CIF ITS 54 DAF, 487, 1995-05-16

CIF ITS 54 DAF
487, 1995-05-16

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 16, 1995

REGISTRATION NO. 33-57973

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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

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

AMENDMENT NO. 1
TO
FORM S-6
------------------------------------------

FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
------------------------------------------
A. EXACT NAME OF TRUST:

CORPORATE INCOME FUND
INTERMEDIATE TERM SERIES-54
DEFINED ASSET FUNDS
(A UNIT INVESTMENT TRUST)

B. NAMES OF DEPOSITORS:

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

C. COMPLETE ADDRESSES OF DEPOSITORS' PRINCIPAL EXECUTIVE OFFICES:

<TABLE>
<S> <C> <C>
MERRILL LYNCH, PIERCE, FENNER & SMITH BARNEY INC.
SMITH INCORPORATED 388 GREENWICH STREET
DEFINED ASSET FUNDS 23RD FLOOR
P.O. BOX 9051 NEW YORK, N.Y. 10013
PRINCETON, N.J. 08543-9051
PRUDENTIAL SECURITIES INCORPORATED DEAN WITTER REYNOLDS INC. PAINEWEBBER INCORPORATED
ONE SEAPORT PLAZA TWO WORLD TRADE CENTER 1285 AVENUE OF THE AMERICAS
199 WATER STREET 59TH FLOOR NEW YORK, N.Y. 10019
NEW YORK, N.Y. 10292 NEW YORK, N.Y. 10048
</TABLE>

D. NAMES AND COMPLETE ADDRESSES OF AGENTS FOR SERVICE:

<TABLE>
<S> <C> <C>
TERESA KONCICK, ESQ. DOUGLAS LOWE, ESQ. LEE B. SPENCER, JR.
P.O. BOX 9051 130 LIBERTY STREET-29TH ONE SEAPORT PLAZA
PRINCETON, N.J. 08543-9051 FLOOR 199 WATER STREET
NEW YORK, N.Y. 10006 NEW YORK, N.Y. 10292
COPIES TO:
LAURIE A. HESSLEIN ROBERT E. HOLLEY PIERRE DE SAINT PHALLE, ESQ.
388 GREENWICH STREET 1200 HARBOR BLVD. 450 LEXINGTON AVENUE
NEW YORK, N.Y. 10013 WEEHAWKEN, N.J. 07087 NEW YORK, N.Y. 10017
</TABLE>

E. TITLE AND AMOUNT OF SECURITIES BEING REGISTERED:

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

F. PROPOSED MAXIMUM OFFERING PRICE TO THE PUBLIC OF THE SECURITIES BEING
REGISTERED:

Indefinite

G. AMOUNT OF FILING FEE:

$500 (as required by Rule 24f-2)

H. APPROXIMATE DATE OF PROPOSED SALE TO PUBLIC:

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

/ x /Check box if it is proposed that this filing will become effective at 9:30
a.m. on May 16, 1995 pursuant to Rule 487.

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Defined Asset FundsSM
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<TABLE>
<S> <C>
Corporate 6.64% ESTIMATED CURRENT RETURN shows the estimated annual
Income Fund cash to be received from interest-bearing bonds in
the Portfolio (net of estimated annual expenses) divided
by the Public Offering Price (including the maximum sales
INTERMEDIATE TERM
SERIES--54 charge).
6.93% ESTIMATED LONG TERM RETURN is a measure of the
estimated return over the estimated life of the Fund.
This represents an average of the yields to maturity (or
(A UNIT INVESTMENT in certain cases, to an earlier call date) of the
TRUST) individual
bonds in the Portfolio, adjusted to reflect the maximum
sales charge and estimated expenses. The average yield
for
- --------------------
/ / INTERMEDIATE TERM the Portfolio is derived by weighting each bond's yield
MATURITIES by its market value and the time remaining to the call or
maturity date, depending on how the bond is priced.
Unlike Estimated Current Return, Estimated Long Term
/ / DESIGNED FOR HIGH Return takes into account maturities, discounts and
CURRENT INCOME premiums of the underlying bonds.

/ / DEFINED PORTFOLIO
OF CORPORATE BONDS

/ / MONTHLY INCOME No return estimate can be predictive of your actual
return because returns will vary with purchase price
(including
sales charges), how long units are held, changes in
Portfolio composition, changes in interest income and
changes in fees and expenses. Therefore, Estimated
Current Return and Estimated Long Term Return are
/ / INVESTMENT GRADE designed to be com-
parative rather than predictive. A yield calculation
which is more comparable to an individual bond may be
6.64% higher or lower than Estimated Current Return or
ESTIMATED CURRENT Estimated Long Term Return which are more comparable to
RETURN return calcu-
6.93%
ESTIMATED LONG TERM
RETURN lations used by other investment products.
AS OF MAY 15, 1995
</TABLE>

<TABLE>
<S> <C>
SPONSORS: THESE SECURITIES HAVE NOT BEEN APPROVED OR
Merrill Lynch, DISAPPROVED BY THE SECURITIES AND EXCHANGE
Pierce, Fenner & COMMISSION OR ANY STATE SECURITIES COMMISSION
Smith Incorporated NOR HAS THE COMMISSION OR ANY STATE SECURITIES
Smith Barney Inc. COMMISSION PASSED UPON THE ACCURACY OR ADE-
Prudential QUACY OF THIS DOCUMENT. ANY REPRESENTATION
Securities TO THE CONTRARY IS A CRIMINAL OFFENSE.
Incorporated Inquiries should be directed to the Trustee at
Dean Witter Reynolds 1-800-323-1508.
Inc. Prospectus dated May 16, 1995.
PaineWebber Investors should read this prospectus carefully and
Incorporated retain it for future reference.
</TABLE>

<PAGE>
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Defined Asset FundsSM
Defined Asset Funds is America's oldest and largest family of unit investment
trusts, with over $95 billion sponsored since 1971. Each Defined Asset 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.

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

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

Municipal portfolios
Corporate portfolios
Government portfolios
Equity portfolios
International portfolios
The terms of Defined Funds are as short as one year or as long as 30 years.
Special defined bond funds are available including: insured funds, double and
triple tax-free funds and funds with 'laddered maturities' to help protect
against changing interest rates. Defined Asset Funds are offered by prospectus
only.

- ---------------------------------------------------------------
Defined Intermediate Term Series
- ---------------------------------------------------------------

Our defined portfolio of intermediate term corporate bonds offers you a simple
and convenient way to earn a high level of current monthly income. And by
purchasing Defined Asset Funds, you not only receive professional selection but
also gain the advantage of reduced risk by investing in bonds of several
different issuers.

Investment Objective

To provide a high level of current income through investment in a fixed
portfolio consisting primarily of intermediate term corporate bonds.

Diversification

The Portfolio contains 10 bond issues. Spreading your investment among different
issuers reduces your risk, but does not eliminate it. Because of deposits of
additional bonds during the initial offering period of the Fund and maturities,
sales or other dispositions of bonds, the size, composition and return of the
Portfolio will change over time.

- ---------------------------------------------------------------
Defining Your Portfolio
- ---------------------------------------------------------------

Professional Selection and Supervision

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

Types of Bonds

The Portfolio consists of $12,000,000 face amount of bonds issued by 10
different corporate issuers.

<TABLE>
<CAPTION>
APPROXIMATE
ISSUERS PORTFOLIO PERCENTAGE
<S> <C> <C>
/ / Financial 75%
/ / Utility 17%
/ / Consumer Goods 8%
</TABLE>

Bond Call Features

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

Call Protection

None of the bonds in the Portfolio is subject to optional refunding or call
provisions.

A-2
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<PAGE>
Tax Information

In the opinion of special counsel to the Sponsors, each Holder will be
considered to have received the interest on his pro rata portion of each bond
when interest on the bond is received by the Fund. This interest is taxable for
U.S. investors but exempt from U.S. Federal income taxes, including withholding
taxes, for many foreign investors.

- ---------------------------------------------------------------
Defining Your Investment
- ---------------------------------------------------------------

Public Offering Price per Unit

The Public Offering Price as of May 15, 1995, the business day prior to the
Initial Date of Deposit, is based on the aggregate offer side value of the
underlying bonds in the Fund ($11,272,500.00), the price at which they can be
directly purchased by the public assuming they were available, divided by the
number of units outstanding (12,000) plus a maximum sales charge of 4.00%. The
Public Offering Price on any subsequent date will vary. An amount equal to net
accrued but undistributed interest on the unit is added to the Public Offering
Price. The underlying bonds are evaluated by an independent evaluator at 3:30
p.m. Eastern time on every business day.

Low Minimum Investment

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

You can elect to automatically reinvest your distributions into a separate
portfolio of corporate bonds. Reinvesting helps to compound your income.

Principal Distributions

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

Termination Date

The Fund will generally terminate following the maturity date of the last
maturing bond listed in the Portfolio. The Fund may be terminated earlier if the
value is less than 40% of the face amount of bonds deposited.

Sponsors' Profit or Loss

The Sponsors' profit or loss associated with the Fund will include the receipt
of applicable sales charges, any fees for underwriting or placing bonds,
fluctuations in the Public Offering Price or secondary market price of units, a
gain of $38,500.00 on the initial deposit of the bonds and a gain or loss on
subsequent deposits of additional bonds (see Underwriters' and Sponsors' Profits
in Part B).

Underwriting Account

None of the Sponsors has participated as sole underwriter, managing underwriter
or member of an underwriting syndicate from which the bonds in the Portfolio
were acquired.

SPONSORS

The Sponsors are listed on the back cover of the Prospectus. They may
include Merrill Lynch, Pierce, Fenner & Smith Incorporated, a wholly-owned
subsidiary of Merrill Lynch Co. Inc.; Smith Barney Inc., an indirect
wholly-owned subsidiary of The Travelers Inc.; Prudential Securities
Incorporated, an indirect wholly-owned subsidiary of the Prudential Insurance
Company of America; Dean Witter Reynolds, Inc., a principal operating subsidiary
of Dean Witter Discover & Co. and PaineWebber Incorporated, a wholly-owned
subsidiary of PaineWebber Group Inc. Each Sponsor, or one of its predecessor
corporations, has acted as Sponsor of a number of series of unit investment
trusts. Each Sponsor has acted as principal underwriter and managing underwriter
of other investment companies. The Sponsors, in addition to participating as
members of various selling groups or as agents of other investment companies,
execute orders on behalf of investment companies for the purchase and sale of
securities of these companies and sell securities to these companies in their
capacities as brokers or dealers in securities.

PUBLIC DISTRIBUTION

In the initial offering period Units will be distributed to the public
through the Underwriting Account and dealers who are members of the National
Association of Securities Dealers, Inc. The initial offering period is 30 days
or less if all Units are sold. If some Units initially offered have not been
sold, the Sponsors may extend the initial offering period for up to four
additional successive 30-day periods.

The Sponsors intend to qualify Units for sale in all states in which
qualification is deemed necessary through the Underwriting Account and by
dealers who are members of the National Association of Securities Dealers, Inc.
The Sponsors do not intend to qualify Units for sale in any foreign countries
and this Prospectus does not constitute an offer to sell Units in any country
where Units cannot lawfully be sold. Sales to dealers and to introducing
dealers, if any, will initially be made at prices which represent a concession
from the Public Offering Price, but the Agent for the Sponsors reserves the
right to change the rate of any concession from time to time. Any dealer or
introducing dealer may reallow a concession up to the concession to dealers.

UNDERWRITERS' AND SPONSORS' PROFITS

Upon sale of the Units, the Underwriters will be entitled to receive sales
charges. The Sponsors also realize a profit or loss on deposit of the Bonds
equal to the difference between the cost of the Bonds to the Fund (based on the
offer side evaluation on the initial date of deposit) and the Sponsors' cost of
the Bonds. In addition, a Sponsor or Underwriter may realize profits or sustain
losses on Bonds it deposits in the Fund which were acquired from underwriting
syndicates of which it was a member. During the initial offering period, the
Underwriting Account also may realize profits or sustain losses as a result of
fluctuations after the initial date of deposit in the Public Offering Price of
the Units. In maintaining a secondary market for Units, the Sponsors will also
realize profits or sustain losses in the amount of any difference between the
prices at which they buy Units and the prices at which they resell these Units
(which include the sales charge) or the prices at which they redeem the Units.
Cash, if any, made available by buyers of Units to the Sponsors prior to a
settlement date for
10
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the purchase of Units may be used in the Sponsors' businesses to the extent
permitted by Rule 15c3-3 under the Securities Exchange Act of 1934 and may be of
benefit to the Sponsors.

FUND PERFORMANCE

Information on the performance of the Fund for various periods, on the
basis of changes in Unit price plus the amount of income and principal
distributions reinvested, may be included from time to time in advertisements,
sales literature, reports and other information furnished to current or
prospective investors. Total return figures are not averaged, and may not
reflect deduction of the sales charge, which would decrease the return. Average
annualized return figures reflect deduction of the maximum sales charge. No
provision is made for any income taxes payable.

Past performance may not be indicative of future results. The Fund is not
actively managed. Unit price and return fluctuate with the value of the Bonds in
the Portfolio, so there may be a gain or loss when Units are sold.

Fund performance may be compared to performance data from publications such
as Lipper Analytical Services, Inc., Morningstar Publications, Inc., Money
Magazine, The New York Times, U.S. News and World Report, Barron's Business
Week, CDA Investment Technology, Inc., Forbes Magazine or Fortune Magazine. As
with other performance data, performance comparisons should not be considered
representative of the Fund's relative performance for any future period.

DEFINED ASSET FUNDS

For decades informed investors have purchased unit investment trusts for
dependability and professional selection of investments. Defined Asset Funds'
philosophy is to allow investors to 'buy with knowledge' (because, unlike
managed funds, the portfolio of municipal bonds and the return are relatively
fixed) and 'hold with confidence' (because the portfolio is professionally
selected and regularly reviewed). Defined Asset Funds offers an array of simple
and convenient investment choices, suited to fit a wide variety of personal
financial goals--a buy and hold strategy for capital accumulation, such as for
children's education or retirement, or attractive, regular current income
consistent with the preservation of principal. Unit investment trusts are
particularly suited for the many investors who prefer to seek long-term income
by purchasing sound investments and holding them, rather than through active
trading. Few individuals have the knowledge, resources or capital to buy and
hold a diversified portfolio on their own; it would generally take a
considerable sum of money to obtain the breadth and diversity that Defined Asset
Funds offer. One's investment objectives may call for a combination of Defined
Asset Funds.

One of the most important investment decisions you face may be how to
allocate your investments among asset classes. Diversification among different
kinds of investments can balance the risks and rewards of each one. Most
investment experts recommend stocks for long-term capital growth. Long-term
corporate bonds offer relatively high rates of interest income. By purchasing
both defined equity and defined bond funds, investors can receive attractive
current income, as well as growth potential, offering some protection against
inflation. From time to time various advertisements, sales literature, reports
and other information furnished to current or prospective investors may present
the average annual compounded rate of return of selected asset classes over
various periods of time, compared to the rate of inflation over the same
periods.

EXCHANGE OPTION

You may exchange Fund Units for units of certain other Defined Asset Funds
subject only to a reduced sales charge. You may exchange your units of any
Select Ten Portfolio, of any other Defined Asset Fund with a regular maximum
sales charge of at least 3.50%, or of any unaffiliated unit trust with a regular
maximum sales charge of at least 3.0%, for Units of this Fund at their relative
net asset values, subject only to a reduced sales charge.

To make an exchange, you should contact your financial professional to find
out what suitable Exchange Funds are available and to obtain a prospectus. You
may acquire units of only those Exchange Funds in which the Sponsors are
maintaining a secondary market and which are lawfully for sale in the state
where you reside. Except for the reduced sales charge, an exchange is a taxable
event normally requiring recognition of any gain or loss on the units exchanged.
However, the Internal Revenue Service may seek to disallow a loss if the
portfolio of the units acquired is not materially different from the portfolio
of the units exchanged; you should consult your own tax advisor. If the proceeds
of units exchanged are insufficient to acquire a whole number of Exchange Fund
units, you may pay the difference in cash (not exceeding the price of a single
unit acquired).

As the Sponsors are not obligated to maintain a secondary market in any
series, there can be no assurance that units of a desired series will be
available for exchange. The Exchange Option may be amended or terminated at any
time without notice.

11
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SUPPLEMENTAL INFORMATION

Upon written or telephonic request to the Trustee shown on the back cover
of this Prospectus, investors will receive at no cost to the investor
supplemental information about the Fund, which has been filed with the SEC. The
supplemental information includes more detailed risk factor disclosure about the
types of Bonds that may be part of the Fund's Portfolio, general risk disclosure
concerning any insurance securing certain Bonds, and general information about
the structure and operation of the Fund.

12
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APPENDIX A

DESCRIPTION OF RATINGS (AS DESCRIBED BY THE RATING COMPANIES THEMSELVES)

STANDARD & POOR'S RATINGS GROUP, A DIVISION OF MCGRAW HILL, INC.

A Standard & Poor's rating on the units of an investment trust (hereinafter
referred to collectively as 'units' and 'funds') is a current assessment of
creditworthiness with respect to the investments held by the fund. This
assessment takes into consideration the financial capacity of the issuers and of
any guarantors, insurers, lessees, or mortgagors with respect to such
investments. The assessment, however, does not take into account the extent to
which fund expenses will reduce payment to an investor of the interest and
principal required to be paid on portfolio assets. In addition, the rating is
not a recommendation to purchase, sell, or hold units, as the rating does not
comment as to market price of the units or suitability for a particular
investor.

AAA--Units rated AAA represent interests in funds composed exclusively of
securities that, together with their credit support, are rated AAA by Standard &
Poor's and/or certain short-term investments. This AAA rating is the highest
rating assigned by Standard & Poor's to a security. Capacity to pay interest and
repay principal is extremely strong.

AA--Debt rated AA has a very strong capacity to pay interest and repay
principal, and differs from the highest rated issues only in small degree.

A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.

BBB--Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.

BB, B, CCC, CC--Debt rated BB, B, CCC and CC is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and CC the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.

The ratings may be modified by the addition of a plus or minus sign to show
relative standing within the major rating categories.

A provisional rating, indicated by 'p' following a rating, assumes the
successful completion of the project being financed by the issuance of the debt
being rated and indicates that payment of debt service requirements is largely
or entirely dependent upon the successful and timely completion of the project.
This rating, however, while addressing credit quality subsequent to completion
of the project, makes no comment on the likelihood of, or the risk of default
upon failure of, such completion.

MOODY'S INVESTORS SERVICE INC.

Aaa--Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
'gilt edge'. Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.

Aa--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long term risks appear somewhat larger than in Aaa securities.

A--Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.

Baa--Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

Ba--Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate, and thereby not
a-1
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well safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.

B--Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

Rating symbols may include numerical modifiers 1, 2 or 3. The numerical
modifier 1 indicates that the security ranks at the high end, 2 in the
mid-range, and 3 nearer the low end, of the generic category. These modifiers of
rating symbols are to give investors a more precise indication of relative debt
quality in each of the historically defined categories.

Conditional ratings, indicated by 'Con.', are sometimes given when the
security for the bond depends upon the completion of some act or the fulfillment
of some condition. Such bonds are given a conditional rating that denotes their
probable credit stature upon completion of that act or fulfillment of that
condition.

FITCH INVESTORS SERVICES, INC.

AAA--These bonds are considered to be investment grade and of the
highest quality. The obligor has an extraordinary ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.

AA--These bonds are considered to be investment grade and of high
quality. The obligor's ability to pay interest and repay principal, which is
very strong, is somewhat less than for AAA rated securities or more subject to
possible change over the term of the issue.

A--These bonds are considered to be investment grade and of good
quality. The obligor's ability to pay interest and repay principal is considered
to be strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings.

BBB--These bonds are considered to be investment grade and of
satisfactory quality. The obligor's ability to pay interest and repay principal
is considered to be adequate. Adverse changes in economic conditions and
circumstances, however are more likely to weaken this ability than bonds with
higher ratings.

A '+' or a ' sign after a rating symbol indicates relative standing in
its rating.

DUFF & PHELPS CREDIT RATING CO.

AAA--Highest credit quality. The risk factors are negligible, being
only slightly more than for risk-free U.S. Treasury debt.

AA--High credit quality. Protection factors are strong. Risk is modest
but may vary slightly from time to time because of economic stress.

A--Protection factors are average but adequate. However, risk factors
are more variable and greater in periods of economic stress.

A '+' or a ' sign after a rating symbol indicates relative standing in
its rating.

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APPENDIX B

INITIAL OFFERING SALES CHARGE SCHEDULE

<TABLE>
<CAPTION>
SALES CHARGE
(GROSS UNDERWRITING PROFIT)
---------------------------------
AS PERCENT OF AS PERCENT OF DEALER CONCESSION AS PRIMARY MARKET
OFFER SIDE PUBLIC NET AMOUNT PERCENT OF PUBLIC CONCESSION TO
NUMBER OF UNITS OFFERING PRICE INVESTED OFFERING PRICE INTRODUCING DEALERS
- ------------------------------------------- ----------------- ------------- -------------------- -------------------

MONTHLY PAYMENT SERIES, INSURED SERIES:

INTERMEDIATE SERIES:

SECONDARY MARKET SALES CHARGE SCHEDULE

<TABLE>
<CAPTION>
SALES CHARGE
(GROSS UNDERWRITING PROFIT)
--------------------------------
AS PERCENT OF AS PERCENT OF DEALER CONCESSION AS
BID SIDE PUBLIC NET AMOUNT PERCENT OF PUBLIC
NUMBER OF UNITS OFFERING PRICE INVESTED OFFERING PRICE
--------------- ------------- --------------------

MONTHLY PAYMENT SERIES, INSURED SERIES:

INTERMEDIATE SERIES:

b-1
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Defined
Asset FundsSM

<TABLE>
<S> <C>
Sponsors: Corporate Income Fund
Merrill Lynch, Intermediate Term Series--54
Pierce, Fenner & (A Unit Investment Trust)
Smith Incorporated
Defined Asset Funds
P.O. Box 9051
Princeton, NJ
08543-9051
(609) 282-8500
Units of this Fund may no longer be available and
therefore
Smith Barney Inc. information contained herein may be subject to amendment.
Unit Trust A registration statement relating to securities of a
Department future series has been filed with the Securities and
388 Greenwich Exchange Commission. These securities may not be sold nor
Street--23rd Floor may offers to buy be accepted prior to the time the
New York, NY 10013 registration statement becomes
1-800-223-2532
PaineWebber effective. For more complete information about a future
Incorporated series, including additional information on charges and
1200 Harbor Blvd. expenses, please call or write one of the Sponsors listed
Weehawken, NJ 07087 here for a prospectus. Read the prospectus before you
(201) 902-3000 invest or send money.
Prudential
Securities
Incorporated
One Seaport Plaza
199 Water Street ------------------------------------
New York, NY 10292
(212) 776-1000 This Prospectus does not contain all of the information
with respect to the investment company set forth in its
registration statement and exhibits relating thereto
which have been filed
Dean Witter Reynolds with the Securities and Exchange Commission, Washington,
Inc. D.C. under the Securities Act of 1933 and the Investment
Two World Trade Company Act of 1940, and to which reference is hereby
Center made.
59th Floor
New York, NY 10048
(212) 392-2222
------------------------------------
Evaluator:
Interactive Data
Services, Inc.
14 Wall Street No person is authorized to give any information or to
New York, NY 10005 make any representations with respect to this investment
company not contained in this Prospectus; and any
information or representation not contained herein must
not be relied upon
Trustee: as having been authorized. This Prospectus does not
The Chase Manhattan constitute an offer to sell or a solicitation of an offer
Bank, N.A. to buy securities in any state in which such offer,
(a National Banking solicitation or sale would be unlawful prior to
Association) registration or qualification under the securities laws
Defined Asset Funds of any such state.
Box 2051
New York, NY 10081
1-800-323-1508
</TABLE>

15103-5/95

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PART II
Additional Information Not Included in the Prospectus

<TABLE>
<C> <S> <C>
A. The following information relating to the Depositors is incorporated by reference to the SEC
filings indicated and made a part of this Registration Statement.
SEC FILE OR
IDENTIFICATION NUMBER
----------------------------
I. Bonding Arrangements and Date of Organization of the Depositors
filed pursuant to Items A and B of Part II of the Registration
Statement on Form S-6 under the Securities Act of 1933:
Merrill Lynch, Pierce, Fenner & Smith Incorporated............. 2-52691
Prudential Securities Incorporated............................. 2-61418
Smith Barney Inc............................................... 33-29106
Dean Witter Reynolds Inc....................................... 2-60599
PaineWebber Incorporated....................................... 2-87965
II. Information as to Officers and Directors of the Depositors filed
pursuant to Schedules A and D of Form BD under Rules 15b1-1 and
15b3-1 of the Securities Exchange Act of 1934:
Merrill Lynch, Pierce, Fenner & Smith Incorporated............. 8-7221
Prudential Securities Incorporated............................. 8-27154
Smith Barney Inc............................................... 8-8177
Dean Witter Reynolds Inc....................................... 8-14172
PaineWebber Incorporated....................................... 8-16267
III. Charter documents of the Depositors filed as Exhibits to the
Registration Statement on Form S-6 under the Securities Act of
1933 (Charter, By-Laws):
Merrill Lynch, Pierce, Fenner & Smith Incorporated............. 2-73866, 2-77549
Prudential Securities Incorporated............................. 2-86941, 2-86941
Smith Barney Inc............................................... 33-20499
Dean Witter Reynolds Inc....................................... 2-60599, 2-86941
PaineWebber Incorporated....................................... 2-87965, 2-87965
B. The Internal Revenue Service Employer Identification Numbers of the Sponsors and Trustee are
as
follows:
Merrill Lynch, Pierce, Fenner & Smith Incorporated............. 13-5674085
Prudential Securities Incorporated............................. 22-2347336
Smith Barney Inc............................................... 13-1912900
Dean Witter Reynolds Inc....................................... 94-1671384
PaineWebber Incorporated....................................... 13-2638166
The Chase Manhattan Bank, N.A., Trustee........................ 13-2633612
</TABLE>

UNDERTAKING

The Sponsors undertake that they will not instruct the Trustee to accept from
(i) Asset Guaranty Reinsurance Company, MBIA Insurance Corporation or any other
insurance company affiliated with any of the Sponsors, in settlement of any
claim, less than an amount sufficient to pay any principal or interest (and, in
the case of a taxability redemption, premium) then due on any Security in
accordance with the municipal bond guaranty insurance policy attached to such
Security or (ii) any affiliate of the Sponsors who has any obligation with
respect to any Security, less than the full amount due pursuant to the
obligation, unless such instructions have been approved by the Securities and
Exchange Commission pursuant to Rule 17d-1 under the Investment Company Act of
1940.

II-1
<PAGE>
<PAGE>
SERIES OF CORPORATE INCOME FUND,
DEFINED ASSET FUNDS MUNICIPAL INSURED SERIES, EQUITY INCOME FUND
AND MUNICIPAL INVESTMENT TRUST FUND
DESIGNATED PURSUANT TO RULE 487 UNDER THE SECURITIES ACT OF 1933

<TABLE>
<CAPTION>
SEC
SERIES NUMBER FILE NUMBER
<S> <C>
Corporate Income Fund, Two Hundred Thirteenth Monthly Payment Series.................... 2-96642
Corporate Income Fund, First Insured Series............................................. 33-19553
Municipal Investment Trust Fund, Four Hundred Thirty-Eighth Monthly Payment Series...... 33-16561
Municipal Investment Trust Fund, Multistate Series 6E................................... 33-29412
Municipal Investment Trust Fund, Multistate Series-48................................... 33-50247
Equity Income Fund Select Ten Portfolios--1995 Spring Series............................ 33-55807
Defined Asset Funds, Municipal Insured Series........................................... 33-54565
</TABLE>

CONTENTS OF REGISTRATION STATEMENT

The Registration Statement on Form S-6 comprises the following papers and
documents:

The facing sheet of Form S-6.

The Cross-Reference Sheet (incorporated by reference to the
Cross-Reference Sheet to the Registration
Statement of Defined Asset Funds Municipal Insured Series, 1933 Act File No.
33-54565).

The Prospectus.

Additional Information not included in the Prospectus (Part II). Consent
of independent accountants.

The following exhibits:

<TABLE>
<S> <C> <C>
1.1 -- Form of Trust Indenture (incorporated by reference to Exhibit 1.1.1 to the
Registration Statement of The Corporate Income Fund, Insured Series-22, 1933 Act File
No. 33-49833).
1.1.1 -- Form of Standard Terms and Conditions of Trust Effective October 21, 1993
(incorporated by reference to Exhibit 1.1.1 to the Registration Statement of
Municipal Investment Trust Fund, Multistate Series-48, 1933 Act File No. 33-50247).
1.2 -- Form of Master Agreement Among Underwriters (incorporated by reference to Exhibit 1.2
to the Registration Statement of The Corporate Income Fund, One Hundred Ninety-Fourth
Monthly Payment Series, 1933 Act File No. 2-90925).
2.1 -- Form of Certificate of Beneficial Interest (included in Exhibit 1.1.1).
3.1 -- Opinion of counsel as to the legality of the securities being issued including their
consent to the
use of their name under the headings 'Taxes' and 'Miscellaneous--Legal Opinion' in
the
Prospectus.
4.1 -- Consent of the Evaluator.
5.1 -- Consent of Independent Accountants.
9.1 -- Information Supplement.
</TABLE>

R-1
<PAGE>
<PAGE>
SIGNATURES

The registrant hereby identifies the series numbers of Corporate Income
Fund, Defined Asset Funds Municipal Insured Series, Equity Income Fund and
Municipal Investment Trust Fund listed on page R-1 for the purposes of the
representations required by Rule 487 and represents the following:
1) That the portfolio securities deposited in the series as to which this
registration statement is being filed do not differ materially in type
or quality from those deposited in such previous series;

2) That, except to the extent necessary to identify the specific portfolio
securities deposited in, and to provide essential information for, the
series with respect to which this registration statement is being filed,
this registration statement does not contain disclosures that differ in
any material respect from those contained in the registration statements
for such previous series as to which the effective date was determined
by the Commission or the staff; and

3) That it has complied with Rule 460 under the Securities Act of 1933.

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT OR AMENDMENT TO THE REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY
AUTHORIZED IN THE CITY OF NEW YORK AND STATE OF NEW YORK ON THE 16TH DAY OF MAY,
1995.

SIGNATURES APPEAR ON PAGES R-3, R-4, R-5, R-6 AND R-7.

A majority of the members of the Board of Directors of Merrill Lynch,
Pierce, Fenner & Smith Incorporated has signed this Registration Statement or
Amendment to the Registration Statement pursuant to Powers of Attorney
authorizing the person signing this Registration Statement or Amendment to the
Registration Statement to do so on behalf of such members.

A majority of the members of the Board of Directors of Smith Barney Inc.
has signed this Registration Statement or Amendment to the Registration
Statement pursuant to Powers of Attorney authorizing the person signing this
Registration Statement or Amendment to the Registration Statement to do so on
behalf of such members.

A majority of the members of the Executive Committee of the Board of
Directors of PaineWebber Incorporated has signed this Registration Statement or
Amendment to the Registration Statement pursuant to Powers of Attorney
authorizing the person signing this Registration Statement or Amendment to the
Registration Statement to do so on behalf of such members.

A majority of the members of the Board of Directors of Prudential
Securities Incorporated has signed this Registration Statement or Amendment to
the Registration Statement pursuant to Powers of Attorney authorizing the person
signing this Registration Statement or Amendment to the Registration Statement
to do so on behalf of such members.

A majority of the members of the Board of Directors of Dean Witter
Reynolds Inc. has signed this Registration Statement or Amendment to the
Registration Statement pursuant to Powers of Attorney authorizing the person
signing this Registration Statement or Amendment to the Registration Statement
to do so on behalf of such members.

R-2
<PAGE>
<PAGE>
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
DEPOSITOR

<TABLE>
<S> <C>
By the following persons, who constitute a majority of Powers of Attorney have been filed under Form
the Board of Directors of Merrill Lynch, Pierce, SE and the following 1933 Act File Numbers:
Fenner & Smith Incorporated: 33-43466 and 33-51607
</TABLE>

HERBERT M. ALLISON, JR.
BARRY S. FREIDBERG
EDWARD L. GOLDBERG
STEPHEN L. HAMMERMAN
JEROME P. KENNEY
DAVID H. KOMANSKY
DANIEL T. NAPOLI
THOMAS H. PATRICK
JOHN L. STEFFENS
DANIEL P. TULLY
ROGER M. VASEY
ARTHUR H. ZEIKEL

ERNEST V. FABIO
-----------------------------
By: ERNEST V. FABIO
(As authorized signatory for Merrill Lynch, Pierce,
Fenner & Smith Incorporated and
Attorney-in-fact for the persons listed above)

R-3
<PAGE>
<PAGE>
SMITH BARNEY INC.
DEPOSITOR

<TABLE>
<S> <C>
By the following persons, who constitute a majority of Powers of Attorney have been filed under the
the Board of Directors of Smith Barney Inc.: following 1933 Act File Numbers: 33-56722
and 33-51999
</TABLE>

STEVEN D. BLACK
JAMES BOSHART III
ROBERT A. CASE
JAMES DIMON
ROBERT DRUSKIN
ROBERT F. GREENHILL
JEFFREY LANE
ROBERT H. LESSIN
JACK L. RIVKIN
GINA LEMON
------------------------
By: GINA LEMON
(As authorized signatory for
Smith Barney Inc. and
Attorney-in-fact for the persons listed above)

R-4
<PAGE>
<PAGE>
PRUDENTIAL SECURITIES INCORPORATED
DEPOSITOR

<TABLE>
<S> <C>
By the following persons, who constitute a majority of Powers of Attorney have been filed under Form
the Board of Directors of Prudential Securities SE and the following 1933 Act File Number:
Incorporated: 33-41631
</TABLE>

ALAN D. HOGAN
HOWARD A. KNIGHT
GEORGE A. MURRAY
LELAND B. PATON
HARDWICK SIMMONS

RICHARD R. HOFFMANN
---------------------------------------
By: RICHARD R. HOFFMANN
(As authorized signatory for Prudential Securities
Incorporated and Attorney-in-fact for the persons
listed above)

R-5
<PAGE>
<PAGE>
DEAN WITTER REYNOLDS INC.
DEPOSITOR

<TABLE>
<S> <C>
By the following persons, who constitute a majority of Powers of Attorney are being filed under Form
the Board of Directors of Dean Witter Reynolds Inc.: SE and the following 1933 Act File Number:
33-17085
</TABLE>

NANCY DONOVAN
CHARLES A. FIUMEFREDDO
JAMES F. HIGGINS
STEPHEN R. MILLER
PHILIP J. PURCELL
THOMAS C. SCHNEIDER
WILLIAM B. SMITH

MICHAEL D. BROWNE
-----------------------------------
By: MICHAEL D. BROWNE
(As authorized signatory for
Dean Witter Reynolds Inc. and
Attorney-in-fact for the persons listed above)

R-6
<PAGE>
<PAGE>
PAINEWEBBER INCORPORATED
DEPOSITOR

<TABLE>
<S> <C>
By the following persons, who constitute a majority of Powers of Attorney are being filed under Form
the Executive Committee of the Board of Directors of SE and the following 1933 Act File Number:
PaineWebber Incorporated: 33-55073
</TABLE>

LEE FENSTERSTOCK
JOSEPH J. GRANO, JR.
PAUL B. GUENTHER
DONALD B. MARRON

ROBERT E. HOLLEY
---------------------------------
By: ROBERT E. HOLLEY
(As authorized signatory for
PaineWebber Incorporated and
Attorney-in-fact for the persons listed above)

R-7
<PAGE>
<PAGE>

EXHIBIT 3.1

DAVIS POLK & WARDWELL
450 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
(212) 450-4000

MAY 16, 1995

Corporate Income Fund,
Intermediate Term Series-54
Defined Asset Funds

Merrill Lynch, Pierce, Fenner & Smith Incorporated
Smith Barney Inc.
PaineWebber Incorporated
Prudential Securities Incorporated
Dean Witter Reynolds Inc.
c/o Merrill Lynch, Pierce, Fenner & Smith Incorporated
Defined Asset Funds
P.O. Box 9051
Princeton, N.J. 08543-9051

Dear Sirs:

We have acted as special counsel for you, as sponsors (the 'Sponsors') of
the Intermediate Term Series--54 of Corporate Income Fund, Defined Asset Funds
(the 'Fund'), in connection with the issuance of units of fractional undivided
interest in the Fund (the 'Units') in accordance with the Trust Indenture
relating to the Fund (the 'Indenture').

We have examined and are familiar with originals or copies, certified or
otherwise identified to our satisfaction, of such documents and instruments as
we have deemed necessary or advisable for the purpose of this opinion.

Based upon the foregoing, we are of the opinion that (i) the execution and
delivery of the Indenture and the issuance of the Units have been duly
authorized by the Sponsors and (ii) the Units, when duly issued and delivered by
the Sponsors and the Trustee in accordance with the Indenture, will be legally
issued, fully paid and nonassessable.

We hereby consent to the use of this opinion as Exhibit 3.1 to the
Registration Statement relating to the Units filed under the Securities Act of
1933 and to the use of our name in such Registration Statement and in the
related prospectus under the headings 'Taxes' and 'Miscellaneous--Legal
Opinion.'

Very truly yours,

Davis Polk & Wardwell
<PAGE>
<PAGE>

EXHIBIT 4.1

MAY 16, 1995

Interactive Data
14 Wall Street
New York, N.Y. 10005
212-285-0700

Merrill Lynch, Pierce, Fenner & Smith Incorporated
Defined Asset Funds
P.O. Box 9051
Princeton, N.J. 08543-9051

The Chase Manhattan Bank, N.A.
One Chase Manhattan Plaza--3B
New York, NY 10081

RE: CORPORATE INCOME FUND, INTERMEDIATE TERM SERIES-54, DEFINED ASSET FUNDS (A
UNIT INVESTMENT TRUST) UNITS OF FRACTIONAL UNDIVIDED INTEREST--REGISTERED
UNDER THE SECURITIES ACT OF 1933, FILE NO. 33-57973

Gentlemen:

We have examined the Registration Statement for the above-captioned Fund.

We hereby consent to the reference to Interactive Data Services, Inc. in the
Prospectus and Registration Statement for the above-captioned Fund and to the
evaluations of the Obligations prepared by us which are referred to in such
Prospectus and Registration Statement.

You are authorized to file copies of this letter with the Securities and
Exchange Commission.

Very truly yours,

James Perry
Vice President
<PAGE>
<PAGE>

Exhibit 5.1

CONSENT OF INDEPENDENT ACCOUNTANTS

The Sponsors and Trustee of
Corporate Income Fund,
Intermediate Term Series-54, Defined Asset Funds:

We hereby consent to the use in this Registration Statement No. 33-57973 of our
opinion dated May 16, 1995, relating to the Statement of Condition of Corporate
Income Fund, Intermediate Term Series-54, Defined Asset Funds and to the
reference to us under the heading 'Auditors' in the Prospectus which is a part
of this Registration Statement.

DELOITTE & TOUCHE LLP
New York, N.Y.
May 16, 1995

<ARTICLE> 6
<MULTIPLIER> 1

<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> APR-29-1995
<PERIOD-END> MAY-16-1995
<INVESTMENTS-AT-COST> 11,272,500
<INVESTMENTS-AT-VALUE> 11,272,500
<RECEIVABLES> 144,842
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 11,417,342
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 144,842
<TOTAL-LIABILITIES> 144,842
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 11,272,500
<SHARES-COMMON-STOCK> 12,000
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 11,272,500
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 12,000
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

CORPORATE INCOME FUND--DEFINED ASSET FUNDS
INFORMATION SUPPLEMENT

CASH OR ACCRETION BOND SERIES MONTHLY PAYMENT SERIES
FIRST GNMA SERIES PREFERRED STOCK PUT SERIES
INSURED SERIES SELECT SERIES
INTERMEDIATE TERM SERIES

This Information Supplement provides additional information concerning the
structure, operations and risks of corporate bond trusts (each, a "Fund") of
Defined Asset Funds not found in the prospectuses for the Funds. This
Information Supplement is not a prospectus and does not include all of the
information that a prospective investor should consider before investing in a
Fund. This Information Supplement should be read in conjunction with the
prospectus for the Fund in which an investor is considering investing
("Prospectus"). Copies of the Prospectus can be obtained by calling or writing
the Trustee at the telephone number and address indicated in the Prospectus.

This Information Supplement is dated May 15, 1995. Capitalized terms have been
defined in the Prospectus.

Table of Contents

Page Page

<TABLE>
<S> <C>
Fund Structure................... 1
Risk Factors..................... 2 Preferred Stock Put Series.......10
General.......................... 2 Other Risk Factors...............15
Insured Series................ 3 Description of the Fund..........26
First GNMA Series............. 6 Taxes............................?
Cash or Accretion Bond Series Retirement Plans.................30
and Select Series........ 7 Administration of the Fund.......31

</TABLE>

FUND STRUCTURE

The Fund, a series of Corporate Income Fund, is a "unit investment trust"
created by a Trust Indenture (the "Indenture") among the Sponsors, the Trustee
and the Evaluator. The First GNMA Series was created under Massachusetts law
and all other Series were created under New York law. Most Funds were formed
for the purpose of providing a high level of current income through investment
in a fixed portfolio (the "Portfolio") of Securities issued primarily by
corporations, although an additional objective of the Insured Series, and
First GNMA Series is to obtain substantial safety of capital. Additional
objectives of the Preferred Stock Put Series are to provide dividend income
that is eligible for the dividends-received deductions for corporations, and
to minimize loss of capital and reduce fluctuations in the value of the Units.
In addition, the objective of the Cash or Accretion Bond Series and the Select
Series is to provide investors a choice between semi-annual distributions of
cash or additional Units through compounding. The Debt Obligations may
include taxable obligations issued or guaranteed by the United States or
foreign governments, or agencies, political subdivisions or instrumentalities
thereof, and payable in United States currency. The Debt Obligations held by
the Fund may be secured or unsecured (including both senior unsecured
indebtedness and indebtedness which is subordinated to other indebtedness),
have fixed final maturity dates and do not have any conversion or equity
features. To the extent that references in this Prospectus are to articles
and sections of the Indenture, which are hereby incorporated by reference, the
statements made herein are qualified in their entirety by this reference. The
Fund may be an appropriate investment vehicle for investors who desire to
participate in a portfolio of taxable fixed rate securities with greater
diversification than they might be able to acquire individually. In addition,
securities of the type deposited in the Fund often are not available in small
amounts.

The Portfolio contains different issues of debt obligations with fixed final
maturity or disposition dates. As used herein, the terms "Debt Obligations"
and "Securities" mean the bonds, debt obligations or securities initially
deposited in the Fund and described under Portfolio in Part A and replacement
and additional bonds, debt obligations or securities acquired and held by the
Fund pursuant to the provisions of the Indenture (see Description of the
Fund--The Portfolio; Administration of the Fund--Portfolio Supervision).

The deposit of the Securities in the Fund on the Initial Date of Deposit
established a proportionate relationship among the face amounts of Securities
of specified interest rates and maturities in the Portfolio. For certain
Series, following the Initial Date of Deposit, the Sponsors may deposit
additional Securities ("Additional Securities"), contracts to purchase
Additional Securities or cash (or a bank letter of credit in lieu of cash)
with instructions to purchase Additional Securities in order to create new
Units. Replacement Securities may be acquired under specified conditions (see
Description of the Fund--The Portfolio; Administration of the Fund--Portfolio
Supervision).

The holders ("Holders") of units of interest ("Units") will have the right to
have their Units redeemed (see Redemption) at a price based on the aggregate
bid side evaluation of the Securities ("Redemption Price per Unit") if the
Units cannot be sold in the over-the-counter market which the Sponsors propose
to maintain at prices determined in the same manner (see Market for Units).
On the Evaluation Date, each Unit represented the fractional undivided
interest in the Securities in the Fund as set forth under Investment Summary
in Part A, plus any cash adjustments and accrued interest. Thereafter, if any
Units are redeemed, the face amount of Securities in the Fund will be reduced
and the fractional undivided interest represented by each remaining Unit in
the balance will be increased. Units will remain outstanding until redeemed
upon tender to the Trustee by any Holder (which may include the Sponsors) or
until termination of the Indenture (see Redemption; Administration of the
Fund-- Amendment and Termination).

RISK FACTORS

General

An investment in Units of the Fund should be made with an understanding of the
risks which an investment in fixed-rate securities may entail, including the
risk that the value of the Portfolio and hence of the Units will decline with
increases in interest rates, as described below. In recent years there have
been wide fluctuations in interest rates and thus in the value of fixed rate
securities generally. The Sponsors cannot predict future economic policies or
their consequences or, therefore, the course or extent of any similar
fluctuations in the future. The Portfolio consists primarily of publicly held
Securities which, in many cases, do not have the benefit of covenants which
would prevent the issuer from engaging in capital restructurings or borrowing
transactions in connection with corporate acquisitions, leveraged buyouts or
restructurings, which could have the effect of reducing the ability of the
corporation to meet its obligations and may in the future result in the
ratings of the Debt Obligations and the value of the underlying Portfolio
being reduced.

Units offered in the secondary market may reflect redemptions or prepayments,
in whole or in part, or defaults on, certain of the Securities originally
deposited in the Fund or the disposition of certain Securities originally
deposited in the Fund to satisfy redemptions of Units or pursuant to the
exercise by the Sponsors of their supervisory role over the Fund (see Payment
of the Debt Obligations and Life of the Fund and Administration of the
Fund--Portfolio Supervision). Accordingly, the face amount of Units may be
less than their original face amount at the time of the creation of the Fund.
A reduced value per Unit does not therefore mean that a Unit is necessarily
valued at a market discount; market discounts, as well as market premiums, on
Units are determined solely by a comparison of a Unit's outstanding face
amount and its evaluated price.

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 the Fund
will be adversely affected if trading markets for the Securities are limited
or absent.

A Fund may contain or be concentrated in one or more of the classifications
set forth below under Other Factors. A Fund is considered to be
"concentrated" in a particular classification when the aggregate face amount,
or par or stated value, of those securities constitutes more than 25% of the
aggregate face amount, or par or stated value, of the Securities in the Fund.
An investment in Units should be made with an understanding of the risks which
these investments may entail, certain of which are described under Other Risk
Factors below.

Insured Series

The Investment Summary in Part A sets forth the aggregate face amount of the
Portfolio that is insured by an insurance company and whether the insurance
covers the bonds as long as they are outstanding ("permanent insurance" or
insurance "to maturity") or while the bonds are held by the Fund ("portfolio
insurance").

Permanent Insurance

The Debt Obligations in First through Fourth Insured Series (the "Insured Debt
Obligations") have been insured by Financial Security Assurance Inc.
("Financial Security") (see The Insurers below). These surety bonds are
non-cancelable and will continue in force so long as the Insured Debt
Obligations are outstanding. The cost of this insurance is borne by the
Sponsors. The insurance guarantees the scheduled payment of principal and
interest on but does not guarantee the market value of the Insured Debt
Obligations or the value of the Units. The Insurance does not guarantee
accelerated payments of principal or cover redemptions.

Portfolio Insurance

The Fifth and subsequent Insured Series have obtained portfolio insurance
("Portfolio Insurance") from either MBIA Insurance Corporation ("MBIA Corp.")
or Financial Security (each referred to as an "Insurer" or the "Insurers")
(see The Insurers below) that guarantees the scheduled payments of the
principal of and interest on the Debt Obligations ("Portfolio-Insured Debt
Obligations") while they are owned by the Fund. Since the Portfolio Insurance
applies to Debt Obligations only while they are owned by the Fund, the value
of Portfolio-Insured Debt Obligations (and hence the value of the Units) may
decline if the credit quality of any Portfolio-Insured Debt Obligation is
reduced. Premiums for Portfolio Insurance are payable monthly in advance by
the Trustee on behalf of the Fund. The insurance obtained by the Fund is only
effective as to Debt Obligations owned by and held in the Fund and,
consequently, does not cover Debt Obligations for which the contract for
purchase fails. A "when issued" bond will be covered under each policy upon
the settlement date of the "when issued" bond. Each policy shall continue in
force only with respect to Debt Obligations held in and owned by the Fund, and
the Insurer shall not have any liability under the policy with respect to any
Debt Obligations which do not constitute part of the Fund.

By the terms of its policy, the Insurer will unconditionally guarantee to the
Fund the payment, when due, required of the issuer of the Debt Obligations of
an amount equal to the principal of (either at the stated maturity or by any
advancement of maturity pursuant to a mandatory sinking fund payment) and
interest on the Bonds as the payments shall become due but not paid except
that in the event of any acceleration of the due date of principal by reason
of mandatory or optional redemption (other than mandatory sinking fund
redemption), default or otherwise, the payments guaranteed will be made in the
amounts and at the times as would have been due had there not been an
acceleration by reason of mandatory or optional redemption (other than a
mandatory sinking fund redemption), default or otherwise. The Insurer will be
responsible for those payments less any amounts received by the Fund from any
trustee for the bond issuers or from any other source. In the event the due
date of the principal of any Debt Obligation is accelerated, the payments
required by the acceleration are received by the Fund, and the Debt Obligation
is cancelled, the Portfolio Insurance will terminate with respect to that Debt
Obligation. Each policy does not guarantee payment on an accelerated basis,
the payment of any redemption premium or the value of the Units. Each policy
also does not insure against nonpayment of principal of or interest on the
Debt Obligations resulting from the insolvency, negligence or any other act or
omission of the trustee or other paying agent for the Debt Obligations.

Each insurance policy is non-cancelable and will continue in force so long as
the Fund is in existence and the Securities described in the policy continue
to be held in and owned by the Fund. Each policy shall terminate as to any
Debt Obligation which has been redeemed from the Fund or sold by the Trustee
on the date of the redemption or on the settlement date of the sale, and the
Insurer shall not have any liability under the policy as to that Debt
Obligation thereafter. If the date of the redemption or the settlement date
of the sale occurs between a record date and a date of payment of any Debt
Obligation, the policy will terminate as to that Debt Obligation on the
business day next succeeding the date of payment. The termination of the
policy as to any Debt Obligation shall not affect the Insurer's obligations
regarding any other Debt Obligation in the Fund or any other fund which has
obtained an insurance policy from the Insurer. Each policy will terminate as
to all Debt Obligations on the date on which the last of the Debt Obligations
matures, is redeemed or is sold by the Fund. As Portfolio-Insured Debt
Obligations are redeemed by their respective issuers or are sold by the
Trustee, the amount of the premium payable for the Portfolio Insurance will be
correspondingly reduced. Nonpayment of premiums on the policy obtained by the
Fund will not result in the cancellation of insurance but will permit the
Insurer to take action against the Trustee to recover premium payments due it.
The Trustee in turn will be entitled to recover the payments from the Fund.

Upon the sale of a Portfolio-Insured Debt Obligation from the Fund, the
Trustee has the right, pursuant to an irrevocable commitment obtained from the
Insurer, to obtain insurance to maturity ("Permanent Insurance") on the Debt
Obligation upon the payment of a single predetermined insurance premium from
the proceeds of the sale. Accordingly, any Debt Obligation in the Fund is
eligible to be sold on an insured basis. It is expected that the Trustee will
exercise the right to obtain Permanent Insurance upon instructions from the
Sponsors only if the Fund would receive net proceeds from the sale of the Debt
Obligation (sale proceeds less the insurance premium attributable to the
Permanent Insurance and the related custodial and rating agency fees) in
excess of the sale proceeds that would be received if the Debt Obligation were
sold on an uninsured basis. The premiums for Permanent Insurance for each
Portfolio-Insured Debt Obligation will decline over the life of the Debt
Obligation. The predetermined Permanent Insurance premium with respect to
each Debt Obligation is based upon the insurability of each Debt Obligation as
of the Date of Deposit and will not be increased for any change in the
creditworthiness of such Debt Obligation unless that Debt Obligation is in
default as to payment of principal and/or interest. In such event, the
Permanent Insurance premium shall be subject to an increase predetermined at
the Date of Deposit and payable from the proceeds of the sale of that Debt
Obligation.

Although all Debt Obligations are individually insured, neither the Fund, the
Units nor the Portfolio is insured directly or indirectly by the Insurer.

The Public Offering Price does not reflect any element of value for Portfolio
Insurance. The Evaluator will attribute a value to the Portfolio Insurance
(including the right to obtain Permanent Insurance) for the purpose of
computing the price or redemption value of Units only if the Portfolio-Insured
Debt Obligations are in default in payment of principal or interest or, in the
opinion of Defined Asset Funds research analysts, in significant risk of
default. In making this determination the Agent for the Sponsors has
established as a general standard that Portfolio-Insured Debt Obligation which
is rated less than BB by Standard & Poor's or Ba by Moody's will be deemed in
significant risk of default although the Agent for the Sponsors retains the
discretion to conclude that a Portfolio-Insured Debt Obligation is in
significant risk of default even though at the time it has a higher rating, or
not to reach that conclusion even if it has a lower rating. (See Description
of Ratings). The value of the insurance will be equal to the difference
between (i) the market value of the Portfolio-Insured Debt Obligation assuming
the exercise of the right to obtain Permanent Insurance (less the insurance
premium attributable to the purchase of Permanent Insurance and the related
custodial and rating agency fees) and (ii) the market value of the
Portfolio-Insured Debt Obligation not covered by Permanent Insurance.

With respect to MBIA Portfolio Insurance, in the event that interest on or
principal of a Debt Obligation is due for payment but is unpaid by reason of
nonpayment by the issuer thereof, MBIA will make payments to its fiscal agent,
Citibank, N.A., New York, New York (the "Fiscal Agent"), equal to the unpaid
amounts of principal and interest not later than one business day after MBIA
has been notified by the Trustee that the nonpayment has occurred (but not
earlier than the date such payment is due). The Fiscal Agent will disburse to
the Trustee the amount of principal and interest which is then due for payment
but is unpaid upon receipt by the Fiscal Agent of (i) evidence of the Trust's
right to receive payment of the principal and interest and (ii) evidence,
including any appropriate instruments of assignment, that all of the rights to
payment of the principal or interest then due for payment shall thereupon vest
in MBIA. Upon payment by MBIA of any principal or interest payments with
respect to any Debt Obligation, MBIA shall succeed to the rights of the owner
of such Debt Obligation with respect to that payment.

The MBIA policies of insurance are not covered by the Property/Casualty
Insurance Security Fund specified in Article 76 of the New York Insurance Law.

Ratings of Bonds and Units. The Debt Obligations, as insured, have been rated
AAA by Standard & Poor's. In addition, Moody's has rated the Debt Obligations
backed by Portfolio Insurance Aaa. The Portfolio Insurance is effective only
while the Debt Obligations are retained in the Fund.

Standard & Poor's has rated the Units of the Insured Series AAA because of the
insurance on the Debt Obligations. The assignment of the AAA rating is due to
Standard & Poor's assessment of the creditworthiness of the Insurer and of its
ability to pay claims on its policies of insurance. In the event that
Standard & Poor's reassesses the creditworthiness of the Insurer which would
result in the Fund's rating being reduced, the Sponsors are authorized to
direct the Trustee to obtain additional insurance in order to maintain the AAA
rating on the Units (see Expenses and Charges).

The Insurers

Financial Security is a monoline property and casualty insurance company
incorporated in New York in 1984. It is a wholly-owned subsidiary of
Financial Security Assurance Holdings Ltd, which was acquired in 1989 by US
West, Inc. which is currently seeking to sell FSA. FSA is licensed to engage
in the surety business in 42 states and the District of Columbia. FSA is
engaged exclusively in the business of writing financial guaranty insurance on
both tax-exempt and non-municipal securities. As of September 30, 1994,
Financial Security had policyholders" surplus of approximately $369,000,000
and total admitted assets of approximately $776,000,000. Copies of quarterly
and annual financial statements prepared in accordance with generally accepted
accounting principles are available upon written request to Financial Security
Assurance Inc., 350 Park Avenue, New York, New York 10022, Attn: Market
Development. Copies of the statutory quarterly and annual statements filed
with the State of New York Insurance Department by Financial Security are
available upon request to the State of New York Insurance Department.

MBIA Corp. is the principal operating subsidiary of MBIA Inc. The principal
shareholders of MBIA Inc. were originally AEtna Casualty and Surety Company,
The Fund American Companies Inc., subsidiaries of CIGNA Corporation and Credit
Local de France, CAECL, S.A. These shareholders now own approximately 13% of
the outstanding common stock of MBIA Inc. following a series of four public
equity offerings over a five-year period. As of September 30, 1994, MBIA had
admitted assets of $3,314,000,000 and policyholders' surplus of
$1,083,000,000.

Moody's rates all bond issues insured by MBIA and BIG "Aaa" and short term
loans "MIG 1," both designated to be of the highest quality. Standard and
Poor's rates all issues insured by MBIA and BIG "AAA", short term debt A-1+
and notes SP-1+. The Moody's rating of MBIA should be evaluated independently
of the Standard & Poor's rating of MBIA. No application has been made to any
other rating agency in order to obtain additional ratings on the Debt
Obligations. The ratings reflect the respective agency's current assessment
of the creditworthiness of MBIA and its ability to pay claims on its policies
of insurance. Any further explanation as to the significance of the above
ratings may be obtained only from the applicable rating agency. The above
ratings are not recommendations to buy, sell or hold the Debt Obligations, and
those ratings may be subject to revision or withdrawal at any time by the
rating agencies. Any downward revision or withdrawal of either or both
ratings may have an adverse effect on the market price of the Debt
Obligations. The above financial information has been obtained from publicly
available information. No representation is made herein as to the accuracy or
adequacy of the above information relating to the Insurers or as to the
absence of material adverse changes since the information was made available
to the public. The Sponsors are not aware that the information herein is
inaccurate or incomplete as of the date hereof.

Regulation of Insurance Companies

Insurance companies are subject to regulation and supervision in the
jurisdictions in which they do business under statutes which delegate
regulatory, supervisory and administrative powers to state insurance
commissioners. This regulation, supervision and administration relate, among
other things, to: the standards of solvency which must be met and maintained;
the licensing of insurers and their agents; the nature of and limitations on
investments; deposits of securities for the benefit of policyholders; approval
of policy forms and premium rates; periodic examinations of the affairs of
insurance companies; annual and other reports required to be filed on the
financial condition of insurers or for other purposes; and requirements
regarding reserves for unearned premiums, losses and other matters. Insurance
regulation in many states also includes "assigned risk" plans, reinsurance
facilities, and joint underwriting associations, under which all insurers
writing particular lines of insurance within the jurisdiction must accept, for
one or more of those lines, risks unable to secure coverage in voluntary
markets. A significant portion of the assets of insurance companies is
required by law to be held in reserve for potential claims on policies and is
not available to general creditors.

Although the Federal government does not regulate the business of insurance,
Federal initiatives can significantly impact the insurance business. Current
and proposed Federal measures which may significantly affect the insurance
business include pension regulation (ERISA), controls on medical care costs,
minimum standards for no-fault automobile insurance, national health
insurance, personal privacy protection, tax law changes affecting life
insurance companies or the relative desirability of various personal
investment vehicles and repeal of the current antitrust exemption for the
insurance business. (If this exemption is eliminated, it will substantially
affect the way premium rates are set by all property-liability insurers). In
addition, the Federal government operates in some cases as a co-insurer with
the private sector insurance companies.

Insurance companies are also affected by a variety of state and Federal
regulatory measures and judicial decisions that define and extend the risks
and benefits for which insurance is sought and provided. These include
judicial redefinitions of risk exposure in areas such as products liability
and state and Federal extension and protection of employee benefits, including
pension, workers" compensation, and disability benefits. These developments
may result in short-term adverse effects on the profitability of various lines
of insurance. Longer-term adverse effects can often be minimized through
prompt repricing of coverages and revision of policy terms. In some instances
these developments may create new opportunities for business growth. All
insurance companies write policies and set premiums based on actuarial
assumptions about mortality, injury, the occurrence of accidents and other
insured events. These assumptions, while well supported by past experience,
necessarily do not take account of future events. The occurrence in the
future of unforeseen circumstances could affect the financial condition of one
or more insurance companies. The insurance business is highly competitive and
with the deregulation of financial service businesses, it should become more
competitive. In addition, insurance companies may expand into non-traditional
lines of business which may involve different types of risks.

The above financial information relating to the Insurance Companies has been
obtained from publicly available information. No representation is made as to
the accuracy or adequacy of the information or as to the absence of material
adverse changes since the information was made available to the public.

First GNMA Series

The Portfolio of the First GNMA Series consists primarily of mortgage-backed
securities of the modified pass-through type fully guaranteed as to payment of
principal and interest by the Government National Mortgage Association
("GNMA"). An investment in Units should be made with an understanding of the
risks which an investment in fixed rate long-term debt obligations without
prepayment protection may entail, including the risk that the value of the
Portfolio and hence of the Units will decline with increases in interest rates
and that payments of principal may be received sooner than anticipated,
especially if interest rates decline. The potential for appreciation on the
Securities, which could otherwise be expected to result from a decline in
interest rates, may tend to be limited by any increased prepayments by
mortgagors as interest rates decline. In addition, prepayments of principal
on Ginnie Maes purchased at a premium over par will result in some loss on
investment while prepayments on Ginnie Maes purchased at a discount from par
will result in some gain on investment. The Sponsors cannot predict future
economic policies or their consequences or, therefore, the course or extent of
interest rate fluctuations in the future. (For a discussion of the average
life of the Ginnie Maes and the Fund see below under Payment of the Securities
and Life of the Fund-First GNMA Series.)

GNMA is a wholly-owned U.S. government corporation within the Department of
Housing and Urban Development. GNMA is authorized by Section 306(g) of Title
III of the National Housing Act to guarantee the timely payment of the
principal of, and interest on, certificates which are based on and backed by
pools of residential mortgage loans insured or guaranteed by the Federal
Housing Administration ("FHA"), the Farmers' Home Administration ("FMHA") or
the Department of Veteran's Affairs ("VA"). In order to meet its obligation
under its guaranty, GNMA may issue its general obligations to the United
States Treasury. In the event it is called upon at any time to make good its
guaranty, GNMA has the full power and authority to borrow from the Treasury of
the United States, if necessary, amounts sufficient to make payments of
principal and interest on the GNMA Certificates ("GNMA Pass-throughs" or
"Ginnie Maes").

Section 306(g) provides further that the full faith and credit of the United
States is pledged to the payment of all amounts which may be required to be
paid under any guaranty under that subsection. An opinion of an Assistant
Attorney General of the United States, dated December 9, 1969, states that
these guaranties "constitute general obligations of the United States backed
by its full faith and credit." Any statement in this Prospectus that a
particular Security is backed by the full faith and credit of the United
States is based upon the opinion of an Assistant Attorney General of the
United States and should be so construed.

GNMA Pass-throughs. The Ginnie Maes are of the "modified pass-through" type,
the terms of which provide for timely monthly payments by the issuers to the
registered holders (including the Fund) of their pro rata shares of the
scheduled principal payments, whether or not collected by the issuers, on
account of the mortgages backing these Ginnie Maes, plus any prepayments of
principal of such mortgages received, and interest (net of the servicing and
other charges described above) on the aggregate unpaid principal balance of
these Ginnie Maes, whether or not interest on account of these mortgages has
been collected by the issuers. Ginnie Maes are guaranteed by GNMA as to
timely payment of principal and interest. Funds received by the issuers on
account of the mortgages backing the several issues of the Ginnie Maes are
intended to be sufficient to make the required payments of principal and
interest on these Ginnie Maes but, if these funds are insufficient for that
purpose, the guaranty agreements between the issuers and GNMA require the
issuers to make advances sufficient for these payments. If the issuers fail
to make these payments GNMA will do so. The full faith and credit of the
United States is pledged to the payment of all amounts which may be required
to be paid under the guaranty. The payment cycle of Ginnie Maes is 45 days
between the date of security issuance and the first investor payments.

Origination of Mortgage-Backed Securities. The pool of mortgages that is to
underlie a particular new issue of Ginnie Maes, such as the Ginnie Maes in the
Fund, is assembled by the proposed issuer of these Ginnie Maes. This issuer is
typically a mortgage banking firm, savings institution or commercial bank and
in every instance must be a mortgagee approved by and in good standing with
the FHA. In addition, GNMA imposes its own criteria on the eligibility of
issuers, including a net worth requirement and a requirement that a principal
element of its business operation be the origination or servicing of mortgage
loans.

The mortgages which are to compose the new pool may have been originated by
the issuer itself in its capacity as a mortgage lender, or they may be
acquired by the issuer from a third party, such as another mortgage banker, a
banking institution, the VA, which in certain instances acts as a direct
lender and thus originates its own mortgages, or one of several other
governmental agencies. All mortgages in any given pool will be insured under
the National Housing Act, as amended ("FHA-insured") or Title V of the Housing
Act of 1949 ("YMHA-insured") or insured or guaranteed under Chapter 37 of Title
38, U.S.C. ("VA-guaranteed"); will have a date for the first scheduled
monthly payment of principal and interest that is not more than 24 months
prior to the issue date of the Ginnie Mae to be issued; will have homogeneity
as to interest rate, maturity and type of dwelling (e.g., project mortgages on
apartment projects and hospitals will not be mixed with 1-to 4-family
mortgages); and will meet additional criteria of GNMA. All mortgages in the
pools backing the Ginnie Maes contained in the Portfolio are mortgages on 1-to
4-family dwellings (amortizing over a period of up to 30 years). In general,
the mortgages in these pools provide for equal monthly payments over the life
of the mortgage (aside from prepayments), designed to repay the principal of
the mortgage over this period, together with interest at a fixed rate on the
unpaid balance.

In seeking GNMA approval of a new pool, the issuer files with GNMA an
application containing information concerning itself, describing generally the
pooled mortgages, and requesting that GNMA approve the issue and issue its
commitment (subject to its satisfaction with the mortgage documents and other
relevant documentation) to guarantee the timely payment of principal of and
interest on the Ginnie Maes to be issued by the issuer on the basis of that
pool. If the application is in order, GNMA issues its commitment, assigning a
GNMA pool number to the pool. Upon completion of the required documentation,
including detailed information as to the underlying mortgages, a custodial
agreement with a Federal or state regulated financial institution satisfactory
to GNMA pursuant to which the underlying mortgages will be held in safekeeping,
and a detailed guaranty agreement between GNMA and the issuer, the issuance of
the Ginnie Maes is permitted, and GNMA, upon their issuance, endorses its
guaranty thereon. The aggregate principal amount of Ginnie Maes issued will
be equal to the then aggregate unpaid principal balances of the pooled
mortgages. The interest rate borne by the Ginnie Maes is currently fixed at
.5 of 1% below the interest rate of the pooled 1-to 4-family mortgages, the
differential being applied to the payment of servicing and custodial charges
as well as GNMA's guaranty fee.

Each group of Ginnie Maes described above as having a specified range of
maturities includes individual Ginnie Maes having varying ranges of maturities
within that mentioned. Each group is described as one category of Securities
with a single range of maturities because of current market conditions that
accord no difference in price among the Securities grouped together on the
basis of the difference in their maturity ranges. Accordingly, as long as
this market condition prevails, a purchase of securities with the same coupon
rate and a maturity date within the range mentioned above will be considered
as an acquisition of the same security.

The Ginnie Maes are based upon and backed by the aggregate indebtedness
secured by the underlying FHA-insured, FMHA-insured or VA-guaranteed mortgages
and, except to the extent of funds received by the issuers on account of these
mortgages, the Ginnie Maes do not constitute a liability of nor evidence any
recourse against the issuers, but recourse thereon is solely against GNMA.
Holders of Ginnie Maes have no security interest in or lien on the pooled
mortgages.

The GNMA guaranties referred to herein relate only to payment of principal of
and interest on the Ginnie Maes in the Portfolio and not to the Units offered
hereby.

Cash or Accretion Bond Series and Select Series

The Bonds in the Portfolios of the Cash or Accretion Bond Series and Select
Series contain Compound Interest Bonds that initially do not make periodic
payments of interest. It should also be noted that the potential for
appreciation on the Securities which would otherwise be expected to result
from a decline in interest rates, may tend to be limited by any increased
prepayments by mortgagors as interest rates decline.

The Compound Interest Bonds contained in Cash or Accretion Bonds Series and
Select Series initially do not pay either principal or interest, although they
do accrue interest. As used herein the term "Payment Commencement Date" means
the time prior to maturity at which all other classes of bonds of an issue
issued by the issuers have been fully paid and at which payment of interest
and principal on the Compound Interest Bonds commences. Prior to the Payment
Commencement Date of any Compound Interest Bond accrued but unpaid interest
will be added to principal and compounded, generally on a quarterly or
semi-annual basis, and additional Units will be issued to Holders and credited
to the accounts of Holders ratably on each semi-annual Unit Accretion
Distribution Day. Additional Units credited to Holders during this period may
be sold at any time. When all of the Compound Interest Bonds have reached
their respective Payment Commencement Dates, they pay interest and principal.

The value of the Compound Interest Bonds and therefore of the Units, may be
subject to greater fluctuations in response to changing interest rates than
obligations making current interest payments. During the period prior to
their Payment Commencement Dates, however, the Compound Interest Bonds provide
a substantial degree of protection from prepayment because no payments of
principal may be made on the Compound Interest Bonds until the principal
amount of the other classes of bonds issued by the respective issuers
concurrently with the Compound Interest Bonds have been paid in full. The
Compound Interest Bonds also provide protection from reinvestment risk
because, during this initial period, the accrued interest is added to
principal and therefore automatically reinvested at the same interest rate as
the original principal amount of the Compound Interest Bonds. Accordingly, an
investor in the Units who does not elect automatic liquidation, unlike an
investor in a fund composed of customary securities, lessens his risk of being
unable to invest cash distributions at a rate as high as the rate on the
Compound Interest Bonds, but may forego the ability to reinvest fully at
higher rates in the future. (See Administration of the Fund--Automatic Unit
Accretion Liquidations below.) Because the interest on the Compound Interest
Bonds accrues but is not paid until their respective Payment Commencement
Dates and because these Bonds may have been originally issued at a price less
than their original stated principal amounts, the Compound Interest Bonds will
be treated for Federal income tax purpose as having "original issue discount".
Holders of Units will accordingly be required to report as taxable income, in
each year, a portion of this original issue discount prior to the receipt of
the cash attributable to such income (see Taxes below).

If a bankruptcy proceeding is commenced involving an issuer of a compound
interest or original issue discount security, under Section 502(b)(2) of Title
11 of the United States Code, generally the claim of holders of the security
would be limited to the initial public offering price of the security plus
accrued but unpaid interest and the amortized portion of the difference
between the original principal amount and the initial public offering price of
the security to the commencement of the proceeding. Similar limitations may
result under applicable state law. Similarly, the respective Bond Indentures
under which the Compound Interest Bonds were issued generally provide that the
bond trustee named in the Bond Indenture as the registered holder of the
primary collateral for the Compound Interest Bonds (the "Bond Trustee") may
accelerate the Compound Interest Bonds if an event of default occurs and is
continuing. Under these circumstances, the claim of a holder of a Compound
Interest Bond may be limited to an amount equal to the then outstanding
principal amount of the Compound Interest Bond plus accrued interest to the
date of actual payment.

For Cash or Accretion Bond Series and Select Series, principal and interest
payments received by a Bond Trustee will generally be used to pay interest on
and the outstanding principal amount of classes of bonds with earlier stated
maturities issued by the issuers of the Compound Interest Bonds before any
principal or interest payments are applied to pay the principal or interest on
the Compound Interest Bonds included in the Portfolio. For certain Bond
issues, the initial principal payments may be paid into a fund held by the
Bond Trustee and, together with any cash reserves deposited by the issuer
which may be used by the Bond Trustee to make any required payments of
principal and interest on the bonds to the extent cash is not otherwise
available, reinvested on behalf of the bondholders (including the Fund).
Whenever, because of the reinvestment rate of interest, the amount of
principal being prepaid or otherwise, the Bond Trustee does not believe it will
have sufficient collateral if all the bonds remain outstanding, the Bond
Trustee will prepay the appropriate amount of bonds so that the bonds then
outstanding will be fully collateralized. The Bonds may also be redeemed at
the option of the issuer under circumstances permitted under the respective
Bond Indentures.

The Fund may be an appropriate medium for investors who desire to participate
in a portfolio of taxable fixed income bonds offering the safety of capital
provided by an investment which is primarily secured by collateral backed by
the guarantees of GNMA, FNMA or FHLMC (see below) and who wish to have a
degree of prepayment protection from the effects of redemption by the issuers
of similar securities due to the call protection features of the Bonds.

The Bond Indentures require that the collateral for the Bonds of each issuer
include Ginnie Maes, Fannie Maes or Freddie Macs with a principal amount
which, together with any other collateral for the bonds held by the Bond
Trustee for payments of principal on the bonds, will be at least equal to the
aggregate unpaid principal amount of the bonds, and for the Ginnie Maes,
Fannie Maes or Freddie Macs and other collateral held by the Bond Trustee for
the bonds to produce a cash flow sufficient to make interest payments required
to be made on the outstanding bonds until the earlier of the maturity of the
bonds or their redemption. The foregoing assumes that there will be timely
payment of principal and interest on the Ginnie Maes, Fannie Maes or Freddie
Macs, that the issuers and the Bond Trustees will comply with the provisions
of the Bond Indentures, and that collateral for the Bonds of each issuer is
invested by the Bond Trustee in a manner which will produce the return
anticipated at the time such investments are made. Frequently, as a condition
to the issuance of a rating on the bonds, the rating agency will require the
issuer to deposit excess collateral with the Bond Trustee to insure the
availability of funds to make payments on outstanding bonds. This other
collateral may include cash reserves or letters of credit which may be drawn
upon to satisfy cash requirements. Thus, the Sponsors believe that the Bonds
will be fully collateralized at all times.

GNMA. For a description of GNMA and Ginnie Maes, see above under First GNMA
Series.

FNMA. The Federal National Mortgage Association ("FNMA") is a Federally
chartered, privately owned corporation organized and existing under the
Federal National Mortgage Association Charter Act. It is the nation's largest
supplier of residential mortgage funds. FNMA was originally established in
1938 as a United States government agency to provide supplemental liquidity to
the mortgage market but was transformed into a stockholder owned and privately
managed corporation by legislation enacted in 1968. The Secretary of Housing
and Urban Development exercises general regulatory power over FNMA. Although
the Secretary of the Treasury has discretionary authority to lend FNMA up to
$2.25 billion outstanding at any time, neither the United States nor any
agency thereof is obligated to finance FNMA's obligations or to assist FNMA in
any other matter, and obligations issued by FNMA are not guaranteed by and do
not constitute a debt or obligation of the United States or of any agency or
instrumentality thereof other than FNMA. FNMA provides funds to the mortgage
market primarily by purchasing home mortgage loans from local lenders, thereby
replenishing funds for additional lending. FNMA acquires funds to purchase
home mortgage loans from many capital market investors which may not
ordinarily invest in mortgages, thereby expanding the total amount of funds
available for housing.

FNMA Pass-throughs ("Fannie Maes"). Fannie Maes are certificates of
beneficial interest evidencing pro rata undivided ownership interests in pools
of residential mortgages either previously owned by FNMA or purchased by it in
connection with the formation of a pool. FNMA guarantees the full and timely
payment of principal and interest (adjusted to the pass-through rate) on the
mortgage loans in the pool, whether or not received by FNMA or recovered by it
in foreclosure. If FNMA were unable to fulfill its guaranty, distributions to
holders of FNMA Certificates would consist solely of payments and other
recoveries upon the underlying mortgages, and, accordingly, delinquencies and
defaults would diminish distributions to the holders.

FHLMC. The Federal Loan Mortgage Corporation ("FHLMC") is a corporate
instrumentality of the United States created pursuant to the Emergency Home
Finance Act of 1970 (the "FHLMC Act"). The principal activity of FHLMC
consists of the purchase of the first lien, fixed rate conventional mortgage
loans and participations therein and the resale of these loans as
participation certificates. Mortgage loans retained by FHLMC are financed by
debt and equity capital.

FHLMC PCs ("Freddie Macs"). Freddie Macs represent an undivided interest in
identified pools of residential mortgages (a "FHLMC Certificate group")
purchased by FHLMC. Each mortgage loan must meet the applicable standards set
forth in the FHLMC Act. A FHLMC Certificate group may include whole loans,
participation interests in whole loans and undivided interest in whole loans
or participations comprising another FHLMC Certificate group. FHLMC guarantees
the full and timely payment of interest at the rate provided for by Freddie
Macs on the unpaid principal balance outstanding on the underlying mortgage
loans in the FHLMC Certificate group represented by the Freddie Mac, whether
or not received. FHLMC also guarantees collection of all principal on the
underlying mortgage loans, without any offset or deduction, but does not
guarantee the timely payment of scheduled principal. Freddie Macs are not
guaranteed by the United States or by any Federal Home Loan Bank and do not
constitute debts or obligations of the United States or any Federal Home Loan
Bank. The obligations of FHLMC under its guarantee are obligations solely of
FHLMC and are not backed by, nor entitled to, the full faith and credit of the
United States.

Liquidity. The Bonds in the Portfolio have been registered under the
Securities Act of 1933 and, therefore, may be sold by the Fund at any time to
provide funds for purposes of redemption of Units. However, the Securities
are generally not listed on a national securities exchange or on the National
Association of Securities Dealers Automated Quotation System, Inc. 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.
The price at which the Securities may be sold to meet redemptions and the
value of the Fund will be adversely affected if trading markets for the
Securities are limited or absent. However, taking into account the foregoing
and other factors, the Sponsors believe that the Standard & Poor's rating of
the Bonds and the nature of the Ginnie Maes, Fannie Maes or Freddie Macs and
other collateral securing payments of principal and interest due on the Bonds
make the Bonds adequately marketable for purposes of redemptions of Units by
the Fund Trustee (see Redemption).

Limited Assets and Limited Liability. Except as indicated under Investment
Summary in Part A, the issuers of the Bonds generally are limited purpose
corporations organized solely for the purpose of issuing GNMA, FNMA or
FHLMC-collateralized bonds. The issuers thus do not have, nor are they
expected in the future to have, any significant assets other than assets
pledged to secure the GNMA, FNMA or FHLMC-collateralized bonds issued by them.
None of the Bonds are guaranteed by the parent company or any other affiliate
of any issuer. Consequently, holders of the Bonds (including the Fund) must
rely upon payments on the collateral securing Bonds for the payment of
principal and interest due. If the collateral is insufficient to make
payments on those Bonds, it is unlikely that any other asset of the issuer
will be available for payment of the deficiency. The collateral securing the
Bonds of each issuer will be held by the Bond Trustee as security for the
bonds of that issuer. Although payment of principal of, and interest on,
Ginnie Maes, Fannie Maes or Freddie Macs securing the Compound Interest Bonds
is guaranteed by GNMA, FNMA or FHLMC, the Bonds represent obligations solely
of the issuers and are not insured or guaranteed by GNMA, FNMA or FHLMC or any
other governmental agency. A default with respect to the Bonds of a
particular issuer may not necessarily result from a corresponding default with
respect to the Ginnie Maes, Fannie Maes or Freddie Macs securing those Bonds.

Sale of Collateral on Default; Interest Rate Fluctuations. If an event of
default occurs with respect to the Bonds of any issuer and the bonds are
declared due and payable, there can be no assurance that the collateral
securing the bonds will be sufficient to pay the principal and interest then
due on the bonds. The value of the Ginnie Maes, Fannie Maes or Freddie Macs
securing the bonds and the value of the property in which other collateral for
the bonds have been invested in accordance with the respective Bond Indentures
("Eligible Investments") will fluctuate with changes in prevailing rates of
interest generally. Consequently, the Ginnie Maes, Fannie Maes or Freddie
Macs and the Eligible Investments may have to be liquidated at a discount from
par value or from their purchase price, in which case the proceeds of
liquidation might be less than the outstanding principal and interest due on
the bonds. In that event, the issuer of the bonds may be unable to pay in
full the principal and interest due on the bonds. However, the Bond
Indentures generally provide that the Bond Trustees may, in their discretion
if they determine the action to be in the best interests of the bondholders,
refrain from liquidating the collateral for the bonds if the collateral
continues to provide sufficient funds for the payment of principal of, and
interest on, the bonds as the principal and interest would have become due had
the bonds not been declared due and payable. The Bond Trustee would then
continue to apply payments received from the Ginnie Maes, Fannie Maes or
Freddie Macs and other collateral to the payment of principal and interest on
the bonds and for other purposes as provided in the respective Bond
Indentures. Furthermore, the Bond Indentures may prohibit the Bond Trustee
from selling the Ginnie Maes, Fannie Maes or Freddie Macs and the other
collateral unless (i) the proceeds from the sale are sufficient to pay in full
the principal and accrued interest on the outstanding bonds of the Issuer at
the date of the sale or (ii) the Bond Trustee determines that the Ginnie Maes,
Fannie Maes or Freddie Macs and the other collateral would not be sufficient
on an ongoing basis to make all payments on the bonds as they would have
become due if the bonds had not been declared immediately due and payable and
the Bond Trustee obtains, pursuant to the requirements of the relevant Bond
Indenture, the consent of the requisite number of holders (including the Fund)
of all or substantially all of the bonds.

Payments Directly to the Issuers and Withdrawals of Collateral. The Bond
Indentures pursuant to which the Bonds were issued may provide either that the
issuer may recalculate the amount of collateral required by the Bond Indenture
and may, under certain circumstances, withdraw excess collateral from the lien
of the Bond Indenture, or that the Bond Trustee may, under certain
circumstances, release to the issuer certain excess proceeds of the collateral
from the lien of the Bond Indenture. Any amount so paid to any issuer will no
longer be subject to the lien of the Bond Indenture or available to make
payments on outstanding Bonds of the issuer.

Preferred Stock Put Series

An investment in Units of the Fund should be made with an understanding of the
risks which an investment in preferred stocks may entail, including the risk
that the value of the Portfolio and hence of the Units will decline with
increases in interest rates. There have been recent wide fluctuations in
interest rates and thus in the value of preferred stocks generally. The
Sponsors cannot predict future economic policies or their consequences, or,
therefore, the course or extent of any similar fluctuations in the future.

Holders of preferred stocks of the type held in the Portfolio have the right
to receive dividends at a fixed or adjustable rate, as the case may be, when
and as declared by the issuer's Board of Directors but do not participate in
other amounts available for distribution by the issuing corporation.
Preferred stock dividends must be paid before common stock dividends and any
cumulative preferred stock dividend omitted is added to future dividends
payable to holders of the cumulative preferred stock before holders of common
stock may receive a dividend. For that reason, preferred stocks entail less
risk than common stocks. Preferred stocks are, however, equity securities in
the sense that they do not represent a liability of the issuer and therefore
do not offer as great a degree of protection of capital or assurance of
continued income as investments in corporate debt securities. In addition,
the issuance of debt securities or senior issues of preferred stock may create
prior claims for payment of principal, interest and dividends which could
adversely affect the ability of the issuer to pay dividends or the rights of
holders of preferred stock with respect to the assets of the issuer upon
liquidation.

From time to time Congress considers proposals to reduce the rate of the
dividends-received deduction. Enactment into law of such a proposal would
adversely affect the after-tax return to corporate investors who can take
advantage of the deduction.

Sellers

The Securities in these Funds were acquired from one or more savings banks,
savings and loan associations and similar institutions ("thrifts") or
insurance companies or affiliates of any of the foregoing (the "Seller" or
"Sellers") which have committed under certain circumstances described below to
repurchase the Securities from the Fund ("purchase commitment"). In view of
the fact that each Security is backed by a purchase commitment of a Seller, an
investment in Units of these Funds should be made with an understanding of the
characteristics of these institutions and of the risks which such an investment
may entail.

An investment in Units of a Fund containing any of these types of
credit-supported Bonds should be made with an understanding of the
characteristics of the commercial banking and thrift industries and of the
risks which an investment in Units may entail. Banks and thrifts are subject
to extensive governmental regulations which may limit both the amounts and
types of loans and other financial commitments which may be made and interest
rates and fees which may be charged. The profitability of these industries is
largely dependent upon the availability and cost of funds for the purpose of
financing lending operations under prevailing money market conditions. Also,
general economic conditions play an important part in the operations of this
industry and exposure to credit losses arising from possible financial
difficulties of borrowers might affect an institution's ability to meet its
obligations. These factors also affect bank holding companies and other
financial institutions, which may not be as highly regulated as banks, and may
be more able to expand into other non-financial and non-traditional businesses.

In December 1991 Congress passed and the President signed into law the Federal
Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") and the
Resolution Trust Corporation Refinancing, Restructuring, and Improvement Act
of 1991. Those laws imposed many new limitations on the way in which banks,
savings banks, and thrifts may conduct their business and mandated early and
aggressive regulatory intervention for unhealthy institutions.

Investors should recognize that they are subject to having all or part of the
principal amount of their investment returned prior to the termination date of
the Fund if a thrift becomes or is deemed to be insolvent or in any of the
situations outlined under Purchase Commitments below.

The thrift industry has experienced severe strains as demonstrated by the
failure of numerous savings banks and savings and loan associations. One
consequence of this was the insolvency of the deposit insurance fund of the
Federal Savings and Loan Insurance Corporation ("FSLIC"). As a result, in
1989 Congress enacted the Financial Institutions Reform, Recovery and
Enforcement Act ("FIRREA") which significantly altered the legal rules and
regulations governing banks and thrifts. Among other things, FIRREA abolished
the FSLIC and created a new agency, the Resolution Trust Corporation ("RTC"),
investing it with certain of the FSLIC"s powers. The balance of the FSLIC's
powers were transferred to the Federal Deposit Insurance Corporation ("FDIC").
Under FIRREA, as subsequently amended, the RTC is normally appointed as
receiver or conservator of thrifts that fail between January 1, 1989 and a
date that may occur as late as July 1, 1995 if their deposits, prior to
FIRREA, were insured by the FSLIC. The FDIC is normally appointed as receiver
or conservator for all thrifts the deposits of which, before FIRREA, were
insured by the FDIC, and those thrifts the deposits of which, prior to FIRREA,
were insured by the FSLIC that fail on or after the RTC appointment period.

In certain cases, the Sponsors have agreed that the sole recourse in
connection with any default, including insolvency, by thrifts whose
collateralized letter of credit, guarantee or Purchase Commitments may back
any of the Debt Obligations will be to exercise available remedies with
respect to the collateral pledged by the thrift; should the collateral be
insufficient, the Fund will, therefore, be unable to pursue any default
judgment against that thrift. Certain of these collateralized letters of
credit, guarantees or Purchase Commitments may provide that they are to be
called upon in the event the thrift becomes or is deemed to be insolvent.
Accordingly, investors should recognize that they are subject to having the
principal amount of their investment represented by a Debt Obligation secured
by a collateralized letter of credit, guarantee or Purchase Commitment
returned prior to the termination date of the Fund or the maturity or
disposition dates of the Debt Obligation, if the thrift becomes or is deemed
to be insolvent, as well as in any of the situations outlined under Purchase
Commitments below.

FIRREA generally permits the FDIC or the RTC, as the case may be, to prevent
the exercise of a Seller's Insolvency purchase commitment and empowers that
agency to repudiate a Seller's contracts, including a Seller's other purchase
commitments. FIRREA also creates a risk that damages against the FDIC or RTC
would be limited and that investors could be left without the full protections
afforded by the Purchase Commitments and the Collateral. Policy statements
adopted by the FDIC and the RTC concerning collateralized purchase commitments
have partially ameliorated these risks for the Funds. According to these
policy statements, the FDIC or the RTC, as conservator or receiver, will not
assert the position that it can repudiate the purchase commitments without the
payment of damages from the collateral, and will instead either (i) accelerate
the collateralized purchase commitments, in which event payment will be made
under the purchase commitments to the extent of available collateral, or (ii)
enforce the purchase commitments, except that any insolvency clause would not
be enforceable against the FDIC and the RTC. Should the FDIC choose to
accelerate, however, there is some question whether the payment made would
include interest on the defaulted Debt Obligations for the period after the
appointment of the receiver or conservator through the payment date.

The RTC has also given similar comfort with respect to collateralized letters
of credit, but the FDIC has not done so at this time. Consequently, there can
be no assurance that collateralized letters of credit issued by thrifts for
which the FDIC would be the receiver or conservator appointed, as described
three paragraphs earlier, will be available in the event of the failure of any
such thrift.

The possibility of early payment has been increased significantly by the
enactment of FDICIA, which requires federal regulators of insured banks,
savings banks, and thrifts to act more quickly to address the problems of
undercapitalized institutions than previously, and specifies in more detail
the actions they must take. One such requirement virtually compels the
appointment of a receiver or conservator for any institution when its ratio of
tangible equity to total assets declines to two percent. Others force
aggressive intervention in the business of an institution at even earlier
stages of deterioration. Upon appointment of a receiver, if the FDIC of RTC
pays as provided, in the policy statements and notwithstanding the possibility
that the institution might not have deteriorated to zero book net worth (and
therefore might not satisfy traditional definitions of "insolvent"), the
payment could therefore come substantially earlier than might have been the
case prior to FDICIA.

Each Seller has made its purchase commitments only with respect to Securities
which that Seller has sold; consequently, if a particular Seller fails to meet
its commitments, no recourse is available against any other Seller. The
Sponsors have agreed that the sole recourse in connection with any default,
including insolvency, by a Seller whose purchase commitments are
collateralized will be to exercise available remedies with respect to that
Seller's Collateral on deposit with the Collateral Agent; should this
Collateral be insufficient, therefore, it will not be possible to pursue any
default judgment against the Seller.

Each Seller that is subject to regulations by the New York Superintendent of
Banks has agreed to provide without charge to each person to whom this
prospectus is delivered, upon written request, a copy of its financial
statement most recently prepared for delivery to depositors in accordance with
the banking laws of the State of New York and the regulations prescribed by
the New York Superintendent of Banks thereunder. Each Seller which is a
thrift that is not subject to regulation by the New York Superintendent of
Banks has agreed to provide without charge to each person to whom this
prospectus is delivered, upon written request, a copy of its most recent
audited financial statements. Each Seller that is an insurance company has
agreed to provide without charge to each person to whom this prospectus is
delivered, upon written request, a copy of its financial statements most
recently prepared for delivery to policy holders in accordance with the
insurance laws of the jurisdiction under which the Seller is chartered or
otherwise organized and the regulations thereunder, or other applicable laws,
rules and regulations. Written requests should be directed to the Trustee.

Purchase Commitments

Pursuant to a purchase commitment made by each Seller, the Trustee may at any
time not later than two hours after the Evaluation Time on any Purchase Date
(annual for the First Through Third Preferred Stock Put Series and semi-annual
for subsequent Preferred Stock Put Series) as set forth under Investment
Summary in Part A (or if a Purchase Date is not a business day, on the next
business day thereafter), deliver written notice requiring the Seller of any
Security sold by it to the Fund to purchase the Security if necessary to
satisfy redemptions of Units (a "Liquidity Purchase"). Settlement of the
purchase of a Security by a Seller will occur on the seventh calendar day
following the Purchase Date (or if the seventh calendar day is not a business
day, on the next business day thereafter).

Each Seller, severally and not jointly, has also made the following
commitments with respect to each Security sold by it: (i) to purchase at any
time on 14 calendar days' notice (seven calendar days" notice for the Sixth
Preferred Stock Put Series) any Security if the issuer should fail to make any
sinking fund or other redemption payments related to the Securities it has
issued or fail to declare and pay a dividend at a rate at least equal to the
dividend rate prescribed for the Preferred Stock at issuance (the "Stated
Dividend Rate") (a "Default Purchase"); (ii) to purchase at any time
immediately (on 14 calendar days' notice for the First Preferred Stock Put
Series) all Securities if a Seller becomes or is deemed to be bankrupt or
insolvent (an "Insolvency Purchase"); and (iii) (except with respect to the
First Preferred Stock Put Series) to purchase on 14 calendar days' notice
(seven calendar days' notice for the Sixth Preferred Stock Put Series) prior
to the Final Disposition Date as listed under Portfolio all Preferred Stocks
remaining in the Fund on the Final Disposition Date (a "Disposition
Purchase"). (With respect to clause (ii) of the previous sentence, although a
bankrupt Seller would likely be incapable of honoring the Insolvency Purchase
commitment, for the Second Preferred Stock Put and Subsequent Put Series the
Insolvency Purchase commitment would create for the Fund an immediate right to
the Seller's collateral. The ability of the Fund to exercise this right is
described above under Sellers.)

Any purchase of a Security from the First Preferred Stock Put Series as
described in this paragraph will be at a price (the "Put Price") equal to the
fair market value of the Preferred Stock together with the Default and
Insolvency Purchase Commitments on the fifty-third day after the Date of
Deposit, as determined by the Evaluator. The Put Price of a Security
purchased from the Second through Fifth Preferred Stock Put Series as
described in this paragraph will be equal to the cost of that Security to the
Fund increased or decreased by any increase or decrease in the evaluation of
that Security without the purchase commitments between the Date of Deposit and
the forty-sixth day after settlement for purchase of the Preferred Stocks.
For the Sixth Preferred Stock Put Series, the Put Price for any Liquidity or
Disposition Purchase of a Security will be equal to its original cost to the
Fund, while any Default or Insolvency Purchase will be at its Put Price plus
(or minus) the portion of any discount (or premium) which has accrued (or
amortized) to the repurchase date. With respect to any missed dividend, any
purchase will also include an amount equal to such missed dividend. With
respect to the First Preferred Stock Put Series, the amount for any missed
dividend will be calculated so that every Holder receives what he would have
received from the payment of the dividend, after taxes and other applicable
charges, were he subject to Federal income taxation at the maximum tax rate
applicable to corporations and entitled to a deduction for dividends received
by the Fund at the maximum percentage applicable to corporations.

If the sale of a Security by the Fund to a third party is necessary to satisfy
redemptions of Units prior to the Security's final redemption or disposition
date, the related Liquidity Purchase and Disposition Purchase commitments will
be transferable and will be exercisable by the buyer free from the restriction
that the annual or semi-annual purchase right may only be exercised to satisfy
redemption of Units. The Default Purchase and Insolvency Purchase commitments
also will not terminate upon disposition of the Security by the Fund. Prior
to the sale of Securities by the Fund to a third party, the Seller will have
the right to purchase the Securities at a price equal to the greater of the
Put Price or the price offered by the third party (then current market value
or may separately pay for the cancellation of all or some of the purchase
commitments related thereto for the First Preferred Stock Put Series).

In addition, with respect to the First Preferred Stock Put Series, under
certain circumstances relating to actions by Federal or state regulatory
authorities, the Seller has the right to substitute a new obligor for the
purchase commitments so long as (i) the Units would continue to be rated AAA
by Standard & Poor's; (ii) the new obligor shall have issued or guaranteed
obligations rated AAA by Standard & Poor's; and (iii) the fair market value of
the Seller's Securities, including its purchase commitments, after the
substitution shall, in the opinion of the Evaluator, remain at least 97.5% of
their fair market value prior to the substitution. As a condition to its sale
of the Securities, the Seller has required that it be permitted to act as
agent with respect to waivers, amendments or other modifications to the
Securities sold by it. As agent, the Seller shall make all decisions
regarding amendments to the Securities sold by it, but prior to taking any
action relating to the face amount, liquidation value, dividend rate or
redemption schedule of a Security, it shall notify the Agent for the Sponsors
whether it recommends approval or rejection of the proposed change. In the
event that the Agent for the Sponsors disapproves of the proposed action, the
Seller will have a right to purchase the Security at a price equal to no less
than its Put Price.

Collateralized Purchase Commitments (Second and Subsequent Preferred Stock Put
Series)

The purchase commitments of each Seller to these Series are secured by a
security interest in "Eligible Collateral". Eligible Collateral may consist
of mortgage-backed securities issued by private parties and guaranteed as to
full and timely payment of interest and principal by GNMA or FNMA,
mortgage-backed securities issued and guaranteed as to full and timely payment
of interest and full collection of principal by FHLMC, conventional, FHA
insured, VA guaranteed and privately insured mortgages ("Mortgages"), debt
obligations of states and their political subdivisions and public authorities
("Municipal Obligations"), debt obligations of public nongovernmental
corporations, or in the case of the Sixth Preferred Stock Put Series,
preferred stocks of such corporations ("Corporate Obligations"), U.S.
Government securities and cash. For a description of GNMA, FNMA and FHLMC
obligations, see above under Cash or Accretion Bond Series and Select Series.
The remaining types of Eligible Collateral are described below. In addition,
Eligible Collateral may also consist of other securities with collateral
requirements specified by the Sponsors. The types of Eligible Collateral and
the lowest required percentages of the aggregate market value of each type to
the aggregate Put Prices of the Securities (the "Collateral Requirements") are
as follows:
Required
Type of Eligible Collateral Percentage
Cash................................................ 105%
U.S. Governments.................................... 113
GNMA Pass-Throughs.................................. 145
FNMA Pass-Throughs.................................. 155
FHLMC PCs........................................... 155
Mortgages........................................... 170
Municipal Obligations............................... 150
Corporate Obligations--Bonds........................ 155
Corporate Obligations--Preferred Stocks............. 160

The market value of all collateral other than cash is to be determined no less
often than quarterly. If on any valuation date it is determined that the
aggregate market value of the Eligible Collateral does not satisfy the
applicable Collateral Requirements, additional Eligible Collateral must be
delivered. Eligible Collateral may be withdrawn or substituted at any time,
provided that the remaining or substituted Eligible Collateral meets the
applicable Collateral Requirements. Although the Sponsors believe that the
Collateral Requirements are sufficient to provide a high degree of protection
against loss on the Preferred Stocks, investors in the Units should be aware
that if liquidation of the collateral is required and proves insufficient to
provide for payment in full of the Put Price and any past unpaid dividends on
such Preferred Stocks, then the full amount of their investment could not be
returned.

Mortgages--In order to be eligible as Collateral a Mortgage must either be
insured by FHA or guaranteed by VA or must (i) secure a loan not in excess of
80% of the lesser of the purchase price or appraised value, (ii) be secured by
a first lien on a single-family (one unit) detached structure that at the time
of origination was owner-occupied and designated and intended for use as a
primary residence, (iii) not have had any payment of principal or interest or
escrow payment in arrears for 60 or more days at any time during the twelve
months preceding its pledge date and, as of its pledge date, have no payments
more than 30 days due and unpaid, (iv) provide for level monthly payments of
principal and interest for an original term to maturity not in excess of 30
years, (v) bear interest at a fixed annual rate and (vi) if originated
subsequent to January 1, 1977, be written on then-applicable FHLMC/FNMA
documentation.

FHA Insurance--The regulations governing the FHA single family programs
under which a Mortgage may be insured provide that a mortgage will be
considered to be in default if the mortgagor fails to make any payment or
perform any other obligation under the mortgage and such failure continues
for a period of thirty days. Insurance benefits are payable to the mortgagee
either upon foreclosure or other acquisition of the property (which, in
either case, may be subject to certain delays) or upon assignment of the
defaulted mortgage to the United States Department of Housing and Urban
Development ("HUD"). Under most FHA insurance programs for single family
residences the Federal Housing Commissioner has the option of paying
insurance claims in cash or in debentures, although current FHA policy is to
pay insurance claims in cash.

VA Guarantee--Claims for the payment of a VA guarantee may be submitted
when any default of the mortgagor continues for a period of three months. A
guarantee may be paid without the mortgagee instituting foreclosure
proceedings or otherwise acquiring title. The maximum amount of guarantee
that may be paid is limited to the lesser of (1) sixty percent (60%) of the
original principal balance of the mortgage loan or (2) $27,500 for mortgage
loans made on or after October 7, 1980. The liability on the guarantee is
reduced or increased pro rata with any reduction or increase in the amount of
the indebtedness.

Private Mortgage Insurance--Private mortgage insurance policies currently
being issued by private mortgage insurers approved by FHLMC contain
provisions substantially as follows: (a) the private mortgage insurer must
pay a claim, including unpaid principal, accrued interest and certain
expenses, within 60 days of presentment of the claim by the insured; (b) in
order for the insured to present a claim, the insured must have acquired, and
tendered to the insurer, title to the property free and clear of all liens
and encumbrances including any right of redemption by the mortgagor; (c) when
a claim is presented, the insurer will have the option of paying the claim in
full and taking title to the property and arranging for its sale or of paying
the insured percentage of the claim (the insured percentages vary but are
customarily 20-25% of the claim) and allowing the insured to retain title to
the property; and (d) claims may also be settled by the insurer at the option
of the insured for actual losses where such losses are less than the insured
percentage of the claim.

Delays in Foreclosure--Mortgages insured by FHA or guaranteed by VA are
subject to current Federal regulations which provide that a mortgagee may not
initiate foreclosure proceedings on an FHA insured or VA guaranteed loan
unless at least three full monthly installments are due and unpaid. An
administrative appeal prior to foreclosure is available to a mortgagor, and,
if the mortgagor utilizes this procedure, the foreclosure may be delayed an
additional three months. No delay in the foreclosure action is required if
the property is encumbered by an FHA/VA mortgage and is abandoned by the
mortgagor.

Municipal Obligations--Debt Obligations issued by or on behalf of states or
their political subdivisions or public authorities, bearing interest at a
fixed or variable rate, insured as to timely payments of principal and
interest due and rated at least BBB by Standard & Poor's (or another
acceptable rating agency).

U.S. Government Securities--Direct obligations of the United States that
mature within 30 years at the time of being pledged under the Collateral
Agreement.

Corporate Obligations--Marketable direct obligations of public,
nongovernmental corporations payable in U.S. dollars, bearing dividends or
interest at a fixed or variable rate and rated at least A, or marketable
preferred stocks bearing dividends rated at least BBB, by Standard & Poor's
(or another acceptable rating agency at the time rating the Fund).

Liquidity

All of the Securities in Preferred Stock Put Series were purchased by the
Sponsors from the Sellers and were originally acquired by one of the Sellers
in the ordinary course of its business and held in its investment portfolio or
the portfolios of its subsidiaries prior to the sale of the Sponsors. There
may be no established secondary market for certain of the Securities initially
deposited in the Portfolios of these Series. However, based upon the
experience of the Sponsors in the markets which are established for similar
Securities and based upon the Sponsors' analysis of the market for Securities
similar to those in the Portfolio (including Securities subject to purchase
commitments and "puts" which have been marketed to the public in recent years)
for which there is no established market, the Sponsors believe that there
should be a readily available market among institutional investors for these
Securities in the event it is necessary to sell these Securities to meet
redemptions of Units. In addition, upon the sale of a Security to meet
redemptions by the Fund to a third party prior to the Security's final
redemption or disposition date, the related Liquidity Purchase and any
Disposition Purchase commitment will be exercisable by the buyer free from the
restriction that the annual or semi-annual purchase right may only be
exercised to satisfy redemptions of Units.

Liquidity of the Fund is additionally augmented by the Sellers' Liquidity
Purchase commitments in the event it is necessary to sell any Securities to
meet redemptions of Units. There can be no assurance that the prices that can
be obtained for the Securities at any time in the open market will exceed the
Put Prices of the Securities. In addition, the Evaluator has valued the
Securities due in large part to the existence of the Sellers' Liquidity
Purchase and any Disposition Purchase commitments, which are transferable if
the Security is sold to meet redemptions. Because these Purchase commitments
may be called upon during the life of the Fund, the Securities are comparable
to short-term instruments and carry a yield comparable to instruments of
short-term maturity issued by obligors of similar credit standing.

The Portfolio may consist partly of privately placed issues of Securities.
Any privately placed issues, while not registered under the Securities Act of
1933, have in most cases been held by the Sellers for more than three years
and would therefore generally be transferable in the open market without
registration. Any Securities that are not freely transferable should be
readily marketable to institutional investors. However, if the Sellers should
become unable to honor their purchase commitments and the Trustee is
consequently forced to sell these Securities in the open market, it is
possible that the price realized on this sale of these Securities would be
adversely affected by the absence of an established secondary market for
certain of these Securities.

Other Risk Factors

As set forth under Investment Summary in Part A, the Fund may contain or be
concentrated in one or more of the classifications of obligations referred to
below. An investment in Units of the Fund should be made with an understanding
of the risks which these investments may entail, certain of which are
described below.

Utilities

The ability of utilities to meet their obligations with respect to revenue
bonds issued on their behalf is dependent on various factors, including the
rates they may charge their customers, the demand for a utility's services and
the cost of providing those services. Utilities, in particular investor-owned
utilities, are subject to extensive regulation relating to the rates which
they may charge customers. Utilities can experience regulatory, political and
consumer resistance to rate increases. Utilities engaged in long-term capital
projects are especially sensitive to regulatory lags in granting rate
increases. Any difficulty in obtaining timely and adequate rate increases
could adversely affect a utility's results of operations.

The demand for a utility's services is influenced by, among other factors,
competition, weather conditions and economic conditions. Electric utilities,
for example, have experienced increased competition as a result of the
availability of other energy sources, the effects of conservation on the use
of electricity, self-generation by industrial customers and the generation of
electricity by co-generators and other independent power producers. Also,
increased competition will result if federal regulators determine that
utilities must open their transmission lines to competitors. Utilities which
distribute natural gas also are subject to competition from alternative fuels,
including fuel oil, propane and coal.

The utility industry is an increasing cost business making the cost of
generating electricity more expensive and heightening its sensitivity to
regulation. A utility's costs are influenced by the utility's cost of
capital, the availability and cost of fuel and other factors. In addition,
natural gas pipeline and distribution companies have incurred increased costs
as a result of long-term natural gas purchase contracts containing "take or
pay" provisions which require that they pay for natural gas even if natural
gas is not taken by them. There can be no assurance that a utility will be
able to pass on these increased costs to customers through increased rates.
Utilities incur substantial capital expenditures for plant and equipment. In
the future they will also incur increasing capital and operating expenses to
comply with environmental legislation such as the Clean Air Act of 1990, and
other energy, licensing and other laws and regulations relating to, among
other things, air emissions, the quality of drinking water, waste water
discharge, solid and hazardous substance handling and disposal, and siting and
licensing of facilities. Environmental legislation and regulations are
changing rapidly and are the subject of current public policy debate and
legislative proposals. It is increasingly likely that some or many utilities
will be subject to more stringent environmental standards in the future that
could result in significant capital expenditures. Future legislation and
regulation could include, among other things, regulation of so-called
electromagnetic fields associated with electric transmission and distribution
lines as well as emissions of carbon dioxide and other so-called greenhouse
gases associated with the burning of fossil fuels. Compliance with these
requirements may limit a utility's operations or require substantial
investments in new equipment and, as a result, may adversely affect a
utility's results of operations.

The electric utility industry in general is subject to various external
factors including (a) the effects of inflation upon the costs of operation and
construction, (b) substantially increased capital outlays and longer
construction periods for larger and more complex new generating units, (c)
uncertainties in predicting future load requirements, (d) increased financing
requirements coupled with limited availability of capital, (e) exposure to
cancellation and penalty charges on new generating units under construction,
(f) problems of cost and availability of fuel, (g) compliance with rapidly
changing and complex environmental, safety and licensing requirements, (h)
litigation and proposed legislation designed to delay or prevent construction
of generating and other facilities, (i) the uncertain effects of conservation
on the use of electric energy, (j) uncertainties associated with the
development of a national energy policy, (k) regulatory, political and
consumer resistance to rate increases and (l) increased competition as a
result of the availability of other energy sources. These factors may delay
the construction and increase the cost of new facilities, limit the use of, or
necessitate costly modifications to, existing facilities, impair the access of
electric utilities to credit markets, or substantially increase the cost of
credit for electric generating facilities. In addition, there are various
proposals for a new energy tax before Congress. The Sponsors cannot predict
at this time the ultimate effect of such factors on the ability of any issuers
to meet their obligations with respect to Debt Obligations.

The National Energy Policy Act ("NEPA"), which became law in October, 1992,
makes it mandatory for a utility to permit non-utility generators of
electricity access to its transmission system for wholesale customers, thereby
increasing competition for electric utilities. NEPA also mandated demand-side
management policies to be considered by utilities. NEPA prohibits the Federal
Energy Regulatory Commission from mandating electric utilities to engage in
retail wheeling, which is competition among suppliers of electric generation
to provide electricity to retail customers (particularly industrial retail
customers) of a utility. However, under NEPA, a state can mandate retail
wheeling under certain conditions.

There is concern by the public, the scientific community, and the U.S.
Congress regarding environmental damage resulting from the use of fossil
fuels. Congressional support for the increased regulation of air, water, and
soil contaminants is building and there are a number of pending or recently
enacted legislative proposals which may affect the electric utility industry.
In particular, on November 15, 1990, legislation was signed into law that
substantially revises the Clean Air Act (the "1990 Amendments"). The 1990
Amendments seek to improve the ambient air quality throughout the United
States by the year 2000. A main feature of the 1990 Amendments is the
reduction of sulphur dioxide and nitrogen oxide emissions caused by electric
utility power plants, particularly those fueled by coal. Under the 1990
Amendments the U.S. Environmental Protection Agency ("EPA") must develop
limits for nitrogen oxide emissions by 1993. The sulphur dioxide reduction
will be achieved in two phases. Phase I addresses specific generating units
named in the 1990 Amendments. In Phase II the total U.S. emissions will be
capped at 8.9 million tons by the year 2000. The 1990 Amendments contain
provisions for allocating allowances to power plants based on historical or
calculated levels. An allowance is defined as the authorization to emit one
ton of sulphur dioxide.

The 1990 Amendments also provide for possible further regulation of toxic air
emissions from electric generating units pending the results of several
federal government studies to be conducted over the next three to four years
with respect to anticipated hazards to public health, available corrective
technologies, and mercury toxicity.

Electric utilities which own or operate nuclear power plants are exposed to
risks inherent in the nuclear industry. These risks include exposure to new
requirements resulting from extensive federal and state regulatory oversight,
public controversy, decommissioning costs, and spent fuel and radioactive
waste disposal issues. While nuclear power construction risks are no longer
of paramount concern, the emerging issue is radioactive waste disposal. In
addition, nuclear plants typically require substantial capital additions and
modifications throughout their operating lives to meet safety, environmental,
operational and regulatory requirements and to replace and upgrade various
plant systems. The high degree of regulatory monitoring and controls imposed
on nuclear plants could cause a plant to be out of service or on limited
service for long periods. When a nuclear facility owned by an investor-owned
utility or a state or local municipality is out of service or operating on a
limited service basis, the utility operator or its owners may be liable for
the recovery of replacement power costs. Risks of substantial liability also
arise from the operation of nuclear facilities and from the use, handling, and
possible radioactive emissions associated with nuclear fuel. Insurance may
not cover all types or amounts of loss which may be experienced in connection
with the ownership and operation of a nuclear plant and severe financial
consequences could result from a significant accident or occurrence. The
Nuclear Regulatory Commission (the "NRC") has promulgated regulations
mandating the establishment of funded reserves to assure financial capability
for the eventual decommissioning of licensed nuclear facilities. These funds
are to be accrued from revenues in amounts currently estimated to be
sufficient to pay for decommissioning costs.

Telecommunications. The Portfolio may contain obligations of companies
engaged in providing local, long-distance and cellular services, in the
manufacture of telecommunications products and in a wide range of other
activities including directory publishing, information systems and the
operation of voice, data and video telecommunications networks. Technological
innovations in fiber optics, cellular products and services, voice messaging,
call waiting and automatic dialing offer additional potential for significant
expansion. Advances like formation of a national cellular grid should also
contribute to the anticipated growth of this industry. The Fund may contain
obligations of the Regional Bell Holding Companies ("RBOCs") which were spun
off from AT&T in 1984 pursuant to approval of the U.S. District Court for the
District of Columbia (the "Court"), implementing a consent decree relating to
antitrust proceedings brought by the U.S. Department of Justice. The RBOCs
include: Ameritech Corporation, Bell Atlantic Corporation, BellSouth
Corporation, NYNEX Corporation, Pacific Telesis Group, Southwestern Bell
Corporation and U.S. West, Inc. These companies provide near monopoly local
and intrastate telephone service as well as cellular and other generally
unregulated services. The Fund may contain obligations of certain independent
telephone companies which are subject to regulation by the Federal
Communications Commissions (the "FCC") and state utility commissions but not
subject to the consent decree binding the RBOCs and AT&T or of certain
long-distance telecommunications carriers, certain telecommunications
equipment manufacturers or of U.S. companies which provide telecommunitions
services or equipment mainly outside the United States. International
communications facilities in the United States are also subject to the
jurisdiction of the FCC, and the provision of service to foreign countries is
subject to the approval of the FCC and the appropriate foreign governmental
agencies.

In accordance with the consent decree, the RBOCs provide local telephone
service, including exchange access for long-distance companies, and may
provide directory advertising and new customer equipment. Many of the RBOCs,
pursuant to waivers, may also engage in a broad range of businesses including
foreign consulting, servicing computers and marketing or leasing office
equipment. AT&T provides interexchange long distance telephone service in
competition with numerous other providers and certain other products, services
and customer equipment.

The Court's order approving the consent decree provided for periodic reviews
of the restrictions imposed by it. In April 1990, a Federal appeals court
directed the Court to review its ruling that restricts RBOC involvement in the
information services business and to determine whether removal of the
information services restriction would be in the public interest. On July 25,
1991, the Court lifted the information services ban. Other portions of the
consent decree are being litigated. As RBOCs are released from the
restrictions of the 1984 divestiture decree, they and other telephone
companies are being freed to create new products, services and businesses.
For example, a federal district court recently permitted Bell Atlantic to enter
the cable business and it has recently proposed a merger with
Tele-Communications, Inc., a large cable corporation. Bills have been
introduced in the U.S. House of Representatives and the Senate that would
require the RBOCs to pass a competitive market test that would block them from
offering information services in the near future.

The independent telephone companies, like the RBOCs, provide local
telecommunications services, but operate in a more limited area. These
companies are not subject to the consent decree and therefore can provide the
full range of telecommunications services including local exchange services,
the installation of business systems, telephone consulting, the manufacture of
telecommunications equipment, operation of voice and data networks and
directory publishing. Cellular service is providing an increasing component
of the revenues of the RBOCs and independent telephone companies. Both the
RBOCs and independents are subject to regulation by the FCC and state
regulatory authorities. The FCC also has the power to regulate the types of
telecommunications equipment which may be used and therefore may affect the
business of companies in the manufacturing of telecommunications equipment.
Long-distance companies which provide long-distance telecommunications
services are subject to regulation by the FCC. The long-distance industry is
consolidating into larger carriers.

Certain telecommunications services have in the past been fairly resistant to
recession with the exception of long-distance carriers. During the recession
of 1982-83, growth in access lines simply slowed down for the independent
telephone companies and only one of the predecessor Bell operating companies
experienced such a downturn. The Sponsors believe that companies in the
telephone business may remain resistant to recession the next few years and
may experience some growth in access lines and message units. Cellular
telephone service should continue to expand, although at lesser rates of
growth than in the recent past. Also, ongoing technological change may lead
to an increase in the development of new services such as voice messaging,
call screening and automatic dialing and the demand for business services such
as the use of fax machines and the movement of data information should
continue to grow. Of course, there can be no assurance that dividends on the
Stocks in the Fund will be increased or maintained.

Business conditions in the telecommunications industry may affect the
performance of the Fund. The FCC and certain state utility regulators have
introduced certain incentive plans such as price-cap regulation which apply to
certain portions of the business of certain local exchange carriers.
Price-cap regulation offers local exchange carriers an opportunity to share
in higher earnings provided they become more efficient. These new approaches
to regulation by the FCC and various state or other regulatory agencies result
in increased competition and could lead to greater risks as well as greater
rewards for operating telephone companies such as those in the Fund.
Technology has tended to offset the effects of inflation and is expected to
continue to do so. Under traditional regulation, continuing cost increases,
to the extent not offset by improved productivity and revenues from increased
volume of business, would result in a decreasing rate of return and a
continuing need for rate increases. Although allowance is generally made in
ratemaking proceedings for cost increases, delays may be experienced in
obtaining the necessary rate increases through these proceedings and there can
be no assurance that these regulatory commissions in the future will grant
rate increases adequate to cover operating and other expenses and debt service
requirements. The long-distance industry has been increasingly opened to
competition over the last number of years. As a result, the major
long-distance companies compete actively for market share. Indeed, to meet
increasing competition, telecommunications companies will have to commit
substantial capital, technological and marketing resources.

Cellular and cable companies provide wireless services including paging,
dispatch and cellular services throughout the U.S. Most of the RBOCs, as well
as long distance companies, are seeking to increase their share of the
cellular market in view of perceived future growth prospects. It is unclear
what effect, if any, increased competition between wireless and traditional
services will have on the telecommunications industry. Other potential
competition for local service has also developed. The deregulated cellular
telephone industry has a limited operating history and there is significant
uncertainty regarding its future, particularly with regard to increased
competition, the continued growth in the number of customers, the usage and
pricing of cellular services, and the cost of providing cellular services,
including the cost of attracting new customers, developing new technology and
the ability to obtain licenses to provide cellular services. Recent industry
developments may provide increased competition and reduced revenues from
cellular service for RBOCs and independent telephone companies. The uncertain
outcomes of future labor agreements and employee and retiree benefit costs may
also have a negative impact on profitability. Telephone usage, and therefore
revenues, could also be adversely affected by any sustained economic
recession. Each of these problems would adversely affect the profitability of
the telecommunications issuers of the Securities, the value of the Securities
and the ability of the issuers of the Securities to meet their obligations.

Telecommunications equipment companies design, manufacture, and distribute
telecommunication equipment such as central office switching equipment,
switches, displays, mobile and cellular equipment and systems, network
transmission equipment, PBXs, satellite, microwave, antennas, and digital
communication networks. Growth of these companies may result from telephone
service industry expansion, modernization requirements and possible new
technology such as interactive television. As less developed countries
modernize their telecommunications infrastructure, the demand for these
products increases. This segment of the industry is subject to rapidly
changing technology and the risk of technological obsolescence. This sector
of the industry is generally not subject to regulation as other
telecommunications issuers are.

In addition, the portfolio may contain securities issued by telephone
companies which provide telecommunications services or equipment outside the
United States; these companies are subject to regulation by foreign
governments or governmental authorities which have broad authority regulating
the provision of telecommunications services and the use of certain
telecommunication equipment. Consequently, certain Securities in the Fund may
be affected by the rules and regulations adopted by regulatory agencies in
other countries from time to time as well as United States dollar foreign
exchange rates for the relevant currencies. Also, investment risks will
include future political and economic development, the establishment of
exchange controls or other governmental restrictions that might adversely
affect the payment or receipt of payment of dividend on, or the value of, the
relevant securities.

Banks and Other Financial Institutions

Banks are subject to extensive governmental regulations which may limit both
the amounts and types of loans and other financial commitments which may be
made and interest rates and fees which may be charged. The profitability of
financial institutions is largely dependent upon the availability and cost of
funds for the purpose of financing lending operations under prevailing money
market conditions. General depositor worries over perceived risks at many
banks may keep funding costs unusually high. Also, general economic
conditions play an important part in the operations of this industry and
exposure to credit losses arising from possible financial difficulties of
borrowers might affect an institution's ability to meet its obligations.

In the late 1980s and early 1990s, the credit ratings of U.S. banks and bank
holding companies were subject to extensive downgrades due primarily to
deterioration in asset quality and the attendant impact on earnings and
capital adequacy. Major U.S. banks, in particular, suffered from a decline
in asset quality in the area of construction and commercial real-estate loans.
These problem loans have been largely addressed. The FDIC indicated that in
1990 168 federally insured banks with an aggregate total of $45.7 billion in
assets failed, in 1991 124 federally insured banks with an aggregate total of
$64.3 billion in assets failed. During 1992, the FDIC resolved 120 failed
banks with combined assets of $44.2 billion. In 1993, a total of 41 banks
with combined assets of $3.5 billion were closed., The 1993 total was the
lowest level in twelve years. Bank holding companies and other financial
institutions may not be as highly regulated as banks, and may be more able to
expand into other non-financial and non-traditional businesses. During the
early 1990s, the credit ratings of many foreign banks have also been subject
to significant downgrades due to a deterioration in asset quality which has
negatively impacted earnings and capital adequacy. The decline in asset
quality of major foreign banks has been brought about largely by recessionary
conditions in their local economies.

Recent legislation, including the Resolution Trust Corporation Refinancing,
Restructuring and Improvement Act of 1991, FIRREA and FDICIA imposed many new
limitations on the way in which banks, savings banks, and thrifts may conduct
their business and mandated early and aggressive regulatory intervention for
unhealthy institutions. Periodic efforts by recent Administrations to
introduce legislation broadening the ability of banks and thrifts to compete
with new products have not been successful, but if enacted could lead to more
failures as a result of increased competition and added risks. Failure to
enact such legislation, on the other hand, may lead to declining earnings and
an inability to compete with unregulated financial institutions. Efforts to
expand the ability of federal thrifts to branch on an interstate basis have
been initially successful through promulgation of regulations. The Securities
and Exchange Commission ("SEC") is attempting to require the expanded use of
market value accounting by banks and thrifts, and has imposed rules requiring
market accounting for investment securities held for sale. Adoption of
additional such rules may result in increased volatility in the reported
health of the industry, and mandated regulatory intervention to correct such
problems.

Hospitals and Health Care Facilities

The ability of hospitals and other health care facilities to meet their
obligations with respect to revenue bonds issued on their behalf is dependent
on various factors, including the level of payments received from private
third-party payors and government programs and the cost of providing health
care services.

A significant portion of the revenues of hospitals and other health care
facilities is derived from private third-party payors and government programs,
including the Medicare and Medicaid programs. Both private third-party payors
and government programs have undertaken cost containment measures designed to
limit payments made to health care facilities. Furthermore, government
programs are subject to statutory and regulatory changes, retroactive rate
adjustments, administrative rulings and government funding restrictions, all
of which may materially decrease the rate of program payments for health care
facilities. There can be no assurance that payments under governmental
programs will remain at levels comparable to present levels or will, in the
future, be sufficient to cover the costs allocable to patients participating
in such programs. In addition, there can be no assurance that a particular
hospital or other health care facility will continue to meet the requirements
for participation in such programs.

The costs of providing health care services are subject to increase as a
result of, among other factors, changes in medical technology and increased
labor costs. In addition, health care facility construction and operation is
subject to federal, state and local regulation relating to the adequacy of
medical care, equipment, personnel, operating policies and procedures,
rate-setting, and compliance with building codes and environmental laws.
Facilities are subject to periodic inspection by governmental and other
authorities to assure continued compliance with the various standards
necessary for licensing and accreditation. These regulatory requirements are
subject to change and, to comply, it may be necessary for a hospital or other
health care facility to incur substantial capital expenditures or increased
operating expenses to effect changes in its facilities, equipment, personnel
and services.

Hospitals and other health care facilities are subject to claims and legal
actions by patients and others in the ordinary course of business. Although
these claims are generally covered by insurance, there can be no assurance
that a claim will not exceed the insurance coverage of a health care facility
or that insurance coverage will be available to a facility. In addition, a
substantial increase in the cost of insurance could adversely affect the
results of operations of a hospital or other health care facility. The
Clinton Administration may impose regulations which could limit price
increases for hospitals, the level of reimbursements for third-party payors or
other measures to reduce health care costs and make health care available to
more individuals, which would reduce profits for hospitals. Some states, such
as New Jersey, have significantly changed their reimbursement systems. If a
hospital cannot adjust to the new system by reducing expenses or raising
rates, financial difficulties may arise. Also, Blue Cross has denied
reimbursement for some hospitals for services other than emergency room
services. The lost volume would reduce revenue unless replacement patients
were found.

Certain hospital bonds may provide for redemption at par at any time upon the
sale by the issuer of the hospital facilities to a non-affiliated entity, if
the hospital becomes subject to ad valorem taxation, or in various other
circumstances. For example, certain hospitals may have the right to call
bonds at par if the hospital may be legally required because of the bonds to
perform procedures against specified religious principles or to disclose
information that it considers confidential or privileged. Certain FHA-insured
bonds may provide that all or a portion of those bonds, otherwise callable at
a premium, can be called at par in certain circumstances. If a hospital
defaults upon a bond obligation, the realization of Medicare and Medicaid
receivables may be uncertain and, if the bond obligation is secured by the
hospital facilities, legal restrictions on the ability to foreclose upon the
facilities and the limited alternative uses to which a hospital can be put may
severely reduce its collateral value.

The Internal Revenue service is currently engaged in a program of intensive
audits of certain tax-exempt hospital and health care facility organizations.
Although these audits have not yet been completed, it has been reported that
the tax-exempt status of some of these organizations will be revoked. At this
time, it is uncertain whether any of the hospital and health care facility
obligations held by the Fund will be affected by such audit proceedings.

Retailing Companies

The profitability of companies engaged in the retailing industry will be
affected by various factors including the general state of the economy and
consumer spending trends. There have been major changes in the retail
environment in recent years due to the declaration of bankruptcy by some of
the major corporations involved in the retail industry, and the department
store segment in particular. The continued viability of the retail industry
will depend on the industry's ability to adapt and to compete in changing
economic and social conditions, to attract and retain capable management, and
to finance expansion. Continued weakness in the banking and real estate
industry, the current recessionary economic climate with the consequent
slowdown in employment growth, less favorable trends in unemployment and a
marked deceleration in real disposable personal income growth has resulted in
significant pressure on both consumer wealth and consumer confidence. In
addition, competitiveness of the retail industry will require large capital
outlays for investment in the installation of automated checkout equipment to
control inventory, to track the sale of individual items and to gauge the
success of sales campaigns. Increasing employee and retiree benefit costs may
also have an adverse effect on the industry.

Consumer Products Companies

Investment in securities issued by consumer products companies should be made
with an understanding of the many factors which may have an adverse impact on
the credit quality of the particular company or industry. These include
cyclicality of revenues and earnings, changing consumer demands, regulatory
restrictions, products liability litigation and other litigation resulting
from accidents, extensive competition (including that of low-cost foreign
companies), unfunded pension fund liabilities and employee and retiree benefit
costs and financial deterioration resulting from leveraged buy-outs, takeovers
or acquisitions. In general, expenditures on consumer products will be
affected by the economic health of consumers. A continuing weak economy with
its consequent effect on consumer spending would have an adverse effect on the
industry. Other factors of particular relevance to the profitability of the
industry are the effects of increasing environmental regulation on packaging
and on waste disposal, the continuing need to conform with foreign regulations
governing packaging and the environment, the outcome of trade negotiations and
their effect on foreign subsidies and tariffs, foreign exchange rates, the
price of oil and its effect on energy costs, inventory cutbacks by retailers,
transportation and distribution costs, health concerns relating to the
consumption of certain products, the effect of demographics on consumer
demand, the availability and cost of raw materials and the ongoing need to
develop new products and to improve productivity.

Real Estate Companies

Investment in securities issued by real estate companies should be made with
an understanding of the many factors which may have an adverse impact on the
credit quality of the particular company or industry. These include economic
recession, competitive overbuilding, unusually adverse weather conditions,
changing demographics, changes in government regulations (including tax laws
and environmental, building zoning and sales regulation by various federal,
state and local authorities), increases in real estate taxes or costs of
material and labor, the inability to secure performance guarantees as required
and the unavailability of construction financing or mortgage loans at rates
acceptable to builders and home buyers.

In particular, commercial real estate was especially hard hit by the crisis in
the savings and loan industry. The collapse of hundreds of lending
institutions has removed many of the most aggressive lenders and investors,
and most of the remaining institutions have become wary of new real estate
loans. Furthermore, FIRREA places restrictions on developers through limiting
the amount of acquisition, development and construction lending by financial
institutions. This restriction in credit to the real estate industry is
reducing asset prices and further restricting demand for new construction. At
present, vacancy rates for apartments and commercial buildings remain high,
which also depresses the demand for new construction. According to the U.S.
Department of Commerce, growth in white collar employment is likely to slow
over the next several years, due to demographic reasons and this factor will
tend to keep office vacancy rates high. In addition, The Fair Housing Act of
1988, which requires a certain portion of apartments in newly constructed
buildings be made accessible to the handicapped, is expected to increase costs
and reduce overall profit margins for these projects. According to the U.S.
Department of Commerce, the commercial real estate slump is likely to persist
for several years.

Manufacturing Companies

Growth in the manufacturing industry is closely linked to expansion in the
domestic and global economies. The ongoing global recession with its
consequent effect on industrial growth, employment and consumer spending in
addition to any increase in oil prices or in interest rates may lead to a
decrease in demand for the products of companies engaged in manufacturing
industrial and automotive products. Also, since the federal government and
many state, local and foreign governments now have a budget deficit, financial
expenditures by these entities on capital improvements may be extremely
limited. The lack of funds allocated by public entities to capital
improvement projects may adversely affect manufacturers engaged in the
production of industrial materials used for capital improvements or for the
upgrade of the infrastructure. Indeed, government contracts with certain
issuers may contain unfavorable provisions, including provisions allowing the
government to terminate these contracts without prior notice, or to audit and
redetermine amounts payable to the issuer pursuant to these contracts or to
require the issuer to pay for cost overruns. Additionally, legislation to
limit excess profits on government contracts is introduced in the United
States Congress from time to time. Cutbacks in defense spending by the
federal and foreign governments has adversely impacted many of the companies
engaged in the aerospace and arms/defense sectors of the manufacturing
industry.

Environmental and safety issues increasingly affect the manufacturing
industry. Issuers may experience decreases in profitability as legislative
mandates impose costs associated with compliance with environmental
regulations and manufacturing more environmentally sound and safer equipment.
Furthermore, the cost of product liability insurance and the inability of some
manufacturing companies to obtain this insurance may have an adverse impact on
the industry. Financial Accounting Standard Board regulations with regard to
accounting for, among other things, post retirement benefits may lead to
changes in accounting which could have significant negative effects on
reported earnings and reported long term liabilities and book value of some
manufacturing companies. The lack of demand for new home and office
construction will affect the demand for certain tools and industrial machinery
products. Inflation, slow growth in personal disposable income, tighter loan
qualification standards, higher downpayments, the lower rate of job creation,
increased cost of vehicle ownership and operation and oil prices will also
affect companies engaged in manufacturing, particularly in the automotive
industry. Shortages of skilled labor, particularly in the machine tools
industry, may become a major problem in the future.

The long-term outlook is largely dependent upon the growth and competitiveness
of the U.S. manufacturing base. Increased consolidation and merger activity
increases competitiveness in general but individual companies may experience
severe financial problems due to this increased competitiveness. Strong
competition from foreign nations, particularly Latin American and Pacific Rim
countries which have lower labor costs, will severely impact the profitability
of the U.S. manufacturing business. The continuing establishment of
manufacturing and sales facilities abroad to take advantage of international
marketing operations is crucial and the success of these foreign operations
could be affected by a strengthening of the dollar which could lead to a
decrease in demand for U.S. products, the outcome of trade negotiations which
will affect foreign tariffs on U.S. exports abroad and U.S. taxes on foreign
imports to the U.S. and the ability to provide attractive financing packages
to customers in the current tight credit market.

U.S. manufacturers may also experience increased outlays of capital in their
efforts to manufacture products which comply with foreign standards for
certain manufacturing products. Also, since contracts may often be concluded
with entities or governments of unstable foreign nations in, for example,
Eastern Europe, South America or the Middle East, completion of and payment
for certain products and services will be subject to the risks associated with
political instability such as the risk of insurrection, hostilities from the
local population, government policies against businesses owned by
non-nationals and the possibility of expropriation. Certain of these nations
may not honor obligations under contracts when payments are due. Furthermore,
it may be more difficult to enforce a judgment against a foreign contracting
party.

Natural Resource Companies

Investment in securities issued by companies primarily engaged in the
extraction or sale of natural resources should be made with an understanding
of the many factors which may have an adverse impact on the credit quality of
the particular company or industry. These include declining prices for
natural resource products, over-supply, regulation throughout the world of
production (including price control regulation in the United States by state
and federal agencies), federal, state and local environmental laws and
regulations, extensive competition for reserve acquisitions and exploration
leases, licenses and concessions, litigation resulting from accidents or
environmentally-caused illnesses and unavailability of exploration financing.

In particular, the impact of increasing environmental regulation with
legislation such as the Clean Air Act and the Resource Conservation and
Recovery Act, among others, in addition to the increasing pressure to withdraw
land from the mining and forestry industries due to environmental and
conservation concerns may adversely affect companies engaged in the natural
resource industries. Other issues which affect these industries are the
possibility of labor stoppages through strikes, the impact of regulation of
worker conditions by the Occupational Safety and Health Administration, the
imposition of taxes on the extraction of certain materials, fluctuations in
the price of oil, the cost of raw materials, the slump in the construction
industry and the consequent decrease in the demand for wood products,
intellectual property disputes, the time lapse between exploration and the
commencement of mining which may discourage continued investment in
exploration in the future, international competition, foreign exchange rates
and the outcome of trade negotiations.

Foreign Obligors

On the basis of the best information available to the Sponsors, except as
indicated in Part A, under existing law there are no withholding taxes
applicable to any foreign Debt Obligations in the Portfolio. Issues of
foreign obligors may involve investment risks that are different from those of
domestic issues, including fluctuations in the value of the U.S. dollar and
foreign currencies, future political and economic developments and the
possible imposition of withholding taxes on interest income payable on the
Debt Obligations and the possible imposition of exchange controls or other
foreign governmental restrictions (including expropriation, burdensome or
confiscatory taxation and moratoriums) which might adversely affect the
payment or receipt of payment of amounts due on the Debt Obligations. In
addition, it may be more difficult to obtain and enforce a judgment against a
foreign obligor, there may be less publicly available information about a
foreign obligor than about domestic issuers, foreign obligors generally
operate in different regulatory environments than comparable domestic issuers
and foreign obligors are not generally subject to uniform accounting, auditing
and financial reporting standards, practices and requirements comparable to
those applicable to domestic issuers.

Payment of the Securities and Life of the Fund

Because certain of the Debt Obligations from time to time may be redeemed or
prepaid or will mature in accordance with their terms or may be sold under
certain circumstances described herein, no assurance can be given that the
Fund will retain for any length of time its present size and composition.
Many of the Debt Obligations may be subject to redemption prior to their
stated maturity dates pursuant to optional refunding or sinking fund
redemption provisions or otherwise. Issues of preferred stock generally
provide that the preferred stock may be liquidated, either by a partial
scheduled redemption pursuant to a sinking fund or by a refunding redemption
pursuant to which, at the option of the issuer, all or part of the issue can be
retired from any available funds, at prices which may or may not include a
premium over the involuntary liquidation preference, which is the same as the
par or stated value of the Preferred Stocks except as referred to under
Investment Summary in Part A. In general, optional refunding redemption
provisions are more likely to be exercised when the Securities are valued at a
premium over par or stated value than when they are valued at a discount from
par or stated value. Generally, the value of the Securities will be at a
premium over par when market interest rates fall below the coupon rate. The
percentage of the face amount, or par or stated value, of Securities in the
Portfolio which were valued on the Evaluation Date in excess of par is set
forth under Investment Summary in Part A.

Certain Debt Obligations in the Portfolio may be currently subject to sinking
fund provisions. These provisions are designed to redeem a significant
portion of an issue gradually over the life of the issue; obligations to be
redeemed are generally chosen by lot. In addition, certain issues of mortgage
bonds require that the issuer make either scheduled additions to the property
securing the bonds or deposit cash into a replacement, maintenance or similar
fund. Under certain circumstances the deposited cash may be used to redeem
bonds at prices lower than those permissible for optional redemptions.
Additionally, the size and composition of the Fund will be affected by the
level of redemptions of Units that may occur from time to time and the
consequent sale of Securities (see Redemption). Principally, this will depend
upon the number of Holders seeking to sell or redeem their Units and whether
or not the Sponsors continue to reoffer Units acquired by them in the
secondary market. Factors that the Sponsors will consider in the future in
determining to cease offering Units acquired in the secondary market include,
among other things, the diversity of the portfolio remaining at that time, the
number of units of all series of funds which they hold in their inventories,
the saleability of the units and their estimate of the time required to sell
the units and general market conditions, the size of the Fund relative to its
original size, the ratio of Fund expenses to income, the Fund's current return
and the degree to which Units may be selling at a premium over par, and the
cost of maintaining a current prospectus for the Fund. These factors may also
lead the Sponsors to seek to terminate the Fund earlier than would otherwise
be the case (see Administration of the Fund--Amendment and Termination).

First GNMA Series. Monthly payments and prepayments of principal are made to
the Fund in respect of the mortgages underlying the Ginnie Maes (see Income;
Estimated Current Return; Estimated Long Term Return below). All of the
mortgages in the pools relating to the Ginnie Maes are subject to prepayment
without any significant premium or penalty at the option of the mortgagors
(i.e. the homeowners). While the mortgages on 1-to 4-family dwellings
underlying the Ginnie Maes are amortized over a period of up to 30 years, it
has been the experience of the mortgage industry that the average life of
comparable mortgages, owing to prepayments, is much less. Pricing of GNMA
Securities has been based upon yield assumptions grounded in this historical
experience of the FHA relating to 26-30 year mortgages on 1-to 4-family
dwellings at various interest rates (which, in general, have been lower than
the rates of the Ginnie Maes in the Portfolios.) Yield tables for Ginnie Maes
utilize a 12-year average life assumption for Ginnie Mae pools of 30 year
mortgages on 1-to 4-family dwellings. This assumption was derived from the
FHA experience relating to prepayments on such mortgages during the period
from the mid 1950's to the mid 1970's. This 12 year average life assumption
was calculated in respect of a period during which mortgage lending rates were
fairly stable. That assumption is probably no longer an accurate measure of
the average life of Ginnie Maes or their underlying single family mortgage
pools. While the mortgages on 1-to 4-family dwellings underlying the FHLMC
Certificates are amortized over a period of up to 15 years, the average life
of comparable mortgages, owing to prepayments, is much less. Freddie Mac's
current estimate of the weighted average life of 30-year conventional
mortgages is approximately 8.5 years. The weighted average life of 15-year
conventional mortgages is approximately 6 years. Pricing of FHLMC
Certificates has been based upon yield assumptions based on this estimate.
The principal repayment behavior of any individual mortgage will likely vary
from this estimate. The extent of this variation will depend on a variety of
factors, including the relationship between the coupon rate on a mortgage and
prevailing mortgage origination rates. As prevailing mortgage origination
rates increase in relationship to a mortgage coupon rate, the likelihood of
prepayment of that mortgage decreases. Conversely, during periods in which
prevailing mortgage origination rates are significantly less than a mortgage
coupon rate, prepayment of that mortgage becomes increasingly likely. Freddie
Mac revises its weighted average life estimate from time to time to better
reflect both actual and projected payment experience. The bases for the
calculation of the estimated average life and the relationship of this
calculation to Estimated Long Term Return are more fully described below under
Description of the Fund-- Income; Estimated Current Return; Long Term Return.

While the industry estimates that Freddie Mac PCs and Ginnie Maes will prepay
as described herein, it is not possible to predict meaningfully prepayment
levels on those Securities in the Fund. Today, research analysts use complex
formulae to scrutinize the prepayments of mortgage pools in an attempt to
predict more accurately the average life of these mortgage backed securities.

Generally speaking, a number of factors, including mortgage market interest
rates and homeowners mobility, will affect the average life of these
Securities. Changes in prepayment patterns, as reported by the agencies on a
periodic basis, if generally applicable to the mortgage pools related to
specific mortgage-backed securities, could influence yield assumptions used in
pricing the securities. Shifts in prepayment patterns are influenced by
changes in housing cycles and mortgage refinancing and are also subject to
certain limitations on the gathering of the data; it is impossible to predict
how new statistics will affect the yield assumptions that determine mortgage
industry norms and pricing of mortgagebacked securities. Moreover, there is
no assurance that the pools of mortgage loans relating to the Securities in
the Fund will conform to prepayment experience as reported by the agencies on
a periodic basis, or the prepayment experience of other mortgage lenders.

While the value of these mortgage backed securities generally fluctuates
inversely with changes in interest rates, it should also be noted that their
potential for appreciation, which could otherwise be expected to result from a
decline in interest rates, may tend to be limited by any increased prepayments
by mortgagors as interest rates decline. Accordingly, the termination of the
Fund might be accelerated as a result of prepayments made as described above.
It is also possible that, in the absence of a secondary market for the Units
or otherwise, redemptions of Units may occur in sufficient numbers to reduce
the Portfolio to a size resulting in such termination (termination for this
reason would be delayed if additional Units are issued). Early termination of
the Fund or early payments of principal may have important consequences to the
Holders. To the extent that Units were purchased with a view to an investment
of longer duration, the overall investment program of the investor may require
readjustment or the overall return on investment may be less or greater than
anticipated, depending in part on whether the purchase price paid for Units
represented the payment of an overall premium or a discount, respectively,
above or below the stated principal amounts of the underlying mortgages. In
this connection, attention is directed to The GNMA Fund Investment
Accumulation Program and the Reinvestment Plan described below under
Administration of the Fund, which afford to Holders the opportunity to
automatically reinvest distributions of principal resulting from prepayments
and termination as described above (as well as regular payments of interest
and distributions of principal received upon maturity).

Cash or Accretion Bond Series and Select Series. Periodic payments of
principal and interest on the Ginnie Maes, Fannie Maes or Freddie Macs which
back the Compound Interest Bonds in the Portfolio will be made to the
respective Bond Trustees subsequent to the Payment Commencement Dates of the
respective Compound Interest Bonds. In addition, prepayments of principal on
the Ginnie Maes, Fannie Maes or Freddie Macs will be made to the Bond Trustees
and the Ginnie Maes, Fannie Maes or Freddie Macs may be prepaid in their
entirety prior to their stated maturity. All or a portion of the principal
and interest payments and prepayments received on Ginnie Maes, Fannie Maes or
Freddie Macs included in the collateral for the Bonds deposited in the Fund
will be used to make principal and interest payments on the bonds of the issuer
(other than the Compound Interest Bonds) until the bonds are paid in full.
Thereafter, principal and interest payments will be used to pay principal and
interest on the Compound Interest Bonds. Payments of principal will first be
allocated to the holders of any bonds of the issuer which have the earliest
stated maturity. When these bonds have been fully paid, principal payments
will next be allocated to the holders of the remaining bonds of the issuer in
the order of their respective stated maturities. Bonds may also be redeemed
or sold under certain circumstances (See Redemption; Administration of the
Fund--Portfolio Supervision). Because the principal on the Ginnie Maes,
Fannie Maes or Freddie Macs and the proceeds of any sales of Bonds received by
the Fund (less certain amounts deducted by the Fund Trustee) may be
distributed to Holders after an initial period or paid out upon redemptions,
the aggregate principal amount of the Compound Interest Bonds in the
Portfolio, and accordingly the principal amount of Compound Interest Bonds
underlying each Unit, will decrease over time. (For a description of Ginnie
Maes, see above under Risk Factors--First GNMA Series; for a description of
Fannie Maes and Freddie Macs see above under Risk Factors--Cash or Accretion
Bond Series and Select Series.)

As noted above, all of the mortgages in the pools relating to the Ginnie Maes,
Fannie Maes or Freddie Macs are subject to prepayment without any significant
premium or penalty at the option of the mortgagors (i.e., the homeowners).
While the mortgages on the single-family dwellings underlying the Ginnie Maes
and the 1 to 4 family dwellings underlying the Fannie Maes and Freddie Macs
which back the Compound Interest Bonds have a stated maturity of up to 30
years, it has been the experience of the mortgage industry that the average
life of comparable mortgages, owing to prepayments, is considerably less.
Prepayments on mortgages are commonly measured relative to a prepayment
standard or model (a "Prepayment Model"), which represents an assumed rate of
prepayment each month relative to the then outstanding principal balance of a
pool of new mortgage loans. 100% of the Prepayment Model assumes prepayment
rates of 0.2% per annum of the then outstanding principal balance of such
mortgage loans in the first month of the life of the mortgage loans and an
additional 0.2% per annum in each month thereafter until the 30th month.
Beginning in the 30th month and in each month thereafter during the life of
the mortgage loans, 100% of the Prepayment Model assumes a constant prepayment
rate of 6% per annum. The principal repayment behavior of any individual
mortgage will likely vary from these assumptions. The extent of this variation
will depend on a variety of factors, including the relationship between the
coupon rate on a mortgage and prevailing mortgage origination rates. As
prevailing mortgage origination rates increase in relationship to a mortgage
coupon rate, the likelihood of prepayment of that mortgage decreases.
Conversely, during periods in which prevailing mortgage origination rates are
significantly less than a mortgage coupon rate, prepayment of that mortgage
becomes increasingly likely.

By creating separate "fast pay/slow pay" classes of debt obligations, the
issuers are able to create a class of Compound Interest Bonds for which the
"weighted average life" may exceed the average life of a typical mortgage. A
number of factors, including mortgage market interest rates and homeowners"
mobility, will affect the average life of the Ginnie Maes, Fannie Maes or
Freddie Macs which back the Compound Interest Bonds in the Portfolio and,
accordingly, there can be no assurance that the prepayment levels which will
be actually realized will conform to the Prepayment Model. While the value of
Ginnie Maes, Fannie Maes or Freddie Macs fluctuates inversely with changes in
interest rates, it should also be noted that the potential for appreciation on
Ginnie Maes, Fannie Maes or Freddie Macs, which could otherwise be expected to
result from a decline in interest rates, may tend to be limited by any
increased prepayments by mortgagors as interest rates decline. Accordingly,
the termination of the Fund might be accelerated as a result of prepayments
made as described above. In addition, it is possible that, in the absence of
a secondary market for the Units or otherwise, redemptions of Units may occur
in sufficient numbers to reduce the Portfolio to a size resulting in the
termination of the Fund (termination for this reason would be delayed if
additional Units are issued). Early termination of the Fund may have
important consequences to the Holders, e.g., to the extent that Units were
purchased with a view to an investment of longer duration, the overall
investment program of the investor may require readjustment, or the overall
return on investment may be less or greater than anticipated, depending in
part on whether the purchase price paid for Units represented the payment of
an overall premium or a discount, respectively, above or below the stated
principal amounts of the underlying mortgages.

The following table, based on a standard prepayment model, illustrates the
prepayment pattern of a typical Compound Interest Bond and, by comparison, the
prepayment pattern of the "fast-pay" classes of the same issue. THIS TABLE IS
INCLUDED ONLY AS AN EXAMPLE AND DOES NOT REPRESENT THE ACTUAL COMPOUND
INTEREST BONDS IN THE FUND PORTFOLIO. NEITHER THE TABLE NOR ANY OTHER
PREPAYMENT MODEL OR ASSUMPTION PURPORTS TO BE EITHER AN HISTORICAL DESCRIPTION
OF THE PREPAYMENT EXPERIENCE OF ANY POOL OF MORTGAGES OR A PREDICTION OF THE
ANTICIPATED RATE OF PREPAYMENT ON THE COMPOUND INTEREST BONDS IN THE PORTFOLIO.

As used in the table, "0% of the Prepayment Model" assumes no prepayments;
"100% of the Prepayment Model" assumes prepayment rates equal to 100% of 100%
of the Prepayment Model; "175% of the Prepayment Model" assumes prepayment
rates equal to 175% of 100% of the Prepayment Model; and "250% of the
Prepayment Model" assumes prepayment rates equal to 250% of 100% of the
Prepayment Model. The percentage of the Prepayment Model used for a specific
Fund is set forth under Investment Summary in Part A.

Percent of Initial Principal Amount Outstanding
0% of the Prepayment Model 100% of the Prepayment Model

Compound Compound
Interest Interest
Date Class A Class B Class C ClassClass A Class BClass C Class

Initial Balance....... 100 100 100 100 100 100 100 100
August 20, 1989....... 76 100 100 132 45 100 100 132
August 20, 1990....... 67 100 100 145 20 100 100 145
August 20, 1991....... 57 100 100 160 0 97 100 160
August 20, 1992....... 46 100 100 176 0 73 100 176
August 20, 1995....... 7 100 100 233 0 5 100 233
August 20, 1998....... 0 52 100 310 0 0 57 310
August 20, 2000....... 0 6 100 374 0 0 29 374
August 20, 2001....... 0 0 85 411 0 0 18 411
August 20, 2003....... 0 0 68 497 0 0 3 497
August 20, 2004....... 0 0 60 546 0 0 0 455
August 20, 2008....... 0 0 20 797 0 0 0 61
August 20, 2009....... 0 0 8 876 0 0 0 0
August 20, 2013....... 0 0 0 39 0 0 0 0
August 20, 2014....... 0 0 0 0 0 0 0 0
Weighted Average Life (years)(1)
5.6 12.2 19.1 25.6 2.9 7.2 12.9 20.1

Percent of Initial Principal Amount Outstanding
175% of the Prepayment Model 250% of the Prepayment Model
Compound Compound
Interest Interest
Date Class A Class B Class C ClassClass A Class BClass C Class

Initial Balance....... 100 100 100 100 100 100 100 100
August 20, 1989....... 22 100 100 132 1 100 100 132
August 20, 1990....... 0 88 100 145 0 56 100 145
August 20, 1991....... 0 55 100 160 0 19 100 160
August 20, 1992....... 0 25 100 176 0 0 90 176
August 20, 1995....... 0 0 64 233 0 0 36 233
August 20, 1998....... 0 0 22 310 0 0 3 310
August 20, 2000....... 0 0 2 374 0 0 0 123
August 20, 2001....... 0 0 0 284 0 0 0 25
August 20, 2003....... 0 0 0 110 0 0 0 0
August 20, 2004....... 0 0 0 36 0 0 0 0
August 20, 2008....... 0 0 0 0 0 0 0 0
August 20, 2009....... 0 0 0 0 0 0 0 0
August 20, 2013....... 0 0 0 0 0 0 0 0
Weighted Average Life (years) (1)
2.3 5.4 10.3 16.3 2.0 4.4 8.6 13.9

DESCRIPTION OF THE FUND

The Portfolio

The Portfolio contains different issues of Debt Obligations with fixed final
maturity or disposition dates or of Preferred Stocks. In addition up to 10%
of the initial value of the Portfolio may have consisted of units ("Other Fund
Units") of previously-issued Series of The Corporate Income Fund ("Other
Funds") sponsored and underwritten by certain of the Sponsors and acquired by
the Sponsors in the secondary market. The Other Fund Units are not debt
obligations as such but represent interests in the securities, primarily
corporate debt obligations, in the portfolios of the Other Funds. The
Portfolio may also contain Securities which were acquired in private
placements or otherwise and which cannot, in the opinion of counsel designated
by the Sponsors and satisfactory to the Trustee, be sold publicly by the
Trustee without registration (or perfection of an exemption) under the
Securities Act of 1933, as amended, or similar provisions of law subsequently
enacted ("Restricted Securities"). See Investment Summary in Part A for a
summary of particular matters relating to the Portfolio.

In selecting Debt Obligations for deposit in the Fund, the Defined Asset Funds
research analysts considered the following factors, among others: (i) whether
the Debt Obligations were rated in the category A or better by at least one
nationally recognized rating agency--see Description of Ratings below) or, in
the opinion of Defined Asset Funds research analysts, on the Date of Deposit
had comparable credit characteristics; (ii) the yield and price of the Debt
Obligations relative to other comparable debt securities and the yield and
price of the Preferred Stocks relative to other comparable preferred stocks;
(iii) the diversification of the Portfolio as to various utility and
industrial classifications, taking into account the availability in the market
of issues which met the Fund's price criteria; and (iv) (for certain Funds
organized in 1984 and thereafter as grantor trusts) whether the Debt
Obligations were issued after July 18, 1984 if interest thereon is United
States source income. For First GNMA Series, selection criteria also included
the maturities of the available Ginnie Maes and the extent to which they were
trading at a premium over or at a discount from par. For Preferred Stock Put
Series the selection factors included: (a) the yield and price of the
Securities, relative to other comparable preferred stocks; and (b) the terms
and conditions of the purchase commitments of the Sellers with respect to the
Securities. For Cash or Accretion Bond Series and Select Series, selection
factors also included the payment provisions applicable to the Securities.
The restrictions applicable to the purchase of replacement Securities
summarized under Administration of the Fund-- Portfolio Supervision were also
considered.

The Portfolio may contain debt obligations rated BBB by Standard & Poor's and
Baa by Moody's, which are the lowest "investment grade" ratings assigned by
the two rating agencies, or debt obligations rated below investment grade.
Certain Funds contain bonds that have been downgraded to non-investment grade
since their deposit into the Fund. The Portfolio may also contain debt
obligations that have received investment grade ratings from one rating agency
but "junk bond" ratings from the other rating agency. In addition, the
Portfolio may contain debt obligations which are not rated by either agency
but have in the opinion of Defined Asset Funds research analysts, comparable
credit characteristics to debt obligations rated below investment grade.
Investors should therefore be aware that these debt obligations may have
speculative characteristics and that changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments on these debt obligations than is the case with higher
rated bonds. Moreover, conditions may develop with respect to any of the
issuers of debt obligations in the Portfolio which may cause the rating
agencies to lower their ratings below investment grade on a given security or
cause Defined Asset Funds research analysts to determine that the credit
characteristics of a given security are comparable to debt obligations rated
below investment grade. As a result of timing lags or a lack of current
information, there can be no assurance that the rating currently assigned to a
given debt obligation by either agency or the credit assessment of the Defined
Asset Funds research analysts actually reflects all current information about
the issuer of that debt obligation.

Subsequent to the Date of Deposit, a Debt Obligation may cease to be rated,
its rating may be reduced or the credit assessment of the Agent for the
Sponsors may change. Because of the fixed nature of the Portfolio, none of
these events require an elimination of that Debt Obligation from the
Portfolio, but the lowered rating or changed credit assessment may be
considered in the Sponsors' determination to direct the disposal of the Debt
Obligation (see Administration of the Fund-- Portfolio Supervision).

Because ratings may be lowered or the credit assessment of Defined Asset Funds
research analysts may change, an investment in Units of the Trust should be
made with an understanding of the risks of investing in "junk bonds" (bonds
rated below investment grade or unrated bonds having similar credit
characteristics), including increased risk of loss of principal and interest
on the underlying debt obligations and the risk that the value of the Units
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. Debt obligations which are rated below investment
grade or unrated debt obligations having similar credit characteristics are
often subject to greater market fluctuations and risk of loss of income and
principal than securities rated investment grade, and their value may decline
precipitously in response to rising interest rates. This effect is so not only
because increased interest rates generally lead to decreased values for
fixed-rate instruments, but also because increased interest rates may indicate
a slowdown in the economy generally, which could result in defaults by less
creditworthy issuers. Because investors generally perceive that there are
greater risks associated with lower-rated securities, the yields and prices
of these securities tend to fluctuate more than higher-rated securities with
changes in the perceived credit quality of their issuers, whether these
changes are short-term or structural, and during periods of economic
uncertainty.

Debt rated below investment grade or having similar credit characteristics
also tends to be more thinly traded than investment-grade debt and held
primarily by institutions, and this lack of liquidity can negatively affect
the value of the debt. Debt which is not rated investment grade or having
similar credit characteristics may be subordinated to other obligations of the
issuer. Senior debtholders would be entitled to receive payment in full
before subordinated debtholders receive any payment at all in the event of a
bankruptcy or reorganization. Lower rated debt obligations and debt
obligations having similar credit characteristics may also present
payment-expectation risks. For example, these bonds may contain call or
redemption provisions that would make it attractive for the issuers to redeem
them in periods of declining interest rates, and investors would therefore not
be able to take advantage of the higher yield offered.

The Investment Summary in Part A contains the number of bonds that are
non-investment grade and the percentage of the aggregate face amount of the
Portfolio representing any defaulted bonds. Lower-rated securities generally
involve greater risks of loss of income and principal than higher-rated
securities, and recent studies have indicated that the number of defaults by
issuers and the amount of debt in default have increased substantially in the
past few years. Issuers of lower-rated securities may possess less
creditworthy characteristics than issuers of higher-rated securities and,
especially in the case of issuers whose obligations or credit standing have
recently been downgraded, may be subject to claims by debtholders, suppliers,
owners of property leased to the issuer or others which, if sustained, would
make it more difficult for the issuers to meet their payment obligations.
Therefore, investors should consider carefully the relative risks associated
with investment in securities which carry lower ratings.

Debt Obligations that are rated lower than BBB or Baa and unrated bonds with
similar credit characteristics should be considered speculative as such
ratings indicate a quality of less than investment grade. In addition, the
limited market for these Debt Obligations may affect the price of the
particular Security to be sold for purposes of redemption and the amount
actually realized by the Fund upon a sale. Any sale may therefore result in a
loss to the Fund.

The value of the Units reflects the value of the portfolio Securities,
including the value (if any) of Securities in default. Should the issuer of
any Debt Obligation default in the payment of principal or interest, the Fund
may incur additional expenses seeking payment on the defaulted Debt
Obligation. Because amounts (if any) recovered by the Fund in payment under
the defaulted Debt Obligation may not be reflected in the value of the Units
until actually received by the Fund, and depending upon when a Holder
purchases or sells his Units, it is possible that a Holder would bear a
portion of the cost of recovery without receiving any portion of the payment
recovered. It is possible that new laws could be enacted which could hurt the
market for bonds which are not rated investment grade. For example, federally
regulated financial institutions could be required to divest their holdings of
these bonds, or proposals could be enacted which might limit the use, or tax
or other advantages, of these bonds.

The yields on Securities of the type deposited in the Fund are dependent on a
variety of factors, including general money market conditions, general
conditions of the corporate bond market, size of a particular offering, the
maturity of the obligation and rating or other credit assessment of the issue.
Accordingly, the yields of debt obligations deposited in the Fund will vary
with changes in these factors, including changes in ratings or other credit
assessments. The ratings represent the opinions of the rating organizations
as to the quality of the debt obligations that they undertake to rate.
Similarly, the credit assessments of the Agent for the Sponsors represent its
opinion as to the credit quality of the debt obligations that it assesses.
It should be emphasized, however, that ratings are general and are not
absolute standards of quality. Investors should be aware that ratings and
other credit assessments of debt securities evaluate the ability of the issuer
to pay interest and principal but do not evaluate the risk of decline in the
market value of the debt securities for other reasons. Consequently, debt
obligations with the same maturity, coupon and rating may have different
yields, while debt obligations of the same maturity and coupon with different
ratings may have the same yield.

The Agent for the Sponsors might have made arrangements with a number of
different issuers which create a framework within which debt obligations may
be acquired for deposit in various series of corporate Defined Funds on a
private placement basis. Under these arrangements the Agent for the Sponsors
may make bids to purchase debt obligations for deposit in a particular series
on the basis of a price and other terms determined for the particular bid. It
is not, however, obligated to make any bids to purchase debt obligations under
these arrangements and the issuers are not obligated to accept any bid which
the Agent for the Sponsors may choose to make.

The portfolios underlying any Other Fund Units (the units of no one Other Fund
represented more than 5%, and all Other Fund Units represented less than 10%,
of the aggregate offering side evaluation of the Portfolio on the Date of
Deposit) are substantially similar to that of the Fund. The percentage of the
Portfolio, if any, represented by Other Fund Units on the Evaluation Date is
set forth under Investment Summary in Part A. On their respective dates of
deposit, the underlying debt obligations in any Other Funds were rated BBB or
better by Standard & Poor's or Baa or better by Moody's. While certain of
those debt obligations may not currently meet these criteria, they did not
represent more than 0.5% of the face amount of the Portfolio on the Date of
Deposit. Debt obligations in each Other Fund which do not mature according to
their terms within 10 years after the Date of Deposit had an aggregate bid
side evaluation of at least 40% of the initial face amount of the Other Fund.
The investment objectives of the Other Funds are similar to the investment
objective of the Fund, and the Sponsors, Trustee and Evaluator of the Other
Funds have responsibilities and authority paralleling in most important
respects those described in this Prospectus and receive similar fees. The
names of any Other Funds represented in the Portfolio and the number of units
of each Other Fund in the Fund may be obtained without charge by writing to
the Trustee.

The Fund consists of the Securities listed under Portfolio in Part A
(including any additional or replacement Securities acquired and held by the
Fund pursuant to the terms of the Indenture) as long as they may continue to
be held in the Fund, together with accrued and undistributed interest thereon
and undistributed and uninvested cash realized from the disposition or
redemption of Securities (see Administration of the Fund-- Portfolio
Supervision). Cash or Accretion Bond Series and Select Series consist of the
principal amount of the Compound Interest Bonds, appreciating through
compounding of interest, and the principal amount of the interest-bearing
bonds, as they may continue to be held from time to time in the Fund together
with accrued and undistributed interest thereon and undistributed cash
representing payments and prepayments of principal and proceeds realized from
the disposition of Compound Interest Bonds. The Indenture for certain Funds
may authorize the Sponsors to increase the size and the number of Units of the
Fund by the deposit of Additional Securities and the issue of a corresponding
number of additional Units subsequent to the Initial Date of Deposit provided
that the original relationship among the face amounts of Securities of
specified issuers, interest rates, maturities and call provisions, if any, is
maintained. Also, Securities may be sold under certain circumstances (see
Redemption; Administration of the Fund-- Portfolio Supervision). As a result,
the aggregate face amount of the Securities in the Portfolio will vary over
time.

Subsequent to the initial Date of Deposit, if any Units are redeemed by the
Trustee the face amount of Securities in the Fund will be reduced by amounts
allocable to redeemed Units, and the fractional undivided interest represented
by each Unit in the balance will be increased. However, if additional Units
are issued by the Fund (through deposit of Securities by the Sponsor in
connection with the sale of additional Units or reinvestment), the aggregate
value of Securities in the Fund will be increased by amounts allocable to
additional Units, and the fractional undivided interest represented by each
Unit in the balance will be decreased. Units will remain outstanding until
redeemed upon tender to the Trustee by any Holder (which may include the
Sponsor) until the termination of the Indenture (see Redemption;
Administration of the Fund-- Amendment and Termination). Neither the Sponsors
nor the Trustee shall be liable in any way for any default, failure or defect
in any Security. In the event of a failure to deliver any Security that has
been purchased for the Fund under a contract, including any Security purchased
on a when, as and if issued basis, the Sponsors are authorized under the
Indenture to direct the Trustee to acquire other obligations to make up the
original Portfolio of the Fund. If substitute Securities are not acquired, the
Sponsors will, on or before the next following Distribution Day, cause to be
refunded the attributable sales charge, plus the attributable Cost of
Securities to Fund listed under Portfolio in Part A of the Prospectus, plus
interest attributable to the failed obligation. (See Administration of the
Fund-- Portfolio Supervision.)

Income; Estimated Current Return; Estimated Long-Term Return (Monthly Payment
Series, First GNMA
Series, Insured Series, and Intermediate-Term Series)

Generally. The estimated net annual interest rate per Unit on the Evaluation
Date is set forth under Investment Summary in Part A of the Prospectus. This
rate shows the percentage return based on the face amount per Unit after
deducting estimated annual fees and expenses expressed as a percentage.
Interest on the Securities in the Fund, less estimated fees of the Trustee and
(if applicable) Sponsors and certain other expenses, is expected to accrue at
the daily rate (based on a 360-day year) shown under Investment Summary in
Part A of the Prospectus. The rate will vary if any Securities default and as
Securities mature, are exchanged, redeemed, prepaid, paid or sold, or as the
expenses of the Fund change.

Estimated Current Return on a Unit represents annual cash receipts from
coupon-bearing debt obligations in the Portfolio (after estimated annual
expenses) divided by the maximum Public Offering Price (including the sales
charge). For investors interested primarily in cash flow, current return is a
readily ascertainable measure.

"Current return" provides different information than "yield" or "long-term
return". Under accepted bond practice, tax-exempt bonds are customarily
offered to investors on a "yield" basis, which involves a computation of yield
to maturity (or earlier call date), and which takes into account not only the
interest payable on the bonds but also the amortization or accretion to a
specified date of any premium over or discount from the par (maturity) value
in the bond's purchase price. Various formulas exist for calculating
long-term return on a portfolio of debt obligations. Different assumptions
regarding, among other things, reinvestment, term to maturity or call date,
application of sales charge and deduction for expenses, result in different
long-term return figures. Additionally, the resulting figure may be
overstated or understated depending on the manner in which a formula takes
into account delays in distributions of principal and interest on Units and
sales charges. For investors intending to hold Units until the final maturity
of the Fund, both current return and long-term return are relevant measures of
performance. For the investor who redeems Units earlier, both the current
return and the long-term return realized may be diminished, particularly on a
sale shortly after acquisition of those Units-- because the price received
will not reimburse the investor for the sales charge paid.

Generally, the long-term return of a Unit offered in the secondary market will
be lower, sometimes significantly, than its current return, primarily as a
result of changes in market rates of interest and any resulting decrease in
the terms to maturity of the Debt Obligations in the Portfolio, as well as the
likelihood that at least certain of the Debt Obligations will be valued at
market premiums. Furthermore, changes in the composition of the Portfolio,
defaults on interest payments, changes in market valuation as well as the
estimated fees and expenses payable by the Fund will cause current and
long-term returns, as well as the difference between them, to fluctuate.
Because debt obligations are more likely to be redeemed when valued at a
premium over par (generally, those debt obligations bearing the higher
coupons), the current return and long-term return realized by an investor may
be substantially lower than originally estimated.

In addition, for the First GNMA Series, in actual operation, payments
received in respect of the mortgages underlying the Ginnie Maes will consist
of a portion representing interest and a portion representing principal.
Although the aggregate monthly payment made by the obligor on each mortgage
remains constant (aside from optional prepayments of principal), in the early
years the larger proportion of each payment will represent interest, while in
later years, the proportion representing interest will decline and the
proportion representing principal will increase, although, of course, the
interest rate remains constant. Moreover, by reason of optional prepayments,
payments in the earlier years on the mortgages in the pools may be
substantially in excess of those required by the amortization schedules of
these mortgages; conversely, payments in later years may be substantially less
since the aggregate unpaid principal balances of the underlying mortgages may
have been greatly reduced-- ultimately even sufficiently reduced to accelerate
termination of a Fund. To the extent that those underlying mortgages, bearing
the higher interest rates represented in a Portfolio are prepaid faster than
the other underlying mortgages, the net annual interest rate per Unit and the
return on the Units can be expected to decline. Monthly payments to the Holder
will reflect all of the foregoing factors. If a Holder sells all or a portion
of his Units, he will receive his proportionate share of the accrued interest
from the purchaser of his Units. Similarly, if a Holder redeems all or a
portion of his Units, the Redemption Price per Unit will include accrued
interest on the Securities. And if a Security is sold, redeemed or otherwise
disposed of, accrued interest will be received by the Fund and will be
distributed periodically to Holders.

Income; Estimated Current Return; Estimated After-Tax Return (Preferred Stock
Put Series)

The estimated current return is computed by dividing the anticipated net
annual income per Unit by the Public Offering Price. The estimated net annual
income rate per Unit shows the percentage return based on the face amount or
par or stated value per Unit after deducting estimated annual fees and
expenses, including the cost of insurance, if any, expressed as a percentage.

The Estimated After-Tax Return assumes that Holders are taxed at the highest
current corporate tax rate and that all dividends on the Preferred Stocks
received by the Fund and distributed to Holders will be eligible for the
dividends-received deduction for corporations and is determined without regard
to any capital gains which may be recognized by such a Series and distributed
to Holders. Any such capital gains distributed to Holders will be taxed as a
dividend but will not be eligible for the dividends-received deduction. See
Taxes below. Net income will change as Securities are exchanged, redeemed,
paid or sold, as substitute Securities are purchased, and as the expenses of
the Fund change. The Public Offering Price will vary in accordance with
fluctuations in the prices of the underlying Securities. Any change in the
net income per Unit or the Public Offering Price will result in a change in
the current return and the after-tax return.

There is no assurance that all dividends will be paid in the future on the
Preferred Stocks in the Portfolio. Therefore there is no assurance that the
estimated annual income or income rate set forth under Investment Summary in
Part A of the Prospectus will be realized in the future.

Because dividends on the Securities in the Fund are paid at varying intervals,
usually quarterly, any monthly income distribution may be more or less than
the income actually received by the Fund. In order to reduce fluctuations in
distributions, the Trustee is required to advance the amounts necessary to
provide approximately equal Monthly Income Distributions. The Trustee will be
reimbursed, without interest, for these advances from income received on the
Securities.

In addition to the Public Offering Price, the price of a Unit includes the
amount per Unit in the Income Account at the date of delivery of Units to the
purchaser. If a Holder sells all or a portion of his Units, he will receive
his proportionate share of the amount in the Income Account from the purchaser
of his Units. Similarly, if a Holder redeems all or a portion of his Units,
the Redemption Price per Unit will include the amount per Unit in the Income
Account.

Some of the Securities in the Portfolio may provide for scheduled sinking fund
redemptions and optional redemptions prior to maturity. Payments received in
respect of the Securities together with amounts realized upon sale of the
Securities under certain circumstances (see Redemption) will be distributed to
Holders of Units or paid out upon redemption of Units; thus the aggregate par
or liquidation value of the Securities in the Portfolio, and accordingly the
par or liquidation value of the Securities underlying each Unit, may decrease
over time. Although the dividend rates on the Securities will remain
constant, as redemptions of Securities are made the subsequent dividend
payments will decline. Monthly payments to Holders will reflect the foregoing
factors.

Units are offered to investors on a "dollar price" basis whereby the rate of
return on an investment in the Units is stated in terms of estimated current
return. The use of "current return" should be contrasted with the "yield to
maturity" basis often used in offerings of debt obligations, whereby the rate
of return of a debt obligation is expressed as a percentage which is the yield
to maturity or to an earlier redemption date of the debt obligation and takes
into account not only the interest payable on the debt obligation but also the
amortization of discount or premium to the specified date. If the price of
the Units is less than $1,000, the yield to maturity will be greater than the
current return; if the price of the Units is greater than $1,000, the yield to
maturity will be less than the current return.

Income and Estimated Rate to Projected Maturity (Cash or Accretion Bond Series
and Select Series)

Estimated Rate to Projected Maturity of the Compound Interest Bonds is
calculated assuming that the mortgages underlying the Ginnie Mae, Fannie Mae
or Freddie Mac collateral for the Compound Interest Bonds are prepaid at a
certain percentage of the Prepayment Model, that payment on any Compound
Interest Bond is not accelerated due to the default of an issuer, that the
principal amount of the interestbearing bonds is distributed when it matures,
that interest received on the interestbearing bonds will precisely cover the
expenses of the Fund, that a Holder does not redeem or sell any Units
(including new Units credited annually in respect of the aggregate increase in
Accreted Principal Amount of the Compound Interest Bonds) prior to Projected
Maturity (which is also calculated assuming prepayments on the underlying
mortgages at the specified percentage of the Prepayment Model). See Notes to
Portfolio in Part A of the Prospectus for the specific percentage of the
Prepayment Model used for these calculations; see Risk Factors--Payment of the
Securities and Life of the Fund--Cash or Accretion Bond Series and Select
Series above for a discussion of the Prepayment Model. If the Public Offering
Price is less than the current principal amount of the Compound Interest Bonds
and if the mortgages underlying the Ginnie Mae, Fannie Mae or Freddie Mac
collateral prepay faster than the specified assumed rates of the Prepayment
Model, the actual return will be greater; if prepayment occurs more slowly
than these rates, the actual return will be less. The Public Offering Price
will vary in accordance with fluctuations in the prices of the Securities and
any reductions in applicable sales charges in the case of quantity purchases
of Units (see Public Sale of Units--Public Offering Price). Any change in the
Public Offering Price will result in a change in the actual return.

The economic effect of purchasing Units of the Fund is that the investor who
holds his Units until the underlying Compound Interest Bonds are paid or
prepaid receives an actual return on his investment over the life of the
Compound Interest Bonds that reflects the assumed or implicit automatic
reinvestment (accretion) of the compounded interest. This feature
differentiates this Fund from funds comprised of customary securities on which
periodic interest is paid at market rates at time of issue. An investor in
the Units, unlike an investor in a fund comprised of customary securities,
lessens his risk of being unable to invest distributions at a comparable rate
of return, but may forgo the ability to reinvest fully at higher rates in the
future.

RETIREMENT PLANS

The Cash or Accretion Series and Select Series may be well suited for
purchase by individual retirement accounts (IRAs), Keogh plans, pension funds
and other qualified retirement plans, certain of which are briefly described
below. Generally, capital gains and income received in each of the foregoing
plans are exempt from Federal taxation. All distributions from these plans
are generally treated as ordinary income but may, in some cases, be eligible
for special 5 or 10 year averaging or tax-deferred rollover treatment.
Holders of units in IRAs, Keogh plans and other tax-deferred retirement plans
should consult their plan custodian as to the appropriate disposition of
distributions. Investors considering participation in any of these plans
should review specific tax laws related thereto and should consult their
attorneys or tax advisers with respect to the establishment and maintenance of
any of these plans. These plans are offered by brokerage firms, including
each of the Sponsors, and other financial institutions. Fees and charges with
respect to these plans may vary.

Retirement Plans for the Self-Employed--Keogh Plans. Units of the Funds may
be purchased by retirement plans established pursuant to the Self-Employed
Individuals Tax Retirement Act of 1962 ("Keogh plans") for self-employed
individuals, partnerships or unincorporated companies. Qualified individuals
may generally make annual tax-deductible contributions up to the lesser of 20%
of annual compensation or $30,000 to Keogh plans. The assets of the plan must
be held in a qualified trust or other arrangement which meets the requirements
of the Code. Generally there are penalties for premature distributions from a
plan before attainment of age 59, except in the case of a participant's death
or disability and certain other circumstances. Keogh plan participants may
also establish separate IRAs (see below) to which they may contribute up to an
additional $2,000 per year ($2,250 if a spousal account) is also established.

Individual Retirement Account--IRA. Any individual (including one covered by
an employer retirement plan) can establish an IRA or make use of a qualified
IRA arrangement set up by an employer or union for the purchase of Units of
the Fund. Any individual can make a contribution to an IRA equal to the
lesser of $2,000 ($2,250 if a spousal account is also established) or 100% of
earned income; such investment must be made in cash. However, the deductible
amount an individual may contribute will be reduced if the individual's
adjusted gross income exceeds $25,000 (in the case of a single individual),
$40,000 (in the case of married individuals filing a joint return) or $200 (in
case of a married individual filing a separate return). A married individual
filing a separate return will not be entitled to any deduction if the
individual is covered by an employer-maintained retirement plan, without
regard to whether the individual's spouse is an active participant in an
employer retirement plan. Unless nondeductible contributions were made in
1987 or a later year, all distributions from an IRA will be treated as
ordinary income but generally are eligible for tax-deferred rollover
treatment. It should be noted that certain transactions which are prohibited
under Section 408 of the Code will cause all or a portion of the amount in an
IRA to be deemed to be distributed and subject to tax at that time. A
participant's entire interest in an IRA must be, or commence to be,
distributed to the participant not later than the April 1 following the
taxable year during which the participant attains age 70 1/2. Taxable
distributions made before attainment of age 591/2, except in the case of a
participant's death or disability, or where the amount distributed is part of
a series of substantially equal periodic (at least annual) payments that are
to be made over the life expectancies of the participant and his or her
beneficiary, are generally subject to a surtax in an amount equal to 10% of
the distribution.

Corporate Pension and Profit-Sharing Plan. A pension or profit-sharing plan
established for employees of a corporation may purchase Units of the Funds.

The Trustee is empowered to sell Securities in order to make funds available
for redemption (Article V) if funds are not otherwise available in the Capital
and Income Accounts (see Administration of the Fund-- Accounts and
Distributions). The Securities to be sold will be selected from a list
supplied by the Sponsors. Securities will be chosen for this list by the
Sponsors on the basis of those market and credit factors as they may determine
are in the best interests of the Fund. Provision is made under the Indenture
for the Sponsors to specify minimum face amounts in which blocks of Securities
are to be sold in order to obtain the best price for the Fund. While these
minimum amounts may vary from time to time in accordance with market
conditions, the Sponsors believe that the minimum face amounts which would be
specified would range from $25,000 for readily marketable Securities to
$250,000 for certain less marketable Securities or Restricted Securities which
can be distributed on short notice only by private sale, usually to
institutional investors. Provision is also made that sales of Securities may
not be made so as to (i) result in the Fund owning less than $250,000 of any
Restricted Security or (ii) result in more than 50% of the Fund consisting of
Restricted Securities. In addition, the Sponsors will use their best efforts
to see that these sales of Securities are carried out in such a way that no
more than 40% in face amount of the Fund is invested in Restricted Securities,
provided that sales of unrestricted Securities may be made if the Sponsors'
best efforts with regard to timely sales of Restricted Securities at prices
they deem reasonable are unsuccessful and if as a result of these sales more
than 50% of the Fund does not consist of Restricted Securities. Thus the
redemption of Units may require the sale of larger amounts of Restricted
Securities than of unrestricted Securities.

ADMINISTRATION OF THE FUND

Automatic Unit Accretion Liquidations (Cash or Accretion Bond Series and
Select Series)

In order to permit Holders whose Units are held in brokers' accounts to
receive quarterly or semi-annual cash payments substantially equivalent to the
accrued but unpaid interest on the Compound Interest Bonds, Holders may elect
(by promptly notifying their account executive so that the broker can notify
the Fund Trustee of the election, not later than ten days prior to the
quarterly or semi-annual Record Day for Unit Accretion Distribution of each
year to sell or redeem the additional Units that have been credited to their
account during the previous six months. Holders of Units registered with the
Fund Trustee should notify the Fund Trustee in writing of their election not
later than ten days prior to the Record Day for Unit Accretion Distribution.
Once a Holder has elected automatic liquidation, the election will remain in
effect until the Fund Trustee has received notice to rescind the election in
the same manner as notified of the election to automatically liquidate. The
proceeds from the sale or redemption will be distributed to the Holder within
seven calendar days of the Unit Accretion Distribution Date. When additional
Units are credited to the account of a Holder, although the Holder's pro rata
portion of each Bond does not change, the portion of each Bond represented by
each of the Holder's Units (including additional Units) decreases. The
Holder's tax cost for his pro rata portion of each Bond, as discussed under
Taxes, also does not change, but is spread over the portion of each Bond
represented by each of the Holder's Units (including additional Units).
Therefore the Holder's tax cost for his per Unit portion of each Bond will
decrease. Although additional Units will have been credited to a Holder's
account on the basis of one Unit per one dollar of aggregate increase in
Accreted Principal Amount of the Compound Interest Bonds, the Units sold or
redeemed may not generate proceeds equal to one dollar per Unit because the
amount of proceeds depends, of course, on the bid or offering side evaluations
of the Bonds at that time.

If Holders make this election, the Units will be sold to the Sponsors for
resale in the secondary market if at the time the Sponsors are making a market
for Units at a price which will be computed on the basis of the offering side
of the market. If no secondary market is being maintained by the Sponsors,
the Units will be redeemed. Notice of election to have Unit Accretion
Distributions automatically liquidated quarterly must be received by the Fund
Trustee at least ten days prior to the first quarterly Record Day for Unit
Accretion Distribution as to which the election is to apply.

Investment Accumulation Programs

Distributions of interest and any principal or premium received by the Fund
will be paid in cash. However, except for First GNMA Series, Preferred Stock
Put Series, Cash or Accretion Bond Series and Select Series, a Holder may elect
to have these distributions reinvested without sales charge in The Corporate
Fund Accumulation Program, Inc., which is an open-end management investment
company whose primary investment objective is to obtain a high level of
current income through investing in a diversified portfolio consisting
primarily of corporate debt obligations with investment grade credit
characteristics. Holders of Units of the First GNMA Series may reinvest their
distributions in the GNMA Fund Accumulation Program, Inc. For more complete
information about a reinvestment program, including charges and expenses,
return the enclosed form for a prospectus. Read it carefully before you
decide to participate. It should be noted that interest distributions to
Foreign Holders from a reinvestment program will be subject to U.S. Federal
income taxes, including withholding taxes and that income on shares of a
program will not be eligible for the dividends received deduction for
corporations. Investors should note that obligations in these programs are
not insured or backed by other third-party obligations. Holders participating
in these reinvestment programs will be taxed on their reinvested distributions
in the manner described under Taxes even though distributions are
automatically reinvested.

Notice of election to participate must be received by the Trustee in writing
at least ten days before the Record Day for the first distribution to which
the notice is to apply.

Portfolio Supervision

The Fund is a unit investment trust which normally follows a buy and hold
investment strategy and is not actively managed. Traditional methods of
investment management for a managed fund typically involve frequent changes in
a portfolio of securities on the basis of economic, financial and market
analyses. The Portfolio of the Fund, however, will not be actively managed
and therefore the adverse financial condition of an issuer will not
necessarily require the sale of its securities from the Portfolio. Defined
Asset Funds investment professionals are dedicated exclusively to selecting
and then monitoring securities held by the various Defined Funds. On an
ongoing basis, experienced financial analysts regularly review the portfolios
and may direct the disposition of Securities upon default in payment of
amounts due on any of the Securities, institution of certain legal
proceedings, existence of any other legal questions or impediments affecting a
Security or the payment of amounts due on the Security, default under certain
documents adversely affecting debt service, default in payment of amounts due
on other securities of the same issuer or guarantor, decline in projected
income pledged for debt service on revenue bond issues, if a Security is not
consistent with the investment objective of the Fund, if the Trustee has a
right to sell or redeem a Security pursuant to any applicable guarantee or
other credit support or decline in price or the occurrence of other market or
credit factors, including advance refunding (i.e., the issuance of refunding
bonds and the deposit of the proceeds thereof in trust or escrow to retire the
refunded Securities on their respective redemption dates), that in the opinion
of the Sponsors would make the retention of these Securities detrimental to
the interest of the Holders; and, for Funds qualified as "regulated investment
companies" (see Section A of Taxes above), if the disposition of these
Securities is desirable in order to maintain the qualification of the Fund as
a "regulated investment company" under the Code. If a default in the payment
of amounts due on any Security occurs and if the Sponsors fail to give
instructions to sell or to hold the Security, the Indenture provides that the
Trustee, within 30 days of that failure by the Sponsors, may sell the
Security. Within five days after the elimination of a Debt Obligation and the
deposit of a different Debt Obligation in exchange or substitution therefor,
the Trustee is required to give notice thereof to each Holder, identifying the
Debt Obligations eliminated and the Debt Obligations substituted therefor.
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