<PAGE>
DEFINED ASSET FUNDSSM
- --------------------------------------------
- ----------------------------------
MUNICIPAL INVESTMENT TRUST FUND
MULTISTATE SERIES--201
(A UNIT INVESTMENT TRUST)
O CALIFORNIA, CONNECTICUT, FLORIDA AND VIRGINIA
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>
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Defined 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
-----------
California Insured Portfolio--
Risk/Return Summary.................................. 3
Connecticut Portfolio--Risk/Return Summary.............. 6
Florida Insured Portfolio-- Risk/Return Summary......... 9
Virginia Portfolio--
Risk/Return Summary.................................. 12
What You Can Expect From Your Investment................ 16
Monthly Income....................................... 16
Return Figures....................................... 16
Records and Reports.................................. 16
The Risks You Face...................................... 17
Interest Rate Risk................................... 17
Call Risk............................................ 17
Reduced Diversification Risk......................... 17
Liquidity Risk....................................... 17
Concentration Risk................................... 17
State Concentration Risk............................. 18
Bond Quality Risk.................................... 20
Insurance Related Risk............................... 20
Litigation and Legislation Risks..................... 20
Selling or Exchanging Units............................. 20
Sponsors' Secondary Market........................... 21
Selling Units to the Trustee......................... 21
Exchange Option...................................... 21
How The Fund Works...................................... 22
Pricing.............................................. 22
Evaluations.......................................... 22
Income............................................... 22
Expenses............................................. 22
Portfolio Changes.................................... 23
Fund Termination..................................... 23
Certificates......................................... 23
Trust Indenture...................................... 24
Legal Opinion........................................ 24
Auditors............................................. 25
Sponsors............................................. 25
Trustee.............................................. 25
Underwriters' and Sponsors' Profits 25
Public Distribution.................................. 25
Code of Ethics....................................... 25
Year 2000 Issues..................................... 26
Taxes................................................... 26
Supplemental Information................................ 29
Financial Statements.................................... D-1
2
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CALIFORNIA 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
$3,525,000.
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 27%
/ / Housing 15%
/ / Refunded Bonds 11%
/ / Municipal Electric Utilities 15%
/ / Tax Allocation 15%
/ / Universities/Colleges 17%
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 CALIFORNIA
SO IT IS LESS DIVERSIFIED THAN A NATIONAL FUND AND IS
SUBJECT TO RISKS PARTICULAR TO CALIFORNIA WHICH ARE BRIEFLY
DESCRIBED UNDER STATE CONCENTRATION RISKS LATER IN THIS
PROSPECTUS.
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 $ 4.39
Annual Income per unit: $ 52.73
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
$ 0.44
Portfolio Supervision,
Bookkeeping and
Administrative Fees
(including updating
expenses)
$ 0.37
Evaluator's Fee
$ 0.20
Organization Costs
$ 0.24
Other Operating Expenses
-----------
$ 1.94
TOTAL
The Sponsors historically paid organization costs and
updating expenses.
7. HOW HAVE SIMILAR FUNDS PERFORMED IN THE PAST?
In the following chart we show past performance of prior
California Portfolios, which had investment objectives,
strategies and types of bonds substantially similar to
this Fund. These prior Series differed in that they
charged a higher sales fee. These prior California Series
were offered between June 22, 1988 and September 27, 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.
NO SALES
WITH SALES FEE FEE
1 YEAR 5 YEARS 1 YEAR 5 YEARS
- -------------------------------------------------------------------
High 4.57% 7.62% 7.61% 8.82%
Average 2.32 5.66 5.52 6.70
Low 0.40 4.27 3.11 5.10
- -------------------------------------------------------------------
Average
Sales fee 3.18% 5.10%
- -------------------------------------------------------------------
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 $1,058.24
(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 California state and local personal income
taxes if you live in California.
You will also receive principal payments if bonds are sold
or called or mature, when the cash available is more than
$5.00 per unit. You will be subject to tax on any gain
realized by the Fund on the disposition of bonds.
12. WHAT OTHER SERVICES ARE AVAILABLE?
REINVESTMENT
You will receive your income in cash unless you choose to
compound your income by reinvesting at no sales fee in the
Municipal Fund Investment Accumulation Program, Inc. This
program is an open-end mutual fund with a comparable
investment objective, but the bonds will generally not be
insured. Income from this program will generally be subject
to state and local income taxes. For more complete
information about the program, including charges and fees,
ask the Trustee for the program's prospectus. Read it
carefully before you invest. The Trustee must receive your
written election to reinvest at least 10 days before the
record day of an income payment.
EXCHANGE PRIVILEGES
You may exchange units of this Fund for units of certain
other Defined Asset Funds. You may also exchange into this
Fund from certain other funds. We charge a reduced sales fee
on exchanges.
5
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CONNECTICUT 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 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
$3,105,000.
o The Fund is a unit investment trust which means that,
unlike a mutual fund, the Portfolio is not managed.
o When the bonds were initially deposited they were rated A
or better by Standard & Poor's, Moody's or Fitch. The
quality of the bonds may currently be lower.
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 61% 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 44%
/ / Hospitals/Health Care 29%
/ / Industrial Development Revenue 16%
/ / Municipal Electric Utilities 11%
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 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.
6
<PAGE>
ALSO, THE PORTFOLIO IS CONCENTRATED IN BONDS OF CONNECTICUT
SO IT IS LESS DIVERSIFIED THAN A NATIONAL FUND AND IS
SUBJECT TO RISKS PARTICULAR TO CONNECTICUT WHICH ARE
BRIEFLY DESCRIBED UNDER STATE CONCENTRATION RISKS LATER IN
THIS PROSPECTUS.
5. IS THIS FUND APPROPRIATE FOR YOU?
Yes, if you want federally tax-free income. You will
benefit from a professionally selected and supervised
portfolio whose risk is reduced by investing in bonds of
several different issuers.
The Fund is not appropriate for you if you want a
speculative investment that changes to take advantage of
market movements, if you do not want a tax-advantaged
investment or if you cannot tolerate any risk.
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 $ 4.27
Annual Income per unit: $ 51.27
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
be charged a reduced sales fee of no less than $5.00 per
unit.
The maximum sales fee is reduced if you invest at least
$100,000, as follows:
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
$ 0.45
Portfolio Supervision,
Bookkeeping and
Administrative Fees
(including updating
expenses)
$ 0.42
Evaluator's Fee
$ 0.20
Organization Costs
$ 0.25
Other Operating Expenses
-----------
$ 2.01
TOTAL
The Sponsors historically paid organization costs and
updating expenses.
7. HOW HAVE SIMILAR FUNDS PERFORMED IN THE PAST?
In the following chart we show past performance of prior
Connecticut 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 Connecticut Series
were offered between October 26, 1988 and April 25, 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 5.44% 7.23% 6.86% 6.62% 8.43% 7.46%
Average 2.77 5.16 6.74 5.00 6.14 7.34
Low 0.43 4.55 6.65 3.81 5.39 7.24
- -------------------------------------------------------------------
Average
Sales fee 2.21% 4.79% 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.
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 $1,048.02
(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 Connecticut state and local personal
income taxes if you live in Connecticut.
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>
- --------------------------------------------------------------------------------
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 6 long-term tax-exempt
municipal bonds with an aggregate face amount of
$2,020,000.
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 40%
/ / Hospitals/Health Care 52%
/ / Municipal Water/Sewer Utilities 8%
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 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 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.
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 $ 4.09
Annual Income per unit: $ 49.18
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
$ 0.44
Portfolio Supervision,
Bookkeeping and
Administrative Fees
(including updating
expenses)
$ 0.64
Evaluator's Fee
$ 0.20
Organization Costs
$ 0.49
Other Operating Expenses
-----------
$ 2.46
TOTAL
The Sponsors historically paid organization costs and
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.
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 $1,021.98
(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 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>
- --------------------------------------------------------------------------------
VIRGINIA 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 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
$3,110,000.
o The Fund is a unit investment trust which means that,
unlike a mutual fund, the Portfolio is not managed.
o When the bonds were initially deposited they were rated A
or better by Standard & Poor's, Moody's or Fitch. The
quality of the bonds may currently be lower.
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 27% 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
/ / Moral Obligation 14%
/ / Hospital/Health Care 43%
/ / Lease Rental Appropriation 16%
/ / Refunded Bonds 15%
/ / Municipal Electric Utilities 12%
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.
12
<PAGE>
ALSO, THE PORTFOLIO IS CONCENTRATED IN BONDS OF VIRGINIA SO
IT IS LESS DIVERSIFIED THAN A NATIONAL FUND AND IS SUBJECT
TO RISKS PARTICULAR TO VIRGINIA WHICH ARE BRIEFLY DESCRIBED
UNDER STATE CONCENTRATION RISKS LATER IN THIS PROSPECTUS.
5. IS THIS FUND APPROPRIATE FOR YOU?
Yes, if you want federally tax-free income. You will
benefit from a professionally selected and supervised
portfolio whose risk is reduced by investing in bonds of
several different issuers.
The Fund is not appropriate for you if you want a
speculative investment that changes to take advantage of
market movements, if you do not want a tax-advantaged
investment or if you cannot tolerate any risk.
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 $ 4.37
Annual Income per unit: $ 52.48
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
$ 0.45
Portfolio Supervision,
Bookkeeping and
Administrative Fees
(including updating
expenses)
$ 0.42
Evaluator's Fee
$ 0.20
Organization Costs
$ 0.24
Other Operating Expenses
-----------
$ 2.00
TOTAL
The Sponsors historically paid organization costs and
updating expenses.
7. HOW HAVE SIMILAR FUNDS PERFORMED IN THE PAST?
In the following chart we show past performance of prior
Virginia Portfolios, which had investment objectives,
strategies and types of bonds substantially similar to
this Fund. These prior Series differed in that they
charged a higher sales fee. These prior Virginia Series
were offered between October 26, 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 1 YEAR 5 YEARS
- ---------------------------------------------------------------
High 4.15% 7.32% 6.85% 8.52%
Average 2.43 5.53 5.09 6.50
Low -0.04 4.33 3.32 5.13
- ---------------------------------------------------------------
Average
Sales fee 2.64% 4.77%
- -------------------------------------------------------------
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 $1,058.89
(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 Virginia state and local personal income
taxes if you live in Virginia.
You will also receive principal payments if bonds are sold
or called or mature, when the cash available is more than
$5.00 per unit. You will be subject to tax on any gain
realized by the Fund on the disposition of bonds.
12. WHAT OTHER SERVICES ARE AVAILABLE?
REINVESTMENT
You will receive your income in cash unless you choose to
compound your income by reinvesting at no sales fee in the
Municipal Fund Investment Accumulation Program, Inc. This
program is an open-end mutual fund with a comparable
investment objective. Income from this program will
generally be subject to state and local income taxes. For
more complete information about the program, including
charges and fees, ask the Trustee for the program's
prospectus. Read it carefully before you invest. The Trustee
must receive your written election to reinvest at least 10
days before the record day of an income payment.
EXCHANGE PRIVILEGES
You may exchange units of this Fund for units of certain
other Defined Asset Funds. You may also exchange into this
Fund from certain other funds. We charge a reduced sales fee
on exchanges.
14
<PAGE>
- --------------------------------------------------------------------------------
TAX-FREE VS. TAXABLE INCOME: A COMPARISON OF TAXABLE AND TAX-FREE YIELDS
FOR CALIFORNIA 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 20.10 5.01 5.63 6.26 6.88 7.51 8.14 8.76 9.39 10.01
$ 25,751- 62,450 $ 43,051-104,050 34.70 6.13 6.89 7.66 8.42 9.19 9.95 10.72 11.48 12.25
$ 62,451-130,250 $104,051-158,550 37.42 6.39 7.19 7.99 8.79 9.59 10.39 11.19 11.98 12.78
$130,251-283,150 $158,551-283,150 41.95 6.89 7.75 8.61 9.47 10.34 11.20 12.06 12.92 13.78
OVER $283,151 OVER $283,151 45.22 7.30 8.21 9.13 10.04 10.95 11.87 12.78 13.69 14.60
</TABLE>
FOR CONNECTICUT 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 18.83 3.70 4.31 4.93 5.54 6.18 6.78 7.39 8.01
$ 25,350- 81,400 $ 42,350-102,300 31.24 4.36 5.09 5.82 6.54 7.27 8.00 8.73 9.45
$ 81,400-128,100 $102,300-155,950 34.11 4.55 5.31 6.07 6.83 7.59 8.35 9.11 9.86
$128,100-278,450 $155,950-278,450 38.88 4.91 5.73 6.54 7.38 8.18 9.00 9.82 10.63
OVER $278,450 OVER $278,450 42.32 5.20 6.07 6.93 7.80 8.87 9.54 10.40 11.27
</TABLE>
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 VIRGINIA 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 19.89 4.99 5.62 6.24 6.87 7.49 8.11 8.74 9.36 9.99
$ 25,751- 62,450 $ 43,051-104,050 32.14 5.89 6.63 7.37 8.10 8.84 9.58 10.32 11.05 11.79
$ 62,451-130,250 $104,051-158,550 34.97 6.15 6.92 7.69 8.46 9.23 10.00 10.76 11.53 12.30
$130,251-283,150 $158,551-283,150 39.68 6.63 7.46 8.29 9.12 9.95 10.78 11.60 12.43 13.26
OVER $283,151 OVER $283,151 43.07 7.03 7.90 8.78 9.66 10.54 11.42 12.30 13.17 14.05
</TABLE>
To compare the yield of a taxable security with the yield of a tax-free
security, find your taxable income and read across. The table incorporates 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 California, Connecticut, Florida and
Virginia 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 Connecticut and Florida Portfolios'
concentrations 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.
Changes to the portfolio from bond redemptions, maturities and sales may affect
the Fund's concentrations over time.
STATE CONCENTRATION RISK
CALIFORNIA RISKS
Generally
From the late 1980s through the early 1990s, an economic recession eroded
California's revenue base. At the same time rapid population growth caused State
expenditures to exceed budget appropriations.
o As a result California experienced a period of sustained budget imbalance.
o Since that time the California economy has improved and the extreme
budgetary pressures have begun to lessen.
State Government
The 1997-98 Budget Act allocated a State budget of approximately $66.9 Billion
and contains no tax increases or reductions. Despite this somewhat improved
state, California's budget is still subject to certain unforeseeable events. For
example:
o In December, 1994, Orange County and its investment pool filed for
bankruptcy. While a settlement has been reached, the full impact on the
State and Orange County is still unknown.
o California faces constant fluctuations in other expenses (including health
and welfare caseloads, property tax receipts, federal funding and natural
disaster relief) that will undoubtedly create new budgetary pressure and
reduce issuers' ability to pay their debts.
o California's general obligation bonds are currently rated A1 by Moody's and
A+ by Standard & Poor's.
Other Risks
Issuers' ability to make payments on bonds (and the remedies available to
bondholders)
18
<PAGE>
could also be adversely affected by the following constraints:
o Certain provisions of California's Constitution, laws and regulatory system
contain tax, spending and appropriations limits and prohibit certain new
taxes.
o Certain other California laws subject the users of bond proceeds to strict
rules and limits regarding revenue repayment.
o Bonds of healthcare institutions which are subject to the strict rules and
limits regarding reimbursement payments of California's Medi-Cal program
for health care services to welfare recipients and bonds secured by liens
on real property are two of the types of bonds affected by these
provisions.
CONNECTICUT RISKS
Generally
Connecticut has experienced a variety of economic problems in the last several
years including:
o manufacturing, historically the state's most important activity, has
employed fewer and fewer poeple over the last 10 years;
o large cuts in defense spending threaten defense-related business, which has
traditionally represented a big part of the state's manufacturing
activity; and
o unemployment and poverty are high in certain parts of the state, even
though unemployment state-wide is below the national average.
State and Local Government
Connecticut's state and local governments have also experienced financial
difficulties for several years. For example:
o the state's General Fund had operating deficits for several years in the
late 1980s and early 1990s. Since 1991, however, the General Fund has had
operating surpluses;
o the state issued notes in 1991 to fund its accumulated deficit. The notes
were originally supposed to be paid by 1996, but they were rescheduled, so
that they will be repaid by 1999; and
o Connecticut has several of the nation's poorest and most financially
troubled cities, including Bridgeport, which filed for bankruptcy in 1991,
and its capital city of Hartford.
Local governments in Connecticut receive tax revenue only from taxes on real
estate and personal property, which makes it hard for them to raise additional
tax revenue. Both Connecticut and its cities depend heavily on federal aid, and
the cities also depend on a significant amount of state aid. Both the state and
its cities could be hurt by any future reduction in the amount of such aid.
Connecticut's general obligation bonds are rated AA by Standard & Poor's, Aa3 by
Moody's, and AA by Fitch.
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;
19
<PAGE>
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.
VIRGINIA RISKS
Virginia's economy is highly dependent on defense spending:
o there are major concentrations of defense installations in Northern
Virginia and the Hampton Roads area; and
o any substantial reductions in military spending, including base closings,
could hurt both the state and local economies.
The state's general obligations are rated AAA by Standard & Poor's and Aaa by
Moody's.
BOND QUALITY RISK
A reduction in a bond's rating may decrease its value and, indirectly, the value
of your investment in the Fund.
INSURANCE RELATED RISK
Some bonds are backed by insurance companies (as shown under Portfolios).
Insurance policies generally make payments only according to a bond's original
payment schedule and do not make early payments when a bond defaults or becomes
taxable. Although the federal government does not regulate the insurance
business, various state laws and federal initiatives and tax law changes could
significantly affect the insurance business. The claims-paying ability of the
insurance companies is generally rated A or better by Standard & Poor's or
another nationally recognized rating organization. The insurance company ratings
are subject to change at any time at the discretion of the rating agencies.
LITIGATION AND LEGISLATION RISKS
We do not know of any pending litigation that might have a material adverse
effect upon the Fund.
Future tax legislation could affect the value of the portfolio by:
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.
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.
20
<PAGE>
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 25 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.
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.
21
<PAGE>
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.
In addition, as with mutual funds, the Fund (and therefore the investors) pay
all or some of the costs of organizing the Fund including:
o cost of initial preparation of legal documents;
o federal and state registration fees;
o initial fees and expenses of the Trustee;
o initial audit; and
o 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 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 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
22
<PAGE>
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 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
23
<PAGE>
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.
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.
24
<PAGE>
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 Bank of New York, 101 Barclay Street, 17 W, New York, New York 10268, is the
Trustee.
It is supervised by the Federal Deposit Insurance Corporation, the Board of
Governors of the Federal Reserve System and New York State banking authorities.
UNDERWRITERS' AND SPONSORS' PROFITS
Underwriters receive sales charges when they sell units. The Sponsors also
realized a profit or loss on the initial 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.
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
25
<PAGE>
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 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
26
<PAGE>
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.
CALIFORNIA TAXES
In the opinion of O'Melveny & Myers LLP, Los Angeles, California, special
counsel on California tax matters:
Under the income tax laws of the State of California, the Trust will not be
taxed as a corporation and you will be considered to own directly your share of
each bond of the Trust. If you are a California taxpayer, your share of the
income from the bonds of the Trust will not be tax-exempt in California except
for California personal income tax purposes and only to the extent that the
income is earned on bonds that are exempt for such purposes. If you are a
California taxpayer and all or part of your share of a bond is disposed of (for
example, when a bond is sold, exchanged or redeemed at maturity or you sell or
exchange your units), you will recognize gain or loss for California tax
purposes. Depending on where you live, your income from the Trust may be subject
to state and local taxation. You should consult your tax advisor in this regard.
CONNECTICUT TAXES
In the opinion of Day, Berry & Howard LLP, Hartford, Connecticut, special
counsel on Connecticut tax matters:
Under the income tax laws of the State of Connecticut, the Fund will not be
taxed. If you are an individual, trust or estate that is subject to the
Connecticut income tax, you will not be taxed on your share of the interest
derived by the Fund from those bonds that are tax-
27
<PAGE>
exempt for Connecticut income tax purposes. In addition, if you hold your units
of the Fund as a capital asset, you will not recognize either gain or loss if
the Fund enters into a transaction in which it is treated for federal income tax
purposes as having sold a bond that is issued by an issuer in Connecticut and is
tax-exempt for Connecticut income tax purposes, and you may not have to
recognize gain or loss to the extent attributable to a unit's share of any such
bonds if you sell, exchange or redeem the unit. You should consult your tax
adviser in this regard. In all other instances, you will recognize gain or loss,
in the event either the Fund enters into a transaction involving a bond held by
it or you sell, exchange or redeem a unit of the Fund, to the same extent that
you recognize gain or loss therefrom for Federal income tax purposes.
In the case of an entity subject to the Connecticut corporation business tax,
its share of all income derived from units of the Fund or their ownership will
be subject to that Connecticut tax.
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 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.
CONNECTICUT TAXES
In the opinion of Day, Berry & Howard LLP, Hartford, Connecticut, special
counsel on Connecticut tax matters:
Under the income tax laws of the State of Connecticut, the Fund will not be
taxed. If you are an individual, trust or estate that is subject to the
Connecticut income tax, you will not be taxed on your share of the interest
derived by the Fund from those bonds that are tax-exempt for Connecticut income
tax purposes. In addition, if you hold your units of the Fund as a capital
asset, you will not recognize either gain or loss if the Fund enters into a
transaction in which it is treated for federal income tax purposes as having
sold a bond that is issued by an issuer in Connecticut and is tax-exempt for
Connecticut income tax purposes, and you may not have to recognize gain or loss
to the extent attributable to a unit's share of any such bonds if you sell,
exchange or redeem the unit. You should consult your tax adviser in this regard.
In all other instances, you will recognize gain or loss, in the event
28
<PAGE>
either the Fund enters into a transaction involving a bond held by it or you
sell, exchange or redeem a unit of the Fund, to the same extent that you
recognize gain or loss therefrom for Federal income tax purposes.
In the case of an entity subject to the Connecticut corporation business tax,
its share of all income derived from units of the Fund or their ownership will
be subject to that Connecticut tax.
VIRGINIA TAXES
In the opinion of Hunton & Williams, Richmond, Virginia, special counsel on
Virginia tax matters:
Under the income tax laws of the State of Virginia, the Virginia Trust will not
be taxed as a corporation. If you are a Virginia taxpayer, your income from the
Virginia Trust will not be tax-exempt in Virginia except to the extent that the
income is attributable to either (i) interest earned on bonds that are tax-
exempt for Virginia purposes or (ii) profits from the sale of certain Virginia
bonds that have been issued under Virginia legislation specifically exempting
all income from those bonds. If, at the time of your death, you either are a
Virginia resident or, in certain cases, are not a resident of the United States,
your units may be subject to Virginia estate tax. You should consult your tax
adviser in these matters.
SUPPLEMENTAL INFORMATION
You can receive at no cost supplemental information about the Fund by calling
the Trustee. The supplemental information includes more detailed risk disclosure
about the types of bonds that may be in the Fund's portfolios, general risk
disclosure concerning any insurance securing certain bonds, and general
information about the structure and operation of the Fund. The supplemental
information is also available from the SEC.
29
MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 201 (CALIFORNIA, CONNECTICUT, FLORIDA AND
VIRGINIA TRUSTS), DEFINED ASSET FUNDS
REPORT OF INDEPENDENT ACCOUNTANTS
The Sponsors, Trustee and Holders
of Municipal Investment Trust Fund,
Multistate Series - 201 (California, Connecticut, Florida and
Virginia Trusts)
Defined Asset Funds:
We have audited the accompanying statements of condition of Municipal
Investment Trust Fund, Multistate Series - 201 (California,
Connecticut, Florida and Virginia 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 and 1998 and the period March 1, 1996 to
January 31, 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 Bank of New York, the
Trustee. An audit also includes assessing the accounting principles
used and significant estimates made by the Trustee, as well as
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Municipal
Investment Trust Fund, Multistate Series - 201 (California,
Connecticut, Florida and Virginia Trusts) Defined Asset Funds at
January 31, 1999 and the results of their operations and changes in
their net assets for the above-stated periods in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, N.Y.
April 9, 1999
D - 1
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 201 (CALIFORNIA TRUST),
DEFINED ASSET FUNDS
STATEMENT OF CONDITION
AS OF JANUARY 31, 1999
TRUST PROPERTY:
Investment in marketable securities - at value
(cost $3,499,249)(Note 1)...................... $3,720,929
Accrued interest receivable...................... 61,369
Deferred organization costs...................... 1,614
_____________
Total trust property................. 3,783,912
LESS LIABILITIES:
Advance from Trustee............................. $ 13,992
Accrued expenses................................. 1,377 15,369
_____________ _____________
NET ASSETS, REPRESENTED BY:
3,584 units of fractional undivided
interest outstanding (Note 3).................. 3,755,395
Undistributed net investment income.............. 13,148
_____________
$3,768,543
=============
UNIT VALUE ($3,768,543/3,584 units)................ $1,051.49
=============
See Notes to Financial Statements.
D - 2
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 201 (CALIFORNIA TRUST),
DEFINED ASSET FUNDS
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
March 1,
1996
to
Years Ended January 31, January 31,
1999 1998 1997
_________________________________________
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income........................... $207,764 $221,273 $204,923
Trustee's fees and expenses............... (4,569) (7,055) (4,782)
Sponsors' fees............................ (1,724) (553) (2,909)
Organizational expenses................... (808) (808) (808)
_________________________________________
Net investment income..................... 200,663 212,857 196,424
_________________________________________
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Realized gain on securities sold
or redeemed............................. 13,249 572
Unrealized appreciation (depreciation)
of investments.......................... 45,081 276,800 (100,201)
_________________________________________
Net realized and unrealized gain (loss)
on investments.......................... 58,330 277,372 (100,201)
_________________________________________
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS........................... $258,993 $490,229 $ 96,223
=========================================
</TABLE>
See Notes to Financial Statements.
D - 3
<PAGE>
UNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 201 (CALIFORNIA TRUST),
DEFINED ASSET FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
March 1,
1996
to
Years Ended January 31, January 31,
1999 1998 1997
_________________________________________
<S> <C> <C> <C>
OPERATIONS:
Net investment income....................... $ 200,663 $ 212,857 $ 196,424
Realized gain on securities sold
or redeemed............................... 13,249 572
Unrealized appreciation (depreciation)
of investments............................ 45,081 276,800 (100,201)
_________________________________________
Net increase in net assets resulting
from operations........................... 258,993 490,229 96,223
_________________________________________
DISTRIBUTIONS TO HOLDERS (Note 2):
Income...................................... (200,046) (211,786) (183,770)
Principal................................... (16,325) (4,091)
_________________________________________
Total distributions......................... (216,371) (215,877) (183,770)
_________________________________________
CAPITAL SHARE TRANSACTIONS - Redemptions of
345 and 109 units, respectively............. (360,178) (110,718)
_________________________________________
NET INCREASE (DECREASE) IN NET ASSETS......... (317,556) 163,634 (87,547)
NET ASSETS AT BEGINNING OF PERIOD............. 4,086,099 3,922,465 4,010,012
_________________________________________
NET ASSETS AT END OF PERIOD................... $3,768,543 $4,086,099 $3,922,465
=========================================
PER UNIT:
Income distributions during period.......... $52.76 $52.71 $45.51
=========================================
Principal distributions during period....... $4.48 $1.03
=========================================
Net asset value at end of period............ $1,051.49 $1,039.98 $971.39
=========================================
TRUST UNITS OUTSTANDING AT END OF PERIOD...... 3,584 3,929 4,038
=========================================
</TABLE>
See Notes to Financial Statements.
D - 4
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 201 (CALIFORNIA TRUST),
DEFINED ASSET FUNDS
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Fund is registered under the Investment Company Act of 1940 as
a Unit Investment Trust. The following is a summary of significant
accounting policies consistently followed by the Fund in the
preparation of its financial statements. The policies are in
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, except that
value on March 1, 1996 was based upon offer side evaluations
at February 28, 1996 the day prior to the Date of Deposit.
Cost of securities at March 1, 1996 was also based on such
offer side evaluations.
(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
Cost of 3,584 units at Date of Deposit.............. $3,725,277
Less sales charge................................... 166,118
______________
Net amount applicable to Holders.................... 3,559,159
Redemptions of units - net cost of 454 units
redeemed less redemption amounts.................. (18,849)
Realized gain on securities sold or redeemed........ 13,821
Principal distributions............................. (20,416)
Unrealized appreciation of investments.............. 221,680
______________
Net capital applicable to Holders................... $3,755,395
==============
4. INCOME TAXES
As of January 31, 1999, unrealized appreciation of investments, based
on cost for Federal income tax purposes, aggregated $221,680, all of
which related to appreciated securities. The cost of investment
securities for Federal income tax purposes was $3,499,249 at
January 31, 1999.
D - 5
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 201
DEFINED ASSET FUNDS
PORTFOLIO OF THE CALIFORNIA TRUST (INSURED)
AS OF JANUARY 31, 1999
<TABLE>
<CAPTION>
Rating Optional
Portfolio No. and Title of of Face Redemption
Securities(4) Issues(1) Amount Coupon Maturities(3) Provisions(3) Cost(2) Value(2)
_____________ _________ ______ ______ _____________ _____________ _______ ________
<S> <C> <C> <C> <C> <C> <C> <C>
1 California Educational Facility AAA $ 600,000 5.750% 2018 06/01/05 $ 603,396 $ 634,524
Authority, (Coll. of Osteopathic @ 102.000
Med. of the Pacific), Rfdg. Rev.
Bonds, Ser. 1995 (Connie Lee Ins.)
2 California Health Facility AAA 455,000 5.750 2015 01/15/05 458,627 488,420
Financial Authority, Ins. Hospital @ 102.000
Revenue Rfdg. Bonds, (Mills-
Penninsula Health System), Ser.
1995 A (Connie Lee Ins.)
3 California Housing Finance Agency AAA 515,000 5.650 2016 02/01/06 518,863 540,940
Home Mortgage Revenue Bonds, 1996 @ 102.000
Ser. B (MBIA Ins.)
4 California Statewide Community AAA 500,000 5.500 2022 08/15/05 493,126 523,570
Development Authority, Sutter @ 102.000
Health Obligated Group (MBIA Ins.)
5 San Bernardino Cnty., CA, Certs. of AAA 385,000 5.500 2015(6) 08/01/05 382,709 429,860
Part. (Med. Ctr. Fin. Proj.), Ser. @ 102.000
1995 (MBIA Ins.)
6 Ventura Cnty., CA, Thousand Oaks AAA 545,000 5.375 2025 12/01/05 531,135 564,146
Redev. Agy., Thousand Oaks Blvd. @ 102.000
Redev. Proj., 1995 Tax Alloc. Rfdg.
Bonds (MBIA Ins.)
7 City of Los Angeles, CA, Dept. of AAA 525,000 5.375 2023 09/01/03 511,393 539,469
Wtr. and Pwr., Elec. Plant Rfdg. @ 102.000
Rev. Bonds, Ser. 1993 (MBIA Ins.)
______________ ______________ ______________
TOTAL $3,525,000 $3,499,249 $3,720,929
============== ============== ==============
</TABLE>
See Notes to Portfolios on Pages D - 22 and D - 23.
D - 6
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 201 (CONNECTICUT TRUST),
DEFINED ASSET FUNDS
STATEMENT OF CONDITION
AS OF JANUARY 31, 1999
<TABLE>
<CAPTION>
<S> <C> <C>
TRUST PROPERTY:
Investment in marketable securities - at value
(cost $3,069,177)(Note 1)...................... $3,229,279
Accrued interest receivable...................... 22,806
Cash............................................. 18,453
Deferred organization costs...................... 1,312
_____________
Total trust property................. 3,271,850
LESS LIABILITY - Accrued expenses.................. 1,348
_____________
NET ASSETS, REPRESENTED BY:
3,141 units of fractional undivided
interest outstanding (Note 3).................. $3,258,813
Undistributed net investment income.............. 11,689
_____________
$3,270,502
=============
UNIT VALUE ($3,270,502/3,141 units)................ $1,041.23
=============
</TABLE>
See Notes to Financial Statements.
D - 7
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 201 (CONNECTICUT TRUST),
DEFINED ASSET FUNDS
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
March 1,
1996
to
Years Ended January 31, January 31,
1999 1998 1997
_________________________________________
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income........................... $170,622 $173,986 $161,645
Trustee's fees and expenses............... (3,927) (6,665) (4,456)
Sponsors' fees............................ (1,437) (447) (2,364)
Organizational expenses................... (656) (656) (656)
_________________________________________
Net investment income..................... 164,602 166,218 154,169
_________________________________________
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Realized gain (loss) on securities
sold or redeemed........................ 1,020 (368)
Unrealized appreciation (depreciation)
of investments.......................... 29,316 215,730 (84,944)
_________________________________________
Net realized and unrealized gain (loss)
on investments.......................... 30,336 215,362 (84,944)
_________________________________________
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS........................... $194,938 $381,580 $ 69,225
=========================================
</TABLE>
See Notes to Financial Statements.
D - 8
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 201 (CONNECTICUT TRUST),
DEFINED ASSET FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
March 1,
1996
to
Years Ended January 31, January 31,
1999 1998 1997
_________________________________________
<S> <C> <C> <C>
OPERATIONS:
Net investment income....................... $ 164,602 $ 166,218 $ 154,169
Realized gain (loss) on securities
sold or redeemed.......................... 1,020 (368)
Unrealized appreciation (depreciation)
of investments............................ 29,316 215,730 (84,944)
_________________________________________
Net increase in net assets resulting
from operations........................... 194,938 381,580 69,225
_________________________________________
DISTRIBUTIONS TO HOLDERS (Note 2):
Income...................................... (163,626) (165,527) (143,829)
Principal................................... (2,744) (3,104)
_________________________________________
Total distributions......................... (166,370) (168,631) (143,829)
_________________________________________
CAPITAL SHARE TRANSACTIONS - Redemptions of
92 and 47 units, respectively............... (94,187) (47,435)
_________________________________________
NET INCREASE (DECREASE) IN NET ASSETS......... (65,619) 165,514 (74,604)
NET ASSETS AT BEGINNING OF PERIOD............. 3,336,121 3,170,607 3,245,211
_________________________________________
NET ASSETS AT END OF PERIOD................... $3,270,502 $3,336,121 $3,170,607
=========================================
PER UNIT:
Income distributions during period.......... $51.11 $50.83 $43.85
=========================================
Principal distributions during period....... $0.86 $0.96
=========================================
Net asset value at end of period............ $1,041.23 $1,031.90 $966.65
=========================================
TRUST UNITS OUTSTANDING AT END OF PERIOD...... 3,141 3,233 3,280
=========================================
</TABLE>
See Notes to Financial Statements.
D - 9
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 201 (CONNECTICUT 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, except that
value on March 1, 1996 was based upon offer side evaluations
at February 28, 1996 the day prior to the Date of Deposit.
Cost of securities at March 1, 1996 was also based on such
offer side evaluations.
(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
Cost of 3,141 units at Date of Deposit.............. $3,252,768
Less sales charge................................... 145,083
______________
Net amount applicable to Holders.................... 3,107,685
Redemptions of units - net cost of 139 units
redeemed less redemption amounts.................. (3,778)
Realized gain on securities sold or redeemed........ 652
Principal distributions............................. (5,848)
Unrealized appreciation of investments.............. 160,102
______________
Net capital applicable to Holders................... $3,258,813
==============
4. INCOME TAXES
As of January 31, 1999, unrealized appreciation of investments, based
on cost for Federal income tax purposes, aggregated $160,102, all of
which related to appreciated securities. The cost of investment
securities for Federal income tax purposes was $3,069,177 at
January 31, 1999.
D - 10
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 201
DEFINED ASSET FUNDS
PORTFOLIO OF THE CONNECTICUT TRUST
AS OF JANUARY 31, 1999
<TABLE>
<CAPTION>
Rating Optional
Portfolio No. and Title of of Face Redemption
Securities Issues(1) Amount Coupon Maturities(3) Provisions(3) Cost(2) Value(2)
__________ _________ ______ ______ _____________ _____________ _______ ________
<S> <C> <C> <C> <C> <C> <C> <C>
1 State of Connecticut General AAA $ 405,000 5.375% 2013 10/01/05 $ 407,583 $ 431,106
Obligation Bonds, Ser. 1995 B @ 101.000
2 Connecticut Health and Education AAA 395,000 5.000 2013 07/01/03 381,637 404,567
Facility Authority Revenue Bonds, @ 102.000
Lawrence Memorial Hospital Issue,
Ser. D (MBIA Ins.)(5)
3 Connecticut Health and Education AAA 500,000 5.400 2023 07/01/05 496,425 517,060
Facility Authority, Kent School @ 101.000
Issue, Ser. B (MBIA Ins.)(5)
4 Connecticut Health and Educational AAA 500,000 5.375 2025 07/01/06 483,840 509,415
Facility Authority Revenue Bonds, @ 102.000
Bridgeport Hospital Issue, Ser C
(Connie Lee Ins.)(5)
5 Connecticut Development Authority, AAA 500,000 5.500 2028 06/01/03 500,000 520,560
Bridgeport Hydraulic Co. Project, @ 102.000
Ser. 1993 B (MBIA Ins.)(5)
6 Connecticut Development Authority, AA- 455,000 5.550 2015 12/15/05 458,876 486,190
General Fund, Ser. A @ 102.000
7 Puerto Rico Elec. Pwr. Rev. Bonds, BBB+ 350,000 5.500 2020 07/01/04 340,816 360,381
Ser. T @ 100.000
______________ ______________ ______________
TOTAL $3,105,000 $3,069,177 $3,229,279
============== ============== ==============
</TABLE>
See Notes to Portfolios on Pages D - 22 and D - 23.
D - 11
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 201 (FLORIDA TRUST),
DEFINED ASSET FUNDS
STATEMENT OF CONDITION
AS OF JANUARY 31, 1999
<TABLE>
<CAPTION>
<S> <C> <C>
TRUST PROPERTY:
Investment in marketable securities - at value
(cost $1,958,170)(Note 1)...................... $2,054,436
Accrued interest receivable...................... 24,552
Cash............................................. 1,808
Deferred organization costs...................... 1,311
_____________
Total trust property................. 2,082,107
LESS LIABILITY - Accrued expenses.................. 1,306
_____________
NET ASSETS, REPRESENTED BY:
2,052 units of fractional undivided
interest outstanding (Note 3).................. $2,072,592
Undistributed net investment income.............. 8,209
_____________
$2,080,801
=============
UNIT VALUE ($2,080,801/2,052 units)................ $1,014.04
=============
</TABLE>
See Notes to Financial Statements.
D - 12
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 201 (FLORIDA TRUST),
DEFINED ASSET FUNDS
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
March 1,
1996
to
Years Ended January 31, January 31,
1999 1998 1997
_________________________________________
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income........................... $108,769 $147,348 $161,375
Trustee's fees and expenses............... (3,375) (6,157) (2,990)
Sponsors' fees............................ (927) (400) (2,364)
Organizational expenses................... (656) (656) (656)
_________________________________________
Net investment income..................... 103,811 140,135 155,365
_________________________________________
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Realized gain (loss) on securities
sold or redeemed........................ 2,970 (10,223)
Unrealized appreciation (depreciation)
of investments.......................... 20,698 190,118 (114,550)
_________________________________________
Net realized and unrealized gain (loss)
on investments.......................... 23,668 179,895 (114,550)
_________________________________________
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS........................... $127,479 $320,030 $ 40,815
=========================================
</TABLE>
See Notes to Financial Statements.
D - 13
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND
MULTISTATE SERIES - 201 (FLORIDA TRUST),
DEFINED ASSET FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
March 1,
1996
to
Years Ended January 31, January 31,
1999 1998 1997
_________________________________________
<S> <C> <C> <C>
OPERATIONS:
Net investment income....................... $ 103,811 $ 140,135 $ 155,365
Realized gain (loss) on securities
sold or redeemed.......................... 2,970 (10,223)
Unrealized appreciation (depreciation)
of investments............................ 20,698 190,118 (114,550)
_________________________________________
Net increase in net assets resulting
from operations........................... 127,479 320,030 40,815
_________________________________________
DISTRIBUTIONS TO HOLDERS (Note 2):
Income...................................... (103,062) (141,096) (144,801)
Principal................................... (9,952) (51,358)
_________________________________________
Total distributions......................... (113,014) (192,454) (144,801)
_________________________________________
CAPITAL SHARE TRANSACTIONS - Redemptions of
84 and 1,143 units, respectively............ (84,811) (1,114,581)
_________________________________________
NET DECREASE IN NET ASSETS.................... (70,346) (987,005) (103,986)
NET ASSETS AT BEGINNING OF PERIOD............. 2,151,147 3,138,152 3,242,138
_________________________________________
NET ASSETS AT END OF PERIOD................... $2,080,801 $2,151,147 $3,138,152
=========================================
PER UNIT:
Income distributions during period.......... $49.01 $50.16 $44.16
=========================================
Principal distributions during period....... $4.85 $20.82
=========================================
Net asset value at end of period............ $1,014.04 $1,007.09 $957.05
=========================================
TRUST UNITS OUTSTANDING AT END OF PERIOD...... 2,052 2,136 3,279
=========================================
</TABLE>
See Notes to Financial Statements.
D - 14
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 201 (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, except that
value on March 1, 1996 was based upon offer side evaluations
at February 28, 1996 the day prior to the Date of Deposit.
Cost of securities at March 1, 1996 was also based on such
offer side evaluations.
(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>
<CAPTION>
<S> <C>
Cost of 2,052 units at Date of Deposit.............. $2,123,672
Less sales charge................................... 94,741
______________
Net amount applicable to Holders.................... 2,028,931
Redemptions of units - net cost of 1,227 units
redeemed less redemption amounts.................. 15,958
Realized loss on securities sold or redeemed........ (7,253)
Principal distributions............................. (61,310)
Unrealized appreciation of investments.............. 96,266
______________
Net capital applicable to Holders................... $2,072,592
==============
</TABLE>
4. INCOME TAXES
As of January 31, 1999, unrealized appreciation of investments, based
on cost for Federal income tax purposes, aggregated $96,266, all of
which related to appreciated securities. The cost of investment
securities for Federal income tax purposes was $1,958,170 at
January 31, 1999.
D - 15
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 201
DEFINED ASSET FUNDS
PORTFOLIO OF THE FLORIDA TRUST (INSURED)
AS OF JANUARY 31, 1999
<TABLE>
<CAPTION>
Rating Optional
Portfolio No. and Title of of Face Redemption
Securities(4) Issues(1) Amount Coupon Maturities(3) Provisions(3) Cost(2) Value(2)
_____________ _________ ______ ______ _____________ _____________ _______ ________
<S> <C> <C> <C> <C> <C> <C> <C>
1 Dade County., Florida, Seaport AAA $ 350,000 5.125% 2026 10/01/06 $ 333,137 $ 353,297
General Obligation Refunding Bonds, @ 102.000
Ser. 1996 (MBIA Ins.)
2 Dade County, Florida, Public AAA 250,000 5.250 2023 06/01/03 241,203 252,935
Facility Rvenue Bonds (Jackson @ 102.000
Memorial Hospital) Ser. 1993
(MBIA Ins.)
3 Dade County., Florida, Water and AAA 150,000 5.500 2025 10/01/05 150,000 157,584
Sewer System Revenue Bonds, Ser. @ 102.000
1995 (Financial Guaranty Ins.)
4 State of Florida, State Board of AAA 460,000 5.250 2023 06/01/03 446,973 466,804
Education, Public Cap. Outlay @ 101.000
Bonds, 1992 Ser. E (Financial
Guaranty Ins.)
5 City of Lakeland, Florida, Hospital AAA 500,000 5.250 2025 11/15/06 485,320 508,385
Revenue Refunding Bonds (Lakeland @ 102.000
Regional Medical Center Proj.),
Ser. 1996 (MBIA Ins.)
6 South Broward, FL, Hospital Dist., AAA 310,000 5.250 2021 05/01/06 301,537 315,431
Hospital Refunding Revenue Bonds, @ 102.000
Ser. 1996 (MBIA Ins.)
______________ ______________ _____________
TOTAL $2,020,000 $1,958,170 $2,054,436
============== ============== =============
</TABLE>
See Notes to Portfolios on Pages D - 22 and D - 23.
D - 16
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 201 (VIRGINIA TRUST),
DEFINED ASSET FUNDS
STATEMENT OF CONDITION
AS OF JANUARY 31, 1999
<TABLE>
<CAPTION>
<S> <C> <C>
TRUST PROPERTY:
Investment in marketable securities - at value
(cost $3,071,687)(Note 1)...................... $3,267,991
Accrued interest receivable...................... 48,031
Deferred organization costs...................... 1,313
_____________
Total trust property................. 3,317,335
LESS LIABILITIES:
Advance from Trustee............................. $ 6,344
Accrued expenses................................. 1,346 7,690
_____________ _____________
NET ASSETS, REPRESENTED BY:
3,148 units of fractional undivided
interest outstanding (Note 3).................. 3,297,754
Undistributed net investment income.............. 11,891
_____________
$3,309,645
=============
UNIT VALUE ($3,309,645/3,148 units)................ $1,051.35
=============
</TABLE>
See Notes to Financial Statements.
D - 17
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 201 (VIRGINIA TRUST),
DEFINED ASSET FUNDS
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
March 1,
1996
to
Years Ended January 31, January 31,
1999 1998 1997
_________________________________________
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income........................... $173,331 $177,206 $164,067
Trustee's fees and expenses............... (4,091) (6,500) (4,430)
Sponsors' fees............................ (1,432) (444) (2,364)
Organizational expenses................... (656) (656) (656)
_________________________________________
Net investment income..................... 167,152 169,606 156,617
_________________________________________
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Realized gain (loss) on securities
sold or redeemed........................ 4,609 (3,097)
Unrealized appreciation (depreciation)
of investments.......................... 61,859 226,767 (92,322)
_________________________________________
Net realized and unrealized gain (loss)
on investments.......................... 66,468 226,767 (95,419)
_________________________________________
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS........................... $233,620 $396,373 $ 61,198
=========================================
</TABLE>
See Notes to Financial Statements.
D - 18
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 201 (VIRGINIA TRUST),
DEFINED ASSET FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
March 1,
1996
to
Years Ended January 31, January 31,
1999 1998 1997
_________________________________________
<S> <C> <C> <C>
OPERATIONS:
Net investment income....................... $ 167,152 $ 169,606 $ 156,617
Realized gain (loss) on securities
sold or redeemed.......................... 4,609 (3,097)
Unrealized appreciation (depreciation)
of investments............................ 61,859 226,767 (92,322)
_________________________________________
Net increase in net assets resulting
from operations........................... 233,620 396,373 61,198
_________________________________________
DISTRIBUTIONS TO HOLDERS (Note 2):
Income...................................... (166,265) (167,695) (147,251)
Principal................................... (5,981) (2,421)
_________________________________________
Total distributions......................... (172,246) (170,116) (147,251)
_________________________________________
CAPITAL SHARE TRANSACTIONS - Redemptions of
80 and 53 units, respectively............... (82,639) (50,479)
_________________________________________
NET INCREASE (DECREASE) IN NET ASSETS......... (21,265) 226,257 (136,532)
NET ASSETS AT BEGINNING OF PERIOD............. 3,330,910 3,104,653 3,241,185
_________________________________________
NET ASSETS AT END OF PERIOD................... $3,309,645 $3,330,910 $3,104,653
=========================================
PER UNIT:
Income distributions during period.......... $52.27 $51.95 $44.88
=========================================
Principal distributions during period....... $1.90 $0.75
=========================================
Net asset value at end of period............ $1,051.35 $1,031.88 $961.79
=========================================
TRUST UNITS OUTSTANDING AT END OF PERIOD...... 3,148 3,228 3,228
=========================================
</TABLE>
See Notes to Financial Statements.
D - 19
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 201 (VIRGINIA TRUST),
DEFINED ASSET FUNDS
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Fund is registered under the Investment Company Act of 1940 as
a Unit Investment Trust. The following is a summary of significant
accounting policies consistently followed by the Fund in the
preparation of its financial statements. The policies are in
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, except that
value on March 1, 1996 was based upon offer side evaluations
at February 28, 1996 the day prior to the Date of Deposit.
Cost of securities at March 1, 1996 was also based on such
offer side evaluations.
(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>
<CAPTION>
<S> <C>
Cost of 3,148 units at Date of Deposit.............. $3,254,953
Less sales charge................................... 145,154
______________
Net amount applicable to Holders.................... 3,109,799
Redemptions of units - net cost of 133 units
redeemed less redemption amounts.................. (1,459)
Realized gain on securities sold or redeemed........ 1,512
Principal distributions............................. (8,402)
Unrealized appreciation of investments.............. 196,304
______________
Net capital applicable to Holders................... $3,297,754
==============
</TABLE>
4. INCOME TAXES
As of January 31, 1999, unrealized appreciation of investments, based
on cost for Federal income tax purposes, aggregated $196,304, all of
which related to appreciated securities. The cost of investment
securities for Federal income tax purposes was $3,071,687 at
January 31, 1999.
D - 20
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 201
DEFINED ASSET FUNDS
PORTFOLIO OF THE VIRGINIA TRUST
AS OF JANUARY 31, 1999
<TABLE>
<CAPTION>
Rating Optional
Portfolio No. and Title of of Face Redemption
Securities Issues(1) Amount Coupon Maturities(3) Provisions(3) Cost(2) Value(2)
__________ _________ ______ ______ _____________ _____________ _______ ________
<S> <C> <C> <C> <C> <C> <C> <C>
1 Industrial Development Authority of A2(m) $ 500,000 5.500% 2015 10/01/03 $ 494,065 $ 512,005
Albemarle Cnty., Virginia Hosp. @ 102.000
Rfdg. Revenue Bonds (Martha
Jefferson Hospital), Ser. 1993
2 Fairfax County, Virginia, Economic AA 500,000 5.500 2018 05/15/04 493,640 520,665
Development Authority Lease Revenue @ 102.000
Bonds, Ser. 1994
3 Indl. Dev. of The City of Galax, AA 445,000 5.750 2020 09/01/05 448,725 468,367
Virginia, Hospital Facility Revenue @ 102.000
Bonds (Twin county Regional Health
Care, Inc.), Ser. 1995 (Asset
Guaranty Ins.)(5)
4 City of Hampton, Virginia, Museum A 450,000 5.250 2014 01/01/04 432,337 469,867
Revenue Refunding Bonds, Ser. 1994 @ 102.000
5 Indl. Dev. Auth. of the Cnty. of AAA 400,000 5.500 2025 08/15/05 397,104 416,580
Hanover, Virginia, Hosiptal Revenue @ 102.000
Bonds, Ser. 1995 (Bon Secours
Health System Project)
(MBIA Ins.)(5)
6 Virginia Resources Auth., Wtr. and AA 465,000 5.600 2025(6) 10/01/07 465,000 520,126
Swr. Sys. Rev. Bonds, 1995 Ser. A @ 100.000
(Sussex Cnty. Proj.)
7 Puerto Rico Elec. Pwr. Rev. Bonds, BBB+ 350,000 5.500 2020 07/01/04 340,816 360,381
Ser. T @ 100.000
_____________ _____________ ___________
TOTAL $3,110,000 $3,071,687 $3,267,991
============= ============= ===========
</TABLE>
See Notes to Portfolios on Pages D - 22 and D - 23.
D - 21
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 201 (CALIFORNIA, CONNECTICUT, FLORIDA AND VIRGINIA TRUSTS)
DEFINED ASSET FUNDS
NOTES TO PORTFOLIOS
AS OF JANUARY 31, 1999
(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
"AAA" ratings to the Securities. Securities covered by
portfolio insurance are rated "AAA" only as long as they
remain in this Trust.
D - 22
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 201 (CALIFORNIA, CONNECTICUT, FLORIDA AND VIRGINIA TRUSTS)
DEFINED ASSET FUNDS
NOTES TO PORTFOLIOS
AS OF JANUARY 31, 1999
(5) Insured by the indicated municipal bond insurance company.
(6) Bonds with aggregate face amounts of $385,000 and $465,000 for the
California and Virginia Trusts, respectively, have been pre-refunded
and are expected to be called for redemption on the optional redemption
provision dates shown.
D - 23
D - 8
D - 16
D - 25
<PAGE>
Defined
Asset FundsSM
HAVE QUESTIONS ? MUNICIPAL INVESTMENT TRUST FUND
Request the most MULTISTATE SERIES--201
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:
o Securities Act of 1933 (file no.
33-64759) 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.
15205--4/99
