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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 30, 1999
REGISTRATION NOS. 333-46977 AND 333-46981
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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POST-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-6
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FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
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A. EXACT NAME OF TRUST:
EQUITY INVESTOR FUND
FOCUS SERIES
FINANCIAL PORTFOLIO 2
HEALTH CARE PORTFOLIO 3
DEFINED ASSET FUNDS
B. NAMES OF DEPOSITOR:
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
C. COMPLETE ADDRESSES OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES:
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
DEFINED ASSET FUNDS
P.O. BOX 9051
PRINCETON, NJ 08543-9051
D. NAMES AND COMPLETE ADDRESSES OF AGENTS FOR SERVICE:
TERESA KONCICK, ESQ.
P.O. BOX 9051
PRINCETON, NJ 08543-9051 COPIES TO:
PIERRE DE SAINT PHALLE,
ESQ.
450 LEXINGTON AVENUE
NEW YORK, NY 10017
The issuer has registered an indefinite number of Units under the Securities Act
of 1933 pursuant to Rule 24f-2 and filed the Rule 24f-2 Notice for the most
recent fiscal year on May 31, 1999.
Check box if it is proposed that this filing will become effective on July 9,
1999 pursuant to paragraph (b) of Rule 485. / x /
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DEFINED ASSET FUNDSSM
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- ----------------------------------
EQUITY INVESTOR FUND
FOCUS SERIES
FINANCIAL PORTFOLIO 2
HEALTH CARE PORTFOLIO 3
(A UNIT INVESTMENT TRUST)
O FINANCIAL AND HEALTH CARE PORTFOLIOS
O DESIGNED FOR CAPITAL APPRECIATION
O DIVIDEND REINVESTMENT OPTION
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The Securities and Exchange Commission has not
approved or disapproved these Securities or
SPONSOR: passed upon the adequacy of this prospectus. Any
Merrill Lynch, representation to the contrary is a criminal
Pierce, Fenner & Smith offense.
Incorporated Prospectus dated July 9, 1999.
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Def ined Asset FundsSM
Defined Asset FundsSM is America's oldest and largest family of unit investment
trusts, with over $160 billion sponsored over the last 28 years. Defined Asset
Funds has been a leader in unit investment trust research and product
innovation. Our family of Funds helps investors work toward their financial
goals with a full range of quality investments, including municipal, corporate
and government bond portfolios, as well as domestic and international equity
portfolios.
Defined Asset Funds offer a number of advantages:
o A disciplined strategy of buying and holding with a long-term view is the
cornerstone of Defined Asset Funds.
o Fixed portfolio: Defined Funds follow a buy and hold investment strategy;
funds are not managed and portfolio changes are limited.
o Defined Portfolios: We choose the stocks or bonds in advance, so you know what
you're investing in.
o Professional research: Our dedicated research team seeks out stocks or bonds
appropriate for a particular fund's objectives.
o Ongoing supervision: We monitor each portfolio on an ongoing basis.
No matter what your investment goals, risk tolerance or time horizon, there's
probably a Defined Asset Fund that suits your investment style. Your financial
professional can help you select a Defined Asset Fund that works best for your
investment portfolio.
THE FINANCIAL INFORMATION ON THIS PROSPECTUS IS AS OF THE EVALUATION DATE, MARCH
31, 1999.
CONTENTS
PAGE
-----------
Financial Portfolio 2................................... 3
Risk/Return Summary.................................. 3
Health Care Portfolio 3................................. 6
Risk/Return Summary.................................. 6
What You Can Expect From Your Investment................ 9
Income............................................... 9
Records and Reports.................................. 9
The Risks You Face...................................... 9
Concentration Risk................................... 9
Litigation and Legislation Risks..................... 11
Selling or Exchanging Units............................. 11
Sponsor's Secondary Market........................... 11
Selling Units to the Trustee......................... 11
Rollover/Exchange Option............................. 12
How The Fund Works...................................... 12
Pricing.............................................. 12
Evaluations.......................................... 13
Income............................................... 13
Expenses............................................. 13
Portfolio Changes.................................... 14
Portfolio Termination................................ 14
No Certificates...................................... 14
Trust Indenture...................................... 14
Legal Opinion........................................ 15
Auditors............................................. 15
Sponsor.............................................. 15
Trustee.............................................. 15
Underwriters' and Sponsor's Profits.................. 16
Public Distribution.................................. 15
Code of Ethics....................................... 16
Year 2000 Issues..................................... 16
Taxes................................................... 16
Supplemental Information................................ 17
Financial Statements.................................... D-1
2
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FINANCIAL PORTFOLIO 2--RISK/RETURN SUMMARY
1. WHAT IS THE PORTFOLIO'S OBJECTIVE?
O The objective of this Defined Fund is capital appreciation
by investing for a period of about one year in a portfolio
consisting of common stocks in the financial sector.
o When the Portfolio was created in April, 1998, the stocks
were considered by analysts in the Merrill Lynch Global
Research and Economics group to be among the most
attractive in the financial sector.
2. WHAT IS THE PORTFOLIO'S INVESTMENT STRATEGY?
O The Portfolio contains 31 common stocks in the financial
sector selected by the Sponsor for capital appreciation.
- -- The Portfolio is designed for investors who want to
invest a portion of their equity portfolio in the
financial sector, with the opportunity to change the
focus of their equity investment by exchanging units of
this Portfolio into units of other equity Defined Funds
at a reduced sales charge if their views on this sector
change.
- -- The Portfolio is not an appropriate investment for
investors seeking preservation of capital or a high
level of current income.
- -- Since all of the Portfolio stocks are in the financial
sector, this Portfolio is not designed to be a complete
equity investment program.
O The Portfolio plans to hold the stocks in the Portfolio
until May 2000. The Portfolio will terminate by May 5,
2000. If you notify your financial adviser by April 5,
2000, you may rollover your investment into a new Focus
portfolio, if one is offered.
o If your view of this investment changes, you can exchange
your units for units of other Focus or Select Series at any
time before the Portfolio terminates. You can also sell
your units at any time.
3. WHAT FINANCIAL INDUSTRY SECTORS ARE REPRESENTED IN THE
PORTFOLIO?
Based upon the principal business of each issuer and
current market values, the Portfolio represents the
following financial industry groups:
APPROXIMATE
PORTFOLIO
PERCENTAGE
o Banks 34%
o Equity-REITS 9
o Financial Services 25
o Insurance-Life & Annuity 11
o Property & Casualty Insurance 10
o Thrifts 10
4. WHAT ARE THE SIGNIFICANT RISKS?
YOU CAN LOSE MONEY BY INVESTING IN THE PORTFOLIO. THIS CAN
HAPPEN FOR VARIOUS REASONS, INCLUDING:
o Stock prices can be volatile.
o Dividend rates on the stocks or share prices may decline
during the life of the Portfolio.
o Because the Portfolio is concentrated in stocks in the
financial sector, adverse developments in this industry may
affect the value of your units.
o The Portfolio may continue to purchase or hold the stocks
originally selected even though their market value or yield
may have changed or they may no longer be recommended by
research analysts.
3
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FINANCIAL PORTFOLIO 2--RISK/RETURN SUMMARY (Continued)
5. IS THIS PORTFOLIO APPROPRIATE FOR YOU?
Yes, if you want capital appreciation. You will benefit
from a professionally selected and supervised portfolio
whose risk is reduced by investing in equity securities of
different issuers.
The Portfolio is not appropriate for you if you are
unwilling to take the risk involved with an equity
investment. It may not be appropriate for you if you are
seeking preservation of capital or high current income.
6. WHAT ARE THE PORTFOLIO'S FEES AND EXPENSES?
This table shows the costs and expenses you may pay,
directly or indirectly, when you invest in the Portfolio.
ESTIMATED ANNUAL OPERATING EXPENSES
AMOUNT
PER 1,000
UNITS
-----------
$ 0.88
Trustee's Fee
$ 0.45
Portfolio Supervision,
Bookkeeping and
Administrative Fees
(including updating
expenses)
$ 1.05
Organization Expenses
$ 0.50
Other Operating Expenses
-----------
$ 2.88
TOTAL
The Sponsors historically paid organization
costs and updating expenses.
INVESTOR FEES
You will pay an up-front sales fee of 1.00%, as well as a
deferred sales fee of $2.50 per 1,000 units deducted from
the Portfolio's net asset value monthly, May 1 through
November 1, 1999.
The maximum sales fees are as follows:
YOUR MAXIMUM
SALES FEE
IF YOU INVEST: WILL BE:
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Less than $50,000 2.75%
$ 50,000 to $99,999 2.50%
$100,000 to $249,999 2.00%
$250,000 to $999,999 1.75%
$1,000,000 or more 1.00%
7. IS THE PORTFOLIO MANAGED?
Unlike a mutual fund, the Portfolio is not managed and
stocks are not sold because of market changes. The Sponsor
monitors the portfolio and may instruct the Trustee to sell
securities under certain limited circumstances. However,
given the investment philosophy of the Portfolio, the
Sponsor is not likely to do so.
8. HOW DO I BUY UNITS?
The minimum investment is $250.
You can buy units from the Sponsor.
UNIT PRICE PER 1,000 UNITS $796.54
(as of March 31, 1999)
Unit price is based on the net asset value of the Portfolio
plus the up-front sales fee.
The Portfolio stocks are valued by the Trustee on the basis
of their closing prices at 4:00 p.m. Eastern time every
business day. Unit price changes every day with changes in
the prices of the stocks.
9. HOW DO I SELL UNITS?
You may sell your units at any time to the Sponsor or the
Trustee for the net asset value determined at the close of
business on the date of sale, less any remaining deferred
sales fee.
4
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10. HOW ARE DISTRIBUTIONS MADE AND TAXED?
The Fund pays quarterly distributions of any dividend
income, net of expenses, on the 25th of June, September,
December and February, if you own units on the 10th of
those months. Distributions of ordinary income will be
dividends for federal income tax purposes and may be
eligible for the dividends-received deduction for
corporations. You will not be entitled to the 20% maximum
federal tax rate for gains from the sale of your Units
because you will not have held them for more than one year.
Distributions to foreign investors will generally be
subject to withholding taxes.
11. WHAT OTHER SERVICES ARE AVAILABLE?
REINVESTMENT
You may choose to reinvest your distributions into
additional units of the Portfolio. You will pay only the
deferred sales fee remaining at the time of reinvestment.
Unless you choose reinvestment, you will receive your
distributions in cash.
EXCHANGE PRIVILEGES
You may exchange units of this Portfolio for units of
certain other Defined Asset Funds. You may also exchange
into this Portfolio from certain other funds. We charge a
reduced sales fee on designated exchanges.
5
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HEALTH CARE PORTFOLIO 3--RISK/RETURN SUMMARY
1. WHAT IS THE PORTFOLIO'S OBJECTIVE?
O The objective of this Defined Fund is capital appreciation
by investing for a period of about one year in a portfolio
consisting of common stocks in the health care sector.
o When the Portfolio was created in April, 1998, the stocks
were considered by analysts in the Merrill Lynch Global
Research and Economics group to be among the most
attractive in the health care sector.
2. WHAT IS THE PORTFOLIO'S INVESTMENT STRATEGY?
O The Portfolio contains 24 common stocks in the health care
sector selected by the Sponsor for capital appreciation.
- -- The Portfolio is designed for investors who want to
invest a portion of their equity portfolio in the health
care sector, with the opportunity to change the focus of
their equity investment by exchanging units of this
Portfolio into units of other equity Defined Funds at a
reduced sales charge if their views on this sector
change.
- -- The Portfolio is not an appropriate investment for
investors seeking preservation of capital or a high
level of current income.
- -- Since all of the Portfolio stocks are in the health care
sector, this Portfolio is not designed to be a complete
equity investment program.
O The Portfolio plans to hold the stocks in the Portfolio
until May 2000. The Portfolio will terminate by May 5,
2000. If you notify your financial adviser by April 6,
2000, you may rollover your investment into a new Focus
portfolio, if one is offered.
o If your view of this investment changes, you can exchange
your units for units of other Focus or Select Series at any
time before the Portfolio terminates. You can also sell
your units at any time.
3. WHAT HEALTH CARE INDUSTRY SECTORS ARE REPRESENTED IN THE
PORTFOLIO?
Based upon the principal business of each issuer and
current market values, the Portfolio represents the
following health care industry groups:
APPROXIMATE
PORTFOLIO
PERCENTAGE
o Pharmaceuticals 34%
o Biotechnology 23
o Medical Technology 21
o Health Maintenance Organizations 11
o Specialty Services 3
o Hospital Management 5
o Long Term Care 2
o Medical Information Systems 1
4. WHAT ARE THE SIGNIFICANT RISKS?
YOU CAN LOSE MONEY BY INVESTING IN THE PORTFOLIO. THIS CAN
HAPPEN FOR VARIOUS REASONS, INCLUDING:
o Stock prices can be volatile.
o Dividend rates on the stocks or share prices may decline
during the life of the Portfolio.
o Because the Portfolio is concentrated in stocks in the
health care sector, adverse developments in this industry
may affect the value of your units.
o The Portfolio may continue to purchase or hold the stocks
originally selected even though their market value or yield
may have changed or they may no longer be recommended by
research analysts.
6
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HEALTH CARE PORTFOLIO 3--RISK/RETURN SUMMARY (Continued)
5. IS THIS PORTFOLIO APPROPRIATE FOR YOU?
Yes, if you want capital appreciation. You will benefit
from a professionally selected and supervised portfolio
whose risk is reduced by investing in equity securities of
different issuers.
The Portfolio is not appropriate for you if you are
unwilling to take the risk involved with an equity
investment. It may not be appropriate for you if you are
seeking preservation of capital or high current income.
6. WHAT ARE THE PORTFOLIO'S FEES AND EXPENSES?
This table shows the costs and expenses you may pay,
directly or indirectly, when you invest in the Portfolio.
ESTIMATED ANNUAL OPERATING EXPENSES
AMOUNT
PER 1,000
UNITS
-----------
$ 0.88
Trustee's Fee
$ 0.45
Portfolio Supervision,
Bookkeeping and
Administrative Fees
(including updating
expenses)
$ 0.92
Organization Expenses
$ 0.43
Other Operating Expenses
-----------
$ 2.68
TOTAL
The Sponsors historically paid organization
costs and updating expenses.
INVESTOR FEES
You will pay an up-front sales fee of 1.00%, as well as a
deferred sales fee of $2.50 per 1,000 units deducted from
the Portfolio's net asset value monthly, May 1 through
November 1, 1999.
The maximum sales fees are as follows:
YOUR MAXIMUM
SALES FEE
IF YOU INVEST: WILL BE:
----------------------------------- -----------------
Less than $50,000 2.75%
$ 50,000 to $99,999 2.50%
$100,000 to $249,999 2.00%
$250,000 to $999,999 1.75%
$1,000,000 or more 1.00%
7. IS THE PORTFOLIO MANAGED?
Unlike a mutual fund, the Portfolio is not managed and
stocks are not sold because of market changes. The Sponsor
monitors the portfolio and may instruct the Trustee to sell
securities under certain limited circumstances. However,
given the investment philosophy of the Portfolio, the
Sponsor is not likely to do so.
8. HOW DO I BUY UNITS?
The minimum investment is $250.
You can buy units from the Sponsor.
UNIT PRICE PER 1,000 UNITS $926.63
(as of March 31, 1999)
Unit price is based on the net asset value of the Portfolio
plus the up-front sales fee.
The Portfolio stocks are valued by the Trustee on the basis
of their closing prices at 4:00 p.m. Eastern time every
business day. Unit price changes every day with changes in
the prices of the stocks.
9. HOW DO I SELL UNITS?
You may sell your units at any time to the Sponsor or the
Trustee for the net asset value determined at the close of
business on the date of sale, less any remaining deferred
sales fee.
7
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10. HOW ARE DISTRIBUTIONS MADE AND TAXED?
The Fund pays one distribution of any dividend income, net
of expenses, on the 25th of December, 1999, if you own
units on the 10th of that month. Distributions of ordinary
income will be dividends for federal income tax purposes
and may be eligible for the dividends-received deduction
for corporations. You will not be entitled to the 20%
maximum federal tax rate for gains from the sale of your
Units because you will not have held them for more than one
year. Distributions to foreign investors will generally be
subject to withholding taxes.
11. WHAT OTHER SERVICES ARE AVAILABLE?
REINVESTMENT
You may choose to reinvest your distribution into
additional units of the Portfolio. You will pay only the
deferred sales fee remaining at the time of reinvestment.
Unless you choose reinvestment, you will receive your
distributions in cash.
EXCHANGE PRIVILEGES
You may exchange units of this Portfolio for units of
certain other Defined Asset Funds. You may also exchange
into this Portfolio from certain other funds. We charge a
reduced sales fee on designated exchanges.
8
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WHAT YOU CAN EXPECT FROM YOUR INVESTMENT
INCOME
Your income payments will fluctuate based upon the amount of dividends declared
and paid by each issuer. Other reasons your income may vary are:
o changes in the Portfolio because of sales of securities;
o changes in the Portfolio's expenses; and
o the amount of dividends declared and paid.
There can be no assurance that any dividends will be declared or paid.
RECORDS AND REPORTS
You will receive:
o a notice from the Trustee if new equity securities are deposited in exchange
or substitution for equity securities originally deposited;
o a final report on Portfolio activity; and
o annual tax information. This will also be sent to the IRS. You must report the
amount of income received during the year. Please contact your tax advisor in
this regard.
You may inspect records of Portfolio transactions at the Trustee's office during
regular business hours.
THE RISKS YOU FACE
CONCENTRATION RISK
When stocks in a particular industry make up 25% or more of a Portfolio, it is
said to be 'concentrated' in that industry, which makes the Portfolio less
diversified.
Here is what you should know about the Financial Portfolio's concentrations in
stocks of banks and insurance companies.
A bank's profitability depends to a great extent on the credit quality of its
loan portfolio, which is affected by:
o the institution's underwriting criteria;
o concentrations within its loan portfolio; and
o general economic conditions.
A bank's operating performance is also impacted by:
o changes in interest rates;
o availability and cost of funds;
o intensity of competition; and
o degree of government regulation.
Insurance companies are not regulated by the federal government, but the
insurance business can be affected by:
o state laws;
o federal initiatives; and
o tax law changes.
An insurance company's profitability depends largely on:
o actuarial assumptions; and
o investment returns on reserve and surplus funds.
Insurance companies may also be affected by:
o natural catastrophes or environmental claims;
o real estate and equity market returns;
o interest rate levels; and
o general economic conditions.
Here is what you should know about the Health Care Portfolio's concentration in
hospital and health care stocks:
o The payment of dividends on these stocks will be affected by the general
financial condition of issuers in the industry, which in turn is impacted
by revenues from private third-party payors and government programs,
including Medicare and Medicaid, which have
9
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generally undertaken cost containment measures to limit payments to health
care providers;
o hospitals face increasing competition resulting from hospital mergers and
affiliations;
o hospitals need to reduce costs as HMOs increase market penetration and
hospital supply and drug companies raise prices; and
o hospitals and health care providers are subject to various legal claims by
patients and others and are adversely affected by increasing costs of
insurance.
o many hospitals are aggressively buying physician practices and assuming
risk contracts to gain market share. If revenues do not increase
accordingly, this practice could reduce profits.
o Medicare is changing its reimbursement system for nursing homes. Many
nursing home providers are not sure how they will be treated. In many
cases, the providers may receive lower reimbursements and these would have
to cut expenses to maintain profitability.
o most retirement/nursing home providers rely on entrance fees for operating
revenues. If people live longer than expected and turnover is lower than
budgeted, operating revenues would be adversely affected by less than
expected entrance fees.
Here is what you should know about the Health Care Portfolio's concentration in
stocks of the pharmaceutical and biotechnology sectors of the health care
industry:
o Pharmaceutical and biotechnology companies need to price drugs to cover
costs. Increased competition, managed care, larger provider networks and a
planned medicare program may make it difficult to raise prices, and in
fact, may result in price discounting.
o Pharmaceutical companies and biotechnology companies are regulated by the
Food and Drug Administration. Before any drug or medical device can be
sold, it must receive FDA approval. The process to obtain FDA approval is
long and costly, and it is becoming increasingly difficult to recoup these
costs.
o Pharmaceutical and biotechnology companies face the risk of large product
liability suits and consequently must carry expensive liability insurance.
o Pharmaceutical companies must devote a large amount of capital to research
and development and marketing to remain competitive. If new drugs are not
approved, or new applications are not found for existing drugs, profits may
be adversely impacted.
o The biotechnology industry is an emerging growth industry, and therefore
biotechnology companies may be thinly capitalized and more volatile than
companies with greater capitalization.
o Biotechnology companies generally retain earnings to finance the company's
expansion, and as a result no dividends may be paid. Additional capital
may be required to market new products on a commercial basis.
o Biotechnology companies may be dependent for their revenues on only a few
products, and may depend on their competitors to produce and market their
products. These companies are therefore susceptible to product
obsolescence, a common problem in a rapidly developing area like
biotechnology.
10
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LITIGATION AND LEGISLATION RISKS
We do not know of any pending litigation that might have a material adverse
effect upon the Portfolio.
Future tax legislation could affect the value of the Portfolio by:
o reducing the dividends-received deduction or
o increasing the corporate tax rate resulting in less money available for
dividend payments.
SELLING OR EXCHANGING UNITS
You can sell your units at any time for a price based on their net asset value.
Your net asset value is calculated each business day by:
o adding the value of the Portfolio Securities, cash and any other Portfolio
assets;
o subtracting accrued but unpaid Portfolio expenses, unreimbursed Trustee
advances, cash held to buy back units or for distribution to investors, and
any other Portfolio liabilities; and
o dividing the result by the number of outstanding units.
Your net asset value when you sell may be more or less than your cost because of
sales fees, market movements and changes in the Portfolio.
If you sell your units before the final deferred sales fee installment, the
amount of any remaining payments will be deducted from your proceeds.
SPONSOR'S SECONDARY MARKET
While we are not obligated to do so, we will buy back units at net asset value
less any remaining deferred sales fee. We may resell the units to other buyers
or to the Trustee.
We have maintained a secondary market continuously for more than 25 years, but
we could discontinue it without prior notice for any business reason.
SELLING UNITS TO THE TRUSTEE
Regardless of whether we maintain a secondary market, you can sell your units to
the Trustee at any time by contacting your broker, dealer or financial
institution that holds your units in street name. Sometimes, additional
documents are needed such as a trust document, certificate of corporate
authority, certificate of death or appointment as executor, administrator or
guardian.
Within seven days after your request and the necessary documents are received,
the Trustee will mail a check to you. Contact the Trustee for additional
information.
As long as we are maintaining a secondary market, the Trustee will sell your
units to us at a price based on net asset value. If there is no secondary
market, the Trustee will sell your units in the over-the-counter market if it
believes it can obtain a higher price. In that case, you will receive the net
proceeds of the sale.
If the Portfolio does not have cash available to pay you for the units you are
selling we will select securities to be sold. These sales could be made at times
when the securities would not otherwise be sold and may result in your receiving
less than you paid for your unit and also reduce the size and diversity of the
Portfolio.
If you sell units with a value of at least $250,000, you may choose to receive
your distribution 'in kind.' If you so choose, you will receive securities and
cash with a total value equal to the price of your units. The Trustee will try
to distribute securities in the portfolio pro rata, but it reserves the right to
distribute only one or a few securities.
11
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The Trustee will act as your agent in an in-kind distribution and will either
hold the securities for your account or transfer them as you instruct. You must
pay any transaction costs as well as transfer and ongoing custodial fees on
sales of securities distributed in kind.
There could be a delay in paying you for your units:
o if the New York Stock Exchange is closed (other than customary weekend and
holiday closings);
o if the SEC determines that trading on the New York Stock Exchange is
restricted or that an emergency exists making sale or evaluation of the
securities not reasonably practicable; and
o for any other period permitted by SEC order.
ROLLOVER/EXCHANGE OPTION
When this Portfolio is about to terminate, you may have the option to roll your
proceeds into a new Focus Portfolio if one is available.
If you notify your financial adviser by April 5, 2000 for the Financial
Portfolio and April 6, 2000 for the Health Care Portfolio, your units will be
redeemed and certain distributed securities plus the proceeds from the sale of
the remaining distributed securities will be reinvested in units of a new Focus
Portfolio. If you decide not to roll over your proceeds, you will receive a cash
distribution (or, if you are eligible and you so choose, an in-kind
distribution) after the Portfolio terminates.
The Portfolio will terminate by May 5, 2000. You may, by written notice to the
Trustee at least ten business days prior to termination, elect to receive an
in-kind distribution of your pro rata share of the Securities remaining in the
Portfolio at that time (net of your share of expenses). Of course you can sell
your Units at any time prior to termination.
You may exchange units of this Portfolio for units of another Select or Focus
Series or certain other Defined Asset Funds at any time before this fund
terminates. If you continue to hold your Units, you may exchange units of this
Portfolio for units of certain other Defined Asset Funds at a reduced sales fee
if your investment goals change. To exchange units, you should talk to your
financial professional about what Portfolios are exchangeable, suitable and
currently available.
We may amend or terminate the options to exchange your units or roll your
proceeds at any time without notice.
HOW THE FUND WORKS
PRICING
Units are charged a combination of initial and deferred sales fees.
In addition, a portion of the price of a unit also consists of cash to pay all
or some of the costs of organizing the Portfolio including:
o cost of initial preparation of legal documents;
o federal and state registration fees;
o initial fees and expenses of the Trustee;
o initial audit; and
o legal expenses and other out-of-pocket expenses.
The deferred sales fee is generally a monthly charge of $2.50 per 1,000 units
and is accrued in monthly installments through November 1, 1999. Units redeemed
or repurchased prior to the accrual of the final deferred sales fee installment
will have the amount of any remaining installments deducted from the redemption
or
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repurchase proceeds or deducted in calculating an in-kind distribution. (This
deduction will be waived in the event of the death or disability, as defined in
the Internal Revenue Code of 1986, of an investor). The initial sales fee is
equal to the aggregate sales fee less the aggregate amount of any remaining
installments of the deferred sales fee.
It is anticipated that securities will not be sold to pay the deferred sales fee
until after the date of the last installment. Investors will be at risk for
market price fluctuations in the securities from the several installment accrual
dates to the dates of actual sale of securities to satisfy this liability.
EVALUATIONS
The Trustee values the securities on each business day (i.e., any day other than
Saturdays, Sundays and the following holidays as observed by the New York Stock
Exchange: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas).
If the securities are listed on a national securities exchange or the Nasdaq
National Market, evaluations are generally based on closing sales prices on that
exchange or that system or, if closing sales prices are not available, at the
mean between the closing bid and offer prices.
INCOME
o The annual income per unit, after deducting estimated annual Portfolio
expenses per unit, will depend primarily upon the amount of dividends declared
and paid by the issuers of the securities and changes in the expenses of a
Portfolio and, to a lesser degree, upon the level of sales of securities.
There is no assurance that dividends on the securities will continue at their
current levels or be declared at all.
o Each unit receives an equal share of distributions of dividend income net of
estimated expenses. Because dividends on the securities are not received at a
constant rate throughout the year, any distribution may be more or less than
the amount then credited to the income account. The Trustee credits dividends
received to an Income Account and other receipts to a Capital Account. The
Trustee may establish a reserve account by withdrawing from the these
accounts amounts it considers appropriate to pay any material liability. These
accounts do not bear interest.
EXPENSES
The Trustee is paid a fee monthly. It also benefits when it holds cash for a
Portfolio in non-interest bearing accounts. The Trustee may also receive
additional amounts:
o for extraordinary services and costs of indemnifying the Trustee and the
Sponsor;
o costs of actions taken to protect the Portfolio and other legal fees and
expenses;
o expenses for keeping the Portfolio's registration statement current; and
o Portfolio termination expenses and any governmental charges.
The Sponsor is currently reimbursed up to 45 cents per 1,000 units annually for
providing portfolio supervisory, bookkeeping and administrative services and for
any other expenses properly chargeable to the Portfolio. Legal, typesetting,
electronic filing and regulatory fees and expenses associated with updating the
Portfolio's registration statement yearly are also now chargeable to the
Portfolios. While this fee may exceed the amount of these costs and expenses
attributable to a Portfolio, the total of these fees for all Series of Defined
Asset Funds will not exceed the aggregate amount attributable to all of these
Series for any calendar year. Certain
13
<PAGE>
of these expenses were previously paid for by the Sponsor.
The Trustee's and Sponsor's fees may be adjusted for inflation without
investors' approval.
The deferred sales fees you owe are paid from the Capital Account. Although we
may collect the deferred sales charge monthly, to keep Units more fully invested
we do not currently plan to pay the deferred sales charge until after the
rollover notification date.
The Sponsor will pay advertising and selling expenses at no charge to the
Portfolios. If Portfolio expenses exceed initial estimates, the Portfolio will
owe the excess. The Trustee has a lien on Portfolio assets to secure
reimbursement of Portfolio expenses and may sell securities if cash is not
available.
PORTFOLIO CHANGES
If we maintain a secondary market in units but are unable to sell the units that
we buy in the secondary market, we will redeem units, which will affect the size
and composition of the portfolio.
We decide whether to offer units for sale that we acquire in the secondary
market after reviewing:
o diversity of a Portfolio;
o size of the Portfolio relative to its original size;
o ratio of Portfolio expenses to income; and
o cost of maintaining a current prospectus.
PORTFOLIO TERMINATION
When the Portfolios are about to terminate you will receive a notice, and you
will be unable to sell your units after that time. Unless you choose to receive
an in-kind distribution of securities, we will sell any remaining securities,
and you will receive your final distribution in cash.
You will pay your share of the expenses associated with termination, including
brokerage costs in selling securities. This may reduce the amount you receive as
your final distribution.
NO CERTIFICATES
All investors are required to hold their Units in uncertificated form and in
'street name' by their broker, dealer or financial institution at the Depository
Trust Company.
TRUST INDENTURE
Each Portfolio is a 'unit investment trust' governed by a Trust Indenture, a
contract between the Sponsor and the Trustee, which sets forth their duties and
obligations and your rights. A copy of the Indenture is available to you on
request to the Trustee. The following summarizes certain provisions of the
Indenture.
The Sponsor and the Trustee may amend the Indenture without your consent:
o to cure ambiguities;
o to correct or supplement any defective or inconsistent provision;
o to make any amendment required by any governmental agency; or
o to make other changes determined not to be materially adverse to your best
interest (as determined by the Sponsor).
Investors holding 51% of the units may amend the Indenture. Every investor must
consent to any amendment that changes the 51% requirement. No amendment may
reduce your interest in the Portfolio without your written consent.
The Trustee may resign by notifying the Sponsor. The Sponsor may remove the
Trustee without your consent if:
o it fails to perform its duties;
14
<PAGE>
o it becomes incapable of acting or bankrupt or its affairs are taken over by
public authorities; or
o the Sponsor determines that its replacement is in your best interest.
Investors holding 51% of the units may remove the Trustee. The Trustee may
resign or be removed by the Sponsors without the consent of investors. The
resignation or removal of the Trustee becomes effective when a successor accepts
appointment. The Sponsor will try to appoint a successor promptly; however, if
no successor has accepted within 30 days after notice of resignation, the
resigning Trustee may petition a court to appoint a successor.
If the Sponsor fails to perform its duties or becomes bankrupt the Trustee may:
o remove it and appoint a replacement Sponsor;
o liquidate the Portfolio; or
o continue to act as Trustee without a Sponsor.
The Trust Indenture contains customary provisions limiting the liability of the
Trustee and the Sponsor.
LEGAL OPINION
Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York 10017, as
special counsel for the Sponsor, has given an opinion that the units are validly
issued.
AUDITORS
Deloitte & Touche LLP, 2 World Financial Center, New York, New York 10281,
independent accountants, audited the Statement of Condition included in this
prospectus.
SPONSOR:
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED (a wholly-owned subsidiary of
Merrill Lynch & Co., Inc.)
P.O. Box 9051,
Princeton, NJ 08543-9051
The Sponsor is a Delaware corporation and it, or its predecessor, has acted as
sponsor to many unit investment trusts. As a registered broker-dealer the
Sponsor buys and sells securities (including investment company shares) for
others (including investment companies) and participates as an underwriter in
various selling groups.
TRUSTEE
The Bank of New York, 101 Barcley Street--
17 W, New York, New York 10268, is the Trustee. It is supervised by the Federal
Deposit Insurance Corporation, the Board of Governors of the Federal Reserve
System and New York State banking authorities.
UNDERWRITERS' AND SPONSOR'S PROFITS
Underwriters receive sales charges when they sell units. Any cash made available
by you to the Sponsor before the settlement date for those units may be used in
the Sponsor's businesses to the extent permitted by federal law and may benefit
the Sponsor.
The Sponsor or Underwriter may realize profits or sustain losses on stocks in
the Portfolios which were acquired from underwriting syndicates of which it was
a member.
In maintaining a secondary market, the Sponsor will also realize profits or
sustain losses in the amount of any difference between the prices at which it
buys units and the prices at which it resells or redeems them.
15
<PAGE>
PUBLIC DISTRIBUTION
The Sponsor does not intend to qualify units for sale in any foreign countries.
This prospectus does not constitute an offer to sell units in any country where
units cannot lawfully be sold.
CODE OF ETHICS
The Sponsor has adopted a code of ethics requiring reporting of personal
securities transactions by its employees with access to information on portfolio
transactions. The goal of the code is to prevent fraud, deception or misconduct
against the Portfolios and to provide reasonable standards of conduct.
YEAR 2000 ISSUES
Many computer systems were designed in such a way that they may be unable to
distinguish between the year 2000 and the year 1900 (commonly known as the 'Year
2000 Problem'). We do not expect that the computer system changes necessary to
prepare for the Year 2000 will cause any major operational difficulties for the
Portfolios. The Year 2000 Problem may adversely affect the issuers of the
securities contained in the Portfolios, but we cannot predict whether any impact
will be material to a Portfolio, as a whole.
TAXES
The following summarizes the material income tax consequences of holding Units.
It assumes that you are not a dealer in securities, financial institution,
insurance company or other investor with special circumstances. You should
consult your own tax adviser about your particular circumstances.
GENERAL TREATMENT OF THE FUND AND YOUR INVESTMENT
The Portfolios intend to quality for special tax treatment as regulated
investment companies so that they will not be subject to federal income tax on
the portion of their taxable income that they distribute to investors in a
timely manner.
DISTRIBUTIONS
Distributions to you of a Portfolio's dividend income and of the Portfolio's
gains from Securities it has held for one year or less will generally be taxed
to you as ordinary income, to the extent of the Portfolio's taxable income not
attributable to the Portfolio's net capital gain. Distributions to you in excess
of the Portfolio's taxable income will be treated as a return of capital and
will reduce your basis in your Units. To the extent such distributions exceed
your basis, they will be treated as gain from the sale of your Units.
Distributions to you that are treated as ordinary income will constitute
dividends for federal income tax purposes. Corporate investors may be eligible
for the 70% dividends-received deduction with respect to these distributions
(other than distributions from REITs). You should consult your tax adviser.
Distributions to you of a Portfolio's net capital gain will generally be taxable
to you as long-term capital gain, regardless of how long you have held your
Units.
GAIN OR LOSS UPON DISPOSITION
You will generally recognize capital gain or loss when you dispose of your
Units. If you receive Securities upon redemption of your Units, you will
generally recognize capital gain or loss equal to the difference between your
basis in your Units and the fair market value of the Securities received in
redemption.
16
<PAGE>
If your net long-term capital gains exceed your net short-term capital losses,
the excess may be subject to tax at a lower rate than ordinary income. Any
capital gain or loss will generally be long-term if you have held your
investment which produces the gain or loss for more than one year and short-term
if you have held it for one year or less. However, you will not be entitled to
the 20% maximum federal tax rate for gains from the sale of your units because
you will not have held them for more than one year. Because the deductibility of
capital losses is subject to limitations, you may not be able to deduct all of
your capital losses. You should consult your tax adviser in this regard.
YOUR BASIS IN THE SECURITIES
Your aggregate basis in the Units will generally be equal to the cost of your
Units, including the initial sales charge. You should not increase your basis in
your Units by deferred sales charges or organizational expenses, because the tax
reporting form and annual statements you receive will be based on the net
amounts paid to you, from which these expenses will already be deducted.
FOREIGN INVESTORS
If you are a foreign investor and you are not engaged in a U.S. trade or
business, you will generally be subject to 30% withholding tax (or a lower
applicable treaty rate) on distributions. You should consult your tax adviser
about the possible application of federal, state and local, and foreign taxes.
RETIREMENT PLANS
You may wish to purchase units for an Individual Retirement Account ('IRAs') or
other retirement plan. Generally, capital gains and income received in each of
these plans are exempt from federal taxation. All distributions from these types
of plans are generally treated as ordinary income but may, in some cases, be
eligible for tax-deferred rollover treatment. You should consult your attorney
or tax adviser about the specific tax rules relating to these plans. These plans
are offered by brokerage firms, including the Sponsor of these Portfolios, and
other financial institutions. Fees and charges with respect to such plans may
vary.
SUPPLEMENTAL INFORMATION
You can receive at no cost supplemental information about the Portfolios by
calling the Trustee. The supplemental information includes more detailed risk
disclosure and general information about the structure and operation of the
Portfolios. The supplemental information is also available from the SEC.
17
EQUITY INVESTOR FUND,
FOCUS SERIES HEALTHCARE PORTFOLIO SERIES 3
DEFINED ASSET FUNDS
REPORT OF INDEPENDENT ACCOUNTANTS
The Sponsors, Trustee and Holders
of Equity Investor Fund,
Focus Series Healthcare Portfolio Series 3
Defined Asset Funds:
We have audited the accompanying statement of condition of Equity
Investor Fund, Focus Series Healthcare Portfolio Series 3, Defined Asset
Funds including the portfolio, as of March 31, 1999 and the related statements
of operations and of changes in net assets for the period April 10, 1998
to March 31, 1999. These financial statements are the responsibility
of the Trustee. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Securities
owned at March 31, 1999, as shown in such portfolio, were
confirmed to us by The Bank of New York, the Trustee. An audit also
includes assessing the accounting principles used and significant
estimates made by the Trustee, as well as evaluating the overall
financial statement presentation. We believe that our audit provides
a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Equity
Investor Fund, Focus Series Healthcare Portfolio 3, Defined Asset Funds at
March 31, 1999 and the results of its operations and changes in its
net assets for the above-stated period in conformity with generally
accepted accounting principles.
DELIOTTE & TOUCHE LLP
New York, NY
June 3, 1999
D - 1
<PAGE>
EQUITY INVESTOR FUND,
FOCUS SERIES HEALTHCARE PORTFOLIO SERIES 3
DEFINED ASSET FUNDS
STATEMENT OF CONDITION
AS OF MARCH 31,1999
<TABLE>
<S> <C> <C>
TRUST PROPERTY:
Investment in marketable securities - at value
(cost $53,549,574) (Note 1)................... $56,528,923
Dividends receivable............................ 10,778
Receivable from securities sold................. 521,874
Deferred organizational cost (Note 7)........... 102,588
_____________
Total trust property.................. 57,164,163
Less Liabilities:
Accrued expenses payable........................ $ 32,253
Organizational expense payable.................. 156,681
Advance from trustee............................ 9,938
Redemption Payable.............................. 640,856 839,728
____________ _____________
NET ASSETS, REPRESENTED BY:
61,454,493 units of fractional undivided
interest outstanding (Note 3)................. 56,298,054
Underdistributed net investment income.......... 26,381
____________
$56,324,435
==============
UNIT VALUE ($56,324,435/61,454,493 units)......... $.91652
==============
</TABLE>
See Notes to Financial Statements.
D - 2
<PAGE>
EQUITY INVESTOR FUND,
FOCUS SERIES HEALTHCARE PORTFOLIO SERIES 3
DEFINED ASSET FUNDS
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
April 10,
1998
to
March 31,
1999
<S> <C>
INVESTMENT INCOME:
Dividend income................................. $ 185,273
Trustee's fees and expenses..................... (74,341)
Sponsors' fees ................................. (29,490)
_______________
Net investment income........................... 81,442
_______________
REALIZED AND UNREALIZED LOSS ON
INVESTMENTS:
Realized loss on securities sold ............... (4,928,916)
Unrealized appreciation of investments.......... 2,979,349
_______________
Net realized and unrealized loss on
investments................................... (1,949,567)
_______________
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS................................. $(1,868,125)
===============
</TABLE>
See Notes to Financial Statements.
D - 3
<PAGE>
EQUITY INVESTOR FUND,
FOCUS SERIES HEALTHCARE PORTFOLIO SERIES 3
DEFINED ASSET FUNDS
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
April 10,
1998
to
March 31,
1999
<S> <C>
OPERATIONS:
Net investment income........................... $ 81,442
Realized loss on securities sold
or redeemed.................................. (4,928,916)
Unrealized appreciation of investments.......... 2,979,349
_____________
Net decrease in net assets resulting
from operations.............................. (1,868,125)
_____________
Income Distributions to Holders (Note 2)......... (74,923)
Principal Distributions to Holders............... (3,517)
_____________
Total Distributions.............................. (78,440)
_____________
CAPITAL SHARE TRANSACTIONS:
Issuance of 71,295,464 addtional units(Note 1). 68,643,575
Redemptions of 10,286,182 units (Note 5)....... (9,489,667)
Deferred sales charge (Note 8)................. (1,218,064)
Organnizational cost (Note 7).................. (102,588)
_____________
NET CAPITAL SHARE TRANSACTIONS.................... 57,833,256
_____________
NET INCREASE IN NET ASSETS........................ 55,886,691
NET ASSETS AT BEGINNING OF PERIOD................. 437,744
_____________
NET ASSETS AT END OF PERIOD....................... $56,324,435
=============
PER UNIT:
Income distributions during period.............. $.00106
=============
Principal distributions during period........... $.00005
=============
Net asset value at end of period................ $.91652
=============
TRUST UNITS OUTSTANDING AT END OF PERIOD.......... 61,454,493
=============
</TABLE>
See Notes to Financial Statements.
D - 4
<PAGE>
EQUITY INVESTOR FUND,
FOCUS SERIES HEALTHCARE PORTFOLIO SERIES 3
DEFINED ASSET FUNDS
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Fund is registered under the Investment Company Act of 1940 as a Unit
Investment Trust. The following is a summary of significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements. The policies are in conformity with generally
accepted accounting principles.
(a) Securities are stated at value: for securities listed on a national
securities exchange, value is based on the closing sale price on such
exchange and, for securities not so listed, value is based on current
bid price on the over-the-counter market. Realized gains or losses on
sales of securities are determined using the first-in, first-out cost
method.
(b) The Fund is not subject to income taxes. Accordingly, no provision for
such taxes is required.
(c) Dividend income is recorded on the ex-dividend dates.
2. DISTRIBUTIONS
A distribution of net investment income is made to Holders on the
twenty-fifth day of December 1998 and December 1999, if you own Units on
the tenth day of those months. Receipts other than dividends, after
deductions for redemptions and applicable expenses, are also distributed
periodically.
3. NET CAPITAL
<TABLE>
<S> <C>
Cost of 61,454,493 units at Dates of Deposit....................................... $59,330,947
Sales charge including deferred sales charge....................................... (1,218,064)
Redemptions of units - cost of 10,286,182 units redeemed .......................... 240,843
Realized loss on securities sold or redeemed....................................... (4,928,916)
Net unrealized appreciation of investments......................................... 2,979,349
Principal Distributions............................................................ (3,517)
Organizational cost................................................................ (102,588)
______________
Net capital applicable to Holders.................................................. $56,298,054
==============
</TABLE>
D - 5
<PAGE>
EQUITY INVESTOR FUND,
FOCUS SERIES HEALTHCARE PORTFOLIO SERIES 3
DEFINED ASSET FUNDS
NOTES TO FINANCIAL STATEMENTS
4. As of March 31, 1999, net unrealized appreciation of investments, based on
cost for Federal income tax purposes, aggregated $2,979,349, of which
$7,228,523 related to depreciated securities and $10,207,872 related to
appreciated securities. The aggregate cost of investment securities for
Federal income tax purposes was $53,549,574 at March 31,1999.
5. REDEMPTIONS
Holders may request redemptions of units by presentation thereof to the
Trustee, The Bank of New York.
6. REINVESTMENT PLAN
Holders may participate in the Fund's Reinvestment Plan, subject to its
terms, by filing an appropriate notice of election.
7. DEFERRED ORGANIZATIONAL COSTS
Organizational costs have been deferred and amortized over the life of the
fund.
8. DEFERRED SALES CHARGE
A deferred sales charge of $17.50 per 1,000 units is payable each year
through a reduction of net asset value of the fund.
D - 6
<PAGE>
EQUITY INVESTOR FUND,
FOCUS SERIES HEALTH CARE PORTFOLIO SERIES 3
DEFINED ASSET FUNDS
PORTFOLIO
AS OF MARCH 31, 1999
<TABLE> Number
<CAPTION> of
Shares
Port- of Percentage
folio Common of Value
No. Description of Securities Stock of Fund(2) Cost(1) Market Value(1)
___ _________________________ ______ __________ _______ ______________
<S> <C> <C> <C> <C> <C>
1 Abbott Laboratories (3) 56,000 4.64 % $ 2,196,988 $ 2,621,500
2 Alza Corp. 49,825 3.37 2,257,660 1,905,806
3 Boston Scientific Corp. (3) 70,650 5.07 2,480,612 2,865,741
4 Bristol-Meyers Squibb Co. (3) 42,100 4.79 2,355,531 2,707,556
5 Centocor, Inc. 56,000 3.66 2,143,263 2,068,500
6 Elan Corp. 34,825 4.30 2,245,410 2,429,044
7 Genentech, Inc. 35,425 5.55 2,453,499 3,139,541
8 Guidant Corp. (3) 57,300 6.13 1,989,414 3,466,650
9 HCR Manor Care (7) 57,300 2.31 2,219,596 1,307,156
10 Healthsouth Corp 84,500 1.55 2,321,125 876,688
11 Health Management Associates (5) 118,214 2.55 2,553,419 1,440,733
12 Humana, Inc 91,925 2.81 2,471,946 1,585,706
13 IDEC Pharmaceuticals Corp. 56,000 5.09 1,655,700 2,877,000
14 Johnson & Johnson 27,600 4.57 2,008,793 2,585,775
15 Eli Lilly & Co. 36,325 5.45 2,423,854 3,083,084
16 McKesson Corp. (6) 10,940 1.28 929,572 722,040
17 MedImmune, Inc. (3) 86,350 9.04 2,385,220 5,110,841
18 Omnicare, Inc. 57,100 1.93 2,070,380 1,088,469
19 Pfizer, Inc. 21,575 5.30 2,362,559 2,993,531
</TABLE>
D - 7
<PAGE>
EQUITY INVESTOR FUND,
FOCUS SERIES HEALTH CARE PORTFOLIO SERIES 3
DEFINED ASSET FUNDS
PORTFOLIO
AS OF MARCH 31, 1999
<TABLE> Number
<CAPTION> of
Shares
Port- of Percentage
folio Common of Value
No. Description of Securities Stock of Fund(2) Cost(1) Market Value(1)
___ _________________________ ______ __________ _______ ______________
<S> <C> <C> <C> <C> <C>
20 Schering-Plough Corp. (3) 56,650 5.54 % $ 2,557,219 $ 3,133,453
21 Tenet Healthcare Corp. 63,475 2.13 2,080,452 1,202,058
22 United Healthcare Corp. 34,275 3.19 2,124,275 1,803,722
23 Warner-Lambert Co. (4) 42,050 4.92 2,840,897 2,783,184
24 Wellpoint Health Networks Inc. 36,025 4.83 2,422,190 2,731,145
_________ _____________ ______________
Totals 100.00 % $53,549,574 $56,528,923
========= ============= ==============
</TABLE>
Notes:
(1) See Notes to Financial Statements.
(2) Based on value
(3) Received 2 for 1 stock split
(4) Received 3 for 1 stock split
(5) Received 3 for 2 stock split
(6) Merged with HBO & Co. for .37 share for 1.
(7) Name change from Health Care and Retirement Corporation
D - 8
<PAGE>
EQUITY INVESTOR FUND,
FOCUS SERIES FINANCIAL PORTFOLIO SERIES 2
DEFINED ASSET FUNDS
REPORT OF INDEPENDENT ACCOUNTANTS
The Sponsors, Trustee and Holders
of Equity Investor Fund,
Focus Series Financial Portfolio Series 2
Defined Asset Funds:
We have audited the accompanying statement of condition of Equity
Investor Fund, Focus Series Financial Portfolio Series 2, Defined Asset Funds
including the portfolio, as of March 31, 1999 and the related statements of
operations and of changes in net assets for the period April 10, 1998
to March 31, 1999. These financial statements are the responsibility
of the Trustee. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Securities
owned at March 31, 1999, as shown in such portfolio, were
confirmed to us by The Bank of New York, the Trustee. An audit also
includes assessing the accounting principles used and significant
estimates made by the Trustee, as well as evaluating the overall
financial statement presentation. We believe that our audit provides
a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Equity
Investor Fund, Focus Series Financial Portfolio Series 2, Defined Asset Funds
at March 31, 1999 and the results of its operations and changes in its
net assets for the above-stated period in conformity with generally
accepted accounting principles.
DELIOTTE & TOUCHE LLP
New York, NY
June 8, 1999
D - 1
<PAGE>
EQUITY INVESTOR FUND,
FOCUS SERIES FINANCIAL PORTFOLIO SERIES 2
DEFINED ASSET FUNDS
STATEMENT OF CONDITION
AS OF MARCH 31,1999
<TABLE>
<S> <C> <C>
TRUST PROPERTY:
Investment in marketable securities - at value
(cost $65,915,939) (Note 1)................... $58,365,567
Dividends receivable............................ 113,438
Receivable from securities sold................. 334,869
Deferred organizational cost (Note 7)........... 70,861
Cash............................................ 69,882
_____________
Total trust property.................. 58,954,617
Less Liabilities:
Accrued expenses payable........................ $ 70,458
Organizational expense payable.................. 86,337
Redemption payable.............................. 489,054 645,849
____________ _____________
NET ASSETS, REPRESENTED BY:
73,997,511 units of fractional undivided
interest outstanding (Note 3)................. 58,209,052
Undistributed net investment income............. 99,716
____________
$58,308,768
==============
UNIT VALUE ($58,308,768/73,997,511 units)......... $0.78798
==============
</TABLE>
See Notes to Financial Statements.
D - 2
<PAGE>
EQUITY INVESTOR FUND,
FOCUS SERIES FINANCIAL PORTFOLIO SERIES 2
DEFINED ASSET FUNDS
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
April 10,
1998
to
March 31,
1999
<S> <C>
INVESTMENT INCOME:
Dividend income................................. $ 1,108,611
Trustee's fees and expenses..................... (106,541)
Sponsors' fees ................................. (60,589)
_______________
Net investment income........................... 941,481
_______________
REALIZED AND UNREALIZED LOSS ON
INVESTMENTS:
Realized loss on securities sold ............... (7,822,832)
Unrealized depreciation of investments.......... (7,550,372)
_______________
Net realized and unrealized loss on
investments................................... (15,373,204)
_______________
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS................................. $(14,431,723)
===============
</TABLE>
See Notes to Financial Statements.
D - 3
<PAGE>
EQUITY INVESTOR FUND,
FOCUS SERIES FINANCIAL PORTFOLIO SERIES 2
DEFINED ASSET FUNDS
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
April 10,
1998
to
March 31,
1999
<S> <C>
OPERATIONS:
Net investment income........................... $ 941,481
Realized loss on securities sold
or redeemed.................................. (7,822,832)
Unrealized depreciation of investments.......... (7,550,372)
_____________
Net decrease in net assets resulting
from operations.............................. (14,431,723)
_____________
Income Distributions to Holders (Note 2)......... (796,519)
Principal Distributions to Holders............... (23,005)
_____________
Total Distributions.............................. (819,524)
CAPITAL SHARE TRANSACTIONS:
Issuance of 99,362,502 addtional units(Note 1). 95,400,901
Redemptions of 25,806,604 units (Note 5)....... (20,636,489)
Deferred sales charge (Note 8)................. (1,566,089)
Organizational cost (Note 6)................... (70,861)
_____________
NET CAPITAL SHARE TRANSACTIONS.................... 73,127,462
_____________
NET INCREASE IN NET ASSETS........................ 57,876,215
NET ASSETS AT BEGINNING OF PERIOD................. 432,553
_____________
NET ASSETS AT END OF PERIOD....................... $58,308,768
=============
PER UNIT:
Income distributions during period.............. $.00910
=============
Principal distributions during period........... $.00026
=============
Net asset value at end of period................ $0.78798
=============
TRUST UNITS OUTSTANDING AT END OF PERIOD.......... 73,997,511
=============
</TABLE>
See Notes to Financial Statements.
D - 4
<PAGE>
EQUITY INVESTOR FUND,
FOCUS SERIES FINANCIAL PORTFOLIO SERIES 2
DEFINED ASSET FUNDS
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Fund is registered under the Investment Company Act of 1940 as a Unit
Investment Trust. The following is a summary of significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements. The policies are in conformity with generally
accepted accounting principles.
(a) Securities are stated at value: for securities listed on a national
securities exchange, value is based on the closing sale price on such
exchange and, for securities not so listed, value is based on current
bid price on the over-the-counter market. Realized gains or losses on
sales of securities are determined using the first-in, first-out cost
method.
(b) The Fund is not subject to income taxes. Accordingly, no provision for
such taxes is required.
(c) Dividend income is recorded on the ex-dividend dates.
2. DISTRIBUTIONS
A distribution of net investment income is made to Holders on the
twenty-fifth day of December 1998 and December 1999, if you own Units on the
tenth day of those months. Receipts other than dividends, after deductions for
redemptions and applicable expenses, are also distributed periodically.
3. NET CAPITAL
<TABLE>
<S> <C>
Cost of 73,997,511 units at Dates of Deposit....................................... $71,056,793
Sales charge including deferred sales charge....................................... (1,570,458)
Redemption of 25,806,604 units..................................................... 4,189,787
Net realized loss on securities sold or redeemed................................... (7,822,832)
Unrealized depreciation of investments............................................. (7,550,372)
Principal distributions............................................................ (23,005)
Organization cost.................................................................. (70,861)
______________
Net capital applicable to Holders.................................................. $58,209,052
==============
</TABLE>
D - 5
<PAGE>
EQUITY INVESTOR FUND,
FOCUS SERIES FINANCIAL PORTFOLIO SERIES 2
DEFINED ASSET FUNDS
NOTES TO FINANCIAL STATEMENTS
4. As of March 31, 1999, net unrealized depreciation of investments, based on
cost for Federal income tax purposes, aggregated $7,550,372, of which
$9,697,090 related to depreciated securities and $2,146,718 related to
appreciated securities. The aggregate cost of investment securities for
Federal income tax purposes was $65,915,939 at March 31, 1999.
5. REDEMPTIONS
Holders may request redemptions of units by presentation thereof to the
Trustee, The Bank of New York.
6. REINVESTMENT PLAN
Holders may participate in the Fund's Reinvestment Plan, subject to its
terms, by filing an appropriate notice of election.
7. DEFERRED ORGANIZATIONAL COSTS
Organizational costs have been deferred and are being amortized over the
life of the Fund.
8. DEFERRED SALES CHARGE
A deferred sales charge of $17.50 per 1,000 units is payable each year
through a reduction of net asset value of the fund.
D - 6
<PAGE>
EQUITY INVESTOR FUND,
FOCUS SERIES FINANCIAL PORTFOLIO SERIES 2
DEFINED ASSET FUNDS
PORTFOLIO AS OF MARCH 31, 1999
<TABLE>
<CAPTION>
Number
of
Shares
Port- of Percentage
folio Common of Value
No. Description of Securities Stock of Fund(2) Cost(1) Market Value(1)
___ _________________________ ______ __________ _______ ______________
<S> <C> <C> <C> <C>
1 Affiliated Managers Group, Inc. 66,000 2.94 % $ 2,315,375 $ 1,716,000
2 Allstate Corp. (3) 49,650 3.15 2,327,161 1,840,153
3 Archstone Communities (10) 109,925 3.79 2,458,989 2,212,241
4 Bank Of New York Co., The (3) 83,500 5.14 2,586,388 3,000,781
5 BankAmerica Corp. (6) 33,650 4.07 2,571,345 2,376,531
6 CMAC Investment Corp. 41,200 2.75 2,501,516 1,606,800
7 Capital One Financial Corp. 25,425 6.58 2,670,704 3,839,175
8 Chubb Corporation Co 33,500 3.36 2,607,631 1,961,844
9 Citigroup (7) 32,600 3.57 1,998,941 2,082,325
10 Fleet Financial Group, Inc. (3) 50,800 3.27 2,114,382 1,911,350
11 Franklin Resources, Inc. 41,050 1.98 2,048,140 1,154,531
12 Golden State Bancorp. Inc. 59,250 2.26 1,833,883 1,318,313
13 Golden State Bancorp. Inc. Warrants (11) 47,400 0.39 288,809 229,594
14 Golden West Financial Corp. 24,775 4.05 2,561,745 2,366,013
15 Household International, Inc. (4) 49,750 3.89 2,278,233 2,269,843
16 MBNA Corp. (5) 101,000 4.13 2,236,521 2,411,375
17 Mellon Bank Corp. 33,800 4.08 2,297,528 2,378,675
18 National Commerce Bancorporation (3) 118,350 4.63 2,600,856 2,699,859
19 Newcourt Credit Group Inc. 50,100 2.32 2,365,568 1,355,831
20 Post Proerties, Inc. 57,875 3.57 2,319,867 2,083,500
21 Protective Life Corp. 76,875 4.99 2,786,175 2,911,641
22 Republic New York Corp. (3) 33,350 2.64 2,136,154 1,538,269
23 Security Capital Group Inc. Class B 84,500 1.94 2,337,350 1,130,187
24 Torchmark Corp. 50,700 2.75 1,912,183 1,603,387
</TABLE>
D - 7
<PAGE>
EQUITY INVESTOR FUND,
FOCUS SERIES FINANCIAL PORTFOLIO SERIES 2
DEFINED ASSET FUNDS
PORTFOLIO AS OF MARCH 31, 1999
<TABLE>
<CAPTION>
Number
of
Shares
Port- of Percentage
folio Common of Value
No. Description of Securities Stock of Fund(2) Cost(1) Market Value(1)
___ _________________________ ______ __________ _______ ______________
<S> <C> <C> <C> <C>
25 Travelers Property Casualty Corp. 59,800 3.66 % $ 2,463,168 $ 2,137,850
26 U.S. Bancorp (4) 50,550 2.95 2,103,783 1,721,859
27 UNUM Corp. 42,275 3.45 2,324,321 2,010,705
28 Waddell & Reed Financial (8) 2,289 0.08 40,228 46,925
29 Waddell & Reed Financial Class B (9) 14,810 0.50 301,306 294,349
30 Washington Mutual, Inc. (5) 50,650 3.55 2,283,110 2,070,319
31 Wells Fargo & Co (New) 59,475 3.57 2,244,579 2,085,342
_________ _____________ _____________
Totals 100.00 % $65,915,939 $58,365,567
========= ============= =============
</TABLE>
Notes:
(1) See Notes to Financial Statements.
(2) Based on value
(3) Received a 2 for 1 stock split
(4) Received a 3 for 1 stock split
(5) Received a 3 for 2 stock split
(6) Merged with Nationsbank 1 share for 1 share
(7) Merged with Citicorp 2.5 shares for 1 share
(8) Spinoff from Tourchmark .0569 shares Class A for 1
(9) Spinoff from Tourchmark .2449 shares Class B for 1
(10) Cusip changed from 814141107
(11) Spinoff from Golden State Bancorp. Inc.(1 for 1 basis)
D - 8
<PAGE>
Defined
Asset FundsSM
HAVE QUESTIONS ? EQUITY INVESTOR FUND
Request the most FOCUS SERIES
recent free Information FINANCIAL PORTFOLIO 2
Supplement that gives more HEALTH CARE PORTFOLIO 3
details about the Fund, (A Unit Investment Trust)
by calling: ---------------------------------------
The Bank of New York This Prospectus does not contain
1-800-221-7771 complete information about the
investment company filed with the
Securities and Exchange Commission in
Washington, D.C. under the:
o Securities Act of 1933 (file nos.
333-46981 and 333-46977) and
o Investment Company Act of 1940 (file
no. 811-3044).
TO OBTAIN COPIES AT PRESCRIBED RATES--
WRITE: Public Reference Section of the
Commission
450 Fifth Street, N.W., Washington,
D.C. 20549-6009
CALL: 1-800-SEC-0330.
VISIT: http://www.sec.gov.
---------------------------------------
No person is authorized to give any
information or representations about
this Fund not contained in this
Prospectus or the Information
Supplement, and you should not rely on
any other information.
---------------------------------------
When units of this Fund are no longer
available, this Prospectus may be used
as a preliminary prospectus for a
future series, but some of the
information in this Prospectus will be
changed for that series.
Units of any future series may not be
sold nor may offers to buy be accepted
until that series has become effective
with the Securities and Exchange
Commission. No units can be sold in any
State where a sale would be illegal.
70067--8/99
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This Post-Effective Amendment to 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 to the Cross-Reference
Sheet to the Registration Statement of Defined Asset Funds Municipal Insured
Series, 1933 Act File No. 33-54565).
The Prospectus.
The Signatures.
The following exhibits:
1.1.1 --Form of Standard Terms and Conditions of Trust Effective
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. 33-50247).
5.1 --Consent of independent accountants.
9.1 --Information Supplement (incorporated by reference to Exhibit
9.1 to the Registration Statement of Equity Income Fund, Select
Ten Portfolio 1996 International Series B (United Kingdom and
Japan Portfolios), 1933 Act File No. 33-00593).
R-1
<PAGE>
EQUITY INVESTOR FUND
FOCUS SERIES
FINANCIAL PORTFOLIO 2
HEALTH CARE PORTFOLIO 3
DEFINED ASSET FUNDS
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT,
EQUITY INVESTOR FUND FOCUS SERIES FINANCIAL PORTFOLIO 2 AND HEALTH CARE
PORTFOLIO 3, DEFINED ASSET FUNDS CERTIFIES THAT IT MEETS ALL OF THE REQUIREMENTS
FOR EFFECTIVENESS OF THIS REGISTRATION STATEMENT PURSUANT TO RULE 485(B) UNDER
THE SECURITIES ACT OF 1933 AND 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 30TH DAY OF JUNE, 1999.
SIGNATURES APPEAR ON PAGE R-3.
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.
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: 333-70593
HERBERT M. ALLISON, JR.
GEORGE A. SCHIEREN
JOHN L. STEFFENS
By J. DAVID MEGLEN
(As authorized signatory for Merrill Lynch, Pierce,
Fenner & Smith Incorporated and
Attorney-in-fact for the persons listed above)
R-3
<PAGE>
Exhibit 5.1
CONSENT OF INDEPENDENT ACCOUNTANTS
The Sponsors and Trustee of Equity Investor Fund,
Focus Series Health Care Portfolio 3, Financial Portfolio 2, Defined Asset Funds
We consent to the use in this Post-Effective Amendment No. 1 to Registration
Statement No. 333-46977 and 333-46981 of our opinion dated June 3, 1999 and June
8, 1999 appearing in the Prospectus, which is part of such Registration
Statement, and to the reference to us under the heading
'Miscellaneous--Auditors' in such Prospectus.
DELOITTE & TOUCHE LLP
New York, N.Y.
June 30, 1999
