AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 6, 1994
REGISTRATION NO. 33-54919
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
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 TEN PORTFOLIO--AUTUMN 1994 INTERNATIONAL SERIES
(UNITED KINGDOM AND HONG KONG PORTFOLIOS)
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:
SMITH BARNEY INC. MERRILL LYNCH, PIERCE, DEAN WITTER REYNOLDS INC.
TWO WORLD TRADE CENTER FENNER & TWO WORLD TRADE
101ST FLOOR SMITH INCORPORATED CENTER--59TH FLOOR
NEW YORK, N.Y. 10048 UNIT INVESTMENT TRUST NEW YORK, N.Y. 10048
DIVISION
P.O. BOX 9051
PRINCETON, N.J.
08543-9051
PRUDENTIAL SECURITIES PAINEWEBBER INCORPORATED
INCORPORATED 1285 AVENUE OF THE
ONE SEAPORT PLAZA AMERICAS
199 WATER STREET NEW YORK, N.Y. 10019
NEW YORK, N.Y. 10292
D. NAMES AND COMPLETE ADDRESSES OF AGENTS FOR SERVICE:
TERESA KONCICK, ESQ. THOMAS D. HARMAN, ESQ. LEE B. SPENCER, JR.
P.O. BOX 9051 388 GREENWICH STREET ONE SEAPORT PLAZA
PRINCETON, N.J. NEW YORK, N.Y. 10013 199 WATER STREET
08543-9051 NEW YORK, N.Y. 10292
COPIES TO:
ROBERT E. HOLLEY DOUGLAS LOWE, ESQ. PIERRE DE SAINT PHALLE,
1285 AVENUE OF THE 130 LIBERTY STREET--29TH ESQ.
AMERICAS FLOOR 450 LEXINGTON AVENUE
NEW YORK, N.Y. 10019 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)
/ x / Check box if it is proposed that this filing will become effective upon
filing on September 6, 1994 pursuant to Rule 487.
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<PAGE>
Defined
Asset FundsSM
EQUITY This Defined Fund consists of two separate
INCOME FUND portfolios (each a 'Portfolio') of preselected
SELECT TEN PORTFOLIO-- securities, each formed to obtain total return
AUTUMN 1994 through a combination of capital appreciation and
INTERNATIONAL SERIES current dividend income. The 'United Kingdom
(UNITED KINGDOM AND HONG KONG Portfolio' will invest for a period of about one
PORTFOLIOS) year in the ten common stocks in the Financial
Times Industrial Ordinary Share Index (the 'FT
Index') having the highest dividend yield two
business days prior to the date of this
Prospectus. The FT Index is an unweighted average
of 30 companies which are representative of
British industry and commerce. The 'Hong Kong
Portfolio' will invest for a period of about one
year in the ten common stocks in the Hang Seng
Index having the highest dividend yield two
business days prior to the date of this
Prospectus. The Hang Seng Index is made up of 33
companies listed on the Hong Kong Stock Exchange
which are representative of the companies listed
on the Hong Kong Stock Exchange. The Hang Seng
Index is weighted by market capitalization. The
publishers of these Indexes are not affiliated
with the Sponsors, have not participated in any
way in the creation of the Fund or in the
selection of stocks included in the Portfolios and
have not reviewed or approved any information
included in this Prospectus.
The value of Units will fluctuate with the value
of the applicable Portfolio of underlying
Securities and no assurance can be given that
dividends will be paid or that the Units will
appreciate in value.
Unless otherwise indicated, all amounts herein are
stated in U.S. dollars computed on the basis of
the exchange rate for British pounds sterling or
Hong Kong dollars, as applicable, on September 6,
1994.
An investor may invest in Units from one or both
Portfolios.
Minimum purchase: $1,000 of Units per Portfolio.
Minimum purchase for Individual Retirement/Keogh
Accounts: $250 of Units per Portfolio.
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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 PROSPECTUS. ANY REPRESENTATION TO THE
Incorporated CONTRARY IS A CRIMINAL OFFENSE.
Smith Barney Inc. Inquiries should be directed to the Trustee at
PaineWebber Incorporated 1-800-323-1508.
Prudential Securities Prospectus dated September 6, 1994.
Incorporated READ AND RETAIN THIS PROSPECTUS FOR FUTURE
Dean Witter Reynolds Inc. REFERENCE.
<PAGE>
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DEFINED ASSET FUNDSSM is America's oldest and largest family of unit investment
trusts, with over $90 billion sponsored since 1970. Each Defined Fund is a
portfolio of preselected securities. The portfolio is divided into 'units'
representing equal shares of the underlying assets. Each unit receives an equal
share of income and principal distributions.
With Defined Asset Funds you know in advance what you are investing in and that
changes in the portfolio are limited. Most defined bond funds pay interest
monthly and distribute principal as bonds are called, redeemed, sold or as they
mature. Defined equity funds offer preselected stock portfolios with defined
termination dates.
Your financial professional can help you select a Defined Fund to meet your
personal investment objectives. Our size and market presence enable us to offer
a wide variety of investments. Defined Funds are available in the following
types of securities: municipal bonds, corporate bonds, government bonds, utility
stocks, growth stocks, real estate investment trusts, even international
securities denominated in foreign currencies.
The terms of Defined Funds are as short as one year or as long as 30 years.
Special funds are available for investors seeking extra features: insured funds,
double and triple tax-free funds, and funds with 'laddered maturities' to help
protect against rising interest rates. Defined Funds are offered by prospectus
only.
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CONTENTS
Investment Summary.......................................... A-3
Fee Table................................................... A-4
Underwriting Account........................................ A-10
Report of Independent Accountants........................... A-16
Statements of Condition..................................... A-16
Portfolios.................................................. A-17
Fund Structure.............................................. 1
Risk Factors................................................ 2
Description of the Fund..................................... 9
Taxes....................................................... 11
Foreign Taxation............................................ 13
Public Sale of Units........................................ 15
Market for Units............................................ 17
Redemption.................................................. 17
Reinvestment Plan........................................... 19
Special Redemption, Liquidation and Investment in
New Portfolio............................................ 20
Termination................................................. 22
Expenses and Charges........................................ 22
Administration of the Fund.................................. 23
Resignation, Removal and Limitations on Liability........... 25
Miscellaneous............................................... 26
Exchange Option............................................. 29
A-2
<PAGE>
INVESTMENT SUMMARY AS OF SEPTEMBER 6, 1994 (THE BUSINESS DAY PRIOR TO THE
INITIAL DATE OF DEPOSIT)(a)
UNITED KINGDOM PORTFOLIO
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INITIAL NUMBER OF UNITS-- 302,255
FRACTIONAL UNDIVIDED INTEREST IN PORTFOLIO REPRESENTED BY
EACH UNIT-- 1/302,255th
CALCULATION OF PUBLIC OFFERING PRICE PER 1,000 UNITS
Aggregate U.S. dollar value of Securities and cash held to
purchase Securities(b)..................................$ 299,232.46
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Divided by 302,255 Units..................................$ 990.00
(times 1,000)
Plus maximum sales charge of 2.75%(c) of Public Offering
Price (2.778% of net amount invested in Securities and
cash held to purchase Securities)....................... 27.50
Less Deferred Sales Charge................................ (17.50)
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Public Offering Price per 1,000 Units..................... 1,000.00
Plus the amount per 1,000 Units in the Income Account (see
Administration of the Fund-- Accounts and Distributions) 0.00
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Total per 1,000 Units.....................................$ 1,000.00
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SPONSORS' REPURCHASE PRICE AND REDEMPTION PRICE PER 1,000
UNITS.......................................................$ 972.50(d)
TRUSTEE'S ANNUAL FEE AND EXPENSES
$2.50 per 1,000 Units (see Expenses and
Charges)(e)
SPONSORS' PROFIT OR (LOSS) ON DEPOSIT--
($2,129.96)
EVALUATION TIME: Close of the London Stock
Exchange (currently 11:30 A.M., New York
Time)
HONG KONG PORTFOLIO
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INITIAL NUMBER OF UNITS-- 309,956
FRACTIONAL UNDIVIDED INTEREST IN PORTFOLIO REPRESENTED BY
EACH UNIT-- 1/309,956th
CALCULATION OF PUBLIC OFFERING PRICE PER 1,000 UNITS
Aggregate U.S. dollar value of Securities and cash held to
purchase Securities(b)..................................$ 306,856.87
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Divided by 309,956 Units..................................$ 990.00
(times 1,000)
Plus maximum sales charge of 2.75%(c) of Public Offering
Price (2.778% of net amount invested in Securities and
cash held to purchase Securities)....................... 27.50
Less Deferred Sales Charge................................ (17.50)
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Public Offering Price per 1,000 Units..................... 1,000.00
Plus the amount per 1,000 Units in the Income Account (see
Administration of the Fund-- Accounts and Distributions) 0.00
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Total per 1,000 Units.....................................$ 1,000.00
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SPONSORS' REPURCHASE PRICE AND REDEMPTION PRICE PER 1,000
UNITS.......................................................$ 972.50(d)
TRUSTEE'S ANNUAL FEE AND EXPENSES
$3.51 per 1,000 Units (see Expenses and
Charges)(e)
SPONSORS' PROFIT OR (LOSS) ON DEPOSIT--
($1,061.61)
EVALUATION TIME: Close of the Stock Market of
Hong Kong, Ltd. (currently 3:30 A.M., New
York Time)
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(a) The initial deposits were made and the Indentures were signed on the
date of this Prospectus.
(b) After deduction of the Deferred Sales Charge then payable (zero on the
date of this Investment Summary). The aggregate value of Securities in
each Portfolio represents U.S. dollar value based on currency exchange
rates for the British pound sterling and the Hong Kong dollar, as
applicable, at the Evaluation Time on the date of this Investment
Summary. The Public Offering Price per 1,000 Units is based on the
aggregate value of the Securities computed on the basis of the offering
side value of the relevant currency exchange rate expressed in U.S.
dollars.
(c) The sales charge consists of an Initial Sales Charge and a Deferred
Sales Charge. The Initial Sales Charge is computed by deducting the
Deferred Sales Charge ($17.50 per 1,000 Units) from the aggregate sales
charge (a maximum of 2.75% of the Public Offering Price); thus on the
date of this Investment Summary, the maximum Initial Sales Charge is
$10 per 1,000 Units or 1% of the Public Offering Price. The Initial
Sales Charge is deducted from the purchase price at the time of
purchase and is reduced on a graduated basis on purchases of $50,000 or
more (see Public Sale of Units--Public Offering Price). The Deferred
Sales Charge is paid through reduction of the net asset value of the
Fund by $1.75 per 1,000 Units on each Deferred Sales Charge Payment
Date (the 1st day of each month, commencing December 1, 1994). On a
repurchase or redemption of Units before the last Deferred Sales Charge
Payment Date, any remaining Deferred Sales Charge payments will be
deducted from the proceeds. Units purchased pursuant to the
Reinvestment Plan are subject to that portion of the Deferred Sales
Charge remaining at the time of reinvestment (see Reinvestment Plan).
(d) Reflects deductions for remaining Deferred Sales Charge payments
($17.50 initially). The Sponsors' Repurchase Price and Redemption Price
Per 1,000 Units are based on the aggregate value of the Securities
computed on the basis of the bid side value of the relevant currency
exchange rate expressed in U.S. dollars. Further, after the initial
offering period, the repurchase and cash redemption prices will be
further reduced to reflect the Fund's estimated costs of liquidating
Securities to meet the redemption, currently estimated at $2.17 and
$6.55 per 1,000 Units for the United Kingdom Portfolio and the Hong
Kong Portfolio, respectively.
(e) Assumes the Portfolio will reach a size estimated by the Sponsors;
expenses will vary with the size of the Portfolio. Of this amount, the
Trustee receives annually for its services as Trustee $0.84 per 1,000
Units, calculated monthly based on the largest number of Units
outstanding at any time during that month.
A-3
<PAGE>
INVESTMENT SUMMARY AS OF SEPTEMBER 6, 1994 (CONTINUED)
FEE TABLE
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THIS FEE TABLE IS INTENDED TO ASSIST INVESTORS IN UNDERSTANDING THE COSTS
AND EXPENSES THAT AN INVESTOR IN A PORTFOLIO WILL BEAR DIRECTLY OR INDIRECTLY.
SEE PUBLIC SALE OF UNITS AND EXPENSES AND CHARGES. ALTHOUGH EACH 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.
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UNITED KINGDOM PORTFOLIO
<TABLE><CAPTION>
UNITHOLDER TRANSACTION EXPENSES AMOUNT PER
1,000 UNITS
------------
<S> <C> <C> <C>
Maximum Initial Sales Charge Imposed on Purchase (as a percentage of offering price)................ 1.00%(a) $ 10.00
Deferred Sales Charge per Year (as a percentage of original purchase price)......................... 1.75%(b) 17.50
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2.75% $ 27.50
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Maximum Sales Charge Imposed Per Year on Reinvested Dividends....................................... 1.58%(b) $ 15.75
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ESTIMATED ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Trustee's Fee....................................................................................... 0.085% $ 0.84
Portfolio Supervision, Bookkeeping and Administrative Fees.......................................... 0.045% 0.45
Other Operating Expenses............................................................................ 0.123% 1.21
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Total............................................................................................. 0.253% $ 2.50
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</TABLE>
<TABLE>
EXAMPLE
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CUMULATIVE EXPENSES PAID FOR PERIOD OF:
---------------------------------------
1 YEAR 3 YEARS 5 YEARS
----------- ------------- -----------
<S> <C> <C> <C>
An investor would pay the following expenses on a $1,000 investment, assuming
the estimated operating expense ratio of 0.253% on the Autumn 1994 United
Kingdom Portfolio and a 5% annual return on the investment throughout the
periods..................................................................... $ 30 $ 73 $ 118
EXAMPLE
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10 YEARS
-----------
An investor would pay the following expenses on a $1,000 investment, assuming
the estimated operating expense ratio of 0.253% on the Autumn 1994 United
Kingdom Portfolio and a 5% annual return on the investment throughout the
periods..................................................................... $ 242
</TABLE>
HONG KONG PORTFOLIO
<TABLE><CAPTION>
UNITHOLDER TRANSACTION EXPENSES AMOUNT PER
1,000 UNITS
------------
<S> <C> <C> <C>
Maximum Initial Sales Charge Imposed on Purchase (as a percentage of offering price)................ 1.00%(a) $ 10.00
Deferred Sales Charge per Year (as a percentage of original purchase price)......................... 1.75%(b) 17.50
--------- ------------
2.75% $ 27.50
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Maximum Sales Charge Imposed Per Year on Reinvested Dividends....................................... 1.58%(b) $ 15.75
--------- ------------
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ESTIMATED ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Trustee's Fee....................................................................................... 0.085% $ 0.84
Portfolio Supervision, Bookkeeping and Administrative Fees.......................................... 0.045% 0.45
Other Operating Expenses............................................................................ 0.225% 2.22
--------- ------------
Total............................................................................................. 0.355% $ 3.51
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</TABLE>
<TABLE><CAPTION>
EXAMPLE
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CUMULATIVE EXPENSES PAID FOR PERIOD OF:
---------------------------------------
1 YEAR 3 YEARS 5 YEARS
----------- ------------- -----------
<S> <C> <C> <C>
An investor would pay the following expenses on a $1,000 investment, assuming
the estimated operating expense ratio of 0.355% on the Autumn 1994 Hong Kong
Portfolio and a 5% annual return on the investment throughout the periods... $ 31 $ 76 $ 123
EXAMPLE
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10 YEARS
-----------
An investor would pay the following expenses on a $1,000 investment, assuming
the estimated operating expense ratio of 0.355% on the Autumn 1994 Hong Kong
Portfolio and a 5% annual return on the investment throughout the periods... $ 253
</TABLE>
The Examples assume reinvestment of all dividends and distributions and utilize
a 5% annual rate of return as mandated by Securities and Exchange Commission
regulations applicable to mutual funds. For purposes of the Examples, 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. Because the reductions to the repurchase and cash redemption
prices described in footnote (d) on page A-3 apply only to the secondary market,
these reductions have not been reflected in the figures above. The Examples
should not be considered representations of past or future expenses or annual
rate of return; the actual expenses and annual rate of return may be more or
less than those assumed for purposes of the Examples.
- ------------------
(a) The Maximum Initial Sales Charge is actually the difference between 2.75%
and the Deferred Sales Charge ($17.50 per 1,000 Units) and would exceed 1%
if the Public Offering Price exceeds $1,000 per 1,000 Units.
(b) The actual fee is $1.75 per month per 1,000 Units, irrespective of purchase
or redemption price, deducted in each of the last 10 months of each one-year
Portfolio (see Reinvestment Plan on p. A-9). If a Holder sells Units before
all of these deductions have been made, the balance of the Deferred Sales
Charge will be deducted from the sales proceeds. If Unit price exceeds $1
per Unit, the Deferred Sales Charge will be less than 1.75%; if Unit price
is less than $1 per Unit, the Deferred Sales Charge will exceed 1.75%.
A-4
<PAGE>
INVESTMENT SUMMARY FOR EACH PORTFOLIO AS OF SEPTEMBER 6, 1994 (CONTINUED)
SPECIAL REDEMPTION AND LIQUIDATION
PERIOD
Beginning on September 12, 1995 until no later than
October 13, 1995 (the 'Special Redemption and
Liquidation Period').
PROCEDURES FOR SPECIAL REDEMPTION,
LIQUIDATION AND INVESTMENT IN NEW FUND
If a Holder (a 'Rollover Holder') so specifies
by September 11, 1995 or another date as
determined by the Sponsors (the 'Rollover
Notification Date'), the Rollover Holder's Units
will be redeemed in kind and the underlying
distributed shares will be sold by the
Distribution Agent during the Special
Redemption and Liquidation Period. The
proceeds will be invested as received in a
portfolio of the Autumn 1995 International
Series (the 'Autumn 1995 International
Series'), if offered (see Special Redemption,
Liquidation and Investment in New Portfolio).
SEMI-ANNUAL INCOME DISTRIBUTIONS
Distributions of income, if any, will be paid on
the 25th of February 1995 and August 1995
(each a 'Distribution Day') to Holders of
record on the 10th of February 1995 and
August 1995, respectively (each a 'Record
Day').
PORTFOLIO SUPERVISION FEE+
Maximum of $.35 per 1,000 Units (see
Expenses and Charges).
MINIMUM VALUE OF PORTFOLIO
Trust Indenture may be terminated if value of a
Portfolio is less than 40% of the U.S. dollar
value of the Securities on the dates of their
deposit.
DEFERRED SALES CHARGE PAYMENT DATES
The 1st of each month, commencing December
1, 1994
MANDATORY TERMINATION DATE
October 13, 1995. The final distribution will be
made within a reasonable time thereafter (see
Termination).
OBJECTIVE OF THE FUND--The objective of each Portfolio of the Fund is to
provide total return through capital appreciation and current dividend income.
The United Kingdom and Hong Kong Portfolios will invest for approximately the
next twelve (12) months in approximately equal values of the ten common stocks
in the FT Index (United Kingdom) and the Hang Seng Index (Hong Kong) (each an
'Index'), respectively, having the highest dividend yield two business days
prior to the date of this Prospectus ('Strategy Stocks'). (See Investment
Summary--Special Characteristics of the Fund.) An investment in approximately
equal values of the ten highest dividend-yielding stocks in the FT Index for a
period of one year would have, in 16 of the last 20 years, yielded a higher
total return than an investment in all of the stocks comprising the FT Index and
a similar investment in the ten highest yielding stocks in the Hang Seng Index
would have, in ten of the last 16 years, yielded a higher total return than an
investment in all of the stocks comprising the Hang Seng Index. (See Comparison
of Dividends, Appreciation and Total Return on pages A-11 and A-13.) Investment
in a number of companies having high dividends relative to their stock prices
(usually because their stock prices are depressed) is designed to increase the
Portfolio's potential for higher returns. The Securities may appreciate or
depreciate in value (or pay or fail to pay dividends) depending on the full
range of economic and market influences affecting corporate profitability, the
financial condition of issuers and the prices of equity securities in general
and the Securities in particular (see Risk Factors). In addition, a decrease in
the value of the British pound sterling or Hong Kong dollar relative to the U.S.
dollar will adversely affect the value of the relevant Portfolio's assets and
income and the value of Units of that Portfolio (see Risk Factors). Therefore,
there is no guarantee that the objective of the Fund will be achieved.
SPECIAL CHARACTERISTICS OF THE FUND-- The United Kingdom and Hong Kong
Portfolios consist of the ten common stocks in the FT Index (the 'FT Strategy
Stocks') and the Hang Seng Index (the 'Hang Seng Strategy Stocks'),
respectively, having the highest dividend yield two business days prior to the
Initial Date of Deposit. The publishers of these Indexes are not affiliated with
the Sponsors, have not participated in any way in the creation of the Fund or in
the selection of the stocks included in the Fund and have not reviewed or
approved any of the information contained in this prospectus. The dividend yield
for each Security was generally calculated by adding together the most recent
interim dividend and final dividend declared* and dividing the result by the
market value of the Security two business days prior to the Initial Date of
Deposit. This formula (an objective determination) was the basis for the
Sponsors' selection of the ten stocks in each Index having the highest dividend
yield. The philosophy is simple. A Portfolio does not require an explanation of
'betas' or 'thetas', just
- ------------------------------------
+ In addition to this amount the Sponsors may be reimbursed for bookkeeping or
other administrative expenses not exceeding their actual costs, currently at
a maximum annual rate of $.10 per 1,000 Units.
* Generally, United Kingdom and Hong Kong companies pay one interim and one
final dividend per fiscal year.
A-5
<PAGE>
INVESTMENT SUMMARY FOR EACH PORTFOLIO AS OF SEPTEMBER 6, 1994 (CONTINUED)
the simple concept of buying a portfolio of equities based on their dividend
yields in one convenient purchase. The Securities were included in the
respective Portfolios irrespective of any research recommendations by any of the
Sponsors. There can be no assurance that any dividends will be declared or paid
in the future on the Securities in the Portfolios.
Investors should note that the Fund's selection criteria were applied to
the Securities included in each Portfolio two business days prior to the Initial
Date of Deposit. The Sponsors may deposit additional Securities in connection
with the sale of additional Units, the yields on these Securities may change
subsequent to the Initial Date of Deposit or the Securities may no longer be
included in the applicable Index; however, such subsequent changes will not
change the composition of the Portfolios. In addition, certain Securities to be
deposited in the United Kingdom Portfolio and the Hong Kong Portfolio may be
purchased on securities exchanges other than the London Stock Exchange and the
Hong Kong Exchange, respectively.
United Kingdom Portfolio--The FT Index. The FT Index comprises 30 common
stocks chosen by the editors of The Financial Times (London) as representative
of British industry and commerce. The companies are major factors in their
industries and their stocks are widely held by individuals and institutional
investors. The FT Index is a geometric, unweighted average of the share prices
of these companies and is calculated on an hourly basis. Its base is 100 as at
April 10, 1962. Changes in the components of the FT Index are made entirely by
the editors of The Financial Times without consultation with the companies, any
stock exchange or any official agency. For the sake of continuity, the balance
of stocks from various industry sectors has been maintained since the
introduction of the FT Index in 1935. Most substitutions of companies within
those sectors have been the result of mergers or because of poor share
performance, and from time to time, changes may be made to achieve a better
representation. The components of the FT Index may be changed at any time for
any reason. Any changes in the components in the FT Index announced after the
Initial Date of Deposit will not cause a change in the identity of the common
stocks included in the United Kingdom Portfolio, including any Securities
deposited thereafter. (See Risk Factors--United Kingdom Portfolio.)
Hong Kong Portfolio--The Hang Seng Index. The Hang Seng Index, which was
first published in 1969, comprises 33 of the 358 stocks currently listed on the
Stock Exchange of Hong Kong Ltd. (the 'Hong Kong Exchange'), and includes
companies intended to represent four major market sectors: commerce and
industry, finance, properties and utilities. The Hang Seng Index is a recognized
indicator of stock market performance in Hong Kong. It is computed on an
arithmetic basis, weighted by market capitalization, and is therefore strongly
influenced by stocks with large market capitalizations. The Index represents
approximately 70% of the total market capitalization of the stocks listed on the
Hong Kong Exchange. Any changes in the components in the Hang Seng Index
announced after the Initial Date of Deposit will not cause a change in the
identity of the common stocks included in the Hong Kong Portfolio, including any
Securities deposited thereafter. (See Risk Factors--Hong Kong Portfolio.)
PORTFOLIO STRUCTURE--Each Portfolio contains 10 common stocks issued by
companies engaged primarily in the following industries:
NUMBER OF ISSUERS BY
INDUSTRY GROUP
-----------------------------
UNITED KINGDOM HONG KONG
PORTFOLIO PORTFOLIO
--------------- ------------
Automotive/Aviation--............................. 1 --
Chemical--........................................ 1 --
Electronics--..................................... 1 --
Engineering--..................................... 1 --
Financial Services--.............................. 1 --
Food/Beverage--................................... 1 --
Hotel--........................................... -- 1
Pharmaceuticals--................................. 1 --
Properties/Real Estate--.......................... -- 4
Retail--.......................................... -- 1
Textiles--........................................ -- 2
Transportation--.................................. 1 1
Utilities--....................................... 1 1
Telecommunications--.............................. 1 --
A-6
<PAGE>
INVESTMENT SUMMARY FOR EACH PORTFOLIO AS OF SEPTEMBER 6, 1994 (CONTINUED)
Although there are certain risks of price volatility associated with investment
in common stocks (particularly with an investment in one or two common stocks),
your risk is reduced because your capital is divided among 10 stocks from
different industry groups.
MARKET FOR UNITS; DEFERRED SALES CHARGE--Although not obligated to do so,
the Sponsors intend to maintain a market for Units based on the aggregate U.S.
dollar value of the underlying Securities. If a market is not maintained, it is
unlikely that a Holder would be able to dispose of his Units other than through
redemption (see Redemption). The Sponsors' Repurchase Price, like the Redemption
Price, will reflect deduction from the value of the underlying Securities of any
unpaid portion of the Deferred Sales Charge. In addition, after the initial
offering period, the repurchase and cash redemption prices will be further
reduced to reflect the Fund's estimated costs of liquidating Securities to meet
the redemption in the amounts shown on page A-3. Investors should note that the
Deferred Sales Charge of $1.75 per 1,000 Units will be deducted from assets of
each Portfolio on the first of each month commencing on the first Deferred Sales
Charge Payment Date shown above, and unless the entire Deferred Sales Charge has
been deducted by the time the Units are sold, redeemed or exchanged, the
remainder will be deducted from the cash proceeds or in calculating an in-kind
redemption.
RISK FACTORS-- Investment in the Fund should be made with an understanding
that the value of each underlying Portfolio may fluctuate in accordance with
changes in the financial condition of the issuers of the Securities in that
Portfolio, changes in the various industry sectors represented, the value of
stocks generally, global and regional perceptions of the United Kingdom and Hong
Kong markets, currency exchange rate fluctuations, the impact of the Sponsors'
purchase and sale of the Securities (especially during the primary offering
period of Units and during the Special Redemption and Liquidation Period) and
other factors. Common stocks may be susceptible to general stock market
fluctuations and to volatile increases and decreases of value as market
confidence in, and perceptions of, the issuers and market change. Any
declaration of dividends by the issuers of the Securities in the Portfolio
depends upon several factors including the financial condition of the issuers
and general economic conditions. (See Risk Factors.)
All of the Stocks in the United Kingdom Portfolio represent United Kingdom
issuers, and that Portfolio is not considered to be 'concentrated' in stocks of
any particular industry (see Risk Factors--United Kingdom Portfolio). All of the
Stocks in the Hong Kong Portfolio represent Hong Kong and other non-United
States issuers, and that Portfolio is considered to be concentrated in real
estate and property stocks.* (see Risk Factors-- Hong Kong Portfolio--Hong Kong
Real Estate Companies).
Foreign Issuers. Each Portfolio is considered to be concentrated in
securities of non-United States issuers. Issues of non-United States companies
may involve investment risks that are different from those of domestic issues,
including future political and economic developments, the possible imposition of
withholding taxes and exchange controls or other foreign governmental
restrictions which might adversely affect the payment of distributions on
Securities in the Portfolio. In addition, there may be less publicly available
information about a foreign issuer and foreign issuers are not generally subject
to uniform accounting, auditing and financial reporting standards, practices and
requirements comparable to those applicable to domestic issuers. Foreign
securities markets, while growing in volume, have, for the most part,
substantially less volume than U.S. markets, and securities of many foreign
companies are less liquid and their prices more volatile than securities of
comparable domestic companies. Fixed brokerage commissions and other transaction
costs on foreign securities exchanges are generally higher than in the United
States and there is generally less government supervision and regulation of
exchanges, brokers and issuers in foreign countries than there is in the United
States. (See Risk Factors-- Jurisdiction Over Foreign Issuers.)
Currency Exchange. All of the Securities in the United Kingdom Portfolio
are denominated in British pounds sterling, and all of the Securities in the
Hong Kong Portfolio are denominated in Hong Kong dollars. In the past both of
these currencies have fluctuated in value against the United States dollar for
many reasons, including supply and demand of each currency, the impact of
interest rate differentials between different currencies on the movement of
foreign currency rates, the soundness of the world economy, the rate of
inflation in the United Kingdom and Hong Kong compared to that of the United
States and the strength of the economies of
- ------------------------------------
* A portfolio is considered to be 'concentrated' in a particular category when
the securities in that category constitute 25% or more of the aggregate value
of the portfolio (see Risk Factors).
A-7
<PAGE>
INVESTMENT SUMMARY FOR EACH PORTFOLIO AS OF SEPTEMBER 6, 1994 (CONTINUED)
the United Kingdom and Hong Kong as compared to the economy of the United
States. However, the Hong Kong Dollar has been 'pegged' to the U.S. dollar since
1983 and this has reduced currency exchange risk to some degree. (See Risk
Factors--Foreign Exchange Rates.)
A-8
<PAGE>
INVESTMENT SUMMARY FOR EACH PORTFOLIO AS OF SEPTEMBER 6, 1994 (CONTINUED)
The following table sets forth recent end-of-month United States dollar
exchange rates for the British pound sterling and the Hong Kong dollar.
Fluctuations of the rates that have occurred in the past are not necessarily
indicative of fluctuations that may occur over the term of the Fund:
<TABLE><CAPTION>
END-OF-MONTH U.S. END-OF-MONTH U.S.
DOLLAR DOLLAR
EXCHANGE RATES EXCHANGE RATES
---------------------------------------- ----------------------------------------
U.S.$/Y HK$/U.S.$ U.S.$/Y HK$/U.S.$
---------------------------------------- ----------------------------------------
1992: 1993:
<S> <C> <C> <C> <C> <C>
January 1.787 7.757 January 1.486 7.733
February 1.757 7.757 February 1.425 7.734
March 1.736 7.738 March 1.514 7.731
April 1.776 7.758 April 1.574 7.730
May 1.829 7.744 May 1.563 7.723
June 1.905 7.730 June 1.491 7.743
July 1.927 7.732 July 1.482 7.761
August 1.988 7.729 August 1.492 7.754
September 1.777 7.724 September 1.496 7.734
October 1.558 7.736 October 1.480 7.733
November 1.517 7.742 November 1.485 7.724
December 1.510 7.743 December 1.477 7.722
END-OF-MONTH U.S.
DOLLAR
EXCHANGE RATES
----------------------------------------
U.S.$/Y HK$/U.S.$
----------------------------------------
1992: 1994:
January January 1.506 7.723
February February 1.485 7.727
March March 1.484 7.736
April April 1.518 7.725
May May 1.511 7.726
June June 1.544 7.730
July July 1.544 7.725
August August 1.534 7.728
September
October
November
December
</TABLE>
- ------------------------------------
Source: Bloomberg Financial Markets
The Securities in the United Kingdom and Hong Kong Portfolios are generally
listed on a securities exchange. Whether or not those Securities are, or
continue to be, listed, their principal trading market 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
any Sponsor. The price at which the Securities may be sold to meet redemptions
and the value of Units will be adversely affected if trading markets for the
Securities are limited or absent. (See Risk Factors-- Liquidity.)
Unlike a mutual fund, the Portfolios are not actively managed and the
Sponsors receive no management fee. Therefore, the adverse financial condition
of an issuer will not necessarily require the sale of Securities from a
Portfolio or mean that the Sponsors will not continue to purchase the Security
in order to create additional Units. Although the Portfolios are regularly
reviewed and evaluated and the Sponsors may instruct the Trustee to sell
Securities under certain limited circumstances, given the investment philosophy
of the Fund, the Sponsors are not likely to sell Securities (see Administration
of the Fund--Portfolio Supervision). Securities will not be sold from a
Portfolio to take advantage of market fluctuations or changes in anticipated
rates of appreciation. Investors should note in particular that the Securities
included in each Portfolio were included on the basis of the criteria set forth
under Objective of the Fund. These criteria may not necessarily reflect the
research recommendations of any of the Sponsors. A Portfolio may continue to
purchase or hold Securities originally selected through this process even though
the yields on the Securities may have changed or the Securities may no longer be
included on the related index.
Subsequent to the Initial Date of Deposit, the Sponsors may create
additional Units by depositing either additional Securities, contracts to
purchase additional Securities or cash (or a bank letter or letters of credit)
with instructions to purchase additional Securities if additional Units are to
be offered to the public. (See Administration of the Fund--Portfolio
Supervision). If cash (or a bank letter or letters of credit) in U.S. dollars is
deposited with instructions to purchase Securities, to the extent the price of a
Security in the relevant currency increases or decreases between the time of
deposit and the time that Security is purchased, Units of the Portfolio for
which additional Securities are purchased will represent less or more of that
Security and more or less of the other Securities in that Portfolio.
A-9
<PAGE>
Def ined
Asset Funds
INVESTOR'S GUIDE DEFINED EQUITY INCOME FUND, INTERNATIONAL SERIES
EQUITY INCOME FUND Our defined international equity portfolios offer
SELECT TEN PORTFOLIO-- investors a simple and convenient way to
AUTUMN 1994 INTERNATIONAL participate in selected international equity
SERIES, markets. By purchasing defined equity funds,
UNITED KINGDOM AND HONG KONG investors not only avoid the difficulties of
PORTFOLIOS selecting individual securities by themselves, but
also gain the advantage of diversification by
investing in securities of several different
issuers. Spreading your investment among different
securities and issuers reduces your risk, but does
not eliminate it.
SELECT TEN PORTFOLIOS
The Select Ten Portfolios seek to outperform
certain indices of major foreign markets by
investing for about one year in their ten highest
dividend-yielding stocks ('Strategy Stocks').
Although Select Ten International Portfolios were
not available until 1993, a strategy of investing
in approximately equal values of these stocks each
year generally would have yielded a higher total
return than an investment in all of the stocks in
an entire index.
INVESTMENT STRATEGY
The objective of each Portfolio is to provide
total return through a combination of capital
appreciation and current dividend income. Each
Portfolio holds approximately equal values of the
ten highest dividend-yielding stocks in the
designated index having the highest yield as of
two business days prior to the date of this
prospectus. After about one year, the Portfolios
will terminate. Investors may choose to either
reinvest their proceeds into the Autumn 1995
International Series, if available, subject only
to the deferred sales charge, or to receive a cash
distribution.
PERFORMANCE OF THE STRATEGY
The returns shown in the tables on the following
page represent past performance and are no
guarantee of future results; they should not be
used to predict returns from any Portfolio. As
indicated, the Strategy Stocks underperformed the
designated index in certain years and there can be
no assurance that a Portfolio will outperform the
related index over its one year life or over
consecutive rollover periods, if available. An
investor in a Portfolio may not realize as high a
total return as on a direct investment in the
Strategy Stocks since the Portfolio has sales
charges and expenses and may not be fully invested
at all times. Unit prices will fluctuate with the
value of the underlying stocks, and there is no
assurance that dividends on these stocks will be
paid or that the Units will appreciate in value.
- ------------------
This material may not be distributed unless included in a current prospectus.
Investors should refer to the prospectus for further information.
<PAGE>
PERFORMANCE OF THE STRATEGY
COMPARISON OF TOTAL RETURN
United Kingdom Stocks
FINANCIAL TIMES
INDEX (FT)* FT STRATEGY STOCKS
YEAR TOTAL RETURN(1) TOTAL RETURN(2)
---------------------------------------------------------------------------
1974 -46.65% -40.44%
1975 111.59 142.99
1976 -15.58 -15.89
1977 61.92 87.27
1978 9.92 17.73
1979 3.59 4.76
1980 31.77 30.15
1981 -5.30 -6.26
1982 0.42 44.03
1983 21.94 42.06
1984 2.15 5.50
1985 54.74 78.64
1986 24.36 32.88
1987 38.99 48.10
1988 6.74 11.38
1989 22.80 28.71
1990 10.29 9.26
1991 14.65 16.57
1992 -2.33 4.27
1993 18.40 37.69
1/1/94-6/30/94 -5.16 -.66
Hong Kong Stocks
HANG SENG
INDEX* HANG SENG STRATEGY STOCKS
YEAR TOTAL RETURN(1) TOTAL RETURN(2)
- --------- ------------------------- -----------------------------
1978 23.51% 28.04%
1979 78.33 82.28
1980 65.83 41.40
1981 -11.07 -3.86
1982 -47.79 -38.97
1983 -0.89 -7.48
1984 42.54 65.32
1985 51.10 47.52
1986 51.16 60.49
1987 -6.73 3.03
1988 20.60 34.04
1989 10.19 9.41
1990 11.99 6.11
1991 48.25 48.51
1992 33.63 38.94
1993 121.11 106.99
1/1/94-6/30/94 -25.29 -22.65
(1) The Strategy Stocks for each period were
identified by ranking the dividend yields for
each of the stocks in the Index as of the
beginning of that period, generally computed
by adding together the interim and final
dividends declared in that period and dividing
the result by that stock's market value on the
first trading day on the London Stock Exchange
and Hong Kong Stock Exchange, respectively.
(2) Total Return represents the sum of
Appreciation and Actual Dividend Yield. Total
Return does not take into consideration any
sales charges, commissions, expenses, taxes or
reinvestment of dividend income.
From January 1974 through June 1994, the FT
Strategy Stocks achieved an average
annual total return of 22.84%, as compared to
the average annual total return of all of the
stocks in the FT Index, which was 13.47%. These
stocks also had a higher average dividend yield
in each of the last 20 years and outperformed
the FT Index in 16 of these years. When viewed
for at least 3 consecutive years, this strategy
never lost money.
From January 1978 through June 1994 the Hang Seng
Strategy Stocks achieved an
average annual total return of 24.49%, as
compared to the average annual total return of
all of the stocks in the Hang Seng Index, which
was 21.50%. These stocks also had a higher
average dividend yield in each of the last 16
years and outperformed the Hang Seng Index in
10 of these years.
- ------------------------------------
* The publishers of these indexes are not affiliated with the Sponsors, have not
participated in any way in the creation of the Fund and
have not reviewed or approved any information included in the prospectus.
<PAGE>
PORTFOLIO PERFORMANCE
The following shows total returns (price changes
plus dividends received, divided by the maximum
initial public offering price, each converted into
U.S. dollars) for each completed prior series, and
reflects all applicable sales charges and
expenses.
TOTAL
PORTFOLIO TERM RETURN
--------------- ----------------- -----------
1993 Spring HK 6/21/93-7/22/94 20.07%
1993 Spring UK 6/21/83-7/22/84 16.36%
On the same basis, including presently outstanding
series, a holder who rolled over all income and
principal distributions in the next available
series would have received the following results:
AVERAGE
TOTAL ANNUAL
SERIES TERM RETURN RETURN
--------------- ----------------- ----------- -----------
Spring HK 6/21/93-8/31/94 26.79% 21.99%
Autumn HK 9/28/93-8/31/94 15.71 *
Winter HK 1/05/94-8/31/94 - 24.38 *
Spring UK 6/21/93-8/31/94 17.76 14.66
Autumn UK 9/28/93-8/31/94 13.10 *
Winter UK 1/05/94-8/31/94 1.04 *
The past performance above may not be indicative
of results of future series. Portfolio unit price
will fluctuate with the value of the stocks held
ad with currency exchange rates, and there is no
assurance that dividends on these stocks will be
paid or that the units will appreciate in value.
REDUCED RISK
Buying just one or two of these stocks may subject
you to greater investment risk. With these
Portfolios, your risk is reduced because your
capital is spread among ten common stocks from
various industry groups. Because the Portfolios
will remain relatively fixed, there are no
management fees.
A LIQUID INVESTMENT
Although not legally required to do so, the
Sponsors have maintained a secondary market for
Defined Asset Funds for over 20 years. You can
cash in your Units at any time. Your price is
based on the market value of the securities in the
Portfolio at the conversion rate into U.S. dollars
at that time. Or, you can exchange your investment
for another Defined Fund at a reduced sales
charge. There is never a fee for cashing in your
investment.
RISK FACTORS
The value of the Units may fluctuate with changes
in the financial condition of the issuers of
stocks held, changes in currency exchange rates,
the value of stocks generally and the impact of
the Fund's purchase and sale of stocks (especially
during the primary offering and the special
redemption and liquidation periods). Dividends are
subject to the financial condition of and
declaration by the issuers. There can be no
assurance that either Portfolio will achieve its
objective. Although the Portfolios are monitored,
they are not actively managed and, given the
investment philosophy of the Fund, it is unlikely
that a Portfolio will change during its life.
VOLUME PURCHASE DISCOUNT
The initial sales charge will be reduced starting
at purchases of $50,000. For purchases of $250,000
or more, only the deferred portion of the sales
charge is payable.
<PAGE>
DEFERRED SALES CHARGE
Deferring part of the sales charge permits more of
your money to go to work for you. Because payment
of a portion of the sales charge is deferred until
the termination of the Fund, or, in the case of a
Rollover Holder, until redemption, the proceeds
you receive upon such event will reflect deduction
of this amount (the 'Deferred Sales Charge'). The
annual statement and the relevant tax reporting
forms you receive will reflect the actual amount
paid to you, net of the Deferred Sales Charge.
Accordingly, you should not increase your basis in
your units by the Deferred Sales Charge amount.
REINVESTMENT OPTION
You can elect to reinvest your semi-annual
distributions automatically in additional Units
subject only to the remaining deferred sales
charge. Reinvestment allows you to increase your
overall investment in the Fund and compound income
for a greater total return. Contact your financial
professional to participate in this Reinvestment
Plan.
<PAGE>
AUTHORIZATION FOR REINVESTMENT
EQUITY INCOME FUND SELECT TEN PORTFOLIO
(AUTUMN 1994 INTERNATIONAL SERIES UNITED KINGDOM PORTFOLIO)
DEFINED ASSET FUNDS
/ / Yes, I want to participate in the Fund's Reinvestment Plan and purchase
additional Units or fractions of additional Units of the Fund.
I hereby acknowledge receipt of the Prospectus for Equity Income Fund
Select Ten Portfolio (Autumn 1994 International Series), Defined Asset Funds and
authorize The Chase Manhattan Bank, N.A. to pay distributions on my Units as
indicated below (distributions to be reinvested will be paid for my account to
The Chase Manhattan Bank, N.A.).
/ / I want to reinvest all distributions (including capital gains) in additional
Units of the Fund.
Please print or type
Name -----------------------------------
Registered Holder
Address ------------
--------------------
Registered Holder
(Two signatures
required if joint
City State Zip tenancy)
Unless you complete and return this form, all distributions to you from the
Select Ten Portfolio (Autumn 1994 International Series United Kingdom Portfolio)
will be paid in cash.
This page is a self-mailer. Please complete the information above, cut along the
dotted line, fold along the lines on the reverse side, tape, and mail with the
Trustee's address displayed on the outside.
12345678
<PAGE>
BUSINESS REPLY MAIL NO POSTAGE
FIRST CLASS PERMIT NO. 644 NEW YORK, NY NECESSARY
IF MAILED
POSTAGE WILL BE PAID BY ADDRESSEE IN THE
THE CHASE MANHATTAN BANK, N.A. (EIF) UNITED STATES
UNIT TRUST DEPARTMENT
BOX 2051
NEW YORK, NY 10081
- --------------------------------------------------------------------------------
(Fold along this line.)
- --------------------------------------------------------------------------------
(Fold along this line.)
<PAGE>
AUTHORIZATION FOR REINVESTMENT
EQUITY INCOME FUND SELECT TEN PORTFOLIO
(AUTUMN 1994 INTERNATIONAL SERIES HONG KONG PORTFOLIO)
DEFINED ASSET FUNDS
/ / Yes, I want to participate in the Fund's Reinvestment Plan and purchase
additional Units or fractions of additional Units of the Fund.
I hereby acknowledge receipt of the Prospectus for Equity Income Fund
Select Ten Portfolio (Autumn 1994 International Series), Defined Asset Funds and
authorize The Chase Manhattan Bank, N.A. to pay distributions on my Units as
indicated below (distributions to be reinvested will be paid for my account to
The Chase Manhattan Bank, N.A.).
/ / I want to reinvest all distributions (including capital gains) in additional
Units of the Fund.
Please print or type
Name -----------------------------------
Registered Holder
Address ------------
--------------------
Registered Holder
(Two signatures
required if joint
City State Zip tenancy)
Unless you complete and return this form, all distributions to you from the
Select Ten Portfolio (Autumn 1994 International Series Hong Kong Portfolio) will
be paid in cash.
This page is a self-mailer. Please complete the information above, cut along the
dotted line, fold along the lines on the reverse side, tape, and mail with the
Trustee's address displayed on the outside.
12345678
<PAGE>
BUSINESS REPLY MAIL NO POSTAGE
FIRST CLASS PERMIT NO. 644 NEW YORK, NY NECESSARY
IF MAILED
POSTAGE WILL BE PAID BY ADDRESSEE IN THE
THE CHASE MANHATTAN BANK, N.A. (EIF) UNITED STATES
UNIT TRUST DEPARTMENT
BOX 2051
NEW YORK, NY 10081
- --------------------------------------------------------------------------------
(Fold along this line.)
- --------------------------------------------------------------------------------
(Fold along this line.)
<PAGE>
INVESTMENT SUMMARY FOR EACH PORTFOLIO AS OF SEPTEMBER 6, 1994 (CONTINUED)
Stock price and currency fluctuations during the period from the time of
deposit of cash (or a bank letter or letters of credit) to the time the
Securities are purchased will affect the value of every Holder's Units in a
Portfolio and the income per Unit received by that Portfolio. In order to
minimize these effects, Securities will be purchased as near as possible to the
Evaluation Time or at prices as close as possible to the prices used to evaluate
the Portfolio at the Evaluation Time. In addition, brokerage fees, stamp taxes
and other costs associated with foreign trading incurred in purchasing
Securities with cash deposited with instructions to purchase the Securities will
be an expense of that Portfolio. These fees and costs are generally greater than
those paid in connection with transactions involving domestic securities and may
have a significant impact on the net asset value of the Portfolios. These
factors will affect the value of every Holder's Units and the income per Unit.
In particular, Holders who purchase Units during the primary offering period
would experience a dilution of their investment as a result of any brokerage
fees and other expenses paid by the Portfolio during subsequent deposits of
additional Securities purchased with cash deposited with instructions to
purchase Securities. In addition, during the initial offering period the Fund
will incur brokerage fees and other expenses when it has to sell Securities.
(See Fund Structure; Administration of the Fund--Portfolio Supervision). Because
Securities generally will not be sold to pay the Deferred Sales Charge until
after the last Deferred Sales Charge Payment Date, a Portfolio may realize a
gain or loss on changes in the price of the Securities or in the currency
exchange rate between the various deduction dates and the actual sale of
Securities to satisfy this liability.
Investors should be aware that it may not be possible to buy all Securities
at the same time because of unavailability of any Security, any restrictions
applicable to the Portfolio relating to the purchase of the Security by reason
of the federal securities laws or otherwise. Any monies allocated to the
purchase of a Security will generally be held for the purchase of the Security.
DISTRIBUTIONS--Semi-annual Income Distributions of dividends, if any, will
be made in cash on the dates set forth under Investment Summary on page A-5 to
Holders of record on the record days (see Administration of the Fund--Accounts
and Distributions). Alternatively, Holders may elect to have their Semi-annual
Income Distributions reinvested as described more fully below. Each Portfolio
will be terminated by the Mandatory Termination Date and liquidated and the
final distribution made as soon thereafter as is reasonable. Holders who elect
to become Rollover Holders will not receive the final liquidation distribution,
but will receive the August 1995 Semi-annual Income Distribution (see Special
Redemption, Liquidation and Investment in New Portfolio).
REINVESTMENT PLAN--Holders electing to participate in the Reinvestment Plan
may purchase additional Units of a Portfolio ('Reinvestment Units') at the net
asset value per 1,000 Units, subject only to the remaining Deferred Sales
Charge. For example, Holders electing reinvestment at the time of the first
Semi-Annual Income Distribution (February 1995) would be subject to a Deferred
Sales Charge of $12.25 per 1,000 Units on their Reinvestment Units (the full
Deferred Sales Charge of $17.50 minus a total of $5.25 already deducted each
month December 1994, January 1995 and February 1995). Holders electing to
reinvest their second Semi-Annual Income Distribution (August 1995) would be
subject to a Deferred Sales Charge of $1.75 per 1,000 Units on their
Reinvestment Units (the full Deferred Sales Charge of $17.50 minus a total of
$15.75 already deducted each month December 1994 through August 1995). Holders
electing to reinvest their dividends will receive additional Units and therefore
will own a greater percentage of a Portfolio than Holders who receive their
distributions in cash. The Sponsors reserve the right to amend, modify or
terminate the Reinvestment Plan at any time without prior notice. (See
Administration of the Fund--Reinvestment Plan.)
TAXATION--In the opinion of special counsel to the Sponsors, each Holder
will be considered to have received all of the dividends paid on his pro rata
portion of each Security in a Portfolio when those dividends are received by the
Portfolio, even though a portion of the dividend payments are used to pay
expenses of the Portfolio. Prospective purchasers of Units in the United Kingdom
Portfolio should be aware that the Trust will report as gross income earned by
Holders of Units their pro rata share of dividends earned by the Trust, which
dividends will be grossed-up to reflect the payment of certain U.K. taxes by the
relevant U.K. corporation, and that, as a practical matter, such purchasers may
not be able to obtain a refund of any amount of such U.K. taxes under the
U.S.-U.K. Treaty under presently existing procedures of United Kingdom tax
authorities. (See Taxes.)
PUBLIC OFFERING PRICE--The Public Offering Price per 1,000 Units is based
on the aggregate U.S. dollar value of the underlying Securities and any cash
held to purchase Securities at the offering side value of the currency exchange
rate divided by the number of Units outstanding times 1,000 plus the applicable
sales charge. A proportionate share of the amount in the Income Account and the
amount in the Capital Account to the extent not allocated to the purchase of
specific Securities (described under Administration of the Fund--Accounts and
Distributions) on the date of delivery of the Units to the purchaser is added to
the Public Offering Price. The total sales charge consists of an Initial Sales
Charge and a Deferred Sales Charge, the maximum total of which equals 2.75% of
the Public Offering Price or 2.778% of the net asset value of each Portfolio.
The Initial Sales Charge is computed by deducting the Deferred Sales Charge
($17.50 per 1,000 Units) from the aggregate sales charge; thus on the date of
the Investment Summary, the maximum Initial Sales Charge is $10 per 1,000 Units
or 1% of the Public Offering Price. The Initial Sales Charge is deducted from
the purchase price at the time of purchase. The
A-9
<PAGE>
INVESTMENT SUMMARY FOR EACH PORTFOLIO AS OF SEPTEMBER 6, 1994 (CONTINUED)
Initial Sales Charge will be reduced on a graduated basis on purchases of
$50,000 or more. The Deferred Sales Charge is paid through reduction of the net
asset value of the Fund by $1.75 per 1,000 Units monthly on each Deferred Sales
Charge Payment Date (commencing on the first Deferred Sales Charge Payment Date
shown on Page A-5). Units purchased pursuant to the Reinvestment Plan are only
subject to remaining deductions of the Deferred Sales Charge (see Reinvestment
Plan). If a Holder redeems, exchanges or sells his Units to the Sponsors prior
to the last Deferred Sales Charge Payment Date, the Holder is obligated to pay
any remaining Deferred Sales Charge which has not been deducted from the value
underlying his Units. Units are offered at the Public Offering Price computed as
of the Evaluation Time for all sales subsequent to the previous evaluation. The
Public Offering Price on the Initial Date of Deposit, and on subsequent dates,
will vary from the Public Offering Price set forth on page A-3. (See Public Sale
of Units--Public Offering Price.) The minimum purchase is $1,000 per Portfolio
($250 for certain tax-deferred retirement plans).
DESCRIPTION OF SPECIAL REDEMPTION, LIQUIDATION AND INVESTMENT IN NEW
PORTFOLIO--Holders of Units have the right to exchange Units for units of other
Select Ten Portfolios subject only to the Deferred Sales Charge (see Exchange
Option). In addition, Holders will have the option of specifying by the Rollover
Notification Date (see page A-5) to have all of their Units redeemed in kind and
the distributed Securities sold by the Distribution Agent during the Special
Redemption and Liquidation Period (as defined under Investment Summary). The
proceeds of the redemption will be invested in units of the Autumn 1995
International Series, if offered, subject only to the Deferred Sales Charge.
(See Special Redemption, Liquidation and Investment in New Fund.)
Units of Rollover Holders will be redeemed in kind on the first day of the
Special Redemption and Liquidation Period. By participating in the Special
Redemption and Liquidation, each Rollover Holder will be deemed to have
irrevocably instructed the Distribution Agent to sell his portion of the total
distributed Securities during the Special Redemption and Liquidation Period. The
Distribution Agent will appoint the Sponsors as its agents to determine the
manner, timing and execution of sales of underlying Securities.
For each Rollover Holder who confirms his interest in buying units of a
Autumn 1995 International Series Portfolio, the proceeds of the redemption of
the underlying Securities (as the proceeds become available) will be invested in
those units. The Sponsors may, however, stop creating new units at any time in
their sole discretion without regard to whether all Rollover proceeds have been
invested. The Sponsors are under no obligation to create a Autumn 1995
International Series, however, and may modify the terms of the Special
Redemption, Liquidation and Investment in New Portfolio upon notice to Holders
of Units at any time. The Sponsors also reserve the right to extend the Rollover
Notification Date stated herein.
Holders who do not wish to have their Units so redeemed may continue to
hold Units in accordance with the terms described in this Prospectus until the
Portfolio is terminated or until the Mandatory Termination Date listed on page
A-5, whichever occurs first. (See Termination.) These Holders may, of course,
redeem their Units at any time as set forth under Redemption. If these Holders
choose to redeem during the Special Redemption and Liquidation Period, or
possibly for some period thereafter, the redemption proceeds they receive may
also be affected by the same negative market price consequences described under
Special Redemption, Liquidation and Investment in New Portfolio. In addition,
any brokerage commissions, ongoing custodial fees and other costs associated
with foreign trading on sales of the underlying Securities distributed in
connection with in-kind redemptions will be borne by the redeeming Holder. These
costs and fees are generally greater than those paid in connection with
transactions involving domestic securities. (See Redemption; Special Redemption,
Liquidation and Investment in New Portfolio.)
PURCHASE OF UNITS--Units can be purchased by contacting the Sponsors, whose
addresses are listed on the back cover of this Prospectus. The minimum purchase
of either Portfolio is $1,000 except that Individual Retirement Accounts and
certain other tax deferred retirement plans may purchase as little as $250 (see
Retirement Plans).
UNDERWRITING--None of the Sponsors has participated as sole underwriter,
managing underwriter or member of an underwriting syndicate from which the
Securities in the Portfolios were acquired but one of the Sponsors may have been
managing underwriter of a public offering of one or more issues of Securities
within the last three years (see Portfolios).
UNDERWRITING ACCOUNT
The names and addresses of the Underwriters are:
<TABLE>
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith P.O. Box 9051, Princeton, N.J. 08543-9051
Incorporated
Smith Barney Inc. Two World Trade Center--101st Floor
New York, N.Y. 10048
PaineWebber Incorporated 1285 Avenue of the Americas, New York, N.Y. 10019
Prudential Securities Incorporated One Seaport Plaza--199 Water Street, New York, N.Y. 10292
Dean Witter Reynolds Inc. Two World Trade Center--59th Floor
New York, N.Y. 10048
</TABLE>
Each Underwriter's interest in the Underwriting Account will depend upon
the number of Units acquired through the issuance of additional Units.
A-11
<PAGE>
UNITED KINGDOM PORTFOLIO
INVESTMENT SUMMARY AS OF SEPTEMBER 6, 1994 (CONTINUED)
The following table compares the actual performance of the FT Index and
approximately equal values of the ten stocks in the FT Index having the highest
dividend yield (the 'FT Strategy Stocks') in each of the past 20 years, as of
December 31 in each of those years, and for the first half of 1994. The FT Index
statistics are based on a geometric, unweighted average of 30 companies, while
the statistics for the FT Strategy Stocks are based on an approximately equal
distribution (based on market price) of each of the ten stocks. All figures have
been adjusted by taking into account currency exchange rates for U.S. dollars as
of the end of each period of time ('period').
COMPARISON OF DIVIDENDS, APPRECIATION AND TOTAL RETURN
<TABLE><CAPTION>
FT STRATEGY STOCKS(1) FINANCIAL TIMES ORDINARY SHARE INDEX (FT
INDEX)*
----------------------------------------------------------- ------------------------------------------
PERIOD APPRECIATION(2) ACTUAL DIVIDEND YIELD(3) TOTAL RETURN(4) APPRECIATION(2) ACTUAL DIVIDEND YIELD(3)
- ----------- --------------- ------------------------- --------------- --------------- -------------------------
<S> <C> <C> <C> <C> <C>
1974 -49.10% 8.66% -40.44% -52.54% 5.89%
1975 127.22 15.77 142.99 100.41 11.18
1976 -23.33 7.44 -15.89 -20.59 5.01
1977 73.41 13.86 87.27 53.46 8.46
1978 7.22 10.51 17.73 3.57 6.35
1979 -5.75 10.51 4.76 -3.94 7.53
1980 16.49 13.66 30.15 22.57 9.20
1981 -14.02 7.76 -6.26 -10.36 5.06
1982 34.04 9.99 44.03 -4.41 4.83
1983 34.17 7.89 42.06 16.60 5.34
1984 -0.85 6.35 5.50 -2.26 4.41
1985 69.36 9.28 78.64 48.25 6.49
1986 26.35 6.53 32.88 19.14 5.22
1987 40.49 7.61 48.10 32.97 6.02
1988 5.19 6.19 11.38 1.62 5.12
1989 22.08 6.63 28.71 17.57 5.23
1990 1.91 7.35 9.26 4.31 5.98
1991 8.70 7.87 16.57 9.36 5.29
1992 -1.41 5.68 4.27 -6.33 4.00
1993 31.55 6.14 37.69 14.24 4.16
1/1/94 to
6/30/94 -3.24 2.58 -.66 -7.20 2.04
</TABLE>
PERIOD TOTAL RETURN(4)
- ----------- ---------------
1974 -46.65%
1975 111.59
1976 -15.58
1977 61.92
1978 9.92
1979 3.59
1980 31.77
1981 -5.30
1982 0.42
1983 21.94
1984 2.15
1985 54.74
1986 24.36
1987 38.99
1988 6.74
1989 22.80
1990 10.29
1991 14.65
1992 -2.33
1993 18.40
1/1/94 to
6/30/94 -5.16
- ------------------------------------
* Source: Datastream International, Inc. The Sponsors have not independently
verified these data, but they have no reason to believe that these data are
incorrect in any material respect.
- ------------------------------------
(1) The FT Strategy Stocks for any given period were identified by ranking the
dividend yields for each of the stocks in the FT Index as of the beginning
of that period, generally computed by adding together the interim and final
dividends (United Kingdom companies generally pay one interim and one final
dividend per fiscal year) declared in that period and dividing the result by
that stock's market value on the first trading day on the London Stock
Exchange in that period.
(2) Appreciation for the FT Strategy Stocks is calculated by subtracting the
market value of these stocks as of the first trading day on the London Stock
Exchange in the period from the market value of those stocks as of the last
trading day in that period, and dividing the result by the market value of
the stocks as of the first trading day in that period. Appreciation for the
FT Index is calculated by subtracting the opening value of the FT Index as
of the first trading day in each period from the closing value of the FT
Index as of the last trading day in each period, and dividing the result by
the opening value of the FT Index as of the first trading day in that
period.
(3) Actual Dividend Yield for the FT Strategy Stocks is calculated by adding
together the total dividends received on the stocks in the period and
dividing the result by the market value of the stocks as of the first
trading day in that period. Actual Dividend Yield for the FT Index is
calculated by dividing the total dividends credited to the FT Index by the
opening value of the FT Index as of the first trading day of the period. No
adjustments have been made to reflect taxes payable or withholding taxes.
(4) Total Return represents the sum of Appreciation and Actual Dividend Yield.
Total Return does not take into consideration any sales charges,
commissions, expenses or taxes that will be incurred by the United Kingdom
Portfolio. Total Return does not take into consideration any reinvestment of
dividend income. From January 1974 through June 1994, the FT Strategy Stocks
achieved an average annual total return of 22.84%, as compared to the
average annual total return of the FT Index, which was 13.47%. These stocks
also had a higher average dividend yield in each of the last 20 years and
outperformed the FT Index in 16 of these years. When viewed for at least 3
consecutive years, this strategy never lost money. Although the United
Kingdom Portfolio seeks to outperform the FT Index, there can be no
assurance that the United Kingdom Portfolio, net of sales charges and
expenses, will do so over its one-year life or that successive series of
United Kingdom portfolios would outperform the FT Index over consecutive
rollover periods, if available.
A-12
<PAGE>
UNITED KINGDOM PORTFOLIO
INVESTMENT SUMMARY AS OF SEPTEMBER 6, 1994 (CONTINUED)
The returns shown on the preceding page represent past performance of FT
Strategy Stocks and are no guarantee of future results; they should not be used
to predict returns to be expected from the Portfolio. As indicated, the FT
Strategy Stocks underperformed the FT Index in certain years and there can be no
assurance that the Portfolio will outperform the FT Index over its one year life
or over consecutive rollover periods, if available. Investors in the Portfolio
may not realize as high a total return as on an investment in the FT Strategy
Stocks since the Portfolio has sales charges and expenses and may not be fully
invested at all times. Unit price will fluctuate with the value of the
underlying stocks, and there is no assurance that dividends on these stocks will
be paid or that the Units will appreciate in value.
VALUE OF $10,000 INVESTED JANUARY 1, 1974
PERIOD FT STRATEGY STOCKS FT INDEX
- ----------- ------------------ ----------------
1974 $ 5,956.00 $ 5,335.00
1975 14,472.48 11,288.33
1976 12,172.81 9,529.61
1977 22,796.01 15,430.34
1978 26,837.75 16,961.03
1979 28,115.23 17,569.93
1980 36,591.97 23,151.89
1981 34,301.31 21,924.84
1982 49,404.17 22,016.93
1983 70,183.57 26,847.44
1984 74,043.67 27,424.66
1985 132,271.61 42,436.92
1986 175,762.51 52,774.55
1987 260,304.28 73,351.35
1988 289,926.91 78,295.23
1989 373,164.92 96,146.55
1990 407,719.99 106,040.03
1991 475,279.20 121,574.89
1992 495,573.62 118,742.19
1993 682,355.31 140,590.76
1/1/94-
6/30/94 677,851.77 133,336.28
The table above represents past performance of the FT Index and the FT
Strategy Stocks (but not any United Kingdom Portfolio) and should not be
considered indicative of future results of the Strategy or the Portfolio. The
table indicates the hypothetical performance of the Strategy as if it had been
employed since 1974. The table assumes that all dividends during a year are
reinvested at the end of that year and does not reflect commissions, custodial
fees or income taxes. The FT Strategy Stocks underperformed the FT Index in
certain of those 20 years, and there can be no assurance that the Portfolio will
outperform the FT Index over its one-year life or over consecutive rollover
periods, if available. In addition, the performance of the United Kingdom
Portfolio will vary from that of the FT Strategy Stocks because the United
Kingdom Portfolio has a sales charge and expenses and may not be fully invested
at all times.
UK PORTFOLIOS' PERFORMANCE
The following shows total returns (price changes plus dividends received,
divided by the maximum initial public offering price, each converted into U.S.
dollars) for the completed 1993 Spring United Kingdom Portfolio and reflects all
applicable sales charges and expenses.
TERM TOTAL RETURN
- ----------------- -------------
6/21/93-7/22/94 20.07%
On the same basis, including presently outstanding U.K. Portfolios, a
holder who rolled over all income and principal would have received the
following results:
AVERAGE
TOTAL ANNUAL
SERIES TERM RETURN RETURN
- --------- ----------------- ----------- -----------
Spring 6/21/93-8/31/94 17.76% 14.66%
Autumn 9/28/93-8/31/94 13.10 *
Winter 1/05/94-8/31/94 1.04 *
The past performance above may not be indicative of results of future
series. Portfolio unit price will fluctuate with the value of the stocks held
and with currency exchange rates, and there is no assurance that any dividends
on these stocks will be paid or that the units will appreciate in value.
- ------------------------
* Performance for less than a year. This series has not yet rolled over.
A-13
<PAGE>
HONG KONG PORTFOLIO
INVESTMENT SUMMARY AS OF SEPTEMBER 6, 1994 (CONTINUED)
The following table compares the actual performance of the Hang Seng Index
and approximately equal values of the ten stocks in the Hang Seng Index having
the highest dividend yield (the 'Hang Seng Strategy Stocks') in each of the past
16 years, as of December 31 in each of those years, and for the first half of
1994. The Hang Seng Index statistics are calculated on an arithmetic basis,
weighted by market capitalization, while the statistics for the ten
highest-yielding stocks are based on an approximately equal distribution (based
on market price) of each of ten stocks. All figures have been adjusted by taking
into account currency exchange rates for U.S. dollars as of the end of each
period of time ('period').
<TABLE><CAPTION>
COMPARISON OF DIVIDENDS, APPRECIATION AND TOTAL RETURN
HANG SENG STRATEGY STOCKS(1) HANG SENG INDEX (HANG SENG)*
----------------------------------------------------------- --------------------------------------------
PERIOD APPRECIATION(2) ACTUAL DIVIDEND YIELD(3) TOTAL RETURN(4) APPRECIATION(2) ACTUAL DIVIDEND YIELD(3)
- ----------- --------------- ------------------------- --------------- --------------- ---------------------------
<S> <C> <C> <C> <C> <C>
1978 19.82% 8.22% 28.04% 17.83% 5.68%
1979 72.63 9.65 82.28 72.27 6.06
1980 34.03 7.37 41.40 61.60 4.23
1981 -10.94 7.08 -3.86 -13.75 2.68
1982 -46.13 7.16 -38.97 -51.24 3.45
1983 -15.40 7.92 -7.48 -6.92 6.03
1984 53.82 11.50 65.32 36.45 6.09
1985 40.25 7.27 47.52 46.33 4.77
1986 54.50 5.99 60.49 46.90 4.26
1987 -2.15 5.18 3.03 -10.06 3.33
1988 28.02 6.02 34.04 16.07 4.53
1989 2.66 6.75 9.41 5.55 4.64
1990 -1.93 8.04 6.11 6.71 5.28
1991 40.07 8.44 48.51 42.41 5.84
1992 32.08 6.86 38.94 28.87 4.76
1993 100.80 6.19 106.99 116.14 4.97
1/1/94 to
6/30/94 -24.35 1.70 -22.65 -26.39 1.10
PERIOD TOTAL RETURN(4)
- ----------- ---------------
1978 23.51%
1979 78.33
1980 65.83
1981 -11.07
1982 -47.79
1983 -0.89
1984 42.54
1985 51.10
1986 51.16
1987 -6.73
1988 20.60
1989 10.19
1990 11.99
1991 48.25
1992 33.63
1993 121.11
1/1/94 to
6/30/94 -25.29
- ------------------------------------
* Source: Datastream, International, Inc. The Sponsors have not independently
verified these data, but they have no reason to believe that these data are
incorrect in any material respect.
- ------------------------------------
(1) The Hang Seng Strategy Stocks for any period were identified by ranking the
dividend yields for each of the stocks in the Hang Seng Index as of the
beginning of that period, computed by adding together the interim and final
dividends (Hong Kong companies generally pay one interim and one final
dividend per fiscal year) declared in that period and dividing the result by
that stock's market value on the first trading day on the Hong Kong Stock
Exchange in that period.
(2) Appreciation for the Hang Seng Strategy Stocks is calculated by subtracting
the market value of these stocks as of the first trading day on the Hong
Kong Stock Exchange in the year from the market value of those stocks as of
the last trading day in that period, and dividing the result by the market
value of the Stocks as of the first trading day in that period. Appreciation
for the Hang Seng Index is calculated by subtracting the opening value of
the Hang Seng Index as of the first trading day in each period from the
closing value of the Hang Seng Index as of the last trading day in each
period, and dividing the result by the opening value of the Hang Seng Index
as of the first trading day in each period.
(3) Actual Dividend Yield for the Hang Seng Strategy Stocks is calculated by
adding together the total dividends received on the stocks in the period and
dividing the result by the market value of the stocks as of the first
trading day in that period. Actual Dividend Yield for the Hang Seng Index is
calculated by dividing the total dividends credited to the Hang Seng Index
by the opening value of the Hang Seng Index as of the first trading day of
the period.
(4) Total Return represents the sum of Appreciation and Actual Dividend Yield.
Total Return does not take into consideration any sales charges,
commissions, expenses or taxes that will be incurred by the Hong Kong
Portfolio. Total Return does not take into consideration any reinvestment of
dividend income. From January 1978 through June 1994, the Hang Seng Strategy
Stocks achieved an average annual total return of 24.49%, as compared to the
average annual total return of the Hang Seng Index, which was 21.50%. These
stocks also had a higher average dividend yield in each of the last 16 years
and outperformed the Hang Seng Index in 10 of these years. Although the Hong
Kong Portfolio seeks to outperform the Hang Seng Index, there can be no
assurance that the Hong Kong Portfolio, net of sales charges and expenses,
will do so over its one-year life or that successive series of Hong Kong
Portfolios would outperform the Hang Seng Index over consecutive rollover
periods, if available.
A-14
<PAGE>
HONG KONG PORTFOLIO
INVESTMENT SUMMARY AS OF SEPTEMBER 6, 1994 (CONTINUED)
The returns shown on the preceding page represent past performance of Hang
Seng Strategy Stocks and are no guarantee of future results; they should not be
used to predict returns to be expected from the Portfolio. As indicated in the
Hang Seng Strategy Stocks underperformed the Hang Seng Index in certain years
and there can be no assurance that the Portfolio will outperform the Hang Seng
Index over its one year life or over consecutive rollover periods, if available.
An investor in the Portfolio may not realize as high a total return as on an
investment in the Hang Seng Strategy Stocks since the Portfolio has sales
charges and expenses and may not be fully invested at all times. Unit price will
fluctuate with the value of the underlying stocks, and there is no assurance
that dividends on these stocks will be paid or that the Units will appreciate in
value.
VALUE OF $10,000 INVESTED JANUARY 1, 1978
PERIOD HANG SENG STRATEGY STOCKS HANG SENG INDEX
- ----------- ------------------------- ----------------
1978 $ 12,804.00 $ 12,351.00
1979 23,339.13 22,025.54
1980 33,001.53 36,524.95
1981 31,727.67 32,481.64
1982 19,363.40 16,958.66
1983 17,915.02 16,807.73
1984 29,617.10 23,957.74
1985 43,691.15 36,200.15
1986 70,119.93 54,720.14
1987 72,244.57 51,037.47
1988 96,836.62 61,551.19
1989 105,948.94 67,823.26
1990 112,422.42 75,955.27
1991 166,958.54 112,603.69
1992 231,972.19 150,472.31
1993 480,159.24 332,709.32
1/1/94-
6/30/94 371,403.17 248,567.13
The table above represents past performance of the Hang Seng Index and the
Hang Seng Strategy Stocks (but not any Hong Kong Portfolio) and should not be
considered indicative of future results of the Strategy or the Portfolio. The
table indicates the hypothetical performance of the strategy as if it had been
employed since 1978. The table assumes that all dividends during a year are
reinvested at the end of that year and does not reflect commissions, custodial
fees or income taxes. The Hang Seng Strategy Stocks underperformed the Hang Seng
Index in certain of those 16 years, and there can be no assurance that the Hong
Kong Portfolio will outperform the Hang Seng Index over its one-year life or
over consecutive rollover periods, if available. In addition, the performance of
the Hong Kong Portfolio will vary from that of the Hang Seng Strategy Stocks
because the Hong Kong Portfolio has a sales charge and expenses and may not be
fully invested at all times.
HONG KONG PORTFOLIOS' PERFORMANCE
The following shows total returns (price changes plus dividends received,
divided by the maximum initial public offering price, each converted into U.S.
dollars) for the completed 1993 Spring Hong Kong Portfolio and reflects all
applicable sales charges and expenses.
TERM TOTAL RETURN
- ----------------- -------------
6/21/93-7/22/94 20.07%
On the same basis, including presently outstanding H.K. Portfolios, a
holder who rolled over all income and principal would have received the
following results:
AVERAGE
TOTAL ANNUAL
SERIES TERM RETURN RETURN
- --------- ----------------- --------- -----------
Spring 6/21/93-8/31/94 26.79% 21.99%
Autumn 9/28/93-8/31/94 15.71 *
Winter 1/05/94-8/31/94 -24.38 *
A-15
<PAGE>
The past performance above may not be indicative of results of future
series. Portfolio unit price will fluctuate with the value of the stocks held
and with currency exchange rates, and there is no assurance that any dividends
on these stocks will be paid or that the units will appreciate in value.
- ------------------------
* Performance for less than a year. This series has not yet rolled over.
A-16
<PAGE>
INVESTMENT SUMMARY AS OF SEPTEMBER 6, 1994 (CONTINUED)
GLOBAL DIVERSIFICATION WITH THE SELECT TEN STRATEGY
By investing equal amounts each year in the ten highest dividend yielding
stocks in the Dow Jones Industrial Average+, the Hang Seng Index or the FT Index
an investor would generally have earned a higher total return over the last 15
years than on an investment in each index as a whole. The following table
compares the total returns (change in share prices plus dividends reinvested at
the end of each year) and cumulative performance of hypothetical investments of
equal amounts of money in the ten highest dividend-yielding stocks in the Dow
Jones Industrial Average ('DJIA Strategy Stocks'), FT Strategy Stocks and the
Hang Seng Strategy Stocks, with an investment of equal amounts in all three (the
'Combined Strategy'). These figures do not reflect commissions or taxes, nor the
performance of any Select Ten Portfolio, which is subject to sales charges and
expenses.
The table presents past performance of the Combined Strategy and should not
be considered indicative of future results of the Combined Strategy or any
Select Ten Portfolio. Both stock prices (which may appreciate or depreciate) and
dividends (which may be increased, reduced or eliminated) will affect the
returns. Also, there are additional risks associated with investments
denominated in foreign currencies. However, the table indicates that
diversifying an investment among the 10 highest dividend-yielding stocks in each
of these three indexes would have produced a substantially higher total return
than the DJIA Strategy Stocks alone, while increasing the volatility in total
return only slightly.
</TABLE>
<TABLE><CAPTION>
DJIA STRATEGY FT STRATEGY HANG SENG COMBINED
STOCKS STOCKS STRATEGY STOCKS STRATEGY
TOTAL VALUE OF TOTAL VALUE OF TOTAL VALUE OF TOTAL VALUE OF
YEAR RETURN INVESTMENT RETURN INVESTMENT RETURN INVESTMENT RETURN INVESTMENT
- --------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 10,000 $ 10,000 $ 10,000 $ 10,000
1978 0.16% 10,016 17.73% 11,773 28.04% 12,804 15.31% 11,531
1979 12.35 11,253 4.76 12,333 82.28 23,339 33.13 15,351
1980 26.37 14,220 30.15 16,052 41.40 33,002 32.64 20,362
1981 7.47 15,283 -6.26 15,047 -3.86 31,728 -0.88 20,182
1982 25.46 19,174 44.03 21,672 -38.97 19,363 10.17 22,235
1983 38.46 26,548 42.06 30,788 -7.48 17,915 24.35 27,649
1984 7.34 28,496 5.50 32,481 65.32 29,617 26.05 34,852
1985 28.63 36,655 78.64 58,024 47.52 43,691 51.60 52,835
1986 34.57 49,327 32.88 77,102 60.49 70,120 42.65 75,367
1987 6.97 52,765 48.10 114,189 3.03 72,245 19.37 89,963
1988 21.50 64,109 11.38 127,183 34.04 96,837 22.31 110,031
1989 27.30 81,611 28.71 163,697 9.41 105,949 21.81 134,025
1990 -7.94 75,131 9.26 178,856 6.11 112,422 2.48 137,344
1991 33.37 100,202 16.57 208,492 48.51 166,959 32.82 182,416
1992 8.32 108,539 4.27 217,395 38.94 231,972 17.18 213,749
1993 26.92 137,757 37.69 299,331 106.99 480,159 57.20 336,013
1/1/94-
6/30/94 -2.33 134,548 -.66 297,355 -22.65 371,403 -8.55 307,295
Total
Return 1,245.48% 2,873.55% 3,614.03% 2,972.95%
Average Annual Total
Return 17.06% 22.83% 24.49% 23.07%
</TABLE>
- ------------------------------------
+ The name 'Dow Jones Industrial Average' is the property of Dow Jones &
Company, Inc. Dow Jones & Company, Inc. is not affiliated with the Sponsors,
has not participated in any way in the creation of the Fund or in the
selection of stocks included in the Portfolios, nor reviewed or approved any
information included in this Prospectus.
A-17
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Sponsors, Trustee and Holders of Equity Income Fund, Select Ten
Portfolio--Autumn 1994 International Series (United Kingdom and Hong Kong
Portfolios), Defined Asset Funds:
We have audited the accompanying statements of condition, including the
portfolios, of Equity Income Fund, Select Ten Portfolio--Autumn 1994
International Series (United Kingdom and Hong Kong Portfolios), Defined Asset
Funds as of September 6, 1994. These financial statements are the responsibility
of the Trustee. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. The deposits on
September 6, 1994 of letters of credit for the purchase of securities, as
described in the statements of condition, were confirmed to us by the Chase
Manhattan Bank, N.A., the Trustee. An audit also includes assessing the
accounting principles used and significant estimates made by the Trustee, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Equity Income Fund, Select Ten
Portfolio--Autumn 1994 International Series (United Kingdom and Hong Kong
Portfolios), Defined Asset Funds at September 6, 1994 in conformity with
generally accepted accounting principles.
Deloitte & Touche LLP
New York, N.Y.
September 6, 1994
EQUITY INCOME FUND
SELECT TEN PORTFOLIO--AUTUMN 1994 INTERNATIONAL SERIES
(UNITED KINGDOM AND HONG KONG PORTFOLIOS)
DEFINED ASSET FUNDS
STATEMENTS OF CONDITION AS OF INITIAL DATE OF DEPOSIT, SEPTEMBER 6, 1994
<TABLE><CAPTION>
UNITED
KINGDOM HONG KONG
PORTFOLIO PORTFOLIO
-------------- --------------
TRUST PROPERTY
<S> <C> <C>
Investment in Securities:
Contracts to purchase underlying Securities(1).................................... $ 299,232.46 $ 306,856.87
-------------- --------------
-------------- --------------
LIABILITY AND INTEREST OF HOLDERS
Liability--
Payment of deferred portion of sales charge(2)............................................ $ 5,289.46 $ 5,424.23
-------------- --------------
Interest of Holders--
Units of fractional undivided interest outstanding
(United Kingdom Portfolio--302,255 Units;
Hong Kong Portfolio--309,956 Units):
Cost to investors(3).............................................................. $ 302,255.00 $ 309,956.00
Gross underwriting commissions(4)................................................. (8,312.00) (8,523.36)
-------------- --------------
Net amount applicable to investors.......................................................... $ 293,943.00 $ 301,432.64
-------------- --------------
Total.................................................................................. $ 299,232.46 $ 306,856.87
-------------- --------------
-------------- --------------
</TABLE>
- ------------------------------------
(1) Aggregate cost to each Portfolio of the Securities listed under Portfolios
is based on the U.S. dollar offering side value (computed on the basis of
the offer side value of the relevant exchange rate), as determined by the
Trustee at the Evaluation Time, one business day prior to the Initial Date
of Deposit on the basis set forth above under Public Sale of Units--Public
Offering Price. See also the column headed Cost of Securities to Portfolio
in U.S. dollars under Portfolios. In connection with contracts to purchase
Securities, irrevocable letters of credit in the aggregate amount of
$610,247.98 have been deposited with the Trustee and the Co-Trustees for the
purchase of $606,089.33 aggregate value of Securities (based on currency
exchange rates at the Evaluation Time one business day prior to the Initial
Date of Deposit). The letters of credit have been issued by DG Bank, New
York Branch.
(2) 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 December 1,
1994 through September 1, 1995. Distributions will be made to an account
maintained by the Trustee from which the Holders' Deferred Sales Charge
obligation to the Sponsors will be satisfied. If Units are redeemed prior to
September 1, 1995, the remaining portion of the distribution applicable to
such Units will be transferred to such account on the redemption date.
(3) Aggregate public offering price computed on the basis of the aggregate U.S.
dollar value of the aggregate underlying Securities (based on the offer side
value of the relevant currency exchange rate), as of the Evaluation Time one
business day prior to the Initial Date of Deposit.
(4) Assumes the maximum sales charge per 1,000 Units of 2.75% of the Public
Offering Price computed on the basis set forth under Public Sale of
Units--Public Offering Price and Underwriters' and Sponsors' Profits.
A-18
<PAGE>
PORTFOLIO OF EQUITY INCOME FUND
SELECT TEN PORTFOLIO--AUTUMN 1994 INTERNATIONAL SERIES
UNITED KINGDOM PORTFOLIO ON THE INITIAL DATE OF DEPOSIT,
DEFINED ASSET FUNDS SEPTEMBER 6, 1994
<TABLE><CAPTION>
CURRENT ANNUAL
NUMBER OF DIVIDEND PER
PORTFOLIO NO. AND NAME OF SHARES OF PERCENTAGE OF SHARE IN U.S.
ISSUER OF SECURITIES CONTRACTED FOR COMMON STOCK PORTFOLIO(1) DOLLARS(2)
-------------------------------------------------------------------- --------------- -------------- ---------------
<S> <C> <C> <C>
1. British Gas PLC 6,500 9.81% $ 0.225
2. BICC PLC 4,800 9.75% 0.298
3. Hanson PLC 7,600 9.88% 0.181
4. Peninsular & Oriental Steam Navigation Company 2,900 10.11% 0.473
5. British Telecommunications PLC 5,000 10.19% 0.259
6. Glaxo Holdings PLC 3,100 9.96% 0.372
7. National Westminster Bank PLC 4,000 10.59% 0.301
8. The General Electric Company PLC 6,400 9.78% 0.168
9. Allied-Lyons PLC 3,200 10.08% 0.342
10. Lucas Industries PLC 9,700 9.85% 0.109
--------------
100.00%
--------------
--------------
</TABLE>
COST OF
PRICE SECURITIES
PER SHARE TO PORTFOLIO
TO PORTFOLIO IN CURRENT
IN U.S. U.S. DIVIDEND
DOLLARS DOLLARS(3) YIELD(4)
-------------- -------------- -----------
1. $ 4.519 $ 29,370.71 4.98%
2. 6.076 29,166.87 4.90%
3. 3.891 29,569.90 4.65%
4. 10.432 30,253.50 4.53%
5. 6.100 30,498.41 4.25%
6. 9.611 29,793.11 3.87%
7. 7.921 31,684.25 3.80%
8. 4.573 29,266.08 3.67%
9. 9.425 30,158.94 3.63%
10. 3.038 29,470.69 3.59%
--------------
$ 299,232.46
--------------
--------------
- ------------------------------------
NOTES
(1) Based on Cost of Securities to Portfolio in U.S. Dollars.
(2) Based on the most recent interim and final dividends declared, converted
into U.S. dollars at the offer side of the exchange rate at the Evaluation
Time on the Initial Date of Deposit. There can be no assurance that future
dividend payments, if any, will be maintained in an amount equal to the
dividend listed above.
(3) Valuation by the Trustee made on the basis of closing sale prices at the
Evaluation Time on the Initial Date of Deposit, converted into U.S. dollars
at the offer side of the exchange rate at the Evaluation Time on the
Initial Date of Deposit.
(4) Current Dividend Yield for each Security was generally calculated by adding
together the most recent interim and final dividends declared on that
Security and dividing the result by the market value of the Security as of
the close of trading on September 6, 1994.
---------------------------------------------
The Securities were acquired on September 6, 1994 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 Portfolio during the last 3 years. Affiliates of the Sponsors may serve as
specialists in the Securities in this Portfolio on one or more stock exchanges
and may have a long or short position in any of these stocks or in options on
any of these stocks, 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 Portfolio. A Sponsor may trade
for its own account as an odd-lot dealer, market maker, block positioner and/or
arbitrageur in any securities or options relating thereto. Any
Sponsor, its affiliates, directors, elected officers and employee benefits
programs may have either a long or short position in any Security or option
relating thereto.
A-17
<PAGE>
PORTFOLIO OF EQUITY INCOME FUND
SELECT TEN PORTFOLIO--AUTUMN 1994 INTERNATIONAL SERIES
HONG KONG PORTFOLIO ON THE INITIAL DATE OF DEPOSIT,
DEFINED ASSET FUNDS SEPTEMBER 6, 1994
<TABLE><CAPTION>
CURRENT ANNUAL
NUMBER OF DIVIDEND PER
PORTFOLIO NO. AND NAME OF SHARES OF PERCENTAGE OF SHARE IN U.S.
ISSUER OF SECURITIES CONTRACTED FOR COMMON STOCK PORTFOLIO(1) DOLLARS(2)
-------------------------------------------------------------------- --------------- -------------- ---------------
<S> <C> <C> <C>
1. Winsor Industrial Corp. 20,000 9.95% $ 0.104
2. Lai Sun Garment International 16,000 9.99 0.110
3. Hopewell Holdings 33,000 9.78 0.048
4. Shun Tak Holdings Limited 34,000 9.54 0.041
5. Hang Lung Development Company 17,000 10.36 0.076
6. Hysan Development Company 10,000 9.97 0.116
7. Dairy Farm International Holdings 20,000 10.37 0.057
8. Hong Kong Land Holdings Limited 11,000 10.11 0.100
9. Hong Kong Electric 8,500 9.54 0.122
10. Mandarin Oriental 22,000 10.39 0.050
--------------
100.00%
--------------
--------------
COST OF
SECURITIES
PRICE TO PORTFOLIO
PER SHARE IN CURRENT
TO PORTFOLIO U.S. DIVIDEND
IN U.S. DOLLARS DOLLARS(3) YIELD(4)
--------------- -------------- -----------
1. $ 1.527 $ 30,541.07 6.81%
2. 1.915 30,644.60 5.74
3. 0.909 30,000.78 5.28
4. 0.861 29,259.90 4.76
5. 1.870 31,789.89 4.06
6. 3.061 30,605.77 3.79
7. 1.592 31,835.18 3.55
8. 2.821 31,032.83 3.54
9. 3.442 29,259.90 3.54
10. 1.449 31,886.95 3.45
--------------
$ 306,856.87
--------------
--------------
- ------------------------------------
NOTES
(1) Based on Cost of Securities to Portfolio in U.S. dollars.
(2) Based on the most recent interim and final dividends declared converted
into U.S. dollars at the offer side value of the exchange rate at the
Evaluation Time on the Initial Date of Deposit. There can be no assurance
that future dividend payments, if any, will be maintained in an amount
equal to the dividend listed above.
(3) Valuation by the Trustee made on the basis of closing sale prices at the
Evaluation Time on the Initial Date of Deposit, converted into U.S. dollars
at the offer side of the exchange rate at the Evaluation Time on the
Initial Date of Deposit.
(4) Current Dividend Yield for each Security was calculated by adding together
the most recent interim and final dividends declared on that Security and
dividing the result by the market value of that Security as of the close of
trading on September 6, 1994.
---------------------------------------------
The Securities were acquired on September 6, 1994 and are represented entirely
by contracts to purchase the Securities. Any of the Sponsors may have acted as
underwriters, managers or co-managers of a public offering of the Securities in
this Portfolio during the last 3 years. Affiliates of the Sponsors may serve as
specialists in the Securities in this Portfolio on one or more stock exchanges
and may have a long or short position in any of these stocks or in options on
any of these stocks, 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 Portfolio. A Sponsor may trade
for its own account as an odd-lot dealer, market maker, block positioner and/or
arbitrageur in any Securities or options relating thereto. Any
Sponsor, its affiliates, directors, elected officers and employee benefits
programs may have either a long or short position in any Security or option
relating thereto.
A-18
<PAGE>
EQUITY INCOME FUND
SELECT TEN PORTFOLIO--AUTUMN 1994 INTERNATIONAL SERIES
UNITED KINGDOM AND HONG KONG PORTFOLIOS
DEFINED ASSET FUNDS
FUND STRUCTURE
This International Series (the 'Fund') of Equity Income Fund, Select Ten
Portfolio consists of two unit investment trusts, the United Kingdom Portfolio
and the Hong Kong Portfolio, created under New York law by Trust Indentures (the
'Indentures') among the Sponsors and the Trustee. This Prospectus summarizes
various provisions of the Indentures, but each statement herein is qualified in
its entirety by reference to the Indentures. On the date of this Prospectus (the
'Initial Date of Deposit') the Sponsors, acting as managers for the underwriters
named under Underwriting Account, deposited the underlying Securities with the
Trustee at a price equal to the aggregate value of the Securities on that date
as determined by the Trustee, converted into U.S. dollars at the offer side
value of the applicable exchange rate, and the Trustee delivered to the Sponsors
units of interest ('Units') representing the entire ownership of each Portfolio.
Except as otherwise indicated under each Portfolio (the 'Portfolios'), the
Securities so deposited were represented by purchase contracts assigned to the
Trustee together with an irrevocable letter or letters of credit issued by a
commercial bank or banks in the amount necessary to complete the purchase
thereof.
The Portfolios contain common stocks in the Financial Times Industrial
Ordinary Share Index ('FT Index') and the Hang Seng Index (which are
unaffiliated with the Sponsors) having the highest dividend yield two business
days prior to the Initial Date of Deposit ('Strategy Stocks'). As used herein,
the term 'Highest Dividend Yield' means the yield for each Security calculated
by adding the most recent interim and final dividends declared on the Security
and dividing the result by the market value of that Security two business days
prior to the Initial Date of Deposit. This rate is historical, and there is no
assurance that any dividends will be declared or paid in the future on the
Securities in the Fund. As used herein, the term 'Securities' means the common
stocks initially deposited in the Portfolios and described in the Portfolios and
any additional common stocks acquired and held in the Portfolios pursuant to the
provisions of the Indenture (see Description of the Fund--The Portfolios;
Administration of the Fund--Portfolio Supervision).
With the deposit of the Securities in the Portfolios on the Initial Date of
Deposit, the Sponsors established a proportionate relationship among the number
of shares of each stock deposited in each Portfolio. During the 90-day period
following the Initial Date of Deposit, the Sponsors may deposit additional
Securities ('Additional Securities'), contracts to purchase Additional
Securities or cash (or a bank letter of credit in lieu of cash) with
instructions to purchase Additional Securities in order to create new Units,
maintaining to the extent practicable the original proportionate relationship
among the number of shares of each stock in each Portfolio. It may not be
possible to maintain the exact original proportionate relationship among the
Securities deposited on the Initial Date of Deposit because of, among other
reasons, purchase requirements, changes in prices or unavailability of
Securities. Units may be continuously offered to the public by means of this
Prospectus (see Public Sale of Units--Public Distribution) resulting in a
potential increase in the number of Units outstanding. Any deposits of
Additional Securities subsequent to the 90-day period following the Initial Date
of Deposit must replicate exactly the proportionate relationship among the
number of shares of each Security in the Portfolio at the end of the initial
90-day period, subject to certain events as discussed under Administration of
the Fund--Portfolio Supervision.
The holders of record ('Holders') of Units will have the right to have
their Units redeemed (see Redemption) at a U.S. dollar price computed as set
forth under Redemption--Computation of Redemption Price per Unit ('Redemption
Price per Unit') if they cannot be sold in the over-the-counter market which the
Sponsors propose to maintain (see Market for Units). Redemptions will be made in
cash or in Securities ('in kind') (see Redemption). On the Initial Date of
Deposit each Unit of a Portfolio represented the fractional undivided interest
in the Securities and net income of the Portfolio set forth under Investment
Summary.
1
<PAGE>
The Fund may be an appropriate medium for investors who desire to
participate in a portfolio of common stocks of foreign issuers with greater
diversification than they might be able to acquire individually.
RISK FACTORS
An investment in Units should be made with an understanding of the risks
inherent in an investment in equity securities of foreign issuers, 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, as
well as the risk that the value of a Portfolio and hence of Units will decline
with changes in the exchange rate for the relevant currency. 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 the
Portfolios 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 that Portfolio to values higher or lower than those
prevailing on the 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 all the Securities at the same time because
of unavailability of a Security, any restrictions applicable to the Fund
relating to the purchase of the Security by reason of the federal securities
laws or otherwise.
Investors should note that additional Units may be offered to the public.
This may have an effect upon the value of previously existing Units. To create
additional Units the Sponsors may deposit cash with instructions to purchase
Additional Securities (or a bank letter of credit in lieu of cash). To the
extent the price of a Security or the relevant currency exchange rate increases
or decreases between the time cash is deposited with instructions to purchase
the Security and the time the cash is used to purchase the Security, Units will
represent less or more of that Security and more or less of the other Securities
in the Portfolio. Holders will be at risk because of price and currency
fluctuations during this period since if the price of shares of a Security
increases, Holders will have an interest in fewer shares of that Security, and
if the price of a Security decreases, Holders will have an interest in more
shares of that Security, than if the Security had been purchased on the date
cash was deposited with instructions to purchase the Security. In order to
minimize these effects, Securities will be purchased as close as possible to the
relevant Evaluation Time or at prices as close as possible to the prices used to
evaluate the Portfolios at the relevant Evaluation Time. For this reason,
Securities for the United Kingdom Portfolio and the
2
<PAGE>
Hong Kong Portfolio may be purchased on securities exchanges other than the
London Stock Exchange and Hong Kong Exchange, respectively. In addition,
brokerage fees incurred in purchasing Securities with cash deposited with
instructions to purchase the Securities will be an expense of the relevant
Portfolio. Thus, price and currency fluctuations during this period and payment
of any brokerage fees by a Portfolio will affect the value of every Holder's
Units and the income per Unit. In particular, Holders who purchase Units during
the primary offering period of the Units would experience a dilution of their
investment as a result of any brokerage fees paid by a Portfolio on purchase of
additional Securities with cash deposited with instructions to purchase
Securities.
As it is anticipated that Securities generally will not be sold to pay the
Deferred Sales Charge until after the last Deferred Sales Charge Payment Date,
Holders also will be at risk with respect to changes in the market value of
Securities between the accrual of each monthly deferred sales charge installment
and the sale of Securities to satisfy this liability.
Foreign Issuers. Investments in funds consisting partially or entirely of
securities of foreign issuers involve investment risks that are different in
some respects from an investment in a fund 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 the
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. 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.
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
3
<PAGE>
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 following table shows fluctuations in the value of the British pound
and Hong Kong dollar relative to the United States dollar in the past ten years.
FOREIGN EXCHANGE RATES
RANGE OF FLUCTUATIONS IN FOREIGN CURRENCY
U.S./UNITED
KINGDOM HONG KONG/U.S.
PERIOD POUND STERLING DOLLAR
- ---------------------------------------------------------------
1984 1.491 - 1.158 8.050 - 7.774
1985 1.489 - 1.052 7.990 - 7.729
1986 1.555 - 1.377 7.819 - 7.767
1987 1.886 - 1.470 7.822 - 7.751
1988 1.905 - 1.663 7.911 - 7.769
1989 1.831 - 1.495 7.833 - 7.759
1990 1.988 - 1.589 7.818 - 7.737
1991 2.005 - 1.599 7.815 - 7.696
1992 2.011 - 1.490 7.785 - 7.696
1993 1.599 - 1.407 7.783 - 7.707
Source: Bloomberg Financial Markets
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 the Fund
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
the 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 the 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.
4
<PAGE>
PERFORMANCE OF WORLD EQUITY MARKETS
COMPOUND ANNUAL TOTAL RETURNS
DECEMBER 31, 1983 TO JUNE 30, 1994
The rapid expansion of non-U.S. markets has resulted in a growing interest in
global investments. The chart below shows how average annual total returns
(share price changes with dividends reinvested) of equity markets in major
industrialized countries compare over the past 10 1/2 years.
LOCAL
COUNTRY U.S. DOLLAR CURRENCY
- ----------------------- --------------- -------------
Hong Kong 30.57% 30.49%
Belgium 24.39 18.24
France 20.12 15.32
Netherlands 20.95 14.85
Spain 23.44 21.35
Austria 22.40 16.15
Japan 18.56 9.27
Sweden 16.40 15.92
Switzerland 18.62 13.20
United Kingdom 16.58 15.90
Norway 13.54 12.36
Germany 16.53 10.68
Italy 18.12 17.55
USA 13.68 13.68
Source: Morgan Stanley Capital Int'l (MCSI) Index
The returns shown above represent past performance of stocks in the
countries shown, generally representing at least 60% of total market
capitalization in each market; they are not guarantees of future performance and
should not be used as a predictor of returns to be expected in connection with
either Portfolio. These figures do not reflect sales charges, commissions,
expenses or taxes, and a Portfolio may not be fully invested at all times nor
invested in the same stocks or in the same proportions as reflected in these
returns. Therefore, a Holder of Units would not necessarily realize as high a
return as the figures shown above. See Description of the Fund--The Portfolio.
Exchange Controls. On the basis of the best information available to the
Sponsors at the present time none of the Securities, except as indicated under
Investment Summary, is subject to exchange control restrictions under existing
law which would materially interfere with payment to the Portfolio of amounts
due on the 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 the Securities as exempt by following 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 the Portfolio and on the ability of the Portfolio to satisfy its
obligation to redeem Units tendered to the Trustee for redemption (see
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
5
<PAGE>
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 such 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, the 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.
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 the United Kingdom and the value of any
Securities held by the United Kingdom Portfolio or between the economy of Hong
Kong and the value of any Securities held by the Hong Kong Portfolio.
UNITED KINGDOM PORTFOLIO
The Portfolio contains common stocks of British companies engaged in such
industries as the building materials industry, the food and beverage industry,
the automotive/aviation industry, the transportation industry, engineering,
finance and utilities.
The economy of the United Kingdom is focused upon the private services
sector, which includes the wholesale and retail sector, banking, finance,
insurance, and tourism. Services as a whole account for a majority of the United
Kingdom's gross national product and make a significant contribution to the
country's balance of payments. London is one of the world's major financial
centers, with a substantial part of the business international in nature. The
continuance of London as an international financial center is dependent on,
among other things, a favorable regulatory regime and its success against
foreign competition.
In addition, the United Kingdom is a member of the European Union (the
'EU'), formerly known as the European Community. The 12 nations of the EU are
united under a unique framework for policy and administrative action. With its
goal of eliminating trade barriers and forming a European single market reached
in 1993, the EU has become a powerful trade bloc with a combined population of
over 350 million people and an annual gross national product of more than $4
trillion. The EU became a reality with implementation of the Maastricht Treaty
on European Union in late 1993. Trade barriers between member states essentially
have been eliminated under a system similar to the trading policy between states
of the United States. The recent rapid political and social change throughout
Europe make the extent and nature of future economic development in the United
Kingdom and Europe and the impact of such development upon the value of the
Securities in the Portfolio impossible to predict at present. Volatility in oil
prices could slow economic development throughout Western Europe; moreover, it
is not possible accurately to predict the effect of the current political and
economic situation upon the long-term inflation and balance of trade cycles and
how these changes would affect the currency exchange rate between the U.S.
dollar and the British pound sterling. The United Kingdom's economic prospects
are now looking better than they have in many years. The economy is growing
quite strongly and expansion is expected to continue for some time. Unemployment
is falling, although it is still at high levels. The rate of inflation remains
low, and that has helped to keep interest rates at levels last seen in the
1960s. The imposition of value-added tax (VAT) on domestic fuel, and other tax
increases which came into effect from April 1994, have not had any discernible
effect on consumer confidence so far. The increased taxes will help to cut the
government's budget deficit, and thus should prevent any collapse of confidence
in the government's handling of the economy.
6
<PAGE>
THE FINANCIAL TIMES INDUSTRIAL ORDINARY SHARE INDEX (THE 'FT INDEX')
The FT Index began as the Financial News Industrial Ordinary Share Index in
London in 1935 and became the Financial Times Industrial Ordinary Share Index in
1947. The following are the stocks currently represented in the FT Index:
Allied Lyons PLC
ASDA Group PLC
BICC PLC
The BOC Group PLC
BTR PLC
Blue Circle Industries PLC
The Boots Company PLC
The British Petroleum Company
PLC
British Telecommunications PLC
British Gas PLC
British Airways PLC
Cadbury Schweppes Public Limited Co.
Courtaulds PLC
Forte PLC
The General Electric Company PLC
Glaxo Holdings PLC
Grand Metropolitan PLC
Guest Keen & Nettlefolds (GKN)
PLC
Guinness PLC
Hanson PLC
Imperial Chemical Industries PLC
Lucas Industries PLC
Marks & Spencer PLC
National Westminster Bank PLC
Peninsular & Oriental Steam Navigation
Company
Reuters Holdings PLC
Royal Insurance Holdings PLC
SmithKline Beecham PLC
Tate & Lyle PLC
Thorn EMI PLC
HONG KONG PORTFOLIO
The Hong Kong Portfolio contains common stocks of companies trading on the
Hong Kong Exchange and engaged in such businesses as hotels, property and real
estate, textiles, telecommunications and utilities.
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
Formal trading of securities was established in Hong Kong in 1891 when the
Association of Stockbrokers in Hong Kong was formed. It was renamed the Hong
Kong Stock Exchange in 1914. In 1969, the Far East Exchange was formed, followed
by the Kam Ngan Stock Exchange in 1971 and the Kowloon Stock Exchange in 1972.
These four exchanges merged to form the Stock Exchange of Hong Kong Ltd. (the
'Hong Kong Exchange') which commenced trading on April 2, 1986. The Hong Kong
Exchange, with a total market capitalization as of December 31, 1992 of
approximately US$170.80 billion, is the second largest stock market in Asia,
measured by market capitalization, behind that of Japan. As of that date, 413
companies and 749 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
May, 1989 in response to the difficulties encountered in Hong Kong's financial
markets at the time of the October, 1987 world stock market crash, exercises
supervision of the securities, financial investment and commodities futures
industry.
In March 1994, Jardine Matheson Holdings, the British trading house,
announced that it would delist its shares from the Hong Kong Stock Exchange at
the end of 1994. Subsequently, Jardin Strategic, one of the Jardine companies,
also announced that it would delist its shares from the Hong Kong Stock Exchange
at the end of 1994. It is possible that three other Jardine companies, which are
represented in the Portfolio, Mandarin Oriental, Hong Kong Land Holdings Limited
and Dairy Farm International Holdings, may also leave the Hong Kong Stock
Exchange. An official confirmation regarding the delisting of these three
companies is scheduled to be issued on September 7, 1994. The five companies
together represent almost 10% of total capitalization of the Hang Seng Index.
Any future delisting could have an adverse impact on the performance of the
Portfolio. Such delisting
7
<PAGE>
would not necessarily result in the disposal of the stock of these companies,
nor would it prevent the Portfolio from purchasing such Securities in connection
with the issuance of Additional Units or the purchase of Additional Securities
(see Administration of the Fund--Portfolio Supervision).
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 following the
events at Tiananmen Square. 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.
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 June 30, 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.
</TABLE>
<TABLE><CAPTION>
PERCENTAGE NUMBER OF TRADING DAYS WITH GAINS OR LOSSES SHOWN
---------------------------------------------------------------------
GAINS OR LOSSES HANG SENG FT DOW JONES
IN VALUE OF INDEX INDEX INDEX INDUSTRIAL AVERAGE
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
1%............... 311 297 204
2%............... 111 27 25
3%............... 68 12 10
</TABLE>
Previous performance is no guarantee of future results; any index may display
more or less volatility in the future. However, additional factors which may
cause added volatility of the Hang Seng Index include, but are not limited to,
those discussed below. (See Additional Hong Kong Risk Factors below.)
Hong Kong Real Estate Companies
The Hong Kong Portfolio is 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 and construction costs, a growing supply of real estate and a
tightening of credit markets. The same trend continued in 1993. 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 the Hong Kong Portfolio. Hong Kong real estate companies also could be
materially adversely affected by other factors, including those discussed below
(see Additional Hong Kong Risk Factors below).
Additional Hong Kong Risk Factors
Hong Kong's Reversion to Chinese Sovereignty. In December, 1984, Great
Britain and China signed an agreement (the 'Sino-British Accord') under which
Hong Kong will revert to Chinese sovereignty effective July 1, 1997. Although
China has committed by treaty to preserve for 50 years the economic and social
freedoms
8
<PAGE>
currently enjoyed in Hong Kong, the continuation of the economic system in Hong
Kong after the reversion will be dependent on the Chinese government. For
example, Christopher Patten, who assumed office as British Governor of Hong Kong
in June, 1992, has proposed increased democratization of Hong Kong's
legislature. In response, China declared that all contracts negotiated by the
current Hong Kong government with the private sector would be void upon the
reversion to Chinese sovereignty, unless specifically approved by China. Any
increase in uncertainty as to the future economic status of Hong Kong could have
a materially adverse effect on the value of the 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
the 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. In addition, in 1991
China and Hong Kong announced the construction of a new airport on Lantau
Island, together with an expansion of the port facilities, to be worth an
estimated HK$127 billion and scheduled for completion around 1997. Any downturn
in economic growth or increase in the rate of inflation in China could have a
materially adverse effect on the value of the Hong Kong Portfolio.
THE HANG SENG INDEX
Following are the stocks currently comprising the Hang Seng Index:
Bank of East Asia Ltd.
Cathay Pacific
Cheung Kong
China Light & Power Co.
Citic Pacific
Dairy Farm Int. Holdings
Great Eagle Holdings
Hang Lung Development Company
Hang Seng Bank
Henderson Land Development
Hong Kong Aircraft Engineering
Hong Kong Electric
Hong Kong and China Gas
Hong Kong and Shanghai Hotels
Hong Kong Land Holdings Limited
Hong Kong Telecommunications
Hopewell Holdings
HSBC Holdings PLC
Hutchison Whampoa
Hysan Development Company
Jardine Matheson
Jardine Strategic
Lai Sun Garment International
Mandarin Oriental
Miramar Hotel & Investment
New World Dev.
Shun Tak Holdings Limited
Sun Hung Kai Properties
Swire Pacific (A)
TV Broadcasts
Wharf Holdings
Winsor Industrial Corp.
Wheelock & Co.
LITIGATION AND LEGISLATION
At any time after the Initial Date of Deposit, litigation may be initiated
on a variety of grounds, or legislation may be enacted, with respect to the
Securities in the Portfolios or the issuers of the Securities. Changing
approaches to regulation may have a negative impact on certain companies
represented in the Portfolios. There can be no assurance that future litigation,
legislation, regulation or deregulation will not have a material adverse effect
on the Portfolios or will not impair the ability of the issuers of the
Securities to achieve their business goals.
DESCRIPTION OF THE FUND
THE PORTFOLIOS
The Fund contains two separate fixed diversified portfolios of ten common
stocks in the FT Index and ten common stocks in the Hang Seng Index,
respectively (see Fund Structure). Each Security in a Portfolio was
9
<PAGE>
selected on the basis of the composition of the related Index as of two business
days prior to the Initial Date of Deposit after giving effect to any forthcoming
changes in the Index announced prior to that date. A Portfolio will not be
changed to reflect any changes in the composition of the related Index announced
subsequent to the Initial Date of Deposit.
Today's global market place offers many opportunities. Defined Asset Funds
can make some of them available to investors with the Select Ten, International
Series, portfolios designed to yield a higher total return by investing in
economies of selected countries. Global markets can move in different
directions. While some markets may be experiencing rapid growth, others, at the
same time, may be in a temporary decline. These market movements can offer
attractive growth opportunities, like the ones currently in the United Kingdom
and Hong Kong. Hong Kong has experienced outstanding economic growth. The United
Kingdom has also experienced economic growth. This growth is reflected in the
performance of the Hang Seng and Financial Times Indexes. The companies
represented are among the most highly capitalized in Hong Kong and the United
Kingdom, respectively.
Simple strategies can sometimes be the most effective. Historically, common
stocks have outperformed most other classes of investments over the long-term.
To outperform a stock market is more difficult. The United Kingdom Portfolio and
the Hong Kong Portfolio seek a higher total return than the FT Index and the
Hang Seng Index, respectively, by acquiring the ten stocks in each Index with
the highest dividend yield three days prior to the Initial Date of Deposit and
holding them for about one year. There can be no assurance that the dividend
rates will be maintained. Reduction or elimination of a dividend could adversely
affect the stock price as well. Purchasing a portfolio of these stocks as
opposed to one or two can achieve a more diversified holding. For each Portfolio
the investor need only make one investment decision instead of ten, and Holders
receive two semi-annual dividends instead of 20. This strategy avoids the need
for the investor to determine when to buy and sell individual stocks. Investors
also benefit from the reduced commissions and institutional prices available to
the Fund. An investment in the Fund can be cost-efficient. Investment in a
number of quality stocks having high dividends relative to their stock prices is
designed to increase a Portfolio's potential for higher return. Each Select Ten
Portfolio seeks to outperform the related Index by following this simple
investment strategy, based on three time-tested investment principles: time in
the market is more important than timing the market; the stocks to buy are the
ones everyone else is selling; and dividends can be an important part of total
return. Each Portfolio's return will consist of a combination of capital
appreciation and current dividend income. Each Portfolio will terminate in about
one year, when investors may choose to either receive the distribution in cash
or reinvest in a Autumn 1995 International Portfolio (if available) at a reduced
sales charge.
Each Portfolio consists of the Securities (or contracts to purchase the
Securities) listed under the relevant Portfolio (including any Additional
Securities deposited in connection with the sale of additional Units to the
public as described under Fund Structure above) as long as they may continue to
be held from time to time in a Portfolio together with accrued and undistributed
income therefrom and undistributed and uninvested cash realized from the
disposition of Securities. Neither the Sponsors nor the Trustee shall be liable
in any way for any default, failure or defect in any of the Securities. However,
should any contract deposited hereunder (or to be deposited in connection with
the sale of additional Units) fail (a 'Failed Security'), the Sponsors are
authorized under the Indenture to acquire replacement Securities. If replacement
Securities are not acquired, the Sponsors shall, on or before the next following
Distribution Day, cause to be refunded the attributable sales charge, plus the
attributable Cost of Securities to Portfolio listed under Portfolio (converted
into U.S. dollars at the best spot buying exchange rate offered to the Trustee
on the relevant date). (See Administration of the Fund--Portfolio Supervision.)
Each Indenture authorizes the Sponsors to increase the size and the number
of Units of a Portfolio by the deposit of Additional Securities and the issue of
a corresponding number of additional Units subsequent to the Initial Date of
Deposit; provided that the original relationship among the number of shares of
each of the Securities is maintained subject to certain events. Also, Securities
may be sold under certain circumstances. (See Redemption; Administration of the
Fund--Portfolio Supervision). As a result, the aggregate value of the Securities
in the Portfolios will vary over time.
Because each Portfolio of Defined Funds is a portfolio of preselected
securities, purchasers know in advance what they are investing in. Of course,
the Portfolios will change somewhat over time as Additional Securities are
10
<PAGE>
deposited, or as Securities are sold to meet redemptions and in the limited
other circumstances described below. However, since the Portfolios will remain
relatively fixed, there are no management fees.
Defined equity funds offer investors a simple and convenient way to
participate in the equity markets. By purchasing equity income funds, investors
not only avoid the problem of selecting securities by themselves, but also gain
the advantage of diversification by investing in securities of several different
issuers, selected by experienced buyers and market analysts.
Each Portfolio is divided into units, representing equal shares of
underlying assets. On the Initial Date of Deposit each Unit represented the
fractional undivided interest in the Securities plus net income of the relevant
Portfolio set forth under the Investment Summary. Thereafter, if any Units are
redeemed by the Trustee, the aggregate value of Securities will be reduced by
amounts allocable to redeemed Units, and the fractional undivided interest
represented by each Unit in the balance will be increased. However, if
additional Units are issued, the aggregate value of Securities will be increased
by amounts allocable to additional Units, and the fractional undivided interest
represented by each Unit in the balance will be decreased. Units will remain
outstanding until redeemed upon tender to the Trustee by any Holder (which may
include the Sponsors) or until the termination of the Indenture (see Redemption;
Termination).
INCOME AND DISTRIBUTIONS
The net annual U.S. dollar income per Unit that is earned by a Portfolio is
determined by subtracting from the annual dividend income of the Securities
received by the Portfolio the annual expenses (total applicable custodial fees
and certain other costs associated with foreign trading, annual Trustee's,
Sponsors' and administrative fees and expenses) and dividing by the number of
Units outstanding. The net annual U.S. dollar income per Unit will depend upon
the amount of dividends declared and paid by the issuers of the Securities,
fluctuations in the relevant U.S. dollar exchange rates, and sales of Securities
and the purchase of additional Securities (recognizing, however, that the sale
or purchase of Securities by itself should have a minimal effect on income per
Unit because each Unit will continue to represent a fractional undivided
interest in the same number of shares of Securities of the same issuers).
Record Days and Distribution Days are set forth under the Investment
Summary. U.S. Dollar dividend income per Unit received by the Fund and available
for distribution as of the next preceding Record Day will be distributed on or
shortly after each Distribution Day to the Holders of record on the preceding
Record Day (see Administration of the Fund--Accounts and Distributions).
Further, because dividends on the Securities are not necessarily received by the
Fund at a constant rate throughout the year or at a time that precedes or
coincides with a Record Day, any distribution may be more or less than the
amount credited to the Income Account as of the Record Day. Holders who roll
over their Units will not receive the final distribution upon termination of the
Fund on the Mandatory Termination Date as set forth under the Investment
Summary. (See Special Redemption, Liquidation and Investment in New Portfolio.)
Upon receipt of dividend payments, the Trustee will hold the sum in the Income
Account until the following Distribution Day.
TAXES
The following discussion addresses only the tax consequences of Units held
as capital assets by U.S. Holders and does not address the tax consequences of
Units held by dealers, financial institutions or insurance companies.
As used herein, the term 'U.S. Holder' means an owner of a Unit in the
United Kingdom Portfolio or the Hong Kong Portfolio (each, a 'Trust') that (a)
is (i) for United States federal income tax purposes a citizen or resident of
the United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or of any political
subdivision thereof, or (iii) an estate or trust the income of which is subject
to United States federal income taxation regardless of its source or (b) is not
a U.S. Holder and whose income from a Unit is effectively connected with such
Holder's conduct of a United States trade or business. The term also includes
certain former citizens of the United States whose income and gain on the Units
will be taxable.
In the opinion of Davis Polk & Wardwell, special counsel for the Sponsors,
under existing law:
11
<PAGE>
The Trusts are not associations taxable as corporations for federal income
tax purposes, and income received by the Trusts will be treated as income of the
Holders in the manner set forth below.
Each Holder of Units of a Trust will be considered the owner of a pro rata
portion of each Security in the Trust under the grantor trust rules of Sections
671-679 of the Internal Revenue Code of 1986, as amended (the 'Code'). The total
cost (in U.S. dollars) to a Holder of his Units, including sales charges, is
allocated among his pro rata portion of each Security, in proportion to the fair
market values thereof on the date the Holder purchases his Units, in order to
determine his tax cost (in U.S. dollars) for his pro rata portion of each
Security.
Provided a Holder holds Units on the record date for dividends on the
underlying Securities held by the Trust, each Holder of Units of a Trust 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 Trust regardless of
whether such dividends are used to pay a portion of the deferred sales charge.
Holders will be taxed in this manner regardless of whether distributions from a
Portfolio are actually received by the Holder or are automatically reinvested
(see Reinvestment Plan). The amount of the dividend payment will be the U.S.
dollar value based on the exchange rate in effect on the date the dividend
payment is received by the Trust. Dividends considered to have been received by
a Holder will not qualify for the dividends-received deduction for corporate
Holders because the dividends-received deduction is only available for dividends
received from domestic corporations. Notwithstanding the fact that, as stated
below under 'United Kingdom Taxation', it is unclear whether in practice U.S.
Holders of Units will be able to obtain a refund of any amount of U.K. taxes
pursuant to the U.S.-U.K. double tax convention (the 'Treaty'), the United
Kingdom Portfolio (the 'U.K. Trust') will report as gross income earned by
Holders of Units their pro rata share of dividends received by the Trust as well
as their pro rata share of the associated Tax Credit Amount (as defined below
under 'United Kingdom Taxation'). Those U.S. Holders who hold Units on the
relevant record date for dividends on the underlying Securities held by the U.K.
Trust should be entitled to either a credit or a deduction for foreign taxes
payable with respect to such dividend payments. In addition, IRAs and other
plans addressed below under 'Retirement Plans' should note that they are not
eligible to claim any Treaty Payment (as defined below) pursuant to the Treaty.
An individual Holder who itemizes deductions will be entitled to deduct his
pro rata share of fees and expenses paid by the Trust only to the extent that
this amount together with the Holder's other miscellaneous deductions exceeds 2%
of his adjusted gross income.
The Holder's basis in his Units will be equal to 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 a Holder 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 Holders will reflect the actual amounts paid to
them, net of the Deferred Sales Charge. Accordingly, Holders should not increase
their basis in their Units by the Deferred Sales Charge amount.
A pro rata distribution of Securities by the Trustee to a Holder (or to his
agent, including the Distribution Agent) upon redemption of Units (or an
exchange of Units for Securities by the Holder with the Sponsor) will not be a
taxable event to the Holder or to other Holders. The redeeming or exchanging
Holder's basis for such Securities will be equal to his basis for the same
Securitites (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. A Holder will have a taxable gain or loss
(measured in U.S. dollars based on the exchange rate at the time of
disposition), which will be a capital gain or loss, when the Holder (or his
agent, including the Distribution Agent) sells the Securities so received in
redemption for cash, when a redeeming or exchanging Holder receives cash in lieu
of fractional shares, when the Holder sells his Units for cash or when the
Trustee sells the Securities from the Trust. However, to the extent a Rollover
Holder invests his redemption proceeds in units of the Autumn 1995 International
Series, such Holder generally will not be entitled to a deduction for any losses
recognized upon the disposition of any Securities to the extent that such Holder
is considered the owner of substantially identical securities under the grantor
trust rules described above as applied to such Holder's ownership of units in
the Autumn 1995 International Series, if such substantially identical securities
are acquired within a period ending 30 days after such disposition. Capital
gains are generally taxed at the same rate as ordinary income. However, the
excess of net long-term capital gains over net short-term capital losses may be
taxed at a lower rate than ordinary income for certain noncorporate taxpayers. A
capital gain or loss is long-term if the asset is held for more than one year
and short-term if held for one year or less. Therefore, such lower rate will be
unavailable to those non-
12
<PAGE>
corporate holders 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 Holders, this lower rate will
be unavailable if, as of the beginning of the Special Redemption and Liquidation
Period, such Rollover Holders have held their Units for less than a year and a
day. The deduction of capital losses is subject to limitations.
Under the income tax laws of the State and City of New York, the Trusts are
not associations taxable as corporations and the income of the Trusts will be
treated as the income of the Holders in the same manner as for Federal income
tax purposes.
The foregoing discussion relates only to the tax treatment of U.S. Holders
with regard to Federal and certain aspects of New York State and City income
taxes. Holders may be subject to taxation in New York or in other jurisdictions
and should consult their own tax advisors in this regard.
* * *
The foregoing discussion relates only to U.S. Holders (as defined above).
Since both Trusts hold Securities of non-U.S. issuers, it is expected that
income earned by Holders of Units who are not U.S. Holders ('non-U.S. Holders')
will not be treated as U.S.-source income and should not be subject to any U.S.
withholding tax.
At the termination of the Trusts, the Trustee will furnish to each Holder
an annual statement containing information relating to the dividends received by
the Trust on the Securities, the gross proceeds received by the Trust from the
disposition of any Security (resulting from redemption or the sale by the Trust
of any Security), and the fees and expenses paid the Trust. The Trustee will
also furnish annual information returns to each Holder and to the Internal
Revenue Service.
FOREIGN TAXATION
UNITED KINGDOM TAXATION
Tax Consequences of Ownership of Ordinary Shares
In the opinion of Linklaters & Paines, London special counsel to the
Sponsors, based on the terms of the Fund as described in the Prospectus and on
certain representations made by special U.S. counsel to the Sponsors, the
following summary accurately describes the U.K. tax consequences to U.S. Holders
of Units of the U.K. Trust. This summary is based upon current U.S. law, U.K.
law and Inland Revenue practice in the U.K., the Treaty and the U.S./U.K.
convention relating to estate and gift taxes (the 'Estate Tax Treaty'). The
summary is a general guide only and is subject to any changes in U.K. or U.S.
law, or the practice relating thereto and in the Treaty or Estate Tax Treaty
occurring after the date of this Prospectus which may affect (including possibly
on a retroactive basis) the tax consequences described herein. Accordingly,
Holders should consult their tax advisors as to the U.K. tax consequences of
ownership of the Units of the U.K. Trust applicable to their particular
circumstances.
Taxation of Dividends
Subject to the comments in the following paragraph, where a U.K. resident
receives a dividend from a U.K. corporation, such resident is generally entitled
to a tax credit, which may be offset against such resident's U.K. taxes, or, in
certain circumstances, repaid. Under the Treaty, a U.S. Holder, may, in
appropriate circumstances, be entitled to a repayment of that tax credit, but
such repayment is subject to withholding tax at the rate of 15% of the sum of
the dividend and the credit. The credit is equal to one quarter of the dividend
(the 'Tax Credit Amount'). Although a U.S. Holder who held shares in a U.K.
corporation directly could generally claim a refund of a portion of the Tax
Credit Amount attributable to the dividend (a 'Treaty Payment') pursuant to the
terms of the Treaty, the ability of a Holder of Units in the U.K. Trust to claim
such a Treaty Payment is unclear where dividend payments are made directly to an
entity such as the U.K. Trust. Any claim for such a Treaty Payment would have to
be supported by evidence of each Holder's entitlement to the relevant dividend.
There is no established procedure for proving such entitlement where the U.K.
corporation pays the dividend to a person such as the Trust unless a specific
procedure is negotiated in advance with the U.K. Inland Revenue. The Trustee has
determined that it is impracticable to claim such Treaty Payments on behalf of
Holders and will not incur any
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further expenses in assisting Holders in this respect. Therefore, in the absence
of the Trustee's cooperation, Holders who are U.S. persons may not in practice
be able to claim a Treaty Payment from the U.K. Inland Revenue.
Under the provisions of the Finance Act 1994, after 1st July 1994 a U.K.
company can elect to pay a 'foreign income dividend' rather than an ordinary
dividend. If a company whose shares were held in the Portfolio of the Fund paid
a foreign income dividend, no tax credit would be attributable to it.
Taxation of Capital Gains
U.S. Holders who are not resident or ordinarily resident for tax purposes
in the U.K. will not be liable for U.K. tax on capital gains realized on the
disposal of their Units unless such units are used, held or acquired for the
purposes of a trade, or professional vocation carried on in the U.K. through a
branch or agency which constitutes a permanent establishment or fixed base as
defined in the Treaty or for the purposes of such branch or agency.
A U.S. Holder who is liable for both U.K. capital gains tax or U.K.
corporation tax on chargeable gains and U.S. tax on a gain on the disposal of a
unit will generally be entitled, subject to certain limitations, to credit the
U.K. tax against its U.S. federal income tax liability in respect of such gain.
U.K. Inheritance Tax
An individual Holder who is domiciled in the U.S. for the purposes of the
Estate Tax Treaty and who is not a national of the U.K. for the purposes of the
Estate Tax Treaty will generally not be subject to U.K. inheritance tax in
respect of Units in the U.K. Trust on the individual's death or on a gift of
such Units during the individual's lifetime provided that any applicable U.S.
federal gift or estate tax liability is paid, unless the Units are part of the
business property of a permanent establishment of the individual in the U.K. or
pertain to a fixed base in the U.K. used by an individual for the performance of
independent personal services. Where the Units have been placed in trust by a
settlor, the Units will generally not be subject to U.K. inheritance tax unless
the settlor, at the time of settlement, was not domiciled in the U.S. or was a
U.K. national. In the exceptional case where the Units are subject both to U.K.
inheritance tax and to U.S. federal gift or estate tax, the Estate Tax Treaty
generally provides for the tax paid in the U.K. to be credited against tax paid
in the U.S. or for tax paid in the U.S. to be credited against tax payable in
the U.K. based on priority rules set out in that Treaty.
* * *
The foregoing discussion addresses the U.K. tax consequences of Units of
the U.K. Trust held by U.S. Holders only. For the U.S. tax consequences to U.S.
Holders, see Taxes. The taxation of non-U.S. Holders in the U.K. and in their
own countries of residence as a result of their ownership, sale, exchange or
other disposition of Units of the U.K. Trust will be governed by the relevant
treaties, if any, between the countries of residence of such non-U.S. Holders
and the U.K. and by the internal tax laws of such countries. Accordingly,
non-U.S. Holders should consult their tax advisors in this regard.
HONG KONG TAXATION
The Sponsors have been advised by Hong Kong counsel that the following
summary accurately describes the Hong Kong tax consequences under existing law
to all Holders of Units of the Hong Kong Portfolio ('Hong Kong Trust'). This
discussion is for general purposes only and assumes that such Holder is not
carrying on a trade, profession or business in Hong Kong and has no profits
arising in or derived from Hong Kong in respect of the carrying on of such
trade, profession or business. Holders should consult their tax advisors as to
the Hong Kong tax consequences of ownership of the Units of the Hong Kong Trust
applicable to their particular circumstances.
Taxation of Dividends
Amounts in respect of dividends paid to Holders of Units of the Hong Kong
Trust are not taxable and therefore will not be subject to the deduction of any
withholding tax.
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Profits tax
A Holder of Units of the Hong Kong Trust (other than a person carrying on a
trade, profession or business in Hong Kong) will not be subject to profits tax
on any gain or profits made on the realization or other disposal of his units.
Hong Kong Estate Duty
Units of the Hong Kong Trust will not give rise to a liability to Hong Kong
estate duty.
* * *
The foregoing discussion addresses only the Hong Kong tax consequences to
Holders of Units in the Hong Kong Trust. For the U.S. tax consequences to U.S.
Holders, see Taxes. The taxation of non-U.S. Holders in their own countries of
residence as a result of their ownership, sale, exchange or other disposition of
Units in the Hong Kong Trust will be governed by the internal tax laws of the
countries of residence of such non-U.S. Holders. Accordingly, non-U.S. Holders
should consult their tax advisors in this regard.
RETIREMENT PLANS
This Series of Equity Income Fund may be 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. 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 such plan should review specific tax laws
related thereto and should consult their attorneys or tax advisers with respect
to the establishment and maintenance of any such plan. Such plans are offered by
brokerage firms, including the Sponsors 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 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 arrangement set up by an employer or union for the purchase of Units. 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 are 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
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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. An employer who has established
a pension or profit-sharing plan for employees may purchase Units for such a
plan.
PUBLIC SALE OF UNITS
PUBLIC OFFERING PRICE
The Public Offering Price of the Units is computed by dividing the
aggregate U.S. dollar value of the Securities (as determined by the Trustee
based on the offer side of the relevant exchange rate) and any cash held to
purchase Securities, by the number of Units outstanding and adding thereto the
applicable sales charge. A proportionate share of any cash held by a Portfolio
in the Capital Account not allocated to the purchase of specific Securities and
net income in the Income Account (described under Administration of the
Fund--Accounts and Distributions) on the date of delivery of the Units to the
purchaser is added to the Public Offering Price. The Public Offering Price on
the date of this Prospectus or on any subsequent date will vary from the Public
Offering Price on the business day prior to the date of this Prospectus (set
forth under the Investment Summary) in accordance with fluctuations in the
aggregate local currency value of the underlying Securities, changes in the
relevant foreign currency exchange rates and changes in applicable commissions,
stamp taxes, custodial fees, and other costs associated with foreign trading.
The sales charge consists of an Initial Sales Charge and a Deferred Sales
Charge. The Initial Sales Charge is computed by deducting the Deferred Sales
Charge ($17.50 per 1,000 Units) from the aggregate sales charge; thus on the
date of the Investment Summary, the maximum Initial Sales Charge is $10 per
1,000 Units or 1% of the Public Offering Price. The Initial Sales Charge is
deducted from the purchase price at the time of purchase. The Deferred Sales
Charge will initially be $17.50 per 1,000 Units but will be reduced each month
by one tenth; the Deferred Sales Charge will be paid through deductions of $1.75
per 1,000 Units per month commencing on the first Deferred Sales Charge Payment
Date as shown on page A-5. To the extent the entire Deferred Sales Charge has
not been so deducted at the time of repurchase or redemption of the Units, any
unpaid amount will be deducted from the proceeds or in calculating an in kind
distribution. For purchases of $50,000 or more, the Initial Sales Charge is
reduced on a graduated basis as shown below. Units purchased pursuant to the
Reinvestment Plan are subject only to any remaining Deferred Sales Charge
deductions (see Reinvestment Plan).
The following table sets forth the applicable percentages of sales charges,
which are reduced on a graduated scale for sales to any purchaser of at least
$50,000 and will be applied on whichever basis is more favorable to the
purchaser. To qualify for the reduced sales charge applicable to quantity
purchases, the dealer must confirm that the sale is to a single purchaser as
defined below or is purchased for its own account and not for distribution.
Sales charges are as follows:
INITIAL OFFERING PERIOD
<TABLE><CAPTION>
SALES CHARGE
(GROSS UNDERWRITING PROFIT)
------------------------------
AS PERCENT OF AS PERCENT OF
PUBLIC NET AMOUNT DOLLAR AMOUNT DEFERRED
AMOUNT PURCHASED OFFERING PRICE INVESTED PER 1,000 UNITS
- ----------------------------------------------------------------------- --------------- ------------- -----------------------
<S> <C> <C> <C>
Less than $50,000...................................................... 2.75% 2.778% $ 17.50
$50,000 - $99,999...................................................... 2.50 2.519 17.50
$100,000 - $249,999.................................................... 2.00 2.001 17.50
$250,000 or more....................................................... 1.75 1.750 17.50
</TABLE>
The above graduated sales charges will apply on all purchases on any one
day by the same purchaser of Units only in the amounts stated. For this purpose
purchases will not be aggregated with concurrent purchases of any other unit
trusts sponsored by the Sponsors other than Select Ten Portfolios as described
in the following paragraph. Units held in the name of the spouse of the
purchaser or in the name of a child of the purchaser under
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<PAGE>
21 years of age are deemed to be registered in the name of the purchaser. The
graduated sales charges are also applicable to a trustee or other fiduciary
purchasing securities for a single trust estate or single fiduciary account.
The applicable rate of sales charge in the table above will be determined
on the basis of the aggregate number of units of all Select Ten Portfolios
purchased by the same purchaser in the same day. To be eligible for this reduced
sales charge, the purchaser or the purchaser's securities dealer must notify the
Sponsors at the time of purchase that such purchase qualifies under this reduced
sales charge provision and supply sufficient information to permit confirmation
of qualification. Acceptance of the purchase order is subject to such
confirmation. This reduced sales charge provision may be amended or terminated
at any time without notice. The Sponsors also reserve the right to extend the
Rollover Notification Date stated in any prospectus.
Employees of certain of the Sponsors and their affiliates and non-employee
directors of Merrill Lynch & Co., Inc. may purchase Units subject only to the
Deferred Sales Charge. In addition, Holders of the Select Ten Portfolio Autumn
1993 International Series are entitled to purchase Units of the Fund subject
only to the Deferred Sales Charge by notifying the Sponsors of their intention
to exercise the Special Redemption, Liquidation and Investment in New Fund
option.
The value of the Securities is determined on each business day by the
Trustee at the last reported closing prices on the relevant securities exchange
at the Evaluation Time on the day the evaluation is made or, if there are no
reported sales or if closing sale prices are not reported or a Security is not
listed on a national securities exchange or if the principal market therefor
becomes other than on an exchange, taking into account the same factors referred
to under Redemption--Computation of Redemption Price per Unit, except that the
relevant exchange rate used for determining the value of Securities in the
foreign currency may include the cost of any forward contract to purchase the
relevant currency (Section 4.01). The term 'business day', as used herein and
under 'Redemption', shall exclude Saturdays, Sundays and the following holidays
as observed by the New York Stock Exchange, Inc.: New Year's Day, Washington's
Birthday, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving
and Christmas Day. In addition, for the United Kingdom Portfolio, 'business day'
shall exclude the following U.K. holidays: Easter Monday, May Day, Autumn Bank
Holiday, Summer Bank Holiday and Boxing Day; for the Hong Kong Portfolio,
'business day' shall exclude the following Hong Kong holidays: Lunar New Year's
Day and the following day, Ching Ming Festival, Easter Monday, Queen's Birthday
and the following Monday, Tuen Ng Festival, Summer Bank Holiday, Liberation Day,
Chinese Mid-Autumn Festival and the following day, Chung Yeung Festival and the
two weekdays following Christmas Day.
PUBLIC DISTRIBUTION
During the primary 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. The Sponsors
intend to qualify Units for sale in all states in the U.S. in which
qualification is deemed necessary through the Underwriting Account and by
dealers who are members of the National Association of Securities Dealers, Inc.
The Sponsors do not intend to qualify Units for sale in any foreign countries
and this Prospectus does not constitute an offer to sell Units in any country
where Units cannot lawfully be sold.
UNDERWRITERS' AND SPONSORS' PROFITS
Assuming no volume discounts, the Sponsors will receive a total maximum
sales charge per 1,000 Units of 2.75% of the Public Offering Price (2.778% of
the net amount invested). The Sponsors also realized a profit or loss on deposit
of the Securities in the Portfolios in the amount set forth under the Investment
Summary. This profit or loss is the difference between the cost of the
Securities to a Portfolio (which is based on the aggregate U. S. dollar value of
the Securities at the offer side value of the relevant exchange rate on the
Initial Date of Deposit) and the U.S. dollar purchase price of the Securities to
the Sponsors. On each subsequent deposit of Securities with respect to the sale
of additional Units to the public the Sponsors may realize a profit or loss. In
addition, the Sponsors or Underwriters may realize profits or sustain losses in
respect of Securities deposited in the Fund which were acquired by the Sponsors
or Underwriters from underwriting syndicates of which the Sponsors or
Underwriters were a member. During the primary offering period and thereafter to
the extent additional Units continue to be offered for sale to the public, the
Underwriting Account also may realize profits or sustain losses as a result of
fluctuations after the Initial Date of Deposit in the U.S. dollar aggregate
value of the Securities and
17
<PAGE>
hence in the Public Offering Price of the Units (see the Investment Summary).
Cash, if any, made available by buyers of Units to the Sponsors prior to the
settlement date for purchase of Units may be used in the Sponsors' businesses
subject to the limitations of Rule 15c3-3 under the Securities Exchange Act of
1934 and may be of benefit to the Sponsors.
Except as indicated under Portfolio, the Sponsors have not participated as
sole underwriters or managers or members of underwriting syndicates from which
syndicates the Securities in the Portfolio were acquired.
In maintaining a market for the Units (see Market for Units), the Sponsors
will also realize profits or sustain losses in the amount of any difference
between the prices at which they buy Units and the prices at which they resell
these Units (which includes the sales charge) or the prices at which they redeem
the Units (each based on the U.S. dollar aggregate value of the Securities at
the bid side value of the relevant exchange rate), as the case may be.
MARKET FOR UNITS
While the Sponsors are not obligated to do so, they intend to maintain a
secondary market for Units of this Series and continuously to offer to purchase
Units of this Series at prices, subject to change at any time, which will be
computed on the basis of the U.S. dollar aggregate value of the Securities,
taking into account the same factors referred to in determining the Redemption
Price per Unit (see Redemption). This secondary market provides Holders with a
fully liquid investment. They can cash in units at any time without a fee. The
Sponsors may discontinue purchases of Units of this Series at prices based on
the U.S dollar aggregate value of the Securities should the supply of Units
exceed demand or for other business reasons. The Sponsors, of course, do not in
any way guarantee the enforceability, marketability or price of any Securities
in the Portfolio or of the Units. During the primary public offering period or
thereafter, on a given day the price offered by the Sponsors for the purchase of
Units shall be an amount not less than the Redemption Price per Unit, based on
the aggregate U.S. dollar value of Securities in the Fund at the Evaluation Time
next following the time at which the Units are tendered for redemption (see
Redemption).
The Sponsors may redeem any Units they have purchased in the secondary
market if they determine that it is undesirable to continue to hold these Units
in their inventories. Factors which the Sponsors will consider in making this
determination will include the number of units of all series of all funds which
they hold in their inventories, the saleability of the units and their estimate
of the time required to sell the units and general market conditions. For a
description of certain consequences of any redemption for remaining Holders, see
Redemption.
A Holder who wishes to dispose of his Units should inquire of his bank or
broker as to current market prices in order to determine if there exist
over-the-counter prices in excess of the redemption price and the repurchase
price (see Redemption).
REDEMPTION
While it is anticipated that Units in most cases can be sold in the
over-the-counter market for an amount at least equal to the Redemption Price per
Unit (see Market for Units), Units may be redeemed at the office of the Trustee
set forth on the back cover of this Prospectus, on any business day, as defined
under Public Sale of Units--Public Offering Price, upon delivery of a request
for redemption, and payment of any relevant tax, without any other fee (Section
5.02). The London Stock Exchange and the Hong Kong Exchange are open for trading
on certain days which are U.S. holidays on which the Fund will not transact
business. The Securities will continue to trade on those days and thus the value
of the Portfolios may be significantly affected on days when the Holder cannot
sell or redeem his Units. Holders' signatures must be guaranteed by an eligible
guarantor institution or in some other manner acceptable to the Trustee. In
certain instances the Trustee may require additional documents including, but
not limited to, trust instruments, certificates of death, appointments as
executor or administrator or certificates of corporate authority.
On the seventh calendar day following the tender (or if the seventh
calendar day is not a business day on the first business day prior thereto), the
Holder will be entitled to receive the proceeds of the redemption in an amount
per Unit equal to the Redemption Price per Unit (see below) as determined as of
the Evaluation Time next following the tender of Units for redemption and
converted into U.S. dollars as of the Exchange Rate Pricing Time set forth under
the Investment Summary. The Trustee is authorized in its discretion, if the
Sponsors do not
18
<PAGE>
elect to repurchase any Units tendered for redemption or if the Sponsors tender
Units for redemption, to sell the Units in the over-the-counter market at prices
which will return to the Holder a net amount in cash equal to or in excess of
the Redemption Price per Unit for the Units (Section 5.02).
Securities may be sold from the Portfolio in order to make funds available
for redemption (Section 5.02) if sufficient funds are not otherwise available in
the Capital and Income Accounts (see Administration of the Fund--Accounts and
Distributions). The Securities to be sold will be selected by the Sponsors in
accordance with procedures specified in the Indenture in order to maintain, to
the extent practicable, the proportionate relationship among the number of
shares of each Security. Provision is made in the Indenture under which the
Sponsors may, but need not, specify minimum amounts in which blocks of
Securities are to be sold in order to obtain the best price for the Fund. These
minimum amounts may vary from time to time in accordance with market conditions.
Certain Holders tendering Units for redemption may request distribution in
kind from the Trustee in lieu of cash. Until the Rollover Notification Date a
Holder may request distribution in kind of an amount and value of Securities per
Unit equal to the Redemption Price per Unit as determined as of the Evaluation
Time next following the tender, provided that the tendering Holder is entitled
to receive at least the lesser of U.S.$500,000 in total value of each Security
in the Portfolio and 10% of the net asset value of the Portfolio (computed as of
the Evaluation Time next following tender for redemption) as part of his
distribution. The distribution in kind on redemption of Units will be held by a
distribution agent (the 'Distribution Agent') for the account of, and for
disposition in accordance with the instructions of, the tendering Holder. The
tendering Holder shall be entitled to receive whole shares of each of the
Securities comprising the Portfolio and cash from the Capital Account equal to
the fractional shares to which the tendering Holder is entitled less any
deferred sales charge payable. Any brokerage commissions as well as any transfer
and ongoing custodial fees on sales of the underlying Securities distributed in
connection with in-kind redemptions will be borne by the redeeming Holder. In
implementing these redemption procedures, the Trustee and Distribution Agent
shall make any adjustments necessary to reflect differences between the
Redemption Price of the Units and the value of the Securities distributed in
kind as of the date of tender. If funds in the Capital Account are insufficient
to cover the required cash distribution to the tendering Holder, the Trustee may
sell Securities according to the criteria discussed above. The in-kind
redemption option may be terminated by the Sponsors upon prior notice to the
Holders.
To the extent that Securities are redeemed in kind or sold, the size and
diversity of a Portfolio will be reduced but each remaining Unit will continue
to represent approximately the same proportional interest in each Security.
Sales will usually be required at a time when Securities would not otherwise be
sold and may result in lower prices than might otherwise be realized. The price
received upon redemption may be more or less than the amount paid by the Holder
depending on the value of the Securities in the Portfolio at the time of
redemption. In addition, because of the minimum amounts in which Securities are
required to be sold, the proceeds of sale may exceed the amount required at the
time to redeem Units; these excess proceeds will be distributed to Holders (see
Administration of the Fund--Accounts and Distributions).
The right of redemption may be suspended and payment postponed (1) for any
period during which the New York Stock Exchange, Inc. is closed other than for
customary weekend and holiday closings or (2) for any period during which, as
determined by the Securities and Exchange Commission ('SEC'), (i) trading on
that Exchange is restricted or (ii) an emergency exists as a result of which
disposal or evaluation of the Securities is not reasonably practicable or (3)
for any other periods which the SEC may by order permit (Section 5.02).
COMPUTATION OF REDEMPTION PRICE PER UNIT
Redemption Price per Unit is computed by the Trustee, converted into U.S.
dollars as of the Evaluation Time, on each June 30 and December 31 (or the last
business day prior thereto), on any business day as of the Evaluation Time next
following the tender of any Unit for redemption, and on any other business day
desired by the Trustee or the Sponsors, by adding (a) the U. S. dollar aggregate
value of the Securities in a Portfolio (computed on the basis of the bid side
value of the relevant exchange rate) (which is net of applicable commissions and
stamp taxes after any deduction for the monthly sales charge as determined by
the Trustee, (b) U.S. dollar equivalent (at the bid side value of the relevant
exchange rate) of cash on hand in the Portfolio (other than cash covering
contracts to purchase Securities or credited to a reserve account), (c) declared
but unpaid dividends on the Securities and (d) the aggregate value of all other
assets of the Fund; deducting therefrom the
19
<PAGE>
sum of (v) the U.S. dollar equivalent (at bid side value of the relevant
exchange rate) of taxes or other governmental charges against the Fund not
previously deducted, (w) accrued but unpaid expenses of the Fund and accrued
Deferred Sales Charges declared but not yet paid, (x) amounts payable for
reimbursement of Trustee advances, (y) the U.S. dollar equivalent (at bid side
value of the relevant exchange rate) of cash held for redemption of Units for
distribution to Holders of record as of a date prior to the evaluation and (z)
the aggregate value of all other liabilities of the Fund; and dividing the
result by the number of Units outstanding as of the date of computation (Section
5.01). After the initial offering period, the repurchase and cash redemption
prices will be reduced to reflect the cost to the Fund (estimated as shown on
page A-3) of liquidating Securities to meet the redemption.
The aggregate value of the Securities is determined in good faith by the
Trustee in the following manner: if the Securities are listed on a securities
exchange, this evaluation is generally based on the U.S. dollar equivalent (at
the relevant exchange rate) of closing sale prices on that exchange (unless the
Trustee deems these prices inappropriate as a basis for valuation) or, if there
is no closing sale price on that exchange or system, at the mean between the
closing bid and asked prices. If the Securities are not so listed or, if so
listed and the principal market therefor is other than on the exchange, the
evaluation shall generally be based on the U.S. dollar equivalent (at the
relevant exchange rate) of current bid price on the over-the-counter market
(unless the Trustee deems these prices inappropriate as a basis for evaluation).
If current bid prices are unavailable, the evaluation is generally determined
(a) on the basis of U.S. dollar equivalent (at the relevant exchange rate) of
current bid prices for comparable securities, (b) by appraising the value of the
Securities on the bid side of the market or (c) by any combination of the above.
The relevant exchange rate used for evaluations of the Securities will include
the cost of any forward foreign exchange contract in the relevant currency to
correspond to the requirement that the Trustee settle redemption requests in
U.S. dollars within seven days.
REINVESTMENT PLAN
Semi-annual Income Distributions on Units may be reinvested by
participating in the Fund's reinvestment plan (the 'Reinvestment Plan'). Holders
of Units held in 'street name' by their broker, dealer or financial institution
should contact their financial professional if they wish to participate in the
Reinvestment Plan.
Deposits of Additional Securities in connection with the Reinvestment Plan
will be made so as to maintain the proportionate relationship (subject to
adjustment under certain circumstances) among the number of shares of each
Security in the Fund at the time of such deposits (see Administration of the
Fund--Portfolio Supervision). In the event an issuer of a Security has a
shareholder dividend reinvestment plan, a stock purchase plan or a similar plan
under which its shareholders may automatically reinvest their dividends or
invest optional cash payments in additional shares of the issuer's common or
preferred stock without brokerage commission or service charge or otherwise on a
basis favorable to the shareholder in the opinion of the Sponsors, the Fund (as
a shareholder of such issuer) upon the direction of the Sponsors may participate
in such plans to the extent permitted under the Indenture given the other
restrictions on the purchase of Additional Securities even if such participation
results in a temporary imbalance of the proportionate relationship among the
Securities.
Purchases made pursuant to the Reinvestment Plan will be made on (or as
soon as possible after) the close of business on the Distribution Date, at the
net asset value per 1,000 Units, subject to any remaining deductions of Deferred
Sales Charge. (Reinvestment Units are not subject to the Initial Sales Charge.)
For example, Holders electing reinvestment at the time of the first Semi-annual
Income Distribution (February 1995) would be subject to a Deferred Sales Charge
of $12.25 on their Reinvestment Units (the full Deferred Sales Charge of $17.50
minus the $5.25 already deducted in December 1994, January 1995 and February,
1995). Holders electing to reinvest their second Semi-annual Income Distribution
(August 1995) would be subject to a Deferred Sales Charge of $1.75 on their
Reinvestment Units (the full Deferred Sales Charge of $17.50 minus a total of
$15.75 already deducted each month from December 1994 through August 1995).
Under the Reinvestment Plan the Fund will pay the distributions to the
brokers, dealers or financial institutions who are holders of record on the
books of the Depository Trust Company; in turn they will purchase for the Holder
Units of the Fund at the price and time indicated above, will add the Units to
the Holder's account, and will send the Holder an account statement reflecting
the reinvestment. These Units may be Units already held in inventory by the
Sponsors (see Market for Units) 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
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cash) with instructions to purchase additional Securities (see Description of
the Fund--The Portfolio). Each Holder's account will be credited with the number
of Units purchased with such Holder's reinvested distribution. Holders of Units
participating in the Reinvestment Plan will receive confirmation of their
reinvestments in their regular account statements or on a periodic basis.
The Sponsors reserve the right to amend, modify or terminate the
Reinvestment Plan at any time without prior notice.
SPECIAL REDEMPTION, LIQUIDATION AND INVESTMENT IN NEW PORTFOLIO
It is expected that a special redemption and liquidation will be made of
all Units of the Portfolio held by any Holder (a 'Rollover Holder') who
affirmatively notifies the Trustee in writing that he elects to participate by
the Rollover Notification Date specified on page A-5. It should also be noted
that Rollover Holders may realize taxable capital gains on the Special
Redemption and Liquidation but generally will not be entitled to a deduction for
certain capital losses and, due to the procedures for investing in the Autumn
1995 International Series, no cash would be distributed at that time to pay any
taxes (for the tax consequences of participation in the Special Redemption,
Liquidation and Investment in New Fund, see Taxes).
All Units of Rollover Holders will be redeemed in kind (see Redemption) on
the first day of the Special Redemption and Liquidation Period (as defined
herein under Investment Summary) and the underlying Securities will be
distributed to the Distribution Agent on behalf of the Rollover Holders (Section
5.03). During the Special Redemption and Liquidation Period (as described under
Investment Summary--Special Redemption, Liquidation and Investment in New
Portfolio), the Distribution Agent will be required to sell all of the
underlying Securities on behalf of Rollover Holders.
Rollover Holders may purchase units of the Autumn 1995 International
Series, if available, subject only to the Deferred Sales Charge.
Thus, if a Holder of Units so specifies by the Rollover Notification Date,
his Units will be redeemed in kind and the Securities disposed of over the
Special Redemption and Liquidation Period. As long as the Holder confirms his
interest in purchasing units of the Autumn 1995 International Series and units
are available, the proceeds of the sales (net of brokerage commissions, stamp
taxes, governmental charges and any other costs associated with foreign trading)
will be invested in units of that Portfolio of the Autumn 1995 International
Series at daily prices over the Special Redemption and Liquidation Period based
on the asset value per Autumn 1995 International Series unit plus the applicable
sales charge. It is expected that the terms of the Portfolios comprising the
Autumn 1995 International Series will be substantially the same as the terms of
the the Portfolios comprising this Series, and that a similar procedure for
redemption, liquidation and investment in a subsequent Series will be available
for each new Series approximately one year after the creation of that Series.
The Sponsors are under no obligation to create any new International Series,
however, and may modify the terms of the Special Redemption, Liquidation and
Investment in New Portfolio upon notice to Holders of Units at any time.
Depending on the volume of proceeds to be invested in the Autumn 1995
International Series through the Special Redemption, Liquidation and Investment
in New Portfolio and the volume of other orders for units in the Autumn 1995
International Series, the Sponsors may purchase large volumes of the securities
for the Autumn 1995 International Series 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 Special Redemption
and Liquidation Period. Depending on the volume of sales required, and the
prices of and demand for Securities, the Sponsors' sales may tend to depress the
market prices and the value of Units, and thus reduce the proceeds to be
credited to Rollover Holders for investment in the Autumn 1995 International
Series.
The Distribution Agent will engage the Sponsors as its agents to sell the
distributed Securities. Prior to the Special Redemption and Liquidation Period,
the Sponsors may begin to sell any relatively less liquid Securities from the
Portfolio. The Sponsors will then attempt to sell the remaining Securities as
quickly as is practicable during the Special Redemption and Liquidation 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
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Special Redemption and Liquidation 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
Special Redemption and Liquidation Period; for less liquid Securities, on each
of the first two days of the Special Redemption and Liquidation 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 Special Redemption and Liquidation
Period.
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, each terminating Select Ten Series (and
the Distribution Agent on behalf of Rollover Holders) can now sell securities to
the next Series if those securities continue to meet the Select Ten Strategy by
remaining among the ten highest dividend-yielding securities. The exemption will
enable each Series 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 each Series.
The Rollover Holders' proceeds will be invested in the Autumn 1995
International Series, if one is then being offered. The proceeds of redemption
available on each day will be used to buy new International Series units as the
proceeds become available.
The Sponsors intend to create Autumn 1995 International Series units as
quickly as possible, dependent upon the availability and reasonably favorable
price of the securities included in the portfolios, and it is intended that
Rollover Holders will be given first priority to purchase Autumn 1995
International Series units. There can be no assurance, however, as to the exact
timing of the creation of Autumn 1995 International Series units or the
aggregate number of Autumn 1995 International Series units which the Sponsors
will create. The Sponsors may, in their sole discretion, stop creating new units
(whether permanently or temporarily) at any time they choose, regardless of
whether all proceeds of the Special Redemption and Liquidation have been
invested on behalf of Rollover Holders. Cash which has not been invested on
behalf of the Rollover Holders in Autumn 1995 International Series units will be
distributed at the end of the Special Redemption and Liquidation 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 Autumn 1995
International Series may not be fully invested on the next business day.
Any Rollover Holder may thus be redeemed out of the Fund and become a
holder of an entirely different Portfolio with different securities. The
Rollover Holder's Units will be redeemed in kind and the distributed Securities
shall be sold during the Special Redemption and Liquidation Period. In
accordance with the Rollover Holders' offers to purchase Autumn 1995
International Series units, 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 Autumn 1995 International Series units, 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 growth and income potential only for a year, at which
point a new portfolio may or may not be chosen. It is contemplated that a
similar process of redemption, liquidation and investment in a new Portfolio
will be available for the Autumn 1995 International Series, and each subsequent
Select Ten series, approximately a year after the creation of that Series.
The Sponsors believe that the gradual redemption, liquidation and
subsequent investment procedures will help mitigate any negative market price
consequences stemming from the trading of large volumes of Securities and of the
underlying securities in the Autumn 1995 International Series 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 Holders
than might be obtained on any given day
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during the Special Redemption and Liquidation 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 Holders could then receive a less
favorable average unit price than if they bought all their units of the Autumn
1995 International Series 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.
In addition, during this period a Holder 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.
Holders who do not inform the Trustee that they wish to have their Units so
redeemed and liquidated ('Remaining Holders') will continue to hold Units of a
Portfolio as described in this Prospectus until a Portfolio is terminated or
until the Mandatory Termination Date listed in the Investment Summary, whichever
occurs first. These Remaining Holders will not realize capital gains or losses
due to the Special Redemption and Liquidation, and will not be charged any
additional sales charge. If a large percentage of Holders become Rollover
Holders, 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
Special Redemption, Liquidation and Investment in New Portfolio. A Portfolio
might also reduce to the Minimum Value of Portfolio listed on page A-5 because
of the lesser number of Units in the Fund, and possibly also due to a value
reduction, however temporary, in Units caused by the Sponsors' sales of
Securities (see Investment Summary-- Special Redemption, Liquidation and
Investment in New Portfolio); if so, the Sponsors could then choose to liquidate
the Fund without the consent of the remaining Holders. See Fund Structure. The
Securities remaining in a Portfolio after the Special Redemption and Liquidation
Period will be sold by the Sponsors as quickly as possible without, in their
judgment, materially adversely affecting the market price of the Securities.
The Sponsors may for any reason, in their sole discretion, decide not to
sponsor a Autumn 1995 International Series or any subsequent Series, without
penalty or incurring liability to any Holder. If the Sponsors so decide, the
Sponsors shall notify the Holders before the Special Redemption and Liquidation
Period would have commenced. All Holders will then be Remaining Holders, with
rights to ordinary redemption as before (see Redemption). The Sponsors may
modify the terms of the Autumn 1995 International Series or any subsequent
Series. The Sponsors may also modify the terms of the Special Redemption,
Liquidation and Investment in New Portfolio upon notice to the Holders prior to
the Rollover Notification Date specified on page A-5, and may also extend the
Rollover Notification Date.
Investors should be aware that the staff of the Division of Investment
Management of the SEC is of the view that the rollover option described in this
Prospectus 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 option, but no assurance
can be given that the SEC will concur with the Sponsors' position and additional
regulatory approvals may be required.
TERMINATION
The Indentures will terminate upon the sale, or other disposition of the
last Security held thereunder but in no event are they to continue beyond the
Mandatory Termination Date set forth under the Investment Summary. The
Indentures may be terminated by the Sponsors if the value of the relevant
Portfolio is less than the relevant Minimum Value of Portfolio set forth under
the Investment Summary, and may be terminated at any time by Holders of 51% of
the Units (Sections 8.01(g) and 9.01). The Trustee will deliver written notice
of any termination to each Holder within a reasonable period of time prior to
the termination. Within a reasonable period of time after the termination, the
Trustee must sell all of the Securities then held and distribute to each Holder,
after deductions for accrued but unpaid fees, taxes and governmental and other
charges, the Holder's interest in the Income and Capital Accounts (Section
9.01). This distribution will normally be made by mailing a check in the amount
of each Holder's interest in these accounts to the address of the Holder
appearing on the record books of the Trustee.
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EXPENSES AND CHARGES
INITIAL EXPENSES
All expenses incurred in establishing the Fund, including the cost of the
initial preparation and printing of documents relating to the Fund and any
foreign trading costs, including commissions, custodial fees and stamp taxes,
the initial fees and expenses of the Trustee, legal expenses, advertising and
selling expenses and any other out-of-pocket expenses, will be paid by the
Underwriting Account at no charge to the Fund.
FEES
An estimate of the total annual expenses of each Portfolio is set forth
under the Investment Summary. The Portfolio Supervision fee is based on the
average daily number of Units outstanding. (Section 3.04). This Fee, which is
not to exceed the maximum amount set forth under the Investment Summary, may
exceed the actual costs of providing portfolio supervisory services for these
Portfolios, but at no time will the total amount they receive for portfolio
supervisory services rendered to all series of Equity Income Fund in any
calendar year exceed the aggregate cost to them of supplying these services in
that year (Section 7.06). In addition, the Sponsors may also be reimbursed for
bookkeeping or other administrative services provided to the Portfolios in
amounts not exceeding their costs of providing these services (Sections 3.04 and
7.06). The Trustee receives for its services as Trustee and for reimbursement of
expenses incurred on behalf of a Portfolio, payable in monthly installments, the
amount per 1,000 Units set forth under Investment Summary, which includes the
estimated Sponsors' Portfolio Supervision Fee, estimated reimbursable
bookkeeping or other administrative expenses paid to the Sponsors, certain
evaluation, auditing, printing and mailing expenses and certain other custodial
fees. The Trustee also receives benefits to the extent that it holds funds on
deposit in the various non-interest bearing accounts created under the
Indentures. The foregoing fees may be adjusted for inflation in accordance with
the terms of the Indentures without approval of Holders (Sections 4.02, 7.06 and
8.05).
OTHER CHARGES
Other charges which may be incurred by a Portfolio include: (a) fees of the
Trustee for extraordinary services (Section 8.05), (b) certain extraordinary
expenses of the Trustee (including legal and auditing expenses) and of counsel
designated by the Sponsors (Sections 3.04, 3.10, 8.01(e), 8.03 and 8.05), (c)
various governmental charges (Sections 3.03 and 8.01 (h)), (d) expenses and
costs of action taken to protect the Portfolio and the rights and interests of
Holders (Sections 7.06 and 8.01(d)), (e) indemnification of the Trustee for any
losses, liabilities and expenses incurred without gross negligence, bad faith or
wilful misconduct on its part (Section 8.05), (f) indemnification of the
Sponsors for any losses, liabilities and expenses incurred without gross
negligence, bad faith or wilful misconduct (Section 7.05(b)) and (g)
expenditures incurred in contacting Holders upon termination of the Portfolio
(Section 9.02). The amounts of these charges and fees are secured by a lien on
the Portfolio and, if the balances in the Income and Capital Accounts (see
below) are insufficient, the Trustee has the power to sell Securities to pay
these amounts (Section 8.05).
ADMINISTRATION OF THE FUND
RECORDS
The Trustee keeps a register of the names, addresses and holdings of all
Holders. The Trustee also keeps records of transactions of the Portfolio,
including a current list of the Securities and a copy of the Indenture, which
records are available to Holders for inspection at the office of the Trustee at
reasonable times during business hours (Sections 8.02 and 8.04).
ACCOUNTS AND DISTRIBUTIONS
Dividends payable to a Portfolio are credited by the Trustee to an Income
Account (after conversion into U.S. dollars at an estimate of the exchange rate
to be applicable upon receipt of the dividends), as of the date on which the
Fund receives the dividends. Other receipts, including amounts received upon the
sale of rights pursuant to Section 3.08 of the Indentures, are credited to a
Capital Account (after conversion into U.S. dollars at the applicable rates)
(Sections 3.01 and 3.02). The Semi-annual Income Distribution for each Holder as
of each
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Record Day will be made on the following Distribution Day or shortly thereafter
and shall consist of an amount substantially equal to the Holder's pro rata
share of the distributable cash balance in the Income Account after deducting
amounts required to satisfy estimated expenses computed as of the close of
business on the preceding Record Day and after any adjustment necessary to
reflect changes in currency cyclical rates. It is anticipated that the deferred
sales charge will be collected from the Capital Account and that amounts in the
Capital Account will be sufficient to cover the cost of the deferred sales
charge. Distributions of amounts necessary to pay the deferred portion of the
sales charge will be made to an account maintained by the Trustee for purposes
of satisfying Holders' deferred sales charge obligations. Although the Sponsors
have the right to collect the deferred sales charge monthly, in order to keep
Holders of Units as fully invested as possible, it is anticipated that no
Securities will be sold to pay the deferred sales charge to the Sponsors until
after the Rollover Notification Date set forth on page A-5. The amount of the
Semi-annual Income Distribution will change with fluctuations in the relevant
dividend rates and in the applicable currency exchanges rates as Securities are
sold or as substitute Securities are purchased.
Proceeds received from the disposition of any of the Securities which are
not used to pay the deferred portion of the sales charge or for redemption of
Units will be held in the Capital Account to be distributed on the final
Distribution Day or following liquidation of the Portfolio. The first
distribution for persons who purchase Units between a Record Day and a
Distribution Day will be made on the second Distribution Day following their
purchase of Units.
A Reserve Account may be created by the Trustee by withdrawing from the
Income or Capital Accounts, from time to time, those amounts as it deems
requisite to establish a reserve for any taxes or other governmental charges
that may be payable out of the Portfolio (Section 3.03). Funds held by the
Trustee in the various accounts created under the Indentures do not bear
interest (Section 8.01).
PORTFOLIO SUPERVISION
Each Portfolio is a unit investment trust which normally follows a buy and
hold investment strategy and is not actively managed. Traditional methods of
investment management for a managed fund (such as a mutual fund) typically
involve frequent changes in a portfolio of securities on the basis of economic,
financial and market analyses. The Portfolios of this Series, however, will not
be actively managed and therefore 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 the Holders of the Units to do so. The Sponsors may also direct the
disposition of Securities upon default in payment of amounts due on any of the
Securities, institution of certain legal proceedings, default under certain
documents materially and adversely affecting future declaration or payment of
amounts due, or decline in price or the occurrence of other market or credit
factors that in the opinion of the Sponsors would make the retention of these
Securities detrimental to the interest of the Holders (Section 3.08). However,
given the investment philosophy of the Fund, the Sponsors are not likely to sell
Securities for any of these reasons; and even though the yield on certain
Securities may have changed subsequent to the Initial Date of Deposit and even
though a stock may no longer be among the ten highest dividend yielding stocks
in the relevant Index or a component of that index the Portfolio may continue to
hold the Securities and may continue to purchase the Securities in connection
with the issuance of Additional Units or the purchase of Additional Securities.
The Indentures authorize the Sponsors to increase the size and number of
Units of a Portfolio by the deposit of Additional Securities, contracts to
purchase Additional Securities or cash or a letter of credit with instructions
to purchase Additional Securities in exchange for the corresponding number of
additional Units during the 90-day period subsequent to the Initial Date of
Deposit, provided that the original proportionate relationship among the number
of shares of each Security established on the Initial Date of Deposit (the
'Original Proportionate Relationship') is maintained to the extent practicable.
(Deposits of Additional Securities subsequent to the 90-day period following the
Initial Date of Deposit must replicate exactly the proportionate relationship
among the share amounts of Securities comprising a Portfolio at the time of such
deposits.)
With respect to deposits of Additional Securities (or cash or a letter of
credit with instructions to purchase Additional Securities), in connection with
creating additional Units during the 90-day period following the Initial
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Date of Deposit, the Sponsors may specify the minimum numbers in which
Additional Securities will be deposited or purchased. If a deposit is not
sufficient to acquire minimum amounts of each Security, Additional Securities
may be acquired in the order of the Security most under-represented immediately
before the deposit when compared to the Original Proportionate Relationship. If
Securities of an issue originally deposited are unavailable at the time of
subsequent deposit, or cannot be purchased at reasonable prices or their
purchase is prohibited or restricted by law, regulation or policies applicable
to the Fund or the Sponsors, the Sponsors may (1) deposit cash or a letter of
credit with instructions to purchase the Security when it becomes available
(provided that it becomes available within 110 days after the Initial Date of
Deposit) or (2) deposit (or instruct the Trustee to purchase) Securities of one
or more other issues originally deposited. Any funds held to acquire Additional
Securities which have not been used to purchase Securities at the end of the
90-day period beginning with the Initial Date of Deposit, shall be used to
purchase Securities as described above or shall be distributed to Holders
together with the attributable sales charge.
Voting rights with respect to the Securities will be exercised by the
Trustees in accordance with directions given by the Sponsors.
REPORTS TO HOLDERS
With any distribution, the Trustee will furnish Holders with a statement of
the amounts of income and the amounts of other receipts, if any, which are being
distributed, expressed in each case as a dollar amount per Unit. Following the
termination of the Fund, the Trustee will furnish to each person who at any time
was a Holder of record, a statement (i) summarizing transactions in the Income
and Capital Accounts, (ii) identifying Securities sold and purchased and listing
Securities held and the number of Units outstanding at termination, (iii)
stating the Redemption Price per 1,000 Units based upon the computation thereof
made at termination and (iv) specifying the amounts distributed from the Income
and Capital Accounts (Section 3.07). The accounts of the Fund may be audited by
independent accountants designated by the Sponsor and any report of the
accountants shall be furnished by the Trustee to Holders upon request (Section
8.01(e)).
UNCERTIFICATED UNITS
All Holders are required to hold their Units in uncertificated form and in
'street name' by their broker, dealer or financial institution at the Depository
Trust Company ('DTC'). Units are transferable between accounts of brokers,
dealers or financial institutions which are members of DTC.
AMENDMENT
The Sponsors and Trustee may amend the Indentures, without the consent of
the Holders, (a) to cure any ambiguity or to correct or supplement any provision
thereof which may be defective or inconsistent, (b) to change any provision
thereof as may be required by the SEC or any successor governmental agency or
(c) to make any other provisions which do not materially adversely affect the
interest of the Holders (as determined in good faith by the Sponsors). The
Indentures may also be amended in any respect by the Sponsors and the Trustee,
or any of the provisions thereof may be waived, with the consent of the Holders
of 51% of the Units, provided that none of these amendments or waivers will
reduce the interest in a Portfolio of any Holder without the consent of the
Holder or reduce the percentage of Units required to consent to any of these
amendments or waivers without the consent of all Holders (Section 10.01).
RESIGNATION, REMOVAL AND LIMITATIONS ON LIABILITY
TRUSTEE
A Trustee or any successor may resign upon notice to the Sponsors. A
Trustee may be removed upon the direction of the Holders of 51% of the Units at
any time or by the Sponsors without the consent of any of the Holders if the
Trustee becomes incapable of acting or becomes bankrupt or its affairs are taken
over by public authorities or if for any reasons the Sponsors determine in good
faith that the replacement of the Trustee is in the best interest of the
Holders. The resignation or removal shall become effective upon the acceptance
of appointment by the successor which may, in the case of a resigning or removed
Co-Trustee, be one or more of the remaining Co-Trustees. In case of resignation
or removal, the Sponsors are to use their best efforts to appoint a
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successor promptly and if upon resignation of the Trustee no successor has
accepted appointment within thirty days after notification, the Trustee may
apply to a court of competent jurisdiction for the appointment of a successor
(Section 8.06). The Trustee shall be under no liability for any action taken in
good faith in reliance on prima facie properly executed documents or for the
disposition of monies or Securities under the Indentures. This provision,
however, shall not protect the Trustee in cases of wilful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations and duties. In
the event of the failure of the Sponsors to act, the Trustee may act under the
Indenture and shall not be liable for any of these actions taken in good faith.
The Trustee shall not be personally liable for any taxes or other governmental
charges imposed upon or in respect of the Securities or upon the interest
thereon. In addition, the Indenture contains other customary provisions limiting
the liability of the Trustee (Sections 8.01 and 8.05).
SPONSORS
Any Sponsor may resign if the remaining Sponsor maintains a net worth of
$2,000,000 and is agreeable to the resignation (Section 7.04). A new Sponsor may
be appointed by the remaining Sponsor and the Trustee to assume the duties of
the resigning Sponsor. If there is only one Sponsor and it fails to perform its
duties or becomes incapable of acting or becomes bankrupt or its affairs are
taken over by public authorities, then the Trustee may (a) appoint a successor
Sponsor at rates of compensation deemed by the Trustee to be reasonable and as
may not exceed amounts prescribed by the SEC, or (b) terminate the Indenture and
liquidate the Fund or (c) continue to act as Trustee without terminating the
Indenture (Section 8.01(e)). The Agent for the Sponsors has been appointed by
the other Sponsors as agent for purposes of taking action under the Indenture
(Section 7.01). If the Sponsors are unable to agree with respect to action to be
taken jointly by them under the Indenture and they cannot agree as to which
Sponsors shall continue to act as Sponsors, then Merrill Lynch, Pierce, Fenner &
Smith Incorporated shall continue to act as sole Sponsor (Section 7.02(b)). If
one of the Sponsors fails to perform its duties or becomes incapable of acting
or becomes bankrupt or its affairs are taken over by public authorities, then
that Sponsor is automatically discharged and the other Sponsor shall act as sole
Sponsor (Section 7.02(b)). The Sponsors shall be under no liability to the Fund
or to the Holders for taking any action or for refraining from taking any action
in good faith or for errors in judgment and shall not be liable or responsible
in any way for depreciation or loss incurred by reason of the sale of any
Security. This provision, however, shall not protect the Sponsors in cases of
wilful misfeasance, bad faith, gross negligence or reckless disregard of their
obligations and duties (Section 7.05). The Sponsors and their successors are
jointly and severally liable under the Indenture. A Sponsor may transfer all or
substantially all of its assets to a corporation or partnership which carries on
its business and duly assumes all of its obligations under the Indenture and in
that event it shall be relieved of all further liability under the Indenture
(Section 7.03).
MISCELLANEOUS
TRUSTEE
The Trustee and its address are named on the back cover page of this
Prospectus. The Trustee is subject to supervision by the Federal Deposit
Insurance Corporation, the Board of Governors of the Federal Reserve System and
either the Comptroller of the Currency or state banking authorities.
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 Statements of Condition, including the Portfolios of the Fund, included
herein, have been audited by Deloitte & Touche LLP, independent accountants, as
stated in their opinion appearing herein and have been so included in reliance
upon that opinion given on the authority of that firm as experts in accounting
and auditing.
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SPONSORS
Each Sponsor is a Delaware corporation and is engaged in the underwriting,
securities and commodities brokerage business and is a member of the New York
Stock Exchange, Inc., other major securities exchanges and commodity exchanges,
and the National Association of Securities Dealers, Inc. Merrill Lynch, Pierce,
Fenner & Smith Incorporated and Merrill Lynch Asset Management, a Delaware
corporation, each of which is a subsidiary of Merrill Lynch & Co., Inc., are
engaged in the investment advisory business. Smith Barney Inc., an investment
banking and securities broker-dealer firm, is an indirect wholly-owned
subsidiary of The Travelers Inc. PaineWebber Incorporated is engaged in the
investment advisory business and is a wholly-owned subsidiary of PaineWebber
Group Inc. Prudential Securities Incorporated, a wholly-owned subsidiary of
Prudential Securities Group Inc. and an indirectly wholly-owned subsidiary of
the Prudential Insurance Company of America, is engaged in the investment
advisory business. Dean Witter Reynolds Inc., a principal operating subsidiary
of Dean Witter, Discover & Co., is engaged in the investment advisory business.
Each Sponsor, or one of its predecessor corporations, has acted as Sponsor of a
number of series of unit investment trusts. Each Sponsor has acted as principal
underwriter and managing underwriter of other investment companies. The
Sponsors, in addition to participating as members of various selling groups or
as agents of other investment companies, execute orders on behalf of investment
companies for the purchase and sale of securities of these companies and sell
securities to these companies in their capacities as brokers or dealers in
securities.
Each Sponsor (or a predecessor) has acted as Sponsor of various series of
Defined Asset Funds. A subsidiary of Merrill Lynch, Pierce, Fenner & Smith
Incorporated succeeded in 1970 to the business of Goodbody & Co., which had been
a co-Sponsor of Defined Asset Funds since 1964. That subsidiary resigned as
Sponsor of each of the Goodbody series in 1971. Merrill Lynch, Pierce, Fenner &
Smith Incorporated has been co-Sponsor and the Agent for the Sponsors of each
series of Defined Asset Funds created since 1971. Shearson Lehman Brothers Inc.
(Shearson) and certain of its predecessors were underwriters beginning in 1962
and co-Sponsors from 1965 to 1967 and from 1980 to 1993 of various Defined Asset
Funds. As a result of the acquisition of certain of Shearson's assets by Smith
Barney, Harris Upham & Co. Incorporated and Primerica Corporation (now The
Travelers Inc.), Smith Barney Inc. now serves as co-Sponsor of various Defined
Asset Funds. PaineWebber Incorporated and its predecessor have co-Sponsored
certain Defined Asset Funds since 1983. Prudential Securities Incorporated and
its predecessors have been underwriters of Defined Asset Funds since 1961 and
co-Sponsors since 1964, in which year its predecessor became successor
co-Sponsor to the original Sponsor. Dean Witter Reynolds Inc. and its
predecessors have been underwriters of various Defined Asset Funds since 1964
and co-Sponsors since 1974.
The Sponsors have maintained secondary markets for Defined Asset Funds for
over 20 years. For decades informed investors have purchased unit investment
trusts for dependability and professional selection of investments. Defined
Asset Funds offers an array of 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 a nest egg for
retirement, or attractive, regular current income consistent with relative
protection of capital. There are Defined Funds to meet the needs of just about
any investor. Unit investment trusts are particularly suited for the many
investors who prefer to seek long-term profits by purchasing sound investments
and holding them, rather than through active trading. Few individuals have the
knowledge, resources or capital to buy and hold a diversified portfolio on their
own; it would generally take a considerable sum of money to obtain the breadth
and diversity offered by Defined Funds. Sometimes it takes a combination of
Defined Funds to plan for an investor's objectives.
Defined Asset Funds offers a variety of fund types. The tax exemption of
municipal securities, which makes them attractive to high-bracket taxpayers, is
offered by Defined Municipal Investment Trust Funds. Municipal Defined Funds
offer a simple and convenient way for investors to earn monthly income free from
regular Federal income tax. Defined Municipal Investment trust funds have
provided investors with tax-free income for more than 30 years. Defined
Corporate Income Funds, with higher current returns than municipal or government
funds, are suitable for Individual Retirement Accounts and other tax-advantaged
accounts and provide monthly income. Defined Government Securities Income Funds
provide a way to participate in markets for U.S. government securities while
earning an attractive current return. Defined International Bond Funds, invested
in bonds payable in foreign currencies, offer the potential to profit from
changes in currency values and possibly from interest rates higher than paid on
comparable US bonds, but investors incur a higher risk for these potentially
greater returns. Historically, stocks have offered growth of capital, and thus
some protection against
28
<PAGE>
inflation, over the long term. Defined Equity Income Funds offer participation
in the stock market, providing current income as well as the possibility of
capital appreciation. The S&P Index Trusts offer a convenient and inexpensive
way to participate in broad market movements. Concept Series seek to capitalize
on selected anticipated economic, political or business trends. Utility Stock
Series, consisting of stocks of issuers with established reputations for regular
cash dividends, seek to benefit from dividend increases. Select Ten Portfolios
seek total return by investing for one year in the ten highest yielding stocks
on a designated stock index.
One of the most important investment decisions an investor faces may be how
to allocate his 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
current income, as well as growth potential, offering some protection against
inflation.
29
<PAGE>
The following chart shows the average annual compounded rate of return of
selected asset classes over the 10-year and 20-year periods ending December 31,
1993, compared to the rate of inflation over the same periods. Of course, this
chart represents past performance of these investment categories and there is no
guarantee of future results, either of these categories or of any Defined Fund.
Defined Funds also have sales charges and expenses which are not reflected in
the chart.
Stocks (S&P 500)
20 yr 12.76%
10 yr 14.94%
Small-company stocks
20 yr 18.82%
10 yr 9.96%
Long-term corporate bonds
20 yr 10.16%
10 yr 14.00%
U.S. Treasury bills (short-term)
20 yr 7.49%
10 yr 6.35%
Consumer Price Index
20 yr 5.92%
10 yr 3.73%
0 2 4 6 8 10
12 14 16 18 20%
Source: Ibbotson Associates. Used with permission.
All rights reserved.
Instead of having to select individual securities on their own, purchasers
of Defined Funds benefit from the expertise of Defined Asset Funds' experienced
buyers and research analysts. In addition, they gain the advantage of
diversification by investing in units of a Defined Fund holding securities of
several different issuers. Such diversification can reduce risk, but does not
eliminate it. While the portfolio of a managed fund, such as a mutual fund,
continually changes, defined bond funds offer a defined portfolio and a schedule
of income distributions identified in the prospectus. Investors know, generally,
when they buy, the issuers, maturities, call dates and ratings of the securities
in the portfolio. Of course, the portfolio may change somewhat over time as
additional securities are deposited, as securities mature or are called or
redeemed or as they are sold to meet redemptions and in certain other limited
circumstances. Investors also know at the time of purchase their estimated
income and current and long-term returns, subject to credit and market risks and
to changes in the portfolio or fund expenses.
Performance Information-- Information on the performance of the Portfolios
in 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 and reports to current or prospective
Holders. Performance of individual Select Ten Portfolios may also be shown along
with performance of the other Select Ten Portfolios for comparable (though not
necessarily identical) periods and on a combined bassis. 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 may not be indicative of future results. The Portfolios
are not actively managed. Unit price and return fluctuate with the value of the
common stocks in the portfolio, so there may be a gain or loss when units are
sold.
Portfolio performance may be compared to the performance on the same basis
of the Dow Jones Industrial Average, 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
30
<PAGE>
Magazine or Fortune Magazine. As with other performance data, performance
comparisons should not be considered representative of a Portfolio's relative
performance for any future period.
Information on the performance of the 10 highest yielding stocks in the FT
Index and the Hang Seng Index, respectively, contained in this Prospectus, as
further updated, may also be included from time to time in such material.
EXCHANGE OPTION
ELECTION
Holders may elect to exchange any or all of their Units of this Series for
units of one or more Select Ten Portfolios of Equity Income Fund. Holders of
other series of Funds listed in the table set forth below (the 'Exchange
Funds'), which normally are sold at prices which include the sales charge
indicated in the table may elect to exchange any or all of their units of those
Series for Units of this Series. Certain series of the Funds listed have lower
maximum applicable sales charges than those stated in the table; also the rates
of sales charges may be changed from time to time. No series with a maximum
applicable sales charge of less than 3.50% of the public offering price is
eligible to be exchanged under the Exchange Option, with the following
exceptions: (1) Freddie Mac Series may be acquired by exchange during the
initial offering period from any of the Exchange Funds listed in the table and
(2) Units of this Fund may be acquired at the exchange fee listed in the table
by holders of any other Select Ten Portfolios of Equity Income Fund which units
normally have an aggregate sales charge of 2.75%. Units of the Exchange Funds
may be acquired at prices which include the reduced sales charge for Exchange
Fund units listed in the table, subject, however, to these important
limitations:
First, there must be a secondary market maintained by the Sponsors in
units of the series being exchanged and a primary or secondary market in
units of the series being acquired and there must be units of the
applicable Exchange Fund lawfully available for sale in the state in which
the Holder is resident. There is no legal obligation on the part of the
Sponsors to maintain a market for any units or to maintain the legal
qualification for sale of any of these units in any state or states.
Therefore, there is no assurance that a market for units will in fact exist
or that any units will be lawfully available for sale on any given date at
which a Holder wishes to sell his Units of this Series and thus there is no
assurance that the Exchange Option will be available to any Holder.
Second, when units subject to a deferred sales charge are exchanged for
units subject to a front-end sales charge, the sales charge will be the
greater of (a) the reduced sales charge set forth in the table below or (b)
the difference between sales charges paid with respect to the units being
exchanged and the regular sales charge for the quantity of units being
acquired, determined as of the date of the exchange. When units held for at
least eight months are exchanged for units of a fund with a deferred sales
charge, the exchange fee of $15 per 1,000 Units will be collected from the
proceeds of the exchange and the units acquired will be subject to any
continuing deferred sales charge.
Third, exchanges will be affected in whole units only. If the proceeds
from the Units being surrendered are less than the cost of a whole number
of units being acquired, excess cash insufficient to purchase an additional
whole unit will be returned to the exchanging Holder.
Fourth, the Sponsors reserve the right to modify, suspend or terminate
the Exchange Option at any time without further notice to Holders. In the
event the Exchange Option is not available to a Holder at the time he
wishes to exercise it, the Holder will be immediately notified and no
action will be taken with respect to his Units without further instruction
from the Holder.
PROCEDURES
To exercise the Exchange Option, a Holder should notify one of the Sponsors
of his desire to use the proceeds from the sale of his Units of this Series to
purchase units of one or more of the Exchange Funds. If units of the applicable
outstanding series of the Exchange Fund are at that time available for sale, the
Holder may select the series or group of series for which he desires his Units
to be exchanged. Of course, the Holder will be provided with a current
prospectus or prospectuses relating to each series in which he indicates
interest. The exchange transaction will operate in a manner essentially
identical to any secondary market transaction, i.e., Units will be repurchased
at a price equal to the aggregate bid side evaluation per Unit of the Securities
in the Portfolio plus
31
<PAGE>
accrued interest. Units of the Exchange Fund will be sold to the Holder at a
price equal to the bid side evaluation per 1,000 units of the underlying
securities in the Portfolio plus interest plus the applicable sales charge
listed in the table below. Units of The Equity Income Fund are sold, and will be
repurchased, at a price normally based on the closing sale prices on the New
York Stock Exchange, Inc. of the underlying securities in the Portfolio. The
maximum applicable sales charges for units of the Exchange Funds are also listed
in the table. Excess proceeds not used to acquire whole Exchange Fund units will
be paid to the exchanging Holder.
THE EXCHANGE FUNDS
The current return from taxable fixed income securities is normally higher
than that available from tax exempt fixed income securities. Certain of the
Exchange Funds do not provide for periodic payments of interest and are best
suited for purchase by IRA's, Keogh plans, pension funds or other tax-deferred
retirement plans. Consequently, some of the Exchange Funds may be inappropriate
investments for some Holders and therefore may be inappropriate exchanges for
Units of this Series. The table below indicates certain characteristics of each
of the Exchange Funds which a Holder should consider in determining whether each
Exchange Fund would be an appropriate investment vehicle and an appropriate
exchange for Units of this Series.
TAX CONSEQUENCES
An exchange of Units pursuant to the Exchange Option for units of a series
of another Fund should constitute a 'taxable event' under the Code, requiring a
Holder to recognize a tax gain or loss, subject to the following limitation. The
Internal Revenue Service may seek to disallow a loss (or a pro rata portion
thereof) on an exchange of Units if the units received by a Holder in connection
with such an exchange represent securities that are not materially different
from the securities that his previous units represented (e.g., both Funds
contain securities issued by the same obligor that have the same material
terms). Holders are urged to consult their own tax advisers as to the tax
consequences to them of exchanging units in particular cases.
EXAMPLE
Assume that a Holder, who has three units of a fund with a 5.50% sales
charge and a current price (offering side evaluation plus accrued interest) of
$1,100 per unit, sells his units and exchanges the proceeds for units of a
series of an Exchange Fund with a current price of $950 per unit and the same
sales charge. The proceeds from the Holder's units will aggregate $3,300. Since
only whole units of an Exchange Fund may be purchased under the Exchange Option,
the Holder would be able to acquire three units in the Exchange Fund for a total
cost of $2,895 ($2,850 for units and $45 for the $15 per unit sales charge) and
would receive $405 in cash. Were the Holder to acquire the same number of units
at the same time in the regular secondary market maintained by the Sponsors, the
price would be $3,006.75 ($2,850 for the units and $156.75 for the 5.50% sales
charge).
32
<PAGE>
<TABLE><CAPTION>
REDUCED
MAXIMUM SALES CHARGE
NAME OF APPLICABLE FOR SECONDARY INVESTMENT
EXCHANGE FUND SALES CHARGE* MARKET** CHARACTERISTICS
- --------------------------------------- --------------- ---------------------- --------------------------------------------------
<S> <C> <C> <C>
DEFINED ASSET FUNDS--EQUITY INCOME FUND
Utility Common Stock Series 4.50% $15 per 1,000 units*** dividends, taxable income, underlying securities
are common stocks of public utilities
Concept Series 4.00% $15 per 100 units underlying securities constitute a professionally
selected portfolio of common stocks consistent
with an investment idea or concept
Select Ten Portfolios 2.75% $17.50 per 1,000 units underlying securities represent 10 highest
yielding stocks in a specified securities index as
of date of creation of Fund
DEFINED ASSET FUNDS-- GOVERNMENT
SECURITIES INCOME FUND
GNMA Series (other than those 4.25% $15 per unit long-term, fixed rate, taxable income, underlying
below) securities backed by the full faith and credit of
the United States
GNMA Series E or other GNMA Series 4.25% $15 per 1,000 units long-term, fixed rate, taxable income, underlying
having units with an initial face securities backed by the full faith and credit of
value of $1.00 the United States, appropriate for IRA's or
tax-deferred retirement plans
Freddie Mac Series 3.50% $15 per 1,000 units intermediate term, fixed rate, taxable income,
underlying securities are backed by Federal Home
Loan Mortgage Corporation but not by U.S.
Government.
DEFINED ASSET FUNDS-- MUNICIPAL INCOME
FUND
Insured Discount Series 5.50%+ $15 per unit long-term, fixed rate, insured, tax-exempt income,
taxable capital gains
DEFINED ASSET FUNDS-- CORPORATE INCOME
FUND
Monthly Payment Series 5.50% $15 per unit long-term, fixed rate, taxable income
Intermediate Term Series 4.75% $15 per unit intermediate-term, fixed rate, taxable income
Cash or Accretion Bond Series and 3.50% $15 per 1,000 units intermediate-term, fixed rate, underlying
SELECT Series securities composed of compound interest
obligations principally secured by collateral
backed by the full faith and credit of the United
States, taxable return, appropriate for IRA's or
tax-deferred retirement plans
Insured Series 5.50% $15 per unit long-term, fixed rate, taxable income, underlying
securities are insured
DEFINED ASSET FUNDS-- INTERNATIONAL
BOND FUND
Multi-Currency Series 5.50% $15 per unit intermediate-term, fixed rate, payable in foreign
currencies, taxable income
Australian and New Zealand Dollar 3.75% $15 per unit intermediate-term, fixed rate, payable in
Bond Series Australian and New Zealand dollars, taxable income
Australian Dollar Bonds Series 3.75% $15 per unit intermediate-term, fixed rate, payable in
Australian dollars, taxable income
Canadian Dollar Bonds Series 3.75% $15 per unit short intermediate-term, fixed rate, payable in
Canadian dollars, taxable income
DEFINED ASSET FUNDS-- MUNICIPAL
INVESTMENT TRUST FUND
Monthly Payment, State and 5.50%+ $15 per unit long-term, fixed rate, tax-exempt income
Multistate Series
Intermediate Term Series 4.50%+ $15 per unit intermediate-term, fixed rate, tax-exempt income
Insured Series 5.50%+ $15 per unit long-term, fixed rate, tax-exempt income,
underlying securities insured by insurance
companies
AMT Monthly Payment Series 5.50%+ $15 per unit long-term, fixed rate, income exempt from regular
federal income tax but partially subject to
Alternative Minimum Tax
</TABLE>
- ---------------
* As described in the prospectuses relating to certain Exchange Funds, this
sales charge for secondary market sales may be reduced on a graduated scale
in the case of quantity purchases.
** The reduced sales charge for Units acquired during their initial offering
period is: $20 per unit for Series for which the Reduced Sales Charge for
Secondary Market (above) is $15 per unit; $20 per 100 units for Series for
which the Reduced Sales Charge for Secondary Market is $15 per 100 units and
$20 per 1,000 units for Series for which the Reduced Sales Charge for
Secondary Market is $15 per 1,000 units.
*** The reduced sales charge for the Sixth Utility Common Stock Series of The
Equity Income Fund is $15 per 2,000 units and for prior Utility Common Stock
Series is $7.50 per unit.
+ Subject to reduction depending on the maturities of the underlying
Securities.
33
<PAGE>
Defined
Asset FundsSM
SPONSORS: EQUITY INCOME FUND
Merrill Lynch, SELECT TEN PORTFOLIO--
Pierce, Fenner & Smith Incorporated Autumn 1994 International Series
Unit Investment Trusts (United Kingdom and
P.O. Box 9051 Hong Kong Portfolios)
Princeton, N.J. 08543-9051 (Unit Investment Trusts)
(609) 282-8500 PROSPECTUS
Smith Barney Shearson Inc. This Prospectus does not contain all of
Unit Trust Department the information with respect to the
Two World Trade Center--101st Floor investment company set forth in its
New York, N.Y. 10048 registration statement and exhibits
1-800-298-UNIT relating thereto which have been filed
PaineWebber Incorporated with the Securities and Exchange
1200 Harbor Blvd. Commission, Washington, D.C. under the
Weehawken, N.J. 07087 Securities Act of 1933 and the
(201) 902-3000 Investment Company Act of 1940, and to
Prudential Securities Incorporated which reference is hereby made.
One Seaport Plaza No person is authorized to give any
199 Water Street information or to make any
New York, N.Y. 10292 representations with respect to this
(212) 776-1000 investment company not contained in
Dean Witter Reynolds Inc. this Prospectus; and any information or
Two World Trade Center--59th Floor representation not contained herein
New York, N.Y. 10048 must not be relied upon as having been
(212) 392-2222 authorized. This Prospectus does not
INDEPENDENT ACCOUNTANTS: constitute an offer to sell, or a
Deloitte & Touche LLP solicitation of an offer to buy,
1633 Broadway securities in any state to any person
3rd Floor to whom it is not lawful to make such
New York, N.Y. 10019 offer in such state.
TRUSTEE:
The Chase Manhattan Bank, N.A.
Unit Trust Department
Box 2051
New York, NY 10081
1-800-323-1508
14954--9/94
34
<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.
SEC FILE OR
IDENTIFICATION
NUMBER
--------------------
I. Bonding Arrangements and Date of Organization of the
Depositors filed pursuant to Items A and B of
Part II of the Registration Statement on Form
S-6 under the Securities Act of 1933:
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.................................... 2-52691
Smith Barney Inc................................ 33-29106
Prudential Securities Incorporated.............. 2-61418
PaineWebber Incorporated........................ 2-87965
Dean Witter Reynolds Inc........................ 2-60599
II. Information as to Officers and Directors of the
Depositors filed pursuant to Schedules A and D
of Form BD under Rules 15b1-1 and 15b3-1 of the
Securities Exchange Act of 1934:
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.................................... 8-7721
Smith Barney Inc................................ 8-8177
Prudential Securities Incorporated.............. 8-12321
PaineWebber Incorporated........................ 8-16267
Dean Witter Reynolds Inc........................ 8-14172
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
Smith Barney Inc................................ 33-20499
Prudential Securities Incorporated.............. 2-86941, 2-86941
PaineWebber Incorporated........................ 2-87965, 2-87965
Dean Witter Reynolds Inc........................ 2-60599, 2-86941
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
Prudential Securities Incorporated.............. 13-6134767
PaineWebber Incorporated........................ 13-2638166
Dean Witter Reynolds Inc........................ 94-1671384
The Chase Manhattan Bank, N.A., Trustee......... 13-2633612
II-1
<PAGE>
SERIES OF EQUITY INCOME FUND,
INTERNATIONAL INCOME FUND,
CORPORATE INCOME FUND
AND MUNICIPAL INVESTMENT TRUST FUND
DESIGNATED PURSUANT TO RULE 487 UNDER THE SECURITIES ACT OF 1933
SEC
SERIES NUMBER FILE NUMBER
- --------------------------------------------------------------------------------
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
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
Municipal Investment Trust Fund, Multistate Series 48....... 33-50247
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 The Equity Income Fund,
Sixth Utility Common Stock Series, 1933 Act File No. 2-86836).
The Prospectus.
Additional Information not included in the Prospectus (Part II).
* Consent of independent public accountants.
The following exhibits:
1.1 --Form of Trust Indenture (incorporated by reference to Exhibit 1.1 to
the Registration Statement of Equity Income Fund, Select Ten
Portfolio--1994 Winter Series, 1933 Act File No. 51049).
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 names under the headings
'Taxes' and 'Miscellaneous--Legal Opinion' in the Prospectus.
R-1
<PAGE>
SIGNATURES
The registrant hereby identifies the series numbers of Equity Income Fund,
International Bond Fund, Corporate Income Fund and Municipal Investment Trust
Fund listed on page R-1 for the purposes of the representations required by Rule
487 and represents the following:
1) That the portfolio securities deposited in the series as to which this
registration statement is being filed do not differ materially in type
or quality from those deposited in such previous series;
2) That, except to the extent necessary to identify the specific portfolio
securities deposited in, and to provide essential 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
SEPTEMBER, 1994.
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
33-51607
STEVEN D. BLACK
JAMES BOSHART III
ROBERT A. CASE
JAMES DIMON
ROBERT DRUSKIN
ROBERT F. GREENHILL
JEFFREY LANE
JACK L. RIVKIN
By GINA LEMON
(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 SE and the following
the Board of Directors of Dean Witter 1933 Act File Number: 33-17085
Reynolds Inc.:
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
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Sponsors and Trustee of Equity Income Fund, Select Ten Portfolio--Autumn
1994 International Series (United Kingdom and Hong Kong Portfolios), Defined
Asset Funds:
We hereby consent to the use in this Registration Statement No. 33-54919 of our
opinion dated September 6, 1994, relating to the Statements of Condition of
Equity Income Fund, Select Ten Portfolio--Autumn 1994 International Series
(United Kingdom and Hong Kong Portfolios), 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.
September 6, 1994
R-8
EXHIBIT 3.1
DAVIS POLK & WARDWELL
450 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
(212) 450-4000
SEPTEMBER 6, 1994
EQUITY INCOME FUND,
SELECT TEN PORTFOLIO--AUTUMN 1994 INTERNATIONAL SERIES
(UNITED KINGDOM AND HONG KONG PORTFOLIOS)
DEFINED ASSET FUNDS
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
SMITH BARNEY INC.
PRUDENTIAL SECURITIES INCORPORATED
PAINEWEBBER INCORPORATED
DEAN WITTER REYNOLDS INC.
C/O MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
UNIT INVESTMENT TRUSTS
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 Ten Portfolio--Autumn 1994 International Series,
United Kingdom and Hong Kong Portfolios, 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 Indentures relating to the Fund
(the 'Indentures').
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 Indentures 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, the Trustee in accordance with the Indentures, 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
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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