<PAGE>
DEFINED ASSET FUNDSSM
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EQUITY INVESTOR FUND
UTILITY PORTFOLIO SERIES 3
(A UNIT INVESTMENT TRUST)
O TOTAL RETURN FROM:
-- CAPITAL APPRECIATION
-- CURRENT DIVIDEND INCOME
O MONTHLY INCOME
O PROFESSIONAL SELECTION
O DIVIDEND REINVESTMENT OPTION
SPONSORS: -------------------------------------------------
Merrill Lynch, The Securities and Exchange Commission has not
Pierce, Fenner & Smith approved or disapproved these Securities or
Incorporated passed upon the adequacy of this prospectus. Any
Salomon Smith Barney Inc. representation to the contrary is a criminal
PaineWebber Incorporated offense.
Dean Witter Reynolds Inc. Prospectus dated May 13, 1999.
<PAGE>
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Defined Asset FundsSM
DEFINED ASSET FUNDSSM IS AMERICA'S OLDEST AND LARGEST FAMILY OF UNIT INVESTMENT
TRUSTS, WITH OVER $160 BILLION SPONSORED OVER THE LAST 28 YEARS. DEFINED ASSET
FUNDS HAS BEEN A LEADER IN UNIT INVESTMENT TRUST RESEARCH AND PRODUCT
INNOVATION. OUR FAMILY OF FUNDS HELPS INVESTORS WORK TOWARD THEIR FINANCIAL
GOALS WITH A FULL RANGE OF QUALITY INVESTMENTS, INCLUDING MUNICIPAL, CORPORATE
AND GOVERNMENT BOND PORTFOLIOS, AS WELL AS DOMESTIC AND INTERNATIONAL EQUITY
PORTFOLIOS.
DEFINED ASSET FUNDS OFFER A NUMBER OF ADVANTAGES:
O A DISCIPLINED STRATEGY OF BUYING AND HOLDING WITH A LONG-TERM VIEW IS THE
CORNERSTONE OF DEFINED ASSET FUNDS.
O FIXED PORTFOLIO: DEFINED FUNDS FOLLOW A BUY AND HOLD INVESTMENT STRATEGY;
FUNDS ARE NOT MANAGED AND PORTFOLIO CHANGES ARE LIMITED.
O DEFINED PORTFOLIOS: WE CHOOSE THE STOCKS AND BONDS IN ADVANCE, SO YOU KNOW
WHAT YOU'RE INVESTING IN.
O PROFESSIONAL RESEARCH: OUR DEDICATED RESEARCH TEAM SEEKS OUT STOCKS OR BONDS
APPROPRIATE FOR A PARTICULAR FUND'S OBJECTIVES.
O ONGOING SUPERVISION: WE MONITOR EACH PORTFOLIO ON AN ONGOING BASIS.
NO MATTER WHAT YOUR INVESTMENT GOALS, RISK TOLERANCE OR TIME HORIZON, THERE'S
PROBABLY A DEFINED ASSET FUND THAT SUITS YOUR INVESTMENT STYLE. YOUR FINANCIAL
PROFESSIONAL CAN HELP YOU SELECT A DEFINED ASSET FUND THAT WORKS BEST FOR YOUR
INVESTMENT PORTFOLIO.
CONTENTS
PAGE
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RISK/RETURN SUMMARY..................................... 3
WHAT YOU CAN EXPECT FROM YOUR INVESTMENT................ 6
INCOME............................................... 6
RECORDS AND REPORTS.................................. 6
THE RISKS YOU FACE...................................... 6
CONCENTRATION RISK................................... 6
LITIGATION AND LEGISLATION RISKS..................... 7
SELLING OR EXCHANGING UNITS............................. 7
SPONSORS' SECONDARY MARKET........................... 8
SELLING UNITS TO THE TRUSTEE......................... 8
ROLLOVER/EXCHANGE OPTION............................. 9
HOW THE FUND WORKS...................................... 9
PRICING.............................................. 9
EVALUATIONS.......................................... 10
INCOME............................................... 10
EXPENSES............................................. 10
PORTFOLIO CHANGES.................................... 11
PORTFOLIO TERMINATION................................ 11
NO CERTIFICATES...................................... 11
TRUST INDENTURE...................................... 11
LEGAL OPINION........................................ 12
AUDITORS............................................. 12
SPONSORS............................................. 12
TRUSTEE.............................................. 13
UNDERWRITERS' AND SPONSORS' PROFITS.................. 13
PUBLIC DISTRIBUTION.................................. 13
CODE OF ETHICS....................................... 14
YEAR 2000 ISSUES..................................... 14
ADVERTISING AND SALES LITERATURE..................... 14
TAXES................................................... 14
SUPPLEMENTAL INFORMATION................................ 16
FINANCIAL STATEMENTS.................................... 17
REPORT OF INDEPENDENT ACCOUNTANTS.................... 17
STATEMENT OF CONDITION............................... 17
2
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RISK/RETURN SUMMARY
1. WHAT IS THE PORTFOLIO'S OBJECTIVE?
O The Portfolio seeks total return through a combination of
current dividend income and capital appreciation.
o Its strategy is to invest for a period of about two years
in a fixed portfolio of publicly traded common stocks
issued by domestic companies in the electric utility
sector.
You can participate in the Portfolio by purchasing units.
Each unit represents an equal share of the stocks in the
Portfolio and receives an equal share of dividend income.
2. WHAT IS THE PORTFOLIO'S INVESTMENT STRATEGY?
O The 15 stocks represented in the Fund are issued by
companies that have been identified by Defined Asset Funds
Research.
o The common stocks included in the Portfolio were selected
for their current dividend yields. In the opinion of the
Sponsors, these stocks have potential for dividend growth
because each of the companies represented in the Portfolio:
-- have raised their common stock dividend payments at
least once during the 10 years prior to the initial date
of deposit; and
-- have a record of uninterrupted dividend payments since
1947 or earlier.
O The Portfolio plans to hold the stocks in the Portfolio for
about two years. At the end of the two years, we will
liquidate the Portfolio and select a new portfolio, if
available.
3. WHAT ARE THE SIGNIFICANT RISKS?
YOU CAN LOSE MONEY BY INVESTING IN THE PORTFOLIO. THIS CAN
HAPPEN FOR VARIOUS REASONS, INCLUDING:
o Stock prices can be volatile.
o Dividend rates on the stocks or share prices may decline
during the life of the Portfolio.
o Because the Portfolio is concentrated in stocks of domestic
electric utility companies, it is dependent to a
significant extent on revenues generated from those
particular activities. Adverse developments in this
industry may affect the value of your units.
o The Fund is designed for investors who want to invest a
portion of their equity portfolio in the electric utility
sector; this Fund is not designed to be a complete equity
investment program.
o The Portfolio may continue to purchase or hold the stocks
originally selected even though their market value or yield
may have changed or they may be subject to sell
recommendations from one or more of the Sponsors.
4. IS THIS PORTFOLIO APPROPRIATE FOR YOU?
Yes, if you want current dividend income and capital
appreciation. You will benefit from a professionally
selected and supervised portfolio whose risk is reduced by
investing in equity securities of different issuers in a
variety of industries.
The Portfolio is not appropriate for you if you are not
comfortable with the Strategy or are unwilling to take the
risk involved with an equity investment. It may not be
appropriate for you if you are seeking preservation of
capital or high current income.
3
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Defined Portfolio
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Equity Investor Fund
Utility Portfolio Series 3
Defined Asset Funds
<TABLE>
<CAPTION>
PRICE
PER SHARE
TICKER PERCENTAGE CURRENT TO COST
NAME OF ISSUER SYMBOL OF PORTFOLIO (1) DIVIDEND YIELD (2) PORTFOLIO TO PORTFOLIO (3)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. Interstate Energy Corporation LNT 10.67% 6.96% $ 28.7500 $ 11,500.00
2. WPS Resources Corporation WPS 11.27 6.52 30.3750 12,150.00
3. Ameren Corporation AEE 7.30 6.45 39.3750 7,875.00
4. New Century Energies, Inc. NCE 10.51 6.15 37.7500 11,325.00
5. Northern States Power Company NSP 6.80 5.85 24.4375 7,331.25
6. Wisconsin Energy Corporation WEC 9.90 5.85 26.6875 10,675.00
7. IDACORP, Inc. IDA 8.89 5.82 31.9375 9,581.25
8. American Electric Power Company,
Inc. AEP 7.68 5.80 41.3750 8,275.00
9. Constellation Energy Group CEG 5.50 5.67 29.6250 5,925.00
10. LG&E Energy Corporation LGE 4.06 5.62 21.8750 4,375.00
11. Central Hudson Gas & Electric
Corporation CNH 3.61 5.56 38.8750 3,887.50
12. Florida Progress Corporation FPC 3.67 5.51 39.5625 3,956.25
13. Cleco Corporation CNL 2.95 5.23 31.7500 3,175.00
14. DPL, Inc. DPL 3.34 5.22 18.0000 3,600.00
15. Minnesota Power, Inc. MPL 3.85 5.16 20.7500 4,150.00
----------------- -----------------
100.00% $ 107,781.25
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</TABLE>
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(1) Based on Cost to Portfolio.
(2) Current Dividend Yield for each security was calculated by annualizing the
last monthly, quarterly or semi-annual ordinary dividend declared on the
security and dividing the result by its market value as of the close of
trading on May 12, 1999.
(3) Valuation by the Trustee made on the basis of closing sale prices at the
evaluation time on May 12, 1999, the business day prior to the initial date
of deposit. The value of the Securities on any subsequent business day will
vary.
------------------------------------
The securities were acquired on May 12, 1999 and are represented entirely by
contracts to purchase the securities. Any of the Sponsors may have acted as
underwriters, managers or co-managers of a public offering of the securities in
this Portfolio during the last three years. Affiliates of the Sponsors may serve
as specialists in the securities in this Portfolio on one or more stock
exchanges and may have a long or short position in any of these securities or
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 any of the Sponsors may be an officer or
director of one or more of the issuers of the securities in the Portfolio. A
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.
Any 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.
------------------------------------
PLEASE NOTE THAT IF THIS PROSPECTUS IS USED AS A PRELIMINARY
PROSPECTUS
FOR A FUTURE FUND IN THIS SERIES, THE PORTFOLIO WILL CONTAIN
DIFFERENT
STOCKS FROM THOSE DESCRIBED ABOVE.
<PAGE>
RISK/RETURN SUMMARY (Continued)
5. WHAT ARE THE PORTFOLIO'S FEES AND EXPENSES?
This table shows the costs and expenses you may pay,
directly or indirectly, when you invest in the Portfolio.
ESTIMATED ANNUAL OPERATING EXPENSES
AMOUNT
AS A % OF PER 1,000
NET ASSETS UNITS
---------- -----------
.091% $ 0.90
Trustee's Fee
.046% $ 0.45
Portfolio Supervision,
Bookkeeping and
Administrative Fees
(including updating
expenses)
.034% $ 0.34
Other Operating Expenses
---------- -----------
.171% $ 1.69
TOTAL
ORGANIZATION COSTS per 1,000
units (deducted from Portfolio
assets at the close of the initial
offering period) $2.04
The Sponsors historically paid updating and organization
costs.
INVESTOR FEES
Maximum Sales Fee (Load) on new
purchases (as a percentage of $1,000
invested) 4.50%
You will pay an up-front sales fee of approximately 1.00%.
In addition, seven monthly deferred sales charges of $2.50
per 1,000 units ($17.50 annually) will be deducted from
the Portfolio's net asset value each year of the
Portfolio's two-year life (December 1, 1999 through June
1, 2000 and July 1, 2000 through January 1, 2001).
The maximum sales fees are as follows:
YOUR MAXIMUM
SALES FEE
IF YOU INVEST: WILL BE:
----------------------------------- -----------------
Less than $50,000 4.50%
$ 50,000 to $99,999 4.25%
$100,000 to $249,999 3.75%
$250,000 to $999,999 3.50%
$1,000,000 or more 2.75%
EXAMPLE
This example may help you compare the cost of investing in
the Portfolio to the cost of investing in other funds.
The example assumes that you invest $10,000 in the
Portfolio for the periods indicated and sell all your
units at the end of those periods. The example also
assumes a 5% return on your investment each year and that
the Portfolio's operating expenses stay the same. Although
your actual costs may be higher or lower, based on these
assumptions your costs would be:
1 Year 3 Years 5 Years 10 Years
$315 $744 $1,199 $2,446
6. IS THE PORTFOLIO MANAGED?
Unlike a mutual fund, the Portfolio is not managed and
stocks are not sold because of market changes. The Sponsors
monitor the portfolio and may instruct the Trustee to sell
securities under certain limited circumstances. However,
given the investment philosophy of the Portfolio, the
Sponsors are not likely to do so.
7. HOW DO I BUY UNITS?
The minimum investment is $250.
You can buy units from any of the Sponsors and other
broker-dealers. The Sponsors are listed later in this
prospectus. Some banks may offer units for sale through
special arrangements with the Sponsors, although certain
legal restrictions may apply. Employees of the Sponsors and
certain Sponsor affiliates and non-employee directors of
the Sponsors may purchase units at a reduced sales charge.
UNIT PRICE PER 1,000 UNITS $999.95
(as of May 12, 1999)
Unit price is based on the net asset value of the Portfolio
plus the up-front sales fee. Unit price also includes the
estimated organization costs shown above, to which no sales
fee has been applied.
The Portfolio stocks are valued by the Trustee on the basis
of their closing prices at 4:00 p.m. Eastern time every
business day. Unit price changes every day with changes in
the prices of the stocks.
4
<PAGE>
8. HOW DO I SELL UNITS?
You may sell your units at any time to any Sponsor or the
Trustee for the net asset value determined at the close of
business on the date of sale, less any remaining deferred
sales fee and the costs of liquidating securities to meet
the redemption.
9. HOW ARE DISTRIBUTIONS MADE AND TAXED?
The Portfolio pays distributions of any dividend income,
net of expenses, on the 25th of each month beginning July,
1999 through March, 2001, if you own units on the 10th of
those months. For tax purposes, you will be considered to
have received all the dividends paid on your pro rata
portion of each security in the Portfolio when those
dividends are received by the Portfolio regardless of when
you receive Portfolio distributions and regardless of
whether you reinvest your dividends in the Portfolio. A
portion of the dividend payments may be used to pay
expenses of the Portfolio.
10. WHAT OTHER SERVICES ARE AVAILABLE?
REINVESTMENT
You may choose to reinvest your distributions into
additional units of the Portfolio. You will pay only the
deferred sales fee remaining at the time of reinvestment.
Unless you choose reinvestment, you will receive your
distributions in cash.
EXCHANGE PRIVILEGES
You may exchange units of this Portfolio for units of
certain other Defined Asset Funds. You may also exchange
into this Portfolio from certain other funds. We charge a
reduced sales fee on designated exchanges.
5
<PAGE>
WHAT YOU CAN EXPECT FROM YOUR INVESTMENT
INCOME
The Portfolio will pay to you any income it has received monthly during its
life. Because the Portfolio generally pays dividends as they are received,
individual income payments will fluctuate based upon the amount of dividends
declared and paid by each issuer. Other reasons your income may vary are:
o changes in the Portfolio because of additional securities purchases or
sales;
o a change in the Portfolio's expenses; and
o the amount of dividends declared and paid.
There can be no assurance that any dividends will be declared or paid.
RECORDS AND REPORTS
You will receive:
o a notice from the Trustee if new equity securities are deposited in exchange
or substitution for equity securities originally deposited;
o a final report on Portfolio activity; and
o annual tax information. This will also be sent to the IRS. You must report the
amount of income received during the year. Please contact your tax advisor in
this regard.
You may request audited financial statements of the Portfolio from the Trustee.
You may inspect records of Portfolio transactions at the Trustee's office during
regular business hours.
THE RISKS YOU FACE
CONCENTRATION RISK
When stocks in a particular industry make up 25% or more of the Portfolio, it is
said to be 'concentrated' in that industry, which makes the Portfolio less
diversified.
Here is what you should know about the Portfolio's concentration in electric
utility stocks.
o Dividends on these stocks may depend on rates that the utility companies may
charge, the demand for their services and their operating cost.
o Electric utilities face pressure to keep rates low, which may make it
difficult to recover investments in generating plant.
o Utilities generally are sensitive to costs and availability of fuel.
o Some electric utilities are subject to the risks of the nuclear industry.
o Restructuring has been taking place on a state-by-state basis with the most
significant activity occurring in regions with high electric rates. Several of
the plans have required utilities to sell generation facilities and reduce
customer rates in exchange for the opportunity to recoup unrecovered
investments and commitments no longer economically viable (stranded costs).
Although most restructuring activity has been generally constructive for
investors, uncertainty regarding rate cuts and allowable stranded costs still
exists in those states where competition has not been introduced.
6
<PAGE>
o Utilities face risks inherent in diversification into other business lines or
other countries. Some utilities have purchased utilities in foreign countries
or have invested in construction of generation outside the U.S., thereby
exposing them to political and currency risks.
o Because of the critical role utilities play from both an economic and social
standpoint, Y2K compliance is of utmost importance. Results of a November
1998 survey conducted by the North American Electric Reliability Council
indicate that 44% of utilities had completed remediation and testing. However,
about half the industry indicated that they did not expect to be Year 2000
ready by the June 1999 target date and about one sixth of the industry does
not expect to be ready for full compliance until the last quarter of 1999. In
some instances, spending for Y2K compliance will be significant. However,
capitalization of a portion of these costs is expected to help offset some of
the adverse impacts on company operating results.
LITIGATION AND LEGISLATION RISKS
We do not know of any pending litigation that might have a material adverse
effect upon the Portfolio.
The 1990 Clean Air Act limits emissions of sulfur dioxide and nitrogen oxides
and requires emissions and air quality monitoring. Most utilities are compliant
with the 1990 Act. In 1997, the Environmental Protection Agency (EPA) revised
standards that will probably result in further limitations on small
particulate-related emissions. The EPA's revisions are being challenged in the
courts.
The new standards will have the largest impact on utilities with large
percentages of coal-fired generation. While coal generators are believed to be
most favorably positioned for a competitive market owing to low costs, these
companies may experience a disadvantage -- particularly if states do not view
future environmental costs as stranded and include them in transition cost
calculations. With coal accounting for more than half the generation in the
U.S., final expenditures to comply with the latest standards could have a
material impact on the industry.
Future tax legislation could affect the value of the Portfolio by:
o reducing the dividends-received deduction or
o increasing the corporate tax rate resulting in less money available for
dividend payments.
SELLING OR EXCHANGING UNITS
You can sell your units at any time for a price based on their net asset value.
Your net asset value is calculated each business day by:
o adding the value of the Portfolio Securities, cash and any other Portfolio
assets;
o subtracting accrued but unpaid Portfolio expenses, unreimbursed Trustee
advances, cash held to buy back units or for distribution to investors,
and any other Portfolio liabilities; and
o dividing the result by the number of outstanding units.
Your net asset value when you sell may be more or less than your cost because of
sales fees, market movements and changes in the Portfolio.
7
<PAGE>
As of the close of the initial offering period, the price you receive will be
reduced to pay the Portfolio's estimated organization costs.
SPONSORS' SECONDARY MARKET
While we are not obligated to do so, we will buy back units at net asset value
less any remaining deferred sales fee and the cost of liquidating Securities to
meet the redemption. We may resell the units to other buyers or to the Trustee.
We have maintained a secondary market continuously for more than 28 years, but
we could discontinue it without prior notice for any business reason.
SELLING UNITS TO THE TRUSTEE
Regardless of whether we maintain a secondary market, you can sell your units to
the Trustee at any time by contacting your broker, dealer or financial
institution that holds your units in street name. Sometimes, additional
documents are needed such as a trust document, certificate of corporate
authority, certificate of death or appointment as executor, administrator or
guardian.
Within seven days after your request and the necessary documents are received,
the Trustee will mail a check to you. Contact the Trustee for additional
information.
As long as we are maintaining a secondary market, the Trustee will sell your
units to us at a price based on net asset value. If there is no secondary
market, the Trustee will sell your units in the over-the-counter market if it
believes it can obtain a higher price. In that case, you will receive the net
proceeds of the sale.
If the Portfolio does not have cash available to pay you for the units you are
selling, the agent for the Sponsors will select securities to be sold. These
sales could be made at times when the securities would not otherwise be sold and
may result in your receiving less than you paid for your unit and also reduce
the size and diversity of the Portfolio.
If you sell units with a value of at least $250,000, you may choose to receive
your distribution 'in kind.' If you so choose, you will receive securities and
cash with a total value equal to the price of your units. The Trustee will try
to distribute securities in the portfolio pro rata, but it reserves the right to
distribute only one or a few securities. The Trustee will act as your agent in
an in-kind distribution and will either hold the securities for your account or
transfer them as you instruct. You must pay any transaction costs as well as
transfer and ongoing custodial fees on sales of securities distributed in kind.
There could be a delay in paying you for your units:
o if the New York Stock Exchange is closed (other than customary weekend and
holiday closings);
o if the SEC determines that trading on the New York Stock Exchange is
restricted or that an emergency exists making sale or evaluation of the
securities not reasonably practicable; and
o for any other period permitted by SEC order.
8
<PAGE>
ROLLOVER/EXCHANGE OPTION
When this Portfolio is about to terminate, you may have the option to roll your
proceeds into the next Utility Portfolio if one is available.
If you hold your Units with one of the Sponsors and notify your financial
adviser by May 18, 2001, your units will be redeemed and certain distributed
securities plus the proceeds from the sale of the remaining distributed
securities will be reinvested in units of a new Utility Portfolio Series. If you
decide not to roll over your proceeds, you will receive a cash distribution (or,
if you so choose, an in-kind distribution) after the Portfolio terminates.
The Portfolio will terminate by June 18, 2001. You may, by written notice to the
Trustee at least ten business days prior to termination, elect to receive an
in-kind distribution of your pro rata share of the Securities remaining in the
Portfolio at that time (net of your share of expenses). Of course you can sell
your Units at any time prior to termination.
You may exchange units of this Portfolio for units of another Select or Focus
Series or certain other Defined Asset Funds any time before this Portfolio
terminates. If you continue to hold your Units, you may exchange units of this
Portfolio for units of certain other Defined Asset Funds at a reduced sales fee
if your investment goals change. To exchange units, you should talk to your
financial professional about what Portfolios are exchangeable, suitable and
currently available.
We may amend or terminate the options to exchange your units or roll your
proceeds at any time without notice.
HOW THE FUND WORKS
PRICING
Units are charged a combination of initial and deferred sales fees.
In addition, during the initial offering period, a portion of the price of a
unit also consists of securities to pay all or some of the costs of organizing
the Portfolio including:
o cost of initial preparation of legal documents;
o federal and state registration fees;
o initial fees and expenses of the Trustee;
o initial audit; and
o legal expenses and other out-of-pocket expenses.
The estimated organization costs will be deducted from the assets of the
Portfolio as of the close of the initial offering period.
The deferred sales fee is generally a monthly charge of $2.50 per 1,000 units
and is accrued in seven monthly installments each year of the Portfolio's life.
Units redeemed or repurchased prior to the accrual of the final deferred sales
fee installment will have the amount of any remaining installments deducted from
the redemption or repurchase proceeds or deducted in calculating an in-kind
distribution, however, this deduction will be waived in the event of the death
or disability (as defined in the Internal Revenue Code of 1986) of an investor.
If you redeem or sell your units before July 1, 2000, you will pay only the
balance of any deferred sales fee remaining for
9
<PAGE>
the first year. If you redeem or sell your units on or after July 1, 2000 you
will pay the remaining balance of the deferred sales fee for the second year.
The initial sales fee is equal to the aggregate sales fee less the aggregate
amount of any remaining installments of the deferred sales fee.
It is anticipated that securities will not be sold to pay the deferred sales fee
until after the date of the last installment. Investors will be at risk for
market price fluctuations in the securities from the several installment accrual
dates to the dates of actual sale of securities to satisfy this liability.
EVALUATIONS
The Trustee values the securities on each business day (i.e., any day other than
Saturdays, Sundays and the following holidays as observed by the New York Stock
Exchange: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas).
If the securities are listed on a national securities exchange or the Nasdaq
National Market, evaluations are generally based on closing sales prices on that
exchange or that system or, if closing sales prices are not available, at the
mean between the closing bid and offer prices.
INCOME
o The annual income per unit, after deducting estimated annual Portfolio
expenses per unit, will depend primarily upon the amount of dividends declared
and paid by the issuers of the securities and changes in the expenses of 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.
o Each unit receives an equal share of distributions of dividend income net of
estimated expenses. Each investor's monthly income distribution will equal
approximately one-twelfth of the investor's pro rata share of the estimated
annual income to the Income Account, after deducting estimated expenses.
Because dividends on the securities are not received at a constant rate
throughout the year, any distribution may be more or less than the amount then
credited to the income account. The Trustee credits dividends received to an
Income Account and other receipts to a Capital Account. The Trustee may
establish a reserve account by withdrawing from the these accounts amounts it
considers appropriate to pay any material liability. These accounts do not
bear interest.
EXPENSES
The Trustee is paid a fee monthly. It also benefits when it holds cash for the
Portfolio in non-interest bearing accounts. The Trustee may also receive
additional amounts:
o for extraordinary services and costs of indemnifying the Trustee and the
Sponsors;
o costs of actions taken to protect the Portfolio and other legal fees and
expenses;
o expenses for keeping the Portfolio's registration statement current; and
o Portfolio termination expenses and any governmental charges.
10
<PAGE>
The Sponsors are currently reimbursed up to 45 cents per 1,000 units annually
for providing portfolio supervisory, bookkeeping and administrative services and
for any other expenses properly chargeable to the Portfolio. Legal, typesetting,
electronic filing and regulatory filing fees and expenses associated with
updating the Portfolio's registration statement yearly are also now chargeable
to the Portfolio. While this fee may exceed the amount of these costs and
expenses attributable to this Portfolio, the total of these fees for all Series
of Defined Asset Funds will not exceed the aggregate amount attributable to all
of these Series for any calendar year. Certain of these expenses were previously
paid for by the Sponsors.
The Trustee's and Sponsors'fees may be adjusted for inflation without investors'
approval.
The deferred sales fees you owe are paid from the Capital Account. Although we
may collect the deferred sales charge monthly, to keep Units more fully invested
we do not currently plan to pay the deferred sales charge until after the
rollover notification date.
The Sponsors will pay advertising and selling expenses at no charge to the
Portfolio. If Portfolio expenses exceed initial estimates, the Portfolio will
owe the excess. The Trustee has a lien on Portfolio assets to secure
reimbursement of Portfolio expenses and may sell securities if cash is not
available.
PORTFOLIO CHANGES
If we maintain a secondary market in units but are unable to sell the units that
we buy in the secondary market, we will redeem units, which will affect the size
and composition of the portfolio.
We decide whether to offer units for sale that we acquire in the secondary
market after reviewing:
o diversity of the Portfolio;
o size of the Portfolio relative to its original size;
o ratio of Portfolio expenses to income; and
o cost of maintaining a current prospectus.
PORTFOLIO TERMINATION
When the Portfolio is about to terminate you will receive a notice, and you will
be unable to sell your units after that time. Unless you choose to receive an
in-kind distribution of securities, we will sell any remaining securities, and
you will receive your final distribution in cash.
You will pay your share of the expenses associated with termination, including
brokerage costs in selling securities. This may reduce the amount you receive as
your final distribution.
NO CERTIFICATES
All investors are required to hold their Units in uncertificated form and in
'street name' by their broker, dealer or financial institution at the Depository
Trust Company.
TRUST INDENTURE
The Portfolio is a 'unit investment trust' governed by a Trust Indenture, a
contract among the Sponsors and the Trustee, which sets forth their duties and
obligations and your rights. A copy of the Indenture is available to you on
request to the Trustee. The following summarizes certain provisions of the
Indenture.
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The Sponsors and the Trustee may amend the Indenture without your consent:
o to cure ambiguities;
o to correct or supplement any defective or inconsistent provision;
o to make any amendment required by any governmental agency; or
o to make other changes determined not to be materially adverse to your best
interest (as determined by the Sponsors).
Investors holding 51% of the units may amend the Indenture. Every investor must
consent to any amendment that changes the 51% requirement. No amendment may
reduce your interest in the Portfolio without your written consent.
The Trustee may resign by notifying the Sponsors. The Sponsors may remove the
Trustee without your consent if:
o it fails to perform its duties;
o it becomes incapable of acting or bankrupt or its affairs are taken over by
public authorities; or
o the Sponsors determine that its replacement is in your best interest.
Investors holding 51% of the units may remove the Trustee. The Trustee may
resign or be removed by the Sponsors without the consent of investors. The
resignation or removal of the Trustee becomes effective when a successor accepts
appointment. The Sponsors will try to appoint a successor promptly; however, if
no successor has accepted within 30 days after notice of resignation, the
resigning Trustee may petition a court to appoint a successor.
Any Sponsor may resign as long as one Sponsor with a net worth of $2 million
remains and agrees to the resignation. The remaining Sponsors and the Trustee
may appoint a replacement. If there is only one Sponsor and it fails to perform
its duties or becomes bankrupt the Trustee may:
o remove it and appoint a replacement Sponsor;
o liquidate the Portfolio; or
o continue to act as Trustee without a Sponsor.
Merrill Lynch, Pierce, Fenner & Smith Incorporated acts as agent for the
Sponsors.
The Trust Indenture contains customary provisions limiting the liability of the
Trustee and the Sponsors.
LEGAL OPINION
Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York 10017, as
special counsel for the Sponsors, has given an opinion that the units are
validly issued.
AUDITORS
Deloitte & Touche LLP, 2 World Financial Center, New York, New York 10281,
independent accountants, audited the Statement of Condition included in this
prospectus.
SPONSORS
The Sponsors are:
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED (a wholly-owned subsidiary of
Merrill Lynch & Co., Inc.)
P.O. Box 9051,
Princeton, NJ 08543-9051
SALOMON SMITH BARNEY INC. (an indirectly wholly-owned subsidiary of Citigroup
Inc.)
388 Greenwich Street--23rd Floor,
New York, NY 10013
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DEAN WITTER REYNOLDS INC. (a principal operating subsidiary of Morgan Stanley
Dean Witter & Co.)
Two World Trade Center--59th Floor,
New York, NY 10048
PAINEWEBBER INCORPORATED (a wholly-owned subsidiary of PaineWebber Group Inc.)
1285 Avenue of the Americas,
New York, NY 10019
Each Sponsor is a Delaware corporation and it, or its predecessor, has acted as
sponsor to many unit investment trusts. As a registered broker-dealer each
Sponsor buys and sells securities (including investment company shares) for
others (including investment companies) and participates as an underwriter in
various selling groups.
TRUSTEE
The Bank of New York, Unit Trust Department, P.O. Box 974--Wall Street Division,
New York, New York 10268-0974, is the Trustee. It is supervised by the Federal
Deposit Insurance Corporation, the Board of Governors of the Federal Reserve
System and New York State banking authorities.
UNDERWRITERS' AND SPONSORS' PROFITS
Underwriters receive sales charges when they sell units. Any cash made available
by you to the Sponsors before the settlement date for those units may be used in
the Sponsors' businesses to the extent permitted by federal law and may benefit
the Sponsors.
A Sponsor or Underwriter may realize profits or sustain losses on stocks in the
Portfolio which were acquired from underwriting syndicates of which it was a
member.
During the initial offering period, the Sponsors also may realize profits or
sustain losses on units they hold. The profit or loss from the Portfolio will
include the receipt of applicable sales charges, fluctuation in the price per
unit, a loss of $180.00 on the initial deposit of the securities and a gain or
loss on subsequent deposits of securities. In maintaining a secondary market,
the Sponsors 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 or redeem them.
PUBLIC DISTRIBUTION
During the initial offering period, units will be distributed to the public by
the Sponsors and dealers who are members of the National Association of
Securities Dealers, Inc.
Dealers will be entitled to the concession stated below on Units sold or
redeemed during the first year. On Units held in the second year, the 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).
DEALER CONCESSION AS
A % OF PUBLIC
AMOUNT PURCHASED OFFERING PRICE
---------------------------- ---------------------
Less than $50,000 2.00%
$50,000 to $99,999 1.80%
$100,000 to $249,999 1.45%
$250,000 to $999,999 1.25%
$1,000,000 and over 0.50%
The Sponsors do not intend to qualify units for sale in any foreign countries.
This prospectus does not constitute an offer to sell units in any country where
units cannot lawfully be sold.
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CODE OF ETHICS
Merrill Lynch, as agent for the Sponsors, has adopted a code of ethics requiring
reporting of personal securities transactions by its employees with access to
information on portfolio transactions. The goal of the code is to prevent fraud,
deception or misconduct against the Portfolio and to provide reasonable
standards of conduct.
YEAR 2000 ISSUES
Many computer systems were designed in such a way that they may be unable to
distinguish between the year 2000 and the year 1900 (commonly known as the 'Year
2000 Problem'). We do not expect that the computer system changes necessary to
prepare for the Year 2000 will cause any major operational difficulties for the
Portfolio. The Year 2000 Problem may adversely affect the issuers of the
securities contained in the Portfolio, but we cannot predict whether any impact
will be material to the Portfolio as a whole.
ADVERTISING AND SALES LITERATURE
Advertising and sales literature may include brief descriptions of the principal
businesses of the companies represented in the Portfolio and the research
analysis of why they were selected.
TAXES
The following summary describes some of the important income tax consequences of
holding units. It assumes that you are not a dealer, financial institution,
insurance company or other investor with special circumstances. You should
consult your own tax adviser about your particular circumstances.
In the opinion of our counsel, under existing law:
GENERAL TREATMENT OF THE FUND AND YOUR INVESTMENT
The Portfolio will not be taxed as a corporation for federal income tax
purposes, and you will be considered to own directly your share of each Security
in the Portfolio.
You will be considered to receive your share of any dividends paid when those
dividends are received by the Portfolio. Income dividends will be taxed at
ordinary income rates. If you are a corporate investor, you may be eligible for
the dividends received deduction if you satisfy the applicable holding period
and other requirements. You should consult your tax adviser in this regard.
GAIN OR LOSS UPON DISPOSITION
You will generally recognize gain or loss when you dispose of your units for
cash (by sale or redemption) or when the Trustee disposes of the Securities in
the Portfolio. You generally will not recognize gain or loss on an 'in-kind'
distribution to you of your proportional share of the Portfolio securities
whether it is in redemption of your units or upon termination of the Portfolio.
Your holding period for the distributed Securities will include your holding
period in your units.
If you elect to roll over your investment in the Portfolio, you will not
recognize gain or loss on your units except to the extent that your share of the
Securities in the Portfolio is sold and the proceeds are paid to you. Your basis
in the
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Securities that are rolled over into a new portfolio will be the same as the
portion of your basis in your units which was attributable to the rolled over
Securities.
If your net long-term capital gains exceed your net short-term capital losses,
the excess may be subject to tax at a lower rate than ordinary income. Any
capital gain or loss from the Portfolio will be long-term if you are considered
to have held your investment which produces the gain or loss for more than one
year and short-term otherwise. Because the deductibility of capital losses is
subject to limitations, you may not be able to deduct all of your capital
losses. You should consult your tax adviser in this regard.
YOUR TAX BASIS IN THE SECURITIES
Your aggregate tax basis in units that you have purchased for cash will be equal
to the cost of the units, including the sales fee. Your aggregate tax basis in
units that you hold as a result of a rollover from an earlier portfolio will
equal your basis in Securities that have been rolled over from the previous
portfolio plus the proceeds (other than proceeds that were paid to you) from the
sale of Securities from the portfolio which were not rolled over. You should not
increase your basis in your units by deferred sales charges or organizational
expenses. Your basis for Securities distributed to you will be the same as the
portion of your basis in your units that is attributable to the distributed
Securities. The tax reporting form and annual statements you receive will be
based on the net amounts paid to you, from which these expenses will already be
deducted.
EXPENSES
If you are an individual who itemizes deductions, you may deduct your share of
Portfolio expenses, but only to the extent that your share of the expenses,
together with your other miscellaneous deductions, exceeds 2% of your adjusted
gross income. Your ability to deduct Portfolio expenses will be limited further
if your adjusted gross income exceeds a specified amount (currently, $126,600 or
$63,300 for a married person filing separately).
STATE AND LOCAL TAXES
Under the income tax laws of the State and City of New York, the Portfolio will
not be taxed as a corporation, and the income of the Portfolio will be treated
as the income of the investors in the same manner as for federal income tax
purposes.
FOREIGN INVESTORS
If you are a foreign investor and you are not engaged in a U.S. trade or
business, you generally will be subject to 30% withholding tax (or a lower
applicable treaty rate) on distributions. You should consult your tax adviser
about the possible application of federal, state and local, and foreign taxes.
RETIREMENT PLANS
You may wish to purchase units for an Individual Retirement Account ('IRAs') or
other retirement plan. Generally, capital gains and income received in each of
these plans are exempt from federal taxation. All distributions from these types
of plans are generally treated as ordinary income but may, in some cases, be
eligible for tax-deferred rollover treatment. You should consult your
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attorney or tax adviser about the specific tax rules relating to these plans.
These plans are offered by brokerage firms, including the Sponsors of this
Portfolio, and other financial institutions. Fees and charges with respect to
such plans may vary.
SUPPLEMENTAL INFORMATION
You can receive at no cost supplemental information about the Portfolio by
calling the Trustee. The supplemental information includes more detailed risk
disclosure and general information about the structure and operation of the
Portfolio. The supplemental information is also available from the SEC.
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REPORT OF INDEPENDENT ACCOUNTANTS
The Sponsors, Trustee and Holders of Equity Investor Fund, Utility Portfolio
Series 3, Defined Asset Funds (the 'Portfolio'):
We have audited the accompanying statement of condition and the related defined
portfolio included in the prospectus of the Portfolio as of May 13, 1999. 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 May 13,
1999 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, N.Y.
May 13, 1999
STATEMENT OF CONDITION AS OF MAY 13, 1999
TRUST PROPERTY
Investments--Contracts to purchase Securities(1).........$ 107,781.25
--------------------
Total.........................................$ 107,781.25
--------------------
--------------------
LIABILITY AND INTEREST OF HOLDERS
Reimbursement of Sponsors for organization
expenses(2).......................................$ 222.09
--------------------
Subtotal 222.09
--------------------
Interest of Holders of 108,869 Units of fractional
undivided interest outstanding:(3)
Cost to investors(4)...................................$ 108,863.56
Gross underwriting commissions and organization
expenses(5)(2)....................................... (1,304.40)
--------------------
Subtotal 107,559.16
--------------------
Total.........................................$ 107,781.25
--------------------
--------------------
- ---------------
(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 May
12, 1999. 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 $107,961.25 and deposited with the Trustee. The amount of the
letter of credit includes $107,781.25 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 $2.04 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 organization
expenses obligation of the investors will be satisfied. If the actual
organization costs exceed the estimated aggregate amount shown above, the
Sponsors will pay for this excess amount.
(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 to maintain the $999.95 per 1,000 Units offering price only for that
day. The Public Offering Price on any subsequent business day will vary.
(4) Aggregate public offering price computed on the basis of the value
of the underlying securities at 4:00 p.m., Eastern time on May 12, 1999.
(5) Assumes the maximum initial sales charge per 1,000 units of 1.00%
of the Public Offering Price. A deferred sales charge of $2.50 per 1,000 Units
is payable on the 1st day of each month beginning December 1, 1999 through June
1, 2000 and July 1, 2000 through January 2001. Distributions will be made to an
account maintained by the Trustee from which the deferred sales charge
obligation of the investors to the Sponsors will be satisfied.
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Defined
Asset FundsSM
HAVE QUESTIONS ? EQUITY INVESTOR FUND
Request the most UTILITY PORTFOLIO SERIES 3
recent free Information (A Unit Investment Trust)
Supplement that gives more ---------------------------------------
details about the Fund, This Prospectus does not contain
by calling: complete information about the
The Bank of New York investment company filed with the
1-800-221-7771 Securities and Exchange Commission in
Washington, D.C. under the:
o Securities Act of 1933 (file no.
333-76593) and
o Investment Company Act of 1940 (file
no. 811-3044).
TO OBTAIN COPIES AT PRESCRIBED RATES--
WRITE: Public Reference Section of the
Commission
450 Fifth Street, N.W., Washington,
D.C. 20549-6009
CALL: 1-800-SEC-0330.
VISIT: http://www.sec.gov.
---------------------------------------
No person is authorized to give any
information or representations about
this Fund not contained in this
Prospectus or the Information
Supplement, and you should not rely on
any other information.
---------------------------------------
When units of this Fund are no longer
available, this Prospectus may be used
as a preliminary prospectus for a
future series, but some of the
information in this Prospectus will be
changed for that series.
Units of any future series may not be
sold nor may offers to buy be accepted
until that series has become effective
with the Securities and Exchange
Commission. No units can be sold in any
State where a sale would be illegal.
100167RR--5/99
