<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 30, 1998
REGISTRATION NO. 333-66087
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------------
AMENDMENT NO. 1
TO
FORM S-6
------------------------------------------
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
------------------------------------------
A. EXACT NAME OF TRUST:
EQUITY INVESTOR FUND
CONCEPT SERIES
REAL ESTATE INCOME FUND 3
DEFINED ASSET FUNDS
B. NAMES OF DEPOSITORS:
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
C. COMPLETE ADDRESSES OF DEPOSITORS' 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
E. TITLE OF SECURITIES BEING REGISTERED:
An indefinite number of Units of Beneficial Interest pursuant to Rule 24f-2
promulgated under the Investment Company Act of 1940, as amended.
F. APPROXIMATE DATE OF PROPOSED SALE TO PUBLIC:
As soon as practicable after the effective date of the Registration Statement.
/ x / Check box if it is proposed that this filing will become effective upon
filing October 30, 1998 pursuant to Rule 487.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
DEFINED ASSET FUNDSSM
- --------------------------------------------------------------------------------
EQUITY INVESTOR FUND The objective of this Defined Fund is total return
CONCEPT SERIES through a combination of high current income and
REAL ESTATE INCOME FUND 3 capital appreciation by investing for
(A UNIT INVESTMENT approximately two years in a diversified portfolio
TRUST) of publicly traded equity real estate investment
- ------------------------------trusts ('REITs').
- -- MONTHLY INCOME The REITs included in the Portfolio were selected
- -- PROFESSIONAL SELECTION for their current dividend yields and potential
- -- DIVERSIFICATION for capital appreciation and increasing dividends.
- -- REINVESTMENT OPTION The value of units will fluctuate with the value
of the REITs in the Portfolio and there is no
assurance that dividends will be paid or that the
REITs, and therefore the units, will appreciate in
value.
Minimum purchase: $250.
-------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS DOCUMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Inquiries should be directed to the Trustee at
SPONSOR: 1-800-221-7771.
Merrill Lynch, Prospectus dated October 30, 1998.
Pierce, Fenner & Smith INVESTORS SHOULD READ THIS PROSPECTUS CAREFULLY
Incorporated AND RETAIN IT FOR FUTURE REFERENCE.
<PAGE>
- --------------------------------------------------------------------------------
Defined Asset FundsSM
Defined Asset Funds is America's oldest and largest family of unit investment
trusts, with over $115 billion sponsored in the last 25 years. Each Defined
Asset Fund is a portfolio of preselected securities. The portfolio is divided
into 'units' representing equal shares of the underlying assets. Each unit
receives an equal share of income and principal distributions.
Defined Asset Funds offer several defined 'distinctives'. You know in advance
what you are investing in and that changes in the portfolio are limited - a
defined portfolio. Most defined bond funds pay interest monthly - defined
income. The portfolio offers a convenient and simple way to invest - simplicity
defined.
Your financial professional can help you select a Defined Asset Fund to meet
your personal investment objectives. Our size and market presence enable us to
offer a wide variety of investments. The Defined Asset Funds family offers:
o Municipal bond portfolios
o Corporate bond portfolios
o Government bond portfolios
o Equity portfolios
o International bond and equity portfolios
The terms of Defined Funds are as short as one year or as long as 30 years.
Special defined bond funds are available including: insured funds, double and
triple tax-free funds and funds with 'laddered maturities' to help protect
against changing interest rates. Defined Asset Funds are offered by prospectus
only.
- ----------------------------------------------------------------
Defining Your Portfolio
- ----------------------------------------------------------------
The Portfolio contains 25 equity REITs selected by the Sponsor with research
provided by a professional REIT Consultant, Cohen & Steers Capital Management,
Inc. In the opinion of the Sponsor these REITs have attractive dividend yields
and the potential for capital appreciation and increasing dividends. Investing
in the Portfolio, rather than in only one or two of the underlying REITs, is a
way to diversify your investment, even though 100% of the Portfolio is invested
in a single industry.
TYPES OF REITS
The portfolio contains REITs in the following real estate sectors:
APPROXIMATE
PORTFOLIO PERCENTAGE
/ / Office/Industrial 32%
/ / Apartment 20%
/ / Regional Mall 16%
/ / Healthcare 12%
/ / Shopping Center 12%
/ / Industrial 8%
- ----------------------------------------------------------------
Defining Your Risks
- ----------------------------------------------------------------
The Portfolio is considered to be 'concentrated' in the real estate industry and
is subject to certain risks associated with ownership of real estate generally
and the value of REITs in particular. The REIT market has undergone considerable
growth and change in recent years with the transformation from private to public
ownership of real estate. Significant developments affecting REITs, which are
generally disclosed in periodic reports filed by the REITs under the federal
securities laws, are expected to continue (see Risk Factors in Part B).
Unit price fluctuates with the value of the Portfolio, and the value of the
Portfolio will be affected by changes in the financial condition of the issuers,
changes in the real estate industry, general economic conditions, movements in
stock prices generally, the impact of the Sponsor's purchase and sale of the
securities (especially during the primary offering period of units) and other
factors. Further distributions of income on the underlying securities will
generally depend upon the declaration of dividends by the issuers, and there can
be no assurance that the issuers of securities will pay dividends or that the
current level of dividends can be maintained. Therefore, there is no guarantee
that the objective of the Portfolio will be achieved. Certain of the REITs may
be relatively illiquid and some of the issuers may be thinly capitalized or have
a limited operating history and as a result may be especially susceptible to
stock market and real estate fluctuations.
Unlike a mutual fund, the Portfolio is not actively managed and the Sponsor
receives no management fee. Therefore, the adverse financial condition of an
issuer or any market movement in the price of a security will not necessarily
require the sale of securities from the Portfolio or mean that the Sponsor will
not continue to purchase the security in order to create additional Units.
Although the Portfolio is regularly reviewed and evaluated and the Sponsor may
instruct the Trustee to sell securities under certain limited circumstances,
securities will not be sold to take advantage of market fluctuations or changes
in anticipated rates of appreciation. (See Portfolio Supervision in Part B.)
A-2
<PAGE>
- ----------------------------------------------------------------
Defining Your Investment
- ----------------------------------------------------------------
PUBLIC OFFERING PRICE PER 1,000 UNITS $999.96
The Public Offering Price as of October 29, 1998, the business day prior to the
initial date of deposit, is based on the aggregate value of the underlying
securities ($249,448.77) and any cash held to purchase securities, divided by
the number of units outstanding (251,968) times 1,000, plus the initial sales
charge. The Public Offering Price includes the estimated organization costs of
$1.61 per 1,000 Units, to which no sales charge has been applied. Units offered
on the Initial Date of Deposit will also be priced at $999.96 per 1,000 Units
although the aggregate value of the underlying securities, cash amount and
number of Units may vary. The Public Offering Price on any subsequent date will
vary. The underlying securities are valued by the Trustee on the basis of their
closing sale prices at 4:00 p.m. Eastern time on every business day.
SALES CHARGES
The total sales charge for this investment combines an initial up-front sales
charge and an annual deferred sales charge that will be deducted from the net
asset value of the Portfolio in seven monthly payments each year of the
Portfolio. If you redeem or exchange your units prior to October 29, 1999, you
will not pay the deferred sales charge for the second year.
ROLLOVER/EXCHANGE OPTION
You may exchange your units of this Portfolio for units of any Focus or Select
Series, or certain other selected Defined Asset Funds, any time prior to
termination of this Portfolio. If you continue to hold your units, when this
Portfolio is about to be liquidated you may have the option to roll your
proceeds into the next Real Estate Portfolio, if one is available. If you notify
your financial professional by October 27, 2000, your units will be redeemed and
your proceeds will be reinvested in units of the next Portfolio, if available.
If you decide not to roll over your proceeds, you will receive a cash
distribution after termination. Of course you can sell or redeem your Units at
any time prior to termination.
MONTHLY INCOME DISTRIBUTIONS
The Fund pays monthly income. Monthly distributions of dividends are payable on
the 25th of the month beginning December 25, 1998 to holders of record on the
10th day of the month. In order to meet certain tax requirements, a special
distribution of income including capital gains, may be paid to holders of record
as of a date in December. Any capital gain net income will generally be
distributed after the end of the Trust's taxable year.
REINVESTMENT OPTION
You can elect to automatically reinvest your distributions into additional units
of the Portfolio subject only to the deferred sales charge remaining at the time
of reinvestment. Reinvesting helps to compound your income for a greater total
return.
TAXES
Distributions which are taxable to Investors as ordinary income will constitute
dividends for federal income tax purposes but will not be eligible for the
dividends-received deduction for certain corporations (see Taxes in Part B).
Noncorporate investors who have held their units for more than one year may be
entitled to a 20% maximum federal tax rate for gains from the sale of these
units. Certain dividends from the Portfolio may be designated as capital gains
dividends, which may be eligible for the 20% maximum federal tax rate in the
hands of noncorporate investors.
Foreign investors should be aware that distributions will generally be subject
to information reporting and withholding taxes. Foreign investors should not be
subject to withholding tax under the Foreign Investors in Real Property Act
('FIRPTA') with respect to gain from the sale or redemption of units. (See Taxes
in Part B.)
TAX BASIS REPORTING
The proceeds received when you sell this investment will reflect the deduction
of the deferred sales charge. In addition, the annual statement and the relevant
tax reporting forms you receive at year-end will be based on the amount paid to
you (not including the deferred sales charge). Accordingly, you should not
increase your basis in your units by the deferred sales charge.
TERMINATION DATE
The Portfolio will terminate by November 24, 2000. The final distribution will
be made within a reasonable time afterward. The Portfolio may be terminated
earlier if its value is less than 40% of the value of the securities when
deposited.
SPONSOR'S PROFIT OR LOSS
The Sponsor's profit or loss from the Portfolio will include the receipt of
applicable sales charges, fluctuations in the Public Offering Price or secondary
market price of units, a loss of $532.50 on the initial deposit of the
securities and a gain or loss on subsequent deposits of securities (see
Sponsor's and Underwriters' Profits in Part B).
A-3
<PAGE>
- ----------------------------------------------------------------
Defining Your Costs
- ----------------------------------------------------------------
SALES CHARGE
You will pay an initial sales charge of about 1.0%. 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 each year of the Portfolio's
two-year life (April 1, 1999 and thereafter on the first of each month through
October 1, 1999, and November 1, 1999 through May 1, 2000). This deferred method
of payment keeps more of your money invested over a longer period of time. The
sales charge is reduced on purchases of $50,000 or more as shown in Part B. If
you exchange units of this Portfolio for units of a Focus, Select or other
Defined Asset Fund or roll the proceeds of your investment into a new portfolio,
you will not be subject to the initial charge otherwise payable upon an
investment in the new portfolio. (See How To Buy Units--Public Offering Price.)
Although this is a unit investment trust rather than a mutual fund, the
following information is presented to permit a comparison of fees and an
understanding of the direct or indirect costs and expenses that you pay. On a
$1,000 investment for 1,000 Units, you will pay the following charges:
As a %
of Initial Public
Offering Price
-----------------
Initial Sales Charge 1.00%
Deferred Sales Charge per Year 1.75%
Maximum Sales Charge 4.50%
Maximum Sales Charge Imposed on Reinvested
Dividends 3.50%
ESTIMATED ANNUAL FUND OPERATING EXPENSES
As a % Amount per
of Net Assets 1,000 Units
----------------- --------------
Trustee's Fee .089% $ 0.88
Portfolio Supervision,
Bookkeeping and Administrative
Fees .046% $ 0.45
Other Operating Expenses .031% $ 0.31
----------------- --------------
TOTAL .166% $ 1.64
These estimates do not include the costs of purchasing and selling the
underlying Stocks.
ORGANIZATION COSTS
Investors will bear all or a portion of the expenses incurred in organizing the
Portfolio--including costs of preparing the registration statement, the trust
indenture and other closing documents, registering units with the SEC and the
states, and the initial audit of the Portfolio-- as is common for mutual funds.
Estimated organization costs shown below are included in the public offering
price and will be deducted from the assets of the Portfolio as of the close of
the initial offering period. The total annual fees may be greater for this
Portfolio than for other equity funds of the Sponsor because most other funds do
not pay consultants for ongoing research.
AMOUNT
PER 1,000
UNITS
-----------------------------
$ 1.61
Estimated Organization Costs
REIT CONSULTANT'S FEE
The Sponsor believes that the research arrangement with the REIT Consultant
(which is not affiliated with the Sponsor) is desirable in the present
circumstances due to the complexity of the REIT industry and the REIT
Consultant's expertise on providing equity research on individual REITs and the
REIT industry in general.
AMOUNT
PER 1,000
UNITS
-----------------------------
$ 1.50
REIT Consultant's Fee
COSTS OVER TIME
You would pay the following cumulative expenses on a $1,000 investment, assuming
5% annual return on the investment throughout the indicated periods and
redemption at the end of the period:
1 Year 3 Years 5 Years 10 Years
$33 $78 $126 $257
Although the Portfolio has a term of only two years and is a unit investment
trust rather than a mutual fund, this information is presented to permit a
comparison of fees, assuming the investment is rolled over into a new portfolio
subject only to the deferred sales charge and fund expenses.
The example assumes reinvestment of any dividends and distributions and uses a
5% annual rate of return as mandated by SEC regulations applicable to mutual
funds. For purposes of the example, the deferred sales charge imposed on
reinvestment of dividends is not reflected until the year following payment of
the dividend; the cumulative expenses would be higher if sales charges on
reinvested dividends were reflected in the year of reinvestment.
Reductions to the repurchase and cash redemption prices in the secondary market
to recoup the costs of liquidating securities to meet redemption (described
below) have not been reflected. The example should not be considered a
representation of past or future expenses or annual rates of return; the actual
expenses and annual rates of return may be more or less than the example.
REDEEMING OR SELLING YOUR INVESTMENT
You may redeem or sell your units at any time prior to the termination of the
Portfolio. Your price will be based on the then current net asset value. The
redemption and secondary market repurchase price as of October 29, 1998 was
$972.50 per 1,000 units ($17.50 per 1,000 units less than the net asset value).
This price reflects deductions of the annual deferred sales charge which
declines over each year of the Portfolio ($17.50 initially). If you redeem or
sell your units before November 1, 1999, you will pay only the balance of any
deferred sales charge remaining for the first year. If you redeem or sell your
units on or after November 1, 1999, you will pay the remaining balance of the
deferred sales charge for the second year. As of the close of the initial
offering period these prices will be reduced to reflect the estimated
organization costs shown above. After the initial offering period, the
repurchase and cash redemption prices for units may be reduced to reflect the
estimated costs of liquidating securities to meet the redemption, currently
estimated at $2.15 per 1,000 units. If you reinvest in a new portfolio, you will
pay your share of any brokerage commissions on the sale of underlying securities
when your units are liquidated during the rollover.
A-4
<PAGE>
- --------------------------------------------------------------------------------
Defined Portfolio
- --------------------------------------------------------------------------------
Equity Investor Fund
Concept Series
Real Estate Income Fund 3 October 30, 1998
<TABLE><CAPTION>
PRICE CURRENT
TICKER PERCENTAGE OF PER SHARE COST DIVIDEND
NAME OF ISSUER SYMBOL FUND (1) TO FUND TO FUND (2) YIELD (3)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1. Apartment Investment &
Management Company AIV 4.04% $ 34.7500 $ 10,077.50 6.47%
2. Archstone Communities Trust ASN 4.02 20.0625 10,031.25 7.08
3. Arden Realty, Inc. ARI 4.07 21.1250 10,140.00 7.95
4. Brandywine Realty Trust BDN 4.03 17.9375 10,045.00 8.47
5. Cabot Industrial Trust CTR 3.96 19.7500 9,875.00 6.58
6. Camden Property Trust CPT 3.98 26.8125 9,920.63 7.53
7. CarrAmerica Realty Corporation CRE 3.98 21.1250 9,928.75 8.76
8. Charles E. Smith Residential
Realty, Inc. SRW 3.97 30.9375 9,900.00 6.92
9. Crescent Real Estate Equities
Company CEI 3.99 23.6875 9,948.75 9.29
10. Developers Diversified Realty
Corporation DDR 4.03 18.6250 10,057.50 7.03
11. First Industrial Realty Trust,
Inc. FR 3.97 25.3750 9,896.25 8.35
12. Health Care Property Investors,
Inc. HCP 4.01 34.5000 10,005.00 7.77
13. Highwoods Properties, Inc. HIW 4.00 26.9375 9,966.88 8.02
14. JDN Realty Corporation JDN 3.98 21.1250 9,928.75 6.82
15. JP Realty, Inc. JPR 4.04 21.0000 10,080.00 8.57
16. Liberty Property Trust LRY 3.94 22.8750 9,836.25 7.87
17. The Macerich Company MAC 4.00 27.0000 9,990.00 6.81
18. Mack-Cali Realty Corporation CLI 3.95 29.0000 9,860.00 7.59
19. Nationwide Health Properties,
Inc. NHP 4.05 22.9375 10,092.50 7.32
20. OMEGA Healthcare Investors,
Inc. OHI 3.99 31.1250 9,960.00 8.61
21. Post Properties, Inc. PPS 4.03 38.6875 10,058.75 6.72
22. Regency Realty Corporation REG 4.01 22.7500 10,010.00 7.74
23. Simon Property Group, Inc. SPG 3.97 29.1250 9,902.50 6.94
24. SL Green Realty Corporation SLG 4.02 18.9375 10,036.88 7.39
25. Taubman Centers, Inc. TCO 3.97 13.5625 9,900.63 6.93
--------------- ----------------
100.00% $ 249,448.77
--------------- ----------------
--------------- ----------------
</TABLE>
- ------------------------------------
(1) Based on Cost to Fund.
(2) Valuation by the Trustee made on the basis of closing sale prices at the
evaluation time on October 29, 1998.
(3) Calculated by annualizing the latest quarterly or semi-annual dividend
declared.
------------------------------------
The securities were acquired on October 29, 1998 and are represented entirely by
contracts to purchase the securities. The Sponsor may have acted as underwriter,
manager or comanager of a public offering of the securities in this Fund during
the last three years. Affiliates of the Sponsor may serve as specialists in the
securities in this Fund on one or more stock exchanges and may have a long or
short position in any of these securities or in options on any of them, and may
be on the opposite side of public orders executed on the floor of an exchange
where the securities are listed. An officer, director or employee of the Sponsor
may be an officer or director of one or more of the issuers of the securities in
the Fund. The Sponsor may trade for its own account as an odd-lot dealer, market
maker, block positioner and/or arbitrageur in any of the securities or in
options on them. The Sponsor, its affiliates, directors, elected officers and
employee benefits programs may have either a long or short position in any
securities or in options on them.
A-5
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Sponsor, Trustee and Holders of Equity Investor Fund, Concept Series, Real
Estate Income Fund 3, Defined Asset Funds (the 'Portfolio'):
We have audited the accompanying statement of condition and the defined
portfolio included in the prospectus of the Portfolio as of October 30, 1998.
This financial statement is the responsibility of the Trustee. Our
responsibility is to express an opinion on this financial statement based on our
audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. Our procedures included
confirmation of an irrevocable letter of credit deposited for the purchase of
securities, as described in the statement of condition, with the Trustee. An
audit also includes assessing the accounting principles used and significant
estimates made by the Trustee, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the financial position of the Portfolio as of October 30,
1998 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, N.Y.
October 30, 1998
STATEMENT OF CONDITION AS OF OCTOBER 30, 1998
TRUST PROPERTY
Investments--Contracts to purchase Securities(1).........$ 249,448.77
--------------------
Total.........................................$ 249,448.77
--------------------
--------------------
LIABILITY AND INTEREST OF HOLDERS
Reimbursement of Sponsor for organization
expenses(2)..........................................$ 405.67
--------------------
Subtotal...............................................$ 405.67
--------------------
Interest of Holders of 251,968 Units of fractional
undivided interest outstanding(3):
Cost to investors(4)...................................$ 251,957.92
Gross underwriting commissions(5) and organization
expenses(2).......................................... (2,914.82)
--------------------
Subtotal...............................................$ 249,043.10
--------------------
Total.........................................$ 249,448.77
--------------------
--------------------
- ---------------
(1) Aggregate cost to the Portfolio of the securities listed under
Defined Portfolio determined by the Trustee at 4:00 p.m., Eastern time on
October 29, 1998. The contracts to purchase securities are collateralized by an
irrevocable letter of credit which has been issued by DBS Bank, New York Branch,
in the amount of $249,981.25 and deposited with the Trustee. The amount of the
letter of credit includes $249,448.77 for the purchase of securities.
(2) A portion of the Public Offering Price consists of securities in
an amount sufficient to pay all or a portion of the costs incurred in
establishing the Portfolio. These costs have been estimated at $1.61 per 1,000
Units. A distribution will be made as of the close of the initial offering
period to an account maintained by the Trustee from which the organizational
expenses obligation of the investors will be satisfied.
(3) Because the value of securities at the evaluation time on the
Initial Date of Deposit may differ from the amounts shown in this statement of
condition, the number of Units offered on the Initial Date of Deposit will be
adjusted from the initial number of Units to maintain the $999.96 per 1,000
Units offering price.
(4) Aggregate public offering price computed on the basis of the
value of the underlying securities at 4:00 p.m., Eastern time on October 29,
1998.
(5) Assumes the maximum initial sales charge per 1,000 units of 1.00%
of the Public Offering Price. A deferred sales charge of $17.50 per 1,000 Units
is payable each year ($2.50 per 1,000 Units on April 1, 1999 and thereafter on
the first of each month through October 1, 1999 and November 1, 1999 through May
1, 2000). Distributions will be made on behalf of investors to an account
maintained by the Trustee from which the deferred sales charge obligation of the
investors to the Sponsor will be satisfied.
A-6
<PAGE>
DEFINED ASSET FUNDSSM
PROSPECTUS--PART B
EQUITY INVESTOR FUND
CONCEPT SERIES
REAL ESTATE INCOME FUND 3
FURTHER INFORMATION REGARDING THE FUND MAY BE OBTAINED
WITHIN FIVE DAYS BY WRITING OR CALLING THE TRUSTEE AT THE ADDRESS AND
TELEPHONE NUMBER SET FORTH ON THE BACK COVER OF THIS PROSPECTUS.
INDEX
PAGE
---------
PORTFOLIO DESCRIPTION............................................ 1
RISK FACTORS..................................................... 2
HOW TO BUY UNITS................................................. 4
HOW TO REDEEM OR SELL UNITS...................................... 6
EXCHANGE OPTION.................................................. 7
INCOME, DISTRIBUTIONS AND REINVESTMENT........................... 8
PORTFOLIO EXPENSES............................................... 9
TAXES............................................................ 9
RECORDS AND REPORTS.............................................. 12
TRUST INDENTURE.................................................. 12
MISCELLANEOUS.................................................... 13
SUPPLEMENTAL INFORMATION......................................... 15
PORTFOLIO DESCRIPTION
PORTFOLIO SELECTION
All of the REITs in the Portfolio were chosen from a list of recommended
REITs provided to the Sponsor by the REIT Consultant, Cohen & Steers. The REIT
Consultant considered the following factors, among others, when recommending the
REITs to the Sponsor: (i) the risk-adjusted potential returns of the REIT, (ii)
whether the management is highly focused and free from conflicts, (iii)
performance under various economic conditions, (iv) the appreciation potential
of the property owned, (v) the financial strength and flexibility of the REIT,
(vi) whether the REIT has access to capital markets and (vii) the cash flow
quality and growth potential of the REIT. The Sponsor considered the following
factors, among others, when selecting the REITs from the recommended list: (i)
liquidity, (ii) yield and (iii) diversification of the Portfolio by REIT type
(e.g. industrial, commercial, healthcare, apartments or retail) and geographic
location to provide both regional expertise and national exposure.
The REIT Consultant, Cohen & Steers, is based in New York City. Cohen &
Steers is a registered investment adviser, organized in 1986, managing $4.4
billion in assets at September 30, 1998, invested almost exclusively in
publicly traded real estate securities. It has extensive investment experience,
substantial research capabilities and strong trading relationships in the real
estate industry. Clients include corporate and public pension plans, endowment
funds and investment companies.
In addition to providing the initial list of recommended REITs to the
Sponsor, the REIT Consultant will periodically provide the Sponsor with research
on individual REITs and the REIT market in general to assist the Sponsor in
supervising the Portfolio (see Portflio Supervision below).
The Fund may be an appropriate medium for investors who desire to
participate in a portfolio of REITs with greater variety than they might be able
to acquire individually. Over the longterm, REITs have tended to offer a hedge
1
<PAGE>
against inflation. While REIT prices have had a low correlation with price
movements in common stocks generally (and therefore can help to diversify an
investment portfolio), because of substantial past price fluctuations in REITs,
an investment in the Portfolio should not be considered a complete investment
program.
The deposit of the Securities in the Portfolio on the initial date of
deposit established a proportionate relationship among the number of shares of
each Security. Following the initial date of deposit the Sponsor may deposit
additional Securities in order to create new Units, maintaining to the extent
possible that original proportionate relationship. The ability to acquire each
Security at the same time will generally depend upon the Security's availability
and any restrictions on the purchase of that Security by reason of the federal
securities laws or otherwise.
Additional Units may also be created by the deposit of cash (including a
letter of credit) with instructions to purchase additional Securities. This
practice could cause both existing and new investors to experience a dilution of
their investments and a reduction in their anticipated income because of price
fluctuations in the Securities between the time of the cash deposit and the
actual purchase of the additional Securities and because the associated
brokerage fees will be an expense of the Portfolio. To minimize these effects,
the Portfolio will try to purchase Securities as close to the Evaluation Time or
at prices as close to the evaluated prices as possible.
Because each Defined Asset Fund is a preselected portfolio, you know the
securities before you invest. Of course, the Portfolio will change somewhat over
time, as Securities are purchased upon creation of additional Units, as
securities are sold to meet Unit redemptions or in other limited circumstances.
PORTFOLIO SUPERVISION
The Portfolio follows a buy and hold investment strategy in contrast to the
frequent portfolio changes of a managed fund based on economic, financial and
market analyses. In the event a public tender offer is made for a Security or a
merger or acquisition is announced affecting a Security, the Sponsor may
instruct the Trustee to tender or sell the Security in the open market when in
its opinion it is in the best interests of investors to do so. Although the
Portfolio is not actively managed it is regularly reviewed and evaluated and
Securities can be sold in case of certain adverse developments concerning a
Security including the adverse financial condition of the issuer. the
institution of legal proceedings against the issuer, a decline in the price or
the occurrence of other market or credit factors that might otherwise make
retention of the Security detrimental to the interest of investors or if the
disposition of these Securities is necessary in order to enable the Portfolio to
make distributions of the Portfolio's capital gain net income or desirable in
order to maintain the qualification of the Portfolio as a regulated investment
company under the Internal Revenue Code. Securities can also be sold to meet
redemption of Units. The Sponsor is also authorized to direct the reinvestment
of the proceeds of the sale of Securities, as well as moneys held to cover the
purchase of Securities, as well as moneys held to cover the purchase of
Securities pursuant to contracts which have failed, in Replacement Securities
which satisfy certain conditions specified in the Indenture.
RISK FACTORS
An investment in the Portfolio entails certain risks, including the risk
that the value of your investment will decline if the financial condition of the
issuers of the Securities becomes impaired or if the general condition of the
stock market worsens. The rights of holders of common stocks to receive payments
from the issuer are generally inferior to the rights of creditors of, or holders
of debt obligations or preferred stocks issued by, the issuer. Moreover, because
common stocks do not represent an obligation of the issuer they do not offer any
assurance of income or provide the degree of protection of capital provided by
debt securities. Common stocks in general are susceptible to general stock
market movements and to volatile increases and decreases in value as market
confidence in and perceptions of the issuers change. Equity markets can be
affected by unpredictable factors including expectations regarding government,
economic, monetary and fiscal policies, inflation and interest rates, economic
expansion or contraction, and global or regional political, economic or banking
crises. The Sponsor cannot predict the direction or scope of any of these
factors.
The Portfolio is concentrated in real estate investment trusts.
Concentration may involve additional risk because of the decreased
diversification of economic, financial and market risks. Set forth below is a
brief description of certain risks associated with the Securities. Additional
information is contained in the Information Supplement which is available from
the Trustee at no charge to the investor.
2
<PAGE>
REAL ESTATE INVESTMENT TRUSTS
Real estate is a traditional investment. REITs are financial vehicles that
have as their objective the pooling of capital from a number of investors in
order to participate directly in real estate ownership or financing and offer a
convenient and cost effective way to diversify your portfolio with real estate
investments. They generally have interests in income-producing real estate.
Equity REITs such as those in the Portfolio emphasize direct property
investment, holding their invested assets primarily in the ownership of real
estate or other equity interests. The objective of an equity REIT is to purchase
income-producing real estate properties in order to generate high levels of cash
flow from rental income and a gradual asset appreciation, and they typically
invest in properties such as office, retail, industrial, hotel and apartment
buildings and health care facilities. The REITs in the Portfolio are not highly
leveraged and generate most of their income from rents on established
properties. Their properties are geographically diversified around the country.
While past experience is no guarantee of the future, REITs historically have
distributed high levels of income through various economic and market cycles.
REITs have grown significantly in recent years and have been a stablizing force
in the U.S. real estate market. The Sponsor believes selected REITs offer an
attractive opportunity over the next two years.
Many factors can have an adverse impact on the performance of a particular
REIT, its cash available for distribution, the credit quality of a particular
REIT or the real estate industry generally. Risks associated with the direct
ownership of real estate include, among other factors, general and local
economic conditions, decline in real estate values, the financial health of
tenants, overbuilding and increased competition for tenants, oversupply of
properties for sale, changing demographics, changes in interest rates, changes
in government regulations, faulty construction, changes in neighborhood values,
and the unavailability of construction financing or mortgage loans at rates
acceptable to developers. Variations in rental income and space availability and
vacancy rates in terms of supply and demand are additional factors affecting
real estate generally and REITs in particular. Investors should also be aware
that REITs may not be diversified and are subject to the risks of financing
projects. REITs are also subject to defaults by borrowers, self-liquidation and
the market's perception of the REIT industry generally.
Certain REIT's in the Portfolio may be structured as UPREIT's. This form of
REIT owns an interst in a partnership that owns real estate, which can result in
a potential conflict of interest between shareholders who may want to sell an
asset and partnership interest holders who would be subject to tax liability if
the REIT sells the property. In some cases, REITS have entered into 'no sell'
agreements, which are designed to avoid a taxable event to the holders of
partnership units by preventing the REIT from selling the property. This kind of
arrangement could mean that the REIT would refuse a lucrative offer for an asset
or be forced to hold on to a poor asset. Since 'no sell' agreements are often
undisclosed, the Sponsor is unable to state whether any of the REITS in the
Portfolio have entered into this kind of arrangement.
REIT Taxation. Each of the REITs in which the Fund invests will generally
state its intention to operate in such manner as to qualify for taxation as a
'real estate investment trust' under Sections 850-860 of the Internal Revenue
Code of 1986, as amended, although no assurance can be given that each REIT will
at all times so qualify. So long as an issuer qualifies as a REIT, it will, in
general, be subject to Federal income tax only on income that is not distributed
to stockholders. In order to qualify as a REIT for any taxable year, a REIT
must, among other things, hold at least 75% of its assets in real estate, cash
items and government securities; derive at least 75% of its gross income from
rents and interest on mortgages gain from disposition of real property that is
not inventory, distributions from other REITS, and certain other types of real
estate related income; and distribute to its stockholders an amount at least
equal to the sum of 95% of its taxable income. Failure to qualify for taxation
as a REIT in any taxable year will subject an issuer to tax on its taxable
income at regular corporate rates. Unless entitled to relief under specific
statutory provisions, the issuer would not qualify for taxation as a REIT for
the next four taxable years after failing to qualify in any year. Each REIT may
also be subject to state, local or other taxation in various state, local or
other jurisdictions.
LIQUIDITY
Whether or not the Securities are listed on a national securities exchange,
the principal trading market for the Securities may be in the over-the-counter
market. As a result, the existence of a liquid trading market for the Securities
may depend on whether dealers will make a market in the Securities. There can be
no assurance that a market will be made for any of the Securities, that any
market for the Securities will be maintained or of the liquidity of the
Securities in any markets made. In addition, the Portfolio may be restricted
under the Investment Company Act of 1940 from
3
<PAGE>
selling Securities to the Sponsor. The price at which the Securities may be sold
to meet redemptions and the value of the Portfolio will be adversely affected if
trading markets for the Securities are limited or absent.
LITIGATION AND LEGISLATION
The Sponsor does not know of any pending litigation as of the initial date
of deposit that might reasonably be expected to have a material adverse effect
on the Portfolio, although pending litigation may have a material adverse effect
on the value of the Securities. In addition, at any time after the initial date
of deposit, litigation may be initiated on a variety of grounds, or legislation
may be enacted, affecting the Securities in the Portfolio or the issuers of the
Securities. Changing approaches to regulation may have a negative impact on
certain companies represented in the Portfolio. There can be no assurance that
future litigation, legislation, regulation or deregulation will not have a
material adverse effect on the Portfolio or will not impair the ability of the
issuers of the Securities to achieve their business goals. From time to time
Congress considers proposals to reduce the rate of the dividends-received
deduction. This type of legislation, if enacted into law, would adversely affect
the after-tax return to investors who can take advantage of the deduction. See
Taxes.
LIFE OF THE PORTFOLIO; TERMINATION
The size and composition of the Portfolio will be affected by the level of
redemptions of Units that may occur from time to time. Principally, this will
depend upon the number of investors seeking to sell or redeem their Units. The
Portfolio will be terminated no later than the mandatory termination date
specified in Part A of the Prospectus. It will terminate earlier upon the
disposition of the last Security or upon the consent of investors holding 51% of
the Units. The Portfolio may also be terminated earlier by the Sponsor once its
total assets have fallen below the minimum value specified in Part A of the
Prospectus. A decision by the Sponsor to terminate the Portfolio early will be
based on factors such as the size of the Portfolio relative to its original
size, the ratio of Portfolio expenses to income, and the cost of maintaining a
current prospectus.
Notice of impending termination will be provided to investors and
thereafter units will no longer be redeemable. On or shortly before termination,
the Trustee will seek to dispose of any Securities remaining in the Portfolio
although any Security unable to be sold at a reasonable price may continue to be
held by the Trustee in a liquidating trust pending its final disposition. A
proportional share of the expenses associated with termination, including
brokerage costs in disposing of Securities, will be borne by investors remaining
at that time. This may have the effect of reducing the amount of proceeds those
investors are to receive in any final distribution.
HOW TO BUY UNITS
Units are available from the Sponsor, Underwriters and other broker-dealers
at the Public Offering Price. The Public Offering Price varies each Business Day
with changes in the value of the Portfolio and other assets and liabilities of
the Fund.
PUBLIC OFFERING PRICE
Units are charged a combination of Initial and Deferred Sales Charges which
will aggregate 2.75% of the public offering price for the first year ($17.50
Deferred Sales Charge plus an Initial Sales Charge of about 1.0%, totaling 2.75%
of the public offering price) and approximately 1.75% for the second year.
Because the annual Deferred Sales Charge is $17.50 per 1,000 Units in the second
year regardless of the price you pay, the maximum sales charges expressed as a
percentage of the public offering price will vary with the price you pay. For
example, if you buy 1,000 Units for $1,050 (including an initial sales charge of
$11.38) and hold the Units until termination, you will pay a total sales charge
of $46.38 or 4.42% of the acquisition price on those Units. At an acquisition
price of $950 (including an initial sales charge of $8.63), you would pay a
total sales charge of $43.63 or 4.59% of the acquisition price.
For quantity purchases of units of this Series and all Focus and Select
Series, and certain other Selected Equity Investor Series, by an investor and
the investor's spouse and minor children, or by a single trust estate or
fiduciary account, made on a single day, the following percentages will apply
(assuming a $1,000 public offering price for 1,000 Units):
4
<PAGE>
<TABLE><CAPTION>
INITIAL OFFER PERIOD SALES CHARGES CUMULATIVE SALES
DEALER CONCESSION CHARGES
-------------------------------------------------------------
AS % OF
PUBLIC OFFERING
PRICE ---------------------
AS % OF AS % OF NET ------------------- AS % OF
AMOUNT PURCHASED PUBLIC OFFERING PRICE AMOUNT INVESTED PUBLIC OFFERING PRICE
- --------------------------------------- --------------------- ----------------- ---------------------
<S> <C> <C> <C> <C>
Less than $50,000 ..................... 2.75% 2.778% 2.00% 4.50%
$50,000 to $99,999 .................... 2.50 2.519 1.80 4.25
$100,000 to $249,999 .................. 2.00 2.005 1.45 3.75
$250,000 to $999,999 .................. 1.75 1.750 1.25 3.50
$1,000,000 or more .................... 1.00 1.000 .50 2.75
AS % OF NET
AMOUNT PURCHASED AMOUNT INVESTED
- --------------------------------------- -----------------
Less than $50,000 ..................... 4.712%
$50,000 to $99,999 .................... 4.439
$100,000 to $249,999 .................. 3.896
$250,000 to $999,999 .................. 3.627
$1,000,000 or more .................... 2.828
</TABLE>
In addition, a portion of the Public Offering Price also consists of securities
in an amount sufficient to pay for all or a portion of the costs incurred in
establishing the Portfolio, including the costs of the initial preparation of
documents relating to the Portfolio, federal and state registration fees, and
the initial fees and expenses of the Trustee, legal expenses and any other
out-of-pocket expenses. The estimated organization costs will be deducted from
the assets of the Portfolio as of the close of the initial offering period.
The annual Deferred Sales Charge is a charge of $17.50 per 1,000 units and
is accrued in seven monthly installments each year of the Portfolio, in the
months indicated in part A of this Prospectus. Units redeemed or repurchased
prior to the accrual of the final Deferred Sales Charge installment in the first
or second year will have the amount of any remaining installments deducted from
the redemption or repurchase proceeds or deducted in calculating an in-kind
redemption, although this deduction will be waived in the event of the death or
disability (as defined in the Internal Revenue Code) of an investor.
It is anticipated that Securities will not be sold to pay the Deferred
Sales Charge until after the date of the last installment in each year of the
Portfolio. 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. In selling Securities the
Portfolio will attempt to minimize any current tax liability for current
investors.
Selling dealers will be entitled to the concession stated in the table
above on Units sold or redeemed during the first year. On Units held in the
second year of the Portfolio, the selling dealer will be entitled to an
additional concession of $11 per 1,000 Units ($5 per 1,000 Units for purchases
of $1 million or more). Employees of the Sponsor and Sponsor affiliates and
non-employee directors of the Sponsor may purchase Units at a reduced sales
charge.
Commercial banks and their securities broker subsidiaries that have
agreements with the Sponsors may make Units available to their customers as
their agents. A portion of the sales charge (equal to the dealer commission
referred to above) will be retained or remitted to the banks. Under the
Glass-Steagall Act, banks are prohibited from underwriting Units; however, the
Glass-Steagall Act permits banks to act as agents of their customers on a
disclosed basis and federal banking regulations have approved similar
arrangements. In addition, state securities laws on this issue may differ from
the interpretation of federal law expressed above and banks and financial
institutions may be required to register as dealers pursuant to state law.
EVALUATIONS
Evaluations are determined by the Trustee on each Business Day. This
excludes Saturdays, Sundays and the following holidays as observed by the New
York Stock Exchange: New Year's Day, 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 system, evaluations are generally based on closing sales
prices on that exchange or that system (unless the Trustee deems these prices
inappropriate) or, if closing sales prices are not available, at the mean
between the closing bid and offer prices. If the Securities are not listed or if
listed but the principal market is elsewhere, the evaluation is generally
determined based on sales prices of the Securities on the over-the-counter
market or, if sales prices in that market are not available, on the basis of the
mean between current bid and offer prices for the Securities or for comparable
securities or by appraisal or by any combination of these methods. Neither the
Sponsor nor the Trustee guarantees the enforceability, marketability or price of
any Securities.
5
<PAGE>
NO CERTIFICATES
All investors are required to hold their Units in uncertifcated form and in
'street name' by their broker, dealer or financial institution at the Depository
Trust Company ('DTC').
HOW TO REDEEM OR SELL UNITS
You can redeem your Units at any time for net asset value. In addition, the
Sponsor has maintained an uninterrupted secondary market for Units for over 20
years and will ordinarily buy back Units at net asset value. The following
describes these two methods to redeem or sell Units in greater detail.
REDEEMING UNITS
You can always redeem your Units for net asset value. This can be done by
contacting your broker, dealer or financial institution that holds your Units in
street name. In certain instances, additional documents may be required such as
a trust instrument, certificate of corporate authority, certificate of death or
appointment as executor, administrator or guardian.
Within seven days after the receipt of your request (and any necessary
documents), a check will be mailed to you in an amount equal to the net asset
value of your Units. Because of the sales charge, market movements or changes in
the Portfolio, net asset value at the time you redeem your Units may be greater
or less than the original cost of your Units. Net asset value is calculated each
Business Day by adding the value of the Securities, declared but unpaid
dividends on the Securities, cash and the value of any other Portfolio assets;
deducting unpaid taxes or other governmental charges, accrued but unpaid
Portfolio expenses and any remaining Deferred Sales Charges, unreimbursed
Trustee advances, cash held to redeem Units or for distribution to investors and
the value of any other Portfolio liabilities; and dividing the result by the
number of outstanding Units. After the initial offering period, the repurchase
and cash redemption prices will be reduced to reflect the cost to the Portfolio
of liquidating Securities to meet the redemption.
As long as the Sponsor is maintaining a secondary market for Units (as
described below), the Trustee will not actually redeem your Units but will sell
them to the Sponsor for net asset value. If the Sponsor is not maintaining a
secondary market, the Trustee will redeem your Units for net asset value or will
sell your Units in the over-the-counter market if the Trustee believes it will
obtain a higher net price for your Units. If the Trustee is able to sell the
Units for a net price higher than net asset value, you will receive the net
proceeds of the sale.
If cash is not available in the Income and Capital Accounts to pay
redemptions, the Trustee may sell Securities selected by the Agent for the
Sponsor based on market and credit factors determined to be in the best interest
of the Fund. These sales are often made at times when the Securities would not
otherwise be sold and may result in lower prices than might be realized
otherwise and may also reduce the size and diversity of the Fund. If Securities
are being sold during a time when additional Units are being created by the
purchase of additional Securities (as described under Portfolio Selection),
Securities will be sold in a manner designed to maintain, to the extent
practicable, the proportionate relationship among the number of shares of each
Security in the Portfolio.
Any investor or related accounts owning Units representing Securities with
a value of at least $250,000 who redeems those Units prior to the rollover
notification date indicated in Part A of the Prospectus may, in lieu of cash
redemption, request distribution in kind of an amount and value of Securities
per Unit equal to the otherwise applicable Redemption Price per Unit. Generally,
whole shares of each Security together with cash from the Capital Account equal
to any fractional shares to which the investor would be entitled (less any
Deferred Sales Charge payable) will be paid over to a distribution agent and
either held for the account of the investor or disposed of in accordance with
instructions of the investor. Any brokerage commissions on sales of Securities
in connection with in-kind redemptions will be borne by the redeeming investors.
The in-kind redemption option is subject to all applicable legal restrictions
and may be terminated by the Sponsor at any time upon prior notice to investors.
Redemptions may be suspended or payment postponed (i) if the New York Stock
Exchange is closed (other than customary weekend and holiday closings), (ii) if
the SEC determines that trading on the New York Stock Exchange is restricted or
that an emergency exists making disposal or evaluation of the Securities not
reasonably practicable or (iii) for any other period permitted by SEC order.
6
<PAGE>
SPONSOR'S SECONDARY MARKET FOR UNITS
The Sponsor, while not obligated to do so, will buy back Units at net asset
value without any other fee or charge as long as it is maintaining a secondary
market for Units. Because of the sales charge, market movements or changes in
the portfolio, net asset value at the time you sell your Units may be greater or
less than the original cost of your Units. The Sponsor may resell the Units to
other buyers or redeem the Units by tendering them to the Trustee. You should
consult your financial professional for current market prices to determine if
other broker-dealers or banks are offering higher prices for Units.
The Sponsor may discontinue the secondary market for Units without prior
notice if the supply of Units exceeds demand or for other business reasons.
Regardless of whether the Sponsor maintains a secondary market, you have the
right to redeem your Units for net asset value with the Trustee at any time, as
described above.
EXCHANGE OPTION
You may exchange Units for units of Focus or Select Portfolios or certain
other selected Defined Asset Funds with a combination of initial and deferred
sales charges. Select and Focus Portfolios have a sales charge for first-time
investors of 1% initially and annual deferred sales charges of $17.50 per 1,000
units. On exchanges, the initial sales charge is waived and units are acquired
subject to any remaining deferred sales charges. Investors can also exchange
units of those Portfolios and similar series of unaffiliated equity unit
investment trusts for Units, subject only to the remaining deferred sales
charges. In the future, the Exchange Option may be extended to other series and
types of trusts with similar sales charge structures.
To make an exchange, you should contact your financial professional to find
out what suitable exchange funds are available and to obtain a prospectus. You
may acquire units of only those exchange funds in which the Sponsor is
maintaining a market and which are lawfully for sale in the state where you
reside. An exchange is a taxable event normally requiring recognition of any
gain or loss on the units exchanged. However, the Internal Revenue Service may
seek to disallow a loss if the portfolio of the units acquired is not materially
different from the portfolio of the units exchanged; you should consult your own
tax adviser. If the proceeds of units exchanged are insufficient to acquire a
whole number of exchange fund units, you may pay the difference in cash (not
exceeding the price of a single unit acquired).
As the Sponsor is not obligated to maintain a market in any series or to
offer successor portfolios, there can be no assurance that units can be
exchanged. The Exchange Option may be amended or terminated at any time without
notice.
ROLLOVER
In lieu of redeeming Units or receiving liquidation proceeds upon the
termination of the Portfolio, investors who hold their units with the Sponsor
may elect, by contacting their financial adviser prior to the rollover
notification date indicated in Part A, to apply their proportional interest in
the Securities and other assets of the Portfolio toward the purchase of units of
a new Real Estate portfolio (if available). It is expected that the terms of any
new portfolio, including the exchange and rollover features, will be
substantially the same as those of this Portfolio.
A rollover of your units is accomplished by the in-kind redemption of Units
followed by the sale of the underlying Securities by a distribution agent on
behalf of participating investors and the reinvestment of the sale proceeds (net
of brokerage fees, governmental charges and other sale expenses) in units of the
new portfolio at their net asset value.
The Sponsor intends to sell the distributed Securities, on behalf of the
distribution agent, as quickly as practicable and then to create units of the
new portfolio as quickly as possible, subject in both cases to the Sponsor's
sensitivity that the concentrated sale and purchase of large volumes of
securities may affect market prices in a manner adverse to the interest of
investors. Accordingly, the Sponsor may, in its sole discretion, undertake a
more gradual sale of the distributed Securities and a more gradual creation of
units of the new portfolio to help mitigate any negative market price
consequences caused by this large volume of securities trades. In order to
minimize potential losses caused by market movement during the rollover period,
the Sponsor may enter into program trades, which might increase brokerage
7
<PAGE>
commissions payable by investors. There can be no assurance, however, that any
trading procedures will be successful or might not result in less advantageous
prices. Pending the investment of rollover proceeds in the securities to
comprise the new portfolio, those moneys may be uninvested for up to several
days. For any Securities in the Portfolio that will also be in the new
portfolio, a direct sale of those securities between the two funds is now
permitted pursuant to an SEC exemptive order. These sales will be effected at
the securities' closing sales prices on the exchanges where they are principally
traded, free of any brokerage costs.
By participating in the rollover you may realize taxable capital gain on
the rollover but may not be entitled to a deduction for capital loss recognized
on the rollover and, because of the rollover procedures, you will not receive a
cash distribution with which to pay those taxes. You should consult your own tax
advisers in this regard. Investors who do not participate will continue to hold
their Units until the termination of the Portfolio; however, depending upon the
extent of participation in the rollover, the aggregate size of the Portfolio may
be sharply reduced resulting in a significant increase in per Unit expenses.
The Sponsor may, in its sole discretion and without penalty or liability to
investors, decide not to sponsor a new portfolio or to modify the terms of the
rollover.
The Division of Investment Management of the SEC is of the view that the
rollover option constitutes an 'exchange offer', for the purposes of Section
11(c) of the Investment Company Act of 1940, and would therefore be prohibited
absent an exemptive order. The Sponsor has received exemptive orders under
Section 11(c) which it believes permits it to offer the rollover, but no
assurance can be given that the SEC will concur with the Sponsor's position and
additional regulatory approvals may be required.
INCOME, DISTRIBUTIONS AND REINVESTMENT
INCOME AND DISTRIBUTIONS
The annual income per Unit, after deducting estimated annual 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 purchases of additional Securities and
sales of Securities. There is no assurance that dividends on the Securities will
continue at their current levels or be declared at all.
Each Unit receives an equal share of distributions of dividend income net
of estimated expenses. Dividends received are credited to an Income Account and
other receipts to a Capital Account. 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. A Reserve Account may
be created by withdrawing from the Income and Capital Accounts amounts
considered appropriate by the Trustee to reserve for any material amount that
may be payable out of the Portfolio. Funds held by the Trustee in the various
accounts do not bear interest. Subject to the reinvestment plan, the Monthly
Income Distribution for each investor shall consist of an amount, computed
monthly by the Trustee, substantially equal to one-twelfth of the investor's pro
rata share of the estimated annual income to the Income Account, after deducting
estimated expenses. There is no assurance that actual distributions will be made
since all dividends received may be used to pay expenses. In addition,
distributions of amounts necessary to pay the Deferred Sales Charge will be made
from the Capital Account to an account maintained by the Trustee for purposes of
satisfying investors' sales charge obligations. Although the Sponsor may collect
the Deferred Sales Charge during the months stated in Part A, to keep Units more
fully invested the Sponsor currently does not anticipate sales of Securities to
pay the Deferred Sales Charge until after the final Deferred Sales Charge
installment in each year of the Portfolio. Proceeds of the disposition of any
Securities not used to pay Deferred Sales Charge or to redeem Units will be held
in the Capital Account and distributed following liquidation of the Portfolio.
An amount equal to any capital gain net income (i.e. the excess of capital
gains over capital losses recognized by the Fund in any taxable year) will be
distributed shortly after the end of the year. In order to meet certain tax
requirements the Portfolio may make a special distribution of income, including
capital gains, to holders of record as of a date in December. Proceeds received
from the disposition of any of the Securities which are not used to make the
distribution of capital gain net income, for redemption of Units or reinvested
in additional Securities will be held in the Capital Account to be distributed
on the next succeeding distribution day.
8
<PAGE>
REINVESTMENT
Income and principal distributions on Units may be reinvested by
participating in the reinvestment plan. Under the plan, the Units acquired for
investors will be either Units already held in inventory by the Sponsor or new
Units created by the Sponsor's deposit of additional Securities, contracts to
purchase additional Securities or cash (or a bank letter of credit in lieu of
cash) with instructions to purchase additional Securities. Purchases made
pursuant to the reinvestment plan will be made without initial sales charge at
the net asset value for Units (but will be subject to subsequently deducted
deferred sales charges). Under the reinvestment plan, the Portfolio will pay the
distributions to the Trustee which in turn will purchase for the investor full
and fractional Units at the price determined as of the close of business on the
distribution day and will add the Units to the investor's account and send the
investor an account statement reflecting the reinvestment. The Sponsor reserves
the right to amend, modify or terminate the reinvestment plan at any time
without prior notice. Investors holding Units in 'street name' should contact
their broker, dealer or financial institution if they wish to participate in the
reinvestment plan.
PORTFOLIO EXPENSES
Estimated annual Portfolio expenses are listed in Part A of the Prospectus;
if actual expenses exceed the estimate, the excess will be borne by the
Portfolio. The estimated expenses do not include any brokerage commissions
payable by the Portfolio in buying and selling Securities. The Trustee's fees
shown in Part A of this Prospectus assume that the Portfolio will reach a size
estimated by the Sponsor and are based on a sliding fee scale that reduces the
per 1,000 units Trustee's fee as the size of the Portfolio increases. The
Trustee's annual fee is payable in monthly installments. The Trustee also
benefits when it holds cash for the Portfolio in non-interest bearing accounts.
Possible additional charges include Trustee fees and expenses for extraordinary
services, costs of indemnifying the Trustee and the Sponsor, costs of action
taken to protect the Portfolio and other legal fees and expenses, termination
expenses and any governmental charges. The Trustee has a lien on Portfolio
assets to secure reimbursement of these amounts and may sell Securities for this
purpose if cash is not available. The Sponsor receives an annual fee currently
estimated at $0.45 per 1,000 Units to reimburse it for the cost of providing
Portfolio supervisory, bookkeeping and administrative services and for any other
expenses properly chargeable to the Portfolio. While the fee may exceed the
amount of these costs and expenses attributable to the Portfolio, the total of
these fees from all Series of Defined Asset Funds will not exceed the aggregate
amount attributable to all of those Series during any calendar year. The
Trustee's and Sponsor's fees may be adjusted for inflation without investor
approval.
Advertising and selling expenses will be paid from the Underwriting Account
at no charge to the Portfolio. Defined Asset Funds can be a cost-effective way
to purchase and hold investments. Annual operating expenses are generally lower
than for managed funds. Because Defined Asset Funds have no management fees,
limited transaction costs and no ongoing marketing expenses, operating expenses
are generally less than 0.25% a year. When compounded annually, small
differences in expense ratios can make a big difference in your investment
results.
TAXES
TAXATION OF THE PORTFOLIO
The Portfolio intends to qualify for and elect the special tax treatment
applicable to 'regulated investment companies' under Sections 851-855 of the
Internal Revenue Code of 1986, as amended (the 'Code'). Qualification and
election as a 'regulated investment company' involve no supervision of
investment policy or management by any government agency. If the Portfolio
qualifies as a 'regulated investment company' and distributes to investors 90%
or more of its taxable income, excluding its net capital gain (i.e., the excess
of its net long-term capital gain over its net short-term capital loss), it will
not be subject to federal income tax on the portion of its taxable income
(including any net capital gain) it distributes to investors in a timely manner.
In addition, the Portfolio will not be subject to the 4% excise tax on certain
undistributed income of 'regulated investment companies' to the extent it
distributes to investors in a timely manner at least 98% of its taxable income
(including any net capital gain). It is anticipated that the Portfolio will not
be subject to federal income tax or the excise tax, because the Indenture
requires the distribution of the Portfolio's taxable income (including any net
capital gain) in a timely manner. Although all or a portion of the Portfolio's
taxable income (including any net capital gain) for any calendar year may be
distributed shortly after the end of the calendar year, such a distribution will
be treated for federal income tax purposes as having been received by investors
during the calendar year.
9
<PAGE>
DISTRIBUTIONS
Distributions to investors of the Portfolio's dividend income and net
short-term capital gain in any year will generally be taxable as ordinary income
to investors to the extent of the Portfolio's taxable income (other than taxable
income attributable to its net capital gain) for that year. Distributions in
excess of the Portfolio's taxable income will be treated as a return of capital
and will reduce the investor's basis in his Units and, to the extent that such
distributions exceed his basis, will be treated as a gain from the sale of his
Units as discussed below. It is anticipated that substantially all of the
distributions of the Portfolio's net capital gains will be designated as capital
gain dividends and that the Portfolio's dividend income and net short-term
capital gain will be taxable as ordinary income to investors.
Distributions that are taxable as ordinary income to investors will
constitute dividends for federal income tax purposes. Certain corporate
investors will be eligible for the 70% dividends-received deduction to the
extent that the distributions are appropriately designated by the Portfolio and
are attributable to eligible dividends received by the Portfolio from domestic
issuers with respect to whose Securities the Portfolio satisfies the
requirements for the dividends-received deduction. The 46-day holding period for
the dividends-received deduction must begin before and include each ex-dividend
date and excludes the purchase date and any days during which the investor's
investment is hedged. Depending upon the particular corporate investor's
circumstances, additional limitations on the availability of the
dividends-received deduction may be applicable. Further, legislative and
regulatory proposals arise from time to time that may adversely affect the
after-tax returns to investors taking advantage of the deduction. Investors are
urged to consult their own tax advisers in this regard.
Distributions of the Portfolio's net capital gain that are designated as
capital gain dividends by the Portfolio will be taxable to investors as
long-term capital gain, regardless of the time the investor has held his Units.
However, if the Portfolio were to terminate in less than one year, the Portfolio
would not distribute any capital gain dividends.
An investor, other than a dealer in securities, will generally recognize
capital gain or loss when the investor disposes of his Units (by sale,
redemption or otherwise). In the case of a distribution of Securities to an
investor upon redemption of his Units, capital gain or loss will generally be
recognized in an amount equal to the difference between the investor's tax basis
in his Units and the fair market value of the Securities received in redemption.
Noncorporate investors who have held their Units for more than one year may be
entitled to a 20% maximum federal tax rate for gains from the sale or redemption
of these Units. Capital gain or loss is long-term if the relevant asset is held
for more than one year and short-term if held one year or less. However, any
capital loss on the sale or redemption of a Unit that an investor has held for
six months or less will be a long-term capital loss to the extent of any capital
gain dividends previously distributed to the investor by the Portfolio. The
deduction of capital losses is subject to limitations. Investors should consult
their tax advisers regarding these matters.
Any dividends received by the Portfolio from foreign issuers will in most
cases be subject to foreign withholding taxes, which will generally be reduced,
though not eliminated, by treaties between the United States and the relevant
foreign country. The Portfolio will not be eligible for an election that would
enable the investors to credit foreign withholding taxes against their federal
income tax liability on distributions by the Portfolio.
The investor's basis in his Units will be equal to the cost of his Units,
including the initial sales charge. A portion of the sales charge is deferred
until the termination of the Portfolio or the redemption of the Units. The
proceeds received by an investor upon such event will reflect deduction of the
deferred amount. The relevant tax reporting forms received by investors will
reflect the actual amounts paid to them, net of the deferred sales charge.
Accordingly, investors should not increase their basis in their Units by the
deferred sales charge amount.
Investors will be taxed in the manner described above regardless of whether
distributions from the Portfolio are actually received by the investor or are
reinvested pursuant to the reinvestment plan. The federal tax status of each
year's distributions will be reported to investors and to the Internal Revenue
Service. The Portfolio intends to report to each investor, no later than January
31, the amount of distributions to that investor.
The foregoing discussion summarizes only certain U.S. federal income tax
consequences of an investment in Units by investors who are U.S. persons, as
defined in the Code. Foreign investors (including nonresident alien individuals
and foreign corporations) not engaged in U.S. trade or business will generally
be subject to 30% withholding tax (or lower applicable treaty rate) on dividend
distributions by the Portfolio. Investors may be subject to taxation in New York
or in other U.S. or foreign jurisdictions and should consult their own tax
advisers in this regard.
10
<PAGE>
FOREIGN HOLDERS
A 'Foreign Holder' is a person or entity that, for U.S. Federal income tax
purposes, is a non-resident alien individual, a foreign corporation, a foreign
partnership, or a non-resident fiduciary of a foreign estate or trust. If a
distribution of the Fund's taxable income (without regard to its net capital
gain) to a Foreign Holder is not effectively connected with a U.S. trade or
business carried on by the investor, such distribution will be subject to
withholding tax at a 30% rate or such lower rate as may be specified by an
applicable income tax treaty. In addition, distributions from the Fund will
generally be subject to information reporting.
A Foreign Holder should not be subject to withholding tax under the Foreign
Investment in Real Property Tax Act ('FIRPTA') with respect to gain arising from
the sale or redemption of Units. In addition, based upon advice of counsel as to
existing law, the Trustee does not intend to withhold under FIRPTA on
distributions of the Fund's net capital gain (designated as capital gain by the
Fund). Such income generally will not be subject to Federal income tax unless
the income is effectively connected with a trade or business of such Holder in
the United States. In the case of a Foreign Holder who is a non-resident alien
individual, however, gain arising from the sale or redemption of Units or
distributions of the Fund's net capital gain ordinarily will be subject to
Federal income tax at a rate of 30% if such individual is physically present in
the U.S. for 183 days or more during the taxable year and, in the case of the
gain arising from the sale or redemption of Units, either the gain is
attributable to an office or other fixed place of business maintained by the
Holder in the United States or the Holder has a 'tax home' in the United States.
In addition, a Unit held by an individual who is not a citizen or resident of
the United States at the time of his death will generally be subject to United
States federal estate tax unless an applicable treaty provides otherwise.
The tax consequences to a Foreign Holder entitled to claim the benefits of
an applicable tax treaty may be different from those described herein. Foreign
Holders should consult their own tax advisers to determine whether investment in
the Fund is appropriate.
RETIREMENT PLANS
Units may be well suited for purchase by Individual Retirement Accounts
('IRAs'), Keogh plans, pension funds and other qualified retirement plans,
certain of which are briefly described below. Generally, capital gains and
income received in each of the foregoing plans are exempt from federal taxation.
All distributions from such plans are generally treated as ordinary income but
may, in some cases, be eligible for special 5 or 10 year averaging (prior to the
year 2000) or tax-deferred rollover treatment. Investors in IRAs, Keogh plans
and other tax-deferred retirement plans should consult their plan custodian as
to the appropriate disposition of distributions. Investors considering
participation in any of these plans should review specific tax laws related
thereto and should consult their attorneys or tax advisers with respect to the
establishment and maintenance of any of these plans. These plans are offered by
brokerage firms, including the Sponsor of this Portfolio, and other financial
institutions. Fees and charges with respect to such plans may vary.
Retirement Plans for the Self-Employed--Keogh Plans. Units may be purchased
by retirement plans established for self-employed individuals, partnerships or
unincorporated companies ('Keogh plans'). The assets of a Keogh plan must be
held in a qualified trust or other arrangement which meets the requirements of
the Code. Keogh plan participants may also establish separate IRAs (see below)
to which they may contribute up to an additional $2,000 per year ($4,000 in a
spousal account).
Individual Retirement Account--IRA. Any individual can make use of a
qualified IRA arrangement for the purchase of Units. Any individual (including
one covered by an employer retirement plan) can make a contribution to an IRA
equal to the lesser of $2,000 ($4,000 in a spousal account) or 100% of earned
income; such investment must be made in cash. However, the deductible amount of
a contribution by an individual covered by an employer retirement plan will be
reduced if the individual's adjusted gross income exceeds $25,000 (in the case
of a single individual), $40,000 (in the case of a married individual filing a
joint return) or $200 (in the case of a married individual filing a separate
return). These income threshholds will gradually be increased by 2004 to $50,000
for a single individual and $80,000 for a married individual filing jointly.
Certain transactions which are prohibited under Section 408 of the Code will
cause all or a portion of the amount in an IRA to be deemed to the distributed
and subject to tax at that time. Unless nondeductible contributions were made in
1987 or a later year, all distributions from an IRA will be treated as ordinary
income but generally are eligible for tax-deferred rollover treatment. Taxable
distributions made
11
<PAGE>
before attainment of age 59 1/2, except in the case of the participant's death
or disability or where the amount distributed is part of a series of
substantially equal periodic (at least annual) payments that are to be made over
the life expectancies of the participant and his or her beneficiary, are
generally subject to a surtax in an amount equal to 10% of the distribution. The
10% surtax will be waived for withdrawals for certain educational and first-time
homebuyers expenses. Subject to certain income limitations, under a special type
of IRA, contributions would be non-deductible but distributions would be
tax-free if the account were held for at least five years and the account holder
was at least 59 1/2 at the time of distribution.
Corporate Pension and Profit-Sharing Plans. A pension or profit-sharing
plan for employees of a corporation may purchase Units.
RECORDS AND REPORTS
The Trustee keeps a register of the names, addresses and holdings of all
investors. The Trustee also keeps records of the transactions of the Fund,
including a current list of the Securities and a copy of the Indenture, which
may be inspected by investors at reasonable times during business hours.
With each distribution, the Trustee includes a statement of the amounts of
income and any other receipts being distributed. The Trustee sends each investor
of record an annual report summarizing transactions in the Fund's accounts
including amounts distributed during the year, identifying Securities sold and
purchased and listing Securities held and the number of Units outstanding and
stating the Redemption Price per 1,000 Units at year end, and the fees and
expenses paid by the Fund, among other matters. Fund accounts are audited
annually by independent accountants selected by the Sponsors. Audited financial
statements are available from the Trustee on request.
TRUST INDENTURE
The Fund is a 'unit investment trust' created under New York law by a Trust
Indenture between the Sponsor and the Trustee. This Prospectus summarizes
various provisions of the Indenture, but each statement is qualified in its
entirety by reference to the Indenture.
The Indenture may be amended by the Sponsor and the Trustee without consent
by investors to cure ambiguities or to correct or supplement any defective or
inconsistent provision, to make any amendment required by the SEC or other
governmental agency or to make any other change not materially adverse to the
interest of investors (as determined in good faith by the Sponsor). The
Indenture may also generally be amended upon consent of investors holding 51% of
the Units. No amendment may reduce the interest of any investor in the Fund
without the investor's consent or reduce the percentage of Units required to
consent to any amendment without unanimous consent of investors. Investors will
be notified of the substance of any amendment.
The Trustee may resign upon notice to the Sponsor. It may be removed by
investors holding 51% of the Units at any time or by the Sponsor without the
consent of investors if it becomes incapable of acting or bankrupt, its affairs
are taken over by public authorities, or if under certain conditions the Sponsor
determines in good faith that its replacement is in the best interest of the
investors. The resignation or removal becomes effective upon acceptance of
appointment by a successor; in this case, the Sponsor will use its best efforts
to appoint a successor promptly; however, if upon resignation no successor has
accepted appointment within 30 days after notification, the resigning Trustee
may apply to a court of competent jurisdiction to appoint a successor.
If the Sponsor fails to perform its duties or becomes incapable of acting or
bankrupt or its affairs are taken over by public authorities, the Trustee may
appoint a successor Sponsor at reasonable rates of compensation, terminate the
Indenture and liquidate the Fund or continue to act as Trustee without a
Sponsor.
The Sponsor and the Trustee are not liable to investors or any other party
for any act or omission in the conduct of their responsibilities absent bad
faith, willful misfeasance, negligence (gross negligence in the case of a
Sponsor) or reckless disregard of duty. The Indenture contains customary
provisions limiting the liability of the Trustee.
12
<PAGE>
MISCELLANEOUS
LEGAL OPINION
The legality of the Units has been passed upon by Davis Polk & Wardwell,
450 Lexington Avenue, New York, New York 10017, as special counsel for the
Sponsors.
AUDITORS
The Statement of Condition in Part A of the Prospectus was audited by
Deloitte & Touche LLP, independent accountants, as stated in their opinion. It
is included in reliance upon that opinion given on the authority of that firm as
experts in accounting and auditing.
TRUSTEE
The Trustee and its address are stated on the back cover of the Prospectus.
The Trustee is subject to supervision by the Federal Deposit Insurance
Corporation, the Board of Governors of the Federal Reserve System and New York
State banking authorities.
SPONSOR
The Sponsor is a wholly-owned subsidiary of Merrill Lynch & Co., Inc. The
Sponsor, or one of its predecessor corporations, has acted as Sponsor of a
number of series of unit investment trusts and as principal underwriter and
managing underwriter of other investment companies. The Sponsor, in addition to
participating as a member of various selling groups or as agent of other
investment companies, executes orders on behalf of investment companies for the
purchase and sale of securities of these companies and sell securities to these
companies in its capacity as broker or dealers in securities.
CODE OF ETHICS
The Sponsor has adopted a code of ethics requiring preclearance and
reporting of personal securities transactions by its personnel who have access
to information on Defined Asset Funds portfolio transactions. The code is
intended to prevent any act, practice or course of conduct which would operate
as a fraud or deceit on any Fund and to provide guidance to these persons
regarding standards of conduct consistent with the Sponsor's responsibilities to
the Funds.
YEAR 2000 ISSUES
Many computer systems were designed using only two digits to designate
years. These systems may not be able to distinguish the Year 2000 from the Year
1900 (commonly known as the 'Year 2000 Problem'). Like other investment
companies and financial and business organizations, the Portfolio could be
adversely affected if the computer systems used by the Sponsor or Portfolio
service providers do not properly address this problem prior to January 1, 2000.
The Sponsor has established a dedicated group to analyze these issues and to
implement any systems modifications necessary to prepare for the Year 2000.
Currently, we do not anticipate that the transition to the 21st century will
have any material effect on the Portfolio. The Sponsor has sought assurances
from the Portfolio's other service providers that they are taking all necessary
steps to ensure that their computer systems will accurately reflect the Year
2000, and the Sponsor will continue to monitor the situation. At this time,
however, no assurance can be given that the Portfolio's other service providers
have anticipated every step necessary to avoid any adverse effect on the
Portfolio attributable to the Year 2000 Problem.
PUBLIC DISTRIBUTION
During the initial offering period and thereafter to the extent additional
Units continue to be offered for sale to the public by means of this Prospectus,
Units will be distributed directly to the public by this Prospectus at the
Public Offering Price determined in the manner provided above or to selected
dealers who are members of the National Association of Securities Dealers, Inc.
at a concession not in excess of the maximum sales charge. The Sponsor intends
to qualify Units for sale in all states in which qualification is deemed
necessary through the Underwriting Account and by dealers who are members of the
National Association of Securities Dealers, Inc.. The Sponsor does not intend to
13
<PAGE>
qualify Units for sale in any foreign countries and this Prospectus does not
constitute an offer to sell Units in any country where Units cannot lawfully be
sold.
UNDERWRITERS' AND SPONSOR'S PROFITS
Upon sale of the Units, the Sponsor will be entitled to receive sales
charges. The Sponsor also realizes a profit or loss on deposit of the Securities
equal to the difference between the cost of the Securities to the Fund (based on
the aggregate value of the Securities on their date of deposit) and the purchase
price of the Securities to the Sponsor plus commissions payable by the Sponsor.
In addition, the Sponsor or Underwriter may realize profits or sustain losses on
Securities it deposits in the Fund which were acquired from underwriting
syndicates of which it was a member. During the initial offering period, the
Underwriting Account also may realize profits or sustain losses as a result of
fluctuations after the initial date of deposit in the Public Offering Price of
the Units. In maintaining a secondary market for Units, the Sponsor will also
realize profits or sustain losses in the amount of any difference between the
prices at which they buy Units and the prices at which they resell these Units
(which include the sales charge) or the prices at which they redeem the Units.
Cash, if any, made available by buyers of Units to the Sponsor prior to a
settlement date for the purchase of Units may be used in the Sponsor's business
to the extent permitted by Rule 15c3-3 under the Securities Exchange Act of 1934
and may be of benefit to the Sponsor.
PERFORMANCE INFORMATION
Information on the performance of the Fund for various periods, on the
basis of changes in Unit price plus the amount of dividends and capital gains
reinvested, may be included from time to time in advertisements, sales
literature, reports and other information furnished to current or prospective
investors. Total return figures are not averaged, and may not reflect deduction
of the sales charge, which would decrease the return. Average annualized return
figures reflect deduction of the maximum sales charge. No provision is made for
any income taxes payable.
Past performance of any series may not be indicative of results of future
series. Fund performance may be compared to the performance of the DJIA, the S&P
500 Composite Price Stock Index, the S&P MidCap 400 Index, or performance data
from publications such as Lipper Analytical Services, Inc., Morningstar
Publications, Inc., Money Magazine, The New York Times, U.S. News and World
Report, Barron's, Business Week, CDA Investment Technology, Inc., Forbes
Magazine or Fortune Magazine. Performance of the Stocks may be compared in sales
literature to performance of the S&P 500 Stock Price Composite Index, to which
may be added by year various national and international political and economic
events, and certain milestones in price and market indicators and in offerings
of Defined Asset Funds. This performance may also be compared for various
periods with an investment in short-term U.S. Treasury securities; however, the
investor should bear in mind that Treasury securities are fixed income
obligations, having the highest credit characterisitics, while the Stocks
involve greater risk because they have no maturities, and income thereon is
subject to the financial condition of, and declaration by, the issuers. Sales
literature may also describe certain historic milestones of the
telecommunications industry.
DEFINED ASSET FUNDS
For decades informed investors have purchased unit investment trusts for
dependability and professional selection of investments. Defined Asset Funds'
philosophy is to allow investors to 'buy with knowledge' (because, unlike
managed funds, the portfolio is relatively fixed) and 'hold with confidence'
(because the portfolio is professionally selected and regularly reviewed).
Defined Asset Funds offers an array of simple and convenient investment choices,
suited to fit a wide variety of personal financial goals--a buy and hold
strategy for capital accumulation, such as for children's education or
retirement, or attractive, regular current income consistent with the
preservation of principal. Unit investment trusts are particularly suited for
the many investors who prefer to seek long-term profits by purchasing sound
investments and holding them, rather than through active trading. Few
individuals have the knowledge, resources or capital to buy and hold a
diversified portfolio on their own; it would generally take a considerable sum
of money to obtain the breadth and diversity that Defined Asset Funds offer.
Your investment objectives may call for a combination of Defined Asset Funds.
One of the most important investment decisions you face may be how to
allocate your investments among asset classes. Diversification among different
kinds of investments can balance the risks and rewards of each one. Most
investment experts recommend stocks for long-term capital growth. Long-term
corporate bonds offer relatively high rates of interest income. By purchasing
both defined equity and defined bond funds, investors can receive attractive
14
<PAGE>
current income, as well as growth potential, offering some protection against
inflation. From time to time various advertisements, sales literature, reports
and other information furnished to current or prospective investors may present
the average annual compounded rate of return of selected asset classes over
various periods of time, compared to the rate of inflation over the same
periods.
SUPPLEMENTAL INFORMATION
Upon writing or calling the Trustee shown on the back cover of this
Prospectus, investors will receive without charge supplemental information about
the Fund, which has been filed with the SEC. The supplemental information
includes more detailed risk factor disclosure about the types of securities that
may be part of the Portfolio and general information about the structure and
operation of the Fund.
15
<PAGE>
Defined
Asset FundsSM
SPONSOR: EQUITY INVESTOR FUND
Merrill Lynch, CONCEPT SERIES
Pierce, Fenner & Smith IncorporatedREAL ESTATE INCOME FUND 3
Defined Asset Funds
P.O. Box 9051
Princeton, NJ 08543-9051 This Prospectus does not contain all of the
(609) 282-8500 information with respect to the investment
(212) 816-4000 company set forth in its registration
TRUSTEE: statement and exhibits relating thereto which
The Bank of New York have been filed with the Securities and
Unit Investment Trust Department Exchange Commission, Washington, D.C. under
Box 974 the Securities Act of 1933 and the Investment
Wall Street Station Company Act of 1940, and to which reference
New York, NY 10268-0974 is hereby made. Copies of filed material can
1-800-221-7771 be obtained from the Public Reference Section
of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates.
The Commission also maintains a Web site that
contains information statements and other
information regarding registrants such as
Defined Asset Funds that file electronically
with the Commission at http://www.sec.gov.
------------------------------
No person is authorized to give any
information or to make any representations
with respect to this investment company not
contained in its registration statement and
exhibits relating thereto; and any
information or representation not contained
therein must not be relied upon as having
been authorized.
------------------------------
When Units of this Fund are no longer
available this Prospectus may be used as a
preliminary prospectus for a future series,
in which case investors should note the
following:
Information contained herein is subject to
amendment. A registration statement relating
to securities of a future series has been
filed with the Securities and Exchange
Commission. These securities may not be sold
nor may offers to buy be accepted prior to
the time the registration statement becomes
effective.
This Prospectus shall not constitute an offer
to sell or the solicitation of an offer to
buy nor shall there be any sale of these
securities in any State in which such offer
solicitation or sale would be unlawful prior
to registration or qualification under the
securities laws of any such State.
--10/98
16
<PAGE>
PART II
ADDITIONAL INFORMATION NOT INCLUDED IN THE PROSPECTUS
A. The following information relating to the Depositor is incorporated by
reference to the SEC filings indicated and made a part of this Registration
Statement.
I. Bonding arrangements of the Depositor are incorporated by reference to Item
A of Part II to the Registration Statement on Form S-6 under the Securities Act
of 1933 for Municipal Investment Trust Fund, Monthly Payment Series--573 Defined
Asset Funds (Reg. No. 333-08241).
II. The date of organization of the Depositor is set forth in Item B of Part II
to the Registration Statement on Form S-6 under the Securities Act of 1933 for
Municipal Investment Trust Fund, Monthly Payment Series--573 Defined Asset Funds
(Reg. No. 333-08241) and is herein incorporated by reference thereto.
III. The Charter and By-Laws of the Depositor are incorporated herein by
reference to Exhibits 1.3 through 1.12 to the Registration Statement on Form S-6
under the Securities Act of 1933 for Municipal Investment Trust Fund, Monthly
Payment Series--573 Defined Asset Funds (Reg. No. 333-08241).
IV. Information as to Officers and Directors of the Depositor has been filed
pursuant to Schedules A and D of Form BD under Rules 15b1-1 and 15b3-1 of the
Securities Exchange Act of 1934 and is incorporated by reference to the SEC
filings indicated and made a part of this Registration Statement:
Incorporated Merrill Lynch, Pierce, Fenner & Smith 8-7221
------------------------------------
B. The Internal Revenue Service Employer Identification Numbers of the Sponsor
and Trustee are as follows:
Merrill Lynch, Pierce, Fenner & Smith Incorporated 13-5674085
The Bank of New York, Trustee................... 13-4941102
II-1
<PAGE>
SERIES OF EQUITY INCOME FUND, EQUITY INVESTOR FUND
AND DEFINED ASSET FUNDS MUNICIPAL INSURED SERIES
DESIGNATED PURSUANT TO RULE 487 UNDER THE SECURITIES ACT OF 1933
SEC
SERIES NUMBER FILE NUMBER
- --------------------------------------------------------------------------------
Equity Income Fund, Blue Chip Stock Series 1................ 33-05653
Equity Income Fund, Concept Series Real Estate Income
Fund........................................................ 33-51869
Equity Income Fund, Select Ten Portfolio--1995 Spring
Series...................................................... 33-55807
Equity Investor Fund, Focus Series Financial Portfolio...... 333-32179
Equity Investor Fund, Standard & Poor's Industry Turnaround
Portfolio................................................... 333-39121
Equity Investor Fund, Select Ten Portfolio 1997 Series A.... 333-15193
Defined Asset Funds Municipal Insured Series................ 33-54565
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement on Form S-6 comprises the following papers and
documents:
The facing sheet of Form S-6.
The Cross-Reference Sheet (incorporated by reference from the
Cross-Reference Sheet of the Registration Statement of Defined Asset Funds
Municipal Insured Series, 1933 Act File No. 33-54565).
The Prospectus.
The Signatures.
The following exhibits:
1.1 --Form of Trust Indenture (incorporated by reference to Exhibit 1.1 to
Amendment No. 2 to the Registration Statement on Form S-6 of Equity
Income Fund, Select Growth Portfolio--1995 Series 2, Defined Asset
Funds, Reg. No. 33-58535).
1.1.1 --Form of Standard Terms and Conditions of Trust Effective as of October
21, 1993 (incorporated by reference to Exhibit 1.1.1 to the
Registration Statement of Municipal Investment Trust Fund, Multistate
Series-48, 1933 Act File No. 33-50247).
1.2 --Form of Master Agreement Among Underwriters (incorporated by reference
to Exhibit 1.2 to the Registration Statement under the Securities Act
of 1933 of The Corporate Income Fund, One Hundred Ninety-Fourth
Monthly Payment Series, 1933 Act File No. 2-90925).
3.1 --Opinion of counsel as to the legality of the securities being issued
including its consent to the use of their names under the heading
'Miscellaneous--Legal Opinion' in the Prospectus.
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 CONCEPT SERIES
REAL ESTATE INCOME FUNDS 3
SIGNATURES
The registrant hereby identifies the series numbers of Equity Income Fund,
Equity Investor Fund and Defined Asset Funds Municipal Insured Series listed on
page R-1 for the purposes of the representations required by Rule 487 and
represents the following:
1) That the portfolio securities deposited in the series as to which this
registration statement is being filed do not differ materially in type
or quality from those deposited in such previous series;
2) That, except to the extent necessary to identify the specific portfolio
securities deposited in, and to provide essential financial information
for, the series with respect to which this registration statement is
being filed, this registration statement does not contain disclosures
that differ in any material respect from those contained in the
registration statements for such previous series as to which the
effective date was determined by the Commission or the staff; and
3) That it has complied with Rule 460 under the Securities Act of 1933.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT OR AMENDMENT TO THE REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY
AUTHORIZED IN THE CITY OF NEW YORK AND STATE OF NEW YORK ON THE 30TH DAY OF
OCTOBER, 1998.
SIGNATURES APPEAR ON PAGE R-3 AND R-4.
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: 33-43466
HERBERT M. ALLISON, JR.
STEPHEN L. HAMMERMAN
DAVID H. KOMANSKY
JOHN L. STEFFENS
By ERNEST V. FABIO
(As authorized signatory for Merrill Lynch, Pierce,
Fenner & Smith Incorporated and
Attorney-in-fact for the persons listed above)
R-3
<PAGE>
EXHIBIT 3.1
DAVIS POLK & WARDWELL
450 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
(212) 450-4000
OCTOBER 30, 1998
EQUITY INVESTOR FUND,
CONCEPT SERIES
REAL ESTATE INCOME FUND 3
DEFINED ASSET FUNDS
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
SALOMON SMITH BARNEY INC.
C/O MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
DEFINED ASSET FUNDS
P.O. BOX 9051
PRINCETON, N.J. 08543-9051
(609) 282-8500
Dear Sirs:
We have acted as special counsel for you, as sponsor (the 'Sponsor') of
Equity Investor Fund, Concept Series, Real Estate Income Fund 3, Defined Asset
Funds (the 'Fund'), in connection with the issuance of units of fractional
undivided interest in the Fund (the 'Units') in accordance with the Trust
Indenture relating to the Fund (the 'Indenture').
We have examined and are familiar with originals or copies, certified or
otherwise identified to our satisfaction, of such documents and instruments as
we have deemed necessary or advisable for the purpose of this opinion.
Based upon the foregoing, we are of the opinion that (i) the execution and
delivery of the Indenture and the issuance of the Units have been duly
authorized by the Sponsor and (ii) the Units, when duly issued and delivered by
the Sponsor and the Trustee in accordance with the Indenture, will be legally
issued, fully paid and non-assessable.
We hereby consent to the use of this opinion as Exhibit 3.1 to the
Registration Statement relating to the Units filed under the Securities Act of
1933 and to the use of our name in such Registration Statement and in the
related prospectus under the heading 'Miscellaneous--Legal Opinion.'
Very truly yours,
DAVIS POLK & WARDWELL
<PAGE>
EXHIBIT 5.1
CONSENT OF INDEPENDENT ACCOUNTANTS
The Sponsor and Trustee of Equity Investor Fund,
Concept Series, Real Estate Income Fund 3, Defined Asset Funds:
We consent to the use in this Registration Statement No. 333-66087 of our
opinion dated October 30, 1998, relating to the Statement of Condition of Equity
Investor Fund, Concept Series, Real Estate Income Fund 3, Defined Asset Funds
and to the reference to us under the heading 'Miscellaneous-- Auditors' in the
Prospectus which is part of this Registration Statement.
DELOITTE & TOUCHE LLP
New York, N.Y.
October 30, 1998
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> OCT-30-1998
<INVESTMENTS-AT-COST> 249,449
<INVESTMENTS-AT-VALUE> 249,449
<RECEIVABLES> 0
<ASSETS-OTHER> 406
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 249,854
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 406
<TOTAL-LIABILITIES> 406
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 249,449
<SHARES-COMMON-STOCK> 251,968
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 249,448
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 251,968
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
