This Supplement is filed pursuant to Rule 497(d) with regard to
Defined Asset Funds-Municipal Investment Trust Fund, Multistate Series 9J.
The text of the supplement to the Prospectus dated November 19, 1993 is as
follows:
SUPPLEMENT DATED APRIL 19, 1994
TO PROSPECTUSES OF
DEFINED ASSET FUNDSSM
MUNICIPAL INVESTMENT TRUST FUND
MULTISTATE SERIES
1P, 1U, 1X, 2H
2L, 3G, 4F, 4K, 4N, 5L, 7K, 9I AND 9J
THE COLORADO TRUST
RISK FACTORS--Generally. The portfolio of the Colorado Trust consists
primarily of obligations issued by or on behalf of the State of Colorado and
its political subdivisions. The State's political subdivisions include
approximately 1,600 units of local government in Colorado, including counties,
statutory cities and towns, home-rule cities and counties, school districts
and a variety of water, irrigation, and other special districts and special
improvement districts, all with various constitutional and statutory authority
to levy taxes and incur indebtedness.
Following is a brief summary of some of the factors which may affect the
financial condition of the State of Colorado and its political subdivisions.
It is not a complete or comprehensive description of these factors or analysis
of financial conditions and may not be indicative of the financial condition
of issuers of obligations contained in the portfolio of the Colorado Trust or
any particular projects financed by those obligations. Many factors not
included in the summary, such as the national economy, social and
environmental policies and conditions, and the national and international
markets for petroleum, minerals and metals, could have an adverse impact on
the financial condition of the State and its political subdivisions, including
the issuers of obligations contained in the portfolio of the Colorado Trust.
It is not possible to predict whether and to what extent those factors may
affect the financial condition of the State and its political subdivisions,
including the issuers of obligations contained in the portfolio of the
Colorado Trust. Prospective investors should study with care the issues
contained in the portfolio of the Colorado Trust, review carefully the
information set out in Part B of the prospectus under the caption 'Risk
Factors' and consult with their investment advisors as to the merits of
particular issues in the portfolio.
The following summary is based on publicly available information which
has not been independently verified by the Sponsor or its legal counsel.
The State Economy. Among the most significant sectors of the State's
economy are services, trade, manufacture of durable and non-durable goods and
tourism. Between late 1984 and mid-1987, the State's economy was adversely
affected by numerous factors, including the contraction of the energy sector
layoffs by advanced technology firms and an excess supply of both residential
and nonresidential buildings causing employment in the construction sector to
decline. As a result of these conditions, certain areas of the State
experienced particularly high unemployment. Furthermore, in 1986, for the
first time in 32 years, job generation in the State was negative and, in 1986,
for the first time in 21 years, the State experienced negative migration, with
more people leaving the State than moving in.
From 1987 through 1991, there was moderate but steady improvement in the
Colorado economy: per-capita income increased 27.6% (3.8% in 1992) and retail
trade sales increased 33.2% (8.2% in 1992; 10.9% in 1993). Since that time,
the State economy has shown stronger growth. The State's economic growth in
1993 is estimated to have surpassed that of the national economy. Migration
into the State rose 15.6% over 1992, with overall State population increasing
approximately 2.9%. State employment increased 3.1% in 1993, compared to 1.4%
at the national level. An estimated 49,500 net new jobs were generated in the
State economy. The State's unemployment rate remained below the national
unemployment rate.
State Revenues. The State operates on a fiscal year beginning July 1 and
ending June 30. Fiscal year 1993 refers to the year ended June 30, 1993.
The State derives all of its General Fund revenues from taxes. The two
most important sources of these revenues are sales and use taxes and
individual income taxes, which accounted for approximately 28.9% and 51.0%,
respectively, of total General Fund revenues during fiscal year 1993. The
Office of State Planning and Budgeting estimates that, during fiscal year
1994, sales and use taxes will account for approximately 31.2% of total
General Fund revenues and individual income taxes will account for
approximately 54.3% of total General Fund revenues. The ending General Fund
balance for fiscal year 1992 was $133.3 million and for fiscal year 1993 was
$326.7 million.
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The Colorado Constitution contains strict limitations on the ability of
the State to create debt except under certain very limited circumstances.
However, the constitutional provision has been interpreted not to limit the
ability of the State to issue certain obligations which do not constitute
debt, including short-term obligations which do not extend beyond the fiscal
year in which they are incurred and lease purchase obligations which are
subject to annual appropriation. Nevertheless, following passage by the votes
of the State of a tax and spending limitation amendment, described below, the
General Assembly adopted legislation prohibiting the State from entering into
contracts for the purchase or lease of real or personal property if such
contract involves the issuance of certificates of participation or other
similar instruments, until a court of competent jurisdiction renders a final
decision as to the constitutionality of such instruments. See the discussion
below under 'Tax and Spending Limitation Amendment.'
The State is authorized pursuant to State statute to issue short-term
notes to alleviate temporary cash flow shortfalls. The most recent issue of
such notes, issued on July 6, 1993 and maturing June 27, 1994, were given the
highest rating available for short-term obligations by Standard & Poor's
Corporation and Fitch Investors Service, Inc. A rating on such notes was not
requested from, and consequently no rating was given by, Moody's Investors
Service, Inc. Because of the short-term nature of such notes, their ratings
should not be considered necessarily indicative of the State's general
financial condition. It is expected that the State will issue similar
short-term notes shortly after July 1, 1994, the beginning of the State's 1994
fiscal year.
Tax and Spending Limitation Amendment. On November 3, 1992, the Colorado
voters approved a State constitutional amendment (the 'Amendment') that
restricts the ability of the State and local governments to increase taxes,
revenues, debt and spending. The Amendment provides that its provisions
supersede conflicting State constitutional, State statutory, charter or other
State or local provisions.
The provisions of the Amendment apply to 'districts,' which are defined
in the Amendment as the State or any local government, with certain
exclusions. Under the terms of the Amendment, districts must have prior voter
approval to impose any new tax, tax rate increase, mill levy increase,
valuation for assessment ratio increase and extension of an expiring tax.
Prior voter approval is also required, except in certain limited
circumstances, for the creation of 'any multiple-fiscal year direct or
indirect district debt or other financial obligations.' The Amendment
prescribes the timing and procedures for any elections required by the
Amendment. Litigation has been filed, and is in various stages of proceedings,
against a number of Colorado municipalities, counties and school districts,
under which the plaintiffs claim various procedural and substantive violations
of the Amendment in the conduct of the elections held in such municipalities,
counties and school districts on November 2, 1993. One of the school district
cases has been accepted, after the opinion of the District Court was
delivered, for review by the State Supreme Court.
Because the Amendment's voter approval requirements apply to any
'multiple fiscal year' debt or financial obligation, short-term obligations
which do not extend beyond the fiscal year in which they are incurred are
treated as exempt from the voter approval requirements of the Amendment. Case
law prior to the adoption of the Amendment determined that lease purchase
obligations subject to annual appropriation do not constitute debt under the
Colorado constitution. Litigation is pending in the State concerning whether a
proposed lease which is subject to annual appropriation is a 'multiple-fiscal
year direct or indirect debt' under the Amendment, and consequently subject to
the voter approval requirements of the Amendment.
The Amendment's voter approval requirements and other limitations
(discussed in the following paragraph) do not apply to 'enterprises' which
term is defined to include government-owned businesses authorized to issue
their own revenue bonds and receiving under 10% of annual revenue in grants
from all Colorado state and local governments combined. Enterprise status
under the Amendment has been and is likely to continue to be subject to
legislative and judicial interpretation.
Among other provisions, the Amendment requires the establishment of
emergency reserves, limits increases in district revenues and limits increases
in district fiscal year spending. As a general matter, annual State fiscal
year spending may change no more than inflation plus the percentage change in
State population in the prior calendar year. Annual local district fiscal year
spending may change no more than inflation in the prior calendar year plus
annual local growth, as defined in and subject to the adjustments provided in
the Amendment. The Amendment provides that annual district property tax
revenues may change no more than inflation in the prior calendar year plus
annual local growth, as defined in and subject to the adjustments provided in
the Amendment. District revenues in excess of
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the limits prescribed by the Amendment are required, absent voter approval, to
be refunded by any reasonable method, including temporary tax credits or rate
reductions. In addition, the Amendment prohibits new or increased real
property transfer taxes, new State real property taxes and new local district
income taxes. The Amendment also provides that a local district may reduce or
end its subsidiary to any program (other than public education through grade
12 or as required by federal law) delegated to it by the State General
Assembly for administration.
This description is not intended to constitute a complete description of
all of the provisions of the Amendment. Many provisions of the Amendment are
ambiguous and will require judicial interpretation. Several statutes enacted
during the 1993 legislative session and legislation proposed during the
pending 1994 legislative session attempt to clarify the application of the
Amendment with respect to certain governmental entities and activities.
However, many provisions of the Amendment are likely to continue to be the
subject of further legislation of judicial proceedings. The application of the
Amendment may adversely affect the financial condition and operations of the
State and local govenments in the State to an extent which cannot be
predicted. Litigation attempting to apply the provisions of the Amendment in a
manner which would affect general obligations of a school district issued
prior to the approval of the Amendment was commenced in 1993. In December 1993
the District Court before which this litigation was pending issued its
opinion, among others, that the school district could increase its debt
service mill levy to provide for the debt service on such general obligations
without additional, post-Amendment, voter approval and without decreasing its
general revenue mill levy. This case has been appealed to the State Court of
Appeals.
COLORADO TAXES
In the opinion of Becker Stowe Bowles & Lynch P.C., special counsel on
Colorado tax matters, under existing Colorado law and for Colorado income tax
purposes only:
1. The Colorado Trust will be treated as a trust and will not be
taxable as a corporation. Income of the Colorado Trust will be treated as
income of the Holders of Units of the Colorado Trust in the same manner
as for Federal income tax purposes.
2. Each Holder of Units of the Colorado Trust will be treated as
receiving his or her pro rata share of interest on each Debt Obligation
in the Colorado Trust when it is received by the Colorado Trust. Interest
on Debt Obligations in the Colorado Trust that would be exempt from
Colorado income tax if paid directly to a Holder will be treated as
exempt from Colorado income tax when received by the Colorado Trust and
distributed to the Holders of Units of the Colorado Trust.
3. Each Holder of Units of the Colorado Trust will be treated as
recognizing gain or loss when the Colorado Trust disposes of a Debt
Obligation or when the Holder disposes of all or a portion of his or her
Units, whether by sale, exchange, redemption or payment at maturity, in
the same manner as for Federal income tax purposes. The amount of such
gain or loss is determined by reference to the amount of such gain or
loss for Federal income tax purposes.
4. Interest on indebtness incurred or continued by a Holder of Units
of the Colorado Trust to purchase or carry such Units is not deductible
for Colorado income tax purposes to the extent it is not deductible for
Federal income tax purposes.
The foregoing opinions concerning Colorado income tax apply only to
Holders who are individuals and have been made in reliance upon the opinion of
Davis Polk & Wardwell concerning the Federal income tax treatment of the
Colorado Trust and the Holders of its Units.
