DEFINED ASSET FUNDSSM
- --------------------------------------------------------------------------------
EQUITY INVESTOR FUND This Fund was created to provide investors with
SECOND EXCHANGE SERIES the opportunity to invest in a fixed portfolio
AT&T SHARES consisting of shares of AT&T common stock and
(A UNIT INVESTMENT shares of common stock of the regional holding
TRUST) companies created pursuant to its Plan of
- ------------------------------Reorganization. The value of the Securities and
- -- MONTHLY INCOME therefore the value of Units of the Fund may be
- -- PROFESSIONAL SELECTION expected to fluctuate with changes in the values
- -- DIVERSIFICATION of stocks in general and of telephone company
- -- REINVESTMENT OPTION stocks in particular. The payment of dividends and
preservation of capital depend upon several
factors including the financial condition of these
issuers and general economic conditions.
Therefore, there is no assurance that the past
rate of income will be maintained in the future.
Minimum purchase in individual transactions: One
Unit.
-------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS DOCUMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
-------------------------------------------------
PART A OF THIS PROSPECTUS MAY NOT BE DISTRIBUTED
SPONSORS: UNLESS ACCOMPANIED BY EQUITY INCOME FUND
Merrill Lynch, PROSPECTUS PART B.
Pierce, Fenner & Smith INVESTORS SHOULD READ BOTH PARTS OF THIS
Incorporated PROSPECTUS CAREFULLY AND RETAIN THEM FOR FUTURE
Smith Barney Inc. REFERENCE.
Prudential Securities INQUIRIES SHOULD BE DIRECTED TO THE TRUSTEE AT
Incorporated 1-800-221-7771.
Dean Witter Reynolds Inc. PROSPECTUS DATED SEPTEMBER 26, 1997.
<PAGE>
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Def ined Asset FundsSM
Defined Asset Funds is America's oldest and largest family of unit investment
trusts, with over $115 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.
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Defining Your Portfolio
- ----------------------------------------------------------------
The Portfolio contains 11 common stocks issued by telecommunications companies.
The Fund was created on December 6, 1983. Investing in the Portfolio, rather
than in only one or two of the underlying stocks, is a way to diversify your
investment, even though 100% of the Portfolio is invested in a single industry.
FRACTIONAL INTERESTS PER UNIT
Each Unit represents the following percentages of one share of each of the
issuers:
AT&T 98.5%
Bell South Corporation 88.7%
SBC Communications 87.9%
Ameritech 59.1%
Bell Atlantic Corporation 39.4%
Airtouch Communications 39.4%
U.S. West Communications 39.4%
U.S. West Media Group 39.4%
NYNEX Corporation 39.4%
Lucent Technologies 31.9%
NCR Corporation 6.2%
MONTHLY INCOME DISTRIBUTIONS
The Fund pays monthly income, even though the Securities generally pay dividends
quarterly. Monthly distributions of dividends are payable on the 1st day of the
month to holders of record on the 15th day of the preceding month.
REINVESTMENT OPTION
You can elect to automatically reinvest your distributions into additional units
of the Portfolio with no sales charge. Reinvesting helps to compound your income
for a greater total return.
TAXES
In the opinion of counsel, you will be considered to have received all the
dividends paid on your pro rata portion of each security in the Portfolio when
those dividends are received by the Portfolio, even though a portion of the
dividend payments may be used to pay expenses of the Portfolio and regardless of
whether you reinvest your dividends in the Portfolio.
TAX BASIS REPORTING
The proceeds received when you sell this investment will reflect the deduction
of the deferred sales charge and the charge for organizational expenses. In
addition, the annual statement and the relevant tax reporting forms you receive
at year-end will be based upon the amount paid to you (net of the deferred sales
charge and the charge for organizational expenses). Accordingly, you should not
increase your basis in your units by the deferred sales charge and the charge
for organizational expenses.
MANDATORY TERMINATION DATE
The Portfolio will terminate by August 1, 2008. 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 deposited Securities.
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Defining Your Investment
- ----------------------------------------------------------------
PUBLIC OFFERING PRICE PER UNIT $288.45
The Public Offering Price as of June 30, 1997, the evaluation date, is based on
the aggregate value of the underlying securities ($42,786,460) plus a maximum
sales charge of 2.50% of the value of the securities, plus cash, divided by the
number of units outstanding (152,134). 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.
A-2
<PAGE>
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Defining Your Risks
- ----------------------------------------------------------------
The Portfolio is considered to be 'concentrated' in stocks of telecommunications
companies and is therefore dependent on revenues from those particular
activities. (See Risk Factors in Part B.)
Unit price fluctuates with the value of the Portfolio, and the value of the
Portfolio will be affected by changes in the financial condition of the issuers,
changes in the telecommunications industry, general economic conditions,
movements in stock prices generally, the impact of the Sponsors' purchase and
sale of the securities and other factors. Further distributions of income on the
underlying securities will generally depend upon the declaration of dividends by
the issuers, and there can be no assurance that the issuers of securities will
pay dividends or that the current level of dividends can be maintained or
increased. Therefore, there is no guarantee that the objective of the Portfolio
will be achieved. Also, the value of equity securities issued by utilities,
because of their higher yields, might be more adversely affected by a reduction
in the dividends-received deduction than equity securities generally.
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.
- ----------------------------------------------------------------
Defining Your Costs
- ----------------------------------------------------------------
SALES CHARGES
Although the Fund 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 Secondary
Market
Public
Offering Price
-----------------
Maximum Sales Charge 2.50%
ESTIMATED ANNUAL FUND OPERATING EXPENSES
Amount per
Unit
---------------
Trustee's Fee $ 0.06
Portfolio Supervision, Bookkeeping and
Administrative Fees $ 0.01
Other Operating Expenses $ 0.17
---------------
TOTAL $ 0.24
REDEEMING OR 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 the evaluation date, June
30, 1997, was $281.24 per unit ($7.21 per unit less than the Public Offering
Price).
- ----------------------------------------------------------------
Taxes
- ----------------------------------------------------------------
The following discussion addresses only the tax consequences of Units held as
capital assets and does not address the tax consequences of Units held by
dealers, financial institutions or insurance companies.
In the opinion of Davis Polk & Wardwell, special counsel for the Sponsors, under
existing law:
The Fund is not an association taxable as a corporation for federal income tax
purposes. Each investor will be considered the owner of a pro rata portion of
each Security in the Fund under the grantor trust rules of Sections 671-679 of
the Internal Revenue Code of 1986, as amended (the 'Code'). Each investor will
be considered to have received all of the dividends paid on his pro rata portion
of each Security when such dividends are received by the Fund, regardless of
whether such dividends are used to pay a portion of Fund expenses or whether
they are automatically reinvested (see Reinvestment Plan).
Amounts considered to have been received by a corporate investor from domestic
corporations that constitute dividends for federal income tax purposes will
generally qualify for the dividends-received deduction, which is currently 70%.
Depending upon the particular corporate investor's circumstances, limitations on
the availability of the dividends-received deduction may be applicable. Further,
Congress from time to time considers proposals that would adversely affect the
after-tax return to investors that can take advantage of the deduction. For
example, the recently enacted Taxpayer Relief Act of 1997 requires the holding
period for the dividends-received deduction (during which the investor's
position may not be hedged) to be satisfied immediately proximate to each
ex-dividend date. Investors are urged to consult their own tax advisers in this
regard.
A-3
<PAGE>
An individual investor who itemizes deductions will be entitled to deduct his
pro rata share of current Portfolio expenses only to the extent that this amount
together with the investor's other miscellaneous deductions exceeds 2% of his
adjusted gross income. The Code further restricts the ability of an individual
investor with an adjusted gross income in excess of a specified amount (for
1997, $121,200 or $60,600 for a married person filing a separate return) to
claim itemized deductions (including his pro rata share of Fund expenses).
The investor's basis in his Units will equal the cost of his Units, including
the initial sales charge. A portion of the sales charge is deferred until the
termination of the Fund or the redemption of the Units. The proceeds received by
an investor upon such event will reflect deduction of the deferred amount (the
'Deferred Sales Charge') and a charge for organizational expenses. The annual
statement and the relevant tax reporting forms received by investors will be
based upon the amounts paid to them, net of the Deferred Sales Charge and the
charge for organizational expenses. Accordingly, investors should not increase
their basis in their Units by the Deferred Sales Charge amount or any amount
used to pay organizational expenses.
An investor will generally recognize capital gain or loss when the investor
disposes of his Units (by sale, redemption or otherwise) or when the Trustee
disposes of the Securities from the Fund. However, deductions will be disallowed
for such losses realized by investors who invest in a new Select Ten Portfolio
('rollover investor') within 30 days after incurring such losses to the extent
that the securities in that series are substantially identical to the old
Securities. Furthermore, an investor will generally not recognize gain or loss
upon the distribution of a pro rata amount of each of the Securities by the
Trustee to an investor (or to his agent) in redemption of Units, except to the
extent of cash received in lieu of fractional shares. The redeeming investor's
basis for such Securities will be equal to his basis for the same Securities
(previously represented by his Units) prior to such redemption, and his holding
period for such Securities will include the period during which he held his
Units.
Net capital gain (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
individual and other 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. The deduction of capital losses is subject to limitations. The lower
net capital gain tax rate will be unavailable to those noncorporate investors
who, as of the mandatory termination date (or earlier termination of the Fund),
have held their units for less than a year and a day. Similarly, with respect to
noncorporate rollover investors, this lower rate will be unavailable if, as of
the beginning of the rollover period, those investors have held their units for
less than a year and a day. Under the recently enacted Taxpayer Relief Act of
1997, an investor who is an individual and has held his pro rata portion of
Securities for more than eighteen months may be entitled to a 20% maximum
federal tax rate for gains from the sale of these Securities or corresponding
Units. Investors should consult their tax advisers in this regard.
Under the income tax laws of the State and City of New York, the Fund is not an
association taxable as a corporation and the income of the Fund will be treated
as the income of the investors in the same manner as for federal income tax
purposes.
The foregoing discussion summarizes only certain U.S. federal and New York State
and City income tax consequences of an investment in Units by investors who are
U.S. persons, as defined in the Code. Foreign investors (including nonresident
alien individuals and foreign corporations) not engaged in U.S. trade or
business will generally be subject to 30% withholding tax (or lower applicable
treaty rate) on dividend distributions. Investors may be subject to taxation in
New York or in other U.S. or foreign jurisdictions and should consult their own
tax advisers in this regard.
* * * *
At the termination of the Fund, the Trustee will furnish to each investor an
annual statement containing information relating to the dividends received by
the Fund on the Securities, the cash proceeds received by the Fund from the
disposition of any Security (resulting from redemption or the sale by the Fund
of any Security), and the fees and expenses paid by the Fund. The Trustee will
also furnish annual information returns to each investor and to the Internal
Revenue Service.
A-4
<PAGE>
DEFINED ASSET FUNDS - THE EQUITY INVESTOR FUND,
SECOND EXCHANGE SERIES - AT&T SHARES
REPORT OF INDEPENDENT ACCOUNTANTS
The Sponsors, Trustee and Holders of
Defined Asset Funds - Equity Investor Fund,
Second Exchange Series - AT&T Shares:
We have audited the accompanying statement of condition of Defined Asset
Funds - The Equity Investor Fund, Second Exchange Series - AT&T Shares as
of June 30, 1997 and the related statements of operations and of changes
in net assets for the years ended June 30, 1997, 1996 and 1995. These
financial statements are the responsibility of the Trustee. Our
responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Securities
owned at June 30, 1997, 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 audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Defined
Asset Funds - The Equity Investor Fund, Second Exchange Series - AT&T
Shares, at June 30, 1997 and the results of its operations and changes
in its net assets for the above-stated years in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, N.Y.
September 12, 1997
D - 1
<PAGE>
DEFINED ASSET FUNDS - EQUITY INVESTOR FUND,
SECOND EXCHANGE SERIES - AT&T SHARES
STATEMENT OF CONDITION
AS OF JUNE 30, 1997
<TABLE>
<CAPTION>
TRUST PROPERTY:
<S> <C> <C>
Investment in marketable securities - at value
(cost $17,429,505) (Notes 1 and 2)............ $42,786,460
Dividends receivable............................ 100,251
Prepaid expenses................................ 2,753
Cash............................................ 10,881
____________
Total trust property.................. 42,900,345
LESS LIABILITY - Distribution payable............. 104,668
____________
NET ASSETS, REPRESENTED BY:
152,134 units of fractional undivided
interest outstanding (Note 6)................. $42,791,836
Undistributed net investment income............. 3,841
____________
$42,795,677
==============
UNIT VALUE ($42,795,677/152,134 units)............ $281.30
==============
</TABLE>
See Notes to Financial Statements.
D - 2
<PAGE>
DEFINED ASSET FUNDS - EQUITY INVESTOR FUND,
SECOND EXCHANGE SERIES - AT&T SHARES
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
............Years Ended June 30,..........
1997 1996 1995
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividend income................................. $1,291,827 $1,255,688 $1,191,210
Trustee's fees and expenses..................... (36,123) (23,726) (29,962)
Sponsors' fees ................................. (1,894) (820) (1,420)
__________________________________________
Net investment income........................... 1,253,810 1,231,142 1,159,828
__________________________________________
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT:
Realized gain on securities sold
or redeemed............................... 623,593
Unrealized appreciation
of investments................................ 4,010,191 5,955,443 988,721
__________________________________________
Net realized and unrealized gain on
investments................................... 4,633,784 5,955,443 988,721
__________________________________________
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS................................. $5,887,594 $7,186,585 $2,148,549
==========================================
</TABLE>
See Notes to Financial Statements.
D - 3
<PAGE>
DEFINED ASSET FUNDS - EQUITY INVESTOR FUND,
SECOND EXCHANGE SERIES - AT&T SHARES
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
............Years Ended June 30,..........
1997 1996 1995
<S> <C> <C> <C>
OPERATIONS:
Net investment income........................... $ 1,253,810 $ 1,231,142 $ 1,159,828
Realized gain on securities sold
or redeemed................................. 623,593
Unrealized appreciation of
investments.................................. 4,010,191 5,955,443 988,721
__________________________________________
Net increase in net assets resulting
from operations.............................. 5,887,594 7,186,585 2,148,549
__________________________________________
INCOME DISTRIBUTIONS TO HOLDERS (Note 3)......... (1,253,189) (1,357,026) (1,093,349)
__________________________________________
CAPITAL SHARE TRANSACTIONS:
Issuances of 1,665, 6,733 and 4,586 additional
units, respectively (Note 4)................. 401,814 1,673,494 912,514
Redemptions of 4,166, 25 and 50 units,
respectively (Note 5)........................ (1,037,745) (5,969) (10,072)
__________________________________________
Net capital share transactions................... (635,931) 1,667,525 902,442
__________________________________________
NET INCREASE IN NET ASSETS........................ 3,998,474 7,497,084 1,957,642
NET ASSETS AT BEGINNING OF YEAR................... 38,797,203 31,300,119 29,342,477
__________________________________________
NET ASSETS AT END OF YEAR......................... $42,795,677 $38,797,203 $31,300,119
==========================================
PER UNIT:
Income distributions during year................ $8.14 $8.29 $7.49
==========================================
Net asset value at end of year.................. $281.30 $250.90 $211.59
==========================================
TRUST UNITS OUTSTANDING AT END OF YEAR............ 152,134 154,635 147,927
==========================================
</TABLE>
See Notes to Financial Statements.
D - 4
<PAGE>
DEFINED ASSET FUNDS - EQUITY INVESTOR FUND,
SECOND EXCHANGE SERIES - AT&T SHARES
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Fund is registered under the Investment Company Act of 1940 as a Unit
Investment Trust. A summary of the significant accounting policies, which
are in conformity with generally accepted accounting principles, followed
by the Fund in the preparation of its financial statements since
December 7, 1983, it's initial date of deposit, is as follows:
(a) Securities are stated at market value based on the last sales prices
reported at the close of business on the New York Stock Exchange. The
aggregate cost of securities represents the market value of the
securities on the dates they were acquired by the Fund; the
appropriate portion of such aggregate cost was allocated among the
portfolio holdings in shares of AT&T and seven regional holding
companies following their divestiture by AT&T in accordance with its
Plan of Reorganization. Realized gains or losses on sales of
securities are determined using the first-in first-out cost basis.
See "Redemption - Computation of redemption Price Unit" in this
Prospectus, Part B.
(b) The Fund is not subject to income taxes. Accordingly, no provision for
such taxes is required.
(c) Dividend income has been recognized on the ex-dividend date.
2. PORTFOLIO - JUNE 30, 1997
<TABLE>
<CAPTION>
Number
Shares
Common Market
Name of Issuer Stock Cost Value
________________ ________ _______ _________
<S> <C> <C> <C>
Airtouch Communications 59,941 $ 709,987 $ 1,640,885
AT&T (formerly American Telephone and
Telegraph Company) 149,852 2,960,599 5,254,186
Ameritech 89,912 2,021,256 6,108,397
Bell Atlantic Corporation 59,941 1,873,612 4,548,023
BellSouth Corporation 134,867 2,452,939 6,254,457
Lucent Technologies (1) 48,553 1,206,382 3,498,851
NCR Corp.(2) 9,366 148,303 278,639
NYNEX Corporation 59,941 1,722,261 3,454,100
Southwestern Bell Corporation (3) 133,755 2,841,930 8,276,091
U. S. West Communications 59,941 896,890 2,259,026
U. S. West Media Group 59,941 595,346 1,213,805
__________ __________
Total $17,429,505 $42,786,460
=========== ===========
</TABLE>
(1) Spin off from AT&T Corp.
(2) Spin off from AT&T Corp.
(3) Merged with Pacific Telesis Group.
D - 5
<PAGE>
DEFINED ASSET FUNDS - EQUITY INVESTOR FUND,
SECOND EXCHANGE SERIES - AT&T SHARES
NOTES TO FINANCIAL STATEMENTS
3. DISTRIBUTIONS
Any monthly distributions to Holders, who have not elected to participate
in the Fund's Reinvestment Plan, are made on or about the first day of
each month. Receipts other than interest, after deductions for redemptions
and applicable expenses, are distibuted as explained in "Administrations
of the Fund - Accounts and Distributions" in this Prospectus, Part B. The
income distribution payable at June 30, 1996 was at the rate of $0.69800
per unit.
4. REINVESTMENT PROGRAM
Holders may reinvest any distibutions in the Fund by executing an
appropriate notice of election to participate in the Fund's Reinvestment
Plan. The Sponsors (Merrill Lynch, Pierce, Fenner & Smith Inc., Dean
Witter Reynolds Inc., Prudential Securities Inc. and Smith Barney
Inc.) may, in their sole discretion, cancel the Fund's Reinvestment Plan
at any time. Subsequent to March 31, 1984, Holders of The Equity Income
Fund, First Exchange Series - AT&T Shares could, by executing an
appropriate notice of election, reinvest any of their distributions from
that Fund into this Fund.
5. REDEMPTIONS
Holders may request redemptions of units by presentation thereof to the
Trustee, The Bank of New York. The Trustee has the option of redeeming
units in kind or in cash. The tax effect on Holders of redemptions and
related distributions is described under "Taxes" in this Prospectus,
Part B.
6. NET CAPITAL
<TABLE>
<S> <C>
Cost, including reinvested distributions, of 152,134 units at Dates
of Deposit............................................................ $17,750,732
Less sales charge....................................................... 798,452
____________
Net amount applicable to Holders........................................ 16,952,280
Redemptions of units - net cost of 5,686 units redeemed less redemption
amounts............................................................... (677,157)
Realized gain on securities sold or redeemed............................ 1,159,758
Unrealized appreciation of investments.................................. 25,356,955
____________
Net capital applicable to Holders....................................... $42,791,836
============
</TABLE>
D - 6
<PAGE>
DEFINED ASSET FUNDS - EQUITY INVESTOR FUND,
SECOND EXCHANGE SERIES - AT&T SHARES
NOTES TO FINANCIAL STATEMENTS
7. INCOME TAXES
All Fund items of income received, expenses paid, and realized gains and
losses on securities sold are attributable to the Holder's on a pro rata
basis, for Federal income tax purposes in accordance with the grantor
trust rules of the United States Internal Revenue Code.
At June 30, 1997, the cost of investment securities for Federal income tax
purposes was approximately equivalent to the cost as shown in the Fund's
portfolio.
D - 7
<PAGE>
AUTHORIZATION FOR REINVESTMENT
DEFINED ASSET FUNDS--EQUITY INVESTOR FUND
SECOND EXCHANGE SERIES--AT&T SHARES
/ / Yes, I want to participate in the Fund's Reinvestment Plan and purchase
additional Units of the Fund each month.
I hereby acknowledge receipt of the Prospectus for Defined Asset
Funds--Equity Investor Fund, Second Series--AT&T Shares and authorize The Bank
of New York to pay distributions on my Units as indicated below (distributions
to be reinvested will be paid for my account to The Bank of New York).
/ / I want to invest all distributions of income and principal (including
capital gains) in additional Units of the Fund.
Please print or type
Name Registered Holder
Address
Registered Holder
(Two signatures required if
joint tenancy)
City State Zip Code
This page is a self-mailer. Please complete the information above, cut
along the dotted line, fold along the lines on the reverse side, tape, and mail
with the Trustee's address displayed on the outside.
12345678
<PAGE>
BUSINESS REPLY MAIL NO POSTAGE
FIRST CLASS PERMIT NO. 1313 NEW YORK, N.Y. NECESSARY
IF MAILED
POSTAGE WILL BE PAID BY ADDRESSEE IN THE
DEFINED ASSET FUNDS--EQUITY INVESTOR FUND UNITED STATES
SECOND EXCHANGE SERIES--AT&T SHARES
THE BANK OF NEW YORK
UNIT INVESTMENT TRUST DEPARTMENT
P.O. BOX 974
WALL STREET STATION
NEW YORK, N.Y. 10268-0974
- --------------------------------------------------------------------------------
(Fold along this line.)
- --------------------------------------------------------------------------------
(Fold along this line.)
<PAGE>
DEFINED ASSET FUNDSSM
PROSPECTUS--PART B
EQUITY INCOME FUND
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 PART A OF THE PROSPECTUS.
INDEX
PAGE
---------
FUND DESCRIPTION..................................................... 1
RISK FACTORS......................................................... 2
HOW TO BUY UNITS..................................................... 6
HOW TO SELL UNITS.................................................... 7
INCOME, DISTRIBUTIONS AND REINVESTMENT............................... 8
FUND EXPENSES........................................................ 8
TAXES................................................................ 9
RECORDS AND REPORTS.................................................. 11
TRUST INDENTURE...................................................... 11
MISCELLANEOUS........................................................ 12
EXCHANGE OPTION...................................................... 14
SUPPLEMENTAL INFORMATION............................................. 14
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
stocks, the dividend payment record of the issuers and the prices of the stocks.
The yield and price of stocks of the type deposited in the Fund are dependent on
a variety of factors, including money market conditions, general conditions of
the corporate bond and equity markets, size of a particular offering and capital
structure of the issuer. While it may not be likely that dividends on any stocks
would be omitted, of course no assurances can be given since earnings available
for dividends, regardless of the size of the company, are subject to numerous
events which are often beyond the issuer's control.
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
1
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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. In Funds organized as regulated investment
companies, 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 additional Securities.
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. In addition, 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.
A Portfolio may be concentrated in one or more of the following categories.
Concentration may involve additional risk because of the decreased
diversification of economic, financial and market risks. Set forth below is a
brief description of certain risks associated with certain of the Securities.
Additional information is contained in the Information Supplement which is
available from the Trustee at no charge to the investor.
CONSUMER PRODUCTS COMPANIES
Risk factors include cyclicality of revenues and earnings, changing
consumer demands, regulatory restrictions, products liability litigation and
other litigation resulting from accidents, extensive competition (including that
of low-cost foreign companies), unfunded pension fund liabilities, employee and
retiree benefit costs and financial deterioration resulting from leveraged
buy-outs, takeovers or acquisitions. In general, expenditures on consumer
products will be affected by the economic health of consumers. A continuing weak
economy with its consequent effect on consumer spending would have an adverse
effect on the industry.
HEALTH CARE
Companies in the health care industry face several risks. Most health care
companies are extensively regulated. All are subject to extreme cost-containment
pressures. As a result they cannot readily raise the prices of their products
and services, and may experience price declines. Most are subject to intense
competition and are required to spend large amounts of capital to keep pace with
technological innovation. Many of the companies also face product obsolescence,
the threat of product liability suits and expensive liability insurance. In
addition, issuers in the health care industry will be affected by health reform
legislation. Proposed federal legislation would significantly reduce Medicare
and Medicaid payments to providers and impose stringent cost controls that would
affect insurance premiums and fees paid to providers; it is impossible to
predict what reforms may be adopted or when reforms might be implemented at the
federal or state level.
MANUFACTURING COMPANIES
Growth in the manufacturing industry is closely linked to expansion in the
domestic and global economies. Since the U.S. government and many state, local
and foreign governments now have a budget deficit, financial expenditures by
these entities on capital improvements may be extremely limited. The lack of
funds allocated by public entities to capital improvement projects may adversely
affect manufacturers engaged in the production of industrial materials used for
capital improvements or for the upgrade of the infrastructure. Cutbacks in
defense spending have adversely impacted many of the companies engaged in the
aerospace and arms/defense sectors of the manufacturing industry. Environmental
and safety issues increasingly affect the manufacturing industry.
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Issuers may experience decreases in profitability as legislative mandates impose
costs associated with compliance with environmental regulations and
manufacturing more environmentally sound and safer equipment. Furthermore, the
cost of product liability insurance and the inability of some manufacturing
companies to obtain this insurance may have an adverse impact on the industry.
The long-term outlook is largely dependent upon the growth and competitiveness
of the U.S. manufacturing base. Increased consolidation and merger activity
increases competitiveness in general but individual companies may experience
severe financial problems due to this increased competitiveness. Strong
competition from foreign nations, particularly those with lower labor costs,
will severely impact the profitability of the U.S. manufacturing business.
REAL ESTATE COMPANIES
Investment in securities issued by real estate companies should be made
with an understanding of the many factors which may have an adverse impact on
the credit quality of the particular company or industry. These include economic
recession, competitive overbuilding, unusually adverse weather conditions,
changing demographics, changes in government regulations (including tax laws and
environmental, building zoning and sales regulation by various federal, state
and local authorities), increases in real estate taxes or costs of material and
labor, the inability to secure performance guarantees as required and the
unavailability of construction financing or mortgage loans at rates acceptable
to builders and home buyers. Variations in rental income and space availability
and vacancy rates in terms of supply and demand are additional factors affecting
real estate generally and Real Estate Investment Trusts (REITs) in particular.
Performance by individual REITs is dependent on the types of real estate
investments held. For example, the effect of interest rate fluctuations on
mortgage REITs is greater than on equity REITs and the nature of the underlying
assets of a mortgage REIT may be considered less tangible than that of an equity
REIT. In addition, equity REITs may be affected by changes in the value of the
underlying property they own, while mortgage REITs may be affected by the
quality of credit extended.
TECHNOLOGY COMPANIES
Technology companies, such as semiconductor, computer and electronics
manufacturing companies, are rapidly developing and highly competitive, both
domestically and internationally, and tend to be relatively volatile as compared
to other types of investments. Certain of these companies may be smaller and
less seasoned companies with limited product lines, markets or financial
resources and limited management or marketing personnel. These companies are
characterized by a high degree of investment to maintain competitiveness and are
affected by worldwide scientific and technological developments (and resulting
product obsolescence) as well as government regulation, increase in material or
labor costs, changes in distribution channels and the need to manage inventory
levels in line with product demand. Other risk factors include short product
life cycles, aggressive pricing and reduced profit margins, dramatic and often
unpredictable changes in growth rates, frequent new product introduction, the
need to enhance existing products, intense competition from large established
companies and potential competition from small start up companies.
TELECOMMUNICATIONS
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 ability to obtain
periodic rate increases, 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 extensive 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. Companies offering telephone
services are experiencing increasing competition from cellular telephones, and
the cellular telephone industry, because of its limited operating history, faces
uncertainty concerning the future of the industry and demand for cellular
telephones. Telecommunications companies in both developed
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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 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.
UTILITIES
Payments on utility stocks are dependent on various factors, including the
rates the utilities may charge, the demand for their services and their
operating costs, including expenses to comply with environmental legislation and
other energy and licensing laws and regulations. Utilities are particularly
sensitive to, among other things, the effects of inflation on operating and
construction costs, the unpredictability of future usage requirements, the costs
and availability of fuel and, with certain electric utilities, the risks
associated with the nuclear industry.
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. Many of the Securities of foreign
issuers were 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
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.
THE S&P 500 INDEX AND THE S&P MIDCAP INDEX
The S&P 500 Index is composed of 500 selected common stocks, most of which
are listed in the New York Stock Exchange. This well-known index, originally
consisting of 233 stocks in 1923, was expanded to 500 stocks in 1957 and was
restructured in 1976 to a composite consisting of four major industry sectors:
industrial, utility, financial and transportation. The four major industry
sectors are comprised of eleven regular industry sectors which are further
divided into industry groups. The S&P 500 Index contains a variety of stocks
which are market-value weighted to represent the overall market. The Index
represents approximately 69% of U.S. stock market capitalization. At present,
the mean market capitalization of the companies in the S&P 500 Index is
approximately $3.346 billion.
The S&P MidCap Index is composed of 400 selected common stocks; as of the
initial date of deposit, 279 were listed on the New York Stock Exchange, 9 were
listed on the American Stock Exchange and 112 were quoted on The Nasdaq National
Market. The MidCap Index stocks were chosen for market size, liquidity and
industry group representation. As of December 31, 1994, industrial stocks
accounted for approximately 69.5% of S&P MidCap Index market capitalization,
utilities approximately 14.1%, financial stocks approximately 14.6% and
transportation stocks approximately 1.8%. The capitalizations of individual
companies ranged from about $49
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million to over $10,066 million; the mean market capitalization of the companies
in the S&P MidCap Index was approximately $1.156 billion.
The weightings of stocks in the S&P 500 Index and the S&P MidCap Index are
primarily based on each stock's relative total market value; that is, its market
price per share times the number of shares outstanding.
Standard and Poor's only relationship to the Portfolios is the licensing of
the right to use the S&P 500 Index and the S&P MidCap Index as bases for
determining the composition of the Portfolios and to use the related trademarks
and tradenames in the name of the Fund and in the Prospectus and related sales
literature to the extent that the Sponsors deem appropriate or desirable under
Federal and state securities laws and to indicate the source of the Indexes. The
Indexes are determined, comprised and calculated without regard to the Funds.
S&P does not guarantee the accuracy and/or the completeness of the S&P 500
Index or the S&P MidCap Index or any data included therein and S&P shall have no
liability for any errors, omissions, or interruptions therein. S&P makes no
warranty, express or implied, as to results to be obtained by the sponsors, the
funds, any person or any entity from the use of the S&P index or the S&P MidCap
Index or any data included therein. S&P makes no express or implied warranties,
and expressly disclaims all warranties of merchantability or fitness for a
particular purpose or use, with respect to the S&P 500 Index or the S&P MidCap
Index or any data included therein. Without limiting any of the foregoing, in no
event shall S&P have any liability for any special, punitive, indirect, or
consequential damages (including lost profits), even if notified of the
possibility of such damages.
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
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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, which includes the applicable sales
charge -- see Appendix A. 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
In the secondary market (after the initial offering period), the Public
Offering Price is based on the next evaluation of the Securities, and includes a
sales charge based (a) on the number of Units of the Fund purchased in the
secondary market on the same day by a single purchaser (see Secondary Market
Sales Charge Schedule in Appendix A). To qualify for a reduced sales charge, the
dealer must confirm that the sale is to a single purchaser or is purchased for
its own account and not for distribution. For these purposes, Units held in the
name of the purchaser's spouse or child under 21 years of age are deemed to be
purchased by a single purchaser. A trustee or other fiduciary purchasing
securities for a single trust or single fiduciary account is also considered a
single purchaser.
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.
S&P 500 TRUST 2 AND S&P MIDCAP TRUST. The graduated sales charges shown in
Appendix A will apply on all purchases on any one day (with credit given for
previously purchased Units as described below under Right of Accumulation) by a
single purchaser of Units in one or both Trusts of this Fund only in the amounts
stated. For this purpose purchases will not be aggregated with concurrent
purchases of any other unit trusts sponsored by the Sponsors. However, 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. To qualify for the reduced sales charge and concession applicable to
quantity purchases, the dealer must confirm that the sale is to a single
purchaser. The sales charge is lower than sales charges on many other equity
investments.
Right of Accumulation. Reduced sales charges are applicable through a right
of accumulation under which eligible investors are permitted to purchase Units
of either Trust at the offering price applicable to the total of (a) the dollar
amount then being purchased plus (b) an amount equal to the then current net
asset value of the purchaser's holdings of Units of both Trusts. To be eligible
either for this right of accumulation or the reduced sales charge applicable to
purchases of both Trusts on the same day, the purchaser or the purchaser's
securities dealer must notify the Sponsors at the time of purchase that such
purchase qualifies under this accumulation provision and supply sufficient
information to permit confirmation of qualification. Acceptance of the purchase
order is subject to such confirmation. These reduced sales charge provisions may
be amended or terminated at any time without notice.
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,
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
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combination of these methods. Neither the Sponsors nor the Trustee guarantee the
enforceability, marketability or price of any Securities.
CERTIFICATES
Certificates for Units may be issued for certain Funds 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. Units of certain Funds identified in Part A of the Prospectus must be
held in uncertificated form.
HOW TO SELL UNITS
SPONSORS' MARKET FOR UNITS
You can sell your Units at any time without a fee. The Sponsors (although
not obligated to do so) will normally buy any Units offered for sale at the
repurchase price next computed after receipt of the order. The Sponsors have
maintained secondary markets in Defined Asset Funds for the last 25 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, 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.
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 based on market and credit factors determined to be in the best
interest of the Fund. 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.
REDEMPTION IN KIND--CONCEPT SERIES, INCOME GROWTH FUND, REAL ESTATE INCOME
FUND, SECOND EXCHANGE SERIES--AT&T SHARES. You may request distribution in kind
from the Trustee instead of cash redemption, provided that you are tendering
Units with a required minimum value. By the seventh calendar day after tender,
an amount and value of Securities per Unit, together with a pro rata portion of
the cash balance in the Fund, equal to the Redemption Price per Unit, will be
paid over to the Trustee, as distribution agent, and either held for your
account or disposed of in accordance with your instructions. Any brokerage
commissions on sales of
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Securities in connection with in-kind redemptions will be borne by you. The
Sponsors may modify or terminate this redemption in kind option at any time
without notice to investors.
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 monthly or 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 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.
UTILITY STOCK SERIES, SECOND EXCHANGE SERIES--AT&T SHARES, REAL ESTATE
INCOME FUND, INCOME GROWTH FUND. Subject to the Reinvestment Plan, the Monthly
Income Distribution for each investor shall consist of an amount, computed
monthly by the Trustee, substantially equal to one-twelfth of the investor's pro
rata share of the estimated annual income to the Income Account, after deducting
estimated expenses.
ALL OTHER FUNDS: Unless otherwise indicated in Part A, dividend income
received by the Fund and available for distribution and the distributable
balance in the Capital Account (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.
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 generally be distributed shortly
after the end of the year. In order to meet certain tax requirements a 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 PLAN -- UTILITY STOCK SERIES, INCOME GROWTH FUND, CONCEPT SERIES,
SECOND EXCHANGE SERIES -- AT&T SHARES AND S&P INDEX TRUSTS.
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 sales charge at the
net asset value for Units of the Fund. 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 to
determine whether they may 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
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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. The Trustee's and Sponsors' fees may be adjusted for inflation
without investors' approval.
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.
S&P Index Trusts. The Trusts have entered into license agreements with
Standard & Poor's that permit the Trusts to use the trademarks and tradenames
'S&P 500', 'S&P MidCap 400 Index' and other trademarks and tradenames, to the
extent the Sponsors deem appropriate and desirable under federal and state
securities laws to indicate the source of the Indices as a basis for determining
the composition of the Fund's investment portfolios. As consideration for the
grant of the license, each Portfolio will pay to Standard & Poor's Corporation
an annual fee equal to .02% of the average net asset value of the Portfolio (or,
if greater, $10,000). In addition, the Fund will pay approximately $45,000 per
year for access to independent computer services that track the S&P 500 Index
and the S&P MidCap Index. Computer expenses will be divided between the Trusts
in proportion to their respective assets during the relevant period.
TAXES
TAXATION OF THE FUND--EXCEPT FOR SECOND EXCHANGE SERIES--AT&T SHARES (SEE
PROSPECTUS PART A).
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
9
<PAGE>
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 upon such distribution (equal to the difference between
such an investor's tax basis in his Units and the fair market value of
Securities received in redemption), which will be capital gain or loss except in
the case of a dealer in securities. Investors should consult their own tax
advisers in this regard.
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 to reduce the rate, and enactment of such a
proposal would adversely affect the after-tax return to investors who can take
advantage of the deduction. 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.
Dividends received by the Fund from foreign issuers will in most cases be
subject to foreign withholding taxes. The Fund will not be eligible for, and
therefore does not expect to make, an election that would enable investors to
credit foreign withholding taxes against their federal income tax liability on
distributions by the Fund.
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 a 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
Equity Income Funds 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
10
<PAGE>
distributions. Investors considering participation in any of these plans should
review specific tax laws related thereto and should consult their attorneys or
tax advisors with respect to the establishment and maintenance of any of these
plans. These plans are offered by brokerage firms, including the Sponsor of this
Fund, and other financial institutions. Fees and charges with respect to such
plans may vary.
Retirement Plans for the Self-Employed--Keogh Plans. Units of the Fund may
be purchased by retirement plans established for self-employed individuals,
partnerships or unincorporated companies ('Keogh plans'). The assets of a Keogh
plan must be held in a qualified trust or other arrangement which meets the
requirements of the Code. Keogh plan participants may also establish separate
IRAs (see below) to which they may contribute up to an additional $2,000 per
year ($2,250 in a spousal account).
Individual Retirement Account--IRA, Any individual can make use of a
qualified IRA arrangement for the purchase of Units of the Fund. Any individual
(including one covered by an employer retirement plan) can make a contribution
in an IRA equal to the lesser of $2,000 ($2,250 in a spousal account) or 100% of
earned income; such investment must be made in cash. However, the deductible
amount an individual may contribute will be reduced if the individual's adjusted
gross income exceeds $25,000 (in the case of a single individual), $40,000 (in
the case of married individuals filing a joint return) or $200 (in the case of a
married individual filing a separate return). Certain transactions which are
prohibited under Section 408 of the Code will cause all or a portion of the
amount in an IRA to be deemed to the distributed and subject to tax at that
time. Unless nondeductible contributions were made in 1987 or a later year, all
distributions from an IRA will be treated as ordinary income but generally are
eligible for tax-deferred rollover treatment. Taxable distributions made before
attainment of age 59 1/2, except in the case of the participant's death or
disability or where the amount distributed is part of a series of substantially
equal periodic (at least annual) payments that are to be made over the life
expectancies of the participant and his or her beneficiary, are generally
subject to a surtax in an amount equal to 10% of the distribution.
Corporate Pension and Profit-Sharing Plans. A pension or profit-sharing
plan for employees of a corporation may purchase Units of the Fund.
RECORDS AND REPORTS
The Trustee keeps a register of the names, addresses and holdings of all
investors. The Trustee also keeps records of the transactions of the Fund,
including a current list of the Securities and a copy of the Indenture, which
may be inspected by investors at reasonable times during business hours.
With each distribution, the Trustee includes a statement of the amounts of
income and any other receipts being distributed. Following the termination of
the Fund, the Trustee sends each investor of record a statement summarizing
transactions in the Fund's accounts including amounts distributed from them,
identifying Securities sold and purchased and listing Securities held and the
number of Units outstanding at termination and stating the Redemption Price 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 (under
Massachusetts law for certain Funds) 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
11
<PAGE>
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.
AUDITORS
The Statement of Condition in Part A of the Prospectus was audited by
Deloitte & Touche LLP, independent accountants, as stated in their opinion. It
is included in reliance upon that opinion given on the authority of that firm as
experts in accounting and auditing.
TRUSTEE
The Trustee and its address are stated on the back cover of the Prospectus.
The Trustee is subject to supervision by the Federal Deposit Insurance
Corporation, the Board of Governors of the Federal Reserve System and either the
Comptroller of the Currency or state banking authorities.
SPONSORS
The Sponsors are listed on the back cover of the Prospectus. They may
include Merrill Lynch, Pierce, Fenner & Smith Incorporated, a wholly-owned
subsidiary of Merrill Lynch Co. Inc.; Smith Barney Inc., an indirect
wholly-owned subsidiary of The Travelers Inc.; Prudential Securities
Incorporated, an indirect wholly-owned subsidiary of the Prudential Insurance
Company of America, and Dean Witter Reynolds, Inc., a principal operating
subsidiary of Dean Witter Discover & Co. Each Sponsor, or one of its predecessor
corporations, has acted as Sponsor of a number of series of unit investment
trusts. Each Sponsor has acted as principal underwriter and managing underwriter
of other investment companies. The Sponsors, in addition to participating as
members of various selling groups or as agents of other investment companies,
execute orders on behalf of investment companies for the purchase and sale of
securities of these companies and sell securities to these companies in their
capacities as brokers or dealers in securities.
PUBLIC DISTRIBUTION
During the initial offering period and thereafter to the extent additional
Units continue to be offered for sale to the public by means of this Prospectus,
Units will be distributed directly to the public by this Prospectus at the
Public Offering Price determined in the manner provided above or to selected
dealers who are members of the National Association of Securities Dealers, Inc.
at a concession not in excess of the maximum sales charge. The Sponsors intend
to qualify Units for sale in all states in which qualification is deemed
necessary through the Underwriting Account and by dealers who are members of the
National Association of Securities Dealers, Inc..
12
<PAGE>
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
Holders. Total return figures are not averaged, and may not reflect deduction of
the sales charge, which would decrease the return. Average annualized return
figures reflect deduction of the maximum sales charge. No provision is made for
any income taxes payable.
Past performance of any series may not be indicative of results of future
series. Fund performance may be compared to the performance of the Dow Jones
Industrial Average, the S&P 500 Composite Price Stock Index, the S&P MidCap 400
Index, or performance data from publications such as Lipper Analytical Services,
Inc., Morningstar Publications, Inc., Money Magazine, The New York Times, U.S.
News and World Report, Barron's, Business Week, CDA Investment Technology, Inc.,
Forbes Magazine or Fortune Magazine. Performance of the Stocks may be compared
in sales literature to performance of the S&P 500 Stock Price Composite Index,
to which may be added by year various national and international political and
economic events, and certain milestones in price and market indicators and in
offerings of Defined Asset Funds. This performance may also be compared for
various periods with an investment in short-term U.S. Treasury securities;
however, the investor should bear in mind that Treasury securities are fixed
income obligations, having the highest credit characterisitics, while the Stocks
involve greater risk because they have no maturities, and income thereon is
subject to the financial condition of, and declaration by, the issuers.
DEFINED ASSET FUNDS
For decades informed investors have purchased unit investment trusts for
dependability and professional selection of investments. Defined Asset Funds'
philosophy is to allow investors to 'buy with knowledge' (because, unlike
managed funds, the portfolio is relatively fixed) and 'hold with confidence'
(because the portfolio is professionally selected and regularly reviewed).
Defined Asset Funds offers an array of simple and convenient investment choices,
suited to fit a wide variety of personal financial goals--a buy and hold
strategy for capital accumulation, such as for children's education or
retirement, or attractive, regular current income consistent with the
preservation of principal. Unit investment trusts are particularly suited for
the many investors who prefer to seek long-term profits by purchasing sound
investments and holding them, rather than through active trading. Few
individuals have the knowledge, resources or capital to buy and hold a
diversified portfolio on their own; it would generally take a considerable sum
of money to obtain the breadth and diversity that Defined Asset Funds offer.
Your investment objectives may call for a combination of Defined Asset Funds.
One of the most important investment decisions you face may be how to
allocate your investments among asset classes. Diversification among different
kinds of investments can balance the risks and rewards of each one. Most
investment experts recommend stocks for long-term capital growth. Long-term
corporate bonds offer
13
<PAGE>
relatively high rates of interest income. By purchasing both defined equity and
defined bond funds, investors can receive attractive current income, as well as
growth potential, offering some protection against inflation. From time to time
various advertisements, sales literature, reports and other information
furnished to current or prospective investors may present the average annual
compounded rate of return of selected asset classes over various periods of
time, compared to the rate of inflation over the same periods.
EXCHANGE OPTION
You may be able to exchange Fund Units for units of certain other Defined
Asset Funds subject only to a reduced sales charge or to any remaining deferred
sales charge, as applicable. To make an exchange, you should contact your
financial professional to find out what suitable exchange funds are available
and to obtain a prospectus. You may acquire units of only those exchange funds
in which the Sponsors are maintaining a secondary market and which are lawfully
for sale in the state where you reside. Except for the reduced sales charge, an
exchange is a taxable event normally requiring recognition of any gain or loss
on the units exchanged. However, the Internal Revenue Service may seek to
disallow a loss if the portfolio of the units acquired is not materially
different from the portfolio of the units exchanged; you should consult your own
tax advisor. If the proceeds of units exchanged are insufficient to acquire a
whole number of exchange fund units, you may pay the difference in cash (not
exceeding the price of a single unit acquired).
As the Sponsors are not obligated to maintain a secondary market in any
series, there can be no assurance that units of a desired series will be
available for exchange. The Exchange Option may be amended or terminated at any
time without notice.
SUPPLEMENTAL INFORMATION
Upon writing or calling the Trustee shown on the back cover of Part A 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.
14
<PAGE>
APPENDIX A
SECONDARY MARKET SALES CHARGE SCHEDULE
UTILITY STOCK SERIES
<TABLE><CAPTION>
SALES CHARGE
(GROSS UNDERWRITING PROFIT)
----------------------------------
AS PERCENT OF AS PERCENT OF DEALER CONCESSION AS
PUBLIC OFFERING NET AMOUNT PERCENT OF PUBLIC
AMOUNT PURCHASED PRICE INVESTED OFFERING PRICE
- -------------------------------------------------------------------- ----------------- --------------- -----------------------
<S> <C> <C> <C>
Less than $250,000.................................................. 4.50% 4.712% 2.925%
$250,000-$499,000................................................... 3.75 3.896 2.438
$500,000-$749,000................................................... 2.50 2.564 1.625
$750,000-$999,000................................................... 2.00 2.041 1.300
$1,000,000 or more.................................................. 1.50 1.523 0.975
<CAPTION>
S&P 500 TRUST 2, S&P MIDCAP TRUST
<S> <C> <C> <C>
Less than $25,000................................................... 2.25% 2.302% 1.463%
$25,000-$49,999..................................................... 2.00 2.041 1.300
$50,000-$74,999..................................................... 1.75 1.781 1.138
$75,000-$99,999..................................................... 1.50 1.523 0.975
$100,000-$249,999................................................... 1.25 1.266 0.813
$250,000 or more.................................................... 1.00 1.010 0.650
</TABLE>
INCOME GROWTH FUND 1993 SERIES
The sales charge consists of an initial portion and a deferred portion, the
total of which may equal a maximum of approximately 5.50% of the Public Offering
Price or 5.820% of the aggregate value of Securities, although these percentages
will vary should Units be purchased at a public offering price other than that
set forth on page A-3. For example, if you acquire Units for $1,050 (including
an initial sales charge of $15.75) and hold the Units until the termination of
the Fund, you will pay a total sales charge of $55.75 or 5.31% of the
acquisition price on those Units. At an acquisition price of $950 (including an
initial sales charge of $14.25), you would pay a total sales charge of $54.25 or
5.71% of the acquisition price. The initial portion of the sales charge is equal
to 1.50% of the Public Offering Price (1.523% of the aggregate value of
Securities) and the deferred portion of the sales charge is $10.00 per 1,000
Units payable by the Fund on behalf of investors out of net asset value of the
Fund on each Deferred Charge Payment Date through 1997. If you sell or redeem
Units before a Deferred Charge Payment Date, no future deferred sales charges
will be collected from you; this will have the effect of reducing the rate of
sales charge.
CONCEPT SERIES: BLUE CHIP STOCK SERIES, REAL ESTATE INCOME FUND, HEALTH CARE
TRUST II
The sales charge consists of an initial portion and a deferred portion, the
total of which may equal a maximum of approximately 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 investors out of net asset value of the Fund on
each quarterly Deferred Charge Payment Date until the Fund terminates. If you
sell or redeem Units before a Deferred Charge Payment Date, all future
deductions of deferred sales charges with respect to you will be waived; this
will have the effect of reducing your rate of sales charge.
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.
<TABLE><CAPTION>
SALES CHARGE
(GROSS UNDERWRITING PROFIT)
----------------------------------
AS PERCENT OF AS PERCENT OF DEALER CONCESSION AS
PUBLIC OFFERING NET AMOUNT PERCENT OF PUBLIC
AMOUNT PURCHASED PRICE INVESTED OFFERING PRICE
- -------------------------------------------------------------------- ----------------- --------------- -----------------------
<S> <C> <C> <C>
Less than $250,000.................................................. 2.75% 2.828% 1.788%
$250,000-$499,000................................................... 2.25 2.302 1.463
$500,000-$749,000................................................... 1.75 1.781 1.138
$750,000-$999,000................................................... 1.25 1.266 0.813
$1,000,000 or more.................................................. 1.00 1.010 0.650
</TABLE>
a-1
<PAGE>
SECOND EXCHANGE SERIES--AT&T SHARES
The sales charge for Units of this Trust is 2.25% (2.302% of net amount
invested). There is no reduction for quantity purchases of Units.
CONCEPT SERIES: TELECOMMUNICATIONS TRUST 1, TELE-GLOBAL TRUST,
NATURAL GAS TRUST 2
The sales charge for Units of these Trusts is 2.00% (2.041% of net amount
invested). There is no reduction for quantity purchases of Units.
CONCEPT SERIES: FOOD FUND, NORTHWEST TRUST
The sales charge for Units of this Trust is 1.50% (1.523% of net amount
invested). There is no reduction for quantity purchases of Units.
a-2
<PAGE>
14101--12/95
<PAGE>
Def ined
Asset FundsSM
SPONSORS: EQUITY INVESTOR FUND
Merrill Lynch, SECOND EXCHANGE SERIES--
Pierce, Fenner & Smith IncorporatedAT&T SHARES
Defined Asset Funds (A UNIT INVESTMENT TRUST)
P.O. Box 9051
Princeton, NJ 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
(212) 816-4000 the Securities Act of 1933 and the Investment
Prudential Securities Incorporated Company Act of 1940, and to which reference
One New York Plaza is hereby made. Copies of filed material can
New York, NY 10292 be obtained from the Public Reference Section
(212) 778-6164 of the Commission, 450 Fifth Street, N.W.,
Dean Witter Reynolds Inc. Washington, D.C. 20549 at prescribed rates.
Two World Trade Center--59th Floor The Commission also maintains a Web site that
New York, NY 10048 contains information statements and other
(212) 392-2222 information regarding registrants such as
TRUSTEE: Defined Asset Funds that file electronically
The Bank of New York with the Commission at http://www.sec.gov.
Box 974--Wall Street Station ------------------------------
New York, NY 10268-0974 No person is authorized to give any
1-800-221-7771 information or to make any representations
with respect to this investment company not
contained in its registration statement and
exhibits relating thereto; and any
information or representation not contained
therein must not be relied upon as having
been authorized. This Prospectus shall not
constitute an offer to sell or the
solicitation of an offer to buy nor shall
there be any sale of these securities in any
State in which such offer solicitation or
sale would be unlawful prior to registration
or qualification under the securities laws of
any such State.
11820--9/97
