Rule 497(b)
Registration No. 2-68167
Note: Part A of This Prospectus May Not Be
Distributed Unless Accompanied by Part B.
MUNICIPAL SECURITIES TRUST
SERIES 4
- ------------------------------------------------------------------------------
The Trust is a unit investment trust designated Series 4 ("Municipal
Trust") with an underlying portfolio of long-term tax-exempt bonds issued by or
on behalf of states, municipalities and public authorities, and was formed to
preserve capital and to provide interest income (including, where applicable,
earned original issue discount) which, in the opinions of bond counsel to the
respective issuers, is, with certain exceptions, currently exempt from regular
Federal income tax (including where applicable earned original discount) under
existing law but may be subject to state and local taxes. Such interest income
may, however, be a specific preference item for purposes of Federal individual
and/or corporate alternative minimum tax. Investors may recognize taxable
capital gain upon maturity or earlier redemption of the underlying bonds. (See
"Tax Status" and "The Trust--Portfolio" in Part B of this Prospectus.) The
Sponsor is Reich & Tang Distributors L.P. (successor Sponsor to Bear, Stearns &
Co. Inc.). The value of the Units of the Trust will fluctuate with the value of
the underlying bonds. Minimum purchase: 1 Unit.
- ------------------------------------------------------------------------------
This Prospectus consists of two parts. Part A contains the Summary
of Essential Information as of December 31, 1995 (the "Evaluation Date"), a
summary of certain specific information regarding the Trust and audited
financial statements of the Trust, including the related portfolio, as of the
Evaluation Date. Part B of this Prospectus contains a general summary of the
Trust.
Investors should retain both parts of this Prospectus for
future reference.
- ------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus Part A Dated April 30, 1996
112152.1
<PAGE>
THE TRUST. The Trust is a unit investment trust formed to preserve
capital and to provide interest income (including, where applicable, earned
original issue discount) which, in the opinions of bond counsel to the
respective issuers, is, with certain exceptions, currently exempt from regular
federal income tax under existing law through investment in a fixed, diversified
portfolio of long-term bonds (the "Bonds") issued by or on behalf of states,
municipalities and public authorities. A Trust designated as a
short/intermediate-term trust must have a dollar-weighted average portfolio
maturity of more than two years but less than five years; a Trust designated as
an intermediate-term trust must have a dollar-weighted average portfolio
maturity of more than three years but not more than ten years; a Trust
designated as an intermediate/long-term trust must have a dollar-weighted
average portfolio maturity of more than ten years but less than fifteen years;
and a Trust designated as a long-term trust must have a dollar-weighted average
portfolio maturity of more than ten years. Although the Supreme Court has
determined that Congress has the authority to subject interest on bonds such as
the Bonds in the Trust to regular federal income taxation, existing law excludes
such interest from regular federal income tax. Such interest income may,
however, be subject to the federal corporate alternative minimum tax and to
state and local taxes. (See "Description of Portfolio" in this Part A for a
description of those Bonds which pay interest income subject to the federal
individual alternative minimum tax. See also "Tax Status" in Part B of this
Prospectus.) Some of the Bonds in the portfolio may be "Zero Coupon Bonds",
which are original issue discount bonds that provide for payment at maturity at
par value, but do not provide for the payment of any current interest. Some of
the Bonds in the portfolio may have been purchased at an aggregate premium over
par. Some of the Bonds in the Trust have been issued with optional refunding or
refinancing provisions ("Refunded Bonds") whereby the issuer of the Bond has the
right to call such Bond prior to its stated maturity date (and other than
pursuant to sinking fund provisions) and to issue new bonds ("Refunding Bonds")
in order to finance the redemption. Issuers typically utilize refunding calls in
order to take advantage of lower interest rates in the marketplace. Some of
these Refunded Bonds may be called for redemption pursuant to pre-refunding
provisions ("Pre-Refunded Bonds") whereby the proceeds from the issue of the
Refunding Bonds are typically invested in government securities in escrow for
the benefit of the holders of the Pre-Refunded Bonds until the refunding call
date. Usually, Pre-Refunded Bonds will bear a triple-A rating because of this
escrow. The issuers of Pre-Refunded Bonds must call such Bonds on their
refunding call date. Therefore, as of such date, the Trust will receive the call
price for such bonds but will cease receiving interest income with respect to
them. For a list of those Bonds which are Pre-Refunded Bonds, if any, as of the
Evaluation Date, see "Notes to Financial Statements" in this Part A. All of the
Bonds in the Trust were rated "A" or better by Standard & Poor's Corporation or
Moody's Investors Service, Inc. at the time originally deposited in the Trust.
For a discussion of the significance of such ratings see "Description of Bond
Ratings" in Part B of this Prospectus and for a list of ratings on the
Evaluation Date see the "Portfolio". The payment of interest and preservation of
capital are, of course, dependent upon the continuing ability of the issuers of
the Bonds to meet their obligations. There can be no assurance that the Trust's
objectives will be achieved. Investment in the Trust should be made with an
understanding of the risks which an investment in long-term fixed rate
obligations may entail, including the risk that the value of the underlying
portfolio will decline with increases in interest rates, and that the value of
Zero Coupon Bonds is subject to greater fluctuations than coupon bonds in
response to changes in interest rates. Each Unit in the Trust represents a
1/8484th undivided interest in the principal and net income of the Trust. The
principal amount of Bonds deposited in the Trust per Unit is reflected in the
Summary of Essential Information. (See "The Trust--Organization" in Part B of
this Prospectus.) The Units being offered hereby are issued and outstanding
Units which have been purchased by the Sponsor in the secondary market.
A-2
112152.1
<PAGE>
PUBLIC OFFERING PRICE. The secondary market Public Offering Price of
each Unit is equal to the aggregate bid price of the Bonds in the Trust divided
by the number of Units outstanding, plus a sales charge of 5.15% of the Public
Offering Price, which is the same as 5.429% of the net amount invested in Bonds
per Unit. In addition, accrued interest to expected date of settlement is added
to the Public Offering Price. If Units had been purchased on the Evaluation
Date, the Public Offering Price per Unit would have been $156.25 plus accrued
interest of $14.88 under the monthly distribution plan, $14.93 under the
semi-annual distribution plan and $14.88 under the annual distribution plan, for
a total of $171.13, $171.18 and $171.13, respectively. The Public Offering Price
per Unit can vary on a daily basis in accordance with fluctuations in the
aggregate bid price of the Bonds. (See the "Summary of Essential Information"
and "Public Offering--Offering Price" in Part B of this Prospectus.)
ESTIMATED LONG TERM RETURN AND ESTIMATED CURRENT RETURN. Units of
each Trust are offered to investors on a "dollar price" basis (using the
computation method previously described under "Public Offering Price") as
distinguished from a "yield price" basis often used in offerings of tax exempt
bonds (involving the lesser of the yield as computed to maturity of bonds or to
an earlier redemption date). Since they are offered on a dollar price basis, the
rate of return on an investment in Units of each Trust is measured in terms of
"Estimated Current Return" and "Estimated Long Term Return".
Estimated Long Term Return is calculated by: (1) computing the yield
to maturity or to an earlier call date (whichever results in a lower yield) for
each Bond in the Trust's portfolio in accordance with accepted bond practices,
which practices take into account not only the interest payable on the Bond but
also the amortization of premiums or accretion of discounts, if any; (2)
calculating the average of the yields for the Bonds in the Trust's portfolio by
weighing each Bond's yield by the market value of the Bond and by the amount of
time remaining to the date to which the Bond is priced (thus creating an average
yield for the portfolio of the Trust); and (3) reducing the average yield for
the portfolio of the Trust in order to reflect estimated fees and expenses of
the Trust and the maximum sales charge paid by investors. The resulting
Estimated Long Term Return represents a measure of the return to investors
earned over the estimated life of the Trust. (For the Estimated Long Term Return
to Certificateholders under the monthly, semi-annual and annual distribution
plans, see "Summary of Essential Information".)
Estimated Current Return is a measure of the Trust's cash flow.
Estimated Current Return is computed by dividing the Estimated Net Annual
Interest Income per Unit by the Public Offering Price per Unit. In contrast to
the Estimated Long Term Return, the Estimated Current Return does not take into
account the amortization of premium or accretion of discount, if any, on the
Bonds in the portfolio of the Trust. Moreover, because interest rates on Bonds
purchased at a premium are generally higher than current interest rates on newly
issued bonds of a similar type with comparable rating, the Estimated Current
Return per Unit may be affected adversely if such Bonds are redeemed prior to
their maturity.
The Estimated Net Annual Interest Income per Unit of the Trust will
vary with changes in the fees and expenses of the Trustee and the Evaluator
applicable to the Trust and with the redemption, maturity, sale or other
disposition of the Bonds in the Trust. The Public Offering Price will vary with
changes in the bid prices of the Bonds. Therefore, there is no assurance that
the present Estimated Current Return or Estimated Long Term Return will be
realized in the future. (For the Estimated Current Return to Certificateholders
under the monthly, semi-annual and annual distribution plans, see "Summary of
Essential Information". See "Estimated Long Term Return and Estimated Current
Return" in Part B of this Prospectus.)
A-3
112152.1
<PAGE>
A schedule of cash flow projections is available from the Sponsor
upon request.
DISTRIBUTIONS. Distributions of interest income, less expenses, will
be made by the Trust either monthly, semi-annually or annually depending upon
the plan of distribution applicable to the Unit purchased. A purchaser of a Unit
in the secondary market will initially receive distributions in accordance with
the plan selected by the prior owner of such Unit and may thereafter change the
plan as provided in "Interest and Principal Distributions" in Part B of this
Prospectus. Distributions of principal, if any, will be made semi-annually on
June 15 and December 15 of each year. (See "Rights of
Certificateholders--Interest and Principal Distributions" in Part B of this
Prospectus. For estimated monthly, semi-annual and annual interest
distributions, see "Summary of Essential Information".)
MARKET FOR UNITS. The Sponsor, although not obligated to do so,
presently maintains and intends to continue to maintain a market for the Units
at prices based upon the aggregate bid price of the Bonds in the portfolio of
the Trust. The Secondary Market repurchase price is based on the aggregate bid
price of the Bonds in the Trust portfolio, and the reoffer price is based on the
aggregate bid price of the Bonds plus a sales charge of 5.15% of the Public
Offering Price (5.429% of the net amount invested) plus net accrued interest. If
such a market is not maintained, a Certificateholder will be able to redeem his
or her Units with the Trustee at a price also based upon the aggregate bid price
of the Bonds. (See "Sponsor Repurchase" and "Public Offering--Offering Price" in
Part B of this Prospectus.)
TOTAL REINVESTMENT PLAN. Certificateholders under the semi-annual
and annual plans of distribution have the opportunity to have their interest
distributions and principal distributions, if any, reinvested in available
series of "Insured Municipal Securities Trust" or "Municipal Securities Trust."
(See "Total Reinvestment Plan" and for residents of Texas, see "Total
Reinvestment Plan for Texas Residents" in Part B of this Prospectus.) The Plan
is not designed to be a complete investment program.
A-4
112152.1
<PAGE>
MUNICIPAL SECURITIES TRUST
SERIES 4
SUMMARY OF ESSENTIAL INFORMATION AS OF DECEMBER 31, 1995
Date of Deposit: June 27, 1980 Minimum Principal Distribution:
Principal Amount of Bonds ... $1,140,000 $1.00 per Unit.
Number of Units ............. 8,484 Weighted Average Life
Fractional Undivided Inter- to Maturity: 19.2 Years.
est in Trust per Unit ..... 1/8484 Minimum Value of Trust:
Principal Amount of Trust may be terminated if
Bonds per Unit ............ $134.37 value of Trust is less than
Secondary Market Public $4,000,000 in principal amount
Offering Price** of Bonds.
Aggregate Bid Price Mandatory Termination Date:
of Bonds in Trust ....... $1,260,709+++ The earlier of December 31,
Divided by 8,484 Units .... $148.60 2028 or the disposition of the
Plus Sales Charge of 5.15% last Bond in the Trust.
of Public Offering Price $7.66 Trustee***: The Bank of New
Public Offering Price York.
per Unit ................ $156.25+ Trustee's Annual Fee: Monthly
Redemption and Sponsor's plan $1.08 per $1,000; semi-
Repurchase Price annual plan $.60 per $1,000;
per Unit .................. $148.60+ and annual plan is $.40 per
+++ $1,000.
++++ Evaluator: Kenny S&P Evaluation
Excess of Secondary Market Services.
Public Offering Price Evaluator's Fee for Each
over Redemption and Evaluation: Minimum of $35
Sponsor's Repurchase plus $.25 per each issue of
Price per Unit ............ $7.66++++ Bonds in excess of 50 issues
Difference between Public (treating separate maturities
Offering Price per Unit as separate issues).
and Principal Amount per Sponsor: Reich & Tang
Unit Premium/(Discount) ... $21.88 Distributors L.P.
Evaluation Time: 4:00 p.m.
New York Time.
PER UNIT INFORMATION BASED UPON INTEREST DISTRIBUTION PLAN ELECTED
Monthly Semi-Annual Annual
Option Option Option
Gross annual interest income# ......... $11.48 $11.48 $11.48
Less estimated annual fees and
expenses ............................ .93 .75 .72
Estimated net annual interest ______ ______ ______
income (cash)# ...................... $10.55 $10.73 $10.76
Estimated interest distribution# ...... .87 5.36 10.76
Estimated daily interest accrual# ..... .0293 .0298 .0298
Estimated current return#++ ........... 6.75% 6.87% 6.89%
Estimated long term return++ .......... 7.04% 7.16 7.18%
Record dates .......................... 1st of Dec. 1 and Dec. 1
each month June 1
Interest distribution dates ........... 15th of Dec. 15 and Dec. 15
each month June 15
A-5
112152.1
<PAGE>
Footnotes to Summary of Essential Information
* The Date of Deposit is the date on which the Trust Agreement was signed
and the deposit of the Bonds with the Trustee made.
** For information regarding offering price per unit and applicable sales
charge under the Total Reinvestment Plan, see "Total Reinvestment Plan" in
Part B of this Prospectus.
*** The Trustee maintains its corporate trust office at 101 Barclay Street,
New York, New York 10286 (tel. no.: 1-212-495-1784). For information
regarding redemption by the Trustee, see "Trustee Redemption" in Part B
of this Prospectus.
+ Plus accrued interest to expected date of settlement (approximately five
business days after purchase) of $14.88 monthly, $14.93 semi-annually and
$14.88 annually.
++ The estimated current return and estimated long term return are increased
for transactions entitled to a discount (see "Employee Discounts" in Part
B of this Prospectus), and are higher under the semi-annual and annual
options due to lower Trustee's fees and expenses.
+++ Based solely upon the bid side evaluation of the underlying Bonds
(including, where applicable, undistributed cash in the principal
account). Upon tender for redemption, the price to be paid will be
calculated as described under "Trustee Redemption" in Part B of this
Prospectus.
++++ See "Comparison of Public Offering Price, Sponsor's Repurchase Price and
Redemption Price" in Part B of this Prospectus.
# Does not include income accrual from original issue discount bonds, if
any.
A-6
112152.1
<PAGE>
INFORMATION REGARDING THE TRUST
AS OF DECEMBER 31, 1995
DESCRIPTION OF PORTFOLIO*
The portfolio of the Trust consists of 4 issues representing
obligations of issuers located in 3 states. The Sponsor has participated as a
sole underwriter or manager, co-manager or member of an underwriting syndicate
from which 20.5% of the initial aggregate principal amount of the Bonds were
acquired. None of the Bonds are obligations of state and local housing
authorities; approximately 27.7% are hospital revenue bonds; none are issued in
connection with the financing of nuclear generating facilities; and none are
"mortgage subsidy" bonds. All of the Bonds in the Trust are subject to
redemption prior to their stated maturity dates pursuant to sinking fund or
optional call provisions. The Bonds may also be subject to other calls, which
may be permitted or required by events which cannot be predicted (such as
destruction, condemnation, termination of a contract, or receipt of excess or
unanticipated revenues). None of the Bonds are general obligation bonds. Four
issues representing $1,175,000 of the principal amount of the Bonds are payable
from the income of a specific project or authority and are not supported by the
issuer's power to levy taxes. The portfolio is divided for purpose of issue as
follows: Electric Power 1, Federally Subsidized Mortgage 1 and Hospital 2. For
an explanation of the significance of these factors see "The Trust--Portfolio"
in Part B of this Prospectus.
As of December 31, 1995, none of the Bonds were original issue
discount bonds. Approximately 12.8% of the aggregate principal amount of the
Bonds in the Trust were purchased at a discount from par value at maturity,
approximately 87.2% were purchased at a premium and none were purchased at par.
For an explanation of the significance of these factors see "Discount and Zero
Coupon Bonds" in Part B of this Prospectus.
None of the Bonds in the Trust are subject to the federal
individual alternative minimum tax under the Tax Reform Act of 1986. See "Tax
Status" in Part B of this Prospectus.
- --------
* Changes in the Trust Portfolio: From January 1, 1996 to March 22, 1996,
the entire principal amounts of the Bonds in portfolio nos. 1, 2 and 3a
were called and are no longer contained in the Trust. 30 Units were
redeemed from the Trust.
A-7
112152.1
<PAGE>
FINANCIAL AND STATISTICAL INFORMATION
Selected data for each Unit outstanding for the periods listed below:
Distribu-
tions of
Distributions of Interest Principal
During the Period (per Unit) During
Net Asset* Semi- the
Units Out- Value Monthly Annual Annual Period
Period Ended standing Per Unit Option Option Option (Per Unit)
December 31, 1993 9,054 $185.17 $11.99 $12.24 $12.28 -0-
December 31, 1994 8,859 159.79 11.24 11.46 11.50 $14.79
December 31, 1995 8,484 163.46 10.81 11.04 11.09 1.63
- --------
* Net Asset Value per Unit is calculated by dividing net assets as disclosed
in the "Statement of Net Assets" by the number of Units outstanding as of
the date of the Statement of Net Assets. See Note 5 of Notes to Financial
Statements for a description of the components of Net Assets.
A-8
112152.1
<PAGE>
Independent Auditors' Report
The Sponsor, Trustee and Certificateholders
Municipal Securities Trust, Series 4:
We have audited the accompanying statement of net assets, including the
portfolio, of Municipal Securities Trust, Series 4 as of December 31, 1995, and
the related statements of operations, and changes in net assets for each of the
years in the three year period then ended. These financial statements are the
responsibility of the Trustee (see note 2). Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1995, by correspondence with
the Trustee. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Municipal Securities Trust,
Series 4 as of December 31, 1995, and the results of its operations and the
changes in its net assets for each of the years in the three year period then
ended in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
New York, New York
March 31, 1996
<PAGE>
Statement of Net Assets
December 31, 1995
Investments in marketable securities,
at market value (cost $1,148,938) $ 1,260,830
Excess of other assets over total liabilities 126,006
------------
Net assets 8,484 units of fractional undivided
interest outstanding,$163.46 per unit) $ 1,386,836
------------
------------
See accompanying notes to financial statements.
<PAGE>
<TABLE>
Statements of Operations
<CAPTION>
Years ended December 31,
------------ --- ------------ --- ------------
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Investment income - interest $ 102,083 108,874 120,211
------------ ------------ ------------
Expenses:
Trustee's fees 4,068 4,365 4,371
Evaluator's fees 3,286 3,307 3,298
------------ ------------ ------------
Total expenses 7,354 7,672 7,669
------------ ------------ ------------
Investment income, net 94,729 101,202 112,542
------------ ------------ ------------
Realized and unrealized gain (loss) on investments:
Net realized (loss) gain on
bonds sold or called (826) 24,638 (537)
Unrealized appreciation
(depreciation) for the year 48,300 (119,047) 16,126
------------ ------------ ------------
Net gain (loss)
on investments 47,474 (94,409) 15,589
------------ ------------ ------------
Net increase in net
assets resulting
from operations $ 142,203 6,793 128,131
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
Years ended December 31,
------------ -- ------------ -- ------------
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Operations:
Investment income, net $ 94,729 101,202 112,542
Net realized (loss) gain on
bonds sold or called (826) 24,638 (537)
Unrealized appreciation
(depreciation) for the year 48,300 (119,047) 16,126
------------ ------------ ------------
Net increase in net
assets resulting
from operations 142,203 6,793 128,131
------------ ------------ ------------
Distributions to Certificateholders:
Investment income 94,425 101,590 111,795
Principal 14,155 133,465 -
Redemptions:
Interest 5,901 3,089 5,229
Principal 56,452 29,647 57,746
------------ ------------ ------------
Total distributions
and redemptions 170,933 267,791 174,770
------------ ------------ ------------
Total decrease (28,730) (260,998) (46,639)
Net assets at beginning of year 1,415,566 1,676,564 1,723,203
------------ ------------ ------------
Net assets at end of year (including
undistributed net investment
income of$126,126, $131,723
and $135,200, respectively) $ 1,386,836 1,415,566 1,676,564
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
MUNICIPAL SECURITIES TRUST, SERIES 4
Notes to Financial Statements
December 31, 1995, 1994, and 1993
(1) Organization
Municipal Securities Trust, Series 4 (Trust) was organized on June 27,
1980 by Bear, Stearns & Co. Inc. under the laws of the State of New York
by a Trust Indenture and Agreement, and is registered under the Investment
Company Act of 1940. Effective September 28, 1995, Reich & Tang
Distributors L.P. (Reich & Tang) has become the successor sponsor
(Sponsor) to certain of the unit investments trusts previously sponsored
by Bear, Stearns & Co. Inc. As successor Sponsor, Reich & Tang has assumed
all of the obligations and rights of Bear Stearns & Co. Inc., the previous
sponsor.
(2) Summary of Significant Accounting Policies
The Bank of New York (Trustee) has custody of and responsibility for the
accounting records and financial statements of the Trust and is responsible
for establishing and maintaining a system of internal control related
thereto.
The Trustee is also responsible for all estimates of expenses and accruals
reflected in the Trust's financial statements. The accompanying financial
statements have been adjusted to record the unrealized appreciation
(depreciation) of investments and to record interest income and expenses on
the accrual basis.
Investments are carried at market value which is determined by Kenny S&P
Evaluation Services (Evaluator). The market value of the portfolio is
based upon the bid prices for the bonds at the end of the year, except
that the market value on the date of deposit represents the cost to the
Trust based on the offering prices for investments at that date. The
difference between cost and market value is reflected as unrealized
appreciation (depreciation) of investments. Securities transactions are
recorded on the trade date. Realized gains (losses) from securities
transactions are determined on the basis of average cost of the securities
sold or redeemed.
The preparation of financial statements in conformity with generally
accepted accounting principles requires the Trustee to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
(3) Income Taxes
The Trust is not subject to Federal income taxes as provided for by the
Internal Revenue Code.
(Continued)
F-5
<PAGE>
MUNICIPAL SECURITIES TRUST, SERIES 4
Notes to Financial Statements
(4) Trust Administration
The fees and expenses of the Trust are incurred and paid on the basis set
forth under "Trust Expenses and Charges" in Part B of this Prospectus.
The Trust Indenture and Agreement provides for interest distributions as
often as monthly (depending upon the distribution plan elected by the
Certificateholders).
See "Financial and Statistical Information" in Part A of this Prospectus
for the amounts of per unit distributions during the years ended December 31,
1995, 1994 and 1993.
The Trust Indenture and Agreement further requires that principal received
from the disposition of bonds, other than those bonds sold in connection with
the redemption of units, be distributed to Certificateholders.
The Trust Indenture and Agreement also requires the Trust to redeem units
tendered. 375, 195, and 337 units were redeemed during the years ended December
31, 1995, 1994, and 1993, respectively.
(5) Net Assets
At December 31, 1995, the net assets of the Trust represented the interest
of Certificateholders as follows:
Original cost to Certificateholders $ 10,316,488
Less initial gross underwriting commission (464,200)
-----------
9,852,288
Cost of securities sold or called (8,703,350)
Net unrealized appreciation 111,892
Undistributed net investment income 126,125
Distributions in excess of proceeds
from bonds sold or called (120)
----------
Total $ 1,386,836
==========
The original cost to Certificateholders, less the initial gross
underwriting commission, represents the aggregate initial public offering price
net of the applicable sales charge on 10,000 units of fractional undivided
interest of the Trust as of the date of deposit.
F-6
<PAGE>
<TABLE>
MUNICIPAL SECURITIES TRUST, SERIES 4
Portfolio
December 31, 1995
<CAPTION>
Port- Aggregate Coupon Rate/ Redemption Feature
folio Principal Name of Issuer Ratings Date(s) of S.F.--Sinking Fund Market
No. Amount and Title of Bonds (1) Maturity(2) Ref. --Refunding (2) (6) Value(3)
- ----- ------------ ------------------------------------- ---- ------------- ------------------------- ------------
<S> <C> <C> <C> <C> <C> <C>
1 105,000 Jacksonville Health Facilities AAA 9.125 Currently @ 100 S.F. 120,124
Authority, Florida, Health Facilities 1/01/2003 None
Revenue Bonds, Series 1980, St.
Catherine Laboure Manor, Inc.
2 185,000 Jacksonville Health Facilities AAA 9.125 Currently @ 100 S.F. 214,576
Authority, Florida, Health Facilities 1/01/2003 None
Revenue Bonds, Series 1980, St.
Vincent's Medical Center, Inc.
3 685,000 New Jersey Economic Development AAA 8.875 Currently @ 100 S.F. 726,134
Authority Economic Development Senior 1/15/2020 None
Revenue Bonds (Lakewood of Voorhees
FHA Insured Project) Series A
3a 15,000 New Jersey Economic Development AAA 8.875 Currently @ 100 S.F. 15,000
Authority Economic Development Senior 1/15/2020 None
Revenue Bonds (Lakewood of Voorhees
FHA Insured Project) Series A
4 150,000 South Carolina Public Service AA* 5.875 7/01/99 @ 100 S.F. 149,996
Authority Electric System Expansion, 7/01/2018 1/29/1996 @ 100 Ref.
1978 Series
------------ ------------
$ 1,140,000 $ 1,225,830
============ ============
</TABLE>
See accompanying footnotes to portfolio and notes to the financial statements.
F-7
<PAGE>
MUNICIPAL SECURITIES TRUST, SERIES 4
Footnotes to Portfolio
December 31, 1995
(1) All ratings are by Standard & Poor's Corporation, except for those
identified by an asterisk (*) which are by Moody's Investors Service, Inc.
A brief description of the ratings symbols and their meanings is set forth
under "Description of Bond Ratings" in Part B of this Prospectus.
(2) See "The Trust - Portfolio" in Part B of this Prospectus for an explanation
of redemption features. See "Tax Status" in Part B of this Prospectus for a
statement of the Federal tax consequences to a Certificateholder upon the
sale, redemption or maturity of a bond.
(3) At December 31, 1995, the net unrealized appreciation of all the bonds was
comprised of the following:
Gross unrealized appreciation $ 112,480
Gross unrealized depreciation (588)
---
Net unrealized appreciation $ 111,892
=======
(4) The annual interest income, based upon bonds held at December 31, 1995, to
the Trust is $100,594.
(5) The bonds have been prerefunded and will be redeemed at the next refunding
call date.
(6) Bonds sold or called after December 31, 1995 are noted in a footnote
"Changes in Trust Portfolio" under "Description of Portfolio" in Part A of
this Prospectus.
(7) The Bonds may also be subject to other calls, which may be permitted or
required by events which cannot be predicted (such as destruction,
condemnation, termination of a contract, or receipt of excess or
unanticipated revenues).
F-8
<PAGE>
Note: Part B of This Prospectus May Not Be
Distributed Unless Accompanied by Part A.
Please Read and Retain Both Parts
of This Prospectus for Future Reference.
MUNICIPAL SECURITIES TRUST
Prospectus Part B
Dated: April 30, 1996
THE TRUST
Organization
"Municipal Securities Trust" (the "Trust") consists of the "unit
investment trusts" designated as set forth in Part A.* The Trust was created
under the laws of the State of New York pursuant to the Trust Indenture and
Agreements** (collectively, the "Trust Agreement"), dated the Date of Deposit,
among Reich & Tang Distributors L.P., as successor Sponsor to Bear, Stearns &
Co. Inc., or depending on the particular Trust, among Reich & Tang Distributors
L.P. and Gruntal & Co., Incorporated, as Co-Sponsors (the Sponsors or
Co-Sponsors, if applicable, are referred to herein as the "Sponsor"), Kenny S&P
Evaluation Services, a division of J.J. Kenny Co., Inc., as Evaluator, and,
depending on the particular Trust, either The Bank of New York or The Chase
Manhattan Bank, N.A., as Trustee. The name of the Sponsor and the Trustee for a
particular Trust is contained in the "Summary of Essential Information" in Part
A.
On the Date of Deposit the Sponsor deposited with the Trustee
long-term bonds and/or delivery statements relating to contracts for the
purchase of certain such bonds (the "Bonds") and cash or an irrevocable letter
of credit issued by a major commercial bank in the amount required for such
purchases. Thereafter, the Trustee, in exchange for the Bonds so deposited,
delivered to the Sponsor the Certificates evidencing the ownership of all Units
of the Trust.
The Trust consists of the bonds described under "The Trust" in Part
A of this Prospectus, the interest (including, where applicable earned original
discount) on which, in the opinions of bond counsel to the respective issuers
given at the time of original delivery of the Bonds, is exempt from regular
federal income tax under existing law.
Each "Unit" outstanding on the Evaluation Date represented an
undivided interest or pro rata share in the principal and interest of the Trust
in the per Unit ratio set forth under "Summary of Essential Information" in Part
A. To the extent that any Units are redeemed by the Trustee, the fractional
undivided interest or pro rata share in the Trust represented by
- --------
* This Part B relates to the outstanding series of Municipal Securities
Trust or Municipal Securities Trust Discount Series as reflected in Part A
attached hereto.
** References in this Prospectus to the Trust Agreements are qualified in
their entirety by the respective Trust Indentures and Agreements which are
incorporated herein by reference.
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<PAGE>
each unredeemed Unit will increase, although the actual interest in the Trust
represented by such fraction will remain unchanged. Units will remain
outstanding until redeemed upon tender to the Trustee by Certificateholders,
which may include the Sponsor or until the termination of the Trust Agreement.
Objectives
The Trust, one of a series of similar but separate unit investment
trusts formed by the Sponsor, offers investors the opportunity to participate in
a portfolio of long-term tax-exempt bonds with a greater diversification than
they might be able to acquire themselves. The objectives of the Trust are to
preserve capital and to provide interest income (including, where applicable,
earned original issue discount) which, in the opinions of bond counsel to the
respective issuers given at the time of original delivery of the Bonds, is, with
certain exceptions, exempt from regular federal income tax under existing law.
Such interest income may, however, be subject to the federal corporate
alternative minimum tax and to state and local taxes. An investor will realize
taxable income upon maturity or early redemption of the market discount bonds in
a Trust portfolio and will realize, where applicable, tax-exempt income to the
extent of the earned portion of interest, including original issue discount
earned on the bonds in a Trust portfolio. Investors should be aware that there
is no assurance the Trust's objectives will be achieved as these objectives are
dependent on the continuing ability of the issuers of the Bonds to meet their
interest and principal payment requirements, on the continuing satisfaction of
the Bonds of the conditions required for the exemption of interest thereon from
regular federal income tax, and on the market value of the Bonds, which can be
affected by fluctuations in interest rates and other factors.
Since disposition of Units prior to final liquidation of the Trust
may result in an investor receiving less than the amount paid for such Units
(see "Comparison of Public Offering Price, Sponsor's Repurchase Price and
Redemption Price"), the purchase of a Unit should be looked upon as a long-term
investment. Neither the Trust nor the Total Reinvestment Plan is designed to be
a complete investment program.
Portfolio
All of the Bonds in the Trust were rated "A" or better by Standard &
Poor's Corporation or Moody's Investors Service, Inc. at the time originally
deposited in the Trust. For a list of the ratings of each Bond on the Evaluation
Date, see "Portfolio" in Part A.
For information regarding (i) the number of issues in the Trust,
(ii) the range of fixed maturities of the Bonds, (iii) the number of issues
payable from the income of a specific project or authority and (iv) the number
of issues constituting general obligations of a government entity, see "The
Trust" and "Portfolio" in Part A.
When selecting Bonds for the Trust, the following factors, among
others, were considered by the Sponsor on the Date of Deposit: (a) the quality
of the Bonds and whether such Bonds were rated "A" or better by either Standard
& Poor's Corporation or Moody's Investors Service, Inc., (b) the yield and price
of the Bonds relative to other tax-exempt securities of comparable quality and
maturity, (c) income to the Certificateholders of the Trust and (d) the
diversification of the Trust portfolio, as to purpose of issue and location of
issuer, taking into account the availability in the market of issues which meet
the Trust's quality, rating, yield and price criteria. Subsequent to the
Evaluation Date, a Bond may cease to be rated or its rating may be reduced below
that specified above. Neither event requires an elimination of such Bond from a
Trust but may be considered in the Sponsor's determination to direct the Trustee
to dispose of the Bond. See
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<PAGE>
"Portfolio Supervision". For an interpretation of the bond ratings see
"Description of Bond Ratings".
Housing Bonds. Some of the aggregate principal amount of the Bonds
may consist of obligations of state and local housing authorities whose revenues
are primarily derived from mortgage loans to rental housing projects for low to
moderate income families. Since such obligations are usually not general
obligations of a particular state or municipality and are generally payable
primarily or solely from rents and other fees, adverse economic developments
including failure or inability to increase rentals, fluctuations of interest
rates and increasing construction and operating costs may reduce revenues
available to pay existing obligations. See "Description of Portfolio" in Part A
for the amount of rental housing bonds contained therein.
Hospital Revenue Bonds. Some of the aggregate principal amount of
the Bonds may consist of hospital revenue bonds. Ratings of hospital bonds are
often initially based on feasibility studies which contain projections of
occupancy levels, revenues and expenses. Actual experience may vary considerably
from such projections. A hospital's gross receipts and net income will be
affected by future events and conditions including, among other things, demand
for hospital services and the ability of the hospital to provide them,
physicians' confidence in hospital management capability, economic developments
in the service area, competition, actions by insurers and governmental agencies
and the increased cost and possible unavailability of malpractice insurance.
Additionally, a major portion of hospital revenue typically is derived from
federal or state programs such as Medicare and Medicaid which have been revised
substantially in recent years and which are undergoing further review at the
state and federal level.
The health care delivery system is undergoing considerable
alteration and consolidation. Consistent with that trend, the ownership or
management of a hospital or health care facility may change, which could result
in (i) an early redemption of bonds, (ii) alteration of the facilities financed
by the Bonds or which secure the Bonds, (iii) a change in the tax exempt status
of the Bonds or (iv) an inability to produce revenues sufficient to make timely
payment of debt service on the Bonds.
Proposals for significant changes in the health care system and the
present programs for third party payment of health care costs are under
consideration in Congress and many states. Future legislation or changes in the
areas noted above, among other things, would affect all hospitals to varying
degrees and, accordingly, any adverse change in these areas may affect the
ability of such issuers to make payment of principal and interest on such bonds.
See "Description of Portfolio" in Part A for the amount of hospital revenue
bonds contained therein.
Nuclear Power Facility Bonds. Certain Bonds may have been issued in
connection with the financing of nuclear generating facilities. In view of
recent developments in connection with such facilities, legislative and
administrative actions have been taken and proposed relating to the development
and operation of nuclear generating facilities. The Sponsor is unable to predict
whether any such actions or whether any such proposals or litigation, if enacted
or instituted, will have an adverse impact on the revenues available to pay the
debt service on the Bonds in the portfolio issued to finance such nuclear
projects. See "Description of Portfolio" in Part A for the amount of bonds
issued to finance nuclear generating facilities contained therein.
Mortgage Subsidy Bonds. Certain Bonds may be "mortgage subsidy
bonds" which are obligations of which all or a significant portion of the
proceeds are to be used directly or indirectly for mortgages on owner-occupied
residences. Section 103A of the Internal Revenue Code of 1954, as amended,
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<PAGE>
provided as a general rule that interest on "mortgage subsidy bonds" will not be
exempt from Federal income tax. An exception is provided for certain "qualified
mortgage bonds." Qualified mortgage bonds are bonds that are used to finance
owner-occupied residences and that meet numerous statutory requirements. These
requirements include certain residency, ownership, purchase price and target
area requirements, ceiling amounts for state and local issuers, arbitrage
restrictions and (for bonds issued after December 31, 1984) certain information
reporting, certification, public hearing and policy statement requirements. In
the opinions of bond counsel to the issuing governmental authorities, interest
on all the Bonds in a Trust that might be deemed "mortgage subsidy bonds" will
be exempt from Federal income tax when issued. See "Description of Portfolio" in
Part A for the amount of mortgage subsidy Bonds contained therein.
Mortgage Revenue Bonds. Certain Bonds may be "mortgage revenue
bonds." Under the Internal Revenue Code of 1986, as amended (the "Code") (and
under similar provisions of the prior tax law) "mortgage revenue bonds" are
obligations the proceeds of which are used to finance owner-occupied residences
under programs which meet numerous statutory requirements relating to residency,
ownership, purchase price and target area requirements, ceiling amounts for
state and local issuers, arbitrage restrictions, and certain information
reporting certification, and public hearing requirements. There can be no
assurance that additional federal legislation will not be introduced or that
existing legislation will not be further amended, revised, or enacted after
delivery of these Bonds or that certain required future actions will be taken by
the issuing governmental authorities, which action or failure to act could cause
interest on the Bonds to be subject to federal income tax. If any portion of the
Bonds proceeds are not committed for the purpose of the issue, Bonds in such
amount could be subject to earlier mandatory redemption at par, including issues
of Zero Coupon Bonds (see "Discount and Zero Coupon Bonds"). See "Description of
Portfolio" in Part A for the amount of mortgage revenue bonds contained therein.
Private Activity Bonds. The portfolio of the Trust may contain other
Bonds which are "private activity bonds" (often called Industrial Revenue Bonds
("IRBs") if issued prior to 1987) which would be primarily of two types: (1)
Bonds for a publicly owned facility which a private entity may have a right to
use or manage to some degree, such as an airport, seaport facility or water
system and (2) facilities deemed owned or beneficially owned by a private entity
but which were financed with tax-exempt bonds of a public issuer, such as a
manufacturing facility or a pollution control facility. In the case of the first
type, bonds are generally payable from a designated source of revenues derived
from the facility and may further receive the benefit of the legal or moral
obligation of one or more political subdivisions or taxing jurisdictions. In
most cases of project financing of the first type, receipts or revenues of the
Issuer are derived from the project or the operator or from the unexpended
proceeds of the bonds. Such revenues include user fees, service charges, rental
and lease payments, and mortgage and other loan payments.
The second type of issue will generally finance projects which are
owned by or for the benefit of, and are operated by, corporate entities.
Ordinarily, such private activity bonds are not general obligations of
governmental entities and are not backed by the taxing power of such entities,
and are solely dependent upon the creditworthiness of the corporate user of the
project or corporate guarantor.
The private activity bonds in the Trust have generally been issued
under bond resolutions, agreements or trust indentures pursuant to which the
revenues and receipts payable under the issuer's arrangements with the users or
the corporate operator of a particular project have been assigned and pledged to
the holders of the private activity bonds. In certain cases a
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<PAGE>
mortgage on the underlying project has been assigned to the holders of the
private activity bonds or a trustee as additional security. In addition, private
activity bonds are frequently directly guaranteed by the corporate operator of
the project or by another affiliated company. See "Description of Portfolio" in
Part A for the amount of private activity bonds contained therein.
Litigation. Litigation challenging the validity under state
constitutions of present systems of financing public education has been
initiated in a number of states. Decisions in some states have been reached
holding such school financing in violation of state constitutions. In addition,
legislation to effect changes in public school financing has been introduced in
a number of states. The Sponsor is unable to predict the outcome of the pending
litigation and legislation in this area and what effect, if any, resulting
changes in the sources of funds, including proceeds from property taxes applied
to the support of public schools, may have on the school bonds in a Trust.
Legal Proceedings Involving the Trusts. The Sponsor has not been
notified or made aware of any litigation pending with respect to any Bonds which
might reasonably be expected to have a material adverse effect on a Trust. Such
litigation, as, for example, suits challenging the issuance of pollution control
revenue bonds under recently-enacted environmental protection statutes, may
affect the validity of such Bonds or the tax-free nature of the interest
thereon. At any time after the date of this Prospectus litigation may be
instituted on a variety of grounds with respect to any Bond in a Trust. The
Sponsor is unable to predict whether any such litigation may be instituted or,
if instituted, whether it might have a material adverse effect on a Trust.
Other Factors. The Bonds in the Trust, despite their optional
redemption provisions which generally do not take effect until 10 years after
the original issuance dates of such bonds (often referred to as "ten year call
protection"), do contain provisions which require the issuer to redeem such
obligations at par from unused proceeds of the issue within a stated period. In
recent periods there have been increased redemptions of bonds, particularly
housing bonds, pursuant to such redemption provisions. In addition, the Bonds in
the Trusts are also subject to mandatory redemption in whole or in part at par
at any time that voluntary or involuntary prepayments of principal on the
underlying collateral are made to the trustee for such bonds or that the
collateral is sold by the bond issuer. Prepayments of principal tend to be
greater in periods of declining interest rates; it is possible that such
prepayments could be sufficient to cause a bond to be redeemed substantially
prior to its stated maturity date, earliest call date or sinking fund redemption
date.
The Bonds may also be subject to other calls, which may be permitted
or required by events which cannot be predicted (such as destruction,
condemnation, or termination of a contract).
In 1976 the federal bankruptcy laws were amended so that an
authorized municipal debtor could more easily seek federal court protection to
assist in reorganizing its debts so long as certain requirements were met.
Historically, very few financially troubled municipalities have sought court
assistance for reorganizing their debts; notwithstanding, the Sponsors are
unable to predict to what extent financially troubled municipalities may seek
court assistance in reorganizing their debts in the future and, therefore, what
effect, if any, the applicable federal bankruptcy law provisions will have on
the Trusts.
The Trust may also include "moral obligation" bonds. Under
statutes applicable to such bonds, if an issuer is unable to meet its
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<PAGE>
obligations, the repayment of such bonds becomes a moral commitment but not a
legal obligation of the state or municipality in question. See "Description of
Portfolio" and "The Trust" in Part A of this Prospectus for the amount of moral
obligations bonds contained in the Trust.
Certain of the Bonds in the Trust are subject to redemption prior to
their stated maturity dates pursuant to sinking fund or call provisions. A
sinking fund is a reserve fund appropriated specifically toward the retirement
of a debt. A callable bond is one which is subject to redemption or refunding
prior to maturity at the option of the issuer. A refunding is a method by which
a bond is redeemed at or before maturity from the proceeds of a new issue of
bonds. In general, call provisions are more likely to be exercised when the
offering side evaluation of a bond is at a premium over par than when it is at a
discount from par. A listing of the sinking fund and call provisions, if any,
with respect to each of the Bonds is contained under "Portfolio" in Part A of
this Prospectus. Certificateholders will realize a gain or loss on the early
redemption of such Bonds, depending upon whether the price of such Bonds is at a
discount from or at a premium over par at the time Certificateholders purchase
their Units.
Neither the Sponsor nor the Trustee shall be liable in any way for
any default, failure or defect in any of the Bonds. Because certain of the Bonds
from time to time may be redeemed or will mature in accordance with their terms
or may be sold under certain circumstances, no assurance can be given that a
Trust will retain its present size and composition for any length of time. The
proceeds from the sale of a Bond or the exercise of any redemption or call
provision will be distributed to Certificateholders on the next distribution
date, except to the extent such proceeds are applied to meet redemptions of
Units. See "Trustee Redemption".
Discount and Zero Coupon Bonds
Some of the Bonds in the Municipal Discount Trust and Municipal
Trust may contain original issue discount bonds (see "Description of Portfolio"
in the Part A). The original issue discount, which is the difference between the
initial purchase price of the Bonds and the face value, is deemed to accrue on a
daily basis and the accrued portion will be treated as tax-exempt interest
income for regular federal income tax purposes. Upon sale or redemption, any
gain realized that is in excess of the earned portion of original issue discount
will be taxable as capital gain. (See "Tax Status".) The current value of an
original issue discount bond reflects the present value of its face amount at
maturity. The market value tends to increase more slowly in early years and in
greater increments as the Bonds approach maturity. Of these original issue
discount bonds, a portion of the aggregate principal amount of the Bonds in the
Trust are Zero Coupon Bonds. Zero Coupon Bonds do not provide for the payment of
any current interest and provide for payment at maturity at face value unless
sooner sold or redeemed. The market value of Zero Coupon Bonds is subject to
greater fluctuation than coupon bonds in response to changes in interest rates.
Zero Coupon Bonds generally are subject to redemption at compound accreted value
based on par value at maturity. Because the issuer is not obligated to make
current interest payments, Zero Coupon Bonds may be less likely to be redeemed
than coupon bonds issued at a similar interest rate.
Some of the Bonds in the Trust may have been purchased at a "market"
discount from par value at maturity. This is because the coupon interest rates
on the discount bonds at the time they were purchased and deposited in the Trust
were lower than the current market interest rates for newly issued bonds of
comparable rating and type. At the time of issuance the discount bonds were for
the most part issued at then current coupon interest rates. The current returns
(coupon interest income as a percentage of market price) of discount bonds will
be lower than the current returns of comparably
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<PAGE>
rated bonds of similar type newly issued at current interest rates because
discount bonds tend to increase in market value as they approach maturity and
the full principal amount becomes payable. A discount bond held to maturity will
have a larger portion of its total return in the form of capital gain and less
in the form of tax-exempt interest income than a comparable bond newly issued at
current market rates. Gain on the disposition of a Bond purchased at a market
discount generally will be treated as ordinary income, rather than capital gain,
to the extent of accrued market discount. Discount bonds with a longer term to
maturity tend to have a higher current return and a lower current market value
than otherwise comparable bonds with a shorter term of maturity. If interest
rates rise, the value of discount bonds will decrease; and if interest rates
decline, the value of discount bonds will increase. The discount does not
necessarily indicate a lack of market confidence in the issuer.
PUBLIC OFFERING
Offering Price
The secondary market Public Offering Price per Unit is computed by
adding to the aggregate bid price of the Bonds in each Trust divided by the
number of Units outstanding, an amount based on the applicable sales charge
times such aggregate bid price of the Bonds in each Trust.
The method used by the Evaluator for computing the sales charge for
secondary market purchases shall be based upon the number of years remaining to
maturity of each bond in the portfolio. Bonds will be deemed to mature on their
stated maturity dates unless bonds have been called for redemption, funds have
been placed in escrow to redeem them on an earlier call date or are subject to a
"mandatory put," in which case the maturity will be deemed to be such other
date.
The table below sets forth the various sales charges based on the
length of maturity of each Bond.
As Percent of Public
Time to Maturity Offering Price
less than 6 months 0%
6 mos. to 1 year 1%
over 1 yr. to 2 yrs. 1 1/2%
over 2 yrs. to 4 yrs. 2 1/2%
over 4 yrs. to 8 yrs. 3 1/2%
over 8 yrs. to 15 yrs. 4 1/2%
over 15 years 5 1/2%
(see "Public Offering Price" in Part A for the applicable sales charge for the
Trust). A proportionate share of accrued interest on the Bonds to the expected
date of settlement for the Units is added to the Public Offering Price. Accrued
interest is the accumulated and unpaid interest on a Bond from the last day on
which interest was paid and is initially accounted for daily by the Trust at the
daily rate set forth under "Summary of Essential Information" in Part A. The
secondary market Public Offering Price can vary on a daily basis from the amount
stated in Part A in accordance with fluctuations in the prices of the Bonds. The
price to be paid by each
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<PAGE>
investor will be computed on the basis of an evaluation made on the day the
Units are purchased. The aggregate bid price evaluation of the Bonds is
determined in the manner set forth under "Trustee Redemption".
The Evaluator may obtain current prices for the Bonds from
investment dealers or brokers (including the Sponsor) that customarily deal in
tax-exempt obligations or from any other reporting service or source of
information which the Evaluator deems appropriate.
Accrued Interest
An amount of accrued interest which represents accumulated unpaid or
uncollected interest on a Bond from the last day on which interest was paid
thereon will be added to the Public Offering Price and paid by the Certificate-
holder at the time the Units are purchased. Since the Trust normally receives
the interest on Bonds twice a year and the interest on the Bonds in the Trust is
accrued on a daily basis, the Trust will always have an amount of interest
accrued but not actually received and distributed to Certificateholders. A
Certificateholder will not recover his proportionate share of accrued interest
until the Units are sold or redeemed, or the Trust is terminated. At that time,
the Certificateholder will receive his proportionate share of the accrued
interest computed to the settlement date in the case of a sale or termination
and to the date of tender in the case of redemption.
Employee Discounts
Employees (and their immediate families) of Reich & Tang
Distributors L.P. and its affiliates, Gruntal & Co., Incorporated and of any
underwriter of a Trust, pursuant to employee benefit arrangements, may purchase
Units of a Trust at a price equal to the bid side evaluation of the underlying
securities in the Trust divided by the number of Units outstanding plus a
reduced sales charge of $10.00 per Unit. Such arrangements result in less
selling effort and selling expenses than sales to employee groups of other
companies. Resales or transfers of Units purchased under the employee benefit
arrangements may only be made through the Sponsor's secondary market, so long as
it is being maintained.
Distribution of Units
Certain banks and thrifts will make Units of the Trust available to
their customers on an agency basis. A portion of the sales charge paid by their
customers is retained by or remitted to the banks. Under the Glass- Steagall
Act, banks are prohibited from underwriting Units; however, the Glass-Steagall
Act does permit certain agency transactions and the banking regulators have
indicated that these particular agency transactions are permitted under such
Act. In addition, state securities laws on this issue may differ from the
interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law.
The Sponsor intends to qualify the Units for sale in substantially
all States through dealers who are members of the National Association of
Securities Dealers, Inc. Units may be sold to dealers at prices which represent
a concession of up to (a) 4% of the Public Offering Price for the Municipal
Securities Trust Series or (b) $25.00 per unit for the Municipal Securities
Trust Discount Series, subject to the Sponsor's right to change the dealers'
concession from time to time. Such Units may then be distributed to the public
by the dealers at the Public Offering Price then in effect. In addition, for
transactions of 1,000,000 Units or more, the Sponsor intends to negotiate the
applicable sales charge and such charge will be disclosed to any such purchaser.
The Sponsor reserves the right to reject, in whole or in
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part, any order for the purchase of Units. The Sponsor reserves the right to
change the discounts from time to time.
Sponsor's Profits
The Sponsor will receive a gross commission on all Units sold in the
secondary market equal to the applicable sales charge on each transaction. (See
"Offering Price".) In addition, in maintaining a market for the Units (see
"Sponsor Repurchase"), the Sponsor will realize profits or sustain losses in the
amount of any difference between the price at which it buys Units and the price
at which it resells such Units.
Participants in the "Total Reinvestment Plan" can designate a
broker as the recipient of a dealer concession. See "Total Reinvestment
Plan".
Comparison of Public Offering Price, Sponsor's Repurchase Price
and Redemption Price
The secondary market Public Offering Price of Units will be
determined on the basis of the current bid prices of the Bonds in the Trust,
plus the applicable sales charge. The value at which Units may be resold in the
secondary market or redeemed will be determined on the basis of the current bid
prices of such Bonds without any sales charge. On the Evaluation Date, the
Public Offering Price per Unit (based on the bid prices of the Bonds in the
Trust plus the sales charge) exceeded the Repurchase and Redemption Price per
Unit (based upon the bid prices of the Bonds in the Trust without the sales
charge) by the amount shown under "Summary of Essential Information" in Part A
of this Prospectus. For this reason, among others (including fluctuations in the
market prices of Bonds and the fact that the Public Offering Price includes the
applicable sales charge), the amount realized by a Certificateholder upon any
redemption or repurchase of Units may be less than the price paid for such
Units.
ESTIMATED LONG TERM RETURN AND ESTIMATED CURRENT RETURN
The rate of return on an investment in Units of each Trust is
measured in terms of "Estimated Current Return" and "Estimated Long Term
Return".
Estimated Long Term Return is calculated by: (1) computing the yield
to maturity or to an earlier call date (whichever results in a lower yield) for
each Bond in a Trust's portfolio in accordance with accepted bond practices,
which practices take into account not only the interest payable on the Bond but
also the amortization of premiums or accretion of discounts, if any; (2)
calculating the average of the yields for the Bonds in each Trust's portfolio by
weighing each Bond's yield by the market value of the Bond and by the amount of
time remaining to the date to which the Bond is priced (thus creating an average
yield for the portfolio of each Trust); and (3) reducing the average yield for
the portfolio of each Trust in order to reflect estimated fees and expenses of
that Trust and the maximum sales charge paid by Certificateholders. The
resulting Estimated Long Term Return represents a measure of the return to
Certificateholders earned over the estimated life of each Trust. The Estimated
Long Term Return as of the day prior to the Evaluation Date is stated for each
Trust under "Summary of Essential Information" in Part A.
Estimated Current Return is computed by dividing the Estimated Net
Annual Interest Income per Unit by the Public Offering Price per Unit. In
contrast to the Estimated Long Term Return, the Estimated Current Return does
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not take into account the amortization of premium or accretion of discount, if
any, on the Bonds in the portfolios of each Trust. Moreover, because interest
rates on Bonds purchased at a premium are generally higher than current interest
rates on newly issued bonds of a similar type with comparable rating, the
Estimated Current Return per Unit may be affected adversely if such Bonds are
redeemed prior to their maturity. On the day prior to the Evaluation Date, the
Estimated Net Annual Interest Income per Unit divided by the Public Offering
Price resulted in the Estimated Current Return stated for each Trust under
"Summary of Essential Information" in Part A.
The Estimated Net Annual Interest Income per Unit of each Trust will
vary with changes in the fees and expenses of the Trustee and the Evaluator
applicable to each Trust and with the redemption, maturity, sale or other
disposition of the Bonds in each Trust. The Public Offering Price will vary with
changes in the bid prices of the Bonds. Therefore, there is no assurance that
the present Estimated Current Return or Estimated Long Term Return will be
realized in the future.
A schedule of cash flow projections is available from the Sponsors
upon request.
RIGHTS OF CERTIFICATEHOLDERS
Certificates
Ownership of Units of the Trust is evidenced by registered
Certificates executed by the Trustee and the Sponsor. Certificates may be issued
in denominations of one or more Units and will bear appropriate notations on
their faces indicating which plan of distribution has been selected by the
Certificateholder. Certificates are transferable by presentation and surrender
to the Trustee properly endorsed and/or accompanied by a written instrument or
instruments of transfer. Although no such charge is presently made or
contemplated, the Trustee may require a Certificateholder to pay $2.00 for each
Certificate reissued or transferred and any governmental charge that may be
imposed in connection with each such transfer or interchange. Mutilated,
destroyed, stolen or lost Certificates will be replaced upon delivery of
satisfactory indemnity and payment of expenses incurred.
Interest and Principal Distributions
Interest received by the Trust is credited by the Trustee to an
Interest Account and a deduction is made to reimburse the Trustee without
interest for any amounts previously advanced. Proceeds representing principal
received from the maturity, redemption, sale or other disposition of the Bonds
are credited to a Principal Account.
Distributions to each Certificateholder from the Interest Account
are computed as of the close of business on each Record Date for the following
Payment Date and consist of an amount substantially equal to one-twelfth,
one-half or all of each Certificateholder's pro rata share of the Estimated Net
Annual Interest Income in the Interest Account, depending upon the applicable
plan of distribution. Distributions from the Principal Account will be computed
as of each semi-annual Record Date, and will be made to the Certifi- cateholders
on or shortly after the next semi-annual Payment Date. Proceeds representing
principal received from the disposition of any of the Bonds between a Record
Date and a Payment Date which are not used for redemptions of Units will be held
in the Principal Account and not distributed until the second succeeding
semi-annual Payment Date. No distributions will be made to Certificateholders
electing to participate in the Total Reinvestment Plan, except as provided
thereunder. Persons who purchase Units between a Record
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Date and a Payment Date will receive their first distribution on the second
Payment Date after such purchase.
Because interest payments are not received by the Trust at a
constant rate throughout the year, interest distributions may be more or less
than the amount credited to the Interest Account as of a given Record Date. For
the purpose of minimizing fluctuations in the distributions from the Interest
Account, the Trustee will advance sufficient funds, without interest, as may be
necessary to provide interest distributions of approximately equal amounts. All
funds in respect of the Bonds received and held by the Trustee prior to
distribution to Certificateholders may be of benefit to the Trustee and do not
bear interest to Certificateholders.
As of the first day of each month, the Trustee will deduct from the
Interest Account, and, to the extent funds are not sufficient therein, from the
Principal Account, amounts necessary to pay the expenses of the Trust (as
determined on the basis set forth under "Trust Expenses and Charges"). The
Trustee also may withdraw from said accounts such amounts, if any, as it deems
necessary to establish a reserve for any applicable taxes or other governmental
charges that may be payable out of the Trust. Amounts so withdrawn shall not be
considered a part of the Trust's assets until such time as the Trustee shall
return all or any part of such amounts to the appropriate accounts. In addition,
the Trustee may withdraw from the Interest and Principal Accounts such amounts
as may be necessary to cover redemptions of Units by the Trustee.
The estimated monthly, semi-annual or annual interest distribution
per Unit will be in the amount shown under Summary of Essential Information and
will change and may be reduced as bonds mature or are redeemed, exchanged or
sold, or as expenses of the Trust fluctuate. No distribution need be made from
the Principal Account until the balance therein is an amount sufficient to
distribute $1.00 per Unit.
Distribution Elections
Interest is distributed monthly, semi-annually or annually,
depending upon the distribution plan applicable to the Unit purchased. Record
Dates are the first day of each month for monthly distributions, the first day
of each June and December for semi-annual distributions and the first day of
each December for annual distributions. Payment Dates will be the fifteenth day
of each month following the respective Record Dates. Certificateholders
purchasing Units in the secondary market will initially receive distributions in
accordance with the election of the prior owner. Every October each
Certificateholder may change his distribution election by notifying the Trustee
in writing of such change between October 1 and November 1 of each year.
(Certificateholders deciding to change their election should contact the Trustee
by calling the number listed on the back cover hereof for information regarding
the procedures that must be followed in connection with this written
notification of the change of election.) Failure to notify the Trustee on or
before November 1 of each year will result in a continuation of the plan for the
following 12 months.
Records
The Trustee shall furnish Certificateholders in connection with each
distribution a statement of the amount of interest, if any, and the amount of
other receipts, if any, which are being distributed, expressed in each case as a
dollar amount per Unit. Within a reasonable time after the end of each calendar
year (normally prior to January 31 of the succeeding year), the Trustee will
furnish to each person who at any time during the calendar year was a
Certificateholder of record, a statement showing (a) as to the Interest Account:
interest received (including any earned original issue
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discount and amounts representing interest received upon any disposition of
Bonds), amounts paid for redemptions of Units, if any, deductions for applicable
taxes and fees and expenses of the Trust, 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; (b) as to the Principal Account: the
dates of disposition of any Bonds and the net proceeds received therefrom
(including any unearned original issue discount but excluding any portion
representing accrued interest), deductions for payments of applicable taxes and
fees and expenses of the Trust, amounts paid for redemptions of Units, if any,
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;
(c) a list of the Bonds held and the number of Units outstanding on the last
business day of such calendar year; (d) the Redemption Price per Unit based upon
the last computation thereof made during such calendar year; and (e) amounts
actually distributed to Certifi- cateholders during such calendar year from the
Interest and Principal Accounts, separately stated, expressed both as total
dollar amounts and as dollar amounts representing the pro rata share of each
Unit outstanding on the last business day of such calendar year.
The Trustee shall keep available for inspection by Certificate-
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 Certificateholders, Certificates issued or held, a current list of
Bonds in the portfolio and a copy of the Trust Agreement.
TAX STATUS
All Bonds acquired by the Trust were accompanied by copies of
opinions of bond counsel to the issuing governmental authorities given at the
time of original delivery of the Bonds to the effect that the interest thereon
is exempt from regular federal income tax, but such interest may be subject to
the federal corporate alternative minimum tax and to state and local taxes.
Neither the Sponsor nor the Trustee nor their respective counsel have made any
review of the proceedings relating to the issuance of the Bonds or the bases for
such opinions, and express no opinion as to these matters, and neither the
Trustee nor the Sponsor nor their respective counsel have made an independent
examination or verification that the federal income tax status of the Bonds has
not been altered since the time of the original delivery of those opinions.
In rendering the opinion set forth below, counsel has examined the
Agreement, the final form of Prospectus dated the date hereof (the "Prospectus")
and the documents referred to therein, among others, and has relied on the
validity of said documents and the accuracy and completeness of the facts set
forth therein.
In the opinion of Battle Fowler LLP, counsel for the Sponsor, under
existing law:
The Trust is not an association taxable as a corporation for federal
income tax purposes under the Internal Revenue Code of 1986 (the "Code"), and
income received by the Trust that consists of interest excludable from federal
gross income under the Code will be excludable from the federal gross income of
the Certificateholders of the Trust.
Each Certificateholder will be considered the owner of a pro rata
portion of the Trust under Section 676(a) of the Code. Thus, each Cer-
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<PAGE>
tificateholder will be considered to have received his pro rata share of Bond
interest when it is received by the Trust, and the net income distributable to
Certificateholders that is exempt from federal income tax when received by the
Trust will constitute tax-exempt income when received by the Certificateholders.
Gain (other than any earned original issue discount) realized on a sale or
redemption of the Bonds or on a sale of a Unit is, however, includable in gross
income for federal income tax purposes, generally as capital gain, although gain
on the disposition of a Bond or a Unit purchased at a market discount generally
will be treated as ordinary income, rather than capital gain, to the extent of
accrued market discount. (It should be noted in this connection that such gain
does not include any amounts received in respect of accrued interest.) Such gain
may be long or short-term depending on the facts and circumstances. Capital
losses are deductible to the extent of capital gains; in addition, up to $3,000
of capital losses of non-corporate Certificate- holders may be deducted against
ordinary income. Capital assets must be held for more than one year to qualify
for long-term capital gain treatment. Individuals who realize long-term capital
gains will be subject to a reduced maximum tax rate on such gain.
Each Certificateholder will realize taxable gain or loss when the Trust
disposes of a Bond (whether by sale, exchange, redemption or payment at
maturity), as if the Certificateholder had directly disposed of his pro rata
share of such Bond. The gain or loss is measured by the difference between (i)
the tax cost of such pro rata share and (ii) the amount received therefor. For
this purpose, a Certificateholder's tax cost for each Bond is determined by
allocating the total tax cost of each Unit among all of the Bonds held in the
Trust (in accordance with the portion of the Trust comprised by each Bond). In
order to determine the amount of taxable gain or loss, the Certificateholder's
amount received is similarly allocated at that time. The Certificateholder may
exclude from the amount received any amounts that represent accrued interest or
the earned portion of any original issue discount but may not exclude amounts
attributable to market discount. Thus, when a Bond is disposed of by the Trust
at a gain, taxable gain will equal the difference between (i) the amount
received and (ii) the amount paid plus any original issue discount (limited, in
the case of Bonds issued after June 8, 1980, to the portion earned from the date
of acquisition to the date of disposition). Gain on the disposition of a Bond
purchased at a market discount generally will be treated as ordinary income,
rather than capital gain, to the extent of accrued market discount. No deduction
is allowed for the amortization of bond premium on tax-exempt bonds such as the
Bonds in computing regular federal income tax.
Discount generally accrues based on the principle of compounding of
accrued interest, not on a straight-line or ratable method, with the result that
the amount of earned original issue discount is less in the earlier years and
more in the later years of a bond term. The tax basis of a discount bond is
increased by the amount of accrued, tax-exempt original issue discount thus
determined. This method of calculation will produce higher capital gains (or
lower losses) to a Certificate- holder, as compared to the results produced by
the straight-line method of accounting for original issue discount, upon an
early disposition of a Bond by the Trust or of a Unit by a Certificateholder.
A Certificateholder may also realize taxable income or loss when a Unit is
sold or redeemed. The amount received is allocated among all the Bonds in the
Trust in the same manner as when the Trust disposes of Bonds and the
Certificateholder may exclude accrued interest and the earned portion of any
original issue discount (but not amounts
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attributable to market discount). The return of a Certificateholder's
tax cost is otherwise a tax-free return of capital.
A portion of social security benefits is includable in gross income for
taxpayers whose "modified adjusted gross income" combined with a portion of
their 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 to be
added to adjusted gross income for purposes of computing the amount of benefits
that are includable in gross income and determining whether an individual's
income exceeds the base amount above which a portion of the benefits would be
subject to tax. For taxable years beginning after December 31, 1993, the amount
of Social Security benefits subject to tax has been increased.
Corporate Certificateholders are required to include in federal corporate
alternative minimum taxable income 75 percent of the amount by which the
adjusted current earnings (which will include tax-exempt interest) of the
corporation exceeds alternative minimum taxable income (determined without this
item). In addition, in certain cases, Subchap- ter S corporations with
accumulated earnings and profits from Subchap- ter C years will be subject to a
minimum tax on excess "passive investment income" which includes tax-exempt
interest.
The Trust is not subject to the New York State Franchise Tax on Business
Corporations or the New York City General Corporation Tax. For a
Certificateholder who is a New York resident, however, a pro rata portion of all
or part of the income of the Trust will be treated as the income of the
Certificateholder under the income tax laws of the State and City of New York.
Similar treatment may apply in other states.
The exemption of interest on municipal obligations for federal
income tax purposes does not necessarily result in exemption under the income
tax laws of any state or political subdivision. In general, municipal bond
interest exempt from federal income tax is taxable income to residents of the
State or City of New York under the tax laws of those jurisdictions unless the
bonds are issued by the State of New York or one of its political subdivisions
or by the Commonwealth of Puerto Rico or one of its political subdivisions. For
corporations doing business in New York State, interest earned on state and
municipal obligations that are exempt from federal income tax, including
obligations of New York State, its political subdivisions and instrumentalities,
must be included in calculating New York State and New York City entire net
income for purposes of computing New York State and New York City franchise
(income) tax. The laws of the several states and local taxing authorities vary
with respect to the taxation of such obligations and each Certificateholder is
advised to consult his own tax advisor as to the tax consequences of his
Certificates under state and local tax laws.
In the case of Bonds that are industrial revenue bonds ("IRBs") or
certain types of private activity bonds, the opinions of bond counsel to the
respective issuing authorities indicate that interest on such Bonds is exempt
from regular federal income tax. However, interest on such Bonds will not be
exempt from regular federal income tax for any period during which such Bonds
are held by a "substantial user" of the facilities financed by the proceeds of
such Bonds or by a "related person" thereof within the meaning of the Code.
Therefore, interest on any such Bonds allocable to a Certificateholder who is
such a "substantial user" or "related person" thereof will not be tax-exempt.
Furthermore, in the case of Bonds that qualify for the "small issue" exemption,
the "small issue" exemption will not be available or will be lost if, at any
time during the three-year period beginning on the later of the date the
facilities are placed in service or the date of issue, all outstanding
tax-exempt IRBs, together with a proportionate share of any
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<PAGE>
present issue, of an owner or principal user (or related person) of the
facilities exceeds $40,000,000. In the case of IRBs issued under the $10,000,000
"small issue" exemption, interest on such IRBs will become taxable if the face
amount of the IRBs plus certain capital expenditures exceeds $10,000,000.
In addition, a Bond can lose its tax-exempt status as a result of
other subsequent but unforeseeable events such as prohibited "arbitrage"
activities by the issuer of the Bond or the failure of the Bond to continue to
satisfy the conditions required for the exemption of interest thereon from
regular federal income tax. No investigation has been made as to the current or
future owners or users of the facilities financed by the Bonds, the amount of
such persons' outstanding tax-exempt IRBs, or the facilities themselves, and no
assurance can be given that future events will not affect the tax-exempt status
of the Bonds. Investors should consult their tax advisors for advice with
respect to the effect of these provisions on their particular tax situation.
Interest on indebtedness incurred or continued to purchase or carry
the Units is not deductible for federal income tax purposes. In addition, under
rules used by the Internal Revenue Service for determining when borrowed funds
are considered used for the purpose of purchasing or carrying particular assets,
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. Also, in the case of certain financial institutions that acquire Units,
in general no deduction is allowed for interest expense allocable to such Units.
From time to time proposals have been introduced before Congress to
restrict or eliminate the federal income tax exemption for interest on debt
obligations similar to the Bonds in the Trust, and it can be expected that
similar proposals may be introduced in the future. In particular, Congress may
consider the adoption of some form of a "flat tax," which could have an adverse
impact on the value of tax-exempt bonds.
In South Carolina v. Baker, the U.S. Supreme Court held that the
federal government may constitutionally require states to register bonds they
issue and subject the interest on such bonds to federal income tax if not
registered, and that there is no constitutional prohibition against the federal
government's taxing the interest earned on state or other municipal bonds. The
Supreme Court decision affirms the authority of the federal government to
regulate and control bonds such as the Bonds in the Trust and to tax interest on
such bonds in the future. The decision does not, however, affect the current
exemption from taxation of the interest earned on the Bonds in the Trust in
accordance with Section 103 of the Code.
The opinions of bond counsel or special tax counsel to the issuing
governmental authorities to the effect that interest on the Bonds is exempt from
regular federal income tax 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. Investors are advised to
consult their own tax advisors for advice with respect to the effect of any
legislative changes.
LIQUIDITY
Sponsor Repurchase
The Sponsor, although not obligated to do so, intends to maintain a
secondary market for the Units. The Sponsor's secondary market repurchase price
will be based on the aggregate bid price of the Bonds in the Trust
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<PAGE>
portfolio, determined by the Evaluator on a daily basis, and will be the same as
the redemption price. See "Trustee Redemption". Certificateholders who wish to
dispose of their Units should inquire of the Sponsor prior to making a tender
for redemption. The Sponsor may discontinue repurchases of Units if the supply
of Units exceeds demand, or for other business reasons. The date of repurchase
is deemed to be the date on which Certificates representing Units are physically
received in proper form by the Sponsor, Reich & Tang Distributors L.P., 600
Fifth Avenue, New York, N.Y. 10020. Units received after 4:00 P.M., New York
Time, will be deemed to have been repurchased on the next business day. In the
event a market is not maintained for the Units, a Certificateholder may be able
to dispose of Units only by tendering them to the Trustee for redemption.
Prospectuses relating to certain other bond trusts indicate an
intention by the respective Sponsors, subject to change, to repurchase units on
the basis of a price higher than the bid prices of the bonds in the trust.
Consequently, depending on the prices actually paid, the secondary market
repurchase price of other trusts may be computed on a somewhat more favorable
basis than the repurchase price offered by the Sponsor for units of this Trust,
although in all bond trusts, the purchase price of a unit depends primarily on
the value of the bonds in the trust portfolio.
Units purchased by the Sponsor in the secondary market may be
reoffered for sale by the Sponsor at a price based on the aggregate bid price of
the Bonds in the Trust plus the applicable sales charge (see "Public Offering
Price" in Part A) plus net accrued interest. Any Units that are purchased by the
Sponsor in the secondary market also may be redeemed by the Sponsor if it
determines such redemption to be in its best interest.
The Sponsor may, under certain circumstances, as a service to Cer-
tificateholders, elect to purchase any Units tendered to the Trustee for
redemption. (See "Trustee Redemption".) For example, if in order to meet
redemptions of Units the Trustee must dispose of Bonds, and if such disposition
cannot be made by the redemption date (seven calendar days after tender), the
Sponsor may elect to purchase such Units. Such purchase shall be made by payment
to the Certificateholder not later than the close of business on the redemption
date of an amount equal to the Redemption Price on the date of tender.
Trustee Redemption
Units also may be tendered to the Trustee for redemption at its
corporate trust office as set forth in Part A of this Prospectus, upon proper
delivery of Certificates representing such Units and payment of any relevant
tax. At the present time there are no specific taxes related to the redemption
of Units. No redemption fee will be charged by the Sponsor or the Trustee. Units
redeemed by the Trustee will be cancelled.
Certificates representing Units to be redeemed must be delivered to
the Trustee and must be properly endorsed or accompanied by proper instruments
of transfer with signature guaranteed (or by providing satisfactory indemnity,
as in the case of lost, stolen or mutilated Certificates). Thus, redemptions of
Units cannot be effected until Certificates representing such Units have been
delivered by the person seeking redemption. (See "Certificates".)
Certificateholders must sign exactly as their names appear on the faces of their
Certificates. 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 a tender for redemption, or, if
such seventh day is not a business day, on the first business day prior
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thereto, the Certificateholder will be entitled to receive in cash an amount for
each Unit tendered equal to the Redemption Price per Unit computed as of the
Evaluation Time on the date of tender. The "date of tender" is deemed to be the
date on which Units are received by the Trustee, except that with respect to
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, and
such Units will be deemed to have been tendered to the Trustee on such day for
redemption at the Redemption Price computed on that day.
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 redemptions. Such sales, if required, could result in a sale of
Bonds by the Trustee at a loss. To the extent Bonds are sold, the size and
diversity of the Trust will be reduced.
The Redemption Price per Unit is the pro rata share of each Unit in
the Trust determined by the Trustee on the basis of (i) the cash on hand in the
Trust or moneys in the process of being collected, (ii) the value of the Bonds
in the Trust based on the bid prices of such Bonds and (iii) interest accrued
thereon, less (a) amounts representing taxes or other governmental charges
payable out of the Trust, (b) the accrued expenses of the Trust and (c) cash
allocated for the distribution to Certificateholders of record as of the
business day prior to the evaluation being made. The Evaluator may determine the
value of the Bonds in the Trust for purposes of redemption (1) on the basis of
current bid prices of the Bonds obtained from dealers or brokers who customarily
deal in bonds comparable to those held by the Trust, (2) on the basis of bid
prices for bonds comparable to any Bonds for which bid prices are not available,
(3) by determining the value of the Bonds by appraisal, or (4) by any
combination of the above.
The Trustee is irrevocably authorized in its discretion, if the
Sponsor does not elect to purchase a Unit tendered for redemption or if the
Sponsor tenders a Unit for redemption, in lieu of redeeming such Unit, to sell
such Unit in the over-the-counter market for the account of the tendering Cer-
tificateholder at prices which will return to the Certificateholder an amount in
cash, net after deducting brokerage commissions, transfer taxes and other
charges, equal to or in excess of the Redemption Price for such Unit. The
Trustee will pay the net proceeds of any such sale to the Certificateholder on
the day he would otherwise be entitled to receive payment of the Redemption
Price.
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, other than customary
weekend and holiday closings, 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 Bonds is not
reasonably practicable, or for such other periods as the Securities and Exchange
Commission may by order permit. The Trustee and the Sponsor are not liable to
any person or in any way for any loss or damage which may result from any such
suspension or postponement.
A Certificateholder who wishes to dispose of his Units should
inquire of his bank or broker in order to determine if there is a current
secondary market price in excess of the Redemption Price.
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TOTAL REINVESTMENT PLAN
Under the Total Reinvestment Plan (the "Plan"), semi-annual and
annual Certificateholders (except Texas residents*) may elect to have all
regular interest and principal distributions, if any, with respect to their
Units reinvested either in units of various series of "Municipal Securities
Trust" which will have been created shortly before each semi-annual or annual
Payment Date (a "Primary Series") or, if units of a Primary Series are not
available, in units of a previously formed series of the Trust which have been
repurchased by the Sponsor in the secondary market, including the units being
offered hereby (a "Secondary Series") (Primary Series and Secondary Series are
hereafter collectively referred to as "Available Series"). June 15 and December
15 of each year, in the case of semi-annual Certificateholders, and December 15
of each year in the case of annual Certificateholders, are the "Plan
Reinvestment Dates".
Under the Plan (subject to compliance with applicable blue sky
laws), fractional units ("Plan Units") will be purchased from the Sponsor at a
price equal to the aggregate offering price per Unit of the bonds in the
Available Series portfolio during the initial offering of the Available Series
or at the aggregate bid price per Unit of the Available Series if its initial
offering has been completed, plus a sales charge equal to 3.627% of the net
amount invested in such bonds or 3-1/2% of the Reinvestment Price per Plan Unit,
plus accrued interest, divided by one hundred (the "Reinvestment Price per Plan
Unit"). All Plan Units will be sold at this reduced sales charge of 3-1/2% in
comparison to the regular sales charge levied on primary and secondary market
sales of units in any series of "Municipal Securities Trust". Participants in
the Plan will have the opportunity to designate, in the Authorization Form for
the Plan, the name of a broker to whom the Sponsor will allocate a sales
commission of 1-1/2% per Plan Unit, payable out of the 3-1/2% sales charge. If
no such designation is made, the Sponsor will retain the sales commission.
Under the Plan, the entire amount of a participant's income and
principal distributions will be reinvested. For example, a Certificateholder who
is entitled to receive $130.50 interest income from the Trust would acquire
13.05 Plan Units assuming that the Reinvestment Price per Plan Unit, plus
accrued interest, was $10.
A semi-annual or annual Certificateholder may join the Plan at the
time he invests in Units of the Trust or any time thereafter by delivering to
the Trustee an Authorization Form which is available from brokers or the
Sponsor. In order that distributions may be reinvested on a particular Plan
Reinvestment Date, the Authorization Form must be received by the Trustee not
later than the 15th day of the month preceding such Date. Authorization Forms
not received in time for a particular Plan Reinvestment Date will be valid only
for the second succeeding Plan Reinvestment Date. Similarly, a participant may
withdraw from the Plan at any time by notifying the Trustee (see below).
However, if written confirmation of withdrawal is not given to the Trustee prior
to a particular distribution, the participant will be deemed to have elected to
participate in the Plan with respect to that particular distribution and his
withdrawal would become effective for the next succeeding distribution.
Once delivered to the Trustee, an Authorization Form will constitute
a valid election to participate in the Plan with respect to Units
- --------
* Texas residents may elect to participate in the "Total Reinvestment Plan
for Texas Residents" hereinafter described.
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purchased of the Trust (and with respect to Plan Units purchased with the
distributions from the Units purchased of the Trust) for each subsequent
distribution as long as the Certificateholder continues to participate in the
Plan. However, if an Available Series should materially differ from the Trust in
the opinion of the Sponsor, the authorization will be voided and participants
will be provided with both a notice of the material change and a new
Authorization Form which would have to be returned to the Trustee before the
Certificateholder would again be able to participate in the Plan. The Sponsor
anticipates that a material difference which would result in a voided
authorization would include such facts as the inclusion of bonds in the
Available Series portfolio the interest income on which was not exempt from
federal income tax, or the inclusion of bonds which were not rated "A" or better
by either Standard & Poor's Corporation or Moody's Investors Service, Inc. on
the date such bonds were initially deposited in the Available Series portfolio.
The Sponsor has the option at any time to use units of a Secondary
Series to fulfill the requirements of the Plan in the event units of a Primary
Series are not available either because a Primary Series is not then in
existence or because the registration statement relating thereto is not declared
effective in sufficient time to distribute final prospectuses to Plan
participants (see below). It should be noted that there is no assurance that the
quality and diversification of the Bonds in any Available Series or the
estimated current return thereon will be similar to that of this Trust.
It is the Sponsor's intention that Plan Units will be offered on or
about each semi-annual and annual Record Date for determining who is eligible to
receive distributions on the related Payment Date. Such Record Dates are June 1
and December 1 of each year for semi-annual Certificate- holders, and December 1
of each year for annual Certificateholders. On each Record Date, the Sponsor
will send a current Prospectus relating to the Available Series being offered
for the next Plan Reinvestment Date along with a letter which reminds each
participant that Plan Units are being purchased for him as part of the Plan
unless he notifies the Trustee in writing by that Plan Reinvestment Date that he
no longer wishes to participate in the Plan. In the event a Primary Series has
not been declared effective in sufficient time to distribute a final Prospectus
relating thereto and there is no Secondary Series as to which a registration
statement is currently effective, it is the Sponsor's intention to suspend the
Plan and distribute to each participant his regular semi-annual or annual
distribution. If the Plan is so suspended, it will resume in effect with the
next Plan Reinvestment Date assuming units of an Available Series are then being
offered.
To aid a participant who might desire to withdraw either from the
Plan or from a particular distribution, the Trustee has established a toll free
number (see below) for participants to use for notification of withdrawal, which
must be confirmed in writing prior to the Plan Reinvestment Date. Should the
Trustee be so notified, it will make the appropriate cash disbursement. Unless
the withdrawing participant specifically indicates in his written confirmation
that (a) he wishes to withdraw from the Plan for that particular distribution
only, or (b) he wishes to withdraw from the Plan for less than all units of each
series of "Municipal Securities Trust" which he might then own (and specifically
identifies which series are to continue in the Plan), he will be deemed to have
withdrawn completely from the Plan in all respects. Once a participant withdraws
completely, he will only be allowed to again participate in the Plan by
submitting a new Authorization Form. A sale or redemption of a portion of a
participant's Plan Units will not constitute a withdrawal from the Plan with
respect to the remaining Plan Units owned by such participant.
Unless a Certificateholder notifies the Trustee in writing to the
contrary, each semi-annual and annual Certificateholder who has acquired Plan
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Units will be deemed to have elected the semi-annual and annual plan of
distribution, respectively, and to participate in the Plan with respect to
distributions made in connection with such Plan Units. (Should the Available
Series from which Plan Units are purchased for the account of an annual Cer-
tificateholder fail to have an annual distribution plan, such Certificate-
holder will be deemed to have elected the semi-annual plan of distribution, and
to participate in the Plan with respect to distributions made in connection with
such Plan Units.) A participant who subsequently desires to have distributions
made with respect to Plan Units delivered to him in cash may withdraw from the
Plan with respect to such Plan Units and remain in the Plan with respect to
units acquired other than through the Plan. Assuming a participant has his
distributions made with respect to Plan Units reinvested, all such distributions
will be accumulated with distributions generated from the Units of the Trust
used to purchase such additional Plan Units. However, distributions related to
units in other series of "Municipal Securities Trust" will not be accumulated
with the foregoing distributions for Plan purchases. Thus, if a person owns
units in more than one series of "Municipal Securities Trust" (which are not the
result of purchases under the Plan), distributions with respect thereto will not
be aggregated for purchases under the Plan.
Although not obligated to do so, the Sponsor has maintained and
intends to continue to maintain a market for the Plan Units and continuously to
offer to purchase Plan Units at prices based upon the aggregate bid price of the
bonds in the Available Series portfolio, during the initial offering of the
Available Series, or at the aggregate bid price of the Bonds in the Available
Series if its initial offering has been completed. The Sponsor may discontinue
such purchases at any time. The aggregate bid price of the underlying bonds may
be expected to be less than the aggregate offering prices. In the event that a
market is not maintained for Plan Units, a participant desiring to dispose of
his Plan Units may be able to do so only by tendering such Plan Units to the
Trustee for redemption at the Redemption Price of full units in the Available
Series corresponding to such Plan Units, which is based upon the aggregate bid
price of the underlying bonds as described in the "Municipal Securities Trust"
Prospectus for the Available Series in question. If a participant wishes to
dispose of his Plan Units, he should inquire of the Sponsor as to current market
prices prior to making a tender for redemption to the Trustee.
Any participant may tender his Plan Units for redemption to the
Available Series trustee. Participants may redeem Plan Units by making a written
request to the Trustee, at the address listed in the "Summary of Essential
Information" in Part A on the Redemption Form supplied by the Trustee. The
redemption price per Plan Unit will be determined as set forth in the "Municipal
Securities Trust" Prospectus of the Available Series from which such Plan Unit
was purchased following receipt of the request and adjusted to reflect the fact
that it relates to a Plan Unit. There is no charge for the redemption of Plan
Units.
The Trust Agreement requires that the Trustee notify the Sponsor of
any tender of Plan Units for redemption. So long as the Sponsor is maintaining a
bid in the secondary market, the Sponsor will purchase any Plan Units tendered
to the Trustee for redemption by making payment therefor to the
Certificateholder in an amount not less than the redemption price for such Plan
Units on the date of tender not later than the day on which such Plan Units
would otherwise have been redeemed by the Trustee.
Participants in the Plan will not receive individual certificates
for their Plan Units unless the amount of Plan Units accumulated represents the
principal amount of bonds originally underlying each Unit and, in such case, a
written request for certificates is made to the Trustee. All Plan Units will be
accounted for by the Trustee on a book entry system. Each time Plan Units are
purchased under the Plan, a participant will receive a
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confirmation stating his cost, number of Units purchased and estimated current
return. Questions regarding a participant's statement should be directed to the
Trustee by calling the Trustee at the number listed in the "Summary of Essential
Information" in Part A.
All expenses relating to the operation of the Plan are borne by the
Sponsor. Both the Sponsor and the Trustee reserve the right to suspend, modify
or terminate the Plan at any time for any reason, including the right to suspend
the Plan if the Sponsor is unable or unwilling to establish a Primary Series or
is unable to provide Secondary Series units. All participants will receive
notice of any such suspension, modification or termination.
Total Reinvestment Plan for Texas Residents
Except as specifically provided under this Section, and unless the
context otherwise requires, all provisions and definitions contained under the
heading "Total Reinvestment Plan" shall be applicable to the Total Reinvestment
Plan for Texas Residents ("Texas Plan").
Semi-annual and annual Certificateholders of the Trust who are
residents of Texas have the option prior to any semi-annual or annual
distribution to elect affirmatively to reinvest that distribution, including
both interest and principal, if any, in an Available Series.
A resident of Texas who is a semi-annual Certificateholder may join
the Texas Plan for any particular semi-annual or annual distribution by
delivering to the Trustee an Authorization Form For Texas Residents ("Texas
Authorization Form") specifically mentioning the date of the particular
semi-annual or annual distribution he wishes to reinvest. On or about each
semi-annual or annual Record Date, Texas Authorization Forms shall be sent by
the Trustee to every Certificateholder who is a resident of Texas. In the event
that the Sponsor suspends the Plan or the Texas Plan, no Texas Authorization
Forms shall be sent. In order that distributions may be reinvested on a
particular Plan Reinvestment Date, the Texas Authorization Form must be received
by the Trustee on or before such Date. Texas Authorization Forms not received in
time for the Plan Reinvestment Date will be deemed void. A participant who
delivers a Texas Authorization Form to the Trustee may thereafter withdraw said
authorization by notifying the Trustee at its toll free telephone number prior
to a Plan Reinvestment Date. Such notification of a withdrawal must be confirmed
in writing prior to the Plan Reinvestment Date. Under no circumstances shall a
Texas Authorization Form be provided or accepted by the Trustee which provides
for the reinvestment of distributions for more than one Plan Reinvestment Date.
On or about each semi-annual and annual Record Date, the Sponsor
will send a current Prospectus relating to the Available Series being offered on
the next Plan Reinvestment Date along with a letter incorporating a Texas
Authorization Form which specifies the funds available for reinvestment, reminds
each participant that no Plan Units will be purchased for him unless the Texas
Authorization Form is received by the Trustee on or before that particular Plan
Reinvestment Date, and states that the Texas Authorization Form is valid only
for that particular semi-annual or annual distribution. If the Available Series
should materially differ from the Trust, the participant will be provided with a
notice of the material change and a new Texas Authorization Form which would
have to be returned to the Trustee before the Certificateholder would again be
able to participate in the Plan.
Each semi-annual and annual Certificateholder who has acquired Plan
Units will be deemed to have elected the semi-annual and annual plan of
distribution, respectively, with respect to such Units, but such Certificate-
holder will not be deemed to participate in the Plan for any particular
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distribution unless and until he delivers to the Trustee a Texas Authorization
Form pertaining to those Plan Units. (Should the Available Series from which
Plan Units are purchased for the account of an annual Certificateholder fail to
have an annual distribution plan, such Certificateholder will be deemed to have
elected the semi-annual plan of distribution, and to participate in the Plan
with respect to distributions made, in connection with such Plan Units.)
TRUST ADMINISTRATION
Portfolio Supervision
The Sponsor may direct the Trustee to dispose of Bonds upon (i)
default in payment of principal or interest on such Bonds, (ii) institution of
certain legal proceedings with respect to the issuers of such Bonds, (iii)
default under other documents adversely affecting debt service on such Bonds,
(iv) default in payment of principal or interest on other obligations of the
same issuer or guarantor, (v) with respect to revenue Bonds, decline in revenues
and income of any facility or project below the estimated levels calculated by
proper officials charged with the construction or operation of such facility or
project or (vi) decline in price or the occurrence of other market or credit
factors which in the opinion of the Sponsor would make the retention of such
Bonds in the Trust detrimental to the interests of the Certificateholders. If a
default in the payment of principal or interest on any of the Bonds occurs and
if the Sponsor fails to instruct the Trustee to sell or hold such Bonds, the
Trust Agreement provides that the Trustee may sell such Bonds.
The Sponsor is authorized by the Trust Agreement to direct the
Trustee to accept or reject certain plans for the refunding or refinancing of
any of the Bonds. Any bonds received in exchange or substitution will be held by
the Trustee subject to the terms and conditions of the Agreement to the same
extent as the Bonds originally deposited. Within five days after such deposit,
notice of such exchange and deposit shall be given by the Trustee to each
Certificateholder registered on the books of the Trustee, including an
identification of the Bonds eliminated and the bonds substituted therefor.
Except as stated, the acquisition by the Trust of any securities other than the
bonds initially deposited is prohibited.
Trust Agreement, Amendment and Termination
The Trust Agreement may be amended by the Trustee, the Sponsor and
the Evaluator without the consent of any of the Certificateholders: (1) to cure
any ambiguity or to correct or supplement any provision which may be defective
or inconsistent; (2) to change any provision thereof as may be required by the
Securities and Exchange Commission or any successor governmental agency; or (3)
to make such other provisions in regard to matters arising thereunder as shall
not adversely affect the interests of the Certifi- cateholders.
The Trust Agreement may also be amended in any respect, or
performance of any of the provisions thereof may be waived, with the consent of
the holders of Certificates evidencing 66-2/3% of the Units then outstanding,
for the purpose of modifying the rights of Certificateholders; provided that no
such amendment or waiver shall reduce any Certificateholder's interest in the
Trust without his consent or reduce the percentage of Units required to consent
to any such amendment or waiver without the consent of the holders of all
Certificates. The Trust Agreement may not be amended, without the consent of the
holders of all Certificates then outstanding, to increase the number of Units
issuable or to permit the acquisition of any bonds in addition to or in
substitution for those initially deposited in the Trust, except in accordance
with the provisions of the Trust Agreement. The Trustee
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shall promptly notify Certificateholders, in writing, of the substance of any
such amendment.
The Trust Agreement provides that the Trust shall terminate upon the
maturity, redemption or other disposition, as the case may be, of the last of
the Bonds held in the Trust but in no event is it to continue beyond the end of
the calendar year preceding the fiftieth anniversary of the execution of the
Trust Agreement. If the value of the Trust shall be less than the minimum amount
set forth under "Summary of Essential Information" in Part A, the Trustee may,
in its discretion, and shall, when so directed by the Sponsor, terminate the
Trust. The Trust may also be terminated at any time with the consent of the
holders of Certificates representing 100% of the Units then outstanding. In the
event of termination, written notice thereof will be sent by the Trustee to all
Certificateholders. Within a reasonable period after termination, the Trustee
must sell any Bonds remaining in the Trust, and, after paying all expenses and
charges incurred by the Trust, distribute to each Certificateholder, upon
surrender for cancellation of his Certificate for Units, his pro rata share of
the Interest and Principal Accounts.
The Sponsor
The Sponsor, Reich & Tang Distributors L.P. (successor to the Unit
Investment Trust Division of Bear, Stearns & Co. Inc.), a Delaware limited
partnership, is engaged in the brokerage business and is a member of the
National Association of Securities Dealers, Inc. Reich & Tang is also a
registered investment adviser. Reich & Tang maintains its principal business
offices at 600 Fifth Avenue, New York, New York 10020. Reich & Tang Asset
Management L.P. ("RTAM LP"), a registered investment adviser, having its
principal place of business at 399 Boylston Street, Boston, MA 02116, is the 99%
limited partner of the Sponsor. RTAM LP is 99.5% owned by New England Investment
Companies, LP ("NEIC LP") and Reich & Tang Asset Management, Inc., a wholly
owned subsidiary of NEIC LP, owns the remaining .5% interest of RTAM LP and is
its general partner. NEIC LP's general partner is New England Investment
Companies, Inc. ("NEIC"), a holding company offering a broad array of investment
styles across a wide range of asset categories through ten investment
advisory/management affiliates and two distribution affiliates. These affiliates
in the aggregate are investment advisers or managers to over 57 registered
investment companies. Reich & Tang is the successor sponsor for numerous series
of unit investment trusts, including: New York Municipal Trust, Series 1 (and
Subsequent Series); Municipal Securities Trust, Series 1 (and Subsequent
Series), 1st Discount Series (and Subsequent Series), Multi- State Series 1 (and
Subsequent Series), Insured Municipal Securities Trust, Series 1 (and Subsequent
Series), 5th Discount Series (and Subsequent Series) and Equity Securities
Trust, Series 1, Signature Series, Gabelli Communications Income Trust (and
Subsequent Series). The information included herein is only for the purpose of
informing investors as to the financial responsibility of the Sponsor and its
ability to carry out its contractual obligations.
For certain other Trusts as set forth in the "Summary of Essential
Information" in Part A, the Co-Sponsors are Reich & Tang and Gruntal & Co.,
Incorporated, both of whom have entered into an Agreement among Co-Sponsors
pursuant to which both parties have agreed to act as Co-Sponsors for the Trust.
Reich & Tang has been appointed by Gruntal & Co., Incorporated as agent for
purposes of taking any action required or permitted to be taken by the Sponsors
under the Trust Agreement. If the Sponsors are unable to agree with respect to
action to be taken jointly by them under the Trust Agreement and they cannot
agree as to which Sponsor shall act as sole Sponsor, then Reich & Tang shall act
as sole Sponsor. If one of the Sponsors fails to perform its duties under the
Trust Agreement or becomes incapable of acting or becomes bankrupt or its
affairs are taken over by public authorities, that
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<PAGE>
Sponsors may be discharged under the Trust Agreement and a new Sponsor(s) may be
appointed or the remaining Sponsor(s) may continue to act as Sponsors.
Gruntal & Co., Incorporated, a Delaware corporation, operates a
regional securities broker/dealer from its main office in New York City and
branch offices in nine states and the District of Columbia. The firm is very
active in the marketing of investment companies and has signed dealer agreements
with every mutual fund group, as well as being the managing distributor for The
Home Group Money Market and Mutual Funds. Further, through its Syndicate
Department, Gruntal & Co. Incorporated has underwritten a large number of
Closed-End Funds and has been Co-Manager on the following offerings: Cigna High
Income Shares; Dreyfus New York Municipal Income, Inc.; Franklin Principal
Maturity Trust and Van Kampen Merritt Limited Term High Income Trust.
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 Certificateholders for taking any action, or refraining from taking
any action, in good faith pursuant to the Trust Agreement, or for errors in
judgment except in cases of its own willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations and duties.
The Sponsor may resign at any time by delivering to the Trustee an
instrument of resignation executed by the Sponsor.
If at any time the Sponsor shall resign or fail to perform any of
its duties under the Trust Agreement or becomes incapable of acting or becomes
bankrupt or its affairs are taken over by public authorities, then the Trustee
may either (a) appoint a successor Sponsor; (b) terminate the Trust Agreement
and liquidate the Trust; or (c) continue to act as Trustee without terminating
the Trust Agreement. Any successor Sponsor appointed by the Trustee shall be
satisfactory to the Trustee and, at the time of appointment, shall have a net
worth of at least $1,000,000.
The Trustee
The Trustee is The Chase Manhattan Bank (National Association), a
national banking association with its principal executive office located at 1
Chase Manhattan Plaza, New York, New York 10081 and its unit investment trust
office at 770 Broadway, New York, New York 10003 (800) 882-9898. The Trustee is
subject to the supervision by the Comptroller of the Currency, the Federal
Deposit Insurance Corporation and the Board of Governors of the Federal Reserve
System.
For certain other Trusts as set forth in the "Summary of Essential
Information" in Part A, the Trustee is The Bank of New York, a trust company
organized under the laws of New York, having its offices at 101 Barclay Street,
New York, New York 10286 (1-800-431-8002). The Bank of New York is subject to
supervision and examination by the Superintendent of Banks of the State of New
York and the Board of Governors of the Federal Reserve System, and its deposits
are insured by the Federal Deposit Insurance Corporation to the extent permitted
by law. The Trustee must be a banking corporation organized under the laws of
the United States or any state which is authorized under such laws to exercise
corporate trust powers and must have at all times an aggregate capital, surplus
and undivided profits of not less than $5,000,000. The duties of the Trustee are
primarily ministerial in nature. The Trustee did not participate in the
selection of Securities for the portfolio of the Trust.
The Trustee shall not be liable or responsible in any way for taking
any action, or for refraining from taking any action, in good faith pursuant to
the Trust Agreement, or for errors in judgment; or for any
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disposition of any moneys, Bonds or Certificates in accordance with the Trust
Agreement, except in cases of its own willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations and duties; provided,
however, that the Trustee shall not in any event be liable or responsible for
any evaluation made by the Evaluator. In addition, the Trustee shall not be
liable for any taxes or other governmental charges imposed upon or in respect of
the Bonds or the Trust which it may be required to pay under current or future
law of the United States or any other taxing authority having jurisdiction. The
Trustee shall not be liable for depreciation or loss incurred by reason of the
sale by the Trustee of any of the Bonds pursuant to the Trust Agreement.
For further information relating to the responsibilities of the
Trustee under the Trust Agreement, see "Rights of Certificateholders".
The Trustee may resign by executing an instrument in writing and
filing the same with the Sponsor, and mailing a copy of a notice of resignation
to all Certificateholders. In such an event the Sponsor is obligated to appoint
a successor Trustee as soon as possible. In addition, 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. Notice of such removal and appointment shall be
mailed to each Certificateholder by the Sponsor. If upon resignation of the
Trustee no successor has been appointed and has accepted the appointment within
thirty days after notification, the retiring Trustee may apply to a court of
competent jurisdiction for the appointment of a successor. The resignation or
removal of the Trustee becomes effective only when the successor Trustee accepts
its appointment as such or when a court of competent jurisdiction appoints a
successor Trustee. Upon execution of a written acceptance of such appointment by
such successor Trustee, all the rights, powers, duties and obligations of the
original Trustee shall vest in the successor.
Any corporation into which the Trustee may be merged or with which
it may be consolidated, or any corporation resulting from any merger or
consolidation to which the Trustee shall be a party, shall be the successor
Trustee. The Trustee must always be a banking corporation organized under the
laws of the United States or any State and have at all times an aggregate
capital, surplus and undivided profits of not less than $2,500,000.
The Evaluator
The Evaluator is Kenny S&P Evaluation Services, a division of J.J.
Kenny Co., Inc. with main offices located at 65 Broadway, New York, New York
10006. The Evaluator is a wholly-owned subsidiary of McGraw-Hill, Inc. The
Evaluator is a registered investment advisor and also provides financial
information services.
The Trustee, the Sponsor and Certificateholders may rely on any
evaluation furnished by the Evaluator and shall have no responsibility for the
accuracy thereof. Determinations 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 no liability to the
Trustee, the Sponsor, or Certificateholders for errors in judgment, except in
cases of its own willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations and duties.
The Evaluator may resign or may be removed by the Sponsor and the
Trustee, and 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 the successor Evaluator. If upon
resignation of the Evaluator no successor has accepted appointment within
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<PAGE>
thirty days after notice of resignation, the Evaluator may apply to a court of
competent jurisdiction for the appointment of a successor.
TRUST EXPENSES AND CHARGES
At no cost to the Trust, the Sponsor has borne the expenses of
creating and establishing the Trust, including the cost of initial preparation
and execution of the Trust Agreement, registration of the Trust and the Units
under the Investment Company Act of 1940 and the Securities Act of 1933,
preparation and printing of the Certificates, legal and auditing expenses,
advertising and selling expenses, initial fees and expenses of the Trustee and
other out-of-pocket expenses. The fees of the Evaluator, however, incurred
during the initial public offering are paid directly by the Trustee.
The Sponsor will not charge the Trust a fee for its services as
such. See "Sponsor's Profits".
The Trustee will receive for its ordinary recurring services to the
Trust an annual fee in the amount set forth under "Summary of Essential
Information" in Part A of this Prospectus. For a discussion of the services
performed by the Trustee pursuant to its obligations under the Trust Agreement,
see "Trust Administration" and "Rights of Certificateholders".
The Evaluator will receive, for each daily evaluation of the Bonds
in the Trust, a fee in the amount set forth under "Summary of Essential
Information" in Part A of this Prospectus.
The Trustee's and Evaluator's fees are payable monthly as of the
Record Date from the Interest Account to the extent funds are available and then
from the Principal Account. Both fees may be increased without approval of the
Certificateholders by amounts not exceeding proportionate increases in consumer
prices for services as measured by the United States Department of Labor's
Consumer Price Index entitled "All Services Less Rent".
The following additional charges are or may be incurred by the
Trust: all expenses (including counsel and auditing fees) of the Trustee
incurred and advances made in connection with its activities under the Trust
Agreement, including the expenses and costs of any action undertaken by the
Trustee to protect the Trust and the rights and interests of the Certificate-
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
the Trust; indemnification of the Sponsor for any loss, liabilities and expenses
incurred in acting as Sponsor of the Trust without gross negligence, bad faith
or willful misconduct on its part; and all taxes and other governmental charges
imposed upon the Bonds or any part of the Trust (no such taxes or charges are
being levied, made or, to the knowledge of the Sponsor, contemplated). The above
expenses, including the Trustee's fees, when paid by or owing to the Trustee are
secured by a first lien on the Trust. In addition, the Trustee is empowered to
sell Bonds in order to make funds available to pay all expenses.
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EXCHANGE PRIVILEGE AND CONVERSION OFFER
Exchange Privilege
Certificateholders may elect to exchange any or all of their Units
of these Trusts for Units of one or more of any available series of Insured
Municipal Securities Trust, Municipal Securities Trust, New York Municipal
Trust, Mortgage Securities Trust or Equity Securities Trust (the "Exchange
Trusts") at a reduced sales charge as set forth below. Under the Exchange
Privilege, the Sponsor's repurchase price of the Units being surrendered, and
only after the initial offering period is completed, will be based on the market
value of the Securities in the Trust portfolio or on the aggregate offer price
of the Bonds in the other Trust Portfolios; and, after the initial offering
period has been completed, will be based on the aggregate bid price of the Bonds
in the particular Trust portfolio. Units in an Exchange Trust then will be sold
to the Certificateholder at a price based on the aggregate offer price of the
Bonds in the Exchange Trust portfolio during the initial public offering period
of the Exchange Trust (or for Units of Equity Securities Trust, based on the
market value of the underlying securities in the Equity Trust portfolio); and
after the initial offering period has been completed, based on the aggregate bid
price of the Bonds in the Exchange Trust portfolio if its initial offering has
been completed, plus accrued interest (or for Units of Equity Securities Trust,
based on the market value of the underlying securities in the Equity Trust
portfolio) and a reduced sales charge as set forth below.
Except for unitholders who wish to exercise the Exchange Privilege
within the first five months of their purchase of Units of Trust, the sales
charge applicable to the purchase of units of an Exchange Trust shall be
approximately 1.5% of the price of each Exchange Trust unit (or 1,000 Units for
the Mortgage Securities Trust or 100 Units for the Equity Securities Trust). For
unitholders who wish to exercise the Exchange Privilege within the first five
months of their purchase of Units of Trust, the sales charge applicable to the
purchase of units of an Exchange Trust shall be the greater of (i) 1.5% of the
price of each Exchange Trust unit (or 1,000 Units for the Mortgage Securities
Trust or 100 Units for the Equity Securities Trust), or (ii) an amount which
when coupled with the sales charge paid by the unitholder upon his original
purchase of Units of the Trust at least equals the sales charge applicable in
the direct purchase of units of an Exchange Trust. The Exchange Privilege is
subject to the following conditions:
(1) The Sponsor must be maintaining a secondary market in both the
Units of the Trust held by the Certificateholder and the Units of the
available Exchange Trust. While the Sponsor has indicated its intention to
maintain a market in the Units of all Trusts sponsored by it, the Sponsor
is under no obligation to continue to maintain a secondary market and
therefore there is no assurance that the Exchange Privilege will be
available to a Certificateholder at any specific time in the future. At
the time of the Certificateholder's election to participate in the
Exchange Privilege, there also must be Units of the Exchange Trust
available for sale, either under the initial primary distribution or in
the Sponsor's secondary market.
(2) Exchanges will be effected in whole units only. Any excess
proceeds from the Units surrendered for exchange will be remitted and the
selling Certificateholder will not be permitted to advance any new funds
in order to complete an exchange. Units of the Mortgage Securities Trust
may only be acquired in blocks of 1,000 Units. Units of the Equity
Securities Trust may only be acquired in blocks of 100 Units.
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(3) The Sponsor reserves the right to suspend, modify or terminate
the Exchange Privilege. The Sponsor will provide unitholders of the Trust
with 60 days' prior written notice of any termination or material
amendment to the Exchange Privilege, provided that, no notice need be
given if (i) the only material effect of an amendment is to reduce or
eliminate the sales charge payable at the time of the exchange, to add one
or more series of the Trust eligible for the Exchange Privilege or to
delete a series which has been terminated from eligibility for the
Exchange Privilege, (ii) there is a suspension of the redemption of units
of an Exchange Trust under Section 22(e) of the Investment Company Act of
1940, or (iii) an Exchange Trust temporarily delays or ceases the sale of
its units because it is unable to invest amounts effectively in accordance
with its investment objectives, policies and restrictions. During the 60
day notice period prior to the termination or material amendment of the
Exchange Privilege described above, the Sponsor will continue to maintain
a secondary market in the units of all Exchange Trusts that could be
acquired by the affected unitholders. Unitholders may, during this 60 day
period, exercise the Exchange Privilege in accordance with its terms then
in effect. In the event the Exchange Privilege is not available to a
Certificateholder at the time he wishes to exercise it, the
Certificateholder will immediately be notified and no action will be taken
with respect to his Units without further instructions from the
Certificateholder.
To exercise the Exchange Privilege, a Certificateholder should
notify the Sponsor of his desire to exercise his Exchange Privilege. If Units of
a designated, outstanding series of an Exchange Trust are at the time available
for sale and such Units may lawfully be sold in the state in which the
Certificateholder is a resident, the Certificateholder will be provided with a
current prospectus or prospectuses relating to each Exchange Trust in which he
indicates an interest. He may then select the Trust or Trusts into which he
desires to invest the proceeds from his sale of Units. The exchange transaction
will operate in a manner essentially identical to a secondary market transaction
except that units may be purchased at a reduced sales charge.
Example: Assume that after the initial public offering has been
completed, a Certificateholder has five units of a Trust with a current value of
$700 per unit which he has held for more than 5 months and the Certificate-
holder wishes to exchange the proceeds for units of a secondary market Exchange
Trust with a current price of $725 per unit. The proceeds from the
Certificateholder's original units will aggregate $3,500. Since only whole units
of an Exchange Trust may be purchased under the Exchange Privilege, the
Certificateholder would be able to acquire four units (or 4,000 Units of the
Mortgage Securities Trust or 400 Units of the Equity Securities Trust) for a
total cost of $2,943.50 ($2,900 for unit and $43.50 for the sales charge). The
remaining $556.50 would be remitted to the Certificateholder in cash. If the
Certificateholder acquired the same number of units at the same time in a
regular secondary market transaction, the price would have been $3,059.50
($2,900 for units and $159.50 for the sales charge, assuming a 5 1/2% sales
charge times the public offering price).
The Conversion Offer
Unit owners of any registered unit investment trust for which there
is no active secondary market in the units of such trust (a "Redemption Trust")
may elect to redeem such units and apply the proceeds of the redemption to the
purchase of available Units of one or more series of Municipal Securities Trust,
Insured Municipal Securities Trust, Mortgage Securities Trust, New York
Municipal Trust or Equity Securities Trust (the "Conversion Trusts") at the
Public Offering Price for units of the Conversion Trust based on a reduced sales
charge as set forth below. Under the
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<PAGE>
Conversion Offer, units of the Redemption Trust must be tendered to the trustee
of such trust for redemption at the redemption price, which is based upon the
market value of the underlying securities in the Trust portfolio or the
aggregate bid side evaluation of the underlying bonds in such trust and is
generally about 1 1/2% to 2% lower than the offering price for such bonds. The
purchase price of the units in the Conversion Trust will be based on the
aggregate offer price of the bonds in the Conversion Trust Portfolio during its
initial offering price, or, at a price based on the aggregate bid price of the
underlying bonds if the initial public offering of the Conversion Trust has been
completed, plus accrued interest and a sales charge as set forth below. If the
participant elects to purchase units of the Equity Securities Trust under the
Conversion Offer, the purchase price of the units will be based, at all times,
on the market value of the underlying securities in the Trust portfolio plus a
sales charge.
Except for Unitholders who wish to exercise the Conversion Offer
within the first five months of their purchase of units of a Redemption Trust,
the sales charge applicable to the purchase of Units of the Conversion Trust
shall be 1.5% per Unit (or per 1,000 Units for the Mortgage Securities Trust or
per 100 Units for the Equity Securities Trust). For unitholders who wish to
exercise the Conversion Offer within the first five months of their purchase of
units of a Redemption Trust, the sales charge applicable to the purchase of
Units of a Conversion Trust shall be the greater of (i) 1.5% per Unit (or per
1,000 Units for the Mortgage Securities Trust or per 100 Units for the Equity
Securities Trust) or (ii) an amount which when coupled with the sales charge
paid by the unitholder upon his original purchase of units of the Redemption
Trust at least equals the sales charge applicable in the direct purchase of
Units of a Conversion Trust. The Conversion Offer is subject to the following
limitations:
(1) The Conversion Offer is limited only to unit owners of any
Redemption Trust, defined as a unit investment trust for which there is no
active secondary market at the time the Certificateholder elects to
participate in the Conversion Offer. At the time of the unit owner's
election to participate in the Conversion Offer, there also must be
available units of a Conversion Trust, either under a primary distribution
or in the Sponsor's secondary market.
(2) Exchanges under the Conversion Offer will be effected in whole
units only. Unit owners will not be permitted to advance any new funds in
order to complete an exchange under the Conversion Offer. Any excess
proceeds from units being redeemed will be returned to the unit owner.
Units of the Mortgage Securities Trust may only be acquired in blocks of
1,000 units. Units of the Equity Securities Trust may only be acquired in
blocks of 100 Units.
(3) The Sponsor reserves the right to modify, suspend or terminate
the Conversion Offer at any time without notice to unit owners of
Redemption Trusts. In the event the Conversion Offer is not available to a
unit owner at the time he wishes to exercise it, the unit owner will be
notified immediately and no action will be taken with respect to his units
without further instruction from the unit owner. The Sponsor also reserves
the right to raise the sales charge based on actual increases in the
Sponsor's costs and expenses in connection with administering the program,
up to a maximum sales charge of $20 per unit (or per 1,000 units for the
Mortgage Securities Trust or per 100 Units for the Equity Securities
Trust).
To exercise the Conversion Offer, a unit owner of a Redemption Trust
should notify his retail broker of his desire to redeem his Redemption Trust
Units and use the proceeds from the redemption to purchase Units of one or more
of the Conversion Trusts. If Units of a designated, outstanding
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<PAGE>
series of a Conversion Trust are at that time available for sale and if such
Units may lawfully be sold in the state in which the unit owner is a resident,
the unit owner will be provided with a current prospectus or prospectuses
relating to each Conversion Trust in which he indicates an interest. He then may
select the Trust or Trusts into which he decides to invest the proceeds from the
sale of his Units. The transaction will be handled entirely through the unit
owner's retail broker. The retail broker must tender the units to the trustee of
the Redemption Trust for redemption and then apply the proceeds to the
redemption toward the purchase of units of a Conversion Trust at a price based
on the aggregate offer or bid side evaluation per Unit of the Conversion Trust,
depending on which price is applicable, plus accrued interest and the applicable
sales charge. The certificates must be surrendered to the broker at the time the
redemption order is placed and the broker must specify to the Sponsor that the
purchase of Conversion Trust Units is being made pursuant to the Conversion
Offer. The unit owner's broker will be entitled to retain $5 of the applicable
sales charge.
Example: Assume a unit owner has five units of a Redemption Trust
which has held for more than 5 months with a current redemption price of $675
per unit based on the aggregate bid price of the underlying bonds and the unit
owner wishes to participate in the Conversion Offer and exchange the proceeds
for units of a secondary market Conversion Trust with a current price of $750
per Unit. The proceeds from the unit owner's redemption of units will aggregate
$3,375. Since only whole units of a Redemption Trust may be purchased under the
Conversion Offer, the unit owner will be able to acquire four units of the
Conversion Trust (or 4,000 units of the Mortgage Securities Trust or 400 Units
for the Equity Securities Trust) for a total cost of $3,045 ($3,000 for units
and $45 for the sales charge). The remaining $330 would be remitted to the unit
owner in cash. If the unit owner acquired the same number of Conversion Trust
units at the same time in a regular secondary market transaction, the price
would have been $3,165 ($3,000 for units and $165 sales charge, assuming a 5
1/2% sales charge times the public offering price).
Description Of The Exchange Trusts And The Conversion Trusts
Municipal Securities Trust and New York Municipal Trust may be
appropriate investment vehicles for an investor who is more interested in
tax-exempt income. The interest income from New York Municipal Trust is, in
general, also exempt from New York State and local New York income taxes, while
the interest income from Municipal Securities Trust is subject to applicable New
York State and local New York taxes, except for that portion of the income which
is attributable to New York obligations in the Trust portfolio, if any. The
interest income from each State Trust of the Municipal Securities Trust,
Multi-State Series is, in general, exempt from state and local taxes when held
by residents of the state where the issuers of bonds in such State Trusts are
located. The Insured Municipal Securities Trust combines the advantages of
providing interest income free from regular federal income tax under existing
law with the added safety of irrevocable insurance. Insured Navigator Series
further combines the advantages of providing interest income free from regular
federal income tax and state and local taxes when held by residents of the state
where issuers of bonds in such state trusts are located with the added safety of
irrevocable insurance. Mortgage Securities Trust offers an investment vehicle
for investors who are interested in obtaining safety of capital and a high level
of current distribution of interest income through investment in a fixed
portfolio of collateralized mortgage obligations. Equity Securities Trust offers
investors an opportunity to achieve capital appreciation together with a high
level of current income.
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<PAGE>
Tax Consequences Of The Exchange Privilege And The Conversion Offer
A surrender of units pursuant to the Exchange Privilege or the
Conversion Offer normally will constitute a "taxable event" to the Certifi-
cateholder under the Code. The Certificateholder will recognize a tax gain or
loss that will be of a long or short-term capital or ordinary income nature
depending on the length of time the units have been held and other factors. A
Certificateholder's tax basis in the Units acquired pursuant to the Exchange
Privilege or Conversion Offer will be equal to the purchase price of such Units.
Investors should consult their own tax advisors as to the tax consequences to
them of exchanging or redeeming units and participating in the Exchange
Privilege or Conversion Offer.
OTHER MATTERS
Legal Opinions
The legality of the Units originally offered and certain matters
relating to federal tax law have been passed upon by Battle Fowler LLP, 75 East
55th Street, New York, New York 10022, or Berger Steingut Tarnoff & Stern, 600
Madison Avenue, New York, New York 10022, as counsel for the Sponsor. Carter,
Ledyard & Milburn, Two Wall Street, New York, New York 10005 have acted as
counsel for Chase Manhattan Bank, N.A. On the initial date of deposit, Booth &
Baron acted as counsel for The Bank of New York.
Independent Auditors
The financial statements of the Trusts included in Part A of this
Prospectus as of the dates set forth in Part A have been examined by KPMG Peat
Marwick LLP, independent certified public accountants for the periods indicated
in its reports appearing herein. The financial statements of KPMG Peat Marwick
LLP have been so included in reliance on its report given upon the authority of
said firm as experts in accounting and auditing.
DESCRIPTION OF BOND RATINGS*
Standard & Poor's Corporation
A brief description of the applicable Standard & Poor's Corporation
rating symbols and their meanings is as follows:
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.
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:
- --------
* As described by the rating agencies.
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1173.3
<PAGE>
(1) 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.
(2) Nature of and provisions of the obligation.
(3) 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 principal and
interest.
AA -- Bonds rated AA also qualify as high-quality debt obligations.
Capacity to pay principal and interest is very strong, and they differ from AAA
issues only in small degrees.
A -- Bonds rated A have a strong capacity to pay principal and
interest, although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions.
BBB -- Bonds rated BBB are regarded as having an adequate capacity
to pay principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in the A category.
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 -- (Prov.) following a rating indicates the
rating is provisional, which assumes the successful completion of the project
being financed by the issuance of the bonds being rated and indicates that
payment of debt service requirements is largely or entirely dependent upon the
successful and timely completion of the project. This rating, however, while
addressing credit quality subsequent to completion, 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.
Moody's Investors Service, Inc.
A brief description of the applicable Moody's Investors Service,
Inc.'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. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be
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<PAGE>
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.
Those bonds in the A and Baa group which Moody's believes possess
the strongest investment attributes are designated by the symbol A 1 and Baa 1.
Other A bonds comprise the balance of the group. These rankings (1) designate
the bonds which offer the maximum in security within their quality group, (2)
designate bonds which can be bought for possible upgrading in quality and (3)
additionally afford the investor an opportunity to gauge more precisely the
relative attractiveness of offerings in the market place.
Moody's applies numerical modifiers, 1, 2, and 3 in each generic
rating classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
Con-Bonds for which the security depends upon the completion of some
act or the fulfillment of some condition are rated conditionally. These are debt
obligations secured by (a) earnings of projects under construction, (b) earnings
of projects unseasoned in operating experience, (c) rentals which begin when
facilities are completed, or (d) payments to which some other limiting condition
attaches. Rating denotes probable credit stature upon completion of construction
or elimination of basis of condition.
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<PAGE>
FOR USE WITH MUNICIPAL SECURITIES TRUST
SERIES 1-25
1st-34th DISCOUNT SERIES
AUTHORIZATION FOR INVESTMENT IN MUNICIPAL SECURITIES TRUST
TRP PLAN - TOTAL REINVESTMENT PLAN
I hereby elect to participate in the TRP Plan and am the owner of _____ units of
Series ___/___ Discount Series.
I hereby authorize The Bank of New York, Trustee, to pay all semi-annual or
annual distributions of interest and principal (if any) with respect to such
units to The Bank of New York, as TRP Plan Agent, who shall immediately invest
the distributions in units of the available series of Municipal Securities
Trust.
The foregoing authorization is subject in Date ______________, 19__ all respects
to the terms and conditions of participation set forth in the prospectus
relating to such available series.
- ------------------------------------------- ---------------------------------
Registered Holder (print) Registered Holder (print)
- ------------------------------------------- --------------------------------
Registered Holder Signature Registered Holder Signature
(Two signatures if joint tenancy)
My Brokerage Firm's Name ____________________________________________________
Street Address ______________________________________________________________
City, State & Zip Code ______________________________________________________
Salesman's Name ___________________________ Salesman's No. _________________
UNIT HOLDERS NEED ONLY DATE AND SIGN THIS FORM AND MAIL THIS CARD.
Mail to your Broker
or
The Bank of New York
101 Barclay Street
New York, New York 10286
1173.3
<PAGE>
FOR USE WITH MUNICIPAL SECURITIES TRUST
SERIES 26-55
35th-79th DISCOUNT SERIES
AUTHORIZATION FOR INVESTMENT IN MUNICIPAL SECURITIES TRUST
TRP PLAN - TOTAL REINVESTMENT PLAN
I hereby elect to participate in the TRP Plan and am the owner of _____ units of
Series ___/___ Discount Series.
I hereby authorize The Chase Manhattan Bank, N.A., Trustee, to pay all
semi-annual or annual distributions of interest and principal (if any) with
respect to such units to The Chase Manhattan Bank, N.A., as TRP Plan Agent, who
shall immediately invest the distributions in units of the available series of
Municipal Securities Trust.
The foregoing authorization is subject in Date ______________, 19__ all respects
to the terms and conditions of participation set forth in the prospectus
relating to such available series.
- ------------------------------------------- ---------------------------------
Registered Holder (print) Registered Holder (print)
- ------------------------------------------- ---------------------------------
Registered Holder Signature Registered Holder Signature
(Two signatures if joint tenancy)
My Brokerage Firm's Name ____________________________________________________
Street Address ______________________________________________________________
City, State & Zip Code ______________________________________________________
Salesman's Name ___________________________ Salesman's No. _________________
UNIT HOLDERS NEED ONLY DATE AND SIGN THIS FORM AND MAIL THIS CARD.
Mail to your Broker
or
The Chase Manhattan Bank, N.A.
Attn: UIT Reinvestment Unit A
770 Broadway
New York, New York 10003
1173.3
<PAGE>
INDEX MUNICIPAL SECURITIES TRUST
(Unit Investment Trust)
Prospectus
Title Page
Dated: April 30, 1996
Summary of Essential Information............A-4
Information Regarding the Trust.............A-6 Sponsor:
Financial and Statistical Information.......A-7
Audit and Financial Information Reich & Tang Distributors L.P.
600 Fifth Avenue
Report of Independent Accountants.........F-1 New York, New York 10020
Statements of Net Assets..................F-2 212-830-5200
Statements of Operations..................F-3
Statements of Changes in Net Assets.......F-4 (and for certain Trusts:)
Notes to Financial Statements.............F-5 Gruntal & Co., Incorporated
Portfolio.................................F-7 14 Wall Street
New York, New York 10005
PART B 212-267-8800
The Trust.................................... 1
Public Offering.............................. 7 Trustee:
Estimated Long Term Return and
Estimated Current Return................... 9 The Chase Manhattan Bank, N.A.
Rights of Certificateholders.................10 770 Broadway
Tax Status...................................12 New York, New York 10003
Liquidity....................................15 1-800-882-9898
Total Reinvestment Plan......................18
Trust Administration.........................22 or
Trust Expenses and Charges...................26
Exchange Privilege and Conversion Offer......27 The Bank of New York
Other Matters................................31 101 Barclay Street
Description of Bond Ratings..................31 New York, New York 10286
1-800-431-8002
Parts A and B of this Prospectus do not Evaluator:
contain all of the information set forth in
the registration statement and exhibits Kenny S&P Evaluation Services,
relating thereto, filed with the Securities a division of J.J. Kenny Co.,
and Exchange Commission, Washington, D.C., Inc.
under the Securities Act of 1933, and to 65 Broadway
which reference is made. New York, New York 10006
* * *
This Prospectus does not constitute an offer to sell, or a
solicitation of an offer to buy, securities in any state to any person to whom
it is not lawful to make such offer in such state.
* * *
No person is authorized to give any information or to make any
representations not contained in Parts A and B of this Prospectus; and any
information or representation not contained herein must not be relied upon as
having been authorized by the Trust, the Trustee, the Evaluator, or the Sponsor.
The Trust is registered as a unit investment trust under the Investment Company
Act of 1940. Such registration does not imply that the Trust or any of its Units
have been guaranteed, sponsored, recommended or approved by the United States or
any state or any agency or officer thereof.
1173.3
