<PAGE>
DEFINED ASSET FUNDSSM
- --------------------------------------------
- ----------------------------------
THE MERRILL LYNCH FUND OF STRIPPED
('ZERO') U.S. TREASURY SECURITIES SERIES A-L
(UNIT INVESTMENT TRUSTS)
O PORTFOLIOS OF 'ZERO COUPON' U.S. TREASURY
SECURITIES
O DESIGNED FOR SAFETY OF CAPITAL AND HIGH YIELD
TO MATURITY
O UNITS SOLD TO SEPARATE ACCOUNTS TO FUND
BENEFITS UNDER VARIABLE LIFE INSURANCE
POLICIES
-------------------------------------------------
The Securities and Exchange Commission has not
approved or disapproved these Securities or
SPONSOR: passed upon the adequacy of this prospectus. Any
Merrill Lynch, representation to the contrary is a criminal
Pierce, Fenner & Smith offense.
Incorporated Prospectus dated April 30, 1999.
<PAGE>
- --------------------------------------------------------------------------------
CONTENTS
PAGE
-----------
Risk/Return Summary..................................... 3
What You Can Expect From Your Investment................ 6
Distributions at Maturity............................ 6
Records and Reports.................................. 6
The Risk You Face....................................... 6
Price Risk........................................... 6
Selling or Exchanging Units............................. 6
Sponsor's Secondary Market........................... 6
Selling Units to the Trustee......................... 6
How The Fund Works...................................... 7
Pricing.............................................. 7
Evaluations.......................................... 7
Income............................................... 7
Expenses............................................. 7
Portfolio Changes.................................... 7
Termination.......................................... 8
Certificates......................................... 8
Trust Indenture...................................... 8
Legal Opinion........................................ 9
Auditors............................................. 9
Sponsor.............................................. 9
Trustee.............................................. 9
Sponsors's Profits................................... 9
Code of Ethics....................................... 10
Year 2000 Issues..................................... 10
Taxes................................................... 10
Supplemental Information................................ 10
Financial Statements of Series L........................ 11
Financial Statements of Series A-K...................... D-1
2
<PAGE>
- --------------------------------------------------------------------------------
RISK/RETURN SUMMARY
1. WHAT IS THE FUND'S OBJECTIVE?
The Fund seeks safety of capital and high yield to maturity
by investing primarily in fixed portfolios of Stripped U.S.
Treasury securities.
Units are offered only to separate accounts to fund the
benefits under variable insurance policies issued by
Monarch Life Insurance Company, Merrill Lynch Life
Insurance Company and ML Life Insurance Company of New
York. These Accounts invest in units in accordance with
allocation instructions received by policyowners.
Accordingly, the interests of a policyowner in the units
are subject to the terms of the insurance policy.
The rights of the Accounts as holders of units should be
distinguished from the rights of the policyowners. Please
review the accompanying prospectus for the insurance
policies, which describes the rights of and risks to
policyowners. The term 'you' in this Prospectus refers to
the Accounts (or the Sponsor if it holds units).
2. WHAT ARE STRIPPED U.S. TREASURY SECURITIES?
These are debt obligations directly issued by the U.S.
Treasury. They do not make any periodic payments of
interest before maturity and are priced at a deep discount
from face amount. They pay a fixed amount of principal at
maturity.
3. WHAT IS THE FUND'S INVESTMENT STRATEGY?
O The Fund consists of 12 separate series, each containing
one or more unit investment trusts. Each trust is
designated by the year in which its Stripped Treasury
securities mature. Each trust also contains an
interest-bearing U.S. Treasury note to provide income to
pay the trust's expenses.
o Unlike a mutual fund, the portfolios of these unit
investment trusts are not managed.
o For each unit purchased, you will receive a total
distribution of approximately $1,000 for units held until
maturity of the underlying securities in the trust.
o The securities in the Fund but not the Fund or the units
are backed by the full faith and credit of the United
States.
o 100% of the trusts consist of U.S. Treasury securities.
4. WHAT ARE THE SIGNIFICANT RISKS?
YOU CAN LOSE MONEY. THIS CAN HAPPEN FOR VARIOUS REASONS,
INCLUDING:
o Rising interest rates can reduce the value of the units.
o Since each portfolio is priced at a deep discount from face
amount, unit prices may be subject to greater fluctuations
in response to changing interest rates. This risk is greater
than on debt securities that pay interest currently and
increases when the time to maturity is longer.
o If units are sold before the underlying securities mature,
the value of your units may decrease, because market prices
of the securities before maturity will vary with changes in
interest rates and other factors.
5. IS THIS FUND APPROPRIATE FOR YOU?
Yes, if you want safety of capital with a locked-in yield to
maturity. You benefit from a portfolio of U.S. government
securities with fixed returns and a stated maturity.
The Fund is not appropriate for you if you want current
income or a speculative investment that changes to take
advantage of market movements.
3
<PAGE>
6. IS THE FUND MANAGED?
Unlike a mutual fund, the Fund is not managed and
securities are not sold because of market changes. To lock
in the yield on the purchase date, a trust holds securities
to maturity unless sales are needed to raise cash for
redemptions.
7. HOW DO I BUY UNITS?
Each Account buys units from the Sponsor. There is no
minimum investment.
Unit price is based on the net asset value of the trust
plus the applicable transaction charge shown below. Any
principal cash, and any net accrued but undistributed
interest on the unit is added to the unit price. An
independent evaluator prices the securities at their offer
side values at 3:30 p.m. Eastern time each business day.
Unit price varies daily with changes in the prices of the
securities in the trust.
8. HOW DO I SELL UNITS?
An Account may sell units at any time to the Sponsor or the
Trustee for the net asset value determined at the close of
business on the date of sale. You will not pay any fee when
you sell your units.
9. HOW ARE DISTRIBUTIONS MADE AND TAXED?
Stripped Treasury securities do not pay interest until they
mature; consequently, you should not expect any
distributions of interest income. When the Stripped
Treasury security matures, the proceeds will be distributed
to the Accounts. A distribution will be made in cash two
business days following the maturity of the Stripped
Treasury security.
The Accounts (not the policyowners) have significant
amounts of income attributed to them annually as original
issue discount is accrued on the Stripped Treasury
securities.
10. WHAT ARE THE FUND'S FEES AND EXPENSES?
This table shows the costs and expenses the Accounts may
pay, directly or indirectly, when they invest in the Fund.
TRANSACTION CHARGES
The insurance company initially pays a transaction charge
to the Sponsor on the units sold to an Account. The
insurance company intends to recover this amount through an
asset charge. See the accompanying prospectus for the
insurance policies for futher information. The transaction
charge is based on the remaining years to maturity of the
Stripped Treasury security:
PERCENT OF
OFFER
REMAINING YEARS TO MATURITY PRICE
--------------------------------------------- ------------
Less than 2 years............................ 0.25%
At least 2 years but less than 3 years 0.50
At least 3 years but less than 5 years 0.75
At least 5 years but less than 8 years 1.00
At least 8 years but less than 13 years...... 1.50
13 years but less than 18 years.............. 1.75
18 years or more............................. 2.00
4
<PAGE>
UNIT PRICE (as of December 31, 1998)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SERIES A SERIES B SERIES C SERIES D SERIES E SERIES F
---------- ---------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
2003 2001 2005 2006 2007 2008 1999
TRUST TRUST TRUST TRUST TRUST TRUST TRUST
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net asset value (based on offer side
evaluation of underlying Securities) $ 811.04 $ 911.35 $ 757.37 $ 735.48 $ 695.01 $ 645.54 $ 995.42
Plus transaction charge $ 6.13 $ 4.58 $ 7.65 $ 7.43 $ 10.59 $ 9.83 $ 2.50
---------- ---------- ---------- ---------- ---------- ---------- ----------
Unit price per 1,000 Units $ 817.17 $ 915.93 $ 765.02 $ 742.91 $ 705.60 $ 655.37 $ 997.92
2009
TRUST
----------
Net asset value (based on offer side
evaluation of underlying Securities) $ 609.68
Plus transaction charge $ 9.29
----------
Unit price per 1,000 Units $ 618.97
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SERIES G SERIES H SERIES I SERIES J SERIES K
---------------------- ---------- ---------- ---------- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
2000 2010 2011 2002 2013 2004 2014
TRUST TRUST TRUST TRUST TRUST TRUST TRUST
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net asset value (based on offer side
evaluation of underlying Securities) $ 953.11 $ 567.82 $ 539.49 $ 868.98 $ 474.72 $ 789.31 $ 441.61
Plus transaction charge $ 2.39 $ 8.65 $ 8.22 $ 6.57 $ 8.45 $ 7.97 $ 7.87
---------- ---------- ---------- ---------- ---------- ---------- ----------
Unit price per 1,000 Units $ 955.50 $ 576.47 $ 547.71 $ 875.55 $ 483.17 $ 797.28 $ 449.48
</TABLE>
- --------------------------------------------------------------------------------
TRUSTEE'S ANNUAL OPERATING FEE AND EXPENSES PER $1,000 FACE AMOUNT OF UNDERLYING
SECURITIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SERIES A SERIES B SERIES C SERIES D SERIES E SERIES F
- ---------- -------------------- --------- --------- --------- --------------------
2003 2001 2005 2006 2007 2008 1999 2009
TRUST TRUST TRUST TRUST TRUST TRUST TRUST TRUST
- ---------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 0.35 $ 0.35 $ 0.31 $ 0.33 $ 0.36 $ 0.35 $ 0.36
$ 0.35
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SERIES G SERIES H SERIES I SERIES J SERIES K
- -------------------- --------- --------- --------- --------------------
2000 2010 2011 2002 2013 2004 2014
TRUST TRUST TRUST TRUST TRUST TRUST TRUST
- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
$ 0.35 $ 0.37 $ 0.36 $ 0.36 $ 0.32 $ 0.35 $ 0.35
</TABLE>
- --------------------------------------------------------------------------------
UNIT PRICE (as of April 27, 1999)
- --------------------------------------------------------------------------------
SERIES L
----------
2019
TRUST
----------
Net asset value (based on offer side $ 312.49
evaluation of underlying Securities)
Plus transaction charge $ 6.38
Unit price per 1,000 Units $ 318.87
- --------------------------------------------------------------------------------
TRUSTEE'S ANNUAL OPERATING FEE AND EXPENSES PER $1,000 FACE AMOUNT OF UNDERLYING
SECURITIES
- --------------------------------------------------------------------------------
SERIES L
2019
TRUST
$0.35
- --------------------------------------------------------------------------------
5
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Sponsor, Trustee and Holders of The Merrill Lynch Fund of Stripped ('Zero')
U.S. Treasury Securities, Series L:
We have audited the accompanying statement of condition of the 2019 Trust of The
Merrill Lynch Fund of Stripped ('Zero') U.S. Treasury Securities, Series L and
the related portfolio included in the prospectus of the Fund as of April 28,
1999. This financial statement is the responsibility of the Trustee. Our
responsibility is to express an opinion on this financial statement based on our
audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. Our procedures included
confirmation of an irrevocable letter of credit deposited for the purchase of
securities, as described in the statement of condition, with the Trustee. An
audit also includes assessing the accounting principles used and significant
estimates made by the Trustee, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the financial position of the above-mentioned Trust of
The Merrill Lynch Fund of Stripped ('Zero') U.S. Treasury Securities, Series L
as of April 28, 1999 in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
NEW YORK, N.Y.
APRIL 28, 1999
THE MERRILL LYNCH FUND OF STRIPPED ('ZERO')
U.S. TREASURY SECURITIES, SERIES L
STATEMENT OF CONDITION AS OF INITIAL DATE OF DEPOSIT, APRIL 28, 1999
2019
TRUST
--------------------
Trust Property
Investments in Securities--
Contracts to purchase Securities(1)......................$ 122,036.24
Accrued interest to Initial Date of Deposit on underlying
U.S. Treasury Note....................................... 26.88
--------------------
Total $ 122,063.12
--------------------
--------------------
LIABILITIES AND INTEREST OF HOLDERS
Liability--Accrued interest to Initial Date of Deposit on
underlying U.S. Treasury Note(2).........................$ 26.88
--------------------
Interest of Holders--
Cost to investors(3)................................$ 124,527.77
Gross underwriting commissions(4)........................ (2,491.53)
--------------------
Net amount applicable to investors....................... 122,036.24
--------------------
Total $ 122,063.12
--------------------
--------------------
UNITS OUTSTANDING........................................ 390,523.00
--------------------
--------------------
- ---------------
(1) Aggregate cost to Trust of the Securities listed under its Portfolio is
based upon the offer side evaluation determined by the Evaluator at the
evaluation time on the business day prior to the Initial Date of Deposit as
set forth under Offering Price. See also the column headed Cost of
Securities to Trust under Portfolio. An irrevocable letter or letters of
credit includes amount of $122,332.27 has been deposited with the Trustee.
The amount of such letter or letters of credit include $122,305.39 (equal to
the purchase price to the Sponsors) for the purchase of $390,523 face amount
of Securities pursuant to contracts to purchase Securities, plus $26.88
covering accrued interest to the earlier of the date of settlement for the
purchase of Units or the date of delivery of the Securities. The letter or
letters of credit has been issued by DBS Bank, New York Branch.
(2) Representing,as set forth under Income and Yield, a special distribution by
the Trustee of an amount equal to the accrued interest on the U.S. Treasury
Note as of the Initial Date of Deposit.
(3) Aggregate offering price (exclusive of interest) computed on the basis of
the offer side evaluation of the underlying Securities as of the Evaluation
Time on the Business Day prior to the Initial Date of Deposit.
(4) Transaction charge of 2.00% for the 2019 Trust, computed on the basis set
forth under Sale of Units--Offering Price.
11
<PAGE>
- --------------------------------------------------------------------------------
ON THE INITIAL DATE OF DEPOSIT, APRIL 28, 1999
PORTFOLIO OF SERIES L
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COST
PORTFOLIO NO. AND TITLE OF FACE TO PORTFOLIO
SECURITIES CONTRACTED FOR (1) COUPON AMOUNT MATURITIES (2)
- ------------------------------------------------------------------------------------------
2019 TRUST
<S> <C> <C> <C> <C> <C>
1 Stripped Treasury Securities
(3) 0% $ 389,000 2/15/19 $ 119,968.77
2 U.S. Treasury Note 8.875% 1,523 2/15/19 2,067.47
----------- --------------
$ 390,523 $ 122,036.24
----------- --------------
----------- --------------
</TABLE>
- ------------------------------------
NOTES
(1) All Securities are represented by contracts to purchase such Securities,
which were entered into by the Sponsor on April 27, 1999. All contracts are
expected to be settled by the initial settlement date for Units.
(2) Evaluation of Securities by the Evaluator made on the basis of current offer
side evaluation. The following table sets forth the amount by which the
offer side evaluation is greater than the current bid side evaluation of the
Securities (the basis on which Redemption Price per Unit is determined--see
Selling or Exchanging Units. Sponsor's loss on deposit was $269.15.
<TABLE>
<CAPTION>
AGGREGATE BID SIDE AMOUNT BY WHICH
EVALUATION OF SECURITIES AGGREGATE OFFER SIDE
ON THE INITIAL EVALUATION IS GREATER THAN % OF AGGREGATE
TRUST DATE OF DEPOSIT AGGREGATE BID SIDE EVALUATION FACE AMOUNT
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
2019 $ 121,574.71 $ 461.53 0.12%
</TABLE>
- ------------------------------------
(3) See 'The Risk You Face--Price Risk'.
------------------------------------
PLEASE NOTE THAT IF THIS PROSPECTUS IS USED AS A PRELIMINARY
PROSPECTUS
FOR A FUTURE FUND IN THIS SERIES, THE PORTFOLIO WILL CONTAIN
DIFFERENT
SECURITIES FROM THOSE DESCRIBED ABOVE.
12
<PAGE>
WHAT YOU CAN EXPECT FROM YOUR INVESTMENT
DISTRIBUTIONS AT MATURITY
Each trust normally holds any net income and principal received until the
Stripped Treasury security matures. However, the Trustee may distribute any
available balances in the Income and Capital Accounts once a year, as instructed
by the Sponsor.
RECORDS AND REPORTS
The Accounts receive:
o with any distribution, a statement of income and other payments;
o an annual report on Fund transactions; and
o annual tax information. This also is sent to the IRS.
You will receive audited financial statements of the Fund once a year.
THE RISK YOU FACE
PRICE RISK
Investing involves risks, including the risk that your investment before
maturity will decline in value if interest rates rise. Generally, the price of
Stripped Treasury securities fluctuates more widely than prices of debt
securities that pay interest currently. Also, securities with longer maturities
will change in value more than securities with shorter maturities. Of course, we
cannot predict how interest rates may change.
SELLING OR EXCHANGING UNITS
SPONSOR'S SECONDARY MARKET
We have agreed to buy back units at their offer side value without any fee or
charge. We may resell the units to an Account or to the Trustee.
SELLING UNITS TO THE TRUSTEE
If we fail to maintain a secondary market, an Account can sell units to the
Trustee at any time at a price based on the lower bid side evaluation of the
securities in the trust. It must deliver instructions to the Trustee (with
coordinated delivery or assignment of any outstanding certificates if issued).
Within seven days after receiving a redemption request in proper form, the
Trustee will transmit the proceeds as directed by the redemption instructions.
An Account may opt to receive securities rather than cash. Contact the Trustee
for additional information.
If the trust does not have cash available to pay for units redeemed, the Sponsor
will select securities to be sold, based on market and credit factors. These
sales could be made at times when the securities would not otherwise be sold and
may result in receiving less than the unit par value and also reduce the size
and diversity of the trust.
Payments for units could be delayed:
o if the New York Stock Exchange is closed (other than customary weekend and
holiday closings);
o if the SEC determines that trading on the New York Stock Exchange is
restricted or that an emergency exists making sale or evaluation of the
bonds not reasonably practicable; and
o for any other period permitted by SEC order.
6
<PAGE>
HOW THE FUND WORKS
PRICING
The price of a unit includes interest accrued on the securities, less expenses,
up to, but not including, the settlement date, which is usually the business day
after purchase of the unit.
EVALUATIONS
An independent Evaluator values the securities on each business day (excluding
Saturdays, Sundays and the following holidays as observed by the New York Stock
Exchange: New Year's Day, Presidents' Day, Martin Luther King, Jr. Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas;
and the following federal holidays: Columbus Day and Veterans Day). Values are
based on current offer prices for the securities or comparable bonds.
INCOME
The Trustee credits interest to an Income Account and other receipts to a
Capital Account. The Trustee may establish a Reserve Account by withdrawing from
these accounts amounts it considers appropriate to pay any material liability.
These accounts do not bear interest.
EXPENSES
The Trustee is paid semi-annually. It also benefits when it holds cash for a
trust in non-interest bearing accounts. The Trustee may also receive additional
amounts:
o to reimburse the Trustee for the trust's operating expenses;
o for extraordinary services and costs of indemnifying the Trustee and the
Sponsor;
o costs of actions taken to protect a trust and other legal fees and
expenses;
o termination expenses and any governmental charges.
The trusts also pay the Evaluator's fees.
The Trustee's and Evaluator's fees may be adjusted for inflation without
investors' approval.
If trust expenses exceed initial estimates, the trust will owe the excess. The
Trustee has a lien on trust assets to secure reimbursement of trust expenses and
may sell bonds if cash is not available.
PORTFOLIO CHANGES
The Sponsor and Trustee are not liable for any default or defect in a security.
Unlike a mutual fund, the portfolio is designed to remain intact and we may keep
securities in the portfolio even if adverse financial circumstances occur.
However, we may sell a security in certain cases if we believe that certain
adverse credit or other conditions exist.
If we maintain a secondary market in units but are unable to sell the units that
we buy in the secondary market, we will redeem units, which will affect the size
and composition of the portfolio. Units offered in the secondary market may not
represent the same face amount of securities that they did originally.
We decide whether or not to offer units for sale that we acquire in the
secondary market after reviewing:
o diversity of the portfolio;
7
<PAGE>
o size of the trust relative to its original size;
o level of trust expenses;
o yield to maturity;
o degree to which units may be selling at a premium over par; and
o cost of maintaining a current prospectus.
TERMINATION
Each trust terminates following the stated maturity or sale of the last security
in its portfolio. A trust may also terminate earlier with the consent of
investors holding 51% of the units or if its total assets are less than 40% of
the face amount of securities deposited. We will decide whether to terminate a
trust early based on the same factors used in deciding whether or not to offer
units in the secondary market.
When a trust is about to terminate the Account will receive a notice, and it
will be unable to sell units of the trust after that time. On or shortly before
termination, we will sell any remaining securities, and you will receive your
final distribution. Any security that cannot be sold at a reasonable price may
continue to be held by the Trustee in a liquidating trust pending its final
sale.
You will bear your share of the expenses associated with termination, including
costs in selling securities. This may reduce the amount you receive as your
final distribution.
CERTIFICATES
Certificates for units are issued on request. An Account may transfer
certificates by complying with the requirements for redeeming certificates,
described above. It can replace lost or mutilated certificates by delivering
satisfactory indemnity and paying the associated costs.
TRUST INDENTURE
The Fund is a 'unit investment trust' governed by a Trust Indenture, a contract
among the Sponsor, the Trustee and the Evaluator, which sets forth their duties
and obligations and your rights. A copy of the Indenture is available to you on
request to the Trustee. The following summarizes certain provisions of the
Indenture.
The Sponsor and the Trustee may amend the Indenture without your consent:
o to cure ambiguities;
o to correct or supplement any defective or inconsistent provision;
o to make any amendment required by any governmental agency; or
o to make other changes determined not to be materially adverse to your best
interest (as determined by the Sponsor).
Investors holding 51% of the units may amend the Indenture. Every investor must
consent to any amendment that changes the 51% requirement. No amendment may
reduce your interest in a trust without your written consent.
The Trustee may resign by notifying the Sponsor. The Sponsor may remove the
Trustee without your consent if:
o it fails to perform its duties and the Sponsor determines that its
replacement is in your best interest; or
o it becomes incapable of acting or bankrupt or its affairs are taken over by
public authorities.
Investors holding 51% of the units may remove the Trustee. The Evaluator may
resign or be removed by the Sponsor and the Trustee
8
<PAGE>
without the consent of investors. The resignation or removal of either becomes
effective when a successor accepts appointment. The Sponsor will try to appoint
a successor promptly; however, if no successor has accepted within 30 days after
notice of resignation, the resigning Trustee or Evaluator may petition a court
to appoint a successor.
If the Sponsor fails to perform its duties or becomes bankrupt the Trustee may:
o remove it and appoint a replacement Sponsor;
o liquidate the trusts; or
o continue to act as Trustee without a Sponsor.
The Trust Indenture contains customary provisions limiting the liability of the
Trustee, the Sponsor and the Evaluator.
LEGAL OPINION
Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York 10017, as
special counsel for the Sponsors, has given an opinion that the units are
validly issued.
AUDITORS
Deloitte & Touche LLP, 2 World Financial Center, New York, New York 10281,
independent accountants, audited the Financial Statements included in this
Prospectus.
SPONSOR
The Sponsor is:
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED (a wholly-owned subsidiary of
Merrill Lynch & Co., Inc.)
P.O. Box 9051,
Princeton, NJ 08543-9051
The Sponsor is a Delaware corporation and it, or its predecessor, has acted as
sponsor to many unit investment trusts. As a registered broker-dealer the
Sponsor buys and sells securities (including investment company shares) for
others (including investment companies) and participates as an underwriter in
various selling groups.
TRUSTEE
The Chase Manhattan Bank, Unit Investment Trust Departament, 4 New York
Plaza--6th Floor, New York, New York 10004, is the Trustee.
It is supervised by the Federal Deposit Insurance Corporation, the Board of
Governors of the Federal Reserve System and New York State banking authorities.
SPONSOR'S PROFITS
Upon the sale of units, the Sponsor receives the transaction charge from an
Account (as set out above). The Sponsor also realizes a profit or loss on each
deposit of securities in a trust.
In maintaining a secondary market, the Sponsor will also realize profits or
sustain losses in the amount of any difference between the prices at which it
buys units and the prices at which it resells or redeems those units.
CODE OF ETHICS
Merrill Lynch, as Sponsor, has adopted a code of ethics requiring preclearance
and reporting of personal securities transactions by its employees with access
to information on portfolio transactions. The goal of the code is to prevent
fraud, deception or misconduct against the Fund and to provide reasonable
standards of conduct.
9
<PAGE>
YEAR 2000 ISSUES
Many computer systems were designed in such a way that they may be unable to
distinguish between the year 2000 and the year 1900 (commonly known as the 'Year
2000 Problem'). We do not expect that the computer system changes necessary to
prepare for the Year 2000 will cause any major operational difficulties for the
Fund. The Year 2000 Problem may adversely affect the U.S. Treasury, as issuer of
the securities held by a trust, but we cannot predict whether any impact will be
material to the trust.
TAXES
The following discussion relates only to the Accounts as holders of units, and
not to policyowners. The separate prospectus for the insurance policies,
attached, describes tax consequences to policyowners.
In the opinion of our counsel, under existing law:
The Fund will not be taxed as a corporation for federal income tax purposes, and
you will be considered to own directly your share of each Stripped Treasury
security in the Fund.
The zero coupon bonds will be considered to have been issued at an 'original
issue discount' for federal income tax purposes. As a result, you will be
required to include original issue discount in respect of the zero coupon bonds
as it accrues, in accordance with a constant yield method based on a compounding
of interest.
SUPPLEMENTAL INFORMATION
You can receive at no cost supplemental information about the Fund by calling
the Trustee. The supplemental information includes more detailed risk disclosure
about the securities that may be in the Fund's portfolio and general information
about the structure and operation of the Fund. The supplemental information is
also available from the SEC.
10
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES
REPORT OF INDEPENDENT ACCOUNTANTS
The Sponsor, Trustee and Holders
of The Merrill Lynch Fund of Stripped ("Zero")
U.S. Treasury Securities, Series A (2003 Trust),
Series B (2001 and 2005 Trusts), Series C (2006 Trust),
Series D (2007 Trust), Series E (2008 Trust),
Series F (2009 Trust), Series G (2000 and
2010 Trusts), Series H (2011 Trust),
Series I (2002 Trust), Series J (2013 Trust) and
Series K (2004 and 2014 Trusts) (the Funds):
We have audited the accompanying statements of condition of the Funds, including
the portfolios, as of December 31, 1998 and the related statements of operations
and of changes in net assets for the years ended December 31, 1998, 1997 and
1996. 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, 1998, as shown in such portfolios, were confirmed to us by The
Chase Manhattan Bank, the Trustee. An audit also includes assessing the
accounting principles used and significant estimates made by the Trustee, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Funds at December 31, 1998
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 16, 1999
D-1
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES A
STATEMENT OF CONDITION
AS OF DECEMBER 31, 1998
2003 TRUST
TRUST PROPERTY:
Investment in marketable securities
(see Portfolio and Note 1) $48,504,172
Other 87,722
Total trust property 48,591,894
LESS LIABILITY - Other 4,093
NET ASSETS (Note 2) $48,587,801
UNITS OUTSTANDING 59,850,919
UNIT VALUE $.81181
See Notes to Financial Statements.
D-2
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES A
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
2003 TRUST
Years Ended December 31,
1998 1997 1996
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income $ 22,308 $ 24,902 $ 27,183
Accretion of original issue
discount 3,487,242 3,628,183 3,638,172
Trustee's fees and expenses (15,733) (16,828) (18,146)
Net investment income 3,493,817 3,636,257 3,647,209
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Realized gain on securities sold 732,262 818,013 828,620
Unrealized appreciation (depreciation) of
investments 893,998 31,844 (4,351,762)
Realized and unrealized gain (loss) on
investments 1,626,260 849,857 (3,523,142)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $5,120,077 $4,486,114 $ 124,067
</TABLE>
See Notes to Financial Statements.
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,
1998 1997 1996
<S> <C> <C> <C>
OPERATIONS:
Net investment income $ 3,493,817 $ 3,636,257 $ 3,647,209
Realized gain on securities sold 732,262 818,013 828,620
Unrealized appreciation (depreciation) of
investments 893,998 31,844 (4,351,762)
Net increase (decrease) in net assets
resulting from operations 5,120,077 4,486,114 124,067
CAPITAL SHARE TRANSACTIONS (Note 3):
Issuance of additional units 199,957 213,357
Redemptions of units (4,447,838) (5,561,092) (4,579,226)
Net capital share transactions (4,447,838) (5,361,135) (4,365,869)
NET INCREASE (DECREASE) IN NET ASSETS 672,239 (875,021) (4,241,802)
NET ASSETS, BEGINNING OF YEAR 47,915,562 48,790,583 53,032,385
NET ASSETS, END OF YEAR $48,587,801 $47,915,562 $48,790,583
UNIT VALUE, END OF YEAR $.81181 $.72956 $.66428
UNITS OUTSTANDING, END OF YEAR 59,850,919 65,677,446 73,448,689
See Notes to Financial Statements.
</TABLE>
D-4
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES B
STATEMENTS OF CONDITION
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
2001 TRUST 2005 TRUST
TRUST PROPERTY:
<S> <C> <C> <C> <C> <C> <C>
Investment in marketable securities
(see Portfolio and Note 1) $48,742,160 $25,628,714
Other 72,932 28,713
Total trust property 48,815,092 25,657,427
LESS LIABILITY - Other 3,926 6,209
NET ASSETS (Note 2) $48,811,166 $25,651,218
UNITS OUTSTANDING 53,520,078 33,867,164
UNIT VALUE $.91202 $.75741
</TABLE>
See Notes to Financial Statements.
D-5
<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,
1998 1997 1996
INVESTMENT INCOME:
<S> <C> <C> <C>
Interest income $ 19,477 $ 21,215 $ 23,315
Accretion of original issue discount 3,908,822 3,964,020 4,052,834
Trustee's fees and expenses (14,505) (15,315) (16,333)
Net investment income 3,913,794 3,969,920 4,059,816
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain on securities sold 320,464 444,680 729,602
Unrealized appreciation (depreciation) of
investments (413,110) (876,128) (3,688,347)
Realized and unrealized gain (loss) on
investments (92,646) (431,448) (2,958,745)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $3,821,148 $3,538,472 $1,101,071
</TABLE>
See Notes to Financial Statements.
D-6
<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,
1998 1997 1996
INVESTMENT INCOME:
<S> <C> <C> <C>
Interest income $ 11,497 $ 12,069 $ 12,909
Accretion of original issue discount 1,509,134 1,503,945 1,507,646
Trustee's fees and expenses (10,112) (10,338) (10,945)
Net investment income 1,510,519 1,505,676 1,509,610
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain on securities sold 287,941 202,442 239,717
Unrealized appreciation (depreciation) of
investments 911,552 648,748 (1,944,792)
Realized and unrealized gain (loss) on
investments 1,199,493 851,190 (1,705,075)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $2,710,012 $2,356,866 $ (195,465)
</TABLE>
See Notes to Financial Statements.
D-7
<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,
1998 1997 1996
OPERATIONS:
<S> <C> <C> <C>
Net investment income $ 3,913,794 $ 3,969,920 $ 4,059,816
Realized gain on securities sold 320,464 444,680 729,602
Unrealized appreciation (depreciation)
of investments (413,110) (876,128) (3,688,347)
Net increase (decrease)in net assets
resulting from operations 3,821,148 3,538,472 1,101,071
CAPITAL SHARE TRANSACTIONS (Note 3):
Issuance of additional units 647,129 397,111 809,728
Redemptions of units (4,102,436) (4,861,241) (6,094,730)
Net capital share transactions (3,455,307) (4,464,130) (5,285,002)
NET INCREASE (DECREASE) IN NET ASSETS 365,841 (925,658) (4,183,931)
NET ASSETS, BEGINNING OF YEAR 48,445,325 49,370,983 53,554,914
NET ASSETS, END OF YEAR $48,811,166 $48,445,325 $49,370,983
UNIT VALUE, END OF YEAR $.91202 $.84350 $.78459
UNITS OUTSTANDING, END OF YEAR 53,520,078 57,433,435 62,925,765
</TABLE>
See Notes to Financial Statements.
D-8
<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,
1998 1997 1996
OPERATIONS:
<S> <C> <C> <C>
Net investment income $ 1,510,519 $ 1,505,676 $ 1,509,610
Realized gain on securities sold 287,941 202,442 239,717
Unrealized appreciation (depreciation)
of investments 911,552 648,748 (1,944,792)
Net increase (decrease) in net assets
resulting from operations 2,710,012 2,356,866 (195,465)
CAPITAL SHARE TRANSACTIONS (Note 3):
Issuance of additional units 2,239,894 743,426 1,171,904
Redemptions of units (1,664,525) (1,854,199) (2,282,137)
Net capital share transactions 575,369 (1,110,773) (1,110,233)
NET INCREASE (DECREASE) IN NET ASSETS 3,285,381 1,246,093 (1,305,698)
NET ASSETS, BEGINNING OF YEAR 22,365,837 21,119,744 22,425,442
NET ASSETS, END OF YEAR $25,651,218 $22,365,837 $21,119,744
UNIT VALUE, END OF YEAR $.75741 $.67280 $.60348
UNITS OUTSTANDING, END OF YEAR 33,867,164 33,242,884 34,996,785
</TABLE>
See Notes to Financial Statements.
D-9
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES C
STATEMENT OF CONDITION
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
2006 TRUST
TRUST PROPERTY:
<S> <C>
Investment in marketable securities
(see Portfolio and Note 1) $8,903,785
Other 2,288
Total trust property 8,906,073
LESS LIABILITY - Other 72
NET ASSETS (Note 2) $8,906,001
UNITS OUTSTANDING 12,116,560
UNIT VALUE $.73503
</TABLE>
See Notes to Financial Statements.
D-10
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES C
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
2006 TRUST
Years Ended December 31,
1998 1997 1996
INVESTMENT INCOME:
<S> <C> <C> <C>
Interest income $ 3,561 $ 3,792 $ 4,065
Accretion of original issue discount 466,132 485,166 467,093
Trustee's fees and expenses (3,510) (3,683) (3,738)
Net investment income 466,183 485,275 467,420
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Realized gain on securities sold 245,706 406,791 78,989
Unrealized appreciation (depreciation)
of investments 415,809 152,479 (488,521)
Realized and unrealized gain (loss) on
investments 661,515 559,270 (409,532)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $1,127,698 $1,044,545 $ 57,888
</TABLE>
See Notes to Financial Statements.
D-11
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES C
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
2006 TRUST
Years Ended December 31,
1998 1997 1996
OPERATIONS:
<S> <C> <C> <C>
Net investment income $ 466,183 $ 485,275 $ 467,420
Realized gain on securities sold 245,706 406,791 78,989
Unrealized appreciation (depreciation)
of investments 415,809 152,479 (488,521)
Net increase (decrease) in net assets
resulting from operations 1,127,698 1,044,545 57,888
CAPITAL SHARE TRANSACTIONS (Note 3):
Issuance of additional units 1,237,586 245,845 2,799,053
Redemptions of units (697,866) (1,459,989) (582,696)
Net capital share transactions 539,720 (1,214,144) 2,216,357
NET INCREASE (DECREASE) IN NET ASSETS 1,667,418 (169,599) 2,274,245
NET ASSETS, BEGINNING OF YEAR 7,238,583 7,408,182 5,133,937
NET ASSETS, END OF YEAR $8,906,001 $7,238,583 $7,408,182
UNIT VALUE, END OF YEAR $.73503 $.64467 $.57315
UNITS OUTSTANDING, END OF YEAR 12,116,560 11,228,372 12,925,437
</TABLE>
See Notes to Financial Statements.
D-12
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES D
STATEMENT OF CONDITION
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
2007 TRUST
TRUST PROPERTY:
<S> <C>
Investment in marketable securities
(see Portfolio and Note 1) $15,078,605
Other 2,963
Total trust property 15,081,568
LESS LIABILITY - Other 1,514
NET ASSETS (Note 2) $15,080,054
UNITS OUTSTANDING 21,715,233
UNIT VALUE $.69445
</TABLE>
See Notes to Financial Statements.
D-13
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES D
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
2007 TRUST
Years Ended December 31
1998 1997 1996
INVESTMENT INCOME:
Interest income $ 7,329 $ 7,314 $ 6,683
<S> <C> <C> <C>
Accretion of original issue discount 884,318 826,932 701,298
Trustee's fees and expenses (7,337) (7,325) (6,675)
Net investment income 884,310 826,921 701,306
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Realized gain on securities sold 75,524 59,353 137,187
Unrealized appreciation (depreciation) of
investments 953,956 674,748 (1,039,668)
Realized and unrealized gain (loss) on
investments 1,029,480 734,101 (902,481)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $1,913,790 $1,561,022 $ (201,175)
</TABLE>
See Notes to Financial Statements.
D-14
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES D
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
2007 TRUST
Years Ended December 31
1998 1997 1996
OPERATIONS:
<S> <C> <C> <C>
Net investment income $ 884,310 $ 826,921 $ 701,306
Realized gain on securities sold 75,524 59,353 137,187
Unrealized appreciation (depreciation)
of investments 953,956 674,748 (1,039,668)
Net increase (decrease)in net assets
resulting from operations 1,913,790 1,561,022 (201,175)
CAPITAL SHARE TRANSACTIONS (Note 3):
Issuance of additional units 318,728 1,541,671 198,530
Redemptions of units (327,475) (300,187) (557,763)
Net capital share transactions (8,747) 1,241,484 (359,233)
NET INCREASE (DECREASE) IN NET ASSETS 1,905,043 2,802,506 (560,408)
NET ASSETS, BEGINNING OF YEAR 13,175,011 10,372,505 10,932,913
NET ASSETS, END OF YEAR $15,080,054 $13,175,011 $10,372,505
UNIT VALUE, END OF YEAR $.69445 $.60479 $.53353
UNITS OUTSTANDING, END OF YEAR 21,715,233 21,784,452 19,441,293
</TABLE>
See Notes to Financial Statements.
D-15
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES E
STATEMENT OF CONDITION
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
2008 TRUST
<S> <C>
TRUST PROPERTY:
Investment in marketable securities
(see Portfolio and Note 1) $23,705,568
Other 34,594
Total trust property 23,740,162
LESS LIABILITY - Other 9,272
NET ASSETS (Note 2) $23,730,890
UNITS OUTSTANDING 36,757,279
UNIT VALUE $.64561
</TABLE>
See Notes to Financial Statements.
D-16
<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
1998 1997 1996
INVESTMENT INCOME
<S> <C> <C> <C>
Interest income $ 14,231 $ 15,421 $ 17,094
Accretion of original issue
discount 1,483,819 1,504,333 1,566,068
Trustee's fees and expenses (11,317) (11,957) (12,920)
Net investment income 1,486,733 1,507,797 1,570,242
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Realized gain on securities sold 783,621 288,696 535,460
Unrealized appreciation (depreciation)
of investments 1,129,509 1,163,882 (2,866,638)
Realized and unrealized gain (loss)
on investments 1,913,130 1,452,578 (2,331,178)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $3,399,863 $2,960,375 $ (760,936)
</TABLE>
See Notes to Financial Statements.
D-17
<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
1998 1997 1996
OPERATIONS:
<S> <C> <C> <C>
Net investment income $ 1,486,733 $ 1,507,797 $ 1,570,242
Realized gain on securities sold 783,621 288,696 535,460
Unrealized appreciation (depreciation) of
investments 1,129,509 1,163,882 (2,866,638)
Net increase (decrease) in net assets
resulting from operations 3,399,863 2,960,375 (760,936)
CAPITAL SHARE TRANSACTIONS (Note 3):
Issuance of additional Units 447,496 1,102,323
Redemptions of Units (2,925,925) (2,064,469) (3,669,808)
Net capital share transactions (2,478,429) (2,064,469) (2,567,485)
NET INCREASE (DECREASE) IN NET ASSETS 921,434 895,906 (3,328,421)
NET ASSETS, BEGINNING OF YEAR 22,809,456 21,913,550 25,241,971
NET ASSETS, END OF YEAR $23,730,890 $22,809,456 $21,913,550
UNIT VALUE, END OF YEAR $.64561 $.55850 $.48816
UNITS OUTSTANDING, END OF YEAR 36,757,279 40,840,808 44,890,165
</TABLE>
See Notes to Financial Statements.
D-18
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES F
STATEMENT OF CONDITION
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
2009 TRUST
TRUST PROPERTY:
<S> <C> <C> <C> <C> <C> <C>
Investment in marketable securities
(see Portfolio and Note 1) $ 9,958,384
Other 15,125
Total trust property 9,973,509
LESS LIABILITY - Other 7,379
NET ASSETS (Note 2) $ 9,966,130
UNITS OUTSTANDING 16,350,375
UNIT VALUE $.60954
</TABLE>
See Notes to Financial Statements.
D-19
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES F
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
2009 TRUST
Years Ended December 31
1998 1997 1996
INVESTMENT INCOME:
<S> <C> <C> <C>
Interest income $ 6,487 $ 7,191 $ 7,951
Accretion of original issue discount 614,533 639,710 643,976
Trustee's fees and expenses (6,485) (7,105) (7,936)
Net investment income 614,535 639,796 643,991
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain on securities sold 299,484 220,815 130,319
Unrealized appreciation (depreciation) of
investments 576,107 471,994 (1,124,284)
Realized and unrealized gain (loss) on
investments 875,591 692,809 (993,965)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $1,490,126 $1,332,605 $ (349,974)
</TABLE>
See Notes to Financial Statements.
D-20
<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
1998 1997 1996
OPERATIONS:
<S> <C> <C> <C>
Net investment income $ 614,535 $ 639,796 $ 643,991
Realized gain on securities sold 299,484 220,815 130,319
Unrealized appreciation (depreciation) of
investments 576,107 471,994 (1,124,284)
Net increase (decrease) in net assets
resulting from operations 1,490,126 1,332,605 (349,974)
CAPITAL SHARE TRANSACTIONS (Note 3):
Issuance of additional units 182,231
Redemptions of units (1,103,948) (1,170,043) (716,485)
Net capital share transactions (1,103,948) (1,170,043) (534,254)
NET INCREASE (DECREASE) IN NET ASSETS 386,178 162,562 (884,228)
NET ASSETS, BEGINNING OF YEAR 9,579,952 9,417,390 10,301,618
NET ASSETS, END OF YEAR $9,966,130 $9,579,952 $ 9,417,390
UNIT VALUE, END OF YEAR $.60954 $.52533 $.45585
UNITS OUTSTANDING, END OF YEAR 16,350,375 18,236,148 20,659,112
</TABLE>
See Notes to Financial Statements.
D-21
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES G
STATEMENTS OF CONDITION
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
2000 TRUST 2010 TRUST
TRUST PROPERTY:
<S> <C> <C> <C> <C> <C> <C>
Investment in marketable securities
(see Portfolio and Note 1) $26,531,652 $10,431,997
Other 5,500 6,185
Total trust property 26,537,152 10,438,182
LESS LIABILITY - Other 2,154 178
NET ASSETS (Note 2) $26,534,998 $10,438,004
UNITS OUTSTANDING 27,855,188 18,391,957
UNIT VALUE $.95261 $.56753
</TABLE>
See Notes to Financial Statements.
D-22
<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,
1998 1997 1996
INVESTMENT INCOME:
<S> <C> <C> <C>
Interest income $ 9,671 $ 9,454 $ 9,437
Accretion of original issue discount 1,694,876 1,610,298 1,521,693
Trustee's fees and expenses (9,184) (9,020) (9,004)
Net investment income 1,695,363 1,610,732 1,522,126
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Realized gain (loss) on securities sold 85,281 97,827 54,447
Unrealized appreciation (depreciation)
of investments (73,905) (181,107) (907,562)
Realized and unrealized gain (loss) on
investments 11,376 (83,280) (853,115)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $1,706,739 $1,527,452 $ 669,011
</TABLE>
See Notes to Financial Statements.
D-23
<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,
1998 1997 1996
INVESTMENT INCOME:
<S> <C> <C> <C>
Interest income $ 6,416 $ 7,100 $ 7,681
Accretion of original issue discount 540,842 634,768 604,550
Trustee's fees and expenses (6,387) (6,969) (7,558)
Net investment income 540,871 634,899 604,673
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) on securities sold 69,850 192,086 413,063
Unrealized appreciation (depreciation) of
investments 721,439 410,774 (1,250,513)
Realized and unrealized gain (loss)on
investments 791,289 602,860 (837,450)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $1,332,160 $1,237,759 $ (232,777)
</TABLE>
See Notes to Financial Statements.
D-24
<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,
1998 1997 1996
OPERATIONS:
<S> <C> <C> <C>
Net investment income $ 1,695,363 $ 1,610,732 $ 1,522,126
Realized gain (loss) on securities sold 85,281 97,827 54,447
Unrealized appreciation (depreciation)
of investments (73,905) (181,107) (907,562)
Net increase (decrease) in net assets
resulting from operations 1,706,739 1,527,452 669,011
CAPITAL SHARE TRANSACTIONS (Note 3):
Issuance of additional units 5,875,313 1,984,343 487,979
Redemptions of units (3,803,375) (2,875,921) (1,346,695)
Net capital share transactions 2,071,938 (891,578) (858,716)
NET INCREASE (DECREASE) IN NET ASSETS 3,778,677 635,874 (189,705)
NET ASSETS, BEGINNING OF YEAR 22,756,321 22,120,447 22,310,152
NET ASSETS, END OF YEAR $26,534,998 $22,756,321 $22,120,447
UNIT VALUE, END OF YEAR $.95261 $.88976 $.83284
UNITS OUTSTANDING, END OF YEAR 27,855,188 25,575,784 26,560,105
</TABLE>
See Notes to Financial Statements.
D-25
<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,
1998 1997 1996
OPERATIONS:
<S> <C> <C> <C>
Net investment income $ 540,871 $ 634,899 $ 604,673
Realized gain (loss) on securities sold 69,850 192,086 413,063
Unrealized appreciation (depreciation) of
investments 721,439 410,774 (1,250,513)
Net increase (decrease) in net assets
resulting from operations 1,332,160 1,237,759 (232,777)
CAPITAL SHARE TRANSACTIONS (Note 3):
Issuance of additional units 1,225,106 5,760,544 2,997,567
Redemptions of units (540,288) (6,927,386) (2,968,890)
Net capital share transactions 684,818 (1,166,842) 28,677
NET INCREASE (DECREASE) IN NET ASSETS 2,016,978 70,917 (204,100)
NET ASSETS, BEGINNING OF YEAR 8,421,026 8,350,109 8,554,209
NET ASSETS, END OF YEAR $10,438,004 $8,421,026 $8,350,109
UNIT VALUE, END OF YEAR $.56753 $.48925 $.42143
UNITS OUTSTANDING, END OF YEAR 18,391,957 17,212,004 19,813,618
</TABLE>
See Notes to Financial Statements.
D-26
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES H
STATEMENT OF CONDITION
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
2011 TRUST
TRUST PROPERTY:
<S> <C>
Investment in marketable securities
(see Portfolio and Note 1) $2,308,070
Other 2,127
Total trust property 2,310,197
LESS LIABILITY - Other 317
NET ASSETS (Note 2) $2,309,880
UNITS OUTSTANDING 4,283,180
UNIT VALUE $.53929
</TABLE>
See Notes to Financial Statements.
D-27
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES H
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
2011 TRUST
Years Ended December 31,
1998 1997 1996
INVESTMENT INCOME:
<S> <C> <C> <C>
Interest income $ 1,507 $ 2,020 $ 2,130
Accretion of original issue discount 118,651 164,042 146,632
Trustee's fees and expenses (1,527) (1,943) (2,103)
Net investment income 118,631 164,119 146,659
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain on securities sold or redeemed 104,640
Unrealized appreciation (depreciation) of investments 186,725 71,464 (195,003)
Realized and unrealized gain (loss) on investments 186,725 176,104 (195,003)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $305,356 $340,223 $(48,344)
</TABLE>
See Notes to Financial Statements.
D-28
<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,
1998 1997 1996
OPERATIONS:
<S> <C> <C> <C>
Net investment income $ 118,631 $ 164,119 $ 146,659
Realized gain on securities sold 104,640
Unrealized appreciation (depreciation)
of investments 186,725 71,464 (195,003)
Net increase (decrease) in net assets
resulting from operations 305,356 340,223 (48,344)
CAPITAL SHARE TRANSACTIONS (NOTE 3):
Issuance of additional units 223,286 404,419
Redemption of units (1,116,749)
Net capital share transactions 223,286 (1,116,749) 404,419
NET INCREASE (DECREASE) IN NET ASSETS 528,642 (776,526) 356,075
NET ASSETS, BEGINNING OF YEAR 1,781,238 2,557,764 2,201,689
NET ASSETS, END OF YEAR $2,309,880 $1,781,238 $2,557,764
UNIT VALUE, END OF YEAR $.53929 $.46569 $.39709
UNITS OUTSTANDING, END OF YEAR 4,283,180 3,824,917 6,441,209
</TABLE>
See Notes to Financial Statements.
D-29
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES I
STATEMENT OF CONDITION
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
2002 TRUST
TRUST PROPERTY:
<S> <C>
Investment in marketable securities
(see Portfolio and Note 1) $11,950,688
Other 3,324
Total trust property 11,954,012
LESS LIABILITY - Other 486
NET ASSETS (Note 2) $11,953,526
UNITS OUTSTANDING 13,762,347
UNIT VALUE $.86857
</TABLE>
See Notes to Financial Statements.
D-30
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES I
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
2002 TRUST
Years Ended December 31,
1998 1997 1996
INVESTMENT INCOME:
<S> <C> <C> <C>
Interest income $ 5,166 $ 4,996 $ 4,486
Accretion of original issue discount 749,861 677,645 587,737
Trustee's fees and expenses (2,627) (4,866) (4,567)
Net investment income 752,400 677,775 587,656
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain on securities sold or redeemed 60,441 24,811 26,301
Unrealized appreciation (depreciation) of
investments 256,059 144,877 (479,823)
Realized and unrealized gain (loss) on
investments 316,500 169,688 (453,522)
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $1,068,900 $847,463 $134,134
</TABLE>
See Notes to Financial Statements.
D-31
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES I
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
2002 TRUST
Years Ended December 31,
1998 1997 1996
OPERATIONS:
<S> <C> <C> <C>
Net investment income $ 752,400 $ 677,775 $ 587,656
Realized gain on securities sold 60,441 24,811 26,301
Unrealized appreciation (depreciation) of
investments 256,059 144,877 (479,823)
Net increase in net assets resulting
from operations 1,068,900 847,463 134,134
CAPITAL SHARE TRANSACTIONS (NOTE 3):
Issuance of additional units 589,692 1,602,921 999,668
Redemptions of units (713,612) (329,153) (593,312)
Net capital share transactions (123,920) 1,273,768 406,356
NET INCREASE IN NET ASSETS 944,980 2,121,231 540,490
NET ASSETS, BEGINNING OF YEAR 11,008,546 8,887,315 8,346,825
NET ASSETS, END OF YEAR $11,953,526 $11,008,546 $8,887,315
UNIT VALUE, END OF YEAR $.86857 $.79373 $.73334
UNITS OUTSTANDING, END OF YEAR 13,762,347 13,869,363 12,118,903
</TABLE>
See Notes to Financial Statements.
D-32
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES J
STATEMENT OF CONDITION
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
2013 TRUST
TRUST PROPERTY:
<S> <C> <C> <C> <C> <C> <C>
Investment in marketable securities
(see Portfolio and Note 1) $1,682,253
Other 1,903
Total trust property 1,684,156
LESS LIABILITY - Other 80
NET ASSETS (Note 2) $1,684,076
UNITS OUTSTANDING 3,548,349
UNIT VALUE $.47461
</TABLE>
See Notes to Financial Statements.
D-33
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES J
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
2013 TRUST
Years Ended December 31,
1998 1997 1996
INVESTMENT INCOME:
<S> <C> <C> <C>
Interest income $ 1,279 $ 1,279 $ 1,409
Accretion of original issue discount 88,872 82,526 89,578
Trustee's fees and expenses (640) (1,280) (1,266)
Net investment income 89,511 82,525 89,721
REALIZED AND UNREALIZED GAIN (LOSS)ON INVESTMENTS:
Realized gain on securities sold
or redeemed 56,841
Unrealized appreciation (depreciation) of
investments 138,787 157,252 (241,371)
Realized and unrealized gain (loss) on
investments 138,787 157,252 (184,530)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $228,298 $239,777 $(94,809)
</TABLE>
See Notes to Financial Statements.
D-34
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES J
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
2013 TRUST
Years Ended December 31,
1998 1997 1996
OPERATIONS:
<S> <C> <C> <C>
Net investment income $ 89,511 $ 82,525 $ 89,721
Realized gain on securities sold 56,841
Unrealized appreciation (depreciation) of
investments 138,787 157,252 (241,371)
Net increase (decrease) in net assets resulting
from operations 228,298 239,777 (94,809)
CAPITAL SHARE TRANSACTIONS (NOTE 3):
Issuance of additional units 277,784
Redemption of units (475,164)
Net capital share transactions (197,380)
NET INCREASE (DECREASE) IN NET ASSETS 228,298 239,777 (292,189)
NET ASSETS, BEGINNING OF YEAR 1,455,778 1,216,001 1,508,190
NET ASSETS, END OF YEAR $1,684,076 $1,455,778 $1,216,001
UNIT VALUE, END OF YEAR $.47461 $.41027 $.34269
UNITS OUTSTANDING, END OF YEAR 3,548,349 3,548,349 3,548,349
</TABLE>
See Notes to Financial Statements.
D-35
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES K
STATEMENTS OF CONDITION
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
2004 TRUST 2014 TRUST
TRUST PROPERTY:
Investment in marketable securities
<S> <C> <C> <C>
(see Portfolio and Note 1) $ 8,250,450 $26,473,515
Other 1,832 23,078
Total trust property 8,252,282 26,496,593
LESS LIABILITY - Other 784 4,982
NET ASSETS (Note 2) $ 8,251,498 $26,491,611
UNITS OUTSTANDING 10,460,977 60,031,399
UNIT VALUE $.78879 $.44130
</TABLE>
See Notes to Financial Statements.
D-36
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES K
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
2004 TRUST
Years Ended December 31,
1998 1997 1996
INVESTMENT INCOME:
<S> <C> <C> <C>
Interest income $ 3,839 $ 4,366 $ 4,441
Accretion of original issue discount 517,767 556,688 543,331
Trustee's fees and expenses (3,721) (4,217) (4,777)
Net investment income 517,885 556,837 542,995
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain on securities sold 164,436 429,318 83,953
Unrealized appreciation (depreciation)
of investments 207,329 152,350 (586,245)
Realized and unrealized gain (loss) on
investments 371,765 581,668 (502,292)
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $889,650 $1,138,505 $ 40,703
</TABLE>
See Notes to Financial Statements.
D-37
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES K
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
2014 TRUST
Years Ended December 31,
1998 1997 1996
INVESTMENT INCOME:
<S> <C> <C> <C>
Interest income $ 19,256 $ 21,572 $ 23,635
Accretion of original issue discount 1,464,616 1,515,782 1,600,126
Trustee's fees and expenses (15,177) (15,987) (17,481)
Net investment income 1,468,695 1,521,367 1,606,280
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) on securities sold 1,722,576 2,627 (688,528)
Unrealized appreciation (depreciation)
of investments 53,921 2,654,490 (1,102,292)
Realized and unrealized gain (loss)
on investments 1,776,497 2,657,117 (1,790,820)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $3,245,192 $4,178,484 $ (184,540)
</TABLE>
See Notes to Financial Statements.
D-38
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES K
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
2004 TRUST
Years Ended December 31,
1998 1997 1996
OPERATIONS:
<S> <C> <C> <C>
Net investment income $ 517,885 $ 556,837 $ 542,995
Realized gain on securities sold 164,436 429,318 83,953
Unrealized appreciation (depreciation)
of investments 207,329 152,350 (586,245)
Net increase (decrease) in net assets
resulting from operations 889,650 1,138,505 40,703
CAPITAL SHARE TRANSACTIONS (NOTE 3):
Issuance of additional units 796,913 513,283 2,528,106
Redemptions of units (1,486,459) (2,219,459) (1,342,267)
Net capital share transactions (689,546) (1,706,176) 1,185,839
NET INCREASE (DECREASE) IN NET ASSETS 200,104 (567,671) 1,226,542
NET ASSETS, BEGINNING OF YEAR 8,051,394 8,619,065 7,392,523
NET ASSETS, END OF YEAR $8,251,498 $8,051,394 $8,619,065
UNIT VALUE, END OF YEAR $.78879 $.70618 $.63949
UNITS OUTSTANDING, END OF YEAR 10,460,977 11,401,318 13,477,969
</TABLE>
See Notes to Financial Statements.
D-39
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES K
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
2014 TRUST
Years Ended December 31,
1998 1997 1996
OPERATIONS:
<S> <C> <C> <C>
Net investment income $ 1,468,695 $1,521,367 $ 1,606,280
Realized gain (loss) on securities sold 1,722,576 2,627 (688,528)
Unrealized appreciation (depreciation)
of investments 53,921 2,654,490 (1,102,292)
Net increase (decrease) in net assets
resulting from operations 3,245,192 4,178,484 (184,540)
CAPITAL SHARE TRANSACTIONS (NOTE 3):
Issuance of additional units 12,948,776 5,440,489 20,777,671
Redemptions of units (9,990,644) (10,272,293) (12,608,859)
Net capital share transactions 2,958,132 (4,831,804) 8,168,812
NET INCREASE (DECREASE) IN NET ASSETS 6,203,324 (653,320) 7,984,272
NET ASSETS, BEGINNING OF YEAR 20,288,287 20,941,607 12,957,335
NET ASSETS, END OF YEAR $26,491,611 $20,288,287 $20,941,607
UNIT VALUE, END OF YEAR $.44130 $.38263 $.31570
UNITS OUTSTANDING, END OF YEAR 60,031,399 53,023,893 66,334,438
</TABLE>
See Notes to Financial Statements.
D-40
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Funds are 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 Funds in the preparation of their
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 Funds are not subject to income taxes. Accordingly, no provision
for such taxes is required.
2. NET ASSETS, DECEMBER 31, 1998
Series A (2003 Trust)
Cost of 59,850,919 units at Dates of Deposit $14,560,959
Less sales charge 254,817
Net amount applicable to Holders 14,306,142
Realized gain on securities sold 13,298,272
Unrealized appreciation of investments 7,913,243
Redemptions of units - net cost of units redeemed less
redemption amounts (7,706,143)
Undistributed net investment income 20,776,287
Net assets $48,587,801
Series B (2001 Trust)
Cost of 53,520,078 units at Dates of Deposit $16,868,982
Less sales charge 253,035
Net amount applicable to Holders 16,615,947
Realized gain on securities sold 14,424,949
Unrealized appreciation of investments 1,930,560
Redemptions of units - net cost of units redeemed less
redemption amounts (4,458,572)
Undistributed net investment income 20,298,282
Net assets $48,811,166
D-41
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES
NOTES TO FINANCIAL STATEMENTS
2. NET ASSETS, DECEMBER 31, 1998 (Continued)
Series B (2005 Trust)
Cost of 33,867,164 units at Dates of Deposit $ 8,602,812
Less sales charge 150,549
Net amount applicable to Holders 8,452,263
Realized gain on securities sold 6,207,677
Unrealized appreciation of investments 3,666,856
Redemptions of units - redemption amounts less net cost
of units redeemed 432,590
Undistributed net investment income 6,891,832
Net assets $25,651,218
Series C (2006 Trust)
Cost of 12,116,560 units at Dates of Deposit $ 3,492,758
Less sales charge 61,123
Net amount applicable to Holders 3,431,635
Realized gain on securities sold 1,797,524
Unrealized appreciation of investments 960,220
Redemptions of units - net cost of units redeemed less
redemption amounts 1,297,540
Undistributed net investment income 1,419,082
Net assets $ 8,906,001
Series D (2007 Trust)
Cost of 21,715,233 units at Dates of Deposit $ 4,267,979
Less sales charge 85,360
Net amount applicable to Holders 4,182,619
Realized gain on securities sold 4,373,994
Unrealized appreciation of investments 3,621,683
Redemptions of units - net cost of units redeemed less
redemption amounts (1,997,141)
Undistributed net investment income 4,898,899
Net assets $15,080,054
Series E (2008 Trust)
Cost of 36,757,279 units at Dates of Deposit $ 7,311,222
Less sales charge 146,224
Net amount applicable to Holders 7,164,998
Realized gain on securities sold 10,302,635
Unrealized appreciation of investments 5,881,857
Redemptions of units - net cost of units redeemed less
redemption amounts (6,938,402)
Undistributed net investment income 7,319,802
Net assets $23,730,890
D-42
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES
NOTES TO FINANCIAL STATEMENTS
2. NET ASSETS, DECEMBER 31, 1998 (Continued)
Series F (2009 Trust)
Cost of 16,350,375 units at Dates of Deposit $ 3,559,929
Less sales charge 35,599
Net amount applicable to Holders 3,524,330
Realized loss on securities sold 66,202
Unrealized appreciation of investments 2,587,017
Redemptions of units - net cost of units redeemed less
redemption amounts 826,112
Undistributed net investment income 2,962,469
Net assets $ 9,966,130
Series G (2000 Trust)
Cost of 27,855,188 units at Dates of Deposit $17,682,008
Less sales charge 265,230
Net amount applicable to Holders 17,416,778
Realized gain on securities sold 541,096
Unrealized appreciation of investments 487,089
Redemptions of units - net cost of units redeemed less
redemption amounts 2,971,285
Undistributed net investment income 5,118,750
Net assets $26,534,998
Series G (2010 Trust)
Cost of 18,391,957 units at Dates of Deposit $ 4,759,098
Less sales charge 95,182
Net amount applicable to Holders 4,663,916
Realized gain on securities sold 2,796,757
Unrealized appreciation of investments 1,384,753
Redemptions of units - net cost of units redeemed less
redemption amounts 787,949
Undistributed net investment income 804,629
Net assets $10,438,004
D-43
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES
NOTES TO FINANCIAL STATEMENTS
2. NET ASSETS, DECEMBER 31, 1998 (Continued)
Series H (2011 Trust)
Cost of 4,283,180 units at Dates of Deposit $ 1,282,342
Less sales charge 25,647
Net amount applicable to Holders 1,256,695
Realized gain on securities sold 658,774
Unrealized appreciation of investments 435,313
Redemptions of units - net cost of units redeemed less
redemption amounts (449,955)
Undistributed net investment income 409,053
Net assets $ 2,309,880
Series I (2002 Trust)
Cost of 13,762,347 units at Dates of Deposit $ 8,852,187
Less sales charge 132,783
Net amount applicable to Holders 8,719,404
Realized gain on securities sold 145,207
Unrealized appreciation of investments 714,196
Redemptions of units - net cost of units redeemed less
redemption amounts 4,506
Undistributed net investment income 2,370,213
Net assets $11,953,526
Series J (2013 Trust)
Cost of 3,548,349 units at Dates of Deposit $ 936,698
Less sales charge 18,734
Net amount applicable to Holders 917,964
Realized loss on securities sold (15,485)
Unrealized appreciation of investments 416,927
Redemptions of units - net cost of units redeemed less
redemption amounts 72,037
Undistributed net investment income 292,633
Net assets $ 1,684,076
Series K (2004 Trust)
Cost of 10,460,977 units at Dates of Deposit $ 6,005,794
Less sales charge 120,116
Net amount applicable to Holders 5,885,678
Realized gain on securities sold 686,941
Unrealized appreciation of investments 673,466
Redemption of units - net cost of units redeemed less
redemption amounts (185,339)
Undistributed net investment income 1,190,752
Net assets $ 8,251,498
D-44
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES
NOTES TO FINANCIAL STATEMENTS
2. NET ASSETS, DECEMBER 31, 1998 (Concluded)
Series K (2014 Trust)
Cost of 60,031,399 units at Dates of Deposit $18,418,152
Less sales charge 368,363
Net amount applicable to Holders 18,049,789
Realized gain on securities sold 2,940,938
Unrealized appreciation of investments 2,761,427
Redemptions of units - net cost of units redeemed less
redemption amounts 1,203,489
Undistributed net investment income 1,535,968
Net assets $26,491,611
3. CAPITAL SHARE TRANSACTIONS
Additional units were issued as follows:
Series Trust 1998 1997 1996
A 2003 0 295,618 335,709
B 2001 749,573 499,725 1,049,370
B 2005 2,941,197 1,222,534 2,047,138
C 2006 1,681,203 420,107 5,142,683
D 2007 458,880 2,872,766 397,026
E 2008 780,399 0 2,285,094
F 2009 0 0 389,225
G 2000 6,346,370 2,356,540 596,716
G 2010 2,245,742 13,001,876 7,645,028
H 2011 458,263 0 1,105,160
I 2002 727,856 2,168,572 1,390,455
J 2013 0 0 829,985
K 2004 1,072,923 770,557 4,088,054
K 2014 31,094,278 16,314,688 68,769,448
D-45
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES
NOTES TO FINANCIAL STATEMENTS
3. CAPITAL SHARE TRANSACTIONS (Continued)
Units were redeemed as follows:
Series Trust 1998 1997 1996
A 2003 5,826,527 8,066,861 7,108,646
B 2001 4,662,930 5,992,055 7,988,798
B 2005 2,316,917 2,976,435 3,967,657
C 2006 793,015 2,117,172 1,604,908
D 2007 528,099 529,607 1,057,295
E 2008 4,863,928 4,049,357 7,812,795
F 2009 1,885,773 2,422,964 1,612,044
G 2000 4,066,966 3,340,861 1,673,631
G 2010 1,065,789 15,603,490 7,393,245
H 2011 0 2,616,292 0
I 2002 834,872 418,112 834,868
J 2013 0 0 1,473,737
K 2004 2,013,264 2,847,208 2,173,415
K 2014 24,086,772 29,625,233 4,288,897
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 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, 1998, 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-46
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES
PORTFOLIOS
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
Portfolio No. Adjusted
and Title of Interest Face Cost Value
Securities Rate Maturities Amount (Note A) (Note A)
Series A (2003 Trust)
<S> <C> <C> <C> <C> <C>
1 Stripped Treasury
Securities (Note B) 0% 8/15/03 $59,721,625 $40,362,380 $48,261,353
2 U.S. Treasury Bonds 11.125 8/15/03 192,475 228,549 242,819
Total $59,914,100 $40,590,929 $48,504,172
Series B (2001 Trust)
1 Stripped Treasury
Securities (Note B) 0% 2/15/01 $53,556,325 $46,616,340 $48,560,880
2 U.S. Treasury Bonds 11.750 2/15/01 158,800 195,260 181,280
Total $53,715,125 $46,811,600 $48,742,160
Series B (2005 Trust)
1 Stripped Treasury
Securities (Note B) 0% 2/15/05 $34,072,940 $21,828,527 $25,491,175
2 U.S. Treasury Bonds 11.625 11/15/04 102,141 133,331 137,539
Total $34,175,081 $21,961,858 $25,628,714
Series C (2006 Trust)
1 Stripped Treasury
Securities (Note B) 0% 2/15/06 $12,415,000 $ 7,892,132 $ 8,850,516
2 U.S. Treasury Bonds 9.375 2/15/06 41,698 51,433 53,269
Total $12,456,698 $ 7,943,565 $ 8,903,785
Series D (2007 Trust)
1 Stripped Treasury
Securities (Note B) 0% 2/15/07 $22,150,000 $11,370,888 $14,977,625
2 U.S. Treasury Bonds 9.375 2/15/06 79,045 86,034 100,980
Total $22,229,045 $11,456,922 $15,078,605
</TABLE>
D-47
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES
PORTFOLIOS
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
Portfolio No. Adjusted
and Title of Interest Face Cost Value
Securities Rate Maturities Amount (Note A) (Note A)
Series E (2008 Trust)
<S> <C><C> <C><C> <C>
1 Stripped Treasury
Securities (Note B) 0% 2/15/08 $36,734,000 $17,669,172 $23,524,417
2 U.S. Treasury Bonds 9.375 2/15/06 141,801 154,539 181,151
Total $36,875,801 $17,823,711 $23,705,568
Series F (2009 Trust)
1 Stripped Treasury
Securities (Note B) 0% 2/15/09 $16,371,000 $ 7,298,248 $ 9,875,953
2 U.S. Treasury Bonds 9.375 2/15/06 64,525 73,119 82,431
Total $16,435,525 $ 7,371,367 $ 9,958,384
Series G (2000 Trust)
1 Stripped Treasury
Securities (Note B) 0% 2/15/00 $27,786,000 $25,919,202 $26,413,066
2 U.S. Treasury Notes 8.500 2/15/00 113,922 125,361 118,586
Total $27,899,922 $26,044,563 $26,531,652
Series G (2010 Trust)
1 Stripped Treasury
Securities (Note B) 0% 2/15/10 $18,253,000 $ 8,964,439 $10,339,211
2 U.S. Treasury Bonds 9.375 2/15/06 72,631 82,805 92,786
Total $18,325,631 $ 9,047,244 $10,431,997
</TABLE>
D-48
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES
PORTFOLIOS
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
Portfolio No. Adjusted
and Title of Interest Face Cost Value
Securities Rate Maturities Amount (Note A) (Note A)
Series H (2011 Trust)
<S> <C> <C> <C> <C> <C>
1 Stripped Treasury
Securities (Note B) 0% 2/15/11 $ 4,299,000 $ 1,852,210 $ 2,286,548
2 U.S. Treasury Bonds 9.375 2/15/06 16,847 20,547 21,522
Total $ 4,315,847 $ 1,872,757 $ 2,308,070
Series I (2002 Trust)
1 Stripped Treasury
Securities (Note B) 0% 02/15/02 $13,708,000 $11,167,020 $11,879,613
2 U.S. Treasury Notes 7.500 11/15/01 66,135 69,472 71,075
Total $13,774,135 $11,236,492 $11,950,688
Series J (2013 Trust)
1 Stripped Treasury
Securities (Note B) 0% 02/15/13 $ 3,552,000 $ 1,249,953 $ 1,665,210
2 U.S. Treasury Bonds 10.375 11/15/12(C) 12,328 15,373 17,043
Total $ 3,564,328 $ 1,265,326 $ 1,682,253
Series K (2004 Trust)
1 Stripped Treasury
Securities (Note B) 0% 2/15/04 $10,384,000 $ 7,513,101 $ 8,184,035
2 U.S. Treasury Notes 5.875 2/15/04 62,934 63,883 66,415
Total $10,446,934 $ 7,576,984 $ 8,250,450
Series K (2014 Trust)
1 Stripped Treasury
Securities (Note B) 0% 2/15/14 $59,411,000 $23,434,130 $26,165,139
2 U.S. Treasury Bonds 11.250 2/15/15 186,189 277,958 308,376
Total $59,597,189 $23,712,088 $26,473,515
</TABLE>
D-49
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES
NOTES TO PORTFOLIOS
AS OF DECEMBER 31, 1998
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-50
<PAGE>
HAVE QUESTIONS ? THE MERRILL LYNCH FUND OF STRIPPED
Request the most recent free ('ZERO') U.S TREASURY SECURITIES,
Information Supplement SERIES A-L
that gives more details about (Unit Investment Trusts)
the Fund, by calling: ---------------------------------------
The Chase Manhattan Bank This Prospectus does not contain
1-800-323-1508 complete information about the
investment company filed with the
Securities and Exchange Commission in
Washington, D.C. under the:
o Securities Act of 1933 (file numbers:
2-89536, 2-94915, 33-02813, 33-13386,
33-21320, 33-28038, 33-34403, 33-39606,
33-47078, 33-49519 and 33-53085);
o Investment Company Act of 1940 (file
no. 811-2810).
TO OBTAIN COPIES AT PRESCRIBED RATES--
WRITE: Public Reference Section of the
Commission
450 Fifth Street, N.W., Washington,
D.C. 20549-6009
CALL: 1-800-SEC-0330.
VISIT: http://www.sec.gov.
---------------------------------------
No person is authorized to give any
information or representations about
this Fund not contained in this
Prospectus or the Information
Supplement, and you should not rely on
any other information.
---------------------------------------
This Prospectus may be used as a
preliminary prospectus for a future
series, but some of the information in
this Prospectus will be changed for
that series.
Units of any future series may not be
sold nor may offers to buy be accepted
until that series has become effective
with the Securities and Exchange
Commission. No units can be sold in any
State where a sale would be illegal.
14850--4/99
