Defined
Asset FundsSM
INDEX SERIES The Defined Fund consists of two separate Trusts,
S&P 500 TRUST 2 designated the S&P 500 Trust 2 (the 'S&P 500
S&P MIDCAP TRUST Trust') and the S&P MidCap Trust, which offer
EQUITY INCOME FUND investors the opportunity to purchase Units
UNIT INVESTMENT TRUSTS representing proportionate interests in defined
PROSPECTUS DATED portfolios of preselected securities consisting of
APRIL 7, 1995 substantially all of the common stocks, in
substantially the same proportions, which comprise
the Standard and Poor's 500 Stock Price Composite
Index and the Standard and Poor's MidCap 400
Index, respectively. The Fund is designed to
produce investment results that generally
correspond to the price and yield performance of
the common stocks represented by these Indices.
There can be no assurance that these objectives
will be met (see Risk Factors). The Fund is not
sponsored by or affiliated with Standard and
Poor's Corporation.
The value of Units in the Fund will fluctuate with
the value of the Portfolios of underlying
Securities and no assurance can be given that
dividends will be paid or that the Units will
appreciate in value.
Minimum purchase: 1,000 Units.
Minimum purchase for Individual Retirement/Keogh
Accounts: unrestricted.
-------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR
SPONSORS: DISAPPROVED BY THE SECURITIES AND EXCHANGE
Merrill Lynch, COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
Pierce, Fenner & Smith HAS THE COMMISSION OR ANY STATE SECURITIES
Incorporated COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
Smith Barney Inc. OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
PaineWebber Incorporated CONTRARY IS A CRIMINAL OFFENSE.
Prudential Securities -------------------------------------------------
Incorporated READ AND RETAIN THIS PROSPECTUS FOR FUTURE
Dean Witter Reynolds Inc. REFERENCE.
<PAGE>
- ------------------------------------------------------------------------------
DEFINED ASSET FUNDSSM is America's oldest and largest family of unit investment
trusts with over $95 billion sponsored since 1971. Each Defined Fund is a
portfolio of preselected securities. The portfolio is divided into 'units'
representing equal shares of the underlying assets. Each unit receives an equal
share of income and principal distributions.
With Defined Asset Funds you know in advance what you are investing in and that
changes in the portfolio are limited. Most defined bond funds pay interest
monthly and repay principal as bonds are called, redeemed, sold or as they
mature. Defined equity funds offer preselected stock portfolios with defined
termination dates.
Your financial advisor can help you select a Defined Fund to meet your personal
investment objectives. Our size and market presence enable us to offer a wide
variety of investments. Defined Funds are available in the following types of
securities: municipal bonds, corporate bonds, government bonds, utility stocks,
growth stocks, even international securities denominated in foreign currencies.
Termination dates are as short as one year or as long as 30 years. Special funds
are available for investors seeking extra features: insured funds, double and
triple tax-free funds, and funds with 'laddered maturities' to help protect
against rising interest rates. Defined Funds are offered by prospectus only.
- --------------------------------------------------------------------------------
CONTENTS
Investment Summary.......................................... A-3
S&P 500 TRUST 2
Accountants' Opinion Relating to the Fund................... D-1
Statement of Condition of the Fund.......................... D-2
Portfolio................................................... D-6
S&P MIDCAP TRUST
Accountants' Opinion Relating to the Fund................... D-16
Statement of Condition of the Fund.......................... D-17
Portfolio................................................... D-21
Fund Structure.............................................. 1
Risk Factors................................................ 1
Description of the Fund..................................... 3
Taxes....................................................... 8
Public Sale of Units........................................ 9
Market for Units............................................ 11
Redemption.................................................. 11
Expenses and Charges........................................ 13
Administration of the Fund.................................. 13
Resignation, Removal and Limitations on Liability........... 16
Miscellaneous............................................... 17
A-2
<PAGE>
DEFINED ASSET FUNDS--EQUITY INCOME FUND, INDEX SERIES
S&P 500 TRUST 2
S&P MIDCAP TRUST
INVESTMENT SUMMARY AS OF DECEMBER 31, 1994 (THE EVALUATION DATE)
S&P 500 TRUST
- ------------------------------------------------------------
NUMBER OF UNITS-- 65,445,611
FRACTIONAL UNDIVIDED INTEREST IN FUND REPRESENTED BY EACH
UNIT-- 1/65,445,611th
PUBLIC OFFERING PRICE PER 1,000 UNITS(d)
Trust Property(a).........................................$ 71,324,369
----------------
Divided by Number of Units................................$ 1,089.83
(times 1,000)
Plus sales charge of 2.25% of Public Offering Price
(2.302% of net amount invested in Trust Property)(e).... 25.08
----------------
Public Offering Price per 1,000 Units.....................$ 1,114.91
SPONSORS' REPURCHASE PRICE PER 1,000 UNITS AND REDEMPTION
PRICE PER 1,000 UNITS (based on Trust Property).........$ 1,089.83
($25.08 less
than Public
Offering Price
per 1,000
Units)(f)
TRUSTEE'S ANNUAL FEE AND EXPENSES
$2.02 per 1,000 Units (see Expenses and Charges)(b)
INCOME DISTRIBUTIONS
Distributions of income, if any, will be paid on the
25th day of each month (each a 'Distribution Day')
to Holders of record on the 10th day of that month
(each a 'Record Day').
EVALUATION TIME
4:00 P.M., New York Time
PORTFOLIO SUPERVISION FEE(c)
Maximum of $0.35 per 1,000 Units (see Expenses
and Charges).
MINIMUM VALUE OF TRUST
Trust Indenture may be terminated if the value of the
Trust is less than 40% of the value of the Securities
when deposited in the Portfolio. As of the Evalua-
tion Date the value of the Trust is 101% of the
value of the Securities when deposited in the Port-
folio.
MANDATORY TERMINATION DATE
February 28, 2017
LICENSOR
Standard & Poor's Corporation
S&P MIDCAP TRUST
- ------------------------------------------------------------
NUMBER OF UNITS-- 32,668,823
FRACTIONAL UNDIVIDED INTEREST IN FUND REPRESENTED BY EACH
UNIT-- 1/32,668,823rd
PUBLIC OFFERING PRICE PER 1,000 UNITS(d)
Trust Property(a).........................................$ 33,580,568
----------------
Divided by Number of Units................................$ 1,027.91
(times 1,000)
Plus sales charge of 2.25% of Public Offering Price
(2.302% of net amount invested in Trust Property)(e).... 23.66
----------------
Public Offering Price per 1,000 Units.....................$ 1,051.57
SPONSORS' REPURCHASE PRICE PER 1,000 UNITS AND REDEMPTION
PRICE PER 1,000 UNITS (based on Trust Property) $ 1,027.91
($23.66 less
than Public
Offering Price
per 1,000
Units)(f)
TRUSTEE'S ANNUAL FEE AND EXPENSES
$2.68 per 1,000 Units (see Expenses and Charges)(b)
INCOME DISTRIBUTIONS
Distributions of income, if any, will be paid on the
25th day of each month (each a 'Distribution Day')
to Holders of record on the 10th day of that month
(each a 'Record Day').
EVALUATION TIME
4:00 P.M., New York Time
PORTFOLIO SUPERVISION FEE(c)
Maximum of $0.35 per 1,000 Units (see Expenses
and Charges).
MINIMUM VALUE OF TRUST
Trust Indenture may be terminated if the value of the
Trust is less than 40% of the value of the Securities
when deposited in the Portfolio. As of the Evaluation
Date the value of the Trust is 100% of the value of
the Securities when deposited in the Portfolio.
MANDATORY TERMINATION DATE
February 28, 2017
LICENSOR
Standard & Poor's Corporation
- ------------------
(a)On the Initial Date of Deposit (February 19, 1992) the aggregate value
of Securities in each Trust was $2,000,000.00 and 2,046,035 Units of
each Trust were outstanding. Cost of Securities is set forth under
Portfolio.
(b)Of this amount the Trustee receives annually for its services as
Trustee $0.84 per 1,000 Units (calculated monthly based on the largest
number of Units outstanding at anytime during that month) subject to
reduction as the size of the Fund increases. The Trustee's Annual Fee
and Expenses also includes the Portfolio Supervision Fee set forth
herein.
(c)The Sponsors also may be reimbursed for their costs of bookkeeping and
administrative services to the Fund. Portfolio supervision fees
deducted in excess of portfolio supervision expenses may be used for
this reimbursement. Additional deductions for this purpose are
currently estimated not to exceed an annual rate of $0.10 per 1,000
Units.
(d)These figures assume a purchase of 1,000 Units. The price of a single
Unit, or any multiple thereof, is calculated simply by dividing the
Public Offering Price per 1,000 Units, above, by 1,000, and
multiplying by the number of Units.
(e)The sales charge is a maximum of 2.25% of the Public Offering Price,
and is reduced in the case of purchases of $25,000 or more. See Public
Sale of Units--Public Offering Price. There is no sales charge for
purchases pursuant to the Reinvestment Plan.
(f)For Units purchased or redeemed on the Evaluation Date, the amount in
the Income Account is approximately equal to the undistributed net
investment income of the Fund (see Statement of Condition on p. D-2)
divided by the number of outstanding Units, plus any amount per Unit
added to the Income Account to the expected date of settlement (5
business days after purchase or redemption). The amount of the cash
adjustment which is added is equal to the cash per Unit in the Capital
Account not allocated to the purchase of specific Securities (see
Public Sale of Units--Public Offering Price and Redemption).
A-3
<PAGE>
INVESTMENT SUMMARY AS OF THE EVALUATION DATE (CONTINUED)
OBJECTIVE OF THE TRUSTS--To provide investors with the opportunity to
purchase Units representing proportionate interests in a portfolio consisting of
substantially all of the common stocks, in substantially the same proportions,
which comprise the Standard & Poor's 500 Stock Price Composite Index (the 'S&P
500 Index') or the Standard & Poor's MidCap 400 Index (the 'S&P MidCap Index')
in order to produce investment results that generally correspond to the price
and yield performance of the S&P 500 Index and the S&P MidCap Index. There can
be no assurance that this objective will be met because it may be impracticable
for the Fund to duplicate or maintain precisely the relative weightings of the
common stocks which comprise the S&P 500 Index (the '500 Index Stocks') or the
S&P MidCap Index (the 'MidCap Index Stocks') or to purchase all of these stocks.
(See Fund Structure; Description of the Fund--The S&P 500 Index and The S&P
MidCap Index). The payment of dividends and preservation of capital are
dependent on several factors including the financial condition of the issuers of
the Securities in the Portfolios. The value of the underlying Portfolios and
therefore the value of the Units will fluctuate with changes in the values of
common stocks generally and other factors.
It is the Fund's investment policy to have at least 95% of a Trust's assets
invested in the common stocks comprising the S&P 500 Index and the S&P MidCap
Index, respectively. The Sponsors expect to maintain a correlation of between
.97-.99 between each Trust and the applicable Index.
FUND PORTFOLIOS--The Trusts consist of different issues of common stocks of
corporations selected in accordance with the selection and weightings of stocks
established by the S&P 500* Index and the S&P MidCap Index, respectively. The
S&P 500 Index is composed of 500 selected common stocks, most of which are
listed on the New York Stock Exchange. The S&P MidCap Index is composed of 400
selected common stocks of which, as of the Evaluation Date, 273 were listed
either on the New York or the American Stock Exchange and 127 were quoted on the
NASDAQ National Market System. (See Description of the Fund--The S&P 500 Index
and The S&P MidCap Index.)
Investors often compare the performance of their equity investments to a
measure of overall market performance--an index. The Trusts are designed to
offer investors an opportunity, with a single, convenient purchase, to
participate in the total return performance of two indices broadly representing
the market. This diversification reduces the risk of selecting individual stocks
or market sectors. Indexing is a strategy that most equity investors can use as
part of their overall investment plan, to seek potential growth in otherwise
conservative portfolios or to hedge an aggressive strategy.
Since common stocks are purchased for the Fund only in round lots, and
because of certain procedural policies of the Fund, the Portfolios may never
precisely duplicate the percentage relationships established for stocks by the
S&P 500 Index and the S&P MidCap Index. For example, brokerage fees incurred in
purchasing Securities with cash deposited with instructions to purchase the
Securities will be an expense of a Trust, and price fluctuations from the time
moneys are received by a Trust and invested will affect the value of the Units,
the income per Unit received by the Trust and the correlations between the
Trusts and the Indices. (See Fund Structure; Administration of the
Fund--Portfolio Supervision.) Additional deposits or purchases of common stocks
in connection with creation of additional Units will be effected in a manner
that will maintain, to the extent practicable, the relative weightings among the
common stocks in the relevant Index.
RISK FACTORS--Investment in the Fund should be made with an understanding
that the value of the underlying Portfolios may fluctuate in accordance with
changes in the financial condition of the issuers of the Securities in the
Portfolios (particularly those that are heavily weighted in the relevant Index),
the value of common stocks generally and other factors. Also the identity and
weighting of the 500 Index Stocks and the MidCap Index Stocks will change from
time to time (see Description of the Fund--The S&P 500 Index and The S&P MidCap
Index). There can be no assurance that the issuers of the Securities will pay
dividends on outstanding shares of common stock. Distributions of income on the
underlying Securities will generally depend upon the declaration of dividends by
the issuers of the Securities
- ------------------------------------
*'S&P', 'Standard & Poor's', 'S&P 500', 'Standard & Poor's 500', 'S&P MidCap
400 Index' and 'Standard & Poor's MidCap 400 Index' are trademarks of Standard &
Poor's Corporation.
A-4
<PAGE>
Defined
Asset Funds
INVESTOR'S GUIDE DEFINED EQUITY INCOME FUND
INDEX SERIES Our defined portfolios of equities offer investors
S&P 500 TRUST 2 a simple and convenient way to participate in the
S&P MIDCAP TRUST equity markets. By purchasing defined equity
EQUITY INCOME FUND funds, investors not only avoid the problem of
UNIT INVESTMENT TRUSTS selecting securities by themselves, but also gain
the advantage of diversification by investing in
securities of several different issuers. Spreading
your investment among different securities and
issuers reduces your risk, but does not eliminate
it.
THE INDEX SERIES
One of the greatest benefits of performance is the
total return. After all, total return is why
you're investing in stocks. The tricky part is
keeping the cost of your investments from eating
away at your profits. That's where we can help.
The Index Series was created for investors, like
yourself, who are looking for an opportunity to
reflect the performance of a major market index.
WHY INDEX YOUR INVESTMENT?
Indexing is an investment strategy that allows you
to invest in a portfolio of stocks that is
carefully structured to mirror, as closely as
possible, the total return of a market index. The
chart below illustrates the performance of the S&P
500 Index over the past 10 years and of the S&P
MidCap Index in 1991-1994.
S&P 500 S&P Midcap
Index Performance* Index Performance*
1985 +31.73 --
1986 +18.66 --
1987 +5.25 --
1988 +16.61 --
1989 +31.69 --
1990- 3.10 --
1991 +30.47 +50.1
1992 +7.66 +11.91
1993 +10.08 +13.95
1994 1.31 - 3.57
*Past performance does not guarantee future
results. The figures reflect the reinvestment of
dividends on a monthly basis but not commissions.
Because of sales charges and expenses, actual
returns on the Trusts would be lower. Performance
figures for the S&P MidCap Index reflect the stock
prices since the beginning of 1991, although the
index was created on June 5, 1991.
SIMPLIFIED DECISION-MAKING
When you invest in the Index Series, you don't
have to select individual stocks or market
sectors. You are, in effect, buying the major
portion of the market represented by the index.
Your portfolio is broadly diversified. Of course,
the Trusts may not hold all of the stocks in the
Index at all times, but will seek to reflect the
performance of the respective indices.
- ------------------
This page may not be distributed unless included in a current prospectus.
Investors should refer to the prospectus for further information.
<PAGE>
MONTHLY INCOME OR
REINVESTMENT
The Trusts pay income
monthly or you can
elect to have any
dividend income and
capital gains
automatically
reinvested into
additional units of
the same Trust at net
asset value. By
reinvesting your
income, you not only
increase your holding
but gain the important
benefits that monthly
compounding can have
on total return
performance.
RISK REDUCTION WITH
DIVERSIFICATION
One of the best
reasons for an
indexing approach to
investing is the fact
that indexing reduces
the volatility of
individual stocks. It
substantially reduces
the risk of investing
in a single stock or
industry through
diversification. By
owning units in a
Trust, you participate
in a broadly
diversified portfolio.
Through one purchase,
you are instantly
diversified among
hundreds of companies
in four industry
sectors. This way,
your exposure to risk
is substantially
reduced, especially
when compared to
buying one, two or
even ten of the
individual stocks.
A LIQUID INVESTMENT
Although not legally
required to do so, we
have maintained a
secondary market for
Defined Asset Funds
for over 20 years. You
can cash in your Units
at any time. Your
price is based on the
market value of the
securities in the
Portfolio at that
time. There is never a
fee for cashing in
your investment.
VOLUME PURCHASE
DISCOUNTS
For larger purchases,
the rate of sales
charge is
substantially reduced
to put a greater
percentage of your
investment dollars to
work for you.
<TABLE><CAPTION>
SALES CHARGE
AS A PERCENTAGE OF
AMOUNT PURCHASED THE PUBLIC OFFERING PRICE
-----------------------------------------------------
<S> <C>
Less than $25,000 2.25%
$25,000-$49,999 2.00%
$50,000-$74,999 1.75%
$75,000-$99,999 1.50%
$100,000-$249,999 1.25%
$250,000 or more 1.00%
</TABLE>
RISK FACTORS
The value of the Units may fluctuate with changes
in the financial condition of the issuers of
stocks held, changes in the industry sectors
represented and the value of stocks generally.
Dividends are subject to the financial condition
of, and declaration by, the issuers. There can be
no assurance that the Fund will achieve its
objective. Although the Portfolio is monitored, it
will change primarily to replicate the composition
of the index and not because of the financial
condition of stock issuers.
<PAGE>
INVESTMENT SUMMARY AS OF THE EVALUATION DATE (CONTINUED)
and the declaration of any such dividends depends upon several factors including
the financial condition of the issuers and general economic conditions. The
adverse financial condition of a company will not result directly in its
elimination from a Portfolio unless the company is removed from the relevant
Index. Substantially all income distributions from the Fund, when received by
Holders, will constitute dividend income for Federal income tax purposes (see
Taxes).
An investment in Units should also be made with an understanding of the
risks inherent in an investment in equity securities, including the risk that
the financial condition of the issuers of the Securities may become impaired or
that the general condition of the stock market may worsen (either of which may
cause a decrease in the value of the Securities and thus in the value of the
Units). Common stocks are susceptible to general stock market fluctuations 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 and regional political, economic and banking crises.
(See Risk Factors.)
The Sponsors may deposit either additional Securities, contracts to
purchase additional Securities or cash (or a bank letter or letters of credit in
lieu of cash) with instructions to purchase additional Securities (where
additional Units are to be offered to the public) (see Administration of the
Fund--Portfolio Supervision), in each case maintaining, as closely as
practicable, the proportionate relationship among the Securities in the S&P 500
Index or S&P MidCap Index, as the case may be. If cash (or a bank letter of
credit in lieu of cash) is deposited with instructions to purchase Securities,
to the extent the price of a Security increases or decreases between the time of
deposit and the time any Security is purchased, Units will represent less or
more of that Security and more or less of the other Securities in a Trust. Price
fluctuations during the period from the time of deposit of cash (or a bank
letter of credit in lieu of cash) in a Trust to the time the Securities are
purchased will affect the value of the Units and the income per Unit received by
a Trust. In order to minimize these effects, each Trust will try to purchase
Securities as near as possible to the Evaluation Time or at prices as close as
possible to the prices used to evaluate the Trust at the Evaluation Time.
Investors should be aware that the S&P MidCap Trust may not invest more
than 5% of its assets in the stock of any issuer that derives more than 15% of
its revenues from securities-related activities (a 'securities-related issuer')
or invest in a securities-related issuer if its stock is not a marginable
security under Regulation T promulgated by the Board of Governors of the Federal
Reserve System. Because it is believed to be unlikely that any issuer, whether
or not securities-related, will account for more than 5% of the S&P MidCap Index
or that the S&P MidCap Index will include any non-marginable securities-related
issuer, the foregoing restrictions are not expected to have a significant effect
on the correlation between the S&P MidCap Trust and the S&P MidCap Index. The
S&P 500 Trust is not affected by the foregoing restrictions because it is
covered by an SEC exemptive order.
DISTRIBUTIONS AND REINVESTMENT OF INCOME--Monthly distributions of
dividends received will be made by each Trust in cash on the date set forth
under Investment Summary on pA-3 to Holders of record on the Record Day set
forth on pA-3. Distributions of capital gain net income (i.e., the excess of
capital gains over capital losses) recognized, if any, will be made after the
end of each Trust's taxable year. In order to meet certain tax requirements
either Trust may make a special distribution of income, including capital gains,
to Holders of record as of a date in December. (See Taxes.) Holders may elect to
have distributions from a Trust reinvested in additional whole or fractional
Units of the Trust at no sales charge (see Administration of the Fund--
Reinvestment Plan). However, whether or not a distribution is received in cash,
the distribution will be taxable to the Holder.
TAXATION--Distributions which are taxable as ordinary income to Holders
will constitute dividends for Federal income tax purposes. Such dividends will
be eligible for the 70% dividends-received deduction available to certain
corporations to the extent of qualifying dividends received from domestic
corporations. (See Taxes.)
PUBLIC OFFERING PRICE--The Public Offering Price per 1,000 Units is based
on the aggregate value of the underlying Securities divided by the number of
Units outstanding times 1,000 plus the sales charge. A proportionate share of
the amount in the Income Account and the amount in the Capital Account to the
extent not allocated to the purchase of Securities (described under
Administration of the Fund--Accounts and Distributions) on the date of delivery
of the Units to the purchaser is added to the Public Offering Price. The maximum
sales charge is 2.25% of the Public Offering Price.* Units are offered at the
Public Offering Price computed as of the Evaluation Time for all sales
subsequent to the previous evaluation. The Public Offering Prices on the
Investment Summary Date and on subsequent dates, will vary from the Public
Offering Prices set forth on pA3. (See Public Sale of Units--Public Offering
Price.)
- ------------------------------------
*This sales charge will be reduced on a graduated scale in the case of quantity
purchases. (See Public Sale of Units--Public Offering Price.)
A-5
<PAGE>
INVESTMENT SUMMARY AS OF THE EVALUATION DATE (CONTINUED)
PURCHASE OF UNITS--Units can be purchased by contacting the Sponsors, whose
addresses are listed on the back cover of this Prospectus. The minimum purchase
is 1,000 Units at a purchase price of approximately $1,000, except that
purchases under the Reinvestment Plan and by Individual Retirement Accounts and
certain other tax deferred retirement plans are unrestricted (see Retirement
Plans).
MARKET FOR UNITS--Although not obligated to do so, the Sponsors intend to
maintain a market for Units based on the aggregate value of the underlying
Securities. If a market is not maintained, it is unlikely that a Holder would be
able to dispose of his Units other than through redemption (see Redemption).
UNDERWRITING ACCOUNT
Certain of the Sponsors may have participated as issuer, sole underwriter,
managing underwriter or member of an underwriting syndicate in a public offering
of some of the Securities in the Portfolios (see Composition of Indices).
The names and addresses of the Underwriters and their several interests in
the Underwriting Account are:
<TABLE>
<S> <C> <C>
Merrill Lynch, Pierce, Fenner & Smith P.O. Box 9051, Princeton, N.J. 08543-9051 76.00%
Incorporated
Smith Barney Inc. 388 Greenwich Street--23rd Floor,
New York, N.Y. 10013 6.00
Prudential Securities Incorporated One Seaport Plaza--199 Water Street,
New York, N.Y. 10292 7.50
PaineWebber Incorporated 1285 Avenue of the Americas, New York, N.Y. 10019 3.00
Dean Witter Reynolds Inc. Two World Trade Center, 59th Floor,
New York, N.Y. 10048 5.50
Broadcort Capital Corp. 100 Church Street, New York, N.Y. 10007 1.00
Gruntal & Co. Incorporated 14 Wall Street, New York, N.Y. 10001 1.00
------
100.00%
------
------
A-6
<PAGE>
DEFINED ASSET FUNDS - EQUITY INCOME FUND INDEX SERIES,
S&P 500 TRUST 2
REPORT OF INDEPENDENT ACCOUNTANTS
The Sponsors, Trustee and Holders
of Defined Asset Funds -
Equity Income Fund Index Series,
S&P 500 Trust 2:
We have audited the accompanying statement of condition of Defined Asset Funds -
Equity Income Fund Index Series, S&P 500 Trust 2, including the portfolio, as of
December 31, 1994 and the related statements of operations and of changes in net
assets for the years ended December 31, 1994 and 1993 and the period February 20
to December 31, 1992. 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
December 31, 1994, as shown in such portfolio, were confirmed to us by the Chase
Manhattan Bank, N.A., the Trustee. An audit also includes assessing the
accounting principles used and significant estimates made by the Trustee, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Defined Asset Funds - Equity
Income Fund Index Series, S&P 500 Trust 2 at December 31, 1994 and the results
of its operations and changes in its net assets for the above-stated periods in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, N.Y.
March 9, 1995
D-1
<PAGE>
DEFINED ASSET FUNDS - EQUITY INCOME FUND INDEX SERIES,
S&P 500 TRUST 2
STATEMENT OF CONDITION
AS OF DECEMBER 31, 1994
</TABLE>
<TABLE>
<S> <C> <C>
TRUST PROPERTY:
Investment in marketable securities - at value
(cost $67,812,767) (Note 1) $71,324,369
Dividends receivable 193,946
Receivable from units issued 500,000
Total trust property 72,018,315
LESS LIABILITIES:
Payable for securities purchased $ 545,490
Advance from Trustee 91,468 636,958
NET ASSETS, REPRESENTED BY:
65,445,611 units of fractional
undivided interest outstanding (Note 3) 71,324,965
Undistributed net investment income 56,392 $71,381,357
UNIT VALUE ($71,381,357 / 65,445,611 units) $1.09070
</TABLE>
See Notes to Financial Statements.
D-2
<PAGE>
DEFINED ASSET FUNDS - EQUITY INCOME FUND INDEX SERIES,
S&P 500 TRUST 2
STATEMENTS OF OPERATIONS
<TABLE><CAPTION>
February 20,
to
Years Ended December 31, December 31,
1994 1993 1992
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividend income $1,924,809 $1,418,147 $ 560,493
Trustee's fees and expenses (91,625) (96,992) (25,412)
Sponsors' fees (25,941) (11,785) (4,936)
Net investment income 1,807,243 1,309,370 530,145
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Realized gain (loss) on securities sold or
redeemed 494,726 81,902 (1,655)
Unrealized appreciation (depreciation) of
investments (1,429,745) 3,296,373 1,644,974
Net realized and unrealized gain (loss) on
investments (935,019) 3,378,275 1,643,319
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $ 872,224 $4,687,645 $2,173,464
</TABLE>
See Notes to Financial Statements.
D-3
<PAGE>
DEFINED ASSET FUNDS - EQUITY INCOME FUND INDEX SERIES,
S&P 500 TRUST 2
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE><CAPTION>
February 20,
to
Years Ended December 31, December 31,
1994 1993 1992
<S> <C> <C> <C>
OPERATIONS:
Net investment income $ 1,807,243 $ 1,309,370 $ 530,145
Realized gain (loss) on securities sold or
redeemed 494,726 81,902 (1,655)
Unrealized appreciation (depreciation) of
investments (1,429,745) 3,296,373 1,644,974
Net increase in net assets resulting from
operations 872,224 4,687,645 2,173,464
DISTRIBUTIONS TO HOLDERS (Note 2):
Income (1,793,155) (1,340,429) (531,387)
Principal (350,938) (38,724)
Total distributions (2,144,093) (1,379,153) (531,387)
CAPITAL SHARE TRANSACTIONS - Issuance of
11,104,169, 23,143,896 and 30,130,178 units,
respectively (Note 4) 12,228,709 24,748,345 29,800,000
REDEMPTION OF 978,667 UNITS (Note 4) (1,074,397)
NET CAPITAL SHARE TRANSACTIONS 11,154,312 24,748,345 29,800,000
NET INCREASE IN NET ASSETS 9,882,443 28,056,837 31,442,077
NET ASSETS AT BEGINNING OF PERIOD 61,498,914 33,442,077 2,000,000
NET ASSETS AT END OF PERIOD $71,381,357 $61,498,914 $33,442,077
PER UNIT:
Income distributions during period $.02877 $0.02719 $0.02372
Principal distributions during period $.00540 $.00070
Net asset value at end of period $1.09070 $1.11169 $1.03934
TRUST UNITS OUTSTANDING AT END OF PERIOD 65,445,611 55,320,109 32,176,213
</TABLE>
See Notes to Financial Statements.
D-4
<PAGE>
DEFINED ASSET FUNDS - EQUITY INCOME FUND INDEX SERIES,
S&P 500 TRUST 2
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Fund is registered under the Investment Company Act of 1940 as a Unit
Investment Trust. The following is a summary of significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements. The policies are in conformity with generally
accepted accounting principles.
(a) Securities are stated at market value; for securities listed on a
national securities exchange, value is based on the closing sale price
on such exchange and for securities not so listed, value is based on
the current bid price on the over-the-counter market. Realized gains
or losses on sales of securities are determined using the first-in,
first-out cost method.
(b) The Fund is not subject to income taxes. Accordingly, no provision for
such taxes is required.
(c) Dividend income is recorded on the ex-dividend date.
2. DISTRIBUTIONS
A distribution of net investment income is made to Holders on the twenty-
fifth day of each month. Receipts other than dividends, after deductions
for redemptions and applicable expenses, are distributed as explained in
"Administration of the Fund" in this Prospectus, Part B.
3. NET CAPITAL
Cost of 65,445,611 units at Dates of Deposit $69,245,977
Less sales charge 1,558,173
Net amount applicable to Holders 67,687,804
Redemptions of units - net cost of 978,667 units redeemed
less redemption amounts (59,752)
Realized gain on securities sold or redeemed 574,973
Principal distributions (389,662)
Net unrealized appreciation of investments 3,511,602
Net capital applicable to Holders $71,324,965
4. REDEMPTIONS
Holders may request redemptions of units by presentation thereof to the
Trustee, Chase Manhattan Bank, N.A.
5. INCOME TAXES
As of December 31, 1994, net unrealized appreciation of investments, based
on cost for Federal income tax purposes, aggregated $3,511,602 of which
$7,404,918 related to appreciated securities and $3,893,316 related to
depreciated securities. The aggregate cost of investment securities for
Federal income tax purposes was $67,812,767 at December 31, 1994.
D-5
<PAGE>
DEFINED ASSET FUNDS - EQUITY INCOME FUND INDEX SERIES,
S&P 500 TRUST 2
PORTFOLIO
AS OF DECEMBER 31, 1994
<TABLE><CAPTION>
Percentage
of Total
Portfolio Market
No. Common Stocks Shares Cost(1) Value(1) Value
<S> <C> <C> <C> <C> <C>
1 General Electric Co. 36,400 $ 1,556,540 $ 1,856,400 2.6028%
2 American Tel. & Tel. 33,300 1,633,515 1,673,325 2.3461
3 Exxon Corp. 26,500 1,634,575 1,609,875 2.2571
4 Coca-Cola 27,400 1,139,552 1,411,100 1.9784
5 Royal Dutch Petroleum 11,400 1,017,870 1,225,500 1.7182
6 Phillip Morris 18,300 1,258,003 1,052,250 1.4753
7 Wal-mart Stores 49,000 1,377,433 1,041,250 1.4599
8 Merck & Co., Inc. 26,800 1,113,513 1,021,750 1.4325
9 IBM 12,500 855,413 918,750 1.2881
10 Proctor and Gamble 14,600 756,770 905,200 1.2691
11 Dupont (E.I.) De Nemours 14,500 726,225 815,625 1.1435
12 Microsoft Corp. 12,400 649,375 757,950 1.0627
13 Johnson & Johnson 13,700 632,630 750,075 1.0516
14 Motorola Inc. 12,500 403,755 723,438 1.0143
15 Mobil Corp. 8,500 579,163 716,125 1.0040
16 General Motors Corp. 16,100 664,343 680,225 0.9537
17 American Int'l Group, Inc. 6,700 498,102 656,600 0.9206
18 Bristol Myers Squibb 10,900 708,870 630,838 0.8845
19 AMOCO Corp. 10,600 549,480 626,725 0.8787
20 GTE Corp. 20,500 690,613 622,688 0.8730
21 Chevron Corp. 13,900 523,935 620,288 0.8697
22 Pepsico Inc. 16,900 631,970 612,625 0.8589
23 Ford 21,800 522,844 610,400 0.8558
24 Bell South Corp. 10,600 558,255 573,725 0.8044
25 Intel Corp. 8,800 389,388 562,100 0.7881
26 Abbot Laboratories 17,200 500,872 561,150 0.7868
27 Hewlett Packard Co. 5,400 392,958 539,325 0.7562
28 Walt Disney Co. 11,400 461,254 525,825 0.7372
29 Pfizer, Inc. 6,700 463,873 517,575 0.7257
30 Southwestern Bell Corp. 12,800 451,113 516,800 0.7246
31 Minnesota Mining & Mfg. 9,000 454,774 480,375 0.6735
32 Ameritech 11,700 415,620 472,388 0.6623
33 Bell Atlantic Corp. 9,300 466,527 462,675 0.6487
34 Home Depot Inc. 9,600 391,045 441,600 0.6191
35 McDonald's Corp. 14,900 361,055 435,825 0.6110
36 Federal Nat'l Mortg Assn. 5,800 421,028 422,675 0.5926
37 American Home Products 6,500 443,112 407,875 0.5719
38 Eli Lily & Co. 6,200 376,873 406,875 0.5705
39 Dow Chemical 5,900 343,558 396,775 0.5563
40 Unilever 3,400 362,220 396,100 0.5554
41 Chrysler 7,600 267,417 372,400 0.5221
42 Gillette Co. 4,700 259,835 351,325 0.4926
43 Citicorp 8,400 217,045 347,550 0.4873
44 Atlantic Richfield 3,400 377,507 345,950 0.4850
45 US West Inc. 9,700 386,410 345,563 0.4845
46 Sears Roebuck 7,500 248,650 345,000 0.4837
47 Eastman Kodak 7,200 264,451 343,800 0.4820
48 Boeing Co. Com. 7,300 295,415 341,275 0.4785
49 Nynex Corp. 9,000 362,538 330,750 0.4637
50 Texaco Inc. 5,500 342,075 329,313 0.4617
51 American Express 10,800 275,565 318,600 0.4467
52 Bankamerica Corp. 7,940 362,862 313,630 0.4397
</TABLE>
D-6
<PAGE>
DEFINED ASSET FUNDS - EQUITY INCOME FUND INDEX SERIES,
S&P 500 TRUST 2
PORTFOLIO
AS OF DECEMBER 31, 1994
<TABLE><CAPTION>
Percentage
of Total
Portfolio Market
No. Common Stocks Shares Cost(1) Value(1) Value
<S> <C> <C> <C> <C> <C>
53 Viacom Inc. 7,600 $ 296,555 $ 308,750 0.4329%
54 Airtouch Comm. 10,500 56,265 305,813 0.4288
55 Schering Plough 4,100 248,980 303,400 0.4254
56 Emerson Electric Co. 4,800 265,778 300,000 0.4206
57 Time Warner Inc. 8,100 255,413 284,513 0.3989
58 Capital Cities ABC Inc. 3,300 163,342 281,325 0.3944
59 Columbia Health Care Corp 7,692 261,494 280,758 0.3936
60 Anheuser-Busch 5,500 297,812 279,813 0.3923
61 Southern Co. 13,900 261,905 278,000 0.3898
62 Kellogg Co. 4,700 286,085 273,187 0.3830
63 WMX Technologies 10,300 363,728 270,375 0.3791
64 Oracle Systems Corp. 6,100 103,144 269,163 0.3774
65 MCI Communications 14,500 302,350 266,437 0.3736
66 NationsBank Corp. 5,900 290,883 266,238 0.3733
67 Tele-Communications Inc. 12,200 262,775 265,350 0.3720
68 Schlumberger Ltd. 5,200 316,860 261,950 0.3673
69 Sara Lee Corp. 10,200 268,848 257,550 0.3611
70 Pacific Telesis Group 9,000 396,625 256,500 0.3596
71 Caterpillar Inc. 4,300 141,064 237,038 0.3323
72 Campbell Soup 5,300 206,177 233,863 0.3279
73 Seagram Ltd. 7,900 222,320 233,050 0.3267
74 Xerox 2,300 192,203 227,700 0.3192
75 Archer-Daniels-Midland 10,993 167,917 226,741 0.3179
76 Pacific Gas & Electric 9,200 293,235 224,250 0.3144
77 Morgan J.P. 4,000 251,488 224,000 0.3141
78 Warner Lambert Co. 2,900 194,645 223,300 0.3131
79 Penny J.C. Co. Inc. 5,000 200,281 223,125 0.3128
80 Travelers Inc. 6,833 216,345 222,073 0.3114
81 Banc One Corp. 8,722 313,265 221,321 0.3103
82 Compaq Computer 5,500 94,079 217,250 0.3046
83 General Re. Corp. 1,700 181,223 210,375 0.2950
84 Sprint 7,400 216,958 204,425 0.2866
85 Allied-Signal Inc. 6,000 184,500 204,000 0.2860
86 ITT Corp. 2,300 172,403 203,837 0.2858
87 Int'l. Paper 2,700 183,710 203,512 0.2853
88 Union Pacific 4,400 247,858 200,750 0.2815
89 Dun & Bradstreet 3,600 206,768 198,000 0.2776
90 Colgate Palmolive 3,100 171,530 196,463 0.2755
91 Heinz H J 5,300 203,778 194,775 0.2731
92 General Mills Com. w/rights 3,400 220,883 193,800 0.2717
93 Cisco Systems 5,500 174,187 193,188 0.2709
94 Federal Home Loan 3,800 176,158 191,900 0.2691
95 Chemical Banking Corp. 5,200 194,747 186,550 0.2616
96 Toys R Us 6,100 223,230 186,050 0.2609
97 Phillips Petroleum 5,600 153,055 183,400 0.2571
98 Northern Telecom Ltd. 5,400 202,745 180,225 0.2527
99 May Department Stores 5,300 182,748 178,875 0.2508
100 Raytheon 2,800 146,076 178,850 0.2508
101 Monsanto Co. 2,500 153,600 176,250 0.2471
102 Norfolk Southern Corp. 2,900 180,420 175,813 0.2465
103 Automatic Data Processing 3,000 147,462 175,500 0.2461
104 Kimberly Clark Corp. 3,400 185,158 171,700 0.2407
</TABLE>
D-7
<PAGE>
DEFINED ASSET FUNDS - EQUITY INCOME FUND INDEX SERIES,
S&P 500 TRUST 2
PORTFOLIO
AS OF DECEMBER 31, 1994
<TABLE><CAPTION>
Percentage
of Total
Portfolio Market
No. Common Stocks Shares Cost(1) Value(1) Value
<S> <C> <C> <C> <C> <C>
105 CPC Int'l. Inc. 3,200 $ 148,337 $ 170,400 0.2389%
106 United Technologies Corp. 2,700 144,110 169,763 0.2380
107 Baxter Int'l., Inc. 6,000 181,865 169,500 0.2376
108 Rockwell Int'l 4,700 138,873 168,025 0.2356
109 Duke Power Co. 4,400 161,183 167,750 0.2352
110 PPG Ind. 4,500 148,003 167,063 0.2342
111 United Healthcare Corp. 3,700 167,423 166,963 0.2341
112 Conagra Inc. 5,300 149,527 165,625 0.2322
113 Amgen Inc. 2,800 151,800 165,200 0.2316
114 Weyerhaeuser 4,400 171,433 165,000 0.2313
115 Computer Assoc. Int'l. 3,400 76,220 164,900 0.2312
116 Enron Corp. 5,400 137,453 164,700 0.2309
117 American Barrick Resource 7,400 198,382 164,650 0.2308
118 Aluminum Co. of America 1,900 133,932 164,588 0.2308
119 American Brands 4,300 171,502 161,250 0.2261
120 AMP Inc. 2,200 132,497 160,050 0.2244
121 Gannett Co. 3,000 149,113 159,750 0.2240
122 Wells Fargo & Co. 1,100 114,043 159,500 0.2236
123 Tenneco, Inc. 3,700 162,973 157,250 0.2205
124 First Union Corp. 3,800 162,553 157,225 0.2204
125 Albertson's Inc. 5,400 129,860 156,600 0.2196
126 Norwest Corp. 6,600 148,240 154,275 0.2163
127 Texas Utilities Company 4,800 198,353 153,600 0.2154
128 CSX Corporation 2,200 152,060 153,175 0.2148
129 Texas Instruments 2,000 111,938 149,750 0.2100
130 Chubb Corp. 1,900 151,482 147,013 0.2061
131 Merrill Lynch Co. 4,100 133,813 146,575 0.2055
132 Corning Inc. 4,900 166,695 146,388 0.2052
133 Unocal Corp. 5,200 135,648 141,700 0.1987
134 FPL Group 4,000 143,688 140,500 0.1970
135 US Healthcare, Inc. 3,400 147,100 140,250 0.1966
136 Medtronic Inc. 2,500 102,811 139,062 0.1950
137 SCE Corp. 9,500 204,036 138,938 0.1948
138 Pub. Serv. Enterprise Gr. 5,200 154,385 137,800 0.1932
139 Limited Inc. 7,600 182,143 137,750 0.1931
140 Georgia-Pacific Corp. 1,900 121,208 135,850 0.1905
141 Novell Inc. 7,900 198,475 135,288 0.1897
142 Chase Manhattan 3,900 116,220 134,063 0.1880
143 Dominion Resources Inc. 3,700 147,910 132,275 0.1855
144 Keycorp 5,200 163,710 130,000 0.1823
145 Consolidated Edison 5,000 154,825 128,750 0.1805
146 American Electric Power 3,900 129,420 128,213 0.1798
147 Occidental Petroleum 6,600 127,993 127,050 0.1781
148 Marsh & Mclennan Cos. Inc. 1,600 135,218 126,800 0.1778
149 KMART 9,700 220,205 126,100 0.1768
150 American General 4,400 117,190 124,300 0.1743
151 Wrigley Wm. Jr. Co. 2,500 82,420 123,438 0.1731
152 Dean Witter Disc Corp. 3,641 158,233 123,339 0.1729
153 Alcan Aluminum 4,800 95,540 121,800 0.1708
154 Alltel Corp. 4,000 120,700 120,500 0.1689
155 Nike Inc. 1,600 110,393 119,400 0.1674
156 Suntrust Bks. Inc. 2,500 105,500 119,375 0.1674
</TABLE>
D-8
<PAGE>
DEFINED ASSET FUNDS - EQUITY INCOME FUND INDEX SERIES,
S&P 500 TRUST 2
PORTFOLIO
AS OF DECEMBER 31, 1994
<TABLE><CAPTION>
Percentage
of Total
Portfolio Market
No. Common Stocks Shares Cost(1) Value(1) Value
<S> <C> <C> <C> <C> <C>
157 UST Inc. 4,300 $ 127,203 $ 119,325 0.1673%
158 Wachovia Corp. 3,700 139,635 119,325 0.1673
159 Deere & Co. 1,800 99,940 119,250 0.1672
160 Browning Ferris Ind. 4,200 106,660 119,175 0.1671
161 Lowe's Cos. Inc. 3,400 60,167 118,150 0.1657
162 Peco Energy Co. 4,700 127,085 115,150 0.1614
163 Upjohn Corp. 3,700 120,460 113,775 0.1595
164 Walgreen Co. 2,600 99,818 113,750 0.1595
165 McDonnell Douglas 800 50,840 113,600 0.1593
166 Aetna Life & Casualty 2,400 116,132 113,100 0.1586
167 Int'l. Flavors & Fragrance 2,400 87,675 111,000 0.1556
168 Placer Dome Inc. 5,100 73,968 110,925 0.1555
169 Scott Paper Co. 1,600 64,005 110,600 0.1551
170 Unicom Corp. 4,600 129,680 110,400 0.1548
171 First Data Corp. 2,300 114,540 108,963 0.1528
172 Pacificorp 6,000 121,163 108,750 0.1525
173 First Interstate Bancorp 1,600 87,368 108,200 0.1517
174 Pitney Bowes 3,400 126,140 107,950 0.1514
175 Goodyear Tire & Rubber 3,200 117,268 107,600 0.1509
176 Entergy Corp. 4,900 159,345 107,188 0.1503
177 Air Products & Chemicals 2,400 107,186 107,100 0.1502
178 Dayton Hudson 1,500 106,988 106,125 0.1488
179 PNC Financial 5,000 139,908 105,625 0.1481
180 Nucor Corp. 1,900 74,766 105,450 0.1478
181 Illinois Tool Wks. Inc. 2,400 83,263 105,000 0.1472
182 Rubbermaid Inc. 3,500 110,388 100,625 0.1411
183 Sysco Corp. 3,900 98,178 100,425 0.1408
184 USX-Marathon Group, Inc. 6,100 117,780 99,888 0.1400
185 Digital Equipment 3,000 120,900 99,750 0.1399
186 Houston Industries Inc. 2,800 122,790 99,750 0.1399
187 Apple Computer Inc. 2,500 128,225 97,500 0.1367
188 Donnelley RR & Sons 3,300 94,500 97,350 0.1365
189 Micron Tech. 2,200 79,110 97,075 0.1361
190 Textron Inc. 1,900 82,658 95,713 0.1342
191 First Chicago 2,000 78,925 95,500 0.1339
192 CIGNA Corp. 1,500 87,800 95,438 0.1338
193 Genuine Parts Co. 2,650 89,513 95,400 0.1338
194 Mattel Inc. 3,787 80,041 95,148 0.1334
195 Mellon Bank Corp. 3,100 109,343 94,937 0.1331
196 The Gap Inc. 3,100 114,655 94,550 0.1326
197 Burlington Resources 2,700 122,210 94,500 0.1325
198 Lockheed Corp. 1,300 70,003 94,412 0.1324
199 Fleet Financial Group 2,900 92,170 94,250 0.1321
200 Bankers Trust of NY 1,700 112,523 94,138 0.1320
201 Union Carbide Corp. 3,200 65,560 94,000 0.1318
202 Ralston-Ralston Purina Co. 2,100 98,618 93,713 0.1314
203 NBD Bancorp. Inc. 3,400 103,645 93,075 0.1305
204 Phelps Dodge Corp. 1,500 70,728 92,813 0.1301
205 TRW Inc. 1,400 81,208 92,400 0.1295
206 Hercules 800 61,928 92,300 0.1294
207 Hershey Foods Corp. 1,900 88,920 91,912 0.1289
208 Westinghouse Electric 7,500 116,438 91,875 0.1288
</TABLE>
D-9
<PAGE>
DEFINED ASSET FUNDS - EQUITY INCOME FUND INDEX SERIES,
S&P 500 TRUST 2
PORTFOLIO
AS OF DECEMBER 31, 1994
<TABLE><CAPTION>
Percentage
of Total
Portfolio Market
No. Common Stocks Shares Cost(1) Value(1) Value
<S> <C> <C> <C> <C> <C>
209 Burlington Northern 1,900 $ 88,820 $ 91,438 0.1282%
210 Amerada Hess Corp. 2,000 94,775 91,250 0.1279
211 Carolina Power & Light 3,400 94,682 90,525 0.1269
212 Central & Southwest Corp. 4,000 114,495 90,500 0.1269
213 Avon Prods. Inc. 1,500 80,812 89,625 0.1257
214 Martin Marietta Corp. 2,000 66,298 88,750 0.1244
215 Morton Int'l Inc. 3,100 71,205 88,350 0.1239
216 Honeywell Inc. 2,800 95,838 88,200 0.1237
217 Eastman Chemical Co. 1,725 79,549 87,113 0.1221
218 Saloman Inc. 2,300 87,940 86,250 0.1209
219 DSC Communications 2,400 37,850 86,100 0.1207
220 Quaker Oats Co. 2,800 88,083 86,100 0.1207
221 Conrail Inc. 1,700 83,645 85,850 0.1204
222 Great Lakes Chemicals 1,500 100,025 85,500 0.1199
223 Cooper-Industries Inc. 2,500 118,162 85,313 0.1196
224 AMR Corp. 1,600 105,018 85,200 0.1195
225 The Times Mirror Co. 2,700 89,060 84,713 0.1188
226 National City Corp. 3,200 88,960 82,800 0.1161
227 Winn Dixie Stores 1,600 89,818 82,200 0.1152
228 Block H & R Inc. 2,200 81,335 81,675 0.1145
229 Detroit Edison 3,100 100,605 80,988 0.1135
230 American Stores 3,000 59,717 80,625 0.1130
231 Corestates Financial Corp. 3,100 80,782 80,600 0.1130
232 Barnett Banks of Florida 2,100 85,392 80,588 0.1130
233 St. Paul Cos. Inc. 1,800 69,370 80,550 0.1129
234 Whirlpool Corp. 1,600 77,805 80,400 0.1127
235 Comcast Corp. Cl. A 5,100 108,812 80,006 0.1122
236 Rohm & Haas Co. 1,400 76,358 79,975 0.1121
237 Halliburton Co. 2,400 75,795 79,500 0.1115
238 Eaton Corp. 1,600 71,084 79,200 0.1110
239 Household Int'l. 2,100 63,053 77,962 0.1093
240 Union Electric 2,200 80,198 77,825 0.1091
241 Fluor Corp. 1,800 77,065 77,625 0.1088
242 Grace (W.R.) 2,000 77,325 77,250 0.1083
243 Masco Corp. 3,400 99,520 76,925 0.1079
244 Tribune Co. 1,400 69,670 76,650 0.1075
245 First Fidelity Banc Corp. 1,700 70,297 76,288 0.1070
246 Tyco Labs. Inc. 1,600 69,180 76,000 0.1066
247 Nordstrom 1,800 64,188 75,600 0.1060
248 Alco Standard 1,200 52,797 75,300 0.1056
249 Transamerica Corp. 1,500 70,738 74,625 0.1046
250 MBNA Corp. 3,150 52,300 73,631 0.1032
251 Dresser Industries Inc. 3,900 77,831 73,613 0.1032
252 McGraw-Hill Inc. 1,100 70,893 73,562 0.1031
253 Marriott International Inc. 2,600 66,401 73,125 0.1025
254 Champion Int'l. 2,000 58,737 73,000 0.1023
255 Ingersoll-Rand Co. 2,300 75,009 72,450 0.1016
256 Federal Express 1,200 63,098 72,300 0.1014
257 Becton Dickinson & Co. 1,500 56,417 72,000 0.1009
258 CBS Inc. 1,300 52,428 71,988 0.1009
259 Crown Cork & Seal Inc. 1,900 68,216 71,725 0.1006
260 INCO Ltd. 2,500 64,163 71,562 0.1003
</TABLE>
D-10
<PAGE>
DEFINED ASSET FUNDS - EQUITY INCOME FUND INDEX SERIES,
S&P 500 TRUST 2
PORTFOLIO
AS OF DECEMBER 31, 1994
<TABLE><CAPTION>
Percentage
of Total
Portfolio Market
No. Common Stocks Shares Cost(1) Value(1) Value
<S> <C> <C> <C> <C> <C>
261 Newell 3,400 $ 68,310 $ 71,400 0.1001%
262 Reebok Int'l Ltd. 1,800 57,928 71,100 0.0997
263 Melville Corp. 2,300 107,578 71,012 0.0996
264 Consolidated Natural Gas 2,000 87,862 71,000 0.0995
265 Sun Microsystems Inc. 2,000 58,313 71,000 0.0995
266 Union Camp Corp. 1,500 70,888 70,688 0.0991
267 Lincoln National Corp. 2,000 71,148 70,000 0.0981
268 Sante Fe Southern Pacific 4,000 60,225 70,000 0.0981
269 Baltimore Gas & Electric 3,100 72,257 68,588 0.0962
270 Loral Corp. 1,800 45,193 68,175 0.0956
271 V F Corp. 1,400 67,195 68,075 0.0954
272 Safeco Corp. 1,300 70,250 67,600 0.0948
273 Hilton Hotel Corp. 1,000 46,813 67,375 0.0945
274 Promus Corp. 2,150 42,913 66,650 0.0934
275 Newmont Mining 1,847 69,078 66,492 0.0932
276 Sun Co. 2,300 63,740 66,125 0.0927
277 Pioneer Hi-Bred Intl 1,900 69,325 65,550 0.0919
278 Louisiana Pacific 2,400 70,095 65,400 0.0917
279 Tandy Corp. 1,300 40,653 65,163 0.0914
280 Dow Jones 2,100 66,518 65,100 0.0913
281 Providian Corp. 2,100 70,858 64,838 0.0909
282 Clorox Co. 1,100 53,042 64,763 0.0908
283 Dillard Department Stores 2,400 97,125 64,200 0.0900
284 Reynolds Metals 1,300 69,015 63,700 0.0893
285 Grainger W.W. 1,100 61,855 63,525 0.0891
286 Mead Corp. 1,300 52,390 63,212 0.0886
287 Panhandle Eastern Corp. 3,200 62,160 63,200 0.0886
288 Dover Corp. 1,200 55,348 61,950 0.0869
289 Northern Sts. Power Minn. 1,400 60,233 61,600 0.0864
290 Premark Int'l 1,400 37,806 61,250 0.0859
291 Unum Corp. 1,600 90,468 60,400 0.0847
292 Kroger Co. 2,500 45,675 60,312 0.0846
293 Harcourt General 1,700 53,298 59,925 0.0840
294 Boatmens Bancshares 2,200 59,287 59,675 0.0837
295 Sherwin Williams 1,800 55,165 59,625 0.0836
296 Bank of Boston 2,300 53,240 59,513 0.0834
297 Praxair Inc. Com. 2,900 36,018 59,450 0.0834
298 Price/Costco 4,604 82,000 59,277 0.0831
299 Ohio Edison Co. 3,200 69,998 59,200 0.0830
300 Services Corp. Int'l 2,050 43,045 56,888 0.0798
301 USX-US Steel Corp. 1,600 52,943 56,800 0.0796
302 Coastal Corp. 2,200 58,685 56,650 0.0794
303 General Dynamics 1,300 55,506 56,550 0.0793
304 Computer Sciences Corp. 1,100 29,337 56,100 0.0787
305 Torchmark Corp. 1,600 76,126 55,800 0.0782
306 Delta Airlines 1,100 60,830 55,550 0.0779
307 Knight-Rider Inc. 1,100 64,480 55,550 0.0779
308 Westvaco Corp. 1,400 50,195 54,950 0.0770
309 Baker Hughes Inc. 3,000 64,125 54,750 0.0768
310 Jefferson-Pilot Corp. 1,050 46,025 54,469 0.0764
311 Temple Inland Inc. 1,200 59,298 54,150 0.0759
312 Hasbro Inc. 1,850 57,303 54,112 0.0759
</TABLE>
D-11
<PAGE>
DEFINED ASSET FUNDS - EQUITY INCOME FUND INDEX SERIES,
S&P 500 TRUST 2
PORTFOLIO
AS OF DECEMBER 31, 1994
<TABLE><CAPTION>
Percentage
of Total
Portfolio Market
No. Common Stocks Shares Cost(1) Value(1) Value
<S> <C> <C> <C> <C> <C>
313 Sonat Inc. 1,900 $ 46,558 $ 53,200 0.0746%
314 Cypress Minerals 2,000 47,976 52,250 0.0733
315 Interpublic Group 1,600 51,843 51,400 0.0721
316 National Semiconductor 2,600 36,118 50,700 0.0711
317 Kerr-Mcgee 1,100 48,630 50,600 0.0709
318 Nalco Chemical 1,500 51,613 50,250 0.0705
319 Southwest Airlines 3,000 84,925 50,250 0.0705
320 Williams Cos. 2,000 43,823 50,250 0.0705
321 Advanced Micro Devices 2,000 39,912 49,750 0.0698
322 Homestake Mining Co. 2,900 42,220 49,662 0.0696
323 National Medical Ent. 3,500 45,713 49,438 0.0693
324 Dana Corp. 2,100 48,168 49,088 0.0688
325 New York Times Cl. A 2,200 59,985 48,675 0.0682
326 Mallinckrodt Group, Inc. 1,600 52,105 47,800 0.0670
327 Deluxe Corp. 1,800 73,853 47,700 0.0669
328 US Bancorp 2,100 51,150 47,513 0.0666
329 Circuit City Stores 2,100 44,757 46,725 0.0655
330 Englehard Corp. 2,100 45,903 46,725 0.0655
331 FMC Corp. 800 38,328 46,200 0.0648
332 Northrop Corp. 1,100 37,105 46,200 0.0648
333 Golden West Financial 1,300 54,690 45,825 0.0642
334 Brown-Forman Distillers Co. 1,500 39,537 45,750 0.0641
335 Pall Corp. 2,433 47,293 45,625 0.0640
336 Parker-Hannifin 1,000 32,363 45,500 0.0638
337 Roadway Services 800 53,600 45,400 0.0637
338 Ashland Oil 1,300 38,978 44,850 0.0629
339 Great Western Financial 2,800 48,565 44,800 0.0628
340 Penzoil Co. 1,000 52,563 44,125 0.0619
341 Johnson Controls 900 40,570 44,100 0.0618
342 Bausch & Lomb Inc. 1,300 65,652 44,038 0.0617
343 Pet 2,200 39,435 43,450 0.0609
344 American Greetings Cl. A 1,600 39,437 43,200 0.0606
345 Beneficial Corp. 1,100 36,555 42,900 0.0601
346 Black & Decker 1,800 37,952 42,750 0.0599
347 Niagara Mohawk Power Co. 3,000 59,575 42,750 0.0599
348 Avery Dennison Corp. 1,200 33,097 42,600 0.0597
349 Cooper Tire & Rubber 1,800 51,837 42,525 0.0596
350 Dial Corp. 2,000 41,263 42,500 0.0596
351 Rite Aid Corp. 1,800 36,965 42,075 0.0590
352 Woolworth 2,800 78,478 42,000 0.0589
353 Bethlehem Steel 2,300 39,915 41,400 0.0580
354 Western Atlas Inc. 1,100 48,893 41,388 0.0580
355 Tandem Computers Inc. 2,400 31,083 41,100 0.0576
356 Lotus Development 1,000 34,250 41,000 0.0575
357 Shawmut National Corp. 2,500 49,050 40,938 0.0574
358 Cummins Engine Inc. 900 34,980 40,725 0.0571
359 Ahmanson (H.F.) & Co. 2,500 44,887 40,313 0.0565
360 Pep Boys-Manny, Moe & Jac. 1,300 31,278 40,300 0.0565
361 St Jude Medical 1,000 36,775 39,750 0.0557
362 Moore Ltd. 2,100 37,893 39,638 0.0556
363 Autodesk 1,000 20,650 39,625 0.0556
364 Allergan 1,400 33,682 39,550 0.0555
</TABLE>
D-12
<PAGE>
DEFINED ASSET FUNDS - EQUITY INCOME FUND INDEX SERIES,
S&P 500 TRUST 2
PORTFOLIO
AS OF DECEMBER 31, 1994
<TABLE><CAPTION>
Percentage
of Total
Portfolio Market
No. Common Stocks Shares Cost(1) Value(1) Value
<S> <C> <C> <C> <C> <C>
365 Echlin Inc. 1,300 $ 30,465 $ 39,000 0.0547%
366 Worthington Ind. 1,950 33,750 39,000 0.0547
367 Pacific Enterprises 1,800 38,078 38,250 0.0536
368 Whitman Corp. 2,200 31,810 37,950 0.0532
369 Brunswick Corp. 2,000 32,450 37,750 0.0529
370 Ryder Sys. Inc. 1,700 35,493 37,400 0.0524
371 Manor Care Inc. 1,350 29,503 36,956 0.0518
372 Super Valu Stores, Inc. 1,500 45,875 36,750 0.0515
373 Santa Fe Pacific Gold Co. 2,839 7,213 36,564 0.0513
374 Sigma Aldrich 1,100 39,050 36,300 0.0509
375 Stanley Works 1,000 41,025 35,750 0.0501
376 Inland Stl. Inds. Inc. 1,000 27,700 35,125 0.0492
377 Paccar Inc. 790 40,400 34,958 0.0490
378 James River Corp. (Va.) 1,700 33,598 34,425 0.0483
379 Harris Corp. Del 800 27,290 34,000 0.0477
380 Biomet Inc. 2,400 37,500 33,600 0.0471
381 Scientific Atlanta 1,600 19,813 33,600 0.0471
382 Maytag Co. 2,200 35,948 33,000 0.0463
383 Stone Container Corp. 1,910 35,508 32,948 0.0462
384 Varity Corp. 900 27,708 32,625 0.0457
385 Polaroid Corp. 1,000 30,613 32,500 0.0456
386 Raychem Corp. 900 33,733 32,063 0.0450
387 General Signal Corp. 1,000 31,393 31,875 0.0447
388 Wendy's Int'l. 2,200 30,410 31,625 0.0443
389 Mercantile Stores Inc. 800 27,303 31,600 0.0443
390 Unisys Corp. 3,600 38,568 31,050 0.0435
391 Armstrong World Ind. Inc. 800 27,877 30,800 0.0432
392 Alza Corp. Cl. N 1,700 60,235 30,600 0.0429
393 Snap-on-Tools 900 31,858 29,925 0.0420
394 Bard C.R. Inc. 1,100 31,067 29,700 0.0416
395 Ecolab Inc. 1,400 26,528 29,400 0.0412
396 E Systems 700 27,285 29,138 0.0409
397 Owens Corning Fiberglass 900 33,683 28,800 0.0404
398 Andrew Corp. 550 8,750 28,738 0.0403
399 Liz Claiborne, Inc. 1,700 60,335 28,687 0.0402
400 Cinergy Corp. 3,127 44,032 73,094 0.1025
401 Giant Food, Inc. 1,300 29,128 28,275 0.0396
402 Russell Corp. 900 29,308 28,238 0.0396
403 National Service Inds. Inc. 1,100 28,593 28,188 0.0395
404 Harnishfeger Indus. 1,000 24,188 28,125 0.0394
405 King World Productions 800 24,440 27,600 0.0387
406 Amdahl Corp. 2,500 26,269 27,500 0.0386
407 McDermott Int'l. 1,100 25,905 27,225 0.0382
408 Ceridian Corp. 1,000 16,812 26,875 0.0377
409 Thomas & Betts Corp. 400 26,108 26,850 0.0376
410 Bemis 1,100 26,475 26,400 0.0370
411 Federal Paper Board 900 24,558 26,100 0.0366
412 Goodrich B.F. Co. 600 27,430 26,025 0.0365
413 Beverly Enterprises 1,800 20,190 25,875 0.0363
414 Columbia Gas System, Inc. 1,100 23,542 25,850 0.0362
415 Asarco Inc. 900 23,645 25,650 0.0360
416 Louisiana Ld Expl Co. 700 26,235 25,462 0.0357
</TABLE>
D-13
<PAGE>
DEFINED ASSET FUNDS - EQUITY INCOME FUND INDEX SERIES,
S&P 500 TRUST 2
PORTFOLIO
AS OF DECEMBER 31, 1994
<TABLE><CAPTION>
Percentage
of Total
Portfolio Market
No. Common Stocks Shares Cost(1) Value(1) Value
<S> <C> <C> <C> <C> <C>
417 Nicor Inc. 1,100 $ 26,260 $ 25,025 0.0351%
418 TJX Cos. Common 1,600 39,193 25,000 0.0351
419 The Timken Co. 700 20,748 24,675 0.0346
420 USF & G Corp. 1,800 23,778 24,525 0.0344
421 Echo Bay Mines 2,300 18,059 24,438 0.0343
422 Millipore Corp. 500 17,338 24,188 0.0339
423 Teledyne Inc. 1,200 25,560 24,150 0.0339
424 Tektronix Inc. 700 17,360 23,975 0.0336
425 Navistar Int'l. Corp. 1,580 39,475 23,898 0.0335
426 Pittston Services Group 900 16,733 23,850 0.0334
427 Foster Wheeler Corp. 800 23,803 23,800 0.0334
428 Oryx Energy Co. 2,000 42,263 23,750 0.0333
429 Perkin Elmer 900 30,820 23,063 0.0323
430 Continental Corp. 1,200 32,322 22,800 0.0320
431 US Surgical Corp. 1,200 77,823 22,800 0.0320
432 Potlatch Corp. 600 27,680 22,350 0.0313
433 Clark Equipment Co. 400 12,920 21,700 0.0304
434 Boise Cascade Corp. 800 17,190 21,400 0.0300
435 Briggs & Stratton 600 16,690 19,650 0.0276
436 Ball Corp. 600 18,100 18,900 0.0265
437 Fleetwood Enterprises 1,000 21,010 18,750 0.0263
438 Fleming Cos. 800 25,178 18,600 0.0261
439 Enserch Corp. 1,400 21,783 18,375 0.0258
440 People's Energy Corp. 700 20,285 18,288 0.0256
441 Consolidated Freightways 800 14,602 17,900 0.0251
442 Safety-Kleen Corp. 1,200 28,398 17,700 0.0248
443 Trinova Corp. 600 16,305 17,625 0.0247
444 US Life Corp. 500 18,101 17,438 0.0244
445 Ogden Corp. 900 19,545 16,875 0.0237
446 Jostens Inc. 900 23,795 16,762 0.0235
447 Alexander & Alexander 900 20,282 16,650 0.0233
448 Cincinnati Milicron 700 13,547 16,538 0.0232
449 Shared Medical Sys. Corp. 500 11,213 16,375 0.0230
450 Alberto Culver 600 14,567 16,350 0.0229
451 Crane Co. 600 15,267 16,125 0.0226
452 Centex Corp. 700 20,217 15,925 0.0223
453 EG&G 1,100 24,425 15,538 0.0218
454 Springs Ind. 400 15,820 14,800 0.0208
455 Great Atlantic & Pacific 800 21,878 14,500 0.0203
456 Sante Fe Resources 1,800 16,428 14,400 0.0202
457 Yellow Corp. 600 15,538 14,325 0.0201
458 Bruno's Inc. 1,700 20,450 14,238 0.0200
459 Meredith Corp. 300 8,553 13,988 0.0196
460 ARMCO Inc. 2,100 13,730 13,913 0.0195
461 Charming Shoppes Inc. 2,100 31,525 13,913 0.0195
462 Pulte Corp. 600 16,493 13,800 0.0193
463 Noram Energy Corp. 2,500 21,950 13,438 0.0188
464 Coors (Adolph) Cl. B. 800 11,710 13,400 0.0188
465 Transco Energy 800 11,778 13,300 0.0186
466 Eastern Enterprises 500 13,350 13,125 0.0184
467 Helmerich & Payne 500 12,438 12,812 0.0180
468 Brown Group 400 12,095 12,800 0.0179
</TABLE>
D-14
<PAGE>
DEFINED ASSET FUNDS - EQUITY INCOME FUND INDEX SERIES,
S&P 500 TRUST 2
PORTFOLIO
AS OF DECEMBER 31, 1994
<TABLE><CAPTION>
Percentage
of Total
Portfolio Market
No. Common Stocks Shares Cost(1) Value(1) Value
<S> <C> <C> <C> <C> <C>
469 Longs Drug Stores, Inc. 400 $ 14,308 $ 12,700 0.0178%
470 Harland, John 600 14,480 12,000 0.0168
471 Luby's Cafeteria Inc. 500 9,300 11,188 0.0157
472 Stride Rite 1,000 20,838 11,125 0.0156
473 Rowan Cos. Inc. 1,800 13,915 11,025 0.0155
474 Zenith Electronics 900 8,608 10,463 0.0147
475 Giddings & Lewis Inc. 700 16,850 10,325 0.0145
476 Shoney's Inc. 800 17,715 10,200 0.0143
477 First Mississippi 400 4,445 10,000 0.0140
478 Basset Furniture Inds. 350 11,550 9,975 0.0140
479 Community Psychiatric Center 900 10,920 9,900 0.0139
480 NACCO Inds. Inc. Cl. A 200 11,198 9,675 0.0136
481 Maxus Energy 2,700 18,598 9,112 0.0128
482 Kaufman & Broad Home Corp. 700 11,773 9,012 0.0126
483 Oneok Inc. 500 9,450 9,000 0.0126
484 Ryans Family Steak House 1,100 10,275 8,250 0.0116
485 Handleman Co. 700 9,435 7,962 0.0112
486 Cray Research Inc. 500 14,912 7,875 0.0110
487 Outboard Marine Corp. 400 8,858 7,850 0.0110
488 Morrison Knudson 600 13,188 7,650 0.0107
489 Intergraph Corp. 900 12,475 7,312 0.0103
490 Data General Corp. 700 6,748 7,000 0.0098
491 Rollins Environmental SE 1,300 12,715 6,338 0.0089
492 Bally Entertainment Corp. 1,000 7,225 6,125 0.0086
493 USAIR Group 1,200 17,260 5,250 0.0074
494 SPX Corp. 300 5,340 4,988 0.0070
495 Oshkosh B'Gosh Cl. A 300 6,450 4,200 0.0059
496 Skyline Corp. 200 3,685 3,850 0.0054
497 Zurn Ind. Inc. 200 7,410 3,600 0.0050
498 Hartmarx Corp. 600 3,755 3,525 0.0049
499 M/A Com. Inc. 400 2,420 2,900 0.0041
500 National Education Corp. 400 2,987 1,650 0.0023
TOTAL $67,812,767 $71,324,369 100.0000
</TABLE>
(1) See Notes to Financial Statements
D-15
<PAGE>
DEFINED ASSET FUNDS - EQUITY INCOME FUND
INDEX SERIES, S&P MIDCAP TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
The Sponsors, Co-Trustees and Holders
of Defined Asset Funds - Equity Income Fund
Index Series, S&P Midcap Trust:
We have audited the accompanying statement of condition of Defined Asset
Funds - Equity Income Fund Index Series, S&P Midcap Trust, including the
portfolio, as of December 31, 1994 and the related statements of
operations and of changes in net assets for the years ended December 31,
1994 and 1993 and the period February 20, 1992 to December 31, 1992.
These financial statements are the responsibility of the Co-Trustees. 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 December 31, 1994, as shown in such
portfolio, were confirmed to us by Investors Bank & Trust Company, a
Co-Trustee. An audit also includes assessing the accounting principles
used and significant estimates made by the Co-Trustees, 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 -
Equity Income Fund Index Series, S&P Midcap Trust at December 31, 1994 and
the results of its operations and changes in its net assets for the
above-stated periods in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
NEW YORK, N.Y.
February 27, 1995
D - 16
<PAGE>
DEFINED ASSET FUNDS - EQUITY INCOME FUND
INDEX SERIES, S&P MIDCAP TRUST
STATEMENT OF CONDITION
As of December 31, 1994
<TABLE>
<S> <C>
TRUST PROPERTY:
INVESTMENT IN MARKETABLE SECURITIES - AT VALUE (COST $32,697,197) (NOTE 1)................................. $ 33,580,568
CASH PRINCIPAL............................................................................................. 17,441
DIVIDENDS RECEIVABLE....................................................................................... 68,303
-------------
TOTAL TRUST PROPERTY....................................................................................... 33,666,312
LESS LIABILITIES:
ADVANCE FROM CO-TRUSTEE...................................................................... $ 11,283
ACCRUED EXPENSES............................................................................. 16,568
-------------
TOTAL LIABILITIES............................................................................ 27,851
-------------
NET ASSETS, REPRESENTED BY:
32,668,823 UNITS OF FRACTIONAL UNDIVIDED INTEREST OUTSTANDING (NOTE 3)...................... 33,598,009
UNDISTRIBUTED NET INVESTMENT INCOME.......................................................... 40,452
-------------
NET ASSETS..................................................................................... $ 33,638,461
=============
UNITS OUTSTANDING............................................................................................ 32,668,823
=============
NET ASSET VALUE PER UNIT..................................................................................... $ 1.02968
=============
</TABLE>
See Notes To Financial Statements.
D - 17
<PAGE>
DEFINED ASSET FUNDS - EQUITY INCOME FUND
INDEX SERIES, S&P MIDCAP TRUST
STATEMENTS OF OPERATIONS
<TABLE><CAPTION>
February 20,
1992
Year Ended Year Ended to
December 31, December 31, December 31,
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
INVESTMENT INCOME:
DIVIDEND INCOME.............................................................. 739,530 589,506 192,922
CO-TRUSTEES' FEES AND EXPENSES............................................... (93,080) (118,503) (31,760)
SPONSORS' FEES............................................................... (11,272) (9,486) 0
------------- ------------- -------------
NET INVESTMENT INCOME........................................................ 635,178 461,517 161,162
------------- ------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
NET REALIZED GAIN ON SECURITIES SOLD OR REDEEMED............................. 919,206 947,793 2,798
NET UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENTS.................... (2,949,727) 2,350,501 1,482,597
------------- ------------- -------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS....................... (2,030,521) 3,298,294 1,485,395
------------- ------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS................ $ (1,395,343) $ 3,759,811 $ 1,646,557
============= ============= =============
See Notes to Financial Statements.
</TABLE>
D - 18
<PAGE>
DEFINED ASSET FUNDS - EQUITY INCOME FUND
INDEX SERIES, S&P MIDCAP TRUST
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE><CAPTION>
February 20,
1992
Year Ended Year Ended to
December 31, December 31, December 31,
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
OPERATIONS:
NET INVESTMENT INCOME........................................................ $ 635,178 $ 461,517 $ 161,162
NET REALIZED GAIN ON SECURITIES SOLD OR REDEEMED............................. 919,206 947,793 2,798
NET UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENTS.................... (2,949,727) 2,350,501 1,482,597
------------- ------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS.............. (1,395,343) 3,759,811 1,646,557
------------- ------------- -------------
DISTRIBUTIONS TO HOLDERS: (NOTE 2)
INCOME....................................................................... (633,412) (466,939) (170,432)
PRINCIPAL.................................................................... (1,639,322) (206,835) (2,743)
------------- ------------- -------------
TOTAL DISTRIBUTIONS.......................................................... (2,272,734) (673,774) (173,175)
------------- ------------- -------------
UNIT TRANSACTIONS:
ISSUANCE OF ADDITIONAL UNITS (NOTE 4)........................................ 3,516,996 11,043,575 17,002,548
REDEMPTION AMOUNTS - PRINCIPAL............................................... (814,908) 0 0
REDEMPTION AMOUNTS - INCOME.................................................. (1,092) 0 0
------------- ------------- -------------
TOTAL UNIT TRANSACTIONS...................................................... 2,700,996 11,043,575 17,002,548
------------- ------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS.......................................... (967,081) 14,129,612 18,475,930
NET ASSETS AT BEGINNING OF YEAR................................................ 34,605,542 20,475,930 2,000,000
------------- ------------- -------------
NET ASSETS AT END OF YEAR...................................................... $ 33,638,461 $ 34,605,542 $ 20,475,930
============= ============= =============
PER UNIT:
INCOME DISTRIBUTIONS DURING YEAR............................................. $ 0.01981 $ 0.01685 $ 0.01407
============= ============= =============
PRINCIPAL DISTRIBUTIONS DURING YEAR.......................................... $ 0.05018 $ 0.00684 $ 0.00015
============= ============= =============
NET ASSET VALUE AT END OF YEAR............................................... $ 1.02968 $ 1.14440 $ 1.03692
============= ============= =============
TRUST UNITS:
REDEEMED DURING YEAR......................................................... 741,073 0 0
============= ============= =============
ISSUED DURING YEAR........................................................... 3,170,819 10,492,227 17,700,815
============= ============= =============
OUTSTANDING AT END OF YEAR................................................... 32,668,823 30,239,077 19,746,850
============= ============= =============
See Notes To Financial Statements.
</TABLE>
D - 19
<PAGE>
DEFINED ASSET FUNDS - EQUITY INCOME FUND
INDEX SERIES, S&P MIDCAP TRUST
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Fund is registered under the Investment Company Act of 1940 as a
Unit Investment Trust. The following is a summary of significant
accounting policies consistently followed by the Fund in the
preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles.
(a) Securities are stated at market value; for securities listed on a
national securities exchange, value is based on the closing price
on such exchange and for securities not so listed, value is based
on the current bid price on the over-the-counter market.
Realized gains or losses on sales of securities are determined
using the first-in, first-out cost method.
(b) The Fund is not subject to income taxes. Accordingly, no
provision for such taxes is required.
(c) Dividend income is recorded on the ex-dividend date.
2. DISTRIBUTIONS
A distribution of net investment income is made to Holders on the
twenty-fifth day of each month. Receipts other than dividends, after
deductions for redemptions and applicable expenses, are distributed as
explained in "Administration of the Fund" in this Prospectus, Part B.
3. NET CAPITAL
Cost of 32,668,823 units as of Date of Deposit......... $ 33,519,645
Less sales charge...................................... 754,259
-------------
Net amount applicable to Holders....................... 32,765,386
Redemptions of units - net cost of 741,073 units
less redemption amounts.............................. (71,645)
Net realized gain on securities sold or redeemed....... 1,869,797
Unrealized appreciation of investments................. 883,371
Principal distributions................................ (1,848,900)
-------------
Net capital applicable to Holders...................... $ 33,598,009
=============
4. REDEMPTIONS
On March 1, 1995, The Bank of New York assumed all of the Trustee
responsibilities from Investors Bank & Trust Company. Holders
may request redemptions of units by presentation thereof to The
Bank of New York generally on any business day.
5. INCOME TAXES
As of December 31, 1994, net unrealized appreciation of investments,
based on cost for Federal income tax purposes, aggregated $883,371,
of which $3,123,395 related to depreciated securities and $4,006,766
related to appreciated securities. The cost of investment securities
for Federal income tax purposes was $32,697,197 at December 31, 1994.
D - 20
<PAGE>
DEFINED ASSET FUNDS - EQUITY INCOME FUND
INDEX SERIES, S&P MIDCAP TRUST
PORTFOLIO
AS OF DECEMBER 31, 1994
<TABLE><CAPTION>
Percentage
Portfolio of Total
No. Common Stocks Shares Cost(1) Value(1) Market Value
___ _____________ ______ _______ ________ ____________
<S> <C> <C> <C> <C> <C>
1 General Motors Corp 19,100 $ 602,793 $ 735,350 2.1900%
2 Bank of New York Co Inc 13,800 353,150 400,200 1.1918
3 Morgan Stanley Group Inc 5,600 318,993 330,400 0.9839
4 Silicon Graphics Inc 10,320 155,719 319,920 0.9527
5 EMC Corp 14,300 291,553 309,238 0.9209
6 First Financial Mgmt Corp 4,600 182,269 283,475 0.8442
7 CUC International Inc 8,375 170,389 280,563 0.8355
8 First Bank System Inc 8,400 248,745 279,300 0.8317
9 Office Depot Inc 10,950 173,410 262,800 0.7826
10 Applied Materials Inc 6,100 135,250 257,725 0.7675
11 Bay Networks Inc 8,225 206,847 242,638 0.7226
12 Cabletron Systems Inc 5,200 198,692 241,800 0.7201
13 AON Corp 7,500 244,978 240,000 0.7147
14 AFLAC Inc 7,425 197,750 237,600 0.7076
15 Tyson Foods Inc 10,800 229,125 229,500 0.6834
16 Fifth Third Bancorp 4,750 238,025 228,000 0.6790
17 Franklin Resources Inc 6,000 203,725 213,750 0.6365
18 Comerica Inc 8,596 256,478 209,528 0.6240
19 Florida Progress Corp 6,850 214,876 205,500 0.6120
20 Wisconsin Energy Corp 7,900 207,134 204,413 0.6087
21 Molex Inc 5,793 136,413 199,859 0.5952
22 Northeast Utilities 9,100 232,568 196,788 0.5860
23 Washington Post Co 800 187,265 194,000 0.5777
24 Chiron Corp 2,400 135,450 192,900 0.5744
25 Willamette Industries Inc 4,000 160,650 190,000 0.5658
26 Allegheny Power Systems Inc 8,700 205,508 189,225 0.5635
27 Telephone and Data Systems, Inc 4,000 157,363 184,500 0.5494
28 Progressive Corp Ohio 5,200 152,118 182,000 0.5420
29 Sensormatic Electronics Corp 5,050 121,993 181,800 0.5414
30 Freeport-McMoran Inc 10,100 193,795 179,275 0.5339
31 LDDS Communications Inc 9,004 143,223 175,015 0.5212
32 Teco Energy Inc 8,500 175,923 171,063 0.5094
33 Coca-Cola Enterprises Inc 9,500 127,450 169,813 0.5057
34 Thermo Electron Corp 3,700 127,995 166,038 0.4944
35 Anadarko Petroleum Corp 4,300 142,415 165,550 0.4930
36 Lubrizol Corp 4,800 148,225 162,600 0.4842
37 State Street Boston Corp 5,600 213,338 160,300 0.4774
38 Laidlaw Inc CLB 20,300 177,165 159,863 0.4761
39 Potomac Electric Power Co 8,600 211,580 158,025 0.4706
40 LSI Logic Corp 3,900 49,945 157,463 0.4689
41 Harley-Davidson Inc 5,600 99,013 156,800 0.4669
42 Mylan Laboratories Inc 5,800 147,488 156,600 0.4663
43 New England Electric System 4,800 173,528 154,200 0.4592
44 Informix Corp 4,800 88,375 154,200 0.4592
45 Forest Laboratories Inc 3,300 124,765 153,863 0.4582
46 Lyondell Petrochemical Co 5,900 144,608 152,663 0.4546
47 Shaw Industries Inc 10,200 161,498 151,725 0.4518
48 Southern New England Telecommunications Corp 4,700 157,448 150,988 0.4496
49 International Game Technology 9,700 229,426 150,350 0.4477
50 Fruit of the Loom Inc 5,500 216,400 148,500 0.4422
51 Equifax Inc 5,600 112,193 147,700 0.4398
52 SCANA Corp 3,500 151,250 147,438 0.4391
53 Circus Circus Enterprises Inc 6,300 202,423 146,475 0.4362
54 Schwab Charles Corp 4,150 87,563 144,731 0.4310
55 CMS Energy Corp 6,300 125,878 144,113 0.4292
56 Consolidated Papers Inc 3,200 133,925 144,000 0.4288
</TABLE>
D - 21
<PAGE>
DEFINED ASSET FUNDS - EQUITY INCOME FUND
INDEX SERIES, S&P MIDCAP TRUST
PORTFOLIO
AS OF DECEMBER 31, 1994
<TABLE><CAPTION>
Percentage
Portfolio of Total
No. Common Stocks Shares Cost(1) Value(1) Market Value
___ _____________ ______ _______ ________ ____________
<S> <C> <C> <C> <C> <C>
57 Cardinal Health Inc (Formerly Cardinal 3,075 $ 99,950 $ 142,603 0.4247%
Distribution Inc)
58 Parametric Technology Corp 4,100 102,681 141,450 0.4212
59 Murphy Oil Corp 3,300 125,815 140,250 0.4177
60 Sonoco Products Co 6,400 141,375 140,000 0.4169
61 NIPSCO Industries Inc 4,700 126,998 139,825 0.4164
62 Omnicom Group Inc 2,700 110,360 139,725 0.4161
63 Northern Trust Corp 3,950 159,525 138,250 0.4117
64 Mirage Resorts Inc 6,700 108,772 137,350 0.4090
65 Linear Technology Corp 2,700 69,425 133,650 0.3980
66 Marshall & Ilsley Corp 7,000 149,150 133,000 0.3961
67 Public Service Co of Colorado 4,500 126,625 132,188 0.3936
68 First of America Bank Corp 4,400 159,883 132,000 0.3931
69 Unifi Inc 5,150 145,374 131,325 0.3911
70 Adobe Systems Inc 4,400 97,263 130,900 0.3898
71 Foundation Health Corp 4,200 154,560 130,200 0.3877
72 Analog Devices Inc 3,700 60,723 129,963 0.3870
73 Stryker Corp 3,500 113,900 128,625 0.3830
74 Seagate Technology Inc 5,300 96,300 127,200 0.3788
75 Bear Stearns Co Inc 8,266 132,868 127,090 0.3785
76 Pinnacle West Capital Corp 6,400 126,195 126,400 0.3764
77 Litton Industries Inc 3,400 120,645 125,800 0.3746
78 Hubbell Inc 2,300 139,815 122,475 0.3647
79 Arrow Electronics Inc 3,400 116,345 121,975 0.3632
80 Loctite Corp 2,600 113,080 120,900 0.3600
81 Cintas Corp 3,400 97,875 120,700 0.3594
82 Georgia Gulf Corp 3,100 71,368 120,513 0.3589
83 Caesars World Inc 1,800 71,878 120,150 0.3578
84 IVAX Corp 6,300 170,065 119,700 0.3565
85 Illinova Corp (Formerly Illinois Power Co) 5,500 123,450 119,625 0.3562
86 Century Telephone Enterprises, Inc 3,950 102,918 116,525 0.3470
87 Dell Computer Corp 2,800 89,508 114,800 0.3419
88 Rochester Telephone Corp 5,400 99,695 114,075 0.3397
89 MAPCO Inc 2,200 123,360 112,750 0.3358
90 Staples Inc 4,550 75,786 112,613 0.3354
91 Apache Corp 4,500 98,100 112,500 0.3350
92 Meridian Bancorp Inc 4,200 123,838 111,825 0.3330
93 Avnet Inc 3,000 94,613 111,000 0.3305
94 Atmel Corp 3,300 117,563 110,550 0.3292
95 Danaher Corp 2,100 58,068 109,725 0.3268
96 American Pwr Conversion Corp 6,700 90,825 109,713 0.3267
97 Sundstrand Corp 2,400 96,770 109,200 0.3252
98 Value Health Inc 2,900 113,883 108,025 0.3217
99 Nextel Communications Inc 7,500 321,325 107,813 0.3211
100 McCormick & Co Inc 5,900 148,050 107,675 0.3206
101 Kohls Corp 2,700 130,748 107,325 0.3196
102 Southtrust Corp 5,950 106,500 107,100 0.3189
103 AES Corp 5,453 110,159 106,334 0.3167
104 IBP Inc 3,500 70,650 105,875 0.3153
105 Kansas City Power & Light Co 4,500 101,148 105,188 0.3132
106 Leggett & Platt Inc 3,000 98,508 105,000 0.3127
107 Tambrands Inc 2,700 158,210 104,288 0.3106
108 BMC Software Inc 1,800 102,800 102,375 0.3049
109 Crestar Financial Corp 2,700 96,675 101,588 0.3025
110 Dole Food Co 4,400 139,770 101,200 0.3014
111 Witco Corp 4,100 107,414 100,963 0.3007
</TABLE>
D - 22
<PAGE>
DEFINED ASSET FUNDS - EQUITY INCOME FUND
INDEX SERIES, S&P MIDCAP TRUST
PORTFOLIO
AS OF DECEMBER 31, 1994
<TABLE><CAPTION>
Percentage
Portfolio of Total
No. Common Stocks Shares Cost(1) Value(1) Market Value
___ _____________ ______ _______ ________ ____________
<S> <C> <C> <C> <C> <C>
112 Xilinx Inc 1,700 $ 50,538 $ 100,725 0.3000%
113 Biogen Inc 2,400 79,975 100,200 0.2984
114 ADC Telecommunications Inc 2,000 49,150 100,000 0.2978
115 York International Corp 2,700 106,485 99,563 0.2965
116 Oklahoma Gas & Electric Co 3,000 104,613 99,375 0.2959
117 New York State Electric & Gas Corp 5,200 158,198 98,800 0.2942
118 Kansas City Southern Industries Inc 3,200 92,486 98,800 0.2942
119 Mercantile Bancorporation 3,150 99,205 98,438 0.2931
120 Allegheny Ludlum Corp 5,200 95,600 97,500 0.2903
121 Dollar Gen Corp 3,233 53,897 96,990 0.2888
122 Illinois Central Corp 3,150 81,576 96,863 0.2884
123 UJB Financial Corp 4,000 90,550 96,500 0.2874
124 First Tennessee Natl Corp 2,350 89,450 95,763 0.2852
125 Regions Financial Corp (Formerly First 3,080 95,874 95,480 0.2843
Alabama Bancshares Inc)
126 Olsten Corp 3,000 110,400 95,250 0.2836
127 IMC Global Inc (Formerly IMC Fertilizer Group 2,200 91,248 95,150 0.2833
Inc)
128 Transatlantic Holdings Inc 1,700 78,173 94,988 0.2829
129 Brinker International Inc 5,225 103,076 94,703 0.2820
130 Kemper Corp 2,500 90,050 94,688 0.2820
131 Puget Sound Power & Light Co 4,700 120,935 94,588 0.2817
132 Alumax Inc 3,300 74,140 93,638 0.2788
133 Diebold Inc 2,275 65,602 93,559 0.2786
134 Flightsafety International Inc 2,300 99,678 93,438 0.2782
135 Trinity Industries Inc 2,950 81,462 92,925 0.2767
136 Storage Technology Corp 3,200 105,460 92,800 0.2764
137 Noble Affiliates Inc 3,700 74,573 91,575 0.2727
138 America Premier Underwriters Inc (Formerly 3,500 83,274 90,563 0.2697
Penn Central Corp)
139 LG&E Energy Corp 2,450 84,658 90,344 0.2690
140 Heilig Meyers Co 3,575 73,682 90,269 0.2688
141 Paychex Inc 2,225 51,108 90,113 0.2683
142 Montana Power Co 3,900 99,808 89,700 0.2671
143 Betz Laboratories Inc 2,000 108,943 88,500 0.2635
144 Teradyne Inc 2,600 46,393 88,075 0.2623
145 Varian Associates Inc 2,500 55,653 87,500 0.2606
146 Utilicorp United Inc 3,300 93,340 87,450 0.2604
147 Clayton Homes Inc 5,496 79,085 86,562 0.2578
148 Health Care Compare Corp 2,500 64,850 85,313 0.2541
149 Dean Foods Co 2,900 78,383 84,100 0.2504
150 Nordson Corp 1,400 70,025 84,000 0.2501
151 IPALCO Enterprises Inc 2,800 97,853 84,000 0.2501
152 Ethyl Corp 8,700 98,310 83,738 0.2494
153 Callaway Golf Co 2,500 87,988 82,813 0.2466
154 Stewart & Stevenson Services Inc 2,400 83,413 82,800 0.2466
155 Questar Corp 3,000 79,650 82,500 0.2457
156 Olin Corp 1,600 75,455 82,400 0.2454
157 El Paso Natural Gas Co 2,700 101,148 82,350 0.2452
158 National Health Laboratories Holdings 6,200 85,448 82,150 0.2446
(Formerly National Health Labs Inc)
159 Healthsouth Rehabilitation Corp 2,200 51,335 81,400 0.2424
160 First Security Corp 3,550 93,992 80,763 0.2405
161 Cracker Barrel Old Ctry Store Inc 4,350 114,533 80,475 0.2396
162 Multimedia Inc 2,800 85,500 79,800 0.2376
163 MCN Corp 4,400 64,060 79,750 0.2375
</TABLE>
D - 23
<PAGE>
DEFINED ASSET FUNDS - EQUITY INCOME FUND
INDEX SERIES, S&P MIDCAP TRUST
PORTFOLIO
AS OF DECEMBER 31, 1994
<TABLE><CAPTION>
Percentage
Portfolio of Total
No. Common Stocks Shares Cost(1) Value(1) Market Value
___ _____________ ______ _______ ________ ____________
<S> <C> <C> <C> <C> <C>
164 Edwards AG Inc 4,425 $ 86,070 $ 79,650 0.2372%
165 Southwestern Public Service Co 3,000 93,088 79,500 0.2367
166 Cabot Corp 2,800 65,008 79,450 0.2366
167 Delmarva Power & Light Co 4,400 97,583 79,200 0.2359
168 Belo A H Corp 1,400 60,008 79,100 0.2356
169 RPM Inc Ohio 4,200 71,029 78,750 0.2345
170 Hannaford Brothers Co 3,100 70,743 78,663 0.2343
171 Bancorp Hawaii Inc 3,100 95,725 78,663 0.2343
172 Reynolds & Reynolds Co 3,100 43,605 77,500 0.2308
173 Kelly Services Inc 2,800 84,535 77,000 0.2293
174 Brooklyn Union Gas Co 3,450 79,266 76,763 0.2286
175 Alexander & Baldwin Inc 3,400 85,050 75,650 0.2253
176 Schulman A Inc 2,750 67,270 75,625 0.2252
177 Legent Corp 2,600 99,300 74,750 0.2226
178 FHP International Corp 2,900 61,925 74,675 0.2224
179 First Virginia Banks Inc 2,300 77,916 73,600 0.2192
180 Harsco Corp 1,800 67,390 73,575 0.2191
181 Tosco Corp 2,500 63,375 72,813 0.2168
182 Cordis Corp 1,200 40,550 72,600 0.2162
183 Chris-Craft Industries Inc 2,104 62,477 72,588 0.2162
184 Tidewater Inc 3,900 72,258 72,150 0.2149
185 Vanguard Cellular Systems Inc 2,800 50,467 72,100 0.2147
186 Tecumseh Products Co 1,600 84,925 72,000 0.2144
187 Bowater Inc 2,700 61,923 71,888 0.2141
188 Provident Life & Accident Ins Co of America 3,300 87,735 71,775 0.2137
CLB
189 CBI Industries Inc 2,800 84,190 71,750 0.2137
190 Portland General Corp 3,700 66,810 71,225 0.2121
191 Atlantic Energy Inc 4,000 88,455 70,500 0.2099
192 Perrigo Co 5,600 171,825 70,000 0.2085
193 Central Fidelity Banks Inc 2,850 78,354 69,113 0.2058
194 Home Shopping Network Inc 6,900 56,369 69,000 0.2055
195 West One Bancorp 2,600 62,063 68,900 0.2052
196 National Fuel Gas Co 2,700 78,923 68,850 0.2050
197 Stratus Computer Inc 1,800 67,753 68,400 0.2037
198 Hawaiian Electric Industries Inc 2,100 76,568 67,988 0.2025
199 Magma Power Co Inc 1,800 50,850 67,838 0.2020
200 Wellman Inc 2,400 55,883 67,800 0.2019
201 Nevada Power Co 3,300 72,553 67,238 0.2002
202 Federal Signal Corp 3,300 54,545 67,238 0.2002
203 Rayonier Inc-wi 2,200 71,060 67,100 0.1998
204 Mercantile Bankshares Corp 3,400 69,058 66,725 0.1987
205 Albemarle Corp 4,800 70,153 66,600 0.1983
206 GATX Corp 1,500 47,188 66,000 0.1965
207 Idaho Power Co 2,800 76,640 65,800 0.1959
208 Comsat Corp 3,500 84,265 65,188 0.1941
209 Lancaster Colony Corp 2,210 51,908 64,919 0.1933
210 Battle Mountain Gold Co 5,900 41,508 64,900 0.1933
211 Cypress Semiconductor Corp 2,800 34,365 64,750 0.1928
212 Mark IV Industries 3,260 50,235 64,385 0.1917
213 U S Shoe Corp 3,400 46,858 63,750 0.1898
214 Bob Evans Farms Inc 3,100 60,706 63,550 0.1892
215 Modine Manufacturing Co 2,200 43,088 63,250 0.1884
216 Morrison Restaurants Inc 2,575 46,719 63,088 0.1879
217 Altera Corp 1,500 29,988 62,813 0.1871
218 Comdisco Inc 2,710 42,592 62,669 0.1866
</TABLE>
D - 24
<PAGE>
DEFINED ASSET FUNDS - EQUITY INCOME FUND
INDEX SERIES, S&P MIDCAP TRUST
PORTFOLIO
AS OF DECEMBER 31, 1994
<TABLE><CAPTION>
Percentage
Portfolio of Total
No. Common Stocks Shares Cost(1) Value(1) Market Value
___ _____________ ______ _______ ________ ____________
<S> <C> <C> <C> <C> <C>
219 Fiserv Inc 2,900 $ 52,983 $ 62,350 0.1857%
220 Overseas Shipholding Group Inc 2,700 49,260 62,100 0.1849
221 Hanna M A Co 2,600 50,018 61,750 0.1839
222 Hon Industries Inc 2,300 54,175 61,525 0.1832
223 Rollins Inc 2,650 60,016 60,619 0.1805
224 Wisconsin Pwr & Light (WPL) Holdings Co 2,200 72,673 60,225 0.1793
225 Centocor Inc 3,700 48,738 60,125 0.1790
226 Longview Fibre Co 3,800 67,528 59,850 0.1782
227 Hartford Steam Boiler & Inspections Ins Co 1,500 79,550 59,813 0.1781
228 Cadence Design Systems Inc 2,900 52,545 59,813 0.1781
229 Crompton & Knowles Corp 3,600 75,040 59,400 0.1769
230 Wilmington Trust Corp 2,600 69,925 59,150 0.1761
231 Policy Management Systems Corp 1,400 84,683 58,800 0.1751
232 Lee Enterprises Inc 1,700 59,550 58,650 0.1747
233 Beckman Instruments Inc 2,100 48,393 58,538 0.1743
234 AnnTaylor Stores, Inc 1,700 67,023 58,438 0.1740
235 Minnesota Power & Light Co 2,300 74,340 58,075 0.1729
236 Superior Industries Intl Inc 2,200 65,560 58,025 0.1728
237 Pentair Inc 1,350 42,317 57,713 0.1719
238 Vons Companies Inc 3,200 75,460 57,600 0.1715
239 Surgical Care Affiliates Inc 2,800 60,687 56,700 0.1688
240 Genzyme Corp-General Division (Formerly 1,800 70,034 56,700 0.1688
Genzyme Corp)
241 Bergen Brunswig Corp 2,700 51,873 56,363 0.1678
242 Chesapeake Corp 1,700 38,523 56,100 0.1671
243 First Brands Corp 1,600 47,618 56,000 0.1668
244 Symbol Technologies Inc 1,800 32,290 55,575 0.1655
245 Sci-Med Life Systems Inc 1,100 56,075 55,550 0.1654
246 Mentor Graphics Corp 3,600 41,188 54,900 0.1635
247 Sealed Air Corp 1,500 37,981 54,375 0.1619
248 Diamond Shamrock Inc 2,100 44,193 54,338 0.1618
249 Dauphin Deposit Corp 2,300 53,900 54,338 0.1618
250 Valero Energy Corp 3,200 78,773 54,000 0.1608
251 Atlanta Gas Light Co 1,800 65,290 54,000 0.1608
252 Media General Inc 1,900 39,908 53,913 0.1605
253 Sterling Chemicals Inc 4,100 19,093 53,813 0.1602
254 Parker & Parsley Petroleum Co 2,600 60,668 53,300 0.1587
255 Fingerhut Companies Inc 3,400 95,983 52,700 0.1569
256 Federal-Mogul Corp 2,600 57,405 52,325 0.1558
257 Universal Foods Corp 1,900 62,133 52,250 0.1556
258 Universal Corp Virginia 2,600 71,893 51,675 0.1539
259 Family Dollar Stores Inc 4,100 77,893 51,250 0.1526
260 Flowers Industries Inc 2,800 50,953 50,750 0.1511
261 American President Co 2,000 41,858 50,500 0.1504
262 Smucker J M Co 2,100 56,505 50,400 0.1501
263 Wausau Paper Mills Co 2,211 49,916 50,300 0.1498
264 Washington Gas Light Co 1,500 56,150 50,250 0.1496
265 Quantum Corp 3,300 49,825 49,913 0.1486
266 Houghton Mifflin Co 1,100 41,018 49,913 0.1486
267 Seagull Energy Corp 2,600 50,043 49,725 0.1481
268 Glatfelter (P.H.) Co 3,200 56,585 49,600 0.1477
269 Cirrus Logic Inc 2,200 62,675 49,500 0.1474
270 Burlington Industries Inc 5,000 51,500 49,375 0.1470
271 Ferro Corp 2,050 58,264 48,944 0.1458
272 Miller Herman Inc 1,800 38,363 47,250 0.1407
273 Sotheby's Holdings Inc 4,100 54,380 47,150 0.1404
</TABLE>
D - 25
<PAGE>
DEFINED ASSET FUNDS - EQUITY INCOME FUND
INDEX SERIES, S&P MIDCAP TRUST
PORTFOLIO
AS OF DECEMBER 31, 1994
<TABLE><CAPTION>
Percentage
Portfolio of Total
No. Common Stocks Shares Cost(1) Value(1) Market Value
___ _____________ ______ _______ ________ ____________
<S> <C> <C> <C> <C> <C>
274 Kennametal Inc 1,900 $ 34,185 $ 46,550 0.1386%
275 WATTS Industries Inc 2,200 52,525 46,475 0.1384
276 Wallace Computer Services Inc 1,600 43,343 46,400 0.1382
277 Teleflex Inc 1,300 42,765 46,150 0.1374
278 Coram Healthcare Corp 2,790 79,132 46,035 0.1371
279 Donaldson Co Inc 1,900 33,230 45,600 0.1358
280 Symantec Corp 2,600 48,388 45,500 0.1355
281 Sequent Computer Systems Inc 2,300 39,375 45,425 0.1353
282 Banta Corp 1,500 41,067 45,375 0.1351
283 PHH Corp 1,300 49,603 45,175 0.1345
284 Stanhome Inc 1,400 46,358 44,275 0.1318
285 Keystone International Inc 2,600 65,068 44,200 0.1316
286 Carter-Wallace Inc 3,400 100,114 44,200 0.1316
287 Iowa-Illinois Gas & Electric Co 2,200 51,210 43,725 0.1302
288 Global Marine Inc 12,000 38,313 43,500 0.1295
289 Tiffany & Co 1,100 37,455 42,900 0.1278
290 JB Hunt Transport Services Inc 2,800 68,725 42,700 0.1272
291 Waban Inc 2,400 45,270 42,600 0.1269
292 Albany International Corp 2,200 37,198 42,350 0.1261
293 Ranger Oil Ltd 7,200 43,735 42,300 0.1260
294 Ametek Inc 2,500 39,550 42,188 0.1256
295 Mac Frugals Bargains Close Outs Inc 2,100 33,018 42,000 0.1251
296 Lincoln Telecommunications Co 2,400 32,075 40,800 0.1215
297 Public Service Co of New Mexico 3,100 37,580 40,300 0.1200
298 NCH Corp 600 38,830 40,125 0.1195
299 Lawter International Inc 3,300 44,153 40,013 0.1192
300 Carlisle Co Inc 1,100 26,601 39,738 0.1183
301 Nabors Industries Inc 6,100 43,980 39,650 0.1181
302 Nellcor Inc 1,200 32,600 39,600 0.1179
303 Lance Inc 2,200 50,925 39,600 0.1179
304 Arnold Industries Inc 1,900 31,625 39,425 0.1174
305 TCA Cable TV Inc 1,800 38,613 39,150 0.1166
306 Dexter Corporation 1,800 44,828 39,150 0.1166
307 Sbarro Inc 1,500 34,106 39,000 0.1161
308 Atlantic Southeast Airlines Inc 2,500 58,025 38,750 0.1154
309 Enterra Corp 2,000 41,388 38,000 0.1132
310 Verifone Inc 1,700 37,075 37,825 0.1126
311 Central Louisiana Electric Inc 1,600 39,116 37,800 0.1126
312 CML Group Inc 3,700 74,370 37,463 0.1116
313 Arvin Industries Inc 1,600 46,793 37,200 0.1108
314 Conner Peripherals Inc 3,900 70,270 37,050 0.1103
315 Standard Register Co 2,100 39,550 36,750 0.1094
316 OEA Inc 1,500 39,850 36,750 0.1094
317 Smith International 2,900 27,395 36,250 0.1079
318 Thiokol Corp 1,300 24,178 36,238 0.1079
319 Lands End Inc 2,600 41,108 35,750 0.1065
320 Octel Communications Corp 1,700 38,875 35,275 0.1050
321 AST Research Inc 2,400 43,575 35,100 0.1045
322 City National Corp 3,300 29,135 35,063 0.1044
323 Exabyte Corp 1,600 37,063 34,200 0.1018
324 Fuller H B Co 1,000 40,825 34,125 0.1016
325 Acuson Corp 2,100 35,593 34,125 0.1016
326 NovaCare Inc 4,700 87,573 34,075 0.1015
327 Service Merchandise Co 7,300 78,234 33,763 0.1005
328 Carpenter Technology Corp 600 29,830 33,600 0.1001
329 Jacobs Engineering Group Inc 1,800 48,140 33,300 0.0992
</TABLE>
D - 26
<PAGE>
DEFINED ASSET FUNDS - EQUITY INCOME FUND
INDEX SERIES, S&P MIDCAP TRUST
PORTFOLIO
AS OF DECEMBER 31, 1994
<TABLE>
<CAPTION>
Percentage
Portfolio of Total
No. Common Stocks Shares Cost(1) Value(1) Market Value
___ _____________ ______ _______ ________ ____________
<S> <C> <C> <C> <C> <C>
330 Cleveland-Cliffs Inc 900 $ 32,008 $ 33,300 0.0992%
331 Central Maine Power Co 2,400 50,170 33,000 0.0983
332 Indiana Energy Inc 1,600 31,867 32,800 0.0977
333 Ruddick Corp 1,700 31,810 32,513 0.0968
334 Goulds Pumps Inc 1,500 36,738 32,438 0.0966
335 Quaker State Corp 2,300 29,590 32,200 0.0959
336 Calgon Carbon Corp 3,000 52,113 31,125 0.0927
337 Airborne Freight Corp 1,500 34,013 30,750 0.0916
338 Measurex Corp 1,300 24,828 30,713 0.0915
339 International Dairy Queen Inc 1,800 34,000 30,600 0.0911
340 Lukens Inc 1,050 40,501 30,581 0.0911
341 Phillips Van Heusen Corp 2,000 55,350 30,500 0.0908
342 Precision Castparts Corp 1,500 23,288 30,375 0.0905
343 Edison Brothers Stores Inc 1,600 62,893 29,600 0.0881
344 Calmat Co 1,700 38,023 29,538 0.0880
345 Kaydon Corp 1,200 30,038 28,800 0.0858
346 Diagnostek Inc 1,800 26,028 28,575 0.0851
347 Gencorp Inc 2,400 31,083 28,500 0.0849
348 Savannah Foods & Industries Inc 1,900 29,215 28,025 0.0835
349 Dreyers Grand Ice Cream Inc 1,100 27,375 27,225 0.0811
350 Information Resources Inc 1,900 54,800 26,125 0.0778
351 Church & Dwight Inc 1,400 39,508 25,200 0.0750
352 Magnetek Inc 1,800 31,340 24,300 0.0724
353 Duriron Co Inc 1,350 22,533 23,963 0.0714
354 International Multifoods Corp 1,300 32,490 23,888 0.0711
355 Diagnostic Products Corp 900 23,345 23,625 0.0704
356 Lawson Products Inc 900 23,325 23,400 0.0697
357 Buffetts Inc 2,300 38,738 22,713 0.0676
358 Duty Free International Inc 2,000 58,763 22,250 0.0663
359 Oregon Steel Mills Inc 1,400 33,133 21,875 0.0651
360 Black Hills Corp 1,000 26,075 21,375 0.0637
361 Brush Wellman Inc 1,200 18,723 20,850 0.0621
362 National Presto Industries Inc 500 27,375 20,750 0.0618
363 Datascope Corp 1,200 27,275 20,400 0.0607
364 Dibrell Bros Inc 1,000 34,525 20,375 0.0607
365 BJ Services Co 1,200 20,773 20,250 0.0603
366 Intelligent Electronics Inc 2,500 34,450 20,000 0.0596
367 Parker Drilling Co 4,200 22,910 19,950 0.0594
368 Angelica Corp 700 20,410 19,338 0.0576
369 Claire's Stores Inc 1,600 19,918 19,200 0.0572
370 Southdown Inc 1,300 16,890 18,850 0.0561
371 MAXXAM Inc 600 19,068 18,525 0.0552
372 Advanced Technology Labs Inc 1,000 16,098 18,500 0.0551
373 Topps Co Inc 3,600 45,463 18,450 0.0549
374 Granite Contstruction Inc 900 20,100 18,225 0.0543
375 Sequa Corp 700 23,798 18,200 0.0542
376 Continental Medical Systems Inc 2,900 44,670 18,125 0.0540
377 CPI Corp 1,000 19,813 17,875 0.0532
378 Gibson Greetings Inc 1,200 26,513 17,700 0.0527
379 Cross A T Co 1,200 24,060 16,350 0.0487
380 Varco International Inc 2,600 14,405 16,250 0.0484
381 Network Systems Corp 2,300 26,288 16,100 0.0479
382 Western Publishing Group Inc 1,600 27,950 15,200 0.0453
383 Hancock Fabrics Inc 1,700 19,973 15,088 0.0449
384 Ennis Business Forms 1,200 20,060 15,000 0.0447
385 Alaska Air Group Inc 1,000 17,363 15,000 0.0447
</TABLE>
D - 27
<PAGE>
DEFINED ASSET FUNDS - EQUITY INCOME FUND
INDEX SERIES, S&P MIDCAP TRUST
PORTFOLIO
AS OF DECEMBER 31, 1994
<TABLE><CAPTION>
Percentage
Portfolio of Total
No. Common Stocks Shares Cost(1) Value(1) Market Value
___ _____________ ______ _______ ________ ____________
<S> <C> <C> <C> <C> <C>
386 Convex Computer Corp 1,900 $ 15,083 $ 14,963 0.0446%
387 Michael Foods Inc 1,500 17,863 14,813 0.0441
388 Rohr Industries Inc 1,400 17,058 14,525 0.0433
389 Air & Water Technologies Corp 2,400 31,695 14,400 0.0429
390 Borland International Inc 2,200 69,975 13,475 0.0401
391 Sizzler International Inc 2,200 21,723 13,200 0.0393
392 Mid-American Waste Systems Inc 1,800 26,165 12,375 0.0369
393 Applied Bioscience International Inc 2,200 26,025 12,100 0.0360
394 Structural Dynamics Research Corp 2,100 32,700 11,288 0.0336
395 NPC International Inc (Formerly National 1,900 14,425 9,975 0.0297
Pizza Co)
396 International Technology Corp 2,300 12,765 6,900 0.0205
397 Xoma Corp 1,500 18,950 4,031 0.0120
398 American Waste Services 2,000 6,500 3,250 0.0097
399 Genzyme Corp - Tissue Repair 243 1,591 911 0.0027
________________ _______________ _____________
TOTAL $ 32,697,197 $ 33,580,568 100.0000%
================ =============== =============
NOTE:
(1) See Notes to Financial Statements.
</TABLE>
<PAGE>
DEFINED ASSET FUNDS--EQUITY INCOME FUND
INDEX SERIES
S&P 500 TRUST 2 AND S&P MIDCAP TRUST
FUND STRUCTURE
This Series (the 'Fund') of Equity Income Fund, consists of two unit
investment trusts, the S&P 500 Trust 2 (the 'S&P 500 Trust') and the S&P MidCap
Trust, created under New York law by Trust Indentures (the 'Indentures')* among
the Sponsors and each Trustee.
On the Evaluation Date each Unit represented the fractional undivided
interest in the Trust set forth under Investment Summary. During the Initial
Deposit Period, the Sponsors deposited additional cash (or bank letters of
credit in lieu of cash) with instructions to continue to purchase Securities (in
order to create new Units) with the goal of gradually purchasing all of the
stocks in each Index. It may not be possible to maintain this exact
proportionate relationship among the Securities because of, among other reasons,
purchase requirements and changes in prices. If additional Units are issued by
either Trust (through deposit of additional Securities by the Sponsors or
purchase of Securities by the Trustee) for purposes of sale or reinvestment, the
aggregate value of Securities in the Trust will be increased and the fractional
undivided interest represented by each Unit in the balance will be decreased. If
any Units of either Trust are redeemed, the aggregate value of Securities in the
Trust will be reduced, and the fractional undivided interest represented by each
remaining Unit in the balance will be increased. Units will remain outstanding
until redeemed upon tender to the Trustee by any Holder (which may include the
Sponsors) or until the termination of the Indenture (see Administration of the
Fund).
In accordance with the Indentures the Sponsors may deposit additional cash
(or a letter of credit accompanied by instructions to buy specified Securities)
in either Trust in connection with the issuance of additional Units, in each
case maintaining, as closely as practicable, the proportionate relationship
among the Securities in the S&P 500 Index or the S&P MidCap Index, as the case
may be. Purchase and sale transactions will be effected in accordance with
computer program output showing which Securities are under-or over-represented
in the Portfolio. Neither the Sponsors nor the Trustee will exercise any
investment discretion in connection therewith. Precise duplication of the
relationship among the Securities in the relevant Index may not be achieved
because it may be economically impracticable or impossible to acquire very small
numbers of shares of certain Index Stocks and because of other procedural
policies of the Fund, but correlation between the relevant Index and the
investment results of each Trust is expected to be between .97 and .99 (see
Description of the Fund--The Portfolios--The S&P 500 Index and The S&P MidCap
Index).
As used herein the terms 'Common Stocks' and 'Securities' refer to the
common stocks (or cash or a letter of credit together with instructions to
purchase common stocks) deposited in the Fund.
RISK FACTORS
An investment in Units should be made with an understanding of the risks
which an investment in common stocks entails including the risk that the
financial condition of the issuers of the Securities may become impaired or that
the general condition of the common stock market may worsen (either may cause a
decrease in the value of Securities and thus in the value of the Units). In
addition, investors should be aware that no attempt is made to 'manage' the
Portfolios in the traditional sense and, as a result, the adverse financial
condition of a company will not result directly in its elimination from a
Portfolio unless the company is removed from the applicable Index.
Holders of common stocks have rights to receive payments from the issuers
of those common stocks that are generally inferior to those of creditors of, or
holders of debt obligations or preferred stocks of, such issuers. Holders of
common stocks of the type held by the Fund have a right to receive dividends
only when and if, and in the amounts, declared by the issuer's board of
directors and have a right to participate in amounts available for distribution
by the issuer only after all other claims on the issuer have been paid or
provided for. By contrast,
- ------------------------------------
* To the extent references in this Prospectus are to articles and sections
of the Indentures, which are hereby incorporated by reference, the statements
made herein are qualified in their entirety by such reference.
1
<PAGE>
holders of preferred stocks have the right to receive dividends at a fixed rate
when and as declared by the issuer's board of directors, normally on a
cumulative basis, but do not participate in other amounts available for
distribution by the issuing corporation. Common stocks are 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. In addition, common stocks do
not represent an obligation or liability of the issuer and therefore do not
offer any assurance of income or provide the degree of protection of capital of
debt securities. Indeed, the issuance of debt securities or even preferred stock
will create prior claims for payment of principal, interest, liquidation
preferences and dividends which could adversely affect the ability and
inclination of the issuer to declare or pay dividends on its common stock or the
rights of holders of common stock with respect to assets of the issuer upon
liquidation or bankruptcy. Further, unlike debt securities which typically have
a stated principal amount payable at maturity (whose value, however, will be
subject to market fluctuations prior thereto), common stocks have neither a
fixed principal amount or liquidation preference nor a maturity or redemption
date and have values which are subject to market fluctuations for as long as the
stocks remain outstanding. While it may not be likely that any stock's dividends
would be omitted, no assurances can, of course, 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. The value of the
Securities in the Portfolios thus may be expected to fluctuate over the entire
life of a Trust to values higher or lower than those prevailing on the
Evaluation Date (see Administration of the Fund--Amendment and Termination).
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 Sponsor. The
price at which the Securities may be sold to meet redemptions and the value of a
Trust will be adversely affected if trading markets for the Securities are
limited or absent.
Investors should note that additional Units may be offered to the public
from time to time and that the creation of additional Units may have an effect
upon the value of previously existing Units. To create additional Units the
Sponsor may deposit cash with instructions to purchase Securities (or a bank
letter of credit in lieu of cash) in amounts sufficient to maintain to the
extent practicable the relative weighting among the Securities as exists among
the Common Stocks in the applicable Index based on the price of the Securities
at the Evaluation Time on the date the cash is deposited. To the extent the
price of a Security increases or decreases between the time cash is deposited
with instructions to purchase the Security and the time the cash is used to
purchase the Security, Units will represent less or more of that Security and
more or less of the other Securities in the Trust. Holders will be at risk
because of price fluctuations during this period; if the price of shares of a
Security increases, Holders will have an interest in fewer shares of that
Security, and if the price of a Security decreases, Holders will have an
interest in more shares of that Security, than if the Security had been
purchased on the date cash was deposited with instructions to purchase the
Security. In addition, brokerage fees incurred in purchasing Securities of each
Trust will be an expense of the Trust. Thus, price fluctuations during this
period and commissions payable by a Trust in purchasing Securities will affect
the value of the Units of every Holder of that Trust and the income per Unit
received by the Trust. In order to minimize these effects, the Fund will try to
purchase Securities as close as possible to the next Evaluation Time or at
prices as close as possible to the prices used to evaluate the Fund at the next
Evaluation Time (see Public Sale of Units--Public Offering Price).
In connection with the creation of additional Units (for purposes of sale
or reinvestment), the Sponsors may at their option deposit with the Trustee a
letter of credit, accompanied by instructions to buy specified Securities. The
amount of such letter of credit will generally be based on the closing price of
the Securities on the day that the additional Units were created. Since the
actual purchases of the Securities cannot be executed until the following
business day, the relevant Trust will benefit from any decrease, on a net basis,
in the actual prices paid for the Securities and will be subject to a risk that
the price of the Securities, on a net basis, will rise above that used in the
valuation. Amounts not invested because of a decrease in stock prices will be
invested on the following business day and any additional amounts necessary to
purchase the Securities because of an increase in stock prices will be advanced
by the Trustee.
2
<PAGE>
DESCRIPTION OF THE FUND
THE PORTFOLIOS
General--Since the objective of the Fund is to provide investment results
that duplicate substantially the price and yield performance (in other words,
the total return) of the S&P 500 Index, in the case of the S&P 500 Trust, and
the S&P MidCap Index, in the case of the S&P MidCap Trust, the Portfolio of each
Trust will at any time consist of as many of the Index Stocks as is feasible.
Each Trust will at all times be invested in no less than 95% of the Index
Stocks. Although, at any time, a Trust may fail to own certain of the Index
Stocks, each Trust will be substantially totally invested in Index Stocks and
the Sponsors expect to maintain a theoretical correlation of between .97 and .99
between the investment performance of the relevant Index and that derived from
ownership of Units. Adjustments will be made in accordance with the computer
program output to bring the weightings of the Securities more closely into line
with their weightings in the relevant Index as each Trust invests in new
Securities in connection with the creation of new Units, as companies are
dropped from or added to either Index or as Securities are sold to meet
redemptions. These adjustments will be made on the business day following the
relevant transaction in accordance with computer program output showing which
Securities are under-or over-represented in each Portfolio. Adjustments may also
be made at other times to bring either Portfolio into line with the applicable
Index. The proceeds from any such sale will be invested in those Index Stocks
which the computer program output indicates are most under-represented (see
Administration of the Fund--Portfolio Supervision).
The Sponsors anticipate that the selection of any additional Index Stocks
deposited or purchased in connection with the creation of additional Units of a
Trust will be those stocks which are most under-represented in the Portfolio
based upon the computer program output and the applicable Index as of the date
prior to the date of such subsequent deposit or purchase. Securities sold in
order to meet redemptions will be those stocks which are most over-represented
in the Portfolio based upon the computer program output and the applicable Index
as of the date prior to the date of such sale.
Finally, from time to time adjustments may be made in either Portfolio
because of changes in the composition of the applicable Index. Based on past
history, it is anticipated that most such changes will occur as a result of
merger or acquisition activity. In such cases, the Fund, as shareholder of a
company which is the object of such merger or acquisition activity, will
presumably receive various offers from would-be acquirors of the company. The
Trustees will not be permitted to accept any such offers until such time as the
company has been deleted from the applicable Index. Since, in most cases, a
company is removed from an Index only after the consummation of a merger or
acquisition of the company, it is anticipated that the Fund will generally
acquire, in exchange for the stock of the deleted company, whatever
consideration is being offered to shareholders of that company who have not
tendered their shares prior to such time. Any cash received in such transactions
will be reinvested in the most under-represented Index Stocks. Any securities
received as a part of the consideration which are not included in the relevant
Index will be sold as soon as practicable and reinvested in the most under-
represented Index Stocks.
In attempting to duplicate the proportionate relationships represented by
the S&P 500 Index and the S&P MidCap Index the Sponsors do not anticipate
purchasing or selling shares in quantities of less than round lots. In addition,
certain Index Stocks may at times not be available in the quantities in which
the computer program specifies that they be purchased. For these reasons, among
others, precise duplication of this proportionate relationship may not ever be
possible but nevertheless will continue to be the goal in connection with all
acquisitions or dispositions of Securities (see Administration of the
Fund--Portfolio Supervision). As the holder of the Securities, the Trustees will
have the right to vote all of the voting stocks in the Portfolio and will vote
such stocks in accordance with the instructions of the Sponsors except that, if
the Trustee holds any of the common stocks of Merrill Lynch & Co., Inc.,
Prudential Insurance Company of America (the parent of Prudential Securities
Incorporated) or The Travelers Inc. (as long as it remains the parent of Smith
Barney Inc.) or any other common stock of companies which are affiliates of the
Sponsors, the Trustee will vote such stock in the same proportionate
relationship as all other shares of such companies are voted.
The Fund consists of unit investment trusts and is not a managed fund.
Traditional methods of investment management for a managed fund typically
involve frequent changes in a portfolio of securities on the basis of economic,
financial and market analyses. The Portfolios of the Fund, however, will not be
managed. Instead, the only purchases and sales that will be made with respect to
the Fund Portfolios will be those necessary to create, to the extent feasible,
Portfolios which will substantially duplicate the S&P 500 Index and the S&P
MidCap Index,
3
<PAGE>
taking into consideration redemptions, sales of additional Units and the other
adjustments referred to above. Since no attempt is made to 'manage' the
Portfolios in the traditional sense, the adverse financial condition of a
company will not be the basis for the sale of its securities from the Portfolio
unless the company is removed from the relevant Index.
The investments of the Holders of Units of the Fund will be liquidated on
the fixed date specified on pA-3. In addition, Holders will have the right to
have their Units redeemed at a price based on the aggregate value of the
Securities in the Trust ('Redemption Price per Unit') if they cannot be sold in
the over-the-counter market which the Sponsors propose to maintain (see Market
for Units and Redemption).
The Fund is not sponsored, endorsed, sold or promoted by Standard & Poor's
Corporation and such Corporation makes no representation, express or implied, to
the Fund or the Holders of Fund Units regarding the advisability of investing in
index or unit investment trusts generally or in the Fund particularly or the
ability of the S&P 500 Index or the S&P MidCap Index to track general stock
market performance.
Selection and Acquisition of Securities--The yield and price of common
stocks deposited in the Fund are dependent on a variety of factors, including
money market conditions and general conditions of the corporate equity markets.
As additional Stocks continue to be purchased the Trusts will more closely
approximate (although not exactly duplicate) the proportionate relationships of
such stocks within the S&P 500 Index, in the case of the S&P 500 Trust
Portfolio, and the S&P MidCap Index, in the case of the S&P MidCap Trust
Portfolio.
The Fund consists of such of the Securities as may continue to be held from
time to time in each Trust and any additional Securities acquired and held by
the Fund pursuant to the provisions of the Indentures (including the provisions
with respect to the deposit into the Fund of Securities in connection with the
sale of additional Units to the public and the automatic reinvestment of
distributions to Holders who have elected to participate in the Reinvestment
Plan) together with undistributed income therefrom and undistributed and
uninvested cash realized from the disposition of Securities (see Administration
of the Fund--Accounts and Distributions). It is anticipated that the amount of
such uninvested cash will rarely be significant and that, in any event, such
amount as exists at the time of any valuation of the Fund will almost always be
invested in additional Index Stocks on the following business day. Neither the
Sponsors nor the Trustees shall be liable in any way for any default, failure or
defect in any of the Securities.
Because certain of the Securities from time to time may be sold or their
percentage reduced under certain circumstances described herein, no assurance
can be given that either Trust will retain for any length of time its size and
composition as of any particular date (see Administration of the Fund--Amendment
and Termination). Each Indenture requires the Sponsors, as part of their
administrative function, to instruct the Trustee to reinvest the net proceeds of
the sale of Securities in additional Index Stocks to the extent that such
proceeds are not required for the redemption of Units.
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 on 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 industrial, utility, financial
and transportation market sectors. It contains a variety of companies with
diverse capitalization, 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 following table shows the performance of the S&P 500 Index for 1960
through 1994. Stock prices fluctuated widely during the period and were higher
at the end than at the beginning. The results shown should not be considered as
a representation of the income yield or capital gain or loss which may be
generated by the S&P 500 Index in the future.
4
<PAGE>
<TABLE><Caption?
- ------------------------------------------------------------------------------------------------------------------------------
YEAR-END INDEX
YEAR-END VALUE DIVIDENDS
YEAR-END INDEX VALUE CHANGE IN INDEX AVERAGE YIELD REINVESTED
YEAR INDEX VALUE* 1960=100 FOR YEAR FOR YEAR* 1960=100**
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1960.......................................... 58.11 100.00 -- % 3.47% 100.00
1961.......................................... 71.55 123.13 23.13 2.98 126.79
1962.......................................... 63.10 108.59 -- 11.81 3.37 115.71
1963.......................................... 75.02 129.10 18.89 3.17 141.93
1964.......................................... 84.75 145.84 12.97 3.01 165.09
1965.......................................... 92.43 159.06 9.06 3.00 185.48
1966.......................................... 80.33 138.24 -- 13.09 3.40 165.11
1967.......................................... 96.47 166.01 20.09 3.20 204.54
1968.......................................... 103.86 178.73 7.66 3.07 227.00
1969.......................................... 92.06 158.42 -- 11.36 3.24 207.89
1970.......................................... 92.15 158.58 0.10 3.83 216.06
1971.......................................... 102.09 175.68 10.79 3.14 247.52
1972.......................................... 118.05 203.15 15.63 2.84 294.30
1973.......................................... 97.55 167.87 -- 17.37 3.06 250.83
1974.......................................... 68.56 117.98 -- 29.72 4.47 184.64
1975.......................................... 90.19 155.21 31.55 4.31 253.25
1976.......................................... 107.46 184.93 19.15 3.77 312.94
1977.......................................... 95.10 163.66 -- 11.50 4.62 289.72
1978.......................................... 96.11 165.39 1.06 5.28 308.20
1979.......................................... 107.94 185.75 12.31 5.47 364.29
1980.......................................... 135.76 233.63 25.77 5.26 481.86
1981.......................................... 122.55 210.89 -- 9.73 5.20 457.72
1982.......................................... 140.64 242.02 14.76 5.81 555.84
1983.......................................... 164.93 283.82 17.27 4.40 680.24
1984.......................................... 167.24 287.80 1.40 4.64 721.73
1985.......................................... 211.28 363.59 26.33 4.25 949.59
1986.......................................... 242.17 416.75 14.62 3.49 1,125.83
1987.......................................... 247.08 425.19 2.03 3.08 1,183.25
1988.......................................... 277.72 477.92 12.40 3.64 1,379.78
1989.......................................... 353.40 608.15 27.25 3.13 1,617.04
1990.......................................... 330.22 568.27 -- 6.56 3.61 1,760.71
1991.......................................... 417.09 717.78 26.31 3.70 2,297.20
1992.......................................... 435.71 749.79 4.46 2.97 2,472.25
1993.......................................... 466.45 802.70 7.06 2.78 2,721.45
1994.......................................... 459.27 790.53 -- 1.54 2.42 2,757.25
</TABLE>
- ---------------
*Source: Standard & Poor's Corporation. Yields are obtained by dividing the
aggregate cash dividends by the aggregate market value of the stocks in the
Index at the beginning of the period, assuming no reinvestment of dividends.
**Assumes that cash distributions on the securities which comprise the S&P 500
Index are treated as reinvested in the S&P 500 Index as of the end of each
month following the payment of the dividend. Because the Fund is sold to the
public at net asset value plus the applicable sales charge and the expenses of
the Fund are deducted before making distributions to Holders, investment in
the Fund would have resulted in investment performance to Holders somewhat
reduced from that reflected in the above table. In addition certain Holders
may not elect to participate in the Reinvestment Plan and to that extent cash
distributions representing dividends on the Index Stocks may not be reinvested
in other Index Stocks.
The S&P MidCap Index is composed of 400 selected common stocks of which, as
of the Evaluation Date, 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 System. 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 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 S&P MidCap Index was created
5
<PAGE>
June 5, 1991 and would have had a total return, with monthly reinvested
dividends, of 50.10% for the year if the Index had been in existence for the
entire year. The total return for 1994 was -3.57%.
The chart below compares the relative total returns of the S&P 500 Index,
the S&P Midcap Index (although the Midcap Index was not created until June 5,
1991) and of over 2,000 small company stocks (as measured by Ibbotson
Associates) for the four years ended December 31, 1994. Of course, past
performance is no indication of future results. Performance of the index will
vary from the Trust because of Trust expenses (including brokers' commissions),
and sales charges, and the fact that the Trust may not be fully invested or
invested in the same weightings as the index at all times. These figures reflect
the reinvestment of dividends on a monthly basis.
CUMULATIVE RETURNS*, 4 YEARS ENDED DECEMBER 31, 1994
(VALUE OF $5,000 INVESTED AT BEGINNING OF PERIOD)
SMALL COMPANY
$11,000 -- STOCKS**
10,500 -- $11,126.76
S&P MIDCAP
10,000 -- INDEX
9,500 -- $9,229.50
9,000 --
8,500 --
8,000 -- S&P 500 INDEX
7,500 -- $7,831.30
7,000 --
6,500 -- * Returns for the indices reflect
reinvested dividends but not
commissions, taxes, expenses or
a Trust sales charge of 2.25% which
could reduce the performance
quoted.
6,000 -- The S&P 500 and MidCap Trust
average annualized return
(reflecting sales charges and
expenses) were -1.06% and -4.72%
for 1994 and 5.52% and 4.22%
respectively since inception.
5,500 -- ** As measured by Ibbotson
Associates' index of 2,000+ stocks
5,000 --
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. The S&P 500 Index and
the S&P MidCap Index together represented approximately 79% of the total market
capitalization of stocks traded in the United States, as of December 31, 1994.
Stocks are generally selected for the Portfolios in the order of their
weightings in the relevant Index, beginning with the heaviest-weighted stocks.
The percentage of each Trust's assets invested in each stock is approximately
the same as the percentage it represents in the relevant Index.
Subject to market conditions, the Sponsors may create additional S&P 500 or
S&P MidCap Index Series of the Equity Income Fund. The Fund has entered into
license agreements with Standard & Poor's Corporation (the 'License
Agreements'), under which the Fund is granted licenses to use the trademarks and
tradenames 'S&P 500', 'Standard & Poor's 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 Trust will pay to Standard &
Poor's Corporation an annual fee equal to .02% of the average net asset value of
the Trust (or, if greater, $10,000). The License Agreements permit the Fund to
substitute another index for the S&P 500 Index or the S&P MidCap Index in the
event that Standard & Poor's Corporation ceases to compile and publish that
Index. In addition, if either Index ceases to be compiled or made available or
the
6
<PAGE>
anticipated correlations between the Trusts and the applicable Index is not
maintained, the Sponsors may direct that the affected Trust continue to be
operated using the S&P 500 Index or the S&P MidCap Index (as the case may be) as
it existed on the last date on which it was available or may direct that the
applicable Indenture be terminated (see Administration of the Fund--Amendment
and Termination).
Neither the Fund nor the Holders is entitled to any rights whatsoever under
the foregoing licensing arrangements or to use any of the covered trademarks or
to use the S&P 500 Index or the S&P MidCap Index, except as specifically
described herein or as may be specified in the Indentures.
Standard and Poor's Corporation's only relationship to the Fund 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 Fund 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 S&P 500 Index or the S&P MidCap Index. The S&P 500 Index and the S&P MidCap
Index are determined, comprised and calculated without regard to the Fund.
Standard and Poor's Corporation shall have no obligation to take the needs of
the Fund or its Holders into consideration in determining, comprising or
calculating the S&P 500 Index or the S&P MidCap Index. Standard and Poor's
Corporation is not responsible for and shall not participate in sales of Units
or in the determination of the timing of, prices at, or quantities and
proportions in which purchases or sales of Securities shall be made.
S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P 500
INDEX AND 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 500 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.
Information on the S&P 500 Index and the S&P MidCap Index contained in this
Prospectus, as further updated, may also be included from time to time in other
prospectuses or in advertising material. The performance of a Trust or of either
Index (provided information is also given reflecting the performance of the
Trust in comparison to that Index) may also be compared to the performance of
money managers as reported in SEI Fund Evaluation Survey (the leading data base
of tax-exempt assets consisting of over 4,000 portfolios with total assets of
$250 billion) or of mutual funds as reported by Lipper Analytical Services Inc.
(which calculates total return using actual dividends on ex-dates accumulated
for the quarter and reinvested at quarter end), Money Magazine Fund Watch (which
rates fund performance over a specified time period after sales charge and
assuming all dividends reinvested) or Wiesenberger Investment Companies Service
(which states fund performance annually on a total return basis) or of the New
York Stock Exchange Composite Index, the American Stock Exchange Index
(unmanaged indices of stocks traded on the New York and American Stock
Exchanges, respectively), the Dow Jones Industrial Average (an index of 30
widely traded industrial common stocks) or the NASDAQ Composite Index (an
unmanaged index of over-the-counter stocks) or similar measurement standards
during the same period of time.
INCOME
The net annual income per Unit of a Trust is determined by subtracting from
the annual dividend income of the Securities in the Portfolio the estimated
annual expenses (total estimated annual Trustee's, Sponsors', Licensor's, and
administrative fees and expenses) and dividing by the number of Units
outstanding. The net annual income per Unit will change as the issuers of the
Securities change their dividend rate, as the issuers whose securities are
included in each Index change or as the expenses of a Trust change.
Record Days and Distribution Days are set forth under Investment Summary.
Dividend income per Unit received by each Trust and available for distribution
as of the next preceding Record Day will be distributed on or shortly after each
Distribution Day to the Holders of record on the preceding Record Day (see
Administration of
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the Fund--Accounts and Distributions). Distributions of net realized capital
gains, if any, will be made after the end of the Fund's taxable year.
TAXES
Each Trust has elected and intends to qualify for the special tax treatment
applicable to 'regulated investment companies' under Sections 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 a Trust qualifies
as a 'regulated investment company' and distributes to Holders 90% or more of
its taxable income without regard to its net capital gain (net capital gain is
defined as the excess of net long-term capital gain over 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 Holders in a
timely manner. In addition, a Trust will not be subject to the 4% excise tax on
certain undistributed income of 'regulated investment companies' to the extent
it distributes to Holders in a timely manner at least 98% of its taxable income
(including any net capital gain). It is anticipated that each Trust will not be
subject to Federal income tax or the excise tax because the Indentures require
the distribution of each Trust's taxable income (including any net capital gain)
in a timely manner. Although all or a portion of a Trust's taxable income
(including any net capital gain) for the 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 Holders during the
calendar year.
Distributions to Holders of a Trust's dividend income and net short-term
capital gain in any year will be taxable as ordinary income to Holders to the
extent of the Trust'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 Holder'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 a Trust's dividend income and net short-term capital gain will be taxable as
ordinary income to Holders.
Distributions of a Trust's net capital gain (designated as capital gain
dividends by the Trust) will be taxable to Holders as long-term capital gain,
regardless of the length of time the Units have been held by a Holder. A Holder
may recognize a taxable gain or loss if the Holder 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 or a financial institution. Capital gains are generally taxed at the same
rate as ordinary income. However, the excess of net long-term capital gains over
net short-term capital losses may be taxed at a lower rate than ordinary income
for certain noncorporate taxpayers. A capital 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.
Distributions which are taxable as ordinary income to Holders will
constitute dividends for Federal income tax purposes. To the extent that
distributions are appropriately designated by the Trust and are attributable to
dividends received by the Trust from domestic issuers with respect to whose
securities the Trust satisfied the requirements for the dividends-received
deduction, such distributions will be eligible for the dividends-received
deduction generally available 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 is generally 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. Holders are urged to consult their own tax advisors.
Sections 246 and 246A of the Code contain additional limitations on the
eligibility of dividends for the dividends-received deduction. Depending upon
the corporate Holder'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 from a Trust by a corporate Holder which
would otherwise qualify for the dividends-received deduction for corporations
under the principles discussed above. Accordingly, Holders should consult their
own tax advisers in this regard. A corporate Holder 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.
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The Federal tax status of each year's distributions will be reported to
Holders 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. Holders. Holders that are not United States
citizens or residents should be aware that distributions from the Trusts 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. These distributions may also be subject to state and local
taxation and Holders should consult their own tax advisors in this regard.
Holders will be taxed in the manner described above regardless of whether
distributions from the Trust are actually received by the Holder or are
reinvested pursuant to the Reinvestment Plan.
RETIREMENT PLANS
This Series of Defined Asset Funds--Equity Income Fund may be suited for
purchase by Individual Retirement Accounts ('IRAs'), Keogh plans, pension funds
and other qualified retirement plans, certain of which are briefly described
below. Generally, capital gains and income received in each of the foregoing
plans are exempt from Federal taxation. All distributions from such plans are
generally treated as ordinary income but may, in some cases, be eligible for
special 5 or 10 year averaging or tax-deferred rollover treatment. Holders of
Units in IRAs, Keogh plans and other tax-deferred retirement plans should
consult their plan custodian as to the appropriate disposition of distributions.
Investors considering participation in any such plan should review specific tax
laws related thereto and should consult their attorneys or tax advisers with
respect to the establishment and maintenance of any such plan. Such plans are
offered by brokerage firms, including the Sponsors of this Fund, and other
financial institutions. Fees and charges with respect to such plans may vary.
Retirement Plans for the Self-Employed--Keogh Plans. Units may be purchased
by retirement plans established pursuant to the Self-Employed Individuals Tax
Retirement Act of 1962 ('Keogh plans') for self-employed individuals,
partnerships or unincorporated companies. Qualified individuals may generally
make annual tax-deductible contributions up to the lesser of 20% of annual
compensation or $30,000 in a Keogh plan. The assets of the plan must be held in
a qualified trust or other arrangement which meets the requirements of the Code.
Generally there are penalties for premature distributions from a plan before
attainment of age 59 1/2, except in the case of a participant's death or
disability and certain other related circumstances. Keogh plan participants may
also establish separate IRAs (see below) to which they may contribute up to an
additional $2,000 per year ($2,250 in a spousal account).
Individual Retirement Account--IRA. Any individual (including one covered
by an employer retirement plan) can establish an IRA or make use of a qualified
IRA arrangement set up by an employer or union for the purchase of Units. Any
individual can make an investment in an IRA equal to the lesser of $2,000
($2,250 in a spousal account) or 100% of earned income; such investment must be
made in cash. However, the deductible amount an individual may contribute will
be reduced if the individual's adjusted gross income exceeds $25,000 (in the
case of a single individual), $40,000 (in the case of married individuals filing
a joint return) or $200 (in the case of a married individual filing a separate
return). A married individual filing a separate return will not be entitled to
any deduction if the individual is covered by an employer-maintained retirement
plan without regard to whether the individual's spouse is an active participant
in an employer retirement plan. Unless nondeductible contributions are made in
1987 or a later year, all distributions from an IRA will be treated as ordinary
income but generally will be eligible for tax-deferred rollover treatment. It
should be noted that certain transactions which are prohibited under Section 408
of the Code will cause all or a portion of the amount in an IRA to be deemed to
be distributed and subject to tax at that time. A participant's entire interest
in an IRA must be, or commence to be, distributed to the participant not later
than April 1 following the end of the taxable year during which the participant
attains age 70 1/2. Taxable distributions made before attainment of age 59 1/2,
except in the case of the participant's death or disability, or where the amount
distributed is part of a series of substantially equal periodic (at least
annual) payments that are to be made over the life expectancies of the
participant and his beneficiary, are generally subject to a surtax in an amount
equal to 10% of the distribution.
PUBLIC SALE OF UNITS
PUBLIC OFFERING PRICE
The Public Offering Price of the Units of each Trust is computed by adding
to the aggregate value of the Securities in the Trust (as determined by the
Trustee) divided by the number of Units outstanding, a sales charge of 2.302%.
This sales charge is equal to a gross underwriting commission of 2.25% of the
Public Offering Price. A
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proportionate share of the amount in the Income Account (described under
Administration of the Fund-- Accounts and Distributions) on the date of delivery
of the Units to the purchaser is added to the Public Offering Price. The Public
Offering Price on the date of this Prospectus or on any subsequent date will
vary from the Public Offering Price on the Evaluation Date (set forth on pA-3)
in accordance with fluctuations in the aggregate value of the underlying
Securities.
The sales charge applicable to quantity purchases and the concession to
dealers per Unit (referred to below under Public Distribution) is reduced on a
graduated scale for sales to any purchaser of at least $25,000 of Units of a
Trust on any one day as follows:
CURRENTLY PAYABLE SALES
CHARGE DEALER
CONCESSION
AS PERCENT OF
----------------------------------------
AS PERCENT OF OFFERING PRICE
AS PERCENT OF NET AMOUNT --------------------
AMOUNTS PURCHASED OFFERING PRICE INVESTED
- ------------------------------------------------------------
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
The above graduated sales charges 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.
The value of the Securities is determined on each business day by the
Trustee based on the closing sale prices on the day the valuation is made or, if
there are no such reported sales or a Security is not listed on a national
securities exchange or if the principal market therefor is other than on such an
exchange, taking into account the same factors referred to under
Redemption--Computation of Redemption Price per Unit (Section 4.01).
PUBLIC DISTRIBUTION
The Sponsors intend to qualify Units for sale in all States in which
qualification is necessary through the Sponsors and dealers who are members of
the National Association of Securities Dealers, Inc. Sales to dealers, if any,
will initially be made at prices which represent a concession as set forth above
but Merrill Lynch, Pierce, Fenner & Smith, as Agent for the Sponsors ('Agent for
the Sponsors') reserves the right to change the amount of the concession to
dealers from time to time. The concession to dealers is reduced on a graduated
scale as indicated above.
UNDERWRITERS' AND SPONSORS' PROFITS
Upon sale of the Units, the Underwriters named under Underwriting Account,
including the Sponsors, receive sales charges at the rates set forth in the
table above. In addition, on each deposit of Index Stocks with
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respect to the creation of additional Units (for purposes of sale or
reinvestment) the Sponsors may realize a profit or loss, based on the difference
between the cost of the Securities to the Fund and the purchase price of such
Securities for the Sponsors. The Sponsors or any Underwriter may also realize
profits or sustain losses in respect of Securities deposited in the Fund which
were acquired by the Sponsors or such Underwriter from underwriting syndicates
of which the Sponsors or such Underwriter was a member and they also may realize
profits or sustain losses as a result of fluctuations in the aggregate value of
the Securities and hence in the Public Offering Price. Cash, if any, made
available by buyers of Units to the Sponsors prior to the settlement dates for
purchase of Units may be used in the Sponsors' businesses, subject to the
limitations of Rule 15c3-3 under the Securities Exchange Act of 1934, and may be
of benefit to the Sponsors.
Other than in the course of deposit transactions, the Sponsors will not be
permitted to derive profit from, or to in any manner deal with, the Fund while
acting as principal (as distinguished from brokerage transactions) (see
Administration of the Fund--Portfolio Supervision).
In maintaining a market for the Units (see Market for Units) the Sponsors
will also realize profits or sustain losses in the amount of any difference
between the prices at which they buy Units (based on the aggregate value of the
Securities) and the prices at which they resell such Units (which include the
sales charge) or the prices at which they redeem such Units (based on the
aggregate value of the Securities), as the case may be.
MARKET FOR UNITS
While the Sponsors are not obligated to do so, it is their intention to
maintain a market for Units of this Fund and continuously to offer to purchase
Units of this series at prices, subject to change at any time, which will be
computed for each Trust by adding (a) the aggregate value of Securities in the
Trust, (b) cash on hand in the Trust including dividends receivable on stocks
trading ex-dividend (other than cash covering contracts to purchase Securities)
and (c) all other assets in the Trust; deducting therefrom the sum of (x) taxes
or other governmental charges against the Trust not previously deducted, (y)
accrued fees and expenses of the Trustee (including legal and auditing
expenses), the Sponsors, the Licensor and counsel, and certain other expenses
and (z) cash held for distribution and any other amounts required to be
distributed (by sale of Securities or otherwise) to Holders of record as of a
date prior to the evaluation; and dividing the result of such computation by the
number or Units outstanding as of the date thereof. The Sponsors may discontinue
purchases of Units of either Trust at prices based on the value of Securities in
the Trust if the supply of Units of this series exceeds demand or for any other
business reason. The Sponsors, of course, do not in any way guarantee the
enforceability, marketability or price of any Securities in the Portfolio or of
the Units. However, the Sponsors will not repurchase Units in the secondary
market at a price below the net value of the Securities in the Trust.
The Sponsors may, of course, redeem any Units that they have purchased in
the secondary market to the extent that they determine that it is undesirable to
continue to hold such Units in their inventory. Factors which the Sponsors will
consider in making such a determination will include the number of Units of all
Series of unit trusts which they have in their inventory, the saleability of
such Units and their estimate of the time required to sell such Units and
general market conditions. For a description of certain consequences of such
redemption for the remaining Holders, see Redemption.
A Holder who wishes to dispose of his Units should inquire of his bank or
broker as to current market prices in order to determine if there exist
over-the-counter prices in excess of the redemption price and the repurchase
price (see Redemption).
REDEMPTION
Units may be redeemed and any Certificates cancelled by the Trustee of each
Trust at the office set forth on the back of this Prospectus upon tender of
Certificates and payment of any relevant tax without any other fee (Section
5.02). Certificates to be redeemed must be properly endorsed or accompanied by a
written instrument or instruments of transfer. Holders must sign exactly as
their name appears on the face of the Certificate with the signature guaranteed
by an eligible guarantor institution or in such other manner as may be
acceptable to the Trustee. In certain instances the Trustee may require
additional documents such as, but not limited to, trust instruments,
certificates of death, appointments as executor or administrator or certificates
of corporate authority.
On the seventh calendar day following such tender (or if the seventh
calendar day is not a business day on the first business day prior thereto), the
Holder will be entitled to receive in cash an amount per Unit equal to the
Redemption Price per Unit as determined as of the day of tender. The Trustee is
irrevocably authorized in its
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<PAGE>
discretion, if the Sponsors do not elect to repurchase any Unit tendered for
redemption or if the Sponsors tender a Unit for redemption, in lieu of redeeming
such Units, to sell such Units in the over-the-counter market for the account of
the tendering Holder at prices which will return to the Holder an amount in
cash, net after deducting brokerage commissions, transfer taxes and other
charges, equal to or in excess of the Redemption Price for such Units. The
Trustee will pay the net proceeds of any such sale to the Holder on the day he
would otherwise be entitled to receive payment of the redemption price (Section
5.02).
Any amounts paid on redemption representing income received will be
withdrawn from the Income Account to the extent funds are available; all other
amounts paid on redemption will be withdrawn from the Capital Account (an
explanation of such Accounts is set forth in Administration of the
Fund--Accounts and Distributions). The Trustee is empowered to sell Securities
in order to make funds available for redemption (Section 5.02). The Securities
to be sold will be selected by the Trustee in accordance with procedures to be
specified by the Sponsors and on the basis of computer programs so as to
maintain, as closely as practicable, the proportionate relationship between
relative weightings of the Securities in the Portfolio and those of the stocks
in the applicable Index. Provision is made under the Indenture under which the
Sponsors may, but need not, specify minimum amounts in which blocks of
Securities are to be sold in order to obtain the best price for the Fund.
To the extent that Securities are sold, the size and the diversity of the
Fund will be reduced. Any such sales may be made at a time when Securities would
not otherwise be sold and may result in lower prices than might otherwise be
realized. In addition, because of the minimum amounts in which Securities may be
required to be sold, the proceeds of sale may exceed the amount required at the
time to redeem Units; such excess proceeds will be distributed to Holders unless
reinvested in substitute Securities in accordance with procedures to be
specified by the Sponsors (see Administration of the Fund--Portfolio
Supervision). The price received upon redemption may be more than or less than
the amount paid by the Holder depending on the value of the Securities in the
Portfolio at the time of redemption.
The right of redemption may be suspended and payment postponed for any
period, determined by the Securities and Exchange Commission ('SEC'), (1) during
which the New York Stock Exchange, Inc. is closed other than for customary
weekend and holiday closings, (2) during which the trading on that Exchange is
restricted or an emergency exists as a result of which disposal or evaluation of
the Securities is not reasonably practicable or (3) for such other periods as
the SEC may by order permit (Section 5.02).
COMPUTATION OF REDEMPTION PRICE PER UNIT
Redemption Price per Unit is computed for each Trust by the Trustee on each
June 30 and December 31 (or the last business day prior thereto), at the next
evaluation price (determined at the Evaluation Time set forth under Investment
Summary) after a receipt of a redemption request by a Holder and on any other
business day desired by the Trustee or requested by the Sponsors, by adding (a)
the aggregate value of the Securities in the Trust determined by the Trustee and
(b) cash on hand in the Trust including dividends receivable on stocks trading
exdividend (other than cash covering contracts to purchase Securities) and
deducting therefrom the sum of (x) taxes or other governmental charges against
the Fund not previously deducted, (y) accrued fees and expenses of the Trustee
(including legal and auditing expenses), the Licensor, the Sponsors and counsel,
and certain other expenses and (z) cash held for distribution and any other
amounts required to be distributed (by sale of Securities or otherwise) to
Holders of record as of a date prior to the evalution; and dividing the result
of such computation by the number of Units outstanding as of the date thereof
(Sections 4.01 and 5.01).
The aggregate value of the Securities shall be determined by the Trustee in
good faith in the following manner: if the Securities are listed on a national
securities exchange or the National Market System maintained by NASDAQ, such
evaluation shall generally be based on the closing sale price on such exchange
(unless the Trustee deems such price inappropriate as a basis for evaluation)
or, if there is no closing sale price on such exchange, at the mean between the
closing bid and asked prices. If the Securities are not so listed or, if so
listed and the principal market therefor is other than on such exchange, such
evaluation shall generally be made by the Trustee in good faith based on the
current bid price on the overthecounter market (unless the Trustee deems such
price inappropriate as a basis for evalution) or if no such current bid price is
available, (a) on the basis of current bid prices for comparable securities, (b)
by the Trustee's appraising the value of the Securities in good faith on the bid
side of the market or (c) by any combination thereof.
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EXPENSES AND CHARGES
Licensor's Fee and Computer Tracking Expenses--The Licensor receives an
annual fee from each Trust of .02% of the average net asset value of the Trust
or, if greater, $10,000 (Section 3.12). This fee covers the license to the Fund
of the use of the trademarks and trade names 'S&P 500', 'Standard & Poors MidCap
400 Index' and other trademarks and trade names, as described above under
'Description of the Fund -- The S&P 500 Index and the S&P MidCap Index'. 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.
Trustee's Annual Fee and Expenses--The Trustee receives for its services as
Trustee and for reimbursement of expenses incurred on behalf of the Trust,
payable in monthly installments, the amount per 1,000 Units set forth under
Investment Summary as Trustee's Annual Fee and Expenses, which includes the
estimated Sponsors' Portfolio Supervision Fee, Licensor's Fee and Computer
Tracking Expenses, estimated reimbursable bookkeeping or other administrative
expenses paid to the Sponsors and certain mailing and printing expenses. There
are no odd-lot premiums in buying Trust Units. There are no management fees and
there are relatively low ongoing expenses. Low costs are essential for an index
fund to approximate the performance of the index, which has no expenses, and
result in more of purchasers' money being invested. The Trustee also receives
benefits to the extent that it holds funds on deposit in the various
non-interest bearing accounts created under the Indenture. The foregoing fees
may be adjusted for inflation in accordance with the terms of the Indenture
without approval of Holders (Sections 4.02, 7.06 and 8.05).
Portfolio Supervision Fee--The Sponsors' fee, which is earned for portfolio
supervisory services, is an annual fee equal to the lesser of the cost to the
Sponsors of supplying the services and the maximum amount set forth under
Investment Summary per 1,000 Units of the Trust based on the average of largest
number of Units outstanding during each month of a calendar year. The Sponsors'
fee may exceed the actual costs of providing portfolio supervisory services for
this Fund, but at no time will the total amount they receive for portfolio
supervisory services rendered to all series of Equity Income Fund in any
calendar year exceed the aggregate cost to them of supplying these services in
that year (Section 7.06). In addition, the Sponsors may be reimbursed for
bookkeeping or other administrative services provided to each Trust in amounts
not exceeding their costs of providing these services (Sections 3.04, 7.06).
Other Charges--These include: (a) fees of the Trustee for extraordinary
services (Section 8.05), (b) expenses of the Trustee (including legal and
auditing expenses) and of counsel designated by the Sponsors (Sections 3.04,
3.10, 8.01[e], 8.03 and 8.05), (c) various governmental charges (Sections 3.03
and 8.01[h]), (d) expenses and costs of any action taken by the Trustee or the
Sponsors to protect the Trust and the rights and interests of the Holders
(Section 7.06 and 8.01[d]), (e) indemnification of the Trustee for any loss,
liabilities and expenses incurred in the administration of the Fund, without
gross negligence, bad faith or wilful misconduct on its part (Section 8.05), (f)
indemnification of the Sponsors for any loss, liabilities and expenses incurred
in acting as Sponsors of the Trust without gross negligence, bad faith or wilful
misconduct (Section 7.05[b]) and (g) expenditures incurred in contacting Holders
upon termination of the Trust (Section 9.02).
The Trustee's fee may be increased without approval of Holders by amounts
not exceeding proportionate increases under the classification 'All Services
Less Rent' in the Consumer Price Index published by the United States Department
of Labor (Sections 7.06 and 8.05).
The fees and expenses set forth herein are payable out of each Trust and
when paid by or owing to the Trustee are secured by a lien on the Trust (Section
8.05). If the balance in the Income Account is insufficient to provide for
amounts payable by the Trust, the Trustee has the power to sell Securities to
pay such amounts (Section 8.05).
ADMINISTRATION OF THE FUND
RECORDS
The Trustee of each Trust keeps records of the transactions of the Trust at
its unit trust office including names, addresses and holdings of all Holders, a
current list of the Securities and a copy of the applicable Indenture. Such
records are available to Holders for inspection at reasonable times during
business hours (Section 8.02 and 8.04).
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ACCOUNTS AND DISTRIBUTIONS
Dividends payable to each Trust are credited by the Trustee to an Income
Account, as of the date on which the Trust is entitled to receive such dividends
as a holder of record of the Securities. Other receipts, including amounts
received upon the sale of rights pursuant to Section 3.08 of the Indenture, are
credited to a Capital Account (Sections 3.01 and 3.02). Subject to the
Reinvestment Plan described below, any income distribution for each Holder as of
each Record Day will be made on the following Distribution Day or shortly
thereafter and shall consist of an amount equal to such Holder's pro rata share
of the distributable balance in the Income Account as of such Record Date, after
deducting estimated expenses, plus (in the case of the first such distribution
made in each calendar year) such Holder's pro rata share of the distributable
cash balance of the Capital Account computed as of the close of business on such
Record Day. Provision is made for cash generated in respect of each capital
gains transaction to be reinvested in 500 Index Stocks or MidCap Index Stocks
(as the case may be) on a timely basis and for Securities to be sold to make
cash available annually to permit distribution of net capital gains and net
short-term capital gains to Holders. The first distribution for persons who
purchase Units between a Record Day and a Distribution Day will be made on the
second Distribution Day following their purchase of Units. A Reserve Account may
be created by the Trustee by withdrawing from the Income Account, from time to
time, amounts deemed necessary to establish a reserve for any material amounts
that may be payable out of the Fund (Section 3.03). Funds held by the Trustee in
the various accounts created under the Indentures do not bear interest (Section
8.01).
REINVESTMENT PLAN
Monthly income distributions and annual distributions of any net capital
gains in respect of the Units may be reinvested by participating in the Fund's
reinvestment plan (the 'Reinvestment Plan'). A Holder of either Trust (including
any Holder which is a broker or nominee of a bank or other financial
institution) may indicate to the Trustee, by filing the written notice of
election accompanying this Prospectus or by notice to the Holder's account
executive or sales representative, that he wishes such distributions to be
automatically invested in additional Units (or fractions thereof) of the Trust.
The Holder's completed notice of election to participate in the Reinvestment
Plan must be received by the Trustee at least ten days prior to the Record Day
applicable to any distribution in order for the Reinvestment Plan to be in
effect as to such distribution. Holders of Units held in 'street name' by their
broker or dealer should contact their account executive or sales representative
to determine whether or not participation in the Reinvestment Plan through that
broker or dealer is available. Holders of Units participating in the
Reinvestment Plan through their broker or dealer will receive confirmation of
their reinvestments in their regular account statements or on a quarterly basis.
Until such time as additional Units cease to be issued by a Trust (see Fund
Structure), Reinvestment Plan distributions will be reinvested in such
additional Units. After the Fund has ceased to issue new Units, Reinvestment
Plan distributions may be reinvested (subject to SEC approval) in new units of
subsequent funds of the Index Series, if any are offered. If no such new units
of subsequent funds are available for reinvestment, distributions will be
reinvested in Units of the Trust or units of such subsequent funds, which are
available for sale in the secondary market maintained by the Sponsors (see
Market for Units). If Units are unavailable in the secondary market,
distributions which would otherwise have been reinvested shall be paid to the
Holder on the applicable Distribution Day.
Purchases made pursuant to the Reinvestment Plan will be made without sales
charge at net asset value on the close of business on the Distribution Day to
take into account that purchases for the Reinvestment Plan result in less
selling expense. Under the Reinvestment Plan, each Trust will pay the
distributions to the Trustee which in turn will purchase for the Holder full and
fractional Units of the Trust (or units of such subsequent funds) at the price
and time indicated above, will add the Units (or such subsequent fund units) to
the Holder's account, and will send the Holder an account statement reflecting
the reinvestment. Reinvesting compounds total return performance.
The Trustee will issue Certificates for whole Units purchased through the
Reinvestment Plan only if the Holder so requests. Certificates will not be
issued for fractional units. The Trustee will credit each Holder's account with
the number of Units purchased with such Holder's reinvested distribution. Each
Holder receives account statements both annually and after each Reinvestment
Plan transaction to provide the Holder with a record of the total number of
Units in his account. This relieves the Holder of responsibility for safekeeping
of Certificates and, should he sell his Units, eliminates the need to deliver
certificates. The Holder may at any time request the Trustee (at the Trust's
cost) to issue Certificates for full Units.
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During such time as Reinvestment Plan distributions are being reinvested in
new Units of a Trust, in the event an issuer of a Security has a shareholder
dividend reinvestment plan, a stock purchase plan or a similar plan under which
its shareholders may automatically reinvest their dividends or invest optional
cash payments in additional shares of the issuer's common stock without
brokerage commission or service charge or otherwise on a basis favorable to the
shareholder in the opinion of the Sponsors, the Trust (as a shareholder of such
issuer) upon the direction of the Sponsors may participate in such plans to the
extent practicable given the other restrictions on the purchase of additional
Securities even if such participation temporarily results in the proportionate
relationship with the relevant Index not being maintained. In such event the
Sponsors will deposit cash (or a letter of credit) with the Trustee together
with instructions to invest such cash in accordance with such plans in lieu of
depositing Index Stocks.
Certain of the shareholder dividend reinvestment, stock purchase or similar
plans maintained by issuers of the Securities in the Trusts offer shares
pursuant to such plans at a discount from market value. The Trustee is required
by applicable provisions of the Federal Internal Revenue Code to distribute pro
rata to all Holders (i.e., not just to those Holders participating in the
Reinvestment Program) the income attributable to such discounts.
PORTFOLIO SUPERVISION
The Sponsors may direct the Trustee of either Trust to dispose of
Securities and either to acquire other Securities through the use of proceeds of
such disposition in order to make such changes in the Portfolio or to distribute
the proceeds of such disposition to Holders (i) as may be necessary to reflect
any additions to or deletions from the applicable Index, (ii) as may be
necessary to establish a closer correlation between the weightings of the
Securities in the Portfolio and their weightings in the applicable Index, (iii)
as may be required for purposes of distributing to Holders at least annually
their pro rata share of net realized capital gains or as the Sponsors may
otherwise determine or (iv) as may be required to maintain the qualification of
the Trust as a regulated investment company for Federal income tax purposes or
by applicable law (Section 3.08). The Sponsors may direct the Trustee of either
Trust to sell any property (other than cash) or any Securities other than Index
Stocks received by the Trust as a result of any recapitalization,
reorganization, merger, payment of a dividend or other similar transaction
entered into by any of the companies included in the applicable Index and may
direct the Trustee to invest the proceeds of any such sale in additional Index
Stocks. In accordance with each Indenture, and with procedures to be specified
by the Sponsors or provided therein and on the basis of computer programs, the
Trustee will purchase and sell Securities in a manner that maintains, to the
extent practicable, the same proportionate relationship among the Securities in
the Portfolio as exists among the stocks in the relevant Index (Sections 3.08
and 3.11).
Failure to declare or pay dividends, institution of materially adverse
legal proceedings, defaults materially and adversely affecting future
declaration or payment of dividends, or the occurrence of other materially
adverse credit factors will not be a basis for the disposition of a Security
unless such Security is eliminated from the applicable Index.
The Trustee will follow a policy that it will place securities transactions
with a broker or dealer only if it expects to obtain the most favorable prices
and executions of orders. Transactions in securities of the nature held in the
Fund are generally made in brokerage transactions (as distinguished from
principal transactions--see Public Sale of Units--Underwriters' and Sponsors'
Profits) and the Sponsors or any of their affiliates may act as brokers therein
if the Trustee expects thereby to obtain the most favorable prices and
execution. The furnishing of statistical and research information to the Trustee
by any of the securities dealers through which transactions are executed will
not be considered in placing securities transactions.
REPORTS TO HOLDERS
The Trustee furnishes Holders with each distribution a statement of the
amount of income and the amount of other receipts, if any, which are being
distributed, expressed in each case as a dollar amount per Unit. Within a
reasonable period of time after the end of each calendar year (normally prior to
January 31 of the succeeding year), the Trustee of each Trust will furnish to
each person who at any time during the calendar year was a Holder of record a
statement, in reasonable detail, (i) summarizing transactions for such year in
the Income, Capital and Reserve Accounts, including a list of Securities sold
and purchased during such year, (ii) stating the Redemption Price based upon the
computation thereof made on the 31st day of December of such year, (iii)
specifying the amounts distributed during such year to Holders with respect to
the Income Account and the Capital Gains Account and (iv) if applicable,
summarizing transactions for such year with respect to such person's
participation
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in the Reinvestment Plan. The accounts of each Trust shall be audited not less
frequently than annually by independent certified public accountants designated
by the Sponsors, and the report of such accountants shall be furnished by the
Trustee to Holders upon request (Section 8.01[e]).
CERTIFICATES
Certain of the Sponsors may collect additional charges for registering and
shipping Certificates to purchasers of Units. These Certificates are
transferable or interchangeable upon presentation at the office of the relevant
Trustee as set forth on the back of this Prospectus, properly endorsed or
accompanied by an instrument of transfer satisfactory to the Trustee, together
with a payment of $2.00 if required by the Trustee (or such other amount as may
be specified by the Trustee and approved by the Sponsors) for each new
Certificate and any sums payable for taxes or other governmental charges imposed
upon such transaction (Section 6.01). Mutilated, destroyed, stolen or lost
Certificates will be replaced upon delivery of satisfactory indemnity and
payment of expenses incurred (Section 6.02).
AMENDMENT AND TERMINATION
Each Indenture may be amended by the Trustee and the Sponsors without the
consent of any of the Holders (a) to cure any ambiguity or to correct or
supplement any provision thereof which may be defective or inconsistent, (b) to
change any provision thereof as may be required by the SEC or any successor
governmental agency, (c) to add or change any provision thereof as may be
necessary or advisable for continuing qualification of the Trust as a regulated
investment company under the Internal Revenue Code or (d) to make such other
provisions as shall not materially adversely affect the interest of the Holders.
Each Indenture may also be amended in any respect by the Sponsors and the
Trustee, or any of the provisions thereof may be waived, with the consent of the
Holders of 51% of the Units then outstanding, provided that no such amendment or
waiver will reduce the interest in the Trust of any Holder without the consent
of such Holder or reduce the percentage of Units required to consent to any such
amendment or waiver without the consent of all Holders. The Trustee must
promptly notify Holders of the substance of any such amendment (Section 10.01).
The Fund will be terminated and liquidated on or before the Mandatory
Termination Date set forth under Investment Summary. Either Indenture may be
terminated if the value of the Trust is less than 40% of its value on the
Initial Date of Deposit or if the number of outstanding Units is less than 40%
of the number outstanding on the Initial Date of Deposit (see Investment
Summary), and may be terminated at any time by Holders holding 51% of the
outstanding Units (Sections 8.01[g] and 9.01). In addition, either Indenture may
be terminated if the applicable Index ceases to be compiled or made available.
Written notice of termination of the Indenture must be given to all Holders
(Section 9.01). Within a reasonable period of time after such termination, the
Trustee must sell all of the Securities then held and distribute to Holders,
upon surrender for cancellation of their Certificates, and after deductions of
accrued and unpaid fees, taxes and governmental and other charges, the Holders'
interest in the Income and Capital Accounts (Section 9.01). Such distributions
normally will be made by mailing a check in the amount of each Holder's interest
in such accounts, to the address of such Holder appearing on the record books of
the Trustee. Due to market conditions the amount realized by a Holder on such
distributions may be more or less than the amount paid by such Holder for his
Units.
RESIGNATION, REMOVAL AND LIMITATIONS ON LIABILITY
THE TRUSTEES--A Trustee or any successor may resign upon notice to the
Sponsors. The Trustee of either Trust may be removed upon the direction of the
Holders of 51% of the Units of the Trust at any time or by the Sponsors without
the consent of any of the Holders if the Trustee becomes incapable of acting or
becomes bankrupt or its affairs are taken over by public authorities or if the
Sponsors determine in good faith for any reason that the replacement of the
Trustee is in the best interest of the Holders. Such resignation or removal
shall become effective upon the acceptance of appointment by the successor. In
case of such resignation or removal the Sponsors are to use their best efforts
to appoint a successor promptly and if upon resignation of a Trustee no
successor has accepted appointment within thirty days after notification, the
Trustee may apply to a court of competent jurisdiction for the appointment of a
successor. The Trustee shall be under no liability for any action taken in good
faith in reliance on prima facie properly executed documents or for the
disposition of monies or Securities, nor shall they be liable or responsible in
any way for depreciation or loss incurred by reason of the sale of any
Securities. This provision, however, shall not protect a Trustee in cases of
wilful misfeasance, bad faith, gross negligence or reckless disregard of its
obligations and duties. In the event of the failure of the Sponsors to act, the
Trustee of the Trust may act under the Indenture and shall not be liable for any
such action taken in good
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faith. The Trustees shall not be personally liable for any taxes or other
governmental charges imposed upon or in respect of the Securities or upon the
interest thereon. In addition, the Indentures contains other customary
provisions limiting the liability of the Trustees.
THE SPONSORS--Any Sponsor may resign if one remaining Sponsor maintains a
net worth of $2,000,000 and is agreeable to such resignation. A new Sponsor may
be appointed for either Trust by the remaining Sponsors and the Trustee to
assume the duties of the resigning Sponsor (Section 7.04). If there is only one
Sponsor of a Trust and it shall fail to perform its duties or becomes incapable
of acting or becomes bankrupt or its affairs are taken over by public
authorities, then the Trustee may (a) appoint a successor Sponsor at rates of
compensation deemed by the Trustee to be reasonable and as may not exceed
amounts prescribed by the SEC, or (b) terminate the Indenture and liquidate the
Fund or (c) continue to act as Trustee without terminating the Indenture
(Section 8.01[f]). The Agent for the Sponsors has been appointed by the other
Sponsors for purposes of taking action under each Indenture (Section 7.01). If
the Sponsors are unable to agree with respect to action to be taken jointly by
them under an Indenture and they cannot agree as to which Sponsors shall
continue to act as Sponsors, then Merrill Lynch, Pierce, Fenner & Smith
Incorporated shall continue to act as sole Sponsor (Section 7.02[b]). If one of
the Sponsors fails to perform its duties or becomes incapable of acting or
becomes bankrupt or its affairs are taken over by public authorities, then such
Sponsor is automatically discharged and the other Sponsors shall act as Sponsor
(Section 7.02[a]). The Sponsors shall be under no liability to the Fund or to
the Holders of Units for taking any action or for refraining from taking any
action in good faith or for errors in judgment and shall not be liable or
responsible in any way for depreciation or loss incurred by reason of the sale
of any Securities. This provision, however, shall not protect the Sponsors in
cases of wilful misfeasance, bad faith, gross negligence or reckless disregard
of their obligations and duties (Section 7.05). The Sponsors and their
successors are jointly and severally liable under the Indentures. A Sponsor may
transfer all or substantially all of its assets to a corporation or partnership
which carries on its business and duly assumes all of its obligations under the
Indentures and in such event it shall be relieved of all further liability under
the Indentures (Section 7.03).
MISCELLANEOUS
TRUSTEE
The Trustee and its address are named on the back cover page of this
Prospectus. The Trustee is subject to supervision by the Federal Deposit
Insurance Corporation, the Board of Governors of the Federal Reserve System and
either the Comptroller of the Currency or State banking authorities.
LEGAL OPINION
The legality of the Units has been passed upon by Davis Polk & Wardwell,
450 Lexington Avenue, New York, New York 10017, as special counsel for the
Sponsors.
AUDITORS
The Statements of Condition, including the Portfolios of the Fund, included
herein have been audited by Deloitte & Touche LLP, independent accountants, as
stated in their opinion appearing herein and have been so included in reliance
upon that opinion given on the authority of that firm as experts in accounting
and auditing.
SPONSORS
Each Sponsor is a Delaware corporation and is engaged in the underwriting,
securities and commodities brokerage business and is a member of the New York
Stock Exchange, Inc., other major securities exchanges and commodity exchanges,
and the National Association of Securities Dealers, Inc. Merrill Lynch, Pierce,
Fenner & Smith Incorporated and Merrill Lynch Asset Management, a Delaware
corporation, each of which is a subsidiary of Merrill Lynch & Co., Inc., are
engaged in the investment advisory business. Smith Barney Inc., an investment
banking and securities broker-dealer firm, is an indirect wholly-owned
subsidiary of The Travelers Inc. Prudential Securities Incorporated, a
wholly-owned subsidiary of Prudential Securities Group Inc. and an indirectly
wholly-owned subsidiary of the Prudential Insurance Company of America, is
engaged in the investment advisory business. Dean Witter Reynolds Inc., a
principal operating subsidiary of Dean Witter, Discover & Co. is engaged in the
investment advisory business. PaineWebber Incorporated is engaged in the
investment advisory business and is a wholly-owned subsidiary of PaineWebber
Group Inc. 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
17
<PAGE>
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.
The Sponsors have maintained secondary markets in Defined Asset Funds for
over 20 years. For decades informed investors have purchased unit investment
trusts for dependability and professional selection of investments. Defined
Asset Funds offers an array of simple and convenient investment choices, suited
to fit a wide variety of personal financial goals--a buy and hold strategy for
capital accumulation, such as for children's education or a nest egg for
retirement, or attractive, regular current income consistent with relative
protection of capital. There are Defined Funds to meet the needs of just about
any investor. Unit investment trusts are particularly suited for the many
investors who prefer to seek long-term profits by purchasing sound investments
and holding them, rather than through active trading. Few individuals have the
knowledge, resources, capital or time to buy and hold a diversified portfolio on
their own; it would generally take a considerable sum of money to obtain the
breadth and diversity offered by Defined Funds. Sometimes it takes a combination
of Defined Funds to plan for your objectives.
One of the most important decisions an investor faces may be how to
allocate his investments among asset classes. Diversification among different
kinds of investments can balance the risks and rewards of each one. Most
investment experts recommend stocks for long-term capital growth. Long-term
corporate bonds offer relatively high 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.
Instead of having to select individual securities on their own, purchasers
of Defined Funds benefit from the expertise of Defined Asset Funds' experienced
buyers and research analysts. In addition, they gain the advantage of
diversification by investing in units of a Defined Fund holding securities of
several different issuers. Such diversification reduces risk, but does not
eliminate it. While the portfolio of a managed fund, such as a mutual fund,
continually changes, defined bond funds offer a defined portfolio and a schedule
of income distributions identified in the prospectus. Investors know, generally,
when they buy, the issuers, maturities, call dates and ratings of the securities
in the portfolio. Of course, the portfolio may change somewhat over time as
additional securities are deposited, as securities mature or are called or
redeemed or as they are sold to meet redemptions and in certain other limited
circumstances. Investors buy bonds for dependability--they know what they can
expect to earn and that principal is distributed as the bonds mature. Investors
also know at the time of purchase their estimated income and current and
long-term returns, subject to credit and market risks and to changes in the
portfolio or the fund's expenses.
Defined Asset Funds offers a variety of fund types. The tax exemption of
municipal securities, which makes them attractive to high-bracket taxpayers, is
offered by Defined Municipal Investment Trust Funds. Municipal Defined Funds
offer a simple and convenient way for investors to earn monthly income free from
regular Federal income tax. Defined Municipal Investment Trust Funds have
provided investors with tax-free income for more than 30 years. Defined
Corporate Income Funds, with higher current returns than municipal or government
funds, are suitable for Individual Retirement Accounts and other tax-advantaged
accounts and provide monthly income. Defined Government Securities Income Funds
provide a way to participate in markets for U.S. government securities while
earning an attractive current return. Defined International Bond Funds, invested
in bonds payable in foreign currencies, offer the potential to profit from
changes in currency values and possibly from interest rates higher than paid on
comparable US bonds, but investors incur a higher risk for these potentially
greater returns. Historically, stocks have offered growth of capital, and thus
some protection against inflation, over the long term. Defined Equity Income
Funds offer participation in the stock market, providing current income as well
as the possibility of capital appreciation. The S&P Index Trusts offer a
convenient and inexpensive way to participate in broad market movements. Concept
Series seek to capitalize on selected anticipated economic, political or
business trends. Utility Stock Series, consisting of stocks of issuers with
established reputations for regular cash dividends, seek to benefit from
dividend increases. Select Ten Portfolios seek total return by investing for one
year in the the ten highest yielding stocks on a designated stock index.
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Defined
Asset FundsSM
SPONSORS: EQUITY INCOME FUND
Merrill Lynch, INDEX SERIES
Pierce, Fenner & Smith Incorporated S&P 500 Trust 2
Defined Asset Funds S&P MidCap Trust
P.O. Box 9051 Unit Investment Trusts
Princeton, N.J. 08543-9051 PROSPECTUS
(609) 282-8500 This Prospectus does not contain all of
Smith Barney Inc. the information set forth in the
Unit Trust Department registration statements and exhibits
388 Greenwich Street relating thereto, which the Fund has
23rd Floor filed with the Securities and Exchange
New York, NY 10013 Commission, Washington, D.C. under the
1-800-223-2532 Securities Act of 1933 and the
PaineWebber Incorporated Investment Company Act of 1940, and to
1200 Harbor Blvd. which reference is hereby made.
Weehawken, N.J. 07087 No person is authorized to give any
(201) 902-3000 information or to make any
Prudential Securities Incorporated representations with respect to this
One Seaport Plaza investment company not contained in
199 Water Street this Prospectus; and any information or
New York, N.Y. 10292 representation not contained herein
(212) 776-1000 must not be relied upon as having been
Dean Witter Reynolds Inc. authorized. This Prospectus does not
Two World Trade Center constitute an offer to sell, or a
59th Floor solicitation of an offer to buy,
New York, NY 10048 securities in any state to any person
(212) 392-2222 to whom it is not lawful to make such
INDEPENDENT ACCOUNTANTS: offer in such state.
Deloitte & Touche LLP
2 World Financial Center
9th Floor
New York, N.Y. 10281-1414
TRUSTEE FOR THE S&P 500 TRUST 2:
The Chase Manhattan Bank, N.A.
Unit Trust Department
Box 2051
New York, NY 10081
1-800-323-1508
TRUSTEE FOR THE S&P MIDCAP
TRUST:
The Bank of New York
Unit Investment Trust Department
P.O. Box 974
Wall Street Station
New York, N.Y. 10268-0974
1-800-221-7771
14124--4/95
