DEFINED ASSET FUNDS MUNICIPAL INVT TR FD MULTISTATE SER 83, S-6EL24/A, 1995-03-01

DEFINED ASSET FUNDS MUNICIPAL INVT TR FD MULTISTATE SER 83
S-6EL24/A, 1995-03-01

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 1, 1995

REGISTRATION NO. 33-57443

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

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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

AMENDMENT NO. 1
TO
FORM S-6

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

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

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

A. EXACT NAME OF TRUST:

MUNICIPAL INVESTMENT TRUST FUND

MULTISTATE SERIES - 83
DEFINED ASSET FUNDS

B. NAMES OF DEPOSITORS:

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

C. COMPLETE ADDRESSES OF DEPOSITORS' PRINCIPAL EXECUTIVE OFFICES:

MERRILL LYNCH, PIERCE, FENNER & SMITH SMITH BARNEY INC.
INCORPORATED 388 GREENWICH STREET--23RD FLOOR
DEFINED ASSET FUNDS NEW YORK, N.Y. 10013
P.O. BOX 9051
PRINCETON, N.J. 08543-9051

PAINEWEBBER INCORPORATED PRUDENTIAL SECURITIES DEAN WITTER REYNOLDS INC.
1285 AVENUE OF THE INCORPORATED TWO WORLD TRADE
AMERICAS ONE SEAPORT PLAZA CENTER--59TH FLOOR
NEW YORK, N.Y. 10019 199 WATER STREET NEW YORK, N.Y. 10048
NEW YORK, N.Y. 10292

D. NAMES AND COMPLETE ADDRESSES OF AGENTS FOR SERVICE:

TERESA KONCICK, ESQ. THOMAS D. HARMAN, ESQ. LEE B. SPENCER, JR.
P.O. BOX 9051 388 GREENWICH STREET ONE SEAPORT PLAZA
PRINCETON, N.J. 8543-9051 NEW YORK, NY 10013 199 WATER STREET
NEW YORK, N.Y. 10292
COPIES TO:
DOUGLAS LOWE, ESQ. ROBERT E. HOLLEY PIERRE DE SAINT PHALLE,
130 LIBERTY STREET--29TH 1200 HARBOR BLVD. ESQ.
FLOOR WEEHAWKEN, N.J. 07087 450 LEXINGTON AVENUE
NEW YORK, N.Y. 10019 NEW YORK, N.Y. 10017

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.

THIS REGISTRATION STATEMENT SHALL HEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.

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<PAGE>
Defined

Asset FundsSM

MUNICIPAL INVESTMENT This Defined Fund consists of separate underlying
TRUST FUND Trusts, each of which is a portfolio of
- ------------------------------preselected securities issued by or on behalf of
MULTISTATE SERIES - 83 the State for which the Trust is named and
(UNIT INVESTMENT TRUSTS) political subdivisions and public authorities
CALIFORNIA TRUST (INSURED) thereof or certain United States territories or
5.56% possessions. The Fund is formed for the purpose of
ESTIMATED CURRENT RETURN providing interest income which in the opinion of
5.63% counsel is, with certain exceptions, exempt from
ESTIMATED LONG TERM RETURN regular Federal income taxes and from certain
MICHIGAN TRUST (INSURED) state and local personal income taxes in the State
5.54% for which each Trust is named but may be subject
ESTIMATED CURRENT RETURN to other state and local taxes. In addition, the
5.57% Debt Obligations included in each Trust are
ESTIMATED LONG TERM RETURN insured. This insurance guarantees the timely
NEW JERSEY TRUST (INSURED) payment of principal and interest on but does not
5.44% guarantee the market value of the Debt Obligations
ESTIMATED CURRENT RETURN or the value of the Units. As a result of this
5.49% insurance, Units of each Trust are rated AAA by
ESTIMATED LONG TERM RETURN Standard & Poor's Ratings Group, a division of
NEW YORK TRUST (INSURED) McGraw Hill, Inc. ('Standard & Poor's'). The value
5.54% of the Units of each Trust will fluctuate with the
ESTIMATED CURRENT RETURN value of the Portfolio of underlying Debt
5.59% Obligations in the Trust.
ESTIMATED LONG TERM RETURN The Estimated Current Return and Estimated Long
OHIO TRUST (INSURED) Term Return figures shown give different
5.40% information about the return to investors.
ESTIMATED CURRENT RETURN Estimated Current Return on a Unit shows a net
5.47% annual current cash return based on the initial
ESTIMATED LONG TERM RETURN Public Offering Price and the maximum applicable
AS OF FEBRUARY 28, 1995 sales charge and is computed by multiplying the
estimated net annual interest rate per Unit by
$1,000 and dividing the result by the Public
Offering Price per Unit (including the sales
charge but not including accrued interest).
Estimated Long Term Return shows a net annual
long-term return to investors holding to maturity
based on the yield on the individual bonds in the
Portfolio, weighted to reflect the time to
maturity (or in certain cases to an earlier call
date) and market value of each bond in the
Portfolio, adjusted to reflect the Public Offering
Price (including the sales charge) and estimated
expenses. Unlike Estimated Current Return,
Estimated Long Term Return takes into account
maturities of the underlying Securities and
discounts and premiums. Distributions of income on
Units are generally subject to certain delays; if
the Estimated Long Term Return figure shown above
took these delays into account, it would be lower.
Both Estimated Current Return and Estimated Long
Term Return are subject to fluctuations with
changes in Portfolio composition (including the
redemption, sale or other disposition of
Securities in the Portfolio), changes in the
market value of the underlying Securities and
changes in fees and expenses. Estimated cash flows
are available upon request from the Sponsors at no
charge.
Minimum purchase: 1 Unit.

----------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED
OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY
SPONSORS: REPRESENTATION
Merrill Lynch, TO THE CONTRARY IS A CRIMINAL OFFENSE.
Pierce, Fenner & Smith Incorporated INQUIRIES SHOULD BE DIRECTED TO THE
Smith Barney Inc. TRUSTEE AT 1-800-323-1508.
PaineWebber Incorporated PROSPECTUS PART A DATED MARCH 1, 1995.
Prudential Securities Incorporated READ AND RETAIN THIS PROSPECTUS FOR
Dean Witter Reynolds Inc. FUTURE REFERENCE.

<PAGE>
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DEFINED ASSET FUNDSSM is America's oldest and largest family of unit investment
trusts with over $95 billion sponsored since 1971. Each Defined Fund is a
portfolio of preselected securities. The portfolio is divided into 'units'
representing equal shares of the underlying assets. Each unit receives an equal
share of income and principal distributions.

With Defined Asset Funds you know in advance what you are investing in and that
changes in the portfolio are limited. Most defined bond funds pay interest
monthly and repay principal as bonds are called, redeemed, sold or as they
mature. Defined equity funds offer preselected stock portfolios with defined
termination dates.
Your financial advisor can help you select a Defined Fund to meet your personal
investment objectives. Our size and market presence enable us to offer a wide
variety of investments. Defined Funds are available in the following types of
securities: municipal bonds, corporate bonds, government bonds, utility stocks,
growth stocks, even international securities denominated in foreign currencies.
Termination dates are as short as one year or as long as 30 years. Special funds
are available for investors seeking extra features: insured funds, double and
triple tax-free funds, and funds with 'laddered maturities' to help protect
against rising interest rates. Defined Funds are offered by prospectus only.
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CONTENTS

Investment Summary.......................................... A-3
Tax-Free vs. Taxable Income................................. A-7
Underwriting Account........................................ A-10
Fee Table................................................... A-11
Report of Independent Accountants........................... A-13
Statements of Condition..................................... A-14
Portfolios.................................................. A-16
State Disclosure............................................ A-25

A-2

<PAGE>

INVESTMENT SUMMARY AS OF FEBRUARY 28, 1995 (THE BUSINESS DAY PRIOR TO THE
INITIAL DATE OF DEPOSIT)(a)

CALIFORNIA MICHIGAN NEW JERSEY
TRUST TRUST TRUST
-------------- -------------- --------------
ESTIMATED CURRENT RETURN(b)
(based on Public Offering
Price)--...................... 5.56% 5.54% 5.44%
ESTIMATED LONG TERM RETURN(b)
(based on Public Offering
Price)--...................... 5.63% 5.57% 5.49%
PUBLIC OFFERING PRICE PER UNIT
(including a 4.50% sales
charge).......................$ 1,002.92(c)$ 1,015.78(c)$ 999.64(c)
FACE AMOUNT OF DEBT
OBLIGATIONS...................$ 4,000,000 $ 3,250,000 $ 3,250,000
INITIAL NUMBER OF UNITS(d)...... 4,000 3,250 3,250
FRACTIONAL UNDIVIDED INTEREST IN
TRUST REPRESENTED BY EACH
UNIT.......................... 1/4,000th 1/3,250th 1/3,250th
MONTHLY INCOME DISTRIBUTIONS
First distribution to be paid
on the 25th of May 1995,
June 1995 and May 1995 to
Holders of record on the
10th of May 1995, June 1995
and May 1995,
respectively................ 1.07 5.67 1.26
Calculation of second and
following distributions:
Estimated net annual interest
rate per Unit times
$1,000....................$ 55.80 $ 56.28 $ 54.36
Divided by 12.................$ 4.65 $ 4.69 $ 4.53
SPONSORS' REPURCHASE PRICE AND
REDEMPTION PRICE PER UNIT(e)
(based on bid side
evaluation)...................$ 953.79(c)$ 966.07(c)$ 950.66(c)
REDEMPTION PRICE PER UNIT LESS
THAN:
Public Offering Price by....$ 49.13 $ 49.71 $ 48.98
Sponsors' Initial Repurchase
Price by....................$ 4.00 $ 4.00 $ 4.00
CALCULATION OF PUBLIC OFFERING
PRICE
Aggregate offer side
evaluation of Debt
Obligations.................$ 3,831,168.25 $ 3,152,727.50 $ 3,102,643.15
-------------- -------------- --------------
Divided by Number of
Units.....................$ 957.79 $ 970.07 $ 954.66
Plus sales charge of 4.50%
of Public Offering Price
(4.712% of net amount
invested)(f).............. 45.13 45.71 44.98
-------------- -------------- --------------
Public Offering Price per
Unit........................$ 1,002.92 $ 1,015.78 $ 999.64
Plus accrued interest(g).... 1.08 1.09 1.05
-------------- -------------- --------------
Total.....................$ 1,004.00 $ 1,016.87 $ 1,000.69
-------------- -------------- --------------
-------------- -------------- --------------
CALCULATION OF ESTIMATED NET
ANNUAL INTEREST RATE PER UNIT
(based on face amount of
$1,000 per Unit)
Annual interest rate per
Unit........................ 5.792% 5.853% 5.665%
Less estimated annual
expenses per Unit
expressed as a
percentage................ .212% .225% .229%
-------------- -------------- --------------
Estimated net annual
interest rate per
Unit.................... 5.580% 5.628% 5.436%
-------------- -------------- --------------
-------------- -------------- --------------
DAILY RATE AT WHICH ESTIMATED
NET INTEREST ACCRUES PER
UNIT.......................... .0155% .0156% .0151%
SPONSORS' PROFIT (LOSS) ON
DEPOSIT.......................$ 47,875.75 $ 34,616.50 $ 36,986.00
TRUSTEE'S ANNUAL FEE AND
EXPENSES........................$ 2.12(h)$ 2.25(i)$ 2.29(h)
Per Unit commencing March
1995, April 1995 and March
1995, respectively.

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

(i) During the first year this amount will be reduced by $0.20. Estimated
annual interest income per Unit (estimated annual interest rate per Unit times
$1,000) during the first year will be $58.33 and estimated annual expenses per
Unit will be $2.05. Estimated net annual interest income per Unit for the Trust
will remain the same (see Income and Distributions-- Income).

A-3

<PAGE>

INVESTMENT SUMMARY AS OF FEBRUARY 28, 1995 (CONTINUED)

CALIFORNIA MICHIGAN NEW JERSEY
TRUST TRUST TRUST
------------- ------------- -------------
NUMBER OF ISSUES IN PORTFOLIO-- 7 7 7
NUMBER OF ISSUES BY SOURCE OF
REVENUE(a):
State/Local Government Supported-- -- -- 1
Special Tax-- 2 -- --
Industrial Development Revenue-- -- -- 1
Municipal Water/Sewer Utilities-- -- 1 1
Miscellaneous-- -- 1 --
General Obligation-- -- 3 1
Hospitals/Healthcare Facilities-- 2 1 2
Universities/Colleges-- 1 1 1
State/Local Municipal Electric
Utilities-- 2 -- --
NUMBER OF ISSUES RATED BY
STANDARD &
POOR'S/RATING: -- AAA-- 7(b) 7(b) 7(b)
RANGE OF FIXED FINAL MATURITY DATES
OF DEBT OBLIGATIONS.............. 2013-2033 2012-2024 2012-2033
TYPE OF ISSUE EXPRESSED AS A
PERCENTAGE OF THE AGGREGATE FACE
AMOUNT OF PORTFOLIO:
General Obligation Issues........ -- 46% 15%
Issues Payable from Income of
Specific Project or
Authority...................... 100% 54% 85%
Debt Obligations Issued at an
'Original Issue Discount'(c)... 69% 88% 80%
Obligations Insured by certain
Insurance Companies:(d)
AMBAC.......................... 15% 23% 15%
Financial Guaranty............. 11% 46% 46%
MBIA........................... 58% 31% 24%
CAPMAC......................... 16% -- --
CGIC........................... -- -- 15%
CONCENTRATIONS(a) EXPRESSED AS A
PERCENTAGE OF THE AGGREGATE FACE
AMOUNT OF PORTFOLIO(e):
Special Tax.................... 31% -- --
State/Local Municipal Electric
Utility........................ 26% -- --
Hospital/Healthcare Facility... 28% -- --
General Obligation Bonds....... -- 46% --
PREMIUM AND DISCOUNT ISSUES IN
PORTFOLIO
Face amount of Debt Obligations
with offer side
evaluation: over
par-- 31% 26% 46%
at a discount from par-- 69% 74% 54%
PERCENTAGE OF PORTFOLIO ACQUIRED
FROM UNDERWRITING SYNDICATE IN
WHICH CERTAIN SPONSORS
PARTICIPATED AS SOLE UNDERWRITER,
MANAGING UNDERWRITER OR MEMBER... -- -- --
PERCENTAGE OF PORTFOLIOS SUBJECT TO
OPTIONAL REDEMPTIONS BUT NOT
PRIOR TO 2002 (AT PRICES
INITIALLY AT LEAST 100% OF
PAR)(f).......................... 100% 100% 100%

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

A-4

<PAGE>

INVESTMENT SUMMARY AS OF FEBRUARY 28, 1995 (THE BUSINESS DAY PRIOR TO THE
INITIAL DATE OF DEPOSIT)(a)

NEW YORK OHIO
TRUST TRUST
-------------- --------------
ESTIMATED CURRENT RETURN(b)
(based on Public Offering
Price)--...................... 5.54% 5.40%
ESTIMATED LONG TERM RETURN(b)
(based on Public Offering
Price)--...................... 5.59% 5.47%
PUBLIC OFFERING PRICE PER UNIT
(including a 4.50% sales
charge).......................$ 1,020.36(c)$ 1,001.53(c)
FACE AMOUNT OF DEBT
OBLIGATIONS...................$ 5,000,000 $ 3,250,000
INITIAL NUMBER OF UNITS(d)...... 5,000 3,250
FRACTIONAL UNDIVIDED INTEREST IN
TRUST REPRESENTED BY EACH
UNIT............................ 1/5,000th 1/3,250th
MONTHLY INCOME DISTRIBUTIONS
First distribution to be paid
on the 25th of May 1995 and
June 1995 to Holders of
record on the 10th of May
1995 and June 1995,
respectively................ 1.03 4.77
Calculation of second and
following distributions:
Estimated net annual interest
rate per Unit times
$1,000....................$ 56.52 $ 54.12
Divided by 12.................$ 4.71 $ 4.51
SPONSORS' REPURCHASE PRICE AND
REDEMPTION PRICE PER UNIT(e)
(based on bid side
evaluation)...................$ 970.45(c)$ 952.46(c)
REDEMPTION PRICE PER UNIT LESS
THAN:
Public Offering Price by....$ 49.91 $ 49.07
Sponsors' Initial Repurchase
Price by....................$ 4.00 $ 4.00
CALCULATION OF PUBLIC OFFERING
PRICE
Aggregate offer side
evaluation of Debt
Obligations.................$ 4,872,244.50 $ 3,108,497.50
-------------- --------------
Divided by Number of
Units.....................$ 974.45 $ 956.46
Plus sales charge of 4.50%
of Public Offering Price
(4.712% of the net amount
invested)(f).............. 45.91 45.07
-------------- --------------
Public Offering Price per
Unit........................$ 1,020.36 $ 1,001.53
Plus accrued interest(g).... 1.09 1.05
-------------- --------------
Total.....................$ 1,021.45 $ 1,002.58
-------------- --------------
-------------- --------------
CALCULATION OF ESTIMATED NET
ANNUAL INTEREST RATE PER UNIT
(based on face amount of
$1,000 per Unit)
Annual interest rate per
Unit........................ 5.851% 5.646%
Less estimated annual
expenses per Unit
expressed as a
percentage................ .199% .234%
-------------- --------------
Estimated net annual
interest rate per
Unit.................... 5.652% 5.412%
-------------- --------------
-------------- --------------
DAILY RATE AT WHICH ESTIMATED
NET INTEREST ACCRUES PER
UNIT.................... .0157% .0150%
SPONSORS' PROFIT (LOSS) ON
DEPOSIT.................$ 69,239.50 $ 41,467.50
TRUSTEE'S ANNUAL FEE AND
EXPENSES........................$ 1.99(h)$ 2.34(i)
Per Unit commencing March
1995.

A-5

<PAGE>

INVESTMENT SUMMARY AS OF FEBRUARY 28, 1995 (CONTINUED)

NEW YORK OHIO
TRUST TRUST
------------- -------------
NUMBER OF ISSUES IN PORTFOLIO-- 7 7
NUMBER OF ISSUES BY SOURCE OF
REVENUE(a):
Airports/Ports/Highways-- 1 --
Transit Authority-- 1 --
Industrial Development Revenue-- 1 1
Municipal Water/Sewer Utilities-- 2 1
Lease Rental-- 1 --
General Obligation-- -- 1
Hospitals/Healthcare Facilities-- 1 1
State/Local Municipal Electric
Utilities-- -- 3
NUMBER OF ISSUES RATED BY
STANDARD &
POOR'S/RATING: -- AAA-- 7(b) 7(b)
RANGE OF FIXED FINAL MATURITY DATES
OF DEBT OBLIGATIONS.............. 2014-2034 2015-2024
TYPE OF ISSUE EXPRESSED AS A
PERCENTAGE OF THE AGGREGATE FACE
AMOUNT OF PORTFOLIO:
General Obligation Issues........ -- 15%
Issues Payable from Income of
Specific Project or Authority.... 100% 85%
Debt Obligations Issued at an
'Original Issue Discount'(c)....... 85% 69%
Obligations Insured by certain
Insurance Companies:(d)
AMBAC.......................... 45% 31%
Financial Guaranty............. 24% 15%
MBIA........................... 31% 54%
CONCENTRATIONS(a) EXPRESSED AS A
PERCENTAGE OF THE AGGREGATE FACE
AMOUNT OF PORTFOLIO(e):
State/Local Municipal Electric
Utilities...................... -- 40%
PREMIUM AND DISCOUNT ISSUES IN
PORTFOLIO
Face amount of Debt Obligations
with offer side
evaluation: over
par-- -- 31%
at par-- 30% --
at a discount from par-- 70% 69%
PERCENTAGE OF PORTFOLIO ACQUIRED
FROM UNDERWRITING SYNDICATE IN
WHICH CERTAIN SPONSORS
PARTICIPATED AS SOLE UNDERWRITER,
MANAGING UNDERWRITER OR MEMBER... -- --
PERCENTAGE OF PORTFOLIOS SUBJECT TO
OPTIONAL REDEMPTIONS BUT NOT
PRIOR TO 2002 (AT PRICES
INITIALLY AT LEAST 101% OF
PAR)(f).......................... 100% 100%

A-6

<PAGE>
Def ined
Asset Funds

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

This page may not be distributed unless included in a current prospectus.
Investors should refer to the prospectus for further information.
<PAGE>
TAX-FREE VS. TAXABLE INCOME
A COMPARISON OF TAXABLE AND TAX-FREE YIELDS

FOR CALIFORNIA RESIDENTS
<TABLE><CAPTION>
COMBINED
TAXABLE INCOME 1995* EFFECTIVE
TAX RATE
A TAX-FREE YIELD OF
%
SINGLE RETURN JOINT RETURN 4% 4.5% 5% 5.5% 6% 6.5% 7%
IS EQUIVALENT TO A TAXABLE YIELD OF
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
$0-39,000 20.10 5.01 5.63 6.26 6.88 7.51 8.14 8.76
- --------------------------------------------------------------------------------------------------------------------------------
$0-23,350 20.10 5.01 5.63 6.26 6.88 7.51 8.14 8.76
- --------------------------------------------------------------------------------------------------------------------------------
$39,900-94,250 34.70 6.13 6.89 7.66 8.42 9.19 9.95 10.72
- --------------------------------------------------------------------------------------------------------------------------------
$23,350-56,550 34.70 6.13 6.89 7.66 8.42 9.19 9.95 10.72
- --------------------------------------------------------------------------------------------------------------------------------
$94,250-143,600 37.42 6.39 7.19 7.99 8.79 9.59 10.39 11.19
- --------------------------------------------------------------------------------------------------------------------------------
$56,550-117,950 37.90 6.44 7.25 8.05 8.86 9.66 10.47 11.27
- --------------------------------------------------------------------------------------------------------------------------------
$143,600-256,500 42.40 6.94 7.81 8.68 9.55 10.42 11.28 12.15
- --------------------------------------------------------------------------------------------------------------------------------
$117,950-256,500 43.04 7.02 7.90 8.78 9.66 10.53 11.41 12.29
- --------------------------------------------------------------------------------------------------------------------------------
OVER $256,500 46.24 7.44 8.37 9.30 10.23 11.16 12.09 13.02
- --------------------------------------------------------------------------------------------------------------------------------
OVER $256,500 46.24 7.44 8.37 9.30 10.23 11.16 12.09 13.02
- --------------------------------------------------------------------------------------------------------------------------------

<CAPTION>
TAXABLE INCOME 1995*

SINGLE RETURN 7.5% 8%
<S> <C> <C>
- ----------------
9.39 10.01
- ----------------
$0-23,350 9.39 10.01
- ----------------
11.48 12.25
- ----------------
$23,350-56,550 11.48 12.25
- ----------------
11.98 12.78
- ----------------
$56,550-117,950 12.08 12.88
- ----------------
13.02 13.89
- ----------------
$117,950-256,500 13.17 14.04
- ----------------
13.95 14.88
- ----------------
OVER $256,500 13.95 14.88
- ----------------

</TABLE>
FOR MICHIGAN RESIDENTS

<TABLE><CAPTION>
COMBINED
TAXABLE INCOME 1995* EFFECTIVE
TAX RATE
TAX-FREE YIELD OF
%
SINGLE RETURN JOINT RETURN 4% 4.5% 5% 5.5% 6% 6.5% 7%
IS EQUIVALENT TO A TAXABLE YIELD OF
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
$0-39,000 18.74 4.92 5.54 6.15 6.77 7.38 8.00 8.61
- ------------------------------------------------------------------------------------------------------------------------------
$0-23,350 18.74 4.92 5.54 6.15 6.77 7.38 8.00 8.61
- ------------------------------------------------------------------------------------------------------------------------------
$39,000-94,250 31.17 5.81 6.54 7.26 7.99 8.72 9.44 10.17
- ------------------------------------------------------------------------------------------------------------------------------
$23,350-56,550 31.17 5.81 6.54 7.26 7.99 8.72 9.44 10.17
- ------------------------------------------------------------------------------------------------------------------------------
$94,250-143,600 34.04 6.06 6.82 7.58 8.34 9.10 9.85 10.61
- ------------------------------------------------------------------------------------------------------------------------------
$56,550-117,950 34.04 6.06 6.82 7.58 8.34 9.10 9.85 10.61
- ------------------------------------------------------------------------------------------------------------------------------
$143,600-256,500 38.82 6.54 7.35 8.17 8.99 9.81 10.62 11.44
- ------------------------------------------------------------------------------------------------------------------------------
$117,950-256,500 38.82 6.54 7.35 8.17 8.99 9.81 10.62 11.44
- ------------------------------------------------------------------------------------------------------------------------------
OVER $256,550 42.26 6.93 7.79 8.66 9.53 10.39 11.26 12.12
- ------------------------------------------------------------------------------------------------------------------------------
OVER $256,550 42.26 6.93 7.79 8.66 9.53 10.39 11.26 12.12
- ------------------------------------------------------------------------------------------------------------------------------

<CAPTION>
TAXABLE INCOME 1995*

SINGLE RETURN 7.5% 8%
<S> <C> <C>
- ----------------
9.23 9.84
- ----------------
$0-23,350 9.23 9.84
- ----------------
10.90 11.62
- ----------------
$23,350-56,550 10.90 11.62
- ----------------
11.37 12.13
- ----------------
$56,550-117,950 11.37 12.13
- ----------------
12.26 13.08
- ----------------
$117,950-256,500 12.26 13.08
- ----------------
12.99 13.85
- ----------------
OVER $256,550 12.99 13.85
- ----------------
</TABLE>

FOR NEW JERSEY RESIDENTS

<TABLE><CAPTION>
COMBINED
TAXABLE INCOME 1995* EFFECTIVE
TAX RATE
TAX-FREE YIELD OF
%
SINGLE RETURN JOINT RETURN 4% 4.5% 5% 5.5% 6% 6.5% 7%
IS EQUIVALENT TO A TAXABLE YIELD OF
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
$0-39,000 16.81 4.81 5.41 6.01 6.61 7.21 7.81 8.41
- ------------------------------------------------------------------------------------------------------------------------------
$0-23,350 16.81 4.81 5.41 6.01 6.61 7.21 7.81 8.41
- ------------------------------------------------------------------------------------------------------------------------------
$39,000-94,250 32.33 5.91 6.65 7.39 8.13 8.87 9.61 10.34
- ------------------------------------------------------------------------------------------------------------------------------
$23,350-56,550 32.33 5.91 6.65 7.39 8.13 8.87 9.61 10.34
- ------------------------------------------------------------------------------------------------------------------------------
$94,250-143,600 35.15 6.17 6.94 7.71 8.48 9.25 10.02 10.79
- ------------------------------------------------------------------------------------------------------------------------------
$56,550-117,950 35.54 6.21 6.98 7.76 8.53 9.31 10.08 10.86
- ------------------------------------------------------------------------------------------------------------------------------
$143,600-256,500 40.21 6.69 7.53 8.36 9.20 10.04 10.87 11.71
- ------------------------------------------------------------------------------------------------------------------------------
$117,950-256,500 40.21 6.69 7.53 8.36 9.20 10.04 10.87 11.71
- ------------------------------------------------------------------------------------------------------------------------------
OVER $256,500 43.57 7.09 7.98 8.86 9.75 10.63 11.52 12.41
- ------------------------------------------------------------------------------------------------------------------------------
OVER $256,500 43.57 7.09 7.98 8.86 9.75 10.63 11.52 12.41
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
TAXABLE INCOME 1995*

SINGLE RETURN 7.5% 8%
<S> <C> <C>
- ----------------
9.02 9.62
- ----------------
$0-23,350 9.02 9.62
- ----------------
11.08 11.82
- ----------------
$23,350-56,550 11.08 11.82
- ----------------
11.56 12.34
- ----------------
$56,550-117,950 11.64 12.41
- ----------------
12.54 13.38
- ----------------
$117,950-256,500 12.54 13.38
- ----------------
13.29 14.18
- ----------------
OVER $256,500 13.29 14.18
- ----------------

</TABLE>
To compare the yield of a taxable security with the yield of a tax-free security
find your taxable income and read across. These tables incorporate projected
1995 Federal and applicable State income tax rates and assume that all income
would otherwise be taxable at the investor's highest tax rates. Yield figures
are for example only.

Legislation has recently been enacted that would increase rates for certain
individuals, thereby increasing the tax-free equivalent yield.

*Based upon net amount subject to Federal income tax after deductions and
exemptions. These tables do not reflect other possible tax factors such as the
alternative minimum tax, personal exemptions, the phase out of exemptions,
itemized deductions and the possible partial disallowance of deductions.
Consequently, holders are urged to consult their own tax advisers in this
regard.

A-7
<PAGE>

TAX-FREE VS. TAXABLE INCOME
A COMPARISON OF TAXABLE AND TAX-FREE YIELDS

FOR NEW YORK CITY RESIDENTS

COMBINED
TAXABLE INCOME 1995* EFFECTIVE
TAX RATE
TAX-FREE YIELD OF
%
SINGLE RETURN JOINT RETURN 4% 4.5% 5% 5.5% 6% 6.5% 7%
IS EQUIVALENT TO A TAXABLE YIELD OF
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
$0-39,000 24.26 5.28 5.94 6.60 7.26 7.92 8.58 9.24
- ------------------------------------------------------------------------------------------------------------------------------
$0-23,350 24.26 5.28 5.94 6.60 7.26 7.92 8.58 9.24
- ------------------------------------------------------------------------------------------------------------------------------
$39,000-94,250 35.88 6.24 7.02 7.80 8.58 9.36 10.14 10.92
- ------------------------------------------------------------------------------------------------------------------------------
$23,350-56,550 35.88 6.24 7.02 7.80 8.58 9.36 10.14 10.92
- ------------------------------------------------------------------------------------------------------------------------------
$94,250-143,600 38.59 6.51 7.33 8.14 8.96 9.77 10.58 11.40
- ------------------------------------------------------------------------------------------------------------------------------
$56,550-117,950 38.59 6.51 7.33 8.14 8.96 9.77 10.58 11.40
- ------------------------------------------------------------------------------------------------------------------------------
$143,600-256,500 43.04 7.02 7.90 8.78 9.66 10.53 11.41 12.29
- ------------------------------------------------------------------------------------------------------------------------------
$117,950-256,500 43.04 7.02 7.90 8.78 9.66 10.53 11.41 12.29
- ------------------------------------------------------------------------------------------------------------------------------
OVER $256,500 46.24 7.44 8.37 9.30 10.23 11.16 12.09 13.02
- ------------------------------------------------------------------------------------------------------------------------------
OVER $256,500 46.24 7.44 8.37 9.30 10.23 11.16 12.09 13.02
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
TAXABLE INCOME 1995*

SINGLE RETURN 7.5% 8%
<S> <C> <C>
- ----------------
9.90 10.56
- ----------------
$0-23,350 9.90 10.56
- ----------------
11.70 12.48
- ----------------
$23,350-56,550 11.70 12.48
- ----------------
12.21 13.03
- ----------------
$56,550-117,950 12.21 13.03
- ----------------
13.17 14.04
- ----------------
$117,950-256,500 13.17 14.04
- ----------------
13.95 14.88
- ----------------
OVER $256,500 13.95 14.88
- ----------------
</TABLE>

FOR NEW YORK STATE RESIDENTS

<TABLE><CAPTION>
COMBINED
TAXABLE INCOME 1995* EFFECTIVE
TAX RATE
TAX-FREE YIELD OF
%
SINGLE RETURN JOINT RETURN 4% 4.5% 5% 5.5% 6% 6.5% 7%
IS EQUIVALENT TO A TAXABLE YIELD OF
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
$0-39,000 21.45 5.09 5.73 6.37 7.00 7.64 8.28 8.91
- ------------------------------------------------------------------------------------------------------------------------------
$0-23,350 21.45 5.09 5.73 6.37 7.00 7.64 8.28 8.91
- ------------------------------------------------------------------------------------------------------------------------------
$39,000-94,250 33.47 6.01 6.76 7.52 8.27 9.02 9.77 10.52
- ------------------------------------------------------------------------------------------------------------------------------
$23,350-56,550 33.47 6.01 6.76 7.52 8.27 9.02 9.77 10.52
- ------------------------------------------------------------------------------------------------------------------------------
$94,250-143,600 36.24 6.27 7.06 7.84 8.63 9.41 10.19 10.98
- ------------------------------------------------------------------------------------------------------------------------------
$56,550-117,950 36.24 6.27 7.06 7.84 8.63 9.41 10.19 10.98
- ------------------------------------------------------------------------------------------------------------------------------
$143,600-256,500 40.86 6.76 7.61 8.45 9.30 10.15 10.99 11.84
- ------------------------------------------------------------------------------------------------------------------------------
$117,950-256,500 40.86 6.76 7.61 8.45 9.30 10.15 10.99 11.84
- ------------------------------------------------------------------------------------------------------------------------------
OVER $256,500 44.19 7.17 8.06 8.96 9.85 10.75 11.65 12.54
- ------------------------------------------------------------------------------------------------------------------------------
OVER $256,500 44.19 7.17 8.06 8.96 9.85 10.75 11.65 12.54
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
TAXABLE INCOME 1995*

SINGLE RETURN 7.5% 8%
<S> <C> <C>
- ----------------
9.55 10.19
- ----------------
$0-23,350 9.55 10.19
- ----------------
11.27 12.02
- ----------------
$23,350-56,550 11.27 12.02
- ----------------
11.76 12.55
- ----------------
$56,550-117,950 11.76 12.55
- ----------------
12.68 13.53
- ----------------
$117,950-256,500 12.68 13.53
- ----------------
13.44 14.33
- ----------------
OVER $256,500 13.44 14.33
- ----------------
</TABLE>

FOR OHIO RESIDENTS

<TABLE><CAPTION>
COMBINED
TAXABLE INCOME 1995* EFFECTIVE
TAX RATE
TAX-FREE YIELD OF
%
SINGLE RETURN JOINT RETURN 4% 4.5% 5% 5.5% 6% 6.5% 7%
IS EQUIVALENT TO A TAXABLE YIELD OF
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
$0-39,000 18.79 4.93 5.54 6.16 6.77 7.39 8.00 8.62
- ------------------------------------------------------------------------------------------------------------------------------
$0-23,500 18.79 4.93 5.54 6.16 6.77 7.39 8.00 8.62
- ------------------------------------------------------------------------------------------------------------------------------
$39,000-94,250 32.28 5.91 6.64 7.38 8.12 8.86 9.60 10.34
- ------------------------------------------------------------------------------------------------------------------------------
$23,500-56,550 31.74 5.86 6.59 7.33 8.06 8.79 9.52 10.26
- ------------------------------------------------------------------------------------------------------------------------------
$94,250-143,600 35.76 6.23 7.01 7.78 8.56 9.34 10.12 10.90
- ------------------------------------------------------------------------------------------------------------------------------
$56,550-117,950 35.76 6.23 7.01 7.78 8.56 9.34 10.12 10.90
- ------------------------------------------------------------------------------------------------------------------------------
$143,600-256,500 40.80 6.76 7.60 8.45 9.29 10.14 10.98 11.82
- ------------------------------------------------------------------------------------------------------------------------------
$117,950-256,500 40.80 6.76 7.60 8.45 9.29 10.14 10.98 11.82
- ------------------------------------------------------------------------------------------------------------------------------
OVER $256,500 44.13 7.16 8.05 8.95 9.84 10.74 11.63 12.53
- ------------------------------------------------------------------------------------------------------------------------------
OVER $256,500 44.13 7.16 8.05 8.95 9.84 10.74 11.63 12.53
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
TAXABLE INCOME 1995*

SINGLE RETURN 7.5% 8%
<S> <C> <C>
- ----------------
9.24 9.85
- ----------------
$0-23,500 9.24 9.85
- ----------------
11.07 11.81
- ----------------
$23,500-56,550 10.99 11.72
- ----------------
11.68 12.45
- ----------------
$56,550-117,950 11.68 12.45
- ----------------
12.67 13.51
- ----------------
$117,950-256,500 12.67 13.51
- ----------------
13.42 14.32
- ----------------
OVER $256,500 13.42 14.32
- ----------------
</TABLE>

To compare the yield of a taxable security with the yield of a tax-free security
find your taxable income and read across. These tables incorporate projected
1995 Federal and applicable State (and City) income tax rates and assume that
all income would otherwise be taxable at the investor's highest tax rates. Yield
figures are for example only.

Legislation has recently been enacted that would increase rates for certain
individuals, thereby increasing the tax-free equivalent yield.

A-8
<PAGE>
MUNICIPAL INVESTMENT TRUST FUND
MULTISTATE SERIES
DEFINED ASSET FUNDS
I want to learn more about automatic reinvestment in the Investment Accumulation
Program. Please send me information about participation in the Municipal Fund
Accumulation Program, Inc. and a current Prospectus.
My name (please
print) _________________________________________________________________________
My address (please print):
Street and Apt.
No. ____________________________________________________________________________
City, State, Zip
Code ___________________________________________________________________________
This page is a self-mailer. Please complete the information above, cut along the
dotted line, fold along the lines on the reverse side, tape, and mail with the
Trustee's address displayed on the outside.
12345678

<PAGE>

BUSINESS REPLY MAIL NO POSTAGE
FIRST CLASS PERMIT NO. 644 NEW YORK, NY NECESSARY
IF MAILED
POSTAGE WILL BE PAID BY ADDRESSEE IN THE
THE CHASE MANHATTAN BANK, N.A. UNITED STATES
UNIT TRUST DEPARTMENT
BOX 2051
NEW YORK, NY 10081

- --------------------------------------------------------------------------------
(Fold along this line.)

- --------------------------------------------------------------------------------
(Fold along this line.)
<PAGE>

INVESTMENT SUMMARY FOR EACH TRUST AS OF FEBRUARY 28, 1995 (CONTINUED)

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

OBJECTIVE--To provide tax-exempt interest income through investment in
fixed-income debt obligations issued by or on behalf of the States for which the
Trusts are named and political subdivisions and public authorities thereof or
certain United States territories or possessions. There is no assurance that
this objective will be met because it is subject to the continuing ability of
issuers of the Debt Obligations held by the Trusts to meet their principal and
interest requirements. Furthermore, the market value of the underlying Debt
Obligations, and therefore the value of the Units, will fluctuate with changes
in interest rates and other factors.

RISK FACTORS--Investment in a Trust should be made with an understanding
that the value of the underlying Portfolio may decline with increases in
interest rates. In recent years there have been wide fluctuations in interest
rates and thus in the value of fixed-rate debt obligations generally. The
Sponsors cannot predict whether these fluctuations will continue in the future.
The Securities are generally not listed on a national securities exchange.
Whether or not the Securities are listed, the principal trading market for the
Securities will generally be in the over-the-counter market. As a result, the
existence of a liquid trading market for the Securities may depend on whether
dealers will make a market in the Securities. There can be no assurance that a
market will be made for any of the Securities, that any market for the
Securities will be maintained or of the liquidity of the Securities in any
markets made. In addition, the Fund may be restricted under the Investment
Company Act of 1940 from selling Securities to any Sponsor. The price at which
the Securities may be sold to meet redemptions and the value of Trust Units will
be adversely affected if trading markets for the Securities are limited or
absent.

PUBLIC OFFERING PRICE--During the initial offering period and any offering
of additional units the Public Offering Price of the Units of a Trust is based
on the aggregate offer side evaluation of the underlying Securities in the Trust
(the price at which they could be directly purchased by the public assuming they
were available) divided by the number of Units of the Trust outstanding plus the
applicable sales charge (as set forth on page A-3.)(b) For secondary market
sales charges see Appendix B. Units are offered at the Public Offering Price
computed as of the Evaluation Time for all sales made subsequent to the previous
evaluation, plus cash per unit in the Capital Account not allocated to the
purchase of specific Securities and net interest accrued. The Public Offering
Price on the Initial Date of Deposit and subsequent dates will vary from the
Public Offering Prices set forth on page A-3. (See How To Buy; How To Sell.)

ESTIMATED CURRENT RETURN; ESTIMATED LONG TERM RETURN--Estimated Current
Return on a Unit of the Trust shows the return based on the Initial Public
Offering Price and the maximum applicable sales charge (as set forth on page
A-3) and is computed by multiplying the estimated net annual interest rate per
Unit (which shows the return per Unit based on $1,000 face amount per Unit) by
$1,000 and dividing the result by the Public Offering Price per Unit (not
including accrued interest). Estimated Long Term Return on a Unit of the Trust
shows a net annual long-term return to investors holding to maturity based on
the individual Debt Obligations in the Portfolio weighted to reflect the time to
maturity (or in certain cases to an earlier call date) and market value of each
Debt Obligation in the Portfolio, adjusted to reflect the Public Offering Price
(including the maximum applicable sales charge) and estimated expenses. The net
annual interest rate per Unit and the net annual long-term return to investors
will vary with changes in the fees and expenses of the Trustee and Sponsors and
the fees of the Evaluator which are paid by the Fund, and with the exchange,
redemption, sale, prepayment or maturity of the underlying Securities; the
Public Offering Price will vary with any reduction in sales charges paid in the
case of purchases of 250 or more Units, as well as with fluctuations in the
offer side evaluation of the underlying Securities. Therefore, it can be
expected that the Estimated Current Return and Estimated Long Term Return will
fluctuate in the future (see Income and Distributions--Returns).

- ---------------
(a) In addition to this amount, the Sponsors may be reimbursed for bookkeeping
or other administrative expenses not exceeding their actual costs, currently at
a maximum annual rate of $0.10 per Unit.
(b) The sales charge during the initial offering period and in the secondary
market will be reduced on a graduated scale in the case of purchases of 250 or
more Units (see Appendix B).

A-9

<PAGE>

INVESTMENT SUMMARY FOR EACH TRUST AS OF FEBRUARY 28, 1995 (CONTINUED)

MONTHLY DISTRIBUTIONS--Monthly distributions of interest and any principal
or premium received by a Trust will be made in cash on or shortly after the 25th
day of each month to Holders of record of Units of the Trust on the 10th day of
such month commencing with the first distribution on the date indicated above
(see Income and Distributions). Alternatively, Holders may elect to have their
monthly distributions reinvested in the Municipal Fund Accumulation Program,
Inc. Further information about the program, including a current prospectus, may
be obtained by returning the enclosed form (see Income and
Distributions--Investment Accumulation Program).

TAXATION--In the opinion of special counsel to the Sponsors, each Holder of
Units of a Trust will be considered to have received the interest on his pro
rata portion of each Debt Obligation in the Trust when interest on the Debt
Obligation is received by the Trust. In the opinion of bond counsel rendered on
the date of issuance of the Debt Obligation, this interest is exempt under
existing law from regular Federal income tax and exempt from certain state and
local personal income taxes of the State for which the Trust is named (except in
certain circumstances depending on the Holder), but may be subject to other
state and local taxes. Any gain on the disposition of a Holder's pro rata
portion of a Debt Obligation will be subject to tax. (See Taxes.)

MARKET FOR UNITS--The Sponsors, though not obligated to do so, intend to
maintain a secondary market for Units based on the aggregate bid side evaluation
of the underlying Securities. If this market is not maintained a Holder will be
able to dispose of his Units through redemption at prices also based on the
aggregate bid side evaluation of the underlying Securities. There is no fee for
selling Units. Market conditions may cause the prices available in the market
maintained by the Sponsors or available upon exercise of redemption rights to be
more or less than the total of the amount paid for Units plus accrued interest.
(See How To Buy; How To Sell.)

UNDERWRITING ACCOUNT

The names and addresses of the Underwriters and their several interests in
the Underwriting Account are:

<TABLE>
<S> <C> <C>
Merrill Lynch, Pierce, Fenner & Smith Incorporated P.O. Box 9051, Princeton, N.J. 08543-9051 56.96%
Smith Barney Inc. 388 Greenwich Street--23rd Floor, New York, N.Y. 10013 11.30
PaineWebber Incorporated 1285 Avenue of the Americas, New York, N.Y. 10019 17.39
Prudential Securities Incorporated 1 Seaport Plaza, 199 Water Street, New York, N.Y. 10292 6.52
Dean Witter Reynolds Inc. Two World Trade Center--59th Floor, New York, N.Y.
10048 7.83
----------
100.00%
----------
----------
</TABLE>

A-10

<PAGE>

INVESTMENT SUMMARY AS OF FEBRUARY 28, 1995 (CONTINUED)
FEE TABLE

THIS FEE TABLE IS INTENDED TO ASSIST INVESTORS IN UNDERSTANDING THE COSTS
AND EXPENSES THAT AN INVESTOR IN A TRUST WILL BEAR DIRECTLY OR INDIRECTLY. SEE
HOW TO BUY AND INCOME AND DISTRIBUTIONS--FUND EXPENSES. ALTHOUGH A TRUST IS A
UNIT INVESTMENT TRUST RATHER THAN A MUTUAL FUND, THIS INFORMATION IS PRESENTED
TO PERMIT A COMPARISON OF FEES.

<TABLE>
<S> <C>
UNITHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases during the Initial Offering Period (as a percentage of Public
Offering Price).............................................................................................. 4.50%
Maximum Sales Charge Imposed on Purchases during the Secondary Offering Period (as a percentage of Public
Offering Price).............................................................................................. 5.50%
-----------------
</TABLE>

<TABLE><CAPTION>
ESTIMATED ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS1)
CALIFORNIA MICHIGAN NEW JERSEY NEW YORK
TRUST TRUST TRUST TRUST
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Trustee's Fee...................................... .073% .072% .073% .072%
Portfolio Supervision, Bookkeeping and
Administrative Fees............................. .047% .046% .047% .046%
Other Operating Expenses........................... .102% .114% .120% .087%
-------------- -------------- -------------- --------------
Total........................................... .222% .232% .240% .205%
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
<CAPTION>
ESTIMATED ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS1)
OHIO
TRUST
--------------
<S> <C>
Trustee's Fee...................................... .073%
Portfolio Supervision, Bookkeeping and
Administrative Fees............................. .047%
Other Operating Expenses........................... .125%
--------------
Total........................................... .245%
--------------
--------------
</TABLE>

- ------------------
1Based on the mean of the bid and offer side evaluations; these figures may
differ from those set forth as estimated annual expenses per unit expressed as a
percentage on pages A-3 and A-5.

<TABLE><CAPTION>
EXAMPLE
- ------------------------------------------------------------------------------------------------------------------------

An investor would pay the following expenses on a $1,000 investment,
assuming the Trust's estimated operating expense ratio as described in
parentheses below and a 5% annual CUMULATIVE EXPENSES PAID FOR PERIOD OF:
return on the investment throughout the periods:
-----------------------------------------
1 YEAR 3 YEARS 5 YEARS
----------- ------------- -------------
<S> <C> <C> <C>
California Trust (.222%)................................................ $ 47 $ 52 $ 57
Michigan Trust (.232%).................................................. 47 52 57
New Jersey Trust (.240%)................................................ 47 52 58
New York Trust (.205%).................................................. 47 51 56
Ohio Trust (.245%)...................................................... 47 53 58
<CAPTION>
EXAMPLE
- -----------------------------------------------------------------------------
An investor would pay the following expenses on a $1,000 investment,
assuming the Trust's estimated operating expense ratio as described in
parentheses below and a 5% annual
return on the investment throughout the periods:

10 YEARS
-------------
<S> <C>
California Trust (.222%)................................................ $ 72
Michigan Trust (.232%).................................................. 73
New Jersey Trust (.240%)................................................ 74
New York Trust (.205%).................................................. 70
Ohio Trust (.245%)...................................................... 75

The Example assumes reinvestment of all distributions into additional Units of a
Trust (a reinvestment option different from that offered by this Fund--see
Income and Distributions--Reinvestment) and utilizes a 5% annual rate of return
as mandated by Securities and Exchange Commission regulations applicable to
mutual funds. Cumulative expenses above reflect both sales charges and operating
expenses on an increasing investment (because the net annual return is
reinvested). In addition to the charges described above, a Holder selling or
redeeming his Units in the secondary market (before a Trust terminates) will
receive a price based on the then-current bid side evaluation of the underlying
securities. The difference between this bid side evaluation and the offer side
evaluation (the basis for the Public Offering Price), as of the day before the
Initial Date of Deposit, is $4.00 per Unit for each Trust. Of course, this
difference may change over time. The Example should not be considered a
representation of past or future expenses or annual rate of return; the actual
expenses and annual rate of return may be more or less than those assumed for
purposes of the Example.

A-11

<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

The Sponsors, Trustee and Holders of Municipal Investment Trust Fund,
Multistate Series - 83, Defined Asset Funds (California, Michigan, New Jersey,
New York and Ohio Trusts):

We have audited the accompanying statements of condition, including the
portfolios, of Municipal Investment Trust Fund, Multistate Series - 83, Defined
Asset Funds (California, Michigan, New Jersey, New York and Ohio Trusts) as of
March 1, 1995. These financial statements are the responsibility of the Trustee.
Our responsibility is to express an opinion on these financial statements based
on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. The deposit on March 1,
1995 of securities and an irrevocable letter or letters of credit for the
purchase of securities, as described in the statements of condition, was
confirmed to us by The Chase Manhattan Bank, N.A., the Trustee. An audit also
includes assessing the accounting principles used and significant estimates made
by the Trustee, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Municipal Investment Trust
Fund, Multistate Series - 83, Defined Asset Funds (California, Michigan, New
Jersey, New York and Ohio Trusts) at March 1, 1995 in conformity with generally
accepted accounting principles.

DELOITTE & TOUCHE LLP
New York, N.Y.
March 1, 1995

A-12
<PAGE>

MUNICIPAL INVESTMENT TRUST FUND
MULTISTATE SERIES - 83
DEFINED ASSET FUNDS
STATEMENTS OF CONDITION AS OF INITIAL DATE OF DEPOSIT, MARCH 1, 1995

CALIFORNIA MICHIGAN NEW JERSEY
TRUST TRUST TRUST
-------------- -------------- --------------
FUND PROPERTY
Investment in Debt
Obligations(1)
Debt Obligations Deposited
in the Trust..................$ 448,317.00 -- --
Contracts to purchase
Debt Obligations......... 3,382,851.25 $ 3,152,727.50 $ 3,102,643.15
Accrued interest to Initial Date
of Deposit on underlying Debt
Obligations................... 25,615.63 43,519.58 36,111.09
-------------- -------------- --------------
Total...............$ 3,856,783.88 $ 3,196,247.08 $ 3,138,754.24
-------------- -------------- --------------
-------------- -------------- --------------
LIABILITY AND INTEREST OF
HOLDERS
Liability--Accrued interest to
Initial Date of Deposit on
underlying Debt
Obligations(2)................$ 25,615.63 $ 43,519.58 $ 36,111.09
-------------- -------------- --------------
Interest of Holders--
Units of fractional undivided
interest outstanding
(California Trust--4,000;
Michigan Trust--3,250;
New Jersey Trust--3,250)
Cost to investors(3).......$ 4,011,688.25 $ 3,301,285.00 $ 3,248,828.15
Gross underwriting
commissions(4)............. (180,520.00) (148,557.50) (146,185.00)
-------------- -------------- --------------
Net amount applicable to
investors.................. 3,831,168.25 3,152,727.50 3,102,643.15
-------------- -------------- --------------
Total...............$ 3,856,783.88 $ 3,196,247.08 $ 3,138,754.24
-------------- -------------- --------------
-------------- -------------- --------------

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

(1) Aggregate cost to each Trust of the Debt Obligations is based on the offer
side evaluation determined by the Evaluator at the Evaluation Time on the
business day prior to the Initial Date of Deposit as set forth under How To
Buy. See also the column headed Cost of Debt Obligations to Trust under
Portfolios. An irrevocable letter or letters of credit in the aggregate
amount of $17,166,850.37 has been deposited with the Trustee. The amount of
such letter or letters of credit includes $16,983,832.65 (equal to the
aggregate purchase price to the Sponsors) for the purchase of $17,850,000
face amount of Debt Obligations in connection with contracts to purchase
Debt Obligations, plus $183,017.72 covering accrued interest thereon to the
earlier of the date of settlement for the purchase of Units or the date of
delivery of the Debt Obligations. The letter or letters of credit has been
issued by San Paolo Bank, New York Branch.

A-13
<PAGE>

MUNICIPAL INVESTMENT TRUST FUND
MULTISTATE SERIES - 83
DEFINED ASSET FUNDS
STATEMENTS OF CONDITION AS OF INITIAL DATE OF DEPOSIT, MARCH 1, 1995

NEW YORK OHIO
TRUST TRUST
-------------- --------------
FUND PROPERTY
Investment in Debt
Obligations(1)
Debt Obligations Deposited
in the Trust..................$ 763,522.25 --
Contracts to purchase
Debt Obligations......... 4,108,722.25 $ 3,108,497.50
Accrued interest to Initial Date
of Deposit on underlying Debt
Obligations................... 55,294.80 26,848.60
-------------- --------------
Total...............$ 4,927,539.30 $ 3,135,346.10
-------------- --------------
-------------- --------------
LIABILITY AND INTEREST OF
HOLDERS
Liability--Accrued interest to
Initial Date of Deposit on
underlying Debt
Obligations(2)................$ 55,294.80 $ 26,848.60
-------------- --------------
Interest of Holders--
Units of fractional undivided
interest outstanding
(New York Trust--5,000;
Ohio Trust--3,250)
Cost to investors(3).......$ 5,101,794.50 $ 3,254,975.00
Gross underwriting
commissions(4)............. (229,550.00) (146,477.50)
-------------- --------------
Net amount applicable to
investors.................. 4,872,244.50 3,108,497.50
-------------- --------------
Total...............$ 4,927,539.30 $ 3,135,346.10
-------------- --------------
-------------- --------------

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

(2) Representing, as set forth under How To Buy--Accrued Interest, a special
distribution by the Trustee of an amount equal to accrued interest on the
Debt Obligations as of the Initial Date of Deposit.

(3) Aggregate public offering price (exclusive of interest) computed on the
basis of the offer side evaluation of the underlying Debt Obligations as of
the Evaluation Time on the Business Day prior to the Initial Date of
Deposit.

(4) Assumes sales charge of 4.50% on all Units computed on the basis set forth
under How To Buy.

A-14
<PAGE>

MUNICIPAL INVESTMENT TRUST FUND, MULTISTATE SERIES - 83
ON THE INITIAL DATE OF DEPOSIT,
DEFINED ASSET FUNDS
MARCH 1, 1995
PORTFOLIO OF THE CALIFORNIA TRUST (INSURED)

</TABLE>
<TABLE><CAPTION>
OPTIONAL
PORTFOLIO NO. AND TITLE OF RATINGS OF FACE REFUNDING
DEBT OBLIGATIONS CONTRACTED FOR ISSUES (1) AMOUNT COUPON MATURITIES REDEMPTIONS (2)
---------------------------------------------- ----------- ------------- ----------- ----------- -------------------
<S> <C> <C> <C> <C> <C> <C>
1. California Statewide Communities Dev. Auth., AAA $ 500,000 6.00% 8/15/24 8/15/04 @ 102
Certs. of Part. (Sharp Healthcare Obligated
Group) (MBIA Ins.)
2. Cerritos, CA, Cerritos Pub. Fin. Auth., 1993 AAA 600,000 5.75 11/1/22 11/1/03 @ 102
Rev. Bonds, Ser. A (Los Coyotes Redev. Proj.
Loan) (AMBAC Ins.)
3. Los Angeles, CA, Dept. of Wtr. and Pwr. of the AAA 450,000 6.125 1/15/33 1/15/03 @ 102
City of L.A. Elec. Plant Rev. Bonds, Iss. of
1993 (Financial Guaranty Ins.)
4. Pomona Pub. Fin. Auth., CA, 1993 Rfdg. Rev. AAA 625,000 5.70 2/1/13 2/1/04 @ 102
Bonds, Ser. L (Southwest Pomona Redev.
Proj.) (CAPMAC Ins.)
5. Sacramento, CA, Sacramento Muni. Util. Dist. AAA 600,000 4.75 9/1/21 9/1/03 @ 100
Elec. Rev. Rfdg. Bonds, 1993 Ser. G (MBIA
Ins.)
6. San Diego, CA, California Hlth. Fac. Fin. AAA 625,000 6.20 8/1/20 8/1/02 @ 102
Auth., Ins. Hosp. Rev. Rfdg. Bonds (San
Diego Hosp. Assoc.), Ser. 1992 A (MBIA Ins.)
7. San Diego, CA, San Diego State Univ., Student AAA 600,000 6.125 11/1/24 11/1/04 @ 102
Union Rev. Bonds, Ser. B (MBIA Ins.)
-------------
$ 4,000,000
-------------
-------------
<CAPTION>
SINKING COST OF YIELD TO MATURITY
FUND DEBT OBLIGATIONS ON INITIAL DATE OF
REDEMPTIONS (2) TO TRUST (3) DEPOSIT (3)
--------------- ----------------- -------------------
<S> <C> <C> <C>
1. 8/15/21 $ 489,835.00 6.150%

2. 11/1/19 575,904.00 6.050

3. 1/15/14 448,317.00 6.150

4. 2/1/09 597,937.50 6.100

5. 9/1/14 490,830.00 6.150

6. 8/1/13 627,168.75 6.150+

7. 11/1/18 601,176.00 6.100+

-----------------
$ 3,831,168.25
-----------------
-----------------
</TABLE>

A-15
<PAGE>
- ------------
NOTES

(1) All ratings are by Standard & Poor's. Any rating followed by a 'p' is
provisional and assumes the successful completion of the project being
financed. (See Appendix A.)

(2) Debt Obligations are first subject to optional redemption (which may be
exercised in whole or in part) on the dates and at the prices indicated
under the Optional Refunding Redemptions column in the table. In subsequent
years Debt Obligations are redeemable at declining prices, but typically
not below par value. Some issues may be subject to sinking fund redemption
or extraordinary redemption without premium prior to the dates shown.

Certain Debt Obligations may provide for redemption at par prior or in
addition to any optional or mandatory redemption dates or maturity, for
example, if proceeds are not able to be used as contemplated, if the project
is sold by the owner, if the project is condemned or sold, if the project
is destroyed and insurance proceeds are used to redeem the Debt
Obligations, if interest on the Debt Obligations becomes subject to
taxation, if any related credit support expires prior to maturity and is
not renewed or substitute credit support not obtained, if, in the case of
housing obligations, mortgages are prepaid, or in other special
circumstances.

Sinking fund redemptions are all at par and generally redeem only part of an
issue. Some of the Debt Obligations have mandatory sinking funds which
contain optional provisions permitting the issuer to increase the principal
amount of Debt Obligations called on a mandatory redemption date. The
sinking fund redemptions with optional provisions may, and optional
refunding redemptions generally will, occur at times when the redeemed Debt
Obligations have an offer side evaluation which represents a premium over
par. To the extent that the Debt Obligations were deposited in the Trust at
a price higher than the redemption price, this will represent a loss of
capital when compared with the original Public Offering Price of the Units.
Monthly distributions will generally be reduced by the amount of the income
which would otherwise have been paid with respect to redeemed Debt
Obligations and there will be distributed to Holders any principal amount
and premium received on such redemption after satisfying any redemption
requests received by the Trust. The current return and long term return in
this event may be affected by redemptions. The tax effect on Holders of
redemptions and related distributions is described under Taxes.

(3) Evaluation of Debt Obligations by the Evaluator is made on the basis of
current offer side evaluation. The offering side evaluation is greater than
the current bid side evaluation of the Debt Obligations, which is the basis
on which Redemption Price per Unit is determined (see How To Sell). The
aggregate value based on the bid side evaluation at the Evaluation Time on
the business day prior to the Initial Date of Deposit was $3,815,168.25,
which is $16,000.00 (.40% of the aggregate face amount) lower than the
aggregate Cost of Debt Obligations to Trust based on the offer side
evaluation.
Yield to Maturity on the Initial Date of Deposit of Debt Obligations was
computed on the basis of the offer side evaluation at the Evaluation Time on
the business day prior to the Initial Date of Deposit. Percentages in this
column represent Yield to Maturity on Initial Date of Deposit unless
followed by '+' which indicates yield to an earlier redemption date. (See
Income and Distributions--Returns for a description of the computation of
yield price.)

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

The Debt Obligation in Portfolio Number 3 has been deposited with the
Trustee. All other Debt Obligations are represented entirely by contracts to
purchase such Debt Obligations, which were entered into by the Sponsors
during the period of February 23, 1995 to February 28, 1995. All contracts
are expected to be settled by the initial settlement date for the purchase of
Units.

All Debt Obligations have been insured or guaranteed to maturity by the
indicated insurance company (see Risk Factors--Obligations Backed by
Insurance).

+ See Footnote (3).

A-16
<PAGE>

MUNICIPAL INVESTMENT TRUST FUND, MULTISTATE SERIES - 83
ON THE INITIAL DATE OF DEPOSIT,
DEFINED ASSET FUNDS
MARCH 1, 1995
PORTFOLIO OF THE MICHIGAN TRUST (INSURED)

2. Board of Trustees of Western Michigan AAA 500,000 6.125 11/15/22 11/15/02 @ 102
University, Gen. Rev. Bonds, Ser. 1992 A
(Financial Guaranty Ins.)

3. The Econ. Dev. Corp. of the Cnty. of Gratiot, AAA 400,000 5.20 11/15/12 11/15/03 @ 102
MI, Ltd. Oblig. Econ. Dev. Rev. Rfdg. Bonds,
Ser. 1993 (Michigan Masonic Home Proj.)
(AMBAC Ins.)

4. Warren Consol. Schools, Counties of Macomb abd AAA 500,000 5.25 5/1/21 5/1/03 @ 102
Oakland, MI, 1993 Rfdg. Bonds, Ser. II (G.O.
- Unlimited Tax) (Financial Guaranty Ins.)

5. Greenville Pub. Schools, Counties of Montcalm, AAA 500,000 5.75 5/1/24 5/1/04 @ 101
Kent and Ionia, MI, 1995 Sch. Bldg. and Site
Bonds (G.O. - Unlimited Tax) (MBIA Ins.)

6. West Ottawa Pub. Schools, Cnty. of Ottawa, MI, AAA 500,000 6.00 5/1/20 5/1/02 @ 102
1992 Rfdg. Bonds (G.O.-Unlimited Tax)
(Financial Guaranty Ins.)

7. City of Grand Rapids, MI, Sanitary Swr. Imp. AAA 500,000 6.00 1/1/22 1/1/02 @ 102
Rev. Bonds, Ser. 1992 (MBIA Ins.)
-------------
$ 3,250,000
-------------
-------------
<CAPTION>
SINKING COST OF YIELD TO MATURITY
FUND DEBT OBLIGATIONS ON INITIAL DATE OF
REDEMPTIONS (2) TO TRUST (3) DEPOSIT (3)
--------------- ----------------- -------------------
<S> <C> <C> <C>
1. 11/1/15 $ 373,222.50 6.000%+

2. 11/15/13 500,845.00 6.100+

3. 11/15/08 361,300.00 6.100

4. 5/1/17 447,730.00 6.050

5. 5/1/20 479,510.00 6.050

6. 5/1/11 496,735.00 6.050

7. 1/1/13 493,385.00 6.100

-----------------
$ 3,152,727.50
-----------------
-----------------
</TABLE>

A-17
<PAGE>
- ------------
NOTES

(1) All ratings are by Standard & Poor's. Any rating followed by '*' is subject
to submission and review of final documentation. Any rating followed by a
'p' is provisional and assumes the successful completion of the project
being financed. (See Appendix A.)

(3) Evaluation of Debt Obligations by the Evaluator is made on the basis of
current offer side evaluation. The offering side evaluation is greater than
the current bid side evaluation of the Debt Obligations, which is the basis
on which Redemption Price per Unit is determined (see How To Sell). The
aggregate value based on the bid side evaluation at the Evaluation Time on
the business day prior to the Initial Date of Deposit was $3,152,727.50,
which is $13,000.00 (.40% of the aggregate face amount) lower than the
aggregate Cost of Debt Obligations to Trust based on the offer side
evaluation.
Yield to Maturity on the Initial Date of Deposit of Debt Obligations was
computed on the basis of the offer side evaluation at the Evaluation Time on
the business day prior to the Initial Date of Deposit. Percentages in this
column represent Yield to Maturity on Initial Date of Deposit unless
followed by '+' which indicates yield to an earlier redemption date. (See
Income and Distributions--Returns for a description of the computation of
yield price.)

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

All Debt Obligations are represented entirely by contracts to purchase such
Debt Obligations, which were entered into by the Sponsors during the period
of February 23, 1995 to February 28, 1995. All contracts are expected to be
settled by the initial settlement date for purchase of Units, except for the
Debt Obligations in Portfolio Number 5 (approximately 15% of the aggregate
face amount of the Portfolio) which have been purchased on a when-issued
basis and are expected to be settled 8 days after the settlement date for
purchase of Units.

All Debt Obligations have been insured or guaranteed to maturity by the
indicated insurance company (see Risk Factors--Obligations Backed by
Insurance).

+ See Footnote (3).

A-18
<PAGE>

MUNICIPAL INVESTMENT TRUST FUND, MULTISTATE SERIES - 83
ON THE INITIAL DATE OF DEPOSIT,
DEFINED ASSET FUNDS
MARCH 1, 1995
PORTFOLIO OF THE NEW JERSEY TRUST (INSURED)

<TABLE><CAPTION>
OPTIONAL
PORTFOLIO NO. AND TITLE OF RATINGS OF FACE REFUNDING
DEBT OBLIGATIONS CONTRACTED FOR ISSUES (1) AMOUNT COUPON MATURITIES REDEMPTIONS (2)
---------------------------------------------- ----------- ------------- ----------- ----------- -------------------
<S> <C> <C> <C> <C> <C> <C>
1. New Jersey Educl. Fac. Auth., Rfdg. Rev. AAA $ 500,000 6.00% 7/1/19 7/1/02 @ 102
Bonds, Trenton State College Iss., Ser. 1992
E (AMBAC Ins.)
2. New Jersey Hlth. Care Fac. Fin. Auth. Rev. AAA 500,000 6.25 7/1/24 7/1/04 @ 102
Bonds, Monmouth Med. Ctr. Iss., Ser. C (CGIC
Ins.)
3. New Jersey Hlth. Care Fac. Fin. Auth. Rev. AAA 250,000 5.75 7/1/14 7/1/04 @ 102
Bonds, St. Charles-Riverside Med. Ctr.
Oblig. Grp. Iss., Ser. 1994 (MBIA Ins.)
4. The Essex Cnty. Imp. Auth., NJ, Gen. Oblig. AAA 500,000 5.20 12/1/24 12/1/04 @ 101
Lease Rev. Bonds (Gibraltar Bldg. Proj.),
Ser. 1994 (Financial Guaranty Ins.)
5. The Pollution Ctl. Fin. Auth. of Salem Cnty., AAA 500,000 5.55 11/1/33 11/1/03 @ 102
NJ, Poll. Ctl. Rev. Rfdg. Bonds (Pub. Serv.
Elec. and Gas Co. Proj.), 1993 Ser. C (MBIA
Ins.)
6. The Board of Educ. of the Twp. of Medford, in AAA 155,000 5.95 2/1/12 2/1/05 @ 100
the Cnty. of Burlington, NJ, Sch. Bonds, 345,000 5.95 2/1/13 2/1/05 @ 100
Ser. 1995 (Financial Guaranty Ins.)
7. The Passaic Val. Wtr. Comm., NJ, 1993 Wtr. AAA 500,000 5.00 12/15/22 12/15/03 @ 102
Supply Sys. Rev. Rfdg. Bonds, Ser. A
(Financial Guaranty Ins.)
-------------
$ 3,250,000
-------------
-------------
<CAPTION>
SINKING COST OF YIELD TO MATURITY
FUND DEBT OBLIGATIONS ON INITIAL DATE OF
REDEMPTIONS (2) TO TRUST (3) DEPOSIT (3)
--------------- ----------------- -------------------
<S> <C> <C> <C>
1. 7/1/13 $ 503,500.00 5.900%+

2. 7/1/17 508,070.00 6.050+

3. 7/1/11 245,685.00 5.900

4. 12/1/15 447,935.00 5.950

5. -- 459,280.00 6.100

6. -- 156,145.45 5.850+
-- 346,262.70 5.900+

7. 12/15/10 435,765.00 5.950

-----------------
$ 3,102,643.15
-----------------
-----------------
</TABLE>

A-19
<PAGE>
- ------------
NOTES

(3) Evaluation of Debt Obligations by the Evaluator is made on the basis of
current offer side evaluation. The offering side evaluation is greater than
the current bid side evaluation of the Debt Obligations, which is the basis
on which Redemption Price per Unit is determined (see How To Sell). The
aggregate value based on the bid side evaluation at the Evaluation Time on
the business day prior to the Initial Date of Deposit was $3,089,643.15,
which is $13,000.00 (.40% of the aggregate face amount) lower than the
aggregate Cost of Debt Obligations to Trust based on the offer side
evaluation.
Yield to Maturity on the Initial Date of Deposit of Debt Obligations was
computed on the basis of the offer side evaluation at the Evaluation Time on
the business day prior to the Initial Date of Deposit. Percentages in this
column represent Yield to Maturity on Initial Date of Deposit unless
followed by '+' which indicates yield to an earlier redemption date. (See
Income and Distributions--Returns for a description of the computation of
yield price.)

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

All Debt Obligations have been insured or guaranteed to maturity by the
indicated insurance company (see Risk Factors--Obligations Backed by
Insurance).

+ See Footnote (3).

A-20
<PAGE>

MUNICIPAL INVESTMENT TRUST FUND, MULTISTATE SERIES - 83
ON THE INITIAL DATE OF DEPOSIT,
DEFINED ASSET FUNDS
MARCH 1, 1995
PORTFOLIO OF THE NEW YORK TRUST (INSURED)

<TABLE><CAPTION>
OPTIONAL
PORTFOLIO NO. AND TITLE OF RATINGS OF FACE REFUNDING
DEBT OBLIGATIONS CONTRACTED FOR ISSUES (1) AMOUNT COUPON MATURITIES REDEMPTIONS (2)
---------------------------------------------- ----------- ------------- ----------- ----------- -------------------
<S> <C> <C> <C> <C> <C> <C>
1. Dormitory Auth. of the State of New York, AAA $ 750,000 6.00% 7/1/14 7/1/04 @ 102
Leake and Watts Serv., Inc., Ins. Rev.
Bonds, Ser. 1994 (MBIA Ins.)
2. New York State Energy Research and Devl. AAA 775,000 6.05 4/1/34 4/1/04 @ 102
Auth., Poll. Ctl. Rfdg. Rev. Bonds (NY Elec.
and Gas Corp. Proj.), 1994 Ser. A (MBIA
Ins.)
3. New York State Med. Care Fac. Fin. Agy., AAA 750,000 5.90 8/15/22 8/15/02 @ 102
Mental Hlth. Serv. Fac. Imp. Rev. Bonds,
1992 Ser. D (AMBAC Ins.)
4. Metropolitan Trans. Auth., NY, Trans. Fac. AAA 750,000 6.00 7/1/14 7/1/03 @ 101.5
Rev. Bonds, Ser. M (AMBAC Ins.)
5. New York State Thruway Auth., Gen. Rev. Bonds, AAA 750,000 6.00 1/1/25 1/1/05 @ 102
Ser. C (Financial Guaranty Ins.)
6. Albany Muni. Wtr. Fin. Auth., NY, Wtr. and AAA 475,000 5.50 12/1/22 12/1/03 @ 102
Swr. Sys. Rev. Bonds, Ser. 1993 A (Financial
Guaranty Ins.)
7. New York City Muni. Wtr. Fin. Auth., NY, Wtr. AAA 750,000 5.375 6/15/19 6/15/04 @ 101
and Swr. Sys. Rev. Bonds, Fixed Rate Fiscal
1994 Ser. B (AMBAC Ins.)
-------------
$ 5,000,000
-------------
-------------
<CAPTION>
SINKING COST OF YIELD TO MATURITY
FUND DEBT OBLIGATIONS ON INITIAL DATE OF
REDEMPTIONS (2) TO TRUST (3) DEPOSIT (3)
--------------- ----------------- -------------------
<S> <C> <C> <C>
1. 7/1/10 $ 750,000.00 5.999%

2. -- 763,522.25 6.150

3. 2/15/14 735,000.00 6.050

4. 7/1/11 750,000.00 5.999

5. 1/1/16 744,772.50 6.050

6. 12/1/13 443,037.25 6.000

7. 6/15/15 685,912.50 6.050

-----------------
$ 4,872,244.50
-----------------
-----------------

</TABLE>
A-21
<PAGE>

- ------------
NOTES

(3) Evaluation of Debt Obligations by the Evaluator is made on the basis of
current offer side evaluation. The offering side evaluation is greater than
the current bid side evaluation of the Debt Obligations, which is the basis
on which Redemption Price per Unit is determined (see How To Sell). The
aggregate value based on the bid side evaluation at the Evaluation Time on
the business day prior to the Initial Date of Deposit was $4,852,244.50,
which is $20,000.00 (.40% of the aggregate face amount) lower than the
aggregate Cost of Debt Obligations to Trust based on the offer side
evaluation.
Yield to Maturity on the Initial Date of Deposit of Debt Obligations was
computed on the basis of the offer side evaluation at the Evaluation Time on
the business day prior to the Initial Date of Deposit. Percentages in this
column represent Yield to Maturity on Initial Date of Deposit unless
followed by '+' which indicates yield to an earlier redemption date. (See
Income and Distributions--Returns for a description of the computation of
yield price.)

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

The Debt Obligation in Portfolio Number 2 has been deposited with the
Trustee. All other Debt Obligations are represented entirely by contracts to
purchase such Debt Obligations, which were entered into by the Sponsors
during the period of February 24, 1995 to February 28, 1995. All contacts
are expected to be settled by the initial settlement date for the purchase of
Units.

All Debt Obligations have been insured or guaranteed to maturity by the
indicated insurance company (see Risk Factors--Obligations Backed by
Insurance).

+ See Footnote (3).

A-22
<PAGE>

MUNICIPAL INVESTMENT TRUST FUND, MULTISTATE SERIES - 83
ON THE INITIAL DATE OF DEPOSIT,
DEFINED ASSET FUNDS
MARCH 1, 1995
PORTFOLIO OF THE OHIO TRUST (INSURED)

<TABLE><CAPTION>
OPTIONAL
PORTFOLIO NO. AND TITLE OF RATINGS OF FACE REFUNDING
DEBT OBLIGATIONS CONTRACTED FOR ISSUES (1) AMOUNT COUPON MATURITIES REDEMPTIONS (2)
---------------------------------------------- ----------- ------------- ----------- ----------- -------------------
<S> <C> <C> <C> <C> <C> <C>
1. Ohio Air Quality Dev. Auth., State of OH, Dev. AAA $ 500,000 5.45% 1/1/24 1/1/04 @ 102
Rev. Rfdg. Bonds (The Cincinnati Gas & Elec.
Co. Proj.), 1994 Ser. B (MBIA Ins.)
2. Ohio Muni. Elec. Generation Agy., Joint AAA 500,000 5.375 2/15/24 2/15/03 @ 102
Venture 5, 'Omega JV5' (Belleville
Hydroelectric Proj.), Beneficial Interest
Certificates (AMBAC Ins.)
3. County of Lucas, OH, Hosp. Rfdg. Rev. Bonds AAA 500,000 5.375 8/15/17 8/15/03 @ 102
(St. Vincent Med. Ctr.), Ser. 1993 B (MBIA
Ins.)
4. City of Canton, OH, Wtrwks. Sys. Imp. Bonds AAA 500,000 5.85 12/1/15 12/1/05 @ 102
(Gen. Oblig. Ltd. Tax), Ser. 1995 (AMBAC
Ins.)
5. City of Hamilton, OH, Elec. Sys. Mtge. Rev. AAA 500,000 6.00 10/15/23 10/15/02 @ 102
Rfdg. Bonds, 1992 Ser. A (Financial Guaranty
Ins.)
6. City of Hamilton, OH, Gas Sys. Rev. Bonds, AAA 250,000 5.00 10/15/18 10/15/03 @ 102
1993 Ser. A (MBIA Ins.)
7. City of Stow, OH, Safety Ctr. Construction AAA 500,000 6.15 12/1/15 12/1/05 @ 102
Bonds (Gen. Oblig. Ltd. Tax) (MBIA Ins.)
-------------
$ 3,250,000
-------------
-------------
<CAPTION>
SINKING COST OF YIELD TO MATURITY
FUND DEBT OBLIGATIONS ON INITIAL DATE OF
REDEMPTIONS (2) TO TRUST (3) DEPOSIT (3)
--------------- ----------------- -------------------
<S> <C> <C> <C>
1. -- $ 462,450.00 6.000%

2. 2/15/17 454,125.00 6.050

3. 8/15/13 458,820.00 6.050

4. 12/1/11 496,975.00 5.900

5. 10/15/13 503,590.00 5.900+

6. 10/15/14 221,497.50 5.900

7. 12/1/10 511,040.00 5.900+

-----------------
$ 3,108,497.50
-----------------
-----------------

</TABLE>
A-23
<PAGE>

- ------------
NOTES

(1) All ratings are by Standard & Poor's. Any rating followed by a 'p' is
provisional and assumes the successful completion of the project being
financed. (See Appendix A.)

(3) Evaluation of Debt Obligations by the Evaluator is made on the basis of
current offer side evaluation. The offering side evaluation is greater than
the current bid side evaluation of the Debt Obligations, which is the basis
on which Redemption Price per Unit is determined (see How To Sell). The
aggregate value based on the bid side evaluation at the Evaluation Time on
the business day prior to the Initial Date of Deposit was $3,095,497.50,
which is $5,000.00 (.40% of the aggregate face amount) lower than the
aggregate Cost of Debt Obligations to Trust based on the offer side
evaluation.
Yield to Maturity on the Initial Date of Deposit of Debt Obligations was
computed on the basis of the offer side evaluation at the Evaluation Time on
the business day prior to the Initial Date of Deposit. Percentages in this
column represent Yield to Maturity on Initial Date of Deposit unless
followed by '+' which indicates yield to an earlier redemption date. (See
Income and Distributions--Returns for a description of the computation of
yield price.)

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

All Debt Obligations are represented entirely by contracts to purchase such
Debt Obligations, which were entered into by the Sponsors during the period
February 23, 1995 to February 27, 1995. All contracts are expected to be
settled by the initial settlement date for purchase of Units, except for the
Debt Obligations in Portfolio Number 4 (approximately 15% of the aggregate
face amount of the Portfolio) which have a delayed delivery and are expected
to be settled 1 day after the settlement date for the purchase of Units.

All Debt Obligations have been insured or guaranteed to maturity by the
indicated insurance company (see Risk Factors--Obligations Backed by
Insurance).

+ See Footnote (3).

A-24
<PAGE>

STATE DISCLOSURE

The following summaries are based on publicly available information which
has not been independently verified by the Sponsors or their legal counsel and
are qualified in their entirety by the more detailed information appearing in
the Information Supplement.

CALIFORNIA RISK FACTORS

The State of California continues to confront budgetary concerns. State
expenditures in recent years have exceeded projected amounts mainly because of
increased health and welfare caseloads, lower property taxes (requiring State
support for certain education expenses), lower than expected federal government
payments for immigration related costs, significant additional costs associated
with the construction and operation of correctional institutions and
extraordinary expenditures related to the January 1994 Los Angeles earthquake
and the recent severe flooding in various parts of the State. More recently, in
December 1994, Orange County, California and its Investment Pool filed for
bankruptcy in connection with substantial losses experienced by the Pool. The
County has since defaulted on certain of its obligations and substantial budget
deficits may be experienced by the County and other public agencies which
participate in the Pool. The ultimate financial impact of these events upon the
County and other Pool investors and the State of California, generally, or the
liquidity or value of their securities, cannot be predicted.

To balance the budget, the Governor of California has proposed, among other
things, a series of revenue shifts from local government, reliance on increased
federal aid and reductions in state spending. Major adjustments reflected in
recent budgets include a shift in property taxes from cities, counties, special
districts and redevelopment agencies to school and community college districts,
severe reductions in support for health and welfare programs and higher
education, and various other cuts in services, suspensions of tax credits and
payment deferrals.

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

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

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

CALIFORNIA TAXES

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

The Trust is not an association taxable as a corporation for California tax
purposes. Each investor will be considered the owner of a pro rata portion of
the Trust and will be deemed to receive his pro rata portion of the income
therefrom. To the extent interest on the Bonds is exempt from California
personal income taxes, said interest is similarly exempt from California
personal income taxes in the hands of the investors, except to the extent such
investors are banks or corporations subject to the California franchise tax.
Investors will be subject to California income tax on any gain on the
disposition of all or part of his pro rata portion of a Bond in the Trust. An
investor will be considered to have disposed of all or part of his pro rata
portion of each Bond when he sells or redeems all or some of his Units. An
investor will also be considered to have disposed of all or part of his pro rata
portion of a Bond when all or part of the Bond is sold by the Trust or is
redeemed or paid at maturity. The Bonds and the Units are not taxable under the
California personal property tax law.

A-25
<PAGE>

MICHIGAN RISK FACTORS

Due primarily to the fact that the leading sector of the State of
Michigan's economy is the manufacturing of durable goods, economic activity in
the State has tended to be more cyclical than in the nation as a whole. As a
result, any substantial national economic downturn is likely to have an adverse
effect on the economy of the State and on the revenues of the State and some of
its local governmental units. Additionally, the State's economy is reliant, to a
significant degree, upon the auto industry and could be adversely affected by
changes in the auto industry, notably consolidation and plant closings resulting
from competitive pressures and over-capacity. Recently, as well as historically,
the average monthly unemployment rate in the State has been higher than the
average figures for the United States.

On March 15, 1994, the electors of the State voted to amend the State's
Constitution to increase the State sales tax rate from 4% to 6% and to place an
annual cap on property assessment increases for all property taxes. Companion
legislation also cut the State's income tax rate from 4.6% to 4.4%. In addition,
property taxes for school operating purposes have been reduced and school
funding is being provided from a combination of property taxes and state
revenues, some of which are being provided from new or increased State taxes.
The legislation also contains other provisions that may reduce or alter the
revenues of local units of government and tax increment bonds could be
particularly affected.

Constitutional limitations on the amount of total state revenues which may
be raised from taxes and certain other sources may also affect State operations
and revenue sharing to local units of government.

The foregoing financial conditions and constitutional provisions could
adversely affect the market value or marketability of the Michigan obligations
in the Portfolio and indirectly affect the ability of local governmental units
to pay debt service on their obligations.

Michigan's general obligation bonds are rated A-1 by Moody's and AA by
Standard & Poor's.

MICHIGAN TAXES

In the opinion of Miller, Canfield, Paddock and Stone, Detroit, Michigan,
special counsel on Michigan tax matters, under existing Michigan law:

The Trust and the owners of Units will be treated for purposes of the
Michigan income tax laws and the Single Business Tax in substantially the same
manner as they are for purposes of Federal income tax laws, as currently
enacted. Accordingly, we have relied upon the opinion of Messrs. Davis Polk &
Wardwell as to the applicability of Federal income tax under the Internal
Revenue Code of 1986, as amended, to the Trust and investors in the Trust.

Under the income tax laws of the State of Michigan, the Trust is not an
association taxable as a corporation; the income of Trust will be treated as the
income of the investors in the Trust and be deemed to have been received by them
when received by the Trust. Interest on the Bonds in the Trust which is exempt
from tax under the Michigan income tax laws when received by the Trust will
retain its status as tax exempt interest to the investors in the Trust.

For purposes of the Michigan income tax laws, each investor in the Trust
will be considered to have received his pro rata share of interest on each Bond
in the Trust when it is received by the Trust, and each investor will have a
taxable event when the Trust disposes of a Bond (whether by sale, exchange,
redemption or payment at maturity) or when the investor redeems or sells his
Unit, to the extent the transaction constitutes a taxable event for Federal
income tax purposes. The tax cost of each Unit to an investor will be
established and allocated for purposes of the Michigan income tax laws in the
same manner as such cost is established and allocated for Federal income tax
purposes.

Under the Michigan intangibles tax, the Trust is not taxable and the pro
rata ownership of the underlying Bonds as well as the interest thereon, will be
exempt to the investors in the Trust to the extent the Trust consists of
obligations of the State of Michigan or its political subdivisions or
municipalities or obligations of the Government of Puerto Rico, or of any, other
possession, agency or instrumentality of the United States.

The Michigan Single Business Tax replaced the tax on corporate and
financial institution income under the Michigan Income Tax, and the intangibles
tax with respect to those intangibles of persons subject to the Single Business
Tax the income from which would be considered in computing the Single Business
Tax. Persons are

A-26
<PAGE>

subject to the Single Business Tax only if they are engaged in 'business
activity', as defined in the act. Under the Single Business Tax, both interest
received by the Trust on the underlying Bonds and any amount distributed from
the Trust to an investor, if not included in determining taxable income for
Federal income tax purposes, is also not included in the adjusted tax base upon
which the Single Business Tax is computed, of either the Trust or the investors.
If the Trust or the investors have a taxable event for Federal income tax
purposes, when the Trust disposes of a Bond (whether by sale, exchange,
redemption or payment at maturity) or the investor redeems or sells his Unit, an
amount equal to any gain realised from such taxable event which was included in
the computation of taxable income for Federal income tax purposes (plus an
amount equal to any capital gain of an individual realised in connection with
such event but deducted in computing that individual's Federal taxable income)
will be included in the tax base against which, after allocation, apportionment
and other adjustments, the Single Business Tax is computed. The tax base will be
reduced by an amount equal to any capital loss realized from such a taxable
event, whether or not the capital loss was deducted in computing Federal taxable
income in the year the loss occurred. Investors should consult their tax advisor
as to their status under Michigan law.

In rendering the above Opinion, special Michigan counsel also advises that,
as the Tax Reform Act of 1986 eliminates the capital gain deduction for tax
years beginning after December 31, 1986, the Federal adjusted gross income, the
computation base for the Michigan income tax, of an investor will be increased
accordingly to the extent such capital gains are realized when the Trust
disposes of a Bond or when the investor redeems or sells a Unit, to the extent
such transaction consititutes a taxable event for Federal income tax purposes.

NEW JERSEY RISK FACTORS

New Jersey and certain of its public authorities have in recent years
experienced financial difficulties and pressures to a significant degree.
Employment in manufacturing, wholesale and retail trade and construction have
been in decline although gains have been recorded in the services, government,
financial/insurance/real estate and tranportation/communication/public utilities
sectors. The economic recovery in New Jersey is likely to be slow and uneven
becasue some sectors, like commercial and industrial construction, suffer from
excess capacity, and even in rebounding sectors, employers are expected to be
cautious about hiring.

State appropriations of funds are distributed among a diverse group of
public recipients. In 1994, the largest state aid appropriation was provided for
local elementary and secondary education programs, followed by appropriations
for operation of the state government (including the State Legislature,
Judiciary and Executive Office) and other programs including, among others,
correctional facilities and the State Police, higher education and environmental
protection. The effect on these appropriations and other State funding
requirements of Governor Whitman's 1994 personal income tax rate reduction of 5%
cannot yet be evaluated.

NEW JERSEY TAXES

In the opinion of Shanley & Fisher, P.C., Morristown, New Jersey, special
counsel on New Jersey tax matters, under existing New Jersey law:

1. The proposed activities of the Fund will not cause it to be subject to
the New Jersey Corporation Business Tax Act.

2. The income of the Fund will be treated as the income of individuals,
estates and trusts who are the investors in the Fund for purposes of the New
Jersey Gross Income Tax Act, and interest which is exempt from tax under the New
Jersey Gross Income Tax Act when received by the Fund will retain its status as
tax exempt in the hands of such investors. Gains arising from the sale or
redemption by an investor of his Units or from the sale or redemption by the
Fund of any Bond are exempt from taxation under the New Jersey Gross Income Tax
Act, as enacted and construed on the date hereof, to the extent such gains are
attributable to Bonds the interest on which is exempt from tax under the New
Jersey Gross Income Tax Act.

3. Units of the Fund may be subject, in the estates of New Jersey
residents, to taxation under the Transfer Inheritance Tax Law of the State of
New Jersey.

A-27
<PAGE>

NEW YORK RISK FACTORS

The State of New York and several of its public authorities and
municipalities including, in particular, New York City, continue to face
financial difficulties. For many years, the State accumulated deficits by
extraordinary borrowing, which have been paid off by the issuance of long-term
bonds under legislation limiting future borrowing for deficits. The State
currently projects a $300 million budget gap for the current fiscal year and a
$5 billion budget gap for the fiscal year beginning April 1, 1995. Closing the
deficit for future years will be more difficult because of plans proposed by the
State's new Governor to reduce personal income taxes by 25% during his four-year
term. The State's general obligation debt is rated A-by S&P and A by Moody's; at
March 31, 1994, approximately $5.4 billion face amount was outstanding. 18 State
authorities had an aggregate of $63.5 billion of debt outstanding at September
30, 1993, of which approximately $24 billion was State supported.

New York City, despite over $3 billion of gap-closing measures already
adopted, faces an estimated remaining budget gap for the current fiscal year of
about $650 million, and a $2 billion budget gap is projected for the fiscal year
beginning July 1, 1995. New York City bonds are rated A-by S&P and Baa1 by
Moody's. At September 30, 1994, approximately $21.7 billion of New York City
bonds (excluding City debt held by The Municipal Assitance Corporation for the
City of New York (MAC)) and approximately $4.1 billion of MAC bonds were
outstanding. Other localities in the State had an aggregate of approximately
$15.7 billion of indebtedness outstanding in 1992.

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

Both the State and New York City suffer from long-term structural
imbalances between revenues and expenditures, which historically have been
narrowed through extensive use of non-recurring measures such as bond
refinancings, depletion of reserves, sales of assets, cost-cuts and layoffs.
Except for property taxes, changes in New York City revenue measures require
State approval. Based on the City's current debt and proposed issuances, the
City Comptroller has estimated that by fiscal 1998 debt service will consume
19.5% of New York City's tax revenue. The City is also particularly subject to
unanticipated increases in labor costs, resulting primarily from expiring union
contracts and overtime expense. Both the State and New York City also face
substantial replacement costs for infrastructure (such as roads, bridges and
other public facilities) which has suffered from reduced maintenance
expenditures during various economic declines.

Various municipalities and State and local authorities in New York
(particularly, the Metropolitan Transportation Authority) are dependent to
varying degrees on State and federal aid, and could be adversely affected by the
State's and federal government's actions to balance their budgets. The State's
dependence on federal aid and sensitivity to economic cycles, as well as high
levels of taxes and unemployment, may continue to make it difficult to balance
State and local budgets in the future.

NEW YORK TAXES

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

Under the income tax laws of the State and City of New York, the Fund is
not an association taxable as a corporation and income received by the Fund
will be treated as the income of the investors in the same manner as for
federal income tax purposes. Accordingly, each investor will be considered
to have received the interest on his pro rata portion of each Bond when
interest on the Bond is received by the Trust. In the opinion of bond
counsel delivered on the date of issuance of the Bonds, such interest will
be exempt from New York State and City personal income taxes except where
such interest is subject to federal income taxes (see Taxes). A
noncorporate investor in Units of the Trust who is a New York State (and
City) resident will be subject to New York State (and City) personal income
taxes on any gain recognized when he disposes of all or part of his pro
rata portion of a Bond. A noncorporate investor who is not a New York State
resident will not be subject to New York State or City personal income
taxes on any such gain unless such Units are attributable to a business,
trade, profession or occupation carried on in New York. A New York State
(and

A-28
<PAGE>

City) resident should determine his tax basis for his pro rata portion of
each Bond for New York State (and City) income tax purposes in the same
manner as for federal income tax purposes. Interest income on, as well as
any gain recognized on the disposition of, an investor's pro rata portion
of the Bonds are generally not excludable from income in computing New York
State and City corporate franchise taxes.

OHIO RISK FACTORS

Economic activity in Ohio, as in many other industrially developed states,
tends to be more cyclical than in some other states and in the nation as a
whole. Although manufacturing (including auto-related manufacturing) remains an
important part of Ohio's economy, in recent years growth in payroll employment
has been concentrated among non-manufacturing industries, with manufacturing
payroll employment growth tapering off since its 1969 peak. Agriculture,
however, remains a very important segment of the economy in Ohio.

Consistent with national economic conditions, during its 1990-91 biennium,
Ohio experienced an economic slowdown producing some significant changes in
certain general revenue fund revenue and expenditure levels. On the revenue
side, revenues from sales and use taxes (including auto) and corporate franchise
and personal income taxes were less than previously forecasted. Expenditures,
however, have exceeded forecasts, especially in the areas of expenditures for
human services such as for Medicaid, Aid to Dependent Children and general
assistance. Subsequent executive and legislative actions have provided for
positive general revenue fund balances in recent years. The general revenue fund
balances were approximately $111 million at the end of the 1992-93 biennium and
over $560 million at the end of the first year of the 1994-95 biennium.

At various times, Ohio voters have authorized the incurrence of State debt
to which taxes or excises are pledged for payment.

The Ohio public and joint vocational school districts receive a major
portion of their operating funds from State subsidy appropriations and receipts
from locally-voted taxes. Litigation alleging that the Ohio system of school
funding violates various provisions of the Ohio Constitution is currently
pending. A lower court decision adverse to the State has been appealed. It is
not possible at this time to state whether the suit will be successful or, if
plaintiffs should prevail, the effect on the State's present school funding
system, including the amount of and criteria for State basic aid allocations to
school districts.

Various Ohio municipalities have experienced fiscal difficulties and the
State established an act in 1979 to identify and assist cities and villages
experiencing defined 'fiscal emergencies'.

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

OHIO TAXES

In the opinion of Vorys, Sater, Seymour and Pease, Columbus, Ohio, special
counsel on Ohio tax matters and subject to the assumptions and qualifications
contained in such opinion, under existing Ohio law:

The Ohio Trust is not an association subject to the Ohio corporation
franchise tax or the Ohio tax on dealers in intangibles and the Trustees will
not be subject to the Ohio personal income tax.

In calculating an investor's Ohio personal income tax or the Ohio
corporation franchise tax, an investor will not be required to include in the
investor's 'adjusted gross income' or 'net income', as the case may be, the
investor's shares of interest received by or distributed from the Ohio Trust on
any Bond in the Ohio Trust, the interest on which is exempt from Ohio personal
income or corporation franchise taxes, as the case may be.

In calculating an investor's Ohio personal income tax or the Ohio
corporation franchise tax, an investor will be required to include in the
investor's 'adjusted gross income' or 'net income', as the case may be, capital
gains and losses which the investor must recognize for Federal income tax
purposes (upon the sale or other disposition of Units by the investor or upon
the sale or other disposition of Bonds by the Ohio Trust), except gains and
losses

A-29
<PAGE>

attributable to Bonds specifically exempted from such taxation by the Ohio law
authorizing their issuance. An investor subject to the Ohio corporation
franchise tax may, in the alternative if it results in a larger amount of tax
payable, be taxed upon its net worth and, for this purpose, is required to
include in its net worth the full value, as shown on the books of the
corporation, of all Units which it owns.

For purposes of Ohio municipal income taxation, the investor's shares of
interest received by or distributed from the Ohio Trust on Bonds or gains
realized by the investor from the sale, exchange or other disposition of Units
by the investor or from the sale, exchange or other disposition of Bonds by the
Ohio Trust, as a result of the repeal of the Ohio tax on intangible personal
property, might be required to be included in an investor's taxable income if
(1) such interest or gain is not exempt from Ohio municipal income taxes by
virtue of a specific statutory or constitutional exemption from such taxes
(regarding which no blanket opinion is being given), and (2) the Ohio
municipality in which the investor resides was taxing such income on or before
April 1, 1986 and such tax was submitted to and approved by the voters of such
municipality in an election held on November 8, 1988.

Assuming that the Ohio Trust will not hold any tangible personal property
nor any real property, neither Bond is held by the Ohio Trust nor Units of the
Ohio Trust held by individuals are subject to any property tax levied by the
State of Ohio or any political subdivision thereof.

A-30

<PAGE>

DEFINED ASSET FUNDSSM
PROSPECTUS--PART B
DEFINED ASSET FUNDS MUNICIPAL SERIES
MUNICIPAL INVESTMENT TRUST FUND

THIS PART B OF THE PROSPECTUS MAY NOT BE DISTRIBUTED UNLESS ACCOMPANIED OR
PRECEDED BY PART A. FURTHER DETAIL REGARDING ANY OF THE INFORMATION
PROVIDED IN THE PROSPECTUS MAY BE OBTAINED WITHIN FIVE DAYS OF WRITTEN
OR TELEPHONIC REQUEST TO THE TRUSTEE, THE ADDRESS AND
TELEPHONE NUMBER OF WHICH ARE SET FORTH IN PART A OF THIS PROSPECTUS.

Index

PAGE
---------
Fund Description...................................... 1
Risk Factors.......................................... 2
How to Buy Units...................................... 7
How to Sell Units..................................... 9
Income, Distributions and Reinvestment................ 9
Fund Expenses......................................... 10
Taxes................................................. 11
Records and Reports................................... 12

PAGE
---------
Trust Indenture....................................... 12
Miscellaneous......................................... 13
Exchange Option....................................... 14
Supplemental Information.............................. 15
Appendix A--Description of Ratings.................... a-1
Appendix B--Sales Charge Schedules for Defined Asset
Funds Municipal Series................................ b-1
Appendix C--Sales Charge Schedules for Municipal
Investment Trust Fund................................. c-1

FUND DESCRIPTION

BOND PORTFOLIO SELECTION
Professional buyers and research analysts for Defined Asset Funds, with
access to extensive research, selected the Bonds for the Portfolio after
considering the Fund's investment objective as well as the quality of the Bonds
(all Bonds in the Portfolio are initially rated in the category A or better by
at least one nationally recognized rating organization or have comparable credit
characteristics), the yield and price of the Bonds compared to similar
securities, the maturities of the Bonds and the diversification of the
Portfolio. Only issues meeting these stringent criteria of the Defined Asset
Funds team of dedicated research analysts are included in the Portfolio. No
leverage or borrowing is used nor does the Portfolio contain other kinds of
securities to enhance yield. A summary of the Bonds in the Portfolio appears in
Part A of the Prospectus.
The deposit of the Bonds in the Fund on the initial date of deposit
established a proportionate relationship among the face amounts of the Bonds.
During the 90-day period following the initial date of deposit the Sponsors may
deposit additional Bonds in order to create new Units, maintaining to the extent
possible that original proportionate relationship. Deposits of additional Bonds
subsequent to the 90-day period must generally replicate exactly the
proportionate relationship among the face amounts of the Bonds at the end of the
initial 90-day period.
Yields on bonds depend on many factors including general conditions of the
bond markets, the size of a particular offering and the maturity and quality
rating of the particular issues. Yields can vary among bonds with similar
maturities, coupons and ratings. Ratings represent opinions of the rating
organizations as to the quality of the bonds rated, based on the credit of the
issuer or any guarantor, insurer or other credit provider, but these ratings are
only general standards of quality (see Appendix A).
After the initial date of deposit, the ratings of some Bonds may be reduced
or withdrawn, or the credit characteristics of the Bonds may no longer be
comparable to bonds rated A or better. Bonds rated BBB or Baa (the lowest
investment grade rating) or lower may have speculative characteristics, and
changes in economic conditions or other circumstances are more likely to lead to
a weakened capacity to make principal and interest payments than is the case
with higher grade bonds. Bonds rated below investment grade or unrated bonds
with
1
<PAGE>
similar credit characteristics are often subject to
greater market fluctuations and risk of loss of principal and income than higher
grade bonds and their value may decline precipitously in response to rising
interest rates.
Because each Defined Asset Fund is a preselected portfolio of bonds, you
know the securities, maturities, call dates and ratings before you invest. Of
course, the Portfolio will change somewhat over time, as Bonds mature, are
redeemed or are sold to meet Unit redemptions or in other limited circumstances.
Because the Portfolio is not actively managed and principal is returned as the
Bonds are disposed of, this principal should be relatively unaffected by changes
in interest rates.

BOND PORTFOLIO SUPERVISION
The Fund follows a buy and hold investment strategy in contrast to the
frequent portfolio changes of a managed fund based on economic, financial and
market analyses. The Fund may retain an issuer's bonds despite adverse financial
developments. Experienced financial analysts regularly review the Portfolio and
a Bond may be sold in certain circumstances including the occurrence of a
default in payment or other default on the Bond, a decline in the projected
income pledged for debt service on a revenue bond, institution of certain legal
proceedings, if the Bond becomes taxable or is otherwise inconsistent with the
Fund's investment objectives, a decline in the price of the Bond or the
occurrence of other market or credit factors (including advance refunding) that,
in the opinion of Defined Asset Funds research analysts, makes retention of the
Bond detrimental to the interests of investors. The Trustee must generally
reject any offer by an issuer of a Bond to exchange another security pursuant to
a refunding or refinancing plan.
The Sponsors and the Trustee are not liable for any default or defect in a
Bond. If a contract to purchase any Bond fails, the Sponsors may generally
deposit a replacement bond so long as it is a tax-exempt bond, has a fixed
maturity or disposition date substantially similar to the failed Bond and is
rated A or better by at least one nationally recognized rating organization or
has comparable credit characteristics. A replacement bond must be deposited
within 110 days after deposit of the failed contract, at a cost that does not
exceed the funds reserved for purchasing the failed Bond and at a yield to
maturity and current return substantially equivalent (considering then current
market conditions and relative creditworthiness) to those of the failed Bond, as
of the date the failed contract was deposited.

RISK FACTORS
An investment in the Fund entails certain risks, including the risk that
the value of your investment will decline with increases in interest rates.
Generally speaking, bonds with longer maturities will fluctuate in value more
than bonds with shorter maturities. In recent years there have been wide
fluctuations in interest rates and in the value of fixed-rate bonds generally.
The Sponsors cannot predict the direction or scope of any future fluctuations.
Certain of the Bonds may have been deposited at a market discount or
premium principally because their interest rates are lower or higher than
prevailing rates on comparable debt securities. The current returns of market
discount bonds are lower than comparably rated bonds selling at par because
discount bonds tend to increase in market value as they approach maturity. The
current returns of market premium bonds are higher than comparably rated bonds
selling at par because premium bonds tend to decrease in market value as they
approach maturity. Because part of the purchase price is returned through
current income payments and not at maturity, an early redemption at par of a
premium bond will result in a reduction in yield to the Fund. Market premium or
discount attributable to interest rate changes does not indicate market
confidence or lack of confidence in the issue.
Certain Bonds deposited into the Fund may have been acquired on a
when-issued or delayed delivery basis. The purchase price for these Bonds is
determined prior to their delivery to the Fund and a gain or loss may result
from fluctuations in the value of the Bonds. Additionally, in any Defined Asset
Funds Municipal Series, if the value of the Bonds reserved for payment of the
periodic deferred sales charge, together with the interest thereon, were to
become insufficient to pay these charges, additional bonds would be required to
be sold.
The Fund may be concentrated in one or more of types of bonds.
Concentration in a State may involve additional risk because of the decreased
diversification of economic, political, financial and market risks. Set forth
below is a brief description of certain risks associated with bonds which may be
held by the Fund. Additional information is contained in the Information
Supplement which is available from the Trustee at no charge to the investor.
2
<PAGE>
GENERAL OBLIGATION BONDS

Certain of the Bonds may be general obligations of a governmental entity.
General obligation bonds are backed by the issuer's pledge of its full faith,
credit and taxing power for the payment of principal and interest. However, the
taxing power of any governmental entity may be limited by provisions of state
constitutions or laws and its credit will depend on many factors, including an
erosion of the tax base resulting from population declines, natural disasters,
declines in the state's industrial base or an inability to attract new
industries, economic limits on the ability to tax without eroding the tax base
and the extent to which the entity relies on federal or state aid, access to
capital markets or other factors beyond the entity's control. In addition,
political restrictions on the ability to tax and budgetary constraints affecting
state governmental aid may have an adverse impact on the creditworthiness of
cities, counties, school districts and other local governmental units.
As a result of the recent recession's adverse impact upon both revenues and
expenditures, as well as other factors, many state and local governments have
confronted deficits which were the most severe in recent years. Many issuers are
facing highly difficult choices about significant tax increases and spending
reductions in order to restore budgetary balance. The failure to implement these
actions on a timely basis could force these issuers to issue additional debt to
finance deficits or cash flow needs and could lead to a reduction of their bond
ratings and the value of their outstanding bonds.

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

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

MUNICIPAL REVENUE BONDS
Municipal revenue bonds are tax-exempt securities issued by states,
municipalities, public authorities or similar entities to finance the cost of
acquiring, constructing or improving various projects. Municipal revenue bonds
are not general obligations of governmental entities backed by their taxing
power and payment is generally solely dependent upon the creditworthiness of the
public issuer or the financed project or state appropriations. Examples of
municipal revenue bonds are:
Municipal utility bonds, including electrical, water and sewer revenue
bonds, whose payments are dependent on various factors, including the rates
the utilities may charge, the demand for their services and their operating
costs, including expenses to comply with environmental legislation and
other energy and licensing laws and regulations. Utilities are particularly
sensitive to, among other things, the effects of inflation on operating and
construction costs, the unpredictability of future usage requirements, the
costs and availability of fuel and, with certain electric utilities, the
risks associated with the nuclear industry;
Lease rental bonds which are generally issued by governmental financing
authorities with no direct taxing power for the purchase of equipment or
construction of buildings that will be used by a state or local government.
Lease rental bonds are generally subject to an annual risk that the lessee
government might not appropriate funds for the leasing rental payments to
service the bonds and may also be subject to the risk that rental
obligations may terminate in the event of damage to or destruction or
condemnation of the equipment or building;
Multi-family housing revenue bonds and single family mortgage revenue
bonds which are issued to provide financing for various housing projects
and which are payable primarily from the revenues derived from mortgage
loans to housing projects for low to moderate income families or notes
secured by mortgages on residences; repayment of this type of bonds is
therefore dependent upon, among other things, occupancy
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<PAGE>
levels, rental income, the rate of default on underlying mortgage loans,
the ability of mortgage insurers to pay claims, the continued availability
of federal, state or local housing subsidy programs, economic conditions in
local markets, construction costs, taxes, utility costs and other operating
expenses and the managerial ability of project managers. Housing bonds are
generally prepayable at any time and therefore their average life will
ordinarily be less than their stated maturities;
Hospital and health care facility bonds whose payments are dependent
upon revenues of hospitals and other health care facilities. These revenues
come from private third-party payors and government programs, including the
Medicare and Medicaid programs, which have generally undertaken cost
containment measures to limit payments to health care facilities. Hospitals
and health care facilities are subject to various legal claims by patients
and others and are adversely affected by increasing costs of insurance;
Airport, port, highway and transit authority revenue bonds which are
dependent for payment on revenues from the financed projects, including
user fees from ports and airports, tolls on turnpikes and bridges, rents
from buildings, transit fare revenues and additional financial resources
including federal and state subsidies, lease rentals paid by state or local
governments or a pledge of a special tax such as a sales tax or a property
tax. In the case of the air travel industry, airport income is largely
affected by the airlines' ability to meet their obligations under use
agreements which in turn is affected by increased competition among
airlines, excess capacity and increased fuel costs, among other factors.
Solid waste disposal bonds which are generally payable from dumping and
user fees and from revenues that may be earned by the facility on the sale
of electrical energy generated in the combustion of waste products and
which are therefore dependent upon the ability of municipalities to fully
utilize the facilities, sufficient supply of waste for disposal, economic
or population growth, the level of construction and maintenance costs, the
existence of lower-cost alternative modes of waste processing and
increasing environmental regulation. A recent decision of the U.S. Supreme
Court limiting a municipality's ability to require use of its facilities
may have an adverse affect on the credit quality of various issues of these
bonds;
Special tax bonds which are not secured by general tax revenues but are
only payable from and secured by the revenues derived by a municipality
from a particular tax--for example, a tax on the rental of a hotel room, on
the purchase of food and beverages, on the rental of automobiles or on the
consumption of liquor and may therefore be adversely affected by a
reduction in revenues resulting from a decline in the local economy or
population or a decline in the consumption, use or cost of the goods and
services that are subject to taxation;
Student loan revenue bonds which are typically secured by pledges of new
or existing student loans. The loans, in turn, are generally either
guaranteed by eligible guarantors and reinsured by the Secretary of the
U.S. Department of Education, directly insured by the federal government,
or financed as part of supplemental or alternative loan programs within a
state (e.g., loan repayments are not guaranteed). These bonds often permit
the issuer to enter into interest rate swap agreements with eligible
counterparties in which event the bonds are subject to the additional risk
of the counterparty's ability to fulfill its swap obligation;
University and college bonds, the payments on which are dependent upon
various factors, including the size and diversity of their sources of
revenues, enrollment, reputation, the availability of endowments and other
funds and, in the case of public institutions, the financial condition of
the relevant state or other governmental entity and its policies with
respect to education; and
Tax increment and tax allocation bonds, which are secured by ad valorem
taxes imposed on the incremental increase of taxable assessed valuation of
property within a jurisdiction above an established base of assessed value.
The issuers of these bonds do not have general taxing authority and the tax
assessments on which the taxes used to service the bonds are based may be
subject to devaluation due to market price declines or governmental action.

Puerto Rico. Certain Bonds may be affected by general economic conditions
in the Commonwealth of Puerto Rico. Puerto Rico's economy is largely dependent
for its development on federal programs and current federal budgetary policies
suggest that an expansion of its programs is unlikely. Reductions in federal tax
benefits or incentives or curtailment of spending programs could adversely
affect the Puerto Rican economy.
Industrial Development Revenue Bonds. Industrial development revenue bonds
are municipal obligations issued to finance various privately operated projects
including pollution control and manufacturing facilities. Payment is generally
solely dependent upon the creditworthiness of the corporate operator of the
project and, in
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certain cases, an affiliated or third party guarantor and may be affected by
economic factors relating to the particular industry as well as varying degrees
of governmental regulation. In many cases industrial revenue bonds do not have
the benefit of covenants which would prevent the corporations from engaging in
capital restructurings or borrowing transactions which could reduce their
ability to meet their obligations and result in a reduction in the value of the
Portfolio.

BONDS BACKED BY LETTERS OF CREDIT OR INSURANCE
Certain Bonds may be secured by letters of credit issued by commercial
banks or savings banks, savings and loan associations and similar thrift
institutions or are direct obligations of banks or thrifts. The letter of credit
may be drawn upon, and the Bonds redeemed, if an issuer fails to pay amounts due
on the Bonds or, in certain cases, if the interest on the Bond becomes taxable.
Letters of credit are irrevocable obligations of the issuing institutions. The
profitability of a financial institution is largely dependent upon the credit
quality of its loan portfolio which, in turn, is affected by the institution's
underwriting criteria, concentrations within the portfolio and specific industry
and general economic conditions. The operating performance of financial
institutions is also impacted by changes in interest rates, the availability and
cost of funds, the intensity of competition and the degree of governmental
regulation.
Certain Bonds may be insured or guaranteed by insurance companies listed
below. The claims-paying ability of each of these companies, unless otherwise
indicated, was rated AAA by Standard & Poor's or another nationally recognized
rating organization at the time the insured Bonds were purchased by the Fund.
The ratings are subject to change at any time at the discretion of the rating
agencies. In the event that the rating of an Insured Fund is reduced, the
Sponsors are authorized to direct the Trustee to obtain other insurance on
behalf of the Fund. The insurance policies guarantee the timely payment of
principal and interest on the Bonds but do not guarantee their market value or
the value of the Units. The insurance policies generally do not provide for
accelerated payments of principal or cover redemptions resulting from events of
taxability.
The following summary information relating to the listed insurance
companies has been obtained from publicly available information:
<TABLE><CAPTION>
FINANCIAL INFORMATION
AS OF SEPTEMBER 30, 1994
(IN MILLIONS OF DOLLARS)
--------------------------------------
POLICYHOLDERS'
NAME DATE ESTABLISHED ADMITTED ASSETS SURPLUS
- ---------------------------------------------------- ----------------- --------------- ---------------------
<S> <C> <C> <C>
AMBAC Indemnity Corporation......................... 1970 $ 2,150 $ 779
Asset Guaranty Insurance Co. (AA by S&P) 1988 152 73
Capital Guaranty Insurance Company.................. 1986 293 166
Capital Markets Assurance Corp...................... 1987 198 139
Connie Lee Insurance Company........................ 1987 193 106
Continental Casualty Company........................ 1948 19,220 3,309
Financial Guaranty Insurance Company................ 1984 2,092 872
Financial Security Assurance Inc.................... 1984 776 369
Firemen's Insurance Company of Newark, NJ........... 1855 2,236 383
Industrial Indemnity Co. (HIBI)..................... 1920 1,853 299
Municipal Bond Investors Assurance Corporation...... 1986 3,314 1,083

Insurance companies are subject to extensive regulation and supervision
where they do business by state insurance commissioners who regulate the
standards of solvency which must be maintained, the nature of and limitations on
investments, reports of financial condition, and requirements regarding reserves
for unearned premiums, losses and other matters. A significant portion of the
assets of insurance companies are required by law to be held in reserve against
potential claims on policies and is not available to general creditors. Although
the federal government does not regulate the business of insurance, federal
initiatives including pension regulation, controls on medical care costs,
minimum standards for no-fault automobile insurance, national health insurance,
tax law changes affecting life insurance companies and repeal of the antitrust
exemption for the insurance business can significantly impact the insurance
business.
5
<PAGE>
STATE RISK FACTORS
Investment in a single State Trust, as opposed to a Fund which invests in
the obligations of several states, may involve some additional risk due to the
decreased diversification of economic, political, financial and market risks. A
brief description of the factors which may affect the financial condition of the
applicable State for any State Trust, together with a summary of tax
considerations relating to that State, appear in Part A (or for certain State
Trusts, Part C), of the Prospectus; further information is contained in the
Information Supplement.

LITIGATION AND LEGISLATION
The Sponsors do not know of any pending litigation as of the initial date
of deposit which might reasonably be expected to have a material adverse effect
upon the Fund. At any time after the initial date of deposit, litigation may be
initiated on a variety of grounds, or legislation may be enacted, affecting the
Bonds in the Fund. Litigation, for example, challenging the issuance of
pollution control revenue bonds under environmental protection statutes may
affect the validity of certain Bonds or the tax-free nature of their interest.
While the outcome of litigation of this nature can never be entirely predicted,
opinions of bond counsel are delivered on the date of issuance of each Bond to
the effect that it has been validly issued and that the interest thereon is
exempt from federal income tax. Also, certain proposals, in the form of state
legislative proposals or voter initiatives, seeking to limit real property taxes
have been introduced in various states, and an amendment to the constitution of
the State of California, providing for strict limitations on real property
taxes, has had a significant impact on the taxing powers of local governments
and on the financial condition of school districts and local governments in
California. In addition, other factors may arise from time to time which
potentially may impair the ability of issuers to make payments due on the Bonds.
Under the Federal Bankruptcy Code, for example, municipal bond issuers, as well
as any underlying corporate obligors or guarantors, may proceed to restructure
or otherwise alter the terms of their obligations.
From time to time Congress considers proposals to prospectively and
retroactively tax the interest on state and local obligations, such as the
Bonds. The Supreme Court clarified in South Carolina v. Baker (decided on April
20, 1988) that the U.S. Constitution does not prohibit Congress from passing a
nondiscriminatory tax on interest on state and local obligations. This type of
legislation, if enacted into law, could require investors to pay income tax on
interest from the Bonds and could adversely affect an investment in Units. See
Taxes.

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

FUND TERMINATION
The Fund will be terminated no later than the mandatory termination date
specified in Part A of the Prospectus. It will terminate earlier upon the
disposition of the last Bond or upon the consent of investors holding 51% of the
Units. The Fund may also be terminated earlier by the Sponsors once the total
assets of the Fund have fallen below the minimum value specified in Part A of
the Prospectus. A decision by the Sponsors to terminate the Fund early will be
based on factors similar to those considered by the Sponsors in determining
whether to continue the sale of Units in the secondary market.
Notice of impending termination will be provided to investors and
thereafter units will no longer be redeemable. On or shortly before termination,
the Fund will seek to dispose of any Bonds remaining in the
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<PAGE>
Portfolio although any Bond unable to be sold at a reasonable price may continue
to be held by the Trustee in a liquidating trust pending its final disposition.
A proportional share of the expenses associated with termination, including
brokerage costs in disposing of Bonds, will be borne by investors remaining at
that time. This may have the effect of reducing the amount of proceeds those
investors are to receive in any final distribution.

LIQUIDITY
Up to 40% of the value of the Portfolio may be attributable to guarantees
or similar security provided by corporate entities. These guarantees or other
security may constitute restricted securities that cannot be sold publicly by
the Trustee without registration under the Securities Act of 1933, as amended.
The Sponsors nevertheless believe that, should a sale of the Bonds guaranteed or
secured be necessary in order to meet redemption of Units, the Trustee should be
able to consummate a sale with institutional investors.
The principal trading market for the Bonds will generally be in the
over-the-counter market and the existence of a liquid trading market for the
Bonds may depend on whether dealers will make a market in them. There can be no
assurance that a liquid trading market will exist for any of the Bonds,
especially since the Fund may be restricted under the Investment Company Act of
1940 from selling Bonds to any Sponsor. The value of the Portfolio will be
adversely affected if trading markets for the Bonds are limited or absent.

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

PUBLIC OFFERING PRICE--DEFINED ASSET FUNDS MUNICIPAL SERIES
To allow Units to be priced at $1,000, the Units outstanding as of the
Evaluation Time on the Initial Date of Deposit (all of which are held by the
Sponsors) will be split (or split in reverse).
During the initial offering period for at least the first three months of
the Fund, the Public Offering Price (and the Initial Repurchase Price) is based
on the higher, offer side evaluation of the Bonds at the next Evaluation Time
after the order is received. In the secondary market (after the initial offering
period), the Public Offering Price (and the Sponsors' Repurchase Price and the
Redemption Price) is based on the lower, bid side evaluation of the Bonds.
Investors will be subject to differing types and amounts of sales charge
depending upon the timing of their purchases and redemptions of Units. A
periodic deferred sales charge will be payable quarterly through about the fifth
anniversary of the Fund from a portion of the interest on and principal of Bonds
reserved for that purpose. Commencing on the first anniversary of the Fund, the
Public Offering Price will also include an up-front sales charge applied to the
value of the Bonds in the Portfolio. Lastly, investors redeeming their Units
prior to the fourth anniversary of the Fund will be charged a contingent
deferred sales charge payable out of the redemption proceeds of their Units.
These charges may be less than you would pay to buy and hold a comparable
managed fund. A complete schedule of sales charges appears in Appendix B. The
Sponsors have received an opinion of their counsel that the deferred sales
charge described in this Prospectus is consistent with an exemptive order
received from the SEC.
Because accrued interest on the Bonds is not received by the Fund at a
constant rate throughout the year, any Monthly Income Distribution may be more
or less than the interest actually received by the Fund. To eliminate
fluctuations in the Monthly Income Distribution, a portion of the Public
Offering Price consists of an advance to the Trustee of an amount necessary to
provide approximately equal distributions. Upon the sale or redemption of Units,
investors will receive their proportionate share of the Trustee advance. In
addition, if a Bond is sold, redeemed or otherwise disposed of, the Fund will
periodically distribute the portion of the Trustee advance that is attributable
to the Bond to investors.
The regular Monthly Income Distribution is stated in Part A of the
Prospectus and will change as the composition of the Portfolio changes over
time.

PUBLIC OFFERING PRICE--MUNICIPAL INVESTMENT TRUST FUND
In the initial offering period, the Public Offering Price is based on the
next offer side evaluation of the Bonds, and includes a sales charge based on
the number of Units of a single Fund or Trust purchased on the same or any
7
<PAGE>
preceding day by a single purchaser. See Initial Offering sales charge schedule
in Appendix C. The purchaser or his dealer must notify the Sponsors at the time
of purchase of any previous purchase to be aggregated and supply sufficient
information to permit confirmation of eligibility; acceptance of the purchase
order is subject to confirmation. Purchases of Fund Units may not be aggregated
with purchases of any other unit trust. This procedure may be amended or
terminated at any time without notice.
In the secondary market (after the initial offering period), the Public
Offering Price is based on the bid side evaluation of the Bonds, and includes a
sales charge based (a) on the number of Units of the Fund and any other Series
of Municipal Investment Trust Fund purchased in the secondary market on the same
day by a single purchaser (see Secondary Market sales charge schedule in
Appendix C) and (b) the maturities of the underlying Bonds (see Effective Sales
Charge Schedule in Appendix C). To qualify for a reduced sales charge, the
dealer must confirm that the sale is to a single purchaser or is purchased for
its own account and not for distribution. For these purposes, Units held in the
name of the purchaser's spouse or child under 21 years of age are deemed to be
purchased by a single purchaser. A trustee or other fiduciary purchasing
securities for a single trust estate or single fiduciary account is also
considered a single purchaser.
In the secondary market, the Public Offering Price is further reduced
depending on the maturities of the various Bonds in the Portfolio, by
determining a sales charge percentage for each Bond, as stated in Effective
Sales Charge in Appendix C. The sales charges so determined, multiplied by the
bid side evaluation of the Bonds, are aggregated and the total divided by the
number of Units outstanding to determine the Effective Sales Charge. On any
purchase, the Effective Sales Charge is multiplied by the applicable secondary
market sales charge percentage (depending on the number of Units purchased) in
order to determine the sales charge component of the Public Offering Price.
* * *
Employees of certain Sponsors and Sponsor affiliates and non-employee
directors of Merrill Lynch & Co. Inc. may purchase Units at any time at prices
including a sales charge of not less than $5 per Unit.
Net accrued interest is added to the Public Offering Price, the Sponsors'
Repurchase Price and the Redemption Price per Unit. This represents the interest
accrued on the Bonds, net of Fund expenses, from the initial date of deposit to,
but not including, the settlement date for Units (less any prior distributions
of interest income to investors). Bonds deposited also carry accrued but unpaid
interest up to the initial date of deposit. To avoid having investors pay this
additional accrued interest (which earns no return) when they purchase Units,
the Trustee advances and distributes this amount to the Sponsors; it recovers
this advance from interest received on the Bonds. Because of varying interest
payment dates on the Bonds, accrued interest at any time will exceed the
interest actually received by the Fund.

EVALUATIONS
Evaluations are determined by the independent Evaluator on each Business
Day. This excludes Saturdays, Sundays and the following holidays as observed by
the New York Stock Exchange: New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas. Bond
evaluations are based on closing sales prices (unless the Evaluator deems these
prices inappropriate). If closing sales prices are not available, the evaluation
is generally determined on the basis of current bid or offer prices for the
Bonds or comparable securities or by appraisal or by any combination of these
methods. In the past, the bid prices of publicly offered tax-exempt issues have
been lower than the offer prices by as much as 3 1/2% or more of face amount in
the case of inactively traded issues and as little as 1/2 of 1% in the case of
actively traded issues, but the difference between the offer and bid prices has
averaged between 1 and 2% of face amount. Neither the Sponsors, the Trustee or
the Evaluator will be liable for errors in the Evaluator's judgment. The fees of
the Evaluator will be borne by the Fund.

CERTIFICATES
Certificates for Units are issued upon request and may be transferred by
paying any taxes or governmental charges and by complying with the requirements
for redeeming Certificates (see How To Sell Units--Trustee's Redemption of
Units). Certain Sponsors collect additional charges for registering and shipping
Certificates to purchasers. Lost or mutilated Certificates can be replaced upon
delivery of satisfactory indemnity and payment of costs.
8
<PAGE>
HOW TO SELL UNITS

SPONSORS' MARKET FOR UNITS
You can sell your Units at any time without a fee. The Sponsors (although
not obligated to do so) will normally buy any Units offered for sale at the
repurchase price next computed after receipt of the order. The Sponsors have
maintained secondary markets in Defined Asset Funds for over 20 years. Primarily
because of the sales charge and fluctuations in the market value of the Bonds,
the sale price may be less than the cost of your Units. You should consult your
financial professional for current market prices to determine if other broker-
dealers or banks are offering higher prices for Units.
The Sponsors may discontinue this market without prior notice if the supply
of Units exceeds demand or for other business reasons; in that event, the
Sponsors may still purchase Units at the redemption price as a service to
investors. The Sponsors may reoffer or redeem Units repurchased.

TRUSTEE'S REDEMPTION OF UNITS
You may redeem your Units by sending the Trustee a redemption request
together with any certificates you hold. Certificates must be properly endorsed
or accompanied by a written transfer instrument with signatures guaranteed by an
eligible institution. In certain instances, additional documents may be required
such as a certificate of death, trust instrument, certificate of corporate
authority or appointment as executor, administrator or guardian. If the Sponsors
are maintaining a market for Units, they will purchase any Units tendered at the
repurchase price described above. While Defined Asset Funds Municipal Series
have a declining deferred sales charge payable on redemption (see Appendix B),
Municipal Investment Trust Fund has no back-end load or 12b-1 fees, so there is
never a fee for cashing in your investment (see Appendix C). If they do not
purchase Units tendered, the Trustee is authorized in its discretion to sell
Units in the over-the-counter market if it believes it will obtain a higher net
price for the redeeming investor.
By the seventh calendar day after tender you will be mailed an amount equal
to the Redemption Price per Unit. Because of market movements or changes in the
Portfolio, this price may be more or less than the cost of your Units. The
Redemption Price per Unit is computed each Business Day by adding the value of
the Bonds, net accrued interest, cash and the value of any other Fund assets;
deducting unpaid taxes or other governmental charges, accrued but unpaid Fund
expenses, unreimbursed Trustee advances, cash held to redeem Units or for
distribution to investors and the value of any other Fund liabilities; and
dividing the result by the number of outstanding Units.
For Defined Asset Funds Municipal Series, Bonds are evaluated on the offer
side during the initial offering period and for at least the first three months
of the Fund (even in the secondary market) and on the bid side thereafter. For
Municipal Investment Trust Fund, Bonds are evaluated on the offer side during
the initial offering period and on the bid side thereafter.
If cash is not available in the Fund's Income and Capital Accounts to pay
redemptions, the Trustee may sell Bonds selected by the Agent for the Sponsors
based on market and credit factors determined to be in the best interest of the
Fund. These sales are often made at times when the Bonds would not otherwise be
sold and may result in lower prices than might be realized otherwise and will
also reduce the size and diversity of the Fund.
Redemptions may be suspended or payment postponed if the New York Stock
Exchange is closed other than for customary weekend and holiday closings, if the
SEC determines that trading on that Exchange is restricted or that an emergency
exists making disposal or evaluation of the Bonds not reasonably practicable, or
for any other period permitted by the SEC.

INCOME, DISTRIBUTIONS AND REINVESTMENT

INCOME
Some of the Bonds may have been purchased on a when-issued basis or may
have a delayed delivery. Since interest on these Bonds does not begin to accrue
until the date of their delivery to the Fund, the Trustee's annual fee and
expenses may be reduced to provide tax-exempt income to investors for this
non-accrual period. If a when-issued Bond is not delivered until later than
expected and the amount of the Trustee's annual fee and expenses is insufficient
to cover the additional accrued interest, the Sponsors will treat the contracts
as failed Bonds. The Trustee is compensated for its fee reduction by drawing on
the letter of credit deposited by the
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<PAGE>
Sponsors before the settlement date for these Bonds and depositing the proceeds
in a non-interest bearing account for the Fund.
Interest received is credited to an Income Account and other receipts to a
Capital Account. A Reserve Account may be created by withdrawing from the Income
and Capital Accounts amounts considered appropriate by the Trustee to reserve
for any material amount that may be payable out of the Fund.

DISTRIBUTIONS
Each Unit receives an equal share of monthly distributions of interest
income net of estimated expenses. Interest on the Bonds is generally received by
the Fund on a semi-annual or annual basis. Because interest on the Bonds is not
received at a constant rate throughout the year, any Monthly Income Distribution
may be more or less than the interest actually received. To eliminate
fluctuations in the Monthly Income Distribution, the Trustee will advance
amounts necessary to provide approximately equal interest distributions; it will
be reimbursed, without interest, from interest received on the Bonds, but the
Trustee is compensated, in part, by holding the Fund's cash balances in
non-interest bearing accounts. Along with the Monthly Income Distributions, the
Trustee will distribute the investor's pro rata share of principal received from
any disposition of a Bond to the extent available for distribution. In addition,
for Defined Asset Funds Municipal Series, distributions of amounts necessary to
pay the deferred portion of the sales charge will be made from the Capital and
Income Accounts to an account maintained by the Trustee for purposes of
satisfying investors' sales charge obligations.
The initial estimated annual income per Unit, after deducting estimated
annual Fund expenses (and, for Defined Asset Funds Municipal Series, the portion
of the deferred sales charge payable from interest income) as stated in Part A
of the Prospectus, will change as Bonds mature, are called or sold or otherwise
disposed of, as replacement bonds are deposited and as Fund expenses change.
Because the Portfolio is not actively managed, income distributions will
generally not be affected by changes in interest rates. Depending on the
financial conditions of the issuers of the Bonds, the amount of income should be
substantially maintained as long as the Portfolio remains unchanged; however,
optional bond redemptions or other Portfolio changes may occur more frequently
when interest rates decline, which would result in early returns of principal
and possibly earlier termination of the Fund.

REINVESTMENT
Distributions will be paid in cash unless the investor elects to have
distributions reinvested without sales charge in the Municipal Fund Accumulation
Program, Inc. The Program is an open-end management investment company whose
investment objective is to obtain income exempt from regular federal income
taxes by investing in a diversified portfolio of state, municipal and public
authority bonds rated A or better or with comparable credit characteristics.
Reinvesting compounds earnings free from federal tax. Investors participating in
the Program will be subject to state and local income taxes to the same extent
as if the distributions had been received in cash, and most of the income on the
Program is subject to state and local income taxes. For more complete
information about the Program, including charges and expenses, request the
Program's prospectus from the Trustee. Read it carefully before you decide to
participate. Written notice of election to participate must be received by the
Trustee at least ten days before the Record Day for the first distribution to
which the election is to apply.

FUND EXPENSES
Estimated annual Fund expenses are listed in Part A of the Prospectus; if
actual expenses exceed the estimate, the excess will be borne by the Fund. The
Trustee's annual fee is payable in monthly installments. The Trustee also
benefits when it holds cash for the Fund in non-interest bearing accounts.
Possible additional charges include Trustee fees and expenses for extraordinary
services, costs of indemnifying the Trustee and the Sponsors, costs of action
taken to protect the Fund and other legal fees and expenses, Fund termination
expenses and any governmental charges. The Trustee has a lien on Fund assets to
secure reimbursement of these amounts and may sell Bonds for this purpose if
cash is not available. The Sponsors receive an annual fee of a maximum of $0.35
per $1,000 face amount to reimburse them for the cost of providing Portfolio
supervisory services to the Fund. While the fee may exceed their costs of
providing these services to the Fund, the total supervision fees from all
Defined Asset Funds Municipal Series will not exceed their costs for these
services to all of those Series during any calendar year; and the total
supervision fees from all Series of Municipal Investment Trust Fund will not
exceed their costs for these services to all of those Series during any calendar
year. The Sponsors may also be reimbursed for their costs of providing
bookkeeping and administrative services to the Fund, currently estimated at
$0.10 per Unit. The Trustee's, Sponsors' and Evaluator's fees may be adjusted
for inflation without investors' approval.
10
<PAGE>
All expenses in establishing the Fund will be paid from the Underwriting
Account at no charge to the Fund. Sales charges on Defined Asset Funds range
from under 1.0% to 5.5%. This may be less than you might pay to buy and hold a
comparable managed fund. Defined Asset Funds can be a cost-effective way to
purchase and hold investments. Annual operating expenses are generally lower
than for managed funds. Because Defined Asset Funds have no management fees,
limited transaction costs and no ongoing marketing expenses, operating expenses
are generally less than 0.25% a year. When compounded annually, small
differences in expense ratios can make a big difference in your investment
results.

TAXES
The following discussion addresses only the U.S. federal and certain New
York State and City income tax consequences under current law of Units held as
capital assets and does not address the tax consequences of Units held by
dealers, financial institutions or insurance companies or other investors with
special circumstances.
In the opinion of Davis Polk & Wardwell, special counsel for the Sponsors,
under existing law:
The Fund is not an association taxable as a corporation for federal
income tax purposes. Each investor will be considered the owner of a pro
rata portion of each Bond in the Fund under the grantor trust rules of
Sections 671-679 of the Internal Revenue Code of 1986, as amended (the
'Internal Revenue Code'). Each investor will be considered to have received
the interest and accrued the original issue discount, if any, on his pro
rata portion of each Bond when interest on the Bond is received or original
issue discount is accrued by the Fund. The investor's basis in his Units
will be equal to the cost of his Units, including any up-front sales
charge.
When an investor pays for accrued interest, the investor's confirmation
of purchase will report to him the amount of accrued interest for which he
paid. These investors will receive the accrued interest amount as part of
their first monthly distribution. Accordingly, these investors should
reduce their tax basis by the accrued interest amount after the first
monthly distribution.
An investor will recognize taxable gain or loss when all or part of his
pro rata portion of a Bond is disposed of by the Fund. An investor will
also be considered to have disposed of all or a portion of his pro rata
portion of each Bond when he sells or redeems all or some of his Units. An
investor who is treated as having acquired his pro rata portion of a Bond
at a premium will be required to amortize the premium over the term of the
Bond. The amortization is only a reduction of basis for the investor's pro
rata portion of the Bond and does not result in any deduction against the
investor's income. Therefore, under some circumstances, an investor may
recognize taxable gain when his pro rata portion of a Bond is disposed of
for an amount equal to or less than his original tax basis therefor.
Under Section 265 of the Internal Revenue Code, a non-corporate investor
is not entitled to a deduction for his pro rata share of fees and expenses
of the Fund, because the fees and expenses are incurred in connection with
the production of tax-exempt income. Further, if borrowed funds are used by
an investor to purchase or carry Units of the Fund, interest on this
indebtedness will not be deductible for federal income tax purposes. In
addition, under rules used by the Internal Revenue Service, the purchase of
Units may be considered to have been made with borrowed funds even though
the borrowed funds are not directly traceable to the purchase of Units.
Under the income tax laws of the State and City of New York, the Fund is
not an association taxable as a corporation and income received by the Fund
will be treated as the income of the investors in the same manner as for
federal income tax purposes, but will not necessarily be tax-exempt.
The foregoing discussion relates only to U.S. federal and certain
aspects of New York State and City income taxes. Depending on their state
of residence, investors may be subject to state and local taxation and
should consult their own tax advisers in this regard.
* * *
In the opinion of bond counsel rendered on the date of issuance of each
Bond, the interest on each Bond is excludable from gross income under existing
law for regular federal income tax purposes (except in certain circumstances
depending on the investor) but may be subject to state and local taxes, and
interest on some or all of the Bonds may become subject to regular federal
income tax, perhaps retroactively to their date of issuance, as a result of
changes in federal law or as a result of the failure of issuers (or other users
of the proceeds of the Bonds) to comply with certain ongoing requirements. If
the interest on a Bond should be determined to be taxable, the
11
<PAGE>
Bond would generally have to be sold at a substantial discount. In addition,
investors could be required to pay income tax on interest received prior to the
date on which the interest is determined to be taxable.
Neither the Sponsors nor Davis Polk & Wardwell have made or will make any
review of the proceedings relating to the issuance of the Bonds or the basis for
these opinions and there can be no assurance that the issuer (and other users)
will comply with any ongoing requirements necessary for a Bond to maintain its
tax-exempt character.

RECORDS AND REPORTS
The Trustee keeps a register of the names, addresses and holdings of all
investors. The Trustee also keeps records of the transactions of the Fund,
including a current list of the Bonds and a copy of the Indenture, and
supplemental information on the operations of the Fund and the risks associated
with the Bonds held by the Fund, which may be inspected by investors at
reasonable times during business hours.
With each distribution, the Trustee includes a statement of the interest
and any other receipts being distributed. Within five days after deposit of
Bonds in exchange or substitution for Bonds (or contracts) previously deposited,
the Trustee will send a notice to each investor, identifying both the Bonds
removed and the replacement bonds deposited. The Trustee sends each investor of
record an annual report summarizing transactions in the Fund's accounts and
amounts distributed during the year and Bonds held, the number of Units
outstanding and the Redemption Price at year end, the interest received by the
Fund on the Bonds, the gross proceeds received by the Fund from the disposition
of any Bond (resulting from redemption or payment at maturity or sale of any
Bond), and the fees and expenses paid by the Fund, among other matters. The
Trustee will also furnish annual information returns to each investor and to the
Internal Revenue Service. Investors are required to report to the Internal
Revenue Service the amount of tax-exempt interest received during the year.
Investors may obtain copies of Bond evaluations from the Trustee to enable them
to comply with federal and state tax reporting requirements. Fund accounts are
audited annually by independent accountants selected by the Sponsors. Audited
financial statements are available from the Trustee on request.

TRUST INDENTURE
The Fund is a 'unit investment trust' created under New York law by a Trust
Indenture among the Sponsors, the Trustee and the Evaluator. This Prospectus
summarizes various provisions of the Indenture, but each statement is qualified
in its entirety by reference to the Indenture.
The Indenture may be amended by the Sponsors and the Trustee without
consent by investors to cure ambiguities or to correct or supplement any
defective or inconsistent provision, to make any amendment required by the SEC
or other governmental agency or to make any other change not materially adverse
to the interest of investors (as determined in good faith by the Sponsors). The
Indenture may also generally be amended upon consent of investors holding 51% of
the Units. No amendment may reduce the interest of any investor in the Fund
without the investor's consent or reduce the percentage of Units required to
consent to any amendment without unanimous consent of investors. Investors will
be notified on the substance of any amendment.
The Trustee may resign upon notice to the Sponsors. It may be removed by
investors holding 51% of the Units at any time or by the Sponsors without the
consent of investors if it becomes incapable of acting or bankrupt, its affairs
are taken over by public authorities, or if under certain conditions the
Sponsors determine in good faith that its replacement is in the best interest of
the investors. The Evaluator may resign or be removed by the Sponsors and the
Trustee without the investors' consent. The resignation or removal of either
becomes effective upon acceptance of appointment by a successor; in this case,
the Sponsors will use their best efforts to appoint a successor promptly;
however, if upon resignation no successor has accepted appointment within 30
days after notification, the resigning Trustee or Evaluator may apply to a court
of competent jurisdiction to appoint a successor.
Any Sponsor may resign so long as one Sponsor with a net worth of
$2,000,000 remains and is agreeable to the resignation. A new Sponsor may be
appointed by the remaining Sponsors and the Trustee to assume the duties of the
resigning Sponsor. If there is only one Sponsor and it fails to perform its
duties or becomes incapable of acting or bankrupt or its affairs are taken over
by public authorities, the Trustee may appoint a successor Sponsor at reasonable
rates of compensation, terminate the Indenture and liquidate the Fund or
continue to act as Trustee without a Sponsor. Merrill Lynch, Pierce, Fenner &
Smith Incorporated has been appointed as Agent for the Sponsors by the other
Sponsors.
The Sponsors, the Trustee and the Evaluator are not liable to investors or
any other party for any act or omission in the conduct of their responsibilities
absent bad faith, willful misfeasance, negligence (gross negligence
12
<PAGE>
in the case of a Sponsor or the Evaluator) or reckless disregard of duty. The
Indenture contains customary provisions limiting the liability of the Trustee.

MISCELLANEOUS

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

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

TRUSTEE
The Trustee and its address are stated in Part A of the Prospectus. The
Trustee is subject to supervision by the Federal Deposit Insurance Corporation,
the Board of Governors of the Federal Reserve System and either the Comptroller
of the Currency or state banking authorities.

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

PUBLIC DISTRIBUTION
In the initial offering period Units will be distributed to the public
through the Underwriting Account and dealers who are members of the National
Association of Securities Dealers, Inc. The initial offering period is 30 days
or less if all Units are sold. If some Units initially offered have not been
sold, the Sponsors may extend the initial offering period for up to four
additional successive 30-day periods.
The Sponsors intend to qualify Units for sale in all states in which
qualification is deemed necessary through the Underwriting Account and by
dealers who are members of the National Association of Securities Dealers, Inc.;
however, Units of a State trust will be offered for sale only in the State for
which the trust is named, except that Units of a New Jersey trust will also be
offered in Connecticut, Units of a Florida trust will also be offered in New
York and Units of a New York trust will also be offered in Connecticut, Florida
and Puerto Rico. The Sponsors do not intend to qualify Units for sale in any
foreign countries and this Prospectus does not constitute an offer to sell Units
in any country where Units cannot lawfully be sold. Sales to dealers and to
introducing dealers, if any, will initially be made at prices which represent a
concession from the Public Offering Price, but the Agent for the Sponsors
reserves the right to change the rate of any concession from time to time. Any
dealer or introducing dealer may reallow a concession up to the concession to
dealers.

UNDERWRITERS' AND SPONSORS' PROFITS
Upon sale of the Units, the Underwriters will be entitled to receive sales
charges. The Sponsors also realize a profit or loss on deposit of the Bonds
equal to the difference between the cost of the Bonds to the Fund (based on the
offer side evaluation on the initial date of deposit) and the Sponsors' cost of
the Bonds. In addition, a Sponsor or Underwriter may realize profits or sustain
losses on Bonds it deposits in the Fund which were acquired from underwriting
syndicates of which it was a member. During the initial offering period, the
Underwriting Account also may realize profits or sustain losses as a result of
fluctuations after the initial date of deposit in the Public Offering Price of
the Units. In maintaining a secondary market for Units, the Sponsors will also
realize profits or sustain losses in the amount of any difference between the
prices at which they buy Units and the prices at which they resell these Units
(which include the sales charge) or the prices at which they redeem the Units.
Cash, if any,
13
<PAGE>
made available by buyers of Units to the Sponsors prior to a settlement date for
the purchase of Units may be used in the Sponsors' businesses to the extent
permitted by Rule 15c3-3 under the Securities Exchange Act of 1934 and may be of
benefit to the Sponsors.

FUND PERFORMANCE
Information on the performance of the Fund for various periods, on the
basis of changes in Unit price plus the amount of income and principal
distributions reinvested, may be included from time to time in advertisements,
sales literature, reports and other information furnished to current or
prospective investors. Total return figures are not averaged, and may not
reflect deduction of the sales charge, which would decrease the return. Average
annualized return figures reflect deduction of the maximum sales charge. No
provision is made for any income taxes payable.
Past performance may not be indicative of future results. The Fund is not
actively managed. Unit price and return fluctuate with the value of the Bonds in
the Portfolio, so there may be a gain or loss when Units are sold.
Fund performance may be compared to performance on the same basis (with
distributions reinvested) of Moody's Municipal Bond Averages or performance data
from publications such as Lipper Analytical Services, Inc., Morningstar
Publications, Inc., Money Magazine, The New York Times, U.S. News and World
Report, Barron's Business Week, CDA Investment Technology, Inc., Forbes Magazine
or Fortune Magazine. As with other performance data, performance comparisons
should not be considered representative of the Fund's relative performance for
any future period.

DEFINED ASSET FUNDS
Municipal Investment Trust Funds have provided investors with tax-free
income for more than 30 years. For decades informed investors have purchased
unit investment trusts for dependability and professional selection of
investments. Defined Asset Funds' philosophy is to allow investors to 'buy with
knowledge' (because, unlike managed funds, the portfolio of municipal bonds and
the return are relatively fixed) and 'hold with confidence' (because the
portfolio is professionally selected and regularly reviewed). Defined Asset
Funds offers an array of simple and convenient investment choices, suited to fit
a wide variety of personal financial goals--a buy and hold strategy for capital
accumulation, such as for children's education or retirement, or attractive,
regular current income consistent with the preservation of principal. Tax-exempt
income can help investors keep more today for a more secure financial future. It
can also be important in planning because tax brackets may increase with higher
earnings or changes in tax laws. Unit investment trusts are particularly suited
for the many investors who prefer to seek long-term income by purchasing sound
investments and holding them, rather than through active trading. Few
individuals have the knowledge, resources or capital to buy and hold a
diversified portfolio on their own; it would generally take a considerable sum
of money to obtain the breadth and diversity that Defined Asset Funds offer.
One's investment objectives may call for a combination of Defined Asset Funds.
One of the most important investment decisions you face may be how to
allocate your investments among asset classes. Diversification among different
kinds of investments can balance the risks and rewards of each one. Most
investment experts recommend stocks for long-term capital growth. Long-term
corporate bonds offer relatively high rates of interest income. By purchasing
both defined equity and defined bond funds, investors can receive attractive
current income, as well as growth potential, offering some protection against
inflation. From time to time various advertisements, sales literature, reports
and other information furnished to current or prospective investors may present
the average annual compounded rate of return of selected asset classes over
various periods of time, compared to the rate of inflation over the same
periods.

EXCHANGE OPTION--MUNICIPAL INVESTMENT TRUST FUND ONLY.
You may exchange Fund Units for units of certain other Defined Asset Funds
subject only to a reduced sales charge. You may exchange your units of any
Select Ten Portfolio, of any other Defined Asset Fund with a regular maximum
sales charge of at least 3.50%, or of any unaffiliated unit trust with a regular
maximum sales charge of at least 3.0%, for Units of this Fund at their relative
net asset values, subject only to a reduced sales charge, or to any remaining
Deferred Sales Charge, as applicable.
To make an exchange, you should contact your financial professional to find
out what suitable Exchange Funds are available and to obtain a prospectus. You
may acquire units of only those Exchange Funds in which the Sponsors are
maintaining a secondary market and which are lawfully for sale in the state
where you reside. Except for the reduced sales charge, an exchange is a taxable
event normally requiring recognition of any gain or loss on the units exchanged.
However, the Internal Revenue Service may seek to disallow a loss if the
portfolio of the
14
<PAGE>
units acquired is not materially different from the portfolio of the units
exchanged; you should consult your own tax advisor. If the proceeds of units
exchanged are insufficient to acquire a whole number of Exchange Fund units, you
may pay the difference in cash (not exceeding the price of a single unit
acquired).
As the Sponsors are not obligated to maintain a secondary market in any
series, there can be no assurance that units of a desired series will be
available for exchange. The Exchange Option may be amended or terminated at any
time without notice.

SUPPLEMENTAL INFORMATION
Upon written or telephonic request to the Trustee shown in Part A of this
Prospectus, investors will receive at no cost to the investor supplemental
information about the Fund, which has been filed with the SEC and is hereby
incorporated by reference. The supplemental information includes more detailed
risk factor disclosure about the types of Bonds that may be part of the Fund's
Portfolio, general risk disclosure concerning any letters of credit or insurance
securing certain Bonds, and general information about the structure and
operation of the Fund.
15
<PAGE>
APPENDIX A
DESCRIPTION OF RATINGS (AS DESCRIBED BY THE RATING COMPANIES THEMSELVES)
STANDARD & POOR'S RATINGS GROUP, A DIVISION OF MCGRAW-HILL, INC.
AAA--Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB--Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB, B, CCC, CC--Debt rated BB, B, CCC and CC is regarded, on balance, as
predominately speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and CC the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
The ratings may be modified by the addition of a plus or minus sign to show
relative standing within the major rating categories.
A provisional rating, indicated by 'p' following a rating, assumes the
successful completion of the project being financed by the issuance of the debt
being rated and indicates that payment of debt service requirements is largely
or entirely dependent upon the successful and timely completion of the project.
This rating, however, while addressing credit quality subsequent to completion
of the project, makes no comment on the likelihood of, or the risk of default
upon failure of, such completion.
NR--Indicates that no rating has been requested, that there is insufficient
information on which to base a rating or that Standard & Poor's does not rate a
particular type of obligation as a matter of policy.
MOODY'S INVESTORS SERVICE, INC.
Aaa--Bonds which are rated Aaa are judged to be the best quality. They
carry the smallest degree of investment risk and are generally referred to as
'gilt edge'. Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa--Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba--Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.

a-1
<PAGE>
B--Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Rating symbols may include numerical modifiers 1, 2 or 3. The numerical
modifier 1 indicates that the security ranks at the high end, 2 in the
mid-range, and 3 nearer the low end, of the generic category. These modifiers of
rating symbols give investors a more precise indication of relative debt quality
in each of the historically defined categories.
Conditional ratings, indicated by 'Con.', are sometimes given when the
security for the bond depends upon the completion of some act or the fulfillment
of some condition. Such bonds are given a conditional rating that denotes their
probable credit stature upon completion of that act or fulfillment of that
condition.
NR--Should no rating be assigned, the reason may be one of the following:
(a) an application for rating was not received or accepted; (b) the issue or
issuer belongs to a group of securities that are not rated as a matter of
policy; (c) there is a lack of essential data pertaining to the issue or issuer
or (d) the issue was privately placed, in which case the rating is not published
in Moody's publications.
FITCH INVESTORS SERVICE, INC.
AAA--These bonds are considered to be investment grade and of the highest
quality. The obligor has an extraordinary ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA--These bonds are considered to be investment grade and of high quality.
The obligor's ability to pay interest and repay principal, while very strong, is
somewhat less than for AAA rated securities or more subject to possible change
over the term of the issue.
A--These bonds are considered to be investment grade and of good quality.
The obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB--These bonds are considered to be investment grade and of satisfactory
quality. The obligor's ability to pay interest and repay principal is considered
to be adequate. Adverse changes in economic conditions and circumstances,
however are more likely to weaken this ability than bonds with higher ratings.
A '+' or a '-' sign after a rating symbol indicates relative standing in
its rating.
DUFF & PHELPS CREDIT RATING CO.
AAA--Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA--High credit quality. Protection factors are strong. Risk is modest but
may vary slightly from time to time because of economic condtions.
A--Protection factors are average but adequate. However, risk factors are
more variable and greater in periods of economic stress.
A '+' or a '-' sign after a rating symbol indicates relative standing in
its rating.
a-2
<PAGE>
APPENDIX B
SALES CHARGE SCHEDULES FOR DEFINED ASSET FUNDS, MUNICIPAL SERIES

DEFERRED AND UP-FRONT SALES CHARGES. Units purchased during the first year
of the Fund will be subject to periodic deferred and contingent deferred sales
charges. Units purchased in the second through fifth year will be subject to an
up-front sales charge as well as periodic deferred and contingent deferred sales
charges. Units purchased thereafter will be subject only to an up-front sales
charge. During the first five years of the Fund, a fixed periodic deferred sales
charge of $2.75 per Unit is payable on 20 quarterly payment dates occurring on
the 10th day of February, May, August and November, commencing no earlier than
45 days after the initial date of deposit. Investors purchasing Units on the
initial date of deposit and holding for at least five years, for example, would
incur total periodic deferred sales charges of $55.00 per Unit. Because of the
time value of money, however, as of the initial date of deposit this periodic
deferred sales charge obligation would, at current interest rates, equate to an
up-front sales charge of approximately 4.75%.
On the Fund's initial offering date, the Public Offering Price per Unit
will be $1,000. Subsequently, the Public Offering Price per Unit will fluctuate.
As the periodic deferred sales charge is a fixed dollar amount irrespective of
the Public Offering Price, it will represent a varying percentage of the Public
Offering Price. An up-front sales charge will be imposed on all unit purchases
after the first year of the Fund. The following table illustrates the combined
maximum up-front and periodic deferred sales charges that would be incurred by
an investor who purchases Units at the beginning of each of the first five years
of the Fund (based on a constant Unit price) and holds them through the fifth
year of the Fund:

</TABLE>
<TABLE><CAPTION>
TOTAL
UP-FRONT SALES CHARGE MAXIMUM UP-FRONT AND PERIODIC
----------------------------------------------------------- AMOUNT DEFERRED SALES
YEAR OF UNIT AS PERCENT OF PUBLIC AS PERCENT OF NET AMOUNT PER DEFERRED PER CHARGES
PURCHASE OFFERING PRICE AMOUNT INVESTED $1,000 INVESTED $1,000 INVESTED PER $1,000 INVESTED
- ------------------- --------------------- ------------------- --------------- --------------- ---------------------
<S> <C> <C> <C> <C> <C>
1 None None None $ 55.00 $ 55.00
2 1.10% 1.11% $ 11.00 44.00 55.00
3 2.20 2.25 22.00 33.00 55.00
4 3.30 3.41 33.00 22.00 55.00
5 4.40 4.60 44.00 11.00 55.00
</TABLE>
CONTINGENT DEFERRED SALES CHARGE. Units redeemed or repurchased within 4
years after the Fund's initial date of deposit will not only incur the periodic
deferred sales charge until the quarter of redemption or repurchase but will
also be subject to a contingent deferred sales charge:

YEAR SINCE FUND'S
INITIAL DATE OF CONTINGENT DEFERRED
DEPOSIT SALES CHARGE PER UNIT
- --------------------- ---------------------
1 $ 25.00
2 15.00
3 10.00
4 5.00
5 and thereafter None

The contingent deferred sales charge is waived on any redemption or
repurchase of Units after the death (including the death of a single joint
tenant with rights of survivorship) or disability (as defined in the Internal
Revenue Code) of an investor, provided the redemption or repurchase is requested
within one year of the death or initial determination of disability. The
Sponsors may require receipt of satisfactory proof of disability before
releasing the portion of the proceeds representing the amount of the contingent
deferred sales charge waived.
To assist investors in understanding the total costs of purchasing units
during the first four years of the Fund and disposing of those units by the
fifth year, the following tables set forth the maximum combined up-front,
periodic and contingent deferred sales charges that would be incurred (assuming
a constant Unit price) by an investor:
<TABLE><CAPTION>
UNITS PURCHASED ON INITIAL OFFERING DATE

b-1
<PAGE>
<CAPTION>
UNITS PURCHASED ON FIRST ANNIVERSARY OF FUND

<CAPTION>
UNITS PURCHASED ON FOURTH ANNIVERSARY OF FUND

YEAR OF UNIT DEFERRED SALES CONTINGENT DEFERRED
DISPOSITION UP-FRONT SALES CHARGE CHARGE SALES CHARGE TOTAL SALES CHARGES
- ------------------- --------------------- ----------------- ------------------- -------------------
<S> <C> <C> <C> <C>
5 $ 44.00 $ 11.00 $ 0.00 $ 55.00
</TABLE>
b-2
<PAGE>
APPENDIX C
SALES CHARGE SCHEDULES FOR MUNICIPAL INVESTMENT TRUST FUND
INITIAL OFFERING
<TABLE><CAPTION>
SALES CHARGE
(GROSS UNDERWRITING PROFIT)
----------------------------------
AS PERCENT OF AS PERCENT OF DEALER CONCESSION AS PRIMARY MARKET
OFFER SIDE PUBLIC NET AMOUNT PERCENT OF PUBLIC CONCESSION TO
NUMBER OF UNITS OFFERING PRICE INVESTED OFFERING PRICE INTRODUCING DEALERS
- ----------------------------------- ------------------- ------------- --------------------- -------------------

MONTHLY PAYMENT SERIES, MULTISTATE SERIES, INSURED SERIES
<S> <C> <C> <C> <C>
Less than 250...................... 4.50% 4.712% 2.925% $ 32.40
250 - 499.......................... 3.50 3.627 2.275 25.20
500 - 749.......................... 3.00 3.093 1.950 21.60
750 - 999.......................... 2.50 2.564 1.625 18.00
1,000 or more...................... 2.00 2.041 1.300 14.40
<CAPTION>
INTERMEDIATE SERIES (TEN YEAR MATURITIES)
<S> <C> <C> <C> <C>
Less than 250...................... 4.00% 4.167% 2.600% $ 28.80
250 - 499.......................... 3.00 3.093 1.950 21.60
500 - 749.......................... 2.50 2.564 1.625 18.00
750 - 999.......................... 2.00 2.041 1.300 14.40
1,000 or more...................... 1.50 1.523 0.975 10.00
<CAPTION>
INTERMEDIATE SERIES (SHORT INTERMEDIATE MATURITIES)
<S> <C> <C> <C> <C>
Less than 250...................... 2.75% 2.828% 1.788% $ 19.80
250 - 499.......................... 2.25 2.302 1.463 16.20
500 - 749.......................... 1.75 1.781 1.138 12.60
750 - 999.......................... 1.25 1.266 0.813 9.00
1,000 or more...................... 1.00 1.010 0.650 7.20
</TABLE>

SECONDARY MARKET

ACTUAL SALES CHARGE AS DEALER CONCESSION AS
PERCENT OF EFFECTIVE PERCENT OF EFFECTIVE
NUMBER OF UNITS SALES CHARGE SALES CHARGE
- ----------------- ------------------------- -------------------------
1-249 100% 65%
250-499 80 52
500-749 60 39
750-999 45 29.25
1,000 or more 35 22.75

EFFECTIVE SALES CHARGE

AS PERCENT AS PERCENT
TIME TO OF BID SIDE OF PUBLIC
MATURITY EVALUATION OFFERING PRICE
- ---------------------------- ------------- -----------------
Less than six months 0% 0%
Six months to 1 year 0.756 0.75
Over 1 year to 2 years 1.523 1.50
Over 2 years to 4 years 2.564 2.50
Over 4 years to 8 years 3.627 3.50
Over 8 years to 15 years 4.712 4.50
Over 15 years 5.820 5.50

For this purpose, a Bond will be considered to mature on its stated
maturity date unless it has been called for redemption or funds or securities
have been placed in escrow to redeem it on an earlier date, or is subject to a
mandatory tender, in which case the earlier date will be considered the maturity
date.
c-1

<PAGE>
Def ined
Asset FundsSM

SPONSORS: MUNICIPAL INVESTMENT
Merrill Lynch, TRUST FUND
Pierce, Fenner & Smith Incorporated Multistate Series - 83
Defined Asset Funds (Unit Investment Trusts)
P.O. Box 9051 PROSPECTUS PARTS A AND B
Princeton, N.J. 08543-9051 This Prospectus consists of a Part A and
(609) 282-8500 a Part B. The Prospectus does not
Smith Barney Inc. contain all of the information with
Unit Trust Department respect to the investment company set
388 Greenwich Street--23rd Floor forth in its registration statement and
New York, N.Y. 10013 exhibits relating thereto which have
1-800-223-2532 been filed with the Securities and
PaineWebber Incorporated Exchange Commission, Washington, D.C.
1200 Harbor Blvd. under the Securities Act of 1933 and the
Weehawken, N.J. 07087 Investment Company Act of 1940, and to
(201) 902-3000 which reference is hereby made.
Prudential Securities Incorporated No person is authorized to give any
One Seaport Plaza information or to make any
199 Water Street representations with respect to this
New York, N.Y. 10292 investment company not contained in this
(212) 776-1000 Prospectus; and any information or
Dean Witter Reynolds Inc. representation not contained herein must
Two World Trade Center--59th Floor not be relied upon as having been
New York, N.Y. 10048 authorized. This Prospectus does not
(212) 392-2222 constitute an offer to sell, or a
EVALUATOR: solicitation of an offer to buy,
Kenny Information Systems, securities in any state to any person to
a Division of J. J. Kenny Co., Inc. whom it is not lawful to make such offer
65 Broadway in such state.
New York, N.Y. 10006-2511
INDEPENDENT ACCOUNTANTS:
Deloitte & Touche LLP
2 World Financial Center
9th Floor
New York, N.Y. 10281-1414
TRUSTEE:
The Chase Manhattan Bank, N.A.
Unit Trust Department
Box 2051
New York, N.Y. 10081
1-800-323-1508

15076--3/95

<PAGE>
PART II
ADDITIONAL INFORMATION NOT INCLUDED IN THE PROSPECTUS

A. The following information relating to the Depositors is incorporated by
refer-
ence to the SEC filings indicated and made a part of this Registration
Statement.
<TABLE><CAPTION>

SEC FILE OR
IDENTIFICATION DATE
NUMBER FILED
----------------------------------------
<S> <C> <C>
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 1/17/95
Smith Barney Inc................................ 33-29106 6/29/89
PaineWebber Incorporated........................ 2-87965 11/18/83
Prudential Securities Incorporated.............. 2-61418 4/26/78
Dean Witter Reynolds Inc........................ 2-60599 1/4/78
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 5/26/94, 6/29/92
Smith Barney Inc................................ 8-8177 8/29/94, 8/2/93
PaineWebber Incorporated........................ 8-16267 4/20/94, 7/31/86
Prudential Securities Incorporated.............. 8-27154 6/30/94, 6/20/88
Dean Witter Reynolds Inc........................ 8-14172 2/23/94, 4/9/91
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 9/22/81, 6/15/82
Smith Barney Inc................................ 33-20499 3/30/88
PaineWebber Incorporated........................ 2-87965, 2-87965 11/18/83
Prudential Securities Incorporated.............. 2-86941, 2-86941 3/4/75
Dean Witter Reynolds Inc........................ 2-60599, 2-86941 1/4/78
B. The Internal Revenue Service Employer Identification
Numbers of the Sponsors and Trustee are as follows:
Merrill Lynch, Pierce, Fenner & Smith
Incorporated 13-5674085
Smith Barney Inc................................ 13-1912900
PaineWebber Incorporated........................ 13-2638166
Prudential Securities Incorporated.............. 22-2347336
Dean Witter Reynolds Inc........................ 94-1671384
The Chase Manhattan Bank, N.A................... 13-3233612

</TABLE>
UNDERTAKING
The Sponsors undertake that they will not instruct the Trustee to accept from
(i) Asset Guaranty Reinsurance Company, Municipal Bond Investors Assurance
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.

The Sponsors undertake that they will not make any amendment to the
Supplement to this Registration Statement which includes material changes
without submitting the amendment for Staff review prior to distribution.

The Sponsors undertake that if, based on the portfolio of any specific
Trust they believe that either financial statements of third parties or
disclosure of the risks of investing in a specific state are required, they will
not seek to go effective with a registration statement for that Trust without
previously submitting the disclosure for Staff review.

II-1
<PAGE>

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 Municipal Investment Trust Fund,
Forty-Fourth Intermediate Term Series D, 1933 Act File No. 2-88251).

The Prospectus.

Additional Information not included in the Prospectus (Part II).

Consent of independent accountants.

The following exhibits:

1.1 --Form of Trust Indenture (incorporated by reference to
Exhibit 1.1 to the Registration Statement of Municipal
Investment Trust Fund, Multistate Series-48, 1933 Act File
No. 33-50247).
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
names under the headings 'Taxes' and 'Miscellaneous--Legal
Opinion' in the Prospectus.
4.1.1 --Consent of the Evaluator.
4.1.2 --Consent of the Rating Agency as to Insured Trusts.
5.1 --Consent of Independent Accountants.

9.1 --Information Supplement

R-1
<PAGE>

SIGNATURES

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 1ST DAY OF
MARCH, 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>
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
DEPOSITOR

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

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

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

R-3
<PAGE>
SMITH BARNEY INC.
DEPOSITOR

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

STEVEN D. BLACK
JAMES BOSHART III
ROBERT A. CASE
JAMES DIMON
ROBERT DRUSKIN
ROBERT F. GREENHILL
JEFFREY LANE
ROBERT H. LESSIN
JACK L. RIVKIN

By GINA LEMON
(As authorized signatory for
Smith Barney Inc. and
Attorney-in-fact for the persons listed above)

R-4
<PAGE>
PAINEWEBBER INCORPORATED
DEPOSITOR

By the following persons, who constitute Powers of Attorney have been filed
a majority of under
the Executive Committee of the Board the following 1933 Act File
of Directors Number: 33-55073
of PaineWebber Incorporated:

LEE FENSTERSTOCK
JOSEPH J. GRANO, JR.
PAUL B. GUENTHER
DONALD B. MARRON
By
ROBERT E. HOLLEY
(As authorized signatory for PaineWebber Incorporated
and Attorney-in-fact for the persons listed above)

R-5
<PAGE>
PRUDENTIAL SECURITIES INCORPORATED
DEPOSITOR

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

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

By
WILLIAM W. HUESTIS
(As authorized signatory for Prudential Securities
Incorporated and Attorney-in-fact for the persons
listed above)

R-6
<PAGE>
DEAN WITTER REYNOLDS INC.
DEPOSITOR

By the following persons, who constitute Powers of Attorney have been filed
a majority of under Form SE and the following 1933
the Board of Directors of Dean Witter Act File Number: 33-17085
Reynolds Inc.:

NANCY DONOVAN
CHARLES A. FIUMEFREDDO
JAMES F. HIGGINS
STEPHEN R. MILLER
PHILIP J. PURCELL
THOMAS C. SCHNEIDER
WILLIAM B. SMITH
By
MICHAEL D. BROWNE
(As authorized signatory for Dean Witter Reynolds Inc.
and Attorney-in-fact for the persons listed above)

R-7

EXHIBIT 3.1
DAVIS POLK & WARDWELL
450 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
(212) 450-4000

MARCH 1, 1995

Municipal Investment Trust Fund,
Multistate Series - 83
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, NJ 08543-9051

Dear Sirs:

We have acted as special counsel for you, as sponsors (the 'Sponsors') of
Multistate Series - 83 of Municipal Investment Trust 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 Indentures
relating to the Fund (the 'Indentures').

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 Indentures 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 applicable Indentures, will
be legally issued, fully paid and non-assessable.

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

EXHIBIT 5.1

CONSENT OF INDEPENDENT ACCOUNTANTS
The Sponsors and Trustee of Municipal Investment Trust Fund, Multistate
Series - 83,
Defined Asset Funds (California, Michigan, New Jersey, New York and Ohio
Trusts):

We hereby consent to the use in this Registration Statement No. 33-57443 of our
opinion dated March 1, 1995, relating to the Statements of Condition of
Municipal Investment Trust Fund, Multistate Series - 83, Defined Asset Funds
(California, Michigan, New Jersey, New York and Ohio) 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.
March 1, 1995

EXHIBIT 4.1.1

KENNY INFORMATION SYSTEMS,
A Division of J. J. Kenny Co., Inc.
65 Broadway
New York, New York 10006
Telephone: 212/770-4405
Fax: 212/797-8681
John R. Fitzgerald
Vice President

March 1, 1995

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

The Chase Manhattan Bank, N.A.
1 Chase Manhattan Plaza--3B
New York, N.Y. 10081

Re: Municipal Investment Trust Fund, Multistate Series - 83, Defined Asset Funds

Gentlemen:

We have examined the Registration Statement File No. 33-57443 for the
above-captioned fund. We hereby acknowledge that Kenny Information Systems, a
Division of J. J. Kenny Co., Inc. is currently acting as the evaluator for the
fund. We hereby consent to the use in the Registration Statement of the
reference to Kenny Information Systems, a Division of J. J. Kenny Co., Inc. as
evaluator.

In addition, we hereby confirm that the ratings indicated in the
Registration Statement for the respective bonds comprising the trust portfolio
are the ratings indicated in our KENNYBASE database as of the date of the
Evaluation Report.

You are hereby authorized to file a copy of this letter with the Securities
and Exchange Commission.

Sincerely,

JOHN R. FITZGERALD
VICE PRESIDENT

EXHIBIT 4.1.2
STANDARD & POOR'S RATINGS GROUP
BOND INSURANCE ADMINISTRATION
25 BROADWAY
NEW YORK, NEW YORK 10004
TELEPHONE (212) 208-1061

March 1, 1995

Merrill Lynch Pierce The Chase Manhattan Bank, N.A.
Fenner & Smith Incorporated 1 Chase Manhattan Plaza--3B
Defined Asset Funds New York, New York 10081
P.O. Box 9051
Princeton, NJ 08543-9051

Re: Municipal Investment Trust Fund, Multistate Series - 83
Defined Asset Funds (California, Michigan, New Jersey, New York and Ohio
Trusts)

Gentlemen:

Pursuant to your request for a Standard & Poor's rating on the units of the
above-captioned trusts, SEC No. 33-57443, we have reviewed the information
presented to us and have assigned a 'AAA' rating to the units of the trusts and
a 'AAA' rating to the securities contained in the trusts. The ratings are direct
reflections, of the portfolios of the trusts, which will be composed solely of
securities covered by bond insurance policies that insure against default in the
payment of principal and interest on the securities so long as they remain
outstanding. Since such policies have been issued by one or more insurance
companies which have been assigned 'AAA' claims paying ability ratings by S&P,
S&P has assigned a 'AAA' rating to the units of the trusts and to the securities
contained in the trusts.

You have permission to use the name of Standard & Poor's Corporation and
the above-assigned ratings in connection with your dissemination of information
relating to these units, provided that it is understood that the ratings are not
'market' ratings nor recommendations to buy, hold, or sell the units of the
trusts or the securities contained in the trusts. Further, it should be
understood the rating on the units does not take into account the extent to
which trust expenses or portfolio asset sales for less than the trust's purchase
price will reduce payment to the unit holders of the interest and principal
required to be paid on the portfolio assets. S&P reserves the right to advise
its own clients, subscribers, and the public of the ratings. S&P relies on the
sponsor and its counsel, accountants, and other experts for the accuracy and
completeness of the information submitted in connection with the ratings. S&P
does not independently verify the truth or accuracy of any such information.

This letter evidences our consent to the use of the name of Standard &
Poor's Corporation in connection with the rating assigned to the units in the
registration statement or prospectus relating to the units or the trusts.
However, this letter should not be construed as a consent by us, within the
meaning of Section 7 of the Securities Act of 1933, to the use of the name of
Standard & Poor's Corporation in connection with the ratings assigned to the
securities contained in the trusts. You are hereby authorized to file a copy of
this letter with the Securities and Exchange Commission.
<PAGE>
Please be certain to send us three copies of your final prospectus as soon
as it becomes available. Should we not receive them within a reasonable time
after the closing or should they not conform to the representations made to us,
we reserve the right to withdraw the rating.

We are pleased to have had the opportunity to be of service to you. If we
can be of further help, please do not hesitate to call upon us.

Very truly yours,

VINCENT S. ORGO
Standard & Poor's Corporation

DEFINED ASSET FUNDS
-------------------

INFORMATION SUPPLEMENT

This Information Supplement provides additional
information concerning the structure, operations and risks
of municipal 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 Part A of
the Prospectus. This Information Supplement has been
incorporated by reference into the Prospectus.

This Information Supplement is dated March 1, 1995.
Capitalized terms have been defined in the Prospectus.

TABLE OF CONTENTS
-----------------

Description of Fund Investments
Fund Structure . . . . . . . . . . . . . 2
Portfolio Supervision . . . . . . . . . . 2
Risk Factors
Concentration . . . . . . . . . . . . . . 6
General Obligation Bonds . . . . . . . . 6
Moral Obligation Bonds . . . . . . . . . 7
Refunded Bonds . . . . . . . . . . . . . 7
Industrial Development Revenue Bonds . . 7
Municipal Revenue Bonds . . . . . . . . . 8
Municipal Utility Bonds . . . . . . . . 8
Lease Rental Bonds . . . . . . . . . . 12
Housing Bonds . . . . . . . . . . . . . 13
Hospital and Health Care Bonds . . . . 14
Facility Revenue Bonds . . . . . . . . 16
Solid Waste Disposal Bonds . . . . . . 17
Special Tax Bonds . . . . . . . . . . . 18
Student Loan Revenue Bonds . . . . . . 18
Transit Authority Bonds . . . . . . . . 19
Municipal Water and Sewer Revenue Bonds 19
University and College Bonds . . . . . 19
Puerto Rico . . . . . . . . . . . . . . . 20
Bonds Backed by Letters of Credit
or Repurchase Commitments . . . . . . . 21
Liquidity . . . . . . . . . . . . . . . . 25
Bonds Backed by Insurance . . . . . . . . 27
State Risk Factors . . . . . . . . . . . 34
Payment of Bonds and Life of a Fund . . . 35
Redemption . . . . . . . . . . . . . . . 35
Tax Exemption . . . . . . . . . . . . . . 36

<PAGE>

Income and Returns
Income . . . . . . . . . . . . . . . . . 37

Appendix A - State Matters . . . . . . . . A-1

DESCRIPTION OF FUND INVESTMENTS

Fund Structure

The Portfolio contains different issues of Bonds
with fixed final maturity or disposition dates. 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 Municipal Investment Trust 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 bonds as such but represent interests in
the securities, primarily state, municipal and public
authority bonds, in the portfolios of the Other Funds. As
used herein, the term "Debt Obligations" means the bonds
deposited in the Fund and described under Portfolio in Part
A and the term "Securities" means the Debt Obligations and
any Other Fund Units. See Investment Summary in Part A for
a summary of particular matters relating to the Portfolio.

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 bonds in any Other Funds
were rated BBB or better by Standard & Poor's or Baa or
better by Moody's. While certain of those bonds 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. Bonds 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.

<PAGE>

Portfolio Supervision

Each Fund is a unit investment trust which follows
a buy and hold investment strategy. Traditional methods of
investment management for mutual funds typically involve
frequent changes in fund holdings based on economic,
financial and market analyses. Because a Fund is not
actively managed, it may retain an issuer's securities
despite financial or economic developments adversely
affecting the market value of the securities held by a Fund.
However, Defined Asset Funds' financial analysts regularly
review a Fund's Portfolio, and the Sponsors may instruct a
Trustee to sell securities in a Portfolio in the following
circumstances: (i) default in payment of amounts due on the
security; (ii) institution of certain legal proceedings;
(iii) other legal questions or impediments affecting the
security or payments thereon; (iv) default under certain
documents adversely affecting debt service or in payments on
other securities of the same issuer or guarantor; (v)
decline in projected income pledged for debt service on a
revenue bond; (vi) if a security becomes taxable or
otherwise inconsistent with a Fund's investment objectives;
(vii) a right to sell or redeem the security pursuant to a
guarantee or other credit support; or (viii) decline in
security price or other market or credit factors (including
advance refunding) that, in the opinion of Defined Asset
Funds research, makes retention of the security detrimental
to the interests of Holders. If there is a payment default
on any Bond and the Agent for the Sponsors fails to instruct
the Trustee within 30 days after notice of the default, the
Trustee will sell the Bond.

A Trustee must reject any offer by an issuer of a
Bond to exchange another security pursuant to a refunding or
refinancing plan unless (a) the Bond is in default or (b) in
the written opinion of Defined Asset Funds research
analysts, a default is probable in the reasonably
foreseeable future, and the Sponsors instruct the Trustee to
accept the offer or take any other action with respect to
the offer as the Sponsors consider appropriate.

Units offered in the secondary market may reflect
redemptions or prepayments, in whole or in part, or defaults
on, certain of the Bonds originally deposited in the Fund or
the disposition of certain Bonds originally deposited in the
Fund to satisfy redemptions of Units (see Redemption) or
pursuant to the exercise by the Sponsors of their
supervisory role over the Fund (see Risk Factors -- Payment
of the Bonds and Life of the Fund). 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

<PAGE>

market premiums, on Units are determined solely by a
comparison of a Unit's outstanding face amount and its
evaluated price.

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.
The Portfolio may also contain debt obligations that have
received investment grade ratings from one agency but "junk
Bond" ratings from the other agency. In addition, the
Portfolio may contain debt obligations which are not rated
by either agency but have in the opinion of Merrill Lynch,
Pierce, Fenner & Smith Incorporated, as Agent for the
Sponsors, comparable credit characteristics to debt
obligations rated near or 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 the Agent for the Sponsors 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 Agent for the Sponsors actually reflects
all current information about the issuer of that debt
obligation.

Subsequent to the Date of Deposit, a Debt
Obligation or other obligations of the issuer or guarantor
or bank or other entity issuing a letter of credit related
thereto 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 the Agent for the Sponsors 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

<PAGE>

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. Moreover, issuers whose obligations have been
recently downgraded may be subject to claims by debtholders
and suppliers which, if sustained, would make it more
difficult for these issuers to meet payment obligations.

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 value of Units reflects the value of the
underlying debt obligations, including the value (if any) of
any issues which are in default. In the event of a default
in payment of principal or interest, the Trust may incur
additional expenses in seeking payment under the defaulted
debt obligations. Because amounts recovered (if any) in
respect of a defaulted debt obligation may not be reflected
in the value of Units until actually received by the Trust,

<PAGE>

it is possible that a Holder who sells Units would bear a
portion of the expenses without receiving a portion of the
payments received. 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.

RISK FACTORS

Concentration

A Portfolio may contain or be concentrated in one
or more of the types of Bonds discussed below. An
investment in a Fund should be made with an understanding of
the risks that these bonds may entail, certain of which are
described below. Political restrictions on the ability to
tax and budgetary constraints affecting the state or local
government may result in reductions of, or delays in the
payment of, state aid to cities, counties, school districts
and other local units of government which, in turn, may
strain the financial operations and have an adverse impact
on the creditworthiness of these entities. State agencies,
colleges and universities and health care organizations,
with municipal debt outstanding, may also be negatively
impacted by reductions in state appropriations.

General Obligation Bonds

General obligation bonds are backed by the
issuer's pledge of its full faith and credit and are secured
by its taxing power for the payment of principal and
interest. However, the taxing power of any governmental
entity may be limited by provisions of state constitutions
or laws and an entity's credit will depend on many factors,
including an erosion of the tax base due to population
declines, natural disasters, declines in the state's
industrial base or inability to attract new industries,
economic limits on the ability to tax without eroding the
tax base and the extent to which the entity relies on
Federal or state aid, access to capital markets or other
factors beyond the entity's control.

Over time, many state and local governments may
confront deficits due to economic or other factors. In
addition, a Portfolio may contain obligations of issuers who
rely in whole or in part on ad valorem real property taxes
as a source of revenue. Certain proposals, in the form of
state legislative proposals or voter initiatives, to limit
ad valorem real property taxes have been introduced in

<PAGE>

various states, and an amendment to the constitution of the
State of California, providing for strict limitations on ad
valorem real property taxes, has had a significant impact on
the taxing powers of local governments and on the financial
condition of school districts and local governments in
California. It is not possible at this time to predict the
final impact of such measures, or of similar future
legislative or constitutional measures, on school districts
and local governments or on their abilities to make future
payments on their outstanding bonds.

Moral Obligation Bonds

The repayment of a "moral obligation" bond is only
a moral commitment, and not a legal obligation, of the state
or municipality in question. Even though the state may be
called on to restore any deficits in capital reserve funds
of the agencies or authorities which issued the bonds, any
restoration generally requires appropriation by the state
legislature and accordingly does not constitute a legally
enforceable obligation or debt of the state. The agencies
or authorities generally have no taxing power.

Refunded Bonds

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

Industrial Development Revenue Bonds

Industrial Development Revenue Bonds, or "IDRs",
including pollution control revenue bonds, are tax-exempt
bonds issued by states, municipalities, public authorities
or similar entities to finance the cost of acquiring,
constructing or improving various projects, including
pollution control facilities and certain manufacturing
facilities. These projects are usually operated by private
corporations. IDRs are not general obligations of
governmental entities backed by their taxing power.
Municipal issuers are only obligated to pay amounts due on
the IDRs to the extent that funds are available from the
unexpended proceeds of the IDRs or from receipts or revenues
under arrangements between the municipal issuer and the
corporate operator of the project. These arrangements may
be in the form of a lease, installment sale agreement,
conditional sale agreement or loan agreement, but in each

<PAGE>

case the payments to the issuer are designed to be
sufficient to meet the payments of amounts due on the IDRs.

IDRs are generally issued under bond resolutions,
agreements or trust indentures pursuant to which the
revenues and receipts payable to the issuer by the corporate
operator of the project have been assigned and pledged to
the holders of the IDRs or a trustee for the benefit of the
holders of the IDRs. In certain cases, a mortgage on the
underlying project has been assigned to the holders of the
IDRs or a trustee as additional security for the IDRs. In
addition, IDRs are frequently directly guaranteed by the
corporate operator of the project or by an affiliated
company. Regardless of the structure, payment of IDRs is
solely dependent upon the creditworthiness of the corporate
operator of the project, corporate guarantor and credit
enhancer. Corporate operators or guarantors that are
industrial companies may be affected by 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, regulatory and environmental
restrictions, litigation resulting from accidents or
environmentally-caused illnesses, extensive competition
(including that of low-cost foreign companies), unfunded
pension fund liabilities or off-balance sheet items, and
financial deterioration resulting from leveraged buy-outs or
takeovers. However, certain of the IDRs in the Portfolio
may be additionally insured or secured by letters of credit
issued by banks or otherwise guaranteed or secured to cover
amounts due on the IDRs in the event of a default in
payment.

Municipal Revenue Bonds

Municipal Utility Bonds. The ability of utilities
to meet their obligations under revenue bonds issued on
their behalf is dependent on various factors, including the
rates they may charge their customers, the demand for their
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

<PAGE>

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 affected by its cost of capital, the
availability and cost of fuel and other factors. 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 citing 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 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)

<PAGE>

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.

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. California,
Michigan, New Mexico and Ohio have instituted investigations
into the possible introduction of retail wheeling within
their respective states, which could foster competition
among the utilities. Retail wheeling might result in the
issue of stranded investment (investment in assets not being
recovered in base rates), thus hampering a utility's ability
to meet its obligations.

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

<PAGE>

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 presented to Congress by the end of
1995 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 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. Since there have been very few
nuclear plants decommissioned to date, these estimates may
be unrealistic.

The ability of state and local joint action power
agencies to make payments on bonds they have issued is

<PAGE>

dependent in large part on payments made to them pursuant to
power supply or similar agreements. Courts in Washington,
Oregon and Idaho have held that certain agreements between
the Washington Public Power Supply System ("WPPSS") and the
WPPSS participants are unenforceable because the
participants did not have the authority to enter into the
agreements. While these decisions are not specifically
applicable to agreements entered into by public entities in
other states, they may cause a reexamination of the legal
structure and economic viability of certain projects
financed by joint action power agencies, which might
exacerbate some of the problems referred to above and
possibly lead to legal proceedings questioning the
enforceability of agreements upon which payment of these
bonds may depend.

Lease Rental Bonds. Lease rental bonds are issued
for the most part by governmental authorities that have no
taxing power or other means of directly raising revenues.
Rather, the authorities are financing vehicles created
solely for the construction of buildings (administrative
offices, convention centers and prisons, for example) or the
purchase of equipment (police cars and computer systems, for
example) that will be used by a state or local government
(the "lessee"). Thus, the bonds are subject to the ability
and willingness of the lessee government to meet its lease
rental payments which include debt service on the bonds.
Willingness to pay may be subject to changes in the views of
citizens and government officials as to the essential nature
of the finance project. Lease rental bonds are subject, in
almost all cases, to the annual appropriation risk, i.e.,
----
the lessee government is not legally obligated to budget and
appropriate for the rental payments beyond the current
fiscal year. These bonds are also subject to the risk of
abatement in many states--rental obligations cease in the
event that damage, destruction or condemnation of the
project prevents its use by the lessee. (In these cases,
insurance provisions and reserve funds designed to alleviate
this risk become important credit factors). In the event of
default by the lessee government, there may be significant
legal and/or practical difficulties involved in the
reletting or sale of the project. Some of these issues,
particularly those for equipment purchase, contain the
so-called "substitution safeguard", which bars the lessee
government, in the event it defaults on its rental payments,
from the purchase or use of similar equipment for a certain
period of time. This safeguard is designed to insure that
the lessee government will appropriate the necessary funds
even though it is not legally obligated to do so, but its
legality remains untested in most, if not all, states.

<PAGE>

Housing Bonds. Multi-family housing revenue bonds
and single family mortgage revenue bonds are state and local
housing issues that have been issued to provide financing
for various housing projects. Multi-family housing revenue
bonds are payable primarily from the revenues derived from
mortgage loans to housing projects for low to moderate
income families. Single-family mortgage revenue bonds are
issued for the purpose of acquiring from originating
financial institutions notes secured by mortgages on
residences.

Housing bonds are not general obligations of the
issuer although certain obligations may be supported to some
degree by Federal, state or local housing subsidy programs.
Budgetary constraints experienced by these programs as well
as the failure by a state or local housing issuer to satisfy
the qualifications required for coverage under these
programs or any legal or administrative determinations that
the coverage of these programs is not available to a housing
issuer, probably will result in a decrease or elimination of
subsidies available for payment of amounts due on the
issuer's bonds. The ability of housing issuers to make debt
service payments on their bonds will also be affected by
various economic and non-economic developments including,
among other things, the achievement and maintenance of
sufficient occupancy levels and adequate rental income in
multi-family projects, the rate of default on mortgage loans
underlying single family issues and the ability of mortgage
insurers to pay claims, employment and income conditions
prevailing in local markets, increases in construction
costs, taxes, utility costs and other operating expenses,
the managerial ability of project managers, changes in laws
and governmental regulations and economic trends generally
in the localities in which the projects are situated.
Occupancy of multi-family housing projects may also be
adversely affected by high rent levels and income
limitations imposed under Federal, state or local programs.

All single family mortgage revenue bonds and
certain multi-family housing revenue bonds are prepayable
over the life of the underlying mortgage or mortgage pool,
and therefore the average life of housing obligations cannot
be determined. However, the average life of these
obligations will ordinarily be less than their stated
maturities. Single-family issues are subject to mandatory
redemption in whole or in part from prepayments on
underlying mortgage loans; mortgage loans are frequently
partially or completely prepaid prior to their final stated
maturities as a result of events such as declining interest
rates, sale of the mortgaged premises, default, condemnation
or casualty loss. Multi-family issues are characterized by
mandatory redemption at par upon the occurrence of monetary
defaults or breaches of covenants by the project operator.

<PAGE>

Additionally, housing obligations are generally subject to
mandatory partial redemption at par to the extent that
proceeds from the sale of the obligations are not allocated
within a stated period (which may be within a year of the
date of issue).

The tax exemption for certain housing revenue
bonds depends on qualification under Section 143 of the
Internal Revenue Code of 1986, as amended (the "Code"), in
the case of single family mortgage revenue bonds or Section
142(a)(7) of the Code or other provisions of Federal law in
the case of certain multi-family housing revenue bonds
(including Section 8 assisted bonds). These sections of the
Code or other provisions of Federal law contain certain
ongoing requirements, including requirements relating to the
cost and location of the residences financed with the
proceeds of the single family mortgage revenue bonds and the
income levels of tenants of the rental projects financed
with the proceeds of the multi-family housing revenue bonds.
While the issuers of the bonds and other parties, including
the originators and servicers of the single-family mortgages
and the owners of the rental projects financed with the
multi-family housing revenue bonds, generally covenant to
meet these ongoing requirements and generally agree to
institute procedures designed to ensure that these
requirements are met, there can be no assurance that these
ongoing requirements will be consistently met. The failure
to meet these requirements could cause the interest on the
bonds to become taxable, possibly retroactively from the
date of issuance, thereby reducing the value of the bonds,
subjecting Holders to unanticipated tax liabilities and
possibly requiring a Trustee to sell these bonds at reduced
values. Furthermore, any failure to meet these ongoing
requirements might not constitute an event of default under
the applicable mortgage or permit the holder to accelerate
payment of the bond or require the issuer to redeem the
bond. In any event, where the mortgage is insured by the
Federal Housing Administration, its consent may be required
before insurance proceeds would become payable to redeem the
mortgage bonds.

Hospital and Health Care Bonds. 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

<PAGE>

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.
Certain special revenue obligations (i.e., Medicare or
Medicaid revenues) may be payable subject to appropriations
by state legislatures. 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 these 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 these 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 or 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

<PAGE>

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 revenues unless
replacement patients were found.

Certain hospital bonds 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 is considered 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, the realization of Medicare and Medicaid receivables
may be uncertain and, if the bond 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 large 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 may be revoked.

Facility Revenue Bonds. Facility revenue bonds
are generally payable from and secured by the revenues from
the ownership and operation of particular facilities such as
airports (including airport terminals and maintenance
facilities), bridges, marine terminals, turnpikes and port
authorities. For example, the major portion of gross
airport operating income is generally derived from fees
received from signatory airlines pursuant to use agreements
which consist of annual payments for airport use, occupancy
of certain terminal space, facilities, service fees,
concessions and leases. Airport operating income may
therefore be affected by the ability of the airlines to meet
their obligations under the use agreements. The air
transport industry is experiencing significant variations in
earnings and traffic, due to increased competition, excess
capacity, increased aviation fuel, deregulation, traffic
constraints and other factors. As a result, several airlines
are experiencing severe financial difficulties. Several
airlines including America West Airlines have sought
protection from their creditors under Chapter 11 of the
Bankruptcy Code. In addition, other airlines such as Midway

<PAGE>

Airlines, Inc., Eastern Airlines, Inc. and Pan American
Corporation have been liquidated. However, Continental
Airlines and Trans World Airlines have emerged from
bankruptcy. The Sponsors cannot predict what effect these
industry conditions may have on airport revenues which are
dependent for payment on the financial condition of the
airlines and their usage of the particular airport facility.
Furthermore, proposed legislation would provide the U.S.
Secretary of Transportation with the temporary authority to
freeze airport fees upon the occurrence of disputes between
a particular airport facility and the airlines utilizing
that facility.

Similarly, payment on bonds related to other
facilities is dependent on revenues from the projects, such
as use fees from ports, tolls on turnpikes and bridges and
rents from buildings. Therefore, payment may be adversely
affected by reduction in revenues due to these factors and
increased cost of maintenance or decreased use of a
facility, lower cost of alternative modes of transportation
or scarcity of fuel and reduction or loss of rents.

Solid Waste Disposal Bonds. Bonds issued for
solid waste disposal facilities are generally payable from
dumping fees and from revenues that may be earned by the
facility on the sale of electrical energy generated in the
combustion of waste products. The ability of solid waste
disposal facilities to meet their obligations depends upon
the continued use of the facility, the successful and
efficient operation of the facility and, in the case of
waste-to-energy facilities, the continued ability of the
facility to generate electricity on a commercial basis. All
of these factors may be affected by a failure of
municipalities to fully utilize the facilities, an
insufficient supply of waste for disposal due to economic or
population decline, rising construction and maintenance
costs, any delays in construction of facilities, lower-cost
alternative modes of waste processing and changes in
environmental regulations. Because of the relatively short
history of this type of financing, there may be
technological risks involved in the satisfactory
construction or operation of the projects exceeding those
associated with most municipal enterprise projects.
Increasing environmental regulation on the federal, state
and local level has a significant impact on waste disposal
facilities. While regulation requires more waste producers
to use waste disposal facilities, it also imposes
significant costs on the facilities. These costs include
compliance with frequently changing and complex regulatory
requirements, the cost of obtaining construction and
operating permits, the cost of conforming to prescribed and
changing equipment standards and required methods of
operation and, for incinerators or waste-to-energy

<PAGE>

facilities, the cost of disposing of the waste residue that
remains after the disposal process in an environmentally
safe manner. In addition, waste disposal facilities
frequently face substantial opposition by environmental
groups and officials to their location and operation, to the
possible adverse effects upon the public health and the
environment that may be caused by wastes disposed of at the
facilities and to alleged improper operating procedures.
Waste disposal facilities benefit from laws which require
waste to be disposed of in a certain manner but any
relaxation of these laws could cause a decline in demand for
the facilities' services. Finally, waste-to-energy
facilities are concerned with many of the same issues facing
utilities insofar as they derive revenues from the sale of
energy to local power utilities.

Special Tax Bonds. Special tax bonds are payable
from and secured by the revenues derived by a municipality
from a particular tax such as a tax on the rental of a hotel
room, on the purchase of food and beverages, on the rental
of automobiles or on the consumption of liquor. Special tax
bonds are not secured by the general tax revenues of the
municipality, and they do not represent general obligations
of the municipality. Therefore, payment on special tax
bonds may be adversely affected by a reduction in revenues
realized from the underlying special tax due to a general
decline in the local economy or population or due to a
decline in the consumption, use or cost of the goods and
services that are subject to taxation. Also, should
spending on the particular goods or services that are
subject to the special tax decline, the municipality may be
under no obligation to increase the rate of the special tax
to ensure that sufficient revenues are raised from the
shrinking taxable base.

Student Loan Revenue Bonds. Student loan revenue
bonds are issued by various authorities to finance the
acquisition of student loan portfolios or to originate new
student loans. These bonds are typically secured by pledged
student loans, loan repayments and funds and accounts
established under the indenture. Student loans are
generally either guaranteed by eligible guarantors under the
Higher Education Act of 1965, as amended, and reinsured by
the Secretary of the U.S. Department of Education, directly
insured by the federal government or financed as part of
supplemental or alternative loan programs with a state
(e.g., loan repayment is not guaranteed).
----

Certain student loan revenue bonds may permit the
issuer to enter into an "interest rate swap agreement" with
a counterparty obligating the issuer to pay either a fixed
or a floating rate on a notional principal amount of bonds
and obligating the counterparty to pay either a fixed or a

<PAGE>

floating interest rate on the issuer's bonds. The payment
obligations of the issuer and the counterparty to each other
will be netted on each interest payment date, and only one
payment will be made by one party to the other. Although
the choice of counterparty typically requires a
determination from a rating agency that any rating of the
bonds will not be adversely affected by the swap, payment on
the bonds may be subject to the additional risk of the
counterparty's ability to fulfill its swap obligation.

Transit Authority Bonds. Mass transit is
generally not self-supporting from fare revenues.
Therefore, additional financial resources must be made
available to ensure operation of mass transit systems as
well as the timely payment of debt service. Often these
financial resources include Federal and state subsidies,
lease rentals paid by funds of the state or local government
or a pledge of a special tax such as a sales tax or a
property tax. If fare revenues or the additional financial
resources do not increase appropriately to pay for rising
operating expenses, the ability of the issuer to adequately
service the debt may be adversely affected.

Municipal Water and Sewer Revenue Bonds. Water
and sewer bonds are generally payable from user fees. The
ability of state and local water and sewer authorities to
meet their obligations may be affected by failure of
municipalities to utilize fully the facilities constructed
by these authorities, economic or population decline and
resulting decline in revenue from user charges, rising
construction and maintenance costs and delays in
construction of facilities, impact of environmental
requirements, failure or inability to raise user charges in
response to increased costs, the difficulty of obtaining or
discovering new supplies of fresh water, the effect of
conservation programs and the impact of "no growth" zoning
ordinances. In some cases this ability may be affected by
the continued availability of Federal and state financial
assistance and of municipal bond insurance for future bond
issues.

University and College Bonds. The ability of
universities and colleges to meet their obligations is
dependent upon various factors, including the size and
diversity of their sources of revenues, enrollment,
reputation, management expertise, the availability and
restrictions on the use of endowments and other funds, the
quality and maintenance costs of campus facilities, and, in
the case of public institutions, the financial condition of
the relevant state or other governmental entity and its
policies with respect to education. The institution's
ability to maintain enrollment levels will depend on such
factors as tuition costs, demographic trends, geographic

<PAGE>

location, geographic diversity and quality of the student
body, quality of the faculty and the diversity of program
offerings.

Legislative or regulatory action in the future at
the Federal, state or local level may directly or indirectly
affect eligibility standards or reduce or eliminate the
availability of funds for certain types of student loans or
grant programs, including student aid, research grants and
work-study programs, and may affect indirect assistance for
education.

Puerto Rico

Various Bonds may be affected by general economic
conditions in Puerto Rico. Puerto Rico's unemployment rate
remains significantly higher than the U.S. unemployment
rate. Furthermore, the Puerto Rican economy is largely
dependent for its development upon U.S. policies and
programs that are being reviewed and may be eliminated.

The Puerto Rican economy is affected by a number
of Commonwealth and Federal investment incentive programs.
For example, Section 936 of the Code provides for a credit
against Federal income taxes for U.S. companies operating on
the island if certain requirements are met. The Omnibus
Budget Reconciliation Act of 1993 imposes limits on this
credit, effective for tax years beginning after 1993. In
addition, from time to time proposals are introduced in
Congress which, if enacted into law, would eliminate some or
all of the benefits of Section 936. Although no assessment
can be made at this time of the precise effect of this
limitation, it is expected that the limitation of Section
936 credits would have a negative impact on Puerto Rico's
economy.

Aid for Puerto Rico's economy has traditionally
depended heavily on Federal programs, and current Federal
budgetary policies suggest that an expansion of aid to
Puerto Rico is unlikely. An adverse effect on the Puerto
Rican economy could result from other U.S. policies,
including a reduction of tax benefits for distilled
products, further reduction in transfer payment programs
such as food stamps, curtailment of military spending and
policies which could lead to a stronger dollar.

In a plebiscite held in November, 1993, the Puerto
Rican electorate chose to continue Puerto Rico's
Commonwealth status. Previously proposed legislation, which
was not enacted, would have preserved the federal tax exempt
status of the outstanding debts of Puerto Rico and its
public corporations regardless of the outcome of the
referendum, to the extent that similar obligations issued by

<PAGE>

states are so treated and subject to the provisions of the
Code currently in effect. There can be no assurance that
any pending or future legislation finally enacted will
include the same or similar protection against loss of tax
exemption. The November 1993 plebiscite can be expected to
have both direct and indirect consequences on such matters
as the basic characteristics of future Puerto Rico debt
obligations, the markets for these obligations, and the
types, levels and quality of revenue sources pledged for the
payment of existing and future debt obligations. The
possible consequences include legislative proposals seeking
restoration of the status of Section 936 benefits otherwise
subject to the limitations discussed above. However, no
assessment can be made at this time of the economic and
other effects of a change in federal laws affecting Puerto
Rico as a result of the November 1993 plebiscite.

Bonds Backed by Letters of Credit or Repurchase Commitments

In the case of Bonds secured by letters of credit
issued by commercial banks or savings banks, savings and
loan associations and similar institutions ("thrifts"), the
letter of credit may be drawn upon, and the Bonds
consequently redeemed, if an issuer fails to pay amounts due
on the Bonds or defaults under its reimbursement agreement
with the issuer of the letter of credit or, in certain
cases, if the interest on the Bonds is deemed to be taxable
and full payment of amounts due is not made by the issuer.
The letters of credit are irrevocable obligations of the
issuing institutions, which 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.

Certain Intermediate Term and Put Series and
certain other Series contain Bonds purchased from one or
more commercial banks or thrifts or other institutions
("Sellers") which have committed under certain circumstances
specified below to repurchase the Bonds from the Fund
("Repurchase Commitments"). The Bonds in these Funds may be
secured by one or more Repurchase Commitments (see
Investment Summary in Part A) which, in turn may be backed
by a letter of credit or secured by a security interest in
collateral. A Seller may have committed to repurchase from
the Fund any Bonds sold by it, within a specified period
after receiving notice from the Trustee, to the extent
necessary to satisfy redemptions of Units despite the
market-making activity of the Sponsors (a "Liquidity
Repurchase"). The required notice period may be 14 days (a
"14 Day Repurchase") or, if a repurchase date is set forth
under Investment Summary in Part A, the Trustee may at any
time not later than two hours after the Evaluation Time on
the repurchase date (or if a repurchase date is not a

<PAGE>

business day, on the first business day thereafter), deliver
this notice to the Seller. Additionally, if the Sponsors
elect to remarket Units which have been received at or
before the Evaluation Time on any repurchase date (the
"Tendered Units"), a Seller may have committed to repurchase
from the Fund on the date 15 business days after that
repurchase date, any Bonds sold by the Seller to the Fund in
order to satisfy any tenders for redemption by the Sponsors
made within 10 business days after the Evaluation Time. A
Seller may also have made any of the following commitments:
(i) to repurchase at any time on 14 calendar days' notice
any Bonds if the issuer thereof shall fail to make any
payments of principal thereof and premium and interest
thereon (a "Default Repurchase"); (ii) to repurchase any
Bond on a fixed disposition date (a "Disposition Date") if
the Trustee elects not to sell the Bond in the open market
(because a price in excess of its Put Price (as defined
under Investment Summary in Part A) cannot be obtained) on
this date (a "Disposition Repurchase")); (iii) to repurchase
at any time on 14 calendar days' notice any Bond in the
event that the interest thereon should be deemed to be
taxable (a "Tax Repurchase"); and (iv) to repurchase
immediately all Bonds if the Seller becomes or is deemed to
be bankrupt or insolvent (an "Insolvency Repurchase"). (See
Investment Summary in Part A.) Any repurchase of a Bond
will be at a price no lower than its original purchase price
to the Fund, plus accrued interest to the date of
repurchase, plus any further adjustments as described under
Investment Summary in Part A.

Upon the sale of a Bond by the Fund to a third
party prior to its Disposition date, any related Liquidity
and Disposition Repurchase commitments will be transferable,
together with an interest in any collateral or letter of
credit backing the repurchase commitments and the Liquidity
Repurchase commitments will be exercisable by the buyer free
from the restriction that the annual repurchase right may
only be exercised to meet redemptions of Units. Any Default
Repurchase, Tax Repurchase and Insolvency Repurchase
commitments also will not terminate upon disposition of the
Bond by the Fund but will be transferable, together with an
interest in the collateral or letter of credit backing the
Repurchase Commitments or both, as the case may be.

A Seller's Repurchase Commitments apply only to
Bonds which it has sold to the Fund; consequently, if a
particular Seller fails to meet its commitments, no recourse
is available against any other Seller nor against the
collateral or letters of credit of any other Seller. Each
Seller's Repurchase Commitments relating to any Bond
terminate (i) upon repurchase by the Seller of the Bond,
(ii) on the Disposition Date of the Bond if its holder does
not elect to have the Seller repurchase the Bond on that

<PAGE>

date and (iii) in the event notice of redemption shall have
been given on or prior to the Disposition Date for the
entire outstanding principal amount of the Bond and that
redemption or maturity of the Bond occurs on or prior to the
Disposition Date. On the scheduled Disposition Date of a
Bond the Trustee will sell that Bond in the open market if a
price in excess of the Put Price as of the Disposition Date
can be obtained.

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.

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

<PAGE>

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 end of 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 Repurchase 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 Repurchase 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
Repurchase Commitment returned prior to the termination date
of the Fund or the maturity or disposition dates of the Debt
Obligations if the thrift becomes or is deemed to be
insolvent, as well as in any of the situations outlined
under Repurchase Commitments below.

Moreover, FIRREA generally permits the FDIC or the
RTC, as the case may be, to prevent the exercise of a
Seller's Insolvency Repurchase commitment and empowers that
agency to repudiate a Seller's contracts, including a
Seller's other Repurchase 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 Repurchase Commitments and the
Collateral. Policy statements adopted by the FDIC and the
RTC concerning collateralized repurchase 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 repurchase commitments without the
payment of damages from the collateral, and will instead
either (i) accelerate the collateralized repurchase
commitments, in which event payment will be made under the
repurchase commitments to the extent of available
collateral, or (ii) enforce the repurchase 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

<PAGE>

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 requirement
virtually compels the appointment of a receiver 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 or 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.

Certain letters of credit or guarantees backing
Bonds may have been issued by a foreign bank or corporation
or similar entity (a "Foreign Guarantee"). Foreign
Guarantees are subject to the risk that exchange control
regulations might be adopted in the future which might
affect adversely payments to the Fund. Similarly, foreign
withholding taxes could be imposed in the future although
provision is made in the instruments governing any Foreign
Guarantee that, in substance, to the extent permitted by
applicable law, additional payments will be made by the
guarantor so that the total amount paid, after deduction of
any applicable tax, will not be less than the amount then
due and payable on the Foreign Guarantee. The adoption of
exchange control regulations and other legal restrictions
could have an adverse impact on the marketability of any
Bonds backed by a Foreign Guarantee.

Liquidity.

Certain of the Bonds may have been purchased by
the Sponsors from various banks and thrifts in large

<PAGE>

denominations and may not have been issued under bond
resolutions or trust indentures providing for issuance of
bonds in small denominations. These Bonds were generally
directly placed with the banks or thrifts and held in their
portfolios prior to sale to the Sponsors. There is no
established secondary market for those Bonds. The Sponsors
believe that there should be a readily available market
among institutional investors for the Bonds which were
purchased from these portfolios in the event it is necessary
to sell Bonds to meet redemptions of Units (should
redemptions be made despite the market making activity of
the Sponsors) in light of the following considerations: (i)
the credit characteristics of the companies obligated to
make payments on the Bonds; (ii) the fact that these Bonds
may be backed by irrevocable letters of credit or guarantees
of banks or thrifts; and (iii) the fact that banks or
thrifts selling these Bonds to the Sponsors for deposit in
the Fund or the placement agent acting in connection with
their sale generally have stated their intentions, although
they are not legally obligated to do so, to remarket or to
repurchase, at the then-current bid side evaluation, any of
these Bonds proposed to be sold by the Trustee. The
interest on these Bonds received by the Fund is net of the
fee for the related letter of credit or guarantee charged by
the bank or thrift issuing the letter of credit or
guarantee.

Any Bonds which were purchased from these
portfolios are exempt from the registration provisions of
the Federal securities laws, and, therefore, can be sold
free of the registration requirements of the securities
laws. Because there is no established secondary market for
these Bonds, however, there is no assurance that the price
realized on sale of these Bonds will not be adversely
affected. Consequently it is more likely that the sale of
these Bonds may cause a decline in the value of Units than a
sale of debt obligations for which an established secondary
market exists. In addition, in certain Intermediate Term
and Put Series and certain other Series, liquidity of the
Fund is additionally augmented by the Sellers'
collateralized or letter of credit-backed Liquidity
Repurchase commitment in the event it is necessary to sell
any Bond to meet redemptions of Units. If, upon the
scheduled Disposition Date for any Bond, the Trustee elects
not to sell the Bond scheduled for disposition on this date
in the open market (because, for example, a price in excess
of its Put Price cannot be obtained), the Seller of the Bond
is obligated to repurchase the Bond pursuant to its
collateralized or letter of credit-backed Disposition
Repurchase commitment. There can be no assurance that the
prices that can be obtained for the Bonds at any time in the
open market will exceed the Put Price of the Bonds. In
addition, if any Seller should become unable to honor its

<PAGE>

repurchase commitments and the Trustee is consequently
forced to sell the Bonds in the open market, there is no
assurance that the price realized on this sale of the Bonds
would not be adversely affected by the absence of an
established secondary market for certain of the Bonds.

In some cases, the Sponsors have entered into an
arrangement with the Trustee whereby certain of the Bonds
may be transferred to a trust (a "Participation Trust") in
exchange for certificates of participation in the
Participation Trust which could be sold in order to meet
redemptions of Units. The certificates of participation
would be issued in readily marketable denominations of
$5,000 each or any greater multiple thereof and the holder
thereof would be fully entitled to the repayment protections
afforded by collateral arrangements to any holder of the
underlying Bonds. These certificates would be exempt from
registration under the Securities Act of 1933 pursuant to
Section 3(a)(2) thereof.

For Bonds that have been guaranteed or similarly
secured by insurance companies or other corporations or
entities, the guarantee or similar commitment may constitute
a security (a "Restricted Security") that cannot, in the
opinion of counsel, be sold publicly by the Trustee without
registration under the Securities Act of 1933, as amended,
or similar provisions of law subsequently exacted. The
Sponsors nevertheless believe that, should a sale of these
Bonds be necessary in order to meet redemptions, the Trustee
should be able to consummate a sale with institutional
investors. Up to 40% of the Portfolio may initially have
consisted of Bonds purchased from various banks and thrifts
and other Bonds with guarantees which may constitute
Restricted Securities.

The Fund may contain bonds purchased directly from
issuers. These Bonds are generally issued under bond
resolutions or trust indentures providing for the issuance
of bonds in publicly saleable denominations (usually
$5,000), may be sold free of the registration requirements
of the Securities Act of 1933 and are otherwise structured
in contemplation of ready marketability. In addition, the
Sponsors generally have obtained letters of intention to
repurchase or to use best efforts to remarket these Debt
Obligations from the issuers, the placement agents acting in
connection with their sale or the entities providing the
additional credit support, if any. These letters do not
express legal obligations; however, in the opinion of the
Sponsors, these Bonds should be readily marketable.

<PAGE>

Bonds Backed by Insurance

Municipal bond insurance may be provided by one or
more of AMBAC Indemnity Corporation ("AMBAC"), Asset
Guaranty Reinsurance Co. ("Asset Guaranty"), Capital
Guaranty Insurance Company ("CGIC"), Capital Markets
Assurance Corp. ("CAPMAC"), Connie Lee Insurance Company
("Connie Lee"), Continental Casualty Company
("Continental"), Financial Guaranty Insurance Company
("Financial Guaranty"), Financial Security Assurance Inc.
("FSA"), Firemen's Insurance Company of Newark, New Jersey
("Firemen's "), Industrial Indemnity Insurance Company
("IIC"), which operates the Health Industry Bond Insurance
("HIBI") Program or Municipal Bond Investors Assurance
Corporation ("MBIA") (collectively, the "Insurance
Companies"). The claims-paying ability of each of these
companies, unless otherwise indicated, is rated AAA by
Standard & Poor's or another acceptable national rating
agency. The ratings are subject to change at any time at
the discretion of the rating agencies. In determining
whether to insure bonds, the Insurance Companies severally
apply their own standards. The cost of this insurance is
borne either by the issuers or previous owners of the bonds
or by the Sponsors. The insurance policies are
non-cancellable and will continue in force so long as the
insured Bonds are outstanding and the insurers remain in
business. The insurance policies guarantee the timely
payment of principal and interest on but do not guarantee
the market value of the insured Bonds or the value of the
Units. The insurance policies generally do not provide for
accelerated payments of principal or cover redemptions
resulting from events of taxability. If the issuer of any
insured Bond should fail to make an interest or principal
payment, the insurance policies generally provide that a
Trustee or its agent will give notice of nonpayment to the
Insurance Company or its agent and provide evidence of the
Trustee's right to receive payment. The Insurance Company
is then required to disburse the amount of the failed
payment to the Trustee or its agent and is thereafter
subrogated to the Trustee's right to receive payment from
the issuer.

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. Standard & Poor's has rated the
Units of any Insured Fund AAA because the Insurance
Companies have insured the Bonds. The assignment of a AAA
rating is due to Standard & Poor's assessment of the
creditworthiness of the Insurance Companies and of their
ability to pay claims on their policies of insurance. In

<PAGE>

the event that Standard & Poor's reassesses the
creditworthiness of any Insurance Company which would result
in the rating of an Insured Fund being reduced, the Sponsors
are authorized to direct the Trustee to obtain other
insurance.

Certain Bonds may be entitled to portfolio
insurance ("Portfolio Insurance") that guarantees the
scheduled payment of the principal of and interest on those
Bonds ("Portfolio-Insured Bonds") while they are retained in
the Fund. Since the Portfolio Insurance applies to Bonds
only while they are retained in the Fund, the value of
Portfolio-Insured Bonds (and hence the value of the Units)
may decline if the credit quality of any Portfolio-Insured
Bonds is reduced. Premiums for Portfolio Insurance are
payable monthly in advance by the Trustee on behalf of the
Fund.

As Portfolio-Insured Bonds 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 any
policy obtained by the Fund will not result in the
cancellation of insurance but will permit the portfolio
insurer to take action against the Trustee to recover
premium payments due it. Upon the sale of a Portfolio-
Insured Bond from the Fund, the Trustee has the right,
pursuant to an irrevocable commitment obtained from the
portfolio insurer, to obtain insurance to maturity
("Permanent Insurance") on the Bond upon the payment of a
single predetermined insurance premium from the proceeds of
the sale. It is expected that the Trustee will exercise the
right to obtain Permanent Insurance only if the Fund would
receive net proceeds from the sale of the Bond (sale
proceeds less the insurance premium attributable to the
Permanent Insurance) in excess of the sale proceeds that
would be received if the Bonds were sold on an uninsured
basis. The premiums for Permanent Insurance for each
Portfolio-Insured Bond will decline over the life of the
Bond.

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 Bonds are in default in payment of
principal or interest or, in the opinion of the Agent for
the Sponsors, in significant risk of default. In making
this determination the Agent for the Sponsors has
established as a general standard that a Portfolio-Insured
Bond which is rated less than BB by Standard & Poor's or Ba

<PAGE>

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 Bond 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. The value of the insurance will be equal to
the difference between (i) the market value of the
Portfolio-Insured Bond assuming the exercise of the right to
obtain Permanent Insurance (less the insurance premium
attributable to the purchase of Permanent Insurance) and
(ii) the market value of the Portfolio-Insured Bond not
covered by Permanent Insurance.

In addition, certain Funds may contain Bonds that
are insured to maturity as well as being Portfolio-Insured
Bonds.

The following are brief descriptions of the
Insurance Companies. The financial information presented
for each company has been determined on a statutory basis
and is unaudited.

AMBAC is a Wisconsin-domiciled stock insurance
company, regulated by the Insurance Department of the State
of Wisconsin, and licensed to do business in various states,
with admitted assets of approximately $2,150,000,000 and
policyholders' surplus of approximately $779,000,000 as of
September 30, 1994. AMBAC is a wholly-owned subsidiary of
AMBAC Inc., a financial holding company which is publicly
owned following a complete divestiture by Citibank during
the first quarter of 1992.

Asset Guaranty is a New York State insurance
company licensed to write financial guarantee, credit,
residual value and surety insurance. Asset Guaranty
commenced operations in mid-1988 by providing reinsurance to
several major monoline insurers. The parent holding company
of Asset Guaranty, Asset Guarantee Inc. (AGI), merged with
Enhance Financial Services (EFS) in June, 1990 to form
Enhance Financial Services Group Inc. (EFSG). The two main,
100%-owned subsidiaries of EFSG, Asset Guaranty and Enhance
Reinsurance Company (ERC), share common management and
physical resources. After an initial public offering
completed in February 1992 and the sale by Merrill Lynch &
Co. of its state, EFSG is 49.8%-owned by the public, 29.9%
by US West Financial Services, 14.1% by Manufacturers Life
Insurance Co. and 6.2% by senior management. Both ERC and
Asset Guaranty are rated "AAA" for claims paying ability by
Duff & Phelps, and ERC is rated triple-A for claims-paying-
ability for both S&P and Moody's. Asset Guaranty received a
"AA" claims-paying-ability rating from S&P during August
1993, but remains unrated by Moody's. As of September 30,
1994 Asset Guaranty had admitted assets of approximately

<PAGE>

$152,000,000 and policyholders' surplus of approximately
$73,000,000.

CGIC, a monoline bond insurer headquartered in San
Francisco, California, was established in November 1986 to
assume the financial guaranty business of United States
Fidelity and Guaranty Company ("USF&G"). It is a
wholly-owned subsidiary of Capital Guaranty Corporation
("CGC") whose stock is owned by: Constellation Investments,
Inc., an affiliate of Baltimore Gas & Electric,
Fleet/Norstar Financial Group, Inc., Safeco Corporation,
Sibag Finance Corporation, an affiliate of Siemens AG,
USF&G, the eighth largest property/casualty company in the
U.S. as measured by net premiums written, and CGC
management. As of September 30, 1994, CGIC had total
admitted assets of approximately $293,000,000 and
policyholders' surplus of approximately $166,000,000.

CAPMAC commenced operations in December 1987, as
the second mono-line financial guaranty insurance company
(after FSA) organized solely to insure non-municipal
obligations. CAPMAC, a New York corporation, is a
wholly-owned subsidiary of CAPMAC Holdings, Inc. (CHI),
which was sold in 1992 by Citibank (New York State) to a
group of 12 investors led by the following: Dillon Read's
Saratoga Partners II, L.P., an acquisition fund; Caprock
Management, Inc., representing Rockefeller family interests;
Citigrowth Fund, a Citicorp venture capital group; and
CAPMAC senior management and staff. These groups control
approximately 70% of the stock of CHI. CAPMAC had
traditionally specialized in guaranteeing consumer loan and
trade receivable asset-backed securities. Under the new
ownership group CAPMAC intends to become involved in the
municipal bond insurance business, as well as their
traditional non-municipal business. As of September 30,
1994 CAPMAC's admitted assets were approximately
$198,000,000 and its policyholders' surplus was
approximately $139,000,000.

Connie Lee is a wholly-owned subsidiary of College
Construction Loan Insurance Association ("CCLIA"), a
government-sponsored enterprise established by Congress to
provide American academic institutions with greater access
to low-cost capital through credit enhancement. Connie Lee,
the operating insurance company, was incorporated in 1987
and began business as a reinsurer of tax-exempt bonds of
colleges, universities, and teaching hospitals with a
concentration on the hospital sector. During the fourth
quarter of 1991 Connie Lee began underwriting primary bond
insurance which will focus largely on the college and
university sector. CCLIA's founding shareholders are the
U.S. Department of Education, which owns 36% of CCLIA, and
the Student Loan Marketing Association ("Sallie Mae"), which

<PAGE>

owns 14%. The other principal owners are: Pennsylvania
Public School Employees' Retirement System, Metropolitan
Life Insurance Company, Kemper Financial Services, Johnson
family funds and trusts, Northwestern University,
Rockefeller & Co., Inc. administered trusts and funds, and
Stanford University. Connie Lee is domiciled in the state
of Wisconsin and has licenses to do business in 47 states
and the District of Columbia. As of September 30, 1994, its
total admitted assets were approximately $193,000,000 and
policyholders' surplus was approximately $106,000,000.

Continental is a wholly-owned subsidiary of CNA
Financial Corp. and was incorporated under the laws of
Illinois in 1948. As of September 30, 1994, Continental had
policyholders' surplus of approximately $3,309,000,000 and
admitted assets of approximately $19,220,000,000.
Continental is the lead property-casualty company of a fleet
of carriers nationally known as "CNA Insurance Companies".
CNA is rated AA+ by Standard & Poor's.

Financial Guaranty, a New York stock insurance
company, is a wholly-owned subsidiary of FGIC Corporation,
which is wholly owned by General Electric Capital
Corporation. The investors in the FGIC Corporation are not
obligated to pay the debts of or the claims against
Financial Guaranty. Financial Guaranty commenced its
business of providing insurance and financial guarantees for
a variety of investment instruments in January 1984 and is
currently authorized to provide insurance in 49 states and
the District of Columbia. It files reports with state
regulatory agencies and is subject to audit and review by
those authorities. As of September 30, 1994, its total
admitted assets were approximately $2,092,000,000 and its
policyholders' surplus was approximately $872,000,000.

FSA 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 December 1989 by US
West, Inc., the regional Bell Telephone Company serving the
Rocky Mountain and Pacific Northwestern states. U.S. West
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, FSA had
policyholders' surplus of approximately $369,000,000 and
total admitted assets of approximately $776,000,000.

Firemen's, which was incorporated in New Jersey in
1855, is a wholly-owned subsidiary of The Continental
Corporation and a member of The Continental Insurance
Companies, a group of property and casualty insurance

<PAGE>

companies the claims paying ability of which is rated AA- by
Standard & Poor's. It provides unconditional and non-
cancellable insurance on industrial development revenue
bonds. As of September 30, 1994, the total admitted assets
of Firemen's were approximately $2,236,000,000 and its
policyholders' surplus was approximately $383,000,000.

IIC, which was incorporated in California in 1920,
is a wholly-owned subsidiary of Crum and Forster, Inc., a
New Jersey holding company and a wholly-owned subsidiary of
Xerox Corporation. IIC is a property and casualty insurer
which, together with certain other wholly-owned insurance
subsidiaries of Crum and Forster, Inc., operates under a
Reinsurance Participation Agreement whereby all insurance
written by these companies is pooled among them. As of
September 30, 1994 the total admitted assets and
policyholders' surplus of IIC on a consolidated-statutory
basis were $1,853,000,000 and $299,000,000 respectively.
Standard & Poor's has rated IIC's claims-paying ability A.
Any IIC/HIBI-rated Debt Obligations in an Insured Series are
additionally insured for as long as they remain in the Fund
and as long as IIC/HIBI's rating is below AAA, in order to
maintain the AAA-rating of Fund Units. The cost of any
additional insurance is paid by the Fund and such insurance
would expire on the sale or maturity of the Debt Obligation.

MBIA 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 principal
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 approximately
$3,314,000,000 and policyholders' surplus of approximately
$1,083,000,000.

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. Regulatory agencies require that

<PAGE>

premium rates not be excessive, inadequate or unfairly
discriminatory. 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 that are otherwise uninsurable. A significant portion
of the assets of insurance companies is required by law to
be held in reserve against potential claims on policies and
is not available to general creditors.

Although the Federal government does not regulate
the business of insurance, Federal initiatives 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

<PAGE>

into non-traditional lines of business which may involve
different types of risks.

State Risk Factors

Investment in a single State Trust, as opposed to
a Fund which invests in the obligations of several states,
may involve some additional risk due to the decreased
diversification of economic, political, financial and market
risks. See Appendix A to this Information Supplement for
brief summaries of some of the factors which may affect the
financial condition of the States represented in various
State Trusts of Defined Asset Funds, together with summaries
of tax considerations relating to those States.

Payment of Bonds and Life of a Fund

Because Bonds 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 a Portfolio will retain for any
length of time its present size and composition. Bonds may
be subject to redemption prior to their stated maturity
dates pursuant to optional refunding or sinking fund
redemption provisions or otherwise. In general, optional
refunding redemption provisions are more likely to be
exercised when the offer side evaluation is at a premium
over par than when it is at a discount from par. Generally,
the offer side evaluation of Bonds will be at a premium over
par when market interest rates fall below the coupon rate on
the Bonds. Bonds in a Portfolio may be subject to sinking
fund provisions early in the life of a Fund. 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. Additionally,
the size and composition of a Portfolio will be affected by
the level of redemptions of Units that may occur from time
to time and the consequent sale of Bonds. 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 a Portfolio remaining at that time, the size of a
Portfolio relative to its original size, the ratio of Fund
expenses to income, a Fund's current and long-term returns,
the degree to which Units may be selling at a premium over
par relative to other funds sponsored by the Sponsors and
the cost of maintaining a current prospectus for a Fund.
These factors may also lead the Sponsors to seek to
terminate a Fund earlier than would otherwise be the case.

<PAGE>

Redemption

The Trustee is empowered to sell Bonds in order to
make funds available for redemption if funds are not
otherwise available in the Capital and Income Accounts. The
Bonds 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 Bonds 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 Bonds to $250,000
for certain Restricted Securities which can be distributed
on short notice only by private sale, usually to
institutional investors. Provision is also made that sales
of Bonds 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 Bonds 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.

Tax Exemption

In the opinion of bond counsel rendered on the
date of issuance of each Bond, the interest on each Bond is
excludable from gross income under existing law for regular
Federal income tax purposes (except in certain circumstances
depending on the Holder) but may be subject to state and
local taxes and may be a preference item for purposes of the
Alternative Minimum Tax. Interest on Bonds may become
subject to regular Federal income tax, perhaps retroactively
to their date of issuance, as a result of changes in Federal
law or as a result of the failure of issuers (or other users
of the proceeds of the Bonds) to comply with certain ongoing
requirements.

Moreover, the Internal Revenue Service has
announced an expansion of its examination program with
respect to tax-exempt bonds. The expanded examination
program will consist of, among other measures, increased

<PAGE>

enforcement against abusive transactions, broader audit
coverage (including the expected issuance of audit
guidelines) and expanded compliance achieved by means of
expected revisions to the tax-exempt bond information return
forms.

In certain cases, a Bond may provide that if the
interest on the Bond should ultimately be determined to be
taxable, the Bond would become due and payable by its
issuer, and, in addition, may provide that any related
letter of credit or other security could be called upon if
the issuer failed to satisfy all or part of its obligation.
In other cases, however, a Bond may not provide for the
acceleration or redemption of the Bond or a call upon the
related letter of credit or other security upon a
determination of taxability. In those cases in which a Bond
does not provide for acceleration or redemption or in which
both the issuer and the bank or other entity issuing the
letter of credit or other security are unable to meet their
obligations to pay the amounts due on the Bond as a result
of a determination of taxability, a Trustee would be
obligated to sell the Bond and, since it would be sold as a
taxable security, it is expected that it would have to be
sold at a substantial discount from current market price.
In addition, as mentioned above, under certain circumstances
Holders could be required to pay income tax on interest
received prior to the date on which the interest is
determined to be taxable.

INCOME AND RETURNS

Income

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

The regular monthly income distribution stated in
Part A of the Prospectus is based on a Public Offering Price
of $1,000 per Unit after deducting estimated Fund expenses,
and will change as the composition of the Portfolio changes
over time.

<PAGE>

Income is received by a Fund upon semi-annual
payments of interest on the Bonds held in a Portfolio.
Bonds may sometimes be purchased on a when, as and if issued
basis or may have a delayed delivery. Since interest on
these Bonds does not begin to accrue until the date of
delivery to a Fund, in order to provide tax-exempt income to
Holders for this non-accrual period, the Trustee's Annual
Fee and Expenses is reduced by the interest that would have
accrued on these Bonds between the initial settlement date
for Units and the delivery dates of the Bonds. This
eliminates reduction in Monthly Income Distributions.
Should when-issued Bonds be issued later than expected, the
fee reduction will be increased correspondingly. If the
amount of the Trustee's Annual Fee and Expenses is
insufficient to cover the additional accrued interest, the
Sponsors will treat the contracts as Failed Bonds. As the
Trustee is authorized to draw on the letter of credit
deposited by the Sponsors before the settlement date for
these Bonds and deposit the proceeds in an account for the
Fund on which it pays no interest, its use of these funds
compensates the Trustee for the reduction described above.

<PAGE>

Appendix A

STATE MATTERS
-------------

CALIFORNIA SERIES

RISK FACTORS - Economic Factors. The Governor's
1993-1994 Budget, introduced on January 8, 1993, proposed
general fund expenditures of $37.3 billion, with projected
revenues of $39.9 billion. To balance the budget in the
face of declining revenues, the Governor proposed a series
of revenue shifts from local government, reliance on
increased federal aid, and reductions in state spending.

The Department of Finance of the State of
California's May Revision of General Fund Revenues and
Expenditures (the "May Revision"), released on May 20, 1993,
projected the State would have an accumulated deficit of
about $2.75 billion by June 30, 1993, essentially unchanged
from the prior year. The Governor proposed to eliminate
this deficit over an 18-month period. He also agreed to
retain the 0.5% sales tax scheduled to expire June 30 for a
six-month period, dedicated to local public safety purposes,
with a November election to determine a permanent extension.
Unlike previous years, the Governor's Budget and May
Revision did not calculate a "gap" to be closed, but rather
set forth revenue and expenditure forecasts and proposals
designed to produce a balanced budget.

The 1993-1994 budget act (the "1993-94 Budget
Act") was signed by the Governor on June 30, 1993, along
with implementing legislation. The Governor vetoed about
$71 million in spending.

The 1993-94 Budget Act is predicated on general
fund revenues and transfers estimated at $40.6 billion, $400
million below 1992-93 (and the second consecutive year of
actual decline). The principal reasons for declining
revenue are the continued weak economy and the expiration
(or repeal) of three fiscal steps taken in 1991 - a half
cent temporary sales tax, a deferral of operating loss
carryforwards, and repeal by initiative of a sales tax on
candy and snack foods.

The 1993-94 Budget Act also assumes special fund
revenues of $11.9 billion, an increase of 2.9 percent over
1992-93.

The 1993-94 Budget Act includes general fund
expenditures of $38.5 billion (a 6.3 percent reduction from
projected 1992-93 expenditures of $41.1 billion), in order
to keep a balanced budget within the available revenues.
The 1993-94 Budget Act also includes special fund

<PAGE>

expenditures of $12.1 billion, a 4.2 percent increase. The
1993-94 Budget Act reflects the following major adjustments:

1. Changes in local government financing to
shift about $2.6 billion in property taxes from cities,
counties, special districts and redevelopment agencies
to school and community college districts, thereby
reducing general fund support by an equal amount.
About $2.5 billion would be permanent, reflecting
termination of the State's "bailout" of local
governments following the property tax cuts of
Proposition 13 in 1978 (See "Constitutional,
Legislative and Other Factors" below).

The property tax revenue losses for cities
and counties are offset in part by additional sales tax
revenues and mandate relief. The temporary 0.5 percent
sales tax has been extended through December 31, 1993,
for allocation to counties for public safety programs.
The voters approved Proposition 172 in November 1993
and the 0.5 percent sales tax was extended permanently
for public safety purposes.

Legislation also has been enacted to
eliminate state mandates in order to provide local
governments flexibility in making their programs
responsive to local needs. Legislation provides
mandate relief for local justice systems which affect
county audit requirements, court reporter fees, and
court consolidation; health and welfare relief
involving advisory boards, family planning, state
audits and realignment maintenance efforts; and relief
in areas such as county welfare department self-
evaluations, noise guidelines and recycling
requirements.

2. The 1993-94 Budget Act keeps K-12 Proposition
98 funding on a cash basis at the same per-pupil level
as 1992-93 by providing schools a $609 million loan
payable from future years' Proposition 98 funds.

3. The 1993-94 Budget Act assumed receipt of
about $692 million of aid to the State from the federal
government to offset health and welfare costs
associated with foreign immigrants living in the State,
which would reduce a like amount of General Fund
expenditures. About $411 million of this amount was
one-time funding. Congress ultimately appropriated
only $450 million.

4. Reductions of $600 million in health and
welfare programs and $400 million in support for higher
education, partly offset by fee increases at all three

A-2

<PAGE>

units of higher education and various miscellaneous
cuts (totalling approximately $150 million) in State
government services in many agencies, up to 15 percent.

5. A 2-year suspension of the renters' tax
credit ($390 million expenditure reduction in 1993-94).

6. Miscellaneous one-time items, including
deferral of payment to the Public Employees Retirement
Fund ($339 million) and a change in accounting for debt
service from accrual to cash basis, saving $107
million.

The 1993-94 Budget Act contains no general fund
tax/revenue increases other than a two year suspension of
the renters' tax credit. The 1993-94 Budget Act suspended
the 4 percent automatic budget reduction "trigger", as was
done in 1992-93, so cuts could be focused.

Administration reports during the course of the
1993-94 Fiscal Year have indicated that while economic
recovery appears to have started in the second half of the
fiscal year, recessionary conditions continued longer than
had been anticipated when the 1993-94 Budget Act was
adopted. Overall, revenues for the 1993-94 Fiscal Year were
about $800 million lower than original projections, and
expenditures were about $780 million higher, primarily
because of higher health and welfare caseloads, lower
property taxes which require greater State support for K-14
education to make up the shortfall, and lower than
anticipated federal government payments for immigration-
related costs. The most recent reports, however, in May and
June, 1994, indicated that revenues in the second half of
the 1993-94 Fiscal Year have been very close to the
projections made in the Governor's Budget of January 10,
1994, which is consistent with a slow turnaround in the
economy.

On January 17, 1994, a major earthquake measuring
an estimated 6.8 on the Richter Scale struck Los Angeles.
Significant property damage to private and public facilities
occurred in a four-county area including northern Los
Angeles County, Ventura County, and parts of Orange and San
Bernardino Counties, which were declared as State and
federal disaster areas by January 18. Preliminary estimates
of total property damage (private and public) are in the
range of $15 billion or more. However, precise estimates of
the damage are being developed and may change.

Despite such damage, on the whole, the vast
majority of structures in the areas, including large
manufacturing and commercial buildings and all modern high-
rise offices, survived the earthquake with minimal or no

A-3

<PAGE>

damage, validating the cumulative effect of strict building
codes and thorough preparation for such an emergency by the
State and local agencies.

State-owned facilities, including transportation
corridors and facilities such as Interstate Highways 5 and
10 and State Highways 14, 118 and 210, and certain other
State facilities, such as the campus at California State
University - Northridge (which was heavily damaged and is
only partly open), the Van Nuys State Office Building and
the University of California at Los Angeles, sustained some
damage. Aside from the road and bridge closures, it is not
expected that this damage will interfere significantly with
ongoing State government operations. Work to date has
allowed reopening of the most heavily damaged sections of
the Santa Monica Freeway (Interstate 10).

The State in conjunction with the federal
government is committed to providing assistance to local
governments, individuals and businesses suffering damage as
a result of the earthquake, as well as to provide for the
repair and replacement of State-owned facilities. The
federal government will provide substantial earthquake
assistance.

The President immediately allocated some available
disaster funds, and Congress has approved additional funds
for a total of at least $9.5 billion of federal funds for
earthquake relief, including assistance to homeowners and
small businesses, and costs for repair of damaged public
facilities. The Governor has announced that the State will
have to pay about $1.9 billion for earthquake relief costs,
including a 10 percent match to some of the federal funds,
and costs for some programs not covered by the federal aid.
The Governor has proposed to cover $1.05 billion of these
costs from a general obligation bond issue which was on the
June, 1994 ballot but it was not approved by the voters.
The Governor subsequently announced that the State's share
for transportation projects would come from existing
Department of Transportation funds (thereby delaying other,
non-earthquake related projects), the State's share for
certain other costs (including local school building
repairs) would come from reallocating existing bond funds,
and that a proposed program for homeowner and small business
aid supplemental to federal aid would have to be abandoned.
Some other costs will be borrowed from the federal
government in a manner similar to that used by the State of
Florida after Hurricane Andrew; pursuant to Senate Bill
2383, repayment will have to be addressed in 1995-96 or
beyond.

The 1994-95 Fiscal Year will represent the fourth
consecutive year the Governor and Legislature will be faced

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with a very difficult budget environment to produce a
balanced budget. Many program cuts and budgetary
adjustments have already been made in the last three years.
The Governor's Budget proposal, as updated in May and June,
1994, recognized that the accumulated deficit could not be
repaid in one year, and proposed a two-year solution. The
budget proposal sets forth revenue and expenditure forecasts
and revenue and expenditure proposals which result in
operating surpluses for the budget for both 1994-95 and
1995-96, and lead to the elimination of the accumulated
budget deficit, estimated at about $2.0 billion at June 30,
1994, by June 30, 1996.

The 1994-95 Budget Act, signed by the Governor on
July 8, 1994, projects revenues and transfers of $41.9
billion, about $2.1 billion higher than revenues in 1993-94.
Also included in this figure is a projected receipt of about
$360 million from the Federal Government to reimburse the
State's cost of incarcerating undocumented immigrants. The
State will not know how much the Federal Government will
actually provide until the Federal FY 1995 Budget is
completed. Completion of the Federal Budget is expected by
October 1994. The Legislature took no action on a proposal
in the January Governor's Budget to undertake an expansion
of the transfer of certain programs to counties, which would
also have transferred to counties 0.5% of the State's
current sales tax.

The Budget Act projects Special Fund revenues of
$12.1 billion, a decrease of 2.4% from 1993-94 estimated
revenues.

The 1994-95 Budget Act projects General Fund
expenditures of $40.9 billion, an increase of $1.6 billion
over 1993-94. The Budget Act also projects Special Fund
expenditures of $13.7 billion, a 5.4% increase over 1993-94
estimated expenditures. The principal features of the
Budget Act were the following:

1. Receipt of additional federal aid in 1994-95
of about $400 million for costs of refugee assistance
and medical care for undocumented immigrants, thereby
offsetting a similar General Fund cost. The State will
not know how much of these funds it will receive until
the Federal FY 1995 Budget is passed.

2. Reductions of approximately $1.1 billion in
health and welfare costs.

3. A General Fund increase of approximately $38
million in support for the University of California and
$65 million for California State University. It is

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anticipated that student fees for both the U.C. and the
C.S.U. will increase up to 10%.

4. Proposition 98 funding for K-14 schools is
increased by $526 million from 1993-94 levels,
representing an increase for enrollment growth and
inflation. Consistent with previous budget agreements,
Proposition 98 funding provides approximately $4,217
per student for K-12 schools, equal to the level in the
past three years.

5. Legislation enacted with the Budget clarifies
laws passed in 1992 and 1993 which require counties and
other local agencies to transfer funds to local school
districts, thereby reducing State aid. Some counties
had implemented a method of making such transfers which
provided less money for schools if there were
redevelopment agency projects. The new legislation
bans this method of transfer. If all counties had
implemented this method, General Fund aid to K-12
schools would have been $300 million higher in each of
the 1994-95 and 1995-96 Fiscal Years.

6. The 1994-95 Budget Act provides funding for
anticipated growth in the State's prison inmate
population, including provisions for implementing
recent legislation (the so-called "Three Strikes" law)
which requires mandatory life prison terms for certain
third-time felony offenders.

7. Additional miscellaneous cuts ($500 million)
and fund transfers ($255 million) totalling in the
aggregate approximately $755 million.

The 1994-95 Budget Act contains no tax increases.
Under legislation enacted for the 1993-94 Budget, the
renters' tax credit was suspended for two years (1993 and
1994). A ballot proposition to permanently restore the
renters' tax credit after this year failed at the June, 1994
election. The Legislature enacted a further one-year
suspension of the renters' tax credit, for 1995, saving
about $390 million in the 1995-96 Fiscal Year.

The 1994-95 Budget assumes that the State will use
a cash flow borrowing program in 1994-95 which combines one-
year notes and warrants. Issuance of warrants allows the
State to defer repayment of approximately $1.0 billion of
its accumulated budget deficit into the 1995-96 Fiscal Year.

A key feature of the 1993-94 Budget Act was a plan
to retire by December 31, 1994 the $2.8 billion budget
deficit which had been accumulated by June 30, 1993. The
original deficit retirement plan anticipated a combined

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program to balance the budget over the 1993-94 and 1994-95
Fiscal Years, and projected a General Fund balance of $260
million on June 30, 1995. Because fiscal conditions did not
improve as projected in 1993-94, the revenue assumptions of
the original deficit retirement plan could not be met, and
the Governor indicated in the June 1994 revisions that the
General Fund condition would be about $1 billion worse at
June 30, 1994 than was projected at the start of the year.
Accordingly, the 1994-95 Budget Act anticipates deferring
retirement of about $1 billion of the carryover budget
deficit to the 1995-96 Fiscal Year, when it is intended to
be fully retired. This 22-month deficit reduction plan uses
existing statutory authority to borrow $4 billion externally
of which approximately $1 billion is the carryover budget
deficit.

Constitutional, Legislative and Other Factors.
Certain California constitutional amendments, legislative
measures, executive orders, administrative regulations and
voter initiatives could result in the adverse effects
described below. The following information constitutes only
a brief summary, does not purport to be a complete
description, and is based on information drawn from official
statements and prospectuses relating to securities offerings
of the State of California and various local agencies in
California, available as of the date of this Prospectus.
While the Sponsors have not independently verified such
information, they have no reason to believe that such
information is not correct in all material respects.

Certain Debt Obligations in the Portfolio may be
obligations of issuers which rely in whole or in part on
California State revenues for payment of these obligations.
Property tax revenues and a portion of the State's general
fund surplus are distributed to counties, cities and their
various taxing entities and the State assumes certain
obligations theretofore paid out of local funds. Whether
and to what extent a portion of the State's general fund
will be distributed in the future to counties, cities and
their various entities, is unclear.

In 1988, California enacted legislation providing
for a water's-edge combined reporting method if an election
fee was paid and other conditions met. On October 6, 1993,
California Governor Pete Wilson signed Senate Bill 671
(Alquist) which modifies the unitary tax law by deleting the
requirements that a taxpayer electing to determine its
income on a water's-edge basis pay a fee and file a domestic
disclosure spreadsheet and instead requiring an annual
information return. Significantly, the Franchise Tax Board
can no longer disregard a taxpayer's election. The
Franchise Tax Board is reported to have estimated state
revenue losses from the Legislation as growing from $27

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million in 1993-94 to $616 million in 1999-2000, but others,
including Assembly Speaker Willie Brown, disagree with that
estimate and assert that more revenue will be generated for
California, rather than less, because of an anticipated
increase in economic activity and additional revenue
generated by the incentives in the Legislation.

Certain of the Debt Obligations may be obligations
of issuers who rely in whole or in part on ad valorem real
property taxes as a source of revenue. On June 6, 1978,
California voters approved an amendment to the California
Constitution known as Proposition 13, which added Article
XIIIA to the California Constitution. The effect of Article
XIIIA is to limit ad valorem taxes on real property and to
restrict the ability of taxing entities to increase real
property tax revenues. On November 7, 1978, California
voters approved Proposition 8, and on June 3, 1986,
California voters approved Proposition 46, both of which
amended Article XIIIA.

Section 1 of Article XIIIA limits the maximum ad
valorem tax on real property to 1% of full cash value (as
defined in Section 2), to be collected by the counties and
apportioned according to law; provided that the 1%
limitation does not apply to ad valorem taxes or special
assessments to pay the interest and redemption charges on
(i) any indebtedness approved by the voters prior to July 1,
1978, or (ii) any bonded indebtedness for the acquisition or
improvement of real property approved on or after July 1,
1978, by two-thirds of the votes cast by the voters voting
on the proposition. Section 2 of Article XIIIA defines
"full cash value" to mean "the County Assessor's valuation
of real property as shown on the 1975/76 tax bill under
'full cash value' or, thereafter, the appraised value of
real property when purchased, newly constructed, or a change
in ownership has occurred after the 1975 assessment." The
full cash value may be adjusted annually to reflect
inflation at a rate not to exceed 2% per year, or reduction
in the consumer price index or comparable local data, or
reduced in the event of declining property value caused by
damage, destruction or other factors. The California State
Board of Equalization has adopted regulations, binding on
county assessors, interpreting the meaning of "change in
ownership" and "new construction" for purposes of
determining full cash value of property under Article XIIIA.

Legislation enacted by the California Legislature
to implement Article XIIIA (Statutes of 1978, Chapter 292,
as amended) provides that notwithstanding any other law,
local agencies may not levy any ad valorem property tax
except to pay debt service on indebtedness approved by the
voters prior to July 1, 1978, and that each county will levy
the maximum tax permitted by Article XIIIA of $4.00 per $100

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assessed valuation (based on the former practice of using
25%, instead of 100%, of full cash value as the assessed
value for tax purposes). The legislation further provided
that, for the 1978/79 fiscal year only, the tax levied by
each county was to be apportioned among all taxing agencies
within the county in proportion to their average share of
taxes levied in certain previous years. The apportionment
of property taxes for fiscal years after 1978/79 has been
revised pursuant to Statutes of 1979, Chapter 282 which
provides relief funds from State moneys beginning in fiscal
year 1979/80 and is designed to provide a permanent system
for sharing State taxes and budget funds with local
agencies. Under Chapter 282, cities and counties receive
more of the remaining property tax revenues collected under
Proposition 13 instead of direct State aid. School
districts receive a correspondingly reduced amount of
property taxes, but receive compensation directly from the
State and are given additional relief. Chapter 282 does not
affect the derivation of the base levy ($4.00 per $100
assessed valuation) and the bonded debt tax rate.

On November 6, 1979, an initiative known as
"Proposition 4" or the "Gann Initiative" was approved by the
California voters, which added Article XIIIB to the
California Constitution. Under Article XIIIB, State and
local governmental entities have an annual "appropriations
limit" and are not allowed to spend certain moneys called
"appropriations subject to limitation" in an amount higher
than the "appropriations limit." Article XIIIB does not
affect the appropriation of moneys which are excluded from
the definition of "appropriations subject to limitation,"
including debt service on indebtedness existing or
authorized as of January 1, 1979, or bonded indebtedness
subsequently approved by the voters. In general terms, the
"appropriations limit" is required to be based on certain
1978/79 expenditures, and is to be adjusted annually to
reflect changes in consumer prices, population, and certain
services provided by these entities. Article XIIIB also
provides that if these entities' revenues in any year exceed
the amounts permitted to be spent, the excess is to be
returned by revising tax rates or fee schedules over the
subsequent two years.

At the November 8, 1988 general election,
California voters approved an initiative known as
Proposition 98. This initiative amends Article XIIIB to
require that (i) the California Legislature establish a
prudent state reserve fund in an amount as it shall deem
reasonable and necessary and (ii) revenues in excess of
amounts permitted to be spent and which would otherwise be
returned pursuant to Article XIIIB by revision of tax rates
or fee schedules, be transferred and allocated (up to a
maximum of 4%) to the State School Fund and be expended

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solely for purposes of instructional improvement and
accountability. No such transfer or allocation of funds
will be required if certain designated state officials
determine that annual student expenditures and class size
meet certain criteria as set forth in Proposition 98. Any
funds allocated to the State School Fund shall cause the
appropriation limits established in Article XIIIB to be
annually increased for any such allocation made in the prior
year.

Proposition 98 also amends Article XVI to require
that the State of California provide a minimum level of
funding for public schools and community colleges.
Commencing with the 1988-89 fiscal year, state monies to
support school districts and community college districts
shall equal or exceed the lesser of (i) an amount equalling
the percentage of state general revenue bonds for school and
community college districts in fiscal year 1986-87, or (ii)
an amount equal to the prior year's state general fund
proceeds of taxes appropriated under Article XIIIB plus
allocated proceeds of local taxes, after adjustment under
Article XIIIB. The initiative permits the enactment of
legislation, by a two-thirds vote, to suspend the minimum
funding requirement for one year.

On June 30, 1989, the California Legislature
enacted Senate Constitutional Amendment 1, a proposed
modification of the California Constitution to alter the
spending limit and the education funding provisions of
Proposition 98. Senate Constitutional Amendment 1, on the
June 5, 1990 ballot as Proposition 111, was approved by the
voters and took effect on July 1, 1990. Among a number of
important provisions, Proposition 111 recalculates spending
limits for the State and for local governments, allows
greater annual increases in the limits, allows the averaging
of two years' tax revenues before requiring action regarding
excess tax revenues, reduces the amount of the funding
guarantee in recession years for school districts and
community college districts (but with a floor of 40.9
percent of State general fund tax revenues), removes the
provision of Proposition 98 which included excess moneys
transferred to school districts and community college
districts in the base calculation for the next year, limits
the amount of State tax revenue over the limit which would
be transferred to school districts and community college
districts, and exempts increased gasoline taxes and truck
weight fees from the State appropriations limit.
Additionally, Proposition 111 exempt from the State
appropriations limit funding for capital outlays.

Article XIIIB, like Article XIIIA, may require
further interpretation by both the Legislature and the
courts to determine its applicability to specific situations

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involving the State and local taxing authorities. Depending
upon the interpretation, Article XIIIB may limit
significantly a governmental entity's ability to budget
sufficient funds to meet debt service on bonds and other
obligations.

On November 4, 1986, California voters approved an
initiative statute known as Proposition 62. This initiative
(i) requires that any tax for general governmental purposes
imposed by local governments be approved by resolution or
ordinance adopted by a two-thirds vote of the governmental
entity's legislative body and by a majority vote of the
electorate of the governmental entity, (ii) requires that
any special tax (defined as taxes levied for other than
general governmental purposes) imposed by a local
governmental entity be approved by a two-thirds vote of the
voters within that jurisdiction, (iii) restricts the use of
revenues from a special tax to the purposes or for the
service for which the special tax was imposed, (iv)
prohibits the imposition of ad valorem taxes on real
property by local governmental entities except as permitted
by Article XIIIA, (v) prohibits the imposition of
transaction taxes and sales taxes on the sale of real
property by local governments, (vi) requires that any tax
imposed by a local government on or after August 1, 1985 be
ratified by a majority vote of the electorate within two
years of the adoption of the initiative or be terminated by
November 15, 1988, (vii) requires that, in the event a local
government fails to comply with the provisions of this
measure, a reduction in the amount of property tax revenue
allocated to such local government occurs in an amount equal
to the revenues received by such entity attributable to the
tax levied in violation of the initiative, and (viii)
permits these provisions to be amended exclusively by the
voters of the State of California.

In September 1988, the California Court of Appeal
in City of Westminster v. County of Orange, 204 Cal. App. 3d
---------------------------------------
623, 215 Cal. Rptr. 511 (Cal. Ct. App. 1988), held that
Proposition 62 is unconstitutional to the extent that it
requires a general tax by a general law city, enacted on or
after August 1, 1985 and prior to the effective date of
Proposition 62, to be subject to approval by a majority of
voters. The Court held that the California Constitution
prohibits the imposition of a requirement that local tax
measures be submitted to the electorate by either referendum
or initiative. It is not possible to predict the impact of
this decision on charter cities, on special taxes or on new
taxes imposed after the effective date of Proposition 62.

On November 8, 1988, California voters approved
Proposition 87. Proposition 87 amended Article XVI, Section
16, of the California Constitution by authorizing the

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California Legislature to prohibit redevelopment agencies
from receiving any of the property tax revenue raised by
increased property tax rates levied to repay bonded
indebtedness of local governments which is approved by
voters on or after January 1, 1989. It is not possible to
predict whether the California Legislature will enact such a
prohibition nor is it possible to predict the impact of
Proposition 87 on redevelopment agencies and their ability
to make payments on outstanding debt obligations.

Certain Debt Obligations in the Portfolio may be
obligations which are payable solely from the revenues of
health care institutions. Certain provisions under
California law may adversely affect these revenues and,
consequently, payment on those Debt Obligations.

The Federally sponsored Medicaid program for
health care services to eligible welfare beneficiaries in
California is known as the Medi-Cal program. Historically,
the Medi-Cal Program has provided for a cost-based system of
reimbursement for inpatient care furnished to Medi-Cal
beneficiaries by any hospital wanting to participate in the
Medi-Cal program, provided such hospital met applicable
requirements for participation. California law now provides
that the State of California shall selectively contract with
hospitals to provide acute inpatient services to Medi-Cal
patients. Medi-Cal contracts currently apply only to acute
inpatient services. Generally, such selective contracting
is made on a flat per diem payment basis for all services to
Medi-Cal beneficiaries, and generally such payment has not
increased in relation to inflation, costs or other factors.
Other reductions or limitations may be imposed on payment
for services rendered to Medi-Cal beneficiaries in the
future.

Under this approach, in most geographical areas of
California, only those hospitals which enter into a Medi-Cal
contract with the State of California will be paid for non-
emergency acute inpatient services rendered to Medi-Cal
beneficiaries. The State may also terminate these contracts
without notice under certain circumstances and is obligated
to make contractual payments only to the extent the
California legislature appropriates adequate funding
therefor.

In February 1987, the Governor of the State of
California announced that payments to Medi-Cal providers for
certain services (not including hospital acute inpatient
services) would be decreased by ten percent through June
1987. However, a federal district court issued a
preliminary injunction preventing application of any cuts
until a trial on the merits can be held. If the injunction
is deemed to have been granted improperly, the State of

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California would be entitled to recapture the payment
differential for the intended reduction period. It is not
possible to predict at this time whether any decreases will
ultimately be implemented.

California enacted legislation in 1982 that
authorizes private health plans and insurers to contract
directly with hospitals for services to beneficiaries on
negotiated terms. Some insurers have introduced plans known
as "preferred provider organizations" ("PPOs"), which offer
financial incentives for subscribers who use only the
hospitals which contract with the plan. Under an exclusive
provider plan, which includes most health maintenance
organizations ("HMOs"), private payors limit coverage to
those services provided by selected hospitals. Discounts
offered to HMOs and PPOs may result in payment to the
contracting hospital of less than actual cost and the volume
of patients directed to a hospital under an HMO or PPO
contract may vary significantly from projections. Often,
HMO or PPO contracts are enforceable for a stated term,
regardless of provider losses or of bankruptcy of the
respective HMO or PPO. It is expected that failure to
execute and maintain such PPO and HMO contracts would reduce
a hospital's patient base or gross revenues. Conversely,
participation may maintain or increase the patient base, but
may result in reduced payment and lower net income to the
contracting hospital.

These Debt Obligations may also be insured by the
State of California pursuant to an insurance program
implemented by the Office of Statewide Health Planning and
Development for health facility construction loans. If a
default occurs on insured Debt Obligations, the State
Treasurer will issue debentures payable out of a reserve
fund established under the insurance program or will pay
principal and interest on an unaccelerated basis from
unappropriated State funds. At the request of the Office of
Statewide Health Planning and Development, Arthur D. Little,
Inc. prepared a study in December, 1983, to evaluate the
adequacy of the reserve fund established under the insurance
program and based on certain formulations and assumptions
found the reserve fund substantially underfunded. In
September of 1986, Arthur D. Little, Inc. prepared an update
of the study and concluded that an additional 10% reserve be
established for "multi-level" facilities. For the balance
of the reserve fund, the update recommended maintaining the
current reserve calculation method. In March of 1990,
Arthur D. Little, Inc. prepared a further review of the
study and recommended that separate reserves continue to be
established for "multi-level" facilities at a reserve level
consistent with those that would be required by an insurance
company.

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Certain Debt Obligations in the Portfolio may be
obligations which are secured in whole or in part by a
mortgage or deed of trust on real property. California has
five principal statutory provisions which limit the remedies
of a creditor secured by a mortgage or deed of trust. Two
limit the creditor's right to obtain a deficiency judgment,
one limitation being based on the method of foreclosure and
the other on the type of debt secured. Under the former, a
deficiency judgment is barred when the foreclosure is
accomplished by means of a nonjudicial trustee's sale.
Under the latter, a deficiency judgment is barred when the
foreclosed mortgage or deed of trust secures certain
purchase money obligations. Another California statute,
commonly known as the "one form of action" rule, requires
creditors secured by real property to exhaust their real
property security by foreclosure before bringing a personal
action against the debtor. The fourth statutory provision
limits any deficiency judgment obtained by a creditor
secured by real property following a judicial sale of such
property to the excess of the outstanding debt over the fair
value of the property at the time of the sale, thus
preventing the creditor from obtaining a large deficiency
judgment against the debtor as the result of low bids at a
judicial sale. The fifth statutory provision gives the
debtor the right to redeem the real property from any
judicial foreclosure sale as to which a deficiency judgment
may be ordered against the debtor.

Upon the default of a mortgage or deed of trust
with respect to California real property, the creditor's
nonjudicial foreclosure rights under the power of sale
contained in the mortgage or deed of trust are subject to
the constraints imposed by California law upon transfers of
title to real property by private power of sale. During the
three-month period beginning with the filing of a formal
notice of default, the debtor is entitled to reinstate the
mortgage by making any overdue payments. Under standard
loan servicing procedures, the filing of the formal notice
of default does not occur unless at least three full monthly
payments have become due and remain unpaid. The power of
sale is exercised by posting and publishing a notice of sale
for at least 20 days after expiration of the three-month
reinstatement period. Therefore, the effective minimum
period for foreclosing on a mortgage could be in excess of
seven months after the initial default. Such time delays in
collections could disrupt the flow of revenues available to
an issuer for the payment of debt service on the outstanding
obligations if such defaults occur with respect to a
substantial number of mortgages or deeds of trust securing
an issuer's obligations.

In addition, a court could find that there is
sufficient involvement of the issuer in the nonjudicial sale

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of property securing a mortgage for such private sale to
constitute "state action," and could hold that the private-
right-of-sale proceedings violate the due process
requirements of the Federal or State Constitutions,
consequently preventing an issuer from using the nonjudicial
foreclosure remedy described above.

Certain Debt Obligations in the Portfolio may be
obligations which finance the acquisition of single family
home mortgages for low and moderate income mortgagors.
These obligations may be payable solely from revenues
derived from the home mortgages, and are subject to
California's statutory limitations described above
applicable to obligations secured by real property. Under
California antideficiency legislation, there is no personal
recourse against a mortgagor of a single family residence
purchased with the loan secured by the mortgage, regardless
of whether the creditor chooses judicial or nonjudicial
foreclosure.

Under California law, mortgage loans secured by
single-family owner-occupied dwellings may be prepaid at any
time. Prepayment charges on such mortgage loans may be
imposed only with respect to voluntary prepayments made
during the first five years during the term of the mortgage
loan, and cannot in any event exceed six months' advance
interest on the amount prepaid in excess of 20% of the
original principal amount of the mortgage loan. This
limitation could affect the flow of revenues available to an
issuer for debt service on the outstanding debt obligations
which financed such home mortgages.

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FLORIDA SERIES

RISK FACTORS - The State Economy. In 1980 Florida
ranked seventh among the fifty states with a population of
9.7 million people. The State has grown dramatically since
then and, as of April 1, 1993, ranked fourth with an
estimated population of 13.6 million, an increase of
approximately 44.7% since 1980. Since 1982 Florida has
surpassed Ohio, Illinois and Pennsylvania in total
population. Florida's attraction as both a growth and
retirement state has kept net migration fairly steady with
an average of 292,988 new residents each year. Since 1983
the prime working age population (18-44) has grown at an
average annual rate of 2.6%. The share of Florida's total
working age population (18-59) to total state population is
approximately 54%. Non-farm employment has grown by
approximately 64.4% since 1980. The service sector is
Florida's largest employment sector, presently accounting
for 32.1% of total non-farm employment. Manufacturing jobs
in Florida are concentrated in the area of high-tech and
value added sectors, such as electrical and electronic
equipment as well as printing and publishing. Job gains in
Florida's manufacturing sector have exceeded national
averages increasing by 11.7% between 1980 and 1993. Foreign
Trade has contributed significantly to Florida's employment
growth. Florida's dependence on highly cyclical
construction and construction related manufacturing has
declined. Total contract construction employment as a share
of total non-farm employment has fallen from 10% in 1973, to
7% in 1980 to 5% in 1993. Although the job creation rate
for the State of Florida since 1980 is over two times the
rate for the nation as a whole, since 1989 the unemployment
rate for the State has risen faster than the national
average. The average rate of unemployment for Florida since
1980 is 6.5%, while the national average is 7.1%. Because
Florida has a proportionately greater retirement age
population, property income (dividends, interest and rent)
and transfer payments (social security and pension benefits)
are a relatively more important source of income. In 1993,
Florida employment income represented 61% of total personal
income while nationally, employment income represented 72%
of total personal income.

The ability of the State and its local units of
government to satisfy the Debt Obligations may be affected
by numerous factors which impact on the economic vitality of
the State in general and the particular region of the State
in which the issuer of the Debt Obligation is located.
South Florida is particularly susceptible to international
trade and currency imbalances and to economic dislocations
in Central and South America, due to its geographical
location and its involvement with foreign trade, tourism and
investment capital. The central and northern portions of

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the State are impacted by problems in the agricultural
sector, particularly with regard to the citrus and sugar
industries. Short-term adverse economic conditions may be
created in these areas, and in the State as a whole, due to
crop failures, severe weather conditions or other
agriculture-related problems. The State economy also has
historically been somewhat dependent on the tourism and
construction industries and is sensitive to trends in those
sectors.

The State Budget. The State operates under a
biennial budget which is formulated in even numbered years
and presented for approval to the Legislature in odd
numbered years. A supplemental budget request process is
utilized in the even numbered years for refining and
modifying the primary budget. Under the State Constitution
and applicable statutes, the State budget as a whole, and
each separate fund within the State budget, must be kept in
balance from currently available revenues during each State
fiscal year. (The State's fiscal year runs from July 1
through June 30). The Governor and the Comptroller of the
State are charged with the responsibility of ensuring that
sufficient revenues are collected to meet appropriations and
that no deficit occurs in any State fund.

The financial operations of the State covering all
receipts and expenditures are maintained through the use of
three types of funds: the General Revenue Fund, Trust Funds
and Working Capital Fund. The majority of the State's tax
revenues are deposited in the General Revenue Fund and
moneys in the General Revenue Fund are expended pursuant to
appropriations acts. In fiscal year 1992-93, expenditures
for education, health and welfare and public safety
represented approximately 49%, 30% and 11% respectively, of
expenditures from the General Revenue Fund. The Trust Funds
consist of moneys received by the State which under law or
trust agreement are segregated for a purpose authorized by
law. Revenues in the General Revenue Fund which are in
excess of the amount needed to meet appropriations may be
transferred to the Working Capital Fund.

State Revenues. Estimated General Revenue and
Working Capital Fund revenues of $13,582.7 million for 1993-
94 (excluding Hurricane Andrew related revenues and
expenses) represent an increase of 8.4% over revenues for
1992-93. This amount reflects a transfer of $190 million,
out of an estimated $220 million in non-recurring revenue
due to Hurricane Andrew, to a hurricane relief trust fund.
Estimated Revenue for 1994-95 of $14,573.8 million
represents an increase of 87.3% over 1993-1994. This amount
reflects a transfer of $159 million in non-recurring revenue
due to Hurricane Andrew, to a hurricane trust fund.

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In fiscal year 1992-1993, the State derived
approximately 62% of its total direct revenues for deposit
in the General Revenue Fund, Trust Fund and Working Capital
Fund from State taxes. Federal grants and other special
revenues accounted for the remaining revenues. The greatest
single source of tax receipts in the State is the 6% sales
and use tax. For the fiscal year ended June 30, 1993,
receipts from the sales and use tax totaled $9,426 million,
an increase of approximately 12.5% over fiscal year 1991-92.
This amount includes non-recurring increases attributable to
the rebuilding and reconstruction following the hurricane.
The second largest source of State tax receipts is the tax
on motor fuels including the tax receipts distributed to
local governments. Receipts from the taxes on motor fuels
are almost entirely dedicated to trust funds for specific
purposes or transferred to local governments and are not
included in the General Revenue Fund. For the fiscal year
ended June 30, 1992, collections of this tax totaled
$1,475.5 million.

The State currently does not impose a personal
income tax. However, the State does impose a corporate
income tax on the net income of corporations, organizations,
associations and other artificial entities for the privilege
of conducting business, deriving income or existing within
the State. For the fiscal year ended June 30, 1993,
receipts from the corporate income tax totaled $846.6
million, an increase of approximately 5.6% from fiscal year
1991-92. The Documentary Stamp Tax collections totalled
$639 million during fiscal year 1992-93, or approximately
27% over fiscal year 1991-92. The Alcoholic Beverage Tax,
an excise tax on beer, wine and liquor totaled $442.2
million in 1992-93, an increase of 1.6% from fiscal year
1991-92. The Florida lottery produced sales of $2.13
billion of which $810.4 million was used for education in
fiscal year 1992-93.

While the State does not levy ad valorem taxes on
real property or tangible personal property, counties,
municipalities and school districts are authorized by law,
and special districts may be authorized by law, to levy ad
valorem taxes. Under the State Constitution, ad valorem
taxes may not be levied by counties, municipalities, school
districts and water management districts in excess of the
following respective millages upon the assessed value of
real estate and tangible personal property: for all county
purposes, ten mills; for all municipal purposes, ten mills;
for all school purposes, ten mills; and for water management
purposes, either 0.05 mill or 1.0 mill, depending upon
geographic location. These millage limitations do not apply
to taxes levied for payment of bonds and taxes levied for
periods not longer than two years when authorized by a vote

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of the electors. (Note: one mill equals one-tenth of one
cent).

The State Constitution and statutes provide for
the exemption of homesteads from certain taxes. The
homestead exemption is an exemption from all taxation,
except for assessments for special benefits, up to a
specific amount of the assessed valuation of the homestead.
This exemption is available to every person who has the
legal or equitable title to real estate and maintains
thereon his or her permanent home. All permanent residents
of the State are currently entitled to a $25,000 homestead
exemption from levies by all taxing authorities, however,
such exemption is subject to change upon voter approval.

On November 3, 1992, the voters of the State of
Florida passed an amendment to the Florida Constitution
establishing a limitation on the annual increase in assessed
valuation of homestead property commencing January 1, 1994,
of the lesser of 3% or the increase in the Consumer Price
Index during the relevant year, except in the event of a
sale thereof during such year, and except as to improvements
thereto during such year. The amendment did not alter any
of the millage rates described above.

Since municipalities, counties, school districts
and other special purpose units of local governments with
power to issue general obligation bonds have authority to
increase the millage levy for voter approved general
obligation debt to the amount necessary to satisfy the
related debt service requirements, the amendment is not
expected to adversely affect the ability of these entities
to pay the principal of or interest on such general
obligation bonds. However, in periods of high inflation,
those local government units whose operating millage levies
are approaching the constitutional cap and whose tax base
consists largely of residential real estate, may, as a
result of the above-described amendment, need to place
greater reliance on non-ad valorem revenue sources to meet
their operating budget needs.

At the November 1994 general election, voters
approved an amendment to the State Constitution that will
limit the amount of taxes, fees, licenses and charges
imposed by the Legislature and collected during any fiscal
year to the amount of revenues allowed for the prior fiscal
year, plus an adjustment for growth. Growth is defined as
the amount equal to the average annual rate of growth in
Florida personal income over the most recent twenty quarters
times the state revenues allowed for the prior fiscal year.
The revenues allowed for any fiscal year can be increased by
a two-thirds vote of the legislature. the limit will be
effective starting with fiscal year 1995-1996. Any excess

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revenues generated will be deposited in the budget
stabilization fund until it is fully funded and then
refunded to taxpayers. Included amount the categories of
revenues which are exempt from the proposed revenue
limitation, however, are revenues pledged to state bonds.

State General Obligation Bonds and State Revenue
Bonds. The State Constitution does not permit the State to
issue debt obligations to fund governmental operations.
Generally, the State Constitution authorizes State bonds
pledging the full faith and credit of the State only to
finance or refinance the cost of State fixed capital outlay
projects, upon approval by a vote of the electors, and
provided that the total outstanding principal amount of such
bonds does not exceed 50% of the total tax revenues of the
State for the two preceding fiscal years. Revenue bonds may
be issued by the State or its agencies without a vote of the
electors only to finance or refinance the cost of State
fixed capital outlay projects which are payable solely from
funds derived directly from sources other than State tax
revenues.

Exceptions to the general provisions regarding the
full faith and credit pledge of the State are contained in
specific provisions of the State Constitution which
authorize the pledge of the full faith and credit of the
State, without electorate approval, but subject to specific
coverage requirements, for: certain road projects, county
education projects, State higher education projects, State
system of Public Education and construction of air and water
pollution control and abatement facilities, solid waste
disposal facilities and certain other water facilities.

Local Bonds. The State Constitution provides that
counties, school districts, municipalities, special
districts and local governmental bodies with taxing powers
may issue debt obligations payable from ad valorem taxation
and maturing more than 12 months after issuance, only (i) to
finance or refinance capital projects authorized by law,
provided that electorate approval is obtained; or (ii) to
refund outstanding debt obligations and interest and
redemption premium thereon at a lower net average interest
cost rate.

Counties, municipalities and special districts are
authorized to issue revenue bonds to finance a variety of
self-liquidating projects pursuant to the laws of the State,
such revenue bonds to be secured by and payable from the
rates, fees, tolls, rentals and other charges for the
services and facilities furnished by the financed projects.
Under State law, counties and municipalities are permitted
to issue bonds payable from special tax sources for a

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variety of purposes, and municipalities and special
districts may issue special assessment bonds.

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

Litigation. Due to its size and its broad range
of activities, the State (and its officers and employees)
are involved in numerous routine lawsuits. The managers of
the departments of the State involved in such routine
lawsuits believed that the results of such pending
litigation would not materially affect the State's financial
position. In addition to the routine litigation pending
against the State, its officers and employees, the following
lawsuits and claims are also pending:

A. In a suit, plaintiff has sought title to
Hugh Taylor Birch State Recreation Area by virtue
of a reverter clause in the deed from Hugh Taylor
Birch to the State. A final judgment at trial was
entered in favor of the State. The case has been
appealed to the Fourth District Court of Appeal.
The Department of Natural Resources anticipates
the area will remain in State lands; however, in
the event the court should rule in favor of the
plaintiff, the State is subject to a loss of real
property valued at approximately $400 million.

B. In a suit, the Florida Supreme Court
prospectively invalidated a tax preference
methodology under former Sections 554.06 and
565.12 of the Florida Statutes (1985). This
ruling was appealed to the United States Supreme
Court which reversed the State Supreme Court and
remanded the matter back to the State court. The
Supreme Court's opinion suggested that one of the
State's options for correcting the constitutional
problems would be to assess and collect back taxes
at the higher rates applicable to those who were
ineligible for the tax preference from all
taxpayers who had benefitted from the tax
preference during the contested tax period. The
State chose to seek a recovery of taxes from those
who benefitted from the tax preference by
requiring them to pay taxes at the higher rate
that applied to out-of-state manufacturers and
distributors. The Florida Supreme Court remanded
the matter to the Circuit Court for the 2nd
Judicial Circuit to hear arguments on the method
chosen by the State to provide a clear and certain
remedy. The trial court's decision against the
State is on appeal at the First District Court of

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Appeal. With the exception of two parties, all
parties have settled their claims with the State.
Should an unfavorable outcome result in this case,
approximately $33 million may be refunded.

C. A class action suit brought against the
Department of Corrections, alleging race
discrimination in hiring and employment practices,
originally went to trial in 1982 with the
Department prevailing on all claims except a
partial summary judgment to a plaintiff sub-class
claiming a discriminatory impact on hiring caused
by an examination requirement. Jurisdictional
aspects of the testing issue were appealed to the
Eleventh Circuit Court of Appeals which vacated
the trial court's order and was upheld by the
United States Supreme Court. The district court
consolidated three successor lawsuits with this
case and entered a final judgment in favor of the
State. The judgment, however, has been appealed
to the Eleventh Circuit Court of Appeals. Should
the department fail in future appeals, the
liability of the State for back pay and other
monetary relief could exceed $40 million.

D. Complaints were filed in the Second
Judicial Circuit seeking a declaration that
Sections 624.509, 624.512 and 624.514, F.S. (1988)
violate various U.S. and Florida Constitutional
provisions. Relief was sought in the form of a
tax refund. The Florida Supreme Court reversed
the trial court in favor of the State. Plaintiffs
have petitioned for certiorari with the United
States Supreme Court. The State has settled all
outstanding litigation in this area. Similar
issues had been raised in the following cases
which were part of the settlement: Ford Motor
Company v. Bill Gunter, Case No. 86-3714, 2nd
Judicial Circuit, and General Motors Corporation
v. Tom Gallagher, Case Nos. 90-2045 and 88-2925,
2nd Judicial Circuit, where the plaintiffs are
challenging Section 634.131, F.S., which imposes
taxes on the premiums received for certain motor
vehicle service agreements. Current estimates
indicate that the State's potential refund
exposure under the remaining refund applications
yet to be denied is approximately $150 million.
However, the State hopes that refund exposure will
be reduced as these refund requests begin to be
denied based upon the Florida Supreme Court
decision in the instant case.

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E. In two cases, plaintiffs have sought
approximately $25 million in intangible tax
refunds based partly upon claims that Florida's
intangible tax statutes are unconstitutional.

F. A lawsuit was filed against the
Department of Health and Rehabilitative Services
(DHRS) and the Comptroller of the State of Florida
involving a number of issues arising out of the
implementation of a DHRS computer system and
seeking declaratory relief and money damages. The
estimated potential liability to the State is in
excess of $40 million.

G. Plaintiffs in a case have sought a
declaration that statutory assessments on certain
hospital net revenues are invalid,
unconstitutional, and unenforceable and request
temporary and permanent injunctive relief be
granted prohibiting the enforcement or collection
of the assessment and that all monies paid to the
State by the plaintiffs and the class members
within the four years preceding the filing of the
action be reimbursed by the defendants with
interest. An unfavorable outcome to this case
could result in the possibility of refunds
exceeding $50 million.

H. In an inverse condemnation suit claiming
that the actions of the State constitute a taking
of certain leases for which compensation is due,
the Circuit Judge granted the State's motion for
summary judgment finding that the State had not
deprived plaintiff of any royalty rights they
might have. Plaintiff has appealed.
Additionally, plaintiff's request for a drilling
permit was rejected after administrative
proceedings before the Department of Environmental
Protection. Plaintiff is expected to challenge
the decision.

I. In an inverse condemnation suit alleging
the regulatory taking of property without
compensation in the Green Swamp Area of Critical
State Concern, discovery is concluding and a
motion for a summary judgment will likely be made.
If the judgment should be for the plaintiff,
condemnation procedures would be instituted with
costs of $30 million, plus interest from 1975.

J. In 1990, the Florida Legislature passed
an act imposing a $295 impact fee on cars
purchased or titled in other states that are then

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registered in the State by persons having or
establishing permanent residency in the State.
Two separate groups filed suit challenging the
fee. The circuit court consolidated the various
cases and entered final summary judgment finding
the fee unconstitutional under the Commerce Clause
of the United States Constitution and ordered an
immediate refund to all persons having paid the
fee since the statute came into existence. The
State noticed an appeal of the circuit court
ruling which entitled the State to a stay of the
effectiveness of such ruling, thus, the fee
continued to be collected during the period of the
pending appeal. On September 29, 1994, the
Supreme Court of Florida reaffirmed the circuit
court's decision by concluding that the statute
results in discrimination against out of state
economic interests in contravention of the
Commerce Clause and that the proper remedy for
such violation is a full refund to all persons who
have paid the illegal fee. The State's refund
exposure may be in excess of $100 million.

K. Santa Rosa County has filed a complaint
for declaratory relief against the State
requesting the Circuit Court to: (1) find that
Section 206.60(2)(a), F.S., does not allow the
Department to deduct administrative expenses
unrelated to the collection, administration, and
distribution of the county gas tax; and (2) order
the department to pay Santa Rosa County all moneys
shown to have been unlawfully deducted from the
motor fuel tax revenues plus interest. All
hearings in the case have been postponed until
early 1994. This case seeks refunds of
approximately $45 million.

L. Lee Memorial Hospital has contested the
calculation of its disproportionate share payment
for the 1992-93 State fiscal year. An unfavorable
outcome to this case could result in a possible
settlement of $20 to $30 million.

M. A lawsuit has challenged the freezing of
nursing home reimbursement rates for the period
January 1, 1990 through July 1, 1990. The First
District Court of Appeal ruled against the Agency
for Health Care Administration (AHCA). The AHCA
has petitioned the Florida Supreme Court for
review of this declaration. An unfavorable
outcome to this case could result in a potential
liability of $40 million.

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MICHIGAN SERIES

RISK FACTORS - Due primarily to the fact that the
leading sector of the State's economy is the manufacturing
of durable goods, economic activity in the State has tended
to be more cyclical than in the nation as a whole. While
the State's efforts to diversify its economy have proven
successful, as reflected by the fact that the share of
employment in the State in the durable goods sector has
fallen from 33.1 percent in 1960 to 15.1 percent in 1993,
durable goods manufacturing still represents a sizable
portion of the State's economy. As a result, any
substantial national economic downturn is likely to have an
adverse effect on the economy of the State and on the
revenues of the State and some of its local government
units. Recently, as well as historically, the average
monthly unemployment rate in the State has been higher than
the average figures for the United States. For example, for
1993 the average monthly unemployment rate in this State was
7.0% as compared to a national average of 6.8% in the United
States.

The Michigan Constitution limits the amount of
total revenues of the State raised from taxes and certain
other sources to a level for each fiscal year equal to a
percentage of the State's personal income for the prior
calendar year. In the event the State's total revenues
exceed the limit by 1% or more, the Constitution requires
that the excess be refunded to taxpayers. The State
Constitution does not prohibit the increasing of taxes so
long as revenues are expected to amount to less than the
revenue limit and authorizes exceeding the limit for
emergencies when deemed necessary by the governor and a two-
thirds vote of the members of each house of the legislature.
The State Constitution further provides that the proportion
of State spending paid to all local units to total spending
may not be reduced below the proportion in effect in the
1978/79 fiscal year. The Constitution requires that if the
spending does not meet the required level in a given year an
additional appropriation for local units is required for the
following fiscal year. The State Constitution also requires
the State to finance any new or expanded activity of local
units mandated by State law. Any expenditures required by
this provision would be counted as State spending for local
units for purposes of determining compliance with the
provisions cited above.

The State Constitution limits State general
obligation debt to (i) short-term debt for State operating
purposes; (ii) short-and long-term debt for purposes of
making loans to school districts; and (iii) long-term debt
for a voter-approved purpose. Short-term debt for operating
purposes is limited to an amount not in excess of fifteen

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(15%) percent of undedicated revenues received by the State
during the preceding fiscal year and must mature in the same
fiscal year in which it is issued. Debt incurred by the
State for purposes of making loans to school districts is
recommended by the Superintendent of Public Instruction who
certifies the amounts necessary for loans to school
districts for the ensuing two (2) calendar years. These
bonds may be issued without vote of the electors of the
State and in whatever amount required. There is no limit on
the amount of long-term voter-approved State general
obligation debt. In addition to the foregoing, the State
authorizes special purpose agencies and authorities to issue
revenue bonds payable from designated revenues and fees.
Revenue bonds are not obligations of the State and in the
event of shortfalls in self-supporting revenues, the State
has no legal obligation to appropriate money to meet debt
service payments. The Michigan State Housing Development
Authority has a capital reserve fund pledged or the payment
of debt service on its bonds derived from the State
appropriation. The act creating this Authority provides
that the Governors's proposed budget include an amount
sufficient to replenish any deficiency in the capital
reserve fund. The legislature, however, is not obligated to
appropriate such moneys and any such appropriation would
require a two-thirds vote of the members of the legislature.
Obligations of all other authorities and agencies of the
State are payable solely from designated revenues or fees
and no right to certify to the legislature exists with
respect to those authorities or agencies.

The State finances its operations through the
State's General Fund and special revenue funds. The General
Fund receives revenues of the State that are not
specifically required to be included in the Special Revenue
Fund. General Fund revenues are obtained approximately 59%
from the payment of State taxes and 41% from federal and
non-tax revenue sources. The majority of the revenues from
State taxes are from the State's personal income tax, single
business tax, use tax, sales tax and various other taxes.
Approximately 60% of total General Fund expenditures have
been for State support of public education and for social
services programs. Other significant expenditures from the
General Fund provide funds for law enforcement, general
State government, debt service and capital outlay. The
State Constitution requires that any prior years' surplus or
deficit in any fund must be included in the next succeeding
year's budget for that fund.

In recent years, the State of Michigan has
reported its financial results in accordance with generally
accepted accounting principles. For the fiscal years ended
September 30, 1990 and 1991, the State reported negative
year-end General Fund balances of $310.3 million and $169.4

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million, respectively, but ended the 1992 fiscal year with
its General Fund in balance. A positive cash balance in the
combined General Fund/School Aid Fund was recorded at
September 30, 1990. In each of the three prior fiscal years
the State has undertaken mid-year actions to address
projected year-end budget deficits, including expenditure
cuts and deferrals and one-time expenditures or revenue
recognition adjustments. The State reported a balance in
the General Fund as of September 30, 1993 of $26.0 million
after a transfer of $283 million to the Budget Stabilization
Fund described below. From 1991 through 1993 the state
experienced deteriorating cash balances which necessitated
short-term borrowings and the deferral of certain scheduled
cash payments to local units of government. The State
borrowed $700 million for cash flow purposes in the 1992
fiscal year and $900 million in the 1993 fiscal year. The
State has a Budget Stabilization Fund which had an accrued
balance of $20.1 million as of September 30, 1992; and,
after a transfer of $283 million on an accrual basis upon
completion of the State's financial reports, an ending
balance of $303 million as of September 30, 1993.

In April, 1986, Moody's upgraded Michigan's
general obligation credit rating from A to A-1 and Standard
& Poor's raised its rating on the State's general obligation
bonds from A+ to AA-. In October, 1989, Standard & Poor's
raised its rating again to AA. Early in 1992, Standard &
Poor's maintained this rating.

The State's economy could be affected by changes
in the auto industry, notably consolidation and plant
closings resulting from competitive pressures and over-
capacity. The financial impact on the local units of
government in the areas in which plants are or have been
closed could be more severe than on the State as a whole.
State appropriations and State economic conditions in
varying degrees affect the cash flow and budgets of local
units and agencies of the State, including school districts
and municipalities, as well as the State of Michigan itself.

Amendments to the Michigan Constitution which
place limitations on increases in State taxes and local ad
valorem taxes (including taxes used to meet debt service
commitments on obligations of taxing units) were approved by
the voters of the State of Michigan in November 1978 and
became effective on December 23, 1978. To the extent that
obligations in the Portfolio are tax-supported and are for
local units and have not been voted by the taxing unit's
electors and have been issued on or subsequent to December
23, 1978, the ability of the local units to levy debt
service taxes might be affected.

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State law provides for distributions of certain
State collected taxes or portions thereof to local units
based in part on population as shown by census figures and
authorizes levy of certain local taxes by local units having
a certain level of population as determined by census
figures. Reductions in population in local units resulting
from periodic census could result in a reduction in the
amount of State collected taxes returned to those local
units and in reductions in levels of local tax collections
for such local units unless the impact of the census is
changed by State law. No assurance can be given that any
such State law will be enacted. In the 1991 fiscal year,
the State deferred certain scheduled payments to
municipalities, school districts, universities and community
colleges. While such deferrals were made up at later dates,
similar future deferrals could have an adverse impact on the
cash position of some local units. Additionally, the State
reduced revenue sharing payments to municipalities below
that level provided under formulas by $10.9 million in the
1991 fiscal year, $34.4 million in the 1992 fiscal year,
$45.5 million in the 1993 fiscal year and $64.6 million
(budgeted) in the 1994 fiscal year.

On March 15, 1994, the electors of the State voted
to amend the State's Constitution to increase the State
sales tax rate from 4% to 6% and to place an annual cap on
property assessment increases for all property taxes.
Companion legislation also cut the State's income tax rate
from 4.6% to 4.4%. In addition, property taxes for school
operating purposes have been reduced and school funding is
being provided from a combination of property taxes and
state revenues, some of which are being provided from new or
increased State taxes. The legislation also contains other
provisions that may reduce or alter the revenues of local
units of government and tax increment bonds could be
particularly affected. While the ultimate impact of the
constitutional amendment and related legislation cannot yet
be accurately predicted, investors should be alert to
potential effect of such measures upon the operations and
revenues of Michigan local units of government.

The foregoing financial conditions and
constitutional provisions could adversely affect the State's
or local unit's ability to continue existing services or
facilities or finance new services or facilities, and, as a
result, could adversely affect the market value or
marketability of the Michigan obligations in the Portfolio
and indirectly affect the ability of local units to pay debt
service on their obligations, particularly in view of the
dependency of local units upon State aid and reimbursement
programs.

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The Portfolio may contain obligations of the
Michigan State Building Authority. These obligations are
payable from rentals to be paid by the State as part of the
State's general operating budget. The foregoing financial
conditions and constitutional provisions could affect the
ability of the State to pay rentals to the Authority and
thus adversely affect payment of the State Building
Authority Bonds.

The Portfolio may contain obligations issued by
various school districts pledging the full faith and credit
of the school district. The ability of the school district
to pay debt service may be adversely affected by those
factors described above for general obligation bonds and, if
the obligations were not voted by that school's electors by
the restructuring of school operating funding as described
above. The school district obligations also may be
qualified for participation in the Michigan School Bond Loan
Fund. If the bonds are so qualified, then in the event the
school district is for any reason unable to pay its debt
service commitments when due, the school district is
required to borrow the deficiency from the School Bond Loan
Fund and the State is required to make the loan. The School
Bond Loan Fund is funded by means of debt obligations issued
by the State. In the event of fiscal and cash flow
difficulties of the State the availability of sufficient
cash or the ability of the State to sell debt obligations to
fund the School Bond Loan Fund may be adversely affected and
this could adversely affect the ability of the State to make
loans it is required to make to school districts issuing
qualified school bonds in the event the school district's
tax levies are insufficient therefor.

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NEW JERSEY SERIES

RISK FACTORS - Prospective investors should
consider the recent financial difficulties and pressures
which the State of New Jersey and certain of its public
authorities have undergone.

The State's 1994 Fiscal Year budget became law on
June 30, 1993.

The New Jersey State Constitution prohibits the
legislature from making appropriations in any fiscal year in
excess of the total revenue on had and anticipated, as
certified by the Governor. It additionally prohibits a debt
or liability that exceeds 1% of total appropriations for the
year, unless it is in connection with a refinancing to
produce a debt service savings or it is approved at a
general election. Such debt must be authorized by law and
applied to a single specified object or work. Laws
authorizing such debt provide the ways and means, exclusive
of loans, to pay as it becomes due and the principal within
35 years from the time the debt is contracted. These laws
may not be repealed until the principal and interest are
fully paid. These Constitutional provisions do not apply to
debt incurred because of war, insurrection or emergencies
caused by disaster.

Pursuant to Article VIII, Section II, par. 2 of
the New Jersey Constitution, no monies may be drawn from the
State Treasury except for appropriations made by law. In
addition, the monies for the support of State government and
all State purposes, as far as can be ascertained, must be
provided for in one general appropriation law covering one
and the same fiscal year. The State operates on a fiscal
year beginning July 1 and ending June 30. For example,
"fiscal 1994" refers to the year ended June 30, 1994.

In addition to the Constitutional provisions, the
New Jersey statutes contain provisions concerning the budget
and appropriation system. Under these provisions, each unit
of the State requests an appropriation from the Director of
the Division of Budget and Accounting, who reviews the
budget requests and forwards them with his recommendations
to the Governor. The Governor then transmits his
recommended expenditures and sources of anticipated revenue
to the legislature, which reviews the Governor's Budget
Message and submits an appropriations bill to the Governor
for his signature by July 1 of each year. At the time of
signing the bill, the Governor may revise appropriations or
anticipated revenues. That action can be reversed by a two-
thirds vote of each House. No supplemental appropriation
may be enacted after adoption of the act, except where there
are sufficient revenues on hand or anticipated, as certified

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by the Governor, to meet the appropriation. Finally, the
Governor may, during the course of the year, prevent the
expenditure of various appropriations when revenues are
below those anticipated or when he determines that such
expenditure is not in the best interest of the State.

In 1992, employment in services and government
turned around in the State, growing over the year by 0.7%
and 0.3%, respectively. These increases were outweighed by
declines in other sectors -- especially in manufacturing,
wholesale and retail trade, and construction -- resulting in
a net decline in non-farm employment of 1.7% in 1992. Non-
farm employment continued to decline in 1993 but the rate of
decline has tapered off. Employment in the first nine
months of 1993 was 1.0% lower than in the same period in
1992. Gains were recorded in services, government, finance/
insurance/real estate and transportation/communication/
public utilities. Declines continued in trade, construction
and manufacturing.

The economic recovery is likely to be slow and
uneven in both New Jersey and the nation. Some sectors,
like commercial and industrial construction, will
undoubtedly lag because of continued excess capacity. Also,
employers in rebounding sectors can be expected to remain
cautious about hiring until they become convinced that
improved business will be sustained. Other firms will
continue to merge or downsize to increase profitability. As
a result, job gains will probably come grudgingly and
unemployment will recede at a correspondingly slow pace.

One of the major reasons for cautious optimism is
found in the construction industry. Total construction
contracts awarded in New Jersey have turned around, rising
by 7.0% in 1993 compared with 1992. By far, the largest
boost came from residential construction awards which
increased by 26% in 1993 compared with 1992. In addition,
non-residential building construction awards have turned
around, posting a 17% gain.

Nonbuilding construction awards have been at high
levels since 1991 due to substantial outlays for roads,
bridges and other infrastructure projects. Although
nonbuilding construction awards declined in 1993 compared
with 1992, this was due to an unusually large amount of
contracts in the spring of 1992.

Finally, even in the labor market there are signs
of recovery. Thanks to a reduced layoff rate and the
reappearance of job opportunities in some parts of the
economy, unemployment in the State has been receding since
July 1992, when it peaked at 9.6% according to U.S. Bureau
of Labor Statistics estimates based on the federal

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government's monthly household survey. The same survey
showed joblessness dropped to an average of 6.7% in the
fourth quarter of 1993. The unemployment rate registered an
average of 7.8% in the first quarter of 1994, but this rate
cannot be compared with prior date due to the changes in the
U.S. Department of Labor procedures for determining the
unemployment rate that went into effect in January 1994.

For Fiscal Year 1994, the State has made
appropriations of $119.9 million for principal and interest
payments for general obligation bonds. For Fiscal Year
1995, the Governor has recommended appropriations of $103.5
million for principal and interest payments for general
obligation bonds. Of the $15,410.7 million appropriated in
Fiscal Year 1994 from the General Fund, the Property Tax
Relief Fund, the Gubernatorial Elections Fund, the Casino
Control Fund and the Casino Revenue Fund, $5,812.4 million
(37.8%) was appropriated for State Aid to Local Governments,
$3,698.9 million (24.0%) is appropriated for Grants-in-Aid,
$5,335.5 million (34.6%) for Direct State Services, $119.9
million (0.7%) for Debt Service on State general obligation
bonds and $443.9 million (2.9%) for Capital Construction.

State Aid to Local Governments was the largest
portion of Fiscal Year 1994 appropriations. In Fiscal Year
1994, $5,812.4 million of the State's appropriations
consisted of funds which are distributed to municipalities,
counties and school districts. The largest State Aid
appropriation, in the amount of $4,044.3 million, is
provided for local elementary and secondary education
programs. Of this amount, $2,538.2 million was provided as
foundation aid to school districts by formula based upon the
number of students and the ability of a school district to
raise taxes from its own base. In addition, the State
provided $582.5 million for special education programs for
children with disabilities. A $293.0 million program was
also funded for pupils at risk of educational failure,
including basic skills improvement. The State appropriated
$776.9 million on behalf of school districts as the employer
share of the teachers' pension and benefits programs, $263.8
million to pay for the cost of pupil transportation and
$57.4 million for transition aid, which guaranteed school
districts a 6.5% increase over the aid received in Fiscal
Year 1991 and is being phased out over four years.

Appropriations to the State Department of
Community Affairs totalled $650.4 million in State Aid
monies for Fiscal Year 1994. The principal programs funded
were the Supplemental Municipal Property Tax Act ($365.7
million); the Municipal Revitalization Program ($165.0
million); municipal aid to urban communities to maintain and
upgrade municipal services ($40.4 million); and the Safe and
Clean Neighborhoods Program ($58.9 million). Appropriations

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to the State Department of the Treasury totalled $327.5
million in State Aid monies for Fiscal Year 1994. The
principal programs funded by these appropriations were
payments under the Business Personal Property Tax
Replacement Programs ($158.7 million); the cost of senior
citizens, disabled and veterans property tax deductions and
exemptions ($41.7 million); aid to densely populated
municipalities ($33.0 million); Municipal Purposes Tax
Assistance ($30.0 million); and payments to municipalities
for services to state owned property ($34.9 million); and
the Safe and Clean Communities program ($15.0 million).

Other appropriations of State Aid in Fiscal Year
1994 include welfare programs ($477.4 million); aid to
county colleges ($114.6 million); and aid to county mental
hospitals ($88.8 million).

The second largest portion of appropriations in
Fiscal Year 1994 is applied to Direct State Services; the
operation of State government's 19 departments, the
Executive Office, several commissions, the State Legislature
and the Judiciary. In Fiscal Year 1994, appropriations for
Direct State Services aggregated $5,335.5 million. Some of
the major appropriations for Direct State Services during
Fiscal Year 1994 are detailed below.

$602.3 million was appropriated for programs
administered by the State Department of Human Services. Of
that amount, $448.2 million was appropriated for mental
health and mental retardation programs, including the
operation of seven psychiatric institutions and nine schools
for the retarded.

The State Department of Labor is appropriated
$51.4 million for the administration of programs for
workers' compensation, unemployment and disability
insurance, manpower development, and health safety
inspection.

The State Department of Health is appropriated
$37.6 million for the prevention and treatment of diseases,
alcohol and drug abuse programs, regulation of health care
facilities and the uncompensated care program.

$673.0 million is appropriated to the State
Department of Higher Eduction for the support of nine State
colleges, Rutgers University, the New Jersey Institute of
Technology, and the University of Medicine and Dentistry.

$932.6 million is appropriated to the State
Department of Law and Public Safety and the State Department
of Corrections. Among the programs funded by this
appropriation are the administration of the State's

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correctional facilities and parole activities, the
registration and regulation of motor vehicles and licensed
drivers and the investigative and enforcement activities of
the State Police.

$99.8 million is appropriated to the State
Department of Transportation for the various programs it
administers, such as the maintenance and improvement of the
State highway system.

$156.4 million is appropriated to the State
Department of Environmental Protection for the protection of
air, land, water, forest, wildlife and shellfish resources
and for the provision of outdoor recreational facilities.

The primary method for State financing of capital
projects is through the sale of the general obligation bonds
of the State. These bonds are backed by the full faith and
credit of the State. Tax revenues and certain other fees
are pledged to meet the principal and interest payments and
if provided, redemption premium payments required to pay the
debt fully. No general obligation debt can be issued by the
State without prior voter approval, except that no voter
approval is required for any law authorizing the creation of
a debt for the purpose of refinancing all or a portion of
outstanding debt of the State, so long as such law requires
that the refinancing provide a debt service savings.

In addition to payment from bond proceeds, capital
construction can also be funded by appropriation of current
revenues on a pay-as-you-go basis. This amount represents
2.9 percent of the total budget for fiscal year 1994.

The aggregate outstanding general obligation
bonded indebtedness of the State as of June 30, 1993 was
$3,594.7 billion. The debt service obligation for
outstanding indebtedness is $119.9 million for fiscal year
1994.

On January 18, 1994, Christine Todd-Whitman
replaced James Florio as Governor of the State. As a matter
of public record, Governor Whitman, during her campaign,
publicized her intention to reduce taxes in the State.
Effective January 1, 1994, the State's personal income tax
rates were reduced by 5% for all taxpayers. Effective
January 1, 1995, the State's personal income tax rates will
be reduced by an additional 10% for most taxpayers. The
effect of the tax reductions cannot be evaluated at this
time.

All appropriations for capital projects and all
proposals for State bond authorizations are subject to the
review and recommendation of the New Jersey Commission on

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Capital Budgeting and Planning. This permanent commission
was established in November, 1975, and is charged with the
preparation of the State Capital Improvement Plan, which
contains proposals for State spending for capital projects.

At any given time, there are various numbers of
claims and cases pending against the State, State agencies
and employees, seeking recovery of monetary damages that are
primarily paid out of the fund created pursuant to the Tort
Claims Act N.J.S.A. 59:1-1 et seq. In addition, at any
given time there are various contract claims against the
State and State agencies seeking recovery of monetary
damages. The State is unable to estimate its exposure for
these claims and cases. An independent study estimated an
aggregate potential exposure of $50 million for tort claims
pending, as of January 1, 1982. It is estimated that were a
similar study made of claims currently pending the amount of
estimated exposure would be higher. Moreover, New Jersey is
involved in a number of other lawsuits in which adverse
decisions could materially affect revenue or expenditures.
Such cases include challenges to its system of educational
funding, the methods by which the State Department of Human
Services shares with county governments the maintenance
recoveries and costs for residents in state psychiatric
hospitals and residential facilities for the developmentally
disabled.

Other lawsuits, that could materially affect
revenue or expenditures include a suit by a number of tax-
payers seeking refunds of taxes paid to the Spill
Compensation Fund pursuant to NJSA 58:10-23.11, a suit
alleging that unreasonably low Medicaid payment rates have
been implemented for long-term care facilities in New
Jersey, a suit alleging unfair taxation on interstate
commerce, a suit by Essex County seeking to invalidate the
State's method of funding the judicial system and a suit
seeking return of moneys paid by various counties for
maintenance of Medicaid or Medicare eligible residents of
institutions and facilities for the developmentally disabled
and a suit challenging the imposition of premium tax
surcharges or insurers doing business in New Jersey, and
assessments upon property and casualty liability insurers
pursuant to the Fair Automobile Insurance Reform Act.

Legislation enacted June 30, 1992, which called
for revaluation of several public employee pension funds,
authorized an adjustment to the assumed rate of return on
the investment of pension fund assets, and refunds $773
million in public employer contributions to the State from
various pension funds, reflected as a revenue source for
Fiscal Year 1992. It is estimated that savings of $226
million will be effected in fiscal year 1993 and each fiscal
year thereafter. Several labor unions filed suit seeking a

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judgment directing the State Treasurer to refund all monies
transferred from the pension funds and paid into the General
Fund. On February 5, 1993, the Superior Court granted the
State's motion for summary judgment as to all claims. An
appeal has been filed with the Appellate Division of the
Superior Court. On May 5, 1994, the Appellate Division
affirmed the decision of the trial court dismissing the
complaint. An adverse determination in this matter would
have a significant impact on fiscal year 1993 and subsequent
fiscal year fund balances.

Bond Ratings -- Citing a developing pattern of
------------
reliance of non-recurring measures to achieve budgetary
balance, four years of financial operations marked by
revenue shortfalls and operating deficits, and the
likelihood that financial pressures will persist, on August
24, 1992 Moody's lowered from Aaa to Aa1 the rating assigned
to New Jersey general obligation bonds. The downgrade
reflects Moody's concern that the state's chronic budgetary
problems detract from bondholder security. The Aa-1 rating
from Moody's is equivalent to Standard & Poor's AA rating.
On July 6, 1992, Standard & Poor's affirmed its AA+ ratings
on New Jersey's general obligation and various lease and
appropriation backed debt, but its ratings outlook was
revised to negative for the longer term horizon (beyond four
months) for resolution of two items cited in the Credit
Watch listing: (i) the Federal Health Care Facilities
Administration ruling concerning retroactive medicaid
hospital reimbursements and (ii) the state's uncompensated
health care funding system, which is under review by the
United States Supreme Court.

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NEW YORK SERIES

RISK FACTORS - Prospective investors should
consider the financial difficulties and pressure which the
State of New York and several of its public authorities and
municipal subdivisions have undergone. The following
briefly summarizes some of these difficulties and the
current financial situation, based principally on certain
official statements currently available; copies may be
obtained without charge from the issuing entity.

New York State. In recent fiscal years, there
have been extended delays in adopting the State's budget,
repeated revisions of budget projections, significant
revenue shortfalls (as well as increased expenses)and year-
end borrowing to finance deficits. These developments
reflect faster long-term growth in State spending than
revenues and that the State was earlier and more severely
affected by the recent economic recession than most of the
rest of the country, as well as its substantial reliance on
non-recurring revenue sources. The State's general fund
incurred cash basis deficits of $775 million, $1,081 million
and $575 million, respectively, for the 1990-92 fiscal
years. Measures to deal with deteriorating financial
conditions included transfers from reserve funds,
recalculating the State's pension fund obligations
(subsequently ruled illegal), hiring freezes and layoffs,
reduced aid to localities, sales of State property to State
authorities, and additional borrowings (including issuance
of additional short-term tax and revenue anticipation notes
payable out of impounded revenues in the next fiscal year).
The general fund realized a %671 million surplus for fiscal
year ended March 31, 1993, and a $1.54 billion surplus for
the fiscal year ended March 31, 1994.

Approximately $5.4 billion of State general
obligation debt was outstanding at March 31, 1994. The
State's net tax-supported debt (restated to reflect LGAC's
assumption of certain obligations previously funded through
issuance of short-term debt) was $27.5 billion at March 31,
1994, up from $11.7 billion in 1984. A proposed
constitutional amendment passed by the Legislature would
limit additional lease-purchase and contractual obligation
financing for State facilities, but would authorized the
State without voter referendum to issue revenue bonds within
a formula-based cap, secured solely by a pledge of certain
State tax receipts. It would also restrict State debt to
capital projects included in a multi-year capital financing
plan. The proposal is subject to approval by the next
Legislature and then by voters. S&P reduced its ratings of
the State's general obligation bonds on January 13, 1992 to
A- (its lowest rating for any state). Moody's reduced its
ratings of State general obligation bonds from A1 to A on

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June 6, 1990 and to Baa1, its rating of $14.2 billion of
appropriation-backed debt of the State and State agencies
(over two-thirds of the total debt) on January 6, 1992.

In May 1992 (over 2 months after the beginning of
the 1992 fiscal year), the State Legislature adopted a
budget to close a projected $6.5 billion gap (Including
repayment of $905 million of fiscal 1991 deficit notes).
Measures included $1.2 billion in new taxes and fees, $0.9
billion in non-recurring measures and about $4.5 billion of
reduced spending by State agencies (including layoffs),
reduced aid to localities and school districts, and Medicaid
cost containment measures. After the Governor vetoed $0.9
billion in spending, the State adopted $0.7 billion in
additional spending, together with various measures
including a $100 million increase in personal income taxes
and $180 million of additional non-recurring measures. Due
primarily to declining revenues and escalating Medicaid and
social service expenditures, $0.4 billion of administrative
actions, $531 million of year-end short-term borrowing and a
$44 million withdrawal from the Tax Stabilization Reserve
Fund were required to meet the State's cash flow needs.

The State budget to close a projected $4.8 billion
gap for the State's 1993 fiscal year (including repayment of
the fiscal 1992 short-term borrowing) contained a
combination of $3.5 billion of spending reductions
(including measures to reduce Medicaid and social service
spending, as well as further employee layoffs, reduced aid
to municipalities and schools and reduced support for
capital programs), deferral of scheduled tax reductions, and
some new and increased fees. Nonrecurring measures
aggregated $1.18 billion. The City and its Board of
Education sued the Governor and various other State
officials in March 1993, claiming that the State's formula
for allocating aid to education discriminated against City
schools by at least $274 million in the 1993 fiscal year.

To close a projected budget gap of nearly $3
billion for the fiscal year ended March 31, 1994, the State
budget contained various measures including further deferral
of scheduled income tax reductions, some tax increases, $1.6
billion in spending cuts, especially for Medicaid, and
further reduction of the State's work force. The budget
increased aid to schools, and included a formula to channel
more aid to districts with lower-income students and high
property tax burdens. State legislation requires deposit of
receipts from the petroleum business tax and certain other
transportation-related taxes into funds dedicated to
transportation purposes. Nevertheless, $516 million of
these monies were retained in the generally fund during this
fiscal year. The Division of the Budget has estimated that
non-recurring income items other than the $671 million

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surplus from the 1993 fiscal year aggregated $318 million.
$89 million savings from bond refinancings was deposited in
a contingency reserve fund to pay litigation settlements,
particularly to repay monies received under the State's
abandoned property law, which the State will be required to
give up as described below.

The budget for the fiscal year that began April 1,
1994, increases spending by 3.,8% (greater than inflation
for the first time in six years). Tax revenue projections
are based on assumed modest growth in the State economy. It
provides a tax credit for low income families and increases
aid to education, especially in the poorer districts. The
litigation fund will be increased and then paid out during
the year. The State is reducing coverage and placing
additional restrictions on certain health care services.
Over $1 billion results from postponement of scheduled
reductions in personal income taxes for a fifth year and in
taxes on hospital income; another $1 billion comes from
rolling over the surplus from the previous fiscal. Other
non-recurring measures would be reduced to $78 million. The
State Legislature passed legislation to implement a budget
agreement more than two months after the beginning of the
year. Taxes (principally business taxes) would be reduced
by $475 million in the current fiscal year and by $1.6
billion annually after fully phased in. In November 1993
the State's Court of Appeals ruled unconstitutional 1990
legislation which postponed employee pension contributions
by the State and localities (other than New York City). The
amounts to be made up, estimated to aggregate $4 billion
(half from the State), would be repaid in increasing amounts
over 12-20 years under a plan proposed by the State
Comptroller, trustee of the State pension system, and
previous contribution levels will not be exceeded until
1999. The State's new Governor estimates a deficit of at
least $300 million for the fiscal year ending March 31, 1995
and at least $5 billion for the next fiscal year. He
ordered a partial hiring freeze and reductions in non-
essential expenditures. However, closing the deficit for
that and future years will be more difficult in view of the
Governor's plan to reduce personal income taxes by 25%
during his four-year term and because of potential decreases
in Federal aid. State and other estimates are subject to
uncertainties including the effects of Federal tax
legislation and economic developments. The State in October
1994 cautioned that its estimates were subject to the risk
that further increases in interest rates could impede
economic growth.

The State normally adjusts its cash basis balance
by deferring until the first quarter of the succeeding
fiscal year substantial amounts of tax refunds and other
disbursements. For many years, it also paid in that quarter

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more than 40% of its annual assistance to local governments.
Payment of these annual deferred obligations and the State's
accumulated deficit was substantially financed by issuance
of short-term tax and revenue anticipation notes shortly
after the beginning of each fiscal year. The New York Local
Government Assistance Corporation ("LGAC") was established
in 1990 to issue long-term bonds over several years, payable
from a portion of the State sales tax, to fund certain
payments to local governments traditionally funded through
the State's annual seasonal borrowing. The legislation will
normally limit the State's short-term borrowing, together
with net proceeds of LGAC bonds ($3.9 billion to date), to a
total of $4.7 billion. The State's latest seasonal
borrowing, in May 1993, was $850 million.

Generally accepted accounting principles ("GAAP")
for municipal entities apply modified accrual accounting and
give no effect to payment deferrals. On an audited GAAP
basis, the State's government funds group recorded operating
deficits of $1.2 billion and $1.4 billion for the 1990 and
1991 fiscal years. For the same periods the general fund
recorded deficits (net of transfers from other funds) of
$0.7 billion and $1.0 billion. Reflecting $1.6 billion,
$881 million and$875 million of payments by LGAC to local
governments out of proceeds from bond sales, the general
fund realized surpluses of $1.7 billion, $2.1 billion and
$0.9 billion for the 1992, 1993 and 1994 fiscal years,
respectively, leaving an accumulated deficit of $1.6
billion. A $0.7 billion deficit has been projected for the
fiscal year ending March 31, 1995.

For decades, the State's economy has grown more
slowly than that of the rest of the nation as a whole. Part
of the reason for this decline has been attributed to the
combined State and local tax burden, which is among the
highest in the nation (over 60% above the national average.
The State's dependence on Federal funds and sensitivity to
changes in economic cycles, as well as the high level of
taxes, may continue to make it difficult to balance State
and local budgets in the future. The total employment
growth rate i the State has been below the national average
since 1984. The state lost 524,000 jobs in 1990-1992. It
regained approximately 134,000 jobs between November 1990
and July 1994 but has experienced a slight decline since
then.

New York City (the "City"). The City is the
State's major political subdivision. In 1975, the City
encountered severe financial difficulties, including
inability to refinance $6 billion of short-term debt
incurred to meet prior annual operating deficits. The City
lost access to the public credit markets for several years
and depended on a variety of fiscal rescue measures

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including commitments by certain institutions to postpone
demands for payment, a moratorium on note payment (later
declared unconstitutional), seasonal loans from the Federal
government under emergency congressional legislation,
Federal guarantees of certain City bonds, and sales and
exchanges of bonds by The Municipal Assistance corporation
for the City of New York ("MAC") to fund the City's debt.

MAC has no taxing power and pays its obligations
out of sales taxes imposed within the City and per capita
State aid to the City. The State has no legal obligation to
back the MAC bonds, although it has a "moral obligation" to
do so. MAC is now authorized to issue bonds only for
refunding outstanding issues and up to $1.5 billion should
the City fail to fund specified transit and school capital
programs. The State also established the Financial Control
Board ("FCB") to review the City's budget, four-year
financial plans, borrowings and major contracts. These were
subject to FCB approval until 1986 when the City satisfied
statutory conditions for termination of such review. The
FCB is required to reimpose the review and approval process
in the future if the City were to experience certain adverse
financial circumstances. The City's fiscal condition is
also monitored by a Deputy State Comptroller.

The City projects that it is emerging from four
years of economic recession. From 1989 to 1993, the gross
city product declined by 10.1% and employment, by almost
11%, while public assistance caseload grew by over 25%.
Unemployment averaged 10.8% in 1992 and 10.1% in 1993,
peaking at 13.4% in January 1993, the highest level in 25
years. Wile the City's unemployment rate has declined
substantially since then, it is still above the rest of the
State and the nation as a whole. The number of persons on
welfare exceeds 1.1 million, the highest level since 1972,
and one in seven residents is currently receiving some form
of public assistance.

While the City, as required by State law, has
balanced its budgets in accordance with GAAP since 1981,
this has required exceptional measures in recent years. The
FCB has commented that the City expenditures have grown
faster than revenues each year since 1986, masked in part by
a large number of non-recurring gap closing actions. To
eliminate potential budget gaps of $1-$3 billion each year
since 1988 the City has taken a wide variety of measures.
In addition to increased taxes and productivity increases,
these have included hiring freezes and layoffs, reductions
in services, reduced pension contributions, and a number of
nonrecurring measures such as bond refundings, transfers of
surplus funds from MAC, sales of City property and tax
receivables. The FCB concluded that the City has neither

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the economy nor the revenues to do everything its citizens
have been accustomed to expect.

The City closed a budget gap for the 1993 fiscal
year (estimated at $1.2 billion) through actions including
service reductions, productivity initiatives, transfer of
$0.5 billion surplus from the 1992 fiscal year and $100
million from MAC. A November 1992 revision offset an
additional $561 million in projected expenditures through
measures including a refunding to reduce current debt
service costs, reduction in the reserve and an additional
$81 million of gap closing measures. Over half of the
City's actions to eliminate the gap were non-recurring.

The Financial Plan for the City's 1994 fiscal year
relied on increases in State and Federal aid, as well as the
1993 $280 million surplus and a partial hiring freeze, to
close a gap resulting primarily from labor settlements and
decline in property tax revenues. The Plan contained over
$1.3 billion of one-time revenue measures including bond
refundings, sale of various City assets and borrowing
against future property tax receipts. On July 2, 1993, the
previous Mayor and City Comptroller assumed office in
January 1994. Various fiscal monitors criticized reliance
on non-recurring revenues, with attendant increases in the
gaps for future years. The new Mayor initiated a program to
reduce non-personnel costs by up to $150 million. The FCB
reported that although a $98 million surplus was projected
for the year (the surplus was actually $81 million), a $312
million shortfall in budgeted revenues and $904 million on
unanticipated expenses (including an unbudgeted increase of
over 3,300 in the number of employees and a record level of
overtime), net of certain increased revenues and other
savings, resulted in depleting prior years' surpluses by
$326 million. The new City Comptroller criticized retention
of a proposal to sell delinquent property tax receivables.

The City's Financial Plan for the current fiscal
year (that began July 1, 1994) proposed both to eliminate a
projected $2.3 billion budget gap and to stabilize overall
spending while beginning to reduce some business and other
taxes. It calls for a reduction of 11,500 in the City
workforce by June 1995 unless equivalent productivity
savings are negotiated with unions; with the aid of $200
million from MAC, the City induced 11,500 workers to accept
voluntary severance, and union leaders accepted transfer of
remaining employees between agencies. The Plan projects
about $560 million of increased State and Federal aid, some
of which has not yet been approved. Non-recurring measures
include $225 million from refinancing outstanding bonds
(which the FCB estimates will cancel almost 10% of the debt
service savings anticipated from the recent capital plan
reduction), extension of the repayment schedule of a debt to

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City pension funds and revision of actuarial assumptions to
reduce contribution levels, and sale of a City-owned hotel.
A proposal for city employees to bear $200 million other
health care costs must be negotiated with the unions, which
have announced their opposition.

Since the current year's Financial Plan was
adopted, the City has experienced lower than anticipated tax
collections, higher than budgeted costs (particularly
overtime and liability claims), and increased likelihood
that various revenue measures including certain anticipated
Federal and State aid, will not occur, at least during the
current fiscal year. In July 1994, the Mayor ordered
expenditure reductions of $250 million during the next six
months and a contingency plan for another $200 million. In
late October, the Mayor proposed another $900 million of
spending cuts to address a then projected $1.1 billion
additional budget gap. $190 million represents proposed
transfers of excess reserves in employee health care plans,
a non-recurring measure, and he would reduce the City's
subsidy to theTA by the $113 million it expects to realize
this year. Maintenance of City infrastructure would be
reduced which could lead to higher expenses in future years.
The City Council rejected the Mayor's proposals and adopted
its own plan, overriding the Mayor's veto and sued the Mayor
in State Supreme Court to enforce that plan. Following the
Mayor's withdrawal of his October proposals and dismissal of
the suit, the Mayor impounded nearly $800 million of funds
for previously authorized expenditures. In January 1995 the
Mayor ordered contingency plans to address a further
shortfall of at least $650 million, attributed to tax
revenue shortfalls, reductions in State and Federal aid,
higher Medicaid spending, a reduction in lease payments for
City airports, additional funding for pensions and State
failure to adopt a tort reform measure. The City effected a
second bond refinancing in January 1995 as an alternative to
about $120 million of additional reductions in subsidies to
the Board of Education.

The Mayor is exploring the possibility of
privatizing some of the City's services. The City Council
passed legislation which authorized the Council to hold
hearings on any significant privatization and requires
submission of a cost-benefit analysis. The City has awarded
or is in the process of awarding contracts to private
companies to run more than twenty separate services.
Responding to an impasse in negotiations to increase the
Port Authority rent paid to the City for Kennedy and
LaGuardia airports, the City is studying how the airports
might be privatized. The Mayor has also been seeking
greater control over spending by independent authorities and
agencies such as the Board of Education, the Health and
Hospitals Corporation and the TA. The Mayor's efforts to

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reduce expenditures by the Board of Education, including
appointment of another fiscal monitor, reduction in City
funding of capital projects and rejection of a tentative
labor contract, have strained relations with the Schools
Chancellor at a time of rising enrollments. In March 1994
the Mayor reduced cash incentives to landlords renting
apartments to the homeless. A program to require able-
bodied welfare recipients to render community service
started being phased in commencing January 1995. It has
been reported that he is considering proposals including
eliminating City financing of a program that creates housing
for single homeless people, charging shelter occupants who
refuse offers of treatment or training a modest rent for use
of the shelter, replacing some of the subsidies to day care
centers with a voucher system and a plan to fingerprint
welfare recipients in the City; this could be subject to
legal challenge. Budget gaps of $1.0 billion, $1.5 billion
and $2.0 billion were projected for the 1996 through 1998
fiscal years, respectively in the Mayor's October 1994
proposal audit has been reported that the City now projects
a budget gap of about $2.5 billion for the fiscal year
commencing July 1, 1995. In December 1994 the Mayor's
Budget Director ordered preparation of proposals to reduce
City expenditures on welfare, and particularly Medicaid, for
that 1996 fiscal year. The fiscal monitors have suggested
that these gaps could reach $2-4 billion annually. The
State Comptroller cited principally growing Medicaid,
employee health insurance and debt service costs. Even
after recent capital plan reductions, the City Comptroller
recently projected that debt service will consume 19.5% of
tax revenue by the 1998 fiscal year.

A major uncertainty is the City's labor costs,
which represent about 50% of its total expenditures. The
City's workforce grew by 34% during the 1980s. A January
1993 agreement covering approximately 44% of the City
workers followed negotiations lasting nearly two years.
Workers will receive wage and benefit raises totally 8.25%
over 39 months ending March 1995. An agreement announced in
August 1993 provides wage increases for City teachers
averaging 9% over the 48 1/2 months ending October 1995.
The City is seeking to negotiate workforce productivity
initiatives, savings from which would be shared with the
workers involved. Under a contract reached in September
1994, while sanitation workers would receive an overall
increase of 8.25% in wages and benefits over 39 months,
routes would be lengthened by an average of 20%. The
Financial Plan assumes no further wage increases after the
1995 fiscal year. Also, costs of some previous wage
increases were offset by reduced contributions to pension
funds; because fund performance has been less than the
earnings projected the City will have to increase

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contributions by $300 million a year, beginning in the
City's next fiscal year.

Budget balance may also be adversely affected by
the effect of the economy on economically sensitive taxes.
Reflecting the down turn in real estate prices and
increasing defaults, estimates of property tax revenues have
been reduced. If this trend continues, the City's ability to
issue additional general obligation bonds could be limited
by the 1998 fiscal year. The City also faces uncertainty in
its dependence on State aid as the State grapples with its
own projected budget gap. The new Governor withdrew his
pledge not to reduce State aid to local governments and
schools. Other uncertainties include additional
expenditures to combat deterioration in the City's
infrastructure (such as bridges, schools and water supply),
costs of developing alternatives to ocean dumping of sewage
sludge (which the City expects to defray through increased
water and sewer charges), cost of the AIDS epidemic and
problems of drug addiction and homelessness. For example,
the City may be ordered to spend up to $8 billion to
construct water filtration facilities if it is not
successful in implementing measures to prevent pollution of
its watershed upstate. In December 1994 the City submitted
for State approval proposed new pervasive regulations of
activities in the area which can cause pollution.
Elimination of any additional budget gaps will require
various actions, including by the State, a number of which
are beyond the City's control. Staten Island voters in 1993
approved a proposed charter under which Staten Island would
secede from the City. Secession will require enabling
legislation by the State Legislature; it would also be
subject to legal challenge by the City. The effect of
secession on the City cannot be determined at this time, but
questions include responsibility for outstanding debt, a
diminished tax base, and continued use of the Fresh Kills
landfill, the City's only remaining garbage dump. A similar
measure with respect to Queens was approved by the New York
State Senate.

In December 1993, a report commissioned by the
City was released, describing the nature of the City's
structural deficit. It projects that the City will need to
identify and implement $5 billion in annual gap closing
measures by 1998. The report suggests a variety of possible
measures for City consideration. While the new Mayor
rejected out of hand many of the proposals such as tax
increases, the State Comptroller urged him to reconsider the
report.

The City sold $1.4 billion, $1.8 billion and $2.2
billion of short-term notes, respectively, during the 1993,
1994 and current fiscal years. At September 30, 1994, there

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were outstanding $21.7 billion of City bonds (not including
City debt held by MAC), $4.1 billion of MAC bonds and $0.8
billion of City-related public benefit corporation
indebtedness, each net of assets held for debt service.
Standard & Poor's and Moody's during the 1975-80 period
either withdrew or reduced their ratings of the City's
bonds. S&P currently rates the City's debt A- while Moody's
rates City bonds Baa1. Following announcement of the second
bond refinancing, in January 1995 S&P put the City's debt
rating on CreditWatch for possible downgrading. City-
related debt almost doubled since 1987, although total debt
declined as a percentage of estimated full value of real
property. The City's financing program projects long-term
financing during fiscal years 1995-1998 to aggregate $15.9
billion. An additional $2.8 billion is to be derived from
other sources, principally use of restricted cash balances
and advances from the general fund in anticipation of bond
issuances. The City's latest Ten Year Capital Strategy plans
capital expenditures of $45.6 billion during 1995-2003 (93%
of the City funded).

Other New York Localities. In 1992, other
localities had an aggregate of approximately $15.7 billion
of indebtedness outstanding. In recent years, several
experienced financial difficulties. A March 1993 report by
Moody's Investors Service concluded that the decline in
ratings of most of the State's largest cities in recent
years resulted from the decline in the State's manufacturing
economy. Seventeen localities had outstanding indebtedness
for deficit financing at the close of their respective 1992
fiscal years. Any reductions in State aid to localities may
cause additional localities to experience difficulty in
achieving balanced budgets. If special local assistance
were needed from the State in the future, this could
adversely affect the State's as well as the localities'
financial condition. Most localities depend on substantial
annual State appropriations. Legal actions by utilities to
reduce the valuation of their municipal franchises, if
successful, could result in localities becoming liable for
substantial tax refunds.

State Public Authorities. In 1975, after the
Urban Development Corporation ("UDC"), with $1 billion of
outstanding debt, defaulted on certain short-term notes, it
and several other State authorities became unable to market
their securities. Since 1975 the State has provided
substantial direct and indirect financial assistance to
UEDC, the Housing Finance Agency ("HFA"), the Environmental
Facilities Corporation and other authorities. Practical and
legal limitations on these agencies' ability to pass on
rising costs through rents and fees could require further
State appropriations. 18 State authorities had an aggregate
of $63.5 billion of debt outstanding at September 30, 1993.

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At March 31, 1994, approximately $0.5 billion of state
public authority obligations was State-guaranteed, $7.3
billion was moral obligation debt (including $4.8 billion of
MAC debt) and $16.6 billion was financed under lease-
purchase or contractual obligation financing arrangements
with the State. Various authorities continue to depend on
State appropriations or special legislation to meet their
budgets.

The Metropolitan Transportation Authority ("MTA"),
which oversees operation of the City's subway and bus system
by the City Transit Authority (the "TA") and operates
certain commuter rail lines, has required substantial State
and City subsidies, as well as assistance from several
special state taxes. measures to balance the TA's 1993
budget included increased funding by the City, increased
bridge and tunnel tolls and allocation of part of the
revenues from the Petroleum Business Tax. While the TA
projects a budget surplus for 1994 (the City's Mayor has
proposed to reduce City subsidies to the TA by the amount of
this surplus) cash basis gaps of $300-800 million are
projected for each of the 1995 through 1998 years. Measures
proposed to close these gaps include various additional
State aid (which is unlikely) and possible fare increases.
An agreement with TA workers reached in July 1994, which
provides 10.4% wage increases over 39 months, will cost the
MTA $337 million. The MTA Chairman stated that this cost
would be partly offset by savings from work rules changes
and that money for the settlement is available in the TA's
budget. An earlier settlement with Long Island Railroad
workers is expected to cost the MTA $14 million over 26
months. The MTA in December 1994 proposed to change various
TA fares in mid 1995, but failed to reflect the City's
proposed reduction in its subsidy by the amount of the 1994
surplus and its subsidy for reduced fares for school
children and various other uncertainties. Later that month,
it postponed adoption of the 1995 operating budget to allow
time for consultation with the State's new Governor. In
January 1995 a State Supreme Court justice ruled that the
Mayor is authorized to withhold the City subsidy for transit
police ($320 million a year).

Substantial claims have been made against the TA
and the City for damages from a 1990 subway fire and a 1991
derailment. The MTA infrastructure, especially in the City,
needs substantial rehabilitation. In December 1993, a $9.5
billion MTA Capital Plan was finally approved for 1992-1996;
however, $500 million was contingent on increased
contributions from the City which it has declined to
approve. The City is seeking State and MAC approval to
defer $245 million of capital contributions to theTA from
the current fiscal year until 1998. It is anticipated that
the MTA and the TA will continue to require significant

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State and City support. Moody's reduced its rating of
certain MTA obligations to Baa on April 14, 1992.

A Federal District Court ruled in February 1993
that State surcharges of up to 24% on hospital bills paid by
commercial insurance companies and health maintenance
organizations, much of which is used to subsidize care of
uninsured patients, violate Federal law; however, the Court
permitted continuance of the system pending appeal of the
ruling.

Litigation. The State and the City are defendants
in numerous legal proceedings, including challenges to the
constitutionality and effectiveness of various welfare
programs, alleged torts and breaches of contract,
condemnation proceedings and other alleged violations of
laws. Adverse judgments in these matters could require
substantial financing not currently budgeted. For example,
in addition to real estate certiorari proceedings, claims in
excess of $286 billion were outstanding against the City at
June 30, 1994, for which it estimated its potential future
liability at $2.6 billion. Another action seeks a judgment
that, as a result of an overestimate by the State Board of
Equalization and Assessment, the City's 1992 real estate tax
levy exceeded constitutional limits. In March 1993, the
U.S. Supreme Court rules that if the last known address of a
beneficial owner of accounts held by banks and brokerage
firms cannot be ascertained, unclaimed funds therein belong
to the state of the broker's incorporation rather than where
its principal office is located. New York agreed to pay
Delaware $200 million over a 5-year period and other states
$100 million over a 10-year period.

Final adverse decisions in any of these cases
could require extraordinary appropriations at either the
State or City level or both.

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OHIO SERIES

RISK FACTORS - The following summary is based on
publicly available information which has not been
independently verified by the Sponsors or their legal
counsel.

Employment and Economy. Economic activity in
Ohio, as in many other industrially developed states, tends
to be more cyclical than in some other states and in the
nation as a whole. Ohio ranked third in the nation in 1991
personal income derived from manufacturing. Although
manufacturing (including auto-related manufacturing) remains
an important part of Ohio's economy, the greatest growth in
employment in Ohio in recent years, consistent with national
trends, has been in the non-manufacturing area. Payroll
employment in Ohio showed a steady upward trend until 1979,
then decreased until 1982. It peaked in the summer of 1993
after a slight decrease in 1992, and then decreased slightly
but, as of May 1994, it has approached a new high. Growth
in recent years has been concentrated among non-
manufacturing industries, with manufacturing tapering off
since its 1969 peak. Over three-fourths of the payroll
workers in Ohio are employed by non-manufacturing
industries.

The average monthly unemployment rate in Ohio was
5.7% in July, 1994.

With 15.7 million acres in farm land, agriculture
is a very important segment of the economy in Ohio,
providing an estimated 750,000 jobs or approximately 15% of
total Ohio employment. By many measures, agriculture is
Ohio's leading industry contributing nearly $4.1 billion to
the state's economy each year.

Ohio continues to be a major "headquarters" state.
Of the top 500 industrial corporations (based on 1993 sales)
as reported in 1994 by Fortune magazine, 42 had headquarters
in Ohio, placing Ohio fourth as a "headquarters" state for
industrial corporations. Ohio places sixth as a
"headquarters" state for service corporations (24 of the top
500).

The State Budget, Revenues and Expenditures and
Cash Flow. Ohio law effectively precludes the State from
ending a fiscal year or a biennium with a deficit. The
State Constitution provides that no appropriation may be
made for more than two years and consistent with that
provision the State operates on a fiscal biennium basis.
The current fiscal biennium runs from July 1, 1993 through
June 30, 1995.

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Under Ohio law, if the Governor ascertains that
the available revenue receipts and balances for the general
revenue fund or other funds for the then current fiscal year
will probably be less than the appropriations for the year,
he must issue orders to the State agencies to prevent their
expenditures and obligations from exceeding the anticipated
receipts and balances. The Governor implemented this
directive in some prior years, including fiscal years 1992
and 1993.

Consistent with national economic conditions, in
the 1990-91 biennium, Ohio experienced an economic slowdown
producing some significant changes in certain general
revenue fund revenue and expenditure levels for the fiscal
year 1991. Examples on the revenue side included lower than
previously forecasted revenues from sales and use taxes
(including auto) and corporate franchise and personal income
taxes. Increased human services expenditure requirements
developed, such as for Medicaid, Aid to Dependent Children
and general assistance. Several executive and legislative
measures were taken to address the anticipated shortfall in
revenues and increase in expenditures. As a result, the
Ohio Office of Budget and Management (the "OBM") reported a
positive general revenue fund balance of approximately
$135.4 million at the end of fiscal year 1991.

State and national fiscal uncertainties during the
1992-93 biennium required several actions to achieve the
ultimate positive general revenue fund ending balances. OBM
projected a fiscal year 1992 imbalance - a receipts
shortfall resulting primarily from lower collection of
certain taxes, particularly sales, use and personal income
taxing and higher expenditure levels in certain areas,
particularly human services including Medicaid. As an
initial action, the Governor ordered most state agencies to
reduce general revenue fund appropriation spending in the
final six months of fiscal year 1992 by a total of
approximately $184 million. Debt service obligations were
not affected by this order. The General Assembly
authorized, and the OBM made in June 1992, a $100.4 million
transfer to the general revenue fund from the budget
stabilization fund and certain other funds. Other revenue
and spending actions, legislative and administrative,
resolved the remaining general revenue fund imbalance for
fiscal year 1992.

As a first step toward addressing a $520 million
general revenue fund shortfall for fiscal year 1993 then
estimated by OBM, the Governor ordered, effective July 1,
1992, selected general revenue fund appropriations
reductions totalling $300 million (but such reductions did
not include debt service). Subsequent executive and
legislative actions provided for positive biennium-ending

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general revenue fund balances for the current biennium. The
general revenue fund ended the 1992-93 biennium with a fund
balance of approximately $111 million and a cash balance of
approximately $394 million. The general revenue fund
appropriations bill for the current biennium was passed on
June 30, 1993. The first year of the current biennium,
fiscal year 1994, ended with a general revenue fund of over
$560,000,000.

Because the schedule of general revenue fund cash
receipts and disbursements do not precisely coincide,
temporary general revenue fund cash flow deficiencies often
occur in some months of a fiscal year, particularly in the
middle months. Statutory provisions provide for effective
management of these temporary cash flow deficiencies by
permitting adjustment of payment schedules and the use of
total operating funds. A general revenue fund cash flow
deficiency occurred in two months of fiscal year 1990, with
the highest being approximately $252.4 million. In fiscal
year 1991, there were general revenue fund cash flow
deficiencies in nine months, with the highest being $582.5
million; in fiscal year 1992 there were general revenue fund
cash flow deficiencies in ten months, with the highest being
approximately $743.1 million. In fiscal year 1993, general
revenue fund cash flow deficiencies occurred in August 1992
through May 1993, with the highest being approximately
$768.6 million in December. General revenue fund cash flow
deficiencies occurred in six months of fiscal year 1994,
with the highest being approximately $500.6 million. OBM
currently projects cash flow deficiencies in certain months
of the current fiscal year.

State and State Agency Debt. The Ohio
Constitution prohibits the incurrence or assumption of debt
by the State without a popular vote except for the
incurrence of debt to cover casual deficits or failures in
revenue or to meet expenses not otherwise provided for which
are limited to $750,000 and to repel invasions, suppress
insurrection or defend the State in war. Under
interpretations by Ohio courts, revenue bonds of the State
and State agencies that are payable from net revenues of or
related to revenue producing facilities or categories of
such facilities are not considered "debt" within the meaning
of these constitutional provisions.

At various times since 1921, Ohio voters, by
thirteen specific constitutional amendments (the last
adopted in 1993), authorized the incurrence of up to $4.664
billion in State debt to which taxes or excises were pledged
for payment. Of that amount, $715 million was for veterans'
bonuses. As of August 16, 1994, of the total amount
authorized by the voters, excluding highway obligations and
general obligation park bonds discussed below, approximately

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$3.235 billion has been issued, of which approximately
$2.564 billion has been retired and approximately $671.4
million remains outstanding. The only such State debt still
authorized to be incurred are portions of the Highway
Obligation Bonds, the Coal Development Bonds, and the State
general obligation bonds for local government infrastructure
projects and parks.

No more than $500 million in highway obligations
may be outstanding at any time. As of August 16, 1994,
approximately $446.3 million of highway obligations were
outstanding. No more than $100 million in State obligations
for coal development may be outstanding at any one time. As
of August 16, 1994, approximately $38.9 million of such
bonds were outstanding. Not more than $1.2 billion of State
general obligation bonds to finance local capital
infrastructure improvements may be issued at any one time,
and no more than $120 million can be issued in a calendar
year. As of August 16, 1994, approximately $625.3 million
of those bonds were outstanding.

The Ohio Constitution authorizes State bonds for
certain housing purposes, but tax moneys may not be
obligated or pledged to those bonds. In addition, the Ohio
Constitution authorizes the issuance of obligations of the
State for certain purposes, the owners or holders of which
are not given the right to have excises or taxes levied by
the State legislature to pay principal and interest. Such
debt obligations include the bonds and notes issued by the
Ohio Public Facilities Commission and the Ohio Building
Authority.

Under recent legislation, the State has been
authorized to issue bonds to finance approximately $140
million of capital improvements for local elementary and
secondary public school facilities, and the State building
authority has been authorized to issue $100 million of bonds
to provide computer technology and security systems for
local for local school districts. Debt service on the
obligations is payable from State resources.

A statewide economic development program assists
with loans and loan guarantees, the financing of facilities
for industry, commerce, research and distribution. The law
authorizes the issuance of State bonds and loan guarantees
secured by a pledge of portions of the State profits from
liquor sales. The General Assembly has authorized the
issuance of these bonds by the State Treasurer, with a
maximum amount of $300 million, subject to certain
adjustments, currently authorized to be outstanding at any
one time. Of an approximate $148.0 million issue in 1989,
approximately $89.9 million is outstanding. The highest

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future year annual debt service on those 1989 bonds, which
are payable through 2000, is approximately $18.3 million.

An amendment to the Ohio Constitution authorizes
revenue bond financing for certain single and multifamily
housing. No State resources are to be used for the
financing. As of the August 17, 1994, the Ohio Housing
Financing Agency, pursuant to that constitutional amendment
and implementing legislation, had sold revenue bonds in the
aggregate principal amount of approximately $234.32 million
for multifamily housing and approximately $3.866 billion for
single family housing.

A constitutional amendment adopted in 1990
authorizes greater State and political subdivision
participation in the provision of housing for individuals
and families in order to supplement existing State housing
assistance programs. The General Assembly could authorize
State borrowing for the new programs and the issuance of
State obligations secured by a pledge of all or a portion of
State revenues or receipts, although the obligations may not
be supported by the State's full faith and credit.

A 1986 act, amended in 1994 (the "Rail Act"),
authorizes the Ohio Rail Development Commission (the "Rail
Commission") to issue obligations to finance the costs of
rail service projects within the State either directly or by
loans to other entities. The Rail Commission has considered
financing plan options and the possibility of issuing bonds
or notes. The Rail Act prohibits, without express approval
by joint resolution of the General Assembly, the collapse of
any escrow of financing proceeds for any purpose other than
payment of the original financing, the substitution of any
other security, and the application of any proceeds to loans
or grants. The Rail Act authorizes the Rail Commission, but
only with subsequent General Assembly action, to pledge the
faith and credit of the State but not the State's power to
levy and collect taxes (except ad valorem property taxes if
subsequently authorized by the General Assembly) to secure
debt service on any post-escrow obligations and, provided it
obtains the annual consent of the State Controlling Board,
to pledge to and use for the payment of debt service on any
such obligations, all excises, fees fines and forfeitures
and other revenues (except highway receipts) of the State
after provision for the payment of certain other obligations
of the State.

Schools and Municipalities. The 612 public school
districts and 49 joint vocational school districts in the
State receive a major portion (approximately 46%) of their
operating funds from State subsidy appropriations, the
primary portion known as the Foundation Program. They must
also rely heavily upon receipts from locally-voted taxes.

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Some school districts in recent years have experienced
varying degrees of difficulty in meeting mandatory and
discretionary increased costs. Current law prohibits school
closings for financial reasons.

Original State appropriations for the 1992-93
biennium provided for an increase in school funding over
funding for the preceding biennium. The reduction in
appropriations spending for fiscal year 1992 included a 2.5%
overall reduction in the annual Foundation Program
appropriations and a 6% reduction in other primary and
secondary education programs. The reductions were in
varying amounts, and had varying effects, with respect to
individual school districts. State appropriations for the
current biennium provide for an increase in State school
funding appropriations over those in the preceding biennium.
The $8.9 billion appropriated for primary and secondary
education is intended to provide for 2.4% and 4.6% increases
in basic aid for the two fiscal years of the biennium.

In previous years school districts facing deficits
at year end had to apply to the State for a loan from the
Emergency School Advancement Fund. This Fund met all the
needs of the school districts with potential deficits in
fiscal years 1979 through 1989. New legislation replaced
the Fund with enhanced provisions for individual district
local borrowing, including direct application of Foundation
Program distributions to repayment if needed. As of fiscal
year 1993, there were 27 loans made for an approximate
aggregate amount of $94.5 million. Twenty-eight school
districts have received approval for loans totalling
approximately $15.6 million in fiscal year 1994.

Litigation contesting the Ohio system of school
funding is pending with defendants being the State and
several State agencies and officials. The complaints
essentially request a declaratory judgment that the State's
statutory system of funding public elementary and secondary
education violates various provisions of the Ohio
Constitution and request the State to devise a
constitutionally acceptable system of school funding. On
July 1, 1994, the trial court concluded that certain
provisions of current law violated provisions of the Ohio
constitution. The trial court directed the State to provide
for and fund a system of funding public elementary and
secondary education in compliance with the Ohio
Constitution. Defendants have appealed this ruling, and
have applied for a stay until the case is resolved on
appeal. It is not possible at this time to state whether
the suit will be successful or, if plaintiffs should
prevail, the effect on the State's present school funding
system, including the amount of and criteria for State basic
aid allocations to school districts.

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Various Ohio municipalities have experienced
fiscal difficulties. Due to these difficulties, the State
established an act in 1979 to identify and assist cities and
villages experiencing defined "fiscal emergencies". A
commission appointed by the Governor monitors the fiscal
affairs of municipalities facing substantial financial
problems. To date, this act has been applied to eleven
cities and twelve villages. The situations in nine of the
cities and nine of the villages have been resolved and their
commissions terminated.

State Employees and Retirement Systems. The State
has established five public retirement systems, three of
which cover both State and local government employees, one
covers State government employees only, and one covers local
government employees only. Those systems provide
retirement, disability retirement and survivor benefits.
Federal law requires newly-hired State employees to
participate in the federal Medicare program, requiring
matching employer and employee contributions, each now 1.45%
of the wage base. Otherwise, State employees covered by a
State retirement system are not currently covered under the
federal Social Security Act. The actuarial evaluations
reported by these five systems showed aggregate unfunded
accrued liabilities of approximately $17,143 billion
covering both State and local employees.

The State engages in employee collective
bargaining and currently operates under staggered two-year
agreements with all of its 21 bargaining units. The State
has a new agreement, expiring March 31, 1997, with its
largest bargaining unit representing approximately 37,000
employees. The remaining bargaining units have entered into
new agreements with the State which expire at various times
in 1997.

Health Care Facilities Debt. Revenue bonds are
issued by Ohio counties and other agencies to finance
hospitals and other health care facilities. The revenues of
such facilities consist, in varying but typically material
amounts, of payment from insurers and third-party
reimbursement programs, such as Medicaid, Medicare and Blue
Cross. Consistent with the national trend, third-party
reimbursement programs in Ohio have begun new programs, and
modified benefits, with a goal of reducing usage of health
care facilities. In addition, the number of alternative
health care delivery systems in Ohio has increased over the
past several years. For example, the number of health
maintenance organizations licensed by the Ohio Department of
Insurance increased from 12 on February 14, 1983 to 33 as of
August 17, 1994. Due in part to changes in the third-party
reimbursement programs and an increase in alternative
delivery systems, the health care industry in Ohio has

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become more competitive. This increased competition may
adversely affect the ability of health care facilities in
Ohio to make timely payments of interest and principal on
the indebtedness.

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PENNSYLVANIA SERIES

RISK FACTORS - Prospective investors should
consider the financial difficulties and pressures which the
Commonwealth of Pennsylvania and certain of its municipal
subdivisions have undergone. Both the Commonwealth and the
City of Philadelphia have historically experienced
significant revenue shortfalls. There can be no assurance
that the Commonwealth will not experience a further decline
in economic conditions or that portions of the municipal
obligations contained in the Portfolio of the Pennsylvania
Trust will not be affected by such a decline. Without
intending to be complete, the following briefly summarizes
some of these difficulties and the current financial
situation, as well as some of the complex factors affecting
the financial situation in the Commonwealth. It is derived
from sources that are generally available to investors and
is based in part on information obtained from various
agencies in Pennsylvania. No independent verification has
been made of the following information.

State Economy. Pennsylvania has been historically
identified as a heavy industry state although that
reputation has changed recently as the industrial
composition of the Commonwealth diversified when the coal,
steel and railroad industries began to decline. The major
new sources of growth in Pennsylvania are in the service
sector, including trade, medical and the health services,
education and financial institutions. Pennsylvania's
agricultural industries are also an important component of
the Commonwealth's economic structure, accounting for more
than $3.6 billion in crop and livestock products annually
while agribusiness and food related industries support $39
billion in economic activity annually.

Employment within the Commonwealth increased
steadily from 1984 to 1990. From 1991 to 1994, employment
in the Commonwealth declined 1.2 percent. The growth in
employment experienced in the Commonwealth during such
period is comparable to the growth in employment in the
Middle Atlantic region of the United States. Non-
manufacturing employment in the Commonwealth has increased
steadily since 1980 to its 1993 level of 81.6 percent of
total Commonwealth employment. Manufacturing, which
contributed 18.4 percent of 1993 non-agricultural
employment, has fallen behind both the services sector and
the trade sector as the largest single source of employment
within the Commonwealth. In 1993, the services sector
accounted for 29.9 percent of all non-agricultural
employment in the Commonwealth while the trade sector
accounted for 22.4 percent.

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The Commonwealth recently experienced a slowdown
in its economy. Moreover, economic strengths and weaknesses
vary in different parts of the Commonwealth. In general,
heavy industry and manufacturing have recently been facing
increasing competition from foreign producers. During 1993,
the annual average unemployment rate in Pennsylvania was 7.0
percent compared to 6.8 percent for the United States. For
January 1995 the unadjusted unemployment rate was 6.5
percent in Pennsylvania and 6.2 percent in the United
States, while the seasonally adjusted unemployment rate for
the Commonwealth was 5.9 percent and for the United States
was 5.7 percent.

State Budget. The Commonwealth operates under an
annual budget that is formulated and submitted for
legislative approval by the Governor each February. The
Pennsylvania Constitution requires that the Governor's
budget proposal consist of three parts: (i) a balanced
operating budget setting forth proposed expenditures and
estimated revenues from all sources and, if estimated
revenues and available surplus are less than proposed
expenditures, recommending specific additional sources of
revenue sufficient to pay the deficiency; (ii) a capital
budget setting forth proposed expenditures to be financed
from the proceeds of obligations of the Commonwealth or its
agencies or from operating funds; and (iii) a financial plan
for not less than the succeeding five fiscal years, that
includes for each year projected operating expenditures and
estimated revenues and projected expenditures for capital
projects. The General Assembly may add, change or delete
any items in the budget prepared by the Governor, but the
Governor retains veto power over the individual
appropriations passed by the legislature. The
Commonwealth's fiscal year begins on July 1 and ends on June
30.

All funds received by the Commonwealth are subject
to appropriation in specific amounts by the General Assembly
or by executive authorization by the Governor. Total
appropriations enacted by the General Assembly may not
exceed the ensuing year's estimated revenues, plus (less)
the unappropriated fund balance (deficit) of the preceding
year, except for constitutionally authorized debt service
payments. Appropriations from the principal operating funds
of the Commonwealth (the General Fund, the Motor License
Fund and the State Lottery Fund) are generally made for one
fiscal year and are returned to the unappropriated surplus
of the fund if not spent or encumbered by the end of the
fiscal year. The Constitution specifies that a surplus of
operating funds at the end of a fiscal year must be
appropriated for the ensuing year.

A-58

<PAGE>

Pennsylvania uses the "Fund" method of accounting
for receipts and disbursements. For purposes of government
accounting, a "fund" is an independent fiscal and accounting
entity with a self-balancing set of accounts, recording cash
and/or other resources together with all related liabilities
and equities. In the Commonwealth, over 150 funds have been
established by legislative enactment or in certain cases by
administrative action for the purpose of recording the
receipt and disbursement of moneys received by the
Commonwealth. Annual budgets are adopted each fiscal year
for the principal operating funds of the Commonwealth and
several other special revenue funds. Expenditures and
encumbrances against these funds may only be made pursuant
to appropriation measures enacted by the General Assembly
and approved by the Governor. The General Fund, the
Commonwealth's largest fund, receives all tax revenues, non-
tax revenues and federal grants and entitlements that are
not specified by law to be deposited elsewhere. The
majority of the Commonwealth's operating and administrative
expenses are payable from the General Fund. Debt service on
all bond indebtedness of the Commonwealth, except that
issued for highway purposes or for the benefit of other
special revenue funds, is payable from the General Fund.

Financial information for the principal operating
funds of the Commonwealth is maintained on a budgetary basis
of accounting, which is used for the purpose of ensuring
compliance with the enacted operating budget. The
Commonwealth also prepares annual financial statements in
accordance with generally accepted accounting principles
("GAAP"). Budgetary basis financial reports are based on a
modified cash basis of accounting as opposed to a modified
accrual basis of accounting prescribed by GAAP. Financial
information is adjusted at fiscal year-end to reflect
appropriate accruals for financial reporting in conformity
with GAAP.

Recent Financial Results. From fiscal 1984, when
the Commonwealth first prepared its financial statements on
a GAAP basis, through fiscal 1989, the Commonwealth reported
a positive unreserved-undesignated fund balance for its
government fund types (General Fund, Special Revenue Fund
and Capital Projects Fund) at the fiscal year end. Slowing
economic growth during 1990, leading to a national economic
recession beginning in fiscal 1991, reduced revenue growth
and increased expenditures and contributed to negative
unreserved-undesignated fund balances at the end of the 1990
and 1991 fiscal years. The negative unreserved-undesignated
fund balance was due largely to operating deficits in the
General Fund and the State Lottery Fund during those fiscal
years. Actions taken during fiscal 1992 to bring the
General Fund back into balance, including tax increases and
expenditure restraints, resulted in a $1.1 billion reduction

A-59

<PAGE>

to the unreserved-undesignated fund deficit for combined
governmental fund types at June 30, 1993, as a result of a
$420.4 million increase in the balance. These gains were
produced by continued efforts to control expenditure growth.
The Combined Balance Sheet as of June 30, 1993, showed total
fund balance and other credits for the total governmental
fund types of $1,959.9 million, a $732.1 million increase
from the balance at June 30, 1992. During fiscal 1993,
total assets increased by $1,296.7 million to $7,096.4
million, while liabilities increased $564.6 million to
$5,136.5 million.

Fiscal 1991 Financial Results. The Commonwealth
-----------------------------
experienced a $453.6 million general fund deficit as of the
end of its 1991 fiscal year. The deficit reflected higher
than budgeted expenditures, below-estimate economic activity
and growth rates of economic indicators and total tax
revenue shortfalls below those assumed in the enacted
budget.

Rising demands on state programs caused by the
economic recession, particularly for medical assistance and
cash assistance programs, and the increased costs of special
education programs and correction facilities and programs,
contributed to increased expenditures in fiscal 1991, while
tax revenues for the 1991 fiscal year were severely affected
by the economic recession. Total corporation tax receipts
and sales and use tax receipts during fiscal 1991 were,
respectively, 7.3 percent and 0.9 percent below amounts
collected during fiscal 1990. Personal income tax receipts
also were affected by the recession but not to the extent of
the other major General Fund taxes, increasing only 2.0
percent over fiscal 1990 collections.

A number of actions were taken throughout the
fiscal year by the Commonwealth to mitigate the effects of
the recession on budget revenues and expenditures. The
Commonwealth initiated a number of cost-saving measures,
including the firing of 2,000 state employees, deferral of
paychecks and reduction of funds to state universities,
which resulted in approximately $871 million cost savings.

Fiscal 1992 Financial Results. Actions taken
-----------------------------
during fiscal 1992 to bring the General Fund budget back
into balance, including tax increases and expenditure
restraints resulted in a $1.1 billion reduction for the
unreserved-undesignated fund deficit for combined
governmental fund types and a return to a positive fund
balance. Total General Fund revenues for fiscal 1992 were
$14,516.8 million which is approximately 22 percent higher
than fiscal 1991 revenues of $11,877.3 million due in large
part to tax increases. The increased revenues funded
substantial increases in education, social services and

A-60

<PAGE>

corrections programs. As a result of the tax increases and
certain appropriation lapses, fiscal 1992 ended with an $8.8
million surplus after having started the year with an
unappropriated general fund balance deficit of $453.6
million.

Fiscal 1993 Financial Results. Fiscal 1993 closed
-----------------------------
with revenues higher than anticipated and expenditures
approximately as projected, resulting in an ending
unappropriated balance surplus of $242.3 million. A
reduction in the personal income tax rate in July 1992 and
the one-time receipt of revenues from retroactive corporate
tax increases in fiscal 1992 were responsible, in part, for
the low growth in fiscal 1993.

Fiscal 1994 Financial Results. Commonwealth
-----------------------------
revenues during the 1994 fiscal year totaled $15,210.7
million, $38.6 million above the fiscal year estimate, and
3.9 percent over commonwealth revenues during the 1993
fiscal year. The sales tax was an important contributor to
the higher than estimated revenues. The strength of
collections from the sales tax offset the lower than
budgeted performance of the personal income tax that ended
the 1994 fiscal year $74.4 million below estimate. The
shortfall in the personal income tax was largely due to
shortfalls in income not subject to withholding such as
interest, dividends and other income. Expenditures,
excluding pooled financial expenditures and net of all
fiscal 1994 appropriation lapses, totaled $14,934.4 million
representing a 7.2 percent increase over fiscal 1993
expenditures. Medical assistance and prisons spending
contributed to the rate of spending growth for the 1994
fiscal year. The Commonwealth maintained an operating
balance on a budgetary basis for fiscal 1994 producing a
fiscal year ending unappropriated surplus of $335.8 million.

Fiscal 1995 Budget. On June 16, 1994, the
Governor signed a $15.7 billion general fund budget, an
increase of over five percent from the fiscal 1994 budget.
A substantial amount of the increase is targeted for medical
assistance expenditures, reform of the state-funded public
assistance program and education subsidies to local school
districts. The budget also includes tax reductions totaling
an estimated $166.4 million benefitting principally low
income families and corporations. The fiscal 1995 budget
projects a $4 million fiscal year-end unappropriated
surplus.

Debt Limits and Outstanding Debt. The
Constitution of Pennsylvania permits the issuance of the
following types of debt: (i) debt to suppress insurrection
or rehabilitate areas affected by disaster; (ii) electorate
approved debt; (iii) debt for capital projects subject to an

A-61

<PAGE>

aggregate debt limit of 1.75 times the annual average tax
revenues of the preceding five fiscal years; and (iv) tax
anticipation notes payable in the fiscal year of issuance.

Under the Pennsylvania Fiscal Code, the Auditor
General is required annually to certify to the Governor and
the General Assembly certain information regarding the
Commonwealth's indebtedness. According to the August 31,
1994 Auditor General certificate, the average annual tax
revenues deposited in all funds in the five fiscal years
ended June 30, 1994 was approximately $16.5 billion, and,
therefore, the net debt limitation for the 1995 fiscal year
is approximately $28.8 billion. Outstanding net debt
totalled $4.0 billion at June 30, 1994, approximately equal
to the net debt at June 30, 1993. At August 31, 1994, the
amount of debt authorized by law to be issued, but not yet
incurred was $15.0 billion.

Debt Ratings. All outstanding general obligation
bonds of the Commonwealth are rated AA- by Standard and
Poor's and A1 by Moody's.

City of Philadelphia. The City of Philadelphia
(the "City" or "Philadelphia") is the largest city in the
Commonwealth. The City of Philadelphia experienced a series
of general fund deficits for fiscal years 1988 through 1992,
which have culminated in the City's present serious
financial difficulties. In its 1992 Comprehensive Annual
Financial Report, Philadelphia reported a cumulative general
fund deficit of $71.4 million for fiscal year 1992.

In June 1991, the Pennsylvania legislature
established the Pennsylvania Inter-Governmental Cooperation
Authority ("PICA"), a five-member board which would oversee
the fiscal affairs of the City of Philadelphia. The
legislation empowers PICA to issue notes and bonds on behalf
of Philadelphia and also authorizes Philadelphia to levy a
one-percent sales tax the proceeds of which would be used to
pay off the bonds. In return for PICA's fiscal assistance,
Philadelphia was required, among other things, to establish
a five-year financial plan that includes balanced annual
budgets. Under the legislation, if Philadelphia does not
comply with such requirements, PICA may withhold bond
revenues and certain state funding.

At this time, the City is operating under a five-
year fiscal plan approved by PICA on April 6, 1992. Full
implementation of the five-year plan was delayed due to
labor negotiations that were not completed until October
1992, three months after the expiration of the old labor
contracts. The terms of the new labor contracts are
estimated to cost approximately $144.4 million more than
what was budgeted in the original five-year plan. The

A-62

<PAGE>

Mayor's latest update of the five-year financial plan was
approved by PICA on May 2, 1994.

As of November 17, 1994, PICA has issued $1,296.7
million of its Special Tax Revenue Bonds. In accordance
with the enabling legislation, PICA was guaranteed a
percentage of the wage tax revenue expected to be collected
from Philadelphia residents to permit repayment of the
bonds.

In January 1993, Philadelphia anticipated a
cumulative general fund budget deficit of $57 million for
fiscal year 1993. In response to the anticipated deficit,
the Major unveiled a financial plan eliminating the budget
deficit for fiscal year 1993 through significant service
cuts that included a plan to privatize certain city-provided
services. Due to an upsurge in tax receipts, cost-cutting
and additional PICA borrowings, Philadelphia completed
fiscal year 1993 with a balanced general fund budget. The
audited General Fund balance for fiscal year 1993 showed a
surplus of approximately $3 million.

In January 1994, the Major proposed a $2.3 billion
city general fund budget that included no tax increases, no
significant service cuts and a series of modest health and
welfare program increases. At that time, the Mayor also
unveiled a $2.2 billion program (the "Philadelphia Economic
Stimulus Program") designed to stimulate Philadelphia's
economy and stop the loss of 1,000 jobs a month. The
unaudited preliminary General Fund balance as of June 30,
1994, estimates a surplus of approximately $15.4 million.

S&P's rating on Philadelphia's general obligation
bonds is "BB." Moody's rating is currently "Ba."

Litigation. The Commonwealth is a party to
numerous lawsuits in which an adverse final decision would
materially affect the Commonwealth's governmental operations
and consequently its ability to pay debt service on its
obligations. The Commonwealth also faces tort claims made
possible by the limited waiver of sovereign immunity
effected by Act 152, approved September 28, 1978. Damages
are limited under such waiver to $250,000 for each person
and $1 million for each accident.

_________________

The Sponsors believe that the information
summarized above described some of the more significant
matters relating to State Series. For a discussion of the
particular risks with each of the Bonds, and other factors
to be considered in connection therewith, reference should

A-63

<PAGE>

be made to the Official Statement and other offering
materials relating to each of the Bonds included in the
portfolio of the State Series. The foregoing information
regarding a State, its political subdivisions and its
agencies and authorities constitutes only a brief summary,
does not purport to be a complete description of the matters
covered and is based solely upon information drawn from
official statements relating to offerings of certain bonds
of that State. The Sponsors and their counsel have not
independently verified this information and the Sponsors
have no reason to believe that such information is incorrect
in any material respect. None of the information presented
in this summary is relevant to Puerto Rico or Guam Bonds
which may be included in the State Series.

A-64

<ARTICLE> 6
<SERIES>
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<NAME> CALIFORNIA TRUST

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<ARTICLE> 6
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<NAME> MICHIGAN TRUST

<S> <C>
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<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> NEW JERSEY TRUST

<S> <C>
<PERIOD-TYPE> OTHER
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<PERIOD-END> MAR-01-1995
<INVESTMENTS-AT-COST> 3,102,643
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<ARTICLE> 6
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<NAME> NEW YORK TRUST

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<ARTICLE> 6
<SERIES>
<NUMBER> 5
<NAME> OHIO TRUST

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</TABLE>