AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 24, 1995
REGISTRATION NO. 33-53669
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-6
------------------------------------------
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
------------------------------------------
A. EXACT NAME OF TRUST:
EQUITY INCOME FUND, CONCEPT SERIES
HEALTH CARE TRUST II
DEFINED ASSET FUNDS
(FORMERLY EQUITY INCOME FUND--CONCEPT SERIES-18 DEFINED ASSET FUNDS)
B. NAMES OF DEPOSITORS:
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
SMITH BARNEY INC.
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
DEAN WITTER REYNOLDS INC.
C. COMPLETE ADDRESSES OF DEPOSITORS' PRINCIPAL EXECUTIVE OFFICES:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
DEFINED ASSET FUNDS
POST OFFICE BOX 9051
PRINCETON, N.J.
08543-9051 SMITH BARNEY INC.
388 GREENWICH
STREET--23RD FLOOR
NEW YORK, N.Y. 10013
PAINEWEBBER INCORPORATED PRUDENTIAL SECURITIES DEAN WITTER REYNOLDS INC.
1285 AVENUE OF THE INCORPORATED TWO WORLD TRADE
AMERICAS ONE SEAPORT PLAZA CENTER--59TH FLOOR
NEW YORK, N.Y. 10019 199 WATER STREET NEW YORK, N.Y. 10048
NEW YORK, N.Y. 10292
D. NAMES AND COMPLETE ADDRESSES OF AGENTS FOR SERVICE:
TERESA KONCICK, ESQ. THOMAS D. HARMAN, ESQ. ROBERT E. HOLLEY
P.O. BOX 9051 388 GREENWICH STREET 1200 HARBOR BLVD.
PRINCETON, N.J. NEW YORK, N.Y. 10013 WEEHAWKEN, N.J. 07087
08543-9051
COPIES TO:
LEE B. SPENCER, JR. DOUGLAS LOWE, ESQ. PIERRE DE SAINT PHALLE,
ONE SEAPORT PLAZA 130 LIBERTY STREET--29TH ESQ.
199 WATER STREET FLOOR 450 LEXINGTON AVENUE
NEW YORK, N.Y. 10292 NEW YORK, N.Y. 10006 NEW YORK, N.Y. 10017
E. TITLE AND AMOUNT OF SECURITIES BEING REGISTERED:
An indefinite number of Units of Beneficial Interest pursuant to Rule 24f-2
promulgated under the Investment Company Act of 1940, as amended.
F. PROPOSED MAXIMUM OFFERING PRICE TO THE PUBLIC OF THE SECURITIES BEING
REGISTERED:
Indefinite
G. AMOUNT OF FILING FEE:
$500 (as required by Rule 24f-2)
H. APPROXIMATE DATE OF PROPOSED SALE TO PUBLIC:
As soon as practicable after the effective date of the registration statement.
/ x / Check box if it is proposed that this filing will become effective at 9:30
a.m. on January 24, 1995 pursuant to Rule 487.
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<PAGE>
Defined
Asset FundsSM
EIF This Defined Fund is formed to obtain capital
CONCEPT SERIES appreciation by investing in a portfolio of common
- ------------------------------stocks representing various sectors of the health
HEALTH CARE TRUST II care industry.
A UNIT INVESTMENT TRUST The value of Units in the Fund will fluctuate with
/ / PROFESSIONAL SELECTION the value of the Portfolio of underlying
/ / CAPITAL APPRECIATION Securities and no assurance can be given that the
Units will appreciate in value.
Minimum purchase: $1,000.
Minimum purchase for Individual Retirement/Keogh
Accounts: $250.
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
SPONSORS: HAS THE COMMISSION OR ANY STATE SECURITIES
Merrill Lynch, COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
Pierce, Fenner & Smith OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
Incorporated 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 January 24, 1995.
Incorporated READ AND RETAIN THIS PROSPECTUS FOR FUTURE
Dean Witter Reynolds Inc. REFERENCE.
<PAGE>
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DEFINED ASSET FUNDSSM is America's oldest and largest family of unit investment
trusts, with over $90 billion sponsored since 1970. Each Defined Fund is a
defined portfolio of preselected securities 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 professional 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, real estate investment trusts, even international
securities denominated in foreign currencies.
The terms of Defined Funds are as short as one year or as long as 30 years.
Special bond 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.
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CONTENTS
Investment Summary.......................................... A-3
Fee Table................................................... A-4
Underwriting Account........................................ A-8
Report of Independent Accountants........................... A-9
Statement of Condition...................................... A-10
Portfolio................................................... A-11
Fund Structure.............................................. 1
Risk Factors................................................ 2
Description of the Fund..................................... 7
Taxes....................................................... 8
Public Sale of Units........................................ 11
Market for Units............................................ 12
Redemption.................................................. 13
Termination................................................. 14
Expenses and Charges........................................ 15
Administration of the Fund.................................. 16
Resignation, Removal and Limitations on Liability........... 19
Miscellaneous............................................... 19
Exchange Option............................................. 22
A-2
<PAGE>
INVESTMENT SUMMARY AS OF JANUARY 23, 1995 (THE BUSINESS DAY PRIOR TO THE INITIAL
DATE OF DEPOSIT)(a)
INITIAL NUMBER OF UNITS(b) -- 143,933
FRACTIONAL UNDIVIDED INTEREST IN FUND
REPRESENTED BY EACH UNIT-- 1/143,933RD
PUBLIC OFFERING PRICE PER 1,000 UNITS
Aggregate value of Securities in
Fund.............................. $ 139,975.00
------------------
Divided by Number of Units (times
1,000)............................ $ 972.50
Plus initial sales charge of 2.75% of
Public Offering Price (2.828% of
net amount invested in
Securities)(c).................... 27.50
Plus the amount per 1,000 Units in
the Income and Capital
Accounts (see Administration of
the Fund--Accounts and
Distributions).................... 0.00
------------------
Public Offering Price per 1,000
Units............................. $ 1,000.00
------------------
------------------
SPONSORS' REPURCHASE PRICE PER 1,000
UNITS AND REDEMPTION PRICE PER
1,000 UNITS
(based on net asset value of the
Fund)(d).......................... $ 972.50
LIQUIDATION PERIOD
Beginning on March 1, 1995 until no
later than the Mandatory
Termination Date (the 'Liquidation
Period').
ANNUAL INCOME DISTRIBUTIONS
Distributions of income, if any, will be paid on the
25th day of December, to Holders of record on the
10th day of December, commencing in 1995. In
order to meet certain tax requirements, the Fund
may also 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-- (230.00)
TRUSTEE'S ANNUAL FEE AND EXPENSES(e)
$2.03 per 1,000 Units
ANNUAL PORTFOLIO SUPERVISION FEE(f)
Maximum of $.35 per 1,000 Units
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
March 31, 1999.
DEFERRED CHARGE PAYMENT DATES
The 10th day of February, May, August and
November, commencing May 10, 1995.
- -----------------
(a) The Indenture was signed and the initial deposit was made on the date of
this Prospectus.
(b) The Sponsors may create additional Units during the life of the Fund.
(c) 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 (5.501% 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.)
(d) Equal to aggregate value of Securities in Fund plus net balance in the
Capital Account.
(e) Assumes the Fund will reach a size estimated by the Sponsors; expenses
will vary with the size of the Fund. The Trustee receives annually for
its services as Trustee $0.84 per 1,000 Units (computed monthly based on
the largest number of Units outstanding during the month), subject to
reduction as the size of the Fund increases. (See Expenses and Charges.)
(f) 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. (See
Expenses and Charges.)
A-3
<PAGE>
INVESTMENT SUMMARY AS OF JANUARY 23, 1995 (CONTINUED)
FEE TABLE
THIS FEE TABLE IS INTENDED TO HELP YOU UNDERSTAND THE COSTS AND EXPENSES
THAT AN INVESTOR IN THE FUND WILL BEAR DIRECTLY OR INDIRECTLY. SEE PUBLIC SALE
OF UNITS AND EXPENSES AND CHARGES. ALTHOUGH THE FUND IS A UNIT INVESTMENT TRUST
RATHER THAN A MUTUAL FUND, THIS INFORMATION IS PRESENTED TO PERMIT A COMPARISON
OF FEES.
<TABLE><CAPTION>
UNITHOLDER TRANSACTION EXPENSES
<S> <C>
Maximum Initial Sales Charge Imposed on Purchases (as a percentage of Public Offering Price).............. 2.75%
Maximum Deferred Sales Charge (as a
percentage of original purchase price)................................................................. 2.60%
---------
5.35%
---------
---------
Maximum Sales Charge Imposed on Reinvested Dividends...................................................... 2.60%
---------
---------
ESTIMATED ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Trustee's Fee............................................................................................. .087%
Portfolio Supervision, Bookkeeping and Administrative Fees................................................ .046%
Other Operating Expenses.................................................................................. .076%
---------
Total.................................................................................................. .209%
---------
---------
</TABLE>
<TABLE><CAPTION>
UNITHOLDER TRANSACTION EXPENSES
AMOUNT PER
1,000 UNITS
--------------
<S> <C>
Maximum Initial Sales Charge Imposed on Purchases (as a percentage of Public Offering Price).............. $ 27.50
Maximum Deferred Sales Charge (as a
percentage of original purchase price)................................................................. $ 26.00*
--------------
$ 53.50
--------------
--------------
Maximum Sales Charge Imposed on Reinvested Dividends...................................................... $ 26.00*
--------------
--------------
ESTIMATED ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Trustee's Fee............................................................................................. $ 0.84
Portfolio Supervision, Bookkeeping and Administrative Fees................................................ $ 0.45
Other Operating Expenses.................................................................................. $ 0.74
--------------
Total.................................................................................................. $ 2.03
--------------
--------------
</TABLE>
EXAMPLE
<TABLE><CAPTION>
CUMULATIVE EXPENSES PAID FOR PERIOD
OF:
-----------------------------------------
1 YEAR 2 YEARS 3 YEARS
----------- ------------- -------------
<S> <C> <C> <C>
An investor would pay the following expenses on a $1,000 investment, assuming the
Fund's estimated operating expense ratio of .209% and a 5% annual return on the
investment throughout the periods............................................... $ 36 $ 45 $ 55
4 YEARS
-------------
An investor would pay the following expenses on a $1,000 investment, assuming the
Fund's estimated operating expense ratio of .209% and a 5% annual return on the
investment throughout the periods............................................... $ 65
</TABLE>
The Example assumes reinvestment of all dividends and distributions and utilizes
a 5% annual rate of return as mandated by Securities and Exchange Commission
regulations applicable to mutual funds. For purposes of the Example, the
Deferred Sales Charge imposed on reinvestment of dividends is not reflected
until the year following payment of the dividend; the cumulative expenses would
be higher if sales charges on reinvested dividends were reflected in the year of
reinvestment. The Example should not be considered a representation of past or
future expenses or annual rate of return; the actual expenses and annual rate of
return may be more or less than those assumed for purposes of the Example.
* The actual fee is $1.625 per 1,000 Units per quarter, irrespective of the
purchase price. If a Holder sells Units before a Deferred Charge Payment Date,
no additional deductions are made. Thus the Deferred Sales Charge varies with
the length of time Units are held. Also, if Unit price exceeds $1 per Unit or
Units are purchased after the initial Deferred Charge Payment Date, the Deferred
Sales Charges would be less than 2.60%; if Unit price is less than $1 per Unit,
the Deferred Sales Charge may exceed 2.60%.
A-4
<PAGE>
INVESTMENT SUMMARY AS OF JANUARY 23, 1995 (CONTINUED)
OBJECTIVES OF THE FUND--The Fund seeks capital appreciation through
investment for approximately four years in a portfolio of common stocks issued
by companies in various sectors of the health care industry. 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 health care stocks
in particular. The common stocks included in the Portfolio have been selected
because the issuers of these stocks are engaged in businesses which are expected
to expand in the intermediate term in response to an anticipated increase in
demand for their products and services from an increasingly elderly and health
conscious nation. It is anticipated that certain issuers will benefit from the
commercial potential of new medical technology and that other issuers will
benefit from their ability to provide consumers with health care products and
services on a cost-effective basis. Capital appreciation is, of course,
dependent upon several factors including the financial condition of the issuers
of the Securities. Dividend income is not an objective of the Fund. There can be
no assurance that the Fund will achieve its objectives.
PORTFOLIO AT A GLANCE--
DIVERSIFICATION--The Portfolio contains 35 different publicly traded common
stocks representing the following sectors of the health care industry: drug
companies, hospital supply companies, biotechnology companies, medical devices
companies, health maintenance organizations, home care companies, nursing homes,
services companies and hospital management companies.
FUND PORTFOLIO--The Portfolio consists entirely of common stocks of
companies which together represent many aspects of the health care industry.
These include the development and marketing of prescription drugs, the design
and marketing of diagnostic and therapeutic medical devices, the application of
biotechnology to medicine, the marketing of cost-effective health care plans,
acute care treatment, the provision of in-home and long-term care for the
elderly and disabled and of medical services in general. The Fund is considered
to be 'concentrated' in stocks in the health care industry and is subject to
certain risks.* For a brief summary of some of the risks associated with the
health care industry, see Risk Factors--The Health Care Industry.
The issuers of the Securities in the Portfolio are in the following health
care sectors (percentages are based on the aggregate value of the Portfolio):
Drugs (13%)
Elan Corporation PLC
Forest Laboratories, Inc.
Mylan Laboratories, Inc.
Pfizer Inc.
Hospital Supply (14%)
Abbott Laboratories
Johnson & Johnson
Owens & Minor Inc.
Biotechnology (13%)
Amgen Inc.
Chiron Corporation
Medical Devices (13%)
Biomet, Inc.
Cordis Corporation
Medtronic Inc.
Tecnol Medical Products Inc.
Health Maintenance Organizations (12%)
Humana Inc.
Foundation Health Corporation
Mid Atlantic Medical Services, Inc.
United Healthcare Corporation
Home Care (8%)
Abbey Healthcare Group Inc.
Caremark International Inc.
Homedco Group Inc.
Lincare Holdings Inc.
Nursing Homes (15%)
Beverly Enterprises Inc.
Genesis Health Ventures Inc.
Health Care & Retirement Corporation
Horizon Healthcare Corporation
Integrated Health Services, Inc.
Living Centers of America, Inc.
Regency Health Services Inc.
Sun Healthcare Group Inc.
Services (8%)
Coastal Healthcare Group Inc.
Diagnostek Inc.
HealthCare COMPARE Corp.
Value Health Inc.
Hospital Management (4%)
Community Health Systems, Inc.
Vencor Inc.
- ------------------------------------
* A Fund is considered to be 'concentrated' in a particular category when
the securities in that category constitute 25% or more of the aggregate value of
the Portfolio.
A-5
<PAGE>
INVESTMENT SUMMARY AS OF JANUARY 23, 1995 (CONTINUED)
RISK FACTORS--The Securities in the Portfolio have been chosen for their
potential to appreciate in value within approximately four years. Of course,
there can be no guarantee that the Securities will appreciate in value.
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, conditions in the health
care 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 and
interest rate 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. Certain of the Securities 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 may be thinly capitalized or have a limited operating history and,
consequently, may be more susceptible to stock market and economic fluctuations
than companies with greater capitalization or more established companies. (See
Risk Factors).
Companies in the health care industry face several risks. Most health care
companies are extensively regulated. All are subject to extreme cost-containment
pressures. As a result they cannot readily raise the prices of their products
and services, and may experience price declines. Most are subject to intense
competition and are required to spend large amounts of capital to keep pace with
technological innovation. Many of the companies also face product obsolescence,
the threat of product liability suits and expensive liability insurance. In
addition, issuers in the health care industry may be affected by proposed health
reform legislation. Proposed federal legislation would significantly reduce
Medicare and Medicaid payments to providers, and would impose stringent cost
controls that would affect insurance premiums and fees paid to providers. None
of the major proposed reforms were enacted during the 1994 legislative session;
however, it is not possible to predict what reforms may be adopted or when
reforms might be implemented at the federal or state level. (See Risk
Factors--The Health Care Industry).
Whether or not the Securities are listed on a national securities exchange,
the principal trading market for certain of the Securities may be in the
over-the-counter market. As a result, the existence of a liquid trading market
for these 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.
Unlike a mutual fund, the Portfolio is not actively managed and the Sponsors
receive no management fee. Therefore, the adverse financial condition of an
issuer will not necessarily require the sale of Securities from the Portfolio or
mean that the Sponsors will not continue to purchase the Security in order to
create additional Units. Although the Portfolio is regularly reviewed and
evaluated and the Sponsors may instruct the Trustee to sell Securities under
certain limited circumstances (see Administration of the Fund--Portfolio
Supervision) Securities will not be sold by the Fund to take advantage of market
fluctuations or changes in anticipated rates of appreciation. Investors should
note in particular that the Securities were selected on the basis of the
criteria set forth above under Objectives of the Fund. The Fund may continue to
purchase or hold Securities originally selected through this process even though
the outlook for the Securities may have changed. In the event a public tender
offer is made for a Security or a merger or acquisition is announced affecting a
Security, the 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. If Securities are sold from the Fund, the
proceeds may be reinvested in Replacement Securities. (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.)
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
A-6
<PAGE>
INVESTMENT SUMMARY AS OF JANUARY 23, 1995 (CONTINUED)
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.
In addition, investors should be aware that the Fund may not be able to buy
each Security at the same time because of availability of the Security, any
restrictions applicable to the Fund relating to the purchase of the Security by
reason of the federal securities laws or otherwise. Any monies allocated to the
purchase of a Security will generally be held for the purchase of that Security
as soon as practicable.
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--Annual 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 be distributed as required by the Internal Revenue Code of 1986, as amended
(the 'Internal Revenue Code'). 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 initial 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. The Fund intends to report to each
Holder by the end of January the amount of Distributions to that Holder.
TAXATION--The Fund intends to qualify as a 'regulated investment company'
under the Internal Revenue Code. Distributions which are taxable as ordinary
income to Holders will constitute dividends for Federal income tax purposes and
will be eligible for the dividends-received deduction for many corporations only
to the extent of qualifying dividends received by the Fund. Foreign holders
should be aware that distributions from the Fund will generally be subject to
withholding taxes and information reporting. (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 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-7
<PAGE>
Defined
Asset Funds
INVESTOR'S GUIDE DEFINED EQUITY INCOME FUND, CONCEPT SERIES
EIF CONCEPT SERIES Our defined portfolios of equities offer investors
- ------------------------------a simple and convenient way to participate in the
HEALTH CARE TRUST II equity markets. Our funds seek to benefit from
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 defined equity
funds, investors not only avoid the difficulties
of selecting securities by themselves, but also
gain the advantage of diversification by investing
in securities of several different issues.
Spreading your investment among different
securities and issuers reduces your risk, but does
not eliminate it, especially if all of the issuers
are in one industry.
HEALTH CARE TRUST II
The Health Care Trust II offers a convenient way
to invest in common stocks of issuers in the
health care industry which the Sponsors believe to
offer attractive capital appreciation over a four
year period.
New developments in the pharmaceutical field, new
technology, our aging population, the rapid rise
in health care costs, the continuing fight against
major diseases such as AIDS, heart disease and
cancer, and the nation's growing interest in
health and fitness is expected to lead to
increased demand for health care related products
and services.
The Health Care Trust II offers a convenient means
to invest in stocks which the sponsors believe are
well-positioned to take advantage of these
economic and demographic trends.
HEALTH CARE TRUST II SELECTION
The individual Securities in the Fund's portfolio
were professionally selected to give an investor a
broad investment within the health care industry
that is usually beyond the resources of most
individuals. Diversification does not eliminate
the risk of an investment in common stock, but it
should reduce it. For you to obtain comparable
diversification, you would normally have to invest
a substantial amount of capital. Although the
portfolio is concentrated in the health care
industry, the stocks represent a variety of
businesses within that industry group.
RISK FACTORS
The value of the Units may fluctuate with changes
in the financial condition of the issuers of the
stocks, changes in the health care industry,
proposed health care reform, increasing cost
containment pressure and competition, among other
factors. The Securities in the Portfolio may be
susceptible to volatile increases and decreases of
value. The Portfolio is not actively managed.
However, each Security is regularly reviewed and
evaluated and can be sold in the event of
developments that make its retention detrimental
to holders.
REINVESTMENT OPTION
You can elect to reinvest your distributions
automatically into additional Units free of
initial sales charge. Reinvestment not only
increases your holdings but offers the benefit of
income compounding for a potentially greater total
return. Contact your financial professional to
participate in the reinvestment program.
A LIQUID INVESTMENT
You can cash in your Units at any time. Your price
will be based on the market value of the
securities in the Portfolio at that time as
determined by an independent evaluator. There is
never a fee for cashing in your investment.
VOLUME PURCHASE DISCOUNT
The initial sales charge will be reduced starting
at purchases of $250,000.
THIS PAGE MAY NOT BE DISTRIBUTED UNLESS INCLUDED IN A CURRENT PROSPECTUS.
INVESTORS SHOULD REFER TO THE PROSPECTUS FOR FURTHER INFORMATION.
<PAGE>
AUTHORIZATION FOR REINVESTMENT
EQUITY INCOME FUND CONCEPT SERIES
HEALTH CARE TRUST II
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, Health Care Trust II, 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.
Please print or type Name_______________________________ __________________
Registered Holder
Address_________________________________________________ __________________
Registered Holder
(Two signatures required if joint tenancy)
City _________________ State ______ Zip________
Unless you complete and return this form, all distributions to you
from the Health Care Trust II 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.
1 2 3 4 5 6 7 8
<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
HEALTH CARE TRUST II
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>
INVESTMENT SUMMARY AS OF JANUARY 23 ,1995 (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. The Agent for the Sponsors, will determine the manner, timing and
execution of the sales of the underlying Securities.
The Agent for the Sponsors will attempt to sell the securities as quickly as
it can during the Liquidation Period without in its judgment having a material
adverse effect on the market price of the Securities. It is expected that all of
the Securities will be disposed of by the end of the Liquidation Period and that
the Liquidation Period will be no longer than one month and 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 available for sale and desired for purchase on any particular day.
It is expected (but not required) that the following guidelines will
generally be followed in selling the Securities: highly liquid Securities will
be sold on the first day of the Liquidation Period; on each of the first two
days of the Liquidation Period, an amount of any underlying less liquid
Securities will be sold 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,
the Agent for the Sponsors 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, or $250 for Individual Retirement Accounts and certain other
tax deferred retirement plans (see Retirement Plans). There is no minimum
purchase requirement for Units 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).
UNDERWRITING--None of the Sponsors has participated as sole underwriter,
managing underwriter or member of an underwriting syndicate from which
Securities in the Portfolio were acquired.
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:
U.S. Healthcare, Inc.
Healthsource, Inc.
The Hillhaven Corporation
Summit Care Corporation
UNDERWRITING ACCOUNT
<TABLE><CAPTION>
The names and addresses of the Underwriters are:
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith Incorporated P.O. Box 9051, Princeton, N.J. 08543-9051
Smith Barney Inc. 388 Greenwich Street--23rd Floor, New York, N.Y. 10013
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--59th 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-8
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Sponsors, Trustee and Holders of Equity Income Fund, Concept Series,
Health Care Trust II, Defined Asset Funds:
We have audited the accompanying statement of condition, including the
portfolio, of Equity Income Fund, Concept Series, Health Care Trust II, Defined
Asset Funds, as of January 24, 1995. This financial statement is the
responsibility of the Trustee. Our responsibility is to express an opinion on
this financial statement 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 statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. The deposit on January
24, 1995 of an irrevocable letter or letters of credit for the purchase of
securities, as described in the statement of condition, was confirmed to us by
The Chase Manhattan Bank, N.A., the Trustee. An audit also includes assessing
the accounting principles used and significant estimates made by the Trustee, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the financial position of Equity Income Fund, Concept
Series, Health Care Trust II, Defined Asset Funds, at January 24, 1995 in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, N.Y.
January 24, 1995
A-9
<PAGE>
EQUITY INCOME FUND CONCEPT SERIES
HEALTH CARE TRUST II, DEFINED ASSET FUNDS
STATEMENT OF CONDITION AS OF INITIAL DATE OF DEPOSIT, JANUARY 24, 1995
<TABLE><CAPTION>
<S> <C>
TRUST PROPERTY
Investment in Securities:
Contracts to purchase underlying Securities(1)............................................... $ 139,975.00
--------------
--------------
INTEREST OF HOLDERS
143,933 Units of fractional undivided interest outstanding:
Cost to Holders(2)........................................................................... $ 143,933.00
Gross underwriting commissions(3)............................................................ (3,958.00)
--------------
Net amount applicable to Holders....................................................................... $ 139,975.00
--------------
--------------
</TABLE>
- ------------
(1) Aggregate cost to the Fund of the Securities listed under Portfolio is
determined by the Trustee on the basis set forth above under Public Sale of
Units--Public Offering Price. See also the column headed Cost of Securities
to Fund under Portfolio. In connection with contracts to purchase
Securities, an irrevocable letter or letters of credit in the amount of
$140,205.00 has been deposited with the Trustee for the purchase of
$140,050.00 aggregate value of Securities. The letter or letters of credit
has been issued by Istituto Bancario San Paolo Di Torino SPA, New York
Branch.
(2) Aggregate public offering price computed on the basis of the value of the
underlying Securities as of the Evaluation Time on the Business Day prior to
the Initial Date of Deposit plus an initial sales charge at a rate of 2.75%
of the Public Offering Price (2.828% of the aggregate value of Securities).
In addition, Units are subject to deferred sales charges of $1.625 per 1,000
Units payable on each quarterly Deferred Charge Payment Date ($6.50 per
year). 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.
(3) Assumes the initial sales charge at a rate of 2.75% of the Public Offering
Price (2.828% of the net amount invested in the Securities) computed on the
basis set forth under Public Sale of Units--Public Offering Price and
Underwriters' and Sponsors' Profits.
A-10
<PAGE>
PORTFOLIO OF EQUITY INCOME FUND CONCEPT SERIES,
HEALTH CARE TRUST II, DEFINED ASSET FUNDS
ON THE INITIAL DATE OF DEPOSIT, JANUARY 24, 1995
<TABLE><CAPTION>
NUMBER OF
PORTFOLIO NO. AND SHARES OF
NAME OF STOCK COMMON
ISSUER OF SECURITIES CONTRACTED FOR SYMBOL STOCK
------------------------------------------------------------------------------------------ --------- -----------
<S> <C> <C>
1. Abbey Healthcare Group Inc. ABBY 100
2. Abbott Laboratories ABT 200
3. Amgen Inc. AMGN 200
4. Beverly Enterprises, Inc. BEV 100
5. Biomet, Inc. BMET 200
6. Caremark International Inc. CK 100
7. Chiron Corporation CHIR 100
8. Coastal Healthcare Group Inc. DR 100
9. Community Health Systems, Inc. CYH 100
10. Cordis Corporation CORD 100
11. Diagnostek Inc. DXK 100
12. Elan Corporation PLC ELN 100
13. Forest Laboratories, Inc. FRX 100
14. Foundation Health Corporation FH 100
15. Genesis Health Ventures Inc. GHV 100
16. Health Care & Retirement Corporation HCR 100
17. HealthCare COMPARE Corp. HCCC 100
18. Homedco Group Inc. HOME 100
19. Horizon Healthcare Corporation HHC 100
20. Humana Inc. HUM 200
21. Integrated Health Services, Inc. IHS 100
22. Johnson & Johnson JNJ 200
23. Lincare Holdings Inc. LNCR 100
24. Living Centers of America, Inc. LCA 100
25. Medtronic Inc. MDT 100
26. Mid Atlantic Medical Services, Inc. MME 200
27. Mylan Laboratories, Inc. MYL 100
28. Owens & Minor Inc. OMI 200
29. Pfizer Inc. PFE 100
30. Regency Health Services Inc. RHS 100
31. Sun Healthcare Group Inc. SHG 100
32. Tecnol Medical Products Inc. TCNL 200
</TABLE>
PERCENTAGE PRICE CURRENT COST OF
OF PER SHARE DIVIDEND SECURITIES
FUND(1) TO FUND PER SHARE(2) TO FUND(3)
----------- ----------- ------------- --------------
1. 1.79% $ 25.125 $ 0.00 $ 2,512.50
2. 4.70 32.875 0.76 6,575.00
3. 8.30 58.125 0.00 11,625.00
4. 0.97 13.625 0.00 1,362.50
5. 2.14 15.000 0.00 3,000.00
6. 1.18 16.500 0.04 1,650.00
7. 4.43 62.000 0.00 6,200.00
8. 1.87 26.250 0.00 2,625.00
9. 1.96 27.375 0.00 2,737.50
10. 4.13 57.750 0.00 5,775.00
11. 1.13 15.750 0.00 1,575.00
12. 2.53 35.375 0.00 3,537.50
13. 3.15 44.125 0.00 4,412.50
14. 2.08 29.125 0.00 2,912.50
15. 2.09 29.250 0.00 2,925.00
16. 2.02 28.250 0.00 2,825.00
17. 2.34 32.750 0.00 3,275.00
18. 3.05 42.750 0.00 4,275.00
19. 1.94 27.125 0.00 2,712.50
20. 3.20 22.375 0.00 4,475.00
21. 2.85 39.875 0.02 3,987.50
22. 7.98 55.875 1.16 11,175.00
23. 1.79 25.000 0.00 2,500.00
24. 2.36 33.000 0.00 3,300.00
25. 4.10 57.375 0.41 5,737.50
26. 3.32 23.250 0.00 4,650.00
27. 1.88 26.375 0.20 2,637.50
28. 2.04 14.250 0.18 2,850.00
29. 5.70 79.750 1.88 7,975.00
30. 0.83 11.625 0.00 1,162.50
31. 1.85 25.875 0.00 2,587.50
32. 2.39 16.750 0.00 3,350.00
A-11
<PAGE>
PORTFOLIO OF EQUITY INCOME FUND CONCEPT SERIES,
HEALTH CARE TRUST II, DEFINED ASSET FUNDS
ON THE INITIAL DATE OF DEPOSIT, JANUARY 24, 1995
<TABLE><CAPTION>
NUMBER OF
PORTFOLIO NO. AND SHARES OF
NAME OF STOCK COMMON
ISSUER OF SECURITIES CONTRACTED FOR SYMBOL STOCK
------------------------------------------------------------------------------------------ --------- -----------
<S> <C> <C>
33. United Healthcare Corporation UNH 100
34. Value Health Inc. VH 100
35. Vencor Inc. VC 100
</TABLE>
PERCENTAGE PRICE CURRENT COST OF
OF PER SHARE DIVIDEND SECURITIES
FUND(1) TO FUND PER SHARE(2) TO FUND(3)
----------- ----------- ------------- --------------
33. 3.22% $ 45.125 $ 0.03 $ 4,512.50
34. 2.50 35.000 0.00 3,500.00
35. 2.19 30.625 0.00 3,062.50
----------- --------------
100.00% $ 139,975.00
----------- --------------
----------- --------------
- ------------
NOTES
(1) Based on Cost of Securities to Fund.
(2) Calculated by annualizing the latest quarterly or semi-annual ordinary
dividend declared.
(3) Valuation by the Trustee made on the basis of closing sale prices at the
Evaluation Time on the Business Day prior to the Initial Date of Deposit.
------------------------------
The Securities were acquired on January 23, 1995 and are represented entirely by
contracts to purchase the Securities. One or more of the Sponsors may have acted
during the last 3 years or may be acting as an underwriter, manager or
co-manager of a public offering of the Securities in this Fund. Affiliates of
the Sponsors may serve as specialists in the Securities in this Fund on one or
more stock exchanges and may have a long or short position in any of these
stocks or in options on any of these stocks, and may be on the opposite side of
public orders executed on the floor of an exchange where the Securities are
listed. An officer, director or employee of any of the Sponsors may be an
officer or director of one or more of the issuers of the Securities in the Fund.
The Sponsors may trade for their own account as odd-lot dealers, market makers,
block positioners and/or arbitrageurs in any securities or options relating to
the common stock of the issuers of the Securities. In addition, the Sponsors,
their affiliates, directors, elected officers and employee benefit programs may
have either a long or short position in any security or option of the issuers.
A-12
<PAGE>
EQUITY INCOME FUND
CONCEPT SERIES
HEALTH CARE TRUST II
DEFINED ASSET FUNDS
FUND STRUCTURE
The Fund is a 'unit investment trust' created under New York law by a Trust
Indenture (the 'Indenture') among the Sponsors and the Trustee. This Prospectus
summarizes various provisions of the Indenture but each statement made herein is
qualified in its entirety by reference to the Indenture. On the date of this
Prospectus (the 'Initial Date of Deposit') the Sponsors, acting as managers for
the underwriters named under Underwriting Account, deposited the underlying
Securities with the Trustee at a price equal to the aggregate value of the
Securities on that date as determined by the Trustee, and the Trustee delivered
to the Sponsors units of interest ('Units') representing the entire ownership of
the Fund. Except as otherwise indicated under Portfolio (the 'Portfolio'), the
Securities so deposited were represented by purchase contracts assigned to the
Trustee together with an irrevocable letter or letters of credit issued by a
commercial bank or banks in the amount necessary to complete the purchase
thereof.
The Portfolio contains common stocks issued by companies in the health care
industry. 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 original proportionate
relationship among the Securities deposited on the Initial Date of Deposit
because of, among other reasons, purchase requirements, changes in prices,
unavailability of Securities or restrictions upon those Securities the Sponsors
may purchase. 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 health care
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.
The companies whose securities are included in the Portfolio are engaged in
nine major sectors of the health care industry: drugs, hospital supply,
biotechnology, medical devices, health maintenance organizations, home care,
nursing homes, services and hospital management. Companies in the health care
industry may have a strong appreciation potential over the intermediate term
because of anticipated growth in demand for their products and services. It is
expected that the issuers in the Portfolio will be able to benefit from the
health care demands of a population that is increasingly elderly and health
conscious. Unlike many cyclical industries, the health care industry's
performance is affected more by demographics than economic conditions. As the
average age of the population increases, more care is needed. The challenges of
critical or terminal illnesses also create a demand for new health care products
and services. It is anticipated that certain issuers will benefit from the
commercial potential of new medical technology and that other issuers will
benefit from their ability to provide consumers with health care products and
services on a cost-effective basis. New devices and equipment are reducing the
invasiveness of surgery as well as the time it requires, and also reducing
hospital stays and recovery periods. According to statistics published by the
Health Care Financing Administration of the U.S. Department of Health (the
'HCFA'), health care expenditures in the United States in 1993 amounted to $884
billion, up 7.8% from the $820 billion spent in 1992. Growth is expected to
continue, but may be at a lower rate than in recent years. Of
1
<PAGE>
course, there can be no assurance that these projections are accurate or that
the value of the particular stocks in the Portfolio will necessarily benefit
from these trends or appreciate in value.
The drug companies as well as some of the hospital supply companies in the
Portfolio produce prescription drugs and a wide array of other health care
products. These companies are developing new drugs and researching new
applications for existing drugs. The hospital supply companies are all
well-established and sell products as diverse as surgical supply kits,
intravenous fluids and toiletries. The biotechnology companies are among the
more established in their field and have produced various pharmaceuticals and
diagnostics including blood cell development and treatment for multiple
sclerosis. The medical devices companies include leading manufacturers of
diagnostic cardiac catheters, pacemakers, replacement joints and disposable
medical products. The health maintenance organizations ('HMO's') market
cost-effective, managed health care plans to corporations and individuals and
contract with medical practitioners for the provision of specific services. The
home care companies treat patients at home or on an outpatient basis and are
large providers of products and services including respiratory and home infusion
therapy. The nursing home companies include one of the largest nursing home
operators in the nation, and operate collectively approximately 1,700 facilities
with more than 170,000 beds throughout the United States. Nursing home occupancy
rates are increasing along with life expectancy. The services companies in the
Portfolio provide physician practice management services, mail-order drug
distribution, cost management and other services. The hospital management
companies in the Portfolio own or operate acute care or long-term care
facilities.
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 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
2
<PAGE>
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. Furthermore, sales of
Securities to pay the Deferred Sales Charge will result in some reduction of
aggregate Fund income following each Deferred Sales Charge Payment Date.
The Fund is concentrated in the health care industry*. Of course, a
portfolio concentrated in a single industry may present more risks than a
portfolio broadly invested over several industries. An investment in Units of
the Fund should be made with an understanding of the risks which this investment
may entail, certain of which are summarized below.
THE HEALTH CARE INDUSTRY
Companies in the health care industry face numerous risks. Most health care
companies are extensively regulated. All are subject to extreme cost-containment
pressures and as a result they cannot readily raise prices for their products or
services, or may experience price declines. Most are subject to intensive
competition and are required to spend vast amounts of capital to keep pace with
technological innovation. These constraints affect the various health care
sectors in the Portfolio in specific ways. Strategic alliances are being formed
by drug companies, hospital supply companies, HMOs, hospitals, and to a lesser
extent other health care companies to reduce costs and benefit from economies of
scale. The inability to form such alliances on favorable terms or to compete
with other alliances could adversely affect a company's profits and the price of
its securities.
Many problems faced by drug companies, hospital supply companies and
medical devices companies typify those faced by the health care industry in
general. These companies are regulated by the federal Food and Drug
Administration (the 'FDA'). The FDA regulates the development, manufacture and
marketing of all drugs and medical products. Before a product can be sold it
must receive FDA approval, a long and very costly process. Governments and
large, private health care consumers are exerting strenuous efforts to contain
health care costs. The federal government and increasing numbers of insurance
companies reimburse health care providers on a 'prospective payment basis'. This
means the physician or hospital is only paid a predetermined amount depending
upon the patient's diagnosis. If the cost of treatment exceeds the predetermined
amount, the physician or hospital will lose money, if it is less, money will be
made. This creates an incentive to prescribe cheaper, generic substitutes for
brand-name drugs and causes significant profit erosion for drug companies. Some
states have laws requiring pharmacists to dispense generic drugs unless
precluded by the prescribing physician. Other states set up auctions among drug
companies to determine which company will agree to meet their needs at the
lowest price. Therefore, the cost of marketing a drug is increasing while at the
same time it is becoming increasingly difficult to recoup that cost. Future
trends in drug pricing remain unclear. HMOs and other third-party payors are
gaining power and demanding larger discounts. The United States accounts for 35%
of the global drug market, so demand for drugs from foreign countries,
particularly developed countries is important, and cannot be predicted. Foreign
countries are demanding discounts as well.
Drug companies must devote large amounts of risk capital to research and
development in order to develop new and unique drugs with patent protection from
generic substitutes and other competitors. Drug companies also face the risk of
large product liability suits and consequently expensive liability insurance.
Finally, technological change is becoming increasingly rapid and products tend
to become obsolete more quickly than before.
- ---------------
* A fund is considered to be 'concentrated' in a particular category when
the securities in that category constitute 25% or more of the aggregate value of
the Portfolio.
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Hospital supply companies face the risk that hospitals will delay purchases
because they fear health care reform. (See Health Care Reform). Hospitals are
also increasingly demanding discounts and that pressure may continue to grow as
hospitals consolidate.
The facilities served by hospital management companies are subject to
extensive regulation on federal, state and local levels. Many states require
hospital management companies to submit their financial statements for review
and some even regulate the rates they charge. When treatment costs are
reimbursed by third parties such as Medicare or Medicaid, hospitals have to work
within the discipline of the prospective payment system and also face more
specific cost-containment measures. The effort to reduce costs has resulted in a
movement away from more expensive inpatient treatment to treatment on an
out-patient basis or in specialized facilities. This has reduced bed-occupancy
rates in the large general hospitals and affected revenues adversely.
Furthermore, the revenues and expenses of hospitals and other health care
facilities will be affected by future events and conditions including, among
other things, the demand for health care services at the particular type of
facility, increasing costs of medical technology, utilization practices of
physicians and physicians' confidence in the facilities, the ability of the
facilities to provide the services required by patients, greater longevity and
the higher medical expenses of treating the elderly, medical and other
scientific advances resulting in decreased usage of health care facilities,
increased costs associated with attracting and maintaining qualified physicians,
nurses and other technical staff, employee strikes and other adverse labor
actions, economic developments in the service area, demographic changes, the
occurrence of natural disasters, and increased competition from other similar
facilities or alternative health care providers. Hospital management and medical
devices companies may be adversely affected by health care reforms proposed by
President Clinton and various federal legislators in 1993 and 1994. Proposals
included various insurance market reforms, significant reductions in Medicare
and Medicaid payments to providers, and stringent government cost controls that
would directly control insurance premiums and indirectly affect the fees of
hospitals, physicians and other health care providers. Other aspects of the
proposals, such as universal health insurance coverage, could have a positive
impact by reducing the amount of uncompensated care provided by hospitals.
Congress adjourned its 1994 legislative session without acting on any major
reform proposals. It is not possible at this time to predict what, if any,
reforms will be adopted in the future. (see Health Care Reform).
Hospitals may be adversely affected by competitive pressure to consolidate.
There can be no assurance that hospitals will be able to make profitable
acquisitions. Hospitals may be subject to federal, state or insurer inquiries or
investigations, which may lead to sanctions. Hospitals also face the risk of
large liability suits and must carry expensive liability insurance and maintain
loss reserves, which may not be sufficient to cover claims. To the extent
hospital management companies are adversely impacted by any of the foregoing,
services companies and medical devices companies would also be affected
adversely.
While the biotechnology companies in the Portfolio are among the more
established in their field, the biotechnology industry in general is an emerging
growth industry. They are regulated by the FDA to the same extent as traditional
drug companies. As emerging growth companies, they may be thinly capitalized and
more susceptible to general market fluctuations than companies with greater
capitalization. Also, the stocks of emerging growth companies trade at higher
price-to-earnings multiples than the stocks of more established companies
because the price is more influenced by investor confidence in future earnings
than recorded historic earnings. Therefore, the stock prices can be extremely
volatile as investor confidence rises or ebbs or as the issuer or its
competitors announce new products. In addition, the liquidity of the stocks of
young companies can be limited and therefore subject to greater price
fluctuations when large numbers of shares are bought and sold. These companies
often have a limited operating history with inexperienced but highly motivated
management, who may retain effective control over the voting stock of the
company. Earnings are generally retained to finance the company's expansion and
thus no dividends may be paid and additional capital may be required to market
new products on a commercial basis. The biotechnology companies may also be
dependent for their revenues upon only a few products and upon larger drug
companies (who may be their competitors) to produce and market their products.
This dependence upon a limited range of products increases the damage that would
be caused by product obsolescence, a risk that is greater in a rapidly
developing area like biotechnology. There exists doubt as to the extent of
patent protection that will be afforded products developed through
biotechnology. At its simplest, biotechnology involves the identification of
genes that produce proteins useful in the combat of disease. Once identified,
the gene can be separated and used to produce commercial quantities of the
protein. As the protein production processes are broadly similar, patent
protection has generally been extended only to the identified gene. This allows
the identified gene to be used offshore to produce the drug for sale in the
United States, without any infringement of U.S. patent law. If this practice
were to become widespread it would significantly affect the revenues of
biotechnology companies. The application of patent law to biotechnology in
general is the subject of much academic and legislative attention which may
result in changes in the law.
HMOs are subject to federal and state regulation. Most states require HMOs
to provide periodic financial reports and some even require HMOs to maintain
minimum reserve requirements. HMOs are paid a fixed membership fee. HMOs are
turning to 'capitation,' where they contract to provide services for a certain
population for a set price, regardless of whether or not the service is
provided. Depending on the negotiated
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<PAGE>
provisions of the contract, costs in excess of set fees may be borne either by
the HMO or the health care provider. HMOs run the risk that inflation,
epidemics, lack of financial discipline among professional staff and the need to
acquire new technology will increase treatment costs and erode profits. In
addition, HMOs face the risk of saturation in some markets. Where that occurs,
they will be forced to incur the expense of marketing in new geographic areas
and developing new products and services. They are expected to face extreme
pressure to increase premiums, while they face the risk that regulators may seek
to limit their profits. In addition, up to half of an HMO's enrollees may be
Medicare beneficiaries whose membership fees are paid by the HCFA under so-
called 'Senior Plans'. Thus, for a fixed fee, HMOs are exposed to higher and
more expensive health care utilization by the elderly. The HCFA also regulates
the profit an HMO can make on a Senior Plan and the quality of care provided by
a Senior Plan. Finally, HMOs may be adversely affected by the proposed Medicare
and Medicaid reforms, which would significantly reduce Medicare and Medicaid
payments to providers. It is not possible to predict what, if any, reforms will
be adopted in the future. (see Health Care Reform).
Services companies face each of the risks confronted by HMOs. They also
face the pressures of increased competition.
Nursing home companies have historically grown through acquisitions, and
there is no assurance that suitable acquisitions can be identified or completed
in the future. Acquisitions are dependent on financing and on personnel, which
may not be available. Even if they are successfully completed, acquisitions may
entail unanticipated business risks or legal liabilities. Nursing homes face
federal, state and local governmental regulation. Failure to comply with
applicable laws and regulations could result, in extreme circumstances, in the
revocation of a facility's license. There can be no assurance that future
regulatory changes will not have an adverse impact. (see Regulation, Litigation
and Other Legislation). At the same time, nursing home companies face tough
competition from new facilities with greater financing, whether from tax
exemptions, government support, endowments or charitable contributions that are
not available to profit-seeking corporations. Other competitors include
companies providing rehabilitation therapy, home care services, respiratory
treatment and clinical labs. Additional competitive factors may arise in the
future.
Nursing homes may also be affected by the proposed health care reforms.
Proposals include various insurance market reforms, significant reductions in
Medicare and Medicaid payments to providers, and stringent government cost
controls that would directly control insurance premiums and indirectly affect
the fees of hospitals, physicians and other health care providers. It is not
possible to predict what, if any, reforms will be adopted in the future. (see
Health Care Reform). States may also act to reduce Medicare and Medicaid
reimbursement for long-term care.
Home care companies face uncertain payment structures. Presently, some
clients are charged more than others, and regulatory authorities have been
reviewing billing practices for fairness. Home care companies may also be
affected by proposed health care reforms, specifically those which may limit the
fees of health care providers. It is not possible to predict what, if any,
reforms will be adopted in the future. (see Health Care Reform). Home care
companies are expected to face the same severe cost containment pressures facing
other companies in the health care industry.
LIQUIDITY
Whether or not the Securities are listed on a national securities exchange,
the principal trading market for the Securities may be in the over-the-counter
market. As a result, the existence of a liquid trading market for the Securities
may depend on whether dealers will make a market in the Securities. There can be
no assurance that a market will be made for any of the Securities, that any
market for the Securities will be maintained or of the liquidity of the
Securities in any markets made. In addition, the Fund may be restricted under
the Investment Company Act of 1940 from selling Securities to the Sponsors. The
price at which the Securities may be sold to meet redemptions and the value of
the Fund will be adversely affected if trading markets for the Securities are
limited or absent.
HEALTH CARE REFORM
In late 1993, President Clinton submitted to Congress proposed
comprehensive health care reform legislation. Key elements in the President's
proposal included various insurance market reforms, the requirement that
businesses provide health insurance coverage for their full-time and part-time
employees, significant reductions in future Medicare and Medicaid payments to
providers, and stringent government cost controls that would directly control
insurance premiums and indirectly affect the fees of hospitals, physicians and
other healthcare providers. Several other comprehensive reform proposals were
introduced in the Congress, including alternatives introduced by the House and
Senate majority leaders in 1994. The proposals covered cost controls on
hospitals, insurance market reform to increase the availability of group health
insurance to small businesses, requirements that all businesses offer health
insurance coverage to their employees and the creation of a single government
health insurance plan that would cover all citizens. Health care reform
legislation is also pending in a number of states.
5
<PAGE>
Certain aspects of the proposals offered in 1994, such as reductions in
Medicare payments and the elimination of Medicaid disproportionate share
payments to hospitals, and increased reliance on managed competition, if
adopted, could adversely affect the issuers in the Portfolio. Other aspects of
the proposals, such as universal health insurance coverage, could have a
positive impact on certain issuers in the Portfolio, for example, by reducing
the amount of uncompensated care provided by hospitals. Congress adjourned its
1994 legislative session without acting on any major reform proposals. It is not
possible at this time to predict what, if any, reforms will be adopted by the
Congress or various state legislatures, or when such reforms will be adopted or
implemented. No assurance can be given that any such reforms will not have a
material adverse impact on the revenues and earnings of the issuers in the
Portfolio.
REGULATION, LITIGATION AND OTHER LEGISLATION
Companies in the health care industry are subject to extensive federal,
state and local governmental regulation relating to licensing, conduct of
operations, billing and reimbursement, relationships with physicians,
construction of new facilities, expansion or acquisition of existing facilities
and the offering of new services. Failure to comply with applicable laws and
regulations could result in, among other things, the imposition of fines,
temporary suspension of admission of new patients to the facility or, in extreme
circumstances, exclusion from participation in government health care
reimbursement programs such as Medicare and Medicaid or the revocation of
facility licenses. There can be no assurance that future regulatory changes will
not have an adverse impact on any of the issuers in the Portfolio.
Companies in the health care industry continue to derive a substantial
portion of their revenue from the Medicare and Medicaid programs. Funds received
from these programs are subject to audit, which can result in retroactive
adjustments to such payments. These programs are highly regulated and subject to
frequent and, in certain cases, substantial changes. Recent changes designed to
control health care costs have resulted both in pressure on hospitals and other
health care providers to reduce their costs and in reduced levels of
reimbursement for a substantial portion of hospital procedures and costs.
Tax law changes have discouraged private contributions to hospitals and
health care facilities and have limited somewhat the use of tax-exempt bonds to
finance health care facilities, all of which could adversely affect the ability
of these facilities to finance their future capital needs and could have other
adverse effects which cannot be predicted. 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. There can be no assurance that future litigation or legislation 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.
DESCRIPTION OF THE FUND
THE PORTFOLIO
Experienced research analysts for Defined Asset Funds selected health care
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 generally identified as well positioned to benefit from the
anticipated increased demand for health care services and products. 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
overall credit quality of the issuers, (iii) the potential for capital
appreciation of the Securities in the next four years, and (iv) the variety of
the health care Securities in the Portfolio, taking into account the market
capitalization and liquidity of those issuers which meet 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 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).
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<PAGE>
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.
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.
The annual Record Day and Distribution Day 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 annual 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).
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
common stocks of issuers in the health care industry. 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.
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<PAGE>
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 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
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.
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.
Distributions that 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 satisfied the requirements for the dividends-received
deduction, such distributions will be eligible for the dividends-received
deduction for corporations (other than corporations such as 'S' corporations
which are not eligible for such deduction because of their special
characteristics and other than for purposes of special taxes such as the
accumulated earnings tax and the personal holding company tax).
The dividends-received deduction generally is 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 additional limitations on the
eligibility of dividends for their 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.
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
will recognize a taxable gain or loss if the Holder sells or redeems his Units.
Any gain or loss arising from
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<PAGE>
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. However, any capital loss on the sale or redemption of a Unit that a
Holder has held for six months or less will be a long-term capital loss to the
extent of any capital gain dividends previously distributed to the Holder by the
Fund. 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.
The Holder's basis in his Units will be equal to the cost of his Units,
including the initial sales charge. A portion of the sales charge is deferred
until the termination of the Fund or the redemption of the Units. The proceeds
received by a Holder upon such event will reflect deduction of the deferred
amount (the 'Deferred Sales Charge'). The annual statement and the relevant tax
reporting forms received by Holders will reflect the actual amounts paid to
them, net of the Deferred Sales Charge. Accordingly, Holders should not increase
their basis in their Units by the Deferred Sales Charge amount.
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 Fund intends to report to each
Holder in mid-January the amount of Distributions to that Holder. 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. Distributions may
also be subject to state and local taxation and Holders should consult their own
tax advisers in this regard.
FOREIGN HOLDERS
A 'Foreign Holder' is a person or entity that, for U.S. Federal income tax
purposes, is a non-resident alien individual, a foreign corporation, a foreign
partnership, or a non-resident fiduciary of a foreign estate or trust. If a
distribution of the Fund's taxable income (without regard to its net capital
gain) to a Foreign Holder is not effectively connected with a U.S. trade or
business carried on by the investor, such distribution will be subject to
withholding tax at a 30% rate or such lower rate as may be specified by an
applicable income tax treaty. In addition, distributions from the Fund will
generally be subject to information reporting.
A Foreign Holder generally will not be subject to Federal income tax with
respect to gain arising from the sale or redemption of Units or distribution of
the Fund's net capital gain unless the income is effectively connected with a
trade or business of such Holder in the United States. In the case of a Foreign
Holder who is a non-resident alien individual, however, gain arising from the
sale or redemption of Units or distributions of the Fund's net capital gain
ordinarily also will be subject to Federal income tax at a rate of 30% if such
individual is physically present in the U.S. for 183 days or more during the
taxable year and, in the case of the gain arising from the sale or redemption of
Units, either the gain is attributable to an office or other fixed place of
business maintained by the Holder in the United States or the Holder has a 'tax
home' in the United States. In addition, a Unit held by an individual who is not
a citizen or resident of the United States at the time of his death will
generally be subject to United States federal estate tax unless an applicable
treaty provides otherwise.
The tax consequences to a Foreign Holder entitled to claim the benefits of
an applicable tax treaty may be different from those described herein. Foreign
Holders should consult their own tax advisers to determine whether investment in
the Fund is appropriate.
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
9
<PAGE>
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 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. A pension or profit-sharing
plan established for employees of a corporation may purchase Units of the Fund.
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 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
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<PAGE>
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 DEALER CONCESSION
PUBLIC OFFERING NET AMOUNT DOLLAR AMOUNT DEFERRED AS PERCENT OF
AMOUNT PURCHASED PRICE INVESTED PER 1,000 UNITS PUBLIC OFFERING PRICE
----------------- -------------- ------------------------ -----------------------
<S> <C> <C> <C> <C>
Less than $250,000................ 2.75% 2.828% $ 26.00 1.788%
$250,000 - $499,999............... 2.25 2.302 26.00 1.463
$500,000 - $749,999............... 1.75 1.781 26.00 1.138
$750,000 - $999,999............... 1.25 1.266 26.00 0.813
$1,000,000 and more............... 1.00 1.010 26.00 0.650
</TABLE>
CONCESSION TO
INTRODUCING
AMOUNT PURCHASED DEALERS
--------------
Less than $250,000................ $ 19.80
$250,000 - $499,999............... 16.20
$500,000 - $749,999............... 12.60
$750,000 - $999,999............... 9.00
$1,000,000 and more............... 7.20
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 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.
11
<PAGE>
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.
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
12
<PAGE>
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 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 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
13
<PAGE>
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. The 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 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.
Securities will be sold as quickly as possible during the Liquidation
Period without in the judgment of the Agent for the Sponsors 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. It is not expected 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 available for sale on any
particular day.
It is expected (but not required) that the following guidelines will
generally be followed in selling the Securities: highly liquid Securities will
generally be sold on the first day of the Liquidation Period; for less liquid
Securities, on each of the first two days of the Liquidation Period, any amount
of any underlying Securities will generally be sold at a price no less than 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, it is currently intended that at least a fraction of the remaining
underlying Securities will be sold, 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 page 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 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.
14
<PAGE>
FEES
An estimate of the total annual expenses of the Fund is set forth under
Investment Summary. The Annual Portfolio Supervision Fee is based on the number
of Units in the Fund on the Initial Date of Deposit and on the first business
day of each calendar year thereafter, except that if in any calendar year
Additional Securities are deposited, the fee for the balance of the year will be
based on the number of Units on each Record Day. (Section 3.04). This 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 receives for its services as Trustee and for
reimbursement of expenses 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 Annual 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). Subject to the
Reinvestment Plan described below, the Annual 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, computed annually by the
Trustee, substantially equal to the Holder's pro rata share of the estimated
annual income to the Income Account, 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 be
distributed to Holders shortly 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. 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 substitute Securities will be held in the Capital Account to be
distributed on the next succeeding
15
<PAGE>
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 need be made from the Capital
Account, other than distributions of capital gains, if the balance therein is
less than the amount set forth under Investment Summary--Capital Distributions
(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
Annual distributions of income (including any net capital gain net income,
which is 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 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 Monthly 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 which normally follows a buy and hold
investment strategy and is not actively managed. However, the Portfolio is
regularly reviewed. Traditional methods of investment management for a managed
fund (such as a mutual 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
16
<PAGE>
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 Holders unless reinvested in Replacement
Securities in accordance with provisions of the Indenture. The Sponsors may also
direct the disposition of Securities upon default in payment of amounts due on
any of the Securities, the delisting of any of the Securities from the New York
Stock Exchange or the American Stock Exchange, 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).
The Sponsors are 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 and 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.
17
<PAGE>
After the end of each calendar year during which an Annual 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 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 or if for any reason the Sponsors determine in good
faith that the replacement of the Trustee is in the best interest of the
Holders. 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 under the Indenture. 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 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
18
<PAGE>
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(e)). The Agent
for Sponsors 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 Sponsors shall continue to act as Sponsors, then
Merrill Lynch, Pierce, Fenner & Smith Incorporated shall continue to act as sole
Sponsor (Section 7.02(b)). If one of the Sponsors fails to perform its duties or
becomes incapable of acting or becomes bankrupt or its affairs are taken over by
public authorities, then that Sponsor is automatically discharged and the other
Sponsors shall act as 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 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 and its address are named on the back cover page of
this Prospectus. The Trustee is subject to supervision by the Federal Deposit
Insurance Corporation, the Board of Governors of the Federal Reserve System and
either the Comptroller of the Currency or state banking authorities.
LEGAL OPINION
The legality of the Units has been passed upon by Davis Polk & Wardwell,
450 Lexington Avenue, New York, New York 10017, as special counsel for the
Sponsors.
AUDITORS
The Statement of Condition, including the Portfolio of the Fund, included
herein, has been audited by Deloitte & Touche LLP, 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 Inc., an investment banking and securities
broker-dealer firm, is an indirect wholly-owned subsidiary of The Travelers Inc.
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. Each Sponsor or one of its predecessor
corporations, has acted as Sponsor of a number of series of unit investment
trusts. Each Sponsor has acted as principal underwriter and managing underwriter
of other investment companies. The Sponsors, in addition to participating as
members of various selling groups or as agents of other investment companies,
execute orders on behalf of investment companies for the purchase and sale of
securities of these companies and sell securities to these companies in their
capacities as brokers or dealers in securities.
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.
19
<PAGE>
('Shearson') 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, Harris Upham & Co. and Primerica (now The Travelers Inc.), Smith Barney
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.
One of the most important investment decisions an investor faces may be how
to allocate his investments among asset classes. Diversification among different
kinds of investments can balance the risks and rewards of each one. Most
investment experts recommend stocks for long-term capital growth. Long-term
corporate bonds offer relatively high rates of interest income. By purchasing
both defined equity and defined bond funds, investors can receive attractive
current income, as well as growth potential, offering some protection against
inflation.
The following chart shows the average annual compounded rate of return of
selected asset classes over the 10-year and 20-year periods ending September 30,
1994, 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, either of these categories or of any Defined Fund. Defined Funds
also have sales charges and expenses which are not reflected in the chart.
Stocks (S&P 500)
20 yr 15.09%
10 yr 14.60%
Small-company stocks
20 yr 20.31%
10 yr 10.84%
Long-term corporate bonds
20 yr 10.42%
10 yr 12.43%
U.S. Treasury bills (short-term)
20 yr 7.31%
10 yr 5.89%
Consumer Price Index
20 yr 5.56%
10 yr 3.60%
0 2 4 6 8 10
12 14 16 18 20% 22%
Source: Ibbotson Associates. Used with permission. All rights reserved.
Instead of having to select individual securities on their own, purchasers
of Defined Funds benefit from the expertise of Defined Asset Funds' experienced
buyers and research analysts. In addition, they gain the advantage
20
<PAGE>
of diversification by investing in units of a Defined Fund holding securities of
several different issuers. Such diversification can reduce risk, but does not
eliminate it. While the portfolio of a managed fund, such as a mutual fund,
continually changes, defined bond funds offer a defined portfolio and a schedule
of income distributions identified in the prospectus. Investors know, generally,
when they buy, the issuers, maturities, call dates and ratings of the securities
in the portfolio. Of course, the portfolio may change somewhat over time as
additional securities are deposited, as securities mature or are called or
redeemed or as they are sold to meet redemptions and in certain other limited
circumstances. Investors also know at the time of purchase their estimated
income and current and long-term returns, subject to credit and market risks and
to changes in the portfolio or fund expenses.
Defined Asset Funds offers a variety of fund types. The tax exemption of
municipal securities, which makes them attractive to high-bracket taxpayers, is
offered by Defined Municipal Investment Trust Funds. Municipal Defined Funds
offer a simple and convenient way for investors to earn monthly income free from
regular Federal income tax. Defined Municipal Investment Trust Funds have
provided investors with tax-free income for more than 30 years. Defined
Corporate Income Funds, with higher current returns than municipal or government
funds, are suitable for Individual Retirement Accounts and other tax-advantaged
accounts and provide monthly income. Defined Government Securities Income Funds
provide a way to participate in markets for U.S. government securities while
earning an attractive current return. Defined International Bond Funds, invested
in bonds payable in foreign currencies, offer the potential to profit from
changes in currency values and possibly from interest rates higher than paid on
comparable US bonds, but investors incur a higher risk for these potentially
greater returns. Historically, stocks have offered growth of capital, and thus
some protection against inflation, over the long term. Defined Equity Income
Funds offer participation in the stock market, providing current income as well
as the possibility of capital appreciation. The S&P Index Trusts offer a
convenient and inexpensive way to participate in broad market movements. Concept
Series seek to capitalize on selected anticipated economic, political or
business trends. Utility Stock Series, consisting of stocks of issuers with
established reputations for regular cash dividends, seek to benefit from
dividend increases. Select Ten Portfolios seek total return by investing for one
year in the ten highest yielding stocks on a designated stock index.
EXCHANGE OPTION
It is expected that exchanges at a reduced sales charge will be offered
with future series of Equity Income Fund, Concept Series having deferred sales
charges as those Series become available.
21
<PAGE>
Defined
Asset FundsSM
SPONSORS: EQUITY INCOME FUND
Merrill Lynch, Concept Series
Pierce, Fenner & Smith Incorporated Health Care Trust II
Defined Asset Funds 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
388 Greenwich Street registration statement and exhibits
23rd Floor relating thereto which have been filed
New York, N.Y. 10013 with the Securities and Exchange
(800) 298-UNIT 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--59th 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 10048
1-800-323-1508
15043--1/95
<PAGE>
PART II
ADDITIONAL INFORMATION NOT INCLUDED IN THE PROSPECTUS
A. THE FOLLOWING INFORMATION RELATING TO THE DEPOSITORS IS INCORPORATED BY
REFERENCE TO
THE SEC FILINGS INDICATED AND MADE A PART OF THIS REGISTRATION STATEMENT.
SEC FILE OR
IDENTIFICATION
NUMBER
--------------------
I. Bonding Arrangements and Date of Organization of the
Depositors filed pursuant to Items A and B of
Part II of the Registration Statement on Form
S-6 under the Securities Act of 1933:
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................. 2-52691
Smith Barney Inc............................. 33-29106
PaineWebber Incorporated..................... 2-87965
Prudential Securities Incorporated........... 2-61418
Dean Witter Reynolds Inc..................... 2-60599
II. Information as to Officers and Directors of the
Depositors filed pursuant to Schedules A and D
of Form BD under Rules 15b1-1 and 15b3-1 of the
Securities Exchange Act of 1934:
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................. 8-7221
Smith Barney Inc............................. 8-8177
PaineWebber Incorporated..................... 8-16267
Prudential Securities Incorporated........... 8-27154
Dean Witter Reynolds Inc..................... 8-14172
III. Charter documents of the Depositors filed as
Exhibits to the Registration Statement on Form
S-6 under the Securities Act of 1933 (Charter,
By-Laws):
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................. 2-73866, 2-77549
Smith Barney Inc............................. 33-20499
PaineWebber Incorporated..................... 2-87965, 2-87965
Prudential Securities Incorporated........... 2-86941, 2-86941
Dean Witter Reynolds Inc..................... 2-60599, 2-86941
B. The Internal Revenue Service Employer Identification
Numbers of the Sponsors and Trustee are as follows:
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................. 13-5674085
Smith Barney Inc............................. 13-1912900
PaineWebber Incorporated..................... 13-2638166
Prudential Securities Incorporated........... 22-2347336
Dean Witter Reynolds Inc..................... 94-1671384
The Chase Manhattan Bank, N.A., Trustee...... 13-2633612
II-1
<PAGE>
SERIES OF EQUITY INCOME FUND
DESIGNATED PURSUANT TO RULE 487 UNDER
THE SECURITIES ACT OF 1933
SEC
SERIES FILE NUMBER
- --------------------------------------------------------------------------------
'MERIT' 1987 Series (The Merrill Equity Research
Investment Trust)............................ 33-10989
Concept Series Environmental Technology Trust............ 33-26511
Investment Philosophy Series 1991 Selected Industrial
Portfolio................................................ 33-39158
Concept Series Real Estate Income Fund................... 33-51869
CONTENTS OF REGISTRATION STATEMENT
THE REGISTRATION STATEMENT ON FORM S-6 COMPRISES THE FOLLOWING PAPERS AND
DOCUMENTS:
THE FACING SHEET OF FORM S-6.
THE CROSS-REFERENCE SHEET (INCORPORATED BY REFERENCE FROM THE CROSS-REFERENCE
SHEET OF THE REGISTRATION STATEMENT OF THE EQUITY INCOME FUND, SIXTH UTILITY
COMMON STOCK SERIES, 1933 ACT FILE NO. 2-86836). ADDITIONAL INFORMATION NOT
INCLUDED IN THE PROSPECTUS (PART II).
CONSENT OF INDEPENDENT ACCOUNTANTS.
THE FOLLOWING EXHIBITS:
1.1 --FORM OF TRUST INDENTURE (INCORPORATED BY REFERENCE TO EXHIBIT 1.1 TO
THE REGISTRATION STATEMENT OF THE EQUITY INCOME FUND CONCEPT SERIES,
ENVIRONMENTAL TECHNOLOGY TRUST, 1933 ACT FILE NO. 33-26511.)
1.1.1 --FORM OF STANDARD TERMS AND CONDITIONS OF TRUST EFFECTIVE AS OF OCTOBER
21, 1993 (INCORPORATED BY REFERENCE TO EXHIBIT 1.1.1 TO THE
REGISTRATION STATEMENT OF MUNICIPAL INVESTMENT TRUST FUND, MULTISTATE
SERIES--48, 1933 ACT FILE NO. 50247.)
1.2 --FORM OF MASTER AGREEMENT AMONG UNDERWRITERS (INCORPORATED BY REFERENCE
TO EXHIBIT 1.2 TO THE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OF 1933 OF THE CORPORATE INCOME FUND, ONE HUNDRED NINETY-FOURTH
MONTHLY PAYMENT SERIES, 1933 ACT FILE NO. 2-90925).
2.1 --FORM OF CERTIFICATE OF BENEFICIAL INTEREST (INCLUDED IN EXHIBIT 1.1.1)
3.1 --OPINION OF COUNSEL AS TO THE LEGALITY OF THE SECURITIES BEING ISSUED
INCLUDING THEIR CONSENT TO THE USE OF ITS NAME UNDER THE HEADING
'MISCELLANEOUS--LEGAL OPINION' IN THE PROSPECTUS.
R-1
<PAGE>
SIGNATURES
THE REGISTRANT HEREBY IDENTIFIES THE SERIES NUMBERS OF EQUITY INCOME FUND
LISTED ON PAGE R-1 FOR THE PURPOSES OF THE REPRESENTATIONS REQUIRED BY RULE 487
AND REPRESENTS THE FOLLOWING:
1) THAT THE PORTFOLIO SECURITIES DEPOSITED IN THE SERIES AS TO WHICH THIS
REGISTRATION STATEMENT IS BEING FILED DO NOT DIFFER MATERIALLY IN TYPE OR
QUALITY FROM THOSE DEPOSITED IN SUCH PREVIOUS SERIES;
2) THAT, EXCEPT TO THE EXTENT NECESSARY TO IDENTIFY THE SPECIFIC PORTFOLIO
SECURITIES DEPOSITED IN, AND TO PROVIDE ESSENTIAL FINANCIAL INFORMATION
FOR, THE SERIES WITH RESPECT TO WHICH THIS REGISTRATION STATEMENT IS BEING
FILED, THIS REGISTRATION STATEMENT DOES NOT CONTAIN DISCLOSURES THAT
DIFFER IN ANY MATERIAL RESPECT FROM THOSE CONTAINED IN THE REGISTRATION
STATEMENTS FOR SUCH PREVIOUS SERIES AS TO WHICH THE EFFECTIVE DATE WAS
DETERMINED BY THE COMMISSION OR THE STAFF; AND
3) THAT IT HAS COMPLIED WITH RULE 460 UNDER THE SECURITIES ACT OF 1933.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT OR AMENDMENT TO THE REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY
AUTHORIZED IN THE CITY OF NEW YORK AND STATE OF NEW YORK ON THE 24TH DAY OF
JANUARY, 1995.
SIGNATURES APPEAR ON PAGES R-3, R-4, R-5, R-6 AND R-7.
A MAJORITY OF THE MEMBERS OF THE BOARD OF DIRECTORS OF MERRILL LYNCH, PIERCE,
FENNER & SMITH INCORPORATED HAS SIGNED THIS REGISTRATION STATEMENT OR AMENDMENT
TO THE REGISTRATION STATEMENT PURSUANT TO POWERS OF ATTORNEY AUTHORIZING THE
PERSON SIGNING THIS REGISTRATION STATEMENT OR AMENDMENT TO THE REGISTRATION
STATEMENT TO DO SO ON BEHALF OF SUCH MEMBERS.
A MAJORITY OF THE MEMBERS OF THE BOARD OF DIRECTORS OF SMITH BARNEY SHEARSON
INC. HAS SIGNED THIS REGISTRATION STATEMENT OR AMENDMENT TO THE REGISTRATION
STATEMENT PURSUANT TO POWERS OF ATTORNEY AUTHORIZING THE PERSON SIGNING THIS
REGISTRATION STATEMENT OR AMENDMENT TO THE REGISTRATION STATEMENT TO DO SO ON
BEHALF OF SUCH MEMBERS.
A MAJORITY OF THE MEMBERS OF THE EXECUTIVE COMMITTEE OF THE BOARD OF
DIRECTORS OF PAINEWEBBER INCORPORATED HAS SIGNED THIS REGISTRATION STATEMENT OR
AMENDMENT TO THE REGISTRATION STATEMENT PURSUANT TO POWERS OF ATTORNEY
AUTHORIZING THE PERSON SIGNING THIS REGISTRATION STATEMENT OR AMENDMENT TO THE
REGISTRATION STATEMENT TO DO SO ON BEHALF OF SUCH MEMBERS.
A MAJORITY OF THE MEMBERS OF THE BOARD OF DIRECTORS OF PRUDENTIAL SECURITIES
INCORPORATED HAS SIGNED THIS REGISTRATION STATEMENT OR AMENDMENT TO THE
REGISTRATION STATEMENT PURSUANT TO POWERS OF ATTORNEY AUTHORIZING THE PERSON
SIGNING THIS REGISTRATION STATEMENT OR AMENDMENT TO THE REGISTRATION STATEMENT
TO DO SO ON BEHALF OF SUCH MEMBERS.
A MAJORITY OF THE MEMBERS OF THE BOARD OF DIRECTORS OF DEAN WITTER REYNOLDS
INC. HAS SIGNED THIS REGISTRATION STATEMENT OR AMENDMENT TO THE REGISTRATION
STATEMENT PURSUANT TO POWERS OF ATTORNEY AUTHORIZING THE PERSON SIGNING THIS
REGISTRATION STATEMENT OR AMENDMENT TO THE REGISTRATION STATEMENT TO DO SO ON
BEHALF OF SUCH MEMBERS.
R-2
<PAGE>
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
DEPOSITOR
BY THE FOLLOWING PERSONS, WHO CONSTITUTE POWERS OF ATTORNEY HAVE BEEN FILED
A MAJORITY OF UNDER
THE BOARD OF DIRECTORS OF MERRILL FORM SE AND THE FOLLOWING 1933 ACT
LYNCH, PIERCE, FILE
FENNER & SMITH INCORPORATED: NUMBER: 33-43466
HERBERT M. ALLISON, JR.
BARRY S. FREIDBERG
EDWARD L. GOLDBERG
STEPHEN L. HAMMERMAN
JEROME P. KENNEY
DAVID H. KOMANSKY
DANIEL T. NAPOLI
THOMAS H. PATRICK
JOHN L. STEFFENS
DANIEL P. TULLY
ROGER M. VASEY
ARTHUR H. ZEIKEL
BY
ERNEST V. FABIO
(AS AUTHORIZED SIGNATORY FOR MERRILL LYNCH, PIERCE,
FENNER & SMITH INCORPORATED AND
ATTORNEY-IN-FACT FOR THE PERSONS LISTED ABOVE)
R-3
<PAGE>
SMITH BARNEY INC.
DEPOSITOR
BY THE FOLLOWING PERSONS, WHO CONSTITUTE POWERS OF ATTORNEY HAVE BEEN FILED
A MAJORITY OF UNDER THE
THE BOARD OF DIRECTORS OF SMITH BARNEY FOLLOWING 1933 ACT FILE NUMBERS:
INC.: 33-49753 AND 33-51607
STEVEN D. BLACK
JAMES BOSHART III
ROBERT A.CASE
JAMES DIMON
ROBERT DRUSKIN
ROBERT F. GREENHILL
JEFFREY LANE
ROBERT H. LESSIN
JACK L. RIVKIN
BY
GINA LEMON
(AS AUTHORIZED SIGNATORY FOR
SMITH BARNEY INC. AND
ATTORNEY-IN-FACT FOR THE PERSONS LISTED ABOVE)
R-4
<PAGE>
PAINEWEBBER INCORPORATED
DEPOSITOR
BY THE FOLLOWING PERSONS, WHO CONSTITUTE POWERS OF ATTORNEY HAVE BEEN FILED
A MAJORITY OF UNDER
THE EXECUTIVE COMMITTEE OF THE BOARD FORM SE AND THE FOLLOWING 1933 ACT
OF DIRECTORS FILE
OF PAINEWEBBER INCORPORATED: NUMBER: 33-55073
PAUL B. GUENTHER
DONALD B. MARRON
JOSEPH J. GRANO, JR.
LEE FENSTERSTOCK
BY
ROBERT E. HOLLEY
(AS AUTHORIZED SIGNATORY FOR PAINEWEBBER INCORPORATED
AND ATTORNEY-IN-FACT FOR THE PERSONS LISTED ABOVE)
R-5
<PAGE>
PRUDENTIAL SECURITIES INCORPORATED
DEPOSITOR
BY THE FOLLOWING PERSONS, WHO CONSTITUTE POWERS OF ATTORNEY HAVE BEEN FILED
A MAJORITY OF UNDER FORM SE AND THE FOLLOWING 1933
THE EXECUTIVE COMMITTEE OF THE BOARD ACT FILE NUMBER: 33-41631
OF DIRECTORS OF
PRUDENTIAL SECURITIES INCORPORATED:
JAMES T. GAHAN
ALAN D. HOGAN
HOWARD A. KNIGHT
GEORGE A. MURRAY
LELAND B. PATON
HARDWICK SIMMONS
BY
RICHARD R. HOFFMANN
(AS AUTHORIZED SIGNATORY FOR PRUDENTIAL SECURITIES
INCORPORATED AND ATTORNEY-IN-FACT FOR THE PERSONS LISTED ABOVE)
R-6
<PAGE>
DEAN WITTER REYNOLDS INC.
DEPOSITOR
BY THE FOLLOWING PERSONS, WHO CONSTITUTE POWERS OF ATTORNEY HAVE BEEN FILED
A MAJORITY OF UNDER FORM SE AND THE FOLLOWING
THE BOARD OF DIRECTORS OF DEAN WITTER 1933 ACT FILE NUMBER: 33-17085
REYNOLDS INC.:
NANCY DONOVAN
CHARLES A. FIUMEFREDDO
JAMES F. HIGGINS
STEPHEN R. MILLER
PHILIP J. PURCELL
THOMAS C. SCHNEIDER
WILLIAM B. SMITH
BY
MICHAEL D. BROWNE
(AS AUTHORIZED SIGNATORY FOR DEAN WITTER REYNOLDS INC.
AND ATTORNEY-IN-FACT FOR THE PERSONS LISTED ABOVE)
R-7
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
THE SPONSORS AND TRUSTEE OF EQUITY INCOME FUND,
CONCEPT SERIES, HEALTH CARE TRUST II,
DEFINED ASSET FUNDS:
WE HEREBY CONSENT TO THE USE IN THIS REGISTRATION STATEMENT NO. 33-53669 OF OUR
OPINION DATED JANUARY 24, 1995 RELATING TO THE STATEMENT OF CONDITION OF EQUITY
INCOME FUND, CONCEPT SERIES, HEALTH CARE TRUST II, DEFINED ASSET FUNDS, AND TO
THE REFERENCE TO US UNDER THE HEADING 'AUDITORS' IN THE PROSPECTUS WHICH IS A
PART OF THIS REGISTRATION STATEMENT.
DELOITTE & TOUCHE LLP
New York, N.Y.
January 24, 1995
R-8
EXHIBIT 3.1
DAVIS POLK & WARDWELL
450 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
(212) 450-4000
JANUARY 24, 1995
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
SMITH BARNEY INC.
PRUDENTIAL SECURITIES INCORPORATED
PAINEWEBBER INCORPORATED
DEAN WITTER REYNOLDS INC.
c/o MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
DEFINED ASSET FUNDS
P.O. BOX 9051
PRINCETON, N.J. 08543-9051
(609) 292-8500
Dear Sirs:
We have acted as special counsel for you, as sponsors (the 'Sponsors') of
Equity Income Fund, Concept Series, Health Care Trust II, Defined Asset Funds
(the 'Fund'), in connection with the issuance of units of fractional undivided
interest in the Fund (the 'Units') in accordance with the Trust Indenture
relating to the Fund (the 'Indenture').
We have examined and are familiar with originals or copies, certified or
otherwise identified to our satisfaction, of such documents and instruments as
we have deemed necessary or advisable for the purpose of this opinion.
Based upon the foregoing, we are of the opinion that (i) the execution and
delivery of the Indenture and the issuance of the Units have been duly
authorized by the Sponsors and (ii) the Units, when duly issued and delivered by
the Sponsors and the Trustee in accordance with the Indenture, will be legally
issued, fully paid and non-assessable.
We hereby consent to the use of this opinion as Exhibit 3.1 to the
Registration Statement relating to the Units field under the Securities Act of
1933 and to the use of our name in such Registration Statement and in the
related prospectus under the heading 'Miscellaneous--Legal Opinion'.
Very truly yours,
DAVIS POLK & WARDWELL
