MUNICIPAL INVESTMENT TR FD MULTISTATE SER 407 DEF ASSET FDS, 497, 2000-06-16

MUNICIPAL INVESTMENT TR FD MULTISTATE SER 407 DEF ASSET FDS
497, 2000-06-16

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DEFINED ASSET FUNDS--REGISTERED TRADEMARK--
------------------------------
----------------------

MUNICIPAL INVESTMENT TRUST FUND
MULTISTATE SERIES--407
(A UNIT INVESTMENT TRUST)
- MICHIGAN, NEW JERSEY, NEW YORK AND OHIO PORTFOLIOS
- PORTFOLIOS OF INSURED LONG-TERM MUNICIPAL BONDS
- DESIGNED TO BE FREE OF REGULAR FEDERAL INCOME TAX
- EXEMPT FROM SOME STATE TAXES
- DISTRIBUTIONS TWICE A YEAR

SPONSORS:
MERRILL LYNCH, -----------------------------------------------------
PIERCE, FENNER & SMITH The Securities and Exchange Commission has not
INCORPORATED approved or disapproved these Securities or passed
SALOMON SMITH BARNEY INC. upon the adequacy of this prospectus. Any
PAINEWEBBER INCORPORATED representation to the contrary is a criminal offense.
DEAN WITTER REYNOLDS INC. Prospectus dated June 16, 2000.

<PAGE>
--------------------------------------------------------------------------------

Defined Asset Funds--Registered Trademark--
Defined Asset Funds-Registered Trademark- is America's oldest and largest family
of unit investment trusts, with over $160 billion sponsored over the last 28
years. Defined Asset Funds has been a leader in unit investment trust research
and product innovation. Our family of Funds helps investors work toward their
financial goals with a full range of quality investments, including municipal,
corporate and government bond portfolios, as well as domestic and international
equity portfolios.

Defined Asset Funds offer a number of advantages:
- A Disciplined strategy of buying and holding with a long-term view is the
cornerstone of Defined Asset Funds.
- Fixed portfolio: Defined Funds follow a buy and hold investment strategy;
funds are not managed and portfolio changes are limited.
- Defined Portfolios: We choose the stocks and bonds in advance, so you know
what you're investing in.
- Professional research: Our dedicated research team seeks out stocks or bonds
appropriate for a particular fund's objectives.
- Ongoing supervision: We monitor each portfolio on an ongoing basis.
No matter what your investment goals, tolerance for risk or time horizon,
there's probably a Defined Asset Fund that suits your investment style. Your
financial professional can help you select a Defined Asset Fund that works best
for your investment portfolio.

THE FINANCIAL INFORMATION IN THIS PROSPECTUS IS AS OF FEBRUARY 29, 2000, THE
EVALUATION DATE.

<TABLE>
<S> <C>
CONTENTS
PAGE
---
Michigan Insured Portfolio--
Risk/Return Summary................ 3
New Jersey Insured Portfolio--
Risk/Return Summary................ 6
New York Insured Portfolio--
Risk/Return Summary................ 9
Ohio Insured Portfolio--
Risk/Return Summary................ 12
What You Can Expect From Your
Investment......................... 16
Income Twice A Year................ 16
Return Figures..................... 16
Records and Reports................ 16
The Risks You Face................... 17
Interest Rate Risk................. 17
Call Risk.......................... 17
Reduced Diversification Risk....... 17
Liquidity Risk..................... 17
Concentration Risk................. 17
State Concentration Risk........... 18
Bond Quality Risk.................. 20
Insurance Related Risk............. 20
Litigation and Legislation Risks... 21
Selling or Exchanging Units.......... 21
Sponsors' Secondary Market......... 21
Selling Units to the Trustee....... 21
Exchange Option.................... 22
How The Fund Works................... 22
Pricing............................ 22
Evaluations........................ 23
Income............................. 23
Expenses........................... 23
Portfolio Changes.................. 24
Fund Termination................... 24
Certificates....................... 24
Trust Indenture.................... 24
Legal Opinion...................... 25
Auditors........................... 25
Sponsors........................... 26
Trustee............................ 26
Underwriters' and Sponsors'
Profits.......................... 26
Public Distribution................ 26
Code of Ethics..................... 26
Year 2000 Issues................... 27
Taxes................................ 27
Supplemental Information............. 29
Financial Statements................. D-1
</TABLE>

2
<PAGE>
--------------------------------------------------------------------------------

MICHIGAN INSURED PORTFOLIO--RISK/RETURN SUMMARY

<TABLE>
<C> <S>
1. WHAT IS THE FUND'S OBJECTIVE?
The Fund seeks interest income that is
exempt from regular federal income taxes
and some state and local taxes by
investing in a fixed portfolio
consisting primarily of insured, long
term municipal revenue bonds.

2. WHAT ARE MUNICIPAL REVENUE BONDS?
Municipal revenue bonds are bonds issued
by states, municipalities and public
authorities to finance the cost of
buying, building or improving various
projects intended to generate revenue,
such as airports, health care
facilities, housing and municipal
electric, water and sewer utilities.
Generally, payments on these bonds
depend solely on the revenues generated
by the projects, excise taxes or state
appropriations, and are not backed by
the government's taxing power.

3. WHAT IS THE FUND'S INVESTMENT STRATEGY?

- The Fund plans to hold to maturity 9
long-term tax-exempt municipal bonds,
and some short-term bonds reserved to
pay the deferred sales fee, with an
aggregate face amount of $3,245,000.
- The Fund is a unit investment trust
which means that, unlike a mutual fund,
the Portfolio is not managed.
- The bonds are rated AAA or Aaa by
Standard & Poor's, Moody's or Fitch.
- Many of the bonds can be called at a
premium declining over time to par
value. Some bonds may be called earlier
at par for extraordinary reasons.
- 100% of the bonds are insured by
insurance companies that guarantee
timely payments of principal and
interest on the bonds (but not Fund
units or the market value of the bonds
before they mature).

The Portfolio consists of municipal
bonds of the following types:
</TABLE>

<TABLE>
/ / Airports/Ports/Highways 16%
<S> <C>
/ / General Obligation 36%
/ / Hospitals/Health Care 32%
/ / Municipal Water/Sewer
Utilities 16%
</TABLE>

<TABLE>
<C> <S>
4. WHAT ARE THE SIGNIFICANT RISKS?

YOU CAN LOSE MONEY BY INVESTING IN THE
FUND. THIS CAN HAPPEN FOR VARIOUS
REASONS, INCLUDING:

- Rising interest rates, an issuer's
worsening financial condition or a drop
in bond ratings can reduce the price of
your units.

- Because the Fund is concentrated in
hospital/health care and general
obligation bonds, adverse developments in
these sectors may affect the value of
your units.

- Assuming no changes in interest rates,
when you sell your units, they will
generally be worth less than your cost
because your cost included a sales fee.

- The Fund will receive early returns of
principal if bonds are called or sold
before they mature. If this happens your
income will decline and you may not be
able to reinvest the money you receive at
as high a yield or as long a maturity.

ALSO, THE PORTFOLIO IS CONCENTRATED IN
BONDS OF MICHIGAN SO IT IS LESS
DIVERSIFIED THAN A NATIONAL FUND AND IS
SUBJECT TO RISKS PARTICULAR TO MICHIGAN
WHICH ARE BRIEFLY DESCRIBED UNDER STATE
CONCENTRATION RISKS LATER IN THIS
PROSPECTUS.
</TABLE>

3
<PAGE>

<TABLE>
<C> <S>
5. IS THIS FUND APPROPRIATE FOR YOU?

Yes, if you want federally tax-free
income. You will benefit from a
professionally selected and supervised
portfolio whose risk is reduced by
investing in insured bonds of several
different issuers.
The Fund is NOT appropriate for you if
you want a speculative investment that
changes to take advantage of market
movements, if you do not want a
tax-advantaged investment or if you
cannot tolerate any risk.
</TABLE>

<TABLE>
<C> <S>
DEFINING YOUR INCOME
</TABLE>

<TABLE>
<C> <S> <C>
WHAT YOU MAY EXPECT (Payable on the 25th day
of each April and October to holders of
record on the 10th day of the month):
Semi-Annual Income per 1,000 units $24.33
Annual Income per 1,000 units: $48.67
THESE FIGURES ARE ESTIMATES DETERMINED ON THE
EVALUATION DAY; ACTUAL PAYMENTS MAY VARY.
</TABLE>

<TABLE>
<C> <S>
6. WHAT ARE THE FUND'S FEES AND EXPENSES?

This table shows the costs and expenses you may pay,
directly or indirectly, when you invest in the Fund.

INVESTOR FEES

Maximum Sales Fee (Load) on new
purchases (as a percentage of
$1,000 invested) 2.90%

You will pay an up-front sales fee of 1.714%, as well
as a deferred sales fee of $3.75 per unit quarterly
February, May, August, and November through May, 2001.
Employees of some of the Sponsors and their affiliates
may pay a reduced sales fee of no less than $5.00 per
unit.

The maximum sales fee is reduced if you invest at
least $100,000, as follows:
</TABLE>

<TABLE>
<CAPTION>
YOUR MAXIMUM
SALES FEE
IF YOU INVEST: WILL BE:
-------------- ------------
<C> <S> <C>
Less than $100,000 2.90%
$100,000 to $249,999 2.65%
$250,000 to $499,999 2.40%
$500,000 to $999,999 2.15%
$1,000,000 and over 1.90%

Maximum Exchange Fee 1.90%
</TABLE>

<TABLE>
<C> <S>
ESTIMATED ANNUAL FUND OPERATING EXPENSES
</TABLE>

<TABLE>
<CAPTION>
AMOUNT
PER UNIT
--------
<C> <S> <C>
$0.63
Trustee's Fee
$0.46
Portfolio Supervision,
Bookkeeping and
Administrative Fees
(including updating
expenses)
$0.40
Evaluator's Fee
$0.51
Other Operating Expenses
-----
$2.00
TOTAL
</TABLE>

<TABLE>
<C> <S>
The Sponsors historically paid updating
expenses.

7. HOW HAVE SIMILAR FUNDS PERFORMED IN THE PAST?

IN THE FOLLOWING CHART WE SHOW PAST PERFORMANCE
OF PRIOR MICHIGAN PORTFOLIOS, WHICH HAD
INVESTMENT OBJECTIVES, STRATEGIES AND TYPES OF
BONDS SUBSTANTIALLY SIMILAR TO THIS FUND. THESE
PRIOR SERIES DIFFERED IN THAT THEY CHARGED A
HIGHER SALES FEE. These prior Michigan Series
were offered after 1987 and were outstanding on
March 31, 2000. OF COURSE, PAST PERFORMANCE OF
PRIOR SERIES IS NO GUARANTEE OF FUTURE RESULTS
OF THIS FUND.

AVERAGE ANNUAL COMPOUND TOTAL RETURNS
FOR PRIOR SERIES
REFLECTING ALL EXPENSES. FOR PERIODS ENDED
3/31/00.
</TABLE>

<TABLE>
<CAPTION>
WITH SALES FEE NO SALES FEE
1 YEAR 5 YEARS 1 YEAR 5 YEARS
<S> <C> <C> <C> <C>
-----------------------------------------------------------------
High 1.08% 5.29% 2.60% 6.47%
Average -1.20 4.43 0.62 5.47
Low -4.00 3.01 -1.38 3.91

<C> <S>

<C> <S>
managed and bonds are not sold because of market
changes. Rather, experienced Defined Asset Funds
financial analysts regularly review the bonds in
the Fund. The Fund may sell a bond if certain
adverse credit or other conditions exist.
</TABLE>

4
<PAGE>

<TABLE>
<C> <S>
9. HOW DO I BUY UNITS?

The minimum investment is one unit.

You can buy units from any of the
Sponsors and other broker-dealers. The
Sponsors are listed later in this
prospectus. Some banks may offer units
for sale through special arrangements
with the Sponsors, although certain
legal restrictions may apply.

UNIT PRICE PER 1,000 UNITS $891.80
(as of February 29, 2000)

Unit price is based on the net asset
value of the Fund plus the sales fee. An
amount equal to any principal cash, as
well as net accrued but undistributed
interest on the unit, is added to the
unit price. An independent evaluator
prices the bonds at 3:30 p.m. Eastern
time every business day. Unit price
changes every day with changes in the
prices of the bonds in the Fund.

10. HOW DO I SELL UNITS?

You may sell your units at any time to
any Sponsor or the Trustee for the net
asset value determined at the close of
business on the date of sale, less any
remaining deferred sales fee. You will
not pay any other fee when you sell your
units.
</TABLE>

<TABLE>
<C> <S>
11. HOW ARE DISTRIBUTIONS MADE AND TAXED?

The Fund pays income twice a year.

In the opinion of bond counsel when each
bond was issued, interest on the bonds in
this Fund is generally 100% exempt from
regular federal income tax. Your income
may also be exempt from some Michigan
state and local personal income taxes if
you live in Michigan.
You will also receive principal payments
if bonds are sold or called or mature,
when the cash available is more than
$10.00 per 1,000 units. You will be
subject to tax on any gain realized by
the Fund on the disposition of bonds.

12. WHAT OTHER SERVICES ARE AVAILABLE?

REINVESTMENT
You will receive your income in cash
unless you choose to compound your income
by reinvesting at no sales fee in the
Municipal Fund Investment Accumulation
Program, Inc. This program is an open-end
mutual fund with a comparable investment
objective, but the bonds will generally
not be insured. Income from this program
will generally be subject to state and
local income taxes. FOR MORE COMPLETE
INFORMATION ABOUT THE PROGRAM, INCLUDING
CHARGES AND FEES, ASK THE TRUSTEE FOR THE
PROGRAM'S PROSPECTUS. READ IT CAREFULLY
BEFORE YOU INVEST. THE TRUSTEE MUST
RECEIVE YOUR WRITTEN ELECTION TO REINVEST
AT LEAST 10 DAYS BEFORE THE RECORD DAY OF
AN INCOME PAYMENT.

EXCHANGE PRIVILEGES
You may exchange units of this Fund for
units of certain other Defined Asset
Funds. You may also exchange into this
Fund from certain other funds. We charge
a reduced sales fee on exchanges.
</TABLE>

5
<PAGE>
--------------------------------------------------------------------------------

NEW JERSEY INSURED PORTFOLIO--RISK/RETURN SUMMARY

3. WHAT IS THE FUND'S INVESTMENT STRATEGY?

- The Fund plans to hold to maturity 10
long-term tax-exempt municipal bonds,
and some short-term bonds reserved to
pay the deferred sales fee, with an
aggregate face amount of $2,900,000.
- The Fund is a unit investment trust
which means that, unlike a mutual fund,
the Portfolio is not managed.
- The bonds are rated AAA or Aaa by
Standard & Poor's, Moody's or Fitch.
- Many of the bonds can be called at a
premium declining over time to par
value. Some bonds may be called earlier
at par for extraordinary reasons.
- 100% of the bonds are insured by
insurance companies that guarantee
timely payments of principal and
interest on the bonds (but not Fund
units or the market value of the bonds
before they mature).

The Portfolio consists of municipal
bonds of the following types:
</TABLE>

<TABLE>
/ / Airports/Ports/Highways 18%
<S> <C>
/ / General Obligation 17%
/ / Hospitals/Health Care 17%
/ / Lease Rental 17%
/ / Municipal Water/Sewer
Utilities 22%
/ / Special Tax Issues 5%
/ / Universities/Colleges 4%
</TABLE>

<TABLE>
<C> <S>
4. WHAT ARE THE SIGNIFICANT RISKS?

YOU CAN LOSE MONEY BY INVESTING IN THE
FUND. THIS CAN HAPPEN FOR VARIOUS
REASONS, INCLUDING:

- Rising interest rates, an issuer's
worsening financial condition or a drop
in bond ratings can reduce the price of
your units.

- Assuming no changes in interest rates,
when you sell your units, they will
generally be worth less than your cost
because your cost included a sales fee.

ALSO, THE PORTFOLIO IS CONCENTRATED IN
BONDS OF NEW JERSEY SO IT IS LESS
DIVERSIFIED THAN A NATIONAL FUND AND IS
SUBJECT TO RISKS PARTICULAR TO NEW
JERSEY WHICH ARE BRIEFLY DESCRIBED UNDER
STATE CONCENTRATION RISKS LATER IN THIS
PROSPECTUS.
</TABLE>

6
<PAGE>

<TABLE>
<C> <S>
5. IS THIS FUND APPROPRIATE FOR YOU?

<TABLE>
<C> <S>
DEFINING YOUR INCOME
</TABLE>

<TABLE>
<C> <S> <C>
WHAT YOU MAY EXPECT (Payable on the 25th day
of each April and October to holders of
record on the 10th day of the month):
Regular Semi-annual Income per 1,000 units $23.55
Annual Income per 1,000 units: $47.10
THESE FIGURES ARE ESTIMATES DETERMINED ON THE
EVALUATION DAY; ACTUAL PAYMENTS MAY VARY.
</TABLE>

<TABLE>
<C> <S>
6. WHAT ARE THE FUND'S FEES AND EXPENSES?

This table shows the costs and expenses you may pay,
directly or indirectly, when you invest in the Fund.

INVESTOR FEES

Maximum Sales Fee (Load) on new
purchases (as a percentage of
$1,000 invested) 2.90%

You will pay an up-front sales fee of 1.714%, as well
as a deferred sales fee of $3.75 per unit quarterly
February, May, August and November through May, 2001.
Employees of some of the Sponsors and their affiliates
may pay a reduced sales fee of no less than $5.00 per
unit.

The maximum sales fee is reduced if you invest at
least $100,000, as follows:
</TABLE>

Maximum Exchange Fee 1.90%
</TABLE>

<TABLE>
<C> <S>
ESTIMATED ANNUAL FUND OPERATING EXPENSES
</TABLE>

<TABLE>
<CAPTION>
AMOUNT
PER UNIT
--------
<C> <S> <C>
$0.63
Trustee's Fee
$0.46
Portfolio Supervision,
Bookkeeping and
Administrative Fees
(including updating
expenses)
$0.40
Evaluator's Fee
$0.62
Other Operating Expenses
-----
$2.11
TOTAL
</TABLE>

<TABLE>
<C> <S>
The Sponsors historically paid updating
expenses.

7. HOW HAVE SIMILAR FUNDS PERFORMED IN THE PAST?

IN THE FOLLOWING CHART WE SHOW PAST PERFORMANCE
OF PRIOR NEW JERSEY PORTFOLIOS, WHICH HAD
INVESTMENT OBJECTIVES, STRATEGIES AND TYPES OF
BONDS SUBSTANTIALLY SIMILAR TO THIS FUND. THESE
PRIOR SERIES DIFFERED IN THAT THEY CHARGED A
HIGHER SALES FEE. These prior New Jersey Series
were offered after 1987 and were outstanding on
March 31, 2000. OF COURSE, PAST PERFORMANCE OF
PRIOR SERIES IS NO GUARANTEE OF FUTURE RESULTS
OF THIS FUND.

AVERAGE ANNUAL COMPOUND TOTAL RETURNS
FOR PRIOR SERIES
REFLECTING ALL EXPENSES. FOR PERIODS ENDED
3/31/00.
</TABLE>

<TABLE>
<CAPTION>
WITH SALES FEE NO SALES FEE
1 YEAR 5 YEARS 1 YEAR 5 YEARS
<S> <C> <C> <C> <C>
-----------------------------------------------------------------
High 3.00% 5.11% 4.09% 6.28%
Average -1.29 4.31 0.58 5.40
Low -5.59 2.67 -2.87 3.45

<C> <S>

7
<PAGE>

<TABLE>
<C> <S>
9. HOW DO I BUY UNITS?

The minimum investment is one unit.

UNIT PRICE PER 1,000 UNITS $877.56
(as of February 29, 2000)

10. HOW DO I SELL UNITS?

<TABLE>
<C> <S>
11. HOW ARE DISTRIBUTIONS MADE AND TAXED?

The Fund pays income twice a year.

In the opinion of bond counsel when each
bond was issued, interest on the bonds in
this Fund is generally 100% exempt from
regular federal income tax. Your income
may also be exempt from some New Jersey
state and local personal income taxes if
you live in New Jersey.
You will also receive principal payments
if bonds are sold or called or mature,
when the cash available is more than
$10.00 per 1,000 units. You will be
subject to tax on any gain realized by
the Fund on the disposition of bonds.

12. WHAT OTHER SERVICES ARE AVAILABLE?

REINVESTMENT
You will receive your income in cash
unless you choose to compound your income
by reinvesting at no sales fee in the
Municipal Fund Investment Accumulation
Program, Inc. This program is an open-end
mutual fund with a comparable investment
objective, but the bonds generally will
not be insured. Income from this program
will generally be subject to state and
local income taxes. FOR MORE COMPLETE
INFORMATION ABOUT THE PROGRAM, INCLUDING
CHARGES AND FEES, ASK THE TRUSTEE FOR THE
PROGRAM'S PROSPECTUS. READ IT CAREFULLY
BEFORE YOU INVEST. THE TRUSTEE MUST
RECEIVE YOUR WRITTEN ELECTION TO REINVEST
AT LEAST 10 DAYS BEFORE THE RECORD DAY OF
AN INCOME PAYMENT.

8
<PAGE>
--------------------------------------------------------------------------------

NEW YORK INSURED PORTFOLIO--RISK/RETURN SUMMARY

3. WHAT IS THE FUND'S INVESTMENT STRATEGY?

- The Fund plans to hold to maturity 11
long-term tax-exempt municipal bonds,
and some short-term bonds reserved to
pay the deferred sales fee, with an
aggregate face amount of $5,040,000.
- The Fund is a unit investment trust
which means that, unlike a mutual fund,
the Portfolio is not managed.
- The bonds are rated AAA or Aaa by
Standard & Poor's, Moody's or Fitch.
- Many of the bonds can be called at a
premium declining over time to par
value. Some bonds may be called earlier
at par for extraordinary reasons.
- 100% of the bonds are insured by
insurance companies that guarantee
timely payments of principal and
interest on the bonds (but not Fund
units or the market value of the bonds
before they mature).

The Portfolio consists of municipal
bonds of the following types:
</TABLE>

<TABLE>
/ / General Obligation 4%
<S> <C>
/ / Hospitals/Health Care 26%
/ / Lease Rental 8%
/ / Municipal Water/Sewer
Utilities 15%
/ / Special Tax Issues 17%
/ / Transit Authority 15%
/ / Universities/Colleges 15%
</TABLE>

<TABLE>
<C> <S>
4. WHAT ARE THE SIGNIFICANT RISKS?

YOU CAN LOSE MONEY BY INVESTING IN THE
FUND. THIS CAN HAPPEN FOR VARIOUS
REASONS, INCLUDING:

- Rising interest rates, an issuer's
worsening financial condition or a drop
in bond ratings can reduce the price of
your units.

- Because the Fund is concentrated in
hospital/health care bonds, adverse
developments in this sector may affect
the value of your units.

- Assuming no changes in interest rates,
when you sell your units, they will
generally be worth less than your cost
because your cost included a sales fee.

ALSO, THE PORTFOLIO IS CONCENTRATED IN
BONDS OF NEW YORK SO IT IS LESS
DIVERSIFIED THAN A NATIONAL FUND AND IS
SUBJECT TO RISKS PARTICULAR TO NEW YORK
WHICH ARE BRIEFLY DESCRIBED UNDER STATE
CONCENTRATION RISKS LATER IN THIS
PROSPECTUS.
</TABLE>

9
<PAGE>

<TABLE>
<C> <S>
5. IS THIS FUND APPROPRIATE FOR YOU?

<TABLE>
<C> <S>
DEFINING YOUR INCOME
</TABLE>

<TABLE>
<C> <S> <C>
WHAT YOU MAY EXPECT (Payable on the 25th day
of each April and October to holders of
record on the 10th day of the month):
Semi-annual Income per 1,000 units $24.29
Annual Income per 1,000 units: $48.59
THESE FIGURES ARE ESTIMATES DETERMINED ON THE
EVALUATION DAY; ACTUAL PAYMENTS MAY VARY.
</TABLE>

<TABLE>
<C> <S>
6. WHAT ARE THE FUND'S FEES AND EXPENSES?

This table shows the costs and expenses you may pay,
directly or indirectly, when you invest in the Fund.

INVESTOR FEES

Maximum Sales Fee (Load) on new
purchases (as a percentage of
$1,000 invested) 2.90%

The maximum sales fee is reduced if you invest at
least $100,000, as follows:
</TABLE>

Maximum Exchange Fee 1.90%
</TABLE>

<TABLE>
<C> <S>
ESTIMATED ANNUAL FUND OPERATING EXPENSES
</TABLE>

<TABLE>
<CAPTION>
AMOUNT
PER UNIT
--------
<C> <S> <C>
$0.63
Trustee's Fee
$0.46
Portfolio Supervision,
Bookkeeping and
Administrative Fees
(including updating
expenses)
$0.26
Evaluator's Fee
$0.32
Other Operating Expenses
-----
$1.67
TOTAL
</TABLE>

<TABLE>
<C> <S>
The Sponsors historically paid updating
expenses.

7. HOW HAVE SIMILAR FUNDS PERFORMED IN THE PAST?

IN THE FOLLOWING CHART WE SHOW PAST PERFORMANCE
OF PRIOR NEW YORK PORTFOLIOS, WHICH HAD
INVESTMENT OBJECTIVES, STRATEGIES AND TYPES OF
BONDS SUBSTANTIALLY SIMILAR TO THIS FUND. THESE
PRIOR SERIES DIFFERED IN THAT THEY CHARGED A
HIGHER SALES FEE. These prior New York Series
were offered after 1987 and were outstanding on
March 31, 2000. OF COURSE, PAST PERFORMANCE OF
PRIOR SERIES IS NO GUARANTEE OF FUTURE RESULTS
OF THIS FUND.

AVERAGE ANNUAL COMPOUND TOTAL RETURNS
FOR PRIOR SERIES
REFLECTING ALL EXPENSES. FOR PERIODS ENDED
3/31/00.
</TABLE>

-------------------------------------------------------------------

<TABLE>
High 6.07% 5.45% 6.45% 6.62% 6.63% 7.04%
<S> <C> <C> <C> <C> <C> <C>
Average -1.33 4.16 5.99 0.54 5.18 6.58
Low -7.77 2.58 5.63 -5.23 3.54 6.22
</TABLE>

-----------------------------------------------------------

<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Average
Sales fee 1.94% 5.07% 5.78%
</TABLE>

-----------------------------------------------------------

NOTE: ALL RETURNS REPRESENT CHANGES IN UNIT PRICE WITH DISTRIBUTIONS REINVESTED
INTO THE MUNICIPAL FUND INVESTMENT ACCUMULATION PROGRAM.

<TABLE>
<C> <S>
8. IS THE FUND MANAGED?

Unlike a mutual fund, the Fund is not managed and
bonds are not sold because of market changes.
Rather, experienced Defined Asset Funds financial
analysts regularly review the bonds in the Fund.
The Fund may sell a bond if certain adverse
credit or other conditions exist.
</TABLE>

10
<PAGE>

<TABLE>
<C> <S>
9. HOW DO I BUY UNITS?

The minimum investment is one unit.

UNIT PRICE PER 1,000 UNITS $883.32
(as of February 29, 2000)

10. HOW DO I SELL UNITS?

<TABLE>
<C> <S>
11. HOW ARE DISTRIBUTIONS MADE AND TAXED?

The Fund pays income twice a year.

In the opinion of bond counsel when each
bond was issued, interest on the bonds in
this Fund is generally 100% exempt from
regular federal income tax. Your income
may also be exempt from some New York
state and local personal income taxes if
you live in New York.
You will also receive principal payments
if bonds are sold or called or mature,
when the cash available is more than
$10.00 per 1,000 units. You will be
subject to tax on any gain realized by
the Fund on the disposition of bonds.

12. WHAT OTHER SERVICES ARE AVAILABLE?

REINVESTMENT
You will receive your income in cash
unless you choose to compound your income
by reinvesting at no sales fee in the
Municipal Fund Investment Accumulation
Program, Inc. This program is an open-end
mutual fund with a comparable investment
objective, but the bonds generally will
not be insured. Income from this program
will generally be subject to state and
local income taxes. FOR MORE COMPLETE
INFORMATION ABOUT THE PROGRAM, INCLUDING
CHARGES AND FEES, ASK THE TRUSTEE FOR THE
PROGRAM'S PROSPECTUS. READ IT CAREFULLY
BEFORE YOU INVEST. THE TRUSTEE MUST
RECEIVE YOUR WRITTEN ELECTION TO REINVEST
AT LEAST 10 DAYS BEFORE THE RECORD DAY OF
AN INCOME PAYMENT.

11
<PAGE>
--------------------------------------------------------------------------------

OHIO INSURED PORTFOLIO--RISK/RETURN SUMMARY

3. WHAT IS THE FUND'S INVESTMENT STRATEGY?

- The Fund plans to hold to maturity 8
long-term tax-exempt municipal bonds,
and some short-term bonds reserved to
pay the deferred sales fee, with an
aggregate face amount of $3,115,000.
- The Fund is a unit investment trust
which means that, unlike a mutual fund,
the Portfolio is not managed.
- The bonds are rated AAA or Aaa by
Standard & Poor's, Moody's or Fitch.
- Many of the bonds can be called at a
premium declining over time to par
value. Some bonds may be called earlier
at par for extraordinary reasons.
- 100% of the bonds are insured by
insurance companies that guarantee
timely payments of principal and
interest on the bonds (but not Fund
units or the market value of the bonds
before they mature).

The Portfolio consists of municipal
bonds of the following types:
</TABLE>

<TABLE>
/ / General Obligation 24%
<S> <C>
/ / Hospitals/Health Care 16%
/ / Special Tax Issues 12%
/ / Municipal Electric Utilities 16%
/ / Universities/Colleges 32%
</TABLE>

<TABLE>
<C> <S>
4. WHAT ARE THE SIGNIFICANT RISKS?

YOU CAN LOSE MONEY BY INVESTING IN THE
FUND. THIS CAN HAPPEN FOR VARIOUS
REASONS, INCLUDING:

- Rising interest rates, an issuer's
worsening financial condition or a drop
in bond ratings can reduce the price of
your units.

- Because the Fund is concentrated in
university/college bonds, adverse
developments in this sector may affect
the value of your units.

- Assuming no changes in interest rates,
when you sell your units, they will
generally be worth less than your cost
because your cost included a sales fee.

ALSO, THE PORTFOLIO IS CONCENTRATED IN
BONDS OF OHIO SO IT IS LESS DIVERSIFIED
THAN A NATIONAL FUND AND IS SUBJECT TO
RISKS PARTICULAR TO OHIO WHICH ARE
BRIEFLY DESCRIBED UNDER STATE
CONCENTRATION RISKS LATER IN THIS
PROSPECTUS.
</TABLE>

12
<PAGE>

<TABLE>
<C> <S>
5. IS THIS FUND APPROPRIATE FOR YOU?

<TABLE>
<C> <S>
DEFINING YOUR INCOME
</TABLE>

<TABLE>
<C> <S> <C>
WHAT YOU MAY EXPECT (Payable on the 25th day
of each April and October to holders of
record on the 10th day of the month):
Semi-annual Income per 1,000 units $23.85
Annual Income per 1,000 units: $47.71
THESE FIGURES ARE ESTIMATES DETERMINED ON THE
EVALUATION DAY; ACTUAL PAYMENTS MAY VARY.
</TABLE>

<TABLE>
<C> <S>
6. WHAT ARE THE FUND'S FEES AND EXPENSES?

This table shows the costs and expenses you may pay,
directly or indirectly, when you invest in the Fund.

INVESTOR FEES

Maximum Sales Fee (Load) on new
purchases (as a percentage of
$1,000 invested) 2.90%

You will pay an up-front sales fee of 1.714%, as well
as a deferred sales fee of $3.75 per unit quarterly
November, February, May and August through May, 2001.
Employees of some of the Sponsors and their affiliates
may pay a reduced sales fee of no less than $5.00 per
unit.

The maximum sales fee is reduced if you invest at
least $100,000, as follows:
</TABLE>

Maximum Exchange Fee 1.90%
</TABLE>

<TABLE>
<C> <S>
ESTIMATED ANNUAL FUND OPERATING EXPENSES
</TABLE>

<TABLE>
<CAPTION>
AMOUNT
PER UNIT
--------
<C> <S> <C>
$0.63
Trustee's Fee
$0.46
Portfolio Supervision,
Bookkeeping and
Administrative Fees
(including updating
expenses)
$0.41
Evaluator's Fee
$0.53
Other Operating Expenses
-----
$2.03
TOTAL
</TABLE>

<TABLE>
<C> <S>
The Sponsors historically paid updating
expenses.

7. HOW HAVE SIMILAR FUNDS PERFORMED IN THE PAST?

IN THE FOLLOWING CHART WE SHOW PAST PERFORMANCE
OF PRIOR OHIO PORTFOLIOS, WHICH HAD INVESTMENT
OBJECTIVES, STRATEGIES AND TYPES OF BONDS
SUBSTANTIALLY SIMILAR TO THIS FUND. THESE PRIOR
SERIES DIFFERED IN THAT THEY CHARGED A HIGHER
SALES FEE. These prior Ohio Series were offered
after 1987 and were outstanding on March 31,
2000. OF COURSE, PAST PERFORMANCE OF PRIOR
SERIES IS NO GUARANTEE OF FUTURE RESULTS OF
THIS FUND.

AVERAGE ANNUAL COMPOUND TOTAL RETURNS
FOR PRIOR SERIES
REFLECTING ALL EXPENSES. FOR PERIODS ENDED
3/31/00.
</TABLE>

<TABLE>
<CAPTION>
WITH SALES FEE NO SALES FEE
1 YEAR 5 YEARS 1 YEAR 5 YEARS
<S> <C> <C> <C> <C>
-------------------------------------------------------------
High 2.94% 4.83% 3.46% 5.94%
Average -1.11 4.02 0.58 5.10
Low -10.37 2.86 -7.66 3.87

<C> <S>

13
<PAGE>

<TABLE>
<C> <S>
9. HOW DO I BUY UNITS?

The minimum investment is one unit.

UNIT PRICE PER 1,000 UNITS $886.98
(as of February 29, 2000)

10. HOW DO I SELL UNITS?

11. HOW ARE DISTRIBUTIONS MADE AND TAXED?

The Fund pays income twice a year.

In the opinion of bond counsel when each
bond was issued, interest on the bonds
in this Fund is generally 100% exempt
from regular federal income tax. Your
income may also be exempt from some Ohio
state and local personal income taxes if
you live in Ohio.
You will also receive principal payments
if bonds are sold or called or mature,
when the cash available is more than
$10.00 per 1,000 units. You will be
subject to tax on any gain realized by
the Fund on the disposition of bonds.

12. WHAT OTHER SERVICES ARE AVAILABLE?

REINVESTMENT
You will receive your income in cash
unless you choose to compound your
income by reinvesting at no sales fee in
the Municipal Fund Investment
Accumulation Program, Inc. This program
is an open-end mutual fund with a
comparable investment objective, but the
bonds will generally not be insured.
Income from this program will generally
be subject to state and local income
taxes. FOR MORE COMPLETE INFORMATION
ABOUT THE PROGRAM, INCLUDING CHARGES AND
FEES, ASK THE TRUSTEE FOR THE PROGRAM'S
PROSPECTUS. READ IT CAREFULLY BEFORE YOU
INVEST. THE TRUSTEE MUST RECEIVE YOUR
WRITTEN ELECTION TO REINVEST AT LEAST 10
DAYS BEFORE THE RECORD DAY OF AN INCOME
PAYMENT.

14
<PAGE>
--------------------------------------------------------------------------------
TAX-FREE VS. TAXABLE INCOME: A COMPARISON OF TAXABLE AND TAX-FREE YIELDS

FOR MICHIGAN RESIDENTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMBINED
EFFECTIVE
TAXABLE INCOME 2000* TAX RATE TAX-FREE YIELD OF
SINGLE RETURN JOINT RETURN % 3% 3.5% 4% 4.5% 5% 5.5%
<S> <C> <C> <C> <C> <C> <C> <C> <C>
IS EQUIVALENT TO A TAXABLE YIELD OF

TAXABLE INCOME 2000* TAX-FREE YIELD OF
SINGLE RETURN 6% 6.5% 7% 7.5% 8%
<S> <C> <C> <C> <C> <C>
IS EQUIVALENT TO A
TAXABLE YIELD OF
</TABLE>

--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0- 26,250 $ 0- 43,850 18.66 3.69 4.30 4.92 5.53 6.15 6.76 7.38
$ 26,251- 63,550 $ 43,851-105,950 31.10 4.35 5.08 5.81 6.53 7.26 7.98 8.71
$ 63,551-132,600 $105,951-161,450 33.97 4.54 5.30 6.06 6.81 7.57 8.33 9.09
$132,601-288,350 $161,451-288,350 38.75 4.90 5.71 6.53 7.35 8.16 8.98 9.80
OVER $288,350 OVER $288,350 42.20 5.19 6.06 6.92 7.79 8.65 9.52 10.38

FOR NEW JERSEY RESIDENTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMBINED
EFFECTIVE
TAXABLE INCOME 2000* TAX RATE TAX-FREE YIELD OF
SINGLE RETURN JOINT RETURN % 4% 4.5% 5% 5.5% 6% 6.5%
<S> <C> <C> <C> <C> <C> <C> <C> <C>
IS EQUIVALENT TO A TAXABLE YIELD OF

TAXABLE INCOME 2000* TAX-FREE YIELD OF
SINGLE RETURN 7.% 7.5% 8.%
<S> <C> <C> <C>
IS EQUIVALENT TO A
TAXABLE YIELD OF
</TABLE>

--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0- 26,250 $ $0- 43,850 16.49 4.79 5.39 5.99 6.59 7.18 7.78 8.38
$ 26,251- 63,550 $ 43,851-105,950 31.98 5.88 6.62 7.35 8.09 8.82 9.56 10.29
$ 63,551-132,600 $105,951-161,450 35.40 6.19 6.97 7.74 8.51 9.29 10.06 10.84
$132,601-288,350 $161,451-288,350 40.08 6.68 7.51 8.34 9.18 10.01 10.85 11.68
OVER $288,350 OVER $288,350 43.45 7.07 7.96 8.84 9.73 10.61 11.49 12.38

FOR NEW YORK CITY RESIDENTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMBINED
EFFECTIVE
TAXABLE INCOME 2000* TAX RATE TAX-FREE YIELD OF
SINGLE RETURN JOINT RETURN % 4% 4.5% 5% 5.5% 6% 6.5%
<S> <C> <C> <C> <C> <C> <C> <C> <C>
IS EQUIVALENT TO A TAXABLE YIELD OF

TAXABLE INCOME 2000* TAX-FREE YIELD OF
SINGLE RETURN 7% 8%
<S> <C> <C> <C>
IS EQUIVALENT TO A
TAXABLE YIELD OF
</TABLE>

--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0- 43,850 23.94 5.26 5.92 6.57 7.23 7.89 8.55 9.20
$ 0- 26,250 23.99 5.26 5.92 6.58 7.24 7.89 8.55 9.21
$ 26,251- 63,550 $ 43,851-105,950 35.65 6.22 6.99 7.77 8.55 9.32 10.10 10.88
$ 63,551-132,600 $105,951-161,450 38.33 6.49 7.30 8.11 8.92 9.73 10.54 11.35
$132,601-288,350 $161,451-288,350 42.80 6.99 7.87 8.74 9.62 10.49 11.36 12.24
OVER $288,350 OVER $288,350 46.02 7.41 8.34 9.26 10.19 11.12 12.04 12.97

FOR NEW YORK STATE RESIDENTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMBINED
EFFECTIVE
TAXABLE INCOME 2000* TAX RATE TAX-FREE YIELD OF
SINGLE RETURN JOINT RETURN % 4% 4.5% 5% 5.5% 6% 6.5%
<S> <C> <C> <C> <C> <C> <C> <C> <C>
IS EQUIVALENT TO A TAXABLE YIELD OF

TAXABLE INCOME 2000* TAX-FREE YIELD OF
SINGLE RETURN 7% 8%
<S> <C> <C> <C>
IS EQUIVALENT TO A
TAXABLE YIELD OF
</TABLE>

--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0- 26,250 $ $0- 43,850 20.82 5.05 5.68 6.31 6.95 7.58 8.21 8.84
$ 26,251- 63,550 $ 43,851-105,950 32.93 5.96 6.71 7.46 8.20 8.95 9.69 10.44
$ 63,551-132,600 $105,951-161,450 35.73 6.22 7.00 7.78 8.56 9.34 10.11 10.89
$132,601-288,350 $161,451-288,350 40.38 6.71 7.55 8.39 9.23 10.06 10.90 11.74
OVER $288,350 OVER $288,350 43.74 7.11 8.00 8.89 9.78 10.66 11.55 12.44

FOR OHIO RESIDENTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMBINED
EFFECTIVE
TAXABLE INCOME 2000* TAX RATE TAX-FREE YIELD OF
SINGLE RETURN JOINT RETURN % 4% 4.5% 5% 5.5% 6% 6.5%
<S> <C> <C> <C> <C> <C> <C> <C> <C>
IS EQUIVALENT TO A TAXABLE YIELD OF

TAXABLE INCOME 2000* TAX-FREE YIELD OF
SINGLE RETURN 7% 7.5% 8%
<S> <C> <C> <C>
IS EQUIVALENT TO A
TAXABLE YIELD OF
</TABLE>

--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0- 43,850 19.26 4.95 5.57 6.19 6.81 7.43 8.05 8.67
$ 0- 26,250 18.65 4.92 5.53 6.15 6.76 7.38 7.99 8.60
$ 43,851-105,950 32.79 5.95 6.70 7.44 8.18 8.93 9.67 10.41
$ 26,251- 63,550 31.61 5.85 6.58 7.31 8.04 8.77 9.50 10.24
$ 63,551-132,600 $105,951-161,450 35.59 6.21 6.99 7.76 8.54 9.32 10.09 10.87
$132,601-288,350 $161,451-288,350 40.63 6.74 7.58 8.42 9.26 10.11 10.95 11.79
OVER $288,350 OVER $288,350 43.97 7.14 8.03 8.92 9.82 10.71 11.60 12.49

To compare the yield of a taxable security with the yield of a tax-free
security, find your taxable income and read across. The table incorporates 2000
federal and applicable State (and City) income tax rates and assumes that all
income would otherwise be taxed at the investor's highest tax rate. Yield
figures are for example only.

*Based upon net amount subject to federal income tax after deductions and
exemptions. This table does not reflect the possible effect of other tax
factors, such as alternative minimum tax, personal exemptions, the phase out of
exemptions, itemized deductions or the possible partial disallowance of
deductions. Consequently, investors are urged to consult their own tax advisers
in this regard.

15
<PAGE>
WHAT YOU CAN EXPECT FROM YOUR INVESTMENT

INCOME TWICE A YEAR

The Fund will pay you regular semi-annual income. Your income may vary because
of:
- elimination of one or more bonds from the Fund's portfolio because of calls,
redemptions or sales;
- a change in the Fund's expenses; or
- the failure by a bond's issuer to pay interest.

Changes in interest rates generally will not affect your income because the
portfolio is fixed.

Along with your income, you will receive your share of any available bond
principal.

RETURN FIGURES

We cannot predict your actual return, which will vary with unit price, how long
you hold your investment and changes in the portfolio, interest income and
expenses.

ESTIMATED CURRENT RETURN equals the estimated annual cash to be received from
the bonds in the Fund less estimated annual Fund expenses, divided by the Unit
Price (including the maximum sales fee):

<TABLE>
<S> <C> <C>
Estimated Annual Estimated
Interest Income - Annual Expenses
-------------------------------------
Unit Price
</TABLE>

ESTIMATED LONG TERM RETURN is a measure of the estimated return over the
estimated life of the Fund. Unlike Estimated Current Return, Estimated Long Term
Return reflects maturities, discounts and premiums of the bonds in the Fund. It
is an average of the yields to maturity (or in certain cases, to an earlier call
date) of the individual bonds in the portfolio, adjusted to reflect the Fund's
maximum sales fee and estimated expenses. We calculate the average yield for the
portfolio by weighting each bond's yield by its market value and the time
remaining to the call or maturity date.

Yields on individual bonds depend on many factors including general conditions
of the bond markets, the size of a particular offering and the maturity and
quality rating of the particular issues. Yields can vary among bonds with
similar maturities, coupons and ratings.

These return quotations are designed to be comparative rather than predictive.

RECORDS AND REPORTS

You will receive:
- a statement of income payments and any principal payments;
- a notice from the Trustee when new bonds are deposited in exchange or
substitution for bonds originally deposited;
- an annual report on Fund activity; and
- annual tax information. THIS WILL ALSO BE SENT TO THE IRS. YOU MUST REPORT THE
AMOUNT OF TAX-EXEMPT INTEREST RECEIVED DURING THE YEAR.

You may request:
- copies of bond evaluations to enable you to comply with federal and state tax
reporting requirements; and
- audited financial statements of the Fund.

You may inspect records of Fund transactions at the Trustee's office during
regular business hours.

16
<PAGE>
THE RISKS YOU FACE

INTEREST RATE RISK

Investing involves risks, including the risk that your investment will decline
in value if interest rates rise. Generally, bonds with longer maturities will
change in value more than bonds with shorter maturities. Bonds in the Fund are
more likely to be called when interest rates decline. This would result in early
returns of principal to you and may result in early termination of the Fund. Of
course, we cannot predict how interest rates may change.

CALL RISK

Many bonds can be prepaid or "called" by the issuer before their stated
maturity.

For example, some bonds may be required to be called pursuant to mandatory
sinking fund provisions.

Also, an issuer might call its bonds during periods of falling interest rates,
if the issuer's bonds have a coupon higher than current market rates.

An issuer might call its bonds in extraordinary cases, including if:
- it no longer needs the money for the original purpose;
- the project is condemned or sold;
- the project is destroyed and insurance proceeds are used to redeem the
bonds;
- any related credit support expires and is not replaced; or
- interest on the bonds become taxable.

If the bonds are called, your income will decline and you may not be able to
reinvest the money you receive at as high a yield or as long a maturity. An
early call at par of a premium bond will reduce your return.

REDUCED DIVERSIFICATION RISK

If many investors sell their units, the Fund will have to sell bonds. This could
reduce the diversification of your investment and increase your share of Fund
expenses.

LIQUIDITY RISK

You can always sell back your units, but we cannot assure you that a liquid
trading market will always exist for the bonds in the portfolio, especially
since current law may restrict the Fund from selling bonds to any Sponsor. The
bonds will generally trade in the over-the-counter market. The value of the
bonds, and of your investment, may be reduced if trading in bonds is limited or
absent.

CONCENTRATION RISK

When a certain type of bond makes up 25% or more of the portfolio, it is said to
be "concentrated" in that bond type, which makes the Portfolio less diversified.

Here is what you should know about the Michigan and New York Portfolios'
concentrations in hospital and health care bonds.
- payment for these bonds depends on revenues from private third-party payors
and government programs, including Medicare and Medicaid, which have
generally undertaken cost containment measures to limit payments to health
care providers;
- hospitals face increasing competition resulting from hospital mergers and
affiliations;
- hospitals need to reduce costs as HMOs increase market penetration and
hospital supply and drug companies raise prices;
- hospitals and health care providers are subject to various legal claims by
patients

17
<PAGE>
and others and are adversely affected by increasing costs of insurance; and
- many hospitals are aggressively buying physician practices and assuming risk
contracts to gain market share. If revenues do not increase accordingly,
this practice could reduce profits;
- Medicare is changing its reimbursement system for nursing homes. Many
nursing home providers are not sure how they will be treated. In many cases,
the providers may receive lower reimbursements and these would have to cut
expenses to maintain profitability; and
- most retirement/nursing home providers rely on entrance fees for operating
revenues. If people live longer than expected and turnover is lower than
budgeted, operating revenues would be adversely affected by less than
expected entrance fees.

Here is what you should know about the Michigan Portfolio's concentration in
general obligation bonds.
- general obligation bonds are backed by the issuer's pledge of its full
faith, credit and taxing power;
- but the taxing power of any government issuer may be limited by provisions
of the state constitution or laws as well as political considerations; and
- an issuer's credit can be negatively affected by various factors, including
population decline that erodes the tax base, natural disasters, decline in
industry, limited access to capital markets or heavy reliance on state or
federal aid.

Here is what you should know about the Ohio Portfolio's concentration in
university/college bonds. Payment for these bonds depends on:
- level or amount and diversity of sources of revenue;
- availability of endowments and other funds;
- enrollment;
- financial management;
- reputation; and
- for public institutions, the financial condition of the government and its
educational policies.

Changes to the portfolio from bond redemptions, maturities and sales may affect
the Fund's concentrations over time.

STATE CONCENTRATION RISK

MICHIGAN RISKS

Because Michigan's leading sectors are closely integrated with the manufacturing
of durable goods, its economy is more cyclical than non-industrial states and
the nation as a whole. As a result:

- any substantial national economic downturn will likely hurt Michigan's
economy and its state and local governments;

- because the state is highly reliant on the auto industry, its economy could
be hurt by changes in that industry, expecially consolidation, plant
closings and labor disputes;

- while in the past the state's unemployment rate was higher than the national
average, for several years it has been near or below the national average.

Certain tax changes have reduced or changed the mix of tax revenues of the state
and local governments. In recent years:

- the state sales tax rate was raised;

- the income tax rate was lowered;

- an annual cap was imposed on property tax assessment increases; and

18
<PAGE>
- property taxes used for school funding were cut, and now schools are paid
for by a combination of property taxes and general and restricted state
revenues.

In addition, certain state laws limit the overall amount of state revenues that
can be raised from taxes, which could affect State operations and restrict the
sharing of revenue with local governments. This, combined with the above tax
changes, could hurt the value of Michigan bonds in the portfolio or make it more
difficult for Michigan's local governments to pay their debt service.

The state's general obligation bonds are rated Aa1 by Moody's, AA+ by Standard &
Poor's and AA+ by Fitch.

NEW JERSEY RISKS

STATE AND LOCAL GOVERNMENT

Certain features of New Jersey law could affect the repayment of debt:

- the State of New Jersey and its agencies and public authorities issue
general obligation bonds, which are secured by the full faith and credit of
the state, backed by its taxing authority, without recourse to specific
sources of revenue, therefore, any liability to increase taxes could impair
the state's ability to repay debt; and

- the state is required by law to maintain a balanced budget, and state
spending for any given municipality or county cannot increase by more than
5% per year. This limit could make it harder for any particular county or
municipality to repay its debts.

In recent years the state budget's main expenditures have been

- elementary and secondary education, and

- state agencies and programs, including police and corrections facilities,
higher education, and environmental protection.

The state's general obligations are rated Aa1 by Moody's and AA+ by Standard &
Poor's.

NEW YORK RISKS

GENERALLY

For decades, New York's economy has trailed the rest of the nation. Both the
state and New York City have experienced long-term structural imbalances between
revenues and expenses, and have repeatedly relied substantially on non-recurring
measures to achieve budget balance. The pressures that contribute to budgetary
problems at both the state and local level include:

- the high combined state and local tax burden;

- a decline in manufacturing jobs, leading to above-average unemployment;

- sensitivity to the financial services industry; and

- dependence on federal aid.

STATE GOVERNMENT

The State government frequently has difficulty approving budgets on time. Budget
gaps of $3 billion and $5 billion are projected for the next two years. The
State's general obligation bonds are rated A by Standard & Poor's and A2 by
Moody's. There is $37 billion of state-related debt outstanding.

19
<PAGE>
NEW YORK CITY GOVERNMENT

Even though the City had budget surpluses each year from 1981, budget gaps of
nearly $2 billion are projected for the 2001, 2002, and 2003 fiscal years. New
York City faces fiscal pressures from:

- aging public facilities that need repair or replacement;

- welfare and medical costs;

- expiring labor contracts; and

- a high and increasing debt burden.

The City requires substantial state aid, and its fiscal strength depends heavily
on the securities industry. Its general obligation bonds are rated A- by
Standard & Poor's and A3 by Moody's. $31.2 billion of combined City, MAC and PBC
debt is outstanding, and the City proposes $25.3 billion of financing over
fiscal 1999-2003.

OHIO RISKS

GENERALLY

Overall, Ohio's economy is more cyclical than non-industrial states and the
nation as a whole:

- manufacturing (including auto-related manufacturing) is an important part of
Ohio's economy.

- agriculture and related industries are also very important.

- recent employment growth has been in non-manufacturing areas.

STATE GOVERNMENT

The Ohio general revenue fund for the current two-year period calls for
expenditures of over $36 billion:

- because general fund receipts and payments do not match exactly, temporary
cash-flow deficiencies occur throughout the year. Ohio law permits the state
government to manage this problem by permitting the adjustment of payment
schedules and the use of the total operating fund.

- Ohio's general obligation bonds are currently rated Aa1 by Moody's; AA+ by
Standard & Poor's (except for the State's highway bonds which Standard &
Poor's rates AAA). Fitch rates Ohio's general obligation bonds and its
highway bonds AA+. Other bonds issued by other State agencies may have lower
ratings. Any of these ratings may be changed.

- Ohio voters have authorized the State to incur debt to which taxes or
excises are pledged for payment.

EDUCATION FINANCING

In 1997, the Ohio Supreme Court found major aspects of the State's school
funding system to be unconstitutional. The Court ruled that, although property
taxes can play a role in school financing, they can no longer be the primary
means of school financing. The Court stayed its ruling to allow the State to
devise a system that complied with the State's constitution. During that stay,
repayment provisions of certain bonds issued for school funding will remain
valid.

BOND QUALITY RISK

A reduction in a bond's rating may decrease its value and, indirectly, the value
of your investment in the Fund.

INSURANCE RELATED RISK

The bonds are backed by insurance companies (as shown under Portfolios).
Insurance policies generally make payments

20
<PAGE>
only according to a bond's original payment schedule and do not make early
payments when a bond defaults or becomes taxable. Although the federal
government does not regulate the insurance business, various state laws and
federal initiatives and tax law changes could significantly affect the insurance
business. The claims-paying ability of the insurance companies is generally
rated A or better by Standard & Poor's or another nationally recognized rating
organization. The insurance company ratings are subject to change at any time at
the discretion of the rating agencies.

LITIGATION AND LEGISLATION RISKS

We do not know of any pending litigation that might have a material adverse
effect upon the Fund.

Future tax legislation could affect the value of the portfolio by:
- limiting real property taxes,
- reducing tax rates,
- imposing a flat or other form of tax, or
- exempting investment income from tax.

SELLING OR EXCHANGING UNITS

You can sell your units at any time for a price based on net asset value. Your
net asset value is calculated each business day by:
- ADDING the value of the bonds, net accrued interest, cash and any other Fund
assets;
- SUBTRACTING accrued but unpaid Fund expenses, unreimbursed Trustee advances,
cash held to buy back units or for distribution to investors and any other
Fund liabilities; and
- DIVIDING the result by the number of outstanding units.

Your net asset value when you sell may be more or less than your cost because of
sales fees, market movements and changes in the portfolio.

If you sell your units before the final deferred sales fee installment, the
amount of any remaining installments will be deducted from your proceeds.

SPONSORS' SECONDARY MARKET

While we are not obligated to do so, we will buy back units at net asset value
without any other fee or charge other than any remaining deferred sales charge.
We may resell the units to other buyers or to the Trustee. You should consult
your financial professional for current market prices to determine if other
broker-dealers or banks are offering higher prices.

We have maintained the secondary market continuously for over 28 years, but we
could discontinue it without prior notice for any business reason.

SELLING UNITS TO THE TRUSTEE

Regardless of whether we maintain a secondary market, you can sell your units to
the Trustee at any time by sending the Trustee a letter (with any outstanding
certificates if you hold Unit certificates). You must properly endorse your
certificates (or execute a written transfer instrument with signatures
guaranteed by an eligible institution). Sometimes, additional documents are
needed such as a trust document, certificate of corporate authority, certificate
of death or appointment as executor, administrator or guardian.

21
<PAGE>
Within seven days after your request and the necessary documents are received,
the Trustee will mail a check to you. Contact the Trustee for additional
information.

As long as we are maintaining a secondary market, the Trustee will sell your
units to us at a price based on net asset value. If there is no secondary
market, the Trustee may sell your units in the over-the-counter market for a
higher price, but it is not obligated to do so. In that case, you will receive
the net proceeds of the sale.

If the Fund does not have cash available to pay you for units you are selling,
the agent for the Sponsors will select bonds to be sold. Bonds will be selected
based on market and credit factors. These sales could be made at times when the
bonds would not otherwise be sold and may result in your receiving less than the
unit par value and also reduce the size and diversity of the Fund.

If you acquire 25% or more of the outstanding units of the Fund and you sell
units with a value exceeding $250,000, the Trustee may choose to pay you "in
kind" by distributing bonds and cash with a total value equal to the price of
those units. The Trustee will try to distribute bonds in the portfolio pro rata,
but it reserves the right to distribute only one or a few bonds. The Trustee
will act as your agent in an in kind distribution and will either hold the bonds
for your account or sell them as you instruct. You must pay any transaction
costs as well as transfer and ongoing custodial fees on sales of bonds
distributed in kind.

There could be a delay in paying you for your units:
- if the New York Stock Exchange is closed (other than customary weekend and
holiday closings);
- if the SEC determines that trading on the New York Stock Exchange is
restricted or that an emergency exists making sale or evaluation of the
bonds not reasonably practicable; and
- for any other period permitted by SEC order.

EXCHANGE OPTION

You may exchange units of certain Defined Asset Funds for units of this Fund at
a maximum exchange fee of 1.90%. You may exchange units of this Fund for units
of certain other Defined Asset Funds at a reduced sales fee if your investment
goals change. To exchange units, you should talk to your financial professional
about what funds are exchangeable, suitable and currently available.

Normally, an exchange is taxable and you must recognize any gain or loss on the
exchange. However, the IRS may try to disallow a loss if the portfolios of the
two funds are not materially different; you should consult your own tax adviser.

We may amend or terminate this exchange option at any time without notice.

HOW THE FUND WORKS

PRICING

The price of a unit includes interest accrued on the bonds, less expenses, from
the initial most recent Record Day up to, but not including, the settlement
date, which is

22
<PAGE>
usually three business days after the purchase date of the unit.

A portion of the price of a unit consists of cash so that the Trustee can
provide you with regular monthly income. When you sell your units you will
receive your share of this cash.

EVALUATIONS

An independent Evaluator values the bonds on each business day (excluding
Saturdays, Sundays and the following holidays as observed by the New York Stock
Exchange: New Year's Day, Presidents' Day, Martin Luther King, Jr. Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas).
Bond values are based on current bid or offer prices for the bonds or comparable
bonds. In the past, the difference between bid and offer prices of publicly
offered tax-exempt bonds has ranged from 0.5% of face amount on actively traded
issues to 3.5% on inactively traded issues; the difference has averaged between
1 and 2%.

INCOME

The Trustee credits interest to an Income Account and other receipts to a
Capital Account. The Trustee may establish a Reserve Account by withdrawing from
these accounts amounts it considers appropriate to pay any material liability.
These accounts do not bear interest.

EXPENSES

The Trustee is paid monthly. It also benefits when it holds cash for the Fund in
non-interest bearing accounts. The Trustee may also receive additional amounts:
- to reimburse the Trustee for the Fund's operating expenses;
- for extraordinary services and costs of indemnifying the Trustee and the
Sponsors;
- costs of actions taken to protect the Fund and other legal fees and
expenses;
- expenses for keeping the Fund's registration statement current; and
- Fund termination expenses and any governmental charges.

The Sponsors are currently reimbursed up to 55 CENTS per $1,000 face amount
annually for providing portfolio supervisory, bookkeeping and administrative
services and for any other expenses properly chargeable to the Fund. Legal,
typesetting, electronic filing and regulatory filing fees and expenses
associated with updating the Portfolio's registration statement yearly are also
now chargeable to the Portfolio. While this fee may exceed the amount of these
costs and expenses attributable to this Fund, the total of these fees for all
Series of Defined Asset Funds will not exceed the aggregate amount attributable
to all of these Series for any calendar year. The Fund also pays the Evaluator's
fees.

The Trustee's, Sponsors' and Evaluator's fees may be adjusted for inflation
without investors' approval.

Any quarterly deferred sales fees you owe are paid with interest and principal
from certain bonds. If these amounts are not enough, the rest will be paid out
of distributitons to you from the Fund's Capital and Income Accounts.

23
<PAGE>
The Sponsors will pay advertising and selling expenses at no charge to the Fund.
If Fund expenses exceed initial estimates, the Fund will owe the excess. The
Trustee has a lien on Fund assets to secure reimbursement of Fund expenses and
may sell bonds if cash is not available.

PORTFOLIO CHANGES

The Sponsors and Trustee are not liable for any default or defect in a bond; if
a contract to buy any bond.

Unlike a mutual fund, the portfolio is designed to remain intact and we may keep
bonds in the portfolio even if their credit quality declines or other adverse
financial circumstances occur. However, we may sell a bond in certain cases if
we believe that certain adverse credit conditions exist or if a bond becomes
taxable.

If we maintain a secondary market in units but are unable to sell the units that
we buy in the secondary market, we will redeem units, which may affect the
composition of the portfolio. Units offered in the secondary market may not
represent the same face amount of bonds that they did originally.

We decide whether or not to offer units for sale that we acquire in the
secondary market after reviewing:
- diversity of the portfolio;
- size of the Fund relative to its original size;
- ratio of Fund expenses to income;
- current and long-term returns;
- degree to which units may be selling at a premium over par; and
- cost of maintaining a current prospectus.

FUND TERMINATION

The Fund will terminate following the stated maturity or sale of the last bond
in the portfolio. The Fund may also terminate earlier with the consent of
investors holding 51% of the units or if total assets of the Fund have fallen
below 40% of the face amount of bonds deposited. We will decide whether to
terminate the Fund early based on the same factors used in deciding whether or
not to offer units in the secondary market.

When the Fund is about to terminate you will receive a notice, and you will be
unable to sell your units after that time. On or shortly before termination, we
will sell any remaining bonds, and you will receive your final distribution. Any
bond that cannot be sold at a reasonable price may continue to be held by the
Trustee in a liquidating trust pending its final sale.

You will pay your share of the expenses associated with termination, including
brokerage costs in selling bonds. This may reduce the amount you receive as your
final distribution.

CERTIFICATES

Certificates for units are issued on request. You may transfer certificates by
complying with the requirements for redeeming certificates, described above. You
can replace lost or mutilated certificates by delivering satisfactory indemnity
and paying the associated costs.

TRUST INDENTURE

The Fund is a "unit investment trust" governed by a Trust Indenture, a contract

24
<PAGE>
among the Sponsors, the Trustee and the Evaluator, which sets forth their duties
and obligations and your rights. A copy of the Indenture is available to you on
request to the Trustee. The following summarizes certain provisions of the
Indenture.

The Sponsors and the Trustee may amend the Indenture without your consent:
- to cure ambiguities;
- to correct or supplement any defective or inconsistent provision;
- to make any amendment required by any governmental agency; or
- to make other changes determined not to be materially adverse to your best
interest (as determined by the Sponsors).

Investors holding 51% of the units may amend the Indenture. Every investor must
consent to any amendment that changes the 51% requirement. No amendment may
reduce your interest in the Fund without your written consent.

The Trustee may resign by notifying the Sponsors. The Sponsors may remove the
Trustee without your consent if:
- it fails to perform its duties and the Sponsors determine that its
replacement is in your best interest; or
- it becomes incapable of acting or bankrupt or its affairs are taken over by
public authorities.

Investors holding 51% of the units may remove the Trustee. The Evaluator may
resign or be removed by the Sponsors and the Trustee without the consent of
investors. The resignation or removal of either becomes effective when a
successor accepts appointment. The Sponsors will try to appoint a successor
promptly; however, if no successor has accepted within 30 days after notice of
resignation, the resigning Trustee or Evaluator may petition a court to appoint
a successor.

Any Sponsor may resign as long as one Sponsor with a net worth of $2 million
remains and agrees to the resignation. The remaining Sponsors and the Trustee
may appoint a replacement. If there is only one Sponsor and it fails to perform
its duties or becomes bankrupt the Trustee may:
- remove it and appoint a replacement Sponsor;
- liquidate the Fund; or
- continue to act as Trustee without a Sponsor.

Merrill Lynch, Pierce, Fenner & Smith Incorporated acts as agent for the
Sponsors.

The Trust Indenture contains customary provisions limiting the liability of the
Trustee, the Sponsors and the Evaluator.

LEGAL OPINION

Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York 10017, as
counsel for the Sponsors, has given an opinion that the units are validly
issued. Special counsel located in the relevant states have given state and
local tax opinions.

AUDITORS

Deloitte & Touche LLP, 2 World Financial Center, New York, New York 10281,
independent accountants, audited the Statements of Condition included in this
prospectus.

25
<PAGE>
SPONSORS

The Sponsors are:
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED (a wholly-owned subsidiary of
Merrill Lynch & Co., Inc.)
P.O. Box 9051,
Princeton, NJ 08543-9051
SALOMON SMITH BARNEY INC. (an indirectly wholly-owned subsidiary of Citigroup
Inc.)
388 Greenwich Street--23rd Floor,
New York, NY 10013
DEAN WITTER REYNOLDS INC. (a principal operating subsidiary of Morgan Stanley
Dean Witter & Co.)
Two World Trade Center--59th Floor,
New York, NY 10048
PAINEWEBBER INCORPORATED (a wholly-owned subsidiary of PaineWebber Group Inc.)
1285 Avenue of the Americas,
New York, NY 10019

Each Sponsor is a Delaware corporation and it, or its predecessor, has acted as
sponsor to many unit investment trusts. As a registered broker-dealer each
Sponsor buys and sells securities (including investment company shares) for
others (including investment companies) and participates as an underwriter in
various selling groups.

TRUSTEE

The Chase Manhattan Bank, Unit Investment Trust Department, 4 New York
Plaza--6th Floor, New York, New York 10004, is the Trustee. It is supervised by
the Federal Deposit Insurance Corporation, the Board of Governors of the Federal
Reserve System and New York State banking authorities.

UNDERWRITERS' AND SPONSORS' PROFITS

Underwriters receive sales charges when they sell units. The Sponsors also
realized a profit or loss on the initial date of deposit of the bonds. Any cash
made available by you to the Sponsors before the settlement date for those units
may be used in the Sponsors' businesses to the extent permitted by federal law
and may benefit the Sponsors.

A Sponsor or Underwriter may realize profits or sustain losses on bonds in the
Fund which were acquired from underwriting syndicates of which it was a member.

In maintaining a secondary market, the Sponsors will also realize profits or
sustain losses in the amount of any difference between the prices at which they
buy units and the prices at which they resell or redeem them.

PUBLIC DISTRIBUTION

The Sponsors do not intend to qualify units for sale in any foreign countries.
This prospectus does not constitute an offer to sell units in any country where
units cannot lawfully be sold.

CODE OF ETHICS

The Fund and the Agent for the Sponsors have each adopted a code of ethics
requiring reporting of personal securities transactions by its employees with
access to information on Fund transactions. Subject to certain conditions, the
codes permit employees to invest in Fund securities for their own accounts. The
codes are designed to prevent fraud, deception and misconduct against the Fund
and to provide reasonable

26
<PAGE>
standards of conduct. These codes are on file with the Commission and you may
obtain a copy by contacting the Commission at the address listed on the back
cover of this prospectus.

YEAR 2000 ISSUES

Many computer systems were designed in such a way that they may be unable to
distinguish between the year 2000 and the year 1900 (commonly known as the "Year
2000 Problem"). To date we are not aware of any major operational difficulties
resulting from the computer system changes necessary to prepare for the Year
2000. However, there can be no assurance that the Year 2000 Problem will not
adversely affect the issuers of the bonds contained in the Portfolio. We cannot
predict whether any impact will be material to the Fund as a whole.

TAXES

The following summary describes some of the important income tax consequences of
holding units. It assumes that you are not a dealer, financial institution,
insurance company or other investor with special circumstances or subject to
special rules. You should consult your own tax adviser about your particular
circumstances.

At the date of issue of each bond, counsel for the issuer delivered an opinion
to the effect that interest on the bond is exempt from regular federal income
tax. However, interest may be subject to state and local taxes and may be taken
into account in determining your preference items for alternative minimum tax
purposes. Neither we nor our counsel have reviewed the issuance of the bonds,
related proceedings or the basis for the opinions of counsel for the issuers. We
cannot assure you that the issuers (or other users of bond proceeds) have
complied or will comply with any requirements necessary for a bond to be
tax-exempt. If any of the bonds were determined not to be tax-exempt, you could
be required to pay income tax for current and prior years, and if the Fund were
to sell the bond, it might have to sell it at a substantial discount.

In the opinion of our counsel, under existing law:

GENERAL TREATMENT OF THE FUND AND YOUR INVESTMENT

The Fund will not be taxed as a corporation for federal income tax purposes, and
you will be considered to own directly your share of each bond in the Fund.

GAIN OR LOSS UPON DISPOSITION

When all or part of your share of a bond is disposed of (for example, when the
Fund sells, exchanges or redeems a bond or when you sell or exchange your
units), you will generally recognize capital gain or loss. Your gain, however,
will generally be ordinary income to the extent of any accrued "market
discount". Generally you will have market discount to the extent that your basis
in a bond when you purchase a unit is less than its stated redemption price at
maturity (or, if it is an original issue discount bond, the issue price
increased by original issue discount that has accrued on the bond before your
purchase). You should consult your tax adviser in this regard.

27
<PAGE>
If your net long-term capital gains exceed your net short-term capital losses,
the excess may be subject to tax at a lower rate than ordinary income. Any
capital gain from the Fund will be long-term if you are considered to have held
your investment on each bond for more than one year and short-term otherwise.
Because the deductibility of capital losses is subject to limitations, you may
not be able to deduct all of your capital losses.

YOUR BASIS IN THE BONDS

Your aggregate basis in the bonds will be equal to the cost of your units,
including any sales charges you pay, adjusted to reflect any accruals of
"original issue discount," "acquisition premium" and "bond premium". You should
consult your tax adviser in this regard.

EXPENSES

If you are not a corporate investor, you will not be entitled to a deduction for
your share of fees and expenses of the Fund. Also, if you borrowed money in
order to purchase or carry your units, you will not be able to deduct the
interest on this borrowing for federal income tax purposes. The IRS may treat
your purchase of units as made with borrowed money even if the money is not
directly traceable to the purchase of units.

NEW YORK TAXES

Under the income tax laws of the State and City of New York, the Fund will not
be taxed as a corporation. If you are a New York taxpayer, your income from the
Fund will not be tax-exempt in New York except to the extent that the income is
earned on bonds that are tax-exempt for New York purposes. Depending on where
you live, your income from the Fund may be subject to state and local taxation.
You should consult your tax adviser in this regard.

MICHIGAN TAXES

In the opinion of Miller, Canfield, Paddock and Stone, P.L.C. Bloomfield Hills,
Michigan, special counsel on Michigan tax matters:

Under the income tax laws of the State of Michigan, the Fund will not be taxed
as a corporation. If you are a Michigan taxpayer, your interest income from the
Fund will not be tax-exempt in Michigan except to the extent that the interest
is earned on bonds that are tax-exempt for Michigan purposes. Capital gain
distributions and capital gain or loss on your Fund units themselves will be
subject to Michigan income tax. Depending on where you live, your income from
the Fund may be subject to state and local taxation. You should consult your tax
adviser in this regard.

NEW JERSEY TAXES

In the opinion of Drinker Biddle & Reath LLP, Philadelphia, Pennsylvania,
special counsel on New Jersey tax matters:

The Fund will not be taxed as a corporation under the current income tax laws of
the State of New Jersey. Your income from the Fund may be subject to taxation
depending on where you live. If you are a New Jersey taxpayer your income from
the Fund (including gains on sales of bonds by the Fund) and gains on sales of
units by you will be tax-exempt to the extent that income

28
<PAGE>
and gains are earned on bonds that are tax-exempt for New Jersey purposes. You
should consult your tax adviser as to the consequences to you with respect to
any investment you make in the Fund.

OHIO TAXES

In the opinion of Vorys, Sater, Seymour and Pease LLP, Columbus, Ohio, special
counsel on Ohio tax matters:

Under the laws of the State of Ohio, the Ohio Trust will not be subject to the
Ohio corporation franchise tax or the Ohio tax on dealers in intangibles. If you
are an Ohio taxpayer, your interest income from the Ohio Trust will be exempt
from Ohio personal income taxes and Ohio corporation franchise taxes to the
extent it relates to bonds held by the Ohio Trust that are exempt from taxation
under Ohio law. However, any gains and losses which must be recognized for
federal income tax purposes (whether upon the sale of your units in the Ohio
Trust or upon the sale of bonds by the Ohio Trust) also must be recognized for
Ohio personal income and corporation franchise tax purposes, except to the
extent the gains and losses are attributable to the sale of bonds by the Ohio
Trust that are exempt from such taxation under Ohio law. Your interest income
and your gains and losses generally are not subject to municipal income taxation
in Ohio. You should consult your tax adviser concerning the application of Ohio
taxes to you in connection with your investment in the Ohio Trust.

SUPPLEMENTAL INFORMATION

You can receive at no cost supplemental information about the Fund by calling
the Trustee. The supplemental information includes more detailed risk disclosure
about the types of bonds that may be in the Fund's portfolios, general risk
disclosure concerning any insurance securing certain bonds, and general
information about the structure and operation of the Fund. The supplemental
information is also available from the SEC.

29
<PAGE>

MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 407 (MICHIGAN INSURED, NEW JERSEY
INSURED, NEW YORK INSURED AND OHIO INSURED TRUSTS),
DEFINED ASSET FUNDS

REPORT OF INDEPENDENT ACCOUNTANTS

The Sponsors, Trustee and Holders
of Municipal Investment Trust Fund, Multistate Series -
407 (Michigan Insured, New Jersey Insured, New York
Insured and Ohio Insured Trusts),
Defined Asset Funds:

We have audited the accompanying statements of condition of Municipal
Investment Trust Fund, Multistate Series - 407 (Michigan Insured, New
Jersey Insured, New York Insured and Ohio Insured Trusts), Defined
Asset Funds, including the portfolios, as of February 29, 2000 and the
related statements of operations and of changes in net assets for the
period March 27, 1999 to February 29, 2000. These financial statements
are the responsibility of the Trustee. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards
generally accepted in the United States of America. 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 February 29, 2000, as shown in such portfolios,
were confirmed to us by The Chase Manhattan Bank, the Trustee. An
audit also includes assessing the accounting principles used and
significant estimates made by the Trustee, as well as evaluating the
overall financial statement presentation. We believe that our 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 Municipal
Investment Trust Fund, Multistate Series - 407 (Michigan Insured, New
Jersey Insured, New York Insured and Ohio Insured Trusts), Defined
Asset Funds at February 29, 2000 and the results of their operations
and changes in their net assets for the above-stated period in
accordance with accounting principle generally accepted in the United
States of America.

DELOITTE & TOUCHE LLP

New York, N.Y.
May 23, 2000

D - 1.
<PAGE>

MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 407 (MICHIGAN INSURED TRUST),
DEFINED ASSET FUNDS

STATEMENT OF CONDITION
As of February 29, 2000

<TABLE>
<S> <C> <C>
TRUST PROPERTY:
Investment in marketable securities -
at value (cost $ 3,234,362 )(Note 1)......... $ 2,790,242
Accrued interest ............................... 41,925
Accrued interest on Segregated Bonds (Note 5) .. 850
Principal payments receivable .................. 1,267
Income payments receivable (Segregated Bonds) .. 1,964
Prepaid Trustee's fees and expenses ............ 54
Cash - income .................................. 39,555
Cash - principal ............................... 968
-----------
Total trust property ......................... 2,876,825

LESS LIABILITIES:
Income advance from Trustee .................... $ 20,731
Other advance from Trustee ..................... 209
Principal payments from Trustee ................ 1,267
Deferred sales charge (Note 5) ................. 23,027
Principal payments payable (Segregated Bonds) .. 968
Accrued Sponsor fees ........................... 246 46,448
----------- -----------

NET ASSETS, REPRESENTED BY:
3,183,336 units of fractional undivided
interest outstanding (Note 3)................ 2,769,820

Undistributed net investment income ............ 60,557 $ 2,830,377
----------- ===========

UNIT VALUE ($ 2,830,377 / 3,183,336 units )....... $ .88912
===========
</TABLE>

See Notes to Financial Statements.

D - 2.
<PAGE>

MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 407 (MICHIGAN INSURED TRUST),
DEFINED ASSET FUNDS

STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
March 27, 1999
to
February 29,
2000
----

<S> <C>
INVESTMENT INCOME:
Interest income ........................ $ 152,839
Interest income on Segregated
Bonds (Note 5) ....................... 2,605
Trustee's fees and expenses ............ (4,511)
Sponsors' fees ......................... (1,520)
------------
Net investment income .................. 149,413
------------

REALIZED AND UNREALIZED LOSS
ON INVESTMENTS:
Realized loss on
securities sold or redeemed .......... (9,511)
Unrealized depreciation
of investments ....................... (444,120)
------------
Net realized and unrealized
loss on investments ................. (453,631)
------------

NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS .............. $ (304,218)
============
</TABLE>

See Notes to Financial Statements.

D - 3.

<PAGE>

MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 407 (MICHIGAN INSURED TRUST),
DEFINED ASSET FUNDS

STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
March 27, 1999
to
February 29,
2000
----
<S> <C>
OPERATIONS:
Net investment income .................. $ 149,413
Realized loss on
securities sold or redeemed .......... (9,511)
Unrealized depreciation
of investments ....................... (444,120)
------------
Net decrease in net assets
resulting from operations ............ (304,218)
------------

INCOME DISTRIBUTIONS TO
HOLDERS (Note 2)....................... (85,313)
------------

SHARE TRANSACTIONS:
Deferred sales charge (Note 5):
Principal ............................ (23,996)

Redemption amounts:
Income ............................... (938)
Principal ............................ (56,020)
------------
Net share transactions ................. (80,954)
------------

NET DECREASE IN NET ASSETS ............... (470,485)

NET ASSETS AT BEGINNING OF PERIOD ........ 3,300,862
------------
NET ASSETS AT END OF PERIOD .............. $ 2,830,377
============
PER UNIT:
Income distributions during
period ............................... $ .02625
============
Net asset value at end of
period ............................... $ .88912
============
TRUST UNITS:
Redeemed during period ................. 66,664
Outstanding at end of period ........... 3,183,336
============
</TABLE>

See Notes to Financial Statements.

D - 4.
<PAGE>

MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 407 (MICHIGAN INSURED TRUST),
DEFINED ASSET FUNDS

NOTES TO FINANCIAL STATEMENTS

1. SIGNIFICANT ACCOUNTING POLICIES

The Fund is registered under the Investment Company Act of 1940 as a
Unit Investment Trust. The following is a summary of significant
accounting policies consistently followed by the Fund in the
preparation of its financial statements. The policies are in
accordance with accounting principles generally accepted in the United
States of America.

(A) Securities are stated at value as determined by the
Evaluator based on bid side evaluations for the securities,
except that value on March 27, 1999 was based upon offering
side evaluations at March 25, 1999, the day prior to the
Date of Deposit. Cost of securities at March 27, 1999 was
also based on such offering side evaluations.

(B) The Fund is not subject to income taxes. Accordingly, no
provision for such taxes is required.

2. DISTRIBUTIONS

A distribution of net investment income is made to Holders each month.
Receipts other than interest, after deductions for redemptions and
applicable expenses, are also distributed periodically.

3. NET CAPITAL

<TABLE>
<S> <C>
Cost of 3,183,336 units at Date of Deposit ................. $ 3,233,155
Transfer to capital of interest on Segregated Bonds (Note 5) 2,605
Redemptions of units - net cost of 66,664 units redeemed
less redemption amounts (principal)....................... 11,687
Deferred sales charge (Note 5) ............................. (23,996)
Realized loss on securities sold or redeemed ............... (9,511)
Unrealized depreciation of investments ..................... (444,120)
-----------

Net capital applicable to Holders .......................... $ 2,769,820
===========
</TABLE>

4. INCOME TAXES

As of February 29, 2000, unrealized depreciation of investments, based
on cost for Federal income tax purposes, aggregated $444,120, all of
which related to depreciated securities. The cost of investment
securities for Federal income tax purposes was $3,234,362 at February
29, 2000.

D - 5.
<PAGE>

MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 407 (MICHIGAN INSURED TRUST),
DEFINED ASSET FUNDS

NOTES TO FINANCIAL STATEMENTS

5. DEFERRED SALES CHARGE

$40,000 face amount of Montrose Cmnty. Schools, Cntys. of Genesee and
Saginaw, MI, 1997 Sch. Bldg. and Site Bonds and $20,000 face amount of
the County of Livingston, MI, Livingston Cnty.-Marion Sanitary Swr.
Sys. No. 1 Bonds, Ser. 1997 A, have been segregated to fund the
deferred sales charges. The sales charges are being paid for with the
interest received and by periodic sales or maturity of these bonds, as
well as principal proceeds received in conjunction with the
disposition on the unsegregated bonds in the portfolio. A deferred
sales charge of $2.38 per 1,000 units in the first year and $2.37 per
1,000 units in the second year is charged on a quarterly basis, and
paid to the Sponsors periodically by the Trustee on behalf of the
Holders, up to an aggregate of $19.00 per 1,000 units over the first
two years of the life of the Fund. Should a Holder redeem Units prior
to the second anniversary of the Fund, the remaining balance of the
deferred sales charge will be charged.

D - 6.
<PAGE>

MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 407 (MICHIGAN TRUST) (INSURED),
DEFINED ASSET FUNDS

PORTFOLIO
As of February 29, 2000

Rating of Optional
Portfolio No. and Title of Issues Face Redemption
Securities (1) (4) Amount Coupon Maturities(3) Provisions(3) Cost(2) Value(2)
---------- --------- ----------- ----------- ------------ ------------ ---------- ---------

<S> <C> <C> <C> <C> <C> <C> <C>
1 Charter Cnty. of Wayne, MI, Arpt. Rev. AAA $ 500,000 4.875 % 2023 12/01/08 $ 487,695 $ 414,375
Bonds (Detroit Metro. Wayne Cnty. Arpt.) @ 101.000
Ser. 1998 B (MBIA Ins.)

2 Montrose Cmnty. Schools, Cntys. of AAA 40,000 4.500 2000 None 40,578 40,030
Genesee and Saginaw, MI, 1997 Sch. Bldg.
and Site Bonds (MBIA Ins.) (5)

3 Brandon Sch. Dist., Cntys. of Oakland AAA 200,000 5.000 2026 05/01/08 198,522 169,788
and Lapeer, MI, G.O. Unlimited Tax Bonds, @ 100.000
Rfdg. Bonds, Ser. 1998 (AMBAC Ins.)

4 Fruitport Cmnty. Schools, Cntys. of AAA 435,000 5.300 2022 05/01/07 445,035 394,532
Muskegon and Ottawa, MI, G.O. Unlimited @ 100.000
Tax Bonds, Ser. 1997 (Financial Guaranty
Ins.)

5 Chelsea Sch. Dist., Cntys. of Washtenaw AAA 500,000 5.000 2025 05/01/08 496,370 426,245
and Jackson, Mi, G.O. Unlimited Tax Bonds, @ 100.000
Ser. 1998 (Financial Guaranty Ins.)

6 Michigan State Hosp. Fin. Auth., Hosp. AAA 500,000 5.250 2025 05/15/06 507,215 435,240
Rev. and Rfdg. Bonds (Henry Ford Hlth. @ 102.000
Sys.), Ser. 1995 A (MBIA Ins.)

7 County of Lenawee, MI, Hosp. Fin. Auth., AAA 550,000 5.000 2028 07/01/09 541,640 455,092
Hosp. Rev. and Rfdg. Bonds (Lenawee Hlth. @ 101.000
Alliance Oblig. Grp.), Ser. 1999 A (AMBAC
Ins.)

8 County of Livingston, MI, Livingston Cnty. AAA 20,000 5.000 2001 None 20,667 20,130
-Marion Sanitary Swr. Sys. No. 1 Bonds,
Ser. 1997 A (MBIA Ins.) (5)

9 Detroit, MI, Wtr. Supply Sys. Rev. Bonds, AAA 500,000 5.000 2021 07/01/07 496,640 434,810
Ser. 1997 A (MBIA Ins.) @ 101.000

--------- --------- ---------
TOTAL $ 3,245,000 $ 3,234,362 $ 2,790,242
========= ========= =========
</TABLE>

See Notes to Portfolios on page D - 28.

D - 7.
<PAGE>

MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 407 (NEW JERSEY INSURED TRUST),
DEFINED ASSET FUNDS

STATEMENT OF CONDITION
As of February 29, 2000

<TABLE>
<S> <C> <C>
TRUST PROPERTY:
Investment in marketable securities -
at value (cost $ 2,861,260 )(Note 1)......... $ 2,444,867
Accrued interest ............................... 28,902
Accrued interest on Segregated Bonds (Note 5) .. 803
Income payments receivable ..................... 1,743
Prepaid Trustee's fees and expenses receivable . 877
Principal payments receivable .................. 1,579
Cash - income .................................. 20,793
Cash - income on Segregated Bonds .............. 1,938
-----------
Total trust property ......................... 2,501,502

LESS LIABILITIES:
Deferred sales charge (Note 5) ................. $ 22,779
Principal payments payable (Segregated Bonds) .. 1,579
Accrued Sponsors fees .......................... 221 24,579
----------- -----------

NET ASSETS, REPRESENTED BY:
2,834,571 units of fractional undivided
interest outstanding (Note 3)................ 2,424,829

Undistributed net investment income ............ 52,094 $ 2,476,923
----------- ===========

UNIT VALUE ($ 2,476,923 / 2,834,571 units )....... $ .87383
===========
</TABLE>

See Notes to Financial Statements.

D - 8.
<PAGE>

MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 407 (NEW JERSEY INSURED TRUST),
DEFINED ASSET FUNDS

STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
March 27, 1999
to
February 29,
2000
----

<S> <C>
INVESTMENT INCOME:
Interest income ........................ $ 143,125
Interest income on Segregated
Bonds (Note 5) ....................... 2,741
Trustee's fees and expenses ............ (3,645)
Sponsors' fees ......................... (1,257)
------------
Net investment income .................. 140,964
------------

REALIZED AND UNREALIZED LOSS
ON INVESTMENTS:
Realized loss on
securities sold or redeemed .......... (54,152)
Unrealized depreciation
of investments ....................... (416,393)
------------
Net realized and unrealized
loss on investments ................. (470,545)
------------

NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS .............. $ (329,581)
============
</TABLE>

See Notes to Financial Statements.

D - 9.
<PAGE>

MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 407 (NEW JERSEY INSURED TRUST),
DEFINED ASSET FUNDS

STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
March 27, 1999
to
February 29,
2000
----

<S> <C>
OPERATIONS:
Net investment income .................. $ 140,964
Realized loss on
securities sold or redeemed .......... (54,152)
Unrealized depreciation
of investments ....................... (416,393)
------------
Net decrease in net assets
resulting from operations ............ (329,581)
------------

INCOME DISTRIBUTIONS TO
HOLDERS (Note 2) ....................... (82,550)
------------
SHARE TRANSACTIONS:
Deferred sales charge (Note 5):
Principal ............................ (28,132)

Redemption amounts:
Income ............................... (3,579)
Principal ............................ (356,345)
------------
Net share transactions ................. (388,056)
------------

NET DECREASE IN NET ASSETS ............... (800,187)

NET ASSETS AT BEGINNING OF PERIOD ........ 3,277,110
------------
NET ASSETS AT END OF PERIOD .............. $ 2,476,923
============
PER UNIT:
Income distributions during
period ............................... $ .02540
============
Net asset value at end of
period ............................... $ .87383
============
TRUST UNITS:
Redeemed during period ................. 415,429
Outstanding at end of period ........... 2,834,571
============
</TABLE>

See Notes to Financial Statements.

D - 10.
<PAGE>

MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 407 (NEW JERSEY INSURED TRUST),
DEFINED ASSET FUNDS

NOTES TO FINANCIAL STATEMENTS

1. SIGNIFICANT ACCOUNTING POLICIES

(B) The Fund is not subject to income taxes. Accordingly, no
provision for such taxes is required.

2. DISTRIBUTIONS

A distribution of net investment income is made to Holders each month.
Receipts other than interest, after deductions for redemptions and
applicable expenses, are also distributed periodically.

3. NET CAPITAL

<TABLE>
<S> <C>
Cost of 2,834,571 units at Date of Deposit ................. $ 2,858,216
Transfer to capital of interest on Segregated Bonds (Note 5) 2,741
Redemptions of units - net cost of 415,429 units redeemed
less redemption amounts (principal)....................... 62,549
Deferred sales charge (Note 5) ............................. (28,132)
Realized loss on securities sold or redeemed ............... (54,152)
Unrealized depreciation of investments ..................... (416,393)
-----------

Net capital applicable to Holders .......................... $ 2,424,829
===========
</TABLE>

4. INCOME TAXES

As of February 29, 2000, unrealized depreciation of investments, based
on cost for Federal income tax purposes, aggregated $416,393, all of
which related to depreciated securities. The cost of investment
securities for Federal income tax purposes was $2,861,260 at February
29, 2000.

D - 11.
<PAGE>

MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 407 (NEW JERSEY INSURED TRUST),
DEFINED ASSET FUNDS

NOTES TO FINANCIAL STATEMENTS

5. DEFERRED SALES CHARGE

$20,000 face amount of New Jersey Transit Corp., Certs. of Part., Ser.
1999 A and $40,000 face amount of The Rockaway Valley Regl. Sewerage
Auth., Morris Cnty., NJ, Swr. Rev. Rfdg. Bonds, Ser. 1992, have been
segregated to fund the deferred sales charges. The sales charges are
being paid for with the interest received and by periodic sales or
maturity of these bonds, as well as principal proceeds received in
conjunction with the disposition on the unsegregated bonds in the
portfolio. A deferred sales charge of $2.38 per 1,000 units in the
first year and $2.37 per 1,000 units in the second year is charged on
a quarterly basis, and paid to the Sponsors periodically by the
Trustee on behalf of the Holders, up to an aggregate of $19.00 per
1,000 units over the first two years of the life of the Fund. Should a
Holder redeem units prior to the second anniversary of the Fund, the
remaining balance of the deferred sales charge will be charged.

D - 12.
<PAGE>

MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 407 (NEW JERSEY TRUST) (INSURED),
DEFINED ASSET FUNDS

PORTFOLIO
As of February 29, 2000

<S> <C> <C> <C> <C> <C> <C> <C>
1 New Jersey Transit Corp., Certs. of AAA $ 20,000 3.625 % 2001 None $ 20,106 $ 19,633
Part., Ser. 1999 A (AMBAC Ins.) (5)

2 The Port Auth. of New York and New AAA 500,000 4.750 2026 01/15/06 485,210 409,885
Jersey, Consol. Bonds, One Hundred @ 101.000
Fourth Ser. (AMBAC Ins.)

3 The Board of Educ. of the City of AAA 500,000 5.000 2026 08/01/09 501,970 430,580
Plainfield, Union Cnty., NJ, School @ 100.000
Rfdg. Bonds (FSA Ins.)

4 New Jersey Hlth. Care Fac. Fin. Auth., AAA 500,000 4.750 2028 01/01/09 480,855 403,355
Rev. and Rfdg. Bonds (St. Barnabas @ 101.000
Hlth. Care Sys. Issue), Ser. 1998 B
(MBIA Ins.)

5 County of Middlesex, NJ, Certs. of Part. AAA 500,000 4.850 2028 06/15/07 492,280 415,805
(Civic Square III Redev. Assoc., L.L.C.), @ 101.000
Ser. 1998 (MBIA Ins.)

6 The Essex Cnty. Util. Auth., NJ, Solid Aaa(m) 500,000 5.000 2022 04/01/09 501,950 434,265
Waste Sys. Rev. Bonds, Ser. 1999 A @ 100.000
(FSA Ins.)

7 North Jersey Dist. Wtr. Supply Comm., AAA 90,000 5.125 2021 11/15/07 91,284 80,403
NJ, Rev. Rfdg. Bonds (Wanaque North @ 101.000
Proj.), Ser. 1997 (MBIA Ins.)

8 The Rockaway Valley Regl. Sewerage AAA 40,000 5.550 2000 None 41,595 40,447
Auth., Morris Cnty., NJ, Swr. Rev.
Rfdg. Bonds, Ser. 1992 (MBIA Ins.) (5)
Ins.)
</TABLE>

D - 13.
<PAGE>

MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 407 (NEW JERSEY TRUST) (INSURED),
DEFINED ASSET FUNDS

PORTFOLIO
As of February 29, 2000

<S> <C> <C> <C> <C> <C> <C> <C>
9 New Jersey Educl. Fac. Auth., Rev. AAA $ 100,000 5.000 % 2025 07/01/09 $ 100,391 $ 86,238
Bonds (New Jersey City Univ. Iss.), @ 100.000
Ser. 1999 B (AMBAC Ins.)

10 New Jersey Econ. Dev. Auth., Ins. Rev. AAA 150,000 4.750 2025 05/15/08 145,619 124,256
Rfdg. Bonds (Educl. Testing Svc. Issue), @ 101.000
Ser. 1998 (MBIA Ins.)

--------- --------- ---------
TOTAL $ 2,900,000 $ 2,861,260 $ 2,444,867
========= ========= =========

See Notes
to Portfolios on page D - 28.
</TABLE>

D - 14.
<PAGE>

MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 407 (NEW YORK INSURED TRUST),
DEFINED ASSET FUNDS

STATEMENT OF CONDITION
As of February 29, 2000

<TABLE>
<S> <C> <C>
TRUST PROPERTY:
Investment in marketable securities -
at value (cost $ 5,007,912 )(Note 1)......... $ 4,294,890
Accrued interest ............................... 31,011
Accrued interest on Segregated Bonds (Note 5) .. 1,225
Principal payments receivable .................. 1,007
Cash - income .................................. 63,555
Cash - income on Segregated Bonds .............. 2,079
Cash - principal ............................... 344
-----------
Total trust property ......................... 4,394,111

LESS LIABILITIES:
Principal advance from Trustee ................. $ 1,007
Deferred sales charge (Note 5) ................. 35,985
Principal payments payable (Segregated Bonds) .. 344
Accrued Sponsor fees ........................... 378 37,714
----------- -----------

NET ASSETS, REPRESENTED BY:
4,947,001 units of fractional undivided
interest outstanding (Note 3)................ 4,262,209

Undistributed net investment income ............ 94,188 $ 4,356,397
----------- ===========

UNIT VALUE ($ 4,356,397 / 4,947,001 units )....... $ .88061
===========
</TABLE>

See Notes to Financial Statements.

D - 15.
<PAGE>

MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 407 (NEW YORK INSURED TRUST),
DEFINED ASSET FUNDS

STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
March 27, 1999
to
February 29,
2000
----

<S> <C>
INVESTMENT INCOME:
Interest income ........................ $ 233,499
Interest income on Segregated
Bonds (Note 5) ....................... 3,304
Trustee's fees and expenses ............ (5,640)
Sponsors' fees ......................... (1,977)
------------
Net investment income .................. 229,186
------------

REALIZED AND UNREALIZED LOSS
ON INVESTMENTS:
Realized loss on
securities sold or redeemed .......... (6,911)
Unrealized depreciation
of investments ....................... (713,022)
------------
Net realized and unrealized
loss on investments ................. (719,933)
------------

NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS .............. $ (490,747)
============
</TABLE>

See Notes to Financial Statements.

D - 16.
<PAGE>

MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 407 (NEW YORK INSURED TRUST),
DEFINED ASSET FUNDS

STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
March 27, 1999
to
February 29,
2000
----

<S> <C>
OPERATIONS:
Net investment income .................. $ 229,186
Realized loss on
securities sold or redeemed .......... (6,911)
Unrealized depreciation
of investments ....................... (713,022)
------------
Net decrease in net assets
resulting from operations ............ (490,747)
------------

INCOME DISTRIBUTIONS TO
HOLDERS (Note 2)....................... (131,050)
------------

SHARE TRANSACTIONS:
Deferred sales charge (Note 5):
Principal ............................ (36,329)

Redemption amounts:
Income ............................... (644)
Principal ............................ (44,484)
------------
Net share transactions ................. (81,457)
------------

NET DECREASE IN NET ASSETS ............... (703,254)

NET ASSETS AT BEGINNING OF PERIOD ........ 5,059,651
------------
NET ASSETS AT END OF PERIOD .............. $ 4,356,397
============
PER UNIT:
Income distributions during
period ............................... $ .02621
============
Net asset value at end of
period ............................... $ .88061
============
TRUST UNITS:
Redeemed during period ................. 52,999
Outstanding at end of period ........... 4,947,001
============
</TABLE>

See Notes to Financial Statements.

D - 17.
<PAGE>

MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 407 (NEW YORK INSURED TRUST),
DEFINED ASSET FUNDS

NOTES TO FINANCIAL STATEMENTS

1. SIGNIFICANT ACCOUNTING POLICIES

(B) The Fund is not subject to income taxes. Accordingly, no
provision for such taxes is required.

2. DISTRIBUTIONS

A distribution of net investment income is made to Holders each month.
Receipts other than interest, after deductions for redemptions and
applicable expenses, are also distributed periodically.

3. NET CAPITAL

<TABLE>
<S> <C>
Cost of 4,947,001 units at Date of Deposit ................. $ 5,006,020
Transfer to capital of interest on Segregated Bonds (Note 5) 3,304
Redemptions of units - net cost of 52,999 units redeemed
less redemption amounts (principal)....................... 9,147
Deferred sales charge (Note 5) ............................. (36,329)
Realized loss on securities sold or redeemed ............... (6,911)
Unrealized depreciation of investments...................... (713,022)
-----------

Net capital applicable to Holders .......................... $ 4,262,209
===========
</TABLE>

4. INCOME TAXES

As of February 29, 2000, unrealized depreciation of investments, based
on cost for Federal income tax purposes, aggregated $713,022, all of
which was related to depreciated securities. The cost of investment
securities for Federal income tax purposes was $5,007,912 at February
29, 2000.

D - 18.
<PAGE>

MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 407 (NEW YORK INSURED TRUST),
DEFINED ASSET FUNDS

NOTES TO FINANCIAL STATEMENTS

5. DEFERRED SALES CHARGE

$40,000 face amount of the Dormitory Auth. of the State of New York,
Green Chimneys Sch. for Little Folk, Ins. Rev. Bonds, Ser. 1999 A and
$50,000 face amount of Rome, Oneida Cnty., NY, G.O. Pub. Imp. Bonds,
Ser. 1998, have been segregated to fund the deferred sales charges.
The sales charges are being paid for with the interest received and by
periodic sales or maturity of these bonds, as well as principal
proceeds received in conjunction with the disposition on the
unsegregated bonds in the portfolio. A deferred sales charge of $2.38
per 1,000 units in the first year and $2.37 per 1,000 units in the
second year is charged on a quarterly basis, and paid to the Sponsors
periodically by the Trustee on behalf of the Holders, up to an
aggregate of $19.00 per 1,000 units over the first two years of the
life of the Fund. Should a Holder redeem Units prior to the second
anniversary of the Fund, the remaining balance of the deferred sales
charge will be charged.

D - 19.
<PAGE>

MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 407 (NEW YORK TRUST) (INSURED),
DEFINED ASSET FUNDS

PORTFOLIO
As of February 29, 2000

<TABLE>
<CAPTION>
Rating of Optional
Portfolio No. and Title of Issues Face Redemption
Securities (1) (4) Amount Coupon Maturities(3)Provisions(3) Cost(2) Value(2)
---------- --------- ----------- ----------- ------------ ------------ ---------- ---------

<S> <C> <C> <C> <C> <C> <C> <C>
1 Metropolitan Trans. Auth., NY, Commuter AAA $ 750,000 4.750 % 2026 07/01/08 $ 716,820 $ 610,493
Facs. Rev. Bonds, Ser. 1998 B (Financial @ 101.000
Guaranty Ins.)

2 Dormitory Auth. of the State of New AAA 40,000 3.500 2001 None 39,912 39,225
York, Green Chimneys Sch. for Little
Folk, Ins. Rev. Bonds, Ser. 1999 A
(AMBAC Ins.) (5)

3 City of Rome, Oneida Cnty., NY, G.O. Aaa(m) 50,000 4.300 2000 None 50,784 50,077
Pub. Imp. Bonds, Ser. 1998 (AMBAC Ins.)
(5)

4 Town of North Hempstead, Nassau Cnty., AAA 95,000 5.400 2021 02/15/07 98,305 88,345
NY, Various Purp. Serial Bonds, @ 102.000
Ser. 1997 A (Financial Guaranty Ins.)

5 Dormitory Auth. of the State of New York, Aaa(m) 170,000 5.150 2029 02/01/09 172,247 147,842
The Brooklyn Hosp. Ctr., FHA-Ins. Mtge. @ 101.000
Hosp. Rev. Bonds, Ser. 1999 (AMBAC Ins.)

6 Dormitory Auth. of the State of New York, AAA 435,000 5.000 2029 02/15/09 431,637 364,143
Mental Hlth. Svcs. Fac. Imp. Rev. Bonds, @ 101.000
Ser. 1999 B (MBIA Ins.)

7 Dormitory Auth. of the State of New York, AAA 750,000 4.750 2027 02/01/08 716,228 604,425
The New York and Presbyterian Hosp., @ 101.000
FHA-Ins. Mtge. Hosp. Rev. Bonds,
Ser. 1998 (AMBAC Ins.)

8 Dormitory Auth. of the State of New York, AAA 400,000 5.125 2027 01/01/08 404,092 345,792
City Univ. Sys. Consol. Rev. Bonds, @ 102.000
Ser. 1998 A (MBIA Ins.)

9 New York City, NY, Muni. Wtr. Fin. Auth., AAA 750,000 5.250 2029 06/15/07 766,433 658,785
Wtr. and Swr. Sys. Rev. Bonds, Fiscal @ 101.000
1998 Ser. B (AMBAC Ins.)
</TABLE>

D - 20.
<PAGE>

MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 407 (NEW YORK TRUST) (INSURED),
DEFINED ASSET FUNDS

PORTFOLIO
As of February 29, 2000

<S> <C> <C> <C> <C> <C> <C> <C>
10 New York City, NY, Transitional Fin. AAA $ 850,000 5.000 % 2027 08/15/07 $ 843,574 $ 721,548
Auth., Future Tax Secured Bonds, Fiscal @ 101.000
1998 Ser. A (Financial Guaranty Ins.)

11 Dormitory Auth. of the State of New York AAA 750,000 5.250 2026 07/01/07 767,880 664,215
Ithaca Coll., Ins. Rev. Bonds, Ser. 1997 @ 102.000
(AMBAC Ins.)

--------- --------- ---------
TOTAL $ 5,040,000 $ 5,007,912 $ 4,294,890
========= ========= =========
</TABLE>

See Notes to Portfolios on page D - 28.

D - 21.
<PAGE>

MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 407 (OHIO INSURED TRUST),
DEFINED ASSET FUNDS

STATEMENT OF CONDITION
As of February 29, 2000

<TABLE>
<S> <C> <C>
TRUST PROPERTY:
Investment in marketable securities -
at value (cost $ 3,093,072 )(Note 1)......... $ 2,666,264
Accrued interest ............................... 44,729
Accrued interest on Segregated Bonds (Note 5) .. 525
Prepaid Trustee's fees and expenses ............ 740
Cash - income .................................. 11,907
Cash - income on Segregated Bonds .............. 1,429
Cash - principal ............................... 1,288
-----------
Total trust property ......................... 2,726,882

LESS LIABILITIES:
Principal advance from Trustee ................. $ 1,330
Deferred sales charge (Note 5) ................. 24,189
Principal payments payable (Segregated Bonds) .. 1,288
Accrued Sponsor fees ........................... 232 27,039
----------- -----------

NET ASSETS, REPRESENTED BY:
3,058,443 units of fractional undivided
interest outstanding (Note 3)................ 2,642,699

Undistributed net investment income ............ 57,144 $ 2,699,843
----------- ===========

UNIT VALUE ($ 2,699,843 / 3,058,443 units )....... $ .88275
===========
</TABLE>

See Notes to Financial Statements.

D - 22.
<PAGE>

MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 407 (OHIO INSURED TRUST),
DEFINED ASSET FUNDS

STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
March 27, 1999
to
February 29,
2000
----

<S> <C>
INVESTMENT INCOME:
Interest income ........................ $ 147,084
Interest income on Segregated
Bonds (Note 5) ....................... 1,954
Trustee's fees and expenses ............ (3,797)
Sponsors' fees ......................... (1,269)
------------
Net investment income .................. 143,972
------------

REALIZED AND UNREALIZED LOSS
ON INVESTMENTS:
Realized loss on
securities sold or redeemed .......... (25,755)
Unrealized depreciation
of investments ....................... (426,808)
------------
Net realized and unrealized
loss on investments ................. (452,563)
------------

NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS .............. $ (308,591)
============
</TABLE>

See Notes to Financial Statements.

D - 23.
<PAGE>

MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 407 (OHIO INSURED TRUST),
DEFINED ASSET FUNDS

STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
March 27, 1999
to
February 29,
2000
----

<S> <C>
OPERATIONS:
Net investment income .................. $ 143,972
Realized loss on
securities sold or redeemed .......... (25,755)
Unrealized depreciation
of investments ....................... (426,808)
------------
Net decrease in net assets
resulting from operations ............ (308,591)
------------

DISTRIBUTIONS TO HOLDERS (Note 2):
Income ................................. (82,133)
Principal .............................. (5,230)
------------
Total distributions .................... (87,363)
------------

SHARE TRANSACTIONS:
Deferred sales charge (Note 5):
Principal ............................ (25,477)

Redemption amounts:
Income ............................... (2,741)
Principal ............................ (166,725)
------------
Net share transactions ................. (194,943)
------------

NET DECREASE IN NET ASSETS ............... (590,897)

NET ASSETS AT BEGINNING OF PERIOD ........ 3,290,740
------------
NET ASSETS AT END OF PERIOD .............. $ 2,699,843
============
PER UNIT:
Income distributions during
period ............................... $ .02581
============
Principal distributiions during
period ............................... $ .00171
============
Net asset value at end of
period ............................... $ .88275
============
TRUST UNITS:
Redeemed during period ................. 191,557
Outstanding at end of period ........... 3,058,443
============
</TABLE>

See Notes to Financial Statements.

D - 24.
<PAGE>

MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 407 (OHIO INSURED TRUST),
DEFINED ASSET FUNDS

NOTES TO FINANCIAL STATEMENTS

1. SIGNIFICANT ACCOUNTING POLICIES

(B) The Fund is not subject to income taxes. Accordingly, no
provision for such taxes is required.

2. DISTRIBUTIONS

A distribution of net investment income is made to Holders each month.
Receipts other than interest, after deductions for redemptions and
applicable expenses, are also distributed periodically.

3. NET CAPITAL

<TABLE>
<S> <C>
Cost of 3,058,443 units at Date of Deposit ................. $ 3,096,782
Transfer to capital of interest on Segregated Bonds (Note 5) 1,954
Redemptions of units - net cost of 191,557 units redeemed
less redemption amounts (principal)....................... 27,233
Principal distributions .................................... (5,230)
Deferred sales charge (Note 5) ............................. (25,477)
Realized loss on securities sold or redeemed ............... (25,755)
Unrealized depreciation of investments...................... (426,808)
-----------

Net capital applicable to Holders .......................... $ 2,642,699
===========
</TABLE>

4. INCOME TAXES

As of February 29, 2000, unrealized depreciation of investments, based
on cost for Federal income tax purposes, aggregated $426,808, all of
which was related to depreciated securities. The cost of investment
securities for Federal income tax purposes was $3,093,072 at February
29, 2000.

D - 25.
<PAGE>

MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 407 (OHIO INSURED TRUST),
DEFINED ASSET FUNDS

NOTES TO FINANCIAL STATEMENTS

5. DEFERRED SALES CHARGE

$60,000 face amount of The Ohio Univ., Gen. Receipts Bonds (State
Univ. of Ohio), Ser. 1999, have been segregated to fund the deferred
sales charges. The sales charges are being paid for with the interest
received and by periodic sales or maturity of these bonds, as well as
principal proceeds received in conjunction with the disposition on the
unsegregated bonds in the portfolio. A deferred sales charge of $2.38
per 1,000 units in the first year and $2.37 per 1,000 units in the
second year is charged on a quarterly basis, and paid to the Sponsors
periodically by the Trustee on behalf of the Holders, up to an
aggregate of $19.00 per 1,000 units over the first two years of the
life of the Fund. Should a Holder redeem Units prior to the second
anniversary of the Fund, the remaining balance of the deferred sales
charge will be charged.

D - 26.
<PAGE>

MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 407 (OHIO TRUST) (INSURED),
DEFINED ASSET FUNDS

PORTFOLIO
As of February 29, 2000

<S> <C> <C> <C> <C> <C> <C> <C>
1 Wyoming City Sch. Dist. Dist., Cnty. AAA $ 250,000 5.000 % 2023 12/01/08 $ 250,000 $ 215,710
of Hamilton, OH, Sch. Imp. Bonds (Bd. @ 101.000
of Educ.), Ser. 1998 B (Financial
Guaranty Ins.)

2 Licking Valley Local Sch. Dist., Licking Aaa(m) 500,000 5.000 2025 12/01/09 500,000 428,970
and Muskingum Cntys., OH, Sch. Bldg. @ 100.000
Construction Bonds, Ser. 1999
(MBIA Ins.)

3 County of Washington, OH, Hosp. Fac. Aaa(m) 500,000 4.500 2023 09/01/08 461,625 387,840
Rev. Rfdg. and Imp. Bonds (Marietta @ 102.000
Area Hlth. Care, Inc. Proj.), Ser. 1998
(FSA Ins.)

4 City of Cleveland, OH, Pub. Pwr. Sys., AAA 500,000 5.000 2024 11/15/06 500,000 429,080
First Mtge. Rev. Rfdg. Bonds, @ 102.000
Ser. 1996-1 (MBIA Ins.)

5 County of Hamilton, OH, Sales Tax Bonds AAA 375,000 5.000 2027 06/01/08 375,000 317,940
(Hamilton Cnty. Football Proj.), @ 101.000
Ser. 1998 B (MBIA Ins.)

6 The Ohio Univ., Gen. Receipts Bonds AAA 500,000 5.000 2024 12/01/09 500,000 429,025
(State Univ. of Ohio), Ser. 1999 @ 100.000
(FSA Ins.)

7 The Ohio Univ., Gen. Receipts Bonds AAA 30,000 3.400 2000 None 30,023 29,781
(State Univ. of Ohio), Ser. 1999 (FSA
Ins.) (5)
30,000 3.600 2001 None 30,037 29,256

8 Ohio Higher Educl. Fac. Comm., Higher AAA 430,000 5.400 2022 12/01/07 446,387 398,662
Educl. Fac. Rev. Bonds (Univ. of Dayton @ 101.000
1997 Proj.) (AMBAC Ins.)

--------- --------- ---------
TOTAL $ 3,115,000 $ 3,093,072 $ 2,666,264
========= ========= =========
</TABLE>

See Notes to Portfolios on page D - 28.

D - 27.
<PAGE>

MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 407 (MICHIGAN INSURED, NEW JERSEY
INSURED, NEW YORK INSURED, AND OHIO INSURED TRUSTS),
DEFINED ASSET FUNDS

NOTES TO PORTFOLIOS
As of February 29, 2000

(1) The ratings of the bonds are by Standard & Poor's Ratings Group, or by
Moody's Investors Service, Inc. if followed by "(m)", or by Fitch
Investors Service, Inc. if followed by "(f)"; "NR" indicates that this
bond is not currently rated by any of the above-mentioned rating
services. These ratings have been furnished by the Evaluator but not
confirmed with the rating agencies.

(2) See Notes to Financial Statements.

(3) Optional redemption provisions, which may be exercised in whole or in
part, are initially at prices of par plus a premium, then subsequently
at prices declining to par. Certain securities may provide for
redemption at par prior or in addition to any optional or mandatory
redemption dates or maturity, for example, through the operation of a
maintenance and replacement fund, if proceeds are not able to be used
as contemplated, the project is condemned or sold or the project is
destroyed and insurance proceeds are used to redeem the securities.
Many of the securities are also subject to mandatory sinking fund
redemption commencing on dates which may be prior to the date on which
securities may be optionally redeemed. Sinking fund redemptions are at
par and redeem only part of the issue. Some of the securities have
mandatory sinking funds which contain optional provisions permitting
the issuer to increase the principal amount of securities called on a
mandatory redemption date. The sinking fund redemptions with optional
provisions may, and optional refunding redemptions generally will,
occur at times when the redeemed securities have an offering side
evaluation which represents a premium over par. To the extent that the
securities were acquired at a price higher than the redemption price,
this will represent a loss of capital when compared with the Public
Offering Price of the Units when acquired. Distributions will
generally be reduced by the amount of the income which would otherwise
have been paid with respect to redeemed securities and there will be
distributed to Holders any principal amount and premium received on
such redemption after satisfying any redemption requests for Units
received by the Fund. The estimated current return may be affected by
redemptions.

(4) Insured by AAA-rated insurance companies that guarantee timely
payments of principal and interest on the bonds (but not Fund units or
the market value of the bonds before they mature).

(5) These bonds have been segregated to fund the deferred sales charges.

D - 28.
<PAGE>
DEFINED ASSET FUNDS--REGISTERED TRADEMARK--

<TABLE>
<S> <C>
HAVE QUESTIONS ? MUNICIPAL INVESTMENT TRUST FUND
Request the most MULTISTATE SERIES--407
recent free Information (A Unit Investment Trust)
Supplement that gives more ---------------------------------------
details about the Fund, This Prospectus does not contain
by calling: complete information about the
The Chase Manhattan Bank investment company filed with the
1-800-323-1508 Securities and Exchange Commission in
Washington, D.C. under the:
- Securities Act of 1933 (file no.
333-72789) and
- Investment Company Act of 1940 (file
no. 811-1777).
TO OBTAIN COPIES AT PRESCRIBED RATES--
WRITE: Public Reference Section of the
Commission
450 Fifth Street, N.W., Washington,
D.C. 20549-6009
CALL: 1-800-SEC-0330.
VISIT: http://www.sec.gov.
---------------------------------------
No person is authorized to give any
information or representations about
this Fund not contained in this
Prospectus or the Information
Supplement, and you should not rely on
any other information.
---------------------------------------
When units of this Fund are no longer
available, this Prospectus may be used
as a preliminary prospectus for a
future series, but some of the
information in this Prospectus will be
changed for that series.
UNITS OF ANY FUTURE SERIES MAY NOT BE
SOLD NOR MAY OFFERS TO BUY BE ACCEPTED
UNTIL THAT SERIES HAS BECOME EFFECTIVE
WITH THE SECURITIES AND EXCHANGE
COMMISSION. NO UNITS CAN BE SOLD IN ANY
STATE WHERE A SALE WOULD BE ILLEGAL.
100152RR--6/00
</TABLE>