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DEFINED ASSET FUNDS--REGISTERED TRADEMARK--
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CORPORATE INCOME FUND
INTERMEDIATE TERM SERIES 202
(A UNIT INVESTMENT TRUST)
- PORTFOLIO OF INTERMEDIATE TERM CORPORATE BONDS
- DESIGNED FOR HIGH CURRENT INCOME
- MONTHLY INCOME DISTRIBUTIONS
- U.S. TAX EXEMPT FOR MANY FOREIGN HOLDERS
SPONSOR:
MERRILL LYNCH,
PIERCE, FENNER & SMITH
INCORPORATED
SALOMON SMITH BARNEY INC. -----------------------------------------------------
PRUDENTIAL SECURITIES The Securities and Exchange Commission has not
INCORPORATED approved or disapproved these Securities or passed
PAINEWEBBER INCORPORATED upon the adequacy of this prospectus. Any
DEAN WITTER REYNOLDS representation to the contrary is a criminal offense.
I+NC. Prospectus dated February 4, 2000.
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Defined Asset Funds--Registered Trademark--
For more than 25 years, Defined Asset Funds-Registered Trademark- has been a
leader in unit investment trust research and product innovation. Our family of
"Defined-Registered Trademark-" 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:
- Fixed portfolio: Defined Funds follow a buy and hold investment strategy;
funds are not managed and portfolio changes are limited.
- Preselected Portfolios: We choose the stocks and bonds in advance, so you
know what you're investing in.
- Professional research: Our dedicated research team seeks out stocks or bonds
appropriate for a particular fund's objectives.
- Ongoing supervision: We monitor each portfolio on an ongoing basis.
No matter what your investment goals, tolerance for risk or time horizon,
there's probably a Defined Asset Fund that suits your investment style. Your
financial professional can help you select a Defined Asset Fund that works best
for your investment portfolio.
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CONTENTS
PAGE
--
Risk/Return Summary and Portfolio... 3
What You Can Expect From Your
Investment........................ 6
Monthly Income.................... 6
Return Figures.................... 6
Records and Reports............... 6
The Risks You Face.................. 7
Interest Rate Risk................ 7
Call Risk......................... 7
Reduced Diversification Risk...... 7
Liquidity Risk.................... 7
Concentration Risk................ 7
Bond Quality Risk................. 7
Litigation Risk................... 7
Selling or Exchanging Units......... 7
Sponsors' Secondary Market........ 8
Selling Units to the Trustee...... 8
Exchange Option................... 9
How The Fund Works.................. 9
Pricing........................... 9
Evaluations....................... 9
Income............................ 9
Expenses.......................... 10
Portfolio Changes................. 10
Fund Termination.................. 11
Certificates...................... 11
Trust Indenture................... 11
Legal Opinion..................... 12
Auditors.......................... 12
Sponsors.......................... 12
Trustee........................... 12
Underwriters' and Sponsors'
Profits......................... 13
Public Distribution............... 13
Code of Ethics.................... 13
Year 2000 Issues.................. 13
Taxes............................... 13
Supplemental Information............ 15
Financial Statements................ 16
Report of Independent
Accountants..................... 16
Statement of Condition............ 16
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2
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RISK/RETURN SUMMARY
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1. WHAT IS THE FUND'S OBJECTIVE?
The Fund seeks high current interest
income by investing in a fixed
portfolio consisting primarily of
corporate bonds with an estimated
average life of 10 years.
2. WHAT ARE CORPORATE BONDS?
Corporate bonds are bonds issued by
companies, governments or other
institutions to raise money to use in
their business or to fund their
activities. In return, they pay a fixed
rate of interest and principal at
maturity.
3. WHAT IS THE FUND'S INVESTMENT STRATEGY?
- The Fund plans to hold to maturity 12
intermediate-term corporate bonds with
an aggregate face amount of $6,000,000,
and some short-term U.S. Treasury notes
reserved to pay the deferred sales fee.
The Fund is a unit investment trust
which means that, unlike a mutual fund,
the Fund's portfolio is not managed.
- The bonds are rated A or better by
Standard & Poor's, Moody's or Fitch.
- Several of the bonds may be redeemed,
in whole or in part, at any time at an
amount equal to the principal amount of
the bond plus a "make-whole" premium.
The "make-whole" premium is equal to
the greater of:
(1) the present value of the remaining
payments on the bond discounted at
the Treasury Rate plus 15 basis
points; or
(2) par value
The Portfolio consists of corporate
bonds of the following types:
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- Corporate Utilities 8%
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- Financial Institutions 65%
- Manufacturing 8%
- Retailing 8%
- Service Industries 8%
- U.S. Government 3%
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4. WHAT ARE THE SIGNIFICANT RISKS?
YOU CAN LOSE MONEY BY INVESTING IN THE
FUND. THIS CAN HAPPEN FOR VARIOUS
REASONS, INCLUDING:
- Rising interest rates, an issuer's
worsening financial condition or a drop
in bond ratings can reduce the price of
your units.
- Because the Fund is concentrated in
Financial Institution bonds, adverse
developments in this industry may
affect the value of your units. These
risks are discussed later in this
prospectus under Concentration Risk.
- Assuming no changes in interest rates,
when you sell your units, they will
generally be worth less than your cost
because your cost included a sales fee.
- The Fund will receive early returns of
principal if bonds are sold before they
mature. If this happens your income
will decline and you may not be able to
reinvest the money you receive at as
high a yield or as long a maturity.
5. IS THIS FUND APPROPRIATE FOR YOU?
Yes, if you want current monthly
income. You will benefit from a
professionally selected and supervised
portfolio whose risk is reduced by
investing in bonds of several different
issuers.
The Fund is NOT appropriate for you if
you want a speculative investment that
changes to take advantage of market
movements or if you cannot tolerate any
risk.
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3
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Defined Portfolio
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Intermediate Term Series--202
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RATINGS OF ISSUES (1)
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STANDARD COST
PORTFOLIO TITLE COUPON MATURITY & POOR'S MOODY'S FITCH TO FUND (2)
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CORPORATE UTILITIES (8%):
1. $500,000 GTE Corporation, Notes 7.51% 4/1/09 A Baa1 A $499,995.00
FINANCIAL INSTITUTIONS (65%):
2. $500,000 Allstate Corporation, Senior Notes 7.20 12/1/09 A+ A1 NR 482,325.00
3. $500,000 Barclays Bank plc., Subordinated Notes 7.40 12/15/09 AA- Aa3 NR 490,780.00
4. $500,000 Fleet Boston Corporation, Subordinated Notes 7.375 12/1/09 A- A3 A+ 490,955.00
5. $500,000 Ford Motor Credit Company, Notes 7.375 10/28/09 A+ A1 A+ 489,005.00
6. $500,000 General Electric Capital Corporation, Notes 7.375 1/19/10 AAA Aaa NR 501,605.00
7. $500,000 General Motors Acceptance Corporation, Notes 7.75 1/19/10 A A2 A 503,470.00
8. $500,000 HSBC Holding plc., Subordinated Notes 7.50 7/15/09 A A1 A+ 492,750.00
9. $500,000 National Westminster Bank, Subordinated Notes 7.375 10/1/09 AA- Aa3 AA 485,775.00
MANUFACTURING (8%):
10. $500,000 DaimlerChrysler National Association Holding, 7.20 9/1/09 A+ A1 NR 487,935.00
Company Guaranteed
SERVICE INDUSTRIES (8%):
11. $500,000 Electronic Data Systems, Notes 7.125 10/15/09 A+ A1 AA- 489,930.00
RETAILING (8%):
12. $500,000 Wal-Mart Stores, Senior Notes 6.875 8/10/09 AA Aa2 NR 484,020.00
U.S. GOVERNMENT (3%):
13. $124,000 United States Treasury Notes (3) 5.50- 7/31/01- AAA Aaa AAA 122,062.50
5.75 10/31/02
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$6,020,607.50
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(1) Ratings A through AAA indicate good to highest quality bonds with a strong
to very strong capacity to pay interest and repay principal. "NR" indicates
that no rating has been assigned.
(2) Approximately 16% of the bonds were deposited at a premium and 84% at a
discount from par. Sponsors' profit on deposit was $25,645.62.
(3) It is anticipated that principal received upon the sale or maturity of
these securities will be applied to the payment of the investors' deferred
sales charge; the interest income will be distributed at the end of each
year. These amounts have not been included in the calculation of the Fund's
Estimated Current or Long Term Returns.
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PLEASE NOTE THAT IF THIS PROSPECTUS IS USED AS A PRELIMINARY
PROSPECTUS
FOR A FUTURE FUND IN THIS SERIES, THE PORTFOLIO WILL CONTAIN
DIFFERENT
BONDS FROM THOSE DESCRIBED ABOVE.
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RISK/RETURN SUMMARY (CONTINUED)
DEFINING YOUR INCOME AND ESTIMATING
YOUR RETURN
WHAT YOU MAY EXPECT
First payment per 1,000 units (3/25/00) $ 7.07
Regular Monthly Income per 1,000 units
(beginning 4/25/00): $ 5.89
Annual Income per 1,000 units: $70.70
RECORD DAY: 10th day of each month
THESE FIGURES ARE ESTIMATES ON THE BUSINESS DAY BEFORE
THE INITIAL DATE OF DEPOSIT; ACTUAL PAYMENTS MAY VARY.
Estimated Current Return 6.96%
Estimated Long Term Return 7.08%
THESE RETURNS WILL VARY (SEE PAGE 6)
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
3.00%
Maximum Sales Fee (Load) on new
purchases (as a percentage of $1,000
invested)
You will pay an up-front sales fee of 1.00%,
as well as a total deferred sales fee of
$20.00 per 1,000 units (beginning in August,
2000, eight quarterly payments of $2.50 per
1,000 units). Employees of some of the
Sponsors and their affiliates may be charged a
reduced sales fee of no less than $5.00 per
1,000 Units.
The maximum sales fee is reduced if you invest
at least $100,000, as follows:
YOUR MAXIMUM
SALES FEE
IF YOU INVEST: WILL BE:
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Less than $100,000 3.00%
$100,000 to $249,999 2.75%
$250,000 to $499,999 2.50%
$500,000 to $999,999 2.25%
$1,000,000 and over 2.00%
Maximum Exchange Fee 2.00%
ESTIMATED ANNUAL FUND OPERATING EXPENSES
AS A % OF AMOUNT
$1,000 PER 1,000
INVESTED UNITS
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.070 % $0.70
Trustee's Fee
.055 % $0.55
Portfolio Supervision,
Bookkeeping and
Administrative Fees
(including updating
expenses)
.031 % $0.31
Evaluator's Fee
.023 % $0.23
Other Operating Expenses
------- -----
.179 % $1.79
TOTAL
AMOUNT
PER 1,000
UNITS
---------
$2.00
ORGANIZATIONAL COSTS (deducted from
Fund assets at the close of the
initial offering period)
The Sponsors historically paid
organization costs and updating
expenses.
EXAMPLE
This example may help you compare the
cost of investing in the Fund to the
cost of investing in other funds.
The example assumes that you invest
$10,000 in the Fund for the periods
indicated and sell all your units at the
end of those periods. The example also
assumes a 5% return on your investment
each year and that the Fund's operating
expenses stay the same. Although your
actual costs may be higher or lower,
based on these assumptions your costs
would be:
1 Year 3 Years 5 Years 10 Years
$338 $377 $420 $546
You will pay the following expenses if you do
not sell your units:
1 Year 3 Years 5 Years 10 Years
$238 $377 $420 $546
7. HOW HAVE SIMILAR FUNDS PERFORMED IN THE PAST?
IN THE FOLLOWING CHART WE SHOW PAST
PERFORMANCE OF PRIOR INTERMEDIATE TERM SERIES
OF CORPORATE INCOME FUND, WHICH HAD THE SAME
INVESTMENT OBJECTIVES, STRATEGIES AND TYPES OF
BONDS AS THIS FUND. THESE PRIOR SERIES
DIFFERED IN THAT THEY CHARGED A HIGHER SALES
FEE. These prior Intermediate Term Series were
offered after 1987 and were outstanding on
December 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
12/31/99.
WITH SALES FEE NO SALES FEE
1 YEAR 5 YEARS 1 YEAR 5 YEARS
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High 0.53% 7.95% 3.55% 8.99%
Average -3.42 7.22 -0.50 8.25
Low -8.68 6.13 -5.92 7.14
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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.
9. HOW DO I BUY UNITS?
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.
The minimum investment is $250.
UNIT PRICE PER 1,000 UNITS $1,015.20
(as of February 3, 2000)
Unit price is based on the net asset value of
the Fund plus the up-front sales fee. An
amount equal to any principal cash, as well as
net accrued but undistributed interest on the
unit, is added to the unit price. Unit price
also includes the estimated organization costs
shown on the previous page. 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.
UNIT PAR VALUE $1.00
Unit par value means the total amount of money
you should generally receive on each unit by
the termination of the Fund (other than
interest and premium on the bonds). This total
amount assumes that all bonds in the Fund are
either paid at maturity or called by the
issuer at par or are sold by the Fund at par.
If you sell your units before the Fund
terminates, you may receive more or less than
the unit par value.
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, less any remaining deferred
sales fee. You will not pay any other fee when
you sell your units.
11. HOW ARE DISTRIBUTIONS MADE AND TAXED?
The Fund pays income monthly. Interest and
original issue discount (if any) on the bonds
in this Fund are subject to federal income
taxes for U.S. investors, but if you are a
non-U.S. investor, your interest may be exempt
from U.S. federal income taxes, including
withholding taxes. Interest on the U.S.
Treasury notes will be exempt from state and
local personal income taxes.
You will also receive principal payments if
bonds are sold or called or mature, when the
cash available is more than $5.00 per 1,000
units. You will be subject to tax on any gain
realized by the Fund on the disposition of
bonds.
12. WHAT OTHER SERVICES ARE AVAILABLE?
REINVESTMENT
You will receive your monthly income in cash
unless you choose to compound your income by
reinvesting at no sales fee in the Corporate
Fund Investment Accumulation Program, Inc.
This Program is an open-end mutual fund with a
comparable investment objective. Income from
this Program will be subject to U.S. federal
income taxes for both U.S. and foreign
investors. 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
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WHAT YOU CAN EXPECT FROM YOUR INVESTMENT
MONTHLY INCOME
The Fund will pay you regular monthly income. Your monthly income may vary
because of:
- elimination of one or more bonds from the Fund's portfolio because of calls,
redemptions or sales;
- a change in the Fund's expenses; or
- the failure by a bond's issuer to pay interest.
Changes in interest rates generally will not affect your monthly income because
the portfolio is fixed.
Along with your monthly 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):
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Estimated Annual Estimated
Interest Income - Annual Expenses
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Unit Price
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ESTIMATED LONG TERM RETURN is a measure of the estimated return over the
estimated life of the Fund. Unlike Estimated Current Return, Estimated Long Term
Return reflects maturities, discounts and premiums of the bonds in the Fund. It
is an average of the yields to maturity (or in certain cases, to an earlier call
date) of the individual bonds in the portfolio, adjusted to reflect the Fund's
maximum sales fee and estimated expenses. We calculate the average yield for the
portfolio by weighting each bond's yield by its market value and the time
remaining to the call or maturity date.
Yields on individual bonds depend on many factors including general conditions
of the bond markets, the size of a particular offering and the maturity and
quality rating of the particular issues. Yields can vary among bonds with
similar maturities, coupons and ratings.
These return quotations are designed to be comparative rather than predictive.
RECORDS AND REPORTS
You will receive:
- - a monthly statement of income payments and any principal payments;
- - a notice from the Trustee when new bonds are deposited in exchange or
substitution for bonds originally deposited;
- - an annual report on Fund activity; and
- - annual tax information. THIS WILL ALSO BE SENT TO THE IRS. YOU MUST REPORT THE
AMOUNT OF INTEREST RECEIVED DURING THE YEAR.
You may request:
- - copies of bond evaluations to enable you to comply with federal and state tax
reporting requirements; and
- - audited financial statements of the Fund.
You may inspect records of Fund transactions at the Trustee's office during
regular business hours.
6
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THE RISKS YOU FACE
INTEREST RATE RISK
Investing involves risks, including the risk that your investment will decline
in value if interest rates rise. Generally, 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, an issuer might call its bonds if it no longer needs the money for
the original purpose or, during periods of falling interest rates, if the
issuer's bonds have a coupon higher than current market rates. 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
The bonds will generally trade in the over-the-counter market. We cannot assure
you that a liquid trading market will exist, especially since current law may
restrict the Fund from selling bonds to any Sponsor. 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, the Fund is
said to be "concentrated" in that bond type, which makes the Fund less
diversified.
Here is what you should know about the Fund's concentration in bonds of
financial institutions.
The profitability of a financial institution depends to a great extent on the
credit quality of its loan portfolio, which is affected by:
- the institution's underwriting criteria;
- Concentrations within its loan portfolio; and
- general economic conditions.
A financial institution's operating performance is also impacted by:
- changes in interest rates;
- availability and cost of funds;
- intensity of competition; and
- degree of government regulation.
Changes to the portfolio from bond redemptions, maturities and sales may affect
the Fund's concentration over time.
BOND QUALITY RISK
A reduction in a bond's rating may decrease its value and, indirectly, the value
of your investment in the Fund.
LITIGATION RISK
We do not know of any pending litigation that might have a material adverse
effect upon the Fund.
SELLING OR EXCHANGING UNITS
You can sell your units at any time for a price based on net asset value. Your
net asset value is calculated each business day by:
7
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- ADDING the value of the bonds, net accrued interest, cash and any other Fund
assets;
- SUBTRACTING accrued but unpaid Fund expenses, unreimbursed Trustee advances,
cash held to buy back units or for distribution to investors and any other
Fund liabilities; and
- DIVIDING the result by the number of outstanding units.
Your net asset value when you sell may be more or less than your cost because of
sales fees, market movements and changes in the portfolio.
As of the close of the initial offering period, the price you receive will be
reduced to reflect estimated organization costs.
If you sell your units before the final deferred sales fee installment, the
amount of any remaining installments will be deducted from your proceeds.
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 other than any remaining deferred sales charge.
We may resell the units to other buyers or to the Trustee. You should consult
your financial professional for current market prices to determine if other
broker-dealers or banks are offering higher prices.
We have maintained a secondary market continuously for over 28 years, but we
could discontinue it without prior notice for any business reason.
SELLING UNITS TO THE TRUSTEE
Regardless of whether we maintain a secondary market, you can sell your units to
the Trustee at any time by sending the Trustee a letter (with any outstanding
certificates if you hold Unit certificates). You must properly endorse your
certificates (or execute a written transfer instrument with signatures
guaranteed by an eligible institution). Sometimes, additional documents are
needed such as a trust document, certificate of corporate authority, certificate
of death or appointment as executor, administrator or guardian.
Within seven days after your request and the necessary documents are received,
the Trustee will mail a check to you. Contact the Trustee for additional
information.
As long as we are maintaining a secondary market, the Trustee will sell your
units to us at a price based on net asset value. If there is no secondary
market, the Trustee may sell your units in the over-the-counter market for a
higher price, but it is not obligated to 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.
If you acquire 25% or more of the outstanding units of the Fund and you sell
units with a value exceeding $250,000, the Trustee may choose to pay you "in
kind" by distributing bonds and cash with a total value equal to the price of
those units. The Trustee will try to distribute bonds in the portfolio pro rata,
but it reserves the right to distribute only one or a few bonds. The Trustee
will act as your agent in an in kind distribution and will either hold the bonds
for your account or sell them as you instruct. You must pay any transaction
costs as well as transfer and ongoing custodial fees on sales of bonds
distributed in kind.
8
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There could be a delay in paying you for your units:
- if the New York Stock Exchange is closed (other than customary weekend and
holiday closings);
- if the SEC determines that trading on the New York Stock Exchange is
restricted or that an emergency exists making sale or evaluation of the
bonds not reasonably practicable; and
- for any other period permitted by SEC order.
EXCHANGE OPTION
You may exchange units of certain Defined Asset Funds for units of this Fund at
a maximum exchange fee of 2.00%. You may exchange units of this Fund for units
of certain other 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 date of deposit up to, but not including, the settlement date, which
is usually three business days after the purchase date of the unit.
Bonds also carry accrued but unpaid interest up to the initial date of deposit.
To avoid having you pay this additional accrued interest (which earns no return)
when you buy, the Trustee advances this amount to the Sponsors. The Trustee
recovers this advance from interest received on the bonds.
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.
In addition, a portion of the price of a unit also consists of cash to pay all
or some of the costs of organizing the Fund including:
- cost of initial preparation of legal documents;
- federal and state registration fees;
- initial fees and expenses of the Trustee;
- initial audit; and
- legal expenses and other out-of-pocket expenses.
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 corporate bonds has ranged from 0.25% of face amount on actively traded
issues to 1.5% on inactively traded issues; the difference has averaged between
0.5% and 1%.
INCOME
Interest on any bonds purchased on a when-issued basis or for a delayed delivery
does not begin to accrue until the bonds are delivered
9
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to the Fund. The Trustee may advance money to provide you with income for this
non-accrual period.
If a bond is not delivered on time and the Trustee's annual fee and expenses do
not cover the additional accrued interest, we will treat the contract to buy the
bond as failed.
The Trustee credits interest to an Income Account and other receipts to a
Capital Account. The Trustee may establish a Reserve Account by withdrawing from
these accounts amounts it considers appropriate to pay any material liability.
These accounts do not bear interest.
EXPENSES
The Trustee is paid monthly. It also benefits when it holds cash for the Fund in
non-interest bearing accounts. The Trustee may also receive additional amounts:
- to reimburse the Trustee for the Fund's operating expenses;
- for extraordinary services and costs of indemnifying the Trustee and the
Sponsors;
- costs of actions taken to protect the Fund and other legal fees and
expenses;
- expenses for keeping the Fund's registration statement current; and
- Fund termination expenses and any governmental charges.
The Sponsors are currently reimbursed up to 55 CENTS per $1,000 face amount
annually for providing portfolio supervisory, bookkeeping and administrative
services and for any other expenses properly chargeable to the Fund. Legal,
typesetting, electronic filing and regulatory filing fees and expenses
associated with updating the Fund's registration statement yearly are also now
chargeable to the Fund. 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.
Certain of these expenses were previously paid for by the Sponsors.
The Trustee's, Sponsors' and Evaluator's fees may be adjusted for inflation
without investors' approval.
Quarterly deferred sales charges you owe are paid with interest and principal
from certain bonds. If these amounts are not enough, the rest will be paid out
of distributions to you from the Fund's Capital and Income Accounts.
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 fails in the first 90 days of the Fund, we generally
will deposit a replacement corporate bond with a similar yield, maturity, rating
and price.
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 or certain other conditions exist.
If we maintain a secondary market in units but are unable to sell the units that
we buy in the secondary market, we will redeem units, which will affect the size
and composition of the portfolio. Units offered in the secondary market may not
represent
10
<PAGE>
the same face amount of bonds that they did originally.
We decide whether or not to offer units for sale that we acquire in the
secondary market after reviewing:
- diversity of the portfolio;
- size of the Fund relative to its original size;
- ratio of Fund expenses to income;
- current and long-term returns;
- degree to which units may be selling at a premium over par; and
- cost of maintaining a current prospectus.
FUND TERMINATION
The Fund will terminate following the stated maturity or sale of the last bond
in the portfolio. The Fund may also terminate earlier with the consent of
investors holding 51% of the units or if total assets of the Fund have fallen
below 40% of the face amount of bonds deposited. We will decide whether to
terminate the Fund early based on the same factors used in deciding whether or
not to offer units in the secondary market.
When the Fund is about to terminate you will receive a notice, and you will be
unable to sell your units after that time. On or shortly before termination, we
will sell any remaining bonds, and you will receive your final distribution. Any
bond that cannot be sold at a reasonable price may continue to be held by the
Trustee in a liquidating trust pending its final sale.
You will pay your share of the expenses associated with termination, including
brokerage costs in selling bonds. This may reduce the amount you receive as your
final distribution.
CERTIFICATES
Certificates for units are issued on request. You may transfer certificates by
complying with the requirements for redeeming certificates, described above. You
can replace lost or mutilated certificates by delivering satisfactory indemnity
and paying the associated costs.
TRUST INDENTURE
The Fund is a "unit investment trust" governed by a Trust Indenture, a contract
among the Sponsors, the Trustee and the Evaluator, which sets forth their duties
and obligations and your rights. A copy of the Indenture is available to you on
request to the Trustee. The following summarizes certain provisions of the
Indenture.
The Sponsors and the Trustee may amend the Indenture without your consent:
- to cure ambiguities;
- to correct or supplement any defective or inconsistent provision;
- to make any amendment required by any governmental agency; or
- to make other changes determined not to be materially adverse to your best
interest (as determined by the Sponsors).
Investors holding 51% of the units may amend the Indenture. Every investor must
consent to any amendment that changes the 51% requirement. No amendment may
reduce your interest in the Fund without your written consent.
The Trustee may resign by notifying the Sponsors. The Sponsors may remove the
Trustee without your consent if:
- it fails to perform its duties and the Sponsors determine that its
replacement is in your best interest; or
11
<PAGE>
- it becomes incapable of acting or bankrupt or its affairs are taken over by
public authorities.
Investors holding 51% of the units may remove the Trustee. The Evaluator may
resign or be removed by the Sponsors and the Trustee without the consent of
investors. The resignation or removal of either becomes effective when a
successor accepts appointment. The Sponsors will try to appoint a successor
promptly; however, if no successor has accepted within 30 days after notice of
resignation, the resigning Trustee or Evaluator may petition a court to appoint
a successor.
Any Sponsor may resign as long as one Sponsor with a net worth of $2 million
remains and agrees to the resignation. The remaining Sponsors and the Trustee
may appoint a replacement. If there is only one Sponsor and it fails to perform
its duties or becomes bankrupt the Trustee may:
- remove it and appoint a replacement Sponsor;
- liquidate the Fund; or
- continue to act as Trustee without a Sponsor.
Merrill Lynch, Pierce, Fenner & Smith Incorporated acts as agent for the
Sponsors.
The Trust Indenture contains customary provisions limiting the liability of the
Trustee, the Sponsors and the Evaluator.
LEGAL OPINION
Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York 10017, as
special counsel for the Sponsors, has given an opinion that the units are
validly issued.
AUDITORS
Deloitte & Touche LLP, 2 World Financial Center, New York, New York 10281,
independent accountants, audited the Statement of Condition included in this
prospectus.
SPONSORS
The Sponsors and their underwriting percentages are:
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED (a wholly-owned subsidiary of
Merrill Lynch & Co., Inc.)
P.O. Box 9051,
Princeton, NJ 08543-9051 78.59%
SALOMON SMITH BARNEY INC. (an indirectly wholly-owned subsidiary of Citigroup
Inc.)
388 Greenwich Street--23rd Floor,
New York, NY 10013 8.23%
DEAN WITTER REYNOLDS INC. (a principal operating subsidiary of Morgan Stanley
Dean Witter & Co.)
Two World Trade Center--59th Floor,
New York, NY 10048 6.59%
PAINEWEBBER INCORPORATED (a wholly-owned subsidiary of PaineWebber Group Inc.)
1285 Avenue of the Americas,
New York, NY 10019 6.59%
100.00%
Each Sponsor is a Delaware corporation and it, or its predecessor, has acted as
sponsor to many unit investment trusts. As a registered broker-dealer each
Sponsor buys and sells securities (including investment company shares) for
others (including investment companies) and participates as an underwriter in
various selling groups.
TRUSTEE
The Bank of New York, Unit Investment Trust Department, P.O. Box 974, Wall
Street Division, New York, New York 10268-0974, 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.
12
<PAGE>
UNDERWRITERS' AND SPONSORS' PROFITS
Underwriters receive sales charges when they sell units. Sponsors also realize a
profit or loss on deposit of the bonds shown under Defined Portfolio. 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.
None of the bonds in the Portfolio were purchased from any of the Sponsors (as
sole underwriter, managing underwriter or member of an underwriting syndicate).
During the initial offering period, the Sponsors also may realize profits or
sustain losses on units they hold. 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.
PUBLIC DISTRIBUTION
During the initial offering period, units will be distributed to the public by
the Sponsors and dealers who are members of the National Association of
Securities Dealers, Inc. This period is 30 days or less if all units are sold.
The Sponsors may extend the initial period up to 120 days.
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.
In the initial offering period, the concession to dealers will be $20 per 1,000
units. We may change the concession at any time. Dealers may resell units to
other dealers with a concession not in excess of the original concession to
dealers.
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"). To date, we are not aware of any major operational difficulties
resulting from the computer system changes necessary to prepare for the Year
2000.
However, there can be no assurance that the Year 2000 Problem will not adversely
affect the issuers of the securities contained in the Portfolio. We cannot
predict whether any impact will be material to the Fund as a whole.
TAXES
The following summary describes some of the important income tax consequences of
holding units. It assumes that you are not a dealer, financial institution,
insurance company or other investor with special circumstances or subject to
special rules. You should consult your own tax adviser about your particular
circumstances.
In the opinion of our counsel, under existing law:
13
<PAGE>
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. You
will be considered to have received the interest (or original issue discount, if
any) when interest is received (or original issue discount, if any, is accrued)
by the Fund, regardless of whether the interest is reinvested or a portion is
used to pay fund expenses.
GAIN OR LOSS UPON DISPOSITION
When all or part of your share of a bond is disposed of (for example, when the
Fund sells, exchanges or redeems a bond or when you sell or exchange your
units), you will generally recognize capital gain or loss. Your gain, however,
will generally be ordinary income to the extent of any accrued "market
discount". Generally you will have market discount to the extent that your basis
in a bond when you purchase a unit is less than its stated redemption price at
maturity (or, if it is an original issue discount bond, the issue price
increased by original issue discount that has accrued on the bond before your
purchase). You should consult your tax adviser in this regard.
If your net long-term capital gains exceed your net short-term capital losses,
the excess may be subject to tax at a lower rate than ordinary income. Any
capital gain from the Fund will be long-term if you are considered to have held
your investment on each bond for more than one year and short-term if you are
considered to have held it for one year or less. Because the deductibility of
capital losses is subject to limitations, you may not be able to deduct all of
your capital losses. You should consult your tax advisor in this regard.
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 an individual who itemizes deductions, you may deduct your share of
Fund expenses, but only to the extent that such amount, together with your other
miscellaneous deductions, exceeds 2% of your adjusted gross income. Your ability
to deduct Fund expenses will be limited further if your adjusted gross income
exceeds a specified amount currently $128,950 ($64,475 for a married person
filing separately).
FOREIGN INVESTORS
If you are a foreign investor and you are not engaged in a U.S. trade or
business, you generally will not be subject to U.S. federal income tax,
including withholding tax, on the interest or gain on a bond issued after July
18, 1984 if you meet certain requirements, including the certification of
foreign status and other matters. You should consult your tax adviser about the
possible application of federal, state and local, and foreign taxes.
RETIREMENT PLANS
You may wish to purchase units for an Individual Retirement Account (IRA) or
other retirement plan. Generally, capital gains and income received in each of
these plans are exempt from federal taxation. All distributions from such plans
are generally treated as ordinary income but may, in some cases, be eligible for
tax-deferred rollover
14
<PAGE>
treatment. You should consult your attorney or tax adviser about the specific
tax rules relating to thse plans. These plans are offered by brokerage firms,
including the Sponsors of this Fund, and other financial institutions. Fees and
charges with respect to such plans may vary.
SUPPLEMENTAL INFORMATION
You can receive at no cost supplemental information about the Fund by calling
the Trustee. The supplemental information includes more detailed risk disclosure
about the types of bonds that may be in the Fund's portfolio, 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.
15
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Sponsors, Trustee and Holders of Corporate Income Fund, Intermediate Term
Series--202, Defined Asset Funds (the "Fund"):
We have audited the accompanying statement of condition and the related defined
portfolio included in the prospectus of the Fund as of February 4, 2000. This
financial statement is the responsibility of the Trustee. Our responsibility is
to express an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. Our procedures included
confirmation of cash and an irrevocable letter of credit deposited for the
purchase of securities, as described in the statement of condition, with the
Trustee. An audit also includes assessing the accounting principles used and
significant estimates made by the Trustee, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the financial position of the Fund as of February 4, 2000
in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
NEW YORK, N.Y.
FEBRUARY 4, 2000
STATEMENT OF CONDITION AS OF FEBRUARY 4, 2000
TRUST PROPERTY
<TABLE>
<S> <C>
Investments--Bonds and Contracts to purchase Bonds(1) $ 6,020,607.50
Cash 86,148.00
Accrued interest to Initial Date of Deposit on underlying
Bonds 104,565.94
--------------------
Total $ 6,211,321.44
====================
LIABILITIES AND INTEREST OF HOLDERS
Liabilities: Advance by Trustee for accrued interest (2) $ 104,565.94
Reimbursement of Sponsors for organization
expenses (3) $ 12,148.00
--------------------
Subtotal 116,713.94
--------------------
Interest of Holders of 6,074,000 Units of fractional
undivided interest outstanding:
Cost to investors (3)(4)(5) 6,166,341.44
Organization expenses (3) (71,733.94)
--------------------
Subtotal 6,094,607.50
--------------------
Total $ 6,211,321.44
====================
</TABLE>
- ------------
(1) Aggregate cost to the Fund of the bonds listed under Defined
Portfolio is based upon the offer side evaluation determined by the Evaluator at
the evaluation time on the business day prior to the Initial Date of Deposit.
The contracts to purchase the bonds are collateralized by an irrevocable letter
of credit which has been issued by Deutsche Genossenschaftsbank, A.G., New York
Branch, in the amount of $6,104,420.06 and deposited with the Trustee. The
amount of the letter of credit includes $5,994,961.88 for the purchase of
$6,124,000 face amount of the bonds, plus $109,458.18 for accrued interest.
(2) Representing a special distribution to the Sponsors by the Trustee
of an amount equal to the accrued interest on the bonds.
(3) A portion of the Unit Price consists of cash in an amount sufficient
to pay for costs incurred in establishing the Fund. These costs have been
estimated at $2.00 per 1,000 Units. A distribution will be made at the close of
the initial offering period to an account maintained by the Trustee from which
the organization expense obligation of the investors to the Sponsors will be
satisfied. If the actual organization costs exceed the estimated aggregate
amount shown above, the Sponsors will pay for this excess amount.
(4) Assumes the maximum up-front sales fee per 1,000 units of 1.00% of
the Unit Price. A deferred sales fee of $20.00 per 1,000 Units is payable over a
two-year period (eight quarterly payments of $2.50 per 1,000 Units).
Distributions will be made to an account maintained by the Trustee from which
the deferred sales fee obligation of the investors will be satisfied. If units
are redeemed prior to the end of the second anniversary of the Fund, the
remaining portion of the deferred sales fee applicable to such units will be
transferred to the account on the redemption date.
(5) Aggregate Unit Price (exclusive of interest) computed on the basis
of the offer side evaluation of the underlying bonds as of the evaluation time
on the business day prior to the Initial Date of Deposit.
16
<PAGE>
Defined
Asset Funds
- -SM-
<TABLE>
<S> <C>
HAVE QUESTIONS ? CORPORATE INCOME FUND
Request the most INTERMEDIATE TERM SERIES 202
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 Bank of New York investment company filed with the
1-800-221-7771 Securities and Exchange Commission in
Washington, D.C. under the:
- Securities Act of 1933 (file no.
333-95731) and
- Investment Company Act of 1940 (file
no. 811-2295).
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.
100623RR--2/00
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