<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 27, 1994
REGISTRATION NO. 33-26716
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------------
POST-EFFECTIVE AMENDMENT NO. 5
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:
DEFINED ASSET FUNDS--
GOVERNMENT SECURITIES INCOME FUND
U.S. GOVERNMENT ZERO COUPON BOND SERIES 3
(A UNIT INVESTMENT TRUST)
B. NAMES OF DEPOSITORS:
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
C. COMPLETE ADDRESSES OF DEPOSITORS' PRINCIPAL EXECUTIVE OFFICES:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
UNIT INVESTMENT TRUSTS
POST OFFICE BOX 9051
PRINCETON, N.J. 08543-9051
D. NAMES AND COMPLETE ADDRESSES OF AGENTS FOR SERVICE:
COPIES TO:
TERESA KONCICK, ESQ.
P.O. BOX 9051
PRINCETON, N.J.
08543-9051
PIERRE DE SAINT PHALLE,
ESQ.
450 LEXINGTON AVENUE
NEW YORK, N.Y. 10017
The issuer has registered an indefinite number of Units under the Securities Act
of 1933 pursuant to Rule 24f-2 and filed the Rule 24f-2 Notice for the most
recent fiscal year on February 17, 1994.
Check box if it is proposed that this filing will become effective on July 29,
1994 pursuant to paragraph (b) of Rule 485. / x /
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
DEFINED
ASSET FUNDSSM
GOVERNMENT SECURITIES
INCOME FUND
- ------------------------------------------------------------
U.S. GOVERNMENT
ZERO COUPON BOND
SERIES 3
(A UNIT INVESTMENT TRUST)
PROSPECTUS, PART A
DATED JULY 29, 1994
SPONSOR:
Merrill Lynch,
Pierce, Fenner & Smith Inc.
This Series (the 'Fund') was formed to provide safety of capital and a high
yield to maturity through investment in fixed portfolios consisting primarily of
stripped debt obligations of the United States of America ('Stripped Treasury
Securities'). There is no assurance that these objectives will be met if Units
are sold before the underlying Securities mature because market prices of the
Securities before maturity and therefore the value of the Units will vary with
changes in interest rates and other factors. Stripped Treasury Securities do not
make any periodic payments of interest prior to maturity; accordingly, each
Trust's portfolio as a whole is priced at a deep discount from face amount and
Unit prices may be subject to greater fluctuations in response to changing
interest rates than a fund consisting of debt obligations of comparable
maturities that pay interest currently. This risk is greater when the period to
maturity is longer. See Risk Factors. The Fund consists of the 1994, 1999 and
2009 Trusts, each a separate unit investment trust ('Trust'), designated by the
year in which its Stripped Treasury Securities mature. Each Trust also contains
an interest-bearing Treasury security (the 'Treasury Note') to provide income to
pay the expenses of the Trust and the Sponsor's administrative fee.
Units of interest ('Units') in the Trusts will be sold only to employee benefit
plans (the 'Plans') as an investment alternative for Plan allocations to help
participants meet their personal retirement needs and goals. The choice of
maturities is offered to enable Plan allocations to be tailored to participants'
retirement planning objectives and financial requirements. Each Plan will invest
in Units of the Trusts in accordance with allocation instructions received from
employees pursuant to the Plan. Accordingly, the interest of an employee in the
Units is subject to the terms of the Plan. The rights of a Plan as a Holder of
Units should be distinguished from the rights of an employee. The term 'Holder'
in this Prospectus shall refer to the Plans, to the Sponsor if it holds Units
(see Market for Units) and to any employee who holds Units distributed from a
Plan.
- ------------------------------------------------------------------------
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
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- ------------------------------------------------------------------------
Read and retain this Prospectus for future reference.
<PAGE>
DEFINED ASSET FUNDSSM is America's oldest and largest family of unit investment
trusts with over $90 billion sponsored since 1970. Each Defined Fund is a
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.
With Defined Asset Funds you know in advance what you are investing in and that
changes in the portfolio are limited. Most defined bond funds pay interest
monthly and repay principal as bonds are called, redeemed, sold or as they
mature. Defined equity funds offer preselected stock portfolios with defined
termination dates.
Your financial advisor can help you select a Defined Fund to meet your personal
investment objectives. Our size and market presence enable us to offer a wide
variety of investments. Defined Funds are available in the following types of
securities: municipal bonds, corporate bonds, government bonds, utility stocks,
growth stocks, even international securities denominated in foreign currencies.
Termination dates are as short as one year or as long as 30 years. Special funds
are available for investors seeking extra features: insured funds, double and
triple tax-free funds, and funds with 'laddered maturities' to help protect
against rising interest rates. Defined Funds are offered by prospectus only.
- --------------------------------------------------------------------------------
CONTENTS
Investment Summary.......................................... 3
Fund Structure.............................................. 6
Risk Factors................................................ 6
Description of the Fund..................................... 7
Taxes....................................................... 9
Sale of Units............................................... 10
Market for Units............................................ 12
Redemption.................................................. 12
Expenses and Charges........................................ 13
Administration of the Fund.................................. 14
Resignation, Removal and Limits on Liability................ 15
Miscellaneous............................................... 16
Accountants' Opinion Relating to the Fund................... D-1
Statement of Condition...................................... D-2
Portfolio................................................... D-11
2
<PAGE>
INVESTMENT SUMMARY AS OF MARCH 31, 1994 THE EVALUATION DATE+
This Series consists of separate unit investment trusts, each designated for
the maturity of its underlying Securities (see Portfolios).
<TABLE>
<CAPTION>
1994 1999 2009
TRUST TRUST TRUST
-------------- -------------- --------------
<S> <C> <C> <C>
FACE AMOUNT OF SECURITIES..............$ 12,674,630 $ 38,007,873 $ 72,295,092
NUMBER OF UNITS........................ 127,044 380,142 723,272
FACE AMOUNT OF SECURITIES PER UNIT.....$ 99.765 $ 99.983 $ 99.955
FRACTIONAL UNDIVIDED INTEREST IN FUND
REPRESENTED BY EACH UNIT............. 1/127,044th 1/380,142nd 1/723,272nd
OFFER PRICE PER UNIT
Net Assets of Trust*...............$ 12,409,291 $ 26,895,894 $ 24,738,059
Divided by Number of Units.........$ 97.677 $ 70.752 $ 34.203
Plus Adjustment Factor**........... .049 .106 .103
-------------- -------------- --------------
Total++............................ 97.726 70.858 34.306
-------------- -------------- --------------
-------------- -------------- --------------
REDEMPTION PRICE PER UNIT
(net of Adjustment Factor**)++.......$ 97.628 $ 70.646 $ 34.100
REDEMPTION PRICE PER UNIT LESS
THAN OFFER PRICE BY..................$ .098 $ .212 $ .206
CALCULATION OF ESTIMATED NET ANNUAL
CASH INTEREST INCOME PER 1,000 FACE
AMOUNT
Gross annual cash income........... 4.00 1.82 1.38
Less estimated annual expenses..... .91 .71 .64
Less annual Sponsor's
administrative fee***................ 3.09 1.11 .74
-------------- -------------- --------------
Estimated net annual cash income...$ 0.00 $ 0.00 $ 0.00
-------------- -------------- --------------
-------------- -------------- --------------
ESTIMATED YIELD TO MATURITY (based on
Price per Unit)........................ 3.786% 6.232% 7.206%
ESTIMATED MAXIMUM DOLLAR AMOUNT PER 10
UNITS PAYABLE ON ACCOUNT OF SPONSOR'S
ADMINISTRATIVE FEE****...............$ 1.94 $ 6.25 $ 11.19
INCOME ACCOUNT DISTRIBUTIONS
Although no periodic distributions
of income should be expected, the
Sponsor may direct the Trustee to
distribute any accumulated net
interest income to Holders of a
Trust as of the last Business Day
in any year.
CAPITAL ACCOUNT DISTRIBUTIONS
Distributions from the Capital
Account will be made on the first
business day following the maturity
of the Stripped Treasury Securities
in a Trust to holders of record on
the business day immediately
preceding the date of the
distribution.
TRUSTEE'S ANNUAL FEE AND EXPENSES*****
Per 10 Units (see Expenses and
Charges)...........................$ .91 $ .71+++ $ .64+++
EVALUATOR'S FEE FOR EACH EVALUATION
Minimum of $5.00 plus $0.25 for
each issue of underlying Securities
in excess of 50 issues, treating
separate maturities as separate
issues (see Expenses and Charges).
EVALUATION TIME
3:30 P.M. New York Time
MANDATORY TERMINATION DATE
Each Trust must be terminated no
later than one year after the
maturity date of the last maturing
Security in that Trust listed under
Portfolio (see Portfolio).
</TABLE>
- ------------------
+ The Indenture was signed and the initial deposit was made as of
February 2, 1989.
++ Plus any net cash.
+++ During the last 12 months of the 1999 Trust, and for up to 60 months
in the 2009 Trust in the event the Treasury Note is called at its earliest call
date, the Trustee's Annual Fee and Expenses will be reduced, and the estimated
net annual income per Unit should remain the same (see Expenses and
Charges--Fees).
* The net assets of the Trust represent the aggregate value of Securities
(including amortization of discount) plus other assets less accrued liabilities,
determined as described under Redemption--Computation of Redemption Price per
Unit.
** The net asset value per Unit is adjusted by adding to the Offer Price
and subtracting from the Redemption Price, an amount (the 'Adjustment Factor'),
currently .0005 times the net assets per Unit for the 1994 Trust, .0015 for the
1999 Trust; and .003 for the 2009 Trust. See Sales of Units--Unit Offer Price.
***There is no sales charge on purchases of Units. Income on the Units
will be subject to a Sponsor's administrative fee accrued at the annual rate
shown. This fee will be calculated on a daily basis and will accrue from the
settlement date for Units purchased on the Initial Date of Deposit. This fee
will be deducted from interest income on the U.S. Treasury Notes semi-annually
(see Expenses and Charges). For Units that are tendered for redemption, a pro
rata portion of the accrued administrative fee will be deducted at the time of
redemption (see Redemption). See the chart at the end of this Investment Summary
for the percentage which the present value of the Sponsor's administrative fee
represents at various intervals of the Price per 10 Units.
**** This amount assumes that each Holder holds his Units until termination
of the Trust. This amount may differ from actual payments on account of the
Sponsor's administrative fee as a result of the length of time a Holder holds
his Units and other factors.
***** Of this amount, the Trustee receives annually for its services as
Trustee, $0.50 per 10 Units, payable in semi-annual installments.
3
<PAGE>
INVESTMENT SUMMARY AS OF MARCH 31, 1994 THE EVALUATION DATE
TRUST PORTFOLIOS (SEE PORTFOLIOS)
SECURITIES--Each Trust consists primarily of issues of Stripped Treasury
Securities purchased at a deep discount. The Securities are not rated but, in
the opinion of the Sponsor, have credit characteristics comparable to those of
Securities rated 'AAA' by nationally recognized rating agencies. Each Trust also
contains one interest-bearing Treasury Security (the 'Treasury Note') deposited
in order to provide cash income with which to pay the expenses, including the
Sponsor's administrative fee, of the Trust.
RISK FACTORS--An investment in Units of a Trust should be made with an
understanding of the risks which an investment in debt obligations, most of
which were purchased at a deep discount, may entail, including the risk that the
value of a Trust and hence of the Units will decline with increases in interest
rates. The market value of Stripped Treasury Securities, and therefore the value
of the Units, may be subject to greater fluctuations in response to changing
interest rates than debt obligations of comparable maturities which pay interest
currently. The risk is greater when the period to maturity is longer. (See pages
6-7.) For each 10 Units of a Trust purchased, a Holder will receive total
distributions of approximately $1,000 for Units held until maturity of the
underlying Securities of that Trust. Furthermore, the price per Unit will vary
in accordance with fluctuations in the values of the Securities and the
distributions could change if the Securities are paid or sold, or if the
expenses or Sponsor's administrative fee of the Trust change. For a discussion
of the economic differences between the Trusts and a fund consisting of
customary securities, see Description of the Fund--Income and Estimated Yield to
Maturity.
Additional Units may be offered subsequent to the Initial Date of Deposit,
which may have an effect upon the value of previously existing Units. Additional
Units may be created by depositing Securities (or contracts to purchase
Securities accompanied by cash, or a bank letter of credit in an amount
sufficient to complete the contracts) or cash (or a bank letter of credit) to
purchase additional Securities, in each instance maintaining precisely the
original proportionate relationship between the face amounts of Stripped
Treasury Securities and the Treasury Notes of identical maturities. If cash (or
a letter of credit) is deposited to purchase Securities, the value of existing
Units will change to the extent the price of a Security increases or decreases
between the time of deposit and the time the Security is purchased. See Fund
Structure. The Adjustment Factor, which is added to the Offer Price and
subtracted from the Redemption Price, is intended to cover the costs of
acquiring and disposing of securities so that they are not borne by the Trust.
See Sale of Units--Unit Offer Price.
ML PLANS--Units may be purchased by certain employee benefit plans
established for employees of Merrill Lynch & Co., Inc. and its affiliates ('ML
Plans'). An ML Plan may buy Units only directly from the Trustee and may realize
the value of Units only by tendering them for redemption. See FUND STRUCTURE--ML
Plans.
DISTRIBUTIONS--There will be no payments of interest on the Securities other
than on the Treasury Note in each Trust, which will be used to pay the expenses
of and Sponsor's administrative fee on the Trust. Consequently, no distributions
of interest income should be expected; however, the Sponsor may direct the
Trustee to distribute any accumulated net interest income to Holders of a Trust
as of the last Business Day in any year. Nevertheless, the gross interest income
on all Securities in the Trust is taxable to Holders. Each Stripped Treasury
Security will be treated for Federal income tax purposes as having 'original
issue discount,' which must be amortized over the term of the Stripped Treasury
Security and included in a Holder's ordinary gross income before the Holder
receives the cash attributable to that income. These tax consequences would
apply to an employee only if he becomes a Holder by taking Units upon
terminating participation in the Plan. See Taxes. The final distribution will be
made in cash following the maturity of the Stripped Treasury Securities in the
Trust, and may include any amount received upon the sale of Securities to meet
redemptions of Units which exceeds the amount necessary to meet those
redemptions and any accumulated net interest income. Principal from maturity of
the Treasury Note will not be distributed until disposition of the Stripped
Treasury Security in the Trust. See Administration of the Fund--Accounts and
Distributions.
ESTIMATED YIELD TO MATURITY ON UNITS--The yield to maturity on the Units of
each Trust is the annual percentage return to the investor based on amortization
of discount, compounded semi-annually, divided by the Offer Price per Unit. It
is assumed that interest income will equal expenses and other deductions. The
value of the Units will fluctuate with the value of the portfolio of underlying
Securities. The yield to maturity will change with changes in the price per Unit
(including the Adjustment Factor) and any change in the Trust's expenses or the
Sponsor's administrative fee.
UNIT PRICE--The price of the Units is based on the net asset value per Unit,
determined as described under Redemption--Computation of Redemption Price per
Unit. The Adjustment Factor, at current rates described under Sale of
Units--Unit Offer Price, is added in computing the Offer Price of Units and
deducted in computing the Redemption Price or sale price. Units are subject to a
Sponsor's administrative fee calculated on a daily basis at the annual rate of
$3.09 per 10 Units of the 1994 Trust; $1.11 per 10 Units of the 1999 Trust; and
$.74 per 10 Units of the 2009 Trust. The following chart states these
administrative fees as percentages of the prices at various intervals. It is
assumed that Trust expenses and the accrued Sponsor's administrative fee will
exactly offset any accrued interest. There is no minimum purchase.
4
<PAGE>
INVESTMENT SUMMARY AS OF MARCH 31, 1994 THE EVALUATION DATE
PRESENT VALUE OF SPONSOR'S ADMINISTRATIVE FEE AS
PERCENT OF PRICE PER 10 UNITS AT SELECTED INTERVALS*
<TABLE>
<CAPTION>
PRICE PER
$10
UNITS AS
OF
MARCH 31,
1994,
THE
EVALUATION
$25 LESS DATE $25 MORE $50 MORE $100 MORE
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
1994 TRUST Price per 10 Units $ 952.26 $ 977.26 -- -- --
1.79 1.85 -- -- --
Present value of Sponsor's
administrative fee
0.190% 0.190% -- -- --
Sponsor's administrative fee
1999 TRUST Price per 10 Units $ 683.58 $ 708.58 $ 733.58 $ 758.58 $ 808.58
5.03 5.13 5.23 5.32 5.52
Present value of Sponsor's
administrative fee
0.74% 0.72% 0.71% 0.70% 0.68%
Sponsor's administrative fee
2009 TRUST Price per 10 Units $ 318.06 $ 343.06 $ 368.06 $ 393.06 $ 443.06
6.47 6.68 6.89 7.09 7.48
Present value of Sponsor's
administrative fee
2.03% 1.95% 1.87% 1.80% 1.69%
Sponsor's administrative fee
</TABLE>
- ------------------
* These represent the maximum fees and figures assume that Units are
purchased on the Evaluation Date and are held until maturity of the Trust.
Purchase after the Evaluation Date or sale before maturity will result in lesser
deductions and therefore a lesser rate of administrative fee. The present value
is computed at the same interest rate as the estimated yield to maturity at each
purchase price.
MARKET FOR UNITS--The Sponsor, though not obligated to do so, intends to
maintain a market for Units at the Redemption Price per Unit. See Page 12. If
that market is not maintained, a Holder will be able to dispose of Units through
redemption at prices computed on the same basis. See Redemption. Market
conditions and the Adjustment Factor may cause the prices available in the
market maintained by the Sponsor or upon exercise of redemption rights to be
more or less than the amount paid for Units. The market prices of Stripped
Treasury Securities, and hence of the Units, are subject to greater fluctuations
than the prices of securities making current payments of interest.
5
<PAGE>
FUND STRUCTURE
This Series (the 'Fund') consists of a number of separate unit investment
trusts (each a 'Trust') created under New York law by one Trust indenture (the
'Indenture') among the Sponsor, the Trustee and the Evaluator. Unless otherwise
indicated, when Investors Bank & Trust Company and The First National Bank of
Chicago act as Co-Trustees to the Fund, reference to the Trustee in the
Prospectus shall be deemed to refer to Investors Bank & Trust Company and The
First National Bank of Chicago, as Co-Trustees. To the extent that references in
the Prospectus are to articles and sections of the Indenture, which are hereby
incorporated by reference, the statements made herein are qualified in their
entirety by this reference. On the initial date of deposit for each Trust stated
in this Prospectus (the 'Initial Date of Deposit') the Sponsor deposited the
underlying Securities with the Trustee at prices equal to the valuation of those
Securities as determined by the Evaluator, and the Trustee delivered to the
Sponsor units of interest ('Units') representing the entire ownership of that
Trust in the Fund. Most if not all of the Securities so deposited were
represented by purchase contracts assigned to the Trustee together with an
irrevocable letter or letters of credit issued by a commercial bank or banks in
the amount necessary to complete the purchase thereof. The record holders
('Holders') of Units will have the right to have their Units redeemed (see
Redemption) if the Units cannot be sold in the market which the Sponsor intends
to maintain (see Market for Units). Redemption will be made in securities ('in
kind') or in cash at the option of the Holder.
With the initial deposit in each Trust, a proportionate relationship was
established between the face amounts of Stripped Treasury Securities and the
Treasury Note therein. Following the Initial Date of Deposit, additional Units
may be issued on deposit of additional Securities by the Sponsor or on deposit
of cash (or a bank letter of credit) to purchase Securities. In either case, the
additional Securities will have maturities identical to those in the Trust and
maintain precisely the original proportionate relationship among the face
amounts of each type of Security. Units will to the extent practicable continue
to represent the identical face amount of each Security. However, it may not be
practicable to maintain this identical face amount per Unit because of, among
other reasons, changes in prices. Units in the Trusts may be continuously
offered for sale by means of this Prospectus (see Sale of Units--Distribution),
resulting in a potential increase in the number of outstanding Units of each
Trust (see Selection and Acquisition of Securities).
As used herein, 'Securities' includes the Stripped Treasury Securities and
interest-bearing Treasury Note deposited in the Trusts and described under
Portfolios and any additional Treasury Securities deposited thereafter or
contracts for the purchase thereof together with an irrevocable letter or
letters of credit sufficient to perform such contracts. As used herein, the term
'Units,' unless the context otherwise indicates, means the units of interest in
all Trusts of the Fund.
ML PLANS
As the Sponsor is a 'party in interest' with respect to each ML Plan, it is
prohibited by ERISA from selling Units to or buying them from any ML Plan.
Accordingly, any ML Plan will purchase Units directly from the Trustee and may
only tender Units to the Trustee for redemption. It is also prohibited from
acting as dealer, and from charging for its services as broker, for the Trust in
acquiring Securities with monies paid for Units, and in selling Securities to
pay redemptions of Units, by ML Plans. In addition, ERISA prohibits the Sponsor
from receiving compensation or other consideration except for reimbursement of
its direct expenses. Therefore, the proceeds of the Sponsor's administrative fee
paid by any ML Plan will be used to reimburse the Sponsor for these expenses,
and the Sponsor will not collect the administrative fee on Units held by ML
Plans at any time when it has no unreimbursed expenses. Merrill Lynch & Co.,
Inc. intends to file with the Department of Labor an application for exemption
from certain of the ERISA prohibited transaction provisions so that the Sponsor,
among other things, may provide a secondary market for Units held by ML Plans
and may charge certain fees and recover certain additional costs.
RISK FACTORS
An investment in Units should be made with an understanding of the risks
which an investment in deep discount debt obligations may entail, including the
risk that the value of the Trust's portfolio (the 'Portfolio') and hence of the
Units will decline with increases in interest rates. High inflation and
recession, together with the fiscal and monetary measures adopted to attempt to
deal with those and other economic problems, have contributed to recent wide
fluctuations in interest rates and thus in the value of fixed-rate debt
obligations generally. The Sponsor cannot predict future economic policies or
their consequences or, therefore, the course or
6
<PAGE>
extent of any similar fluctuations in the future. Furthermore, a Holder (but not
employees before they terminate Plan participation--see Taxes) will have
significant amounts of taxable income attributable to it before the receipt of
the cash attributable to that income.
SPECIAL CHARACTERISTICS OF STRIPPED TREASURY SECURITIES
Stripped Treasury Securities are sold at a deep discount from their face
amounts payable at maturity because the buyer of those securities receives only
the right to receive a future fixed payment on the security and not any rights
to periodic interest payments thereon. Purchasers of these securities acquire,
in effect, discount obligations that are economically identical to the
'zero-coupon bonds' that have been issued by corporations. Zero coupon bonds are
debt obligations which do not make any periodic payments of interest prior to
maturity and accordingly are issued at a deep discount. Accordingly, the Trusts
are not a suitable investment to persons seeking current cash distributions.
Because interest on 'zero coupon' debt obligations is not distributed on a
current basis but in effect compounded, the value of securities of this type,
including the value of accrued and reinvested interest (and of a fund comprised
of these obligations), is subject to greater fluctuations than on obligations
which distribute income regularly. Accordingly, while the full faith and credit
of the U.S. government provides a high level of protection against credit risks
on the Securities, sale of Units before maturity of the Securities at a time
when interest rates have increased would involve greater market risk than in a
fund which is invested in debt obligations of comparable maturity which pay
interest currently. This risk is greater when the period to maturity is longer.
Stripped Treasury Securities held by any Trust shall consist solely of
registered U.S. Treasury debt obligations which may be held through the Federal
Reserve Bank's book entry system called 'Separate Trading of Registered Interest
and Principal of Securities' ('STRIPS'). STRIPS, while direct obligations of the
United States and issued under programs introduced by the U.S. Treasury, are not
issued directly by the U.S. government. The STRIPS program facilitates secondary
market stripping of selected Treasury notes and bonds into individual principal
and interest components by purchasers with access to a book-entry account at a
Federal Reserve bank. Those obligations may be maintained in the book-entry
system operated by the Federal Reserve in a manner that permits separate trading
and ownership of interest and principal payments. The Federal Reserve does not
charge a fee for this service, but book-entry transfers of interest and
principal components are subject to the same fee schedule generally applicable
to transfers of Treasury securities. The Stripped Treasury Securities are
payable in full at maturity at their stated maturity amount, and are not subject
to redemption prior to maturity. In addition, the Stripped Treasury Securities
do not make any periodic payments of interest.
Sales of Units in California may be made only to persons which have a minimum
net worth (exclusive of home, home furnishings, and automobiles for personal
use) of at least (i) $75,000 or (ii) $30,000 if the investor has an adjusted
gross income of at least $30,000. A holder of Stripped Treasury Securities will
be required to include annually in gross income an allocable portion of the
deemed original issue discount, prior to receipt of the cash attributable to
that income. However, a qualified retirement plan is not taxed on income.
Under generally accepted accounting principles, a holder of a security
purchased at a discount normally must report as an item of income for financial
accounting purposes the portion of the discount attributable to the applicable
reporting period. The calculation of this attributable income would be made on
the 'interest' method which generally will result in a lesser amount of
includible income in earlier periods and a correspondingly larger amount in
later periods. For Federal income tax purposes, the inclusion will be on a basis
that reflects the effective semi-annual compounding of accrued but unpaid
interest effectively represented by the discount. Although this treatment is
similar to the 'interest' method described above, the 'interest' method may
differ to the extent that generally accepted accounting principles permit or
require the inclusion of interest on the basis of a compounding period other
than the semi-annual period (see Taxes).
DESCRIPTION OF THE FUND
THE PORTFOLIO
The Portfolio of each Trust consists of different issues of Stripped
Treasury Securities, with fixed maturity dates and not having any equity or
conversion features, that do not pay interest before maturity and as such were
purchased at a deep discount (see above) and of the Treasury Note deposited in
order to provide cash income with which to pay the expenses of the Trust and the
Sponsor's administrative fee.
7
<PAGE>
SELECTION AND ACQUISITION OF SECURITIES
In selecting Securities for deposit in a Trust, the following factors,
among others, were considered by the Unit Investment Trusts division of Merrill
Lynch, Pierce, Fenner & Smith Incorporated: (i) the types of securities
available; (ii) the prices of those securities relative to other comparable
securities; (iii) the extent to which those securities trade at a discount from
par once the interest coupons are stripped; (iv) the yield to maturity of those
securities; and (v) the maturities of those securities.
The yield to maturity and discount from par on securities of the type
deposited in the Trusts are dependent on a variety of factors, including general
money market conditions, general conditions of the bond market, prevailing
interest rates and the maturities of the securities.
Each Trust consists of the Securities (or contracts to purchase the
Securities) listed under Portfolios and any additional Securities acquired
pursuant to the terms of the Indenture (including provisions with respect to
deposit of Securities in connection with the sale of additional Units) as long
as they may continue to be held from time to time in the Trust together with
accrued and undistributed interest on any interest-bearing securities deposited
in order to pay the expenses of the Trust and the Sponsor's administrative fee,
undistributed cash representing payments of principal and cash realized from the
disposition of Securities.
Neither the Sponsor nor the Trustee shall be liable in any way for any
default, failure or defect in any of the Securities. In the event of a failure
to deliver any Security that has been purchased for a Trust under a contract
('Failed Security'), the Sponsor is authorized under the Indenture to direct the
Trustee to acquire substitute securities ('Replacement Securities') to make up
the portfolio of the Trust. Replacement Securities must be deposited within 20
days after delivery of notice of the Failed Security; the purchase price may not
exceed the amount of funds reserved for the purchase of the Failed Security. The
Replacement Securities must (i) be Securities issued by the U.S. Treasury, that
if stripped make no periodic payments of interest, or if interest-bearing are of
the same issue, (ii) have a fixed maturity identical to that of the Failed
Security, (iii) be purchased at a price that results in a yield to maturity as
of the date of deposit of the Failed Security which is equivalent (taking into
consideration then current market conditions) to the yield to maturity of the
Failed Security and (iv) not be when, as and if issued obligations. If this
right of substitution is not utilized to acquire Replacement Securities in the
event of a failed contract, the Sponsor will cause to be refunded any
attributable sales charge plus the attributable Cost of Securities to Trust,
plus accrued interest and amortization attributable to the relevant Security.
Because certain of the Securities from time to time may be sold under
certain circumstances described herein, each Trust is not expected to retain its
present size and composition (see Redemption). The Indenture also authorizes the
increase of the size and number of Units of any Trust by the deposit of
additional Securities or cash and the issue of a corresponding number of
additional Units, provided that the maturity of any additional Securities so
acquired is identical to the maturity of the Securities initially deposited in
the Trust and the relative face amounts of Securities deposited maintain as
closely as practicable the original proportionate relationship between the face
amounts of those Securities.
THE UNITS
On the date of the Investment Summary of each Trust each Unit represented
the fractional undivided interest in the Securities held in the Trust and net
income of the Trust set forth under Investment Summary. Thereafter, if Units of
any Trust are redeemed the face amount of Securities in that Trust will be
reduced by amounts allocable to redeemed Units, and the fractional undivided
interest represented by each remaining Unit in the balance will be increased.
However, if additional Units are issued by any Trust, the aggregate face amount
of Securities in the Trust will be increased by amounts allocable to the
additional Units, and the fractional undivided interest represented by each Unit
in the balance of the Trust will be decreased. Units will remain outstanding
until redeemed upon tender to the Trustee by a Holder (which may include the
Sponsor) or until the termination of the Indenture (see Redemption and
Administration of the Fund--Amendment and Termination).
INCOME AND ESTIMATED YIELD TO MATURITY
The estimated yield to maturity per Unit of each Trust is the annual
percentage return to the investor based on amortization of discount, compounded
semi-annually, divided by the Unit Offer Price. It is assumed that interest
income on the Treasury Note will equal expenses and other deductions. If the
price of the Units is less
8
<PAGE>
than stated in the Investment Summary, the yield to maturity will be greater, if
the price is greater (other than additional accrued original discount), the
yield to maturity will be less.
The economic effect of purchasing Units of a Trust is that the investor who
holds his Units until maturity of the underlying Securities should receive
approximately a fixed yield, not only on his original investment but on all
earned discount during the life of the Securities. The assumed or implicit
automatic reinvestment at market rates at the time of purchase of the portion of
the yield represented by earned discount differentiates the Trusts from funds
consisting of customary securities on which current periodic interest is paid at
market rates at the time of issue. Accordingly, an investor in the Units, unlike
an investor in a fund comprised of customary securities, virtually eliminates
his risk of being unable to invest distributions at a rate as high as the yield
on his Trust, but will forego the ability to reinvest at higher rates in the
future.
The price per Unit of each Trust will vary in accordance with fluctuations
in the prices of the Securities held by the Trust. Changes in the Offer and
Redemption Price per Unit or in a Trust's expenses will result in changes in the
yields to maturity.
TAXES
While Units are held by a Plan, neither it nor any participating employee
will be taxable on income from the Trust. An employee who elects to receive his
pro rata portion of Units held by the Plan when he terminates participation in
the Plan and does not roll over those Units to an eligible retirement plan as
described in Section 402(c) of the Internal Revenue Code of 1986, as amended
(the 'Code'), will be taxable under rules applicable to qualified plan
distributions as described in Section 402 of the Code. Thereafter, the employee
will be taxable as a Holder as described below.
In the opinion of Davis Polk & Wardwell, special counsel for the Sponsor,
under existing law:
Each Trust is not an association taxable as a corporation for Federal
income tax purposes, and income received by the Trust will be treated as
the income of the Holders of the Trust in the manner set forth below.
Each Holder will be considered the owner of a pro rata portion of each
Security in his Trust under the grantor trust rules of Sections 671-679 of
the Code. The total cost to a Holder for his Units (i.e., for an individual
Holder, the fair market value of his Units on the date the Plan distributes
them to him) is allocated among his pro rata portion of each Security in
his Trust (in proportion to the fair market values thereof on that date) in
order to determine his tax cost for his pro rata portion of each Security.
A Holder will be entitled to add to his tax cost of his pro rata portion of
each Security that portion of the administrative fee which is not
characterized as imputed interest (see below).
Each Trust consists primarily of Stripped Treasury Securities. A Holder
is required to treat his pro rata portion of each Stripped Treasury
Security in his Trust as a bond that was originally issued on the date the
Holder purchased his Units (for an individual Holder, the date of
distribution) at an original issue discount equal to the excess of the
stated redemption price at maturity over the Holder's tax cost therefor as
discussed above, and to include annually in income a portion of such
original issue discount determined under a formula which takes into account
the compounding of interest. The amount of accrued original issue discount
so included in income in respect of a Holder's pro rata portion of a
Security is added to the Holder's tax basis therefor.
Each Holder will be considered to have received the income on his pro
rata portion of the Treasury Note in his Trust when interest on the Note is
received by his Trust. An individual Holder who itemizes deductions may
deduct his pro rata share of the fees and expenses of his Trust, but only
to the extent that this amount together with the Holder's other
miscellaneous deductions exceeds 2% of his adjusted gross income. A portion
of the Sponsor's administrative fee may constitute imputed interest which
is deductible subject to limitations on investment interest.
Except with respect to Units held in a Plan, a Holder will recognize
taxable gain or loss when all or part of his pro rata portion of a Security
in his Trust is disposed of (i.e., when the Security is sold by the Trust
or is redeemed or paid at maturity or when the Holder sells or redeems for
cash all or some of his Units) for an amount greater or less than his
original tax cost therefor, increased by the amount of original issue
discount included in the Holder's gross income as discussed above. This
resulting gain or loss generally will be capital gain or loss (except in
the case of a dealer or financial institution), and will be long-term if
the Holder has held his Units for more than one year. Capital gains are
generally taxed at the same rate as ordinary income.
9
<PAGE>
However, the excess of net long-term capital gains over net short-term
capital losses may be taxed at a lower rate than ordinary income for
certain non-corporate taxpayers. The deduction of capital losses is subject
to limitations.
A distribution to a Holder of Securities upon redemption of Units will
not be a taxable event to the Holder or to nonredeeming Holders. The
redeeming Holder's basis for such Securities will be equal to his basis for
the Securities (previously represented by his Units) prior to such
redemption, and his holding period for such Securities will include the
period during which he held his Units. However, a Holder may recognize
taxable gain or loss when the Holder sells the Securities so distributed
for cash.
Under the income tax laws of the State and City of New York, each Trust
is not an association taxable as a corporation and income received by the
Trust will be treated as the income of the Holders of the Trust in the same
manner as for Federal income tax purposes.
Holders will be required for Federal income tax purposes to include
amounts in ordinary gross income in advance of the receipt of the cash
attributable to such income. Therefore, direct holding of Units may be
appropriate only for a tax-deferred account which can have taxable income
attributed in advance of the receipt of the cash attributable to such
income.
The foregoing discussion relates only to Federal and certain aspects of
New York income taxes. Depending on their state of residence, Holders may
be subject to state and local taxation and should consult their own tax
advisors in this regard.
* * *
After the end of each calendar year, the Trustee will furnish to each
Holder a report from which the Holder may determine the income received by his
Trust on his pro rata portion of the Treasury Note, the gross proceeds received
by the Trust from the disposition of any Security and the Holder's pro rata
portion of the fees and expenses paid by his Trust. In order to enable them to
comply with Federal and state tax reporting requirements, Holders will be
furnished upon request to the Trustee with evaluations of Securities furnished
to it by the Evaluator (Section 4.02). The Trustee will also furnish to each
Holder and the Internal Revenue Service all required information returns
(including a return with respect to original issue discount).
SALE OF UNITS
UNIT OFFER PRICE
Units may be purchased by a Plan at the Offer Price by means of this
Prospectus. The Offer Price per Unit of a Trust is computed as of the Evaluation
Time by adding the evaluation of the underlying Securities, as determined by the
Evaluator as described under Redemption--Computation of Redemption Price per
Unit, plus the Adjustment Factor, divided by the number of Units outstanding.
The Adjustment Factor is currently .0005 times the evaluation for the 1994
Trust, .0015 for the 1999 Trust and .003 for the 2009 Trust. The Adjustment
Facor (as determined by the Sponsor) may be changed for each calendar quarter
but in no event will it exceed .00175 for the 1994 Trust, .007 for the 1999
Trust or .0175 for the 2009 Trust. This factor is designed to cover the Trust's
costs, without profit, of buying and selling securities in connection with sales
and redemptions of Units, and is intended to ensure that the prices for
purchases or sales of Units more closely match the market value of the
underlying Securities. A proportionate share of any cash in the Capital Account
not allocated to the purchase of specific Securities is added. Because the
income on the Treasury Note is designed to exactly equal the Trust expenses,
accrued interest on the Note is not reflected in the offering, repurchase or
redemption prices of Units. In practice, as determined on an accrual basis by
the auditors, accumulated expenses have been slightly higher or lower than the
interest on the Treasury Notes. These differences are immaterial and may change
over time. If there is an expense deficit at termination of a Trust, either the
Trustee will waive part of its fee or the Sponsor will bear sufficient expenses
to eliminate the deficit. If a surplus remains at termination, the amount will
be distributed to Holders. The Offer Price per Unit of a Trust will vary after
the Evaluation Date (set forth under Investment Summary) in accordance with
fluctuations in the evaluations of the underlying Securities. Amortization of
discount will have the effect of increasing at any particular time the
evaluation of the Securities.
No sales charge is payable when Units are purchased. Instead, Units are
subject to a Sponsor's administrative fee at the annual rates set forth under
Investment Summary. The percentage which their present values represent of the
Offer Price per Unit at various intervals is shown in the chart at the end of
the Investment Summary. If a
10
<PAGE>
Holder sells or redeems Units before the maturity of a Trust, except for the
Adjustment Factor only the administrative fees accrued to the date of sale or
redemption will be payable, and this will have the effect of reducing the rate
of administrative fees. Similarly, if Units are purchased after the Evaluation
Date, the purchaser will not pay fees previously accrued and this will also have
the effect of reducing the rate of administrative fees.
Evaluations of the Securities are determined by the Evaluator taking into
account the same factors referred to under Redemption--Computation of Redemption
Price per Unit. The determinations are made on each business day, effective for
all sales made since the last of these evaluations (Section 4.01). The term
'business day', as used herein and under 'Redemption', shall exclude Saturdays,
Sundays and the following holidays as observed by the New York Stock Exchange:
New Year's Day, Washington's birthday, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving and Christmas; and the following Federal holidays:
Martin Luther King's birthday, Columbus Day and Veterans Day.
Because of fluctuations in the market prices of these Securities and the
fact that the Adjustment Factor and the accrued portion of the administrative
fee will be deducted from amounts paid to Holders upon redemption, among other
reasons, the amount realized by a Holder upon any sale or redemption of Units
may be less than the price paid for these Units.
SPONSOR'S PROFITS
The Sponsor receives the administrative fee through periodic deductions at
the rates set forth above and through deduction of a pro rata portion of the
accrued administrative fee at the time of any redemption.
The following chart sets forth the estimated maximum dollar amount payable
on account of the Sponsor's administrative fee assuming that Holders hold their
Units for the following periods of time from March 31, 1994:
MAXIMUM DOLLAR AMOUNT PER 10 UNITS
PAYABLE ON ACCOUNT OF SPONSOR'S ADMINISTRATIVE FEE
YEARS HELD 1994 TRUST 1999 TRUST 2009 TRUST
- --------------------------------------------------------------------------------
1 $ 1.94$ 1.11$ 0.74
2 2.22 1.48
3 3.33 2.22
4 4.44 2.96
5 5.55 3.70
6 6.25 4.44
7 5.18
8 5.92
9 6.66
10 7.40
11 8.14
12 8.88
13 9.62
14 10.36
15 11.10
16 11.19
The Sponsor may also realize a profit or loss on each deposit of Securities
in a Trust. This is the difference between the cost of the Securities to the
Trusts (which is based on the mean between the bid and offering side evaluation
of the Securities on the date of deposit) and the purchase price of those
Securities to the Sponsor. To the extent additional Units continue to be offered
for sale, the Sponsor also may realize profits or sustain losses as a result of
fluctuations after the date of deposit in the Offer Price of the Units.
Employees may incur an annual account maintenance fee after termination of Plan
participation--see Expenses and Charges below. Cash, if any, made available by
buyers of Units to the Sponsor prior to the settlement dates for purchase of
Units may be used in the Sponsor's business, subject to the limitations of Rule
15c33 under the Securities Exchange Act of 1934, and may be of benefit to the
Sponsor.
11
<PAGE>
In maintaining a market for the Units the Sponsor will also realize profits
or sustain losses in the amount of any difference between the prices at which it
buys Units and the prices at which it resells or redeems those Units, as the
case may be.
MARKET FOR UNITS
While the Sponsor is not obligated to do so, it intends to maintain a
secondary market for Units of each Trust and continuously to offer to purchase
Units of each Trust. The Sponsor, of course, does not in any way guarantee the
enforceability, marketability of price of any Securities in the Trusts or of the
Units. The Sponsor may discontinue purchases of Units of any Trust should the
supply of Units exceed demand or for other business reasons.
The Sponsor may redeem any Units it has purchased in the secondary market
or through the Trustee in accordance with the procedures described below if it
determines it is undesirable to continue to hold those Units in its inventory.
REDEMPTION
Units may be redeemed at the office of the Trustee upon delivery on any
business day, as defined under Sale of Units--Unit Price, of a request for
redemption, and payment of any relevant tax, without any other fee (Section
5.02). Holders' signatures must be guaranteed by an eligible guarantor
institution or in some other manner acceptable to the Trustee. In certain
instances the Trustee may require additional documents including, but not
limited to, trust instruments, certificates of death, appointments as executor
or administrator or certificates of corporate authority.
The Trustee will redeem Units either in cash or, at the option of certain
qualified Holders as specified in writing to the Trustee, in kind. Unless
otherwise specified, redemptions will be made in cash. On the seventh calendar
day following the tender (or if the seventh calendar day is not a business day
on the first business day prior thereto), the Holder will be entitled to receive
the proceeds of the redemption in an amount and value of Securities per Unit
equal to the Redemption Price per Unit (see below) as determined as of the
Evaluation Time next following the tender.
The Trustee is empowered to sell Securities from a Trust in order to make
funds available for cash redemptions (Section 5.02). The Securities to be sold
so as to maintain, as closely as practicable, the percentage relationship
between the face amounts of Stripped Treasury Securities and the Treasury Note
in the Trust at the time of sale. Provision is made under the Indenture for the
Sponsor to specify minimum face amounts in which blocks of Securities are to be
sold in order to obtain the best price for the Trust. While these minimum
amounts may vary from time to time in accordance with market conditions, the
Sponsor believes that the minimum face amounts which would be specified would
range from $25,000 to $100,000.
Holders tendering Units for redemption may, in lieu of receiving cash,
request the Trustee to distribute in kind an amount and value of Securities per
Unit equal to the Redemption Price per Unit as determined as of the Evaluation
Time next following the tender. The distribution in kind on redemption of Units
will be held by a Distribution Agent (the 'Distribution Agent') for the account
of, and for disposition in accordance with the instructions of, the tendering
Holder. If a qualified tendering Holder requests redemption in kind, the Trustee
as Distribution Agent for the account of the redeeming Holder will sell the
Securities and distribute the net cash proceeds to the Holder (unless he
requests that the in kind redemption be held on a book entry system for his
account). A Holder will not recognize any gain or loss for Federal income tax
purposes to the extent the Holder receives a distribution in kind. In
implementing these redemption procedures, the Trustee and Distribution Agent
shall make any adjustments necessary to reflect differences between the
Redemption Price of the Units and the value of the Securities distributed in
kind as of the date of tender. If funds in the Capital Account are insufficient
to cover the required cash distribution to the tendering Holder, the Trustee may
sell Securities according to the criteria discussed above. (Section 5.02)
To the extent that Securities in a Trust are redeemed in kind or sold, the
size of the relevant Trust will be reduced. Sales will usually be required at a
time when Securities would not otherwise be sold and may result in lower prices
than might otherwise be realized. In addition, because of the minimum face
amounts in which Securities are required to be sold, the proceeds of sale may,
if the Sponsor fails to purchase Units tendered for redemption, exceed the
amount required at the time to redeem Units; any excess proceeds will be
deposited in the Capital Account. See Administration of the Fund--Accounts and
Distributions. The price received upon
12
<PAGE>
redemption may be more than or less than the amount paid by the Holder depending
on the value of the Securities in the Trust at the time of redemption.
The right of redemption may be suspended and payment postponed (1) for any
period during which the New York Stock Exchange, Inc. is closed other than for
customary weekend and holiday closings or (2) for any period during which, as
determined by the Securities and Exchange Commission, (i) trading on that
Exchange is restricted or (ii) an emergency exists as a result of which disposal
or evaluation of the Securities is not reasonably practicable, or (3) for any
other periods which the Commission may by order permit (Section 5.02).
COMPUTATION OF REDEMPTION PRICE PER UNIT
Redemption Price per Unit of a Trust is computed by the Trustee as of the
Evaluation Time on each June 30 and December 31 (or the last business day prior
thereto), on any business day, as of the Evaluation Time next following the
tender of any Unit for redemption, and on any other business day desired by the
Trustee or the Sponsor, by adding (a) the value of the Securities in the Trust,
(b) cash on hand in the Trust (other than cash covering contracts to purchase
Securities), (c) accrued and unpaid interest on these Securities up to but not
including the date of redemption and (d) all other assets of the Trust;
deducting therefrom the sum of (v) taxes or other governmental charges against
the Trust not previously deducted, (w) accrued fees and expenses of the Trustee
(including legal and auditing expenses), the Evaluator and counsel, and certain
other expenses, (x) the Adjustment Factor at the applicable rate, (y) accrued
administrative fees payable and (z) any cash held for distribution to Holders of
record as of a date prior to the evaluation; and dividing the result by the
number of Units outstanding as of the date of computation (Sections 4.01 and
5.01). The Adjustment Factor will not be deducted from a redemption in kind nor
from the distribution when the Trust terminates.
The value of the Securities is determined by the Evaluator in the following
manner: (a) on the basis of the mean between the current bid and offering prices
for the Securities, (b) if bid and offering prices are not available for any
Securities, on the basis of current bid and offering prices for comparable
securities, (c) by appraising the value of the Securities, or (d) by any
combination of the above. The Evaluator may obtain current price information as
to the Securities from investment dealers or brokers (including the Sponsor)
which customarily deal in that type of securities. On the day on which a Holder
is entitled to receive the Redemption Price, the accrued but unpaid
administrative fee will be deducted from the accrued interest on the Securities
to provide funds to meet such redemption and will be distributed to the Sponsor.
While Securities of the type included in the Trusts' Portfolios involve
minimal risk of loss of principal when held to maturity, due to variations in
interest rates the market value of the Securities and Redemption Price per Unit
can be expected to fluctuate during the period of an investment in a Trust.
EXPENSES AND CHARGES
SPONSOR'S ADMINISTRATIVE FEE
An administrative fee, to reimburse the Sponsor for certain expenses
described under Fund Structure--ML Plans, at the rates set forth under
Investment Summary, calculated on a daily basis, will be deducted from interest
income received by the Fund semi-annually and will be distributed to the Sponsor
upon certification of its reimbursable expenses.
FEES
The Trustee's and Evaluator's fees are set forth under Investment Summary.
The Trustee's fees for its services as Trustee, payable in semi-annual
installments, are accrued daily based on the number of Units in a Trust. Certain
regular and recurring expenses of each Trust, including the Evaluator's fee and
certain mailing and printing expenses, are also included in the amount set forth
under Investment Summary as Trustee's Annual Fee and Expenses (Section 3.14).
Expenses in excess of the amount included for these expenses in the Trustee's
Annual Fee and Expenses under Investment Summary will be borne by the Trust. The
Trustee also receives benefits to the extent that it holds funds on deposit in
the various non-interest bearing accounts created under the Indenture.
The interest bearing Securities in the 1999 Trust mature several months
before the Stripped Treasury Securities therein and in the 2009 Trust, may be
called up to five years before maturity (see Portfolio). The Trustee will reduce
its fees and expenses for these Trusts in the amount of interest that would have
accrued on these Securities between their maturity date and the maturity date of
the Stripped Treasury Securities in the
13
<PAGE>
Trust. This reduction will eliminate the necessity of charging the Capital
Account for the Trust expenses during this period.
When an employee receives Units from a Plan, he may establish an individual
account or deposit the Units in an existing account with Merrill Lynch. Merrill
Lynch currently charges annual maintenance fees on some types of accounts. The
individual Holder would be responsible for any such charge. The fee is not
payable if the employee is the record holder of the Units.
OTHER CHARGES
These include: (a) fees of the Trustee for extraordinary services (Section
8.05), (b) certain expenses of the Trustee (including legal and auditing
expenses) and of counsel designated by the Sponsor (Sections 3.04, 3.09, 8.01e],
8.03 and 8.05), (c) various governmental charges (Sections 3.03 and 8.01h]), (d)
expenses and costs of any action taken to protect any Trust (Section 8.01d]),
(e) indemnification of the Trustee for any loss, liabilities and expenses
incurred without gross negligence, bad faith or wilful misconduct on its part
(Section 8.05), (f) indemnification of the Sponsor for any losses, liabilities
and expenses incurred without gross negligence, bad faith, wilful misconduct or
reckless disregard of its duties (Section 7.05b]) and (g) expenditures incurred
in contacting Holders upon termination of the Trust (Section 9.02). The amounts
of these charges and fees are secured by a lien on the relevant Trust and, if
the balances in the Income and Capital Accounts (see below) are insufficient,
the Trustee has the power to sell Securities to pay these amounts (Section
8.05).
ADMINISTRATION OF THE FUND
RECORDS
The Trustee keeps a register of the names, address and holdings of all
Holders of each Trust. The Trustee also keeps records of the transactions of
each Trust, including a current list of the Securities and a copy of the
Indenture, which are available to record Holders for inspection at the office of
the Trustee at reasonable times during business hours (Sections 8.02 and 8.04).
ACCOUNTS AND DISTRIBUTIONS
The terms of the Securities provide for payment to the holders thereof
(including the Trusts) upon their maturities. Interest received on any
Securities in a Trust which bear current interest, including that part of the
proceeds of any disposition of any such Security which represents accrued
interest and any late payment penalties, is credited to an Income Account for
the applicable Trust and other receipts to a Capital Account for the Trust
(Sections 3.01 and 3.02). Distributions for Holders as of the Record Day
normally will be made by mail on the following Distribution Day and shall
consist of an amount substantially equal to each Holder's pro rata share of the
distributable cash balance of the Income Account of the Trust computed as of the
close of business on the Record Day. The balance in the Capital Account shall be
distributed on the business day following the maturity of the Stripped Treasury
Securities in the Trust Portfolio; the Record Day for that distribution shall be
the business day immediately preceding the distribution day. The Trustee will
acquire additional Securities as directed by the Sponsor, in the original
proportionate relationship between face amounts, if there is a sufficient cash
balance in the Capital Account.
The amount to be distributed may change as Securities are exchanged, paid
or sold. A Reserve Account may be created by the Trustee by withdrawing from the
Income or Capital Accounts, from time to time, amounts which it deems requisite
to establish a reserve for any taxes or other governmental charges that may be
payable out of the Trust (Section 3.03). Funds held by the Trustee in the
various accounts created under the Indenture do not bear interest (Section
8.01).
PORTFOLIO SUPERVISION
Each Trust is part of a unit investment trust and its not an actively
managed fund. Traditional methods of investment management for a managed fund
typically involve frequent changes in a portfolio of securities on the basis of
economic, financial and market analyses. The Portfolios of the Trusts, however,
will not be actively managed and therefore the adverse financial condition of an
issuer will not necessarily require the sale of its securities from a Trust.
However, the Sponsor may direct the disposition of Securities upon default in
payment of amounts due on any Securities which is not promptly cured,
institution of certain legal proceedings, default in payment of amounts due on
other Treasury Securities, or decline in price or the occurrence of other market
or credit factors that in the opinion of the Sponsor would make the retention of
these Securities in any Trust
14
<PAGE>
detrimental to the interest of the Holders of that Trust. If a default in
payment of amounts due on any Security occurs and if the Sponsor fails to give
instructions to sell or hold the Security the Indenture provides that the
Trustee, within 30 days of that failure by the Sponsor, may sell the Security
(Sections 3.07 and 3.10).
REPORTS TO HOLDERS
The Trustee will furnish Holders of record with each distribution a
statement of the amounts of interest and other receipts which are being
distributed, expressed in each case as a dollar amount per Unit. After the end
of each calendar year (usually within twenty to sixty days), the Trustee will
furnish to Holders of record a statement (i) summarizing transactions for the
year in the Income, Capital and Reserve Accounts of the Trust, (ii) indentifying
Securities sold and purchased during the year and listing Securities held and
the number of Units oustanding at the end of the year by the Trust, (iii)
stating the Trust's Redemption Price per Unit based upon the computation thereof
made at the end of that year and (iv) specifying the amounts distributed during
that year from the Trust's Income and Capital Accounts (Section 3.06). The
accounts of each Trust shall be audited at least annually by independent
certified public accountants designated by the Sponsor, and the report of the
accountants shall be furnished by the Trustee to Holders upon request (Section
8.01[e]).
In order to enable them to comply with Federal and state tax reporting
requirements, Holders will be furnished upon request to the Trustee with
evaluations of Securities furnished to it by the Evaluator (Section 4.02).
UNCERTIFICATED UNITS
All Holders are required to hold their Units in uncertificated form. The
Trustee will credit a Holder's account with the number of Units held by the
Holder. This relieves the Holder of the responsibility of safekeeping of
certificates and the need to deliver certificates upon sale or redemption of
Units. Units are transferable by the Trustee, with a payment of $2.00 if
required by the Trustee (or such other amount as may be specified by the Trustee
and approved by the Sponsor) for each transfer and any sums payable for taxes or
other governmental charges imposed upon these transactions and compliance with
the formalities necessary to redeem Units (Section 6.02).
AMENDMENT AND TERMINATION
The Sponsor and Trustee may amend the Indenture without the consent of
Holders (a) to cure any ambiguity or to correct or supplement any provision
thereof which may be defective or inconsistent, (b) to change any provision
thereof as may be required by the Securities and Exchange Commission or any
successor governmental agency, or (c) to make any other provisions which do not
adversely affect the interest of the Holders (as determined in good faith by the
Sponsor). The Indenture may also be amended in any respect by the Sponsor and
Trustee, or any of the provisions thereof may be waived, with the consent of the
Holders of 51% of the Units then outstanding, provided that none of these
amendments or waivers will reduce the interest in any Trust of any Holder
without the consent of the Holder or reduce the percentage of Units required to
consent to any of these amendments or waivers without the consent of all Holders
(Section 10.01).
The Indenture will terminate upon the earlier of the disposition of the
last Security held thereunder or the mandatory termination date. The Indenture
as to any Trust may be terminated at any time by written instrument executed by
the Sponsor and consented to by Holders of 51% of the Units (Sections 8.01[g]
and 9.01). The Trustee will deliver written notice of any termination to each
Holder within a reasonable period of time prior to the termination, specifying
the times at which the Holders may surrender their Certificates for
cancellation. Within a reasonable period of time after the termination, the
Trustee must sell all of the Securities then held and distribute to each Holder,
upon surrender for cancellation of his Certificates, and after deductions for
accrued but unpaid fees, taxes and governmental and other charges, the Holder's
interest in the Income and Capital Accounts (Section 9.01). This distribution
will normally be made by mailing a check in the amount of each Holder's interest
in these accounts to the address of the Holder appearing on the record books of
the Trustee.
RESIGNATION, REMOVEL AND LIMITATIONS ON LIABILITY
THE TRUSTEE
The Trustee or any successor may resign upon notice to the Sponsor. The
Trustee may be removed upon the direction of the Holders of 51% of the Units at
any time or by the Sponsor without the consent of any of the Holders, if the
Trustee becomes incapable of acting or becomes bankrupt or its affairs are taken
over by public
15
<PAGE>
authorities or if for any reason the Sponsor determines in good faith that the
replacement of the Trustee is in the best interests of the Holders. The
resignation or removal shall become effective upon the acceptance of appointment
by the successor. In case of resignation or removal the Sponsor is to use its
best efforts to appoint a successor promptly and if upon resignation of the
Trustee no successor has accepted appointment within thirty days after
notification, the Trustee may apply to a court of competent jurisdiction for the
appointment of a successor (Section 8.06). The Trustee shall be under no
liability for any action taken in good faith in reliance on prima facie properly
executed documents or for the disposition of monies or Securities, nor shall it
be liable or responsible in any way for depreciation or loss incurred by reason
of the sale of any Security. This provision, however, shall not protect the
Trustee in cases of wilful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations and duties. In the event of the failure of the
Sponsor to act, the Trustee may act under the Indenture and shall not be liable
for any of these actions taken in good faith. The Trustee shall not be
personally liable for any taxes or other governmental charges imposed upon or in
respect of the Securities or upon the interest thereon. In addition, the
Indenture contains other customary provisions limiting the liability of the
Trustee (Sections 3.07, 3.10, 8.01 and 8.05).
THE EVALUATOR
The Evaluator may resign or may be removed, effective upon the acceptance
of appointment by its successor, by the Sponsor, who is to use its best efforts
to appoint a successor promptly. If upon resignation of the Evaluator no
successor has accepted appointment within thirty days after notification, the
Evaluator may apply to a court of competent jurisdiction for the appointment of
a successor (Section 4.40). Determinations by the Evaluator under the Indenture
shall be made in good faith upon the basis of the best information available to
it; provided, however, that the Evaluator shall be under no liability to the
Trustee, the Sponsor or the Holders for errors in judgment. This provision,
however, shall not protect the Evaluator in cases of wilful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations and duties
(Section 4.03). The Trustee, the Sponsor and the Holders may rely on any
evaluation furnished by the Evaluator and shall have no responsibility for the
accuracy thereof.
THE SPONSOR
If the Sponsor fails to perform its duties or becomes incapable of acting
or becomes bankrupt or its affairs are taken over by public authorities, then
the Trustee may (a) appoint a successor Sponsor at rates of compensation deemed
by the Trustee to be reasonable and as may not exceed amounts prescribed by the
Securities and Exchange Commission, or (b) terminate the Indenture and liquidate
the Trusts or (c) continue to act as Trustee without terminating the Indenture
(Section 8.01[f]). The Sponsor shall be under no liability to the Trusts or to
the Holders for taking any action or for refraining from the taking any action
in good faith or for errors in judgment and shall not be liable or responsible
in any way for depreciation or loss incurred by reason of the sale of any
Security. This provision, however, shall not protect the Sponsor in cases of
wilful misfeasance, bad faith, gross negligence or reckless disregard of its
obligations and duties (Section 7.02). The Sponsor may transfer all or
substantially all of its assets to a corporation or partnership which carries on
its business and duly assumes all of its obligations under the Indenture and in
that event shall be relieved of all futher liability under the Indenture
(Section 7.01)
MISCELLANEOUS
TRUSTEE
Acting as Co-Trustees are Investors Bank & Trust Company, a Massachusetts
trust company with its unit investment trust servicing group at One Lincoln
Plaza, Boston, Massachusetts 02111 (which is subject to supervision by the
Massachusetts Commissioner of Banks, the Federal Deposit Insurance Corporation
and the Board of Governors of the Federal Reserve System) and The First National
Bank of Chicago, a national banking association with its corporate trust office
at One First National Plaza, Suite 0126, Chicago, Illinois 60670-0126 (which is
subject to supervision by the Comptroller of the Currency, the Federal Deposit
Insurance Corporation and the Board of Governors of the Federal Reserve System).
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
Sponsor. Bingham, Dana & Gould, 150 Federal Street, Boston,
16
<PAGE>
Massachusetts 02110, act as counsel for The First National Bank of Chicago and
Investors Bank & Trust Company, as Co-Trustees.
AUDITORS
The financial statements, including the Portfolios of the Trusts, included
herein have been audited by Deloitte & Touche, independent accountants, as
stated in their opinion appearing herein and have been so included in reliance
upon that opinion given on the authority of that firm as experts in accounting
and auditing.
SPONSOR
The Sponsor is a Delaware corporation and is engaged in the underwriting,
securities and commodities brokerage business, and is a member of the New York
Stock Exchange, Inc., other major securities exchanges and commodity exchanges,
and the National Association of Securities Dealers, Inc. The Sponsor and Merrill
Lynch Asset Management, Inc., a Delaware corporation and subsidiary of Merrill
Lynch & Co., Inc., the parent of the Sponsor, are engaged in the investment
advisory business. The Sponsor has acted as sponsor of a number of series of
unit investment trusts. The Sponsor has acted 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 an agent of other
investment companies, executes orders on behalf of investment companies for the
purchase and sale of securities of these companies and sells securities to these
companies in its capacity as a broker or dealer in securities.
17
<PAGE>
DEFINED ASSET FUNDS - GOVERNMENT SECURITIES INCOME FUND,
U.S. GOVERNMENT ZERO COUPON BOND SERIES - 3
REPORT OF INDEPENDENT ACCOUNTANTS
The Sponsor, Co-Trustees and Holders
of Defined Asset Funds - Government Securities Income Fund,
U.S. Government Zero Coupon Bond Series - 3:
We have audited the accompanying statements of condition of the 1994 Trust, 1999
Trust and the 2009 Trust of Defined Asset Funds - Government Securities Income
Fund, U.S. Government Zero Coupon Bond Series - 3, including the portfolios, as
of March 31, 1994 and the related statements of operations and of changes in net
assets for the years ended March 31, 1994, 1993 and 1992. These financial
statements are the responsibility of the Co-Trustees. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Securities owned at
March 31, 1994, as shown in such portfolios, were confirmed to us by Investors
Bank & Trust Company, a Co-Trustee. An audit also includes assessing the
accounting principles used and significant estimates made by the Co-Trustees, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the above-mentioned Trusts of
Defined Asset Funds - Government Securities Income Fund, U.S. Government Zero
Coupon Bond Series - 3 at March 31, 1994 and the results of their operations and
changes in their net assets for the above-stated years in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE
New York, N.Y.
June 6, 1994
D-1
<PAGE>
DEFINED ASSET FUNDS - GOVERNMENT SECURITIES INCOME FUND,
U.S. GOVERNMENT ZERO COUPON BOND SERIES - 3
STATEMENTS OF CONDITION
AS OF MARCH 31, 1994
<TABLE>
1994
TRUST
<S> <C>
TRUST PROPERTY:
Investment in marketable securities - at value
(cost $12,261,917) (Note 1) $12,507,220
Accrued interest receivable 19,378
Cash 187,713
Total trust property 12,714,311
LESS LIABILITIES:
Accrued expenses $ 80,815
Liability for securities purchased 126,191 207,006
NET ASSETS (Note 2) $12,507,305
UNITS OUTSTANDING 128,052.094
UNIT VALUE $97.67
1999
TRUST
TRUST PROPERTY:
Investment in marketable securities - at value
(cost $24,932,114) (Note 1) $26,895,280
Accrued interest receivable 26,087
Cash 65,451
Total trust property 26,986,818
LESS LIABILITIES:
Accrued expenses $ 90,752
Redemptions payable 6,246 96,998
NET ASSETS (Note 2) $26,889,820
UNITS OUTSTANDING 380,053.673
UNIT VALUE $70.75
See Notes to Financial Statements.
</TABLE>
D-2
<PAGE>
DEFINED ASSET FUNDS - GOVERNMENT SECURITIES INCOME FUND,
U.S. GOVERNMENT ZERO COUPON BOND SERIES - 3
STATEMENTS OF CONDITION
AS OF MARCH 31, 1994
<TABLE>
<CAPTION>
2009
TRUST
<S> <C>
TRUST PROPERTY:
Investment in marketable securities - at value
(cost $22,278,142) (Note 1) $24,733,631
Accrued interest receivable 37,468
Cash 116,980
Total trust property 24,888,079
LESS LIABILITIES:
Accrued expenses $141,250
Redemptions payable 13,220 154,470
NET ASSETS (Note 2) $24,733,609
UNITS OUTSTANDING 723,288.954
UNIT VALUE $34.20
See Notes to Financial Statements.
</TABLE>
D-3
<PAGE>
DEFINED ASSET FUNDS - GOVERNMENT SECURITIES INCOME FUND,
U.S. GOVERNMENT ZERO COUPON BOND SERIES - 3
STATEMENTS OF OPERATIONS
1994 TRUST
<TABLE>
<CAPTION>
Years Ended March 31,
1994 1993 1992
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income $ 53,476 $ 55,794 $ 53,786
Accretion of original issue discount 835,486 862,001 745,203
Co-Trustees' fees and expenses (11,879) (12,540) (14,174)
Sponsors' fees (41,206) (54,013) (27,869)
Net investment income 835,877 851,242 756,946
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Realized gain on securities sold or redeemed 110,124 106,544 113,912
Unrealized appreciation (depreciation) of
investments (550,693) 223,084 304,334
Net realized and unrealized gain (loss) on
investments (440,569) 329,628 418,246
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $ 395,308 $1,180,870 $1,175,192
1999 TRUST
Years Ended March 31,
1994 1993 1992
INVESTMENT INCOME:
Interest income $ 72,523 $ 76,988 $ 66,811
Accretion of original issue discount 1,894,492 1,897,209 1,544,837
Co-Trustees' fees and expenses (27,597) (30,063) (28,719)
Sponsors' fees (44,861) (55,869) (27,869)
Net investment income 1,894,557 1,888,265 1,555,060
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Realized gain on securities sold or redeemed 1,037,077 400,371 199,384
Unrealized appreciation (depreciation) of
investments (2,082,261) 2,817,119 744,871
Net realized and unrealized gain (loss) on
investments (1,045,184) 3,217,490 944,255
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $ 849,373 $5,105,755 $2,499,315
See Notes to Financial Statements.
</TABLE>
D-4
<PAGE>
DEFINED ASSET FUNDS - GOVERNMENT SECURITIES INCOME FUND,
U.S. GOVERNMENT ZERO COUPON BOND SERIES - 3
STATEMENTS OF OPERATIONS
2009 TRUST
<TABLE>
<CAPTION>
Years Ended March 31,
1994 1993 1992
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income $ 100,309 $ 111,389 $ 104,396
Accretion of original issue discount 1,628,064 1,656,612 1,401,573
Co-Trustees' fees and expenses (44,847) (52,003) (49,798)
Sponsors' fees (54,606) (84,822) (27,869)
Net investment income 1,628,920 1,631,176 1,428,302
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Realized gain (loss) on securities sold or
redeemed 2,020,300 453,945 (71,931)
Unrealized appreciation (depreciation) of
investments (2,082,706) 3,378,855 1,017,809
Net realized and unrealized gain (loss) on
investments (62,406) 3,832,800 945,878
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $1,566,514 $5,463,976 $2,374,180
See Notes to Financial Statements.
</TABLE>
D-5
<PAGE>
DEFINED ASSET FUNDS - GOVERNMENT SECURITIES INCOME FUND,
U.S. GOVERNMENT ZERO COUPON BOND SERIES - 3
STATEMENTS OF CHANGES IN NET ASSETS
1994 TRUST
<TABLE>
<CAPTION>
Years Ended March 31,
1994 1993 1992
<S> <C> <C> <C>
OPERATIONS:
Net investment income $ 835,877 $ 851,242 $ 756,946
Realized gain on securities sold or redeemed 110,124 106,544 113,912
Unrealized appreciation (depreciation) of
investments (550,693) 223,084 304,334
Net increase in net assets resulting from
operations 395,308 1,180,870 1,175,192
CAPITAL SHARE TRANSACTIONS (Note 3):
Voluntary Contribution by Affiliate
of Sponsor 54,154
Issuance of additional units 1,591,459 2,708,051 4,418,082
Redemptions of units (2,746,509) (2,496,318) (2,416,657)
Net capital share transactions (1,100,896) 211,733 2,001,425
NET INCREASE (DECREASE) IN NET ASSETS (705,588) 1,392,603 3,176,617
NET ASSETS AT BEGINNING OF YEAR 13,212,893 11,820,290 8,643,673
NET ASSETS AT END OF YEAR $12,507,305 $13,212,893 $11,820,290
PER UNIT:
Net asset value at end of year $97.67 $94.32 $85.88
TRUST UNITS OUTSTANDING AT END OF YEAR 128,052.094 140,090.135 137,643.496
See Notes to Financial Statements.
</TABLE>
D-6
<PAGE>
DEFINED ASSET FUNDS - GOVERNMENT SECURITIES INCOME FUND,
U.S. GOVERNMENT ZERO COUPON BOND SERIES - 3
STATEMENTS OF CHANGES IN NET ASSETS
1999 TRUST
<TABLE>
<CAPTION>
Years Ended March 31,
1994 1993 1992
<S> <C> <C> <C>
OPERATIONS:
Net investment income $ 1,894,557 $ 1,888,265 $ 1,555,060
Realized gain on securities sold or redeemed 1,037,077 400,371 199,384
Unrealized appreciation (depreciation) of
investments (2,082,261) 2,817,119 744,871
Net increase in net assets resulting from
operations 849,373 5,105,755 2,499,315
CAPITAL SHARE TRANSACTIONS (Note 3):
Voluntary Contribution by Affiliate
of Sponsor 135,008
Issuance of additional units 3,906,487 7,730,515 8,702,185
Redemptions of units (7,828,047) (5,272,030) (4,188,366)
Net capital share transactions (3,786,552) 2,458,485 4,513,819
NET INCREASE (DECREASE) IN NET ASSETS (2,937,179) 7,564,240 7,013,134
NET ASSETS AT BEGINNING OF YEAR 29,826,999 22,262,759 15,249,625
NET ASSETS AT END OF YEAR $26,889,820 $29,826,999 $22,262,759
PER UNIT:
Net asset value at end of year. $70.75 $68.84 $56.92
TRUST UNITS OUTSTANDING AT END OF YEAR 380,053.673 433,265.276 391,148.012
See Notes to Financial Statements.
</TABLE>
D-7
<PAGE>
DEFINED ASSET FUNDS - GOVERNMENT SECURITIES INCOME FUND,
U.S. GOVERNMENT ZERO COUPON BOND SERIES - 3
STATEMENTS OF CHANGES IN NET ASSETS
2009 TRUST
<TABLE>
<CAPTION>
Years Ended March 31,
1994 1993 1992
<S> <C> <C> <C>
OPERATIONS:
Net investment income $ 1,628,920 $ 1,631,176 $ 1,428,302
Realized gain (loss) on securities sold or
redeemed 2,020,300 453,945 (71,931)
Unrealized appreciation (depreciation) of
investments (2,082,706) 3,378,855 1,017,809
Net increase (decrease) in net assets
resulting from operations 1,566,514 5,463,976 2,374,180
CAPITAL SHARE TRANSACTIONS (Note 3):
Voluntary Contribution by Affiliate
of Sponsor 216,142
Issuance of additional units 6,381,661 8,708,468 9,467,284
Redemptions of units (9,480,835) (7,837,490) (8,708,300)
Net capital share transactions (2,883,032) 870,978 758,984
NET INCREASE (DECREASE) IN NET ASSETS (1,316,518) 6,334,954 3,133,164
NET ASSETS AT BEGINNING OF YEAR 26,050,127 19,715,173 16,582,009
NET ASSETS AT END OF YEAR $24,733,609 $26,050,127 $19,715,173
PER UNIT:
Net asset value at end of year $34.20 $32.37 $25.81
TRUST UNITS OUTSTANDING AT END OF YEAR 723,288.954 804,786.144 763,740.955
See Notes to Financial Statements.
</TABLE>
D-8
<PAGE>
DEFINED ASSET FUNDS - GOVERNMENT SECURITIES INCOME FUND,
U.S. GOVERNMENT ZERO COUPON BOND SERIES - 3
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Fund is registered under the Investment Company Act of 1940 as a Unit
Investment Trust. The Fund consists of the 1994, 1999 and 2009 Trusts,
each a separate unit investment trust. The following is a summary of
significant accounting policies consistently followed by the Fund in the
preparation of its financial statements. The policies are in conformity
with generally accepted accounting principles.
(a) Securities are stated at value as determined by the Evaluator based on
the mean between bid and offering prices for the securities (see
"Redemption - Computation of Redemption Price Per Unit" in this
Prospectus).
(b) Cost of securities has been adjusted to include the accretion of
original issue discount on the Stripped Treasury Securities.
(c) Each Trust is not subject to income taxes. Accordingly, no provision
for such taxes is required.
2. NET ASSETS, MARCH 31, 1994
1994 TRUST
Cost of 128,052.094 units at Dates of Deposit $ 9,857,784
Redemption of units - Net cost of 94,171.340 units redeemed
less redemption amounts 42,748
Realized gain on securities sold or redeemed 338,326
Unrealized appreciation of investments 245,303
Net capital applicable to Holders 10,484,161
Undistributed net investment income - accretion of original
issue discount ($2,023,564) less excess ($420) of fees
and expenses over interest income 2,023,144
Net assets $12,507,305
1999 TRUST
Cost of 380,053.673 units at Dates of Deposit $19,835,342
Redemption of units - Net cost of 306,828.723 units
redeemed less redemption amounts (956,200)
Realized gain on securities sold or redeemed 1,671,668
Unrealized appreciation of investments 1,963,166
Net capital applicable to Holders 22,513,976
Undistributed net investment income - accretion of original
issue discount ($4,375,672) plus excess ($172) of
interest income over fees and expenses 4,375,844
Net assets $26,889,820
D-9
<PAGE>
DEFINED ASSET FUNDS - GOVERNMENT SECURITIES INCOME FUND,
U.S. GOVERNMENT ZERO COUPON BOND SERIES - 3
NOTES TO FINANCIAL STATEMENTS
2009 TRUST
Cost of 723,288.954 units at Dates of Deposit $17,451,173
Redemption of units - Net cost of 1,187,720.853 units redeemed
less redemption amounts (1,129,983)
Realized gain on securities sold or redeemed 2,671,242
Unrealized appreciation of investments 2,455,489
Net capital applicable to Holders 21,447,921
Undistributed net investment income - accretion of original
issue discount ($3,287,281) less excess ($1,593) of fees
and expenses over interest income 3,285,688
Net assets $24,733,609
3. CAPITAL SHARE TRANSACTIONS
Additional units were issued by the Trusts as follows:
Year Ended Year Ended Year Ended
Trust March 31, 1994 March 31, 1993 March 31, 1992
1994 16,521.091 29,875.299 55,226.306
1999 54,539.727 123,828.126 164,535.347
2009 178,220.474 307,177.790 392,745.500
Units were redeemed as follows:
Year Ended Year Ended Year Ended
Trust March 31, 1994 March 31, 1993 March 31, 1992
1994 28,559.132 27,428.660 28,920.172
1999 107,751.330 81,710.862 76,299.280
2009 259,717.664 266,132.027 352,362.078
Units may be redeemed at the office of the Trustee upon tender thereof
generally on any business day or, in the case of uncertificated units, upon
delivery of a request for redemption and payment of any relevant tax. The
Trustee may redeem units either in cash or in kind at the option of the
Holder as specified in writing to the Trustee.
On July 21, 1993, an affiliate of the Sponsor, as Plan Administrator, made
voluntary contributions of $54,154, $135,008 and $216,142 into the 1994,
1999 and 2009 Trusts, respectively, to purchase additional securities.
4. INCOME TAXES
All Trust items of income received, accretion of original issue discount,
expenses paid, and realized gains and losses on securities sold are
attributable to the Holders, on a pro rata basis, for Federal income tax
purposes in accordance with the grantor trust rules of the United States
Internal Revenue Code.
At March 31, 1994, the cost of investment securities for Federal income tax
purposes was approximately equivalent to the adjusted cost as shown in each
Trust's portfolio.
D-10
<PAGE>
DEFINED ASSET FUNDS - GOVERNMENT SECURITIES INCOME FUND,
U.S. GOVERNMENT ZERO COUPON BOND SERIES - 3
NOTES TO FINANCIAL STATEMENTS
5. DISTRIBUTIONS
It is anticipated that each Trust will not make any distributions until the
first business day following the maturity of its holdings in the Stripped
Treasury Securities which are non-interest bearing.
D-11
<PAGE>
DEFINED ASSET FUNDS - GOVERNMENT SECURITIES INCOME FUND,
U.S. GOVERNMENT ZERO COUPON BOND SERIES - 3
PORTFOLIOS
AS OF MARCH 31, 1994
<TABLE>
<CAPTION>
Portfolio No. and Title Interest Face Adjusted
of Securities Rates Maturities Amount Cost(1) Value(1)
<S> <C> <C> <C> <C> <C>
1994 TRUST
1 Stripped Treasury Securities(2) 0.000% 11/15/94 $12,298,000 $11,717,284 $11,983,786
2 U.S. Treasury Notes 10.125 11/15/94 505,728 544,633 523,434
Total $12,803,728 $12,261,917 $12,507,220
1999 TRUST
1 Stripped Treasury Securities(2) 0.000% 11/15/99 $37,231,000 $24,108,306 $26,034,893
2 U.S. Treasury Notes 8.875 11/15/98 776,873 823,808 860,387
Total $38,007,873 $24,932,114 $26,895,280
2009 TRUST
1 Stripped Treasury Notes Securities(2) 0.000% 5/15/09 $71,210,000 $21,086,376 $23,488,618
2 U.S. Treasury Bonds 9.125 5/15/09(3) 1,085,092 1,191,766 1,245,013
Total $72,295,092 $22,278,142 $24,733,631
(1) See Notes to Financial Statements.
(2) See "Risk Factors - Special Characteristics of Stripped Treasury Securities" in this Prospectus.
(3) Callable beginning 5/15/04 at par.
</TABLE>
D-12
<PAGE>
DEFINED
ASSET FUNDSSM
SPONSOR: GOVERNMENT SECURITIES
Merrill Lynch, INCOME FUND
Pierce, Fenner & Smith Inc. U.S. Government Zero Coupon
Unit Investment Trusts Bond Series 3
P.O. Box 9051 (A Unit Investment Trust)
Princeton, N.J. 08543-9051 PROSPECTUS
(609) 282-8500 This Prospectus does not contain all of
EVALUATOR: the information with respect to the
Kenny S&P Evaluation Services investment company set forth in its
65 Broadway registration statement and exhibits
New York, N.Y. 10006 relating thereto which have been filed
INDEPENDENT ACCOUNTANTS: with the Securities and Exchange
Deloitte & Touche Commission, Washington, D.C. under the
1633 Broadway Securities Act of 1933 and the
3rd Floor Investment Company Act of 1940, and to
New York, N.Y. 10048 which reference is hereby made.
CO-TRUSTEES: No person is authorized to give any
The First National Bank of Chicago information or to make any
Investors Bank & Trust Company representations with respect to this
P.O. Box 1537 investment company not contained in this
Boston, MA 02205-1537 Prospectus; and any information or
1-800-338-6019 representation not contained herein must
not be relied upon as having been
authorized. This Prospectus does not
constitute an offer to sell, or a
solicitation of an offer to buy,
securities in any state to any person to
whom it is not lawful to make such offer
in such state.
11879--7/94
<PAGE>
DEFINED ASSET FUNDS--
GOVERNMENT SECURITIES INCOME FUND
CONTENTS OF REGISTRATION STATEMENT
This Post-Effective Amendment to the Registration Statement on Form S-6
comprises the following papers and documents:
The facing sheet of Form S-6.
The cross-reference sheet (incorporated by reference to Post-Effective
Amendment No. 2 to the Registration Statement on Form S-6 of The Government
Securities Income Fund, GNMA Series E, 1933 Act File No. 2-74993).
The Prospectus.
The Signatures.
The following exhibits:
4.1 --Consent of the Evaluator.
5.1 --Consent of independent accountants.
R-1
<PAGE>
DEFINED ASSET FUNDS--
GOVERNMENT SECURITIES INCOME FUND
U.S. GOVERNMENT ZERO COUPON BOND SERIES 3
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT,
DEFINED ASSET FUNDS--GOVERNMENT SECURITIES INCOME FUND, U.S. GOVERNMENT ZERO
COUPON BOND SERIES 3 (A UNIT INVESTMENT TRUST), CERTIFIES THAT IT MEETS ALL OF
THE REQUIREMENTS FOR EFFECTIVENESS OF THIS REGISTRATION STATEMENT PURSUANT TO
RULE 485(B) UNDER THE SECURITIES ACT OF 1933 AND HAS DULY CAUSED THIS
REGISTRATION STATEMENT OR AMENDMENT TO THE REGISTRATION STATEMENT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED IN THE CITY OF NEW
YORK AND STATE OF NEW YORK ON THE 27TH DAY OF JULY, 1994.
SIGNATURES APPEAR ON PAGE R-3.
A majority of the members of the Board of Directors of Merrill Lynch,
Pierce, Fenner & Smith Incorporated has signed this Registration Statement or
Amendment to the Registration Statement pursuant to Powers of Attorney
authorizing the person signing this Registration Statement or Amendment to the
Registration Statement to do so on behalf of such members.
R-2
<PAGE>
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
DEPOSITOR
By the following persons, who constitute a majority of Powers of Attorney
the Board of Directors of Merrill Lynch, Pierce, have been filed
Fenner & Smith Incorporated: under
Form SE and the
following 1933 Act
File
Number: 33-43466
HERBERT M. ALLISON, JR.
BARRY S. FREIDBERG
EDWARD L. GOLDBERG
STEPHEN L. HAMMERMAN
JEROME P. KENNEY
DAVID H. KAMANSKY
DANIEL T. NAPOLI
THOMAS H. PATRICK
JOHN L. STEFFENS
DANIEL P. TULLY
ROGER M. VASEY
ARTHUR H. ZEIKEL
By
ERNEST V. FABIO
(As authorized signatory for Merrill Lynch, Pierce,
Fenner & Smith Incorporated and
Attorney-in-fact for the persons listed above)
R-3
<PAGE>
Exhibit 5.1
DEFINED ASSET FUNDS--
GOVERNMENT SECURITIES INCOME FUND,
U.S. GOVERNMENT ZERO COUPON BOND SERIES--3
CONSENT OF INDEPENDENT ACCOUNTANTS
The Sponsors and Co-Trustees
of Defined Asset Funds--Government Securities Income Fund,
U.S. Government Zero Coupon Bond Series--3:
We hereby consent to the use in Post-Effective Amendment No. 5 to Registration
Statement No. 33-26716 of our opinion dated June 6, 1994 relating to the
Financial Statements of Defined Asset Funds--Government Securities Income Fund,
U.S. Government Zero Coupon Bond Series--3 and to the reference to us under the
heading 'Auditors' in the Prospectus which is a part of this Registration
Statement.
DELOITTE & TOUCHE
New York, N.Y.
July 27, 1994
<PAGE>
EXHIBIT 4.1
KENNY S&P EVALUATION SERVICES
A Division of Kenny Information Systems, Inc.
65 BROADWAY
NEW YORK, N.Y. 10006
TELEPHONE (212) 770-4405
FAX 212/797-8681
July 27, 1994
John R. Fitzgerald
Vice President
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Unit Investment Trust Division
P.O. Box 9051
Princeton, New Jersey 08543-9051
Investors Bank & Trust Company
The First National Bank of Chicago
c/o One Lincoln Plaza
89 South Street
Boston, Massachusetts 02111
RE: DEFINED ASSET FUNDS--GOVERNMENT SECURITIES INCOME FUND,
U.S. GOVERNMENT ZERO COUPON BOND SERIES--3
Gentlemen:
We have examined the post-effective Amendment to the Registration Statement
File No. 33-26716 for the above-captioned trust. We hereby acknowledge that
Kenny S&P Evaluation Services, a division of Kenny Information Systems, Inc. is
currently acting as the evaluator for the trust. We hereby consent to the use in
the Amendment of the reference to Kenny S&P Evaluation Services, a division of
Kenny Information Systems, Inc. as evaluator.
You are hereby authorized to file copies of this letter with the Securities
and Exchange Commission.
Sincerely,
JOHN R. FITZGERALD
Vice President
<PAGE>
DAVIS POLK & WARDWELL
450 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
(212) 450-4000
July 27, 1994
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Dear Sirs:
We hereby represent that the Post-Effective Amendments to the registered
unit investment trusts described in Exhibit A attached hereto do not contain
disclosures which would render them ineligible to become effective pursuant to
Rule 485(b) under the Securities Act of 1933.
Very truly yours,
Davis Polk & Wardwell
Attachment
<PAGE>
EXHIBIT A
<TABLE>
<CAPTION>
1933 ACT 1940 ACT
FUND NAME CIK FILE NO. FILE NO.
- --------- --- -------- --------
<S> <C> <C> <C>
DEFINED ASSET FUNDS-CIF CABS-1 751575 2-92891 811-2295
DEFINED ASSET FUNDS-CIF CABS-4 779322 33-00938 811-2295
DEFINED ASSET FUNDS-CIF CABS-9 782394 33-09483 811-2295
DEFINED ASSET FUNDS-CIF CABS-10 782395 33-10067 811-2295
DEFINED ASSET FUNDS-MITF CA-43 747838 33-27522 811-1777
DEFINED ASSET FUNDS-MITF IS-139 781155 33-26501 811-1777
DEFINED ASSET FUNDS-MITF IS-140 781158 33-26707 811-1777
DEFINED ASSET FUNDS-MITF IS-178 803845 33-45958 811-1777
DEFINED ASSET FUNDS-MITF ITS-150 780797 33-33589 811-1777
DEFINED ASSET FUNDS-MITF ITS-190 868095 33-46843 811-1777
DEFINED ASSET FUNDS-MITF ITS-205 868112 33-49425 811-1777
DEFINED ASSET FUNDS-MITF MPS-496 803703 33-33381 811-1777
DEFINED ASSET FUNDS-MITF MSS-33 895620 33-49427 811-1777
DEFINED ASSET FUNDS-MITF MSS-4 881828 33-47649 811-1777
DEFINED ASSET FUNDS-MITF MSS 4A 780518 33-19683 811-1777
DEFINED ASSET FUNDS-MITF MSS 4B 780519 33-19690 811-1777
DEFINED ASSET FUNDS-MITF MSS 4C 780520 33-19798 811-1777
DEFINED ASSET FUNDS-MITF MSS 6Z 847194 33-34131 811-1777
DEFINED ASSET FUNDS-GSIF USGZCBS 3 845859 33-26716 811-2810
TOTAL: 19 FUNDS
</TABLE>
