THE MERRILL LYNCH FUND OF STRIPPED ('ZERO')
U.S. TREASURY SECURITIES, SERIES A THROUGH K
- --------------------------------------------------------------------------------
Each Series (a 'Fund') was formed to provide safety of capital and a high yield
to maturity through investment in fixed portfolios consisting primarily of
stripped debt obligations of the United States of America and receipts and
certificates for such stripped debt obligations ('Stripped Treasury
Securities'). See Risk Factors--Special Characteristics of Stripped Treasury
Securities for a brief description of the characteristics of the various types
of these Securities. Each Trust also contains an interest-bearing Treasury
Security (the 'Treasury Note') to provide income to pay the expenses of the
Trust. There is no assurance that these objectives will be realized if Units are
sold before the underlying Securities mature, because market prices of the
Securities before maturity and therefore the value of the Units will vary with
changes in interest rates and other factors. Each Series consists of a number of
separate unit investment trusts ('Trusts'), each designated by the year in which
its Stripped Treasury Securities mature. Series A consists of the 2003 Trust;
Series B, of the 1995, 2001 and 2005 Trusts; Series C, of the 1996 and 2006
Trusts; Series D, of the 1997 and 2007 Trusts; Series E, of the 1998 and 2008
Trusts; Series F, of the 1999 and 2009 Trusts; Series G, of the 2000 and 2010
Trusts; Series H, of the 2011 Trust; Series I, of the 2002 Trust; Series J of
the 2013 Trust; and Series K, of the 2004 and 2014 Trusts. Stripped Treasury
Securities do not make any periodic payments of interest prior to maturity;
accordingly, each Trust's portfolio as a whole is priced at a deep discount from
face amount and Unit prices may be subject to greater fluctuations in response
to changing interest rates than in a fund consisting of debt obligations of
comparable maturities that pay interest currently. This risk is greater when the
period to maturity is longer. See Risk Factors. The Sponsor may deposit
additional Securities, with maturities identical to those of the Securities
initially deposited, in any or all of the Trusts in connection with the creation
and sale of additional Units (see Fund Structure).
Units of interest ('Units') in the Trusts are sold only to certain separate
accounts (the 'Accounts') to fund the benefits under Variable Life Insurance
Policies (the 'Policies') issued by Monarch Life Insurance Company ('Monarch'),
Merrill Lynch Life Insurance Company and ML Life Insurance Company of New York
(collectively, the 'Insurers'). The Accounts invest in Units of the Trusts in
accordance with allocation instructions received from Policyowners. Accordingly,
the interest of a Policyowner in the Units is subject to the terms of the Policy
and is described in the accompanying Prospectus for the Policies, which should
be reviewed carefully by a person considering the purchase of a Policy. That
Prospectus describes the relationship between increases or decreases in the net
asset value of, and any distributions on, Units, and the benefits provided under
a Policy. The rights of the Accounts as Holders of Units should be distinguished
from the rights of a Policyowner which are described in the Policies. As long as
Units are sold only to the Accounts, the term 'Holder' in this Prospectus shall
refer to the Accounts (or the Sponsor if it holds Units acquired in the
secondary market--see Market for Units).
- --------------------------------------------------------------------------------
SPONSOR:
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
PROSPECTUS
DATED MAY 1, 1995
INQUIRIES SHOULD BE DIRECTED READ AND RETAIN THIS PROSPECTUS
TO THE TRUSTEE 1-800-323-1508. FOR FUTURE REFERENCE
<PAGE>
INVESTMENT SUMMARY AS OF DECEMBER 31, 1994+, THE EVALUATION DATE
The following Trusts, each designated for the maturity of its underlying
Stripped Treasury Securities, are offered in Series A-K (see Portfolios).
1995
TRUST
--------------
FACE AMOUNT OF SECURITIES...............$ 79,374,361
NUMBER OF UNITS......................... 79,255,752
FACE AMOUNT OF SECURITIES PER UNIT......$ 1.00
FRACTIONAL UNDIVIDED INTEREST IN TRUST
REPRESENTED BY EACH UNIT................ 1/79,255,752nd
OFFERING PRICE PER 1,000 UNITS***
Aggregate offering side evaluation
of Securities in Trust*.................$ 74,877,986
--------------
Net asset value (divided by number
of Units, times 1,000)..................$ 944.76
Plus the applicable transaction
charge**............................$ 2.37
--------------
Offering Price per 1,000
Units***++..........................$ 947.13
--------------
--------------
SPONSOR'S REPURCHASE PRICE PER 1,000
UNITS
(based on offering side evaluation of
underlying Securities)++..............$ 944.76
REDEMPTION PRICE PER 1,000 UNITS (based
on bid side evaluation of underlying
Securities)****++ $ 944.16
CALCULATION OF ESTIMATED NET ANNUAL CASH
INTEREST INCOME PER $1,000 FACE AMOUNT
Gross annual cash income............$ .35
Less estimated annual expenses......$ .35
--------------
Estimated net annual cash income....$ 0.00
--------------
--------------
TRUSTEE'S ANNUAL FEE AND EXPENSES
Per $1,000 face amount of underlying
Securities (see Expenses and
Charges)..............................$ .35
EVALUATOR'S FEE FOR EACH EVALUATION
Minimum of $5.00 plus 25 cents for
each issue of underlying Securities
in excess of 50 issues, treating
separate maturities as separate
issues (see Expenses and Charges).
EVALUATION TIME
3:30 P.M. New York Time
- ------------------
+ The Indentures were signed and the initial deposits were made as of
April 30, 1984 (Series A: 2003 Trust), December 27, 1984 (Series B: 1995, 2001
and 2005 Trusts), April 23, 1986 (Series C: 1996 and 2006 Trusts), April 28,
1987 (Series D: 1997 and 2007 Trusts), April 27, 1988 (Series E: 1998 and 2008
Trusts), April 25, 1989 (Series F: 1999 and 2009 Trusts), April 27, 1990 (Series
G: 2000 and 2010 Trusts), April 30, 1991 (Series H: 2011 Trust), April 28, 1992
(Series I: 2002 Trust), April 20, 1993 (Series J: 2013 Trust ) and April 26,
1994 (Series K: 2004 and 2014 Trusts).
++ Plus any net cash.
+++ During the last three months of the 1997 Trust, the Trustee's Fee
and therefore estimated expenses will be eliminated, and the estimated net
annual income per Units will remain the same (see Selection and Acquisition of
Securities).
* Includes amortization of discount, calculated using the 'interest'
method, to expected date of settlement (five business days after purchase) for
Securities purchased on the Investment Summary date.
**The transaction charges applicable as of the date above are .25% of the
Offering Price of the 1995 and 1996 Trusts (.251% of the net amount invested),
.50% of the Offering Price of the 1997 Trust (.503% of the net amount invested),
.75% of the Offering Price of the 1998 and 1999 Trusts (.756% of the net amount
invested) and 1.00% of the Offering Price of the 2000 Trust (1.010% of the net
amount invested). Transaction charges will decrease as the Trusts approach
maturity, as described under Sale of Units.
*** These figures are computed by dividing the aggregate offering side
evaluation of the underlying Securities in the Trust (the price at which they
could be purchased directly by the public if they were available) by the number
of Units of the Trust outstanding, multiplying the result times 1,000 and adding
the applicable transaction charge as described in the preceding footnote. These
figures assume a purchase of 1,000 Units. The price of a single Unit, or any
multiple thereof, is calculated by dividing the Offering Price per 1,000 Units
above by 1,000, and multiplying by the number of Units. As explained under Sale
of Units--Offering Price, as it is assumed that income on the Treasury Note will
equal Trust expenses, no accrued interest is added to the Offering, Sponsor's
Repurchase or Redemption Prices.
**** Figures shown are $2.37, $2.94, $4.93, $6.60, $6.14 and $7.49 less
than the Offering Price and $.60, $.62, $.62, $.63 and $.63 less than the
Sponsor's Repurchase Price per 1,000 units, with respect to the 1995 through
2000 Trusts, respectively.
A-2
<PAGE>
INVESTMENT SUMMARY AS OF DECEMBER 31, 1994, THE EVALUATION DATE (CONTINUED)
<TABLE><CAPTION>
1996 1997 1998 1999 2000
TRUST TRUST TRUST TRUST TRUST
- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
$ 54,160,792 $ 61,704,881 $ 64,438,871 $ 27,332,205 $ 23,378,725
54,159,061 61,590,781 64,390,067 27,332,137 23,345,619
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
1/54,159,061st 1/61,590,781st 1/64,390,067th 1/27,332,137th 1/23,345,619th
$ 50,036,653 $ 52,713,739 $ 50,873,287 $ 19,977,377 $ 15,846,637
- -------------- -------------- -------------- -------------- --------------
$ 923.88 $ 855.87 $ 790.08 $ 730.91 $ 678.78
$ 2.32 $ 4.31 $ 5.97 $ 5.53 $ 6.86
- -------------- -------------- -------------- -------------- --------------
$ 926.20 $ 860.18 $ 796.05 $ 736.44 $ 685.64
- -------------- -------------- -------------- -------------- --------------
- -------------- -------------- -------------- -------------- --------------
$ 923.88 $ 855.87 $ 790.08 $ 730.91 $ 678.78
$ 923.26 $ 855.25 $ 789.45 $ 730.30 $ 678.15
$ .35 $ .35 $ .35 $ .35 $ .35
$ .35 $ .35 $ .35 $ .35 $ .35
- -------------- -------------- -------------- -------------- --------------
$ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
- -------------- -------------- -------------- -------------- --------------
- -------------- -------------- -------------- -------------- --------------
$ .35 $ .35 $ .35+++ $ .35 $ .35
</TABLE>
A-3
<PAGE>
INVESTMENT SUMMARY AS OF DECEMBER 31, 1994, THE EVALUATION DATE (CONTINUED)
2001
TRUST
--------------
FACE AMOUNT OF SECURITIES................................$ 74,009,844
NUMBER OF UNITS.......................................... 73,744,210
FACE AMOUNT OF SECURITIES PER UNIT.......................$ 1.00
FRACTIONAL UNDIVIDED INTEREST IN TRUST REPRESENTED BY
EACH UNIT................................................ 1/73,744,210th
OFFERING PRICE PER 1,000 UNITS***
Aggregate offering side evaluation of Securities in
Trust*...............................................$ 46,510,409
--------------
Net asset value (divided by number of Units, times
1,000)...............................................$ 630.70
Plus the applicable transaction charge**.............$ 6.37
--------------
Offering Price per 1,000 Units***+...................$ 637.07
--------------
--------------
SPONSOR'S REPURCHASE PRICE PER 1,000 UNITS
(based on offering side evaluation of underlying
Securities)+.........................................$ 630.70
REDEMPTION PRICE PER 1,000 UNITS (based on bid side
evaluation of underlying
Securities)****+.......................................$ 630.12
CALCULATION OF ESTIMATED NET ANNUAL CASH INTEREST INCOME
PER $1,000 FACE AMOUNT
Gross annual cash income.............................$ .35
Less estimated annual expenses.......................$ .35
--------------
Estimated net annual cash income.....................$ 0.00
--------------
--------------
TRUSTEE'S ANNUAL FEE AND EXPENSES
Per $1,000 face amount of underlying Securities (see
Expenses and Charges)..................................$ .35
- ------------------
+ Plus any net cash.
++ During the last three months of the 2005 Trust, the Trustee's fee and
expenses will be eliminated, and the estimated net annual income per Unit will
remain the same (see Selection and Acquisition of Securities).
* Includes amortization of discount, calculated using the 'interest'
method, to expected date of settlement (the business day after purchase) for
Units purchased on the Investment Summary date.
**The transaction charges applicable as of the date above are 1.00% of
the Offering price of the 2001 and 2002 Trusts (1.010% of the net amount
invested) and 1.50% of the Offering Price of the 2003, 2004, 2005 and 2006
Trusts (1.523% of the net amount invested). Transaction charges will decrease as
the Trusts approach maturity, as described under Sale of Units.
*** These figures are computed by dividing the aggregate offering side
evaluation of the underlying Securities in the particular Trust (the price at
which they could be purchased directly by the public if they were available) by
the number of Units of the Trust outstanding, multiplying the result times 1,000
and adding the applicable transaction charge as described in the preceding
footnote. These figures assume a purchase of 1,000 Units. The price of a single
Unit, or any multiple thereof, is calculated simply by dividing the Offering
Price per 1,000 Units above by 1,000, and multiplying by the number of Units. As
explained under Sale of Units--Offering Price, as it is assumed that income on
the Treasury Note will equal Trust expenses, no accrued interest is added to the
Offering, Soponsor's Repurchase or Redemption Prices.
**** Figures shown are $6.95, $6.53, $8.52, $8.16, $7.67 and $7.26 less
than the Offering Price and $.58, $.64, $.64, $.60, $.62 and $.65 less than the
Sponsor's Repurchase Price per 1,000 Units, with respect to the 2001 through
2006 Trusts, respectively.
A-4
<PAGE>
INVESTMENT SUMMARY AS OF DECEMBER 31, 1994, THE EVALUATION DATE (CONTINUED)
2002 2003 2004 2005 2006
TRUST TRUST TRUST TRUST TRUST
- ------------ ------------ ------------ ------------ ------------
$ 6,626,800 $ 86,138,197 $ 8,463,782 $ 36,852,032 $ 9,294,933
6,620,929 86,053,770 8,463,782 36,552,329 9,061,845
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.02
1/6,620,929th 1/86,053,770th 1/8,463,782nd 1/36,552,329th 1/9,061,845th
$ 3,858,338 $ 44,497,891 $ 4,202,228 $ 16,900,151 $ 3,930,822
- ------------ ------------ ------------ ------------ ------------
$ 582.75 $ 517.09 $ 496.50 $ 462.35 $ 433.78
$ 5.89 $ 7.88 $ 7.56 $ 7.05 $ 6.61
- ------------ ------------ ------------ ------------ ------------
$ 588.64 $ 524.97 $ 504.06 $ 469.40 $ 440.39
- ------------ ------------ ------------ ------------ ------------
- ------------ ------------ ------------ ------------ ------------
$ 582.75 $ 517.09 $ 496.50 $ 462.35 $ 433.78
$ 582.11 $ 516.45 $ 495.90 $ 461.73 $ 433.13
$ .35 $ .35 $ .35 $ .35 $ .35
$ .35 $ .35 $ .35 $ .35 $ .35
- ------------ ------------ ------------ ------------ ------------
$ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
- ------------ ------------ ------------ ------------ ------------
- ------------ ------------ ------------ ------------ ------------
$ .35 $ .35 $ .35 $ .35++ $ .35
A-5
<PAGE>
INVESTMENT SUMMARY AS OF DECEMBER 31, 1994, THE EVALUTION DATE (CONTINUED)
2007
TRUST
--------------
FACE AMOUNT OF SECURITIES................................$ 22,959,683
NUMBER OF UNITS.......................................... 22,426,556
FACE AMOUNT OF SECURITIES PER UNIT.......................$ 1.02
FRACTIONAL UNDIVIDED INTEREST IN TRUST REPRESENTED BY
EACH UNIT................................................ 1/22,426,556th
OFFERING PRICE PER 1,000 UNITS***
Aggregate offering side evaluation of Securities in
Trust*...............................................$ 8,960,118
--------------
Net asset value (divided by number of Units, times
1,000)...............................................$ 399.53
Plus the applicable transaction charge**.............$ 6.08
--------------
Offering Price per 1,000 Units***+...................$ 405.61
--------------
--------------
SPONSOR'S REPURCHASE PRICE PER 1,000 UNITS
(based on offering side evaluation of underlying
Securities)+.........................................$ 399.53
REDEMPTION PRICE PER 1,000 UNITS (based on bid side
evaluation of underlying
Securities)****+.......................................$ 398.98
CALCULATION OF ESTIMATED NET ANNUAL CASH INTEREST INCOME
PER $1,000 FACE AMOUNT
Gross annual cash income.............................$ .35
Less estimated annual expenses.......................$ .35
--------------
Estimated net annual cash income.....................$ 0.00
--------------
--------------
TRUSTEE'S ANNUAL FEE AND EXPENSES
Per $1,000 face amount of underlying Securities (see
Expenses and Charges)..................................$ .35++
- ------------------
+ Plus any net cash.
++ During the last twelve months of the 2007 Trust, the last 24 months
of the 2008 Trust, the last 36 months of the 2009 Trust, the last 48 months of
the 2010 Trust, the last 60 months of the 2011 Trust and the last 3 months
(potentially up to 63 months in the Treasury Note is called when it first
becomes callable), of the 2013 Trust, the Trustee's fee and expenses will be
eliminated, and the estimated net annual income per Unit will remain the same
(see Selection and Acquisition of Securities).
* Includes amortization of discount, calculated using the 'interest'
method, to expected date of settlement (the business day after purchase) for
Units purchased on the Investment Summary Date.
**The transaction charges applicable as of the date above are 1.50% of
the Offering Price of the 2007 Trust (1.523% of the net amount invested), 1.75%
of the Offering Price of the 2008, 2009, 2010 and 2011 Trusts (1.781% of the net
amount invested), 2.00% of the Offering Price of the 2013 Trust (2.041% of the
net amount invested). Transaction charges will decrease as the Trusts approach
maturity, as described under Sale of Units.
*** These figures are computed by dividing the aggregate offering side
evaluation of the underlying Securities in the particular Trust (the price at
which they could be purchased directly by the public if they were available) by
the number of Units of the Trust outstanding, multiplying the result times 1,000
and adding the applicable transaction charge as described in the preceding
footnote. These figures assume a purchase of 1,000 Units. The price of a single
Unit, or any multiple thereof, is calculated simply by dividing the Offering
Price per 1,000 Units above by 1,000, and multiplying by the number of Units. As
explained under Sale of Units--Offering Price, as it is assumed that income on
the Treasury Note will equal Trust expenses, no accrued interest is added to the
Offering, Soponsor's Repurchase or Redemption Prices.
**** Figures shown are $6.63, $7.03, $6.61, $6.05, $5.68 and $5.57 less
than the Offering Price and $.55, $.62, $.63, $.57, $.60 and $.63 less than the
Sponsor's Repurchase Price per 1,000 Units, with respect to the 2007 through
2013 Trusts, respectively.
A-6
<PAGE>
INVESTMENT SUMMARY AS OF DECEMBER 31, 1994, THE EVALUATION DATE (CONTINUED)
<TABLE><CAPTION>
2008 2009 2010 2011 2013
TRUST TRUST TRUST TRUST TRUST
- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
$ 55,482,418 $ 24,496,249 $ 22,389,555 $ 8,862,035 $ 9,474,303
55,283,741 24,354,501 22,412,755 8,820,153 9,487,523
$ 1.00 $ 1.00 $ .99 $ 1.00 $ .99
1/55,283,741st 1/24,354,501st 1/22,412,755th 1/8,820,153rd 1/9,487,523rd
$ 20,032,603 $ 8,177,067 $ 6,897,312 $ 2,514,042 $ 2,294,634
- -------------- -------------- -------------- -------------- --------------
$ 362.36 $ 335.75 $ 307.74 $ 285.03 $ 241.86
$ 6.45 $ 5.98 $ 5.48 $ 5.08 $ 4.94
- -------------- -------------- -------------- -------------- --------------
$ 368.81 $ 341.73 $ 313.22 $ 290.11 $ 246.80
- -------------- -------------- -------------- -------------- --------------
- -------------- -------------- -------------- -------------- --------------
$ 362.36 $ 335.75 $ 307.74 $ 285.03 $ 241.86
$ 361.73 $ 335.12 $ 307.17 $ 284.43 $ 241.23
$ .35 $ .35 $ .35 $ .35 $ .35
$ .35 $ .35 $ .35 $ .35 $ .35
- -------------- -------------- -------------- -------------- --------------
$ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
- -------------- -------------- -------------- -------------- --------------
- -------------- -------------- -------------- -------------- --------------
$ .35++ $ .35++ $ .35++ $ .35++ $ .35++
</TABLE>
A-7
<PAGE>
INVESTMENT SUMMARY AS OF DECEMBER 31, 1994, THE EVALUATION DATE (CONTINUED)
2014
TRUST
--------------
FACE AMOUNT OF SECURITIES................................$ 19,244,726
NUMBER OF UNITS.......................................... 19,262,056
FACE AMOUNT OF SECURITIES PER UNIT.......................$ .99
FRACTIONAL UNDIVIDED INTEREST IN TRUST REPRESENTED BY
EACH UNIT................................................ 1/19,262,056th
OFFERING PRICE PER 1,000 UNITS***
Aggregate offering side evaluation of Securities in
Trust*...............................................$ 4,313,906
--------------
Net asset value (divided by number of Units, times
1,000)...............................................$ 223.95
Plus the applicable transaction charge**.............$ 4.57
--------------
Offering Price per 1,000 Units***+...................$ 228.52
--------------
--------------
SPONSOR'S REPURCHASE PRICE PER 1,000 UNITS
(based on offering side evaluation of underlying
Securities)+.........................................$ 223.95
REDEMPTION PRICE PER 1,000 UNITS (based on bid side
evaluation of underlying
Securities)****+.......................................$ 223.35
CALCULATION OF ESTIMATED NET ANNUAL CASH INTEREST INCOME
PER $1,000 FACE AMOUNT
Gross annual cash income.............................$ .35
Less estimated annual expenses.......................$ .35
--------------
Estimated net annual cash income.....................$ 0.00
--------------
--------------
TRUSTEE'S ANNUAL FEE AND EXPENSES
Per $1,000 face amount of underlying Securities (see
Expenses and Charges)..................................$ .35
EVALUATOR'S FEE FOR EACH EVALUATION
Minimum of $5.00 plus 25 cents for each issue of
underlying Securities in excess of 50 issues,
treating separate maturities as separate issues
(see Expenses ad Charges).
EVALUATION TIME
3:30 P.M. New York Time
- ------------------
+ Plus any net cash.
* Includes amortization of discount, calculated using the 'interest'
method, to expected date of settlement (the business day after purchase) for
Units purchased on the Investment Summary date.
**The transaction charge applicable as of the date above is 2.00% of the
Offering price of the 2014 Trust (2.041% of the net amount invested).
Transaction charges will decrease as the Trusts approach maturity, as described
under Sale of Units.
*** These figures are computed by dividing the aggregate offering side
evaluation of the underlying Securities in the particular Trust (the price at
which they could be purchased directly by the public if they were available) by
the number of Units of the Trust outstanding, multiplying the result times 1,000
and adding the applicable transaction charge as described in the preceding
footnote. These figures assume a purchase of 1,000 Units. The price of a single
Unit, or any multiple thereof, is calculated simply by dividing the Offering
Price per 1,000 Units above by 1,000, and multiplying by the number of Units. As
explained under Sale of Units--Offering Price, as it is assumed that income on
the Treasury Note will equal Trust expenses, no accrued interest is added to the
Offering, Soponsor's Repurchase or Redemption Prices.
**** Figure shown is $5.17 less than the Offering Price and $.60 less than
the Sponsor's Repurchase Price per 1,000 units, with respect to the 2014 Trust.
A-8
<PAGE>
INVESTMENT SUMMARY (CONTINUED)
TRUST PORTFOLIOS (see Portfolios)
SECURITIES--Each Trust consists primarily of issues of Stripped Treasury
Securities purchased at a deep discount. It is intended that Securities selected
for inclusion in the Trusts will comply with any investment limitations required
to assure favorable Federal income tax treatment for the Policies issued by the
Insurers. The Securities are not rated but, in the opinion of the Sponsor, have
credit characteristics comparable to those of Securities rated 'AAA' by
nationally recognized rating agencies. Each Trust also contains one
interest-bearing Treasury Security (the 'Treasury Note') deposited in order to
provide cash income with which to pay the expenses of the Trust.
RISK FACTORS--An investment in Units of a Trust should be made with an
understanding of the risks which an investment in debt obligations, most of
which were purchased at a deep discount, may entail, including the risk that the
value of a Trust and hence of the Units will decline with increases in interest
rates. The market value of Stripped Treasury Securities, and therefore the value
of the Units, may be subject to greater fluctuations in response to changing
interest rates than debt obligations of comparable maturities which pay interest
currently. The risk is greater when the period to maturity is longer. (See p.1.)
For each 1,000 Units of a Trust purchased, it is expected that a Holder will
receive total distributions of approximately $1,000 for Units held until
maturity of the underlying Securities of that Trust. The Offering Price will
vary in accordance with fluctuations in the values of the Securities and the
distributions could change if the Securities are paid or sold, or if the
expenses of the Trust change. For a discussion of the economic differences
between the Trusts and a fund consisting of customary securities, see
Description of the Fund--Income and Yield.
MARKET FOR UNITS--The Sponsor has committed to maintain a market for Units
based on the aggregate offer side evaluation of the underlying Securities in
each Trust. See p.7. If that market is not maintained, a Holder will be able to
dispose of Units through redemption at prices based on the lower, aggregate bid
side evaluation of the underlying Securities in the Trust. See Redemption.
Market conditions may cause the prices available in the market maintained by the
Sponsor or upon exercise of redemption rights to be more or less than the amount
paid for Units. The market prices of Stripped Treasury Securities, and hence of
the Units, are subject to greater fluctuations than the prices of securities
making current payments of interest.
DISTRIBUTIONS--Distributions normally will be made only on the first
business day following the maturity of the Stripped Treasury Securities in a
Trust to holders of record on the business day immediately preceding the date of
the distribution, and may include any amount received upon the sale of
Securities in order to meet redemptions of the Units which exceeds the amount
necessary to pay those redemptions and any accumulated net interest income.
Principal from maturity of the Treasury Note will not be distributed until
disposition of the Stripped Treasury Security in the Trust. There will be no
payments of interest on the Securities other than on the Treasury Note in each
Trust, which will be used to pay the expenses of the Trust. Consequently, no
distributions of interest income should be expected. However, the Sponsor may
direct the Trustee to distribute to Holders of a Trust as of the last Business
Day in any year any cash balance in the Income and Capital Accounts not
otherwise allocated. See Administration of the Fund--Accounts and Distributions.
Nevertheless, the gross interest income on all securities in the Trust is
taxable to Holders. Each Stripped Treasury Security will be treated for Federal
income tax purposes as having 'original issue discount,' which must be amortized
over the term of the Stripped Treasury Security and included in a Holder's
ordinary gross income before the Holder receives the cash attributable to that
income. See Taxes.
MINIMUM FACE AMOUNT OF FUND--A Trust may be terminated if the face amount is
less than 40% of the face amount of Securities deposited (of the face amount of
Securities on the Initial Date of Deposit for the 1995, 2001, 2003 and 2005
Trusts). With respect to the 2004 and 2014 Trusts, each Trust must be terminated
no later than one year after the maturity date of the Stripped Treasury
Securities in that Trust.
A-9
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES A
REPORT OF INDEPENDENT ACCOUNTANTS
The Sponsor, Trustee and Holders
of The Merrill Lynch Fund of Stripped ("Zero")
U.S. Treasury Securities, Series A
We have audited the accompanying statement of condition of the 2003 Trust of The
Merrill Lynch Fund of Stripped ("Zero") U.S. Treasury Securities, Series A,
including the portfolio, as of December 31, 1994 and the related statements of
operations and of changes in net assets for the years ended December 31, 1994,
1993 and 1992. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Securities owned at
December 31, 1994, as shown in such portfolio, were confirmed to us by The Chase
Manhattan Bank (National Association), 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 the above-mentioned Trust of
The Merrill Lynch Fund of Stripped ("Zero") U.S. Treasury Securities, Series A
at December 31, 1994 and the results of their operations and changes in their
net assets for the above-stated years in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
New York, N.Y.
February 7, 1995
D-1
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES A
STATEMENT OF CONDITION
AS OF DECEMBER 31, 1994
<TABLE><CAPTION>
2003 TRUST
<S> <C>
TRUST PROPERTY:
Investment in marketable securities
(see Portfolio and Note 1) $44,442,783
Other 55,537
Total trust property 44,498,320
LESS LIABILITY - Other 5,843
NET ASSETS (Note 2) $44,492,477
UNITS OUTSTANDING 86,053,770
UNIT VALUE $.51703
</TABLE>
See Notes to Financial Statements.
D-2
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES A
STATEMENTS OF OPERATIONS
AS OF DECEMBER 31, 1994
<TABLE>
<CAPTION>
2003 TRUST
Years Ended December 31
1994 1993 1992
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income $ 31,322 $ 35,982 $ 33,039
Accretion of original issue
discount 3,575,917 3,767,614 3,916,566
Trustee's fees and expenses (20,811) (21,329) (27,310)
Net investment income 3,586,428 3,782,267 3,922,295
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain on securities sold 921,823 2,757,943 1,398,733
Unrealized appreciation (depreciation) of
investments (8,735,643) 3,465,550 (1,003,127)
Net realized and unrealized gain (loss) on
investments (7,813,820) 6,223,493 395,606
NET INCREASE
(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $(4,227,392) $10,005,760 $4,317,901
See Notes to Financial Statements.
</TABLE>
D-3
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES A
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
2003 TRUST
Years Ended December 31
1994 1993 1992
<S> <C> <C> <C>
OPERATIONS:
Net investment income $ 3,586,428 $ 3,782,267 $ 3,922,295
Realized gain on securities sold 921,823 2,757,943 1,398,733
Unrealized appreciation (depreciation) of
investments (8,735,643) 3,465,550 (1,003,127)
Net increase (decrease) in net assets resulting
from operations (4,227,392) 10,005,760 4,317,901
CAPITAL SHARE TRANSACTIONS (Note 3):
Issuance of additional units 826,575 1,509,919 1,917,003
Redemptions of units (4,969,574) (9,728,606) (7,940,468)
Net capital share transactions (4,142,999) (8,218,687) (6,023,465)
NET INCREASE (DECREASE) IN NET ASSETS (8,370,391) 1,787,073 (1,705,564)
NET ASSETS, BEGINNING OF YEAR 52,862,868 51,075,795 52,781,359
NET ASSETS, END OF YEAR $44,492,477 $52,862,868 $51,075,795
UNIT VALUE, END OF YEAR $.51703 $.56338 $.46829
UNITS OUTSTANDING, END OF YEAR 86,053,770 93,832,418 109,068,799
See Notes to Financial Statements.
</TABLE>
D-4
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES A
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Fund is registered under the Investment Company Act of 1940 as a Unit
Investment Trust. The following is a summary of significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements. The policies are in conformity with generally
accepted accounting principles.
(a) Securities are stated at value as determined by an independent
evaluator based on bid side evaluations for the securities.
(b) Cost of securities is based on offering side evaluations for the
securities at Dates of Deposit. Cost of securities subsequent to such
dates has been adjusted to include the accretion of original issue
discount on the Stripped Treasury Securities. Realized gain and loss
on sales of securities are determined using the first-in, first-out
cost basis.
(c) The Fund is not subject to income taxes. Accordingly, no provision
for such taxes is required.
2. NET ASSETS, DECEMBER 31, 1994
2003 Trust
Cost of 86,053,770 units at Dates of Deposit $20,679,072
Less sales charge 361,850
Net amount applicable to Holders 20,317,222
Realized gain on securities sold 10,026,617
Unrealized appreciation of investments 3,801,580
Redemptions of units - net cost of units redeemed less
redemption amounts (4,531,451)
Undistributed net investment income 14,878,509
Net assets $44,492,477
D-5
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES A
NOTES TO FINANCIAL STATEMENTS
3. CAPITAL SHARE TRANSACTIONS
Additional units were issued as follows:
Trust 1994 1993 1992
2003 1,583,219 2,866,682 4,446,747
Units were redeemed as follows:
Trust 1994 1993 1992
2003 9,361,867 18,103,063 18,535,623
Units may be redeemed at the office of the Trustee upon tender thereof
generally on any business day or, in the case of uncertificated units, upon
delivery of a request for redemption and payment of any relevant tax. The
Trustee will redeem units either in cash or in kind at the option of the
Holder as specified in writing to the Trustee.
4. INCOME TAXES
All Fund items of income received, accretion of original issue discount,
expenses paid, and realized gains and losses on securities sold are
attributable to the Holders, on a pro rata basis, for Federal income tax
purposes in accordance with the grantor trust rules of the United States
Internal Revenue Code.
At December 31, 1994, the cost of investment securities for Federal income
tax purposes was approximately equivalent to the adjusted cost as shown in
each Trust's portfolio.
5. DISTRIBUTIONS
It is anticipated that the Trust will not make any distributions until the
first business day following the maturity of its holdings in the Stripped
Treasury Securities which are noninterest-bearing.
D-6
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES A
PORTFOLIO
AS OF DECEMBER 31, 1994
Portfolio No. Adjusted
and Title of Interest Face Cost Value
Securities Rate Maturities Amount (Note A) (Note A)
2003 TRUST
1 Stripped Treasury 0% 8/15/03 $85,864,625 $40,321,875 $44,114,163
Securities
(Note B)
2 U.S. Treasury
Bonds 11.125 8/15/03 273,572 319,328 328,620
Total $86,138,197 $40,641,203 $44,442,783
Note A - See Note 1 to Financial Statements.
Note B - Stripped Treasury Securities consist of one or more of the following
types of securities: (a) U.S. Treasury debt obligations which have
been stripped of their remaining interest coupons, (b) interest
coupons which have been stripped from U.S. Treasury debt obligations
and (c) receipts or certificates for underlying stripped U.S.
Treasury debt obligations. The receipts or certificates evidence
ownership of future interest or principal payments on U.S. Treasury
notes or bonds. The receipts or certificates are issued in
registered form by a major bank which acts as custodian and nominal
Holder of the underlying stripped U.S. Treasury debt obligation. The
Stripped Treasury Securities are payable in full at maturity at their
stated maturity amount, and are not subject to redemption prior to
maturity. The Stripped Treasury Securities do not make any periodic
payments of interest.
D-7
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES B
REPORT OF INDEPENDENT ACCOUNTANTS
The Sponsor, Trustee and Holders
of The Merrill Lynch Fund of Stripped ("Zero")
U.S. Treasury Securities, Series B
We have audited the accompanying statements of condition of the 1995, 2001 and
2005 Trusts of The Merrill Lynch Fund of Stripped ("Zero") U.S. Treasury
Securities, Series B, including the portfolios, as of December 31, 1994 and the
statements of operations and of changes in net assets for the aforementioned
trusts for the years ended December 31, 1994, 1993 and 1992. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Securities owned at
December 31, 1994, as shown in such portfolios, were confirmed to us by The
Chase Manhattan Bank (National Association), 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 the above-mentioned Trusts of
The Merrill Lynch Fund of Stripped ("Zero") U.S. Treasury Securities, Series B
at December 31, 1994 and the results of their operations and changes in their
net assets for the above-stated years in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
New York, N.Y.
February 7, 1995
D-8
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES B
STATEMENTS OF CONDITION
AS OF DECEMBER 31, 1994
<TABLE><CAPTION>
1995 TRUST 2001 TRUST 2005 TRUST
<S> <C> <C> <C>
TRUST PROPERTY:
Investment in marketable securities
(see Portfolio and Note 1) $74,830,217 $46,467,427 $16,877,310
Receivable from securities sold 314,869
Other 50,457 48,255 16,278
Total trust property 75,195,543 46,515,682 16,893,588
LESS LIABILITIES:
Redemptions payable 314,869
Other 2,442 5,332 844
Total liabilities 317,311 5,332 844
NET ASSETS (Note 2) $74,878,232 $46,510,350 $16,892,744
UNITS OUTSTANDING 79,255,752 73,744,210 36,522,329
UNIT VALUE $.94477 $.63070 $.46253
</TABLE>
See Notes to Financial Statements.
D-9
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES B
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
1995 TRUST
Years Ended December 31,
1994 1993 1992
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income $ 28,582 $ 31,807 $ 32,129
Accretion of original issue discount 6,296,713 5,748,856 6,827,762
Trustee's fees and expenses (19,191) (20,271) (31,768)
Net investment income 6,306,104 5,760,392 6,828,123
REALIZED AND UNREALIZED LOSS ON INVESTMENTS:
Realized gain (loss) on securities sold (5,705) 1,728,856 1,823,750
Unrealized depreciation of investments (4,976,878) (1,795,919) (2,498,353)
Realized and unrealized loss on
investments (4,982,583) (67,063) (674,603)
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $1,323,521 $5,693,329 $6,153,520
See Notes to Financial Statements.
</TABLE>
D-10
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES B
STATEMENTS OF OPERATIONS
<TABLE><CAPTION>
2001 TRUST
Years Ended December 31,
1994 1993 1992
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income $ 26,523 $ 31,082 $ 34,360
Accretion of original issue discount 4,112,256 1,970,916 4,723,883
Trustee's fees and expenses (23,626) (15,676) (25,555)
Net investment income 4,115,153 1,986,322 4,732,688
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain on securities sold 1,017,673 4,726,764 2,288,200
Unrealized appreciation (depreciation) of
investments (8,491,267) 2,005,671 (2,187,343)
Realized and unrealized gain (loss) on
investments (7,473,594) 6,732,435 100,857
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $(3,358,441) $8,718,757 $4,833,545
See Notes to Financial Statements.
</TABLE>
D-11
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES B
STATEMENTS OF OPERATIONS
<TABLE><CAPTION>
2005 TRUST
Years Ended December 31,
1994 1993 1992
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income $ 12,787 $ 13,934 $ 13,549
Accretion of original issue discount 1,297,432 1,373,844 1,299,844
Trustee's fees and expenses (10,828) (10,862) (16,235)
Net investment income 1,299,391 1,376,916 1,297,158
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain on securities sold 368,832 716,371 584,241
Unrealized appreciation (depreciation) of
investments (3,305,168) 1,407,540 (421,547)
Realized and unrealized gain (loss) on
investments (2,936,336) 2,123,911 162,694
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $(1,636,945) $3,500,827 $1,459,852
See Notes to Financial Statements.
</TABLE>
D-12
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES B
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
1995 TRUST
Years Ended December 31,
1994 1993 1992
<S> <C> <C> <C>
OPERATIONS:
Net investment income $ 6,306,104 $ 5,760,392 $ 6,828,123
Realized gain (loss) on securities sold (5,705) 1,728,856 1,823,750
Unrealized depreciation of investments (4,976,878) (1,795,919) (2,498,353)
Net increase in net assets resulting from
operations 1,323,521 5,693,329 6,153,520
CAPITAL SHARE TRANSACTIONS (Note 3):
Issuance of additional units 4,043,112 1,817,328 6,208,724
Redemptions of units (10,549,364) (10,539,500) (15,549,869)
Net capital share transactions (6,506,252) (8,722,172) (9,341,145)
NET DECREASE IN NET ASSETS (5,182,731) (3,028,843) (3,187,625)
NET ASSETS, BEGINNING OF YEAR 80,060,963 83,089,806 86,277,431
NET ASSETS, END OF YEAR $74,878,232 $80,060,963 $83,089,806
UNIT VALUE, END OF YEAR $.94477 $.92804 $.86621
UNITS OUTSTANDING, END OF YEAR 79,255,752 86,269,097 95,923,192
See Notes to Financial Statements.
</TABLE>
D-13
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES B
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE><CAPTION>
2001 TRUST
Years Ended December 31,
1994 1993 1992
<S> <C> <C> <C>
OPERATIONS:
Net investment income $ 4,115,153 $ 1,986,322 $ 4,732,688
Realized gain on securities sold 1,017,673 4,726,764 2,288,200
Unrealized appreciation (depreciation)
of investments (8,491,267) 2,005,671 (2,187,343)
Net increase (decrease)in net assets
resulting from operations (3,358,441) 8,718,757 4,833,545
CAPITAL SHARE TRANSACTIONS (Note 3):
Issuance of additional units 1,230,864 700,963 4,949,499
Redemptions of units (6,500,507) (9,067,185) (15,333,426)
Net capital share transactions (5,269,643) (8,366,222) (10,383,927)
NET INCREASE (DECREASE) IN NET ASSETS (8,628,084) 352,535 (5,550,382)
NET ASSETS, BEGINNING OF YEAR 55,138,434 54,785,899 60,336,281
NET ASSETS, END OF YEAR $46,510,350 $55,138,434 $54,785,899
UNIT VALUE, END OF YEAR $.63070 $.67405 $.57865
UNITS OUTSTANDING, END OF YEAR 73,744,210 81,801,200 94,679,067
See Notes to Financial Statements.
</TABLE>
D-14
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES B
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE><CAPTION>
2005 TRUST
Years Ended December 31,
1994 1993 1992
<S> <C> <C> <C>
OPERATIONS:
Net investment income $ 1,299,391 $ 1,376,916 $ 1,297,158
Realized gain on securities sold 368,832 716,371 584,241
Unrealized appreciation (depreciation)
of investments (3,305,168) 1,407,540 (421,547)
Net increase (decrease) in net assets
resulting from operations (1,636,945) 3,500,827 1,459,852
CAPITAL SHARE TRANSACTIONS (Note 3):
Issuance of additional units 979,867 1,693,122 3,436,629
Redemptions of units (1,937,561) (3,436,735) (3,892,154)
Net capital share transactions (957,694) (1,743,613) (455,525)
NET INCREASE (DECREASE) IN NET ASSETS (2,594,639) 1,757,214 1,004,327
NET ASSETS, BEGINNING OF YEAR 19,487,383 17,730,169 16,725,842
NET ASSETS, END OF YEAR $16,892,744 $19,487,383 $17,730,169
UNIT VALUE, END OF YEAR $.46253 $.50723 $.41637
UNITS OUTSTANDING, END OF YEAR 36,522,329 38,419,137 42,582,267
See Notes to Financial Statements.
</TABLE>
D-15
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES B
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Fund is registered under the Investment Company Act of 1940 as a Unit
Investment Trust. The following is a summary of significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements. The policies are in conformity with generally
accepted accounting principles.
(a) Securities are stated at value as determined by an independent
evaluator based on bid side evaluations for the securities.
(b) Cost of securities is based on offering side evaluations for the
securities at Dates of Deposit. Cost of securities subsequent to such
dates has been adjusted to include the accretion of original issue
discount on the Stripped Treasury Securities. Realized gain and loss
on sales of securities are determined using the first-in, first-out
cost basis.
(c) The Fund is not subject to income taxes. Accordingly, no provision
for such taxes is required.
2. NET ASSETS, DECEMBER 31, 1994
1995 Trust
Cost of 79,255,752 units at Dates of Deposit $36,941,221
Less sales charge 369,412
Net amount applicable to Holders 36,571,809
Realized gain on securities sold 7,717,890
Unrealized appreciation of investments 285,696
Redemptions of units - net cost of
units redeemed less redemption amounts 3,827,563
Undistributed net investment income 26,475,274
Net assets $74,878,232
2001 Trust
Cost of 73,744,210 units at Dates of Deposit $22,412,427
Less sales charge 336,186
Net amount applicable to Holders 22,076,241
Realized gain on securities sold 12,209,631
Unrealized appreciation of investments 1,747,098
Redemptions of units - net cost of units redeemed less
redemption amounts (3,786,898)
Undistributed net investment income 14,264,278
Net assets $46,510,350
D-16
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES B
NOTES TO FINANCIAL STATEMENTS
2005 Trust
Cost of 36,522,329 units at Dates of Deposit $ 8,152,176
Less sales charge 142,663
Net amount applicable to Holders 8,009,513
Realized gain on securities sold 5,108,193
Unrealized appreciation of investments 460,844
Redemptions of units - redemption amounts less net cost
of units redeemed (769,166)
Undistributed net investment income 4,083,360
Net assets $16,892,744
3. CAPITAL SHARE TRANSACTIONS
Additional units were issued as follows:
Trust 1994 1993 1992
1995 4,340,981 1,998,365 7,640,577
2001 1,928,908 1,129,643 9,508,268
2005 2,087,385 3,480,932 9,045,440
Units were redeemed as follows:
Trust 1994 1993 1992
1995 11,354,326 11,652,460 18,784,006
2001 9,985,898 14,007,510 28,306,155
2005 3,984,193 7,644,062 10,325,039
Units may be redeemed at the office of the Trustee upon tender thereof
generally on any business day or, in the case of uncertificated units, upon
delivery of a request for redemption and payment of any relevant tax. The
Trustee will redeem units either in cash or in kind at the option of the
Holder as specified in writing to the Trustee.
4. INCOME TAXES
All Fund items of income received, accretion of original issue discount,
expenses paid, and realized gains and losses on securities sold are
attributable to the Holders, on a pro rata basis, for Federal income tax
purposes in accordance with the grantor trust rules of the United States
Internal Revenue Code.
At December 31, 1994, the cost of investment securities for Federal income
tax purposes was approximately equivalent to the adjusted cost as shown in
each Trust's portfolio.
5. DISTRIBUTIONS
It is anticipated that each Trust will not make any distributions until the
first business day following the maturity of its holdings in the Stripped
Treasury Securities which are noninterest-bearing.
D-17
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES B
PORTFOLIOS
AS OF DECEMBER 31, 1994
Portfolio No. Adjusted
and Title of Interest Face Cost Value
Securities Rate Maturities Amount (Note A) (Note A)
1995 TRUST
1 Stripped Treasury 0% 11/15/95 $79,131,475 $74,268,186 $74,578,675
Securities (Note B)
2 U.S. Treasury Bonds 11.50 11/15/95 242,886 276,335 251,542
Total $79,374,361 $74,544,521 $74,830,217
2001 TRUST
1 Stripped Treasury 0% 2/15/01 $73,790,325 $44,451,989 $46,206,700
Securities (Note B)
2 U.S. Treasury Bonds 11.75 2/15/01 219,519 268,340 260,727
Total $74,009,844 $44,720,329 $46,467,427
2005 TRUST
1 Stripped Treasury 0% 2/15/05 $36,741,940 $16,274,088 $16,739,417
Securities (Note B)
2 U.S. Treasury Bonds 11.625 11/15/04 110,092 142,377 137,893
Total $36,852,032 $16,416,465 $16,877,310
Note A - See Note 1 to Financial Statements.
Note B - Stripped Treasury Securities consist of one or more of the following
types of securities: (a) U.S. Treasury debt obligations which have
been stripped of their remaining interest coupons, (b) interest coupons
which have been stripped from U.S. Treasury debt obligations and (c)
receipts or certificates for underlying stripped U.S. Treasury debt
obligations. The receipts or certificates evidence ownership of future
interest or principal payments on U.S. Treasury notes or bonds. The
receipts or certificates are issued in registered form by a major bank
which acts as custodian and nominal holder of the underlying stripped
U.S. Treasury debt obligation. The Stripped Treasury Securities are
payable in full at maturity at their stated maturity amount, and are
not subject to redemption prior to maturity. The Stripped Treasury
Securities do not make any periodic payments of interest.
D-18
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES C
REPORT OF INDEPENDENT ACCOUNTANTS
The Sponsor, Trustee and Holders
of The Merrill Lynch Fund of Stripped ("Zero")
U.S. Treasury Securities, Series C
We have audited the accompanying statements of condition of the 1996 Trust and
the 2006 Trust of The Merrill Lynch Fund of Stripped ("Zero") U.S. Treasury
Securities, Series C, including the portfolios, as of December 31, 1994 and the
related statements of operations and of changes in net assets for the years
ended December 31, 1994, 1993 and 1992. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Securities owned at
December 31, 1994, as shown in such portfolios, were confirmed to us by The
Chase Manhattan Bank (National Association), 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 the above-mentioned Trusts of
The Merrill Lynch Fund of Stripped ("Zero") U.S. Treasury Securities, Series C
at December 31, 1994 and the results of their operations and changes in their
net assets for the above-stated years in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
New York, N.Y.
February 7, 1995
D-19
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES C
STATEMENTS OF CONDITION
AS OF DECEMBER 31, 1994
<TABLE><CAPTION>
1996 TRUST 2006 TRUST
<S> <C> <C>
TRUST PROPERTY:
Investment in marketable securities
(see Portfolio and Note 1) $50,003,084 $3,924,993
Other 16,005 7,912
Total trust property 50,019,089 3,932,905
LESS LIABILITY - Other 3,744 6,189
NET ASSETS (Note 2) $50,015,345 $3,926,716
UNITS OUTSTANDING 54,159,061 9,061,845
UNIT VALUE $.92349 $.43332
See Notes to Financial Statements.
</TABLE>
D-20
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES C
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
1996 TRUST 2006 TRUST
Years Ended December 31, Years Ended December 31,
1994 1993 1992 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income $ 18,697 $ 20,566 $ 23,325 $ 2,744 $ 3,441 $ 4,105
Accretion of original
issue discount 3,980,152 4,108,748 4,281,471 305,003 338,288 363,678
Trustee's fees and
expenses (14,128) (13,637) (17,286) (2,651) (1,879) (5,602)
Net investment
income 3,984,721 4,115,677 4,287,510 305,096 339,850 362,181
REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS:
Realized gain on
securities sold 314,180 720,145 569,618 187,066 237,823 270,119
Unrealized appre-
ciation (depre-
ciation)
of investments (3,745,174) (740,581) (1,096,102) (906,211) 446,085 (238,685)
Realized and
unrealized gain
(loss) on
investments (3,430,994) (20,436) (526,484) (719,145) 683,908 31,434
NET INCREASE (DECREASE)
IN NET ASSETS RESULT-
ING FROM OPERATIONS $ 553,727 $4,095,241 $3,761,026 $(414,049) $1,023,758 $ 393,615
See Notes to Financial Statements.
</TABLE>
D-21
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES C
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
1996 TRUST 2006 TRUST
Years Ended December 31, Years Ended December 31,
1994 1993 1992 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment
income $ 3,984,721 $4,115,677 $ 4,287,510 $ 305,096 $ 339,850 $ 362,181
Realized gain
on securities
sold 314,180 720,145 569,618 187,066 237,823 270,119
Unrealized
appreciation
(depreciation)
of investments (3,745,174) (740,581) (1,096,102) (906,211) 446,085 (238,685)
Net increase
(decrease)in
net assets
resulting from
operations 553,727 4,095,241 3,761,026 (414,049) 1,023,758 393,615
CAPITAL SHARE
TRANSACTIONS
(Note 3):
Issuance of
additional
units 8,184,051 487,644 777,347 418,164 455,062 640,119
Redemptions of
units (8,228,518) (7,791,180) (7,658,064) (955,121) (868,372) (1,534,016)
Net capital
share trans-
actions (44,467) (7,303,536) (6,880,717) (536,957) (413,310) (893,897)
NET INCREASE (DE-
CREASE) IN NET
ASSETS 509,260 (3,208,295) (3,119,691) (951,006) 610,448 (500,282)
NET ASSETS,
BEGINNING OF
YEAR 49,506,085 52,714,380 55,834,071 4,877,722 4,267,274 4,767,556
NET ASSETS, END
OF YEAR $50,015,345 $49,506,085 $52,714,380 $3,926,716 $4,877,722 $ 4,267,274
UNIT VALUE, END
OF YEAR $.92349 $.91291 $.84510 $.43332 $.47786 $.38733
UNITS OUT-
STANDING,
END OF YEAR 54,159,061 54,228,810 62,376,749 9,061,845 10,207,360
11,017,265
See Notes to Financial Statements.
</TABLE>
D-22
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES C
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Fund is registered under the Investment Company Act of 1940 as a Unit
Investment Trust. The following is a summary of significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements. The policies are in conformity with generally
accepted accounting principles.
(a) Securities are stated at value as determined by an independent
evaluator based on bid side evaluations for the securities.
(b) Cost of securities is based on offering side evaluations for the
securities at Dates of Deposit. Cost of securities subsequent to such
dates has been adjusted to include the accretion of original issue
discount on the Stripped Treasury Securities. Realized gain and loss
on sales of securities are determined using the first-in, first-out
cost basis.
(c) The Fund is not subject to income taxes. Accordingly, no provision
for such taxes is required.
2. NET ASSETS, DECEMBER 31, 1994
1996 Trust
Cost of 54,159,061 units at Dates of Deposit $30,085,874
Less sales charge 300,859
Net amount applicable to Holders 29,785,015
Realized gain on securities sold 845,614
Unrealized appreciation of investments 675,642
Redemptions of units - net cost of units redeemed less
redemption amounts 2,965,377
Undistributed net investment income 15,743,697
Net assets $50,015,345
2006 Trust
Cost of 9,061,845 units at Dates of Deposit $ 2,071,645
Less sales charge 36,254
Net amount applicable to Holders 2,035,391
Realized gain on securities sold 860,510
Unrealized appreciation of investments 104,328
Redemptions of units - net cost of units redeemed less
redemption amounts 68,253
Undistributed net investment income 858,234
Net assets $ 3,926,716
D-23
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES C
NOTES TO FINANCIAL STATEMENTS
3. CAPITAL SHARE TRANSACTIONS
Additional units were issued as follows:
Trust 1994 1993 1992
1996 8,936,680 542,180 959,020
2006 983,437 1,054,074 1,782,774
Units were redeemed as follows:
Trust 1994 1993 1992
1996 9,006,429 8,690,119 9,520,222
2006 2,128,952 1,863,979 4,271,980
Units may be redeemed at the office of the Trustee upon tender thereof
generally on any business day or, in the case of uncertificated units, upon
delivery of a request for redemption and payment of any relevant tax. The
Trustee will redeem units either in cash or in kind at the option of the
Holder as specified in writing to the Trustee.
4. INCOME TAXES
All Fund items of income received, accretion of original issue discount,
expenses paid, and realized gains and losses on securities sold are
attributable to the Holders, on a pro rata basis, for Federal income tax
purposes in accordance with the grantor trust rules of the United States
Internal Revenue Code.
At December 31, 1994, the cost of investment securities for Federal income
tax purposes was approximately equivalent to the adjusted cost as shown in
each Trust's portfolio.
5. DISTRIBUTIONS
It is anticipated that each Trust will not make any distributions until the
first business day following the maturity of its holdings in the Stripped
Treasury Securities which are noninterest-bearing.
D-24
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES C
PORTFOLIOS
AS OF DECEMBER 31, 1994
Portfolio No. Adjusted
and Title of Interest Face Cost Value
Securities Rates Maturities Amount (Note A) (Note A)
1996 TRUST
[S] [C] [C] [C] [C] [C]
1 Stripped Treasury
Securities (Note B) 0% 2/15/96 $53,945,853 $49,107,977 $49,784,927
2 U.S. Treasury Notes 8.875 2/15/96 214,939 219,465 218,157
Total $54,160,792 $49,327,442 $50,003,084
2006 TRUST
1 Stripped Treasury
Securities (Note B) 0% 2/15/06 $ 9,265,000 $ 3,786,669 $ 3,891,778
2 U.S. Treasury Bonds 9.375 2/15/06 29,933 33,996 33,215
Total $ 9,294,933 $ 3,820,665 $ 3,924,993
Note A - See Note 1 to Financial Statements.
Note B - Stripped Treasury Securities consist of one or more of the following
types of securities: (a) U.S. Treasury debt obligations which have
been stripped of their remaining interest coupons, (b) interest
coupons which have been stripped from U.S. Treasury debt obligations
and (c) receipts or certificates for underlying stripped U.S.
Treasury debt obligations. The receipts or certificates evidence
ownership of future interest or principal payments on U.S. Treasury
notes or bonds. The receipts or certificates are issued in
registered form by a major bank which acts as custodian and nominal
holder of the underlying stripped U.S. Treasury debt obligations.
The Stripped Treasury Securities are payable in full at maturity at
their stated maturity amount, and are not subject to redemption prior
to maturity. The Stripped Treasury Securities do not make any
periodic payments of interest.
D-25
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES D
REPORT OF INDEPENDENT ACCOUNTANTS
The Sponsor, Trustee and Holders
of The Merrill Lynch Fund of Stripped ("Zero")
U.S. Treasury Securities, Series D
We have audited the accompanying statements of condition of the 1997 Trust and
the 2007 Trust of The Merrill Lynch Fund of Stripped ("Zero") U.S. Treasury
Securities, Series D, including the portfolios, as of December 31, 1994 and the
related statements of operations and of changes in net assets for the years
ended December 31, 1992, 1993 and 1994. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Securities owned at
December 31, 1994, as shown in such portfolios, were confirmed to us by The
Chase Manhattan Bank (National Association), 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 the above-mentioned Trusts of
The Merrill Lynch Fund of Stripped ("Zero") U.S. Treasury Securities, Series D
at December 31, 1994 and the results of their operations and changes in their
net assets for the above-stated years in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
New York, N.Y.
February 7, 1995
D-26
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES D
STATEMENTS OF CONDITION
AS OF DECEMBER 31, 1994
<TABLE><CAPTION>
1997 TRUST 2007 TRUST
<S> <C> <C>
TRUST PROPERTY:
Investment in marketable securities
(see Portfolio and Note 1) $52,675,481 $8,947,708
Other 18,080 2,911
Total trust property 52,693,561 8,950,619
LESS LIABILITY - Other 947 1,504
NET ASSETS (Note 2) $52,692,614 $8,949,115
UNITS OUTSTANDING 61,590,781 22,426,556
UNIT VALUE $.85553 $.39904
See Notes to Financial Statements.
</TABLE>
D-27
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES D
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
1997 TRUST 2007 TRUST
Years Ended December 31 Years Ended December 31
1994 1993 1992 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income $ 21,475 $ 23,900 $ 23,067 $ 8,030 $ 10,681 $ 9,931
Accretion of original
issue discount 4,188,411 4,238,667 4,700,500 705,967 840,251 939,041
Trustee's fees and
expenses (15,353) (16,265) (25,960) (8,899) (7,218) (13,150)
Net investment
income 4,194,533 4,246,302 4,697,607 705,098 843,714 935,822
REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS:
Realized gain on
securities sold 300,597 1,069,363 1,236,248 248,777 1,054,077 557,225
Unrealized appre-
ciation (depre-
ciation) of
investments (5,176,128) 188,278 (1,708,402) (2,051,001) 978,063 (569,283)
Realized and
unrealized gain
(loss) on
investments (4,875,531) 1,257,641 (472,154) (1,802,224) 2,032,140 (12,058)
NET INCREASE (DECREASE)
IN NET ASSETS RESULT-
ING FROM OPERATIONS $ (680,998) $5,503,943 $4,225,453 $(1,097,126)$2,875,854 $ 923,764
See Notes to Financial Statements.
</TABLE>
D-28
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES D
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
1997 TRUST 2007 TRUST
Years Ended December 31 Years Ended December 31
1994 1993 1992 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment
income $ 4,194,533 $ 4,246,302 $ 4,697,607 $ 705,098 $ 843,714 $ 935,822
Realized gain
on securities
sold 300,597 1,069,363 1,236,248 248,777 1,054,077 557,225
Unrealized
appreciation
(depreciation)
of investments (5,176,128) 188,278 (1,708,402) (2,051,001) 978,063
(569,283)
Net increase
(decrease)in
net assets
resulting from
operations (680,998) 5,503,943 4,225,453 (1,097,126) 2,875,854 923,764
CAPITAL SHARE
TRANSACTIONS
(Note 3):
Issuance of
additional
units 3,919,628 642,033 5,949,721 213,762 117,514
Redemptions of
units (5,370,837) (8,848,290) (11,517,017) (1,193,225) (3,238,370) (2,870,648)
Net capital
share trans-
actions (1,451,209) (8,206,237) (5,567,296) (1,193,225) (3,024,608) (2,753,134)
NET DECREASE IN
NET ASSETS (2,132,207) (2,702,304) (1,341,843) (2,290,351) (148,754) (1,829,370)
NET ASSETS,
BEGINNING OF
PERIOD 54,824,821 57,527,125 58,868,968 11,239,466 11,388,220 13,217,590
NET ASSETS, END
OF PERIOD $52,692,614 $54,824,821 $57,527,125 $ 8,949,115 $11,239,466 $11,388,220
UNIT VALUE, END
OF PERIOD $.85553 $.86631 $.78771 $.39904 $.44340 $.35615
UNITS OUT-
STANDING,
END OF PERIOD 61,590,781 63,285,271 73,030,656 22,426,556 25,348,458
31,976,321
See Notes to Financial Statements.
</TABLE>
D-29
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES D
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Fund is registered under the Investment Company Act of 1940 as a Unit
Investment Trust. The following is a summary of significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements. The policies are in conformity with generally
accepted accounting principles.
(a) Securities are stated at value as determined by an independent
evaluator based on bid side evaluations for the securities.
(b) Cost of securities is based on offering side evaluations for the
securities at Dates of Deposit. Cost of securities subsequent to such
dates has been adjusted to include the accretion of original issue
discount on the Stripped Treasury Securities. Realized gain and loss
on sales of securities are determined using the first-in, first-out
cost basis.
(c) The Fund is not subject to income taxes. Accordingly, no provision
for such taxes is required.
2. NET ASSETS, DECEMBER 31, 1994
1997 Trust
Cost of 61,590,781 units at Dates of Deposit $29,988,548
Less sales charge 449,828
Net amount applicable to Holders 29,538,720
Realized gain on securities sold 3,545,778
Unrealized appreciation of investments 1,042,434
Redemptions of units - net cost of units redeemed less
redemption amounts 357,508
Undistributed net investment income 18,208,174
Net assets $52,692,614
2007 Trust
Cost of 22,426,556 units at Dates of Deposit $ 4,174,370
Less sales charge 83,487
Net amount applicable to Holders 4,090,883
Realized gain on securities sold 3,739,027
Unrealized appreciation of investments 1,033,331
Redemptions of units - net cost of units redeemed less
redemption amounts (2,848,784)
Undistributed net investment income 2,934,658
Net assets $ 8,949,115
D-30
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES D
NOTES TO FINANCIAL STATEMENTS
3. CAPITAL SHARE TRANSACTIONS
Additional units were issued as follows:
Trust 1994 1993 1992
1997 4,563,407 742,180 8,014,253
2007 524,545 343,368
Units were redeemed as follows:
Trust 1994 1993 1992
1997 6,257,897 10,487,565 15,335,470
2007 2,921,902 7,152,408 8,764,687
Units may be redeemed at the office of the Trustee upon tender thereof
generally on any business day or, in the case of uncertificated units, upon
delivery of a request for redemption and payment of any relevant tax. The
Trustee will redeem units either in cash or in kind at the option of the
Holder as specified in writing to the Trustee.
4. INCOME TAXES
All Fund items of income received, accretion of original issue discount,
expenses paid, and realized gains and losses on securities sold are
attributable to the Holders, on a pro rata basis, for Federal income tax
purposes in accordance with the grantor trust rules of the United States
Internal Revenue Code.
At December 31, 1994, the cost of investment securities for Federal income
tax purposes was approximately equivalent to the adjusted cost as shown in
each Trust's portfolio.
5. DISTRIBUTIONS
It is anticipated that each Trust will not make any distributions until the
first business day following the maturity of its holdings in the Stripped
Treasury Securities which are noninterest-bearing.
D-31
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES D
PORTFOLIOS
AS OF DECEMBER 31, 1994
Portfolio No. Adjusted
and Title of Interest Face Cost Value
Securities Rate Maturities Amount (Note A) (Note A)
1997 TRUST
1 Stripped Treasury
Securities (Note B) 0% 2/15/97 $61,405,423 $51,352,293 $52,378,329
2 U.S. Treasury Notes 7.25 11/15/96 299,458 280,754 297,152
Total $61,704,881 $51,633,047 $52,675,481
2007 TRUST
1 Stripped Treasury
Securities (Note B) 0% 2/15/07 $22,878,000 $ 7,828,640 $ 8,857,068
2 U.S. Treasury Bonds 9.375 2/15/06 81,683 85,737 90,640
Total $22,959,683 $ 7,914,377 $ 8,947,708
Note A - See Note 1 to Financial Statements.
Note B - Stripped Treasury Securities consist of one or more of the following
types of securities: (a) U.S. Treasury debt obligations which have
been stripped of their remaining interest coupons, (b) interest
coupons which have been stripped from U.S. Treasury debt obligations
and (c) receipts or certificates for underlying stripped U.S.
Treasury debt obligations. The receipts or certificates evidence
ownership of future interest or principal payments on U.S. Treasury
notes or bonds. The receipts or certificates are issued in
registered form by a major bank which acts as custodian and nominal
holder of the underlying stripped U.S. Treasury debt obligation. The
Stripped Treasury Securities are payable in full at maturity at their
stated maturity amount, and are not subject to redemption prior to
maturity. The Stripped Treasury Securities do not make any periodic
payments of interest.
D-32
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES E
REPORT OF INDEPENDENT ACCOUNTANTS
The Sponsor, Trustee and Holders
of The Merrill Lynch Fund of Stripped ("Zero")
U.S. Treasury Securities, Series E
We have audited the accompanying statements of condition of the 1998 Trust and
the 2008 Trust of The Merrill Lynch Fund of Stripped ("Zero") U.S. Treasury
Securities, Series E, including the portfolios, as of December 31, 1994 and the
related statements of operations and of changes in net assets for the years
ended December 31, 1994, 1993 and 1992. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Securities owned at
December 31, 1994, as shown in such portfolios, were confirmed to us by The
Chase Manhattan Bank (National Association), 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 the above mentioned Trusts of
The Merrill Lynch Fund of Stripped ("Zero") U.S. Treasury Securities, Series E
at December 31, 1994 and the results of their operations and changes in their
net assets for the above-stated years in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
New York, N.Y.
February 7, 1995
D-33
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES E
STATEMENTS OF CONDITION
AS OF DECEMBER 31, 1994
<TABLE><CAPTION>
1998 TRUST 2008 TRUST
<S> <C> <C>
TRUST PROPERTY:
Investment in marketable securities
(see Portfolio and Note 1) $50,832,691 $19,997,654
Other 34,823 18,960
Total trust property 50,867,514 20,016,614
LESS LIABILITY - Other 4,322 9,131
NET ASSETS (Note 2) $50,863,192 $20,007,483
UNITS OUTSTANDING 64,390,067 55,283,741
UNIT VALUE $.78992 $.36191
See Notes to Financial Statements.
</TABLE>
D-34
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES E
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
1998 TRUST
Years Ended December 31
1994 1993 1992
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income $ 22,510 $ 25,125 $ 27,711
Accretion of original issue
discount 4,032,437 3,806,941 4,745,830
Trustee's fees and expenses (16,133) (15,691) (20,545)
Net investment income 4,038,814 3,816,375 4,752,996
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Realized gain on securities sold 332,571 1,660,333 1,084,050
Unrealized appreciation (deprecia-
tion) of investments (5,936,517) 648,235 (1,398,847)
Realized and unrealized gain (loss)
on investments (5,603,946) 2,308,568 (314,797)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $(1,565,132) $6,124,943 $4,438,199
See Notes to Financial Statements.
</TABLE>
D-35
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES E
STATEMENTS OF OPERATIONS
<TABLE><CAPTION>
2008 TRUST
Years Ended December 31
1994 1993 1992
<S> <C> <C> <C>
INVESTMENT INCOME
Interest income $ 21,497 $ 27,805 $ 35,572
Accretion of original issue
discount 1,656,763 2,055,569 2,488,488
Trustee's fees and expenses (16,170) (17,246) (24,807)
Net investment income 1,662,090 2,066,128 2,499,253
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Realized gain on securities sold 467,814 5,337,058 1,504,803
Unrealized appreciation (deprecia-
tion) of investments (4,738,832) (835,824) (1,708,936)
Realized and unrealized gain (loss)
on investments (4,271,018) 4,501,234 (204,133)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $(2,608,928) $6,567,362 $2,295,120
See Notes to Financial Statements.
</TABLE>
D-36
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES E
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
1998 TRUST
Years Ended December 31
1994 1993 1992
<S> <C> <C> <C>
OPERATIONS:
Net investment income $ 4,038,814 $ 3,816,375 $ 4,752,996
Realized gain on securities sold 332,571 1,660,333 1,084,050
Unrealized appreciation (depreciation) of
investments (5,936,517) 648,235 (1,398,847)
Net increase (decrease) in net assets
resulting from operations (1,565,132) 6,124,943 4,438,199
CAPITAL SHARE TRANSACTIONS (Note 3):
Issuance of additional Units 3,891,991 638,357 3,439,828
Redemptions of Units (4,458,847) (9,971,447) (11,046,624)
Net capital share transactions (566,856) (9,333,090) (7,606,796)
NET DECREASE IN NET ASSETS (2,131,988) (3,208,147) (3,168,597)
NET ASSETS, BEGINNING OF PERIOD 52,995,180 56,203,327 59,371,924
NET ASSETS, END OF PERIOD $50,863,192 $52,995,180 $56,203,327
UNIT VALUE, END OF PERIOD $.78992 $.81415 $.73079
UNITS OUTSTANDING, END OF PERIOD 64,390,067 65,092,391 76,907,638
See Notes to Financial Statements.
</TABLE>
D-37
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES E
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE><CAPTION>
2008 TRUST
Years Ended December 31
1994 1993 1992
<S> <C> <C> <C>
OPERATIONS:
Net investment income $ 1,662,090 $ 2,066,128 $ 2,499,253
Realized gain on securities sold 467,814 5,337,058 1,504,803
Unrealized depreciation of investments (4,738,832) (835,824) (1,708,936)
Net increase (decrease) in net assets
resulting from operations (2,608,928) 6,567,362 2,295,120
CAPITAL SHARE TRANSACTIONS (Note 3):
Issuance of additional Units 285,598 845,437 1,473,279
Redemptions of Units (3,749,194) (9,768,905) (11,252,614)
Net capital share transactions (3,463,596) (8,923,468) (9,779,335)
NET DECREASE IN NET ASSETS (6,072,524) (2,356,106) (7,484,215)
NET ASSETS, BEGINNING OF PERIOD 26,080,007 28,436,113 35,920,328
NET ASSETS, END OF PERIOD $20,007,483 $26,080,007 $28,436,113
UNIT VALUE, END OF PERIOD $.36191 $.40278 $.32250
UNITS OUTSTANDING, END OF PERIOD 55,283,741 64,750,242 88,174,129
See Notes to Financial Statements.
</TABLE>
D-38
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES E
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Fund is registered under the Investment Company Act of 1940 as a Unit
Investment Trust. The following is a summary of significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements. The policies are in conformity with generally
accepted accounting principles.
(a) Securities are stated at value as determined by an independent
evaluator based on bid side evaluations for the securities.
(b) Cost of securities is based on offering side evaluations for the
securities at Dates of Deposit. Cost of securities subsequent to such
dates has been adjusted to include the accretion of original issue
discount on the Stripped Treasury Securities. Realized gain and loss
on sales of securities are determined using the first-in, first-out
cost basis.
(c) The Fund is not subject to income taxes. Accordingly, no provision
for such taxes is required.
2. NET ASSETS, DECEMBER 31, 1994
1998 Trust
Cost of 64,390,067 units at Dates of Deposit $30,248,969
Less sales charge 453,734
Net amount applicable to Holders 29,795,235
Realized gain on securities sold 4,753,112
Unrealized appreciation of investments 1,241,596
Redemptions of units - net cost of units redeemed less
redemption amounts (1,436,278)
Undistributed net investment income 16,509,527
Net assets $50,863,192
2008 Trust
Cost of 55,283,741 units at Dates of Deposit $10,838,405
Less sales charge 216,768
Net amount applicable to Holders 10,621,637
Realized gain on securities sold 8,453,756
Unrealized appreciation of investments 1,002,221
Redemptions of units - net cost of units redeemed less
redemption amounts (5,192,985)
Undistributed net investment income 5,122,854
Net assets $20,007,483
D-39
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES E
NOTES TO FINANCIAL STATEMENTS
3. CAPITAL SHARE TRANSACTIONS
Additional Units were issued as follows:
1994 1993 1992
Trust
1998 4,892,359 782,851 5,068,763
2008 804,899 2,449,524 5,207,624
Units were redeemed as follows:
1994 1993 1992
Trust
1998 5,594,683 12,598,098 15,994,165
2008 10,271,400 25,873,411 38,520,772
Units may be redeemed at the office of the Trustee upon tender thereof,
generally on any business day or, in the case of uncertificated units, upon
delivery of a request for redemption and payment of any relevant tax. The
Trustee will redeem units either in cash or in kind at the option of the
holder as specified in writing to the Trustee.
4. INCOME TAXES
All Fund items of income received, accretion of original issue discount,
expenses paid, and realized gains and losses on securities sold are
attributable to the Holders, on a pro rata basis, for Federal income tax
purposes in accordance with the grantor trust rules of the United States
Internal Revenue Code.
At December 31, 1994, the cost of investment securities for Federal income
tax purposes was approximately equivalent to the adjusted cost as shown in
each Trust's portfolio.
5. DISTRIBUTIONS
It is anticipated that each Trust will not make any distributions until the
first business day following the maturity of its holdings in the Stripped
Treasury Securities which are noninterest-bearing.
D-40
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES E
PORTFOLIOS
AS OF DECEMBER 31, 1994
Portfolio No. Adjusted
and Title of Interest Face Cost Value
Securities Rate Maturities Amount (Note A) (Note A)
1998 TRUST
1 Stripped Treasury 0% 2/15/98 $64,160,000 $49,321,110 $50,551,664
Securities (Note B)
2 U.S. Treasury Notes 8.125 2/15/98 278,871 269,985 281,027
Total $64,438,871 $49,591,095 $50,832,691
2008 TRUST
1 Stripped Treasury 0% 2/15/08 $55,272,000 $18,772,912 $19,764,162
Securities (Note B)
2 U.S. Treasury Bonds 9.375 2/15/06 210,418 222,521 233,492
Total $55,482,418 $18,995,433 $19,997,654
Note A - See Note 1 to Financial Statements.
Note B - Stripped Treasury Securities consist of one or more of the following
types of securities: (a) U.S. Treasury debt obligations which have
been stripped of their remaining interest coupons, (b) interest
coupons which have been stripped from U.S. Treasury debt obligations,
and (c) receipts or certificates for underlying stripped U.S. Treasury
debt obligations. The receipts or certificates evidence ownership of
future interest or principal payments on U.S. Treasury notes or bonds.
The receipts or certificates are issued in registered form by a major
bank which acts as custodian and nominal holder of the underlying
stripped U.S. Treasury debt obligation. The Stripped Treasury
Securities are payable in full at maturity at their stated maturity
amount, and are not subject to redemption prior to maturity. The
Stripped Treasury Securities do not make any periodic payments of
interest.
D-41
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES F
REPORT OF INDEPENDENT ACCOUNTANTS
The Sponsor, Trustee and Holders
of The Merrill Lynch Fund of Stripped ("Zero")
U.S. Treasury Securities, Series F
We have audited the accompanying statements of condition of the 1999 Trust and
the 2009 Trust of The Merrill Lynch Fund of Stripped ("Zero") U.S. Treasury
Securities, Series F, including the portfolios, as of December 31, 1994 and the
related statements of operations and of changes in net assets for the years
ended December 31, 1994, 1993 and 1992. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Securities owned at
December 31, 1994, as shown in such portfolios, were confirmed to us by The
Chase Manhattan Bank (National Association), 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 the above-mentioned Trusts of
The Merrill Lynch Fund of Stripped ("Zero") U.S. Treasury Securities, Series F
at December 31, 1994 and the results of their operations and changes in their
net assets for the above-stated years in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
New York, N.Y.
February 7, 1995
D-42
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES F
STATEMENTS OF CONDITION
AS OF DECEMBER 31, 1994
<TABLE><CAPTION>
1999 TRUST 2009 TRUST
<S> <C> <C>
TRUST PROPERTY:
Investment in marketable securities
(see Portfolio and Note 1) $19,960,703 $ 8,161,637
Other 3,577 15,391
Total trust property 19,964,280 8,177,028
LESS LIABILITY: - Other 3,213 8,039
NET ASSETS (Note 2) $19,961,067 $ 8,168,989
UNITS OUTSTANDING 27,332,137 24,354,501
UNIT VALUE $.73031 $.33542
See Notes to Financial Statements.
</TABLE>
D-43
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES F
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
1999 TRUST
Years Ended December 31
1994 1993 1992
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income $ 6,786 $ 5,242 $ 5,526
Accretion of original issue discount 1,039,555 1,002,409 714,468
Trustee's fees and expenses (6,414) (3,771) (6,810)
Net investment income 1,039,927 1,003,880 713,184
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain on securities sold 30,735 109,193 3,553
Unrealized appreciation (depreciation)of
investments (1,649,501) 265,039 86,135
Realized and unrealized gain (loss) on
investments (1,618,766) 374,232 89,688
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $ (578,839) $1,378,112 $ 802,872
</TABLE>
<TABLE><CAPTION>
2009 TRUST
Years Ended December 31
1994 1993 1992
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income $ 9,446 $ 11,694 $ 16,320
Accretion of original issue discount 683,420 825,730 1,030,679
Trustee's fees and expenses (9,012) (9,100) (15,114)
Net investment income 683,854 828,324 1,031,885
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain on securities sold 236,183 604,618 622,693
Unrealized appreciation (depreciation) of
investments (1,964,408) 1,184,559 (672,654)
Realized and unrealized gain (loss) on
investments (1,728,225) 1,789,177 (49,961)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $(1,044,371) $2,617,501 $ 981,924
See Notes to Financial Statements.
</TABLE>
D-44
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES F
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE><CAPTION>
1999 TRUST
Years Ended December 31
1994 1993 1992
<S> <C> <C> <C>
OPERATIONS:
Net investment income $ 1,039,927 $ 1,003,880 $ 713,184
Realized gain on securities sold 30,735 109,193 3,553
Unrealized appreciation (depreciation) of
investments (1,649,501) 265,039 86,135
Net increase (decrease) in net assets
resulting from operations (578,839) 1,378,112 802,872
CAPITAL SHARE TRANSACTIONS (Note 3):
Issuance of additional units 11,083,330 150,449 1,810,751
Redemptions of units (1,153,804) (1,546,344) (1,951,684)
Net capital share transactions 9,929,526 (1,395,895) (140,933)
NET INCREASE (DECREASE) IN NET ASSETS 9,350,687 (17,783) 661,939
NET ASSETS, BEGINNING OF YEAR 10,610,380 10,628,163 9,966,224
NET ASSETS, END OF YEAR $19,961,067 $10,610,380 $10,628,163
UNIT VALUE, END OF YEAR $.73031 $.76453 $.67538
UNITS OUTSTANDING, END OF YEAR 27,332,137 13,878,316 15,736,540
See Notes to Financial Statements.
</TABLE>
D-45
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES F
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE><CAPTION>
2009 TRUST
Years Ended December 31
1994 1993 1992
<S> <C> <C> <C>
OPERATIONS:
Net investment income $ 683,854 $ 828,324 $ 1,031,885
Realized gain on securities sold 236,183 604,618 622,693
Unrealized appreciation (depreciation) of
investments (1,964,408) 1,184,559 (672,654)
Net increase (decrease) in net assets
resulting from operations (1,044,371) 2,617,501 981,924
CAPITAL SHARE TRANSACTIONS (Note 3):
Issuance of additional units 409,149 1,470,486
Redemptions of units (1,771,941) (2,888,682) (5,693,204)
Net capital share transactions (1,362,792) (2,888,682) (4,222,718)
NET DECREASE IN NET ASSETS (2,407,163) (271,181) (3,240,794)
NET ASSETS, BEGINNING OF YEAR 10,576,152 10,847,333 14,088,127
NET ASSETS, END OF YEAR $ 8,168,989 $10,576,152 $10,847,333
UNIT VALUE, END OF YEAR $.33542 $.37304 $.29755
UNITS OUTSTANDING, END OF YEAR 24,354,501 28,350,975 36,455,263
See Notes to Financial Statements.
D-46
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES F
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Fund is registered under the Investment Company Act of 1940 as a Unit
Investment Trust. The following is a summary of significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements. The policies are in conformity with generally
accepted accounting principles.
(a) Securities are stated at value as determined by an independent
evaluator based on bid side evaluations for the securities.
(b) Cost of securities is based on offering side evaluations for the
securities at Dates of Deposit. Cost of securities subsequent to such
dates has been adjusted to include the accretion of original issue
discount on the Stripped Treasury Securities. Realized gain and loss
on sales of securities are determined using the first-in, first-out
cost basis.
(c) The Fund is not subject to income taxes. Accordingly, no provision
for such taxes is required.
2. NET ASSETS, DECEMBER 31, 1994
1999 Trust
Cost of 27,332,137 units at Dates of Deposit $16,757,238
Less sales charge 251,359
Net amount applicable to Holders 16,505,879
Realized gain on securities sold 179,798
Unrealized depreciation of investments (347,777)
Redemptions of units - net cost of units redeemed less
redemption amounts 975,794
Undistributed net investment income 2,647,373
Net assets $19,961,067
2009 Trust
Cost of 24,354,501 units at Dates of Deposit $ 5,322,412
Less sales charge 103,986
Net amount applicable to Holders 5,218,426
Realized loss on securities sold (913,576)
Unrealized appreciation of investments 401,345
Redemptions of units - net cost of units redeemed less
redemption amounts 1,664,596
Undistributed net investment income 1,798,198
Net assets $ 8,168,989
D-47
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES F
NOTES TO FINANCIAL STATEMENTS
3. CAPITAL SHARE TRANSACTIONS
Additional units were issued as follows:
Trust 1994 1993 1992
1999 14,996,491 195,741 2,870,632
2009 1,138,211 5,582,733
Units were redeemed as follows:
Trust 1994 1993 1992
1999 1,542,670 2,053,965 3,084,858
2009 5,134,685 8,104,288 20,812,303
Units may be redeemed at the office of the Trustee upon tender thereof
generally on any business day or, in the case of uncertificated units, upon
delivery of a request for redemption and payment of any relevant tax. The
Trustee will redeem units either in cash or in kind at the option of the
Holder as specified in writing to the Trustee.
4. INCOME TAXES
All Fund items of income received, accretion of original issue discount,
expenses paid, and realized gains and losses on securities sold are
attributable to the Holders, on a pro rata basis, for Federal income tax
purposes in accordance with the grantor trust rules of the United States
Internal Revenue Code.
At December 31, 1994, the cost of investment securities for Federal income
tax purposes was approximately equivalent to the adjusted cost as shown in
each Trust's portfolio.
5. DISTRIBUTIONS
It is anticipated that each Trust will not make any distributions until the
first business day following the maturity of its holdings in the Stripped
Treasury Securities which are noninterest-bearing.
D-48
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES F
PORTFOLIOS
AS OF DECEMBER 31, 1994
Portfolio No. Adjusted
and Title of Interest Face Cost Value
Securities Rate Maturities Amount (Note A) (Note A)
1999 TRUST
1 Stripped Treasury 0% 2/15/99 $27,225,000 $20,193,580 $19,849,748
Securities (Note B)
2 U.S. Treasury Notes 8.875 2/15/99 107,205 114,900 110,955
Total $27,332,205 $20,308,480 $19,960,703
2009 TRUST
1 Stripped Treasury 0% 2/15/09 $24,402,000 $ 7,654,790 $ 8,057,052
Securities (Note B)
2 U.S. Treasury Bonds 9.375 2/15/06 94,249 105,502 104,585
Total $24,496,249 $ 7,760,292 $ 8,161,637
Note A - See Note 1 to Financial Statements.
Note B - Stripped Treasury Securities consist of one or more of the following
types of securities: (a) U.S. Treasury debt obligations which have
been stripped of their remaining interest coupons, (b) interest
coupons which have been stripped from U.S. Treasury debt obligations
and (c) receipts or certificates for underlying stripped U.S.
Treasury debt obligations. The receipts or certificates evidence
ownership of future interest or principal payments on U.S. Treasury
notes or bonds. The receipts or certificates are issued in
registered form by a major bank which acts as custodian and nominal
holder of the underlying stripped U.S. Treasury debt obligation. The
Stripped Treasury Securities are payable in full at maturity at their
stated maturity amount, and are not subject to redemption prior to
maturity. The Stripped Treasury Securities do not make any periodic
payments of interest.
</TABLE>
D-49
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES G
REPORT OF INDEPENDENT ACCOUNTANTS
The Sponsor, Trustee and Holders
of The Merrill Lynch Fund of Stripped ("Zero")
U.S. Treasury Securities, Series G
We have audited the accompanying statements of condition of the 2000 Trust and
the 2010 Trust of The Merrill Lynch Fund of Stripped ("Zero") U.S. Treasury
Securities, Series G, including the portfolios, as of December 31, 1994 and the
related statements of operations and of changes in net assets for the years
ended December 31, 1994, 1993 and 1992. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Securities owned at
December 31, 1994, as shown in such portfolios, were confirmed to us by The
Chase Manhattan Bank (National Association), 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 the above-mentioned Trusts of
The Merrill Lynch Fund of Stripped ("Zero") U.S. Treasury Securities, Series G
at December 31, 1994 and the results of their operations and changes in their
net assets for the above-stated years in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
New York, N.Y.
February 7, 1995
D-50
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES G
STATEMENTS OF CONDITION
AS OF DECEMBER 31, 1994
2000 TRUST 2010 TRUST
TRUST PROPERTY:
Investment in marketable securities
(see Portfolio and Note 1) $15,831,908 $6,884,547
Other 3,843 7,178
Total trust property 15,835,751 6,891,725
LESS LIABILITY - Other 2,117 1,503
NET ASSETS (Note 2) $15,833,634 $6,890,222
UNITS OUTSTANDING 23,345,619 22,412,755
UNIT VALUE $.67823 $.30742
See Notes to Financial Statements.
D-51
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES G
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
2000 TRUST
Years Ended December 31,
1994 1993 1992
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income $ 6,916 $ 7,551 $ 6,222
Accretion of original issue discount 991,190 881,261 863,594
Trustee's fees and expenses (6,728) (4,115) (7,261)
Net investment income 991,378 884,697 862,555
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Realized gain on securities sold 47,190 293,367 156,766
Unrealized appreciation (depreciation)
of investments (1,847,249) 672,178 (37,928)
Realized and unrealized gain (loss) on
investments (1,800,059) 965,545 118,838
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $ (808,681) $1,850,242 $981,393
See Notes to Financial Statements.
</TABLE>
D-52
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES G
STATEMENTS OF OPERATIONS
<TABLE><CAPTION>
2010 TRUST
Years Ended December 31,
1994 1993 1992
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income $ 7,302 $ 8,362 $ 13,133
Accretion of original issue discount 505,061 599,536 842,434
Trustee's fees and expenses (7,403) (6,877) (12,942)
Net investment income 504,960 601,021 842,625
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain on securities sold 261,562 1,206,832 315,775
Unrealized depreciation of investments (1,125,138) (26,233) (541,986)
Realized and unrealized gain (loss)on
investments (863,576) 1,180,599 (226,211)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $ (358,616) $1,781,620 $616,414
See Notes to Financial Statements.
</TABLE>
D-53
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES G
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
2000 TRUST
Years Ended December 31,
1994 1993 1992
<S> <C> <C> <C>
OPERATIONS:
Net investment income $ 991,378 $ 884,697 $ 862,555
Realized gain on securities sold 47,190 293,367 156,766
Unrealized appreciation (depreciation)
of investments (1,847,249) 672,178 (37,928)
Net increase (decrease) in net assets
resulting from operations (808,681) 1,850,242 981,393
CAPITAL SHARE TRANSACTIONS (Note 3):
Issuance of additional units 3,985,324 679,422 4,313,764
Redemptions of units (836,261) (1,985,206) (1,400,080)
Net capital share transactions 3,149,063 (1,305,784) 2,913,684
NET INCREASE IN NET ASSETS 2,340,382 544,458 3,895,077
NET ASSETS, BEGINNING OF YEAR 13,493,252 12,948,794 9,053,717
NET ASSETS, END OF YEAR $15,833,634 $13,493,252 $12,948,794
UNIT VALUE, END OF YEAR $.67823 $.71952 $.62704
UNITS OUTSTANDING, END OF YEAR 23,345,619 18,753,153 20,650,544
See Notes to Financial Statements.
</TABLE>
D-54
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES G
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE><CAPTION>
2010 TRUST
Years Ended December 31,
1994 1993 1992
<S> <C> <C> <C>
OPERATIONS:
Net investment income $ 504,960 $ 601,021 $ 842,625
Realized gain on securities sold 261,562 1,206,832 315,775
Unrealized depreciation of investments (1,125,138) (26,233) (541,986)
Net increase (decrease) in net assets
resulting from operations (358,616) 1,781,620 616,414
CAPITAL SHARE TRANSACTIONS (Note 3):
Issuance of additional units 3,725,175 3,975,770 3,093,258
Redemptions of units (3,356,388) (6,429,139) (7,349,853)
Net capital share transactions 368,787 (2,453,369) (4,256,595)
NET INCREASE (DECREASE) IN NET ASSETS 10,171 (671,749) (3,640,181)
NET ASSETS, BEGINNING OF YEAR 6,880,051 7,551,800 11,191,981
NET ASSETS, END OF YEAR $6,890,222 $ 6,880,051 $ 7,551,800
UNIT VALUE, END OF YEAR $.30742 $.34436 $.27266
UNITS OUTSTANDING, END OF YEAR 22,412,755 19,979,135 27,696,889
See Notes to Financial Statements.
</TABLE>
D-55
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES G
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Fund is registered under the Investment Company Act of 1940 as a Unit
Investment Trust. The following is a summary of significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements. The policies are in conformity with generally
accepted accounting principles.
(a) Securities are stated at value as determined by an independent
evaluator based on bid side evaluations for the securities.
(b) Cost of securities is based on offering side evaluations for the
securities at Dates of Deposit. Cost of securities subsequent to such
dates has been adjusted to include the accretion of original issue
discount on the Stripped Treasury Securities. Realized gain and loss
on sales of securities are determined using the first-in, first-out
cost basis.
(c) The Fund is not subject to income taxes. Accordingly, no provision
for such taxes is required.
2. NET ASSETS, DECEMBER 31, 1994
2000 Trust
Cost of 23,345,619 units at Dates of Deposit $12,637,323
Less sales charge 189,579
Net amount applicable to Holders 12,447,744
Realized gain on securities sold 546,062
Unrealized depreciation of investments (262,803)
Redemptions of units - net cost of units redeemed less
redemption amounts 453,853
Undistributed net investment income 2,648,778
Net assets $15,833,634
2010 Trust
Cost of 22,412,755 units at Dates of Deposit $ 5,007,826
Less sales charge 100,157
Net amount applicable to Holders 4,907,669
Realized gain on securities sold 2,262,363
Unrealized depreciation of investments (594,455)
Redemptions of units - net cost of units redeemed less
redemption amounts (99,648)
Undistributed net investment income 414,293
Net assets $ 6,890,222
D-56
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES G
NOTES TO FINANCIAL STATEMENTS
3. CAPITAL SHARE TRANSACTIONS
Additional units were issued as follows:
Trust 1994 1993 1992
2000 5,786,280 972,864 7,328,893
2010 12,472,504 12,042,798 12,407,648
Units were redeemed as follows:
Trust 1994 1993 1992
2000 1,193,814 2,870,255 2,390,103
2010 10,038,884 19,760,552 29,467,381
Units may be redeemed at the office of the Trustee upon tender thereof
generally on any business day or, in the case of uncertificated units, upon
delivery of a request for redemption and payment of any relevant tax. The
Trustee will redeem units either in cash or in kind at the option of the
Holder as specified in writing to the Trustee.
4. INCOME TAXES
All Fund items of income received, accretion of original issue discount,
expenses paid, and realized gains and losses on securities sold are
attributable to the Holders, on a pro rata basis, for Federal income tax
purposes in accordance with the grantor trust rules of the United States
Internal Revenue Code.
At December 31, 1994, the cost of investment securities for Federal income
tax purposes was approximately equivalent to the adjusted cost as shown in
each Trust's portfolio.
5. DISTRIBUTIONS
It is anticipated that each Trust will not make any distributions until the
first business day following the maturity of its holdings in the Stripped
Treasury Securities which are noninterest-bearing.
D-57
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES G
PORTFOLIOS
AS OF DECEMBER 31, 1994
Portfolio No. Adjusted
and Title of Interest Face Cost Value
Securities Rates Maturities Amount (Note A) (Note A)
2000 TRUST
1 Stripped Treasury 0% 2/15/00 $23,284,000 $15,993,909 $15,734,629
Securities (Note B)
2 U.S. Treasury Notes 8.500 2/15/00 94,725 100,802 97,279
Total $23,378,725 $16,094,711 $15,831,908
2010 TRUST
1 Stripped Treasury 0% 2/15/10 $22,302,000 $ 7,372,868 $ 6,787,391
Securities (Note B)
2 U.S. Treasury Bonds 9.375 2/15/06 87,555 106,134 97,156
Total $22,389,555 $ 7,479,002 $ 6,884,547
<TABLE>
Note A - See Note 1 to Financial Statements.
<S> <C>
Note B - Stripped Treasury Securities consist of one or more of the following types of
securities: (a) U.S. Treasury debt obligations which have been stripped of
their remaining interest coupons, (b) interest coupons which have been stripped
from U.S. Treasury debt obligations, and (c) receipts or certificates for
underlying stripped U.S. Treasury debt obligations. The receipts or
certificates evidence ownership of future interest or principal payments on U.S.
Treasury notes or bonds. The receipts or certificates are issued in registered
form by a major bank which acts as custodian and nominal holder of the
underlying stripped U.S. Treasury debt obligation. The Stripped Treasury
Securities are payable in full at maturity at their stated maturity amount, and
are not subject to redemption prior to maturity. The Stripped Treasury
Securities do not make any periodic payments of interest.
</TABLE>
D-58
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES H
REPORT OF INDEPENDENT ACCOUNTANTS
The Sponsor, Trustee and Holders
of The Merrill Lynch Fund of Stripped ("Zero")
U.S. Treasury Securities, Series H
We have audited the accompanying statement of condition of the 2011 Trust of The
Merrill Lynch Fund of Stripped ("Zero") U.S. Treasury Securities, Series H,
including the portfolio, as of December 31, 1994 and the related statements of
operations and of changes in net assets for the years ended December 31, 1994,
1993 and 1992. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Securities owned at
December 31, 1994, as shown in such portfolio, were confirmed to us by The Chase
Manhattan Bank (National Association), 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 the above-mentioned Trust of
The Merrill Lynch Fund of Stripped ("Zero") U.S. Treasury Securities, Series H
at December 31, 1994 and the results of its operations and changes in its net
assets for the above-stated years, in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
New York, N.Y.
February 7, 1995
D-59
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES H
STATEMENT OF CONDITION
AS OF DECEMBER 31, 1994
<TABLE><CAPTION>
2011 TRUST
<S> <C>
TRUST PROPERTY:
Investment in marketable securities
(see Portfolio and Note 1) $2,508,724
Other 2,243
Total trust property 2,510,967
LESS LIABILITY - Other 609
NET ASSETS (Note 2) $2,510,358
UNITS OUTSTANDING 8,820,153
UNIT VALUE $.28462
See Notes to Financial Statements.
</TABLE>
D-60
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES H
STATEMENTS OF OPERATIONS
AS OF DECEMBER 31, 1994
<TABLE>
<CAPTION>
2011 TRUST
Years Ended December 31,
1994 1993 1992
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income $ 3,618 $ 4,737 $ 5,180
Accretion of original issue discount 245,966 294,464 307,165
Trustee's fees and expenses (3,441) (3,011) (5,360)
Net investment income 246,143 296,190 306,985
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain on securities sold or redeemed 115,674 238,213 29,846
Unrealized appreciation (depreciation) of investments (755,936) 386,516 116,174
Net realized and unrealized gain (loss) on investments (640,262) 624,729 146,020
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $(394,119) $920,919 $453,005
See Notes to Financial Statements.
</TABLE>
D-61
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES H
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
2011 TRUST
Years Ended December 31,
1994 1993 1992
<S> <C> <C> <C>
OPERATIONS:
Net investment income $ 246,143 $ 296,190 $ 306,985
Realized gain on securities sold 115,674 238,213 29,846
Unrealized appreciation (depreciation)
of investments (755,936) 386,516 116,174
Net increase (decrease) in net assets
resulting from operations (394,119) 920,919 453,005
CAPITAL SHARE TRANSACTIONS (NOTE 3):
Issuance of additional units 472,768 919,691 5,691,235
Redemption of units (1,424,735) (1,769,511) (3,377,073)
Net capital share transactions (951,967) (849,820) 2,314,162
NET INCREASE IN NET ASSETS (1,346,086) 71,099 2,767,167
NET ASSETS, BEGINNING OF YEAR 3,856,444 3,785,345 1,018,178
NET ASSETS, END OF YEAR $2,510,358 $3,856,444 $3,785,345
NET VALUE, END OF YEAR $.28462 $.32073 $.25240
UNITS OUTSTANDING, END OF YEAR 8,820,153 12,023,998 14,997,268
See Notes to Financial Statements.
</TABLE>
D-62
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES H
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Fund is registered under the Investment Company Act of 1940 as a Unit
Investment Trust. The following is a summary of significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements. The policies are in conformity with generally
accepted accounting principles.
(a) Securities are stated at value as determined by an independent
evaluator based on bid side evaluations for the securities.
(b) Cost of securities is based on offering side evaluations for the
securities at Dates of Deposit. Cost of securities subsequent to such
dates has been adjusted to include the accretion of original issue
discount on the Stripped Treasury Securities. Realized gain and loss
on sales of securities are determined using the first-in, first-out
cost basis.
(c) The Fund is not subject to income taxes. Accordingly, no provision
for such taxes is required.
2. NET ASSETS, DECEMBER 31, 1994
2011 Trust
Cost of 8,820,153 units at Dates of Deposit $2,067,066
Less sales charge 41,342
Net amount applicable to Holders 2,025,724
Realized gain on securities sold 417,891
Unrealized depreciation of investments (162,058)
Redemptions of units - net cost of units redeemed less
redemption amounts (95,074)
Undistributed net investment income 323,875
Net assets $2,510,358
3. CAPITAL SHARE TRANSACTIONS
Additional units were issued as follows:
Trust 1994 1993 1992
2011 1,508,368 3,319,138 25,175,856
Units were redeemed as follows:
Trust 1994 1993 1992
2011 4,712,213 6,292,408 14,551,906
Units may be redeemed at the office of the Trustee upon tender thereof
generally on any business day or, in the case of uncertificated units, upon
delivery of a request for redemption and payment of any relevant tax. The
Trustee will redeem units either in cash or in kind at the option of the
Holder as specified in writing to the Trustee.
D-63
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES H
NOTES TO FINANCIAL STATEMENTS
4. INCOME TAXES
All Fund items of income received, accretion of original issue discount,
expenses paid, and realized gains and losses on securities sold are
attributable to the Holders, on a pro rata basis, for Federal income tax
purposes in accordance with the grantor trust rules of the United States
Internal Revenue Code.
At December 31, 1994, the cost of investment securities for Federal income
tax purposes was approximately equivalent to the adjusted cost as shown in
each Trust's portfolio.
5. DISTRIBUTIONS
It is anticipated that the Trust will not make any distributions until the
first business day following the maturity of its holdings in the Stripped
Treasury Securities which are noninterest-bearing.
D-64
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES H
PORTFOLIO
AS OF DECEMBER 31, 1994
Portfolio No. Adjusted
and Title of Interest Face Cost Value
Securities Rate Maturities Amount (Note A) (Note A)
2011 TRUST
1 Stripped Treasury 0% 2/15/11 $8,828,000 $2,629,293 $2,470,957
Securities (Note B)
2 U.S. Treasury Bonds 9.375 2/15/06 34,035 41,489 37,767
Total $8,862,035 $2,670,782 $2,508,724
Note A - See Note 1 to Financial Statements.
Note B - Stripped Treasury Securities consist of one or more of the following
types of securities: (a) U.S. Treasury debt obligations which have been
stripped of their remaining interest coupons, (b) interest coupons which
have been stripped from U.S. Treasury debt obligations and (c) receipts
or certificates for underlying stripped U.S. Treasury debt obligations.
The receipts or certificates evidence ownership of future interest or
principal payments on U.S. Treasury notes or bonds. The receipts or
certificates are issued in registered form by a major bank which acts as
custodian and nominal holder of the underlying stripped U.S. Treasury
debt obligation. The Stripped Treasury Securities are payable in full at
maturity at their stated maturity amount, and are not subject to
redemption prior to maturity. The Stripped Treasury Securities do make
any periodic payments of interest.
D-65
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES I
REPORT OF INDEPENDENT ACCOUNTANTS
The Sponsors, Trustee and Holders
of The Merrill Lynch Fund of Stripped ("Zero")
U.S. Treasury Securities, Series I
We have audited the accompanying statement of condition of the 2002 Trust of The
Merrill Lynch Fund of Stripped ("Zero") U.S. Treasury Securities, Series I,
including the portfolio, as of December 31, 1994 and the related statements of
operations and of changes in net assets for the years ended December 31, 1994
and 1993 and the period April 28 to December 31, 1992. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Securities owned at
December 31, 1994, as shown in such portfolio, were confirmed to us by The Chase
Manhattan Bank (National Association), 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 the above-mentioned Trust of
The Merrill Lynch Fund of Stripped ("Zero") U.S. Treasury Securities, Series I
at December 31, 1994 and the results of its operations and changes in its net
assets for the above-stated periods, in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
New York, NY
February 7, 1995
D-66
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES I
STATEMENT OF CONDITION
AS OF DECEMBER 31, 1994
<TABLE><CAPTION>
2002 TRUST
<S> <C>
TRUST PROPERTY:
Investment in marketable securities
(see Portfolio and Note 1) $3,854,138
Other 335
Total trust property 3,854,473
LESS LIABILITY - Other 430
NET ASSETS (Note 2) $3,854,043
UNITS OUTSTANDING 6,620,929
UNIT VALUE $.58210
See Notes to Financial Statements.
</TABLE>
D-67
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES I
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
2002 TRUST
April 28
Years Ended to
December 31, December 31,
1994 1993 1992
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income $ 2,064 $ 1,863 $ 797
Accretion of original issue discount 245,717 201,018 85,762
Trustee's fees and expenses (389) (3,057) (1,410)
Net investment income 247,392 199,824 85,149
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain on securities sold or redeemed 8,260 20,034 5,360
Unrealized appreciation (depreciation) of
investments (491,502) 282,131 84,604
Net realized and unrealized gain (loss) on
investments (483,242) 302,165 89,964
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS $(235,850) $501,989 $175,113
See Notes to Financial Statements.
</TABLE>
D-68
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES I
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
2002 TRUST
April 28
Years Ended to
December 31, December 31,
1994 1993 1992
<S> <C> <C> <C>
OPERATIONS:
Net investment income $ 247,392 $ 199,824 $ 85,149
Realized gain on securities sold 8,260 20,034 5,360
Unrealized appreciation (depreciation) of
investments (491,502) 282,131 84,604
Net increase (decrease) in net assets resulting
from operations (235,850) 501,989 175,113
CAPITAL SHARE TRANSACTIONS (NOTE 3):
Issuance of additional units 1,337,796 307,925 2,175,549
Redemption of units (368,756) (130,488) (107,462)
Net capital share transactions 969,040 177,437 2,068,087
NET INCREASE IN NET ASSETS 733,190 679,426 2,243,200
NET ASSETS, BEGINNING OF PERIOD 3,120,853 2,441,427 198,227
NET ASSETS, END OF PERIOD $3,854,043 $3,120,853 $2,441,427
NET VALUE, END OF PERIOD $.58210 $.62563 $.52842
UNITS OUTSTANDING, END OF PERIOD 6,620,929 4,988,332 4,620,220
See Notes to Financial Statements.
</TABLE>
D-69
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES I
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Fund is registered under the Investment Company Act of 1940 as a Unit
Investment Trust. The following is a summary of significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements. The policies are in conformity with generally
accepted accounting principles.
(a) Securities are stated at value as determined by an independent
evaluator based on bid side evaluations for the securities.
(b) Cost of securities is based on offering side evaluations for the
securities at Date of Deposit. Cost of securities subsequent to dates
of purchase has been adjusted to include the accretion of original
issue discount on the Stripped Treasury Securities. Realized gain and
loss on sales of securities are determined using the first-in, first-
out cost basis.
(c) The Fund is not subject to income taxes. Accordingly, no provision
for such taxes is required.
2. NET ASSETS, DECEMBER 31, 1994
2002 Trust
Cost of 6,620,929 units at Dates of Deposit $3,522,812
Less sales charge 53,653
Net amount applicable to Holders 3,469,159
Realized gain on securities sold 33,654
Unrealized depreciation of investments (124,768)
Redemptions of units - net cost of units redeemed less
redemption amounts 22,946
Undistributed net investment income 453,052
Net capital applicable to Holders $3,854,043
3. CAPITAL SHARE TRANSACTIONS
Units were issued as follows:
Trust 1994 1993 1992
2002 2,265,189 577,911 4,401,119
Units were redeemed as follows:
Trust 1994 1993 1992
2002 632,592 209,799 207,934
Units may be redeemed at the office of the Trustee upon tender thereof
generally on any business day or, in the case of uncertificated units, upon
delivery of a request for redemption and payment of any relevant tax. The
Trustee will redeem units either in cash or in kind at the option of the
Holder as specified in writing to the Trustee.
D-70
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES I
NOTES TO FINANCIAL STATEMENTS
4. INCOME TAXES
All Fund items of income received, accretion of original issue discount,
expenses paid, and realized gains and losses on securities sold are
attributable to the Holders, on a pro rata basis, for Federal income tax
purposes in accordance with the grantor trust rules of the United States
Internal Revenue Code.
At December 31, 1994, the cost of investment securities for Federal income
tax purposes was approximately equivalent to the adjusted cost as shown in
the Trust's portfolio.
5. DISTRIBUTIONS
It is anticipated that the Trust will not make any distributions until the
first business day following the maturity of its holdings in the Stripped
Treasury Securities which are noninterest-bearing.
D-71
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES FUND, SERIES I
PORTFOLIO
AS OF DECEMBER 31, 1994
Portfolio No. Adjusted
and Title of Interest Face Cost Value
Securities Rate Maturities Amount (Note A) (Note A)
2002 TRUST
1 Stripped Treasury 0% 02/15/02 $6,595,000 $3,946,084 $3,822,858
Securities (Note B)
2 U.S. Treasury Notes 7.50 11/15/01 31,800 32,822 31,280
Total $6,626,800 $3,978,906 $3,854,138
Note A - See Note 1 to Financial Statements.
Note B - Stripped Treasury Securities consist of one or more of the following
types of securities: (a) U.S. Treasury debt obligations which have
been stripped of their remaining interest coupons, (b) interest
coupons which have been stripped from U.S. Treasury debt obligations,
and (c) receipts or certificates for underlying stripped U.S. Treasury
debt obligations. The receipts or certificates evidence ownership of
future interest or principal payments on U.S. Treasury notes or bonds.
The receipts or certificates are issued in registered form by a major
bank which acts as custodian and nominal holder of the underlying
stripped U.S. Treasury debt obligations. The Stripped Treasury
Securities are payable in full at maturity at their stated maturity
amount, and are not subject to redemption prior to maturity. The
Stripped Treasury Securities do not make any periodic payments of
interest.
D-72
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES J
REPORT OF INDEPENDENT ACCOUNTANTS
The Sponsors, Trustee and Holders
of The Merrill Lynch Fund of Stripped ("Zero")
U.S. Treasury Securities, Series J
We have audited the accompanying statement of condition of the 2013 Trust of The
Merrill Lynch Fund of Stripped ("Zero") U.S. Treasury Securities, Series J,
including the portfolio, as of December 31, 1994 and the related statements of
operations and of changes in net assets for the year ended December 31, 1994 and
the period April 21 to December 31, 1993. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Securities owned at
December 31, 1994, as shown in such portfolio, were confirmed to us by The Chase
Manhattan Bank (National Association), 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 the above-mentioned Trust of
The Merrill Lynch Fund of Stripped ("Zero") U.S. Treasury Securities, Series J
at December 31, 1994 and the results of its operations and changes in its net
assets for the above-stated periods, in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
New York, NY
February 7, 1995
D-73
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES J
STATEMENT OF CONDITION
AS OF DECEMBER 31, 1994
<TABLE><CAPTION>
2013 TRUST
<S> <C>
TRUST PROPERTY:
Investment in marketable securities
(see Portfolio and Note 1) $2,888,665
Other 769
Total trust property 2,289,434
LESS LIABILITY - Other 215
NET ASSETS (Note 2) $2,289,219
UNITS OUTSTANDING 9,487,523
UNIT VALUE $.24129
See Notes to Financial Statements.
</TABLE>
D-74
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES J
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
2013 TRUST
April 21
Year Ended to
December 31, December 31,
1994 1993
<S> <C> <C>
INVESTMENT INCOME:
Interest income $ 3,103 $ 419
Accretion of original issue discount 180,168 36,623
Trustee's fees and expenses (2,451) (519)
Net investment income 180,820 36,523
REALIZED AND UNREALIZED GAIN (LOSS)ON INVESTMENTS:
Realized gain (loss) on securities sold or redeemed (312,022) 42,857
Unrealized depreciation of investments (114,971) (48,875)
Net realized and unrealized loss on investments (426,993) (6,018)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $(246,173) $ 30,505
See Notes to Financial Statements.
</TABLE>
D-75
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES J
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
2013 TRUST
April 21
Year Ended to
December 31, December 31,
1994 1993
<S> <C> <C>
OPERATIONS:
Net investment income $ 180,820 $ 36,523
Realized gain (loss) on securities sold (312,022) 42,857
Unrealized depreciation of investments (114,971) (48,875)
Net increase (decrease) in net assets resulting from
operations (246,173) 30,505
CAPITAL SHARE TRANSACTIONS (NOTE 3):
Issuance of additional units 3,211,198 1,381,341
Redemption of units (1,552,323) (637,561)
Net capital share transactions 1,658,875 743,780
NET INCREASE IN NET ASSETS 1,412,702 774,285
NET ASSETS, BEGINNING OF PERIOD 876,517 102,232
NET ASSETS, END OF PERIOD $2,289,219 $ 876,517
NET VALUE, END OF PERIOD $.24129 $.27382
UNITS OUTSTANDING, END OF PERIOD 9,487,523 3,201,118
See Notes to Financial Statements.
</TABLE>
D-76
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES J
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Fund is registered under the Investment Company Act of 1940 as a Unit
Investment Trust. The following is a summary of significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements. The policies are in conformity with generally
accepted accounting principles.
(a) Securities are stated at value as determined by an independent
evaluator based on bid side evaluations for the securities.
(b) Cost of securities is based on offering side evaluations for the
securities at Dates of Deposit. Cost of securities subsequent to such
dates has been adjusted to include the accretion of original issue
discount on the Stripped Treasury Securities. Realized gain and loss
on sales of securities are determined using the first-in, first-out
cost basis.
(c) The Fund is not subject to income taxes. Accordingly, no provision
for such taxes is required.
2. NET ASSETS, DECEMBER 31, 1994
2013 Trust
Cost of 9,487,523 units at Dates of Deposit $2,479,790
Less sales charge 49,596
Net amount applicable to Holders 2,430,194
Realized loss on securities sold (269,165)
Unrealized depreciation of investments (163,846)
Redemptions of units - net cost of units redeemed less
redemption amounts 180,674
Undistributed net investment income 111,362
Net capital applicable to Holders $2,289,219
3. CAPITAL SHARE TRANSACTIONS
Additional units were issued as follows:
Trust 1994 1993
2013 12,770,407 5,141,650
Units were redeemed as follows:
Trust 1994 1993
2013 6,484,002 2,356,948
Units may be redeemed at the office of the Trustee upon tender thereof
generally on any business day or, in the case of uncertificated units, upon
delivery of a request for redemption and payment of any relevant tax. The
Trustee will redeem units either in cash or in kind at the option of the
Holder as specified in writing to the Trustee.
D-77
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES J
NOTES TO FINANCIAL STATEMENTS
4. INCOME TAXES
All Fund items of income received, accretion of original issue discount,
expenses paid, and realized gains and losses on securities sold are
attributable to the Holders, on a pro rata basis, for Federal income tax
purposes in accordance with the grantor trust rules of the United States
Internal Revenue Code.
At December 31, 1994, the cost of investment securities for Federal income
tax purposes was approximately equivalent to the adjusted cost as shown in
the Trust's portfolio.
5. DISTRIBUTIONS
It is anticipated that the Trust will not make any distributions until the
first business day following the maturity of its holdings in the Stripped
Treasury Securities which are noninterest-bearing.
D-78
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES FUND, SERIES J
PORTFOLIO
AS OF DECEMBER 31, 1994
Portfolio No. Adjusted
and Title of Interest Face Cost Value
Securities Rate Maturities Amount (Note A) (Note A)
2013 TRUST
1 Stripped Treasury 0% 02/15/13 $9,442,000 $2,411,465 $2,250,217
Securities (Note B)
2 U.S. Treasury Bonds 10.375 11/15/12(C) 32,303 41,046 38,448
Total $9,474,303 $2,452,511 $2,288,665
Note A - See Note 1 to Financial Statements.
Note B - Stripped Treasury Securities consist of one or more of the
following types of securities: (a) U.S. Treasury debt
obligations which have been stripped of their remaining
interest coupons, (b) interest coupons which have been
stripped from U.S. Treasury debt obligations, and (c)
receipts or certificates for underlying stripped U.S.
Treasury debt obligations. The receipts or certificates
evidence ownership of future interest or principal payments
on U.S. Treasury notes or bonds. The receipts or
certificates are issued in registered form by a major bank
which acts as custodian and nominal holder of the underlying
stripped U.S. Treasury debt obligation. The Stripped
Treasury Securities are payable in full at maturity at their
stated maturity amount, and are not subject to redemption
prior to maturity. The Stripped Treasury Securities do not
make any periodic payments of interest.
Note C - Callable at par commencing 11/15/07.
D-79
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES K
REPORT OF INDEPENDENT ACCOUNTANTS
The Sponsors, Trustee and Holders
of The Merrill Lynch Fund of Stripped ("Zero")
U.S. Treasury Securities, Series K
We have audited the accompanying statements of condition of the 2004 Trust and
the 2014 Trust of The Merrill Lynch Fund of Stripped ("Zero") U.S. Treasury
Securities, Series K, including the portfolios, as of December 31, 1994 and the
related statements of operations and of changes in net assets for the period
April 27 to December 31, 1994. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Securities owned at
December 31, 1994, as shown in such portfolios, were confirmed to us by The
Chase Manhattan Bank (National Association), 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 the above-mentioned Trusts of
The Merrill Lynch Fund of Stripped ("Zero") U.S. Treasury Securities, Series K
at December 31, 1994 and the results of their operations and changes in their
net assets for the above-stated period in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
New York, NY
February 7, 1995
D-80
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES K
STATEMENTS OF CONDITION
AS OF DECEMBER 31, 1994
<TABLE><CAPTION>
2004 TRUST 2014 TRUST
<S> <C> <C>
TRUST PROPERTY:
Investment in marketable securities
(see Portfolio and Note 1) $4,197,150 $4,302,166
Other 1,119 2,538
Total trust property 4,198,269 4,304,704
LESS LIABILITY - Other 1,081 2,549
NET ASSETS (Note 2) $4,197,188 $4,302,155
UNITS OUTSTANDING 8,463,782 19,262,056
UNIT VALUE $.49590 $.22335
</TABLE>
See Notes to Financial Statements.
D-81
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES K
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
2004 TRUST
April 27
to
December 31,
1994
<S> <C>
INVESTMENT INCOME:
Interest income $ 941
Accretion of original issue discount 92,946
Trustee's fees and expenses (903)
Net investment income 92,984
UNREALIZED DEPRECIATION OF INVESTMENTS (124,406)
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS $(31,422)
</TABLE>
<TABLE><CAPTION>
2014 TRUST
April 27
to
December 31,
1994
<S> <C>
INVESTMENT INCOME:
Interest income $ 1,979
Accretion of original issue discount 111,279
Trustee's fees and expenses (1,990)
Net investment income 111,268
REALIZED AND UNREALIZED LOSS ON INVESTMENTS:
Realized loss on securities sold (208,605)
Unrealized appreciation of investments 175,148
Realized and unrealized loss on investments (33,457)
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 77,811
See Notes to Financial Statements.
</TABLE>
D-82
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES K
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
2004 TRUST
April 27
to
December 31,
1994
<S> <C>
OPERATIONS:
Net investment income $ 92,984
Unrealized depreciation of investments (124,406)
Net decrease in net assets resulting from
operations (31,422)
CAPITAL SHARE TRANSACTIONS (NOTE 3) - Issuance of additional units 4,127,042
NET INCREASE IN NET ASSETS 4,095,620
NET ASSETS, BEGINNING OF PERIOD 101,568
NET ASSETS, END OF PERIOD $4,197,188
UNIT VALUE, END OF PERIOD $.49590
UNITS OUTSTANDING, END OF PERIOD 8,463,782
See Notes to Financial Statements.
</TABLE>
D-83
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES K
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE><CAPTION>
2014 TRUST
April 27
to
December 31,
1994
<S> <C>
OPERATIONS:
Net investment income $ 111,268
Realized loss on securities sold (208,605)
Unrealized appreciation of investments 175,148
Net increase in net assets resulting from
operations 77,811
CAPITAL SHARE TRANSACTIONS (NOTE 3):
Issuance of additional units 5,732,846
Redemptions of units (1,611,186)
Net capital share transactions 4,121,660
NET INCREASE IN NET ASSETS 4,199,471
NET ASSETS, BEGINNING OF PERIOD 102,684
NET ASSETS, END OF PERIOD $4,302,155
UNIT VALUE, END OF PERIOD $.22335
UNITS OUTSTANDING, END OF PERIOD 19,262,056
See Notes to Financial Statements.
</TABLE>
D-84
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES K
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Fund is registered under the Investment Company Act of 1940 as a Unit
Investment Trust. The following is a summary of significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements. The policies are in conformity with generally
accepted accounting principles.
(a) Securities are stated at value as determined by an independent
evaluator based on bid side evaluations for the securities.
(b) Cost of securities is based on offering side evaluations for the
securities at Dates of Deposit. Cost of securities subsequent to such
dates has been adjusted to include the accretion of original issue
discount on the Stripped Treasury Securities. Realized gain and loss
on sales of securities are determined using the first-in, first-out
cost basis.
(c) The Fund is not subject to income taxes. Accordingly, no provision
for such taxes is required.
2. NET ASSETS, DECEMBER 31, 1994
2004 Trust
Cost of 8,463,782 units at Dates of Deposit $4,293,005
Less sales charge 64,395
Net amount applicable to Holders 4,228,610
Unrealized depreciation of investments (124,406)
Undistributed net investment income 92,984
Net assets $4,197,188
2014 Trust
Cost of 19,262,056 units at Dates of Deposit $4,245,366
Less sales charge 84,907
Net amount applicable to Holders 4,160,459
Realized loss on securities sold (208,605)
Unrealized appreciation of investments 175,148
Redemptions of units - net cost of units redeemed less
redemption amounts 136,421
Undistributed net investment income 38,732
Net assets $4,302,155
D-85
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES K
NOTES TO FINANCIAL STATEMENTS
3. CAPITAL SHARE TRANSACTIONS
Additional units were issued as follows:
April 27
to
Trust December 31, 1994
2004 8,262,575
2014 26,575,919
Units were redeemed as follows:
April 27
to
Trust December 31, 1994
2014 7,755,231
Units may be redeemed at the office of the Trustee upon tender thereof
generally on any business day or, in the case of uncertificated units, upon
delivery of a request for redemption and payment of any relevant tax. The
Trustee will redeem units either in cash or in kind at the option of the
Holder as specified in writing to the Trustee.
4. INCOME TAXES
All Fund items of income received, accretion of original issue discount,
expenses paid, and realized gains and losses on securities sold are
attributable to the Holders, on a pro rata basis, for Federal income tax
purposes in accordance with the grantor trust rules of the United States
Internal Revenue Code.
At December 31, 1994, the cost of investment securities for Federal income
tax purposes was approximately equivalent to the adjusted cost as shown in
each Trust's portfolio.
5. DISTRIBUTIONS
It is anticipated that each Trust will not make any distributions until the
first business day following the maturity of its holdings in the Stripped
Treasury Securities which are noninterest-bearing.
D-86
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES FUND, SERIES K
PORTFOLIOS
AS OF DECEMBER 31, 1994
Portfolio No. Adjusted
and Title of Interest Face Cost Value
Securities Rate Maturities Amount (Note A) (Note A)
2004 TRUST
1 Stripped Treasury 0% 2/15/04 $8,413,000 $4,275,877 $4,152,825
Securities (Note B)
2 U.S. Treasury Notes 5.875 2/15/04 50,782 45,679 44,325
Total $8,463,782 $4,321,556 $4,197,150
2014 TRUST
1 Stripped Treasury 0% 2/15/14 $19,185,000 $4,048,620 $4,223,194
Securities (Note B)
2 U.S. Treasury Bonds 11.250 2/15/15 59,726 78,398 78,972
Total $19,244,726 $4,127,018 $4,302,166
Note A - See Note 1 to Financial Statements.
Note B - Stripped Treasury Securities consist of one or more of the
following types of securities: (a) U.S. Treasury debt
obligations which have been stripped of their remaining
interest coupons, (b) interest coupons which have been
stripped from U.S. Treasury debt obligations, and (c)
receipts or certificates for underlying stripped U.S.
Treasury debt obligations. The receipts or certificates
evidence ownership of future interest or principal payments
on U.S. Treasury notes or bonds. The receipts or
certificates are issued in registered form by a major bank
which acts as custodian and nominal holder of the underlying
stripped U.S. Treasury debt obligation. The Stripped
Treasury Securities are payable in full at maturity at their
stated maturity amount, and are not subject to redemption
prior to maturity. The Stripped Treasury Securities do not
make any periodic payments of interest.
D-87
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ('ZERO')
U.S. TREASURY SECURITIES
FUND STRUCTURE
Each Series (a 'Fund') consists of a number of separate unit investment
trusts (each a 'Trust') created under New York law by one Trust indenture (the
'Indenture') among the Sponsor, the Trustee and the Evaluator. To the extent
that references in the Prospectus are to articles and sections of the Indenture,
which are hereby incorporated by reference, the statements made herein are
qualified in their entirety by this reference. On the initial date of deposit
for each Trust (the 'Initial Date of Deposit') the Sponsor deposited the
underlying Securities with the Trustee at prices equal to the valuation of those
Securities on the offer side of the market as determined by the Evaluator, and
the Trustee delivered to the Sponsor units of interest ('Units') representing
the entire ownership of that Trust in the Fund. Most if not all of the
Securities so deposited were represented by purchase contracts assigned to the
Trustee together with an irrevocable letter or letters of credit issued by a
commercial bank or banks in the amount necessary to complete their purchase. The
record holders ('Holders') of Units will have the right to have their Units
redeemed (see Redemption) at a price based on the aggregate bid side evaluation
of the Securities ('Redemption Price per Unit') if the Units cannot be sold in
the market which the Sponsor has committed to maintain (see Market for Units).
Redemption will be made in securities ('in kind') or in cash at the option of
the Holder.
The Sponsor may deposit additional Securities, with an identical maturity
to that of the Securities initially deposited, in any of the Trusts, and Units
in the Trusts may be continuously offered for sale by means of this Prospectus
(see Sale of Units--Distribution), resulting in a potential increase in the
number of outstanding Units of each Trust (see Selection and Acquisition of
Securities). However, each Unit will continue to represent the identical face
amount of Securities with identical maturity dates.
As used herein, 'Securities' includes the Stripped Treasury Securities and
interest-bearing Treasury Note deposited in the Trusts and described under
Portfolios and any additional Treasury Securities deposited thereafter or
contracts for the purchase thereof together with an irrevocable letter or
letters of credit sufficient to perform such contracts. As used herein, the term
'Units,' unless the context otherwise indicates, means the units of interest in
all Trusts.
RISK FACTORS
An investment in Units of a Trust should be made with an understanding of
the risks which an investment in deep discount debt obligations may entail,
including the risk that the value of the Trust's portfolio (the 'Portfolio') and
hence of the Units will decline with increases in interest rates. High inflation
and recession, together with the fiscal and monetary measures adopted to attempt
to deal with those and other economic problems, have contributed to recent wide
fluctuations in interest rates and thus in the value of fixed-rate debt
obligations generally. The Sponsor cannot predict future economic policies or
their consequences or, therefore, the course or extent of any similar
fluctuations in the future. Furthermore, a direct Holder (but not necessarily
Policyowners--see Taxes) will have significant amounts of taxable income
attributable to it before receipt of the cash attributable to that income.
Because interest on 'zero coupon' debt obligations is not distributed on a
current basis but in effect compounded, the value of securities of this type,
including the value of accrued and reinvested interest (and of a fund comprised
of these obligations), is subject to greater fluctuations than on obligations
that distribute income regularly. Accordingly, while the full faith and credit
of the U.S. government provides a high level of protection against credit risks
on the Securities, sale of Units before maturity of the Securities at a time
when interest rates have increased would involve greater market risk than in a
fund invested in debt obligations of comparable maturity that pay interest
currently. This risk is greater when the period to maturity is longer.
SPECIAL CHARACTERISTICS OF STRIPPED TREASURY SECURITIES
Bearer bonds are transferable by delivery; payments are made to the holder
of the bonds. Stripped bonds have been stripped of their unmatured interest
coupons; stripped coupons are coupons that have been stripped from an issuer's
bonds. Stripped Treasury Securities are sold at a deep discount because the
buyer of those securities receives only the right to receive a future fixed
payment on the security and not any rights to periodic
1
<PAGE>
interest payments thereon. Purchasers of these securities acquire, in effect,
discount obligations that are economically identical to the 'zero-coupon bonds'
that have been issued by corporations. Zero coupon bonds are debt obligations
that do not make any periodic payments of interest prior to maturity and
accordingly are issued at a deep discount.
Stripped Treasury Securities held by any Trust shall consist solely of one
or more of the following types of securities: (a) U.S. Treasury debt obligations
which have been stripped of their unmatured interest coupons, (b) coupons which
have been stripped from U.S. Treasury bearer bonds, either of which may be held
through the Federal Reserve Bank's book entry systems called 'Separate Trading
of Registered Interest and Principal of Securities' ('STRIPS') and 'Coupon Under
Book-Entry Safekeeping' ('CUBES'), and (c) receipts or certificates for stripped
U.S. Treasury debt obligations. STRIPS and CUBES, while direct obligations of
the United States and issued under programs introduced by the U.S. Treasury, are
not issued directly by the U.S. government. The STRIPS program facilitates
secondary market stripping of selected Treasury notes and bonds into individual
principal and interest components by purchasers with access to a book-entry
account at a Federal Reserve bank. Those obligations may be maintained in the
book-entry system operated by the Federal Reserve in a manner that permits
separate trading and ownership of interest and principal payments. The Federal
Reserve does not charge a fee for this service, but book-entry transfers of
interest and principal components are subject to the same fee schedule generally
applicable to transfers of Treasury securities. Receipts or certificates
evidence ownership of future interest or principal payments on U.S. Treasury
notes or bonds which are direct obligations of the United States of America. The
receipts or certificates are issued in registered form by a major bank which
acts as custodian and nominal holder of the underlying stripped U.S. Treasury
debt obligation (which may be held by it either in physical or in book entry
form). The terms of custody provide that the underlying debt obligations will be
held separate from the general assets of the custodian and will not be subject
to any right, charge, security interest, lien or claim of any kind in favor of
the custodian or any person claiming through the custodian, and the custodian
will be responsible for applying all payments received on those underlying debt
obligations to the related receipts or certificates without making any
deductions other than applicable tax withholding. The custodian is required to
maintain insurance for the protection of holders of receipts or certificates in
customary amounts against losses resulting from the custody arrangement due to
dishonest or fraudulent action by the custodian's employees. The holders of
receipts or certificates, as the real parties in interest, are entitled to the
rights and privileges of the underlying debt obligations including the right in
the event of default in payment of principal or interest thereon to proceed
individually against the United States without acting in concert with other
holders of those receipts or certificates or the custodian. Receipts and
certificates may not be as liquid as STRIPS or CUBES.
The Stripped Treasury Securities in each Trust are payable in full at
maturity at their stated maturity amount and are not subject to redemption prior
to maturity. In addition, the Stripped Treasury Securities do not make any
periodic payments of interest. The Securities are sold at a substantial discount
from their face amounts payable at maturity. A holder of Stripped Treasury
Securities will be required to include annually in gross income an allocable
portion of the deemed original issue discount, prior to receipt of the cash
attributable to that income. However, an insurance company separate account such
as the Account can avoid being taxed on such income by deducting an equal amount
for an increase in reserves. Stripped Treasury Securities are marketable in
substantially the same manner as other discount Treasury securities.
Under generally accepted accounting principles, a holder of a security
purchased at a discount normally must report as an item of income for financial
accounting purposes the portion of the discount attributable to the applicable
reporting period. The calculation of this attributable income would be made on
the 'interest' method which generally will result in a lesser amount of
includible income in earlier periods and a correspondingly larger amount in
later periods. For Federal income tax purposes, the inclusion will be on a basis
that reflects the effective semi-annual compounding of accrued but unpaid
interest effectively represented by the discount. Although this treatment is
similar to the 'interest' method described above, the 'interest' method may
differ to the extent that generally accepted accounting principles permit or
require the inclusion of interest on the basis of a compounding period other
than the semi-annual period (see Taxes below).
2
<PAGE>
DESCRIPTION OF THE FUND
THE PORTFOLIO
The Portfolio of each Trust consists of different issues of Stripped
Treasury Securities, with fixed maturity dates and not having any equity or
conversion features, that do not pay interest before maturity and as such were
purchased at a deep discount (see above) and of the Treasury Note deposited in
order to provide cash income with which to pay the expenses of the Trust. It is
intended that the Portfolio for each Trust will comply with any investment
limitations required to assure favorable Federal income tax treatment for the
Policies issued by the Insurers.
SELECTION AND ACQUISITION OF SECURITIES
In selecting Securities for deposit in a Trust, the following factors,
among others, were considered by the Unit Investment Trusts division of Merrill
Lynch, Pierce, Fenner & Smith Incorporated: (i) the types of securities
available; (ii) the prices of those securities relative to other comparable
securities; (iii) the extent to which those securities trade at a discount from
par once the interest coupons are stripped; (iv) the yield to maturity of those
securities; and (v) the maturities of those securities.
The yield to maturity and discount from par on securities of the type
deposited in the Trusts depend on a variety of factors, including general money
market conditions, general conditions of the bond market, prevailing interest
rates and the maturities of the securities.
Each Trust consists of the Securities (or contracts to purchase the
Securities) listed under Portfolios and any additional Securities deposited in
the Trust pursuant to the terms of the Indenture (including provisions with
respect to deposit of Securities in connection with the sale of additional
Units) as long as they may continue to be held from time to time in the Trust,
together with accrued and undistributed interest on any interest-bearing
securities deposited in order to pay the expenses of the Trust, undistributed
cash representing payments of principal and cash realized from the disposition
of Securities.
Neither the Sponsor nor the Trustee shall be liable in any way for any
default, failure or defect in any Security. In the event of a failure to deliver
any Security that has been purchased for a Trust under a contract ('Failed
Security'), the Sponsor is authorized under the Indenture to direct the Trustee
to acquire substitute securities ('Replacement Securities') to make up the
portfolio of the Trust. Replacement Securities for Securities initially
deposited must be deposited into the Trust within 110 days after the Initial
Date of Deposit; Replacement Securities for Securities deposited thereafter must
be deposited within 20 days after delivery of notice of the failed contract; the
purchase price may not exceed the amount of funds reserved for the purchase of
the Failed Security. The Replacement Securities must be Securities issued by the
U.S. Treasury (i) that if stripped make no periodic payments of interest, or if
interest-bearing are of the same issue, (ii) that have a fixed maturity
identical to that of the Failed Security, (iii) that are purchased at a price
that results in a yield to maturity as of the date of deposit of the Failed
Security which is equivalent (taking into consideration then-current market
conditions) to the yield to maturity of the Failed Security and (iv) that are
not when, as and if issued obligations. If this right of substitution is not
utilized to acquire Replacement Securities in the event of a failed contract,
the Sponsor will cause to be refunded the attributable transaction charge plus
the attributable Cost of Securities to Trust, plus accrued interest and
amortization attributable to the relevant Security to the date the Sponsor is
notified of the failure.
Because certain of the Securities from time to time may be sold under
certain circumstances described herein, each Trust is not expected to retain its
present size and composition (see Redemption). The Indenture also authorizes the
Sponsor to increase the size and number of Units of any Trust by the deposit of
additional Securities and the issue of a corresponding number of additional
Units, provided that the maturity of any additional Securities deposited in the
Trust is identical to the maturity of the Securities initially deposited in the
Trust.
THE UNITS
On the date of the Investment Summary of each Trust each Unit represented
the fractional undivided interest in the Securities held in the Trust and net
income of the Trust set forth in the Investment Summary. Thereafter, if Units of
any Trust are redeemed the face amount of Securities in that Trust will be
reduced by amounts allocable to redeemed Units, and the fractional undivided
interest represented by each remaining Unit
3
<PAGE>
in the balance will be increased. However, if additional Units are issued by any
Trust (through deposit of Securities by the Sponsor in connection with the sale
of additional Units), the aggregate face amount of Securities in the Trust will
be increased by amounts allocable to the additional Units, and the fractional
undivided interest represented by each Unit in the balance of the Trust will be
decreased. Units will remain outstanding until redeemed upon tender to the
Trustee by a Holder (which may include the Sponsor) or until the termination of
the Indenture (see Redemption and Administration of the Fund--Amendment and
Termination).
INCOME AND YIELD
The economic effect of purchasing Units of a Trust is that the investor who
holds his Units until maturity of the underlying Securities should receive
approximately a fixed yield, not only on his original investment but on all
earned discount during the life of the Securities. The assumed or implicit
automatic reinvestment at market rates at the time of purchase of the portion of
the yield represented by earned discount differentiates the Trusts from funds
consisting of customary securities on which current periodic interest is paid at
market rates at the time of issue. Accordingly, an investor in the Units, unlike
an investor in a fund comprised of customary securities, virtually eliminates
his risk of being unable to invest distributions at a rate as high as the yield
on his Trust, but will forego the ability to reinvest at higher rates in the
future.
The Treasury Note deposited in each Trust in order to pay the expenses of
the Trust includes an item of accrued but unpaid interest up to its date of
deposit. To avoid having Holders pay this accrued interest (which earns no
return) when Units are purchased, the Trustee pays this amount of accrued
interest to the Sponsor as a special distribution. The Trustee will recover the
amount of this distribution from interest received on the Treasury Note
deposited in the Trust. Although the Treasury Note will also accrue interest
during the period between the date of deposit and the date of settlement for
Units, the Sponsor anticipates that any such amount of accrued interest will be
minimal and, therefore, will not be added to the Offering Price of the Units.
The price per Unit will vary in accordance with fluctuations in the prices
of the Securities held by the Trust. Changes in the Offering Prices or in a
Trust's expenses will result in changes in the yields to maturity.
TAXES
The following discussion relates only to direct holders of Units of the
Trusts, and not to Policyowners. If an Account is the Holder, any taxable income
will in effect be offset by a deduction for an increase in reserves. For
information on tax consequences to Policyowners, see the attached Prospectus for
the Policies.
In the opinion of Davis Polk & Wardwell, special counsel for the Sponsor,
under existing law:
Each Trust is not an association taxable as a corporation for Federal
income tax purposes, and income received by the Trust will be treated as
the income of the Holders of the Trust in the manner set forth below.
Each Holder will be considered the owner of a pro rata portion of each
Security in his Trust under the grantor trust rules of Sections 671-679 of
the Internal Revenue Code of 1986, as amended (the 'Code'). The total cost
to a Holder for his Units, including the transaction charge, is allocated
among his pro rata portion of each Security in his Trust (in proportion to
the fair market values thereof on the date the Holder purchases his Units)
in order to determine his tax cost for his pro rata portion of each
Security.
Each Trust consists primarily of Stripped Treasury Securities. A Holder
is required to treat his pro rata portion of each Stripped Treasury
Security in his Trust as a bond that was originally issued on the date the
Holder purchased his Units at an original issue discount equal to the
excess of the stated redemption price at maturity over the Holder's tax
cost therefor as discussed above, and to include annually in income a
portion of such original issue discount determined under a formula which
takes into account the compounding of interest.
Each Holder will be considered to have received the income on his pro
rata portion of the Treasury Note in his Trust when interest on the Note is
received by his Trust.
A Holder will recognize taxable gain or loss when all or part of his pro
rata portion of a Security is disposed of by the Fund for an amount greater
or less than his adjusted tax basis. Any such taxable gain or loss will be
capital gain or loss except that any gain from the disposition of a
Holder's pro rata portion of a Security acquired by the Holder at a 'market
discount' (i.e., if the Holder's original cost for his pro rata portion of
the Security (plus any original issue discount which will accrue thereon)
is less than its stated
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redemption price at maturity) will be treated as ordinary income to the
extent the gain does not exceed the accrued market discount. Capital gains
are generally taxed at the same rate as ordinary income. However, the
excess of net long-term capital gains over net short-term capital losses
may be taxed at a lower rate than ordinary income for certain noncorporate
taxpayers. A capital gain or loss is long-term if the asset is held for
more than one year and short-term if held for one year or less. The
deduction of capital losses is subject to limitations. A Holder will also
be considered to have disposed of all or part of his pro rata portion of
each Security when he sells or redeems all or some of his Units.
A distribution to a Holder of Securities upon redemption of Units will
not be a taxable event to the Holder or to nonredeeming Holders. The
redeeming Holder's basis for such Securities will be equal to his basis for
the Securities (previously represented by his Units) prior to such
redemption, and his holding period for such Securities will include the
period during which he held his Units. However, a Holder may recognize
taxable gain or loss when the Holder sells the Securities so distributed
for cash.
Under the income tax laws of the State and City of New York, each Trust
is not an association taxable as a corporation and income received by the
Trust will be treated as the income of the Holders of the Trust.
Holders will be required for Federal income tax purposes to include
amounts in ordinary gross income in advance of the receipt of the cash
attributable to such income. Therefore, direct holding of Units may be
appropriate only for a tax-deferred account which can have taxable income
attributed in advance of the receipt of the cash attributable to such
income.
The foregoing discussion relates only to Federal and certain aspects of
New York income taxes. Depending on their state of residence, Holders may
be subject to state and local taxation and should consult their own tax
advisers in this regard.
* * *
After the end of each calendar year, the Trustee will furnish to each
Holder a report from which the Holder may determine the income received by his
Trust on his pro rata portion of the Treasury Note, the gross proceeds received
by the Fund from the disposition of any Security and the Holder's pro rata
portion of the fees and expenses paid by his Trust. In order to enable them to
comply with Federal and state tax reporting requirements, upon request to the
Trustee Holders will be furnished with evaluations of Securities furnished to it
by the Evaluator.
SALE OF UNITS
OFFERING PRICE
The Offering Price per Unit of a Trust is computed as of the Evaluation
Time by adding (a) the aggregate offer side evaluation of the Securities in the
Trust (as determined by the Evaluator), (b) cash on hand in the Trust (other
than cash covering contracts to purchase Securities), (c) accrued and unpaid
interest as of the date of computation and (d) all other assets of the Trust;
deducting therefrom the sum of (x) taxes or other governmental charges against
the Trust not previously deducted, (y) accrued fees and expenses of the Trustee
(including legal and auditing expenses), the Evaluator and counsel, and certain
other expenses and (z) any cash held for distribution to Holders of record as of
a date prior to the evaluation; dividing the result by the number of Units of
the Trust outstanding as of the date of computation (Sections 4.01 and 5.01);
and adding the applicable transaction charge depending on the remaining years to
maturity of the Stripped Treasury Security in the Trust:
PERCENT
PERCENT OF
OF NET
AMOUNT
OFFERING
REMAINING YEARS TO MATURITY PRICE INVESTED
- --------------------------------------------------------------- ------
Less than 2 years........................................ 0.25% 0.251%
At least 2 years but less than 3 years................... 0.50 0.503
At least 3 years but less than 5 years................... 0.75 0.756
At least 5 years but less than 8 years................... 1.00 1.010
At least 8 years but less than 13 years.................. 1.50 1.523
At least 13 years but less than 18 years................. 1.75 1.781
18 years or more......................................... 2.00 2.041
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On Units sold to an Account, the Insurer initially pays the transaction
charge, which it intends to recover through an asset charge. See the
accompanying Prospectus for the Policies for further information. These
transaction charges are less than sales charges on comparable funds offered by
the Sponsor reflecting elimination of distribution expenses because all sales
are made to the Accounts. Because the income on the Treasury Note is designed to
equal the Trust expenses, accrued interest on the Note is not reflected in the
offering, repurchase or redemption prices of Units. In practice, as determined
on an accrual basis by the auditors, accumulated expenses have been slightly
higher or lower than the interest on the Treasury Notes. These differences are
immaterial and may change over time. If there is an expense deficit at
termination of a Trust, either the Trustee will waive a part of its fees or the
Sponsor will bear sufficient expenses to eliminate the deficit. If a surplus
remains at termination, the amount will be distributed to Holders; alternately,
the Sponsor from time to time may direct the Trustee to distribute part or all
of any accumulated surplus. The Offering Price on the date of this Prospectus or
on any subsequent date will vary from the Offering Price on the date of the
Investment Summary in accordance with fluctuations in the aggregate offering
side evaluation of the underlying Securities in the Trust. Amortization of
discount will have the effect of increasing at any particular time the offering
side evaluation of the underlying Securities.
The aggregate bid or offer side evaluation of the Securities is determined
by the Evaluator in the following manner: (a) on the basis of current bid or
offer prices for the Securities, (b) if bid or offer prices are not available
for any Securities, on the basis of current bid or offer prices for comparable
securities, (c) by appraising the value of the Securities on the bid or offer
side of the market, or (d) by any combination of the above. The Evaluator may
obtain current price information as to the Securities from investment dealers or
brokers (including the Sponsor) which customarily deal in that type of
securities.
The Offering Price is determined on each business day during any initial
offering as of the Evaluation Time, effective for all sales of Units made since
the last of these evaluations and as of the Evaluation Time on the last business
day of each week during any period when there is no initial offering (i.e., when
no additional Units are being created), effective for all sales made during the
following week (Section 4.01). The term 'business day', as used herein and under
'Redemption', shall exclude Saturdays, Sundays; the following holidays as
observed by the New York Stock Exchange: New Year's Day, Washington's birthday,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas; and the following Federal holidays: Martin Luther King's birthday,
Columbus Day and Veterans' Day.
COMPARISON OF OFFERING PRICE, SPONSOR'S REPURCHASE PRICE AND REDEMPTION PRICE
On the date of the Investment Summary the Offering Price per Unit of each
Trust (which includes the transaction charge) and the Sponsor's Repurchase Price
per Unit (each based on the offer side evaluation of Securities in the
Trust--see above) exceeded the Redemption Price per Unit (based on the bid side
evaluation thereof--see Redemption) by the amounts set forth in the Investment
Summary.
Because the bid side evaluations of the Units are lower than the offer side
evaluations thereof by the amounts set forth under Investment Summary and other
reasons (including fluctuations in the market prices of these Securities and the
fact that the Offering Price includes a transaction charge), the amount realized
by a Holder upon any sale or redemption of Units may be less than the price paid
for these Units.
DISTRIBUTION
During the initial offering period (i) for Units issued on the Initial Date
of Deposit and (ii) for additional Units issued after that date in respect of
additional Securities deposited by the Sponsor, Units may be purchased by an
Account at the Offering Price by means of this Prospectus (except that, as
explained above, the transaction charge is initially paid by the Insurer). The
initial offering period in each case will terminate on the date all newly issued
Units are sold. Upon the completion of any initial offering, Units acquired in
the secondary market may be offered by this Prospectus at the secondary market
Offering Price determined in the manner provided above as of the close of
business on the last business day of each week (see Market for Units), also less
the transaction charge paid by the Insurer.
SPONSOR'S PROFITS
Upon the sale of the Units, the Sponsor receives the transaction charge at
the rates set forth above. The Sponsor may also realize a profit or loss on each
deposit of Securities in a Trust. This is the difference between the
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cost of the Securities to the Trust (which is based on the offer side evaluation
of the Securities on the Initial Date of Deposit) and the purchase price of
those Securities to the Sponsor. During the initial offering period, and
thereafter to the extent additional Units continue to be offered for sale, the
Sponsor also may realize profits or sustain losses as a result of fluctuations
after the date of deposit in the Offering Price of the Units. Cash, if any, made
available by buyers of Units to the Sponsor prior to the settlement dates for
purchase of Units may be used in the Sponsor's business, subject to the
limitations of Rule 15c3-3 under the Securities Exchange Act of 1934, and may be
of benefit to the Sponsor.
In maintaining a market for the Units the Sponsor will also realize profits
or sustain losses in the amount of any difference between the prices at which it
buys Units (based on the offer side evaluation of the Securities) and the prices
at which it resells those Units (which include the relevant transaction charge)
or the prices at which it may redeem those Units (based on the bid side
evaluation of the Securities), as the case may be.
MARKET FOR UNITS
The Sponsor has committed to maintain a secondary market for Units of each
Trust at its own expense and continuously to offer to purchase Units of each
Trust at prices, subject to change at any time, that will be computed on the
basis of the offer side evaluation of the Securities, taking into account the
same factors referred to in determining the offer side evaluation of the
Securities for purposes of sale of Units (see Sale of Units-- Offering Price).
During the initial offering period or thereafter, on a given day, the price
offered by the Sponsor for the purchase of Units shall be an amount not less
than the Redemption Price per Unit, based on the aggregate bid side evaluation
of Securities in the relevant Trust on the date on which the Units are tendered
for redemption.
The Sponsor may redeem any Units it has purchased in the secondary market
if it determines it is undesirable to continue to hold those Units in its
inventory, provided that it has committed to redeem Units only in an amount to
substantially equal the value of one or more Securities, so that uninvested cash
generated by a redemption is de minimis. Factors which the Sponsor will consider
in making this determination will include the number of units of all series of
all funds which it has in its inventory, the saleability of the units and its
estimate of the time required to sell the units and general market conditions.
REDEMPTION
While it is anticipated that Units in most cases can be sold for amounts
exceeding the Redemption Price per Unit (see Market for Units), Units may be
redeemed at the office of the Trustee, upon tender on any business day, as
defined under Sale of Units--Offering Price, of Certificates or, in the case of
uncertificated Units, delivery of a request for redemption, and payment of any
relevant tax, without any other fee (Section 5.02). Certificates to be redeemed
must be properly endorsed or accompanied by a written instrument or instruments
of transfer.
The Trustee will redeem Units either in cash or in kind at the option of
the Holder as specified in writing to the Trustee. Unless otherwise specified,
redemptions will be made in cash. Not later than the seventh calendar day
following the tender (or if the seventh calendar day is not a business day on
the first business day prior thereto), the Holder will be entitled to receive
the proceeds of the redemption in an amount and value of Securities per Unit
equal to the Redemption Price per Unit (see below) as determined as of the
Evaluation Time next following the tender. The Redemption Price per Unit for in
kind distributions (the 'In Kind Distribution') will take the form of the
distribution of whole Securities represented by the fractional undivided
interest in the applicable Trust of the Units tendered for redemption (based
upon the Redemption Price per Unit) (Section 5.02). Because the Sponsor is
committed to maintain a market at prices in excess of the Redemption Price per
Unit, the Sponsor expects to repurchase any Units tendered for redemption in
cash no later than the close of business on the business day following the
tender.
If the tendering Holder requests distribution in kind, the Trustee as
Distribution Agent for the account of the tendering Holder shall sell any
portion of the In Kind Distribution represented by fractional interests in
accordance with the instructions of the tendering Holder and distribute net cash
proceeds to the tendering Holder together with certificates representing whole
Securities received as the In Kind Distribution. In implementing these
redemption procedures, the Trustee shall make any adjustments necessary to
reflect differences between the Redemption Price of the Units and the value of
the In Kind Distribution as of the date of tender.
The Trustee is empowered to sell Securities from a Trust in order to make
funds available for cash redemptions (Section 5.02). The Securities will be sold
so as to maintain, as closely as practicable, the percentage relationship
between the face amounts of Stripped Treasury Securities and the Treasury Note
in the Trust at the
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time of sale. Provision is made under the Indenture for the Sponsor to specify
minimum face amounts in which blocks of Securities are to be sold in order to
obtain the best price for the Trust. While these minimum amounts may vary from
time to time in accordance with market conditions, the Sponsor believes that the
minimum face amounts which would be specified would range from $25,000 to
$100,000.
To the extent that Securities are redeemed in kind or sold, the size of the
relevant Trust will be reduced. Sales will usually be required at a time when
Securities would not otherwise be sold and may result in lower prices than might
otherwise be realized. In addition, because of the minimum face amounts in which
Securities are required to be sold, the proceeds of sale may, if the Sponsor
fails to adhere to its commitment described above, exceed the amount required at
the time to redeem Units; any excess proceeds will be deposited in the Capital
Account. The price received upon redemption may be more than or less than the
amount paid by the Holder depending on the value of the Securities in the Trust
at the time of redemption.
The right of redemption may be suspended and payment postponed (1) for any
period during which the New York Stock Exchange, Inc. is closed other than for
customary weekend and holiday closings or (2) for any period during which, as
determined by the Securities and Exchange Commission, (i) trading on that
Exchange is restricted or (ii) an emergency exists as a result of which disposal
or evaluation of the Securities is not reasonably practicable, or (3) for any
other periods which the Commission may by order permit (Section 5.02).
Redemption Price per Unit of a Trust is computed by the Trustee as of the
Evaluation Time on each June 30 and December 31 (or the last business day prior
thereto), on any business day, as of the Evaluation Time next following the
tender of any Unit for redemption, and on any other business day desired by the
Trustee or the Sponsor, on the bid side of the market, taking into account the
same factors referred to in determining the offering side evaluation for
purposes of sale of Units (see Sale of Units--Offering Price).
While Securities of the type included in the Trusts' Portfolios involve
minimal risk of loss of principal when held to maturity, due to variations in
interest rates the market value of the Securities and Redemption Price per Unit
can be expected to fluctuate during the period of an investment in a Trust.
EXPENSES AND CHARGES
INITIAL EXPENSES
All expenses incurred in establishing the Trusts and the initial offering
of Units and any additional Units, including the cost of the initial preparation
and printing of documents related to the Fund, cost of the initial evaluation,
the initial fees and expenses of the Trustee, legal expenses, advertising and
selling expenses and any other out-of-pocket expenses, will be paid by the
Sponsor at no charge to the Trusts.
NO SPONSOR'S FEES
The Sponsor receives no fee from the Trusts for its services as such.
However, while the transaction charges paid by the Insurers to the Sponsor are
not directly charged to the Accounts, because of the asset charge by the
Insurers, Policyowners will indirectly bear these charges (see the accompanying
Prospectus).
FEES
The Trustee's and Evaluator's fees are set forth in the Investment Summary.
The Trustee's fees, payable in semi-annual installments, are based on the
largest face amount of Securities in a Trust during the preceding semi-annual
period. For its services as Trustee, the Trustee receives annually $0.18 per
$1,000 face amount of Treasury Securities. When a Treasury Note matures before
termination of a Trust, the Trustee will waive its fee thereafter. Certain
regular and recurring expenses of each Trust, including the Evaluator's fee and
certain mailing and printing expenses, are borne by the Trustee. Expenses in
excess of the amount included for those expenses in the Trustee's Annual Fee and
Expenses under the Investment Summary are borne by the Trust (Section 3.14). The
Trustee also receives benefits to the extent that it holds funds on deposit in
the various non-interest bearing accounts created under the Indenture.
The interest bearing Securities in certain Trusts mature several months or
years before the Stripped Treasury Securities therein (see Portfolios). The
Trustee will reduce its fees and expenses for these Trusts in the amount of
interest that would have accrued on these Securities between their maturity date
and the maturity date of the Stripped Treasury Securities in the Trust. This
reduction will eliminate the necessity of charging the Capital Account for the
Trust expenses during this period.
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OTHER CHARGES
These include: (a) fees of the Trustee for extraordinary services (Section
8.05), (b) certain expenses of the Trustee (including legal and auditing
expenses) and of counsel designated by the Sponsor (Sections 3.04, 3.09, 8.01e]
and 8.05), (c) various governmental charges (Sections 3.03 and 8.01h]), (d)
expenses and costs of any action taken to protect any Trust (Section 8.01d]),
(e) indemnification of the Trustee for any loss, liabilities and expenses
incurred without gross negligence, bad faith or wilful misconduct on its part
(Section 8.05) and (f) indemnification of the Sponsor for any losses,
liabilities and expenses incurred without gross negligence, bad faith, wilful
misconduct or reckless disregard of its duties (Section 7.02b]). The amounts of
these charges and fees are secured by a lien on the relevant Trust and, if the
balances in the Income and Capital Accounts (see below) are insufficient, the
Trustee has the power to sell Securities to pay these amounts (Section 8.05).
ADMINISTRATION OF THE FUND
RECORDS
The Trustee keeps records of transactions of each Trust, including a
current list of the Securities and a copy of the Indenture, which are available
to record Holders for inspection at the office of the Trustee at reasonable
times during business hours (Sections 8.02 and 8.04).
ACCOUNTS AND DISTRIBUTIONS
The terms of the Securities provide for payment to the holders thereof
(including the Trusts) upon their maturities. Interest received on any
Securities in a Trust which bear current interest, including that part of the
proceeds of any disposition of any such Security which represents accrued
interest and any late payment penalties, is credited to an Income Account for
the applicable Trust and all other receipts to a Capital Account for the Trust
(Sections 3.01 and 3.02). Distributions to Holders as of the Record Day normally
will be made by mail on the following Distribution Day and shall consist of an
amount substantially equal to each Holder's pro rata share of the distributable
cash balance in the Income and Capital Accounts of the Trust computed as of the
close of business on the Record Day. The Distribution Day normally shall be the
next business day following the maturity of the Stripped Treasury Securities in
the Trust Portfolio; the Record Day shall be the business day immediately
preceding the Distribution Day. However, the Sponsor may direct distribution of
any cash balance in the Income and Capital Accounts not otherwise allocated on
the last Business Day of any year.
The amount to be distributed may change as Securities are exchanged, paid
or sold. Proceeds received from the disposition or payment of any of the
Securities which are not used for redemption will be held in the Capital Account
(Section 3.04). However, the Sponsor is committed to maintain a secondary market
and to redeem Units only when the value of Units redeemed substantially equals
the value of one or more portfolio Securities. Amounts, if any, in the Income
Account will be distributed to Holders pro rata upon termination of the Trust. A
Reserve Account may be created by the Trustee by withdrawing from the Income or
Capital Accounts, from time to time, amounts which it deems requisite to
establish a reserve for any taxes or other governmental charges that may be
payable out of the Trust (Section 3.03). Funds held by the Trustee in the
various accounts created under the Indenture do not bear interest (Section
8.01).
PORTFOLIO SUPERVISION
Each Trust is part of a unit investment trust and not an actively managed
fund. Traditional methods of investment management for a managed fund typically
involve frequent changes in a portfolio of securities on the basis of economic,
financial and market analyses. The Portfolios of the Trusts, however, will not
be actively managed and therefore adverse conditions will not necessarily
require the sale of securities from a Trust. However, the Sponsor may direct the
disposition of Securities upon default in payment of amounts due on any of the
Securities which is not promptly cured, institution of certain legal
proceedings, default in payment of amounts due on other Treasury Securities, or
decline in price or the occurrence of other market or credit factors that in the
opinion of the Sponsor would make the retention of these Securities in any Trust
detrimental to the interest of the Holders of that Trust. If a default in
payment of amounts due on any Security occurs and if the Sponsor fails to give
instructions to sell or hold the Security the Indenture provides that the
Trustee, within 30 days of that failure by the Sponsor, may sell the Security
(Sections 3.07 and 3.10).
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REPORTS TO HOLDERS
The Trustee will furnish Holders of record with each distribution a
statement of the amounts of interest and of other receipts which are being
distributed, expressed in each case as a dollar amount per Unit. After the end
of each calendar year, the Trustee will furnish to Holders of record a statement
(i) summarizing transactions for the year in the Income, Capital and Reserve
Accounts of each Trust, (ii) identifying Securities sold and purchased during
the year and listing Securities held and the number of Units outstanding at the
end of the year by the Trust, (iii) stating the Trust's Redemption Price per
Unit based upon the computation thereof made at the end of the year and (iv)
specifying any amounts distributed during the year from the Trust's Income and
Capital Accounts (Section 3.06). The accounts of each Trust shall be audited at
least annually by independent certified public accountants designated by the
Sponsor, and the report of the accountants shall be furnished by the Trustee to
Holders upon request (Section 8.01e]).
In order to enable them to comply with Federal and state tax reporting
requirements, Holders will be furnished upon request to the Trustee with
evaluations of Securities furnished to it by the Evaluator (Section 4.02).
CERTIFICATES
The Sponsor may collect additional charges for registering and shipping
Certificates to purchasers. These Certificates are transferable or
interchangeable upon presentation at the office of the Trustee, with a payment
of $2.00 if required by the Trustee (or other amounts specified by the Trustee
and approved by the Sponsor) for each new Certificate and any sums payable for
taxes or other governmental charges imposed upon this transaction (Section 6.01)
and compliance with the formalities necessary to redeem Certificates (see
Redemption). Mutilated, destroyed, stolen or lost Certificates will be replaced
upon delivery of satisfactory indemnity and payment of expenses incurred
(Section 6.02).
Alternatively, Holders may elect to hold their Units in uncertificated
form. The Trustee will credit each such Holder's account with the number of
Units purchased by that Holder. This relieves the Holder of the responsibility
for safekeeping of Certificates and of the need to deliver Certificates upon
sale of Units. Uncertificated Units are transferable through the same procedures
applicable to Units evidenced by Certificates (see above), except that no
Certificate need be presented to the Trustee and none will be issued upon
transfer unless requested by the Holder. A Holder may at any time request the
Trustee (at the Trust's cost) to issue Certificates for Units.
AMENDMENT AND TERMINATION
The Sponsor and Trustee may amend the Indenture without the consent of
Holders (a) to cure any ambiguity or to correct or supplement any provision
thereof which may be defective or inconsistent, (b) to change any provision
thereof as may be required by the Securities and Exchange Commission or any
successor governmental agency, or (c) to make any other provisions which do not
materially adversely affect the interest of the Holders (as determined in good
faith by the Sponsor). The Indenture may also be amended in any respect by the
Sponsor and Trustee, or any of the provisions thereof may be waived, with the
consent of the Holders of 51% of the Units then outstanding, provided that none
of these amendments or waivers will reduce the interest in any Trust of any
Holder without the consent of the Holder or reduce the percentage of Units
required to consent to any of these amendments or waivers without the consent of
all Holders (Section 10.01).
The Indenture will terminate upon the earlier of the disposition of the
last Security held thereunder or the mandatory termination date. The Indenture
as to any Trust may be terminated by the Sponsor if the face amount of the Trust
is less than the minimum set forth under Investment Summary and may be
terminated at any time by written instruments executed by the Sponsor and
consented to by Holders of 51% of the Units (Sections 8.01g] and 9.01). The
Trustee will deliver written notice of any termination to each Holder within a
reasonable period of time prior to the termination, specifying the times at
which the Holders may surrender their Certificates for cancellation. Within a
reasonable period of time after the termination, the Trustee must sell all of
the Securities then held and distribute to each Holder, upon surrender for
cancellation of his Certificates, and after deductions for accrued but unpaid
fees, taxes and governmental and other charges, the Holder's interest in the
Income and Capital Accounts (Section 9.01). This distribution will normally be
made by mailing a check in the amount of each Holder's interest in these
accounts to the address of the Holder appearing on the record books of the
Trustee.
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RESIGNATION, REMOVAL AND LIMITATIONS ON LIABILITY
THE TRUSTEE
The Trustee or any successor may resign upon notice to the Sponsor. The
Trustee may be removed upon the direction of the Holders of 51% of the Units at
any time or by the Sponsor without the consent of any of the Holders if the
Trustee becomes incapable of acting or becomes bankrupt or its affairs are taken
over by public authorities. The resignation or removal shall become effective
upon the acceptance of appointment by the successor. In case of resignation or
removal the Sponsor is to use its best efforts to appoint a successor promptly
and if upon resignation of the Trustee no successor has accepted appointment
within thirty days after notification, the Trustee may apply to a court of
competent jurisdiction for the appointment of a successor (Section 8.06). The
Trustee shall be under no liability for any action taken in good faith in
reliance on prima facie properly executed documents or for the disposition of
monies or Securities, nor shall it be liable or responsible in any way for
depreciation or loss incurred by reason of the sale of any Security. This
provision, however, shall not protect the Trustee in cases of wilful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations and duties. In the event of the failure of the Sponsor to act, the
Trustee may act under the Indenture and shall not be liable for any of these
actions taken in good faith. The Trustee shall not be personally liable for any
taxes or other governmental charges imposed upon or in respect of the Securities
or upon the interest thereon. In addition, the Indenture contains other
customary provisions limiting the liability of the Trustee (Sections 3.07, 3.10,
8.01 and 8.05).
THE EVALUATOR
The Evaluator may resign or may be removed, effective upon the acceptance
of appointment by its successor, by the Sponsor, who is to use its best efforts
to appoint a successor promptly. If upon resignation of the Evaluator no
successor has accepted appointment within thirty days after notification, the
Evaluator may apply to a court of competent jurisdiction for the appointment of
a successor (Section 4.04). Determinations by the Evaluator under the Indenture
shall be made in good faith upon the basis of the best information available to
it; provided, however, that the Evaluator shall be under no liability to the
Trustee, the Sponsor or the Holders for errors in judgment. This provision,
however, shall not protect the Evaluator in cases of wilful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations and duties
(Section 4.03). The Trustee, the Sponsor and the Holders may rely on any
evaluation furnished by the Evaluator and shall have no responsibility for the
accuracy thereof.
THE SPONSOR
If the Sponsor fails to perform its duties or becomes incapable of acting
or becomes bankrupt or its affairs are taken over by public authorities, then
the Trustee may (a) appoint a successor Sponsor at rates of compensation deemed
by the Trustee to be reasonable and as may not exceed amounts prescribed by the
Securities and Exchange Commission, or (b) terminate the Indenture and liquidate
the Trusts or (c) continue to act as Trustee without terminating the Indenture
(Section 8.01f]). The Sponsor shall be under no liability to the Trusts or to
the Holders for taking any action or for refraining from taking any action in
good faith or for errors in judgment and shall not be liable or responsible in
any way for depreciation or loss incurred by reason of the sale of any Security.
This provision, however, shall not protect the Sponsor in cases of wilful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations and duties (Section 7.02). The Sponsor may transfer all or
substantially all of its assets to a corporation or partnership which carries on
its business and duly assumes all of its obligations under the Indenture and in
such event shall be relieved of all further liability under the Indenture
(Section 7.01).
MISCELLANEOUS
TRUSTEE
The Trustee is The Chase Manhattan Bank, N.A., a national banking
association with its corporate trust office at 1 Chase Manhattan Plaza--3B, New
York, New York 10081, which is subject to supervision by the Comptroller of the
Currency, the Federal Deposit Insurance Corporation and the Board of Governors
of the Federal Reserve System.
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LEGAL OPINION
The legality of the Units has been passed upon by Davis Polk & Wardwell,
450 Lexington Avenue, New York, New York 10017, as special counsel for the
Sponsor.
AUDITORS
The financial statements, including the Portfolios of the Trusts, included
herein have been examined by Deloitte & Touche LLP, independent accountants, as
stated in their opinions appearing herein and have been included in reliance
upon those opinions given on the authority of that firm as experts in accounting
and auditing.
SPONSOR
The Sponsor is a Delaware corporation and is engaged in the underwriting,
securities and commodities brokerage business, and is a member of the New York
Stock Exchange, Inc., other major securities exchanges and commodity exchanges,
and the National Association of Securities Dealers, Inc. The Sponsor and Merrill
Lynch Asset Management, Inc., a Delaware corporation, each of which is a
subsidiary of Merrill Lynch & Co., Inc., are engaged in the investment advisory
business. The Sponsor has acted as principal underwriter and managing
underwriter of other investment companies. The Sponsor, in addition to
participating as a member of various selling groups or as an agent of other
investment companies, executes orders on behalf of investment companies for the
purchase and sale of securities of these companies and sells securities to these
companies in its capacity as a broker or dealer in securities.
12
<PAGE>
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PROSPECTUS
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THIS PROSPECTUS DOES NOT CONTAIN ALL OF THE INFORMATION WITH RESPECT TO THE
INVESTMENT COMPANY SET FORTH IN ITS REGISTRATION STATEMENT AND EXHIBITS RELATING
THERETO WHICH HAVE BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION,
WASHINGTON, D.C. UNDER THE SECURITIES ACT OF 1933 AND THE INVESTMENT COMPANY ACT
OF 1940, AND TO WHICH REFERENCE IS HEREBY MADE.
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THE MERRILL LYNCH FUND OF STRIPPED ('ZERO')
U.S. TREASURY SECURITIES, SERIES A THROUGH K
INDEX
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PAGE
--------------------
Investment Summary.......................................... A-2
Accountants' Opinion Relating to Series A................... D-1
Statements of Conditions of Series A........................ D-2
Portfolios of Series A...................................... D-7
Accountants' Opinion Relating to Series B................... D-8
Statements of Condition of Series B......................... D-9
Portfolios of Series B...................................... D-18
Accountant's Opinion Relating to Series C................... D-19
Statements of Condition of Series C......................... D-20
Portfolios of Series C...................................... D-25
Accountants' Opinion Relating to Series D................... D-26
Statements of Condition of Series D......................... D-27
Portfolios of Series D...................................... D-32
Accountant's Opinion Relating to Series E................... D-33
Statements of Condition of Series E......................... D-34
Portfolio of Series E....................................... D-41
Accountants' Opinion Relating to Series F................... D-42
Statements of Conditions of Series F........................ D-43
Portfolios of Series F...................................... D-49
Accountants' Opinion Relating to Series G................... D-50
Statements of Conditions of Series G........................ D-51
Portfolios of Series G...................................... D-58
Accountants' Opinion Relating to Series H................... D-59
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INDEX
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PAGE
--------------------
Statement of Conditions of Series H......................... D-60
Portfolio of Series H....................................... D-65
Accountant's Opinion Relating to Series I................... D-66
Statement of Condition of Series I.......................... D-67
Portfolio of Series I....................................... D-72
Accountant's Opinion Relating to Series J................... D-73
Statement of Condition of Series J.......................... D-74
Portfolio of Series J....................................... D-79
Accountant's Opinion Relating to Series K................... D-80
Statement of Condition of Series K.......................... D-81
Portfolio of Series K....................................... D-87
Fund Structure.............................................. 1
Risk Factors................................................ 1
Description of the Fund..................................... 3
Taxes....................................................... 4
Sale of Units............................................... 5
Market for Units............................................ 7
Redemption.................................................. 7
Expenses and Charges........................................ 8
Administration of the Fund.................................. 9
Resignation, Removal and Limitation on Liability............ 11
Miscellaneous............................................... 11
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SPONSOR: EVALUATOR:
Merrill Lynch, Pierce, Kenny S&P Evaluation
Fenner & Smith Incorporated Services, a division of
Defined Asset Funds J. J. Kenny Co., Inc.
Post Office Box 9051 65 Broadway
Princeton, N.J. 08543-9051 New York, N.Y. 10006
(609) 282-8500
TRUSTEE: INDEPENDENT ACCOUNTANTS:
The Chase Manhattan Bank, N. A. Deloitte & Touche, LLP
Unit Trust Department 2 World Financial Center
Box 2051 9th Floor
New York, N.Y. 10081 New York, N.Y. 10281-1414
1-800-323-1508
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NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS
WITH RESPECT TO THIS INVESTMENT COMPANY NOT CONTAINED IN PARTS A AND B OF THIS
PROSPECTUS; AND ANY INFORMATION OR REPRESENTATION NOT CONTAINED HEREIN MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED. PARTS A AND B OF THIS PROSPECTUS DO
NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY,
SECURITIES IN ANY STATE TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE SUCH
OFFER IN SUCH STATE.
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14850-5/95
