AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 10, 1995
REGISTRATION NO. 33-55807
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 3
TO
FORM S-6
------------------------------------------
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--1995 SPRING SERIES
DEFINED ASSET FUNDS
B. NAMES OF DEPOSITORS:
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
SMITH BARNEY INC.
PRUDENTIAL SECURITIES INCORPORATED
DEAN WITTER REYNOLDS INC.
C. COMPLETE ADDRESSES OF DEPOSITORS' PRINCIPAL EXECUTIVE OFFICES:
MERRILL LYNCH, PIERCE, SMITH BARNEY INC.
FENNER & SMITH 388 GREENWICH STREET
INCORPORATED 23RD FLOOR
DEFINED ASSET FUNDS NEW YORK, N.Y. 10013
P.O. BOX 9051
PRINCETON, N.J.
08543-9051
PRUDENTIAL SECURITIES DEAN WITTER REYNOLDS INC.
INCORPORATED TWO WORLD TRADE
ONE SEAPORT PLAZA CENTER--59TH FLOOR
199 WATER STREET NEW YORK, N.Y. 10048
NEW YORK, N.Y. 10292
D. NAMES AND COMPLETE ADDRESSES OF AGENTS FOR SERVICE:
TERESA KONCICK, ESQ. LAURIE A. HESSLEIN
P.O. BOX 9051 388 GREENWICH ST.
PRINCETON, N.J. NEW YORK, N.Y. 10013
08543-9051
COPIES TO:
LEE B. SPENCER, JR. DOUGLAS LOWE, ESQ. PIERRE DE SAINT PHALLE,
ONE SEAPORT PLAZA 130 LIBERTY STREET--29TH ESQ.
199 WATER STREET FLOOR 450 LEXINGTON AVENUE
NEW YORK, N.Y. 10292 NEW YORK, N.Y. 10006 NEW YORK, N.Y. 10017
E. TITLE AND AMOUNT OF SECURITIES BEING REGISTERED:
An indefinite number of Units of Beneficial Interest pursuant to Rule 24f-2
promulgated under the Investment Company Act of 1940, as amended.
F. PROPOSED MAXIMUM OFFERING PRICE TO THE PUBLIC OF THE SECURITIES BEING
REGISTERED: Indefinite
G. AMOUNT OF FILING FEE: $500 (as required by Rule 24f-2)
H. APPROXIMATE DATE OF PROPOSED SALE TO PUBLIC:
As soon as practicable after the effective date of the registration statement.
THIS REGISTRATION STATEMENT SHALL HEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
DEFINED ASSET FUNDSSM
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EQUITY INCOME FUND The objective of this Defined Fund is total return
SELECT TEN PORTFOLIO through a combination of capital appreciation and
1995 SPRING SERIES current dividend income. The common stocks in the
(A UNIT INVESTMENT Portfolio were selected by following a strategy
TRUST) that invests for a period of about one year in
- ------------------------------approximately equal values of the ten common
/ / DESIGNED FOR TOTAL RETURN stocks in the Dow Jones Industrial Average (DJIA)
/ / DEFINED PORTFOLIO OF 10 having the highest dividend yields on the day
HIGHEST DIVIDEND before the date of this Prospectus.
YIELDING DOW STOCKS The value of units will fluctuate with the value
/ / QUARTERLY DIVIDEND INCOME of the Common Stocks in the Portfolio and no
assurance can be given that dividends will be paid
or that the units will appreciate in value.
Minimum purchase: $1,000.
Minimum purchase for Individual Retirement/Keogh
Accounts: $250.
-------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE COMMISSION OR ANY STATE SECURITIES
SPONSORS: COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
Merrill Lynch, OF THIS DOCUMENT. ANY REPRESENTATION TO THE
Pierce, Fenner & Smith CONTRARY IS A CRIMINAL OFFENSE.
Incorporated Inquiries should be directed to the Trustee at
Smith Barney Inc. 1-800-221-7771.
Prudential Securities Prospectus dated May 10, 1995.
Incorporated INVESTORS SHOULD READ THIS PROSPECTUS CAREFULLY
Dean Witter Reynolds Inc. AND RETAIN IT FOR FUTURE REFERENCE.
<PAGE>
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Defined Asset FundsSM
Defined Asset Funds is America's oldest and largest family of unit investment
trusts, with over $95 billion sponsored since 1971. Each Defined Asset Fund is a
portfolio of preselected securities. The portfolio is divided into 'units'
representing equal shares of the underlying assets. Each unit receives an equal
share of income and principal distributions.
Defined Asset Funds offer several defined 'distinctives'. You know in advance
what you are investing in and that changes in the portfolio are limited - a
defined portfolio. Most defined bond funds pay interest monthly - defined
income. The portfolio offers a convenient and simple way to invest - simplicity
defined.
Your financial professional can help you select a Defined Asset Fund to meet
your personal investment objectives. Our size and market presence enable us to
offer a wide variety of investments. The Defined Asset Funds family offers:
o Municipal portfolios
o Corporate portfolios
o Government portfolios
o Equity portfolios
o International portfolios
The terms of Defined Funds are as short as one year or as long as 30 years.
Special defined bond funds are available including: insured funds, double and
triple tax-free funds and funds with 'laddered maturities' to help protect
against changing interest rates. Defined Asset Funds are offered by prospectus
only.
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Defining the Strategy
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The Select Ten Portfolio follows a simple, time-tested Strategy: buy
approximately equal amounts of the ten highest dividend-yielding common stocks
(Strategy Stocks) of the 30 stocks in the DJIA* (determined as of the day prior
to the date of this Prospectus) and hold them for about one year. At the end of
the year, the Portfolio will be liquidated and the Strategy reapplied to the
DJIA to select a new portfolio. Each Select Ten Portfolio is designed to be part
of a longer term strategy and investors are advised to follow the Strategy for
at least a three to five year period. Historically, for those periods, the
Strategy has never lost money. So long as the Sponsors continue to offer new
portfolios, investors will have the option to reinvest into a new portfolio at a
reduced sales charge. The Sponsors reserve the right, however, not to offer new
portfolios.
- ------------
* The name 'Dow Jones Industrial Average' is the property of Dow Jones &
Company, Inc., which is not affiliated with the Sponsors, has not participated
in any way in the creation of the Portfolio or in the selection of stocks
included in the Portfolio and has not reviewed or approved any information
included in this Prospectus.
The Strategy provides a disciplined approach to investing, based on a buy and
hold philosophy, which ignores market timing and investment research and rejects
active management of the Portfolio. The Sponsors anticipate that the Portfolio
will remain unchanged over its one-year life despite adverse developments
concerning an issuer, an industry or the economy or stock market generally.
While the Strategy does not work perfectly each and every year, the Strategy had
a higher total return than the DJIA in 14 of the last 20 years, on a
hypothetical basis. Of course, past performance of the Strategy is no guarantee
of future results and there can be no guarantee that the Portfolio will meet its
objectives over its one-year life or that the Strategy will not lose money over
consecutive annual periods.
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Defining Your Portfolio
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Investing in the Portfolio, rather than in only one or two of the Strategy
Stocks, is a way to diversify your investment. Additionally, the Portfolio is
diversified by industry. Based upon current market values, the following
industries are represented in the Portfolio:
PORTFOLIO PERCENTAGE
/ / Petroleum Refining 29.74%
/ / Chemical Products 9.99
/ / Retailers 10.15
/ / Consumer Goods 10.02
/ / Manufacturers 9.75
/ / Financial Services 10.18
/ / Electronics 10.11
/ / Auto Manufacturing 10.06
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Defining Your Risks
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The Strategy Stocks, as the 10 highest yielding stocks in the DJIA, generally
share attributes that have caused them to have lower prices or higher yields
relative to the other stocks in the DJIA. The Strategy is therefore contrarian
in nature. The Strategy Stocks may, for example, be experiencing financial
difficulty, or be out of favor in the market because of weak performance, poor
earnings forecasts or negative publicity; or they may be reacting to general
market cycles. The Portfolio does not reflect any investment recommendations of
the Sponsors and one or more of the stocks in the Portfolio may, from time to
time, be subject to sell recommendations from one or more of the Sponsors.
The Portfolio is not an appropriate investment for those who are not comfortable
with the Strategy or for those who are unable or unwilling to assume the risk
involved generally with an equity investment. It may not be appropriate for
investors seeking either preservation of capital or high current income.
A-2
<PAGE>
There can be no assurance that the market factors that caused the relatively low
prices and high yields of the
Strategy Stocks will change, that any negative conditions adversely affecting
the stock price will not deteriorate, that the dividend rates on the Strategy
Stocks will be maintained or that share prices will not decline further during
the life of the Portfolio, or that the Strategy Stocks will continue to be
included in the DJIA. Unit price fluctuates with the value of the Portfolio and
the value of the securities could be affected by changes in the financial
condition of the issuers, changes in the various industries represented in the
Portfolio, movements in stock prices generally, the impact of the Sponsors'
purchase and sale of the securities (especially during the primary offering
period of units and during the rollover period) and other factors. Therefore,
there is no guarantee that the objective of the Portfolio will be achieved.
Unlike a mutual fund, the Portfolio is not actively managed and the Sponsors
receive no management fee. The Portfolio follows a defined strategy; therefore,
the adverse financial condition of an issuer or any market movement in the price
of a security will not require the sale of securities from the Portfolio.
Although the Sponsors may instruct the Trustee to sell securities under certain
limited circumstances, given the investment philosophy of the Portfolio, the
Sponsors are not likely to do so. The Portfolio may continue to purchase or hold
securities originally selected even though the yields on the securities may have
changed or the securities may no longer be included in the DJIA.
In addition, the Portfolio is considered to be 'concentrated' in stocks of
companies deriving a substantial portion of their income from the petroleum
refining industry. Investment in this industry may pose additional risks
including the volatility of oil prices, the level of demand for oil and
petroleum products and increasing costs associated with exploration, compliance
with environmental regulations and legislation (see Risk Factors--Petroleum
Refining Companies in Part B).
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Defining Your Investment
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PUBLIC OFFERING PRICE PER 1,000 UNITS $1,000.00
The Public Offering Price as of May 9, 1995, the business day prior to the
initial date of deposit is based on the aggregate value of the underlying
securities ($608,825.00) and any cash held to purchase securities, divided by
the number of units outstanding (614,974) times 1,000, plus the initial sales
charge. The Public Offering Price on any subsequent date will vary. The
underlying securities are valued by the Trustee on the basis of their closing
sale prices at 4:00 p.m. Eastern time on every business day.
SALES CHARGES
The total sales charge for this investment combines an initial up-front sales
charge and a deferred sales charge that will be deducted from the net asset
value of the Portfolio monthly beginning August 1, 1995 for the remaining ten
months of the Portfolio.
ROLLOVER OPTION
When this Select Ten Portfolio is about to be liquidated, you may have the
option to roll your proceeds into the next portfolio of the then current
Strategy Stocks. If you notify your financial consultant by May 17th, 1996, your
units will be redeemed and your proceeds will be reinvested in units of the next
Select Ten Portfolio. If you decide not to roll over your proceeds, you will
receive a cash distribution after the Fund terminates. Of course you can sell
your Units at anytime.
QUARTERLY DISTRIBUTIONS
You will receive distributions of any dividend income, net of expenses, on the
25th of July and October 1995 and January and March 1996, if you own units on
the 10th of those months.
REINVESTMENT OPTION
You can elect to automatically reinvest your distributions into additional units
of the Portfolio subject only to the deferred sales charge remaining at the time
of reinvestment. Reinvesting helps to compound your income for a greater total
return.
TAXES
In the opinion of counsel, you will be considered to have received all the
dividends paid on your interest in each security in the Portfolio when those
dividends are received by the Portfolio, even though a portion of the dividend
payments may be used to pay expenses of the Portfolio and regardless of whether
you reinvest your dividends in the Portfolio.
TAX BASIS REPORTING
The proceeds received when you sell this investment will reflect the deduction
of the deferred sales charge. In addition, the annual statement and the relevant
tax reporting forms you receive at year-end will reflect the actual amount paid
to you (not including the deferred sales charge). Accordingly, you should not
increase your basis in your units by the deferred sales charge.
TERMINATION DATE
The Portfolio will terminate by June 28, 1996. The final distribution will be
made within a reasonable time afterward. The Portfolio may be terminated earlier
if its value is less than 40% of the value of the securities when deposited.
SPONSORS' PROFIT OR LOSS
The Sponsors' profit or loss from the Portfolio will include the receipt of
applicable sales charges, fluctuations in the Public Offering Price or secondary
market price of units and a loss of $512.50 on the initial deposit of the
securities.
A-3
<PAGE>
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Defining Your Costs
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SALES CHARGE
First-time investors pay a 1% sales charge when they buy. For example, on a
$1,000 investment, $990 is invested in the Strategy Stocks. In addition, a
deferred sales charge of $1.75 per 1,000 units will be deducted from the
Portfolio's net asset value each month over the last ten months of the
Portfolio's life ($17.50 total). This deferred method of payment keeps more of
your money invested over a longer period of time. If you roll the proceeds of
your investment into a new portfolio, you will not be subject to the 1% initial
charge, just the $17.50 deferred fee. Although this is a unit investment trust
rather than a mutual fund, the following information is presented to permit a
comparison of fees and an understanding of the direct or indirect costs and
expenses that you pay.
As a %
of Initial Public Amount per
Offering Price 1,000 Units
----------------- --------------
Maximum Initial Sales Charge 1.00% $ 10.00
Deferred Sales Charge per Year 1.75% 17.50
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2.75% $ 27.50
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Maximum Sales Charge Imposed per
Year on Reinvested Dividends 1.75% $ 17.50
ESTIMATED ANNUAL FUND OPERATING EXPENSES
As a % Amount per
of Net Assets 1,000 Units
----------------- --------------
Trustee's Fee .085% $ 0.84
Maximum Portfolio Supervision,
Bookkeeping and Administrative
Fees .045% $ 0.45
Organizational Expenses .089% $ 0.88
Other Operating Expenses .011% $ 0.11
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TOTAL .230% $ 2.28
This Portfolio (and therefore the investors) will bear all or a portion of its
organizational costs--including costs of preparing the registration statement,
the trust indenture and other closing documents, registering units with the SEC
and the states and the initial audit of the Portfolio--as is common for mutual
funds. Historically, the Sponsors of unit investment trusts have paid all the
costs of establishing those trusts.
COSTS OVER TIME
You would pay the following cumulative expenses on a $1,000 investment, assuming
a 5% annual return on the investment throughout the indicated periods and
redemption at the end of the period:
1 Year 3 Years 5 Years 10 Years
$30 $72 $117 $240
Although each Series 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 Series subject only to the deferred sales charge and fund
expenses.
The example assumes reinvestment of all dividends and distributions and uses a
5% annual rate of return as mandated by SEC regulations applicable to mutual
funds. For purposes of the example, the deferred sales charge imposed on
reinvestment of dividends is not reflected until the year following payment of
the dividend; the cumulative expenses would be higher if sales charges on
reinvested dividends were reflected in the year of reinvestment.
Reductions to the repurchase and cash redemption prices in the secondary market
to recoup the costs of liquidating securities to meet redemption (described
below) have not been reflected. The example should not be considered a
representation of past or future expenses or annual rates of return; the actual
expenses and annual rates of return may be more or less than the example.
SELLING YOUR INVESTMENT
You may sell your units at any time. Your price will be based on the then
current net asset value of the Portfolio. The redemption and secondary market
repurchase price as of May 9, 1995 was $972.50 per 1,000 units ($27.50 per 1,000
units less than the Public Offering Price). This price reflects deductions of
the deferred sales charge which declines over the last ten months of the
Portfolio ($17.50 initially). If you sell your units before the termination of
the Portfolio, you will pay the remaining balance of the deferred sales charge.
After the initial offering period, the repurchase and cash redemption prices for
units will be reduced to reflect the estimated costs of liquidating securities
to meet the redemption, currently estimated at $0.83 per 1,000 units. If you
reinvest in the new series, you will pay your share of any brokerage commissions
on the sale of underlying securities when your units are liquidated during the
rollover.
A-4
<PAGE>
<TABLE><CAPTION>
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Defined Portfolio
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Equity Income Fund
Select Ten Portfolio 1995 Spring Series May 10, 1995
TICKER PERCENTAGE CURRENT COST
NAME OF ISSUER SYMBOL OF FUND (1) DIVIDEND YIELD (2) TO FUND (3)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. Texaco, Inc. TX 10.02% 4.72% $ 60,975.00
2. Philip Morris Companies, Inc. MO 10.02 4.60 60,987.50
3. J.P. Morgan & Company JPM 10.18 4.36 61,987.50
4. Exxon Corporation XON 9.76 4.29 59,393.75
5. Chevron Corporation CHV 9.96 3.81 60,625.00
6. Minnesota Mining and
Manufacturing Company MMM 9.75 3.17 59,375.00
7. Du Pont (E.I.) de Nemours &
Company DD 9.99 3.08 60,862.50
8. Sears Roebuck & Company S 10.15 2.98 61,812.50
9. General Electric Co. GE 10.11 2.80 61,556.25
10. General Motors Corporation GM 10.06 2.74 61,250.00
----------------- -----------------
100.00% $ 608,825.00
----------------- -----------------
----------------- -----------------
</TABLE>
- ------------------------------------
(1) Based on Cost to Fund.
(2) Current Dividend Yield for each security was calculated by annualizing the
last quarterly or semi-annual ordinary dividend received on the security and
dividing the result by its market value as of the close of trading on May 9,
1995.
(3) Valuation by the Trustee made on the basis of closing sale prices at the
evaluation time on May 9, 1995.
------------------------------------
The securities were acquired on May 9, 1995 and are represented entirely by
contracts to purchase the securities. Any of the Sponsors may have acted as
underwriters, managers or comanagers of a public offering of the securities in
this Fund during the last three years. Affiliates of the Sponsors may serve as
specialists in the securities in this Fund on one or more stock exchanges and
may have a long or short position in any of these securities or in options on
any of them, and may be on the opposite side of public orders executed on the
floor of an exchange where the securities are listed. An officer, director or
employee of any of the Sponsors may be an officer or director of one or more of
the issuers of the securities in the Fund. A Sponsor may trade for its own
account as an odd-lot dealer, market maker, block positioner and/or arbitrageur
in any of the securities or in options on them. Any Sponsor, its affiliates,
directors, elected officers and employee benefits programs may have either a
long or short position in any securities or in options on them.
A-5
<PAGE>
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Performance Information
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The following table compares the actual performance of the Dow Jones Industrial
Average and the hypothetical performance of approximately equal amounts invested
in each of the Strategy Stocks (but not any Select Ten Portfolio) at the
beginning of each year and reinvesting the proceeds annually for the past 20
years, as of December 31 in each of these years. These results represent past
performance of the Strategy Stocks, and may not be indicative of future results
of the Strategy or the Portfolio. The Strategy Stocks underperformed the DJIA in
certain years. Also, an investment in the Portfolio will not realize as high a
total return as a direct investment in the Strategy Stocks, since the Portfolio
has sales charges and expenses and may not be fully invested at all times.
Actual performance of a Portfolio will also differ from quoted performance of
the Strategy Stocks and the DJIA because the quoted performance figures are
annual figures based on closing sales prices on December 31, while the
Portfolios are established and liquidated at various times during the year.
Performance variances may also result because stocks are normally purchased or
sold at prices different from the closing price used to determine the
Portfolio's net asset value and not all stocks may be weighted equally at all
times.
<TABLE><CAPTION>
COMPARISON OF DIVIDENDS, APPRECIATION AND TOTAL RETURN
(FIGURES DO NOT REFLECT SALES CHARGES, COMMISSIONS, FUND EXPENSES OR TAXES)
STRATEGY STOCKS(1) DOW JONES INDUSTRIAL AVERAGE (DJIA)
----------------------------------------------------------------- ----------------------------------------------
YEAR APPRECIATION(2) ACTUAL DIVIDEND YIELD(3) TOTAL RETURN(4) APPRECIATION(2) ACTUAL DIVIDEND YIELD(3)
- --------- ----------------- --------------------------- ----------------- ----------------- ---------------------------
<S> <C> <C> <C> <C> <C>
1975 49.06% 7.96% 57.02% 38.32% 6.08%
1976 27.69 7.12 34.81 17.86 4.86
1977 -6.75 5.92 -0.83 -17.27 4.56
1978 -6.94 7.10 0.16 -3.15 5.84
1979 3.94 8.41 12.35 4.19 6.33
1980 17.83 8.54 26.37 14.93 6.48
1981 -0.94 8.41 7.47 -9.23 5.83
1982 17.24 8.22 25.46 19.60 6.19
1983 30.22 8.24 38.46 20.30 5.38
1984 0.69 6.65 7.34 -3.76 4.82
1985 21.66 6.97 28.63 27.66 5.12
1986 23.76 10.81 34.57 22.58 4.33
1987 1.87 5.10 6.97 2.26 3.76
1988 15.71 5.79 21.50 11.85 4.10
1989 20.35 6.95 27.30 26.96 4.75
1990 -13.00 5.06 -7.94 -4.34 3.77
1991 28.16 5.21 33.37 20.32 3.61
1992 3.62 4.70 8.32 4.17 3.17
1993 22.71 4.21 26.92 13.72 3.00
1994 -0.19 4.08 3.89 2.14 2.81
1995 11.88 1.08 12.96 8.43 0.72
(through 3/31)
<CAPTION>
YEAR TOTAL RETURN(4)
- --------- -----------------
<S> <C>
1975 44.40%
1976 22.72
1977 -12.71
1978 2.69
1979 10.52
1980 21.41
1981 -3.40
1982 25.79
1983 25.68
1984 1.06
1985 32.78
1986 26.91
1987 6.02
1988 15.95
1989 31.71
1990 -0.57
1991 23.93
1992 7.34
1993 16.72
1994 4.95
1995 9.15
(through 3/31)
</TABLE>
From January 1975 through March 31, 1995, the Strategy Stocks achieved an
average annual total return of 19.01%, as compared to the average annual total
return of the DJIA, which was 14.63%. These stocks also had a higher average
dividend yield in each of the last 20 years and outperformed the DJIA in 14 of
these years. When viewed for at least three consecutive years, the Strategy
never lost money.
- ------------------------------------
(1) The Strategy Stocks for any given year were selected by ranking the dividend
yields for each of the stocks in the DJIA as of the beginning of that year,
based upon an annualization of the last quarterly or semi-annual regular
dividend distribution (which would have been declared in the preceding year)
divided by that stock's market value on the first trading day that year on
the New York Stock Exchange.
(2) Appreciation for the Strategy Stocks is calculated by subtracting the market
value of these stocks on the first trading day on the New York Stock
Exchange in a given year from the market value of those stocks on the last
trading day in that year, and dividing the result by the market value of the
stocks on the first trading day in that year. Appreciation for the DJIA is
calculated by subtracting the opening value of the DJIA on the first trading
day in each year from the closing value of the DJIA on the last trading day
in that year, and dividing the result by the opening value of the DJIA on
the first trading day in that year.
(3) Actual Dividend Yield for the Strategy Stocks is calculated by adding the
total dividends received on the stocks in the year and dividing the result
by the market value of the stocks on the first trading day in that year.
Actual Dividend Yield for the DJIA is calculated by taking the total
dividends credited to the DJIA and dividing the result by the opening value
of the DJIA on the first trading day of the year.
(4) Total Return represents the sum of Appreciation and Actual Dividend Yield.
Total Return does not take into consideration any reinvestment of dividend
income.
A-6
<PAGE>
PORTFOLIO PERFORMANCE
Information on the performance of the current and one or more prior Portfolios
for various periods, on the basis of changes in Unit price plus the amount of
dividends and capital gains reinvested, divided by the maximum public offering
price, may be included from time to time in advertisements, sales literature and
reports to current or prospective investors. Average annualized returns may also
be shown for consecutive series of the same Winter, Spring or Autumn cycle.
Information on the performance of the DJIA Strategy Stocks contained in this
Prospectus, as further updated, may also be included from time to time in such
material. 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 basis. Total return is
computed by dividing share price changes plus dividends reinvested at the end of
each year by initial share prices, but does not reflect commissions, taxes or
Portfolio sales charges or expenses, 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.
The Sponsors also offer Select Ten International Portfolios applying the Select
Ten Strategy to stocks in the Hang Seng Index (Hong Kong) and the Financial
Times Industrial Ordinary Share Index (United Kingdom). Various advertisements,
sales literature, reports and other information furnished to current or
prospective investors may include total return by year and average annualized
performance information since 1978 of the Strategy applied to those indexes and
to equal amounts invested pursuant to the Strategy in all three indexes. This
material may also contain performance information similar to the foregoing on
all prior International Portfolios. While past performance cannot guarantee
future results, more consistent results could generally have been achieved by
pursuing all three strategies simultaneously.
A-7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Sponsors, Trustee and Holders of Defined Asset Funds, Equity Income Fund
Select Ten Portfolio--1995 Spring Series (the 'Fund'):
We have audited the accompanying statement of condition and the related
portfolio included in the prospectus of the Fund as of May 10, 1995. This
financial statement is the responsibility of the Trustee. Our responsibility is
to express an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. Our procedures included
confirmation of securities and the irrevocable letters of credit deposited for
the purchase of securities, as described in the statement of condition, with the
Trustee. An audit also includes assessing the accounting principles used and
significant estimates made by the Trustee, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the financial position of the Fund as of May 10, 1995 in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, N.Y.
May 10, 1995
STATEMENT OF CONDITION AS OF MAY 10, 1995
TRUST PROPERTY
Investments--Contracts to purchase Securities(1).........$ 608,825.00
Organizational Costs(2).................................. 702,564.31
--------------------
Total.........................................$ 1,311,389.31
--------------------
--------------------
LIABILITY AND INTEREST OF HOLDERS
Liability--Payment of deferred portion of sales
charge(3)................................................$ 10,762.05
--------------------
Interest of Holders of 614,974 Units of fractional
undivided interest outstanding:
Cost to investors(4)...................................$ 614,974.00
Gross underwriting commissions(5)...................... (16,911.05)
Accrued Liability(2)................................... 702,564.31
--------------------
Net amount applicable to investors.....................$ 1,300,627.26
--------------------
Total.........................................$ 1,311,389.31
--------------------
--------------------
- ---------------
(1) Aggregate cost to the Fund of the securities listed under Defined
Portfolio determined by the Trustee at 4:00 p.m., Eastern time on May 9, 1995.
The contracts to purchase securities are collateralized by irrevocable letters
of credit which have been issued by Citibank, N.A., in the amount of $609,337.50
and deposited with the Trustee. The amount of letters of credit includes
$608,825.00 for the purchase of securities.
(2) Organizational costs incurred by the Fund have been deferred and
will be amortized over the life of the Fund. Organizational costs have been
estimated based on projected total assets of $800 million. To the extent the
Fund is larger or smaller, the estimate may vary.
(3) Represents the aggregate amount of mandatory distributions of
$1.75 per 1,000 Units per month payable on the 1st day of each month from
August, 1995 through May, 1996. Distributions will be made to an account
maintained by the Trustee from which the deferred sales charge obligation of the
investors to the Sponsors will be satisfied. If units are redeemed prior to May
1, 1996, the remaining portion of the distribution applicable to such units will
be transferred to such account on the redemption date.
(4) Aggregate public offering price computed on the basis of the
value of the underlying securities at 4:00 p.m., Eastern time on May 9, 1995.
(5) Assumes the maximum sales charge per 1,000 units of 2.75% of the
Public Offering Price.
A-8
<PAGE>
DEFINED ASSET FUNDSSM
PROSPECTUS--PART B
EQUITY INCOME FUND SELECT TEN PORTFOLIOS
FURTHER INFORMATION REGARDING THE FUND MAY BE OBTAINED
WITHIN FIVE DAYS OF WRITTEN OR TELEPHONIC REQUEST TO THE TRUSTEE AT THE ADDRESS
AND
TELEPHONE NUMBER SET FORTH ON THE BACK COVER OF THIS PROSPECTUS.
Index
PAGE
---------
Fund Description...................................... 1
Risk Factors.......................................... 3
How to Buy Units...................................... 4
How to Sell Units..................................... 5
Income, Distributions and Reinvestment................ 7
Fund Expenses......................................... 8
PAGE
---------
Taxes................................................. 8
Records and Reports................................... 10
Trust Indenture....................................... 10
Miscellaneous......................................... 11
Exchange Option....................................... 12
Supplemental Information.............................. 13
FUND DESCRIPTION
THE STRATEGY
Simple strategies can sometimes be the most effective. To outperform the
market is more difficult than just outperforming other asset classes. The Fund
seeks a higher total return than the Dow Jones Industrial Average (DJIA) by
acquiring the ten established, widely held stocks with the highest yield one
business day before the Fund is created, and holding them for about one year.
There can be no assurance that the dividend rates on the selected stocks will be
maintained. Reduction or elimination of a dividend could adversely affect the
stock price as well. An investment in the Fund can be cost-efficient, avoiding
the odd-lot costs of buying small quantities of securities directly. Purchasing
a portfolio of these stocks as opposed to one or two can achieve a more
diversified holding. There is only one investment decision instead of ten, four
quarterly dividends instead of 40. Investments in a number of companies with
high dividends relative to their stock prices (usually because their stock
prices are depressed) is designed to increase the Fund's potential for higher
returns. The Select Ten Portfolio seeks to outperform the DJIA 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. Investing in the stocks of the DJIA may be effective as well as
conservative because regular dividends are common for established companies and
dividends have accounted for a substantial portion of the total return on stocks
of the DJIA as a group. The Fund's return will consist of a combination of
capital appreciation and current dividend income. The Fund will terminate in
about one year, when investors may choose to either receive the distribution in
cash or reinvest in the 1996 Spring Series (if available) at a reduced sales
charge.
The first DJIA, consisting of 12 stocks, was published in The Wall Street
Journal in 1896. The list grew to 20 stocks in 1916 and to 30 stocks on October
1, 1928. Taking into account a number of name changes, 9 of the original
companies are still in the DJIA today. For two periods of 17 consecutive years
each, there were no changes to the list: March 14, 1939-July 1956 and June 1,
1959-August 6, 1976. The Dow Jones Industrial Average includes some of the most
well-known, widely followed and highly capitalized companies in America. Many
are household names. These companies are major factors in their industries.
These companies file information with the SEC which is available free of charge
upon request from the Trustee. The Strategy Stocks, as components of the DJIA,
are generally stocks of high quality, established companies with significant
resources to see them through real or perceived adversity.
1
<PAGE>
LIST AS OF OCTOBER 1, 1928 CURRENT LIST
- ----------------------------------------------------------------------
Allied Chemical Allied Signal
American Can J.P. Morgan & Co.
American Smelting Minnesota Mining & Manufacturing
American Sugar Du Pont
American Tobbaco Eastman Kodak
Atlantic Refining Goodyear
Bethlehem Steel Bethlehem Steel
Chrysler IBM
General Electric General Electric
General Motors General Motors
General Railway Signal McDonald's
Goodrich Chevron
International Harverster Caterpillar
International Nickel Boeing
Mack Trucks Merck
Nash Motors Procter & Gamble
North American American Express
Paramount Publix International Paper
Postum, Inc. Philip Morris
Radio Corporation of America (RCA) United Technologies
Sears Roebuck Sears Roebuck
Standard Oil of New Jersey Exxon
Texas Corporation Texaco
Texas Gulf Sulphur Coca-Cola
Union Carbide Union Carbide
United States Steel Walt Disney
Victor Talking Machine AT&T
Westinghouse Electric Westinghouse Electric
Woolworth Woolworth
Wright Aeronautical Aluminum Co. of America
PORTFOLIO SELECTION
The Portfolio contains ten common stocks in the DJIA having the highest
dividend yields on the business day prior to the initial date of deposit.
'Highest dividend yield' is calculated for each Security by annualizing the last
quarterly or semi-annual ordinary dividend distributed on the Security and
dividing the result by its closing sales price. This yield is historical and
there is no assurance that any dividends will be declared or paid in the future
on the Securities. No leverage or borrowing is used nor does the Portfolio
contain other kinds of securities to enhance yield.
The Strategy selection process is a straightforward, objective,
mathematical application that ignores any subjective factors concerning an
issuer in the DJIA, an industry or the economy generally. The application of the
Strategy may cause the Portfolio to own a stock that the Sponsors do not
recommend for purchase, and, in fact, the Sponsors may have sell recommendations
on a number of the stocks in the Portfolio at the time the stocks are selected
for inclusion in the Portfolio. Various theories are from time to time expressed
as to the reasons for a certain common stock to be among the ten stocks in the
DJIA with the highest dividend yield: the issuer may be in financial difficulty
or out of favor in the market because of weak earnings or performance or
forecasts or negative publicity; or uncertainties relating to pending or
threatened litigation or pending or proposed legislation or government
regulation; or the stock may be a cyclical stock reacting to national and
international economic developments; or the market may be anticipating a
reduction in or the elimination of the issuer's dividend. Some of the foregoing
factors may be relevant to only a segment of an issuer's overall business yet
the publicity may be strong enough to outweigh otherwise solid business
performance. In addition, companies in certain industries have historically paid
relatively high dividends, and may therefore not be out of favor.
2
<PAGE>
The deposit of the Securities in the Fund on the initial date of deposit
established a proportionate relationship among the number of shares of each
Security. During the 90-day period following the initial date of deposit the
Sponsors may deposit additional Securities in order to create new Units,
maintaining to the extent possible that original
proportionate relationship. Deposits of additional Securities subsequent to the
90-day period must generally replicate exactly the proportionate relationship
among the number of shares of each Security at the end of the initial 90-day
period. The ability to acquire each Security at the same time will generally
depend upon the Security's availability and any restrictions on the purchase of
that Security under the federal securities laws or otherwise.
Additional Units may also be created by the deposit of cash (including a
letter of credit) with instructions to purchase additional Securities. This
practice could cause both existing and new investors to experience a dilution of
their investments and a reduction in their anticipated income because of price
fluctuations in the Securities between the time of the cash deposit and the
actual purchase of the additional Securities and because the associated
brokerage fees will be an expense of the Portfolio. To minimize these effects,
the Portfolio will try to purchase Securities as close to the Evaluation Time or
at prices as close to the evaluated prices as possible.
Because each Defined Asset Fund is a preselected portfolio, you know the
securities before you invest. Of course, the Portfolio will change somewhat over
time, as Securities are purchased upon creation of additional Units, as
securities are sold to meet Unit redemptions or in other limited circumstances.
PORTFOLIO SUPERVISION
The Portfolio follows a buy and hold investment strategy in contrast to the
frequent portfolio changes of a managed fund based on economic, financial and
market analyses. In the event a public tender offer is made for a Security or a
merger or acquisition is announced affecting a Security, the Sponsors may
instruct the Trustee to tender or sell the Security in the open market when in
its opinion it is in the best interests of investors to do so. Otherwise,
although the Portfolio is regularly reviewed and evaluated, because of the
Strategy, the Portfolio is unlikely to sell any of the Securities, other than to
satisfy redemptions of units, or to cease buying additional shares in connection
with the issuance of Additional Units. More specifically, adverse developments
concerning a Security including the adverse financial condition of the issuer, a
failure to maintain a current dividend rate, the institution of legal
proceedings against the issuer, a default under certain documents materially and
adversely affecting the future declaration of dividends, or a decline in the
price or the occurrence of other market or credit factors that might otherwise
make retention of the Security detrimental to the interest of investors, will
generally not cause the Fund to dispose of a Security or cease buying it.
Furthermore, the Portfolio will likely continue to hold a Security and purchase
additional shares notwithstanding its ceasing to be included among the ten
highest dividend yielding stocks in the DJIA or even its deletion from the DJIA.
RISK FACTORS
An investment in the Fund entails certain risks, including the risk that
the value of your investment will decline if the financial condition of the
issuers of the Securities becomes impaired or if the general condition of the
stock market worsens and the risk that holders of common stocks have generally
inferior rights to receive payments from the issuer in comparison with the
rights of creditors of, or holders of debt obligations or preferred stocks
issued by, the issuer. Moreover, common stocks do not represent an obligation of
the issuer and therefore do not offer any assurance of income or provide the
degree of protection of capital provided by debt securities. Common stocks in
general may be especially susceptible to general stock market movements and to
volatile increases and decreases in value as market confidence in and
perceptions of the issuers change. These perceptions are based on unpredictable
factors including expectations regarding government, economic, monetary and
fiscal policies, inflation and interest rates, economic expansion or
contraction, and global or regional political, economic or banking crises. The
Sponsors cannot predict the direction or scope of any of these factors.
The Portfolio may be concentrated in one or more of types of issuers.
Concentration may involve additional risk because of the decreased
diversification of economic, financial and market risks. Set forth below is a
brief description of certain risks associated with Securities which may be held
by the Fund. Additional information is contained in the Information Supplement
which is available from the Trustee at no charge to the investor.
3
<PAGE>
PETROLEUM REFINING COMPANIES
Certain of the issuers of the Securities refine and market oil and related
petroleum products. The principal risks faced by these companies include the
price and availability of oil, the level of demand for oil and petroleum
products, refinery capacity and operating margins, the cost of financing
required for exploration and expansion and increasing expenses necessary to
comply with environmental and other energy related laws and regulations. Oil
prices generally depend upon the available supply of crude oil and the
willingness and ability of companies to adjust production levels. Declining U.S.
crude oil production is likely to lead to increased dependence on foreign
sources of oil and to
uncertain supply for refiners and the risk of unpredictable supply disruptions.
In addition, future scientific advances with new energy sources could have an
adverse impact on the petroleum and natural gas industries.
LITIGATION AND LEGISLATION
The Sponsors do not know of any pending litigation as of the initial date
of deposit that might reasonably be expected to have a material adverse effect
on the Fund, although pending litigation may have a material adverse effect on
the value of Securities in the Fund. In addition, at any time after the initial
date of deposit, litigation may be initiated on a variety of grounds, or
legislation may be enacted, affecting the Securities in the Portfolio or the
issuers of the Securities. Changing approaches to regulation, particularly with
respect to the environment or with respect to the petroleum industry, may have a
negative impact on certain companies represented in the Portfolio. There can be
no assurance that future litigation, legislation, regulation or deregulation
will not have a material adverse effect on the Portfolio or will not impair the
ability of the issuers of the Securities to achieve their business goals. From
time to time Congress considers proposals to reduce the rate of the
dividends-received deduction. This type of legislation, if enacted into law,
would adversely affect the after-tax return to investors who can take advantage
of the deduction. See Taxes.
LIFE OF THE FUND; FUND TERMINATION
The size and composition of the Portfolio will be affected by the level of
redemptions of Units that may occur from time to time. Principally, this will
depend upon the number of investors seeking to sell or redeem their Units or
participating in a rollover. The Portfolio will be terminated no later than the
mandatory termination date specified in Part A of the Prospectus. It will
terminate earlier upon the disposition of the last Security or upon the consent
of investors holding 51% of the Units. The Portfolio may also be terminated
earlier by the Sponsors once its total assets have fallen below the minimum
value specified in Part A of the Prospectus. A decision by the Sponsors to
terminate the Portfolio early, which will likely be made following the rollover,
will be based on factors such as the size of the Portfolio relative to its
original size, the ratio of Portfolio expenses to income, and the cost of
maintaining a current prospectus.
Notice of impending termination will be provided to investors and
thereafter units will no longer be redeemable. On or shortly before termination,
the Trustee will seek to dispose of any Securities remaining in the Portfolio
although any Security unable to be sold at a reasonable price may continue to be
held by the Trustee in a liquidating trust pending its final disposition. A
proportional share of the expenses associated with termination, including
brokerage costs in disposing of Securities, will be borne by investors remaining
at that time. This may have the effect of reducing the amount of proceeds those
investors are to receive in any final distribution.
HOW TO BUY UNITS
Units are available from any of the Sponsors, Underwriters and other
broker-dealers at the Public Offering Price. The Public Offering Price varies
each Business Day with changes in the value of the Portfolio and other assets
and liabilities of the Fund.
PUBLIC OFFERING PRICE
Units are charged a combination of Initial and Deferred Sales Charges
equal, in the aggregate, to a maximum charge of 2.75% of the public offering
price or, for quantity purchases of units of all Select Portfolios by an
investor and the investor's spouse and minor children, or by a single trust
estate or fiduciary account, made on a single day, the following percentages of
the public offering price:
4
<PAGE>
APPLICABLE SALES CHARGE
(GROSS UNDERWRITING PROFIT)
------------------------------------
AS % OF PUBLIC AS % OF NET
AMOUNT PURCHASED OFFERING PRICE AMOUNT INVESTED
- ---------------------------------------- ----------------- -----------------
Less than $50,000....................... 2.75% 2.778%
$50,000 to $99,999...................... 2.50 2.519
$100,000 to $249,999.................... 2.00 2.005
$250,000 or more........................ 1.75 1.750
The Deferred Sales Charge is a monthly charge of $1.75 per 1,000 units and
is accrued in ten monthly installments commencing on the date indicated in part
A of this Prospectus. Units redeemed or repurchased prior to the accrual of the
final Deferred Sales Charge installment will have the amount of any remaining
installments deducted from the redemption or repurchase proceeds or deducted in
calculating an in-kind distribution, although this deduction will be waived in
the event of the death or disability (as defined in the Internal Revenue Code of
1986) of an investor. The Initial Sales Charge is equal to the aggregate sales
charge, determined as described above, less the aggregate amount of any
remaining installments of the Deferred Sales Charge.
It is anticipated that Securities will not be sold to pay the Deferred
Sales Charge until after the date of the last installment. Investors will be at
risk for market price fluctuations in the Securities from the several
installment accrual dates to the dates of actual sale of Securities to satisfy
this liability.
Employees of certain Sponsors and Sponsor affiliates and non-employee
directors of Merrill Lynch & Co. Inc. may purchase Units subject only to the
Deferred Sales Charge.
EVALUATIONS
Evaluations are determined by the Trustee on each Business Day. This
excludes Saturdays, Sundays and the following holidays as observed by the New
York Stock Exchange: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas. If the Securities are
listed on a national securities exchange or the NASDAQ national market system,
evaluations are generally based on closing sales prices on that exchange or that
system (unless the Trustee deems these prices inappropriate) or, if closing
sales prices are not available, at the mean between the closing bid and offer
prices. If the Securities are not listed or if listed but the principal market
is elsewhere, the evaluation is generally determined based on sales prices of
the Securities on the over-the-counter market or, if sales prices in that market
are not available, on the basis of the mean between current bid and offer prices
for the Securities or for comparable securities or by appraisal or by any
combination of these methods. Neither the Sponsors nor the Trustee guarantee the
enforceability, marketability or price of any Securities.
NO CERTIFICATES
All investors are required to hold their Units in uncertifcated form and in
'street name' by their broker, dealer or financial institution at the Depository
Trust Company ('DTC').
HOW TO SELL UNITS
SPONSORS' MARKET FOR UNITS
You can sell your Units at any time without a fee (other than the deduction
after the initial offering period for the costs of liquidating Securities). The
Sponsors (although not obligated to do so) will normally buy any Units offered
for sale at the repurchase price next computed after receipt of the order. The
Sponsors have maintained secondary markets in Defined Asset Funds for over 20
years. Primarily because of the sales charge and fluctuations in the market
value of the Securities, the sale price may be less than the cost of your Units.
You should consult your financial professional for current market prices to
determine if other broker-dealers or banks are offering higher prices for Units.
The Sponsors may discontinue this market without prior notice if the supply
of Units exceeds demand or for other business reasons. The Sponsors may reoffer
or redeem Units repurchased.
5
<PAGE>
TRUSTEE'S REDEMPTION OF UNITS
You may redeem your Units by sending the Trustee a redemption request.
Signatures must be guaranteed by an eligible institution. In certain instances,
additional documents may be required such as a certificate of death, trust
instrument, certificate of corporate authority or appointment as executor,
administrator or guardian. If the Sponsors are maintaining a market for Units,
they will purchase any Units tendered at the repurchase price described above.
If they do not purchase Units tendered, the Trustee is authorized in its
discretion to sell Units in the over-the-counter market if it believes it will
obtain a higher net price for the redeeming investor.
By the seventh calendar day after tender you will be mailed an amount equal
to the Redemption Price per Unit. Because of market movements or changes in the
Portfolio, this price may be more or less than the cost of your Units.
The Redemption Price per Unit is computed each Business Day by adding the value
of the Securities, declared but unpaid dividends on the Securities, cash and the
value of any other Fund assets; deducting unpaid taxes or other governmental
charges, accrued but unpaid Fund expenses and accrued but unpaid Deferred Sales
Charges, unreimbursed Trustee advances, cash held to redeem Units or for
distribution to investors and the value of any other Fund liabilities; and
dividing the result by the number of outstanding Units.
Any investor owning Units representing Securities with a value of at least
$500,000 who redeems those Units prior to the rollover notification date
indicated in Part A of the Prospectus may, in lieu of cash redemption, request
distribution in kind of an amount and value of Securities per Unit equal to the
otherwise applicable Redemption Price per Unit. Whole shares of each Security
together with cash from the Capital Account equal to any fractional shares to
which the investor would be entitled (less any Deferred Sales Charge payable)
will be paid over to a distribution agent and either held for the account of the
investor or disposed of in accordance with instructions of the investor. Any
brokerage commissions on sales of Securities in connection with in-kind
redemptions will be borne by the redeeming investors. The in-kind redemption
option may be terminated by the Sponsors at any time upon prior notice to
investors.
After the initial offering period, the repurchase and cash redemption
prices will be reduced to reflect the cost to the Fund of liquidating Securities
to meet the redemption.
If cash is not available in the Fund's Income and Capital Accounts to pay
redemptions, the Trustee may sell Securities selected by the Agent for the
Sponsors in a manner designed to maintain, to the extent practicable, the
proportionate relationship among the number of shares of each Security. These
sales are often made at times when the Securities would not otherwise be sold
and may result in lower prices than might be realized otherwise and will also
reduce the size and diversity of the Fund.
Redemptions may be suspended or payment postponed if the New York Stock
Exchange is closed other than for customary weekend and holiday closings, if the
SEC determines that trading on that Exchange is restricted or that an emergency
exists making disposal or evaluation of the Securities not reasonably
practicable, or for any other period permitted by the SEC.
ROLLOVER
In lieu of redeeming their Units or receiving liquidation proceeds upon the
termination of the Fund, investors may elect, by written notice to the Trustee
prior to the rollover notification date indicated in Part A, to apply their
proportional interest in the Securities and other assets of the Fund toward the
purchase of units of the Select Ten Portfolio - 1996B Series (if available). The
1996B Series will invest in the ten highest yielding stocks in the Dow Jones
Industrial Average as of that time and it is expected that the terms of the
1996B Series, including this rollover feature, will be substantially the same as
those of the Fund.
A rollover of an investor's units is accomplished by the in-kind redemption
of his Units of the Fund followed by the sale of the underlying Securities by a
distribution agent on behalf of participating investors and the reinvestment of
the sale proceeds (net of brokerage fees, governmental charges and other sale
expenses) in units of the 1996 Spring Series at their net asset value.
The Sponsors intend to sell the distributed Securities, on behalf of the
distribution agent, as quickly as practicable and then to create units of the
1996B Series as quickly as possible, subject in both cases to the Sponsors'
sensitivity that the concentrated sale and purchase of large volumes of
securities may affect market prices in a manner adverse to the interest of
investors. Accordingly, the Sponsors may, in their sole discretion,
6
<PAGE>
undertake a
more gradual sale of the distributed Securities and a more gradual creation of
units of the 1996B Series to help mitigate any negative market price
consequences caused by this large volume of securities trades. There can be no
assurance, however, that this procedure will be successful or might not result
in less advantageous prices than had this procedure not been practiced at all.
Pending the investment of rollover proceeds in the securities to comprise the
1996B Series, those moneys may be uninvested for up to several days. For those
Securities in the Portfolio that will also be in the portfolio of the 1996B
Series, a direct sale of those securities between the two funds is now permitted
pursuant to an SEC exemptive order. These sales will be effected at the
securities' closing sale prices on the exchanges where they are principally
traded, free of any brokerage costs.
Investors participating in the rollover may realize taxable capital gains
from the rollover but will not be entitled to a deduction for certain capital
losses and, because of the rollover procedures, will not receive a cash
distribution with which to pay those taxes. Investors who do not participate
will continue to hold their Units until the termination of the Fund; however,
depending upon the extent of participation in the rollover, the aggregate size
of the Fund may be sharply reduced resulting in a significant increase in per
Unit expenses.
The Sponsors may, in their sole discretion and without penalty or liability
to investors, decide not to sponsor the 1996 Spring Series or to modify the
terms of the rollover. Prior notice of any decision would be provided to
investors.
The Division of Investment Management of the SEC is of the view that the
rollover option constitutes an 'exchange offer', for the purposes of Section
11(c) of the Investment Company Act of 1940, and would therefore be prohibited
absent an exemptive order. The Sponsors have received exemptive orders under
Section 11(c) which they believe permit them to offer the rollover, but no
assurance can be given that the SEC will concur with the Sponsors' position and
additional regulatory approvals may be required.
INCOME, DISTRIBUTIONS AND REINVESTMENT
INCOME AND DISTRIBUTIONS
The annual income per Unit, after deducting estimated annual Fund expenses
per Unit, will depend primarily upon the amount of dividends declared and paid
by the issuers of the Securities and changes in the expenses of the Fund and, to
a lesser degree, upon the level of purchases of additional Securities and sales
of Securities. There is no assurance that dividends on the Securities will
continue at their current levels or be declared at all.
Each Unit receives an equal share of distributions of dividend income net
of estimated expenses. Because dividends on the Securities are not received at a
constant rate throughout the year, any distribution may be more or less than the
amount then credited to the Income Account. Dividends received are credited to
an Income Account and other receipts to a Capital Account. A Reserve Account may
be created by withdrawing from the Income and Capital Accounts amounts
considered appropriate by the Trustee to reserve for any material amount that
may be payable out of the Fund. Funds held by the Trustee in the various
accounts do not bear interest. In addition, distributions of amounts necessary
to pay the Deferred Sales Charge will be made from the Capital Account to an
account maintained by the Trustee for purposes of satisfying investors' sales
charge obligations. Although the Sponsors may collect the Deferred Sales Charge
monthly, to keep Units more fully invested the Sponsors currently do not
anticipate sales of Securities to pay the deferred sales charge until after the
rollover notification date. Proceeds of the disposition of any Securities not
used to pay Deferred Sales Charge or to redeem Units will be held in the Capital
Account and distributed on the final Distribution Day or following liquidation
of the Fund.
REINVESTMENT
Income and principal distributions on Units may be reinvested by
participating in the Fund's reinvestment plan. Under the plan, the Units
acquired for investors will be either Units already held in inventory by the
Sponsors or new Units created by the Sponsors' deposit of additional Securities,
contracts to purchase additional Securities or cash (or a bank letter of credit
in lieu of cash) with instructions to purchase additional Securities. Deposits
or purchases of additional Securities will generally be made so as to maintain
the then existing proportionate relationship among the number of shares of each
Security in the Fund. Units acquired by
7
<PAGE>
reinvestment will not be subject to the
initial sales charge but will be subject to any remaining installments of
Deferred Sales Charge. The Sponsors reserve the right to amend, modify or
terminate the reinvestment plan at any time without prior notice. Investors
holding Units in 'street name' should contact their broker, dealer or financial
institution if they wish to participate in the reinvestment plan.
FUND EXPENSES
Estimated annual Fund expenses are listed in Part A of the Prospectus; if
actual expenses exceed the estimate, the excess will be borne by the Fund. The
Trustee's annual fee is payable in monthly installments. The Trustee also
benefits when it holds cash for the Fund in non-interest bearing accounts.
Possible additional charges include Trustee fees and expenses for extraordinary
services, costs of indemnifying the Trustee and the Sponsors, costs of action
taken to protect the Fund and other legal fees and expenses, Fund termination
expenses and any governmental charges. The
Trustee has a lien on Fund assets to secure reimbursement of these amounts and
may sell Securities for this purpose if cash is not available. The Sponsors
receive an annual fee of a maximum of $0.35 per 1,000 Units to reimburse them
for the cost of providing Portfolio supervisory services to the Fund. While the
fee may exceed their costs of providing these services to the Fund, the total
supervision fees from all Series of Equity Income Fund will not exceed their
costs for these services to all of those Series during any calendar year. The
Sponsors may also be reimbursed for their costs of providing bookkeeping and
administrative services to the Fund, currently estimated at $0.10 per 1,000
Units. The Trustee's and Sponsors' fees may be adjusted for inflation without
investors' approval.
Expenses incurred in establishing the Fund, including the cost of the
initial preparation of documents relating to the Fund, Federal and State
registration fees, the initial fees and expenses of the Trustee, legal expenses
and any other out-of-pocket expenses will be paid by the Fund and amortized over
the life of the Fund. Advertising and selling expenses will be paid from the
Underwriting Account at no charge to the Fund. Defined Asset Funds can be a
cost-effective way to purchase and hold investments. Annual operating expenses
are generally lower than for managed funds. Because Defined Asset Funds have no
management fees, limited transaction costs and no ongoing marketing expenses,
operating expenses are generally less than 0.25% a year. When compounded
annually, small differences in expense ratios can make a big difference in your
investment results.
TAXES
The following discussion addresses only the tax consequences of Units held
as capital assets and does not address the tax consequences of Units held by
dealers, financial institutions or insurance companies.
In the opinion of Davis Polk & Wardwell, special counsel for the Sponsors,
under existing law:
The Fund is not an association taxable as a corporation for federal
income tax purposes. Each investor will be considered the owner of a pro
rata portion of each Security in the Fund under the grantor trust rules of
Sections 671-679 of the Internal Revenue Code of 1986, as amended (the
'Code'). Each investor will be considered to have received all of the
dividends paid on his pro rata portion of each Security when such dividends
are received by the Fund, regardless of whether such dividends are used to
pay a portion of the expenses or whether they are automatically reinvested
(see Reinvestment Plan).
Dividends considered to have been received by an investor from domestic
corporations which constitute dividends for federal income tax purposes
will generally qualify for the dividends-received deduction, which is
currently 70%, for corporate investors. Depending upon the individual
corporate investor's circumstances, limitations on the availability of the
dividends-received deduction may be applicable. Investors are urged to
consult their own tax advisers.
An individual investor who itemizes deductions will be entitled to
deduct his pro rata share of fees and expenses paid by the Fund only to the
extent that this amount together with the investor's other miscellaneous
deductions exceeds 2% of his adjusted gross income.
The investor's basis in his Units will equal the cost of his Units,
including the initial sales charge. A portion of the sales charge is
deferred until the termination of the Fund or the redemption of the Units.
The proceeds received by an investor upon such event will reflect deduction
of the deferred amount (the 'Deferred Sales Charge'). The annual statement
and the relevant tax reporting forms received by investors will reflect the
8
<PAGE>
actual amounts paid to them, net of the Deferred Sales Charge. Accordingly,
investors should not increase their basis in their Units by the Deferred
Sales Charge amount.
A distribution of Securities by the Trustee to an investor (or to his
agent) upon redemption of Units (or an exchange of Units for Securities by
the investor with the Sponsor) will not be a taxable event to the investor
or to other investors. The redeeming or exchanging investor's basis for
such Securities will be equal to his basis for the same Securities
(previously represented by his Units) prior to such redemption or exchange,
and his holding period for such Securities will include the period during
which he held his Units. An investor will have a taxable gain or loss,
which will be a capital gain or loss, when the investor (or his agent)
sells the Securities so received in redemption for cash, when a redeeming
or exchanging investor receives cash in lieu of fractional shares, when the
investor sells his Units for cash or when the Trustee sells the Securities
from the Fund. However, deductions may be disallowed for losses realized by
investors who invest their redemption proceeds in the Spring 1996 Series
('rollover investor') within 30 days of redemption to the extent that the
securities in that series are substantially identical to the old
Securities.
The lower net capital gain tax rate will be unavailable to those
noncorporate investors who, as of the Mandatory Termination Date (or
earlier termination of the Fund), have held their units for less than a
year and a day. Similarly, with respect to noncorporate rollover investors,
this lower rate will be unavailable if, as of the beginning of the rollover
period, those investors have held their shares for less than a year and a
day.
Under the income tax laws of the State and City of New York, the Fund is
not an association taxable as a corporation and the income of the Fund will
be treated as the income of the investors in the same manner as for federal
income tax purposes.
The foregoing discussion relates only to the tax treatment of U.S.
investors with regard to federal and certain aspects of New York State and
City income taxes. Investors may be subject to taxation in New York or in
other jurisdictions and should consult their own tax advisors in this
regard. Investors that are not U.S. citizens or residents ('foreign
investors') should be aware that dividend distributions from the Fund will
generally be subject to a withholding tax of 30%, or a lower treaty rate,
such as 15%, depending on their country of residence. Foreign investors
should consult their tax advisors on their eligibility for the withholding
rate under applicable treaties.
* * * *
At the termination of the Fund, the Trustee will furnish to each investor
an annual statement containing information relating to the dividends received by
the Fund on the Securities, the gross proceeds received by the Fund from the
disposition of any Security (resulting from redemption or the sale by the Fund
of any Security), and the fees and expenses paid by the Fund. The Trustee will
also furnish annual information returns to each investor and to the Internal
Revenue Service.
RETIREMENT PLANS
This Series of Equity Income Fund may be well suited for purchase by
Individual Retirement Accounts ('IRAs'), Keogh plans, pension funds and other
qualified retirement plans, certain of which are briefly described below.
Generally, capital gains and income received in each of the foregoing plans are
exempt from Federal taxation. All distributions from such plans are generally
treated as ordinary income but may, in some cases, be eligible for special 5 or
10 year averaging or tax-deferred rollover treatment. Holders of Units in IRAs,
Keogh plans and other tax-deferred retirement plans should consult their plan
custodian as to the appropriate disposition of distributions. Investors
considering participation in any of these plans should review specific tax laws
related thereto and should consult their attorneys or tax advisors with respect
to the establishment and maintenance of any of these plans. These plans are
offered by brokerage firms, including the Sponsor of this Fund, and other
financial institutions. Fees and charges with respect to such plans may vary.
Retirement Plans for the Self-Employed--Keogh Plans. Units of the Fund may
be purchased by retirement plans established for self-employed individuals,
partnerships or unincorporated companies ('Keogh plans'). The assets of a Keough
plan must be held in a qualified trust or other arrangement which meets the
requirements of the Code. Keogh plan participants may also establish separate
IRAs (see below) to which they may contribute up to an additional $2,000 per
year ($2,250 in a spousal account).
9
<PAGE>
Individual Retirement Account--IRA, Any individual can make use of a
qualified IRA arrangement for the purchase of Units of the Fund. Any individual
(including one covered by an employer retirement plan) can make a contribution
in an IRA equal to the lesser of $2,000 ($2,250 in a spousal account) or 100% of
earned income; such investment must be made in cash. However, the deductible
amount an individual may contribute will be reduced if the individual's adjusted
gross income exceeds $25,000 (in the case of a single individual), $40,000 (in
the case of married individuals filing a joint return) or $200 (in the case of a
married individual filing a separate return). Certain transactions which are
prohibited under Section 408 of the Code will cause all or a portion of the
amount in an IRA to be deemed to the distributed and subject to tax at that
time. Unless nondeductible contributions were made in 1987 or a later year, all
distributions from an IRA will be treated as ordinary income but generally are
eligible for tax-deferred rollover treatment. Taxable distributions made before
attainment of age 59 1/2, except in the case of the participant's death or
disability or where the amount distributed is part of a series of substantially
equal periodic (at least annual)
payments that are to be made over the life expectancies of the participant and
his or her beneficiary, are generally subject to a surtax in an amount equal to
10% of the distribution.
Corporate Pension and Profit-Sharing Plans. A pension or profit-sharing
plan for employees of a corporation may purchase Units of the Fund.
RECORDS AND REPORTS
The Trustee keeps a register of the names, addresses and holdings of all
investors. The Trustee also keeps records of the transactions of the Fund,
including a current list of the Securities and a copy of the Indenture, which
may be inspected by investors at reasonable times during business hours.
With each distribution, the Trustee includes a statement of the amounts of
income and any other receipts being distributed. Following the termination of
the Fund, the Trustee sends each investor of record a statement summarizing
transactions in the Fund's accounts including amounts distributed from them,
identifying Securities sold and purchased and listing Securities held and the
number of Units outstanding at termination and stating the Redemption Price per
1,000 Units at termination, and the fees and expenses paid by the Fund, among
other matters. Fund accounts may be audited by independent accountants selected
by the Sponsors and any report of the accountants will be available from the
Trustee on request.
TRUST INDENTURE
The Fund is a 'unit investment trust' created under New York law by a Trust
Indenture among the Sponsors and the Trustee. This Prospectus summarizes various
provisions of the Indenture, but each statement is qualified in its entirety by
reference to the Indenture.
The Indenture may be amended by the Sponsors and the Trustee without
consent by investors to cure ambiguities or to correct or supplement any
defective or inconsistent provision, to make any amendment required by the SEC
or other governmental agency or to make any other change not materially adverse
to the interest of investors (as determined in good faith by the Sponsors). The
Indenture may also generally be amended upon consent of investors holding 51% of
the Units. No amendment may reduce the interest of any investor in the Fund
without the investor's consent or reduce the percentage of Units required to
consent to any amendment without unanimous consent of investors. Investors will
be notified of the substance of any amendment.
The Trustee may resign upon notice to the Sponsors. It may be removed by
investors holding 51% of the Units at any time or by the Sponsors without the
consent of investors if it becomes incapable of acting or bankrupt, its affairs
are taken over by public authorities, or if under certain conditions the
Sponsors determine in good faith that its replacement is in the best interest of
the investors. The resignation or removal becomes effective upon acceptance of
appointment by a successor; in this case, the Sponsors will use their best
efforts to appoint a successor promptly; however, if upon resignation no
successor has accepted appointment within 30 days after notification, the
resigning Trustee may apply to a court of competent jurisdiction to appoint a
successor.
Any Sponsor may resign so long as one Sponsor with a net worth of
$2,000,000 remains. A new Sponsor may be appointed by the remaining Sponsors and
the Trustee to assume the duties of the resigning Sponsor. If there is only one
Sponsor and it fails to perform its duties or becomes incapable of acting or
bankrupt or its affairs are taken over by public authorities, the Trustee may
appoint a successor Sponsor at reasonable rates of
10
<PAGE>
compensation, terminate the
Indenture and liquidate the Fund or continue to act as Trustee without a
Sponsor. Merrill Lynch, Pierce, Fenner & Smith Incorporated has been appointed
as Agent for the Sponsors by the other Sponsors.
The Sponsors and the Trustee are not liable to investors or any other party
for any act or omission in the conduct of their responsibilities absent bad
faith, willful misfeasance, negligence (gross negligence in the case of a
Sponsor) or reckless disregard of duty. The Indenture contains customary
provisions limiting the liability of the Trustee.
MISCELLANEOUS
LEGAL OPINION
The legality of the Units has been passed upon by Davis Polk & Wardwell,
450 Lexington Avenue, New York, New York 10017, as special counsel for the
Sponsors.
AUDITORS
The Statement of Condition in Part A of the Prospectus was audited by
Deloitte & Touche LLP, independent accountants, as stated in their opinion. It
is included in reliance upon that opinion given on the authority of that firm as
experts in accounting and auditing.
TRUSTEE
The Trustee and its address are stated on the back cover of the Prospectus.
The Trustee is subject to supervision by the Federal Deposit Insurance
Corporation, the Board of Governors of the Federal Reserve System and either the
Comptroller of the Currency or state banking authorities.
SPONSORS
The Sponsors are listed on the back cover of the Prospectus. They may
include Merrill Lynch, Pierce, Fenner & Smith Incorporated, a wholly-owned
subsidiary of Merrill Lynch Co. Inc.; Smith Barney Inc., an indirect wholly-
owned subsidiary of The Travelers Inc.; Prudential Securities Incorporated, an
indirect wholly-owned subsidiary of the Prudential Insurance Company of America,
and Dean Witter Reynolds, Inc., a principal operating subsidiary of Dean Witter
Discover & Co. Each Sponsor, or one of its predecessor corporations, has acted
as Sponsor of a number of series of unit investment trusts. Each Sponsor has
acted as principal underwriter and managing underwriter of other investment
companies. The Sponsors, in addition to participating as members of various
selling groups or as agents of other investment companies, execute orders on
behalf of investment companies for the purchase and sale of securities of these
companies and sell securities to these companies in their capacities as brokers
or dealers in securities.
PUBLIC DISTRIBUTION
During the initial offering period and thereafter to the extent additional
Units continue to be offered for sale to the public by means of this Prospectus,
Units will be distributed directly to the public by this Prospectus at the
Public Offering Price determined in the manner provided above or to selected
dealers who are members of the National Association of Securities Dealers, Inc.
at a concession not in excess of the maximum sales charge. The Sponsors intend
to qualify Units for sale in all states in which qualification is deemed
necessary through the Underwriting Account and by dealers who are members of the
National Association of Securities Dealers, Inc.. The Sponsors do not intend to
qualify Units for sale in any foreign countries and this Prospectus does not
constitute an offer to sell Units in any country where Units cannot lawfully be
sold.
UNDERWRITERS' AND SPONSORS' PROFITS
Upon sale of the Units, the Underwriters will be entitled to receive sales
charges; each Underwriters' interest in the Underwriting Account will depend on
the number of Units acquired through the issuance of additional Units. The
Sponsors also realize a profit or loss on deposit of the Securities equal to the
difference between the cost of the Securities to the Fund (based on the
aggregate value of the Securities on their date of deposit) and the purchase
price of the Securities to the Sponsors plus commissions payable by the
Sponsors. In addition, a Sponsor or Underwriter may realize profits or sustain
losses on Securities it deposits in the Fund which were acquired
11
<PAGE>
from
underwriting syndicates of which it was a member. During the initial offering
period, the Underwriting Account also may realize profits or sustain losses as a
result of fluctuations after the initial date of deposit in the Public Offering
Price of the Units. In maintaining a secondary market for Units, the Sponsors
will also realize profits or sustain losses in the amount of any difference
between the prices at which they buy Units and the prices at which they resell
these Units (which include the sales charge) or the prices at which they redeem
the Units. Cash, if any, made available by buyers of Units to the Sponsors prior
to a settlement date for the purchase of Units may be used in the Sponsors'
businesses to the extent permitted by Rule 15c3-3 under the Securities Exchange
Act of 1934 and may be of benefit to the Sponsors.
PERFORMANCE INFORMATION
Sales material for the Fund may show the results of investing $10,000 a
year in the Strategy Stocks for a period of 15 years, rolling over the
investment (including dividends received) at the end of each year; and at the
end of the 15-year period withdrawing $50,000 a year for at least five years
thereafter, while reinvesting the remainder. It may also show the cumulative
results of an initial $10,000 invested in the Strategy Stocks and the DJIA and
rolled over each year for the same 15-year period.
Past performance of any series may not be indicative of results of future
series. Fund performance may be compared to the performance of the DJIA, the S&P
500 Composite Price Stock Index, the S&P MidCap 400 Index, or performance data
from publications such as Lipper Analytical Services, Inc., Morningstar
Publications, Inc., Money Magazine, The New York Times, U.S. News and World
Report, Barron's, Business Week, CDA Investment Technology, Inc., Forbes
Magazine or Fortune Magazine. Performance of the Strategy Stocks may be compared
in sales literature to performance of the S&P 500 Stock Price Composite Index,
to which may be added by year various national and international political and
economic events, and certain milestones in price and market indicators and in
offerings of Defined Asset Funds. This performance may also be compared for
various periods with an investment in short-term U.S. Treasury securities;
however, the investor should bear in mind that Treasury securities are fixed
income obligations, having the highest credit characterisitics, while the
Strategy Stocks involve greater risk because they have no maturities, and income
thereon is subject to the financial condition of, and declaration by, the
issuers.
DEFINED ASSET FUNDS
For decades informed investors have purchased unit investment trusts for
dependability and professional selection of investments. Defined Asset Funds'
philosophy is to allow investors to 'buy with knowledge' (because, unlike
managed funds, the portfolio is relatively fixed) and 'hold with confidence'
(because the portfolio is professionally selected and regularly reviewed).
Defined Asset Funds offers an array of simple and convenient investment choices,
suited to fit a wide variety of personal financial goals--a buy and hold
strategy for capital accumulation, such as for children's education or
retirement, or attractive, regular current income consistent with the
preservation of principal. Unit investment trusts are particularly suited for
the many investors who prefer to seek long-term profits by purchasing sound
investments and holding them, rather than through active trading. Few
individuals have the knowledge, resources or capital to buy and hold a
diversified portfolio on their own; it would generally take a considerable sum
of money to obtain the breadth and diversity that Defined Asset Funds offer.
Your investment objectives may call for a combination of Defined Asset Funds.
One of the most important investment decisions you face may be how to
allocate your investments among asset classes. Diversification among different
kinds of investments can balance the risks and rewards of each one. Most
investment experts recommend stocks for long-term capital growth. Long-term
corporate bonds offer relatively high rates of interest income. By purchasing
both defined equity and defined bond funds, investors can receive attractive
current income, as well as growth potential, offering some protection against
inflation. From time to time various advertisements, sales literature, reports
and other information furnished to current or prospective investors may present
the average annual compounded rate of return of selected asset classes over
various periods of time, compared to the rate of inflation over the same
periods.
EXCHANGE OPTION
You may exchange Fund Units for units of other Select Ten Portfolios
subject only to the remaining deferred sales charge on the units received. You
may exchange your units of any Select Ten Portfolio, of any other Defined Asset
Fund with a regular maximum sales charge of at least 3.50%, or of any
unaffiliated unit trust with a regular
12
<PAGE>
maximum sales charge of at least 3.0%,
for Units of this Fund at their relative net asset values, subject only to a
reduced sales charge, or to any remaining Deferred Sales Charge, as applicable.
To make an exchange, you should contact your financial professional to find
out what suitable exchange funds are available and to obtain a prospectus. You
may acquire units of only those exchange funds in which the Sponsors are
maintaining a secondary market and which are lawfully for sale in the state
where you reside. Except for the reduced sales charge, an exchange is a taxable
event normally requiring recognition of any gain or loss on the units exchanged.
However, the Internal Revenue Service may seek to disallow a loss if the
portfolio of the units acquired is not materially different from the portfolio
of the units exchanged; you should consult your own tax advisor. If the proceeds
of units exchanged are insufficient to acquire a whole number of exchange fund
units, you may pay the difference in cash (not exceeding the price of a single
unit acquired).
As the Sponsors are not obligated to maintain a secondary market in any
series, there can be no assurance that units of a desired series will be
available for exchange. The Exchange Option may be amended or terminated at any
time without notice.
SUPPLEMENTAL INFORMATION
Upon written or telephonic request to the Trustee shown on the back cover
of this Prospectus, investors will receive without charge supplemental
information about the Fund, which has been filed with the SEC. The supplemental
information includes more detailed risk factor disclosure about the types of
securities that may be part of the Portfolio and general information about the
structure and operation of the Fund.
13
<PAGE>
Def ined
Asset FundsSM
SPONSORS/UNDERWRITERS AND SELECTED EQUITY INCOME FUND
DEALER: SELECT TEN PORTFOLIO
Merrill Lynch, 1995 SPRING SERIES
Pierce, Fenner & Smith Incorporated
Defined Asset Funds
P.O. Box 9051 Units of this Fund may no longer be available
Princeton, N.J. 08543-9051 and therefore information contained herein
(609) 282-8500 may be subject to amendment. A registration
Smith Barney Inc. statement relating to securities of a future
Unit Trust Department series has been filed with the Securities and
388 Greenwich Street--23rd Floor Exchange Commission. These securities may not
New York, NY 10013 be sold nor may offers to buy be accepted
1-800-223-2532 prior to the time the registration statement
Prudential Securities Incorporated becomes effective. For more complete
One Seaport Plaza information about a future series, including
199 Water Street additional information on charges and
New York, N.Y. 10292 expenses, please call or write one of the
(212) 776-1000 Sponsors listed here for a prospectus. Read
Dean Witter Reynolds Inc. the prospectus before you invest or send
Two World Trade Center--59th Floor money.
New York, N.Y. 10048 ------------------------------
(212) 392-2222 This Prospectus does not contain all of the
- ------------------------------ information with respect to the investment
PaineWebber Incorporated company set forth in its registration
1200 Harbor Blvd. statement and exhibits relating thereto which
Weehawken, N.J. 07087 have been filed with the Securities and
(201) 902-3000 Exchange Commission, Washington, D.C. under
TRUSTEE: the Securities Act of 1933 and the Investment
The Bank of New York Company Act of 1940, and to which reference
(a New York Banking Corporation) is hereby made.
Box 974--Wall Street Division ------------------------------
New York, N.Y. 10268-0974 No person is authorized to give any
1-800-221-7771 information or to make any representations
with respect to this investment company not
contained in this Prospectus; and any
information or representation not contained
herein must not be relied upon as having been
authorized. This Prospectus shall not
constitute an offer to sell or the
solicitation of an offer to buy nor shall
there be any sale of these securities in any
State in which such offer, solicitation or
sale would be unlawful prior to registration
or qualification under the securities laws of
any such State.
15099--5/95
<PAGE>
PART II
ADDITIONAL INFORMATION NOT INCLUDED IN THE PROSPECTUS
A. The following information relating to the Depositors is incorporated by
reference to the SEC filings indicated and made a part of this Registration
Statement.
<TABLE><CAPTION>
SEC FILE OR
IDENTIFICATION DATE
NUMBER FILED
----------------------------------------
<S> <C> <C>
I. Bonding Arrangements and Date of Organization of the
Depositors filed pursuant to Items A and B of
Part II of the Registration Statement on Form
S-6 under the Securities Act of 1933:
Merrill Lynch, Pierce, Fenner & Smith
Incorporated 2-52691 1/17/95
Smith Barney Inc. .............................. 33-29106 6/29/89
Prudential Securities Incorporated.............. 2-61418 4/26/78
Dean Witter Reynolds Inc. ...................... 2-60599 1/4/78
II. Information as to Officers and Directors of the
Depositors filed pursuant to Schedules A and D
of Form BD under Rules 15b1-1 and 15b3-1 of the
Securities Exchange Act of 1934:
Merrill Lynch, Pierce, Fenner & Smith
Incorporated 8-7221 5/26/94, 6/29/92
Smith Barney Inc. .............................. 8-8177 8/29/94, 8/2/93
Prudential Securities Incorporated.............. 8-27154 6/30/94, 6/20/88
Dean Witter Reynolds Inc. ...................... 8-14172 2/23/94, 4/9/91
III. Charter documents of the Depositors filed as
Exhibits to the Registration Statement on Form
S-6 under the Securities Act of 1933 (Charter,
By-Laws):
Merrill Lynch, Pierce, Fenner & Smith
Incorporated 2-73866, 2-77549 9/22/81, 6/15/82
Smith Barney Inc. .............................. 33-20499 3/30/88
Prudential Securities Incorporated.............. 2-52947 3/4/75
Dean Witter Reynolds Inc. ...................... 2-60599 1/4/78
B. The Internal Revenue Service Employer Identification
Numbers of the Sponsors and Trustee are as follows:
Merrill Lynch, Pierce, Fenner & Smith
Incorporated 13-5674085
Smith Barney Inc. .............................. 13-1912900
Prudential Securities Incorporated.............. 22-2347336
Dean Witter Reynolds Inc. ...................... 94-0899825
The Bank of New York, Trustee................... 13-4941102
</TABLE>
UNDERTAKING
The Sponsors undertake that they will not make any amendment to the Supplement
to this Registration Statement which includes material changes without
submitting the amendment for Staff review prior to distribution.
II-1
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
The Registration Statement on Form S-6 comprises the following papers and
documents:
The facing sheet of Form S-6.
The Cross-Reference Sheet (incorporated by reference from the
Cross-Reference Sheet of the Registration Statement of Defined Asset Funds
Municipal Insured Series, 1933 Act File No. 33-54565).
The Prospectus.
Additional Information not included in the Prospectus (Part II).
The following exhibits:
1.1 --Form of Trust Indenture (incorporated by reference to Exhibit 1.1 of
the Registration Statement of Equity Income Fund, Select Ten
Portfolio--1994 Winter Series, 1933 Act File No. 33-51049).
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 name under the headings
'Taxes' and 'Miscellaneous--Legal Opinion' in the Prospectus.
5.1 --Consent of independent accountants.
9.1 --Information Supplement.
R-1
<PAGE>
SIGNATURES
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 10TH DAY OF MAY,
1995.
SIGNATURES APPEAR ON PAGE R-3, R-4, R-5 AND R-6.
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 Board of Directors of Prudential
Securities Incorporated has signed this Registration Statement or Amendment to
the Registration Statement pursuant to Powers of Attorney authorizing the person
signing this Registration Statement or Amendment to the Registration Statement
to do so on behalf of such members.
A majority of the members of the Board of Directors of Dean Witter
Reynolds Inc. has signed this Registration Statement or Amendment to the
Registration Statement pursuant to Powers of Attorney authorizing the person
signing this Registration Statement or Amendment to the Registration Statement
to do so on behalf of such members.
R-2
<PAGE>
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
DEPOSITOR
By the following persons, who constitute Powers of Attorney have been filed
a majority of under
the Board of Directors of Merrill Form SE and the following 1933 Act
Lynch, Pierce, File
Fenner & Smith Incorporated: Number: 33-43466
HERBERT M. ALLISON, JR.
BARRY S. FREIDBERG
EDWARD L. GOLDBERG
STEPHEN L. HAMMERMAN
JEROME P. KENNEY
DAVID H. KOMANSKY
DANIEL T. NAPOLI
THOMAS H. PATRICK
JOHN L. STEFFENS
DANIEL P. TULLY
ROGER M. VASEY
ARTHUR H. ZEIKEL
By
ERNEST V. FABIO
(As authorized signatory for Merrill Lynch, Pierce,
Fenner & Smith Incorporated and
Attorney-in-fact for the persons listed above)
R-3
<PAGE>
SMITH BARNEY INC.
DEPOSITOR
By the following persons, who constitute a majority of Powers of Attorney
the Board of Directors of Smith Barney Inc.: have been filed
under the 1933 Act
File Number:
33-49753 and
33-55073
STEVEN D. BLACK
JAMES BOSHART III
ROBERT A. CASE
JAMES DIMON
ROBERT DRUSKIN
ROBERT F. GREENHILL
JEFFREY LANE
JACK L. RIVKIN
By GINA LEMON
(As authorized signatory for
Smith Barney Inc. and
Attorney-in-fact for the persons listed above)
R-4
<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-5
<PAGE>
DEAN WITTER REYNOLDS INC.
DEPOSITOR
By the following persons, who constitute Powers of Attorney have been filed
a majority of under Form
the Board of Directors of Dean Witter SE and the following 1933 Act File
Reynolds Inc.: Number:
33-17085
NANCY DONOVAN
CHARLES A. FIUMEFREDDO
JAMES F. HIGGINS
STEPHEN R. MILLER
PHILIP J. PURCELL
THOMAS C. SCHNEIDER
WILLIAM B. SMITH
By
MICHAEL D. BROWNE
(As authorized signatory for Dean Witter Reynolds Inc.
and Attorney-in-fact for the persons listed above)
R-6
EXHIBIT 3.1
DAVIS POLK & WARDWELL
450 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
(212) 450-4000
MAY 10, 1995
DEFINED ASSET FUNDS EQUITY INCOME FUND,
SELECT TEN PORTFOLIO--1995 SPRING SERIES
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
SMITH BARNEY INC.
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
DEAN WITTER REYNOLDS INC.
C/O MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
DEFINED ASSET FUNDS
P.O. BOX 9051
PRINCETON, N.J. 08543-9051
(609) 282-8500
Dear Sirs:
We have acted as special counsel for you, as sponsors (the 'Sponsors') of
Defined Asset Funds Equity Income Fund, Select Ten Portfolio--1995 Spring Series
(the 'Fund'), in connection with the issuance of units of fractional undivided
interest in the Fund (the 'Units') in accordance with the Trust Indenture
relating to the Fund (the 'Indenture').
We have examined and are familiar with originals or copies, certified or
otherwise identified to our satisfaction, of such documents and instruments as
we have deemed necessary or advisable for the purpose of this opinion.
Based upon the foregoing, we are of the opinion that (i) the execution and
delivery of the Indenture and the issuance of the Units have been duly
authorized by the Sponsors and (ii) the Units, when duly issued and delivered by
the Sponsors and the Trustee in accordance with the Indenture, will be legally
issued, fully paid and non-assessable.
We hereby consent to the use of this opinion as Exhibit 3.1 to the
Registration Statement relating to the Units filed under the Securities Act of
1933 and to the use of our name in such Registration Statement and in the
related prospectus under the headings 'Taxes' and 'Miscellaneous--Legal
Opinion.'
Very truly yours,
DAVIS POLK & WARDWELL
EXHIBIT 5.1
CONSENT OF INDEPENDENT ACCOUNTANTS
The Sponsors and Trustee of Defined Asset Funds Equity Income Fund,
Select Ten Portfolio--1995 Spring Series:
We hereby consent to the use in this Registration Statement No. 33-55807 of our
opinion dated May 10, 1995, relating to the Statement of Condition of Defined
Asset Funds Equity Income Fund, Select Ten Portfolio--1995 Spring Series 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.
May 10, 1995
DEFINED ASSET FUNDS
INFORMATION SUPPLEMENT
SELECT TEN PORTFOLIOS
This Information Supplement provides additional information concerning
the structure, operations and risks of trusts (each, a "Portfolio") of the
Select Ten Series of Defined Asset Funds not found in the prospectuses for the
Portfolios. This Information Supplement is not a prospectus and does not include
all of the information that a prospective investor should consider before
investing in a Portfolio. This Information Supplement should be read in
conjunction with the prospectus for the Portfolio in which an investor is
considering investing ("Prospectus"). Copies of the Prospectus can be obtained
by calling or writing the Trustee at the telephone number and address indicated
on the back cover of the Prospectus.
This Information Supplement is dated May 1, 1995. Capitalized terms
have been defined in the Prospectus.
TABLE OF CONTENTS
Description of Portfolio Investments..................................... 1
Portfolio Supervision.................................................. 1
Risk Factors............................................................. 2
Equity Securities...................................................... 2
International Risk Factors (United Kingdom Portfolio
and Hong Kong Portfolio only)........................................ 3
Additional Hong Kong Risk Factors (Hong Kong
Portfolio only)...................................................... 6
Concentration.......................................................... 8
Rollover ................................................................ 9
Taxation-Retirement Plans................................................ 12
DESCRIPTION OF PORTFOLIO INVESTMENTS
Portfolio Supervision
Each Portfolio is a unit investment trust which normally follows a buy
and hold investment strategy. Traditional methods of investment management for
mutual funds typically involve frequent changes in portfolio holdings based on
economic, financial and market analyses. Because a Portfolio is not actively
managed the adverse financial condition of an issuer or its failure to maintain
its current dividend rate will not necessarily require the sale of its
securities from a Portfolio. In the event a public tender offer is made for a
security or a merger or acquisition is announced affecting a security, the
Sponsors may instruct the Trustee to tender or sell the security on the open
market when in its opinion it is in the best interest of investors to do so. The
Sponsors may also instruct a Trustee to sell a security in the following
circumstances: (i) failure to declare or pay a regular dividend on a security or
anticipated dividends generally; (ii) institution of certain legal proceedings;
(iii) other legal questions or impediments affecting the security or payments on
that security; (iv) default under certain documents adversely affecting the
declaration or payment of anticipated dividends on the security, the issuer's
general credit standing or the sound investment character of the security, or a
default on other outstanding securities of the same issuer; (v) if a security
becomes inconsistent with a Portfolio's investment objectives; or (vi) decline
in security price or other market or credit factors that, in the opinion of
Defined Asset Funds research, makes
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retention of the security detrimental to the interests of investors. If there is
a failure to declare or pay a regular dividend on a security or anticipated
dividends generally on that security and the Agent for the Sponsors fails to
instruct the Trustee within 30 days after notice of the failure, the Trustee
will sell the security. However, given the investment philosophy of the Select
Ten Portfolios, 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 a Portfolio's initial date of deposit and even though a stock may
no longer be among the ten highest dividend-yielding stocks in the Dow Jones
Industrial Average, the Financial Times Industrial Ordinary Share Index (FT
Index) or the Hang Seng Index, as the case may be, a 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.
Voting rights with respect to the securities will be exercised by the
Trustee in accordance with directions given by the Sponsors.
RISK FACTORS
Equity Securities
An investment in Units of a Portfolio should be made with an
understanding of the risks inherent in an investment in equity securities,
including the risk that the financial condition of the issuers of the securities
may become impaired or that the general condition of the relevant stock market
may worsen (both of which may contribute directly to a decrease in the value of
the securities and thus in the value of the Units) or the risk that holders of
common stocks have a right to receive payments from the issuers of those stocks
that is generally inferior to that of creditors of, or holders of debt
obligations issued by, the issuers and that the rights of holders of common
stocks generally rank inferior to the rights of holders of preferred stock.
Common stocks in general and stocks of petroleum refining companies, in
particular, may be especially susceptible to general stock market movements and
to volatile increases and decreases in value as market confidence in and
perceptions of the issuers change. These perceptions are based on unpredictable
factors including expectations regarding government, economic, monetary and
fiscal policies, inflation and interest rates, economic expansion or
contraction, and global or regional political, economic or banking crises.
Holders of common stocks incur more risk than holders of preferred
stocks and debt obligations because common stockholders, as owners of the
entity, have generally inferior rights to receive payments from the issuer in
comparison with the rights of creditors of, or holders of debt obligations or
preferred stocks issued by the issuer. Holders of common stocks of the type held
by a Portfolio have a right to receive dividends only when and if, and in the
amounts, declared by the issuer's board of directors and to participate in
amounts available for distribution by the issuer only after all other claims on
the issuer have been paid or provided for. By contrast, holders of preferred
stocks have the right to receive dividends at a fixed rate when and as declared
by the issuer's board of directors, normally on a cumulative basis, but do not
participate in other amounts available for distribution by the issuing
corporation. Cumulative preferred stock dividends must be paid before common
stock dividends and any cumulative preferred stock dividend omitted is added to
future dividends payable to the holders of cumulative preferred stock. Preferred
stocks are also entitled to rights on liquidation which are senior to those of
common stocks. Moreover, common stocks do not represent an obligation of the
issuer and therefore do not offer any assurance of income or provide the degree
of protection of capital provided by debt securities. Indeed, the issuance of
debt securities or even preferred stock will create prior claims for payment of
principal, interest, liquidation preferences and dividends which could adversely
affect the ability and inclination of the issuer to declare or pay dividends on
its common stock or the rights of holders of common stock with respect to assets
of the issuer upon liquidation or bankruptcy. Further, unlike debt securities
which
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typically have a stated principal amount payable at maturity (whose value,
however, will be subject to market fluctuations prior thereto), common stocks
have neither a fixed principal amount nor a maturity and have values which are
subject to market fluctuations for as long as the stocks remain outstanding. The
value of the securities in a Portfolio thus may be expected to fluctuate over
the entire life of the Portfolio to values higher or lower than those prevailing
on the Portfolio's initial date of deposit. Any monies allocated to the purchase
of a security will generally be held for the purchase of the security. However,
a Portfolio may not be able to buy each security at the same time, because of
unavailability of the security or because of any restrictions applicable to the
Portfolio relating to the purchase of the security by reason of the federal
securities laws or otherwise.
International Risk Factors (United Kingdom Portfolio
and Hong Kong Portfolio only)
Foreign Issuers. Investments in Portfolios consisting partially or
entirely of securities of foreign issuers involve investment risks that are
different in some respects from an investment in a Portfolio that invests
partially or entirely in securities of domestic issuers. Those investment risks
include future political and economic developments and the possible
establishment of exchange controls or other governmental restrictions which
might adversely affect the payment or receipt of payment of dividends on the
relevant securities. In addition, for foreign issuers that are not subject to
the reporting requirements of the Securities Exchange Act of 1934, there may be
less publicly available information than is available from a domestic issuer.
Also, foreign issuers are not necessarily subject to uniform accounting,
auditing and financial reporting standards, practices and requirements such as
those applicable to domestic issuers.
Securities issued by non-U.S. issuers generally pay dividends in
foreign currencies, and are principally traded in foreign currencies. Therefore,
there is a risk that the United States dollar value of these securities will
vary with fluctuations in the United States dollar foreign exchange rates for
the relevant currencies.
Foreign Exchange Rates. A Portfolio of securities that are principally
traded in foreign currencies involves investment risks that are substantially
different from an investment in a fund which invests in securities that are
principally traded in United States dollars. This is because the United States
dollar value of a Portfolio (and hence of the Units) and of the distributions
from the Portfolio will vary with fluctuations in the United States dollar
foreign exchange rates for the relevant currencies. Most foreign currencies have
fluctuated widely in value against the United States dollar for many reasons,
including supply and demand of the respective currency, the soundness of the
world economy and the strength of the respective economy as compared to the
economies of the United States and other countries.
The post-World War II international monetary system was, until 1973,
dominated by the Bretton Woods Treaty, which established a system of fixed
exchange rates and the convertibility of the United States dollar into gold
through foreign central banks. Starting in 1971, growing volatility in the
foreign exchange markets caused the United States to abandon gold convertibility
and to effect a small devaluation of the United States dollar. In 1973, the
system of fixed exchange rates between a number of the most important industrial
countries of the world, among them the United States and most Western European
countries, was completely abandoned. Subsequently, major industrialized
countries have adopted "floating" exchange rates, under which daily currency
valuations depend on supply and demand in a freely fluctuating international
market. Many smaller or developing countries have continued to "peg" their
currencies to the United States dollar although there has been some interest in
recent years in "pegging" currencies to "baskets" of other currencies or to a
Special Drawing Right administered by the International Monetary Fund. Since
1983, the Hong Kong dollar has been pegged to the U.S. dollar although there is
no guarantee that the Hong Kong dollar will continue to be "pegged" to the U.S.
dollar in the future. In Europe a European Currency Unit ("ECU") has been
developed. Currencies are generally traded by leading
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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 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 try ng to anticipate the future relative strength or
weakness of a particular currency may sometimes exercise considerable
speculative influence on currency exchange rates by purchasing or selling large
amounts of the same currency or currencies. However, over the long term, the
currency of a country with a low rate of inflation and a favorable balance of
trade should increase in value relative to the currency of a country with a high
rate of inflation and deficits in the balance of trade.
The Trustee will estimate current exchange rates for the relevant
currencies based on activity in the various currency exchange markets. However,
since these markets are volatile and are constantly changing, depending on the
activity at any particular time of the large international commercial banks,
various central banks, large multi-national corporations, speculators and other
buyers and sellers of foreign currencies, and since actual foreign currency
transactions may not be instantly reported, the exchange rates estimated by the
Trustee may not be indicative of the amount in United States dollars a Portfolio
would receive had the Trustee sold any particular currency in the market.
The foreign exchange transactions of a Portfolio may be concluded by
the Trustee with foreign exchange dealers acting as principals either on a spot
(i.e., cash) buying basis or on a forward foreign exchange basis on the date a
Portfolio is entitled to receive the applicable foreign currency. These forward
foreign exchange transactions will generally be of as short a duration as
practicable and will generally settle on the date of receipt of the applicable
foreign currency involving specific receivables or payables of the Portfolio
accruing in connection with the purchase and sale of its securities and income
received on the securities or the sale and redemption of Units. These
transactions are accomplished by contracting to purchase or sell a specific
currency at a future date and price set at the time of the contract. The cost to
a Portfolio of engaging in these foreign currency transactions varies with such
factors as the currency involved, the length of the contract period and the
market conditions then prevailing. Since transactions in foreign currency
exchange are usually conducted on a principal basis, fees or commissions are not
normally involved. Although foreign exchange dealers trade on a net basis they
do realize a profit based upon the difference between the price at which they
are willing to buy a particular currency (bid price) and the price at which they
are willing to sell the currency (offer price). The relevant exchange rate used
for evaluations of securities will include the cost of buying or selling, as the
case may be, of any forward foreign exchange contract in the relevant currency
to correspond to the requirement that Units when purchased settle on a regular
basis and that the Trustee settle redemption requests in United States dollars
within seven days.
Exchange Controls. On the basis of the best information available to
the Sponsors at the present time none of the securities, except as otherwise
indicated in a Portfolio's prospectus, is subject to exchange control
restrictions under existing law which would materially interfere with payment to
a Portfolio of amounts due on securities either because the particular
jurisdictions have not adopted any currency regulations of this type or because
the issues qualify for an exemption or the Portfolio, as an extraterritorial
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investor, has qualified its purchase of 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 a Portfolio and on the ability of a Portfolio to
satisfy its obligation to redeem Units tendered to the Trustee for redemption.
Liquidity. Foreign securities generally have not been registered under
the Securities Act of 1933 and may not be exempt from the registration
requirements of the Act. Sales of non-exempt securities by a Portfolio in United
States securities markets are subject to severe restrictions and may not be
practicable. Accordingly, sales of these securities by a Portfolio will
generally be effected only in foreign securities markets. Although the Sponsors
do not believe that a Portfolio will encounter obstacles in disposing of the
securities, investors should realize that the securities may be traded in
foreign countries where the securities markets are not as developed or efficient
and may not be as liquid as those in the United States. To the extent the
liquidity of these markets becomes impaired, however, the value of a Portfolio
when responding to a substantial volume of requests for redemption of Units
(should redemptions be necessary despite the market making activities of the
Sponsors) received at or about the same time could be adversely affected. This
might occur, for example, as a result of economic or political turmoil in a
country in whose currency a Portfolio had a substantial portion of its assets
invested, or should relations between the United States and a foreign country
deteriorate markedly. Even though the securities are listed, the principal
trading market for the securities may be in the over-the-counter market. As a
result, the existence of a liquid trading market for the securities may depend
on whether dealers will make a market in the securities. There can be no
assurance that a market will be made for any of the securities, that any market
for the securities will be maintained or of the liquidity of the securities in
any markets made. In addition, a Portfolio may be restricted under the
Investment Company Act of 1940 from selling securities to any Sponsor. The price
at which the securities may be sold to meet redemptions and the value of a
Portfolio will be adversely affected if trading markets for the securities are
limited or absent.
Additional Hong Kong Risk Factors (Hong Kong Portfolio only)
The information set forth below has been extracted from various
governmental and private publications, but no representation can be made as to
its accuracy; furthermore, no representation is made that any correlation exists
between the state of the economy of Hong Kong and the value of any securities
held by a Hong Kong Portfolio.
Hong Kong. The British colony of Hong Kong, established in the 1840's,
is situated on the southern coast of the People's Republic of China ("China").
It is currently a colony of Great Britain, ruled by the British Government with
a Governor appointed by the Queen on the advice of the British Government. The
Hong Kong government generally follows a laissez-faire policy towards industry.
There are no major import, export or foreign exchange restrictions. Regulation
of business is generally minimal with certain exceptions, including regulated
entry into certain sectors of the economy and a fixed exchange rate regime by
which the Hong Kong dollar has been pegged to the U.S. dollar. Over the ten year
period between 1983 and 1993, Real Gross Domestic Product increased at an
average annual rate of approximately 6%.
Hong Kong Exchange. The Stock Exchange of Hong Kong Ltd. (the "Hong
Kong Exchange"), with a total market capitalization as of December 31, 1993 of
approximately US$385 billion, is the second largest stock market in Asia,
measured by market capitalization, behind that of Japan. As of that date, 477
companies and 891 securities (including ordinary shares, warrants and other
derivative instruments) were listed on the Hong Kong Exchange. The Securities
and Futures Commission, which was established by
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the Hong Kong government in 1989, exercises supervision of the securities,
financial investment and commodities futures industry.
The Hang Seng Index is subject to change and delisting of shares of
any issuers may have an adverse impact on the performance of a Portfolio.
Jardine Matheson Holdings Ltd. ("Jardine Matheson"), Jardine Strategic
Holdings Ltd. ("Jardine Strategic"), Lai Sun Garment (International) Ltd. and
Windsor Industrial Corporation Ltd. delisted from the Hong Kong Exchange on
November 30, 1994 and three Jardine affiliates (Dairy Farms International
Holdings Ltd., Hong Kong Land Holdings Ltd. and Mandarin Oriental International
Ltd. (collectively with Jardine Matheson and Jardine Strategic, the "Jardine
Companies")) delisted from the Hong Kong Exchange on February 28, 1995. The
Jardine Companies represented almost 10% of total capitalization of the Hang
Seng Index. Any future delisting could have an adverse impact on the
performance of a Portfolio. Such delisting would not necessarily result in
the disposal of the stock of these companies, nor would it prevent a Portfolio
from purchasing such securities in connection with the issuance of additional
Units or the purchase of additional securities.
Volatility of the Hang Seng Index. Securities prices on the Hang Seng
Index can be highly volatile and are sensitive to developments in Hong Kong and
China, as well as other world markets. For example, in 1989, the Hang Seng Index
rose to 3,310 in May from its previous year-end level of 2,687 but fell to 2,094
in early June 1989. The Hang Seng Index gradually climbed in subsequent months
but fell by 181 points on October 13, 1989 (approximately 6.5%) following a
substantial fall in the U.S. stock markets, and at the year end closed at a
level of 2,837. More recently, during 1994 the Hang Seng Index lost
approximately 31% of its value.
The following table demonstrates the volatility of the Hang Seng Index
in comparison to that of the FT Index and the Dow Jones Industrial Average by
showing for each index, the number of trading days during the period from
January 1, 1989 through March 31, 1994, on which the value of the index in local
currency gained or lost 1%, 2% and 3% of its value as of the previous trading
day.
Percentage Gains or Losses Number of Trading Days with
in Value of Index Gains or Losses Shown
------------------------- ----------------------------------------------
Hang Seng FT Dow Jones
Index Index Industrial Average
---------------- -------------------------
1%............................... 532 364251
2%............................... 194 3935
3%............................... 74 1210
Previous performance is no guarantee of future results; any index may
display more or less volatility in the future.
Hong Kong's Reversion to Chinese Sovereignty. Hong Kong will revert to
Chinese sovereignty effective July 1, 1997 with Hong Kong becoming a Special
Administrative Region ("SAR") of China. Although China has committed by treaty
to preserve for 50 years the economic and social freedoms currently enjoyed in
Hong Kong, the continuation of the economic system in Hong Kong after the
reversion will be dependent on the Chinese government and there can be no
assurances that the commitment made by China regarding Hong Kong will be
maintained. Legislation has recently been enacted in Hong Kong that will extend
democratic voting procedures for Hong Kong's legislature. China has expressed
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disagreement with this legislation which it states is in contravention of the
principles evinced in the Basic Law of the Hong Kong SAR. The National People's
Congress of China has passed a resolution to the effect that the Legislative
Council and certain other councils and boards of the Hong Kong Government will
be terminated on June 30, 1997. It is expected that such bodies will be
subsequently reconstituted in accordance with China's interpretation of the
Basic Law. China and Great Britain have also yet to resolve their differences on
other issues relating to the reversion to sovereignty including the financing of
and construction of a new international airport on Lantau Island. Any increase
in uncertainty as to the future economic and political status of Hong Kong could
have a materially adverse effect on the value of a Hong Kong Portfolio.
Most Favored Nation Status. China (like most other nations) currently
enjoys a most favored nation status ("MFN Status") from the United States, which
is subject to annual review by the President of the United States. One June 2,
1994, President Clinton signed an executive order which renewed China's MFN
Status for another year. Revocation of the MFN Status would have a severe effect
on China's trade and thus could have a materially adverse effect on the value of
a Hong Kong Portfolio.
Other Economic Factors. The performance of certain companies listed on the
Hong Kong Exchange is linked to the economic climate of China. For example,
between 1985 and 1990, Hong Kong businesses invested US$20 billion in the nearby
Chinese province of Guangdong to take advantage of the lower property and labor
costs than were available in Hong Kong. Recently, however, high economic growth
in this area (industrial production grew at an annual rate of about 20% in 1991,
24% in 1992 and 36.5% in 1993) has been associated with rising inflation and
concerns about the devaluation of the Chinese currency. Any downturn in economic
growth or increase in the rate of inflation in China could have a materially
adverse effect on the value of a Hong Kong Portfolio.
Concentration
A Portfolio may contain or be concentrated in securities of issuers
engaged in the industries discussed below. An investment in a Portfolio should
be made with an understanding of the risks that these securities may entail,
certain of which are described below.
Petroleum Refining Companies. According to the U.S. Department of
Commerce, the factors which will most likely shape the petroleum refining and
marketing industry to 1996 and beyond include the price and availability of oil
from the Middle East, general economic conditions, changes in United States
regulatory policies, international events and the continued decline in U.S.
production of crude oil. Possible effects of these factors may be increased U.S.
and world dependence on oil from the Organization of Petroleum Exporting
Countries ("OPEC"), highly uncertain and potentially more volatile oil prices
and a higher rate of growth for natural gas production than for other fuels.
The refining industry is highly competitive with margins sensitive to
supply and demand cycles. Declining U.S. crude oil production will likely lead
to increased dependence on OPEC oil, putting refiners at risk of continued and
unpredictable supply disruption. The existence of surplus crude oil production
capacity and the willingness to adjust production levels are the two principal
requirements for stable crude oil markets. Without excess capacity, supply
disruptions in some countries cannot be compensated for by others.
Although unused capacity can contribute to market stability, it also
creates pressure to overproduce and contributes to market uncertainty. The
likely restoration of a large portion of Kuwait and Iraq's production and export
capacity over the next few years could lead to market disruptions in the absence
of substantial growth in world oil demand. Formerly, OPEC members attempted to
exercise control over production levels in each country through a system of
mandatory production quotas. The mandatory system
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has since been replaced with a voluntary system. Production under the new system
has had to be curtailed on at least one occasion as a result of weak prices,
even in the absence of supplies from Iraq. The pressure to deviate from
mandatory quotas, if they are reimposed, is likely to be substantial and could
lead to a weakening of prices.
Fluctuations in demand for oil-related products could also effect the
profitability of oil companies. If world oil demand increases additional
capacity and production will be required to compensate for expected sharp drops
in U.S. crude oil production and exports from the former Soviet Union. Only a
few OPEC countries, particularly Saudi Arabia, have the petroleum reserves that
will allow the required increase in production capacity to be attained. Given
the large-scale financing that is required, the prospect that such expansion
will occur soon enough to meet the increased demand is uncertain. However, no
assurance can be given that the demand for or the price of oil will increase or
that if either anticipated increase does take place, it will not be marked by
great volatility. Lower consumer demand due to increases in energy efficiency,
gasoline reformulations that call for less crude oil, warmer winters or a
general slowdown in economic growth in this country and abroad, could negatively
affect the price of oil and the profitability of oil companies. Cheaper oil
could also decrease demand for natural gas.
Refiners are subject to extensive federal, state and local environmental
laws and regulations that will pose serious challenges to the industry over the
coming decade. Refiners are likely to be required to commit considerable
resources to plant additions and make major production adjustments in order to
comply with increasingly stringent environmental legislation, such as the 1990
amendments to the Clean Air Act. If the cost of these changes is substantial
enough to cut deeply into profits, smaller refiners may be forced out of the
industry entirely. Additionally, refining operations are hazardous due, in part,
to the highly flammable nature of crude oil, natural gas and refined products.
As a result, refining operations are subject to personal injury and property
damage incidents.
Any future scientific advances concerning new sources of energy and fuels
or legislative changes relating to the energy industry or the environment could
have a negative impact on the petroleum product or natural gas industry. While
legislation has been enacted to deregulate certain aspects of the oil industry,
no assurances can be given that new or additional regulations will not be
adopted. Each of the problems referred to above could adversely affect the
financial stability of the issuers of any petroleum industry stocks in a
Portfolio.
Hong Kong Real Estate Companies. Certain Hong Kong Portfolios may be
considered to be concentrated in common stocks of companies engaged in real
estate asset management, development, leasing, property sales and other related
activities. Investment in securities issued by these real estate companies
should be made with an understanding of the many factors which may have an
adverse impact on the credit quality of the particular company or industry.
Generally, these include economic recession, the cyclical nature of real estate
markets, competitive overbuilding, unusually adverse weather conditions,
changing demographics, changes in governmental regulations (including tax laws
and environmental, building, zoning and sales regulations), increases in real
estate taxes or costs of material and labor, the inability to secure performance
guarantees or insurance as required, the unavailability of investment capital
and the inability to obtain construction financing or mortgage loans at rates
acceptable to builders and purchasers of real estate. Additional risks include
an inability to reduce expenditures associated with a property (such as mortgage
payments and property taxes) when rental revenue declines, and possible loss
upon foreclosure of mortgaged properties if mortgage payments are not paid when
due.
Recently, in the wake of Chinese economic development and reform, certain
Hong Kong real estate companies and other investors began purchasing and
developing real estate in southern China, including Beijing, the Chinese
capital. By 1992, however, southern China began to experience a rise in real
estate prices, increases in construction costs and a tightening of credit
markets. Any worsening of these conditions
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could affect the profitability and financial condition of Hong Kong real estate
companies and could have a materially adverse effect on the value of a Hong Kong
Portfolio.
ROLLOVER
It is expected that a special redemption and liquidation will be made of
all Units of a Portfolio held by any investor who affirmatively notifies the
Trustee in writing by the applicable notification date specified in the
Portfolio's prospectus that he elects to participate. It should also be noted
that rollover investors may realize taxable capital gains on the rollover but
generally will not be entitled to a deduction for certain capital losses and no
cash would be distributed at that time to pay any taxes.
All Units of rollover investors will be redeemed in kind on the first day
of the rollover period and the underlying securities will be distributed to a
distribution agent on behalf of the rollover investors. During the rollover
period, the distribution agent will be required to sell all of the underlying
securities on behalf of rollover investors. The sale proceeds will be net of
brokerage fees, governmental charges or any expenses involved in the sales.
Rollover investors may purchase units of a new Select Ten Portfolio, if
available, subject only to the Deferred Sales Charge; provided that rollover
investors who no longer hold their Units in an account maintained with one of
the Sponsors at the time of the rollover may not be eligible to participate in
the direct reinvestment in the new Select Ten Portfolio.
If an investor so specifies by the applicable notification date, his Units
will be redeemed in kind and the securities disposed of during the rollover
period. As long as the investor confirms his interest in purchasing units of a
new Select Ten Portfolio and units are available, the proceeds of the sales (net
of brokerage commissions, stamp taxes, governmental charges and any other
selling expenses or if applicable, costs associated with foreign trading) will
be invested in units of the next Select Ten Portfolio at daily prices over the
rollover period based on the asset value of units of the next Select Ten
Portfolio plus the applicable sales charge. The Sponsors are under no obligation
to create a new Select Ten Portfolio, however, and may modify the terms of the
rollover upon notice to investors at any time.
Depending on the volume of proceeds to be invested in the next Select Ten
Portfolio through the rollover and the volume of other orders for units in the
next Select Ten Portfolio, the Sponsors may purchase large volumes of the
securities for the next Select Ten Portfolio in a short period of time. This
concentrated buying may tend to raise the market prices of these securities. The
actual market impact of the Sponsors' purchases, however, is currently
unpredictable because the actual volume of securities to be purchased and the
supply and price of those securities are unknown. A similar problem may occur in
connection with the Sponsors' sales of securities during the rollover period.
Depending on the volume of sales required, and the prices of and demand for
securities, sales by the Sponsors may tend to depress the market prices and the
value of Units, and thus reduce the proceeds to be credited to rollover
investors for investment in the next Select Ten Portfolio.
The distribution agent will engage the Sponsors as its agents to sell the
distributed securities. The Sponsors will attempt to sell the securities as
quickly as is practicable during the rollover period without in their judgment
materially adversely affecting the market price of the securities, but all of
the securities will in any event be disposed of by the end of the rollover
period. The Sponsors do not anticipate that the period will be longer than 12
business days, although it could be shorter or longer given the varying
liquidity of the Securities. The liquidity of any security depends on the daily
trading volume of the security and the amount that the Sponsors have available
for sale on any particular day.
9
<PAGE>
It is expected (but not required) that the Sponsors will generally follow
the following guidelines in selling the securities: for highly liquid
securities, the Sponsors will generally sell securities on the first day of the
rollover period; for less liquid securities, on each of the first two days of
the rollover period, the Sponsors will generally sell any amount of any
underlying securities at a price no less than 1/2 of one point under the closing
sale price of those securities on the preceding day. Thereafter, the Sponsors
intend to sell without any price restrictions at least a portion of the
remaining underlying securities, the numerator of which is one and the
denominator of which is the total number of days remaining (including that day)
in the rollover period.
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 Portfolio (and
the distribution agent on behalf of rollover investors) can now sell securities
to the next Select Ten Portfolio if those securities continue to meet the
applicable Select Ten Strategy by remaining among the ten highest
dividend-yielding securities in the Dow Jones Industrial Average, the FT Index
or the Hang Seng Index, as the case may be. The exemption will enable each
Portfolio 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 Portfolio.
The Sponsors intend to create new units of new Select Ten Portfolios as
quickly as possible, depending upon the availability and reasonably favorable
price of the securities included in the new Select Ten Portfolio, and it is
intended that rollover investors will be given first priority to purchase new
units of the new Select Ten Portfolio. There can be no assurance, however, as to
the exact timing of the creation of units of new Select Ten Portfolios or the
aggregate number of new units of new Select Ten Portfolios which the Sponsors
will create. The Sponsors may, in their sole discretion, stop creating units
(whether permanently or temporarily) at any time they choose, regardless of
whether all proceeds of the rollover have been invested on behalf of rollover
investors. Cash which has not been invested on behalf of the rollover investors
in new Select Ten Portfolios will be distributed at the end of the rollover
period. However, since the Sponsors can create units by depositing cash (or bank
letter of credit) with instructions to buy securities, the Sponsors anticipate
that sufficient units can be created, although moneys in the new Select Ten
Portfolio may not be fully invested on the next business day.
Any rollover investor may thus be redeemed out of a Portfolio and become a
holder of an entirely different trust with a different portfolio of securities.
The rollover investor's Units will be redeemed in kind and the distributed
securities shall be sold during the rollover period. In accordance with the
rollover investors' offers to purchase units of new Select Ten Portfolios, the
proceeds of the sales (and any other cash distributed upon redemption), less the
amount of any deferred sales charge still unpaid, will be invested in new units
of the next Select Ten Portfolio, at the Public Offering Price, including the
applicable sales charge per unit.
This process of redemption, liquidation, and investment in a new trust is
intended to allow for the fact that the portfolios selected by the Sponsors are
chosen on the basis of the Select Ten Strategy for a period of one year, at
which point a new portfolio is chosen. It is contemplated that a similar process
of redemption, liquidation and investment in a new fund will be available for
each subsequent Select Ten Portfolio, approximately a year after the creation of
the prior series.
The Sponsors believe that the gradual redemption, liquidation and
investment in the new Select Ten Portfolio will help mitigate any negative
market price consequences stemming from the trading of large volumes of
securities and of the underlying securities in the new Select Ten Portfolio in a
short, publicized period of time. The above procedures may, however, be
insufficient or unsuccessful in avoiding such price consequences. There can be
no assurance that the procedures will effectively mitigate any adverse price
10
<PAGE>
consequences of heavy volume trading or that the procedures will produce a
better price for investors than might be obtained on any given day during the
rollover period. In fact, market price trends may make it advantageous to sell
or buy more quickly or more slowly than permitted by these procedures. Rollover
investors could then receive a less favorable average unit price than if they
bought all their units of the new Select Ten Portfolio on any given day of the
period. Historically, the prices of securities selected by the Sponsors as good
investments have generally risen over the first few days following the
announcement.
It should also be noted that rollover investors may realize taxable
capital gains on the rollover but generally will not be entitled to a deduction
for certain capital losses and, due to the procedures for investing in new
Select Ten Portfolios, no cash would be distributed at that time to pay any
taxes.
In addition, during this period an investor will be at risk to the extent
that securities are not sold and will not have the benefit of any stock
appreciation to the extent that monies have not been invested; for this reason,
the Sponsors will be inclined to sell and purchase the securities in as short a
period as they can without materially adversely affecting the price of the
securities.
Investors who do not inform the Trustee that they wish to have their Units
so redeemed and liquidated will continue to hold Units of a Portfolio until that
Portfolio is terminated. These remaining investors will not realize capital
gains or losses due to the rollover and will not be charged any additional sales
charge. If a large percentage of investors become rollover investors, the
aggregate size of a Portfolio will be sharply reduced. As a consequence,
expenses, if any, in excess of the amount to be borne by the Trustee would
constitute a higher percentage amount per Unit than prior to the rollover in the
new Select Ten Portfolio. Also, because of the lesser number of Units in a
Portfolio, and possibly also due to a value reduction, however temporary, in
Units caused by the Sponsors' sales of securities, a Portfolio might also reduce
to the minimum value that would allow the Sponsors to choose to liquidate that
Portfolio without the consent of the remaining investors. The securities
remaining in a Portfolio after the rollover will be sold by the Sponsors as
quickly a possible without, in their judgment, materially adversely affecting
the market price of the securities.
TAXATION--RETIREMENT PLANS
A Portfolio may be well suited for purchase by Individual Retirement
Accounts ("IRAs"), Keogh plans, pension funds and other qualified retirement
plans, certain of which are briefly described below. Generally, capital gains
and income received in each of the foregoing plans are exempt from Federal
taxation. All distributions from such plans are generally treated as ordinary
income but may, in some cases, be eligible for special 5 or 10 year averaging or
tax-deferred rollover treatment. Investors who are also invested in IRAs, Keogh
plans and other tax-deferred retirement plans should consult their plan
custodian as to the appropriate disposition of distributions. Investors
considering participation in any of these plans should review specific tax laws
related thereto and should consult their attorneys or tax advisers with respect
to the establishment and maintenance of any of these plans. These plans are
offered by brokerage firms, including the Sponsors, and other financial
institutions. Fees and charges with respect to such plans may vary.
Retirement Plans for the Self-Employed -- Keogh Plans. Units of a
Portfolio may be purchased by retirement plans established pursuant to
Self-Employed Individuals Tax Retirement Act of 1962 ("Keogh plans") for
self-employed individuals, partnerships or unincorporated companies. Qualified
individuals may generally make annual tax-deductible contributions up to the
lesser of 20% of annual compensation or $30,000 to eogh 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).
11
<PAGE>
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 of the Fund. Any individual can make a contribution in an IRA equal to the
lesser of $2,000 ($2,250 in a spousal account) or 100% of earned income; such
investment must be made in cash. However, the deductible amount an individual
may contribute will be reduced if the individual's adjusted gross income exceeds
$25,000 (in the case of a single individual), $40,000 (in the case of married
individuals filing a joint return) or $200 (in the case of a married individual
filing a separate return). A married individual filing a separate return will
not be entitled to any deduction if the individual is covered by an
employer-maintained retirement plan without regard to whether the individual's
spouse is an active participant in an employer retirement plan. Unless
nondeductible contributions were made in 1987 or a later year, all distributions
from an IRA will be treated as ordinary income but generally are eligible for
tax-deferred rollover treatment. It should be noted that certain transactions
which are prohibited under Section 408 of the Code will cause all or a portion
of the amount in an IRA to be deemed to be distributed and subject to tax at
that time. A participant's entire interest in an IRA must be, or commence to be,
distributed to the participant not later than the April 1 following the taxable
year during which the participant attains age 70 1/2. Taxable distributions made
before attainment of age 59 1/2, except in the case of the participant's death
or disability or where the amount distributed is part of a series of
substantially equal periodic (at least annual) payments that are to be made over
the life expectancies of the participant and his or her beneficiary, are
generally subject to a surtax in an amount equal to 10% of the distribution.
Corporate Pension and Profit-Sharing Plans. A pension or profit-sharing
plan for employees of a corporation may purchase Units of a Portfolio.
12
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<PERIOD-END> MAY-10-1995
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