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DEFINED ASSET FUNDSSM
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EQUITY INVESTOR FUND
FOCUS SERIES EUROPEAN MONETARY
UNION PORTFOLIO
(A UNIT INVESTMENT TRUST)
O CAPITAL APPRECIATION
O PROFESSIONAL SELECTION
O OPTIONAL REINVESTMENT OF CASH DISTRIBUTIONS
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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 23, 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 IN THIS PROSPECTUS IS AS OF THE EVALUATION DATE, APRIL
30, 1999.
CONTENTS
PAGE
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Risk/Return Summary..................................... 3
What You Can Expect From Your Investment................ 6
Income............................................... 6
Records and Reports.................................. 6
The Risks You Face...................................... 6
Foreign Issuer Risk.................................. 6
European Risk Factors................................ 6
Concentration Risk................................... 7
Litigation and Legislation Risks..................... 8
Selling or Exchanging Units............................. 8
Sponsor's Secondary Market........................... 8
Selling Units to the Trustee......................... 8
Rollover/Exchange Option............................. 9
How The Fund Works...................................... 10
Pricing.............................................. 10
Evaluations.......................................... 10
Income............................................... 10
Expenses............................................. 10
Portfolio Changes.................................... 11
Portfolio Termination................................ 11
No Certificates...................................... 11
Trust Indenture...................................... 12
Legal Opinion........................................ 12
Auditors............................................. 12
Sponsor.............................................. 12
Trustee.............................................. 13
Sponsor's Profits.................................... 13
Public Distribution.................................. 13
Code of Ethics....................................... 13
Year 2000 Issues..................................... 13
Taxes................................................... 13
Supplemental Information................................ 15
Financial Statements.................................... D-1
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RISK/RETURN SUMMARY
1. WHAT IS THE PORTFOLIO'S OBJECTIVE?
The objective of this Defined Fund is capital appreciation
by investing for a period of approximately one year in a
portfolio of stocks that, as of the initial date of deposit
(May 13, 1998), were expected by analysts in the Merrill
Lynch Global Research and Economics group to benefit from
the establishment of the European Monetary Union.
You can participate in the Portfolio by purchasing units.
Each unit represents an equal share of the stocks in the
Portfolio and receives an equal share of income
distributions, if any.
2. WHAT IS THE PORTFOLIO'S INVESTMENT STRATEGY?
O The Portfolio contains 39 common stocks of foreign issuers
selected by the Sponsor for capital appreciation.
o The Portfolio plans to hold the stocks in the Portfolio for
about one year. At the end of the year, we will liquidate
the Portfolio and a new Focus Portfolio will be selected,
if available.
o The Portfolio is designed for investors who want to invest
a portion of their assets in international equities, with
the opportunity to change the focus of their investment if
their views on this investment change.
3. WHAT INDUSTRY SECTORS ARE REPRESENTED IN THE PORTFOLIO?
The Portfolio is concentrated in stocks of foreign issuers
although it is diversified among various European countries
and industry groups.
The following EMU countries are represented in the
Portfolio:
APPROXIMATE
PORTFOLIO
PERCENTAGE
o Belgium 36%
o Finland 4
o France 3
o Germany 11
o Ireland 17
o Italy 2
o The Netherlands 20
o Portugal 1
o Spain 6
Based upon the principal business of each issuer and
current market values, the following industry groups are
represented in the Portfolio:
APPROXIMATE
PORTFOLIO
PERCENTAGE
o Insurance 10%
o Financial/Insurance 2
o Telecommunications 31
o Oil 15
o Chemicals 9
o Food 5
o Utilities 5
o Automobiles 2
o Electrical Equipment 2
o Machinery 4
o Banks 15
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 Share prices may decline during the life of the Portfolio.
o Because the Portfolio is concentrated in common stocks of
foreign issuers, as well as in the telecommunications
industry, adverse developments in Europe or in this
industry may affect the value of your units. Investing in
securities of foreign issuers involves risks that are
different from investing in securities of domestic issuers.
These risks are discussed later in the prospectus under The
Risks You Face.
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 be subject to sell
recommendations from the Sponsor.
o The Portfolio does not reflect any investment
recommendations of the Sponsor, and any one or more of the
stocks in the Portfolio may, from time to time, be subject
to sell recommendations from the Sponsor.
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5. IS THIS FUND 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 international equity
securities of different issuers.
The Fund is not appropriate for you if you are unwilling to
take the risk involved with an international equity
investment or if you are seeking preservation of capital or
high current income.
6. WHAT ARE THE FUND'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
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$ 0.87
Trustee's Fee
$ 0.45
Portfolio Supervision,
Bookkeeping and
Administrative Fees
(including updating
expenses)
$ 0.90
Other Operating Expenses
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$ 2.22
TOTAL
The Sponsors historically paid updating costs.
INVESTOR FEES
Maximum Sales Fee (Load) on new purchases
(as a percentage of $1,000 invested) 2.75%
You will pay an up-front sales
fee of approximately 1.00%. In
addition, seven monthly deferred
sales charges of $2.50 per 1,000
units ($17.50 annually) will be
deducted from the Portfolio's
net asset value during the life
of the Portfolio (July 1, 1999
through January 1, 2000).
<TABLE>
<CAPTION>
APPROXIMATE
MAXIMUM SALES FEE
(AS A PERCENT OF
OFFER PRICE) WILL
IF YOU INVEST: BE:
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<S> <C> <C>
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%
</TABLE>
These percentages will vary slightly depending on unit
price.
7. IS THE FUND 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 if the issuer no longer meets the selection
criteria or under certain other limited circumstances.
8. HOW DO I BUY UNITS?
The minimum investment is $250.
You can buy units from the Sponsor. Employees of the
Sponsor or Sponsor afiliates and non-employee directors of
the Sponsor may buy units subject only to the deferred
sales charge.
UNIT PRICE PER UNIT $1,051.31
(as of April 30, 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.
10. HOW ARE DISTRIBUTIONS MADE AND TAXED?
The Portfolio pays distributions of any dividend income,
net of expenses, on the 25th of December, 1999, if you own
Units on the 10th of that month. For tax purposes, you will
be considered to have received all the dividends paid on
your pro rata portion of each security in the Portfolio
(including your share of any foreign taxes withheld) when
those dividends are received by the Portfolio regardless of
whether you invest your dividends in the Portfolio. A
portion of the dividend payments may be used to pay
expenses of the Portfolio.
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11. WHAT OTHER SERVICES ARE AVAILABLE?
REINVESTMENT
You may choose to reinvest any distributions into
additional units of the Portfolio. You will pay only the
deferred sales charge 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.
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WHAT YOU CAN EXPECT FROM YOUR INVESTMENT
INCOME
Any dividend income will be distributed at termination of the Portfolio.
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 annual reports on Portfolio activity; and
o annual tax information. This will also be sent to the IRS. You must report the
amount of income received. Please contact your tax adviser in this regard.
You may inspect records of Portfolio transactions at the Trustee's office during
regular business hours.
THE RISKS YOU FACE
FOREIGN ISSUER RISK
Investments in securities of foreign issuers involve risks that are different
from investments in securities of domestic issuers. They may include:
o adverse political and economic developments;
o possibility of withholding taxes;
o exchange controls or other governmental restrictons on the payment of
dividends;
o conversion of local currency to U.S. dollars upon the sale of Portfolio
Securities;
o less publicly available information; and
o absence of uniform accounting, auditing and financial reporting standards,
practices and requirements.
American Depositary Shares and Receipts
American depositary shares and receipts are issued by an American bank or trust
company to evidence ownership of underlying common stock issued by a foreign
corporation and deposited in a depositary facility. The terms and conditions of
the depositary facility may result in less liquidity or lower market prices for
the ADRs than for the underlying shares. Certain of the Portfolio Securities
were purchased in ADR form in the United States.
Foreign Currency Risk
Because securities of non-U.S. issuers generally pay dividends and trade in
foreign currencies, there is the risk that the U.S. dollar value of these
securities will vary widely with fluctuations in foreign exchange rates.
At the present time the Sponsor does not believe that any of the Portfolio
Securities is subject to exchange control restrictions which would materially
interfere with payment to the Portfolio of amounts due on the Portfolio
Securities. The adoption of exchange control regulations or other legal
restrictions could have an adverse impact on the marketability of international
securities in the Portfolio and on the ability of the Portfolio to satisfy
redemptions. There can be no assurance that exchange control regulations might
not be adopted in the future that would adversely affect payments to the
Portfolio.
EUROPEAN RISK FACTORS
The economies of individual European countries may differ unfavorably from the
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U.S. economy in gross national product, growth of gross national product, rate
of inflation, capital reinvestment, resource self-sufficiency and balance of
payments position.
For a number of years, certain European countries have been seeking economic and
political unification which would reduce barriers between countries, increase
competition among companies, reduce government subsidies in certain industries
and reduce or eliminate currency fluctuations among these European countires.
On January 1, 1999, the European Monetary Union (EMU) introduced a new single
currency, the euro. A newly created European Central Bank (ECB) has the
authority to direct the monetary policy for this region, including the
determination of interest rates. These changes may affect the European capital
markets, and the related risks may increase the volatility in European capital
and currency markets. This, in turn, may affect the Portfolio's performance.
No assurances can be given that changes planned for Europe can be successfully
implemented or that these changes will not result in lower market prices for the
securities in the Portfolio.
Risks associated with investing in European securities may be heightened in the
case of investments in smaller European securities markets because of risks due
to the inexperience of financial intermediaries, the lack of modern technology,
the lack of a sufficient capital base and the possibility of permanent or
temporary termination of trading in those markets.
CONCENTRATION RISK
When stocks in a particular industry make up 25% or more of the Portfolio, it is
said to be 'concentrated' in that industry, which makes the Portfolio less
diversified.
Here is what you should know about the Portfolio's concentration in stocks of
the telecommunications industry.
These companies:
o provide local, long-distance, wireless, cable television and internet services
and information systems;
o manufacture of telecommunications products; and
o operate voice, data and video telecommunications networks.
Payment on common stocks of companies in this industry generally depends upon:
o the amount and growth of customer demand;
o the level of rates they are allowed to charge; and
o the effects of inflation on the cost of providing services and the rate of
technological innovation.
The telecommunications industry is characterized by increasing competition in
all sectors. To meet increasing competition, companies may have to commit
substantial capital, particularly in the formulation of new products and
services using new technology.
Telecommunications companies in both developed and emerging countries are
undergoing significant change due to varying and evolving levels of governmental
regulation or deregulation and other factors. As a result, competitive pressures
are intense and the securities of such companies may be subject to significant
price volatility.
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In addition, all telecommunications companies in both developed and emerging
countries are subject to the additional risk that technological innovations will
make their products and services obsolete.
While the worldwide market for telecommunications equipment is expected to grow,
we cannot predict the overall effect on the Portfolio of factors such as:
o competing technologies;
o increasing capital requirements;
o protectionist actions by foreign governments; and
o demand for new technologies.
The telecommunications companies in the Portfolio include former government
owned telecommunications systems that have been privatized in stages. We cannot
predict whether such privatization will continue in the future or what, if any,
effect this will have on the Portfolio.
LITIGATION AND LEGISLATION RISKS
We do not know of any pending litigation that might have a material adverse
effect upon the Fund.
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.
As of the close of the initial offering period, the price you receive will be
reduced to pay the Portfolio's estimated organization costs.
If you sell your units before the final deferred sales fee installment, the
amount of any remaining payments will be deducted from your proceeds.
SPONSORS' SECONDARY MARKET
While we are not obligated to do so, we will buy back units at net asset value.
We may resell the units to other buyers or to the Trustee.
We have maintained a secondary market continuously for more than 28 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
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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 $500,000, 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. 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 or Select Series, if one is available.
If you hold notify your financial adviser by May 12, 2000, 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
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 June 9, 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 any time before this Portfolio
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 Series are exchangeable, suitable and
currently available.
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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.
The deferred sales fee is generally a monthly charge of $2.50 per 1,000 units
and is accrued in seven monthly installments. 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 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);
and various additional holidays in the relevant foreign countries. 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, if any, 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 the 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 any 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 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 the
Portfolio in non-interest bearing accounts. The Trustee may also receive
additional amounts:
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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 filing fees and expenses associated with
updating the Portfolio's registration statement yearly are now chargeable to the
Portfolio. While this fee may exceed the amount of these costs and expenses
attributable to this 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 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 sals charge until after the
rollover notification date.
The Sponsor will pay advertising and selling expenses at no charge to the
Portfolio. 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 the 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 Portfolio is 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.
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TRUST INDENTURE
The 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;
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 Sponsor without the consent of investors. The
resignation or removal of the Trustee becomes effective when a successor accepts
appointment. The Sponsors 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
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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 Chase Manhattan Bank, Unit Trust Department, 4 New York Plaza--6th Floor,
New York, New York 10004, 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.
SPONSOR'S PROFITS
The Sponsor receives sales fees when it sells units. Any cash made available by
you to the Sponsor before the settlement date for those units may be used in the
Sponsor's business to the extent permitted by federal law and may benefit the
Sponsor.
The Sponsor may realize profits or sustain losses on stocks in the Portfolio
which were acquired from underwriting syndicates of which it was a member.
Any profit or loss to the Portfolio will be effected by the receipt of
applicable sales fees and a gain or loss on subsequent deposits of securities
after the initial deposit. 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.
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 Portfolio 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
Portfolio. The Year 2000 Problem may adversely affect the issuers of the
securities contained in the Fund, but we cannot predict whether any impact will
be material to the Portfolio as a whole.
TAXES
The following summarizes the material income tax consequences of holding Units.
It assumes that you are not a dealer, financial institution, insurance company
or other investor with special circumstances. You should consult your own tax
adviser about your particular circumstances.
In the opinion of our counsel, under existing law:
GENERAL TREATMENT OF THE FUND AND YOUR INVESTMENT
The Portfolio will not be taxed as a corporation for federal income tax
purposes, and you will be considered to own directly
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your share of each Security in the Portfolio. You will be considered to receive
your share of any dividends paid when those dividends are received by the
Portfolio. Income from dividends will be taxed at ordinary income rates. If you
are a corporate investor, you may be eligible for the dividends received
deduction if you satisfy the applicable holding period and other requirements.
You should consult your tax adviser in this regard.
GAIN OR LOSS UPON DISPOSITION
You will generally recognize gain or loss when you dispose of your units for
cash (by sale or redemption) or when the Trustee disposes of the Securities in
the Portfolio. You generally will not recognize gain or loss on an 'in-kind'
distribution to you of your proportional share of the Portfolio Securities,
whether it is in redemption of your units or upon termination of the Portfolio.
Your holding period for the distributed Securities will include your holding
period in your units.
If you elect to roll over your investment in the Portfolio, you will not
recognize gain or loss on your units except to the extent that your share of the
Securities in the Portfolio is sold. Your basis in the Securities that are
rolled over into a new portfolio will be the same as the portion of your basis
in your units which was attributable to the rolled over Securities.
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 from the Portfolio will be long-term if you are considered
to have held the your investment which produces the gain or loss for more than
one year and short-term otherwise. 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 TAX BASIS IN THE SECURITIES
Your aggregate tax basis in units that you have purchased for cash will be equal
to the cost of the units, including the sales fee. Your aggregate tax basis in
units that you hold as a result of a rollover from an earlier portfolio will
equal your basis in Securities that have been rolled over from the previous
portfolio plus the proceeds (other than proceeds that were paid to you) from the
sale of Securities from the portfolio which were not rolled over. You should not
increase your basis in your units by deferred sales charges or organizational
expenses. Your basis for Securities distributed to you will be the same as the
portion of your basis in your units that is attributable to the distributed
Securities. 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.
EXPENSES
If you are an individual who itemizes deductions, you may deduct your share of
Portfolio expenses, but only to the extent that your share of the expenses,
together with your other miscellaneous deductions, exceeds 2% of your adjusted
gross income. Your ability to deduct Portfolio expenses will be limited further
if your adjusted gross income exceeds a specified amount (for 1999, $126,600 or
$63,300 for a married person filing separately).
14
<PAGE>
STATE AND LOCAL TAXES
Under the income tax laws of the State and City of New York, the Portfolio will
not be taxed as a corporation, and the income of the Portfolio will be treated
as the income of the investors in the same manner as for federal income tax
purposes.
FOREIGN TAXES
Dividends paid with respect to any foreign Securities in the Portfolio will
generally be subject to foreign withholding taxes. You will be considered to
receive the entire amount of your share of these dividends, including your share
of foreign taxes withheld. You may be eligible for a credit or a deduction for
your share of these taxes to reduce your U.S. tax liability, subject to various
requirements and limitations. You should consult your tax adviser in this
regard.
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. However, all distributions from
these types of plans are generally treated as ordinary income, subject to
tax-deferred rollover treatment in some cases. 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 Sponsors of this Portfolio, 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 Portfolio by
calling the Trustee. The supplemental information includes more detailed risk
disclosure and general information about the structure and operation of the
Portfolio. The supplemental information is also available from the SEC. You may
also obtain information about the issuers of the stocks in this Portfolio from
the SEC, because each company is a reporting company.
15
<PAGE>
EQUITY INVESTOR FUND, FOCUS SERIES
EUROPEAN MONETARY UNION PORTFOLIO - DEFINED ASSET FUNDS
REPORT OF INDEPENDENT ACCOUNTANTS
The Sponsors, Trustee and Holders
of Equity Investor Fund,
Focus Series - European Monetary Union Portfolio,
Defined Asset Funds:
We have audited the accompanying statement of condition of Equity Investor Fund,
Focus Series - European Monetary Union Portfolio, Defined Asset Funds, including
the portfolio, as of April 30, 1999 and the related statements of operations and
of changes in net assets for the period May 14, 1998 to April 30, 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
April 30, 1999, as shown in such portfolio, were confirmed to us by The Chase
Manhattan Bank, the Trustee. An audit also includes assessing the accounting
principles used and significant estimates made by the Trustee, as well as
evaluating the overall financial statement presentation. We believe that our
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 - European Monetary Union Portfolio, Defined Asset Funds at April 30,
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.
DELOITTE & TOUCHE
New York, N.Y.
June 10, 1999
D-1
<PAGE>
EQUITY INVESTOR FUND, FOCUS SERIES
EUROPEAN MONETARY UNION PORTFOLIO - DEFINED ASSET FUNDS
<TABLE>
<CAPTION>
STATEMENT OF CONDITION
AS OF APRIL 30, 1999
<S> <C>
TRUST PROPERTY:
Investment in marketable securities - at value
(cost $99,602,135) $103,120,508
Dividends receivable 133,614
Proceeds receivable for securities sold 594,838
Cash 264,536
Deferred organization costs (Note 5) 73,506
Total trust property 104,187,002
LESS LIABILITIES:
Deferred sales charge payable $ 1,095,354
Redemptions payable 1,484,003
Accrued fees and expenses 16,286
Other liabilities (Note 5) 147,012 2,742,655
NET ASSETS, REPRESENTED BY:
97,465,756 units of fractional undivided interest
outstanding (Note 3) 101,302,249
Undistributed net investment income 142,098 $101,444,347
UNIT VALUE ($101,444,347 / 97,465,756 units) $1.04082
</TABLE>
See Notes to Financial Statements.
D-2
<PAGE>
EQUITY INVESTOR FUND, FOCUS SERIES
EUROPEAN MONETARY UNION PORTFOLIO - DEFINED ASSET FUNDS
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
May 14,
1998 to
April 30,
1999
<S> <C>
INVESTMENT INCOME:
Dividend income $ 936,590
Foreign tax expense (175,288)
Trustee's fees and expenses (210,150)
Sponsors' fees (43,661)
Net investment income 507,491
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Realized gain on securities sold 260,261
Unrealized appreciation of investments 3,518,373
Net realized and unrealized gain on investments 3,778,634
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $4,286,125
See Notes to Financial Statements.
</TABLE>
D-3
<PAGE>
EQUITY INVESTOR FUND, FOCUS SERIES
EUROPEAN MONETARY UNION PORTFOLIO - DEFINED ASSET FUNDS
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
May 14,
1998 to
April 30,
1999
<S> <C>
OPERATIONS:
Net investment income $ 507,491
Realized gain on securities sold 260,261
Unrealized appreciation of investments 3,518,373
Net increase in net assets resulting from operations 4,286,125
INCOME DISTRIBUTIONS TO UNIT HOLDERS (Note 2) (752,885)
CAPITAL SHARE TRANSACTIONS:
Issuance of 121,717,203 units 123,567,705
Redemptions of 24,756,622 units (24,702,993)
Deferred sales charge (1,379,292)
Deferred organizational expenses (73,506)
Net capital share transactions 97,411,914
NET INCREASE IN NET ASSETS 100,945,154
NET ASSETS AT BEGINNING OF PERIOD 499,193
NET ASSETS AT END OF PERIOD $101,444,347
PER UNIT:
Income distributions during period $0.00651
Net asset value at end of period $1.04082
Units outstanding at end of period 97,465,756
See Notes to Financial Statements.
</TABLE>
D-4
<PAGE>
EQUITY INVESTOR FUND, FOCUS SERIES
EUROPEAN MONETARY UNION PORTFOLIO - 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 market value; for securities listed on a
national securities exchange, value is based on the closing sale price
on such exchange and, for securities not so listed, value is based on
the current bid price on the over the counter market. The value of
the securities on May 14, 1998 was based upon valuations at May 12,
1998, the day prior to the Date of Deposit. Cost of securities at
May 14, 1998 was also based on such valuations. Gains or losses on
sales of securities are computed using the first-in, first-out method.
(b) The Fund is not subject to income taxes. Accordingly, no provision
for such taxes is required.
(c) Income is recognized on the ex-dividend date.
2. DISTRIBUTIONS
A distribution of net investment income is made annually to Holders on the
25th day of December to holders of record on the 10th day of that month.
Receipts other than dividends, after deduction for redemptions and
applicable expenses, are also distributed periodically.
3. NET CAPITAL
Cost of 97,465,756 units at date of deposit $ 99,566,610
Less sales charge (974,617)
Net amount applicable to Holders 98,591,993
Redemptions of units - net cost of 24,756,622 units
redeemed less redemption amounts 384,420
Realized gain on securities sold 260,261
Deferred sales charge (1,379,292)
Deferred organizational costs (73,506)
Net unrealized appreciation of investments 3,518,373
Net capital applicable to Holders $101,302,249
4. INCOME TAXES
As of April 30, 1999, net unrealized appreciation of investments, based on
cost for Federal income tax purposes, aggregated $3,518,373 of which
$10,220,705 related to appreciated securities and $6,702,332 related to
depreciated securities. The cost of the investment securities for Federal
income tax purposes was $99,602,135 at April 30, 1999.
5. DEFERRED ORGANIZATION COSTS
Deferred organization costs are being amortized over the life of the Fund.
Included in "Other Liabilities" in the accompanying Statement of Condition
is $147,012 payable to the Trustee for reimbursement of costs related to
the organization of the Trust.
D-5
<PAGE>
EQUITY INVESTOR FUND, FOCUS SERIES
EUROPEAN MONETARY UNION PORTFOLIO - DEFINED ASSET FUNDS
PORTFOLIO
AS OF MARCH 31, 1999
<TABLE>
<CAPTION>
Number of
Shares of Percentage Cost of
Portfolio No. and Title of Common of Securities
Securities Stock Fund(2) to Fund Value(1)
<S> <C> <C> <C> <C>
Belgium
1. Fortis AG (3) 53,190 1.73% $ 1,642,804 $ 1,787,407
Finland
2. Nokia Oyj - ADR (4) 61,624 4.43 2,316,556 4,571,730
France
3. Axa 19,600 2.46 2,374,753 2,534,995
4. Banque Nationale de Paris 19,600 1.58 1,660,312 1,627,417
5. Elf Acquitaine SA 17,640 2.66 2,393,913 2,744,516
6. France Telecom SA 70,560 5.54 4,579,779 5,709,340
7. Groupe Danone 7,840 2.04 2,207,861 2,099,357
8. Rhone Poulenc 35,280 1.63 1,965,097 1,680,316
9. Societe Generale 7,840 1.36 1,693,753 1,405,657
10. Suez Lyonnaise des Eaux 11,760 1.94 2,067,171 2,003,932
11. Total SA 17,640 2.35 2,119,605 2,419,655
12 Vivendi (5) 9,800 2.22 2,101,700 2,293,320
Germany
13. BASF AG 51,690 2.20 2,406,320 2,267,675
14. Bayer AG 53,190 2.19 2,556,163 2,263,111
15. Bayerische Motoren Werke (BMW) AG 2,955 2.06 2,978,381 2,120,494
16. Bayerische Hypo-Und Vereinsbank AG (6) 27,020 1.71 2,332,694 1,764,495
17. Deutsche Bank AG 24,350 1.37 1,994,550 1,417,462
18. Deutsche Telekom AG 195,030 7.47 5,427,367 7,699,457
19. Dresdner Bank AG 31,030 1.30 1,803,481 1,339,960
20. Mannesmann AG (7) 29,550 3.78 2,979,460 3,896,955
21. Muenchener Rueckversicherunhgs-
Gaselleshaft AG (4) 11,820 2.31 2,871,145 2,376,955
22. RWE AG 33,490 1.49 1,858,255 1,534,804
Ireland
23. Allied Irish Banks PLC (8) 155,630 2.44 2,258,802 2,513,322
24. Bank of Ireland (8) 106,380 2.06 2,119,486 2,127,780
Italy
25. Telecom Italia Mobile (TIM) SpA 476,740 2.79 3,039,057 2,875,106
26. Telecom Italia SpA 372,330 3.83 2,952,680 3,946,652
The Netherlands
27. ABN AMRO Holding N.V. - ADR 112,555 2.56 2,755,523 2,638,008
28. Aegon N.V. - ADR (4) 38,200 3.62 3,453,328 3,728,900
29. Akzo Nobel N.V. - ADR (4) 22,480 0.97 1,211,314 1,003,170
30. ING Groep N.V. - ADR 54,100 3.22 3,720,937 3,320,387
31. Royal Dutch Petroleum Company - ADR 116,500 6.63 6,245,924 6,837,094
32. Royal KPN N.V. - ADR (9) 37,331 1.55 1,460,000 1,600,567
33. Royal Phillips Electronics N.V.- ADR 23,440 1.94 2,041,195 2,001,190
34. TNT Post Group N.V. - ADR (10) 38,828 1.03 958,390 1,065,343
35. Unilever N.V. - ADR 47,024 2.96 3,688,928 3,053,621
Portugal
36. Portugal Telecom SA - ADR 33,370 1.36 1,840,387 1,407,797
</TABLE>
D-6
<PAGE>
EQUITY INVESTOR FUND, FOCUS SERIES
EUROPEAN MONETARY UNION PORTFOLIO - DEFINED ASSET FUNDS
PORTFOLIO
AS OF MARCH 31, 1999
<TABLE>
<CAPTION>
Number of
Shares of Percentage Cost of
Portfolio No. and Title of Common of Securities
Securities Stock Fund (2) to Fund Value(1)
<S> <C> <C> <C> <C>
Spain
37. Endesa SA - ADR 109,726 2.35% $ 2,482,246 $ 2,420,830
38. Repsol SA - ADR (11) 82,720 1.32 1,514,186 1,364,880
39. Telefonica SA - ADR (12) 26,238 3.55 3,528,632 3,656,851
100.00% $99,602,135 $103,120,508
(1) See notes to financial statements
(2) Based on value
(3) Includes 9 for 1 stock split
(4) Includes 2 for 1 stock split
(5) Name change from Compagnie Generale des Eaux
(6) Name change from Bayerische Vereinsbank AG
(7) Includes 10 for 1 stock split
(8) Transactions conducted in British pounds sterling on the London Stock Exchange
(9) Name change from Koninklljke PTT Nederland N.V. - ADR
(10) Received from 1 for 1 spin-off from Royal KPN N.V. - ADR
(11) Includes 3 for 1 stock split
(12) Includes two 2% stock dividends
</TABLE>
D-7
<PAGE>
Defined
Asset FundsSM
HAVE QUESTIONS ? EQUITY INVESTOR FUND
Request the most FOCUS SERIES EUROPEAN MONETARY UNION
recent free Information PORTFOLIO
Supplement that gives more (A Unit Investment Trust)
details about the Fund, ---------------------------------------
by calling: This Prospectus does not contain
The Chase Manhattan Bank complete information about the
1-800-323-1508 investment company filed with the
Securities and Exchange Commission in
Washington, D.C. under the:
o Securities Act of 1933 (file no.
333-46979) 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.
70079--7/99
