<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 10, 1999
REGISTRATION NO. 333-62185
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------------
POST-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-6
------------------------------------------
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
------------------------------------------
A. EXACT NAME OF TRUST:
DEFINED ASSET FUNDS
MUNICIPAL DEFINED FUND--2
B. NAME OF DEPOSITOR:
MERRILL LYNCH, PIERCE, FENNER & SMITH INC.
SALOMON SMITH BARNEY INC.
PAINEWEBBER INCORPORATED
DEAN WITTER REYNOLDS INC.
C. COMPLETE ADDRESSES OF DEPOSITORS' PRINCIPAL EXECUTIVE OFFICES:
MERRILL LYNCH, PIERCE,
FENNER & SMITH
INCORPORATED
DEFINED ASSET FUNDS
POST OFFICE BOX 9051
PRINCETON, NJ 08543-9051 SALOMON SMITH BARNEY INC.
388 GREENWICH
STREET--23RD FLOOR
NEW YORK, NY 10013
PAINEWEBBER INCORPORATED
1285 AVENUE OF THE
AMERICAS
NEW YORK, NY 10019
DEAN WITTER REYNOLDS INC.
TWO WORLD TRADE
CENTER--59TH FLOOR
NEW YORK, NY 10048
D. NAMES AND COMPLETE ADDRESSES OF AGENTS FOR SERVICE:
TERESA KONCICK, ESQ.
P.O. BOX 9051
PRINCETON, NJ 08543-9051 ROBERT E. HOLLEY
1200 HARBOR BLVD.
WEEHAWKEN, NJ 07087
COPIES TO: DOUGLAS LOWE, ESQ.
PIERRE DE SAINT PHALLE, DEAN WITTER REYNOLDS INC.
MICHAEL KOCHMANN ESQ. TWO WORLD TRADE
388 GREENWICH STREET 450 LEXINGTON AVENUE CENTER--59TH FLOOR
NEW YORK, NY 10013 NEW YORK, NY 10017 NEW YORK, NY 10048
The issuer has registered an indefinite number of Units under the Securities Act
of 1933 pursuant to Rule 24f-2 and filed the Rule 24f-2 Notice for the most
recent fiscal year on March 25, 1999.
Check box if it is proposed that this filing will become effective on November
19, 1999 pursuant to paragraph (b) of Rule 485. / x /
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
DEFINED ASSET FUNDSSM
- --------------------------------------------
- ----------------------------------
MUNICIPAL DEFINED FUND--2
(A UNIT INVESTMENT TRUST)
O PORTFOLIO OF LONG TERM MUNICIPAL BONDS
O DESIGNED TO BE FREE OF REGULAR FEDERAL INCOME
TAX
O DISTRIBUTIONS TWICE A YEAR
SPONSORS: -------------------------------------------------
Merrill Lynch, The Securities and Exchange Commission has not
Pierce, Fenner & Smith approved or disapproved these Securities or
Incorporated passed upon the adequacy of this prospectus. Any
Salomon Smith Barney Inc. representation to the contrary is a criminal
PaineWebber Incorporated offense.
Dean Witter Reynolds Inc. Prospectus dated November 19, 1999.
<PAGE>
- --------------------------------------------------------------------------------
Def ined Asset FundsSM
Defined Asset FundsSM is America's oldest and largest family of unit investment
trusts, with over $160 billion sponsored over the last 28 years. Defined Asset
Funds has been a leader in unit investment trust research and product
innovation. Our family of Funds helps investors work toward their financial
goals with a full range of quality investments, including municipal, corporate
and government bond portfolios, as well as domestic and international equity
portfolios.
Defined Asset Funds offer a number of advantages:
o A disciplined strategy of buying and holding with a long-term view is the
cornerstone of Defined Asset Funds.
o Fixed portfolio: Defined Funds follow a buy and hold investment strategy;
funds are not managed and portfolio changes are limited.
o Defined Portfolios: We choose the stocks and bonds in advance, so you know
what you're investing in.
o Professional research: Our dedicated research team seeks out stocks or bonds
appropriate for a particular fund's objectives.
o Ongoing supervision: We monitor each portfolio on an ongoing basis.
No matter what your investment goals, tolerance for risk or time horizon,
there's probably a Defined Asset Fund that suits your investment style. Your
financial professional can help you select a Defined Asset Fund that works best
for your investment portfolio.
THE FINANCIAL INFORMATION IN THIS PROSPECTUS IS AS OF THE EVALUATION DATE,
AUGUST 31, 1999.
CONTENTS
PAGE
---------
Risk/Return Summary.................................... 3
What You Can Expect From Your Investment............... 6
Monthly Income...................................... 6
Return Figures...................................... 6
Records and Reports................................. 6
The Risks You Face..................................... 7
Interest Rate Risk.................................. 7
Call Risk........................................... 7
Reduced Diversification Risk........................ 7
Liquidity Risk...................................... 7
Collateral Related Risk............................. 7
Concentration Risk.................................. 7
Bond Quality Risk................................... 8
Insurance Related Risk.............................. 8
Litigation and Legislation Risks.................... 8
Selling or Exchanging Units............................ 8
Sponsors' Secondary Market.......................... 8
Selling Units to the Trustee........................ 8
Exchange Option..................................... 9
How The Fund Works..................................... 10
Pricing............................................. 10
Evaluations......................................... 10
Income.............................................. 10
Expenses............................................ 10
Portfolio Changes................................... 11
Fund Termination.................................... 11
Certificates........................................ 12
Trust Indenture..................................... 12
Legal Opinion....................................... 12
Auditors............................................ 12
Sponsors............................................ 13
Trustee............................................. 13
Underwriters' and Sponsors' Profits 13
Public Distribution................................. 13
Code of Ethics...................................... 14
Year 2000 Issues.................................... 14
Taxes.................................................. 14
Supplemental Information............................... 15
Financial Statements................................... D-1
2
<PAGE>
- --------------------------------------------------------------------------------
RISK/RETURN SUMMARY
1. WHAT IS THE FUND'S OBJECTIVE?
The Fund seeks interest income that is exempt from regular
federal income taxes by investing in a fixed portfolio
consisting primarily of 15-to 30-year municipal revenue
bonds.
2. WHAT ARE MUNICIPAL REVENUE BONDS?
Municipal revenue bonds are bonds issued by states,
municipalities and public authorities to finance the cost
of buying, building or improving various projects intended
to generate revenue, such as airports, health care
facilities, housing and municipal electric, water and sewer
utilities. Generally, payments on these bonds depend solely
on the revenues generated by the projects, excise taxes or
state appropriations, and are not backed by the
government's taxing power.
3. WHAT IS THE FUND'S INVESTMENT STRATEGY?
O The Fund plans to hold to maturity 30 long-term tax-exempt
municipal bonds, and some short-term bonds reserved to pay
the deferred sales charge, with an aggregate face amount of
$15,030,000.00. The Fund is a unit investment trust which
means that, unlike a mutual fund, the Fund's portfolio is
not managed.
o The bonds are rated A or better by Standard & Poor's,
Moody's or Fitch or in the opinion of the agent for the
Sponsors have similar credit quality to other bonds in the
portfolio.
o Most of the bonds cannot be called for several years, and
after that they can be called at a premium declining over
time to par value. Some bonds may be called earlier at par
for extraordinary reasons.
o 21% of the bonds are insured by AAA-rated insurance
companies that guarantee timely payments of principal and
interest on the bonds (but not Fund units or the market
value of the bonds before they mature).
The Portfolio consists of municipal bonds of the following
types:
APPROXIMATE
PORTFOLIO
PERCENTAGE
o Airports/Ports/Highways 10%
o Convection Center 6%
o Ecological Svcs/Equipment 3%
o General Obligation 19%
o Hospitals/Health Care 38%
o Housing 8%
o Municipal Water/Sewer Utilities 1%
o University/College 13%
o Miscellaneous 2%
4. WHAT ARE THE SIGNIFICANT RISKS?
YOU CAN LOSE MONEY BY INVESTING IN THE FUND. THIS CAN
HAPPEN FOR VARIOUS REASONS, INCLUDING:
o Rising interest rates, an issuer's worsening financial
condition or a drop in bond ratings can reduce the price of
your units.
o Because the Fund is concentrated in hospital/health care
bonds, adverse developments in this industry may affect the
value of your units.
o Assuming no changes in interest rates, when you sell your
units, they will generally be worth less than your cost
because your cost included a sales fee.
o The Fund will receive early returns of principal if bonds
are called or sold before they mature. If this happens your
income will decline and you may not be able to reinvest the
money you receive at as high a yield or as long a maturity.
5. IS THIS FUND APPROPRIATE FOR YOU?
Yes, if you want federally tax-free income. You will
benefit from a professionally selected and supervised
portfolio whose risk is reduced by investing in bonds of
several different issuers.
The Fund is not appropriate for you if you want a
speculative investment that changes to take advantage of
market movements, if you do not want a tax-advantaged
investment or if you cannot tolerate any risk.
3
<PAGE>
DEFINING YOUR INCOME
WHAT YOU MAY EXPECT (RECORD DAY: 10TH DAY OF
EACH MARCH AND SEPTEMBER):
Regular Semi-Annual Income per 1,000 units
(each March and September beginning 9/25/99): $ 26.09
Annual Income per 1,000 units: $ 52.18
RECORD DAY: 10th day of each month
These figures are estimates on the business day before the
initial date of desit; actual payments may vary.
Estimated Current Return %
Estimated Long Term Return %
These returns will vary (see page 6).
6. WHAT ARE THE FUND'S FEES AND EXPENSES?
This table shows the costs and expenses you may pay,
directly or indirectly, when you invest in the Fund.
INVESTOR FEES
Maximum Sales Fee (Load) on new
purchases (as a percentage of
$1,000 invested) 2.90%
You will pay an up-front sales fee of 1.00% as well as a
deferred sales fee of $11.86 ($1.714 per 1,000 units
quarterly in the second year). Employees of some of the
Sponsors and their affiliates may pay a reduced sales fee of
at least $5.00 per 1,000 units.
The maximum sales fee is reduced if you invest at least
$100,000, as follows:
YOUR MAXIMUM
SALES FEE
IF YOU INVEST: WILL BE:
--------------------------- -----------------
$100,000 to $249,999 2.65%
$250,000 to $499,999 2.40%
$500,000 to $999,999 2.15%
$1,000,000 and over 1.90%
Maximum Exchange Fee 1.90%
ESTIMATED ANNUAL FUND OPERATING EXPENSES
AMOUNT
PER UNIT
-----------
$ 0.52
Trustee's Fee
$ 0.40
Portfolio Supervision,
Bookkeeping and
Administrative Fees
(including updating
expenses)
$ 0.09
Evaluator's Fee
$ 0.
Organization Costs
$ 0.15
Other Operating Expenses
-----------
$ 1.16
TOTAL
The Sponsors historically paid organization costs and
updating expenses.
7. HOW HAVE SIMILAR FUNDS PERFORMED IN THE PAST?
In the following chart we show past performance of prior
Monthly Payment Series, which had the same investment
objectives, strategies and types of bonds as this Fund.
These prior series differed in that they charged a higher
sales fee. These prior Monthly Payment Series were offered
between February 4, 1988 and September 26, 1996 and were
outstanding on September 30, 1999. OF COURSE, PAST
PERFORMANCE OF PRIOR SERIES IS NO GUARANTEE OF FUTURE
RESULTS OF THIS FUND.
AVERAGE ANNUAL COMPOUND TOTAL RETURNS
FOR PRIOR SERIES
Reflecting all expenses. For periods ended 9/30/99.
WITH SALES FEE NO SALES FEE
1 YEAR 5 YEARS 10 YEARS 1 YEAR 5 YEARS 10 YEARS
- -------------------------------------------------------------------
High 1.81% 6.93% 6.10% 2.95 8.13% 6.64%
Average -2.55 4.95 5.77 -0.70 5.96 6.35
Low -7.99 3.10 5.46 -5.90 3.87 6.05
- -------------------------------------------------------------------
Average
Sales fee 1.93% 5.01% 5.77%
- -------------------------------------------------------------------
Note: All returns represent changes in unit price with distributions reinvested
into the Municipal Fund Investment Accumulation Program.
8. IS THE FUND MANAGED?
Unlike a mutual fund, the Fund is not managed and bonds are
not sold because of market changes. Rather, experienced
Defined Asset Funds financial analysts regularly review the
bonds in the Fund. The Fund may sell a bond if certain
adverse credit or other conditions exist.
9. HOW DO I BUY UNITS?
The minimum investment is $250.
You can buy units from any of the Sponsors and other
broker-dealers. The Sponsors are listed later in this
prospectus. Some banks may offer units for sale through
special arrangements with the Sponsors, although certain
legal restrictions may apply.
4
<PAGE>
UNIT PRICE PER 1,000 UNITS $945.21
(as of August 31, 1999)
Unit price is based on the net asset value of the Fund plus
the up-front sales fee. An amount equal to any principal
cash, as well as net accrued but undistributed interest on
the unit, is added to the unit price. Unit price also
includes the estimated organization costs shown on the
previous page. An independent evaluator prices the bonds at
3:30 p.m. Eastern time every business day. Unit price
changes every day with changes in the prices of the bonds in
the Fund.
10. HOW DO I SELL UNITS?
You may sell your units at any time to any Sponsor or the
Trustee for the net asset value determined at the close of
business don the date of sale, less any remaining deferred
sales fee. You will not pay any other fee when you sell your
units.
11. HOW ARE DISTRIBUTIONS MADE AND TAXED?
The Fund pays income twice a year.
In the opinion of bond counsel when each bond was issued,
interest on the bonds in this Fund is generally 100% exempt
from regular federal income tax. A portion of the income may
also be exempt from state and local personal income taxes,
depending on where you live.
You will also receive principal payments if bonds are sold
or called or mature, when the cash available is more than
$10.00 per 1,000 units. You will be subject to tax on any
gain realized by the Fund on the disposition of bonds.
12. WHAT OTHER SERVICES ARE AVAILABLE?
REINVESTMENT
You will receive your semi-annual income in cash unless you
choose to compound your income by reinvesting at no sales
fee in the Municipal Fund Investment Accumulation Program,
Inc. This Program is an open-end mutual fund with a
comparable investment objective. Income from this Program
will generally be subject to state and local income taxes.
For more complete information about the Program, including
charges and fees, ask the Trustee for the Program's
prospectus. Read it carefully before you invest. The Trustee
must receive your written election to reinvest at least 10
days before the record day of an income payment.
EXCHANGE PRIVILEGES
You may exchange units of this Fund for units of certain
other Defined Asset Funds. You may also exchange into this
Fund from certain other funds. We charge a reduced sales fee
on exchanges.
- --------------------------------------------------------------------------------
TAX-FREE VS. TAXABLE INCOME: A COMPARISON OF TAXABLE AND TAX-FREE YIELDS
<TABLE>
<CAPTION>
EFFECTIVE
TAXABLE INCOME 1999* % TAX TAX-FREE YIELD OF
SINGLE RETURN JOINT RETURN BRACKET 3% 3.5% 4% 4.5% 5% 5.5% 6% 6.5%
IS EQUIVALENT TO A TAXABLE YIELD OF
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0- 25,750 $ 0- 43,050 15.00 3.53 4.12 4.71 5.29 5.88 6.47 7.06 7.65
- ----------------------------------------------------------------------------------------------------------
$ 25,751- 62,450 $ 43,051-104,050 28.00 4.17 4.86 5.56 6.25 6.94 7.64 8.33 9.03
- ----------------------------------------------------------------------------------------------------------
$ 62,451-130,250 $104,051-158,550 31.00 4.35 5.07 5.80 6.52 7.25 7.97 8.70 9.42
- ----------------------------------------------------------------------------------------------------------
$130,251-283,150 $158,551-283,150 36.00 4.69 5.47 6.25 7.03 7.81 8.59 9.38 10.16
- ----------------------------------------------------------------------------------------------------------
OVER $283,151 OVER $283,151 39.60 4.97 5.79 6.62 7.45 8.28 9.11 9.93 10.76
- ----------------------------------------------------------------------------------------------------------
</TABLE>
To compare the yield of a taxable security with the yield of a federally
tax-free security, find your taxable income and read across. The table
incorporates 1999 federal income tax rates and assumes that all income would
otherwise be taxed at a U.S. 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, the possible partial disallowance of deductions
or state and local taxation. Consequently, investors are urged to consult their
own tax advisers in this regard.
5
<PAGE>
WHAT YOU CAN EXPECT FROM YOUR INVESTMENT
INCOME TWICE A YEAR
The Fund will pay you regular income twice a year. Your income may vary because
of:
o elimination of one or more bonds from the Fund's portfolio because of
calls, redemptions or sales;
o a change in the Fund's expenses; or
o the failure by a bond's issuer to pay interest.
Changes in interest rates generally will not affect your income because the
portfolio is fixed.
Along with your income, you will receive your share of any available bond
principal.
RETURN FIGURES
We cannot predict your actual return, which will vary with unit price, how long
you hold your investment and changes in the portfolio, interest income and
expenses.
Estimated Current Return equals the estimated annual cash to be received from
the bonds in the Fund less estimated annual Fund expenses, divided by the Unit
Price (including the maximum sales fee):
Estimated Annual Estimated
Interest Income - Annual Expenses
- -------------------------------------------------
Unit Price
Estimated Long Term Return is a measure of the estimated return over the
estimated life of the Fund. Unlike Estimated Current Return, Estimated Long Term
Return reflects maturities, discounts and premiums of the bonds in the Fund. It
is an average of the yields to maturity (or in certain cases, to an earlier call
date) of the individual bonds in the portfolio, adjusted to reflect the Fund's
maximum sales fee and estimated expenses. We calculate the average yield for the
portfolio by weighting each bond's yield by its market value and the time
remaining to the call or maturity date.
Yields on individual bonds depend on many factors including general conditions
of the bond markets, the size of a particular offering and the maturity and
quality rating of the particular issues. Yields can vary among bonds with
similar maturities, coupons and ratings.
These return quotations are designed to be comparative rather than predictive.
RECORDS AND REPORTS
You will receive:
o a statement of income payments twice a year;
o a notice from the Trustee when new bonds are deposited in exchange or
substitution for bonds originally deposited;
o an annual report on Fund activity; and
o annual tax information. This will also be sent to the IRS. You must report the
amount of tax-exempt interest received during the year.
You may request:
o copies of bond evaluations to enable you to comply with federal and state tax
reporting requirements; and
o audited financial statements of the Fund.
You may inspect records of Fund transactions at the Trustee's office during
regular business hours.
6
<PAGE>
THE RISKS YOU FACE
INTEREST RATE RISK
Investing involves risks, including the risk that your investment will decline
in value if interest rates rise. Generally, bonds with longer maturities will
change in value more than bonds with shorter maturities. Bonds in the Fund are
more likely to be called when interest rates decline. This would result in early
returns of principal to you and may result in early termination of the Fund. Of
course, we cannot predict how interest rates may change.
CALL RISK
Many bonds can be prepaid or 'called' by the issuer before their stated
maturity.
For example, an issuer might call its bonds if it no longer needs the money for
the original purpose or, during periods of falling interest rates, if the
issuer's bonds have a coupon higher than current market rates. If the bonds are
called, your income will decline and you may not be able to reinvest the money
you receive at as high a yield or as long a maturity. An early call at par of a
premium bond will reduce your return.
REDUCED DIVERSIFICATION RISK
If many investors sell their units, the Fund will have to sell bonds. This could
reduce the diversification of your investment and increase your share of Fund
expenses.
LIQUIDITY RISK
The bonds will generally trade in the over-the-counter market. We cannot assure
you that a liquid trading market will exist, especially since current law may
restrict the Fund from selling bonds to any Sponsor. The value of the bonds, and
of your investment, may be reduced if trading in bonds is limited or absent.
CONCENTRATION RISK
When a certain type of bond makes up 25% or more of the portfolio, the Fund is
said to be 'concentrated' in that bond type, which makes the Fund less
diversified.
Here is what you should know about the Fund's concentration in hospital and
health care bonds.
o payment for these bonds depends on revenues from private third-party payors
and government programs, including Medicare and Medicaid, which have
generally undertaken cost containment measures to limit payments to health
care providers;
o hospitals face increasing competition resulting from hospital mergers and
affiliations;
o hospitals need to reduce costs as HMOs increase market penetration and
hospital supply and drug companies raise prices; and
o hospitals and health care providers are subject to various legal claims by
patients and others and are adversely affected by increasing costs of
insurance.
o many hospitals are aggressively buying physician practices and assuming
risk contracts to gain market share. If revenues do not increase
accordingly, this practice could reduce profits.
o Medicare is changing its reimbursement system for nursing homes. Many
nursing home providers are not sure how they will be treated. In many
cases, the providers may receive lower reimbursements and these would have
to cut expenses to maintain profitability.
o most retirement/nursing home providers rely on entrance fees for operating
revenues. If people live longer than expected and turnover is lower than
budgeted, operating
7
<PAGE>
revenues would be adversely affected by less than expected entrance fees.
Changes to the portfolio from bond redemptions, maturities and sales may affect
the Fund's concentration over time.
BOND QUALITY RISK
A reduction in a bond's rating may decrease its value and, indirectly, the value
of your investment in the Fund.
INSURANCE RELATED RISK
Some bonds are backed by insurance companies (as shown under Municipal Defined
Fund Portfolio). Insurance policies generally make payments only according to a
bond's original payment schedule and do not make early payments when a bond
defaults or becomes taxable. Although the federal government does not regulate
the insurance business, various state laws and federal initiatives and tax law
changes could significantly affect the insurance business. The claims-paying
ability of the insurance companies is generally rated A or better by Standard &
Poor's or another nationally recognized rating organization. The insurance
company ratings are subject to change at any time at the discretion of the
rating agencies.
LITIGATION AND LEGISLATION RISKS
We do not know of any pending litigation that might have a material adverse
effect upon the Fund.
Future tax legislation could affect the value of the portfolio by:
o limiting real property taxes,
o reducing tax rates,
o imposing a flat or other form of tax, or
o exempting investment income from tax.
SELLING OR EXCHANGING UNITS
You can sell your units at any time for a price based on net asset value. Your
net asset value is calculated each business day by:
o adding the value of the bonds, net accrued interest, cash and any other
Fund assets;
o subtracting accrued but unpaid Fund expenses, unreimbursed Trustee
advances, cash held to buy back units or for distribution to investors and
any other Fund liabilities; and
o dividing the result by the number of outstanding units.
Your net asset value when you sell may be more or less than your cost because of
sales fees, market movements and changes in the portfolio.
As of the close of the initial offering period, the price you receive will be
reduced to reflect estimated organization costs.
If you sell your units before the final deferred sales fee installment, the
amount of any remaining installments will be deducted from your proceeds.
SPONSORS' SECONDARY MARKET
While we are not obligated to do so, we will buy back units at net asset value
without any other fee or charge other than any remaining deferred sales charge.
We may resell the units to other buyers or to the Trustee. You should consult
your financial professional for current market prices to determine if other
broker-dealers or banks are offering higher prices.
We may discontinue the secondary market without prior notice for any business
reason.
SELLING UNITS TO THE TRUSTEE
Regardless of whether we maintain a secondary market, you can sell your units to
the Trustee at
8
<PAGE>
any time by sending the Trustee a letter (with any outstanding certificates if
you hold Unit certificates). You must properly endorse your certificates (or
execute a written transfer instrument with signatures guaranteed by an eligible
institution). Sometimes, additional documents are needed such as a trust
document, certificate of corporate authority, certificate of death or
appointment as executor, administrator or guardian.
Within seven days after your request and the necessary documents are received,
the Trustee will mail a check to you. Contact the Trustee for additional
information.
As long as we are maintaining a secondary market, the Trustee will sell your
units to us at a price based on net asset value. If there is no secondary
market, the Trustee may sell your units in the over-the-counter market for a
higher price, but the Trustee is not required to do so. In that case, you will
receive the net proceeds of the sale.
If the Fund does not have cash available to pay you for units you are selling,
the agent for the Sponsors will select bonds to be sold. Bonds will be selected
based on market and credit factors. These sales could be made at times when the
bonds would not otherwise be sold and may result in your receiving less than the
unit par value and also reduce the size and diversity of the Fund.
If you acquire 25% or more of the outstanding units of the Fund and you sell
units with a value exceeding $250,000, the Trustee may choose to pay you 'in
kind' by distributing bonds and cash with a total value equal to the price of
those units. The Trustee will try to distribute bonds in the portfolio pro rata,
but it reserves the right to distribute only one or a few bonds. The Trustee
will act as your agent in an in kind distribution and will either hold the bonds
for your account or sell them as you instruct. You must pay any transaction
costs as well as transfer and ongoing custodial fees on sales of bonds
distributed in kind.
There could be a delay in paying you for your units:
o if the New York Stock Exchange is closed (other than customary weekend and
holiday closings);
o if the SEC determines that trading on the New York Stock Exchange is
restricted or that an emergency exists making sale or evaluation of the
bonds not reasonably practicable; and
o for any other period permitted by SEC order.
EXCHANGE OPTION
You may exchange units of certain Defined Asset Funds for units of this Fund at
a maximum exchange fee of 1.90%. You may exchange units of this Fund for units
of certain other Defined Asset Funds at a reduced sales fee if your investment
goals change. To exchange units, you should talk to your financial professional
about what funds are exchangeable, suitable and currently available.
Normally, an exchange is taxable and you must recognize any gain or loss on the
exchange. However, the IRS may try to disallow a loss if the portfolios of the
two funds are not materially different; you should consult your own tax adviser.
We may amend or terminate this exchange option at any time without notice.
9
<PAGE>
HOW THE FUND WORKS
PRICING
The price of a unit includes interest accrued on the bonds, less expenses, from
the initial date of deposit up to, but not including, the settlement date, which
is usually three business days after the purchase date of the unit.
Bonds also carry accrued but unpaid interest up to the initial date of deposit.
To avoid having you pay this additional accrued interest (which earns no return)
when you buy, the Trustee advances this amount to the Sponsors. The Trustee
recovers this advance from interest received on the bonds.
In addition, a portion of the price of a unit also consists of cash to pay all
or some of the costs of organizing the Fund including:
o cost of initial preparation of legal documents;
o federal and state registration fees;
o initial fees and expenses of the Trustee;
o initial audit; and
o legal expenses and other out-of-pocket expenses.
EVALUATIONS
An independent Evaluator values the bonds on each business day (excluding
Saturdays, Sundays and the following holidays as observed by the New York Stock
Exchange: New Year's Day, Presidents' Day, Martin Luther King, Jr. Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas).
Bond values are based on current bid or offer prices for the bonds or comparable
bonds. In the past, the difference between bid and offer prices of publicly
offered tax-exempt bonds has ranged from 0.5% of face amount on actively traded
issues to 3.5% on inactively traded issues; the difference has averaged between
1 and 2%.
INCOME
Interest on any bonds purchased on a when-issued basis or for a delayed delivery
does not begin to accrue until the bonds are delivered to the Fund. The Trustee
may reduce its fee to provide you with tax-exempt income for this non-accrual
period. If a bond is not delivered on time and the Trustee's annual fee and
expenses do not cover the additional accrued interest, we will treat the
contract to buy the bond as failed.
The Trustee credits interest to an Income Account and other receipts to a
Capital Account. The Trustee may establish a Reserve Account by withdrawing from
these accounts amounts it considers appropriate to pay any material liability.
These accounts do not bear interest.
EXPENSES
The Trustee is paid monthly. It also benefits when it holds cash for the Fund in
non-interest bearing accounts. The Trustee may also receive additional amounts:
o to reimburse the Trustee for the Fund's operating expenses;
o for extraordinary services and costs of indemnifying the Trustee and the
Sponsors;
o costs of actions taken to protect the Fund and other legal fees and
expenses;
o expenses for keeping the Fund's registration statement current; and
o Fund termination expenses and any governmental charges.
The Sponsors are currently reimbursed up to 55 cents per $1,000 face amount
annually for providing portfolio supervisory, bookkeeping and administrative
services and for any other
10
<PAGE>
expenses properly chargeable to the Fund. While this fee may exceed the amount
of these costs and expenses attributable to this Fund, the total of these fees
for all Series of Defined Asset Funds will not exceed the aggregate amount
attributable to all of these Series for any calendar year. The Fund also pays
the Evaluator's fees.
The Trustee's, Sponsors' and Evaluator's fees may be adjusted for inflation
without investors' approval.
Quarterly deferred sales charges you owe are paid with interest and principal
from certain bonds. If these amounts are not enough, the rest will be paid out
of distributions to you from the Fund's Capital and Income Accounts.
The Sponsors will pay advertising and selling expenses at no charge to the Fund.
If Fund expenses exceed initial estimates, the Fund will owe the excess. The
Trustee has a lien on Fund assets to secure reimbursement of Fund expenses and
may sell bonds if cash is not available.
PORTFOLIO CHANGES
The Sponsors and Trustee are not liable for any default or defect in a bond; if
a contract to buy any bond fails in the first 90 days of the Fund, we generally
will deposit a replacement tax-exempt bond with a similar yield, maturity,
rating and price.
Unlike a mutual fund, the portfolio is designed to remain intact and we may keep
bonds in the portfolio even if their credit quality declines or other adverse
financial circumstances occur. However, we may sell a bond in certain cases if
we believe that certain adverse credit conditions exist or if a bond becomes
taxable.
If we maintain a secondary market in units but are unable to sell the units that
we buy in the secondary market, we will redeem units, which will affect the size
and composition of the portfolio. Units offered in the secondary market may not
represent the same face amount of bonds that they did originally.
We decide whether or not to offer units for sale that we acquire in the
secondary market after reviewing:
o diversity of the portfolio;
o size of the Fund relative to its original size;
o ratio of Fund expenses to income;
o current and long-term returns;
o degree to which units may be selling at a premium over par; and
o cost of maintaining a current prospectus.
FUND TERMINATION
The Fund will terminate following the stated maturity or sale of the last bond
in the portfolio. The Fund may also terminate earlier with the consent of
investors holding 51% of the units or if total assets of the Fund have fallen
below 40% of the face amount of bonds deposited. We will decide whether to
terminate the Fund early based on the same factors used in deciding whether or
not to offer units in the secondary market.
When the Fund is about to terminate you will receive a notice, and you will be
unable to sell your units after that time. On or shortly before termination, we
will sell any remaining bonds, and you will receive your final distribution. Any
bond that cannot be sold at a reasonable price may continue to be held by the
Trustee in a liquidating trust pending its final sale.
You will pay your share of the expenses associated with termination, including
brokerage costs in selling bonds. This may reduce the amount you receive as your
final distribution.
11
<PAGE>
CERTIFICATES
Certificates for units are issued on request. You may transfer certificates by
complying with the requirements for redeeming certificates, described above. You
can replace lost or mutilated certificates by delivering satisfactory indemnity
and paying the associated costs.
TRUST INDENTURE
The Fund is a 'unit investment trust' governed by a Trust Indenture, a contract
among the Sponsors, the Trustee and the Evaluator, which sets forth their duties
and obligations and your rights. A copy of the Indenture is available to you on
request to the Trustee. The following summarizes certain provisions of the
Indenture.
The Sponsors and the Trustee may amend the Indenture without your consent:
o to cure ambiguities;
o to correct or supplement any defective or inconsistent provision;
o to make any amendment required by any governmental agency; or
o to make other changes determined not to be materially adverse to your best
interest (as determined by the Sponsors).
Investors holding 51% of the units may amend the Indenture. Every investor must
consent to any amendment that changes the 51% requirement. No amendment may
reduce your interest in the Fund without your written consent.
The Trustee may resign by notifying the Sponsors. The Sponsors may remove the
Trustee without your consent if:
o it fails to perform its duties and the Sponsors determine that its
replacement is in your best interest; or
o it becomes incapable of acting or bankrupt or its affairs are taken over by
public authorities.
Investors holding 51% of the units may remove the Trustee. The Evaluator may
resign or be removed by the Sponsors and the Trustee without the consent of
investors. The resignation or removal of either becomes effective when a
successor accepts appointment. The Sponsors will try to appoint a successor
promptly; however, if no successor has accepted within 30 days after notice of
resignation, the resigning Trustee or Evaluator may petition a court to appoint
a successor.
Any Sponsor may resign as long as one Sponsor with a net worth of $2 million
remains and agrees to the resignation. The remaining Sponsors and the Trustee
may appoint a replacement. If there is only one Sponsor and it fails to perform
its duties or becomes bankrupt the Trustee may:
o remove it and appoint a replacement Sponsor;
o liquidate the Fund; or
o continue to act as Trustee without a Sponsor.
Merrill Lynch, Pierce, Fenner & Smith Incorporated acts as agent for the
Sponsors.
The Trust Indenture contains customary provisions limiting the liability of the
Trustee, the Sponsors and the Evaluator.
LEGAL OPINION
Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York 10017, as
special counsel for the Sponsors, has given an opinion that the units are
validly issued.
AUDITORS
Deloitte & Touche LLP, 2 World Financial Center, New York, New York 10281,
12
<PAGE>
independent accountants, audited the Statement of Condition included in this
prospectus.
SPONSORS
The Sponsors and their underwriting percentages are:
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED (a wholly-owned subsidiary of
Merrill Lynch & Co., Inc.)
P.O. Box 9051,
Princeton, NJ 08543-9051 60.00%
SALOMON SMITH BARNEY INC. (an indirectly wholly-owned subsidiary of The
Travelers Inc.)
388 Greenwich Street--23rd Floor,
New York, NY 10013 16.67%
DEAN WITTER REYNOLDS INC. (a principal operating subsidiary of Morgan Stanley
Dean Witter & Co.)
Two World Trade Center--59th Floor,
New York, NY 10048 3.33%
PAINEWEBBER INCORPORATED (a wholly-owned subsidiary of PaineWebber Group Inc.)
1285 Avenue of the Americas,
New York, NY 10019 20.00%
100.00%
Each Sponsor is a Delaware corporation and it, or its predecessor, has acted as
sponsor to many unit investment trusts. As a registered broker-dealer each
Sponsor buys and sells securities (including investment company shares) for
others (including investment companies) and participates as an underwriter in
various selling groups.
TRUSTEE
The Chase Manhattan Bank, Unit Investment Trust Department, 4 New York
Plaza--6th Floor, New York, New York 10004, is the Trustee. It is supervised by
the Federal Deposit Insurance Corporation, the Board of Governors of the Federal
Reserve System and New York State banking authorities.
UNDERWRITERS' AND SPONSORS' PROFITS
Underwriters receive sales charges when they sell units. Sponsors also realize a
profit or loss on deposit of the bonds shown under Municipal Defined Fund
Portfolio. Any cash made available by you to the Sponsors before the settlement
date for those units may be used in the Sponsors' businesses to the extent
permitted by federal law and may benefit the Sponsors.
A Sponsor or Underwriter may realize profits or sustain losses on bonds in the
Fund which were acquired from underwriting syndicates of which it was a member.
We bought approximately 23% of the bonds in the portfolio from one or more of
the Sponsors (as sole underwriter, managing underwriter or member of an
underwriting syndicate).
During the initial offering period, the Sponsors also may realize profits or
sustain losses on units they hold. In maintaining a secondary market, the
Sponsors will also realize profits or sustain losses in the amount of any
difference between the prices at which they buy units and the prices at which
they resell or redeem them.
PUBLIC DISTRIBUTION
During the initial offering period, units will be distributed to the public by
the Sponsors and dealers who are members of the National Association of
Securities Dealers, Inc. This period is 30 days or less if all units are sold.
The Sponsors may extend the initial period up to 120 days.
The Sponsors do not intend to qualify units for sale in any foreign countries.
This prospectus does not constitute an offer to sell units in any country where
units cannot lawfully be sold.
13
<PAGE>
In the initial offering period, the concession to dealers will be $21 per 1,000
units. We may change the concession at any time. Dealers may resell units to
other dealers with a concession not in excess of the original concession to
dealers.
CODE OF ETHICS
Merrill Lynch, as agent for the Sponsors, has adopted a code of ethics requiring
preclearance and reporting of personal securities transactions by its employees
with access to information on portfolio transactions. The goal of the code is to
prevent fraud, deception or misconduct against the Fund and to provide
reasonable standards of conduct.
YEAR 2000 ISSUES
Many computer systems were designed in such a way that they may be unable to
distinguish between the year 2000 and the year 1900 (commonly known as the 'Year
2000 Problem'). We do not expect that the computer system changes necessary to
prepare for the Year 2000 will cause any major operational difficulties for the
Fund. The Year 2000 Problem may adversely affect the issuers of the bonds
contained in the Portfolio, but we cannot predict whether any impact will be
material to the Fund as a whole.
TAXES
The following summary describes some of the important income tax consequences of
holding units. It assumes that you are not a dealer, financial institution,
insurance company or other investor with special circumstances or subject to
special rules. You should consult your own tax adviser about your particular
circumstances.
At the date of issue of each bond, counsel for the issuer delivered an opinion
to the effect that interest on the bond is exempt from regular federal income
tax. However, interest may be subject to state and local taxes and may be taken
into account in determining your preference items for Alternative Minimum Tax
purposes. Neither we nor our counsel have reviewed the issuance of the bonds,
related proceedings or the basis for the opinions of counsel for the issuers. We
cannot assure you that the issuer (or other users) have complied or will comply
with any requirements necessary for a bond to be tax-exempt. If any of the bonds
were determined not to be tax-exempt, you could be required to pay income tax
for current and prior years, and if the Fund were to sell the bond, it might
have to sell it at a substantial discount.
In the opinion of our counsel, under existing law:
GENERAL TREATMENT OF THE FUND AND YOUR INVESTMENT
The Fund will not be taxed as a corporation for federal income tax purposes, and
you will be considered to own directly your share of each bond in the Fund.
GAIN OR LOSS UPON DISPOSITION
When all or part of your share of a bond is disposed of (for example, when the
Fund sells, exchanges or redeems a bond or when you sell or exchange your
units), you will generally recognize capital gain or loss. Your gain, however,
will generally be ordinary income to the extent of any accrued 'market
discount'. Generally you will have market discount to the extent that your basis
in a bond when you purchase a unit is less than its stated redemption price at
maturity (or, if it is an original issue discount bond, the issue price
increased by original issue discount that has
14
<PAGE>
accrued on the bond before your purchase). You should consult your tax adviser
in this regard.
If your net long-term capital gains exceed your net short-term capital losses,
the excess may be subject to tax at a lower rate than ordinary income. Any
capital gain from the Fund will be long-term if you are considered to have held
your investment on each bond for more than one year and short-term otherwise. If
you are an individual and sell your units after holding them for more than 12
months, you may be entitled to a 20% maximum federal tax rate on any resulting
gains. Consult your tax adviser in this regard. Because the deductibility of
capital losses is subject to limitations, you may not be able to deduct all of
your capital losses.
YOUR BASIS IN THE BONDS
Your aggregate basis in the bonds will be equal to the cost of your units,
including any sales charges and the organizational expenses you pay, adjusted to
reflect any accruals of 'original issue discount,' 'acquisition premium' and
'bond premium'. You should consult your tax adviser in this regard.
EXPENSES
If you are not a corporate investor, you will not be entitled to a deduction for
your share of fees and expenses of the Fund. Also, if you borrowed money in
order to purchase or carry your units, you will not be able to deduct the
interest on this borrowing for federal income tax purposes. The IRS may treat
your purchase of units as made with borrowed money even if the money is not
directly traceable to the purchase of units.
STATE AND LOCAL TAXES
Under the income tax laws of the State and City of New York, the Fund will not
be taxed as a corporation. If you are a New York taxpayer, your income from the
Fund will not be tax-exempt in New York except to the extent that the income is
earned on bonds that are tax-exempt for New York purposes. Depending on where
you live, your income from the Fund may be subject to state and local taxation.
You should consult your tax adviser in this regard.
SUPPLEMENTAL INFORMATION
You can receive at no cost supplemental information about the Fund by calling
the Trustee. The supplemental information includes more detailed risk disclosure
about the types of bonds that may be in the Fund's portfolio, general risk
disclosure concerning any insurance securing certain bonds, and general
information about the structure and operation of the Fund. The supplemental
information is also available from the SEC.
15
<PAGE>
MUNICIPAL DEFINED FUND,
DEFINED ASSET FUNDS
REPORT OF INDEPENDENT ACCOUNTANTS
The Sponsors, Trustee and Holders
of Municipal Defined Fund,
Defined Asset Funds:
We have audited the accompanying statement of condition of Municipal
Defined Fund, Defined Asset Funds, including the portfolio, as of July
31, 1999 and the related statements of operations and of changes in
net assets for the period August 15, 1998 to July 31, 1999. These
financial statements are the responsibility of the Trustee. Our
responsibility is to express an opinion on these financial statements
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 statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. Securities owned at July 31, 1999, as shown in
such portfolio, were confirmed to us by The Bank of New York, the
Trustee. An audit also includes assessing the accounting principles
used and significant estimates made by the Trustee, as well as
evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Municipal
Defined Fund, Defined Asset Funds at July 31, 1999 and the results of
its operations and changes in its net assets for the above-stated
period in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, N.Y.
October 20, 1999
D - 1
<PAGE>
MUNICIPAL DEFINED FUND,
DEFINED ASSET FUNDS
STATEMENT OF CONDITION
AS OF JULY 31, 1999
<TABLE>
<S> <C> <C>
TRUST PROPERTY:
Investment in marketable securities - at value
(cost $14,841,795)(Note 1)..................... $14,102,221
Receivable from security sold or redeemed........ 157,705
Accrued interest receivable...................... 185,565
Accrued interest receivable on segregated bonds 889
Cash............................................. 188,535
_____________
Total trust property................. 14,634,915
LESS LIABILITIES:
Redemptions payable.............................. $ 161,677
Deferred sales charge (Note 5)................... 63,163
Accrued expenses................................. 5,118 229,958
_____________ _____________
NET ASSETS, REPRESENTED BY:
14,754,087 units of fractional undivided
interest outstanding (Note 3).................. 14,039,945
Undistributed net investment income.............. 365,012
_____________
$14,404,957
=============
UNIT VALUE ($14,404,957/14,754,087 units).......... $0.97634
=============
</TABLE>
See Notes to Financial Statements.
D - 2
<PAGE>
MUNICIPAL DEFINED FUND,
DEFINED ASSET FUNDS
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
August 15,
1998
to
July 31,
1999
_____________
<S> <C>
INVESTMENT INCOME:
Interest income........................... $ 761,274
Interest income on segregated bonds....... 10,670
Trustee's fees and expenses............... (3,150)
Sponsors' fees............................ (5,271)
_____________
Net investment income..................... 763,523
_____________
REALIZED AND UNREALIZED (LOSS)
ON INVESTMENTS:
Realized loss on securities sold
or redeemed............................. (13,821)
Unrealized depreciation of investments.... (739,574)
_____________
Net realized and unrealized loss on
investments............................. (753,395)
_____________
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS........................... $ 10,128
=============
</TABLE>
See Notes to Financial Statements.
D - 3
<PAGE>
MUNICIPAL DEFINED FUND,
DEFINED ASSET FUNDS
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
August 15,
1998
to
July 31,
1999
_____________
<S> <C>
OPERATIONS:
Net investment income....................... $ 763,523
Realized loss on securities sold
or redeemed............................... (13,821)
Unrealized depreciation of investments...... (739,574)
_____________
Net increase in net assets resulting
from operations........................... 10,128
INCOME DISTRIBUTIONS TO HOLDERS (Note 2)...... (382,199)
DEFERRED SALES CHARGE (Note 5)................ (74,902)
CAPITAL SHARE TRANSACTIONS - Redemptions of
245,913 units............................... (238,557)
_____________
NET DECREASE IN NET ASSETS.................... (685,530)
NET ASSETS AT BEGINNING OF PERIOD............. 15,090,487
_____________
NET ASSETS AT END OF PERIOD................... $14,404,957
=============
PER UNIT:
Income distributions during period.......... $0.02548
=============
Net asset value at end of period............ $0.97634
=============
TRUST UNITS OUTSTANDING AT END OF PERIOD...... 14,754,087
=============
</TABLE>
See Notes to Financial Statements.
D - 4
<PAGE>
MUNICIPAL DEFINED FUND,
DEFINED ASSET FUNDS
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Fund is registered under the Investment Company Act of 1940 as
a Unit Investment Trust. The following is a summary of significant
accounting policies consistently followed by the Fund in the
preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles.
(a) Securities are stated at value as determined by the Evaluator
based on bid side evaluations for the securities, except that
value on August 15, 1998 was based upon offer side evaluations
at August 13, 1998, the day prior to the Date of Deposit. Cost
of securities at August 15, 1998 was also based on such offer
side evaluations.
(b) The Fund is not subject to income taxes. Accordingly, no
provision for such taxes is required.
(c) Interest income is recorded as earned.
2. DISTRIBUTIONS
A distribution of net investment income is made to Holders each
month. Receipts other than interest, after deductions for
redemptions and applicable expenses, are also distributed
periodically.
3. NET CAPITAL
<TABLE>
<S> <C>
Cost of 14,754,087 units at Date of Deposit......... $14,843,091
Redemptions of units - net cost of 245,913 units
redeemed less redemption amounts.................. 14,481
Realized loss on securities sold or redeemed........ (13,821)
Interest income on segregated bonds................. 10,670
Deferred sales charge............................... (74,902)
Unrealized depreciation of investments.............. (739,574)
______________
Net capital applicable to Holders................... $14,039,945
==============
</TABLE>
4. INCOME TAXES
As of July 31, 1999, unrealized depreciation of investments, based
on cost for Federal income tax purposes, aggregated $739,574, all of
which related to depreciated securities. The cost of investment
securities for Federal income tax purposes was $14,841,795 at
July 31, 1999.
D - 5
<PAGE>
MUNICIPAL DEFINED FUND,
DEFINED ASSET FUNDS
NOTES TO FINANCIAL STATEMENTS
5. DEFERRED SALES CHARGE
A deferred sales fee of $19.00 per 1,000 units is payable over a two-year
period ($2.38 per 1,000 units quaterly in the first year and $2.37 per
1,000 units quaterly in the second year.)
D - 6
<PAGE>
MUNICIPAL DEFINED FUND,
DEFINED ASSET FUNDS
PORTFOLIO
AS OF JULY 31, 1999
<TABLE>
<CAPTION>
Ratings Optional
Portfolio No. and Title of of Face Redemption
Securities Issues(1) Amount Coupon Maturities(3) Provisions(3) Cost(2) Value(2)
__________ _________ ______ ______ _____________ _____________ _______ ________
<S> <C> <C> <C> <C> <C> <C> <C>
1 City of Gulf Breeze, FL, Cap. AAA $ 1,125,000 4.500% 2027 06/01/08 $ 1,015,223 $ 944,989
Funding Rev. Bonds, Ser. 1997 @ 100.000
B (MBIA Ins.)(4)
2 Illinois Dev. Fin. Auth., Rev. AA- 1,000,000 5.500 2028 10/01/08 1,008,740 959,300
Bonds (Steppenwolf Theatre Co.) @ 102.000
Ser. 1998 (LaSalle National Bank -
Letter of Credit)
3 City of Del Rio, TX (Val Verde AA 50,000 5.700 2014 04/01/08 51,263 49,603
Cnty.), Combination Tax and Rev. @ 100.000
Certs. of Oblig., Ser. 1998 (Asset 75,000 5.750 2016 04/01/08 76,894 74,122
Guaranty Ins.) (4) @ 100.000
95,000 5.750 2017 04/01/08 97,399 93,645
@ 100.000
50,000 5.750 2018 04/01/08 51,263 49,153
@ 100.000
4 Indiana Hlth. Fac. Financing A-(f) 1,125,000 5.125 2017 02/15/08 1,095,491 1,044,405
Auth., Hosp. Rev. Rfdg. Bonds @ 102.000
(Jackson Cnty., Schneck Mem.
Hosp. Proj.) Ser. 1998
5 County of Franklin, OH, Hlth. NR 500,000 5.500 2021 07/01/08 493,560 469,130
Care Facs. Rfdg. Rev. Bonds (Ohio @ 101.000
Presbyterian Retirement Svcs.),
Ser. 1997
6 Duluth Econ. Dev. Auth., MN, Hlth NR 250,000 5.875 2028 06/01/05 252,813 237,925
Care Facs. Rev. Bonds (BSM @ 102.000
Properties, Inc. Proj.), Ser. 375,000 5.625 2018 06/01/05 379,219 355,511
1998 A @ 102.000
</TABLE>
D - 7
<PAGE>
MUNICIPAL DEFINED FUND,
DEFINED ASSET FUNDS
PORTFOLIO
AS OF JULY 31, 1999
<TABLE>
<CAPTION>
Ratings Optional
Portfolio No. and Title of of Face Redemption
Securities Issues(1) Amount Coupon Maturities(3) Provisions(3) Cost(2) Value(2)
__________ _________ ______ ______ _____________ _____________ _______ ________
<S> <C> <C> <C> <C> <C> <C> <C>
7 Michigan State Hosp. Fin. Auth., AA-(f) $ 500,000 4.500% 2021 10/15/03 $ 443,895 $ 411,785
Rev. and Rfdg. Bonds (McLaren @ 102.000
Oblig. Group), Ser. 1993 A
8 Madison Cnty., MO, Hosp. Rfdg. Rev. NR 350,000 5.750 2018 10/01/08 357,217 337,379
Bonds, Ser. 1998 @ 101.000
375,000 5.875 2026 10/01/08 382,732 357,630
@ 101.000
9 New Jersey Econ. Dev. Auth., First A 1,000,000 5.500 2028 07/01/08 1,004,260 964,910
Mtge. Rev. Fixed Rate Bonds @ 102.000
(Cadbury Corp. Proj.), Ser. 1998
A (ACA Ins.) (4)
10 Wisconsin Hlth. and Educl. Facs. A- 500,000 5.500 2028 02/15/08 504,240 459,025
Auth., Rev. Bonds (Franciscan @ 101.000
Sister of Christian Charity Health
Care Ministry, Inc.), Ser. 1998 A
11 Wisconsin Hlth. and Educl. Facs. A 750,000 5.375 2028 06/01/08 741,690 703,560
Auth. Rev. Bonds (The Richland @ 100.000
Hosp. Inc. Proj.), Ser. 1998 A
(ACA Ins.) (4)
12 Virginia Hsg. Dev. Auth, Multi- AA+ 750,000 5.600 2018 01/01/08 763,215 757,628
Family Housing Bonds, Ser. 1998-1 @ 102.000
13 Wyoming Cmnty. Dev. Auth. Hsg. AA 750,000 5.450 2029 06/01/08 756,435 724,073
Rev. Bonds, Ser. 1998-1 @ 101.500
14 Illinois Hsg. Dev. Auth., Section 8 AAA 710,000 5.250 2021 01/01/08 710,000 689,531
Elderly Hsg. Rfdg. Rev. Bonds @ 101.500
(Morningside North Dev.), Ser 1998
(FSA Ins.)(4)
</TABLE>
D - 8
<PAGE>
MUNICIPAL DEFINED FUND,
DEFINED ASSET FUNDS
PORTFOLIO
AS OF JULY 31, 1999
<TABLE>
<CAPTION>
Ratings Optional
Portfolio No. and Title of of Face Redemption
Securities Issues(1) Amount Coupon Maturities(3) Provisions(3) Cost(2) Value(2)
__________ _________ ______ ______ _____________ _____________ _______ ________
<S> <C> <C> <C> <C> <C> <C> <C>
15 Illinois Hsg. Dev. Auth., Section 8 AAA $ 130,000 3.900% 2000 None $ 130,000 $ 129,856
Elderly Hsg. Rfdg. Rev. Bonds 140,000 4.000 2001 None 140,000 139,595
(Morningside North Dev.), Ser 1998
(FSA Ins.) (4) (5)
16 City of Mishawaka Multi-School A 750,000 5.625 2023 11/05/08 773,895 743,708
Bldg. Corp., IN, First Mtge. Bonds @ 102.000
(St. Joseph Cnty., Indiana),
Ser. 1998
17 Anoka Cnty., MN, Certs. of Part. A3(m) 535,000 5.400 2028 06/01/08 541,040 520,480
(Norwest Bank Minnesota, N.A.), @ 100.000
Ser. 1998
18 Dormitory Auth. of the State of New A(f) 1,000,000 4.750 2028 05/15/08 932,170 870,100
York, NY, State Univ. Educl. Facs. @ 101.000
Rev. Bonds, Ser. 1998 B
19 New York State Urban Dev. Corp., A(f) 200,000 5.000 2028 01/01/08 192,540 180,922
Corr., Facs. Svc. Contract, Rev. @ 102.000
Bonds, Ser. 1998 A
20 New Hampshire Higher Educl. and Aaa(m) 625,000 5.450 2025 06/01/05 631,468 607,244
Hlth. Facs. Auth., Rev. Bonds, @ 102.000
Dartmouth Educl. Loan Corp. Issues,
Ser. 1985
21 New Hampshire Higher Educl. and A 560,000 5.300 2028 04/01/08 555,789 519,305
Hlth. Facs. Auth., Rev. Bonds, @ 102.000
Franklin Pierce Coll. Issue, Ser.
1998 (ACA Ins.) (4)
</TABLE>
D - 9
<PAGE>
MUNICIPAL DEFINED FUND,
DEFINED ASSET FUNDS
PORTFOLIO
AS OF JULY 31, 1999
<TABLE>
<CAPTION>
Ratings Optional
Portfolio No. and Title of of Face Redemption
Securities Issues(1) Amount Coupon Maturities(3) Provisions(3) Cost(2) Value(2)
__________ _________ ______ ______ _____________ _____________ _______ ________
<S> <C> <C> <C> <C> <C> <C> <C>
22 Skagit Valley Coll. Foundation, NR $ 375,000 5.625% 2017 11/01/08 $ 379,672 $ 355,117
WA, Stud. Hsg. Rev. and Rfdg. @ 100.000
Bonds, Ser. 1998 375,000 5.750 2023 11/01/08 379,672 352,590
@ 100.000
______________ ______________ _____________
TOTAL $15,020,000 $14,841,795 $14,102,221
============== ============== =============
</TABLE>
See Notes to Portfolio.
D - 10
<PAGE>
MUNICIPAL DEFINED FUND,
DEFINED ASSET FUNDS
NOTES TO PORTFOLIO
AS OF JULY 31, 1999
(1) The ratings of the bonds are by Standard & Poor's Ratings
Group, or by Moody's Investors Service, Inc. if followed by
"(m)", or by Fitch Investors Service, Inc. if followed by
"(f)"; "NR" indicates that this bond is not currently rated by
any of the above-mentioned rating services. These ratings have
been furnished by the Evaluator but not confirmed with
the rating agencies.
(2) See Notes to Financial Statements.
(3) Optional redemption provisions, which may be exercised in whole
or in part, are initially at prices of par plus a premium, then
subsequently at prices declining to par. Certain securities may
provide for redemption at par prior or in addition to any
optional or mandatory redemption dates or maturity, for
example, through the operation of a maintenance and replacement
fund, if proceeds are not able to be used as contemplated, the
project is condemned or sold or the project is destroyed and
insurance proceeds are used to redeem the securities. Many of
the securities are also subject to mandatory sinking fund
redemption commencing on dates which may be prior to the date
on which securities may be optionally redeemed. Sinking fund
redemptions are at par and redeem only part of the issue. Some
of the securities have mandatory sinking funds which contain
optional provisions permitting the issuer to increase the
principal amount of securities called on a mandatory redemption
date. The sinking fund redemptions with optional provisions
may, and optional refunding redemptions generally will, occur
at times when the redeemed securities have an offering side
evaluation which represents a premium over par. To the extent
that the securities were acquired at a price higher than the
redemption price, this will represent a loss of capital when
compared with the Public Offering Price of the Units when
acquired. Distributions will generally be reduced by the amount
of the income which would otherwise have been paid with respect
to redeemed securities and there will be distributed to Holders
any principal amount and premium received on such redemption
after satisfying any redemption requests for Units received by
the Fund. The estimated current return may be affected by
redemptions.
(4) Insured by the indicated municipal bond insurance company.
(5) It is anticipated that interest and principal received from
these bonds will be applied to the payment of the Trust's
deferred sales charges.
D - 11
Defined
Asset FundsSM
HAVE QUESTIONS ? MUNICIPAL DEFINED FUND--2
Request the most (A Unit Investment Trust)
recent free Information ---------------------------------------
Supplement that gives more This Prospectus does not contain
details about the Fund, complete information about the
by calling: investment company filed with the
The Chase Manhattan Bank Securities and Exchange Commission in
1-800-323-1508 Washington, D.C. under the:
o Securities Act of 1933 (file no.
333-62185) and
o Investment Company Act of 1940 (file
no. 811-2537).
TO OBTAIN COPIES AT PRESCRIBED RATES--
WRITE: Public Reference Section of the
Commission
450 Fifth Street, N.W., Washington,
D.C. 20549-6009
CALL: 1-800-SEC-0330.
VISIT: http://www.sec.gov.
---------------------------------------
No person is authorized to give any
information or representations about
this Fund not contained in this
Prospectus or the Information
Supplement, and you should not rely on
any other information.
---------------------------------------
When units of this Fund are no longer
available, this Prospectus may be used
as a preliminary prospectus for a
future series, but some of the
information in this Prospectus will be
changed for that series.
Units of any future series may not be
sold nor may offers to buy be accepted
until that series has become effective
with the Securities and Exchange
Commission. No units can be sold in any
State where a sale would be illegal.
70112--11/99
<PAGE>
DEFINED ASSET FUNDS--
MUNICIPAL DEFINED FUND
CONTENTS OF REGISTRATION STATEMENT
This Post-Effective Amendment to the Registration Statement on Form S-6
comprises the following papers and documents:
The facing sheet of Form S-6.
The cross-reference sheet (incorporated by reference to the Cross-Reference
Sheet to the Registration Statement of Defined Asset Funds Municipal Insured
Series, 1933 Act File No. 33-54565).
The Prospectus.
The Signatures.
The following exhibits:
1.1.1--Form of Standard Terms and Conditions of Trust Effective as of
October 21, 1993 (incorporated by reference to Exhibit 1.1.1 to the
Registration Statement of Municipal Investment Trust Fund,
Multi-state Series--48, 1933 Act File No. 33-50247).
4.1 --Consent of the Evaluator.
5.1 --Consent of independent accountants.
9.1 --Information Supplement (incorporated by reference to Exhibit 9.1 to
Amendment No. 4 to the Registration Statement of Municipal
Investment Trust Fund, Multistate Series--409, 1933 Act File No.
333-81777).
R-1
<PAGE>
DEFINED ASSET FUNDS--
MUNICIPAL DEFINED FUND--2
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT,
DEFINED ASSET FUNDS--MUNICIPAL DEFINED FUND--2, CERTIFIES THAT IT MEETS ALL OF
THE REQUIREMENTS FOR EFFECTIVENESS OF THIS REGISTRATION STATEMENT PURSUANT TO
RULE 485(B) UNDER THE SECURITIES ACT OF 1933 AND HAS DULY CAUSED THIS
REGISTRATION STATEMENT OR AMENDMENT TO THE REGISTRATION STATEMENT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED IN THE CITY OF NEW
YORK AND STATE OF NEW YORK ON THE 10TH DAY OF NOVEMBER, 1999.
SIGNATURES APPEAR ON PAGES R-3, R-4, R-5 AND R-6.
A majority of the members of the Board of Directors of Merrill Lynch,
Pierce, Fenner & Smith Incorporated has signed this Registration Statement or
Amendment to the Registration Statement pursuant to Powers of Attorney
authorizing the person signing this Registration Statement or Amendment to the
Registration Statement to do so on behalf of such members.
A majority of the members of the Board of Directors of Salomon Smith Barney
Inc. has signed this Registration Statement or Amendment to the Registration
Statement pursuant to Powers of Attorney authorizing the person signing this
Registration Statement or Amendment to the Registration Statement to do so on
behalf of such members.
A majority of the members of the Executive Committee of the Board of
Directors of PaineWebber Incorporated has signed this Registration Statement or
Amendment to the Registration Statement pursuant to Powers of Attorney
authorizing the person signing this Registration Statement or Amendment to the
Registration Statement to do so on behalf of such members.
A majority of the members of the Board of Directors of Dean Witter Reynolds
Inc. has signed this Registration Statement or Amendment to the Registration
Statement pursuant to Powers of Attorney authorizing the person signing this
Registration Statement or Amendment to the Registration Statement to do so on
behalf of such members.
R-2
<PAGE>
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
DEPOSITOR
By the following persons, who constitute Powers of Attorney have been filed
a majority of under
the Board of Directors of Merrill Form SE and the following 1933 Act
Lynch, Pierce, File
Fenner & Smith Incorporated: Number: 333-70593
GEORGE A. SCHIEREN
JOHN L. STEFFENS
By J. DAVID MEGLEN
(As authorized signatory for Merrill Lynch, Pierce,
Fenner & Smith Incorporated and
Attorney-in-fact for the persons listed above)
R-3
<PAGE>
SALOMON SMITH BARNEY INC.
DEPOSITOR
By the following persons, who constitute a majority of Powers of Attorney
the Board of Directors of Salomon Smith Barney Inc.: have been filed
under the 1933 Act
File Numbers:
333-63417 and
333-63033
MICHAEL A. CARPENTER
DERYCK C. MAUGHAN
By GINA LEMON
(As authorized signatory for
Salomon Smith Barney Inc. and
Attorney-in-fact for the persons listed above)
R-4
<PAGE>
PAINEWEBBER INCORPORATED
DEPOSITOR
By the following persons, who constitute Powers of Attorney have been filed
the Board of Directors of PaineWebber under
Incorporated: the following 1933 Act File
Number: 33-55073
MARGO N. ALEXANDER
TERRY L. ATKINSON
BRIAN M. BAREFOOT
STEVEN P. BAUM
MICHAEL CULP
REGINA A. DOLAN
JOSEPH J. GRANO, JR.
EDWARD M. KERSCHNER
JAMES P. MacGILVRAY
DONALD B. MARRON
ROBERT H. SILVER
MARK B. SUTTON
By
ROBERT E. HOLLEY
(As authorized signatory for
PaineWebber Incorporated
and Attorney-in-fact for the persons listed above)
R-5
<PAGE>
DEAN WITTER REYNOLDS INC.
DEPOSITOR
By the following persons, who constitute Powers of Attorney have been filed
a majority of under Form SE and the following 1933
the Board of Directors of Dean Witter Act File Numbers: 33-17085,
Reynolds Inc.: 333-13039 and 333-47553
RICHARD M. DeMARTINI
RAYMOND J. DROP
JAMES F. HIGGINS
MITCHELL M. MERIN
STEPHEN R. MILLER
PHILIP J. PURCELL
THOMAS C. SCHNEIDER
By
MICHAEL D. BROWNE
(As authorized signatory for
Dean Witter Reynolds Inc.
and Attorney-in-fact for the persons listed above)
R-6
<PAGE>
EXHIBIT 4.1
STANDARD & POOR'S
A DIVISION OF THE McGRAW-HILL COMPANIES
J. J. KENNY
65 BROADWAY
NEW YORK, N.Y. 10006-2551
TELEPHONE (212) 770-4422
FAX 212/797-8681
November 10, 1999
Frank A. Ciccotto, Jr.
Vice President
Tax-Exempt Evaluations
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Defined Asset Funds
P.O. Box 9051
Princeton, New Jersey 08543-9051
The Chase Manhattan Bank
4 New York Plaza
1-800-323-1508
RE: DEFINED ASSET FUNDS--MUNICIPAL DEFINED FUND--2
Gentlemen:
We have examined the post-effective Amendment to the Registration Statement
File No. 333-62185 for the above-captioned trust. We hereby acknowledge that
Kenny S&P Evaluation Services, a division of J. J. Kenny Co., Inc. is currently
acting as the evaluator for the trust. We hereby consent to the use in the
Amendment of the reference to Kenny S&P Evaluation Services, a division of J. J.
Kenny Co., Inc. as evaluator.
In addition, we hereby confirm that the ratings indicated in the
above-referenced Amendment to the Registration Statement for the respective
bonds comprising the trust portfolio are the ratings currently indicated in our
KENNYBASE database.
You are hereby authorized to file copies of this letter with the Securities
and Exchange Commission.
Sincerely,
FRANK A. CICCOTTO
Vice President
<PAGE>
Exhibit 5.1
CONSENT OF INDEPENDENT ACCOUNTANTS
The Sponsors and Trustee of
Municipal Defined Fund--2, Defined Asset Funds
We consent to the use in this Post-Effective Amendment No. 1 to Registration
Statement No. 333-62185 of our opinion dated October 28, 1999 appearing in the
Prospectus, which is part of such Registration Statement, and to the reference
to us under the heading 'Auditors' in such Prospectus.
DELOITTE & TOUCHE LLP
New York, N.Y.
November 10, 1999
