DEFINED ASSET FUNDSSM
- --------------------------------------------------------------------------------
EQUITY INCOME FUND The objective of this Defined Fund is total return
CONCEPT SERIES through a combination of capital appreciation and,
TELE-GLOBAL TRUST 2 to a lesser extent, current income by investing
(A UNIT INVESTMENT for a period of about four years in a diversified
TRUST) portfolio of publicly traded common stocks issued
- ------------------------------by domestic and international companies engaged in
- -- PROFESSIONAL SELECTION a wide range of telecommunications activities.
- -- DIVERSIFICATION These issuers provide local, long distance and
- -- REINVESTMENT OPTION cellular telecommunications services as well as
telecommunications equipment and networking. The
telecommunications industry is expected to
continue to expand, stimulated by competition,
globalization and introduction of new products.
There is no assurance that the Fund's objective
will be met.
The value of units will fluctuate with the value
of the common stocks in the Portfolio and no
assurance can be given that the underlying common
stocks will continue to pay dividends or that the
underlying common stocks or the units will
appreciate in value.
Minimum purchase: $250.
-------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
SPONSORS: HAS THE COMMISSION OR ANY STATE SECURITIES
Merrill Lynch, COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
Pierce, Fenner & Smith OF THIS DOCUMENT. ANY REPRESENTATION TO THE
Incorporated CONTRARY IS A CRIMINAL OFFENSE.
Smith Barney Inc. Inquiries should be directed to the Trustee at
PaineWebber Incorporated 1-800-323-1508.
Prudential Securities Prospectus dated February 14, 1996.
Incorporated INVESTORS SHOULD READ THIS PROSPECTUS CAREFULLY
Dean Witter Reynolds Inc. AND RETAIN IT FOR FUTURE REFERENCE.
<PAGE>
- --------------------------------------------------------------------------------
Defined Asset FundsSM
Defined Asset Funds is America's oldest and largest family of unit investment
trusts, with over $100 billion sponsored in the last 25 years. 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.
- ----------------------------------------------------------------
Defining Your Portfolio
- ----------------------------------------------------------------
The 34 stocks represented in the Fund are issued by companies that are expected
to benefit from new telecommunications legislation and a perceived trend toward
globalization of the telecommunications industry. Investing in the Portfolio,
rather than in only one or two of the underlying common stocks, is a way to
diversify your investment. Based upon the principal business of each issuer and
current market values, the following types of telecommunications companies are
represented in the Portfolio:
PORTFOLIO
PERCENTAGE
/ / Telecommunications Services
Regional Bells 19.36%
Independents 10.32%
Long Distance 5.64%
Wireless 2.80%
/ / Telecommunications Equipment 24.27%
/ / Telecommunications Networking 20.00%
/ / International 17.61%
- ----------------------------------------------------------------
Defining Your Risks
- ----------------------------------------------------------------
Unit price fluctuates with the value of the Portfolio, and the value of the
Portfolio could be affected by changes in the financial condition of the
issuers, changes in the telecommunications industry, 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 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. Therefore, the adverse financial condition of an
issuer or any market movement in the price of a security will not necessarily
require the sale of securities from the Portfolio or mean that the Sponsors will
not continue to purchase the security in order to create additional Units.
Although the Portfolio is regularly reviewed and evaluated and Sponsors may
instruct the Trustee to sell securities under certain limited circumstances,
securities will not be sold to take advantage of market fluctuations or changes
in anticipated rates of appreciation.
In addition, the Fund is concentrated in common stocks of domestic
telecommunications companies and therefore is dependent to a significant extent
on revenues generated from those particular activities (see Risk Factors--The
Telecommunications Industry in Part B).
A-2
<PAGE>
- ----------------------------------------------------------------
Defining Your Investment
- ----------------------------------------------------------------
PUBLIC OFFERING PRICE PER 1,000 UNITS $1,000.00
The Public Offering Price as of February 13, 1996, the business day prior to the
initial date of deposit, is based on the aggregate value of the underlying
securities ($356,987.50) and any cash held to purchase securities, divided by
the number of units outstanding (367,082) 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 quarterly on the 10th of each February, May, August and
November beginning May 10, 1996.
QUARTERLY INCOME DISTRIBUTIONS
Distributions of income, if any, will be paid on the 25th day of March, June,
September and December of each year commencing on the 25th day of June 1996 to
Holders of record on the 10th day of March, June, September and December,
respectively. In order to meet certain tax requirements, a special distribution
of income including capital gains, may be paid to holders of record as of a date
in December. Any capital gain net income will generally be distributed after the
end of the year.
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
Distributions which are taxable as ordinary income to Holders will constitute
dividends for Federal income tax purposes and may, subject to certain
limitations, be eligible for the dividends-received deduction for certain
corporations (see Taxes in Part B). Foreign holders should be aware that
distributions from the Fund will generally be subject to information reporting
and withholding taxes.
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 be based on the 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 February 28, 2000. The final distribution will
be made within a reasonable time afterward. The Portfolio may be terminated
earlier if its value is less than 40% of the value of the securities when
deposited.
SPONSORS' PROFIT OR LOSS
The Sponsors' profit or loss from the Portfolio will include the receipt of
applicable sales charges, fluctuations in the Public Offering Price or secondary
market price of units, a loss of $220.00 on the initial deposit of the
securities and a gain or loss on subsequent deposits of securities (see
Sponsors' and Underwriters' Profits in Part B).
A-3
<PAGE>
- ----------------------------------------------------------------
Defining Your Costs
- ----------------------------------------------------------------
SALES CHARGE
First-time investors pay a 2.75% sales charge when they buy. For example, on a
$1,000 investment, $972.50 is invested in the Portfolio. In addition, a deferred
sales charge of $1.625 per 1,000 units will be deducted from the Portfolio's net
asset value each quarter ($26.00 total). This deferred method of payment keeps
more of your money invested over a longer period of time. 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 2.75% $ 27.500
Maximum Deferred Sales Charge 2.60% 26.000
----------------- ---------------
5.35% $ 53.500
----------------- ---------------
----------------- ---------------
Maximum Sales Charge Imposed on
Reinvested Dividends 2.44% $ 24.375
ESTIMATED ANNUAL FUND OPERATING EXPENSES
As a % Amount per
of Net Assets 1,000 Units
----------------- ---------------
Trustee's Fee .087% $ 0.84
Maximum Portfolio Supervision,
Bookkeeping and
Administrative Fees .046% $ 0.45
Organizational Expenses .064% $ 0.62
Other Operating Expenses .044% $ 0.43
----------------- ---------------
TOTAL .241% $ 2.34
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.
COSTS OVER TIME
You would pay the following cumulative expenses on a $1,000 investment, assuming
5% annual return on the investment throughout the indicated periods and
redemption at the end of the period:
1 Year 2 Years 3 Years 4 Years
$36 $47 $56 $64
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.
The example should not be considered a representation of past or future expenses
or annual rates of return; the actual expenses and annual rates of return may be
more or less than the example.
SELLING YOUR INVESTMENT
You may sell or redeem your units at any time prior to the termination of the
Portfolio. Your price will be based on the then current net asset value. The
redemption and secondary market repurchase price as of February 13, 1996 was
$972.50 per 1,000 units. If you sell your units before the termination of the
Portfolio, no further deferred sales charges will be deducted.
A-4
<PAGE>
<TABLE><CAPTION>
- --------------------------------------------------------------------------------
Defined Portfolio
- --------------------------------------------------------------------------------
Equity Income Fund
Concept Series
Tele-Global Trust 2 February 14, 1996
PRICE CURRENT
TICKER PERCENTAGE PER SHARE COST DIVIDEND
NAME OF ISSUER SYMBOL OF FUND (1) TO FUND TO FUND (2) YIELD (3)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1. 3Com Corporation COMS 4.11% $ 48.875 $ 14,662.50 0.00%
2. ADC Telecommunications Inc. ADCT 3.40 40.500 12,150.00 0.00
3. Airtouch Communications, Inc. ATI 1.81 32.250 6,450.00 0.00
4. Alltel Corporation AT 1.94 34.625 6,925.00 3.00
5. Ameritech Corporation AIT 3.64 64.875 12,975.00 3.27
6. AT&T Corporation T 3.81 68.000 13,600.00 1.94
7. Bay Networks Inc. BNET 3.91 46.500 13,950.00 0.00
8. Bell Atlantic Corporation BEL 4.12 73.625 14,725.00 3.80
9. BellSouth Corporation BLS 2.49 44.500 8,900.00 3.24
10. Cabletron Systems, Inc. CS 4.40 78.625 15,725.00 0.00
11. Century Telephone Enterprises CTL 1.95 34.875 6,975.00 0.95
12. Cisco Systems, Inc. CSCO 7.58 90.250 27,075.00 0.00
13. DSC Communications Corporation DIGI 2.85 33.875 10,162.50 0.00
14. Frontier Corporation FRO 1.83 32.750 6,550.00 2.60
15. GTE Corporation GTE 4.08 48.500 14,550.00 3.88
16. Lincoln Telecommunications
Company LTEC 1.13 20.125 4,025.00 2.98
17. Motorola, Inc. MOT 1.57 55.875 5,587.50 0.72
18. Nokia Corporation* NOKA 3.11 37.000 11,100.00 1.34
19. NYNEX Corporation NYN 3.10 55.250 11,050.00 4.27
20. Picturetel Corporation PCTL 3.29 39.125 11,737.50 0.00
21. QUALCOMM, Inc. QCOM 3.89 46.250 13,875.00 0.00
22. Royal PTT Nederland NV* KPN 1.10 39.375 3,937.50 3.21
23. SBC Communications, Inc. SBC 5.01 59.625 17,887.50 2.77
24. Southern New England
Telecommunications Corporation SNG 1.22 43.375 4,337.50 4.06
25. Stet Societa' Finanziaria
Telefonica S.p.A.* STE 1.76 31.500 6,300.00 0.00
26. Stratacom, Inc. STRM 6.64 79.000 23,700.00 0.00
27. Tele Danmark A/S* TLD 1.64 29.250 5,850.00 3.81
28. Telecom Corporation of New
Zealand Limited* NZT 3.80 67.875 13,575.00 5.20
29. Telefonaktiebolaget LM
Ericsson* ERICY 1.73 20.625 6,187.50 0.73
30. Telefonica de Espana* TEF 2.47 44.000 8,800.00 3.32
31. Tellabs, Inc. TLAB 2.63 47.000 9,400.00 0.00
32. U.S. West Communications Group USW 1.00 35.750 3,575.00 5.99
33. United States Cellular
Corporation USM 0.99 35.375 3,537.50 0.00
34. Vodafone Group PLC* VOD 2.00 35.750 7,150.00 1.78
--------------------- -----------------
100.00% $ 356,987.50
--------------------- -----------------
--------------------- -----------------
</TABLE>
- ------------------------------------
* Indicates an American Depositary Receipt ('ADR') (see Risk Factors--Foreign
Issuers in Part B).
(1) Based on Cost to Fund.
(2) Valuation by the Trustee made on the basis of closing sale prices at the
evaluation time on February 13, 1996.
(3) Calculated by annualizing the latest quarterly or semi-annual dividend
declared; except for ADRs, which are calculated on the basis of all
dividends declared or paid in the last year.
------------------------------------
The securities were acquired on February 13, 1996 and are represented entirely
by contracts to purchase the securities. Any of the Sponsors may have acted as
underwriters, managers or comanagers of a public offering of the securities in
this Fund during the last three years. Affiliates of the Sponsors may serve as
specialists in the securities in this Fund on one or more stock exchanges and
may have a long or short position in any of these securities or in options on
any of them, and may be on the opposite side of public orders executed on the
floor of an exchange where the securities are listed. An officer, director or
employee of any of the Sponsors may be an officer or director of one or more of
the issuers of the securities in the Fund. A Sponsor may trade for its own
account as an odd-lot dealer, market maker, block positioner and/or arbitrageur
in any of the securities or in options on them. Any Sponsor, its affiliates,
directors, elected officers and employee benefits programs may have either a
long or short position in any securities or in options on them.
A-5
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Sponsors, Trustee and Holders of Equity Income Fund Concept Series,
Tele-Global Trust 2, Defined Asset Funds (the 'Fund'):
We have audited the accompanying statement of condition and the defined
portfolio included in the prospectus of the Fund as of February 14, 1996. 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 an irrevocable letter 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 February 14,
1996 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, N.Y.
February 14, 1996
STATEMENT OF CONDITION AS OF FEBRUARY 14, 1996
TRUST PROPERTY
Investments--Contracts to purchase Securities(1).........$ 356,987.50
Organizational Costs(2).................................. 124,130.00
--------------------
Total.........................................$ 481,117.50
--------------------
--------------------
LIABILITY AND INTEREST OF HOLDERS
Accrued Liability(2)...................................$ 124,130.00
Interest of Holders of 367,082 Units of fractional
undivided interest outstanding:(3)
Cost to investors(4)...................................$ 367,082.00
Gross underwriting commissions(5)...................... (10,094.50)
--------------------
Subtotal...............................................$ 356,987.50
--------------------
Total.........................................$ 481,117.50
--------------------
--------------------
- ---------------
(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 February 13,
1996. The contracts to purchase securities are collateralized by an irrevocable
letter of credit which has been issued by Banca Nazionale Dell' Agricoltura, New
York Branch, in the amount of $357,207.50 and deposited with the Trustee. The
amount of the letter of credit includes $356,987.50 for the purchase of
securities.
(2) This represents a portion of the Fund's organizational costs,
which will be deferred and amortized over the life of the Fund. Organizational
costs have been estimated based on projected total assets of $50 million. To the
extent the Fund is larger or smaller, the estimate may vary.
(3) Because the value of securities at the evaluation time on the
Initial Date of Deposit may differ from the amounts shown in this statement of
condition, the number of Units offered on the Initial Date of Deposit will be
adjusted from the initial number of Units to maintain the $1,000 per 1,000 Units
offering price.
(4) Aggregate public offering price computed on the basis of the
value of the underlying securities at 4:00 p.m., Eastern time on February 13,
1996, plus an initial sales charge at a rate of 2.75% of the Public Offering
Price (2.828% of the aggregate value of Securities). In addition, Units are
subject to deferred sales charges of $1.625 per 1,000 Units payable quarterly
($6.50 per year). After an investor sells or redeems Units, all future
deductions of deferred sales charges with respect to that investor will be
waived.
(5) Assumes the maximum sales charge per 1,000 units of 2.75% of the
Public Offering Price.
A-6
<PAGE>
DEFINED ASSET FUNDSSM
PROSPECTUS--PART B
EQUITY INCOME FUND
CONCEPT SERIES TELE-GLOBAL TRUST 2
FURTHER INFORMATION REGARDING THE FUND MAY BE OBTAINED
WITHIN FIVE DAYS BY WRITING OR CALLING THE TRUSTEE AT THE ADDRESS AND
TELEPHONE NUMBER SET FORTH ON THE BACK COVER OF THIS PROSPECTUS.
INDEX
PAGE
---------
FUND DESCRIPTION................................................. 1
RISK FACTORS..................................................... 2
HOW TO BUY UNITS................................................. 4
HOW TO SELL UNITS................................................ 5
INCOME, DISTRIBUTIONS AND REINVESTMENT........................... 6
FUND EXPENSES.................................................... 7
TAXES............................................................ 8
RECORDS AND REPORTS.............................................. 10
TRUST INDENTURE.................................................. 10
MISCELLANEOUS.................................................... 10
SUPPLEMENTAL INFORMATION......................................... 12
FUND DESCRIPTION
PORTFOLIO SELECTION
Professional buyers and research analysts for Defined Asset Funds, with
access to extensive research, selected the Securities for the Portfolio after
considering the Fund's investment objective as well as the quality of the common
stocks, the earning and dividend payment records of the issuers, the
capitalization of the issuers and the prices of the common stocks. The screening
process included (1) identifying companies with 4-year growth potential, (2)
performing a thorough fundamental financial analysis, and (3) evaluating
liquidity, market share and timeliness of purchase. This Fund is invested in
telecommunications stocks (both domestic and foreign) believed to be well
positioned to take advantage over the next four years of advances in
telecommunications technology, increasing demand for telecommunications
products, recent legislative changes which should increase flexibility to
combine telephone and wireless services, and global expansion of
telecommunications services (particularly from privitization of government-owned
facilities). Advertising and sales literature may contain brief descriptions of
the businesses of each of the companies in the Portfolio and Defined Asset Funds
research analysis of why they were selected.
The deposit of the Securities in the Portfolio on the initial date of
deposit established a proportionate relationship among the number of shares of
each Security. 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. 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
1
<PAGE>
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 Fund. To minimize these effects, the
Fund 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 Fund 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. Although the
Portfolio is not actively managed, it is regularly reviewed and evaluated and
Securities can be sold in case of certain adverse developments concerning a
Security including the adverse financial condition of the issuer, the
institution of legal proceedings against the issuer, 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 or if the
disposition of these Securities is necessary in order to enable the Fund to make
distributions of the Fund's capital gain net income or desirable in order to
maintain the qualification of the Fund as a regulated investment company under
the Internal Revenue Code. Securities can also be sold to meet redemption of
Units. The Sponsors are also authorized to direct the reinvestment of the
proceeds of the sale of Securities, as well as moneys held to cover the purchase
of Securities pursuant to contracts which have failed, in Replacement Securities
which satisfy certain conditions specified in the Indenture.
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 TELECOMMUNICATIONS INDUSTRY
The companies whose securities are included in the Portfolio are engaged in
providing local, long-distance and wireless services, in the manufacture of
telecommunications products and in a wide range of other activities including
directory publishing, information systems and the operation of voice, data and
video telecommunications networks.
General. Payment on common stocks of companies in the telecommunications
industry, including local, long-distance and cellular service, the manufacture
of telecommunications equipment, and other ancillary services, is generally
dependent upon the amount and growth of customer demand, the level of rates
permitted to be charged by regulatory authorities and the effects of inflation
on the cost of providing services and the rate of technological innovation. The
domestic telecommunications industry is characterized by increasing competition
in all sectors and regulation by the Federal Communications Commission and
various state regulatory authorities. To meet increasing competition, companies
may have to commit substantial capital, particularly in the formulation of new
products and services using new technology. Telecommunications companies in both
developed and emerging countries are undergoing significant change due to
varying and evolving levels of governmental regulation or deregulation and other
factors. As a result, competitive pressures are intense and the securities of
2
<PAGE>
such companies may be subject to significant price volatility. In addition, all
telecommunications companies in both developed and emerging countries are
subject to the additional risk that technological innovations will make their
products and services obsolete.
The Telecommunications Act of 1996. The Telecommunications Act of 1996;
Communication Decency Act of 1996 (the 'Communications Act'), which became law
on February 8, 1996, permits greater competition in the local and long distance
telephone and equipment manufacturing markets. In addition, it changes the
regulatory structure governing the Regional Bell Holding Companies ('RBOCs')
from one based on rate of return to one based on price. The overall impact of
the Communications Act on the Portfolio is uncertain.
Regional Bell Holding Companies. The Portfolio contains securities of six
of the seven RBOCs. These corporations were spun off from AT&T in 1984. Many of
the RBOCs are seeking to increase profits through the development and sale of
new high-margined products, such as caller ID, voicemail, call return, call
waiting and interactive multimedia, to their existing customer base. To the
extent that the demand for such products is less than anticipated, the price of
securities of RBOCs could be adversely affected. Many of the RBOCs are also
aggressively looking to expand into overseas markets through both direct and
indirect investment. The impact of this expansion on the price of securities of
the RBOCs is uncertain.
Wireless Telephone Companies. Wireless telephone companies provide wireless
services including paging, dispatch, cellular and Personal Communication Systems
('PCS') services throughout the United States. Most of the RBOCs as well as long
distance companies are seeking to increase their share of the cellular market in
view of perceived future growth prospects. It is unclear what effect, if any,
increased competition between wireless and traditional services will have on the
Portfolio.
Telecommunications Equipment Manufacturers. While the worldwide market for
telecommunications equipment is expected to grow, the overall effect on the
Portfolio of factors such as competing technologies, increasing capital
requirements, protectionist actions by foreign governments and demand for new
technologies, is impossible to predict.
International Companies. The international companies in the Portfolio
consist predominantly of former government owned telecommunications systems that
have been privatized in stages. The Sponsors cannot predict whether such
privatization will continue in the future or what, if any, effect this will have
on the Portfolio.
FOREIGN ISSUERS
Certain of the Securities in a Portfolio may consist of securities of
foreign issuers. An investment in such a Fund involves some investment risks
that are different in some respects from an investment in a fund that invests
entirely in securities of domestic issuers. Those investment risks include
future political and economic developments and the adoption of withholding
taxes, exchange controls or other restrictions which might adversely affect the
payment or receipt of payment of dividends on the relevant Securities. In
addition, there may be less publicly available information than is available
from a domestic issuer and foreign issuers are not necessarily subject to
uniform accounting, auditing and financial reporting standards, practices and
requirements comparable to those applicable to domestic issuers. In addition,
earnings and dividends for foreign companies are in non-U.S. currencies.
Therefore, the U.S. dollar value of the stock and dividends for these issuers
will vary with fluctuations in the U.S. dollar foreign exchange rates for the
relevant currencies. Most foreign currencies have fluctuated widely in value
against the U.S. dollar for many reasons, including supply and demand for 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.
American Depositary Shares and Receipts. Securities of foreign issuers may
be purchased in ADR form in the United States. ADRs evidence American Depositary
Shares which represent common stock deposited with a custodian in a depositary.
American Depositary Shares (ADSs) and receipts therefor (ADRs) are issued by an
American bank or trust company to evidence ownership of underlying securities
issued by a foreign corporation. These instruments may not necessarily be
denominated in the same currency as the securities into which they may be
converted. Generally, ADSs and ADRs are designed for use in the United States
securities markets. For purposes of this Prospectus, the term ADR generally
includes ADSs.
The terms and conditions of depositary facilities may result in less
liquidity or lower market prices for ADRs than for the underlying shares. For
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<PAGE>
those Securities that are ADRs, currency fluctuations will also affect the U.S.
dollar equivalent of the local currency price of the underlying domestic share
and, as a result, are likely to affect the value of the ADRs and consequently
the value of the Securities.
LIQUIDITY
Whether or not the Securities are listed on a national securities exchange,
the principal trading market for the Securities may be in the over-the-counter
market. As a result, the existence of a liquid trading market for the Securities
may depend on whether dealers will make a market in the Securities. There can be
no assurance that a market will be made for any of the Securities, that any
market for the Securities will be maintained or of the liquidity of the
Securities in any markets made. In addition, the Fund may be restricted under
the Investment Company Act of 1940 from selling Securities to the Sponsors. The
price at which the Securities may be sold to meet redemptions and the value of
the Fund will be adversely affected if trading markets for the Securities are
limited or absent.
LITIGATION AND LEGISLATION
The Sponsors do not know of any pending litigation as of the initial date
of deposit that might reasonably be expected to have a material adverse effect
on the Fund, although pending litigation may have a material adverse effect on
the value of Securities in the Fund. In addition, at any time after the initial
date of deposit, litigation may be initiated on a variety of grounds, or
legislation may be enacted, affecting the Securities in the Portfolio or the
issuers of the Securities. Changing approaches to regulation may have a negative
impact on certain companies represented in the Portfolio. There can be no
assurance that future litigation, legislation, regulation or deregulation will
not have a material adverse effect on the Portfolio or will not impair the
ability of the issuers of the Securities to achieve their business goals. From
time to time Congress considers proposals to reduce the rate of the
dividends-received deduction. This type of legislation, if enacted into law,
would adversely affect the after-tax return to investors who can take advantage
of the deduction. See Taxes.
LIFE OF THE FUND; FUND TERMINATION
The size and composition of the Portfolio will be affected by the level of
redemptions of Units that may occur from time to time. Principally, this will
depend upon the number of investors seeking to sell or redeem their Units. 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 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 5.35% of the public offering
price or 5.501% of the net asset value of the Fund over its expected four-year
life. The initial portion of the sales charge is equal to 2.75% of the Public
Offering Price (2.828%) of the net amount invested in the Securities) and the
deferred portion of the sales charge is $1.625 per 1,000 Units ($6.50 per year)
payable by the Fund on behalf of the investors out of net asset value of the
Fund quarterly until the Fund terminates. If an investor sells or redeems Units
before a quarterly payment date, all future deductions of deferred sales charges
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<PAGE>
with respect to that investor will be waived; this will have the effect of
reducing the rate of sales charge as to that investor.
The initial portion of the sales charge is reduced on a graduated scale for
sales to any purchaser of at least $250,000 of Units and will be applied on
whichever basis is more favorable to the purchaser. To qualify for the reduced
initial sales charge and concession applicable to quantity purchasers, the
dealer must confirm that the sale is to a single purchaser as defined below or
is purchased for its own account and not for distribution. The initial portion
of the sales charge will be reduced as follows:
<TABLE><CAPTION>
SALES CHARGE
(GROSS UNDERWRITING PROFIT)
--------------------------------
AS PERCENT OF AS PERCENT OF MAXIMUM DEALER CONCESSION CONCESSION TO
PUBLIC OFFERING NET AMOUNT DOLLAR AMOUNT DEFERRED AS PERCENT OF INTRODUCING
AMOUNT PURCHASED PRICE INVESTED PER 1,000 UNITS PUBLIC OFFERING PRICE DEALERS
- ---------------------------------- ----------------- ------------- ---------------------- --------------------- -------------
<S> <C> <C> <C> <C> <C>
Less than $250,000................ 2.75% 2.828% $ 26.00 1.788% $ 19.80
$250,000 - $499,999............... 2.25 2.302 26.00 1.463 16.20
$500,000 - $749,999............... 1.75 1.781 26.00 1.138 12.60
$750,000 - $999,999............... 1.25 1.266 26.00 0.813 9.00
$1,000,000 and more............... 1.00 1.010 26.00 0.650 7.20
</TABLE>
The above graduated sales charges will apply on all purchases on any one
day by the same purchaser of Units in this Fund only in the amounts stated. For
this purpose purchases during the primary offering period will not be aggregated
with concurrent purchases of any other unit trusts sponsored by the Sponsors.
Purchases in the secondary market of one or more Series sponsored by the
Sponsors which have the same rates of sales charge will be aggregated. Units
held in the name of the spouse of the purchaser or in the name of a child of the
purchaser under 21 years of age are deemed to be registered in the name of the
purchaser. The graduated sales charges are also applicable to a trustee or other
fiduciary purchasing securities for a single trust estate or single fiduciary
account.
Employees of certain Sponsors and Sponsor affiliates and non-employee
directors of Merrill Lynch & Co. Inc. may purchase Units at a reduced initial
sales charge of not less than $5.00 per 1,000 Units.
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.
CERTIFICATES
Certificates for Units are issued upon request and may be transferred by
paying any taxes or governmental charges and by complying with the requirements
for redeeming Certificates (see How To Sell Units--Trustee's Redemption of
Units). Certain Sponsors collect additional charges for registering and shipping
Certificates to purchasers. Lost or mutilated Certificates can be replaced upon
delivery of satisfactory indemnity and payment of costs.
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
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<PAGE>
Sponsors (although not obligated to do so) will normally buy any Units offered
for sale at the repurchase price next computed after receipt of the order. The
Sponsors have maintained secondary markets in Defined Asset Funds for over 20
years. Primarily because of the sales charge and fluctuations in the market
value of the Securities, the sale price may be less than the cost of your Units.
You should consult your financial professional for current market prices to
determine if other broker-dealers or banks are offering higher prices for Units.
The Sponsors may discontinue this market without prior notice if the supply
of Units exceeds demand or for other business reasons. The Sponsors may reoffer
or redeem Units repurchased.
TRUSTEE'S REDEMPTION OF UNITS
You may redeem your Units by sending the Trustee a redemption request.
Signatures must be guaranteed by an eligible institution. In certain instances,
additional documents may be required such as a certificate of death, trust
instrument, certificate of corporate authority or appointment as executor,
administrator or guardian. If the Sponsors are maintaining a market for Units,
they will purchase any Units tendered at the repurchase price described above.
If they do not purchase Units tendered, the Trustee is authorized in its
discretion to sell Units in the over-the-counter market if it believes it will
obtain a higher net price for the redeeming investor.
By the seventh calendar day after tender you will be mailed an amount equal
to the Redemption Price per Unit. Because of market movements or changes in the
Portfolio, this price may be more or less than the cost of your Units. The
Redemption Price per Unit is computed each Business Day by adding the value of
the Securities, declared but unpaid dividends on the Securities, cash and the
value of any other Fund assets; deducting unpaid taxes or other governmental
charges, accrued but unpaid Fund expenses and accrued but unpaid Deferred Sales
Charges, unreimbursed Trustee advances, cash held to redeem Units, for purchase
of Securities 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 with a value of at least $500,000 who redeems
those Units 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 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.
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.
INCOME, DISTRIBUTIONS AND REINVESTMENT
INCOME AND DISTRIBUTIONS
The net annual income per Unit will depend primarily upon the amount of
dividends declared and paid by the issuers of the Securities and changes in the
expenses of the Fund and, to a lesser degree, upon the level of purchases of
additional Securities and sales of Securities. There is no assurance that
dividends on the Securities will continue at their current levels or be declared
or paid.
Each Unit receives an equal share of quarterly distributions of dividend
income. Because dividends on the Securities are not received at a constant rate
throughout the year, any income distribution may be more or less than the amount
then credited to the Income Account. Dividends payable to the Fund are credited
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<PAGE>
to an Income Account, as of the date on which the Fund is entitled to receive
the dividends, and other receipts are credited 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. Dividend income per Unit received by the Fund and
available for distribution and the distributable balance in the Capital Account
per Unit (other than capital gains) as of any particular record day will be
distributed on or shortly after the related distribution day to the holders of
record on that record day, provided that no distribution from the Capital
Account is required unless the distributable balance therein (excluding capital
gains) is at least $5.00 per 1,000 Units. There is no assurance that actual
distributions will be made since all dividends received may be used to pay
expenses.
An amount equal to any capital gain net income (i.e. the excess of capital
gains over capital losses recognized by the Fund in any taxable year) will be
distributed shortly after the end of the year. In order to meet certain tax
requirements the Fund may make a special distribution of income, including
capital gains, to holders of record as of a date in December. Proceeds received
from the disposition of any of the Securities which are not used to make the
distribution of capital gain net income, for redemption of Units or reinvested
in additional Securities will be held in the Capital Account to be distributed
on the next succeeding distribution day.
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. Purchases
made pursuant to the Reinvestment Plan will be made without initial sales charge
at the net asset value for Units of the Fund (but will be subject to
subsequently deducted deferred sales charges). Under the Reinvestment
Plan, the Fund will pay the distributions to the Trustee which in turn will
purchase for the investor full and fractional Units of the Fund at the price
determined as of the close of business on the distribution day and will add the
Units to the investor's account and send the investor an account statement
reflecting the reinvestment. 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.
7
<PAGE>
TAXES
TAXATION OF THE FUND
The Fund intends to qualify for and elect the special tax treatment
applicable to 'regulated investment companies' under Section 851-855 of the
Internal Revenue Code of 1986, as amended (the 'Code'). Qualification and
election as a 'regulated investment company' involve no supervision of
investment policy or management by any government agency. If the Fund qualifies
as a 'regulated investment company' and distributes to investors 90% or more of
its taxable income without regard to its net capital gain (i.e., the excess of
its net long-term capital gain over its net short-term capital loss), it will
not be subject to Federal income tax on any portion of its taxable income
(including any net capital gain) distributed to investors in a timely manner. In
addition, the Fund will not be subject to the 4% excise tax on certain
undistributed income of 'regulated investment companies' to the extent it
distributes to investors in a timely manner at least 98% of its taxable income
(including any net capital gain). It is anticipated that the Fund will not be
subject to Federal income tax or the excise tax because the Indenture requires
the distribution of the Fund's taxable income (including any net capital gain)
in a timely manner. Although all or a portion of the Fund's taxable income
(including any net capital gain) for a taxable year may be distributed shortly
after the end of the calendar year, such a distribution will be treated for
Federal income tax purposes as having been received by investors during the
calendar year.
DISTRIBUTIONS
Distribution to investors of the Fund's dividend income and net short-term
capital gain in any year will be taxable as ordinary income to investors to the
extent of the Fund's taxable income (without regard to its net capital gain) for
that year. Any excess will be treated as a return of capital and will reduce the
investor's basis in his Units and, to the extent that such distributions exceed
his basis, will be treated as a gain from the sale of his Units as discussed
below. It is anticipated that substantially all of the distributions of the
Fund's dividend income and net short-term capital gain will be taxable as
ordinary income to investors.
Distribution of the Fund's net capital gain (designated as capital gain
dividends by the Fund) will be taxable to investors as long-term capital gain,
regardless of the length of time the Units have been held by an investor. An
investor will recognize a taxable gain or loss if the investor sells or redeems
his Units. Any gain or loss arising from (or treated as arising from) the sale
or redemption of Units will be a capital gain or loss, except in the case of a
dealer in securities. Capital gains are currently taxed at the same rate as
ordinary income, however, the excess of net long-term capital gains over net
short-term capital losses may be taxed at a lower rate than ordinary income for
certain noncorporate taxpayers. A capital gain or loss is long-term if the asset
is held for more than one year and short-term if held for one year or less.
However, any capital loss on the sale or redemption of a Unit that an investor
has held for six months or less will be a long-term capital loss to the extent
of any capital gain dividends previously distributed to the investor by the
Fund. The deduction of capital losses is subject to limitations.
A distribution of Securities to an investor upon redemption of his Units
will be a taxable event to such investor, and that investor will recognize
taxable gain or loss (equal to the difference between such investor's tax basis
in his Units and the fair market value of Securities received in redemption),
which will be capital gain or loss upon such distribution, except in the case
of a dealer in securities. Investors should consult their own tax advisers in
this regard.
Dividends received by the Fund from foreign issuers will generally be
subject to foreign withholding taxes. The Fund will not be eligible for, and
therefore does not intend to make, an election that would enable investors to
credit foreign withholding taxes against their U.S. Federal income tax liability
on distributions from the Fund.
Distributions that are taxable as ordinary income to investors will
constitute dividends for Federal income tax purposes. To the extent that
distributions are appropriately designated by the Fund and are attributable to
dividends received by the Fund from domestic issuers with respect to whose
Securities the Fund satisfies the requirements for the dividends-received
deduction, such distributions will be eligible for the dividends-received
deduction for corporations (other than corporations such as 'S' corporations
which are not eligible for such deduction because of their special
characteristics and other than for purposes of special taxes such as the
accumulated earnings tax and the personal holding company tax). The
dividends-received deduction generally is currently 70%. However, Congress from
time to time considers proposals that would adversely affect the after-tax
return to investors who can take advantage of the deduction. For example, on
December 7, 1995, the Clinton Administration proposed reducing the dividends
8
<PAGE>
received deduction to 50% for dividends paid or accrued after January 31, 1996.
Investors are urged to consult their own tax advisers.
Sections 246 and 246A of the Code contain additional limitations on the
eligibility of dividends for the corporate dividends-received deduction.
Depending upon the corporate investor's circumstances (including whether it has
a 45-day holding period for its Units and whether its Units are debt financed),
these limitations may be applicable to dividends received by an investor from
the Fund which would otherwise qualify for the dividends-received deduction
under the principles discussed above. Accordingly, investors should consult
their own tax advisers in this regard. A corporate investor should be aware that
the receipt of dividend income for which the dividends-received deduction is
available may give rise to an alternative minimum tax liability (or increase an
existing liability) because the dividend income will be included in the
corporation's 'adjusted current earnings' for purposes of the adjustment to
alternative minimum taxable income required by Section 56(g) of the Code.
Investors will be taxed in the manner described above regardless of whether
distributions from the Fund are actually received by the investor or are
reinvested pursuant to the Reinvestment Plan.
The Federal tax status of each year's distributions will be reported to
investors and to the Internal Revenue Service. The foregoing discussion relates
only to the Federal income tax status of the Fund and to the tax treatment of
distributions by the Fund to U.S. investors. Investors that are not United
States citizens or residents should be aware that distributions from the Fund
will generally be subject to a withholding tax of 30%, or a lower treaty rate,
and should consult their own tax advisers to determine whether investment in the
Fund is appropriate. Distributions may also be subject to state and local
taxation and investors should consult their own tax advisers in this regard.
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 Keogh
plan must be held in a qualified trust or other arrangement which meets the
requirements of the Code. Keogh plan participants may also establish separate
IRAs (see below) to which they may contribute up to an additional $2,000 per
year ($2,250 in a spousal account).
Individual Retirement Account--IRA. Any individual can make use of a
qualified IRA arrangement for the purchase of Units of the Fund. Any individual
(including one covered by an employer retirement plan) can make a contribution
in an IRA equal to the lesser of $2,000 ($2,250 in a spousal account) or 100% of
earned income; such investment must be made in cash. However, the deductible
amount an individual may contribute will be reduced if the individual's adjusted
gross income exceeds $25,000 (in the case of a single individual), $40,000 (in
the case of married individuals filing a joint return) or $200 (in the case of a
married individual filing a separate return). Certain transactions which are
prohibited under Section 408 of the Code will cause all or a portion of the
amount in an IRA to be deemed to the distributed and subject to tax at that
time. Unless nondeductible contributions were made in 1987 or a later year, all
distributions from an IRA will be treated as ordinary income but generally are
eligible for tax-deferred rollover treatment. Taxable distributions made before
attainment of age 59 1/2, except in the case of the participant's death or
disability or where the amount distributed is part of a series of substantially
equal periodic (at least annual) payments that are to be made over the life
expectancies of the participant and his or her beneficiary, are generally
subject to a surtax in an amount equal to 10% of the distribution.
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<PAGE>
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 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 limitingthe 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.
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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,
PaineWebber Incorporated, a wholly-owned subsidiary of PaineWebber Group Inc.
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 from
underwriting syndicates of which it was a member. During the initial offering
period, the Underwriting Account also may realize profits or sustain losses as a
result of fluctuations after the initial date of deposit in the Public Offering
Price of the Units. In maintaining a secondary market for Units, the Sponsors
will also realize profits or sustain losses in the amount of any difference
between the prices at which they buy Units and the prices at which they resell
these Units (which include the sales charge) or the prices at which they redeem
the Units. Cash, if any, made available by buyers of Units to the Sponsors prior
to a settlement date for the purchase of Units may be used in the Sponsors'
businesses to the extent permitted by Rule 15c3-3 under the Securities Exchange
Act of 1934 and may be of benefit to the Sponsors.
PERFORMANCE INFORMATION
Information on the performance of the Fund for various periods, on the
basis of changes in Unit price plus the amount of dividends and capital gains
reinvested, may be included from time to time in advertisements, sales
literature, reports and other information furnished to current or prospective
11
<PAGE>
investors. Total return figures are not averaged, and may not reflect deduction
of the sales charge, which would decrease the return. Average annualized return
figures reflect deduction of the maximum sales charge. No provision is made for
any income taxes payable.
Past performance of any series may not be indicative of results of future
series. Fund performance may be compared to the performance of the DJIA, the S&P
500 Composite Price Stock Index, the S&P MidCap 400 Index, or performance data
from publications such as Lipper Analytical Services, Inc., Morningstar
Publications, Inc., Money Magazine, The New York Times, U.S. News and World
Report, Barron's, Business Week, CDA Investment Technology, Inc., Forbes
Magazine or Fortune Magazine. Performance of the Stocks may be compared in sales
literature to performance of the S&P 500 Stock Price Composite Index, to which
may be added by year various national and international political and economic
events, and certain milestones in price and market indicators and in offerings
of Defined Asset Funds. This performance may also be compared for various
periods with an investment in short-term U.S. Treasury securities; however, the
investor should bear in mind that Treasury securities are fixed income
obligations, having the highest credit characterisitics, while the Stocks
involve greater risk because they have no maturities, and income thereon is
subject to the financial condition of, and declaration by, the issuers. Sales
literature may also describe certain historic milestones of the telecommunica-
tions industry.
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.
SUPPLEMENTAL INFORMATION
Upon writing or calling the Trustee shown on the back cover of this
Prospectus, investors will receive without charge supplemental information about
the Fund, which has been filed with the SEC. The supplemental information
includes more detailed risk factor disclosure about the types of securities that
may be part of the Portfolio and general information about the structure and
operation of the Fund.
12
<PAGE>
Defined
Asset FundsSM
SPONSORS: EQUITY INCOME FUND
Merrill Lynch, CONCEPT SERIES
Pierce, Fenner & Smith IncorporatedTELE-GLOBAL TRUST 2
Defined Asset Funds
P.O. Box 9051
Princeton, N.J. 08543-9051 This Prospectus does not contain all of the
(609) 282-8500 information with respect to the investment
Smith Barney Inc. company set forth in its registration
Unit Trust Department statement and exhibits relating thereto which
388 Greenwich Street--23rd Floor have been filed with the Securities and
New York, NY 10013 Exchange Commission, Washington, D.C. under
1-800-223-2532 the Securities Act of 1933 and the Investment
PaineWebber Incorporated Company Act of 1940, and to which reference
1200 Harbor Blvd. is hereby made.
Weehawken, N.J. 07087 ------------------------------
(201) 902-3000 No person is authorized to give any
Prudential Securities Incorporated information or to make any representations
One Seaport Plaza with respect to this investment company not
199 Water Street contained in its registration statement and
New York, N.Y. 10292 exhibits relating thereto; and any
(212) 776-1000 information or representation not contained
Dean Witter Reynolds Inc. therein must not be relied upon as having
Two World Trade Center--59th Floor been authorized.
New York, N.Y. 10048 ------------------------------
(212) 392-2222 When Units of this Fund are no longer
TRUSTEE: available this Prospectus may be used as a
The Chase Manhattan Bank, N.A. preliminary prospectus for a future series,
(a National Banking Association) in which case investors should note the
Unit Trust Department following:
Box 2051 Information contained herein is subject to
New York, NY 10048 amendment. A registration statement relating
1-800-323-1508 to securities of a future series has been
filed with the Securities and Exchange
Commission. These securities may not be sold
nor may offers to buy be accepted prior to
the time the registration statement becomes
effective.
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.
15179--2/96
