DEFINED ASSET FUNDS--REGISTERED TRADEMARK--
------------------------------
----------------------
MUNICIPAL INVESTMENT TRUST FUND
MULTISTATE SERIES--31
(A UNIT INVESTMENT TRUST)
- CALIFORNIA, NEW JERSEY, PENNSYLVANIA AND VIRGINIA
PORTFOLIOS
- PORTFOLIOS OF LONG-TERM MUNICIPAL BONDS
- DESIGNED TO BE FREE OF REGULAR FEDERAL INCOME TAX
- EXEMPT FROM SOME STATE TAXES
- MONTHLY DISTRIBUTIONS
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
INC. upon the adequacy of this prospectus. Any
PAINEWEBBER INCORPORATED representation to the contrary is a criminal offense.
DEAN WITTER REYNOLDS INC. Prospectus dated July 28, 2000.
<PAGE>
--------------------------------------------------------------------------------
Defined Asset Funds--Registered Trademark--
Defined Asset Funds-Registered Trademark- is America's oldest and largest family
of unit investment trusts, with over $160 billion sponsored over the last 28
years. Defined Asset Funds has been a leader in unit investment trust research
and product innovation. Our family of Funds helps investors work toward their
financial goals with a full range of quality investments, including municipal,
corporate and government bond portfolios, as well as domestic and international
equity portfolios.
Defined Asset Funds offer a number of advantages:
- A Disciplined strategy of buying and holding with a long-term view is the
cornerstone of Defined Asset Funds.
- Fixed portfolio: Defined Funds follow a buy and hold investment strategy;
funds are not managed and portfolio changes are limited.
- Defined Portfolios: We choose the stocks and bonds in advance, so you know
what you're investing in.
- Professional research: Our dedicated research team seeks out stocks or bonds
appropriate for a particular fund's objectives.
- Ongoing supervision: We monitor each portfolio on an ongoing basis.
No matter what your investment goals, tolerance for risk or time horizon,
there's probably a Defined Asset Fund that suits your investment style. Your
financial professional can help you select a Defined Asset Fund that works best
for your investment portfolio.
THE FINANCIAL INFORMATION IN THIS PROSPECTUS IS AS OF MARCH 31, 2000, THE
EVALUATION DATE.
<TABLE>
<S> <C>
CONTENTS
PAGE
---
California Insured Portfolio--
Risk/Return Summary................ 3
New Jersey Insured Portfolio--
Risk/Return Summary................ 6
Pennsylvania Insured Portfolio--
Risk/Return Summary................ 9
Virginia Portfolio--
Risk/Return Summary................ 12
What You Can Expect From Your
Investment......................... 16
Monthly Income..................... 16
Return Figures..................... 16
Records and Reports................ 16
The Risks You Face................... 17
Interest Rate Risk................. 17
Call Risk.......................... 17
Reduced Diversification Risk....... 17
Liquidity Risk..................... 17
Concentration Risk................. 17
State Concentration Risk........... 18
Bond Quality Risk.................. 20
Insurance Related Risk............. 20
Litigation and Legislation Risks... 20
Selling or Exchanging Units.......... 20
Sponsors' Secondary Market......... 21
Selling Units to the Trustee....... 21
Exchange Option.................... 21
How The Fund Works................... 22
Pricing............................ 22
Evaluations........................ 22
Income............................. 22
Expenses........................... 22
Portfolio Changes.................. 23
Fund Termination................... 23
Certificates....................... 24
Trust Indenture.................... 24
Legal Opinion...................... 25
Auditors........................... 25
Sponsors........................... 25
Trustee............................ 25
Underwriters' and Sponsors'
Profits.......................... 25
Public Distribution................ 26
Code of Ethics..................... 26
Year 2000 Issues................... 26
Taxes................................ 26
Supplemental Information............. 29
Financial Statements................. D-1
</TABLE>
2
<PAGE>
--------------------------------------------------------------------------------
CALIFORNIA INSURED PORTFOLIO--RISK/RETURN SUMMARY
<TABLE>
<C> <S>
1. WHAT IS THE FUND'S OBJECTIVE?
The Fund seeks interest income that is
exempt from regular federal income taxes
and some state and local taxes by
investing in a fixed portfolio
consisting primarily of insured, long
term municipal revenue bonds.
2. WHAT ARE MUNICIPAL REVENUE BONDS?
Municipal revenue bonds are bonds issued
by states, municipalities and public
authorities to finance the cost of
buying, building or improving various
projects intended to generate revenue,
such as airports, health care
facilities, housing and municipal
electric, water and sewer utilities.
Generally, payments on these bonds
depend solely on the revenues generated
by the projects, excise taxes or state
appropriations, and are not backed by
the government's taxing power.
3. WHAT IS THE FUND'S INVESTMENT STRATEGY?
- The Fund plans to hold to maturity 7
long-term tax-exempt municipal bonds
with an aggregate face amount of
$6,505,000.
- The Fund is a unit investment trust
which means that, unlike a mutual fund,
the Portfolio is not managed.
- The bonds are rated AAA or Aaa by
Standard & Poor's, Moody's or Fitch.
- Many of the bonds can be called at a
premium declining over time to par
value. Some bonds may be called earlier
at par for extraordinary reasons.
- 100% of the bonds are insured by
insurance companies that guarantee
timely payments of principal and
interest on the bonds (but not Fund
units or the market value of the bonds
before they mature).
The Portfolio consists of municipal
bonds of the following types:
</TABLE>
<TABLE>
/ / Airports/Ports/Highways 8%
<S> <C>
/ / General Obligation 16%
/ / Lease Rental 28%
/ / Municipal Water/Sewer Utilities 17%
/ / Refunded Bonds 14%
/ / Municipal Electric Utilities 17%
</TABLE>
<TABLE>
<C> <S>
4. WHAT ARE THE SIGNIFICANT RISKS?
YOU CAN LOSE MONEY BY INVESTING IN THE
FUND. THIS CAN HAPPEN FOR VARIOUS
REASONS, INCLUDING:
- Rising interest rates, an issuer's
worsening financial condition or a drop
in bond ratings can reduce the price of
your units.
- Because the Fund is concentrated in
lease rental bonds, adverse developments
in this sector may affect the value of
your units.
- Assuming no changes in interest rates,
when you sell your units, they will
generally be worth less than your cost
because your cost included a sales fee.
- The Fund will receive early returns of
principal if bonds are called or sold
before they mature. If this happens your
income will decline and you may not be
able to reinvest the money you receive
at as high a yield or as long a
maturity.
ALSO, THE PORTFOLIO IS CONCENTRATED IN
BONDS OF CALIFORNIA SO IT IS LESS
DIVERSIFIED THAN A NATIONAL FUND AND IS
SUBJECT TO RISKS PARTICULAR TO
CALIFORNIA WHICH ARE BRIEFLY DESCRIBED
UNDER STATE CONCENTRATION RISKS LATER IN
THIS PROSPECTUS.
</TABLE>
3
<PAGE>
<TABLE>
<C> <S>
5. IS THIS FUND APPROPRIATE FOR YOU?
Yes, if you want federally tax-free
income. You will benefit from a
professionally selected and supervised
portfolio whose risk is reduced by
investing in insured bonds of several
different issuers.
The Fund is NOT appropriate for you if
you want a speculative investment that
changes to take advantage of market
movements, if you do not want a
tax-advantaged investment or if you
cannot tolerate any risk.
</TABLE>
<TABLE>
<C> <S>
DEFINING YOUR INCOME
</TABLE>
<TABLE>
<C> <S> <C>
WHAT YOU MAY EXPECT (Payable on the 25th day
of the month to holders of record on the 10th
day of the month):
Regular Monthly Income per unit $ 4.63
Annual Income per unit: $55.61
THESE FIGURES ARE ESTIMATES DETERMINED ON THE
EVALUATION DAY; ACTUAL PAYMENTS MAY VARY.
</TABLE>
<TABLE>
<C> <S>
6. WHAT ARE THE FUND'S FEES AND EXPENSES?
This table shows the costs and expenses you may pay,
directly or indirectly, when you invest in the Fund.
INVESTOR FEES
Maximum Sales Fee (Load) on new
purchases (as a percentage of
$1,000 invested) 2.90%
Employees of some of the Sponsors and their affiliates
may pay a reduced sales fee of no less than $5.00 per
unit.
The maximum sales fee is reduced if you invest at
least $100,000, as follows:
</TABLE>
<TABLE>
<CAPTION>
YOUR MAXIMUM
SALES FEE
IF YOU INVEST: WILL BE:
-------------- ------------
<C> <S> <C>
Less than $100,000 2.90%
$100,000 to $249,999 2.65%
$250,000 to $499,999 2.40%
$500,000 to $999,999 2.15%
$1,000,000 and over 1.90%
Maximum Exchange Fee 1.90%
</TABLE>
<TABLE>
<C> <S>
ESTIMATED ANNUAL FUND OPERATING EXPENSES
</TABLE>
<TABLE>
<CAPTION>
AMOUNT
PER UNIT
--------
<C> <S> <C>
$0.69
Trustee's Fee
$0.49
Portfolio Supervision,
Bookkeeping and
Administrative Fees
(including updating
expenses)
$0.13
Evaluator's Fee
$0.29
Other Operating Expenses
-----
$1.60
TOTAL
</TABLE>
<TABLE>
<C> <S>
The Sponsors historically paid updating
expenses.
7. HOW HAVE SIMILAR FUNDS PERFORMED IN THE PAST?
IN THE FOLLOWING CHART WE SHOW PAST PERFORMANCE
OF PRIOR CALIFORNIA PORTFOLIOS, WHICH HAD
INVESTMENT OBJECTIVES, STRATEGIES AND TYPES OF
BONDS SUBSTANTIALLY SIMILAR TO THIS FUND. THESE
PRIOR SERIES DIFFERED IN THAT THEY CHARGED A
HIGHER SALES FEE. These prior California Series
were offered after 1987 and were outstanding on
June 30, 2000. OF COURSE, PAST PERFORMANCE OF
PRIOR SERIES IS NO GUARANTEE OF FUTURE RESULTS
OF THIS FUND.
AVERAGE ANNUAL COMPOUND TOTAL RETURNS
FOR PRIOR SERIES
REFLECTING ALL EXPENSES. FOR PERIODS ENDED
6/30/00.
</TABLE>
-------------------------------------------------------------------
<TABLE>
High 5.23% 5.37% 5.80% 5.64% 6.56% 6.30%
<S> <C> <C> <C> <C> <C> <C>
Average 0.98 4.35 5.55 3.01 5.41 6.12
Low -1.04 2.54 5.29 1.55 3.30 5.88
</TABLE>
-----------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Average
Sales fee 2.05% 5.27% 5.65%
</TABLE>
-----------------------------------------------------------
NOTE: ALL RETURNS REPRESENT CHANGES IN UNIT PRICE WITH DISTRIBUTIONS REINVESTED
INTO THE MUNICIPAL FUND INVESTMENT ACCUMULATION PROGRAM.
<TABLE>
<C> <S>
8. IS THE FUND MANAGED?
Unlike a mutual fund, the Fund is not managed
and bonds are not sold because of market
changes. Rather, experienced Defined Asset Funds
financial analysts regularly review the bonds in
the Fund. The Fund may sell a bond if certain
adverse credit or other conditions exist.
</TABLE>
4
<PAGE>
<TABLE>
<C> <S>
9. HOW DO I BUY UNITS?
The minimum investment is one unit.
You can buy units from any of the Sponsors and
other broker-dealers. The Sponsors are listed
later in this prospectus. Some banks may offer
units for sale through special arrangements with
the Sponsors, although certain legal
restrictions may apply.
UNIT PRICE PER UNIT $1,023.46
(as of March 31, 2000)
Unit price is based on the net asset value of
the Fund plus the sales fee. An amount equal to
any principal cash, as well as net accrued but
undistributed interest on the unit, is added to
the unit price. An independent evaluator prices
the bonds at 3:30 p.m. Eastern time every
business day. Unit price changes every day with
changes in the prices of the bonds in the Fund.
10. HOW DO I SELL UNITS?
You may sell your units at any time to any
Sponsor or the Trustee for the net asset value
determined at the close of business on the date
of sale. You will not pay any other fee when you
sell your units.
11. HOW ARE DISTRIBUTIONS MADE AND TAXED?
The Fund pays income monthly.
In the opinion of bond counsel when each bond
was issued, interest on the bonds in this Fund
is generally 100% exempt from regular federal
income tax. Your income may also be exempt from
some California state and local personal income
taxes if you live in California.
You will also receive principal payments if
bonds are sold or called or mature, when the
cash available is more than $5.00 per unit. You
will be subject to tax on any gain realized by
the Fund on the disposition of bonds.
12. WHAT OTHER SERVICES ARE AVAILABLE?
REINVESTMENT
You will receive your income in cash unless you
choose to compound your income by reinvesting at
no sales fee in the Municipal Fund Investment
Accumulation Program, Inc. This program is an
open-end mutual fund with a comparable
investment objective, but the bonds will
generally not be insured. Income from this
program will generally be subject to state and
local income taxes. FOR MORE COMPLETE
INFORMATION ABOUT THE PROGRAM, INCLUDING CHARGES
AND FEES, ASK THE TRUSTEE FOR THE PROGRAM'S
PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST.
THE TRUSTEE MUST RECEIVE YOUR WRITTEN ELECTION
TO REINVEST AT LEAST 10 DAYS BEFORE THE RECORD
DAY OF AN INCOME PAYMENT.
EXCHANGE PRIVILEGES
You may exchange units of this Fund for units of
certain other Defined Asset Funds. You may also
exchange into this Fund from certain other
funds. We charge a reduced sales fee on
exchanges.
</TABLE>
5
<PAGE>
--------------------------------------------------------------------------------
NEW JERSEY INSURED PORTFOLIO--RISK/RETURN SUMMARY
<TABLE>
<C> <S>
1. WHAT IS THE FUND'S OBJECTIVE?
The Fund seeks interest income that is
exempt from regular federal income taxes
and some state and local taxes by
investing in a fixed portfolio
consisting primarily of insured, long
term municipal revenue bonds.
2. WHAT ARE MUNICIPAL REVENUE BONDS?
Municipal revenue bonds are bonds issued
by states, municipalities and public
authorities to finance the cost of
buying, building or improving various
projects intended to generate revenue,
such as airports, health care
facilities, housing and municipal
electric, water and sewer utilities.
Generally, payments on these bonds
depend solely on the revenues generated
by the projects, excise taxes or state
appropriations, and are not backed by
the government's taxing power.
3. WHAT IS THE FUND'S INVESTMENT STRATEGY?
- The Fund plans to hold to maturity 9
long-term tax-exempt municipal bonds
with an aggregate face amount of
$4,690,000.
- The Fund is a unit investment trust
which means that, unlike a mutual fund,
the Portfolio is not managed.
- The bonds are rated AAA or Aaa by
Standard & Poor's, Moody's or Fitch.
- Many of the bonds can be called at a
premium declining over time to par
value. Some bonds may be called earlier
at par for extraordinary reasons.
- 100% of the bonds are insured by
insurance companies that guarantee
timely payments of principal and
interest on the bonds (but not Fund
units or the market value of the bonds
before they mature).
The Portfolio consists of municipal
bonds of the following types:
</TABLE>
<TABLE>
/ / General Obligation 17%
<S> <C>
/ / Hospitals/Health Care 20%
/ / Lease Rental 12%
/ / Miscellaneous 16%
/ / Municipal Water/Sewer Utilities 35%
</TABLE>
<TABLE>
<C> <S>
4. WHAT ARE THE SIGNIFICANT RISKS?
YOU CAN LOSE MONEY BY INVESTING IN THE FUND.
THIS CAN HAPPEN FOR VARIOUS REASONS,
INCLUDING:
- Rising interest rates, an issuer's worsening
financial condition or a drop in bond
ratings can reduce the price of your units.
- Because the Fund is concentrated in
municipal water/sewer utility bonds, adverse
developments in this sector may affect the
value of your units.
- Assuming no changes in interest rates, when
you sell your units, they will generally be
worth less than your cost because your cost
included a sales fee.
- The Fund will receive early returns of
principal if bonds are called or sold before
they mature. If this happens your income
will decline and you may not be able to
reinvest the money you receive at as high a
yield or as long a maturity.
ALSO, THE PORTFOLIO IS CONCENTRATED IN BONDS
OF NEW JERSEY SO IT IS LESS DIVERSIFIED THAN
A NATIONAL FUND AND IS SUBJECT TO RISKS
PARTICULAR TO NEW JERSEY WHICH ARE BRIEFLY
DESCRIBED UNDER STATE CONCENTRATION RISKS
LATER IN THIS PROSPECTUS.
</TABLE>
6
<PAGE>
<TABLE>
<C> <S>
5. IS THIS FUND APPROPRIATE FOR YOU?
Yes, if you want federally tax-free income.
You will benefit from a professionally
selected and supervised portfolio whose risk
is reduced by investing in insured bonds of
several different issuers.
The Fund is NOT appropriate for you if you
want a speculative investment that changes
to take advantage of market movements, if
you do not want a tax-advantaged investment
or if you cannot tolerate any risk.
</TABLE>
<TABLE>
<C> <S>
DEFINING YOUR INCOME
</TABLE>
<TABLE>
<C> <S> <C>
WHAT YOU MAY EXPECT (Payable on
the 25th day of the month to
holders of record on the 10th
day of the month):
Regular Monthly Income per unit $ 4.56
Annual Income per unit: $54.75
THESE FIGURES ARE ESTIMATES DETERMINED ON
THE EVALUATION DAY; ACTUAL PAYMENTS MAY
VARY.
</TABLE>
<TABLE>
<C> <S>
6. WHAT ARE THE FUND'S FEES AND EXPENSES?
This table shows the costs and expenses you may pay,
directly or indirectly, when you invest in the Fund.
INVESTOR FEES
Maximum Sales Fee (Load) on new
purchases (as a percentage of
$1,000 invested) 2.90%
Employees of some of the Sponsors and their affiliates
may pay a reduced sales fee of no less than $5.00 per
unit.
The maximum sales fee is reduced if you invest at
least $100,000, as follows:
</TABLE>
<TABLE>
<CAPTION>
YOUR MAXIMUM
SALES FEE
IF YOU INVEST: WILL BE:
-------------- ------------
<C> <S> <C>
Less than $100,000 2.90%
$100,000 to $249,999 2.65%
$250,000 to $499,999 2.40%
$500,000 to $999,999 2.15%
$1,000,000 and over 1.90%
Maximum Exchange Fee 1.90%
</TABLE>
<TABLE>
<C> <S>
ESTIMATED ANNUAL FUND OPERATING EXPENSES
</TABLE>
<TABLE>
<CAPTION>
AMOUNT
PER UNIT
--------
<C> <S> <C>
$0.69
Trustee's Fee
$0.49
Portfolio Supervision,
Bookkeeping and
Administrative Fees
(including updating
expenses)
$0.20
Evaluator's Fee
$0.37
Other Operating Expenses
-----
$1.75
TOTAL
</TABLE>
<TABLE>
<C> <S>
The Sponsors historically paid updating
expenses.
7. HOW HAVE SIMILAR FUNDS PERFORMED IN THE PAST?
IN THE FOLLOWING CHART WE SHOW PAST PERFORMANCE
OF PRIOR NEW JERSEY PORTFOLIOS, WHICH HAD
INVESTMENT OBJECTIVES, STRATEGIES AND TYPES OF
BONDS SUBSTANTIALLY SIMILAR TO THIS FUND. THESE
PRIOR SERIES DIFFERED IN THAT THEY CHARGED A
HIGHER SALES FEE. These prior New Jersey Series
were offered after 1987 and were outstanding on
June 30, 2000. OF COURSE, PAST PERFORMANCE OF
PRIOR SERIES IS NO GUARANTEE OF FUTURE RESULTS
OF THIS FUND.
AVERAGE ANNUAL COMPOUND TOTAL RETURNS
FOR PRIOR SERIES
REFLECTING ALL EXPENSES. FOR PERIODS ENDED
6/30/00.
</TABLE>
<TABLE>
<CAPTION>
WITH SALES FEE NO SALES FEE
1 YEAR 5 YEARS 1 YEAR 5 YEARS
<S> <C> <C> <C> <C>
-----------------------------------------------------------------
High 3.82% 5.02% 4.72% 6.19%
Average 0.82 4.15 2.80 5.24
Low -2.37 2.38 0.51 3.17
<C> <S>
<C> <S>
managed and bonds are not sold because of market
changes. Rather, experienced Defined Asset Funds
financial analysts regularly review the bonds in
the Fund. The Fund may sell a bond if certain
adverse credit or other conditions exist.
</TABLE>
7
<PAGE>
<TABLE>
<C> <S>
9. HOW DO I BUY UNITS?
The minimum investment is one unit.
You can buy units from any of the Sponsors and
other broker-dealers. The Sponsors are listed
later in this prospectus. Some banks may offer
units for sale through special arrangements with
the Sponsors, although certain legal restrictions
may apply.
UNIT PRICE PER UNIT $1,014.91
(as of March 31, 2000)
Unit price is based on the net asset value of the
Fund plus the sales fee. An amount equal to any
principal cash, as well as net accrued but
undistributed interest on the unit, is added to
the unit price. An independent evaluator prices
the bonds at 3:30 p.m. Eastern time every
business day. Unit price changes every day with
changes in the prices of the bonds in the Fund.
10. HOW DO I SELL UNITS?
You may sell your units at any time to any
Sponsor or the Trustee for the net asset value
determined at the close of business on the date
of sale. You will not pay any other fee when you
sell your units.
11. HOW ARE DISTRIBUTIONS MADE AND TAXED?
The Fund pays income monthly.
In the opinion of bond counsel when each bond was
issued, interest on the bonds in this Fund is
generally 100% exempt from regular federal income
tax. Your income may also be exempt from some New
Jersey state and local personal income taxes if
you live in New Jersey.
You will also receive principal payments if bonds
are sold or called or mature, when the cash
available is more than $5.00 per unit. You will
be subject to tax on any gain realized by the
Fund on the disposition of bonds.
12. WHAT OTHER SERVICES ARE AVAILABLE?
REINVESTMENT
You will receive your income in cash unless you
choose to compound your income by reinvesting at
no sales fee in the Municipal Fund Investment
Accumulation Program, Inc. This program is an
open-end mutual fund with a comparable investment
objective, but the bonds generally will not be
insured. Income from this program will generally
be subject to state and local income taxes. FOR
MORE COMPLETE INFORMATION ABOUT THE PROGRAM,
INCLUDING CHARGES AND FEES, ASK THE TRUSTEE FOR
THE PROGRAM'S PROSPECTUS. READ IT CAREFULLY
BEFORE YOU INVEST. THE TRUSTEE MUST RECEIVE YOUR
WRITTEN ELECTION TO REINVEST AT LEAST 10 DAYS
BEFORE THE RECORD DAY OF AN INCOME PAYMENT.
EXCHANGE PRIVILEGES
You may exchange units of this Fund for units of
certain other Defined Asset Funds. You may also
exchange into this Fund from certain other funds.
We charge a reduced sales fee on exchanges.
</TABLE>
8
<PAGE>
--------------------------------------------------------------------------------
PENNSYLVANIA INSURED PORTFOLIO--RISK/RETURN SUMMARY
<TABLE>
<C> <S>
1. WHAT IS THE FUND'S OBJECTIVE?
The Fund seeks interest income that is
exempt from regular federal income taxes
and some state and local taxes by
investing in a fixed portfolio
consisting primarily of insured, long
term municipal revenue bonds.
2. WHAT ARE MUNICIPAL REVENUE BONDS?
Municipal revenue bonds are bonds issued
by states, municipalities and public
authorities to finance the cost of
buying, building or improving various
projects intended to generate revenue,
such as airports, health care
facilities, housing and municipal
electric, water and sewer utilities.
Generally, payments on these bonds
depend solely on the revenues generated
by the projects, excise taxes or state
appropriations, and are not backed by
the government's taxing power.
3. WHAT IS THE FUND'S INVESTMENT STRATEGY?
- The Fund plans to hold to maturity 7
long-term tax-exempt municipal bonds
with an aggregate face amount of
$3,125,000.
- The Fund is a unit investment trust
which means that, unlike a mutual fund,
the Portfolio is not managed.
- The bonds are rated AAA or Aaa by
Standard & Poor's, Moody's or Fitch.
- Many of the bonds can be called at a
premium declining over time to par
value. Some bonds may be called earlier
at par for extraordinary reasons.
- 100% of the bonds are insured by
insurance companies that guarantee
timely payments of principal and
interest on the bonds (but not Fund
units or the market value of the bonds
before they mature).
The Portfolio consists of municipal
bonds of the following types:
</TABLE>
<TABLE>
/ / Airports/Ports/Highways 10%
<S> <C>
/ / Hospitals/Health Care 24%
/ / Miscellaneous 13%
/ / Municipal Water/Sewer Utilities 12%
/ / Refunded Bonds 17%
/ / Universities/Colleges 24%
</TABLE>
<TABLE>
<C> <S>
4. WHAT ARE THE SIGNIFICANT RISKS?
YOU CAN LOSE MONEY BY INVESTING IN THE
FUND. THIS CAN HAPPEN FOR VARIOUS
REASONS, INCLUDING:
- Rising interest rates, an issuer's
worsening financial condition or a drop
in bond ratings can reduce the price of
your units.
- Assuming no changes in interest rates,
when you sell your units, they will
generally be worth less than your cost
because your cost included a sales fee.
- The Fund will receive early returns of
principal if bonds are called or sold
before they mature. If this happens your
income will decline and you may not be
able to reinvest the money you receive
at as high a yield or as long a
maturity.
ALSO, THE PORTFOLIO IS CONCENTRATED IN
BONDS OF PENNSYLVANIA SO IT IS LESS
DIVERSIFIED THAN A NATIONAL FUND AND IS
SUBJECT TO RISKS PARTICULAR TO
PENNSYLVANIA WHICH ARE BRIEFLY DESCRIBED
UNDER STATE CONCENTRATION RISKS LATER IN
THIS PROSPECTUS.
</TABLE>
9
<PAGE>
<TABLE>
<C> <S>
5. IS THIS FUND APPROPRIATE FOR YOU?
Yes, if you want federally tax-free
income. You will benefit from a
professionally selected and supervised
portfolio whose risk is reduced by
investing in insured bonds of several
different issuers.
The Fund is NOT appropriate for you if
you want a speculative investment that
changes to take advantage of market
movements, if you do not want a
tax-advantaged investment or if you
cannot tolerate any risk.
</TABLE>
<TABLE>
<C> <S>
DEFINING YOUR INCOME
</TABLE>
<TABLE>
<C> <S> <C>
WHAT YOU MAY EXPECT (Payable on
the 25th day of the month to
holders of record on the 10th
day of the month):
Regular Monthly Income per unit $ 4.59
Annual Income per unit: $55.09
THESE FIGURES ARE ESTIMATES DETERMINED ON
THE EVALUATION DAY; ACTUAL PAYMENTS MAY
VARY.
</TABLE>
<TABLE>
<C> <S>
6. WHAT ARE THE FUND'S FEES AND EXPENSES?
This table shows the costs and expenses you may pay,
directly or indirectly, when you invest in the Fund.
INVESTOR FEES
Maximum Sales Fee (Load) on new
purchases (as a percentage of
$1,000 invested) 2.90%
Employees of some of the Sponsors and their affiliates
may pay a reduced sales fee of no less than $5.00 per
unit.
The maximum sales fee is reduced if you invest at
least $100,000, as follows:
</TABLE>
<TABLE>
<CAPTION>
YOUR MAXIMUM
SALES FEE
IF YOU INVEST: WILL BE:
-------------- ------------
<C> <S> <C>
Less than $100,000 2.90%
$100,000 to $249,999 2.65%
$250,000 to $499,999 2.40%
$500,000 to $999,999 2.15%
$1,000,000 and over 1.90%
Maximum Exchange Fee 1.90%
</TABLE>
<TABLE>
<C> <S>
ESTIMATED ANNUAL FUND OPERATING EXPENSES
</TABLE>
<TABLE>
<CAPTION>
AMOUNT
PER UNIT
--------
<C> <S> <C>
$0.69
Trustee's Fee
$0.48
Portfolio Supervision,
Bookkeeping and
Administrative Fees
(including updating
expenses)
$0.28
Evaluator's Fee
$0.54
Other Operating Expenses
-----
$1.99
TOTAL
</TABLE>
<TABLE>
<C> <S>
The Sponsors historically paid updating
expenses.
7. HOW HAVE SIMILAR FUNDS PERFORMED IN THE PAST?
IN THE FOLLOWING CHART WE SHOW PAST PERFORMANCE
OF PRIOR PENNSYLVANIA PORTFOLIOS, WHICH HAD
INVESTMENT OBJECTIVES, STRATEGIES AND TYPES OF
BONDS SUBSTANTIALLY SIMILAR TO THIS FUND. THESE
PRIOR SERIES DIFFERED IN THAT THEY CHARGED A
HIGHER SALES FEE. These prior Pennsylvania
Series were offered after 1987 and were
outstanding on June 30, 2000. OF COURSE, PAST
PERFORMANCE OF PRIOR SERIES IS NO GUARANTEE OF
FUTURE RESULTS OF THIS FUND.
AVERAGE ANNUAL COMPOUND TOTAL RETURNS
FOR PRIOR SERIES
REFLECTING ALL EXPENSES. FOR PERIODS ENDED
6/30/00.
</TABLE>
-------------------------------------------------------------------
<TABLE>
High 4.59% 5.11% 5.07% 6.29%
<S> <C> <C> <C> <C>
Average 0.44 4.26 2.43 5.34
Low -5.17 2.80 -1.92 3.42
</TABLE>
-----------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Average
Sales fee 2.01% 5.37%
</TABLE>
-----------------------------------------------------------
NOTE: ALL RETURNS REPRESENT CHANGES IN UNIT PRICE WITH DISTRIBUTIONS REINVESTED
INTO THE MUNICIPAL FUND INVESTMENT ACCUMULATION PROGRAM.
<TABLE>
<C> <S>
8. IS THE FUND MANAGED?
Unlike a mutual fund, the Fund is not managed and
bonds are not sold because of market changes.
Rather, experienced Defined Asset Funds financial
analysts regularly review the bonds in the Fund.
The Fund may sell a bond if certain adverse
credit or other conditions exist.
</TABLE>
10
<PAGE>
<TABLE>
<C> <S>
9. HOW DO I BUY UNITS?
The minimum investment is one unit.
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 UNIT $1,011.59
(as of March 31, 2000)
Unit price is based on the net asset value of the
Fund plus the sales fee. An amount equal to any
principal cash, as well as net accrued but
undistributed interest on the unit, is added to
the unit price. An independent evaluator prices
the bonds at 3:30 p.m. Eastern time every
business day. Unit price changes every day with
changes in the prices of the bonds in the Fund.
10. HOW DO I SELL UNITS?
You may sell your units at any time to any
Sponsor or the Trustee for the net asset value
determined at the close of business on the date
of sale. You will not pay any other fee when you
sell your units.
11. HOW ARE DISTRIBUTIONS MADE AND TAXED?
The Fund pays income monthly.
In the opinion of bond counsel when each bond was
issued, interest on the bonds in this Fund is
generally 100% exempt from regular federal income
tax. Your income may also be exempt from some
Pennsylvania state and local personal income
taxes if you live in Pennsylvania.
You will also receive principal payments if bonds
are sold or called or mature, when the cash
available is more than $5.00 per unit. You will
be subject to tax on any gain realized by the
Fund on the disposition of bonds.
12. WHAT OTHER SERVICES ARE AVAILABLE?
REINVESTMENT
You will receive your income in cash unless you
choose to compound your income by reinvesting at
no sales fee in the Municipal Fund Investment
Accumulation Program, Inc. This program is an
open-end mutual fund with a comparable investment
objective, but the bonds generally will not be
insured. Income from this program will generally
be subject to state and local income taxes. FOR
MORE COMPLETE INFORMATION ABOUT THE PROGRAM,
INCLUDING CHARGES AND FEES, ASK THE TRUSTEE FOR
THE PROGRAM'S PROSPECTUS. READ IT CAREFULLY
BEFORE YOU INVEST. THE TRUSTEE MUST RECEIVE YOUR
WRITTEN ELECTION TO REINVEST AT LEAST 10 DAYS
BEFORE THE RECORD DAY OF AN INCOME PAYMENT.
EXCHANGE PRIVILEGES
You may exchange units of this Fund for units of
certain other Defined Asset Funds. You may also
exchange into this Fund from certain other funds.
We charge a reduced sales fee on exchanges.
</TABLE>
11
<PAGE>
--------------------------------------------------------------------------------
VIRGINIA PORTFOLIO--RISK/RETURN SUMMARY
<TABLE>
<C> <S>
1. WHAT IS THE FUND'S OBJECTIVE?
The Fund seeks interest income that is
exempt from regular federal income taxes
and some state and local taxes by
investing in a fixed portfolio
consisting primarily of long term
municipal revenue bonds.
2. WHAT ARE MUNICIPAL REVENUE BONDS?
Municipal revenue bonds are bonds issued
by states, municipalities and public
authorities to finance the cost of
buying, building or improving various
projects intended to generate revenue,
such as airports, health care
facilities, housing and municipal
electric, water and sewer utilities.
Generally, payments on these bonds
depend solely on the revenues generated
by the projects, excise taxes or state
appropriations, and are not backed by
the government's taxing power.
3. WHAT IS THE FUND'S INVESTMENT STRATEGY?
- The Fund plans to hold to maturity 7
long-term tax-exempt municipal bonds
with an aggregate face amount of
$2,310,000.
- The Fund is a unit investment trust
which means that, unlike a mutual fund,
the Portfolio is not managed.
- When the bonds were initially deposited
they were rated A or better by Standard
& Poor's, Moody's or Fitch. THE QUALITY
OF THE BONDS MAY CURRENTLY BE LOWER.
- Many of the bonds can be called at a
premium declining over time to par
value. Some bonds may be called earlier
at par for extraordinary reasons.
- 51% of the bonds are insured by
insurance companies that guarantee
timely payments of principal and
interest on the bonds (but not Fund
units or the market value of the bonds
before they mature).
The Portfolio consists of municipal
bonds of the following types:
</TABLE>
<TABLE>
<CAPTION>
APPROXIMATE
PORTFOLIO
PERCENTAGE
<S> <C>
/ / Airports/Ports/Highways 17%
/ / General Obligation 38%
/ / Municipal Water/Sewer
Utilities 25%
/ / Refunded Bonds 20%
</TABLE>
<TABLE>
<C> <S>
4. WHAT ARE THE SIGNIFICANT RISKS?
YOU CAN LOSE MONEY BY INVESTING IN THE FUND.
THIS CAN HAPPEN FOR VARIOUS REASONS,
INCLUDING:
- Rising interest rates, an issuer's worsening
financial condition or a drop in bond
ratings can reduce the price of your units.
- Because the Fund is concentrated in
municipal water/sewer utility and general
obligation bonds, adverse developments in
these sectors may affect the value of your
units.
- Assuming no changes in interest rates, when
you sell your units, they will generally be
worth less than your cost because your cost
included a sales fee.
- The Fund will receive early returns of
principal if bonds are called or sold before
they mature. If this happens your income
will decline and you may not be able to
reinvest the money you receive at as high a
yield or as long a maturity.
ALSO, THE PORTFOLIO IS CONCENTRATED IN BONDS
OF VIRGINIA SO IT IS LESS DIVERSIFIED THAN A
NATIONAL FUND AND IS SUBJECT TO RISKS
PARTICULAR TO VIRGINIA WHICH ARE BRIEFLY
DESCRIBED UNDER STATE CONCENTRATION RISKS
LATER IN THIS PROSPECTUS.
</TABLE>
12
<PAGE>
<TABLE>
<C> <S>
5. IS THIS FUND APPROPRIATE FOR YOU?
Yes, if you want federally tax-free income.
You will benefit from a professionally
selected and supervised portfolio whose risk
is reduced by investing in bonds of several
different issuers.
The Fund is NOT appropriate for you if you
want a speculative investment that changes
to take advantage of market movements, if
you do not want a tax-advantaged investment
or if you cannot tolerate any risk.
</TABLE>
<TABLE>
<C> <S>
DEFINING YOUR INCOME
</TABLE>
<TABLE>
<C> <S> <C>
WHAT YOU MAY EXPECT (Payable on
the 25th day of the month to
holders of record on the 10th
day of the month):
Regular Monthly Income per unit $ 4.63
Annual Income per unit: $55.57
THESE FIGURES ARE ESTIMATES DETERMINED ON
THE EVALUATION DAY; ACTUAL PAYMENTS MAY
VARY.
</TABLE>
<TABLE>
<C> <S>
6. WHAT ARE THE FUND'S FEES AND EXPENSES?
This table shows the costs and expenses you may pay,
directly or indirectly, when you invest in the Fund.
INVESTOR FEES
Maximum Sales Fee (Load) on new
purchases (as a percentage of
$1,000 invested) 2.90%
Employees of some of the Sponsors and their affiliates
may be charged a reduced sales fee of no less than
$5.00 per unit.
The maximum sales fee is reduced if you invest at
least $100,000, as follows:
</TABLE>
<TABLE>
<CAPTION>
YOUR MAXIMUM
SALES FEE
IF YOU INVEST: WILL BE:
-------------- ------------
<C> <S> <C>
Less than $100,000 2.90%
$100,000 to $249,999 2.65%
$250,000 to $499,999 2.40%
$500,000 to $999,999 2.15%
$1,000,000 and over 1.90%
Maximum Exchange Fee 1.90%
</TABLE>
<TABLE>
<C> <S>
ESTIMATED ANNUAL FUND OPERATING EXPENSES
</TABLE>
<TABLE>
<CAPTION>
AMOUNT
PER UNIT
--------
<C> <S> <C>
$0.69
Trustee's Fee
$0.49
Portfolio Supervision,
Bookkeeping and
Administrative Fees
(including updating
expenses)
$0.39
Evaluator's Fee
$0.65
Other Operating Expenses
-----
$2.22
TOTAL
</TABLE>
<TABLE>
<C> <S>
The Sponsors historically paid updating
expenses.
7. HOW HAVE SIMILAR FUNDS PERFORMED IN THE PAST?
IN THE FOLLOWING CHART WE SHOW PAST PERFORMANCE
OF PRIOR VIRGINIA PORTFOLIOS, WHICH HAD
INVESTMENT OBJECTIVES, STRATEGIES AND TYPES OF
BONDS SUBSTANTIALLY SIMILAR TO THIS FUND. THESE
PRIOR SERIES DIFFERED IN THAT THEY CHARGED A
HIGHER SALES FEE. These prior Virginia Series
were offered after 1987 and were outstanding on
June 30, 2000. OF COURSE, PAST PERFORMANCE OF
PRIOR SERIES IS NO GUARANTEE OF FUTURE RESULTS
OF THIS FUND.
AVERAGE ANNUAL COMPOUND TOTAL RETURNS
FOR PRIOR SERIES
REFLECTING ALL EXPENSES. FOR PERIODS ENDED
6/30/00.
</TABLE>
<TABLE>
<CAPTION>
WITH SALES FEE NO SALES FEE
1 YEAR 5 YEARS 1 YEAR 5 YEARS
<S> <C> <C> <C> <C>
-----------------------------------------------------------------
High 3.98% 5.11% 4.97% 6.29%
Average 0.99 4.20 2.91 5.20
Low -2.24 2.52 0.69 3.33
<C> <S>
<C> <S>
managed and bonds are not sold because of market
changes. Rather, experienced Defined Asset Funds
financial analysts regularly review the bonds in
the Fund. The Fund may sell a bond if certain
adverse credit or other conditions exist.
</TABLE>
13
<PAGE>
<TABLE>
<C> <S>
9. HOW DO I BUY UNITS?
The minimum investment is one unit.
You can buy units from any of the Sponsors and
other broker-dealers. The Sponsors are listed
later in this prospectus. Some banks may offer
units for sale through special arrangements with
the Sponsors, although certain legal restrictions
may apply.
UNIT PRICE PER UNIT $1,004.64
(as of March 31, 2000)
Unit price is based on the net asset value of the
Fund plus the sales fee. An amount equal to any
principal cash, as well as net accrued but
undistributed interest on the unit, is added to
the unit price. An independent evaluator prices
the bonds at 3:30 p.m. Eastern time every
business day. Unit price changes every day with
changes in the prices of the bonds in the Fund.
10. HOW DO I SELL UNITS?
You may sell your units at any time to any
Sponsor or the Trustee for the net asset value
determined at the close of business on the date
of sale. You will not pay any other fee when you
sell your units.
11. HOW ARE DISTRIBUTIONS MADE AND TAXED?
The Fund pays income monthly.
In the opinion of bond counsel when each bond was
issued, interest on the bonds in this Fund is
generally 100% exempt from regular federal income
tax. Your income may also be exempt from some
Virginia state and local personal income taxes if
you live in Virginia.
You will also receive principal payments if bonds
are sold or called or mature, when the cash
available is more than $5.00 per unit. You will
be subject to tax on any gain realized by the
Fund on the disposition of bonds.
12. WHAT OTHER SERVICES ARE AVAILABLE?
REINVESTMENT
You will receive your income in cash unless you
choose to compound your income by reinvesting at
no sales fee in the Municipal Fund Investment
Accumulation Program, Inc. This program is an
open-end mutual fund with a comparable investment
objective. Income from this program will
generally be subject to state and local income
taxes. FOR MORE COMPLETE INFORMATION ABOUT THE
PROGRAM, INCLUDING CHARGES AND FEES, ASK THE
TRUSTEE FOR THE PROGRAM'S PROSPECTUS. READ IT
CAREFULLY BEFORE YOU INVEST. THE TRUSTEE MUST
RECEIVE YOUR WRITTEN ELECTION TO REINVEST AT
LEAST 10 DAYS BEFORE THE RECORD DAY OF AN INCOME
PAYMENT.
EXCHANGE PRIVILEGES
You may exchange units of this Fund for units of
certain other Defined Asset Funds. You may also
exchange into this Fund from certain other funds.
We charge a reduced sales fee on exchanges.
</TABLE>
14
<PAGE>
--------------------------------------------------------------------------------
TAX-FREE VS. TAXABLE INCOME: A COMPARISON OF TAXABLE AND TAX-FREE YIELDS
FOR CALIFORNIA RESIDENTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMBINED
EFFECTIVE
TAXABLE INCOME 2000* TAX RATE TAX-FREE YIELD OF
SINGLE RETURN JOINT RETURN % 3% 3.5% 4% 4.5% 5% 5.5%
<S> <C> <C> <C> <C> <C> <C> <C> <C>
IS EQUIVALENT TO A TAXABLE YIELD OF
<CAPTION>
TAXABLE INCOME 2000* TAX-FREE YIELD OF
SINGLE RETURN 6% 6.5% 7% 7.5% 8%
<S> <C> <C> <C> <C> <C>
IS EQUIVALENT TO A
TAXABLE YIELD OF
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0- 26,250 $ $0- 43,050 20.10 3.75 4.38 5.01 5.63 6.26 6.88 7.51
$ 26,251- 63,550 $ 43,851-105,950 34.70 4.59 5.36 6.13 6.89 7.66 8.42 9.19
$ 63,551-132,600 $105,951-161,450 37.42 4.79 5.59 6.39 7.19 7.99 8.79 9.59
$132,601-288,350 $161,451-288,350 41.95 5.17 6.03 6.89 7.75 8.61 9.47 10.34
OVER $288,350 OVER $288,350 45.22 5.48 6.39 7.30 8.21 9.13 10.04 10.95
<S> <C> <C> <C> <C>
$ 0- 26,250 8.14 8.76 9.39 10.01
$ 26,251- 63,550 9.95 10.72 11.48 12.25
$ 63,551-132,600 10.39 11.19 11.98 12.78
$132,601-288,350 11.20 12.06 12.92 13.78
OVER $288,350 11.87 12.78 13.69 14.60
</TABLE>
FOR PENNSYLVANIA RESIDENTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMBINED
EFFECTIVE
TAXABLE INCOME 2000* TAX RATE TAX-FREE YIELD OF
SINGLE RETURN JOINT RETURN % 3% 3.5% 4% 4.5% 5% 5.5%
<S> <C> <C> <C> <C> <C> <C> <C> <C>
IS EQUIVALENT TO A TAXABLE YIELD OF
<CAPTION>
TAXABLE INCOME 2000* TAX-FREE YIELD OF
SINGLE RETURN 6% 6.5% 7% 7.5% 8%
<S> <C> <C> <C> <C> <C>
IS EQUIVALENT TO A
TAXABLE YIELD OF
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0- 26,250 $ 0- 43,850 17.38 3.63 4.24 4.84 5.45 6.05 6.66 7.26
$ 26,251- 63,550 $ 43,851-109,950 30.02 4.29 5.00 5.72 6.43 7.14 7.86 8.57
$ 63,551-132,600 $105,951-161,450 32.93 4.47 5.22 5.96 6.71 7.46 8.20 8.95
$132,601-288,350 $161,451-288,350 37.79 4.82 5.63 6.43 7.23 8.04 8.84 9.65
OVER $288,350 OVER $288,350 41.29 5.11 5.96 6.81 7.66 8.52 9.37 10.22
<S> <C> <C> <C> <C>
$ 0- 26,250 7.87 8.47 9.08 9.68
$ 26,251- 63,550 9.29 10.00 10.72 11.43
$ 63,551-132,600 9.69 10.44 11.18 11.93
$132,601-288,350 10.45 11.25 12.06 12.86
OVER $288,350 11.07 11.92 12.77 13.63
</TABLE>
FOR NEW JERSEY RESIDENTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMBINED
EFFECTIVE
TAXABLE INCOME 2000* TAX RATE TAX-FREE YIELD OF
SINGLE RETURN JOINT RETURN % 4% 4.5% 5% 5.5% 6% 6.5%
<S> <C> <C> <C> <C> <C> <C> <C> <C>
IS EQUIVALENT TO A TAXABLE YIELD OF
<CAPTION>
TAXABLE INCOME 2000* TAX-FREE YIELD OF
SINGLE RETURN 7.% 7.5% 8.%
<S> <C> <C> <C>
IS EQUIVALENT TO A
TAXABLE YIELD OF
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0- 26,250 $ $0- 43,850 16.49 4.79 5.39 5.99 6.59 7.18 7.78 8.38
$ 26,251- 63,550 $ 43,851-105,950 31.98 5.88 6.62 7.35 8.09 8.82 9.56 10.29
$ 63,551-132,600 $105,951-161,450 35.40 6.19 6.97 7.74 8.51 9.29 10.06 10.84
$132,601-288,350 $161,451-288,350 40.08 6.68 7.51 8.34 9.18 10.01 10.85 11.68
OVER $288,350 OVER $288,350 43.45 7.07 7.96 8.84 9.73 10.61 11.49 12.38
<S> <C> <C>
$ 0- 26,250 8.98 9.58
$ 26,251- 63,550 11.03 11.76
$ 63,551-132,600 11.61 12.38
$132,601-288,350 12.52 13.35
OVER $288,350 13.26 14.15
</TABLE>
FOR VIRGINIA RESIDENTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMBINED
EFFECTIVE
TAXABLE INCOME 2000* TAX RATE TAX-FREE YIELD OF
SINGLE RETURN JOINT RETURN % 4% 4.5% 5% 5.5% 6% 6.5%
<S> <C> <C> <C> <C> <C> <C> <C> <C>
IS EQUIVALENT TO A TAXABLE YIELD OF
<CAPTION>
TAXABLE INCOME 2000* TAX-FREE YIELD OF
SINGLE RETURN 7% 7.5% 8%
<S> <C> <C> <C>
IS EQUIVALENT TO A
TAXABLE YIELD OF
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0- 26,250 $ $0- 43,850 19.89 4.99 5.62 6.24 6.87 7.49 8.11 8.74
$ 26,251- 63,550 $ 43,851-105,950 32.14 5.89 6.63 7.37 8.10 8.84 9.58 10.32
$ 63,551-132,600 $105,951-161,450 34.97 6.15 6.92 7.69 8.46 9.23 10.00 10.76
$132,601-288,350 $161,451-288,350 39.68 6.63 7.46 8.29 9.12 9.95 10.78 11.60
OVER $288,350 OVER $288,350 43.07 7.03 7.90 8.78 9.66 10.54 11.42 12.30
<S> <C> <C>
$ 0- 26,250 9.36 9.99
$ 26,251- 63,550 11.05 11.79
$ 63,551-132,600 11.53 12.30
$132,601-288,350 12.43 13.26
OVER $288,350 13.17 14.05
</TABLE>
To compare the yield of a taxable security with the yield of a tax-free
security, find your taxable income and read across. The table incorporates 2000
federal and applicable State income tax rates and assumes that all income would
otherwise be taxed at the investor's highest tax rate. Yield figures are for
example only.
*Based upon net amount subject to federal income tax after deductions and
exemptions. This table does not reflect the possible effect of other tax
factors, such as alternative minimum tax, personal exemptions, the phase out of
exemptions, itemized deductions or the possible partial disallowance of
deductions. Consequently, you should consult your own tax advisers in this
regard.
15
<PAGE>
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 bonds from the Fund's portfolio because of calls,
redemptions or sales;
- a change in the Fund's expenses; or
- the failure by a bond's issuer to pay interest.
Changes in interest rates generally will not affect your income because the
portfolio is fixed.
Along with your income, you will receive your share of any available bond
principal.
RETURN FIGURES
We cannot predict your actual return, which will vary with unit price, how long
you hold your investment and changes in the portfolio, interest income and
expenses.
ESTIMATED CURRENT RETURN equals the estimated annual cash to be received from
the bonds in the Fund less estimated annual Fund expenses, divided by the Unit
Price (including the maximum sales fee):
<TABLE>
<S> <C> <C>
Estimated Annual Estimated
Interest Income - Annual Expenses
-------------------------------------
Unit Price
</TABLE>
ESTIMATED LONG TERM RETURN is a measure of the estimated return over the
estimated life of the Fund. Unlike Estimated Current Return, Estimated Long Term
Return reflects maturities, discounts and premiums of the bonds in the Fund. It
is an average of the yields to maturity (or in certain cases, to an earlier call
date) of the individual bonds in the portfolio, adjusted to reflect the Fund's
maximum sales fee and estimated expenses. We calculate the average yield for the
portfolio by weighting each bond's yield by its market value and the time
remaining to the call or maturity date.
Yields on individual bonds depend on many factors including general conditions
of the bond markets, the size of a particular offering and the maturity and
quality rating of the particular issues. Yields can vary among bonds with
similar maturities, coupons and ratings.
These return quotations are designed to be comparative rather than predictive.
RECORDS AND REPORTS
You will receive:
- a monthly statement of income payments and any principal payments;
- a notice from the Trustee when new bonds are deposited in exchange or
substitution for bonds originally deposited;
- an annual report on Fund activity; and
- annual tax information. THIS WILL ALSO BE SENT TO THE IRS. YOU MUST REPORT THE
AMOUNT OF TAX-EXEMPT INTEREST RECEIVED DURING THE YEAR.
You may request:
- copies of bond evaluations to enable you to comply with federal and state tax
reporting requirements; and
- audited financial statements of the Fund.
You may inspect records of Fund transactions at the Trustee's office during
regular business hours.
16
<PAGE>
THE RISKS YOU FACE
INTEREST RATE RISK
Investing involves risks, including the risk that your investment will decline
in value if interest rates rise. Generally, bonds with longer maturities will
change in value more than bonds with shorter maturities. Bonds in the Fund are
more likely to be called when interest rates decline. This would result in early
returns of principal to you and may result in early termination of the Fund. Of
course, we cannot predict how interest rates may change.
CALL RISK
Many bonds can be prepaid or "called" by the issuer before their stated
maturity.
For example, some bonds may be required to be called pursuant to mandatory
sinking fund provisions.
Also, an issuer might call its bonds during periods of falling interest rates,
if the issuer's bonds have a coupon higher than current market rates.
An issuer might call its bonds in extraordinary cases, including if:
- it no longer needs the money for the original purpose;
- the project is condemned or sold;
- the project is destroyed and insurance proceeds are used to redeem the
bonds;
- any related credit support expires and is not replaced; or
- interest on the bonds become taxable.
If the bonds are called, your income will decline and you may not be able to
reinvest the money you receive at as high a yield or as long a maturity. An
early call at par of a premium bond will reduce your return.
REDUCED DIVERSIFICATION RISK
If many investors sell their units, the Fund will have to sell bonds. This could
reduce the diversification of your investment and increase your share of Fund
expenses.
LIQUIDITY RISK
You can always sell back your units, but we cannot assure you that a liquid
trading market will always exist for the bonds in the portfolio, especially
since current law may restrict the Fund from selling bonds to any Sponsor. The
bonds will generally trade in the over-the-counter market. The value of the
bonds, and of your investment, may be reduced if trading in bonds is limited or
absent.
CONCENTRATION RISK
When a certain type of bond makes up 25% or more of the portfolio, it is said to
be "concentrated" in that bond type, which makes the Portfolio less diversified.
Here is what you should know about the California Portfolio's concentration in
lease rental bonds. Lease rental bonds are generally issued by governmental
financing authorities that cannot assess a tax to cover the cost of equipment or
construction of buildings that will be used by a state or local government. The
risks associated with these bonds include:
- the failure of the government to appropriate funds for the leasing rental
payments to service the bonds; and
- rental obligations, and therefore payments, may terminate in the event of
damages to or destruction or condemnation of the of the equipment or
building.
Here is what you should know about the New Jersey and Virginia Portfolios'
concentrations in municipal water and sewer
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revenue bonds. The payment of interest and principal of these bonds depends on
the rates the utilities may charge, the demand for their services and the cost
of operating their business which includes the expense of complying with
environmental and other energy and licensing laws and regulations. The operating
results of utilities are particularly influenced by:
- increases in operating and construction costs; and
- unpredicability of future usage requirements.
Here is what you should know about the Virginia Portfolio's concentration in
general obligation bonds.
- general obligation bonds are backed by the issuer's pledge of its full
faith, credit and taxing power;
- but the taxing power of any government issuer may be limited by provisions
of the state constitution or laws as well as political considerations; and
- an issuer's credit can be negatively affected by various factors, including
population decline that erodes the tax base, natural disasters, decline in
industry, limited access to capital markets or heavy reliance on state or
federal aid.
Changes to the portfolio from bond redemptions, maturities and sales may affect
the Fund's concentrations over time.
STATE CONCENTRATION RISK
CALIFORNIA RISK
GENERALLY
From the late 1980s through the early 1990s, an economic recession eroded
California's revenue base. At the same time rapid population growth caused State
expenditures to exceed budget appropriations.
- As a result California experienced a period of sustained budget imbalance.
- Since that time the California economy has improved markedly and the extreme
budgetary pressures have begun to lessen.
STATE GOVERNMENT
The 1999-2000 Budget Act allocated a State budget of approximately $63.7 Billion
and contains no tax increases or reductions. Despite this somewhat improved
state, California's budget is still subject to certain unforeseeable events. For
example:
- In December, 1994, Orange County and its investment pool filed for
bankruptcy. While a settlement has been reached, the full impact on the
State and Orange County remains unknown.
- California faces constant fluctuations in other expenses (including health
and welfare caseloads, property tax receipts, federal funding and natural
disaster relief) that will undoubtedly create new budgetary pressure and
reduce ability to pay their debts.
- California's general obligation bonds are currently rated AA3 by Moody's and
AA- by Standard & Poor's.
OTHER RISKS
Issuers' ability to make payments on bonds (and the remedies available to
bondholders) could also be adversely affected by the following constraints:
- Certain provisions of California's Constitution, laws and regulatory system
contain tax, spending and appropriations limits and prohibit certain new
taxes.
- Certain other California laws subject the users of bond proceeds to strict
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rules and limits regarding revenue repayment.
- Bonds of healthcare institutions which are subject to the strict rules and
limits regarding reimbursement payments of California's Medi-Cal program for
health care services to welfare recipients and bonds secured by liens on
real property are two of the types of bonds that could be affected by these
provisions.
NEW JERSEY RISKS
STATE AND LOCAL GOVERNMENT
Certain features of New Jersey law could affect the repayment of debt:
- the State of New Jersey and its agencies and public authorities issue
general obligation bonds, which are secured by the full faith and credit of
the state, backed by its taxing authority, without recourse to specific
sources of revenue, therefore, any liability to increase taxes could impair
the state's ability to repay debt; and
- the state is required by law to maintain a balanced budget, and state
spending for any given municipality or county cannot increase by more than
5% per year. This limit could make it harder for any particular county or
municipality to repay its debts.
In recent years the state budget's main expenditures have been
- elementary and secondary education, and
- state agencies and programs, including police and corrections facilities,
higher education, and environmental protection.
The state's general obligations are rated Aa1 by Moody's and AA+ by Standard &
Poor's.
PENNSYLVANIA RISKS
GENERALLY
Pennsylvania and many of its municipalities (including Philadelphia) have
undergone an economic decline:
- coal, steel, railroads and other heavy industry historically associated with
the Commonwealth has given way to increased competition from foreign
producers.
- agriculture and related industries are still an important part of the
Commonwealth's economy.
- recently, however, service sector industries (trade, medical and health
services, education and financial services) have provided new sources of
growth.
STATE AND LOCAL GOVERNMENTS
Historically, both the Commonwealth and the City of Philadelphia have
experienced serious revenue shortfalls. At the same time, rising demands for
state and local programs and services (particularly medical assistance and cash
assistance programs) have led to increased spending.
- in recent years, both the Commonwealth and the City of Philadelphia have
tried to balance their budgets with a mix of tax increases and spending
cuts.
- Philadelphia has considered significant service cuts and privatization of
certain services which it has provided to date.
- In 1991, the Commonwealth created the Pennsylvania Inter-Governmental
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Cooperation Authority ('PICA') which it authorized to issue debt to cover
Philadelphia's budget shortfalls, eliminate the City's projected deficits
and fund its capital spending. PICA issued approximately $1.76 billion of
Special Revenue Bonds on Philadelphia's behalf. Its power to issue bonds on
Philadelphia's behalf expired at the end of 1996; as of June 30, 1999,
approximately $1.0 billion in PICA Special Revenue Bonds were outstanding.
- Pennsylvania's general obligation bonds are currently rated Aa3 by Moody's
and AA- by Standard & Poor's. Philadelphia's general obligation bonds are
rated Baa2 by Moody's and BBB by Standard & Poor's. There can be no
assurance that these ratings will not be lowered.
VIRGINIA RISKS
Virginia's economy is highly dependent on defense spending:
- there are major concentrations of defense installations in Northern Virginia
and the Hampton Roads area; and
- any substantial reductions in military spending, including base closings,
could hurt both the state and local economies.
The state's general obligations are rated AAA by Standard & Poor's and Aaa by
Moody's.
BOND QUALITY RISK
A reduction in a bond's rating may decrease its value and, indirectly, the value
of your investment in the Fund.
INSURANCE RELATED RISK
Some bonds are backed by insurance companies (as shown under Portfolios).
Insurance policies generally make payments only according to a bond's original
payment schedule and do not make early payments when a bond defaults or becomes
taxable. Although the federal government does not regulate the insurance
business, various state laws and federal initiatives and tax law changes could
significantly affect the insurance business. The claims-paying ability of the
insurance companies is generally rated A or better by Standard & Poor's or
another nationally recognized rating organization. The insurance company ratings
are subject to change at any time at the discretion of the rating agencies.
LITIGATION AND LEGISLATION RISKS
We do not know of any pending litigation that might have a material adverse
effect upon the Fund.
Future tax legislation could affect the value of the portfolio by:
- limiting real property taxes,
- reducing tax rates,
- imposing a flat or other form of tax, or
- exempting investment income from tax.
SELLING OR EXCHANGING UNITS
You can sell your units at any time for a price based on net asset value. Your
net asset value is calculated each business day by:
- ADDING the value of the bonds, net accrued interest, cash and any other Fund
assets;
- SUBTRACTING accrued but unpaid Fund expenses, unreimbursed Trustee advances,
cash held to buy back units or
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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 the secondary market continuously for over 28 years, but we
could discontinue it without prior notice for any business reason.
SELLING UNITS TO THE TRUSTEE
Regardless of whether we maintain a secondary market, you can sell your units to
the Trustee at any time by sending the Trustee a letter (with any outstanding
certificates if you hold Unit certificates). You must properly endorse your
certificates (or execute a written transfer instrument with signatures
guaranteed by an eligible institution). Sometimes, additional documents are
needed such as a trust document, certificate of corporate authority, certificate
of death or appointment as executor, administrator or guardian.
Within seven days after your request and the necessary documents are received,
the Trustee will mail a check to you. Contact the Trustee for additional
information.
As long as we are maintaining a secondary market, the Trustee will sell your
units to us at a price based on net asset value. If there is no secondary
market, the Trustee may sell your units in the over-the-counter market for a
higher price, but it is not obligated to do so. In that case, you will receive
the net proceeds of the sale.
If the Fund does not have cash available to pay you for units you are selling,
the agent for the Sponsors will select bonds to be sold. Bonds will be selected
based on market and credit factors. These sales could be made at times when the
bonds would not otherwise be sold and may result in your receiving less than the
unit par value and also reduce the size and diversity of the Fund.
There could be a delay in paying you for your units:
- if the New York Stock Exchange is closed (other than customary weekend and
holiday closings);
- if the SEC determines that trading on the New York Stock Exchange is
restricted or that an emergency exists making sale or evaluation of the
bonds not reasonably practicable; and
- for any other period permitted by SEC order.
EXCHANGE OPTION
You may exchange units of certain Defined Asset Funds for units of this Fund at
a maximum exchange fee of 1.90%. You may exchange units of this Fund for units
of certain other Defined Asset Funds at a reduced sales fee if your investment
goals
21
<PAGE>
change. To exchange units, you should talk to your financial professional about
what funds are exchangeable, suitable and currently available.
Normally, an exchange is taxable and you must recognize any gain or loss on the
exchange. However, the IRS may try to disallow a loss if the portfolios of the
two funds are not materially different; you should consult your own tax adviser.
We may amend or terminate this exchange option at any time without notice.
HOW THE FUND WORKS
PRICING
The price of a unit includes interest accrued on the bonds, less expenses, from
the initial most recent Record Day up to, but not including, the settlement
date, which is usually three business days after the purchase date of the unit.
A portion of the price of a unit consists of cash so that the Trustee can
provide you with regular monthly income. When you sell your units you will
receive your share of this cash.
EVALUATIONS
An independent Evaluator values the bonds on each business day (excluding
Saturdays, Sundays and the following holidays as observed by the New York Stock
Exchange: New Year's Day, Presidents' Day, Martin Luther King, Jr. Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas).
Bond values are based on current bid or offer prices for the bonds or comparable
bonds. In the past, the difference between bid and offer prices of publicly
offered tax-exempt bonds has ranged from 0.5% of face amount on actively traded
issues to 3.5% on inactively traded issues; the difference has averaged between
1 and 2%.
INCOME
The Trustee credits interest to an Income Account and other receipts to a
Capital Account. The Trustee may establish a Reserve Account by withdrawing from
these accounts amounts it considers appropriate to pay any material liability.
These accounts do not bear interest.
EXPENSES
The Trustee is paid monthly. It also benefits when it holds cash for the Fund in
non-interest bearing accounts. The Trustee may also receive additional amounts:
- to reimburse the Trustee for the Fund's operating expenses;
- for extraordinary services and costs of indemnifying the Trustee and the
Sponsors;
- costs of actions taken to protect the Fund and other legal fees and
expenses;
- expenses for keeping the Fund's registration statement current; and
- Fund termination expenses and any governmental charges.
The Sponsors are currently reimbursed up to 55 CENTS per $1,000 face amount
annually for providing portfolio supervisory, bookkeeping and administrative
services and for any other expenses properly chargeable to the Fund. Legal,
typesetting, electronic filing and regulatory filing fees and expenses
associated with updating the Portfolio's
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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 bond; if
a contract to buy any bond.
Unlike a mutual fund, the portfolio is designed to remain intact and we may keep
bonds in the portfolio even if their credit quality declines or other adverse
financial circumstances occur. However, we may sell a bond in certain cases if
we believe that certain adverse credit conditions exist or if a bond becomes
taxable.
If we maintain a secondary market in units but are unable to sell the units that
we buy in the secondary market, we will redeem units, which may affect the
composition of the portfolio. Units offered in the secondary market may not
represent the same face amount of bonds that they did originally.
We decide whether or not to offer units for sale that we acquire in the
secondary market after reviewing:
- diversity of the portfolio;
- size of the Fund relative to its original size;
- ratio of Fund expenses to income;
- current and long-term returns;
- degree to which units may be selling at a premium over par; and
- cost of maintaining a current prospectus.
FUND TERMINATION
The Fund will terminate following the stated maturity or sale of the last bond
in the portfolio. The Fund may also terminate earlier with the consent of
investors holding 51% of the units or if total assets of the Fund have fallen
below 40% of the face amount of bonds deposited. We will decide whether to
terminate the Fund early based on the same factors used in deciding whether or
not to offer units in the secondary market.
When the Fund is about to terminate you will receive a notice, and you will be
unable to sell your units after that time. On or shortly before termination, we
will sell any remaining bonds, and you will receive your final distribution. Any
bond that cannot be sold at a reasonable price may continue to be held by the
Trustee in a liquidating trust pending its final sale.
You will pay your share of the expenses associated with termination, including
brokerage costs in selling bonds. This may
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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;
- 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.
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LEGAL OPINION
Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York 10017, as
counsel for the Sponsors, has given an opinion that the units are validly
issued. Special counsel located in the relevant states have given state and
local tax opinions.
AUDITORS
Deloitte & Touche LLP, 2 World Financial Center, New York, New York 10281,
independent accountants, audited the Statements of Condition included in this
prospectus.
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 Chase Manhattan Bank, Unit Investment Trust Department, 4 New York
Plaza--6th Floor, New York, New York 10004, is the Trustee. It is supervised by
the Federal Deposit Insurance Corporation, the Board of Governors of the Federal
Reserve System and New York State banking authorities.
UNDERWRITERS' AND SPONSORS' PROFITS
Underwriters receive sales charges when they sell units. The Sponsors also
realized a profit or loss on the initial date of deposit of the bonds. Any cash
made available by you to the Sponsors before the settlement date for those units
may be used in the Sponsors' businesses to the extent permitted by federal law
and may benefit the Sponsors.
A Sponsor or Underwriter may realize profits or sustain losses on bonds in the
Fund which were acquired from underwriting syndicates of which it was a member.
In maintaining a secondary market, the Sponsors will also realize profits or
sustain losses in the amount of any difference between the prices at which they
buy units and the prices at which they resell or redeem them.
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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.
At the date of issue of each bond, counsel for the issuer delivered an opinion
to the effect that interest on the bond is exempt from regular federal income
tax. However, interest may be subject to state and local taxes and may be taken
into account in determining your preference items for alternative minimum tax
purposes. Neither we nor our counsel have reviewed the issuance of the bonds,
related proceedings or the basis for the opinions of counsel for the issuers. We
cannot assure you that the issuers (or other users of bond proceeds) have
complied or will comply with any requirements necessary for a bond to be
tax-exempt. If any of the bonds were determined not to be tax-exempt, you could
be required to pay income tax for current and prior years, and if the Fund were
to sell the bond, it might have to sell it at a substantial discount.
In the opinion of our counsel, under existing law:
GENERAL TREATMENT OF THE FUND AND YOUR INVESTMENT
The Fund will not be taxed as a corporation for federal income tax purposes, and
you will be considered to own directly your share of each bond in the Fund.
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GAIN OR LOSS UPON DISPOSITION
When all or part of your share of a bond is disposed of (for example, when the
Fund sells, exchanges or redeems a bond or when you sell or exchange your
units), you will generally recognize capital gain or loss. Your gain, however,
will generally be ordinary income to the extent of any accrued "market
discount". Generally you will have market discount to the extent that your basis
in a bond when you purchase a unit is less than its stated redemption price at
maturity (or, if it is an original issue discount bond, the issue price
increased by original issue discount that has accrued on the bond before your
purchase). You should consult your tax adviser in this regard.
If your net long-term capital gains exceed your net short-term capital losses,
the excess may be subject to tax at a lower rate than ordinary income. Any
capital gain from the Fund will be long-term if you are considered to have held
your investment on each bond for more than one year and short-term otherwise.
Because the deductibility of capital losses is subject to limitations, you may
not be able to deduct all of your capital losses.
YOUR BASIS IN THE BONDS
Your aggregate basis in the bonds will be equal to the cost of your units,
including any sales charges you pay, adjusted to reflect any accruals of
"original issue discount," "acquisition premium" and "bond premium". You should
consult your tax adviser in this regard.
EXPENSES
If you are not a corporate investor, you will not be entitled to a deduction for
your share of fees and expenses of the Fund. Also, if you borrowed money in
order to purchase or carry your units, you will not be able to deduct the
interest on this borrowing for federal income tax purposes. The IRS may treat
your purchase of units as made with borrowed money even if the money is not
directly traceable to the purchase of units.
NEW YORK TAXES
Under the income tax laws of the State and City of New York, the Fund will not
be taxed as a corporation. If you are a New York taxpayer, your income from the
Fund will not be tax-exempt in New York except to the extent that the income is
earned on bonds that are tax-exempt for New York purposes. Depending on where
you live, your income from the Fund may be subject to state and local taxation.
You should consult your tax adviser in this regard.
CALIFORNIA TAXES
In the opinion of O'Melveny & Myers LLP, Los Angeles, California, special
counsel on California tax matters:
Under the income tax laws of the State of California, the Trust will not be
taxed as a corporation and you will be considered to own directly your share of
each bond of the Trust. If you are a California taxpayer, your share of the
income from the bonds of the Trust will not be tax-exempt in California except
for California personal income tax purposes and only to the extent that the
income is earned on bonds that are exempt
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for such purposes. If you are a California taxpayer and all or part of your
share of a bond is disposed of (for example, when a bond is sold, exchanged or
redeemed at maturity or you sell or exchange your units), you will recognize
gain or loss for California tax purposes. Depending on where you live, your
income from the Trust may be subject to state and local taxation. You should
consult your tax advisor in this regard.
NEW JERSEY TAXES
In the opinion of Drinker Biddle & Reath LLP, Philadelphia, Pennsylvania,
special counsel on New Jersey tax matters:
The Fund will not be taxed as a corporation under the current income tax laws of
the State of New Jersey. Your income from the Fund may be subject to taxation
depending on where you live. If you are a New Jersey taxpayer your income from
the Fund (including gains on sales of bonds by the Fund) and gains on sales of
units by you will be tax-exempt to the extent that income and gains are earned
on bonds that are tax-exempt for New Jersey purposes. You should consult your
tax adviser as to the consequences to you with respect to any investment you
make in the Fund.
PENNSYLVANIA TAXES
In the opinion of Drinker Biddle & Reath LLP, Philadelphia, Pennsylvania,
special counsel on Pennsylvania tax matters:
The Pennsylvania Trust will not be taxed as a corporation under the current
income tax laws of Pennsylvania. Your income from the Trust may be subject to
taxation depending on where you live. If you are a Pennsylvania taxpayer your
interest income from the Trust will be tax-exempt to the extent that income is
earned on bonds that are tax-exempt for Pennsylvania purposes. However, gains on
the sale of bonds by the Trust or on the sale of your units will be subject to
Pennsylvania income tax. If you are a Philadelphia resident you may be subject
to the Philadelphia school district tax on any gains realized from the sale of
bonds by the Trust or the sale of units by you to the extent either the bonds or
units have been held for six months or less. You should consult your tax adviser
as to the consequences to you with respect to any investment you make in the
Trust.
VIRGINIA TAXES
In the opinion of Hunton & Williams, Richmond, Virginia, special counsel on
Virginia tax matters:
Under the income tax laws of the State of Virginia, the Virginia Trust will not
be taxed as a corporation. If you are a Virginia taxpayer, your income from the
Virginia Trust will not be tax-exempt in Virginia except to the extent that the
income is attributable to either (i) interest earned on bonds that are
tax-exempt for Virginia purposes, (ii) profits from the sale of bonds of
Virginia or any political subdivision or instrumentality of Virginia, or (iii)
profits from the sale of bonds of the United States or any authority,
commission, or instrumentality of the United States. If, at the time of your
death, you either are a Virginia resident or, in certain cases, are not a
resident of the United States, your units may be subject to Virginia estate tax.
You
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should consult your tax adviser in these matters.
SUPPLEMENTAL INFORMATION
You can receive at no cost supplemental information about the Fund by calling
the Trustee. The supplemental information includes more detailed risk disclosure
about the types of bonds that may be in the Fund's portfolios, general risk
disclosure concerning any insurance securing certain bonds, and general
information about the structure and operation of the Fund. The supplemental
information is also available from the SEC.
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MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 31 (CALIFORNIA, NEW JERSEY,
PENNSYLVANIA AND VIRGINIA TRUSTS),
DEFINED ASSET FUNDS
REPORT OF INDEPENDENT ACCOUNTANTS
The Sponsors, Trustee and Holders
of Municipal Investment Trust Fund,
Multistate Series - 31 (California, New Jersey, Pennsylvania
and Virginia Trusts), Defined Asset Funds:
We have audited the accompanying statements of condition of
Municipal Investment Trust Fund, Multistate Series - 31
(California, New Jersey, Pennsylvania and Virginia Trusts),
Defined Asset Funds, including the portfolios, 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 portfolios, were confirmed to us by The Chase
Manhattan Bank, the Trustee. An audit also includes assessing
the accounting principles used and significant estimates made
by the Trustee, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial
position of Municipal Investment Trust Fund, Multistate Series -
31 (California, New Jersey, Pennsylvania and Virginia Trusts),
Defined Asset Funds at March 31, 2000 and the results of their
operations and changes in their 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.
July 6, 2000
D - 1
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MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 31 (CALIFORNIA TRUST),
DEFINED ASSET FUNDS
STATEMENT OF CONDITION
As of March 31, 2000
<TABLE>
<S> <C>
TRUST PROPERTY:
Investment in marketable securities
at value (cost $ 6,412,916)(Note 1) ......... $ 6,550,120
Accrued interest................................ 123,198
Proceeds receivable from sale of securities..... 45,780
Cash - principal ............................... 7,426
-------------
Total trust property ......................... 6,726,524
LESS LIABILITIES:
Income advance from Trustee..................... $ 41,007
Accrued Sponsors' fees ......................... 837
Redemptions payable ............................ 45,373 87,217
------------- -------------
NET ASSETS, REPRESENTED BY:
6,578 units of fractional undivided
interest outstanding (Note 3) ............... 6,558,528
Undistributed net investment income ............ 80,779 $ 6,639,307
------------- =============
UNIT VALUE ($ 6,639,307 / 6,578 units)............ $ 1,009.32
=============
</TABLE>
See Notes to Financial Statements.
D - 2
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 31 (CALIFORNIA TRUST),
DEFINED ASSET FUNDS
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended March 31,
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income ........................ $ 412,181 $ 454,827 $ 479,508
Trustee's fees and expenses ............ (7,675) (7,872) (8,922)
Sponsors' fees ......................... (3,410) (3,024) (3,105)
----------------------------------------------
Net investment income .................. 401,096 443,931 467,481
----------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Realized gain on
securities sold or redeemed .......... 50,811 27,054 17,134
Unrealized appreciation (depreciation)
of investments ....................... (479,723) 49,850 617,562
----------------------------------------------
Net realized and unrealized
gain (loss) on investments ........... (428,912) 76,904 634,696
----------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS .............. $ (27,816) $ 520,835 $ 1,102,177
==============================================
</TABLE>
See Notes To Financial Statements.
D - 3
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 31 (CALIFORNIA TRUST),
DEFINED ASSET FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Years Ended March 31,
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
OPERATIONS:
Net investment income .................. $ 401,096 $ 443,931 $ 467,481
Realized gain on
securities sold or redeemed .......... 50,811 27,054 17,134
Unrealized appreciation (depreciation)
of investments ....................... (479,723) 49,850 617,562
----------------------------------------------
Net increase (decrease) in net assets
resulting from operations ............ (27,816) 520,835 1,102,177
----------------------------------------------
DISTRIBUTIONS TO HOLDERS (Note 2):
Income ................................ (402,022) (444,501) (467,715)
Principal .............................. (23,795) (13,201) (21,458)
----------------------------------------------
Total distributions .................... (425,817) (457,702) (489,173)
----------------------------------------------
SHARE TRANSACTIONS:
Redemption amounts - income ............ (13,132) (4,026) (6,120)
Redemption amounts - principal ......... (1,155,903) (394,477) (516,528)
----------------------------------------------
Total share transactions ............... (1,169,035) (398,503) (522,648)
----------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS .... (1,622,668) (335,370) 90,356
NET ASSETS AT BEGINNING OF YEAR .......... 8,261,975 8,597,345 8,506,989
----------------------------------------------
NET ASSETS AT END OF YEAR ................ $ 6,639,307 $ 8,261,975 $ 8,597,345
==============================================
PER UNIT:
Income distributions during
year ................................. $ 55.67 $ 55.96 $ 56.07
==============================================
Principal distributions during
year ................................. $ 3.38 $ 1.68 $ 2.62
==============================================
Net asset value at end of
year ................................. $ 1,009.32 $ 1,069.37 $ 1,061.66
==============================================
TRUST UNITS:
Redeemed during year ................... 1,148 372 505
Outstanding at end of year ............. 6,578 7,726 8,098
==============================================
</TABLE>
See Notes To Financial Statements.
D - 4
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 31 (CALIFORNIA TRUST),
DEFINED ASSET FUNDS
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Fund is registered under the Investment Company Act of 1940 as a
Unit Investment Trust. The following is a summary of significant
accounting policies consistently followed by the Fund in the
preparation of its financial statements. The policies are in
accordance with accounting principles generally accepted in the
United States of America.
(A) Securities are stated at value as determined by the
Evaluator based on bid side evaluations for the securities.
(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 6,578 units at Date of Deposit ..................... $ 6,784,714
Less sales charge .......................................... 305,312
-----------
Net amount applicable to Holders ........................... 6,479,402
Redemptions of units - net cost of 2,422 units redeemed
less redemption amounts (principal)....................... (75,170)
Realized gain on securities sold or redeemed ............... 90,138
Principal distributions .................................... (73,046)
Unrealized appreciation of investments...................... 137,204
-----------
Net capital applicable to Holders .......................... $ 6,558,528
===========
</TABLE>
4. INCOME TAXES
As of March 31, 2000, unrealized appreciation of investments, based
on cost for Federal income tax purposes, aggregated $137,204, all of
which related to appreciated securities. The cost of investment
securities for Federal income tax purposes was $6,412,916 at March
31, 2000.
D - 5
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 31 (CALIFORNIA TRUST) (INSURED),
DEFINED ASSET FUNDS
PORTFOLIO
As of March 31, 2000
<TABLE>
<CAPTION>
Rating of Optional
Portfolio No. and Title of Issues Face Redemption
Securities (1) (5) Amount Coupon Maturities(3) Provisions(3) Cost Value(2)
---------- --------- ----------- ----------- ----------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 City of Los Angeles, CA, Wastewater AAA $ 1,135,000 6.000 % 2018 12/01/01 $ 1,143,774 $ 1,153,886
System Rev. Rfdg. Bonds, Ser. A 1992 @ 102.000
(Financial Guaranty Ins.)
2 County of Sacramento, CA, Airport AAA 145,000 5.750 2024(4) 07/01/02 142,506 149,359
System Rev. Bonds, Ser. 1992 B @ 100.000
(Financial Guaranty Ins.)
520,000 5.750 2024 07/01/02 511,056 520,380
@ 100.000
3 Los Angeles Cnty. Capital Assets AAA 1,105,000 6.000 2016 12/01/02 1,114,105 1,124,194
Leasing Corp., CA, Lease Rev. Bonds @ 102.000
(1992 Master Rfdg, Proj,) (AMBAC Ins.)
4 Los Angeles Cnty., CA, Metro. Trans. AAA 690,000 6.000 2023(4) 07/01/02 695,534 726,929
Comm., Prop. C Sales Tax Rev. Bonds, @ 102.000
Second Sr. Bonds, 1992-A (MBIA Ins.)
5 M-S-R Pub. Pwr. Agency, CA Rfdg. Rev. AAA 1,155,000 6.000 2020 07/01/03 1,164,829 1,177,222
Bonds, (San Juan Proj.), Ser. F @ 102.000
(AMBAC Ins.)
6 State Public Works Board of The State AAA 715,000 5.000 2019 None 646,768 666,616
of California Lease Rev. Rfdg.
Bonds (Dept. of Corrections), Ser.
1993 A (AMBAC Ins.)
7 State of California, Various Purpose AAA 1,040,000 5.500 2019 04/01/03 994,344 1,031,534
G.O. Bonds (FSA Ins.) @ 102.000
----------- ----------- -----------
$ 6,505,000 $ 6,412,916 $ 6,550,120
=========== =========== ===========
</TABLE>
See Notes To Portfolios on page D - 23.
D - 6
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 31 (NEW JERSEY TRUST),
DEFINED ASSET FUNDS
STATEMENT OF CONDITION
As of March 31, 2000
<TABLE>
<S> <C>
TRUST PROPERTY:
Investment in marketable securities
at value (cost $ 4,640,131)(Note 1) ......... $ 4,665,724
Accrued interest................................ 77,488
Cash - principal ............................... 47
-------------
Total trust property ......................... 4,743,259
LESS LIABILITIES:
Income advance from Trustee..................... $ 18,147
Accrued Sponsors' fees ......................... 579 18,726
------------- -------------
NET ASSETS, REPRESENTED BY:
4,734 units of fractional undivided
interest outstanding (Note 3) ............... 4,665,771
Undistributed net investment income ............ 58,762 $ 4,724,533
------------- =============
UNIT VALUE ($ 4,724,533 / 4,734 units)............ $ 998.00
=============
</TABLE>
See Notes To Financial Statements.
D - 7
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 31 (NEW JERSEY TRUST),
DEFINED ASSET FUNDS
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended March 31,
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income ........................ $ 275,686 $ 307,834 $ 320,365
Trustee's fees and expenses ............ (6,070) (6,217) (7,148)
Sponsors' fees ......................... (2,363) (2,037) (2,088)
----------------------------------------------
Net investment income .................. 267,253 299,580 311,129
----------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Realized gain on
securities sold or redeemed .......... 12,530 19,682 5,691
Unrealized appreciation (depreciation)
of investments ....................... (304,403) 31,855 372,045
----------------------------------------------
Net realized and unrealized
gain (loss) on investments ........... (291,873) 51,537 377,736
----------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS .............. $ (24,620) $ 351,117 $ 688,865
==============================================
</TABLE>
See Notes To Financial Statements.
D - 8
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 31 (NEW JERSEY TRUST),
DEFINED ASSET FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Years Ended March 31,
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
OPERATIONS:
Net investment income .................. $ 267,253 $ 299,580 $ 311,129
Realized gain on
securities sold or redeemed .......... 12,530 19,682 5,691
Unrealized appreciation (depreciation)
of investments ....................... (304,403) 31,855 372,045
----------------------------------------------
Net increase (decrease) in net assets
resulting from operations ............ (24,620) 351,117 688,865
----------------------------------------------
DISTRIBUTIONS TO HOLDERS (Note 2):
Income ................................ (267,598) (299,902) (311,322)
Principal .............................. (25,611) (11,013) (4,836)
----------------------------------------------
Total distributions .................... (293,209) (310,915) (316,158)
----------------------------------------------
SHARE TRANSACTIONS:
Redemption amounts - income ............ (5,129) (3,715) (3,236)
Redemption amounts - principal ......... (436,054) (341,951) (269,245)
----------------------------------------------
Total share transactions ............... (441,183) (345,666) (272,481)
----------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS .... (759,012) (305,464) 100,226
NET ASSETS AT BEGINNING OF YEAR .......... 5,483,545 5,789,009 5,688,783
----------------------------------------------
NET ASSETS AT END OF YEAR ................ $ 4,724,533 $ 5,483,545 $ 5,789,009
==============================================
PER UNIT:
Income distributions during
year ................................. $ 54.89 $ 55.39 $ 55.45
==============================================
Principal distributions during
year ................................. $ 5.41 $ 2.05 $ 0.86
==============================================
Net asset value at end of
year ................................. $ 998.00 $ 1,062.29 $ 1,055.43
==============================================
TRUST UNITS:
Redeemed during year ................... 428 323 265
Outstanding at end of year ............. 4,734 5,162 5,485
==============================================
</TABLE>
See Notes To Financial Statements.
D - 9
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 31 (NEW JERSEY TRUST),
DEFINED ASSET FUNDS
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Fund is registered under the Investment Company Act of 1940 as a
Unit Investment Trust. The following is a summary of significant
accounting policies consistently followed by the Fund in the
preparation of its financial statements. The policies are in
accordance with accounting principles generally accepted in the
United States of America.
(A) Securities are stated at value as determined by the
Evaluator based on bid side evaluations for the securities.
(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 4,734 units at Date of Deposit ..................... $ 4,916,463
Less sales charge .......................................... 221,221
-----------
Net amount applicable to Holders ........................... 4,695,242
Redemptions of units - net cost of 1,266 units redeemed
less redemption amounts (principal)....................... (43,986)
Realized gain on securities sold or redeemed ............... 39,655
Principal distributions .................................... (50,733)
Net unrealized appreciation of investments.................. 25,593
-----------
Net capital applicable to Holders .......................... $ 4,665,771
===========
</TABLE>
4. INCOME TAXES
As of March 31, 2000, net unrealized appreciation of investments,
based on cost for Federal income tax purposes, aggregated $25,593,
of which $3,100 related to depreciated securities and $28,693
related to appreciated securities The cost of investment securities
for Federal income tax purposes was $4,640,131 at March 31, 2000.
D - 10
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 31 (NEW JERSEY TRUST) (INSURED),
DEFINED ASSET FUNDS
PORTFOLIO
As of March 31, 2000
<TABLE>
<CAPTION>
Rating of Optional
Portfolio No. and Title of Issues Face Redemption
Securities (1) (5) Amount Coupon Maturities(3) Provisions(3) Cost Value(2)
---------- --------- ----------- ----------- ----------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Cape May Cnty., NJ, Mun. Util. Auth., AAA $ 115,000 5.750 % 2016 01/01/03 $ 115,000 $ 116,320
Swr. Rev. Rfdg. Bonds, Ser. 1992-A @ 102.000
(MBIA Ins.)
2 New Jersey Hlth. Care Fac. Fin. Auth., AAA 365,000 5.500 2023 07/01/03 351,951 351,083
Rev. Bonds, JFK Hlth. Sys. Obligated @ 102.000
Group Issue, Ser. 1993 (Financial
Guaranty Ins.)
3 New Jersey Hlth. Care Fac. Fin. Auth., AAA 600,000 5.700 2023 07/01/03 591,426 591,426
Rev. Bonds, Underwood-Mem. Hosp. Issue, @ 102.000
Ser. B (AMBAC Ins.)
4 New Jersey Sports and Expos. Auth., AAA 740,000 5.500 2022 07/01/02 718,984 718,673
Convention Center. Luxury Tax Bonds, @ 102.000
Ser. 1992 A (MBIA Ins.)
5 North Jersey District Water Supply AAA 695,000 6.000 2021 07/01/03 706,982 707,107
Comm., NJ, Wanaque South Proj., Rev. @ 102.000
Rfdg. Bonds, Ser. 1993 (MBIA Ins.)
6 Northwest Bergen County Utilities AAA 320,000 6.000 2013 07/15/03 326,941 331,376
Authority, NJ, Utility System Revenue @ 102.000
Refunding Bonds Ser. 1992 (MBIA Ins.)
7 Passaic Valley Sewerage Commissioners, AAA 500,000 5.875 2022 12/01/02 505,210 503,290
NJ, Swr. Sys. Bonds, Ser. D (AMBAC @ 102.000
Ins.)
8 Salem County Improvement Authority AAA 550,000 5.700 2017 05/01/03 546,409 554,208
Revenue Refunding Bonds (Correctional @ 102.000
Facility and Court House Annex) Ser.
1993 (AMBAC Ins.)
</TABLE>
D - 11
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 31 (NEW JERSEY TRUST) (INSURED),
DEFINED ASSET FUNDS
PORTFOLIO
As of March 31, 2000
<TABLE>
<CAPTION>
Rating of Optional
Portfolio No. and Title of Issues Face Redemption
Securities (1) (5) Amount Coupon Maturities(3) Provisions(3) Cost Value(2)
---------- --------- ----------- ----------- ----------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
9 The Essex Cnty. Imp. Auth., NJ, Cnty. AAA $ 805,000 5.500 % 2020 12/01/03 $ 777,228 $ 792,241
G.O. Lease Rev. Rfdg. Bonds, Ser. 1993 @ 102.000
(AMBAC Ins.)
----------- ----------- -----------
$ 4,690,000 $ 4,640,131 $ 4,665,724
=========== =========== ===========
</TABLE>
See Notes To Portfolios on page D - 23.
D - 12
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 31 (PENNSYLVANIA TRUST),
DEFINED ASSET FUNDS
STATEMENT OF CONDITION
As of March 31, 2000
<TABLE>
<S> <C>
TRUST PROPERTY:
Investment in marketable securities
at value (cost $ 3,113,578)(Note 1) ......... $ 3,135,522
Accrued interest................................ 67,754
Cash - principal ............................... 5,041
-------------
Total trust property ......................... 3,208,317
LESS LIABILITIES:
Income advance from Trustee..................... $ 28,554
Accrued Sponsors' fees ......................... 396 28,950
------------- -------------
NET ASSETS, REPRESENTED BY:
3,183 units of fractional undivided
interest outstanding (Note 3) ............... 3,140,563
Undistributed net investment income ............ 38,804 $ 3,179,367
------------- =============
UNIT VALUE ($ 3,179,367 / 3,183 units)............ $ 998.86
=============
</TABLE>
See Notes To Financial Statements.
D - 13
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 31 (PENNSYLVANIA TRUST),
DEFINED ASSET FUNDS
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended March 31,
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income ........................ $ 190,912 $ 214,369 $ 247,982
Trustee's fees and expenses ............ (4,835) (4,868) (5,372)
Sponsors' fees ......................... (1,557) (1,498) (1,597)
----------------------------------------------
Net investment income .................. 184,520 208,003 241,013
----------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Realized gain on
securities sold or redeemed .......... 5,345 40,547 8,153
Unrealized appreciation (depreciation)
of investments ....................... (194,761) 13,849 250,999
----------------------------------------------
Net realized and unrealized
gain (loss) on investments ........... (189,416) 54,396 259,152
----------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS .............. $ (4,896) $ 262,399 $ 500,165
==============================================
</TABLE>
See Notes To Financial Statements.
D - 14
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 31 (PENNSYLVANIA TRUST),
DEFINED ASSET FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Years Ended March 31,
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
OPERATIONS:
Net investment income .................. $ 184,520 $ 208,003 $ 241,013
Realized gain on
securities sold or redeemed .......... 5,345 40,547 8,153
Unrealized appreciation (depreciation)
of investments ....................... (194,761) 13,849 250,999
----------------------------------------------
Net increase (decrease) in net assets
resulting from operations ............ (4,896) 262,399 500,165
----------------------------------------------
DISTRIBUTIONS TO HOLDERS (Note 2):
Income ................................ (185,100) (208,697) (240,885)
Principal .............................. (15,561) (27,483) (4,220)
----------------------------------------------
Total distributions .................... (200,661) (236,180) (245,105)
----------------------------------------------
SHARE TRANSACTIONS:
Redemption amounts - income ............ (2,819) (7,047) (3,057)
Redemption amounts - principal ......... (269,204) (658,583) (303,472)
----------------------------------------------
Total share transactions ............... (272,023) (665,630) (306,529)
----------------------------------------------
NET DECREASE IN NET ASSETS ............... (477,580) (639,411) (51,469)
NET ASSETS AT BEGINNING OF YEAR .......... 3,656,947 4,296,358 4,347,827
----------------------------------------------
NET ASSETS AT END OF YEAR ................ $ 3,179,367 $ 3,656,947 $ 4,296,358
==============================================
PER UNIT:
Income distributions during
year ................................. $ 55.29 $ 55.76 $ 56.01
==============================================
Principal distributions during
year ................................. $ 4.74 $ 7.53 $ 0.99
==============================================
Net asset value at end of
year ................................. $ 998.86 $ 1,058.45 $ 1,052.51
==============================================
TRUST UNITS:
Redeemed during year ................... 272 627 292
Outstanding at end of year ............. 3,183 3,455 4,082
==============================================
</TABLE>
See Notes To Financial Statements.
D - 15
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 31 (PENNSYLVANIA TRUST),
DEFINED ASSET FUNDS
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Fund is registered under the Investment Company Act of 1940 as a
Unit Investment Trust. The following is a summary of significant
accounting policies consistently followed by the Fund in the
preparation of its financial statements. The policies are in
accordance with accounting principles generally accepted in the
United States of America.
(A) Securities are stated at value as determined by the
Evaluator based on bid side evaluations for the securities.
(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 3,183 units at Date of Deposit ..................... $ 3,325,251
Less sales charge .......................................... 149,635
-----------
Net amount applicable to Holders ........................... 3,175,616
Redemptions of units - net cost of 1,817 units redeemed
less redemption amounts (principal)....................... (54,123)
Realized gain on securities sold or redeemed ............... 58,612
Principal distributions .................................... (61,486)
Net unrealized appreciation of investments.................. 21,944
-----------
Net capital applicable to Holders .......................... $ 3,140,563
===========
</TABLE>
4. INCOME TAXES
As of March 31, 2000, net unrealized appreciation of investments,
based on cost for Federal income tax purposes, aggregated $21,944,
of which $5,331 related to depreciated securities and $27,275
related to appreciated securities. The cost of investment securities
for Federal income tax purposes was $3,113,578 at March 31, 2000.
D - 16
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 31 (PENNSYLVANIA TRUST) (INSURED),
DEFINED ASSET FUNDS
PORTFOLIO
As of March 31, 2000
<TABLE>
<CAPTION>
Rating of Optional
Portfolio No. and Title of Issues Face Redemption
Securities (1) (5) Amount Coupon Maturities(3) Provisions(3) Cost Value(2)
---------- --------- ----------- ----------- ----------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Allegheny Cnty., PA, Hosp. Dev. Auth., AAA $ 750,000 6.000 % 2023 11/01/02 $ 756,180 $ 750,848
Hlth. Care Ctr. Rev. Rfdg. Bonds, Ser. @ 102.000
1992 B (Presbyterian Univ. Hlth. Sys.,
Inc. Proj.) (MBIA Ins.)
2 Downington Municipal Water Authority, AAA 35,000 5.900 2025(4) 09/01/03 35,132 36,265
Chester County, Pennsylvania, Gtd. @ 100.000
Water Revenue Bonds, Ser. of 1993 A
(AMBAC Ins.)
3 North Wales Wtr. Auth., PA, Montgomery AAA 370,000 5.500 2016 11/01/03 360,450 361,723
Cnty., Wtr. Rev. Bonds, Ser. 1992 A @ 100.000
(Financial Guaranty Ins.)
4 Pennsylvania Turnpike Commission, AAA 325,000 5.750 2012 12/01/02 326,339 331,487
Turnpike Revenue Bonds, Series P of @ 102.000
1992 (AMBAC Ins.)
5 Pennyslvania Higher Educl. Fac. Auth., AAA 750,000 5.750 2031 04/01/01 733,013 738,270
Temple Univ. Rev. Bonds, Ser. 1991 @ 100.000
(MBIA Ins.)
6 Pittsburgh, Pennsylvania Public AAA 390,000 5.875 2012 12/01/02 395,717 399,294
Parking Authority, Parking System @ 102.000
Revenue Bonds, Series 1992 A
(Financial Guaranty Ins.)
7 Southwest Delaware Cnty., PA, Mun. AAA 505,000 5.850 2022(4) 08/01/02 506,747 517,635
Auth. Gtd. Swr. Rev. Bonds, Ser. of @ 100.000
1992 (AMBAC Ins.)
----------- ----------- -----------
$ 3,125,000 $ 3,113,578 $ 3,135,522
=========== =========== ===========
</TABLE>
See Notes To Portfolios on page D - 23.
D - 17
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 31 (VIRGINIA TRUST),
DEFINED ASSET FUNDS
STATEMENT OF CONDITION
As of March 31, 2000
<TABLE>
<S> <C>
TRUST PROPERTY:
Investment in marketable securities
at value (cost $ 2,298,294)(Note 1) ......... $ 2,303,874
Accrued interest................................ 36,586
Cash - principal ............................... 753
-------------
Total trust property ......................... 2,341,213
LESS LIABILITIES:
Income advance from Trustee..................... $ 5,214
Accrued Sponsors' fees ......................... 289 5,503
------------- -------------
NET ASSETS, REPRESENTED BY:
2,343 units of fractional undivided
interest outstanding (Note 3) ............... 2,304,627
Undistributed net investment income ............ 31,083 $ 2,335,710
------------- =============
UNIT VALUE ($ 2,335,710 / 2,343 units)............ $ 996.89
=============
</TABLE>
See Notes to Financial Statements.
D - 18
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 31 (VIRGINIA TRUST),
DEFINED ASSET FUNDS
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended March 31,
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income ........................ $ 141,776 $ 154,369 $ 159,890
Trustee's fees and expenses ............ (4,112) (3,979) (4,766)
Sponsors' fees ......................... (1,165) (1,003) (1,009)
----------------------------------------------
Net investment income .................. 136,499 149,387 154,115
----------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Realized gain on
securities sold or redeemed .......... 1,372 11,139 3,017
Unrealized appreciation (depreciation)
of investments ....................... (130,516) (2,548) 167,673
----------------------------------------------
Net realized and unrealized
gain (loss) on investments ........... (129,144) 8,591 170,690
----------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS .............. $ 7,355 $ 157,978 $ 324,805
==============================================
</TABLE>
See Notes To Financial Statements.
D - 19
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 31 (VIRGINIA TRUST),
DEFINED ASSET FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Years Ended March 31,
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
OPERATIONS:
Net investment income .................. $ 136,499 $ 149,387 $ 154,115
Realized gain on
securities sold or redeemed .......... 1,372 11,139 3,017
Unrealized appreciation (depreciation)
of investments ....................... (130,516) (2,548) 167,673
----------------------------------------------
Net increase in net assets
resulting from operations ............ 7,355 157,978 324,805
----------------------------------------------
DISTRIBUTIONS TO HOLDERS (Note 2):
Income ................................ (136,571) (149,690) (154,214)
Principal .............................. (10,193) (2,444) (5,530)
----------------------------------------------
Total distributions .................... (146,764) (152,134) (159,744)
----------------------------------------------
SHARE TRANSACTIONS:
Redemption amounts - income ............ (2,724) (1,527) (1,464)
Redemption amounts - principal ......... (203,810) (144,402) (116,615)
----------------------------------------------
Total share transactions ............... (206,534) (145,929) (118,079)
----------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS .... (345,943) (140,085) 46,982
NET ASSETS AT BEGINNING OF YEAR .......... 2,681,653 2,821,738 2,774,756
----------------------------------------------
NET ASSETS AT END OF YEAR ................ $ 2,335,710 $ 2,681,653 $ 2,821,738
==============================================
PER UNIT:
Income distributions during
year ................................. $ 55.68 $ 56.21 $ 56.12
==============================================
Principal distributions during
year ................................. $ 4.11 $ 0.91 $ 2.04
==============================================
Net asset value at end of
year ................................. $ 996.89 $ 1,052.45 $ 1,050.54
==============================================
TRUST UNITS:
Redeemed during year ................... 205 138 114
Outstanding at end of year ............. 2,343 2,548 2,686
==============================================
</TABLE>
See Notes To Financial Statements.
D - 20
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 31 (VIRGINIA TRUST),
DEFINED ASSET FUNDS
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Fund is registered under the Investment Company Act of 1940 as a
Unit Investment Trust. The following is a summary of significant
accounting policies consistently followed by the Fund in the
preparation of its financial statements. The policies are in
accordance with accounting principles generally accepted in the
United States of America.
(A) Securities are stated at value as determined by the
Evaluator based on bid side evaluations for the securities.
(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 2,343 units at Date of Deposit ..................... $ 2,447,755
Less sales charge .......................................... 110,147
-----------
Net amount applicable to Holders ........................... 2,337,608
Redemptions of units - net cost of 957 units redeemed
less redemption amounts (principal)....................... 16,523
Realized loss on securities sold or redeemed ............... (22,966)
Principal distributions .................................... (32,118)
Net unrealized appreciation of investments.................. 5,580
-----------
Net capital applicable to Holders .......................... $ 2,304,627
===========
</TABLE>
4. INCOME TAXES
As of March 31, 2000, net realized appreciation of investments,
based on cost for Federal income tax purposes, aggregated $5,580, of
which $12,892 related to depreciated securities and $18,472 realted
to appreciated securities. The cost of investment securities for
Federal income tax purposes was $2,298,294 at March 31, 2000.
D - 21
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 31 (VIRGINIA TRUST),
DEFINED ASSET FUNDS
PORTFOLIO
As of March 31, 2000
<TABLE>
<CAPTION>
Rating Optional
Portfolio No. and Title of of Face Redemption
Securities Issues(1) Amount Coupon Maturities(3) Provisions(3) Cost Value(2)
---------- --------- ----------- ----------- ----------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Chesapeake Bay Bridge and Tunnel Dist., AAA $ 385,000 5.750 % 2025(4) 07/01/01 $ 382,166 $ 391,129
VA, Gen. Resolution Rev. Bonds, Rfdg. @ 100.000
Ser. 1991 (MBIA Ins.) (6)
2 City of Richmond, VA, G.O. Pub. Imp. AA 410,000 6.250 2018 07/15/04 422,029 417,597
Rfdg. Bonds, Ser. 1991 B @ 102.000
3 Cnty of Roanoke, VA, G.O. Pub. Imp. AA 470,000 5.000 2021 06/01/03 421,087 421,299
and Rfdg. Bonds, Ser. 1993 @ 100.000
4 Commonwealth of Puerto Rico, Pub. Imp. Aaa(m) 65,000 6.000 2022(4) 07/01/02 65,000 68,026
Bonds of 1993 (G.O. Bonds) @ 101.500
Public Improvement Bonds of 1993
(General Oblig.)
5 Fairfax Cnty., VA, Wtr. Auth., Wtr. AA 190,000 5.750 2029 04/01/02 188,567 189,468
Rfdg. Rev. Bonds, Ser. 1992 @ 100.000
6 Loudoun County Virginia, Sanitation AAA 390,000 6.250 2016 01/01/03 403,065 408,435
Auth., Wtr. and Swr. Sys. Rev. Bonds, @ 102.000
Rfdg. Ser. 1992 (Financial Guaranty
Ins.) (6)
7 Richmond VA, Metro. Auth., Expwy. AAA 400,000 6.250 2022 07/15/04 416,380 407,920
Refunding Bonds, Ser. 1992-B @ 102.000
(Financial Guaranty Ins.) (6)
--------- --------- ---------
$ 2,310,000 $ 2,298,294 $ 2,303,874
========= ========= =========
</TABLE>
See Notes To Portfolios on page D - 23.
D - 22
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 31 (CALIFORNIA, NEW JERSEY, PENNSYLVANIA
AND VIRGINIA TRUSTS),
DEFINED ASSET FUNDS
NOTES TO PORTFOLIOS
As of March 31, 2000
(1) The ratings of the bonds are by Standard & Poor's Ratings Group, or
by Moody's Investors Service, Inc. if followed by "(m)", or by Fitch
Investors Service, Inc. if followed by "(f)"; "NR" indicates that
this bond is not currently rated by any of the above-mentioned
rating services. These ratings have been furnished by the Evaluator
but not confirmed with the rating agencies.
(2) See Notes to Financial Statements.
(3) Optional redemption provisions, which may be exercised in whole or
in part, are initially at prices of par plus a premium, then
subsequently at prices declining to par. Certain securities may
provide for redemption at par prior or in addition to any optional
or mandatory redemption dates or maturity, for example, through the
operation of a maintenance and replacement fund, if proceeds are not
able to be used as contemplated, the project is condemned or sold or
the project is destroyed and insurance proceeds are used to redeem
the securities. Many of the securities are also subject to mandatory
sinking fund redemption commencing on dates which may be prior to
the date on which securities may be optionally redeemed. Sinking
fund redemptions are at par and redeem only part of the issue. Some
of the securities have mandatory sinking funds which contain
optional provisions permitting the issuer to increase the principal
amount of securities called on a mandatory redemption date. The
sinking fund redemptions with optional provisions may, and optional
refunding redemptions generally will, occur at times when the
redeemed securities have an offering side evaluation which
represents a premium over par. To the extent that the securities
were acquired at a price higher than the redemption price, this will
represent a loss of capital when compared with the Public Offering
Price of the Units when acquired. Distributions will generally be
reduced by the amount of the income which would otherwise have been
paid with respect to redeemed securities and there will be
distributed to Holders any principal amount and premium received on
such redemption after satisfying any redemption requests for Units
received by the Fund. The estimated current return may be affected
by redemptions.
(4) Bonds with an aggregate face amount of $835,000 of the California
Trust, $540,000 of the Pennsylvania Trust and $450,000 of the
Virginia Trust have been pre-refunded and are expected to be called
for redemption on the optional redemption provision dates shown.
(5) Insured by AAA-rated insurance companies that guarantee timely
payments of principal and interest on the bonds (but not Fund units
or the market value of the bonds before they mature).
(6) Insured by the indicated municipal bond insurance company.
D - 23
<PAGE>
DEFINED ASSET FUNDS--REGISTERED TRADEMARK--
<TABLE>
<S> <C>
HAVE QUESTIONS ? MUNICIPAL INVESTMENT TRUST FUND
Request the most MULTISTATE SERIES--31
recent free Information (A Unit Investment Trust)
Supplement that gives more ---------------------------------------
details about the Fund, This Prospectus does not contain
by calling: complete information about the
The Chase Manhattan Bank investment company filed with the
1-800-323-1508 Securities and Exchange Commission in
Washington, D.C. under the:
- Securities Act of 1933 (file no.
333-49351) and
- Investment Company Act of 1940 (file
no. 811-1777).
TO OBTAIN COPIES AT PRESCRIBED RATES--
WRITE: Public Reference Section of the
Commission
450 Fifth Street, N.W., Washington,
D.C. 20549-6009
CALL: 1-800-SEC-0330.
VISIT: http://www.sec.gov.
---------------------------------------
No person is authorized to give any
information or representations about
this Fund not contained in this
Prospectus or the Information
Supplement, and you should not rely on
any other information.
---------------------------------------
When units of this Fund are no longer
available, this Prospectus may be used
as a preliminary prospectus for a
future series, but some of the
information in this Prospectus will be
changed for that series.
UNITS OF ANY FUTURE SERIES MAY NOT BE
SOLD NOR MAY OFFERS TO BUY BE ACCEPTED
UNTIL THAT SERIES HAS BECOME EFFECTIVE
WITH THE SECURITIES AND EXCHANGE
COMMISSION. NO UNITS CAN BE SOLD IN ANY
STATE WHERE A SALE WOULD BE ILLEGAL.
14462--7/00
</TABLE>
