<PAGE>
DEFINED ASSET FUNDSSM
- --------------------------------------------------------------------------------
EQUITY INVESTOR FUND The objective of these Defined Funds is to provide
INDEX SERIES investors with the opportunity to purchase Units
S&P 500 TRUST 2 representing proportionate interests in defined
S&P MIDCAP TRUST portfolios of preselected securities consisting of
(UNIT INVESTMENT substantially all of the common stocks, in
TRUSTS) substantially the same proportions, which comprise
- ------------------------------the Standard & Poor's 500 Stock Price Composite
- -- MONTHLY INCOME Index or the Standard & Poor's MidCap 400 Index,
- -- PROFESSIONAL SELECTION respectively. The Trusts are designed to produce
- -- DIVERSIFICATION investment results that generally correspond to
- -- REINVESTMENT OPTION the price and yield performance of common stocks
represented by these Indices. There is no
assurance that these objectives will be met. The
Fund is not sponsored by or affiliated with
Standard and Poor's Corporation.
The value of Units 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.
An investor may invest in Units of one or both
Trusts.
Minimum purchase: $250.
-------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
SPONSORS: OF THIS DOCUMENT. ANY REPRESENTATION TO THE
Merrill Lynch, CONTRARY IS A CRIMINAL OFFENSE.
Pierce, Fenner & Smith -------------------------------------------------
Incorporated INVESTORS SHOULD READ THIS PROSPECTUS CAREFULLY
Smith Barney Inc. AND RETAIN IT FOR FUTURE REFERENCE.
Prudential Securities INQUIRIES SHOULD BE DIRECTED TO THE TRUSTEES AT
Incorporated THE TELEPHONE NUMBERS
Dean Witter Reynolds Inc. LISTED ON THE BACK OF THIS PROSPECTUS.
PaineWebber Incorporated PROSPECTUS DATED APRIL 30, 1997.
<PAGE>
- --------------------------------------------------------------------------------
Defined Asset FundsSM
Defined Asset Funds is America's oldest and largest family of unit investment
trusts, with over $115 billion sponsored in the last 25 years. Each Defined
Asset Fund is a portfolio of preselected securities. The portfolio is divided
into 'units' representing equal shares of the underlying assets. Each unit
receives an equal share of income and principal distributions.
Defined Asset Funds offer several defined 'distinctives'. You know in advance
what you are investing in and that changes in the portfolio are limited - a
defined portfolio. Most defined bond funds pay interest monthly - defined
income. The portfolio offers a convenient and simple way to invest - simplicity
defined.
Your financial professional can help you select a Defined Asset Fund to meet
your personal investment objectives. Our size and market presence enable us to
offer a wide variety of investments. The Defined Asset Funds family offers:
o Municipal portfolios
o Corporate portfolios
o Government portfolios
o Equity portfolios
o International portfolios
The terms of Defined Funds are as short as one year or as long as 30 years.
Special defined bond funds are available including: insured funds, double and
triple tax-free funds and funds with 'laddered maturities' to help protect
against changing interest rates. Defined Asset Funds are offered by prospectus
only.
- ----------------------------------------------------------------
Defining The Index Series
- ----------------------------------------------------------------
Indexing is an investment strategy that allows the sponsors to create a
portfolio of stocks that is carefully structured to mirror, as closely as
possible, the total return of a market index. Investors often compare the
performance of their investments to a measure of overall market performance --
an index. Each Trust is designed to offer investors an opportunity, with a
single, convenient purchase, to participate in the total return performance of
an index 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.
Investors in the Index Series do not select individual stocks or market sectors.
Investors, in effect, buy the major portion of the market represented by an
index. The portfolio is broadly diversified. Of course, a Trust may not hold all
of the stocks in the related index at all times, but will seek to reflect the
performance of that index. The Sponsors expect to have at least 95% of each
Trust's assets invested in the common stocks of the related index and to
maintain a correlation of .97-.99 between each index and the investment results
of the related trust.
The Fund was created on February 19, 1992. The information in this prospectus is
as of December 31, 1996, the evaluation date.
- ----------------------------------------------------------------
Defining Your Investment
- ----------------------------------------------------------------
MONTHLY INCOME DISTRIBUTIONS
The Trusts pay monthly income, even though the securities generally pay
dividends quarterly. Monthly distributions of dividends are payable on the 25th
of the month to holders of record on the 10th day of the month. In order to meet
certain tax requirements, a special distribution of income including capital
gains, may be paid to holders of record as of a date in December. Any capital
gain net income will generally be distributed after the end of each Trust's
taxable year.
It is expected that the proceeds of the sale or redemption of securities will
not be distributed but will be reinvested in additional securities. To the
extent these proceeds are available for distribution, they will be distributed
on the next distribution day.
REINVESTMENT OPTION
You can elect to automatically reinvest your distributions into additional units
of a Trust. Reinvesting helps to compound your income for a greater total
return.
TAXES
Distributions which are taxable as ordinary income to investors will constitute
dividends for Federal income tax purposes and may, subject to certain
limitations, be eligible for the 70% dividends-received deduction for certain
corporations. (See Taxes in Part B.)
MANDATORY TERMINATION DATE
The Trusts will terminate by February 28, 2017. The final distribution will be
made within a reasonable time afterward. A Trust may be terminated earlier if
its value is less than 40% of the value of the securities when deposited. On the
evaluation date the value of the S&P 500 Trust 2 was 134% of the value of its
securities when deposited and the value of the S&P MidCap Trust was 133% of the
value of its securities when deposited.
REDEEMING OR SELLING YOUR INVESTMENT
You may sell or redeem your units at any time prior to the termination of the
Portfolio. Your price will be based on the then current net asset value. There
is no fee for redeeming or selling your units.
A-2
<PAGE>
- ----------------------------------------------------------------
Defining Your Risks
- ----------------------------------------------------------------
Unit price fluctuates with the value of a portfolio, and the value of the
portfolio will be affected by changes in the financial condition of the issuers,
general economic conditions, movements in stock prices generally, the impact of
the Sponsors' purchase and sale of the securities and other factors. An
investment in Units should be made with the understanding that the financial
condition of the issuers of the securities may become impaired or that the
general condition of the stock market may worsen. 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 various unpredictable factors. Further distributions of
income on the underlying securities will generally depend upon the declaration
of dividends by the issuers, and there can be no assurance that the issuers of
securities will pay dividends or that the current level of dividends can be
maintained or increased. Therefore, there is no guarantee that the objective of
the Trusts will be achieved.
Unlike a mutual fund, the Trusts are not actively managed and the Sponsors
receive no management fee. Therefore, the adverse financial condition of an
issuer or any market movement in the price of a security will not necessarily
require the sale of securities from a Trust or mean that the Sponsors will not
continue to purchase the security in order to create additional Units. Although
the Trusts are regularly reviewed and evaluated and the Sponsors may instruct
the Trustee to sell securities under certain limited circumstances, securities
will not be sold to take advantage of market fluctuations or changes in
anticipated rates of appreciation.
Investors in the S&P MidCap Trust should note that the 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 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. 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 400 Index.
The S&P 500 Trust is not affected by the foregoing restrictions because it is
covered by an SEC exemptive order. (See Risk Factors in Part B.)
- ----------------------------------------------------------------
Defining Your Costs
- ----------------------------------------------------------------
S&P 500 TRUST 2:
PUBLIC OFFERING PRICE PER 1,000 UNITS $1,780.58
The Public Offering Price as of December 31, 1996, the evaluation date, is based
on the aggregate value of the underlying securities ($237,112,848) and any cash
held to purchase securities, divided by the number of units outstanding
(136,231,823) times 1,000, plus a maximum sales charge of 2.25% (2.302% on the
value of the underlying securities). The redemption and secondary market
repurchase price as of the evaluation date was $1,740.51 per 1,000 units ($40.07
per 1,000 units less than the Public Offering Price).
S&P MIDCAP TRUST:
PUBLIC OFFERING PRICE PER 1,000 UNITS $1,374.59
The Public Offering Price as of December 31, 1996, the evaluation date, is based
on the aggregate value of the underlying securities ($66,576,355) and any cash
held to purchase securities, divided by the number of units outstanding
(49,548,593) times 1,000, plus a maximum sales charge of 2.25% (2.302% on the
value of the underlying securities). The redemption and secondary market
repurchase price as of the evaluation date was $1,343.66 per 1,000 units ($30.93
per 1,000 units less than the Public Offering Price).
The Public Offering Prices and the redemption and secondary market repurchase
prices on any subsequent date will vary. The underlying securities are valued by
the Trustee on the basis of their closing sale prices at 4:00 p.m. Eastern time
on every business day.
SALES CHARGES
Although each Trust is a unit investment trust rather than a mutual fund, the
following information is presented to permit a comparison of fees and an
understanding of the direct or indirect costs and expenses that you pay
As a %
of Secondary
Market
Public
Offering Price
-----------------
Maximum Sales Charge 2.25%
ESTIMATED ANNUAL OPERATING EXPENSES
S&P 500 S&P MIDCAP
TRUST 2 TRUST
Amount per Amount per
1,000 Units 1,000 Units
------------- -------------
Trustee's Fee $ 0.79 $ 0.84
Portfolio Supervision, Bookkeeping
and Administrative Fees $ 0.38 $ 0.38
Other Operating Expenses $ 1.18 $ 1.18
------------- -------------
TOTAL $ 2.35 $ 2.40
A-3
<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, 1996 and the related statements of operations and of changes in
net assets for the years ended December 31, 1996, 1995 and 1994. 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, 1996, as shown in such portfolio, were confirmed to us by The Chase
Manhattan Bank, 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, 1996 and the results
of its operations and changes in its net assets for the above-stated years in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, N.Y.
April 24, 1997
D-1
<PAGE>
DEFINED ASSET FUNDS - EQUITY INCOME FUND INDEX SERIES,
S&P 500 TRUST - 2
STATEMENT OF CONDITION
AS OF DECEMBER 31, 1996
<TABLE>
<S> <C> <C>
TRUST PROPERTY:
Investment in marketable securities - at value
(cost $171,704,148) (Note 1) $237,112,848
Dividends receivable 414,071
Receivable for units sold 500,164
Other receivable 56,422
Total trust property 238,083,505
LESS LIABILITIES:
Advance from Trustee $ 221,750
Payable for securities purchased 621,665 843,415
NET ASSETS, REPRESENTED BY:
136,231,823 units of fractional
undivided interest outstanding (Note 3) 237,129,303
Undistributed net investment income 110,787 $237,240,090
UNIT VALUE ($237,240,090 / 136,231,823 units) $1.74144
</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>
Years Ended December 31,
1996 1995 1994
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividend income $ 4,340,209 $ 2,605,520 $1,924,809
Trustee's fees and expenses (207,657) (127,500) (91,625)
Sponsors' fees (42,468) (29,100) (25,941)
Net investment income 4,090,084 2,448,920 1,807,243
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Realized gain on securities sold or
redeemed 3,767,972 562,667 494,726
Unrealized appreciation (depreciation) of
investments 33,208,147 28,688,951 (1,429,745)
Net realized and unrealized gain (loss) on
investments 36,976,119 29,251,618 (935,019)
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $41,066,203 $31,700,538 $ 872,224
See Notes to Financial Statements.
</TABLE>
D-3
<PAGE>
DEFINED ASSET FUNDS - EQUITY INCOME FUND INDEX SERIES,
S&P 500 TRUST - 2
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE><CAPTION>
Years Ended December 31,
1996 1995 1994
<S> <C> <C> <C>
OPERATIONS:
Net investment income $ 4,090,084 $ 2,448,920 $ 1,807,243
Realized gain on securities sold or
redeemed 3,767,972 562,667 494,726
Unrealized appreciation (depreciation) of
investments 33,208,147 28,688,951 (1,429,745)
Net increase in net assets resulting from
operations 41,066,203 31,700,538 872,224
DISTRIBUTIONS TO HOLDERS (Note 2):
Income (4,215,040) (2,472,574) (1,793,155)
Principal (1,301,160) (594,288) (350,938)
Total distributions (5,516,200) (3,066,862) (2,144,093)
CAPITAL SHARE TRANSACTIONS (Note 4):
Issuance of 42,186,123, 31,833,731 and
11,104,169 units, respectively 65,351,906 41,587,777 12,228,709
Redemption of 2,549,484, 684,158 and 978,667
units, respectively (4,398,518) (866,111) (1,074,397)
NET CAPITAL SHARE TRANSACTIONS 60,953,388 40,721,666 11,154,312
NET INCREASE IN NET ASSETS 96,503,391 69,355,342 9,882,443
NET ASSETS AT BEGINNING OF YEAR 140,736,699 71,381,357 61,498,914
NET ASSETS AT END OF YEAR $237,240,090 $140,736,699 $71,381,357
PER UNIT:
Income distributions during year $.03330 $0.03020 $.02877
Principal distributions during year $.00962 $.00620 $.00540
Net asset value at end of year $1.74144 $1.45697 $1.09070
TRUST UNITS OUTSTANDING AT END OF YEAR 136,231,823 96,595,184 65,445,611
See Notes to Financial Statements.
</TABLE>
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 136,231,823 units at Dates of Deposit $174,373,800
Less charge 3,923,760
Net amount applicable to Holders 170,450,040
Redemptions of units - net cost of 4,212,309 units
redeemed less redemption amounts (1,349,939)
Realized gain on securities sold or redeemed 4,905,612
Principal distributions (2,285,110)
Net unrealized appreciation of investments 65,408,700
Net capital applicable to Holders $237,129,303
4. REDEMPTIONS
Holders may request redemptions of units by presentation thereof to the
Trustee, The Chase Manhattan Bank.
5. INCOME TAXES
As of December 31, 1996, net unrealized appreciation of investments, based
on cost for Federal income tax purposes, aggregated $65,408,700 of which
$2,543,932 related to appreciated securities and $67,952,632 related to
depreciated securities. The aggregate cost of investment securities for
Federal income tax purposes was $171,704,148 at December 31, 1996.
D-5
<PAGE>
DEFINED ASSET FUNDS - EQUITY INCOME FUND INDEX SERIES,
S&P 500 TRUST - 2
PORTFOLIO
AS OF DECEMBER 31, 1996
<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. 69,400 $ 3,986,658 $ 6,861,925 2.8939%
2 Coca-Cola 104,900 3,121,863 5,520,362 2.3281
3 Exxon Corp. 52,300 3,685,184 5,125,400 2.1616
4 Intel Corp. 34,600 1,531,777 4,530,437 1.9106
5 Microsoft Corp. 50,400 1,948,226 4,164,300 1.7563
6 Merck & Co., Inc. 50,800 2,555,728 4,025,900 1.6979
7 Philip Morris 34,300 2,642,476 3,863,037 1.6291
8 Royal Dutch Petroleum 22,600 2,588,053 3,858,950 1.6275
9 IBM 21,800 1,849,226 3,291,800 1.3883
10 Procter & Gamble. 28,700 1,931,064 3,085,250 1.3012
11 A T&T Corp 68,300 2,684,703 2,971,050 1.2530
12 Johnson & Johnson 56,100 1,871,214 2,790,975 1.1771
13 Bristol-Myers Squibb 21,100 1,521,640 2,294,625 0.9677
14 Pfizer, Inc. 27,200 1,331,743 2,254,200 0.9507
15 Du Pont (E.I.) De Nemours 23,700 1,505,433 2,236,687 0.9432
16 Wal-Mart Stores 96,700 2,520,790 2,212,012 0.9328
17 Hewlett-Packard Co. 42,900 1,325,109 2,155,725 0.9092
18 American Int'l Group In. 19,750 1,381,933 2,137,937 0.9016
19 Citicorp 19,800 1,093,400 2,039,400 0.8601
20 Mobil Corp. 16,600 1,456,591 2,029,350 0.8559
21 Walt Disney Co. 28,600 1,567,925 1,991,275 0.8398
22 Pepsico, Inc. 65,500 1,532,871 1,915,875 0.8080
23 GTE Corp. 40,500 1,516,969 1,842,750 0.7772
24 Chevron Corp. 27,500 1,270,568 1,787,500 0.7539
25 General Motors Corp. 31,900 1,461,679 1,778,425 0.7500
26 Cisco Systems 27,400 922,975 1,743,325 0.7352
27 Federal Nat'l Mortg Assn. 46,000 1,091,053 1,713,500 0.7227
28 Lilly (Eli) & Co. 23,300 950,351 1,700,900 0.7173
29 Bell South Corp. 41,900 1,350,711 1,691,712 0.7134
30 AMOCO Corp. 21,000 1,277,910 1,690,500 0.7130
31 Abbott Laboratories 32,700 1,149,394 1,659,525 0.6999
32 Chase Manhattan 18,460 893,579 1,647,555 0.6948
33 Boeing Co. Com. 15,486 902,828 1,647,365 0.6947
34 Ford 50,000 1,424,969 1,593,750 0.6721
35 American Home Products 26,900 1,116,561 1,577,012 0.6650
36 Motorola, Inc. 25,000 1,187,415 1,534,375 0.6471
37 BankAmerica Corp. 15,140 836,747 1,510,215 0.6369
38 Gillette Co. 18,800 766,798 1,461,700 0.6165
39 Minnesota Mining & Mfg. 17,600 976,514 1,458,600 0.6152
40 Ameritech. 23,200 1,045,842 1,406,500 0.5932
41 Mcdonald's Corp. 29,400 1,017,061 1,330,350 0.5611
42 SBC Communications, Inc. 25,400 1,109,574 1,314,450 0.5544
43 Lucent Technologies 26,810 1,253,187 1,239,962 0.5229
44 Travelers Group Inc. 26,999 615,154 1,225,060 0.5167
45 Bell Atlantic Corp. 18,500 1,043,387 1,197,875 0.5052
46 Nations Bank. 12,100 749,141 1,182,775 0.4988
47 Unilever 6,700 824,646 1,174,175 0.4952
48 Oracle Systems Corp. Com. 27,675 548,251 1,155,431 0.4873
49 Columbia Health Care Corp. 28,338 827,592 1,154,773 0.4869
50 Kimberly-Clark Corp. 11,910 687,976 1,134,427 0.4783
</TABLE>
D-6
<PAGE>
DEFINED ASSET FUNDS - EQUITY INCOME FUND INDEX SERIES,
S&P 500 TRUST - 2
PORTFOLIO
AS OF DECEMBER 31, 1996
<TABLE><CAPTION>
Percentage
of Total
Portfolio Market
No. Common Stocks Shares Cost(1) Value(1) Value
<S> <C> <C> <C> <C> <C>
51 American Express 20,000 $ 678,660 $ 1,130,000 0.4766%
52 Eastman Kodak. 14,000 744,104 1,123,500 0.4738
53 Texaco, Inc. 11,100 783,055 1,089,188 0.4594
54 Allstate Corp 18,785 569,747 1,087,178 0.4584
55 Wells Fargo & Co. 3,900 850,783 1,052,025 0.4437
56 Schlumberger, Ltd. 10,400 705,483 1,038,700 0.4381
57 Chrysler 30,700 716,767 1,013,100 0.4273
58 Home Depot Inc. 20,200 890,171 1,012,525 0.4270
59 Schering Plough 15,600 659,736 1,010,100 0.4260
60 Monsanto Co. 24,800 477,998 964,100 0.4066
61 MCI Communications 28,900 680,931 944,669 0.3984
62 Emerson Electric Co. 9,500 645,423 919,125 0.3876
63 Atlantic Richfield 6,800 768,102 901,000 0.3800
64 Time Warner, Inc. 24,000 912,018 900,000 0.3796
65 Nynex Corp. 18,500 811,429 890,313 0.3755
66 First Union Corp. 12,000 646,136 888,000 0.3745
67 Warner-Lambert Co. 11,400 473,913 855,000 0.3606
68 Pharmacia & Upjohn, Inc. 21,450 702,648 849,956 0.3585
69 Compaq Computer 11,400 388,053 846,450 0.3570
70 Anheuser-Busch 21,000 622,004 840,000 0.3543
71 Federal Home Loan 7,500 476,103 825,938 0.3483
72 Dow Chemicals 10,200 680,422 799,425 0.3371
73 Allied-Signal Inc. 11,900 487,811 797,300 0.3363
74 Campbell Soup 9,900 499,893 794,475 0.3351
75 Banc One Corp. 18,044 600,117 775,892 0.3272
76 Morgan J.P 7,900 564,006 771,238 0.3253
77 Computer Assoc. Int'l 15,375 418,287 764,906 0.3226
78 Sears Roebuck 16,500 495,389 761,062 0.3210
79 Sara Lee Corp. 20,400 591,081 759,900 0.3205
80 Lockheed Corp 8,145 440,169 745,268 0.3143
81 First Chicago 13,487 441,673 724,926 0.3057
82 Nike, Inc. 12,100 318,118 722,975 0.3049
83 Sprint 18,100 643,350 721,737 0.3043
84 Xerox 13,700 501,838 720,963 0.3041
85 First Data Corp. 18,900 609,163 689,850 0.2909
86 Medtronic Inc. 10,100 375,372 686,800 0.2897
87 Norwest Corp. 15,600 450,118 678,600 0.2862
88 Northern Telecom, Ltd 10,900 450,395 674,438 0.2844
89 United Technologies Corp. 10,100 389,246 666,600 0.2811
90 WMX Technologies 20,400 661,968 665,550 0.2807
91 Pacific Telesis Group 18,000 671,948 661,500 0.2790
92 US West Communications G 20,100 548,046 648,225 0.2734
93 Southern Co. 28,400 600,240 642,550 0.2710
94 Union Pacific 10,300 436,693 619,287 0.2612
95 Caterpillar Inc. 8,100 393,230 609,525 0.2571
96 Seagram Ltd 15,700 491,663 608,375 0.2566
97 Amgen Inc. 11,100 437,669 603,563 0.2545
98 Kellogg Co. 8,900 586,933 584,062 0.2463
99 Colgate Palmolive 6,200 403,460 571,950 0.2412
100 Mcdonnell Douglas 8,900 235,998 569,600 0.2402
101 Merrill Lynch Co. 6,900 310,536 562,350 0.2372
</TABLE>
D-7
<PAGE>
DEFINED ASSET FUNDS - EQUITY INCOME FUND INDEX SERIES,
S&P 500 TRUST - 2
PORTFOLIO
AS OF DECEMBER 31, 1996
<TABLE><CAPTION>
Percentage
of Total
Portfolio Market
No. Common Stocks Shares Cost(1) Value(1) Value
<S> <C> <C> <C> <C> <C>
102 Rockwell Int'l 9,200 $ 379,185 $ 560,050 0.2362%
103 Bank Of New York Co., Inc. 16,500 339,178 556,875 0.2349
104 Fleet Financial Group 11,100 433,666 553,613 0.2335
105 Burlington Northern 6,400 443,470 552,800 0.2331
106 Heinz H J 15,450 445,935 552,338 0.2329
107 General Re. Corp. 3,500 443,536 552,125 0.2329
108 PNC Financial 14,400 427,698 541,800 0.2285
109 3COM Corp. 7,300 359,998 535,637 0.2259
110 Airtouch Comm. 21,100 371,003 532,775 0.2247
111 Automatic Data Processing 12,200 379,243 523,075 0.2206
112 Viacom, Inc. 14,900 616,156 519,637 0.2192
113 Int'l Paper 12,700 473,303 512,763 0.2163
114 AETNA Inc. 6,400 383,758 512,000 0.2159
115 Texas Instruments 8,000 342,093 510,000 0.2151
116 Archer-Daniels-Midland 22,926 357,851 504,368 0.2127
117 Conagra Inc. 10,100 347,553 502,475 0.2119
118 May Department Stores 10,600 388,645 495,550 0.2090
119 Phillips Petroleum 11,100 355,405 491,175 0.2071
120 Corestates Financial Corp. 9,400 371,470 487,625 0.2057
121 US West Media Group 26,300 461,548 486,550 0.2052
122 Keycorp 9,500 318,725 479,750 0.2023
123 Raytheon 9,900 351,823 476,438 0.2009
124 Penney J.C. Co., Inc. 9,700 433,016 472,875 0.1994
125 CPC Int'l Inc. 6,100 356,717 472,750 0.1994
126 Baxter Int'l, Inc. 11,500 334,429 471,500 0.1989
127 Aluminum Co. of America 7,300 330,193 465,375 0.1963
128 Norfolk Southern Corp. 5,300 372,726 463,750 0.1956
129 Suntrust Bks., Inc. 9,400 256,598 462,950 0.1952
130 Loews Corp. 4,900 326,445 461,825 0.1948
131 Enron Corp. 10,700 340,969 461,438 0.1946
132 Boston Scientific Corp. 7,500 252,011 450,000 0.1898
133 Corning Inc. 9,700 328,897 448,625 0.1892
134 Worldcom Inc. 17,200 395,586 448,275 0.1891
135 Dean Witter Disc Corp. 6,741 315,532 446,591 0.1883
136 Deere & Co. 10,900 290,700 442,812 0.1868
137 Gannett Co. 5,900 334,308 441,763 0.1863
138 CIGNA Corp. 3,200 261,210 437,200 0.1844
139 PPG Ind. 7,700 303,535 432,163 0.1823
140 Barrick Gold Corp. 15,000 405,973 431,250 0.1819
141 Unocal Corp. 10,600 302,603 430,625 0.1816
142 National City Corp. 9,400 308,945 421,825 0.1779
143 Boatmen's Bancshares 6,500 236,119 419,250 0.1768
144 Seagate Technology Inc. 10,600 312,845 418,700 0.1766
145 General Mills, Com w/rights 6,600 397,818 418,275 0.1764
146 Walgreen Co. 10,400 261,065 416,000 0.1754
147 Illinois Tool Wks, Inc. 5,200 262,145 415,350 0.1752
148 BankBoston Corp. 6,400 258,370 411,200 0.1734
149 Dell Computer Corp. 7,600 261,925 403,750 0.1703
150 Sun Microsystems, Inc 15,500 218,863 398,156 0.1679
151 Weyerhaeuser 8,400 353,631 397,950 0.1678
</TABLE>
D-8
<PAGE>
DEFINED ASSET FUNDS - EQUITY INCOME FUND INDEX SERIES,
S&P 500 TRUST - 2
PORTFOLIO
AS OF DECEMBER 31, 1996
<TABLE><CAPTION>
Percentage
of Total
Portfolio Market
No. Common Stocks Shares Cost(1) Value(1) Value
<S> <C> <C> <C> <C> <C>
152 Wachovia Corp. 7,000 $ 282,413 $ 395,500 0.1668%
153 Duke Power Co. 8,500 351,986 393,125 0.1658
154 CUC International 16,525 349,595 392,468 0.1655
155 Chubb Corp. 7,300 319,105 392,375 0.1655
156 MBNA Corp. 9,425 182,185 391,138 0.1650
157 Mellon Bank Corp. 5,500 235,855 390,500 0.1647
158 First Bank Systems Inc. 5,700 303,271 389,025 0.1641
159 Texas Utilities Company 9,500 377,863 387,125 0.1633
160 CSX Corporation 9,100 363,473 384,475 0.1621
161 Household Int'l 4,100 191,030 378,225 0.1595
162 Albertsons Inc. 10,600 312,961 377,625 0.1593
163 Tele-Communications Inc. 28,000 442,929 365,750 0.1543
164 Morgan Stanley 6,400 310,010 365,600 0.1542
165 Pacific Gas & Electric 17,300 501,640 363,300 0.1532
166 Edison International 18,200 350,841 361,725 0.1526
167 Gap Inc. 11,900 250,351 358,488 0.1512
168 American Brands 7,200 294,247 357,300 0.1507
169 Dayton-Hudson 9,100 233,868 357,175 0.1506
170 AMP Inc. 9,300 330,725 356,887 0.1505
171 FPL Group 7,700 302,533 354,200 0.1494
172 Westinghouse Electric 17,700 289,108 351,787 0.1484
173 American General Corp 8,600 267,809 351,525 0.1483
174 United Healthcare Corp. 7,800 377,553 351,000 0.1480
175 Tyco Labs. Inc. 6,600 193,825 348,975 0.1472
176 Honeywell Inc. 5,300 220,566 348,475 0.1470
177 Toys `R' Us, Inc.(Holding Co.) 11,500 367,036 345,000 0.1455
178 Pitney-Bowes 6,300 258,323 343,350 0.1448
179 Goodyear Tire & Rubber 6,600 273,858 339,075 0.1430
180 Conrail Inc. 3,400 199,782 338,725 0.1429
181 ITT/Hartford Group Inc 5,000 189,267 337,500 0.1423
182 Barnett Banks of Florida 8,200 207,007 337,225 0.1422
183 AMR Corp. 3,800 288,013 334,875 0.1412
184 Ralston-Ralston Purina Co. 4,500 242,125 330,188 0.1393
185 Textron, Inc. 3,500 204,311 329,875 0.1391
186 Occidental Petroleum 13,900 296,008 324,913 0.1370
187 Tenneco, Inc. 7,200 289,857 324,900 0.1370
188 Air Products & Chemicals 4,700 232,610 324,887 0.1370
189 American Electric Power 7,900 286,670 324,887 0.1370
190 EMC Corp/Mass 9,800 212,190 324,625 0.1369
191 HFS Inc. 5,400 347,733 322,650 0.1361
192 Avon Prods, Inc. 5,600 188,387 319,900 0.1349
193 Alcan Aluminum 9,500 245,263 319,437 0.1347
194 Halliburton Co. 5,300 213,843 319,325 0.1347
195 Mattel, Inc. 11,397 217,113 316,267 0.1334
196 Marsh & Mclennan Cos. Inc. 3,000 265,100 312,000 0.1316
197 Union Pacific 10,538 261,789 308,237 0.1300
198 Praxair, Inc. Com. 6,600 166,808 304,425 0.1284
199 Marriott International Inc. 5,400 185,804 298,350 0.1258
200 Federated Dept. Stores 8,700 255,746 296,888 0.1252
201 Crown Cork & Seal Inc. 5,400 228,128 293,625 0.1238
</TABLE>
D-9
<PAGE>
DEFINED ASSET FUNDS - EQUITY INCOME FUND INDEX SERIES,
S&P 500 TRUST - 2
PORTFOLIO
AS OF DECEMBER 31, 1996
<TABLE><CAPTION>
Percentage
of Total
Portfolio Market
No. Common Stocks Shares Cost(1) Value(1) Value
<S> <C> <C> <C> <C> <C>
202 Bankers Trust of NY 3,400 $ 227,645 $ 293,250 0.1237%
203 Dominion Resources Corp. 7,600 299,992 292,600 0.1234
204 Consolidated Edison 9,900 301,845 289,575 0.1221
205 USX-Marathon Group, Inc. 12,100 235,578 288,887 0.1218
206 Panenergy 6,400 155,945 288,000 0.1215
207 US Bancorp 6,400 197,738 287,600 0.1213
208 Tellabs Inc. 7,600 195,825 285,950 0.1206
209 AON Corp 4,600 251,018 285,775 0.1205
210 Hershey Foods Corp. 6,500 182,653 284,375 0.1199
211 Alco Standard 5,500 198,858 283,937 0.1197
212 Fifth Third Bancorp 4,500 255,338 282,656 0.1192
213 Georgia-Pacific Corp. 3,900 273,970 280,800 0.1184
214 Service Corp Int'l 9,900 172,580 277,200 0.1169
215 Wrigley (WM.) Jr Co. 4,900 207,065 275,625 0.1162
216 Applied Materials Inc. 7,600 246,675 273,125 0.1152
217 Pub. Serv. Enterprises Gr. 10,000 291,061 272,500 0.1149
218 Hilton Hotel Corp. 10,400 167,351 271,700 0.1146
219 Entergy Corp. 9,700 286,258 269,175 0.1135
220 TRW Inc. 5,400 190,063 267,300 0.1127
221 Burlington Resources 5,300 224,613 266,987 0.1126
222 Computer Sciences Corp. 3,200 175,458 262,800 0.1108
223 Lowe's Cos, Inc. 7,300 195,117 259,150 0.1093
224 Micron Tech. 8,800 266,424 256,300 0.1081
225 Pacificorp 12,400 249,581 254,200 0.1072
226 UST Inc. 7,800 241,315 252,525 0.1065
227 Alltel Corp. 8,000 240,200 251,000 0.1059
228 American Stores 6,100 156,688 249,337 0.1052
229 Williams Cos. 6,600 153,346 247,500 0.1044
230 Unicom Corp. 9,100 260,193 246,837 0.1041
231 Kroger Co. 5,300 144,740 246,450 0.1039
232 Pioneer W-Bred Int'l 3,500 153,535 245,000 0.1033
233 Masco Corp. 6,800 196,913 244,800 0.1032
234 Sysco Corp. 7,500 212,219 244,687 0.1032
235 Morton Int'l Inc. 6,000 170,799 244,500 0.1031
236 Comcast Corp. Cl. A 13,700 261,908 244,031 0.1029
237 Freeport Mcmoran Copper 8,100 217,816 241,988 0.1021
238 Cognizant Corp. 7,200 226,156 237,600 0.1002
239 Peco Energy Co. 9,400 255,343 237,350 0.1001
240 Digital Equipment 6,500 292,412 236,437 0.0997
241 Dover Corp. 4,700 151,532 236,175 0.0996
242 Comerica Inc. 4,500 178,275 235,687 0.0994
243 Browning-Ferris Ind. 8,900 255,195 233,625 0.0985
244 Carolina Power & Light 6,400 196,204 233,600 0.0985
245 Lincoln National Corp. 4,400 185,639 231,000 0.0974
246 Eaton Corp. 3,300 169,453 230,175 0.0971
247 Becton Dickinson 5,300 146,112 229,887 0.0970
248 Dresser Industries Inc. 7,400 170,906 229,400 0.0967
249 Central & Southwest Corp. 8,900 244,892 228,062 0.0962
250 INCO, Ltd. 7,100 214,318 226,313 0.0954
251 Amerada Hess Corp. 3,900 196,568 225,712 0.0952
</TABLE>
D-10
<PAGE>
DEFINED ASSET FUNDS - EQUITY INCOME FUND INDEX SERIES,
S&P 500 TRUST - 2
PORTFOLIO
AS OF DECEMBER 31, 1996
<TABLE><CAPTION>
Percentage
of Total
Portfolio Market
No. Common Stocks Shares Cost(1) Value(1) Value
<S> <C> <C> <C> <C> <C>
252 Genuine Parts Co. 5,050 $ 191,705 $ 224,725 0.0948%
253 Greentree Financial 5,800 195,240 224,025 0.0945
254 Houston Industry Inc. 9,900 220,280 223,988 0.0945
255 Unum Corp. 3,100 173,255 223,975 0.0945
256 Transamerica Corp. 2,800 161,265 221,200 0.0933
257 Cinergy Corp. 6,627 150,968 221,176 0.0933
258 Consolidated Natural Gas 4,000 175,360 221,000 0.0932
259 Clorox Co. 2,200 136,148 220,825 0.0931
260 Union Carbide Corp. 5,400 156,558 220,725 0.0931
261 Rohm & Haas Co. 2,700 162,235 220,388 0.0929
262 Delta Airlines 3,100 218,292 219,712 0.0927
263 Placer Dome, Inc. 10,100 204,003 219,675 0.0926
264 Fluor Corp. 3,500 186,975 219,625 0.0926
265 Cabletron Systems 6,600 201,795 219,450 0.0926
266 Quaker Oats Co. 5,700 186,643 217,313 0.0916
267 Salomon, Inc. 4,600 181,605 216,775 0.0914
268 Coastal Corp. 4,400 140,670 215,050 0.0907
269 Federal Express 4,800 151,858 213,600 0.0901
270 ITT Corporation 4,900 231,767 212,538 0.0896
271 KMART 20,400 331,975 211,650 0.0893
272 Int'l Flavors & Fragrance 4,700 200,535 211,500 0.0892
273 Newell 6,700 156,061 211,050 0.0890
274 Baker Hughes, Inc. 6,100 142,380 210,450 0.0888
275 Limited, Inc. 11,400 236,983 209,475 0.0883
276 Safeco Corp. 5,300 160,275 209,019 0.0882
277 The Times Mirror Co. 4,200 116,902 208,950 0.0881
278 Price/Costco 8,304 148,563 208,638 0.0880
279 Rite Aid Corp. 5,200 156,885 206,700 0.0872
280 Providian Corp. 4,000 153,445 205,500 0.0867
281 St. Paul Cos, Inc 3,500 163,935 205,187 0.0865
282 Tribune Co. 2,600 146,943 205,075 0.0865
283 Ingersoll-Rand Co. 4,600 165,436 204,700 0.0863
284 Winn-Dixie Stores 6,400 195,485 202,400 0.0854
285 Sherwin-Williams 3,600 127,053 201,600 0.0850
286 Tenet Healthcare Corp. 9,100 151,491 199,062 0.0840
287 Northrop Grumman Corp 2,400 130,433 198,600 0.0838
288 Donnelley RR. & Sons 6,300 205,170 197,663 0.0834
289 DTE Holdings Inc. 6,100 195,067 197,488 0.0833
290 W.R. Grace & Co. 3,800 93,909 196,650 0.0829
291 Cooper-Industries, Inc 4,600 196,317 193,775 0.0817
292 Mcgraw-Hill Companies 4,200 154,160 193,725 0.0817
293 General Dynamics 2,700 143,206 190,350 0.0803
294 MGIC Investment Group 2,500 154,163 190,000 0.0801
295 Nucor Corp. 3,700 173,646 188,700 0.0796
296 Republic New York 2,300 138,415 187,738 0.0792
297 CVS Corp. 4,500 159,607 186,187 0.0785
298 Silicon Graphics, Inc 7,300 230,678 186,150 0.0785
299 Hercules 4,300 169,459 185,975 0.0784
300 Newmont Mining 4,147 185,040 185,578 0.0783
301 Sonat, Inc. 3,600 113,373 185,400 0.0782
</TABLE>
D-11
<PAGE>
DEFINED ASSET FUNDS - EQUITY INCOME FUND INDEX SERIES,
S&P 500 TRUST - 2
PORTFOLIO
AS OF DECEMBER 31, 1996
<TABLE><CAPTION>
Percentage
of Total
Portfolio Market
No. Common Stocks Shares Cost(1) Value(1) Value
<S> <C> <C> <C> <C> <C>
302 Eastman Chemical Co. 3,325 $ 180,888 $ 183,706 0.0775%
303 MBIA 1,800 183,465 182,250 0.0769
304 Phelps Dodge Corp. 2,700 151,355 182,250 0.0769
305 V F Corp. 2,700 136,685 182,250 0.0769
306 Guidant Corp. 3,100 173,368 176,700 0.0745
307 Grainger W.W. 2,200 139,198 176,550 0.0745
308 Champion Int'l 4,000 155,525 173,000 0.0730
309 GPU, Inc. 5,100 157,855 171,488 0.0723
310 Bay Networks Inc. 8,200 356,285 171,175 0.0722
311 Dun & Bradstreet 7,200 157,521 171,000 0.0721
312 Case Corp. 3,100 144,693 168,950 0.0713
313 Allegheny Teledyne Inc 7,327 116,901 168,521 0.0711
314 Jefferson-Pilot Corp. 2,975 119,733 168,459 0.0710
315 Great Western Financial 5,800 118,053 168,200 0.0709
316 Baltimore Gas & Electric 6,200 155,072 165,850 0.0699
317 Union Electric 4,300 162,265 165,550 0.0698
318 Western Atlas, Inc. 2,300 116,178 163,012 0.0687
319 Interpublic Group 3,400 129,770 161,500 0.0681
320 Williamette Industries 2,300 151,063 160,094 0.0675
321 P P & L Resources Inc 6,800 167,978 156,400 0.0660
322 TJX Cos, Common 3,300 81,915 156,337 0.0659
323 New York Times Cl. A 4,100 115,553 155,800 0.0657
324 Avery Dennison Corp. 4,400 82,172 155,650 0.0656
325 Knight-Rider, Inc. 4,000 124,526 153,000 0.0645
326 Raychem Corp. 1,900 88,845 152,238 0.0642
327 Reynolds Metals 2,700 145,773 152,213 0.0642
328 Laidlaw Inc. - Class B 13,200 124,410 151,800 0.0640
329 Golden West Financial 2,400 114,895 151,500 0.0639
330 Torchmark Corp. 3,000 138,920 151,500 0.0639
331 Dillard Department Stores 4,800 173,105 148,200 0.0625
332 Advanced Micro Devices 5,700 121,173 146,775 0.0619
333 Columbia Gas System, Inc. 2,300 74,136 146,338 0.0617
334 Beneficial Corp. 2,300 99,368 145,762 0.0615
335 Ohio Edison Co. 6,400 140,668 145,600 0.0614
336 St. Jude Medical 3,400 106,393 144,925 0.0611
337 Whirlpool Corp. 3,100 159,716 144,537 0.0610
338 LSI Logic Corp 5,400 176,370 144,450 0.0609
339 Kerr-Mcgee 2,000 102,938 144,000 0.0607
340 Rubbermaid, Inc. 6,300 189,740 143,325 0.0604
341 Ahmanson (H.F.) & Co 4,400 92,883 143,000 0.0603
342 Hasbro Inc. 3,650 118,230 141,894 0.0598
343 National Semiconductor 5,800 98,090 141,375 0.0596
344 Johnson Controls 1,700 98,435 140,888 0.0594
345 Dana Corp. 4,300 113,765 140,287 0.0592
346 Tupperware Corporation 2,600 118,993 139,425 0.0588
347 Dow Jones 4,100 141,592 138,888 0.0586
348 Union Camp Corp. 2,900 142,245 138,475 0.0584
349 Harcourt General 3,000 114,350 138,375 0.0584
350 Novell Corp. 14,500 293,636 137,297 0.0579
351 Andrew Corp. 2,587 71,599 137,273 0.0579
</TABLE>
D-12
<PAGE>
DEFINED ASSET FUNDS - EQUITY INCOME FUND INDEX SERIES,
S&P 500 TRUST - 2
PORTFOLIO
AS OF DECEMBER 31, 1996
<TABLE><CAPTION>
Percentage
of Total
Portfolio Market
No. Common Stocks Shares Cost(1) Value(1) Value
<S> <C> <C> <C> <C> <C>
352 Mallinckrodt Group, Inc 3,100 $ 108,930 $ 136,788 0.0577%
353 Southwest Airlines 6,100 162,691 134,963 0.0569
354 Northern Sts Power Minn. 2,900 130,556 133,038 0.0561
355 Brown-Forman Distillers Co. 2,900 91,607 132,675 0.0560
356 Sigma-Aldrich 2,100 90,085 131,119 0.0553
357 Humana Inc. 6,800 177,790 130,050 0.0548
358 Mead Corp. 2,200 102,860 127,875 0.0539
359 Block H & R, Inc. 4,400 161,920 127,600 0.0538
360 Great Lakes Chemicals 2,700 179,135 126,225 0.0532
361 General Instrument Corp. 5,800 158,753 125,425 0.0529
362 Temple-Inland, Inc. 2,300 110,865 124,487 0.0525
363 Circuit City Stores 4,100 105,558 123,512 0.0521
364 Pall Corp. 4,833 107,117 123,242 0.0520
365 ITT Industries 5,000 96,383 122,500 0.0517
366 Woolworth 5,600 121,793 122,500 0.0517
367 Westvaco Corp. 4,250 113,612 122,187 0.0515
368 Fruit of the Loom Inc. C 3,200 83,435 121,200 0.0511
369 Nordstrom 3,400 132,150 120,488 0.0508
370 Parker-Hannifin 3,100 91,764 120,125 0.0507
371 James River Corp. (Va.) 3,600 82,956 119,250 0.0503
372 Ashland Oil 2,700 89,772 118,462 0.0500
373 Armstrong World Ind. Inc. 1,700 89,972 118,150 0.0498
374 Ceridian Corp. 2,900 99,420 117,450 0.0495
375 Englehard Corp. 6,100 115,755 116,663 0.0492
376 Liz Claiborne, Inc. 3,000 97,098 115,875 0.0489
377 Paccar, Inc. 1,690 86,224 114,920 0.0485
378 Deluxe Check Printers 3,500 127,973 114,625 0.0483
379 Pennzoil Co. 2,000 96,888 113,000 0.0477
380 USX-US Steel Corp. 3,600 117,868 112,950 0.0476
381 FMC Corp. 1,600 95,755 112,200 0.0473
382 Black & Decker 3,700 103,822 111,462 0.0470
383 Wendy's Int'l 5,400 93,645 110,700 0.0467
384 Tandy Corp. 2,500 100,925 110,000 0.0464
385 Harris Corp. Del 1,600 79,230 109,800 0.0463
386 Pacific Enterprises 3,600 86,530 109,350 0.0461
387 Oryx Energy Co. 4,400 76,433 108,900 0.0459
388 Apple Computer Inc. 5,200 210,486 108,550 0.0458
389 Perkin-Elmer 1,800 73,601 105,975 0.0447
390 US Surgical Corp. 2,600 110,680 102,375 0.0432
391 USF and G 4,900 74,631 102,287 0.0431
392 Ecolab Inc. 2,700 63,793 101,588 0.0428
393 Nalco Chemical 2,800 94,440 101,150 0.0427
394 Harnishfeger Indus. 2,100 63,618 101,063 0.0426
395 Whitman Corp. 4,400 79,995 100,650 0.0424
396 Stanley Works 3,700 85,505 99,900 0.0421
397 Allergan 2,800 81,290 99,750 0.0421
398 Brunswick Corp. 4,100 78,105 98,400 0.0415
399 Thomas & Betts Corp. 2,200 80,563 97,625 0.0412
400 Louisiana-Pacific 4,600 124,516 97,175 0.0410
401 Reebok Int'l Ltd. 2,300 75,403 96,600 0.0407
</TABLE>
D-13
<PAGE>
DEFINED ASSET FUNDS - EQUITY INCOME FUND INDEX SERIES,
S&P 500 TRUST - 2
PORTFOLIO
AS OF DECEMBER 31, 1996
<TABLE><CAPTION>
Percentage
of Total
Portfolio Market
No. Common Stocks Shares Cost(1) Value(1) Value
<S> <C> <C> <C> <C> <C>
402 Ryder Sys. Inc. 3,400 $ 79,840 $ 95,625 0.0403%
403 Owens Corning Fiberglass 2,200 85,921 93,775 0.0395
404 Alza Corp Cl. N 3,600 109,853 93,150 0.0393
405 Goodrich B.F. Co. 2,300 66,663 93,150 0.0393
406 Cyprus/Amax Minerals 3,900 98,433 91,163 0.0384
407 Snap-On-Tools 2,550 65,821 90,844 0.0383
408 General Signal Corp. 2,100 70,848 89,775 0.0379
409 Noram Energy Corp. 5,800 52,953 89,175 0.0376
410 Homestake Mining Co. 6,200 101,398 88,350 0.0373
411 American Greetings Cl. A 3,100 83,000 87,963 0.0371
412 DSC Communications 4,900 125,794 87,588 0.0369
413 Giant Food, Inc. 2,500 67,425 86,250 0.0364
414 Moore Ltd. 4,200 78,785 85,575 0.0361
415 Harrah's Entertainment 4,300 115,763 85,463 0.0360
416 Santa Fe Pacific Gold Co. 5,540 45,023 85,176 0.0359
417 Maytag Co. 4,200 73,535 82,950 0.0350
418 Polaroid Corp. 1,900 68,345 82,650 0.0349
419 Echlin Inc. 2,600 76,443 82,225 0.0347
420 Rowan Cos. Inc 3,600 34,430 81,450 0.0344
421 Bemis 2,200 57,993 81,125 0.0342
422 Bausch & Lomb, Inc. 2,300 103,113 80,500 0.0340
423 Pep Boys-Manny,Moe & Jack 2,600 70,205 79,950 0.0337
424 Supervalu, Inc. 2,800 85,465 79,450 0.0335
425 Mercantile Stores Inc. 1,600 69,718 79,000 0.0333
426 Cummins Engine Inc. 1,700 67,520 78,200 0.0330
427 Sun Co. 3,100 86,268 75,563 0.0319
428 Louisiana Ld Expl Co. 1,400 62,333 75,075 0.0317
429 Nicor, Inc. 2,100 53,473 75,075 0.0317
430 National Service Inds. Inc. 2,000 58,600 74,750 0.0315
431 Millipore Corp. 1,800 45,960 74,475 0.0314
432 Biomet, Inc. 4,900 79,198 74,113 0.0313
433 Tektronix, Inc. 1,400 48,670 71,750 0.0303
434 Manor Care, Inc. 2,650 47,089 71,550 0.0302
435 Worthington Ind. 3,850 72,338 69,781 0.0294
436 Cooper Tire & Rubber 3,500 93,310 69,125 0.0292
437 Tandem Computers, Inc 5,000 62,788 68,750 0.0290
438 Bard C.R., Inc. 2,400 71,745 67,200 0.0283
439 Enserch Corp. 2,900 47,520 66,700 0.0281
440 Battle Mountain Gold 9,400 80,133 64,625 0.0273
441 Boise Cascade Corp. 2,000 60,913 63,500 0.0268
442 Foster Wheeler Corp. 1,700 60,248 63,113 0.0266
443 USAIR Group 2,700 38,323 63,112 0.0266
444 Stone Container Corp 4,210 73,810 62,624 0.0264
445 Amdahl Corp. 5,100 52,180 61,838 0.0261
446 Niagara Mohawk Power Co. 6,100 91,580 60,238 0.0254
447 The Timken Co. 1,300 46,353 59,638 0.0252
448 King World Productions 1,600 55,143 59,000 0.0249
449 Meredith Corp. 1,100 36,445 58,025 0.0245
450 Darden Restaurants Inc. C 6,600 31,865 57,750 0.0244
451 Alberto-Culver 1,200 35,473 57,600 0.0243
</TABLE>
D-14
<PAGE>
DEFINED ASSET FUNDS - EQUITY INCOME FUND INDEX SERIES,
S&P 500 TRUST - 2
PORTFOLIO
AS OF DECEMBER 31, 1996
<TABLE><CAPTION>
Percentage
of Total
Portfolio Market
No. Common Stocks Shares Cost(1) Value(1) Value
<S> <C> <C> <C> <C> <C>
452 Crane Co. 1,950 $ 41,503 $ 56,550 0.0238%
453 Beverly Enterprises 4,200 49,335 53,550 0.0226
454 Autodesk 1,900 53,012 53,200 0.0224
455 Briggs & Stratton 1,200 38,929 52,800 0.0223
456 Sante Fe Resources 3,800 37,003 52,725 0.0222
457 Helmerich & Payne 1,000 34,063 52,125 0.0220
458 Potlatch Corp. 1,200 52,521 51,600 0.0218
459 Great Atlantic & Pacific 1,600 43,266 51,000 0.0215
460 Peoples Energy Corp. 1,500 44,413 50,813 0.0214
461 Scientific-Atlanta 3,300 50,560 49,500 0.0209
462 Unisys Corp. 7,300 67,090 49,275 0.0208
463 Shared Medical Sys. Corp. 1,000 35,663 49,250 0.0208
464 Russell Corp. 1,600 49,018 47,600 0.0201
465 US Life Corp. 1,400 38,075 46,550 0.0196
466 Centex Corp. 1,200 35,455 45,150 0.0190
467 Asarco, Inc. 1,800 51,390 44,775 0.0189
468 Trinova Corp. 1,200 35,473 43,650 0.0184
469 Harland, John 1,300 30,790 42,900 0.0181
470 Bethlehem Steel 4,700 73,869 42,300 0.0178
471 Inland Steel Inds. Inc. 2,100 55,080 42,000 0.0177
472 Fleetwood Enterprises 1,500 34,530 41,250 0.0174
473 Safety-Kleen 2,500 48,463 40,938 0.0173
474 EG&G 2,000 41,595 40,250 0.0170
475 Longs Drug Store 800 30,340 39,300 0.0166
476 Echo Bay Mines 5,900 57,345 39,088 0.0165
477 Springs Ind. 900 37,620 38,700 0.0163
478 Mcdermott Int'l 2,300 51,340 38,238 0.0161
479 Cincinnati Milacron 1,700 38,823 37,187 0.0157
480 Ball Corp. 1,300 38,773 33,800 0.0143
481 Jostens, Inc. 1,600 38,566 33,800 0.0143
482 Alexander & Alexander 1,900 40,383 33,013 0.0139
483 Oneok, Inc. 1,100 22,855 33,000 0.0139
484 Eastern Enterprises 900 27,295 31,838 0.0134
485 Caliber System 1,600 73,984 30,800 0.0130
486 Pulte Corp. 1,000 27,675 30,750 0.0130
487 Coors (Adolph) Cl. B 1,600 27,253 30,400 0.0128
488 Navistar Int'l Corp. 3,080 54,755 28,105 0.0119
489 Fleming Cos. 1,600 41,005 27,600 0.0116
490 Data General Corp. 1,700 19,473 24,650 0.0104
491 Charming Shoppes Inc. 4,400 43,413 22,275 0.0094
492 Stride Rite 2,100 31,480 21,000 0.0089
493 Kaufman & Broad Home Corp. 1,600 24,693 20,600 0.0087
494 Intergraph Corp. 2,000 28,505 20,500 0.0086
495 Luby's Cafeteria, Inc. 1,000 20,663 19,875 0.0084
496 ARMCO, Inc. 4,500 27,471 18,563 0.0078
497 Giddings & Lewis, Inc 1,400 27,043 18,025 0.0076
498 NACCO Inds, Inc. Cl. A 300 17,353 16,050 0.0068
499 Ryan's Family Steak House 2,100 17,788 14,438 0.0061
500 Shoney's, Inc. 2,000 30,500 14,000 0.0059
501 El Paso Natural Gas 1 26 30 0.0000
502 360 Communications C 0 2 2 0.0000%
TOTAL 4,628,252 $171,704,148 $237,112,848 100.0000%
</TABLE>
(1)
See Notes to Financial Statements.
D-15
<PAGE>
AUTHORIZATION FOR REINVESTMENT
DEFINED ASSET FUNDS--EQUITY INVESTOR FUND
INDEX SERIES, S&P 500 TRUST 2
/ / Yes, I want to participate in the Fund's Reinvestment Plan and purchase
additional Units of the Fund each month.
I hereby acknowledge receipt of the Prospectus for Defined Asset
Funds--Equity Investor Fund, Index Series, S&P 500 Trust 2 and authorize The
Chase Manhattan Bank to pay distributions on my Units as indicated below
(distributions to be reinvested will be paid for my account to The Chase
Manhattan Bank).
Income distributions
(check one): / / in cash / / reinvested
Capital
distributions (check
one): / / in cash / / reinvested
Please print or type
Name Registered Holder
Address
Registered Holder
(Two signatures required if
joint tenancy)
City State Zip Code
This page is a self-mailer. Please complete the information above, cut
along the dotted line, fold along the lines on the reverse side, tape, and mail
with the Trustee's address displayed on the outside.
12345678
<PAGE>
AUTHORIZATION FOR REINVESTMENT
DEFINED ASSET FUNDS--EQUITY INVESTOR FUND
INDEX SERIES, S&P MIDCAP TRUST
/ / Yes, I want to participate in the Fund's Reinvestment Plan and purchase
additional Units of the Fund each month.
I hereby acknowledge receipt of the Prospectus for Defined Asset
Funds--Equity Investor Fund, Index Series, S&P MidCap Trust and authorize The
Bank of New York to pay distributions on my Units as indicated below
(distributions to be reinvested will be paid for my account to The Bank of New
York).
Income distributions
(check one): / / in cash / / reinvested
Capital
distributions (check
one): / / in cash / / reinvested
Please print or type
Name Registered Holder
Address
Registered Holder
(Two signatures required if
joint tenancy)
City State Zip Code
This page is a self-mailer. Please complete the information above, cut
along the dotted line, fold along the lines on the reverse side, tape, and mail
with the Trustee's address displayed on the outside.
12345678
<PAGE>
BUSINESS REPLY MAIL NO POSTAGE
FIRST CLASS PERMIT NO. 1313 NEW YORK, N.Y. NECESSARY
IF MAILED
POSTAGE WILL BE PAID BY ADDRESSEE IN THE
DEFINED ASSET FUNDS--EQUITY INVESTOR FUND UNITED STATES
INDEX SERIES, 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
- --------------------------------------------------------------------------------
(Fold along this line.)
- --------------------------------------------------------------------------------
(Fold along this line.)
<PAGE>
BUSINESS REPLY MAIL NO POSTAGE
FIRST CLASS PERMIT NO. 1313 NEW YORK, N.Y. NECESSARY
IF MAILED
POSTAGE WILL BE PAID BY ADDRESSEE IN THE
DEFINED ASSET FUNDS--EQUITY INVESTOR FUND UNITED STATES
INDEX SERIES, S&P 500 TRUST 2
THE BANK OF NEW YORK
UNIT INVESTMENT TRUST DEPARTMENT
P.O. BOX 974
WALL STREET STATION
NEW YORK, N.Y. 10268-0974
- --------------------------------------------------------------------------------
(Fold along this line.)
- --------------------------------------------------------------------------------
(Fold along this line.)
<PAGE>
DEFINED ASSET FUNDSSM
PROSPECTUS--PART B
EQUITY INCOME FUND
FURTHER INFORMATION REGARDING THE FUND MAY BE OBTAINED
WITHIN FIVE DAYS BY WRITING OR CALLING THE TRUSTEE AT THE ADDRESS AND
TELEPHONE NUMBER SET FORTH ON THE BACK COVER OF PART A OF THE PROSPECTUS.
INDEX
PAGE
---------
FUND DESCRIPTION..................................................... 1
RISK FACTORS......................................................... 2
HOW TO BUY UNITS..................................................... 6
HOW TO SELL UNITS.................................................... 7
INCOME, DISTRIBUTIONS AND REINVESTMENT............................... 8
FUND EXPENSES........................................................ 8
TAXES................................................................ 9
RECORDS AND REPORTS.................................................. 11
TRUST INDENTURE...................................................... 11
MISCELLANEOUS........................................................ 12
EXCHANGE OPTION...................................................... 14
SUPPLEMENTAL INFORMATION............................................. 14
FUND DESCRIPTION
PORTFOLIO SELECTION
Professional buyers and research analysts for Defined Asset Funds, with
access to extensive research, selected the Securities for the Portfolio after
considering the Fund's investment objective as well as the quality of the
stocks, the dividend payment record of the issuers and the prices of the stocks.
The yield and price of stocks of the type deposited in the Fund are dependent on
a variety of factors, including money market conditions, general conditions of
the corporate bond and equity markets, size of a particular offering and capital
structure of the issuer. While it may not be likely that dividends on any stocks
would be omitted, of course no assurances can be given since earnings available
for dividends, regardless of the size of the company, are subject to numerous
events which are often beyond the issuer's control.
Because each Defined Asset Fund is a preselected portfolio, you know the
securities before you invest. Of course, the Portfolio will change somewhat over
time, as Securities are purchased upon creation of additional Units, as
securities are sold to meet Unit redemptions or in other limited circumstances.
PORTFOLIO SUPERVISION
The Fund follows a buy and hold investment strategy in contrast to the
frequent portfolio changes of a managed fund based on economic, financial and
market analyses. In the event a public tender offer is made for a Security or a
merger or acquisition is announced affecting a Security, the Sponsors may
instruct the Trustee to tender or sell the Security in the open market when in
its opinion it is in the best interests of investors to do so. Although the
Portfolio is not actively managed, it is regularly reviewed and evaluated and
Securities can be sold in case of certain adverse developments concerning a
Security including the adverse financial condition of the
1
<PAGE>
issuer, the institution of legal proceedings against the issuer, a decline in
the price or the occurrence of other market or credit factors that might
otherwise make retention of the Security detrimental to the interest of
investors or if the disposition of these Securities is necessary in order to
enable the Fund to make distributions of the Fund's capital gain net income or
desirable in order to maintain the qualification of the Fund as a regulated
investment company under the Internal Revenue Code. Securities can also be sold
to meet redemption of Units. In Funds organized as regulated investment
companies, the Sponsors are also authorized to direct the reinvestment of the
proceeds of the sale of Securities, as well as moneys held to cover the purchase
of Securities pursuant to contracts which have failed, in additional Securities.
RISK FACTORS
An investment in the Fund entails certain risks, including the risk that
the value of your investment will decline if the financial condition of the
issuers of the Securities becomes impaired or if the general condition of the
stock market worsens. In addition, holders of common stocks have generally
inferior rights to receive payments from the issuer in comparison with the
rights of creditors of, or holders of debt obligations or preferred stocks
issued by, the issuer. Moreover, common stocks do not represent an obligation of
the issuer and therefore do not offer any assurance of income or provide the
degree of protection of capital provided by debt securities. Common stocks in
general may be especially susceptible to general stock market movements and to
volatile increases and decreases in value as market confidence in and
perceptions of the issuers change. These perceptions are based on unpredictable
factors including expectations regarding government, economic, monetary and
fiscal policies, inflation and interest rates, economic expansion or
contraction, and global or regional political, economic or banking crises. The
Sponsors cannot predict the direction or scope of any of these factors.
A Portfolio may be concentrated in one or more of the following categories.
Concentration may involve additional risk because of the decreased
diversification of economic, financial and market risks. Set forth below is a
brief description of certain risks associated with certain of the Securities.
Additional information is contained in the Information Supplement which is
available from the Trustee at no charge to the investor.
CONSUMER PRODUCTS COMPANIES
Risk factors include cyclicality of revenues and earnings, changing
consumer demands, regulatory restrictions, products liability litigation and
other litigation resulting from accidents, extensive competition (including that
of low-cost foreign companies), unfunded pension fund liabilities, employee and
retiree benefit costs and financial deterioration resulting from leveraged
buy-outs, takeovers or acquisitions. In general, expenditures on consumer
products will be affected by the economic health of consumers. A continuing weak
economy with its consequent effect on consumer spending would have an adverse
effect on the industry.
HEALTH CARE
Companies in the health care industry face several risks. Most health care
companies are extensively regulated. All are subject to extreme cost-containment
pressures. As a result they cannot readily raise the prices of their products
and services, and may experience price declines. Most are subject to intense
competition and are required to spend large amounts of capital to keep pace with
technological innovation. Many of the companies also face product obsolescence,
the threat of product liability suits and expensive liability insurance. In
addition, issuers in the health care industry will be affected by health reform
legislation. Proposed federal legislation would significantly reduce Medicare
and Medicaid payments to providers and impose stringent cost controls that would
affect insurance premiums and fees paid to providers; it is impossible to
predict what reforms may be adopted or when reforms might be implemented at the
federal or state level.
MANUFACTURING COMPANIES
Growth in the manufacturing industry is closely linked to expansion in the
domestic and global economies. Since the U.S. government and many state, local
and foreign governments now have a budget deficit, financial expenditures by
these entities on capital improvements may be extremely limited. The lack of
funds allocated by public entities to capital improvement projects may adversely
affect manufacturers engaged in the production of industrial materials used for
capital improvements or for the upgrade of the infrastructure. Cutbacks in
defense spending have adversely impacted many of the companies engaged in the
aerospace and arms/defense sectors of the manufacturing industry. Environmental
and safety issues increasingly affect the manufacturing industry.
2
<PAGE>
Issuers may experience decreases in profitability as legislative mandates impose
costs associated with compliance with environmental regulations and
manufacturing more environmentally sound and safer equipment. Furthermore, the
cost of product liability insurance and the inability of some manufacturing
companies to obtain this insurance may have an adverse impact on the industry.
The long-term outlook is largely dependent upon the growth and competitiveness
of the U.S. manufacturing base. Increased consolidation and merger activity
increases competitiveness in general but individual companies may experience
severe financial problems due to this increased competitiveness. Strong
competition from foreign nations, particularly those with lower labor costs,
will severely impact the profitability of the U.S. manufacturing business.
REAL ESTATE COMPANIES
Investment in securities issued by real estate companies should be made
with an understanding of the many factors which may have an adverse impact on
the credit quality of the particular company or industry. These include economic
recession, competitive overbuilding, unusually adverse weather conditions,
changing demographics, changes in government regulations (including tax laws and
environmental, building zoning and sales regulation by various federal, state
and local authorities), increases in real estate taxes or costs of material and
labor, the inability to secure performance guarantees as required and the
unavailability of construction financing or mortgage loans at rates acceptable
to builders and home buyers. Variations in rental income and space availability
and vacancy rates in terms of supply and demand are additional factors affecting
real estate generally and Real Estate Investment Trusts (REITs) in particular.
Performance by individual REITs is dependent on the types of real estate
investments held. For example, the effect of interest rate fluctuations on
mortgage REITs is greater than on equity REITs and the nature of the underlying
assets of a mortgage REIT may be considered less tangible than that of an equity
REIT. In addition, equity REITs may be affected by changes in the value of the
underlying property they own, while mortgage REITs may be affected by the
quality of credit extended.
TECHNOLOGY COMPANIES
Technology companies, such as semiconductor, computer and electronics
manufacturing companies, are rapidly developing and highly competitive, both
domestically and internationally, and tend to be relatively volatile as compared
to other types of investments. Certain of these companies may be smaller and
less seasoned companies with limited product lines, markets or financial
resources and limited management or marketing personnel. These companies are
characterized by a high degree of investment to maintain competitiveness and are
affected by worldwide scientific and technological developments (and resulting
product obsolescence) as well as government regulation, increase in material or
labor costs, changes in distribution channels and the need to manage inventory
levels in line with product demand. Other risk factors include short product
life cycles, aggressive pricing and reduced profit margins, dramatic and often
unpredictable changes in growth rates, frequent new product introduction, the
need to enhance existing products, intense competition from large established
companies and potential competition from small start up companies.
TELECOMMUNICATIONS
Payment on common stocks of companies in the telecommunications industry,
including local, long-distance and cellular service, the manufacture of
telecommunications equipment, and other ancillary services, is generally
dependent upon the amount and growth of customer demand, the level of rates
permitted to be charged by regulatory authorities and the ability to obtain
periodic rate increases, the effects of inflation on the cost of providing
services and the rate of technological innovation. The domestic
telecommunications industry is characterized by increasing competition in all
sectors and extensive regulation by the Federal Communications Commission and
various state regulatory authorities. To meet increasing competition, companies
may have to commit substantial capital, particularly in the formulation of new
products and services using new technology. Companies offering telephone
services are experiencing increasing competition from cellular telephones, and
the cellular telephone industry, because of its limited operating history, faces
uncertainty concerning the future of the industry and demand for cellular
telephones. Telecommunications companies in both developed
3
<PAGE>
and emerging countries are undergoing significant change due to varying and
evolving levels of governmental regulation or deregulation and other factors. As
a result, competitive pressures are intense and the securities of such companies
may be subject to significant price volatility. In addition, all
telecommunications companies in both developed and emerging countries are
subject to the additional risk that technological innovations will make their
products and services obsolete.
UTILITIES
Payments on utility stocks are dependent on various factors, including the
rates the utilities may charge, the demand for their services and their
operating costs, including expenses to comply with environmental legislation and
other energy and licensing laws and regulations. Utilities are particularly
sensitive to, among other things, the effects of inflation on operating and
construction costs, the unpredictability of future usage requirements, the costs
and availability of fuel and, with certain electric utilities, the risks
associated with the nuclear industry.
FOREIGN ISSUERS
Certain of the Securities in a Portfolio may consist of securities of
foreign issuers. An investment in such a Fund involves some investment risks
that are different in some respects from an investment in a fund that invests
entirely in securities of domestic issuers. Those investment risks include
future political and economic developments and the adoption of withholding
taxes, exchange controls or other restrictions which might adversely affect the
payment or receipt of payment of dividends on the relevant Securities. In
addition, there may be less publicly available information than is available
from a domestic issuer and foreign issuers are not necessarily subject to
uniform accounting, auditing and financial reporting standards, practices and
requirements comparable to those applicable to domestic issuers. In addition,
earnings and dividends for foreign companies are in non-U.S. currencies.
Therefore, the U.S. dollar value of the stock and dividends for these issuers
will vary with fluctuations in the U.S. dollar foreign exchange rates for the
relevant currencies. Most foreign currencies have fluctuated widely in value
against the U.S. dollar for many reasons, including supply and demand for the
respective currency, the soundness of the world economy and the strength of the
respective economy as compared to the economies of the United States and other
countries.
American Depositary Shares and Receipts. Many of the Securities of foreign
issuers were purchased in ADR form in the United States. ADRs evidence American
Depositary Shares which represent common stock deposited with a custodian in a
depositary. American Depositary Shares (ADSs) and receipts therefor (ADRs) are
issued by an American bank or trust company to evidence ownership of underlying
securities issued by a foreign corporation. These instruments may not
necessarily be denominated in the same currency as the securities into which
they may be converted. Generally, ADSs and ADRs are designed for use in the
United States securities markets. For purposes of this Prospectus, the term ADR
generally includes ADSs.
The terms and conditions of depositary facilities may result in less
liquidity or lower market prices for ADRs than for the underlying shares. For
those Securities that are ADRs, currency fluctuations will also affect the U.S.
dollar equivalent of the local currency price of the underlying domestic share
and, as a result, are likely to affect the value of the ADRs and consequently
the value of the Securities.
THE S&P 500 INDEX AND THE S&P MIDCAP INDEX
The S&P 500 Index is composed of 500 selected common stocks, most of which
are listed in the New York Stock Exchange. This well-known index, originally
consisting of 233 stocks in 1923, was expanded to 500 stocks in 1957 and was
restructured in 1976 to a composite consisting of four major industry sectors:
industrial, utility, financial and transportation. The four major industry
sectors are comprised of eleven regular industry sectors which are further
divided into industry groups. The S&P 500 Index contains a variety of stocks
which are market-value weighted to represent the overall market. The Index
represents approximately 69% of U.S. stock market capitalization. At present,
the mean market capitalization of the companies in the S&P 500 Index is
approximately $3.346 billion.
The S&P MidCap Index is composed of 400 selected common stocks; as of the
initial date of deposit, 279 were listed on the New York Stock Exchange, 9 were
listed on the American Stock Exchange and 112 were quoted on The Nasdaq National
Market. The MidCap Index stocks were chosen for market size, liquidity and
industry group representation. As of December 31, 1994, industrial stocks
accounted for approximately 69.5% of S&P MidCap Index market capitalization,
utilities approximately 14.1%, financial stocks approximately 14.6% and
transportation stocks approximately 1.8%. The capitalizations of individual
companies ranged from about $49
4
<PAGE>
million to over $10,066 million; the mean market capitalization of the companies
in the S&P MidCap Index was approximately $1.156 billion.
The weightings of stocks in the S&P 500 Index and the S&P MidCap Index are
primarily based on each stock's relative total market value; that is, its market
price per share times the number of shares outstanding.
Standard and Poor's only relationship to the Portfolios is the licensing of
the right to use the S&P 500 Index and the S&P MidCap Index as bases for
determining the composition of the Portfolios and to use the related trademarks
and tradenames in the name of the Fund and in the Prospectus and related sales
literature to the extent that the Sponsors deem appropriate or desirable under
Federal and state securities laws and to indicate the source of the Indexes. The
Indexes are determined, comprised and calculated without regard to the Funds.
S&P does not guarantee the accuracy and/or the completeness of the S&P 500
Index or the S&P MidCap Index or any data included therein and S&P shall have no
liability for any errors, omissions, or interruptions therein. S&P makes no
warranty, express or implied, as to results to be obtained by the sponsors, the
funds, any person or any entity from the use of the S&P index or the S&P MidCap
Index or any data included therein. S&P makes no express or implied warranties,
and expressly disclaims all warranties of merchantability or fitness for a
particular purpose or use, with respect to the S&P 500 Index or the S&P MidCap
Index or any data included therein. Without limiting any of the foregoing, in no
event shall S&P have any liability for any special, punitive, indirect, or
consequential damages (including lost profits), even if notified of the
possibility of such damages.
LIQUIDITY
Whether or not the Securities are listed on a national securities exchange,
the principal trading market for the Securities may be in the over-the-counter
market. As a result, the existence of a liquid trading market for the Securities
may depend on whether dealers will make a market in the Securities. There can be
no assurance that a market will be made for any of the Securities, that any
market for the Securities will be maintained or of the liquidity of the
Securities in any markets made. In addition, the Fund may be restricted under
the Investment Company Act of 1940 from selling Securities to the Sponsors. The
price at which the Securities may be sold to meet redemptions and the value of
the Fund will be adversely affected if trading markets for the Securities are
limited or absent.
LITIGATION AND LEGISLATION
The Sponsors do not know of any pending litigation as of the initial date
of deposit that might reasonably be expected to have a material adverse effect
on the Fund, although pending litigation may have a material adverse effect on
the value of Securities in the Fund. In addition, at any time after the initial
date of deposit, litigation may be initiated on a variety of grounds, or
legislation may be enacted, affecting the Securities in the Portfolio or the
issuers of the Securities. Changing approaches to regulation may have a negative
impact on certain companies represented in the Portfolio. There can be no
assurance that future litigation, legislation, regulation or deregulation will
not have a material adverse effect on the Portfolio or will not impair the
ability of the issuers of the Securities to achieve their business goals. From
time to time Congress considers proposals to reduce the rate of the
dividends-received deduction. This type of legislation, if enacted into law,
would adversely affect the after-tax return to investors who can take advantage
of the deduction. See Taxes.
LIFE OF THE FUND; FUND TERMINATION
The size and composition of the Portfolio will be affected by the level of
redemptions of Units that may occur from time to time. Principally, this will
depend upon the number of investors seeking to sell or redeem their Units. The
Portfolio will be terminated no later than the mandatory termination date
specified in Part A of the Prospectus. It will terminate earlier upon the
disposition of the last Security or upon the consent of investors holding 51% of
the Units. The Portfolio may also be terminated earlier by the Sponsors once its
total assets have fallen below the minimum value specified in Part A of the
Prospectus. A decision by the Sponsors to terminate the Portfolio early will be
based on factors such as the size of the Portfolio relative to its original
size, the ratio of Portfolio expenses to income, and the cost of maintaining a
current prospectus.
Notice of impending termination will be provided to investors and
thereafter units will no longer be redeemable. On or shortly before termination,
the Trustee will seek to dispose of any Securities remaining in the
5
<PAGE>
Portfolio although any Security unable to be sold at a reasonable price may
continue to be held by the Trustee in a liquidating trust pending its final
disposition. A proportional share of the expenses associated with termination,
including brokerage costs in disposing of Securities, will be borne by investors
remaining at that time. This may have the effect of reducing the amount of
proceeds those investors are to receive in any final distribution.
HOW TO BUY UNITS
Units are available from any of the Sponsors, Underwriters and other
broker-dealers at the Public Offering Price, which includes the applicable sales
charge -- see Appendix A. The Public Offering Price varies each Business Day
with changes in the value of the Portfolio and other assets and liabilities of
the Fund.
PUBLIC OFFERING PRICE
In the secondary market (after the initial offering period), the Public
Offering Price is based on the next evaluation of the Securities, and includes a
sales charge based (a) on the number of Units of the Fund purchased in the
secondary market on the same day by a single purchaser (see Secondary Market
Sales Charge Schedule in Appendix A). To qualify for a reduced sales charge, the
dealer must confirm that the sale is to a single purchaser or is purchased for
its own account and not for distribution. For these purposes, Units held in the
name of the purchaser's spouse or child under 21 years of age are deemed to be
purchased by a single purchaser. A trustee or other fiduciary purchasing
securities for a single trust or single fiduciary account is also considered a
single purchaser.
Employees of certain Sponsors and Sponsor affiliates and non-employee
directors of Merrill Lynch & Co. Inc. may purchase Units at a reduced initial
sales charge of not less than $5.00 per 1,000 Units.
S&P 500 TRUST 2 AND S&P MIDCAP TRUST. The graduated sales charges shown in
Appendix A will apply on all purchases on any one day (with credit given for
previously purchased Units as described below under Right of Accumulation) by a
single purchaser of Units in one or both Trusts of this Fund only in the amounts
stated. For this purpose purchases will not be aggregated with concurrent
purchases of any other unit trusts sponsored by the Sponsors. However, Units
held in the name of the spouse of the purchaser or in the name of a child of the
purchaser under 21 years of age are deemed to be registered in the name of the
purchaser. The graduated sales charges are also applicable to a trustee or other
fiduciary purchasing securities for a single trust estate or single fiduciary
account. To qualify for the reduced sales charge and concession applicable to
quantity purchases, the dealer must confirm that the sale is to a single
purchaser. The sales charge is lower than sales charges on many other equity
investments.
Right of Accumulation. Reduced sales charges are applicable through a right
of accumulation under which eligible investors are permitted to purchase Units
of either Trust at the offering price applicable to the total of (a) the dollar
amount then being purchased plus (b) an amount equal to the then current net
asset value of the purchaser's holdings of Units of both Trusts. To be eligible
either for this right of accumulation or the reduced sales charge applicable to
purchases of both Trusts on the same day, the purchaser or the purchaser's
securities dealer must notify the Sponsors at the time of purchase that such
purchase qualifies under this accumulation provision and supply sufficient
information to permit confirmation of qualification. Acceptance of the purchase
order is subject to such confirmation. These reduced sales charge provisions may
be amended or terminated at any time without notice.
EVALUATIONS
Evaluations are determined by the Trustee on each Business Day. This
excludes Saturdays, Sundays and the following holidays as observed by the New
York Stock Exchange: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas. If the Securities are
listed on a national securities exchange or the Nasdaq National Market,
evaluations are generally based on closing sales prices on that exchange or that
system (unless the Trustee deems these prices inappropriate) or, if closing
sales prices are not available, at the mean between the closing bid and offer
prices. If the Securities are not listed or if listed but the principal market
is elsewhere, the evaluation is generally determined based on sales prices of
the Securities on the over-the-counter market or, if sales prices in that market
are not available, on the basis of the mean between current bid and offer prices
for the Securities or for comparable securities or by appraisal or by any
6
<PAGE>
combination of these methods. Neither the Sponsors nor the Trustee guarantee the
enforceability, marketability or price of any Securities.
CERTIFICATES
Certificates for Units may be issued for certain Funds upon request and may
be transferred by paying any taxes or governmental charges and by complying with
the requirements for redeeming Certificates (see How To Sell Units--Trustee's
Redemption of Units). Certain Sponsors collect additional charges for
registering and shipping Certificates to purchasers. Lost or mutilated
Certificates can be replaced upon delivery of satisfactory indemnity and payment
of costs. Units of certain Funds identified in Part A of the Prospectus must be
held in uncertificated form.
HOW TO SELL UNITS
SPONSORS' MARKET FOR UNITS
You can sell your Units at any time without a fee. The Sponsors (although
not obligated to do so) will normally buy any Units offered for sale at the
repurchase price next computed after receipt of the order. The Sponsors have
maintained secondary markets in Defined Asset Funds for the last 25 years.
Primarily because of the sales charge and fluctuations in the market value of
the Securities, the sale price may be less than the cost of your Units. You
should consult your financial professional for current market prices to
determine if other broker-dealers or banks are offering higher prices for Units.
The Sponsors may discontinue this market without prior notice if the supply
of Units exceeds demand or for other business reasons. The Sponsors may reoffer
or redeem Units repurchased.
TRUSTEE'S REDEMPTION OF UNITS
You may redeem your Units by sending the Trustee a redemption request.
Signatures must be guaranteed by an eligible institution. In certain instances,
additional documents may be required such as a certificate of death, trust
instrument, certificate of corporate authority or appointment as executor,
administrator or guardian. If the Sponsors are maintaining a market for Units,
they will purchase any Units tendered at the repurchase price described above.
If they do not purchase Units tendered, the Trustee is authorized in its
discretion to sell Units in the over-the-counter market if it believes it will
obtain a higher net price for the redeeming investor.
By the seventh calendar day after tender you will be mailed an amount equal
to the Redemption Price per Unit. Because of market movements or changes in the
Portfolio, this price may be more or less than the cost of your Units. The
Redemption Price per Unit is computed each Business Day by adding the value of
the Securities, declared but unpaid dividends on the Securities, cash and the
value of any other Fund assets; deducting unpaid taxes or other governmental
charges, accrued but unpaid Fund expenses, unreimbursed Trustee advances, cash
held to redeem Units, for purchase of Securities or for distribution to
investors and the value of any other Fund liabilities; and dividing the result
by the number of outstanding Units.
If cash is not available in the Fund's Income and Capital Accounts to pay
redemptions, the Trustee may sell Securities selected by the Agent for the
Sponsors based on market and credit factors determined to be in the best
interest of the Fund. These sales are often made at times when the Securities
would not otherwise be sold and may result in lower prices than might be
realized otherwise and will also reduce the size and diversity of the Fund.
Redemptions may be suspended or payment postponed if the New York Stock
Exchange is closed other than for customary weekend and holiday closings, if the
SEC determines that trading on that Exchange is restricted or that an emergency
exists making disposal or evaluation of the Securities not reasonably
practicable, or for any other period permitted by the SEC.
REDEMPTION IN KIND--CONCEPT SERIES, INCOME GROWTH FUND, REAL ESTATE INCOME
FUND, SECOND EXCHANGE SERIES--AT&T SHARES. You may request distribution in kind
from the Trustee instead of cash redemption, provided that you are tendering
Units with a required minimum value. By the seventh calendar day after tender,
an amount and value of Securities per Unit, together with a pro rata portion of
the cash balance in the Fund, equal to the Redemption Price per Unit, will be
paid over to the Trustee, as distribution agent, and either held for your
account or disposed of in accordance with your instructions. Any brokerage
commissions on sales of
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<PAGE>
Securities in connection with in-kind redemptions will be borne by you. The
Sponsors may modify or terminate this redemption in kind option at any time
without notice to investors.
INCOME, DISTRIBUTIONS AND REINVESTMENT
INCOME AND DISTRIBUTIONS
The net annual income per Unit will depend primarily upon the amount of
dividends declared and paid by the issuers of the Securities and changes in the
expenses of the Fund and, to a lesser degree, upon the level of purchases of
additional Securities and sales of Securities. There is no assurance that
dividends on the Securities will continue at their current levels or be declared
or paid.
Each Unit receives an equal share of monthly or quarterly distributions of
dividend income. Because dividends on the Securities are not received at a
constant rate throughout the year, any income distribution may be more or less
than the amount then credited to the Income Account. Dividends payable to the
Fund are credited to an Income Account, as of the date on which the Fund is
entitled to receive the dividends, and other receipts are credited to a Capital
Account. A Reserve Account may be created by withdrawing from the Income and
Capital Accounts amounts considered appropriate by the Trustee to reserve for
any material amount that may be payable out of the Fund. Funds held by the
Trustee in the various accounts do not bear interest.
UTILITY STOCK SERIES, SECOND EXCHANGE SERIES--AT&T SHARES, REAL ESTATE
INCOME FUND, INCOME GROWTH FUND. Subject to the Reinvestment Plan, the Monthly
Income Distribution for each investor shall consist of an amount, computed
monthly by the Trustee, substantially equal to one-twelfth of the investor's pro
rata share of the estimated annual income to the Income Account, after deducting
estimated expenses.
ALL OTHER FUNDS: Unless otherwise indicated in Part A, dividend income
received by the Fund and available for distribution and the distributable
balance in the Capital Account (other than capital gains) as of any particular
record day will be distributed on or shortly after the related distribution day
to the holders of record on that record day.
There is no assurance that actual distributions will be made since all
dividends received may be used to pay expenses. An amount equal to any capital
gain net income (i.e. the excess of capital gains over capital losses)
recognized by the Fund in any taxable year will generally be distributed shortly
after the end of the year. In order to meet certain tax requirements a Fund may
make a special distribution of income, including capital gains, to holders of
record as of a date in December. Proceeds received from the disposition of any
of the Securities which are not used to make the distribution of capital gain
net income, for redemption of Units or reinvested in additional Securities will
be held in the Capital Account to be distributed on the next succeeding
distribution day.
REINVESTMENT PLAN -- UTILITY STOCK SERIES, INCOME GROWTH FUND, CONCEPT SERIES,
SECOND EXCHANGE SERIES -- AT&T SHARES AND S&P INDEX TRUSTS.
Income and principal distributions on Units may be reinvested by
participating in the Fund's reinvestment plan. Under the plan, the Units
acquired for investors will be either Units already held in inventory by the
Sponsors or new Units created by the Sponsors' deposit of additional Securities,
contracts to purchase additional Securities or cash (or a bank letter of credit
in lieu of cash) with instructions to purchase additional Securities. Purchases
made pursuant to the Reinvestment Plan will be made without sales charge at the
net asset value for Units of the Fund. Under the Reinvestment Plan, the Fund
will pay the distributions to the Trustee which in turn will purchase for the
investor full and fractional Units of the Fund at the price determined as of the
close of business on the distribution day and will add the Units to the
investor's account and send the investor an account statement reflecting the
reinvestment. The Sponsors reserve the right to amend, modify or terminate the
reinvestment plan at any time without prior notice. Investors holding Units in
'street name' should contact their broker, dealer or financial institution to
determine whether they may participate in the reinvestment plan.
FUND EXPENSES
Estimated annual Fund expenses are listed in Part A of the Prospectus; if
actual expenses exceed the estimate, the excess will be borne by the Fund. The
Trustee's annual fee is payable in monthly installments. The Trustee also
benefits when it holds cash for the Fund in non-interest bearing accounts.
Possible additional charges include Trustee fees and expenses for extraordinary
services, costs of indemnifying the Trustee and the Sponsors, costs of
8
<PAGE>
action taken to protect the Fund and other legal fees and expenses, Fund
termination expenses and any governmental charges. The Trustee has a lien on
Fund assets to secure reimbursement of these amounts and may sell Securities for
this purpose if cash is not available. The Sponsors receive an annual fee of a
maximum of $0.35 per 1,000 Units to reimburse them for the cost of providing
Portfolio supervisory services to the Fund. While the fee may exceed their costs
of providing these services to the Fund, the total supervision fees from all
Series of Equity Income Fund will not exceed their costs for these services to
all of those Series during any calendar year. The Sponsors may also be
reimbursed for their costs of providing bookkeeping and administrative services
to the Fund. The Trustee's and Sponsors' fees may be adjusted for inflation
without investors' approval.
Defined Asset Funds can be a cost-effective way to purchase and hold
investments. Annual operating expenses are generally lower than for managed
funds. Because Defined Asset Funds have no management fees, limited transaction
costs and no ongoing marketing expenses, operating expenses are generally less
than 0.25% a year. When compounded annually, small differences in expense ratios
can make a big difference in your investment results.
S&P Index Trusts. The Trusts have entered into license agreements with
Standard & Poor's that permit the Trusts to use the trademarks and tradenames
'S&P 500', 'S&P MidCap 400 Index' and other trademarks and tradenames, to the
extent the Sponsors deem appropriate and desirable under federal and state
securities laws to indicate the source of the Indices as a basis for determining
the composition of the Fund's investment portfolios. As consideration for the
grant of the license, each Portfolio will pay to Standard & Poor's Corporation
an annual fee equal to .02% of the average net asset value of the Portfolio (or,
if greater, $10,000). In addition, the Fund will pay approximately $45,000 per
year for access to independent computer services that track the S&P 500 Index
and the S&P MidCap Index. Computer expenses will be divided between the Trusts
in proportion to their respective assets during the relevant period.
TAXES
TAXATION OF THE FUND--EXCEPT FOR SECOND EXCHANGE SERIES--AT&T SHARES (SEE
PROSPECTUS PART A).
The Fund intends to qualify for and elect the special tax treatment
applicable to 'regulated investment companies' under Section 851-855 of the
Internal Revenue Code of 1986, as amended (the 'Code'). Qualification and
election as a 'regulated investment company' involve no supervision of
investment policy or management by any government agency. If the Fund qualifies
as a 'regulated investment company' and distributes to investors 90% or more of
its taxable income without regard to its net capital gain (i.e., the excess of
its net long-term capital gain over its net short-term capital loss), it will
not be subject to Federal income tax on any portion of its taxable income
(including any net capital gain) distributed to investors in a timely manner. In
addition, the Fund will not be subject to the 4% excise tax on certain
undistributed income of 'regulated investment companies' to the extent it
distributes to investors in a timely manner at least 98% of its taxable income
(including any net capital gain). It is anticipated that the Fund will not be
subject to Federal income tax or the excise tax because the Indenture requires
the distribution of the Fund's taxable income (including any net capital gain)
in a timely manner. Although all or a portion of the Fund's taxable income
(including any net capital gain) for a taxable year may be distributed shortly
after the end of the calendar year, such a distribution will be treated for
Federal income tax purposes as having been received by investors during the
calendar year.
DISTRIBUTIONS
Distribution to investors of the Fund's dividend income and net short-term
capital gain in any year will be taxable as ordinary income to investors to the
extent of the Fund's taxable income (without regard to its net capital gain) for
that year. Any excess will be treated as a return of capital and will reduce the
investor's basis in his Units and, to the extent that such distributions exceed
his basis, will be treated as a gain from the sale of his Units as discussed
below. It is anticipated that substantially all of the distributions of the
Fund's dividend income and net short-term capital gain will be taxable as
ordinary income to investors.
Distribution of the Fund's net capital gain (designated as capital gain
dividends by the Fund) will be taxable to investors as long-term capital gain,
regardless of the length of time the Units have been held by an investor. An
investor will recognize a taxable gain or loss if the investor sells or redeems
his Units. Any gain or loss arising from (or treated as arising from) the sale
or redemption of Units will be a capital gain or loss, except in the case of a
dealer in securities. Capital gains are currently taxed at the same rate as
ordinary income, however, the excess of
9
<PAGE>
net long-term capital gains over net short-term capital losses may be taxed at a
lower rate than ordinary income for certain noncorporate taxpayers. A capital
gain or loss is long-term if the asset is held for more than one year and
short-term if held for one year or less. However, any capital loss on the sale
or redemption of a Unit that an investor has held for six months or less will be
a long-term capital loss to the extent of any capital gain dividends previously
distributed to the investor by the Fund. The deduction of capital losses is
subject to limitations.
A distribution of Securities to an investor upon redemption of his Units
will be a taxable event to such investor, and that investor will recognize
taxable gain or loss upon such distribution (equal to the difference between
such an investor's tax basis in his Units and the fair market value of
Securities received in redemption), which will be capital gain or loss except in
the case of a dealer in securities. Investors should consult their own tax
advisers in this regard.
Distributions that are taxable as ordinary income to investors will
constitute dividends for Federal income tax purposes. To the extent that
distributions are appropriately designated by the Fund and are attributable to
dividends received by the Fund from domestic issuers with respect to whose
Securities the Fund satisfies the requirements for the dividends-received
deduction, such distributions will be eligible for the dividends-received
deduction for corporations (other than corporations such as 'S' corporations
which are not eligible for such deduction because of their special
characteristics and other than for purposes of special taxes such as the
accumulated earnings tax and the personal holding company tax). The
dividends-received deduction generally is currently 70%. However, Congress from
time to time considers proposals to reduce the rate, and enactment of such a
proposal would adversely affect the after-tax return to investors who can take
advantage of the deduction. Investors are urged to consult their own tax
advisers.
Sections 246 and 246A of the Code contain additional limitations on the
eligibility of dividends for the corporate dividends-received deduction.
Depending upon the corporate investor's circumstances (including whether it has
a 45-day holding period for its Units and whether its Units are debt financed),
these limitations may be applicable to dividends received by an investor from
the Fund which would otherwise qualify for the dividends-received deduction
under the principles discussed above. Accordingly, investors should consult
their own tax advisers in this regard. A corporate investor should be aware that
the receipt of dividend income for which the dividends-received deduction is
available may give rise to an alternative minimum tax liability (or increase an
existing liability) because the dividend income will be included in the
corporation's 'adjusted current earnings' for purposes of the adjustment to
alternative minimum taxable income required by Section 56(g) of the Code.
Dividends received by the Fund from foreign issuers will in most cases be
subject to foreign withholding taxes. The Fund will not be eligible for, and
therefore does not expect to make, an election that would enable investors to
credit foreign withholding taxes against their federal income tax liability on
distributions by the Fund.
Investors will be taxed in the manner described above regardless of whether
distributions from the Fund are actually received by the investor or are
reinvested pursuant to a Reinvestment Plan.
The Federal tax status of each year's distributions will be reported to
investors and to the Internal Revenue Service. The foregoing discussion relates
only to the Federal income tax status of the Fund and to the tax treatment of
distributions by the Fund to U.S. investors. Investors that are not United
States citizens or residents should be aware that distributions from the Fund
will generally be subject to a withholding tax of 30%, or a lower treaty rate,
and should consult their own tax advisers to determine whether investment in the
Fund is appropriate. Distributions may also be subject to state and local
taxation and investors should consult their own tax advisers in this regard.
RETIREMENT PLANS
Equity Income Funds may be well suited for purchase by Individual
Retirement Accounts ('IRAs'), Keogh plans, pension funds and other qualified
retirement plans, certain of which are briefly described below. Generally,
capital gains and income received in each of the foregoing plans are exempt from
Federal taxation. All distributions from such plans are generally treated as
ordinary income but may, in some cases, be eligible for special 5 or 10 year
averaging or tax-deferred rollover treatment. Holders of Units in IRAs, Keogh
plans and other tax-deferred retirement plans should consult their plan
custodian as to the appropriate disposition of
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<PAGE>
distributions. Investors considering participation in any of these plans should
review specific tax laws related thereto and should consult their attorneys or
tax advisors with respect to the establishment and maintenance of any of these
plans. These plans are offered by brokerage firms, including the Sponsor of this
Fund, and other financial institutions. Fees and charges with respect to such
plans may vary.
Retirement Plans for the Self-Employed--Keogh Plans. Units of the Fund may
be purchased by retirement plans established for self-employed individuals,
partnerships or unincorporated companies ('Keogh plans'). The assets of a Keogh
plan must be held in a qualified trust or other arrangement which meets the
requirements of the Code. Keogh plan participants may also establish separate
IRAs (see below) to which they may contribute up to an additional $2,000 per
year ($2,250 in a spousal account).
Individual Retirement Account--IRA, Any individual can make use of a
qualified IRA arrangement for the purchase of Units of the Fund. Any individual
(including one covered by an employer retirement plan) can make a contribution
in an IRA equal to the lesser of $2,000 ($2,250 in a spousal account) or 100% of
earned income; such investment must be made in cash. However, the deductible
amount an individual may contribute will be reduced if the individual's adjusted
gross income exceeds $25,000 (in the case of a single individual), $40,000 (in
the case of married individuals filing a joint return) or $200 (in the case of a
married individual filing a separate return). Certain transactions which are
prohibited under Section 408 of the Code will cause all or a portion of the
amount in an IRA to be deemed to the distributed and subject to tax at that
time. Unless nondeductible contributions were made in 1987 or a later year, all
distributions from an IRA will be treated as ordinary income but generally are
eligible for tax-deferred rollover treatment. Taxable distributions made before
attainment of age 59 1/2, except in the case of the participant's death or
disability or where the amount distributed is part of a series of substantially
equal periodic (at least annual) payments that are to be made over the life
expectancies of the participant and his or her beneficiary, are generally
subject to a surtax in an amount equal to 10% of the distribution.
Corporate Pension and Profit-Sharing Plans. A pension or profit-sharing
plan for employees of a corporation may purchase Units of the Fund.
RECORDS AND REPORTS
The Trustee keeps a register of the names, addresses and holdings of all
investors. The Trustee also keeps records of the transactions of the Fund,
including a current list of the Securities and a copy of the Indenture, which
may be inspected by investors at reasonable times during business hours.
With each distribution, the Trustee includes a statement of the amounts of
income and any other receipts being distributed. Following the termination of
the Fund, the Trustee sends each investor of record a statement summarizing
transactions in the Fund's accounts including amounts distributed from them,
identifying Securities sold and purchased and listing Securities held and the
number of Units outstanding at termination and stating the Redemption Price at
termination, and the fees and expenses paid by the Fund, among other matters.
Fund accounts may be audited by independent accountants selected by the Sponsors
and any report of the accountants will be available from the Trustee on request.
TRUST INDENTURE
The Fund is a 'unit investment trust' created under New York law (under
Massachusetts law for certain Funds) by a Trust Indenture among the Sponsors and
the Trustee. This Prospectus summarizes various provisions of the Indenture, but
each statement is qualified in its entirety by reference to the Indenture.
The Indenture may be amended by the Sponsors and the Trustee without
consent by investors to cure ambiguities or to correct or supplement any
defective or inconsistent provision, to make any amendment required by the SEC
or other governmental agency or to make any other change not materially adverse
to the interest of investors (as determined in good faith by the Sponsors). The
Indenture may also generally be amended upon consent of investors holding 51% of
the Units. No amendment may reduce the interest of any investor in the Fund
without the investor's consent or reduce the percentage of Units required to
consent to any amendment without unanimous consent of investors. Investors will
be notified of the substance of any amendment.
The Trustee may resign upon notice to the Sponsors. It may be removed by
investors holding 51% of the Units at any time or by the Sponsors without the
consent of investors if it becomes incapable of acting or
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<PAGE>
bankrupt, its affairs are taken over by public authorities, or if under certain
conditions the Sponsors determine in good faith that its replacement is in the
best interest of the investors. The resignation or removal becomes effective
upon acceptance of appointment by a successor; in this case, the Sponsors will
use their best efforts to appoint a successor promptly; however, if upon
resignation no successor has accepted appointment within 30 days after
notification, the resigning Trustee may apply to a court of competent
jurisdiction to appoint a successor.
Any Sponsor may resign so long as one Sponsor with a net worth of
$2,000,000 remains. A new Sponsor may be appointed by the remaining Sponsors and
the Trustee to assume the duties of the resigning Sponsor. If there is only one
Sponsor and it fails to perform its duties or becomes incapable of acting or
bankrupt or its affairs are taken over by public authorities, the Trustee may
appoint a successor Sponsor at reasonable rates of compensation, terminate the
Indenture and liquidate the Fund or continue to act as Trustee without a
Sponsor. Merrill Lynch, Pierce, Fenner & Smith Incorporated has been appointed
as Agent for the Sponsors by the other Sponsors.
The Sponsors and the Trustee are not liable to investors or any other party
for any act or omission in the conduct of their responsibilities absent bad
faith, willful misfeasance, negligence (gross negligence in the case of a
Sponsor) or reckless disregard of duty. The Indenture contains customary
provisions limitingthe liability of the Trustee.
MISCELLANEOUS
LEGAL OPINION
The legality of the Units has been passed upon by Davis Polk & Wardwell,
450 Lexington Avenue, New York, New York 10017, as special counsel for the
Sponsors.
AUDITORS
The Statement of Condition in Part A of the Prospectus was audited by
Deloitte & Touche LLP, independent accountants, as stated in their opinion. It
is included in reliance upon that opinion given on the authority of that firm as
experts in accounting and auditing.
TRUSTEE
The Trustee and its address are stated on the back cover of the Prospectus.
The Trustee is subject to supervision by the Federal Deposit Insurance
Corporation, the Board of Governors of the Federal Reserve System and either the
Comptroller of the Currency or state banking authorities.
SPONSORS
The Sponsors are listed on the back cover of the Prospectus. They may
include Merrill Lynch, Pierce, Fenner & Smith Incorporated, a wholly-owned
subsidiary of Merrill Lynch Co. Inc.; Smith Barney Inc., an indirect
wholly-owned subsidiary of The Travelers Inc.; Prudential Securities
Incorporated, an indirect wholly-owned subsidiary of the Prudential Insurance
Company of America, and Dean Witter Reynolds, Inc., a principal operating
subsidiary of Dean Witter Discover & Co. Each Sponsor, or one of its predecessor
corporations, has acted as Sponsor of a number of series of unit investment
trusts. Each Sponsor has acted as principal underwriter and managing underwriter
of other investment companies. The Sponsors, in addition to participating as
members of various selling groups or as agents of other investment companies,
execute orders on behalf of investment companies for the purchase and sale of
securities of these companies and sell securities to these companies in their
capacities as brokers or dealers in securities.
PUBLIC DISTRIBUTION
During the initial offering period and thereafter to the extent additional
Units continue to be offered for sale to the public by means of this Prospectus,
Units will be distributed directly to the public by this Prospectus at the
Public Offering Price determined in the manner provided above or to selected
dealers who are members of the National Association of Securities Dealers, Inc.
at a concession not in excess of the maximum sales charge. The Sponsors intend
to qualify Units for sale in all states in which qualification is deemed
necessary through the Underwriting Account and by dealers who are members of the
National Association of Securities Dealers, Inc..
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The Sponsors do not intend to qualify Units for sale in any foreign countries
and this Prospectus does not constitute an offer to sell Units in any country
where Units cannot lawfully be sold.
UNDERWRITERS' AND SPONSORS' PROFITS
Upon sale of the Units, the Underwriters will be entitled to receive sales
charges; each Underwriters' interest in the Underwriting Account will depend on
the number of Units acquired through the issuance of additional Units. The
Sponsors also realize a profit or loss on deposit of the Securities equal to the
difference between the cost of the Securities to the Fund (based on the
aggregate value of the Securities on their date of deposit) and the purchase
price of the Securities to the Sponsors plus commissions payable by the
Sponsors. In addition, a Sponsor or Underwriter may realize profits or sustain
losses on Securities it deposits in the Fund which were acquired from
underwriting syndicates of which it was a member. During the initial offering
period, the Underwriting Account also may realize profits or sustain losses as a
result of fluctuations after the initial date of deposit in the Public Offering
Price of the Units. In maintaining a secondary market for Units, the Sponsors
will also realize profits or sustain losses in the amount of any difference
between the prices at which they buy Units and the prices at which they resell
these Units (which include the sales charge) or the prices at which they redeem
the Units. Cash, if any, made available by buyers of Units to the Sponsors prior
to a settlement date for the purchase of Units may be used in the Sponsors'
businesses to the extent permitted by Rule 15c3-3 under the Securities Exchange
Act of 1934 and may be of benefit to the Sponsors.
PERFORMANCE INFORMATION
Information on the performance of the Fund for various periods, on the
basis of changes in Unit price plus the amount of dividends and capital gains
reinvested, may be included from time to time in advertisements, sales
literature, reports and other information furnished to current or prospective
Holders. Total return figures are not averaged, and may not reflect deduction of
the sales charge, which would decrease the return. Average annualized return
figures reflect deduction of the maximum sales charge. No provision is made for
any income taxes payable.
Past performance of any series may not be indicative of results of future
series. Fund performance may be compared to the performance of the Dow Jones
Industrial Average, the S&P 500 Composite Price Stock Index, the S&P MidCap 400
Index, or performance data from publications such as Lipper Analytical Services,
Inc., Morningstar Publications, Inc., Money Magazine, The New York Times, U.S.
News and World Report, Barron's, Business Week, CDA Investment Technology, Inc.,
Forbes Magazine or Fortune Magazine. Performance of the Stocks may be compared
in sales literature to performance of the S&P 500 Stock Price Composite Index,
to which may be added by year various national and international political and
economic events, and certain milestones in price and market indicators and in
offerings of Defined Asset Funds. This performance may also be compared for
various periods with an investment in short-term U.S. Treasury securities;
however, the investor should bear in mind that Treasury securities are fixed
income obligations, having the highest credit characterisitics, while the Stocks
involve greater risk because they have no maturities, and income thereon is
subject to the financial condition of, and declaration by, the issuers.
DEFINED ASSET FUNDS
For decades informed investors have purchased unit investment trusts for
dependability and professional selection of investments. Defined Asset Funds'
philosophy is to allow investors to 'buy with knowledge' (because, unlike
managed funds, the portfolio is relatively fixed) and 'hold with confidence'
(because the portfolio is professionally selected and regularly reviewed).
Defined Asset Funds offers an array of simple and convenient investment choices,
suited to fit a wide variety of personal financial goals--a buy and hold
strategy for capital accumulation, such as for children's education or
retirement, or attractive, regular current income consistent with the
preservation of principal. Unit investment trusts are particularly suited for
the many investors who prefer to seek long-term profits by purchasing sound
investments and holding them, rather than through active trading. Few
individuals have the knowledge, resources or capital to buy and hold a
diversified portfolio on their own; it would generally take a considerable sum
of money to obtain the breadth and diversity that Defined Asset Funds offer.
Your investment objectives may call for a combination of Defined Asset Funds.
One of the most important investment decisions you face may be how to
allocate your investments among asset classes. Diversification among different
kinds of investments can balance the risks and rewards of each one. Most
investment experts recommend stocks for long-term capital growth. Long-term
corporate bonds offer
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relatively high rates of interest income. By purchasing both defined equity and
defined bond funds, investors can receive attractive current income, as well as
growth potential, offering some protection against inflation. From time to time
various advertisements, sales literature, reports and other information
furnished to current or prospective investors may present the average annual
compounded rate of return of selected asset classes over various periods of
time, compared to the rate of inflation over the same periods.
EXCHANGE OPTION
You may be able to exchange Fund Units for units of certain other Defined
Asset Funds subject only to a reduced sales charge or to any remaining deferred
sales charge, as applicable. To make an exchange, you should contact your
financial professional to find out what suitable exchange funds are available
and to obtain a prospectus. You may acquire units of only those exchange funds
in which the Sponsors are maintaining a secondary market and which are lawfully
for sale in the state where you reside. Except for the reduced sales charge, an
exchange is a taxable event normally requiring recognition of any gain or loss
on the units exchanged. However, the Internal Revenue Service may seek to
disallow a loss if the portfolio of the units acquired is not materially
different from the portfolio of the units exchanged; you should consult your own
tax advisor. If the proceeds of units exchanged are insufficient to acquire a
whole number of exchange fund units, you may pay the difference in cash (not
exceeding the price of a single unit acquired).
As the Sponsors are not obligated to maintain a secondary market in any
series, there can be no assurance that units of a desired series will be
available for exchange. The Exchange Option may be amended or terminated at any
time without notice.
SUPPLEMENTAL INFORMATION
Upon writing or calling the Trustee shown on the back cover of Part A of
this Prospectus, investors will receive without charge supplemental information
about the Fund, which has been filed with the SEC. The supplemental information
includes more detailed risk factor disclosure about the types of securities that
may be part of the Portfolio and general information about the structure and
operation of the Fund.
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APPENDIX A
SECONDARY MARKET SALES CHARGE SCHEDULE
UTILITY STOCK SERIES
<TABLE><CAPTION>
SALES CHARGE
(GROSS UNDERWRITING PROFIT)
----------------------------------
AS PERCENT OF AS PERCENT OF DEALER CONCESSION AS
PUBLIC OFFERING NET AMOUNT PERCENT OF PUBLIC
AMOUNT PURCHASED PRICE INVESTED OFFERING PRICE
- -------------------------------------------------------------------- ----------------- --------------- -----------------------
<S> <C> <C> <C>
Less than $250,000.................................................. 4.50% 4.712% 2.925%
$250,000-$499,000................................................... 3.75 3.896 2.438
$500,000-$749,000................................................... 2.50 2.564 1.625
$750,000-$999,000................................................... 2.00 2.041 1.300
$1,000,000 or more.................................................. 1.50 1.523 0.975
<CAPTION>
S&P 500 TRUST 2, S&P MIDCAP TRUST
<S> <C> <C> <C>
Less than $25,000................................................... 2.25% 2.302% 1.463%
$25,000-$49,999..................................................... 2.00 2.041 1.300
$50,000-$74,999..................................................... 1.75 1.781 1.138
$75,000-$99,999..................................................... 1.50 1.523 0.975
$100,000-$249,999................................................... 1.25 1.266 0.813
$250,000 or more.................................................... 1.00 1.010 0.650
</TABLE>
INCOME GROWTH FUND 1993 SERIES
The sales charge consists of an initial portion and a deferred portion, the
total of which may equal a maximum of approximately 5.50% of the Public Offering
Price or 5.820% of the aggregate value of Securities, although these percentages
will vary should Units be purchased at a public offering price other than that
set forth on page A-3. For example, if you acquire Units for $1,050 (including
an initial sales charge of $15.75) and hold the Units until the termination of
the Fund, you will pay a total sales charge of $55.75 or 5.31% of the
acquisition price on those Units. At an acquisition price of $950 (including an
initial sales charge of $14.25), you would pay a total sales charge of $54.25 or
5.71% of the acquisition price. The initial portion of the sales charge is equal
to 1.50% of the Public Offering Price (1.523% of the aggregate value of
Securities) and the deferred portion of the sales charge is $10.00 per 1,000
Units payable by the Fund on behalf of investors out of net asset value of the
Fund on each Deferred Charge Payment Date through 1997. If you sell or redeem
Units before a Deferred Charge Payment Date, no future deferred sales charges
will be collected from you; this will have the effect of reducing the rate of
sales charge.
CONCEPT SERIES: BLUE CHIP STOCK SERIES, REAL ESTATE INCOME FUND, HEALTH CARE
TRUST II
The sales charge consists of an initial portion and a deferred portion, the
total of which may equal a maximum of approximately 5.35% of the Public Offering
Price or 5.501% of the net asset value of the Fund over its expected four-year
life. The initial portion of the sales charge is equal to 2.75% of the Public
Offering Price (2.828%) of the net amount invested in the Securities) and the
deferred portion of the sales charge is $1.625 per 1,000 Units ($6.50 per year)
payable by the Fund on behalf of investors out of net asset value of the Fund on
each quarterly Deferred Charge Payment Date until the Fund terminates. If you
sell or redeem Units before a Deferred Charge Payment Date, all future
deductions of deferred sales charges with respect to you will be waived; this
will have the effect of reducing your rate of sales charge.
The initial portion of the sales charge is reduced on a graduated scale for
sales to any purchaser of at least $250,000 of Units and will be applied on
whichever basis is more favorable to the purchaser.
<TABLE><CAPTION>
SALES CHARGE
(GROSS UNDERWRITING PROFIT)
----------------------------------
AS PERCENT OF AS PERCENT OF DEALER CONCESSION AS
PUBLIC OFFERING NET AMOUNT PERCENT OF PUBLIC
AMOUNT PURCHASED PRICE INVESTED OFFERING PRICE
- -------------------------------------------------------------------- ----------------- --------------- -----------------------
<S> <C> <C> <C>
Less than $250,000.................................................. 2.75% 2.828% 1.788%
$250,000-$499,000................................................... 2.25 2.302 1.463
$500,000-$749,000................................................... 1.75 1.781 1.138
$750,000-$999,000................................................... 1.25 1.266 0.813
$1,000,000 or more.................................................. 1.00 1.010 0.650
</TABLE>
a-1
<PAGE>
SECOND EXCHANGE SERIES--AT&T SHARES
The sales charge for Units of this Trust is 2.25% (2.302% of net amount
invested). There is no reduction for quantity purchases of Units.
CONCEPT SERIES: TELECOMMUNICATIONS TRUST 1, TELE-GLOBAL TRUST,
NATURAL GAS TRUST 2
The sales charge for Units of these Trusts is 2.00% (2.041% of net amount
invested). There is no reduction for quantity purchases of Units.
CONCEPT SERIES: FOOD FUND, NORTHWEST TRUST
The sales charge for Units of this Trust is 1.50% (1.523% of net amount
invested). There is no reduction for quantity purchases of Units.
a-2
<PAGE>
14101--12/95
<PAGE>
<PAGE>
DEFINED ASSET FUNDSSM
PROSPECTUS--PART B
EQUITY INVESTOR FUND INDEX SERIES
FURTHER INFORMATION REGARDING THE FUND MAY BE OBTAINED
WITHIN FIVE DAYS BY WRITING OR CALLING THE TRUSTEE AT THE ADDRESS AND
TELEPHONE NUMBER SET FORTH ON THE BACK COVER OF PART A OF THE PROSPECTUS.
INDEX
PAGE
---------
FUND DESCRIPTION......................... 1
RISK FACTORS............................. 2
HOW TO BUY UNITS......................... 4
HOW TO REDEEM OR SELL UNITS.............. 5
INCOME, DISTRIBUTIONS AND REINVESTMENT... 6
FUND EXPENSES............................ 7
TAXES.................................... 8
RECORDS AND REPORTS...................... 9
TRUST INDENTURE.......................... 10
MISCELLANEOUS............................ 10
EXCHANGE OPTION.......................... 12
SUPPLEMENTAL INFORMATION................. 12
FUND DESCRIPTION
PORTFOLIO SELECTION
The Fund is designed to produce investment results that generally
correspond to the price and yield performance of the common stocks represented
by the related S&P Index. As a result, 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.
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-
1
<PAGE>
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 Trustee will
have the right to vote all of the voting stocks in a 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 yield and price of stocks of the type deposited in the Fund are
dependent on a variety of factors, including money market conditions, general
conditions of the corporate bond and equity markets, size of a particular
offering and capital structure of the issuer. While it may not be likely that
dividends on any stocks would be omitted, of course no assurances can be given
since earnings available for dividends, regardless of the size of the company,
are subject to numerous events which are often beyond the issuer's control.
Because each Defined Asset Fund is a preselected portfolio, you know the
securities before you invest. Of course, the Portfolio will change somewhat over
time, as Securities are purchased upon creation of additional Units, as
securities are sold to meet Unit redemptions or in other limited circumstances.
PORTFOLIO SUPERVISION
The Fund follows a buy and hold investment strategy in contrast to the
frequent portfolio changes of a managed fund based on economic, financial and
market analyses. In the event a public tender offer is made for a Security or a
merger or acquisition is announced affecting a Security, the Sponsors may
instruct the Trustee to tender or sell the Security in the open market when in
its opinion it is in the best interests of investors to do so. Although the
Portfolio is not actively managed, it is regularly reviewed and evaluated and
Securities can be sold in case of certain adverse developments concerning a
Security including the adverse financial condition of the issuer, the
institution of legal proceedings against the issuer, a decline in the price or
the occurrence of other market or credit factors that might otherwise make
retention of the Security detrimental to the interest of investors or if the
disposition of these Securities is necessary in order to enable the Fund to make
distributions of the Fund's capital gain net income or desirable in order to
maintain the qualification of the Fund as a regulated investment company under
the Internal Revenue Code. Securities can also be sold to meet redemption of
Units; the Sponsors are also authorized to direct the reinvestment of the
proceeds of the sale of Securities, as well as moneys held to cover the purchase
of Securities pursuant to contracts which have failed, in additional Securities.
RISK FACTORS
An investment in the Fund entails certain risks, including the risk that
the value of your investment will decline if the financial condition of the
issuers of the Securities becomes impaired or if the general condition of the
stock market
2
<PAGE>
worsens. In addition, holders of common stocks have generally inferior rights to
receive payments from the issuer in comparison with the rights of creditors of,
or holders of debt obligations or preferred stocks issued by, the issuer.
Moreover, common stocks do not represent an obligation of the issuer and
therefore do not offer any assurance of income or provide the degree of
protection of capital provided by debt securities. Common stocks in general may
be especially susceptible to general stock market movements and to volatile
increases and decreases in value as market confidence in and perceptions of the
issuers change. These perceptions are based on unpredictable factors including
expectations regarding government, economic, monetary and fiscal policies,
inflation and interest rates, economic expansion or contraction, and global or
regional political, economic or banking crises. The Sponsors cannot predict the
direction or scope of any of these factors.
THE S&P 500 INDEX AND THE S&P MIDCAP INDEX
The S&P 500 Index is composed of 500 selected common stocks, most of which
are listed in the New York Stock Exchange. This well-known index, originally
consisting of 233 stocks in 1923, was expanded to 500 stocks in 1957 and was
restructured in 1976 to a composite consisting of four major industry sectors:
industrial, utility, financial and transportation. The four major industry
sectors are comprised of eleven regular industry sectors which are further
divided into industry groups. The S&P 500 Index contains a variety of stocks
which are market-value weighted to represent the overall market. The Index
represents approximately 70% of U.S. stock market capitalization. As of December
31, 1996, the mean market capitalization of the companies in the S&P 500 Index
is approximately $11,251 million.
The S&P MidCap Index is composed of 400 selected common stocks; as of
December 31, 1996, 292 were listed on the New York Stock Exchange, seven were
listed on the American Stock Exchange and 101 were quoted on The Nasdaq National
Market. The MidCap Index stocks were chosen for market size, liquidity and
industry group representation. As of December 31, 1996, industrial stocks
accounted for approximately 71.4% of S&P MidCap Index market capitalization,
utilities approximately 11.9%, financial stocks approximately 15.2% and
transportation stocks approximately 1.5%. The capitalizations of individual
companies ranged from about $148 million to over $7,326 million; the mean market
capitalization of the companies in the S&P MidCap Index was approximately $1,752
million.
The weightings of stocks in the S&P 500 Index and the S&P MidCap Index are
primarily based on each stock's relative total market value; that is, its market
price per share times the number of shares outstanding.
Standard and Poor's only relationship to the Portfolios is the licensing of
the right to use the S&P 500 Index and the S&P MidCap Index as bases for
determining the composition of the Portfolios and to use the related trademarks
and tradenames in the name of the Fund and in the Prospectus and related sales
literature to the extent that the Sponsors deem appropriate or desirable under
Federal and state securities laws and to indicate the source of the Indexes. The
Indexes are determined, comprised and calculated without regard to the Funds.
S&P does not guarantee the accuracy and/or the completeness of the S&P 500
Index or the S&P MidCap Index or any data included therein and S&P shall have no
liability for any errors, omissions, or interruptions therein. S&P makes no
warranty, express or implied, as to results to be obtained by the sponsors, the
funds, any person or any entity from the use of the S&P index or the S&P MidCap
Index or any data included therein. S&P makes no express or implied warranties,
and expressly disclaims all warranties of merchantability or fitness for a
particular purpose or use, with respect to the S&P 500 Index or the S&P MidCap
Index or any data included therein. Without limiting any of the foregoing, in no
event shall S&P have any liability for any special, punitive, indirect, or
consequential damages (including lost profits), even if notified of the
possibility of such damages.
LIQUIDITY
Whether or not the Securities are listed on a national securities exchange,
the principal trading market for the Securities may be in the over-the-counter
market. As a result, the existence of a liquid trading market for the Securities
may depend on whether dealers will make a market in the Securities. There can be
no assurance that a market will be made for any of the Securities, that any
market for the Securities will be maintained or of the liquidity of the
Securities in any markets made. In addition, the Fund may be restricted under
the Investment Company Act of 1940 from selling Securities to the Sponsors. The
price at which the Securities may be sold to meet redemptions and the value of
the Fund will be adversely affected if trading markets for the Securities are
limited or absent.
3
<PAGE>
LITIGATION AND LEGISLATION
The Sponsors do not know of any pending litigation as of the initial date
of deposit that might reasonably be expected to have a material adverse effect
on the Fund, although pending litigation may have a material adverse effect on
the value of Securities in the Fund. In addition, at any time after the initial
date of deposit, litigation may be initiated on a variety of grounds, or
legislation may be enacted, affecting the Securities in the Portfolio or the
issuers of the Securities. Changing approaches to regulation may have a negative
impact on certain companies represented in the Portfolio. There can be no
assurance that future litigation, legislation, regulation or deregulation will
not have a material adverse effect on the Portfolio or will not impair the
ability of the issuers of the Securities to achieve their business goals. From
time to time Congress considers proposals to reduce the rate of the
dividends-received deduction. This type of legislation, if enacted into law,
would adversely affect the after-tax return to investors who can take advantage
of the deduction. See Taxes.
LIFE OF THE FUND; FUND TERMINATION
The size and composition of the Portfolio will be affected by the level of
redemptions of Units that may occur from time to time. Principally, this will
depend upon the number of investors seeking to sell or redeem their Units. The
Portfolio will be terminated no later than the mandatory termination date
specified in Part A of the Prospectus. It will terminate earlier upon the
disposition of the last Security or upon the consent of investors holding 51% of
the Units. The Portfolio may also be terminated earlier by the Sponsors once its
total assets have fallen below the minimum value specified in Part A of the
Prospectus. A decision by the Sponsors to terminate the Portfolio early will be
based on factors such as the size of the Portfolio relative to its original
size, the ratio of Portfolio expenses to income, and the cost of maintaining a
current prospectus.
Notice of impending termination will be provided to investors and
thereafter units will no longer be redeemable. On or shortly before termination,
the Trustee will seek to dispose of any Securities remaining in the Portfolio
although any Security unable to be sold at a reasonable price may continue to be
held by the Trustee in a liquidating trust pending its final disposition. A
proportional share of the expenses associated with termination, including
brokerage costs in disposing of Securities, will be borne by investors remaining
at that time. This may have the effect of reducing the amount of proceeds those
investors are to receive in any final distribution.
HOW TO BUY UNITS
Units are available from any of the Sponsors, Underwriters and other
broker-dealers at the Public Offering Price, which includes the applicable sales
charge -- see Appendix A. The Public Offering Price varies each Business Day
with changes in the value of the Portfolio and other assets and liabilities of
the Fund.
PUBLIC OFFERING PRICE
The Public Offering Price is based on the next evaluation of the Securities
and includes a sales charge based on the amount on the same day by a single
purchaser.
SALES CHARGE
(GROSS UNDERWRITING PROFIT)
--------------------------------
AS PERCENT OF AS PERCENT OF
PUBLIC OFFERING NET AMOUNT
AMOUNT PURCHASED PRICE INVESTED
- -------------------------- ----------------- -------------
Less than $25,000......... 2.25% 2.302%
$25,000-$49,999........... 2.00 2.041
$50,000-$74,999........... 1.75 1.781
$75,000-$99,999........... 1.50 1.523
$100,000-$249,999......... 1.25 1.266
$250,000-$999,999......... 1.00 1.010
$1,000,000-$4,999,999..... 0.75 0.756
$5,000,000 or more........ 0.50 0.503
The concession to dealers is 65% of the effective sales charge.
To qualify for a reduced sales charge, the dealer must confirm that the
sale is to a single purchaser or is purchased for its own account and not for
distribution. For these purposes, Units held in the name of the purchaser's
spouse or
4
<PAGE>
child under 21 years of age are deemed to be purchased by a single purchaser. A
trustee or other fiduciary purchasing securities for a single trust or single
fiduciary account is also considered a single purchaser.
Employees of certain Sponsors and Sponsor affiliates and non-employee
directors of Merrill Lynch & Co. Inc. may purchase Units at a reduced initial
sales charge of not less than $5.00 per 1,000 Units.
The graduated sales charges shown in Appendix A will apply on all purchases
on any one day (with credit given for previously purchased Units as described
below under Right of Accumulation) by a single purchaser of Units in one or both
Trusts of this Fund only in the amounts stated. For this purpose purchases will
not be aggregated with concurrent purchases of any other unit trusts sponsored
by the Sponsors. However, Units held in the name of the spouse of the purchaser
or in the name of a child of the purchaser under 21 years of age are deemed to
be registered in the name of the purchaser. The graduated sales charges are also
applicable to a trustee or other fiduciary purchasing securities for a single
trust estate or single fiduciary account. To qualify for the reduced sales
charge and concession applicable to quantity purchases, the dealer must confirm
that the sale is to a single purchaser. The sales charge is lower than sales
charges on many other equity investments.
Right of Accumulation. Reduced sales charges are applicable through a right
of accumulation under which eligible investors are permitted to purchase Units
of either Trust at the offering price applicable to the total of (a) the dollar
amount then being purchased plus (b) an amount equal to the then current net
asset value of the purchaser's holdings of Units of both Trusts. To be eligible
either for this right of accumulation or the reduced sales charge applicable to
purchases of both Trusts on the same day, the purchaser or the purchaser's
securities dealer must notify the Sponsors at the time of purchase that such
purchase qualifies under this accumulation provision and supply sufficient
information to permit confirmation of qualification. Acceptance of the purchase
order is subject to such confirmation. These reduced sales charge provisions may
be amended or terminated at any time without notice.
EVALUATIONS
Evaluations are determined by the Trustee on each Business Day. This
excludes Saturdays, Sundays and the following holidays as observed by the New
York Stock Exchange: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas. If the Securities are
listed on a national securities exchange or the Nasdaq National Market,
evaluations are generally based on closing sales prices on that exchange or that
system (unless the Trustee deems these prices inappropriate) or, if closing
sales prices are not available, at the mean between the closing bid and offer
prices. If the Securities are not listed or if listed but the principal market
is elsewhere, the evaluation is generally determined based on sales prices of
the Securities on the over-the-counter market or, if sales prices in that market
are not available, on the basis of the mean between current bid and offer prices
for the Securities or for comparable securities or by appraisal or by any
combination of these methods. Neither the Sponsors nor the Trustee guarantee the
enforceability, marketability or price of any Securities.
CERTIFICATES
Certificates for Units are issued upon request and may be transferred by
paying any taxes or governmental charges and by complying with the requirements
for redeeming Certificates (see How To Redeem or Sell Units below). Certain
Sponsors collect additional charges for registering and shipping Certificates to
purchasers. Lost or mutilated Certificates can be replaced upon delivery of
satisfactory indemnity and payment of costs.
HOW TO REDEEM OR SELL UNITS
You can redeem your Units at any time for net asset value. In addition, the
Sponsors have maintained an uninterrupted secondary market for Units for over 20
years and will ordinarily buy back Units at net asset value. The following
describes these two methods to redeem or sell Units in greater detail.
REDEEMING UNITS
You can always redeem your Units directly with the Trustee for net asset
value. This can be done by sending the Trustee a redemption request together
with any Unit certificates you hold, which must be properly endorsed or
accompanied by a written transfer instrument with signatures guaranteed by an
eligible institution. In certain instances, additional documents may be required
such as a trust instrument, certificate of corporate authority, certificate of
death or appointment as executor, administrator or guardian.
5
<PAGE>
Within seven days after the Trustee's receipt of your request (and any
necessary documents), a check will be mailed to you in an amount equal to the
net asset value of your Units. Because of the sales charge, market movements or
changes in the Portfolio, net asset value at the time you redeem your Units may
be greater or less than the original cost of your Units. Net asset value is
calculated each Business Day by adding the value of the Securities, declared but
unpaid dividends on the Securities, cash and the value of any other Fund assets;
deducting unpaid taxes or other governmental charges, accrued but unpaid Fund
expenses and any remaining Deferred Sales Charges, unreimbursed Trustee
advances, cash held to redeem Units or for distribution to investors and the
value of any other Fund liabilities; and dividing the result by the number of
outstanding Units. After the initial offering period, the repurchase and cash
redemption prices will be reduced to reflect the cost to the Fund of liquidating
Securities to meet the redemption.
As long as the Sponsors are maintaining a secondary market for Units (as
described below), the Trustee will not actually redeem your Units but will sell
them to the Sponsors for net asset value. If the Sponsors are not maintaining a
secondary market, the Trustee will redeem your Units for net asset value or will
sell your Units in the over-the-counter market if the Trustee believes it will
obtain a higher net price for your Units. If the Trustee is able to sell the
Units for a net price higher than net asset value, you will receive the net
proceeds of the sale.
If cash is not available in the Fund's Income and Capital Accounts to pay
redemptions, the Trustee may sell Securities selected by the Agent for the
Sponsors based on market and credit factors determined to be in the best
interest of the Fund. These sales are often made at times when the Securities
would not otherwise be sold and may result in lower prices than might be
realized otherwise and may also reduce the size and diversity of the Fund. If
Securities are being sold during a time when additional Units are being created
by the purchase of additional Securities (as described under Portfolio
Selection), Securities will be sold in a manner designed to maintain, to the
extent practicable, the proportionate relationship among the number of shares of
each Security in the Portfolio.
Any investor owning Units representing Securities with a value of at least
$500,000 who redeems those Units prior to the rollover notification date
indicated in Part A of the Prospectus may, in lieu of cash redemption, request
distribution in kind of an amount and value of Securities per Unit equal to the
otherwise applicable Redemption Price per Unit. Generally, whole shares of each
Security together with cash from the Capital Account equal to any fractional
shares to which the investor would be entitled (less any Deferred Sales Charge
payable) will be paid over to a distribution agent and either held for the
account of the investor or disposed of in accordance with instructions of the
investor. Any brokerage commissions on sales of Securities in connection with
in-kind redemptions will be borne by the redeeming investors. The in-kind
redemption option is subject to all applicable legal restrictions and may be
terminated by the Sponsors at any time upon prior notice to investors.
Redemptions may be suspended or payment postponed (i) if the New York Stock
Exchange is closed (other than customary weekend and holiday closings), (ii) if
the SEC determines that trading on the New York Stock Exchange is restricted or
that an emergency exists making disposal or evaluation of the Securities not
reasonably practicable or (iii) for any other period permitted by SEC order.
SPONSORS' SECONDARY MARKET FOR UNITS
The Sponsors, while not obligated to do so, will buy back Units at net
asset value without any other fee or charge as long as they are maintaining a
secondary market for Units. Because of the sales charge, market movements or
changes in the portfolio, net asset value at the time you sell your Units may be
greater or less than the original cost of your Units. The Sponsors may resell
the Units to other buyers or redeem the Units by tendering them to the Trustee.
You should consult your financial professional for current market prices to
determine if other broker-dealers or banks are offering higher prices for Units.
The Sponsors may discontinue the secondary market for Units without prior
notice if the supply of Units exceeds demand or for other business reasons.
Regardless of whether the Sponsors maintain a secondary market, you have the
right to redeem your Units for net asset value with the Trustee at any time, as
described above.
INCOME, DISTRIBUTIONS AND REINVESTMENT
INCOME AND DISTRIBUTIONS
The net annual income per Unit will depend primarily upon the amount of
dividends declared and paid by the issuers of the Securities and changes in the
expenses of the Fund and, to a lesser degree, upon the level of purchases of
6
<PAGE>
additional Securities and sales of Securities. There is no assurance that
dividends on the Securities will continue at their current levels or be declared
or paid.
Each Unit receives an equal share of monthly distributions of dividend
income. Because dividends on the Securities are not received at a constant rate
throughout the year, any income distribution may be more or less than the amount
then credited to the Income Account. Dividends payable to the Fund are credited
to an Income Account, as of the date on which the Fund is entitled to receive
the dividends, and other receipts are credited to a Capital Account. A Reserve
Account may be created by withdrawing from the Income and Capital Accounts
amounts considered appropriate by the Trustee to reserve for any material amount
that may be payable out of the Fund. Funds held by the Trustee in the various
accounts do not bear interest.
Dividend income received by the Fund and available for distribution and the
distributable balance in the Capital Account (other than capital gains) as of
any particular record day will be distributed on or shortly after the related
distribution day to the holders of record on that record day.
There is no assurance that actual distributions will be made since all
dividends received may be used to pay expenses. An amount equal to any capital
gain net income (i.e. the excess of capital gains over capital losses)
recognized by the Fund in any taxable year will generally be distributed shortly
after the end of the year. In order to meet certain tax requirements a Fund may
make a special distribution of income, including capital gains, to holders of
record as of a date in December. Proceeds received from the disposition of any
of the Securities which are not used to make the distribution of capital gain
net income, for redemption of Units or reinvested in additional Securities will
be held in the Capital Account to be distributed on the next succeeding
distribution day.
REINVESTMENT PLAN
Income and principal distributions on Units may be reinvested by
participating in the Fund's reinvestment plan. Under the plan, the Units
acquired for investors will be either Units already held in inventory by the
Sponsors or new Units created by the Sponsors' deposit of additional Securities,
contracts to purchase additional Securities or cash (or a bank letter of credit
in lieu of cash) with instructions to purchase additional Securities. Purchases
made pursuant to the Reinvestment Plan will be made without sales charge at the
net asset value for Units of the Fund. Under the Reinvestment Plan, the Fund
will pay the distributions to the Trustee which in turn will purchase for the
investor full and fractional Units of the Fund at the price determined as of the
close of business on the distribution day and will add the Units to the
investor's account and send the investor an account statement reflecting the
reinvestment. The Sponsors reserve the right to amend, modify or terminate the
reinvestment plan at any time without prior notice. Investors holding Units in
'street name' should contact their broker, dealer or financial institution to
determine whether they may participate in the reinvestment plan.
FUND EXPENSES
Estimated annual Fund expenses are listed in Part A of the Prospectus; if
actual expenses exceed the estimate, the excess will be borne by the Fund. The
Trustee's annual fee is payable in monthly installments. The Trustee also
benefits when it holds cash for the Fund in non-interest bearing accounts.
Possible additional charges include Trustee fees and expenses for extraordinary
services, costs of indemnifying the Trustee and the Sponsors, costs of action
taken to protect the Fund and other legal fees and expenses, Fund termination
expenses and any governmental charges. The Trustee has a lien on Fund assets to
secure reimbursement of these amounts and may sell Securities for this purpose
if cash is not available. The Sponsors receive an annual fee currently estimated
at $0.28 per 1,000 Units to reimburse them for the cost of providing Portfolio
supervisory services to the Fund. While the fee may exceed their costs of
providing these services to the Fund, the total supervision fees from all Series
of Equity Investor Fund will not exceed their costs for these services to all of
those Series during any calendar year. The Sponsors may also be reimbursed for
their costs of providing bookkeeping and administrative services to the Fund.
The Trustee's and Sponsors' fees may be adjusted for inflation without
investors' approval.
Defined Asset Funds can be a cost-effective way to purchase and hold
investments. Annual operating expenses are generally lower than for managed
funds. Because Defined Asset Funds have no management fees, limited transaction
costs and no ongoing marketing expenses, operating expenses are generally less
than 0.25% a year. When compounded annually, small differences in expense ratios
can make a big difference in your investment results.
The Trusts have entered into license agreements with Standard & Poor's that
permit the Trusts to use the trademarks and tradenames 'S&P 500', 'S&P MidCap
400 Index' and other trademarks and tradenames, to the
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extent the Sponsors deem appropriate and desirable under federal and state
securities laws to indicate the source of the Indices as a basis for determining
the composition of the Fund's investment portfolios. As consideration for the
grant of the license, each Portfolio will pay to Standard & Poor's Corporation
an annual fee equal to .02% of the average net asset value of the Portfolio (or,
if greater, $10,000). In addition, the Fund will pay approximately $45,000 per
year for access to independent computer services that track the S&P 500 Index
and the S&P MidCap Index. Computer expenses will be divided between the Trusts
in proportion to their respective assets during the relevant period.
TAXES
TAXATION OF THE FUND
Each Trust intends to qualify for and elect 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 investors 90% or more of
its taxable income, excluding its net capital gain (i.e., the excess of its net
long-term capital gain over its net short-term capital loss), it will not be
subject to Federal income tax on any portion of its taxable income (including
any net capital gain) distributed to investors in a timely manner. In addition,
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 investors in
a timely manner at least 98% of its taxable income (including any net capital
gain). It is anticipated that a Trust will not be subject to Federal income tax
or the excise tax, because the Indenture requires the distribution of the
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 any calendar year may be distributed shortly after the end of that
calendar year, such a distribution will be treated for Federal income tax
purposes as having been received by investors during the calendar year.
DISTRIBUTIONS
Distributions of a Trust's net capital gain (designated as capital gain
dividends by the Trust) will be taxable to investors as long-term capital gain,
regardless of the time the investor has held his Units. Distributions to
investors of a Trust's dividend income and net short-term capital gain in any
year will be taxable as ordinary income to investors to the extent of the
Trust's taxable income (other than taxable income attributable to its net
capital gain) for that year. Any excess will be treated as a return of capital
and will reduce the investor's basis in his Units and, to the extent that such
distributions exceed his basis, will be treated as a gain from the sale of his
Units as discussed below. It is anticipated that substantially all of the
distributions of a Trust's dividend income and net short-term capital gain will
be taxable as ordinary income to investors.
An investor will generally recognize capital gain or loss when the investor
sells or redeems his Units. Capital gains are currently taxed at the same rate
as ordinary income, however, the excess of net long-term capital gains over net
short-term capital losses may be taxed at a lower rate than ordinary income for
certain individuals and other noncorporate taxpayers. A capital gain or loss is
long-term if the asset is held for more than one year and short-term if held for
one year or less. However, any capital loss on the sale or redemption of a Unit
that an investor has held for six months or less will be a long-term capital
loss to the extent of any capital gain dividends previously distributed to the
investor by the Trust. The deduction of capital losses is subject to
limitations.
Distributions that are taxable as ordinary income to investors will
constitute dividends for Federal income tax purposes. To the extent that
distributions are appropriately designated by a Trust and are attributable to
dividends received by the Trust from domestic issuers with respect to whose
Securities the Trust satisfies the requirements for the dividends-received
deduction, such distributions will be eligible for the 70% dividends-received
deduction for certain corporate investors. Depending upon the particular
corporate investors circumstances, limitations on the availability of the
dividends-received deduction may be applicable. Further, Congress from time to
time considers proposals that would adversely affect the after-tax return to
investors that can take advantage of the deduction. For example, on February 6,
1997, the Clinton Administration proposed legislation that would reduce the 70%
dividends-received deduction to 50% for dividends paid or accrued after the 30th
day after the enactment of the porposal. Investors are urged to consult their
own tax advisers in this regard.
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Dividends received by a Trust from foreign issuers will in most cases be
subject to foreign withholding taxes. The Trust will not be eligible for, and
therefore does not expect to make, an election that would enable investors to
credit foreign withholding taxes against their federal income tax liability on
distributions by the Trust.
Investors will be taxed in the manner described above regardless of whether
distributions from the Fund are actually received by the investor or are
reinvested pursuant to the Reinvestment Plan. The Federal tax status of each
year's distributions will be reported to investors and to the Internal Revenue
Service.
The foregoing discussion relates only to the Federal income tax status of
the Trust and to the tax treatment of distributions by the Trust to U.S.
investors. Investors that are not United States citizens or residents should be
aware that distributions from the Trust 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 a Trust is appropriate.
Distributions may also be subject to state and local taxation and investors
should consult their own tax advisers in this regard.
RETIREMENT PLANS
Equity Income Funds may be well suited for purchase by Individual
Retirement Accounts ('IRAs'), Keogh plans, pension funds and other qualified
retirement plans, certain of which are briefly described below. Generally,
capital gains and income received in each of the foregoing plans are exempt from
Federal taxation. All distributions from such plans are generally treated as
ordinary income but may, in some cases, be eligible for special 5 or 10 year
averaging or tax-deferred rollover treatment. Holders of Units in IRAs, Keogh
plans and other tax-deferred retirement plans should consult their plan
custodian as to the appropriate disposition of distributions. Investors
considering participation in any of these plans should review specific tax laws
related thereto and should consult their attorneys or tax advisors with respect
to the establishment and maintenance of any of these plans. These plans are
offered by brokerage firms, including the Sponsor of this Fund, and other
financial institutions. Fees and charges with respect to such plans may vary.
Retirement Plans for the Self-Employed--Keogh Plans. Units of the Fund may
be purchased by retirement plans established for self-employed individuals,
partnerships or unincorporated companies ('Keogh plans'). The assets of a Keogh
plan must be held in a qualified trust or other arrangement which meets the
requirements of the Code. Keogh plan participants may also establish separate
IRAs (see below) to which they may contribute up to an additional $2,000 per
year ($4,000 in a spousal account).
Individual Retirement Account--IRA, Any individual can make use of a
qualified IRA arrangement for the purchase of Units of the Fund. Any individual
(including one covered by an employer retirement plan) can make a contribution
in an IRA equal to the lesser of $2,000 ($4,000 in a spousal account) or 100% of
earned income; such investment must be made in cash. However, the deductible
amount an individual may contribute will be reduced if the individual's adjusted
gross income exceeds $25,000 (in the case of a single individual), $40,000 (in
the case of married individuals filing a joint return) or $200 (in the case of a
married individual filing a separate return). Certain transactions which are
prohibited under Section 408 of the Code will cause all or a portion of the
amount in an IRA to be deemed to the distributed and subject to tax at that
time. Unless nondeductible contributions were made in 1987 or a later year, all
distributions from an IRA will be treated as ordinary income but generally are
eligible for tax-deferred rollover treatment. Taxable distributions made before
attainment of age 59 1/2, except in the case of the participant's death or
disability or where the amount distributed is part of a series of substantially
equal periodic (at least annual) payments that are to be made over the life
expectancies of the participant and his or her beneficiary, are generally
subject to a surtax in an amount equal to 10% of the distribution.
Corporate Pension and Profit-Sharing Plans. A pension or profit-sharing
plan for employees of a corporation may purchase Units of the Fund.
RECORDS AND REPORTS
The Trustee keeps a register of the names, addresses and holdings of all
investors. The Trustee also keeps records of the transactions of the Fund,
including a current list of the Securities and a copy of the Indenture, which
may be inspected by investors at reasonable times during business hours.
With each distribution, the Trustee includes a statement of the amounts of
income and any other receipts being distributed. Following the termination of
the Fund, the Trustee sends each investor of record a statement summarizing
transactions in the Fund's accounts including amounts distributed from them,
identifying Securities
9
<PAGE>
sold and purchased and listing Securities held and the number of Units
outstanding at termination and stating the Redemption Price at termination, and
the fees and expenses paid by the Fund, among other matters. Fund accounts may
be audited by independent accountants selected by the Sponsors and any report of
the accountants will be available from the Trustee on request.
TRUST INDENTURE
The Fund is a 'unit investment trust' created under New York law by a Trust
Indenture among the Sponsors and the Trustee. This Prospectus summarizes various
provisions of the Indenture, but each statement is qualified in its entirety by
reference to the Indenture.
The Indenture may be amended by the Sponsors and the Trustee without
consent by investors to cure ambiguities or to correct or supplement any
defective or inconsistent provision, to make any amendment required by the SEC
or other governmental agency or to make any other change not materially adverse
to the interest of investors (as determined in good faith by the Sponsors). The
Indenture may also generally be amended upon consent of investors holding 51% of
the Units. No amendment may reduce the interest of any investor in the Fund
without the investor's consent or reduce the percentage of Units required to
consent to any amendment without unanimous consent of investors. Investors will
be notified of the substance of any amendment.
The Trustee may resign upon notice to the Sponsors. It may be removed by
investors holding 51% of the Units at any time or by the Sponsors without the
consent of investors if it becomes incapable of acting or bankrupt, its affairs
are taken over by public authorities, or if under certain conditions the
Sponsors determine in good faith that its replacement is in the best interest of
the investors. The resignation or removal becomes effective upon acceptance of
appointment by a successor; in this case, the Sponsors will use their best
efforts to appoint a successor promptly; however, if upon resignation no
successor has accepted appointment within 30 days after notification, the
resigning Trustee may apply to a court of competent jurisdiction to appoint a
successor.
Any Sponsor may resign so long as one Sponsor with a net worth of
$2,000,000 remains. A new Sponsor may be appointed by the remaining Sponsors and
the Trustee to assume the duties of the resigning Sponsor. If there is only one
Sponsor and it fails to perform its duties or becomes incapable of acting or
bankrupt or its affairs are taken over by public authorities, the Trustee may
appoint a successor Sponsor at reasonable rates of compensation, terminate the
Indenture and liquidate the Fund or continue to act as Trustee without a
Sponsor. Merrill Lynch, Pierce, Fenner & Smith Incorporated has been appointed
as Agent for the Sponsors by the other Sponsors.
The Sponsors and the Trustee are not liable to investors or any other party
for any act or omission in the conduct of their responsibilities absent bad
faith, willful misfeasance, negligence (gross negligence in the case of a
Sponsor) or reckless disregard of duty. The Indenture contains customary
provisions limitingthe liability of the Trustee.
MISCELLANEOUS
LEGAL OPINION
The legality of the Units has been passed upon by Davis Polk & Wardwell,
450 Lexington Avenue, New York, New York 10017, as special counsel for the
Sponsors.
AUDITORS
The Statement of Condition in Part A of the Prospectus was audited by
Deloitte & Touche LLP, independent accountants, as stated in their opinion. It
is included in reliance upon that opinion given on the authority of that firm as
experts in accounting and auditing.
TRUSTEE
The Trustee and its address are stated on the back cover of the Prospectus.
The Trustee is subject to supervision by the Federal Deposit Insurance
Corporation, the Board of Governors of the Federal Reserve System and either the
Comptroller of the Currency or state banking authorities.
SPONSORS
The Sponsors are listed on the back cover of the Prospectus. They may
include Merrill Lynch, Pierce, Fenner & Smith Incorporated, a wholly-owned
subsidiary of Merrill Lynch Co. Inc.; Smith Barney Inc., an indirect wholly-
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<PAGE>
owned subsidiary of The Travelers Inc.; Prudential Securities Incorporated, an
indirect wholly-owned subsidiary of the Prudential Insurance Company of America;
Dean Witter Reynolds, Inc., a principal operating subsidiary of Dean Witter
Discover & Co. and PaineWebber Incorporated, a wholly owned subsidiary of
PaineWebber Group Inc. Each Sponsor, or one of its predecessor corporations, has
acted as Sponsor of a number of series of unit investment trusts. Each Sponsor
has acted as principal underwriter and managing underwriter of other investment
companies. The Sponsors, in addition to participating as members of various
selling groups or as agents of other investment companies, execute orders on
behalf of investment companies for the purchase and sale of securities of these
companies and sell securities to these companies in their capacities as brokers
or dealers in securities.
PUBLIC DISTRIBUTION
During the initial offering period and thereafter to the extent additional
Units continue to be offered for sale to the public by means of this Prospectus,
Units will be distributed directly to the public by this Prospectus at the
Public Offering Price determined in the manner provided above or to selected
dealers who are members of the National Association of Securities Dealers, Inc.
at a concession not in excess of the maximum sales charge. The Sponsors intend
to qualify Units for sale in all states in which qualification is deemed
necessary through the Underwriting Account and by dealers who are members of the
National Association of Securities Dealers, Inc.. The Sponsors do not intend to
qualify Units for sale in any foreign countries and this Prospectus does not
constitute an offer to sell Units in any country where Units cannot lawfully be
sold.
UNDERWRITERS' AND SPONSORS' PROFITS
Upon sale of the Units, the Underwriters will be entitled to receive sales
charges; each Underwriters' interest in the Underwriting Account will depend on
the number of Units acquired through the issuance of additional Units. The
Sponsors also realize a profit or loss on deposit of the Securities equal to the
difference between the cost of the Securities to the Fund (based on the
aggregate value of the Securities on their date of deposit) and the purchase
price of the Securities to the Sponsors plus commissions payable by the
Sponsors. In addition, a Sponsor or Underwriter may realize profits or sustain
losses on Securities it deposits in the Fund which were acquired from
underwriting syndicates of which it was a member. During the initial offering
period, the Underwriting Account also may realize profits or sustain losses as a
result of fluctuations after the initial date of deposit in the Public Offering
Price of the Units. In maintaining a secondary market for Units, the Sponsors
will also realize profits or sustain losses in the amount of any difference
between the prices at which they buy Units and the prices at which they resell
these Units (which include the sales charge) or the prices at which they redeem
the Units. Cash, if any, made available by buyers of Units to the Sponsors prior
to a settlement date for the purchase of Units may be used in the Sponsors'
businesses to the extent permitted by Rule 15c3-3 under the Securities Exchange
Act of 1934 and may be of benefit to the Sponsors.
PERFORMANCE INFORMATION
Information on the performance of the Fund for various periods, on the
basis of changes in Unit price plus the amount of dividends and capital gains
reinvested, may be included from time to time in advertisements, sales
literature, reports and other information furnished to current or prospective
Holders. Total return figures are not averaged, and may not reflect deduction of
the sales charge, which would decrease the return. Average annualized return
figures reflect deduction of the maximum sales charge. No provision is made for
any income taxes payable.
Past performance of any series may not be indicative of results of future
series. Fund performance may be compared to the performance of the Dow Jones
Industrial Average, the S&P 500 Composite Price Stock Index, the S&P MidCap 400
Index, or performance data from publications such as Lipper Analytical Services,
Inc., Morningstar Publications, Inc., Money Magazine, The New York Times, U.S.
News and World Report, Barron's, Business Week, CDA Investment Technology, Inc.,
Forbes Magazine or Fortune Magazine. Performance of the Stocks may be compared
in sales literature to performance of the S&P 500 Stock Price Composite Index,
to which may be added by year various national and international political and
economic events, and certain milestones in price and market indicators and in
offerings of Defined Asset Funds. This performance may also be compared for
various periods with an investment in short-term U.S. Treasury securities;
however, the investor should bear in mind that Treasury securities are fixed
income obligations, having the highest credit characterisitics, while the Stocks
involve greater risk because they have no maturities, and income thereon is
subject to the financial condition of, and declaration by, the issuers.
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<PAGE>
DEFINED ASSET FUNDS
For decades informed investors have purchased unit investment trusts for
dependability and professional selection of investments. Defined Asset Funds'
philosophy is to allow investors to 'buy with knowledge' (because, unlike
managed funds, the portfolio is relatively fixed) and 'hold with confidence'
(because the portfolio is professionally selected and regularly reviewed).
Defined Asset Funds offers an array of simple and convenient investment choices,
suited to fit a wide variety of personal financial goals--a buy and hold
strategy for capital accumulation, such as for children's education or
retirement, or attractive, regular current income consistent with the
preservation of principal. Unit investment trusts are particularly suited for
the many investors who prefer to seek long-term profits by purchasing sound
investments and holding them, rather than through active trading. Few
individuals have the knowledge, resources or capital to buy and hold a
diversified portfolio on their own; it would generally take a considerable sum
of money to obtain the breadth and diversity that Defined Asset Funds offer.
Your investment objectives may call for a combination of Defined Asset Funds.
One of the most important investment decisions you face may be how to
allocate your investments among asset classes. Diversification among different
kinds of investments can balance the risks and rewards of each one. Most
investment experts recommend stocks for long-term capital growth. Long-term
corporate bonds offer relatively high rates of interest income. By purchasing
both defined equity and defined bond funds, investors can receive attractive
current income, as well as growth potential, offering some protection against
inflation. From time to time various advertisements, sales literature, reports
and other information furnished to current or prospective investors may present
the average annual compounded rate of return of selected asset classes over
various periods of time, compared to the rate of inflation over the same
periods.
EXCHANGE OPTION
You may be able to exchange Fund Units for units of certain other Defined
Asset Funds subject only to a reduced sales charge or to any remaining deferred
sales charge, as applicable. To make an exchange, you should contact your
financial professional to find out what suitable exchange funds are available
and to obtain a prospectus. You may acquire units of only those exchange funds
in which the Sponsors are maintaining a secondary market and which are lawfully
for sale in the state where you reside. An exchange is a taxable event normally
requiring recognition of any gain or loss on the units exchanged. However, the
Internal Revenue Service may seek to disallow a loss if the portfolio of the
units acquired is not materially different from the portfolio of the units
exchanged; you should consult your own tax advisor. If the proceeds of units
exchanged are insufficient to acquire a whole number of exchange fund units, you
may pay the difference in cash (not exceeding the price of a single unit
acquired).
As the Sponsors are not obligated to maintain a secondary market in any
series, there can be no assurance that units of a desired series will be
available for exchange. The Exchange Option may be amended or terminated at any
time without notice.
SUPPLEMENTAL INFORMATION
Upon writing or calling the Trustee shown on the back cover of this
Prospectus, investors will receive without charge supplemental information about
the Fund, which has been filed with the SEC. The supplemental information
includes more detailed risk factor disclosure about the types of securities that
may be part of the Portfolio and general information about the structure and
operation of the Fund.
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<PAGE>
Defined
Asset FundsSM
SPONSORS: EQUITY INVESTOR FUND
Merrill Lynch, INDEX SERIES,
Pierce, Fenner & Smith IncorporatedS&P 500 TRUST 2
Defined Asset Funds S&P MIDCAP TRUST
P.O. Box 9051
Princeton, NJ 08543-9051 PROSPECTUS PART A
(609) 282-8500 This Prospectus does not contain all of the
Smith Barney Inc. information with respect to the investment
Unit Trust Department company set forth in its registration
388 Greenwich Street--23rd Floor statement and exhibits relating thereto which
New York, NY 10013 have been filed with the Securities and
(212) 816-4000 Exchange Commission, Washington, D.C. under
Prudential Securities Incorporated the Securities Act of 1933 and the Investment
One New York Plaza Company Act of 1940, and to which reference
New York, NY 10292 is hereby made. Copies of filed material can
(212) 778-6164 be obtained from the Public Reference Section
Dean Witter Reynolds Inc. of the Commission, 450 Fifth Street, N.W.,
Two World Trade Center--59th Floor Washington, D.C. 20549 at prescribed rates.
New York, NY 10048 The Commission also maintains a Web site that
(212) 392-2222 contains information statements and other
PaineWebber Incorporated information regarding registrants such as
1200 Harbor Blvd. Defined Asset Funds that file electronically
Weehawken, NJ 07087 with the Commission at http://www.sec.gov.
(201) 902-3000 ------------------------------
TRUSTEE FOR THE S&P 500 TRUST 2: No person is authorized to give any
The Chase Manhattan Bank information or to make any representations
Customer Service Retail Department with respect to this investment company not
Bowling Green Station contained in its registration statement and
P.O. Box 5187 exhibits relating thereto; and any
New York, NY 10274-5187 information or representation not contained
1-800-323-1508 therein must not be relied upon as having
TRUSTEE FOR THE S&P MIDCAP TRUST: been authorized.
The Bank of New York ------------------------------
(a New York Banking Corporation) When Units of this Fund are no longer
Box 974--Wall Street Station available this Prospectus may be used as a
New York, NY 10268-0974 preliminary prospectus for a future series,
1-800-221-7771 and investors should note the following:
Information contained herein is subject to
amendment. A registration statement relating
to securities of a future series has been
filed with the Securities and Exchange
Commission. These securities may not be sold
nor may offers to buy be accepted prior to
the time the registration statement becomes
effective.
This Prospectus shall not constitute an offer
to sell or the solicitation of an offer to
buy nor shall there be any sale of these
securities in any State in which such offer
solicitation or sale would be unlawful prior
to registration or qualification under the
securities laws of any such State.
14124--04/97
