DEFINED ASSET FUNDS--REGISTERED TRADEMARK--
------------------------------
----------------------
GOVERNMENT SECURITIES INCOME FUND
MONTHLY PAYMENT U.S. TREASURY
SERIES--1
A UNIT INVESTMENT TRUST
- PORTFOLIO OF U.S. TREASURY BONDS
- MONTHLY INCOME DISTRIBUTIONS
- U.S. TAX EXEMPT FOR MANY FOREIGN HOLDERS
SPONSORS:
MERRILL LYNCH,
PIERCE, FENNER & SMITH
INCORPORATED -----------------------------------------------------
SALOMON SMITH BARNEY INC. The Securities and Exchange Commission has not
PRUDENTIAL SECURITIES approved or disapproved these Securities or passed
INCORPORATED upon the adequacy of this prospectus. Any
PAINEWEBBER INCORPORATED representation to the contrary is a criminal offense.
DEAN WITTER REYNOLDS INC. Prospectus dated June 23, 2000.
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Defined Asset Funds--Registered Trademark--
Defined Asset Funds-Registered Trademark- is America's oldest and largest family
of unit investment trusts, with over $160 billion sponsored over the last 28
years. Defined Asset Funds has been a leader in unit investment trust research
and product innovation. Our family of Funds helps investors work toward their
financial goals with a full range of quality investments, including municipal,
corporate and government bond portfolios, as well as domestic and international
equity portfolios.
Defined Asset Funds offer a number of advantages:
- A disciplined strategy of buying and holding with a long-term view is the
cornerstone of Defined Asset Funds.
- Fixed portfolio: Defined Funds follow a buy and hold investment strategy;
funds are not managed and portfolio changes are limited.
- Defined Portfolios: We choose the stocks and bonds in advance, so you know
what you're investing in.
- Professional research: Our dedicated research team seeks out stocks or bonds
appropriate for a particular fund's objectives.
- Ongoing supervision: We monitor each portfolio on an ongoing basis.
No matter what your investment goals, tolerance for risk or time horizon,
there's probably a Defined Asset Fund that suits your investment style. Your
financial professional can help you select a Defined Asset Fund that works best
for your investment portfolio.
THE FINANCIAL INFORMATION IN THIS PROSPECTUS IS AS OF THE EVALUATION DATE, MARCH
31, 2000.
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CONTENTS
PAGE
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Risk/Return Summary.................. 3
What You Can Expect From Your
Investment......................... 5
Monthly Income..................... 5
Return Figures..................... 5
Records and Reports................ 5
The Risks You Face................... 6
Interest Rate Risk................. 6
Reduced Diversification Risk....... 6
Litigation Risk.................... 6
Selling or Exchanging Units.......... 6
Sponsors' Secondary Market......... 6
Selling Units to the Trustee....... 6
Exchange Option.................... 7
How The Fund Works................... 7
Pricing............................ 7
Evaluations........................ 7
Income............................. 8
Expenses........................... 8
Portfolio Changes.................. 8
Fund Termination................... 9
Certificates....................... 9
Trust Indenture.................... 9
Legal Opinion...................... 10
Auditors........................... 10
Sponsors........................... 10
Trustee............................ 10
Underwriters' and Sponsors'
Profits.......................... 11
Public Distribution................ 11
Code of Ethics..................... 11
Year 2000 Issues................... 11
Taxes................................ 11
Supplemental Information............. 13
Financial Statements................. D-1
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RISK/RETURN SUMMARY
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1. WHAT IS THE FUND'S OBJECTIVE?
The Fund seeks current interest income
and safety of capital by investing for
approximately 5 years in a fixed
portfolio of U.S. Treasury bonds.
2. WHAT ARE U.S. TREASURY NOTES?
These are directly issued by the U.S.
Treasury and are similar to corporate
bonds in that they pay interest
semi-annually. They are issued to fund
various government activities. In
return, they pay a fixed rate of
interest and principal at maturity.
3. WHAT IS THE FUND'S INVESTMENT STRATEGY?
- The Fund plans to hold to maturity 2
short-intermediate term U.S. Treasury
notes with a current aggregate face
amount of $11,840,000. The Fund is a
unit investment trust which means that,
unlike a mutual fund, the Fund's
portfolio is not managed.
- The securities BUT NOT THE FUND OR THE
UNITS are backed by the full faith and
credit of the United States.
- 100% of the Portfolio consists of United
States government Treasury bonds.
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4. WHAT ARE THE SIGNIFICANT RISKS?
YOU CAN LOSE MONEY BY INVESTING IN THE
FUND. THIS CAN HAPPEN FOR VARIOUS
REASONS, INCLUDING:
- Rising interest rates can reduce the
price of your units.
- Assuming no changes in interest rates,
when you sell your units, they will
generally be worth less than your cost
because your cost included a sales fee.
- The Fund will receive early returns of
principal if securities are sold before
they mature. If this happens your income
will decline and you may not be able to
reinvest the money you receive at as high
a yield or as long a maturity.
5. IS THIS FUND APPROPRIATE FOR YOU?
Yes, if you want current monthly income
exempt from state and local personal
income taxes in all states. You will
benefit from a professionally selected
and supervised portfolio of U.S.
government backed securities.
The Fund is NOT appropriate for you if
you want a speculative investment that
changes to take advantage of market
movements.
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DEFINING YOUR INCOME
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WHAT YOU MAY EXPECT (Payable on the 25th day each
month):
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Regular Monthly Income per 1,000 units: $ 8.16
Annual Income per 1,000 units: $98.01
RECORD DAY: 10th day of each month
THESE FIGURES ARE ESTIMATES ON THE EVALUATION DATE;
ACTUAL PAYMENTS MAY VARY.
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6. WHAT ARE THE FUND'S FEES AND EXPENSES?
This table shows the costs and expenses you may pay,
directly or indirectly, when you invest in the Fund.
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INVESTOR FEES
2.50%
Maximum Sales Fee (Load) on new
purchases (as a percentage of
$1,000 invested)
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Employees of some of the Sponsors and their
affiliates may be charged a reduced sales fee
of no less than $5.00 per 1,000 Units.
The maximum sales fee is reduced if you invest
at least $250,000, as follows:
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YOUR MAXIMUM
SALES FEE
IF YOU INVEST: WILL BE:
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Less than $250,000 2.50%
$250,000-$499,999 2.00%
$500,000-$749,999 1.50%
$750,000-$999,999 1.25%
$1,000,000 and over 1.00%
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ESTIMATED ANNUAL FUND OPERATING EXPENSES
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AMOUNT
PER
1,000 UNITS
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$ 0.70
Trustee's Fee
$ 0.55
Portfolio Supervision,
Bookkeeping and
Administrative Fees (including
updating
expenses)
$ 0.29
Evaluator's Fee
$ 0.43
Other Operating Expenses
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$ 1.97
TOTAL
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The Sponsors historically paid updating
expenses.
7. IS THE FUND MANAGED?
Unlike a mutual fund, the Fund is not managed
and securities are not sold because of market
changes. Rather, experienced Defined Asset
Funds financial analysts regularly review the
securities in the Fund. The Fund may sell a
security if certain adverse credit or other
conditions exist.
8. HOW DO I BUY UNITS?
The minimum investment is $250.
You can buy units from any of the Sponsors and
other broker-dealers. The Sponsors are listed
later in this prospectus. Some banks may offer
units for sale through special arrangements
with the Sponsors, although certain legal
restrictions may apply.
UNIT PRICE PER 1,000 UNITS $1,165.97
(as of March 31, 2000)
Unit price is based on the net asset value of
the Fund plus the up-front sales fee. An amount
equal to any principal cash, as well as net
accrued but undistributed interest on the unit,
is added to the unit price. An independent
evaluator prices the bonds at 3:30 p.m. Eastern
time every business day. Unit price changes
every day with changes in the prices of the
bonds in the Fund.
9. HOW DO I SELL UNITS?
You may sell your units at any time to any
Sponsor or the Trustee for the net asset value
determined at the close of business on the date
of sale. You will not pay any other fee when
you sell your units.
10. HOW ARE DISTRIBUTIONS MADE AND TAXED?
The Fund pays income monthly. Interest on the
bonds in this Fund is subject to federal income
taxes for U.S. investors, but exempt from state
and local personal income taxes. If you are a
non-U.S. investor, your interest may be exempt
from U.S. federal income taxes, including
withholding taxes.
You will also receive principal payments when
the securities mature or if they are sold (when
the cash available is more than $5.00 per 1,000
units. You will be subject to tax on any gain
realized by the Fund on the disposition of
bonds.
11. WHAT OTHER SERVICES ARE AVAILABLE?
REINVESTMENT
You will receive your monthly income in cash
unless you choose to compound your income by
reinvesting into additional units of the Fund
at a reduced sales fee. Contact your broker,
dealer or financial institution.
CHECKWRITING
You may request checkwriting privileges from
the Trustee. Checks must be written for at
least $500, and you may not receive
certificates for your units.
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WHAT YOU CAN EXPECT FROM YOUR INVESTMENT
MONTHLY INCOME
The Fund will pay you regular monthly income. Your monthly income may vary
because of:
- elimination of one or more securities from the Fund's portfolio because of
redemptions or sales; or
- a change in the Fund's expenses;
Changes in interest rates generally will not affect your monthly income because
the portfolio is fixed.
Along with your monthly income, you will receive your share of any available
principal.
RETURN FIGURES
We cannot predict your actual return, which will vary with unit price, how long
you hold your investment and changes in the portfolio, interest income and
expenses.
ESTIMATED CURRENT RETURN equals the estimated annual cash to be received from
the securities in the Fund less estimated annual Fund expenses, divided by the
Unit Price (including the maximum sales fee):
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Estimated Annual Estimated
Interest Income - Annual Expenses
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Unit Price
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ESTIMATED LONG TERM RETURN is a measure of the estimated return over the
estimated life of the Fund. Unlike Estimated Current Return, Estimated Long Term
Return reflects maturities, discounts and premiums of the securities in the
Fund. It is an average of the yields to maturity of the individual securities in
the portfolio, adjusted to reflect the Fund's maximum sales fee and estimated
expenses. We calculate the average yield for the portfolio by weighting each
security's yield by its market value and the time remaining to the maturity
date.
Yields on individual securities depend on many factors including general
conditions of the bond markets, the size of a particular offering and the
maturity and quality rating of the particular issues. Yields can vary among
bonds with similar maturities, coupons and ratings.
These return quotations are designed to be comparative rather than predictive.
RECORDS AND REPORTS
You will receive:
- a monthly statement of income payments and any principal payments;
- a notice from the Trustee when new securities are deposited in exchange or
substitution for securities originally deposited;
- an annual report on Fund activity; and
- annual tax information. THIS WILL ALSO BE SENT TO THE IRS. YOU MUST REPORT THE
AMOUNT OF INTEREST RECEIVED DURING THE YEAR.
You may request:
- copies of evaluations to enable you to comply with federal and state tax
reporting requirements; and
- audited financial statements of the Fund.
You may inspect records of Fund transactions at the Trustee's office during
regular business hours.
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THE RISKS YOU FACE
INTEREST RATE RISK
Investing involves risks, including the risk that your investment will decline
in value if interest rates rise. Generally, securities with longer maturities
will change in value more than securities with shorter maturities. Of course, we
cannot predict how interest rates may change.
REDUCED DIVERSIFICATION RISK
If many investors sell their units, the Fund will have to sell securities. This
could reduce the diversification of your investment and increase your share of
Fund expenses.
LITIGATION RISK
We do not know of any pending litigation that might have a material adverse
effect upon the Fund.
SELLING OR EXCHANGING UNITS
You can sell your units at any time for a price based on net asset value. Your
net asset value is calculated each business day by:
- ADDING the value of the securities, net accrued interest, cash and any other
Fund assets;
- SUBTRACTING accrued but unpaid Fund expenses, unreimbursed Trustee advances,
cash held to buy back units or for distribution to investors and any other
Fund liabilities; and
- DIVIDING the result by the number of outstanding units.
Your net asset value when you sell may be more or less than your cost because of
sales fees, market movements and changes in the portfolio.
SPONSORS' SECONDARY MARKET
While we are not obligated to do so, we will buy back units at net asset value
without any other fee or charge. We may resell the units to other buyers or to
the Trustee. You should consult your financial professional for current market
prices to determine if other broker-dealers or banks are offering higher prices.
We have maintained a secondary market continuously for over 28 years, but we
could discontinue it without prior notice for any business reason.
SELLING UNITS TO THE TRUSTEE
Regardless of whether we maintain a secondary market, you can sell your units to
the Trustee at any time by sending the Trustee a letter (with any outstanding
certificates if you hold Unit certificates). You must properly endorse your
certificates (or execute a written transfer instrument with signatures
guaranteed by an eligible institution). Sometimes, additional documents are
needed such as a trust document, certificate of corporate authority, certificate
of death or appointment as executor, administrator or guardian.
Within seven days after your request and the necessary documents are received,
the Trustee will mail a check to you. Contact the Trustee for additional
information.
As long as we are maintaining a secondary market, the Trustee will sell your
units to us at a price based on net asset value. If there is no secondary
market, the Trustee may sell your units in the over-the-counter market for a
higher price, but it is not obligated to
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do so. In that case, you will receive the net proceeds of the sale.
If the Fund does not have cash available to pay you for units you are selling,
the agent for the Sponsors will select securities to be sold. Securities will be
selected 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 your receiving
less than the unit par value and also reduce the size and diversity of the Fund.
There could be a delay in paying you for your units:
- if the New York Stock Exchange is closed (other than customary weekend and
holiday closings);
- if the SEC determines that trading on the New York Stock Exchange is
restricted or that an emergency exists making sale or evaluation of the
bonds not reasonably practicable; and
- for any other period permitted by SEC order.
HOW THE FUND WORKS
PRICING
The price of a unit includes interest accrued on the securities, less expenses,
from the most recent Record Day up to, but not including, the settlement date,
which is usually three business days after the purchase date of the unit.
A portion of the price of a unit consists of cash so that the Trustee can
provide you with regular monthly income. When you sell your units you will
receive your share of this cash.
EVALUATIONS
An independent Evaluator values the 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 bid or offer prices for the securities or comparable bonds. In
the past, the difference between bid and offer prices of U.S. Treasury
securities of the type in this Fund has been about 0.10%.
INCOME
The Trustee credits interest to an Income Account and other receipts to a
Capital Account. The Trustee may establish a Reserve Account by withdrawing from
these accounts amounts it considers appropriate to pay any material liability.
These accounts do not bear interest.
EXPENSES
The Trustee is paid monthly. It also benefits when it holds cash for the Fund in
non-interest bearing accounts. The Trustee may also receive additional amounts:
- to reimburse the Trustee for the Fund's operating expenses;
- for extraordinary services and costs of indemnifying the Trustee and the
Sponsors;
- costs of actions taken to protect the Fund and other legal fees and
expenses;
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- expenses for keeping the Fund's registration statement current; and
- Fund termination expenses and any governmental charges.
The Sponsors are currently reimbursed up to 55 CENTS per $1,000 face amount
annually for providing portfolio supervisory, bookkeeping and administrative
services and for any other expenses properly chargeable to the Fund. Legal,
typesetting, electronic filing and regulatory filing fees and expenses
associated with updating the Portfolio's registration statement yearly are also
now chargeable to the Portfolio. While this fee may exceed the amount of these
costs and expenses attributable to this Fund, the total of these fees for all
Series of Defined Asset Funds will not exceed the aggregate amount attributable
to all of these Series for any calendar year. The Fund also pays the Evaluator's
fees.
The Trustee's, Sponsors' and Evaluator's fees may be adjusted for inflation
without investors' approval.
The Sponsors will pay advertising and selling expenses at no charge to the Fund.
If Fund expenses exceed initial estimates, the Fund will owe the excess. The
Trustee has a lien on Fund assets to secure reimbursement of Fund expenses and
may sell bonds if cash is not available.
PORTFOLIO CHANGES
The Sponsors and Trustee are not liable for any default or defect in a security.
Unlike a mutual fund, the portfolio is designed to remain intact and we may keep
securities in the portfolio even if their credit quality declines or other
adverse financial circumstances occur. However, we may sell a security in
certain cases if we believe that certain adverse credit or certain 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 may affect the
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:
- diversity of the portfolio;
- size of the Fund relative to its original size;
- ratio of Fund expenses to income;
- current and long-term returns;
- degree to which units may be selling at a premium over par; and
- cost of maintaining a current prospectus.
FUND TERMINATION
The Fund will terminate following the stated maturity or sale of the last
security in the portfolio. The Fund may also terminate earlier with the consent
of investors holding 51% of the units or if total assets of the Fund have fallen
below 40% of the face amount of securities deposited. We will decide whether to
terminate the Fund early based on the same factors used in deciding whether or
not to offer units in the secondary market.
When the Fund is about to terminate you will receive a notice, and you will be
unable
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to sell your units 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 pay your share of the expenses associated with termination, including
brokerage costs in selling securities. This may reduce the amount you receive as
your final distribution.
CERTIFICATES
Certificates for units are issued on request. You may transfer certificates by
complying with the requirements for redeeming certificates, described above. You
can replace lost or mutilated certificates by delivering satisfactory indemnity
and paying the associated costs.
TRUST INDENTURE
The Fund is a "unit investment trust" governed by a Trust Indenture, a contract
among the Sponsors, the Trustee and the Evaluator, which sets forth their duties
and obligations and your rights. A copy of the Indenture is available to you on
request to the Trustee. The following summarizes certain provisions of the
Indenture.
The Sponsors and the Trustee may amend the Indenture without your consent:
- to cure ambiguities;
- to correct or supplement any defective or inconsistent provision;
- to make any amendment required by any governmental agency; or
- to make other changes determined not to be materially adverse to your best
interest (as determined by the Sponsors).
Investors holding 51% of the units may amend the Indenture. Every investor must
consent to any amendment that changes the 51% requirement. No amendment may
reduce your interest in the Fund without your written consent.
The Trustee may resign by notifying the Sponsors. The Sponsors may remove the
Trustee without your consent if:
- it fails to perform its duties and the Sponsors determine that its
replacement is in your best interest; or
- it becomes incapable of acting or bankrupt or its affairs are taken over by
public authorities.
Investors holding 51% of the units may remove the Trustee. The Evaluator may
resign or be removed by the Sponsors and the Trustee without the consent of
investors. The resignation or removal of either becomes effective when a
successor accepts appointment. The Sponsors will try to appoint a successor
promptly; however, if no successor has accepted within 30 days after notice of
resignation, the resigning Trustee or Evaluator may petition a court to appoint
a successor.
Any Sponsor may resign as long as one Sponsor with a net worth of $2 million
remains and agrees to the resignation. The remaining Sponsors and the Trustee
may appoint a replacement. If there is only one Sponsor and it fails to perform
its duties or becomes bankrupt the Trustee may:
- remove it and appoint a replacement Sponsor;
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- liquidate the Fund; or
- continue to act as Trustee without a Sponsor.
Merrill Lynch, Pierce, Fenner & Smith Incorporated acts as agent for the
Sponsors.
The Trust Indenture contains customary provisions limiting the liability of the
Trustee, the Sponsors and the Evaluator.
LEGAL OPINION
Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York 10017, as
special counsel for the Sponsors, has given an opinion that the units are
validly issued.
AUDITORS
Deloitte & Touche LLP, 2 World Financial Center, New York, New York 10281,
independent accountants, audited the Statement of Condition included in this
prospectus.
SPONSORS
The Sponsors are:
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED (a wholly-owned subsidiary of
Merrill Lynch & Co., Inc.)
P.O. Box 9051,
Princeton, NJ 08543-9051
SALOMON SMITH BARNEY INC. (an indirectly wholly-owned subsidiary of Citigroup
Inc.)
388 Greenwich Street--23rd Floor,
New York, NY 10013
DEAN WITTER REYNOLDS INC. (a principal operating subsidiary of Morgan Stanley
Dean Witter & Co.)
Two World Trade Center--59th Floor,
New York, NY 10048
PRUDENTIAL SECURITIES INCORPORATED (an
indirect wholly-owned subsidiary of the
Prudential Insurance Company of America)
One New York Plaza
New York, NY 10292
PAINEWEBBER INCORPORATED (a wholly-owned subsidiary of PaineWebber Group Inc.)
1285 Avenue of the Americas,
New York, NY 10019
Each Sponsor is a Delaware corporation and it, or its predecessor, has acted as
sponsor to many unit investment trusts. As a registered broker-dealer each
Sponsor buys and sells securities (including investment company shares) for
others (including investment companies) and participates as an underwriter in
various selling groups.
TRUSTEE
The Bank of New York,101 Barclay Street--17W, New York, New York 10268, is the
Trustee. It is supervised by the Federal Deposit Insurance Corporation, the
Board of Governors of the Federal Reserve System and New York State banking
authorities.
UNDERWRITERS' AND SPONSORS' PROFITS
Underwriters receive sales charges when they sell units. The Sponsors also
realized a profit or loss on the initial deposit of the securities. Any cash
made available by you to the Sponsors before the settlement date for those units
may be used in the Sponsors' businesses to the extent permitted by federal law
and may benefit the Sponsors.
In maintaining a secondary market, the Sponsors will also realize profits or
sustain losses in the amount of any difference
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between the prices at which they buy units and the prices at which they resell
or redeem them.
PUBLIC DISTRIBUTION
The Sponsors do not intend to qualify units for sale in any foreign countries.
This prospectus does not constitute an offer to sell units in any country where
units cannot lawfully be sold.
CODE OF ETHICS
The Fund and the Agent for the Sponsors have each adopted a code of ethics
requiring reporting of personal securities transactions by its employees with
access to information on Fund transactions. Subject to certain conditions, the
codes permit employees to invest in Fund securities for their own accounts. The
codes are designed to prevent fraud, deception and misconduct against the Fund
and to provide reasonable standards of conduct. These codes are on file with the
Commission and you may obtain a copy by contacting the Commission at the address
listed on the back cover of this prospectus.
YEAR 2000 ISSUES
Many computer systems were designed in such a way that they may be unable to
distinguish between the year 2000 and the year 1900 (commonly known as the "Year
2000 Problem"). To date we are not aware of any major operational difficulties
resulting from the computer system changes necessary to prepare for the Year
2000. However, there can be no assurance that the Year 2000 Problem will not
adversely affect the issuers of the bonds contained in the Portfolio. We cannot
predict whether any impact will be material to the Fund as a whole.
TAXES
The following summary describes some of the important income tax consequences of
holding units. It assumes that you are not a dealer, financial institution,
insurance company or other investor with special circumstances or subject to
special rules. You should consult your own tax adviser about your particular
circumstances.
The Sponsors believe that individual investors will not be subject to any state
or local personal income taxes on interest received by the Fund. However, you
may be subject to alternative minimum tax, state and local taxes on capital
gains (or "market discount"), and possibly other state and local taxes on your
units. Also, you probably will not be entitled to a deduction for state and
local tax purposes for your share of fees and expenses paid by the Fund, for any
amortized "bond premium" or for any interest on money borrowed to purchase your
units. You should consult your tax adviser in this regard.
In the opinion of our counsel, under existing law:
GENERAL TREATMENT OF THE FUND AND YOUR INVESTMENT
The Fund will not be taxed as a corporation for federal income tax purposes, and
you will be considered to own directly your share of each security in the Fund.
You will be considered to receive interest when that interest is received by the
Fund, regardless
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of whether the interest is reinvested or a portion is used to pay Fund expenses.
You will recognize original issue discount (if any) as it accrues on the
underlying securities.
GAIN OR LOSS UPON DISPOSITION
When all or part of your share of a security is disposed of (for example, when
the Fund sells, exchanges or redeems a security or when you sell or exchange
your units), you will generally recognize capital gain or loss. Your gain,
however, will generally be ordinary income to the extent of any accrued "market
discount". Generally you will have market discount to the extent that your basis
in a security when you purchase a unit is less than its stated redemption price
at maturity (or, if it is an original issue discount security, the issue price
increased by original issue discount that has accrued on the security before
your purchase). You should consult your tax adviser in this regard.
If your net long-term capital gains exceed your net short-term capital losses,
the excess may be subject to tax at a lower rate than ordinary income. Any
capital gain from the Fund will be long-term if you are considered to have held
your investment on each security for more than one year and short-term
otherwise. Because the deductibility of capital losses is subject to
limitations, you may not be able to deduct all of your capital losses. You
should consult your tax adviser in this regard.
YOUR BASIS IN THE SECURITIES
Your aggregate basis in the securities will be equal to the cost of your units,
including any sales charges you pay, adjusted to reflect any accruals of
"original issue discount," "acquisition premium" and "bond premium". You should
consult your tax adviser in this regard.
EXPENSES
If you are an individual who itemizes deductions, you may deduct your share of
Fund expenses, but only to the extent that such amount, together with your other
miscellaneous deductions, exceeds 2% of your adjusted gross income. Your ability
to deduct Fund expenses will be limited further if your adjusted gross income
exceeds a specified amount, currently $128,950 ($64,475 for a married person
filing separately).
FOREIGN INVESTORS
If you are a foreign investor and you are not engaged in a U.S. trade or
business, you generally will not be subject to U.S. federal income tax,
including withholding tax, on the interest or gain on a debt security issued
after July 18, 1984 if you meet certain requirements, including the
certification of foreign status and other matters. You should consult your tax
adviser about the possible application of federal, state and local, and foreign
taxes.
RETIREMENT PLANS
You may wish to purchase units for an Individual Retirement Account (IRA) or
other retirement plan. Generally, capital gains and income received in each of
these plans are exempt from such plans are generally treated as ordinary income
but may, in some cases, be eligible for tax-deferred rollover treatment. You
should
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<PAGE>
consult your attorney or tax adviser about the specific tax rules relating to
these plans. These plans are offered by brokerage firms, including the Sponsors
of this Fund, and other financial institutions. Fees and charges with respect to
such plans may vary.
SUPPLEMENTAL INFORMATION
You can receive at no cost supplemental information about the 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.
13
<PAGE>
DEFINED ASSET FUNDS - GOVERNMENT SECURITIES INCOME FUND,
MONTHLY PAYMENT U.S. TREASURY SERIES - 1
REPORT OF INDEPENDENT ACCOUNTANTS
The Sponsors, Trustee and Holders
of Defined Asset Funds - Government Securities Income Fund,
Monthly Payment U.S. Treasury Series - 1:
We have audited the accompanying statement of condition of Defined
Asset Funds - Government Securities Income Fund, Monthly Payment U.S.
Treasury Series - 1, including the portfolio, as of March 31, 2000
and the related statements of operations and of changes in net assets
for the years ended March 31, 2000, 1999 and 1998. These financial
statements are the responsibility of the Trustee. Our responsibility
is to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States of America. Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
Securities owned at March 31, 2000, as shown in such portfolio, were
confirmed to us by The Bank of New York, 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 Defined
Asset Funds - Government Securities Income Fund, Monthly Payment U.S.
Treasury Series - 1 at March 31, 2000 and the results of its
operations and changes in its net assets for the above-stated years
in accordance with accounting principles generally accepted in the
United States of America.
DELOITTE & TOUCHE LLP
New York, N.Y.
June 5, 2000
D - 1
<PAGE>
DEFINED ASSET FUNDS - GOVERNMENT SECURITIES INCOME FUND,
MONTHLY PAYMENT U.S. TREASURY SERIES - 1
STATEMENT OF CONDITION
AS OF MARCH 31, 2000
<TABLE>
<S> <C> <C>
TRUST PROPERTY:
Investment in marketable securities - at value
(cost $12,016,027)(Note 1)..................... $13,460,014
Accrued interest receivable...................... 224,636
Cash............................................. 47,382
_____________
Total trust property................. 13,732,032
LESS LIABILITY - Accrued expenses.................. 10,490
_____________
NET ASSETS, REPRESENTED BY:
11,840,000 units of fractional undivided
interest outstanding (Note 3).................. $13,460,016
Undistributed net investment income.............. 261,526
_____________
$13,721,542
=============
UNIT VALUE ($13,721,542/11,840,000 units).......... $1.15891
=============
</TABLE>
See Notes to Financial Statements.
D - 2
<PAGE>
DEFINED ASSET FUNDS - GOVERNMENT SECURITIES INCOME FUND,
MONTHLY PAYMENT U.S. TREASURY SERIES - 1
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
........Years Ended March 31,...........
2000 1999 1998
_________________________________________
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income........................... $1,276,673 $1,362,527 $1,496,142
Trustee's fees and expenses............... (17,256) (17,032) (20,434)
Sponsors' fees............................ (5,189) (6,481) (5,866)
_________________________________________
Net investment income..................... 1,254,228 1,339,014 1,469,842
_________________________________________
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Realized gain on securities sold
or redeemed............................. 216,013 135,771 294,812
Unrealized appreciation (depreciation)
of investments.......................... (1,167,542) (303,767) 392,722
_________________________________________
Net realized and unrealized gain (loss)
on investments.......................... (951,529) (167,996) 687,534
_________________________________________
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS........................... $ 302,699 $1,171,018 $2,157,376
=========================================
</TABLE>
See Notes to Financial Statements.
D - 3
<PAGE>
DEFINED ASSET FUNDS - GOVERNMENT SECURITIES INCOME FUND,
MONTHLY PAYMENT U.S. TREASURY SERIES - 1
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
........Years Ended March 31,...........
2000 1999 1998
_________________________________________
<S> <C> <C> <C>
OPERATIONS:
Net investment income....................... $ 1,254,228 $ 1,339,014 $ 1,469,842
Realized gain on securities sold
or redeemed............................... 216,013 135,771 294,812
Unrealized appreciation (depreciation)
of investments............................ (1,167,542) (303,767) 392,722
_________________________________________
Net increase in net assets resulting
from operations........................... 302,699 1,171,018 2,157,376
_________________________________________
INCOME DISTRIBUTIONS TO HOLDERS (Note 2)...... (1,257,315) (1,339,581) (1,472,205)
_________________________________________
CAPITAL SHARE TRANSACTIONS - Redemptions of
1,600,000, 600,000 and 1,300,000 units,
respectively,............................. (1,870,276) (747,113) (1,618,136)
_________________________________________
NET DECREASE IN NET ASSETS.................... (2,824,892) (915,676) (932,965)
NET ASSETS AT BEGINNING OF YEAR............... 16,546,434 17,462,110 18,395,075
_________________________________________
NET ASSETS AT END OF YEAR..................... $13,721,542 $16,546,434 $17,462,110
=========================================
PER UNIT:
Income distributions during year............ $0.09811 $0.09821 $0.09832
=========================================
Net asset value at end of year.............. $1.15891 $1.23113 $1.24374
=========================================
TRUST UNITS OUTSTANDING AT END OF YEAR........ 11,840,000 13,440,000 14,040,000
=========================================
</TABLE>
See Notes to Financial Statements.
D - 4
<PAGE>
DEFINED ASSET FUNDS - GOVERNMENT SECURITIES INCOME FUND,
MONTHLY PAYMENT U.S. TREASURY SERIES - 1
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Fund is registered under the Investment Company Act of 1940 as
a Unit Investment Trust. The following is a summary of significant
accounting policies consistently followed by the Fund in the
preparation of its financial statements. The policies are in
accordance with accounting principles generally accepted in the
United States of America.
(a) Securities are stated at value as determined by the Evaluator
based on bid side evaluations for the securities.
(b) The Fund is not subject to income taxes. Accordingly, no
provision for such taxes is required.
(c) Interest income is recorded as earned.
2. DISTRIBUTIONS
A distribution of net investment income is made to Holders
each month. Receipts other than interest, after deductions
for redemptions and applicable expenses, are also distributed
periodically.
3. NET CAPITAL
<TABLE>
<S> <C>
Cost of 11,840,000 units at Date of Deposit......... $12,282,427
Less sales charge................................... 266,400
______________
Net amount applicable to Holders.................... 12,016,027
Redemptions of units - net cost of 19,910,000 units
redeemed less redemption amounts.................. (3,972,719)
Realized gain on securities sold or redeemed........ 3,972,721
Unrealized appreciation of investments.............. 1,443,987
______________
Net capital applicable to Holders................... $13,460,016
==============
</TABLE>
4. INCOME TAXES
As of March 31, 2000, unrealized appreciation of investments, based
on cost for Federal income tax purposes, aggregated $1,443,987, all of
which related to appreciated securities. The cost of investment
securities for Federal income tax purposes was $12,016,027 at
March 31, 2000.
D - 5
<PAGE>
DEFINED ASSET FUNDS - GOVERNMENT SECURITIES INCOME FUND,
MONTHLY PAYMENT U.S. TREASURY SERIES - 1
PORTFOLIO
AS OF MARCH 31, 2000
<TABLE>
<CAPTION>
Rating Optional
Portfolio No. and Title of of Face Redemption
Securities Issues(1) Amount Coupon Maturities(2) Provisions(2) Cost Value(1)
__________ _________ ______ ______ _____________ _____________ ____ ________
<S> <C> <C> <C> <C> <C> <C> <C>
1 United States Treasury Bonds AAA $ 3,557,000 8.250% 2005 05/15/00 $ 3,115,956 $ 3,567,006
@100.000
2 United States Treasury Bonds. AAA 8,283,000 10.750 2005 None 8,900,071 9,893,008
______________ ______________ ______________
TOTAL $11,840,000 $12,016,027 $13,460,014
============== ============== ==============
</TABLE>
See Notes to Portfolio.
D - 6
<PAGE>
DEFINED ASSET FUNDS - GOVERNMENT SECURITIES INCOME FUND,
MONTHLY PAYMENT U.S. TREASURY SERIES - 1
NOTES TO PORTFOLIO
AS OF MARCH 31, 2000
(1) See Notes to Financial Statements.
(2) Optional redemption provisions, which may be exercised in whole
or in part, are initially at prices of par plus a premium, then
subsequently at prices declining to par. Certain securities may
provide for redemption at par prior or in addition to any
optional or mandatory redemption dates or maturity, for
example, through the operation of a maintenance and replacement
fund, if proceeds are not able to be used as contemplated, the
project is condemned or sold or the project is destroyed and
insurance proceeds are used to redeem the securities. Many of
the securities are also subject to mandatory sinking fund
redemption commencing on dates which may be prior to the date
on which securities may be optionally redeemed. Sinking fund
redemptions are at par and redeem only part of the issue. Some
of the securities have mandatory sinking funds which contain
optional provisions permitting the issuer to increase the
principal amount of securities called on a mandatory redemption
date. The sinking fund redemptions with optional provisions
may, and optional refunding redemptions generally will, occur
at times when the redeemed securities have an offering side
evaluation which represents a premium over par. To the extent
that the securities were acquired at a price higher than the
redemption price, this will represent a loss of capital when
compared with the Public Offering Price of the Units when
acquired. Distributions will generally be reduced by the amount
of the income which would otherwise have been paid with respect
to redeemed securities and there will be distributed to Holders
any principal amount and premium received on such redemption
after satisfying any redemption requests for Units received by
the Fund. The estimated current return may be affected by
redemptions.
D - 7
<PAGE>
DEFINED ASSET FUNDS-SM-
<TABLE>
<S> <C>
HAVE QUESTIONS ? GOVERNMENT SECURITIES INCOME FUND
Request the most recent free MONTHLY PAYMENT U.S TREASURY SERIES--1
Information Supplement (A Unit Investment Trust)
that gives more details about ---------------------------------------
the Fund, by calling: This Prospectus does not contain
The Bank of New York complete information about the
1-800-221-7771 investment company filed with the
Securities and Exchange Commission in
Washington, D.C. under the:
- Securities Act of 1933 (file no.
2-81969) and
- 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.
---------------------------------------
When units of this Fund are no longer
available, this Prospectus may be used
as a preliminary prospectus for a
future series, but some of the
information in this Prospectus will be
changed for that series.
UNITS OF ANY FUTURE SERIES MAY NOT BE
SOLD NOR MAY OFFERS TO BUY BE ACCEPTED
UNTIL THAT SERIES HAS BECOME EFFECTIVE
WITH THE SECURITIES AND EXCHANGE
COMMISSION. NO UNITS CAN BE SOLD IN ANY
STATE WHERE A SALE WOULD BE ILLEGAL.
11871--6/00
</TABLE>
