TAX EXEMPT SECURITIES TRUST NATIONAL TRUST 237, 497, 1999-09-23

TAX EXEMPT SECURITIES TRUST NATIONAL TRUST 237
497, 1999-09-23

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<PAGE>

Pursuant to Rule 497(b)
Registration Nos. 333-86623
333-86631
333-83477

TAX EXEMPT SECURITIES TRUST
--------------------------------------------------------------------
National Trust 237
Florida Trust 88
Maryland Trust 109

Unit Investment Trusts

SalomonSmithBarney The Tax Exempt Securities Trust is sponsored by
- ----------------------- Salomon Smith Barney Inc. and consists of three
A member of citigroup[LOGO] separate unit investment trusts: National Trust
237, Florida Trust 88 and Maryland Trust 109.
Each trust contains a fixed portfolio of long
term municipal bonds. The interest income of
these bonds is generally exempt from Federal
income tax and, for state designated trusts,
state and local income tax in the state for
which the trust is named.

This Prospectus contains three parts. Part A contains the Summary of Essential
Information including summary material relating to the trusts, the Portfolios
and the Statements of Financial Condition. Part B contains more detailed
information about the Tax Exempt Securities Trust and Part C contains specific
information about the state designated trusts. Part A may not be distributed
unless accompanied by Parts B and C.

Read and retain this Prospectus for future reference.

The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation
to the contrary is a criminal offense.

Prospectus dated September 22, 1999
<PAGE>

TAX EXEMPT SECURITIES TRUST
INVESTMENT SUMMARY AS OF SEPTEMBER 21, 1999
Use this Investment Summary to help you decide whether the portfolios
comprising the Tax Exempt Securities Trust are right for you. More detailed
information can be found later in this prospectus.

Investment Objective

Each of the trusts seeks to pay investors monthly distributions of tax exempt
interest income while conserving their capital. The Sponsor has selected a
fixed portfolio of municipal bonds intended to achieve these goals.

Investment Strategy

All of the bonds in each of the trusts are rated A or better by Standard &
Poor's, Moody's or Fitch. State designated trusts primarily contain bonds
issued by the state for which the trust is named or counties, municipalities,
authorities or political subdivisions of that state.

Taxes

Interest on all of the bonds in each of the trusts is generally exempt from
regular Federal income taxes. Interest on all of the bonds in each state trust
is generally exempt from certain state and local personal income taxes of the
state for which the trust is named. Each of the bonds in the trusts received an
opinion from bond counsel rendered on the date of issuance confirming its tax
exempt status.

Risk Factors

Holders can lose money by investing in these trusts. The value of the units and
the bonds held in the portfolio can each decline in value. An investment in
units of a trust should be made with an understanding of the following risks:

. Municipal bonds are long-term fixed rate debt obligations that decline in
value with increases in interest rates, an issuer's worsening financial
condition or a drop in bond ratings.

. The effective maturity of a long term bond may be dramatically different
than shorter term obligations. Investors will receive early returns of
principal when bonds are called or sold before they mature. Investors may
not be able to reinvest the money they receive at as high a yield or as
long a maturity.

. The municipal bonds could lose their tax-exempt status either due to
future legislation or due to the failure of a public issuer of a bond (or
private guarantor) to meet certain conditions imposed by various tax
laws.

. The default of an issuer of a municipal bond in making its payment
obligation could result in the loss of interest income and/or principal
to investors.

. Since the portfolio of each of the trusts is fixed and not managed, in
general the Sponsor can only sell bonds at a trust's termination or in
order to meet redemptions. As a result, the price at which a bond is sold
may not be the highest price it attained during the life of a trust.

The Public Offering Price

The Public Offering Price per Unit as of September 21, 1999 would have been
$987.60 for the National Trust, $985.15 for the Florida Trust and $981.36 for
the Maryland Trust. During the initial public offering period the Public
Offering Price per unit is calculated by:

. dividing the aggregate offering price of the underlying bonds in a trust
by the number of units outstanding

. adding a sales charge of 4.70% (4.932% of the aggregate offering price of
the bonds per unit)

A-2
<PAGE>

. adding a per unit amount sufficient to reimburse the Sponsor for
organizational costs

After the initial offering period the Public Offering Price per unit is
calculated by:

. dividing the aggregate bid price of the underlying bonds in a trust by
the number of units outstanding

. adding a sales charge of 5.00% (5.263% of the aggregate bid price of the
bonds per unit)

Market for Units

The Sponsor currently intends to repurchase units from holders at prices based
upon the aggregate bid price of the underlying bonds. The Sponsor is not
obligated to maintain a market and may stop doing so without prior notice for
any business reason. If the Sponsor stops repurchasing units, a unit holder may
dispose of its units by redemption. The price received from the Trustee by the
unit holder for units being redeemed is also based upon the aggregate bid price
of the underlying bonds. Units can be sold at any time to the Sponsor or the
Trustee without fee or penalty.

A-3
<PAGE>

TAX EXEMPT SECURITIES TRUST
FEE TABLE FOR NATIONAL TRUST 237
- --------------------------------------------------------------------------------
This Fee Table is intended to help you to understand the costs and expenses
that you will bear directly or indirectly. See Public Sale of Units and
Expenses and Charges. Although each Trust is a unit investment trust rather
than a mutual fund, this information is presented to permit a comparison of
fees.
- --------------------------------------------------------------------------------

Unitholder Transaction Expenses (fees paid directly from your investment)

<TABLE>
<CAPTION>
As a % of
Public Amounts
Offering per
Price Unit
---------- -------
<S> <C> <C>
Maximum Sales Charge Imposed on Purchase (as a percentage of
offering price)............................................ 4.70% $46.30
Maximum Sales Charge Imposed on Reinvested Dividends........ 0% $ 0
Reimbursement to Sponsor for Estimated Organization Costs... .254% $ 2.50

Estimated Annual Trust Operating Expenses (expenses that are deducted from
Trust assets)

<CAPTION>
Amounts
As a % of per
Net Assets Unit
---------- -------
<S> <C> <C>
Trustee's Fee............................................... 0.135% $ 1.27
Other Operating Expenses.................................... 0.036% $ .34
Maximum Portfolio Supervision, Bookkeeping and
Administrative Fees........................................ 0.027% $ .25
----- ------
Total..................................................... 0.198% $ 1.86
===== ======
</TABLE>

Example

<TABLE>
<CAPTION>
Cumulative Expenses
and Charges
Paid for Period
----------------------
1 3 5 10
Year Years Years Years
---- ----- ----- -----
<S> <C> <C> <C> <C>
An investor would pay the following expenses and
charges on a $10,000 investment, assuming the
Trust's estimated operating expense ratio of
0.198% and a 5% annual return on the investment
throughout the periods............................ $489 $531 $576 $711
</TABLE>

The example assumes reinvestment of all dividends and distributions and
utilizes a 5% annual rate of return as mandated by Securities and Exchange
Commission regulations applicable to mutual funds. 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-4
<PAGE>

TAX EXEMPT SECURITIES TRUST
FEE TABLE FOR FLORIDA TRUST 88
- --------------------------------------------------------------------------------
This Fee Table is intended to help you to understand the costs and expenses
that you will bear directly or indirectly. See Public Sale of Units and
Expenses and Charges. Although each Trust is a unit investment trust rather
than a mutual fund, this information is presented to permit a comparison of
fees.
- --------------------------------------------------------------------------------

Unitholder Transaction Expenses (fees paid directly from your investment)

<TABLE>
<CAPTION>
As a % of
Public Amounts
Offering per
Price Unit
--------- -------
<S> <C> <C>
Maximum Sales Charge Imposed on Purchase (as a percentage of
offering price)............................................. 4.70% $46.18
Maximum Sales Charge Imposed on Reinvested Dividends......... 0% $ 0
Reimbursement to Sponsor for Estimated Organization Costs.... .254% $ 2.50
</TABLE>

Estimated Annual Trust Operating Expenses (expenses that are deducted from
Trust assets)

<TABLE>
<CAPTION>
Amounts
As a % of per
Net Assets Unit
---------- -------
<S> <C> <C>
Trustee's Fee................................................ 0.134% $1.26
Other Operating Expenses..................................... 0.041% $ .38
Maximum Portfolio Supervision, Bookkeeping and
Administrative Fees......................................... 0.027% $ .25
----- -----
Total...................................................... 0.202% $1.89
===== =====
</TABLE>

Example

<TABLE>
<CAPTION>
Cumulative Expenses
and Charges
Paid for Period
----------------------
1 3 5 10
Year Years Years Years
---- ----- ----- -----
<S> <C> <C> <C> <C>
An investor would pay the following expenses and charges
on a $10,000 investment, assuming the Trust's estimated
operating expense ratio of 0.202% and a 5% annual return
on the investment throughout the periods................ $490 $532 $578 $716
</TABLE>

A-5
<PAGE>

TAX EXEMPT SECURITIES TRUST
FEE TABLE FOR MARYLAND TRUST 109
- --------------------------------------------------------------------------------
This Fee Table is intended to help you to understand the costs and expenses
that you will bear directly or indirectly. See Public Sale of Units and
Expenses and Charges. Although each Trust is a unit investment trust rather
than a mutual fund, this information is presented to permit a comparison of
fees.
- --------------------------------------------------------------------------------

Unitholder Transaction Expenses (fees paid directly from your investment)

<TABLE>
<CAPTION>
As a % of
Public Amounts
Offering per
Price Unit
--------- -------
<S> <C> <C>
Maximum Sales Charge Imposed on Purchase (as a percentage of
offering price)............................................. 4.70% $46.01
Maximum Sales Charge Imposed on Reinvested Dividends......... 0% $ 0
Reimbursement to Sponsor for Estimated Organization Costs.... .255% $ 2.50
</TABLE>

Estimated Annual Trust Operating Expenses (expenses that are deducted from
Trust assets)

<TABLE>
<CAPTION>
Amounts
As a % of per
Net Assets Unit
---------- -------
<S> <C> <C>
Trustee's Fee................................................ 0.133% $1.24
Other Operating Expenses..................................... 0.036% $ .34
Maximum Portfolio Supervision, Bookkeeping and
Administrative Fees......................................... 0.027% $ .25
----- -----
Total...................................................... 0.196% $1.83
===== =====
</TABLE>

Example

<TABLE>
<CAPTION>
Cumulative Expenses
and Charges
Paid for Period
----------------------
1 3 5 10
Year Years Years Years
---- ----- ----- -----
<S> <C> <C> <C> <C>
An investor would pay the following expenses and
charges on a $10,000 investment, assuming the
Trust's estimated operating expense ratio of 0.196%
and a 5% annual return on the investment throughout
the periods......................................... $489 $530 $575 $708
</TABLE>

A-6
<PAGE>

TAX EXEMPT SECURITIES TRUST
SUMMARY OF ESSENTIAL INFORMATION
AS OF SEPTEMBER 21, 1999 +
Sponsor

Salomon Smith Barney Inc.

Trustee

The Chase Manhattan Bank

Evaluator

Kenny S & P Evaluation Services, a business unit of J.J. Kenny Company, Inc.

Date of Deposit and of Trust Agreement

September 21, 1999

Mandatory Termination Date*

Each Trust will terminate on the date of maturity, redemption, sale or other
disposition of the last Bond held in the Trust.

Record Dates

The first day of each month, commencing October 1, 1999

Distribution Dates

The fifteenth day of each month,** commencing October 15, 1999

Evaluation Time

As of 1:00 P.M. on the Date of Deposit. Thereafter, as of 4:00 P.M. New York
Time.

Evaluator's Fee

The Evaluator will receive a fee of $.29 per bond per evaluation.

Sponsor's Annual Portfolio Supervision Fee***

Maximum of $.25 per $1,000 face amount of the underlying Bonds.
- ------------
+ The Date of Deposit. The Date of Deposit is the date on which the Trust
Agreement was signed and the deposit with the Trustee was made.
* The actual date of termination of each Trust may be considerably earlier
(see Part B, "Amendment and Termination of the Trust Agreement--
Termination").
** The first monthly income distribution of $1.49 for the National Trust, $1.44
for the Florida Trust and $1.40 for the Maryland Trust, will be made on
October 15, 1999.
*** In addition to this amount, the Sponsor may be reimbursed for bookkeeping
and other administrative expenses not exceeding its actual costs.

A-7
<PAGE>

TAX EXEMPT SECURITIES TRUST
SUMMARY OF ESSENTIAL INFORMATION
AS OF SEPTEMBER 21, 1999
<TABLE>
<CAPTION>
National Florida Maryland
Trust 237 Trust 88 Trust 109
---------- ---------- ----------
<S> <C> <C> <C>
Principal Amount of Bonds in Trust........ $7,000,000 $2,000,000 $2,000,000
Number of Units........................... 7,000 2,000 2,000
Principal Amount of Bonds in Trust per
Unit..................................... $ 1,000 $ 1,000 $ 1,000
Fractional Undivided Interest in Trust per
Unit..................................... 1/7,000 1/2,000 1/2,000
Minimum Value of Trust:
Trust Agreement may be Terminated if
Principal Amount is less than........... $3,500,000 $1,000,000 $1,000,000
Calculation of Public Offering Price per
Unit*:
Aggregate Offering Price of Bonds in
Trust................................... $6,571,617 $1,872,944 $1,865,695
========== ========== ==========
Divided by Number of Units............... $ 938.80 $ 936.47 $ 932.85
Plus: Sales Charge (4.70% of the Public
Offering Price)......................... $ 46.30 $ 46.18 $ 46.01
---------- ---------- ----------
Public Offering Price per Unit........... $ 985.10 $ 982.65 $ 978.86
Plus: Estimated Organization Expenses.... $ 2.50 $ 2.50 $ 2.50
Plus Accrued Interest*................... $ .89 $ .86 $ .84
---------- ---------- ----------
Total.................................... $ 988.49 $ 986.01 $ 982.20
========== ========== ==========
Sponsor's Initial Repurchase Price per
Unit (per Unit Offering Price of
Bonds)**................................. $ 938.80 $ 936.47 $ 932.85
Approximate Redemption Price per Unit (per
Unit Bid Price of Bonds)**............... $ 934.80 $ 932.47 $ 928.85
---------- ---------- ----------
Difference Between per Unit Offering and
Bid Prices of Bonds...................... $ 4.00 $ 4.00 $ 4.00
========== ========== ==========
Calculation of Estimated Net Annual Income
per Unit:
Estimated Annual Income per Unit......... $ 55.50 $ 53.73 $ 52.35
Less: Estimated Trustee's Annual Fee***.. $ 1.27 $ 1.26 $ 1.24
Less: Other Estimated Annual Expenses.... $ .59 $ .63 $ .59
---------- ---------- ----------
Estimated Net Annual Income per Unit..... $ 53.64 $ 51.84 $ 50.52
========== ========== ==========
Calculation of Monthly Income Distribution
per Unit:
Estimated Net Annual Income per Unit..... $ 53.64 $ 51.84 $ 50.52
Divided by 12............................ $ 4.47 $ 4.32 $ 4.21
Accrued interest from the day after the
Date of Deposit to the first record
date**................................... $ 1.49 $ 1.44 $ 1.40
First distribution per unit............... $ 1.49 $ 1.44 $ 1.40
Daily Rate (360-day basis) of Income
Accrual per Unit......................... $ .1490 $ .1440 $ .1403
Estimated Current Return based on Public
Offering Price****....................... 5.43% 5.26% 5.15%
Estimated Long-Term Return****............ 5.51% 5.38% 5.21%
</TABLE>
- --------
* Accrued interest will commence on the day after the Date of Deposit through
the date of settlement (normally three business days after purchase).
** This figure will also include accrued interest from the day after the Date
of Deposit to the date of settlement (normally three business days after
purchase) and the net cash on hand in the relevant Trust, accrued expenses
of such Trust and amounts distributable to holders of record of Units of
such Trust as of a date prior to the computation date, on a pro rata basis.
As of the close of the initial offering period, the Redemption Price per
Unit and the Sponsor's Repurchase Price per Unit for each Trust will be
reduced to reflect the payment of the per Unit organization costs.
*** Per $1,000 principal amount of Bonds, plus expenses.
**** The Estimated Current Return is calculated by dividing the Estimated Net
Annual Interest Income per Unit by the Public Offering Price per Unit.
The Estimated Net Annual Interest Income per Unit will vary with changes
in fees and expenses of the Trustee and the Evaluator and with the
principal prepayment, redemption, maturity, exchange or sale of Bonds
while the Public Offering Price will vary with changes in the offering
price of the underlying Bonds; therefore, there is no assurance that the
present Estimated Current Return indicated above will be realized in the
future. The Estimated Long-Term Return is calculated using a formula
which (1) takes into consideration, and factors in the relative
weightings of, the market values, yields (which takes into account the
amortization of premiums and the accretion of discounts) and estimated
retirements of all of the Bonds in the Trust and (2) takes into account
the expenses and sales charge associated with each Unit. Since the market
values and estimated retirements of the Bonds and the expenses of the
Trust will change, there is no assurance that the present Estimated Long-
Term Return as indicated above will be realized in the future. The
Estimated Current Return and Estimated Long-Term Return are expected to
differ because the calculation of the Estimated Long-Term Return reflects
the estimated date and amount of principal returned while the Estimated
Current Return calculations include only Net Annual Interest Income and
Public Offering Price as of the Date of Deposit.

A-8
<PAGE>

TAX EXEMPT SECURITIES TRUST
PORTFOLIO SUMMARY AS OF SEPTEMBER 21, 1999
<TABLE>
<CAPTION>
National Florida Maryland
Trust 237 Trust 88 Trust 109
------------ ------------ ------------
<S> <C> <C> <C>
Number of municipal bonds (from 13
states and the District of Columbia
for the National Trust; from Florida
for the Florida Trust; and from
Maryland and the Commonwealth of
Puerto Rico for the Maryland Trust)... 20 9 10
Number of bonds issued with "original
issue discount"....................... 16 8 9
Average life to maturity of the bonds
in the Trust (in years)............... 29.4 26.6 30.3
<CAPTION>
Percentages+ Percentages+ Percentages+
------------ ------------ ------------
<S> <C> <C> <C>
Percentage of bonds acquired from the
Sponsor (as sole underwriter, member
of underwriting syndicate or otherwise
from its own organization)............ 8.6% 41.8% 0.0%
General obligation bonds backed by the
taxing power of state issuer.......... 4.4% 0.0% 0.0%
General obligation bonds backed by the
taxing power of Puerto Rico issuer.... 0.0% 0.0% 4.8%
Bonds not supported by the issuer's
power to levy tax..................... 95.6% 100.0% 95.2%
The bonds derived their income from the
following primary sources:
. capital improvement facilities....... 0.0% 4.6% 0.0%
. educational facilities............... 17.8% 25.2%* 12.0%
. hospital and health care facilities.. 29.0%* 45.6%* 62.8%*
. housing facilities................... 24.3% 0.0% 0.0%
. pollution control facilities......... 2.2% 0.0% 0.0%
. power facilities..................... 5.5% 0.0% 0.0%
. recreation facilities................ 0.0% 13.6% 0.0%
. transportation facilities............ 3.3% 11.0% 5.2%
. water and sewer facilities........... 7.6% 0.0% 15.2%
. other................................ 5.9% 0.0% 0.0%
The bonds in the trust are rated as
follows:
. Standard & Poor's
AAA.................................. 15.3% 42.4% 52.7%
AA................................... 35.8% 17.2% 13.3%
A.................................... 37.5% 40.4% 22.0%
---- ----- ----
Total.............................. 88.6% 100.0% 88.0%
==== ===== ====
. Moody's
Aaa.................................. 7.6% 0.0% 0.0%
Aa................................... 3.8% 0.0% 0.0%
A.................................... 0.0% 0.0% 12.0%
---- ----- ----
Total.............................. 11.4% 0.0% 12.0%
==== ===== ====
The following insurance companies have
insured the bonds in the trust as to
timely payment of principal and
interest:
. ACA.................................. 14.6% 0.0% 0.0%
. AMBAC................................ 3.3% 4.6% 0.0%
. Asset Guaranty....................... 19.2% 12.0% 13.3%
. FGIC................................. 4.4% 0.0% 15.2%
. FSA.................................. 0.0% 13.3% 32.6%
. MBIA................................. 0.0% 24.6% 4.9%
---- ----- ----
Total.............................. 41.5% 54.5% 66.0%
==== ===== ====
</TABLE>
- ------------
+ Percentages based on the aggregate offering price of the bonds in the trust.
* The trust is considered to be "concentrated" in a particular category when
bonds of that type make up 25% or more of the portfolio.

A-9
<PAGE>

UNDERWRITING

The names and addresses of the Underwriters and the number of Units to be
sold by them are as follows:

<TABLE>
<CAPTION>
Units
----------------------------
National Florida Maryland
Trust 237 Trust 88 Trust 109
--------- -------- ---------
<S> <C> <C> <C>
Salomon Smith Barney Inc. ......................... 6,150 1,900 1,900
388 Greenwich Street
New York, New York 10013
Gruntal & Co. Incorporated......................... 250 100 100
14 Wall Street
New York, New York 10005
Pershing/division of DLJ........................... 250 -- --
1 Pershing Plaza
Jersey City, New Jersey 07399
William R. Hough................................... 250 -- --
100 Second Avenue
Suite 800
St. Petersburgh, Florida 33701
CIBC Oppenheimer Corp. ............................ 100 -- --
Oppenheimer Tower
One World Financial Center
New York, New York 10281
----- ----- -----
Total.............................................. 7,000 2,000 2,000
===== ===== =====
</TABLE>

A-10
<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Sponsor, Trustee and Unit Holders of
Tax Exempt Securities Trust, National Trust 237, Florida Trust 88 and Maryland
Trust 109:

We have audited the accompanying statements of financial condition, including
the portfolios of securities, of each of the respective trusts constituting Tax
Exempt Securities Trust, National Trust 237, Florida Trust 88 and Maryland
Trust 109 as of September 21, 1999. These financial statements are the
responsibility of the Trustee (see note 6 to the statements of financial
condition). 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 statements of financial condition are
free of material misstatement. An audit of a statement of financial condition
includes examining, on a test basis, evidence supporting the amounts and
disclosures in that statement of financial condition. Our procedures included
confirmation with the Trustee of an irrevocable letter of credit deposited on
September 21, 1999, for the purchase of securities, as shown in the statements
of financial condition and portfolios of securities. An audit of a statement of
financial condition also includes assessing the accounting principles used and
significant estimates made by the Trustee, as well as evaluating the overall
statement of financial condition presentation. We believe that our audits of
the statements of financial condition provide a reasonable basis for our
opinion.

In our opinion, the statements of financial condition referred to above
present fairly, in all material respects, the financial position of each of the
respective trusts constituting Tax Exempt Securities Trust, National Trust 237,
Florida Trust 88 and Maryland Trust 109 as of September 21, 1999, in conformity
with generally accepted accounting principles.

/s/ KPMG LLP
New York, New York
September 21, 1999

A-11
<PAGE>

TAX EXEMPT SECURITIES TRUST
STATEMENTS OF FINANCIAL CONDITION
AS OF DATE OF DEPOSIT, SEPTEMBER 21, 1999

<TABLE>
<CAPTION>
TRUST PROPERTY
--------------------------------
National Florida Maryland
Trust 237 Trust 88 Trust 109
---------- ---------- ----------
<S> <C> <C> <C>
Investment in Tax-Exempt Securities:
Bonds represented by purchase contracts
backed by letter of credit (1)............. $6,571,618 $1,872,944 $1,865,696
Accrued interest through the Date of Deposit
on underlying bonds (1)(2)................... 77,319 23,060 18,630
Cash (3)...................................... 17,500 5,000 5,000
---------- ---------- ----------
Total..................................... $6,666,437 $1,901,004 $1,889,326
========== ========== ==========

<CAPTION>
LIABILITIES AND INTEREST OF
UNIT HOLDERS
--------------------------------
<S> <C> <C> <C>
Liabilities:
Accrued interest through the Date of Deposit
on underlying bonds (1)(2)................. $ 77,319 $ 23,060 $ 18,630
Reimbursement to Sponsor for Organization
Costs (3).................................. 17,500 5,000 5,000
---------- ---------- ----------
94,819 28,060 23,630
---------- ---------- ----------
Interest of Unit Holders:
Units of fractional undivided interest
outstanding (National Trust 237: 7,000;
Florida Trust 88: 2,000; Maryland Trust
109: 2,000) Cost to investors (4).......... 6,913,200 1,970,300 1,962,720
Less--Gross underwriting commission (5).... 324,082 92,356 92,024
Less--Organization Costs (3)............... 17,500 5,000 5,000
---------- ---------- ----------
Net amount applicable to investors......... 6,571,618 1,872,944 1,865,696
---------- ---------- ----------
Total..................................... $6,666,437 $1,901,004 $1,889,326
========== ========== ==========
</TABLE>
- ------------
(1) Aggregate cost to each Trust of the Bonds listed under the Portfolios of
Securities on the immediately following pages is based on offering prices
as of 1:00 P.M. on September 15, 1999, the Date of Deposit, determined by
the Evaluator on the basis set forth in Part B, "Public Offering--Offering
Price." Svenska Handelsbanken issued an irrevocable letter of credit in
the aggregate principal amount of $12,000,000 which was deposited with the
Trustee for the purchase of $11,000,000 principal amount of Bonds in all
of the Trusts, pursuant to contracts to purchase such Bonds at the
aggregate cost of $10,310,256 plus $119,009 representing accrued interest
thereon through the Date of Deposit.
(2) The Indenture provides that the Trustee will advance amounts equal to the
accrued interest on the underlying securities of each Trust (net of
accrued expenses) through the Date of Deposit and that such amounts will
be distributed to the Sponsor as Unit holder of record on such date, as
set forth in Part B, "Rights of Unit Holders--Distribution of Interest and
Principal."
(3) A portion of the Public Offering Price consists of cash in an amount
sufficient to reimburse the Sponsor for the per Unit portion of all or a
part of the organization costs of establishing a Trust. These costs have
been estimated at $2.50 per Unit for each of the Trusts. A payment will be
made as of the close of the initial public offering period to an account
maintained by the Trustee from which the obligation of the investors to
the Sponsor will be satisfied. To the extent that actual organization
expenses are less than the estimated amount, only the actual organization
expenses will be deducted from the assets of a Trust.
(4) Aggregate public offering price (exclusive of interest) computed on 7,000
Units of the National Trust, 2,000 Units of the Florida Trust and 2,000
Units of the Maryland Trust, on the basis set forth in Part B, "Public
Offering--Offering Price."
(5) Sales charge of 4.70% computed on 7,000 Units of the National Trust, 2,000
Units of the Florida Trust and 2,000 Units of the Maryland Trust on the
basis set forth in Part B, "Public Offering--Offering Price."
(6) The Trustee has custody of and responsibility for all accounting and
financial books, records, financial statements and related data of each
Trust and is responsible for establishing and maintaining a system of
internal controls directly related to, and designed to provide reasonable
assurance as to the integrity and reliability of, financial reporting of
each Trust. The Trustee is also responsible for all estimates (exclusive
of estimate of organization expense) and accruals reflected in each
Trust's financial statements. The Evaluator determines the price for each
underlying bond included in each Trust's Portfolio of Securities on the
basis set forth in Part B, "Public Offering--Offering Price."

A-12
<PAGE>

TAX EXEMPT SECURITIES TRUST
NATIONAL TRUST 237--PORTFOLIO OF SECURITIES
AS OF SEPTEMBER 21, 1999

2. 150,000 City of Valdez, Alaska, AA+ 12/1/03 @ 102 146,836 5.800 8,475
Marine Terminal Revenue
Refunding Bonds, BP
Pipelines Inc. Project,
5.65% Due 12/1/2028

3. 250,000 Highlands County, A- 11/15/08 @ 101 221,185 6.100 13,125
Florida, Health SF 11/15/21 @ 100
Facilities Authority,
Hospital Revenue Bonds,
Adventist Health
System/Sunbelt Obligated
Group, 5.25% Due
11/15/2028

4. 250,000 Illinois Development A- 11/15/09 @ 101 224,668 6.250 13,750
Finance Authority, SF 11/15/25 @ 100
Hospital Revenue Bonds,
Adventist Health
System/Sunbelt Obligated
Group, 5.50% Due
11/15/2029

5. 325,000 Cook County, Illinois, AAA 11/15/09 @ 101 288,613 5.800 16,250
Capital Improvement SF 11/15/24 @ 100
General Obligation
Bonds, FGIC Insured,
5.00% Due 11/15/2028

6. 375,000 Indiana Bond Bank, A+ 2/1/07 @ 101 385,035 5.750 22,969
Special Program Bonds, SF 2/1/18 @ 100
6.125% Due 2/1/2023

7. 250,000 Massachusetts AA 8/1/09 @ 102 244,743 5.900 14,375
Development Finance SF 8/1/20 @ 100
Agency Revenue Bonds,
Applewild School Issue,
Asset Guaranty Insured,
5.75% Due 8/1/2029
</TABLE>

A-13
<PAGE>

TAX EXEMPT SECURITIES TRUST
NATIONAL TRUST 237--PORTFOLIO OF SECURITIES
AS OF SEPTEMBER 21, 1999

<TABLE>
<CAPTION>
Cost of Yield on Annual
Securities Represented Redemption Securities Date of Interest
Aggregate by Ratings Provisions to Trust Deposit Income
Principal Purchase Contracts (1) (2) (3)(4) (4) to Trust
--------- ------------------------ ------- ---------------- ---------- -------- --------
<C> <C> <S> <C> <C> <C> <C> <C>
8. $250,000 Massachusetts Turnpike AAA 1/1/09 @ 101 $215,727 5.900% $12,500
Authority, Metropolitan SF 1/1/35 @ 100
Highway System Revenue
Bonds, AMBAC Insured,
5.00% Due 1/1/2039
9. 250,000 City of Burnsville, Aaa* 9/20/09 @ 102 249,750 6.007 15,000
Minnesota, Multifamily SF 3/20/30 @ 100
Housing Revenue
Refunding Bonds, GNMA
Collateralized Mortgage
Loan, Coventry Court
Apartments Project,
6.00% Due 9/20/2034

10. 250,000 City of Eagan, Aaa* 9/20/09 @ 102 249,750 6.007 15,000
Minnesota, Multifamily SF 3/20/30 @ 100
Housing Revenue
Refunding Bonds, GNMA
Collateralized Mortgage
Loan, Forest Ridge
Apartments Project,
6.00% Due 9/20/2034

11. 200,000 North Carolina Medical AA 10/1/08 @ 102 188,802 5.900 11,000
Care Commission, Health SF 10/1/20 @ 100
Care Facilities Revenue
Bonds, Scotland Memorial
Hospital Project, 5.50%
Due 10/1/2029

12. 375,000 North Carolina Eastern A 1/1/09 @ 102 362,640 6.000 21,562
Municipal Power Agency, SF 1/1/23 @ 100
Power System Revenue
Refunding Bonds, ACA
Insured, 5.75% Due
1/1/2026

13. 540,000 Pennsylvania Higher AA 7/15/08 @ 100 442,708 5.900 24,975
Educational Facilities SF 7/15/22 @ 100
Authority, Commonwealth
of Pennsylvania, The
Trustees of the
University of
Pennsylvania Revenue
Bonds, 4.625% Due
7/15/2030

</TABLE>

A-14
<PAGE>

TAX EXEMPT SECURITIES TRUST
NATIONAL TRUST 237--PORTFOLIO OF SECURITIES
AS OF SEPTEMBER 21, 1999

<TABLE>
<CAPTION>
Cost of Yield on Annual
Securities Represented Redemption Securities Date of Interest
Aggregate by Ratings Provisions to Trust Deposit Income
Principal Purchase Contracts (1) (2) (3)(4) (4) to Trust
--------- ------------------------ ------- ----------------- ---------- -------- --------
<C> <C> <S> <C> <C> <C> <C> <C>
14. $250,000 Montgomery County, A- 11/15/08 @ 101 $219,650 6.150% $13,125
Pennsylvania, Industrial SF 11/15/23 @ 100
Development Authority,
Retirement Community
Revenue Bonds, Acts
Retirement Life
Communities, Inc.,
Obligated Group, 5.25%
Due 11/15/2028

15. 500,000 Richland County, South AA 7/1/09 @ 102 482,695 6.000 28,750
Carolina, Educational SF 7/1/20 @ 100
Facilities Revenue
Bonds, Benedict College
Project, Asset Guaranty
Insured, 5.75% Due
7/1/2029

16. 500,000 Newport News AAA 8/20/07 @ 102 499,500 5.856 29,250
Redevelopment and SF 6/20/07 @ 100
Housing Authority,
Virginia, Revenue
Refunding Bonds, GNMA
Mortgage Backed Security
Financing, 5.85% Due
12/20/2030

17. 350,000 Washington State Housing AA 7/1/09 @ 101 347,557 6.050 21,000
Finance Commission, SF 7/1/20 @ 100
Housing Revenue Bonds,
The Kline Galland Center
Project, Asset Guaranty
Insured, 6.00% Due
7/1/2029

18. 250,000 Washington State Housing Aa3* 1/1/10 @ 100 251,858 6.100 15,500
Finance Commission, SF 1/1/16 @ 100
Nonprofit Revenue Bonds,
South Sound YMCA
Project, 6.20% Due
1/1/2024

19. 500,000 Wisconsin Health and A 5/15/09 @ 101 454,895 6.300 28,125
Educational Facilities SF 5/15/21 @ 100
Authority Revenue Bonds,
Kenosha Hospital and
Medical Center Project,
5.625% Due 5/15/2029

</TABLE>

A-15
<PAGE>

TAX EXEMPT SECURITIES TRUST
NATIONAL TRUST 237--PORTFOLIO OF SECURITIES
AS OF SEPTEMBER 21, 1999

<TABLE>
<CAPTION>
Cost of Yield on Annual
Securities Represented Redemption Securities Date of Interest
Aggregate by Ratings Provisions to Trust Deposit Income
Principal Purchase Contracts (1) (2) (3)(4) (4) to Trust
---------- ------------------------ ------- --------------- ---------- -------- --------
<C> <C> <S> <C> <C> <C> <C> <C>
20. $ 600,000 District of Columbia A 7/1/09 @ 102 $ 596,106 6.050% $ 36,000
Revenue Bonds, American SF 7/1/20 @ 100
Association of Homes and
Services for the Aging,
Inc., Headquarters
Issue, ACA Insured,
6.00% Due 7/1/2024
---------- ---------- --------
$7,000,000 $6,571,618 $388,518
========== ========== ========
</TABLE>

The Notes following the Portfolio are an integral part of each Portfolio of
Securities.

A-16
<PAGE>

TAX EXEMPT SECURITIES TRUST
FLORIDA TRUST 88--PORTFOLIO OF SECURITIES
AS OF SEPTEMBER 21, 1999

1. $ 250,000 Broward County, Florida, AAA 9/1/06 @ 101 $ 254,773 5.450% $ 14,375
Professional Sports SF 9/1/17 @ 100
Facilities Tax and
Revenue Bonds, Broward
County Civic Arena
Project, MBIA Insured,
5.75% Due 9/1/2021
2. 250,000 City of Gulf Breeze, AAA 6/1/08 @ 100 205,245 5.800 11,250
Florida, Capital Funding SF 10/1/23 @ 100
Revenue Bonds, MBIA
Insured, 4.50% Due
10/1/2027
3. 250,000 Highlands County, A- 11/15/08 @ 101 221,185 6.100 13,125
Florida, Health SF 11/15/21 @ 100
Facilities Authority,
Hospital Revenue Bonds,
Adventist Health
System/Sunbelt Obligated
Group, 5.25% Due
11/15/2028
4. 250,000 Hillsborough County, AA 12/1/08 @ 102 224,140 5.800 12,500
Florida, Educational SF 12/1/19 @ 100
Facilities Authority
Revenue Bonds,
University of Tampa
Project, Asset Guaranty
Insured, 5.00% Due
12/1/2023
5. 105,000 Jacksonville, Florida AA+ 8/15/09 @ 101 98,692 5.800 5,644
Health Facilities SF 8/15/24 @ 100
Authority, Hospital
Revenue Bonds, Charity
Obligated Group, 5.375%
Due 8/15/2029
6. 295,000 Orange County, Florida, A- 10/1/09 @ 101 294,705 6.007 17,700
Health Facilities SF 10/1/15 @ 100
Authority, Hospital
Revenue Bonds, Orlando
Regional Healthcare
System, 6.00% Due
10/1/2026
</TABLE>

A-17
<PAGE>

TAX EXEMPT SECURITIES TRUST
FLORIDA TRUST 88--PORTFOLIO OF SECURITIES
AS OF SEPTEMBER 21, 1999

<TABLE>
<CAPTION>
Cost of Yield on Annual
Redemption Securities Date of Interest
Aggregate Securities Represented Ratings Provisions to Trust Deposit Income
Principal by Purchase Contracts (1) (2) (3)(4) (4) to Trust
--------- ------------------------ ------- --------------- ---------- -------- --------
<C> <C> <S> <C> <C> <C> <C> <C>
7. $ 100,000 Orange County, Florida, AAA 10/1/09 @ 100 $ 86,222 5.800% $ 4,750
Tourist Development Tax
Refunding Revenue Bonds,
AMBAC Insured, 4.75% Due
10/1/2024
8. 250,000 City of Tampa, Florida, A 7/1/09 @ 101 239,677 6.050 14,375
Capital Improvement SF 7/1/20 @ 100
Hospital Revenue Bonds,
H. Lee Moffitt Cancer
Center Project, 5.75%
Due 7/1/2029
9. 250,000 School Board of Volusia AAA 8/1/09 @ 101 248,305 5.550 13,750
County, Florida, SF 8/1/20 @ 100
Certificates of
Participation, Master
Lease Program, FSA
Insured, 5.50% Due
8/1/2024
---------- ---------- --------
$2,000,000 $1,872,944 $107,469
========== ========== ========
</TABLE>

The Notes following the Portfolios are an integral part of each Portfolio of
Securities.

A-18
<PAGE>

TAX EXEMPT SECURITIES TRUST
MARYLAND TRUST 109--PORTFOLIO OF SECURITIES
AS OF SEPTEMBER 21, 1999

<TABLE>
<CAPTION>
Cost of Yield on Annual
Redemption Securities Date of Interest
Aggregate Securities Represented by Purchase Ratings Provisions to Trust Deposit Income
Principal Contracts (1) (2) (3)(4) (4) to Trust
---------- ---------------------------------- ------- ---------------- ---------- -------- --------
<C> <C> <S> <C> <C> <C> <C> <C>
1. $ 250,000 Maryland Health and AAA 7/1/08 @ 101 $ 231,420 5.650% $ 12,812
Higher Educational SF 7/1/19 @ 100
Facilities Authority
Revenue Bonds, Anne
Arundel Medical Center
Issue, FSA Insured,
5.125% Due 7/1/2028
2. 250,000 Maryland Health and A2* 7/1/08 @ 102 223,748 5.750 12,500
Higher Educational SF 7/1/20 @ 100
Facilities Authority
Revenue Bonds, Calvert
Memorial Hospital Issue,
5.00% Due 7/1/2028
3. 100,000 Maryland Health and AAA 7/1/08 @ 101 90,935 5.600 5,000
Higher Educational SF 7/1/30 @ 100
Facilities Authority
Revenue Bonds, Johns
Hopkins Medicine, Howard
County General Hospital
Acquisition Issue, MBIA
Insured, 5.00% Due
7/1/2033
4. 250,000 Maryland Health and A 10/1/09 @ 101 224,325 5.650 12,500
Higher Educational SF 10/1/30 @ 100
Facilities Authority
Revenue Bonds, Loyola
College Issue, 5.00% Due
10/1/2039
5. 130,000 Maryland Health and AAA -- 120,882 5.700 6,825
Higher Educational SF 8/15/29 @ 100
Facilities Authority
Revenue Bonds,
Medlantic/Helix Issue,
FSA Insured, 5.25% Due
8/15/2038
6. 310,000 Mayor and City Council AAA 7/1/08 @ 101 283,535 5.600 15,500
of Baltimore, Maryland, SF 7/1/19 @ 100
Project and Refunding
Revenue Bonds, Water
Projects, FGIC Insured,
5.00% Due 7/1/2028
</TABLE>

A-19
<PAGE>

TAX EXEMPT SECURITIES TRUST
MARYLAND TRUST 109--PORTFOLIO OF SECURITIES
AS OF SEPTEMBER 21, 1999

<TABLE>
<CAPTION>
Cost of Yield on Annual
Redemption Securities Date of Interest
Aggregate Securities Represented by Purchase Ratings Provisions to Trust Deposit Income
Principal Contracts (1) (2) (3)(4) (4) to Trust
---------- ---------------------------------- ------- --------------- ---------- -------- --------
<C> <C> <S> <C> <C> <C> <C> <C>
7. $ 250,000 Carroll County, AA 1/1/09 @ 101 $ 247,480 5.700% $ 14,063
Maryland, Revenue Bonds, SF 1/1/20 @ 100
EMA Obligated Group
Issue, Fairhaven and
Copper Ridge, Asset
Guaranty Insured, 5.625%
Due 1/1/2025
8. 250,000 Gaithersburg, Maryland, AAA 9/1/05 @ 102 256,330 5.600 15,000
Hospital Facilities SF 9/1/16 @ 100
Revenue Refunding and
Improvement Bonds, Shady
Grove Adventist
Hospital, FSA Insured,
6.00% Due 9/1/2021
9. 100,000 Commonwealth of Puerto A 7/1/08 @ 101 89,806 5.750 5,000
Rico, Public Improvement SF 7/1/24 @ 100
Refunding Bonds, General
Obligation Bonds, 5.00%
Due 7/1/2026
10. 110,000 Puerto Rico Highway and A 7/1/08 @ 101 97,235 5.750 5,500
Transportation SF 7/1/29 @ 100
Authority,
Transportation Revenue
Bonds, 5.00% Due
7/1/2038
---------- ---------- --------
$2,000,000 $1,865,696 $104,700
========== ========== ========

</TABLE>

The Notes following the Portfolios are an integral part of each Portfolio of
Securities.

A-20
<PAGE>

NOTES TO PORTFOLIOS OF SECURITIES

(1) For a description of the meaning of the applicable rating symbols as
published by Standard & Poor's Ratings Group, a division of McGraw-Hill,
Inc., Moody's Investors Service(*) and Fitch Investor Services, Inc.(**),
see Part B, "Bond Ratings."

(2) There is shown under this heading the year in which each issue of Bonds
initially is redeemable and the redemption price for that year; unless
otherwise indicated, each issue continues to be redeemable at declining
prices thereafter, but not below par. "SF" indicates a sinking fund has
been or will be established with respect to an issue of Bonds. The prices
at which Bonds may be redeemed or called prior to maturity may or may not
include a premium and, in certain cases, may be less than the cost of the
Bonds to a Trust. Certain Bonds in a Portfolio, including Bonds listed as
not being subject to redemption provisions, may be redeemed in whole or in
part other than by operation of the stated redemption or sinking fund
provision under certain unusual or extraordinary circumstances specified in
the instruments setting forth the terms and provisions of such Bonds. For
example, see discussion of obligations of housing authorities in Part B,
"Tax Exempt Securities Trust--Portfolio."

(3) Contracts to purchase Bonds were entered into during the period July 30,
1999, through September 21, 1999, with the settlement date on September 24,
1999. The Profit to the Sponsor on Deposit totals $52,421 for the National
Trust, $17,968 for the Florida Trust and $18,385 for the Maryland Trust.

(4) Evaluation of the Bonds by the Evaluator is made on the basis of current
offering prices for the Bonds. The current offering prices of the Bonds are
greater than the current bid prices of the Bonds. The Redemption Price per
Unit and the public offering price of the Units in the secondary market are
determined on the basis of the current bid prices of the Bonds. (See Part
B, "Public Offering--Offering Price" and "Rights of Unit Holders--
Redemption of Units.") Yield on Date of Deposit was computed on the basis
of offering prices on the date of deposit. On September 21, 1999, the
aggregate bid price of the Bonds was $6,543,617 for the National Trust,
$1,864,944 for the Florida Trust, and $1,857,695 for the Maryland Trust.

A-21
<PAGE>

PROSPECTUS--Part B:
- --------------------------------------------------------------------------------

Note that Part B of this Prospectus may not be distributed unless accompanied
by Part A.
- --------------------------------------------------------------------------------
TAX EXEMPT SECURITIES TRUST

The Trusts

For over 20 years, Tax Exempt Securities Trust has specialized in quality
municipal bond investments designed to meet a variety of investment objectives
and tax situations. Tax Exempt Securities Trust is a convenient and cost
effective alternative to individual bond purchases. Each Trust is one of a
series of similar but separate unit investment trusts. A unit investment trust
provides many of the same benefits as individual bond purchases. However, while
receiving many of the benefits, the holder of Units (the "Holder") avoids the
complexity of analyzing, selecting and monitoring a multi-bond portfolio. Each
Trust is also created under the laws of the State of New York by a Trust
Indenture and Agreement and related Reference Trust Agreement dated the Date of
Deposit (collectively, the "Trust Agreement"), of Salomon Smith Barney Inc., as
Sponsor, The Chase Manhattan Bank, as Trustee, and Kenny S&P Evaluation
Services, a business unit of J.J. Kenny Company, Inc., as Evaluator. Each Trust
containing Bonds of a State for which such Trust is named (a "State Trust") and
each National Trust is referred to herein as the "Trust" and together they are
referred to as "Trusts." On the Date of Deposit, the Sponsor deposited
contracts and funds (represented by a certified check or checks and/or an
irrevocable letter or letters of credit, issued by a major commercial bank) for
the purchase of certain interest-bearing obligations (the "Bonds") and/or Units
of preceding Series of Tax Exempt Securities Trust (the "Deposited Units"). The
Bonds and Deposited Units (if any) are referred to herein collectively as the
"Securities." After the deposit of the Securities and the creation of the
Trusts, the Trustee delivered to the Sponsor registered certificates of
beneficial interest (the "Certificates") representing the units (the "Units")
comprising the entire ownership of each Trust. These Units are now being
offered hereby. References to multiple Trusts herein should be read as
references to a single Trust if Part A indicates the creation of only one
Trust.

Objectives

The objectives of a Trust are tax-exempt income and conservation of capital
through an investment in a diversified portfolio of municipal bonds. There is
no guarantee that a Trust's objectives will be achieved.

Portfolio

The Sponsor's investment professionals select Bonds for the Trust portfolios
from among the 200,000 municipal bond issues that vary according to bond
purpose, credit quality and years to maturity. The following factors, among
others, were considered in selecting the Bonds for each Trust:

. whether the interest on the Bonds selected would be exempt from Federal
and/or state income taxes imposed on the Holders;

. whether the Bonds were rated "A" or better by a major bond rating agency;

. the maturity dates of the Bonds (including whether such Bonds may be
called or redeemed prior to their stated maturity);

. the diversity of the types of Bonds; and

. the cost of the Bonds relative to what the Sponsor believes is their
value.

The Units

Each Unit in a Trust represents a fractional undivided interest in the
principal and net income of such Trust. If any Units are redeemed after the
date of this Prospectus, the principal amount of Bonds in the Trust will be
reduced by an amount allocable to redeemed Units. Also, the fractional
undivided interest in the Trust represented by each unredeemed Unit will be
increased. Units will remain outstanding until redeemed or until the
termination of the Trust.

B-1
<PAGE>

RISK FACTORS

An investment in Units is subject to the following risks.

Failure of Issuers to Pay Interest and/or Principal

The primary risk associated with an investment in Bonds is that the issuer of
the Bond will default on principal and/or interest payments when due on the
Bond. Such a default would have the effect of lessening the income generated by
the Trust and/or the value of the Trust's Units. The bond ratings assigned by
major rating organizations are an indication of the issuer's ability to make
interest and principal payments when due on its bonds. Subsequent to the date
of deposit the rating assigned to a bond may decline. Neither the Sponsor nor
the Trustee shall be liable in any way for any default, failure or defect in
any bond.

Original Issue Discount Bonds and Zero Coupon Bonds

Certain of the Bonds in the Trust may be original issue discount bonds and/or
zero coupon bonds. Original issue discount bonds are bonds originally issued at
less than the market interest rate. Zero coupon bonds are original issue
discount bonds that do not provide for the payment of current interest. For
Federal income tax purposes, original issue discount on such bonds must be
accrued over the terms of such bonds. On sale or redemption, the difference
between (i) the amount realized (other than amounts treated as tax-exempt
income as described below) and (ii) the tax basis of such bonds (properly
adjusted, in the circumstances described below, for the accrual of original
issue discount) will be treated as taxable income, gain or loss. The Code
requires the Trust (and therefore the Unitholders) to accrue tax-exempt
original issue discount by using the constant interest method provided for the
holders of taxable obligations and to increase the basis of a tax-exempt
obligation by the amount of accrued tax-exempt original issue discount. These
provisions are applicable to obligations issued after September 3, 1982 and
acquired after March 1, 1984. The Trust's tax basis in a Bond (and a
Unitholder's tax basis in its Units) is increased by an accrued original issue
discount. For Bonds issued after June 9, 1980 that are redeemed prior to
maturity, the difference between the Trust's basis, as adjusted, and the amount
received will be taxable gain or loss to the Unitholders. All or a portion of
any gain may be taxable as ordinary income.

"When Issued" and "Delayed Delivery" Bonds

Certain Bonds in a Trust may have been purchased by the Sponsor on a "when
issued" basis. Bonds purchased on a "when issued" basis have not yet been
issued by their governmental entity on the Date of Deposit (although such
governmental entity had committed to issue such Bonds). In the case of these
and/or certain other Bonds, the delivery of the Bonds may be delayed ("delayed
delivery") or may not occur. The effect of a Trust containing "delayed
delivery" or "when issued" Bonds is that Holders who purchased their Units
prior to the date such Bonds are actually delivered to the Trustee may have to
make a downward adjustment in the tax basis of their Units. Such downward
adjustment may be necessary to account for interest accruing on such "when
issued" or "delayed delivery" Bonds during the time between their purchase of
Units and delivery of such Bonds. Such adjustment has been taken into account
in computing the Estimated Current Return and Estimated Long-Term Return set
forth herein, which is slightly lower than Holders may receive after the first
year. To the extent that the delivery of such Bonds is delayed beyond their
respective expected delivery dates, the Estimated Current Return and Estimated
Long-Term Return for the first year may be lower than indicated in the "Summary
of Essential Information" in Part A.

Redemption or Sale Prior to Maturity

Most of the Bonds in the Portfolio of a Trust are subject to redemption prior
to their stated maturity date pursuant to sinking fund or call

B-2
<PAGE>

provisions. A call or redemption provision is more likely to be exercised when
the offering price valuation of a bond is higher than its call or redemption
price. Such price valuation is likely to be higher in periods of declining
interest rates. Certain of the Bonds may be sold or redeemed or otherwise
mature. In such cases, the proceeds from such events will be distributed to
Holders and will not be reinvested. Thus, no assurance can be given that a
Trust will retain for any length of time its present size and composition. To
the extent that a Bond was deposited in a Trust at a price higher than the
price at which it is redeemable, or at a price higher than the price at which
it is sold, a sale or redemption will result in a loss in the value of Units.
Monthly distributions will generally be reduced by the amount of the income
which would otherwise have been paid with respect to sold or redeemed bonds.
The Estimated Current Return and Estimated Long-Term Return of the Units may be
adversely affected by such sales or redemptions.

Market Discount

The Portfolio of the Trust may consist of some Bonds whose current market
values were below face value on the Date of Deposit. A primary reason for the
market value of such Bonds being less than face value at maturity is that the
interest coupons of such Bonds are at lower rates than the current market
interest rate for comparably rated Bonds. Bonds selling at market discounts
tend to increase in market value as they approach maturity. A market discount
tax-exempt Bond will have a larger portion of its total return in the form of
taxable ordinary income (because market discount income is taxable ordinary
income) and less in the form of tax-exempt income than a comparable Bond
bearing interest at current market rates. See "Taxes" herein.

Failure of a Contract to Purchase Bonds

In the event that any contract for the purchase of any Bond fails, the
Sponsor is authorized under the Trust Agreement to instruct the Trustee to
acquire other securities (the "Replacement Bonds") for inclusion in the
Portfolio of the affected Trust. However, in order for the Trustee to acquire
any Replacement Bonds, they must be deposited not later than the earlier of (i)
the first monthly Distribution Date of the Trust or (ii) 90 days after such
Trust was established. The cost and aggregate principal amount of a Replacement
Bond may not exceed the cost and aggregate principal amount of the Bond which
it replaces. In addition, a Replacement Bond must:

. be a tax-exempt bond;

. have a fixed maturity or disposition date comparable to the Bond it
replaces;

. be purchased at a price that results in a yield to maturity and in a
current return which is approximately equivalent to the yield to maturity
and current return of the Bond which it replaces;

. be purchased within twenty days after delivery of notice of the failed
contracts; and

. be rated in a category of A or better by a major rating organization.

Whenever a Replacement Bond has been acquired for a Trust, the Trustee shall,
within five days thereafter, notify all Holders of such Trust of the
acquisition of the Replacement Bond.

In the event that a contract to purchase any of the Bonds fails and
Replacement Bonds are not acquired, the Trustee will, not later than the second
monthly Distribution Date, distribute to Holders the funds attributable to the
failed contract. The Sponsor will, in such a case, refund the sales charge
applicable to the failed contract. If less than all the funds attributable to a
failed contract are applied to purchase Replacement Bonds, the remaining moneys
will be distributed to Holders not later than the second monthly Distribution
Date. Moreover, the failed contract may reduce the Estimated Net Annual Income
per Unit, and may lower the Estimated Current Return and Estimated Long-Term
Return of the affected Trust.

B-3
<PAGE>

Risks Inherent in an Investment in Different Types of Bonds

The Trust may contain or be concentrated in one or more of the
classifications of Bonds referred to below. A Trust is considered to be
"concentrated" in a particular category when the Bonds in that category
constitute 25% or more of the aggregate value of the Portfolio. An investment
in Units of the Trust should be made with an understanding of the risks that
these investments may entail, certain of which are described below.

General Obligation Bonds. Certain of the Bonds in the Portfolio may be
general obligations of a governmental entity that are secured by the taxing
power of the 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 an entity's credit will depend
on many factors. Some such factors are the entity's tax base, the extent to
which the entity relies on Federal or state aid, and other factors which are
beyond the entity's control.

Industrial Development Revenue Bonds ("IDRs"). IDRs including pollution
control 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. These projects are
usually operated by corporate entities. IDRs are not general obligations of
governmental entities backed by their taxing power. 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 receipts or revenues of the issuer. Payment
of IDRs is solely dependent upon the creditworthiness of the corporate operator
of the project or corporate guarantor. Such 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.

Hospital and Health Care Facility 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. Some such factors are
the level of payments received from private third-party payors and government
programs and the cost of providing health care services. There can be no
assurance that payments under governmental programs will remain at levels
comparable to present levels or will be sufficient to cover the costs
associated with their bonds. It also 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 additionally
subject to claims and legal actions by patients and others in the ordinary
course of business. 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.

Single Family and Multi-Family 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 mortgage loans to
housing projects for low to moderate income families. Single-family mortgage
revenue bonds are issued for the purpose of acquiring notes secured by
mortgages on residences. The ability of housing issuers to make debt service
payments on their obligations may be affected by various economic and non-
economic factors. Such factors include: occupancy levels, 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. 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. Therefore, the average life of housing obligations cannot be
determined. However, the average life of these obligations will ordinarily

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be less than their stated maturities. Mortgage loans are frequently partially
or completely prepaid prior to their final stated maturities. To the extent
that these obligations were valued at a premium when a Holder purchased Units,
any prepayment at par would result in a loss of capital to the Holder and
reduce the amount of income that would otherwise have been paid to Holders.

Power Facility Bonds. The ability of utilities to meet their obligations with
respect to bonds they issue is dependent on various factors. These factors
include the rates they may charge their customers, the demand for a utility's
services and the cost of providing those services. Utilities are also subject
to extensive regulations 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. Utilities are
additionally subject to increased costs due to governmental environmental
regulation and decreased profits due to increasing competition. Any difficulty
in obtaining timely and adequate rate increases could adversely affect a
utility's results of operations. The Sponsor cannot predict at this time the
ultimate effect of such factors on the ability of any issuers to meet their
obligations with respect to Bonds.

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 a number of factors. Some such
factors are the failure of municipalities to utilize fully the facilities
constructed by these authorities, declines in revenue from user charges, rising
construction and maintenance costs, impact of environmental requirements, the
difficulty of obtaining or discovering new supplies of fresh water, the effect
of conservation programs, the impact of "no growth" zoning ordinances and 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. Some of these
factors, of which an investor should be aware, are 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. Also, in the case of public
institutions, the financial condition of the relevant state or other
governmental entity and its policies with respect to education may affect an
institution's ability to make payments on its own.

Lease Rental Bonds. Lease rental bonds are predominantly issued 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 or the purchase of equipment that will be
used by a state or local government. 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. Lease rental bonds are subject to the
risk that 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 as rental bonds cease
in the event that damage, destruction or condemnation of the project prevents
its use by the lessee. Also, 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.

Capital Improvement Facility Bonds. The Portfolio of a Trust may contain
Bonds which are in the capital improvement facilities category. Capital
improvement bonds are bonds issued to provide funds to assist political
subdivisions or agencies of a state through acquisition of the underlying debt
of a state or local political subdivision or agency. The risks of an investment
in such bonds include the risk of possible prepayment or failure of payment of
proceeds on and default of the underlying debt.

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Solid Waste Disposal Bonds. Bonds issued for solid waste disposal facilities
are generally payable from tipping 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. Also, 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.

Moral Obligation Bonds. The Trust may also 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 municipality in question. Thus, such a commitment 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 obligations are
generally noncallable prior to maturity or the predetermined redemption date.
In a few isolated instances to date, however, bonds which were thought to be
escrowed to maturity have been called for redemption prior to maturity.

Airport, Port and Highway Revenue Bonds. Certain facility revenue bonds are
payable from and secured by the revenues from the ownership and operation of
particular facilities, such as airports, highways and port authorities. Airport
operating income may be affected by the ability of airlines to meet their
obligations under the agreements with airports. 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
such factors and increased cost of maintenance or decreased use of a facility.
The Sponsor cannot predict what effect conditions may have on revenues which
are dependent for payment on these bonds.

Special Tax Bonds. Special tax bonds are payable from and secured by the
revenues derived by a municipality from a particular tax. Examples of such
special taxes are 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. 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.

Tax Allocation Bonds. Tax allocation bonds are typically secured by
incremental tax revenues collected on property within the areas where
redevelopment projects, financed by bond proceeds are located. Such payments
are expected to be made from projected increases in tax revenues derived from
higher assessed values of property resulting from development in the particular
project area and not from an increase in tax rates. Special risk considerations
include: reduction of, or a less than anticipated increase in, taxable values
of property in
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the project area; successful appeals by property owners of assessed valuations;
substantial delinquencies in the payment of property taxes; or imposition of
any constitutional or legislative property tax rate decrease.

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 such 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. 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.

Convention Facility Bonds. The Portfolio of a Trust may contain Bonds of
issuers in the convention facilities category. Bonds in the convention
facilities category include special limited obligation securities issued to
finance convention and sports facilities payable from rental payments and
annual governmental appropriations. The governmental agency is not obligated to
make payments in any year in which the monies have not been appropriated to
make such payments. In addition, these facilities are limited use facilities
that may not be used for purposes other than as convention centers or sports
facilities.

Correctional Facility Bonds. The Portfolio of a Trust may contain Bonds of
issuers in the correctional facilities category. Bonds in the correctional
facilities category include special limited obligation securities issued to
construct, rehabilitate and purchase correctional facilities payable from
governmental rental payments and/or appropriations.

Puerto Rico Bonds. Certain of the Bonds in the Trust may be general
obligations and/or revenue bonds of issuers located in Puerto Rico. Such bonds
will be affected by general economic conditions in Puerto Rico. The economy of
Puerto Rico is fully integrated with that of the mainland United States. During
fiscal year 1998, approximately 90% of Puerto Rico's exports were to the United
States mainland, which was also the source of 61% of Puerto Rico's imports. In
fiscal 1998, Puerto Rico experienced a $8.5 billion positive adjusted
merchandise trade balance. The dominant sectors of the Puerto Rico economy are
manufacturing and services. Gross product in fiscal 1993 was $25.1 billion
($24.5 billion in 1992 prices) and gross product in fiscal 1997 was $32.1
billion ($27.7 billion in 1992 prices). This represents an increase in gross
product of 27.7% from fiscal 1993 to 1997 (13.0% in 1992 prices). According to
the Labor Department's Household Employment Survey, during fiscal 1998, total
employment increased 0.8% over fiscal 1997. The preliminary figures of gross
product for fiscal 1998, released in November 1998, was $34.7 billion ($28.5
billion in 1992 prices). This represents an increase of 8.1% (3.1% in 1992
prices) over fiscal 1997. This preliminary growth rate is 0.1% above the
original base line forecast for fiscal 1998. The Planning Board's gross product
forecast for fiscal 1999, made in February 1998, projected an increase of 2.7%
over fiscal 1998. According to the Labor Department's Household Employment
Survey, during the first five months of fiscal 1999, total employment decreased
1.2% over the same period for fiscal 1998. Total monthly employment averaged
1,124,800 during the first five months of fiscal 1999, compared to 1,138,400
over the same period in fiscal 1998. The seasonally adjusted unemployment rate
for November 1998 was 13.3%.

Year 2000 Issue

The Trusts, like other businesses and entities, could be adversely affected
if the computer systems used by the Sponsor and Trustee or other service
providers to a Trust do not properly process and calculate date-related
information and data from and after January 1, 2000. This is commonly known as
the "Year 2000 Problem." The Sponsor and Trustee

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are taking steps that they believe are reasonably designed to address the Year
2000 Problem with respect to their computer systems. The Sponsor and Trustee
are also seeking to obtain reasonable assurances that comparable steps are
being taken by the Trusts' other service providers. However, there can be no
assurance that the Year 2000 Problem will be properly or timely resolved so to
avoid any adverse impact to each Trust. The Year 2000 Problem may also
adversely affect the issuers of the Bonds contained in the Trust to varying
degrees based upon various factors. The Sponsor is unable to predict what
affect, if any, the Year 2000 Problem will have on such issuers.

Insurance

Certain Bonds (the "Insured Bonds") may be insured or guaranteed by American
Capital Access Corporation ("ACA"), Asset Guaranty Insurance Co. ("AGI"), Ambac
Assurance Corporation ("AMBAC"), Asset Guaranty Reinsurance Company ("Asset
Guaranty"), Capital Markets Assurance Corp. ("CAPMAC"), Connie Lee Insurance
Company ("Connie Lee"), Financial Guaranty Insurance Company "Financial
Guaranty"), Financial Security Assurance Inc. ("FSA"), or MBIA Insurance
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 service.
Standard & Poor's has assigned an A claims-paying ability to ACA and an AA
claims-paying ability to AGI. The ratings are subject to change at any time at
the discretion of the rating agencies.

The cost of this insurance is borne either by the issuers or previous owners
of the bonds. The Sponsor does not insure the bonds in conjunction with their
deposit in a Trust and makes no representations with regard to the adequacy of
the insurance covering any of the Insured Bonds. The insurance policies are
non-cancellable and will continue in force so long as the bonds are outstanding
and the insurers remain in business. The insurance policies guarantee the
timely payment of principal and interest on the Insured Bonds. However, the
insurance policies do not guarantee the market value of the Insured Bonds or
the value of the Units. The above 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.

Litigation and Legislation

To the best knowledge of the Sponsor, there is no litigation pending as of
the Date of Deposit in respect of any Bonds which might reasonably be expected
to have a material adverse effect upon the Trust. At any time after the Date of
Deposit, litigation may be initiated on a variety of grounds, or legislation
may be enacted, with respect to Bonds in the Trust. Litigation, for example,
challenging the issuance of pollution control revenue bonds under environmental
protection statutes may affect the validity of 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 the Bond has been validly issued and
that the interest thereon is exempt from regular Federal income tax. 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.

Tax Exemption

From time to time Congress considers proposals to tax the interest on state
and local obligations, such as the Bonds. The Supreme Court has concluded 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

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adversely affect an investment in Units. See "Taxes" herein for a more detailed
discussion concerning the tax consequences of an investment in Units. Unit
holders are urged to consult their own tax advisers.

TAXES

This is a general discussion of some of the income tax consequences of the
ownership of the Units. It applies only to investors who hold the Units as
capital assets. It does not discuss rules that apply to investors subject to
special tax treatment, such as securities dealers, financial institutions and
insurance companies.

The Bonds

In the opinions of bond counsel delivered on the dates the Bonds were issued
(or in opinions to be delivered, in the case of when issued Bonds), the
interest on the Bonds is excludable from gross income for regular Federal
income tax purposes under the law in effect at that time (except in certain
circumstances because of the identity of the holder).
However, interest on the Bonds may be subject to other state and local taxes.
The Sponsor and Battle Fowler LLP have not made and will not make any review of
the procedures for the issuance of the Bonds or the basis for these opinions.

In the opinions of bond counsel referred to above, none of the interest
received on the Bonds is subject to the alternative minimum tax for
individuals. However, the interest is includible in the calculation of a
corporation's alternative minimum tax.

In the case of certain of the Bonds, the opinions of bond counsel indicate
that interest received by a substantial user of the facilities financed with
proceeds of the Bonds, or persons related thereto, will not be exempt from
regular Federal income taxes, although interest on those Bonds received by
others would be exempt. The term substantial user includes only a person whose
gross revenue derived with respect to the facilities financed by the issuance
of the Bonds is more than 5% of the total revenue derived by all users of those
facilities, or who occupies more than 5% of the usable areas of those
facilities or for whom those facilities or a part thereof were specifically
constructed, reconstructed or acquired. Related persons are defined to include
certain related natural persons, affiliated corporations, partners and
partnerships. Similar rules may be applicable for state tax purposes.

The opinions of bond counsel may be limited to law existing at the time the
Bonds were issued, and may not apply to the extent that future changes in law,
regulations or interpretations affect such Bonds. Interest on some or all of
the Bonds may become subject to regular Federal income tax, perhaps
retroactively to their dates 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. Failure to meet these
requirements could cause the interest on the Bonds to become taxable, thereby
reducing the value of the Bonds, subjecting holders of the Bonds to
unanticipated tax liabilities and possibly requiring the Trustee to sell the
Bonds at reduced values.

The Sponsor and Battle Fowler LLP have not made any investigation as to the
current or future owners or users of the facilities financed by the Bonds, the
amount of such persons' outstanding tax-exempt private activity bonds, or the
facilities themselves, and no one can give any assurance that future events
will not affect the tax-exempt status of the Bonds.

From time to time Congress considers proposals to tax the interest on state
and local obligations, such as the Bonds and it can be expected that similar
proposals, including proposals
for a flat tax or consumption tax, may be introduced in the future. The Sponsor
cannot predict whether

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<PAGE>

additional legislation in respect of the Federal income tax status of interest
on state and local obligations may be enacted and what the effect of such
legislation would be on Bonds in the Trust. The Supreme Court has concluded
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, could adversely affect an investment in Units. The
decision does not, however, affect the current exemption from taxation of the
interest earned on the Bonds in the Trust.

The Internal Revenue Service has expanded, and is continuing to expand its
examination program with respect to tax-exempt bonds. The expanded examination
program consists of, among other measures, increased enforcement against
abusive transactions, broader audit coverage and more comprehensive information
reporting on the tax-exempt bond information returns. These developments could
affect the Bonds.

Investors should consult their tax advisors for advice with respect to the
effect of these provisions on their particular tax situation.

The Trust

In the opinion of Battle Fowler LLP, special counsel for the Sponsor, under
existing law:

The Trusts are not associations taxable as corporations for Federal
income tax purposes, and interest on the Bonds that is excludible from
Federal gross income when received by the Trusts will be excludible from
the Federal gross income of the Unit holders. Any proceeds paid under the
insurance policies described above issued to the Trusts with respect to the
Bonds and any proceeds paid under individual policies obtained by issuers
of Bonds or other parties that represent maturing interest on defaulted
obligations held by the Trusts will be excludible from Federal gross income
to the same extent as such interest would have been excludable if paid in
the normal course by the issuer of the defaulted obligations.

Each Unit holder will be considered the owner of a pro rata portion of
the Bonds and any other assets held in the Trust under the grantor trust
rules of the Code. Each Unit holder will be considered to have received its
pro rata share of income from Bonds held by the Trust on receipt by the
Trust (or earlier accrual, depending on the Unit holder's method of
accounting and depending on the existence of any original issue discount),
and each Unit holder will have a taxable event when an underlying Bond is
disposed of (whether by sale, redemption, or payment at maturity) or when
the Unit holder redeems or sells its Units.

The opinion of Battle Fowler LLP as to the tax status of the Trusts is not
affected by the provision of the Trust Agreement that authorizes the
acquisition of Replacement Bonds or by the implementation of the option
automatically to reinvest principal and interest distributions from the Trust
pursuant to the Automatic Accumulation Plan, described under "Automatic
Accumulation Account" in this Part B.

Other Tax Issues

The Trust may contain Bonds issued with original issue discount. The Code
requires Unit holders to accrue tax-exempt original issue discount by using the
constant interest method provided for the holders of taxable obligations and to
increase the basis of a tax-exempt obligation by the amount of accrued tax-
exempt original issue discount. These provisions are applicable to obligations
issued after September 3, 1982 and acquired after March 1, 1984. The Trust's
tax basis (and the Unit holder's tax basis) in a Bond is increased by any
accrued original issue discount. For Bonds issued after June 9, 1980 that are
redeemed prior to maturity, the difference between the Trust's basis, as
adjusted, and the amount received will be taxable gain or loss to the Unit
holders.

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Unit holders should consult their own tax advisors with respect to the state
and local tax consequences of owning original issue discount bonds. It is
possible that in determining state and local taxes, interest on tax-exempt
bonds issued with original issue discount may be deemed to be received in the
year of accrual even though there is no corresponding cash payment.

The total cost of a Unit to a Unit holder, including sales charge, is
allocated among the Bonds held in the Trust (in proportion to the values of
each Bond) in order to determine the Unit holder's per Unit tax basis for each
Bond. The tax basis reduction requirements of the Code relating to amortization
of bond premium discussed below will apply separately to the per Unit cost of
each such Bond.

A Unit holder will be considered to have purchased its pro rata interest in a
Bond at a premium when it acquires a Unit if its tax cost for its pro rata
interest in the Bond exceeds its pro rata interest in the Bond's face amount
(or the issue price plus accrued original issue discount of an original issue
discount bond). The Unit holder will be required to amortize any premium over
the period remaining before the maturity or call date of the Bond. Amortization
of premium on a Bond will
reduce a Unit holder's tax basis for its pro rata interest in the Bond, but
will not result in any deduction from the Unit holder's income. Thus, for
example, a Unit holder who purchases a Unit at a price that results in a Bond
premium and resells it at the same price will recognize taxable gain equal to
the portion of the premium that was amortized during the period the Unit holder
is considered to have held such interest.

Bond premium must be amortized under the method the Unit holder regularly
employs for amortizing bond premium (assuming such method is reasonable). With
respect to a callable bond, the premium must be computed with respect to the
call price and be amortized to the first call date (and successively to later
call dates based on the call prices for those dates).

Gain (or loss) realized on a sale, maturity or redemption of the Bonds or on
a sale or redemption of a Unit is includible in gross income for Federal, state
and local income tax purposes. That gain will be capital gain (or loss),
assuming that the Unit is held as a capital asset, except for any accrued
interest, accrued original issue discount or accrued market discount. When a
Bond is sold by the Trust, taxable gain or loss will be realized by the Unit
holder equal the difference between (i) the amount received (excluding the
portion representing accrued interest) and (ii) the adjusted basis (including
any accrued original issue discount). Taxable gain (or loss) will also result
if a Unit is sold or redeemed for an amount different from its adjusted basis
to the Unit holder. The amount received when a Unit is sold or redeemed is
allocated among all the Bonds in the Trust in the same manner if the Trust had
disposed of the Bonds, and the Unit holder may exclude accrued interest,
including any accrued original issue discount, but not amounts attributable to
market discount. The return of a Unit holder's tax basis is otherwise a tax-
free return of capital.

A Unit holder may acquire its Units, or the Trust may acquire Bonds at a
price that represents a market discount for the Bonds. Bonds purchased at a
market discount tend to increase in market value as they approach maturity,
when the principal amount is payable, thus increasing the potential for taxable
gain (or reducing the potential for loss) on their redemption, maturity or
sale. Gain on the disposition of a Bond purchased at a market discount
generally will be treated as taxable ordinary income, rather than capital gain,
to the extent of accrued market discount. The administration's fiscal year 2000
budget proposal would require accrual basis taxpayers to accrue market discount
income with respect to obligations acquired after the date that the proposal is
enacted.

Long-term capital gains realized by non-corporate Unit holders (with respect
to Units and

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Bonds held for more than one year) will be taxed at a maximum federal income
tax rate of 20%, while ordinary income received by non-corporate Unit holders
will be taxed at a maximum federal income tax rate of 39.6%. The deductibility
of capital losses is limited to the amount of capital gain; in addition, up to
$3,000 of capital losses of noncorporate Unit holders ($1,500 in the case of
married individuals filing separate returns) may be deducted against ordinary
income. Since the proceeds from sales of Bonds, under certain circumstances,
may not be distributed pro-rata, a Unit holder's taxable income or gain for any
year may exceed its actual cash distributions in that year.

If the Trust purchases any units of a previously issued series, based on the
opinion of counsel with respect to such series the Trust's pro rata ownership
interest in the bonds of such series (or any previously issued series) will be
treated as though it were owned directly by the Trust.

Among other things, the Code provides for the following: (1) interest on
certain private activity bonds is an item of tax preference included in the
calculation of alternative minimum tax, however none of the Bonds in the Trust
is covered by this provision; (2) 75% of the amount by which adjusted current
earnings (including interest on all tax-exempt bonds) exceed alternative
minimum taxable income, as modified for this calculation, will be included in
corporate alternative minimum taxable income; (3) subject to certain
exceptions, no financial institution is allowed a deduction for interest
expense allocable to tax-exempt interest on bonds acquired after August 7,
1986; (4) the amount of the deduction
allowed to property and casualty insurance companies for underwriting loss is
decreased by an amount determined with regard to tax-exempt interest income and
the deductible portion of dividends received by such companies; (5) an issuer
must meet certain requirements on a continuing basis in order for interest on a
bond to be tax-exempt, with failure to meet such requirements resulting in the
loss of tax exemption; and (6) the branch profits tax on U.S. branches of
foreign corporations may have the effect of taxing a U.S. branch of a foreign
corporation on the interest on bonds otherwise exempt from tax.

The Code provides that a portion of social security benefits is includible in
taxable income for taxpayers whose "modified adjusted gross income" combined
with a portion of their social security benefits exceeds a base amount. The
base amount is $25,000 for an individual, $32,000 for a married couple filing a
joint return and zero for married persons filing separate returns. Interest on
tax-exempt bonds is added to adjusted gross income for purposes of determining
whether an individual's income exceeds this base amount.

Certain S corporations, with accumulated earnings and profits from years in
which they were subject to regular corporate tax, may be subject to minimum tax
on excess passive income, including tax-exempt interest.

If borrowed funds are used by a Unit holder to purchase or carry Units of the
Trust, interest on such indebtedness will not be deductible for Federal income
tax purposes. Fees and expenses of the Trust will also not be deductible. 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. Similar rules are
applicable for purposes of state and local taxation.

After the end of each calendar year, the Trustee will furnish to each Unit
holder an annual statement containing information relating to the interest
received by the Trust on the Bonds, the gross proceeds received by the Trust
from the disposition of any Bond (resulting from redemption or payment at
maturity of any Bond or the sale by the Trust of any Bond), and the fees and
expenses paid by the Trust. The Trustee will also furnish annual information
returns to each Unit holder and to the Internal Revenue Service. Unit holders
are required

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to report to the Internal Revenue Service the amount of tax-exempt interest
received during the year.

EXPENSES AND CHARGES

Initial Expenses

Investors will reimburse the Sponsor on a per Unit basis, all or a portion of
the estimated costs incurred in organizing each Trust including the cost of the
initial preparation of documents relating to a Trust, Federal and State
registration fees, the initial fees and expenses of the Trustee, legal expenses
and any other out-of-pocket expenses. The estimated organization costs will be
paid to the Sponsor from the assets of a Trust as of the close of the initial
public offering period. To the extent that actual organization costs are less
than the estimated amount, only the actual organization costs will be deducted
from the assets of a Trust. To the extent that actual organization costs are
greater than the estimated amount, only the estimated organization costs added
to the Public Offering Price will be reimbursed to the Sponsor. Any balance of
the costs incurred in establishing a Trust, as well as advertising and selling
expenses and other out-of-pocket expenses will be paid at no cost to the
Trusts.

Fees

The Trustee's, Evaluator's and Sponsor's fees are set forth under the Summary
of Essential Information. The Trustee receives for its services as Trustee
payable in monthly installments, the amount set forth under Summary of
Essential Information. The Trustee's fee is based on the principal amount of
Bonds contained in the Trust during the preceding month. The Trustee also
receives benefits to the extent that it holds funds on deposit in the various
non-interest bearing accounts created under the Indenture.

The Evaluator's fee, which is earned for Bond evaluations, is received for
each evaluation of the Bonds in a Trust as set forth under Summary of Essential
Information.

The Sponsor's fee, which is earned for trust supervisory services, is based
on the largest number of Units outstanding during the year. The Sponsor's fee,
which is not to exceed the maximum amount set forth under Summary of Essential
Information, may exceed the actual costs of providing supervisory services for
the Trust. However, at no time will the total amount the Sponsor receives for
trust supervisory services rendered to all series of Tax Exempt Securities
Trusts in any calendar year exceed the aggregate cost to it of supplying these
services in that year. In addition, the Sponsor may also be reimbursed for
bookkeeping or other administrative services provided to the Trust in amounts
not exceeding its cost of providing those services.

The fees of the Trustee, Evaluator and Sponsor may be increased without
approval of Holders in proportion to increases under the classification "All
Services Less Rent" in the Consumer Price Index published by the United States
Department of Labor.

Other Charges

The following additional charges are or may be incurred by a Trust: all
expenses of the Trustee (including fees and expenses of counsel and auditors)
incurred in connection with its activities under the Trust Agreement, including
reports and communications to Unit holders; expenses and costs of any action
undertaken by the Trustee to protect a Trust and the rights and interests of
the Unit holders; fees of the Trustee for any extraordinary services performed
under the Trust Agreement; indemnification of the Trustee for any loss or
liability accruing to it without gross negligence, bad faith or willful
misconduct on its part, arising out of or in connection with its acceptance or
administration of a Trust.

To the extent lawful, the Trust will also pay expenses associated with
updating the Trusts' registration statements and maintaining registration or
qualification of the Units and/or a Trust under Federal or state securities
laws subsequent to initial

B-13
<PAGE>

registration. Such expenses shall include legal fees, accounting fees,
typesetting fees, electronic filing expenses and regulatory filing fees. The
expenses associated with updating registration statements have been
historically paid by a unit investment trust's sponsor. Any payments received
by the Sponsor reimbursing it for payments made to update Trusts' registration
statements will not exceed the costs incurred by the Sponsors.

The Trusts shall further incur expenses associated with all taxes and other
governmental charges imposed upon the Bonds or any part of a Trust (no such
taxes or charges are being levied or made or, to the knowledge of the Sponsor,
contemplated). The above expenses, including the Trustee's fee, when paid by or
owing to the Trustee, are secured by a lien on the Trust. In addition, the
Trustee is empowered to sell Bonds in order to make funds available to pay all
expenses. All direct distribution expenses of the Trusts (including the costs
of maintaining the secondary market for the Trusts), such as printing and
distributing prospectuses, and preparing, printing and distributing any
advertisements or sales literature, will be paid at no cost to the Trusts.

PUBLIC OFFERING

Offering Price

During the initial public offering period, the Public Offering Price of the
Units is determined by adding to the Evaluator's determination of the aggregate
offering price of the Bonds per Unit a sales charge equal to a percentage of
the Public Offering Price of the Units, as set forth in the table below. In
addition, during the initial public offering period a portion of the Public
Offering Price per Unit also consists of cash in an amount sufficient to pay
the per Unit portion of all or a part of the cost incurred in organizing and
offering a Trust. After the initial public offering period, the Public Offering
Price of the Units of a Trust will be determined by adding to the Evaluator's
determination of the aggregate bid price of the Bonds per Unit a sales charge
equal to 5.00% of the Public Offering Price (5.263% of the aggregate bid price
of the Bonds per Unit). A proportionate share of accrued and undistributed
interest on the Bonds in a Trust at the date of delivery of the Units to the
purchaser is also added to the Public Offering Price.

During the initial public offering period, the sales charge and dealer
concession for the Trusts will be reduced as follows:

<TABLE>
<CAPTION>
Percent of Percent of
Public Net Amount Dealer
Units Purchased+ Offering Price Invested Concession
- ---------------- -------------- ---------- ----------
<S> <C> <C> <C>
1-99 4.70% 4.932% $33.00
100-249 4.25% 4.439% $32.00
250-499 4.00% 4.167% $30.00
500-999 3.50% 3.627% $25.00
1,000 or more 3.00% 3.093% $20.00
</TABLE>
- ------------
+ The reduced sales charge is also applied on a dollar basis utilizing a
breakpoint equivalent in the above table of $1,000 for one Unit, etc. Units
held in the name of the spouse or child under the age of 21 of the purchaser
are deemed to be registered in the name of the purchaser for purposes of
calculating the applicable sales charge.

The Sponsor may at any time change the amount by which the sales charge is
reduced, or discontinue the discount completely.

Employees of the Sponsor and its subsidiaries, affiliates and employee-
related accounts may purchase Units at a Public Offering Price equal to the
Evaluator's determination of the aggregate offering price of the Bonds per Unit
plus a sales charge of .50%. In addition, during the initial public offering
period a portion of the Public Offering Price per Unit also consists of cash in
an amount sufficient to pay the per Unit portion of all or a part of the cost
incurred in organizing and offering a Trust. After the initial public offering
period such purchases may be made at a Public Offering Price equal to the
Evaluator's determination of the aggregate bid price of the Bonds per Unit plus
a

B-14
<PAGE>

sales charge of .50%. Sales through such plans to employees of the Sponsor
result in less selling effort and selling expenses than sales to the general
public. Participants in the Smith Barney Asset OneSM Program and in the
Reinvestment Program of any series of the Trust may purchase Units at a Public
Offering Price equal to the Evaluator's determination of the aggregate offering
price of the Bonds (plus cash held by the Trust for organization and offering
costs) per Unit during the initial offering period and after the initial
offering period at a Public Offering Price equal to the Evaluator's
determination of the aggregate bid price of the Bonds per Unit. Participants in
the Smith Barney Asset OneSM Program are subject to certain fees for specified
securities brokerage and execution services.

Method of Evaluation

During the initial public offering period, the aggregate offering price of
the Bonds is determined by the Evaluator (1) on the basis of current offering
prices for Bonds, (2) if offering prices are not available for any Bonds, on
the basis of current offering prices for comparable securities, (3) by
appraisal, or (4) by any combination of the above. Such determinations are made
each business day as of the Evaluation Time set forth in the Summary of
Essential Information. Following the initial public offering period, the
aggregate bid price of the Bonds will be determined by the Evaluator (1) on the
basis of the current bid prices for the Bonds, (2) if bid prices are not
available for any Bonds, on the basis of current bid prices of comparable
securities, (3) by appraisal, or (4) by any combination of the above. Such
determinations will be made each business day as of the Evaluation Time set
forth in the Summary of Essential Information. The term "business day," as used
herein shall exclude Saturdays, Sundays and any day on which the New York Stock
Exchange is closed. The difference between the bid and offering prices of the
Bonds may be expected to average approximately 1 1/2% of principal amount of
the Bonds. In the case of actively traded securities, the difference may be as
little as 1/2 of 1%, and in the case of inactively traded securities such
difference will usually not exceed 3%. On the Date of Deposit for each Trust
the aggregate current offering price of such Bonds per Unit exceeded the bid
price of such Bonds per Unit by the amounts set forth under Summary of
Essential Information.

Distribution of Units

During the initial public offering period Units of a Trust will be
distributed to the public at the Public Offering Price through the Underwriters
and dealers. The initial public offering period is 30 days unless all Units of
a Trust are sold prior thereto, in which case the initial public offering
period terminates with the sale of all Units. So long as all Units initially
offered have not been sold, the Sponsor may extend the initial public offering
period for up to four additional successive 30-day periods. Upon completion of
the initial public offering, Units which remain unsold or which may be acquired
in the secondary market may be offered by this Prospectus at the Public
Offering Price determined in the manner provided for secondary market sales.

It is the Sponsor's intention to qualify Units of a Trust for sale through
the Underwriters and dealers who are members of the National Association of
Securities Dealers, Inc. 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 York
Trust will also be offered for sale to residents of the State of Connecticut,
the State of Florida and the Commonwealth of Puerto Rico. Units will initially
be sold to dealers at prices which represent a concession equal to the amount
designated in the tables under "Public Offering--Offering Price." The Sponsor
reserves the right to change the amount of the concession to dealers from time
to time. After the initial offering period the dealer concession is negotiated
on a case-by-case basis.

Sales will be made only with respect to whole Units, and the Sponsor reserves
the right to reject, in whole or in part, any order for the purchase of Units.
A purchaser does not become a Holder or become entitled to exercise the rights
of a Holder

B-15
<PAGE>

(including the right to redeem his Units) until he has paid for his Units.
Generally, such payment must be made within five business days after an order
for the purchase of Units has been placed. The price paid by a Holder is the
Public Offering Price in effect at the time his order is received, plus accrued
interest. This price may be different from the Public Offering Price in effect
on any other day, including the day on which he made payment for the Units.

Market for Units

While the Sponsor is not obligated to do so, its intention is to maintain a
market for the Units of a Trust and continuously to offer to purchase such
Units at prices based upon the aggregate bid price of the underlying Bonds. The
Sponsor may cease to maintain such a market at any time and from time to time
without notice if the supply of Units of a Trust of this Series exceeds demand
or for any other reason. In this event the Sponsor may nonetheless purchase
Units at prices based on the current Redemption Price of those Units. In the
event that a market is not maintained for the Units of a Trust, a Holder
desiring to dispose of its Units may be able to do so by tendering such Units
to the Trustee for redemption at the Redemption Price.

Exchange Option

Holders may exchange their Units of this series for units of any series of
Tax Exempt Securities Trust (the "Exchange Trust") available for sale in the
state in which the Holder resides. Such exchange will be at a Public Offering
Price for the units of the Exchange Trust to be acquired based on a fixed sales
charge of $25 per unit. The Sponsor reserves the right to modify, suspend or
terminate this plan at any time without further notice to Holders. Therefore,
there is no assurance that the Exchange Option will be available to a Holder.
Exchanges will be effected in whole units only. If the proceeds from the Units
being surrendered are less than the cost of a whole number of units being
acquired, the exchanging Holder will be permitted to add cash in an amount to
round up to the next highest number of whole units.

An exchange of Units pursuant to the Exchange Option for units of an Exchange
Trust will generally constitute a taxable event under the Code, i.e., a Holder
will recognize a gain or loss at the time of exchange. However, an exchange of
Units of this Trust for units of any other series of the Tax Exempt Securities
Trust, which are grantor trusts for U.S. Federal income tax purposes, will not
constitute a taxable event to the extent that the underlying securities in each
trust do not differ materially either in kind or in extent. Holders are urged
to consult their own tax advisors as to the tax consequences to them of
exchanging Units in particular cases.

Units of the Exchange Trust will be sold under the Exchange Option at the bid
prices (for trusts being offered in the secondary market) and offer prices (for
trusts being offered in the primary market) of the underlying securities in the
particular portfolio involved per unit plus a fixed charge of $25 per unit.
Sales to dealers will be made at prices which represent a concession. The
amount of the concession will be established at the time of sale by the
Sponsor. As an example, assume that a Holder, who has three units of a trust
with a current price of $1,020 per unit based on the bid prices of the
underlying securities, desires to exchange his Units for units of a series of
an Exchange Trust with a current price of $880 per unit based on the bid prices
of the underlying securities. In this example, the proceeds from the Unit
holder's units will aggregate $3,060. Since only whole units of an Exchange
Trust may be purchased under the Exchange Option, the Holder would be able to
acquire three units in the Exchange Trust for a total cost of $2,715 ($2,640
for the units and $75 for the sales charge) and would also receive $345 for the
fractional Unit.

Reinvestment Programs

Distributions of interest and/or principal are made to Holders monthly. The
Holder has the option of either receiving a monthly income check from the
Trustee or participating in one of the reinvestment programs offered by the
Sponsor provided such Holder meets the minimum qualifications of the

B-16
<PAGE>

reinvestment program and such program lawfully qualifies for sale in the
jurisdiction in which the Holder resides. Upon enrollment in a reinvestment
program, the Trustee will direct monthly interest distributions and principal
distributions to the reinvestment program selected by the Holder. Since the
Sponsor has arranged for different reinvestment alternatives Holders should
contact the Sponsor for more complete information, including charges and
expenses. The appropriate prospectus will be sent to the Holder. The Holder
should read the prospectus for a reinvestment program carefully before deciding
to participate. Participation in the reinvestment program will apply to all
Units of a Trust owned by a Holder and may be terminated at any time by the
Holder. The program may also be modified or terminated by the Trustee or the
program's Sponsor.

Sponsor's and Underwriters' Profits

The Underwriters receive a commission based on the sales charge of a
particular Trust as adjusted pursuant to the agreement among Underwriters. The
Sponsor receives a gross commission equal to the applicable sales charge for
any Units they have underwritten, and receive the difference between the
applicable sales charge and the Underwriter's commission for the remainder of
the Units. In addition, the Sponsor may realize profits or sustain losses in
the amount of any difference between the cost of the Bonds to a Trust and the
purchase price of such Bonds to the Sponsor. Under certain circumstances, an
Underwriter may be entitled to share in such profits, if any, realized by the
Sponsor. The Sponsor may also realize profits or sustain losses with respect to
Bonds deposited in a Trust which were acquired from its own organization or
from underwriting syndicates of which it was a member. During the initial
public offering period the Underwriters also may realize profits or sustain
losses as a result of fluctuations after the Date of Deposit in the offering
prices of the Bonds and hence in the Public Offering Price received by the
Underwriters for Units. Cash made available to the Sponsor prior to the
anticipated first settlement date for the purchase of Units may be used in the
Sponsor's businesses to the extent permitted by applicable regulations.

In maintaining a market for the Units the Sponsor will also realize profits
or sustain losses in the amount of any difference between the price at which
they buy such Units and the price at which they resell or redeem such Units.

RIGHTS OF HOLDERS

Certificates

Ownership of Units may be evidenced by registered certificates executed by
the Trustee and the Sponsor. Certificates are transferable by presentation and
surrender to the Trustee properly endorsed or accompanied by a written
instrument or instruments of transfer.

Certificates may be issued in denominations of one Unit or any multiple
thereof. A Holder may be required to pay $2.00 per certificate reissued or
transferred and to pay any governmental charge that may be imposed in
connection with each such transfer or interchange. For new certificates issued
to replace destroyed, stolen or lost certificates, the Holder must furnish
indemnity satisfactory to the Trustee and must pay such expenses as the Trustee
may incur. Mutilated certificates must be surrendered to the Trustee for
replacement.

Distribution of Interest and Principal

Interest and principal received by a Trust will be distributed on each
monthly Distribution Date on a pro rata basis to Holders of record in such
Trust as of the preceding Record Date. All distributions will be net of
applicable expenses and funds required for the redemption of Units and, if
applicable, reimbursements to the Trustee for interest payments advanced to
Holders on previous Distribution Dates.

The Trustee will credit to the Interest Account of a Trust all interest
received by such Trust, including that part of the proceeds of any disposition
of Bonds of such Trust which represents accrued

B-17
<PAGE>

interest. Other receipts will be credited to the Principal Account of a Trust.
The pro rata share of the Interest Account and the pro rata share of cash in
the Principal Account represented by each Unit of a Trust will be computed by
the Trustee each month as of the Record Date. Proceeds received from the
disposition of any of the Bonds subsequent to a Record Date and prior to the
next succeeding Distribution Date will be held in the Principal Account and
will not be distributed until the following Distribution Date. The distribution
to the Holders as of each Record Date will be made on the following
Distribution Date or shortly thereafter. Such distributions shall consist of an
amount substantially equal to one-twelfth of such Holders' pro rata share of
the estimated annual income to the Interest Account after deducting estimated
expenses (the "Monthly Income Distribution") plus such Holders' pro rata share
of the cash balance in the Principal Account computed as of the close of
business on the preceding Record Date. Persons who purchase Units between a
Record Date and a Distribution Date will receive their first distribution on
the second Distribution Date following their purchase of Units. No distribution
need be made from the Principal Account if the balance therein is less than an
amount sufficient to distribute $5.00 per Unit. The Monthly Income Distribution
per Unit initially will be in the amount shown under Summary of Essential
Information for a Trust. The Monthly Income Distribution will change as the
income and expenses of such Trust change and as Bonds are exchanged, redeemed,
paid or sold.

Normally, interest on the Bonds is paid on a semi-annual basis. Because Bond
interest is not received by a Trust at a constant rate throughout the year any
Monthly Income Distribution may be more or less than the amount credited to the
Interest Account as of the Record Date. In order to eliminate fluctuations in
Monthly Income Distributions resulting from such variances, the Trustee is
required by the Trust Agreement to advance such amounts as may be necessary to
provide Monthly Income Distributions of approximately equal amounts. The
Trustee will then be reimbursed, without interest, for any such advances from
funds available from the Interest Account on the next ensuing Record Date. If
all or a portion of the Bonds for which advances have been made subsequently
fail to pay interest when due, the Trustee may recoup such advances by reducing
the amount distributed per Unit in one or more Monthly Interest Distributions.
If Units are redeemed subsequent to such advances by the Trustee, each
remaining Holder will be subject to a greater pro rata reduction in his Monthly
Interest Distribution. To the extent it is unable to recoup advances from the
Interest Account, the Trustee is also entitled to withdraw from the Principal
Account. Funds which are available for future distributions, payments of
expenses and redemptions are in accounts which are non-interest bearing to
Holders and are available for use by The Chase Manhattan Bank pursuant to
normal banking procedures. The Trustee is entitled to the benefit of any
reasonable cash balances in the Income and Principal Accounts. Because of the
varying interest payment dates of the Bonds, accrued interest may at any point
in time be greater than the amount of interest distributed to Holders. This
excess accrued but undistributed interest amount will be added to the value of
the Units on any purchase made after the Date of Deposit. If a Holder sells all
or a portion of his Units a portion of his sale proceeds will be allocable to
his proportionate share of the accrued interest. Similarly, if a Holder redeems
all or a portion of his Units, the Redemption Price per Unit which he is
entitled to receive from the Trustee will also include his accrued interest on
the Bonds.

As of the first day of each month the Trustee will deduct from the Interest
Account of a Trust amounts necessary to pay the expenses of such Trust. To the
extent there are not sufficient funds in the Interest Account to pay Trust
expenses, the Trustee is also entitled to withdraw from the Principal Account.
The Trustee also may withdraw from the accounts such amounts it deems necessary
to establish a reserve for any governmental charges payable out of a Trust.
Amounts so withdrawn shall not be considered a part of the Trust's assets until

B-18
<PAGE>

such time as the Trustee returns any part of such amounts to the appropriate
account. In addition, the Trustee may withdraw from the Interest Account and
the Principal Account such amounts as may be necessary to cover redemption of
Units by the Trustee.

The Trustee has agreed to advance to a Trust the amount of accrued interest
due on the Bonds from their respective issue dates or previous interest payment
dates through the Date of Deposit. This accrued interest amount will be paid to
the Sponsor as the holder of record of all Units on the first settlement date
for the Units. Consequently, when the Sponsor sells Units of a Trust, the
amount of accrued interest to be added to the Public Offering Price of the
Units purchased by an investor will include only accrued interest from the day
after the Date of Deposit through the date of settlement of the investor's
purchase (normally three business days after purchase), less any distributions
from the Interest Account. The Trustee will recover its advances to a Trust
(without interest or other cost to such Trust) from interest received on the
Bonds deposited in such Trust.

Reports and Records

The Trustee shall furnish Holders in connection with each distribution a
statement of the amount of interest and the amount of other receipts which are
being distributed, expressed in each case as a dollar amount per Unit. In the
event that the issuer of any of the Bonds fails to make payment when due of any
interest or principal and such failure results in a change in the amount which
would otherwise be distributed as a monthly distribution, the Trustee will,
with the first such distribution following such failure, set forth in an
accompanying statement, the issuer and the Bond, the amount of the reduction in
the distribution per Unit resulting from such failure, the percentage of the
aggregate principal amount of Bonds which such Bond represents and information
regarding any disposition or legal action with respect to such Bond. Within a
reasonable time after the end of each calendar year, the Trustee will furnish
to each person who at any time during the calendar year was a Holder of record,
a statement (1) as to the Interest Account: interest received, deductions for
payment of applicable taxes and for fees and expenses of a Trust, redemptions
of Units and the balance remaining after such distributions and deductions,
expressed both as a total dollar amount and as a dollar amount representing the
pro rata share of each Unit outstanding on the last business day of such
calendar year; (2) as to the Principal Account: the dates of disposition of any
Bonds and the net proceeds received therefrom (excluding any portion
representing interest), deductions for payments of applicable taxes and for
fees and expenses of a Trust, redemptions of Units, and the balance remaining
after such distributions and deductions, expressed both as a total dollar
amount and as a dollar amount representing the pro rata share of each Unit
outstanding on the last business day of such calendar year; (3) a list of the
Bonds held and the number of Units outstanding on the last business day of such
calendar year; (4) the Redemption Price per Unit based upon the last
computation thereof made during such calendar year; and (5) amounts actually
distributed during such calendar year from the Interest Account and from the
Principal Account. The accounts of a Trust shall be audited not less frequently
than annually by independent auditors designated by the Sponsor, and the report
of such auditors shall be furnished by the Trustee to Holders upon request.

The Trustee shall keep available for inspection by Holders at all reasonable
times during usual business hours, books of record and account of its
transactions as Trustee including records of the names and addresses of
Holders, certificates issued or held, a current list of Bonds in the Portfolio
of a Trust and a copy of the Trust Agreement.

Redemption of Units

Units may be tendered to the Trustee for redemption at its unit investment
trust office at 4 New York Plaza, New York, New York 10004, upon payment of any
relevant tax. At the present time there are no specific taxes related to the

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<PAGE>

redemption of the Units. No redemption fee will be charged by the Sponsor or
the Trustee. Units redeemed by the Trustee will be canceled.

Certificates for Units to be redeemed must be properly endorsed or
accompanied by a written instrument of transfer. Holders must sign exactly as
their name appears on the face of the certificate with the signature guaranteed
by an officer of a national bank or trust company or by a member of either the
New York, Midwest or Pacific Stock Exchange. In certain instances the Trustee
may require additional documents such as, but not limited to, trust
instruments, certificates of death, appointments as executor or administrator
or certificates of corporate authority.

Within seven calendar days following such tender, the Holder will be entitled
to receive in cash an amount for each Unit tendered equal to the Redemption
Price per Unit. The "date of tender" is deemed to be the date on which Units
are received by the Trustee, except as regards Units received after the close
of trading on the New York Stock Exchange, the date of tender is the next day
on which such Exchange is open for trading.

Accrued interest paid on redemption shall be withdrawn from the Interest
Account, or, if the balance therein is insufficient, from the Principal
Account. All other amounts paid on redemption shall be withdrawn from the
Principal Account. The Trustee is empowered to sell Bonds in order to make
funds available for redemption. Such sales could result in a sale of Bonds by
the Trustee at a loss. To the extent Bonds are sold the size and diversity of a
Trust will be reduced.

The Trustee reserves the right to suspend the right of redemption and to
postpone the date of payment of the Redemption Price per Unit for any period
during which the New York Stock Exchange is closed or trading on that Exchange
is restricted or during which (as determined by the Securities and Exchange
Commission) an emergency exists as a result of which disposal or evaluation of
the underlying Bonds is not reasonably practicable, or for such other periods
as the Securities and Exchange Commission has by order permitted.

Computation of Redemption Price per Unit

The Redemption Price per Unit of a Trust is determined by the Trustee on the
basis of the bid prices of the Bonds in such Trust as of the Evaluation Time on
the date any such determination is made. The Redemption Price per Unit of a
Trust is each Unit's pro rata share, determined by the Trustee, of: (1) the
aggregate value of the Bonds in such Trust on the bid side of the market
(determined by the Evaluator as set forth below), (2) cash on hand in such
Trust (other than funds covering contracts to purchase Bonds), and accrued and
unpaid interest on the Bonds as of the date of computation, less (a) amounts
representing taxes or governmental charges payable out of such Trust, (b) the
accrued expenses of such Trust, and (c) cash held for distribution to Holders
of such Trust of record as of a date prior to the evaluation. As of the close
of the initial public offering period the Redemption Price per Unit will be
reduced to reflect the organization costs per Unit of a Trust. To the extent
that actual organization costs are less than the estimated amount, only the
actual organization costs will be deducted from the assets of a Trust.

Purchase by the Sponsor of Units Tendered for Redemption

The Trust Agreement requires that the Trustee notify the Sponsor of any
tender of Units for redemption. So long as the Sponsor maintains a bid in the
secondary market, the Sponsor, prior to the close of business on the second
succeeding business day, will purchase any Units tendered to the Trustee. Such
a purchase by the Sponsor will be at the price so bid by making payment to the
Holder in an amount not less than the Redemption Price and not later than the
day on which the Units would otherwise have been redeemed by the Trustee.

The offering price of any Units resold by the Sponsor will be the Public
Offering Price

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<PAGE>

determined in the manner provided in this Prospectus. Any profit resulting from
the resale of such Units will belong to the Sponsor. The Sponsor likewise will
bear any loss resulting from a lower offering or redemption price subsequent to
their acquisition of such Units.

SPONSOR

Salomon Smith Barney Inc. ("Salomon Smith Barney"), was incorporated in
Delaware in 1960 and traces its history through predecessor partnerships to
1873. On September 1, 1998, Salomon Brothers Inc. merged with and into Smith
Barney Inc. ("Smith Barney") with Smith Barney surviving the merger and
changing its name to Salomon Smith Barney Inc. The merger of Salomon Brothers
Inc. and Smith Barney followed the merger of their parent companies in November
1997. Salomon Smith Barney, an investment banking and securities broker-dealer
firm, is a member of the New York Stock Exchange, Inc. and other major
securities and commodities exchanges, the National Association of Securities
Dealers, Inc. and the Securities Industry Association. Salomon Smith Barney is
an indirect wholly-owned subsidiary of Citigroup Inc. Salomon Smith Barney or
an affiliate is investment adviser, principal underwriter or distributor of 60
open-end investment companies and investment manager of 12 closed-end
investment companies. Salomon Smith Barney also sponsors all Series of
Corporate Securities Trust, Government Securities Trust, Harris, Upham Tax-
Exempt Fund and Tax Exempt Securities Trust, and acts as sponsor of most Series
of Defined Assets Funds.

Limitations on Liability

The Sponsor is liable for the performance of its obligations arising from its
responsibilities under the Trust Agreement, but will be under no liability to
Holders for taking any action or refraining from any action in good faith or
for errors in judgment. The Sponsor shall also not be responsible in any way
for depreciation or loss incurred by reason of the sale of any Bonds, except in
cases of willful misfeasance, bad faith, gross negligence or reckless disregard
of its obligations and duties.

Responsibility

Although the Trusts are not actively managed as mutual funds are, the
portfolios are reviewed periodically on a regular cycle. The Sponsor is
empowered to direct the Trustee to dispose of Bonds when certain events occur
that adversely affect the value of the Bonds. Such events include: default in
payment of interest or principal, default in payment of interest or principal
on other obligations of the same issuer, institution of legal proceedings,
default under other documents adversely affecting debt service, decline in
price or the occurrence of other market or credit factors, or decline in
projected income pledged for debt service on revenue Bonds and advanced
refunding that, in the opinion of the Sponsor, may be detrimental to the
interests of the Holders. The Sponsor intends to provide Portfolio supervisory
services for each Trust in order to determine whether the Trustee should be
directed to dispose of any such Bonds.

It is the responsibility of the Sponsor to instruct the Trustee to reject any
offer made by an issuer of any of the Bonds to issue new obligations in
exchange and substitution for any Bonds pursuant to a refunding or refinancing
plan. However, the Sponsor may instruct the Trustee to accept such an offer or
to take any other action with respect thereto as the Sponsor may deem proper if
the issuer is in default with respect to such Bonds or in the judgment of the
Sponsor the issuer will probably default in respect to such Bonds in the
foreseeable future.

Any obligations so received in exchange or substitution will be held by the
Trustee subject to the terms and conditions of the Trust Agreement to the same
extent as Bonds originally deposited thereunder. Within five days after the
deposit of obligations in exchange or substitution for underlying Bonds the
Trustee is required to give notice thereof to each Holder, identifying the
Bonds eliminated and

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<PAGE>

the Bonds substituted therefor. Except as stated in this and the preceding
paragraph, the acquisition by a Trust of any securities other than the Bonds
initially deposited in the Trust is prohibited.

Resignation

If the Sponsor resigns or becomes unable to perform its duties under the
Trust Agreement, and no express provision is made for action by the Trustee in
such event, the Trustee may appoint a successor sponsor or terminate the Trust
Agreement and liquidate the Trusts.

TRUSTEE

The Trustee is The Chase Manhattan Bank with its principal executive office
located at 270 Park Avenue, New York, New York 10017 and its unit investment
trust office at 4 New York Plaza, New York, New York 10004. The Trustee is
subject to supervision by the Superintendent of Banks of the State of New York,
the Federal Deposit Insurance Corporation and the Board of Governors of the
Federal Reserve System. In connection with the storage and handling of certain
Bonds deposited in the Trust, the Trustee may use the services of The
Depository Trust Company. These services may include safekeeping of the Bonds
and coupon-clipping, computer book-entry transfer and institutional delivery
services. The Depository Trust Company is a limited purpose trust company
organized under the Banking Law of the State of New York, a member of the
Federal Reserve System and a clearing agency registered under the Securities
Exchange Act of 1934.

Limitations on Liability

The Trustee shall not be liable or responsible in any way for depreciation or
loss incurred by reason of the disposition of any moneys, securities or
certificates or in respect of any evaluation or for any action taken in good
faith reliance on prima facie properly executed documents except in cases of
willful misfeasance, bad faith, gross negligence or reckless disregard for its
obligations and duties. In addition, the Trustee shall not be personally liable
for any taxes or other governmental charges imposed upon or in respect of a
Trust which the Trustee may be required to pay under current or future law of
the United States or any other taxing authority having jurisdiction.

Resignation

By executing an instrument in writing and filing the same with the Sponsor,
the Trustee and any successor may resign. In such an event the Sponsor is
obligated to appoint a successor trustee as soon as possible. If the Trustee
becomes incapable of acting or becomes bankrupt or its affairs are taken over
by public authorities, the Sponsor may remove the Trustee and appoint a
successor as provided in the Trust Agreement. Such resignation or removal shall
become effective upon the acceptance of appointment by the successor trustee.
If no successor has accepted the appointment within thirty days after notice of
resignation, the retiring trustee may apply to a court of competent
jurisdiction for the appointment of a successor. The resignation or removal of
a trustee becomes effective only when the successor trustee accepts its
appointment as such or when a court of competent jurisdiction appoints a
successor trustee.

EVALUATOR

The Evaluator is Kenny S&P Evaluation Services, a business unit of J.J. Kenny
Company, Inc., a subsidiary of The McGraw-Hill Companies, Inc., with main
offices located at 65 Broadway, New York, New York 10006.

Limitations on Liability

The Trustee, Sponsor and Holders may rely on any evaluation furnished by the
Evaluator and shall have no responsibility for the accuracy thereof.
Determination by the Evaluator under the Trust Agreement shall be made in good
faith upon the basis of the best information available to it; provided,
however, that the Evaluator shall be under

B-22
<PAGE>

no liability to the Trustee, the Sponsor, or Holders for errors in judgment.
But this provision shall not protect the Evaluator in cases of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations and duties.

Responsibility

The Trust Agreement requires the Evaluator to evaluate the Bonds of a Trust
on the basis of their bid prices on the last business day of June and December
in each year, on the day on which any Unit of such Trust is tendered for
redemption and on any other day such evaluation is desired by the Trustee or is
requested by the Sponsor.

Resignation

The Evaluator may resign or may be removed by the joint action of the Sponsor
and the Trustee. Should such removal occur, the Sponsor and the Trustee are to
use their best efforts to appoint a satisfactory successor. Such resignation or
removal shall become effective upon the acceptance of appointment by a
successor evaluator. If upon resignation of the Evaluator no successor has
accepted appointment within thirty days after notice of resignation, the
Evaluator may apply to a court of competent jurisdiction for the appointment of
a successor.

AMENDMENT AND TERMINATION OF THE TRUST AGREEMENT

Amendment

The Sponsor and the Trustee have the power to amend the Trust Agreement
without the consent of any of the Holders when such an amendment is (1) to cure
any ambiguity or to correct or supplement any provision of the Trust Agreement
which may be defective or inconsistent with any other provision contained
therein, or (2) to make such other provisions as shall not adversely affect the
interests of the Holders. However, the Trust Agreement may not be amended to
increase the number of Units issuable or to permit the deposit or acquisition
of securities either in addition to or in substitution for any of the Bonds
initially deposited in a Trust. In the event of any amendment, the Trustee is
obligated to notify promptly all Holders of the substance of such amendment.

Termination

The Trust Agreement provides that if the principal amount of Bonds held in
Trust is less than 50% of the principal amount of the Bonds originally
deposited in such Trust, the Trustee may in its discretion and will, when
directed by the Sponsor, terminate such Trust. A Trust may be terminated at any
time by 100% of the Holders. However, in no event may a Trust continue beyond
the Mandatory Termination Date set forth under "Summary of Essential
Information." In the event of termination, written notice thereof will be sent
by the Trustee to all Holders. Within a reasonable period after termination,
the Trustee will sell any Bonds remaining in the affected Trust. Then after
paying all expenses and charges incurred by such Trust, the Trustee will
distribute to each Holder, upon surrender for cancellation of his certificate
for Units, his pro rata share of the balances remaining in the Interest and
Principal Account of such Trust.

MISCELLANEOUS

Legal Opinion

The legality of the Units has been passed upon by Battle Fowler LLP, 75 East
55th Street, New York, New York 10022, as special counsel for the Sponsor.

Auditors

The statements of financial condition and the portfolios of securities
included in this Prospectus have been audited by KPMG LLP, independent
auditors, as indicated in their report with respect thereto, and are included
herein in reliance upon the authority of said firm as experts in accounting and
auditing.

B-23
<PAGE>

Performance Information

Sales material may compare tax-equivalent yields of long-term municipal bonds
to long-term U.S. Treasury bonds and to the Bond Buyer Revenue Bond Index. Such
information is based on past performance and is not indicative of future
results. Yields on taxable investment are generally higher than those of tax-
exempt securities of comparable maturity. While income from municipal bonds is
exempt from federal income taxes, income from Treasuries is exempt from state
and local taxes. Since Treasuries are considered to have the highest possible
credit quality, the difference in yields is somewhat narrower than if compared
to corporate bonds with similar ratings and maturities.

BOND RATINGS+

All ratings shown under Part A, "Portfolio of Securities", except those
identified otherwise, are by Standard & Poor's.

Standard & Poor's

A Standard & Poor's corporate or municipal bond rating is a current
assessment of the creditworthiness of an obligor with respect to a specific
debt obligation. This assessment of creditworthiness may take into
consideration obligors such as guarantors, insurers, or lessees. The bond
rating is not a recommendation to purchase or sell a security, inasmuch as it
does not comment as to market price or suitability for a particular investor.
The ratings are based on current information furnished to Standard & Poor's by
the issuer and obtained by Standard & Poor's from other sources it considers
reliable. The ratings may be changed, suspended or withdrawn as a result of
changes in, or unavailability of, such information.

The ratings are based, in varying degrees, on the following considerations:

I. Likelihood of default--capacity and willingness of the obligor as to
the timely payment of interest and repayment of principal in accordance
with the terms of the obligation;
- ------------
+ As described by the rating agencies.

II. Nature of and provisions of the obligation; and

III. Protection afforded by, and relative position of, the obligation in
the event of bankruptcy, reorganization or other arrangement under the laws
of bankruptcy and other laws affecting creditors' rights.

AAA--This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay interest and repay
principal.

AA--Bonds rated AA have a very strong capacity to pay interest and repay
principal, and in the majority of instances they differ from AAA issues only in
small degrees.

A--Bonds rated A have a strong capacity to pay interest and repay principal,
although they are somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than bonds in higher-rated categories.

BBB--Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to weakened capacity to pay interest and repay principal for
bonds in this category than for bonds in the higher-rated categories.

Plus (+) or Minus (-): To provide more detailed indications of credit
quality, the ratings from "AA" to "BB" may be modified by the addition of a
plus or minus sign to show relative standing within the major rating
categories.

Provisional Ratings: The letter "p" following a rating indicates the rating
is provisional. A provisional rating assumes the successful completion of the
project being financed by the issuance of the bonds being rated and indicates
that payment of debt

B-24
<PAGE>

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, makes no comment on the likelihood of, or the
risk of default upon failure of, such completion. Accordingly, the investor
should exercise his own judgment with respect to such likelihood and risk.

Conditional rating(s), indicated by "Con" are given to bonds for which the
continuance of the security rating is contingent upon Standard & Poor's receipt
of an executed copy of the escrow agreement or closing documentation confirming
investments and cash flows and/or the security rating is conditional upon the
issuance of insurance by the respective insurance company.

Moody's

A brief description of the applicable Moody's rating symbols and their
meanings is as follows:

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

Aa--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. Aa bonds 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.

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 "Aa," "A" and "Baa" are to give investors a more
precise indication of relative debt quality in each of the historically defined
categories.

Fitch

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
B-25
<PAGE>

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

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 conditions.

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.

B-26
<PAGE>

FEDERAL TAX FREE VS. TAXABLE INCOME

This table shows the approximate yields which taxable securities must earn
in various income brackets to produce, after Federal income tax, returns
equivalent to specified tax-exempt bond yields. The table is computed on the
theory that the taxpayer's highest bracket tax rate is applicable to the
entire amount of any increase or decrease in his taxable income resulting from
a switch from taxable to tax-exempt securities or vice versa. The table
reflects projected effective Federal income tax rates and tax brackets for the
1999 taxable year. Because the Federal rate brackets are subject to adjustment
based on changes in the Consumer Price Index, the taxable equivalent yields
for subsequent years may vary somewhat from those indicated in the table. Use
this table to find your tax bracket. Read across to determine the approximate
taxable yield you would need to equal a return free of Federal income tax.

1999 Tax Year
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Taxable Income Bracket Tax Exempt Yield
Federal Effective
Tax Federal
Joint Return Single Return Bracket Tax Rate 4.00% 4.50% 5.00% 5.50% 6.00% 6.50%
Taxable Equivalent Yield
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0-
43,050 $ 0- 25,750 15.00% 15.00% 4.71% 5.29% 5.88% 6.47% 7.06% 7.65%
$ 43,051-
104,050 $ 25,751- 62,450 28.00% 28.00% 5.56 6.25 6.94 7.64 8.33 9.03
$104,051-
126,600 $ 62,451-126,600 31.00% 31.00% 5.80 6.52 7.25 7.97 8.70 9.42
$126,601-
158,550 $126,601-130,250 31.00% 31.93% 5.88 6.61 7.35 8.08 8.81 9.55
$158,551-
283,150 $130,251-283,150 36.00% 37.08% 6.36 7.15 7.95 8.74 9.54 10.33
Over
$283,150 Over $283,150 39.60% 40.79% 6.76 7.60 8.44 9.29 10.13 10.98
- ------------------------------------------------------------------------------------------
</TABLE>

Note: This table reflects the following:
1 Taxable income, as reflected in the above table, equals Federal adjusted
gross income (AGI), less personal exemptions and itemized deductions.
However, certain itemized deductions are reduced by the lesser of (i)
three percent of the amount of the taxpayer's AGI over $126,600, or (ii)
80 percent of the amount of such itemized deductions otherwise allowable.
The effect of the three percent phase out on all itemized deductions and
not just those deductions subject to the phase out is reflected above in
the Federal tax rates through the use of higher effective Federal tax
rates. In addition, the effect of the 80 percent cap on overall itemized
deductions is not reflected on this table. Federal income tax rules also
provide that personal exemptions are phased out at a rate of two percent
for each $2,500 (or fraction thereof) of AGI in excess of $189,950 for
married taxpayers filing a joint tax return and $126,600 for single
taxpayers. The effect of the phase out of personal exemptions is not
reflected in the above table.
2 Interest earned on municipal obligations may be subject to the federal
alternative minimum tax. This provision is not incorporated into the
table.
3 The taxable equivalent yield table does not incorporate the effect of
graduated rate structures in determining yields. Instead, the tax rates
used are the highest marginal tax rates applicable to the income levels
indicated within each bracket.
4 Interest earned on all municipal obligations may cause certain investors
to be subject to tax on a portion of their Social Security and/or
railroad retirement benefits. The effect of this provision is not
included in the above table.

B-27
<PAGE>

PROSPECTUS--Part C:
- --------------------------------------------------------------------------------

Note: Part C of this Prospectus may not be distributed unless accompanied by
Parts A and B.
- --------------------------------------------------------------------------------
TAX EXEMPT SECURITIES TRUST--THE STATE TRUSTS

Potential purchasers of the Units of a State Trust should consider the fact
that the Trust's Portfolio consists primarily of Bonds issued by the state for
which such State Trust is named or its municipalities or authorities and
realize the substantial risks associated with an investment in such Bonds. Each
State Trust is subject to certain additional risk factors. The Sponsor believes
the discussions of risk factors summarized below describe some of the more
significant aspects of the State Trusts. The sources of such information are
the official statements of issuers as well as other publicly available
documents. While the Sponsor has not independently verified this information,
it has no reason to believe that such information is not correct in all
material respects. Investment in a State Trust should be made with an
understanding that the value of the underlying Portfolio may decline with
increases in interest rates.

Florida Trust

Risk Factors --

Population. In 1980, Florida was the seventh most populous state in the U.S.
Florida has grown dramatically since then and as of April 1, 1998, ranks fourth
with an estimated population of 15 million.

. In 1998, about 232,000 more new residents moved into Florida then moved
out.

. The U.S.average population increase since 1990 is about 1.0% annually,
while Florida's average increase is about 1.9% annually.

. Florida continues to be one of the fastest growing of the largest states.

Florida's strong population growth is one reason Florida's economy is
performing better than the U.S. as a whole. In addition to attracting senior
citizens to Florida as a place for retirement, Florida is also recognized as
attracting a significant number of individuals of working age (18-64).

. In recent years, Florida's prime working age population (18-44) has grown
at an average annual rate of more than 2.0%.

. More than 60% of Florida's total population is at the working age (18-
64). This share is not expected to change appreciably into the twenty-
first century.

Income. According to the U.S. Department of Commerce and the Florida Consensus
Economic Estimating Conference, personal income in Florida
has been growing strongly the last several years and has generally performed
better than the U.S. as a whole and the southeast U.S. in particular. This is
due to the fact that Florida's population has been growing at a very strong
pace and, since the early 70's, its economy has diversified providing a broader
economic base.

. Florida's real income per person has tracked closely with the U.S.
average and has tracked above the southeast.

Florida has a proportionately greater retirement age population than other
states. As a result, property, income (dividends, interest, and rent), and
transfer payments (Social Security and pension benefits, among other sources of
income) are relatively more important sources of income to persons residing in
Florida. Transfer payments
(Social Security and pension benefits, among other sources of income) are
typically less sensitive to the ups and downs of the economy than wages and
salaries and other employment income. Transfer payments (Social Security and
pension benefits, and other sources of income), therefore, act as a stabilizing
force in weak economic periods.

The personal income of residents of the various states in the U.S. is
frequently used to make

C-1
<PAGE>

comparisons among the various states. However, using personal income to compare
Florida to other states can be misleading. Florida's personal income is
systematically underestimated. Contributions by employers to employees'
pension, profit sharing, and other retirement plans are included in personal
income of that employee while the employee is working and earning wages and
salary. When those same employees retire, to avoid double accounting,
retirement payments to them from those retirement plans are excluded in
computing personal income. Florida retirees are more likely to be collecting
retirement benefits that they earned in a state other than Florida. As a
result, Florida personal income is underestimated.

. Florida's personal income per person in 1998 was $25,852.

. The U.S. average personal income per person was slightly higher at
$26,412.

. Personal income per person in the southeast United States was
significantly lower at $23,725.

. Total Florida real personal income is forecasted to increase 4.9% in the
fiscal year ended June 30, 1999, and 3.5% in the fiscal year ending June
30, 2000.

. Florida real personal income per person is projected to increase 3.1% in
the fiscal year ended June 30, 1999, and 1.8% in the fiscal year ending
June 30, 2000.

. The Florida economy appears to be growing in line with, but stronger
than, the U.S. economy; however, the Florida economy is expected to grow
more slowly in the fiscal year ending June 30, 2000, than in the fiscal
year ended June 30, 1999.

Employment.

. Since 1992, Florida's population has increased an estimated 11.7%, while
the number of employed persons in Florida increased 15.0%.

. In the same period, Florida's total non-farm employment has grown
approximately 24.6%, while U.S. non-farm jobs increased 15.9%.

. Florida is gradually becoming less dependent on employment related to
construction, agriculture, or manufacturing, and more dependent on
employment related to trade and services. This has also contributed to
Florida's strong economic performance.

Presently, services constitute 36% and trade 25.5% of Florida's total non-
farm jobs. The U.S., however, has a greater percentage of manufacturing jobs
than Florida. Manufacturing jobs tend to pay higher wages, but service jobs can
also pay well and tend to be less sensitive to swings in the business cycle.
Florida has a concentration of manufacturing jobs in high-tech and high value-
added sectors, such as electrical and electronic equipment, as well as printing
and publishing. These type of manufacturing jobs tend to be less cyclical.

. Florida's unemployment rate throughout the 1980's was consistently lower
than that for the U.S.

. In the early 1990's Florida's unemployment rate was higher than that of
the U.S.

. In current years, Florida's unemployment rate has again generally fallen
below that of the U.S.

. Florida's unemployment rate was 4.3% during 1998.

. The U.S. unemployment rate was 4.5% during 1998.

. It is estimated that Florida's unemployment rate will be 4.2% in the
fiscal year ended June 30, 1999, and 4.4% in the fiscal year ending June
30, 2000.

Florida's economy is expected to grow at a moderate rate along with the U.S.,
but is expected to out perform the U.S. as a whole.

. Total non-farm employment in Florida is expected to increase 3.4% for the
fiscal year

C-2
<PAGE>

ended June 30, 1999 and 2.9% for the fiscal year ending June 30, 2000.
Trade and services, the two largest employment sectors, account for more
than half of the total non-farm employment in Florida.

. Employment in the service sectors should experience an increase of 5.5%
for the fiscal year ended June 30, 1999, while growing 4.4% for the
fiscal year ending June 30, 2000. Trade is expected to expand 2.8% for
the fiscal year ended June 30, 1999, and 2.8% for the fiscal year ending
June 30, 2000.

. The service sector is now Florida's largest employment category.

Construction. In the past, Florida's economy has been highly dependent on the
construction industry and construction related manufacturing. This dependency
has declined in recent years and continues to decline as a result of continued
diversification of Florida's economy. For example, in 1973, total contract
construction employment as a share of total non-farm employment was about 10%,
in the late 1980's, the share had edged downward to 7.5%, and in 1998, the
share was only 5.3%. This trend is expected to continue as Florida's economy
continues to diversify. Florida, nevertheless, has a dynamic construction
industry, with the percentage of housing starts increasing in 1998 by 11.1%,
and construction jobs overall increasing by 5.1%, due to low interest rates and
favorable economic conditions.

A driving force behind Florida's construction industry has been Florida's
rapid rate of population growth. Although Florida currently is the fourth most
populous state, its annual population growth is now projected to slow somewhat
as the number of people moving into Florida is expected to remain over 200,000
a year during the next decade. This population trend should provide fuel for
business and home builders to keep construction activity lively in Florida in
the next few years. Moreover, recent federal tax reforms reducing capital gains
realized on the sale of homes may increase the purchases of second, pre-
retirement homes in Florida.

. Single and multi-family housing starts in Florida for the fiscal year
ended June 30, 1999, are projected to reach a combined level of 144,000,
decreasing slightly to 143,000 for the fiscal year ending June 30, 2000.

. Total construction expenditures in Florida are forecasted to increase
8.6% for the fiscal year ended June 30, 1999, and increase 2.5% for the
fiscal year ending June 30, 2000.

. Single and multi-family housing starts in Florida are projected to
account for about 9% of all the housing starts in the U.S. for the fiscal
year ended June 30, 1999 and 9.53% of all housing starts in the U.S. for
the fiscal year ending June 30, 2000.

Tourism. Tourism is one of Florida's most important industries. Approximately
48.7 million tourists visited Florida in 1998, a 3.7% increase over 1997.
Tourists in Florida are, in essence, additional residents for purposes of
determining Florida tax revenues. Florida's tourist industry over the years has
become more sophisticated, attracting visitors year-round and, to a degree,
reducing its seasonality. Visitors to Florida tend to arrive slightly more by
air than by auto.

. Tourist arrivals to Florida are forecasted to increase by 2.0% for the
fiscal year ended June 30, 1999, and 1.7% for the fiscal year ending June
30, 2000.

. Tourist arrivals to Florida by air are expected to increase by 3.2% for
the fiscal year ended June 30, 1999, and increase by 3.9% for the fiscal
year ending June 30, 2000.

. Tourist arrivals by car are expected to increase by 0.6% for the fiscal
year ended June 30, 1999, and decrease 1.0% for the fiscal year ending
June 30, 2000.

C-3
<PAGE>

By June 30, 1999, 49.7 million domestic and international tourists are
expected to have visited Florida. For the fiscal year ending June 30, 2000,
about 50.6 million tourists are expected to visit Florida.

Revenues and Expenses. Estimated General Revenue plus Working Capital and
Budget Stabilization funds available to Florida for the fiscal year ended June
30, 1999, total $19,481.8 million, a 5.2% increase over the fiscal year ended
June 30, 1998. Of the total General Revenue plus Working Capital and Budget
Stabilization funds available to Florida, $17,779.5 million of that is
Estimated Revenues and represents an increase of 5.0% over the previous year's
Estimated Revenues. With effective General Revenues plus Working Capital Fund
and Budget Stabilization appropriations at $18,220.0 million, including $100.9
million transferred to the Budget Stabilization Fund, unencumbered reserves at
the fiscal year ended June 30, 1999, are estimated at $1,360.7 million.
Estimated General Revenue plus Working Capital and Budget Stabilization funds
available to Florida for the fiscal year ending June 30, 2000, total $20,133.9
million, a 3.3% increase over the fiscal year ended June 30, 1999. The
$18,555.2 million in Estimated Resources represents an increase of 4.4% over
the previous year's Estimated Revenues.

General Revenues and Expenses

For the fiscal year ended June 30, 1997, approximately 67% of Florida's total
direct revenue
to its four operating funds were derived from Florida taxes and fees, with
Federal grants and other special revenue accounting for the balance. The large
majority of Florida General Revenue Funds available to Florida for the fiscal
year ended June 30, 1997, were made up of the following taxes:

. Sales and use tax--68%

. Corporate income tax--8%

. Intangible personal property tax--4%

. Beverage tax--3%

. Estate tax--3%

During the same fiscal year ended June 30, 1997, the large majority of
expenditures from Florida's General Revenue Fund were as follows:

. Education--53%

. Health and welfare--26%

. Public Safety--14%

Florida Sales and Use Tax

Florida's sales and use tax (6%) currently accounts for Florida's single
largest source of tax receipts. Slightly less than 10% of Florida's sales and
use tax is designated for local governments and is distributed to the
respective counties in which collected for use by the counties, and the
municipalities in such counties. In addition to this money from the State of
Florida, local governments may (by a vote of the residents) assess a 0.5% or a
1.0% discretionary sales surtax within their county. Proceeds from this local
option sales tax are used for funding local infrastructure programs and
acquiring land for public recreation or conservation or protection of natural
resources as provided under applicable Florida law. Certain charter counties
have other taxing powers in addition, and non-consolidated counties with a
population in excess of 800,000 may levy a local option sales tax to fund
indigent health care. The indigent health care tax alone cannot exceed 0.5% and
when combined with the infrastructure surtax cannot exceed 1.0%.

. For the fiscal year ended June 30, 1997, Florida sales and use tax
receipts (exclusive of the tax on gasoline and special fuels) totaled
$12,089 million, an increase of 5.5% over the fiscal year ended June 30,
1996, collections.

Alcoholic Beverage Tax

Florida imposes an alcoholic beverage, wholesale tax (excise tax) on beer,
wine, and liquor. This tax is one of Florida's major tax sources. Ninety-eight
percent of the revenues collected from this tax are deposited into Florida's
General Revenue Fund.

. Alcoholic beverage tax totaled $447.2 million for the fiscal year ended
June 30, 1997.

C-4
<PAGE>

Corporate Income Tax

Florida imposes an income tax on corporations. All receipts of the corporate
income tax are credited to the General Revenue Fund.

. For the fiscal year ended June 30, 1997, corporate income tax totaled
$1,362.3 million, an increase of 17.2% from the fiscal year ended June
30, 1996.

Documentary Stamp Tax

Florida imposes a documentary stamp tax on deeds and other documents relating
to realty, corporate shares, bonds, certificate of indebtedness, promissory
notes, wage assignments, and retail charge accounts. For the fiscal year ended
June 30, 1997, 62.63% of these taxes were deposited to the General Revenue
Fund.

Documentary stamp tax collections totaled $844.2 million for the fiscal year
ended June 30, 1997, an 8.9% increase from the fiscal year ended June 30, 1996.

Intangible Personal Property Tax

Florida imposes an annual intangible personal property tax on stocks, bonds,
including bonds secured by liens on Florida real property, notes, governmental
leaseholds, and certain other intangibles not secured by a lien on Florida real
property. The annual rate of tax is currently 2 mills (a mill is $1.00 of tax
per $1,000.00 of property value). Effective January 1, 2000, the rate for the
annual intangible tax will decrease to 1.5 mills. Florida also imposes a non-
recurring 2 mill tax on mortgages and other obligations secured by liens on
Florida real property. Of the net taxes imposed on intangible personal
property, 66.5% are distributed to the General Revenue Fund.

. For the fiscal year ended June 30, 1997, total intangible personal
property tax collections were $952.4 million, a 6.3% increase from the
fiscal year ended June 30, 1996.

Estate Tax

Florida imposes an estate tax on the estate of a decedent for the privilege
of transferring property at death. All receipts of the estate tax are credited
to the General Revenue Fund.

. For the fiscal year that ended June 30, 1997, receipts from this source
were $546.9 million, an increase of 30% over the fiscal year ended June
30, 1996.

Lottery

Florida began its own lottery in 1988. Florida law requires that lottery
revenues be distributed 50% to the public in prizes, at least 38.0% for use in
enhancing education, and no more than 12.0%, for costs of administering the
lottery.

. Lottery ticket sales for the fiscal year ended June 30, 1997 totaled
$2.09 billion, providing education with approximately $792.3 million.

Debt-Balanced Budget Requirement. At the end of the fiscal year ended June
30, 1998, Florida had outstanding about $8,703 million in principal amount of
debt secured by its full faith and credit. Since then, the State has issued
about $629 million in principal amount of full faith and credit bonds.

Florida's Constitution and statutes require that Florida not run a deficit in
its budget, as a whole, or in any separate fund within its budget. Rather its
budget and funds must be kept in balance from currently available revenues each
fiscal year. If the Governor or Comptroller believes a deficit will occur in
any fund, by statute, he must certify his opinion to the Administrative
Commission, which then is authorized to reduce all Florida agency budgets and
releases by a sufficient amount to prevent a deficit in any fund. Additionally,
the Florida Constitution prohibits Florida from borrowing by issuing bonds to
fund its operations.

Litigation Currently under litigation are several issues relating to Florida
actions or Florida taxes that put at risk a portion of General Revenue Fund
monies. There is no assurance that any of such matters, individually or in the
aggregate, will not have a material adverse affect on Florida's financial
position. A brief summary of these matters follows.

C-5
<PAGE>

Nathan M. Hameroff, M.D., et al. v. Agency for Healthcare Administration, et
al.

The plaintiff challenged the constitutionality of Florida's Public
Medical Assistance Trust Fund annual assessment on net operating revenue of
free standing out-patient facilities offering sophisticated radiology
services. The trial has not been scheduled. If
Florida is unsuccessful in its action, the potential cost to Florida could
be $70 million.

Barnett Bank v. Florida Department of Revenue

This case involves the issue of whether under Florida's refund statute
for dealer repossessions, the Florida Department of Revenue ("DOR") is
authorized to grant a refund to a financial institution, which is the
assignee of security agreements governing the sale of automobiles and other
property sold through dealers. The 4th Judicial Circuit found that the
statute not only provides a refund or credit to the dealer who sold the
tangible personal property and collected and remitted the tax, but that the
statute also allows the right to the refund to be assigned. Several banks
have already applied for refunds based on this holding and the potential
amount in refunds to financial institutions could exceed $30 million
annually. DOR plans to appeal this decision.

Tower Environmental v. Florida Department of Environmental Protection

The plaintiff has alleged that the State of Florida and the Department of
Environmental Protection ("DEP") breached contracts with it by freezing the
processing of reimbursement applications and by terminating the petroleum
reimbursement process. The plaintiff argues alternatively that these
actions are torts or impairment of contractual obligations. The plaintiff
further alleges that the termination of reimbursement claims constitute a
breach of contract. The plaintiff seeks damages, attorneys fees and costs,
the total of which could reach $60 million.

Barnett Banks, Inc. v. Florida Department of Revenue

The taxpayer in this case challenged the imposition of interest on
additional amounts of corporate income tax due as a result of adjustments
under a Federal income tax audit that were reported to Florida. DOR's
historical position is that interest is due from the due date of the return
until payment of the additional amount of tax is made. The taxpayer
contends that interest should begin to accrue only from the date the
Federal audit adjustments were due to be reported to Florida. A Final Order
was issued adopting DOR's position, but the taxpayer has appealed. The
potential lost revenue and refund exposure is in the range of $12 to $20
million annually.

Deficit Fund Equity

The Florida Casualty Insurance Risk Management Trust Fund has deficit
retained earnings of approximately $567 million. These represent long term
liabilities of Florida as a whole. These liabilities include claims
pertaining to state employee Workers' Compensation, federal civil rights,
and general and automotive liability.

The Special Disability Trust Fund has a deficit fund balance of
approximately $1.9 billion. This deficit is the result of claims expense
over net assessment revenue.

Year 2000 Readiness

Some of the computer technology used by the State of Florida may not have
been designed to recognize the year 2000, which means that instead of treating
the double zeros as the end of 2000 as indicating the year 2000, the technology
treats the double zeros as indicating the year 1900. Despite considerable
efforts made by the State to bring all of its computer hardware, software, and
embedded technology into compliance so as to recognize the year 2000, there can
be no guarantee that year 2000 compliance will be achieved in a timely manner
and

C-6
<PAGE>

no assurance made that entities that deal with Florida will have achieved year
2000 compliance.

Florida maintains a bond rating of Aa2, AA+ and AA from Moody's Investors
Service, Standard & Poors Corporation, and Fitch, respectively, on the majority
of its general obligation bonds, although the rating of a particular series of
revenue bonds relates primarily to the project, facility, or other revenue
source from which such series derives funds for repayments While theses ratings
and some of the information presented above indicate that Florida is in
satisfactory economic health, there can be no assurance that there will not be
a decline in economic conditions or that particular Florida Municipal
Obligations purchased by the Fund will not be adversely affected by any such
changes.

The sources for the information presented above include official statements
and financial statements of the State of Florida. While the Sponsor has not
independently verified this information, the Sponsor has no to believe that the
information is not correct in all material respects.

Florida Taxes --

In the opinion of Carlton Fields, Tampa, Florida, special counsel on
Florida tax matters, under existing law:

The Florida Trust will not be subject to the Florida income tax imposed
by Chapter 220 so long as the Florida Trust transacts no business in
Florida or has no income subject to federal income taxation. In addition,
political
subdivisions of Florida do not impose any income taxes.

Non-Corporate Unit holders will not be subject to any Florida income
taxation on income realized by the Florida Trust. Corporate Unit holders
with commercial domiciles in Florida will be subject to Florida income
taxation on income realized by the Trust. Other corporate Unit holders will
be subject to Florida income taxation on income realized by the Florida
Trust only to the extent that the income realized is other than "non-
business income" as defined by Chapter 220.

Florida Trust Units will be subject to Florida estate tax if owned by
Florida residents and may be subject to Florida estate tax if owned by
other decedents at death. However, the Florida estate tax is limited to the
amount of the credit allowable under the applicable Federal Revenue Act
(currently Section 2011 [and in some cases Section 2102] of the Internal
Revenue Code of 1986, as amended) for death taxes actually paid to the
several states.

Neither the Bonds nor the Units will be subject to the Florida ad valorem
property tax or Florida sales or use tax.

Neither the Florida Trust nor the Units will be subject to Florida
intangible personal property tax.

Maryland Trust

Risk Factors--The Public indebtedness of the State of Maryland (the "State")
and its instrumentalities is divided into three general types. The State issues
general obligation bonds for capital improvements and for various State
projects to the payment of which the State ad valorem property tax is
exclusively pledged. In addition, the Maryland Department of Transportation
issues for transportation purposes its limited, special obligation bonds
payable primarily from specific, fixed-rate
excise taxes and other revenues related mainly to highway use. Certain
authorities issue obligations payable solely from specific non-tax, enterprise
fund revenues and for which the State has no liability and has given no moral
obligation assurance.

General obligation bonds of the State are authorized and issued primarily to
provide funds for State-owned capital improvements, including institutions of
higher learning, and the construction of locally owned public schools. Bonds
have also been issued for local government improvements, including grants and
loans for water quality improvement projects and correctional facilities, to
provide funds for repayable loans or outright grants to private, non-profit
cultural or educational institutions, and to fund certain loan and grant
programs.

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<PAGE>

The Maryland Constitution prohibits the contracting of State debt unless it
is authorized by a law levying an annual tax or taxes sufficient to pay the
debt service within 15 years and prohibiting the repeal of the tax or taxes or
their use for another purpose until the debt is paid. As a uniform practice,
each separate enabling act which authorizes the issuance of general obligation
bonds for a given object or purpose has specifically levied and directed the
collection of an ad valorem property tax on all taxable property in the State.
The Board of Public Works is directed by law to fix by May 1 of each year the
precise rate of such tax necessary to produce revenue sufficient for debt
services requirements of the next fiscal year, which begins July 1. However,
the taxes levied need not be collected if or to the extent that funds
sufficient for debt services requirements in the next fiscal year have been
appropriated in the annual State budget. Accordingly, the Board in annually
fixing the rate of property tax after the end of the regular legislative
session in April, takes account of appropriations of general funds for debt
service.

In the opinion of counsel, the courts of Maryland have jurisdiction to
entertain proceeds and power to grant mandatory injunctive relief to (i)
require the Governor to include in the annual budget a sufficient appropriation
to pay all general obligation bond debt service for the ensuing fiscal year;
(ii) prohibit the General Assembly from taking action to reduce any such
appropriation below the level required for that debt service; (iii) require the
Board of Public Works to fix and collect a tax on all property in the State
subject to assessment for State tax purposes at a rate and in an amount
sufficient to make such payments to the extent that adequate funds are not
provided in the annual budget; and (iv) provide such other relief as might be
necessary to enforce the collection of such taxes and payment of the proceeds
of the tax collection to the holders of general obligation bonds, pari passu,
subject to the inherent constitutional limitations referred to below.

It is also the opinion of counsel that, while the mandatory injunctive
remedies would be available and while the general obligation bonds of the State
are entitled to constitutional protection against the impairment of the
obligation of contracts, such constitutional protection and the enforcement of
such remedies would not be absolute. Enforcement of a claim for payment of the
principal of or interest on the bonds would be subject to the provisions of any
statutes that may be constitutionally enacted by the United States Congress or
the Maryland General Assembly extending the time for payment or imposing other
constraints upon enforcement.

There is no general debt limit imposed by the Maryland Constitution or public
general laws, but a special committee created by statute annually submits to
the Governor an estimate of the maximum amount of new general obligation debt
that prudently may be authorized. Although the committee's responsibilities are
advisory only, the Governor is required to give due consideration to the
committee's findings in preparing a preliminary allocation of new general debt
authorization for the next ensuing fiscal year.

Consolidated Transportation Bonds are limited obligations issued by the
Maryland Department of Transportation, the principal of which must be paid
within 15 years from the date of issue, for highway, port, transit, rail or
aviation facilities or any combination of such facilities. Debt service on
Consolidated Transportation Bonds is payable from those portions of the excise
tax on each gallon of motor vehicle fuel and the motor vehicle titling tax, all
mandatory motor vehicle registration fees, monitor carrier fees, and the
corporate income tax as are credited to the Maryland Department of
Transportation, plus all departmental operating revenues and receipts. Holders
of such bonds are not entitled to look to other sources for payment.

The Maryland Department of Transportation also issues its bonds to provide
financing of local road construction and various other county transportation
projects and facilities. Debt service on these bonds is payable from the
subdivisions' share of highway user revenues held to their credit in a

C-8
<PAGE>

special State fund. On November 9, 1994, the Maryland Transportation Authority
issued $162.6 million of special obligation revenue bonds to fund projects at
the Baltimore/Washington International Airport secured by revenues from the
passenger facility charges received by the Maryland Aviation Administration and
from the general account balance of the Transportation Authority. As of June
30, 1997, $388.7 million of the Transportation Authority's revenue bonds were
outstanding.

The Maryland Transportation Authority operates certain highway, bridge and
tunnel toll facilities in the State. The tolls and other revenues received from
these facilities are pledged as security for revenue bonds of the Authority
issued under and secured by a trust agreement between the Authority and a
corporate trustee.

Certain other instrumentalities of the State government are authorized to
borrow money under legislation which expressly provides that the loan
obligations shall not be deemed to constitute a debt or a pledge of the faith
and credit of the State. The Community Development Administration of the
Department of Housing and Community development, the Board of Trustees of St.
Mary's
College of Maryland, the Maryland Environmental Service, the Board of Regents
of the University of Maryland System, the Board of Regents of Morgan State
University, and the Maryland Food Center Authority have issued and have
outstanding bonds of this type. The principal of and interest on bonds issued
by these bodies are payable solely from various sources, principally fees
generated from use of the facilities or enterprises financed by the bonds.

Under a Comprehensive Plan of Financing, as amended, of the Maryland Stadium
Authority, the Authority is authorized to finance the acquisition and
construction of sports facilities at a site within the City of Baltimore.
Currently, the Stadium Authority operates Oriole Park at Camden Yards which
opened in 1992. The Authority's financings are lease-backed revenue
obligations, payment of which is secured by, among other things, an assignment
of revenues to be received under a lease of the sports facilities from the
Authority to the State of Maryland; rental payments due from the State under
that lease will be subject to annual appropriation by the Maryland General
Assembly.

In October 1995, the Stadium Authority and the Baltimore Ravens (formally
known as the Cleveland Browns) executed a Memorandum of Agreement which commits
the Ravens to occupy a to be constructed football stadium in Baltimore City.
The Agreement was approved by the Board of Public Works and constitutes a
"long-term lease with a National Football League team" as required by statute
for the issuance of Stadium Authority bonds. The Stadium Authority sold $87.565
million in lease-backed revenue bonds on May 1, 1996. The proceeds from the
bonds, along with cash available from State lottery proceeds, investment
earnings, and other sources will be used to pay project design and construction
expenses of approximately $200 million. The bonds are solely secured by an
assignment of revenues received under a lease of the project from the Stadium
Authority to the State.

The Stadium Authority has also been assigned responsibility for constructing
an expansion of the
Convention Centers in Baltimore City and Ocean City and construction of a
conference center in Montgomery County. The Baltimore Convention Center
expansion is expected to cost $163 million and is being financed through a
combination of funding from Baltimore City, Stadium Authority revenue bonds,
and State general obligation bonds. The Ocean City Convention Center expansion
is expected to cost $35 million and is being financed through a combination of
funding from Ocean City and the Stadium Authority. The Montgomery County
Conference Center is expected to cost $27.5 million and is being financed
through a combination of funding from Montgomery County and the Stadium
Authority.

The Water Quality Revolving Loan Fund is administered by the Water Quality
Financing Administration in the Department of the

C-9
<PAGE>

Environment. The Fund may be used to provide loans, subsidies and other forms
of financial assistance to local government units for wastewater treatment
projects as contemplated by the 1987 amendments to the federal Water Pollution
Control Act. The Administration is authorized to issue bonds secured by
revenues of the Fund, including loan repayments, federal capitalization grants,
and matching State grants.

The University of Maryland System, Morgan State University, and St. Mary's
College of Maryland are authorized to issue revenue bonds for the purpose of
financing academic and auxiliary facilities. Auxiliary facilities are any
facilities that furnish a service to students, faculty, or staff, and that
generate income. Auxiliary facilities include housing, eating, recreational,
campus, infirmary, parking, athletic, student union or activity, research
laboratory, testing and any related facilities.

Although the State has authority to make short-term borrowings in
anticipation of taxes and other receipts up to a maximum of $100 million, in
the past it has not issued short-term borrowings. However, the State has issued
certain obligations in the nature of bond anticipation notes for the purpose
of assisting several savings and loan associations in qualifying for Federal
insurance and in connection with the assumption by a bank of the deposit
liabilities of an insolvent savings and loan association.

The State has financed the construction and acquisition of various facilities
through conditional purchase, sale-leaseback, and similar transactions. All of
the lease payments under these arrangements are subject to annual appropriation
by the Maryland General Assembly. In the event that appropriations are not
made, the State may not be held contractually liable for the payments.

Local Subdivision Debt. The counties and incorporated municipalities in
Maryland issue general obligation debt for general governmental purposes. The
general obligation debt of the counties and incorporated municipalities is
generally supported by ad valorem taxes on real estate, tangible personal
property and intangible personal property subject to taxation. The issuer
typically pledges its full faith and credit and unlimited taxing power to the
prompt payment of the maturing principal and interest on the general obligation
debt and to the levy and collection of the ad valorem taxes as and when such
taxes become necessary in order to provide sufficient funds to meet the debt
service requirements. The amount of debt which may be authorized may in some
cases be limited by the requirements that it not exceed a stated percentage of
the assessable base upon which taxes are levied.

In the opinion of counsel, the issuer may be sued in the event that it fails
to perform its obligations under the general obligation debt to the holders of
the debt, and any judgments resulting from such suits would be enforceable
against the issuer. Nevertheless, a holder of the debt who has obtained any
such judgment may be required to seek additional relief to compel the issuer to
levy and collect such taxes as may be necessary to provide the Funds from which
a judgment may be paid. Although there is no Maryland law on this point, it
is the opinion of counsel that the appropriate courts of Maryland have
jurisdiction to entertain proceedings and power to grant additional relief,
such as a mandatory injunction, if necessary, to enforce the levy and
collection of such taxes and payment of the proceeds of the collection of the
taxes to the holders of general obligation debt, pari passu subject to the same
constitutional limitations on enforcement, as described above, as apply to the
enforcement of judgments against the State.

Local subdivisions, including counties and municipal corporations, are also
authorized by law to issue special and limited obligation debt for certain
purposes other than general governmental purposes. The source of payment of
that debt is limited to certain revenues of the issuer derived from commercial
activities operated by the issuer, payment made with respect to certain
facilities or

C-10
<PAGE>

loans and any funds pledged for the benefit of the holders of the debt. That
special and limited obligation debt does not constitute a debt of the State,
the issuer or any other political subdivision of either within the meaning of
any constitutional or statutory limitation. Neither the State nor the issuer or
any other political subdivision of either is obligated to pay the debt or the
interest on the debt except from the revenues of the issuer specifically
pledged to the payment of the debt. Neither the faith and credit nor the taxing
power of the State, the issuer or any other political subdivision of either is
pledged to the payment of the debt. The issuance of the debt is not directly or
indirectly or contingently an obligation, moral or other, of the State, the
issuer or any other political subdivision of either to levy any tax for its
payment.

Special Authority Debt. The State and local governments have created several
special authorities with the power to issue debt on behalf of the State or
local government for specific purposes, such as providing facilities for non-
profit health care and higher educational institutions, facilities for the
disposal of solid waste, funds to finance single family and low-to-moderate
income housing, and similar purposes. The Maryland Health and Higher
Educational Facilities Authority, the Northeast Maryland Waste Disposal
Authority, the Housing Opportunities Commission of Montgomery County, and the
Housing Authority of Prince George's County are some of the special authorities
which have issued and have outstanding debt of this type.

The debts of the authorities issuing debt on behalf of the State and the
local governments are limited obligations of the authorities payable solely
from and secured by a pledge of the revenues derived from the facilities or
loans financed with the proceeds of the debt and from any other funds and
receipts pledged under an indenture with a corporate trustee. The debt does not
constitute a debt, liability or pledge of the faith and credit of the State or
of any political subdivision or of the authorities. Neither the State nor any
political subdivision thereof nor the authorities shall be obligated to pay the
debt or the interest on the debt except from such revenues, funds and receipts.
Neither the faith and credit nor the taxing power of the State or of any
political subdivision of the State or the authorities is pledged to the payment
of the principal of or the interest on such debt. The issuance of the debt is
not directly or indirectly an obligation, moral or other, of the State or of
any political subdivision of the State or of the authority to levy or to pledge
any form of taxation whatsoever, or to make any appropriation, for their
payment. The authorities have no taxing power.

Maryland Taxes --

In the opinion of Messrs. Saul, Ewing, Remick & Saul LLP, special Maryland
counsel of Maryland tax matters, under applicable existing Maryland State and
local tax law:

The Maryland Trust will not be treated as an association taxable as a
corporation, and the income of the Maryland Trust will be treated as the
income of the Holders. The Maryland Trust is not a "financial institution"
subject to the Maryland Franchise Tax measure by net earnings. The Maryland
Trust is not subject to Maryland property taxes imposed on the intangible
personal property of certain corporations.

Except as described below in the case of interest paid on private
activity bonds constituting a tax preference for Federal income tax
purposes, a Holder will not be required to include such Holder's pro-rata
share of the earnings of, or distributions from, the Maryland Trust in such
Holder's Maryland taxable income to the extent that such earnings or
distributions represent interest excludable from gross income for Federal
income tax purposes received by the Maryland Trust on obligations of the
State of Maryland, the Government of Puerto Rico, or the Government of Guam
and their respective political subdivisions and authorities. Interest on
Bonds is not subject to the Maryland Franchise Tax imposed on "financial
institutions" and measured by net earnings.

C-11
<PAGE>

In the case of taxpayers who are individuals, Maryland presently imposes
an income tax on items of tax preference with reference to such items as
defined in the Internal Revenue Code, as amended, for purposes of
calculating the Federal alternative minimum tax. Interest paid on certain
private activity bonds is a preference item for purposes of calculating the
Federal alternative minimum tax. Accordingly, if the Maryland Trust holds
such bonds, 50% of the interest on such bonds in excess of a threshold
amount is taxable by Maryland.

A Holder will recognize taxable gain or loss, except in the case of an
individual Holder who is not a Maryland resident, when the Holder disposes
of all or part of such Holder's pro rata portion of the Bonds in the
Maryland Trust. A Holder will be considered to have disposed of all or part
of such Holder's pro rata portion of each Bond when the Holder sells or
redeems all or some of such Holder's Units. A Holder will also be
considered to have disposed of all or part of such Holder's pro rata
portion of a Bond when all or part of the Bond is disposed of by the
Maryland Trust or is redeemed or paid at maturity. Gains included in the
gross income of Holders for federal income tax purposes is, however,
subtracted from income for Maryland income tax purposes to the extent that
the gain is derived from the disposition of Bonds issued by the State of
Maryland and its political subdivisions. Profits realized on the sale or
exchange of Bonds are not subject to the Maryland Franchise Tax imposed on
"financial institutions" and measured by net earnings.

Units of the Maryland Trust will be subject to Maryland inheritance and
estate tax only if held by Maryland residents.

Neither the Bonds nor the Units will be subject to Maryland personal
property tax.

The sales of Units in Maryland or the holding of Units in Maryland will
not be subject to Maryland Sales or Use Tax.

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<PAGE>

TAX FREE VS. TAXABLE INCOME

The following tables show the approximate yields which taxable securities
must earn in various income brackets to equal tax exempt yields under combined
Federal and state individual income tax rates. This table reflects projected
Federal income tax rates and tax brackets for the 1999 taxable year and state
income tax rates that were available on the date of the Prospectus. Because
the Federal rate brackets are subject to adjustment based on changes in the
Consumer Price Index, the taxable equivalent yields for subsequent years may
be lower than indicated. A table is computed on the theory that the taxpayer's
highest bracket tax rate is applicable to the entire amount of any increase or
decrease in taxable income (after allowance for any resulting change in state
income tax) resulting from a switch from taxable to tax-free securities or
vice versa. Variations between state and Federal allowable deductions and
exemptions are generally ignored. The state tax is thus computed by applying
to the Federal taxable income bracket amounts shown in the table the
appropriate state rate for those same dollar amounts. For example, a married
couple living in the State of Florida and filing a Joint Return with $53,000
in taxable income for the 1999 tax year would need a taxable investment
yielding 8.33% in order to equal a tax-free return of 6.00%. Use the
appropriate table to find your tax bracket. Read across to determine the
approximate taxable yield you would need to equal a return free of Federal
income tax and state income tax.

STATE OF FLORIDA
1999 Tax Year
<TABLE>
<CAPTION>
TAX EXEMPT YIELD
Taxable Income Bracket 4.00% 4.50% 5.00% 5.50% 6.00% 6.50%
Joint Return Single Return Effective Federal Tax Rate TAXABLE EQUIVALENT YIELD
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 - 43,050 $ 0 - 25,750 15.00% 4.71% 5.29% 5.88% 6.47% 7.06% 7.65%
$ 43,051 - 104,050 $ 25,751 - 62,450 28.00 5.56 6.25 6.94 7.64 8.33 9.03
$104,051 - 126,600 $ 62,451 - 126,600 31.00 5.80 6.52 7.25 7.97 8.70 9.42
$126,601 - 158,550 $126,601 - 130,250 31.93 5.88 6.61 7.35 8.08 8.81 9.55
$158,551 - 283,150 $130,251 - 283,150 37.08 6.36 7.15 7.95 8.74 9.54 10.33
OVER $283,150 OVER $283,150 40.79 6.76 7.60 8.44 9.29 10.13 10.98
</TABLE>
- --------
Note: This table reflects the following:
1 Taxable income equals adjusted gross income ("AGI") less personal
exemptions and itemized deductions. However, certain itemized deductions
are reduced by the lesser of (i) three percent of the amount of the
taxpayer's AGI over $124,500, or (ii) 80 percent of the amount of such
itemized deductions otherwise allowable. The effect of the three percent
phase out on all itemized deductions and not just those deductions
subject to the phase out is reflected above in the combined Federal and
state tax rates through the use of higher effective Federal tax rates. In
addition, the effect of the 80 percent cap on overall itemized deductions
is not reflected on this table. Federal income tax rules also provide
that personal exemptions are phased out at a rate of two percent for each
$2,500 (or fraction thereof) of AGI in excess of $186,800 for married
taxpayers filing a joint tax return and $124,500 for single taxpayers.
The effect of the phase out of personal exemptions is not reflected in
the above table.
2 Interest earned on municipal obligations may be subject to the federal
alternative minimum tax. This provision is not incorporated into the
table.
3 The taxable equivalent yield table does not incorporate the effect of
graduated rate structures in determining yields. Instead, the tax rates
used are the highest rates applicable to the income levels indicated
within each bracket.
4 Interest earned on all municipal obligations may cause certain investors
to be subject to tax on a portion of their Social Security and/or
railroad retirement benefits. The effect of this provision is not
included in the above table.
5 The State of Florida does not impose a state personal income tax.

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<PAGE>

STATE OF MARYLAND
1999 Tax Year

<TABLE>
<CAPTION>
Approx. Combined
Federal, State TAX FREE YIELD
Taxable and Local 4.00% 4.50% 5.00% 5.50% 6.00% 6.50%
Income Bracket Tax Rate
TAXABLE EQUIVALENT YIELD
JOINT RETURN
<S> <C> <C> <C> <C> <C> <C> <C>
$ 0-
1,000 16.70% 4.80% 5.40% 6.00% 6.60% 7.20% 7.80%
$ 1,001-
2,000 17.55 4.85 5.46 6.06 6.67 7.28 7.88
$ 2,001-
3,000 18.40 4.90 5.51 6.13 6.74 7.35 7.97
$ 3,001-
43,050 19.12 4.95 5.56 6.18 6.80 7.42 8.04
$ 43,051-
104,050 31.49 5.84 6.57 7.30 8.03 8.76 9.49
$104,051-
126,600 34.35 6.09 6.85 7.62 8.38 9.14 9.90
$126,601-
158,550 35.23 6.18 6.95 7.72 8.49 9.26 10.04
$158,551-
283,150 40.13 6.68 7.52 8.35 9.19 10.02 10.86
Over
$283,150 43.66 7.10 7.99 8.87 9.76 10.65 11.54
SINGLE RETURN
$ 0-
1,000 16.70% 4.80% 5.40% 6.00% 6.60% 7.20% 7.80%
$ 1,001-
2,000 17.55 4.85 5.46 6.06 6.67 7.28 7.88
$ 2,001-
3,000 18.40 4.90 5.51 6.13 6.74 7.35 7.97
$ 3,001-
25,750 19.12 4.95 5.56 6.18 6.80 7.42 8.04
$ 25,751-
62,450 31.49 5.84 6.57 7.30 8.03 8.76 9.49
$ 62,451-
126,600 34.35 6.09 6.85 7.62 8.38 9.14 9.90
$126,601-
130,250 35.23 6.18 6.95 7.72 8.49 9.26 10.04
$130,251-
283,150 40.13 6.68 7.52 8.35 9.19 10.02 10.86
Over
$283,150 43.66 7.10 7.99 8.87 9.76 10.65 11.54
</TABLE>
- ------------
Note: This table reflects the following:
1 Taxable income, as reflected in the above table, equals Federal adjusted
gross income (AGI), less personal exemptions and itemized deductions
(including the deduction for state income tax). However, certain itemized
deductions are reduced by the lesser of (i) three percent of the amount
of the taxpayer's AGI over $126,600, or (ii) 80 percent of the amount of
such itemized deductions otherwise allowable. The effect of the three
percent phase out on all itemized deductions and not just those
deductions subject to the phase out is reflected above in the combined
Federal and state tax rates through the use of higher effective Federal
tax rates. In addition, the effect of the 80 percent cap on overall
itemized deductions is not reflected on this table. Federal income tax
rules also provide that personal exemptions are phased out at a rate of
two effective Federal tax rates. Federal income tax rules also provide
that personal exemptions are phased out at a rate of two percent for each
$2,500 (or fraction thereof) of AGI in excess of $189,950 for married
taxpayers filing a joint tax return and $126,600 for single taxpayers.
The effect of the phase out of personal exemptions is not reflected in
the above table .
2 Interest earned on municipal obligations may be subject to the federal
alternative minimum tax. The effect of this provision is not incorporated
into the table.
3 The taxable equivalent yield table does not incorporate the effect of
graduated rate structures in determining yields. Instead, the tax rates
used are the highest rates applicable to the income levels indicated
within each bracket.
4 Interest earned on all municipal obligations may cause certain investors
to be subject to tax on a portion of their Social Security and/or
railroad retirement benefits. The effect of this provision is not
included in the above table.

C-14
<PAGE>

TAX EXEMPT SECURITIES TRUST
----------------------------------------------------------------

11,000 Units Dated September 22, 1999

PROSPECTUS

This Prospectus does not contain all of the information with respect to the
Trust set forth in its registration statements filed with the Securities and
Exchange Commission, Washington, D.C. under the Securities Act of 1933 (file
nos. 333-86623, 333-86631 and 333-83477) and the Investment Company Act of 1940
(file no. 811-2560), and to which reference is hereby made. Copies may be
reviewed at the Commission or on the internet, or obtained from the Commission
at prescribed rates by:
. calling: 1-800-SEC-0330
. visiting the SEC internet address: http://www.sec.gov.
. writing: Public Reference Section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549-6009
- --------------------------------------------------------------------------------

Index Sponsor:

<TABLE> Salomon Smith Barney
<S> <C> Inc.
Investment Summary A-2 388 Greenwich Street
Summary of Essential Information A-8 23rd Floor
Portfolio Summary as of Date of New York, New York 10013
Deposit A-9 (212) 816-4000
Underwriting A-10
Independent Auditors' Report A-11
Statements of Financial Condition A-12
Portfolio A-13
Notes to Portfolios of Securities A-21
Tax Exempt Securities Trust B-1
Risk Factors B-2
Taxes B-9
Expenses and Charges B-13
Public Offering B-14
Rights of Holders B-17
Sponsor B-21
Trustee B-22
Evaluator B-22
Amendment and Termination of the
Trust Agreement B-23
Miscellaneous B-23
Bond Ratings B-24
Federal Tax Free vs. Taxable Income B-27
The State Trusts C-1
Tax Free vs. Taxable Income C-13
</TABLE>

Trustee:

The Chase Manhattan Bank
4 New York Plaza
New York, New York 10004
(800) 354-6565

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

SalomonSmithBarney
----------------------------
A member of citigroup [LOGO]

- --------------------------------------------------------------------------------
No person is authorized to give any information or to make any representations
with respect to this Trust, not contained in this Prospectus and you should not
rely on any other information.
- --------------------------------------------------------------------------------
Salomon Smith Barney is the service mark used by Salomon Smith Barney Inc.