MUNICIPAL INVT TR FD MULTISTATE SER 75 DEFINED ASSET FUNDS
497, 1994-11-18
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Defined
Asset FundsSM

MUNICIPAL INVESTMENT          This Defined Fund consists of separate underlying
TRUST FUND                    Trusts, each of which is a portfolio of
- ------------------------------preselected securities issued by or on behalf of
MULTISTATE SERIES - 75        the State for which the Trust is named and
(UNIT INVESTMENT TRUSTS)      political subdivisions and public authorities
CALIFORNIA TRUST (INSURED)    thereof or certain United States territories or
6.26%                         possessions. The Fund is formed for the purpose of
  ESTIMATED CURRENT RETURN    providing interest income which in the opinion of
  6.50%                       counsel is, with certain exceptions, exempt from
  ESTIMATED LONG TERM RETURN  regular Federal income taxes and from certain
FLORIDA TRUST (INSURED)       state and local personal income taxes in the State
6.29%                         for which each Trust is named but may be subject
  ESTIMATED CURRENT RETURN    to other state and local taxes. In addition, the
  6.43%                       Debt Obligations included in each Trust are
  ESTIMATED LONG TERM RETURN  insured. This insurance guarantees the timely
NEW JERSEY TRUST (INSURED)    payment of principal and interest on but does not
6.37%                         guarantee the market value of the Debt Obligations
  ESTIMATED CURRENT RETURN    or the value of the Units. As a result of this
  6.46%                       insurance, Units of each Trust are rated AAA by
  ESTIMATED LONG TERM RETURN  Standard & Poor's Ratings Group, a division of
NEW YORK TRUST (INSURED)      McGraw Hill, Inc. ('Standard & Poor's'). The value
6.31%                         of the Units of each Trust will fluctuate with the
  ESTIMATED CURRENT RETURN    value of the Portfolio of underlying Debt
  6.52%                       Obligations in the Trust.
  ESTIMATED LONG TERM RETURN  The Estimated Current Return and Estimated Long
OHIO TRUST (INSURED)          Term Return figures shown give different
6.32%                         information about the return to investors.
  ESTIMATED CURRENT RETURN    Estimated Current Return on a Unit shows a net
  6.39%                       annual current cash return based on the initial
  ESTIMATED LONG TERM RETURN  Public Offering Price and the maximum applicable
PENNSYLVANIA TRUST (INSURED)  sales charge and is computed by multiplying the
6.39%                         estimated net annual interest rate per Unit by
  ESTIMATED CURRENT RETURN    $1,000 and dividing the result by the Public
  6.52%                       Offering Price per Unit (including the sales
  ESTIMATED LONG TERM RETURN  charge but not including accrued interest).
AS OF NOVEMBER 15, 1994       Estimated Long Term Return shows a net annual
                              long-term return to investors holding to maturity
                              based on the yield on the individual bonds in the
                              Portfolio, weighted to reflect the time to
                              maturity (or in certain cases to an earlier call
                              date) and market value of each bond in the
                              Portfolio, adjusted to reflect the Public Offering
                              Price (including the sales charge) and estimated
                              expenses. Unlike Estimated Current Return,
                              Estimated Long Term Return takes into account
                              maturities of the underlying Securities and
                              discounts and premiums. Distributions of income on
                              Units are generally subject to certain delays; if
                              the Estimated Long Term Return figure shown above
                              took these delays into account, it would be lower.
                              Both Estimated Current Return and Estimated Long
                              Term Return are subject to fluctuations with
                              changes in Portfolio composition (including the
                              redemption, sale or other disposition of
                              Securities in the Portfolio), changes in the
                              market value of the underlying Securities and
                              changes in fees and expenses. Estimated cash flows
                              are available upon request from the Sponsors at no
                              charge.
                              Minimum purchase: 1 Unit.
                                        ----------------------------------------
                                        THESE SECURITIES HAVE NOT BEEN APPROVED
                                        OR DISAPPROVED
                                        BY THE SECURITIES AND EXCHANGE
                                        COMMISSION OR ANY STATE
                                        SECURITIES COMMISSION NOR HAS THE
                                        COMMISSION OR ANY
                                        STATE SECURITIES COMMISSION PASSED UPON
                                        THE ACCURACY
                                        OR ADEQUACY OF THIS PROSPECTUS. ANY
SPONSORS:                               REPRESENTATION
Merrill Lynch,                          TO THE CONTRARY IS A CRIMINAL OFFENSE.
Pierce, Fenner & Smith Incorporated     INQUIRIES SHOULD BE DIRECTED TO THE
Smith Barney Inc.                       TRUSTEE AT 1-800-221-7771.
PaineWebber Incorporated                PROSPECTUS DATED NOVEMBER 16, 1994.
Prudential Securities Incorporated      READ AND RETAIN THIS PROSPECTUS FOR
Dean Witter Reynolds Inc.               FUTURE REFERENCE.
 
<PAGE>
- ------------------------------------------------------------------------------
 
DEFINED ASSET FUNDSSM is America's oldest and largest family of unit investment
trusts with over $90 billion sponsored since 1970. Each Defined Fund is a
portfolio of preselected securities. The portfolio is divided into 'units'
representing equal shares of the underlying assets. Each unit receives an equal
share of income and principal distributions.
With Defined Asset Funds you know in advance what you are investing in and that
changes in the portfolio are limited. Most defined bond funds pay interest
monthly and repay principal as bonds are called, redeemed, sold or as they
mature. Defined equity funds offer preselected stock portfolios with defined
termination dates.
Your financial advisor can help you select a Defined Fund to meet your personal
investment objectives. Our size and market presence enable us to offer a wide
variety of investments. Defined Funds are available in the following types of
securities: municipal bonds, corporate bonds, government bonds, utility stocks,
growth stocks, even international securities denominated in foreign currencies.
Termination dates are as short as one year or as long as 30 years. Special funds
are available for investors seeking extra features: insured funds, double and
triple tax-free funds, and funds with 'laddered maturities' to help protect
against rising interest rates. Defined Funds are offered by prospectus only.
- --------------------------------------------------------------------------------
CONTENTS
 
Investment Summary..........................................                 A-3
Tax-Free vs. Taxable Income.................................                 A-7
Underwriting Account........................................                A-10
Fee Table...................................................                A-11
Report of Independent Accountants...........................                A-12
Statements of Condition.....................................                A-13
Portfolios..................................................                A-15
Description of Fund Investments.............................                   1
Risk Factors................................................                   2
How To Buy..................................................                  16
How To Sell.................................................                  17
Income and Distributions....................................                  18
Exchange Option.............................................                  21
Taxes.......................................................                  22
Administration of the Fund..................................                  24
Trust Indenture.............................................                  24
Miscellaneous...............................................                  25
Appendix A..................................................                 A-1
Appendix B..................................................                 B-1
Appendix C..................................................                 C-1
Appendix D:
The California Trust........................................                 D-1
The Florida Trust...........................................                 D-9
The New Jersey Trust........................................                D-14
The New York Trust..........................................                D-18
The Ohio Trust..............................................                D-24
The Pennsylvania Trust......................................                D-28
 
                                      A-2
 
<PAGE>
INVESTMENT SUMMARY AS OF NOVEMBER 15, 1994 (THE BUSINESS DAY PRIOR TO THE
INITIAL DATE OF DEPOSIT)(a)
 
                                  CALIFORNIA       FLORIDA        NEW JERSEY
                                    TRUST           TRUST           TRUST
                                --------------  --------------  --------------
ESTIMATED CURRENT RETURN(b)
  (based on Public Offering
  Price)--......................         6.26%           6.29%           6.37%
ESTIMATED LONG TERM RETURN(b)
  (based on Public Offering
  Price)--......................         6.50%           6.43%           6.46%
PUBLIC OFFERING PRICE PER UNIT
  (including a 4.50% sales
  charge).......................$       901.00(c)$       959.05(c)$    973.53(c)
FACE AMOUNT OF DEBT
  OBLIGATIONS...................$    3,250,000  $    3,500,000  $    3,250,000
INITIAL NUMBER OF UNITS(d)......         3,250           3,500           3,250
FRACTIONAL UNDIVIDED INTEREST IN
  TRUST REPRESENTED BY EACH
  UNIT..........................       1/3,250th       1/3,500th       1/3,250th
MONTHLY INCOME DISTRIBUTIONS
  First distribution to be paid
    on the 25th day of February
    1995 to Holders of record on
    the 10th day of February
    1995........................$         3.60  $         4.49  $         4.20
  Calculation of second and
      following distributions:
  Estimated net annual interest
      rate per Unit times
      $1,000....................$        56.40  $        60.36  $        62.04
  Divided by 12.................$         4.70  $         5.03  $         5.17
SPONSORS' REPURCHASE PRICE AND
  REDEMPTION PRICE PER UNIT(e)
  (based on bid side
  evaluation)...................$       856.46(c)$       911.89(c)$    925.72(c)
REDEMPTION PRICE PER UNIT LESS
  THAN:
    Public Offering Price by....$        44.54  $        47.16  $        47.81
    Sponsors' Initial Repurchase
    Price by....................$         4.00  $         4.00  $         4.00
CALCULATION OF PUBLIC OFFERING
  PRICE
    Aggregate offer side
    evaluation of Debt
Obligations                     $ 2,796,494.00  $ 3,205,628.50  $ 3,021,585.00
                                --------------  --------------  --------------
    Divided by Number of
      Units.....................$       860.46  $       915.89  $       929.72
    Plus sales charge of 4.50%
      of Public Offering Price
      (4.712% of net amount
      invested)(f)..............         40.54           43.16           43.81
                                --------------  --------------  --------------
    Public Offering Price per
    Unit........................$       901.00  $       959.05  $       973.53
    Plus accrued interest(g)....          1.09            1.17            1.20
                                --------------  --------------  --------------
      Total.....................$       902.09  $       960.22  $       974.73
                                --------------  --------------  --------------
                                --------------  --------------  --------------
CALCULATION OF ESTIMATED NET
  ANNUAL INTEREST RATE PER UNIT
  (based on face amount of
  $1,000 per Unit)
    Annual interest rate per
    Unit........................        5.861%          6.254%          6.430%
    Less estimated annual
      expenses per Unit
      expressed as a
      percentage................         .221%           .218%           .226%
                                --------------  --------------  --------------
    Estimated net annual
        interest rate per
        Unit....................        5.640%          6.036%          6.204%
                                --------------  --------------  --------------
                                --------------  --------------  --------------
DAILY RATE AT WHICH ESTIMATED
  NET INTEREST ACCRUES PER
  UNIT..........................        .0156%          .0167%          .0172%
SPONSORS' PROFIT (LOSS) ON
  DEPOSIT.......................$    23,338.50  $    29,607.25  $    15,372.50
TRUSTEE'S ANNUAL FEE AND
EXPENSES........................$         2.21(h)$         2.18(i)$     2.26(h)
    Per Unit commencing November
      1994 for the California
      Trust, April 1995 for the
      Florida Trust and November
      1994 for the New Jersey
      Trust.

- ------------------
   (a) The Indentures were signed and the initial deposits were made on the date
of this Prospectus.
   (b) Estimated Current Return represents annual interest income after
estimated annual expenses divided by the maximum public offering price including
maximum applicable sales charge. Estimated Long Term Return is the net annual
percentage return based on the yield on each underlying Debt Obligation weighted
to reflect market value and time to maturity or earlier call date. Estimated
Long Term Return is adjusted for estimated expenses and the maximum offering
price but not for delays in a Trust's distribution of income. Estimated Current
Return shows current annual cash return to investors while Estimated Long Term
Return shows the return on Units held to maturity, reflecting maturities,
discounts and premiums on underlying Debt Obligations. Each figure will vary
with purchase price including sales charge, changes in the net interest income
and the redemptions, sale, or other disposition of Debt Obligations in the
Portfolio.
   (c) Plus accrued interest.
   (d) The Sponsors may create additional Units during the offering period of
the Fund.
   (e) During the initial offering period, the Sponsors intend to offer to
purchase Units at prices based on the offer side value of the underlying
Securities. Thereafter, the Sponsors intend to maintain such a market based on
the bid side value of the underlying Securities which will be equal to the
Redemption Price. (See How To Sell.)
    (f) The sales charge during the initial offering period and in the secondary
market will be reduced on a graduated scale in the case of purchases of 250 or
more Units; the secondary market sales charge will also vary depending on the
maturities of the underlying Securities (see Appendix B). Any resulting
reduction in the Public Offering Price will increase the effective current and
long term returns on a Unit.
   (g) Figure shown represents interest accrued on underlying Securities from
the Initial Date of Deposit to expected date of settlement (normally five
business days after purchase) for Units purchased on Initial Date of Deposit
(see How To Buy--Accrued Interest).
   (h) In the event that any Debt Obligations have a delayed delivery, the
Trustee's Annual Fee and Expenses will be reduced over a period in the amount of
interest that would have accrued on the Debt Obligations between the date of
settlement for the Units and the actual date of delivery of the Debt
Obligations. The Trustee will be reimbursed for this reduction (see Income and
Distributions--Income).
    (i) During the first year this amount will be reduced by $0.75 for the
Florida Trust. Estimated annual interest income per Unit (estimated annual
interest rate per Unit times $1,000) during the first year will be $61.79 and
estimated expenses per Unit will be $1.43 for the Florida Trust. Estimated net
annual interest income per Unit for the Trust will remain the same (see Income
and Distributions--Income).
 
                                      A-3
 
<PAGE>
INVESTMENT SUMMARY AS OF NOVEMBER 15, 1994 (CONTINUED)

                                    CALIFORNIA       FLORIDA      NEW JERSEY
                                       TRUST          TRUST          TRUST
                                   -------------  -------------  -------------
NUMBER OF ISSUES IN PORTFOLIO--          7              8              7
NUMBER OF ISSUES BY
  SOURCE OF REVENUE(a):
 State/Local Government Supported--     --             --              1
   Industrial Development Revenue--     --              1              2
  Municipal Water/Sewer Utilities--      1              1              1
                     Lease Rental--      2              2              1
  Hospitals/Healthcare Facilities--      2              2              1
                          Housing--      1             --              1
                Special Tax Issue--      1              2             --
NUMBER OF ISSUES RATED BY
STANDARD &
POOR'S/RATING:  --            AAA--    7(b)           8(b)           7(b)
RANGE OF FIXED FINAL MATURITY DATES
  OF DEBT
  OBLIGATIONS......................  2016-2024      2014-2025      2016-2031
TYPE OF ISSUE EXPRESSED AS A
  PERCENTAGE OF THE AGGREGATE FACE
  AMOUNT OF PORTFOLIO
  Issues Payable from Income of
     Specific Project or
     Authority.....................    100%           100%           100%
  Debt Obligations Issued at an
     'Original Issue
     Discount'(c)..................     54%           100%            54%
  Obligations Insured by certain
     Insurance Companies:(d)
     AMBAC.........................     31%            28%            31%
     CGIC..........................     --             --             8%
     Financial Guaranty............     15%            14%            --
     MBIA..........................     54%            58%            61%
CONCENTRATIONS(a) EXPRESSED AS A
  PERCENTAGE OF THE AGGREGATE FACE
  AMOUNT OF PORTFOLIO(e)
     Industrial Development
     Revenue.......................     --             --             31%
     Hospitals/Health Care
     Facilities....................     --             29%            --
     Lease Rental..................     31%            29%            --
PREMIUM AND DISCOUNT ISSUES IN
  PORTFOLIO
     Face amount of Debt
       Obligations
       with offer side
       evaluation:             over
       par--                            --             --             15%
at a discount from par--               100%           100%            85%
PERCENTAGE OF PORTFOLIO ACQUIRED
  FROM
  UNDERWRITING SYNDICATE IN WHICH
  CERTAIN SPONSORS PARTICIPATED AS
  SOLE UNDERWRITER, MANAGING
  UNDERWRITER OR MEMBER............     --             --             --
PERCENTAGE OF PORTFOLIOS SUBJECT TO
  OPTIONAL
  REDEMPTIONS BUT NOT PRIOR TO
  2003, 2002 AND 2004 (AT PRICES
  INITIALLY AT LEAST 102%, 101% AND
  101% OF PAR), RESPECTIVELY(f)....    100%           100%           100%
 
- ------------------
   (a) See Risk Factors for a brief summary of certain investment risks relating
to certain of these issues.
   (b) All of the Debt Obligations in this Trust are insured as to scheduled
payments of principal and interest as a result of which the Units of the Trust
are rated AAA by Standard & Poor's (See Appendix A).
   (c) See Taxes.
   (d) See Risk Factors--Obligations Backed by Insurance.
   (e) A Trust is considered to be 'concentrated' in these categories when they
constitute 25% or more of the aggregate face amount of the Portfolio.
    (f) See Footnote (2) to Portfolios.
 
                                      A-4
 
<PAGE>
INVESTMENT SUMMARY AS OF NOVEMBER 15, 1994 (THE BUSINESS DAY PRIOR TO THE
INITIAL DATE OF DEPOSIT)(a)
 

                                   NEW YORK          OHIO        PENNSYLVANIA
                                    TRUST           TRUST           TRUST
                                --------------  --------------  --------------
ESTIMATED CURRENT RETURN(b)
  (based on Public Offering
  Price)--......................         6.31%           6.32%           6.39%
ESTIMATED LONG TERM RETURN(b)
  (based on Public Offering
  Price)--......................         6.52%           6.39%           6.52%
PUBLIC OFFERING PRICE PER UNIT
  (including a 4.50% sales
  charge).......................$       916.73(c)$     1,005.27(c)$   944.44(c)
FACE AMOUNT OF DEBT
  OBLIGATIONS...................$    5,000,000  $    3,250,000  $    3,250,000
INITIAL NUMBER OF UNITS(d)......         5,000           3,250           3,250
FRACTIONAL UNDIVIDED INTEREST IN
  TRUST REPRESENTED BY EACH
  UNIT..........................       1/5,000th       1/3,250th       1/3,250th
MONTHLY INCOME DISTRIBUTIONS
  First distribution to be paid
    on the 25th day of February
    1995 to Holders of record on
    the 10th day of February
    1995........................$         3.62  $         3.60  $         3.85
  Calculation of second and
      following distributions:
  Estimated net annual interest
      rate per Unit times
      $1,000....................$        57.84  $        63.48  $        60.36
  Divided by 12.................$         4.82  $         5.29  $         5.03
SPONSORS' REPURCHASE PRICE AND
  REDEMPTION PRICE PER UNIT(e)
  (based on bid side
  evaluation)...................$       871.48(c)$       956.03(c)$    897.94(c)
REDEMPTION PRICE PER UNIT LESS
  THAN:
    Public Offering Price by....$        45.25  $        49.24  $        46.50
    Sponsors' Initial Repurchase
    Price by....................$         4.00  $         4.00  $         4.00
CALCULATION OF PUBLIC OFFERING
  PRICE
    Aggregate offer side
    evaluation of Debt
Obligations                     $ 4,377,398.90  $ 3,120,112.50  $ 2,931,295.00
                                --------------  --------------  --------------
    Divided by Number of
      Units.....................$       875.48  $       960.03  $       901.94
    Plus sales charge of 4.50%
      of Public Offering Price
      (4.712% of net amount
      invested)(f)..............         41.25           45.24           42.50
                                --------------  --------------  --------------
    Public Offering Price per
    Unit........................$       916.73  $     1,005.27  $       944.44
    Plus accrued interest(g)....          1.12            1.23            1.17
                                --------------  --------------  --------------
      Total.....................$       917.85  $     1,006.50  $       945.61
                                --------------  --------------  --------------
                                --------------  --------------  --------------
CALCULATION OF ESTIMATED NET
  ANNUAL INTEREST RATE PER UNIT
  (based on face amount of
  $1,000 per Unit)
    Annual interest rate per
    Unit........................        5.972%          6.576%          6.265%
    Less estimated annual
      expenses per Unit
      expressed as a
      percentage................         .188%           .228%           .229%
                                --------------  --------------  --------------
    Estimated net annual
        interest rate per
        Unit....................        5.784%          6.348%          6.036%
                                --------------  --------------  --------------
                                --------------  --------------  --------------
DAILY RATE AT WHICH ESTIMATED
  NET INTEREST ACCRUES PER
  UNIT..........................        .0160%          .0176%          .0167%
SPONSORS' PROFIT (LOSS) ON
  DEPOSIT.......................$    26,477.70  $    24,057.50  $    32,750.00
TRUSTEE'S ANNUAL FEE AND
EXPENSES........................$         1.88(h)$         2.28(h)$     2.29(h)
    Per Unit commencing November
      1994.

 
- ------------------
   (a) The Indentures were signed and the initial deposits were made on the date
of this Prospectus.
   (b) Estimated Current Return represents annual interest income after
estimated annual expenses divided by the maximum public offering price including
maximum applicable sales charge. Estimated Long Term Return is the net annual
percentage return based on the yield on each underlying Debt Obligation weighted
to reflect market value and time to maturity or earlier call date. Estimated
Long Term Return is adjusted for estimated expenses and the maximum offering
price but not for delays in a Trust's distribution of income. Estimated Current
Return shows current annual cash return to investors while Estimated Long Term
Return shows the return on Units held to maturity, reflecting maturities,
discounts and premiums on underlying Debt Obligations. Each figure will vary
with purchase price including sales charge, changes in the net interest income
and the redemptions, sale, or other disposition of Debt Obligations in the
Portfolio.
   (c) Plus accrued interest.
   (d) The Sponsors may create additional Units during the offering period of
the Fund.
   (e) During the initial offering period, the Sponsors intend to offer to
purchase Units at prices based on the offer side value of the underlying
Securities. Thereafter, the Sponsors intend to maintain such a market based on
the bid side value of the underlying Securities which will be equal to the
Redemption Price. (See How To Sell.)
    (f) The sales charge during the initial offering period and in the secondary
market will be reduced on a graduated scale in the case of purchases of 250 or
more Units; the secondary market sales charge will also vary depending on the
maturities of the underlying Securities (see Appendix B). Any resulting
reduction in the Public Offering Price will increase the effective current and
long term returns on a Unit.
   (g) Figure shown represents interest accrued on underlying Securities from
the Initial Date of Deposit to expected date of settlement (normally five
business days after purchase) for Units purchased on Initial Date of Deposit
(see How To Buy--Accrued Interest).
   (h) In the event that any Debt Obligations have a delayed delivery, the
Trustee's Annual Fee and Expenses will be reduced over a period in the amount of
interest that would have accrued on the Debt Obligations between the date of
settlement for the Units and the actual date of delivery of the Debt
Obligations. The Trustee will be reimbursed for this reduction (see Income and
Distributions--Income).
 
                                      A-5
 
<PAGE>
INVESTMENT SUMMARY AS OF NOVEMBER 15, 1994 (CONTINUED)
 
                                     NEW YORK         OHIO       PENNSYLVANIA
                                       TRUST          TRUST          TRUST
                                   -------------  -------------  -------------
NUMBER OF ISSUES IN PORTFOLIO--          9              7              7
NUMBER OF ISSUES BY
  SOURCE OF REVENUE(a):
          Airports/Ports/Highways--      1             --             --
   Industrial Development Revenue--      1             --              1
  Municipal Water/Sewer Utilities--      2              2              2
     State/Local Municipal Electric
                        Utilities--     --              1              1
            Universities/Colleges--     --              1              1
                     Lease Rental--      2             --             --
               General Obligation--      1              3             --
  Hospitals/Healthcare Facilities--     --             --              2
                          Housing--      1             --             --
                Transit Authority--      1             --             --
NUMBER OF ISSUES RATED BY
STANDARD &
POOR'S/RATING:  --            AAA--    9(b)           7(b)           7(b)
RANGE OF FIXED FINAL MATURITY DATES
  OF DEBT
  OBLIGATIONS......................  2012-2034      2015-2024      2018-2026
TYPE OF ISSUE EXPRESSED AS A
  PERCENTAGE OF THE AGGREGATE FACE
  AMOUNT OF PORTFOLIO
  General Obligation Issues........     10%            46%            --
  Issues Payable from Income of
     Specific Project or
     Authority.....................     90%            54%           100%
  Debt Obligations Issued at an
     'Original Issue
     Discount'(c)..................     51%            69%            85%
  Obligations Insured by certain
     Insurance Companies:(d)
     AMBAC.........................     15%            15%            15%
     CAPMAC........................     10%            --             15%
     Financial Guaranty............     31%            39%            15%
     MBIA..........................     44%            46%            55%
CONCENTRATIONS(a) EXPRESSED AS A
  PERCENTAGE OF THE AGGREGATE FACE
  AMOUNT OF PORTFOLIO(e)
     General Obligation............     --             46%            --
     Hospitals/Health Care
     Facilities....................     --             --             31%
     Municipal Water/Sewer
     Utilities.....................     --             31%            31%
PREMIUM AND DISCOUNT ISSUES IN
  PORTFOLIO
     Face amount of Debt
       Obligations
       with offer side
       evaluation:             over
       par--                            --             15%            --
at a discount from par--               100%            85%           100%
PERCENTAGE OF PORTFOLIO ACQUIRED
  FROM
  UNDERWRITING SYNDICATE IN WHICH
  CERTAIN SPONSORS PARTICIPATED AS
  SOLE UNDERWRITER, MANAGING
  UNDERWRITER OR MEMBER............     --             --             --
PERCENTAGE OF PORTFOLIOS SUBJECT TO
  OPTIONAL
  REDEMPTIONS BUT NOT PRIOR TO 2002
  (AT PRICES INITIALLY AT LEAST
  100% OF PAR)(f)..................     92%           100%           100%

 
- ------------------
   (a) See Risk Factors for a brief summary of certain investment risks relating
to certain of these issues.
   (b) All of the Debt Obligations in this Trust are insured as to scheduled
payments of principal and interest as a result of which the Units of the Trust
are rated AAA by Standard & Poor's (See Appendix A).
   (c) See Taxes.
   (d) See Risk Factors--Obligations Backed by Insurance.
   (e) A Trust is considered to be 'concentrated' in these categories when they
constitute 25% or more of the aggregate face amount of the Portfolio.
    (f) See Footnote (2) to Portfolios.
 
                                      A-6
 
<PAGE>
                                   Def ined
                                   Asset Funds
 

INVESTOR'S GUIDE
MUNICIPAL INVESTMENT          MUNICIPAL INVESTMENT TRUST FUND
TRUST FUND                    Our defined portfolios of municipal bonds offer
- ------------------------------investors a simple and convenient way to earn
Multistate Series             monthly income tax-free. And by purchasing
                              municipal Defined Funds, investors not only avoid
                              the problem of selecting municipal bonds by
                              themselves, but also gain the advantage of
                              diversification by investing in bonds of several
                              different issuers. Spreading your investment among
                              different securities and issuers reduces your
                              risk, but does not eliminate it.
                              MONTHLY TAX-FREE INTEREST INCOME
                              Each Trust pays monthly income, even though the
                              underlying bonds pay interest semi-annually. This
                              income is generally 100% exempt under existing
                              laws from regular federal income tax and from
                              certain state and local personal income taxes in
                              the State for which the Trust is named. Any gain
                              on disposition of the underlying bonds will be
                              subject to tax.
                              REINVESTMENT OPTION
                              You can elect to automatically reinvest your
                              distributions into a separate portfolio of
                              federally tax-exempt bonds. Reinvesting helps to
                              compound your income tax-free. Income from the
                              reinvestment program may be subject to state and
                              local taxes.
                              A-RATED INVESTMENT QUALITY
                              Each bond in the Fund has been selected by
                              investment professionals among available bonds
                              rated A or better by at least one national rating
                              organization or has, in the opinion of Defined
                              Funds research analysts, comparable credit
                              characteristics. Bonds with these 'investment
                              grade' ratings are judged to have a strong
                              capacity to pay interest and repay principal. In
                              addition, units of any insured Fund are rated AAA
                              by Standard & Poor's.
                              PROFESSIONAL SELECTION AND SUPERVISION
                              Each Trust contains a variety of securities
                              selected by experienced buyers and market
                              analysts. The Trusts are not actively managed.
                              However, each portfolio is regularly reviewed and
                              a security can be sold if, in the opinion of
                              Defined Funds analysts and buyers, retaining it
                              could be detrimental to investors' interests.
                              A LIQUID INVESTMENT
                              Although not legally required to do so, the
                              Sponsors have maintained a secondary market for
                              Defined Asset Funds for over 20 years. You can
                              cash in your units at any time. Your price is
                              based on the market value of the bonds in the
                              Fund's portfolio at that time as determined by an
                              independent evaluator. Or, you can exchange your
                              investment for another Defined Fund at a reduced
                              sales charge. There is never a fee for cashing in
                              your investment.
                              PRINCIPAL DISTRIBUTIONS
                              Principal from sales, redemptions and maturities
                              of bonds in the Fund is distributed to investors
                              periodically.
                              RISK FACTORS
                              Unit price fluctuates and is affected by interest
                              rates as well as the financial condition of the
                              issuers and insurers of the bonds.
 
This page may not be distributed unless included in a current prospectus.
Investors should refer to the prospectus for further information.

<PAGE>
                          TAX-FREE VS. TAXABLE INCOME
                  A COMPARISON OF TAXABLE AND TAX-FREE YIELDS
 
                            FOR CALIFORNIA RESIDENTS
 
<TABLE><CAPTION>
                                     COMBINED
TAXABLE INCOME 1994*                 EFFECTIVE
                                      TAX RATE
                                    A TAX-FREE YIELD OF
                                             %
 SINGLE RETURN      JOINT RETURN                    3%         3.5%         4%         4.5%         5%        5.5%        6%
                                                                                            IS EQUIVALENT TO A TAXABLE YIELD OF
- --------------------------------------------------------------------------------------------------------------------------------
<S>               <C>                    <C>          <C>         <C>         <C>         <C>         <C>        <C>        <C> 
                  $0-36,900              20.10        3.75        4.38        5.01        5.63        6.26       6.88       7.51
- --------------------------------------------------------------------------------------------------------------------------------
$0-22,100                                20.10        3.75        4.38        5.01        5.63        6.26       6.88       7.51
- --------------------------------------------------------------------------------------------------------------------------------
                  $36,900-89,150         34.70        4.59        5.36        6.13        6.89        7.66       8.42       9.19
- --------------------------------------------------------------------------------------------------------------------------------
$22,100-53,500                           34.70        4.59        5.36        6.13        6.89        7.66       8.42       9.19
- --------------------------------------------------------------------------------------------------------------------------------
                  $89,150-140,000        38.59        4.89        5.70        6.51        7.33        8.14       8.96       9.77
- --------------------------------------------------------------------------------------------------------------------------------
$53,500-115,000                          38.59        4.89        5.70        6.51        7.33        8.14       8.96       9.77
- --------------------------------------------------------------------------------------------------------------------------------
                  $140,000-250,000       43.04        5.27        6.14        7.02        7.90        8.78       9.66      10.53
- --------------------------------------------------------------------------------------------------------------------------------
$115,000-250,000                         43.04        5.27        6.14        7.02        7.90        8.78       9.66      10.53
- --------------------------------------------------------------------------------------------------------------------------------
                  OVER $250,000          46.24        5.58        6.51        7.44        8.37        9.30      10.23      11.16
- --------------------------------------------------------------------------------------------------------------------------------
OVER $250,000                            46.24        5.58        6.51        7.44        8.37        9.30      10.23      11.16
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>

TAXABLE INCOME 1994*
 
 SINGLE RETURN      6.5%        7%
 
- ----------------
                       8.14       8.76
- ----------------
$0-22,100              8.14       8.76
- ----------------
                       9.95      10.72
- ----------------
$22,100-53,500         9.95      10.72
- ----------------
                      10.58      11.40
- ----------------
$53,500-115,000       10.58      11.40
- ----------------
                      11.41      12.29
- ----------------
$115,000-250,000      11.41      12.29
- ----------------
                      12.09      13.02
- ----------------
OVER $250,000         12.09      13.02
- ----------------
 
                             FOR FLORIDA RESIDENTS
<TABLE><CAPTION>

TAXABLE INCOME 1994*                 EFFECTIVE
                                      TAX RATE
                                    TAX-FREE YIELD OF
                                             %
 SINGLE RETURN      JOINT RETURN                    3%         3.5%         4%        4.5%        5%        5.5%        6%
                                                                                          IS EQUIVALENT TO A TAXABLE YIELD OF
- ------------------------------------------------------------------------------------------------------------------------------
<S>               <C>                    <C>          <C>         <C>         <C>        <C>        <C>        <C>        <C> 
                  $0-36,900              15.00        3.53        4.12        4.71       5.29       5.88       6.47       7.06
- ------------------------------------------------------------------------------------------------------------------------------
$0-22,100                                15.00        3.53        4.12        4.71       5.29       5.88       6.47       7.06
- ------------------------------------------------------------------------------------------------------------------------------
                  $36,900-89,150         28.00        4.17        4.86        5.56       6.25       6.94       7.64       8.33
- ------------------------------------------------------------------------------------------------------------------------------
$22,100-53,500                           28.00        4.17        4.86        5.56       6.25       6.94       7.64       8.33
- ------------------------------------------------------------------------------------------------------------------------------
                  $89,150-140,000        31.00        4.35        5.07        5.80       6.52       7.25       7.97       8.70
- ------------------------------------------------------------------------------------------------------------------------------
$53,500-115,000                          31.00        4.35        5.07        5.80       6.52       7.25       7.97       8.70
- ------------------------------------------------------------------------------------------------------------------------------
                  $140,000-250,000       36.00        4.69        5.47        6.25       7.03       7.81       8.59       9.38
- ------------------------------------------------------------------------------------------------------------------------------
$115,000-250,000                         36.00        4.69        5.47        6.25       7.03       7.81       8.59       9.38
- ------------------------------------------------------------------------------------------------------------------------------
                  OVER $250,000          39.60        4.97        5.79        6.62       7.45       8.28       9.11       9.93
- ------------------------------------------------------------------------------------------------------------------------------
OVER $250,000                            39.60        4.97        5.79        6.62       7.45       8.28       9.11       9.93
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>

TAXABLE INCOME 1994* 

 SINGLE RETURN      6.5%        7%
 
- ----------------
                       7.65       8.24
- ----------------
$0-22,100              7.65       8.24
- ----------------
                       9.03       9.72
- ----------------
$22,100-53,500         9.03       9.72
- ----------------
                       9.42      10.14
- ----------------
$53,500-115,000        9.42      10.14
- ----------------
                      10.16      10.94
- ----------------
$115,000-250,000      10.16      10.94
- ----------------
                      10.76      11.59
- ----------------
OVER $250,000         10.76      11.59
- ----------------
 
                            FOR NEW JERSEY RESIDENTS
 
<TABLE><CAPTION>
                                     COMBINED
TAXABLE INCOME 1994*                 EFFECTIVE
                                      TAX RATE
                                    TAX-FREE YIELD OF
                                             %
 SINGLE RETURN      JOINT RETURN                    3%         3.5%         4%        4.5%        5%        5.5%        6%
                                                                                          IS EQUIVALENT TO A TAXABLE YIELD OF
- ------------------------------------------------------------------------------------------------------------------------------
<S>               <C>                    <C>          <C>         <C>         <C>        <C>        <C>        <C>        <C> 
                  $0-36,900              17.02        3.62        4.22        4.82       5.42       6.03       6.63       7.23
- ------------------------------------------------------------------------------------------------------------------------------
$0-22,100                                17.02        3.62        4.22        4.82       5.42       6.03       6.63       7.23
- ------------------------------------------------------------------------------------------------------------------------------
                  $36,900-89,150         32.45        4.44        5.18        5.92       6.66       7.40       8.14       8.88
- ------------------------------------------------------------------------------------------------------------------------------
$22,100-53,500                           32.45        4.44        5.18        5.92       6.66       7.40       8.14       8.88
- ------------------------------------------------------------------------------------------------------------------------------
                  $89,150-140,000        35.59        4.66        5.43        6.21       6.99       7.76       8.54       9.32
- ------------------------------------------------------------------------------------------------------------------------------
$53,500-115,000                          35.59        4.66        5.43        6.21       6.99       7.76       8.54       9.32
- ------------------------------------------------------------------------------------------------------------------------------
                  $140,000-250,000       40.26        5.02        5.86        6.70       7.53       8.37       9.21      10.04
- ------------------------------------------------------------------------------------------------------------------------------
$115,000-250,000                         40.26        5.02        5.86        6.70       7.53       8.37       9.21      10.04
- ------------------------------------------------------------------------------------------------------------------------------
                  OVER $250,000          43.62        5.32        6.21        7.09       7.98       8.87       9.75      10.64
- ------------------------------------------------------------------------------------------------------------------------------
OVER $250,000                            43.62        5.32        6.21        7.09       7.98       8.87       9.75      10.64
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
 
TAXABLE INCOME 1994*

 SINGLE RETURN      6.5%        7%
 
- ----------------
                       7.83       8.44
- ----------------
$0-22,100              7.83       8.44
- ----------------
                       9.62      10.36
- ----------------
$22,100-53,500         9.62      10.36
- ----------------
                      10.09      10.87
- ----------------
$53,500-115,000       10.09      10.87
- ----------------
                      10.88      11.72
- ----------------
$115,000-250,000      10.88      11.72
- ----------------
                      11.53      12.42
- ----------------
OVER $250,000         11.53      12.42
- ----------------
 
To compare the yield of a taxable security with the yield of a tax-free security
find your taxable income and read across. These tables incorporate current
Federal and applicable State income tax rates and assume that all income would
otherwise be taxable at the investor's highest tax rates. Yield figures are for
example only.
 
Legislation has recently been enacted that would increase rates for certain
individuals, thereby increasing the tax-free equivalent yield.
 
*Based upon net amount subject to Federal income tax after deductions and
exemptions. These tables do not reflect other possible tax factors such as the
alternative minimum tax, personal exemptions, the phase out of exemptions,
itemized deductions and the possible partial disallowance of deductions.
Consequently, holders are urged to consult their own tax advisers in this
regard.
 
                                      A-7
<PAGE>
                          TAX-FREE VS. TAXABLE INCOME
                  A COMPARISON OF TAXABLE AND TAX-FREE YIELDS
 
                          FOR NEW YORK CITY RESIDENTS
 
<TABLE><CAPTION>
                                     COMBINED
TAXABLE INCOME 1994*                 EFFECTIVE
                                      TAX RATE
                                    TAX-FREE YIELD OF
                                             %
 SINGLE RETURN      JOINT RETURN                    3%         3.5%         4%        4.5%        5%        5.5%        6%
                                                                                          IS EQUIVALENT TO A TAXABLE YIELD OF
- ------------------------------------------------------------------------------------------------------------------------------
<S>               <C>                    <C>          <C>         <C>         <C>        <C>        <C>        <C>        <C> 
                  $0-36,900              25.33        4.02        4.69        5.36       6.03       6.70       7.37       8.04
- ------------------------------------------------------------------------------------------------------------------------------
$0-22,100                                25.33        4.02        4.69        5.36       6.03       6.70       7.37       8.04
- ------------------------------------------------------------------------------------------------------------------------------
                  $36,900-89,150         36.84        4.75        5.54        6.33       7.12       7.92       8.71       9.50
- ------------------------------------------------------------------------------------------------------------------------------
$22,100-53,500                           36.84        4.75        5.54        6.33       7.12       7.92       8.71       9.50
- ------------------------------------------------------------------------------------------------------------------------------
                  $89,150-140,000        39.51        4.96        5.79        6.61       7.44       8.27       9.09       9.92
- ------------------------------------------------------------------------------------------------------------------------------
$53,500-115,000                          39.51        4.96        5.79        6.61       7.44       8.27       9.09       9.92
- ------------------------------------------------------------------------------------------------------------------------------
                  $140,000-250,000       43.89        5.35        6.24        7.13       8.02       8.91       9.80      10.69
- ------------------------------------------------------------------------------------------------------------------------------
$115,000-250,000                         43.89        5.35        6.24        7.13       8.02       8.91       9.80      10.69
- ------------------------------------------------------------------------------------------------------------------------------
                  OVER $250,000          47.05        5.67        6.61        7.55       8.50       9.44      10.39      11.33
- ------------------------------------------------------------------------------------------------------------------------------
OVER $250,000                            47.05        5.67        6.61        7.55       8.50       9.44      10.39      11.33
- ------------------------------------------------------------------------------------------------------------------------------
 
</TABLE>

TAXABLE INCOME 1994*

 SINGLE RETURN      6.5%        7%
 
- ----------------
                       8.71       9.37
- ----------------
$0-22,100              8.71       9.37
- ----------------
                      10.29      11.08
- ----------------
$22,100-53,500        10.29      11.08
- ----------------
                      10.75      11.57
- ----------------
$53,500-115,000       10.75      11.57
- ----------------
                      11.59      12.48
- ----------------
$115,000-250,000      11.59      12.48
- ----------------
                      12.28      13.22
- ----------------
OVER $250,000         12.28      13.22
- ----------------
 
                          FOR NEW YORK STATE RESIDENTS
 
<TABLE> <CAPTION>
                                     COMBINED
TAXABLE INCOME 1994*                 EFFECTIVE
                                      TAX RATE
                                    TAX-FREE YIELD OF
                                             %
 SINGLE RETURN      JOINT RETURN                    3%         3.5%         4%        4.5%        5%        5.5%        6%
                                                                                          IS EQUIVALENT TO A TAXABLE YIELD OF
- ------------------------------------------------------------------------------------------------------------------------------
<S>               <C>                    <C>          <C>         <C>         <C>        <C>        <C>        <C>        <C> 
                  $0-36,900              21.69        3.83        4.47        5.11       5.75       6.39       7.02       7.66
- ------------------------------------------------------------------------------------------------------------------------------
$0-22,100                                21.69        3.83        4.47        5.11       5.75       6.39       7.02       7.66
- ------------------------------------------------------------------------------------------------------------------------------
                  $36,900-89,150         33.67        4.52        5.28        6.03       6.78       7.54       8.29       9.05
- ------------------------------------------------------------------------------------------------------------------------------
$22,100-53,500                           33.67        4.52        5.28        6.03       6.78       7.54       8.29       9.05
- ------------------------------------------------------------------------------------------------------------------------------
                  $89,150-140,000        36.43        4.72        5.51        6.29       7.08       7.87       8.65       9.44
- ------------------------------------------------------------------------------------------------------------------------------
$53,500-115,000                          36.43        4.72        5.51        6.29       7.08       7.87       8.65       9.44
- ------------------------------------------------------------------------------------------------------------------------------
                  $140,000-250,000       41.04        5.09        5.94        6.78       7.63       8.48       9.33      10.18
- ------------------------------------------------------------------------------------------------------------------------------
$115,000-250,000                         41.04        5.09        5.94        6.78       7.63       8.48       9.33      10.18
- ------------------------------------------------------------------------------------------------------------------------------
                  OVER $250,000          44.36        5.39        6.29        7.19       8.09       8.99       9.88      10.78
- ------------------------------------------------------------------------------------------------------------------------------
OVER $250,000                            44.36        5.39        6.29        7.19       8.09       8.99       9.88      10.78
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
 
TAXABLE INCOME 1994*

 SINGLE RETURN      6.5%        7%
 
- ----------------
                       8.30       8.94
- ----------------
$0-22,100              8.30       8.94
- ----------------
                       9.80      10.55
- ----------------
$22,100-53,500         9.80      10.55
- ----------------
                      10.23      11.01
- ----------------
$53,500-115,000       10.23      11.01
- ----------------
                      11.02      11.87
- ----------------
$115,000-250,000      11.02      11.87
- ----------------
                      11.68      12.58
- ----------------
OVER $250,000         11.68      12.58
- ----------------

                               FOR OHIO RESIDENTS
 
<TABLE><CAPTION>
                                     COMBINED
TAXABLE INCOME 1994*                 EFFECTIVE
                                      TAX RATE
                                    TAX-FREE YIELD OF
                                             %
 SINGLE RETURN      JOINT RETURN                    3%         3.5%         4%        4.5%        5%        5.5%        6%
                                                                                          IS EQUIVALENT TO A TAXABLE YIELD OF
- ------------------------------------------------------------------------------------------------------------------------------
<S>               <C>                    <C>          <C>         <C>         <C>        <C>        <C>        <C>        <C> 
                  $0-36,900              18.79        3.69        4.31        4.93       5.54       6.16       6.77       7.39
- ------------------------------------------------------------------------------------------------------------------------------
$0-22,100                                18.79        3.69        4.31        4.93       5.54       6.16       6.77       7.39
- ------------------------------------------------------------------------------------------------------------------------------
                  $36,900-89,150         32.28        4.43        5.17        5.91       6.64       7.38       8.12       8.86
- ------------------------------------------------------------------------------------------------------------------------------
$22,100-53,500                           31.74        4.40        5.13        5.86       6.59       7.33       8.06       8.79
- ------------------------------------------------------------------------------------------------------------------------------
                  $89,150-140,000        35.76        4.67        5.45        6.23       7.01       7.78       8.56       9.34
- ------------------------------------------------------------------------------------------------------------------------------
$53,500-115,000                          35.76        4.67        5.45        6.23       7.01       7.78       8.56       9.34
- ------------------------------------------------------------------------------------------------------------------------------
                  $140,000-250,000       40.80        5.07        5.91        6.76       7.60       8.45       9.29      10.14
- ------------------------------------------------------------------------------------------------------------------------------
$115,000-250,000                         40.80        5.07        5.91        6.76       7.60       8.45       9.29      10.14
- ------------------------------------------------------------------------------------------------------------------------------
                  OVER $250,000          44.13        5.37        6.26        7.16       8.05       8.95       9.84      10.74
- ------------------------------------------------------------------------------------------------------------------------------
OVER $250,000                            44.13        5.37        6.26        7.16       8.05       8.95       9.84      10.74
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
 
TAXABLE INCOME 1994*

 SINGLE RETURN      6.5%        7%
 
- ----------------
                       8.00       8.62
- ----------------
$0-22,100              8.00       8.62
- ----------------
                       9.60      10.34
- ----------------
$22,100-53,500         9.52      10.26
- ----------------
                      10.12      10.90
- ----------------
$53,500-115,000       10.12      10.90
- ----------------
                      10.98      11.82
- ----------------
$115,000-250,000      10.98      11.82
- ----------------
                      11.63      12.53
- ----------------
OVER $250,000         11.63      12.53
- ----------------
 
                           FOR PENNSYLVANIA RESIDENTS
 
<TABLE><CAPTION>
                                     COMBINED
TAXABLE INCOME 1994*                 EFFECTIVE
                                      TAX RATE
                                    TAX-FREE YIELD OF
                                             %
 SINGLE RETURN      JOINT RETURN                    3%         3.5%         4%        4.5%        5%        5.5%        6%
                                                                                          IS EQUIVALENT TO A TAXABLE YIELD OF
- ------------------------------------------------------------------------------------------------------------------------------
<S>               <C>                    <C>          <C>         <C>         <C>        <C>        <C>        <C>        <C> 
                  $0-36,900              17.38        3.63        4.24        4.84       5.45       6.05       6.66       7.26
- ------------------------------------------------------------------------------------------------------------------------------
$0-22,100                                17.38        3.63        4.24        4.84       5.45       6.05       6.66       7.26
- ------------------------------------------------------------------------------------------------------------------------------
                  $36,900-89,150         30.02        4.29        5.00        5.72       6.43       7.14       7.86       8.57
- ------------------------------------------------------------------------------------------------------------------------------
$22,100-53,500                           30.02        4.29        5.00        5.72       6.43       7.14       7.86       8.57
- ------------------------------------------------------------------------------------------------------------------------------
                  $89,150-140,000        32.93        4.47        5.22        5.96       6.71       7.46       8.20       8.95
- ------------------------------------------------------------------------------------------------------------------------------
$53,500-115,000                          32.93        4.47        5.22        5.96       6.71       7.46       8.20       8.95
- ------------------------------------------------------------------------------------------------------------------------------
                  $140,000-250,000       37.79        4.82        5.63        6.43       7.23       8.04       8.84       9.65
- ------------------------------------------------------------------------------------------------------------------------------
$115,000-250,000                         37.79        4.82        5.63        6.43       7.23       8.04       8.84       9.65
- ------------------------------------------------------------------------------------------------------------------------------
                  OVER $250,000          41.29        5.11        5.96        6.81       7.66       8.52       9.37      10.22
- ------------------------------------------------------------------------------------------------------------------------------
OVER $250,000                            41.29        5.11        5.96        6.81       7.66       8.52       9.37      10.22
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>

TAXABLE INCOME 1994*

 SINGLE RETURN      6.5%        7%
 
- ----------------
                       7.87       8.47
- ----------------
$0-22,100              7.87       8.47
- ----------------
                       9.29      10.00
- ----------------
$22,100-53,500         9.29      10.00
- ----------------
                       9.69      10.44
- ----------------
$53,500-115,000        9.69      10.44
- ----------------
                      10.45      11.25
- ----------------
$115,000-250,000      10.45      11.25
- ----------------
                      11.07      11.92
- ----------------
OVER $250,000         11.07      11.92
- ----------------
 
To compare the yield of a taxable security with the yield of a tax-free security
find your taxable income and read across. These tables incorporate current
Federal and applicable State (and City) income tax rates and assume that all
income would otherwise be taxable at the investor's highest tax rates. Yield
figures are for example only.
 
Legislation has recently been enacted that would increase rates for certain
individuals, thereby increasing the tax-free equivalent yield.
 
*Based upon net amount subject to Federal income tax after deductions and
exemptions. These tables do not reflect other possible tax factors such as the
alternative minimum tax, personal exemptions, the phase out of exemptions,
itemized deductions and the possible partial disallowance of deductions.
Consequently, holders are urged to consult their own tax advisers in this
regard.
 
                                      A-8
<PAGE>
                        MUNICIPAL INVESTMENT TRUST FUND
                               MULTISTATE SERIES
                              DEFINED ASSET FUNDS
I want to learn more about automatic reinvestment in the Investment Accumulation
Program. Please send me information about participation in the Municipal Fund
Accumulation Program, Inc. and a current Prospectus.
My name (please
print) ________________________________________________________________________
My address (please print):
Street and Apt.
No. ___________________________________________________________________________
City, State, Zip
Code _________________________________________________________________________
This page is a self-mailer. Please complete the information above, cut along the
dotted line, fold along the lines on the reverse side, tape, and mail with the
Trustee's address displayed on the outside.
12345678
 
                                      A-9
<PAGE>
 
BUSINESS REPLY MAIL                                              NO POSTAGE
FIRST CLASS     PERMIT NO. 1313     NEW YORK, NY                 NECESSARY
                                                                 IF MAILED
POSTAGE WILL BE PAID BY ADDRESSEE                                  IN THE
          THE BANK OF NEW YORK                                 UNITED STATES
          UNIT INVESTMENT TRUST DEPARTMENT
          P.O. BOX 974
          WALL STREET STATION
          NEW YORK, NY 10268-0974

 
- --------------------------------------------------------------------------------
                            (Fold along this line.)
 
- --------------------------------------------------------------------------------
                            (Fold along this line.)
<PAGE>
INVESTMENT SUMMARY FOR EACH TRUST AS OF NOVEMBER 15, 1994 (CONTINUED)
 
RECORD DAY
     The 10th day of each month
DISTRIBUTION DAY
     The 25th day of each month
MINIMUM CAPITAL DISTRIBUTION
     No distribution need be made from Capital Account of any Trust if balance
     is less than $5.00 per Unit outstanding.
EVALUATION TIME
     3:30 P.M. New York Time
ANNUAL PORTFOLIO SUPERVISION FEE(a)
     Maximum of $0.35 per $1,000 face amount of underlying Debt Obligations (see
     Income and Distributions--Fund Expenses)
EVALUATOR'S FEE FOR EACH PORTFOLIO
     Minimum of $5.00 (see Income and Distributions--Fund Expenses)
MANDATORY TERMINATION DATE
     Each Trust must be terminated no later than one year after the maturity
     date of the last maturing Debt Obligation listed under its Portfolio (see
     Portfolios).
MINIMUM VALUE OF TRUSTS
     Any Trust may be terminated if its value is less than 40% of the Face
     Amount of Securities in the Portfolio on the date of their deposit.

 
     OBJECTIVE--To provide tax-exempt interest income through investment in
fixed-income debt obligations issued by or on behalf of the States for which the
Trusts are named and political subdivisions and public authorities thereof or
certain United States territories or possessions. There is no assurance that
this objective will be met because it is subject to the continuing ability of
issuers of the Debt Obligations held by the Trusts to meet their principal and
interest requirements. Furthermore, the market value of the underlying Debt
Obligations, and therefore the value of the Units, will fluctuate with changes
in interest rates and other factors.
 
     RISK FACTORS--Investment in a Trust should be made with an understanding
that the value of the underlying Portfolio may decline with increases in
interest rates. In recent years there have been wide fluctuations in interest
rates and thus in the value of fixed-rate debt obligations generally. The
Sponsors cannot predict whether these fluctuations will continue in the future.
The Securities are generally not listed on a national securities exchange.
Whether or not the Securities are listed, the principal trading market for the
Securities will generally be in the over-the-counter market. As a result, the
existence of a liquid trading market for the Securities may depend on whether
dealers will make a market in the Securities. There can be no assurance that a
market will be made for any of the Securities, that any market for the
Securities will be maintained or of the liquidity of the Securities in any
markets made. In addition, the Fund may be restricted under the Investment
Company Act of 1940 from selling Securities to any Sponsor. The price at which
the Securities may be sold to meet redemptions and the value of Trust Units will
be adversely affected if trading markets for the Securities are limited or
absent.
 
     PUBLIC OFFERING PRICE--During the initial offering period and any offering
of additional units the Public Offering Price of the Units of a Trust is based
on the aggregate offer side evaluation of the underlying Securities in the Trust
(the price at which they could be directly purchased by the public assuming they
were available) divided by the number of Units of the Trust outstanding plus the
applicable sales charge (as set forth on page A-3.)(b) For secondary market
sales charges see Appendix B. Units are offered at the Public Offering Price
computed as of the Evaluation Time for all sales made subsequent to the previous
evaluation, plus cash per unit in the Capital Account not allocated to the
purchase of specific Securities and net interest accrued. The Public Offering
Price on the Initial Date of Deposit and subsequent dates will vary from the
Public Offering Prices set forth on pages A-3 and A-5. (See How To Buy; How To
Sell.)
 
     ESTIMATED CURRENT RETURN; ESTIMATED LONG TERM RETURN--Estimated Current
Return on a Unit of the Trust shows the return based on the Initial Public
Offering Price and the maximum applicable sales charge (as set forth on page
A-3) and is computed by multiplying the estimated net annual interest rate per
Unit (which shows the return per Unit based on $1,000 face amount per Unit) by
$1,000 and dividing the result by the Public Offering Price per Unit (not
including accrued interest). Estimated Long Term Return on a Unit of the Trust
shows a net annual long-term return to investors holding to maturity based on
the individual Debt Obligations in the Portfolio weighted to reflect the time to
maturity (or in certain cases to an earlier call date) and market value of each
Debt Obligation in the Portfolio, adjusted to reflect the Public Offering Price
(including the maximum applicable sales charge) and estimated expenses. The net
annual interest rate per Unit and the net annual long-term return to investors
will vary with changes in the fees and expenses of the Trustee and Sponsors and
the fees of the Evaluator which are paid by the Fund, and with the exchange,
redemption, sale, prepayment or maturity of the underlying Securities; the
Public Offering Price will vary with any reduction in sales charges paid in the
case of purchases of 250 or more Units, as well as with fluctuations in the
offer side evaluation of the underlying Securities. Therefore, it can be
expected that the Estimated Current Return and Estimated Long Term Return will
fluctuate in the future (see Income and Distributions--Returns).
 
- ---------------
(a) In addition to this amount, the Sponsors may be reimbursed for bookkeeping
or other administrative expenses not exceeding their actual costs, currently at
a maximum annual rate of $0.10 per Unit.
(b) The sales charge during the initial offering period and in the secondary
market will be reduced on a graduated scale in the case of purchases of 250 or
more Units (see Appendix B).
 
                                      A-9
 
<PAGE>
 
INVESTMENT SUMMARY FOR EACH TRUST AS OF NOVEMBER 15, 1994 (CONTINUED)
 
     MONTHLY DISTRIBUTIONS--Monthly distributions of interest and any principal
or premium received by a Trust will be made in cash on or shortly after the 25th
day of each month to Holders of record of Units of the Trust on the 10th day of
such month commencing with the first distribution on the date indicated above
(see Income and Distributions). Alternatively, Holders may elect to have their
monthly distributions reinvested in the Municipal Fund Accumulation Program,
Inc. Further information about the program, including a current prospectus, may
be obtained by returning the enclosed form (see Income and
Distributions--Investment Accumulation Program).
 
     TAXATION--In the opinion of special counsel to the Sponsors, each Holder of
Units of a Trust will be considered to have received the interest on his pro
rata portion of each Debt Obligation in the Trust when interest on the Debt
Obligation is received by the Trust. In the opinion of bond counsel rendered on
the date of issuance of the Debt Obligation, this interest is exempt under
existing law from regular Federal income tax and exempt from certain state and
local personal income taxes of the State for which the Trust is named (except in
certain circumstances depending on the Holder), but may be subject to other
state and local taxes. Any gain on the disposition of a Holder's pro rata
portion of a Debt Obligation will be subject to tax. (See Taxes.)
 
     MARKET FOR UNITS--The Sponsors, though not obligated to do so, intend to
maintain a secondary market for Units based on the aggregate bid side evaluation
of the underlying Securities. If this market is not maintained a Holder will be
able to dispose of his Units through redemption at prices also based on the
aggregate bid side evaluation of the underlying Securities. There is no fee for
selling Units. Market conditions may cause the prices available in the market
maintained by the Sponsors or available upon exercise of redemption rights to be
more or less than the total of the amount paid for Units plus accrued interest.
(See How To Buy; How To Sell.)
 
                              UNDERWRITING ACCOUNT
 
     The names and addresses of the Underwriters and their several interests in
the Underwriting Account are:
 
<TABLE>
<S>                                                    <C>                                                         <C>
Merrill Lynch, Pierce, Fenner & Smith Incorporated     P.O. Box 9051, Princeton, N.J. 08543-9051                   66.51%
Smith Barney Inc.                                      Two World Trade Center--101st Floor, New York, N.Y.
                                                       10048                                                        5.35
PaineWebber Incorporated                               1285 Avenue of the Americas, New York, N.Y. 10019           15.11
Prudential Securities Incorporated                     1 Seaport Plaza, 199 Water Street, New York, N.Y. 10292      6.05
Dean Witter Reynolds Inc.                              Two World Trade Center--59th Floor, New York, N.Y.
                                                       10048                                                        6.98
                                                                                                              ----------
                                                                                                                  100.00%
                                                                                                              ----------
                                                                                                              ----------
</TABLE>
 
                                      A-10
 
<PAGE>
INVESTMENT SUMMARY AS OF NOVEMBER 15, 1994 (CONTINUED)
                                   FEE TABLE
 
     THIS FEE TABLE IS INTENDED TO ASSIST INVESTORS IN UNDERSTANDING THE COSTS
AND EXPENSES THAT AN INVESTOR IN A TRUST WILL BEAR DIRECTLY OR INDIRECTLY. SEE
HOW TO BUY AND INCOME AND DISTRIBUTIONS--FUND EXPENSES. ALTHOUGH A TRUST IS A
UNIT INVESTMENT TRUST RATHER THAN A MUTUAL FUND, THIS INFORMATION IS PRESENTED
TO PERMIT A COMPARISON OF FEES.
 
<TABLE><CAPTION>
<S>                                                                                                                      <C>
UNITHOLDER TRANSACTION EXPENSES
  Maximum Sales Charge Imposed on Purchases during the Initial Offering Period (as a percentage of Public
Offering Price)..................................................................................................        4.50%
  Maximum Sales Charge Imposed on Purchases during the Secondary Offering Period (as a percentage of Public
Offering Price)..................................................................................................        5.50%
                                                                                                                   -------------
</TABLE>
 
<TABLE><CAPTION>
ESTIMATED ANNUAL FUND OPERATING EXPENSES
  (AS A PERCENTAGE OF AVERAGE NET ASSETS1)
                                                      CALIFORNIA      FLORIDA     NEW JERSEY       NEW YORK      OHIO
                                                           TRUST        TRUST          TRUST          TRUST      TRUST
                                                     ------------  -----------  --------------  -------------  ---------
<S>                                                        <C>          <C>            <C>            <C>          <C>
  Trustee's Fee....................................        .081%        .077%          .076%          .080%        .073%
  Portfolio Supervision, Bookkeeping and
     Administrative Fees...........................        .052%        .049%          .048%          .051%        .047%
  Other Operating Expenses.........................        .124%        .113%          .120%          .084%        .118%
                                                     ------------  -----------  --------------  -------------  ---------
     Total.........................................        .257%        .239%          .244%          .215%        .238%
                                                     ------------  -----------  --------------  -------------  ---------
                                                     ------------  -----------  --------------  -------------  ---------
 
ESTIMATED ANNUAL FUND OPERATING EXPENSES
  (AS A PERCENTAGE OF AVERAGE NET ASSETS1)
                                                     PENNSYLVANIA
                                                            TRUST
                                                     ---------------
  Trustee's Fee....................................         .078%
  Portfolio Supervision, Bookkeeping and
     Administrative Fees...........................         .050%
  Other Operating Expenses.........................         .126%
                                                     ---------------
     Total.........................................         .254%
                                                     ---------------
                                                     ---------------
</TABLE>
 
- ------------------
1Based on the mean of the bid and offer side evaluations; these figures may
differ from those set forth as estimated annual expenses per unit expressed as a
percentage on page A-3.
 
<TABLE><CAPTION>
                                                         EXAMPLE
- ------------------------------------------------------------------------------------------------------------------------
 
  An investor would pay the following expenses on a $1,000 investment,
     assuming the Trust's estimated operating expense ratio as described in
     parentheses below and a 5% annual                                          CUMULATIVE EXPENSES PAID FOR PERIOD OF:
     return on the investment throughout the periods:
                                                                               -----------------------------------------
                                                                                   1 YEAR       3 YEARS        5 YEARS
                                                                               -----------  -------------  -------------
<S>                                                                             <C>           <C>            <C>
     California Trust (.257%)................................................   $      48     $      53      $      59
     Florida Trust (.239%)...................................................          47            52             58
     New Jersey Trust (.244%)................................................          47            53             58
     New York Trust (.215%)..................................................          47            52             57
     Ohio Trust (.238%)......................................................          47            52             58
     Pennsylvania Trust (.254%)..............................................          47            53             59
 
                                                         EXAMPLE
- -----------------------------------------------------------------------------
  An investor would pay the following expenses on a $1,000 investment,
     assuming the Trust's estimated operating expense ratio as described in
     parentheses below and a 5% annual
     return on the investment throughout the periods:
 
                                                                                  10 YEARS
                                                                               -------------
     California Trust (.257%)................................................    $      76
     Florida Trust (.239%)...................................................           74
     New Jersey Trust (.244%)................................................           75
     New York Trust (.215%)..................................................           71
     Ohio Trust (.238%)......................................................           74
     Pennsylvania Trust (.254%)..............................................           76
</TABLE>
 
The Example assumes reinvestment of all distributions into additional Units of a
Trust (a reinvestment option different from that offered by this Fund--see
Income and Distributions--Investment Accumulation Program) and utilizes a 5%
annual rate of return as mandated by Securities and Exchange Commission
regulations applicable to mutual funds. Cumulative expenses above reflect both
sales charges and operating expenses on an increasing investment (because the
net annual return is reinvested). In addition to the charges described above, a
Holder selling or redeeming his Units in the secondary market (before a Trust
terminates) will receive a price based on the then-current bid side evaluation
of the underlying securities. The difference between this bid side evaluation
and the offer side evaluation (the basis for the Public Offering Price), as of
the day before the Initial Date of Deposit, is $4.00 per Unit for each Trust. Of
course, this difference may change over time. 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 those
assumed for purposes of the Example.
 
                                      A-11
 
<PAGE>
                       REPORT OF INDEPENDENT ACCOUNTANTS
 
The Sponsors, Trustee and Holders of Municipal Investment Trust Fund,
Multistate Series - 75, Defined Asset Funds (California, Florida, New Jersey,
New York, Ohio and Pennsylvania Trusts):
 
We have audited the accompanying statements of condition, including the
portfolios, of Municipal Investment Trust Fund, Multistate Series - 75, Defined
Asset Funds (California, Florida, New Jersey, New York, Ohio and Pennsylvania
Trusts) as of November 16, 1994. 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 audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. The deposit on November
16, 1994 of an irrevocable letter or letters of credit for the purchase of
securities, as described in the statements of condition, was confirmed to us by
The Bank of New York, the Trustee. An audit also includes assessing the
accounting principles used and significant estimates made by the Trustee, as
well as evaluating the overall financial statement presentation. We believe that
our 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 Municipal Investment Trust
Fund, Multistate Series - 75, Defined Asset Funds (California, Florida, New
Jersey, New York, Ohio and Pennsylvania Trusts) at November 16, 1994 in
conformity with generally accepted accounting principles.
 
DELOITTE & TOUCHE LLP
New York, N.Y.
November 16, 1994
 
                                      A-12
<PAGE>
                        MUNICIPAL INVESTMENT TRUST FUND
                             MULTISTATE SERIES - 75
                              DEFINED ASSET FUNDS
    STATEMENTS OF CONDITION AS OF INITIAL DATE OF DEPOSIT, NOVEMBER 16, 1994
 
                                  CALIFORNIA       FLORIDA        NEW JERSEY
                                    TRUST           TRUST           TRUST
                                --------------  --------------  --------------
FUND PROPERTY
Investment in Debt
  Obligations(1)
     Contracts to purchase
       Debt Obligations.........$ 2,796,494.00  $ 3,205,628.50  $ 3,021,585.00
Accrued interest to Initial Date
  of Deposit on underlying Debt
  Obligations...................     44,159.73       40,786.99       57,104.86
                                --------------  --------------  --------------
            Total...............$ 2,840,653.73  $ 3,246,415.49  $ 3,078,689.86
                                --------------  --------------  --------------
                                --------------  --------------  --------------
LIABILITY AND INTEREST OF
  HOLDERS
Liability--Accrued interest to
  Initial Date of Deposit on
  underlying Debt
  Obligations(2)................$    44,159.73  $    40,786.99  $    57,104.86
                                --------------  --------------  --------------
Interest of Holders--
  Units of fractional undivided
    interest outstanding
  (California Trust--3,250;
  Florida Trust--3,500;
  New Jersey Trust--3,250)
     Cost to investors(3).......$ 2,928,249.00  $ 3,356,688.50  $ 3,163,967.50
     Gross underwriting
     commissions(4).............  (131,755.00)    (151,060.00)    (142,382.50)
                                --------------  --------------  --------------
Net amount applicable to
     investors..................  2,796,494.00    3,205,628.50    3,021,585.00
                                --------------  --------------  --------------
            Total...............$ 2,840,653.73  $ 3,246,415.49  $ 3,078,689.86
                                --------------  --------------  --------------
                                --------------  --------------  --------------
- ------------------
 
(1) Aggregate cost to each Trust of the Debt Obligations is based on the offer
    side evaluation determined by the Evaluator at the Evaluation Time on the
    business day prior to the Initial Date of Deposit as set forth under How To
    Buy. See also the column headed Cost of Debt Obligations to Trust under
    Portfolios. An irrevocable letter or letters of credit in the aggregate
    amount of $19,630,108.12 has been deposited with the Trustee. The amount of
    such letter or letters of credit includes $19,300,910.45 (equal to the
    aggregate purchase price to the Sponsors) for the purchase of $21,500,000
    face amount of Debt Obligations in connection with contracts to purchase
    Debt Obligations, plus $329,197.67 covering accrued interest thereon to the
    earlier of the date of settlement for the purchase of Units or the date of
    delivery of the Debt Obligations. The letter or letters of credit has been
    issued by San Paolo Bank, New York Branch.
 
                                      A-13
<PAGE>
                        MUNICIPAL INVESTMENT TRUST FUND
                             MULTISTATE SERIES - 75
                              DEFINED ASSET FUNDS
    STATEMENTS OF CONDITION AS OF INITIAL DATE OF DEPOSIT, NOVEMBER 16, 1994
 
                                   NEW YORK          OHIO        PENNSYLVANIA
                                    TRUST           TRUST           TRUST
                                --------------  --------------  --------------
FUND PROPERTY
Investment in Debt
  Obligations(1)
     Contracts to purchase
       Debt Obligations.........$ 4,377,398.90  $ 3,120,112.50  $ 2,931,295.00
Accrued interest to Initial Date
  of Deposit on underlying Debt
  Obligations...................     74,412.91       44,656.25       51,407.28
                                --------------  --------------  --------------
            Total...............$ 4,451,811.81  $ 3,164,768.75  $ 2,982,702.28
                                --------------  --------------  --------------
                                --------------  --------------  --------------
LIABILITY AND INTEREST OF
  HOLDERS
Liability--Accrued interest to
  Initial Date of Deposit on
  underlying Debt
  Obligations(2)................$    74,412.91  $    44,656.25  $    51,407.28
                                --------------  --------------  --------------
Interest of Holders--
  Units of fractional undivided
    interest outstanding
  (New York Trust--5,000;
  Ohio Trust--3,250;
  Pennsylvania Trust--3,250)
     Cost to investors(3).......$ 4,583,648.90  $ 3,267,142.50  $ 3,069,420.00
     Gross underwriting
     commissions(4).............  (206,250.00)    (147,030.00)    (138,125.00)
                                --------------  --------------  --------------
Net amount applicable to
     investors..................  4,377,398.90    3,120,112.50    2,931,295.00
                                --------------  --------------  --------------
            Total...............$ 4,451,811.81  $ 3,164,768.75  $ 2,982,702.28
                                --------------  --------------  --------------
                                --------------  --------------  --------------
 
- ------------------
 
(2) Representing, as set forth under How To Buy--Accrued Interest, a special
    distribution by the Trustee of an amount equal to accrued interest on the
    Debt Obligations as of the Initial Date of Deposit.
 
(3) Aggregate public offering price (exclusive of interest) computed on the
    basis of the offer side evaluation of the underlying Debt Obligations as of
    the Evaluation Time on the Business Day prior to the Initial Date of
    Deposit.
 
(4) Assumes sales charge of 4.50% on all Units computed on the basis set forth
    under How To Buy.
 
                                      A-14
<PAGE>
  MUNICIPAL INVESTMENT TRUST FUND, MULTISTATE SERIES - 75
                                                 ON THE INITIAL DATE OF DEPOSIT,
  DEFINED ASSET FUNDS
                                                               NOVEMBER 16, 1994
  PORTFOLIO OF THE CALIFORNIA TRUST (INSURED)
 
<TABLE><CAPTION>
                                                                                                                      OPTIONAL
                     PORTFOLIO NO. AND TITLE OF            RATINGS OF       FACE                                      REFUNDING
                  DEBT OBLIGATIONS CONTRACTED FOR          ISSUES (1)      AMOUNT       COUPON      MATURITIES     REDEMPTIONS (2)
           ----------------------------------------------  -----------  -------------  -----------  -----------  -------------------
       <S>                                                        <C>   <C>                  <C>         <C>           <C> 
       1.  California Hsg. Fin. Agy., Hsg. Rev. Bonds,            AAA   $     500,000        5.70%       8/1/16         2/1/04 @ 102
             Series 1994 B (MBIA Ins.)
       2.  California Statewide Comm. Dev. Auth., Cert.           AAA         500,000        6.00       8/15/24        8/15/04 @ 102
             of Part. (Sharp Healthcare Oblig. Group)
             (MBIA Ins.)
       3.  California Statewide Comm. Dev. Auth., Cert.           AAA         200,000        5.50       8/15/23        8/15/03 @ 102
             of Part. (Sutter Hlth. Oblig. Group) (MBIA
             Ins.)
       4.  Anaheim Pub. Fin. Auth., CA, Rev. Bonds (City          AAA         500,000        5.75       10/1/22         4/1/03 @ 102
             of Anaheim Elec. Util., San Juan Unit 4
             Proj.), Second Series 1993 (Financial
             Guaranty Ins.)
       5.  Chino Basin, CA, Regl. Fin. Auth., Rev. Bonds          AAA         500,000        6.00        8/1/16         8/1/04 @ 102
             (Chino Basin Muni. Wtr. Dist. Swr. Sys.
             Proj.), Series 1994 (AMBAC Ins.)
       6.  Ontario Redev. Fin. Auth., San Bernardino              AAA         550,000        5.50        8/1/18         8/1/03 @ 102
             Cnty., CA (Ontario Redev. Proj. No. 1), 1993
             Rev. Bonds (MBIA Ins.)
       7.  Cnty. of Sacramento, CA, 1994 Pub. Fac. Proj.          AAA         500,000        6.40       10/1/19        10/1/04 @ 102
             (Coroner/Crime Lab and Data Ctr.), Cert. of
             Part. (AMBAC Ins.)
                                                                        -------------
                                                                        $   3,250,000
                                                                        -------------
                                                                        -------------
</TABLE>
 
                 SINKING         COST OF       YIELD TO MATURITY
                    FUND    DEBT OBLIGATIONS   ON INITIAL DATE OF
           REDEMPTIONS (2)    TO TRUST (3)        DEPOSIT (3)
           ---------------  -----------------  -------------------
       1.         8/1/04    $      423,020.00           7.100%
 
       2.        8/15/21           432,185.00           7.100
 
       3.        8/15/14           160,968.00           7.100
 
       4.        10/1/10           418,475.00           7.100
 
       5.         8/1/12           444,545.00           7.000
 
       6.         8/1/16           449,691.00           7.100
 
       7.        10/1/15           467,610.00           6.950
 
                            -----------------
                            $    2,796,494.00
                            -----------------
                            -----------------
 
                                      A-15
<PAGE>
- ------------
NOTES
 
(1)  All ratings are by Standard & Poor's. Any rating followed by '*' is subject
     to submission and review of final documentation. Any rating followed by a
     'p' is provisional and assumes the successful completion of the project
     being financed. (See Appendix A.)
 
(2)  Debt Obligations are first subject to optional redemption (which may be
    exercised in whole or in part) on the dates and at the prices indicated
     under the Optional Refunding Redemptions column in the table. In subsequent
     years Debt Obligations 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.
 
    Certain Debt Obligations may provide for redemption at par prior or in
    addition to any optional or mandatory redemption dates or maturity, for
    example, if proceeds are not able to be used as contemplated, if the project
     is sold by the owner, if the project is condemned or sold, if the project
     is destroyed and insurance proceeds are used to redeem the Debt
     Obligations, if interest on the Debt Obligations becomes subject to
     taxation, if any related credit support expires prior to maturity and is
     not renewed or substitute credit support not obtained, if, in the case of
     housing obligations, mortgages are prepaid, or in other special
     circumstances.
 
    Sinking fund redemptions are all at par and generally redeem only part of an
    issue. Some of the Debt Obligations have mandatory sinking funds which
    contain optional provisions permitting the issuer to increase the principal
    amount of Debt Obligations called on a mandatory redemption date. The
    sinking fund redemptions with optional provisions may, and optional
    refunding redemptions generally will, occur at times when the redeemed Debt
    Obligations have an offer side evaluation which represents a premium over
    par. To the extent that the Debt Obligations were deposited in the Trust at
     a price higher than the redemption price, this will represent a loss of
     capital when compared with the original Public Offering Price of the Units.
     Monthly distributions will generally be reduced by the amount of the income
     which would otherwise have been paid with respect to redeemed Debt
     Obligations and there will be distributed to Holders any principal amount
     and premium received on such redemption after satisfying any redemption
     requests received by the Trust. The current return and long term return in
     this event may be affected by redemptions. The tax effect on Holders of
     redemptions and related distributions is described under Taxes.
 
(3)  Evaluation of Debt Obligations by the Evaluator is made on the basis of
    current offer side evaluation. The offering side evaluation is greater than
     the current bid side evaluation of the Debt Obligations, which is the basis
     on which Redemption Price per Unit is determined (see How To Sell). The
     aggregate value based on the bid side evaluation at the Evaluation Time on
     the business day prior to the Initial Date of Deposit was $2,783,494.00,
     which is $13,000.00 (.40% of the aggregate face amount) lower than the
     aggregate Cost of Debt Obligations to Trust based on the offer side
     evaluation.
    Yield to Maturity on the Initial Date of Deposit of Debt Obligations was
    computed on the basis of the offer side evaluation at the Evaluation Time on
    the business day prior to the Initial Date of Deposit. Percentages in this
     column represent Yield to Maturity on Initial Date of Deposit unless
     followed by '+' which indicates yield to an earlier redemption date. (See
     Income and Distributions--Returns for a description of the computation of
     yield price.)
 
                      ------------------------------------
 
   All Debt Obligations are represented entirely by contracts to purchase such
    Debt Obligations, which were entered into by the Sponsors on November 15,
    1994. All contracts are expected to be settled by the initial settlement
   date for purchase of Units.
 
   All Debt Obligations have been insured or guaranteed to maturity by the
    indicated insurance company (see Risk Factors--Obligations Backed by
    Insurance).
 
  +  See Footnote (3).
 
                                      A-16
<PAGE>
  MUNICIPAL INVESTMENT TRUST FUND, MULTISTATE SERIES - 75
                                                 ON THE INITIAL DATE OF DEPOSIT,
  DEFINED ASSET FUNDS
                                                               NOVEMBER 16, 1994
  PORTFOLIO OF THE FLORIDA TRUST (INSURED)
 
<TABLE><CAPTION>
                                                                                                                      OPTIONAL
                     PORTFOLIO NO. AND TITLE OF            RATINGS OF       FACE                                      REFUNDING
                  DEBT OBLIGATIONS CONTRACTED FOR          ISSUES (1)      AMOUNT       COUPON      MATURITIES     REDEMPTIONS (2)
           ----------------------------------------------  -----------  -------------  -----------  -----------  -------------------
       <S>                                                        <C>   <C>                  <C>         <C>           <C> 
       1.  The Sch. Bd. of Bay Cnty., FL, Cert. of Part.          AAA   $     500,000        6.75%       7/1/14         7/1/04 @ 102
             (Bay Cnty. Educl. Fac. Fin. Corp.), Series
             1994 (AMBAC Ins.)
       2.  Citrus Cnty., FL, Poll. Ctl. Rfdg. Rev. Bonds          AAA         225,000        6.35        2/1/22         8/1/02 @ 102
             (Florida Pwr. Corp.-Crystal River Pwr. Plant
             Proj.), Series 1992 B (MBIA Ins.)
       3.  Dade Cnty., FL, Pub. Fac. Rev. Bonds (Jackson          AAA         500,000        5.625       6/1/18         6/1/03 @ 102
             Mem. Hosp.), Series 1993 (MBIA Ins.)
       4.  City of Jacksonville, FL, Cap. Imp. Rev. Bonds         AAA         475,000        6.00       10/1/25        10/1/04 @ 101
             (Gator Bowl Proj.), Series 1994 (AMBAC Ins.)
       5.  Orange Cnty., FL, Tourist Dev. Tax Rfdg. Rev.          AAA         300,000        6.00       10/1/24        10/1/04 @ 102
             Bonds, Series 1994 B (MBIA Ins.)
       6.  The Sch. Bd. of Seminole Cnty., FL, Cert. of           AAA         500,000        6.50        7/1/21         7/1/04 @ 101
             Part. (Seminole Sch. Bd. Leasing Corp.),
             Series 1994 B (MBIA Ins.)
       7.  City of Tallahassee, FL, Hlth. Fac. Rev. Bonds         AAA         500,000        6.00       12/1/15        12/1/02 @ 102
             (Tallahassee Mem. Regl. Med. Ctr., Inc.
             Proj.), Series 1992 A (MBIA Ins.)
       8.  City of West Melbourne, FL, Wtr. and Swr. Rev.         AAA         500,000        6.75       10/1/17        10/1/04 @ 101
             Rfdg. and Imp. Bonds, Series 1994 (Financial
             Guaranty Ins.)
                                                                        -------------
                                                                        $   3,500,000
                                                                        -------------
                                                                        -------------
</TABLE>
 
                 SINKING         COST OF       YIELD TO MATURITY
                    FUND    DEBT OBLIGATIONS   ON INITIAL DATE OF
           REDEMPTIONS (2)    TO TRUST (3)        DEPOSIT (3)
           ---------------  -----------------  -------------------
       1.         7/1/13    $      491,945.00           6.900%
 
       2.             --           209,866.50           6.900
 
       3.         6/1/14           416,200.00           7.100
 
       4.        10/1/20           420,622.00           6.900
 
       5.        10/1/20           265,995.00           6.900
 
       6.         7/1/15           464,280.00           7.100
 
       7.        12/1/10           445,340.00           7.000
 
       8.        10/1/15           491,380.00           6.900
 
                            -----------------
                            $    3,205,628.50
                            -----------------
                            -----------------
 
                                      A-17
<PAGE>
- ------------
NOTES
 
(1)  All ratings are by Standard & Poor's. Any rating followed by '*' is subject
     to submission and review of final documentation. Any rating followed by a
     'p' is provisional and assumes the successful completion of the project
     being financed. (See Appendix A.)
 
(2)  Debt Obligations are first subject to optional redemption (which may be
    exercised in whole or in part) on the dates and at the prices indicated
     under the Optional Refunding Redemptions column in the table. In subsequent
     years Debt Obligations 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.
 
    Certain Debt Obligations may provide for redemption at par prior or in
    addition to any optional or mandatory redemption dates or maturity, for
    example, if proceeds are not able to be used as contemplated, if the project
     is sold by the owner, if the project is condemned or sold, if the project
     is destroyed and insurance proceeds are used to redeem the Debt
     Obligations, if interest on the Debt Obligations becomes subject to
     taxation, if any related credit support expires prior to maturity and is
     not renewed or substitute credit support not obtained, if, in the case of
     housing obligations, mortgages are prepaid, or in other special
     circumstances.
 
    Sinking fund redemptions are all at par and generally redeem only part of an
    issue. Some of the Debt Obligations have mandatory sinking funds which
    contain optional provisions permitting the issuer to increase the principal
    amount of Debt Obligations called on a mandatory redemption date. The
    sinking fund redemptions with optional provisions may, and optional
    refunding redemptions generally will, occur at times when the redeemed Debt
    Obligations have an offer side evaluation which represents a premium over
    par. To the extent that the Debt Obligations were deposited in the Trust at
     a price higher than the redemption price, this will represent a loss of
     capital when compared with the original Public Offering Price of the Units.
     Monthly distributions will generally be reduced by the amount of the income
     which would otherwise have been paid with respect to redeemed Debt
     Obligations and there will be distributed to Holders any principal amount
     and premium received on such redemption after satisfying any redemption
     requests received by the Trust. The current return and long term return in
     this event may be affected by redemptions. The tax effect on Holders of
     redemptions and related distributions is described under Taxes.
 
(3)  Evaluation of Debt Obligations by the Evaluator is made on the basis of
    current offer side evaluation. The offering side evaluation is greater than
     the current bid side evaluation of the Debt Obligations, which is the basis
     on which Redemption Price per Unit is determined (see How To Sell). The
     aggregate value based on the bid side evaluation at the Evaluation Time on
     the business day prior to the Initial Date of Deposit was $3,191,628.50,
     which is $14,000.00 (.40% of the aggregate face amount) lower than the
     aggregate Cost of Debt Obligations to Trust based on the offer side
     evaluation.
    Yield to Maturity on the Initial Date of Deposit of Debt Obligations was
    computed on the basis of the offer side evaluation at the Evaluation Time on
    the business day prior to the Initial Date of Deposit. Percentages in this
     column represent Yield to Maturity on Initial Date of Deposit unless
     followed by '+' which indicates yield to an earlier redemption date. (See
     Income and Distributions--Returns for a description of the computation of
     yield price.)
 
                      ------------------------------------
 
   All Debt Obligations are represented entirely by contracts to purchase such
    Debt Obligations, which were entered into by the Sponsors during the period
    November 9, 1994 to November 15, 1994. All contracts are expected to be
    settled by the initial settlement date for purchase of Units except for the
   Debt Obligations in Portfolio Numbers 1, 6 and 8 (approximately 43% of the
    aggregate face amount of the Portfolio) which have been purchased on a when,
    as and if issued basis, or have a delayed delivery, and are expected to be
   settled 7 to 14 days after the settlement date for purchase of Units.
 
   All Debt Obligations have been insured or guaranteed to maturity by the
    indicated insurance company (see Risk Factors--Obligations Backed by
    Insurance).
 
  +  See Footnote (3).
 
                                      A-18
<PAGE>
  MUNICIPAL INVESTMENT TRUST FUND, MULTISTATE SERIES - 75
                                                 ON THE INITIAL DATE OF DEPOSIT,
  DEFINED ASSET FUNDS
                                                               NOVEMBER 16, 1994
  PORTFOLIO OF THE NEW JERSEY TRUST (INSURED)
 
<TABLE><CAPTION>
                                                                                                                      OPTIONAL
                     PORTFOLIO NO. AND TITLE OF            RATINGS OF       FACE                                      REFUNDING
                  DEBT OBLIGATIONS CONTRACTED FOR          ISSUES (1)      AMOUNT       COUPON      MATURITIES     REDEMPTIONS (2)
           ----------------------------------------------  -----------  -------------  -----------  -----------  -------------------
       <S>                                                        <C>   <C>                  <C>         <C>           <C> 
       1.  New Jersey Econ. Dev. Auth., Gas Fac. Rfdg.            AAA   $     500,000        6.35%      10/1/22        10/1/04 @ 102
             Rev. Bonds (NUI Corp. Proj.), Series 1994 A
             (AMBAC Ins.)
       2.  New Jersey Hlth. Care Fac. Fin. Auth., Rev.            AAA         250,000        6.25        7/1/24          7/1/04 @102
             Bonds (Monmouth Med. Ctr. Iss.), Series C
             (CGIC Ins.)
       3.  New Jersey Hsg. and Mtge. Fin. Agy., Home              AAA         500,000        6.70        4/1/16        10/1/04 @ 102
             Buyer Rev. Bonds, Series 1994 L (MBIA Ins.)
       4.  Essex Cnty. Imp. Auth., NJ, G.O. Lse. Rev.             AAA         500,000        7.00       12/1/24        12/1/04 @ 102
             Bonds (Cnty. Jail and Youth House Proj.),
             Series 1994 (AMBAC Ins.)
       5.  Gloucester Cnty. Util. Auth., NJ, Swr. Rev.            AAA         500,000        6.25        1/1/24         1/1/04 @ 102
             Bonds, Series 1994 (MBIA Ins.)
       6.  The Cnty. of Middlesex, NJ, Cert. of                   AAA         500,000        6.125      2/15/19        2/15/04 @ 101
             Participation (PBCF New Jersey, Inc.) (MBIA
             Ins.)
       7.  The Poll. Ctl. Fin. Auth. of Salem Cnty., NJ,          AAA         500,000        6.25        6/1/31         6/1/04 @ 102
             Poll. Ctl. Rev. Rfdg. Bonds (Public Service
             Elec. and Gas Co. Proj.) (MBIA Ins.)
                                                                        -------------
                                                                        $   3,250,000
                                                                        -------------
                                                                        -------------
</TABLE>

                 SINKING         COST OF       YIELD TO MATURITY
                    FUND    DEBT OBLIGATIONS   ON INITIAL DATE OF
           REDEMPTIONS (2)    TO TRUST (3)        DEPOSIT (3)
           ---------------  -----------------  -------------------
       1.             --    $      460,340.00           7.000%
 
       2.         7/1/17           225,245.00           7.050
 
       3.         4/1/15           480,765.00           7.050
 
       4.        12/1/15           501,990.00           6.950+
 
       5.         1/1/15           453,595.00           7.000
 
       6.        2/15/15           451,900.00           6.950
 
       7.             --           447,750.00           7.050
 
                            -----------------
                            $    3,021,585.00
                            -----------------
                            -----------------

                                      A-19
<PAGE>
- ------------
NOTES
 
(1)  All ratings are by Standard & Poor's. Any rating followed by '*' is subject
     to submission and review of final documentation. Any rating followed by a
     'p' is provisional and assumes the successful completion of the project
     being financed. (See Appendix A.)
 
(2)  Debt Obligations are first subject to optional redemption (which may be
    exercised in whole or in part) on the dates and at the prices indicated
     under the Optional Refunding Redemptions column in the table. In subsequent
     years Debt Obligations 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.
 
    Certain Debt Obligations may provide for redemption at par prior or in
    addition to any optional or mandatory redemption dates or maturity, for
    example, if proceeds are not able to be used as contemplated, if the project
     is sold by the owner, if the project is condemned or sold, if the project
     is destroyed and insurance proceeds are used to redeem the Debt
     Obligations, if interest on the Debt Obligations becomes subject to
     taxation, if any related credit support expires prior to maturity and is
     not renewed or substitute credit support not obtained, if, in the case of
     housing obligations, mortgages are prepaid, or in other special
     circumstances.
 
    Sinking fund redemptions are all at par and generally redeem only part of an
    issue. Some of the Debt Obligations have mandatory sinking funds which
    contain optional provisions permitting the issuer to increase the principal
    amount of Debt Obligations called on a mandatory redemption date. The
    sinking fund redemptions with optional provisions may, and optional
    refunding redemptions generally will, occur at times when the redeemed Debt
    Obligations have an offer side evaluation which represents a premium over
    par. To the extent that the Debt Obligations were deposited in the Trust at
     a price higher than the redemption price, this will represent a loss of
     capital when compared with the original Public Offering Price of the Units.
     Monthly distributions will generally be reduced by the amount of the income
     which would otherwise have been paid with respect to redeemed Debt
     Obligations and there will be distributed to Holders any principal amount
     and premium received on such redemption after satisfying any redemption
     requests received by the Trust. The current return and long term return in
     this event may be affected by redemptions. The tax effect on Holders of
     redemptions and related distributions is described under Taxes.
 
(3)  Evaluation of Debt Obligations by the Evaluator is made on the basis of
    current offer side evaluation. The offering side evaluation is greater than
     the current bid side evaluation of the Debt Obligations, which is the basis
     on which Redemption Price per Unit is determined (see How To Sell). The
     aggregate value based on the bid side evaluation at the Evaluation Time on
     the business day prior to the Initial Date of Deposit was $3,008,585.00,
     which is $13,000.00 (.40% of the aggregate face amount) lower than the
     aggregate Cost of Debt Obligations to Trust based on the offer side
     evaluation.
    Yield to Maturity on the Initial Date of Deposit of Debt Obligations was
    computed on the basis of the offer side evaluation at the Evaluation Time on
    the business day prior to the Initial Date of Deposit. Percentages in this
     column represent Yield to Maturity on Initial Date of Deposit unless
     followed by '+' which indicates yield to an earlier redemption date. (See
     Income and Distributions--Returns for a description of the computation of
     yield price.)
 
                      ------------------------------------
 
   All Debt Obligations are represented entirely by contracts to purchase such
    Debt Obligations, which were entered into by the Sponsors during the period
    November 9, 1994 to November 14, 1994. All contracts are expected to be
    settled by the initial settlement date for purchase of Units.
 
   All Debt Obligations have been insured or guaranteed to maturity by the
    indicated insurance company (see Risk Factors--Obligations Backed by
    Insurance).
 
  +  See Footnote (3).
 
                                      A-20
<PAGE>
  MUNICIPAL INVESTMENT TRUST FUND, MULTISTATE SERIES - 75
                                                 ON THE INITIAL DATE OF DEPOSIT,
  DEFINED ASSET FUNDS
                                                               NOVEMBER 16, 1994
  PORTFOLIO OF THE NEW YORK TRUST (INSURED)
 
<TABLE><CAPTION>
                                                                                                                      OPTIONAL
                     PORTFOLIO NO. AND TITLE OF            RATINGS OF       FACE                                      REFUNDING
                  DEBT OBLIGATIONS CONTRACTED FOR          ISSUES (1)      AMOUNT       COUPON      MATURITIES     REDEMPTIONS (2)
           ----------------------------------------------  -----------  -------------  -----------  -----------  -------------------
       <S>                                                        <C>   <C>                  <C>         <C>           <C> 
       1.  Dormitory Auth. of the State of New York, City         AAA   $     750,000        6.30%       7/1/24         7/1/04 @ 102
             Univ. Sys. Consol. Third Gen. Resolution
             Rev. Bonds, 1994 Ser. 1 (AMBAC Ins.)
       2.  Dormitory Auth. of the State of New York,              AAA         410,000        5.25       5/15/13                   --
             State Univ. Educl. Facs. Rev. Bonds, Ser.
             1993 B (Financial Guaranty Ins.)
       3.  New York State Energy Research and Dev. Auth.,         AAA         750,000        6.05        4/1/34         4/1/04 @ 102
             Poll. Ctl. Rfdg. Rev. Bonds, 1994 Ser. A
             (MBIA Ins.)
       4.  Metro. Trans. Auth., NY, Transit Facs. Rev.            AAA         500,000        6.00        7/1/14       7/1/03 @ 101.5
             Bonds, Ser. M (CAPMAC Ins.)
       5.  State of New York Mtge. Agy., Homeowner Mtge.          AAA         500,000        6.45       10/1/14         6/1/04 @ 102
             Rev. Bonds (MBIA Ins.)
       6.  New York State Thruway Auth., Gen. Rev. Bonds,         AAA         750,000        5.50        1/1/23         1/1/02 @ 100
             Ser. A (Financial Guaranty Ins.)
       7.  Albany Muni. Wtr. Fin. Auth., NY, Wtr. and             AAA         390,000        5.50       12/1/22        12/1/03 @ 102
             Swr. Sys. Rev. Bonds, Ser. 1993 A (Financial
             Guaranty Ins.)
       8.  The City of New York, NY, G.O. Bonds, Fiscal           AAA         500,000        6.95       8/15/12        8/15/04 @ 101
             1995 Ser. B (MBIA Ins.)
       9.  New York City, NY, Muni. Wtr. Fin. Auth., Ser.         AAA         450,000        5.50       6/15/15        6/15/04 @ 101
             F (MBIA Ins.)
                                                                        -------------
                                                                        $   5,000,000
                                                                        -------------
                                                                        -------------
</TABLE>
 
                 SINKING         COST OF       YIELD TO MATURITY
                    FUND    DEBT OBLIGATIONS   ON INITIAL DATE OF
           REDEMPTIONS (2)    TO TRUST (3)        DEPOSIT (3)
           ---------------  -----------------  -------------------
       1.         7/1/21    $      684,682.50           7.000%
 
       2.        5/15/12           334,371.40           7.050
 
       3.             --           650,490.00           7.050
 
       4.         7/1/11           444,595.00           7.050
 
       5.         4/1/08           468,130.00           7.050
 
       6.         1/1/20           608,520.00           7.050
 
       7.        12/1/13           316,524.00           7.050
 
       8.             --           497,405.00           7.000
 
       9.        6/15/12           372,681.00           7.100
 
                            -----------------
                            $    4,377,398.90
                            -----------------
                            -----------------
 
                                      A-21
<PAGE>
- ------------
NOTES
 
(1)  All ratings are by Standard & Poor's. Any rating followed by '*' is subject
     to submission and review of final documentation. Any rating followed by a
     'p' is provisional and assumes the successful completion of the project
     being financed. (See Appendix A.)
 
(2)  Debt Obligations are first subject to optional redemption (which may be
    exercised in whole or in part) on the dates and at the prices indicated
     under the Optional Refunding Redemptions column in the table. In subsequent
     years Debt Obligations 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.
 
    Certain Debt Obligations may provide for redemption at par prior or in
    addition to any optional or mandatory redemption dates or maturity, for
    example, if proceeds are not able to be used as contemplated, if the project
     is sold by the owner, if the project is condemned or sold, if the project
     is destroyed and insurance proceeds are used to redeem the Debt
     Obligations, if interest on the Debt Obligations becomes subject to
     taxation, if any related credit support expires prior to maturity and is
     not renewed or substitute credit support not obtained, if, in the case of
     housing obligations, mortgages are prepaid, or in other special
     circumstances.
 
    Sinking fund redemptions are all at par and generally redeem only part of an
    issue. Some of the Debt Obligations have mandatory sinking funds which
    contain optional provisions permitting the issuer to increase the principal
    amount of Debt Obligations called on a mandatory redemption date. The
    sinking fund redemptions with optional provisions may, and optional
    refunding redemptions generally will, occur at times when the redeemed Debt
    Obligations have an offer side evaluation which represents a premium over
    par. To the extent that the Debt Obligations were deposited in the Trust at
     a price higher than the redemption price, this will represent a loss of
     capital when compared with the original Public Offering Price of the Units.
     Monthly distributions will generally be reduced by the amount of the income
     which would otherwise have been paid with respect to redeemed Debt
     Obligations and there will be distributed to Holders any principal amount
     and premium received on such redemption after satisfying any redemption
     requests received by the Trust. The current return and long term return in
     this event may be affected by redemptions. The tax effect on Holders of
     redemptions and related distributions is described under Taxes.
 
(3)  Evaluation of Debt Obligations by the Evaluator is made on the basis of
    current offer side evaluation. The offering side evaluation is greater than
     the current bid side evaluation of the Debt Obligations, which is the basis
     on which Redemption Price per Unit is determined (see How To Sell). The
     aggregate value based on the bid side evaluation at the Evaluation Time on
     the business day prior to the Initial Date of Deposit was $4,357,398.90,
     which is $20,000.00 (.40% of the aggregate face amount) lower than the
     aggregate Cost of Debt Obligations to Trust based on the offer side
     evaluation.
    Yield to Maturity on the Initial Date of Deposit of Debt Obligations was
    computed on the basis of the offer side evaluation at the Evaluation Time on
    the business day prior to the Initial Date of Deposit. Percentages in this
     column represent Yield to Maturity on Initial Date of Deposit unless
     followed by '+' which indicates yield to an earlier redemption date. (See
     Income and Distributions--Returns for a description of the computation of
     yield price.)
 
                      ------------------------------------
 
   All Debt Obligations are represented entirely by contracts to purchase such
    Debt Obligations, which were entered into by the Sponsors during the period
    November 9, 1994 to November 15, 1994. All contracts are expected to be
    settled by the initial settlement date for purchase of Units.
 
   All Debt Obligations have been insured or guaranteed to maturity by the
    indicated insurance company (see Risk Factors--Obligations Backed by
    Insurance).
 
  +  See Footnote (3).
 
                                      A-22
<PAGE>
  MUNICIPAL INVESTMENT TRUST FUND, MULTISTATE SERIES - 75
                                                 ON THE INITIAL DATE OF DEPOSIT,
  DEFINED ASSET FUNDS
                                                               NOVEMBER 16, 1994
  PORTFOLIO OF THE OHIO TRUST (INSURED)
 
<TABLE><CAPTION>
                                                                                                                      OPTIONAL
                     PORTFOLIO NO. AND TITLE OF            RATINGS OF       FACE                                      REFUNDING
                  DEBT OBLIGATIONS CONTRACTED FOR          ISSUES (1)      AMOUNT       COUPON      MATURITIES     REDEMPTIONS (2)
           ----------------------------------------------  -----------  -------------  -----------  -----------  -------------------
       <S>                                                        <C>   <C>                  <C>         <C>           <C> 
       1.  State of Ohio, Higher Educl. Fac. Mtge. Rev.           AAA   $     500,000        6.60%      12/1/17        12/1/03 @ 102
             Bonds (Univ. of Dayton 1992 Proj.)
             (Financial Guaranty Ins.)
       2.  City of Cleveland, OH, Pub. Pwr. Sys. First            AAA         500,000        7.00      11/15/24       11/15/04 @ 102
             Mtge. Rev. Bonds, Ser. 1994 A (MBIA Ins.)
       3.  City of Cleveland, OH, Var. Pur. G.O. Bonds,           AAA         500,000        6.70      11/15/18       11/15/04 @ 102
             Ser. 1994 (MBIA Ins.)
       4.  City of Hamilton, OH, Elec. Sys. Mtge. Rev.            AAA         250,000        6.00      10/15/23       10/15/02 @ 102
             Rfdg. Bonds, 1992 Ser. A (Financial Guaranty
             Ins.)
       5.  Lakewood City School Dist., OH, School Imp.            AAA         500,000        6.95       12/1/15        12/1/04 @ 102
             Bonds, Ser. 1994 (Gen. Oblig. Unlimited Tax)
             (MBIA Ins.)
       6.  City of Mason, OH, Swr. Sys. Mtge. Rev. Bonds,         AAA         500,000        6.00       12/1/19        12/1/04 @ 101
             Ser. 1994 (Financial Guaranty Ins.)
       7.  Wooster City School Dist., Wayne Cnty., OH,            AAA         500,000        6.50       12/1/17        12/1/02 @ 102
             G.O. Bonds (Unlimited Tax) (AMBAC Ins.)
                                                                        -------------
                                                                        $   3,250,000
                                                                        -------------
                                                                        -------------
</TABLE>
 
                 SINKING         COST OF       YIELD TO MATURITY
                    FUND    DEBT OBLIGATIONS   ON INITIAL DATE OF
           REDEMPTIONS (2)    TO TRUST (3)        DEPOSIT (3)
           ---------------  -----------------  -------------------
       1.        12/1/08    $      485,590.00           6.850%
 
       2.       11/15/17           490,785.00           7.150
 
       3.       11/15/15           491,225.00           6.850
 
       4.       10/15/13           221,957.50           6.900
 
       5.             --           504,030.00           6.850+
 
       6.        12/1/15           446,685.00           6.900
 
       7.        12/1/08           479,840.00           6.850
 
                            -----------------
                            $    3,120,112.50
                            -----------------
                            -----------------

                                      A-23
<PAGE>
- ------------
NOTES
 
(1)  All ratings are by Standard & Poor's. Any rating followed by '*' is subject
     to submission and review of final documentation. Any rating followed by a
     'p' is provisional and assumes the successful completion of the project
     being financed. (See Appendix A.)
 
(2)  Debt Obligations are first subject to optional redemption (which may be
    exercised in whole or in part) on the dates and at the prices indicated
     under the Optional Refunding Redemptions column in the table. In subsequent
     years Debt Obligations 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.
 
    Certain Debt Obligations may provide for redemption at par prior or in
    addition to any optional or mandatory redemption dates or maturity, for
    example, if proceeds are not able to be used as contemplated, if the project
     is sold by the owner, if the project is condemned or sold, if the project
     is destroyed and insurance proceeds are used to redeem the Debt
     Obligations, if interest on the Debt Obligations becomes subject to
     taxation, if any related credit support expires prior to maturity and is
     not renewed or substitute credit support not obtained, if, in the case of
     housing obligations, mortgages are prepaid, or in other special
     circumstances.
 
    Sinking fund redemptions are all at par and generally redeem only part of an
    issue. Some of the Debt Obligations have mandatory sinking funds which
    contain optional provisions permitting the issuer to increase the principal
    amount of Debt Obligations called on a mandatory redemption date. The
    sinking fund redemptions with optional provisions may, and optional
    refunding redemptions generally will, occur at times when the redeemed Debt
    Obligations have an offer side evaluation which represents a premium over
    par. To the extent that the Debt Obligations were deposited in the Trust at
     a price higher than the redemption price, this will represent a loss of
     capital when compared with the original Public Offering Price of the Units.
     Monthly distributions will generally be reduced by the amount of the income
     which would otherwise have been paid with respect to redeemed Debt
     Obligations and there will be distributed to Holders any principal amount
     and premium received on such redemption after satisfying any redemption
     requests received by the Trust. The current return and long term return in
     this event may be affected by redemptions. The tax effect on Holders of
     redemptions and related distributions is described under Taxes.
 
(3)  Evaluation of Debt Obligations by the Evaluator is made on the basis of
    current offer side evaluation. The offering side evaluation is greater than
     the current bid side evaluation of the Debt Obligations, which is the basis
     on which Redemption Price per Unit is determined (see How To Sell). The
     aggregate value based on the bid side evaluation at the Evaluation Time on
     the business day prior to the Initial Date of Deposit was $3,107,112.50,
     which is $13,000.00 (.40% of the aggregate face amount) lower than the
     aggregate Cost of Debt Obligations to Trust based on the offer side
     evaluation.
    Yield to Maturity on the Initial Date of Deposit of Debt Obligations was
    computed on the basis of the offer side evaluation at the Evaluation Time on
    the business day prior to the Initial Date of Deposit. Percentages in this
     column represent Yield to Maturity on Initial Date of Deposit unless
     followed by '+' which indicates yield to an earlier redemption date. (See
     Income and Distributions--Returns for a description of the computation of
     yield price.)
 
                      ------------------------------------
 
   All Debt Obligations are represented entirely by contracts to purchase such
    Debt Obligations, which were entered into by the Sponsors during the period
    November 9, 1994 to November 15, 1994. All contracts are expected to be
    settled by the initial settlement date for purchase of Units.
 
   All Debt Obligations have been insured or guaranteed to maturity by the
    indicated insurance company (see Risk Factors--Obligations Backed by
    Insurance).
 
  +  See Footnote (3).
 
                                      A-24
<PAGE>
  MUNICIPAL INVESTMENT TRUST FUND, MULTISTATE SERIES - 75
                                                 ON THE INITIAL DATE OF DEPOSIT,
  DEFINED ASSET FUNDS
                                                               NOVEMBER 16, 1994
  PORTFOLIO OF THE PENNSYLVANIA TRUST (INSURED)
 
<TABLE><CAPTION>
                                                                                                                      OPTIONAL
                     PORTFOLIO NO. AND TITLE OF            RATINGS OF       FACE                                      REFUNDING
                  DEBT OBLIGATIONS CONTRACTED FOR          ISSUES (1)      AMOUNT       COUPON      MATURITIES     REDEMPTIONS (2)
           ----------------------------------------------  -----------  -------------  -----------  -----------  -------------------
       <S>                                                        <C>   <C>                  <C>         <C>           <C> 
       1.  The Hosp. Auth. of the Cnty. of Beaver, Hosp.          AAA   $     500,000        6.25%       7/1/22         7/1/02 @ 102
             Rev. Bonds, PA, Ser. 1992 A (AMBAC Ins.)
       2.  Exeter Twp. Auth., Berks Cnty., PA, Gtd. Swr.          AAA         500,000        6.20       7/15/22        7/15/02 @ 100
             Rev. Bonds, Ser. of 1993 (MBIA Ins.)
       3.  Erie Cnty. Hosp. Auth. (Commonwealth of PA),           AAA         500,000        6.375       7/1/22         7/1/02 @ 102
             Hosp. Rev. Bonds, Ser. A of 1992 (MBIA Ins.)
       4.  North Penn Water Auth. (Montgomery Cnty., PA),         AAA         500,000        6.20       11/1/22        11/1/02 @ 101
             Wtr. Rev. Bonds, Ser. 1992 (Financial
             Guaranty Ins.)
       5.  Northampton Cnty., PA, Higher Education Auth.,         AAA         250,000        5.75      11/15/18       11/15/02 @ 102
             Univ. Rev. Bonds (Lehigh Univ.), 1993 Ser. A
             (MBIA Ins.)
       6.  York Cnty. Indl. Dev. Auth., PA, Poll. Ctl.            AAA         500,000        6.45       10/1/19        10/1/04 @ 102
             Rev. Rfdg. Bonds, Ser. 1994 A (MBIA Ins.)
       7.  City of Philadelphia, PA, Gas Works Rev.               AAA         500,000        6.375       7/1/26         7/1/03 @ 102
             Bonds, Fourteenth Ser. (CAPMAC Ins.)
                                                                        -------------
                                                                        $   3,250,000
                                                                        -------------
                                                                        -------------
</TABLE>
 
                 SINKING         COST OF       YIELD TO MATURITY
                    FUND    DEBT OBLIGATIONS   ON INITIAL DATE OF
           REDEMPTIONS (2)    TO TRUST (3)        DEPOSIT (3)
           ---------------  -----------------  -------------------
       1.         7/1/12    $      448,795.00           7.100%
 
       2.        7/15/14           445,755.00           7.100
 
       3.         7/1/14           456,315.00           7.100
 
       4.        11/1/13           451,180.00           7.000
 
       5.       11/15/12           212,640.00           7.050
 
       6.             --           464,985.00           7.050
 
       7.         7/1/15           451,625.00           7.150
 
                            -----------------
                            $    2,931,295.00
                            -----------------
                            -----------------

                                      A-25
<PAGE>
- ------------
NOTES
 
(1)  All ratings are by Standard & Poor's. Any rating followed by '*' is subject
     to submission and review of final documentation. Any rating followed by a
     'p' is provisional and assumes the successful completion of the project
     being financed. (See Appendix A.)
 
(2)  Debt Obligations are first subject to optional redemption (which may be
    exercised in whole or in part) on the dates and at the prices indicated
     under the Optional Refunding Redemptions column in the table. In subsequent
     years Debt Obligations 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.
 
    Certain Debt Obligations may provide for redemption at par prior or in
    addition to any optional or mandatory redemption dates or maturity, for
    example, if proceeds are not able to be used as contemplated, if the project
     is sold by the owner, if the project is condemned or sold, if the project
     is destroyed and insurance proceeds are used to redeem the Debt
     Obligations, if interest on the Debt Obligations becomes subject to
     taxation, if any related credit support expires prior to maturity and is
     not renewed or substitute credit support not obtained, if, in the case of
     housing obligations, mortgages are prepaid, or in other special
     circumstances.
 
    Sinking fund redemptions are all at par and generally redeem only part of an
    issue. Some of the Debt Obligations have mandatory sinking funds which
    contain optional provisions permitting the issuer to increase the principal
    amount of Debt Obligations called on a mandatory redemption date. The
    sinking fund redemptions with optional provisions may, and optional
    refunding redemptions generally will, occur at times when the redeemed Debt
    Obligations have an offer side evaluation which represents a premium over
    par. To the extent that the Debt Obligations were deposited in the Trust at
     a price higher than the redemption price, this will represent a loss of
     capital when compared with the original Public Offering Price of the Units.
     Monthly distributions will generally be reduced by the amount of the income
     which would otherwise have been paid with respect to redeemed Debt
     Obligations and there will be distributed to Holders any principal amount
     and premium received on such redemption after satisfying any redemption
     requests received by the Trust. The current return and long term return in
     this event may be affected by redemptions. The tax effect on Holders of
     redemptions and related distributions is described under Taxes.
 
(3)  Evaluation of Debt Obligations by the Evaluator is made on the basis of
    current offer side evaluation. The offering side evaluation is greater than
     the current bid side evaluation of the Debt Obligations, which is the basis
     on which Redemption Price per Unit is determined (see How To Sell). The
     aggregate value based on the bid side evaluation at the Evaluation Time on
     the business day prior to the Initial Date of Deposit was $2,918,295.00,
     which is $13,000.00 (.40% of the aggregate face amount) lower than the
     aggregate Cost of Debt Obligations to Trust based on the offer side
     evaluation.
    Yield to Maturity on the Initial Date of Deposit of Debt Obligations was
    computed on the basis of the offer side evaluation at the Evaluation Time on
    the business day prior to the Initial Date of Deposit. Percentages in this
     column represent Yield to Maturity on Initial Date of Deposit unless
     followed by '+' which indicates yield to an earlier redemption date. (See
     Income and Distributions--Returns for a description of the computation of
     yield price.)
 
                      ------------------------------------
 
   All Debt Obligations are represented entirely by contracts to purchase such
    Debt Obligations, which were entered into by the Sponsors during the period
    November 11, 1994 to November 15, 1994. All contracts are expected to be
    settled by the initial settlement date for purchase of Units.
 
   All Debt Obligations have been insured or guaranteed to maturity by the
    indicated insurance company (see Risk Factors--Obligations Backed by
    Insurance).
 
  +  See Footnote (3).
 
                                      A-26
<PAGE>
                                   APPENDIX D
 
THE CALIFORNIA TRUST
 
     The Portfolio of the California Trust contains different issues of debt
obligations issued by or on behalf of the State of California (the 'State') and
counties, municipalities and other political subdivisions and other public
authorities thereof or by the Government of Puerto Rico or the Government of
Guam or by their respective authorities, all rated in the category A or better
by at least one national rating organization (see Investment Summary).
Investment in the California Trust should be made with an understanding that the
value of the underlying Portfolio may decline with increases in interest rates.
 
     RISK FACTORS--Economic Factors. The Governor's 1993-1994 Budget, introduced
on January 8, 1993, proposed general fund expenditures of $37.3 billion, with
projected revenues of $39.9 billion. To balance the budget in the face of
declining revenues, the Governor proposed a series of revenue shifts from local
government, reliance on increased federal aid, and reductions in state spending.
 
     The Department of Finance of the State of California's May Revision of
General Fund Revenues and Expenditures (the 'May Revision'), released on May 20,
1993, projected the State would have an accumulated deficit of about $2.75
billion by June 30, 1993 essentially unchanged from the prior year. The Governor
proposed to eliminate this deficit over an 18-month period. Unlike previous
years, the Governor's Budget and May Revision did not calculate a 'gap' to be
closed, but rather set forth revenue and expenditure forecasts and proposals
designed to produce a balanced budget.
 
     The 1993-1994 budget act (the '1993-94 Budget Act') was signed by the
Governor on June 30, 1993, along with implementing legislation. The Governor
vetoed about $71 million in spending.
 
     The 1993-94 Budget Act is predicated on general fund revenues and transfers
estimated at $40.6 billion, $400 million below 1992-93 (and the second
consecutive year of actual decline). The principal reasons for declining revenue
are the continued weak economy and the expiration (or repeal) of three fiscal
steps taken in 1991--a half cent temporary sales tax, a deferral of operating
loss carryforwards, and repeal by initiative of a sales tax on candy and snack
foods.
 
     The 1993-94 Budget Act also assumes special fund revenues of $11.9 billion,
an increase of 2.9 percent over 1992-93.
 
     The 1993-94 Budget Act includes general fund expenditures of $38.5 billion
(a 6.3 percent reduction from projected 1992-93 expenditures of $41.1 billion),
in order to keep a balanced budget within the available revenues. The 1993-94
Budget Act also includes special fund expenditures of $12.1 billion, a 4.2
percent increase. The 1993-94 Budget Act reflects the following major
adjustments:
 
        1. Changes in local government financing to shift about $2.6 billion in
     property taxes from cities, counties, special districts and redevelopment
     agencies to school and community college districts, thereby reducing
     general fund support by an equal amount. About $2.5 billion would be
     permanent, reflecting termination of the State's 'bailout' of local
     governments following the property tax cuts of Proposition 13 in 1978 (See
     'Constitutional, Legislative and Other Factors' below).
 
        The property tax revenue losses for cities and counties are offset in
     part by additional sales tax revenues and mandate relief. The temporary 0.5
     percent sales tax has been extended through December 31, 1993, for
     allocation to counties for public safety programs. The voters approved
     Proposition 172 in November 1993 and the 0.5 percent sales tax was extended
     permanently for public safety purposes.
 
        Legislation also has been enacted to eliminate state mandates in order
     to provide local governments flexibility in making their programs
     responsive to local needs. Legislation provides mandate relief for local
     justice systems which affect county audit requirements, court reporter
     fees, and court consolidation; health and welfare relief involving advisory
     boards, family planning, state audits and realignment maintenance efforts;
     and relief in areas such as county welfare department self-evaluations,
     noise guidelines and recycling requirements.
 
        2. The 1993-94 Budget Act projected K-12 Proposition 98 funding on a
     cash basis at the same per-pupil level as 1992-93 by providing schools a
     $609 million loan payable from future years' Proposition 98 funds.
 
                                      d-1
<PAGE>
        3. The 1993-94 Budget Act assumed receipt of about $692 million of aid
     to the State from the federal government to offset health and welfare costs
     associated with foreign immigrants living in the State, which would reduce
     a like amount of General Fund expenditures. About $411 million of this
     amount was one-time funding. Congress ultimately appropriated only $450
     million.
 
        4. Reductions of $600 million in health and welfare programs and $400
     million in support for higher education (partly offset by fee increases at
     all three units of higher education) and various miscellaneous cuts
     (totalling approximately $150 million) in State government services in many
     agencies, up to 15 percent. The 1993-94 Budget Act suspended the 4 percent
     automatic budget reduction 'trigger', as was done in 1992-93, so cuts could
     be focused.
 
        5. A 2-year suspension of the renters' tax credit ($390 million
     expenditure reduction in 1993-94).
 
        6. Miscellaneous one-time items, including deferral of payment to the
     Public Employees Retirement Fund ($339 million) and a change in accounting
     for debt service from accrual to cash basis, saving $107 million.
 
     The 1993-94 Budget Act contains no general fund tax/revenue increases other
than a two year suspension of the renters' tax credit. The 1993-94 Budget Act
suspended the 4 percent automatic budget reduction trigger, as was done in
1992-93 so cuts could be focused.
 
     Administration reports during the course of the 1993-94 Fiscal Year have
indicated that while economic recovery appears to have started in the second
half of the fiscal year, recessionary conditions continued longer than had been
anticipated when the 1993-94 Budget Act was adopted. Overall, revenues for the
1993-94 Fiscal Year were about $800 million lower than original projections, and
expenditures were about $780 million higher, primarily because of higher health
and welfare caseloads, lower property taxes which require greater State support
for K-14 education to make up the shortfall, and lower than anticipated federal
government payments for immigration-related costs. The reports, in May and June,
1994, indicated that revenues in the second half of the 1993-94 Fiscal Year have
been very close to the projections made on the Governor's Budget of January 10,
1994, which is consistent with a slow turnaround in the economy.
 
     The Department of Finance's July 1994 Bulletin, including the final June
receipts, reported that June revenues were $114 million (2.5 percent) above
projection, with final end-of-year results at $377 million (about 1 percent)
above the May Revision projections. Part of this results was due to end-of-year
adjustments and reconcilitations. Personal income tax and sales tax continued to
track projections very well. The largest factor in the higher than anticipated
revenues was from bank and corporation taxes, which were $140 million (18.4
percent) above projection in June. While the higher June receipts are reflected
in the actual 1993-94 Fiscal Year cash flow results, and help the starting cash
balance for the 1994-95 Fiscal Year, the Department of Finance has not adjusted
any of its revenue projections for the 1994-95 or 1995-96 Fiscal Years.
 
     During the 1993-94 Fiscal Year, the State implemented the deficit
retirement plan, which was part of the 1993-94 Budget Act, by issuing $1.2
billion of revenue anticipation warrants in February 1994 maturing December 21,
1994. This borrowing reduced the cash deficit at the end of the 1993-94 Fiscal
Year. Nevertheless, because of the $1.5 billion variance from the original
1993-94 Budget Act assumptions. the General Fund ended the fiscal year at June
30, 1994 carrying forward an accumulated deficit of approximately $2 billion.
 
     Because of the revenue shortfall and the State's reduced internal
borrowable cash resources, in addition to the $1.2 billion of revenue
anticipation warrants issued as part of the deficit retirement plan, the State
issued an additional $2.0 billion of revenue anticipation warrants, maturing
July 26, 1994, which were needed to fund the State's obligations and expenses
through the end of the 1993-94 Fiscal Year.
 
     On January 17, 1994, a major earthquake measuring an estimated 6.8 on the
Richter Scale struck Los Angeles. Significant property damage to private and
public facilities occurred in a four-county area including northern Los Angeles
County, Ventura County, and parts of Orange and San Bernardino Counties, which
were declared as State and federal disaster areas by January 18. Current
estimates of total property damage (private and public) are in the range of $20
billion but these estimates are still subject to change.
 
     Despite such damage, on the whole, the vast majority of structures in the
areas, including large manufacturing and commercial buildings and all modern
high-rise offices, survived the earthquake with minimal or no damage, validating
the cumulative effect of strict building codes and thorough preparation for such
an emergency by the State and local agencies.
 
                                      d-2
<PAGE>
     State-owned facilities including transportation corridors and facilities
such as Interstate Highways 5 and 10 and State Highways 14, 118 and 210
sustained some damage. Most of the major highways (Interstate 5 and 10) have now
been reopened.
 
     The campus of California State University at Northridge (very near the
epicenter) suffered an estimated $350 million damage, resulting in temporary
closure of the campus. It has reopened using borrowed facilities elsewhere in
the area and many temporary structures. There was also some damage to the
University of California at Los Angeles and to an office building in Van Nuys
(now open after a temporary closure). Overalll, except for the temporary road
and bridge closures, and CSU-Northridge, the earthquake did not and is not
expected to significantly State government operations.
 
     The State in conjunction with the federal government is committed to
providing assistance to local governments, individuals and businesses suffering
damage as a result of the earthquake, as well as to provide for the repair and
replacement of State-owned facilities. The federal government will provide
substantial earthquake assistance.
 
     The President immediately allocated some available disaster funds, and
Congress has approved additional funds for a total of at least $9.5 billion of
federal funds for earthquake relief, including assistance to homeowners and
small businesses, and costs for repair of damaged public facilities. The
Governor originally proposed that the State will have to pay about $1.9 billion
for earthquake relief costs, including a 10 percent match to some of the federal
funds, and costs for some programs not covered by the federal aid. The Governor
proposed to cover $1.05 billion of these costs from a general obligation bond
issue which was on the June, 1994 ballot, but it was not approved by the voters.
The Governor subsequently announced that the State's share for transportation
projects would come from existing Department of Transportation funds (thereby
delaying other, non-earthquake related projects), that the State's share for
certain other costs (including local school building repairs) would come from
reallocating existing bond funds, and that a proposed program for homeowner and
small business aid supplemental to federal aid would have to be abandoned. Some
other costs will be borrowed from the federal government in a manner similar to
that used by the State of Florida after Hurricane Andrew; pursuant to Senate
Bill 2383, repayment will have to be addressed in 1995-96 or beyond.
 
     The 1994-95 Fiscal Year represents the fourth consecutive year the Governor
and Legislature will be faced with a very difficult budget environment to
produce a balanced budget. Many program cuts and budgetary adjustments have
already been made in the last three years. The Governor's Budget proposal, as
updated in May and June, 1994, recognized that the accumulated deficit could not
be repaid in one year, and proposed a two-year solution. The budget proposal
sets forth revenue and expenditure forecasts and revenue and expenditure
proposals which result in operating surpluses for the budget for both 1994-95
and 1995-96, and lead to the elimination of the accumulated budget deficit,
estimated at about $2.0 billion at June 30, 1994, by June 30, 1996.
 
     The 1994-95 Budget Act, signed by the Govennor on July 8, 1994, projects
revenues and transfers of $41.9 billion, $2.1 billion higher than revenues in
1993-94. This reflects the Administration's forecast of an improving economy.
Also included in this figure is a projected receipt of about $360 million from
the Federal Government to reimburse the State's cost of incarcerating
undocumented immigrants. The State will not know how much the Federal Government
will actually provide until the Federal FY 1995 Budget is completed. Completion
of the Federal Budget is expected by October 1994. The Legislature took no
action on a proposal in the January Governor's Budget to undertake an expansion
of the transfer of certain programs to counties, which would also have
transferred to counties 0.5% of the State's current sales tax.
 
     The Budget act projects Special Fund revenues of $12.1 billion, a decrease
of 2.4% from 1993-94 estimated revenues.
 
     The 1994-95 Budget Act projects General Fund expenditures of $40.9 billion,
an increase of $1.6 billion over 1993-94. The Budget Act also projects Special
Fund expenditures of $13.7 billion, a 5.4% increase over 1993-94 estimated
expenditures. The principal features of the Budget Act were the following:
 
        1. Receipt of additional federal aid in 1994-95 of about $400 million
     for costs of refugee assistance and medical care for undocumented
     immigrants, thereby offsetting a similar General Fund cost. The State will
     not know how much of these funds it will receive until the Federal FY 1995
     Budget is passed.
 
        2. Reductions of approximately $1.1 billion in health and welfare costs.
 
                                      d-3
<PAGE>
        3. A General Fund increase of approximately $38 million in support for
     the University of California and $65 million for California State
     University. It is anticipated that student fees for both the U.C. and
     C.S.U. will increase up to 10%.
 
        4. Proposition 98 funding for K-14 schools is increased by $526 million
     from 1993-94 levels, representing an increase for enrollment growth and
     inflation. Consistent with previous budget agreements, Proposition 98
     funding provides approximately $4,217 per student for K-12 schools, equal
     to the level in the past three years.
 
        5. Legislation enacted with the Budget clarifies laws passed in 1992 and
     1993 which require counties and other local agencies to transfer funds to
     local school districts, thereby reducing State aid. Some counties had
     implemented a method of making such transfers which provided less money for
     schools if there were redevelopment agency projects. The new legislation
     bans this method of transfer. If all counties had implemented this method,
     General Fund aid to K-12 schools would have been $300 million higher in
     each of the 1994-95 and 1995-96 Fiscal Years.
 
        6. The 1994-95 Budget Act provides funding for anticipated growth in the
     State's prison inmate population, including provisions for implementing
     recent legislation (the so-called 'Three Strikes' law) which requires
     mandatory life prison terms for certain third-time felony offenders.
 
        7. Additional miscellaneous cuts ($500 million) and fund transfers ($255
     milliion) totalling in the aggregate approximately $755 million.
 
     The 1994-95 Budget Act contains no tax increases. Under legislation enacted
for the 1993-94 Budget, the renters' tax credit was suspended for two years
(1993 and 1994). A ballot proposition to permanently restore the renters' tax
credit after this year failed at the June, 1994 election. The Legislature
enacted a further one-year suspension of the renters' tax credit, for 1995,
saving about $390 million in the 1995-96 Fiscal Year.
 
     The 1994-95 Budget assumes that the State will use a cash flow borrowing
program in 1994-95 which combines one-year notes and two-year warrants, which
have now been issued. Issuance of warrants allows the State to defer repayment
of approximately $1.0 billion of its accumulated budget deficit into the 1995-96
Fiscal Year.
 
     The State's cash flow management plan for the 1994-95 fiscal year included
the issuance of $4.0 billion of revenue anticipation warrants on July 26, 1994,
to mature on April 25, 1996, as part of a two-year plan to retire the
accumulated State budget deficit.
 
     Because preparation of cash flow estimates for the 1995-96 Fiscal Year is
necessarily more imprecise than for the current fiscal year and entails greater
risks of variance from assumptions, and because the Governor's two-year budget
plan assumes receipt of a large amount of federal aid in the 1995-96 Fiscal Year
for immigration-related costs which is uncertain, the Legislature enacted a
backup budget adjustment mechanism to mitigate possible deviations from
projected revenues, expenditures or internal borrowable resources which might
reduce available cash resources during the two-year plan, so as to assure
repayment of the warrants.
 
     Pursuant to Section 12467 of the California Government Code, enacted by
Chapter 135, Statutes of 1994 (the 'Budget Adjustment Law'), the State
Controller will, on November 15, 1994, in conjunction with the Legislative
Analyst's Office, review the cash flow projections for the General Fund on June
30, 1995 and compare them to the projections for the 1994-95 Fiscal Year
included in the Official Statement dated July 20, 1994 for the 1994 Revenue
Anticipation Warrants, Series C and D. If the State Controller's report
identifies a decrease in the unused borrowable resources on June 30, 1995 of
more than $430,000,000, then the '1995 cash shortfall' shall be the amount of
the difference that exceeds $430,000,000. On or before February 15, 1995,
legislation must be enacted providing for sufficient General Fund expenditure
reductions, revenue increases, or both, to offset said 1995 cash shortfall. If
such legislation is not enacted, within five days thereafter the Director of
Finance must reduce all General Fund appropriations for the 1994-95 Fiscal Year,
except certain appropriations required by the State Constitution and federal law
(the 'Required Appropriations'), by the percentage equal to the ratio of said
1995 cash shortfall to total remaining General Fund appropriations for the
1994-95 Fiscal Year, excluding the Required Appropriations.
 
     The Director of Finance is required to include updated cash-flow statements
for the 1994-95 and 1995-96 Fiscal Years in the May revision to the 1995-96
Fiscal Year budget proposal. By June 1, 1995, the State Controller must concur
with these updated statements or provide a revised estimate of the cash
condition of the General Fund for the 1994-95 and the 1995-96 Fiscal Years. For
the 1995-96 Fiscal Year, Chapter 135 prohibits
 
                                      d-4
<PAGE>
any external borrowing as of June 30, 1996, thereby requiring the State to rely
solely on internal borrowable resources, expenditure reductions or revenue
increases to eliminate any projected cash flow shortfall.
 
     Commencing on October 15, 1995, the State Controller will, in conjunction
with the Legislative Analyst's Office, review the estimated cash condition of
the General Fund for the 1995-96 Fiscal Year. The '1996 cash shortfall' shall be
the amount necessary to bring the balance of unused borrowable resources on June
30, 1996 to zero. On or before December 1, 1995, legislation must be enacted
providing for sufficient General Fund expenditure reductions, revenue increases,
or both, to offset any such 1996 cash shortfall identified by the State
Controller. If such legislation is not enacted, within five days thereafter the
Director of Finance must reduce all General Fund appropriations for the 1995-96
Fiscal Year, except the Required Appropriations, by the percentage equal to the
ratio of said 1996 cash shortfall to total remaining General Fund appropriations
for the 1995-96 Fiscal Year, excluding the Required Appropriations.
 
     Constitutional, Legislative and Other Factors. Certain California
constitutional amendments, legislative measures, executive orders,
administrative regulations and voter initiatives could result in the adverse
effects described below. The following information constitutes only a brief
summary, does not purport to be a complete description, and is based on
information drawn from official statements and prospectuses relating to
securities offerings of the State of California and various local agencies in
California, available as of the date of this Prospectus. While the Sponsors have
not independently verified such information, they have no reason to believe that
such information is not correct in all material respects.
 
     Certain Debt Obligations in the Portfolio may be obligations of issuers
which rely in whole or in part on California State revenues for payment of these
obligations. Property tax revenues and a portion of the State's general fund
surplus are distributed to counties, cities and their various taxing entities
and the State assumes certain obligations theretofore paid out of local funds.
Whether and to what extent a portion of the State's general fund will be
distributed in the future to counties, cities and their various entities, is
unclear.
 
     In 1988, California enacted legislation providing for a water's-edge
combined reporting method if an election fee was paid and other conditions met.
On October 6, 1993, California Governor Pete Wilson signed Senate Bill 671
(Alquist) which modifies the unitary tax law by deleting the requirements that a
taxpayer electing to determine its income on a water's-edge basis pay a fee and
file a domestic disclosure spreadsheet and instead requiring an annual
information return. Significantly, the Franchise Tax Board can no longer
disregard a taxpayer's election. The Franchise Tax Board is reported to have
estimated state revenue losses from the Legislation as growing from $27 million
in 1993-94 to $616 million in 1999-2000, but others, including Assembly Speaker
Willie Brown, disagree with that estimate and assert that more revenue will be
generated for California, rather than less, because of an anticipated increase
in economic activity and additional revenue generated by the incentives in the
Legislation.
 
     Certain of the Debt Obligations may be obligations of issuers who rely in
whole or in part on ad valorem real property taxes as a source of revenue. On
June 6, 1978, California voters approved an amendment to the California
Constitution known as Proposition 13, which added Article XIIIA to the
California Constitution. The effect of Article XIIIA is to limit ad valorem
taxes on real property and to restrict the ability of taxing entities to
increase real property tax revenues. On November 7, 1978, California voters
approved Proposition 8, and on June 3, 1986, California voters approved
Proposition 46, both of which amended Article XIIIA.
 
     Section 1 of Article XIIIA limits the maximum ad valorem tax on real
property to 1% of full cash value (as defined in Section 2), to be collected by
the counties and apportioned according to law; provided that the 1% limitation
does not apply to ad valorem taxes or special assessments to pay the interest
and redemption charges on (i) any indebtedness approved by the voters prior to
July 1, 1978, or (ii) any bonded indebtedness for the acquisition or improvement
of real property approved on or after July 1, 1978, by two-thirds of the votes
cast by the voters voting on the proposition. Section 2 of Article XIIIA defines
'full cash value' to mean 'the County Assessor's valuation of real property as
shown on the 1975/76 tax bill under 'full cash value' or, thereafter, the
appraised value of real property when purchased, newly constructed, or a change
in ownership has occurred after the 1975 assessment.' The full cash value may be
adjusted annually to reflect inflation at a rate not to exceed 2% per year, or
reduction in the consumer price index or comparable local data, or reduced in
the event of declining property value caused by damage, destruction or other
factors. The California State Board of Equalization has adopted regulations,
binding on county assessors, interpreting the meaning of 'change in ownership'
and 'new construction' for purposes of determining full cash value of property
under Article XIIIA.
 
                                      d-5
<PAGE>
     Legislation enacted by the California Legislature to implement Article
XIIIA (Statutes of 1978, Chapter 292, as amended) provides that notwithstanding
any other law, local agencies may not levy any ad valorem property tax except to
pay debt service on indebtedness approved by the voters prior to July 1, 1978,
and that each county will levy the maximum tax permitted by Article XIIIA of
$4.00 per $100 assessed valuation (based on the former practice of using 25%,
instead of 100%, of full cash value as the assessed value for tax purposes). The
legislation further provided that, for the 1978/79 fiscal year only, the tax
levied by each county was to be apportioned among all taxing agencies within the
county in proportion to their average share of taxes levied in certain previous
years. The apportionment of property taxes for fiscal years after 1978/79 has
been revised pursuant to Statutes of 1979, Chapter 282 which provides relief
funds from State moneys beginning in fiscal year 1979/80 and is designed to
provide a permanent system for sharing State taxes and budget funds with local
agencies. Under Chapter 282, cities and counties receive more of the remaining
property tax revenues collected under Proposition 13 instead of direct State
aid. School districts receive a correspondingly reduced amount of property
taxes, but receive compensation directly from the State and are given additional
relief. Chapter 282 does not affect the derivation of the base levy ($4.00 per
$100 assessed valuation) and the bonded debt tax rate.
 
     On November 6, 1979, an initiative known as 'Proposition 4' or the 'Gann
Initiative' was approved by the California voters, which added Article XIIIB to
the California Constitution. Under Article XIIIB, State and local governmental
entities have an annual 'appropriations limit' and are not allowed to spend
certain moneys called 'appropriations subject to limitation' in an amount higher
than the 'appropriations limit.' Article XIIIB does not affect the appropriation
of moneys which are excluded from the definition of 'appropriations subject to
limitation,' including debt service on indebtedness existing or authorized as of
January 1, 1979, or bonded indebtedness subsequently approved by the voters. In
general terms, the 'appropriations limit' is required to be based on certain
1978/79 expenditures, and is to be adjusted annually to reflect changes in
consumer prices, population, and certain services provided by these entities.
Article XIIIB also provides that if these entities' revenues in any year exceed
the amounts permitted to be spent, the excess is to be returned by revising tax
rates or fee schedules over the subsequent two years.
 
     At the November 8, 1988 general election, California voters approved an
initiative known as Proposition 98. This initiative amends Article XIIIB to
require that (i) the California Legislature establish a prudent state reserve
fund in an amount as it shall deem reasonable and necessary and (ii) revenues in
excess of amounts permitted to be spent and which would otherwise be returned
pursuant to Article XIIIB by revision of tax rates or fee schedules, be
transferred and allocated (up to a maximum of 4%) to the State School Fund and
be expended solely for purposes of instructional improvement and accountability.
No such transfer or allocation of funds will be required if certain designated
state officials determine that annual student expenditures and class size meet
certain criteria as set forth in Proposition 98. Any funds allocated to the
State School Fund shall cause the appropriation limits established in Article
XIIIB to be annually increased for any such allocation made in the prior year.
 
     Proposition 98 also amends Article XVI to require that the State of
California provide a minimum level of funding for public schools and community
colleges. Commencing with the 1988-89 fiscal year, state monies to support
school districts and community college districts shall equal or exceed the
lesser of (i) an amount equalling the percentage of state general revenue bonds
for school and community college districts in fiscal year 1986-87, or (ii) an
amount equal to the prior year's state general fund proceeds of taxes
appropriated under Article XIIIB plus allocated proceeds of local taxes, after
adjustment under Article XIIIB. The initiative permits the enactment of
legislation, by a two-thirds vote, to suspend the minimum funding requirement
for one year.
 
     On June 30, 1989, the California Legislature enacted Senate Constitutional
Amendment 1, a proposed modification of the California Constitution to alter the
spending limit and the education funding provisions of Proposition 98. Senate
Constitutional Amendment 1, on the June 5, 1990 ballot as Proposition 111, was
approved by the voters and took effect on July 1, 1990. Among a number of
important provisions, Proposition 111 recalculates spending limits for the State
and for local governments, allows greater annual increases in the limits, allows
the averaging of two years' tax revenues before requiring action regarding
excess tax revenues, reduces the amount of the funding guarantee in recession
years for school districts and community college districts (but with a floor of
40.9 percent of State general fund tax revenues), removes the provision of
Proposition 98 which included excess moneys transferred to school districts and
community college districts in the base calculation for the next year, limits
the amount of State tax revenue over the limit which would be transferred to
school districts and community college districts, and exempts increased gasoline
taxes and truck weight fees from the State appropriations limit. Additionally,
Proposition 111 exempts from the State appropriations limit funding for capital
outlays.
 
                                      d-6
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     Article XIIIB, like Article XIIIA, may require further interpretation by
both the Legislature and the courts to determine its applicability to specific
situations involving the State and local taxing authorities. Depending upon the
interpretation, Article XIIIB may limit significantly a governmental entity's
ability to budget sufficient funds to meet debt service on bonds and other
obligations.
 
     On November 4, 1986, California voters approved an initiative statute known
as Proposition 62. This initiative (i) requires that any tax for general
governmental purposes imposed by local governments be approved by resolution or
ordinance adopted by a two-thirds vote of the governmental entity's legislative
body and by a majority vote of the electorate of the governmental entity, (ii)
requires that any special tax (defined as taxes levied for other than general
governmental purposes) imposed by a local governmental entity be approved by a
two-thirds vote of the voters within that jurisdiction, (iii) restricts the use
of revenues from a special tax to the purposes or for the service for which the
special tax was imposed, (iv) prohibits the imposition of ad valorem taxes on
real property by local governmental entities except as permitted by Article
XIIIA, (v) prohibits the imposition of transaction taxes and sales taxes on the
sale of real property by local governments, (vi) requires that any tax imposed
by a local government on or after August 1, 1985 be ratified by a majority vote
of the electorate within two years of the adoption of the initiative or be
terminated by November 15, 1988, (vii) requires that, in the event a local
government fails to comply with the provisions of this measure, a reduction in
the amount of property tax revenue allocated to such local government occurs in
an amount equal to the revenues received by such entity attributable to the tax
levied in violation of the initiative, and (viii) permits these provisions to be
amended exclusively by the voters of the State of California.
 
     In September 1988, the California Court of Appeal in City of Westminster v.
County of Orange, 204 Cal. App. 3d 623, 215 Cal. Rptr. 511 (Cal. Ct. App. 1988),
held that Proposition 62 is unconstitutional to the extent that it requires a
general tax by a general law city, enacted on or after August 1, 1985 and prior
to the effective date of Proposition 62, to be subject to approval by a majority
of voters. The Court held that the California Constitution prohibits the
imposition of a requirement that local tax measures be submitted to the
electorate by either referendum or initiative. It is not possible to predict the
impact of this decision on charter cities, on special taxes or on new taxes
imposed after the effective date of Proposition 62.
 
     On November 8, 1988, California voters approved Proposition 87. Proposition
87 amended Article XVI, Section 16, of the California Constitution by
authorizing the California Legislature to prohibit redevelopment agencies from
receiving any of the property tax revenue raised by increased property tax rates
levied to repay bonded indebtedness of local governments which is approved by
voters on or after January 1, 1989. It is not possible to predict whether the
California Legislature will enact such a prohibition nor is it possible to
predict the impact of Proposition 87 on redevelopment agencies and their ability
to make payments on outstanding debt obligations.
 
     Certain Debt Obligations in the Portfolio may be obligations which are
payable solely from the revenues of health care institutions. Certain provisions
under California law may adversely affect these revenues and, consequently,
payment on those Debt Obligations.
 
     The Federally sponsored Medicaid program for health care services to
eligible welfare beneficiaries in California is known as the Medi-Cal program.
Historically, the Medi-Cal Program has provided for a cost-based system of
reimbursement for inpatient care furnished to Medi-Cal beneficiaries by any
hospital wanting to participate in the Medi-Cal program, provided such hospital
met applicable requirements for participation. California law now provides that
the State of California shall selectively contract with hospitals to provide
acute inpatient services to Medi-Cal patients. Medi-Cal contracts currently
apply only to acute inpatient services. Generally, such selective contracting is
made on a flat per diem payment basis for all services to Medi-Cal
beneficiaries, and generally such payment has not increased in relation to
inflation, costs or other factors. Other reductions or limitations may be
imposed on payment for services rendered to Medi-Cal beneficiaries in the
future.
 
     Under this approach, in most geographical areas of California, only those
hospitals which enter into a Medi-Cal contract with the State of California will
be paid for non-emergency acute inpatient services rendered to Medi-Cal
beneficiaries. The State may also terminate these contracts without notice under
certain circumstances and is obligated to make contractual payments only to the
extent the California legislature appropriates adequate funding therefor.
 
     In February 1987, the Governor of the State of California announced that
payments to Medi-Cal providers for certain services (not including hospital
acute inpatient services) would be decreased by ten percent through
 
                                      d-7
<PAGE>
June 1987. However, a federal district court issued a preliminary injunction
preventing application of any cuts until a trial on the merits can be held. If
the injunction is deemed to have been granted improperly, the State of
California would be entitled to recapture the payment differential for the
intended reduction period. It is not possible to predict at this time whether
any decreases will ultimately be implemented.
 
     California enacted legislation in 1982 that authorizes private health plans
and insurers to contract directly with hospitals for services to beneficiaries
on negotiated terms. Some insurers have introduced plans known as 'preferred
provider organizations' ('PPOs'), which offer financial incentives for
subscribers who use only the hospitals which contract with the plan. Under an
exclusive provider plan, which includes most health maintenance organizations
('HMOs'), private payors limit coverage to those services provided by selected
hospitals. Discounts offered to HMOs and PPOs may result in payment to the
contracting hospital of less than actual cost and the volume of patients
directed to a hospital under an HMO or PPO contract may vary significantly from
projections. Often, HMO or PPO contracts are enforceable for a stated term,
regardless of provider losses or of bankruptcy of the respective HMO or PPO. It
is expected that failure to execute and maintain such PPO and HMO contracts
would reduce a hospital's patient base or gross revenues. Conversely,
participation may maintain or increase the patient base, but may result in
reduced payment and lower net income to the contracting hospitals.
 
     These Debt Obligations may also be insured by the State of California
pursuant to an insurance program implemented by the Office of Statewide Health
Planning and Development for health facility construction loans. If a default
occurs on insured Debt Obligations, the State Treasurer will issue debentures
payable out of a reserve fund established under the insurance program or will
pay principal and interest on an unaccelerated basis from unappropriated State
funds. At the request of the Office of Statewide Health Planning and
Development, Arthur D. Little, Inc. prepared a study in December, 1983, to
evaluate the adequacy of the reserve fund established under the insurance
program and based on certain formulations and assumptions found the reserve fund
substantially underfunded. In September of 1986, Arthur D. Little, Inc. prepared
an update of the study and concluded that an additional 10% reserve be
established for 'multi-level' facilities. For the balance of the reserve fund,
the update recommended maintaining the current reserve calculation method. In
March of 1990, Arthur D. Little, Inc. prepared a further review of the study and
recommended that separate reserves continue to be established for 'multi-level'
facilities at a reserve level consistent with those that would be required by an
insurance company.
 
     Certain Debt Obligations in the Portfolio may be obligations which are
secured in whole or in part by a mortgage or deed of trust on real property.
California has five principal statutory provisions which limit the remedies of a
creditor secured by a mortgage or deed of trust. Two limit the creditor's right
to obtain a deficiency judgment, one limitation being based on the method of
foreclosure and the other on the type of debt secured. Under the former, a
deficiency judgment is barred when the foreclosure is accomplished by means of a
nonjudicial trustee's sale. Under the latter, a deficiency judgment is barred
when the foreclosed mortgage or deed of trust secures certain purchase money
obligations. Another California statute, commonly known as the 'one form of
action' rule, requires creditors secured by real property to exhaust their real
property security by foreclosure before bringing a personal action against the
debtor. The fourth statutory provision limits any deficiency judgment obtained
by a creditor secured by real property following a judicial sale of such
property to the excess of the outstanding debt over the fair value of the
property at the time of the sale, thus preventing the creditor from obtaining a
large deficiency judgment against the debtor as the result of low bids at a
judicial sale. The fifth statutory provision gives the debtor the right to
redeem the real property from any judicial foreclosure sale as to which a
deficiency judgment may be ordered against the debtor.
 
     Upon the default of a mortgage or deed of trust with respect to California
real property, the creditor's nonjudicial foreclosure rights under the power of
sale contained in the mortgage or deed of trust are subject to the constraints
imposed by California law upon transfers of title to real property by private
power of sale. During the three-month period beginning with the filing of a
formal notice of default, the debtor is entitled to reinstate the mortgage by
making any overdue payments. Under standard loan servicing procedures, the
filing of the formal notice of default does not occur unless at least three full
monthly payments have become due and remain unpaid. The power of sale is
exercised by posting and publishing a notice of sale for at least 20 days after
expiration of the three-month reinstatement period. Therefore, the effective
minimum period for foreclosing on a mortgage could be in excess of seven months
after the initial default. Such time delays in collections could disrupt the
flow of revenues available to an issuer for the payment of debt service on the
outstanding obligations if such defaults occur with respect to a substantial
number of mortgages or deeds of trust securing an issuer's obligations.
 
                                      d-8
<PAGE>
     In addition, a court could find that there is sufficient involvement of the
issuer in the nonjudicial sale of property securing a mortgage for such private
sale to constitute 'state action,' and could hold that the private-right-of-sale
proceedings violate the due process requirements of the Federal or State
Constitutions, consequently preventing an issuer from using the nonjudicial
foreclosure remedy described above.
 
     Certain Debt Obligations in a Portfolio may be obligations which finance
the acquisition of single family home mortgages for low and moderate income
mortgagors. These obligations may be payable solely from revenues derived from
the home mortgages, and are subject to California's statutory limitations
described above applicable to obligations secured by real property. Under
California antideficiency legislation, there is no personal recourse against a
mortgagor of a single family residence purchased with the loan secured by the
mortgage, regardless of whether the creditor chooses judicial or nonjudicial
foreclosure.
 
     Under California law, mortgage loans secured by single-family
owner-occupied dwellings may be prepaid at any time. Prepayment charges on such
mortgage loans may be imposed only with respect to voluntary prepayments made
during the first five years during the term of the mortgage loan, and cannot in
any event exceed six months' advance interest on the amount prepaid in excess of
20%of the original principal amount of the mortgage loan. This limitation could
affect the flow of revenues available to an issuer for debt service on the
outstanding debt obligations which financed such home mortgages.
 
     CALIFORNIA TAXES
 
     In the opinion of O'Melveny & Myers, Los Angeles, California, special
counsel on California tax matters, under existing California law:
 
        The Trust Fund is not 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.
 
THE FLORIDA TRUST
 
     The Portfolio of the Florida Trust contains different issues of long-term
debt obligations issued by or on behalf of the State of Florida (the 'State')
and counties, municipalities and other political subdivisions and other public
authorities thereof or by the Government of Puerto Rico or the Government of
Guam or by their respective authorities, all rated in the category A or better
by at least one national rating organization (see Investment Summary).
Investment in the Florida Trust should be made with an understanding that the
value of the underlying Portfolio may decline with increases in interest rates.
 
     RISK FACTORS--The State Economy.  In 1980 Florida ranked seventh among the
fifty states with a population of 9.7 million people. The State has grown
dramatically since then and, as of April 1, 1993, ranked fourth with an
estimated population of 13.6 million, an increase of approximately 44.7% since
1980. Since the beginning of the eighties, Florida has surpassed Ohio, Illinois
and Pennsylvania in total population. Florida's attraction, as both a growth and
retirement state, has kept net migration fairly steady with an average of
292,988 new residents each year, from 1983 through 1993. Since 1983 the prime
working age population (18-44) has grown at an average annual rate of 2.6%. The
share of Florida's total working age population (18-59) to total State
population is approximately 54%. Non-farm employment has grown by approximately
64.4% since 1980. The service sector is Florida's largest employment sector,
presently accounting for 32.1% of total non-farm employment. Manufacturing jobs
in Florida are concentrated in the area of high-tech and value-added sectors,
such as electrical and electronic equipment, as well as printing and publishing.
Job gains in Florida's manufacturing sector have exceeded national averages
increasing by 11.7% between 1980 and 1993. Foreign Trade has contributed
significantly to Florida's employment growth. Florida's dependence on highly
cyclical construction and construction related manufacturing has declined. Total
contract construction employment as a share of total non-farm employment has
fallen from 10% in 1973, to 7% in 1980 to 5% in 1993. Although the
 
                                      d-9
<PAGE>
job creation rate for the State of Florida since 1980 is over two times the rate
for the nation as a whole, since 1989 the unemployment rate for the State has
risen faster than the national average. The average rate of unemployment for
Florida since 1980 is 6.5%, while the national average is 7.1%. Because Florida
has a proportionately greater retirement age population, property income
(dividends, interest and rent) and transfer payments (Social Security and
pension benefits) are a relatively more important source of income. In 1993,
Florida employment income represented 62% of total personal income while
nationally, employment income represented 72% of total personal income.
 
     The ability of the State and its local units of government to satisfy the
Debt Obligations may be affected by numerous factors which impact on the
economic vitality of the State in general and the particular region of the State
in which the issuer of the Debt Obligation is located. South Florida is
particularly susceptible to international trade and currency imbalances and to
economic dislocations 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 are impacted by problems in the
agricultural sector, particularly with regard to the citrus and sugar
industries. Short-term adverse economic conditions may be created in these
areas, and in the State as a whole, due to crop failures, severe weather
conditions or other agriculture-related problems. The State economy also has
historically been somewhat dependent on the tourism and construction industries
and is sensitive to trends in those sectors.
 
     The State Budget.  The State operates under a biennial budget which is
formulated in even numbered years and presented for approval to the Legislature
in odd numbered years. A supplemental budget request process is utilized in the
even numbered years for refining and modifying the primary budget. Under the
State Constitution and applicable statutes, the State budget as a whole, and
each separate fund within the State budget, must be kept in balance from
currently available revenues during each State fiscal year. (The State's fiscal
year runs from July 1 through June 30). The Governor and the Comptroller of the
State are charged with the responsibility of ensuring that sufficient revenues
are collected to meet appropriations and that no deficit occurs in any State
fund.
 
     The financial operations of the State covering all receipts and
expenditures are maintained through the use of three types of funds: the General
Revenue Fund, Trust Funds and Working Capital Fund. The majority of the State's
tax revenues are deposited in the General Revenue Fund and moneys in the General
Revenue Fund are expended pursuant to appropriations acts. In fiscal year
1992-93, expenditures for education, health and welfare and public safety
represented approximately 49%, 30% and 11%, respectively, of expenditures from
the General Revenue Fund. The Trust Funds consist of moneys received by the
State which under law or trust agreement are segregated for a purpose authorized
by law. Revenues in the General Revenue Fund which are in excess of the amount
needed to meet appropriations may be transferred to the Working Capital Fund.
 
     State Revenues.  Estimated General Revenue and Working Capital Fund
revenues of $13,582.7 million for 1993-94 (excluding Hurricane Andrew related
revenues and expenses) represent an increase of 8.4% over revenues for 1992-93.
This amount reflects a transfer of $190 million, out of an estimated $220
million in non-recurring revenue due to Hurricane Andrew, to a hurricane relief
trust fund. Estimated Revenue for 1994-95 of $14,573.8 million (excluding
Hurricane Andrew impacts) represent an increase of 7.3% over 1993-1994. This
amount reflects a transfer of $159 million in non-recurring revenue due to
Hurricane Andrew, to a hurricane relief trust fund.
 
     In fiscal year 1992-1993, the State derived approximately 62% of its total
direct revenues for deposit in the General Revenue Fund, Trust Funds and Working
Capital Fund from State taxes. Federal funds and other special revenues
accounted for the remaining revenues. The greatest single source of tax receipts
in the State is the 6% sales and use tax. For the fiscal year ended June 30,
1993, receipts from the sales and use tax totalled $9,426 million, an increase
of approximately 12.5% over fiscal year 1991-92. This amount includes
non-recurring increases attributable to the rebuilding and reconstruction
following the hurricane. The second largest source of State tax receipts is the
tax on motor fuels including the tax receipts distributed to local governments.
Receipts from the taxes on motor fuels are almost entirely dedicated to trust
funds for specific purposes or transferred to local governments and are not
included in the General Revenue Fund. For the fiscal year ended June 30, 1992,
collections of this tax totalled $1,475.5 million.
 
     The State currently does not impose a personal income tax. However, the
State does impose a corporate income tax on the net income of corporations,
organizations, associations and other artificial entities for the privilege of
conducting business, deriving income or existing within the State. For the
fiscal year ended June 30, 1993, receipts from the corporate income tax totalled
$846.6 million, an increase of approximately 5.6% from fiscal year 1991-92. The
Documentary Stamp Tax collections totalled $639 million during fiscal year
1992-93, or
 
                                      d-10
<PAGE>
approximately 27% over fiscal year 1991-92. The Alcoholic Beverage Tax, an
excise tax on beer, wine and liquor totalled $442.2 million in 1992-93, an
increase of 1.6% from fiscal year 1991-92. The Florida lottery produced sales of
$2.13 billion of which $810.4 million was used for education in fiscal year
1992-93.
 
     While the State does not levy ad valorem taxes on real property or tangible
personal property, counties, municipalities and school districts are authorized
by law, and special districts may be authorized by law, to levy ad valorem
taxes. Under the State Constitution, ad valorem taxes may not be levied by
counties, municipalities, school districts and water management districts in
excess of the following respective millages upon the assessed value of real
estate and tangible personal property; for all county purposes, ten mills; for
all municipal purposes, ten mills; for all school purposes, ten mills; and for
water management purposes, either 0.05 mill or 1.0 mill, depending upon
geographic location. These millage limitations do not apply to taxes levied for
payment of bonds and taxes levied for periods not longer than two years when
authorized by a vote of the electors. (Note: one mill equals one-tenth of one
cent).
 
     The State Constitution and statutes provide for the exemption of homesteads
from certain taxes. The homestead exemption is an exemption from all taxation,
except for assessments for special benefits, up to a specific amount of the
assessed valuation of the homestead. This exemption is available to every person
who has the legal or equitable title to real estate and maintains thereon his or
her permanent home. All permanent residents of the State are currently entitled
to a $25,000 homestead exemption from levies by all taxing authorities, however,
such exemption is subject to change upon voter approval.
 
     On November 3, 1992, the voters of the State of Florida passed an amendment
to the Florida Constitution establishing a limitation on the annual increase in
assessed valuation of homestead property commencing January 1, 1994, of the
lesser of 3% or the increase in the Consumer Price Index during the relevant
year, except in the event of a sale thereof during such year, and except as to
improvements thereto during such year. The amendment did not alter any of the
millage rates described above.
 
     Since municipalities, counties, school districts and other special purpose
units of local governments with power to issue general obligation bonds have
authority to increase the millage levy for voter approved general obligation
debt to the amount necessary to satisfy the related debt service requirements,
the amendment is not expected to adversely affect the ability of these entities
to pay the principal of or interest on such general obligation bonds. However,
in periods of high inflation, those local government units whose operating
millage levies are approaching the constitutional cap and whose tax base
consists largely of residential real estate, may, as a result of the
above-described amendment, need to place greater reliance on non-ad valorem
revenue sources to meet their operating budget needs.
 
     At the November 1994 general election, voters approved an amendment to the
State Constitution that will limit the amount of taxes, fees, licenses and
charges imposed by the Legislature and collected during any fiscal year to the
amount of revenues allowed for the prior fiscal year, plus an adjustment for
growth. Growth is defined as the amount equal to the average annual rate of
growth in Florida personal income over the most recent twenty quarters times the
state revenues allowed for the prior fiscal year. The revenues allowed for any
fiscal year can be increased by a two-thirds vote of the Legislature, The limit
will be effective starting with fiscal year 1995-1996. Any excess revenues
generated will be deposited in the budget stabilization fund until it is fully
funded and then refunded to taxpayers. Included among the categories of revenues
which are exempt from the proposed revenue limitation, however, are revenues
pledged to state bonds.
 
     State General Obligation Bonds and State Revenue Bonds.  The State
Constitution does not permit the State to issue debt obligations to fund
governmental operations. Generally, the State Constitution authorizes State
bonds pledging the full faith and credit of the State only to finance or
refinance the cost of State fixed capital outlay projects, upon approval by a
vote of the electors, and provided that the total outstanding principal amount
of such bonds does not exceed 50% of the total tax revenues of the State for the
two preceding fiscal years. Revenue bonds may be issued by the State or its
agencies without a vote of the electors only to finance or refinance the cost of
State fixed capital outlay projects which are payable solely from funds derived
directly from sources other than State tax revenues.
 
     Exceptions to the general provisions regarding the full faith and credit
pledge of the State are contained in specific provisions of the State
Constitution which authorize the pledge of the full faith and credit of the
State, without electorate approval, but subject to specific coverage
requirements, for: certain road projects, county education projects, State
higher education projects, State system of Public Education and construction of
air and water pollution control and abatement facilities, solid waste disposal
facilities and certain other water facilities.
 
                                      d-11
<PAGE>
     Local Bonds.  The State Constitution provides that counties, school
districts, municipalities, special districts and local governmental bodies with
taxing powers may issue debt obligations payable from ad valorem taxation and
maturing more than 12 months after issuance, only (i) to finance or refinance
capital projects authorized by law, provided that electorate approval is
obtained; or (ii) to refund outstanding debt obligations and interest and
redemption premium thereon at a lower net average interest cost rate.
 
     Counties, municipalities and special districts are authorized to issue
revenue bonds to finance a variety of self-liquidating projects pursuant to the
laws of the State, such revenue bonds to be secured by and payable from the
rates, fees, tolls, rentals and other charges for the services and facilities
furnished by the financed projects. Under State law, counties and municipalities
are permitted to issue bonds payable from special tax sources for a variety of
purposes, and municipalities and special districts may issue special assessment
bonds.
 
     Bond Ratings.  General obligation bonds of the State are currently rated Aa
by Moody's and AA by Standard & Poor's.
 
     Litigation.  Due to its size and its broad range of activities, the State
(and its officers and employees) are involved in numerous routine lawsuits. The
managers of the departments of the State involved in such routine lawsuits
believed that the results of such pending litigation would not materially affect
the State's financial position. In addition to the routine litigation pending
against the State, its officers and employees, the following lawsuits and claims
are also pending:
 
        A. In a suit, plaintiff has sought title to Hugh Taylor Birch State
     Recreation Area by virtue of a reverter clause in the deed from Hugh Taylor
     Birch to the State. A final judgment at trial was entered in favor of the
     State. The case has been appealed to the Fourth District Court of Appeal.
     The Department of Natural Resources anticipates the area will remain in
     State lands; however, in the event the court should rule in favor of the
     plaintiff, the State is subject to a loss of real property valued at
     approximately $400 million.
 
        B. In a suit, the Florida Supreme Court prospectively invalidated a tax
     preference methodology under former Sections 554.06 and 565.12 of the
     Florida Statutes (1985). This ruling was appealed to the United States
     Supreme Court which reversed the State Supreme Court and remanded the
     matter back to the State court. The Supreme Court's opinion suggested that
     one of the State's options for correcting the constitutional problems would
     be to assess and collect back taxes at the higher rates applicable to those
     who were ineligible for the tax preference from all taxpayers who had
     benefitted from the tax preference during the contested tax period. The
     State chose to seek a recovery of taxes from those who benefitted from the
     tax preference by requiring them to pay taxes at the higher rate that
     applied to out-of-state manufacturers and distributors. The Florida Supreme
     Court remanded the matter to the Circuit Court for the 2nd Judicial Circuit
     to hear arguments on the method chosen by the State to provide a clear and
     certain remedy. The trial court's decision against the State is on appeal
     at the First District Court of Appeal. With the exception of two parties,
     all parties have settled their claims with the State. Should an unfavorable
     outcome result in this case, approximately $33 million may be refunded.
 
        C. A class action suit brought against the Department of Corrections,
     alleging race discrimination in hiring and employment practices, originally
     went to trial in 1982 with the Department prevailing on all claims except a
     partial summary judgment to a plaintiff sub-class claiming a discriminatory
     impact on hiring caused by an examination requirement. Jurisdictional
     aspects of the testing issue were appealed to the Eleventh Circuit Court of
     Appeals which vacated the trial court's order and was upheld by the United
     States Supreme Court. The district court consolidated three successor
     lawsuits with this case and entered a final judgment in favor of the State.
     The judgment, however, has been appealed to the Eleventh Circuit Court of
     Appeals. Should the department fail in future appeals, the liability of the
     State for back pay and other monetary relief could exceed $40 million.
 
        D. Complaints were filed in the Second Judicial Circuit seeking a
     declaration that Sections 624.509, 624.512 and 624.514, F.S. (1988) violate
     various U.S. and Florida Constitutional provisions. Relief was sought in
     the form of a tax refund. The Florida Supreme Court reversed the trial
     court in favor of the State. Plaintiffs have petitioned for certiorari with
     the United States Supreme Court. The State has settled all outstanding
     litigation in this area. Similar issues had been raised in the following
     cases which were part of the settlement: Ford Motor Company v. Bill Gunter,
     Case No. 86-3714, 2nd Judicial Circuit, and General Motors Corporation v.
     Tom Gallagher, Case Nos. 90-2045 and 88-2925, 2nd Judicial Circuit, where
     the plaintiffs are challenging Section 634.131, F.S., which imposes taxes
     on the premiums received for certain motor vehicle service agreements.
     Current estimates indicate that the State's potential refund exposure under
     the remaining
 
                                      d-12
<PAGE>
     refund application yet to be denied is approximately $150 million. However,
     the State hopes that refund exposure will be reduced as these refund
     requests begin to be denied based upon the Florida Supreme Court decision
     in the instant case.
 
        E. In two cases, plaintiffs have sought approximately $25 million in
     intangible tax refunds based partly upon claims that Florida's intangible
     tax statutes are unconstitutional.
 
        F. A lawsuit was filed against the Department of Health and
     Rehabilitative Services (DHRS) and the Comptroller of the State of Florida
     involving a number of issues arising out of the implementation of a DHRS
     computer system and seeking declaratory relief and money damages. The
     estimated potential liability to the State is in excess of $40 million.
 
        G. Plaintiffs in a case have sought a declaration that statutory
     assessments on certain hospital net revenues are invalid, unconstitutional,
     and unenforceable and request temporary and permanent injunctive relief be
     granted prohibiting the enforcement or collection of the assessment and
     that all monies paid to the State by the plaintiffs and the class members
     within the four years preceding the filing of the action be reimbursed by
     the defendants with interest. An unfavorable outcome to this case could
     result in the possibility of refunds exceeding $50 million. This case was
     voluntarily dismissed but may be refiled.
 
        H. In an inverse condemnation suit claiming that the actions of the
     State constitute a taking of certain leases for which compensation is due,
     the Circuit judge granted the State's motion for summary judgment finding
     that the State had not deprived plaintiff of any royalty rights they might
     have. Plaintiff has appealed. Additionally, plaintiff's request for a
     drilling permit was rejected after administrative proceedings before the
     Department of Environmental Protection. Plaintiff is expected to challenge
     the decision.
 
        I. In an inverse condemnation suit alleging the regulatory taking of
     property without compensation in the Green Swamp Area of Critical State
     Concern, discovery is concluding and a motion for a summary judgment will
     likely be made. If the judgment should be for the plaintiff, condemnation
     procedures would be instituted with costs of $30 million, plus interest
     from 1975.
 
        J. In 1990, the Florida Legislature passed an act imposing a $295 impact
     fee on cars purchased or titled in other states that are then registered in
     the State by persons having or establishing permanent residency in the
     State. Two separate groups filed suit challenging the fee. The circuit
     court consolidated the various cases and entered final summary judgment
     finding the fee unconstitutional under the Commerce Clause of the United
     States Constitution and ordered an immediate refund to all persons having
     paid the fee since the statute came into existence. The State noticed an
     appeal of the circuit court ruling which entitled the State to a stay of
     the effectiveness of such ruling, thus, the fee continued to be collected
     during the period of the pending appeal. On September 29, 1994, the Supreme
     Court of Florida reaffirmed the circuit court's decision by concluding that
     the statute results in discrimination against out of state economic
     interests in contravention of the Commerce Clause and that the proper
     remedy for such violation is a full refund to all persons who have paid the
     illegal fee. The State's refund exposure may be in excess of $100 million.
 
        K. Santa Rosa County has filed a complaint for declaratory relief
     against the State requesting the Circuit Court to: (1) find that Section
     206.60(2)(a), F.S., does not allow the Department to deduct administrative
     expenses unrelated to the collection, administration, and distribution of
     the county gas tax; and (2) order the department to pay Santa Rosa County
     all moneys shown to have been unlawfully deducted from the motor fuel tax
     revenues plus interest. Santa Rosa County obtained a prospective
     injunction, but was denied the refund it sought. There has been no appeal
     by either party. The Legislature changed the statute in accordance with the
     Court's decision.
 
        L. Lee Memorial Hospital has contested the calculation of its
     disproportionate share payment for the 1992-93 State fiscal year. An
     unfavorable outcome to this case could result in a possible settlement of
     $20 to $30 million.
 
        M. A lawsuit has challenged the freezing of nursing home reimbursement
     rates for the period January 1, 1990 through July 1, 1990. The First
     District Court of Appeal ruled against the Agency for Health Care
     Administration (AHCA). The AHCA has petitioned the Florida Supreme Court
     for review of this declaration. An unfavorable outcome to this case could
     result in a potential liability of $40 million.
 
     Summary.  Many factors including national, economic, social and
environmental policies and conditions, most of which are not within the control
of the State or its local units of government, could affect or could have an
adverse impact on the financial condition of the State. Additionally, the
limitations placed by the State
 
                                      d-13
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Constitution on the State and its local units of government with respect to
income taxation, ad valorem taxation, bond indebtedness and other matters
discussed above, as well as other applicable statutory limitations, may
constrain the revenue-generating capacity of the State and its local units of
government and, therefore, the ability of the issuers of the Debt Obligations to
satisfy their obligations thereunder.
 
     The Sponsors believe that the information summarized above describes some
of the more significant matters relating to the Florida Trust. For a discussion
of the particular risks with each of the Debt Obligations, and other factors to
be considered in connection therewith, reference should be made to the Official
Statement and other offering materials relating to each of the Debt Obligations
included in the portfolio of the Florida Trust. The foregoing information
regarding the State, its political subdivisions and its agencies and authorities
constitutes only a brief summary, does not purport to be a complete description
of the matters covered and is based solely upon information drawn from official
statements relating to offerings of certain bonds of the State. The Sponsors and
their counsel have not independently verified this information and the Sponsors
have no reason to believe that such information is incorrect in any material
respect. None of the information presented in this summary is relevant to Puerto
Rico or Guam Debt Obligations which may be included in the Florida Trust.
 
     For a general description of the risks associated with the various types of
Debt Obligations comprising the Florida Trust, see the discussion under 'Risk
Factors', above.
 
     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 Florida Trust 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
     Holders of Units of the Florida Trust will not be subject to any Florida
     income taxes with respect to (i) amounts received by the Florida Trust on
     the Debt Obligations it holds; (ii) amounts which are distributed by the
     Florida Trust to non-corporate Holders of Units of the Florida Trust; or
     (iii) any gain realized on the sale or redemption of Debt Obligations by
     the Florida Trust or of a Unit of the Florida Trust by a non-corporate
     Holder. However, corporations as defined in Chapter 220, Florida Statutes
     (1991), 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 Florida Trust and on any gain realized by a corporate Holder on the
     sale or redemption of Units of the Florida Trust by the corporate Holder.
 
        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 of 1986, 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 (1991), 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 Florida Trust will not be subject to Florida
     intangible personal property tax on any Debt Obligations in the Florida
     Trust 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 Florida Trust will not
     be subject to the Florida intangible personal property tax if the Florida
     Trust invests solely in such Florida, Puerto Rico or Guam debt obligations.
 
THE NEW JERSEY TRUST
 
     The Portfolio of the New Jersey Trust contains different issues of debt
obligations issued by or on behalf of the State of New Jersey (the 'State') and
counties, municipalities and other political subdivisions and other public
authorities thereof or by the Government of Puerto Rico or the Government of
Guam or by their respective authorities, all rated in the category A or better
by at least one national rating organization (see Investment Summary).
Investment in the New Jersey Trust should be made with an understanding that the
value of the underlying Portfolio may decline with increases in interest rates.
 
     RISK FACTORS--Prospective investors should consider the recent financial
difficulties and pressures which the State of New Jersey and certain of its
public authorities have undergone.
 
                                      d-14
<PAGE>
     The State's 1995 Fiscal Year budget became law on June 30, 1994.
 
     The New Jersey State Constitution prohibits the legislature from making
appropriations in any fiscal year in excess of the total revenue on hand and
anticipated, as certified by the Governor. It additionally prohibits a debt or
liability that exceeds 1% of total appropriations for the year, unless it is in
connection with a refinancing to produce a debt service savings or it is
approved at a general election. Such debt must be authorized by law and applied
to a single specified object or work. Laws authorizing such debt provide the
ways and means, exclusive of loans, to pay as it becomes due and the principal
within 35 years from the time the debt is contracted. These laws may not be
repealed until the principal and interest are fully paid. These Constitutional
provisions do not apply to debt incurred because of war, insurrection or
emergencies caused by disaster.
 
     Pursuant to Article VIII, Section II, par. 2 of the New Jersey
Constitution, no monies may be drawn from the State Treasury except for
appropriations made by law. In addition, the monies for the support of State
government and all State purposes, as far as can be ascertained, must be
provided for in one general appropriation law covering one and the same fiscal
year. The State operates on a fiscal year beginning July 1 and ending June 30.
For example, 'fiscal 1994' refers to the year ended June 30, 1994.
 
     In addition to the Constitutional provisions, the New Jersey statutes
contain provisions concerning the budget and appropriation system. Under these
provisions, each unit of the State requests an appropriation from the Director
of the Division of Budget and Accounting, who reviews the budget requests and
forwards them with his recommendations to the Governor. The Governor then
transmits his recommended expenditures and sources of anticipated revenue to the
legislature, which reviews the Governor's Budget Message and submits an
appropriations bill to the Governor for his signature by July 1 of each year. At
the time of signing the bill, the Governor may revise appropriations or
anticipated revenues. That action can be reversed by a two-thirds vote of each
House. No supplemental appropriation may be enacted after adoption of the act,
except where there are sufficient revenues on hand or anticipated, as certified
by the Governor, to meet the appropriation. Finally, the Governor may, during
the course of the year, prevent the expenditure of various appropriations when
revenues are below those anticipated or when he determines that such expenditure
is not in the best interest of the State.
 
     Reflecting the downturn, the rate of unemployment in the State rose from a
low of 3.6 percent during the first quarter of 1989 to a recessionary peak of
9.3% during 1992. Since then, the unemployment rate fell to 6.7% during the
fourth quarter of 1993. The jobless rate averaged 7.1% during the first nine
months of 1994, but this estimate is not comparable to those prior to January
because of major changes in the federal survey from which these statistics are
obtained. (See Appendix B--Table X).
 
     In the first nine months of 1994, relative to the same period a year ago,
job growth took place in services (3.5%) and construction (5.7%), more moderate
growth took place in trade (1.9%), transportation and utilities (1.2%) and
finance/insurance/real estate (1.4%), while manufacturing and government
declined (by 1.5% and 0.1%, respectively). The net result was a 1.6% increase in
average employment during the first nine months of 1994 compared to the first
nine months of 1993. (See Appendix A--Table VIII).
 
     The economic recovery is likely to be slow and uneven in both New Jersey
and the nation. Some sectors, like commercial and industrial construction, will
undoubtedly lag because of continued excess capacity. Also, employers in
rebounding sectors can be expected to remain cautious about hiring until they
become convinced that improved business will be sustained. Other firms will
continue to merge or downsize to increase profitability. As a result, job gains
will probably come grudgingly and unemployment will recede at a correspondingly
slow pace.
 
     One of the major reasons for cautious optimism is found in the construction
industry. Total construction contracts awarded in New Jersey have turned around,
rising by 8.6% in 1993 compared with 1992. By far, the largest boost came from
residential construction awards which increased by 37.7% in 1993 compared with
1992. In addition, non-residential building construction awards have turned
around, posting a 6.9% gain.
 
     Nonbuilding construction awards increased approximately 4% in the first
eight months of 1994 compared with the same period in 1993.
 
     Finally, even in the labor market there are signs of recovery. Thanks to a
reduced layoff rate and the reappearance of job opportunities in some parts of
the economy, unemployment in the State has been receding since July 1992, when
it peaked at 9.6% according to U.S. Bureau of Labor Statistics estimates based
on the federal government's monthly household survey. The same survey showed
joblessness dropped to an average of 6.7% in the fourth quarter of 1993. The
unemployment rate registered an average of 7.8% in the first quarter of
 
                                      d-15
<PAGE>
1994, but this rate cannot be compared with prior date due to the changes in the
U.S. Department of Labor procedures for determining the unemployment rate that
went into effect in January 1994.
 
     For Fiscal Year 1994, the State has made appropriations of $119.9 million
for principal and interest payments for general obligation bonds. For Fiscal
Year 1995, the Governor has recommended appropriations of $103.5 million for
principal and interest payments for general obligation bonds. Of the $15,291.0
million appropriated in Fiscal Year 1995 from the General Fund, the Property Tax
Relief Fund, the Gubernatorial Elections Fund, the Casino Control Fund and the
Casino Revenue Fund and the Gubernatorial Elections Fund, $5,782.2 million
(37.8%) was appropriated for State Aid to Local Governments, $3,761.6 million
(24.6%) is appropriated for Grants-in-Aid, $5,203.1 million (34.0%) for Direct
State Services, $103.5 million (0.7%) for Debt Service on State general
obligation bonds and $440.6 million (2.9%) for Capital Construction.
 
     State Aid to Local Governments was the largest portion of Fiscal Year 1995
appropriations. In Fiscal Year 1995, $5,782.2 million of the State's
appropriations consisted of funds which are distributed to municipalities,
counties and school districts. The largest State Aid appropriation, in the
amount of $3,900.1 million, is provided for local elementary and secondary
education programs. Of this amount, $2,431.6 million was provided as foundation
aid to school districts by formula based upon the number of students and the
ability of a school district to raise taxes from its own base. In addition, the
State provided $582.5 million for special education programs for children with
disabilities. A $293.0 million program was also funded for pupils at risk of
educational failure, including basic skills improvement. The State appropriated
$474.8 million on behalf of school districts as the employer share of the
teachers' pension and benefits programs, $263.8 million to pay for the cost of
pupil transportation and $57.4 million for transition aid, which guaranteed
school districts a 6.5% increase over the aid received in Fiscal Year 1991 and
is being phased out over six years.
 
     Appropriations to the State Department of Community Affairs totalled $635.1
million in State Aid monies for Fiscal Year 1995. The principal programs funded
were the Supplemental Municipal Property Tax Act ($314.1 million); the Municipal
Revitalization Program ($165.0 million); municipal aid to urban communities to
maintain and upgrade municipal services ($40.7 million); and the Safe and Clean
Neighborhoods Program ($58.9 million). Appropriations to the State Department of
the Treasury totalled $321.3 million in State Aid monies for Fiscal Year 1995.
The principal programs funded by these appropriations were payments under the
Business Personal Property Tax Replacement Programs ($158.7 million); the cost
of senior citizens, disabled and veterans property tax deductions and exemptions
($41.7 million); aid to densely populated municipalities ($25.0 million);
Municipal Purposes Tax Assistance ($30.0 million); and payments to
municipalities for services to state owned property ($34.9 million).
 
     Other appropriations of State Aid in Fiscal Year 1995 include welfare
programs ($499.1 million); aid to county colleges ($123.2 million); and aid to
county mental hospitals ($79.4 million).
 
     The second largest portion of appropriations in Fiscal Year 1995 is applied
to Direct State Services: the operation of State government's 17 departments,
the Executive Office, several commissions, the State Legislature and the
Judiciary. In Fiscal Year 1995, appropriations for Direct State Services
aggregated $5,203.1 million. Some of the major appropriations for Direct State
Services during Fiscal Year 1995 are detailed below.
 
     $595.3 million was appropriated for programs administered by the State
Department of Human Services. Of that amount, $445.3 million was appropriated
for mental health and mental retardation programs, including the operation of
seven psychiatric institutions and nine schools for the retarded.
 
     The State Department of Labor is appropriated $49.3 million for the
administration of programs for workers' compensation, unemployment and
disability insurance, manpower development, and health safety inspection.
 
     The State Department of Health is appropriated $32.3 million for the
prevention and treatment of diseases, alcohol and drug abuse programs,
regulation of health care facilities and the uncompensated care program.
 
     $689.3 million is appropriated to the State Department of Higher Education
for the support of nine State colleges, Rutgers University, the New Jersey
Institute of Technology, and the University of Medicine and Dentistry.
 
     $932.5 million is appropriated to the State Department of Law and Public
Safety and the State Department of Corrections. Among the programs funded by
this appropriation are the administration of the State's correctional facilities
and parole activities, the registration and regulation of motor vehicles and
licensed drivers and the investigative and enforcement activities of the State
Police.
 
                                      d-16
<PAGE>
     $92.3 million is appropriated to the State Department of Transportation for
the various programs it administers, such as the maintenance and improvement of
the State highway system.
 
     $176.6 million is appropriated to the State Department of Environmental
Protection for the protection of air, land, water, forest, wildlife and
shellfish resources and for the provision of outdoor recreational facilities.
 
     The primary method for State financing of capital projects is through the
sale of the general obligation bonds of the State. These bonds are backed by the
full faith and credit of the State. tax revenues and certain other fees are
pledged to meet the principal and interest payments and if provided, redemption
premium payments required to pay the debt fully. No general obligation debt can
be issued by the State without prior voter approval, except that no voter
approval is required for any law authorizing the creation of a debt for the
purpose of refinancing all or a portion of outstanding debt of the State, so
long as such law requires that the refinancing provide a debt service savings.
 
     In addition to payment from bond proceeds, capital construction can also be
funded by appropriation of current revenues on a pay-as-you-go basis. This
amount represents 2.9 percent of the total budget for fiscal year 1994.
 
     The aggregate outstanding general obligation bonded indebtedness of the
State as of June 30, 1993 was $3,594.7 billion. The debt service obligation for
outstanding indebtedness is $103.5 million for Fiscal Year 1995.
 
     On January 18, 1994, Christine Todd-Whitman replaced James Florio as
Governor of the State. As a matter of public record, Governor Whitman, during
her campaign, publicized her intention to reduce taxes in the State. Effective
January 1, 1994, the State's personal income tax rates were reduced by 5% for
all taxpayers. Effective January 1, 1995, the State's personal income tax rates
will be reduced. The effect of the tax reductions cannot be evaluated at this
time.
 
     All appropriations for capital projects and all proposals for State bond
authorizations are subject to the review and recommendation of the New Jersey
Commission on Capital Budgeting and Planning. This permanent commission was
established in November, 1975, and is charged with the preparation of the State
Capital Improvement Plan, which contains proposals for State spending for
capital projects.
 
     At any given time, there are various numbers of claims and cases pending
against the State, State agencies and employees, seeking recovery of monetary
damages that are primarily paid out of the fund created pursuant to the Tort
Claims Act N.J.S.A. 59:1-1 et seq. In addition, at any given time there are
various contract claims against the State and State agencies seeking recovery of
monetary damages. The State is unable to estimate its exposure for these claims
and cases. An independent study estimated an aggregate potential exposure of $50
million for tort claims pending, as of January 1, 1982. It is estimated that
were a similar study made of claims currently pending the amount of estimated
exposure would be higher. Moreover, New Jersey is involved in a number of other
lawsuits in which adverse decisions could materially affect revenue or
expenditures. Such cases include challenges to its system of educational
funding, the methods by which the State Department of Human Services shares with
county governments the maintenance recoveries and costs for residents in state
psychiatric hospitals and residential facilities for the developmentally
disabled.
 
     Other lawsuits, that could materially affect revenue or expenditures
include a suit by a number of taxpayers seeking refunds of taxes paid to the
Spill Compensation Fund pursuant to NJSA 58:10-23.11, a suit alleging that
unreasonably low Medicaid payment rates have been implemented for long-term care
facilities in New Jersey, a suit alleging unfair taxation on interstate
commerce, a suit by Essex County seeking to invalidate the State's method of
funding the judicial system and a suit seeking return of moneys paid by various
counties for maintenance of Medicaid or Medicare eligible residents of
institutions and facilities for the developmentally disabled and a suit
challenging the imposition of premium tax surcharges on insurers doing business
in New Jersey, and assessments upon property and casualty liability insurers
pursuant to the Fair Automobile Insurance Reform Act and a suit challenging
amendments to the pension laws enacted on June 30, 1994 concerning the funding
of the Teachers Pension and Annuity Fund (TPAF). The Public Employee's
Retirement System (PERS), the Police and Firemen's Retirement System (PFRS), the
State Police Retirement System (SPRS) and the Judiciary Retirement System (JRS).
.
 
     Legislation enacted June 30, 1992, which called for revaluation of several
public employee pension funds, authorized an adjustment to the assumed rate of
return on the investment of pension fund assets, and refunds $773 million in
public employer contributions to the State from various pension funds, reflected
as a revenue source for Fiscal Year 1992. It is estimated that savings of $226
million will be effected in fiscal year 1993 and
 
                                      d-17
<PAGE>
each fiscal year thereafter. Several labor unions filed suit seeking a judgment
directing the State Treasurer to refund all monies transferred from the pension
funds and paid into the General Fund. On February 5, 1993, the Superior Court
granted the State's motion for summary judgment as to all claims. An appeal has
been filed with the Appellate Division of the Superior Court. On May 5, 1994,
the Appellate Division affirmed the decision of the trial court, dismissing the
complaint. An adverse determination in this matter would have a significant
impact on fiscal year 1993 and subsequent fiscal year fund balances.
 
     Bond Ratings--Citing a developing pattern of reliance on non-recurring
measures to achieve budgetary balance, four years of financial operations marked
by revenue shortfalls and operating deficits, and the likelihood that financial
pressures will persist, on August 24, 1992 Moody's lowered from Aaa to Aa1 the
rating assigned to New Jersey general obligation bonds. The downgrade reflects
Moody's concern that the state's chronic budgetary problems detract from
bondholder security. The Aa-1 rating from Moody's is equivalent to Standard &
Poor's AA rating. On July 6, 1992, Standard & Poor's affirmed its AAI ratings on
New Jersey's general obligation and various lease and appropriation backed debt,
but its ratings outlook was revised to negative for the longer term horizon
(beyond four months) for resolution of two items cited in the Credit Watch
listing: (i) the Federal Health Care Facilities Administration ruling concerning
retroactive medicaid hospital reimbursements and (ii) the state's uncompensated
health care funding system, which is under review by the United States Supreme
Court.
 
     NEW JERSEY TAXES
 
     In the opinion of Shanley & Fisher, P.C., Morristown, New Jersey, special
counsel on New Jersey tax matters, under existing New Jersey law:
 
        1.  The proposed activities of the New Jersey Trust will not cause it to
     be subject to the New Jersey Corporation Business Tax Act.
 
        2.  The income of the New Jersey Trust will be treated as the income of
     individuals, estates and trusts who are the Holders of Units of the New
     Jersey Trust for purposes of the New Jersey Gross Income Tax Act, and
     interest which is exempt from tax under the New Jersey Gross Income Tax Act
     when received by the New Jersey Trust will retain its status as tax exempt
     in the hands of such Unit Holders. Gains arising from the sale or
     redemption by a Holder of his Units or from the sale or redemption by the
     New Jersey Trust of any Debt Obligation are exempt from taxation under the
     New Jersey Gross Income Tax Act, as enacted and construed on the date
     hereof, to the extent such gains are attributable to Debt Obligations the
     interest on which is exempt from tax under the New Jersey Gross Income Tax
     Act.
 
        3.  Units of the New Jersey Trust may be subject, in the estates of New
     Jersey residents, to taxation under the Transfer Inheritance Tax Law of the
     State of New Jersey.
 
THE NEW YORK TRUST
 
     The Portfolio of the New York Trust contains different issues of debt
obligations issued by or on behalf of the State of New York (the 'State') and
counties, municipalities and other political subdivisions and other public
authorities thereof or by the Government of Puerto Rico or the Government of
Guam or by their respective authorities, all rated in the category A or better
by at least one national rating organization (see Investment Summary).
Investment in the New York Trust should be made with an understanding that the
value of the underlying Portfolio may decline with increases in interest rates.
 
     RISK FACTORS--Prospective investors should consider the financial
difficulties and pressures which the State of New York and several of its public
authorities and municipal subdivisions have undergone. The following briefly
summarizes some of these difficulties and the current financial situation, based
principally on certain official statements currently available; copies may be
obtained without charge from the issuing entity, or through the Agent for the
Sponsors upon payment of a nominal fee. While the Sponsors have not
independently verified this information, they have no reason to believe that it
is not correct in all material respects.
 
     New York State.  In recent fiscal years, there have been extended delays in
adopting the State's budget, repeated revisions of budget projections,
significant revenue shortfalls (as well as increased expenses) and year-end
borrowing to finance deficits. These developments reflect faster long-term
growth in State spending than revenues and that the State was earlier and more
severely affected by the recent economic recession than most of the rest of the
country, as well as its substantial reliance on non-recurring revenue sources.
The State's general fund incurred cash basis deficits of $775 million, $1,081
million and $575 million, respectively, for the 1990-1992 fiscal years. Measures
to deal with deteriorating financial conditions included transfers from reserve
funds,
 
                                      d-18
<PAGE>
recalculating the State's pension fund obligations (subsequently ruled illegal),
hiring freezes and layoffs, reduced aid to localities, sales of State property
to State authorities, and additional borrowings (including issuance of
additional short-term tax and revenue anticipation notes payable out of
impounded revenues in the next fiscal year). The general fund realized a $671
million surplus for the fiscal year ended March 31, 1993, and a $1.54 billion
surplus is projected for the fiscal year ended March 31, 1994.
 
     Approximately $5.4 billion of State general obligation debt was outstanding
at March 31, 1994. The State's net tax-supported debt (restated to reflect
LGAC's assumption of certain obligations previously funded through issuance of
short-term debt) was $27.5 billion at March 31, 1994, up from $11.7 billion in
1984. A proposed constitutional amendment passed by the Legislature would limit
additional lease-purchase and contractual obligation financing for State
facilities, but would authorize the State without voter referendum to issue
revenue bonds within a formula-based cap, secured solely by a pledge of certain
State tax receipts. It would also restrict State debt to capital projects
included in a multi-year capital financing plan. The proposal is subject to
approval by the next legislature and by voters. Standard & Poor's reduced its
rating of the State's general obligation bonds on January 13, 1992 to A-(its
lowest rating for any state). Moody's reduced its ratings of State general
obligation bonds from A1 to A on June 6, 1990 and to Baa1, its rating of $14.2
billion of appropriation-backed debt of the State and State agencies (over
two-thirds of the total debt) on January 6, 1992.
 
     In May 1991 (nearly 2 months after the beginning of the 1992 fiscal year),
the State Legislature adopted a budget to close a projected $6.5 billion gap
(including repayment of $905 million of fiscal 1991 deficit notes). Measures
included $1.2 billion in new taxes and fees, $0.9 billion in non-recurring
measures and about $4.5 billion of reduced spending by State agencies (including
layoffs), reduced aid to localities and school districts, and Medicaid cost
containment measures. After the Governor vetoed $0.9 billion in spending, the
State adopted $0.7 billion in additional spending, together with various
measures including a $100 million increase in personal income taxes and $180
million of additional non-recurring measures. Due primarily to declining
revenues and escalating Medicaid and social service expenditures, $0.4 billion
of administrative actions, $531 million of year-end short-term borrowing and a
$44 million withdrawal from the Tax Stabilization Reserve Fund were required to
meet the State's cash flow needs.
 
     The State budget to close a projected $4.8 billion gap for the State's 1993
fiscal year (including repayment of the fiscal 1992 short-term borrowing)
contained a combination of $3.5 billion of spending reductions (including
measures to reduce Medicaid and social service spending, as well as further
employee layoffs, reduced aid to municipalities and schools and reduced support
for capital programs), deferral of scheduled tax reductions, and some new and
increased fees. Nonrecurring measures aggregated $1.18 billion. The City and its
Board of Education sued the Governor and various other State officials in March
1993, claiming that the State's formula for allocating aid to education
discriminated against City schools by at least $274 million in the 1993 fiscal
year.
 
     To close a projected budget gap of nearly $3 billion for the fiscal year
ended March 31, 1994, the State budget contained various measures including
deferral of scheduled income tax reductions for a fourth year, some tax
increases, $1.6 billion in spending cuts, especially for Medicaid, and further
reduction of the State's work force. The budget increased aid to schools, and
included a formula to channel more aid to districts with lower-income students
and high property tax burdens. State legislation requires deposit of receipts
from the petroleum business tax and certain other transportation-related taxes
into funds dedicated to transportation purposes. Nevertheless, $516 million of
these monies were retained in the general fund during this fiscal year. The
Division of the Budget has estimated that non-recurring income items other than
the $671 million surplus from the 1993 fiscal year aggregated $318 million. $89
million savings from bond refinancings was deposited in a contingency reserve
fund to pay litigation settlements, particularly to repay monies received under
the State's abandoned property law, which the State will be required to give up
as described below.
 
     The budget for the fiscal year that began April 1, 1994 increases spending
by 3.8% (greater than inflation for the first time in six years). Tax revenue
projections are based on assumed modest growth in the State economy. It provides
a tax credit for low income families and increases aid to education, especially
in the poorer districts. The litigation fund will be increased and then paid out
during the year. The State is reducing coverage and placing additional
restrictions on certain health care services. Over $1 billion results from
further postponement of scheduled reductions in personal income taxes and in
taxes on hospital income; another $1 billion comes from rolling over the
projected surplus from the previous fiscal year. Other non-recurring measures
would be reduced to $78 million. The State Legislature passed legislation to
implement a budget agreement more than two months after the beginning of the
year. Taxes (principally business taxes) would be reduced by $475 million in the
current fiscal year and by $1.6 billion annually after fully phased in. In
November 1993 the State's Court of Appeals ruled unconstitutional 1990
legislation which postponed employee pension contributions by the State and
localities
 
                                      d-19
<PAGE>
(other than New York City). The amounts to be made up, estimated to aggregate $4
billion (half from the State), would be repaid in increasing amounts over 12-20
years under a plan proposed by the State Comptroller, trustee of the State
pension system, and previous contribution levels will not be exceeded until
1999. While a small surplus has been projected for the current fiscal year,
following the election of a new governor in November 1994, the State estimated
the budget gap for the next fiscal year could be as high as $4 billion. State
and other estimates are subject to uncertainties including the effects of
Federal tax legislation and economic developments.
 
     The State normally adjusts its cash basis balance by deferring until the
first quarter of the succeeding fiscal year substantial amounts of tax refunds
and other disbursements. For many years, it also paid in that quarter more than
40% of its annual assistance to local governments. Payment of these annual
deferred obligations and the State's accumulated deficit was substantially
financed by issuance of short-term tax and revenue anticipation notes shortly
after the beginning of each fiscal year. The New York Local Government
Assistance Corporation ('LGAC') was established in 1990 to issue long-term bonds
over several years, payable from a portion of the State sales tax, to fund
certain payments to local governments traditionally funded through the State's
annual seasonal borrowing. The legislation will normally limit the State's
short-term borrowing, together with net proceeds of LGAC bonds ($3.9 billion to
date), to a total of $4.7 billion. The State's last seasonal borrowing, in May
1993, was $850 million.
 
     Generally accepted accounting principles ('GAAP') for municipal entities
apply modified accrual accounting and give no effect to payment deferrals. On an
audited GAAP basis, the State's government funds group recorded operating
deficits of $1.2 billion and $1.4 billion for the 1990 and 1991 fiscal years.
For the same periods the general fund recorded deficits (net of transfers from
other funds) of $0.7 billion and $1.0 billion. Reflecting $1.6 billion, $881
million and $875 million of payments by LGAC to local governments out of
proceeds from bond sales, the general fund realized surpluses of $1.7 billion,
$2.1 billion and $0.9 billion for the 1992, 1993 and 1994 fiscal years,
respectively, leaving an accumulated deficit of $2.551 billion.
 
     For decades, the State's economy has grown more slowly than that of the
rest of the nation as a whole. Part of the reason for this decline has been
attributed to the combined State and local tax burden, which is the second
highest in the nation (over 60% above the national average). The State's
dependence on Federal funds and sensitivity to changes in economic cycles, as
well as the high level of taxes, may continue to make it difficult to balance
State and local budgets in the future. The total employment growth rate in the
State has been below the national average since 1984. The State lost 524,000
jobs in 1990-1992. It regained approximately 134,000 jobs between November 1992
and August 1994, but continues to have higher unemployment than the national
average.
 
     New York City (the 'City').  The City is the State's major political
subdivision. In 1975, the City encountered severe financial difficulties,
including inability to refinance $6 billion of short-term debt incurred to meet
prior annual operating deficits. The City lost access to the public credit
markets for several years and depended on a variety of fiscal rescue measures
including commitments by certain institutions to postpone demands for payment, a
moratorium on note payment (later declared unconstitutional), seasonal loans
from the Federal government under emergency congressional legislation, Federal
guarantees of certain City bonds, and sales and exchanges of bonds by The
Municipal Assistance Corporation for the City of New York ('MAC') to fund the
City's debt.
 
     MAC has no taxing power and pays its obligations out of sales taxes imposed
within the City and per capita State aid to the City. The State has no legal
obligation to back the MAC bonds, although it has a 'moral obligation' to do so.
MAC is now authorized to issue bonds only for refunding outstanding issues and
up to $1.5 billion should the City fail to fund specified transit and school
capital programs. The State also established the Financial Control Board ('FCB')
to review the City's budget, four-year financial plans, borrowings and major
contracts. These were subject to FCB approval until 1986 when the City satisfied
statutory conditions for termination of such review. The FCB is required to
reimpose the review and approval process in the future if the City were to
experience certain adverse financial circumstances. The City's fiscal condition
is also monitored by a Deputy State Comptroller.
 
     The City projects that it is emerging from four years of economic
recession. From 1989 through 1993, the gross city product declined by 10.1% and
employment, by almost 11%, while the public assistance caseload grew by over
25%. Unemployment averaged 10.8% in 1992 and 10.1% in 1993, peaking at 13.4% in
January 1993, the highest level in 25 years. It dropped to 8.2% in October,
1994. The number of persons on welfare exceeds 1.1 million, the highest level
since 1972, and one in seven residents is currently receiving some form of
public assistance.
 
                                      d-20
<PAGE>
     While the City, as required by State law, has balanced its budgets in
accordance with GAAP since 1981, this has required exceptional measures in
recent years. The FCB has commented that City expenditures have grown faster
than revenues each year since 1986, masked in part by a large number of
non-recurring gap closing actions. To eliminate potential budget gaps of $1-$3
billion each year since 1988 the City has taken a wide variety of measures. In
addition to increased taxes and productivity increases, these have included
hiring freezes and layoffs, reductions in services, reduced pension
contributions, and a number of nonrecurring measures such as bond refundings,
transfers of surplus funds from MAC, sales of City property and tax receivables.
The FCB concluded that the City has neither the economy nor the revenues to do
everything its citizens have been accustomed to expect.
 
     The City closed a budget gap for the 1993 fiscal year (estimated at $1.2
billion) through actions including service reductions, productivity initiatives,
transfer of $0.5 billion surplus from the 1992 fiscal year and $100 million from
MAC. A November 1992 revision offset an additional $561 million in projected
expenditures through measures including a refunding to reduce current debt
service costs, reduction in the reserve and an additional $81 million of gap
closing measures. Over half of the City's actions to eliminate the gap were non-
recurring.
 
     The Financial Plan for the City's 1994 fiscal year relied on increases in
State and Federal aid, as well as the 1993 $280 million surplus and a partial
hiring freeze, to close a gap resulting primarily from labor settlements and
decline in property tax revenues. The Plan contained over $1.3 billion of
one-time revenue measures including bond refundings, sale of various City assets
and borrowing against future property tax receipts. On July 2, 1993, the
previous Mayor ordered spending reductions of about $130 million for the 1994
fiscal year and $400 million for the 1995 fiscal year. A new Mayor and City
Comptroller assumed office in January 1994. Various fiscal monitors criticized
reliance on non-recurring revenues, with attendant increases in the gaps for
future years. The new Mayor initiated a program to reduce non-personnel costs by
up to $150 million. The FCB reported that although a $98 million surplus was
projected for the year (the surplus was actually $81 million ), a $312 million
shortfall in budgeted revenues and $904 million of unanticipated expenses
(including an unbudgeted increase of over 3,300 employees and a record level of
overtime), net of certain increased revenues and other savings, resulted in
depleting prior years' surpluses by $326 million. The new City Comptroller
critized retention of a proposal to sell delinquent property tax receivables.
 
     The City's Financial Plan for the current fiscal year (that began July 1,
1994) proposes both to eliminate a projected $2.3 billion budget gap and to
stabilize overall spending while beginning to reduce some business and other
taxes. It calls for a reduction of 15,000 in the City work-force by June 1995
unless equivalent productivity savings are negotiated with unions; with the aid
of $200 million from MAC, the City induced 6,100 workers to accept voluntary
severance, and union leaders accepted transfer of remaining employees between
agencies. The Plan projects about $560 million of increased State and Federal
aid, some of which has not yet been approved. Non-recurring measures include
$225 million from refinancing outstanding bonds (which the FCB estimates will
cancel almost 10% of the debt service savings anticipated from the recent
capital plan reduction), extension of the repayment schedule of a debt to City
pension funds and revision of actuarial assumptions to reduce contribution
levels, and sale of a City-owned hotel. A proposal for City employees to bear
$200 million of their health care costs must be negotiated with the unions,
which have announced their opposition. In early July, the private members of the
FCB issued a statement concluding that further budget cuts will be required to
balance the current year's budget.
 
     Since the current year's Financial Plan was adopted, the City has
experienced lower than anticipated tax collections, higher than budgeted costs
(particularly overtime) and liability claims and increased likelihood that
various revenue measures including certain anticipated Federal and State aid,
and sale of certain city assets will not occur, at least during the current
fiscal year. In July 1994 the Mayor ordered expenditure reductions of $250
million during the next six months and a contingency plan for another $200
million. In late October, the Mayor proposed an additional $800 million of
spending cuts to address a projected $1.1 billion remaining budget gap for the
current fiscal year. He reached an agreement with City unions for an additional
severance offer, to avert layoffs. Another $190 million represents proposed
transfers of excess reserves in employee health care plans, a non-recurring
measure, and he would reduce the City's subsidy to the TA by the $113 million
surplus it expects to realize this year. Expenditure reductions would aggregate
about 6%, and critics contend they would require reduction or elimination of
numerous essential services. Also, maintenance of City infrastructure would be
reduced, which could lead to higher expenses in future years. These amendments
to the City's Financial Plan are subject to approval by the City Council;
certain proposals (including State assumption of $140 million in student
transportation subsidies) will also require action by the State Legislature. The
City Comptroller has projected that
 
                                      d-21
<PAGE>
an additional $300 million of gap-closing measures will be required for the
current fiscal year. Meanwhile, a Federal District Court enjoined the Mayor's
proposed transfer of welfare center supervisors to other positions, pending
submission of a plan specifying how the City will continue to comply with
Federal and state mandates.
 
     The Mayor is exploring the possibility of privatizing some of the City's
services. The City Council passed legislation which would authorize the Council
to hold hearings on any significant privatization and would require submission
of a cost-benefit analysis. The Mayor has also been seeking greater control over
spending by independent authorities and agencies such as the Board of Education,
the Health and Hospital Corporation and the TA. The Mayor's efforts to reduce
expenditures by the Board of Education, including appointment of another fiscal
monitor, reduction in City funding of capital projects and rejection of a
tentative labor contract, have strained relations with the Schools Chancellor at
a time of rising enrollments. In March 1994 the Mayor reduced cash incentives to
landlords renting apartments to the homeless. In October, he announced a
proposal to require able-bodied welfare recipients to render commumity service.
It has been reported that he is considering proposals including eliminating City
financing of a program that creates housing for single homeless people, charging
shelter occupants who refuse offers of treatment or training a modest rent for
use of the shelter, and replacing some of the subsidies to day care centers with
a voucher system. The Mayor is considering a plan to fingerprint welfare
recipients in the City; this could be subject to legal challenge. Budget gaps of
$1.5 billion, $2.0 billion and $2.4 billion have been projected for the 1996
through 1998 fiscal years, respectively. The State Comptroller suggested the
gaps could exceed these estimates by about $1.2 billion annually, while the FCB
estimated risks of over $2 billion, $3 billion and $3 billion respectively. Even
after recent capital plan reductions, debt service is expected to consume 18.4%
of tax revenue by the 1998 fiscal year. The FCB commented that, in spite of the
Mayor's measures, spending (principally debt service, Medicaid costs and health
and pension benefits) would continue to increase faster than revenues.
 
     A major uncertainty is the City's labor costs, which represent about 50% of
its total expenditures. The City's workforce grew by 34% during the 1980s. A
January 1993 agreement covering approximately 44% of City workers followed
negotiations lasting nearly two years. Workers will receive wage and benefit
raises totalling 8.25% over 39 months ending March 1995. An agreement announced
in August 1993 provides wage increases for City teachers averaging 9% over the
48 1/2 months ending October 1995. The City is seeking to negotiate workforce
productivity initiatives, savings from which would be shared with the workers
involved. Under a tentative contract reached in September 1994, while sanitation
workers would receive an overall increase of 8.25% in wages and benefits over 39
months, routes would be lengthened by an average of 20%. The Financial Plan
assumes no further wage increases after the 1995 fiscal year. Also, costs of
some previous wage increases were offset by reduced contributions to pension
funds; if fund performance is less than the 9% annual earnings projected (as is
expected in the current fiscal year), the City could incur increased expenses in
future years. Pension fund earnings assumptions are currently being reviewed,
and future City pension contributions could be increased by a substantial
amount.
 
     Budget balance may also be adversely affected by the effect of the economy
on economically sensitive taxes. Reflecting the downturn in real estate prices
and increasing defaults, estimates of property tax revenues have been reduced.
Other uncertainties include additional expenditures to combat deterioration in
the City's infrastructure (such as bridges, schools and water supply), costs of
developing alternatives to ocean dumping of sewage sludge (which the City
expects to defray through increased water and sewer charges), cost of the AIDS
epidemic, problems of drug addiction and homelessness and the impact of any
future State assistance payment reductions. For example, the City may be ordered
to spend up to $8 billion to construct water filtration facilities if it is not
successful in implementing measures to prevent pollution of its watershed
upstate. In late September the City was held in contempt and fined for failure
to provide shelter on a timely basis for homeless families. Several similar
decisions had been rendered against the previous administration. Elimination of
any additional budget gaps will require various actions, including by the State,
a number of which are beyond the City's control. Staten Island voters in 1993
approved a proposed charter under which Staten Island would secede from the
City. Secession will require enabling legislation by the State Legislature; it
would also be subject to legal challenge by the City. The effects of secession
on the City cannot be determined at this time, but questions include
responsibility for outstanding debt, a diminished tax base, and continued use of
the Fresh Kills landfill, the City's only remaining garbage dump. A similar
measure with respect to Queens was approved by the New York State Senate.
 
     In December 1993, a report commissioned by the City was released,
describing the nature of the City's structural deficit. It projects that the
City will need to identify and implement $5 billion in annual gap closing
measures by 1998. The report suggests a variety of possible measures for City
consideration. While the new
 
                                      d-22
<PAGE>
Mayor rejected out of hand many of the proposals such as tax increases, the
State Comptroller urged him to reconsider the report.
 
     The City sold $1.4 billion, $1.8 billion and $2.2 billion of short-term
notes, respectively, during the 1993, 1994 and current fiscal years. The FCB
recently recommended development of a cash budgeting system to reduce short-term
borrowing resulting from timing imbalances. At June 30, 1994, there were
outstanding $21.7 billion of City bonds (not including City debt held by MAC),
$4.2 billion of MAC bonds and $0.8 billion of City-related public benefit
corporation indebtedness, each net of assets held for debt service. Standard &
Poor's and Moody's during the 1975-80 period either withdrew or reduced their
ratings of the City's bonds. Standard & Poor's currently rates the City's debt
A-with a negative outlook while Moody's rates City bonds Baa1. City-related debt
almost doubled since 1987, although total debt declined as a percentage of
estimated full value of real property. The City's financing program projects
long-term financing during fiscal years 1995-1998 to aggregate $17.8 billion.
The City's latest Ten Year Capital Strategy plans capital expenditures of $45.6
billion during 1994-2003 (93% to be City funded). The State Comptroller has
criticized some City bond refinancings for producing short-term savings at the
expense of greater overall costs, especially in future years. Annual debt
service is projected to increase.
 
     Other New York Localities.  In 1992, other localities had an aggregate of
approximately $15.7 billion of indebtedness outstanding. In recent years,
several experienced financial difficulties. A March 1993 report by Moody's
Investors Service concluded that the decline in ratings of most of the State's
largest cities in recent years resulted from the decline in the State's
manufacturing economy. Seventeen localities had outstanding indebtedness for
deficit financing at the close of their respective 1992 fiscal years. Any
reductions in State aid to localities may cause additional localities to
experience difficulty in achieving balanced budgets. If special local assistance
were needed from the State in the future, this could adversely affect the
State's as well as the localities' financial condition. Most localities depend
on substantial annual State appropriations. Legal actions by utilities to reduce
the valuation of their municipal franchises, if successful, could result in
localities becoming liable for substantial tax refunds.
 
     State Public Authorities.  In 1975, after the Urban Development Corporation
('UDC'), with $1 billion of outstanding debt, defaulted on certain short-term
notes, it and several other State authorities became unable to market their
securities. Since 1975 the State has provided substantial direct and indirect
financial assistance to UDC, the Housing Finance Agency ('HFA'), the
Environmental Facilities Corporation and other authorities. Practical and legal
limitations on these agencies' ability to pass on rising costs through rents and
fees could require further State appropriations. 18 State authorities had an
aggregate of $63.5 billion of debt outstanding at September 30, 1993. At March
31, 1994, approximately $0.4 billion of State public authority obligations was
State-guaranteed, $7.3 billion was moral obligation debt (including $4.8 billion
of MAC debt) and $16.6 billion was financed under lease-purchase or contractual
obligation financing arrangements with the State. Various authorities continue
to depend on State appropriations or special legislation to meet their budgets.
 
     The Metropolitan Transportation Authority ('MTA'), which oversees operation
of the City's subway and bus system by the City Transit Authority (the 'TA') and
operates certain commuter rail lines, has required substantial State and City
subsidies, as well as assistance from several special State taxes. Measures to
balance the TA's 1993 budget included increased funding by the City, increased
bridge and tunnel tolls and allocation of part of the revenues from the
Petroleum Business Tax. While the TA projects a surplus for 1994, cash basis
gaps of $300-600 million are projected for each of the 1995 through 1998 years.
Measures proposed to close these gaps include various additional State aid and
possible fare increases. However, it was projected in May 1994 that the effect
of the improving economy on transportation-dedicated taxes and on ridership, as
well as implementation of cost savings, would permit deferral of fare increases
until at least July 1995. A tentative agreement with TA workers reached in July
1994, which provides 10.4% wage increases over 39 months, would cost the MTA
$337 million. The MTA Chairman stated that this cost would be partly offset by
savings from work rule changes and that money for the settlement is available in
the TA's budget. An earlier settlement with Long Island Railroad workers is
expected to cost the MTA $14 million over 26 months.
 
     The MTA's Chairman proposed a 5 year financial strategy, including a
variety of fare changes; however, even if these are approved, an estimated $700
million in additional funds will be needed from State and City financial
assistance. Substantial claims have been made against the TA and the City for
damages from a 1990 subway fire and a 1991 derailment. The MTA infrastructure,
especially in the City, needs substantial rehabilitation. In December 1993, a
$9.5 billion MTA Capital Plan was finally approved for 1992-1996, although $500
million is contingent on increased contributions from the City; the City has
until late 1994 to decide if it will make these contributions. The MTA's
Chairman has threatened to raise subway fares and borrow more if the City fails
to
 
                                      d-23
<PAGE>
make up this amount. The City is seeking State and MAC approval to defer $245
million of capital contributions to the TA from the current fiscal year until
1998. It is anticipated that the MTA and the TA will continue to require
significant State and City support. Moody's reduced its rating of certain MTA
obligations to Baa on April 14, 1992.
 
     A Federal District Court ruled in February 1993 that State surcharges of up
to 24% on hospital bills paid by commercial insurance companies and health
maintenance organizations, much of which is used to subsidize care of uninsured
patients, violate Federal law; however, the Court permitted continuance of the
system pending appeal of the ruling.
 
     Litigation.   The State and the City are defendants in numerous legal
proceedings, including challenges to the constitutionality and effectiveness of
various welfare programs, alleged torts and breaches of contract, condemnation
proceedings and other alleged violations of laws. Adverse judgments in these
matters could require substantial financing not currently budgeted. For example,
in addition to real estate certiorari proceedings, claims in excess of $343
billion were outstanding against the City at June 30, 1993, for which it
estimated its potential future liability at $2.2 billion. Another action seeks a
judgment that, as a result of an overestimate by the State Board of Equalization
and Assessment, the City's 1992 real estate tax levy exceeded constitutional
limits. In March 1993, the U.S. Supreme Court ruled that if the last known
address of a beneficial owner of accounts held by banks and brokerage firms
cannot be ascertained, unclaimed funds therein belong to the state of the
broker's incorporation rather than where its principal office is located. New
York has obtained about $350 million of abandoned funds that could have to be
paid to other States. It has agreed to pay Delaware $200 million over a
five-year period. The case has been remanded to a special master to determine
disposition of these monies.
 
     Final adverse decisions in any of these cases could require extraordinary
appropriations at either the State or City level or both.
 
     NEW YORK TAXES
 
     In the opinion of Davis Polk & Wardwell, special counsel for the Sponsors,
under existing New York law:
 
        Under the income tax laws of the State and City of New York, the Trust
     is not an association taxable as a corporation and income received by the
     Trust will be treated as the income of the Holders in the same manner as
     for Federal income tax purposes. Accordingly, each Holder will be
     considered to have received the interest on his pro rata portion of each
     Debt Obligation when interest on the Debt Obligation is received by the
     Trust. In the opinion of bond counsel delivered on the date of issuance of
     the Debt Obligation, such interest will be exempt from New York State and
     City personal income taxes except where such interest is subject to Federal
     income taxes (see Taxes). A noncorporate Holder of 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 when he disposes of
     all or part of his pro rata portion of a Debt Obligation. A noncorporate
     Holder 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 Debt Obligation for New York State
     (and City) income tax purposes in the same manner as for Federal income tax
     purposes. Interest income on a Holder's pro rata portion of the Debt
     Obligations is generally not excludable from income in computing New York
     State and City corporate franchise taxes.
 
THE OHIO TRUST
 
     The Portfolio of the Ohio Trust contains different issues of debt
obligations issued by or on behalf of the State of Ohio (the 'State') and
counties, municipalities and other political subdivisions and other public
authorities thereof or by the Government of Puerto Rico or the Government of
Guam or by their respective authorities, all rated in the category A or better
by at least one national rating organization (see Investment Summary).
Investment in the Ohio Trust should be made with an understanding that the value
of the underlying Portfolio may decline with increases in interest rates.
 
     RISK FACTORS--The following summary is based on publicly available
information which has not been independently verified by the Sponsors or their
legal counsel.
 
     Employment and Economy.  Economic activity in Ohio, as in many other
industrially developed states, tends to be more cyclical than in some other
states and in the nation as a whole. Ohio ranked third in the nation in 1991
personal income derived from manufacturing. Although manufacturing (including
auto-related
 
                                      d-24
<PAGE>
manufacturing) remains an important part of Ohio's economy, the greatest growth
in employment in Ohio in recent years, consistent with national trends, has been
in the non-manufacturing area. Payroll employment in Ohio showed a steady upward
trend until 1979, then decreased until 1982. It peaked in the summer of 1993
after a slight decrease in 1992, and then decreased slightly but, as of May
1994, it has approached a new high. Growth in recent years has been concentrated
among non-manufacturing industries, with manufacturing tapering off since its
1969 peak. Over three-fourths of the payroll workers in Ohio are employed by
non-manufacturing industries.
 
     The average monthly unemployment rate in Ohio was 4.9% in September, 1994.
 
     With 15.7 million acres in farm land, agriculture is a very important
segment of the economy in Ohio, providing an estimated 750,000 jobs or
approximately 15% of total Ohio employment. By many measures, agriculture is
Ohio's leading industry contributing nearly $4.1 billion to the state's economy
each year.
 
     Ohio continues to be a major 'headquarters' state. Of the top 500
industrial corporations (based on 1993 sales) as reported in 1994 by Fortune
magazine, 42 had headquarters in Ohio, placing Ohio fourth as a 'headquarters'
state for industrial corporations. Ohio places sixth as a 'headquarters' state
for service corporations (24 of the top 500).
 
     The State Budget, Revenues and Expenditures and Cash Flow.  Ohio law
effectively precludes the State from ending a fiscal year or a biennium with a
deficit. The State Constitution provides that no appropriation may be made for
more than two years and consistent with that provision the State operates on a
fiscal biennium basis. The current fiscal biennium runs from July 1, 1993
through June 30, 1995.
 
     Under Ohio law, if the Governor ascertains that the available revenue
receipts and balances for the general revenue fund or other funds for the then
current fiscal year will probably be less than the appropriations for the year,
he must issue orders to the State agencies to prevent their expenditures and
obligations from exceeding the anticipated receipts and balances. The Governor
implemented this directive in some prior years, including fiscal years 1992 and
1993.
 
     Consistent with national economic conditions, in the 1990-91 biennium, Ohio
experienced an economic slowdown producing some significant changes in certain
general revenue fund revenue and expenditure levels for the fiscal year 1991.
Examples on the revenue side included lower than previously forecasted revenues
from sales and use taxes (including auto) and corporate franchise and personal
income taxes. Increased human services expenditure requirements developed, such
as for Medicaid, Aid to Dependent Children and general assistance. Several
executive and legislative measures were taken to address the anticipated
shortfall in revenues and increase in expenditures. As a result, the Ohio Office
of Budget and Management (the 'OBM') reported a positive general revenue fund
balance of approximately $135.4 million at the end of fiscal year 1991.
 
     State and national fiscal uncertainties during the 1992-93 biennium
required several actions to achieve the ultimate positive general revenue fund
ending balances. OBM projected a fiscal year 1992 imbalance--a receipts
shortfall resulting primarily from lower collection of certain taxes,
particularly sales, use and personal income taxing and higher expenditure levels
in certain areas, particularly human services including Medicaid. As an initial
action, the Governor ordered most state agencies to reduce general revenue fund
appropriation spending in the final six months of fiscal year 1992 by a total of
approximately $184 million. Debt service obligations were not affected by this
order. The General Assembly authorized, and the OBM made in June 1992, a $100.4
million transfer to the general revenue fund from the budget stabilization fund
and certain other funds. Other revenue and spending actions, legislative and
administrative, resolved the remaining general revenue fund imbalance for fiscal
year 1992.
 
     As a first step toward addressing a $520 million general revenue fund
shortfall for fiscal year 1993 then estimated by OBM, the Governor ordered,
effective July 1, 1992, selected general revenue fund appropriations reductions
totalling $300 million (but such reductions did not include debt service).
Subsequent executive and legislative actions provided for positive
biennium-ending general revenue fund balances for the current biennium. The
general revenue fund ended the 1992-93 biennium with a fund balance of
approximately $111 million and a cash balance of approximately $394 million. The
general revenue fund appropriations bill for the current biennium was passed on
June 30, 1993. The first year of the current biennium, fiscal year 1994, ended
with a general revenue fund of over $560,000,000.
 
     Because the schedule of general revenue fund cash receipts and
disbursements do not precisely coincide, temporary general revenue fund cash
flow deficiencies often occur in some months of a fiscal year, particularly in
the middle months. Statutory provisions provide for effective management of
these temporary cash flow
 
                                      d-25
<PAGE>
deficiencies by permitting adjustment of payment schedules and the use of total
operating funds. A general revenue fund cash flow deficiency occurred in two
months of fiscal year 1990, with the highest being approximately $252.4 million.
In fiscal year 1991, there were general revenue fund cash flow deficiencies in
nine months, with the highest being $582.5 million; in fiscal year 1992 there
were general revenue fund cash flow deficiencies in ten months, with the highest
being approximately $743.1 million. In fiscal year 1993, general revenue fund
cash flow deficiencies occurred in August 1992 through May 1993, with the
highest being approximately $768.6 million in December. General revenue fund
cash flow deficiencies occurred in six months of fiscal year 1994, with the
highest being approximately $500.6 million. OBM currently projects cash flow
deficiencies in nine months of the current fiscal year.
 
     State and State Agency Debt.  The Ohio Constitution prohibits the
incurrence or assumption of debt by the State without a popular vote except for
the incurrence of debt to cover causal deficits or failures in revenue or to
meet expenses not otherwise provided for which are limited to $750,000 and to
repel invasions, suppress insurrection or defend the State in war. Under
interpretations by Ohio courts, revenue bonds of the State and State agencies
that are payable from net revenues of or related to revenue producing facilities
or categories of such facilities are not considered 'debt' within the meaning of
these constitutional provisions.
 
     At various times since 1921, Ohio voters, by thirteen specific
constitutional amendments (the last adopted in 1993), authorized the incurrence
of up to $4.864 billion in State debt to which taxes or excises were pledged for
payment. Of that amount, $715 million was for veterans' bonuses. As of November
1, 1994, of the total amount authorized by the voters, excluding highway
obligations and general obligation park bonds discussed below, approximately
$3.255 billion has been issued, of which approximately $2.581 billion has been
retired and approximately $674.4 million remains outstanding. The only such
State debt still authorized to be incurred are portions of the Highway
Obligation Bonds, the Coal Development Bonds, and the State general obligation
bonds for local government infrastructure projects and parks.
 
     No more than $500 million in highway obligations may be outstanding at any
time. As of November 1, 1994, approximately $446.3 million of highway
obligations were outstanding. No more than $100 million in State obligations for
coal development may be outstanding at any one time. As of November 1, 1994,
approximately $38.9 million of such bonds were outstanding. Not more than $1.2
billion of State general obligation bonds to finance local capital
infrastructure improvements may be issued at any one time, and no more than $120
million can be issued in a calendar year. As of November 1, 1994, approximately
$608.3 million of those bonds were outstanding.
 
     The Ohio Constitution authorizes State bonds for certain housing purposes,
but tax moneys may not be obligated or pledged to those bonds. In addition, the
Ohio Constitution authorizes the issuance of obligations of the State for
certain purposes, the owners or holders of which are not given the right to have
excises or taxes levied by the State legislature to pay principal and interest.
Such debt obligations include the bonds and notes issued by the Ohio Public
Facilities Commission and the Ohio Building Authority.
 
     Under recent legislation, the State has been authorized to issue bonds to
finance approximately $140 million of capital improvements for local elementary
and secondary public school facilities, and the State building authority has
been authorized to issue $100 million of bonds to provide computer technology
and security systems for local school districts. Debt service on the obligations
is payable from State resources.
 
     A statewide economic development program assists with loans and loan
guarantees, the financing of facilities for industry, commerce, research and
distribution. The law authorizes the issuance of State bonds and loan guarantees
secured by a pledge of portions of the State profits from liquor sales. The
General Assembly has authorized the issuance of these bonds by the State
Treasurer, with a maximum amount of $300 million, subject to certain
adjustments, currently authorized to be outstanding at any one time. Of an
approximate $148.0 million issue in 1989, approximately $83.2 million was
outstanding as of November 1, 1994. The highest future year annual debt service
on those 1989 bonds, which are payable through 2000, is approximately $18.3
million.
 
     An amendment to the Ohio Constitution authorizes revenue bond financing for
certain single and multifamily housing. No State resources are to be used for
the financing. As of November 8, 1994, the Ohio Housing Financing Agency,
pursuant to that constitutional amendment and implementing legislation, had sold
revenue bonds in the aggregate principal amount of approximately $234.32 million
for multifamily housing and approximately $3.926 billion for single family
housing.
 
     A constitutional amendment adopted in 1990 authorizes greater State and
political subdivision participation in the provision of housing for individuals
and families in order to supplement existing State housing assistance
 
                                      d-26
<PAGE>
programs. The General Assembly could authorize State borrowing for the new
programs and the issuance of State obligations secured by a pledge of all or a
portion of State revenues or receipts, although the obligations may not be
supported by the State's full faith and credit.
 
     A 1986 act, amended in 1994 (the 'Rail Act'), authorizes the Ohio Rail
Development Commission (the 'Rail Commission') to issue obligations to finance
the costs of rail service projects within the State either directly or by loans
to other entities. The Rail Commission has considered financing plan options and
the possibility of issuing bonds or notes. The Rail Act prohibits, without
express approval by joint resolution of the General Assembly, the collapse of
any escrow of financing proceeds for any purpose other than payment of the
original financing, the substitution of any other security, and the application
of any proceeds to loans or grants. The Rail Act authorizes the Rail Commission,
but only with subsequent General Assembly action, to pledge the faith and credit
of the State but not the State's power to levy and collect taxes (except ad
valorem property taxes if subsequently authorized by the General Assembly) to
secure debt service on any post-escrow obligations and, provided it obtains the
annual consent of the State Controlling Board, to pledge to and use for the
payment of debt service on any such obligations, all excises, fees, fines and
forfeitures and other revenues (except highway receipts) of the State after
provision for the payment of certain other obligations of the State.
 
     Schools and Municipalities.  The 612 public school districts and 49 joint
vocational school districts in the State receive a major portion (approximately
46%) of their operating funds from State subsidy appropriations, the primary
portion known as the Foundation Program. They must also rely heavily upon
receipts from locally-voted taxes. Some school districts in recent years have
experienced varying degrees of difficulty in meeting mandatory and discretionary
increased costs. Current law prohibits school closings for financial reasons.
 
     Original State appropriations for the 1992-93 biennium provided for an
increase in school funding over funding for the preceding biennium. The
reduction in appropriations spending for fiscal year 1992 included a 2.5%
overall reduction in the annual Foundation Program appropriations and a 6%
reduction in other primary and secondary education programs. The reductions were
in varying amounts, and had varying effects, with respect to individual school
districts. State appropriations for the current biennium provide for an increase
in State school funding appropriations over those in the preceding biennium. The
$8.9 billion appropriated for primary and secondary education is intended to
provide for 2.4% and 4.6% increases in basic aid for the two fiscal years of the
biennium.
 
     In previous years school districts facing deficits at year end had to apply
to the State for a loan from the Emergency School Advancement Fund. This Fund
met all the needs of the school districts with potential deficits in fiscal
years 1979 through 1989. New legislation replaced the Fund with enhanced
provisions for individual district local borrowing, including direct application
of Foundation Program distributions to repayment if needed. As of fiscal year
1993, there were 27 loans made for an approximate aggregate amount of $94.5
million. Twenty-eight school districts have received approval for loans
totalling approximately $15.6 million in fiscal year 1994.
 
     Litigation contesting the Ohio system of school funding is pending, with
defendants being the State and several State agencies and officials. The
complaints essentially request a declaratory judgment that the State's statutory
system of funding public elementary and secondary education violates various
provisions of the Ohio Constitution and request the State to devise a
constitutionally acceptable system of school funding. On July 1, 1994, the trial
court concluded that certain provisions of current law violated provisions of
the Ohio constitution. The trial court directed the State to provide for and
fund a system of funding public elementary and secondary education in compliance
with the Ohio Constitution. Defendants have appealed this ruling, and have
applied for a stay until the case is resolved on appeal. It is not possible at
this time to state whether the suit will be successful or, if plaintiffs should
prevail, the effect on the State's present school funding system, including the
amount of and criteria for State basic aid allocations to school districts.
 
     Various Ohio municipalities have experienced fiscal difficulties. Due to
these difficulties, the State established an act in 1979 to identify and assist
cities and villages experiencing defined 'fiscal emergencies'. A commission
appointed by the Governor monitors the fiscal affairs of municipalities facing
substantial financial problems. To date, this act has been applied to eleven
cities and twelve villages. The situations in nine of the cities and nine of the
villages have been resolved and their commissions terminated.
 
     State Employees and Retirement Systems. The State has established five
public retirement systems, three of which cover both State and local government
employees, one covers State government employees only, and one covers local
government employees only. Those systems provide retirement, disability
retirement and survivor
 
                                      d-27
<PAGE>
benefits. Federal law requires newly-hired State employees to participate in the
federal Medicare program, requiring matching employer and employee
contributions, each now 1.45% of the wage base. Otherwise, State employees
covered by a State retirement system are not currently covered under the federal
Social Security Act. The actuarial evaluations reported by these five systems
showed aggregate unfunded accrued liabilities of approximately $17,143 billion
covering both State and local employees.
 
     The State engages in employee collective bargaining and currently operates
under staggered two-year agreements with all of its 21 bargaining units. The
bargaining unit agreements with the State expire at various times in 1997.
 
     Health Care Facilities Debt.  Revenue bonds are issued by Ohio counties and
other agencies to finance hospitals and other health care facilities. The
revenues of such facilities consist, in varying but typically material amounts,
of payment from insurers and third-party reimbursement programs, such as
Medicaid, Medicare and Blue Cross. Consistent with the national trend,
third-party reimbursement programs in Ohio have begun new programs, and modified
benefits, with a goal of reducing usage of health care facilities. In addition,
the number of alternative health care delivery systems in Ohio has increased
over the past several years. For example, the number of health maintenance
organizations licensed by the Ohio Department of Insurance increased from 12 on
February 14, 1983 to 31 as of November, 1994. Due in part to changes in the
third-party reimbursement programs and an increase in alternative delivery
systems, the health care industry in Ohio has become more competitive. This
increased competition may adversely affect the ability of health care facilities
in Ohio to make timely payments of interest and principal on the indebtedness.
 
     OHIO TAXES
 
     In the opinion of Vorys, Sater, Seymour and Pease, Columbus, Ohio, special
counsel on Ohio tax matters, under existing Ohio law:
 
        The Ohio Trust is not an association subject to the Ohio corporation
     franchise tax or the Ohio tax on dealers in intangibles and the Trustees
     will not be subject to the Ohio personal income tax.
 
        In calculating a Holder's Ohio personal income tax or the Ohio
     corporation franchise tax, a Holder will not be required to include in the
     Holder's 'adjusted gross income' or 'net income,' as the case may be, the
     Holder's share of interest received by or distributed from the Ohio Trust
     on any Debt Obligation in the Ohio Trust, the interest on which is exempt
     from Ohio personal income or corporation franchise taxes, as the case may
     be.
 
        In calculating a Holder's Ohio personal income tax or the Ohio
     corporation franchise tax, a Holder will be required to include in the
     Holder's 'adjusted gross income' or 'net income,' as the case may be,
     capital gains and losses which the Holder must recognize for Federal income
     tax purposes (upon the sale or other disposition of Units by the Holder or
     upon the sale or other disposition of Debt Obligations by the Ohio Trust),
     except gains and losses attributable to Debt Obligations specifically
     exempted from such taxation by the Ohio law authorizing their issuance. A
     Holder subject to the Ohio corporation franchise tax may, in the
     alternative if it results in a larger amount of tax payable, be taxed upon
     its net worth and, for this purpose, is required to include in its net
     worth the full value, as shown on the books of the corporation, of all
     Units which it owns.
 
        For purposes of Ohio municipal income taxation, the Holder's share of
     interest received by or distributed from the Ohio Trust on Debt Obligations
     or gains realized by the Holder from the sale, exchange or other
     disposition of Units by the Holder or from the sale, exchange or other
     disposition of Debt Obligations by the Ohio Trust, as a result of the
     repeal of the Ohio tax on intangible personal property, might be required
     to be included in a Holder's taxable income if (1) such interest or gain is
     not exempt from Ohio municipal income taxes by virtue of a specific
     statutory or constitutional exemption from such taxes (regarding which no
     blanket opinion is being given), and (2) the Ohio municipality in which the
     Holder resides was taxing such income on or before April 1, 1986 and such
     tax was submitted to and approved by the voters of such municipality in an
     election held on November 8, 1988.
 
        Assuming that the Ohio Trust will not hold any tangible personal
     property nor any real property, neither Debt Obligations held by the Ohio
     Trust nor Units of the Ohio Trust held by individuals are subject to any
     property tax levied by the State of Ohio or any political subdivision
     thereof.
 
                                      d-28
<PAGE>
THE PENNSYLVANIA TRUST
 
     The Portfolio of the Pennsylvania Trust contains different issues of debt
obligations issued by or on behalf of the State of Pennsylvania (the 'State')
and counties, municipalities and other political subdivisions and other public
authorities thereof or by the Government of Puerto Rico or the Government of
Guam or by their respective authorities, all rated in the category A or better
by at least one national rating organization (see Investment Summary).
Investment in the Pennsylvania Trust should be made with an understanding that
the value of the underlying Portfolio may decline with increases in interest
rates.
 
     RISK FACTORS--Prospective investors should consider the financial
difficulties and pressures which the Commonwealth of Pennsylvania and certain of
its municipal subdivisions have undergone. Both the Commonwealth and the City of
Philadelphia are experiencing significant revenue shortfalls. There can be no
assurance that the Commonwealth will not experience a further decline in
economic conditions or that portions of the municipal obligations contained in
the Portfolio of the Pennsylvania Trust will not be affected by such a decline.
Without intending to be complete, the following briefly summarizes some of these
difficulties and the current financial situation, as well as some of the complex
factors affecting the financial situation in the Commonwealth. It is derived
from sources that are generally available to investors and is based in part on
information obtained from various agencies in Pennsylvania. No independent
verification has been made of the following information.
 
     State Economy.  Pennsylvania has been historically identified as a heavy
industry state although that reputation has changed recently as the industrial
composition of the Commonwealth diversified when the coal, steel and railroad
industries began to decline. The major new sources of growth in Pennsylvania are
in the service sector, including trade, medical and the health services,
education and financial institutions. Pennsylvania's agricultural industries are
also an important component of the Commonwealth's economic structure, accounting
for more than $3.6 billion in crop and livestock products annually while
agribusiness and food related industries support $38 billion in economic
activity annually.
 
     Non-agricultural employment in the Commonwealth has increased steadily from
1984 to its 1992 level of 81.3 percent of the State's employment force. The
growth in employment experienced in Pennsylvania is comparable to the nationwide
growth in employment which has occurred during this period. In 1993,
manufacturing employment represented 18.4 percent of all non-agricultural
employment in the Commonwealth while the services sector accounted for 29.9
percent and the trade sector accounted for 22.4 percent.
 
     The Commonwealth recently experienced a slowdown in its economy. Moreover,
economic strengths and weaknesses vary in different parts of the Commonwealth.
In general, heavy industry and manufacturing have recently been facing
increasing competition from foreign producers. During 1993, the annual average
unemployment rate in Pennsylvania was 7.0 percent compared to 6.8 percent for
the United States. For August 1994 the unadjusted unemployment rate was 6.2
percent in Pennsylvania and 5.9 percent in the United States, while the
seasonally adjusted unemployment rate for the Commonwealth was 6.3 percent and
for the United States was 6.1 percent.
 
     State Budget.  The Commonwealth operates under an annual budget which is
formulated and submitted for legislative approval by the Governor each February.
The Pennsylvania Constitution requires that the Governor's budget proposal
consist of three parts: (i) a balanced operating budget setting forth proposed
expenditures and estimated revenues from all sources and, if estimated revenues
and available surplus are less than proposed expenditures, recommending specific
additional sources of revenue sufficient to pay the deficiency; (ii) a capital
budget setting forth proposed expenditures to be financed from the proceeds of
obligations of the Commonwealth or its agencies or from operating funds; and
(iii) a financial plan for not less than the succeeding five fiscal years, which
includes for each year projected operating expenditures and estimated revenues
and projected expenditures for capital projects. The General Assembly may add,
change or delete any items in the budget prepared by the Governor, but the
Governor retains veto power over the individual appropriations passed by the
legislature. The Commonwealth's fiscal year begins on July 1 and ends on June
30.
 
     All funds received by the Commonwealth are subject to appropriation in
specific amounts by the General Assembly or by executive authorization by the
Governor. Total appropriations enacted by the General Assembly may not exceed
the ensuing year's estimated revenues, plus (less) the unappropriated fund
balance (deficit) of the preceding year, except for constitutionally authorized
debt service payments. Appropriations from the principal operating funds of the
Commonwealth (the General Fund, the Motor License Fund and the State Lottery
Fund) are generally made for one fiscal year and are returned to the
unappropriated surplus of the fund if not spent or
 
                                      d-29
<PAGE>
encumbered by the end of the fiscal year. The Constitution specifies that a
surplus of operating funds at the end of a fiscal year must be appropriated for
the ensuing year.
 
     Pennsylvania uses the 'Fund' method of accounting for receipts and
disbursements. For purposes of government accounting, a 'fund' is an independent
fiscal and accounting entity with a self-balancing set of accounts, recording
cash and/or other resources together with all related liabilities and equities
that are segregated for the purpose of carrying on specific activities or
attaining certain objectives in accordance with the fund's special regulations,
restrictions or limitations. In the Commonwealth, over 150 funds have been
established by legislative enactment or in certain cases by administrative
action for the purpose of recording the receipt and disbursement of moneys
received by the Commonwealth. Annual budgets are adopted each fiscal year for
the principal operating funds of the Commonwealth and several other special
revenue funds. Expenditures and encumbrances against these funds may only be
made pursuant to appropriation measures enacted by the General Assembly and
approved by the Governor. The General Fund, the Commonwealth's largest fund,
receives all tax revenues, non-tax revenues and federal grants and entitlements
that are not specified by law to be deposited elsewhere. The majority of the
Commonwealth's operating and administrative expenses are payable from the
General Fund. Debt service on all bond indebtedness of the Commonwealth, except
that issued for highway purposes or for the benefit of other special revenue
funds, is payable from the General Fund.
 
     Financial information for the principal operating funds of the Commonwealth
is maintained on a budgetary basis of accounting, which is used for the purpose
of insuring compliance with the enacted operating budget. The Commonwealth also
prepares annual financial statements in accordance with generally accepted
accounting principles ('GAAP'). Budgetary basis financial reports are based on a
modified cash basis of accounting as opposed to a modified accrual basis of
accounting prescribed by GAAP. Financial information is adjusted at fiscal
year-end to reflect appropriate accruals for financial reporting in conformity
with GAAP.
 
     Recent Financial Results.  From fiscal 1984, when the Commonwealth first
prepared its financial statements on a GAAP basis, through fiscal 1989, the
Commonwealth reported a positive unreserved-undesignated fund balance for its
government fund types (General Fund, Special Revenue Fund and Capital Projects
Fund) at the fiscal year end. Slowing economic growth during 1990, leading to a
national economic recession beginning in fiscal 1991, reduced revenue growth and
increased expenditures and contributed to negative unreserved-undesignated fund
balances at the end of the 1990 and 1991 fiscal years. The negative
unreserved-undesignated fund balance was due largely to operating deficits in
the General Fund and the State Lottery Fund during those fiscal years. Actions
taken during fiscal 1992 to bring the General Fund back into balance, including
tax increases and expenditure restraints, resulted in a $1.1 billion reduction
to the unreserved-undesignated fund deficit for combined governmental fund types
at June 30, 1993, as a result of a $420.4 million increase in the balance. These
gains were produced by continued efforts to control expenditure growth. The
Combined Balance Sheet as of June 30, 1993, showed total fund balance and other
credits for the total governmental fund types of $1,959.9 million, a $732.1
million increase from the balance at June 30, 1992. During fiscal 1993, total
assets increased by $1,296.7 million to $7,096.4 million, while liabilities
increased $564.6 million to $5,136.5 million.
 
     Fiscal 1991 Financial Results. The Commonwealth experienced a $453.6
million general fund deficit as of the end of its 1991 fiscal year. The deficit
reflected higher than budgeted expenditures, below-estimate economic activity
and growth rates of economic indicators and total tax revenue shortfalls below
those assumed in the enacted budget. Rising demands on state programs caused by
the economic recession, particularly for medical assistance and cash assistance
programs, and the increased costs of special education programs and correction
facilities and programs, contributed to increased expenditures in fiscal 1991,
while tax revenues for the 1991 fiscal year were severely affected by the
economic recession. Total corporation tax receipts and sales and use tax
receipts during fiscal 1991 were, respectively, 7.3 percent and 0.9 percent
below amounts collected during fiscal 1990. Personal income tax receipts also
were affected by the recession but not to the extent of the other major General
Fund taxes, increasing only 2.0 percent over fiscal 1990 collections. A number
of actions were taken throughout the fiscal year by the Commonwealth to mitigate
the effects of the recession on budget revenues and expenditures. The
Commonwealth initiated a number of cost-saving measures, including the firing of
2,000 state employees, deferral of paychecks and reduction of funds to state
universities, which resulted in approximately $871 million cost savings.
 
     Fiscal 1992 Financial Results.  Actions taken during fiscal 1992 to bring
the General Fund budget back into balance, including tax increases and
expenditure restraints resulted in a $1.1 billion reduction for the unreserved-
undesignated fund deficit for combined governmental fund types and a return to a
positive fund balance. Total General Fund revenues for fiscal 1992 were
$14,516.8 million which is approximately 22 percent higher than fiscal 1991
revenues of $11,877.3 million due in large part to tax increases. The increased
revenues funded substantial increases in education, social services and
corrections programs. As a result of the tax increases and
 
                                      d-30
<PAGE>
certain appropriation lapses, fiscal 1992 ended with an $8.8 million surplus
after having started the year with an unappropriated general fund balance
deficit of $453.6 million.
 
     Fiscal 1993 Financial Results.  Fiscal 1993 closed with revenues higher
than anticipated and expenditures approximately as projected, resulting in an
ending unappropriated balance surplus of $242.3 million. A deduction in the
personal income tax rate in July 1992 and the one-time receipt of revenues from
retroactive corporate tax increases in fiscal 1992 were responsible, in part,
for the low growth in fiscal 1993.
 
     Fiscal 1994 Financial Results.  Commonwealth revenues during the 1994
fiscal year totaled $15,210.7 million, $38.6 million above the fiscal year
estimate, and 3.9 percent over commonwealth revenues during the 1993 fiscal
year. The sales tax was an important contributor to the higher than estimated
revenues. The strength of collections from the sales tax offset the lower than
budgeted performance of the personal income tax that ended the 1994 fiscal year
$74.4 million below estimate. The shortfall in the personal income tax was
largely due to shortfalls in income not subject to withholding such as interest,
dividends and other income. Expenditures, excluding pooled financing
expenditures and net of all fiscal 1994 appropriation lapses, totaled $14,934.4
million representing a 7.2 percent increase over fiscal 1993 expenditures.
Medical assistance and prisons spending contributed to the rate of spending
growth for the 1994 fiscal year. The Commonwealth maintained an operating
balance on a budgetary basis for fiscal 1994 producing a fiscal year ending
unappropriated surplus of $335.8 million.
 
     Fiscal 1995 Budget. On June 16, 1994, the Governor signed a $15.7 billion
general fund budget, an increase of over 3.9 percent from the fiscal 1994
budget. A substantial amount of the increase is targeted for medical assistance
expenditures, reform of the state-funded public assistance program and education
subsidies to local school districts. The budget also includes tax reductions
totaling an estimated $166.4 million benefiting principally low income families
and corporations. The fiscal 1995 budget projects a $4 million fiscal year-end
unappropriated surplus.
 
     Debt Limits and Outstanding Debt.  The Constitution of Pennsylvania permits
the issuance of the following types of debt: (i) debt to surpress insurrection
or rehabilitate areas affected by disaster; (ii) electorate approved debt; (iii)
debt for capital projects subject to an aggregate debt limit of 1.75 times the
annual average tax revenues of the preceding five fiscal years; and (iv) tax
anticipation notes payable in the fiscal year of issuance.
 
     Under the Pennsylvania Fiscal Code, the Auditor General is required
annually to certify to the Governor and the General Assembly certain information
regarding the Commonwealth's indebtedness. According to the most recent Auditor
General certificate, the average annual tax revenues deposited in all funds in
the five fiscal years ended June 30, 1993 was $15.5 billion, and, therefore, the
net debt limitation for the 1994 fiscal year is $27.1 billion. Outstanding net
debt totalled $5.1 billion at June 30, 1994, an increase of $37.0 million from
June 30, 1993. At February 28, 1994, the amount of debt authorized by law to be
issued, but not yet incurred was $15.0 billion.
 
     Debt Ratings.  All outstanding general obligation bonds of the Commonwealth
are rated AA-by Standard & Poor's and A1 by Moody's.
 
     City of Philadelphia.  The City of Philadelphia (the 'City' or
'Philadelphia') is the largest city in the Commonwealth. Philadelphia
experienced a series of general fund deficits for fiscal years 1988 through
1992, which have culminated in the City's present serious financial
difficulties. In its 1992 Comprehensive Annual Financial Report, Philadelphia
reported a cumulative general fund deficit of $71.4 million for fiscal year
1992.
 
     In June 1991, the Governor of Pennsylvania signed into law legislation
establishing the Pennsylvania Inter-Governmental Cooperation Authority ('PICA'),
a five-member board which would oversee the fiscal affairs of the City of
Philadelphia. The legislation empowers PICA to issue notes and bonds on behalf
of Philadelphia and also authorizes Philadelphia to levy a one-percent sales tax
the proceeds of which would be used to pay off the bonds. In return for PICA's
fiscal assistance, Philadelphia was required, among other things, to establish a
five-year financial plan that includes balanced annual budgets. Under the
legislation, if Philadelphia does not comply with such requirements, PICA may
withhold bond revenues and certain state funding.
 
     At this time, the City is operating under a five-year fiscal plan approved
by PICA on April 6, 1992. Full implementation of the five-year plan was delayed
due to labor negotiations that were not completed until October 1992, three
months after the expiration of the old labor contracts. The terms of the new
labor contracts are estimated to cost approximately $144.4 million more than
what was budgeted in the original five-year plan. An amended five-year plan was
approved by PICA in May 1993. The Mayor's latest update of the five-year
financial plan was approved by PICA on May 2, 1994.
 
     On June 5, 1992, PICA sold approximately $480 million in bonds at yields
ranging from 5.25 percent to 6.88 percent. The proceeds of the bonds were used
to cover shortfalls accumulated over fiscal years 1988 through 1991, projected
deficits for fiscal years 1992 and 1993, construction projects and other capital
expenditures. In
 
                                      d-31
<PAGE>
accordance with the enabling legislation, PICA was guaranteed a percentage of
the wage tax revenue expected to be collected from Philadelphia residents to
permit repayment of the bonds. In July 1993 and August 1993, PICA issued $643.4
million and $178.7 million, respectively, of Special Tax Revenue Bonds to refund
certain general obligation bonds of the City and to fund additional capital
projects.
 
     In January 1993, Philadelphia anticipated a cumulative general fund budget
deficit of $57 million for fiscal year 1993. In response to the anticipated
deficit, the Mayor unveiled a financial plan eliminating the budget deficit for
fiscal year 1993 through significant service cuts that included a plan to
privatize certain city-provided services. Due to an upsurge in tax receipts,
cost-cutting and additional PICA borrowings, Philadelphia completed fiscal year
1993 with a balanced general fund budget. The audit findings for fiscal year
1993 show a surplus of approximately $3 million for the fiscal year ended June
30, 1993.
 
     In January 1994, the Mayor proposed a $2.3 billion city general fund budget
that included no tax increases, no significant service cuts and a series of
modest health and welfare program increases. At that time, the Mayor also
unveiled a $2.2 billion program (the 'Philadelphia Economic Stimulus Program')
designed to stimulate Philadelphia's economy and stop the loss of 1,000 jobs a
month. However, the success of the Philadelphia Economic Stimulus Program has
been predicated upon several contingencies including, among others, $250 million
in revenues from riverboat gambling over the next three years, which first must
be approved by the state legislature, and $100 million in federal 'empowerment
zone' subsidies, which Philadelphia may or may not receive. As of January 1994,
the 1994 Philadelphia general fund budget was running at a deficit of
approximately $10 million. The Mayor has predicted that the general fund will be
balanced at the end of fiscal year 1994. The fiscal 1994 budget projects no
deficit and a balanced budget for the fiscal year ended June 30, 1994.
 
     S&P's rating on Philadelphia's general obligations is 'BB'; Moody's rating
is currently 'Ba'.
 
     Litigation.  The Commonwealth is a party to numerous lawsuits in which an
adverse final decision could materially affect the Commonwealth's governmental
operations and consequently its ability to pay debt service on its obligations.
The Commonwealth also faces tort claims made possible by the limited waiver of
sovereign immunity effected by Act 152, approved September 28, 1978.
 
     PENNSYLVANIA TAXES
 
     The following summarizes the opinion of Dechert Price & Rhoads,
Philadelphia, Pennsylvania, special counsel on Pennsylvania tax matters, under
existing law:
 
        1.  The Pennsylvania Trust 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 Pennsylvania Trust are not subject to any of the
     personal property taxes presently in effect in Pennsylvania to the extent
     of that proportion of the Trust represented by Debt Obligations 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'). The taxes referred to above include the
     County Personal Property Tax, the additional personal property taxes
     imposed on Pittsburgh residents by the School District of Pittsburgh and by
     the City of Pittsburgh. The City of Pittsburgh, the School District of
     Pittsburgh and Allegheny County cannot impose personal property taxes as of
     January 1, 1995. Fund Units may be taxable under the Pennsylvania
     inheritance and estate taxes.
 
        3.  The proportion of interest income representing interest income from
     Pennsylvania Obligations distributable to Holders of the Pennsylvania Trust
     is 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 will such interest be 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 debt obligations will be exempt from the Pennsylvania
     Personal Income Tax either as payment 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 Debt Obligations will not be subject to this tax.
 
        5.  The disposition by the Pennsylvania Trust of a Pennsylvania
     Obligation (whether by sale, exchange, redemption or payment at maturity)
     will not constitute a taxable event to a Holder under the Pennsylvania
     Personal Income Tax if the Pennsylvania Obligation was issued prior to
     February 1, 1994. Further, although
 
                                      d-32
<PAGE>
     there is no published authority on the subject, counsel is of the opinion
     that (i) a Holder of the Pennsylvania Trust will not have a taxable event
     under the Pennsylvania state and local income taxes referred to in the
     preceding paragraph upon the redemption or sale of his Unit to the extent
     that the Trust is then comprised of Pennsylvania Obligations issued prior
     to February 1, 1994 and (ii) the disposition by the Trust of a Pennsylvania
     Obligation (whether by sale, exchange, redemption or payment at maturity)
     will not constitute a taxable event to a Holder under the Corporate Net
     Income Tax or the Philadelphia School District Investment Income Tax if the
     Pennsylvania Obligation was issued prior to February 1, 1984. (The School
     District tax has no application to gain on the disposition of property held
     by the taxpayer for more than six months.) Gains on the sale, exchange,
     redemption, or payment at maturity of a Pennsylvania Obligation issued on
     or after February 1, 1994, will be taxable under all of these taxes, as
     will gains on the redemption or sale of a unit to the extent that the Trust
     is comprised of Pennsylvania Obligations issued on or after February 1,
     1994.
 
        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 Pennsylvania personal property taxes to
     the extent required by Federal statutes. The proportion of income received
     by Holders derived from interest on such obligations is not taxable under
     any of the Pennsylvania State and local income taxes referred to above.
     Although Federal law does not expressly exclude from taxation gain realized
     on the disposition of obligations of Puerto Rico or of Guam, because
     interest is exempt on such obligations, Pennsylvania does not tax gain from
     the disposition of such obligations under the Personal Income Tax.
 
                                      d-33
<PAGE>
 
                             Defined
                             Asset FundsSM
 
SPONSORS:                               MUNICIPAL INVESTMENT
Merrill Lynch,                          TRUST FUND
Pierce, Fenner & Smith Incorporated     Multistate Series - 75
Unit Investment Trusts                  (Unit Investment Trusts)
P.O. Box 9051                           PROSPECTUS
Princeton, N.J. 08543-9051              This Prospectus does not contain all of
(609) 282-8500                          the information with respect to the
Smith Barney Inc.                       investment company set forth in its
Unit Trust Department                   registration statement and exhibits
Two World Trade Center--101st Floor     relating thereto which have been filed
New York, N.Y. 10048                    with the Securities and Exchange
1-800-298-UNIT                          Commission, Washington, D.C. under the
PaineWebber Incorporated                Securities Act of 1933 and the
1200 Harbor Blvd.                       Investment Company Act of 1940, and to
Weehawken, N.J. 07087                   which reference is hereby made.
(201) 902-3000                          No person is authorized to give any
Prudential Securities Incorporated      information or to make any
One Seaport Plaza                       representations with respect to this
199 Water Street                        investment company not contained in this
New York, N.Y. 10292                    Prospectus; and any information or
(212) 776-1000                          representation not contained herein must
Dean Witter Reynolds Inc.               not be relied upon as having been
Two World Trade Center--59th Floor      authorized. This Prospectus does not
New York, N.Y. 10048                    constitute an offer to sell, or a
(212) 392-2222                          solicitation of an offer to buy,
EVALUATOR:                              securities in any state to any person to
Kenny S&P Evaluation Services           whom it is not lawful to make such offer
65 Broadway                             in such state.
New York, N.Y. 10006
INDEPENDENT ACCOUNTANTS:
Deloitte & Touche LLP
Two World Financial Center
9th Floor
New York, N.Y. 10281-1414
TRUSTEE:
The Bank of New York
Unit Investment Trust Department
P.O. Box 974
Wall Street Station
New York, N.Y. 10268-0974
1-800-221-7771
                                                     15012--11/94
 


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