<PAGE>
DEFINED ASSET FUNDS-SM-
------------------------------
----------------------
MUNICIPAL DEFINED FUND
SERIES 12
(A UNIT INVESTMENT TRUST)
- PORTFOLIO OF LONG TERM MUNICIPAL BONDS
- DESIGNED FOR FEDERALLY TAX-FREE INCOME
- DISTRIBUTIONS TWICE A YEAR
SPONSORS:
Merrill Lynch, -----------------------------------------------------
Pierce, Fenner & Smith The Securities and Exchange Commission has not
Incorporated approved or disapproved these Securities or passed
Salomon Smith Barney Inc. upon the adequacy of this prospectus. Any
PaineWebber Incorporated representation to the contrary is a criminal offense.
Dean Witter Reynolds Inc. Prospectus dated December 3, 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:
- Fixed portfolio: Defined Funds follow a buy and hold investment strategy;
funds are not managed and portfolio changes are limited.
- Defined Portfolios: We choose the stocks and bonds in advance, so you know
what you're investing in.
- Professional research: Our dedicated research team seeks out stocks or bonds
appropriate for a particular fund's objectives.
- Ongoing supervision: We monitor each portfolio on an ongoing basis.
No matter what your investment goals, tolerance for risk or time horizon,
there's probably a Defined Asset Fund that suits your investment style. Your
financial professional can help you select a Defined Asset Fund that works best
for your investment portfolio.
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<S> <C>
CONTENTS
PAGE
--
Risk/Return Summary and Portfolio.... 3
What You Can Expect From Your
Investment......................... 6
Income Twice A Year................ 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
Bond Quality Risk.................. 7
Insurance Related Risk............. 7
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................... 9
Pricing............................ 9
Evaluations........................ 10
Income............................. 10
Expenses........................... 10
Portfolio Changes.................. 11
Fund Termination................... 11
Certificates....................... 12
Trust Indenture.................... 12
Legal Opinion...................... 13
Auditors........................... 13
Sponsors........................... 13
Trustee............................ 13
Underwriters' and Sponsors'
Profits.......................... 13
Public Distribution................ 14
Code of Ethics..................... 14
Year 2000 Issues................... 14
Taxes................................ 14
Supplemental Information............. 16
Financial Statements................. 17
Report of Independent Accountants.. 17
Statement of Condition............. 17
</TABLE>
2
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RISK/RETURN SUMMARY
<TABLE>
<C> <S>
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 20- 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?
- The Fund plans to hold to maturity 15
long-term tax-exempt municipal bonds
with an aggregate face amount of
$13,000,000, and some short-term bonds
reserved to pay the deferred sales
charge. The Fund is a unit investment
trust which means that, unlike a mutual
fund, the Fund's portfolio is not
managed.
- The bonds are rated A or better by
Standard & Poor's, Moody's or Fitch or
in the opinion of the agent for the
Sponsors have similar credit quality to
other bonds in the portfolio.
- 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.
- 5% of the bonds are insured by AAA-rated
insurance companies, 23% of the bonds
are insured by AA-rated insuance
companies and 15% are insured by A-rated
insurance companies. Insurance
guarantees 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:
</TABLE>
<TABLE>
- Airports/Ports/Highways 5%
<C> <S>
- General Obligation 8%
- Hospital/Health Care 17%
- Housing 8%
- Lease Rental 8%
- Municipal Electric Utilities 2%
- Natural Resources 8%
- State/Local Government Supported 15%
- University/College 16%
- Miscellaneous 13%
</TABLE>
<TABLE>
<C> <S>
4. WHAT ARE THE SIGNIFICANT RISKS?
YOU CAN LOSE MONEY BY INVESTING IN THE
FUND. THIS CAN HAPPEN FOR VARIOUS
REASONS, INCLUDING:
- Rising interest rates, an issuer's
worsening financial condition or a drop
in bond ratings can reduce the price of
your units.
- Assuming no changes in interest rates,
when you sell your units, they will
generally be worth less than your cost
because your cost included a sales fee.
- The Fund will receive early returns of
principal if bonds are 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.
</TABLE>
<TABLE>
<C> <S>
DEFINING YOUR INCOME
AND ESTIMATING YOUR RETURN
</TABLE>
<TABLE>
<C> <S> <C>
WHAT YOU MAY EXPECT (Record Day: 10th day of
each June and December)
First payment per 1,000 units (6/25/00): $29.35
Regular Semi-Annual Income per 1,000 units
(each June and December beginning 12/25/00): $28.25
Annual Income per 1,000 units: $56.50
THESE FIGURES ARE ESTIMATES ON THE BUSINESS DAY BEFORE
THE INITIAL DATE OF DEPOSIT; ACTUAL PAYMENTS MAY VARY.
Estimated Current Return 5.85%
Estimated Long Term Return 5.99%
THESE RETURNS WILL VARY (SEE PAGE 6).
</TABLE>
3
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MUNICIPAL DEFINED FUND PORTFOLIO
- --------------------------------------------------------------------------------
SERIES 12
<TABLE>
<CAPTION>
RATING COST
PORTFOLIO TITLE COUPON MATURITY (1) OF ISSUES (2) TO FUND (3)
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
</TABLE>
AIRPORTS/PORTS/HIGHWAYS (5%):
<TABLE>
<S> <C> <C> <C> <C>
1. $720,000 Massachusetts Tpke. Auth., 5.00% 01/01/37 AAA $ 610,560.00
Metro. Hwy. Sys. Rev. Bonds, Ser. 1997 A
(MBIA Ins.)
</TABLE>
GENERAL OBLIGATION (8%):
<TABLE>
<S> <C> <C> <C> <C>
2. $1,000,000 Cypress Hill Mun. Util. Dis. 6.15 09/01/28 AA 1,000,000.00
No. 1, Unltd. Tax Bonds (A Political
Subdivision of the State of Texas located
within Harris Cnty.), Ser. 1999 (Asset
Guaranty Ins.)
</TABLE>
HOSPITALS/HEALTH CARE (17%):
<TABLE>
<S> <C> <C> <C> <C>
3. $1,030,000 South Dakota Hlth. and Educl. 6.125 11/01/29 A+ 992,384.40
Fac. Auth., Rfdg. Rev. Bonds (Children's
Care Hosp. and Sch. Issue), Ser. 1999
4. $1,000,000 Wisconsin Hlth. and Educl. 5.60- 02/15/29 A- 844,500.00
Fac. Auth., Rev. Bonds (Aurora Hlth. 5.625
Care, Inc.), Ser. 1999 A & B
5. $275,000 Wisconsin Hlth. and Educl. Fac. 5.50 02/15/28 A-(m) 231,874.50
Auth., Rev. Bonds (Franciscan Sisters of
Christian Charity Hlth. Care Ministry,
Inc.), Ser. 1998 A
</TABLE>
HOUSING (8%):
<TABLE>
<S> <C> <C> <C> <C>
6. $1,000,000 Wyoming Cmnty. Dev. Auth. Hsg. 5.45 12/01/29 AA 911,010.00
Rev. Bonds, Ser. 1998-1
</TABLE>
LEASE RENTAL (8%):
<TABLE>
<S> <C> <C> <C> <C>
7. $1,000,000 New Jersey Econ. Dev. Auth., 6.25 07/01/24 A 1,004,250.00
Dept. of Human Svcs. Composite Bonds
(Div. of Dev. Disabilities), Ser. 1999 A
</TABLE>
MUNICIPAL ELECTRIC UTILITIES (2%):
<TABLE>
<S> <C> <C> <C> <C>
8. $230,000 Long Island, NY, Pwr. Auth., 4.25- 04/01/01- A- $ 231,024.65
Elec. Sys. Gen. Rev. Bonds, Ser. 1998 5.00% 04/01/02
B(4)
</TABLE>
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(1) Approximately 13% of the long-term bonds are callable in 2007, 8% are
callable in 2008 and the remaining bonds are callable in 2009 and later.
Some bonds could be called earlier under extraordinary circumstances.
(2) 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 IBCA, Inc. rating. Ratings A through AAA indicate
good to highest quality bonds with a strong to very strong capacity to pay
interest and repay principal. Bonds designated by 'NR' are not rated but in
the opinion of the agent for the Sponsors have similar credit quality to
other bonds in the portfolio.
----------------------------
PLEASE NOTE THAT IF THIS PROSPECTUS IS USED AS A PRELIMINARY
PROSPECTUS
FOR A FUTURE FUND IN THIS SERIES, THE PORTFOLIO WILL CONTAIN
DIFFERENT
BONDS FROM THOSE DESCRIBED ABOVE.
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MUNICIPAL DEFINED FUND PORTFOLIO
- --------------------------------------------------------------------------------
SERIES 12
<TABLE>
<CAPTION>
RATING COST
PORTFOLIO TITLE COUPON MATURITY (1) OF ISSUES (2) TO FUND (3)
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
</TABLE>
NATURAL RESOURCES (8%):
<TABLE>
<S> <C> <C> <C> <C>
9. $1,000,000 The Industrial Dev. Bd. of the 5.375 06/01/28 AA- 896,400.00
Town of McIntosh, AL, Envir. Facs. Rfdg.
Rev. Bonds (Ciba Specialty Chemicals
Corp. Proj.), Ser. 1998 C
</TABLE>
STATE/LOCAL GOVERNMENT SUPPORTED (15%):
<TABLE>
<S> <C> <C> <C> <C>
10. $1,050,000 Fort Bend Cnty. Mun. Util. 6.125 09/01/28 AA 1,039,363.50
Dist. No. 23, Unltd. Tax Bonds (A
Political Subdivision of the State of
Texas, located within Fort Bend Cnty.),
Ser. 1999 (Asset Guaranty Ins.)
11. $1,000,000 City of Lewisville, TX, 5.80 09/01/25 A 936,590.00
Combination Contract Rev. and Spec.
Assessment Rfdg. and Cap. Imp. Bonds
(Castle Hills Proj.), Ser. 1998 (ACA
Ins.)
</TABLE>
UNIVERSITY/COLLEGE (16%):
<TABLE>
<S> <C> <C> <C> <C>
12. $200,000 Iowa Higher Educ. Loan Auth., 6.00 10/01/19 NR 188,920.00
Pvt. Coll. Fac. Rev. Bonds (Mount Mercy
Coll. Proj.), Ser. 1999
13. $1,000,000 Washington State Hsg. Fin. 5.30 07/01/31 AA- 869,700.00
Comm. Hsg. and Nonprofit Rev. Bonds
(Seattle Univ. Aux. Svcs. Proj.), Ser.
1998 (Bank of America NW--Letter of
Credit)
14. $1,000,000 Dormitory Auth. of the State 6.25 07/01/29 AA 1,000,000.00
of New York, Marymount Manhattan Coll.,
Ins. Rev. Bonds, Ser. 1999 (Asset
Guaranty)
</TABLE>
MISCELLANEOUS (13%):
<TABLE>
<S> <C> <C> <C> <C>
15. $675,000 Tulsa, OK, Indl. Auth. Educl. 5.25 12/01/19 A- 605,630.25
Facs. Rev. Bonds (Holland Hall Sch.
Proj.), Ser. 1999 A
16. $1,050,000 Virgin Islands Pub. Fin. 6.125 10/01/29 A 1,050,000.00
Auth., Rev. Bonds (Virgin Islands Gross
Receipts Taxes Loan Note), Ser. 1999 A
(ACA Ins.)
---------------
$ 12,412,207.30
===============
</TABLE>
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(3) Approximately 9% of the bonds were deposited at a premium, 23% at par, and
68% at a discount from par. Sponsors' profit on deposit was $119,386.65.
(4) The interest and principal on these bonds will be used to pay the deferred
sales charge obligations of the investors, and these amounts are not
included in the calculation of Estimated Current and Long Term Returns.
----------------------------
PLEASE NOTE THAT IF THIS PROSPECTUS IS USED AS A PRELIMINARY
PROSPECTUS
FOR A FUTURE FUND IN THIS SERIES, THE PORTFOLIO WILL CONTAIN
DIFFERENT
BONDS FROM THOSE DESCRIBED ABOVE.
<PAGE>
<TABLE>
<C> <S>
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.
</TABLE>
<TABLE>
<C> <S>
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.
</TABLE>
<TABLE>
<C> <S> <C>
INVESTOR FEES
2.90%
Maximum Sales Fee (Load) on new
purchases (as a percentage of $1,000
invested)
</TABLE>
<TABLE>
<C> <S>
You will pay an up-front sales fee of
1.00%, as well as a total deferred sales
fee of $19.00 per 1,000 units ($2.38 per
1,000 units quarterly in the first year
and $2.37 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:
</TABLE>
<TABLE>
<CAPTION>
YOUR MAXIMUM
SALES FEE
IF YOU INVEST: WILL BE:
-------------- ------------
<C> <S> <C>
Less than $100,000 2.90%
$100,000 to $249,999 2.65%
$250,000 to $499,999 2.40%
$500,000 to $999,999 2.15%
$1,000,000 and over 1.90%
Maximum Exchange Fee 1.90%
</TABLE>
<TABLE>
<C> <S>
ESTIMATED ANNUAL FUND OPERATING EXPENSES
</TABLE>
<TABLE>
<CAPTION>
AS A % OF AMOUNT
$1,000 PER 1,000
INVESTED UNITS
--------- ---------
<C> <S> <C> <C>
.066 % $0.63
Trustee's Fee
.048 % $0.46
Portfolio Supervision,
Bookkeeping and
Administrative Fees
(including updating
expenses)
.011 % $0.10
Evaluator's Fee
.016 % $0.16
Other Operating Expenses
------- -----
.141 % $1.35
TOTAL
</TABLE>
<TABLE>
<CAPTION>
AMOUNT
PER 1,000
UNITS
---------
<C> <S> <C>
$2.00
ORGANIZATIONAL COSTS (deducted from
Fund assets at the close of the
initial offering period)
</TABLE>
<TABLE>
<C> <S>
The Sponsors historically paid updating
expenses.
EXAMPLE
This example may help you compare the cost of
investing in the Fund to the cost of investing
in other funds.
The example assumes that you invest $10,000 in
the Fund for the periods indicated and sell all
your units at the end of those periods. The
example also assumes a 5% return on your
investment each year and that the Fund's
operating expenses stay the same. Although your
actual costs may be higher or lower, based on
these assumptions your costs would be:
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
$324 $355 $389 $489
</TABLE>
<TABLE>
<C> <S>
You will pay the following expenses if
you do not sell your units:
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
$229 $355 $389 $489
</TABLE>
<TABLE>
<C> <S>
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.
</TABLE>
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<TABLE>
<CAPTION>
High 1.81% 6.93% 6.10% 2.95 8.13% 6.64%
<S> <C> <C> <C> <C> <C> <C>
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
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Average
Sales fee 1.93% 5.01% 5.77%
</TABLE>
-----------------------------------------------------------
Note: All returns represent changes in unit price with distributions reinvested
into the Municipal Fund Investment Accumulation Program.
- ----------------------------------------------------
<TABLE>
<C> <S>
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.
</TABLE>
4
<PAGE>
<TABLE>
<C> <S>
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.
UNIT PRICE PER 1,000 UNITS $966.25
(as of December 3, 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.
UNIT PAR VALUE $1.00
Unit par value means the total amount of
money you should generally receive on each
unit by the termination of the Fund (other
than interest and premium on the bonds).
This total amount assumes that all bonds in
the Fund are either paid at maturity or
called by the issuer at par or are sold by
the Fund at par. If you sell your units
before the Fund terminates, you may receive
more or less than the unit par value.
10. HOW DO I SELL UNITS?
You may sell your units at any time to any
Sponsor or the Trustee for the net asset
value determined at the close of business
on the date of sale, less any remaining
deferred sales fee. You will not pay any
other fee when you sell your units.
</TABLE>
<TABLE>
<C> <S>
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.
</TABLE>
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TAX-FREE VS. TAXABLE INCOME: A COMPARISON OF TAXABLE AND TAX-FREE YIELDS
<TABLE>
EFFECTIVE
TAXABLE INCOME 1999* % TAX TAX-FREE YIELD OF
SINGLE RETURN JOINT RETURN BRACKET 3% 3.5% 4% 4.5% 5% 5.5% 6%
IS EQUIVALENT TO A TAXABLE YIELD OF
<S> <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
- ---------------------------------------------------------------------------------------------------------------------------
$ 25,751- 62,450 $ 43,051-104,050 28.00 4.17 4.86 5.56 6.25 6.94 7.64 8.33
- ---------------------------------------------------------------------------------------------------------------------------
$ 62,451-130,250 $104,051-158,550 31.00 4.35 5.07 5.80 6.52 7.25 7.97 8.70
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$130,251-283,150 $158,551-283,150 36.00 4.69 5.47 6.25 7.03 7.81 8.59 9.38
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OVER $283,151 OVER $283,151 39.60 4.97 5.79 6.62 7.45 8.28 9.11 9.93
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
<S> <C>
TAXABLE INCOME 19
SINGLE RETURN 6.5%
IS
EQUIVALENT
TO A
TAXABLE
YIELD OF
- -----------------
$ 0- 25,750 7.65
- -----------------
$ 25,751- 62,450 9.03
- -----------------
$ 62,451-130,250 9.42
--------
- -----------------
$130,251-283,150 10.16
--------
- -----------------
OVER $283,151 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:
- elimination of one or more bonds from the Fund's portfolio because of calls,
redemptions or sales;
- a change in the Fund's expenses; or
- the failure by a bond's issuer to pay interest.
Changes in interest rates generally will not affect your 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):
<TABLE>
<S> <C> <C>
Estimated Annual Estimated
Interest Income - Annual Expenses
- -------------------------------------
Unit Price
</TABLE>
ESTIMATED LONG TERM RETURN is a measure of the estimated return over the
estimated life of the Fund. Unlike Estimated Current Return, Estimated Long Term
Return reflects maturities, discounts and premiums of the bonds in the Fund. It
is an average of the yields to maturity (or in certain cases, to an earlier call
date) of the individual bonds in the portfolio, adjusted to reflect the Fund's
maximum sales fee and estimated expenses. We calculate the average yield for the
portfolio by weighting each bond's yield by its market value and the time
remaining to the call or maturity date.
Yields on individual bonds depend on many factors including general conditions
of the bond markets, the size of a particular offering and the maturity and
quality rating of the particular issues. Yields can vary among bonds with
similar maturities, coupons and ratings.
These return quotations are designed to be comparative rather than predictive.
RECORDS AND REPORTS
You will receive:
- - a statement of income payments twice a year;
- - a notice from the Trustee when new bonds are deposited in exchange or
substitution for bonds originally deposited;
- - an annual report on Fund activity; and
- - annual tax information. THIS WILL ALSO BE SENT TO THE IRS. YOU MUST REPORT THE
AMOUNT OF TAX-EXEMPT INTEREST RECEIVED DURING THE YEAR.
You may request:
- - copies of bond evaluations to enable you to comply with federal and state tax
reporting requirements; and
- - audited financial statements of the Fund.
You may inspect records of Fund transactions at the Trustee's office during
regular business hours.
6
<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.
Some bonds may be required to be called incrementally pursuant to mandatory
sinking fund provisions.
Also, an issuer might call its bonds during periods of falling interest rates,
if the issuer's bonds have a coupon higher than current market rates.
In extraordinary cases, an issuer might be able to call its bonds if, for
example:
- it no longer needs the money for the original purpose;
- the project is condemned or sold;
- the project is destroyed and insurance proceeds are used to redeem the
bonds;
- any related credit support expires and is not replaced; or
- interest on the bonds become taxable.
If the bonds are called, your income will decline and you may not be able to
reinvest the money you receive at as high a yield or as long a maturity. An
early call at par of a premium bond will reduce your return.
REDUCED DIVERSIFICATION RISK
If many investors sell their units, the Fund will have to sell bonds. This could
reduce the diversification of your investment and increase your share of Fund
expenses.
LIQUIDITY RISK
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.
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.
7
<PAGE>
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:
- limiting real property taxes,
- reducing tax rates,
- imposing a flat or other form of tax, or
- 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:
- ADDING the value of the bonds, net accrued interest, cash and any other Fund
assets;
- SUBTRACTING accrued but unpaid Fund expenses, unreimbursed Trustee advances,
cash held to buy back units or for distribution to investors and any other
Fund liabilities; and
- DIVIDING the result by the number of outstanding units.
Your net asset value when you sell may be more or less than your cost because of
sales fees, market movements and changes in the portfolio.
As of the close of the initial offering period, the price you receive will be
reduced to reflect estimated organization costs.
If you sell your units before the final deferred sales fee installment, the
amount of any remaining installments will be deducted from your proceeds.
SPONSORS' SECONDARY MARKET
While we are not obligated to do so, we will buy back units at net asset value
without any other fee or charge other than any remaining deferred sales charge.
We may resell the units to other buyers or to the Trustee. You should consult
your financial professional for current market prices to determine if other
broker-dealers or banks are offering higher prices.
We 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 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
8
<PAGE>
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:
- if the New York Stock Exchange is closed (other than customary weekend and
holiday closings);
- if the SEC determines that trading on the New York Stock Exchange is
restricted or that an emergency exists making sale or evaluation of the
bonds not reasonably practicable; and
- for any other period permitted by SEC order.
EXCHANGE OPTION
You may exchange units of certain Defined Asset Funds for units of this Fund at
a maximum exchange fee of 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
in this regard.
We may amend or terminate this exchange option at any time without notice.
HOW THE FUND WORKS
PRICING
The price of a unit includes interest accrued on the bonds, less expenses, from
the initial date of deposit up to, but not including, the settlement date, which
is usually three business days after the purchase date of the unit.
Bonds also carry accrued but unpaid interest up to the initial date of deposit.
To avoid having you pay this additional accrued interest (which earns no return)
when you buy, the Trustee advances this amount to the Sponsors. The Trustee
recovers this advance from interest received on the bonds.
9
<PAGE>
In addition, a portion of the price of a unit also consists of cash to pay all
or some of the costs of organizing the Fund including:
- cost of initial preparation of legal documents;
- federal and state registration fees;
- initial fees and expenses of the Trustee;
- initial audit; and
- legal expenses and other out-of-pocket expenses.
EVALUATIONS
An independent Evaluator values the bonds on each business day (excluding
Saturdays, Sundays and the following holidays as observed by the New York Stock
Exchange: New Year's Day, Presidents' Day, Martin Luther King, Jr. Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas).
Bond values are based on current bid or offer prices for the bonds or comparable
bonds. In the past, the difference between bid and offer prices of publicly
offered 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:
- to reimburse the Trustee for the Fund's operating expenses;
- for extraordinary services and costs of indemnifying the Trustee and the
Sponsors;
- costs of actions taken to protect the Fund and other legal fees and
expenses;
- expenses for keeping the Fund's registration statement current; and
- Fund termination expenses and any governmental charges.
The Sponsors are currently reimbursed up to 55 CENTS per $1,000 face amount
annually for providing portfolio supervisory, bookkeeping and administrative
services and for any other expenses properly chargeable to the Fund. Legal,
typesetting, electronic filing and regulatory filing fees and expenses
associated with updating the Fund's registration statement yearly are also now
chargeable to the Fund. While this fee may exceed the amount of these costs and
expenses attributable to this Fund, the total of these fees for all Series of
Defined Asset Funds will not exceed the aggregate amount attributable to all of
these Series for any calendar year. The Fund also pays the
10
<PAGE>
Evaluator's fees. Certain of these expenses were previously paid for by the
Sponsors.
The Trustee's, Sponsors' and Evaluator's fees may be adjusted for inflation
without investors' approval.
Quarterly deferred sales charges you owe are paid with interest and principal
from certain bonds. If these amounts are not enough, the rest will be paid out
of distributions to you from the Fund's Capital and Income Accounts.
The Sponsors will pay advertising and selling expenses at no charge to the Fund.
If Fund expenses exceed initial estimates, the Fund will owe the excess. The
Trustee has a lien on Fund assets to secure reimbursement of Fund expenses and
may sell bonds if cash is not available.
PORTFOLIO CHANGES
The Sponsors and Trustee are not liable for any default or defect in a bond; if
a contract to buy any bond fails in the first 90 days of the Fund, we generally
will deposit a replacement 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 may affect the
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 for sale units that we acquire in the
secondary market after reviewing:
- diversity of the portfolio;
- size of the Fund relative to its original size;
- ratio of Fund expenses to income;
- current and long-term returns;
- degree to which units may be selling at a premium over par; and
- cost of maintaining a current prospectus.
FUND TERMINATION
The Fund will terminate following the stated maturity or sale of the last bond
in the portfolio. The Fund may also terminate earlier with the consent of
investors holding 51% of the units or if total assets of the Fund have fallen
below 40% of the face amount of bonds deposited. We will decide whether to
terminate the Fund early based on the same factors used in deciding whether or
not to offer units in the secondary market.
When the Fund is about to terminate you will receive a notice, and you will be
unable to sell your units after that time. On or shortly before termination, we
will sell any remaining bonds, and you will receive your final distribution. Any
bond that cannot be sold at a reasonable price may continue to be held by the
Trustee in a liquidating trust pending its final sale.
You will pay your share of the expenses associated with termination, including
11
<PAGE>
brokerage costs in selling bonds. This may reduce the amount you receive as your
final distribution.
CERTIFICATES
Certificates for units are issued on request. You may transfer certificates by
complying with the requirements for redeeming certificates, described above. You
can replace lost or mutilated certificates by delivering satisfactory indemnity
and paying the associated costs.
TRUST INDENTURE
The Fund is a "unit investment trust" governed by a Trust Indenture, a contract
among the Sponsors, the Trustee and the Evaluator, which sets forth their duties
and obligations and your rights. A copy of the Indenture is available to you on
request to the Trustee. The following summarizes certain provisions of the
Indenture.
The Sponsors and the Trustee may amend the Indenture without your consent:
- to cure ambiguities;
- to correct or supplement any defective or inconsistent provision;
- to make any amendment required by any governmental agency; or
- to make other changes determined not to be materially adverse to your best
interest (as determined by the Sponsors).
Investors holding 51% of the units may amend the Indenture. Every investor must
consent to any amendment that changes the 51% requirement. No amendment may
reduce your interest in the Fund without your written consent.
The Trustee may resign by notifying the Sponsors. The Sponsors may remove the
Trustee without your consent if:
- it fails to perform its duties and the Sponsors determine that its
replacement is in your best interest; or
- it becomes incapable of acting or bankrupt or its affairs are taken over by
public authorities.
Investors holding 51% of the units may remove the Trustee. The Evaluator may
resign or be removed by the Sponsors and the Trustee without the consent of
investors. The resignation or removal of either becomes effective when a
successor accepts appointment. The Sponsors will try to appoint a successor
promptly; however, if no successor has accepted within 30 days after notice of
resignation, the resigning Trustee or Evaluator may petition a court to appoint
a successor.
Any Sponsor may resign as long as one Sponsor with a net worth of $2 million
remains and agrees to the resignation. The remaining Sponsors and the Trustee
may appoint a replacement. If there is only one Sponsor and it fails to perform
its duties or becomes bankrupt the Trustee may:
- remove it and appoint a replacement Sponsor;
- liquidate the Fund; or
- continue to act as Trustee without a Sponsor.
Merrill Lynch, Pierce, Fenner & Smith Incorporated acts as agent for the
Sponsors.
The Trust Indenture contains customary provisions limiting the liability of the
Trustee, the Sponsors and the Evaluator.
12
<PAGE>
LEGAL OPINION
Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York 10017, as
special counsel for the Sponsors, has given an opinion that the units are
validly issued.
AUDITORS
Deloitte & Touche LLP, 2 World Financial Center, New York, New York 10281,
independent accountants, audited the Statement of Condition included in this
prospectus.
SPONSORS
The Sponsors and their underwriting percentages are:
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED (a wholly-owned subsidiary of
Merrill Lynch & Co., Inc.)
P.O. Box 9051,
Princeton, NJ 08543-9051 65.38%
SALOMON SMITH BARNEY INC. (an indirectly wholly-owned subsidiary of Citigroup
Inc.)
388 Greenwich Street--23rd Floor,
New York, NY 10013 11.54%
DEAN WITTER REYNOLDS INC. (a principal operating subsidiary of Morgan Stanley
Dean Witter & Co.)
Two World Trade Center--59th Floor,
New York, NY 10048 7.69%
PAINEWEBBER INCORPORATED (a wholly-owned subsidiary of PaineWebber Group Inc.)
1285 Avenue of the Americas,
New York, NY 10019 15.39%
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, Customer Service Retail Department, P.O. Box 5187,
Bowling Green Station, New York, NY 10274-5187. 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.
None of the bonds in the portfolio were purchased from any Sponsor (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
13
<PAGE>
at which they buy units and the prices at which they resell or redeem them.
PUBLIC DISTRIBUTION
During the initial offering period, units will be distributed to the public by
the Sponsors and dealers who are members of the National Association of
Securities Dealers, Inc. This period is 30 days or less if all units are sold.
The Sponsors may extend the initial period up to 120 days.
The Sponsors do not intend to qualify units for sale in any foreign countries.
This prospectus does not constitute an offer to sell units in any country where
units cannot lawfully be sold.
In the initial offering period, the concession to dealers will be $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 securities
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 issuers (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.
14
<PAGE>
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
You will generally recognize capital gain or loss when you dispose of your units
for cash (by sale of redemption), when you exchange your units for units of
another Defined Asset Fund or when the Fund disposes of a bond. Your gain,
however, will generally be ordinary income to the extent of any accrued "market
discount". Generally you will have market discount to the extent that your basis
in a bond when you purchase a unit is less than its stated redemption price at
maturity (or, if it is an original issue discount bond, the issue price
increased by original issue discount that has accrued on the bond before your
purchase). You should consult your tax adviser in this regard.
If your net long-term capital gains exceed your net short-term capital losses,
the excess may be subject to tax at a lower rate than ordinary income. Any
capital gain from the Fund will be long-term if you are considered to have held
your investment on each bond for more than one year and short-term otherwise.
Because the deductibility of capital losses is subject to limitations, you may
not be able to deduct all of your capital losses. Consult your tax adviser in
this regard.
YOUR BASIS IN THE BONDS
Your aggregate basis in the bonds will be equal to the cost of your units,
including any sales charges and the organizational expenses you pay, adjusted to
reflect any accruals of "original issue discount," "acquisition premium" and
"bond premium". You should consult your tax adviser in this regard.
EXPENSES
If you are 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.
15
<PAGE>
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.
16
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Sponsors, Trustee and Holders of Defined Asset Funds Municipal Defined Fund
Series 12 (the "Fund"):
We have audited the accompanying statement of condition and the related defined
portfolio included in the prospectus of the Fund as of December 3, 1999. 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, securities 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 December 3, 1999
in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
NEW YORK, N.Y.
DECEMBER 3, 1999
STATEMENT OF CONDITION AS OF DECEMBER 3, 1999
TRUST PROPERTY
<TABLE>
<S> <C>
Investments--Bonds and Contracts to purchase Bonds(1) $ 12,412,207.30
Cash 26,000.00
Accrued interest to Initial Date of Deposit on underlying
Bonds 94,189,81
--------------------
Total $ 12,532,397.11
====================
LIABILITIES AND INTEREST OF HOLDERS
Liabilities: Advance by Trustee for accrued interest (2) $ 94,189.81
Reimbursement of Sponsors for organization
expenses (3) 26,000.00
--------------------
Subtotal 120,189.81
--------------------
Interest of Holders of 13,000,000 Units of fractional
undivided interest outstanding:
Cost to investors (3)(4)(5) 12,561,187.30
Organization expenses (3) and gross
underwriting commissions (4) (148,980.00)
--------------------
Subtotal 12,412,207.30
--------------------
Total $ 12,532,397.11
====================
</TABLE>
- ------------
(1) Aggregate cost to the Fund of the bonds listed under Defined
Portfolio is based upon the offer side evaluation determined by the Evaluator at
the evaluation time on the business day prior to the Initial Date of Deposit.
The contracts to purchase the bonds are collateralized by an irrevocable letter
of credit which has been issued by San Paolo, New York Branch, in the amount of
$11,210,127.46 and deposited with the Trustee. The amount of the letter of
credit includes $11,120,008.15 for the purchase of $12,000,000 face amount of
the bonds, plus $90,119.31 for accrued interest.
(2) Representing a special distribution to the Sponsors by the Trustee
of an amount equal to the accrued interest on the bonds.
(3) A portion of the Unit Price consists of cash in an amount sufficient
to pay for costs incurred in establishing the Fund. These costs have been
estimated at $2.00 per 1,000 Units. A distribution will be made at the close of
the initial offering period to an account maintained by the Trustee from which
the organizational expense obligation of the investors to the Sponsors will be
satisfied. If the actual organization costs exceed the estimated aggregate
amount shown above, the Sponsors will pay for this excess amount.
(4) Assumes the maximum up-front sales fee per 1,000 units of 1.00% of
the Unit Price. A deferred sales fee of $19.00 per 1,000 units is payable over a
two-year period ($2.38 per 1,000 units quarterly in the first year and $2.37 per
1,000 units quarterly in the second year). Distributions will be made to an
account maintained by the Trustee from which the deferred sales fee obligation
of the investors will be satisfied. If units are redeemed prior to the end of
second anniversary of the Fund, the remaining portion of the deferred sales fee
applicable to such units will be transferred to the account on the redemption
date.
(5) Aggregate Unit Price (exclusive of interest) computed on the basis
of the offer side evaluation of the underlying bonds as of the evaluation time
on the business day prior to the Initial Date of Deposit.
17
<PAGE>
Defined
Asset Funds
- -SM-
<TABLE>
<S> <C>
HAVE QUESTIONS ? MUNICIPAL DEFINED FUND
Request the most SERIES 12
recent free Information (A Unit Investment Trust)
Supplement that gives more ---------------------------------------
details about the Fund, This Prospectus does not contain
by calling: complete information about the
The Chase Manhattan Bank investment company filed with the
1-800-323-1508 Securities and Exchange Commission in
Washington, D.C. under the:
- Securities Act of 1933 (file no.
333-87393) and
- 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.
</TABLE>
100457--12/99
