<PAGE>
DEFINED ASSET FUNDSSM
- --------------------------------------------
- ----------------------------------
MUNICIPAL INVESTMENT TRUST FUND
MULTISTATE SERIES--54
(A UNIT INVESTMENT TRUST)
O FLORIDA, MASSACHUSETTS, NEW JERSEY AND
PENNSYLVANIA PORTFOLIOS
O PORTFOLIOS OF LONG TERM MUNICIPAL BONDS
O DESIGNED FOR FEDERALLY TAX-FREE INCOME
O EXEMPT FROM SOME STATE TAXES
O MONTHLY DISTRIBUTIONS
SPONSORS:
Merrill Lynch,
Pierce, Fenner & Smith -------------------------------------------------
Incorporated The Securities and Exchange Commission has not
Salomon Smith Barney Inc. approved or disapproved these Securities or
Prudential Securities passed upon the adequacy of this prospectus. Any
Incorporated representation to the contrary is a criminal
PaineWebber Incorporated offense.
Dean Witter Reynolds Inc. Prospectus dated April 30, 1999.
<PAGE>
- --------------------------------------------------------------------------------
Def ined Asset FundsSM
Defined Asset FundsSM 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:
o A disciplined strategy of buying and holding with a long-term view is the
cornerstone of Defined Asset Funds.
o Fixed portfolio: Defined Funds follow a buy and hold investment strategy;
funds are not managed and portfolio changes are limited.
o Defined Portfolios: We choose the stocks and bonds in advance, so you know
what you're investing in.
o Professional research: Our dedicated research team seeks out stocks or bonds
appropriate for a particular fund's objectives.
o 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 JANUARY 31, 1999, THE
EVALUATION DATE.
CONTENTS
PAGE
-----------
Florida Insured Portfolio--
Risk/Return Summary.................................. 3
Massachusetts Portfolio--Risk/Return Summary............ 6
New Jersey Insured Portfolio-- Risk/Return Summary...... 9
Pennsylvania Insured 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.................................... 21
Insurance Related Risk............................... 21
Litigation and Legislation Risks..................... 21
Selling or Exchanging Units............................. 22
Sponsors' Secondary Market........................... 22
Selling Units to the Trustee......................... 22
Exchange Option...................................... 23
How The Fund Works...................................... 23
Pricing.............................................. 23
Evaluations.......................................... 23
Income............................................... 23
Expenses............................................. 23
Portfolio Changes.................................... 24
Fund Termination..................................... 24
Certificates......................................... 25
Trust Indenture...................................... 25
Legal Opinion........................................ 25
Auditors............................................. 26
Sponsors............................................. 26
Trustee.............................................. 26
Underwriters' and Sponsors' Profits 26
Public Distribution.................................. 26
Code of Ethics....................................... 27
Year 2000 Issues..................................... 27
Taxes................................................... 27
Supplemental Information................................ 30
Financial Statements.................................... D-1
2
<PAGE>
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FLORIDA INSURED PORTFOLIO--RISK/RETURN SUMMARY
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?
O The Fund plans to hold to maturity 7 long-term tax-exempt
municipal bonds with an aggregate face amount of
$2,995,000.
o The Fund is a unit investment trust which means that,
unlike a mutual fund, the Portfolio is not managed.
o The bonds are rated AAA or Aaa by Standard & Poor's,
Moody's or Fitch.
o 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.
o 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:
APPROXIMATE
PORTFOLIO
PERCENTAGE
/ / Hospital/Health Care 33%
/ / Municipal Water/Sewer Utilities 31%
/ / Refunded Bonds 21%
/ / Municipal Electric Utilities 15%
4. WHAT ARE THE SIGNIFICANT RISKS?
YOU CAN LOSE MONEY BY INVESTING IN THE FUND. THIS CAN
HAPPEN FOR VARIOUS REASONS, INCLUDING:
o Rising interest rates, an issuer's worsening financial
condition or a drop in bond ratings can reduce the price of
your units.
o Because the Fund is concentrated in hospital/health care
and municipal water/sewer utility bonds, adverse
developments in these sectors may affect the value of your
units.
o 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.
o 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 FLORIDA SO
IT IS LESS DIVERSIFIED THAN A NATIONAL FUND AND IS SUBJECT
TO RISKS PARTICULAR TO FLORIDA WHICH ARE BRIEFLY DESCRIBED
UNDER STATE CONCENTRATION RISKS LATER IN THIS PROSPECTUS.
3
<PAGE>
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.
DEFINING YOUR INCOME
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 $ 4.12
Annual Income per unit: $ 49.50
These figures are estimates determined on the evaluation
day; actual payments may vary.
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:
YOUR MAXIMUM
SALES FEE
IF YOU INVEST: WILL BE:
----------------------------------- -----------------
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%
ESTIMATED ANNUAL FUND OPERATING EXPENSES
AMOUNT
PER UNIT
-----------
$ 0.70
Trustee's Fee
$ 0.37
Portfolio Supervision,
Bookkeeping and
Administrative Fees
(including updating
expenses)
$ 0.31
Evaluator's Fee
$ 0.35
Other Operating Expenses
-----------
$ 1.73
TOTAL
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
Florida 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 Florida Series
were offered between August 25, 1988 and December 6, 1996
and were outstanding on March 31, 1999. 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 3/31/99.
WITH SALES FEE NO SALES FEE
1 YEAR 5 YEARS 10 YEARS 1 YEAR 5 YEARS 10 YEARS
- -------------------------------------------------------------------
High 4.94% 7.40% 6.95% 7.59% 8.61% 7.55%
Average 2.24 5.62 6.79 5.45 6.67 7.39
Low -0.66 4.39 6.71 3.15 5.28 7.31
- -------------------------------------------------------------------
Average
Sales fee 3.19% 5.13% 5.82%
- -------------------------------------------------------------------
Note: All returns represent changes in unit price with distributions reinvested
into the Municipal Fund Investment Accumulation Program.
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.
4
<PAGE>
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 $1,041.23
(as of January 31, 1999)
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 Florida state and local taxes if you live in
Florida.
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.
5
<PAGE>
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MASSACHUSETTS PORTFOLIO--RISK/RETURN SUMMARY
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?
O The Fund plans to hold to maturity 7 long-term tax-exempt
municipal bonds with an aggregate face amount of
$2,925,000.
o The Fund is a unit investment trust which means that,
unlike a mutual fund, the Portfolio is not managed.
o The bonds are rated AAA or Aaa by Standard & Poor's,
Moody's or Fitch.
o 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.
o 68% 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:
APPROXIMATE
PORTFOLIO
PERCENTAGE
/ / Airports/Ports/Highways 9%
/ / General Obligation 17%
/ / Hospital/Health Care 17%
/ / Refunded Bonds 23%
/ / Universities/Colleges 34%
4. WHAT ARE THE SIGNIFICANT RISKS?
YOU CAN LOSE MONEY BY INVESTING IN THE FUND. THIS CAN
HAPPEN FOR VARIOUS REASONS, INCLUDING:
o Rising interest rates, an issuer's worsening financial
condition or a drop in bond ratings can reduce the price of
your units.
o Because the Fund is concentrated in university/college
bonds, adverse developments in this sector may affect the
value of your units.
o 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.
o 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
MASSACHUSETTS SO IT IS LESS DIVERSIFIED THAN A NATIONAL
FUND AND IS SUBJECT TO RISKS PARTICULAR TO MASSACHUSETTS
WHICH ARE BRIEFLY DESCRIBED UNDER STATE CONCENTRATION RISKS
LATER IN THIS PROSPECTUS.
6
<PAGE>
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.
DEFINING YOUR INCOME
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 $ 4.29
Annual Income per unit: $ 51.58
These figures are estimates determined on the evaluation
day; actual payments may vary.
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:
YOUR MAXIMUM
SALES FEE
IF YOU INVEST: WILL BE:
----------------------------------- -----------------
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%
ESTIMATED ANNUAL FUND OPERATING EXPENSES
AMOUNT
PER UNIT
-----------
$ 0.70
Trustee's Fee
$ 0.37
Portfolio Supervision,
Bookkeeping and
Administrative Fees
(including updating
expenses)
$ 0.32
Evaluator's Fee
$ 0.36
Other Operating Expenses
-----------
$ 1.75
TOTAL
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
Massachusetts 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 Massachusetts
Series were offered between June 23, 1989 and February 3,
1994 and were outstanding on March 31, 1999. 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 3/31/99.
WITH SALES FEE NO SALES FEE
1 YEAR 5 YEARS 1 YEAR 5 YEARS
- ---------------------------------------------------------------
High 4.64% 7.55% 6.14% 8.55%
Average 2.60 5.30 4.55 6.36
Low 0.56 4.31 3.07 5.23
- ---------------------------------------------------------------
Average
Sales fee 1.93% 5.21%
- -------------------------------------------------------------
Note: All returns represent changes in unit price with distributions reinvested
into the Municipal Fund Investment Accumulation Program.
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.
7
<PAGE>
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 $1,053.82
(as of January 31, 1999)
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 Massachusetts state and local personal
income taxes if you live in Massachusetts.
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.
8
<PAGE>
- --------------------------------------------------------------------------------
NEW JERSEY INSURED PORTFOLIO--RISK/RETURN SUMMARY
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?
O The Fund plans to hold to maturity 7 long-term tax-exempt
municipal bonds with an aggregate face amount of
$2,735,000.
o The Fund is a unit investment trust which means that,
unlike a mutual fund, the Portfolio is not managed.
o The bonds are rated AAA or Aaa by Standard & Poor's,
Moody's or Fitch.
o 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.
o 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:
APPROXIMATE
PORTFOLIO
PERCENTAGE
/ / Airports/Ports/Highways 29%
/ / General Obligation 33%
/ / Municipal Water/Sewer Utilities 38%
4. WHAT ARE THE SIGNIFICANT RISKS?
YOU CAN LOSE MONEY BY INVESTING IN THE FUND. THIS CAN
HAPPEN FOR VARIOUS REASONS, INCLUDING:
o Rising interest rates, an issuer's worsening financial
condition or a drop in bond ratings can reduce the price of
your units.
o Because the Fund is concentrated in airport/port/highway,
municipal water/sewer utility and general obligation bonds,
adverse developments in these sectors may affect the value
of your units.
o 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.
o 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.
9
<PAGE>
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.
DEFINING YOUR INCOME
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 $ 4.04
Annual Income per unit: $ 48.57
These figures are estimates determined on the evaluation
day; actual payments may vary.
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:
YOUR MAXIMUM
SALES FEE
IF YOU INVEST: WILL BE:
----------------------------------- -----------------
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%
ESTIMATED ANNUAL FUND OPERATING EXPENSES
AMOUNT
PER UNIT
-----------
$ 0.69
Trustee's Fee
$ 0.37
Portfolio Supervision,
Bookkeeping and
Administrative Fees
(including updating
expenses)
$ 0.34
Evaluator's Fee
$ 0.42
Other Operating Expenses
-----------
$ 1.82
TOTAL
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 between June 22, 1988 and September 19, 1996
and were outstanding on March 31, 1999. 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 3/31/99.
WITH SALES FEE NO SALES FEE
1 YEAR 5 YEARS 10 YEARS 1 YEAR 5 YEARS 10 YEARS
- -------------------------------------------------------------------
High 5.83% 7.04% 6.92% 7.45% 8.24% 7.52%
Average 2.55 5.41 6.80 5.53 6.46 7.40
Low 0.51 4.20 6.73 3.51 5.19 7.33
- -------------------------------------------------------------------
Average
Sales fee 2.96% 5.14% 5.82%
- -------------------------------------------------------------------
Note: All returns represent changes in unit price with distributions reinvested
into the Municipal Fund Investment Accumulation Program.
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.
10
<PAGE>
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 $1,034.09
(as of January 31, 1999)
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.
11
<PAGE>
- --------------------------------------------------------------------------------
PENNSYLVANIA INSURED PORTFOLIO--RISK/RETURN SUMMARY
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?
O The Fund plans to hold to maturity 7 long-term tax-exempt
municipal bonds with an aggregate face amount of
$3,155,000.
o The Fund is a unit investment trust which means that,
unlike a mutual fund, the Portfolio is not managed.
o The bonds are rated AAA or Aaa by Standard & Poor's,
Moody's or Fitch.
o 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.
o 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:
APPROXIMATE
PORTFOLIO
PERCENTAGE
/ / General Obligation 14%
/ / Hospital/Health Care 30%
/ / Municipal Water/Sewer Utilities 13%
/ / Refunded Bonds 11%
/ / Special Tax 16%
/ / Universities/Colleges 16%
4. WHAT ARE THE SIGNIFICANT RISKS?
YOU CAN LOSE MONEY BY INVESTING IN THE FUND. THIS CAN
HAPPEN FOR VARIOUS REASONS, INCLUDING:
o Rising interest rates, an issuer's worsening financial
condition or a drop in bond ratings can reduce the price of
your units.
o Because the Fund is concentrated in hospital/health care
bonds, adverse developments in this sector may affect the
value of your units.
o 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.
o 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.
12
<PAGE>
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.
DEFINING YOUR INCOME
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 $ 4.25
Annual Income per unit: $ 51.04
These figures are estimates determined on the evaluation
day; actual payments may vary.
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:
YOUR MAXIMUM
SALES FEE
IF YOU INVEST: WILL BE:
----------------------------------- -----------------
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%
ESTIMATED ANNUAL FUND OPERATING EXPENSES
AMOUNT
PER UNIT
-----------
$ 0.70
Trustee's Fee
$ 0.37
Portfolio Supervision,
Bookkeeping and
Administrative Fees
(including updating
expenses)
$ 0.30
Evaluator's Fee
$ 0.39
Other Operating Expenses
-----------
$ 1.76
TOTAL
The Sponsors historically paid updating expenses.
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 between May 19, 1988 and September 13,
1996 and were outstanding on March 31, 1999. 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 3/31/99.
WITH SALES FEE NO SALES FEE
1 YEAR 5 YEARS 10 YEARS 1 YEAR 5 YEARS 10 YEARS
- -------------------------------------------------------------------
High 3.65% 7.30% 6.98% 7.57% 8.50% 7.56%
Average 2.17 5.45 6.92 5.22 6.47 7.51
Low -0.52 3.96 6.81 1.23 4.98 7.41
- -------------------------------------------------------------------
Average
Sales fee 3.03% 5.04% 5.68%
- -------------------------------------------------------------------
Note: All returns represent changes in unit price with distributions reinvested
into the Municipal Fund Investment Accumulation Program.
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.
13
<PAGE>
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 $1,047.69
(as of January 31, 1999)
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 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.
14
<PAGE>
- --------------------------------------------------------------------------------
TAX-FREE VS. TAXABLE INCOME: A COMPARISON OF TAXABLE AND TAX-FREE YIELDS
FOR FLORIDA RESIDENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EFFECTIVE
TAXABLE INCOME 1999* TAX RATE TAX-FREE YIELD OF
SINGLE RETURN JOINT RETURN % 3% 3.5% 4% 4.5% 5% 5.5% 6% 6.5% 7%
IS EQUIVALENT TO A TAXABLE YIELD OF
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0- 25,750 $ 0- 43,050 15.00 3.53 4.12 4.71 5.29 5.88 6.47 7.06 7.65 8.24
$ 27,751- 62,450 $ 43,051-104,050 28.00 4.17 4.86 5.56 6.25 6.94 7.64 8.33 9.03 9.72
$ 62,451-130,250 $104,051-158,550 31.00 4.35 5.07 5.80 6.52 7.25 7.97 8.70 9.42 10.14
$130,251-283,150 $158,551-283,150 36.00 4.69 5.47 6.25 7.03 7.81 8.59 9.38 10.16 10.94
OVER $283,151 OVER $283,151 39.60 4.97 5.79 6.62 7.45 8.28 9.11 9.93 10.76 11.59
</TABLE>
FOR MASSACHUSETTS RESIDENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMBINED
EFFECTIVE
TAXABLE INCOME 1998* TAX RATE TAX-FREE YIELD OF
SINGLE RETURN JOINT RETURN % 3% 3.5% 4% 4.5% 5% 5.5% 6% 6.5%
IS EQUIVALENT TO A TAXABLE YIELD OF
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0- 25,350 $ 0- 42,350 25.20 4.01 4.68 5.36 6.02 6.88 7.35 8.02 8.69
$ 25,350- 81,400 $ 42,350-102,300 36.64 4.73 5.52 6.31 7.10 7.89 8.88 9.47 10.26
$ 81,400-128,100 $102,300-155,950 39.28 4.94 5.76 6.59 7.41 8.23 9.08 9.88 10.70
$128,100-278,450 $155,950-278,450 43.68 5.33 6.21 7.10 7.99 8.88 9.77 10.85 11.64
OVER $278,450 OVER $278,450 46.85 5.64 6.58 7.53 8.47 9.41 10.35 11.29 12.23
</TABLE>
FOR NEW JERSEY RESIDENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMBINED
EFFECTIVE
TAXABLE INCOME 1999* TAX RATE TAX-FREE YIELD OF
SINGLE RETURN JOINT RETURN % 4% 4.5% 5% 5.5% 6% 6.5% 7% 7.5% 8%
IS EQUIVALENT TO A TAXABLE YIELD OF
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0- 25,750 $ 0- 43,050 16.49 4.79 5.39 5.99 6.59 7.18 7.78 8.38 8.98 9.58
$ 25,751- 62,450 $ 43,051-104,050 31.98 5.88 6.62 7.35 8.09 8.82 9.56 10.29 11.03 11.76
$ 62,451-130,250 $104,051-158,550 35.40 6.19 6.97 7.74 8.51 9.29 10.06 10.84 11.61 12.38
$130,251-283,150 $158,551-283,150 40.08 6.68 7.51 8.34 9.18 10.01 10.85 11.68 12.52 13.35
OVER $283,151 OVER $283,151 43.45 7.07 7.96 8.84 9.73 10.61 11.49 12.38 13.26 14.15
</TABLE>
FOR PENNSYLVANIA RESIDENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMBINED
EFFECTIVE
TAXABLE INCOME 1999* TAX RATE TAX-FREE YIELD OF
SINGLE RETURN JOINT RETURN % 3% 3.5% 4% 4.5% 5% 5.5% 6% 6.5% 7%
IS EQUIVALENT TO A TAXABLE YIELD OF
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0- 25,750 $ 0- 43,050 17.38 3.63 4.24 4.84 5.45 6.05 6.66 7.26 7.87 8.47
$ 27,751- 62,450 $ 43,051-104,050 30.02 4.29 5.00 5.72 6.43 7.14 7.86 8.57 9.29 10.00
$ 62,451-130,250 $104,051-158,550 32.93 4.47 5.22 5.96 6.71 7.46 8.20 8.95 9.69 10.44
$130,251-283,150 $158,551-283,150 37.79 4.82 5.63 6.43 7.23 8.04 8.84 9.65 10.45 11.25
OVER $283,151 OVER $283,151 41.29 5.11 5.96 6.81 7.66 8.52 9.37 10.22 11.07 11.92
</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 1999
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:
o elimination of one or more bonds from the Fund's portfolio because of
calls, redemptions or sales;
o a change in the Fund's expenses; or
o 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):
Estimated Annual Estimated
Interest Income - Annual Expenses
- -------------------------------------------------
Unit Price
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:
o a monthly statement of income payments and any principal payments;
o a notice from the Trustee when new bonds are deposited in exchange or
substitution for bonds originally deposited;
o an annual report on Fund activity; and
o 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:
o copies of bond evaluations to enable you to comply with federal and state tax
reporting requirements; and
o 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:
o it no longer needs the money for the original purpose;
o the project is condemned or sold;
o the project is destroyed and insurance proceeds are used to redeem the
bonds;
o any related credit support expires and is not replaced; or
o 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 Florida and Pennsylvania Portfolios'
concentrations in hospital and health care bonds.
o payment for these bonds depends on revenues from private third-party payors
and government programs, including Medicare and Medicaid, which have
generally undertaken cost containment measures to limit payments to health
care providers;
o hospitals face increasing competition resulting from hospital mergers and
affiliations;
o hospitals need to reduce costs as HMOs increase market penetration and
hospital supply and drug companies raise prices;
o hospitals and health care providers are subject to various legal claims by
patients and others and are adversely affected by increasing costs of
insurance; and
17
<PAGE>
o many hospitals are aggressively buying physician practices and assuming
risk contracts to gain market share. If revenues do not increase
accordingly, this practice could reduce profits;
o Medicare is changing its reimbursement system for nursing homes. Many
nursing home providers are not sure how they will be treated. In many
cases, the providers may receive lower reimbursements and these would have
to cut expenses to maintain profitability; and
o most retirement/nursing home providers rely on entrance fees for operating
revenues. If people live longer than expected and turnover is lower than
budgeted, operating revenues would be adversely affected by less than
expected entrance fees.
Here is what you should know about the New Jersey Portfolio's concentration in
general obligation bonds.
o general obligation bonds are backed by the issuer's pledge of its full
faith, credit and taxing power;
o 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
o 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.
Here is what you should know about the Massachusetts Portfolio's concentration
in university/college bonds. Payment for these bonds depends on:
o level or amount and diversity of sources of revenue;
o availability of endowments and other funds;
o enrollment;
o financial management;
o reputation; and
o for public institutions, the financial condition of the government and its
educational policies.
Here is what you should know about the Florida and New Jersey Portfolios'
concentrations in municipal water and sewer 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:
o increases in operating and construction costs; and
o unpredicability of future usage requirements.
Here is what you should know about the New Jersey Portfolio's concentration in
airport/port/highway bonds. These bonds are dependent for payment on revenues
from financial projects including:
o user fees from ports and airports;
o tolls on turnpikes and bridges;
o rents from buildings; and
o additional financial resources including
--federal and state subsidies,
--lease rentals paid by state or local governments, or
--the pledge of a special tax such as a sales tax or a property tax.
Airport income is largely affected by:
o increased competition;
o excess capacity; and
o increased fuel costs.
Changes to the portfolio from bond redemptions, maturities and sales may affect
the Fund's concentrations over time.
18
<PAGE>
STATE CONCENTRATION RISK
FLORIDA RISKS
Generally
Florida's financial condition is affected by numerous national, economic, social
and environmental policies and conditions. For example:
o south Florida is heavily involved with foreign tourism, trade and
investment capital. As a result, the region is susceptible to international
trade and currency imbalances and economic problems in Central and South
America;
o central and northern Florida are more vulnerable to agricultural problems,
such as crop failures or severe weather conditions, especially in the
citrus and sugar industries; and
o the state as a whole is also very dependent on tourism and construction.
State and Local Government
The state of Florida and its local governments are restricted in their ability
to raise taxes and incur debts. These restrictions limit their ability to
generate revenue, and so could hurt their ability to pay debts.
General obligations of the state are rated Aa2 by Moody's, AA+ by Standard &
Poor's and AA by Fitch.
NEW JERSEY RISKS
State and Local Government
Certain features of New Jersey law could affect the repayment of debt:
o 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
o 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
o elementary and secondary education, and
o 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.
MASSACHUSETTS RISKS
State Budget (June 30 Fiscal)
By statute, the Legislature and the Governor must approve a balanced budget for
each fiscal year, and no supplementary appropriation bill may be approved by the
Governor if it will result in an unbalanced budget. However, this is a statutory
requirement that may be superseded by an appropriation act.
Fiscal 1999 spending is estimated to be approximately $21.151 billion.
The budget for fiscal 2000 calls for total spending of $20.556 billion.
The Commonwealth of Massachusetts experienced budget surpluses in both fiscal
1997 and fiscal 1998.
Certain legislation passed in recent years affects the taxing and spending power
of Massachusetts and its local governments. Currently, state finance law
provides for a
19
<PAGE>
Stabilization Fund, a Capital Projects Fund and a Tax Reduction Fund relating to
year-end surpluses.
o Up to 7.5% of budgeted revenues and other resources may be accumulated in
the Stabilization Fund
o Amounts in excess of that limit are transferred to the Tax Reduction Fund
which can be used for cuts in personal income taxes; and
o Up to 40% of any year-end budget surplus can be transferred to the Capital
Projects Fund for use on capital expenditures, if there is a negative
balance in the State's capital funds.
In addition, State law limits the rate at which tax revenue can grow, based on
the average growth of wages and salaries in the state:
o This limit could affect the State's ability to pay principal and interest
on its obligations, although the limit has not been reached from fiscal
years 1994 to 1998, and it is not expected to be reached for fiscal 1999.
o Projected tax revenues for fiscal year 1999 and 2000 are estimated to be
$14 billion and $14.459 billion, respectively.
Other Considerations
Recent cash flow estimates predict that Massachusetts will have a cash position
of $975.9 million at fiscal year-end 1999 (not including activity after June 30,
1999, or the balance in the Stabilization Fund).
The Central Artery/Ted Williams Tunnel project has become the largest part of
the Commonwealth's capital spending.
o The magnitude of the Central Artery/Ted Williams Tunnel project has
resulted in the realignment of certain transportation assets in the
Commonwealth and the development of additional financing mechanisms to
support its completion.
The State has maintained a five-year capital spending plan since 1992. The goal
is to limit the State's debt burden by controlling the relationship between
current capital spending and the issuance of debt.
o The plan is based on numerous assumptions including the level of third
party funding and federal funding for the Central Artery/Ted Wiliams
Tunnel project.
There is a limit on debt service in the Commonwealth requiring that no more than
10% of the total appropriations in any fiscal year may be expended for payment
of interest and principal on general obligation debt of the Commonwealth:
o This limit has not been reached from fiscal years 1994 to 1998 and is not
expected to be reached for fiscal 1999.
The Commonwealth has established a Management Office for monitoring the progress
of state agencies in addressing the 'year 2000 problem'. The exposure resulting
from the potential failures with electronic data processing systems and other
equipment affects only a few agencies significantly, but the impact of such
failures would be significant unless addressed timely.
General obligations bonds of Massachusetts are currently rated Aa3 by Moody's,
AA-by Standard & Poor's and AA-by Fitch. There can be no assurance that such
ratings will continue.
PENNSYLVANIA RISKS
Generally
Pennsylvania and many of its municipalities (including Philadelphia) have
undergone an economic decline:
20
<PAGE>
o coal, steel, railroads and other heavy industry historically associated
with the Commonwealth has given way to increased competition from foreign
producers.
o agriculture and related industries are still an important part of the
Commonwealth's economy.
o 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 lead to increased spending.
o 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.
o Philadelphia has considered significant service cuts and privatization of
certain services which it has provided to date.
o In 1991, the Commonwealth created the Pennsylvania Inter-Governmental
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, 1997,
approximately $1.1 billion in PICA Special Revenue Bonds were outstanding.
o Pennsylvania's general obligation bonds are currently rated A1 by Moody's
and AA-by Standard & Poor's. Philadelphia's general obligation bonds are
rated Baa by Moody's and BBB by Standard & Poor's. There can be no
assurance that these ratings will not be lowered.
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:
o limiting real property taxes,
o reducing tax rates,
o imposing a flat or other form of tax, or
o exempting investment income from tax.
21
<PAGE>
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:
o adding the value of the bonds, net accrued interest, cash and any other
Fund assets;
o subtracting accrued but unpaid Fund expenses, unreimbursed Trustee
advances, cash held to buy back units or for distribution to investors and
any other Fund liabilities; and
o 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:
o if the New York Stock Exchange is closed (other than customary weekend and
holiday closings);
o if the SEC determines that trading on the New York Stock Exchange is
restricted or that an emergency exists making sale or evaluation of the
bonds not reasonably practicable; and
o for any other period permitted by SEC order.
22
<PAGE>
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 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:
o to reimburse the Trustee for the Fund's operating expenses;
o for extraordinary services and costs of indemnifying the Trustee and the
Sponsors;
o costs of actions taken to protect the Fund and other legal fees and
expenses;
o expenses for keeping the Fund's registration statement current; and
o Fund termination expenses and any governmental charges.
The Sponsors are currently reimbursed up to 45 cents per $1,000 face amount
annually for providing portfolio supervisory, bookkeeping
23
<PAGE>
and administrative services and for any other expenses properly chargeable to
the Fund. Legal, typesetting, electronic filing and regulatory filing fees and
expenses associated with updating the Portfolio's registration statement yearly
are also now chargeable to the Portfolio. While this fee may exceed the amount
of these costs and expenses attributable to this Fund, the total of these fees
for all Series of Defined Asset Funds will not exceed the aggregate amount
attributable to all of these Series for any calendar year. The Fund also pays
the Evaluator's fees.
The Trustee's, Sponsors' and Evaluator's fees may be adjusted for inflation
without investors' approval.
The Sponsors will pay advertising and selling expenses at no charge to the Fund.
If Fund expenses exceed initial estimates, the Fund will owe the excess. The
Trustee has a lien on Fund assets to secure reimbursement of Fund expenses and
may sell bonds if cash is not available.
PORTFOLIO CHANGES
The Sponsors and Trustee are not liable for any default or defect in a 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 will affect the size
and 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:
o diversity of the portfolio;
o size of the Fund relative to its original size;
o ratio of Fund expenses to income;
o current and long-term returns;
o degree to which units may be selling at a premium over par; and
o 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
24
<PAGE>
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:
o to cure ambiguities;
o to correct or supplement any defective or inconsistent provision;
o to make any amendment required by any governmental agency; or
o to make other changes determined not to be materially adverse to your best
interest (as determined by the 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:
o it fails to perform its duties and the Sponsors determine that its
replacement is in your best interest; or
o it becomes incapable of acting or bankrupt or its affairs are taken over by
public authorities.
Investors holding 51% of the units may remove the Trustee. The Evaluator may
resign or be removed by the 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:
o remove it and appoint a replacement Sponsor;
o liquidate the Fund; or
o 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.
25
<PAGE>
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.
26
<PAGE>
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
Merrill Lynch, as agent for the Sponsors, has adopted a code of ethics requiring
preclearance and reporting of personal securities transactions by its employees
with access to information on portfolio transactions. The goal of the code is to
prevent fraud, deception or misconduct against the Fund and to provide
reasonable standards of conduct.
YEAR 2000 ISSUES
Many computer systems were designed in such a way that they may be unable to
distinguish between the year 2000 and the year 1900 (commonly known as the 'Year
2000 Problem'). We do not expect that the computer system changes necessary to
prepare for the Year 2000 will cause any major operational difficulties for the
Fund. The Year 2000 Problem may adversely affect the issuers of the securities
contained in the Portfolio, but we cannot predict whether any impact will be
material to the Portfolio 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. 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 federal
alternative minimum tax. 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 issuer (or other users) 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.
INCOME 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
27
<PAGE>
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 if you held
it for one year or less. If you are an individual and sell your units after
holding them for more than one year, you may be entitled to a 20% maximum
federal tax rate on any resulting gains. Consult your tax adviser in this
regard. 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 and the organizational expenses 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.
STATE AND LOCAL 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.
FLORIDA TAXES
In the opinion of Greenberg, Traurig, P.A., Miami, Florida, special counsel on
Florida tax matters:
Under the income tax laws of the State of Florida, the Fund will not be taxed as
a corporation. Florida imposes an income tax on corporations but does not impose
a personal income tax. Accordingly, if you are an individual taxpayer your
income from the Fund will not be subject to tax in Florida. However, if you are
an entity that is normally taxed as a corporation, your income from the fund
will not be exempt from tax in Florida and special rules for taxation apply
depending on the type of entity. You should consult your tax adviser in this
regard.
Florida also imposes a tax on intangible personal property, such as stocks,
bonds, notes and units in trusts. The tax is imposed on Florida taxpayers as of
January 1st of each year. Florida exempts certain types of bonds
28
<PAGE>
and debt obligations from this tax. Your units will be exempt from the
intangible personal property tax as long as the Fund invests exclusively in
bonds and other debt obligations that are tax-exempt for Florida purposes.
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.
MASSACHUSETTS TAXES
In the opinion of Masterman, Culbert & Tully LLP, Boston, Massachusetts, special
counsel on Massachusetts tax matters:
This advice only applies to individual investors in the units who are subject to
Massachusetts income taxation and assumes the Fund is a Trust of the type
commonly known as a 'fixed investment trust' for federal tax purposes.
1. The Massachusetts taxing authorities will not tax the Fund as an entity. They
will treat you as the owner of your share of each bond in the Fund.
2. If you are subject to Massachusetts income taxation, you need not include
your share of the Fund's earnings in your Massachusetts gross income to the
extent such earnings are derived by the Fund on tax-exempt bonds issued by
Massachusetts or its agencies or municipalities or by the governments of Puerto
Rico and Guam.
3. You must include gains and losses of the Fund as well as those resulting from
the sale or redemption of your Units in your Massachusetts gross income if you
are required to include such gains or losses in your federal gross income unless
these gains and losses are statutorily exempt from Massachusetts income
taxation. If gains from such bonds in the Fund are exempt from Massachusetts
income taxation, you will not be allowed to include losses in your Massachusetts
gross income to the extent such losses arise from the bonds for which the gains
are statutorily exempt. In each case, the taxability of the gains or losses
depends upon the particular bonds in the Fund.
4. Any distribution made to you by the Fund may be subject to Massachusetts
income tax to the same degree and in the same manner as income, gains and losses
of the Fund as are described in paragraphs 2 and 3 above.
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
29
<PAGE>
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.
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.
30
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 54 (FLORIDA, MASSACHUSETTS,
NEW JERSEY AND PENNSYLVANIA TRUSTS),
DEFINED ASSET FUNDS
REPORT OF INDEPENDENT ACCOUNTANTS
The Sponsors, Trustee and Holders
of Municipal Investment Trust Fund,
Multistate Series - 54 (Florida, Massachusetts,
New Jersey and Pennsylvania Trusts)
Defined Asset Funds:
We have audited the accompanying statements of condition of
Municipal Investment Trust Fund, Multistate Series - 54
(Florida, Massachusetts, New Jersey and Pennsylvania
Trusts), Defined Asset Funds including the portfolios, as of
January 31, 1999 and the related statements of operations and
of changes in net assets for the years ended January 31, 1999,
1998 and 1997. These financial statements are the responsibility
of the Trustee. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures
in the financial statements. Securities owned at January
31, 1999, 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 - 54 (Florida, Massachusetts, New Jersey
and Pennsylvania Trusts), Defined Asset Funds at January 31,
1999 and the results of their operations and changes in their
net assets for the above-stated years in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, N.Y.
March 12, 1999
{PAGE} D - 1.
<PAGE>
<TABLE>
MUNICIPAL INVESTMENT TRUST FUND, {02/18/99 CHASE MANHATTAN BANK 17:16}
MULTISTATE SERIES - 54 (FLORIDA TRUST), { PE REPORT VERSION C PAGE 2 FLML54 }
DEFINED ASSET FUNDS
STATEMENT OF CONDITION
As of January 31, 1999
<CAPTION>
<S> <C> <C>
TRUST PROPERTY:
Investment in marketable securities -
{ 20} at value (cost $ 2,956,035 )(Note 1)......... $ 3,051,786
{ 36} Accrued interest ............................... 39,927
{ 32} Cash - income .................................. 12,759
{ 34} Cash - principal ............................... 5,127
-----------
{ 40} Total trust property ......................... 3,109,599
LESS LIABILITIES:
{ 50} Income advance from Trustee..................... $ 18,118
{ 51} Accrued Sponsors' fees ......................... 94
{143} Trustee's fees and expenses payable............. 464 18,676
----------- -----------
NET ASSETS, REPRESENTED BY:
{ 80} 3,012 units of fractional undivided
{ 80} interest outstanding (Note 3)................ 3,056,913
{105} Undistributed net investment income ............ 34,010 $ 3,090,923
----------- ===========
{130}UNIT VALUE ($ 3,090,923 / 3,012 units )........... $ 1,026.20
===========
</TABLE>
See Notes to Financial Statements.
D - 2.
<PAGE>
<TABLE>
MUNICIPAL INVESTMENT TRUST FUND, {02/18/99 CHASE MANHATTAN BANK 17:16}
MULTISTATE SERIES - 54 (FLORIDA TRUST), { PE REPORT VERSION C PAGE 3 FLML54 }
DEFINED ASSET FUNDS
STATEMENTS OF OPERATIONS
<CAPTION>
Years Ended January 31,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
INVESTMENT INCOME:
{ 10} Interest income ........................ $ 163,797 $ 170,376 $ 170,374
{ 20} Trustee's fees and expenses ............ (4,454) (5,093) (4,847)
{ 30} Sponsors' fees ......................... (1,190) (1,189) (1,174)
------------------------------------------------
{ 40} Net investment income .................. 158,153 164,094 164,353
------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Realized gain on
{ 50} securities sold or redeemed .......... 2,999
Unrealized appreciation (depreciation)
{ 60} of investments ....................... 62,869 265,963 (164,726)
------------------------------------------------
Net realized and unrealized
{ 70} gain (loss) on investments ........... 65,868 265,963 (164,726)
------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
{ 80} RESULTING FROM OPERATIONS .............. $ 224,021 $ 430,057 $ (373)
================================================
</TABLE>
See Notes to Financial Statements.
{PAGE} D - 3.
<PAGE>
<TABLE>
MUNICIPAL INVESTMENT TRUST FUND, {02/18/99 CHASE MANHATTAN BANK 17:16}
MULTISTATE SERIES - 54 (FLORIDA TRUST), { PE REPORT VERSION C PAGE 4 FLML54 }
DEFINED ASSET FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
Years Ended January 31,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
OPERATIONS:
{ 10} Net investment income .................. $ 158,153 $ 164,094 $ 164,353
Realized gain on
{ 20} securities sold or redeemed .......... 2,999
Unrealized appreciation (depreciation)
{ 30} of investments ....................... 62,869 265,963 (164,726)
------------------------------------------------
Net increase (decrease) in net assets
{ 40} resulting from operations ............ 224,021 430,057 (373)
------------------------------------------------
DISTRIBUTIONS TO HOLDERS (Note 2):
{ 50} Income ................................ (158,521) (164,109) (164,307)
{ 60} Principal .............................. (14,938)
------------------------------------------------
{ 70} Total distributions .................... (173,459) (164,109) (164,307)
------------------------------------------------
SHARE TRANSACTIONS:
{ 82} Redemption amounts - income ............ (2,943)
{ 83} Redemption amounts - principal ......... (287,421)
------------------------------------------------
{ 84} Total share transactions ............... (290,364)
------------------------------------------------
{ 90}NET INCREASE (DECREASE) IN NET ASSETS..... (239,802) 265,948 (164,680)
{100}NET ASSETS AT BEGINNING OF YEAR .......... 3,330,725 3,064,777 3,229,457
------------------------------------------------
{110}NET ASSETS AT END OF YEAR ................ $ 3,090,923 $ 3,330,725 $ 3,064,777
================================================
PER UNIT:
Income distributions during
{120} year ................................. $ 49.69 $ 49.73 $ 49.79
================================================
Principal distributions during
{130} year ................................. $ 4.78
================================================
Net asset value at end of
{140} year ................................. $ 1,026.20 $ 1,009.31 $ 928.72
================================================
TRUST UNITS:
{ 83} Redeemed during year ................... 288
{150} Outstanding at end of year ............. 3,012 3,300 3,300
================================================
</TABLE>
See Notes to Financial Statements.
D - 4.
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 54 (FLORIDA 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 conformity with generally accepted accounting
principles.
(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>
{ 8} {Original Units and Unit Cost at Date of Deposit ........... 3,300 3,414,158 }
{ 10} Cost of 3,012 units at Date of Deposit ..................... $ 3,116,195
{ 20} Less sales charge .......................................... 140,228
-----------
{ 25} Net amount applicable to Holders ........................... { 988.0368526} 2,975,967
{ 31} Redemptions of units - net cost of 288 units redeemed
{143} less redemption amounts (principal)....................... (2,866)
{ 40} Realized gain on securities sold or redeemed ............... 2,999
{ 50} Principal distributions .................................... (14,938)
{ 70} Unrealized appreciation of investments...................... 95,751
-----------
{ 80} Net capital applicable to Holders .......................... $ 3,056,913
===========
</TABLE>
4. INCOME TAXES
As of January 31, 1999, unrealized appreciation of investments, based on
cost for Federal income tax purposes, aggregated $95,751, all of which related
to appreciated securities. The cost of investment securities for Federal income
tax purposes was $2,956,035 at January 31, 1999.
{PAGE} D - 5.
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 54 (FLORIDA TRUST) (INSURED)
DEFINED ASSET FUNDS
PORTFOLIO
As of January 31, 1999
<TABLE>
<CAPTION>
Rating of {PE VER C.} Optional
Portfolio No. and Title of Issues Face Redemption
Securities (1) (4) Amount Coupon Maturities(3) Provisions(3) Cost Value(2)
---------- --------- ----------- ----------- ------------ ------------ ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 City of Altamonte Springs, FL, AAA $ 500,000 5.125 % 2018 11/15/03 $ 491,345 $ 504,385
Hlth. Fac., Auth. Hosp. Rev. Bonds {021433DS3 } @ 102.000
Ser. 1993-B (Adventist Hlth. Sys./Sunbelt,
Inc.) (AMBAC Ins.)
2 Dade Cnty., FL, Pub. Fac. Rev. Bonds AAA 500,000 5.250 2023 06/01/03 500,000 505,870
(Jackson Mem. Hosp.), Ser. 1993 {233543ER4 } @ 102.000
(MBIA Ins.)
3 Kissimmee Util. Auth., FL, Elec. Sys. AAA 455,000 5.250 2018 10/01/03 456,934 465,238
Imp. and Rfdg. Rev. Bonds, Ser. 1993 {497850DA2 } @ 102.000
(Financial Guaranty Ins.)
4 City of Melbourne, FL, Water and Sewer AAA 455,000 5.000 2022 10/01/04 441,482 455,541
Rfdg. Rev. Bonds, Ser. 1994A {585395ZG4 } @ 102.000
(Financial Guaranty Ins.)
5 Reedy Creek Imp. Dist., FL, Util. Rev. AAA 460,000 5.000 2019 04/01/04 445,625 460,515
Imp. and Rfdg. Bonds, Ser. 1994-1 {75845HCV3 } @ 101.000
(MBIA Ins.)
6 City of Tampa, FL, Allegany Hlth. Sys. AAA 300,000 5.125 2023 None 292,152 303,861
Rev. Bonds, St. Joseph's Hosp., Inc. {875231BX9 }
Issue, Ser. 1993 (MBIA Ins.)
7 Village Center Cmnty. Dev. Dist. (Lake AAA 325,000 5.375 2023(6) 11/01/03 328,497 356,376
Cnty., FL), Util. Rev. Bonds, Ser. 1993 {927063AN7 } @ 102.000
(Financial Guaranty Ins.)
--------- --------- ---------
TOTAL $ 2,995,000 $ 2,956,035 $ 3,051,786
========= ========= =========
See Notes to Portfolios on page D - 22.
</TABLE>
D - 6.
<PAGE>
<TABLE>
MUNICIPAL INVESTMENT TRUST FUND, {02/18/99 CHASE MANHATTAN BANK 16:41}
MULTISTATE SERIES - 54 (MASSACHUSETTS TRUST), { PE REPORT VERSION C PAGE 2 MAML54 }
DEFINED ASSET FUNDS
STATEMENT OF CONDITION
As of January 31, 1999
<CAPTION>
<S> <C> <C>
TRUST PROPERTY:
Investment in marketable securities -
{ 20} at value (cost $ 2,913,353 )(Note 1)......... $ 3,009,084
{ 36} Accrued interest ............................... 35,272
{ 32} Cash - income .................................. 12,969
{ 34} Cash - principal ............................... 3,085
-----------
{ 40} Total trust property ......................... 3,060,410
LESS LIABILITIES:
{ 50} Income advance from Trustee..................... $ 13,335
{ 51} Accrued Sponsors' fees ......................... 92
{143} Trustee's fees and expenses payable............. 486 13,913
----------- -----------
NET ASSETS, REPRESENTED BY:
{ 80} 2,933 units of fractional undivided
{ 80} interest outstanding (Note 3)................ 3,012,169
{105} Undistributed net investment income ............ 34,328 $ 3,046,497
----------- ===========
{130}UNIT VALUE ($ 3,046,497 / 2,933 units )........... $ 1,038.70
===========
</TABLE>
See Notes to Financial Statements.
{PAGE} D - 7.
<PAGE>
<TABLE>
MUNICIPAL INVESTMENT TRUST FUND, {02/18/99 CHASE MANHATTAN BANK 16:41}
MULTISTATE SERIES - 54 (MASSACHUSETTS TRUST), { PE REPORT VERSION C PAGE 3 MAML54 }
DEFINED ASSET FUNDS
STATEMENTS OF OPERATIONS
<CAPTION>
Years Ended January 31,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
INVESTMENT INCOME:
{ 10} Interest income ........................ $ 170,066 $ 174,376 $ 174,376
{ 20} Trustee's fees and expenses ............ (4,443) (5,030) (4,817)
{ 30} Sponsors' fees ......................... (1,176) (1,170) (1,156)
------------------------------------------------
{ 40} Net investment income .................. 164,447 168,176 168,403
------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Realized gain on
{ 50} securities sold or redeemed .......... 14,844
Unrealized appreciation (depreciation)
{ 60} of investments ....................... 7,821 315,825 (140,585)
------------------------------------------------
Net realized and unrealized
{ 70} gain (loss) on investments ........... 22,665 315,825 (140,585)
------------------------------------------------
NET INCREASE IN NET ASSETS
{ 80} RESULTING FROM OPERATIONS .............. $ 187,112 $ 484,001 $ 27,818
================================================
</TABLE>
See Notes to Financial Statements.
D - 8.
<PAGE>
<TABLE>
MUNICIPAL INVESTMENT TRUST FUND, {02/18/99 CHASE MANHATTAN BANK 16:41}
MULTISTATE SERIES - 54 (MASSACHUSETTS TRUST), { PE REPORT VERSION C PAGE 4 MAML54 }
DEFINED ASSET FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
Years Ended January 31,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
OPERATIONS:
{ 10} Net investment income .................. $ 164,447 $ 168,176 $ 168,403
Realized gain on
{ 20} securities sold or redeemed .......... 14,844
Unrealized appreciation (depreciation)
{ 30} of investments ....................... 7,821 315,825 (140,585)
------------------------------------------------
Net increase in net assets
{ 40} resulting from operations ............ 187,112 484,001 27,818
------------------------------------------------
DISTRIBUTIONS TO HOLDERS (Note 2):
{ 50} Income ................................ (165,032) (168,188) (168,318)
{ 60} Principal .............................. (13,599)
------------------------------------------------
{ 70} Total distributions .................... (178,631) (168,188) (168,318)
------------------------------------------------
SHARE TRANSACTIONS:
{ 82} Redemption amounts - income ............ (3,178)
{ 83} Redemption amounts - principal ......... (323,972)
------------------------------------------------
{ 84} Total share transactions ............... (327,150)
------------------------------------------------
{ 90}NET INCREASE (DECREASE) IN NET ASSETS..... (318,669) 315,813 (140,500)
{100}NET ASSETS AT BEGINNING OF YEAR .......... 3,365,166 3,049,353 3,189,853
------------------------------------------------
{110}NET ASSETS AT END OF YEAR ................ $ 3,046,497 $ 3,365,166 $ 3,049,353
================================================
PER UNIT:
Income distributions during
{120} year ................................. $ 51.82 $ 51.75 $ 51.79
================================================
Principal distributions during
{130} year ................................. $ 4.53
================================================
Net asset value at end of
{140} year ................................. $ 1,038.70 $ 1,035.44 $ 938.26
================================================
TRUST UNITS:
{ 83} Redeemed during year ................... 317
{150} Outstanding at end of year ............. 2,933 3,250 3,250
================================================
</TABLE>
See Notes to Financial Statements.
D - 9.
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 54 (MASSACHUSETTS 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 conformity with generally accepted accounting
principles.
(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>
{ 8} {Original Units and Unit Cost at Date of Deposit ........... 3,250 3,391,798 }
{ 10} Cost of 2,933 units at Date of Deposit ..................... $ 3,060,967
{ 20} Less sales charge .......................................... 137,745
-----------
{ 25} Net amount applicable to Holders ........................... { 996.6662121} 2,923,222
{ 31} Redemptions of units - net cost of 317 units redeemed
{143} less redemption amounts (principal)....................... (8,030)
{ 40} Realized gain on securities sold or redeemed ............... 14,845
{ 50} Principal distributions .................................... (13,599)
{ 70} Unrealized appreciation of investments...................... 95,731
-----------
{ 80} Net capital applicable to Holders .......................... $ 3,012,169
===========
</TABLE>
4. INCOME TAXES
As of January 31, 1999, unrealized appreciation of investments, based on
cost for Federal income tax purposes, aggregated $95,731, all of which related
to appreciated securities. The cost of investment securities for Federal income
tax purposes was $2,913,353 at January 31, 1999.
D - 10.
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 54 (MASSACHUSETTS TRUST),
DEFINED ASSET FUNDS
PORTFOLIO
As of January 31, 1999
<TABLE>
<CAPTION>
Rating {PE VER C.} 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 City of Boston, MA, Industrial AAA $ 500,000 5.250 % 2026 10/01/04 $ 488,505 $ 502,785
Development Fin. Auth., Rev. Bonds {100881AV3 } @ 102.000
(MA Coll. of Pharmacy Proj.),
1994 Ser. A (Connie Lee Ins.) (5)
2 Massachusetts Hlth. and Educl. Facs. AAA 500,000 5.500 2023 10/01/03 504,245 516,575
Auth., Rev. Bonds, Wentworth Institute {5758513A6 } @ 102.000
of Technology, Inc. Issue, Ser. B
(Connie Lee Ins.) (5)
3 Massachusetts Bay Trans. Auth., Gen. AAA 500,000 5.500 2022 03/01/03 510,375 519,870
Trans. Sys. Bonds, 1993 Ser. A Rfdg. {575566S21 } @ 102.000
(MBIA Ins.) (5)
4 Massachusetts Hlth. and Educl. Facs. AAA 500,000 5.500 2023 07/01/03 504,190 517,175
Auth., Rev. Bonds, Morton Hosp. and {575851V49 } @ 102.000
Med. Ctr. Issue Ser. B
(Connie Lee Ins.) (5)
5 Massachusetts Turnpike Auth., Turnpike Aaa(m) 500,000 5.000 2020 None 482,380 513,760
Rev. Bonds, 1993 Ser. A {576029AT9 }
6 Massachusetts Wtr. Resources Auth., Aaa(m) 175,000 5.500 2022(6) 07/15/02 175,438 186,489
Gen. Rev. Bonds, 1992 Ser. A {576049CL2 } @ 100.000
7 Puerto Rico Hwy. and Trans. Auth., A 250,000 5.250 2020 07/01/03 248,220 252,430
Hwy. Rev. Bonds (Ser. W) {745181CD7 } @ 101.500
--------- --------- ---------
TOTAL $ 2,925,000 $ 2,913,353 $ 3,009,084
========= ========= =========
See Notes to Portfolios on page D - 22.
</TABLE>
D - 11.
<PAGE>
<TABLE>
MUNICIPAL INVESTMENT TRUST FUND, {02/19/99 CHASE MANHATTAN BANK 10:53}
MULTISTATE SERIES - 54 (NEW JERSEY TRUST), { PE REPORT VERSION C PAGE 2 NJML54 }
DEFINED ASSET FUNDS
STATEMENT OF CONDITION
As of January 31, 1999
<CAPTION>
<S> <C> <C>
TRUST PROPERTY:
Investment in marketable securities -
{ 20} at value (cost $ 2,735,445 )(Note 1)......... $ 2,778,445
{ 36} Accrued interest ............................... 25,215
{ 32} Cash - income .................................. 11,564
{ 34} Cash - principal ............................... 5,561
-----------
{ 40} Total trust property ......................... 2,820,785
LESS LIABILITIES:
{ 50} Income advance from Trustee..................... $ 4,442
{143} Accrued Sponsors' fees ......................... 86 4,528
----------- -----------
NET ASSETS, REPRESENTED BY:
{ 80} 2,761 units of fractional undivided
{ 80} interest outstanding (Note 3)................ 2,784,006
{105} Undistributed net investment income ............ 32,251 $ 2,816,257
----------- ===========
{130}UNIT VALUE ($ 2,816,257 / 2,761 units )........... $ 1,020.01
===========
</TABLE>
See Notes to Financial Statements.
{PAGE} D - 12.
<PAGE>
<TABLE>
MUNICIPAL INVESTMENT TRUST FUND, {02/19/99 CHASE MANHATTAN BANK 10:53}
MULTISTATE SERIES - 54 (NEW JERSEY TRUST), { PE REPORT VERSION C PAGE 3 NJML54 }
DEFINED ASSET FUNDS
STATEMENTS OF OPERATIONS
<CAPTION>
Years Ended January 31,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
INVESTMENT INCOME:
{ 10} Interest income ........................ $ 145,984 $ 150,758 $ 154,360
{ 20} Trustee's fees and expenses ............ (4,322) (4,937) (4,808)
{ 30} Sponsors' fees ......................... (1,074) (1,073) (1,094)
------------------------------------------------
{ 40} Net investment income .................. 140,588 144,748 148,458
------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Realized gain (loss) on
{ 50} securities sold or redeemed .......... 1,619 73 (10,620)
Unrealized appreciation (depreciation)
{ 60} of investments ....................... 50,045 222,391 (141,487)
------------------------------------------------
Net realized and unrealized
{ 70} gain (loss) on investments ........... 51,664 222,464 (152,107)
------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
{ 80} RESULTING FROM OPERATIONS .............. $ 192,252 $ 367,212 $ (3,649)
================================================
</TABLE>
See Notes to Financial Statements.
{PAGE} D - 13.
<PAGE>
<TABLE>
MUNICIPAL INVESTMENT TRUST FUND, {02/19/99 CHASE MANHATTAN BANK 10:53}
MULTISTATE SERIES - 54 (NEW JERSEY TRUST), { PE REPORT VERSION C PAGE 4 NJML54 }
DEFINED ASSET FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
Years Ended January 31,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
OPERATIONS:
{ 10} Net investment income .................. $ 140,588 $ 144,748 $ 148,458
Realized gain (loss) on
{ 20} securities sold or redeemed .......... 1,619 73 (10,620)
Unrealized appreciation (depreciation)
{ 30} of investments ....................... 50,045 222,391 (141,487)
------------------------------------------------
Net increase (decrease) in net assets
{ 40} resulting from operations ............ 192,252 367,212 (3,649)
------------------------------------------------
DISTRIBUTIONS TO HOLDERS (Note 2):
{ 50} Income ................................ (140,625) (144,673) (148,637)
{ 60} Principal .............................. (8,096) (7,550)
------------------------------------------------
{ 70} Total distributions .................... (148,721) (144,673) (156,187)
------------------------------------------------
SHARE TRANSACTIONS:
{ 82} Redemption amounts - income ............ (1,643) (1,006) (1,235)
{ 83} Redemption amounts - principal ......... (144,544) (78,142) (111,425)
------------------------------------------------
{ 84} Total share transactions ............... (146,187) (79,148) (112,660)
------------------------------------------------
{ 90}NET INCREASE (DECREASE) IN NET ASSETS..... (102,656) 143,391 (272,496)
{100}NET ASSETS AT BEGINNING OF YEAR .......... 2,918,913 2,775,522 3,048,018
------------------------------------------------
{110}NET ASSETS AT END OF YEAR ................ $ 2,816,257 $ 2,918,913 $ 2,775,522
================================================
PER UNIT:
Income distributions during
{120} year ................................. $ 48.71 $ 48.59 $ 48.74
================================================
Principal distributions during
{130} year ................................. $ 2.87 $ 2.53
================================================
Net asset value at end of
{140} year ................................. $ 1,020.01 $ 1,004.79 $ 930.13
================================================
TRUST UNITS:
{ 83} Redeemed during year ................... 144 79 120
{150} Outstanding at end of year ............. 2,761 2,905 2,984
================================================
</TABLE>
See Notes to Financial Statements.
{PAGE} D - 14.
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 54 (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 conformity with generally accepted accounting
principles.
(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>
{ 8} {Original Units and Unit Cost at Date of Deposit ........... 3,250 3,404,807 }
{ 10} Cost of 2,761 units at Date of Deposit ..................... $ 2,892,515
{ 20} Less sales charge .......................................... 130,161
-----------
{ 25} Net amount applicable to Holders ........................... {1,000.4904020} 2,762,354
{ 31} Redemptions of units - net cost of 489 units redeemed
{143} less redemption amounts (principal)....................... 18,134
{ 40} Realized loss on securities sold or redeemed ............... (22,098)
{ 50} Principal distributions .................................... (17,384)
{ 70} Unrealized appreciation of investments...................... 43,000
-----------
{ 80} Net capital applicable to Holders .......................... $ 2,784,006
===========
</TABLE>
4. INCOME TAXES
As of January 31, 1999, unrealized appreciation of investments, based on
cost for Federal income tax purposes, aggregated $43,000, all of which related
to appreciated securities. The cost of investment securities for Federal income
tax purposes was $2,735,445 at January 31, 1999.
D - 15.
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 54 (NEW JERSEY TRUST) (INSURED),
DEFINED ASSET FUNDS
PORTFOLIO
As of January 31, 1999
<TABLE>
<CAPTION>
Rating of {PE VER C.} Optional
Portfolio No. and Title of Issues Face Redemption
Securities (1) (4) Amount Coupon Maturities(3) Provisions(3) Cost Value(2)
---------- --------- ----------- ----------- ------------ ------------ ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 The Delaware River and Bay Auth., AAA $ 440,000 5.000 % 2017 01/01/04 $ 437,012 $ 442,794
Rev. Bonds, Ser. 1993 (MBIA Ins.) {246307BV3 } @ 102.000
2 The Essex Cnty., NJ, Imp. Auth.(Essex AAA 500,000 5.200 2024 12/01/04 502,285 509,305
Cnty., NJ), G.O. Lease Rev. Bonds, {296806DD1 } @ 101.000
Ser. 1994 (Gibraltar Bldg. Proj.)
Financial Guaranty Ins.)
3 The Monmouth Cnty. Imp. Auth. AAA 350,000 5.000 2013 02/01/04 350,000 361,053
(Monmouth Cnty., NJ), Sewage fac. Rev. {609568BG4 } @ 102.000
Rfdg. Bonds, Ser. 1994 (MBIA Ins.)
4 County of Passaic, State of NJ, G.O. AAA 395,000 5.000 2017 05/01/04 392,282 398,800
Rfdg. Bonds, Ser. 1994 (MBIA Ins.) {702724YX7 } @ 102.000
5 The Passaic Valley Water Comm., NJ, AAA 250,000 5.000 2022 12/15/03 246,228 250,563
1993 Wtr. Supply Sys. Rev. Rfdg. Bonds, {702845BQ0 } @ 102.000
Ser. A (Financial Guaranty Ins.)
6 The Port Auth. of New York and New AAA 350,000 5.250 2021 07/15/03 354,501 356,129
Jersey, Consolidated Bonds, {733580K45 } @ 101.000
Eighty - Seventh Ser.
(Finacial Guaranty Ins.)
7 The Town of West New York Mun. Util. AAA 450,000 5.125 2017 12/15/04 453,137 459,801
Auth. (Hudson Cnty., New Jersey), Swr. {954710ET2 } @ 102.000
Rev. Rfdg. Bonds, Ser. 1993
(Financial Guaranty Ins.)
--------- --------- ---------
TOTAL $ 2,735,000 $ 2,735,445 $ 2,778,445
========= ========= =========
See Notes to Portfolios on page D - 22.
</TABLE>
D - 16.
<PAGE>
<TABLE>
MUNICIPAL INVESTMENT TRUST FUND, {02/22/99 CHASE MANHATTAN BANK 10:40}
MULTISTATE SERIES - 54 (PENNSYLVANIA TRUST), { PE REPORT VERSION C PAGE 2 PAML54 }
DEFINED ASSET FUNDS
STATEMENT OF CONDITION
As of January 31, 1999
<CAPTION>
<S> <C> <C>
TRUST PROPERTY:
Investment in marketable securities -
{ 20} at value (cost $ 3,144,663 )(Note 1)......... $ 3,231,410
{ 36} Accrued interest ............................... 26,180
{ 32} Cash - income .................................. 15,186
{ 34} Cash - principal ............................... 5,554
-----------
{ 40} Total trust property ......................... 3,278,330
LESS LIABILITIES:
{ 51} Accrued Sponsors' fees ......................... $ 99
{143} Trustee's fees and expenses payable............. 472 571
----------- -----------
NET ASSETS, REPRESENTED BY:
{ 80} 3,167 units of fractional undivided
{ 80} interest outstanding (Note 3)................ 3,236,964
{105} Undistributed net investment income ............ 40,795 $ 3,277,759
----------- ===========
{130}UNIT VALUE ($ 3,277,759 / 3,167 units )........... $ 1,034.97
===========
</TABLE>
See Notes to Financial Statements.
{PAGE} D - 17.
<PAGE>
<TABLE>
MUNICIPAL INVESTMENT TRUST FUND, {02/22/99 CHASE MANHATTAN BANK 10:40}
MULTISTATE SERIES - 54 (PENNSYLVANIA TRUST), { PE REPORT VERSION C PAGE 3 PAML54 }
DEFINED ASSET FUNDS
STATEMENTS OF OPERATIONS
<CAPTION>
Years Ended January 31,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
INVESTMENT INCOME:
{ 10} Interest income ........................ $ 174,516 $ 185,431 $ 185,499
{ 20} Trustee's fees and expenses ............ (4,703) (5,361) (5,094)
{ 30} Sponsors' fees ......................... (1,254) (1,260) (1,245)
------------------------------------------------
{ 40} Net investment income .................. 168,559 178,810 179,160
------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Realized gain on
{ 50} securities sold or redeemed .......... 5,454 560
Unrealized appreciation (depreciation)
{ 60} of investments ....................... 15,904 293,708 (145,305)
------------------------------------------------
Net realized and unrealized
{ 70} gain (loss) on investments ........... 21,358 294,268 (145,305)
------------------------------------------------
NET INCREASE IN NET ASSETS
{ 80} RESULTING FROM OPERATIONS .............. $ 189,917 $ 473,078 $ 33,855
================================================
</TABLE>
See Notes to Financial Statements.
{PAGE} D - 18.
<PAGE>
<TABLE>
MUNICIPAL INVESTMENT TRUST FUND, {02/22/99 CHASE MANHATTAN BANK 10:40}
MULTISTATE SERIES - 54 (PENNSYLVANIA TRUST), { PE REPORT VERSION C PAGE 4 PAML54 }
DEFINED ASSET FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
Years Ended January 31,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
OPERATIONS:
{ 10} Net investment income .................. $ 168,559 $ 178,810 $ 179,160
Realized gain on
{ 20} securities sold or redeemed .......... 5,454 560
Unrealized appreciation (depreciation)
{ 30} of investments ....................... 15,904 293,708 (145,305)
------------------------------------------------
Net increase in net assets
{ 40} resulting from operations ............ 189,917 473,078 33,855
------------------------------------------------
DISTRIBUTIONS TO HOLDERS (Note 2):
{ 50} Income ................................ (169,010) (178,885) (179,060)
{ 60} Principal .............................. (5,179)
------------------------------------------------
{ 70} Total distributions .................... (174,189) (178,885) (179,060)
------------------------------------------------
SHARE TRANSACTIONS:
{ 82} Redemption amounts - income ............ (3,342) (466)
{ 83} Redemption amounts - principal ......... (296,509) (41,764)
------------------------------------------------
{ 84} Total share transactions ............... (299,851) (42,230)
------------------------------------------------
{ 90}NET INCREASE (DECREASE) IN NET ASSETS..... (284,123) 251,963 (145,205)
{100}NET ASSETS AT BEGINNING OF YEAR .......... 3,561,882 3,309,919 3,455,124
------------------------------------------------
{110}NET ASSETS AT END OF YEAR ................ $ 3,277,759 $ 3,561,882 $ 3,309,919
================================================
PER UNIT:
Income distributions during
{120} year ................................. $ 51.12 $ 51.11 $ 51.16
================================================
Principal distributions during
{130} year ................................. $ 1.61
================================================
Net asset value at end of
{140} year ................................. $ 1,034.97 $ 1,029.74 $ 945.69
================================================
TRUST UNITS:
{ 83} Redeemed during year ................... 292 41
{150} Outstanding at end of year ............. 3,167 3,459 3,500
================================================
</TABLE>
See Notes to Financial Statements.
D - 19.
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 54 (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 conformity with generally accepted accounting
principles.
(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>
{ 8} {Original Units and Unit Cost at Date of Deposit ........... 3,500 3,652,015 }
{ 10} Cost of 3,167 units at Date of Deposit ..................... $ 3,304,552
{ 20} Less sales charge .......................................... 148,723
-----------
{ 25} Net amount applicable to Holders ........................... { 996.4730028} 3,155,829
{ 31} Redemptions of units - net cost of 333 units redeemed
{143} less redemption amounts (principal)....................... (6,447)
{ 40} Realized gain on securities sold or redeemed ............... 6,014
{ 50} Principal distributions .................................... (5,179)
{ 70} Unrealized appreciation of investments...................... 86,747
-----------
{ 80} Net capital applicable to Holders .......................... $ 3,236,964
===========
</TABLE>
4. INCOME TAXES
As of January 31, 1999, unrealized appreciation of investments, based on
cost for Federal income tax purposes, aggregated $86,747, all of which related
to appreciated securities. The cost of investment securities for Federal income
tax purposes was $3,144,663 at January 31, 1999.
{PAGE} D - 20.
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 54 (PENNSYLVANIA TRUST) (INSURED),
DEFINED ASSET FUNDS
PORTFOLIO
As of January 31, 1999
<TABLE>
<CAPTION>
Rating of {PE VER C.} Optional
Portfolio No. and Title of Issues Face Redemption
Securities (1) (4) Amount Coupon Maturities(3) Provisions(3) Cost Value(2)
---------- --------- ----------- ----------- ------------ ------------ ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Bethlehem Auth., Northampton and Lehigh AAA $ 405,000 5.200 % 2021 11/15/04 $ 402,023 $ 409,884
Counties, PA, Water Rev. Rfdg. Bonds, {087401FB6 } @ 102.000
Ser. of 1994 (MBIA Ins.)
2 Bucks Cnty. Indl. Dev. Auth., Bucks Cnty. AAA 500,000 5.250 2021 07/01/03 496,380 503,500
PA, Hosp. Rev. Rfdg. Bonds (Grand View {118612GB0 } @ 102.000
Hosp.), Ser. A of 1993 (AMBAC Ins.)
3 Delaware Cnty. Auth., PA, Hlth. Fac. AAA 350,000 5.375 2023 None 348,677 362,621
Rev. Bonds, Ser. of 1993 A (Mercy Hlth. {245902AD3 }
Corp. of Southeastern PA Obligated Grp.),
(Connie Lee Ins.)
4 Hempfield School Dist., Lancaster AAA 445,000 5.300 2014 10/15/04 448,578 465,092
Cnty., PA, G. O. Bonds, Ser. of 1994 {423745HF8 } @ 100.000
(Financial Guaranty Ins.)
5 Montgomery Cnty., PA, Higher Educ. and AAA 455,000 5.125 2024 06/01/04 443,015 454,008
Hlth. Auth., PA, Hosp. Rev. Bonds, {613604SB4 } @ 102.000
Ser. A of 1994 (Abington Mem. Hosp.)
(AMBAC Ins.)
6 Pennsylvania Higher Educl. Facs. Auth. AAA 500,000 5.250 2018 07/15/03 493,205 508,195
(Commonwealth of PA), Rev. Bonds {709174TH9 } @ 102.000
(Widener Univ.), 1993 Ser. A
(Connie Lee Ins.)
7 Pennsylvania Intergovernmental AAA 500,000 5.600 2015 06/15/03 512,785 528,110
Cooperation Auth., Spec. Tax Rev. Bonds {708840BL6 } @ 100.000
(City of Philadelphia, Funding Prog.),
Ser. of 1993 (MBIA Ins.)
--------- --------- ---------
TOTAL $ 3,155,000 $ 3,144,663 $ 3,231,410
========= ========= =========
See Notes to Portfolios on Page D - 22.
</TABLE>
D - 21.
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 54 (FLORIDA, MASSACHUSETTS,
NEW JERSEY AND PENNSYLVANIA TRUSTS),
DEFINED ASSET FUNDS
NOTES TO PORTFOLIOS
As of January 31, 1999
<TABLE>
<CAPTION>
<S> <C>
(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) All securities are insured, either on an individual basis or by portfolio
insurance, by a municipal bond insurance company which has been assigned
"AAA" claims paying ability by Standard & Poor's. Accordingly, Standard &
Poor's has assigned a "AAA" rating to the securities. Securities covered by
portfolio insurance are rated "AAA" only as long as they remain in the Trust.
(5) Insured by the indicated municipal bond insurance company.
(6) Bonds with an aggregate face amount of $ 325,000 of the Florida Trust and
$ 175,000 of the Massachusetts Trust have been pre-refunded and are expected
to be called for redemption on the optional redemption provision dates shown.
</TABLE>
D - 22.
<PAGE>
Defined
Asset FundsSM
HAVE QUESTIONS ? MUNICIPAL INVESTMENT TRUST FUND
Request the most MULTISTATE SERIES--54
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:
o Securities Act of 1933 (file no.
33-51199) and
o 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.
14692--4/99
