice.
SUPPLEMENTAL INFORMATION
Upon written or telephonic request to the Trustee shown on the back cover
of this Prospectus, investors will receive without charge supplemental
information about the Fund, which has been filed with the SEC. The supplemental
information includes more detailed risk factor disclosure about the types of
securities that may be part of the Portfolio and general information about the
structure and operation of the Fund.
12
<PAGE>
Def ined
Asset FundsSM
SPONSORS: EQUITY INCOME FUND
Merrill Lynch, SELECT GROWTH PORTFOLIO
Pierce, Fenner & Smith Incorporated--1995 SERIES 2
Defined Asset Funds
P.O. Box 9051
Princeton, N.J. 08543-9051 Units of this Fund may no longer be available
(609) 282-8500 and therefore information contained herein
Smith Barney Inc. may be subject to amendment. A registration
Unit Trust Department statement relating to securities of a future
388 Greenwich Street--23rd Floor series has been filed with the Securities and
New York, NY 10013 Exchange Commission. These securities may not
1-800-223-2532 be sold nor may offers to buy be accepted
PaineWebber Incorporated prior to the time the registration statement
1200 Harbor Blvd. becomes effective. For more complete
Weehawken, N.J. 07087 information about a future series, including
(201) 902-3000 additional information on charges and
Prudential Securities Incorporated expenses, please call or write one of the
One Seaport Plaza Sponsors listed here for a prospectus. Read
199 Water Street the prospectus before you invest or send
New York, N.Y. 10292 money.
(212) 776-1000 ------------------------------
Dean Witter Reynolds Inc. This Prospectus does not contain all of the
Two World Trade Center--59th Floor information with respect to the investment
New York, N.Y. 10048 company set forth in its registration
(212) 392-2222 statement and exhibits relating thereto which
TRUSTEE: have been filed with the Securities and
The Bank of New York Exchange Commission, Washington, D.C. under
(a New York Banking Corporation) the Securities Act of 1933 and the Investment
Box 974--Wall Street Division Company Act of 1940, and to which reference
New York, N.Y. 10268-0974 is hereby made.
1-800-221-7771 ------------------------------
No person is authorized to give any
information or to make any representations
with respect to this investment company not
contained in this Prospectus; and any
information or representation not contained
herein must not be relied upon as having been
authorized. This Prospectus shall not
constitute an offer to sell or the
solicitation of an offer to buy nor shall
there be any sale of these securities in any
State in which such offer, solicitation or
sale would be unlawful prior to registration
or qualification under the securities laws of
any such State.
15113--6/95
13
<PAGE>
PART II
ADDITIONAL INFORMATION NOT INCLUDED IN THE PROSPECTUS
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.
<TABLE><CAPTION>
SEC FILE OR
IDENTIFICATION DATE
NUMBER FILED
----------------------------------------
<S> <C> <C>
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 1/17/95
Smith Barney Inc. .............................. 33-29106 6/29/89
PaineWebber Incorporated ....................... 2-87965 11/18/83
Prudential Securities Incorporated.............. 2-61418 4/26/78
Dean Witter Reynolds Inc. ...................... 2-60599 1/4/78
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 5/26/94, 6/29/92
Smith Barney Inc. .............................. 8-8177 8/29/94, 8/2/93
PaineWebber Incorporated ....................... 8-16267 4/20/94, 7/31/86
Prudential Securities Incorporated.............. 8-27154 6/30/94, 6/20/88
Dean Witter Reynolds Inc. ...................... 8-14172 2/23/94, 4/9/91
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 9/22/81, 6/15/82
Smith Barney Inc. .............................. 33-20499 3/30/88
PaineWebber Incorporated ....................... 2-87965 11/18/83
Prudential Securities Incorporated.............. 2-52947 3/4/75
Dean Witter Reynolds Inc. ...................... 2-60599 1/4/78
B. The Internal Revenue Service Employer Identification
Numbers of the Sponsors and Trustee are as follows:
Merrill Lynch, Pierce, Fenner & Smith
Incorporated 13-5674085
Smith Barney Inc. .............................. 13-1912900
PaineWebber Incorporated ....................... 13-2638166
Prudential Securities Incorporated.............. 22-2347336
Dean Witter Reynolds Inc. ...................... 94-0899825
The Bank of New York, Trustee................... 13-4941102
</TABLE>
II-1
<PAGE>
SERIES OF EQUITY INCOME FUND,
INTERNATIONAL INCOME FUND,
CORPORATE INCOME FUND
AND DEFINED ASSET FUNDS MUNICIPAL INSURED SERIES
DESIGNATED PURSUANT TO RULE 487 UNDER THE SECURITIES ACT OF 1933
SEC
SERIES NUMBER FILE NUMBER
- --------------------------------------------------------------------------------
Equity Income Fund, Select Growth Portfolio--1995 Series.... 33-51985
Equity Income Fund, Index Series, S&P 500 Trust 2 and S&P
Midcap Trust................................................ 33-44844
Equity Income Fund, Investment Philosophy Series 1991
Selected Industrial Portfolio............................... 33-39158
Equity Income Fund, Group One Overseas Index Fund Series 1
and 2....................................................... 33-05654
Equity Income Fund, Select Ten Portfolio--1995 Winter
Series...................................................... 33-55811
Equity Income Fund, Select Ten Portfolio--1995 Spring
Series...................................................... 33-55807
International Bond Fund, Australian and New Zealand Dollar
Bonds Series 19............................................. 33-15393
International Bond Fund, Australian and New Zealand Third
Short-Term Series........................................... 33-13200
International Bond Fund, Fourteenth Multi-Currency Series... 33-04447
Corporate Income Fund, First Short-Term Sterling Series..... 2-93990
Defined Asset Funds Municipal Insured Series................ 33-54565
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 from the
Cross-Reference Sheet of the Registration Statement of Defined Asset Funds
Municipal Insured Series, 1933 Act File No. 33-54565).
The Prospectus.
Additional Information not included in the Prospectus (Part II).
The following exhibits:
1.1 --Form of Trust Indenture.
1.1.1 --Form of Standard Terms and Conditions of Trust Effective as of October
21, 1993 (incorporated by reference to Exhibit 1.1.1 to the
Registration Statement of Municipal Investment Trust Fund, Multistate
Series-48, 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 under the Securities Act
of 1933 of The Corporate Income Fund, One Hundred Ninety-Fourth
Monthly Payment Series, 1933 Act File No. 2-90925).
3.1 --Opinion of counsel as to the legality of the securities being issued
including their consent to the use of their name under the headings
'Taxes' and 'Miscellaneous--Legal Opinion' in the Prospectus.
5.1 --Consent of independent accountants.
9.1 --Information Supplement.
R-1
<PAGE>
SIGNATURES
The registrant hereby identifies the series numbers of Equity Income Fund,
International Bond Fund, Corporate Income Fund and Defined Asset Funds Municipal
Insured Series 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 financial 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 6TH DAY OF JUNE,
1995.
SIGNATURES APPEAR ON PAGE R-3, R-4, R-5, R-6 AND R-7.
A majority of the members of the Board of Directors of Merrill Lynch,
Pierce, Fenner & Smith Incorporated has signed this Registration Statement or
Amendment to the Registration Statement pursuant to Powers of Attorney
authorizing the person signing this Registration Statement or Amendment to the
Registration Statement to do so on behalf of such members.
A majority of the members of the Board of Directors of 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>
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
DEPOSITOR
By the following persons, who constitute Powers of Attorney have been filed
a majority of under
the Board of Directors of Merrill Form SE and the following 1933 Act
Lynch, Pierce, File
Fenner & Smith Incorporated: Number: 33-43466
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
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>
SMITH BARNEY INC.
DEPOSITOR
By the following persons, who constitute a majority of Powers of Attorney
the Board of Directors of Smith Barney Inc.: have been filed
under the 1933 Act
File Number:
33-49753 and
33-55073
STEVEN D. BLACK
JAMES BOSHART III
ROBERT A. CASE
JAMES DIMON
ROBERT DRUSKIN
ROBERT F. GREENHILL
JEFFREY LANE
JACK L. RIVKIN
By MICHAEL J. BROPHY
(As authorized signatory for
Smith Barney Inc. and
Attorney-in-fact for the persons listed above)
R-4
<PAGE>
PAINEWEBBER INCORPORATED
DEPOSITOR
By the following persons, who constitute Powers of Attorney have been filed
a majority of under
the Executive Committee of the Board the following 1933 Act File
of Directors Number: 33-55073
of PaineWebber Incorporated:
PAUL B. GUENTHER
DONALD B. MARRON
JOSEPH J. GRANO, JR.
LEE FENSTERSTOCK
By
ROBERT E. HOLLEY
(As authorized signatory for PaineWebber Incorporated
and Attorney-in-fact for the persons listed above)
R-5
<PAGE>
PRUDENTIAL SECURITIES INCORPORATED
DEPOSITOR
By the following persons, who constitute Powers of Attorney have been filed
a majority of under Form SE and the following 1933
the Board of Directors of Prudential Act File Number: 33-41631
Securities
Incorporated:
ALAN D. HOGAN
HOWARD A. KNIGHT
GEORGE A. MURRAY
LELAND B. PATON
HARDWICK SIMMONS
By
RICHARD R. HOFFMANN
(As authorized signatory for Prudential Securities
Incorporated and Attorney-in-fact for the persons listed above)
R-6
<PAGE>
DEAN WITTER REYNOLDS INC.
DEPOSITOR
By the following persons, who constitute Powers of Attorney have been filed
a majority of under Form
the Board of Directors of Dean Witter SE and the following 1933 Act File
Reynolds Inc.: Number:
33-17085
NANCY DONOVAN
CHARLES A. FIUMEFREDDO
JAMES F. HIGGINS
STEPHEN R. MILLER
PHILIP J. PURCELL
THOMAS C. SCHNEIDER
WILLIAM B. SMITH
By
MICHAEL D. BROWNE
(As authorized signatory for Dean Witter Reynolds Inc.
and Attorney-in-fact for the persons listed above)
R-7
EQUITY INCOME FUND
SELECT GROWTH PORTFOLIO 1995 SERIES - 2
DEFINED ASSET FUNDS
REFERENCE TRUST INDENTURE
Dated as of June 6, 1995
This Trust Indenture (the "Indenture") sets forth certain provisions in
full and incorporates other provisions by reference to the document entitled
"Standard Terms and Conditions of Trust Effective October 21, 1993" (the
"Standard Terms and Conditions of Trust") and such provisions as are set forth
in full herein and such provisions as are incorporated by reference constitute a
single instrument. All references herein to Articles and Sections are to
Articles and Sections of the Standard Terms and Conditions of Trust.
WITNESSETH THAT:
In consideration of the premises and of the mutual
agreements herein contained, the Sponsors and the Trustee agree as follows:
Part I
STANDARD TERMS AND CONDITIONS OF TRUST
Subject to the provisions of Part II hereof, all the
provisions contained in the Standard Terms and Conditions of
Trust are herein incorporated by reference in their entirety
and shall be deemed to be a part of this instrument as fully and
to the same extent as though said provisions had been set forth
in full in this instrument.
<PAGE>
Part II
SPECIAL TERMS AND CONDITIONS OF TRUST
The following special terms and conditions are hereby
agreed to:
(a) The Securities (or contracts for the purchase of such Securities)
listed under "Portfolio" in the Prospectus have been deposited with (or assigned
to) the Trustee under this Indenture, and the number of Units specified under
"Investment Summary" in the Prospectus have been delivered to, or assigned in
the name of or on the order of, the Sponsors by the Trustee in exchange
therefor.
(b) The Sponsors are Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Smith Barney Inc., PaineWebber Incorporated, Prudential Securities Incorporated
and Dean Witter Reynolds Inc.
(c) The Trustee is The Bank of New York.
(d) The Trust is organized as a Grantor Trust for Federal tax purposes.
(e) Units may be held in uncertificated form.
(f) Section 3.18 is amended to read as follows:
Section 3.18. Expenses Borne by the Trustee. The following organization
-----------------------------
and regular and recurring expenses of the Trust shall be borne by the
Trustee: (a) to the extent not borne by the Sponsors, expenses incurred
in establishing the Trust, including the cost of the initial preparation
and typesetting of the registration statement, prospectuses (including
preliminary prospectuses), the indenture, and other documents relating to
the Trust, SEC and state blue sky registration fees, the cost of the
initial valuation of the portfolio and audit of the Trust, the initial
fees and expenses of the Trustee, and legal and other out-of-pocket
expenses related thereto, but not including the expenses incurred in the
printing of preliminary prospectuses and prospectuses, expenses incurred
in the preparation and printing of brochures and other advertising
materials and any other selling expenses, (b) the compensation of the
Evaluator provided for in Section 4.03, (c) auditing fees and, to the
extent not borne by the Sponsors, expenses incurred in connection with
maintaining the Trust's registration statement current with Federal and
state authorities, (d) postage, stationery, printing and reproduction
charges incurred in preparing and mailing the statements and reports
furnished pursuant to Sections 3.07 and 8.03, and the distributions made
pursuant to Section 3.05 and the Certificates issued after the Date of
-2-
<PAGE>
Deposit pursuant to Section 6.01; and (e) expenses of any Distribution
Agent; provided that the Trustee shall not be obligated to bear expenses
--------
pursuant to clauses (a) through (e) of this Section for any calendar year
of the Trust in excess of the Trustee Expense Limit (or in excess of a
prorated portion of such amount for any period of less than one year).
Expenses of the Trust for any calendar year in excess of the Trustee
Expense Limit shall be deemed to be non-routine expenses of the Trust
payable by the Trustee in accordance with Section 8.05(b).
The "Trustee Expense Limit" shall initially mean $_____ per 1,000 Units,
provided that the amount of the Trustee Expense Limit shall be reviewed
--------
at least annually by the Trustee and the Sponsors and adjusted by the
mutual written agreement of the Trustee and the Sponsors to reflect
estimated expenses of the Trust for the succeeding year (and the "Trustee
Expense Limit" shall mean thereafter such amount as so adjusted). In
connection with any such review, the Trustee shall furnish to the
Sponsors records in reasonable detail indicating for calendar years ended
prior to such review actual expenses incurred by the Trustee and the
Trust and the amounts paid to the Trustee pursuant to Section 3.04(a)(1)
in such calendar years.
(g) Paragraph (b) of Section 7.06 is amended to read as follows:
(b) The Sponsors shall receive, on or promptly after the Date of
Deposit upon written certification to the Trustee, reimbursement for any
organization expenses of the Trust included in Section 3.18(a) as payable by the
Trustee but which were paid by the Sponsors, without profit. The Sponsors shall
also recieve as reimbursement for any loss, liability or expense referred to in
Section 7.05(b) such amounts as they shall from time to time certify to the
Trustee in writing to be their losses, liabilities and expenses, without profit,
directly attributable to providing services to the Trust, increased by the cost
of such services provided directly by the Sponsors, as determined in accordance
with generally accepted accounting principles consistently applied.
-3-
EXHIBIT 3.1
DAVIS POLK & WARDWELL
450 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
(212) 450-4000
JUNE 6, 1995
EQUITY INCOME FUND,
SELECT GROWTH PORTFOLIO--1995 SERIES 2
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
(609) 282-8500
Dear Sirs:
We have acted as special counsel for you, as sponsors (the 'Sponsors') of
Equity Income Fund, Select Growth Portfolio--1995 Series 2, 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 issued 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 headings 'Taxes' and 'Miscellaneous--Legal
Opinion.'
Very truly yours,
DAVIS POLK & WARDWELL
EXHIBIT 5.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Sponsors and Trustee of Equity Income Fund,
Select Growth Portfolio--1995 Series 2, Defined Asset Funds:
We hereby consent to the use in this Registration Statement No. 33-58535 of our
opinion dated June 6, 1995, relating to the Statement of Condition of Equity
Income Fund, Select Growth Portfolio--1995 Series 2, 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 LLP
New York, N.Y.
June 6, 1995
DEFINED ASSET FUNDS
-------------------
INFORMATION SUPPLEMENT
EQUITY INCOME FUND-DEFINED ASSET FUNDS
This Information Supplement provides additional information concerning the
structure, operations and risks of trusts (each, a "Portfolio") of Equity Income
Fund-Defined Asset Funds not found in the prospectuses for the Portfolios. This
Information Supplement is not a prospectus and does not include all of the
information that a prospective investor should consider before investing in a
Portfolio. This Information Supplement should be read in conjunction with the
prospectus for the Portfolio in which an investor is considering investing
("Prospectus"). Copies of the Prospectus can be obtained by calling or writing
the Trustee at the telephone number and address indicated on the back cover of
the Prospectus.
This Information Supplement is dated June 6, 1995. Capitalized terms have
been defined in the Prospectus.
TABLE OF CONTENTS
-----------------
Description of Portfolio Investments . . . . . . . . . . . . . . 1
Portfolio Supervision . . . . . . . . . . . . . . . . . . . . . 1
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . 2
Equity Securities . . . . . . . . . . . . . . . . . . . . . . . 2
International Risk Factors (Select Ten Series-United
Kingdom Portfolio and Hong Kong Portfolio only) . . . . . . . 3
Additional Hong Kong Risk Factors (Select Ten Series-Hong Kong
Portfolio only) . . . . . . . . . . . . . . . . . . . . . . . 6
Concentration . . . . . . . . . . . . . . . . . . . . . . . 8
Rollover . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Taxation-Retirement Plans . . . . . . . . . . . . . . . . . . . . 12
DESCRIPTION OF PORTFOLIO INVESTMENTS
Portfolio Supervision
Each Portfolio is a unit investment trust which normally follows a buy and
hold investment strategy. Traditional methods of investment management for
mutual funds typically involve frequent changes in portfolio holdings based on
economic, financial and market analyses. Because a Portfolio is not actively
managed the adverse financial condition of an issuer or its failure to maintain
its current dividend rate will not necessarily require the sale of its
securities from a Portfolio. In the event a public tender offer is made for a
security or a merger or acquisition is announced affecting a security, the
Sponsors may instruct the Trustee to tender or sell the security on the open
market when in its opinion it is in the best interest of investors to do so.
The Sponsors may also instruct a Trustee to sell a security in the following
circumstances: (i) failure to declare or pay a regular dividend on a security
or anticipated dividends generally; (ii) institution of certain legal
proceedings; (iii) other legal questions or impediments affecting the security
or payments on that security; (iv) default under certain documents adversely
affecting the declaration or payment of anticipated dividends on the security,
the issuer's general credit standing or the sound investment character of the
security, or a default on other outstanding securities of the same issuer; (v)
if a security becomes inconsistent with a Portfolio's investment objectives; or
(vi) decline in security price or other market or credit factors that, in the
opinion of Defined Asset Funds research, makes retention of the security
detrimental to the interests of investors. If there is a failure to declare or
pay a regular dividend on a security or anticipated dividends generally on that
<PAGE>
security and the Agent for the Sponsors fails to instruct the Trustee within 30
days after notice of the failure, the Trustee will sell the security.
Voting rights with respect to the securities will be exercised by the Trustee
in accordance with directions given by the Sponsors.
RISK FACTORS
Equity Securities
An investment in Units of a Portfolio should be made with an understanding of
the risks inherent in an investment in equity securities, including the risk
that the financial condition of the issuers of the securities may become
impaired or that the general condition of the relevant stock market may worsen
(both of which may contribute directly to a decrease in the value of the
securities and thus in the value of the Units) or the risk that holders of
common stocks have a right to receive payments from the issuers of those stocks
that is generally inferior to that of creditors of, or holders of debt
obligations issued by, the issuers and that the rights of holders of common
stocks generally rank inferior to the rights of holders of preferred stock.
Common stocks may be especially susceptible to general stock market movements
and to volatile increases and decreases in value as market confidence in and
perceptions of the issuers change. These perceptions are based on unpredictable
factors including expectations regarding government, economic, monetary and
fiscal policies, inflation and interest rates, economic expansion or
contraction, and global or regional political, economic or banking crises.
Holders of common stocks incur more risk than holders of preferred stocks and
debt obligations because common stockholders, as owners of the entity, have
generally inferior rights to receive payments from the issuer in comparison with
the rights of creditors of, or holders of debt obligations or preferred stocks
issued by the issuer. Holders of common stocks of the type held by a Portfolio
have a right to receive dividends only when and if, and in the amounts, declared
by the issuer's board of directors and to participate in amounts available for
distribution by the issuer only after all other claims on the issuer have been
paid or provided for. By contrast, holders of preferred stocks have the right
to receive dividends at a fixed rate when and as declared by the issuer's board
of directors, normally on a cumulative basis, but do not participate in other
amounts available for distribution by the issuing corporation. Cumulative
preferred stock dividends must be paid before common stock dividends and any
cumulative preferred stock dividend omitted is added to future dividends payable
to the holders of cumulative preferred stock. Preferred stocks are also
entitled to rights on liquidation which are senior to those of common stocks.
Moreover, common stocks do not represent an obligation of the issuer and
therefore do not offer any assurance of income or provide the degree of
protection of capital provided by debt securities. Indeed, the issuance of debt
securities or even preferred stock will create prior claims for payment of
principal, interest, liquidation preferences and dividends which could adversely
affect the ability and inclination of the issuer to declare or pay dividends on
its common stock or the rights of holders of common stock with respect to assets
of the issuer upon liquidation or bankruptcy. Further, unlike debt securities
which typically have a stated principal amount payable at maturity (whose value,
however, will be subject to market fluctuations prior thereto), common stocks
have neither a fixed principal amount nor a maturity and have values which are
subject to market fluctuations for as long as the stocks remain outstanding.
The value of the securities in a Portfolio thus may be expected to fluctuate
over the entire life of the Portfolio to values higher or lower than those
prevailing on the Portfolio's initial date of deposit. Any monies allocated to
the purchase of a security will generally be held for the purchase of the
security. However, a Portfolio may not be able to buy each security at the same
time, because of unavailability of the security or because of any restrictions
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applicable to the Portfolio relating to the purchase of the security by reason
of the federal securities laws or otherwise.
International Risk Factors (Select Ten Series-United Kingdom Portfolio
and Hong Kong Portfolio only)
Foreign Issuers. Investments in Portfolios consisting partially or entirely
of securities of foreign issuers involve investment risks that are different in
some respects from an investment in a Portfolio that invests partially or
entirely in securities of domestic issuers. Those investment risks include
future political and economic developments and the possible establishment of
exchange controls or other governmental restrictions which might adversely
affect the payment or receipt of payment of dividends on the relevant
securities. In addition, for foreign issuers that are not subject to the
reporting requirements of the Securities Exchange Act of 1934, there may be less
publicly available information than is available from a domestic issuer. Also,
foreign issuers are not necessarily subject to uniform accounting, auditing and
financial reporting standards, practices and requirements such as those
applicable to domestic issuers.
Securities issued by non-U.S. issuers generally pay dividends in foreign
currencies, and are principally traded in foreign currencies. Therefore, there
is a risk that the United States dollar value of these securities will vary with
fluctuations in the United States dollar foreign exchange rates for the relevant
currencies.
Foreign Exchange Rates. A Portfolio of securities that are principally
traded in foreign currencies involves investment risks that are substantially
different from an investment in a fund which invests in securities that are
principally traded in United States dollars. This is because the United States
dollar value of a Portfolio (and hence of the Units) and of the distributions
from the Portfolio will vary with fluctuations in the United States dollar
foreign exchange rates for the relevant currencies. Most foreign currencies
have fluctuated widely in value against the United States dollar for many
reasons, including supply and demand of the respective currency, the soundness
of the world economy and the strength of the respective economy as compared to
the economies of the United States and other countries.
The post-World War II international monetary system was, until 1973,
dominated by the Bretton Woods Treaty, which established a system of fixed
exchange rates and the convertibility of the United States dollar into gold
through foreign central banks. Starting in 1971, growing volatility in the
foreign exchange markets caused the United States to abandon gold convertibility
and to effect a small devaluation of the United States dollar. In 1973, the
system of fixed exchange rates between a number of the most important industrial
countries of the world, among them the United States and most Western European
countries, was completely abandoned. Subsequently, major industrialized
countries have adopted "floating" exchange rates, under which daily currency
valuations depend on supply and demand in a freely fluctuating international
market. Many smaller or developing countries have continued to "peg" their
currencies to the United States dollar although there has been some interest in
recent years in "pegging" currencies to "baskets" of other currencies or to a
Special Drawing Right administered by the International Monetary Fund. Since
1983, the Hong Kong dollar has been pegged to the U.S. dollar although there is
no guarantee that the Hong Kong dollar will continue to be "pegged" to the U.S.
dollar in the future. In Europe a European Currency Unit ("ECU") has been
developed. Currencies are generally traded by leading international commercial
banks and institutional investors (including corporate treasurers, money
managers, pension funds and insurance companies). From time to time, central
banks in a number of countries also are major buyers and sellers of foreign
currencies, mostly for the purpose of preventing or reducing substantial
exchange rate fluctuations.
3
<PAGE>
Exchange rate fluctuations are partly dependent on a number of economic
factors including economic conditions within countries, the impact of actual and
proposed government policies on the value of currencies, interest rate
differentials between the currencies and the balance of imports and exports of
goods and services and transfers of income and capital from one country to
another. These economic factors are influenced primarily by a particular
country's monetary and fiscal policies (although the perceived political
situation in a particular country may have an influence as well--particularly
with respect to transfers of capital). Investor psychology may also be an
important determinant of currency fluctuations in the short run. Moreover,
institutional investors trying to anticipate the future relative strength or
weakness of a particular currency may sometimes exercise considerable
speculative influence on currency exchange rates by purchasing or selling large
amounts of the same currency or currencies. However, over the long term, the
currency of a country with a low rate of inflation and a favorable balance of
trade should increase in value relative to the currency of a country with a high
rate of inflation and deficits in the balance of trade.
The Trustee will estimate current exchange rates for the relevant currencies
based on activity in the various currency exchange markets. However, since
these markets are volatile and are constantly changing, depending on the
activity at any particular time of the large international commercial banks,
various central banks, large multi-national corporations, speculators and other
buyers and sellers of foreign currencies, and since actual foreign currency
transactions may not be instantly reported, the exchange rates estimated by the
Trustee may not be indicative of the amount in United States dollars a Portfolio
would receive had the Trustee sold any particular currency in the market.
The foreign exchange transactions of a Portfolio may be concluded by the
Trustee with foreign exchange dealers acting as principals either on a spot
(i.e., cash) buying basis or on a forward foreign exchange basis on the date a
Portfolio is entitled to receive the applicable foreign currency. These forward
foreign exchange transactions will generally be of as short a duration as
practicable and will generally settle on the date of receipt of the applicable
foreign currency involving specific receivables or payables of the Portfolio
accruing in connection with the purchase and sale of its securities and income
received on the securities or the sale and redemption of Units. These
transactions are accomplished by contracting to purchase or sell a specific
currency at a future date and price set at the time of the contract. The cost
to a Portfolio of engaging in these foreign currency transactions varies with
such factors as the currency involved, the length of the contract period and the
market conditions then prevailing. Since transactions in foreign currency
exchange are usually conducted on a principal basis, fees or commissions are not
normally involved. Although foreign exchange dealers trade on a net basis they
do realize a profit based upon the difference between the price at which they
are willing to buy a particular currency (bid price) and the price at which they
are willing to sell the currency (offer price). The relevant exchange rate used
for evaluations of securities will include the cost of buying or selling, as the
case may be, of any forward foreign exchange contract in the relevant currency
to correspond to the requirement that Units when purchased settle on a regular
basis and that the Trustee settle redemption requests in United States dollars
within seven days.
Exchange Controls. On the basis of the best information available to the
Sponsors at the present time none of the securities, except as otherwise
indicated in a Portfolio's prospectus, is subject to exchange control
restrictions under existing law which would materially interfere with payment to
a Portfolio of amounts due on securities either because the particular
jurisdictions have not adopted any currency regulations of this type or because
the issues qualify for an exemption or the Portfolio, as an extraterritorial
investor, has qualified its purchase of securities as exempt by following
4
<PAGE>
applicable "validation" or similar regulatory or exemptive procedures. However,
there can be no assurance that exchange control regulations might not be adopted
in the future which might adversely affect payments to a Portfolio.
In addition, the adoption of exchange control regulations and other legal
restrictions could have an adverse impact on the marketability of international
securities in a Portfolio and on the ability of a Portfolio to satisfy its
obligation to redeem Units tendered to the Trustee for redemption.
Liquidity. Foreign securities generally have not been registered under the
Securities Act of 1933 and may not be exempt from the registration requirements
of the Act. Sales of non-exempt securities by a Portfolio in United States
securities markets are subject to severe restrictions and may not be
practicable. Accordingly, sales of these securities by a Portfolio will
generally be effected only in foreign securities markets. Although the Sponsors
do not believe that a Portfolio will encounter obstacles in disposing of the
securities, investors should realize that the securities may be traded in
foreign countries where the securities markets are not as developed or efficient
and may not be as liquid as those in the United States. To the extent the
liquidity of these markets becomes impaired, however, the value of a Portfolio
when responding to a substantial volume of requests for redemption of Units
(should redemptions be necessary despite the market making activities of the
Sponsors) received at or about the same time could be adversely affected. This
might occur, for example, as a result of economic or political turmoil in a
country in whose currency a Portfolio had a substantial portion of its assets
invested, or should relations between the United States and a foreign country
deteriorate markedly. Even though the securities are listed, the principal
trading market for the securities may 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, a Portfolio 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 a
Portfolio will be adversely affected if trading markets for the securities are
limited or absent.
Additional Hong Kong Risk Factors (Select Ten Series-Hong Kong Portfolio only)
The information set forth below has been extracted from various governmental
and private publications, but no representation can be made as to its accuracy;
furthermore, no representation is made that any correlation exists between the
state of the economy of Hong Kong and the value of any securities held by a Hong
Kong Portfolio.
Hong Kong. The British colony of Hong Kong, established in the 1840's, is
situated on the southern coast of the People's Republic of China ("China"). It
is currently a colony of Great Britain, ruled by the British Government with a
Governor appointed by the Queen on the advice of the British Government. The
Hong Kong government generally follows a laissez-faire policy towards industry.
There are no major import, export or foreign exchange restrictions. Regulation
of business is generally minimal with certain exceptions, including regulated
entry into certain sectors of the economy and a fixed exchange rate regime by
which the Hong Kong dollar has been pegged to the U.S. dollar. Over the ten
year period between 1983 and 1993, Real Gross Domestic Product increased at an
average annual rate of approximately 6%.
Hong Kong Exchange. The Stock Exchange of Hong Kong Ltd. (the "Hong Kong
Exchange"), with a total market capitalization as of December 31, 1993 of
approximately US$385 billion, is the second largest stock market in Asia,
5
<PAGE>
measured by market capitalization, behind that of Japan. As of that date, 477
companies and 891 securities (including ordinary shares, warrants and other
derivative instruments) were listed on the Hong Kong Exchange. The Securities
and Futures Commission, which was established by the Hong Kong government in
1989, exercises supervision of the securities, financial investment and
commodities futures industry.
The Hang Seng Index is subject to change and delisting of shares of any
issuers may have an adverse impact on the performance of a Portfolio. Jardine
Matheson Holdings Ltd. ("Jardine Matheson"), Jardine Strategic Holdings Ltd.
("Jardine Strategic"), Lai Sun Garment (International) Ltd. and Windsor
Industrial Corporation Ltd. delisted from the Hong Kong Exchange on November 30,
1994 and three Jardine affiliates (Dairy Farms International Holdings Ltd., Hong
Kong Land Holdings Ltd. and Mandarin Oriental International Ltd. (collectively
with Jardine Matheson and Jardine Strategic, the "Jardine Companies")) delisted
from the Hong Kong Exchange on February 28, 1995. The Jardine Companies
represented almost 10% of total capitalization of the Hang Seng Index. Any
future delisting could have an adverse impact on the performance of a Portfolio.
Such delisting would not necessarily result in the disposal of the stock of
these companies, nor would it prevent a Portfolio from purchasing such
securities in connection with the issuance of additional Units or the purchase
of additional securities.
Volatility of the Hang Seng Index. Securities prices on the Hang Seng Index
can be highly volatile and are sensitive to developments in Hong Kong and China,
as well as other world markets. For example, in 1989, the Hang Seng Index rose
to 3,310 in May from its previous year-end level of 2,687 but fell to 2,094 in
early June 1989. The Hang Seng Index gradually climbed in subsequent months but
fell by 181 points on October 13, 1989 (approximately 6.5%) following a
substantial fall in the U.S. stock markets, and at the year end closed at a
level of 2,837. More recently, during 1994 the Hang Seng Index lost
approximately 31% of its value.
The following table demonstrates the volatility of the Hang Seng Index in
comparison to that of the FT Index and the Dow Jones Industrial Average by
showing for each index, the number of trading days during the period from
January 1, 1989 through March 31, 1994, on which the value of the index in local
currency gained or lost 1%, 2% and 3% of its value as of the previous trading
day.
Number of Trading Days
with
Gains or Losses Shown
FT Dow Jones
Percentage Gains Index
or Losses Hang Seng Industrial
in Value of Index Index Average
1% . . . . . . . 532 364251
2% . . . . . . . 194 3935
3% . . . . . . . 74 1210
Previous performance is no guarantee of future results; any index may
display more or less volatility in the future.
6
<PAGE>
Hong Kong's Reversion to Chinese Sovereignty. Hong Kong will revert to
Chinese sovereignty effective July 1, 1997 with Hong Kong becoming a Special
Administrative Region ("SAR") of China. Although China has committed by treaty
to preserve for 50 years the economic and social freedoms currently enjoyed in
Hong Kong, the continuation of the economic system in Hong Kong after the
reversion will be dependent on the Chinese government and there can be no
assurances that the commitment made by China regarding Hong Kong will be
maintained. Legislation has recently been enacted in Hong Kong that will extend
democratic voting procedures for Hong Kong's legislature. China has expressed
disagreement with this legislation which it states is in contravention of the
principles evinced in the Basic Law of the Hong Kong SAR. The National People's
Congress of China has passed a resolution to the effect that the Legislative
Council and certain other councils and boards of the Hong Kong Government will
be terminated on June 30, 1997. It is expected that such bodies will be
subsequently reconstituted in accordance with China's interpretation of the
Basic Law. China and Great Britain have also yet to resolve their differences
on other issues relating to the reversion to sovereignty including the financing
of and construction of a new international airport on Lantau Island. Any
increase in uncertainty as to the future economic and political status of Hong
Kong could have a materially adverse effect on the value of a Hong Kong
Portfolio.
Most Favored Nation Status. China (like most other nations) currently
enjoys a most favored nation status ("MFN Status") from the United States, which
is subject to annual review by the President of the United States. One June 2,
1994, President Clinton signed an executive order which renewed China's MFN
Status for another year. Revocation of the MFN Status would have a severe
effect on China's trade and thus could have a materially adverse effect on the
value of a Hong Kong Portfolio.
Other Economic Factors. The performance of certain companies listed on the
Hong Kong Exchange is linked to the economic climate of China. For example,
between 1985 and 1990, Hong Kong businesses invested US$20 billion in the nearby
Chinese province of Guangdong to take advantage of the lower property and labor
costs than were available in Hong Kong. Recently, however, high economic growth
in this area (industrial production grew at an annual rate of about 20% in 1991,
24% in 1992 and 36.5% in 1993) has been associated with rising inflation and
concerns about the devaluation of the Chinese currency. Any downturn in
economic growth or increase in the rate of inflation in China could have a
materially adverse effect on the value of a Hong Kong Portfolio.
Concentration
A Portfolio may contain or be concentrated in securities of issuers engaged
in the industries discussed below. An investment in a Portfolio should be made
with an understanding of the risks that these securities may entail, certain of
which are described below.
Petroleum Refining Companies. According to the U.S. Department of Commerce,
the factors which will most likely shape the petroleum refining and marketing
industry to 1996 and beyond include the price and availability of oil from the
Middle East, general economic conditions, changes in United States regulatory
policies, international events and the continued decline in U.S. production of
crude oil. Possible effects of these factors may be increased U.S. and world
dependence on oil from the Organization of Petroleum Exporting Countries
("OPEC"), highly uncertain and potentially more volatile oil prices and a higher
rate of growth for natural gas production than for other fuels.
The refining industry is highly competitive with margins sensitive to supply
and demand cycles. Declining U.S. crude oil production will likely lead to
increased dependence on OPEC oil, putting refiners at risk of continued and
7
<PAGE>
unpredictable supply disruption. The existence of surplus crude oil production
capacity and the willingness to adjust production levels are the two principal
requirements for stable crude oil markets. Without excess capacity, supply
disruptions in some countries cannot be compensated for by others.
Although unused capacity can contribute to market stability, it also creates
pressure to overproduce and contributes to market uncertainty. The likely
restoration of a large portion of Kuwait and Iraq's production and export
capacity over the next few years could lead to market disruptions in the absence
of substantial growth in world oil demand. Formerly, OPEC members attempted to
exercise control over production levels in each country through a system of
mandatory production quotas. The mandatory system has since been replaced with
a voluntary system. Production under the new system has had to be curtailed on
at least one occasion as a result of weak prices, even in the absence of
supplies from Iraq. The pressure to deviate from mandatory quotas, if they are
reimposed, is likely to be substantial and could lead to a weakening of prices.
Fluctuations in demand for oil-related products could also effect the
profitability of oil companies. If world oil demand increases additional
capacity and production will be required to compensate for expected sharp drops
in U.S. crude oil production and exports from the former Soviet Union. Only a
few OPEC countries, particularly Saudi Arabia, have the petroleum reserves that
will allow the required increase in production capacity to be attained. Given
the large-scale financing that is required, the prospect that such expansion
will occur soon enough to meet the increased demand is uncertain. However, no
assurance can be given that the demand for or the price of oil will increase or
that if either anticipated increase does take place, it will not be marked by
great volatility. Lower consumer demand due to increases in energy efficiency,
gasoline reformulations that call for less crude oil, warmer winters or a
general slowdown in economic growth in this country and abroad, could negatively
affect the price of oil and the profitability of oil companies. Cheaper oil
could also decrease demand for natural gas.
Refiners are subject to extensive federal, state and local environmental
laws and regulations that will pose serious challenges to the industry over the
coming decade. Refiners are likely to be required to commit considerable
resources to plant additions and make major production adjustments in order to
comply with increasingly stringent environmental legislation, such as the 1990
amendments to the Clean Air Act. If the cost of these changes is substantial
enough to cut deeply into profits, smaller refiners may be forced out of the
industry entirely. Additionally, refining operations are hazardous due, in
part, to the highly flammable nature of crude oil, natural gas and refined
products. As a result, refining operations are subject to personal injury and
property damage incidents.
Any future scientific advances concerning new sources of energy and fuels or
legislative changes relating to the energy industry or the environment could
have a negative impact on the petroleum product or natural gas industry. While
legislation has been enacted to deregulate certain aspects of the oil industry,
no assurances can be given that new or additional regulations will not be
adopted. Each of the problems referred to above could adversely affect the
financial stability of the issuers of any petroleum industry stocks in a
Portfolio.
The Semiconductor and Electronics Industry
The Fund is concentrated in stocks of issuers that manufacture
semiconductors. Semiconductor and Electronics companies present certain risks
that may not exist to the same degree in other industries. The industry is
highly competitive, both domestically and internationally. Technology stocks,
in general, tend to be relatively volatile as compared to other types of
8
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investments. While volatility may create investment opportunities, it does
entail risk. Companies throughout the technology field include many smaller and
less seasoned companies. These types of companies may present greater
opportunities for capital appreciation, but usually involve greater risks.
These companies may have limited product lines, markets or financial resources,
or may have limited management or marketing personnel. In addition, the
securities that have wide institutional holding are more volatile than the
securities with lower institutional holding. The semiconductor and electronics
industry is also strongly affected by worldwide scientific and technological
developments and the products of these companies may rapidly fall into
obsolescence. Certain of these companies may offer products or services that
are subject to (or may become subject to) government regulation and may,
therefore, be affected adversely by government policies. Other factors that
characterize the semiconductor and electronics industry include low barriers to
entry, short product life cycles, aggressive pricing and reduced profit margins,
dramatic and often unpredictable changes in growth rates, a high degree of
investment needed to maintain competitiveness, frequent new product
introduction, the need to enhance existing products, intense competition from
large established companies, and potential competition from small start up
companies. In addition, the semiconductor and electronics industry is subject
to events that affect manufacturing companies in general, such as increases in
material or labor costs, changes in distribution channels and the need to manage
inventory levels in line with product demand.
Hong Kong Real Estate Companies. Certain Hong Kong Portfolios may be
considered to be concentrated in common stocks of companies engaged in real
estate asset management, development, leasing, property sales and other related
activities. Investment in securities issued by these real estate companies
should be made with an understanding of the many factors which may have an
adverse impact on the credit quality of the particular company or industry.
Generally, these include economic recession, the cyclical nature of real estate
markets, competitive overbuilding, unusually adverse weather conditions,
changing demographics, changes in governmental regulations (including tax laws
and environmental, building, zoning and sales regulations), increases in real
estate taxes or costs of material and labor, the inability to secure performance
guarantees or insurance as required, the unavailability of investment capital
and the inability to obtain construction financing or mortgage loans at rates
acceptable to builders and purchasers of real estate. Additional risks include
an inability to reduce expenditures associated with a property (such as mortgage
payments and property taxes) when rental revenue declines, and possible loss
upon foreclosure of mortgaged properties if mortgage payments are not paid when
due.
Recently, in the wake of Chinese economic development and reform, certain
Hong Kong real estate companies and other investors began purchasing and
developing real estate in southern China, including Beijing, the Chinese
capital. By 1992, however, southern China began to experience a rise in real
estate prices, increases in construction costs and a tightening of credit
markets. Any worsening of these conditions could affect the profitability and
financial condition of Hong Kong real estate companies and could have a
materially adverse effect on the value of a Hong Kong Portfolio.
ROLLOVER
It is expected that a special redemption and liquidation will be made of all
Units of a Portfolio held by any investor who affirmatively notifies the Trustee
in writing by the applicable notification date specified in the Portfolio's
prospectus that he elects to participate. It should also be noted that rollover
investors may realize taxable capital gains on the rollover but generally will
not be entitled to a deduction for certain capital losses and no cash would be
distributed at that time to pay any taxes.
9
<PAGE>
All Units of rollover investors will be redeemed in kind on the first day of
the rollover period and the underlying securities will be distributed to a
distribution agent on behalf of the rollover investors. During the rollover
period, the distribution agent will be required to sell all of the underlying
securities on behalf of rollover investors. The sale proceeds will be net of
brokerage fees, governmental charges or any expenses involved in the sales.
Rollover investors may purchase units of a new portfolio of the same series,
if available, subject only to the Deferred Sales Charge; provided that rollover
investors who no longer hold their Units in an account maintained with one of
the Sponsors at the time of the rollover may not be eligible to participate in
the direct reinvestment in the new portfolio.
If an investor so specifies by the applicable notification date, his Units
will be redeemed in kind and the securities disposed of during the rollover
period. As long as the investor confirms his interest in purchasing units of a
new portfolio and units are available, the proceeds of the sales (net of
brokerage commissions, stamp taxes, governmental charges and any other selling
expenses or if applicable, costs associated with foreign trading) will be
invested in units of the next portfolio at daily prices over the rollover period
based on the asset value of units of the next portfolio plus the applicable
sales charge. The Sponsors are under no obligation to create a new portfolio,
however, and may modify the terms of the rollover upon notice to investors at
any time.
Depending on the volume of proceeds to be invested in the next portfolio
through the rollover and the volume of other orders for units in the next
portfolio, the Sponsors may purchase large volumes of the securities for the
next portfolio in a short period of time. This concentrated buying may tend to
raise the market prices of these securities. The actual market impact of the
Sponsors' purchases, however, is currently unpredictable because the actual
volume of securities to be purchased and the supply and price of those
securities are unknown. A similar problem may occur in connection with the
Sponsors' sales of securities during the rollover period. Depending on the
volume of sales required, and the prices of and demand for securities, sales by
the Sponsors may tend to depress the market prices and the value of Units, and
thus reduce the proceeds to be credited to rollover investors for investment in
the next portfolio.
The distribution agent will engage the Sponsors as its agents to sell the
distributed securities. The Sponsors will attempt to sell the securities as
quickly as is practicable during the rollover period without in their judgment
materially adversely affecting the market price of the securities, but all of
the securities will in any event be disposed of by the end of the rollover
period. The Sponsors do not anticipate that the period will be longer than 12
business days, although it could be shorter or longer given the varying
liquidity of the Securities. The liquidity of any security depends on the daily
trading volume of the security and the amount that the Sponsors have available
for sale on any particular day.
It is expected (but not required) that the Sponsors will generally follow
the following guidelines in selling the securities: for highly liquid
securities, the Sponsors will generally sell securities on the first day of the
rollover period; for less liquid securities, on each of the first two days of
the rollover period, the Sponsors will generally sell any amount of any
underlying securities at a price no less than 1/2 of one point under the closing
sale price of those securities on the preceding day. Thereafter, the Sponsors
intend to sell without any price restrictions at least a portion of the
remaining underlying securities, the numerator of which is one and the
denominator of which is the total number of days remaining (including that day)
in the rollover period.
10
<PAGE>
Section 17(a) of the Investment Company Act of 1940 restricts purchases and
sales between affiliates of registered investment companies and those companies.
Pursuant to a recent exemptive order, certain Portfolios (and the distribution
agent on behalf of rollover investors) can now sell securities to the next
portfolio if those securities continue to meet the applicable objective or
Strategy. The exemption will enable these portfolios to eliminate commission
costs on these transactions. The price for those securities will be the closing
sale price on the sale date on the exchange where the securities are principally
traded, as certified by the Agent for the Sponsors and confirmed by the Trustee
of a Portfolio.
The Sponsors intend to create new units of Portfolios as quickly as
possible, depending upon the availability and reasonably favorable price of the
securities included in the new Portfolio, and it is intended that rollover
investors will be given first priority to purchase new units of the new
Portfolio. There can be no assurance, however, as to the exact timing of the
creation of units of new Portfolios or the aggregate number of new units of new
Portfolios which the Sponsors will create. The Sponsors may, in their sole
discretion, stop creating units (whether permanently or temporarily) at any time
they choose, regardless of whether all proceeds of the rollover have been
invested on behalf of rollover investors. Cash which has not been invested on
behalf of the rollover investors in new Portfolios will be distributed at the
end of the rollover period. However, since the Sponsors can create units by
depositing cash (or bank letter of credit) with instructions to buy securities,
the Sponsors anticipate that sufficient units can be created, although moneys in
the new Portfolio may not be fully invested on the next business day.
Any rollover investor may thus be redeemed out of a Portfolio and become a
holder of an entirely different trust with a different portfolio of securities.
The rollover investor's Units will be redeemed in kind and the distributed
securities shall be sold during the rollover period. In accordance with the
rollover investors' offers to purchase units of new Portfolios, the proceeds of
the sales (and any other cash distributed upon redemption), less the amount of
any deferred sales charge still unpaid, will be invested in new units of the
next Portfolio, at the Public Offering Price, including the applicable sales
charge per unit.
This process of redemption, liquidation, and investment in a new trust is
intended to allow for the fact that the portfolios selected by the Sponsors are
chosen on the basis of a strategy for a period of one year, at which point a new
portfolio is chosen. It is contemplated that a similar process of redemption,
liquidation and investment in a new fund will be available for each subsequent
Portfolio, approximately a year after the creation of the prior series.
The Sponsors believe that the gradual redemption, liquidation and investment
in the new Portfolio will help mitigate any negative market price consequences
stemming from the trading of large volumes of securities and of the underlying
securities in the new Portfolio in a short, publicized period of time. The
above procedures may, however, be insufficient or unsuccessful in avoiding such
price consequences. There can be no assurance that the procedures will
effectively mitigate any adverse price consequences of heavy volume trading or
that the procedures will produce a better price for investors than might be
obtained on any given day during the rollover period. In fact, market price
trends may make it advantageous to sell or buy more quickly or more slowly than
permitted by these procedures. Rollover investors could then receive a less
favorable average unit price than if they bought all their units of the new
Portfolio on any given day of the period. Historically, the prices of
securities selected by the Sponsors as good investments have generally risen
over the first few days following the announcement.
11
<PAGE>
It should also be noted that rollover investors may realize taxable capital
gains on the rollover but generally will not be entitled to a deduction for
certain capital losses and, due to the procedures for investing in new
Portfolios, no cash would be distributed at that time to pay any taxes.
In addition, during this period an investor will be at risk to the extent
that securities are not sold and will not have the benefit of any stock
appreciation to the extent that monies have not been invested; for this reason,
the Sponsors will be inclined to sell and purchase the securities in as short a
period as they can without materially adversely affecting the price of the
securities.
Investors who do not inform the Trustee that they wish to have their Units
so redeemed and liquidated will continue to hold Units of a Portfolio until that
Portfolio is terminated. These remaining investors will not realize capital
gains or losses due to the rollover and will not be charged any additional sales
charge. If a large percentage of investors become rollover investors, the
aggregate size of a Portfolio will be sharply reduced. As a consequence,
expenses, if any, in excess of the amount to be borne by the Trustee would
constitute a higher percentage amount per Unit than prior to the rollover in the
new Portfolio. Also, because of the lesser number of Units in a Portfolio, and
possibly also due to a value reduction, however temporary, in Units caused by
the Sponsors' sales of securities, a Portfolio might also reduce to the minimum
value that would allow the Sponsors to choose to liquidate that Portfolio
without the consent of the remaining investors. The securities remaining in a
Portfolio after the rollover will be sold by the Sponsors as quickly as possible
without, in their judgment, materially adversely affecting the market price of
the securities.
TAXATION--RETIREMENT PLANS
A Portfolio may be well suited for purchase by Individual Retirement
Accounts ("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 such 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. Investors who are also invested 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 the Sponsors, and other financial
institutions. Fees and charges with respect to such plans may vary.
Retirement Plans for the Self-Employed-- Keogh Plans. Units of a Portfolio
may be purchased by retirement plans established pursuant to 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 to Keogh plans. 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 before attainment of age 59 1/2, except in the case of a participant's
death or disability and certain other related circumstances. 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
12
<PAGE>
arrangement set up by an employer or union for the purchase of Units of the
Fund. Any individual can make a contribution in an IRA equal to the lesser of
$2,000 ($2,250 in a spousal account) or 100% of earned income; such investment
must be made in cash. However, 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.
Corporate Pension and Profit-Sharing Plans. A pension or profit-sharing
plan for employees of a corporation may purchase Units of a Portfolio.
13
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<PERIOD-END> JUN-06-1995
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