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DEFINED ASSET FUNDSSM
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EQUITY INVESTOR FUND
SELECT SERIES STANDARD & POOR'S INDUSTRY
TURNAROUND PORTFOLIO 2
(A UNIT INVESTMENT TRUST)
O TOTAL RETURN FROM:
-- CAPITAL APPRECIATION
-- CURRENT DIVIDEND INCOME
O REINVESTMENT OPTION
SPONSORS: -------------------------------------------------
Merrill Lynch, The Securities and Exchange Commission has not
Pierce, Fenner & Smith approved or disapproved these Securities or
Incorporated passed upon the adequacy of this prospectus. Any
Salomon Smith Barney Inc. representation to the contrary is a criminal
PaineWebber Incorporated offense.
Dean Witter Reynolds Inc. Prospectus dated July 9, 1999.
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Defined Asset FundsSM
Defined Asset FundsSM is America's oldest and largest family of unit investment
trusts, with over $160 billion sponsored over the last 28 years. Defined Asset
Funds has been a leader in unit investment trust research and product
innovation. Our family of Funds helps investors work toward their financial
goals with a full range of quality investments, including municipal, corporate
and government bond portfolios, as well as domestic and international equity
portfolios.
Defined Asset Funds offer a number of advantages:
o A disciplined strategy of buying and holding with a long-term view is the
cornerstone of Defined Asset Funds.
o Fixed portfolio: Defined Funds follow a buy and hold investment strategy;
funds are not managed and portfolio changes are limited.
o Defined Portfolios: We choose the stocks and bonds in advance, so you know
what you're investing in.
o Professional research: Our dedicated research team seeks out stocks or bonds
appropriate for a particular fund's objectives.
o Ongoing supervision: We monitor each portfolio on an ongoing basis.
No matter what your investment goals, risk tolerance or time horizon, there's
probably a Defined Asset Fund that suits your investment style. Your financial
professional can help you select a Defined Asset Fund that works best for your
investment portfolio.
THE FINANCIAL INFORMATION IN THIS PROSPECTUS IS AS OF THE EVALUATION DATE, MARCH
31, 1999.
CONTENTS
Page
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Risk/Return Summary..................................... 3
What You Can Expect From Your Investment................ 5
Income............................................... 5
Records and Reports.................................. 5
The Risks You Face...................................... 5
Concentration Risk................................... 5
Litigation and Legislation Risks..................... 5
Selling or Exchanging Units............................. 6
Sponsors' Secondary Market........................... 6
Selling Units to the Trustee......................... 6
Rollover/Exchange Option............................. 7
How The Fund Works...................................... 7
Pricing.............................................. 7
Evaluations.......................................... 8
Income............................................... 8
Expenses............................................. 8
Portfolio Changes.................................... 9
Portfolio Termination................................ 9
No Certificates...................................... 9
Trust Indenture...................................... 9
Legal Opinion........................................ 10
Auditors............................................. 10
Sponsors............................................. 10
Trustee.............................................. 11
Underwriters' and Sponsors' Profits.................. 11
Public Distribution.................................. 11
Code of Ethics....................................... 11
Year 2000 Issues..................................... 11
Taxes................................................... 11
Supplemental Information................................ 13
Financial Statements.................................... D-1
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RISK/RETURN SUMMARY
1. WHAT IS THE PORTFOLIO'S OBJECTIVE?
O The Portfolio seeks total return through a combination of
current dividend income and capital appreciation.
You can participate in the Portfolio by purchasing units.
Each unit represents an equal share of the stocks in the
Portfolio and receives an equal share of income and
principal distributions.
2. WHAT IS THE PORTFOLIO'S INVESTMENT STRATEGY?
O As of the initial date of deposit (April 3, 1998), we
selected the 14 stocks in the Portfolio through the
following screening process.
- -- The strategy was to identify those industries that have
recently underperformed the S&P 500 Index but that, in
the opinion of the Sponsors and the Portfolio Consultant
(Standard & Poor's), had begun to turn around.
- -- First, we measured relative industry returns by
comparing the last 12-month performance of each of the
approximately 100 industries within the S&P 500 Index to
the performance of the Index as a whole.
- -- Next, we identified those industries that had broken
above their nine-month average of relative annual
returns.
- -- We then selected the five most underperforming
industries.
- -- Finally, from each industry we chose up to four stocks.
If there were more than four stocks in an industry, we
chose the stocks with the highest S&P Common Stock
Rankings or those whose issuers have the largest market
capitalization.
O The Portfolio plans to hold the stocks in the Portfolio for
about one more year. At the end of the year, we will
liquidate the Portfolio and apply the same Strategy to
select a new portfolio, if available.
o Each Industry Turnaround Portfolio is designed to be part
of a longer term strategy. We believe that more consistent
results are likely if the Strategy is followed for at least
three to five years but you are not required to stay with
the Strategy or to roll over your investment. You can sell
your units any time.
3. WHAT INDUSTRIES ARE REPRESENTED IN THE PORTFOLIO?
Based upon the principal business of each issuer and
current market values, the Portfolio represents the
following industry groups.
APPROXIMATE
PORTFOLIO
PERCENTAGE
/ / Containers (Metal and Glass) 20%
/ / Engineering and Construction 12
/ / Gaming/Lottery/Parimutuel 19
/ / Health Care 12
/ / Restaurants 37
4. WHAT ARE THE SIGNIFICANT RISKS?
YOU CAN LOSE MONEY BY INVESTING IN THE PORTFOLIO. THIS CAN
HAPPEN FOR VARIOUS REASONS, INCLUDING:
o Each industry may be out of favor with the market;
o The underperforming industries from which the stocks were
selected may not turn around.
o Stock prices can be volatile.
o Dividend rates on the stocks or share prices may decline
during the life of the Portfolio.
o Because the Portfolio is concentrated in stocks in the
restaurant sector, adverse developments in this sector may
affect the value of your units.
o The Portfolio may continue to purchase or hold the stocks
originally selected even though their market value or yield
may have changed or the Common Stock Rankings on the stocks
may fall.
5. IS THIS PORTFOLIO APPROPRIATE FOR YOU?
Yes, if you want current dividend income and capital
appreciation. You will benefit from a professionally
selected and supervised portfolio whose risk is reduced by
investing in equity securities of different issuers in a
variety of industries.
The Portfolio is not appropriate for you if you are not
comfortable with the Strategy or are unwilling to take the
risk involved with an equity investment. It may not be
appropriate for you if you are seeking preservation of
capital or high current income.
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RISK/RETURN SUMMARY (Continued)
6. WHAT ARE THE PORTFOLIO'S FEES AND EXPENSES?
This table shows the costs and expenses you may pay,
directly or indirectly, when you invest in the Portfolio.
ESTIMATED ANNUAL OPERATING EXPENSES
AMOUNT
PER 1,000
UNITS
-----------
$ 0.90
Trustee's Fee
$ 0.45
Portfolio Supervision,
Bookkeeping and
Administrative Fees (including updating
expenses)
$ 3.02
Other Operating Expenses
-----------
$ 2.83
TOTAL
The Sponsors historically paid updating expenses.
You will pay an up-front sales fee of 1.00%, as well as a
deferred sales fee of $17.50 ($2.50 per 1,000 units
deducted monthly from the Portfolio's net asset value, May
1, 1999 through November 1, 1999).
The maximum sales fees are as follows:
YOUR MAXIMUM
SALES FEE
IF YOU INVEST: WILL BE:
----------------------------------- -----------------
Less than $50,000 2.75%
$ 50,000 to $99,999 2.50%
$100,000 to $249,999 2.00%
$250,000 to $999,999 1.75%
$1,000,000 or more 1.00%
7. IS THE PORTFOLIO MANAGED?
Unlike a mutual fund, the Portfolio is not managed and
stocks are not sold because of market changes. The
Sponsors monitor the portfolio and may instruct the
Trustee to sell securities under certain limited
circumstances. However, given the investment philosophy of
the Portfolio, the Sponsors are not likely to do so.
8. HOW DO I BUY UNITS?
The minimum investment is $250.
You can buy units from any of the Sponsors. The Sponsors
are listed later in this prospectus.
UNIT PRICE PER 1,000 UNITS $828.12
(as of March 31, 1999)
Unit price is based on the net asset value of the
Portfolio plus the up-front sales fee.
The Portfolio stocks are valued by the Trustee on the
basis of their closing prices at 4:00 p.m. Eastern time
every business day. Unit price changes every day with
changes in the prices of the stocks.
9. HOW DO I SELL UNITS?
You may sell your units at any time to any Sponsor or the
Trustee for the net asset value determined at the close of
business on the date of sale.
10. HOW ARE DISTRIBUTIONS MADE AND TAXED?
The Fund pays distributions of any dividend income, net of
expenses, on the 25th of June, September, December and
February, if you own units on the 10th of those months.
For tax purposes, you will be considered to have received
all the dividends paid on your pro rata portion of each
security in the Portfolio when those dividends are
received by the Portfolio regardless of whether you
reinvest your dividends in the Portfolio. A portion of the
dividend payments may be used to pay expenses of the
Portfolio.
11. WHAT OTHER SERVICES ARE AVAILABLE?
REINVESTMENT
You may choose to reinvest your distributions into
additional units of the Portfolio. You will pay only the
deferred sales fee remaining at the time of reinvestment.
Unless you choose reinvestment, you will receive your
distributions in cash.
EXCHANGE PRIVILEGES
You may exchange units of this Portfolio for units of
certain other Defined Asset Funds. You may also exchange
into this Portfolio from certain other funds. We charge a
reduced sales fee on designated exchanges.
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WHAT YOU CAN EXPECT FROM YOUR INVESTMENT
INCOME
The Portfolio will pay to you quarterly any income it has received. Because the
Portfolio generally pays dividends as they are received, individual income
payments will fluctuate based upon the amount of dividends declared and paid by
each issuer. Other reasons your income may vary are:
o changes in the Portfolio because of additional securities purchases or
sales;
o a change in the Portfolio's expenses; and
o the amount of dividends declared and paid.
There can be no assurance that any dividends will be declared or paid.
RECORDS AND REPORTS
You will receive:
o a notice from the Trustee if new equity securities are deposited in exchange
or substitution for equity securities originally deposited;
o a final report on Portfolio activity; and
o annual tax information. This will also be sent to the IRS. You must report the
amount of income received during the year. Please contact your tax advisor in
this regard.
You may request audited financial statements of the Portfolio from the Trustee.
You may inspect records of Portfolio transactions at the Trustee's office during
regular business hours.
THE RISKS YOU FACE
CONCENTRATION RISK
When stocks in a particular industry make up 25% or more of the Portfolio, it is
said to be 'concentrated' in that industry, which makes the Portfolio less
diversified.
Here is what you should know about the Portfolio's concentration in stocks of
the restaurant industry.
The companies in the portfolio operate fast-food or casual dining chains. Risks
in these kinds of restaurants include:
o high costs of store construction and kitchen equipment;
o increases in minimum wage;
o labor shortages;
o fluctuating costs of food, paper and commodities;
o competitive pressures;
o cash flow sensitivity to regional economic weaknesses; and
o problems associated with franchising.
LITIGATION AND LEGISLATION RISKS
Columbia/HCA Healthcare Corporation common stock represents approximately 10% of
the value of the Portfolio. Columbia/HCA is currently the subject of several
federal and state investigations into its business practices, as well as various
shareholder derivative and class action suits, patient/payer actions and general
liability claims. Columbia/HCA is the subject of a formal order of investigation
by the SEC relating to the anti-fraud, insider trading, periodic reporting and
internal accounting control provisions of the federal securities laws. The
Sponsors cannot predict the outcome of the investigations and litigation pending
against Columbia/HCA, or whether these and other possible developments will have
a material adverse effect on the price of Columbia/HCA stock over the remaining
one-year life of the Portfolio, which could adversely affect unit price. Other
than as described above, we do not know of any pending litigation that might
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have a material adverse effect upon the Portfolio.
Future tax legislation could affect the value of the Portfolio by:
o reducing the dividends-received deduction or
o increasing the corporate tax rate resulting in less money available for
dividend payments.
SELLING OR EXCHANGING UNITS
You can sell your units at any time for a price based on their net asset value.
Your net asset value is calculated each business day by:
o adding the value of the Portfolio Securities, cash and any other Portfolio
assets;
o subtracting accrued but unpaid Portfolio expenses, unreimbursed Trustee
advances, cash held to buy back units or for distribution to investors,
and any other Portfolio liabilities; and
o dividing the result by the number of outstanding units.
Your net asset value when you sell may be more or less than your cost because of
sales fees, market movements and changes in the Portfolio.
If you sell your units before the final deferred sales fee installment, the
amount of any remaining payments will be deducted from your proceeds.
SPONSORS' SECONDARY MARKET
While we are not obligated to do so, we will buy back units at net asset value.
We may resell the units to other buyers or to the Trustee.
We have maintained a secondary market continuously for more than 28 years, but
we could discontinue it without prior notice for any business reason.
SELLING UNITS TO THE TRUSTEE
Regardless of whether we maintain a secondary market, you can sell your units to
the Trustee at any time by contacting your broker, dealer or financial
institution that holds your units in street name. Sometimes, additional
documents are needed such as a trust document, certificate of corporate
authority, certificate of death or appointment as executor, administrator or
guardian.
Within seven days after your request and the necessary documents are received,
the Trustee will mail a check to you. Contact the Trustee for additional
information.
As long as we are maintaining a secondary market, the Trustee will sell your
units to us at a price based on net asset value. If there is no secondary
market, the Trustee will sell your units in the over-the-counter market if it
believes it can obtain a higher price. In that case, you will receive the net
proceeds of the sale.
If the Portfolio does not have cash available to pay you for the units you are
selling, the agent for the Sponsors will select securities to be sold. These
sales could be made at times when the securities would not otherwise be sold and
may result in your receiving less than you paid for your unit and also reduce
the size and diversity of the Portfolio.
If you sell units with a value of at least $250,000, you may choose to receive
your distribution 'in kind.' If you so choose, you will receive securities and
cash with a total value equal to the price of your units. The Trustee will try
to distribute securities in the portfolio pro rata, but it reserves the right to
distribute only one or a few securities. The
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Trustee will act as your agent in an in-kind distribution and will either hold
the securities for your account or transfer them as you instruct. You must pay
any transaction costs as well as transfer and ongoing custodial fees on sales of
securities distributed in kind.
There could be a delay in paying you for your units:
o if the New York Stock Exchange is closed (other than customary weekend and
holiday closings);
o if the SEC determines that trading on the New York Stock Exchange is
restricted or that an emergency exists making sale or evaluation of the
securities not reasonably practicable; and
o for any other period permitted by SEC order.
ROLLOVER/EXCHANGE OPTION
When this Portfolio is about to terminate, you may have the option to roll your
proceeds into the next Industry Turnaround Portfolio if one is available.
If you hold your Units with one of the Sponsors and notify your financial
adviser by March 31, 2000, your units will be redeemed and certain distributed
securities plus the proceeds from the sale of the remaining distributed
securities will be reinvested in units of a new Industry Turnaround Portfolio.
If you decide not to roll over your proceeds, you will receive a cash
distribution (or, if you so choose, an in-kind distribution) after the Portfolio
terminates.
The Portfolio will terminate by May 1, 2000. You may, by written notice to the
Trustee at least ten business days prior to termination, elect to receive an
in-kind distribution of your pro rata share of the Securities remaining in the
Portfolio at that time (net of your share of expenses). Of course you can sell
your Units at any time prior to termination.
You may exchange units of this Portfolio for units of another Select or Focus
Series or certain other Defined Asset Funds any time before this Portfolio
terminates. If you continue to hold your Units, you may exchange units of this
Portfolio for units of certain other Defined Asset Funds at a reduced sales fee
if your investment goals change. To exchange units, you should talk to your
financial professional about what Portfolios are exchangeable, suitable and
currently available.
Normally, a rollover is taxable and you must recognize any gain or loss on the
rollover. However, the IRS may try to disallow a loss if the portfolios of the
two funds are not materially different; you should consult your own tax adviser.
We may amend or terminate the options to exchange your units or roll your
proceeds at any time without notice.
HOW THE FUND WORKS
PRICING
Units are charged a combination of initial and deferred sales fees.
The deferred sales fee is generally a monthly charge of $2.50 per 1,000 units
and is accrued in seven monthly installments. Units redeemed or repurchased
prior to the accrual of the final deferred sales fee installment will have the
amount of any remaining installments deducted from the redemption or repurchase
proceeds or deducted in calculating an in-kind distribution; however, 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
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initial sales fee is equal to the aggregate sales fee less the aggregate amount
of any remaining installments of the deferred sales fee.
It is anticipated that securities will not be sold to pay the deferred sales fee
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.
EVALUATIONS
The Trustee values the securities on each business day (i.e., any day other than
Saturdays, Sundays and the following holidays as observed by the New York Stock
Exchange: New Year's Day, Martin Luther King, Jr. 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, evaluations are generally based on closing sales prices on that
exchange or that system or, if closing sales prices are not available, at the
mean between the closing bid and offer prices.
INCOME
o The annual income per unit, after deducting estimated annual Portfolio
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
Portfolio and, to a lesser degree, upon the level of sales of securities.
There is no assurance that dividends on the securities will continue at their
current levels or be declared at all.
o 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. The Trustee credits dividends
received to an Income Account and other receipts to a Capital Account. The
Trustee may establish a reserve account by withdrawing from the accounts
amounts it considers appropriate to pay any material liability. These accounts
do not bear interest.
EXPENSES
The Trustee is paid a fee monthly. It also benefits when it holds cash for the
Portfolio in non-interest bearing accounts. The Trustee may also receive
additional amounts:
o for extraordinary services and costs of indemnifying the Trustee and the
Sponsors;
o costs of actions taken to protect the Portfolio and other legal fees and
expenses;
o expenses for keeping the Portfolio's registration statement current; and
o Portfolio termination expenses and any governmental charges.
Legal, typesetting, electronic filing and regulatory filing fees and expenses
associated with updating the Portfolio's registration statement yearly are also
now chargeable to the Portfolio; the Sponsors historically paid these amounts.
The Sponsors are currently reimbursed up to 45 cents per 1,000 units annually
for providing portfolio supervisory, bookkeeping and administrative services and
for any other expenses properly chargeable to the Portfolio. While this fee may
exceed the amount of these costs and expenses attributable to this Portfolio,
the total of these fees for all Series of Defined Asset Funds will not exceed
the aggregate amount attributable to all of these Series for any calendar year.
Certain of these
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expenses were previously paid for by the Sponsors.
S&P receives a minimal annual fee from the Portfolio to cover its license to the
agent for the Sponsors of the use of the trademarks and trade names 'Standard &
Poor's', 'S&P' and other trademarks and trade names and the use of the S&P
Common Stock Rankings.
The Trustee's and Sponsors'fees may be adjusted for inflation without investors'
approval.
The deferred sales fees you owe are paid from the Capital Account. Although we
may collect the deferred sales charge monthly, to keep Units more fully invested
we do not currently plan to pay the deferred sales charge until after the
rollover notification date.
The Sponsors will pay advertising and selling expenses at no charge to the
Portfolio. If Portfolio expenses exceed initial estimates, the Portfolio will
owe the excess. The Trustee has a lien on Portfolio assets to secure
reimbursement of Portfolio expenses and may sell securities if cash is not
available.
PORTFOLIO CHANGES
If we maintain a secondary market in units but are unable to sell the units that
we buy in the secondary market, we will redeem units, which will affect the size
and composition of the portfolio.
We decide whether to offer units for sale that we acquire in the secondary
market after reviewing:
o diversity of the Portfolio;
o size of the Portfolio relative to its original size;
o ratio of Portfolio expenses to income; and
o cost of maintaining a current prospectus.
PORTFOLIO TERMINATION
When the Portfolio is about to terminate you will receive a notice, and you will
be unable to sell your units after that time. Unless you choose to receive an
in-kind distribution of securities, we will sell any remaining securities, and
you will receive your final distribution in cash.
You will pay your share of the expenses associated with termination, including
brokerage costs in selling securities. This may reduce the amount you receive as
your final distribution.
NO CERTIFICATES
All investors are required to hold their Units in uncertificated form and in
'street name' by their broker, dealer or financial institution at the Depository
Trust Company.
TRUST INDENTURE
The Portfolio is a 'unit investment trust' governed by a Trust Indenture, a
contract among the Sponsors and the Trustee, which sets forth their duties and
obligations and your rights. A copy of the Indenture is available to you on
request to the Trustee. The following summarizes certain provisions of the
Indenture.
The Sponsors and the Trustee may amend the Indenture without your consent:
o to cure ambiguities;
o to correct or supplement any defective or inconsistent provision;
o to make any amendment required by any governmental agency; or
o to make other changes determined not to be materially adverse to your best
interest (as determined by the Sponsors).
Investors holding 51% of the units may amend the Indenture. Every investor must
consent to any amendment that changes the
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51% requirement. No amendment may reduce your interest in the Portfolio without
your written consent.
The Trustee may resign by notifying the Sponsors. The Sponsors may remove the
Trustee without your consent if:
o it fails to perform its duties;
o it becomes incapable of acting or bankrupt or its affairs are taken over by
public authorities; or
o the Sponsors determine that its replacement is in your best interest.
Investors holding 51% of the units may remove the Trustee. The Trustee may
resign or be removed by the Sponsors without the consent of investors. The
resignation or removal of the Trustee becomes effective when a successor accepts
appointment. The Sponsors will try to appoint a successor promptly; however, if
no successor has accepted within 30 days after notice of resignation, the
resigning Trustee may petition a court to appoint a successor.
Any Sponsor may resign as long as one Sponsor with a net worth of $2 million
remains and agrees to the resignation. The remaining Sponsors and the Trustee
may appoint a replacement. If there is only one Sponsor and it fails to perform
its duties or becomes bankrupt the Trustee may:
o remove it and appoint a replacement Sponsor;
o liquidate the Portfolio; or
o continue to act as Trustee without a Sponsor.
Merrill Lynch, Pierce, Fenner & Smith Incorporated acts as agent for the
Sponsors.
The Trust Indenture contains customary provisions limiting the liability of the
Trustee and the Sponsors.
LEGAL OPINION
Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York 10017, as
special counsel for the Sponsors, has given an opinion that the units are
validly issued.
AUDITORS
Deloitte & Touche LLP, 2 World Financial Center, New York, New York 10281,
independent accountants, audited the Statement of Condition included in this
prospectus.
SPONSORS
The Sponsors are:
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED (a wholly-owned subsidiary of
Merrill Lynch & Co., Inc.)
P.O. Box 9051,
Princeton, NJ 08543-9051
SALOMON SMITH BARNEY INC. (an indirectly wholly-owned subsidiary of Citigroup
Inc.)
388 Greenwich Street--23rd Floor,
New York, NY 10013
DEAN WITTER REYNOLDS INC. (a principal operating subsidiary of Morgan Stanley
Dean Witter & Co.)
Two World Trade Center--59th Floor,
New York, NY 10048
PAINEWEBBER INCORPORATED (a wholly-owned subsidiary of PaineWebber Group Inc.)
1285 Avenue of the Americas,
New York, NY 10019
Each Sponsor is a Delaware corporation and it, or its predecessor, has acted as
sponsor to many unit investment trusts. As a registered broker-dealer each
Sponsor buys and sells securities (including investment company shares) for
others (including investment companies) and participates as an underwriter in
various selling groups.
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TRUSTEE
The Bank of New York, 101 Barclay Street-- 17W, New York, New York 10004, is the
Trustee. It is supervised by the Federal Deposit Insurance Corporation, the
Board of Governors of the Federal Reserve System and New York State banking
authorities.
UNDERWRITERS' AND SPONSORS' PROFITS
Underwriters receive sales charges when they sell units. Any cash made available
by you to the Sponsors before the settlement date for units may be used in the
Sponsors' businesses to the extent permitted by federal law and may benefit the
Sponsors.
A Sponsor or Underwriter may realize profits or sustain losses on stocks in the
Portfolio which were acquired from underwriting syndicates of which it was a
member.
In maintaining a secondary market, the Sponsors will also realize profits or
sustain losses in the amount of any difference between the prices at which they
buy units and the prices at which they resell or redeem them.
PUBLIC DISTRIBUTION
Dealers will be entitled to a concession of $11 per 1,000 Units ($5 per 1,000
Units for purchases of $1 million or more).
The Sponsors do not intend to qualify units for sale in any foreign countries.
This prospectus does not constitute an offer to sell units in any country where
units cannot lawfully be sold.
CODE OF ETHICS
Merrill Lynch, as agent for the Sponsors, has adopted a code of ethics requiring
reporting of personal securities transactions by its employees with access to
information on portfolio transactions. The goal of the code is to prevent fraud,
deception or misconduct against the Portfolio and to provide reasonable
standards of conduct.
YEAR 2000 ISSUES
Many computer systems were designed in such a way that they may be unable to
distinguish between the year 2000 and the year 1900 (commonly known as the 'Year
2000 Problem'). We do not expect that the computer system changes necessary to
prepare for the Year 2000 will cause any major operational difficulties for the
Portfolio. The Year 2000 Problem may adversely affect any of the issuers of the
securities contained in the Portfolio, but we cannot predict whether any impact
will be material to the Portfolio as a whole.
TAXES
The following summary describes some of the important income tax consequences of
holding units. It assumes that you are not a dealer in securities, financial
institution, insurance company or other investor with special circumstances. You
should consult your own tax adviser about your particular circumstances.
In the opinion of our counsel, under existing law:
GENERAL TREATMENT OF THE FUND AND YOUR INVESTMENT
The Portfolio will not be taxed as a corporation for federal income tax
purposes, and you will be considered to own directly your share of each Security
in the Portfolio.
You will be considered to receive your share of any dividends paid when those
dividends are received by the Portfolio. Income from dividends will be taxed at
ordinary income rates. If you are a corporate investor, you may be eligible for
the dividends received
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deduction if you satisfy the applicable holding period and other requirements.
You should consult your tax adviser in this regard.
GAIN OR LOSS UPON DISPOSITION
You will generally recognize gain or loss when you dispose of your units for
cash (by sale or redemption) or when the Trustee disposes of the Securities in
the Portfolio. You generally will not recognize gain or loss on an 'in-kind'
distribution to you of your proportional share of the Portfolio Securities,
whether it is in redemption of your units or upon termination of the Portfolio.
Your holding period for the distributed Securities will include your holding
period in your units.
If you elect to roll over your investment in the Portfolio, you will not
recognize gain or loss on your units except to the extent that your share of the
Securities in the Portfolio is sold and the proceeds are paid to you. Your basis
in the Securities that are rolled over into a new portfolio will be the same as
the portion of your basis in your units which was attributable to the rolled
over Securities.
If your net long-term capital gains exceed your net short-term capital losses,
the excess may be subject to tax at a lower rate than ordinary income. Any
capital gain or loss from the Portfolio will be long-term if you are considered
to have held your investment which produces the gain or loss for more than one
year and short-term otherwise. Because the deductibility of capital losses is
subject to limitations, you may not be able to deduct all of your capital
losses. You should consult your tax adviser in this regard.
YOUR TAX BASIS IN THE SECURITIES
Your aggregate tax basis in your units will be equal to the cost of the units,
including the sales fee. You should not increase your basis in your units by
deferred sales charges or organizational expenses. Your basis for Securities
distributed to you will be the same as the portion of your basis in your units
that is attributable to the distributed Securities. The tax reporting form and
annual statements you receive will be based on the net amounts paid to you, from
which these expenses will already be deducted.
EXPENSES
If you are an individual who itemizes deductions, you may deduct your share of
Portfolio expenses, but only to the extent that your share of the expenses,
together with your other miscellaneous deductions, exceeds 2% of your adjusted
gross income. Your ability to deduct Portfolio expenses will be limited further
if your adjusted gross income exceeds a specified amount (currently, $126,600 or
$63,300 for a married person filing separately).
STATE AND LOCAL TAXES
Under the income tax laws of the State and City of New York, the Portfolio will
not be taxed as a corporation, and the income of the Portfolio will be treated
as the income of the investors in the same manner as for federal income tax
purposes.
FOREIGN INVESTORS
If you are a foreign investor and you are not engaged in a U.S. trade or
business, you generally will be subject to 30% withholding tax (or a lower
applicable treaty rate) on distributions. You should consult your tax adviser
about the possible application of federal, state and local, and foreign taxes.
12
<PAGE>
RETIREMENT PLANS
You may wish to purchase units for an Individual Retirement Account ('IRAs') or
other retirement plan. Generally, capital gains and income received in each of
these plans are exempt from federal taxation. All distributions from these types
of plans are generally treated as ordinary income but may, in some cases, be
eligible for tax-deferred rollover treatment. You should consult your attorney
or tax adviser about the specific tax rules relating to these plans. These plans
are offered by brokerage firms, including the Sponsors of this Portfolio, and
other financial institutions. Fees and charges with respect to such plans may
vary.
SUPPLEMENTAL INFORMATION
You can receive at no cost supplemental information about the Portfolio by
calling the Trustee. The supplemental information includes more detailed risk
disclosure and general information about the structure and operation of the
Portfolio. The supplemental information is also available from the SEC.
13
EQUITY INVESTOR FUND SELECT SERIES,
S&P INDUSTRY TURNAROUND PORTFOLIO SERIES 2
DEFINED ASSET FUNDS
REPORT OF INDEPENDENT ACCOUNTANTS
The Sponsors, Trustee and Holders
of Equity Investor Fund Select Series,
S&P Industry Turnaround Portfolio Series 2
Defined Asset Funds:
We have audited the accompanying statement of condition of Equity
Investor Fund Select Series, S&P Industry Turnaround Portfolio Series 2
Defined Asset Funds including the portfolio, as of March 31, 1999
and the related statements of operations and of changes in net
assets for the period April 4, 1998 to March 31, 1999. These
financial statements are the responsibility of the Trustee. Our
responsibility is to express an opinion on these financial statements
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 statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Securities
owned at March 31, 1999, as shown in such portfolio, were
confirmed to us by The Bank of New York, the Trustee. An audit also
includes assessing the accounting principles used and significant
estimates made by the Trustee, as well as evaluating the overall
financial statement presentation. We believe that our audit provides
a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Equity
Investor Fund Select Series, S&P Industry Turnaround Portfolio Series 2
Defined Asset Funds at March 31, 1999 and the results of its
operations and changes in its net assets for the above-stated period
in conformity with generally accepted accounting principles.
DELIOTTE & TOUCHE LLP
New York, NY
June 8, 1999
D - 1
<PAGE>
EQUITY INVESTOR FUND SELECT SERIES
S&P INDUSTRY TURNAROUND PORTFOLIO SERIES 2
DEFINED ASSET FUNDS
STATEMENT OF CONDITION
AS OF March 31,1999
<TABLE>
<CAPTION>
<S> <C> <C>
TRUST PROPERTY:
Investment in marketable securities - at value
(cost $12,401,054) (Note 1)................... $10,769,568
Dividends receivable............................ 4,586
Receivable from securities sold................. 70,798
Prepaid organizational cost (Note 6)............ 19,909
Cash............................................ 19,219
_____________
Total trust property.................. 10,884,080
Less Liabilities:
Accrued expenses payable........................ $ 22,856
Redemption Payable.............................. 121,785 144,641
____________ _____________
NET ASSETS, REPRESENTED BY:
13,109,432 units of fractional undivided
interest outstanding (Note 3)................. 10,731,442
Undistributed net investment income............. 7,997
____________
$10,739,439
==============
UNIT VALUE ($10,739,439/13,109,432 units)......... $0.81921
==============
</TABLE>
See Notes to Financial Statements.
D - 2
<PAGE>
EQUITY INVESTOR FUND SELECT SERIES
S&P INDUSTRY TURNAROUND PORTFOLIO SERIES 2
DEFINED ASSET FUNDS
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
April 4,
1998
to
March 31,
1999
<S> <C>
INVESTMENT INCOME:
Dividend income................................. $ 113,130
Trustee's fees and expenses..................... (30,892)
Sponsors' fees ................................. (13,295)
_______________
Net investment income........................... 68,943
_______________
REALIZED AND UNREALIZED LOSS ON
INVESTMENTS:
Realized loss on securities sold ............... (1,501,032)
Unrealized depreciation of investments.......... (1,631,486)
_______________
Net realized and unrealized loss on
investments................................... (3,132,518)
_______________
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS................................. $(3,063,575)
===============
</TABLE>
See Notes to Financial Statements.
D - 3
<PAGE>
EQUITY INVESTOR FUND SELECT SERIES
S&P INDUSTRY TURNAROUND PORTFOLIO SERIES 2
DEFINED ASSET FUNDS
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
April 4,
1998
to
March 31,
1999
<S> <C>
OPERATIONS:
Net investment income........................... $ 68,943
Realized loss on securities sold
or redeemed.................................. (1,501,032)
Unrealized depreciation of investments.......... (1,631,486)
_____________
Net decrease in net assets resulting
from operations.............................. (3,063,575)
_____________
INCOME DISTRIBUTIONS TO HOLDERS (Note 2)......... (58,843)
CAPITAL SHARE TRANSACTIONS:
Issuance of 19,909,672 additional units........ 19,393,874
Redemptions of 7,205,113 units (Note 5)........ (5,617,367)
Deferred sales charge.......................... (295,447)
Organizational cost (Note 6)................... (19,909)
_____________
NET CAPITAL SHARE TRANSACTIONS.................... 13,461,151
_____________
NET INCREASE IN NET ASSETS........................ 10,338,733
NET ASSETS AT BEGINNING OF PERIOD................. 400,706
_____________
NET ASSETS AT END OF PERIOD....................... $10,739,439
=============
PER UNIT:
Income distributions during period.............. $.00337
=============
Net asset value at end of period................ $.81921
=============
TRUST UNITS OUTSTANDING AT END OF PERIOD.......... 13,109,432
=============
</TABLE>
See Notes to Financial Statements.
D - 4
<PAGE>
EQUITY INVESTOR FUND SELECT SERIES
S&P INDUSTRY TURNAROUND PORTFOLIO SERIES 2
DEFINED ASSET FUNDS
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Fund is registered under the Investment Company Act of 1940 as a Unit
Investment Trust. The following is a summary of significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements. The policies are in conformity with generally
accepted accounting principles.
(a) Securities are stated at value: for securities listed on a national
securities exchange, value is based on the closing sale price on such
exchange and, for securities not so listed, value is based on current
bid price on the over-the-counter market. Realized gains or losses on
sales of securities are determined using the first-in, first-out cost
method.
(b) The Fund is not subject to income taxes. Accordingly, no provision for
such taxes is required.
(c) Dividend income is recorded on the ex-dividend dates.
2. DISTRIBUTIONS
A distribution of net investment income is made to Holders on the
twenty-fifth day of June, September, December and February. Receipts other than
dividends, after deductions for redemptions and applicable expenses, are also
distributed periodically.
3. NET CAPITAL
<TABLE>
<CAPTION>
<S> <C>
Cost of 13,109,432 units at Dates of Deposit....................................... $12,770,080
Sales charge including deferred sales charge....................................... (295,447)
Redemptions of units - cost of 7,205,113 units redeemed ........................... 1,409,236
Realized loss on securities sold or redeemed....................................... (1,501,032)
Net unrealized depreciation of investments......................................... (1,631,486)
Organizational cost................................................................ (19,909)
______________
Net capital applicable to Holders.................................................. $10,731,442
==============
</TABLE>
D - 5
<PAGE>
EQUITY INVESTOR FUND SELECT SERIES
S&P INDUSTRY TURNAROUND PORTFOLIO SERIES 2
DEFINED ASSET FUNDS
NOTES TO FINANCIAL STATEMENTS
4. As of March 31, 1999, net unrealized depreciation of investments, based on
cost for Federal income tax purposes, aggregated $1,631,486, of which
$3,256,322 related to depreciated securities and $1,624,836 related to
appreciated securities. The aggregate cost of investment securities for
Federal income tax purposes was $12,401,054 at March 31,1999.
5. REDEMPTIONS
Holders may request redemptions of units by presentation
thereof to the Trustee, The Bank of New York.
`
6. PREPAID ORGANIZATIONAL COSTS
Organizational costs have been deferred and are being amortized over the
life of the fund.
D - 6
<PAGE>
EQUITY INVESTOR FUND SELECT SERIES
S&P INDUSTRY TURNAROUND PORTFOLIO SERIES 2
DEFINED ASSET FUNDS
PORTFOLIO
AS OF MARCH 31, 1999
<TABLE>
<CAPTION>
Number
of
Shares
Port- of Percentage
folio Common of Value
No. Description of Securities Stock of Fund(2) Cost(1) Market Value(1)
___ _________________________ ______ __________ _______ ______________
<S> <C> <C> <C> <C>
1 Ball Corp. 24,800 10.81 % $ 941,190 $ 1,164,050
2 Columbia/HCA Healthcare 40,112 7.05 1,303,167 759,621
3 Crown Cork & Seal Co. 16,025 4.25 834,273 457,714
4 Darden Restaurants 40,325 7.72 646,749 831,703
5 Fluor Corp. 15,937 4.00 748,981 430,299
6 Foster Wheeler Corp. 27,512 3.10 754,743 333,583
7 Harrah'S Entertainment 50,750 8.98 1,273,416 967,422
8 Mc Dermott Intl. Inc. 20,362 4.79 814,230 515,413
9 McDonalds Corp. (3) 18,950 7.97 596,350 858,672
10 Mirage Resorts Inc. 50,050 9.88 1,122,453 1,063,563
11 Owens-Illinois 18,800 4.36 803,565 470,000
12 Tenet Healthcare Corp. 33,612 5.91 1,235,636 636,527
13 Tricon Global Restaurant 20,862 13.61 657,206 1,465,556
14 Wendys Intl. Inc. 28,675 7.57 669,095 815,445
_________ _____________ _____________
Totals 100.00 % $12,401,054 $10,769,568
========= ============= =============
</TABLE>
Notes:
(1) See Notes to Financial Statements.
(2) Based on value
(3) Received 2 for 1 stock split
D - 7
<PAGE>
Defined
Asset FundsSM
HAVE QUESTIONS ? EQUITY INVESTOR FUND
Request the most SELECT SERIES STANDARD & POOR'S
recent free Information INDUSTRY TURNAROUND PORTFOLIO 2
Supplement that gives more (A Unit Investment Trust)
details about the Fund, ---------------------------------------
by calling: This Prospectus does not contain
The Bank of New York complete information about the
1-800-221-7771 investment company filed with the
Securities and Exchange Commission in
Washington, D.C. under the:
o Securities Act of 1933 (file no.
333-47937) and
o Investment Company Act of 1940 (file
no. 811-3044).
TO OBTAIN COPIES AT PRESCRIBED RATES--
WRITE: Public Reference Section of the
Commission
450 Fifth Street, N.W., Washington,
D.C. 20549-6009
CALL: 1-800-SEC-0330.
VISIT: http://www.sec.gov.
---------------------------------------
No person is authorized to give any
information or representations about
this Fund not contained in this
Prospectus or the Information
Supplement, and you should not rely on
any other information.
---------------------------------------
When units of this Fund are no longer
available, this Prospectus may be used
as a preliminary prospectus for a
future series, but some of the
information in this Prospectus will be
changed for that series.
Units of any future series may not be
sold nor may offers to buy be accepted
until that series has become effective
with the Securities and Exchange
Commission. No units can be sold in any
State where a sale would be illegal.
70064--6/99
