<PAGE>
DEFINED ASSET FUNDSSM
- --------------------------------------------------------------------------------
MUNICIPAL INVESTMENT 5.36% ESTIMATED CURRENT RETURN shows the estimated
TRUST FUND annual cash to be received from interest-bearing
MONTHLY PAYMENT SERIES 600 bonds in the Portfolio (net of estimated annual
(A UNIT INVESTMENT expenses) divided by the Public Offering Price
TRUST) (including the maximum deferred sales charge).
- ------------------------------5.41% ESTIMATED LONG TERM RETURN is a measure of
/ / DESIGNED FOR FEDERALLY the estimated return over the estimated life of
TAX-FREE INCOME the Fund. This represents an average of the yields
/ / DEFINED PORTFOLIO OF to maturity (or in certain cases, to an earlier
MUNICIPAL BONDS call date) of the individual bonds in the
/ / MONTHLY INCOME Portfolio, adjusted to reflect the maximum
/ / INVESTMENT GRADE deferred sales charge and estimated expenses. The
5.36% average yield for the Portfolio is derived by
ESTIMATED CURRENT RETURN weighting each bond's yield by its market value
5.41% and the time remaining to the call or maturity
ESTIMATED LONG TERM RETURN date, depending on how the bond is priced. Unlike
AS OF NOVEMBER 19, 1996 Estimated Current Return, Estimated Long Term
Return takes into account maturities, discounts
and premiums of the underlying bonds.
No return estimate can be predictive of your
actual return because returns will vary with
purchase price (including sales charges), how long
units are held, changes in Portfolio composition,
changes in interest income and changes in fees and
expenses. Therefore, Estimated Current Return and
Estimated Long Term Return are designed to be
comparative rather than predictive. A yield
calculation which is more comparable to an
individual bond may be higher or lower than
Estimated Current Return or Estimated Long Term
Return which are more comparable to return
calculations used by other investment products.
-------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
SPONSORS: HAS THE COMMISSION OR ANY STATE SECURITIES
Merrill Lynch, COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
Pierce, Fenner & Smith OF THIS DOCUMENT. ANY REPRESENTATION TO THE
Incorporated CONTRARY IS A CRIMINAL OFFENSE.
Smith Barney Inc. Inquiries should be directed to the Trustee at
Prudential Securities 1-800-323-1508.
Incorporated Prospectus dated November 20, 1996.
Dean Witter Reynolds Inc. INVESTORS SHOULD READ THIS PROSPECTUS CAREFULLY
PaineWebber Incorporated AND RETAIN IT FOR FUTURE REFERENCE.
<PAGE>
Defined Asset FundsSM
Defined Asset Funds is America's oldest and largest family of unit investment
trusts, with over $115 billion sponsored in the last 25 years. Each Defined
Asset Fund is a portfolio of preselected securities. The portfolio is divided
into 'units' representing equal shares of the underlying assets. Each unit
receives an equal share of income and principal distributions.
Defined Asset Funds offer several defined 'distinctives'. You know in advance
what you are investing in and that changes in the portfolio are limited - a
defined portfolio. Most defined bond funds pay interest monthly - defined
income. The portfolio offers a convenient and simple way to invest - simplicity
defined.
Your financial professional can help you select a Defined Asset Fund to meet
your personal investment objectives. Our size and market presence enable us to
offer a wide variety of investments. The Defined Asset Funds family offers:
o Municipal bond portfolios
o Corporate bond portfolios
o Government bond portfolios
o Equity portfolios
o International bond and equity portfolios
The terms of Defined Funds are as short as one year or as long as 30 years.
Special defined bond funds are available including: insured funds, double and
triple tax-free funds and funds with 'laddered maturities' to help protect
against changing interest rates. Defined Asset Funds are offered by prospectus
only.
- ----------------------------------------------------------------
Defined Monthly Payment Series
- ----------------------------------------------------------------
Our defined portfolio of municipal bonds offers you a simple and convenient way
to earn tax-free monthly income. And by purchasing Defined Asset Funds, you not
only receive professional selection but also gain the advantage of reduced risk
by investing in bonds of several different issuers.
INVESTMENT OBJECTIVE
To provide interest income exempt from regular federal income taxes through
investment in a fixed portfolio consisting primarily of long-term municipal
bonds issued by or on behalf of states and their local governments and
authorities.
DIVERSIFICATION
The Portfolio is diversified among 16 bond issues. Spreading your investment
among different issuers reduces your risk, but does not eliminate it. Because of
maturities, sales or other dispositions of bonds, the size, composition and
return of the Portfolio will change over time.
- ----------------------------------------------------------------
Defining Your Portfolio
- ----------------------------------------------------------------
PROFESSIONAL SELECTION AND SUPERVISION
The Portfolio contains a variety of bonds selected by experienced buyers. The
Fund is not actively managed; however, it is regularly reviewed and a bond can
be sold if retaining it is considered detrimental to investors' interests.
TYPES OF BONDS
The Portfolio consists of $10,425,000 face amount of municipal bonds of the
following types:
APPROXIMATE
PORTFOLIO
PERCENTAGE
/ / General Obligation 5%
/ / Hospitals/Nursing Homes/Mental Health 33%
/ / Housing 15%
/ / Industrial Development Revenue 7%
/ / Lease Rental Appropriation 26%
/ / State/Local Municipal Electric Utilities 7%
/ / Universities/Colleges 7%
RATED A OR BETTER
Each bond included in the Portfolio is rated investment grade. Each bond has
been selected by investment professionals from among available bonds rated A or
better by a nationally recognized rating organization. In addition,
approximately 16% of the bonds are insured. This insurance guarantees the timely
payment of principal and interest on the bonds but does not guarantee the value
of the bonds or the Fund Units. (See Bonds Backed by Letters of Credit or
Insurance in Part B.)
BOND CALL FEATURES
It is possible that during periods of falling interest rates, a bond with a
coupon higher than current market rates will be prepaid or 'called', at the
option of the bond issuer, before its expected maturity. When bonds are
initially callable, the price is usually at a premium to par which then declines
to par over time. Bonds may also be subject to a mandatory sinking fund or have
extraordinary redemption provisions. For example, if the bond's proceeds are not
able to be used as intended the bond may be redeemed. This redemption and the
sinking fund are often at par.
CALL PROTECTION
Although each of the bonds is subject to optional refunding or call provisions,
we have selected bonds with call protection. This call protection means that any
bond in the Portfolio generally cannot be called for a number of years and
thereafter at a declining premium over par.
A-2
<PAGE>
TAX INFORMATION
Based on the opinion of bond counsel, income from the bonds held by this Fund is
generally 100% exempt under existing laws from regular federal income tax. Any
gain on a disposition of the underlying bonds or units will be subject to tax.
- ----------------------------------------------------------------
Defining Your Investment
- ----------------------------------------------------------------
PUBLIC OFFERING PRICE PER UNIT $1,013.81
The Public Offering Price as of November 19, 1996, the business day prior to the
Initial Date of Deposit, is based on the aggregate offer side value of the
underlying bonds in the Fund ($10,139,439.60) plus cash ($95,000.00), divided by
the number of units (10,095). The Public Offering Price on any subsequent date
will vary. An amount equal to principal cash, if any, as well as net accrued but
undistributed interest on the unit is added to the Public Offering Price. The
underlying bonds are evaluated by an independent evaluator at 3:30 p.m. Eastern
time on every business day thereafter.
UNIT PAR VALUE
The par value of your unit--the amount of money you will receive by termination
of the Fund, assuming all the bonds are paid at maturity or are redeemed by the
issuer at par or sold by the Fund at par to meet redemptions--is $1,000.
LOW MINIMUM INVESTMENT
You can get started with a minimum purchase of about $1,000.
REINVESTMENT OPTION
You can elect to automatically reinvest your distributions into a separate
portfolio of federally tax-exempt bonds. Reinvesting helps to compound your
income tax-free.
PRINCIPAL DISTRIBUTIONS
Principal from sales, redemptions and maturities of bonds in the Fund will be
distributed to investors periodically when the amount to be distributed is more
than $5.00 per unit.
TERMINATION DATE
The Fund will generally terminate following the maturity date of the last
maturing bond listed in the Portfolio. The Fund may be terminated earlier if the
value is less than 40% of the face amount of bonds deposited.
SPONSORS' PROFIT OR LOSS
The Sponsors' profit or loss associated with the Fund will include the receipt
of applicable sales charges, any fees for underwriting or placing bonds,
fluctuations in the Public Offering Price or secondary market price of units and
a gain of $131,947.95 on the deposit of the bonds (see Underwriters' and
Sponsors' Profits in Part B).
UNDERWRITING ACCOUNT
One or more of the Sponsors has participated as sole underwriter, managing
underwriter or member of an underwriting syndicate from which 7% of the bonds in
the Portfolio were acquired.
SPONSORS
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
P.O. Box 9051,
Princeton, NJ 08543-9051 60.38%
SMITH BARNEY INC.
388 Greenwich Street--23rd Floor,
New York, NY 10013 9.91%
PRUDENTIAL SECURITIES INCORPORATED
One New York Plaza,
New York, NY 10292 4.95%
DEAN WITTER REYNOLDS INC.
Two World Trade Center--59th Floor,
New York, NY 10048 4.95%
PAINEWEBBER INCORPORATED
1285 Avenue of the Americas,
New York, NY 10019 19.81%
100.00%
- --------------------------------------------------------------------------------
TAX-FREE VS. TAXABLE INCOME: A COMPARISON OF TAXABLE AND TAX-FREE YIELDS
<TABLE><CAPTION>
TAXABLE INCOME 1996* EFFECTIVE % TAX-FREE YIELD OF
SINGLE RETURN JOINT RETURN TAX BRACKET 4% 4.5% 5% 5.5% 6% 6.5%
IS EQUIVALENT TO A TAXABLE YIELD OF
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
0- 24,000 $ 0- 40,100 15.00 4.71 5.29 5.88 6.47 7.06 7.65
- ---------------------------------------------------------------------------------------------------------------------------
$ 24,000- 58,150 $ 40,100- 96,900 28.00 5.56 6.25 6.94 7.64 8.33 9.03
- ---------------------------------------------------------------------------------------------------------------------------
$ 58,150-121,300 $ 96,900-147,700 31.00 5.80 6.52 7.25 7.97 8.70 9.42
- ---------------------------------------------------------------------------------------------------------------------------
$121,300-263,750 $147,700-263,750 36.00 6.25 7.03 7.81 8.59 9.38 10.16
- ---------------------------------------------------------------------------------------------------------------------------
OVER $263,750 OVER $263,750 39.60 6.62 7.45 8.28 9.11 9.93 10.76
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
TAXABLE INCOME 199
SINGLE RETURN 7% 7.5% 8%
- ------------------
0- 24,000 8.24 8.82 9.41
- ------------------
$ 24,000- 58,150 9.72 10.42 11.11
- ------------------
$ 58,150-121,300 10.14 10.87 11.59
- ------------------
$121,300-263,750 10.94 11.72 12.50
- ------------------
OVER $263,750 11.59 12.42 13.25
- ------------------
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 1996
federal 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, holders are urged to consult their own tax advisers in
this regard.
A-3
<PAGE>
- --------------------------------------------------------------------------------
Defined Portfolio
- --------------------------------------------------------------------------------
Municipal Investment Trust Fund
Monthly Payment Series--600 November 20, 1996
<TABLE><CAPTION>
OPTIONAL SINKING
RATING REFUNDING FUND COST
PORTFOLIO TITLE OF ISSUES (1) REDEMPTIONS (2) REDEMPTIONS (2) TO FUND (3)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. $750,000 Alaska Hsg. Fin. Corp.,
Hsg. Dev. Bonds, Ser. 1993 A,
5.625%, 12/1/23 Aa(m) 12/1/03 @ 100 12/1/14 $ 722,280.00
2. $750,000 City of Valdez, AK,
Marine Terminal Rev. Rfdg. Bonds
(BP Pipelines (Alaska) Inc. Proj.),
Ser. 1993 B, 5.50%, 10/1/28 AA- 10/1/03 @ 102 -- 717,420.00
3. $750,000 Department of Wtr. and
Pwr. of The City of Los Angeles,
CA, Elec. Plant Rfdg. Rev. Bonds,
Second Issue of 1993, 5.40%,
11/15/31 Aa(m) 11/15/03 @ 102 11/15/27 710,617.50
4. $750,000 Illinois Hlth. Fac.
Auth. Rev. Rfdg. Bonds (Riverside
Hlth. Sys.), Ser. 1996 A, 6.00%,
11/15/18 A 11/15/06 @ 102 11/15/16 750,000.00
5. $425,000 Illinois Hlth. Fac.
Auth. Rev. Rfdg. Bonds (Riverside
Hlth. Sys.), Ser. 1996 A (MBIA
Ins.), 4.00% to 4.35%, 11/15/97
through 11/15/99 (5) AAA -- -- 425,189.60
6. $750,000 Illinois Hlth. Fac.
Auth. Rev. Rfdg. Bonds (Sarah Bush
Lincoln Hlth. Ctr.), Ser. 1996 B,
5.75%, 2/15/22 A- 2/15/07 @ 102 2/15/17 725,692.50
7. $500,000 Community Unit Sch.
Dist. Number 116 Lake Cnty., IL
(Round Lake), Sch. Bonds, Ser. 1996
(Asset Guaranty Ins.), 6.10%,
2/1/16 AA 2/1/07 @ 101 2/1/15 506,010.00
8. $750,000 City of Boston, MA,
Indl. Dev. Fin. Auth. Rev. Bonds
(Massachusetts Coll. of Pharmacy
Proj.), Ser. 1993 A (Connie Lee
Ins.), 5.25%, 10/1/26 AAA 10/1/04 @ 102 10/1/15 701,782.50
</TABLE>
- ------------------------------------
(1) All ratings are by Standard & Poor's Ratings Group unless followed by
'(m)', which indicates a Moody's Investors Service rating or by '(f)', which
indicates a Fitch Investors Service rating. Moody's and Fitch ratings have been
furnished by the Evaluator but not confirmed with Moody's or Fitch. (See
Appendix A to Part B.)
(2) Bonds are first subject to optional redemptions (which may be exercised in
whole or in part) on the dates and at the prices indicated under the Optional
Refunding Redemptions column. In subsequent years, bonds are redeemable at
declining prices, but typically not below par value. Some issues may be subject
to sinking fund redemption or extraordinary redemption without premium prior to
the dates shown.
(3) Evaluation of the bonds by the Evaluator is made on the basis of current
offer side evaluation. On this basis, approximately 15% of the bonds were
deposited at a premium, 21% at par and 64% at a discount from par.
A-4
<PAGE>
- --------------------------------------------------------------------------------
Defined Portfolio
- --------------------------------------------------------------------------------
Municipal Investment Trust Fund
Monthly Payment Series--600 (Continued) November 20, 1996
<TABLE><CAPTION>
OPTIONAL SINKING
RATING REFUNDING FUND COST
PORTFOLIO TITLE OF ISSUES (1) REDEMPTIONS (2) REDEMPTIONS (2) TO FUND (3)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
9. $750,000 Michigan State Hsg.
Dev. Auth., Rental Hsg. Rev. Bonds,
Ser. 1994 B, 5.80%, 4/1/19 A+ 4/1/04 @ 102 4/1/14 $ 750,000.00
10. $500,000 Dormitory Auth. of the
State of New York, State Univ.
Educl. Facs., Rev. Bonds, Ser. 1993
C, 5.40%, 5/15/23 A(f) 5/15/04 @ 102 5/15/14 466,700.00
11. $750,000 Dormitory Auth. of the
State of New York, Rev. Bonds,
Upstate Cmnty. Coll., Ser. 1994 A,
5.70%, 7/1/21 A(f) 7/1/04 @ 102 7/1/15 731,692.50
12. $750,000 New York State Urban
Dev. Corp., Corr. Fac. Rev. Bonds,
Rfdg. Ser. 1993 A, 5.25%, 1/1/21 A(f) 1/1/04 @ 102 1/1/17 688,440.00
13. $750,000 The Hospitals and
Higher Educ. Fac. Auth. of
Philadelphia, PA, Hosp. Rev. Bonds
(Frankford Hosp.), Ser. 1993 A,
6.00%, 6/1/14 A3(m) 6/1/03 @ 102 6/1/03 754,950.00
14. $750,000 Montgomery Cnty., PA,
Indl. Dev. Auth. Retirement Cmnty.
Rev. Rfdg. Bonds (Adult Cmnty.
Total Svc., Inc. Oblig. Grp.), Ser.
1996 A, 5.875%, 11/15/22 (4) A- 11/15/06 @ 102 11/15/20 737,722.50
15. $500,000 Municipal Bldg. Auth.
of Salt Lake Cnty., UT, Lease Rev.
Bonds, Ser. 1996 A, 5.85%, 10/1/17 AA-(f) 4/1/07 @ 100 10/1/15 500,000.00
16. $250,000 Municipal Bldg. Auth.
of Salt Lake Cnty., UT, Lease Rev.
Bonds, Ser. 1996 A, 5.85%, 10/1/14 AA-(f) 4/1/07 @ 100 10/1/13 250,942.50
--------------------
$ 10,139,439.60
--------------------
--------------------
</TABLE>
- ------------------------------------
(4) These bonds are when-issued bonds that are expected to settle 24 days after
the settlement date for Units. The Trustee's fees and expenses will be reduced
by $0.22 per Unit to compensate for interest that would have accrued on the
bonds between the settlement date for Units and the actual date of delivery of
the bonds. (See Income, Distributions and Reinvestment--Income in Part B.)
(5) It is anticipated that interest and principal received from these bonds
will be applied to the payment of the Fund's deferred sales charge and,
therefore, these amounts have not been included in the Fund's calculation of
Estimated Current and Long Term Returns.
A-5
<PAGE>
- ----------------------------------------------------------------
Defining Your Costs
- ----------------------------------------------------------------
SALES CHARGES
The Fund does not have an up-front sales charge in the initial offering period
until the deduction of the first deferred sales charge installment from holders
of record on February 10, 1997. In the first three years of owning your units
you will pay a deferred sales charge of $15 per unit each year ($3.75 quarterly
February, May, August and November), a total of $45.00. This deferred sales
charge will be paid from interest on the short-term bonds in the Portfolio and
proceeds from the periodic sale or maturity of those bonds. Interest on these
short-term bonds is not included in the Fund's return figures. Units purchased
after the deduction of the first deferred sales charge installment will be
charged an up-front sales charge equal to 0.375% per unit based on the Public
Offering Price (less the value of the short-term bonds reserved to pay the
deferred sales charge not yet accrued) multiplied by the number of deferred
sales charge payments already deducted. (See How to Buy Units in Part B.)
Although the Fund is a unit investment trust rather than a mutual fund, the
following information is presented to permit a comparison of fees and an
understanding of the direct or indirect costs and expenses that you pay.
As a %
of Initial
Offering Amount per
Period Public $1,000
Offering Price Invested
----------------- ----------------
Maximum Sales Charges 4.50% $ 45.00
The Fund (and therefore the investors) will bear all or a portion of its
organizational costs--including costs of preparing the registration statement,
the trust indenture and other closing documents, registering units with the SEC
and the states and the initial audit of the Portfolio--as is common for mutual
funds.
ESTIMATED ANNUAL FUND OPERATING EXPENSES
As a %
of Average
Net Assets* Per Unit
----------------- ----------------
Trustee's Fee .071% $ 0.72
Portfolio Supervision,
Bookkeeping and
Administrative Fees .046% $ 0.46
Evaluator's Fee .013% $ 0.13
Organizational Costs .020% $ 0.20
Other Operating Expenses .037% $ 0.38
----------------- ----------------
TOTAL .187% $ 1.89
- ------------
* Based on the mean of the bid and offer side evaluations.
COSTS OVER TIME
You would pay the following cumulative expenses on a $1,000 investment, assuming
a 5% annual return on the investment throughout the indicated periods and
redemption at the end of the period:
1 Year 3 Years 5 Years 10 Years
$47 $51 $56 $69
No redemption at the end of the period:
1 Year 3 Years 5 Years 10 Years
$17 $51 $56 $69
The example assumes reinvestment of all distributions into additional units of
the Fund (a reinvestment option different from that offered by this Fund) and
uses a 5% annual rate of return as mandated by Securities and Exchange
Commission regulations applicable to mutual funds. The Costs Over Time above
reflect both sales charges and operating expenses on an increasing investment
(because the net annual return is reinvested). The example should not be
considered a representation of past or future expenses or annual rate of return;
the actual expenses and annual rate of return may be more or less than the
example.
REDEEMING OR SELLING YOUR INVESTMENT
You may redeem or sell your units at any time. Your price is based on the Fund's
then current net asset value (based on the offer side evaluation of the bonds
during the initial public offering period and for at least the first three
months of the Fund and on the lower, bid side evaluation thereafter, as
determined by an independent evaluator) plus principal cash, if any, as well as
accrued interest. The redemption and Sponsors' repurchase price as of November
19, 1996, was $45.00 less than the Public Offering Price, reflecting the
deduction of the deferred sales charge, which declines by $3.75 quarterly over
the first three years of the Fund. If you redeem or sell your Units before the
third anniversary of the Fund, you will pay the remaining balance of the
deferred sales charge. (See How to Buy Units in Part B.)
- ----------------------------------------------------------------
Defining Your Income
- ----------------------------------------------------------------
MONTHLY FEDERALLY TAX-FREE INTEREST INCOME
The Fund pays monthly income, even though the bonds generally pay interest
semi-annually.
WHAT YOU MAY EXPECT
(PAYABLE ON THE 25TH DAY OF THE MONTH TO HOLDERS OF RECORD ON THE 10TH DAY OF
THE MONTH):
First Distribution per unit
(December 25, 1996): $ 3.01
Regular Monthly Income per unit
(Beginning on January 25, 1997): $ 4.52
Annual Income per unit: $ 54.32
These figures are estimates determined as of the business day prior to the
Initial Date of Deposit and actual payments may vary.
Estimated cash flows are available upon request from the Sponsors.
- ----------------------------------------------------------------
Defining Your Risks
- ----------------------------------------------------------------
RISK FACTORS
Unit price fluctuates and could be adversely affected by increasing interest
rates as well as the financial condition of the issuers of the bonds. Because of
the possible maturity, sale or other disposition of securities, the size,
composition and return of the portfolio may change at any time. Because of the
sales charges, returns of principal and fluctuations in unit price, among other
reasons, the sale price will generally be less than the cost of your units. Unit
prices could also be adversely affected if a limited trading market exists in
any security to be sold. There is no guarantee that the Fund will achieve its
investment objective.
The Fund is concentrated in Hospital/Nursing Home/Mental Health bonds and Lease
Rental Appropriation bonds and is therefore dependent to a significant degree on
revenues generated from those particular activities (see Risk Factors in Part
B).
A-6
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Sponsors, Trustee and Holders of Municipal Investment Trust Fund, Monthly
Payment Series--600, Defined Asset Funds (the 'Fund'):
We have audited the accompanying statement of condition and the related defined
portfolio included in the prospectus of the Fund as of November 20, 1996. This
financial statement is the responsibility of the Trustee. Our responsibility is
to express an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. Our procedures included
confirmation of cash and an irrevocable letter of credit deposited for the
purchase of securities, as described in the statement of condition, with the
Trustee. An audit also includes assessing the accounting principles used and
significant estimates made by the Trustee, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the financial position of the Fund as of November 20,
1996 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
NEW YORK, N.Y.
NOVEMBER 20, 1996
STATEMENT OF CONDITION AS OF NOVEMBER 20, 1996
TRUST PROPERTY
Investments--Bonds and Contracts to purchase Bonds(1) $ 10,139,439.60
Cash 95,000.00
Accrued interest to Initial Date of Deposit on underlying
Bonds 104,464.36
Organizational costs (2) 10,095.00
--------------------
Total $ 10,348,998.96
--------------------
--------------------
LIABILITIES AND INTEREST OF HOLDERS
Liabilities: Advance by Trustee for accrued interest (3) $ 104,464.36
Accrued Liability(2) 10,095.00
--------------------
Subtotal 114,559.36
--------------------
Interest of Holders of 10,095 Units of fractional
undivided interest outstanding:
Cost to investors(4)(5) 10,234,439.60
--------------------
Total $ 10,348,998.96
--------------------
--------------------
- ---------------
(1) Aggregate cost to the Fund of the bonds listed under Defined
Portfolio is based upon the offer side evaluation determined by the Evaluator at
the evaluation time on the business day prior to the Initial Date of Deposit.
The contracts to purchase the bonds are collateralized by an irrevocable letter
of credit which has been issued by San Paolo Bank, New York Branch, in the
amount of $10,107,202.28 and deposited with the Trustee. The amount of the
letter of credit includes $10,007,491.65 for the purchase of $10,425,000 face
amount of the bonds, plus $99,710.63 for accrued interest.
(2) This represents a portion of the Fund's organizational costs which
will be deferred and amortized over five years.
(3) Representing a special distribution to the Sponsors by the Trustee
of an amount equal to the accrued interest on the bonds.
(4) A mandatory distribution of $3.75 per Unit is payable quarterly
February, May, August and November, up to an aggregate of $45.00 per Unit over a
three-year period. Distributions will be made to an account maintained by the
Trustee from which the deferred sales charge obligation of the investors to the
Sponsors will be satisfied. If units are redeemed prior to the end of the third
anniversary of the Fund, the remaining portion of the distribution applicable to
such Units will be transferred to such account on the redemption date.
(5) Aggregate public offering price (exclusive of interest) computed
on the basis of the offer side evaluation of the underlying bonds as of the
evaluation time on the business day prior to the Initial Date of Deposit.
A-7
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND
MONTHLY PAYMENT SERIES
DEFINED ASSET FUNDS
I want to learn more about automatic reinvestment in the Investment Accumulation
Program. Please send me information about participation in the Municipal Fund
Accumulation Program, Inc. and a current Prospectus.
My name (please
print) ________________________________________________________________________
My address (please print):
Street and Apt.
No. ___________________________________________________________________________
City, State, Zip
Code __________________________________________________________________________
This page is a self-mailer. Please complete the information above, cut along the
dotted line, fold along the lines on the reverse side, tape, and mail with the
Trustee's address displayed on the outside.
12345678
A-8
<PAGE>
BUSINESS REPLY MAIL NO POSTAGE
FIRST CLASS PERMIT NO. 644 NEW YORK, NY NECESSARY
IF MAILED
POSTAGE WILL BE PAID BY ADDRESSEE IN THE
THE CHASE MANHATTAN BANK (MITF) UNITED STATES
(RETAIL PROCESSING DEPARTMENT)
BOWLING GREEN STATION
P.O. BOX 5179
NEW YORK, NY 10274-5179
- --------------------------------------------------------------------------------
(Fold along this line.)
- --------------------------------------------------------------------------------
(Fold along this line.)
<PAGE>
DEFINED ASSET FUNDSSM
PROSPECTUS--PART B
MUNICIPAL INVESTMENT TRUST FUND
FURTHER DETAIL REGARDING ANY OF THE INFORMATION PROVIDED IN THE PROSPECTUS MAY
BE OBTAINED
WITHIN FIVE DAYS BY WRITING OR CALLING THE TRUSTEE, THE ADDRESS AND
TELEPHONE NUMBER OF WHICH ARE SET FORTH ON THE BACK COVER OF PART A OF THIS
PROSPECTUS.
Index
PAGE
---------
Fund Description...................................... 1
Risk Factors.......................................... 2
How to Buy Units...................................... 7
How to Redeem or Sell Units........................... 9
Income, Distributions and Reinvestment................ 10
Fund Expenses......................................... 11
Taxes................................................. 11
PAGE
---------
Records and Reports................................... 13
Trust Indenture....................................... 13
Miscellaneous......................................... 14
Exchange Option....................................... 15
Supplemental Information.............................. 16
Appendix A--Description of Ratings.................... a-1
Appendix B--Secondary Market Sales Charge Schedule.... b-1
FUND DESCRIPTION
BOND PORTFOLIO SELECTION
Professional buyers for Defined Asset Funds, with access to extensive
research, selected the Bonds for the Portfolio after considering the Fund's
investment objective as well as the quality of the Bonds (all Bonds in the
Portfolio are initially rated in the category A or better by at least one
nationally recognized rating organization or have comparable credit
characteristics), the yield and price of the Bonds compared to similar
securities, the maturities of the Bonds and the diversification of the
Portfolio. Only issues meeting these stringent criteria of Defined Asset Funds
are included in the Portfolio. No leverage or borrowing is used nor does the
Portfolio contain other kinds of securities to enhance yield. A summary of the
Bonds in the Portfolio appears in Part A of the Prospectus. In a Fund that
includes multiple Trusts or Portfolios, the word Fund should be understood to
mean each individual Trust or Portfolio.
The deposit of the Bonds in the Fund on the initial date of deposit
established a proportionate relationship among the face amounts of the Bonds.
During the 90-day period following the initial date of deposit the Sponsors may
deposit additional Bonds in order to create new Units, maintaining to the extent
possible that original proportionate relationship. Deposits of additional Bonds
subsequent to the 90-day period must generally replicate exactly the
proportionate relationship among the face amounts of the Bonds at the end of the
initial 90-day period.
Yields on 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. Ratings represent opinions of the rating
organizations as to the quality of the bonds rated, based on the credit of the
issuer or any guarantor, insurer or other credit provider, but these ratings are
only general standards of quality (see Appendix A).
After the initial date of deposit, the ratings of some Bonds may be reduced
or withdrawn, or the credit characteristics of the Bonds may no longer be
comparable to bonds rated A or better. Bonds rated BBB or Baa (the lowest
investment grade rating) or lower may have speculative characteristics, and
changes in economic conditions or other circumstances are more likely to lead to
a weakened capacity to make principal and interest payments than is the case
with higher grade bonds. Bonds rated below investment grade or unrated bonds
with similar credit characteristics are often subject to greater market
fluctuations and risk of loss of principal and income than higher grade bonds
and their value may decline precipitously in response to rising interest rates.
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Because each Defined Asset Fund is a preselected portfolio of bonds, you
know the securities, maturities, call dates and ratings before you invest. Of
course, the Portfolio will change somewhat over time, as Bonds mature, are
redeemed or are sold to meet Unit redemptions or in other limited circumstances.
Because the Portfolio is not actively managed and principal is returned as the
Bonds are disposed of, this principal should be relatively unaffected by changes
in interest rates.
BOND PORTFOLIO SUPERVISION
The Fund follows a buy and hold investment strategy in contrast to the
frequent portfolio changes of a managed fund based on economic, financial and
market analyses. The Fund may retain an issuer's bonds despite adverse financial
developments. Experienced financial analysts regularly review the Portfolio and
a Bond may be sold in certain circumstances including the occurrence of a
default in payment or other default on the Bond, a decline in the projected
income pledged for debt service on a revenue bond, institution of certain legal
proceedings, if the Bond becomes taxable or is otherwise inconsistent with the
Fund's investment objectives, a decline in the price of the Bond or the
occurrence of other market or credit factors (including advance refunding) that,
in the opinion of the Sponsors makes retention of the Bond detrimental to the
interests of investors. The Trustee must generally reject any offer by an issuer
of a Bond to exchange another security pursuant to a refunding or refinancing
plan.
The Sponsors and the Trustee are not liable for any default or defect in a
Bond. If a contract to purchase any Bond fails, the Sponsors may generally
deposit a replacement bond so long as it is a tax-exempt bond, has a fixed
maturity or disposition date substantially similar to the failed Bond and is
rated A or better by at least one nationally recognized rating organization or
has comparable credit characteristics. A replacement bond must be deposited
within 110 days after deposit of the failed contract, at a cost that does not
exceed the funds reserved for purchasing the failed Bond and at a yield to
maturity and current return substantially equivalent (considering then current
market conditions and relative creditworthiness) to those of the failed Bond, as
of the date the failed contract was deposited.
RISK FACTORS
An investment in the Fund entails certain risks, including the risk that
the value of your investment will decline with increases in interest rates.
Generally speaking, bonds with longer maturities will fluctuate in value more
than bonds with shorter maturities. In recent years there have been wide
fluctuations in interest rates and in the value of fixed-rate bonds generally.
The Sponsors cannot predict the direction or scope of any future fluctuations.
Certain of the Bonds may have been deposited at a market discount or
premium principally because their interest rates are lower or higher than
prevailing rates on comparable debt securities. The current returns of market
discount bonds are lower than comparably rated bonds selling at par because
discount bonds tend to increase in market value as they approach maturity. The
current returns of market premium bonds are higher than comparably rated bonds
selling at par because premium bonds tend to decrease in market value as they
approach maturity. Because part of the purchase price is returned through
current income payments and not at maturity, an early redemption at par of a
premium bond will result in a reduction in yield to the Fund. Market premium or
discount attributable to interest rate changes does not indicate market
confidence or lack of confidence in the issue.
Certain Bonds deposited into the Fund may have been acquired on a
when-issued or delayed delivery basis. The purchase price for these Bonds is
determined prior to their delivery to the Fund and a gain or loss may result
from fluctuations in the value of the Bonds. Additionally, if the value of the
short-term Bonds intended for payment of the periodic deferred sales charge,
together with the interest thereon, were to become insufficient to pay these
charges, additional bonds would be required to be sold.
The Fund may be concentrated in one or more of types of bonds.
Concentration in a State may involve additional risk because of the decreased
diversification of economic, political, financial and market risks. Set forth
below is a brief description of certain risks associated with bonds which may be
held by the Fund. Additional information is contained in the Information
Supplement which is available from the Trustee at no charge to the investor.
GENERAL OBLIGATION BONDS
Certain of the Bonds may be general obligations of a governmental entity.
General obligation bonds are backed by the issuer's pledge of its full faith,
credit and taxing power for the payment of principal and interest. However, the
taxing power of any governmental entity may be limited by provisions of state
constitutions or laws and its credit will
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depend on many factors, including an erosion of the tax base resulting from
population declines, natural disasters, declines in the state's industrial base
or an inability to attract new industries, economic limits on the ability to tax
without eroding the tax base and the extent to which the entity relies on
federal or state aid, access to capital markets or other factors beyond the
entity's control. In addition, political restrictions on the ability to tax and
budgetary constraints affecting state governmental aid may have an adverse
impact on the creditworthiness of cities, counties, school districts and other
local governmental units. Recent and significant changes in Federal welfare
policy may have substantial negative impact on certain states, and localities
within those states, making their ability to maintain balanced finances more
difficult in the future.
MORAL OBLIGATION BONDS
The Portfolio may include 'moral obligation' bonds. If an issuer of moral
obligation bonds is unable to meet its obligations, the repayment of the bonds
becomes a moral commitment but not a legal obligation of the state or local
government in question. Even though the state or local government may be called
on to restore any deficits in capital reserve funds of the agencies or
authorities which issued the bonds, any restoration generally requires
appropriation by the state or local legislature and does not constitute a
legally enforceable obligation or debt of the state or local government. The
agencies or authorities generally have no taxing power.
REFUNDED BONDS
Refunded bonds are typically secured by direct obligations of the U.S.
Government or in some cases obligations guaranteed by the U.S. Government placed
in an escrow account maintained by an independent trustee until maturity or a
predetermined redemption date. These obligations are generally noncallable prior
to maturity or the predetermined redemption date. In a few isolated instances,
however, bonds which were thought to be escrowed to maturity have been called
for redemption prior to maturity.
MUNICIPAL REVENUE BONDS
Municipal revenue bonds are tax-exempt securities issued by states,
municipalities, public authorities or similar entities to finance the cost of
acquiring, constructing or improving various projects. Municipal revenue bonds
are not general obligations of governmental entities backed by their taxing
power and payment is generally solely dependent upon revenues of the project,
excise taxes or state appropriations. Examples of municipal revenue bonds are:
Municipal utility bonds, including electrical, water and sewer revenue
bonds, whose payments are dependent on various factors, including the rates
the utilities may charge, the demand for their services and their operating
costs, including expenses to comply with environmental legislation and
other energy and licensing laws and regulations. Utilities are particularly
sensitive to, among other things, the effects of inflation on operating and
construction costs, the unpredictability of future usage requirements, the
costs and availability of fuel and, with certain electric utilities, the
risks associated with the nuclear industry. The movement to introduce
competition in the investor-owned electric utility industry is likely to
indirectly affect municipal utility systems by inducing them to maintain
rates as low as possible. In this effort to keep rates low, municipal
utilities may have more trouble raising rates to completely recover
investment in generating plant;
Lease rental bonds which are generally issued by governmental financing
authorities with no direct taxing power for the purchase of equipment or
construction of buildings that will be used by a state or local government.
Lease rental bonds are generally subject to an annual risk that the lessee
government might not appropriate funds for the leasing rental payments to
service the bonds and may also be subject to the risk that rental
obligations may terminate in the event of damage to or destruction or
condemnation of the equipment or building;
Multi-family housing revenue bonds and single family mortgage revenue
bonds which are issued to provide financing for various housing projects
and which are payable primarily from the revenues derived from mortgage
loans to housing projects for low to moderate income families or notes
secured by mortgages on residences; repayment of this type of bond is
therefore dependent upon, among other things, occupancy levels, rental
income, the rate of default on underlying mortgage loans, the ability of
mortgage insurers to pay claims, the continued availability of federal,
state or local housing subsidy programs, economic conditions in local
markets, construction costs, taxes, utility costs and other operating
expenses and the managerial ability of project managers. Housing bonds are
generally prepayable at any time and therefore their average life will
ordinarily be less than their stated maturities;
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Hospital, mental health and nursing home facility bonds whose payments
are dependent upon revenues of hospitals and other health care providers.
These revenues come from private third-party payors and government
programs, including the Medicare and Medicaid programs, which have
generally undertaken cost containment measures to limit payments to health
care providers. Hospitals must also deal with shifting competition
resulting from hospital mergers and affiliations and the need to reduce
costs as HMOs increase market penetration. Nursing homes need to keep
residential facilities for the elderly, which are not reimbursable from
Medicare/Medicaid, on a profitable basis. Hospital supply and drug
companies must deal with their need to raise prices in an environment where
hospitals and other health care providers are under intense pressure to
keep their costs low. Hospitals and health care providers are subject to
various legal claims by patients and others and are adversely affected by
increasing costs of insurance. The Internal Revenue Service has been
engaged in a program of intensive audits of certain large tax-exempt
hospital and health care providers. Although these audits have not yet been
completed, it has been reported that the tax-exempt status of some of these
organizations may be revoked. Some hospitals have been required to pay
monetary penalties to the IRS;
Airport, port, highway and transit authority revenue bonds which are
dependent for payment on revenues from the financed projects, including
user fees from ports and airports, tolls on turnpikes and bridges, rents
from buildings, transit fare revenues and additional financial resources
including federal and state subsidies, lease rentals paid by state or local
governments or a pledge of a special tax such as a sales tax or a property
tax. In the case of the air travel industry, airport income is largely
affected by the airlines' ability to meet their obligations under use
agreements which in turn is affected by increased competition among
airlines, excess capacity and increased fuel costs, among other factors;
Solid waste disposal bonds which are generally payable from dumping and
user fees and from revenues that may be earned by the facility on the sale
of electrical energy generated in the combustion of waste products and
which are therefore dependent upon the ability of municipalities to fully
utilize the facilities, sufficient supply of waste for disposal, economic
or population growth, the level of construction and maintenance costs, the
existence of lower-cost alternative modes of waste processing and
increasing environmental regulation. A recent decision of the U.S. Supreme
Court limiting a municipality's ability to require use of its facilities
may have an adverse affect on the credit quality of various issues of these
bonds;
Special tax bonds which are not secured by general tax revenues but are
only payable from and secured by the revenues derived by a municipality
from a particular tax--for example, a tax on the rental of a hotel room, on
the purchase of food and beverages, on the rental of automobiles or on the
consumption of liquor and may therefore be adversely affected by a
reduction in revenues resulting from a decline in the local economy or
population or a decline in the consumption, use or cost of the goods and
services that are subject to taxation;
Student loan revenue bonds which are typically secured by pledges of new
or existing student loans. The loans, in turn, are generally either
guaranteed by eligible guarantors and reinsured by the Secretary of the
U.S. Department of Education, directly insured by the federal government,
or financed as part of supplemental or alternative loan programs within a
state (e.g., loan repayments are not guaranteed). These bonds often permit
the issuer to enter into interest rate swap agreements with eligible
counterparties in which event the bonds are subject to the additional risk
of the counterparty's ability to fulfill its swap obligation;
University and college bonds, the payments on which are dependent upon
various factors, including the size and diversity of their sources of
revenues, enrollment, reputation, the availability of endowments and other
funds and, in the case of public institutions, the financial condition of
the relevant state or other governmental entity and its policies with
respect to education; and
Tax increment and tax allocation bonds, which are secured by ad valorem
taxes imposed on the incremental increase of taxable assessed valuation of
property within a jurisdiction above an established base of assessed value.
The issuers of these bonds do not have general taxing authority and the tax
assessments on which the taxes used to service the bonds are based may be
subject to devaluation due to market price declines or governmental action.
Puerto Rico. Certain Bonds may be affected by general economic conditions
in the Commonwealth of Puerto Rico. Puerto Rico's economy is largely dependent
for its development on federal programs, and current federal budgetary policies
suggest that an expansion of its programs is unlikely. Reductions in federal tax
benefits or incentives or curtailment of spending programs could adversely
affect the Puerto Rican economy.
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Industrial Development Revenue Bonds. Industrial development revenue bonds
are municipal obligations issued to finance various privately operated projects
including pollution control and manufacturing facilities. Payment is generally
solely dependent upon the creditworthiness of the corporate operator of the
project and, in certain cases, an affiliated or third party guarantor and may be
affected by economic factors relating to the particular industry as well as
varying degrees of governmental regulation. In many cases industrial revenue
bonds do not have the benefit of covenants which would prevent the corporations
from engaging in capital restructurings or borrowing transactions which could
reduce their ability to meet their obligations and result in a reduction in the
value of the Portfolio.
BONDS BACKED BY LETTERS OF CREDIT OR INSURANCE
Certain Bonds may be secured by letters of credit issued by commercial
banks or savings banks, savings and loan associations and similar thrift
institutions or are direct obligations of banks or thrifts. The letter of credit
may be drawn upon, and the Bonds redeemed, if an issuer fails to pay amounts due
on the Bonds or, in certain cases, if the interest on the Bond becomes taxable.
Letters of credit are irrevocable obligations of the issuing institutions. The
profitability of a financial institution is largely dependent upon the credit
quality of its loan portfolio which, in turn, is affected by the institution's
underwriting criteria, concentrations within the portfolio and specific industry
and general economic conditions. The operating performance of financial
institutions is also impacted by changes in interest rates, the availability and
cost of funds, the intensity of competition and the degree of governmental
regulation.
Certain Bonds may be insured or guaranteed by insurance companies listed
below. The claims-paying ability of each of these companies, unless otherwise
indicated, was rated AAA by Standard & Poor's or another nationally recognized
rating organization at the time the insured Bonds were purchased by the Fund.
The ratings are subject to change at any time at the discretion of the rating
agencies. In an Insured Series, in the event that the rating of an insurance
company insuring a bond is reduced, the Sponsors are authorized to direct the
Trustee to obtain other insurance on behalf of the Fund. The insurance policies
guarantee the timely payment of principal and interest on the Bonds but do not
guarantee their market value or the value of the Units. The insurance policies
generally do not provide for accelerated payments of principal or cover
redemptions resulting from events of taxability.
The following summary information relating to the listed insurance
companies has been obtained from publicly available information:
<TABLE><CAPTION>
FINANCIAL INFORMATION
AS OF MARCH 31, 1996
(IN MILLIONS OF DOLLARS)
-------------------------------------
POLICYHOLDERS'
NAME DATE ESTABLISHED ADMITTED ASSETS SURPLUS
- ----------------------------------------------------- ----------------- --------------- --------------------
<S> <C> <C> <C>
AMBAC Indemnity Corporation.......................... 1970 $ 2,440 $ 879
Asset Guaranty Insurance Co. (AA by S&P)............. 1988 185 82
Capital Markets Assurance Corp. (CAPMAC) 1987 292 196
Connie Lee Insurance Company......................... 1987 216 111
Financial Guaranty Insurance Company................. 1984 2,314 1,033
Financial Security Assurance Inc. (FSA) (including
Financial Security Assurance of Maryland Inc.
(FSAM) (formerly Capital Guaranty Insurance
Company)........................................... 1984 1,157 458
MBIA Insurance Corporation........................... 1986 3,968 1,317
</TABLE>
Insurance companies are subject to extensive regulation and supervision
where they do business by state insurance commissioners who regulate the
standards of solvency which must be maintained, the nature of and limitations on
investments, reports of financial condition, and requirements regarding reserves
for unearned premiums, losses and other matters. A significant portion of the
assets of insurance companies are required by law to be held in reserve against
potential claims on policies and is not available to general creditors. Although
the federal government does not regulate the business of insurance, federal
initiatives including pension regulation, controls on medical care costs,
minimum standards for no-fault automobile insurance, national health insurance,
tax law changes affecting life insurance companies and repeal of the antitrust
exemption for the insurance business can significantly impact the insurance
business.
STATE RISK FACTORS
Investment in a single State Trust, as opposed to a Fund which invests in
the obligations of several states, may involve some additional risk due to the
decreased diversification of economic, political, financial and market risks. A
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brief description of the factors which may affect the financial condition of the
applicable State for any State Trust, together with a summary of tax
considerations relating to that State, appear in Part A of the Prospectus;
further information is contained in the Information Supplement.
LITIGATION AND LEGISLATION
The Sponsors do not know of any pending litigation as of the initial date
of deposit which might reasonably be expected to have a material adverse effect
upon the Fund. At any time after the initial date of deposit, litigation may be
initiated on a variety of grounds, or legislation may be enacted, affecting the
Bonds in the Fund. Litigation, for example, challenging the issuance of
pollution control revenue bonds under environmental protection statutes may
affect the validity of certain Bonds or the tax-free nature of their interest.
While the outcome of litigation of this nature can never be entirely predicted,
opinions of bond counsel are delivered on the date of issuance of each Bond to
the effect that it has been validly issued and that the interest thereon is
exempt from federal income tax. From time to time, proposals are introduced in
Congress to, among other things, reduce federal income tax rates, impose a flat
tax, exempt investment income from tax or abolish the federal income tax and
replace it with another form of tax. Enactment of any such legislation could
adversely affect the value of the Units. The Fund, however, cannot predict what
legislation, if any, in respect of tax rates may be proposed, nor can it predict
which proposals, if any, might be enacted.
Also, certain proposals, in the form of state legislative proposals or
voter initiatives, seeking to limit real property taxes have been introduced in
various states, and an amendment to the constitution of the State of California,
providing for strict limitations on real property taxes, has had a significant
impact on the taxing powers of local governments and on the financial condition
of school districts and local governments in California. In addition, other
factors may arise from time to time which potentially may impair the ability of
issuers to make payments due on the Bonds. Under the Federal Bankruptcy Code,
for example, municipal bond issuers, as well as any underlying corporate
obligors or guarantors, may proceed to restructure or otherwise alter the terms
of their obligations.
From time to time Congress considers proposals to prospectively and
retroactively tax the interest on state and local obligations, such as the
Bonds. The Supreme Court clarified in South Carolina v. Baker (decided on April
20, 1988) that the U.S. Constitution does not prohibit Congress from passing a
nondiscriminatory tax on interest on state and local obligations. This type of
legislation, if enacted into law, could require investors to pay income tax on
interest from the Bonds and could adversely affect an investment in Units. See
Taxes.
PAYMENT OF THE BONDS AND LIFE OF THE FUND
The size and composition of the Portfolio will change over time. Most of
the Bonds are subject to redemption prior to their stated maturity dates
pursuant to optional refunding or sinking fund redemption provisions or
otherwise. In general, optional refunding redemption provisions are more likely
to be exercised when the value of a Bond is at a premium over par than when it
is at a discount from par. Some Bonds may be subject to sinking fund and
extraordinary redemption provisions which may commence early in the life of the
Fund. Additionally, the size and composition of the Fund will be affected by the
level of redemptions of Units that may occur from time to time. Principally,
this will depend upon the number of investors seeking to sell or redeem their
Units and whether or not the Sponsors are able to sell the Units acquired by
them in the secondary market. As a result, Units offered in the secondary market
may not represent the same face amount of Bonds as on the initial date of
deposit. Factors that the Sponsors will consider in determining whether or not
to sell Units acquired in the secondary market include the diversity of the
Portfolio, the size of the Fund relative to its original size, the ratio of Fund
expenses to income, the Fund's current and long-term returns, the degree to
which Units may be selling at a premium over par and the cost of maintaining a
current prospectus for the Fund. These factors may also lead the Sponsors to
seek to terminate the Fund earlier than its mandatory termination date.
FUND TERMINATION
The Fund will be terminated no later than the mandatory termination date
specified in Part A of the Prospectus. It will terminate earlier upon the
disposition of the last Bond or upon the consent of investors holding 51% of the
Units. The Fund may also be terminated earlier by the Sponsors once the total
assets of the Fund have fallen below the minimum value specified in Part A of
the Prospectus. A decision by the Sponsors to terminate the Fund early will be
based on factors similar to those considered by the Sponsors in determining
whether to continue the sale of Units in the secondary market.
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Notice of impending termination will be provided to investors and
thereafter units will no longer be redeemable. On or shortly before termination,
the Fund will seek to dispose of any Bonds remaining in the Portfolio although
any Bond unable to be sold at a reasonable price may continue to be held by the
Trustee in a liquidating trust pending its final disposition. A proportional
share of the expenses associated with termination, including brokerage costs in
disposing of Bonds, will be borne by investors remaining at that time. This may
have the effect of reducing the amount of proceeds those investors are to
receive in any final distribution.
LIQUIDITY
Up to 40% of the value of the Portfolio may be attributable to guarantees
or similar security provided by corporate entities. These guarantees or other
security may constitute restricted securities that cannot be sold publicly by
the Trustee without registration under the Securities Act of 1933, as amended.
The Sponsors nevertheless believe that, should a sale of the Bonds guaranteed or
secured be necessary in order to meet redemption of Units, the Trustee should be
able to consummate a sale with institutional investors.
The principal trading market for the Bonds will generally be in the
over-the-counter market and the existence of a liquid trading market for the
Bonds may depend on whether dealers will make a market in them. There can be no
assurance that a liquid trading market will exist for any of the Bonds,
especially since the Fund may be restricted under the Investment Company Act of
1940 from selling Bonds to any Sponsor. The value of the Portfolio will be
adversely affected if trading markets for the Bonds are limited or absent.
HOW TO BUY UNITS
Units are available from any of the Sponsors, Underwriters and other
broker-dealers at the Public Offering Price plus accrued interest on the Units.
The Public Offering Price varies each Business Day with changes in the value of
the Portfolio and other assets and liabilities of the Fund.
PUBLIC OFFERING PRICE
Net accrued interest and principal cash, if any, are added to the Public
Offering Price, the Sponsors' Repurchase Price and the Redemption Price per
Unit. This represents the interest accrued on the Bonds, net of Fund expenses,
from the initial date of deposit to, but not including, the settlement date for
Units (less any prior distributions of interest income to investors). Bonds
deposited also carry accrued but unpaid interest up to the initial date of
deposit. To avoid having investors pay this additional accrued interest (which
earns no return) when they purchase Units, the Trustee advances and distributes
this amount to the Sponsors; it recovers this advance from interest received on
the Bonds. Because of varying interest payment dates on the Bonds, accrued
interest at any time will exceed the interest actually received by the Fund.
Because accrued interest on the Bonds is not received by the Fund at a
constant rate throughout the year, any Monthly Income Distribution may be more
or less than the interest actually received by the Fund. To eliminate
fluctuations in the Monthly Income Distribution, a portion of the Public
Offering Price may consist of cash in an amount necessary for the Trustee to
provide approximately equal distributions. Upon the sale or redemption of Units,
investors will receive their proportionate share of this cash. In addition, if a
Bond is sold, redeemed or otherwise disposed of, the Fund will periodically
distribute to investors the portion of this cash that is attributable to the
Bond.
The regular Monthly Income Distribution is stated in Part A of the
Prospectus and will change as the composition of the Portfolio changes over
time.
During the initial offering period and for at least the first three months
of the Fund, the Public Offering Price (and the Initial Repurchase Price) is
based on the higher, offer side evaluation of the Bonds at the next Evaluation
Time after the order is received. In the secondary market (after the initial
offering period), the Public Offering Price (and the Sponsors' Repurchase Price
and the Redemption Price) is based on the lower, bid side evaluation of the
Bonds.
The Fund does not have an up-front sales charge in the initial offering
period until the deduction of the first Deferred Sales Charge installment. In
the first three years of owning your units, you will pay a quarterly Deferred
Sales Charge of $3.75 per Unit which will accrue in 12 quarterly installments
commencing on the date indicated in part A of this Prospectus. Units redeemed or
repurchased prior to the accrual of the final Deferred Sales Charge installment
will have the amount of any remaining installments deducted from the redemption
or repurchase proceeds, although this
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deduction will be waived in the event of the death or disability (as defined in
the Internal Revenue Code of 1986) of an investor.
Units purchased after the deduction of the first Deferred Sales Charge
installment will be charged an up-front sales charge equal to 0.375% per Unit
based on the Public Offering Price (less the value of the short-term bonds
reserved to pay the deferred sales charge not yet accrued), multiplied by the
number of Deferred Sales Charge installments deducted. For example, Units
purchased after the first Deferred Sales Charge installment deduction would
incur an up-front sales charge of 0.375% per Unit and a deferred sales charge of
$41.25 per Unit.
Units purchased after the deduction of the final Deferred Sales Charge
installment will be subject only to an up-front sales charge based on the
maturities of the bonds in the Portfolio, as set forth in Appendix B.
* * *
Employees of certain Sponsors and Sponsor affiliates and non-employee
directors of Merrill Lynch & Co. Inc. may purchase Units at any time at prices
including a sales charge of not less than $5 per Unit.
EVALUATIONS
Evaluations are determined by the independent Evaluator on each Business
Day. This excludes Saturdays, Sundays and the following holidays as observed by
the New York Stock Exchange: New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas. Bond
evaluations are based on closing sales prices (unless the Evaluator deems these
prices inappropriate). If closing sales prices are not available, the evaluation
is generally determined on the basis of current bid or offer prices for the
Bonds or comparable securities or by appraisal or by any combination of these
methods. In the past, the bid prices of publicly offered tax-exempt issues have
been lower than the offer prices by as much as 3 1/2% or more of face amount in
the case of inactively traded issues and as little as 1/2 of 1% in the case of
actively traded issues, but the difference between the offer and bid prices has
averaged between 1 and 2% of face amount. Neither the Sponsors, the Trustee or
the Evaluator will be liable for errors in the Evaluator's judgment. The fees of
the Evaluator will be borne by the Fund.
CERTIFICATES
Certificates for Units are issued upon request and may be transferred by
paying any taxes or governmental charges and by complying with the requirements
for redeeming Certificates (see How To Redeem or Sell Units--Redeeming Units
with the Trustee). Certain Sponsors collect additional charges for registering
and shipping Certificates to purchasers. Lost or mutilated Certificates can be
replaced upon delivery of satisfactory indemnity and payment of costs.
HOW TO REDEEM OR SELL UNITS
You can redeem your Units at any time for net asset value. In addition, the
Sponsors have maintained an uninterrupted secondary market for Units for over 20
years and will ordinarily buy back Units at net asset value. The following
describes these two methods to redeem or sell Units in greater detail.
REDEEMING UNITS WITH THE TRUSTEE
You can always redeem your Units directly with the Trustee for net asset
value. This can be done by sending the Trustee a redemption request together
with any Unit certificates you hold, which must be properly endorsed or
accompanied by a written transfer instrument with signatures guaranteed by an
eligible institution. In certain instances, additional documents may be required
such as a trust instrument, certificate of corporate authority, certificate of
death or appointment as executor, administrator or guardian.
Within seven days after the Trustee's receipt of your request containing
the necessary documents, a check will be mailed to you in an amount equal to the
net asset value of your Units. Because of sales charges, market movements or
changes in the Portfolio, net asset value at the time you redeem your Units may
be greater or less than the original cost of your Units. Net asset value is
calculated each Business Day by adding the value of the Bonds, net accrued
interest, cash and the value of any other Fund assets; deducting unpaid taxes or
other governmental charges, accrued but unpaid Fund expenses and any remaining
deferred sales charges, unreimbursed Trustee advances, cash held to redeem Units
or for distribution to investors and the value of any other Fund liabilities;
and dividing the result by the number
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of outstanding Units. Bonds are evaluated on the offer side during the initial
offering period and for at least the first three months of the Fund (even in the
secondary market) and on the bid side thereafter.
As long as the Sponsors are maintaining a secondary market for Units (as
described below), the Trustee will not actually redeem your Units but will sell
them to the Sponsors for net asset value. If the Sponsors are not maintaining a
secondary market, the Trustee will redeem your Units for net asset value or will
sell your Units in the over-the-counter market if the Trustee believes it will
obtain a higher net price for your Units. If the Trustee is able to sell the
Units for a net price higher than net asset value, you will receive the net
proceeds of the sale.
If cash is not available in the Fund's Income and Capital Accounts to pay
redemptions, the Trustee may sell Bonds selected by the Agent for the Sponsors
based on market and credit factors determined to be in the best interest of the
Fund. These sales are often made at times when the Bonds would not otherwise be
sold and may result in lower prices than might be realized otherwise and may
also reduce the size and diversity of the Fund. If Bonds are being sold during a
time when additional Units are being created by the purchase of additional Bonds
(as described under Portfolio Selection), Bonds will be sold in a manner
designed to maintain, to the extent practicable, the proportionate relationship
among the face amounts of each Bond in the Portfolio.
The Trustee is authorized, on a redemption request for Units with a value
exceeding $250,000 by any investor who acquired 25% or more of the outstanding
Units of a Trust, to pay part or all of the redemption 'in kind' (by the
distribution of Bonds and cash with an aggregate value equal to the applicable
Redemption Price of the Units tendered for redemption). The Trustee will attempt
to make a pro rata distribution of Bonds in the Portfolio, but reserves the
right to distribute solely one or more Bonds. The distribution will be made to
the distribution agent and either held for the account of the investor or
disposed of in accordance with the instructions of the investor. Any transaction
costs as well as transfer and ongoing custodial fees on sales of the Bonds
distributed in kind will be borne by the redeeming investor.
Redemptions may be suspended or payment postponed (i) if the New York Stock
Exchange is closed (other than customary weekend and holiday closings), (ii) if
the SEC determines that trading on the New York Stock Exchange is restricted or
that an emergency exists making disposal or evaluation of the Bonds not
reasonably practicable or (iii) for any other period permitted by SEC order.
SPONSORS' SECONDARY MARKET FOR UNITS
The Sponsors, while not obligated to do so, will buy back Units at net
asset value without any other fee or charge as long as they are maintaining a
secondary market for Units. Because of sales charges, market movements or
changes in the portfolio, net asset value at the time you sell your Units may be
greater or less than the original cost of your Units. The Sponsors may resell
the Units to other buyers or redeem the Units by tendering them 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 for Units.
The Sponsors may discontinue the secondary market for Units without prior
notice if the supply of Units exceeds demand or for other business reasons.
Regardless of whether the Sponsors maintain a secondary market, you have the
right to redeem your Units for net asset value with the Trustee at any time, as
described above.
INCOME, DISTRIBUTIONS AND REINVESTMENT
INCOME
Some of the Bonds may have been purchased on a when-issued basis or may
have a delayed delivery. Since interest on these Bonds does not begin to accrue
until the date of their delivery to the Fund, the Trustee's annual fee and
expenses may be reduced to provide tax-exempt income to investors for this
non-accrual period. If a when-issued Bond is not delivered until later than
expected and the amount of the Trustee's annual fee and expenses is insufficient
to cover the additional accrued interest, the Sponsors will treat the contracts
as failed Bonds. The Trustee is compensated for its fee reduction by drawing on
the letter of credit deposited by the Sponsors before the settlement date for
these Bonds and depositing the proceeds in a non-interest bearing account for
the Fund.
Interest received is credited to an Income Account and other receipts to a
Capital Account. A Reserve Account may be created by withdrawing from the Income
and Capital Accounts amounts considered appropriate by the Trustee to reserve
for any material amount that may be payable out of the Fund.
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DISTRIBUTIONS
Each Unit receives an equal share of monthly distributions of interest
income net of estimated expenses. Interest on the Bonds is generally received by
the Fund on a semi-annual or annual basis. Because interest on the Bonds is not
received at a constant rate throughout the year, any Monthly Income Distribution
may be more or less than the interest actually received. To eliminate
fluctuations in the Monthly Income Distribution, the Trustee will advance
amounts necessary to provide approximately equal interest distributions; it will
be reimbursed, without interest, from interest received on the Bonds, but the
Trustee is compensated, in part, by holding the Fund's cash balances in
non-interest bearing accounts. Along with the Monthly Income Distributions, the
Trustee will distribute the investor's pro rata share of principal received from
any disposition of a Bond to the extent available for distribution. In addition,
distributions of amounts necessary to pay the deferred sales charge will be made
from the Capital and Income Accounts to an account maintained by the Trustee for
purposes of satisfying investors' sales charge obligations.
The initial estimated annual income per Unit, after deducting estimated
annual Fund expenses and the portion of the deferred sales charge payable from
interest income) as stated in Part A of the Prospectus, will change as Bonds
mature, are called or sold or otherwise disposed of, as replacement bonds are
deposited and as Fund expenses change. Because the Portfolio is not actively
managed, income distributions will generally not be affected by changes in
interest rates. Depending on the financial conditions of the issuers of the
Bonds, the amount of income should be substantially maintained as long as the
Portfolio remains unchanged; however, optional bond redemptions or other
Portfolio changes may occur more frequently when interest rates decline, which
would result in early returns of principal and possibly earlier termination of
the Fund.
RETURN CALCULATIONS
Estimated Current Return shows the estimated annual cash to be received
from interest-bearing bonds in a Portfolio (net of estimated annual expenses)
divided by the Public Offering Price (including the maximum sales charge).
Estimated Long Term Return is a measure of the estimated return over the
estimated life of the Trust. This represents 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 maximum sales charge and estimated
expenses. The average yield for the Portfolio is derived by weighting each
Bond's yield by its market value and the time remaining to the call or maturity
date, depending on how the Bond is priced. Unlike Estimated Current Return,
Estimated Long Term Return takes into account maturities, discounts and premiums
of the underlying Bonds.
No return estimate can be predictive of your actual return because returns
will vary with purchase price (including sales charges), how long units are
held, changes in Portfolio composition, changes in interest income and changes
in fees and expenses. Therefore, Estimated Current Return and Estimated Long
Term Return are designed to be comparative rather than predictive. A yield
calculation which is more comparable to an individual Bond may be higher or
lower than Estimated Current Return or Estimated Long Term Return which are more
comparable to return calculations used by other investment products.
REINVESTMENT
Distributions will be paid in cash unless the investor elects to have
distributions reinvested without sales charge in the Municipal Fund Accumulation
Program, Inc. The Program is an open-end management investment company whose
investment objective is to obtain income exempt from regular federal income
taxes by investing in a diversified portfolio of state, municipal and public
authority bonds rated A or better or with comparable credit characteristics.
Reinvesting compounds earnings free from federal tax. Investors participating in
the Program will be subject to state and local income taxes to the same extent
as if the distributions had been received in cash, and most of the income on the
Program is subject to state and local income taxes. For more complete
information about the Program, including charges and expenses, request the
Program's prospectus from the Trustee. Read it carefully before you decide to
participate. Written notice of election to participate must be received by the
Trustee at least ten days before the Record Day for the first distribution to
which the election is to apply.
FUND EXPENSES
Estimated annual Fund expenses are listed in Part A of the Prospectus; if
actual expenses exceed the estimate, the excess will be borne by the Fund. The
Trustee's annual fee is payable in monthly installments. The Trustee also
benefits when it holds cash for the Fund in non-interest bearing accounts.
Possible additional charges include Trustee fees
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and expenses for maintaining the Fund's registration statement current with
Federal and State authorities, extraordinary services, costs of indemnifying the
Trustee and the Sponsors, costs of action taken to protect the Fund and other
legal fees and expenses, Fund termination expenses and any governmental charges.
The Trustee has a lien on Fund assets to secure reimbursement of these amounts
and may sell Bonds for this purpose if cash is not available. The Sponsors
receive an annual fee of a maximum of $0.35 per $1,000 face amount to reimburse
them for the cost of providing Portfolio supervisory services to the Fund. While
the fee may exceed their costs of providing these services to the Fund, the
total supervision fees from all Series of Municipal Investment Trust Fund will
not exceed their costs for these services to all of those Series during any
calendar year. The Sponsors may also be reimbursed for their costs of providing
bookkeeping and administrative services to the Fund, currently estimated at a
maximum of $0.10 per Unit. The Trustee's, Sponsors' and Evaluator's fees may be
adjusted for inflation without investors' approval.
All or a portion of expenses incurred in establishing the Fund, including
the cost of the initial preparation of documents relating to the Fund, Federal
and State registration fees, the initial fees and expenses of the Trustee, legal
expenses and any other out-of-pocket expenses will be paid by the Fund and
amortized over five years. Advertising and selling expenses will be paid from
the Underwriting Account at no charge to the Fund. Sales charges on Defined
Asset Funds range from under 1.0% to 5.5%. This may be less than you might pay
to buy and hold a comparable managed fund. Defined Asset Funds can be a
cost-effective way to purchase and hold investments. Annual operating expenses
are generally lower than for managed funds. Because Defined Asset Funds have no
management fees, limited transaction costs and no ongoing marketing expenses,
operating expenses are generally less than 0.25% a year. When compounded
annually, small differences in expense ratios can make a big difference in your
investment results. Because our portfolios rarely hold any significant amount of
cash, your money is more fully invested.
TAXES
The following discussion addresses only the U.S. federal and certain New
York State and City income tax consequences under current law of Units held as
capital assets and does not address the tax consequences of Units held by
dealers, financial institutions or insurance companies or other investors with
special circumstances.
In the opinion of Davis Polk & Wardwell, special counsel for the Sponsors,
under existing law:
The Fund is not an association taxable as a corporation for federal
income tax purposes. Each investor will be considered the owner of a pro
rata portion of each Bond in the Fund under the grantor trust rules of
Sections 671-679 of the Internal Revenue Code of 1986, as amended (the
'Code'). Each investor will be considered to have received the interest and
accrued the original issue discount, if any, on his pro rata portion of
each Bond when interest on the Bond is received or original issue discount
is accrued by the Fund regardless of whether such interest is used to pay a
portion of the deferred sales charge. The investor's basis in his Units
will be equal to the cost of his Units, including any up-front or deferred
sales charge and the organizational expenses borne by the investor.
When an investor pays for accrued interest, the investor's confirmation
of purchase will report to him the amount of accrued interest for which he
paid. These investors will receive the accrued interest amount as part of
their first monthly distribution. Accordingly, these investors should
reduce their tax basis by the accrued interest amount after the first
monthly distribution.
An investor will recognize taxable gain or loss when all or part of his
pro rata portion of a Bond is disposed of by the Fund. An investor will
also be considered to have disposed of all or a portion of his pro rata
portion of each Bond when he sells or redeems all or some of his Units. An
investor who is treated as having acquired his pro rata portion of a Bond
at a premium will be required to amortize the premium over the term of the
Bond. The amortization is only a reduction of basis for the investor's pro
rata portion of the Bond and does not result in any deduction against the
investor's income. Therefore, under some circumstances, an investor may
recognize taxable gain when his pro rata portion of a Bond is disposed of
for an amount equal to or less than his original tax basis therefor.
Under Section 265 of the Code, a non-corporate investor is not entitled
to a deduction for his pro rata share of fees and expenses of the Fund,
because the fees and expenses are incurred in connection with the
production of tax-exempt income. Further, if borrowed funds are used by an
investor to purchase or carry Units of the Fund, interest on this
indebtedness will not be deductible for federal income tax purposes. In
addition, under rules used
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by the Internal Revenue Service, the purchase of Units may be considered to
have been made with borrowed funds even though the borrowed funds are not
directly traceable to the purchase of Units.
Under the income tax laws of the State and City of New York, the Fund is
not an association taxable as a corporation and income received by the Fund
will be treated as the income of the investors in the same manner as for
federal income tax purposes, but will not be tax-exempt except to the
extent such income is earned by bonds in the Fund that are otherwise
tax-exempt for New York purposes.
The foregoing discussion relates only to U.S. federal and certain
aspects of New York State and City income taxes. Depending on their state
of residence, investors may be subject to state and local taxation and
should consult their own tax advisers in this regard.
* * *
In the opinion of bond counsel rendered on the date of issuance of each
Bond, the interest on each Bond is excludable from gross income under existing
law for regular federal income tax purposes (except in certain circumstances
depending on the investor) but may be subject to state and local taxes, and
interest on some or all of the Bonds may become subject to regular federal
income tax, perhaps retroactively to their date of issuance, as a result of
changes in federal law or as a result of the failure of issuers (or other users
of the proceeds of the Bonds) to comply with certain ongoing requirements. If
the interest on a Bond should be determined to be taxable, the Bond would
generally have to be sold at a substantial discount. In addition, investors
could be required to pay income tax on interest received prior to the date on
which the interest is determined to be taxable.
Neither the Sponsors nor Davis Polk & Wardwell have made or will make any
review of the proceedings relating to the issuance of the Bonds or the basis for
these opinions and there can be no assurance that the issuer (and other users)
will comply with any ongoing requirements necessary for a Bond to maintain its
tax-exempt character.
The Internal Revenue Service is currently engaged in a program of intensive
audits of certain tax-exempt hospital and health care facility organizations.
Although these audits have not yet been completed, it has been reported that the
tax-exempt status of some of these organizations may be revoked. At this time,
it is uncertain whether any of the hospital and health care facility obligations
held by the Fund will be affected by such audit proceedings.
RECORDS AND REPORTS
The Trustee keeps a register of the names, addresses and holdings of all
investors. The Trustee also keeps records of the transactions of the Fund,
including a current list of the Bonds and a copy of the Indenture, and
supplemental information on the operations of the Fund and the risks associated
with the Bonds held by the Fund, which may be inspected by investors at
reasonable times during business hours.
With each distribution, the Trustee includes a statement of the interest
and any other receipts being distributed. Within five days after deposit of
Bonds in exchange or substitution for Bonds (or contracts) previously deposited,
the Trustee will send a notice to each investor, identifying both the Bonds
removed and the replacement bonds deposited. The Trustee sends each investor of
record an annual report summarizing transactions in the Fund's accounts and
amounts distributed during the year and Bonds held, the number of Units
outstanding and the Redemption Price at year end, the interest received by the
Fund on the Bonds, the gross proceeds received by the Fund from the disposition
of any Bond (resulting from redemption or payment at maturity or sale of any
Bond), and the fees and expenses paid by the Fund, among other matters. The
Trustee will also furnish annual information returns to each investor and to the
Internal Revenue Service. Investors are required to report to the Internal
Revenue Service the amount of tax-exempt interest received during the year.
Investors may obtain copies of Bond evaluations from the Trustee to enable them
to comply with federal and state tax reporting requirements. Fund accounts are
audited annually by independent accountants selected by the Sponsors. Audited
financial statements are available from the Trustee on request.
TRUST INDENTURE
The Fund is a 'unit investment trust' created under New York law by a Trust
Indenture among the Sponsors, the Trustee and the Evaluator. This Prospectus
summarizes various provisions of the Indenture, but each statement is qualified
in its entirety by reference to the Indenture.
The Indenture may be amended by the Sponsors and the Trustee without
consent by investors to cure ambiguities or to correct or supplement any
defective or inconsistent provision, to make any amendment required by the SEC
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or other governmental agency or to make any other change not materially adverse
to the interest of investors (as determined in good faith by the Sponsors). The
Indenture may also generally be amended upon consent of investors holding 51% of
the Units. No amendment may reduce the interest of any investor in the Fund
without the investor's consent or reduce the percentage of Units required to
consent to any amendment without unanimous consent of investors. Investors will
be notified on the substance of any amendment.
The Trustee may resign upon notice to the Sponsors. It may be removed by
investors holding 51% of the Units at any time or by the Sponsors without the
consent of investors if it becomes incapable of acting or bankrupt, its affairs
are taken over by public authorities, or if under certain conditions the
Sponsors determine in good faith that its replacement is in the best interest of
the investors. The Evaluator may resign or be removed by the Sponsors and the
Trustee without the investors' consent. The resignation or removal of either
becomes effective upon acceptance of appointment by a successor; in this case,
the Sponsors will use their best efforts to appoint a successor promptly;
however, if upon resignation no successor has accepted appointment within 30
days after notification, the resigning Trustee or Evaluator may apply to a court
of competent jurisdiction to appoint a successor.
Any Sponsor may resign so long as one Sponsor with a net worth of
$2,000,000 remains and is agreeable to the resignation. A new Sponsor may be
appointed by the remaining Sponsors and the Trustee to assume the duties of the
resigning Sponsor. If there is only one Sponsor and it fails to perform its
duties or becomes incapable of acting or bankrupt or its affairs are taken over
by public authorities, the Trustee may appoint a successor Sponsor at reasonable
rates of compensation, terminate the Indenture and liquidate the Fund or
continue to act as Trustee without a Sponsor. Merrill Lynch, Pierce, Fenner &
Smith Incorporated has been appointed as Agent for the Sponsors by the other
Sponsors.
The Sponsors, the Trustee and the Evaluator are not liable to investors or
any other party for any act or omission in the conduct of their responsibilities
absent bad faith, willful misfeasance, negligence (gross negligence in the case
of a Sponsor or the Evaluator) or reckless disregard of duty. The Indenture
contains customary provisions limiting the liability of the Trustee.
MISCELLANEOUS
LEGAL OPINION
The legality of the Units has been passed upon by Davis Polk & Wardwell,
450 Lexington Avenue, New York, New York 10017, as special counsel for the
Sponsors.
AUDITORS
The Statement of Condition in the Prospectus was audited by Deloitte &
Touche LLP, independent accountants, as stated in their opinion. It is included
in reliance upon that opinion given on the authority of that firm as experts in
accounting and auditing.
TRUSTEE
The Trustee and its address are stated on the back cover of the Prospectus.
The Trustee is subject to supervision by the Federal Deposit Insurance
Corporation, the Board of Governors of the Federal Reserve System and New York
State banking authorities.
SPONSORS
The Sponsors are listed on the back cover of the Prospectus. They may
include Merrill Lynch, Pierce, Fenner & Smith Incorporated, a wholly-owned
subsidiary of Merrill Lynch Co. Inc.; Smith Barney Inc., an indirect wholly-
owned subsidiary of The Travelers Inc.; Prudential Securities Incorporated, an
indirect wholly-owned subsidiary of the Prudential Insurance Company of America;
Dean Witter Reynolds, Inc., a principal operating subsidiary of Dean Witter
Discover & Co. and PaineWebber Incorporated, a wholly-owned subsidiary of
PaineWebber Group Inc. Each Sponsor, or one of its predecessor corporations, has
acted as Sponsor of a number of series of unit investment trusts. Each Sponsor
has acted as principal underwriter and managing underwriter of other investment
companies. The Sponsors, in addition to participating as members of various
selling groups or as agents of other investment companies, execute orders on
behalf of investment companies for the purchase and sale of securities of these
companies and sell securities to these companies in their capacities as brokers
or dealers in securities.
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CODE OF ETHICS
The Agent for the Sponsors has adopted a code of ethics requiring
preclearance and reporting of personal securities transactions by its personnel
who have access to information on Defined Asset Funds portfolio transactions.
The code is intended to prevent any act, practice or course of conduct which
would operate as a fraud or deceit on any Fund and to provide guidance to these
persons regarding standards of conduct consistent with the Agent's
responsibilities to the Funds.
PUBLIC DISTRIBUTION
In the initial offering period Units will be distributed to the public
through the Underwriting Account and dealers who are members of the National
Association of Securities Dealers, Inc. The initial offering period is 30 days
or less if all Units are sold. If some Units initially offered have not been
sold, the Sponsors may extend the initial offering period for up to four
additional successive 30-day periods.
The Sponsors intend to qualify Units for sale in all states in which
qualification is deemed necessary through the Underwriting Account and by
dealers who are members of the National Association of Securities Dealers, Inc.;
however, Units of a State trust will be offered for sale only in the State for
which the trust is named, except that Units of a New Jersey trust will also be
offered in Connecticut, Units of a Florida trust will also be offered in New
York and Units of a New York trust will also be offered in Connecticut, Florida
and Puerto Rico. The Sponsors do not intend to qualify Units for sale in any
foreign countries and this Prospectus does not constitute an offer to sell Units
in any country where Units cannot lawfully be sold. Sales to dealers and to
introducing dealers, if any, will initially be made at prices which represent a
concession from the Public Offering Price, but the Agent for the Sponsors
reserves the right to change the rate of any concession from time to time. Any
dealer or introducing dealer may reallow a concession up to the concession to
dealers.
UNDERWRITERS' AND SPONSORS' PROFITS
Upon sale of the Units, the Underwriters will be entitled to receive sales
charges. The Sponsors also realize a profit or loss on deposit of the Bonds
equal to the difference between the cost of the Bonds to the Fund (based on the
offer side evaluation on the initial date of deposit) and the Sponsors' cost of
the Bonds. In addition, a Sponsor or Underwriter may realize profits or sustain
losses on Bonds it deposits in the Fund which were acquired from underwriting
syndicates of which it was a member. During the initial offering period, the
Underwriting Account also may realize profits or sustain losses as a result of
fluctuations after the initial date of deposit in the Public Offering Price of
the Units. In maintaining a secondary market for Units, 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 these Units
(which include the sales charge) or the prices at which they redeem the Units.
Cash, if any, made available by buyers of Units to the Sponsors prior to a
settlement date for the purchase of Units may be used in the Sponsors'
businesses to the extent permitted by Rule 15c3-3 under the Securities Exchange
Act of 1934 and may be of benefit to the Sponsors.
FUND PERFORMANCE
Information on the performance of the Fund for various periods, on the
basis of changes in Unit price plus the amount of income and principal
distributions reinvested, may be included from time to time in advertisements,
sales literature, reports and other information furnished to current or
prospective investors. Total return figures are not averaged, and may not
reflect deduction of the sales charge, which would decrease the return. Average
annualized return figures reflect deduction of the maximum sales charge. No
provision is made for any income taxes payable.
Fund performance may be compared to performance on the same basis (with
distributions reinvested) of Moody's Municipal Bond Averages or performance data
from publications such as Lipper Analytical Services, Inc., Morningstar
Publications, Inc., Money Magazine, The New York Times, U.S. News and World
Report, Barron's Business Week, CDA Investment Technology, Inc., Forbes Magazine
or Fortune Magazine. Average annual compounded rates of return of selected asset
classes over various periods of time may also be compared to the rate of
inflation over the same periods.
DEFINED ASSET FUNDS
Municipal Investment Trust Funds have provided investors with tax-free
income for more than 30 years. For decades informed investors have purchased
unit investment trusts for dependability and professional selection of
investments. Defined Asset Funds' philosophy is to allow investors to 'buy with
knowledge' (because, unlike managed funds, the portfolio of municipal bonds and
the return are relatively fixed) and 'hold with confidence' (because the
portfolio is professionally selected and regularly reviewed). Defined Asset
Funds offers an array of simple and convenient investment choices, suited to fit
a wide variety of personal financial goals--a buy and hold strategy for capital
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accumulation, such as for children's education or retirement, or attractive,
regular current income consistent with the preservation of principal. Tax-exempt
income can help investors keep more today for a more secure financial future. It
can also be important in planning because tax brackets may increase with higher
earnings or changes in tax laws. Defined equity funds offer growth potential and
some protection against inflation. Unit investment trusts are particularly
suited for the many investors who prefer to seek long-term income by purchasing
sound investments and holding them, rather than through active trading. Few
individuals have the knowledge, resources or capital to buy and hold a
diversified portfolio on their own; it would generally take a considerable sum
of money to obtain the breadth and diversity that Defined Asset Funds offer.
One's investment objectives may call for a combination of Defined Asset Funds.
Defined Asset Funds reflect a buy and hold strategy that the Sponsors
believe can be more effective and cost-effective than active management. This
strategy is premised on selection criteria and procedures, diversification and
regular monitoring by investment professionals. Various advertisements and sales
literature may summarize the results of economic studies concerning how stock
market movement has tended to be concentrated and how longer-term investments
can tend to reduce risk.
One of the most important investment decisions you face may be how to
allocate your investments among asset classes. Diversification among different
kinds of investments can balance the risks and rewards of each one. Most
investment experts recommend stocks for long-term capital growth. Long-term
corporate bonds offer relatively high rates of interest income.
EXCHANGE OPTION
You may exchange Units of the Fund for units of certain other Defined Asset
Funds subject only to a reduced sales charge.
Upon the deduction of the final Deferred Sales Charge installment for the
Fund, you may exchange your units of any Municipal Investment Trust Fund
Intermediate Term Series with a regular maximum sales charge of at least 3.25%,
of any other Defined Asset Fund with a regular maximum sales charge of at least
3.50%, or of any unaffiliated unit trust with a regular maximum sales charge of
at least 3.0%, for Units of this Fund at their relative net asset values,
subject only to a reduced sales charge or to any remaining deferred sales charge
on the units being exchanged, as applicable.
To make an exchange, you should contact your financial professional to find
out what suitable Exchange Funds are available and to obtain a prospectus. You
may acquire units of only those Exchange Funds in which the Sponsors are
maintaining a secondary market and which are lawfully for sale in the state
where you reside. Except for the reduced sales charge, an exchange is a taxable
event normally requiring recognition of any gain or loss on the units exchanged.
However, the Internal Revenue Service may seek to disallow a loss if the
portfolio of the units acquired is not materially different from the portfolio
of the units exchanged; you should consult your own tax advisor. If the proceeds
of units exchanged are insufficient to acquire a whole number of Exchange Fund
units, you may pay the difference in cash (not exceeding the price of a single
unit acquired).
As the Sponsors are not obligated to maintain a secondary market in any
series, there can be no assurance that units of a desired series will be
available for exchange. The Exchange Option may be amended or terminated at any
time without notice.
SUPPLEMENTAL INFORMATION
Upon writing or calling the Trustee shown on the back cover of Part A of
this Prospectus, investors will receive at no cost to the investor supplemental
information about the Fund, which has been filed with the SEC. The supplemental
information includes more detailed risk factor disclosure about the types of
Bonds that may be part of the Fund's Portfolio, general risk disclosure
concerning any letters of credit or insurance securing certain Bonds, and
general information about the structure and operation of the Fund.
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APPENDIX A
DESCRIPTION OF RATINGS (AS DESCRIBED BY THE RATING COMPANIES THEMSELVES)
STANDARD & POOR'S RATINGS GROUP, A DIVISION OF MCGRAW-HILL, INC.
AAA--Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB--Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB, B, CCC, CC--Debt rated BB, B, CCC and CC is regarded, on balance, as
predominately speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and CC the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
The ratings from AA to CCC may be modified by the addition of a plus or
minus sign to show relative standing within the major rating categories.
A provisional rating, indicated by 'p' following a rating, assumes the
successful completion of the project being financed by the issuance of the debt
being rated and indicates that payment of debt service requirements is largely
or entirely dependent upon the successful and timely completion of the project.
This rating, however, while addressing credit quality subsequent to completion
of the project, makes no comment on the likelihood of, or the risk of default
upon failure of, such completion.
* Continuance of the rating is contingent upon S&P's receipt of an executed
copy of the escrow agreement or closing documentation confirming investments and
cash flows.
NR--Indicates that no rating has been requested, that there is insufficient
information on which to base a rating or that Standard & Poor's does not rate a
particular type of obligation as a matter of policy.
MOODY'S INVESTORS SERVICE, INC.
Aaa--Bonds which are rated Aaa are judged to be the best quality. They
carry the smallest degree of investment risk and are generally referred to as
'gilt edge'. Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa--Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba--Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
a-1
<PAGE>
B--Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Rating symbols may include numerical modifiers 1, 2 or 3. The numerical
modifier 1 indicates that the security ranks at the high end, 2 in the
mid-range, and 3 nearer the low end, of the generic category. These modifiers of
rating symbols give investors a more precise indication of relative debt quality
in each of the historically defined categories.
Conditional ratings, indicated by 'Con.', are sometimes given when the
security for the bond depends upon the completion of some act or the fulfillment
of some condition. Such bonds are given a conditional rating that denotes their
probable credit stature upon completion of that act or fulfillment of that
condition.
NR--Should no rating be assigned, the reason may be one of the following:
(a) an application for rating was not received or accepted; (b) the issue or
issuer belongs to a group of securities that are not rated as a matter of
policy; (c) there is a lack of essential data pertaining to the issue or issuer
or (d) the issue was privately placed, in which case the rating is not published
in Moody's publications.
FITCH INVESTORS SERVICE, INC.
AAA--These bonds are considered to be investment grade and of the highest
quality. The obligor has an extraordinary ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA--These bonds are considered to be investment grade and of high quality.
The obligor's ability to pay interest and repay principal, while very strong, is
somewhat less than for AAA rated securities or more subject to possible change
over the term of the issue.
A--These bonds are considered to be investment grade and of good quality.
The obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB--These bonds are considered to be investment grade and of satisfactory
quality. The obligor's ability to pay interest and repay principal is considered
to be adequate. Adverse changes in economic conditions and circumstances,
however are more likely to weaken this ability than bonds with higher ratings.
A '+' or a '-' sign after a rating symbol indicates relative standing in
its rating.
DUFF & PHELPS CREDIT RATING CO.
AAA--Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA--High credit quality. Protection factors are strong. Risk is modest but
may vary slightly from time to time because of economic condtions.
A--Protection factors are average but adequate. However, risk factors are
more variable and greater in periods of economic stress.
A '+' or a '-' sign after a rating symbol indicates relative standing in
its rating.
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<PAGE>
APPENDIX B
SECONDARY MARKET SALES CHARGE SCHEDULE
Units purchased after the deduction of the final deferred sales charge
installment will be subject only to an up-front sales charge based on the
maturities of the bonds in the Portfolio, as set forth below.
ACTUAL SALES CHARGE AS DEALER CONCESSION AS
PERCENT OF EFFECTIVE PERCENT OF EFFECTIVE
NUMBER OF UNITS SALES CHARGE SALES CHARGE
- ---------------- ----------------------- -----------------------
1-249 100% 65.00%
250-499 80 52.00
500-749 60 39.00
750-999 45 29.25
1,000 or more 35 22.75
EFFECTIVE SALES CHARGE
AS PERCENT AS PERCENT
TIME TO OF BID SIDE OF PUBLIC
MATURITY EVALUATION OFFERING PRICE
- -------------------------------- ----------- -----------------
Less than six months 0% 0%
Six months to less than 1 year 0.503 0.50
1 year to less than 2 years 1.010 1.00
2 years to less than 3 years 1.523 1.50
3 years to less than 4 years 2.302 2.25
4 years to less than 5 years 2.828 2.75
5 years to less than 6 years 3.093 3.00
6 years to less than 7 years 3.359 3.25
7 years to less than 8 years 3.627 3.50
8 years to less than 9 years 4.167 4.00
9 years to less than 12 years 4.439 4.25
12 years to less than 15 years 4.712 4.50
15 years or more 5.820 5.50
For this purpose, a Bond will be considered to mature on its stated
maturity date unless: it has been called for redemption; (although not called)
its yield to maturity is more than 40 basis points higher than its yield to any
call date; funds or securities have been placed in escrow to redeem it on an
earlier date; or the Bond is subject to a mandatory tender. In each of these
cases the earlier date will be considered the maturity date.
b-1
<PAGE>
Defined
Asset FundsSM
SPONSORS: MUNICIPAL INVESTMENT
Merrill Lynch, TRUST FUND
Pierce, Fenner & Smith Incorporated Monthly Payment Series--600
Defined Asset Funds (A Unit Investment Trust)
P.O. Box 9051 This Prospectus does not contain all of
Princeton, NJ 08543-9051 the information with respect to the
(609) 282-8500 investment company set forth in its
Smith Barney Inc. registration statement and exhibits
Unit Trust Department relating thereto which have been filed
388 Greenwich Street--23rd Floor with the Securities and Exchange
New York, NY 10013 Commission, Washington, D.C. under the
(212) 816-4000 Securities Act of 1933 and the
PaineWebber Incorporated Investment Company Act of 1940, and to
1200 Harbor Blvd. which reference is hereby made. Copies
Weehawken, NJ 07087 of filed material can be obtained from
(201) 902-3000 the Public Reference Section of the
Prudential Securities Incorporated Commission, 450 Fifth Street, N.W.,
One New York Plaza Washington, D.C. 20549 at prescribed
New York, NY 10292 rates. The Commission also maintains a
(212) 778-6164 Web site that contains information
Dean Witter Reynolds Inc. statements and other information
Two World Trade Center--59th Floor regarding registrants such as Defined
New York, NY 10048 Asset Funds that file electronically
(212) 392-2222 with the Commission at
EVALUATOR: http://www.sec.gov.
Kenny S&P Evaluation Services, ------------------------------
a division of J. J. Kenny Co., Inc. No person is authorized to give any
65 Broadway information or to make any
New York, NY 10006 representations with respect to this
TRUSTEE: investment company not contained in
The Chase Manhattan Bank this Prospectus; and any information or
Customer Service Retail Department representation not contained herein
Bowling Green Station must not be relied upon as having been
P.O. Box 5187 authorized.
New York, NY 10274-5187 ------------------------------
1-800-323-1508 When Units of this Fund are no longer
available this Prospectus may be used
as a preliminary prospectus for a
future series, and investors should
note the following:
Information contained herein is subject
to amendment. A registration statement
relating to securities of a future
series has been filed with the
Securities and Exchange Commission.
These securities may not be sold nor
may offers to buy be accepted prior to
the time the registration statement
becomes effective.
This Prospectus shall not constitute an
offer to sell or the solicitation of an
offer to buy nor shall there be any
sale of these securities in any State
in which such offer, solicitation or
sale would be unlawful prior to
qualification under the securities laws
of any such State.
15383--11/96
