DEFINED ASSET FUNDS MUNICIPAL INVT TR FD MULTISTATE SER 8Q (Form: 485BPOS, Received: 07/24/1996 00:00:00) (2024)

RISK FACTORS

Unit price fluctuates and could be adversely affected by increasing interestrates as well as the financial condition of the issuers of the bonds and anyinsurance companies backing certain of the bonds. Because of the possiblematurity, sale or other disposition of securities, the size, composition andreturn of the portfolio may change at any time. Because of the sales charges,returns of principal and fluctuations in unit price, among other reasons, thesale price will generally be less than the cost of your units. Unit prices couldalso be adversely affected if a limited trading market exists in any security tobe sold. There is no guarantee that the Fund will achieve its investmentobjective.

In addition, each Portfolio has fewer bond issues than a national fund, and isconcentrated in bonds of issuers located in only one State. There may beadditional risk from decreased diversification as well as from factorsparticular to that State.

A-3

Defined Pennsylvania Insured Trust

PORTFOLIO DIVERSIFICATION

The Portfolio contains 8 Pennsylvania bonds.

TYPES OF BONDS

The Portfolio consists of municipal bonds of the following types:

/ / General Obligation 18%/ / Hospitals/Health Care Facilities 41%/ / Refunded Bonds 20%/ / State/Local Municipal Electric Utilities 2%/ / Universities/Colleges 19%

AMBAC Indemnity Corporation 42%Financial Guaranty Insurance Company 8%MBIA Insurance Corporation 50%

RISK FACTORS

The Portfolio is concentrated in Hospital/Health Care Facility bonds and istherefore dependent to a significant degree on revenues generated from thoseparticular activities. (See Risk Factors in Part B.) The Portfolio is alsoconcentrated in bonds of Pennsylvania issuers and is subject to additional riskfrom decreased diversification as well as from factors that may be particular toPennsylvania, which are briefly described on the following page.

PREMIUM AND DISCOUNT ISSUES

On the evaluation date, 92% of the bonds were valued at a premium over par and8% at a discount from par (see Risk Factors in Part B).

TERMINATION DATE
The Portfolio will generally terminate no later than the maturity date of thelast maturing bond listed in the Portfolio. The Portfolio may be terminated ifthe value is less than 40% of the face amount of bonds deposited. On theevaluation date the value of the Portfolio was 81% of the face amount of bondsdeposited.

Defining Your Income

WHAT YOU MAY EXPECT

(PAYABLE ON THE 25TH DAY OF THE MONTH TO HOLDERS OF RECORD ON THE 10TH DAY OF
THE MONTH):

Regular Monthly Income per unit: $ 5.32Annual Income per unit: $ 63.86

These figures are estimates determined as of the evaluation date and actualpayments may vary.

Defining Your Costs

PUBLIC OFFERING PRICE PER UNIT $1,082.64

The Public Offering Price as of April 30, 1996, the evaluation date, is based onthe aggregate bid side value of the bonds ($4,065,374), divided by the number ofunits outstanding (3,864), plus a sales charge of 2.82% of the Public OfferingPrice (2.901% of the value of the underlying bonds). An amount equal toprincipal cash, if any, as well as net accrued but undistributed interest on theunit is added to the Public Offering Price.

The per unit bid side redemption and secondary market repurchase price as of theevaluation date was $1,052.11 ($30.53 less than the Public Offering Price).

 As a % of Secondary Market Public Offering Price -----------------Maximum Sales Charges 5.50%ESTIMATED ANNUAL FUND OPERATING EXPENSES Per Unit --------------Trustee's Fee $ 0.70Maximum Portfolio Supervision and Bookkeeping Fees $ 0.38Evaluator's Fee $ 0.43Other Operating Expenses $ 0.50 --------------TOTAL $ 2.01

A-4

Pennsylvania Taxes and Risks

PENNSYLVANIA RISK FACTORS

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

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

To deal with its budget deficits, Philadelphia has considered significantservice cuts and a plan to privatize certain city-provided services. Inaddition, in 1991 the Commonwealth created the Pennsylvania Inter-GovernmentalCooperation Authority ('PICA'), with authority to issue notes and bonds onbehalf of Philadelphia to cover budget shortfalls, to eliminate projecteddeficits and to fund capital spending. PICA has issued approximately $1.4billion of Special Revenue Bonds on behalf of the City. However, its power toissue bonds for the most purposes expired on December 31, 1994 and its power toissue bonds to finance a cash flow deficit will expire on December 31, 1996.PICA's authority to refund existing debt will not expire.

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

PENNSYLVANIA TAXES

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

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

2. Units of the Fund are not subject to the County Personal Property Taxpresently in effect in Pennsylvania to the extent of that proportion of the Fundrepresented by bonds issued by the Commonwealth of Pennsylvania, its agenciesand instrumentalities, or by any county, city, borough, town, township, schooldistrict, municipality or local housing or parking authority in the Commonwealthof Pennsylvania ('Pennsylvania Obligations'). Fund Units may be taxable underthe Pennsylvania inheritance and estate taxes.

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

4. Although there is no published authority on the subject, counsel is ofthe opinion that any insurance proceeds paid in lieu of interest on defaultedtax-exempt bonds will be exempt from the Pennsylvania Personal Income Tax eitheras payment in lieu of tax-exempt interest or as payments of insurance proceedswhich are not included in any of the classes of income specified as taxableunder the Pennsylvania Personal Income Tax Law. Further, because such insuranceproceeds are excluded from the Federal income tax base, such proceeds will notbee subject to the Pennsylvania Corporate Net Income Tax. Proceeds frominsurance policies are expressly excluded from the Philadelphia School DistrictInvestment Income Tax and, accordingly, insurance proceeds paid to replacedefaulted payments under any bonds will not be subject to that tax.

5. Distributions to investors in the Fund attributable to gain on thedisposition by the Fund of Pennsylvania Obligations (whether by sale, redemptionor payment at maturity) will be taxable under the Pennsylvania Personal IncomeTax, the Pennsylvania Corporate Income Tax, and, unless the obligation has beenheld for more than six months, the Philadelphia School District InvestmentIncome Tax. Distributions attributable to gain on the disposition of anyobligation held more than six months will not be subject to the PhiladelphiaSchool District Investment Income Tax.

6. To the extent the value of Units is represented by obligations of theCommonwealth of Puerto Rico or obligations of the territory of Guam, such valuewill not be subject to the Pennsylvania County Personal Property Tax to theextent required by Federal statutes. Distributions to investors in the Fundattributable to interest on such obligations

A-5

is not taxable under any of the Pennsylvania State and local income taxesreferred to above. Distributions to investors in the Fund attributable to gainon the disposition of such obligations will be taxable under the PennsylvaniaState and local income taxes referred to above, except that gain on anyobligation held for more than six months is not subject to the PhiladelphiaSchool District Investment Income Tax.

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

A-6

Defined Texas Insured Trust

PORTFOLIO DIVERSIFICATION

The Portfolio contains 9 Texas bonds.

TYPES OF BONDS

The Portfolio consists of municipal bonds of the following types:

APPROXIMATE
PORTFOLIO
PERCENTAGE

/ / Hospitals/Health Care Facilities 30%/ / Municipal Water/Sewer Utilities 15%/ / Refunded Bonds 42%/ / State/Local Municipal Electric
Utilities 13%

INSURED AND AAA-RATED BONDS

The approximate percentage of the aggregate face amount of the Portfolio insuredby each insurance company is:

AMBAC Indemnity Corporation 58%Financial Guaranty Insurance Company 42%

RISK FACTORS

The Portfolio is concentrated in Hospital/Health Care Facility bonds and istherefore dependent to a significant degree on revenues generated from thoseparticular activities. In addition, the Portfolio is concentrated in RefundedBonds. The Portfolio is also concentrated in bonds of Texas issuers and issubject to additional risk from decreased diversification as well as fromfactors that may be particular to Texas, which are briefly described on thefollowing page.

PREMIUM AND DISCOUNT ISSUES

On the evaluation date, 88% of the bonds were valued at a premium over par and12% at a discount from par (see Risk Factors in Part B).

TERMINATION DATE

The Portfolio will generally terminate no later than the maturity date of thelast maturing bond listed in the Portfolio. The Portfolio may be terminated ifthe value is less than 40% of the face amount of bonds deposited. On theevaluation date the value of the Portfolio was 68% of the face amount of bondsdeposited.

Defining Your Income

WHAT YOU MAY EXPECT

(PAYABLE ON THE 25TH DAY OF THE MONTH TO HOLDERS OF RECORD ON THE 10TH DAY OF
THE MONTH):

Regular Monthly Income per unit: $ 5.47Annual Income per unit: $ 65.69

These figures are estimates determined as of the evaluation date and actualpayments may vary.

Defining Your Costs

PUBLIC OFFERING PRICE PER UNIT $1,071.83

The Public Offering Price as of April 30, 1996, the evaluation date, is based onthe aggregate bid side value of the bonds ($6,805,637), divided by the number ofunits outstanding (6,543), plus a sales charge of 2.96% of the Public OfferingPrice (3.047% of the value of the underlying bonds). An amount equal toprincipal cash, if any, as well as net accrued but undistributed interest on theunit is added to the Public Offering Price.

The per unit bid side redemption and secondary market repurchase price as of theevaluation date was $1,040.14 ($31.69 less than the Public Offering Price).

 As a % of Secondary Market Public Offering Price -----------------Maximum Sales Charges 5.50%ESTIMATED ANNUAL FUND OPERATING EXPENSES Per Unit ---------------Trustee's Fee $ 0.69Maximum Portfolio Supervision and Bookkeeping Fees $ 0.38Evaluator's Fee $ 0.25Other Operating Expenses $ 0.29 ---------------TOTAL $ 1.61

A-7

Texas Taxes and Risks

TEXAS RISK FACTORS

Although the Texas economy performed well in 1995, the state economy facesa number of challenges. In 1994, trade with Mexico and Latin America and exportswere an important component of the economy of Texas, accounting forapproximately $60 billion of the state's gross state product. The recentfinancial crisis in Mexico has placed that segment of the Texas economy at risk,and has also adversely affected retail trade in the Texas-Mexico border region.One governmental estimate suggests that the Mexican crisis could lead to aone-half of one percent reduction in the forecasted growth in the Texas economyfor the 1996-1997 fiscal biennium in Texas. In addition, the recent decisionsrelating to military base closures included a decision to close Kelly Air ForceBase in San Antonio, Texas, which is a major employer of civilians in themetropolitan San Antonio area. State and local officials are concerned that thisclosure could result in the loss of 13,000 jobs in the area and would affect theHispanic population of the area disproportionately. Military bases in threeother communities in Texas will be adversely affected by the decisions of thebase closure commission.

Texas' population growth has recently exceeded job growth, and Texas hasthe highest poverty rate among the ten most populace states. Consequently, theTexas state government faces challenges as demands for state services increaseand the spending of state funds is required by court orders, federal mandatesand growing social services caseloads. Developments in national health and humanservices policy could effect the Texas economy significantly. Approximatelyone-third of the Texas state government's expenditures in recent years have beenmade in the area of health and human services, and Texas has receivedsubstantial amounts of federal funds to pay for such services in part.Legislation under consideration in the United States Congress proposing tomodify the manner in which federal funding is allocated to the states, includingthrough the use of block grants, could have a negative effect on the federalfunding of Texas' social assistance programs. It is estimated by state officialsthat one formula contained in legislation under consideration by the UnitedStates Congress would result in the loss of over $800 million in federal fundingover the next fiscal biennium. In fiscal 1995, the Texas state government'sexpenditures exceeded its net revenues for the first time in many years.Although Texas continued to maintain cash surplus in the state treasury thatstate treasury official believe to be adequate to meet the state's spendingrequirements despite this budgetary shortfall, there is no assurance that it cancontinue to operate on such a basis if increased responsibility for fundinghealth and human services is placed on the states by the federal government.

Property tax revenues are a major source of funding for public education inTexas. The method for funding public education in Texas has undergone materialchanges over the last five years and has been the subject of rancorouslitigation during that period. In response to challenges to prior laws relatingto the funding of public education in Texas, the Texas legislature adopted newlegislation in 1993 that attempts to reduce the disparity of revenues perstudent between low-wealth school districts and high-wealth school districts bycausing high-wealth school districts to share their ad valorem tax revenues withlow-wealth school districts. In January 1995, the Texas Supreme Court affirmedthe constitutionality of this legisltion. There is no assurance that furtherchallenges to this method of funding public education will not be mounted inTexas.

Texas' general obligation bonds are rated AA by Standard & Poor's and Aa byMoody's.

TEXAS TAXES

In the opinion of Hughes & Luce, L.L.P., Dallas, Texas, special counselon Texas tax matters, under Texas law existing on December 31, 1995,applicable to individuals who are residents of Texas for state taxpurposes:

1. The Texas franchise tax functions as an income tax in certainrespects, and is imposed on corportions, limited liability companies andcertain banks, limited banking associations and savings and loanassocitions. Assuming that the Texas Trust is not a corporation, limitedliability company, bank, limited banking association or savings and loanassociation (in each case for Texas franchise tax purposes), the income ofthe Texas Trust will not be subject to an income tax levied by the State ofTexas or any political subdivision thereof.

2. The income derived from the Texas Trust by the Holders who areindividuals will not be subject to any income tax levied by the State ofTexas or any political subdivision thereof.

3. Assuming that the Texas Trust will not hold any tangible property,neither Debt Obligations held by the Texas Trust nor Units of the TexasTrust held by individuals are subject to any property tax levied by theState of Texas or any political subdivision thereof,

4. Units of the Texas Trust held by individuals may be subject to Texasinheritance taxes.

A-8

- -------------------------------------------------------------------------------- TAX-FREE VS. TAXABLE INCOME: A COMPARISON OF TAXABLE AND TAX-FREE YIELDS FOR PENNSYLVANIA RESIDENTS- -------------------------------------------------------------------------------- COMBINED EFFECTIVETAXABLE INCOME 1996* TAX RATE TAX-FREE YIELD OF SINGLE RETURN JOINT RETURN % 4% 4.5% 5% 5.5% 6% 6.5% 7% 7.5% 8% IS EQUIVALENT TO A TAXABLE YIELD OF- --------------------------------------------------------------------------------$ 0- 24,000 $ 0- 40,100 17.38 4.84 5.45 6.05 6.66 7.26 7.87 8.47 9.08 9.68$ 24,000- 58,150 $ 40,100- 96,900 30.02 5.72 6.43 7.14 7.86 8.57 9.29 10.00 10.72 11.43$ 58,150-121,300 $ 96,900-147,700 32.93 5.96 6.71 7.46 8.20 8.95 9.69 10.44 11.18 11.93$121,300-263,750 $147,700-263,750 37.79 6.43 7.23 8.04 8.84 9.65 10.45 11.25 12.06 12.86OVER $263,750 OVER $263,750 41.29 6.81 7.66 8.52 9.37 10.22 11.07 11.92 12.77 13.63 FOR TEXAS RESIDENTS- -------------------------------------------------------------------------------- EFFECTIVETAXABLE INCOME 1996* TAX RATE TAX-FREE YIELD OF SINGLE RETURN JOINT RETURN % 4% 4.5% 5% 5.5% 6% 6.5% 7% 7.5% 8% IS EQUIVALENT TO A TAXABLE YIELD OF- --------------------------------------------------------------------------------$ 0- 24,000 $ 0- 40,100 15.00 4.71 5.29 5.88 6.47 7.06 7.65 8.24 8.82 9.41$ 24,000- 58,150 $ 40,100- 96,900 28.00 5.56 6.25 6.94 7.64 8.33 9.03 9.72 10.42 11.11$ 58,150-121,300 $ 96,900-147,700 31.00 5.80 6.52 7.25 7.97 8.70 9.42 10.14 10.87 11.59$121,300-263,750 $147,700-263,750 36.00 6.25 7.03 7.81 8.59 9.38 10.16 10.94 11.72 12.50OVER $263,750 OVER $263,750 39.60 6.62 7.45 8.28 9.11 9.93 10.76 11.59 12.42 13.25

To compare the yield of a taxable security with the yield of a tax-freesecurity, find your taxable income and read across. The table incorporates 1996federal and applicable State income tax rates and assumes that all income wouldotherwise be taxed at the investor's highest tax rate. Yield figures are forexample only.

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

A-10

DEFINED ASSET FUNDS - MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 8Q (PENNSYLVANIA AND
TEXAS TRUSTS)

TRUST PROPERTY: Investment in marketable securities - at value (cost $ 3,741,373 )(Note 1)......... $ 4,065,374 Accrued interest ............................... 78,390 Cash - principal ............................... 3,686 ----------- Total trust property ......................... 4,147,450LESS LIABILITIES: Income advance from Trustee..................... $ 17,827 Accrued Sponsors' fees ......................... 492 18,319 ----------- -----------NET ASSETS, REPRESENTED BY: 3,864 units of fractional undivided interest outstanding (Note 3)................ 4,069,060 Undistributed net investment income ............ 60,071 $ 4,129,131 ----------- ===========UNIT VALUE ($ 4,129,131 / 3,864 units )........... $ 1,068.62 ===========

 Years Ended April 30, 1996 1995 1994 ---- ---- ----INVESTMENT INCOME: Interest income ........................ $ 265,319 $ 295,886 $ 317,739 Trustee's fees and expenses ............ (7,091) (7,335) (7,689) Sponsors' fees ......................... (3,772) (1,570) (1,497) ------------------------------------------------ Net investment income .................. 254,456 286,981 308,553 ------------------------------------------------REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Realized gain on securities sold or redeemed .......... 42,640 7,167 52,756 Unrealized appreciation (depreciation) of investments ....................... (8,811) 32,892 (202,839) ------------------------------------------------ Net realized and unrealized gain (loss) on investments .......... 33,829 40,059 (150,083) ------------------------------------------------NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .............. $ 288,285 $ 327,040 $ 158,470 ================================================

See Notes to Financial Statements.

D - 3.

DEFINED ASSET FUNDS - MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 8Q (PENNSYLVANIA TRUST)

 Years Ended April 30, 1996 1995 1994 ---- ---- ----OPERATIONS: Net investment income .................. $ 254,456 $ 286,981 $ 308,553 Realized gain on securities sold or redeemed .......... 42,640 7,167 52,756 Unrealized appreciation (depreciation) of investments ....................... (8,811) 32,892 (202,839) ------------------------------------------------ Net increase in net assets resulting from operations ............ 288,285 327,040 158,470 ------------------------------------------------DISTRIBUTIONS TO HOLDERS (Note 2): Income ................................ (257,051) (287,266) (309,125) Principal .............................. (37,919) (9,083) (8,367) ------------------------------------------------ Total distributions .................... (294,970) (296,349) (317,492) ------------------------------------------------SHARE TRANSACTIONS: Redemption amounts - income ............ (7,500) (1,442) (5,343) Redemption amounts - principal ......... (562,724) (106,742) (421,647) ------------------------------------------------ Total share transactions ............... (570,224) (108,184) (426,990) ------------------------------------------------NET DECREASE IN NET ASSETS ............... (576,909) (77,493) (586,012)NET ASSETS AT BEGINNING OF YEAR .......... 4,706,040 4,783,533 5,369,545 ------------------------------------------------NET ASSETS AT END OF YEAR ................ $ 4,129,131 $ 4,706,040 $ 4,783,533 ================================================PER UNIT: Income distributions during year ................................. $ 64.21 $ 65.08 $ 65.35 ================================================ Principal distributions during year ................................. $ 9.50 $ 2.07 1.76 ================================================ Net asset value at end of year ................................. $ 1,068.62 $ 1,072.48 $ 1,065.61 ================================================TRUST UNITS: Redeemed during year ................... 524 101 380 Outstanding at end of year ............. 3,864 4,388 4,489 ================================================

See Notes to Financial Statements.

D - 4.

DEFINED ASSET FUNDS - MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 8Q (PENNSYLVANIA TRUST)

1. SIGNIFICANT ACCOUNTING POLICIES The Fund is registered under the Investment Company Act of 1940 as a Unit Investment Trust. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. The policies are in conformity with generally accepted accounting principles. (A) Securities are stated at value as determined by the Evaluator based on bid side evaluations for the securities. See "How to Sell Units - Trustee's Redemption of Units" in this Prospectus, Part B. (B) The Fund is not subject to income taxes. Accordingly, no provision for such taxes is required. (C) Interest income is recorded as earned.2. DISTRIBUTIONS A distribution of net investment income is made to Holders each month. Receipts other than interest, after deductions for redemptions and applicable expenses, are distributed as explained in "Income, Distributions and Reinvestment - Distributions" in this Prospectus, Part B.3. NET CAPITAL Cost of 3,864 units at Date of Deposit ..................... $ 3,989,928 Less sales charge .......................................... 179,546 ----------- Net amount applicable to Holders ........................... 3,810,382 Redemptions of units - net cost of 1,136 units redeemed less redemption amounts (principal)....................... (106,435) Realized gain on securities sold or redeemed ............... 107,826 Principal distributions .................................... (66,714) Unrealized appreciation of investments ..................... 324,001 ----------- Net capital applicable to Holders .......................... $ 4,069,060 ===========4. INCOME TAXES As of April 30, 1996, unrealized appreciation of investments, based on cost for Federal income tax purposes, aggregated $324,001, all of which related to appreciated securities. The cost of investment securities for Federal income tax purposes was $3,741,373 at April 30, 1996.5. CHANGE OF TRUSTEE Effective May 27, 1995, The Chase Manhattan Bank, N.A. replaced Bankers Trust Company as Trustee.

 Rating of Optional Portfolio No. and Title of Issues Face Redemption Securities (1) (4) Amount Coupon Maturities(3) Provisions(3) Cost Value(2) ---------- --------- ----------- ----------- ------------ ------------ ---------- ---------1 Carbon Cnty., PA, Hosp. Auth., Cnty. AAA $ 750,000 7.000 % 2014 11/15/00 $ 752,918 $ 809,198 Gtd. Rfdg. Hosp. Rev. Bonds (Gnaden @ 102.000 Huetten Mem. Hosp.), Ser. 1990A (AMBAC Ins.)2 Leighton, PA, Area School Dist. Rev. AAA 695,000 6.900 2010 09/15/98 697,099 736,443 Bonds, Ser. 1991 (MBIA Ins.) @ 101.0003 Pennsylvania Higher Educl. Fac. Auth., AAA 585,000 7.200 2019 07/01/99 595,448 633,678 Univ. Rev. Bonds, Ser. of 1989 @ 102.000 (Hahnemann Univ. Proj.) (MBIA Ins.)4 Pennsylvania Higher Educl. Fac. Auth., AAA 155,000 6.750 2011 11/01/99 154,157 167,160 La Salle Univ. Rev. Bonds, Ser. of 1989 @ 102.000 (MBIA Ins.)5 City of Philadelphia, PA, Gas Works AAA 450,000 7.000 2020 None 453,420 517,991 Rev. Bonds, Twelfth Ser. B (MBIA Ins.)6 Sayre, PA, Hlth. Care Fac. Rev. Bonds, AAA 170,000 7.000 2011 03/01/01 170,653 185,344 Guthrie Healthcare Sys. Ser. A @ 102.000 (AMBAC Ins.) 600,000 7.100 2017 03/01/01 607,086 652,386 @ 102.0007 Municipal Auth. of Westmoreland Cnty., AAA 225,000 2.000 2004 None 134,208 167,778 PA, Mun. Svc. Rev. Bonds, Ser. K (Financial Guaranty Ins.) 80,000 2.000 2007 None 43,233 55,3808 City of Philadelphia, PA, Gas Works AAA 105,000 7.250 2010 01/01/99 107,545 112,803 Rev. Bonds, Eleventh Ser. C @ 102.000 (AMBAC Ins.) 25,000 7.250 2010(5) 01/01/99 25,606 27,213 @ 102.000 --------- --------- --------- TOTAL $ 3,840,000 $ 3,741,373 $ 4,065,374 ========= ========= ========= See Notes to Portfolios on page D - 12. D - 6.

DEFINED ASSET FUNDS - MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 8Q (TEXAS TRUST)

STATEMENT OF CONDITION

TRUST PROPERTY: Investment in marketable securities - at value (cost $ 6,328,651 )(Note 1)......... $ 6,805,637 Accrued interest ............................... 117,903 Cash - principal ............................... 4,064 ----------- Total trust property ......................... 6,927,604LESS LIABILITIES: Income advance from Trustee..................... $ 23,902 Accrued Sponsors' fees ......................... 831 24,733 ----------- -----------NET ASSETS, REPRESENTED BY: 6,543 units of fractional undivided interest outstanding (Note 3)................ 6,809,701 Undistributed net investment income ............ 93,170 $ 6,902,871 ----------- ===========UNIT VALUE ($ 6,902,871 / 6,543 units )........... $ 1,055.00 ===========

See Notes to Financial Statements.

D - 7.

DEFINED ASSET FUNDS - MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 8Q (TEXAS TRUST)

 Years Ended April 30, 1996 1995 1994 ---- ---- ----INVESTMENT INCOME: Interest income ........................ $ 470,647 $ 521,308 $ 558,679 Trustee's fees and expenses ............ (8,891) (9,307) (9,908) Sponsors' fees ......................... (6,433) (2,800) (2,742) ------------------------------------------------ Net investment income .................. 455,323 509,201 546,029 ------------------------------------------------REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Realized gain on securities sold or redeemed .......... 105,653 38,905 27,537 Unrealized depreciation of investments ....................... (36,269) (27,926) (194,957) ------------------------------------------------ Net realized and unrealized gain (loss) on investments .......... 69,384 10,979 (167,420) ------------------------------------------------NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .............. $ 524,707 $ 520,180 $ 378,609 ================================================

See Notes to Financial Statements.

D - 8.

DEFINED ASSET FUNDS - MUNICIPAL INVESTMENT TRUST FUND,
MULTISTATE SERIES - 8Q (TEXAS TRUST)

 Years Ended April 30, 1996 1995 1994 ---- ---- ----OPERATIONS: Net investment income .................. $ 455,323 $ 509,201 $ 546,029 Realized gain on securities sold or redeemed .......... 105,653 38,905 27,537 Unrealized depreciation of investments ....................... (36,269) (27,926) (194,957) ------------------------------------------------ Net increase in net assets resulting from operations ............ 524,707 520,180 378,609 ------------------------------------------------DISTRIBUTIONS TO HOLDERS (Note 2): Income ................................ (458,440) (510,300) (546,394) Principal .............................. (47,230) (26,106) (7,040) ------------------------------------------------ Total distributions .................... (505,670) (536,406) (553,434) ------------------------------------------------SHARE TRANSACTIONS: Redemption amounts - income ............ (14,402) (6,694) (3,169) Redemption amounts - principal ......... (1,093,747) (521,193) (239,888) ------------------------------------------------ Total share transactions ............... (1,108,149) (527,887) (243,057) ------------------------------------------------NET DECREASE IN NET ASSETS ............... (1,089,112) (544,113) (417,882)NET ASSETS AT BEGINNING OF YEAR .......... 7,991,983 8,536,096 8,953,978 ------------------------------------------------NET ASSETS AT END OF YEAR ................ $ 6,902,871 $ 7,991,983 $ 8,536,096 ================================================PER UNIT: Income distributions during year ................................. $ 65.89 $ 66.28 $ 66.48 ================================================ Principal distributions during year ................................. $ 6.96 $ 3.43 $ 0.86 ================================================ Net asset value at end of year ................................. $ 1,055.00 $ 1,054.91 $ 1,057.10 ================================================TRUST UNITS: Redeemed during year ................... 1,033 499 220 Outstanding at end of year ............. 6,543 7,576 8,075 ================================================

See Notes to Financial Statements.

D - 9.

1. SIGNIFICANT ACCOUNTING POLICIES The Fund is registered under the Investment Company Act of 1940 as a Unit Investment Trust. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. The policies are in conformity with generally accepted accounting principles. (A) Securities are stated at value as determined by the Evaluator based on bid side evaluations for the securities. See "How to Sell Units - Trustee's Redemption of Units" in this Prospectus, Part B. (B) The Fund is not subject to income taxes. Accordingly, no provision for such taxes is required. (C) Interest income is recorded as earned.2. DISTRIBUTIONS A distribution of net investment income is made to Holders each month. Receipts other than interest, after deductions for redemptions and applicable expenses, are distributed as explained in "Income, Distributions and Reinvestment - Distributions" in this Prospectus, Part B.3. NET CAPITAL Cost of 6,543 units at Date of Deposit ..................... $ 6,757,349 Less sales charge .......................................... 304,082 ----------- Net amount applicable to Holders ........................... 6,453,267 Redemptions of units - net cost of 3,457 units redeemed less redemption amounts (principal)....................... (262,151) Realized gain on securities sold or redeemed ............... 284,208 Principal distributions .................................... (142,609) Unrealized appreciation of investments ..................... 476,986 ----------- Net capital applicable to Holders .......................... $ 6,809,701 ===========4. INCOME TAXES As of April 30, 1996, unrealized appreciation of investments, based on cost for Federal income tax purposes, aggregated $476,986, all of which related to appreciated securities. The cost of investment securities for Federal income tax purposes was $6,328,651 at April 30, 1996.5. CHANGE OF TRUSTEE Effective May 27, 1995, The Chase Manhattan Bank, N.A. replaced Bankers Trust Company as Trustee.

D - 10.

 Rating of Optional Portfolio No. and Title of Issues Face Redemption Securities (1) (4) Amount Coupon Maturities(3) Provisions(3) Cost Value(2) ---------- --------- ----------- ----------- ------------ ------------ ---------- ---------1 City of Austin, TX, Combined Util. Sys. AAA $ 500,000 6.000 % 2015 05/15/00 $ 452,960 $ 504,255 Rev. Rfdg. Bonds, Ser. 1990A (Financial @ 100.000 Guaranty Ins.) 305,000 6.000 2010 05/15/00 279,164 310,231 @ 100.0002 Coastal Water Auth. of Texas, Water AAA 145,000 6.250 2017 None 135,237 144,459 Conveyance Sys. Rfdg. Rev. Bonds (AMBAC Ins.)3 Gregg Cnty., TX, Hlth. Fac. Dev. Corp., AAA 1,250,000 7.500 2015(5) 10/01/00 1,308,413 1,414,400 Hosp. Rev. Bonds (Good Shepherd Med. @ 102.000 Ctr. Proj.), Ser. 1990A (AMBAC Ins.)4 Harris Cnty., TX, Toll Rd. Multiple AAA 620,000 7.100 2017(5) 08/15/99 629,511 685,869 Mode Sr. Lien Rev. Bonds, Ser. 1985-F @ 103.000 (Financial Guaranty Ins.)5 Harris Cnty., TX, Hlth. Fac. Dev. AAA 1,250,000 7.000 2012 06/01/99 1,250,000 1,338,725 Corp., Hosp. Rev. Bonds (Mem. Hosp. @ 102.000 Sys. Proj.), Ser. 1989 (AMBAC Ins.)6 Lubbock, TX, Hlth. Fac. Dev. Corp., AAA 120,000 7.250 2019(5) 12/01/00 123,301 135,008 Hosp. Rev. Bonds (Methodist Hosp.), @ 102.000 Ser. 1990 (AMBAC Ins.)7 Tarrant Cnty., TX, Hlth. Fac. Dev. AAA 660,000 5.000 2015 09/01/97 519,585 579,533 Corp., Hlth. Sys. Rev. Bonds, Ser. @ 100.000 1987A (Harris Methodist Hlth. Sys.) (Financial Guaranty Ins.)8 Texas Turnpike Auth., Dallas North AAA 595,000 6.900 2009 01/01/98 595,000 627,927 Tollway Rev. Bonds, Ser. 1989 @ 102.000 (Financial Guaranty Ins.)9 Texas Water Resources Fin. Auth. Rev. AAA 1,000,000 7.500 2013 08/15/99 1,035,480 1,065,230 Bonds, Ser. 1989 (AMBAC Ins.) @ 100.000 --------- --------- --------- TOTAL $ 6,445,000 $ 6,328,651 $ 6,805,637 ========= ========= ========= See Notes to Portfolios on page D - 12. D - 11.

(1) The rating of the bonds are by Standard & Poor's Ratings Group, or Moody's Investors Service, Inc. if followed by "(m)", or by Fitch Investors Service, Inc. if followed by "(f)"; "NR" indicates that this bonds is not currently rated by any of the above-mentioned rating services. These ratings have been furnished by the Evaluator but not confirmed with the rating agencies. See "Description of Ratings" in Part B of this Prospectus.(2) See Notes to Financial Statements.(3) Optional redemption provisions, which may be exercised in whole or in part, are initially at prices of par plus a premium, then subsequently at prices declining to par. Certain securities may provide for redemption at par prior or in addition to any optional or mandatory redemption dates or maturity, for example, through the operation of a maintenance and replacement fund, if proceeds are not able to be used as contemplated, the project is condemned or sold or the project is destroyed and insurance proceeds are used to redeem the securities. Many of the securities are also subject to mandatory sinking fund redemption commencing on dates which may be prior to the date on which securities may be optionally redeemed. Sinking fund redemptions are at par and redeem only part of the issue. Some of the securities have mandatory sinking funds which contain optional provisions permitting the issuer to increase the principal amount of securities called on a mandatory redemption date. The sinking fund redemptions with optional provisions may, and optional refunding redemptions generally will, occur at times when the redeemed securities have an offering side evaluation which represents a premium over par. To the extent that the securities were acquired at a price higher than the redemption price, this will represent a loss of capital when compared with the Public Offering Price of the Units when acquired. Distributions will generally be reduced by the amount of the income which would otherwise have been paid with respect to redeemed securities and there will be distributed to Holders any principal amount and premium received on such redemption after satisfying any redemption requests for Units received by the Fund. The estimated current return may be affected by redemptions. The tax effect on Holders of redemptions and related distributions is described under "Taxes" in this Prospectus, Part B.(4) All securities are insured, either on an individual basis or by portfolio insurance, by a municipal bond insurance company which has been assigned "AAA" claims paying ability by Standard & Poor's. Accordingly, Standard & Poor's has assigned a "AAA" rating to the securities. Securities covered by portfolio insurance are rated "AAA" only as long as they remain in the Trust. See "Risk Factors - Bonds backed by Letters of Credit or Insurance" in this Prospectus, Part B.(5) Bonds with an aggregate face amount of $ 25,000 of the Pennsylvania Trust and $ 1,990,000 of the Texas Trust have been pre-refunded and are expected to be called for redemption on the optional redemption provision dates shown.

D - 12.

DEFINED ASSET FUNDS
MUNICIPAL INVESTMENT TRUST FUND
MULTISTATE SERIES

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DEFINED ASSET FUNDSSM
PROSPECTUS--PART B
DEFINED ASSET FUNDS MUNICIPAL SERIES
MUNICIPAL INVESTMENT TRUST FUND
FURTHER DETAIL REGARDING ANY OF THE INFORMATION PROVIDED IN THE PROSPECTUS MAY

BE OBTAINED WITHIN FIVE DAYS BY WRITING OR CALLING THE TRUSTEE, THE ADDRESS ANDTELEPHONE NUMBER OF WHICH ARE SET FORTH ON THE BACK COVER OF PART A OF THIS

PROSPECTUS.

Index

PAGE

Fund Description...................................... 1Risk Factors.......................................... 2How to Buy Units...................................... 8How to Sell Units..................................... 10Income, Distributions and Reinvestment................ 10Fund Expenses......................................... 12Taxes................................................. 12Records and Reports................................... 13 PAGE ---------Trust Indenture....................................... 14Miscellaneous......................................... 14Exchange Option....................................... 16Supplemental Information.............................. 17Appendix A--Description of Ratings.................... a-1Appendix B--Sales Charge Schedules for Defined AssetFunds Municipal Series................................ b-1Appendix C--Sales Charge Schedules for MunicipalInvestment Trust Fund................................. c-1

FUND DESCRIPTION

BOND PORTFOLIO SELECTION

Professional buyers and research analysts for Defined Asset Funds, withaccess to extensive research, selected the Bonds for the Portfolio afterconsidering 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 byat least one nationally recognized rating organization or have comparable creditcharacteristics), the yield and price of the Bonds compared to similarsecurities, the maturities of the Bonds and the diversification of thePortfolio. Only issues meeting these stringent criteria of the Defined AssetFunds team of dedicated research analysts are included in the Portfolio. Noleverage or borrowing is used nor does the Portfolio contain other kinds ofsecurities to enhance yield. A summary of the Bonds in the Portfolio appears inPart A of the Prospectus. In a Fund that includes multiple Trusts or Portfolios,the word Fund should be understood to mean each individual Trust or Portfolio.

The deposit of the Bonds in the Fund on the initial date of depositestablished a proportionate relationship among the face amounts of the Bonds.During the 90-day period following the initial date of deposit the Sponsors maydeposit additional Bonds in order to create new Units, maintaining to the extentpossible that original proportionate relationship. Deposits of additional Bondssubsequent to the 90-day period must generally replicate exactly theproportionate relationship among the face amounts of the Bonds at the end of theinitial 90-day period.

Yields on bonds depend on many factors including general conditions of thebond markets, the size of a particular offering and the maturity and qualityrating of the particular issues. Yields can vary among bonds with similarmaturities, coupons and ratings. Ratings represent opinions of the ratingorganizations as to the quality of the bonds rated, based on the credit of theissuer or any guarantor, insurer or other credit provider, but these ratings areonly general standards of quality (see Appendix A).

After the initial date of deposit, the ratings of some Bonds may be reducedor withdrawn, or the credit characteristics of the Bonds may no longer becomparable to bonds rated A or better. Bonds rated BBB or Baa(the lowest investment grade rating) or lower may have speculativecharacteristics, and changes in economic conditions or other circ*mstances aremore likely to lead to a weakened capacity to make principal and interest

1

payments than is the case with higher grade bonds. Bonds rated below investmentgrade or unrated bonds with similar credit characteristics are often subject togreater market fluctuations and risk of loss of principal and income than highergrade bonds and their value may decline precipitously in response to risinginterest rates.

Because each Defined Asset Fund is a preselected portfolio of bonds, youknow the securities, maturities, call dates and ratings before you invest. Ofcourse, the Portfolio will change somewhat over time, as Bonds mature, areredeemed or are sold to meet Unit redemptions or in other limited circ*mstances.Because the Portfolio is not actively managed and principal is returned as theBonds are disposed of, this principal should be relatively unaffected by changesin interest rates.

BOND PORTFOLIO SUPERVISION

The Fund follows a buy and hold investment strategy in contrast to thefrequent portfolio changes of a managed fund based on economic, financial andmarket analyses. The Fund may retain an issuer's bonds despite adverse financialdevelopments. Experienced financial analysts regularly review the Portfolio anda Bond may be sold in certain circ*mstances including the occurrence of adefault in payment or other default on the Bond, a decline in the projectedincome pledged for debt service on a revenue bond, institution of certain legalproceedings, if the Bond becomes taxable or is otherwise inconsistent with theFund's investment objectives, a decline in the price of the Bond or theoccurrence of other market or credit factors (including advance refunding) that,in the opinion of Defined Asset Funds research analysts, makes retention of theBond detrimental to the interests of investors. The Trustee must generallyreject any offer by an issuer of a Bond to exchange another security pursuant toa refunding or refinancing plan.

The Sponsors and the Trustee are not liable for any default or defect in aBond. If a contract to purchase any Bond fails, the Sponsors may generallydeposit a replacement bond so long as it is a tax-exempt bond, has a fixedmaturity or disposition date substantially similar to the failed Bond and israted A or better by at least one nationally recognized rating organization orhas comparable credit characteristics. A replacement bond must be depositedwithin 110 days after deposit of the failed contract, at a cost that does notexceed the funds reserved for purchasing the failed Bond and at a yield tomaturity and current return substantially equivalent (considering then currentmarket conditions and relative creditworthiness) to those of the failed Bond, asof the date the failed contract was deposited.

RISK FACTORS

An investment in the Fund entails certain risks, including the risk thatthe value of your investment will decline with increases in interest rates.Generally speaking, bonds with longer maturities will fluctuate in value morethan bonds with shorter maturities. In recent years there have been widefluctuations 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 orpremium principally because their interest rates are lower or higher thanprevailing rates on comparable debt securities. The current returns of marketdiscount bonds are lower than comparably rated bonds selling at par becausediscount bonds tend to increase in market value as they approach maturity. Thecurrent returns of market premium bonds are higher than comparably rated bondsselling at par because premium bonds tend to decrease in market value as theyapproach maturity. Because part of the purchase price is returned throughcurrent income payments and not at maturity, an early redemption at par of apremium bond will result in a reduction in yield to the Fund. Market premium ordiscount attributable to interest rate changes does not indicate marketconfidence or lack of confidence in the issue.

Certain Bonds deposited into the Fund may have been acquired on awhen-issued or delayed delivery basis. The purchase price for these Bonds isdetermined prior to their delivery to the Fund and a gain or loss may resultfrom fluctuations in the value of the Bonds. Additionally, in any Defined AssetFunds Municipal Series, if the value of the Bonds reserved for payment of theperiodic deferred sales charge, together with the interest thereon, were tobecome insufficient to pay these charges, additional bonds would be required tobe 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 decreaseddiversification of economic, political, financial and market risks. Set forthbelow is a brief description of certain risks associated with bonds which may beheld by the Fund.

2

Additional information is contained in the Information Supplement which isavailable from the Trustee at no charge to the investor.

GENERAL OBLIGATION BONDS

Certain of the Bonds may be general obligations of a governmental entity.General obligation bonds are backed by the issuer's pledge of its full faith,credit and taxing power for the payment of principal and interest. However, thetaxing power of any governmental entity may be limited by provisions of stateconstitutions or laws and its credit will depend on many factors, including anerosion of the tax base resulting from population declines, natural disasters,declines in the state's industrial base or an inability to attract newindustries, economic limits on the ability to tax without eroding the tax baseand the extent to which the entity relies on federal or state aid, access tocapital markets or other factors beyond the entity's control. In addition,political restrictions on the ability to tax and budgetary constraints affectingstate governmental aid may have an adverse impact on the creditworthiness ofcities, counties, school districts and other local governmental units.

As a result of the recent recession's adverse impact upon both revenues andexpenditures, as well as other factors, many state and local governments haveconfronted deficits which were the most severe in recent years. Many issuers arefacing highly difficult choices about significant tax increases and spendingreductions in order to restore budgetary balance. The failure to implement theseactions on a timely basis could force these issuers to issue additional debt tofinance deficits or cash flow needs and could lead to a reduction of their bondratings and the value of their outstanding bonds.

MORAL OBLIGATION BONDS

The Portfolio may include 'moral obligation' bonds. If an issuer of moralobligation bonds is unable to meet its obligations, the repayment of the bondsbecomes a moral commitment but not a legal obligation of the state or localgovernment in question. Even though the state or local government may be calledon to restore any deficits in capital reserve funds of the agencies orauthorities which issued the bonds, any restoration generally requiresappropriation by the state or local legislature and does not constitute alegally enforceable obligation or debt of the state or local government. Theagencies 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 placedin an escrow account maintained by an independent trustee until maturity or apredetermined redemption date. These obligations are generally noncallable priorto maturity or the predetermined redemption date. In a few isolated instances,however, bonds which were thought to be escrowed to maturity have been calledfor 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 ofacquiring, constructing or improving various projects. Municipal revenue bondsare not general obligations of governmental entities backed by their taxingpower and payment is generally solely dependent upon the creditworthiness of thepublic issuer or the financed project or state appropriations. Examples ofmunicipal revenue bonds are:

Municipal utility bonds, including electrical, water and sewer revenuebonds, whose payments are dependent on various factors, including the ratesthe utilities may charge, the demand for their services and their operatingcosts, including expenses to comply with environmental legislation andother energy and licensing laws and regulations. Utilities are particularlysensitive to, among other things, the effects of inflation on operating andconstruction costs, the unpredictability of future usage requirements, thecosts and availability of fuel and, with certain electric utilities, therisks associated with the nuclear industry;

Lease rental bonds which are generally issued by governmental financingauthorities with no direct taxing power for the purchase of equipment orconstruction of buildings that will be used by a state or local government.Lease rental bonds are generally subject to an annual risk that the lesseegovernment might not appropriate funds for the leasing rental payments toservice the bonds and may also be subject to the risk that rentalobligations may terminate in the event of damage to or destruction orcondemnation of the equipment or building;

3

Multi-family housing revenue bonds and single family mortgage revenuebonds which are issued to provide financing for various housing projectsand which are payable primarily from the revenues derived from mortgageloans to housing projects for low to moderate income families or notessecured by mortgages on residences; repayment of this type of bond istherefore dependent upon, among other things, occupancy levels, rentalincome, the rate of default on underlying mortgage loans, the ability ofmortgage insurers to pay claims, the continued availability of federal,state or local housing subsidy programs, economic conditions in localmarkets, construction costs, taxes, utility costs and other operatingexpenses and the managerial ability of project managers. Housing bonds aregenerally prepayable at any time and therefore their average life willordinarily be less than their stated maturities;

Hospital and health care facility bonds whose payments are dependentupon revenues of hospitals and other health care facilities. These revenuescome from private third-party payors and government programs, including theMedicare and Medicaid programs, which have generally undertaken costcontainment measures to limit payments to health care facilities. Hospitalsand health care facilities are subject to various legal claims by patientsand others and are adversely affected by increasing costs of insurance. TheInternal Revenue Service has been engaged in a program of intensive auditsof certain large tax-exempt hospital and health care facilityorganizations. Although these audits have not yet been completed, it hasbeen reported that the tax-exempt status of some of these organizations maybe revoked;

Airport, port, highway and transit authority revenue bonds which aredependent for payment on revenues from the financed projects, includinguser fees from ports and airports, tolls on turnpikes and bridges, rentsfrom buildings, transit fare revenues and additional financial resourcesincluding federal and state subsidies, lease rentals paid by state or localgovernments or a pledge of a special tax such as a sales tax or a propertytax. In the case of the air travel industry, airport income is largelyaffected by the airlines' ability to meet their obligations under useagreements which in turn is affected by increased competition amongairlines, excess capacity and increased fuel costs, among other factors;

Solid waste disposal bonds which are generally payable from dumping anduser fees and from revenues that may be earned by the facility on the saleof electrical energy generated in the combustion of waste products andwhich are therefore dependent upon the ability of municipalities to fullyutilize the facilities, sufficient supply of waste for disposal, economicor population growth, the level of construction and maintenance costs, theexistence of lower-cost alternative modes of waste processing andincreasing environmental regulation. A recent decision of the U.S. SupremeCourt limiting a municipality's ability to require use of its facilitiesmay have an adverse affect on the credit quality of various issues of thesebonds;

Special tax bonds which are not secured by general tax revenues but areonly payable from and secured by the revenues derived by a municipalityfrom a particular tax--for example, a tax on the rental of a hotel room, onthe purchase of food and beverages, on the rental of automobiles or on theconsumption of liquor and may therefore be adversely affected by areduction in revenues resulting from a decline in the local economy orpopulation or a decline in the consumption, use or cost of the goods andservices that are subject to taxation;

Student loan revenue bonds which are typically secured by pledges of newor existing student loans. The loans, in turn, are generally eitherguaranteed by eligible guarantors and reinsured by the Secretary of theU.S. Department of Education, directly insured by the federal government,or financed as part of supplemental or alternative loan programs within astate (e.g., loan repayments are not guaranteed). These bonds often permitthe issuer to enter into interest rate swap agreements with eligiblecounterparties in which event the bonds are subject to the additional riskof the counterparty's ability to fulfill its swap obligation;

University and college bonds, the payments on which are dependent uponvarious factors, including the size and diversity of their sources ofrevenues, enrollment, reputation, the availability of endowments and otherfunds and, in the case of public institutions, the financial condition ofthe relevant state or other governmental entity and its policies withrespect to education; and

Tax increment and tax allocation bonds, which are secured by ad valoremtaxes imposed on the incremental increase of taxable assessed valuation ofproperty within a jurisdiction above an established base of assessed value.The issuers of these bonds do not have general taxing authority and the taxassessments on which the taxes used to service the bonds are based may be

4

subject to devaluation due to market price declines or governmental action.

Puerto Rico. Certain Bonds may be affected by general economic conditionsin the Commonwealth of Puerto Rico. Puerto Rico's economy is largely dependentfor its development on federal programs, and current federal budgetary policiessuggest that an expansion of its programs is unlikely. Reductions in federal taxbenefits or incentives or curtailment of spending programs could adverselyaffect the Puerto Rican economy.

Industrial Development Revenue Bonds. Industrial development revenue bondsare municipal obligations issued to finance various privately operated projectsincluding pollution control and manufacturing facilities. Payment is generallysolely dependent upon the creditworthiness of the corporate operator of theproject and, in certain cases, an affiliated or third party guarantor and may beaffected by economic factors relating to the particular industry as well asvarying degrees of governmental regulation. In many cases industrial revenuebonds do not have the benefit of covenants which would prevent the corporationsfrom engaging in capital restructurings or borrowing transactions which couldreduce their ability to meet their obligations and result in a reduction in thevalue of the Portfolio.

BONDS BACKED BY REPURCHASE COMMITMENTS

Certain Funds contain Bonds that were purchased from commercial banks,savings banks, savings and loan associations or other institutions (thrifts)that had held the Bonds in their investment portfolios prior to selling theBonds to the Fund. These banks or thrifts (the Sellers) have committed torepurchase the Bonds from the Fund in certain circ*mstances. In some cases aSeller's Repurchase Commitments may be backed by a security interest incollateral or by a letter of credit (see Bonds Backed by Letters of Credit orInsurance below).

A Seller may have committed to repurchase any Bond sold by it if necessaryto satisfy investors' unit redemption requests (a Liquidity Repurchase). ASeller may also have committed to repurchase any Bond sold by it if the issuerof the Bond fails to make payments of interest or principal on the Bond (aDefault Repurchase) or if the issuer becomes or is deemed to be bankrupt orinsolvent (an Insolvency Repurchase). A Seller may have committed to repurchaseany Bond if the interest on that Bond becomes taxable (a Tax Repurchase).Investors should realize that they are subject to having all or a portion of theprincipal amount of their investment returned prior to termination of the Fundif any of these situations occurs. A Seller may also have committed torepurchase the Bonds sold by it on their scheduled disposition dates (as shownunder Portfolio in Part A) (a Disposition Repurchase). The price at which any ofthese repurchases will occur (the Put Price) is shown in Part A of theProspectus. Any collateral securing any of the Repurchase Commitments mayconsist of mortgage-backed securities issued by GNMA (Ginnie Maes), FNMA (FannieMaes) or FHLMC (Freddie Macs); mortgages; municipal obligations; corporateobligations; U.S. government securities; and cash.

Investors in a Fund containing any of these credit-supported Bonds shouldbe aware that many thrifts have failed in recent years and that the thriftindustry generally has experienced severe strains. New federal legislation hasresulted that imposes many new limitations on the ways banks and thrifts may dobusiness and mandates aggressive, early intervention into unhealthyinstitutions. One result of this legislation is an increased possibility ofearly payment of the principal amount of an investment in Bonds backed bycollateralized letters of credit or repurchase commitments if a Seller becomesor is deemed to be insolvent.

BONDS BACKED BY LETTERS OF CREDIT OR INSURANCE

Certain Bonds may be secured by letters of credit issued by commercialbanks or savings banks, savings and loan associations and similar thriftinstitutions or are direct obligations of banks or thrifts. The letter of creditmay be drawn upon, and the Bonds redeemed, if an issuer fails to pay amounts dueon the Bonds or, in certain cases, if the interest on the Bond becomes taxable.Letters of credit are irrevocable obligations of the issuing institutions. Theprofitability of a financial institution is largely dependent upon the creditquality of its loan portfolio which, in turn, is affected by the institution'sunderwriting criteria, concentrations within the portfolio and specific industryand general economic conditions. The operating performance of financialinstitutions is also impacted by changes in interest rates, the availabilityand cost of funds, the intensity of competition and the degree of governmentalregulation.

5

Certain Bonds may be insured or guaranteed by insurance companies listedbelow. The claims-paying ability of each of these companies, unless otherwiseindicated, was rated AAA by Standard & Poor's or another nationally recognizedrating 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 ratingagencies. In the event that the rating of an Insured Fund is reduced, theSponsors are authorized to direct the Trustee to obtain other insurance onbehalf of the Fund. The insurance policies guarantee the timely payment ofprincipal and interest on the Bonds but do not guarantee their market value orthe value of the Units. The insurance policies generally do not provide foraccelerated payments of principal or cover redemptions resulting from events oftaxability.

The following summary information relating to the listed insurancecompanies has been obtained from publicly available information:

 FINANCIAL INFORMATION AS OF JUNE 30, 1995 (IN MILLIONS OF DOLLARS) -------------------------------------- POLICYHOLDERS' NAME DATE ESTABLISHED ADMITTED ASSETS SURPLUS- ---------------------------------------------------- ----------------- --------------- ---------------------AMBAC Indemnity Corporation......................... 1970 $ 2,230 $ 805Asset Guaranty Insurance Co. (AA by S&P) 1988 173 78Capital Guaranty Insurance Company (CGIC)........... 1986 316 171Capital Markets Assurance Corp. (CAPMAC)............ 1987 221 136Connie Lee Insurance Company........................ 1987 202 108Continental Casualty Company........................ 1948 20,114 3,747Financial Guaranty Insurance Company................ 1984 2,249 978Financial Security Assurance Inc. (FSA)............. 1984 776 344Firemen's Insurance Company of Newark, NJ 1855 2,083 403Industrial Indemnity Co. (HIBI)..................... 1920 1,706 302MBIA Insurance Corporation.......................... 1986 3,623 1,165

Insurance companies are subject to extensive regulation and supervisionwhere they do business by state insurance commissioners who regulate thestandards of solvency which must be maintained, the nature of and limitations oninvestments, reports of financial condition, and requirements regarding reservesfor unearned premiums, losses and other matters. A significant portion of theassets of insurance companies are required by law to be held in reserve againstpotential claims on policies and is not available to general creditors. Althoughthe federal government does not regulate the business of insurance, federalinitiatives 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 antitrustexemption for the insurance business can significantly impact the insurancebusiness.

STATE RISK FACTORS

Investment in a single State Trust, as opposed to a Fund which invests inthe obligations of several states, may involve some additional risk due to thedecreased diversification of economic, political, financial and market risks. Abrief description of the factors which may affect the financial condition of theapplicable State for any State Trust, together with a summary of taxconsiderations relating to that State, appear in Part A (or for certain StateTrusts, Part C), of the Prospectus; further information is contained in theInformation Supplement.

LITIGATION AND LEGISLATION

The Sponsors do not know of any pending litigation as of the initial dateof deposit which might reasonably be expected to have a material adverse effectupon the Fund. At any time after the initial date of deposit, litigation may beinitiated on a variety of grounds, or legislation may be enacted, affecting theBonds in the Fund. Litigation, for example, challenging the issuance ofpollution control revenue bonds under environmental protection statutes mayaffect the validity of certain Bonds or the tax-free nature of their interest.While the outcome of litigation of this nature can never be entirelypredicted, opinions of bond counsel are delivered on the date of issuance ofeach Bond to the effect that it has been validly issued and that the interestthereon is exempt

6

from federal income tax. From time to time, proposals are introducedin Congress to, among other things, reduce federal income taxrates, impose a flat tax, exempt investment income from tax orabolish the federal income tax and replace it with another form of tax.Enactment of any such legislation could adversely affect the value of the Units.The Fund, however, cannot predict what legislation, if any, in respect of taxrates may be proposed, nor can it predict which proposals, if any, might beenacted.

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

From time to time Congress considers proposals to prospectively andretroactively tax the interest on state and local obligations, such as theBonds. The Supreme Court clarified in South Carolina v. Baker (decided on April20, 1988) that the U.S. Constitution does not prohibit Congress from passing anondiscriminatory tax on interest on state and local obligations. This type oflegislation, if enacted into law, could require investors to pay income tax oninterest from the Bonds and could adversely affect an investment in Units. SeeTaxes.

PAYMENT OF THE BONDS AND LIFE OF THE FUND

The size and composition of the Portfolio will change over time. Most ofthe Bonds are subject to redemption prior to their stated maturity datespursuant to optional refunding or sinking fund redemption provisions orotherwise. In general, optional refunding redemption provisions are more likelyto be exercised when the value of a Bond is at a premium over par than when itis at a discount from par. Some Bonds may be subject to sinking fund andextraordinary redemption provisions which may commence early in the life of theFund. Additionally, the size and composition of the Fund will be affected by thelevel 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 theirUnits and whether or not the Sponsors are able to sell the Units acquired bythem in the secondary market. As a result, Units offered in the secondary marketmay not represent the same face amount of Bonds as on the initial date ofdeposit. Factors that the Sponsors will consider in determining whether or notto sell Units acquired in the secondary market include the diversity of thePortfolio, the size of the Fund relative to its original size, the ratio of Fundexpenses to income, the Fund's current and long-term returns, the degree towhich Units may be selling at a premium over par and the cost of maintaining acurrent prospectus for the Fund. These factors may also lead the Sponsors toseek to terminate the Fund earlier than its mandatory termination date.

FUND TERMINATION

The Fund will be terminated no later than the mandatory termination datespecified in Part A of the Prospectus. It will terminate earlier upon thedisposition of the last Bond or upon the consent of investors holding 51% of theUnits. The Fund may also be terminated earlier by the Sponsors once the totalassets of the Fund have fallen below the minimum value specified in Part A ofthe Prospectus. A decision by the Sponsors to terminate the Fund early will bebased on factors similar to those considered by the Sponsors in determiningwhether to continue the sale of Units in the secondary market.

Notice of impending termination will be provided to investors andthereafter units will no longer be redeemable. On or shortly before termination,the Fund will seek to dispose of any Bonds remaining in the Portfolio althoughany Bond unable to be sold at a reasonable price may continue to be held by theTrustee in a liquidating trust pending its final disposition. A proportionalshare of the expenses associated with termination, including brokerage costs indisposing of Bonds, will be borne by investors remaining at that time. This mayhave the effect of reducing the amount of proceeds those investors are toreceive in any final distribution.

LIQUIDITY

Up to 40% of the value of the Portfolio may be attributable to guaranteesor similar security provided by corporate entities. These guarantees or othersecurity may constitute restricted securities that cannot be sold

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publicly by the Trustee without registration under the Securities Act of 1933,as amended. The Sponsors nevertheless believe that, should a sale of the Bondsguaranteed or secured be necessary in order to meet redemption of Units, theTrustee should be able to consummate a sale with institutional investors.

The principal trading market for the Bonds will generally be in theover-the-counter market and the existence of a liquid trading market for theBonds may depend on whether dealers will make a market in them. There can be noassurance that a liquid trading market will exist for any of the Bonds,especially since the Fund may be restricted under the Investment Company Act of1940 from selling Bonds to any Sponsor. The value of the Portfolio will beadversely affected if trading markets for the Bonds are limited or absent.