MUNICIPAL INVESTMENT TR FD MULTISTATE SER 318 DEF ASSET FDS, 497, 1997-11-03

MUNICIPAL INVESTMENT TR FD MULTISTATE SER 318 DEF ASSET FDS
497, 1997-11-03

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 31, 1997

REGISTRATION NO. 333-33843
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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

---------------------------------

AMENDMENT NO. 1
TO
FORM S-6

---------------------------------

FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2

---------------------------------

A. EXACT NAME OF TRUST:

MUNICIPAL INVESTMENT TRUST FUND

MULTISTATE SERIES - 318
DEFINED ASSET FUNDS

B. NAMES OF DEPOSITORS:

MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
SMITH BARNEY INC.
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
DEAN WITTER REYNOLDS INC.

C. COMPLETE ADDRESSES OF DEPOSITORS' PRINCIPAL EXECUTIVE OFFICES:

MERRILL LYNCH, PIERCE, SMITH BARNEY INC. PAINEWEBBER INCORPORATED
FENNER & 388 GREENWICH 1285 AVENUE OF THE
SMITH INCORPORATED STREET--23RD FLOOR AMERICAS
UNIT INVESTMENT TRUST NEW YORK, NY 10013 NEW YORK, NY 10019
DIVISION
P.O. BOX 9051
PRINCETON, NJ 08543-9051

PRUDENTIAL SECURITIES
INCORPORATED
ONE NEW YORK PLAZA
NEW YORK, NY 10292
DEAN WITTER REYNOLDS INC.
TWO WORLD TRADE
CENTER--59TH FLOOR
NEW YORK, NY 10048

D. NAMES AND COMPLETE ADDRESSES OF AGENTS FOR SERVICE:

TERESA KONCICK, ESQ. LAURIE A. HESSLEIN ROBERT E. HOLLEY
P.O. BOX 9051 388 GREENWICH STREET 1285 AVENUE OF THE
PRINCETON, NJ 08543-9051 NEW YORK, NY 10013 AMERICAS
NEW YORK, NY 10019

COPIES TO:

LEE B. SPENCER, JR. PIERRE DE SAINT PHALLE, DOUGLAS LOWE, ESQ.
ONE NEW YORK PLAZA ESQ. DEAN WITTER REYNOLDS INC.
NEW YORK, NY 10292 450 LEXINGTON AVENUE TWO WORLD TRADE CENTER
NEW YORK, NY 10017 NEW YORK, NY 10048

E. TITLE OF SECURITIES BEING REGISTERED:

An indefinite number of Units of Beneficial Interest pursuant to Rule 24f-2
promulgated under the Investment Company Act of 1940, as amended.

F. APPROXIMATE DATE OF PROPOSED SALE TO PUBLIC:

As soon as practicable after the effective date of the registration statement.

/ x / Check box if it is proposed that this registration statement will become
effective upon filing on October 31, 1997, pursuant to Rule 487.

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<PAGE>
DEFINED ASSET FUNDSSM
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MUNICIPAL INVESTMENT ESTIMATED CURRENT RETURN shows the estimated
TRUST FUND annual cash to be received from interest-bearing
MULTISTATE SERIES 318 bonds in the Portfolio (net of estimated annual
(UNIT INVESTMENT TRUSTS) expenses) divided by the Public Offering Price
- ------------------------------(including the maximum deferred sales charge).
/ / EXEMPT FROM REGULAR ESTIMATED LONG TERM RETURN is a measure of the
FEDERAL INCOME TAX estimated return over the estimated life of the
AND SOME STATE TAXES Fund. This represents an average of the yields to
/ / DEFINED PORTFOLIOS OF maturity (or in certain cases, to an earlier call
MUNICIPAL BONDS date) of the individual bonds in the Portfolio,
/ / MONTHLY INCOME adjusted to reflect the maximum deferred sales
CALIFORNIA INSURED TRUST charge and estimated expenses. The average yield
4.80% for the Portfolio is derived by weighting each
ESTIMATED CURRENT RETURN bond's yield by its market value and the time
4.85% remaining to the call or maturity date, depending
ESTIMATED LONG TERM RETURN on how the bond is priced. Unlike Estimated
FLORIDA INSURED TRUST Current Return, Estimated Long Term Return takes
4.76% into account maturities, discounts and premiums of
ESTIMATED CURRENT RETURN the underlying bonds.
4.80% No return estimate can be predictive of your
ESTIMATED LONG TERM RETURN actual return because returns will vary with
NEW YORK INSURED TRUST purchase price (including sales charges), how long
4.87% units are held, changes in Portfolio composition,
ESTIMATED CURRENT RETURN changes in interest income and changes in fees and
4.91% expenses. Therefore, Estimated Current Return and
ESTIMATED LONG TERM RETURN Estimated Long Term Return are designed to be
PENNSYLVANIA TRUST comparative rather than predictive. A yield
4.91% calculation which is more comparable to an
ESTIMATED CURRENT RETURN individual bond may be higher or lower than
4.94% Estimated Current Return or Estimated Long Term
ESTIMATED LONG TERM RETURN Return which are more comparable to return
AS OF OCTOBER 30, 1997 calculations used by other investment products.

-------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
SPONSORS: HAS THE COMMISSION OR ANY STATE SECURITIES
Merrill Lynch, COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
Pierce, Fenner & Smith OF THIS DOCUMENT. ANY REPRESENTATION TO THE
Incorporated CONTRARY IS A CRIMINAL OFFENSE.
Smith Barney Inc. Inquiries should be directed to the Trustee at
PaineWebber Incorporated 1-800-221-7771.
Prudential Securities Prospectus dated October 31, 1997.
Incorporated INVESTORS SHOULD READ THIS PROSPECTUS CAREFULLY
Dean Witter Reynolds Inc. AND RETAIN IT FOR FUTURE REFERENCE.

<PAGE>
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Defined Asset FundsSM
Defined Asset Funds is America's oldest and largest family of unit investment
trusts, with over $115 billion sponsored in the last 25 years. Each Defined
Asset Fund is a portfolio of preselected securities. Each portfolio is divided
into 'units' representing equal shares of the underlying assets. Each unit
receives an equal share of income and principal distributions.

Defined Asset Funds offer several defined 'distinctives'. You know in advance
what you are investing in and that changes in the portfolio are limited - a
defined portfolio. Most defined bond funds pay interest monthly - defined
income. The portfolio offers a convenient and simple way to invest - simplicity
defined.

Your financial professional can help you select a Defined Asset Fund to meet
your personal investment objectives. Our size and market presence enable us to
offer a wide variety of investments. The Defined Asset Funds family offers:

o Municipal bond portfolios
o Corporate bond portfolios
o Government bond portfolios
o Equity portfolios
o International bond and equity portfolios

The terms of Defined Funds are as short as one year or as long as 30 years.
Special defined funds are available including: insured funds, double and triple
tax-free funds and funds with 'laddered maturities' to help protect against
changing interest rates. Defined Asset Funds are offered by prospectus only.
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Defined Multistate Series
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Our defined portfolios of municipal bonds offers you a simple and convenient way
to earn tax-free monthly income. And by purchasing Defined Asset Funds, you not
only receive professional selection but also gain the advantage of reduced risk
by investing in bonds of several different issuers.

INVESTMENT OBJECTIVE

To provide interest income exempt from regular federal income taxes through
investment in a fixed portfolio consisting primarily of municipal bonds issued
by or on behalf of a single State and its local governments and authorities.
Units may also be exempt from certain state and local taxes for residents of the
State.

DIVERSIFICATION

Each Portfolio contains a number of different bond issues. Spreading your
investment among different issuers reduces your risk, but does not eliminate it,
especially since each Portfolio contains bonds of only one State. Because of
maturities, sales or other dispositions of bonds, the size, composition and
return of the Portfolio will change over time.
- ---------------------------------------------------
Defining Your Portfolio
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PROFESSIONAL SELECTION AND SUPERVISION

Each Portfolio contains a variety of bonds selected by experienced buyers. The
Fund is not actively managed; however, it is regularly reviewed and a bond can
be sold if retaining it is considered detrimental to investors' interests.

MONTHLY FEDERALLY TAX-FREE INTEREST INCOME

Each Portfolio pays monthly income, even though the bonds generally pay interest
semi-annually.

INSURANCE
Certain bonds are insured. This insurance guarantees the timely payment of
principal and interest of the bonds, but does not guarantee the value of the
bonds or the units. Insurance does not cover accelerated payments of principal
or any increase in interest payments or premiums payable on mandatory
redemptions, including if interest on a bond is determined to be taxable. (See
Bonds Backed by Letters of Credit or Insurance in Part B).

BOND CALL FEATURES

It is possible that during periods of falling interest rates, a bond with a
coupon higher than current market rates will be prepaid or 'called', at the
option of the bond issuer, before its expected maturity. When bonds are
initially callable, the price is usually at a premium to par which then declines
to par over time. Bonds may also be subject to a mandatory sinking fund or have
extraordinary redemption provisions. For example, if the bond's proceeds are not
able to be used as intended the bond may be redeemed. This redemption and the
sinking fund are often at par.

CALL PROTECTION

Although many bonds are subject to optional refunding or call provisions, we
have selected bonds with call protection. This call protection means that any
bond in a Portfolio generally cannot be called for a number of years and
thereafter at a declining premium over par.

TAX INFORMATION

Based on the opinion of bond or local counsel, interest income from the bonds
held by this Fund is generally 100% exempt under existing laws from regular
federal income tax and certain state and local personal income taxes for
residents of a particular State. Any gain on a disposition of the underlying
bonds or Units will be subject to tax. If you hold your units for more than 18
months you may be entitled to the new 20% maximum federal tax rate for gains
from the sale of your Units. (See Taxes in Part B.)

LOW MINIMUM INVESTMENT

You can get started with a minimum purchase of about $1,000.

REINVESTMENT OPTION

You can elect to automatically reinvest your distributions into a separate
portfolio of federally tax-exempt bonds. Most or all of the bonds in that
portfolio, however, will not be insured or exempt from state and local taxes.
Reinvesting helps to compound your income free of federal income taxes.

PRINCIPAL DISTRIBUTIONS

Principal from sales, redemptions and maturities of bonds in the Portfolios will
be distributed to investors periodically when the amount to be distributed is
more than $5.00 per unit.

A-2
<PAGE>
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Defining Your Investment
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PUBLIC OFFERING PRICE

The Public Offering Price as of October 30, 1997, the business day prior to the
Initial Date of Deposit, is based on the aggregate offer side value of the
underlying bonds in the Portfolio, plus cash, divided by the number of units
outstanding. The Public Offering Price on any subsequent date will vary. An
amount equal to principal cash, if any, as well as net accrued but undistributed
interest on the unit is added to the Public Offering Price. The underlying bonds
are evaluated by an independent evaluator at 3:30 p.m. Eastern time on every
business day.

SALES CHARGES

There is no up-front sales charge in the initial offering period until the
deduction of the first deferred sales charge installment from holders of record
on February 10, 1998. In the first three years of owning your Units you will pay
a deferred sales charge. This deferred sales charge will be paid from interest
on the short-term bonds in the Portfolio and proceeds from the periodic sale or
maturity of those bonds. Interest on these short-term bonds is not included in a
Trust's return figures. Units purchased after February 10, 1998 will be charged
an up-front sales charge as well as a deferred sales charge. (See Defining Your
Costs; How To Buy Units in Part B.)

PAR VALUE

The par value represented by each unit--the amount of money you will receive by
termination of the Trust, assuming all the bonds are paid at maturity or are
redeemed by the issuer at par or sold by the Fund at par--is $1,000.

TERMINATION DATE

The Portfolios will generally terminate no later than the maturity date of the
last maturing bond listed in the Portfolio. The Portfolios may be terminated if
the value is less than 40% of the face amount of bonds deposited.

SPONSORS' PROFIT OR LOSS

The Sponsors' profit or loss associated with each Portfolio will include the
receipt of applicable sales charges, any fees for underwriting or placing bonds,
fluctuations in the Public Offering Price or secondary market price of units and
a gain or loss on the deposit of the bonds (see Underwriters' and Sponsors'
Profit in Part B).

REDEEMING OR SELLING YOUR INVESTMENT
You may redeem or sell your units at any time. Your price is based on the offer
side evaluation of the bonds during the initial public offering period and for
at least the first three months of the Trust and on the lower, bid side
evaluation thereafter, as determined by an independent evaluator, plus principal
cash, if any, as well as accrued interest. If you redeem or sell your Units
before the final deferred sales charge installment deduction you will pay the
remaining balance of the deferred sales charge. (See How To Buy Units in Part
B.)
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Defining Your Risks
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RISK FACTORS

Unit price fluctuates and could be adversely affected by increasing interest
rates as well as the financial condition of the issuers of the bonds and any
insurance companies backing certain of the bonds. Because of the possible
maturity, sale or other disposition of securities, the size, composition and
return of the portfolio may change at any time. Because of the sales charges,
returns of principal and fluctuations in unit price, among other reasons, the
sale price will generally be less than the cost of your units. Unit prices could
also be adversely affected if a limited trading market exists in any security to
be sold. There is no guarantee that the Fund will achieve its investment
objective.

In addition, each Portfolio has fewer bond issues than a national fund, and is
concentrated in bonds of issuers located in only one State. There may be
additional risk from decreased diversification as well as from factors
particular to that State.

UNDERWRITING ACCOUNT

One or more of the Sponsors has participated as sole underwriter, managing
underwriter or member of an underwriting syndicate from which approximately 1%
of the bonds in the California Trust and 17% of the bonds in the New York Trust
were acquired.

MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
P.O. Box 9051
Princeton, NJ 08543-9051 49.64%

SMITH BARNEY INC.
388 Greenwich Street--23rd Floor
New York, NY 10013 10.07%

PAINEWEBBER INCORPORATED
1285 Avenue of the Americas
New York, NY 10019 22.03%

PRUDENTIAL SECURITIES INCORPORATED
One New York Plaza
New York, NY 10292 6.30%

DEAN WITTER REYNOLDS INC.
Two World Trade Center--59th Floor
New York, NY 10048 11.96%

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100.00%

A-3
<PAGE>

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Defined California Insured Trust
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PORTFOLIO DIVERSIFICATION

The Portfolio contains 10 California bond issues and 1 Puerto Rico bond issue.

TYPES OF BONDS

The Portfolio consists of $4,705,000 face amount of municipal bonds of the
following types:

APPROXIMATE
PORTFOLIO PERCENTAGE

/ / Airports/Ports/Highways 1%
/ / Hospitals/Nursing Homes/Mental Health 16%
/ / Lease Rental Appropriation 45%
/ / Municipal Water/Sewer Utilities 15%
/ / Special Tax 6%
/ / State/Local Municipal Electric Utilities 1%
/ / Tax Allocation 16%

INSURED AAA-RATED BONDS
As a result of insurance, the bonds are rated AAA or Aaa.

The approximate percentage of the aggregate face amount insured by each
insurance company is:

AMBAC Insurance Company 46%
Financial Guaranty Insurance Company 6%
Financial Security Assurance Inc. 16%
MBIA Insurance Corporation 32%

PORTFOLIO CONCENTRATIONS

The Portfolio is considered to be concentrated in Lease Rental Appropriation
bonds and is therefore dependent to a significant degree on revenues generated
from those particular activities (see Risk Factors in Part B.) The Portfolio is
concentrated in bonds of California issuers and is subject to additional risk
from decreased diversification as well as from factors that may be particular to
California, which are briefly described on page A-6.
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Defining Your Income
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WHAT YOU MAY EXPECT
(PAYABLE ON THE 25TH DAY OF THE MONTH TO HOLDERS OF RECORD ON THE 10TH DAY OF
THE MONTH):

First Distribution per unit
(November 25, 1997): $ 1.23
Regular Monthly Income per unit
(Beginning on December 25, 1997): $ 4.11
Annual Income per unit: $49.38

These figures are estimates determined as of the business day prior to the
Initial Date of Deposit and actual payments may vary.

Estimated cash flows are available upon request from the Sponsors.
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Defining Your Costs
- ---------------------------------------------------

SALES CHARGES

In the first three years of owning your units you will pay a deferred sales
charge of $15.00 per unit each year ($3.75 quarterly February, May, August and
November), a total of $45.00. Units purchased after February 10, 1998 will be
charged an up-front sales charge equal to 0.375% per unit based on the Public
Offering Price (less the value of the short-term bonds reserved to pay the
deferred sales charge not yet accrued) multiplied by the number of deferred
sales charge payments already deducted. For example, units purchased in June
1998 would incur an up-front sales charge of 0.750% per unit and a deferred
sales charge of $37.50. (See How To Buy Units in Part B.)
Although the Trust is a unit investment trust rather than a mutual fund, the
following information is presented to permit a comparison of fees and an
understanding of the direct or indirect costs and expenses that you pay (see
Sales Charges on page A-3).

As a %
of Initial
Offering
Period
Public Amount per
Offering $1,000
Price Invested
----------- -----------
MAXIMUM SALES CHARGES 4.50% $ 45.00

The Trust (and therefore the investors) will bear all or a portion of its
organizational costs--including costs of preparing the registration statement,
the trust indenture and other closing documents, registering units with the SEC
and the states and the initial audit of the Portfolio--as is common for mutual
funds.

ESTIMATED ANNUAL FUND OPERATING EXPENSES

As a %
of Average
Net Assets* Per Unit
----------- -----------
TRUSTEE'S FEE .071% $ 0.73
PORTFOLIO SUPERVISION,
BOOKKEEPING AND
ADMINISTRATIVE FEES .045% 0.46
EVALUATOR'S FEE .028% 0.29
ORGANIZATIONAL COSTS .020% 0.20
OTHER OPERATING
EXPENSES .062% 0.63
----------- -----------
TOTAL .226% $ 2.31

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* Based on the mean of the bid and offer side evaluations.

COSTS OVER TIME

You would pay the following cumulative expenses on a $1,000 investment, assuming
a 5% annual return on the investment throughout the indicated periods and
redemption at the end of the period:

1 Year 3 Years 5 Years 10 Years
$47 $52 $58 $74

No redemption at the end of the period:

1 Year 3 Years 5 Years 10 Years
$17 $52 $58 $74

As of October 30, 1997, the Public Offering Price was $1,028.57, based on the
aggregate offer side value of the bonds ($4,629,729.35), plus cash ($40,000.00),
divided by the number of units outstanding (4,540). An amount equal to principal
cash, if any, as well as net accrued but undistributed interest on the unit is
added to the Public Offering Price. The per unit redemption and Sponsors'
repurchase price as of October 30, 1997, was $45.00 less than the Public
Offering Price, reflecting the deduction of the deferred sales charge, which
declines by $3.75 quarterly over approximately the first three years of the
Trust. Sponsors' profit on deposit was $55,170.40.

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A-4
<PAGE>
Defined California Insured Portfolio
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Municipal Investment Trust Fund
Multistate Series--318
California Insured Trust October 31, 1997

OPTIONAL SINKING
RATING REFUNDING FUND
OF ISSUES REDEMPTIONS REDEMPTIONS COST
PORTFOLIO TITLE (1) (2) (2) TO FUND (3)
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<S> <C> <C> <C> <C>

1. $700,000 State of California
Dept. of Wtr. Resources, Central
Valley Proj., Wtr. Sys. Rev. Bonds,
Ser. O (MBIA Ins.), 4.75%, 12/1/29 AAA 12/1/05 @ 101 12/1/26 $ 640,885.00
2. California Hlth. Facs. Fin.
Auth., Ins. Rev. Bonds (Sutter
Hlth.), Ser. 1997 A (FSA Ins.) AAA
$20,000, 3.70%, 8/15/98 (4) -- -- 20,019.20
$20,000, 4.00%, 8/15/99 (4) -- -- 20,039.80
$30,000, 4.15%, 8/15/00 (4) -- -- 30,100.50
$700,000, 5.25%, 8/15/27 8/15/07 @ 102 8/15/18 689,570.00
3. $700,000 Public Wks. Bd. of the
State of California, Lease Rev.
Bonds (Dept. of Corrections), Ser.
1996 A (AMBAC Ins.), 5.25%, 1/1/21 AAA 1/1/06 @ 100 1/1/18 690,711.00
4. $700,000 County of Contra Costa,
CA, Certs. of Part. (Cap. Proj.
Prog.), Ser. 1997 (AMBAC Ins.),
5.25%, 2/1/17 AAA 2/1/07 @ 102 2/1/13 700,000.00
5. $20,000 Industry, CA, Urban Dev.
Agy., Tax Alloc. Bonds (Civic,
Rec., and Indl.), Ser. 1 (MBIA
Ins.), 4.25%, 5/1/01 (4) AAA -- -- 20,129.20
6. $30,000 Los Angeles Cnty., CA,
Capital Asset Leasing Corp., Lease
Rev. Bonds, (1992 Master Rfdg.
Proj.) (AMBAC Ins.), 4.90%, 12/1/98
(4) AAA -- -- 30,346.80
7. $700,000 Sulphur Springs Union
Sch. Dist., Los Angeles Cnty., CA,
Certs. of Part., (1997 Rfdg. and
Sch.Imp. Proj.) (AMBAC Ins.),
5.375%, 2/1/22 AAA 2/1/07 @ 102 2/1/13 700,000.00
8. $30,000 Riverside Cnty. Trans.
Comm., CA, Sales Tax Rev. Bonds,
Ser. 1993 A (AMBAC Ins.), 4.875%,
6/1/99 (4) AAA -- -- 30,444.60
9. $750,000 Indio Pub. Fin. Auth.,
CA, Tax Increment Rev. Rfdg. Bonds,
Ser. 1997 B (MBIA Ins.), 5.35%,
8/15/27 AAA 8/15/06 @ 102 8/15/18 750,000.00
10. $250,000 Sacramento Area Flood
Ctl. Agy., CA, North Area Local
Proj., Cap Assessment Dist. No. 2
Bonds, Ser. 1995 (Financial
Guaranty Ins.), 5.375%, 10/1/20 AAA 10/1/05 @ 102 10/1/16 250,000.00
11. $55,000 Puerto Rico Elec. Pwr.
Auth., Pwr. Rev. Bonds, Ser. R
(MBIA Ins.), 5.70%, 7/1/00 (4) AAA }-- -- 57,483.25
--------------
$ 4,629,729.35
--------------
--------------
</TABLE>

- ----------------------------
(1) All ratings are by Standard & Poor's Ratings Group unless followed by
'(m)', which indicates a Moody's Investors Service rating. Moody's ratings are
furnished by the Evaluator but not confirmed with Moody's. (See Appendix A to
Part B.)
(2) Bonds are first subject to optional redemptions (which may be exercised in
whole or in part) on the dates and at the prices indicated under the Optional
Refunding Redemptions column. In subsequent years, bonds are redeemable at
declining prices, but typically not below par value. Some issues may be subject
to sinking fund redemption or extraordinary redemption without premium prior to
the dates shown.
(3) Evaluation of the bonds by the Evaluator is made on the basis of current
offer side evaluation. On this basis, 4% of the bonds were deposited at a
premium, 51% at par and 45% at a discount from par.
(4) It is anticipated that interest and principal received from these bonds
will be applied to the payment of the Trust's deferred sales charge and,
therefore, these amounts have not been included in the Trust's calculation of
Estimated Current and Long Term Returns.

A-5
<PAGE>
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California Taxes and Risks
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CALIFORNIA RISK FACTORS

From the latter years of the 1980s through fiscal year 1992-1993, California
weathered a turbulent period of repeated budgetary imbalance. Even as rapid
population growth escalated the demand for government services, an economic
recession ravaged the State's revenue base and drove expenditures above budget
appropriations.

Bolstered by strengthening revenues, reduced caseload growth and an
improving economy, the State has begun to experience some relief from the
serious budgetary pressures that characterized a significant portion of the
decade. Reflecting the belief shared by many analysts that the California
economy would remain strong, the 1997-1998 Budget Act allocated a State budget
of some $66.9 billion. The Budget Act contains no tax increases and no tax
reductions.

Nonetheless, the State's budgetary fortunes continue to be subject to
unforeseeable events. In December, 1994, for example, Orange County, California
and its Investment Pool filed for bankruptcy. A plan of adjustment has been
approved by the court and became effective under which all non-municipal
creditors are to be paid in full. However, the ultimate financial impact on the
County and the State cannot be predicted with any certainty. In addition,
constant fluctuations in other factors affecting the State -- including health
and welfare caseloads, property tax receipts, federal funding and extraordinary
expenditures related to natural disasters -- will undoubtedly create new budget
challenges.

Furthermore, certain California constitutional amendments, legislative
measures, executive orders, administrative regulations and voter initiatives
could produce the adverse effects on the California economy. Among these are
measures that have established tax, spending or appropriations limits and
prohibited the imposition of certain new taxes, authorized the transfers of tax
liabilities and reallocations of tax receipts among governmental entities and
provided for minimum levels of funding.

Finally, certain bonds in the Trust may be subject to provisions of
California law that could adversely affect payments on those bonds or limit the
remedies available to bondholders. Among these are bonds of health care
institutions which are subject to the strict rules and limits regarding
reimbursement payments of California's Medi-Cal Program for health care services
to welfare beneficiaries, and bonds secured by liens on real property.

General obligation bonds of the State of California are currently rated A1
by Moody's and A+ by Standard & Poor's.

CALIFORNIA TAXES

In the opinion of O'Melveny & Myers LLP, Los Angeles, California, special
counsel on California tax matters, under existing California law:

The Trust is neither a business trust nor an association taxable as a
corporation for California tax purposes. Each holder will be considered the
owner of a pro rata portion of the Trust Fund and will be deemed to receive his
pro rata portion of the income therefrom. To the extent interest on the Debt
Obligations is exempt from California personal income taxes, said interest is
similarly exempt from California personal income taxes in the hands of the
holders, except to the extent such holders are banks or corporations subject to
the California franchise tax. Holders will be subject to California income tax
on any gain on the disposition of all or part of his pro rata portion of a Debt
Obligation in the Trust Fund. A holder will be considered to have disposed of
all or part of his pro rata portion of each Debt Obligation when he sells or
redeems all or some of his Units. A holder will also be considered to have
disposed of all or part of his pro rata portion of a Debt Obligation when all or
part of the Debt Obligation is sold by the Trust Fund or is redeemed or paid at
maturity. The Debt Obligations and the Units are not taxable under the
California personal property tax law.

A-6
<PAGE>

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Defined Florida Insured Trust
- --------------------------------------------------------------------------------

PORTFOLIO DIVERSIFICATION

The Portfolio contains 10 Florida bond issues and 1 Puerto Rico bond issue.

TYPES OF BONDS

The Portfolio consists of $3,920,000 face amount of municipal bonds of the
following types:

APPROXIMATE
PORTFOLIO PERCENTAGE

/ / Airports/Ports/Highways 6%
/ / General Obligation Bonds 1%
/ / Hospitals/Nursing Homes/Mental Health 28%
/ / Lease Rental Appropriation 32%
/ / Municipal Water/Sewer Utilities 18%
/ / Stadiums 15%

INSURED AAA-RATED BONDS

As a result of insurance, the bonds are rated AAA or Aaa.
The approximate percentage of the aggregate face amount insured by each
insurance company is:

AMBAC Insurance Company 4%
Financial Guaranty Insurance Company 15%
Financial Security Assurance Inc. 6%
MBIA Insurance Corporation 75%

PORTFOLIO CONCENTRATIONS

The Portfolio is considered to be concentrated in Lease Rental Appropriation and
Hospital/Nursing Home/Mental Health Facility bonds and is therefore dependent to
a significant degree on revenues generated from those particular activities (see
Risk Factors in Part B.) The Portfolio is concentrated in bonds of Florida
issuers and is subject to additional risk from decreased diversification as well
as from factors that may be particular to Florida, which are briefly described
on page A-9.
- ---------------------------------------------------
Defining Your Income
- ---------------------------------------------------

WHAT YOU MAY EXPECT
(PAYABLE ON THE 25TH DAY OF THE MONTH TO HOLDERS OF RECORD ON THE 10TH DAY OF
THE MONTH):

First Distribution per unit
(November 25, 1997): $ 1.23
Regular Monthly Income per unit
(Beginning on December 25, 1997): $ 4.10
Annual Income per unit: $49.24

These figures are estimates determined as of the business day prior to the
Initial Date of Deposit and actual payments may vary.

Estimated cash flows are available upon request from the Sponsors.
- ---------------------------------------------------
Defining Your Costs
- ---------------------------------------------------

SALES CHARGES

Although the Trust is a unit investment trust rather than a mutual fund, the
following information is presented to permit a comparison of fees and an
understanding of the direct or indirect costs and expenses that you pay (see
Sales Charges on page A-3).

As a %
of Initial
Offering
Period
Public Amount per
Offering $1,000
Price Invested
----------- -----------
Maximum Sales Charges 4.50% $ 45.00

ESTIMATED ANNUAL FUND OPERATING EXPENSES

As a %
of Average
Net Assets* Per Unit
----------- -----------
Trustee's Fee .070% $ 0.73
Portfolio Supervision,
Bookkeeping and
Administrative Fees .045% 0.46
Evaluator's Fee .034% 0.35
Organizational Costs .019% 0.20
Other Operating
Expenses .072% 0.74
----------- -----------
TOTAL .240% $ 2.48

- ------------
* Based on the mean of the bid and offer side evaluations.

COSTS OVER TIME

You would pay the following cumulative expenses on a $1,000 investment, assuming
a 5% annual return on the investment throughout the indicated periods and
redemption at the end of the period:

1 Year 3 Years 5 Years 10 Years
$47 $53 $59 $76

No redemption at the end of the period:

1 Year 3 Years 5 Years 10 Years
$17 $53 $59 $76

As of October 30, 1997, the Public Offering Price was $1,034.26, based on the
aggregate offer side value of the bonds ($3,879,614.50), plus cash ($33,000),
divided by the number of units outstanding (3,783). An amount equal to principal
cash, if any, as well as net accrued but undistributed interest on the unit is
added to the Public Offering Price. The per unit redemption and Sponsors'
repurchase price as of October 30, 1997, was $45.00 less than the Public
Offering Price, reflecting the deduction of the deferred sales charge, which
declines by $3.75 quarterly over approximately the first three years of the
Trust. Sponsors' profit on deposit was $32,747.70.

A-7
<PAGE>
- --------------------------------------------------------------------------------
Defined Florida Insured Portfolio
- --------------------------------------------------------------------------------

Municipal Investment Trust Fund
Multistate Series--318
Florida Insured Trust October 31, 1997

1. $250,000 Dade Cnty., FL,
Aviation Rev. Rfdg. Bonds, Miami
Intl. Arpt. (Hub of the Americas),
Ser. 1997 C (FSA Ins.), 5.125%,
10/1/27 AAA 10/1/07 @ 101.5 10/1/22 $ 245,297.50
2. $5,000 Dade Cnty., FL, G.O. Pub.
Imp. Bonds, Ser. CC (AMBAC Ins.),
6.60%, 10/1/00 (4) AAA -- -- 5,357.90
3. $600,000 Dade Cnty., FL,
Professional Sports Fran. Facs. Tax
Rev. Bonds, Ser. 1995 (MBIA Ins.),
5.25%, 10/1/30 AAA 10/1/05 @ 102 10/1/29 590,724.00
4. $25,000 The School Dist. of Dade
Cnty., FL, G.O. Sch. Bonds, Ser.
1994 (MBIA Ins.), 6.40%, 8/1/98 (4) AAA -- -- 25,513.50
5. $600,000 Dade Cnty., FL, Wtr.
and Swr. Sys. Rev. Bonds, Ser. 1997
(Financial Guaranty Ins.), 5.25%,
10/1/26 AAA 10/1/07 @ 101 10/1/22 595,554.00
6. $600,000 Hospital Bd. of
Directors of Lee Cnty., FL, Hosp.
Rev. Bonds (Lee Mem. Hlth. Sys.),
Ser. 1997 A (MBIA Ins.), 5.00%,
4/1/20 AAA 4/1/07 @ 101 4/1/18 580,338.00
7. $600,000 The School Bd. of Leon
Cnty., FL, Certs. of Part. (Master
Lease Prog.), Ser. 1997 (MBIA
Ins.), 5.125%, 7/1/22 AAA 7/1/07 @ 101 7/1/18 589,644.00
8. $600,000 The School Bd. of
Orange Cnty., FL, Certs. of Part.,
Ser. 1997 A (MBIA Ins.), 5.375%,
8/1/22 Aaa(m) 8/1/07 @ 101 8/1/18 603,594.00
9. $500,000 Sarasota Cnty., FL,
Pub. Hosp. Bd., Fixed Rate Hosp.
Rev. Rfdg. Bonds (Sarasota Mem.
Hosp. Proj.), Ser. 1997 B (MBIA
Ins.), 5.375%, 10/1/20 Aaa(m) 10/1/07 @ 101.5 10/1/18 501,065.00
10. $80,000 City of Clearwater, FL,
Wtr. and Swr. Rfdg. Rev. Bonds,
Ser. 1993 (AMBAC Ins.), 4.75%,
12/1/00 (4) AAA -- -- 81,956.00
11. $60,000 Puerto Rico Pub. Bldgs.
Auth., Govt. Facs. Rev. Bonds, Ser.
A (AMBAC Ins.), 4.30%, 7/1/99 (4) AAA -- -- 60,570.60
--------------
$ 3,879,614.50
--------------
--------------
</TABLE>

- ----------------------------
(1) All ratings are by Standard & Poor's Ratings Group unless followed by
'(m)', which indicates a Moody's Investors Service rating, or '(f)' which
indicates a Fitch Investors Service rating. Moody's and Fitch ratings are
furnished by the Evaluator but not confirmed with Moody's or Fitch. (See
Appendix A to Part B.)
(2) Bonds are first subject to optional redemptions (which may be exercised in
whole or in part) on the dates and at the prices indicated under the Optional
Refunding Redemptions column. In subsequent years, bonds are redeemable at
declining prices, but typically not below par value. Some issues may be subject
to sinking fund redemption or extraordinary redemption without premium prior to
the dates shown.
(3) Evaluation of the bonds by the Evaluator is made on the basis of current
offer side evaluation. On this basis, approximately 32% of the bonds were
deposited at a premium and 68% at a discount from par.
(4) It is anticipated that interest and principal received from these bonds
will be applied to the payment of the Trust's deferred sales charge and,
therefore, these amounts have not been included in the Trust's calculation of
Estimated Current and Long Term Returns.

A-8
<PAGE>
- --------------------------------------------------------------------------------
Florida Taxes and Risks
- --------------------------------------------------------------------------------

FLORIDA RISK FACTORS

The financial condition of the State of Florida is affected by various
national, economic, social and environmental policies and conditions.
Additionally, limitations placed by the State's Constitution on the State and
its local governments covering income taxes, ad valorem taxes, bond indebtedness
and other matters, as well as various statutory limitations, may constrain the
revenue-generating capacity of the State and its local governments and,
therefore, the ability of the issuers of the Bonds to satisfy their obligations.

The economic vitality of the State and its various regions and, therefore,
the ability of the State and its local governments to satisfy the Bonds, are
affected by numerous factors. South Florida is susceptible to international
trade and currency imbalances and to economic problems in Central and South
America due to its geographical location and its involvement with foreign trade,
tourism and investment capital. The central and northern portions of the State,
on the other hand, could be impacted by problems in the agricultural sector,
including crop failures, severe weather conditions or other agriculture-related
problems, particularly with regard to the citrus and sugar industries. The
State's economy also has historically been somewhat dependent on the tourism and
construction industries and is sensitive to trends in those sectors.

General obligation bonds of the State are currently rated Aa by Moody's
Investors Service and AA by Standard & Poor's.

FLORIDA TAXES

In the opinion of Greenberg Traurig Hoffman Lipoff Rosen & Quentel, P.A.,
Miami, Florida, special counsel on Florida tax matters, under existing
Florida law:

1. The Fund will not be subject to income, franchise or other taxes of a
similar nature imposed by the State of Florida or its subdivisions, agencies
or instrumentalities.

2. Because Florida does not impose a personal income tax, non-corporate
investors in Units of the Fund will not be subject to any Florida income
taxes with respect to (i) amounts received by the Fund on the Bonds it
holds; (ii) amounts which are distributed by the Fund to non-corporate
investors in Units of the Fund or (iii) any gain realized on the sale or
redemption of Bonds by the Fund or of a Unit of the Fund by a non-corporate
investor. However, corporations as defined in Chapter 220, Florida Statutes
(1995), (including limited liability companies) which are otherwise subject
to Florida income taxation will be subject to tax on their respective share
of any income and gain realized by the Fund and on any gain realized by a
corporate investor on the sale or redemption of Units of the Fund by the
corporate investor.

3. The Units will be subject to Florida estate taxes only if held by
Florida residents, or if held by non-residents deemed to have business situs
in Florida. The Florida estate tax is limited to the amount of the credit
for state death taxes provided for in Section 2011 of the Internal Revenue
Code, as amended.

4. Bonds issued by the State of Florida or its political subdivisions are
exempt from Florida intangible personal property taxation under Chapter 199,
Florida Statutes (1995), as amended. Bonds issued by the Government of
Puerto Rico or by the Government of Guam, or by their authority, are exempt
by Federal statute from taxes such as the Florida intangible personal
property tax. Thus, the Fund will not be subject to Florida intangible
personal property tax on any Bonds in the Fund issued by the State of
Florida or its political subdivisions, by the Government of Puerto Rico or
by its authority or by the Government of Guam or by its authority. In
addition, the Units of the Fund will not be subject to the Florida
intangible personal property tax if the Fund invests solely in such Florida,
Puerto Rico or Guam debt obligations.

A-9
<PAGE>

- --------------------------------------------------------------------------------
Defined New York Insured Trust
- --------------------------------------------------------------------------------

PORTFOLIO DIVERSIFICATION

The Portfolio contains 12 New York bond issues and 1 Puerto Rico bond issue.

TYPES OF BONDS

The Portfolio consists of $4,430,000 face amount of municipal bonds of the
following types:

APPROXIMATE
PORTFOLIO PERCENTAGE

/ / Airports/Ports/Highways 9%
/ / General Obligation 2%
/ / Hospitals/Nursing Homes/Mental Health 45%
/ / Lease Rental Appropriation 28%
/ / Special Tax Issues 14%
/ / Miscellaneous 1%
/ / State/Local Municipal Electric Utilities 1%

INSURED AAA-RATED BONDS

As a result of insurance, the bonds are rated AAA or Aaa.
The approximate percentage of the aggregate face amount insured by each
insurance company is:

AMBAC Insurance Company 24%
Financial Guaranty Insurance Company 2%
Financial Security Assurance Inc. 30%
MBIA Insurance Corporation 44%

PORTFOLIO CONCENTRATIONS

The Portfolio is considered to be concentrated in Hospital/Nursing Home/Mental
Health Facility and Lease Rental Appropriation bonds and is therefore dependent
to a significant degree on revenues generated from those particular activities.
(See Risk Factors in Part B.) The Portfolio is concentrated in bonds of New York
issuers and is subject to additional risk from decreased diversification as well
as from factors that may be particular to New York, which are briefly described
on page A-12.
- ---------------------------------------------------
Defining Your Income
- ---------------------------------------------------

WHAT YOU MAY EXPECT
(PAYABLE ON THE 25TH DAY OF THE MONTH TO HOLDERS OF RECORD ON THE 10TH DAY OF
THE MONTH):

First Distribution per unit
(November 25, 1997): $ 1.25
Regular Monthly Income per unit
(Beginning on December 25, 1997): $ 4.18
Annual Income per unit: $50.24

These figures are estimates determined as of the business day prior to the
Initial Date of Deposit and actual payments may vary.

Estimated cash flows are available upon request from the Sponsors.
- ---------------------------------------------------
Defining Your Costs
- ---------------------------------------------------

SALES CHARGES

As a %
of Initial
Offering
Period
Public Amount per
Offering $1,000
Price Invested
----------- -----------
Maximum Sales Charges 4.50% $ 45.00

ESTIMATED ANNUAL FUND OPERATING EXPENSES

As a %
of Average
Net Assets* Per Unit
----------- -----------
Trustee's Fee .070% $ 0.72
Portfolio Supervision,
Bookkeeping and
Administrative Fees .045% 0.46
Evaluator's Fee .029% 0.31
Organizational Costs .020% 0.20
Other Operating
Expenses .065% 0.67
----------- -----------
TOTAL .229% $ 2.36

- ------------
* Based on the mean of the bid and offer side evaluations.

COSTS OVER TIME

You would pay the following cumulative expenses on a $1,000 investment, assuming
a 5% annual return on the investment throughout the indicated periods and
redemption at the end of the period:

1 Year 3 Years 5 Years 10 Years
$47 $52 $58 $74

No redemption at the end of the period:

1 Year 3 Years 5 Years 10 Years
$17 $52 $58 $74

The example assumes reinvestment of all distributions into additional units of
the Fund (a reinvestment option different from that offered by this Fund) and
uses a 5% annual rate of return as mandated by Securities and Exchange
Commission regulations applicable to mutual funds. The Costs Over Time above
reflect both sales charges and operating expenses on an increasing investment
(because the net annual return is reinvested). The example should not be
considered a representation of past or future expenses or annual rate of return;
the actual expenses and annual rate of return may be more or less than the
example.
As of October 30, 1997, the Public Offering Price was $1,031.05, based on the
aggregate offer side value of the bonds ($4,383,104.90), plus cash ($37,000.00),
divided by the number of units outstanding (4,287). An amount equal to principal
cash, if any, as well as net accrued but undistributed interest on the unit is
added to the Public Offering Price. The per unit redemption and Sponsors'
repurchase price as of October 30, 1997, was $45.00 less than the Public
Offering Price, reflecting the deduction of the deferred sales charge, which
declines by $3.75 quarterly over approximately the first three years of the
Trust. Sponsors' profit on deposit was $38,074.80.

A-10
<PAGE>
- --------------------------------------------------------------------------------
Defined New York Insured Portfolio
- --------------------------------------------------------------------------------

Municipal Investment Trust Fund
Multistate Series--318
New York Insured Trust October 31, 1997

1. $650,000 New York Local Govt.
Asst. Corp. (Pub. Benefit Corp. of
the State of NY), Ser. 1993 D (MBIA
Ins.), 5.00%, 4/1/23 AAA 4/1/04 @ 100 4/1/15 $ 618,553.00
2. $300,000 New York State Urban
Dev. Corp., Corr. Cap. Facs. Rev.
Bonds, Ser. 5 (MBIA Ins.), 5.50%,
1/1/25 AAA 1/1/05 @ 102 1/1/21 302,121.00
3. $400,000 New York State Urban
Dev. Corp., Corr. Cap. Facs. Rev.
Bonds, Ser. 6 (AMBAC Ins.), 5.375%,
1/1/25 AAA 1/1/06 @ 102 1/1/18 400,744.00
4. $550,000 Dormitory Auth. of the
State of New York, City Univ. Sys.
Consol. Rev. Bonds, Third General
Resolution Rev. Bonds, Ser. 1997-1
(MBIA Ins.), 5.125%, 7/1/27 (4) AAA 1/1/08 @ 102 1/1/15 535,645.00
5. $30,000 Dormitory Auth. of the
State of New York, Insured Rev.
Bonds (853 Schools Program Issue)
(The Children's Home of Kingston)
Ser. 1997 B (AMBAC Ins.), 4.25%,
7/1/99 (5) AAA -- -- 30,228.90
6. $600,000 Dormitory Auth. of the
State of New York, Mental Hlth.
Facs. Imp. Rev. Bonds, Ser. 1996 B
(FSA Ins.), 5.375%, 2/15/26 AAA 2/15/06 @ 102 2/15/22 600,000.00
7. $650,000 Dormitory Auth. of the
State of New York, Millard Fillmore
Hosp., FHA-Insured Mtge. Hosp. Rev.
Bonds, Ser. 1997 (AMBAC Ins.),
5.375%, 2/1/32 AAA 8/1/04 @ 105 8/1/15 647,413.00
8. $35,000 Dormitory Auth. of the
State of New York, Vassar Brothers
Hosp., Ins. Rev. Bonds, Ser. 1997
(FSA Ins.), 4.125%, 7/1/01 (4) (5) AAA -- -- 34,850.90
9. $700,000 Dormitory Auth. of the
State of New York, Vassar Brothers
Hosp., Ins. Rev. Bonds, Ser. 1997
(FSA Ins.), 5.375%, 7/1/25 (4) AAA 7/1/08 @ 102 7/1/18 692,482.00
10. $400,000 Metropolitan Trans.
Auth., NY, Commuter Fac. Rev.
Bonds, Ser. 1997 C-1 (MBIA Ins.),
5.50%, 7/1/22 AAA 7/1/07 @ 101 7/1/18 403,396.00
11. $35,000 Northeastern Clinton
Central Sch. Dist. at Champlain,
Clinton Cnty., NY, Sch. Dist.
Serial Bonds, Series 1997
(Financial Guaranty Ins.), 4.80%,
9/1/98 to 9/1/99 (5) Aaa(m) -- -- 35,624.70
12. $40,000 County of Monroe, NY,
G.O. Rfdg. Bonds, Ser. 1992
(Financial Guaranty Ins.), 4.70%,
6/1/98 (5) AAA -- -- 40,240.40
13. $40,000 Puerto Rico Elec. Pwr.
Auth., Pwr. Rev. Bonds, Ser. R
(MBIA Ins.), 5.70%, 7/1/00 (5) AAA -- -- 41,806.00
--------------
$ 4,383,104.90
--------------
--------------
</TABLE>

- ----------------------------
(1) All ratings are by Standard & Poor's Ratings Group unless followed by '(m)',
which indicates a Moody's Investors Service rating or '(f)' which indicates a
Fitch Investor's Service rating. Moody's and Fitch ratings are furnished by the
Evaluator but not confirmed with Moody's or Fitch. (See Appendix A to Part B.)
(2) Bonds are first subject to optional redemptions (which may be exercised in
whole or in part) on the dates and at the prices indicated under the Optional
Refunding Redemptions column. In subsequent years, bonds are redeemable at
declining prices, but typically not below par value. Some issues may be subject
to sinking fund redemption or extraordinary redemption without premium prior to
the dates shown.
(3) Evaluation of the bonds by the Evaluator is made on the basis of current
offer side evaluation. On this basis, approximately 28% of the bonds were
deposited at a premium, 14% at par and 58% at a discount from par.
(4) These bonds are when-issued bonds that are expected to settle 8 to 13 days
after the settlement date for Units. The Trustee's fees and expenses will be
reduced during the first year by $0.43 per Unit to compensate for interest that
would have been accrued on the bonds between the settlement date for Units and
the actual date of delivery of the bonds. (See Income, Distributions and
Reinvestment--Income in Part B.)
(5) It is anticipated that interest and principal received from these bonds will
be applied to the payment of the Trust's deferred sales charge and, therefore,
these amounts have not been included in the Trust's calculation of Estimated
Current and Long Term Returns.

A-11
<PAGE>
- --------------------------------------------------------------------------------
New York Taxes and Risks
- --------------------------------------------------------------------------------

NEW YORK RISK FACTORS

The State of New York and several of its public authorities and
municipalities including, in particular, New York City, continue to face
financial difficulties. For many years, the State accumulated deficits by
extraordinary borrowing, which have been paid off by the issuance of long-term
bonds under legislation limiting future borrowing for deficits. The State's
remaining accumulated deficit is about $1.0 billion. For the 1996 fiscal year
(ended March 31), to address a $5 billion projected budget gap, the State budget
included nearly $1 billion of non-recurring measures; a $445 million surplus was
realized. To address a $3.9 billion projected gap, the fiscal 1997 budget
included $1.3 billion of non-recurring measures. The State realized a $1.4
billion surplus (due primarily to higher-than expected revenue and reduced
social services spending). The State Comptroller projected gaps of over $3
billion for each of the current and next fiscal years; the Governor estimated
gaps of $2.3 billion and $1.6 billion, respectively. The State adopted a budget
for the current year 126 days late, the latest ever. Spending will increase by
5.4% (twice the rate of inflation) and balance will be achieved in large part by
using the 1997 surplus. State general obligation debt is rated A by Standard &
Poor's and A2 by Moody's; at March 31, 1997, approximately $5.0 billion face
amount was outstanding. 17 State authorities had an aggregate of $75.4 billion
of debt outstanding at September 30, 1996, of which approximately $22.5 billion
was State supported. Total State-related debt at March 31, 1997 was
approximately $37.1 billion.

New York City finished its 1996 fiscal year with a small surplus, after
adopting measures to eliminate a projected $3.1 billion budget gap. The City
budget to close a projected $2.6 billion budget gap for the fiscal year ended
June 30, 1997, realized a surplus. The City has adopted a budget to close a $1.6
billion gap for the 1998 fiscal year. Budget revisions rely heavily on
questionable assumptions and non-recurring measures ($1.9 billion, $1.2 billion
and $2.0 billion respectively, in the 1995, 1996 and 1998 fiscal years), and
spending is projected to continue to increase faster than revenue, leaving
City-projected future budget gaps of $1.8 billion, $2.8 billion and $2.6
billion, respectively for the 1999 through 2001 fiscal years; fiscal monitors
have higher estimates. The City's unemployment rate averaged 9.7% for the first
half of 1997. Because the City was expected to reach the constitutional limit on
debt issuance this year, the State in 1997 authorized creation of the
Transitional Finance Authority to sell over several years up to $7.5 billion of
additional bonds, backed by City personal income and sales tax revenues, to fund
capital projects. Despite this, if no further action is taken, the City
estimates it will reach its debt limit by June 2000. Debt service is expected to
consume 20% of projected tax revenues by next year. The State Court of Appeals
in March upheld a lower court decision preventing a proposed sale of the City's
Water System, which could have provided nearly $1 billion of surplus funds. The
City also faces imminent cutoff of Federal funds for over 200,000 illegal
immigrants under welfare reform legislation adopted last year. New York City
bonds are rated BBB+ by Standard & Poor's and Baa1 by Moody's. At March 31,
1997, approximately $26.0 billion of New York City bonds (excluding City debt
held by The Municipal Assistance Corporation for the City of New York (MAC)),
$3.8 billion of MAC bonds and $1.2 billion of public benefit corporation debt
were outstanding. Other localities in the State had an aggregate of
approximately $17.7 billion of indebtedness outstanding in 1994, of which $83
million was to finance budget deficits.

For decades, the State's economy has grown more slowly than that of the rest
of the nation as a whole. This low growth rate has been attributed, in part, to
the combined State and New York City tax burden which is among the highest in
the U.S. Because their tax structures are particularly sensitive to economic
cycles, both the State and New York City are prone to substantial budget gaps
during periods of economic weakness. Each has suffered a decline in population
and in manufacturing jobs over many years, and has become particularly dependent
on the financial services industry. Unemployment rates, especially in New York
City, have been above the national average for several years.

Both the State and New York City suffer from long-term structural imbalances
between revenues and expenditures, which historically have been narrowed through
extensive use of non-recurring measures such as bond refinancings, depletion of
reserves, sales of assets, cost-cuts and layoffs. Except for property taxes,
changes in New York City revenue measures require State approval. The City is
also particularly subject to unanticipated increases in labor costs, resulting
primarily from expiring union contracts and overtime expense. Both the State and
New York City also face substantial replacement costs for infrastructure (such
as roads, bridges and other public facilities) which has suffered from reduced
maintenance expenditures during various economic declines.

Various municipalities and State and local authorities in New York
(particularly, the Metropolitan Transportation Authority) are dependent to
varying degrees on State and federal aid, and could be adversely affected by the

A-12
<PAGE>

State's and federal government's actions to balance their budgets. The State's
dependence on federal aid and sensitivity to economic cycles, as well as high
levels of taxes and unemployment, may continue to make it difficult to balance
State and local budgets in the future.

NEW YORK TAXES

In the opinion of bond counsel delivered on the date of issuance of the
Bonds, interest on the Bonds will be exempt from New York State and City
personal income taxes except where such interest is subject to federal
income taxes (see Taxes).

In the opinion of Davis Polk & Wardwell, special counsel for the
Sponsors, under existing New York law:

The Trust is not an association taxable as a corporation, and income
received by the Trust will be treated as the income of the investors in the
same manner as for federal income tax purposes. Accordingly, each investor
will be considered to have received the interest on his pro rata portion of
each Bond when interest on the Bond is received by the Trust. A noncorporate
investor in Units of the Trust who is a New York State (and City) resident
will be subject to New York State (and City) personal income taxes on any
gain recognized from the disposition of his interest in any Bond. A
noncorporate investor who is not a New York State resident will not be
subject to New York State or City personal income taxes on any such gain
unless such Units are attributable to a business, trade, profession or
occupation carried on in New York. A New York State (and City) resident
should determine his tax basis for his pro rata portion of each Bond for New
York State (and City) income tax purposes in the same manner as for federal
income tax purposes. Interest income on, as well as any gain recognized on
the disposition of, an investor's pro rata portion of the Bonds is generally
not excludable from income in computing the New York State corporate
franchise tax or the New York City corporation tax.

A-13
<PAGE>

- --------------------------------------------------------------------------------
Defined Pennsylvania Trust
- --------------------------------------------------------------------------------

PORTFOLIO DIVERSIFICATION

The Portfolio contains 8 Pennsylvania bond issues.

TYPES OF BONDS

The Portfolio consists of $3,390,000 face amount of municipal bonds of the
following types:

APPROXIMATE
PORTFOLIO PERCENTAGE
/ / General Obligation 3%
/ / Hospitals/Nursing Homes/Mental Health 47%
/ / Municipal Water/Sewer Utilities 34%
/ / University/College 16%

RATED A OR BETTER

Each bond included in the Portfolio is rated investment grade. Each bond has
been selected by investment professionals from among available bonds rated A or
better by a nationally recognized rating organization. (See Bond Portfolio
Selection in Part B.)
PORTFOLIO CONCENTRATIONS

The Portfolio is considered to be concentrated in Hospital/Nursing Home/Mental
Health Facility and Municipal Water/Sewer Utility bonds and is therefore
dependent to a significant degree on revenues generated from those particular
activities. (See Risk Factors in Part B.) The Portfolio is concentrated in bonds
of Pennsylvania issuers and is subject to additional risk from decreased
diversification as well as from factors that may be particular to Pennsylvania,
which are briefly described on page A-16.
- ---------------------------------------------------
Defining Your Income
- ---------------------------------------------------

WHAT YOU MAY EXPECT
(PAYABLE ON THE 25TH DAY OF THE MONTH TO HOLDERS OF RECORD ON THE 10TH DAY OF
THE MONTH):

First Distribution per unit
(November 25, 1997): $ 1.25
Regular Monthly Income per unit
(Beginning on December 25, 1997): $ 4.19
Annual Income per unit: $50.30

These figures are estimates determined as of the business day prior to the
Initial Date of Deposit and actual payments may vary.

Estimated cash flows are available upon request from the Sponsors.
- ---------------------------------------------------
Defining Your Costs
- ---------------------------------------------------

SALES CHARGES

As a %
of Initial
Offering
Period
Public Amount per
Offering $1,000
Price Invested
----------- -----------
Maximum Sales Charges 4.50% $ 45.00

ESTIMATED ANNUAL FUND OPERATING EXPENSES

As a %
of Average
Net Assets* Per Unit
----------- -----------
Trustee's Fee .071% $ 0.72
Portfolio Supervision,
Bookkeeping and
Administrative Fees .045% 0.46
Evaluator's Fee .039% 0.40
Organizational Costs .020% 0.20
Other Operating
Expenses .084% 0.86
----------- -----------
TOTAL .259% $ 2.64

- ------------
* Based on the mean of the bid and offer side evaluations.

COSTS OVER TIME

You would pay the following cumulative expenses on a $1,000 investment, assuming
a 5% annual return on the investment throughout the indicated periods and
redemption at the end of the period:

1 Year 3 Years 5 Years 10 Years
$48 $53 $60 $78

No redemption at the end of the period:

1 Year 3 Years 5 Years 10 Years
$18 $53 $60 $78

As of October 30, 1997, the Public Offering Price was $1,023.56, based on the
aggregate offer side value of the bonds ($3,327,217.85), plus cash ($27,000.00),
divided by the number of units outstanding (3,277). An amount equal to principal
cash, if any, as well as net accrued but undistributed interest on the unit is
added to the Public Offering Price. The per unit redemption and Sponsors'
repurchase price as of October 30, 1997, was $45.00 less than the Public
Offering Price, reflecting the deduction of the deferred sales charge, which
declines by $3.75 quarterly over approximately the first three years of the
Trust. Sponsors' profit on deposit was $33,129.35.

A-14
<PAGE>
- --------------------------------------------------------------------------------
Defined Pennsylvania Portfolio
- --------------------------------------------------------------------------------

Municipal Investment Trust Fund
Multistate Series--318
Pennsylvania Trust October 31, 1997

1. $550,000 Pennsylvania Higher
Educl. Fac. Auth., Univ. Rev. Bonds
(The Univ. of the Arts), Ser, 1997
(Asset Guaranty Ins.), 5.50%,
3/15/22 AA 3/15/07 @ 100 3/15/18 $ 551,958.00
2. $550,000 Allegheny Cnty., PA,
Hosp. Dev. Auth., Hosp. Rev. Bonds
(St. Francis Med. Ctr. Proj.), Ser.
1997, 5.75%, 5/15/27 A3(m) 5/15/07 @ 102 5/15/18 556,924.50
3. $35,000 Belle Vernon Area Sch.
Dist. (Fayette and Westmoreland
Ctys., PA), G.O. Bonds (Financial
Guaranty Ins.), Ser. 1997 B, 3.85%,
10/1/98 (4) (5) AAA -- -- 35,045.85
4. The Municipal Swr. and Wtr.
Auth. of Cranberry Twp., Butler
Cnty., PA, Swr. and Wtr. Rev. Bonds
(MBIA Ins.), Ser. 1997 AAA
$55,000, 4.05%, 12/1/99 (4) (5) -- -- 55,000.00
$550,000, 5.125%, 12/1/26 (4) 12/1/07 @ 100 12/1/18 524,810.00
5. $50,000 Borough of Dormont,
Allegheny Cnty., PA, G.O. Bonds
(FSA Ins.), Ser. 1997, 4.10%,
11/15/00 (4) (5) AAA -- -- 50,141.00
6. $500,000 Doylestown Hosp. Auth.,
PA, Doylestown Hosp. Rev. Bonds,
Ser. 1993 A (AMBAC Ins.), 5.00%,
7/1/23 AAA 7/1/04 @ 102 7/1/14 475,685.00
7. $550,000 The Hospitals and
Higher Educ. Fac. Auth. of
Philadelphia, PA, Hosp. Rev. Bonds
(Temple Univ. Hosp.), Ser. 1997,
5.50%, 11/15/27 A- 11/15/07 @ 101 11/15/24 542,030.50
8. $550,000 City of Philadelphia,
PA, Wtr. and Wastewater Rev. Bonds
(AMBAC Ins.), Ser. 1997 A, 5.125%,
8/1/27 (4) AAA 8/1/07 @ 102 8/1/18 535,623.00
--------------
$ 3,327,217.85
--------------
--------------
</TABLE>

- ----------------------------
(1) All ratings are by Standard & Poor's Ratings Group unless followed by
'(m)', which indicates a Moody's Investors Service rating or '(f)' which
indicates a Fitch Investor's Service rating. Moody's and Fitch ratings are
furnished by the Evaluator but not confirmed with Moody's or Fitch. (See
Appendix A to Part B.)
(2) Bonds are first subject to optional redemptions (which may be exercised in
whole or in part) on the dates and at the prices indicated under the Optional
Refunding Redemptions column. In subsequent years, bonds are redeemable at
declining prices, but typically not below par value. Some issues may be subject
to sinking fund redemption or extraordinary redemption without premium prior to
the dates shown.
(3) Evaluation of the bonds by the Evaluator is made on the basis of current
offer side evaluation. On this basis, 35% of the bonds were deposited at a
premium, 2% at par and 63% at a discount from par.
(4) These bonds are when-issued bonds that are expected to settle 7 to 20 days
after the settlement date for Units. The Trustee's fees and expenses will be
reduced during the first year by $0.72 per Unit to compensate for interest that
would have been accrued on the bonds between the settlement date for Units and
the actual date of delivery of the bonds. (See Income, Distributions and
Reinvestment--Income in Part B.)
(5) It is anticipated that interest and principal received from these bonds
will be applied to the payment of the Trust's deferred sales charge and,
therefore, these amounts have not been included in the Trust's calculation of
Estimated Current and Long Term Returns.

A-15
<PAGE>
- --------------------------------------------------------------------------------
Pennsylvania Taxes and Risks
- --------------------------------------------------------------------------------

PENNSYLVANIA RISK FACTORS

The Commonwealth of Pennsylvania and certain of its municipal subdivisions,
including the City of Philadelphia, have undergone the financial difficulties
and pressures that accompany a decline in economic conditions. As the heavy
industries historically associated with Pennsylvania -- e.g., coal, steel and
railroad -- have declined with increasing competition from foreign producers,
the services sector, including trade, medical and health services, education and
financial institutions, has provided major new sources of growth. Agriculture
and related industries continue to be an important part of Pennsylvania's
economy.

Both the Commonwealth of Pennsylvania and the City of Philadelphia have
historically experienced significant revenue shortfalls. On the other hand,
rising demands on state programs, particularly for medical assistance and cash
assistance programs, and the increased cost of special education programs and
correction facilities and programs, have contributed to increased expenditures.
In response, the Commonwealth and the City of Philadelphia have, in recent
years, sought to balance budgets with a combination of tax increases and
expenditure restraints.

To deal with its budget deficits, Philadelphia has considered significant
service cuts and a plan to privatize certain city-provided services. In
addition, in 1991 the Commonwealth created the Pennsylvania Inter-Governmental
Cooperation Authority ('PICA'), with authority to issue notes and bonds on
behalf of Philadelphia to cover budget shortfalls, to eliminate projected
deficits and to fund capital spending. PICA has issued approximately $1.76
billion of Special Revenue Bonds on behalf of the City. However, its power to
issue bonds for most purposes expired on December 31, 1994 and its power to
issue bonds to finance cash flow deficits expired on December 31, 1996. PICA's
authority to refund existing debt will not expire. PICA had approximately $1.1
billion in special revenue bonds outstanding as of June 30, 1997.

Although there can be no assurance that such conditions will continue, the
Commonwealth's general obligation bonds are currently rated AA-by Standard &
Poor's and A1 by Moody's, while Philadelphia's general obligation bonds are
rated BBB and Baa by Standard & Poor's and Moody's, respectively.

PENNSYLVANIA TAXES

The following summarizes the opinion of Drinker Biddle & Reath,
Philadelphia, Pennsylvania, special counsel on Pennsylvania tax matters, under
existing law:

1. The Fund will be recognized as a trust and will not be taxable as a
corporation for Pennsylvania state and local tax purposes.

2. Units of the Fund are not subject to the County Personal Property Tax
presently in effect in Pennsylvania to the extent of that proportion of the Fund
represented by bonds issued by the Commonwealth of Pennsylvania, its agencies
and instrumentalities, or by any county, city, borough, town, township, school
district, municipality or local housing or parking authority in the Commonwealth
of Pennsylvania ('Pennsylvania Obligations'). Fund Units may be taxable under
the Pennsylvania inheritance and estate taxes.

3. Distributions to investors in the Fund attributable to interest from
Pennsylvania Obligations are not taxable under the Pennsylvania Personal Income
Tax or under the Corporate Net Income Tax imposed on corporations by Article IV
of the Pennsylvania Tax Reform Code, nor are such distributions taxable under
the Philadelphia School District Investment Income Tax imposed on Philadelphia
resident individuals.

4. Although there is no published authority on the subject, counsel is of
the opinion that any insurance proceeds paid in lieu of interest on defaulted
tax-exempt bonds will be exempt from the Pennsylvania Personal Income Tax either
as payments in lieu of tax-exempt interest or as payments of insurance proceeds
which are not included in any of the classes of income specified as taxable
under the Pennsylvania Personal Income Tax Law. Further, because such insurance
proceeds are excluded from the Federal income tax base, such proceeds will not
be subject to the Pennsylvania Corporate Net Income Tax. Proceeds from insurance
policies are expressly excluded from the Philadelphia School District Investment
Income Tax, and, accordingly, insurance proceeds paid to replace defaulted
payments under any bonds will not be subject to that tax.

5. Distributions to investors in the Fund attributable to gain on the
disposition by the Fund of Pennsylvania Obligations (whether by sale, redemption
or payment at maturity) will be taxable under the Pennsylvania Personal Income
Tax, the Pennsylvania Corporate Income Tax, and, unless the obligation has been
held for more than six

A-16
<PAGE>
months, the Philadelphia School District Investment Income Tax. Distributions
attributable to gain on the disposition of any obligation held more than six
months will not be subject to the Philadelphia School District Investment Income
Tax.

6. To the extent the value of Units is represented by obligations of the
Commonwealth of Puerto Rico or obligations of the territory of Guam, such value
will not be subject to the Pennsylvania County Personal Property Tax to the
extent required by Federal statutes. Distributions to investors in the Fund
attributable to interest on such obligations is not taxable under any of the
Pennsylvania State and local income taxes referred to above. Distributions to
investors in the Fund attributable to gain on the disposition of such
obligations will be taxable under the Pennsylvania State and local income taxes
referred to above, except that gain on any obligation held for more than six
months is not subject to the Philadelphia School District Investment Income Tax.

7. Gain on the disposition of a Unit will be taxable under the Pennsylvania
Personal Income Tax, the Pennsylvania Corporate Income Tax, and, unless the Unit
has been held for more than six months, the Philadelphia School District
Investment Income tax. Gain on the disposition of a Unit held more than six
months will not be subject to the Philadelphia School District Investment Income
Tax.

A-17
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

The Sponsors, Trustee and Holders of Municipal Investment Trust Fund, Multistate
Series--318, Defined Asset Funds (California, Florida, New York and Pennsylvania
Trusts) (the 'Trusts'):

We have audited the accompanying statements of condition and the related defined
portfolios included in the prospectus of the Trusts as of October 31, 1997.
These financial statements are the responsibility of the Trustee. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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. Our procedures included
confirmation of cash, securities and an irrevocable letter of credit deposited
for the purchase of securities, as described in the statements of condition,
with the Trustee. An audit also includes assessing the accounting principles
used and significant estimates made by the Trustee, as well as evaluating the
overall financial statement presentation. We believe that our 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 each of the Trusts as of
October 31, 1997 in conformity with generally accepted accounting principles.

DELOITTE & TOUCHE LLP
New York, N.Y.
October 31, 1997

STATEMENTS OF CONDITION AS OF OCTOBER 31, 1997

TRUST PROPERTY

CALIFORNIA FLORIDA NEW YORK
TRUST TRUST TRUST
-------------------- -------------------- --------------------
<S> <C> <C> <C>

Investments--Bonds and Contracts to purchase Bonds(1) $ 4,629,729.35 $ 3,879,614.50 $ 4,383,104.90
Cash 40,000.00 33,000.00 37,000.00
Accrued interest to initial date of deposit on underlying
Bonds 63,435.00 32,615.62 48,891.21
Organizational Costs(2) 4,540.00 3,783.00 4,287.00
-------------------- -------------------- --------------------
Total $ 4,737,704.35 $ 3,949,013.12 $ 4,473.283.11
-------------------- -------------------- --------------------
-------------------- -------------------- --------------------
LIABILITIES AND INTEREST OF HOLDERS
Liabilities:
Advance by Trustee for accrued interest(3) $ 63,435.00 $ 32,615.62 $ 48,891.21
Accrued Liability(2) 4,540.00 3,783.00 4,287.00
-------------------- -------------------- --------------------
Subtotal 67,975.00 36,398.62 53,178.21
-------------------- -------------------- --------------------
Interest of Holders of units of fractional undivided
interest outstanding
(California Trust--4,540; Florida Trust--3,783; New
York Trust--4,287; Pennsylvania Trust--3,277)
Cost to investors(4)(5) 4,669,729.35 3,912,614.50 4,420,104.90
-------------------- -------------------- --------------------
Total $ 4,737,704.35 $ 3,949,013.12 $ 4,473,283.11
-------------------- -------------------- --------------------
-------------------- -------------------- --------------------

PENNSYLVANIA
TRUST
--------------------
Investments--Bonds and Contracts to purchase Bonds(1) $ 3,327,217.85
Cash 27,000.00
Accrued interest to initial date of deposit on underlying
Bonds 40,869.83
Organizational Costs(2) 3,277.00
--------------------
Total $ 3,398,364.68
--------------------
--------------------
LIABILITIES AND INTEREST OF HOLDERS
Liabilities:
Advance by Trustee for accrued interest(3) $ 40,869.83
Accrued Liability(2) 3,277.00
--------------------
Subtotal 44,146.83
--------------------
Interest of Holders of units of fractional undivided
interest outstanding
(California Trust--4,540; Florida Trust--3,783; New
York Trust--4,287; Pennsylvania Trust--3,277)
Cost to investors(4)(5) 3,354,217.85
--------------------
Total $ 3,398,364.68
--------------------
--------------------
</TABLE>

- ------------
(1) Aggregate cost to the Fund of the bonds listed under each portfolio
is based upon the offer side evaluation determined by the Evaluator at the
evaluation time on the business day prior to the initial date of deposit. The
contracts to purchase the bonds are collateralized by an irrevocable letter of
credit which has been issued by The Development Bank of Singapore Ltd., New York
Agency, in the amount of $13,734,940.81 deposited with the Trustee. The amount
of the letter of credit includes $13,581,754.15 for the purchase of
$13,900,000.00 face amount of the bonds, plus $153,186.66 for accrued interest.
(2) This represents a portion of the Trust's organizational costs, which
will be deferred and amortized over five years.
(3) Representing a special distribution to the Sponsors by the Trustee
of an amount equal to the accrued interest on the bonds.
(4) A mandatory distribution of $3.75 per unit is payable quarterly
February, May, August and November, up to an aggregate of $45.00 per unit over a
three-year period. Distributions will be made to an account maintained by the
Trustee from which the deferred sales charge obligation of the investors to the
Sponsors will be satisfied. If units are redeemed prior to the end of the third
anniversary of a Trust, the remaining portion of the distributions applicable to
such units will be transferred to such account on the redemption date.
(5) Aggregate public offering price (exclusive of interest) computed on
the basis of the offer side evaluation of the underlying bonds as of the
evaluation time on the business day prior to the Initial Date of Deposit.

A-18
<PAGE>
- --------------------------------------------------------------------------------
TAX-FREE VS. TAXABLE INCOME: A COMPARISON OF TAXABLE AND TAX-FREE YIELDS

FOR CALIFORNIA RESIDENTS
- --------------------------------------------------------------------------------

COMBINED
EFFECTIVE
TAXABLE INCOME 1997* TAX RATE TAX-FREE YIELD OF
SINGLE RETURN JOINT RETURN % 4% 4.5% 5% 5.5% 6% 6.5% 7% 7.5% 8%
IS EQUIVALENT TO A TAXABLE YIELD OF

- --------------------------------------------------------------------------------

$ 0- 24,650 $ $0- 41,200 20.10 5.01 5.63 6.26 6.88 7.51 8.14 8.76 9.39 10.01
$ 24,651- 59,750 $ 41,201- 99,600 34.70 6.13 6.89 7.66 8.42 9.19 9.95 10.72 11.48 12.25
$ 59,751-124,650 $ 99,601-151,750 37.42 6.39 7.19 7.99 8.79 9.59 10.39 11.19 11.98 12.78
$ 124,651-271,050 $ 151,751-271,050 41.95 6.89 7.75 8.61 9.47 10.34 11.20 12.06 12.92 13.78
OVER $271,050 OVER $271,050 45.22 7.30 8.21 9.13 10.04 10.95 11.87 12.78 13.69 14.60

<CAPTION>
FOR FLORIDA RESIDENTS
- --------------------------------------------------------------------------------

EFFECTIVE
TAXABLE INCOME 1997* TAX RATE TAX-FREE YIELD OF
SINGLE RETURN JOINT RETURN % 4% 4.5% 5% 5.5% 6% 6.5% 7% 7.5% 8%
IS EQUIVALENT TO A TAXABLE YIELD OF

- --------------------------------------------------------------------------------

$ 0- 24,650 $ 0- 41,200 15.00 4.71 5.29 5.88 6.47 7.06 7.65 8.24 8.82 9.41
$ 24,651- 59,750 $ 41,201- 99,600 28.00 5.56 6.25 6.94 7.64 8.33 9.03 9.72 10.42 11.11
$ 59,751-124,650 $ 99,601-151,750 31.00 5.80 6.52 7.25 7.97 8.70 9.42 10.14 10.87 11.59
$ 124,651-271,050 $ 151,751-271,050 36.00 6.25 7.03 7.81 8.59 9.38 10.16 10.94 11.72 12.50
OVER $271,050 OVER $271,050 39.60 6.62 7.45 8.28 9.11 9.93 10.76 11.59 12.42 13.25

<CAPTION>
FOR NEW YORK CITY RESIDENTS
- --------------------------------------------------------------------------------

COMBINED
EFFECTIVE
TAXABLE INCOME 1997* TAX RATE TAX-FREE YIELD OF
SINGLE RETURN JOINT RETURN % 4% 4.5% 5% 5.5% 6% 6.5% 7% 7.5% 8%
IS EQUIVALENT TO A TAXABLE YIELD OF

- --------------------------------------------------------------------------------

$ 0- 24,650 $ 0- 41,200 24.10 5.27 5.93 6.59 7.25 7.90 8.56 9.22 9.88 10.54
$ 24,651- 59,750 $ 41,201- 99,600 35.75 6.23 7.00 7.78 8.56 9.34 10.12 10.89 11.67 12.45
$ 59,751-124,650 $ 99,601-151,750 38.42 6.50 7.31 8.12 8.93 9.74 10.56 11.37 12.18 12.99
$ 124,651-271,050 $ 151,751-271,050 42.89 7.00 7.88 8.75 9.63 10.51 11.38 12.26 13.13 14.01
OVER $271,050 OVER $271,050 46.10 7.42 8.35 9.28 10.20 11.13 12.06 12.99 13.91 14.84

<CAPTION>
FOR NEW YORK STATE RESIDENTS
- --------------------------------------------------------------------------------

COMBINED
EFFECTIVE
TAXABLE INCOME 1997* TAX RATE TAX-FREE YIELD OF
SINGLE RETURN JOINT RETURN % 4% 4.5% 5% 5.5% 6% 6.5% 7% 7.5% 8%
IS EQUIVALENT TO A TAXABLE YIELD OF

- --------------------------------------------------------------------------------

$ 0- 24,650 $ 0- 41,200 20.82 5.05 5.68 6.31 6.95 7.58 8.21 8.84 9.47 10.10
$ 24,651- 59,750 $ 41,201- 99,600 32.93 5.96 6.71 7.46 8.20 8.95 9.69 10.44 11.18 11.93
$ 59,751-124,650 $ 99,601-151,750 35.73 6.22 7.00 7.78 8.56 9.34 10.11 10.89 11.67 12.45
$ 124,651-271,050 $ 151,751-271,050 40.38 6.71 7.55 8.39 9.23 10.06 10.90 11.74 12.58 13.42
OVER $271,050 OVER $271,050 43.74 7.11 8.00 8.89 9.78 10.66 11.55 12.44 13.33 14.22

<CAPTION>
FOR PENNSYLVANIA RESIDENTS
- --------------------------------------------------------------------------------

COMBINED
EFFECTIVE
TAXABLE INCOME 1997* TAX RATE TAX-FREE YIELD OF
SINGLE RETURN JOINT RETURN % 4% 4.5% 5% 5.5% 6% 6.5% 7% 7.5% 8%
IS EQUIVALENT TO A TAXABLE YIELD OF

- --------------------------------------------------------------------------------

$ 0- 24,650 $ 0- 41,200 17.38 4.84 5.45 6.05 6.66 7.26 7.87 8.47 9.08 9.68
$ 24,651- 59,750 $ 41,201- 99,600 30.02 5.72 6.43 7.14 7.86 8.57 9.29 10.00 10.72 11.43
$ 59,751-124,650 $ 99,601-151,750 32.93 5.96 6.71 7.46 8.20 8.95 9.69 10.44 11.18 11.93
$ 124,651-271,050 $ 151,751-271,050 37.79 6.43 7.23 8.04 8.84 9.65 10.45 11.25 12.06 12.86
OVER $271,050 OVER $271,050 41.29 6.81 7.66 8.52 9.37 10.22 11.07 11.92 12.77 13.63
</TABLE>

To compare the yield of a taxable security with the yield of a tax-free
security, find your taxable income and read across. The table incorporates 1997
federal and applicable State (and City) income tax rates and assumes that all
income would otherwise be taxed at the investor's highest tax rate. Yield
figures are for example only.

*Based upon net amount subject to federal income tax after deductions and
exemptions. This table does not reflect the possible effect of other tax
factors, such as alternative minimum tax, personal exemptions, the phase out of
exemptions, itemized deductions or the possible partial disallowance of
deductions. Consequently, investors are urged to consult their own tax advisers
in this regard.

A-19
<PAGE>
DEFINED ASSET FUNDSSM
PROSPECTUS--PART B
MUNICIPAL INVESTMENT TRUST FUND
FURTHER DETAIL REGARDING ANY OF THE INFORMATION PROVIDED IN THE PROSPECTUS MAY
BE OBTAINED
WITHIN FIVE DAYS BY WRITING OR CALLING THE TRUSTEE, THE ADDRESS AND
TELEPHONE NUMBER OF WHICH ARE SET FORTH ON THE BACK COVER OF PART A OF THIS
PROSPECTUS.

Index

PAGE
----
Fund Description........................... 1
Risk Factors............................... 2
How to Buy Units........................... 8
How to Redeem or Sell Units................ 9
Income, Distributions and Reinvestment..... 10
Fund Expenses.............................. 12
Taxes...................................... 12
PAGE
----
Records and Reports........................ 13
Trust Indenture............................ 14
Miscellaneous.............................. 14
Exchange Option............................ 16
Supplemental Information................... 17
Appendix A--Description of Ratings......... a-1
Appendix B--Secondary Market Sales Charge
Schedule................................. b-1

FUND DESCRIPTION

BOND PORTFOLIO SELECTION

Professional buyers for Defined Asset Funds, with access to extensive
research, selected the Bonds for the Portfolio after considering the Fund's
investment objective as well as the quality of the Bonds (all Bonds in the
Portfolio are initially rated in the category A or better by at least one
nationally recognized rating organization or have comparable credit
characteristics), the yield and price of the Bonds compared to similar
securities, the maturities of the Bonds and the diversification of the
Portfolio. Only issues meeting these stringent criteria of Defined Asset Funds
are included in the Portfolio. No leverage or borrowing is used nor does the
Portfolio contain other kinds of securities to enhance yield. A summary of the
Bonds in the Portfolio appears in Part A of the Prospectus. In a Fund that
includes multiple Trusts or Portfolios, the word Fund should be understood to
mean each individual Trust or Portfolio.

The deposit of the Bonds in the Fund on the initial date of deposit
established a proportionate relationship among the face amounts of the Bonds.
During the 90-day period following the initial date of deposit the Sponsors may
deposit additional Bonds in order to create new Units, maintaining to the extent
possible that original proportionate relationship. Deposits of additional Bonds
subsequent to the 90-day period must generally replicate exactly the
proportionate relationship among the face amounts of the Bonds at the end of the
initial 90-day period.

Yields on bonds depend on many factors including general conditions of the
bond markets, the size of a particular offering and the maturity and quality
rating of the particular issues. Yields can vary among bonds with similar
maturities, coupons and ratings. Ratings represent opinions of the rating
organizations as to the quality of the bonds rated, based on the credit of the
issuer or any guarantor, insurer or other credit provider, but these ratings are
only general standards of quality (see Appendix A).

After the initial date of deposit, the ratings of some Bonds may be reduced
or withdrawn, or the credit characteristics of the Bonds may no longer be
comparable to bonds rated A or better. Bonds rated BBB or Baa (the lowest
investment grade rating) or lower may have speculative characteristics, and
changes in economic conditions or other circumstances are more likely to lead to
a weakened capacity to make principal and interest payments than is the case
with higher grade bonds. Bonds rated below investment grade or unrated bonds
with similar credit characteristics are often subject to greater market
fluctuations and risk of loss of principal and income than higher grade bonds
and their value may decline precipitously in response to rising interest rates.

1
<PAGE>
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 refundings)
that, in the opinion of the Sponsors makes retention of the Bond detrimental to
the interests of investors. The Trustee must generally reject any offer by an
issuer of a Bond to exchange another security pursuant to a refunding or
refinancing plan.

Every investment involves some risk; for example, the market prices of most
fixed-income investments decline when interest rates rise, and this exposure
increases with the remaining life of the investment. Historically, however,
municipal bonds generally have been second only in creditworthiness to U.S.
government obligations. Municipal unit trusts can be an efficient alternative to
investing in actively managed funds. Active management of a portfolio of quality
municipal bonds may not be as important as with other securities. Insured bonds
provide additional assurance of prompt payments of interest and principal (but
not stability of market value).

The Sponsors and the Trustee are not liable for any default or defect in a
Bond. If a contract to purchase any Bond fails within the 90-day period
following the initial date of deposit, the Sponsors may generally deposit a
replacement bond so long as it is a tax-exempt bond that is not a 'when, as and
if issued' bond, has a fixed maturity or disposition date substantially similar
to the failed Bond and has a rating at least equal to that of the Bond it
replaces (or, if not rated, has comparable credit characteristics). A
replacement bond must be deposited within 110 days after the initial date of
deposit, at a cost that does not exceed the funds reserved for purchasing the
failed Bond and at a yield to maturity and current return substantially
equivalent (considering then current market conditions and relative
creditworthiness) to those of the failed Bond, as of the date the failed
contract was deposited.

RISK FACTORS

An investment in the Fund entails certain risks, including the risk that the
value of your investment will decline with increases in interest rates.
Generally speaking, bonds with longer maturities will fluctuate in value more
than bonds with shorter maturities. In recent years there have been wide
fluctuations in interest rates and in the value of fixed-rate bonds generally.
The Sponsors cannot predict the direction or scope of any future fluctuations.

Certain of the Bonds may have been deposited at a market discount or premium
principally because their interest rates are lower or higher than prevailing
rates on comparable debt securities. The current returns of market discount
bonds are lower than comparably rated bonds selling at par because discount
bonds tend to increase in market value as they approach maturity. The current
returns of market premium bonds are higher than comparably rated bonds selling
at par because premium bonds tend to decrease in market value as they approach
maturity. Because part of the purchase price is returned through current income
payments and not at maturity, an early redemption at par of a premium bond will
result in a reduction in yield to the Fund. Market premium or discount
attributable to interest rate changes does not indicate market confidence or
lack of confidence in the issue.

Certain Bonds deposited into the Fund may have been acquired on a
when-issued or delayed delivery basis. The purchase price for these Bonds is
determined prior to their delivery to the Fund and a gain or loss may result
from fluctuations in the value of the Bonds. Additionally, if the value of the
short-term Bonds intended for payment of the periodic deferred sales charge,
together with the interest thereon, were to become insufficient to pay these
charges, additional bonds would be required to be sold.

The Fund may be concentrated in one or more of types of bonds. Concentration
in a State may involve additional risk because of the decreased diversification
of economic, political, financial and market risks. Set forth below is a

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<PAGE>
brief description of certain risks associated with bonds which may be held by
the Fund. Additional information is contained in the Information Supplement
which is available from the Trustee at no charge to the investor.

GENERAL OBLIGATION BONDS

Certain of the Bonds may be general obligations of a governmental entity.
General obligation bonds are backed by the issuer's pledge of its full faith,
credit and taxing power for the payment of principal and interest. However, the
taxing power of any governmental entity may be limited by provisions of state
constitutions or laws and its credit will depend on many factors, including an
erosion of the tax base resulting from population declines, natural disasters,
declines in the state's industrial base or an inability to attract new
industries, economic limits on the ability to tax without eroding the tax base
and the extent to which the entity relies on federal or state aid, access to
capital markets or other factors beyond the entity's control. In addition,
political restrictions on the ability to tax and budgetary constraints affecting
state governmental aid may have an adverse impact on the creditworthiness of
cities, counties, school districts and other local governmental units. Recent
and significant changes in Federal welfare policy may have substantial negative
impact on certain states, and localities within those states, making their
ability to maintain balanced finances more difficult in the future.

MORAL OBLIGATION BONDS

The Portfolio may include 'moral obligation' bonds. If an issuer of moral
obligation bonds is unable to meet its obligations, the repayment of the bonds
becomes a moral commitment but not a legal obligation of the state or local
government in question. Even though the state or local government may be called
on to restore any deficits in capital reserve funds of the agencies or
authorities which issued the bonds, any restoration generally requires
appropriation by the state or local legislature and does not constitute a
legally enforceable obligation or debt of the state or local government. The
agencies or authorities generally have no taxing power.

REFUNDED BONDS

Refunded bonds are typically secured by direct obligations of the U.S.
Government or in some cases obligations guaranteed by the U.S. Government placed
in an escrow account maintained by an independent trustee until maturity or a
predetermined redemption date. These obligations are generally noncallable prior
to maturity or the predetermined redemption date. In a few isolated instances,
however, bonds which were thought to be escrowed to maturity have been called
for redemption prior to maturity.

MUNICIPAL REVENUE BONDS

Municipal revenue bonds are tax-exempt securities issued by states,
municipalities, public authorities or similar entities to finance the cost of
acquiring, constructing or improving various projects. Municipal revenue bonds
are not general obligations of governmental entities backed by their taxing
power and payment is generally solely dependent upon revenues of the project,
excise taxes or state appropriations. Examples of municipal revenue bonds are:

Municipal utility bonds, including electrical, water and sewer revenue
bonds, whose payments are dependent on various factors, including the rates
the utilities may charge, the demand for their services and their operating
costs, including expenses to comply with environmental legislation and other
energy and licensing laws and regulations. Utilities are particularly
sensitive to, among other things, the effects of inflation on operating and
construction costs, the unpredictability of future usage requirements, the
costs and availability of fuel and, with certain electric utilities, the
risks associated with the nuclear industry. The movement to introduce
competition in the investor-owned electric utility industry is likely to
indirectly affect municipal utility systems by inducing them to maintain
rates as low as possible. In this effort to keep rates low, municipal
utilities may have more trouble raising rates to completely recover
investment in generating plant;

Lease rental bonds which are generally issued by governmental financing
authorities with no direct taxing power for the purchase of equipment or
construction of buildings that will be used by a state or local government.
Lease rental bonds are generally subject to an annual risk that the lessee
government might not appropriate funds for the leasing rental payments to
service the bonds and may also be subject to the risk that rental
obligations may terminate in the event of damage to or destruction or
condemnation of the equipment or building;

Multi-family housing revenue bonds and single family mortgage revenue
bonds which are issued to provide financing for various housing projects and
which are payable primarily from the revenues derived from mortgage

3
<PAGE>
loans to housing projects for low to moderate income families or notes
secured by mortgages on residences; repayment of this type of bond is
therefore dependent upon, among other things, occupancy levels, rental
income, the rate of default on underlying mortgage loans, the ability of
mortgage insurers to pay claims, the continued availability of federal,
state or local housing subsidy programs, economic conditions in local
markets, construction costs, taxes, utility costs and other operating
expenses and the managerial ability of project managers. Housing bonds are
generally prepayable at any time and therefore their average life will
ordinarily be less than their stated maturities;

Hospital, mental health and nursing home facility bonds whose payments
are dependent upon revenues of hospitals and other health care providers.
These revenues come from private third-party payors and government programs,
including the Medicare and Medicaid programs, which have generally
undertaken cost containment measures to limit payments to health care
providers. Hospitals must also deal with shifting competition resulting from
hospital mergers and affiliations and the need to reduce costs as HMOs
increase market penetration. Nursing homes need to keep residential
facilities for the elderly, which are not reimbursable from
Medicare/Medicaid, on a profitable basis. Hospital supply and drug companies
must deal with their need to raise prices in an environment where hospitals
and other health care providers are under intense pressure to keep their
costs low. Hospitals and health care providers are subject to various legal
claims by patients and others and are adversely affected by increasing costs
of insurance;

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.

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<PAGE>
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 (such as the phased
repeal of the Puerto Rico and possession federal tax credit) 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 certain cases, an affiliated or third party guarantor and may be
affected by economic factors relating to the particular industry as well as
varying degrees of governmental regulation. In many cases industrial revenue
bonds do not have the benefit of covenants which would prevent the corporations
from engaging in capital restructurings or borrowing transactions which could
reduce their ability to meet their obligations and result in a reduction in the
value of the Portfolio.

BONDS BACKED BY LETTERS OF CREDIT OR INSURANCE

Certain Bonds may be secured by letters of credit issued by commercial banks
or savings banks, savings and loan associations and similar thrift institutions
or are direct obligations of banks or thrifts. The letter of credit may be drawn
upon, and the Bonds redeemed, if an issuer fails to pay amounts due on the Bonds
or, in certain cases, if the interest on the Bond becomes taxable. Letters of
credit are irrevocable obligations of the issuing institutions. The
profitability of a financial institution is largely dependent upon the credit
quality of its loan portfolio which, in turn, is affected by the institution's
underwriting criteria, concentrations within the portfolio and specific industry
and general economic conditions. The operating performance of financial
institutions is also impacted by changes in interest rates, the availability and
cost of funds, the intensity of competition and the degree of governmental
regulation.

Certain Bonds may be insured or guaranteed by insurance companies listed
below. The claims-paying ability of each of these companies, unless otherwise
indicated, was rated AAA by Standard & Poor's or another nationally recognized
rating organization at the time the insured Bonds were purchased by the Fund.
The ratings are subject to change at any time at the discretion of the rating
agencies. In an Insured Series, in the event that the rating of an insurance
company insuring a bond is reduced, the Sponsors are authorized to direct the
Trustee to obtain other insurance on behalf of the Fund. The insurance policies
guarantee the timely payment of principal and interest on the Bonds but do not
guarantee their market value or the value of the Units. The insurance policies
generally do not provide for accelerated payments of principal, except at the
sole option of the insurer, 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 DECEMBER 31, 1996
(IN MILLIONS OF DOLLARS)
--------------------------------
DATE ADMITTED POLICYHOLDERS'
NAME ESTABLISHED ASSETS SURPLUS
- ------------------------------------------- ------------- ------------ ----------------
<S> <C> <C> <C>

AMBAC Indemnity Corporation................ 1970 $ 2,585 $ 899
Asset Guaranty Insurance Co. (AA by S&P)... 1988 204 87
Capital Markets Assurance Corp. (CAPMAC) 1987 321 194
Connie Lee Insurance Company............... 1987 233 116
Financial Guaranty Insurance Company....... 1984 2,392 1,093
Financial Security Assurance Inc. (FSA)
(including Financial Security Assurance
of Maryland Inc. (FSAM) (formerly Capital
Guaranty Insurance Company).............. 1984 1,155 449
MBIA Insurance Corporation................. 1986 4,189 1,467
</TABLE>

Insurance companies are subject to extensive regulation and supervision
where they do business by state insurance commissioners who regulate the
standards of solvency which must be maintained, the nature of and limitations on
investments, reports of financial condition, and requirements regarding reserves
for unearned premiums, losses and other matters. A significant portion of the
assets of insurance companies are required by law to be held in reserve against
potential claims on policies and is not available to general creditors. Although
the federal government does not regulate the business of insurance, federal
initiatives including pension regulation, controls on medical care costs,

5
<PAGE>
minimum standards for no-fault automobile insurance, national health insurance,
tax law changes affecting life insurance companies and repeal of the antitrust
exemption for the insurance business can significantly impact the insurance
business.

STATE RISK FACTORS

Investment in a single State Trust, as opposed to a Fund which invests in
the obligations of several states, may involve some additional risk due to the
decreased diversification of economic, political, financial and market risks. A
brief description of the factors which may affect the financial condition of the
applicable State for any State Trust, together with a summary of tax
considerations relating to that State, appear in Part A of the Prospectus;
further information is contained in the Information Supplement.

LITIGATION AND LEGISLATION

The Sponsors do not know of any pending litigation as of the initial date of
deposit which might reasonably be expected to have a material adverse effect
upon the Fund. At any time after the initial date of deposit, litigation may be
initiated on a variety of grounds, or legislation may be enacted, affecting the
Bonds in the Fund. Litigation, for example, challenging the issuance of
pollution control revenue bonds under environmental protection statutes may
affect the validity of certain Bonds or the tax-free nature of their interest.
While the outcome of litigation of this nature can never be entirely predicted,
opinions of bond counsel are delivered on the date of issuance of each Bond to
the effect that it has been validly issued and that the interest thereon is
exempt from federal income tax. From time to time, proposals are introduced in
Congress to, among other things, reduce federal income tax rates, impose a flat
tax, exempt investment income from tax or abolish the federal income tax and
replace it with another form of tax. Enactment of any such legislation could
adversely affect the value of the Units. The Fund, however, cannot predict what
legislation, if any, in respect of tax rates may be proposed, nor can it predict
which proposals, if any, might be enacted.

Also, certain proposals, in the form of state legislative proposals or voter
initiatives, seeking to limit real property taxes have been introduced in
various states, and an amendment to the constitution of the State of California,
providing for strict limitations on real property taxes, has had a significant
impact on the taxing powers of local governments and on the financial condition
of school districts and local governments in California. In addition, other
factors may arise from time to time which potentially may impair the ability of
issuers to make payments due on the Bonds. Under the Federal Bankruptcy Code,
for example, municipal bond issuers, as well as any underlying corporate
obligors or guarantors, may proceed to restructure or otherwise alter the terms
of their obligations.

From time to time Congress considers proposals to prospectively and
retroactively tax the interest on state and local obligations, such as the
Bonds. The Supreme Court clarified in South Carolina v. Baker (decided on April
20, 1988) that the U.S. Constitution does not prohibit Congress from passing a
nondiscriminatory tax on interest on state and local obligations. This type of
legislation, if enacted into law, could require investors to pay income tax on
interest from the Bonds and could adversely affect an investment in Units. See
Taxes.

PAYMENT OF THE BONDS AND LIFE OF THE FUND

The size and composition of the Portfolio will change over time. Most of the
Bonds are subject to redemption prior to their stated maturity dates pursuant to
optional refunding or sinking fund redemption provisions or otherwise. In
general, optional refunding redemption provisions are more likely to be
exercised when the value of a Bond is at a premium over par than when it is at a
discount from par. Some Bonds may be subject to sinking fund and extraordinary
redemption provisions which may commence early in the life of the Fund.
Additionally, the size and composition of the Fund will be affected by the level
of redemptions of Units that may occur from time to time. Principally, this will
depend upon the number of investors seeking to sell or redeem their Units and
whether or not the Sponsors are able to sell the Units acquired by them in the
secondary market. As a result, Units offered in the secondary market may not
represent the same face amount of Bonds as on the initial date of deposit.
Factors that the Sponsors will consider in determining whether or not to sell
Units acquired in the secondary market include the diversity of the Portfolio,
the size of the Fund relative to its original size, the ratio of Fund expenses
to income, the Fund's current and long-term returns, the degree to which Units
may be selling at a premium over par and the cost of maintaining a current
prospectus for the Fund. These factors may also lead the Sponsors to seek to
terminate the Fund earlier than its mandatory termination date.

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<PAGE>
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 Portfolio although any Bond
unable to be sold at a reasonable price may continue to be held by the Trustee
in a liquidating trust pending its final disposition. A proportional share of
the expenses associated with termination, including brokerage costs in disposing
of Bonds, will be borne by investors remaining at that time. This may have the
effect of reducing the amount of proceeds those investors are to receive in any
final distribution.

LIQUIDITY

Up to 40% of the value of the Portfolio may be attributable to guarantees or
similar security provided by corporate entities. These guarantees or other
security may constitute restricted securities that cannot be sold publicly by
the Trustee without registration under the Securities Act of 1933, as amended.
The Sponsors nevertheless believe that, should a sale of the Bonds guaranteed or
secured be necessary in order to meet redemption of Units, the Trustee should be
able to consummate a sale with institutional investors.

The principal trading market for the Bonds will generally be in the
over-the-counter market and the existence of a liquid trading market for the
Bonds may depend on whether dealers will make a market in them. There can be no
assurance that a liquid trading market will exist for any of the Bonds,
especially since the Fund may be restricted under the Investment Company Act of
1940 from selling Bonds to any Sponsor. The value of the Portfolio will be
adversely affected if trading markets for the Bonds are limited or absent.

HOW TO BUY UNITS

Units are available from any of the Sponsors, Underwriters and other
broker-dealers at the Public Offering Price plus accrued interest on the Units.
The Public Offering Price varies each Business Day with changes in the value of
the Portfolio and other assets and liabilities of the Fund.

PUBLIC OFFERING PRICE

Net accrued interest and principal cash, if any, are added to the Public
Offering Price, the Sponsors' Repurchase Price and the Redemption Price per
Unit. This represents the interest accrued on the Bonds, net of Fund expenses,
from the initial date of deposit to, but not including, the settlement date for
Units (less any prior distributions of interest income to investors). Bonds
deposited also carry accrued but unpaid interest up to the initial date of
deposit. To avoid having investors pay this additional accrued interest (which
earns no return) when they purchase Units, the Trustee advances and distributes
this amount to the Sponsors; it recovers this advance from interest received on
the Bonds. Because of varying interest payment dates on the Bonds, accrued
interest at any time will exceed the interest actually received by the Fund.

Because accrued interest on the Bonds is not received by the Fund at a
constant rate throughout the year, any Monthly Income Distribution may be more
or less than the interest actually received by the Fund. To eliminate
fluctuations in the Monthly Income Distribution, a portion of the Public
Offering Price may consist of cash in an amount necessary for the Trustee to
provide approximately equal distributions. Upon the sale or redemption of Units,
investors will receive their proportionate share of this cash. In addition, if a
Bond is sold, redeemed or otherwise disposed of, the Fund will periodically
distribute to investors the portion of this cash that is attributable to the
Bond.

The regular Monthly Income Distribution is stated in Part A of the
Prospectus and will change as the composition of the Portfolio changes over
time.

7
<PAGE>
During the initial offering period and for at least the first three months
of the Fund, the Public Offering Price (and the Initial Repurchase Price) is
based on the higher, offer side evaluation of the Bonds at the next Evaluation
Time after the order is received. In the secondary market (after the initial
offering period), the Public Offering Price (and the Sponsors' Repurchase Price
and the Redemption Price) is based on the lower, bid side evaluation of the
Bonds.

The Fund does not have an up-front sales charge in the initial offering
period until after the deduction of the first quarterly Deferred Sales Charge
installment which will commence on the date indicated in part A of this
Prospectus. Units redeemed or repurchased prior to the accrual of the final
Deferred Sales Charge installment will have the amount of any remaining
installments deducted from the redemption or repurchase proceeds, although this
deduction will be waived in the event of the death or disability (as defined in
the Internal Revenue Code of 1986) of an investor. Units purchased after the
deduction of the first Deferred Sales Charge installment will be charged the
up-front per Unit sales charge indicated in Part A of this Prospectus based on
the Public Offering Price (less the value of the short-term bonds reserved to
pay the deferred sales charge not yet accrued), multiplied by the number of
Deferred Sales Charge installments already deducted. Units purchased after the
deduction of the final Deferred Sales Charge installment will be subject only to
an up-front sales charge based on the maturities of the bonds in the Portfolio,
as set forth in Appendix B.

The following table shows the maximum sales charge in the initial offering
period, reduced for the funds listed below on a graduated scale for sales to any
purchaser of at least 250 Units. To qualify for the reduced sales charge the
dealer must confirm that the sale is to a single purchaser as defined below or
is purchased for its own account and not for distribution.

MONTHLY PAYMENT SERIES, INSURED SERIES, STATE TRUSTS (LONG-TERM):

NUMBER OF MAXIMUM SALES
UNITS CHARGE
- ------------- ------------------
1-249 $ 45.00
250-499 40.00
500-749 35.00
750-999 32.50
1,000 or more 30.00

INTERMEDIATE SERIES (10 YEAR) AND INTERMEDIATE STATE TRUSTS (10 YEAR):

NUMBER OF MAXIMUM SALES
UNITS CHARGE
- ------------- ------------------
1-249 $ 40.20
250-499 35.00
500-749 32.50
750-999 30.00
1,000 or more 27.50

The graduated sales charge will apply on all purchases on any one day by the
same purchaser of Units, and purchases will not be aggregated with concurrent
purchases of any other unit trusts sponsored by the Sponsors. Units held in the
name of the purchaser's spouse or his child under age 21 are deemed to be
registered in the purchaser's name. The graduated sales charge is also
applicable to a trustee or other fiduciary purchasing securities for a single
trust estate or single fiduciary account.

Employees of certain of the Sponsors and their affiliates may buy Units at
prices based on a reduced sales charge of not less than $5.00 per Unit.

In the initial offering period the concession to dealers will be equal to:
the Public Offering Price less $30.00 per Unit for Monthly Payment Series,
Insured Series and long-term State Trusts; the Public Offering Price less $27.50
per Unit for Intermediate-Term Series (10 year) and Intermediate State Trusts;
and the Public Offering Price less $20.00 per Unit for Intermediate Term Series
(5 year).

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

8
<PAGE>
available, the evaluation is generally determined on the basis of current bid or
offer prices for the Bonds or comparable securities or by appraisal or by any
combination of these methods. In the past, the bid prices of publicly offered
tax-exempt issues have been lower than the offer prices by as much as 3 1/2% or
more of face amount in the case of inactively traded issues and as little as
1/2 of 1% in the case of actively traded issues, but the difference between the
offer and bid prices has averaged between 1 and 2% of face amount. Neither the
Sponsors, the Trustee or the Evaluator will be liable for errors in the
Evaluator's judgment. The fees of the Evaluator will be borne by the Fund.

CERTIFICATES

Certificates for Units are issued upon request and may be transferred by
paying any taxes or governmental charges and by complying with the requirements
for redeeming Certificates (see How To Redeem or Sell Units--Redeeming Units
with the Trustee). Certain Sponsors collect additional charges for registering
and shipping Certificates to purchasers. Lost or mutilated Certificates can be
replaced upon delivery of satisfactory indemnity and payment of costs.

HOW TO REDEEM OR SELL UNITS

You can redeem your Units at any time for a price based on net asset value.
In addition, the Sponsors have maintained an uninterrupted secondary market for
Units for over 20 years and will ordinarily buy back Units at the same price.
The following describes these two methods to redeem or sell Units in greater
detail.

REDEEMING UNITS WITH THE TRUSTEE

You can always redeem your Units directly with the Trustee for net asset
value. This can be done by sending the Trustee a redemption request together
with any Unit certificates you hold, which must be properly endorsed or
accompanied by a written transfer instrument with signatures guaranteed by an
eligible institution. In certain instances, additional documents may be required
such as a trust instrument, certificate of corporate authority, certificate of
death or appointment as executor, administrator or guardian.

Within seven days after the Trustee's receipt of your request containing the
necessary documents, a check will be mailed to you in an amount based on the net
asset value of your Units. If you redeem or sell your Units before the final
deferred sales charge installment date, the remaining deferred sales charges
will be deducted from the net asset value. Because of sales charges, market
movements or changes in the Portfolio, net asset value at the time you redeem
your Units may be greater or less than the original cost of your Units. Net
asset value is calculated each Business Day by adding the value of the Bonds,
net accrued interest, cash and the value of any other Fund assets; deducting
unpaid taxes or other governmental charges, accrued but unpaid Fund expenses and
any remaining deferred sales charges, unreimbursed Trustee advances, cash held
to redeem Units or for distribution to investors and the value of any other Fund
liabilities; and dividing the result by the number of outstanding Units. Bonds
are evaluated on the offer side during the initial offering period and for at
least the first three months of the Fund (even in the secondary market) and on
the bid side thereafter.

As long as the Sponsors are maintaining a secondary market for Units (as
described below), the Trustee will not actually redeem your Units but will sell
them to the Sponsors for net asset value. If the Sponsors are not maintaining a
secondary market, the Trustee will redeem your Units for net asset value or will
sell your Units in the over-the-counter market if the Trustee believes it will
obtain a higher net price for your Units. If the Trustee is able to sell the
Units for a net price higher than net asset value, you will receive the net
proceeds of the sale.

If cash is not available in the Fund's Income and Capital Accounts to pay
redemptions, the Trustee may sell Bonds selected by the Agent for the Sponsors
based on market and credit factors determined to be in the best interest of the
Fund. These sales are often made at times when the Bonds would not otherwise be
sold and may result in lower prices than might be realized otherwise and may
also reduce the size and diversity of the Fund. If Bonds are being sold during a
time when additional Units are being created by the purchase of additional Bonds
(as described under Portfolio Selection), Bonds will be sold in a manner
designed to maintain, to the extent practicable, the proportionate relationship
among the face amounts of each Bond in the Portfolio.

The Trustee is authorized, on a redemption request for Units with a value
exceeding $250,000 by any investor who acquired 25% or more of the outstanding
Units of a Trust, to pay part or all of the redemption 'in kind' (by the
distribution of Bonds and cash with an aggregate value equal to the applicable
Redemption Price of the Units tendered for redemption). The Trustee will attempt
to make a pro rata distribution of Bonds in the Portfolio, but reserves

9
<PAGE>
the right to distribute solely one or more Bonds. The distribution will be made
to the distribution agent and either held for the account of the investor or
disposed of in accordance with the instructions of the investor. Any transaction
costs as well as transfer and ongoing custodial fees on sales of the Bonds
distributed in kind will be borne by the redeeming investor.

Redemptions may be suspended or payment postponed (i) if the New York Stock
Exchange is closed (other than customary weekend and holiday closings), (ii) if
the SEC determines that trading on the New York Stock Exchange is restricted or
that an emergency exists making disposal or evaluation of the Bonds not
reasonably practicable or (iii) for any other period permitted by SEC order.

SPONSORS' SECONDARY MARKET FOR UNITS

The Sponsors, while not obligated to do so, will buy back Units at net asset
value without any other fee or charge as long as they are maintaining a
secondary market for Units. Because of sales charges, market movements or
changes in the portfolio, net asset value at the time you sell your Units may be
greater or less than the original cost of your Units. The Sponsors may resell
the Units to other buyers or redeem the Units by tendering them to the Trustee.
You should consult your financial professional for current market prices to
determine if other broker-dealers or banks are offering higher prices for Units.

The Sponsors may discontinue the secondary market for Units without prior
notice if the supply of Units exceeds demand or for other business reasons.
Regardless of whether the Sponsors maintain a secondary market, you have the
right to redeem your Units for net asset value with the Trustee at any time, as
described above.

INCOME, DISTRIBUTIONS AND REINVESTMENT

INCOME

Some of the Bonds may have been purchased on a when-issued basis or may have
a delayed delivery. Since interest on these Bonds does not begin to accrue until
the date of their delivery to the Fund, the Trustee's annual fee and expenses
may be reduced to provide tax-exempt income to investors for this non-accrual
period. If a when-issued Bond is not delivered until later than expected and the
amount of the Trustee's annual fee and expenses is insufficient to cover the
additional accrued interest, the Sponsors will treat the contracts as failed
Bonds. The Trustee is compensated for its fee reduction by drawing on the letter
of credit deposited by the Sponsors before the settlement date for these Bonds
and depositing the proceeds in a non-interest bearing account for the Fund.

Interest received is credited to an Income Account and other receipts to a
Capital Account. A Reserve Account may be created by withdrawing from the Income
and Capital Accounts amounts considered appropriate by the Trustee to reserve
for any material amount that may be payable out of the Fund.

DISTRIBUTIONS

Each Unit receives an equal share of monthly distributions of interest
income net of estimated expenses. Interest on the Bonds is generally received by
the Fund on a semi-annual or annual basis. Because interest on the Bonds is not
received at a constant rate throughout the year, any Monthly Income Distribution
may be more or less than the interest actually received. To eliminate
fluctuations in the Monthly Income Distribution, the Trustee will advance
amounts necessary to provide approximately equal interest distributions; it will
be reimbursed, without interest, from interest received on the Bonds, but the
Trustee is compensated, in part, by holding the Fund's cash balances in
non-interest bearing accounts. Along with the Monthly Income Distributions, the
Trustee will distribute the investor's pro rata share of principal received from
any disposition of a Bond to the extent available for distribution. In addition,
distributions of amounts necessary to pay the deferred sales charge will be made
from the Capital and Income Accounts to an account maintained by the Trustee for
purposes of satisfying investors' sales charge obligations.

The initial estimated annual income per Unit, after deducting estimated
annual Fund expenses and the portion of the deferred sales charge payable from
interest income) as stated in Part A of the Prospectus, will change as Bonds
mature, are called or sold or otherwise disposed of, as replacement bonds are
deposited and as Fund expenses change. Because the Portfolio is not actively
managed, income distributions will generally not be affected by changes in
interest rates. Depending on the financial conditions of the issuers of the
Bonds, the amount of income should be substantially maintained as long as the
Portfolio remains unchanged; however, optional bond redemptions or other
Portfolio

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changes may occur more frequently when interest rates decline, which would
result in early returns of principal and possibly earlier termination of the
Fund.

RETURN CALCULATIONS

Estimated Current Return shows the estimated annual cash to be received from
interest-bearing bonds in a Portfolio (net of estimated annual expenses) divided
by the Public Offering Price (including the maximum sales charge). Estimated
Long Term Return is a measure of the estimated return over the estimated life of
the Trust. This represents an average of the yields to maturity (or in certain
cases, to an earlier call date) of the individual Bonds in the Portfolio,
adjusted to reflect the maximum sales charge and estimated expenses. The average
yield for the Portfolio is derived by weighting each Bond's yield by its market
value and the time remaining to the call or maturity date, depending on how the
Bond is priced. Unlike Estimated Current Return, Estimated Long Term Return
takes into account maturities, discounts and premiums of the underlying Bonds.

No return estimate can be predictive of your actual return because returns
will vary with purchase price (including sales charges), how long units are
held, changes in Portfolio composition, changes in interest income and changes
in fees and expenses. Therefore, Estimated Current Return and Estimated Long
Term Return are designed to be comparative rather than predictive. A yield
calculation which is more comparable to an individual Bond may be higher or
lower than Estimated Current Return or Estimated Long Term Return which are more
comparable to return calculations used by other investment products.

REINVESTMENT

Distributions will be paid in cash unless the investor elects to have
distributions reinvested without sales charge in the Municipal Fund Accumulation
Program, Inc. The Program is an open-end management investment company whose
investment objective is to obtain income exempt from regular federal income
taxes by investing in a diversified portfolio of state, municipal and public
authority bonds rated A or better or with comparable credit characteristics.
Reinvesting compounds earnings free from federal tax. Advertisements and sales
literature may illustrate the effects of compounding at different hypothetical
interest rates. 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 maintaining
the Fund's registration statement current with Federal and State authorities,
extraordinary services, costs of indemnifying the Trustee and the Sponsors,
costs of action taken to protect the Fund and other legal fees and expenses,
Fund termination expenses and any governmental charges. The Trustee has a lien
on Fund assets to secure reimbursement of these amounts and may sell Bonds for
this purpose if cash is not available. The Sponsors receive an annual fee
currently estimated at $0.35 per $1,000 face amount to reimburse them for the
cost of providing Portfolio supervisory services to the Fund. While the fee may
exceed their costs of providing these services to the Fund, the total
supervision fees from all Series of Municipal Investment Trust Fund will not
exceed their costs for providing 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 Defined Asset Funds,
currently estimated at $0.10 per Unit. The Trustee's, Sponsors' and Evaluator's
fees may be adjusted for inflation without investors' approval.

All or a portion of expenses incurred in establishing the Fund, including
the cost of the initial preparation of documents relating to the Fund, Federal
and State registration fees, the initial fees and expenses of the Trustee, legal
expenses and any other out-of-pocket expenses will be paid by the Fund and
amortized over five years. Advertising and selling expenses will be paid from
the Underwriting Account at no charge to the Fund. Sales charges on Defined
Asset Funds range from under 1.0% to 5.5%. This may be less than you might pay
to buy and hold a comparable managed fund. Defined Asset Funds can be a
cost-effective way to purchase and hold investments. Annual operating expenses

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are generally lower than for managed funds. Because Defined Asset Funds have no
management fees, limited transaction costs and no ongoing marketing expenses,
operating expenses are generally less than 0.25% a year. When compounded
annually, small differences in expense ratios can make a big difference in your
investment results. Because our portfolios rarely hold any significant amount of
cash, your money is more fully invested.

TAXES

The following summary describes some of the important income tax
consequences of holding Units, assuming that the investor is not a dealer,
financial institution or insurance company or other investor with special
circumstances. Investors should consult their tax advisers about an investment
in the Fund.

At the date of issue of each Bond, counsel for the issuer delivered an
opinion to the effect that interest on the Bond is generally exempt from regular
federal income tax. However, interest may be subject to federal alternative
minimum tax or state and local taxes. Neither the Sponsors nor Davis Polk &
Wardwell has reviewed the issuance of the Bonds, related proceedings or the
basis of the opinions of counsel for the issuers. There can be no assurance,
therefore, that the issuer (or other users) have complied or will comply with
any requirements necessary for a bond to be tax-exempt. If any of the Bonds were
determined not to be tax-exempt, investors might be required to pay income tax
for current and prior years, and if the Fund were to sell the Bond, it might
have to sell it at a substantial discount.

In the opinion of Davis Polk & Wardwell, special counsel for the Sponsors,
under existing law:

GENERAL TREATMENT OF THE FUND

The Fund will not be taxed as a corporation for federal income tax purposes,
and each investor will be considered to own directly a share of each Bond in the
Fund.

INCOME OR LOSS UPON DISPOSITION

Upon a disposition of all or part of an investor's pro rata portion of a
Bond (by sale, exchange or redemption of the Bond or his Units), an investor
will generally recognize capital gain or loss. However, gain from the
disposition will generally be ordinary income to the extent of any accrued
'market discount'. An investor will generally have market discount to the extent
that his basis in a Bond when he purchases a Unit is less than its stated
redemption price at maturity (or, if it is an 'original issue discount' bond,
the issue price increased by 'original issue discount' that has accrued on the
Bond before the investor's purchase). Investors should consult their tax
advisers in this regard.

The excess of a non-corporate investor's net long-term capital gains over
his net short-term capital losses may be subject to tax at a lower rate than
ordinary income. A capital gain or loss is long-term if the investment is held
for more than one year and short-term if held for one year or less. Because the
deduction of capital losses is subject to limitations, an investor may not be
able to deduct all of his capital losses. Under the recently enacted Taxpayer
Relief Act of 1997, an investor who is an individual and has held his pro rata
portions of Bonds for more than 18 months may be entitled to a 20% maximum
federal tax rate for gains from the sale of these Bonds or corresponding Units.
Investors should consult their tax advisers in this regard.

INVESTOR'S BASIS IN THE BONDS

An investor's aggregate basis in the Bonds will be equal to the cost of his
Units, including any sales charges and the organizational expenses borne by the
investor but excluding any amount paid for accrued interest, and adjusted to
reflect any accruals of 'original issue discount', 'acquisition premium' and
'bond premium'. Investors should consult their tax advisers in this regard.

EXPENSES

A non-corporate investor is not entitled to a deduction for his pro rata
share of fees and expenses of the Fund. Also, if an investor borrowed money in
order to purchase or carry his Units, he will not be able to deduct the interest
on this borrowing. The Internal Revenue Service may treat an investor's purchase
of Units as made with borrowed money even if the borrowed money was not directly
used to purchase the Units.

STATE AND LOCAL TAXES

Under the income tax laws of the State and City of New York, the Fund will
not be taxed as a corporation. The income recognized by investors that are New
York taxpayers will not be tax-exempt in New York except to the extent

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it is earned on Bonds that are tax-exempt for New York purposes. Depending on
where investors live, income from the Fund may be subject to state and local
taxation. Investors should consult their tax advisers in this regard.

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 cash 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 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.

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MISCELLANEOUS

LEGAL OPINION

The legality of the Units has been passed upon by Davis Polk & Wardwell, 450
Lexington Avenue, New York, New York 10017, as special counsel for the Sponsors.

AUDITORS

The Statement of Condition in the Prospectus was audited by Deloitte &
Touche LLP, independent accountants, as stated in their opinion. It is included
in reliance upon that opinion given on the authority of that firm as experts in
accounting and auditing.

TRUSTEE

The Trustee and its address are stated on the back cover of the Prospectus.
The Trustee is subject to supervision by the Federal Deposit Insurance
Corporation, the Board of Governors of the Federal Reserve System and New York
State banking authorities.