AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 8, 1995
REGISTRATION NO. 33-30400
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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POST-EFFECTIVE AMENDMENT NO. 5
TO
FORM S-6
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FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
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A. EXACT NAME OF TRUST:
DEFINED ASSET FUNDS--
MUNICIPAL INVESTMENT TRUST FUND
MONTHLY PAYMENT SERIES--491
B. NAMES OF DEPOSITORS:
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
SMITH BARNEY INC.
PRUDENTIAL SECURITIES 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, N.J.
08543-9051 SMITH BARNEY INC.
388 GREENWICH
STREET--23RD FLOOR
NEW YORK, NY 10013
PRUDENTIAL SECURITIES
INCORPORATED
ONE SEAPORT PLAZA
199 WATER STREET
NEW YORK, N.Y. 10292 DEAN WITTER REYNOLDS INC.
TWO WORLD TRADE
CENTER--59TH FLOOR
NEW YORK, N.Y. 10048
D. NAMES AND COMPLETE ADDRESSES OF AGENTS FOR SERVICE:
TERESA KONCICK, ESQ.
P.O. BOX 9051
PRINCETON, N.J.
08543-9051 THOMAS D. HARMAN, ESQ.
388 GREENWICH ST.
NEW YORK, N.Y. 10013
LEE B. SPENCER, JR. DOUGLAS LOWE, ESQ. COPIES TO:
ONE SEAPORT PLAZA 130 LIBERTY STREET--29TH PIERRE DE SAINT PHALLE,
199 WATER STREET FLOOR ESQ.
NEW YORK, N.Y. 10292 NEW YORK, N.Y. 10006 450 LEXINGTON AVENUE
NEW YORK, N.Y. 10017
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 February 15, 1995.
Check box if it is proposed that this filing will become effective on March 17,
1995 pursuant to paragraph (b) of Rule 485. / x /
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<PAGE>
DEFINED
ASSET FUNDSSM
MUNICIPAL INVESTMENT
TRUST FUND
- ------------------------------------------------------------
MONTHLY PAYMENT SERIES--491
(A UNIT INVESTMENT TRUST)
PROSPECTUS, PART A
DATED MARCH 17, 1995
SPONSORS:
Merrill Lynch,
Pierce, Fenner & Smith Incorporated
Smith Barney Inc.
Prudential Securities Incorporated
Dean Witter Reynolds Inc.
MONTHLY INCOME - TAX-FREE
This Defined Fund is a portfolio of preselected securities formed for the
purpose of providing interest income which in the opinion of counsel is, with
certain exceptions, exempt from regular Federal income taxes under existing law
through investment in a fixed portfolio consisting primarily of long-term Debt
Obligations issued by states, municipalities, public authorities and similar
entities thereof, and on the initial Date of Deposit rated investment grade by
at least one national rating agency (or having, in the opinion of Defined Asset
Funds research analysts, comparable credit characteristics). There is no
assurance that this objective will be met because it is subject to the
continuing ability of issuers of the Debt Obligations to meet their principal
and interest requirements. Furthermore, the market value of the underlying Debt
Obligations, and therefore the value of the Units, will fluctuate with changes
in interest rates and other factors.
Minimum Purchase: One Unit
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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NOTE: PART A OF THIS PROSPECTUS MAY NOT BE DISTRIBUTED
UNLESS ACCOMPANIED BY DEFINED ASSET FUNDS--MUNICIPAL INVESTMENT TRUST FUND
PROSPECTUS, PART B.
This Prospectus consists of two parts. The first includes an Investment Summary
and certified financial statements of the Fund, including the related securities
portfolio; the second contains a general summary of the Fund.
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Read and retain both parts of this Prospectus for future reference.
<PAGE>
DEFINED ASSET FUNDSSM is America's oldest and largest family of unit investment
trusts with over $95 billion sponsored since 1970. Each Defined Fund is a
portfolio of preselected securities. The portfolio is divided into 'units'
representing equal shares of the underlying assets. Each unit receives an equal
share of income and principal distributions.
With Defined Asset Funds you know in advance what you are investing in and that
changes in the portfolio are limited. Most defined bond funds pay interest
monthly and repay principal as bonds are called, redeemed, sold or as they
mature. Defined equity funds offer preselected stock portfolios with defined
termination dates.
Your financial advisor can help you select a Defined Fund to meet your personal
investment objectives. Our size and market presence enable us to offer a wide
variety of investments. Defined Funds are available in the following types of
securities: municipal bonds, corporate bonds, government bonds, utility stocks,
growth stocks, even international securities denominated in foreign currencies.
Termination dates are as short as one year or as long as 30 years. Special funds
are available for investors seeking extra features: insured funds, double and
triple tax-free funds, and funds with 'laddered maturities' to help protect
against rising interest rates. Defined Funds are offered by prospectus only.
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CONTENTS
Investment Summary.......................................... A-3
Accountants' Opinion Relating to the Fund................... D-1
Statement of Condition...................................... D-2
Portfolio................................................... D-6
A-2
<PAGE>
DEFINED ASSET FUNDS--MUNICIPAL INVESTMENT TRUST FUND, MONTHLY PAYMENT
SERIES--491
INVESTMENT SUMMARY
AS OF DECEMBER 31, 1994, THE EVALUATION DATE
FACE AMOUNT OF SECURITIES $ 6,945,000(a)
NUMBER OF UNITS.......................................... 7,537
FACE AMOUNT OF SECURITIES PER UNIT.......................$ 921.45
FRACTIONAL UNDIVIDED INTEREST IN FUND REPRESENTED BY EACH
UNIT................................................... 1/7,537th
PUBLIC OFFERING PRICE
Aggregate bid side evaluation of underlying Se-
curities..........................................$ 7,236,601
-----------------
Divided by Number of Units..........................$ 960.14
Plus sales charge of 4.091% of Public Offering Price
(4.266% of net amount invested in
Securities)(b).................................... 40.96
-----------------
Public Offering Price per Unit......................$ 1,001.10
(plus cash
adjustments and
accrued
interest)(c)
SPONSORS' REPURCHASE PRICE AND REDEMPTION PRICE PER
UNIT...................................................$ 960.14
(based on bid side evaluation of Securities) ($40.96 (plus cash
less than Public Offering Price per Unit) adjustments and
accrued
interest)(c)
PREMIUM AND DISCOUNT ISSUES IN PORTFOLIO
Face amount of Debt Obligations with bid side
evaluation:
Over par.......................................... 95%
At a discount from par............................ 5%
CALCULATION OF ESTIMATED NET ANNUAL INTEREST RATE PER
UNIT (based on Face Amount per Unit)
Annual interest rate per Unit....................... 7.348%
Less estimated annual expenses per Unit ($1.95)
expressed as a percentage......................... .211%
-----------------
Estimated net annual interest rate per Unit......... 7.137%
-----------------
-----------------
DAILY RATE AT WHICH ESTIMATED NET INTEREST ACCRUES PER
UNIT................................................... .0198%
MONTHLY INCOME DISTRIBUTIONS
Estimated net annual interest rate per Unit times
the Face Amount per Unit..........................$ 65.77
Divided by 12.......................................$ 5.48
RECORD DAY
The 10th day of each month.
DISTRIBUTION DAY
The 25th day of each month.
MINIMUM CAPITAL DISTRIBUTION
No distribution need be made from Capital Account if balance in Account is
less than $5.00 per Unit.
TRUSTEE'S ANNUAL FEE AND EXPENSES(d)
$1.95 per Unit (see Expenses and Charges in Part B).
PORTFOLIO SUPERVISION FEE(e)
Maximum of $0.35 per $1,000 face amount of underlying Debt Obligations (see
Expenses and Charges in Part B).
EVALUATOR'S FEE FOR EACH EVALUATION
Maximum of $13 (see Expenses and Charges in Part B).
EVALUATION TIME
3:30 P.M. New York Time
MINIMUM VALUE OF FUND
Trust may be terminated if value of Fund is less than 40% of the Face Amount
of Securities on the date of their deposit. As of the Evaluation Date, the
value of the Fund was 72% of the Face Amount of Securities on the date of
their deposit.
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(a)On the Initial Date of Deposit (November 29, 1989) the Face Amount of
Securities was $10,000,000. Cost of Securities is set forth under
Portfolio.
(b)This is the maximum Effective Sales Charge on the date stated. The
sales charge will vary depending on the maturities of the underlying
Securities and will be reduced on a graduated scale for purchases of
250 or more Units (see Public Sale of Units--Public Offering Price in
Part B). Any resulting reduction in the Public Offering Price will
increase the effective current and long term returns on a Unit.
(c)For Units purchased or redeemed on the Evaluation Date, accrued
interest is approximately equal to the undistributed net investment
income of the Fund (see Statement of Condition on p. D-2) divided by
the number of outstanding Units, plus accrued interest per Unit to the
expected date of settlement (5 business days after purchase or
redemption). The amount of the cash adjustment which is added is equal
to the cash per Unit held in the Capital Account (see Public Sale of
Units--Public Offering Price and Redemption in Part B).
(d)Of this figure, the Trustee receives annually for its service as
Trustee, $0.70 per $1,000 face amount of Debt Obligations. The
Trustee's Annual Fee and Expenses also includes the Portfolio
Supervision Fee and Evaluator's Fee set forth herein.
(e)The Sponsors also may be reimbursed for their costs of bookkeeping and
administrative services to the Fund. Portfolio supervision fees
deducted in excess of portfolio supervision expenses may be used for
this reimbursement. Additional deductions for this purpose are
currently estimated not to exceed an annual rate of $0.10 per Unit.
A-3
<PAGE>
DEFINED ASSET FUNDS--MUNICIPAL INVESTMENT TRUST FUND, MONTHLY PAYMENT
SERIES--491
INVESTMENT SUMMARY AS OF THE EVALUATION DATE (CONTINUED)
NUMBER OF ISSUES IN PORTFOLIO............................... 14
NUMBER OF ISSUES RATED BY:(a)
Standard & Poor's Corporation/
rating ............................................. AAA-- 2
AA-- 3
A-- 7
Moody's Investors Service/
rating(b) ........................................ Aa-- 1
NUMBER OF ISSUES NOT RATED(c)............................... 1
RANGE OF MATURITIES.................................................2012-2025
NUMBER OF ISSUES BY SOURCE OF
REVENUE:
Airport/Port/Highway................................... 1
Hospital/Health Care Facility.......................... 2
Housing................................................ 2
State/Local Municipal Utility.......................... 2
Refunded Bonds......................................... 7
CONCENTRATIONS(d) EXPRESSED AS PERCENTAGE OF AGGREGATE FACE
AMOUNT OF DEBT OBLIGATIONS:
Refunded Bonds......................................... 48%
Issuers located in Texas (34%), Florida (11%) and
Maryland (10%).......................................... 55%
PERCENTAGE OF AGGREGATE FACE AMOUNT OF PORTFOLIO COMPRISED
OF:
Moral Obligations...................................... 17%
RISK FACTORS--The Fund is concentrated in TEXAS obligations. The Sponsors and
their counsel have not independently verified the following information but the
Sponsors have no reason to believe that such information is incorrect in any
material respect.
While the Texas economy has continued to improve in many respects through
the fall of 1994, certain traditionally strong segments of the state's economy
have been negatively affected by external market forces. The Texas oil and gas
industry, once the dominant force in the state's economy, was estimated to
constitute only 11% of the Texas economy during the State's fiscal year ended
August 31, 1994 ('Fiscal 1994'). During Fiscal 1994, employment in the Texas oil
and gas industry decreased by 3.1%, a net loss of over 5,000 jobs. Likewise, as
a result of the continuing national defense spending cuts, the Texas aerospace
industry continued to suffer job losses. The aerospace industry lost
approximately 5,000 jobs in Texas during Fiscal 1994. Net job losses in the
Texas aerospace industry have totalled 27,000 since 1989.
Despite the downturn in the oil and gas and aerospace industries in Texas,
the state's economic recovery appeared to strengthen during Fiscal 1994. After
underperforming the national economy during most of the second half of the
1980's, Texas' economy has either out performed the national economy or kept
pace with the improving national economy in recent years. The leading economic
indicators for Texas were up 2.9% over the twelve months ended October, 1994,
although this increase is indicative of a slow down in the state's economic
growth from earlier periods. For example, the same leading indicators were up
3.6% for the twelve month period ended April, 1994. By way of comparison, for
the twelve months ended October, 1994, the increase in the leading indicators
for the nation as a whole was 3.0%. However, the employment growth rate in Texas
has exceeded the employment growth rate in the nation for Texas' last five
fiscal years, and during Fiscal 1994, Texas added more jobs than any other
state.
The Texas state government still faces financial challenges as demands for
state services increase and spending of state funds is required by court orders,
federal mandates and growing social services caseloads. In addition, it is
unclear what the full effect of the recent Mexican financial crisis on the Texas
economy will be, although it is believed that retail sales in cities along the
Texas-Mexico border have decreased substantially as a result of the loss of
Mexican customers.
The state's credit ratings have been unchanged over recent periods,
although such ratings have caused the state to pay higher interest rates on
state bonds than those historically enjoyed by the state. Some local governments
and other political subdivisions also have had their credit ratings lowered from
- ------------------------------
(a) The ratings assigned by the bond rating agencies may change from time
to time. Certain of the ratings may be provisional or conditional. See
Description of Ratings in Part B.
(b) A Moody's rating is included only if Standard & Poor's has not rated
an issue; this rating has been furnished by the Evaluator but not confirmed by
Moody's.
(c) Issues currently unrated by both Standard & Poor's and Moody's. See
Description of Ratings in Part B.
(d) A Fund is considered to be 'concentrated' in a category when the
Securities in that category constitute 25% or more of the aggregate face amount
of the Portfolio. See Risk Factors in Part B for a description of certain
investment risks relating to these types of obligations.
A-4
<PAGE>
DEFINED ASSET FUNDS--MUNICIPAL INVESTMENT TRUST FUND, MONTHLY PAYMENT
SERIES--491
their historical levels. As of December 31, 1994, general obligation bonds
issued by the State of Texas were rated AA by Standard & Poor's, As by Moody's
and AA+ by Fitch's Investor Services.
Despite the growing demands for governmental services, state government
finances improved during Fiscal 1994 with the state's net revenue for general
and special funds exceeding net expenditures by approximately $1.1 billion. The
state's newly-elected Republican governor, George W. Bush, took office in
January, 1995. It is uncertain if any of Governor Bush's initiatives and
programs will be adopted by the Texas legislature during its 1995 session or, if
adopted, if such initiatives and programs will result in a overall reduction in
state revenues from taxes or other sources or a net reduction in state spending.
Although there are indications that the Texas economy is fundamentally
stronger than it has been in the recent past, various economic problems continue
to be experienced throughout the state. While the state's energy industry had
stabilized somewhat in recent years after its collapse in the early 1980's,
during Fiscal 1994, employment in the state's energy industry decreased to less
than 161,000 employees, its lowest level since 1976. The state has experienced a
loss of jobs attributable to oil companies pursuing more attractive drilling
opportunities overseas, consolidations of the domestic workforce, declining
production and relatively low oil and gas prices. The oil and gas rig count, an
industry barometer, was down by 6.1% in Texas over the twelve-month period ended
September 30, 1994 and is well below historical highs. Oil and natural gas
production have continued to trend downward further reducing a once important
source of revenue to the state government. Oil and gas remains an important
contributor to the state's economy, but its relative importance is declining as
the state's economy becomes increasingly more diversified.
The Texas economy is continuing to diversify and become more like the
national economy. As a consequence it is vulnerable to changes in the value of
the dollar and increasing federal budget deficits and is affected by
international events and trade policies more than ever before. A manifestation
of this trend was the downward trend in industrial production in the state
during the early 1990's, which was triggered by the weak national economy.
Industrial production increased in Texas by 5.4% during the twelve months ending
September 30, 1994. However, job growth in the manufacturing sector of the Texas
economy has been relatively weak (1.2% in Fiscal 1994) and the greatest job
growth in Texas during Fiscal 1994 was in the service sector (4.7% in Fiscal
1994). These growth rates reflect the national trend and indicate that Texas is
continuing to move toward a service-based economy. It is unclear what effect
current national and world events will have on the state.
Although the banking and thrift industries in Texas have stabilized and
total bank assets, equity capital and retail loans appear to be increasing, the
total amount of business loans made by Texas banks continues to be at a low
level compared to the level of loan activity in the early 1980's. While the
construction sector of the state's economy remains relatively depressed compared
to the boom levels of the early and mid-1980's, residential construction
increased significantly as a result of the fall in mortgage loan interest rates
with housing permits up 24.3% in September, 1994 compared to their level in
September, 1993. This growth rate is reflective of a slow down in growth in
housing starts in fiscal 1993 during which period the number of housing permits
issued increased by 43.6%. The recent rise in mortgage loan interest rates is
expected to be reflected as a slow down in new home construction. Continuing
high vacancy rates in the State's major office markets have held back the demand
for nonresidential construction.
The two major sources of state revenue are state taxes and federal funds.
Other revenue sources include income from licenses, fees and permits, interest
and investment income, the state lottery, income from sales of goods and
services and land income (which includes income from oil, gas and other mineral
royalties as well as from leases on state lands). The major sources of state
government tax collection are the sales tax, the franchise tax and the motor
fuels tax. During 1991, the Texas Legislature significantly modified the state
franchise tax and the tax on certain motor fuels to raise additional revenues,
and made changes to other tax laws, including some changes to the sales tax.
Limitations on Bond Issuances and Ad Valorem Taxation. Although Texas has
few debt limits, certain tax limitations imposed on counties and cities are in
effect debt limitations. The requirement in Texas that counties and cities
provide for the collection of an annual tax sufficient to retire any bonded
indebtedness they create operates as a limitation on the amount of indebtedness
which may be incurred, since counties and cities may never incur indebtedness
which cannot be satisfied by revenue received from taxes imposed within the tax
limits. The same requirement is generally applicable to indebtedness of the
State of Texas. However, voters have authorized from time to time, by
constitutional amendment, the issuance of general obligation bonds of the state
for various purposes.
To the extent the Texas Debt Obligations in the Portfolio are payable,
either in whole or in part, from ad valorem taxes levied on taxable property,
the limitations described below may be applicable. The Texas Constitution
prohibits the state from levying ad valorem taxes on property. The Texas
Constitution limits the rate of growth of appropriations from tax revenues not
dedicated to a particular purpose by the
A-5
<PAGE>
DEFINED ASSET FUNDS--MUNICIPAL INVESTMENT TRUST FUND, MONTHLY PAYMENT
SERIES--491
Constitution during any biennium to the estimated rate of growth for the Texas
economy, unless both houses of the Texas Legislature, by a majority vote in
each, find that an emergency exists. In addition, the Texas Constitution
authorizes cities having more than 5,000 inhabitants to provide further
limitations in their city charters regarding the amount of ad valorem taxes
which can be assessed. Furthermore, certain provisions of the Texas Constitution
provide for exemptions from ad valorem taxes, of which some are mandatory and
others are available at the option of the particular county, city, town, school
district or other political subdivision of the state. The following is only a
summary of certain laws which may be applicable to an issuer of the Texas Debt
Obligations regarding ad valorem taxation.
Counties and political subdivisions are limited in their issuance of bonds
for certain purposes (including construction, maintenance and improvement of
roads, reservoirs, dams, waterways and irrigation works) to an amount up to
one-fourth of the assessed valuation of real property. No county, city or town
may levy a tax in any one year for general fund, permanent improvement fund,
road and bridge fund or jury fund purposes in excess of $.80 on each $100
assessed valuation. Cities and towns having a population of 5,000 or less may
not levy a tax for any one year for any purpose in excess of 1 1/2%of the
taxable property ($1.50 on each $100 assessed valuation), and a limit of 2 1/2%
($2.50 on each $100 assessed valuation) is imposed on cities having a population
of more than 5,000. Hospital districts may levy taxes up to $.75 on each $100
assessed valuation. School districts are subject to certain restrictions
affecting the issuance of bonds and the imposition of taxes.
The general laws of the State of Texas pertaining to ad valorem taxation of
property by political subdivisions have been codified into the Property Tax
Code. Reference is hereby made thereto for identification of property subject to
taxation; property exempt from taxation and other exemptions granted and
allowed, if claimed; the appraisal of property for purposes of taxation; and the
procedures to be followed and limitations applicable to the levy and collection
of ad valorem taxes. Governing bodies of taxing units may not adopt tax rates
that exceed certain specified rates until certain procedural requirements are
met (including, in certain cases, holding a public hearing preceded by a
published notice thereof). Certain statutory requirements exist which set forth
the procedures necessary for the appropriate governmental body to issue and
approve bonds and to levy taxes. To the extent that such procedural requirements
are not followed correctly, the actions taken by such governmental bodies could
be subject to attack and their validity questioned.
In 1989 the Texas Supreme Court declared that the Texas system then in
effect of funding for public schools did not meet the requirements of the Texas
Constitution. The Court found that the prior state funding system violated the
constitutional provision requiring the state to provide an efficient means of
funding public education because the system resulted in discrimination against
low-wealth school districts. In 1990, the Texas Legislature enacted legislation
designed to establish a constitutional system of financing public education.
However, a state district court subsequently ruled that the funding system
effected by that legislation was also unconstitutional, and the Texas Supreme
Court affirmed the district court's ruling. In 1991, the Governor of Texas
signed into law a public education finance reform bill (the '1991 Public
Education Finance Bill') that dramatically increased revenue for hundreds of
relatively poor school districts, which resulted in increased property taxes and
was expected to increase property taxes in the future. An important feature of
the bill was the creation of new taxing units called 'county education
districts'.
On January 30, 1992, the Texas Supreme Court declared the public school
finance system enacted in the 1991 Public Education Finance Bill to be
unconstitutional and ordered that a new finance system be adopted by the Texas
Legislature by June 1, 1993. The Court deferred the effect of its ruling to June
1, 1993 so as not to interfere with the collection of 1991 and 1992 county
education district taxes. Shortly prior to the June 1 deadline, the Texas
Legislature enacted legislation adopting a new school finance system. The law
attempts to reduce the disparity of revenues per student in low-wealth school
districts compared to high-wealth school districts by providing high-wealth
districts with several options for effectively sharing portions of their ad
valorem tax revenue with low-wealth districts. The 1993 legislation also
abolished county education districts. Certain school districts have already
filed suit in state court challenging the legislation. The state trial court
upheld the constitutionality of the 1993 school finance legislation, and the
plaintiffs appealed the decision. On January 30, 1995, the Texas Supreme Court
affirmed the constitutionality of the legislation.
PUBLIC SALE OF UNITS--
The quantity discount to sales charges applies to all purchases of
Municipal Investment Trust Fund units in the secondary market on the same day,
irrespective of any differences in their rates of Effective Sales Charge. The
limitation to a range of 0.5%, described under Public Sale of Units--Volume
Purchase Discounts, has been eliminated.
A-6
<PAGE>
DEFINED ASSET FUNDS - MUNICIPAL INVESTMENT TRUST FUND
MONTHLY PAYMENT SERIES - 491
REPORT OF INDEPENDENT ACCOUNTANTS
The Sponsors, Co-Trustees and Holders
of Defined Asset Funds - Municipal Investment Trust Fund,
Monthly Payment Series - 491:
We have audited the accompanying statement of condition of Defined Asset
Funds - Municipal Investment Trust Fund, Monthly Payment Series - 491,
including the portfolio, as of December 31, 1994 and the related
statements of operations and of changes in net assets for the years ended
December 31, 1994, 1993 and 1992. These financial statements are the
responsibility of the Co-Trustees. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. Securities owned at December 31, 1994, as shown in such
portfolio, were confirmed to us by Investors Bank & Trust Company, a
Co-Trustee. An audit also includes assessing the accounting principles
used and significant estimates made by the Co-Trustees, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Defined Asset Funds -
Municipal Investment Trust Fund, Monthly Payment Series - 491 at
December 31, 1994 and the results of its operations and changes in its net
assets for the above-stated years in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
NEW YORK, N.Y.
February 20, 1995
D - 1
<PAGE>
DEFINED ASSET FUNDS - MUNICIPAL INVESTMENT TRUST FUND
MONTHLY PAYMENT SERIES - 491
STATEMENT OF CONDITION
As of December 31, 1994
<TABLE>
<S> <C>
TRUST PROPERTY:
INVESTMENT IN MARKETABLE SECURITIES - AT VALUE (COST $6,886,066) (NOTE 1).................................. $ 7,236,601
CASH PRINCIPAL............................................................................................. 4,446
ACCRUED INTEREST RECEIVABLE................................................................................ 144,425
-------------
TOTAL TRUST PROPERTY....................................................................................... 7,385,472
LESS LIABILITIES:
ADVANCE FROM CO-TRUSTEE...................................................................... $ 26,412
ACCRUED EXPENSES............................................................................. 2,764
-------------
TOTAL LIABILITIES............................................................................ 29,176
-------------
NET ASSETS, REPRESENTED BY:
7,537 UNITS OF FRACTIONAL UNDIVIDED INTEREST OUTSTANDING (NOTE 3)........................... 7,241,047
UNDISTRIBUTED NET INVESTMENT INCOME.......................................................... 115,249
-------------
NET ASSETS..................................................................................... $ 7,356,296
=============
UNITS OUTSTANDING............................................................................................ 7,537
=============
NET ASSET VALUE PER UNIT..................................................................................... $ 976.02
=============
See Notes To Financial Statements.
</TABLE>
D - 2
<PAGE>
DEFINED ASSET FUNDS - MUNICIPAL INVESTMENT TRUST FUND
MONTHLY PAYMENT SERIES - 491
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
INVESTMENT INCOME:
INTEREST INCOME.............................................................. $ 523,186 $ 571,537 $ 601,627
CO-TRUSTEES' FEES AND EXPENSES............................................... (12,327) (15,994) (16,167)
SPONSORS' FEES............................................................... (2,587) (2,224) (4,360)
------------- ------------- -------------
NET INVESTMENT INCOME........................................................ 508,272 553,319 581,100
------------- ------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
NET REALIZED GAIN ON SECURITIES SOLD OR REDEEMED............................. 34,470 99,034 25,474
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENTS........................ (565,988) 300,534 238,720
------------- ------------- -------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS....................... (531,518) 399,568 264,194
------------- ------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS................ $ (23,246) $ 952,887 $ 845,294
============= ============= =============
See Notes to Financial Statements.
</TABLE>
D - 3
<PAGE>
DEFINED ASSET FUNDS - MUNICIPAL INVESTMENT TRUST FUND
MONTHLY PAYMENT SERIES - 491
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
OPERATIONS:
NET INVESTMENT INCOME........................................................ $ 508,272 $ 553,319 $ 581,100
NET REALIZED GAIN ON SECURITIES SOLD OR REDEEMED............................. 34,470 99,034 25,474
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENTS........................ (565,988) 300,534 238,720
------------- ------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS.............. (23,246) 952,887 845,294
------------- ------------- -------------
DISTRIBUTIONS TO HOLDERS: (NOTE 2)
INCOME....................................................................... (508,643) (556,362) (582,880)
PRINCIPAL.................................................................... (25,195) (515,443) (32,680)
------------- ------------- -------------
TOTAL DISTRIBUTIONS.......................................................... (533,838) (1,071,805) (615,560)
------------- ------------- -------------
UNIT TRANSACTIONS:
REDEMPTION AMOUNTS - PRINCIPAL............................................... (351,873) (341,931) (546,197)
REDEMPTION AMOUNTS - INCOME.................................................. (4,845) (4,313) (8,429)
------------- ------------- -------------
TOTAL UNIT TRANSACTIONS...................................................... (356,718) (346,244) (554,626)
------------- ------------- -------------
NET DECREASE IN NET ASSETS..................................................... (913,802) (465,162) (324,892)
NET ASSETS AT BEGINNING OF YEAR................................................ 8,270,098 8,735,260 9,060,152
------------- ------------- -------------
NET ASSETS AT END OF YEAR...................................................... $ 7,356,296 $ 8,270,098 $ 8,735,260
============= ============= =============
PER UNIT:
INCOME DISTRIBUTIONS DURING YEAR............................................. $ 65.93 $ 69.18 $ 69.49
============= ============= =============
PRINCIPAL DISTRIBUTIONS DURING YEAR.......................................... $ 3.32 $ 65.01 $ 3.98
============= ============= =============
NET ASSET VALUE AT END OF YEAR............................................... $ 976.02 $ 1,048.04 $ 1,063.85
============= ============= =============
TRUST UNITS:
REDEEMED DURING YEAR......................................................... 354 320 535
============= ============= =============
OUTSTANDING AT END OF YEAR................................................... 7,537 7,891 8,211
============= ============= =============
See Notes To Financial Statements.
</TABLE>
D - 4
<PAGE>
DEFINED ASSET FUNDS - MUNICIPAL INVESTMENT TRUST FUND
MONTHLY PAYMENT SERIES - 491
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. See
"Redemption - Computation of Redemption Price Per Unit" in this
Prospectus, Part B.
(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 distributed as explained in the
"Administration of the Fund - Accounts and Distributions" in this
Prospectus, Part B.
3. NET CAPITAL
Cost of 7,537 units as of Date of Deposit.............. $ 7,774,947
Less sales charge...................................... 349,868
-------------
Net amount applicable to Holders....................... 7,425,079
Redemptions of units - net cost of 2,463 units redeemed
less redemption amounts.............................. (44,665)
Net realized gain on securities sold or redeemed....... 145,542
Unrealized appreciation of investments................. 350,535
Principal distributions................................ (635,444)
-------------
Net capital applicable to Holders...................... $ 7,241,047
=============
4. INCOME TAXES
As of December 31, 1994, unrealized appreciation of investments,
based on cost for Federal income tax purposes, aggregated $350,535,
all of which related to appreciated securities. The cost of
investment securities for Federal income tax purposes was $6,886,066
at December 31, 1994.
D - 5
<PAGE>
DEFINED ASSET FUNDS - MUNICIPAL INVESTMENT TRUST FUND
MONTHLY PAYMENT SERIES - 491
PORTFOLIO
AS OF DECEMBER 31, 1994
<TABLE>
<CAPTION>
Portfolio No. and Rating of Face
Title of Securities Issues(1) Amount Coupon Maturities(3)
___________________ _________ ______ ______ _____________
<S> <C> <C> <C> <C> <C>
1 Colorado Hlth Facs Auth, Hosp Rev Bonds (Lutheran Med Ctr A+ $ 365,000 7.250% 10/01/14
Proj), Ser 1989
2 Mun Elec Auth of GA, Gen Pwr Rev Bonds, 1989 A Ser A+ 505,000 7.400 01/01/25 (4)
3 City of Houston, TX, Wtr & Swr Sys Prior Lien Rev Bonds, AAA 520,000 7.125 12/01/16 (4)
Ser 1986 A
4 Illinois Hlth Facs Auth Rev Bonds, Ser 1989 B (Illinois A- 615,000 7.700 10/01/19 (4)
Masonic Med Ctr)
5 Intermountain Pwr Agy, UT, Pwr Sup Rev Rfdg Bonds, 1985 AA 280,000 7.000 07/01/22 (4)
Ser H
6 State of Maryland, Comm Dev Admin, Dept of Hsg & Comm Aa (m) 660,000 7.400 04/01/17
Dev, Single Family Prog Bonds, 1989 Fourth Ser
7 Pennsylvania Hsg Fin Agy, SFM Rev Bonds, Ser Y AA 500,000 7.450 04/01/16
8 Piedmont Mun Pwr Agy, SC, Elec Rev Bonds, 1986 Rfdg Ser A A- 470,000 7.250 01/01/22
9 County of Ross, OH, Hosp Facs Rev Bonds, Ser 1989 (Med A- 450,000 7.500 12/01/14 (4)
Ctr Hosp Proj)
10 City of St Petersburg Hlth Facs Auth, FL, Allegany Hlth A+ 750,000 7.750 12/01/15
Sys Rev Bonds, Ser 1989B (St Marys Hosp, Inc)
11 City of San Antonio, TX, Elec & Gas Sys Rev Rfdg Bonds, AA 360,000 6.000 02/01/14
New Ser 1989-A
12 City of San Antonio, TX, Prior Lien Swr Sys Rev Imp and AAA 415,000 7.250 05/01/12 (4)
Rfdg Bonds, Ser 1986
13 Texas Hlth Facs Dev Corp, Hosp Rev Bonds (All Saints NR 555,000 7.800 08/15/21 (4)
Episcopal Hospitals of Ft Worth Proj), Ser 1989 B
14 Texas Tpke Auth, Dallas North Tollway Rev Bonds, Ser 1989 A- 500,000 7.125 01/01/15
____________
TOTAL $ 6,945,000
============
</TABLE>
D - 6
<PAGE>
DEFINED ASSET FUNDS - MUNICIPAL INVESTMENT TRUST FUND
MONTHLY PAYMENT SERIES - 491
PORTFOLIO
AS OF DECEMBER 31, 1994
<TABLE>
<CAPTION>
Optional
Portfolio No. and Redemption
Title of Securities Provisions(3) Cost Value(2)
___________________ _____________ ____ ________
<S> <C> <C> <C> <C>
1 Colorado Hlth Facs Auth, Hosp Rev Bonds (Lutheran Med Ctr 10/01/99 @ $ 358,766 $ 369,398
Proj), Ser 1989 102.000
2 Mun Elec Auth of GA, Gen Pwr Rev Bonds, 1989 A Ser 01/01/99 @ 510,651 544,895
102.000
3 City of Houston, TX, Wtr & Swr Sys Prior Lien Rev Bonds, 12/01/96 @ 512,335 547,133
Ser 1986 A 102.000
4 Illinois Hlth Facs Auth Rev Bonds, Ser 1989 B (Illinois 10/01/99 @ 615,000 676,242
Masonic Med Ctr) 102.000
5 Intermountain Pwr Agy, UT, Pwr Sup Rev Rfdg Bonds, 1985 07/01/95 @ 271,264 283,422
Ser H 100.000
6 State of Maryland, Comm Dev Admin, Dept of Hsg & Comm 04/01/99 @ 660,000 676,421
Dev, Single Family Prog Bonds, 1989 Fourth Ser 102.000
7 Pennsylvania Hsg Fin Agy, SFM Rev Bonds, Ser Y 10/01/99 @ 500,000 510,790
102.000
8 Piedmont Mun Pwr Agy, SC, Elec Rev Bonds, 1986 Rfdg Ser A 01/01/96 @ 467,053 475,480
102.000
9 County of Ross, OH, Hosp Facs Rev Bonds, Ser 1989 (Med 12/01/97 @ 450,000 487,350
Ctr Hosp Proj) 103.000
10 City of St Petersburg Hlth Facs Auth, FL, Allegany Hlth 12/01/99 @ 755,813 782,490
Sys Rev Bonds, Ser 1989B (St Marys Hosp, Inc) 102.000
11 City of San Antonio, TX, Elec & Gas Sys Rev Rfdg Bonds, 02/01/99 @ 320,184 333,770
New Ser 1989-A 101.500
12 City of San Antonio, TX, Prior Lien Swr Sys Rev Imp and 05/01/96 @ 415,000 433,638
Rfdg Bonds, Ser 1986 102.000
13 Texas Hlth Facs Dev Corp, Hosp Rev Bonds (All Saints 08/15/99 @ 555,000 608,147
Episcopal Hospitals of Ft Worth Proj), Ser 1989 B 102.000
14 Texas Tpke Auth, Dallas North Tollway Rev Bonds, Ser 1989 01/01/98 @ 495,000 507,425
102.000 _______________ ____________
TOTAL $ 6,886,066 $ 7,236,601
=============== ============
See Notes To Portfolio.
</TABLE>
D - 7
<PAGE>
DEFINED ASSET FUNDS - MUNICIPAL INVESTMENT TRUST FUND
MONTHLY PAYMENT SERIES - 491
NOTES TO PORTFOLIO
AS OF DECEMBER 31, 1994
(1) A description of the rating symbols and their meanings appears under
"Description of Ratings" in this Prospectus, Part B. Ratings, which
have been provided by the Evaluator, are by Standard & Poor's (when
available) or by Moody's Investors Service (as indicated by "m") when
Standard & Poor's Ratings are not available. "NR", if applicable,
indicates that this security is not currently rated by either rating
service.
(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 redemptions 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. The tax
effect on Holders of redemptions and related distributions is
described under "Taxes" in this Prospectus, Part B.
(4) Bonds with an aggregate face amount of $3,340,000 have been
pre-refunded and are expected to be called for redemption on
the optional redemption provision dates shown.
D - 8
<PAGE>
DEFINED ASSET FUNDS--
MUNICIPAL INVESTMENT TRUST FUND
MONTHLY PAYMENT SERIES
I want to learn more about automatic reinvestment in the Investment Accumulation
Program. Please send me information about participation in the Municipal Fund
Accumulation Program, Inc. and a current Prospectus.
My name (please
print) ________________________________________________________________________
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No. ___________________________________________________________________________
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Code __________________________________________________________________________
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<PAGE>
BUSINESS REPLY MAIL NO POSTAGE
FIRST CLASS PERMIT NO. 1313 NEW YORK, N.Y. NECESSARY
IF MAILED
POSTAGE WILL BE PAID BY ADDRESSEE IN THE
INVESTMENT ACCUMULATION PROGRAM (MITF) UNITED STATES
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P.O. BOX 974
WALL STREET STATION
NEW YORK, N.Y. 10268-0974
- --------------------------------------------------------------------------------
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<PAGE>
DEFINED ASSET FUNDSSM
PROSPECTUS--PART B
DEFINED ASSET FUNDS MUNICIPAL SERIES
MUNICIPAL INVESTMENT TRUST FUND
THIS PART B OF THE PROSPECTUS MAY NOT BE DISTRIBUTED UNLESS ACCOMPANIED OR
PRECEDED BY PART A. FURTHER DETAIL REGARDING ANY OF THE INFORMATION
PROVIDED IN THE PROSPECTUS MAY BE OBTAINED WITHIN FIVE DAYS OF WRITTEN
OR TELEPHONIC REQUEST TO THE TRUSTEE, THE ADDRESS AND
TELEPHONE NUMBER OF WHICH ARE SET FORTH IN PART A OF THIS PROSPECTUS.
Index
PAGE
---------
Fund Description...................................... 1
Risk Factors.......................................... 2
How to Buy Units...................................... 7
How to Sell Units..................................... 9
Income, Distributions and Reinvestment................ 9
Fund Expenses......................................... 10
Taxes................................................. 11
Records and Reports................................... 12
PAGE
---------
Trust Indenture....................................... 12
Miscellaneous......................................... 13
Exchange Option....................................... 14
Supplemental Information.............................. 15
Appendix A--Description of Ratings.................... a-1
Appendix B--Sales Charge Schedules for Defined Asset
Funds Municipal Series................................ b-1
Appendix C--Sales Charge Schedules for Municipal
Investment Trust Fund................................. c-1
FUND DESCRIPTION
BOND PORTFOLIO SELECTION
Professional buyers and research analysts for Defined Asset Funds, with
access to extensive research, selected the Bonds for the Portfolio after
considering the Fund's investment objective as well as the quality of the Bonds
(all Bonds in the Portfolio are initially rated in the category A or better by
at least one nationally recognized rating organization or have comparable credit
characteristics), the yield and price of the Bonds compared to similar
securities, the maturities of the Bonds and the diversification of the
Portfolio. Only issues meeting these stringent criteria of the Defined Asset
Funds team of dedicated research analysts are included in the Portfolio. No
leverage or borrowing is used nor does the Portfolio contain other kinds of
securities to enhance yield. A summary of the Bonds in the Portfolio appears in
Part A of the Prospectus.
The deposit of the Bonds in the Fund on the initial date of deposit
established a proportionate relationship among the face amounts of the Bonds.
During the 90-day period following the initial date of deposit the Sponsors may
deposit additional Bonds in order to create new Units, maintaining to the extent
possible that original proportionate relationship. Deposits of additional Bonds
subsequent to the 90-day period must generally replicate exactly the
proportionate relationship among the face amounts of the Bonds at the end of the
initial 90-day period.
Yields on bonds depend on many factors including general conditions of the
bond markets, the size of a particular offering and the maturity and quality
rating of the particular issues. Yields can vary among bonds with similar
maturities, coupons and ratings. Ratings represent opinions of the rating
organizations as to the quality of the bonds rated, based on the credit of the
issuer or any guarantor, insurer or other credit provider, but these ratings are
only general standards of quality (see Appendix A).
After the initial date of deposit, the ratings of some Bonds may be reduced
or withdrawn, or the credit characteristics of the Bonds may no longer be
comparable to bonds rated A or better. Bonds rated BBB or Baa (the lowest
investment grade rating) or lower may have speculative characteristics, and
changes in economic conditions or other circumstances are more likely to lead to
a weakened capacity to make principal and interest payments than is the case
with higher grade bonds. Bonds rated below investment grade or unrated bonds
with
1
<PAGE>
similar credit characteristics are often subject to
greater market fluctuations and risk of loss of principal and income than higher
grade bonds and their value may decline precipitously in response to rising
interest rates.
Because each Defined Asset Fund is a preselected portfolio of bonds, you
know the securities, maturities, call dates and ratings before you invest. Of
course, the Portfolio will change somewhat over time, as Bonds mature, are
redeemed or are sold to meet Unit redemptions or in other limited circumstances.
Because the Portfolio is not actively managed and principal is returned as the
Bonds are disposed of, this principal should be relatively unaffected by changes
in interest rates.
BOND PORTFOLIO SUPERVISION
The Fund follows a buy and hold investment strategy in contrast to the
frequent portfolio changes of a managed fund based on economic, financial and
market analyses. The Fund may retain an issuer's bonds despite adverse financial
developments. Experienced financial analysts regularly review the Portfolio and
a Bond may be sold in certain circumstances including the occurrence of a
default in payment or other default on the Bond, a decline in the projected
income pledged for debt service on a revenue bond, institution of certain legal
proceedings, if the Bond becomes taxable or is otherwise inconsistent with the
Fund's investment objectives, a decline in the price of the Bond or the
occurrence of other market or credit factors (including advance refunding) that,
in the opinion of Defined Asset Funds research analysts, makes retention of the
Bond detrimental to the interests of investors. The Trustee must generally
reject any offer by an issuer of a Bond to exchange another security pursuant to
a refunding or refinancing plan.
The Sponsors and the Trustee are not liable for any default or defect in a
Bond. If a contract to purchase any Bond fails, the Sponsors may generally
deposit a replacement bond so long as it is a tax-exempt bond, has a fixed
maturity or disposition date substantially similar to the failed Bond and is
rated A or better by at least one nationally recognized rating organization or
has comparable credit characteristics. A replacement bond must be deposited
within 110 days after deposit of the failed contract, at a cost that does not
exceed the funds reserved for purchasing the failed Bond and at a yield to
maturity and current return substantially equivalent (considering then current
market conditions and relative creditworthiness) to those of the failed Bond, as
of the date the failed contract was deposited.
RISK FACTORS
An investment in the Fund entails certain risks, including the risk that
the value of your investment will decline with increases in interest rates.
Generally speaking, bonds with longer maturities will fluctuate in value more
than bonds with shorter maturities. In recent years there have been wide
fluctuations in interest rates and in the value of fixed-rate bonds generally.
The Sponsors cannot predict the direction or scope of any future fluctuations.
Certain of the Bonds may have been deposited at a market discount or
premium principally because their interest rates are lower or higher than
prevailing rates on comparable debt securities. The current returns of market
discount bonds are lower than comparably rated bonds selling at par because
discount bonds tend to increase in market value as they approach maturity. The
current returns of market premium bonds are higher than comparably rated bonds
selling at par because premium bonds tend to decrease in market value as they
approach maturity. Because part of the purchase price is returned through
current income payments and not at maturity, an early redemption at par of a
premium bond will result in a reduction in yield to the Fund. Market premium or
discount attributable to interest rate changes does not indicate market
confidence or lack of confidence in the issue.
Certain Bonds deposited into the Fund may have been acquired on a
when-issued or delayed delivery basis. The purchase price for these Bonds is
determined prior to their delivery to the Fund and a gain or loss may result
from fluctuations in the value of the Bonds. Additionally, in any Defined Asset
Funds Municipal Series, if the value of the Bonds reserved for payment of the
periodic deferred sales charge, together with the interest thereon, were to
become insufficient to pay these charges, additional bonds would be required to
be sold.
The Fund may be concentrated in one or more of types of bonds.
Concentration in a State may involve additional risk because of the decreased
diversification of economic, political, financial and market risks. Set forth
below is a brief description of certain risks associated with bonds which may be
held by the Fund. Additional information is contained in the Information
Supplement which is available from the Trustee at no charge to the investor.
2
<PAGE>
GENERAL OBLIGATION BONDS
Certain of the Bonds may be general obligations of a governmental entity.
General obligation bonds are backed by the issuer's pledge of its full faith,
credit and taxing power for the payment of principal and interest. However, the
taxing power of any governmental entity may be limited by provisions of state
constitutions or laws and its credit will depend on many factors, including an
erosion of the tax base resulting from population declines, natural disasters,
declines in the state's industrial base or an inability to attract new
industries, economic limits on the ability to tax without eroding the tax base
and the extent to which the entity relies on federal or state aid, access to
capital markets or other factors beyond the entity's control. In addition,
political restrictions on the ability to tax and budgetary constraints affecting
state governmental aid may have an adverse impact on the creditworthiness of
cities, counties, school districts and other local governmental units.
As a result of the recent recession's adverse impact upon both revenues and
expenditures, as well as other factors, many state and local governments have
confronted deficits which were the most severe in recent years. Many issuers are
facing highly difficult choices about significant tax increases and spending
reductions in order to restore budgetary balance. The failure to implement these
actions on a timely basis could force these issuers to issue additional debt to
finance deficits or cash flow needs and could lead to a reduction of their bond
ratings and the value of their outstanding bonds.
MORAL OBLIGATION BONDS
The Portfolio may include 'moral obligation' bonds. If an issuer of moral
obligation bonds is unable to meet its obligations, the repayment of the bonds
becomes a moral commitment but not a legal obligation of the state or local
government in question. Even though the state or local government may be called
on to restore any deficits in capital reserve funds of the agencies or
authorities which issued the bonds, any restoration generally requires
appropriation by the state or local legislature and does not constitute a
legally enforceable obligation or debt of the state or local government. The
agencies or authorities generally have no taxing power.
REFUNDED BONDS
Refunded bonds are typically secured by direct obligations of the U.S.
Government or in some cases obligations guaranteed by the U.S. Government placed
in an escrow account maintained by an independent trustee until maturity or a
predetermined redemption date. These obligations are generally noncallable prior
to maturity or the predetermined redemption date. In a few isolated instances,
however, bonds which were thought to be escrowed to maturity have been called
for redemption prior to maturity.
MUNICIPAL REVENUE BONDS
Municipal revenue bonds are tax-exempt securities issued by states,
municipalities, public authorities or similar entities to finance the cost of
acquiring, constructing or improving various projects. Municipal revenue bonds
are not general obligations of governmental entities backed by their taxing
power and payment is generally solely dependent upon the creditworthiness of the
public issuer or the financed project or state appropriations. Examples of
municipal revenue bonds are:
Municipal utility bonds, including electrical, water and sewer revenue
bonds, whose payments are dependent on various factors, including the rates
the utilities may charge, the demand for their services and their operating
costs, including expenses to comply with environmental legislation and
other energy and licensing laws and regulations. Utilities are particularly
sensitive to, among other things, the effects of inflation on operating and
construction costs, the unpredictability of future usage requirements, the
costs and availability of fuel and, with certain electric utilities, the
risks associated with the nuclear industry;
Lease rental bonds which are generally issued by governmental financing
authorities with no direct taxing power for the purchase of equipment or
construction of buildings that will be used by a state or local government.
Lease rental bonds are generally subject to an annual risk that the lessee
government might not appropriate funds for the leasing rental payments to
service the bonds and may also be subject to the risk that rental
obligations may terminate in the event of damage to or destruction or
condemnation of the equipment or building;
Multi-family housing revenue bonds and single family mortgage revenue
bonds which are issued to provide financing for various housing projects
and which are payable primarily from the revenues derived from mortgage
loans to housing projects for low to moderate income families or notes
secured by mortgages on residences; repayment of this type of bonds is
therefore dependent upon, among other things, occupancy
3
<PAGE>
levels, rental income, the rate of default on underlying mortgage loans,
the ability of mortgage insurers to pay claims, the continued availability
of federal, state or local housing subsidy programs, economic conditions in
local markets, construction costs, taxes, utility costs and other operating
expenses and the managerial ability of project managers. Housing bonds are
generally prepayable at any time and therefore their average life will
ordinarily be less than their stated maturities;
Hospital and health care facility bonds whose payments are dependent
upon revenues of hospitals and other health care facilities. These revenues
come from private third-party payors and government programs, including the
Medicare and Medicaid programs, which have generally undertaken cost
containment measures to limit payments to health care facilities. Hospitals
and health care facilities are subject to various legal claims by patients
and others and are adversely affected by increasing costs of insurance;
Airport, port, highway and transit authority revenue bonds which are
dependent for payment on revenues from the financed projects, including
user fees from ports and airports, tolls on turnpikes and bridges, rents
from buildings, transit fare revenues and additional financial resources
including federal and state subsidies, lease rentals paid by state or local
governments or a pledge of a special tax such as a sales tax or a property
tax. In the case of the air travel industry, airport income is largely
affected by the airlines' ability to meet their obligations under use
agreements which in turn is affected by increased competition among
airlines, excess capacity and increased fuel costs, among other factors.
Solid waste disposal bonds which are generally payable from dumping and
user fees and from revenues that may be earned by the facility on the sale
of electrical energy generated in the combustion of waste products and
which are therefore dependent upon the ability of municipalities to fully
utilize the facilities, sufficient supply of waste for disposal, economic
or population growth, the level of construction and maintenance costs, the
existence of lower-cost alternative modes of waste processing and
increasing environmental regulation. A recent decision of the U.S. Supreme
Court limiting a municipality's ability to require use of its facilities
may have an adverse affect on the credit quality of various issues of these
bonds;
Special tax bonds which are not secured by general tax revenues but are
only payable from and secured by the revenues derived by a municipality
from a particular tax--for example, a tax on the rental of a hotel room, on
the purchase of food and beverages, on the rental of automobiles or on the
consumption of liquor and may therefore be adversely affected by a
reduction in revenues resulting from a decline in the local economy or
population or a decline in the consumption, use or cost of the goods and
services that are subject to taxation;
Student loan revenue bonds which are typically secured by pledges of new
or existing student loans. The loans, in turn, are generally either
guaranteed by eligible guarantors and reinsured by the Secretary of the
U.S. Department of Education, directly insured by the federal government,
or financed as part of supplemental or alternative loan programs within a
state (e.g., loan repayments are not guaranteed). These bonds often permit
the issuer to enter into interest rate swap agreements with eligible
counterparties in which event the bonds are subject to the additional risk
of the counterparty's ability to fulfill its swap obligation;
University and college bonds, the payments on which are dependent upon
various factors, including the size and diversity of their sources of
revenues, enrollment, reputation, the availability of endowments and other
funds and, in the case of public institutions, the financial condition of
the relevant state or other governmental entity and its policies with
respect to education; and
Tax increment and tax allocation bonds, which are secured by ad valorem
taxes imposed on the incremental increase of taxable assessed valuation of
property within a jurisdiction above an established base of assessed value.
The issuers of these bonds do not have general taxing authority and the tax
assessments on which the taxes used to service the bonds are based may be
subject to devaluation due to market price declines or governmental action.
Puerto Rico. Certain Bonds may be affected by general economic conditions
in the Commonwealth of Puerto Rico. Puerto Rico's economy is largely dependent
for its development on federal programs and current federal budgetary policies
suggest that an expansion of its programs is unlikely. Reductions in federal tax
benefits or incentives or curtailment of spending programs could adversely
affect the Puerto Rican economy.
Industrial Development Revenue Bonds. Industrial development revenue bonds
are municipal obligations issued to finance various privately operated projects
including pollution control and manufacturing facilities. Payment is generally
solely dependent upon the creditworthiness of the corporate operator of the
project and, in
4
<PAGE>
certain cases, an affiliated or third party guarantor and may be affected by
economic factors relating to the particular industry as well as varying degrees
of governmental regulation. In many cases industrial revenue bonds do not have
the benefit of covenants which would prevent the corporations from engaging in
capital restructurings or borrowing transactions which could reduce their
ability to meet their obligations and result in a reduction in the value of the
Portfolio.
BONDS BACKED BY LETTERS OF CREDIT OR INSURANCE
Certain Bonds may be secured by letters of credit issued by commercial
banks or savings banks, savings and loan associations and similar thrift
institutions or are direct obligations of banks or thrifts. The letter of credit
may be drawn upon, and the Bonds redeemed, if an issuer fails to pay amounts due
on the Bonds or, in certain cases, if the interest on the Bond becomes taxable.
Letters of credit are irrevocable obligations of the issuing institutions. The
profitability of a financial institution is largely dependent upon the credit
quality of its loan portfolio which, in turn, is affected by the institution's
underwriting criteria, concentrations within the portfolio and specific industry
and general economic conditions. The operating performance of financial
institutions is also impacted by changes in interest rates, the availability and
cost of funds, the intensity of competition and the degree of governmental
regulation.
Certain Bonds may be insured or guaranteed by insurance companies listed
below. The claims-paying ability of each of these companies, unless otherwise
indicated, was rated AAA by Standard & Poor's or another nationally recognized
rating organization at the time the insured Bonds were purchased by the Fund.
The ratings are subject to change at any time at the discretion of the rating
agencies. In the event that the rating of an Insured Fund is reduced, the
Sponsors are authorized to direct the Trustee to obtain other insurance on
behalf of the Fund. The insurance policies guarantee the timely payment of
principal and interest on the Bonds but do not guarantee their market value or
the value of the Units. The insurance policies generally do not provide for
accelerated payments of principal or cover redemptions resulting from events of
taxability.
The following summary information relating to the listed insurance
companies has been obtained from publicly available information:
<TABLE><CAPTION>
FINANCIAL INFORMATION
AS OF SEPTEMBER 30, 1994
(IN MILLIONS OF DOLLARS)
--------------------------------------
POLICYHOLDERS'
NAME DATE ESTABLISHED ADMITTED ASSETS SURPLUS
- ---------------------------------------------------- ----------------- --------------- ---------------------
<S> <C> <C> <C>
AMBAC Indemnity Corporation......................... 1970 $ 2,150 $ 779
Asset Guaranty Insurance Co. (AA by S&P) 1988 152 73
Capital Guaranty Insurance Company.................. 1986 293 166
Capital Markets Assurance Corp...................... 1987 198 139
Connie Lee Insurance Company........................ 1987 193 106
Continental Casualty Company........................ 1948 19,220 3,309
Financial Guaranty Insurance Company................ 1984 2,092 872
Financial Security Assurance Inc.................... 1984 776 369
Firemen's Insurance Company of Newark, NJ........... 1855 2,236 383
Industrial Indemnity Co. (HIBI)..................... 1920 1,853 299
Municipal Bond Investors Assurance Corporation...... 1986 3,314 1,083
Insurance companies are subject to extensive regulation and supervision
where they do business by state insurance commissioners who regulate the
standards of solvency which must be maintained, the nature of and limitations on
investments, reports of financial condition, and requirements regarding reserves
for unearned premiums, losses and other matters. A significant portion of the
assets of insurance companies are required by law to be held in reserve against
potential claims on policies and is not available to general creditors. Although
the federal government does not regulate the business of insurance, federal
initiatives including pension regulation, controls on medical care costs,
minimum standards for no-fault automobile insurance, national health insurance,
tax law changes affecting life insurance companies and repeal of the antitrust
exemption for the insurance business can significantly impact the insurance
business.
5
<PAGE>
STATE RISK FACTORS
Investment in a single State Trust, as opposed to a Fund which invests in
the obligations of several states, may involve some additional risk due to the
decreased diversification of economic, political, financial and market risks. A
brief description of the factors which may affect the financial condition of the
applicable State for any State Trust, together with a summary of tax
considerations relating to that State, appear in Part A (or for certain State
Trusts, Part C), of the Prospectus; further information is contained in the
Information Supplement.
LITIGATION AND LEGISLATION
The Sponsors do not know of any pending litigation as of the initial date
of deposit which might reasonably be expected to have a material adverse effect
upon the Fund. At any time after the initial date of deposit, litigation may be
initiated on a variety of grounds, or legislation may be enacted, affecting the
Bonds in the Fund. Litigation, for example, challenging the issuance of
pollution control revenue bonds under environmental protection statutes may
affect the validity of certain Bonds or the tax-free nature of their interest.
While the outcome of litigation of this nature can never be entirely predicted,
opinions of bond counsel are delivered on the date of issuance of each Bond to
the effect that it has been validly issued and that the interest thereon is
exempt from federal income tax. Also, certain proposals, in the form of state
legislative proposals or voter initiatives, seeking to limit real property taxes
have been introduced in various states, and an amendment to the constitution of
the State of California, providing for strict limitations on real property
taxes, has had a significant impact on the taxing powers of local governments
and on the financial condition of school districts and local governments in
California. In addition, other factors may arise from time to time which
potentially may impair the ability of issuers to make payments due on the Bonds.
Under the Federal Bankruptcy Code, for example, municipal bond issuers, as well
as any underlying corporate obligors or guarantors, may proceed to restructure
or otherwise alter the terms of their obligations.
From time to time Congress considers proposals to prospectively and
retroactively tax the interest on state and local obligations, such as the
Bonds. The Supreme Court clarified in South Carolina v. Baker (decided on April
20, 1988) that the U.S. Constitution does not prohibit Congress from passing a
nondiscriminatory tax on interest on state and local obligations. This type of
legislation, if enacted into law, could require investors to pay income tax on
interest from the Bonds and could adversely affect an investment in Units. See
Taxes.
PAYMENT OF THE BONDS AND LIFE OF THE FUND
The size and composition of the Portfolio will change over time. Most of
the Bonds are subject to redemption prior to their stated maturity dates
pursuant to optional refunding or sinking fund redemption provisions or
otherwise. In general, optional refunding redemption provisions are more likely
to be exercised when the value of a Bond is at a premium over par than when it
is at a discount from par. Some Bonds may be subject to sinking fund and
extraordinary redemption provisions which may commence early in the life of the
Fund. Additionally, the size and composition of the Fund will be affected by the
level of redemptions of Units that may occur from time to time. Principally,
this will depend upon the number of investors seeking to sell or redeem their
Units and whether or not the Sponsors are able to sell the Units acquired by
them in the secondary market. As a result, Units offered in the secondary market
may not represent the same face amount of Bonds as on the initial date of
deposit. Factors that the Sponsors will consider in determining whether or not
to sell Units acquired in the secondary market include the diversity of the
Portfolio, the size of the Fund relative to its original size, the ratio of Fund
expenses to income, the Fund's current and long-term returns, the degree to
which Units may be selling at a premium over par and the cost of maintaining a
current prospectus for the Fund. These factors may also lead the Sponsors to
seek to terminate the Fund earlier than its mandatory termination date.
FUND TERMINATION
The Fund will be terminated no later than the mandatory termination date
specified in Part A of the Prospectus. It will terminate earlier upon the
disposition of the last Bond or upon the consent of investors holding 51% of the
Units. The Fund may also be terminated earlier by the Sponsors once the total
assets of the Fund have fallen below the minimum value specified in Part A of
the Prospectus. A decision by the Sponsors to terminate the Fund early will be
based on factors similar to those considered by the Sponsors in determining
whether to continue the sale of Units in the secondary market.
Notice of impending termination will be provided to investors and
thereafter units will no longer be redeemable. On or shortly before termination,
the Fund will seek to dispose of any Bonds remaining in the
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Portfolio although any Bond unable to be sold at a reasonable price may continue
to be held by the Trustee in a liquidating trust pending its final disposition.
A proportional share of the expenses associated with termination, including
brokerage costs in disposing of Bonds, will be borne by investors remaining at
that time. This may have the effect of reducing the amount of proceeds those
investors are to receive in any final distribution.
LIQUIDITY
Up to 40% of the value of the Portfolio may be attributable to guarantees
or similar security provided by corporate entities. These guarantees or other
security may constitute restricted securities that cannot be sold publicly by
the Trustee without registration under the Securities Act of 1933, as amended.
The Sponsors nevertheless believe that, should a sale of the Bonds guaranteed or
secured be necessary in order to meet redemption of Units, the Trustee should be
able to consummate a sale with institutional investors.
The principal trading market for the Bonds will generally be in the
over-the-counter market and the existence of a liquid trading market for the
Bonds may depend on whether dealers will make a market in them. There can be no
assurance that a liquid trading market will exist for any of the Bonds,
especially since the Fund may be restricted under the Investment Company Act of
1940 from selling Bonds to any Sponsor. The value of the Portfolio will be
adversely affected if trading markets for the Bonds are limited or absent.
HOW TO BUY UNITS
Units are available from any of the Sponsors, Underwriters and other
broker-dealers at the Public Offering Price plus accrued interest on the Units.
The Public Offering Price varies each Business Day with changes in the value of
the Portfolio and other assets and liabilities of the Fund.
PUBLIC OFFERING PRICE--DEFINED ASSET FUNDS MUNICIPAL SERIES
To allow Units to be priced at $1,000, the Units outstanding as of the
Evaluation Time on the Initial Date of Deposit (all of which are held by the
Sponsors) will be split (or split in reverse).
During the initial offering period for at least the first three months of
the Fund, the Public Offering Price (and the Initial Repurchase Price) is based
on the higher, offer side evaluation of the Bonds at the next Evaluation Time
after the order is received. In the secondary market (after the initial offering
period), the Public Offering Price (and the Sponsors' Repurchase Price and the
Redemption Price) is based on the lower, bid side evaluation of the Bonds.
Investors will be subject to differing types and amounts of sales charge
depending upon the timing of their purchases and redemptions of Units. A
periodic deferred sales charge will be payable quarterly through about the fifth
anniversary of the Fund from a portion of the interest on and principal of Bonds
reserved for that purpose. Commencing on the first anniversary of the Fund, the
Public Offering Price will also include an up-front sales charge applied to the
value of the Bonds in the Portfolio. Lastly, investors redeeming their Units
prior to the fourth anniversary of the Fund will be charged a contingent
deferred sales charge payable out of the redemption proceeds of their Units.
These charges may be less than you would pay to buy and hold a comparable
managed fund. A complete schedule of sales charges appears in Appendix B. The
Sponsors have received an opinion of their counsel that the deferred sales
charge described in this Prospectus is consistent with an exemptive order
received from the SEC.
Because accrued interest on the Bonds is not received by the Fund at a
constant rate throughout the year, any Monthly Income Distribution may be more
or less than the interest actually received by the Fund. To eliminate
fluctuations in the Monthly Income Distribution, a portion of the Public
Offering Price consists of an advance to the Trustee of an amount necessary to
provide approximately equal distributions. Upon the sale or redemption of Units,
investors will receive their proportionate share of the Trustee advance. In
addition, if a Bond is sold, redeemed or otherwise disposed of, the Fund will
periodically distribute the portion of the Trustee advance that is attributable
to the Bond to investors.
The regular Monthly Income Distribution is stated in Part A of the
Prospectus and will change as the composition of the Portfolio changes over
time.
PUBLIC OFFERING PRICE--MUNICIPAL INVESTMENT TRUST FUND
In the initial offering period, the Public Offering Price is based on the
next offer side evaluation of the Bonds, and includes a sales charge based on
the number of Units of a single Fund or Trust purchased on the same or any
7
<PAGE>
preceding day by a single purchaser. See Initial Offering sales charge schedule
in Appendix C. The purchaser or his dealer must notify the Sponsors at the time
of purchase of any previous purchase to be aggregated and supply sufficient
information to permit confirmation of eligibility; acceptance of the purchase
order is subject to confirmation. Purchases of Fund Units may not be aggregated
with purchases of any other unit trust. This procedure may be amended or
terminated at any time without notice.
In the secondary market (after the initial offering period), the Public
Offering Price is based on the bid side evaluation of the Bonds, and includes a
sales charge based (a) on the number of Units of the Fund and any other Series
of Municipal Investment Trust Fund purchased in the secondary market on the same
day by a single purchaser (see Secondary Market sales charge schedule in
Appendix C) and (b) the maturities of the underlying Bonds (see Effective Sales
Charge Schedule in Appendix C). To qualify for a reduced sales charge, the
dealer must confirm that the sale is to a single purchaser or is purchased for
its own account and not for distribution. For these purposes, Units held in the
name of the purchaser's spouse or child under 21 years of age are deemed to be
purchased by a single purchaser. A trustee or other fiduciary purchasing
securities for a single trust estate or single fiduciary account is also
considered a single purchaser.
In the secondary market, the Public Offering Price is further reduced
depending on the maturities of the various Bonds in the Portfolio, by
determining a sales charge percentage for each Bond, as stated in Effective
Sales Charge in Appendix C. The sales charges so determined, multiplied by the
bid side evaluation of the Bonds, are aggregated and the total divided by the
number of Units outstanding to determine the Effective Sales Charge. On any
purchase, the Effective Sales Charge is multiplied by the applicable secondary
market sales charge percentage (depending on the number of Units purchased) in
order to determine the sales charge component of the Public Offering Price.
* * *
Employees of certain Sponsors and Sponsor affiliates and non-employee
directors of Merrill Lynch & Co. Inc. may purchase Units at any time at prices
including a sales charge of not less than $5 per Unit.
Net accrued interest is added to the Public Offering Price, the Sponsors'
Repurchase Price and the Redemption Price per Unit. This represents the interest
accrued on the Bonds, net of Fund expenses, from the initial date of deposit to,
but not including, the settlement date for Units (less any prior distributions
of interest income to investors). Bonds deposited also carry accrued but unpaid
interest up to the initial date of deposit. To avoid having investors pay this
additional accrued interest (which earns no return) when they purchase Units,
the Trustee advances and distributes this amount to the Sponsors; it recovers
this advance from interest received on the Bonds. Because of varying interest
payment dates on the Bonds, accrued interest at any time will exceed the
interest actually received by the Fund.
EVALUATIONS
Evaluations are determined by the independent Evaluator on each Business
Day. This excludes Saturdays, Sundays and the following holidays as observed by
the New York Stock Exchange: New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas. Bond
evaluations are based on closing sales prices (unless the Evaluator deems these
prices inappropriate). If closing sales prices are not available, the evaluation
is generally determined on the basis of current bid or offer prices for the
Bonds or comparable securities or by appraisal or by any combination of these
methods. In the past, the bid prices of publicly offered tax-exempt issues have
been lower than the offer prices by as much as 3 1/2% or more of face amount in
the case of inactively traded issues and as little as 1/2 of 1% in the case of
actively traded issues, but the difference between the offer and bid prices has
averaged between 1 and 2% of face amount. Neither the Sponsors, the Trustee or
the Evaluator will be liable for errors in the Evaluator's judgment. The fees of
the Evaluator will be borne by the Fund.
CERTIFICATES
Certificates for Units are issued upon request and may be transferred by
paying any taxes or governmental charges and by complying with the requirements
for redeeming Certificates (see How To Sell Units--Trustee's Redemption of
Units). Certain Sponsors collect additional charges for registering and shipping
Certificates to purchasers. Lost or mutilated Certificates can be replaced upon
delivery of satisfactory indemnity and payment of costs.
8
<PAGE>
HOW TO SELL UNITS
SPONSORS' MARKET FOR UNITS
You can sell your Units at any time without a fee. The Sponsors (although
not obligated to do so) will normally buy any Units offered for sale at the
repurchase price next computed after receipt of the order. The Sponsors have
maintained secondary markets in Defined Asset Funds for over 20 years. Primarily
because of the sales charge and fluctuations in the market value of the Bonds,
the sale price may be less than the cost of your Units. You should consult your
financial professional for current market prices to determine if other broker-
dealers or banks are offering higher prices for Units.
The Sponsors may discontinue this market without prior notice if the supply
of Units exceeds demand or for other business reasons; in that event, the
Sponsors may still purchase Units at the redemption price as a service to
investors. The Sponsors may reoffer or redeem Units repurchased.
TRUSTEE'S REDEMPTION OF UNITS
You may redeem your Units by sending the Trustee a redemption request
together with any certificates you hold. Certificates must be properly endorsed
or accompanied by a written transfer instrument with signatures guaranteed by an
eligible institution. In certain instances, additional documents may be required
such as a certificate of death, trust instrument, certificate of corporate
authority or appointment as executor, administrator or guardian. If the Sponsors
are maintaining a market for Units, they will purchase any Units tendered at the
repurchase price described above. While Defined Asset Funds Municipal Series
have a declining deferred sales charge payable on redemption (see Appendix B),
Municipal Investment Trust Fund has no back-end load or 12b-1 fees, so there is
never a fee for cashing in your investment (see Appendix C). If they do not
purchase Units tendered, the Trustee is authorized in its discretion to sell
Units in the over-the-counter market if it believes it will obtain a higher net
price for the redeeming investor.
By the seventh calendar day after tender you will be mailed an amount equal
to the Redemption Price per Unit. Because of market movements or changes in the
Portfolio, this price may be more or less than the cost of your Units. The
Redemption Price per Unit is computed each Business Day by adding the value of
the Bonds, net accrued interest, cash and the value of any other Fund assets;
deducting unpaid taxes or other governmental charges, accrued but unpaid Fund
expenses, unreimbursed Trustee advances, cash held to redeem Units or for
distribution to investors and the value of any other Fund liabilities; and
dividing the result by the number of outstanding Units.
For Defined Asset Funds Municipal Series, Bonds are evaluated on the offer
side during the initial offering period and for at least the first three months
of the Fund (even in the secondary market) and on the bid side thereafter. For
Municipal Investment Trust Fund, Bonds are evaluated on the offer side during
the initial offering period and on the bid side thereafter.
If cash is not available in the Fund's Income and Capital Accounts to pay
redemptions, the Trustee may sell Bonds selected by the Agent for the Sponsors
based on market and credit factors determined to be in the best interest of the
Fund. These sales are often made at times when the Bonds would not otherwise be
sold and may result in lower prices than might be realized otherwise and will
also reduce the size and diversity of the Fund.
Redemptions may be suspended or payment postponed if the New York Stock
Exchange is closed other than for customary weekend and holiday closings, if the
SEC determines that trading on that Exchange is restricted or that an emergency
exists making disposal or evaluation of the Bonds not reasonably practicable, or
for any other period permitted by the SEC.
INCOME, DISTRIBUTIONS AND REINVESTMENT
INCOME
Some of the Bonds may have been purchased on a when-issued basis or may
have a delayed delivery. Since interest on these Bonds does not begin to accrue
until the date of their delivery to the Fund, the Trustee's annual fee and
expenses may be reduced to provide tax-exempt income to investors for this
non-accrual period. If a when-issued Bond is not delivered until later than
expected and the amount of the Trustee's annual fee and expenses is insufficient
to cover the additional accrued interest, the Sponsors will treat the contracts
as failed Bonds. The Trustee is compensated for its fee reduction by drawing on
the letter of credit deposited by the
9
<PAGE>
Sponsors before the settlement date for these Bonds and depositing the proceeds
in a non-interest bearing account for the Fund.
Interest received is credited to an Income Account and other receipts to a
Capital Account. A Reserve Account may be created by withdrawing from the Income
and Capital Accounts amounts considered appropriate by the Trustee to reserve
for any material amount that may be payable out of the Fund.
DISTRIBUTIONS
Each Unit receives an equal share of monthly distributions of interest
income net of estimated expenses. Interest on the Bonds is generally received by
the Fund on a semi-annual or annual basis. Because interest on the Bonds is not
received at a constant rate throughout the year, any Monthly Income Distribution
may be more or less than the interest actually received. To eliminate
fluctuations in the Monthly Income Distribution, the Trustee will advance
amounts necessary to provide approximately equal interest distributions; it will
be reimbursed, without interest, from interest received on the Bonds, but the
Trustee is compensated, in part, by holding the Fund's cash balances in
non-interest bearing accounts. Along with the Monthly Income Distributions, the
Trustee will distribute the investor's pro rata share of principal received from
any disposition of a Bond to the extent available for distribution. In addition,
for Defined Asset Funds Municipal Series, distributions of amounts necessary to
pay the deferred portion of the sales charge will be made from the Capital and
Income Accounts to an account maintained by the Trustee for purposes of
satisfying investors' sales charge obligations.
The initial estimated annual income per Unit, after deducting estimated
annual Fund expenses (and, for Defined Asset Funds Municipal Series, the portion
of the deferred sales charge payable from interest income) as stated in Part A
of the Prospectus, will change as Bonds mature, are called or sold or otherwise
disposed of, as replacement bonds are deposited and as Fund expenses change.
Because the Portfolio is not actively managed, income distributions will
generally not be affected by changes in interest rates. Depending on the
financial conditions of the issuers of the Bonds, the amount of income should be
substantially maintained as long as the Portfolio remains unchanged; however,
optional bond redemptions or other Portfolio changes may occur more frequently
when interest rates decline, which would result in early returns of principal
and possibly earlier termination of the Fund.
REINVESTMENT
Distributions will be paid in cash unless the investor elects to have
distributions reinvested without sales charge in the Municipal Fund Accumulation
Program, Inc. The Program is an open-end management investment company whose
investment objective is to obtain income exempt from regular federal income
taxes by investing in a diversified portfolio of state, municipal and public
authority bonds rated A or better or with comparable credit characteristics.
Reinvesting compounds earnings free from federal tax. Investors participating in
the Program will be subject to state and local income taxes to the same extent
as if the distributions had been received in cash, and most of the income on the
Program is subject to state and local income taxes. For more complete
information about the Program, including charges and expenses, request the
Program's prospectus from the Trustee. Read it carefully before you decide to
participate. Written notice of election to participate must be received by the
Trustee at least ten days before the Record Day for the first distribution to
which the election is to apply.
FUND EXPENSES
Estimated annual Fund expenses are listed in Part A of the Prospectus; if
actual expenses exceed the estimate, the excess will be borne by the Fund. The
Trustee's annual fee is payable in monthly installments. The Trustee also
benefits when it holds cash for the Fund in non-interest bearing accounts.
Possible additional charges include Trustee fees and expenses for extraordinary
services, costs of indemnifying the Trustee and the Sponsors, costs of action
taken to protect the Fund and other legal fees and expenses, Fund termination
expenses and any governmental charges. The Trustee has a lien on Fund assets to
secure reimbursement of these amounts and may sell Bonds for this purpose if
cash is not available. The Sponsors receive an annual fee of a maximum of $0.35
per $1,000 face amount to reimburse them for the cost of providing Portfolio
supervisory services to the Fund. While the fee may exceed their costs of
providing these services to the Fund, the total supervision fees from all
Defined Asset Funds Municipal Series will not exceed their costs for these
services to all of those Series during any calendar year; and the total
supervision fees from all Series of Municipal Investment Trust Fund will not
exceed their costs for these services to all of those Series during any calendar
year. The Sponsors may also be reimbursed for their costs of providing
bookkeeping and administrative services to the Fund, currently estimated at
$0.10 per Unit. The Trustee's, Sponsors' and Evaluator's fees may be adjusted
for inflation without investors' approval.
10
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All expenses in establishing the Fund will be paid from the Underwriting
Account at no charge to the Fund. Sales charges on Defined Asset Funds range
from under 1.0% to 5.5%. This may be less than you might pay to buy and hold a
comparable managed fund. Defined Asset Funds can be a cost-effective way to
purchase and hold investments. Annual operating expenses are generally lower
than for managed funds. Because Defined Asset Funds have no management fees,
limited transaction costs and no ongoing marketing expenses, operating expenses
are generally less than 0.25% a year. When compounded annually, small
differences in expense ratios can make a big difference in your investment
results.
TAXES
The following discussion addresses only the U.S. federal and certain New
York State and City income tax consequences under current law of Units held as
capital assets and does not address the tax consequences of Units held by
dealers, financial institutions or insurance companies or other investors with
special circumstances.
In the opinion of Davis Polk & Wardwell, special counsel for the Sponsors,
under existing law:
The Fund is not an association taxable as a corporation for federal
income tax purposes. Each investor will be considered the owner of a pro
rata portion of each Bond in the Fund under the grantor trust rules of
Sections 671-679 of the Internal Revenue Code of 1986, as amended (the
'Internal Revenue Code'). Each investor will be considered to have received
the interest and accrued the original issue discount, if any, on his pro
rata portion of each Bond when interest on the Bond is received or original
issue discount is accrued by the Fund. The investor's basis in his Units
will be equal to the cost of his Units, including any up-front sales
charge.
When an investor pays for accrued interest, the investor's confirmation
of purchase will report to him the amount of accrued interest for which he
paid. These investors will receive the accrued interest amount as part of
their first monthly distribution. Accordingly, these investors should
reduce their tax basis by the accrued interest amount after the first
monthly distribution.
An investor will recognize taxable gain or loss when all or part of his
pro rata portion of a Bond is disposed of by the Fund. An investor will
also be considered to have disposed of all or a portion of his pro rata
portion of each Bond when he sells or redeems all or some of his Units. An
investor who is treated as having acquired his pro rata portion of a Bond
at a premium will be required to amortize the premium over the term of the
Bond. The amortization is only a reduction of basis for the investor's pro
rata portion of the Bond and does not result in any deduction against the
investor's income. Therefore, under some circumstances, an investor may
recognize taxable gain when his pro rata portion of a Bond is disposed of
for an amount equal to or less than his original tax basis therefor.
Under Section 265 of the Internal Revenue Code, a non-corporate investor
is not entitled to a deduction for his pro rata share of fees and expenses
of the Fund, because the fees and expenses are incurred in connection with
the production of tax-exempt income. Further, if borrowed funds are used by
an investor to purchase or carry Units of the Fund, interest on this
indebtedness will not be deductible for federal income tax purposes. In
addition, under rules used by the Internal Revenue Service, the purchase of
Units may be considered to have been made with borrowed funds even though
the borrowed funds are not directly traceable to the purchase of Units.
Under the income tax laws of the State and City of New York, the Fund is
not an association taxable as a corporation and income received by the Fund
will be treated as the income of the investors in the same manner as for
federal income tax purposes, but will not necessarily be tax-exempt.
The foregoing discussion relates only to U.S. federal and certain
aspects of New York State and City income taxes. Depending on their state
of residence, investors may be subject to state and local taxation and
should consult their own tax advisers in this regard.
* * *
In the opinion of bond counsel rendered on the date of issuance of each
Bond, the interest on each Bond is excludable from gross income under existing
law for regular federal income tax purposes (except in certain circumstances
depending on the investor) but may be subject to state and local taxes, and
interest on some or all of the Bonds may become subject to regular federal
income tax, perhaps retroactively to their date of issuance, as a result of
changes in federal law or as a result of the failure of issuers (or other users
of the proceeds of the Bonds) to comply with certain ongoing requirements. If
the interest on a Bond should be determined to be taxable, the
11
<PAGE>
Bond would generally have to be sold at a substantial discount. In addition,
investors could be required to pay income tax on interest received prior to the
date on which the interest is determined to be taxable.
Neither the Sponsors nor Davis Polk & Wardwell have made or will make any
review of the proceedings relating to the issuance of the Bonds or the basis for
these opinions and there can be no assurance that the issuer (and other users)
will comply with any ongoing requirements necessary for a Bond to maintain its
tax-exempt character.
RECORDS AND REPORTS
The Trustee keeps a register of the names, addresses and holdings of all
investors. The Trustee also keeps records of the transactions of the Fund,
including a current list of the Bonds and a copy of the Indenture, and
supplemental information on the operations of the Fund and the risks associated
with the Bonds held by the Fund, which may be inspected by investors at
reasonable times during business hours.
With each distribution, the Trustee includes a statement of the interest
and any other receipts being distributed. Within five days after deposit of
Bonds in exchange or substitution for Bonds (or contracts) previously deposited,
the Trustee will send a notice to each investor, identifying both the Bonds
removed and the replacement bonds deposited. The Trustee sends each investor of
record an annual report summarizing transactions in the Fund's accounts and
amounts distributed during the year and Bonds held, the number of Units
outstanding and the Redemption Price at year end, the interest received by the
Fund on the Bonds, the gross proceeds received by the Fund from the disposition
of any Bond (resulting from redemption or payment at maturity or sale of any
Bond), and the fees and expenses paid by the Fund, among other matters. The
Trustee will also furnish annual information returns to each investor and to the
Internal Revenue Service. Investors are required to report to the Internal
Revenue Service the amount of tax-exempt interest received during the year.
Investors may obtain copies of Bond evaluations from the Trustee to enable them
to comply with federal and state tax reporting requirements. Fund accounts are
audited annually by independent accountants selected by the Sponsors. Audited
financial statements are available from the Trustee on request.
TRUST INDENTURE
The Fund is a 'unit investment trust' created under New York law by a Trust
Indenture among the Sponsors, the Trustee and the Evaluator. This Prospectus
summarizes various provisions of the Indenture, but each statement is qualified
in its entirety by reference to the Indenture.
The Indenture may be amended by the Sponsors and the Trustee without
consent by investors to cure ambiguities or to correct or supplement any
defective or inconsistent provision, to make any amendment required by the SEC
or other governmental agency or to make any other change not materially adverse
to the interest of investors (as determined in good faith by the Sponsors). The
Indenture may also generally be amended upon consent of investors holding 51% of
the Units. No amendment may reduce the interest of any investor in the Fund
without the investor's consent or reduce the percentage of Units required to
consent to any amendment without unanimous consent of investors. Investors will
be notified on the substance of any amendment.
The Trustee may resign upon notice to the Sponsors. It may be removed by
investors holding 51% of the Units at any time or by the Sponsors without the
consent of investors if it becomes incapable of acting or bankrupt, its affairs
are taken over by public authorities, or if under certain conditions the
Sponsors determine in good faith that its replacement is in the best interest of
the investors. The Evaluator may resign or be removed by the Sponsors and the
Trustee without the investors' consent. The resignation or removal of either
becomes effective upon acceptance of appointment by a successor; in this case,
the Sponsors will use their best efforts to appoint a successor promptly;
however, if upon resignation no successor has accepted appointment within 30
days after notification, the resigning Trustee or Evaluator may apply to a court
of competent jurisdiction to appoint a successor.
Any Sponsor may resign so long as one Sponsor with a net worth of
$2,000,000 remains and is agreeable to the resignation. A new Sponsor may be
appointed by the remaining Sponsors and the Trustee to assume the duties of the
resigning Sponsor. If there is only one Sponsor and it fails to perform its
duties or becomes incapable of acting or bankrupt or its affairs are taken over
by public authorities, the Trustee may appoint a successor Sponsor at reasonable
rates of compensation, terminate the Indenture and liquidate the Fund or
continue to act as Trustee without a Sponsor. Merrill Lynch, Pierce, Fenner &
Smith Incorporated has been appointed as Agent for the Sponsors by the other
Sponsors.
The Sponsors, the Trustee and the Evaluator are not liable to investors or
any other party for any act or omission in the conduct of their responsibilities
absent bad faith, willful misfeasance, negligence (gross negligence
12
<PAGE>
in the case of a Sponsor or the Evaluator) or reckless disregard of duty. The
Indenture contains customary provisions limiting the liability of the Trustee.
MISCELLANEOUS
LEGAL OPINION
The legality of the Units has been passed upon by Davis Polk & Wardwell,
450 Lexington Avenue, New York, New York 10017, as special counsel for the
Sponsors.
AUDITORS
The Statement of Condition in Part A of the Prospectus was audited by
Deloitte & Touche LLP, independent accountants, as stated in their opinion. It
is included in reliance upon that opinion given on the authority of that firm as
experts in accounting and auditing.
TRUSTEE
The Trustee and its address are stated in Part A of the Prospectus. The
Trustee is subject to supervision by the Federal Deposit Insurance Corporation,
the Board of Governors of the Federal Reserve System and either the Comptroller
of the Currency or state banking authorities.
SPONSORS
The Sponsors are listed in Part A of the Prospectus. They may include
Merrill Lynch, Pierce, Fenner & Smith Incorporated, a wholly-owned subsidiary of
Merrill Lynch Co. Inc.; Smith Barney Inc., an indirect wholly-owned subsidiary
of The Travelers Inc.; Prudential Securities Incorporated, an indirect
wholly-owned subsidiary of the Prudential Insurance Company of America; Dean
Witter Reynolds, Inc., a principal operating subsidiary of Dean Witter Discover
& Co. and PaineWebber Incorporated, a wholly-owned subsidiary of PaineWebber
Group Inc. Each Sponsor, or one of its predecessor corporations, has acted as
Sponsor of a number of series of unit investment trusts. Each Sponsor has acted
as principal underwriter and managing underwriter of other investment companies.
The Sponsors, in addition to participating as members of various selling groups
or as agents of other investment companies, execute orders on behalf of
investment companies for the purchase and sale of securities of these companies
and sell securities to these companies in their capacities as brokers or dealers
in securities.
PUBLIC DISTRIBUTION
In the initial offering period Units will be distributed to the public
through the Underwriting Account and dealers who are members of the National
Association of Securities Dealers, Inc. The initial offering period is 30 days
or less if all Units are sold. If some Units initially offered have not been
sold, the Sponsors may extend the initial offering period for up to four
additional successive 30-day periods.
The Sponsors intend to qualify Units for sale in all states in which
qualification is deemed necessary through the Underwriting Account and by
dealers who are members of the National Association of Securities Dealers, Inc.;
however, Units of a State trust will be offered for sale only in the State for
which the trust is named, except that Units of a New Jersey trust will also be
offered in Connecticut, Units of a Florida trust will also be offered in New
York and Units of a New York trust will also be offered in Connecticut, Florida
and Puerto Rico. The Sponsors do not intend to qualify Units for sale in any
foreign countries and this Prospectus does not constitute an offer to sell Units
in any country where Units cannot lawfully be sold. Sales to dealers and to
introducing dealers, if any, will initially be made at prices which represent a
concession from the Public Offering Price, but the Agent for the Sponsors
reserves the right to change the rate of any concession from time to time. Any
dealer or introducing dealer may reallow a concession up to the concession to
dealers.
UNDERWRITERS' AND SPONSORS' PROFITS
Upon sale of the Units, the Underwriters will be entitled to receive sales
charges. The Sponsors also realize a profit or loss on deposit of the Bonds
equal to the difference between the cost of the Bonds to the Fund (based on the
offer side evaluation on the initial date of deposit) and the Sponsors' cost of
the Bonds. In addition, a Sponsor or Underwriter may realize profits or sustain
losses on Bonds it deposits in the Fund which were acquired from underwriting
syndicates of which it was a member. During the initial offering period, the
Underwriting Account also may realize profits or sustain losses as a result of
fluctuations after the initial date of deposit in the Public Offering Price of
the Units. In maintaining a secondary market for Units, the Sponsors will also
realize profits or sustain losses in the amount of any difference between the
prices at which they buy Units and the prices at which they resell these Units
(which include the sales charge) or the prices at which they redeem the Units.
Cash, if any,
13
<PAGE>
made available by buyers of Units to the Sponsors prior to a settlement date for
the purchase of Units may be used in the Sponsors' businesses to the extent
permitted by Rule 15c3-3 under the Securities Exchange Act of 1934 and may be of
benefit to the Sponsors.
FUND PERFORMANCE
Information on the performance of the Fund for various periods, on the
basis of changes in Unit price plus the amount of income and principal
distributions reinvested, may be included from time to time in advertisements,
sales literature, reports and other information furnished to current or
prospective investors. Total return figures are not averaged, and may not
reflect deduction of the sales charge, which would decrease the return. Average
annualized return figures reflect deduction of the maximum sales charge. No
provision is made for any income taxes payable.
Past performance may not be indicative of future results. The Fund is not
actively managed. Unit price and return fluctuate with the value of the Bonds in
the Portfolio, so there may be a gain or loss when Units are sold.
Fund performance may be compared to performance on the same basis (with
distributions reinvested) of Moody's Municipal Bond Averages or performance data
from publications such as Lipper Analytical Services, Inc., Morningstar
Publications, Inc., Money Magazine, The New York Times, U.S. News and World
Report, Barron's Business Week, CDA Investment Technology, Inc., Forbes Magazine
or Fortune Magazine. As with other performance data, performance comparisons
should not be considered representative of the Fund's relative performance for
any future period.
DEFINED ASSET FUNDS
Municipal Investment Trust Funds have provided investors with tax-free
income for more than 30 years. For decades informed investors have purchased
unit investment trusts for dependability and professional selection of
investments. Defined Asset Funds' philosophy is to allow investors to 'buy with
knowledge' (because, unlike managed funds, the portfolio of municipal bonds and
the return are relatively fixed) and 'hold with confidence' (because the
portfolio is professionally selected and regularly reviewed). Defined Asset
Funds offers an array of simple and convenient investment choices, suited to fit
a wide variety of personal financial goals--a buy and hold strategy for capital
accumulation, such as for children's education or retirement, or attractive,
regular current income consistent with the preservation of principal. Tax-exempt
income can help investors keep more today for a more secure financial future. It
can also be important in planning because tax brackets may increase with higher
earnings or changes in tax laws. Unit investment trusts are particularly suited
for the many investors who prefer to seek long-term income by purchasing sound
investments and holding them, rather than through active trading. Few
individuals have the knowledge, resources or capital to buy and hold a
diversified portfolio on their own; it would generally take a considerable sum
of money to obtain the breadth and diversity that Defined Asset Funds offer.
One's investment objectives may call for a combination of Defined Asset Funds.
One of the most important investment decisions you face may be how to
allocate your investments among asset classes. Diversification among different
kinds of investments can balance the risks and rewards of each one. Most
investment experts recommend stocks for long-term capital growth. Long-term
corporate bonds offer relatively high rates of interest income. By purchasing
both defined equity and defined bond funds, investors can receive attractive
current income, as well as growth potential, offering some protection against
inflation. From time to time various advertisements, sales literature, reports
and other information furnished to current or prospective investors may present
the average annual compounded rate of return of selected asset classes over
various periods of time, compared to the rate of inflation over the same
periods.
EXCHANGE OPTION--MUNICIPAL INVESTMENT TRUST FUND ONLY.
You may exchange Fund Units for units of certain other Defined Asset Funds
subject only to a reduced sales charge. You may exchange your units of any
Select Ten Portfolio, of any other Defined Asset Fund with a regular maximum
sales charge of at least 3.50%, or of any unaffiliated unit trust with a regular
maximum sales charge of at least 3.0%, for Units of this Fund at their relative
net asset values, subject only to a reduced sales charge, or to any remaining
Deferred Sales Charge, as applicable.
To make an exchange, you should contact your financial professional to find
out what suitable Exchange Funds are available and to obtain a prospectus. You
may acquire units of only those Exchange Funds in which the Sponsors are
maintaining a secondary market and which are lawfully for sale in the state
where you reside. Except for the reduced sales charge, an exchange is a taxable
event normally requiring recognition of any gain or loss on the units exchanged.
However, the Internal Revenue Service may seek to disallow a loss if the
portfolio of the
14
<PAGE>
units acquired is not materially different from the portfolio of the units
exchanged; you should consult your own tax advisor. If the proceeds of units
exchanged are insufficient to acquire a whole number of Exchange Fund units, you
may pay the difference in cash (not exceeding the price of a single unit
acquired).
As the Sponsors are not obligated to maintain a secondary market in any
series, there can be no assurance that units of a desired series will be
available for exchange. The Exchange Option may be amended or terminated at any
time without notice.
SUPPLEMENTAL INFORMATION
Upon written or telephonic request to the Trustee shown in Part A of this
Prospectus, investors will receive at no cost to the investor supplemental
information about the Fund, which has been filed with the SEC and is hereby
incorporated by reference. The supplemental information includes more detailed
risk factor disclosure about the types of Bonds that may be part of the Fund's
Portfolio, general risk disclosure concerning any letters of credit or insurance
securing certain Bonds, and general information about the structure and
operation of the Fund.
15
<PAGE>
APPENDIX A
DESCRIPTION OF RATINGS (AS DESCRIBED BY THE RATING COMPANIES THEMSELVES)
STANDARD & POOR'S RATINGS GROUP, A DIVISION OF MCGRAW-HILL, INC.
AAA--Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB--Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB, B, CCC, CC--Debt rated BB, B, CCC and CC is regarded, on balance, as
predominately speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and CC the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
The ratings may be modified by the addition of a plus or minus sign to show
relative standing within the major rating categories.
A provisional rating, indicated by 'p' following a rating, assumes the
successful completion of the project being financed by the issuance of the debt
being rated and indicates that payment of debt service requirements is largely
or entirely dependent upon the successful and timely completion of the project.
This rating, however, while addressing credit quality subsequent to completion
of the project, makes no comment on the likelihood of, or the risk of default
upon failure of, such completion.
NR--Indicates that no rating has been requested, that there is insufficient
information on which to base a rating or that Standard & Poor's does not rate a
particular type of obligation as a matter of policy.
MOODY'S INVESTORS SERVICE, INC.
Aaa--Bonds which are rated Aaa are judged to be the best quality. They
carry the smallest degree of investment risk and are generally referred to as
'gilt edge'. Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa--Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba--Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
a-1
<PAGE>
B--Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Rating symbols may include numerical modifiers 1, 2 or 3. The numerical
modifier 1 indicates that the security ranks at the high end, 2 in the
mid-range, and 3 nearer the low end, of the generic category. These modifiers of
rating symbols give investors a more precise indication of relative debt quality
in each of the historically defined categories.
Conditional ratings, indicated by 'Con.', are sometimes given when the
security for the bond depends upon the completion of some act or the fulfillment
of some condition. Such bonds are given a conditional rating that denotes their
probable credit stature upon completion of that act or fulfillment of that
condition.
NR--Should no rating be assigned, the reason may be one of the following:
(a) an application for rating was not received or accepted; (b) the issue or
issuer belongs to a group of securities that are not rated as a matter of
policy; (c) there is a lack of essential data pertaining to the issue or issuer
or (d) the issue was privately placed, in which case the rating is not published
in Moody's publications.
FITCH INVESTORS SERVICE, INC.
AAA--These bonds are considered to be investment grade and of the highest
quality. The obligor has an extraordinary ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA--These bonds are considered to be investment grade and of high quality.
The obligor's ability to pay interest and repay principal, while very strong, is
somewhat less than for AAA rated securities or more subject to possible change
over the term of the issue.
A--These bonds are considered to be investment grade and of good quality.
The obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB--These bonds are considered to be investment grade and of satisfactory
quality. The obligor's ability to pay interest and repay principal is considered
to be adequate. Adverse changes in economic conditions and circumstances,
however are more likely to weaken this ability than bonds with higher ratings.
A '+' or a '-' sign after a rating symbol indicates relative standing in
its rating.
DUFF & PHELPS CREDIT RATING CO.
AAA--Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA--High credit quality. Protection factors are strong. Risk is modest but
may vary slightly from time to time because of economic condtions.
A--Protection factors are average but adequate. However, risk factors are
more variable and greater in periods of economic stress.
A '+' or a '-' sign after a rating symbol indicates relative standing in
its rating.
a-2
<PAGE>
APPENDIX B
SALES CHARGE SCHEDULES FOR DEFINED ASSET FUNDS, MUNICIPAL SERIES
DEFERRED AND UP-FRONT SALES CHARGES. Units purchased during the first year
of the Fund will be subject to periodic deferred and contingent deferred sales
charges. Units purchased in the second through fifth year will be subject to an
up-front sales charge as well as periodic deferred and contingent deferred sales
charges. Units purchased thereafter will be subject only to an up-front sales
charge. During the first five years of the Fund, a fixed periodic deferred sales
charge of $2.75 per Unit is payable on 20 quarterly payment dates occurring on
the 10th day of February, May, August and November, commencing no earlier than
45 days after the initial date of deposit. Investors purchasing Units on the
initial date of deposit and holding for at least five years, for example, would
incur total periodic deferred sales charges of $55.00 per Unit. Because of the
time value of money, however, as of the initial date of deposit this periodic
deferred sales charge obligation would, at current interest rates, equate to an
up-front sales charge of approximately 4.75%.
On the Fund's initial offering date, the Public Offering Price per Unit
will be $1,000. Subsequently, the Public Offering Price per Unit will fluctuate.
As the periodic deferred sales charge is a fixed dollar amount irrespective of
the Public Offering Price, it will represent a varying percentage of the Public
Offering Price. An up-front sales charge will be imposed on all unit purchases
after the first year of the Fund. The following table illustrates the combined
maximum up-front and periodic deferred sales charges that would be incurred by
an investor who purchases Units at the beginning of each of the first five years
of the Fund (based on a constant Unit price) and holds them through the fifth
year of the Fund:
</TABLE>
<TABLE><CAPTION>
TOTAL
UP-FRONT SALES CHARGE MAXIMUM UP-FRONT AND PERIODIC
----------------------------------------------------------- AMOUNT DEFERRED SALES
YEAR OF UNIT AS PERCENT OF PUBLIC AS PERCENT OF NET AMOUNT PER DEFERRED PER CHARGES
PURCHASE OFFERING PRICE AMOUNT INVESTED $1,000 INVESTED $1,000 INVESTED PER $1,000 INVESTED
- ------------------- --------------------- ------------------- --------------- --------------- ---------------------
<S> <C> <C> <C> <C> <C>
1 None None None $ 55.00 $ 55.00
2 1.10% 1.11% $ 11.00 44.00 55.00
3 2.20 2.25 22.00 33.00 55.00
4 3.30 3.41 33.00 22.00 55.00
5 4.40 4.60 44.00 11.00 55.00
</TABLE>
CONTINGENT DEFERRED SALES CHARGE. Units redeemed or repurchased within 4
years after the Fund's initial date of deposit will not only incur the periodic
deferred sales charge until the quarter of redemption or repurchase but will
also be subject to a contingent deferred sales charge:
YEAR SINCE FUND'S
INITIAL DATE OF CONTINGENT DEFERRED
DEPOSIT SALES CHARGE PER UNIT
- --------------------- ---------------------
1 $ 25.00
2 15.00
3 10.00
4 5.00
5 and thereafter None
The contingent deferred sales charge is waived on any redemption or
repurchase of Units after the death (including the death of a single joint
tenant with rights of survivorship) or disability (as defined in the Internal
Revenue Code) of an investor, provided the redemption or repurchase is requested
within one year of the death or initial determination of disability. The
Sponsors may require receipt of satisfactory proof of disability before
releasing the portion of the proceeds representing the amount of the contingent
deferred sales charge waived.
To assist investors in understanding the total costs of purchasing units
during the first four years of the Fund and disposing of those units by the
fifth year, the following tables set forth the maximum combined up-front,
periodic and contingent deferred sales charges that would be incurred (assuming
a constant Unit price) by an investor:
<TABLE><CAPTION>
UNITS PURCHASED ON INITIAL OFFERING DATE
YEAR OF UNIT DEFERRED SALES CONTINGENT DEFERRED
DISPOSITION UP-FRONT SALES CHARGE CHARGE SALES CHARGE TOTAL SALES CHARGES
- ------------------- --------------------- ----------------- ------------------- -------------------
<S> <C> <C> <C> <C>
1 None $ 11.00 $ 25.00 $ 36.00
2 None 22.00 15.00 37.00
3 None 33.00 10.00 43.00
4 None 44.00 5.00 49.00
5 None 55.00 0.00 55.00
b-1
<PAGE>
<CAPTION>
UNITS PURCHASED ON FIRST ANNIVERSARY OF FUND
YEAR OF UNIT DEFERRED SALES CONTINGENT DEFERRED
DISPOSITION UP-FRONT SALES CHARGE CHARGE SALES CHARGE TOTAL SALES CHARGES
- ------------------- --------------------- ----------------- ------------------- -------------------
<S> <C> <C> <C> <C>
2 $ 11.00 $ 11.00 $ 15.00 $ 37.00
3 11.00 22.00 10.00 43.00
4 11.00 33.00 5.00 49.00
5 11.00 44.00 0.00 55.00
<CAPTION>
UNITS PURCHASED ON SECOND ANNIVERSARY OF FUND
YEAR OF UNIT DEFERRED SALES CONTINGENT DEFERRED
DISPOSITION UP-FRONT SALES CHARGE CHARGE SALES CHARGE TOTAL SALES CHARGES
- ------------------- --------------------- ----------------- ------------------- -------------------
<S> <C> <C> <C> <C>
3 $ 22.00 $ 11.00 $ 10.00 $ 43.00
4 22.00 22.00 5.00 49.00
5 22.00 33.00 0.00 55.00
<CAPTION>
UNITS PURCHASED ON THIRD ANNIVERSARY OF FUND
YEAR OF UNIT DEFERRED SALES CONTINGENT DEFERRED
DISPOSITION UP-FRONT SALES CHARGE CHARGE SALES CHARGE TOTAL SALES CHARGES
- ------------------- --------------------- ----------------- ------------------- -------------------
<S> <C> <C> <C> <C>
4 $ 33.00 $ 11.00 $ 5.00 $ 49.00
5 33.00 22.00 0.00 55.00
<CAPTION>
UNITS PURCHASED ON FOURTH ANNIVERSARY OF FUND
YEAR OF UNIT DEFERRED SALES CONTINGENT DEFERRED
DISPOSITION UP-FRONT SALES CHARGE CHARGE SALES CHARGE TOTAL SALES CHARGES
- ------------------- --------------------- ----------------- ------------------- -------------------
<S> <C> <C> <C> <C>
5 $ 44.00 $ 11.00 $ 0.00 $ 55.00
</TABLE>
b-2
<PAGE>
APPENDIX C
SALES CHARGE SCHEDULES FOR MUNICIPAL INVESTMENT TRUST FUND
INITIAL OFFERING
<TABLE><CAPTION>
SALES CHARGE
(GROSS UNDERWRITING PROFIT)
----------------------------------
AS PERCENT OF AS PERCENT OF DEALER CONCESSION AS PRIMARY MARKET
OFFER SIDE PUBLIC NET AMOUNT PERCENT OF PUBLIC CONCESSION TO
NUMBER OF UNITS OFFERING PRICE INVESTED OFFERING PRICE INTRODUCING DEALERS
- ----------------------------------- ------------------- ------------- --------------------- -------------------
MONTHLY PAYMENT SERIES, MULTISTATE SERIES, INSURED SERIES
<S> <C> <C> <C> <C>
Less than 250...................... 4.50% 4.712% 2.925% $ 32.40
250 - 499.......................... 3.50 3.627 2.275 25.20
500 - 749.......................... 3.00 3.093 1.950 21.60
750 - 999.......................... 2.50 2.564 1.625 18.00
1,000 or more...................... 2.00 2.041 1.300 14.40
<CAPTION>
INTERMEDIATE SERIES (TEN YEAR MATURITIES)
<S> <C> <C> <C> <C>
Less than 250...................... 4.00% 4.167% 2.600% $ 28.80
250 - 499.......................... 3.00 3.093 1.950 21.60
500 - 749.......................... 2.50 2.564 1.625 18.00
750 - 999.......................... 2.00 2.041 1.300 14.40
1,000 or more...................... 1.50 1.523 0.975 10.00
<CAPTION>
INTERMEDIATE SERIES (SHORT INTERMEDIATE MATURITIES)
<S> <C> <C> <C> <C>
Less than 250...................... 2.75% 2.828% 1.788% $ 19.80
250 - 499.......................... 2.25 2.302 1.463 16.20
500 - 749.......................... 1.75 1.781 1.138 12.60
750 - 999.......................... 1.25 1.266 0.813 9.00
1,000 or more...................... 1.00 1.010 0.650 7.20
</TABLE>
SECONDARY MARKET
ACTUAL SALES CHARGE AS DEALER CONCESSION AS
PERCENT OF EFFECTIVE PERCENT OF EFFECTIVE
NUMBER OF UNITS SALES CHARGE SALES CHARGE
- ----------------- ------------------------- -------------------------
1-249 100% 65%
250-499 80 52
500-749 60 39
750-999 45 29.25
1,000 or more 35 22.75
EFFECTIVE SALES CHARGE
AS PERCENT AS PERCENT
TIME TO OF BID SIDE OF PUBLIC
MATURITY EVALUATION OFFERING PRICE
- ---------------------------- ------------- -----------------
Less than six months 0% 0%
Six months to 1 year 0.756 0.75
Over 1 year to 2 years 1.523 1.50
Over 2 years to 4 years 2.564 2.50
Over 4 years to 8 years 3.627 3.50
Over 8 years to 15 years 4.712 4.50
Over 15 years 5.820 5.50
For this purpose, a Bond will be considered to mature on its stated
maturity date unless it has been called for redemption or funds or securities
have been placed in escrow to redeem it on an earlier date, or is subject to a
mandatory tender, in which case the earlier date will be considered the maturity
date.
c-1
<PAGE>
DEFINED
ASSET FUNDSSM
SPONSORS: MUNICIPAL INVESTMENT
Merrill Lynch, TRUST FUND
Pierce, Fenner & Smith Incorporated Monthly Payment Series--491
Defined Asset Funds (A Unit Investment Trust)
P.O. Box 9051 PROSPECTUS PART A
Princeton, N.J. 08543-9051 This Prospectus does not contain all of
(609) 282-8500 the information with respect to the
Smith Barney Inc. investment company set forth in its
Unit Trust Department registration statement and exhibits
388 Greenwich Street--23rd Floor relating thereto which have been filed
New York, NY 10013 with the Securities and Exchange
1-800-223-2532 Commission, Washington, D.C. under the
Prudential Securities Incorporated Securities Act of 1933 and the
One Seaport Plaza Investment Company Act of 1940, and to
199 Water Street which reference is hereby made.
New York, N.Y. 10292 No person is authorized to give any
(212) 776-1000 information or to make any
Dean Witter Reynolds Inc. representations with respect to this
Two World Trade Center--59th Floor investment company not contained in this
New York, N.Y. 10048 Prospectus; and any information or
(212) 392-2222 representation not contained herein must
EVALUATOR: not be relied upon as having been
Kenny S&P Evaluation Services, authorized. This Prospectus does not
a division of J. J. Kenny Co., Inc. constitute an offer to sell, or a
65 Broadway solicitation of an offer to buy,
New York, N.Y. 10006 securities in any state to any person to
INDEPENDENT ACCOUNTANTS: whom it is not lawful to make such offer
Deloitte & Touche LLP in such state.
2 World Financial Center
9th Floor
New York, N.Y. 10281-1414
TRUSTEE:
The Bank of New York
Unit Investment Trust Department
P.O. Box 974
Wall Street Station
New York, N.Y. 10268-0974
1-800-221-7771
13129--3/95
<PAGE>
DEFINED ASSET FUNDS--
MUNICIPAL INVESTMENT TRUST 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 Post-Effective Amendment No. 4 to the Registration Statement on Form
S-6 of Municipal Investment Trust Fund, One Hundred Sixty-Sixth Monthly Payment
Series, 1933 Act File No. 2-70983).
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.
R-1
<PAGE>
DEFINED ASSET FUNDS--
MUNICIPAL INVESTMENT TRUST FUND
MONTHLY PAYMENT SERIES--491
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT,
DEFINED ASSET FUNDS--MUNICIPAL INVESTMENT TRUST FUND, MONTHLY PAYMENT
SERIES--491, 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 8TH DAY OF
MARCH, 1995.
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 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 Board of Directors of Prudential
Securities 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 a majority of Powers of Attorney
the Board of Directors of Merrill Lynch, Pierce, have been filed
Fenner & Smith Incorporated: under
Form SE and the
following 1933 Act
File
Number: 33-43466
and 33-51607
HERBERT M. ALLISON, JR.
BARRY S. FREIDBERG
EDWARD L. GOLDBERG
STEPHEN L. HAMMERMAN
JEROME P. KENNEY
DAVID H. KOMANSKY
DANIEL T. NAPOLI
THOMAS H. PATRICK
JOHN L. STEFFENS
DANIEL P. TULLY
ROGER M. VASEY
ARTHUR H. ZEIKEL
By
ERNEST V. FABIO
(As authorized signatory for Merrill Lynch, Pierce,
Fenner & Smith Incorporated and
Attorney-in-fact for the persons listed above)
R-3
<PAGE>
PRUDENTIAL SECURITIES INCORPORATED
DEPOSITOR
By the following persons, who constitute a majority of Powers of Attorney
the Board of Directors of Prudential Securities have been filed
Incorporated: under Form SE and
the following 1933
Act File Number:
33-41631
ARTHUR H. BURTON, JR.
JAMES T. GAHAN
ALAN D. HOGAN
HOWARD A. KNIGHT
LELAND B. PATON
HARDWICK SIMMONS
By
WILLIAM W. HUESTIS
(As authorized signatory for Prudential Securities
Incorporated and Attorney-in-fact for the persons
listed above)
R-4
<PAGE>
SMITH BARNEY INC.
DEPOSITOR
By the following persons, who constitute a majority of Powers of Attorney
the Board of Directors of Smith Barney Inc.: have been filed
under the 1933 Act
File Number:
33-49753 and
33-51607
STEVEN D. BLACK
JAMES BOSHART III
ROBERT A. CASE
JAMES DIMON
ROBERT DRUSKIN
ROBERT F. GREENHILL
JEFFREY LANE
JACK L. RIVKIN
By GINA LEMON
(As authorized signatory for
Smith Barney Inc. 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 Number: 33-17085
Reynolds Inc.:
NANCY DONOVAN
CHARLES A. FIUMEFREDDO
JAMES F. HIGGINS
STEPHEN R. MILLER
PHILIP J. PURCELL
THOMAS C. SCHNEIDER
WILLIAM B. SMITH
By
MICHAEL D. BROWNE
(As authorized signatory for
Dean Witter Reynolds Inc.
and Attorney-in-fact for the persons listed above)
R-6
EXHIBIT 4.1
KENNY S&P EVALUTION SERVICES
A Division of Kenny Information Systems, Inc.
65 BROADWAY
NEW YORK, N.Y. 10006-2511
TELEPHONE (212) 770-4000
March 8, 1995
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Unit Investment Trust Division
P.O. Box 9051
Princeton, New Jersey 08543-9051
The Bank of New York
101 Barclay Street
New York, New York 10286
RE: DEFINED ASSET FUNDS--MUNICIPAL INVESTMENT TRUST FUND,
MONTHLY PAYMENT SERIES--491
Gentlemen:
We have examined the post-effective Amendment to the Registration Statement
File No. 33-30400 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 H. CICCOTTO
<TABLE> <S> <C>
<ARTICLE> 6
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 6,886,066
<INVESTMENTS-AT-VALUE> 7,236,601
<RECEIVABLES> 144,425
<ASSETS-OTHER> 4,446
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 7,385,472
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 29,176
<TOTAL-LIABILITIES> 29,176
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6,890,512
<SHARES-COMMON-STOCK> 7,537
<SHARES-COMMON-PRIOR> 7,891
<ACCUMULATED-NII-CURRENT> 115,249
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 350,535
<NET-ASSETS> 7,356,296
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 523,186
<OTHER-INCOME> 0
<EXPENSES-NET> 14,914
<NET-INVESTMENT-INCOME> 508,272
<REALIZED-GAINS-CURRENT> 34,470
<APPREC-INCREASE-CURRENT> (565,988)
<NET-CHANGE-FROM-OPS> (23,246)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 508,643
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 25,195
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 354
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (913,802)
<ACCUMULATED-NII-PRIOR> 120,465
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
Exhibit 5.1
CONSENT OF INDEPENDENT ACCOUNTANTS
The Sponsors and Co-Trustees of
Defined Asset Funds--Municipal Investment Trust Fund--Monthly Payment
Series--491
We consent to the use in this Post-Effective Amendment No. 5 to Registration
Statement No. 33-30400 of our opinion dated February 20, 1995 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.
March 8, 1995
<PAGE>
DAVIS POLK & WARDWELL
450 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
(212) 450-4000
February 27, 1995
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Dear Sirs:
We hereby represent that the Post-Effective Amendments to the registered
unit investment trusts described in Exhibit A attached hereto do not contain
disclosures which would render them ineligible to become effective pursuant to
Rule 485(b) under the Securities Act of 1933.
Very truly yours,
Davis Polk & Wardwell
Attachment
<PAGE>
EXHIBIT A
<TABLE>
<CAPTION>
1933 ACT 1940 ACT
FUND NAME CIK FILE NO. FILE NO.
- --------- --- -------- --------
<S> <C> <C> <C>
DEFINED ASSET FUNDS-GSIF U.S. TREASURY SERIES 7 781768 33-28452 811-2810
TOTAL: 1 FUNDS
</TABLE>
