<PAGE>
DEFINED ASSET FUNDSSM
- --------------------------------------------
- ----------------------------------
MUNICIPAL INVESTMENT TRUST FUND
MULTISTATE SERIES--204
(A UNIT INVESTMENT TRUST)
O CALIFORNIA, CONNECTICUT, MARYLAND, NEW YORK,
PENNSYLVANIA 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 July 30, 1999.
<PAGE>
- --------------------------------------------------------------------------------
Def ined Asset FundsSM
Defined Asset FundsSM is America's oldest and largest family of unit investment
trusts, with over $160 billion sponsored over the last 28 years. Defined Asset
Funds has been a leader in unit investment trust research and product
innovation. Our family of Funds helps investors work toward their financial
goals with a full range of quality investments, including municipal, corporate
and government bond portfolios, as well as domestic and international equity
portfolios.
Defined Asset Funds offer a number of advantages:
o A disciplined strategy of buying and holding with a long-term view is the
cornerstone of Defined Asset Funds.
o Fixed portfolio: Defined Funds follow a buy and hold investment strategy;
funds are not managed and portfolio changes are limited.
o Defined Portfolios: We choose the stocks and bonds in advance, so you know
what you're investing in.
o Professional research: Our dedicated research team seeks out stocks or bonds
appropriate for a particular fund's objectives.
o Ongoing supervision: We monitor each portfolio on an ongoing basis.
No matter what your investment goals, tolerance for risk or time horizon,
there's probably a Defined Asset Fund that suits your investment style. Your
financial professional can help you select a Defined Asset Fund that works best
for your investment portfolio.
THE FINANCIAL INFORMATION IN THIS PROSPECTUS IS AS OF MARCH 31, 1999, THE
EVALUATION DATE.
CONTENTS
PAGE
-----------
California Insured Portfolio--
Risk/Return Summary.................................. 3
Connecticut Portfolio--Risk/Return Summary.............. 6
Maryland Portfolio--Risk/Return Summary................. 9
New York Insured Portfolio--
Risk/Return Summary.................................. 12
Pennsylvania Insured Portfolio--
Risk/Return Summary.................................. 15
Virginia Portfolio--
Risk/Return Summary.................................. 18
What You Can Expect From Your Investment................ 23
Monthly Income....................................... 23
Return Figures....................................... 23
Records and Reports.................................. 23
The Risks You Face...................................... 24
Interest Rate Risk................................... 24
Call Risk............................................ 24
Reduced Diversification Risk......................... 24
Liquidity Risk....................................... 24
Concentration Risk................................... 24
State Concentration Risk............................. 25
Bond Quality Risk.................................... 28
Insurance Related Risk............................... 28
Litigation and Legislation Risks..................... 29
Selling or Exchanging Units............................. 29
Sponsors' Secondary Market........................... 29
Selling Units to the Trustee......................... 29
Exchange Option...................................... 30
How The Fund Works...................................... 30
Pricing.............................................. 30
Evaluations.......................................... 30
Income............................................... 31
Expenses............................................. 31
Portfolio Changes.................................... 31
Fund Termination..................................... 32
Certificates......................................... 32
Trust Indenture...................................... 32
Legal Opinion........................................ 33
Auditors............................................. 33
Sponsors............................................. 33
Trustee.............................................. 33
Underwriters' and Sponsors' Profits 33
Public Distribution.................................. 34
Code of Ethics....................................... 34
Year 2000 Issues..................................... 34
Taxes................................................... 34
Supplemental Information................................ 37
Financial Statements.................................... D-1
2
<PAGE>
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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 8 long-term tax-exempt
municipal bonds with an aggregate face amount of
$3,640,000.
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 100% of the bonds are insured by insurance companies that
guarantee timely payments of principal and interest on the
bonds (but not Fund units or the market value of the bonds
before they mature).
The Portfolio consists of municipal bonds of the following
types:
APPROXIMATE
PORTFOLIO
PERCENTAGE
/ / Airports/Ports/Highways 6%
/ / Hospital/Health Care 17%
/ / Lease Rental Appropriation 30%
/ / Municipal Water/Sewer Utilities 31%
/ / Refunded Bonds 4%
/ / Universities/Colleges 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 lease rental
appropriation and municipal water/sewer utility bonds,
adverse developments in these sectors may affect the value
of your units.
o Assuming no changes in interest rates, when you sell your
units, they will generally be worth less than your cost
because your cost included a sales fee.
o The Fund will receive early returns of principal if bonds
are called or sold before they mature. If this happens your
income will decline and you may not be able to reinvest the
money you receive at as high a yield or as long a maturity.
ALSO, THE PORTFOLIO IS CONCENTRATED IN BONDS OF 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 $ 4.52
Annual Income per unit: $ 54.35
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)
$ 0.36
Evaluator's Fee
$ 0.20
Organization Costs
$ 0.32
Other Operating Expenses
-----------
$ 2.02
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 6/30/99.
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 $1,072.23
(as of March 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
<PAGE>
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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
$2,800,000.
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 51% of the bonds are insured by insurance companies that
guarantee timely payments of principal and interest on the
bonds (but not Fund units or the market value of the bonds
before they mature).
The Portfolio consists of municipal bonds of the following
types:
APPROXIMATE
PORTFOLIO
PERCENTAGE
/ / General Obligation 9%
/ / Hospital/Health Care 51%
/ / Housing 18%
/ / Municipal Water/Sewer Utilities 15%
/ / Refunded Bonds 7%
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 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.
6
<PAGE>
5. IS THIS FUND APPROPRIATE FOR YOU?
Yes, if you want federally tax-free income. You will
benefit from a professionally selected and supervised
portfolio whose risk is reduced by investing in 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 $ 4.40
Annual Income per unit: $ 52.82
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)
$ 0.46
Evaluator's Fee
$ 0.20
Organization Costs
$ 0.42
Other Operating Expenses
-----------
$ 2.22
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 6/30/99.
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 $1,056.91
(as of March 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>
- --------------------------------------------------------------------------------
MARYLAND 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 9 long-term tax-exempt
municipal bonds with an aggregate face amount of
$3,115,000.
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 45% 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 9%
/ / Hospital/Health Care 46%
/ / Housing 3%
/ / Industrial Development Revenue 12%
/ / Lease Rental Appropriation 23%
/ / Refunded Bonds 7%
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 MARYLAND SO
IT IS LESS DIVERSIFIED THAN A NATIONAL FUND AND IS SUBJECT
TO RISKS PARTICULAR TO MARYLAND 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 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 $ 4.40
Annual Income per unit: $ 52.88
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
$ 0.37
Other Operating Expenses
-----------
$ 2.13
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
Maryland 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 Maryland Series
were offered between March 2, 1989 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 6/30/99.
WITH SALES FEE NO SALES FEE
1 YEAR 5 YEARS 1 YEAR 5 YEARS
- ---------------------------------------------------------------
High 3.51% 7.22% 6.44% 8.42%
Average 2.38 5.47 5.09 6.49
Low -0.34 4.57 3.98 5.35
- ---------------------------------------------------------------
Average
Sales fee 2.69% 5.03%
- -------------------------------------------------------------------
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 $1,047.02
(as of March 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 Maryland state and local personal income
taxes if you live in Maryland.
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.
11
<PAGE>
- --------------------------------------------------------------------------------
NEW YORK INSURED PORTFOLIO--RISK/RETURN SUMMARY
1. WHAT IS THE FUND'S OBJECTIVE?
The Fund seeks interest income that is exempt from regular
federal income taxes and some state and local taxes by
investing in a fixed portfolio consisting primarily of
insured, long term municipal revenue bonds.
2. WHAT ARE MUNICIPAL REVENUE BONDS?
Municipal revenue bonds are bonds issued by states,
municipalities and public authorities to finance the cost
of buying, building or improving various projects intended
to generate revenue, such as airports, health care
facilities, housing and municipal electric, water and sewer
utilities. Generally, payments on these bonds depend solely
on the revenues generated by the projects, excise taxes or
state appropriations, and are not backed by the
government's taxing power.
3. WHAT IS THE FUND'S INVESTMENT STRATEGY?
O The Fund plans to hold to maturity 7 long-term tax-exempt
municipal bonds with an aggregate face amount of
$2,880,000.
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 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 8%
/ / Hospital/Health Care 63%
/ / Miscellaneous 17%
/ / 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.
ALSO, THE PORTFOLIO IS CONCENTRATED IN BONDS OF NEW YORK SO
IT IS LESS DIVERSIFIED THAN A NATIONAL FUND AND IS SUBJECT
TO RISKS PARTICULAR TO NEW YORK WHICH ARE BRIEFLY DESCRIBED
UNDER STATE CONCENTRATION RISKS LATER IN THIS PROSPECTUS.
12
<PAGE>
5. IS THIS FUND APPROPRIATE FOR YOU?
Yes, if you want federally tax-free income. You will
benefit from a professionally selected and supervised
portfolio whose risk is reduced by investing in insured
bonds of several different issuers.
The Fund is not appropriate for you if you want a
speculative investment that changes to take advantage of
market movements, if you do not want a tax-advantaged
investment or if you cannot tolerate any risk.
DEFINING YOUR INCOME
WHAT YOU MAY EXPECT (Payable on the 25th day of
the month to holders of record on the 10th day
of the month):
Regular Monthly Income per unit $ 4.37
Annual Income per unit: $ 52.54
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)
$ 0.45
Evaluator's Fee
$ 0.20
Organization Costs
$ 0.42
Other Operating Expenses
-----------
$ 2.20
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
New York Portfolios, which had investment objectives,
strategies and types of bonds substantially similar to
this Fund. These prior Series differed in that they
charged a higher sales fee. These prior New York Series
were offered between January 14, 1988 and October 16, 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 6/30/99.
WITH SALES FEE NO SALES FEE
1 YEAR 5 YEARS 10 YEARS 1 YEAR 5 YEARS 10 YEARS
- -------------------------------------------------------------------
High 5.38% 7.23% 7.44% 7.65% 8.43% 8.04%
Average 2.37 5.33 7.17 5.49 6.33 7.76
Low -0.98 4.23 7.00 3.37 5.12 7.59
- -------------------------------------------------------------------
Average
Sales fee 3.11% 4.90% 5.77%
- ----------------------------------------------------------------
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 $1,049.13
(as of March 31, 1999)
Unit price is based on the net asset value of the Fund plus
the sales fee. An amount equal to any principal cash, as
well as net accrued but undistributed interest on the unit,
is added to the unit price. An independent evaluator prices
the bonds at 3:30 p.m. Eastern time every business day.
Unit price changes every day with changes in the prices of
the bonds in the Fund.
10. HOW DO I SELL UNITS?
You may sell your units at any time to any Sponsor or the
Trustee for the net asset value determined at the close of
business on the date of sale. You will not pay any other
fee when you sell your units.
11. HOW ARE DISTRIBUTIONS MADE AND TAXED?
The Fund pays income monthly.
In the opinion of bond counsel when each bond was issued,
interest on the bonds in this Fund is generally 100% exempt
from regular federal income tax. Your income may also be
exempt from some New York state and local personal income
taxes if you live in New York.
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.
14
<PAGE>
- --------------------------------------------------------------------------------
PENNSYLVANIA INSURED PORTFOLIO--RISK/RETURN SUMMARY
1. WHAT IS THE FUND'S OBJECTIVE?
The Fund seeks interest income that is exempt from regular
federal income taxes and some state and local taxes by
investing in a fixed portfolio consisting primarily of
insured, long term municipal revenue bonds.
2. WHAT ARE MUNICIPAL REVENUE BONDS?
Municipal revenue bonds are bonds issued by states,
municipalities and public authorities to finance the cost
of buying, building or improving various projects intended
to generate revenue, such as airports, health care
facilities, housing and municipal electric, water and sewer
utilities. Generally, payments on these bonds depend solely
on the revenues generated by the projects, excise taxes or
state appropriations, and are not backed by the
government's taxing power.
3. WHAT IS THE FUND'S INVESTMENT STRATEGY?
O The Fund plans to hold to maturity 7 long-term tax-exempt
municipal bonds with an aggregate face amount of
$2,575,000.
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 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 15%
/ / Hospital/Health Care 12%
/ / Industrial Development Revenue 17%
/ / Refunded Bonds 10%
/ / Special Tax Issues 17%
/ / Universities/Colleges 29%
4. WHAT ARE THE SIGNIFICANT RISKS?
YOU CAN LOSE MONEY BY INVESTING IN THE FUND. THIS CAN
HAPPEN FOR VARIOUS REASONS, INCLUDING:
o Rising interest rates, an issuer's worsening financial
condition or a drop in bond ratings can reduce the price of
your units.
o Because the Fund is concentrated in university/college
bonds, adverse developments in this sector may affect the
value of your units.
o Assuming no changes in interest rates, when you sell your
units, they will generally be worth less than your cost
because your cost included a sales fee.
o The Fund will receive early returns of principal if bonds
are called or sold before they mature. If this happens your
income will decline and you may not be able to reinvest the
money you receive at as high a yield or as long a maturity.
ALSO, THE PORTFOLIO IS CONCENTRATED IN BONDS OF
PENNSYLVANIA SO IT IS LESS DIVERSIFIED THAN A NATIONAL FUND
AND IS SUBJECT TO RISKS PARTICULAR TO PENNSYLVANIA WHICH
ARE BRIEFLY DESCRIBED UNDER STATE CONCENTRATION RISKS LATER
IN THIS PROSPECTUS.
15
<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 $ 4.48
Annual Income per unit: $ 53.80
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)
$ 0.50
Evaluator's Fee
$ 0.20
Organization Costs
$ 0.48
Other Operating Expenses
-----------
$ 2.31
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
Pennsylvania Portfolios, which had investment objectives,
strategies and types of bonds substantially similar to
this Fund. These prior Series differed in that they
charged a higher sales fee. These prior Pennsylvania
Series were offered between May 19, 1988 and September 13,
1996 and were outstanding on March 31, 1999. OF COURSE,
PAST PERFORMANCE OF PRIOR SERIES IS NO GUARANTEE OF FUTURE
RESULTS OF THIS FUND.
AVERAGE ANNUAL COMPOUND TOTAL RETURNS
FOR PRIOR SERIES
Reflecting all expenses. For periods ended 6/30/99.
WITH SALES FEE NO SALES FEE
1 YEAR 5 YEARS 10 YEARS 1 YEAR 5 YEARS 10 YEARS
- -------------------------------------------------------------------
High 3.65% 7.30% 6.98% 7.57% 8.50% 7.56%
Average 2.17 5.45 6.92 5.22 6.47 7.51
Low -0.52 3.96 6.81 1.23 4.98 7.41
- -------------------------------------------------------------------
Average
Sales fee 3.03% 5.04% 5.68%
- ----------------------------------------------------------------
Note: All returns represent changes in unit price with distributions reinvested
into the Municipal Fund Investment Accumulation Program.
8. IS THE FUND MANAGED?
Unlike a mutual fund, the Fund is not managed and bonds are
not sold because of market changes. Rather, experienced
Defined Asset Funds financial analysts regularly review the
bonds in the Fund. The Fund may sell a bond if certain
adverse credit or other conditions exist.
16
<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 $1,072.40
(as of March 31, 1999)
Unit price is based on the net asset value of the Fund plus
the sales fee. An amount equal to any principal cash, as
well as net accrued but undistributed interest on the unit,
is added to the unit price. An independent evaluator prices
the bonds at 3:30 p.m. Eastern time every business day.
Unit price changes every day with changes in the prices of
the bonds in the Fund.
10. HOW DO I SELL UNITS?
You may sell your units at any time to any Sponsor or the
Trustee for the net asset value determined at the close of
business on the date of sale. You will not pay any other
fee when you sell your units.
11. HOW ARE DISTRIBUTIONS MADE AND TAXED?
The Fund pays income monthly.
In the opinion of bond counsel when each bond was issued,
interest on the bonds in this Fund is generally 100% exempt
from regular federal income tax. Your income may also be
exempt from some Pennsylvania state and local personal
income taxes if you live in Pennsylvania.
You will also receive principal payments if bonds are sold
or called or mature, when the cash available is more than
$5.00 per unit. You will be subject to tax on any gain
realized by the Fund on the disposition of bonds.
12. WHAT OTHER SERVICES ARE AVAILABLE?
REINVESTMENT
You will receive your income in cash unless you choose to
compound your income by reinvesting at no sales fee in the
Municipal Fund Investment Accumulation Program, Inc. This
program is an open-end mutual fund with a comparable
investment objective, but the bonds will generally not be
insured. Income from this program will generally be subject
to state and local income taxes. For more complete
information about the program, including charges and fees,
ask the Trustee for the program's prospectus. Read it
carefully before you invest. The Trustee must receive your
written election to reinvest at least 10 days before the
record day of an income payment.
EXCHANGE PRIVILEGES
You may exchange units of this Fund for units of certain
other Defined Asset Funds. You may also exchange into this
Fund from certain other funds. We charge a reduced sales
fee on exchanges.
17
<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
$2,910,000.
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 54% 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 29%
/ / Hospital/Health Care 31%
/ / Housing 17%
/ / Lease Rental Appropriation 14%
/ / Municipal Water/Sewer Utilities 9%
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 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.
18
<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 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 $ 4.47
Annual Income per unit: $ 53.74
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)
$ 0.44
Evaluator's Fee
$ 0.20
Organization Costs
$ 0.39
Other Operating Expenses
-----------
$ 2.17
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 6/30/99.
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.
19
<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 $1,059.76
(as of March 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.
20
<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 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 18.83 4.93 5.54 6.16 6.78 7.39 8.01 8.62 9.24 9.86
$ 25,751- 62,450 $ 43,051-104,050 31.24 5.82 6.54 7.27 8.00 8.73 9.45 10.18 10.91 11.63
$ 62,451-130,250 $104,051-158,550 34.11 6.07 6.83 7.59 8.35 9.11 9.86 10.62 11.38 12.14
$130,251-283,150 $158,551-283,150 38.88 6.54 7.36 8.18 9.00 9.82 10.63 11.45 12.27 13.09
OVER $283,151 OVER $283,151 42.32 6.93 7.80 8.67 9.54 10.40 11.27 12.14 13.00 13.87
</TABLE>
FOR MARYLAND 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 19.21 4.95 5.56 6.18 6.80 7.42 8.04 8.66 9.27 9.89
$ 25,751- 62,450 $ 43,051-104,050 31.49 5.84 6.57 7.30 8.03 8.76 9.49 10.22 10.95 11.68
$ 62,451-130,250 $104,051-158,550 34.35 6.09 6.85 7.62 8.38 9.14 9.90 10.66 11.42 12.19
$130,251-283,150 $158,551-283,150 39.10 6.57 7.39 8.21 9.03 9.85 10.67 11.50 12.32 13.14
OVER $283,151 OVER $283,151 42.53 6.96 7.83 8.70 9.57 10.44 11.31 12.18 13.05 13.92
</TABLE>
To compare the yield of a taxable security with the yield of a tax-free
security, find your taxable income and read across. The table incorporates 1999
federal and applicable State income tax rates and assumes that all income would
otherwise be taxed at the investor's highest tax rate. Yield figures are for
example only.
*Based upon net amount subject to federal income tax after deductions and
exemptions. This table does not reflect the possible effect of other tax
factors, such as alternative minimum tax, personal exemptions, the phase out of
exemptions, itemized deductions or the possible partial disallowance of
deductions. Consequently, you should consult your own tax advisers in this
regard.
21
<PAGE>
- --------------------------------------------------------------------------------
TAX-FREE VS. TAXABLE INCOME: A COMPARISON OF TAXABLE AND TAX-FREE YIELDS
FOR NEW YORK CITY 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>
$ 0- 43,060 23.59 5.24 5.89 6.54 7.20 7.85 8.51 9.16 9.82 10.47
$ 0-25,750- 23.63 5.24 5.89 6.55 7.20 7.86 8.51 9.17 9.82 10.48
$ 25,751- 62,450 $ 43,051-104,050 35.35 6.19 6.96 7.73 8.51 9.28 10.05 10.83 11.60 12.37
$ 62,451-130,250 $104,051-158,550 38.04 6.46 7.26 8.07 8.88 9.68 10.49 11.30 12.11 12.91
$130,251-283,150 $158,551-283,150 42.53 6.96 7.83 8.70 9.57 10.44 11.31 12.18 13.05 13.92
OVER $283,151 OVER $283,151 45.77 7.38 8.30 9.22 10.14 11.06 11.98 12.91 13.83 14.75
</TABLE>
FOR NEW YORK STATE 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 20.82 5.05 5.68 6.31 6.95 7.58 8.21 8.84 9.47 10.10
$ 25,751- 62,450 $ 43,051-104,050 32.93 5.96 6.71 7.46 8.20 8.95 9.69 10.44 11.18 11.93
$ 62,451-130,250 $104,051-158,550 35.73 6.22 7.00 7.78 8.56 9.34 10.11 10.69 11.67 12.45
$130,251-283,150 $158,551-283,150 40.38 6.71 7.55 8.39 9.23 10.06 10.90 11.74 12.58 13.42
OVER $283,151 OVER $283,151 43.74 7.11 8.00 8.89 9.78 10.66 11.55 12.44 13.33 14.22
</TABLE>
FOR PENNSYLVANIA RESIDENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMBINED
EFFECTIVE
TAXABLE INCOME 1999* TAX RATE TAX-FREE YIELD OF
SINGLE RETURN JOINT RETURN % 3% 3.5% 4% 4.5% 5% 5.5% 6% 6.5% 7%
IS EQUIVALENT TO A TAXABLE YIELD OF
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0- 25,750 $ 0- 43,050 17.38 3.63 4.24 4.84 5.45 6.05 6.66 7.26 7.87 8.47
$ 27,751- 62,450 $ 43,051-104,050 30.02 4.29 5.00 5.72 6.43 7.14 7.86 8.57 9.29 10.00
$ 62,451-130,250 $104,051-158,550 32.93 4.47 5.22 5.96 6.71 7.46 8.20 8.95 9.69 10.44
$130,251-283,150 $158,551-283,150 37.79 4.82 5.63 6.43 7.23 8.04 8.84 9.65 10.45 11.25
OVER $283,151 OVER $283,151 41.29 5.11 5.96 6.81 7.66 8.52 9.37 10.22 11.07 11.92
</TABLE>
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 (and City) 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, investors are urged to consult their own tax advisers
in this regard.
22
<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.
23
<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 Portfolio's concentration in
lease rental bonds. Lease rental bonds are generally issued by governmental
financing authorities that cannot assess a tax to cover the cost of equipment or
construction of buildings that will be used by a state or local government. The
risks associated with these bonds include:
o the failure of the government to appropriate funds for the leasing rental
payments to service the bonds; and
o rental obligations, and therefore payments, may terminate in the event of
damages to or destruction or condemnation of the of the equipment or
building.
Here is what you should know about the California Portfolio's concentration in
municipal water and sewer revenue bonds. The payment of interest and principal
of these bonds depends on the rates the utilities may
24
<PAGE>
charge, the demand for their services and the cost of operating their business
which includes the expense of complying with environmental and other energy and
licensing laws and regulations. The operating results of utilities are
particularly influenced by:
o increases in operating and construction costs; and
o unpredicability of future usage requirements.
Here is what you should know about the Connecticut, Maryland, New York, 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; and
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.
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.
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 Virginia Portfolio's concentration in
general obligation bonds:
o general obligation bonds are backed by the issuer's pledge of its full
faith, credit and taxing power;
o but the taxing power of any government issuer may be limited by provisions
of the state constitution or laws as well as political and economic
considerations; and
o an issuer's credit can be negatively affected by various factors, including
population decline that erodes the tax base, natural disasters, decline in
industry, limited access to capital markets or heavy reliance on state or
federal aid.
Here is what you should know about the Pennsylvania Portfolio's concentration in
university/college bonds. Payment for these bonds depends on:
o level or amount and diversity of revenue sources;
o availability of endowments and other funds;
o enrollment;
o financial management;
o reputation; and
o for public institutions, the financial condition of the government and its
educational policies.
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
25
<PAGE>
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) 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
26
<PAGE>
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.
MARYLAND RISKS
Generally
The Maryland economy is affected by various economic, social and environmental
conditions, some of which are unique to the state and others which affect the
nation as a whole and the Mid-Atlantic region in particular. For example:
o many residents of the state work for the Federal government in and around
Washington, D.C. Cutbacks in federal spending hurt Maryland more than
other states;
o like those in other states, Maryland businesses are sensitive to changes in
Federal regulation, which can affect their revenues and, therefore, state
tax revenue;
o Maryland has lost many defense and construction jobs in recent years, as
its economy has shifted away from manufacturing and industry and towards
services;
o the state's tax base has eroded as the population has dropped in cities
such as Baltimore.
The state and its local governments are limited in their ability to increase or
impose new taxes or incur indebtedness, which could hurt their ability to meet
debt obligations.
The state's general obligations are rated Aaa by Moody's and AAA by Standard &
Poor's.
NEW YORK RISKS
Generally
For decades, New York's economy has trailed the rest of the nation. Both the
state and New York City have experienced long-term structural imbalances between
revenues and expenses, and have repeatedly relied substantially on non-recurring
measures to achieve budget balance. The pressures that contribute to budgetary
problems at both the state and local level include:
o the high combined state and local tax burden;
o a decline in manufacturing jobs, leading to above-average unemployment;
o sensitivity to the financial services industry; and
o dependence on federal aid.
State Government
The State government frequently has difficulty approving budgets on time. Budget
gaps of $1 billion and $4 billion are projected for the next two years. The
State's general obligation bonds are rated A by Standard & Poor's and A2 by
Moody's. There is $37 billion of state-related debt outstanding.
New York City Government
Even though the City had budget surpluses each year from 1981, budget gaps of $2
billion are projected for each of the next three years. New York City faces
fiscal pressures from:
o aging public facilities that need repair or replacement;
o welfare and medical costs;
27
<PAGE>
o expiring labor contracts; and
o a high and increasing debt burden.
The City requires substantial state aid, and its fiscal strength depends heavily
on the securities industry. Its general obligation bonds are rated A-by Standard
& Poor's and A3 by Moody's.
PENNSYLVANIA RISKS
Generally
Pennsylvania and many of its municipalities (including Philadelphia) have
undergone an economic decline:
o coal, steel, railroads and other heavy industry historically associated
with the Commonwealth has given way to increased competition from foreign
producers.
o agriculture and related industries are still an important part of the
Commonwealth's economy.
o Recently, however, service sector industries (trade, medical and health
services, education and financial services) have provided new sources of
growth.
State and Local Governments
Historically, both the Commonwealth and the City of Philadelphia have
experienced serious revenue shortfalls. At the same time, rising demands for
state and local programs and services (particularly medical assistance and cash
assistance programs) have lead to increased spending.
o In recent years, both the Commonwealth and the City of Philadelphia have
tried to balance their budgets with a mix of tax increases and spending
cuts.
o Philadelphia has considered significant service cuts and privatization of
certain services which it has provided to date.
o In 1991, the Commonwealth created the Pennsylvania Inter-Governmental
Cooperation Authority ('PICA') which it authorized to issue debt to cover
Philadelphia's budget shortfalls, eliminate the City's projected deficits
and fund its capital spending. PICA issued approximately $1.76 billion of
Special Revenue Bonds on Philadelphia's behalf. Its power to issue bonds on
Philadelphia's behalf expired at the end of 1996; as of June 30, 1997,
approximately $1.1 billion in PICA Special Revenue Bonds were outstanding.
o Pennsylvania's general obligation bonds are currently rated A1 by Moody's
and AA-by Standard & Poor's. Philadelphia's general obligation bonds are
rated Baa by Moody's and BBB by Standard & Poor's. There can be no
assurance that these ratings will not be lowered.
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
28
<PAGE>
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.
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.
29
<PAGE>
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.
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
30
<PAGE>
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 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;
31
<PAGE>
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 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.
32
<PAGE>
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.
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
33
<PAGE>
DEAN WITTER REYNOLDS INC. (a principal operating subsidiary of Morgan Stanley
Dean Witter & Co.)
Two World Trade Center--59th Floor,
New York, NY 10048
PRUDENTIAL SECURITIES INCORPORATED (an
indirect wholly-owned subsidiary of the
Prudential Insurance Company of America)
One New York Plaza
New York, NY 10292
PAINEWEBBER INCORPORATED (a wholly-owned subsidiary of PaineWebber Group Inc.)
1285 Avenue of the Americas,
New York, NY 10019
Each Sponsor is a Delaware corporation and it, or its predecessor, has acted as
sponsor to many unit investment trusts. As a registered broker-dealer each
Sponsor buys and sells securities (including investment company shares) for
others (including investment companies) and participates as an underwriter in
various selling groups.
TRUSTEE
The Chase Manhattan Bank, Unit Investment Trust Department, 4 New York
Plaza--6th Floor, New York, New York 10004, is the Trustee.
It is supervised by the Federal Deposit Insurance Corporation, the Board of
Governors of the Federal Reserve System and New York State banking authorities.
UNDERWRITERS' AND SPONSORS' PROFITS
Underwriters receive sales charges when they sell units. The Sponsors also
realized a profit or loss on the initial date of deposit of the bonds. Any cash
made available by you to the Sponsors before the settlement date for those units
may be used in the Sponsors' businesses to the extent permitted by federal law
and may benefit the Sponsors.
A Sponsor or Underwriter may realize profits or sustain losses on bonds in the
Fund which were acquired from underwriting syndicates of which it was a member.
In maintaining a secondary market, the Sponsors will also realize profits or
sustain losses in the amount of any difference between the prices at which they
buy units and the prices at which they resell or redeem them.
PUBLIC DISTRIBUTION
The Sponsors do not intend to qualify units for sale in any foreign countries.
This prospectus does not constitute an offer to sell units in any country where
units cannot lawfully be sold.
CODE OF ETHICS
Merrill Lynch, as agent for the Sponsors, has adopted a code of ethics requiring
preclearance and reporting of personal securities transactions by its employees
with access to information on portfolio transactions. The goal of the code is to
prevent fraud, deception or misconduct against the Fund and to provide
reasonable standards of conduct.
YEAR 2000 ISSUES
Many computer systems were designed in such a way that they may be unable to
distinguish between the year 2000 and the year 1900 (commonly known as the 'Year
2000 Problem'). We do not expect that the computer system changes necessary to
prepare for the Year 2000 will cause any major operational difficulties for the
Fund. The Year 2000 Problem may adversely affect the issuers of the bonds
contained
34
<PAGE>
in a Portfolio, but we cannot predict whether any impact will be material to the
Fund as a whole.
TAXES
The following summary describes some of the important income tax consequences of
holding units. It assumes that you are not a dealer, financial institution,
insurance company or other investor with special circumstances. 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
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
35
<PAGE>
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-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.
36
<PAGE>
MARYLAND TAXES
In the opinion of Saul, Ewing, Remick & Saul LLP, Baltimore, Maryland, special
counsel on Maryland tax matters:
Under the income tax laws of the State of Maryland, the Fund will not be taxed
as a corporation and you will be considered to own directly your share of each
bond in the Fund. You will not be subject to Maryland tax on any income earned
by the Fund to the extent such income is attributable to bonds (other than
private activity bonds) issued by the State of Maryland, the Government of
Puerto Rico, or the Government of Guam or their respective political
subdivisions and authorities. 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 except to the extent the gain is derived from the disposition of a bond
issued by the State of Maryland or its political subdivisions. Neither the bonds
in the Fund nor units held by you will be subject to Maryland personal property
tax or Maryland sales and use tax. If you are a Maryland resident at the time of
your death, your units will be subject to Maryland inheritance and estate tax.
PENNSYLVANIA TAXES
In the opinion of Drinker Biddle & Reath LLP, Philadelphia, Pennsylvania,
special counsel on Pennsylvania tax matters:
The Pennsylvania Trust will not be taxed as a corporation under the current
income tax laws of Pennsylvania. Your income from the Trust may be subject to
taxation depending on where you live. If you are a Pennsylvania taxpayer your
interest income from the Trust will be tax exempt to the extent that income is
earned on bonds that are tax exempt for Pennsylvania purposes. However, gains on
the sale of bonds by the Trust or on the sale of your Units will be subject to
Pennsylvania income tax. If you are a Philadelphia resident you may be subject
to the Philadelphia school district tax on any gains realized from the sale of
bonds by the Trust or the sale of Units by you to the extent either the bonds or
Units have been held for six months or less. You should consult your tax adviser
as to the consequences to you with respect to any investment you make in the
Trust.
VIRGINIA TAXES
In the opinion of Hunton & Williams, Richmond, Virginia, special counsel on
Virginia tax matters:
Under the income tax laws of the State of Virginia, the Virginia Trust will not
be taxed as a corporation. If you are a Virginia taxpayer, your income from the
Virginia Trust will not be tax-exempt in Virginia except to the extent that the
income is attributable to either (i) interest earned on bonds that are
tax-exempt for Virginia purposes 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,
37
<PAGE>
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.
38
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND, MULTISTATE SERIES - 204
(CALIIFORNIA, CONNECTICUT, MARYLAND, NEW YORK, PENNSYLVANIA
AND VIRGINIA TRUSTS), DEFINED ASSET FUNDS
REPORT OF INDEPENDENT ACCOUNTANTS
The Sponsors, Trustee and Holders
of Municipal Investment Trust Fund, Multistate Series -
204, (California, Connecticut, Maryland, New York,
Pennsylvania and Virgina Trusts), Defined Asset Funds:
We have audited the accompanying statements of condition
of Municipal Investment Trust Fund, Multistate Series - 204,
(California, Connecticut, Maryland, New York, Pennsylvania and
Virginia Trusts), Defined Asset Funds, including the
portfolios, as of March 31, 1999 and the related statements
of operations and of changes in net assets for the years ended
March 31, 1999 and 1998 and the period April 26, 1996 to
March 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 March 31,
1999, as shown in such portfolios, were confirmed to us by
The Chase Manhattan Bank, the Trustee. An audit also includes
assessing the accounting principles used and significant estimates
made by the Trustee, as well as evaluating the overall financial
statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements referred to
above present fairly, in all material respects, the
financial position of Municipal Investment Trust Fund,
Multistate Series - 204, (California, Connecticut, Maryland,
New York, Pennsylvania, and Virginia Trusts), Defined Asset
Funds at March 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.
June 2, 1999
D - 1.
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND, MULTISTATE SERIES - 204(CALIFORNIA TRUST),
DEFINED ASSET FUNDS
STATEMENT OF CONDITION
As of March 31, 1999
<TABLE>
<S> <C> <C>
TRUST PROPERTY:
Investment in marketable securities -
{ 20} at value (cost $ 3,544,552 )(Note 1)......... $ 3,841,557
{ 36} Accrued interest ............................... 68,749
Cash - income .................................. 280
{ 34} Cash - principal ............................... 33,727
Deferred organization costs (Note 5) ........... 1,736
-----------
{ 40} Total trust property ......................... 3,946,049
LESS LIABILITIES:
{ 50} Income advance from Trustee..................... $ 57,054
{143} Accrued Sponsors' fees ......................... 413
Other liabilities .............................. 1,736 59,203
----------- -----------
NET ASSETS, REPRESENTED BY:
{ 80} 3,677 units of fractional undivided
{ 80} interest outstanding (Note 3)................ 3,875,284
{105} Undistributed net investment income ............ 11,562 $ 3,886,846
----------- ===========
{130}UNIT VALUE ($ 3,886,846 / 3,677 units )........... $ 1,057.07
===========
</TABLE>
See Notes to Financial Statements.
D - 2.
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND, MULTISTATE SERIES - 204(CALIFORNIA TRUST),
DEFINED ASSET FUNDS
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
April 26, 1996
to
Years Ended March 31, March 31,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
INVESTMENT INCOME:
{ 10} Interest income ........................ $ 210,528 $ 226,029 $ 210,184
{ 20} Trustee's fees and expenses ............ (5,764) (6,453) (4,014)
{ 30} Sponsors' fees ......................... (1,735) (1,792) (1,680)
------------------------------------------------
{ 40} Net investment income .................. 203,029 217,784 204,490
------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Realized gain on
{ 50} securities sold or redeemed .......... 12,743 8,639
Unrealized appreciation (depreciation)
{ 60} of investments ....................... 42,856 282,527 (28,378)
------------------------------------------------
Net realized and unrealized
{ 70} gain (loss) on investments ........... 55,599 291,166 (28,378)
------------------------------------------------
NET INCREASE IN NET ASSETS
{ 80} RESULTING FROM OPERATIONS .............. $ 258,628 $ 508,950 $ 176,112
================================================
</TABLE>
See Notes to Financial Statements.
D - 3.
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND, MULTISTATE SERIES - 204(CALIFORNIA TRUST),
DEFINED ASSET FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
April 26, 1996
to
Years Ended March 31, March 31,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
OPERATIONS:
{ 10} Net investment income .................. $ 203,029 $ 217,784 $ 204,490
Realized gain on
{ 20} securities sold or redeemed .......... 12,743 8,639
Unrealized appreciation (depreciation)
{ 30} of investments ....................... 42,856 282,527 (28,378)
------------------------------------------------
Net increase in net assets
{ 40} resulting from operations ............ 258,628 508,950 176,112
------------------------------------------------
DISTRIBUTIONS TO HOLDERS (Note 2):
{ 50} Income ................................ (202,934) (218,146) (191,717)
{ 60} Principal .............................. (10,001) (720)
------------------------------------------------
{ 70} Total distributions .................... (212,935) (218,866) (191,717)
------------------------------------------------
SHARE TRANSACTIONS:
{ 82} Redemption amounts - income ............ (592) (352)
{ 83} Redemption amounts - principal ......... (182,982) (192,852)
------------------------------------------------
{ 84} Total share transactions ............... (183,574) (193,204)
------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS..... (137,881) 96,880 (15,605)
{100}NET ASSETS AT BEGINNING OF PERIOD ........ 4,024,727 3,927,847 3,943,452
------------------------------------------------
{110}NET ASSETS AT END OF PERIOD .............. $ 3,886,846 $ 4,024,727 $ 3,927,847
================================================
PER UNIT:
Income distributions during
{120} period ............................... $ 54.38 $ 54.56 $ 47.49
================================================
Principal distributions during
{130} period ............................... $ 2.72 $ 0.18
=====================================
Net asset value at end of
{140} period ............................... $ 1,057.07 $ 1,044.84 $ 972.96
================================================
TRUST UNITS:
{ 83} Redeemed during period ................. 175 185
{150} Outstanding at end of period ........... 3,677 3,852 4,037
================================================
</TABLE>
See Notes to Financial Statements.
D - 4.
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND, MULTISTATE SERIES - 204 (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 April 26, 1996 was based upon offering side
evaluations at April 24, 1996, the day prior to the Date of
Deposit. Cost of securities at April 26, 1996 was also based
on such offering 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>
<S> <C>
{ 10} Cost of 3,677 units at Date of Deposit ..................... $ 3,759,429
{ 20} Less sales charge .......................................... 167,635
-----------
{ 25} Net amount applicable to Holders ........................... 3,591,794
{ 31} Redemptions of units - net cost of 360 units redeemed
{143} less redemption amounts (principal)....................... (24,176)
{ 40} Realized gain on securities sold or redeemed ............... 21,382
{ 50} Principal distributions .................................... (10,721)
{ 70} Unrealized appreciation of investments...................... 297,005
-----------
{ 80} Net capital applicable to Holders .......................... $ 3,875,284
===========
</TABLE>
4. INCOME TAXES
As of March 31, 1999, unrealized appreciation of investments, based on cost
for Federal income tax purposes, aggregated $297,005, all of which related
to appreciated securities. The cost of investment securities for Federal
income tax purposes was $3,544,552 at March 31, 1999.
D - 5.
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND, MULTISTATE SERIES - 204 (CALIFORNIA TRUST),
DEFINED ASSET FUNDS
NOTES TO FINANCIAL STATEMENTS
5. DEFERRED ORGANIZATION COSTS
Deferred organization costs are being amortized over a period of five years.
Included in "Other liabilities" is $ 1,736 payable to the Trustee for
reimbursement of costs related to the organization of the Trust.
D - 6.
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND, MULTISTATE SERIES - 204 (CALIFORNIA TRUST)
(INSURED), DEFINED ASSET FUNDS
PORTFOLIO
As of March 31, 1999
<TABLE>
<CAPTION>
Rating of Optional
Portfolio No. and Title of Issues Face Redemption
Securities (1) (4) Amount Coupon Maturities(3) Provisions(3) Cost(2) Value(2)
---------- --------- ----------- ----------- ------------ ------------ ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Los Angeles, CA, Conv. and Exhibition AAA $ 600,000 5.125 % 2021 08/15/03 $ 535,614 $ 602,064
Ctr. Auth., Lease Rev. Bonds, 1993 @ 102.000
Rfdg. Ser. A (MBIA Ins.)
2 The City of Los Angeles, CA, Wastewater AAA 565,000 5.875 2024 06/01/04 566,023 609,183
Sys. Rev. Bonds, Ser. 1994 A (MBIA Ins.) @ 102.000
3 Berkeley Jt. Pwrs. Fin. Auth., CA, AAA 500,000 5.700 2015 06/01/03 494,235 525,915
Rfdg. Lease Rev. Bonds, Ser. 1996 @ 102.000
(AMBAC Ins.)
4 City of Chino Hills, CA, Certs. of AAA 570,000 5.875 2015 06/01/03 570,000 604,873
Part., 1996 Wtr. Sys. Refinancing Proj. @ 102.000
(Financial Guaranty Ins.)
5 City of Fresno, CA, Wtr. Sys. Rev. AAA 160,000 6.000 2024(6) 06/01/04 161,800 178,477
Bonds, Wtr. Remediation Proj. II, @ 101.000
Ser. 1995 A (Financial Guaranty Ins.)
6 California Hlth. Facs. Fin. Auth., AAA 600,000 5.600 2033 05/01/03 568,722 622,158
Kaiser Permanente Rev. Bonds, @ 102.000
Ser. 1993 C (MBIA Ins.)
7 Airports Comm. City and Cnty. of San AAA 200,000 6.000 2025 05/01/04 202,246 217,250
Francisco, CA (San Francisco Intl. @ 102.000
Arpt.), Second Ser. Rev. Bonds, Issue 7
A (Superbay Hangar)
(Financial Guaranty Ins.)
8 San Jose St. Univ., CA, Stud. Union AAA 445,000 5.875 2019 11/01/05 445,912 481,637
Rfdg. Rev. Bonds, Ser. D (AMBAC Ins.) @ 102.000
--------- --------- ---------
TOTAL $ 3,640,000 $ 3,544,552 $ 3,841,557
========= ========= =========
See Notes to Portfolios on page D - 39.
</TABLE>
D - 7.
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND, MULTISTATE SERIES - 204(CONNECTICUT TRUST)
DEFINED ASSET FUNDS
STATEMENT OF CONDITION
As of March 31, 1999
<TABLE>
<S> <C> <C>
TRUST PROPERTY:
Investment in marketable securities -
{ 20} at value (cost $ 2,698,006 )(Note 1)......... $ 2,916,538
{ 36} Accrued interest ............................... 44,033
{ 32} Cash - income .................................. 5,928
{ 34} Cash - principal ............................... 30,319
{ 35} Deferred organization costs..................... 1,411
-----------
{ 40} Total trust property ......................... 2,998,229
LESS LIABILITIES:
{ 50} Income advance from Trustee..................... $ 40,927
{143} Accrued Sponsors' fees ......................... 324
{145} Other liabilities............................... 1,411 42,662
----------- -----------
NET ASSETS, REPRESENTED BY:
{ 80} 2,838 units of fractional undivided
{ 80} interest outstanding (Note 3)................ 2,946,857
{105} Undistributed net investment income ............ 8,710 $ 2,955,567
----------- ===========
{130}UNIT VALUE ($ 2,955,567 / 2,838 units )........... $ 1,041.43
===========
</TABLE>
See Notes to Financial Statements.
D - 8.
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND, MULTISTATE SERIES - 204(CONNECTICUT TRUST)
DEFINED ASSET FUNDS
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
April 26, 1996
to
Years Ended March 31, March 31,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
INVESTMENT INCOME:
{ 10} Interest income ........................ $ 163,946 $ 181,853 $ 169,867
{ 20} Trustee's fees and expenses ............ (5,098) (5,845) (6,513)
{ 30} Sponsors' fees ......................... (1,402) (1,463) (1,368)
------------------------------------------------
{ 40} Net investment income .................. 157,446 174,545 161,986
------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Realized gain on
{ 50} securities sold or redeemed .......... 22,788 7,819
Unrealized appreciation (depreciation)
{ 60} of investments ....................... 170 239,282 (20,920)
------------------------------------------------
Net realized and unrealized
{ 70} gain (loss) on investments ........... 22,958 247,101 (20,920)
------------------------------------------------
NET INCREASE IN NET ASSETS
{ 80} RESULTING FROM OPERATIONS .............. $ 180,404 $ 421,646 $ 141,066
================================================
</TABLE>
See Notes to Financial Statements.
D - 9.
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND, MULTISTATE SERIES - 204(CONNECTICUT TRUST)
DEFINED ASSET FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
April 26, 1996
to
Years Ended March 31, March 31,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
OPERATIONS:
{ 10} Net investment income .................. $ 157,446 $ 174,545 $ 161,986
Realized gain on
{ 20} securities sold or redeemed .......... 22,788 7,819
Unrealized appreciation (depreciation)
{ 30} of investments ....................... 170 239,282 (20,920)
------------------------------------------------
Net increase in net assets
{ 40} resulting from operations ............ 180,404 421,646 141,066
------------------------------------------------
DISTRIBUTIONS TO HOLDERS (Note 2):
{ 50} Income ................................ (157,402) (174,779) (151,779)
{ 60} Principal .............................. (19,638)
------------------------------------------------
{ 70} Total distributions .................... (177,040) (174,779) (151,779)
------------------------------------------------
SHARE TRANSACTIONS:
{ 82} Redemption amounts - income ............ (1,102) (203)
{ 83} Redemption amounts - principal ......... (348,537) (111,994)
------------------------------------------------
{ 84} Total share transactions ............... (349,639) (112,197)
------------------------------------------------
{ 90}NET INCREASE (DECREASE) IN NET ASSETS..... (346,275) 134,670 (10,713)
{100}NET ASSETS AT BEGINNING OF PERIOD ........ 3,301,842 3,167,172 3,177,885
------------------------------------------------
{110}NET ASSETS AT END OF PERIOD .............. $ 2,955,567 $ 3,301,842 $ 3,167,172
================================================
PER UNIT:
Income distributions during
{120} period ............................... $ 53.00 $ 53.27 $ 46.26
================================================
Principal distributions during
{130} period ............................... $ 6.73
===================
Net asset value at end of
{140} period ............................... $ 1,041.43 $ 1,040.61 $ 965.31
================================================
TRUST UNITS:
{ 83} Redeemed during period ................. 335 108
{150} Outstanding at end of period ........... 2,838 3,173 3,281
================================================
</TABLE>
See Notes to Financial Statements.
D - 10.
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND, MULTISTATE SERIES - 204 (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 April 26, 1996 was based upon offering side
evaluations at April 24, 1996, the day prior to the Date of Deposit.
Cost of securities at April 26, 1996 was also based on such offering
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>
<S> <C>
{ 10} Cost of 2,838 units at Date of Deposit ..................... $ 2,877,085
{ 20} Less sales charge .......................................... 128,277
-----------
{ 25} Net amount applicable to Holders ........................... 2,748,808
{ 31} Redemptions of units - net cost of 443 units redeemed
{143} less redemption amounts (principal)....................... (31,452)
{ 40} Realized gain on securities sold or redeemed ............... 30,607
{ 50} Principal distributions .................................... (19,638)
{ 70} Unrealized appreciation of investments...................... 218,532
-----------
{ 80} Net capital applicable to Holders .......................... $ 2,946,857
===========
</TABLE>
4. INCOME TAXES
As of March 31, 1999, unrealized appreciation of investments, based on cost
for Federal income tax purposes, aggregated $218,532, all of which related
to appreciated securities. The cost of investment securities for Federal
income tax purposes was $2,698,006 at March 31, 1999.
D - 11.
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND, MULTISTATE SERIES - 204 (CONNECTICUT TRUST),
DEFINED ASSET FUNDS
NOTES TO FINANCIAL STATEMENTS
5. DEFERRED ORGANIZATION COSTS
Deferred organization costs are being amortized over a period of five years.
Included in "Other liabilities is $ 1,411 payable to the Trustee for
reimbursement of costs related to the organization of the Trust.
D - 12.
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND, MULTISTATE SERIES - 204(CONNECTICUT TRUST)
DEFINED ASSET FUNDS
PORTFOLIO
As of March 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, Clean Wtr. Fund AAA $ 415,000 5.400 % 2015 05/01/05 $ 402,820 $ 432,119
Rev. Bonds, Ser. 1996 @ 101.000
2 State of Connecticut G.O. Bonds, Aaa(m) 215,000 5.800 2014(6) 03/15/03 216,469 234,771
1995 Ser. A @ 102.000
3 Connecticut Hlth. and Educl. Facs. AAA 500,000 5.375 2025 07/01/06 460,360 506,685
Auth., Rev. Bonds, Bridgeport Hosp. @ 102.000
Issue, Ser. C (Connie Lee Ins.) (5)
4 Connecticut Hlth. and Educl. Facs. AAA 500,000 5.375 2023 01/01/06 467,820 508,860
Auth., Rev. Bonds, Danbury Hosp. Issue, @ 102.000
Ser. F (AMBAC Ins.) (5)
5 Connecticut Hlth. and Educl. Facs. AAA 420,000 5.800 2026 07/01/06 416,997 447,808
Auth., Rev. Bonds, Greenwich Hosp. @ 102.000
Issue, Ser. A (MBIA Ins.) (5)
6 Connecticut Hsg. Fin. Auth., Hsg. Mtge. AA 500,000 5.950 2017 05/15/06 502,500 529,540
Fin. Prog. Bonds, 1996 Ser. A, @ 102.000
Subseries A-1
7 Commonwealth of Puerto Rico, G.O. Bonds A 250,000 5.400 2025 07/01/06 231,040 256,755
Ser. 1996 @ 101.500
--------- --------- ---------
TOTAL $ 2,800,000 $ 2,698,006 $ 2,916,538
========= ========= =========
See Notes to Portfolios on page D - 39.
</TABLE>
D - 13.
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND, MULTISTATE SERIES - 204 (MARYLAND TRUST),
DEFINED ASSET FUNDS
STATEMENT OF CONDITION
As of March 31, 1999
<TABLE>
<S> <C> <C>
TRUST PROPERTY:
Investment in marketable securities -
{ 20} at value (cost $ 3,001,822 )(Note 1)......... $ 3,208,474
{ 36} Accrued interest ............................... 44,332
{ 32} Cash - income .................................. 26,109
{ 34} Cash - principal ............................... 29,785
{ 35} Deferred organization costs..................... 1,411
-----------
{ 40} Total trust property ......................... 3,310,111
LESS LIABILITIES:
{ 50} Income advance from Trustee..................... $ 60,220
{143} Accrued Sponsors' fees ......................... 353
{145} Other liabilities............................... 1,411 61,984
----------- -----------
NET ASSETS, REPRESENTED BY:
{ 80} 3,151 units of fractional undivided
{ 80} interest outstanding (Note 3)................ 3,238,259
{105} Undistributed net investment income ............ 9,868 $ 3,248,127
----------- ===========
{130}UNIT VALUE ($ 3,248,127 / 3,151 units )........... $ 1,030.82
===========
</TABLE>
See Notes to Financial Statements.
D - 14.
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND, MULTISTATE SERIES - 204 (MARYLAND TRUST),
DEFINED ASSET FUNDS
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
April 26, 1996
to
Years Ended March 31, March 31,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
INVESTMENT INCOME:
{ 10} Interest income ........................ $ 176,176 $ 181,150 $ 168,990
{ 20} Trustee's fees and expenses ............ (5,322) (5,955) (6,436)
{ 30} Sponsors' fees ......................... (1,447) (1,463) (1,365)
------------------------------------------------
{ 40} Net investment income .................. 169,407 173,732 161,189
------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Realized gain on
{ 50} securities sold or redeemed .......... 5,322
Unrealized appreciation (depreciation)
{ 60} of investments ....................... 3,988 239,406 (36,742)
------------------------------------------------
Net realized and unrealized
{ 70} gain (loss) on investments ........... 9,310 239,406 (36,742)
------------------------------------------------
NET INCREASE IN NET ASSETS
{ 80} RESULTING FROM OPERATIONS .............. $ 178,717 $ 413,138 $ 124,447
================================================
</TABLE>
See Notes to Financial Statements.
D - 15.
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND, MULTISTATE SERIES - 204 (MARYLAND TRUST),
DEFINED ASSET FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
April 26, 1996
to
Years Ended March 31, March 31,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
OPERATIONS:
{ 10} Net investment income .................. $ 169,407 $ 173,732 $ 161,189
Realized gain on
{ 20} securities sold or redeemed .......... 5,322
Unrealized appreciation (depreciation)
{ 30} of investments ....................... 3,988 239,406 (36,742)
------------------------------------------------
Net increase in net assets
{ 40} resulting from operations ............ 178,717 413,138 124,447
------------------------------------------------
DISTRIBUTIONS TO HOLDERS (Note 2):
{ 50} Income ................................ (169,530) (173,631) (151,025)
{ 60} Principal .............................. (6,869)
------------------------------------------------
{ 70} Total distributions .................... (176,399) (173,631) (151,025)
------------------------------------------------
SHARE TRANSACTIONS:
{ 82} Redemption amounts - income ............ (273)
{ 83} Redemption amounts - principal ......... (134,335)
------------------------------------------------
{ 84} Total share transactions ............... (134,608)
------------------------------------------------
{ 90}NET INCREASE (DECREASE) IN NET ASSETS..... (132,290) 239,507 (26,578)
{100}NET ASSETS AT BEGINNING OF PERIOD ........ 3,380,417 3,140,910 3,167,488
------------------------------------------------
{110}NET ASSETS AT END OF PERIOD .............. $ 3,248,127 $ 3,380,417 $ 3,140,910
================================================
PER UNIT:
Income distributions during
{120} period ............................... $ 52.95 $ 52.92 $ 46.03
================================================
Principal distributions during
{130} period ............................... $ 2.18
===================
Net asset value at end of
{140} period ............................... $ 1,030.82 $ 1,030.30 $ 957.30
================================================
TRUST UNITS:
{ 83} Redeemed during period ................. 130
{150} Outstanding at end of period ........... 3,151 3,281 3,281
================================================
</TABLE>
See Notes to Financial Statements.
D - 16.
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND, MULTISTATE SERIES - 204 (MARYLAND 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 April 26, 1996 was based upon offering side
evaluations at April 24, 1996, the day prior to the Date of Deposit.
Cost of securities at April 26, 1996 was also based on such offering
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>
<S> <C>
{ 10} Cost of 3,151 units at Date of Deposit ..................... $ 3,183,938
{ 20} Less sales charge .......................................... 141,953
-----------
{ 25} Net amount applicable to Holders ........................... 3,041,985
{ 31} Redemptions of units - net cost of 130 units redeemed
{143} less redemption amounts (principal)....................... (8,831)
{ 40} Realized gain on securities sold or redeemed ............... 5,322
{ 50} Principal distributions .................................... (6,869)
{ 70} Unrealized appreciation of investments...................... 206,652
-----------
{ 80} Net capital applicable to Holders .......................... $ 3,238,259
===========
</TABLE>
4. INCOME TAXES
As of March 31, 1999, unrealized appreciation of investments, based on cost
for Federal income tax purposes, aggregated $206,652, all of which related
to appreciated securities. The cost of investment securities for Federal
income tax purposes was $3,001,822 at March 31, 1999.
D - 17.
{PAGE}
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND, MULTISTATE SERIES - 204 (MARYLAND TRUST),
DEFINED ASSET FUNDS
NOTES TO FINANCIAL STATEMENTS
5. DEFERRED ORGANIZATION COSTS
Deferred organization costs are being amortized over a period of five years.
Included in "Other liabilities" is $ 1,411 payable to the Trustee for
reimbursement of costs related to the organization of the Trust.
D - 18.
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND, MULTISTATE SERIES - 204 (MARYLAND TRUST),
DEFINED ASSET FUNDS
PORTFOLIO
As of March 31, 1999
<TABLE>
<CAPTION>
Rating {PE VER C.} Optional
Portfolio No. and Title of of Face Redemption
Securities Issues(1) Amount Coupon Maturities(3) Provisions(3) Cost(2) Value(2)
---------- --------- ----------- ----------- ------------ ------------ ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Anne Arundel Cnty., MD, Poll. Ctl. Rev. A $ 135,000 6.000 % 2024 04/01/04 $ 136,503 $ 145,130
Rfdg. Bonds (Baltimore Gas and Elec. @ 102.000
Co. Proj.), Ser. 1994
2 Mayor and City Council of Baltimore, AAA 220,000 5.250 2016 None 208,285 227,425
MD, Rfdg. Cert. of Part. (Rivoli
Office Bldg. Fac.), Ser. 1993 A
(MBIA Ins.) (5)
280,000 5.250 2016 04/01/03 265,091 285,480
@ 102.000
3 Maryland Indl. Dev. Fin. Auth., Econ. AA 465,000 5.500 2015 12/01/03 448,758 475,100
Dev. Rev. Bonds (Holy Cross Hlth. Sys. @ 102.000
Corp.), Ser. 1993
4 Maryland Community Dev. Admin., Dept. Aa(m) 100,000 6.050 2024 05/15/03 101,000 104,721
of Hsg. and Cmnty. Dev., Multi-Family @ 102.000
Hsg. Rev. Bonds (Ins. Mtge. Loans),
Ser. 1993 D
5 Montgomery Cnty., MD, Poll. Ctl. Rev. A1(m) 250,000 5.375 2024 02/15/04 235,393 254,508
Rfdg. Bonds (Potomac Elec. Proj.), @ 102.000
Ser. 1994
6 Prince George's Cnty., MD, Proj. and A(m) 500,000 5.300 2024 07/01/04 452,640 475,280
Rfdg. Rev. Bonds (Dimensions Hlth. Corp. @ 102.000
Issue), Ser. 1994
7 Maryland Stadium Auth., Sports Facs. AAA 440,000 5.800 2026 03/01/06 441,720 470,932
Lease Rev. Bonds, Ser. 1996 @ 101.000
(AMBAC Ins.) (5)
8 City of Takoma Park, MD, Hosp. Facs. AAA 460,000 6.000 2021 09/01/05 467,530 497,738
Rfdg. and Imp. Rev. Bonds (Washington @ 102.000
Adventist Hosp.), Ser. 1995
(FSA Ins.) (5)
</TABLE>
D - 19.
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND, MULTISTATE SERIES - 204 (MARYLAND TRUST),
DEFINED ASSET FUNDS
PORTFOLIO
As of March 31, 1999
<TABLE>
<CAPTION>
Rating {PE VER C.} Optional
Portfolio No. and Title of of Face Redemption
Securities Issues(1) Amount Coupon Maturities(3) Provisions(3) Cost(2) Value(2)
---------- --------- ----------- ----------- ------------ ------------ ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
9 Commonwealth of Puerto Rico, G.O. A $ 265,000 5.400 % 2025 07/01/06 $ 244,902 $ 272,160
Bonds, Ser. 1996 @ 101.500
--------- --------- ---------
TOTAL $ 3,115,000 $ 3,001,822 $ 3,208,474
========= ========= =========
See Notes to Portfolios on page D - 39.
</TABLE>
D - 20.
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND, MULTISTATE SERIES - 204 (NEW YORK TRUST),
DEFINED ASSET FUNDS
STATEMENT OF CONDITION
As of March 31, 1999
<TABLE>
<S> <C> <C>
TRUST PROPERTY:
Investment in marketable securities -
{ 20} at value (cost $ 2,772,215 )(Note 1)......... $ 2,997,029
{ 36} Accrued interest ............................... 34,353
{ 32} Cash - income .................................. 14,443
{ 34} Cash - principal ............................... 28,289
Deferred organization costs (Note 5) ........... 1,520
-----------
{ 40} Total trust property ......................... 3,075,634
LESS LIABILITIES:
{ 50} Income advance from Trustee..................... $ 39,488
{143} Accrued Sponsors' fees ......................... 326
Other liabilities .............................. 1,520 41,334
----------- -----------
NET ASSETS, REPRESENTED BY:
{ 80} 2,938 units of fractional undivided
{ 80} interest outstanding (Note 3)................ 3,025,318
{105} Undistributed net investment income ............ 8,982 $ 3,034,300
----------- ===========
{130}UNIT VALUE ($ 3,034,300 / 2,938 units )........... $ 1,032.78
===========
</TABLE>
See Notes to Financial Statements.
D - 21.
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND, MULTISTATE SERIES - 204 (NEW YORK TRUST),
DEFINED ASSET FUNDS
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
April 26, 1996
to
Years Ended March 31, March 31,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
INVESTMENT INCOME:
{ 10} Interest income ........................ $ 161,312 $ 182,839 $ 183,167
{ 20} Trustee's fees and expenses ............ (5,132) (6,021) (6,736)
{ 30} Sponsors' fees ......................... (1,376) (1,523) (1,470)
------------------------------------------------
{ 40} Net investment income .................. 154,804 175,295 174,961
------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Realized gain (loss) on
{ 50} securities sold or redeemed .......... 9,109 16,260 (1,317)
Unrealized appreciation (depreciation)
{ 60} of investments ....................... 19,585 251,184 (45,955)
------------------------------------------------
Net realized and unrealized
{ 70} gain (loss) on investments ........... 28,694 267,444 (47,272)
------------------------------------------------
NET INCREASE IN NET ASSETS
{ 80} RESULTING FROM OPERATIONS .............. $ 183,498 $ 442,739 $ 127,689
================================================
</TABLE>
See Notes to Financial Statements.
D - 22.
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND, MULTISTATE SERIES - 204 (NEW YORK TRUST),
DEFINED ASSET FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
April 26, 1996
to
Years Ended March 31, March 31,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
OPERATIONS:
{ 10} Net investment income .................. $ 154,804 $ 175,295 $ 174,961
Realized gain (loss) on
{ 20} securities sold or redeemed .......... 9,109 16,260 (1,317)
Unrealized appreciation (depreciation)
{ 30} of investments ....................... 19,585 251,184 (45,955)
------------------------------------------------
Net increase in net assets
{ 40} resulting from operations ............ 183,498 442,739 127,689
------------------------------------------------
DISTRIBUTIONS TO HOLDERS (Note 2):
{ 50} Income ................................ (154,946) (175,480) (164,048)
{ 60} Principal .............................. (13,485) (21,023)
------------------------------------------------
{ 70} Total distributions .................... (168,431) (196,503) (164,048)
------------------------------------------------
SHARE TRANSACTIONS:
{ 82} Redemption amounts - income ............ (253) (1,031) (321)
{ 83} Redemption amounts - principal ......... (136,179) (367,250) (100,220)
------------------------------------------------
{ 84} Total share transactions ............... (136,432) (368,281) (100,541)
------------------------------------------------
{ 90}NET DECREASE IN NET ASSETS ............... (121,365) (122,045) (136,900)
{100}NET ASSETS AT BEGINNING OF PERIOD ........ 3,155,665 3,277,710 3,414,610
------------------------------------------------
{110}NET ASSETS AT END OF PERIOD .............. $ 3,034,300 $ 3,155,665 $ 3,277,710
================================================
PER UNIT:
Income distributions during
{120} period ............................ $ 52.54 $ 53.02 $ 46.42
================================================
Principal distributions during
{130} period ............................... $ 4.59 $ 6.50
=====================================
Net asset value at end of
{140} period ............................... $ 1,032.78 $ 1,027.57 $ 955.60
================================================
TRUST UNITS:
{ 83} Redeemed during period ................. 133 359 104
{150} Outstanding at end of period ........... 2,938 3,071 3,430
================================================
</TABLE>
See Notes to Financial Statements.
D - 23.
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND, MULTISTATE SERIES - 204 (NEW YORK 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 April 26, 1996 was based upon offering side
evaluations at April 24, 1996, the day prior to the Date of Deposit.
Cost of securities at April 26, 1996 was also based on such offering
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 peridically.
3. NET CAPITAL
<TABLE>
<S> <C>
{ 10} Cost of 2,938 units at Date of Deposit ..................... $ 2,971,160
{ 20} Less sales charge .......................................... 132,416
-----------
{ 25} Net amount applicable to Holders ........................... 2,838,744
{ 31} Redemptions of units - net cost of 596 units redeemed
{143} less redemption amounts (principal)....................... (27,784)
{ 40} Realized gain on securities sold or redeemed ............... 24,052
{ 50} Principal distributions .................................... (34,508)
{ 70} Unrealized appreciation of investments...................... 224,814
-----------
{ 80} Net capital applicable to Holders .......................... $ 3,025,318
===========
</TABLE>
4. INCOME TAXES
As of March 31, 1999, unrealized appreciation of investments, based on cost
for Federal income tax purposes, aggregated $224,814, all of which related
to appreciated securities. The cost of investment securities for Federal
income tax purposes was $2,772,215 at March 31, 1999.
D - 24.
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND, MULTISTATE SERIES - 204 (NEW YORK TRUST),
DEFINED ASSET FUNDS
NOTES TO FINANCIAL STATEMENTS
5. DEFERRED ORGANIZATION COSTS
Deferred organization costs are being amortized over a period of five years.
Included in "Other liabilities" is $ 1,520 payable to the Trustee for
reimbursement of costs related to the organization of the Trust.
D - 25.
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND, MULTISTATE SERIES - 204 (NEW YORK TRUST)
(INSURED), DEFINED ASSET FUNDS
PORTFOLIO
As of March 31, 1999
<TABLE>
<CAPTION>
Rating of {PE VER C.} Optional
Portfolio No. and Title of Issues Face Redemption
Securities (1) (4) Amount Coupon Maturities(3) Provisions(3) Cost(2) Value(2)
---------- --------- ----------- ----------- ------------ ------------ ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Battery Park City Auth., NY, Sr. Rev. AAA $ 500,000 5.250 % 2017 11/01/03 $ 466,430 $ 507,195
Rfdg. Bonds, Ser. 1993 A (MBIA Ins.) @ 102.000
2 The City of New York, NY, G.O. Bonds, AAA 240,000 5.750 2017 02/01/06 238,536 255,158
Ser. 1996 G (MBIA Ins.) @ 101.500
3 New York City Hlth. and Hosp. Corp., AAA 500,000 5.750 2022 02/15/03 490,070 522,985
NY, Hlth. Sys. Bonds, 1993 Ser. A @ 102.000
(AMBAC Ins.)
4 New York City, NY, Mun. Wtr. Fin. AAA 340,000 5.500 2023 06/15/04 326,111 352,022
Auth., Wtr. and Swr. Sys. Rev. Bonds, @ 101.500
Fiscal Ser. 1994 F (MBIA Ins.)
5 New York State Med. Care Facs. Fin. AAA 435,000 6.000 2035 02/15/05 436,670 470,087
Agy., FHA-Ins. Mtge. Rev. Bonds @ 102.000
(Montefiore Med. Ctr.), Ser. 1995 A
(AMBAC Ins.)
6 Dormitory Auth. of the State of New AAA 365,000 5.750 2025 07/01/06 354,908 385,597
York, Ins. Rev. Bonds (The John T. @ 102.000
Mather Mem. Hosp.), Ser. 1996
(Connie Lee Ins.)
7 New York State Med. Care Fac. Fin. AAA 500,000 5.250 2019 02/15/04 459,490 503,985
Agy., Mental Hlth. Svcs. Facs. Imp. Rev. @ 102.000
Rfdg. Bonds, 1993 Ser. F
(Financial Guaranty Ins.)
--------- --------- ---------
TOTAL $ 2,880,000 $ 2,772,215 $ 2,997,029
========= ========= =========
See Notes to Portfolios on page D - 39.
</TABLE>
D - 26.
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND, MULTISTATE SERIES - 204
(PENNSYLVANIA TRUST), DEFINED ASSET FUNDS
STATEMENT OF CONDITION
As of March 31, 1999
<TABLE>
<S> <C> <C>
TRUST PROPERTY:
Investment in marketable securities -
{ 20} at value (cost $ 2,532,775 )(Note 1)......... $ 2,742,472
{ 36} Accrued interest ............................... 37,460
{ 32} Cash - income .................................. 26,109
{ 34} Cash - principal ............................... 24,053
Deferred organization costs (Note 5) ........... 1,410
-----------
{ 40} Total trust property ......................... 2,831,504
LESS LIABILITIES:
{ 50} Income advance from Trustee..................... $ 54,772
{143} Accrued Sponsors' fees ......................... 291
Other liabilities .............................. 1,410 56,473
----------- -----------
NET ASSETS, REPRESENTED BY:
{ 80} 2,628 units of fractional undivided
{ 80} interest outstanding (Note 3)................ 2,766,525
{105} Undistributed net investment income ............ 8,506 $ 2,775,031
----------- ===========
{130}UNIT VALUE ($ 2,775,031 / 2,628 units )........... $ 1,055.95
===========
</TABLE>
See Notes to Financial Statements.
D - 27.
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND, MULTISTATE SERIES - 204
(PENNSYLVANIA TRUST), DEFINED ASSET FUNDS
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
April 26, 1996
to
Years Ended March 31, March 31,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
INVESTMENT INCOME:
{ 10} Interest income ........................ $ 160,214 $ 185,500 $ 170,946
{ 20} Trustee's fees and expenses ............ (5,069) (6,027) (4,323)
{ 30} Sponsors' fees ......................... (1,364) (1,462) (1,365)
------------------------------------------------
{ 40} Net investment income .................. 153,781 178,011 165,258
------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Realized gain on
{ 50} securities sold or redeemed .......... 51,527
Unrealized appreciation (depreciation)
{ 60} of investments ....................... (16,169) 260,134 (34,268)
------------------------------------------------
Net realized and unrealized
{ 70} gain (loss) on investments ........... 35,358 260,134 (34,268)
------------------------------------------------
NET INCREASE IN NET ASSETS
{ 80} RESULTING FROM OPERATIONS .............. $ 189,139 $ 438,145 $ 130,990
================================================
</TABLE>
See Notes to Financial Statements.
D - 28.
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND, MULTISTATE SERIES - 204
(PENNSYLVANIA TRUST), DEFINED ASSET FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
April 26, 1996
to
Years Ended March 31, March 31,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
OPERATIONS:
{ 10} Net investment income .................. $ 153,781 $ 178,011 $ 165,258
Realized gain on
{ 20} securities sold or redeemed .......... 51,527
Unrealized appreciation (depreciation)
{ 30} of investments ....................... (16,169) 260,134 (34,268)
------------------------------------------------
Net increase in net assets
{ 40} resulting from operations ............ 189,139 438,145 130,990
------------------------------------------------
DISTRIBUTIONS TO HOLDERS (Note 2):
{ 50} Income ................................ (154,095) (177,842) (154,816)
{ 60} Principal .............................. (24,949)
------------------------------------------------
{ 70} Total distributions .................... (179,044) (177,842) (154,816)
------------------------------------------------
SHARE TRANSACTIONS:
{ 82} Redemption amounts - income ............ (1,524) (267)
{ 83} Redemption amounts - principal ......... (616,823) (71,397)
------------------------------------------------
{ 84} Total share transactions ............... (618,347) (71,664)
------------------------------------------------
{ 90}NET INCREASE (DECREASE) IN NET ASSETS..... (608,252) 188,639 (23,826)
{100}NET ASSETS AT BEGINNING OF PERIOD ........ 3,383,283 3,194,644 3,218,470
------------------------------------------------
{110}NET ASSETS AT END OF PERIOD .............. $ 2,775,031 $ 3,383,283 $ 3,194,644
================================================
PER UNIT:
Income distributions during
{120} period ............................... $ 54.01 $ 54.22 $ 47.20
================================================
Principal distributions during
{130} period ............................... $ 8.82
===================
Net asset value at end of
{140} period ............................... $ 1,055.95 $ 1,053.33 $ 973.98
================================================
TRUST UNITS:
{ 83} Redeemed during period ................. 584 68
{150} Outstanding at end of period ........... 2,628 3,212 3,280
================================================
</TABLE>
See Notes to Financial Statements.
D - 29.
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND, MULTISTATE SERIES - 204
(PENNSYLVANIA TRUST), DEFINED ASSET FUNDS
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Fund is registered under the Investment Company Act of 1940 as a Unit
Investment Trust. The following is a summary of significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements. The policies are in conformity with generally accepted
accounting principles.
(A) Securities are stated at value as determined by the
Evaluator based on bid side evaluations for the securities,
except that value on April 26, 1996 was based upon offering side
evaluations at April 24, 1996, the day prior to the Date of Deposit.
Cost of securities at April 26, 1996 was also based on such offering
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>
{ 10} Cost of 2,628 units at Date of Deposit ..................... $ 2,699,089
{ 20} Less sales charge .......................................... 120,389
-----------
{ 25} Net amount applicable to Holders ........................... 2,578,700
{ 31} Redemptions of units - net cost of 652 units redeemed
{143} less redemption amounts (principal)....................... (48,450)
{ 40} Realized gain on securities sold or redeemed ............... 51,527
{ 50} Principal distributions .................................... (24,949)
{ 70} Unrealized appreciation of investments...................... 209,697
-----------
{ 80} Net capital applicable to Holders .......................... $ 2,766,525
===========
</TABLE>
4. INCOME TAXES
As of March 31, 1999, unrealized appreciation of investments, based on cost
for Federal income tax purposes, aggregated $209,697, all of which related
to appreciated securities. The cost of investment securities for Federal
income tax purposes was $2,532,775 at March 31, 1999.
D - 30.
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND, MULTISTATE SERIES - 204
(PENNSYLVANIA TRUST), DEFINED ASSET FUNDS
NOTES TO FINANCIAL STATEMENTS
5. DEFERRED ORGANIZATION COSTS
Deferred organization costs are being amortized over a period of five years.
Included in "Other liabilities" is $ 1,410 payable to the Trustee for
reimbursement of costs related to the organization of the Trust.
D - 31.
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND, MULTISTATE SERIES - 204
(PENNSYLVANIA TRUST) (INSURED), DEFINED ASSET FUNDS
PORTFOLIO
As of March 31, 1999
<TABLE>
<CAPTION>
Rating {PE VER C.} Optional
Portfolio No. and Title of of Face Redemption
Securities Issues(1)(4) Amount Coupon Maturities(3) Provisions(3) Cost(2) Value(2)
---------- --------- ----------- ----------- ------------ ------------ ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Bellefonte Area Sch. Dist., Centre AAA $ 390,000 5.500 % 2026 05/15/06 $ 373,429 $ 402,484
Cnty., PA, G.O. Bonds, Ser. 1996 @ 100.000
(MBIA Ins.)
2 Delaware Cnty. Auth., PA, Coll. Rev. AAA 245,000 5.625 2025(6) 10/01/05 235,631 266,567
Bonds (Neumann Coll.), Ser. 1995 @ 100.000
(Connie Lee Ins.)
3 Beaver Cnty., PA, Indl. Dev. Auth., AAA 450,000 6.000 2028 09/01/05 455,499 489,528
Poll. Ctl. Rev. Rfdg. Bonds @ 102.000
(Pennsylvania Pwr. Co. Beaver Valley
Proj.), Ser. 1995 A (AMBAC Ins.)
4 Chester Cnty., PA, Hlth. and Educ. AAA 300,000 5.500 2015 05/15/04 289,689 309,603
Facs. Auth., Hlth. Sys. Rev. Bonds @ 102.000
(Main Line Hlth. Sys.), Ser. 1994 A
(MBIA Ins.)
5 Pennsylvania Higher Educl. Facs. Auth., AAA 240,000 5.625 2017 05/01/06 234,931 252,295
La Salle Univ. Rev. Bonds, Ser. 1996 @ 101.000
(MBIA Ins.)
6 Pennsylvania Higher Educl. Facs. Auth., AAA 500,000 5.875 2025 07/15/05 496,525 529,000
St. Joseph's Univ. Rev. Bonds, @ 102.000
Ser. 1995 (Connie Lee Ins.)
7 Southeastern Pennsylvania Trans. Auth., AAA 25,000 5.750 2020(6) 03/01/05 24,837 27,454
Special Rev. bonds Ser of 1995 A @ 101.000
(Financial Guaranty Ins.)
425,000 5.750 2020(6) 03/01/05 422,234 465,541
@ 101.000
--------- --------- ---------
TOTAL $ 2,575,000 $ 2,532,775 $ 2,742,472
========= ========= =========
See Notes to Portfolios page D - 39.
</TABLE>
D - 32.
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND, MULTISTATE SERIES - 204 (VIRGINIA TRUST),
DEFINED ASSET FUNDS
STATEMENT OF CONDITION
As of March 31, 1999
<TABLE>
<S> <C> <C>
TRUST PROPERTY:
Investment in marketable securities -
{ 20} at value (cost $ 2,807,680 )(Note 1)......... $ 3,039,786
Accrued interest ............................... 39,191
Cash - income .................................. 224
{ 34} Cash - principal ............................... 29,739
Deferred organization costs (Note 5) ........... 1,411
-----------
{ 40} Total trust property ......................... 3,110,351
LESS LIABILITIES:
{ 50} Income advance from Trustee..................... $ 29,667
{143} Accrued Sponsors' fees ......................... 330
Other liabilities .............................. 1,411 31,408
----------- -----------
NET ASSETS, REPRESENTED BY:
{ 80} 2,949 units of fractional undivided
{ 80} interest outstanding (Note 3)................ 3,069,525
{105} Undistributed net investment income ............ 9,418 $ 3,078,943
----------- ===========
{130}UNIT VALUE ($ 3,078,943 / 2,949 units )........... $ 1,044.06
===========
</TABLE>
See Notes to Financial Statements.
D - 33.
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND, MULTISTATE SERIES - 204 (VIRGINIA TRUST),
DEFINED ASSET FUNDS
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
April 26, 1996
to
Years Ended March 31, March 31,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
INVESTMENT INCOME:
{ 10} Interest income ........................ $ 169,478 $ 183,662 $ 169,013
{ 20} Trustee's fees and expenses ............ (5,129) (5,845) (3,528)
{ 30} Sponsors' fees ......................... (1,412) (1,462) (1,365)
------------------------------------------------
{ 40} Net investment income .................. 162,937 176,355 164,120
------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Realized gain on
{ 50} securities sold or redeemed .......... 12,265 6,557
Unrealized appreciation (depreciation)
{ 60} of investments ....................... 20,646 228,797 (17,337)
------------------------------------------------
Net realized and unrealized
{ 70} gain (loss) on investments ........... 32,911 235,354 (17,337)
------------------------------------------------
NET INCREASE IN NET ASSETS
{ 80} RESULTING FROM OPERATIONS .............. $ 195,848 $ 411,709 $ 146,783
================================================
</TABLE>
See Notes to Financial Statements.
D - 34.
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND, MULTISTATE SERIES - 204 (VIRGINIA TRUST),
DEFINED ASSET FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
April 26, 1996
to
Years Ended March 31, March 31,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
OPERATIONS:
{ 10} Net investment income .................. $ 162,937 $ 176,355 $ 164,120
Realized gain on
{ 20} securities sold or redeemed .......... 12,265 6,557
Unrealized appreciation (depreciation)
{ 30} of investments ....................... 20,646 228,797 (17,337)
------------------------------------------------
Net increase in net assets
{ 40} resulting from operations ............ 195,848 411,709 146,783
------------------------------------------------
DISTRIBUTIONS TO HOLDERS (Note 2):
{ 50} Income ................................ (163,066) (176,032) (153,827)
{ 60} Principal .............................. (7,348)
------------------------------------------------
{ 70} Total distributions .................... (170,414) (176,032) (153,827)
------------------------------------------------
SHARE TRANSACTIONS:
{ 82} Redemption amounts - income ............ (327) (742)
{ 83} Redemption amounts - principal ......... (169,464) (176,763)
------------------------------------------------
{ 84} Total share transactions ............... (169,791) (177,505)
------------------------------------------------
{ 90}NET INCREASE (DECREASE) IN NET ASSETS..... (144,357) 58,172 (7,044)
{100}NET ASSETS AT BEGINNING OF PERIOD ........ 3,223,300 3,165,128 3,172,172
------------------------------------------------
{110}NET ASSETS AT END OF PERIOD .............. $ 3,078,943 $ 3,223,300 $ 3,165,128
================================================
PER UNIT:
Income distributions during
{120} period ............................... $ 53.74 $ 53.87 $ 46.87
================================================
Principal distributions during
{130} period ............................... $ 2.41
==================
Net asset value at end of
{140} period ............................... $ 1,044.06 $ 1,036.10 $ 964.39
================================================
TRUST UNITS:
{ 83} Redeemed during period ................. 162 171
{150} Outstanding at end of period ........... 2,949 3,111 3,282
================================================
</TABLE>
See Notes to Financial Statements.
D - 35.
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND, MULTISTATE SERIES - 204 (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 April 26, 1996 was based upon offering side
evaluations at April 24 1996, the day prior to the Date of Deposit.
Cost of securities at April 26, 1996 was also based on such offering
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>
<S> <C>
{ 10} Cost of 2,949 units at Date of Deposit ..................... $ 2,983,257
{ 20} Less sales charge .......................................... 132,941
-----------
{ 25} Net amount applicable to Holders ........................... 2,850,316
{ 31} Redemptions of units - net cost of 333 units redeemed
{143} less redemption amounts (principal)....................... (24,371)
{ 40} Realized gain on securities sold or redeemed ............... 18,822
{ 50} Principal distributions .................................... (7,348)
{ 70} Unrealized appreciation of investments...................... 232,106
-----------
{ 80} Net capital applicable to Holders .......................... $ 3,069,525
===========
</TABLE>
4. INCOME TAXES
As of March 31, 1999, unrealized appreciation of investments, based on cost
for Federal income tax purposes, aggregated $232,106, all of which related
to appreciated securities. The cost of investment securities for Federal
income tax purposes was $2,807,680 at March 31, 1999.
D - 36.
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND, MULTISTATE SERIES - 204
(VIRGINIA TRUST), DEFINED ASSET FUNDS
NOTES TO FINANCIAL STATEMENTS
5. DEFERRED ORGANIZATION COSTS
Deferred organization costs are being amortized over a period of five years.
Included in "Other liabilities" is $ 1,411 payable to the Trustee for
reimbursement of costs related to the organization of the Trust.
D - 37.
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND, MULTISTATE SERIES - 204
DEFINED ASSET FUNDS (VIRGINIA TRUST)
PORTFOLIO
As of March 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 Dev. Auth. of Fairfax Cnty., AA $ 500,000 6.000 % 2026 08/15/06 $ 502,105 $ 541,300
VA, Hlth. Care Rev. Bonds (Inova Hlth. @ 102.000
Sys. Proj.), Ser. 1996
2 Virginia Hsg. Dev. Auth., Commonwealth AA+ 500,000 6.125 2019 07/01/05 501,260 529,285
Mtge. Bonds, Ser. 1995 D, Subseries D-3 @ 102.000
3 City of Richmond, VA, G.O. Pub. Imp. AAA 500,000 5.000 2021 01/15/06 447,765 492,785
Rfdg. Bonds Ser. 1995 B @ 102.000
(Financial Guaranty Ins.) (5)
4 Riverside Regl. Jail Auth., VA Jail Fac. AAA 400,000 6.000 2025 07/01/05 406,476 434,512
Rev. Bonds, Ser. 1995 (MBIA Ins.) (5) @ 102.000
5 Industrial Dev. Auth. of the City of AAA 395,000 5.250 2025 07/01/03 359,418 395,383
Roanoke, VA, Hosp. Rev. Rfdg. Bonds @ 102.000
(Roanoke Mem. Hosps., Community Hosp.
of Roanoke Valley, Franklin Mem. Hosp.
and St. Albans Psychiatric Hosp. Proj.)
Ser. 1993 A (MBIA Ins.) (5)
6 City of Norfolk, VA, Wtr. Rev. Bonds, AAA 265,000 5.900 2025 11/01/05 267,200 287,064
Ser. 1995 (MBIA Ins.) (5) @ 102.000
7 Commonwealth of Puerto Rico, G.O. Bonds A 350,000 5.400 2025 07/01/06 323,456 359,457
Ser. 1996 @ 101.500
--------- --------- ---------
TOTAL $ 2,910,000 $ 2,807,680 $ 3,039,786
========= ========= =========
See Notes to Portfolios on page D - 39.
</TABLE>
D - 38.
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND, MULTISTATE SERIES - 204
(CALIFORNIA, CONNECTICUT, MARYLAND, NEW YORK, PENNSYLVANIA
AND VIRGINIA TRUSTS), DEFINED ASSET FUNDS
NOTES TO PORTFOLIOS
As of March 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.
(5) Insured by the indicated municipal bond insurance company.
(6) Bonds with an aggregate face amount of $ 160,000 of the California Trust,
$ 215,000 of the Connecticut Trust and $ 695,000 of the Pennsylvania Trust
have been pre-refunded and are expected to be called for redemption on the
optional redemption provision dates shown.
D - 39.
<PAGE>
Defined
Asset FundsSM
HAVE QUESTIONS ? MUNICIPAL INVESTMENT TRUST FUND
Request the most MULTISTATE SERIES--204
recent free Information (A Unit Investment Trust)
Supplement that gives more ---------------------------------------
details about the Fund, This Prospectus does not contain
by calling: complete information about the
The Chase Manhattan Bank investment company filed with the
1-800-323-1508 Securities and Exchange Commission in
Washington, D.C. under the:
o Securities Act of 1933 (file no.
333-01227) 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.
15313--7/99
