<PAGE>
Def ined
Asset FundsSM
EQUITY This Fund is formed for the purpose of obtaining
INCOME FUND capital appreciation and current income through
- ------------------------------investing for approximately four years in a
CONCEPT SERIES preselected, diversified portfolio of
TELE-GLOBAL TRUST publicly-traded common stocks issued by domestic
A UNIT INVESTMENT TRUST and international companies engaged in a wide
/ / PROFESSIONAL SELECTION range of telecommunications activities. These
/ / CAPITAL APPRECIATION AND activities include the provision of local, long
INCOME distance and cellular telecommunications services
and, to a lesser extent, the manufacture of
telecommunications equipment.
These companies are considered to have potential
for appreciation in the intermediate term due to
expected continuing demand for business and basic
telecommunications services, ongoing technological
innovations and the expected continued growth
worldwide in the use of telephone lines, facsimile
machines, cellular phones, personal computers and
modems.
The value of Units in the Fund will fluctuate with
the value of the Portfolio of underlying
Securities and no assurance can be given that the
Units will appreciate in value.
Minimum purchase: $1,000 of Units in individual
transactions; $250 of Units minimum purchase for
Individual Retirement/Keogh Accounts (purchases
under the Reinvestment Plan are not restricted).
-------------------------------------------------
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
SPONSORS: COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
Merrill Lynch, OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
Pierce, Fenner & Smith Inc. CONTRARY IS A CRIMINAL OFFENSE.
Smith Barney Inc. Inquiries should be directed to the Trustee at
PaineWebber Incorporated 1-800-323-1508.
Prudential Securities Prospectus dated December 30, 1994.
Incorporated READ AND RETAIN THIS PROSPECTUS FOR FUTURE
Dean Witter Reynolds Inc. REFERENCE.
<PAGE>
- --------------------------------------------------------------------------------
DEFINED ASSET FUNDSSMis America's oldest and largest family of unit investment
trusts with over $90 billion sponsored since 1970. Each Defined Fund is a
portfolio of preselected securities. The portfolio is divided into 'units'
representing equal shares of the underlying assets. Each unit receives an equal
share of income and principal distributions.
With Defined Asset Funds you know in advance what you are investing in and that
changes in the portfolio are limited. Most defined bond funds pay interest
monthly and repay principal as bonds are called, redeemed, sold or as they
mature. Defined equity funds offer preselected stock portfolios with defined
termination dates.
Your financial advisor can help you select a Defined Fund to meet your personal
investment objectives. Our size and market presence enable us to offer a wide
variety of investments. Defined Funds are available in the following types of
securities: municipal bonds, corporate bonds, government bonds, utility stocks,
growth stocks, even international securities denominated in foreign currencies.
Termination dates are as short as one year or as long as 30 years. Special funds
are available for investors seeking extra features: insured funds, double and
triple tax-free funds, and funds with 'laddered maturities' to help protect
against rising interest rates. Defined Funds are offered by prospectus only.
- --------------------------------------------------------------------------------
CONTENTS
Investment Summary.......................................... A-3
Underwriting Account........................................ A-7
Accountants' Opinion Relating to the Fund................... D-
Statement of Condition...................................... D-
Portfolio................................................... D-
Fund Structure.............................................. 1
Risk Factors................................................ 1
Description of the Fund..................................... 7
Taxes....................................................... 9
Public Sale of Units........................................ 11
Market for Units............................................ 13
Redemption.................................................. 13
Termination................................................. 14
Expenses and Charges........................................ 15
Administration of the Fund.................................. 16
Resignation, Removal and Limitations on Liability........... 19
Miscellaneous............................................... 20
Exchange Option............................................. 23
A-2
<PAGE>
EQUITY INCOME FUND, CONCEPT SERIES TELE-GLOBAL TRUST DEFINED ASSET FUNDS
INVESTMENT SUMMARY AS OF SEPTEMBER 30, 1994 (THE EVALUATION DATE)
INITIAL NUMBER OF UNITS -- 241,940,690
FRACTIONAL UNDIVIDED INTEREST IN FUND
REPRESENTED BY EACH UNIT-- 1/241,940,690TH
PUBLIC OFFERING PRICE PER 1,000 UNITS
Aggregate value of Securities in
Fund+............................. $ 224,397,385
------------------
Divided by 241,940,690 Units (times
1,000)............................ $ 1,002.42
Plus initial sales charge of 2.75% of
Public Offering Price (2.828% of
net amount invested in
Securities*)**.................... 27.50
Plus the amount per 1,000 Units in
the Income and Capital
Accounts plus applicable
commissions*** (see
Administration of the Fund--
Accounts and Distributions) 1.24
------------------
Public Offering Price per 1,000
Units............................. $ 1,031.16
------------------
------------------
SPONSORS' REPURCHASE PRICE PER 1,000
UNITS AND REDEMPTION PRICE PER
1,000 UNITS
(based on net asset value of the
Fund*)**.......................... $ 1,002.42
LIQUIDATION PERIOD
Beginning on November 14, 1997 until
no later than the Mandatory
Termination Date ('the Liquidation
Period').
AGENT FOR THE SPONSORS
Merrill Lynch, Pierce, Fenner & Smith Incorporated
QUARTERLY INCOME DISTRIBUTIONS
Distributions of income, if any, will be paid on the
25th day of March, June, September and December
of each year to Holders of record on the 10th day of
March, June, September and December,
respectively. In order to meet certain tax
requirements, the Fund may make a special
distribution of income including capital gains to
Holders of record as of a date in December.
CAPITAL DISTRIBUTIONS
No distribution (other than distributions of capital
gains) need be made from Capital Account if the
balance is less than $5.00 per 1,000 Units (see
Administration of the Fund--Accounts and
Distributions).
EVALUATION TIME
4:00 P.M., New York Time
SPONSORS' PROFIT OR (LOSS) ON DEPOSIT-- 0.00
TRUSTEE'S ANNUAL FEE AND EXPENSES++
$1.58 per 1,000 Units (see Expenses and Charges)
PORTFOLIO SUPERVISION FEE+++
Maximum of $.35 per 1,000 Units (see Expenses
and Charges)
MINIMUM VALUE OF FUND
Trust Indenture may be terminated if value of Fund
is less than 40% of the value of the Securities when
deposited in the Portfolio.
MANDATORY TERMINATION DATE
December 12, 1997.
DEFERRED CHARGE PAYMENT DATES
The 10th day of February, May, August and
November.
- ------------------------------------
+ On the Initial Date of Deposit (October 13, 1993), the aggregate value
of the Securities in the Fund was $485,115.
++ Of this figure the Trustee receives annually for its services as
Trustee, $0.84 per 1,000 Units. The Trustee's Annual Fee and Expenses
also includes the Portfolio Supervision Fee set forth herein.
+++ In addition to this amount, the Sponsors may be reimbursed for
bookkeeping or other administrative expenses not exceeding their
actual costs, currently at a maximum annual rate of $.10 per 1,000
Units.
* Equal to aggregate value of Securities in Fund plus net balance in the
Capital Account.
** The sales charge consists of (i) an initial sales charge at the rate of
2.75% of the Public Offering Price (2.828% of the net amount invested in
the Securities) payable on the date of the purchase of Units and (ii)
deferred sales charges in the amount of $1.625 per 1,000 Units payable
by the Fund on behalf of the Holders out of net asset value of the Fund
on each quarterly Deferred Charge Payment Date ($6.50 per year) until
the Fund terminates. The maximum aggregate sales charge for a Holder
holding Units over the entire expected life of the Fund will equal
approximately 5.35% of the Public Offering Price (5.50% of the net
amount invested). If a Holder sells or redeems Units before a Deferred
Charge Payment Date, all future deductions of deferred sales charges
with respect to such Units will be waived; this will have the effect of
reducing the rate of sales charges for that Holder. The initial portion
of the sales charge will be reduced on a graduated basis for quantity
purchases. (See Public Sale of Units--Public Offering Price.)
*** The amount of applicable commissions (currently estimated to be
approximately $1.24 per 1,000 Units) is added to Units created during a
primary offering period and when Units are created for the Reinvestment
Plan. Any commissions collected by the Sponsors from Holders in excess
of commissions actually incurred will be distributed to Holders. Costs
other than commissions incurred in connection with the acquisition of
Securities not listed on any national securities exchange will be at the
expense of the Fund (see Risk Factors--General). (See Public Sale of
Units--Public Offering Price; Administration of the Fund--Reinvestment
Plan.)
A-3
<PAGE>
EQUITY INCOME FUND, CONCEPT SERIES TELE-GLOBAL TRUST DEFINED ASSET FUNDS
INVESTMENT SUMMARY AS OF THE EVALUATION DATE (CONTINUED)
OBJECTIVE OF THE FUND--Capital appreciation and current income through
investment for approximately four years from the Initial Date of Deposit in a
fixed portfolio of common stocks issued by domestic and international
telecommunications companies. There can be no assurance that the Fund will
achieve its objectives. The issuers of the stocks in the Portfolio are engaged
in a wide range of telecommunications activities including local, long distance
and cellular telecommunications services and, to a lesser extent, in the
manufacture of telecommunications equipment. The value of all portfolio
Securities and therefore the value of the Units may be expected to fluctuate
with changes in values of stocks in general and of telecommunications stocks in
particular. The common stocks included in the Portfolio have been selected
because the issuers of these stocks are engaged in an industry which may benefit
from the continuing demand for expanded basic and business telecommunications
services and from the development of and demand for new technologies.
Furthermore, many of the telephone companies contained in the Fund experienced
dividend growth in the nine years previous to the Initial Date of Deposit.
The telephone service sectors of the S&P 500 Stock Price Composite Index
outperformed the entire Index for four of the last five years and the nine
months ended September 30, 1993. The telephone equipment sector of the Index
outperformed the Index in each of the last four years, although not in the last
nine months. The performance of these sectors does not reflect the performance
of the Fund or any prior Series, which have sales charges and expenses. These
figures are limited to domestic telephone companies, and past performance is no
assurance of future results. However, the telecommunications industry should
continue to benefit from any strengthening of the U.S. and global economies and
the trend toward easing regulatory restrictions. The Sponsors believe that this
industry has the potential to be a major growth industry for the rest of the
1990s.
As most of the yield from telecommunications stocks is expected to take the
form of stock price appreciation, investors in higher Federal tax brackets can
benefit from the favorable treatment of capital gains income under the 1993 U.S.
tax law.
PORTFOLIO AT A GLANCE--
DIVERSIFICATION--The Portfolio contains 35 common stocks of telecommunications
company issuers. Of the issuers, 7 (29% of the aggregate value of the
Portfolio) are Regional Bell Holding Companies, 7 (15%) are independent
companies, 10 (33%) are non-U.S. telephone companies, 3 (8%) are long distance
companies, 6 (10%) are telecommunications equipment companies and 2 (5%) are a
provider of cellular service. Of the 10 non-U.S. companies, 2 are headquartered
in the United Kingdom and 1 each in New Zealand, France, Hong Kong, Chile,
Spain, Sweden and Canada. The companies represented in the Portfolio operate in
over 50 countries. The common stocks issued by the non-U.S. companies may be
issued in the form of American Depositary Receipts ('ADRs'). (See Risk
Factors--The Global Telecommunications Industry.)
FUND PORTFOLIO--100% of the Portfolio consists of common stocks and ADRs of
domestic and non-U.S. companies which represent many aspects of the
telecommunications industry. These include the provision of local, long distance
and cellular services, telecommunications products and a wide range of other
activities including directory publishing, information systems and the operation
of voice, data and video telecommunications networks. Technological innovations
in fiber optics, cellular products and services, voice messaging, call waiting
and automatic dialing offer additional potential for significant expansion.
Advances like formation of a national cellular grid should also contribute to
the anticipated growth of this industry. (See Portfolio.)
RISK FACTORS--The Securities in the Portfolio have been chosen for current
income and their potential to appreciate in value within approximately four
years because of greater pricing flexibility as well as expected continued
growth in access lines and cellular services and the ongoing demand for business
telecommunications services such as fax machines and the movement of data
information. Of course, there can never be a guarantee that the stocks in the
Portfolio will appreciate in value or that dividends will be paid by the
companies in the Fund. The Securities were selected for inclusion in the
Portfolio without regard to any buy, sell or hold recommendation by any of the
Sponsors. Investment in the Fund should be made with an understanding that the
value of the underlying Portfolio may fluctuate in accordance with changes in
the financial condition of the issuers of the Securities in the Portfolio,
changes in the telecommunications industry, the value of stocks generally, the
impact of the Sponsors' buying Securities (especially during the primary
offering period of Units of the Fund) and other factors. Common Stocks may be
susceptible to general stock market fluctuations and to volatile increases and
decreases of value as market confidence in and perceptions of the issuers
change. Any distributions of income will generally depend upon the declaration
of dividends by the issuers of the Securities in the Portfolio and the
declaration of any dividends depends upon several factors including the
financial condition of the issuers and general economic conditions. Furthermore,
with respect to companies which declare dividends in foreign currencies,
fluctuations in currencies may result in a difference between
A-4
<PAGE>
EQUITY INCOME FUND, CONCEPT SERIES TELE-GLOBAL TRUST DEFINED ASSET FUNDS
INVESTMENT SUMMARY AS OF THE EVALUATION DATE (CONTINUED)
any dividends declared and dividends received by the Fund. In addition, the
common stocks of certain of these issuers may be relatively illiquid and,
therefore, the Sponsors' purchases may tend to raise their market prices and
sales may tend to decrease their prices. Certain of the issuers of the
Securities in the Portfolio may be thinly capitalized or have a limited
operating history and, consequently, may be more susceptible to stock market
fluctuations than companies with greater capitalization or more established
companies. (See Risk Factors).
The Fund is considered to be 'concentrated' in stocks of the
telecommunications industry.* Companies in the telecommunications industry face
several risks. Most telecommunications companies are extensively regulated and
over the last several years this regulation has been changing, resulting in
increased competition and in a great deal of uncertainty as to its future effect
on the performance of telecommunications companies. Furthermore, to meet
increasing competition, these companies may have to commit substantial capital,
particularly in the formulation of new products and services using new
technology. The global telecommunications industry is subject to varying degrees
of regulatory, political and economic risk which may affect the price of the
stocks of companies involved in such industry. Such risks depend on a number of
factors including the country in which a company is located. Telecommunications
companies in both developed and emerging countries are undergoing significant
change due to varying and evolving levels of governmental regulation or
deregulation and other factors. As a result, competitive pressures are intense
and the securities of such companies may be subject to significant price
volatility. In addition, 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. 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. (See Risk Factors--The Global Telecommunications
Industry.)
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 any Sponsor. 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.
Although the Portfolio is not actively managed, the Sponsors may instruct
the Trustee to sell Securities and to reinvest the proceeds in replacement
Securities. In the event a public tender offer is made for a Security or a
merger or acquisition is announced affecting a Security, Merrill Lynch, as agent
for the Sponsors, may instruct the Trustee to tender or sell the Security on the
open market when, in its opinion, it is in the best interest of the holders of
the Units to do so (see Administration of the Fund--Portfolio Supervision).
Subsequent to the Initial Date of Deposit, the Sponsors may deposit either
additional Securities, contracts to purchase additional Securities or cash (or a
bank letter or letters of credit in lieu of cash) with instructions to purchase
additional Securities (where additional Units are to be offered to the public or
to Holders pursuant to the Reinvestment Plan), in each instance maintaining, as
closely as practicable, the original proportionate relationship, subject to
adjustment under certain circumstances, among the number of shares of each
Security in the Fund. If cash (or a letter of credit in lieu of cash) is
deposited with instructions to purchase Securities, to the extent the price of a
Security increases or decreases between the time of deposit and the time any
Security is purchased, Units will represent less or more of that Security and
more or less of the other Securities in the Fund. Price fluctuations during the
period from the time of deposit of cash (or a bank letter of credit in lieu of
cash) to the time the Securities are purchased will affect the value of every
Holder's Units and the income per Unit received by the Fund. In order to
minimize these effects, the Fund will try to purchase Securities as near as
possible to the Evaluation Time or at prices as close as possible to the prices
used to evaluate the Fund at the Evaluation Time. In addition, brokerage fees
incurred in purchasing Securities with cash deposited with instructions to
purchase the Securities will be an expense of the Fund. Thus, price fluctuations
during this period and payment of any brokerage fees by the Fund will affect the
value of every Holder's Units and the income per Unit received by the Fund. In
particular, Holders who purchase Units during the primary offering period of the
Units would experience a dilution of their investment as a result of any
brokerage fees paid by the Fund during subsequent deposits of additional
Securities purchased with cash deposited with instructions to purchase
Securities. (See Fund Structure; Administration of the Fund--Portfolio
Supervision.)
- ---------------
* A Fund is considered to be 'concentrated' in a particular category when
the Securities in that category constitute 25% or more of the Portfolio (see
Risk Factors--The Global Telecommunications Industry).
A-5
<PAGE>
EQUITY INCOME FUND, CONCEPT SERIES TELE-GLOBAL TRUST DEFINED ASSET FUNDS
INVESTMENT SUMMARY AS OF THE EVALUATION DATE (CONTINUED)
Investors should also be aware that because Securities are sold to pay the
obligations due on the Deferred Charge Payment Dates, they may realize gains or
losses on those sales due to changes in Securities prices between the date on
which the Units are purchased and the Deferred Charge Payment Dates. In
addition, Units purchased shortly before a Deferred Charge Payment Date would
nevertheless incur the full sales charge for that period.
At any time after the date of this prospectus, new litigation, legislation,
regulation or deregulation may be initiated, proposed or enacted which may have
a material adverse effect on the Fund or impair the ability of the issuers of
the Securities to achieve their business goals (for a fuller discussion, see
Risk Factors--Litigation and Legislation).
DISTRIBUTIONS--Quarterly distributions of dividends, if any, will be made in
cash on the dates set forth under Investment Summary on page A-3 to Holders of
record on the record days set forth on page A-3 (see Administration of the
Fund--Accounts and Distributions). 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 after the end of the year. In order to meet
certain tax requirements the Fund may make a special distribution of income,
including capital gains, to Holders of record as of a date in December. (See
Taxes.) Holders may elect to have distributions reinvested in additional whole
or fractional Units of the Fund at no additional sales charge (see
Administration of the Fund--Reinvestment Plan). However, whether or not a
distribution is received in cash, the distribution will be taxable to the
Holder.
TAXATION--Distributions which are taxable as ordinary income to Holders will
constitute dividends for Federal income tax purposes but will be eligible for
the dividends-received deduction for many corporations only to the extent of
dividends received by the Fund from domestic corporations. In addition,
dividends received by the Fund on the Securities of foreign issuers will
generally be subject to foreign withholding taxes. Holders should be aware that
they are not eligible for the foreign tax credit in respect of these foreign
withholding taxes. Foreign holders should be aware that distributions from the
Fund will generally be subject to information reporting and withholding taxes.
(See Taxes.)
REDEMPTION IN KIND--Upon redemption of Units prior to the Mandatory
Termination Date, a Holder generally may choose to receive cash or, if he would
be entitled to receive at least 100 shares of each underlying Security and he
has tendered for redemption prior to the date specified under Liquidation Period
on page A-3, his share of the Securities (see Redemption). However, a Holder
will recognize a taxable gain or loss if the Holder sells or redeems his Units
even if he redeems his Units in kind. (See Taxes.)
PUBLIC OFFERING PRICE--The Public Offering Price per 1,000 Units is equal to
the aggregate value of the underlying Securities (the price at which they could
be directly purchased by the public assuming they were available) divided by the
number of Units outstanding times 1,000, plus 2.75% (the initial portion of the
sales charge). Units are offered at the Public Offering Price plus a
proportionate share of the amount in the Income Account and the Capital Account
(described under Administration of the Fund--Accounts and Distribution), to the
extent not allocated to the purchase of specific Securities, on the date of
delivery of the Units to the Purchaser, plus (in connection with the creation of
Units) applicable commissions, computed as of the Evaluation Time for all sales
subsequent to the previous evaluation.
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 initial net asset value per 1,000 Units. The initial
portion of the sales charge is 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 payable on each quarterly Deferred Charge
Payment Date ($6.50 per year) until the Fund terminates. If a Holder sells or
redeems Units before a Deferred Charge Payment Date, no future deferred sales
charges will be collected from that Holder; this will have the effect of
reducing the rate of sales charge to that Holder.
- ---------------
* The initial portion of the sales charge will be reduced on a graduated
scale in the case of quantity purchases of $250,000 or more (see Public Sale of
Units--Public Offering Price). There is no initial sales charge for purchases
pursuant to the Reinvestment Plan (see Administration of the Fund--Reinvestment
Plan).
A-6
<PAGE>
Def ined
Asset FundsSM
INVESTOR'S GUIDE DEFINED EQUITY INCOME FUND, CONCEPT SERIES
EQUITY INCOME FUND Our defined portfolios of equities offer investors
- ------------------------------a simple and convenient way to participate in the
Concept Series equity markets. Our funds seek to benefit from
Tele-Global Trust opportunities created by economic changes that
affect specific areas of the economy or by
increased demand for the selected companies'
products or services. By purchasing equity income
funds, investors not only avoid the difficulty of
selecting individual securities by themselves, but
also gain the advantage of reduced risk by
investing in securities of several different
issuers.
TELE-GLOBAL TRUST
Telecommunications has become increasingly in
demand in today's world of global communication.
In addition to providing 'plain old telephone
service', telecommunications companies are
developing new products and services, including
cellular telephone service, to keep up with a
communicating world.
The telecommunications industry is experiencing
growth as the use of telephone lines, facsimile
(fax) machines and cellular phones increases.
These companies are expected to offer investors
attractive returns.
Certain telecommunications services (excluding
long-distance carriers) in the past have
demonstrated a resistance to recessionary
conditions. The growth of basic telephone service
is expected to be less affected in the event of a
slowing economy.
Many European and Asian telephone systems seem
poised for significant growth. To take advantage
of favorable international trends, the stocks of
telecommunications companies in nine countries,
with interests in over 50 other foreign countries,
are included in the Portfolio.
The Tele-Global Trust offers a convenient means to
invest in stocks, both domestic and international,
which the Sponsors believe are well-positioned to
take advantage of favorable trends in product
development and consumer usage. However, there can
be no assurance that the Trust will achieve its
objectives.
The companies whose securities are included in
this portfolio are involved in the major segments
of the telecommunications industry: regional
Bells, independent telephone companies,
international telecommunications companies, long
distance carriers, telecommunications equipment
makers and cellular telecommunications companies.
Some of the selected companies are involved in a
combination of these segments.
The stocks in this portfolio may benefit from the
following factors:
Increased Demand For Products/Services
Telecommunications companies serve certain markets
that have the potential to expand. The growing use
of personal computers and modems in homes should
serve as an additional source of income for
companies which continue to benefit from growth in
telephone lines and continued usage of the lines.
This material may not be distributed unless included in or preceded or
accompanied by a current prospectus.
<PAGE>
INVESTOR'S GUIDE Competition
EQUITY Increasing deregulation and consequent
INCOME FUND pricing flexibility may offer
(CONTINUED) opportunities for local exchange
- ----------------------------------------carriers to share in higher earnings if
they become more efficient. Also,
ongoing technological innovations may
help to increase demand for new services
such as voice messaging, call screening
and automatic dialing. Flexibility in
rates may make companies more
competitive although increased
competition involves additional risks
and may adversely affect the
telecommunications industry.
Privatization
As foreign governments privatize their
telephone systems (under privatization,
formerly government-owned agencies
become private corporations), telephone
service is likely to expand and, as a
result of greater efficiency,
potentially become more profitable.
POTENTIAL FOR CAPITAL APPRECIATION AND
CURRENT INCOME
The stocks included in the Tele-Global
Trust are considered to have potential
for capital appreciation over the
intermediate term due to anticipated
growth in the telecommunications
industry. Of course, common stocks in
general and stocks of telecommunications
companies in particular may be
susceptible to general stock market
fluctuations and to market price
volatility. And, as with any common
stock, there is never a guarantee that
the stocks in the portfolio will
appreciate.
Dividend Paying Record
Most U.S. stocks in the portfolio are
currently paying a dividend. Most of
these companies, or their predecessor
organizations, have paid dividends at
least for the past nine years, since the
break-up of AT&T. Also, many of these
companies have increased their common
stock dividends each year since that
time. Most non-U.S. stocks in the
portfolio have been paying and annually
increasing dividends since private
ownership of the issuers was permitted.
QUARTERLY INCOME
The Trust will make quarterly
distributions of net dividend income to
investors. Any dividend income received
is taxable. However, for corporations,
income distributions received from
domestic corporations will generally be
eligible for the 70% Federal
'dividends-received deduction'. (See
Taxes.)
PROFESSIONAL SELECTION AND SUPERVISION
The Trust contains a variety of
securities selected by experienced
buyers and market analysts. Spreading
your investment among different issuers
reduces your risk, but does not
eliminate it especially since the
issuers are concentrated in one
industry. The Trust is not actively
managed. However, the portfolio is
regularly reviewed and evaluated. The
Sponsors can sell a security if they
believe retaining it would be
detrimental to investors' interest.
REINVESTMENT OPTION
You can elect to automatically reinvest
your distributions free of initial sales
charge into additional units of the
Trust. Reinvesting helps to compound
your income.
<PAGE>
INVESTOR'S GUIDE A LIQUID INVESTMENT
EQUITY Although not legally required to do so,
INCOME FUND we have maintained a secondary market
(CONTINUED) for our funds for over 20 years. You can
- ----------------------------------------cash in your units at any time. Your
price is based on the market value of
the fund's securities at that time.
There is never a fee for cashing in your
investment.
DEFERRED SALES CHARGE
With this Fund you defer payment of part
of the sales charge so that more of your
money is immediately invested. The Fund
combines initial and deferred sales
charges. There is an initial sales
charge of 2.75% of the Public Offering
Price (approximately $27.50 per 1,000
Units). On an ongoing basis there is a
deferred sales charge of $1.625 per
1,000 Units per quarter as long as you
invest in the Fund. The deferred sales
charge is paid out of the net asset
value of the Fund. For example, if you
hold the Fund for its expected four year
life your total charges would be
approximately 5.5% of the net amount
invested.
TAX INFORMATION
Your tax basis will reflect the payment
of the initial sales charge as well as
all deferred sales charges. For example,
if you invest $1,000 (including an
initial sales charge of $27.50) and hold
your investment for one year (through
four Deferred Charge Payments) you will
have a tax basis of $1,006.50.
VOLUME PURCHASE DISCOUNT
For larger purchases the rate of the
initial sales charge is reduced.
<TABLE>
<CAPTION> INITIAL
SALES CHARGE
AS A
PERCENTAGE
OF THE PUBLIC
OFFERING
AMOUNT PURCHASED PRICE
------------------------------------ -------------
<S> <C>
Less than $250,000.................. 2.75%
$250,000 to $499,999................ 2.25%
$500,000 to $749,999................ 1.75%
$750,000 to $999,999................ 1.25%
$1,000,000 or more.................. 1.00%
</TABLE>
<PAGE>
EQUITY INCOME FUND, CONCEPT SERIES
TELE-GLOBAL TRUST, DEFINED ASSET FUNDS
REPORT OF INDEPENDENT ACCOUNTANTS
The Sponsors, Trustee and Holders
of Equity Income Fund, Concept Series
Tele-Global Trust, Defined Asset Funds:
We have audited the accompanying statement of condition of Equity Income Fund,
Concept Series Tele-Global Trust, Defined Asset Funds, including the portfolio,
as of September 30, 1994 and the related statements of operations and of changes
in net assets for the period October 14, 1993 to September 30, 1994. These
financial statements are the responsibility of the Trustee. Our responsibility
is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Securities owned at
September 30, 1994, as shown in such portfolio, were confirmed to us by Chase
Manhattan Bank (National Association), the Trustee. An audit also includes
assessing the accounting principles used and significant estimates made by the
Trustee, as well as evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Equity Income Fund, Tele-
Global Trust, Defined Asset Funds at September 30, 1994 and the results of its
operations and changes in its net assets for the above-stated period in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, N.Y.
November 23, 1994
D-1
<PAGE>
EQUITY INCOME FUND, CONCEPT SERIES
TELE-GLOBAL TRUST - DEFINED ASSET FUNDS
STATEMENT OF CONDITION
AS OF SEPTEMBER 30, 1994
<TABLE>
<S> <C> <C>
TRUST PROPERTY:
Investment in marketable securities - at value
(cost $234,132,465) (Note 1) $223,126,600
Dividends receivable 706,018
Cash 590,450
Accrued supplemental deposits 447,288
Total trust property 224,870,356
LESS LIABILITIES:
Accrued expenses $ 17,850
Accrued purchases of securities 447,884 465,734
NET ASSETS, REPRESENTED BY:
241,940,690 units of fractional undivided interest
outstanding (Note 3) 222,689,082
Undistributed net investment income 1,715,540 $224,404,622
UNIT VALUE ($224,404,622 / 241,940,690 units) $.92752
See Notes to Financial Statements.
</TABLE>
D-2
<PAGE>
EQUITY INCOME FUND, CONCEPT SERIES
TELE-GLOBAL TRUST - DEFINED ASSET FUNDS
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
October 14,
1993 to
September 30,
1994
<S> <C>
INVESTMENT INCOME:
Dividend income $ 7,460,122
Foreign tax expense (Note 1) (341,937)
Trustee's fees and expenses (210,645)
Sponsors' fees (24,996)
Net investment income 6,882,544
REALIZED AND UNREALIZED LOSS ON
INVESTMENTS:
Realized loss on securities sold (492,515)
Unrealized depreciation of investments (11,005,865)
Realized and unrealized loss on investments (11,498,380)
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(4,615,836)
See Notes to Financial Statements.
</TABLE>
D-3
<PAGE>
EQUITY INCOME FUND, CONCEPT SERIES
TELE-GLOBAL TRUST - DEFINED ASSET FUNDS
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
October 14,
1993 to
September 30,
1994
<S> <C>
OPERATIONS:
Net investment income $ 6,882,544
Realized loss on securities sold (492,515)
Unrealized depreciation of investments (11,005,865)
Net decrease in net assets resulting from operations (4,615,836)
INCOME DISTRIBUTIONS TO HOLDERS (Note 2) (5,457,925)
CAPITAL SHARE TRANSACTIONS:
Issuance of 246,430,430 additional units 238,586,617
Redemptions of 4,974,855 units (4,580,009)
Net capital share transactions 234,006,608
NET INCREASE IN NET ASSETS 223,932,847
NET ASSETS AT BEGINNING OF PERIOD 471,775
NET ASSETS AT END OF PERIOD $224,404,622
PER UNIT:
Income distributions during period $.02375
Net asset value at end of period $.92752
TRUST UNITS OUTSTANDING AT END OF PERIOD 241,940,690
See Notes to Financial Statements.
</TABLE>
D-4
<PAGE>
EQUITY INCOME FUND, CONCEPT SERIES
TELE-GLOBAL TRUST - DEFINED ASSET FUNDS
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Fund is registered under the Investment Company Act of 1940 as a Unit
Investment Trust. The following is a summary of significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements. The policies are in conformity with generally
accepted accounting principles.
(a) Securities are stated at value; for securities listed on a national
securities exchange, value is based on the closing sale price on such
exchange and, for securities not so listed, value is based on the
current bid price on the over-the-counter market (see "Redemption -
Computation of Redemption Price Per Unit" in this Prospectus, Part B).
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.
Dividends received by the Fund from foreign issuers are, in most cases,
subject to foreign withholding taxes. The Fund has made and expects
to continue to make an election that will enable Holders to credit
foreign withholding taxes against their Federal income tax liability
on distributions by the Fund.
(c) Dividend income is recorded on the ex-dividend date.
2. DISTRIBUTIONS
A distribution of net investment income is made to Holders on the 25th day
of March, June, September and December each year. Receipts other than
dividends, after deductions for redemptions and applicable expenses, are
distributed as explained in "Administration of the Fund - Accounts and
Distributions" in this Prospectus, Part B.
3. NET CAPITAL
Cost of 241,940,690 units at Dates of Deposit $240,760,880
Less sales charge 6,835,305
Net amount applicable to Holders 233,925,575
Net cost of 4,974,855 units less redemption amounts paid 261,887
Realized loss on securities sold (492,515)
Net unrealized depreciation of investments (11,005,865)
Net capital applicable to Holders $222,689,082
4. INCOME TAXES
As of September 30, 1994, net unrealized depreciation of investments, based
on cost for Federal income tax purposes, aggregated $11,005,865 of which
$7,750,295 related to appreciated securities and $18,756,160 related to
depreciated securities. The cost of investment securities for Federal
income tax purposes was $234,132,465 at September 30, 1994.
D-5
<PAGE>
EQUITY INCOME FUND, CONCEPT SERIES
TELE-GLOBAL TRUST - DEFINED ASSET FUNDS
PORTFOLIO
AS OF SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
Number of
Shares of
Common Stock or Current Annual
American or Indicated Cost of
Portfolio No. and Depository Percentage Dividend Per Securities
Title of Securities Receipts of Fund(3) Share(2) to Fund (1) Value(1)
<S> <C> <C> <C> <C> <C>
1 ADC Telecommunications, Inc. 50,200 0.903% $0.00 $1,858,775 $2,014,275
2 AirTouch Communications (4) 253,500 3.252 0.00 5,600,561 7,256,438
3 Alcatel Alsthom Compagine
Generale d'Electricite - ADR 149,100 1.236 0.41 3,949,193 2,758,350
4 Alltel Corp. 100,200 1.212 0.88 2,808,335 2,705,400
5 Ameritech Corp. (5) 295,700 5.334 1.92 12,041,245 11,901,925
6 Andrew Corp. (6) 75,300 1.692 0.00 1,903,075 3,774,413
7 AT&T 150,300 3.637 1.32 8,492,828 8,116,200
8 Bell Atlantic Corp. 245,500 5.831 2.76 15,096,650 13,011,500
9 Bellsouth Corp. 199,200 4.977 2.76 11,741,710 11,105,400
10 British Telecommunications
PLC-ADR 241,000 6.183 2.06 16,809,863 13,797,250
11 Cable & Wireless PLC-ADR (7) 398,400 3.370 0.55 8,854,770 7,519,800
12 Cableton Systems, Inc. (8) 125,500 2.679 0.00 5,135,830 5,976,938
13 Century Telephone Enterprise 100,000 1.294 0.32 2,673,675 2,887,500
14 Cincinnati Bell, Inc. 287,500 2.384 0.80 6,102,900 5,318,750
15 Cisco Systems, Inc. (5) 100,400 1.232 0.00 2,834,000 2,748,450
16 Compania de Telefonos de Chile
S.A. - ADR 46,900 1.844 1.39 4,277,170 4,115,475
17 GTE Corp. 300,000 4.084 1.88 11,139,900 9,112,500
18 Hong Kong Telecommunications
LTD - ADR (9) 742,200 6.694 2.14 15,025,707 14,936,775
19 L.M. Ericsson Telephone
Co. - ADR 49,800 1.200 0.48 2,470,150 2,676,750
20 Lincoln Telecommunications
Co. (5) 194,400 1.329 0.52 3,754,925 2,964,600
21 MCI Communications Corp. 99,800 1.146 0.05 2,683,300 2,557,375
22 Motorola, Inc. (5) 100,400 2.374 0.28 4,986,070 5,296,100
23 Newbridge Networks Corp. 49,800 0.714 0.00 2,998,055 1,593,600
24 NYNEX Corp. 99,600 1.719 2.36 4,195,730 3,834,600
25 Pacific Telesis Group 249,000 3.432 2.18 8,306,874 7,656,750
26 Rochester Telephone Corp. (5) 298,200 2.940 0.81 6,913,298 6,560,400
27 Scientific-Atlanta, Inc. 50,200 0.920 0.12 1,707,410 2,051,925
28 Southern New England
Telecommunications Corp. 150,000 2.260 1.76 5,400,525 5,043,750
29 Southwestern Bell Corp. 199,600 3.802 1.58 8,349,930 8,483,000
30 Sprint Corp. 149,100 2.548 1.00 5,256,893 5,684,438
31 Telecom Corp. of New Zealand
LTD-ADR 207,500 4.731 2.83 9,878,550 10,556,563
32 Telefonica de Espana - ADR 249,000 4.520 1.28 9,642,575 10,084,500
</TABLE>
D-6
<PAGE>
EQUITY INCOME FUND, CONCEPT SERIES
TELE-GLOBAL TRUST - DEFINED ASSET FUNDS
PORTFOLIO
AS OF SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
Number of
Shares of
Common Stock or Current Annual
American or Indicated Cost of
Portfolio No. and Depository Percentage Dividend Per Securities
Title of Securities Receipts of Fund(3) Share(2) to Fund (1) Value(1)
<S> <C> <C> <C> <C> <C>
33 Telephone & Data Systems, Inc. 100,200 2.066% $0.36 $ 5,171,360 $ 4,609,200
34 US West, Inc. 250,000 4.342 2.14 11,813,375 9,687,500
35 Vodaphone Group PLC - ADR (9) 150,700 2.119 1.38 4,257,261 4,728,212
TOTAL 100.000% $234,132,465 $223,126,600
</TABLE>
(1) See Notes to Financial Statements.
(2) Based on latest quarterly, semiannual, or annual declaration.
(3) Based on value.
(4) Represents distribution of 1 share AirTouch for every share of
Pacific Telesis outstanding on April 6, 1994.
(5) Includes 2 for 1 stock split distributed in 1994.
(6) Includes 3 for 2 stock split distributed in 1994.
(7) Includes 2 for 1 stock split distributed in 1993.
(8) Includes 2.5 for 1 stock split distributed in 1994.
(9) Includes 200% stock dividend distributed in 1994.
D-7
<PAGE>
AUTHORIZATION FOR REINVESTMENT
EQUITY INCOME FUND CONCEPT SERIES
TELE-GLOBAL TRUST
DEFINED ASSET FUNDS
/ / Yes I want to participate in the Fund's Reinvestment Plan and
purchase additional Units or fractions of additional Units of the
Fund.
I hereby acknowledge receipt of the Prospectus for Equity Income Fund
Concept Series, Tele-Global Trust, Defined Asset Funds and authorize
The Chase Manhattan Bank, N.A. to pay distributions on my Units as
indicated below (distributions to be reinvested will be paid for my
account to The Chase Manhattan Bank, N.A.).
/ / I want to reinvest all distributions of Income and Principal (including
capital gains) in additional Units of the Fund.
/ / I want to reinvest only Income distributions in additional Units of the
Fund.
/ / I want to reinvest only Principal (including capital gains) distributions in
additional Units of the Fund.
Please print or type Name Registered Holder
Address Registered Holder
City State Zip Two signatures required if joint tenancy)
Unless you complete and return this form, all distributions to you
from the Tele-Global Trust will be paid in cash.
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. 644 NEW YORK, NY NECESSARY
IF MAILED
POSTAGE WILL BE PAID BY IN THE
EQUITY INCOME FUND UNITED STATES
CONCEPT SERIES
TELE-GLOBAL TRUST
DEFINED ASSET FUNDS
THE CHASE MANHATTAN BANK, N.A.
UNIT TRUST DEPARTMENT
BOX 2051
NEW YORK, NY 10081
- --------------------------------------------------------------------------------
(Fold along this line.)
- --------------------------------------------------------------------------------
(Fold along this line.)
<PAGE>
EQUITY INCOME FUND, CONCEPT SERIES TELE-GLOBAL TRUST DEFINED ASSET FUNDS
INVESTMENT SUMMARY AS OF THE EVALUATION DATE (CONTINUED)
TERMINATION--On the date specified under Liquidation Period on page A-3,
Securities may begin to be sold in connection with the termination of the Fund
and it is expected that all Securities will be sold by the Mandatory Termination
Date. Merrill Lynch, as agent for the Sponsors, will determine the manner,
timing and execution of the sales of the underlying Securities. At this time the
Sponsors may offer to Holders the option of having their Units redeemed in kind
and the proceeds of this redemption invested in units of a new series of the
Fund, if one is offered, at a reduced sales charge. The Sponsors are under no
obligation to create a new Series of the Fund, however, or to offer Holders this
kind of redemption and reinvestment option.
Merrill Lynch will attempt to sell the securities as quickly as it can
during the Liquidation Period without in its judgment materially adversely
affecting the market price of the Securities, but it is expected that all of the
Securities will in any event be disposed of by the end of the Liquidation
Period. Merrill Lynch does not anticipate that the period will be longer than
one month, and it could be as short as one day, depending on the liquidity of
the Securities being sold. The liquidity of any Security depends on the daily
trading volume of the Security and the amount that Merrill Lynch has available
for sale on any particular day.
It is expected (but not required) that Merrill Lynch will generally follow
the following guidelines in selling the Securities: for highly liquid
Securities, Merrill Lynch will generally sell Securities on the first day of the
Liquidation Period; for less liquid Securities, on each of the first two days of
the Liquidation Period, Merrill Lynch will generally sell any amount of any
underlying Securities at a price no less than 1/2 point less than the last
closing sale price of those Securities. Thereafter, the price limit will
increase to one point less than the last closing sale price. After four days,
Merrill Lynch intends to sell at least a fraction of the remaining underlying
Securities, the numerator of which is one and the denominator of which is the
total number of days remaining (including that day) in the Liquidation Period
without any price restrictions.
PURCHASE OF UNITS--Units can be purchased by contacting any of the Sponsors,
whose addresses are listed on the back cover of this Prospectus. The minimum
purchase is $1,000 of Units, except that Individual Retirement Accounts and
certain other tax deferred retirement plans may purchase as few as $250 of Units
(see Retirement Plans). There is no minimum purchase requirement for shares
purchased pursuant to the Reinvestment Plan (see Reinvestment Plan.)
MARKET FOR UNITS--Although not obligated to do so, the Sponsors intend to
maintain a market for Units based on the aggregate value of the underlying
Securities. If a market is not maintained, it is unlikely that a Holder would be
able to dispose of his Units other than through redemption (see Redemption).
REPLACEMENT SECURITIES--The Indenture permits the deposit of Replacement
Securities in the Fund under certain circumstances described under
Administration of the Fund--Portfolio Supervision. The Securities on the current
list from which Replacement Securities are to be selected are:
Citizens Utilities
Communications Satellite Corporation
UNDERWRITING ACCOUNT
The names and addresses of the Underwriters and their several interests in the
Underwriting Account are:
<TABLE>
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith Incorporated P.O. Box 9051, Princeton, N.J. 08543-9051
Smith Barney Shearson Inc. Two World Trade Center--101st Floor, New York, N.Y. 10048
PaineWebber Incorporated 1285 Avenue of the Americas, New York, N.Y. 10019
Prudential Securities Incorporated One Seaport Plaza--199 Water Street, New York, N.Y. 10292
Dean Witter Reynolds Inc. Two World Trade Center--69th Floor, New York, N.Y. 10048
</TABLE>
Each Underwriter's interest in the Underwriting Account will depend upon the
number of Units acquired through the issuance of additional Units.
A-7
<PAGE>
EQUITY INCOME FUND
CONCEPT SERIES
TELE-GLOBAL TRUST
DEFINED ASSET FUNDS
FUND STRUCTURE
This Series (the 'Fund') Equity Income Fund is a 'unit investment trust'
created under New York law by a Trust Indenture (the 'Indenture') among the
Sponsors and the Trustee. To the extent that references in this Prospectus are
to articles and sections of the Indenture, which are hereby incorporated by
reference, the statements made herein are qualified in their entirety by this
reference.
The Portfolio contains common stocks issued by telecommunications
companies. As used herein, the term 'Securities' or 'Stocks' means the common
stocks initially deposited in the Fund and described under Portfolio and any
replacement and additional common stocks acquired and held by the Fund pursuant
to the provisions of the Indenture (see Description of the Fund--The Portfolio;
Administration of the Fund--Portfolio Supervision).
With the deposit of the Securities in the Fund on the Initial Date of
Deposit, the Sponsors established a proportionate relationship among the number
of shares of each stock deposited in the Portfolio. Following the Initial Date
of Deposit, the Sponsors may deposit additional Securities ('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 in order to create new Units, maintaining to the extent practicable
the original proportionate relationship among the number of shares of each stock
in the Portfolio. It may not be possible to maintain the exact original
proportionate relationship among the Securities deposited on the Initial Date of
Deposit because of, among other reasons, purchase requirements, changes in
prices or unavailability of Securities. Replacement Securities may be acquired
under specified conditions (see Description of the Fund--The Portfolio;
Administration of the Fund--Portfolio Supervision). Units may be continuously
offered to the public by means of this Prospectus (see Public Sale of
Units--Public Distribution) resulting in a potential increase in the number of
Units outstanding. In addition, new Units may be created under the Reinvestment
Plan (see Reinvestment Plan).
The holders of record ('Holders') of Units will have the right to have
their Units redeemed (see Redemption) at a price computed as set forth under
Computation of Redemption Price per Unit ('Redemption Price per Unit') if they
cannot be sold in the over-the-counter market which the Sponsors propose to
maintain (see Market for Units). Redemptions will be made in cash or in
Securities ('in kind') (see Redemption). On the Initial Date of Deposit each
Unit represented the fractional undivided interest in the Securities and net
income of the Fund set forth under Investment Summary.
The Fund may be an appropriate medium for investors who desire to
participate in a portfolio of common stocks of companies in the
telecommunications industry with greater diversification than they might be able
to acquire individually. It is suggested that prospective investors who consider
investing in the Fund should reach an investment decision only after carefully
considering the suitability of the Securities in the light of each investor's
particular circumstances.
RISK FACTORS
An investment in Units of the Fund should be made with an understanding of
the risks inherent in an investment in equity securities, including the risk
that the financial condition of the issuers of the Securities may become
impaired or that the general condition of the stock market may worsen (both of
which may contribute directly to a decrease in the value of the Securities and
thus in the value of the Units) or the risk that holders of common stocks have a
right to receive payments from the issuers of those stocks that is generally
inferior to that of creditors of, or holders of debt obligations issued by, the
issuers and that the rights of holders of common stocks generally rank inferior
to the rights of holders of preferred stock. Common stocks 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.
Holders of common stocks incur more risk than holders of preferred stocks
and debt obligations because common stockholders, as owners of the company, 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. Holders of common stocks of the type held by the Portfolio
have a right to receive dividends only when and if, and in the amounts, declared
by the issuer's Board of Directors and to participate in amounts available for
distribution by the issuer only after all other claims on the issuer have been
paid or provided for. By contrast, holders of preferred stocks have the right to
receive dividends at a fixed rate when and as declared by the issuer's Board of
Directors, normally on a cumulative basis, but do not participate in other
amounts available for distribution by the issuer. Cumulative preferred stock
dividends must be paid before common stock dividends and any cumulative
preferred stock dividend omitted is added to future dividends payable to the
holders of cumulative preferred stock. Preferred stocks are also entitled to
rights on liquidation which are senior to those of
1
<PAGE>
common stocks. 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 capital protection offered by debt securities. Indeed, the issuance of debt
securities or even preferred stock will create prior claims for payment of
principal, interest, liquidation preferences and dividends which could adversely
affect the ability and inclination of the issuer to declare or pay dividends on
its common stock or the rights of holders of common stock with respect to assets
of the issuer upon liquidation or bankruptcy. Further, unlike debt securities
which typically have a stated principal amount payable at maturity (whose value,
however, will be subject to market fluctuations prior thereto), common stocks
have neither a fixed principal amount nor a maturity and have values which are
subject to market fluctuations for as long as the stocks remain outstanding. The
value of the Securities in the Portfolio thus may be expected to fluctuate over
the entire life of the Fund to values higher or lower than those prevailing on
the Initial Date of Deposit.
Investors should note that additional Units may be offered to the public
(or to Holders pursuant to the Reinvestment Plan) subsequent to the Initial Date
of Deposit and that the creation of additional Units may have an effect upon the
value of previously existing Units. To create additional Units the Sponsors may
deposit cash with instructions to purchase Securities (or a bank letter of
credit in lieu of cash) in amounts sufficient to maintain to the extent
practicable the percentage relationship among the number of shares of each
Security based on the price of the Securities at the Evaluation Time on the date
the cash is deposited. To the extent the price of a Security increases or
decreases between the time cash is deposited with instructions to purchase the
Security and the time the cash is used to purchase the Security, Units will
represent less or more of that Security and more or less of the other Securities
in the Fund. Holders will be at risk because of price fluctuations during this
period since if the price of shares of a Security increases, Holders will have
an interest in fewer shares of that Security, and if the price of a Security
decreases, Holders will have an interest in more shares of that Security, than
if the Security had been purchased on the date cash was deposited with
instructions to purchase the Security. In order to minimize these effects, the
Fund will try to purchase Securities as close as possible to the Evaluation Time
or at prices as close as possible to the prices used to evaluate the Fund at the
Evaluation Time. Furthermore, brokerage fees incurred in purchasing Securities
with cash deposited with instructions to purchase the Securities will be an
expense of the Fund. Thus price fluctuations during this period and payment of
any brokerage fees by the Fund will affect the value of every Holder's Units and
the income per Unit received by the Fund. In particular, Holders who purchase
Units during the primary offering period of the Units would experience a
dilution of their investment as a result of any brokerage fees paid by the Fund
during subsequent deposits of additional Securities purchased with cash
deposited with instructions to purchase Securities. In addition, costs incurred
in connection with the acquisition of Securities not listed on any national
securities exchange (due to differentials between bid and offer prices for the
Securities) will be at the expense of the Fund and will affect the value of
every Holder's Units.
Investors should also be aware that because Securities are sold on the
Deferred Charge Payment Dates, purchasers may realize gains or losses on those
sales due to changes in Securities prices between the date on which the Units
are purchased and the Deferred Charge Payment Dates. In addition, Units
purchased shortly before a quarterly Deferred Charge Payment Date would
nevertheless incur the full sales charge for that period.
THE GLOBAL TELECOMMUNICATIONS INDUSTRY
The global telecommunications industry is subject to varying degrees of
regulatory, political and economic risk which may affect the price of the stocks
of companies involved in such industry. Such risks depend on a number of factors
including the country in which a company is located. Telecommunications
companies in both developed and emerging countries are undergoing significant
change due to varying and evolving levels of governmental regulation or
deregulation and other factors. As a result, competitive pressures are intense
and the securities of such companies may be subject to rapid price volatility.
In addition, 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. 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.
United States. The companies whose Securities are included in the Portfolio
are engaged in providing local, long-distance and cellular services, in the
manufacture of telecommunications products and in a wide range of other
activities including directory publishing, information systems and the operation
of voice, data and video telecommunications networks. Technological innovations
in fiber optics, cellular products and services, voice messaging, call waiting
and automatic dialing offer additional potential for significant expansion.
Advances like formation of a national cellular grid should also contribute to
the anticipated growth of this industry. The Fund contains securities of each of
the Regional Bell Holding Companies ('RBOCs') which were spun off from AT&T in
1984 pursuant to approval of the U.S. District Court for the District of
Columbia (the 'Court'), implementing a consent decree relating to antitrust
proceedings brought by the U.S. Department of Justice. The RBOCs include:
Ameritech Corporation, Bell Atlantic Corporation, BellSouth Corporation, NYNEX
Corporation, Pacific Telesis Group, Southwestern Bell Corporation and U.S. West,
Inc. These companies provide near monopoly local and
2
<PAGE>
intrastate telephone service as well as cellular and other generally unregulated
services. This sector was emphasized in the Portfolio to obtain the greater
yields available relative to the other sectors, as well as a more predictable
but slower earnings growth. The Fund also contains the securities of certain
independent telephone companies which are subject to regulation by the Federal
Communications Commission (the 'FCC') and state utility commissions but not
subject to the consent decree binding the RBOCs and AT&T and of certain long-
distance telecommunications carriers, certain telecommunications equipment
manufacturers and certain non-U.S. companies which provide telecommunications
services or equipment mainly outside the United States. International
communications facilities in the United States are also subject to the
jurisdiction of the FCC, and the provision of service to foreign countries is
subject to the approval of the FCC and the appropriate foreign governmental
agencies.
In accordance with the consent decree, the RBOCs provide local telephone
service, including exchange access for long-distance companies, and may provide
directory advertising and new customer equipment. Many of the RBOCs, pursuant to
waivers, may also engage in a broad range of businesses including foreign
consulting, servicing computers and marketing or leasing office equipment. AT&T
provides interexchange long distance telephone service in competition with
numerous other providers and certain other products, services and customer
equipment.
The Court's order approving the consent decree provided for periodic
reviews of the restrictions imposed by it. In April 1990, a Federal appeals
court directed the Court to review its ruling that restricts RBOC involvement in
the information services business and to determine whether removal of the
information services restriction would be in the public interest. On July 25,
1991, the Court lifted the information services ban. Other portions of the
consent decree are being litigated. As RBOCs are released from the restrictions
of the 1984 divestiture decree, they and other telephone companies are being
freed to create new products, services and businesses. For example, a federal
district court recently permitted Bell Atlantic to enter the cable business.
Bills have been introduced in the U.S. House of Representatives and the Senate
that would require the RBOCs to pass a competitive market test that would block
them from offering information services in the near future.
The independent telephone companies, like the RBOCs, provide local
telecommunications services, but operate in a more limited area. Each of these
issuers is considered large enough to compete effectively in the existing
telecommunications environment or has been identified by the Sponsors as a
possible takeover candidate. These companies are not subject to the consent
decree and therefore can provide the full range of telecommunications services
including local exchange services, the installation of business systems,
telephone consulting, the manufacture of telecommunications equipment, operation
of voice and data networks and directory publishing. Cellular service is
providing an increasing component of the revenues of the RBOCs and independent
telephone companies. Both the RBOCs and independents are subject to regulation
by the FCC and state regulatory authorities. The FCC also has the power to
regulate the types of telecommunications equipment which may be used and
therefore may affect the business of companies in the manufacturing of
telecommunications equipment.
Long-distance companies which provide long-distance telecommunications
services are subject to regulation by the FCC. The long-distance industry,
currently dominated by the three long-distance companies represented in the
Trust's portfolio, is consolidating into larger carriers.
Certain telecommunications services have in the past been fairly resistant
to recession with the exception of long-distance carriers. During the recession
of 1982-83, growth in access lines simply slowed down for the independent
telephone companies and only one of the predecessor Bell operating companies
experienced such a downturn. The Sponsors believe that companies in the
telephone business may remain resistant to recession in the four years
subsequent to the Initial Date of Deposit and may experience some growth in
access lines and message units. Cellular telephone service should continue to
expand, although at lesser rates of growth than in the recent past. Also,
ongoing technological change may lead to an increase in the development of new
services such as voice messaging, call screening and automatic dialing and the
demand for business services such as the use of fax machines and the movement of
data information should continue to grow. Most of the U.S. companies or their
predecessors have paid common stock dividends throughout the last nine years and
many have increased those dividends each year during this period. Most of the
non-U.S. Securities have paid and annually increased dividends since
privatization of these companies. The Agent for the Sponsors estimates that
dividends on the Securities in the Portfolio are likely to show significant
increases on average over the next four years. Of course, there can be no
assurance that dividends on the Stocks in the Fund will be increased or
maintained.
Business conditions in the telecommunications industry may affect the
performance of the Fund. The FCC and certain state utility regulators have
introduced certain incentive plans such as price-cap regulation which apply to
certain portions of the business of certain local exchange carriers. Price-cap
regulation offers local exchange carriers an opportunity to share in higher
earnings provided they become more efficient. These new approaches to regulation
by the FCC and various state or other regulatory agencies result in increased
competition and could lead to greater risks as well as greater rewards for
operating telephone companies such as those in the Fund. Technology has tended
to offset the effects of inflation and is expected to continue to do so. Under
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traditional regulation, continuing cost increases, to the extent not offset by
improved productivity and revenues from increased volume of business, would
result in a decreasing rate of return and a continuing need for rate increases.
Although allowance is generally made in ratemaking proceedings for cost
increases, delays may be experienced in obtaining the necessary rate increases
through these proceedings and there can be no assurance that these regulatory
commissions in the future will grant rate increases adequate to cover operating
and other expenses and debt service requirements. The long-distance industry has
been increasingly opened to competition over the last number of years. As a
result, the major long-distance companies compete actively for market share.
Indeed, to meet increasing competition, telecommunications companies will have
to commit substantial capital, technological and marketing resources.
Cellular and cable companies provide wireless services including paging,
dispatch and cellular services throughout the U.S. Most of the RBOCs, as well as
long distance companies, are seeking to increase their share of the cellular
market in view of perceived future growth prospects. It is unclear what effect,
if any, increased competition between wireless and traditional services will
have on the telecommunications industry. Other potential competition for local
service has also developed. The deregulated cellular telephone industry has a
limited operating history and there is significant uncertainty regarding its
future, particularly with regard to increased competition, the continued growth
in the number of customers, the usage and pricing of cellular services, and the
cost of providing cellular services, including the cost of attracting new
customers, developing new technology and the ability to obtain licenses to
provide cellular services. Recent industry developments, such as the proposed
purchase of McCaw Cellular Communications Inc., the largest U.S. cellular
carrier, by AT&T, may provide increased competition and reduced revenues from
cellular service for RBOCs and independent telephone companies. The uncertain
outcomes of future labor agreements and employee and retiree benefit costs may
also have a negative impact on profitability. Telephone usage, and therefore
revenues, could also be adversely affected by any sustained economic recession.
Each of these problems would adversely affect the profitability of the
telecommunications issuers of the Securities, the value of the Securities and
the ability of the issuers of the Securities to make payments of dividends.
The telecommunications equipment companies included in the Portfolio
design, manufacture, and distribute telecommunication equipment such as central
office switching equipment, switches, displays, mobile and cellular equipment
and systems, network transmission equipment, PBXs, satellite, microwave,
antennas, and digital communication networks. Growth of these companies is
anticipated from telephone service industry expansion, modernization
requirements and possible new technology such as interactive television. As less
developed countries modernize their telecommunications infrastructure, the
demand for these products increases. This segment of the industry is subject to
rapidly changing technology and the risk of technological obsolescense. It is
not uncommon for such companies to forgo dividends in favor of reinvestment in
research and development. This sector of the industry is generally not subject
to regulation as other telecommunications issuers are.
In addition, the portfolio contains securities issued by U.S. telephone
companies which provide telecommunications services or equipment outside the
United States; these companies are subject to regulation by foreign governments
or governmental authorities which have broad authority regulating the provision
of telecommunications services and the use of certain telecommunication
equipment. Consequently, certain Securities in the Fund may be affected by the
rules and regulations adopted by regulatory agencies in other countries from
time to time.
It is suggested that prospective investors who consider investing in the
Fund should reach an investment decision only after carefully considering the
suitability of the Securities in the light of each investor's particular
circumstances.
Foreign Telecommunications Issues. Many European and Asian telephone
systems appear to have significant growth potential. The international sector in
the Portfolio consists predominantly of former government-owned
telecommunications systems that have been privatized in stages. Most are similar
to AT&T before 1984 in their dominance of local, long-distance and international
service within their country. As governments privatize their systems by selling
stock to the public, telephone service is likely to expand and, as a result of
greater efficiency, potentially becomes more profitable. Many of these companies
have expanded into other countries.
The Sponsors believe there is significant potential for expansion of
telephone services in foreign countries. The following chart, from a 1993 Value
Line Investment Survey based on various company reports, shows the number of
telephone lines in comparison to population of selected countries. Of course,
there can be no assurance of whether or when telephone service in these
countries will expand or its effects on the non-U.S. companies in the Portfolio
over the Fund's expected four-year term.
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SOURCE: VALUE LINE INVESTMENT SURVEY, COPYRIGHT 1993. ALL
RIGHTS RESERVED. REPRINTED BY PERMISSION.
- ---------------
* While there are no securities of Mexican companies represented in the
Portfolio, certain of the RBOCs have significant investments in the Mexican
telecommunications industry.
** Hong Kong Telecommunications, Ltd. has existing business relationships with
adjacent provinces of the Peoples Republic of China ('PRC') and derives a
significant amount of its revenues from the PRC. In addition, the Sponsors view
the company as a gateway to the PRC and expect revenues from the PRC to continue
to grow as the anticipated union with the PRC in 1997 approaches.
Since certain of the Securities in the Portfolio are Securities of foreign
issuers, an investment in the Fund involves certain risks that are different
from the risks of a fund that invests entirely in securities of domestic
issuers. These investment risks include future foreign political and economic
developments, the possible establishment of exchange controls or other
governmental laws or restrictions which might adversely affect the payment or
receipt of payment of dividends on the relevant Securities and currency risk.
With respect to certain countries, there is the possibility of expropriation of
assets, confiscatory taxation, economic, political or social instability or
diplomatic developments which could affect the value of investments in those
countries. In selecting the non-U.S. Securities in the Portfolio, the Sponsors
have attempted to minimize this country risk. In addition, for the foreign
issuers that are not subject to the reporting requirements of the Securities
Exchange Act of 1934, there may be less publicly available information than is
available from a domestic issuer. Also, foreign issuers are not necessarily
subject to uniform accounting, auditing and financial reporting standards,
practices and requirements comparable to those applicable to domestic issuers.
However, the Sponsors anticipate that adequate information will be available to
allow the Sponsors to supervise the Portfolio as set forth in Administration of
the Fund--Portfolio Supervision. Many of the non-U.S. issuers represented in the
Portfolio were originally government owned and are being privatized in stages.
Many operate beyond their own borders in a wide variety of other countries.
Further, regulation of these foreign issuers may be less than regulation of U.S.
countries and is based on price-cap regulation, which under certain
circumstances may allow these companies to earn a greater rate of return.
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 of these
companies will vary with fluctuations in the U. S. dollar foreign exchange rates
for the relevant currencies. Also, investment risks will include future
political and economic development, the establishment of exchange controls or
other governmental restrictions that might adversely affect the payment or
receipt of payment of dividends on, or the value of, the relevant securities.
Most foreign currencies have fluctuated widely in value against the United
States dollar for many reasons, including supply and demand of 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.
Therefore, for any securities of issuers whose earnings are stated in foreign
currencies, or which pay dividends in foreign currencies or which are traded in
foreign currencies, there is a risk that their United States dollar value will
vary with fluctuations in the United States dollar foreign exchange rates for
the relevant currencies.
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On the basis of the best information available to the Sponsors at the
present time none of the Securities is subject to exchange control restrictions
under existing law which would materially interfere with payment to the Fund of
dividends due on, or proceeds from the sale of, the Securities either because
the particular jurisdictions have not adopted any currency regulations of this
type or because the issues qualify for an exemption, or the Fund, as an
extraterritorial investor, has qualified its purchase of the Securities as
exempt by following applicable 'validation' or similar regulatory or exemptive
procedures. However, there can be no assurance that exchange control regulations
might not be adopted in the future which might adversely affect payments to the
Fund.
In addition, the adoption of exchange control regulations and other legal
restrictions could have an adverse impact on the marketability of international
securities in the Portfolio and on the ability of the Fund to satisfy its
obligation to redeem Units tendered to the Trustee for redemption (see
Redemption).
American Depositary Shares and Receipts. Most of the Securities of foreign
issuers in the Fund are purchased by the Fund in ADR form in the United States.
ADRs evidence American Depository 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.
ADRs represent common stock deposited with a custodian in a depositary.
ADRs may be sponsored or unsponsored. In an unsponsored facility, the depositary
initiates and arranges the facility at the request of market makers and acts as
agent for the ADR holder, while the company itself is not involved in the
transaction. In a sponsored facility, the issuing company initiates the facility
and agrees to pay certain administrative and shareholder-related expenses.
Sponsored facilities use a single depositary and entail a contractual
relationship between the issuer, the shareholder and the depositary; unsponsored
facilities involve several depositaries with no contractual relationship to the
company. The terms and conditions of depositary facilities may result in less
liquidity or lower market prices for ADRs then 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 depositary bank that issues an ADR
generally charges a fee, based on the price of the ADR, upon issuance and
cancellation of the ADR. This fee would be in addition to the brokerage
commissions paid upon the acquisition or surrender of the security. In addition,
the depositary bank incurs expenses in connection with the conversion of
dividends or other cash distributions paid in local currency into U.S. dollars
and such expenses are deducted from the amount of the dividend or distribution
paid to holders, resulting in a lower payout per underlying share represented by
the ADR than would be the case if the underlying share were held directly.
Furthermore, foreign investment laws in certain countries may restrict ownership
by foreign nationals of certain classes of underlying shares. Accordingly, the
ADR representing a class of securities may not possess voting rights, if any,
equivalent to those in respect of the underlying shares. Certain tax
considerations, including tax rate differentials, arising from applications of
the tax laws of one nation to the nationals of another and from certain
practices in the ADR market may also exist with respect to certain ADRs. In
varying degrees, any or all of these factors may affect the value of the ADR
compared with the value of the underlying shares in the local market. ADRs are
registered securities pursuant to the Securities Act of 1933 and may be subject
to the reporting requirements of the Securities Exchange Act of 1934.
LIQUIDITY
Whether or not the Securities are listed on a national securities exchange
or a foreign 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
From time to time Congress considers proposals to reduce the rate of the
dividends-received deduction. Enactment into law of a proposal to reduce the
rate would adversely affect the after-tax return to investors who can take
advantage of the deduction. Holders are urged to consult their own tax advisers.
Further, at any time after the Initial Date of Deposit, litigation may be
initiated on a variety of grounds, or legislation may be enacted, with respect
to the Securities in the Fund or the issuers of the Securities. Since the
telecommunications industry is regulated by various bodies, changing approaches
to regulation may have a negative impact on certain companies
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represented in the Fund. There can be no assurance that future litigation,
legislation, regulation or deregulation will not have a material adverse effect
on the Fund or will not impair the ability of issuers of the Securities to
achieve their business goals. In addition, foreign issuers are subject to
similar events and actions by their governments and regulatory bodies.
DESCRIPTION OF THE FUND
THE PORTFOLIO
Experienced research analysts for the Agent for the Sponsors selected
telecommunications stocks for the Portfolio which they believe to have
above-average growth potential over the next four years. Each of the issuers of
the Securities in the Portfolio has been identified by at least one of the
Sponsors as well positioned to benefit from the anticipated increased demand for
telecommunications services and products. The Securities were selected for
inclusion in the Portfolio without regard to any buy, sell or hold
recommendation by any of the Sponsors. The analysts reviewed telecommunications
stocks available in U.S. equity markets for market share and timeliness of
purchase. The screening process included a thorough financial analysis of each
company, including its operating history, balance sheet and cash flow. In
addition, the Securities deposited in the Fund were selected by taking into
account the following factors, among others: (i) the liquidity of the Securities
as represented by number of shares of the issuer currently outstanding, (ii) the
current annual or indicated dividend rate, (iii) the overall credit quality of
the issuers and the economic outlook and political stability of the foreign
countries represented and (iv) the mix of both domestic and non-U.S.
telecommunications Securities in the Portfolio, taking into account the
availability on the market of the securities which met the Fund's criteria.
The Fund consists of the Securities (or contracts to purchase the
Securities) listed under Portfolio (including any Replacement Securities and
Additional Securities deposited in the Fund in connection with the sale of
additional Units to the public as described under Fund Structure above or to
Holders pursuant to the Reinvestment Plan) as long as they may continue to be
held from time to time in the Fund together with accrued and undistributed
income therefrom and undistributed and uninvested cash realized from the
disposition of Securities (see Administration of the Fund--Portfolio
Supervision). Neither the Sponsors nor the Trustee shall be liable in any way
for any default, failure or defect in any of the Securities. However, should any
contract deposited hereunder (or to be deposited in connection with the sale of
additional Units) fail (a 'Failed Security'), the Sponsors shall, on or before
the next following Distribution Day, cause to be refunded the attributable sales
charge, plus the attributable Cost of Securities to Fund listed under Portfolio,
unless substantially all of the moneys held in the Fund to cover such purchase
are reinvested in additional or replacement Securities in accordance with the
Indenture (see Administration of the Fund--Portfolio Supervision).
The Indenture authorizes the Sponsors to increase the size and number of
Units of the Fund by the deposit of Additional Securities, Replacement
Securities, contracts to purchase Additional or Replacement Securities or cash
with instructions to purchase Securities (or a bank letter of credit in lieu of
cash), and the issue of a corresponding number of additional Units subsequent to
the Initial Date of Deposit, provided that to the extent practicable the
percentage relationship among the number of shares of each Stock is maintained.
Investors should note that cash deposited with instructions to purchase
Securities (or a bank letter of credit in lieu of cash) will be in amounts
sufficient to maintain to the extent practicable the percentage relationship
among the number of shares of each Security. To the extent the price of a
Security increases or decreases between the time the cash is deposited with
instructions to purchase the Security and the time the cash is used to purchase
the Security, Units will represent less or more of that Security and more or
less of the other Securities in the Fund. Also, Securities may be sold under
certain circumstances (see Redemption: Administration of the Fund--Portfolio
Supervision). Because the proceeds from these sales received by the Fund (less
certain amounts deducted by the Trustee as described under Expenses and Charges)
will be reinvested in Additional Securities, distributed to Holders or paid out
upon redemptions, and because Additional Securities may be deposited following
the Initial Date of Deposit, the aggregate value of the Securities in the
Portfolio will vary over time.
Sales charges on Defined Asset Funds range from under 1.0% to 5.5%. This
may be less than you might pay to buy a comparable fund. Defined Asset Funds can
be a cost-effective way to purchase and hold investments. Annual operating
expenses are generally lower than for managed funds. Because unit investment
trusts are not actively managed and have limited transactions, costs are
generally less than 0.25% per year. Keeping costs low increases earnings. When
compounded annually, small differences in expense ratios can make a big
difference in earnings. See Public Sale of Units--Public Offering Price.
Because each Defined Asset Fund is a defined portfolio of preselected
securities, purchasers know in advance what they are investing in. Of course,
the portfolio will change somewhat over time as additional securities are
deposited, or redeemed or as they are sold to meet redemptions and in the
limited other circumstances described below.
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Our defined portfolios of equities offer investors a simple and convenient
way to participate in the equity markets. Our funds seek to benefit from
opportunities often created by economic changes that affect specific areas of
the economy or by increased demand for the companies' products or services. By
purchasing equity income funds, investors not only avoid the problem of
selecting securities by themselves, but also gain the advantage of reduced risk
by investing in securities of several different issuers selected by experienced
buyers and market analysts.
Each portfolio is divided into units, representing equal shares of
underlying assets. On the Initial Date of Deposit each Unit represented the
fractional undivided interest in the Securities plus net income of the Fund set
forth under Investment Summary. Thereafter, if any Units are redeemed by the
Trustee, the aggregate value of Securities in the Fund will be reduced by
amounts allocable to redeemed Units, and the fractional undivided interest
represented by each Unit in the balance will be increased. However, if
additional Units are issued by the Fund, the aggregate value of Securities in
the Fund will be increased by amounts allocable to additional Units, and the
fractional undivided interest represented by each Unit in the balance will be
decreased. Units will remain outstanding until redeemed upon tender to the
Trustee by any Holder (which may include the Sponsors) or until the termination
of the Indenture (see Redemption; Termination).
INCOME AND DISTRIBUTION
Any net annual income per Unit that is earned by the Fund is determined by
subtracting from the annual dividend income of the Securities in the Portfolio
the annual expenses (total estimated annual Trustee's, Sponsors' and
administrative fees and expenses) and dividing by the number of Units
outstanding. The net annual income per Unit will depend upon the amount of
dividends declared and paid by the issuers of the Securities, sales and
substitution of Securities and the purchase of additional Securities
(recognizing, however, that the sale or purchase of Securities by itself should
not have a substantial effect on income per Unit because, as much as
practicable, each Unit will continue to represent a fractional undivided
interest in the same percentages of Securities of the same issuers) and changes
in the expenses of the Fund.
There is no assurance that any dividends will be declared or paid in the
future on the Securities in the Fund.
Record Days and Distribution Days are set forth under Investment Summary.
Dividend income per Unit received by the Fund and available for distribution and
the distributable balance in the Capital Account per Unit (other than capital
gains) as of any particular Record Day will be distributed on or shortly after
the related Distribution Day to the Holders of record on that Record Day,
provided that no distribution from the Capital Account is required unless the
distributable balance therein (excluding capital gains) is at least the minimum
amount set forth under Investment Summary (see Administration of the
Fund--Accounts and Distributions). Normally, dividends on the Securities in the
Fund are paid on a quarterly basis which may or may not coincide with a Record
Day. Therefore, to the extent dividends are paid, it may take several months
after the Initial Date of Deposit for the Trustee to receive sufficient
dividends on the Securities to be able to begin distributions to Holders.
Thereafter, it may take several months after a dividend is received by the Fund
for the Holders to receive these dividends.
Net capital gain income (i.e., the excess of capital gains over capital
losses) recognized by the Fund in any taxable year will generally be distributed
to Holders shortly after the end of the year. In order to meet certain tax
requirements the record date for this distribution may be in December.
The Fund can be a simple and cost-effective way to invest in selected
telecommunications stocks. The initial portion of the sales charge is reduced on
purchases of $250,000 or more (see Public Sale of Units--Public Offering Price).
With no management fees, the Fund's estimated annual operating expenses are less
than for most comparable managed funds, which can increase income to investors.
FUND PERFORMANCE
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 may not be indicative of future results. The Fund is not
actively managed. Unit price and return fluctuate with the value of the common
stocks in the portfolio, so there may be a gain or loss when Units are sold.
Fund performance may be compared to performance on the same basis (with
distributions reinvested) of the Dow Jones Industrial Average, the S&P 500 Stock
Price Composite Index, the S&P MidCap 400 Index, or
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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. As with other performance data, performance
comparisons should not be considered representative of the Fund's relative
performance for any future period.
TAXES
In the opinion of Davis Polk & Wardwell, special counsel for the Sponsors,
under existing law:
TAXATION OF THE FUND
The Fund intends to qualify for and elect the special tax treatment
applicable to 'regulated investment companies' under Sections 851-855 of the
United States 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 Holders
90% or more of its taxable income without regard to its net capital gain (net
capital gain is defined as the excess of net long-term capital gain over net
short-term capital loss), it will not be subject to Federal income tax on any
portion of its taxable income (including any net capital gain) distributed to
Holders in a timely manner. In addition, 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 Holders 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 Holders
during the calendar year. Exchange control regulations may restrict repatriation
of investment income and capital or the proceeds of securities sales by foreign
investors such as the Fund and it is possible that such regulations may limit
the Fund's ability to make sufficient distributions to satisfy the 90% and
excise tax distributions requirements.
DISTRIBUTIONS
Distributions to Holders of the Fund's dividend income and net short-term
capital gain in any year will be taxable as ordinary income to Holders to the
extent of the 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
Holder's basis in his Units and, to the extent that such distributions exceed
his basis, will be treated as a gain from the sale of his Units as discussed
below. It is anticipated that substantially all of the distributions of the
Fund's dividend income and net short-term capital gain will be taxable as
ordinary income to Holders.
Distribution of the Fund's net capital gain (designated as capital gain
dividends by the Fund) will be taxable to Holders as long-term capital gain,
regardless of the length of time the Units have been held by a Holder. A Holder
may recognize a taxable gain or loss if the Holder sells or redeems his Units.
Any gain or loss arising from (or treated as arising from) the sale or
redemption of Units will be a capital gain or loss, except in the case of a
dealer in securities. Capital gains are generally taxed at the same rate as
ordinary income, however, the excess of net long-term capital gains over net
short-term capital losses may be taxed at a lower rate than ordinary income for
certain noncorporate taxpayers. A capital gain or loss is long-term if the asset
is held for more than one year and short-term if held for one year or less. The
deduction of capital losses is subject to limitations.
A distribution of Securities to a Holder upon redemption of his Units will
be a taxable event to such Holder, and that Holder will recognize taxable gain
or loss upon such distribution (equal to the difference between such Holder'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. Holders are urged to consult their own tax advisers as to the tax
consequences to them of exchanging units in particular cases.
Distributions which are taxable as ordinary income to Holders will
constitute dividends for Federal income tax purposes. To the extent that
distributions are appropriately designated by the 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).
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The dividends-received deduction generally is 70%. However, Congress from
time to time considers proposals to reduce the rate, and enactment of such a
proposal would adversely affect the after-tax return to investors who can take
advantage of the deduction. Holders are urged to consult their own tax advisers.
Sections 246 and 246A of the Code contain limitations on the eligibility of
dividends for the corporate dividends-received deduction. Depending upon the
corporate Holder's circumstances (including whether it has a 45-day holding
period for its Units and whether its Units are debt financed), these limitations
may be applicable to dividends received by a Holder from the Fund which would
otherwise qualify for the dividends-received deduction under the principles
discussed above. Accordingly, Holders should consult their own tax advisers in
this regard. A corporate Holder should be aware that the receipt of dividend
income for which the dividends-received deduction is available may give rise to
an alternative minimum tax liability (or increase an existing liability) because
the dividend income will be included in the corporation's 'adjusted current
earnings' for purposes of the adjustment to alternative minimum taxable income
required by Section 56(g) of the Code.
Dividends received by the Fund from foreign issuers will generally be
subject to foreign withholding taxes. The Fund will not be eligible for, and
therefore does not expect to make, an election that would enable Holders to
credit foreign withholding taxes against their Federal income tax liability on
distributions by the Fund.
The Holder's basis in his Units will be equal to the cost of his Units,
including the initial sales charge. When the Fund pays the deferred sales charge
on behalf of a Holder, the Holder will be treated as if the Fund had actually
distributed to the Holder the amount of the deferred sales charge and as if the
Holder had paid such charge directly. A portion of the deferred sales charge
deemed paid by the Holder may be treated as interest, which would be deductible
by a Holder subject to limitations on the deduction of investment interest.
Those Holders who hold Units on the Deferred Charge Payment Date should increase
their tax basis in their Units by the amount of the deferred sales charge not
treated as interest. Holders should consult their tax advisors as to the income
tax consequences of the deferred sales charge.
Holders will be taxed in the manner described above regardless of whether
distributions from the Fund are actually received by the Holder or are
reinvested pursuant to the Reinvestment Plan.
The Federal tax status of each year's distributions will be reported to
Holders and to the Internal Revenue Service. The foregoing discussion relates
only to the Federal income tax status of the Fund and to the tax treatment of
distributions by the Fund to U.S. Holders. Holders that are not United States
citizens or residents should be aware that distributions from the Fund will
generally be subject to information reporting and withholding taxes, 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
Holders should consult their own tax advisers in this regard.
RETIREMENT PLANS
This Series of Equity Income Fund may be well suited for purchase by
Individual Retirement Accounts ('IRAs'), Keogh plans, pension funds and other
qualified retirement plans, certain of which are briefly described below.
Generally, capital gains and income received in each of the foregoing plans are
exempt from Federal taxation. All distributions from such plans are generally
treated as ordinary income but may, in some cases, be eligible for special 5 or
10 year averaging or tax-deferred rollover treatment. Holders of Units in IRAs,
Keogh plans and other tax-deferred retirement plans should consult their plan
custodian as to the appropriate disposition of distributions. Investors
considering participation in any such plan should review specific tax laws
related thereto and should consult their attorneys or tax advisers with respect
to the establishment and maintenance of any such plan. Such plans are offered by
brokerage firms, including each of the Sponsors of this Fund, and other
financial institutions. Fees and charges with respect to such plans may vary.
Retirement Plans for the Self-Employed--Keogh Plans. Units of the Fund may
be purchased by retirement plans established pursuant to Self-Employed
Individuals Tax Retirement Act of 1962 ('Keogh plans') for self-employed
individuals, partnerships or unincorporated companies. Qualified individuals may
generally make annual tax-deductible contributions up to the lesser of 20% of
annual compensation or $30,000 to Keogh plans. The assets of the plan must be
held in a qualified trust or other arrangement which meets the requirements of
the Code. Generally, there are penalties for premature distributions from a plan
before attainment of age 59, except in the case of a participant's death or
disability and certain other related circumstances. Keogh plan participants may
also establish separate IRAs (see below) to which they may contribute up to an
additional $2,000 per year ($2,250 in a spousal account).
Individual Retirement Account--IRA. Any individual (including one covered
by a qualified private or government retirement plan) can establish an IRA or
make use of a qualified IRA arrangement set up by an
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employer or union for the purchase of Units of the Fund. Any individual can make
a contribution to an IRA equal to the lesser of $2,000 ($2,250 in a spousal
account) or 100% of earned income; such investment must be made in cash.
However, the deductible amount an individual may contribute will be reduced if
the individual's adjusted gross income exceeds $25,000 (in the case of a single
individual), $40,000 (in the case of married individuals filing a joint return)
or $200 (in the case of a married individual filing a separate return). A
married individual filing a separate return will not be entitled to any
deduction if the individual is covered by an employer-maintained retirement
plan, without regard to whether the individual's spouse is an active participant
in an employer retirement plan. Unless nondeductible contributions 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. It should
be noted that certain transactions which are prohibited under Section 408 of the
Code will cause all or a portion of the amount in an IRA to be deemed to be
distributed and subject to tax at that time. A participant's entire interest in
an IRA must be, or commence to be, distributed to the participant not later than
the April 1 following the taxable year during which the participant attains age
70-1/2. Taxable distributions made before attainment of age 59-1/2, except in
the case of a 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. An employer who has established
a pension or profit-sharing plan for employees may purchase Units of the fund
for such a plan.
PUBLIC SALE OF UNITS
PUBLIC OFFERING PRICE
The Public Offering Price of the Units is computed by dividing the
aggregate value of the Securities (as determined by the Trustee), by the number
of Units outstanding and adding to the quotient the sales charge at the
applicable percentage of the aggregate value per Unit (the net amount invested).
A proportionate share of any cash held by the Fund in the Capital Account not
allocated to the purchase of specific Securities and net income in the Income
Account (described under Administration of the Fund--Accounts and Distributions)
on the date of delivery of the Units to the purchaser plus (in connection with
the creation of Units) applicable commissions is added to the Public Offering
Price. The Public Offering Price on the date of this Prospectus or on any
subsequent date will vary from the Public Offering Price on the business day
prior to the date of this Prospectus (set forth under Investment Summary) in
accordance with fluctuations in the aggregate value of the underlying
Securities.
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 the Holders out of net asset value of the Fund
on each quarterly Deferred Charge Payment Date until the Fund terminates. If a
Holder sells or redeems Units before a Deferred Charge Payment Date, all future
deductions of deferred sales charges with respect to such Holder will be waived;
this will have the effect of reducing the rate of sales charge as to such
Holder.
The initial portion of the sales charge is reduced on a graduated scale for
sales to any purchaser of at least $250,000 of Units and will be applied on
whichever basis is more favorable to the purchaser. To qualify for the reduced
initial sales charge and concession applicable to quantity purchasers, the
dealer must confirm that the sale is to a single purchaser as defined below or
is purchased for its own account and not for distribution. The initial portion
of the sales charge will be reduced as follows:
<TABLE>
<CAPTION>
SALES CHARGE
(GROSS UNDERWRITING PROFIT)
-----------------------------------
AS PERCENT OF AS PERCENT OF MAXIMUM
PUBLIC OFFERING NET AMOUNT DOLLAR AMOUNT DEFERRED
AMOUNT PURCHASED PRICE INVESTED PER 1,000 UNITS
------------------- -------------- ------------------------
<S> <C> <C> <C>
Less than $250,000.............................................. 2.75% 2.828% $ 26.00
$250,000 - $499,999............................................. 2.25 2.302 26.00
$500,000 - $749,999............................................. 1.75 1.781 26.00
$750,000 - $999,999............................................. 1.25 1.266 26.00
$1,000,000 and more............................................. 1.00 1.010 26.00
</TABLE>
The above graduated sales charges will apply on all purchases on any one
day by the same purchaser of Units in this Fund only in the amounts stated. For
this purpose purchases during the primary offering period will not be
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<PAGE>
aggregated with concurrent purchases of any other unit trusts sponsored by the
Sponsors. Purchases in the secondary market of one or more Series sponsored by
the Sponsors which have the same rates of sales charge will be aggregated. Units
held in the name of the spouse of the purchaser or in the name of a child of the
purchaser under 21 years of age are deemed to be registered in the name of the
purchaser. The graduated sales charges are also applicable to a trustee or other
fiduciary purchasing securities for a single trust estate or single fiduciary
account.
Employees of certain of the Sponsors and their affiliates and non-employee
directors of Merrill Lynch & Co., Inc. may purchase Units of this Fund pursuant
to employee benefit plans at a price equal to the aggregate value of the
Securities in the Fund divided by the number of Units outstanding plus a reduced
initial sales charge of not less than $5.00 per 1,000 Units.
The value of the Securities is determined on each business day by the
Trustee based on the closing sale prices at the Evaluation Time on the day the
evaluation is made or, if there are no reported sales or if closing sale prices
are not reported or a Security is not listed on a national securities exchange
or if the principal market therefor becomes other than on an exchange, taking
into account the same factors referred to under Redemption-- Computation of
Redemption Price per Unit (Section 4.01). The term 'business day', as used
herein and under 'Redemption', shall exclude Saturdays, Sundays and the
following holidays as observed by the New York Stock Exchange, Inc.: New Year's
Day, Washington's Birthday, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving and Christmas.
PUBLIC DISTRIBUTION
During the primary 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. The Sponsors
intend to qualify Units for sale in all states in the U.S. 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
The Underwriters named under Underwriting Account, including the Sponsors,
may receive maximum aggregate sales charges (initial and deferred) per 1,000
Units equal to approximately 5.35% of the Public Offering Price (5.501% of the
net amount invested). The initial portion of the sales charge is equal to $27.50
per 1,000 Units payable upon the sale of the Units. The deferred sales charge
will be $1.625 per 1,000 Units payable on each quarterly Deferred Charge Payment
Date (set forth under Investment Summary). The Sponsors also realized a profit
or loss on deposit of the Securities in the Fund in the amount set forth under
Investment Summary. This profit or loss is the difference between the cost of
the Securities to the Fund (which is based on the aggregate value of the
Securities on the Initial Date of Deposit) and the purchase price of the
Securities to the Sponsors plus commissions payable by the Sponsors. On each
subsequent deposit of Securities with respect to the sale of additional Units to
the public the Sponsors may realize a profit or loss. In addition, any Sponsor
or Underwriter may realize profits or sustain losses in respect of Securities
deposited in the Fund which were acquired by the Sponsor or Underwriter from
underwriting syndicates of which the Sponsor or Underwriter was a member. During
the primary offering period and thereafter to the extent additional Units
continue to be offered for sale to the public, the Underwriting Account also may
realize profits or sustain losses as a result of fluctuations after the Initial
Date of Deposit in the aggregate value of the Securities and hence in the Public
Offering Price of the Units (see Investment Summary). Cash, if any, made
available by buyers of Units to the Sponsors prior to the settlement date for
purchase of Units may be used in the Sponsors' businesses subject to the
limitations of Rule 15c3-3 under the Securities Exchange Act of 1934 and may be
of benefit to the Sponsors.
Except as indicated under Portfolio, the Sponsors have not participated as
sole underwriter or manager or member of underwriting syndicates from which
syndicates the Securities in the Portfolio were acquired.
In maintaining a market for the Units (see Market for Units), the Sponsors
will also realize profits or sustain losses in the amount of any difference
between the prices at which they buy Units (based on the aggregate value of the
Securities) and the prices at which they resell these Units (which includes the
sales charge) or the prices at which they redeem the Units (based on the
aggregate value of the Securities), as the case may be.
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<PAGE>
MARKET FOR UNITS
While the Sponsors are not obligated to do so, they intend to maintain a
secondary market for Units of this Series and continuously to offer to purchase
Units of this Series at prices, subject to change at any time, which will be
computed on the basis of the aggregate value of the Securities, taking into
account the same factors referred to in determining the Redemption Price per
Unit (see Redemption). The Sponsors may discontinue purchases of Units of this
Series at prices based on the aggregate value of the Securities should the
supply of Units exceed demand or for other business reasons. The Sponsors, of
course, do not in any way guarantee the enforceability, marketability or price
of any Securities in the Portfolio or of the Units. However, the Sponsors will
not repurchase Units in the secondary market at a price below the aggregate
value of the Securities in the Fund. During the primary public offering period
or thereafter, on a given day the price offered by the Sponsors for the purchase
of Units shall be an amount not less than the Redemption Price per Unit, based
on the aggregate value of Securities in the Fund on the date on which the Units
are tendered for redemption (see Redemption).
The Sponsors may redeem any Units they have purchased in the secondary
market if they determine that it is undesirable to continue to hold these Units
in their inventories. Factors which the Sponsors will consider in making this
determination will include the number of units of all series of all funds which
they hold in their inventories, the saleability of the units and their estimate
of the time required to sell the units and general market conditions. For a
description of certain consequences of any redemption for remaining Holders, see
Redemption.
A Holder who wishes to dispose of his Units should inquire of his bank or
broker as to current market prices in order to determine if there exist
over-the-counter prices in excess of the redemption price and the repurchase
price (see Redemption).
REDEMPTION
While it is anticipated that Units in most cases can be sold in the
over-the-counter market for an amount at least equal to the Redemption Price per
Unit (see Market for Units), Units may be redeemed at the office of the Trustee
set forth on the back cover of this Prospectus, upon tender on any business day,
as defined under Public Sale of Units--Public Offering Price, of Certificates
or, in the case of uncertificated Units, delivery of a request for redemption,
and payment of any relevant tax, without any other fee (Section 5.02).
Certificates to be redeemed must be properly endorsed or accompanied by a
written instrument or instruments of transfer. Holders must sign exactly as
their names appear on the face of the Certificate with the signatures guaranteed
by an eligible guarantor institution, or in some other manner acceptable to the
Trustee. In certain instances the Trustee may require additional documents
including, but not limited to, trust instruments, certificates of death,
appointments as executor or administrator or certificates of corporate
authority.
On the seventh calendar day following the tender (or if the seventh
calendar day is not a business day on the first business day prior thereto), the
Holder will be entitled to receive the proceeds of the redemption in an amount
per Unit equal to the Redemption Price per Unit (see below) as determined as of
the day of tender. The Trustee is authorized in its discretion, if the Sponsors
do not elect to repurchase any Units tendered for redemption or if the Sponsors
tender Units for redemption, to sell the Units in the over-the-counter market at
prices which will return to the Holder a net amount in cash equal to or in
excess of the Redemption Price per Unit for the Units (Section 5.02).
Securities are to be sold from the Portfolio in order to make funds
available for redemption (Section 5.02) if funds are not otherwise available in
the Capital and Income Accounts to meet redemptions (see Administration of the
Fund--Accounts and Distributions). The Securities to be sold will be selected by
the Sponsors in accordance with procedures specified in the Indenture in order
to maintain, to the extent practicable, the proportionate relationship among the
number of shares of each Stock. Provision is made in the Indenture under which
the Sponsors may, but need not, specify minimum amounts in which blocks of
Securities are to be sold in order to obtain the best price for the Fund. While
these minimum amounts may vary from time to time in accordance with market
conditions, the Sponsors believe that the minimum amounts which would be
specified would be approximately 100 shares for readily marketable Securities.
Holders tendering Units for redemption may request distribution in kind
from the Trustee in lieu of cash redemption. A Holder may request distribution
in kind of an amount and value of Securities per Unit equal to the Redemption
Price per Unit as determined as of the Evaluation Time next following the
tender, provided that the tendering Holder is entitled to receive at least 100
shares of each Security in the Portfolio as part of his distribution and the
Holder has elected to redeem prior to the date specified under Investment
Summary-- Redemption In Kind. If the Holder can receive this requisite number of
shares, the distribution in kind on
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<PAGE>
redemption of Units will be held by a distribution agent (the 'Distribution
Agent') for the account of, and for disposition in accordance with the
instructions of, the tendering Holder. The tendering Holder shall be entitled to
receive whole shares of each of the Securities comprising the Portfolio and cash
from the Capital Account equal to the fractional shares to which the tendering
Holder is entitled. Any brokerage commissions on sales of the underlying
Securities distributed in connection with in kind redemptions will be borne by
the tendering Holder. In implementing these redemption procedures, the Trustee
and Distribution Agent shall make any adjustments necessary to reflect
differences between the Redemption Price of the Units and the value of the
Securities distributed in kind as of the date of tender. If funds in the Capital
Account are insufficient to cover the required cash distribution to the
tendering Holder, the Trustee may sell Securities according to the criteria
discussed above. The in kind redemption option may be terminated by the Sponsors
on a date other than that specified under Redemption In Kind upon notice to the
Holders prior to the specified date.
To the extent that Securities are redeemed in kind or sold, the size and
diversity of the Fund will be reduced but each remaining Unit will continue to
represent approximately the same proportional interest in each Security. Sales
will usually be required at a time when Securities would not otherwise be sold
and may result in lower prices than might otherwise be realized. The price
received upon redemption may be more or less than the amount paid by the Holder
depending on the value of the Securities in the Portfolio at the time of
redemption. In addition, because of the minimum amounts in which Securities are
required to be sold, the proceeds of sale may exceed the amount required at the
time to redeem Units; these excess proceeds will be distributed to Holders
unless reinvested in Additional Securities (see Administration of the
Fund--Accounts and Distributions).
The right of redemption may be suspended and payment postponed (1) for any
period during which the New York Stock Exchange, Inc. is closed other than for
customary weekend and holiday closings or (2) for any period during which, as
determined by the Securities and Exchange Commission ('SEC'), (i) trading on
that Exchange is restricted or (ii) an emergency exists as a result of which
disposal or evaluation of the Securities is not reasonably practicable, or (3)
for any other periods which the SEC may by order permit (Section 5.02).
COMPUTATION OF REDEMPTION PRICE PER UNIT
Redemption Price per Unit is computed by the Trustee, as of the Evaluation
Time, on each June 30 and December 31 (or the last business day prior thereto),
on any day on which the New York Stock Exchange is open as of the Evaluation
Time next following the tender of any Unit for redemption, and on any other
business day desired by the Trustee or the Sponsors, by adding (a) the aggregate
value of the Securities as determined by the Trustee and (b) cash on hand in the
Fund (other than cash covering contracts to purchase Securities) including
dividends receivable on stocks trading ex-dividend and deducting therefrom the
sum of (x) taxes or other governmental charges against the Fund not previously
deducted, (y) accrued fees and expenses of the Trustee (including legal and
auditing expenses), the Sponsors and counsel, and certain other expenses and (z)
cash held for distribution to Holders of record as of a date prior to the
evaluation; and dividing the result by the number of Units outstanding as of the
date of computation (Section 5.01).
The aggregate value of the Securities is determined in good faith by the
Trustee in the following manner: if the Securities are listed on a national
securities exchange or the NASDAQ national market system, or a foreign
securities exchange, this evaluation is generally based on the closing sale
prices on that exchange or that system (unless the Trustee deems these prices
inappropriate as a basis for valuation) or, if there is no closing sale price on
that exchange or system, at the mean between the closing bid and asked prices.
If the Securities are not so listed or, if so listed and the principal market
therefor is other than on the exchange, the evaluation shall generally be based
on the current bid price on the over-the-counter market (unless the Trustee
deems these prices inappropriate as a basis for evaluation). If current bid
prices are unavailable, the evaluation is generally determined (a) on the basis
of current bid prices for comparable securities, (b) by appraising the value of
the Securities on the bid side of the market or (c) by any combination of the
above.
TERMINATION
On the date specified under Liquidation Period under Investment Summary the
Trustee may begin to sell all of the underlying Securities on behalf of Holders
in connection with the termination of the Fund. Merrill Lynch, as agent for the
Sponsors, has agreed to perform these sales for the Trustee. The sale proceeds
will be net of any incidental expenses involved in the sales. At this time the
Sponsors may offer to Holders the option of having their Units redeemed in kind
and the distributed Securities sold by the Distribution Agent; the proceeds
would then be invested in units of a new Series of the Fund, if one is being
offered, at a reduced sales charge. The
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<PAGE>
Sponsors are under no obligation to create a new Series of the Fund, however, or
to offer Holders this kind of redemption and reinvestment option.
Merrill Lynch will attempt to sell the Securities as quickly as it can
during the Liquidation Period without in its judgment materially adversely
affecting the market price of the Securities, but it is expected that all of the
Securities will in any event be disposed of by the end of the Liquidation
Period. Merrill Lynch does not anticipate that the period will be longer than
one month, and it could be as short as one day, depending on the liquidity of
the Securities being sold. The liquidity of any Security depends on the daily
trading volume of the Security and the amount that Merrill Lynch has available
for sale on any particular day.
It is expected (but not required) that Merrill Lynch will generally follow
the following guidelines in selling the Securities: for highly liquid
Securities, Merrill Lynch will generally sell Securities on the first day of the
Liquidation Period; for less liquid Securities, on each of the first two days of
the Liquidation Period, Merrill Lynch will generally sell any amount of any
underlying Securities at a price no less than of one point under the last
closing sale price of those Securities. Thereafter, the price limit will
increase to one point under the last closing sale price. After four days,
Merrill Lynch currently intends to sell at least a fraction of the remaining
underlying Securities, the numerator of which is one and the denominator of
which is the total number of days remaining (including that day) in the
Liquidation Period without any price restrictions. Of course, no assurances can
be given that the market value of the Securities will not be adversely affected
during the Liquidation Period.
The Fund might reduce to the Minimum Value of Fund listed on p A-3 because
of the lesser number of Units in the Fund, and possibly also due to a value
reduction, however temporary, in Units caused by Merrill Lynch's sales of
Securities (see Investment Summary--Termination); if so, the Sponsors could then
choose to liquidate the Fund without the consent of the remaining Holders (see
Fund Structure).
The Indenture will terminate upon the sale, or other disposition of the
last Security held thereunder but in no event is it to continue beyond the
mandatory termination date set forth under Investment Summary. The Indenture may
be terminated by the Sponsors if the value of the Fund is less than the minimum
value set forth under Investment Summary, and may be terminated at any time by
Holders of 51% of the Units (Sections 8.01(g) and 9.01). The Trustee will
deliver written notice of any termination to each Holder within a reasonable
period of time prior to the termination, specifying the times at which the
Holders may surrender their Certificates for cancellation. Within a reasonable
period of time after the termination, the Trustee must sell all of the
Securities then held and distribute to each Holder, upon surrender for
cancellation of his Certificates and after deductions for accrued but unpaid
fees, taxes and governmental and other charges, the Holder's interest in the
Income and Capital Accounts (Section 9.01). This distribution will normally be
made by mailing a check in the amount of each Holder's interest in these
accounts to the address of the Holder appearing on the record books of the
Trustee.
EXPENSES AND CHARGES
INITIAL EXPENSES
All expenses incurred in establishing the Fund, including the cost of the
initial preparation and printing of documents relating to the Fund, the initial
fees and expenses of the Trustee, legal expenses, advertising and selling
expenses and any other out-of-pocket expenses, will be paid by the Underwriting
Account at no charge to the Fund.
FEES
An estimate of the total annual expenses of the Fund is set forth under
Investment Summary. The Sponsors' Portfolio Supervision Fee is an annual fee
equal to the lesser of the cost to the Sponsors of supplying the services and
the maximum amount set forth under Investment Summary per 1,000 Units of the
Fund based on the average of the largest number of Units in the Fund during each
month of a calendar year in which additional Securities are deposited in the
Fund, and thereafter based on the largest number of Units oustanding at any time
during the year. The Sponsors' Portfolio Supervision Fee, which is not to exceed
the maximum amount set forth under Investment Summary, may exceed the actual
costs of providing portfolio supervisory services for this Fund, but at no time
will the total amount they receive for portfolio supervisory services rendered
to all series of Defined Asset Funds--Equity Income Fund in any calendar year
exceed the aggregate cost to them of supplying these services in that year
(Section 7.06). In addition, the Sponsors may also be reimbursed for bookkeeping
or other administrative services provided to the Fund in amounts not exceeding
their costs of providing these services (Sections 3.04 and 7.06). The Trustee
(or Co-Trustees, in the case of Investors Bank & Trust Company and the First
National Bank of Chicago) receives for its services as Trustee and for
reimbursement of expenses
15
<PAGE>
incurred on behalf of the Fund, payable in monthly installments, the amount per
1,000 Units set forth under Investment Summary as Trustee's Annual Fee and
Expenses, which includes the estimated Sponsors' Portfolio Supervision Fee,
estimated reimbursable bookkeeping or other administrative expenses paid to the
Sponsors and certain auditing, printing and mailing expenses. (Section 3.17).
Expenses in excess of the amount so included will be borne by the Fund. The
Trustee also receives benefits to the extent that it holds funds on deposit in
the various non-interest bearing accounts created under the Indenture. The
foregoing fees may be adjusted for inflation in accordance with the terms of the
Indenture without approval of Holders (Sections 4.02, 7.06 and 8.05).
OTHER CHARGES
Other charges which may be incurred by the Fund include: (a) fees of the
Trustee for extraordinary services (Section 8.05), (b) certain extraordinary
expenses of the Trustee (including legal and auditing expenses) and of counsel
designated by the Sponsors (Sections 3.04, 3.10, 8.01(e), 8.03 and 8.05), (c)
various governmental charges (Sections 3.03 and 8.01 (h)), (d) expenses and
costs of action taken to protect the Fund and the rights and interests of
Holders (Sections 7.06 and 8.01(d)), (e) indemnification of the Trustee for any
losses, liabilities and expenses incurred without gross negligence, bad faith or
wilful misconduct on its part (Section 8.05), (f) indemnification of the
Sponsors for any losses, liabilities and expenses incurred without gross
negligence, bad faith or wilful misconduct (Section 7.05(b)) and (g)
expenditures incurred in contacting Holders upon termination of the Fund
(Section 9.02). The amounts of these charges and fees are secured by a lien on
the Fund and, if the balances in the Income and Capital Accounts (see below) are
insufficient, the Trustee has the power to sell Securities to pay these amounts
(Section 8.05).
ADMINISTRATION OF THE FUND
RECORDS
The Trustee keeps a register of the names, addresses and holdings of all
Holders. The Trustee also keeps records of transactions of the Fund, including a
current list of the Securities and a copy of the Indenture, which records are
available to Holders for inspection at the office of the Trustee at reasonable
times during business hours (Sections 8.02 and 8.04).
ACCOUNTS AND DISTRIBUTIONS
Dividends payable to the Fund are credited by the Trustee to an Income
Account, as of the date on which the Fund is entitled to receive the dividends
as a Holder of record of the Securities. Other receipts, including amounts
received upon the sale of rights pursuant to Section 3.08 of the Indenture, are
credited to a Capital Account (Sections 3.01 and 3.02). The Quarterly Income
Distribution for each Holder as of each Record Day will be made on the following
Distribution Day or shortly thereafter and shall consist of an amount
substantially equal to the Holder's pro rata share of the distributable cash
balance in the Income Account as of such Record Day, after deducting estimated
expenses. 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 to Holders shortly after the end of the year. Principal
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 generally be held in the
Capital Account to be distributed on the next succeeding Distribution Day. The
first distribution for persons who purchase Units between a Record Day and a
Distribution Day will be made on the second Distribution Day following their
purchase of Units. No distribution other than capital gains need be made from
the Capital Account if the balance therein is less than $5.00 per 1,000 Units
(Section 3.04). A Reserve Account may be created by the Trustee by withdrawing
from the Income or Capital Accounts, from time to time, those amounts as it
deems requisite to establish a reserve for any taxes or other governmental
charges that may be payable out of the Fund (Section 3.03). Funds held by the
Trustee in the various accounts created under the Indenture do not bear interest
(Section 8.01).
REINVESTMENT PLAN
Quarterly income distributions and annual distributions of any net capital
gain net income (i.e. the excess of capital gains over capital losses) and other
capital distributions in respect of the Units may be reinvested by participating
in the Fund's reinvestment plan (the 'Reinvestment Plan'). Reinvesting helps to
compound your income. A Holder (including any Holder which is a broker or
nominee of a bank or other financial institution) may indicate to the Trustee,
by filing the written notice of election accompanying this Prospectus or by
notice to
16
<PAGE>
the Holder's account executive or sales representative, that he wishes such
distributions to be automatically invested in additional Units (or fractions
thereof) of the Fund. The Holder's completed notice of election to participate
in the Reinvestment Plan must be received by the Trustee at least ten days prior
to the Record Date applicable to any distribution in order for the Reinvestment
Plan to be in effect as to such distribution and will remain effective until
notice to the contrary is timely received by the Trustee. Holders who elect to
reinvest their distributions will receive additional Units and therefore will
increase their proportionate ownership of the Fund relative to the proportionate
ownership of those Holders who receive their distributions in cash. Any such
election will not reduce the income per Unit distributed to Holders. Elections
may be modified or revoked on similar notice.
Reinvestment Plan distributions may be reinvested in Units already held in
inventory by the Sponsors (see Market for Units) or, until such time as
additional Units cease to be issued by the Fund (see Description of the
Fund--Structure), distributions may be reinvested in such additional Units. If
units are unavailable in the secondary market, distributions which would
otherwise have been reinvested shall be paid to the Holder on the applicable
Distribution Day.
Purchases made pursuant to the Reinvestment Plan will be made without
initial sales charge at the net asset value for Units of the Fund (but will be
subject to subsequently deducted deferred sales charges). Under the Reinvestment
Plan, the Fund will pay the distributions to the Trustee which in turn will
purchase for the Holder 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 Holder's account and send the Holder an account statement
reflecting the reinvestment.
The Trustee will issue Certificates for whole units purchased through the
Reinvestment Plan only if the Holder so requests. Certificates will not be
issued for fractional units. The Trustee will credit each Holder's account with
the number of units purchased with such Holder's reinvested distribution. Each
Holder receives account statements at least annually or after each Reinvestment
Plan transaction to provide the Holder with a record of the total number of
units in his account. This relieves the Holder of responsibility for safekeeping
of Certificates and, should he sell his units, eliminates the need to deliver
certificates. The Holder may at any time request the Trustee (at the Fund's
cost) to issue Certificates for full Units. The cost of administering the
Reinvestment Plan will be borne by the Fund and thus indirectly by all Holders.
The Sponsors may at any time cease to offer the Reinvestment Plan. After
that time, all Holders of the Fund, including those who participate in the
Reinvestment Plan, will receive all Quarterly Distributions in cash unless the
Sponsors provide another reinvestment alternative at this time.
Holders of Units in IRA's, Keogh plans, and other tax-deferred retirement
plans should consult with their plan custodian as to the appropriate disposition
of distributions (see Taxes--Retirement Plans).
PORTFOLIO SUPERVISION
The Fund is a unit investment trust and is not an actively managed fund.
However, the Portfolio is regularly reviewed. Traditional methods of investment
management for a managed fund typically involve frequent changes in a portfolio
of securities on the basis of economic, financial and market analyses. The
Portfolio of the Fund, however, will not be actively managed and therefore the
adverse financial condition of an issuer will not necessarily require the sale
of its Securities from the Portfolio. In the event a public tender offer is made
for a Security or a merger or acquisition is announced affecting a Security,
Merrill Lynch, as agent for the Sponsors, may instruct the Trustee to tender or
sell the Security on the open market when in its opinion it is in the best
interest of the Holders of the Units to do so. The proceeds realized from the
tender or sale of any Security will be distributed to the Holders. The Sponsors
may also direct the disposition of Securities upon default in payment of amounts
due on any of the Securities, institution of certain legal proceedings, default
under certain documents materially and adversely affecting future declaration or
payment of amounts due, or decline in price or the occurrence of other market or
credit factors that in the opinion of the Sponsors would make the retention of
these Securities detrimental to the interest of the Holders, 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 Code (Section 3.08). If a default in the payment of amounts due on any
Security occurs and if the Sponsors fail to give instructions to sell or hold
that Security, the Indenture provides that the Trustee, within 30 days of that
failure by the Sponsors, may sell the Security (Section 3.12).
17
<PAGE>
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 or
in Replacement Securities which satisfy certain conditions specified in the
Indenture including, among other conditions, requirements that the Replacement
Securities shall be selected by the Sponsors from a list of securities
maintained by them and updated from time to time; shall be common stocks having,
in the opinion of the Sponsors, characteristics sufficiently similar to the
characteristics of the other Securities in the Fund as to be acceptable for
acquisition by the Fund. The Securities on the current list maintained by the
Sponsors and updated from time to time from which Replacement Securities are to
be selected are set forth under Investment Summary. Whenever a Security has been
eliminated by the Fund, the Trustee shall, within five days thereafter, notify
all Holders of the sale of the Security eliminated and the acquisition of the
Replacement Security. If Replacement Securities are not acquired with respect to
a Failed Security, the Sponsors will, on or before the next following
Distribution Day, cause to be refunded the attributable sales charge, plus the
attributable Cost of Securities to Fund listed under Portfolio, plus income
attributable to the Failed Security.
The Indenture also requires that the purchase of the Replacement Securities
will not (i) disqualify the Fund as a regulated investment company under the
Code, (ii) result in more than 10% of the Fund consisting of securities of a
single issuer (or of two or more issuers which are Affiliated Persons as this
term is defined in the Investment Company Act of 1940) which are not registered
and are not being registered under the Securities Act of 1933 or (iii) result in
the Fund owning more than 50% of any single issue which has been registered
under the Securities Act of 1933 (Section 3.06).
The Indenture also authorizes the Sponsors to increase the size and number
of Units of the Fund by the deposit of Additional Securities, contracts to
purchase Additional Securities or cash or a letter of credit with instructions
to purchase Additional Securities in exchange for the corresponding number of
additional Units subsequent to the Initial Date of Deposit, provided that the
original proportionate relationship among the number of shares of each Security
established on the Initial Date of Deposit (the 'Original Proportionate
Relationship') is maintained to the extent practicable.
With respect to deposits of Additional Securities (or cash or a letter of
credit with instructions to purchase Additional Securities), in connection with
creating additional Units of the Fund, the Sponsors may specify the minimum
numbers in which Additional Securities will be deposited or purchased. If a
deposit is not sufficient to acquire minimum amounts of each Security,
Additional Securities may be acquired in the order of the Security most
under-represented immediately before the deposit when compared to the Original
Proportionate Relationship. If Securities of an issue originally deposited are
unavailable at the time of subsequent deposit, or cannot be purchased at
reasonable prices or their purchase is prohibited or restricted by law,
regulation or policies applicable to the Fund or any of the Sponsors, the
Sponsors may (1) deposit cash or a letter of credit with instructions to
purchase the Security when practicable, or (2) deposit (or instruct the Trustee
to purchase) either Securities of one or more other issues originally deposited
or a Replacement Security that satisfies the conditions for Replacement
Securities that are set forth above.
REPORTS TO HOLDERS
With each distribution, the Trustee will furnish Holders with a statement
of the amounts of income and the amounts of other receipts, if any, which are
being distributed, expressed in each case as a dollar amount per Unit. After the
end of each calendar year during which a Quarterly Income Distribution was made
and following the termination of the Fund, the Trustee will furnish to each
person who at any time during the calendar year was a Holder of record, a
statement (i) summarizing transactions for that year in the Income and Capital
Accounts, (ii) identifying Securities sold and purchased during the year and
listing Securities held and the number of Units outstanding at the end of that
calendar year, (iii) stating the Redemption Price per Unit based upon the
computation thereof made at the end of that calendar year and (iv) specifying
the amounts distributed during that calendar year from the Income and Capital
Accounts (Section 3.07). The accounts of the Fund shall be audited at least
annually by independent certified public accountants designated by the Sponsors
and the report of the accountants shall be furnished by the Trustee to Holders
upon request (Section 8.01(e)).
CERTIFICATES
Certain of the Sponsors may collect additional charges for registering and
shipping Certificates to purchasers. These Certificates are transferable or
interchangeable upon presentation at the office of the Trustee, with a payment
of $2.00 if required by the Trustee (or other amounts specified by the Trustee
and approved by the Sponsors) for each new Certificate and any sums payable for
taxes or other governmental charges imposed upon
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<PAGE>
the transaction (Section 6.01) and compliance with the formalities necessary to
redeem Certificates (see Redemption). Mutilated, destroyed, stolen or lost
Certificates will be replaced upon delivery of satisfactory indemnity and
payment of expenses incurred (Section 6.02).
AMENDMENT
The Sponsors and Trustee may amend the Indenture, without the consent of
the Holders, (a) to cure any ambiguity or to correct or supplement any provision
thereof which may be defective or inconsistent, (b) to change any provision
thereof as may be required by the SEC or any successor governmental agency, (c)
to add or change any provision as may be necessary or advisable for the
continuing qualification of the Fund as a regulated investment company under the
Code or (d) to make any other provisions which do not materially adversely
affect the interest of the Holders (as determined in good faith by the
Sponsors). The Indenture may also be amended in any respect by the Sponsors and
the Trustee, or any of the provisions thereof may be waived, with the consent of
the Holders of 51% of the Units, provided that none of these amendments or
waivers will reduce the interest in the Fund of any Holder without the consent
of the Holder or reduce the percentage of Units required to consent to any of
these amendments or waivers without the consent of all Holders (Section 10.01).
RESIGNATION, REMOVAL AND LIMITATIONS ON LIABILITY
TRUSTEE
The Trustee or any successor may resign upon notice to the Sponsors. The
Trustee may be removed upon the direction of the Holders of 51% of the Units at
any time or by the Sponsors without the consent of any of the Holders if the
Trustee becomes incapable of acting or becomes bankrupt or its affairs are taken
over by public authorities. The resignation or removal shall become effective
upon the acceptance of appointment by the successor which may, in the case of a
resigning or removed Co-Trustee, be one or more of the remaining Co-Trustees. In
case of resignation or removal the Sponsors are to use their best efforts to
appoint a successor promptly and if upon resignation of the Trustee no successor
has accepted appointment within thirty days after notification, the Trustee may
apply to a court of competent jurisdiction for the appointment of a successor
(Section 8.06). The Trustee shall be under no liability for any action taken in
good faith in reliance on prima facie properly executed documents or for the
disposition of monies or Securities, nor shall it be liable or responsible in
any way for depreciation or loss incurred by reason of the sale of any Security.
This provision, however, shall not protect the Trustee in cases of wilful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations and duties. In the event of the failure of the Sponsors to act, the
Trustee may act under the Indenture and shall not be liable for any of these
actions taken in good faith. The Trustee shall not be personally liable for any
taxes or other governmental charges imposed upon or in respect of the Securities
or upon the interest thereon. In addition, the Indenture contains other
customary provisions limiting the liability of the Trustee (Sections 3.04, 3.08,
8.01 and 8.05).
SPONSORS
Any Sponsor may resign if one remaining Sponsor maintains a net worth of
$2,000,000 and is agreeable to the resignation (Section 7.04). 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 shall fail to perform
its duties or becomes incapable of acting or becomes bankrupt or its affairs are
taken over by public authorities, then the Trustee may (a) appoint a successor
Sponsor at rates of compensation deemed by the Trustee to be reasonable and as
may not exceed amounts prescribed by the SEC, or (b) terminate the Indenture and
liquidate the Fund or (c) continue to act as Trustee without terminating the
Indenture (Section 8.01(f)). Merrill Lynch has been appointed by the other
Sponsors as agent for purposes of taking action under the Indenture (Section
7.01). If the Sponsors are unable to agree with respect to action to be taken
jointly by them under the Indenture and they cannot agree as to which Sponsor
shall continue to act as sole Sponsor, then Merrill Lynch shall continue to act
as sole Sponsor (Section 7.02(b)). If one of the Sponsors fails to perform its
duties or becomes incapable of acting or becomes bankrupt or its affairs are
taken over by public authorities, then that Sponsor is automatically discharged
and the other Sponsors shall act as sole Sponsors (Section 7.02(a)). The
Sponsors shall be under no liability to the Fund or to the Holders for taking
any action or for refraining from taking any action in good faith or for errors
in judgment and shall not be liable or responsible in any way for depreciation
or loss incurred by reason of the sale of any Security. This provision, however,
shall not protect the Sponsors in cases of wilful misfeasance, bad faith, gross
negligence or reckless disregard of their obligations and duties (Section 7.05).
The Sponsors and their successors are jointly and severally liable under the
Indenture. A Sponsor may transfer all or substantially all of its assets to a
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<PAGE>
corporation or partnership which carries on its business and duly assumes all of
its obligations under the Indenture and in that event it shall be relieved of
all further liability under the Indenture (Section 7.03).
MISCELLANEOUS
TRUSTEE
The Trustee of the Fund is named on the back cover page of this Prospectus
and is either The Bank of New York, a New York banking corporation with its Unit
Investment Trust Department at 101 Barclay Street, New York, New York 10286
(which is subject to supervision by the New York Superintendent of Banks, the
Federal Deposit Insurance Corporation and the Board of Governors of the Federal
Reserve System); Bankers Trust Company, a New York banking corporation with its
corporate trust office at 4 Albany Street, New York, New York 10015 (which is
subject to supervision by the New York Superintendent of Banks, the Federal
Deposit Insurance Corporation and the Board of Governors of the Federal Reserve
System); The Chase Manhattan Bank, N.A., a national banking association with its
Unit Trust Department at 1 Chase Manhattan Plaza-3B, New York, New York 10081
(which is subject to supervision by the Comptroller of the Currency, the Federal
Deposit Insurance Corporation and the Board of Governors of the Federal Reserve
System); or (acting as Co-Trustees) Investors Bank & Trust Company, a
Massachusetts trust company with its unit investment trust servicing group at
One Lincoln Plaza, Boston, Massachusetts 02111 (which is subject to supervision
by the Massachusetts Commissioner of Banks, the Federal Deposit Insurance
Corporation and the Board of Governors of the Federal Reserve System) and The
First National Bank of Chicago, a national banking association with its
corporate trust office at One First National Plaza, Suite 0126, Chicago,
Illinois 60670-0126 (which is subject to supervision by the Comptroller of the
Currency, the Federal Deposit Insurance Corporation and the Board of Governors
of the Federal Reserve System).
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. Emmet, Marvin & Martin, 48 Wall Street, New York, New York 10005, act
as counsel for The Bank of New York, as Trustee. Bingham, Dana & Gould, 150
Federal Street, Boston, Massachusetts 02110, act as counsel for The First
National Bank of Chicago and Investors Bank & Trust Company, as Co-Trustees.
Hawkins, Delafield & Wood, 67 Wall Street, New York, New York 10005, act as
counsel for Bankers Trust Company, as Trustee.
AUDITORS
The Statement of Condition, including the Portfolio of the Fund, included
herein, has been audited by Deloitte & Touche, independent accountants, as
stated in their opinion appearing herein and has been so included in reliance
upon that opinion given on the authority of that firm as experts in accounting
and auditing.
SPONSORS
Each Sponsor is a Delaware corporation and is engaged in the underwriting,
securities and commodities brokerage business, and is a member of the New York
Stock Exchange, Inc., other major securities exchanges and commodity exchanges,
and the National Association of Securities Dealers, Inc. Merrill Lynch, Pierce,
Fenner & Smith Incorporated and Merrill Lynch Asset Management, Inc., a Delaware
corporation and subsidiary of Merrill Lynch & Co., Inc., the parent of Merrill
Lynch, Pierce, Fenner & Smith Incorporated, are engaged in the investment
advisory business. Smith Barney Shearson Inc., an investment banking and
securities broker-dealer firm, is an indirect wholly-owned subsidiary of
Primerica Corporation ('Primerica'). In July 1993, Primerica and Smith Barney,
Harris Upham & Co. Incorporated ('Smith Barney') acquired the assets of the
domestic retail brokerage and asset management businesses of Shearson Lehman
Brothers Inc. ('Shearson'), previously a co-Sponsor of various Defined Asset
Funds. PaineWebber Incorporated is engaged in the investment advisory business
and is a wholly owned subsidiary of PaineWebber Group Inc. Prudential Securities
Incorporated, a wholly-owned subsidiary of Prudential Securities Group Inc. and
an indirect wholly-owned subsidiary of the Prudential Insurance Company of
America, is engaged in the investment advisory business. Dean Witter Reynolds
Inc., a principal operating subsidiary of Dean Witter, Discover & Co. is engaged
in the investment advisory business. Sears, Roebuck and Co. indirectly has held
a controlling interest in Dean Witter Reynolds Inc. but has sold that interest.
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
20
<PAGE>
sale of securities of these companies and sell securities to these companies in
their capacities as brokers or dealers in securities.
Each Sponsor (or a predecessor) has acted as Sponsor of series of Defined
Asset Funds. A subsidiary of Merrill Lynch, Pierce, Fenner & Smith Incorporated
succeeded in 1970 to the business of Goodbody & Co., which had been a co-Sponsor
of Defined Asset Funds since 1964. That subsidiary resigned as Sponsor of each
of the Goodbody series in 1971. Merrill Lynch, Pierce, Fenner & Smith
Incorporated has been co-Sponsor and the Agent for the Sponsors of each series
of Defined Asset Funds created since 1971. Shearson Lehman Brothers Inc. and
certain of its predecessors were underwriters beginning in 1962 and co-Sponsors
from 1965 to 1967 and from 1980 to 1993 of various Defined Asset Funds. As a
result of the acquisition of certain of Shearson's assets by Smith Barney and
Primerica, as described above, Smith Barney Shearson Inc. now serves as
co-Sponsor of various Defined Asset Funds. Prudential Securities Incorporated
and its predecessors have been underwriters of Defined Asset Funds since 1961
and co-Sponsors since 1964, in which year its predecessor became successor co-
Sponsor to the original Sponsor. Dean Witter Reynolds Inc. and its predecessors
have been underwriters of various Defined Asset Funds since 1964 and co-Sponsors
since 1974. PaineWebber Incorporated and its predecessor have co-Sponsored
certain Defined Asset Funds since 1983.
The Sponsors have maintained secondary markets in these funds for over 20
years. For decades informed investors have purchased unit investment trusts for
dependability and professional selection of investments. Different Defined Asset
Funds offer an array of investment choices, suited to fit a wide variety of
personal financial goals--a buy and hold strategy for capital accumulation, such
as for children's education or a nest egg for retirement, or attractive, regular
current income consistent with relative protection of capital. There are Defined
Asset Funds to meet the needs of just about any investor. Unit investment trusts
are particularly suited for the many investors who prefer to seek long-term
profits by purchasing sound investments and holding them, rather than through
active trading. Few individuals have the knowledge, resources or capital to buy
and hold a diversified portfolio on their own; it would generally take a
considerable sum of money to obtain comparable breadth and diversity. Sometimes
it takes a combination of Defined Asset Funds to plan for your objectives.
The following chart shows the average annual compounded rate of return of
selected asset classes over the 10-year and 20-year periods ending December 31,
1992, compared to the rate of inflation over the same periods. Of course, this
chart represents past performance of these investments and is no guarantee of
future results of the Funds. Funds also have sales charges and expenses.
21
<PAGE>
<TABLE>
<S> <C> <C>
Stocks (S&P 500)
20 yr 11.33%
10 yr 16.19%
Small-company stocks
20 yr 15.54%
10 yr 11.55%
Long-term corporate bonds
20 yr 9.54%
10 yr 13.14%
U.S. Treasury bills (short-term)
20 yr 7.70%
10 yr 6.95%
Consumer Price Index
20 yr 6.21%
10 yr 3.81%
0 2 4 6 8 10 12 14 16 18%
</TABLE>
Source: Ibbotson Associates (Chicago). Used with
permission. All rights reserved.
One of your most important investment decisions may be how you divide your money
among asset classes. Spreading your money among different kinds of investments
can balance the risks and rewards of each one. Most investment experts recommend
stocks for long-term capital growth. For attractive income consider long-term
corporate bonds. By combining both stock and bond funds, investors can receive
attractive current income and growth potential, offering some protection against
inflation.
By purchasing Defined Asset Funds, investors not only avoid the
responsibility of selecting individual securities by themselves, but also gain
the advantage of a higher degree of safety by holding interests in securities of
several different issuers. Spreading your investment among different securities
and issuers reduces your risk, but does not eliminate it. Defined Municipal Bond
Funds offer a simple and convenient means for investors to earn monthly income
free from regular Federal income tax. When individual bonds are called or
mature, investors might consider reinvesting their proceeds in Defined Municipal
Bond Funds. The securities in managed funds continually change. In Defined Asset
Funds, the portfolio is defined, so that generally the securities, maturities,
call dates and rating are known before you buy. The defined portfolio of
securities listed in the prospectus and regular income distributions make
Defined Bond Funds a dependable investment. Investors know when they buy what
their estimated income, current and long-term returns will be, subject to credit
and market risks on the bonds or if the fund portfolio or expenses change.
Investors buy bonds for dependability--they know what they can expect to
earn and that principal is distributed as the bonds mature. Defined Bond Funds
can offer most of these benefits, with steady income and a yield and maturity
similar to owning bonds directly. The tax exemption of municipal securities,
which makes them attractive to high-bracket taxpayers, is offered by Defined
Municipal Investment Trusts. Defined Corporate Income Funds, with higher current
returns than municipal or government funds, are suitable for IRAs and other
tax-advantaged accounts and offer investors a simple and convenient way to earn
monthly income. Defined Government Securities Income Funds offer investors a
simple and convenient way to participate in markets for Government securities
while earning an attractive current return. Defined International Bond Funds,
invested in bonds payable in foreign currencies, offer a potential to profit
from changes in currency values and possibly from interest rates higher than
paid on comparable US bonds, but investors incur a higher risk for these
potentially
22
<PAGE>
greater returns. Historically, stocks have offered a potential for growth of
capital, and thus some protection against inflation, over the long term. Defined
Equity Income Funds offer a smart, sensible way to participate in the stock
market. There is no need for multiple stock purchases. Investors know in advance
how their money is invested. They can follow the individual stocks in the
Portfolio, or track the Fund's price, which will be quoted weekly in Barron's.
Defined Concept Series offer a way to participate in industry trend potential
without multiple stock purchases. The S&P Index Trusts offer a convenient and
inexpensive way to participate in broad market movements. Concept Series seek to
capitalize on selected anticipated economic, political or business trends.
Utility Stock Series, consisting of issuers with established reputations for
regular cash dividends, seek to benefit from dividend increases.
EXCHANGE OPTION
It is expected that exchanges at a reduced sales charge will be offered
with future Concept Series of Equity Income Fund having deferred sales charges
as those Series become available.
23
<PAGE>
Def ined
Asset FundsSM
SPONSORS: EQUITY INCOME FUND
Merrill Lynch, Concept Series
Pierce, Fenner & Smith Inc. Tele-Global Trust
Unit Investment Trusts A Unit Investment Trust
P.O. Box 9051 PROSPECTUS
Princeton, N.J. 08543-9051 This Prospectus does not contain all of
(609) 282-8500 the information with respect to the
Smith Barney Inc. investment company set forth in its
Unit Trust Department registration statement and exhibits
388 Greenwich Street--23rd Floor relating thereto which have been filed
New York, NY 10013 with the Securities and Exchange
1-800-223-2532 Commission, Washington, D.C. under the
PaineWebber Incorporated Securities Act of 1933 and the
1200 Harbor Blvd. Investment Company Act of 1940, and to
Weehawken, N.J. 07087 which reference is hereby made.
(201) 902-3000 No person is authorized to give any
Prudential Securities Incorporated information or to make any
One Seaport Plaza representations with respect to the
199 Water Street Fund not contained in this Prospectus;
New York, N.Y. 10292 and any information or representation
(212) 776-1000 not contained herein must not be relied
Dean Witter Reynolds Inc. upon as having been authorized. This
Two World Trade Center--69th Floor Prospectus does not constitute an offer
New York, N.Y. 10048 to sell, or a solicitation of an offer
(212) 392-2222 to buy, securities in any state to any
INDEPENDENT ACCOUNTANTS: person to whom it is not lawful to make
Deloitte & Touche LLP such offer in such state.
2 World Financial Center
9th Floor
New York, N.Y. 10281-1414
TRUSTEE:
The Chase Manhattan Bank, N.A.
Unit Trust Department
Box 2051
New York, NY 10081
1-800-323-1508
14625--12/94
